Closing Bell - Closing Bell: Finding the Market's Next Catalyst 6/21/24

Episode Date: June 21, 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.

All right, guys, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make-or-break hour begins with NVIDIA's quick correction, whether it's time to sell the hottest stock in the market or just continue to buy it. We'll ask our experts over this final stretch, take a look at the scorecard with 60 minutes to go in regulation. Fairly muted action today, but as you know, that could certainly change over this last hour. It is triple witching Friday. It's a period when several options contracts all expire at once, can get a little volatile, could get a little interesting. That's why we're here. We'll take you right up to the finish and see what happens. Let's zero in, though, on NVIDIA. Those shares are under some pressure yet again today. The stock falling 10%

from its peak yesterday to the low this morning. Some buyers coming in or at least attempting to, but the stock is still down 3%. We discuss where it could really go from here. It does lead us to our talk of the tape, whether NVIDIA's meteoric rise has happened too fast and if that incredible run has left the market unstable now. Let's ask our panel. Malcolm Etheridge is vice president of CIC, WealthBrand, Talkington, Requisite Capital, Stephanie Link, Hightower, all three are CNBC contributors. Good to have everybody here. Bryn, I'm Requisite Capital, Stephanie Link, Hightower, all three are CNBC contributors. Good to have everybody here. Bryn, I'm going to begin with you because you're the one who owns NVIDIA. As I said, it had this quick correction of 10 percent.

What do we make of that? Are you are should we be concerned about where this stock is today? I think it's so healthy. We would be concerned if it just continued to go up 2% to 3% a day. If you just look at basic technicals, it was so far above the 50-day moving average. That number is like close to $100. I doubt it gets there, but it needs to take a breather and consolidate. And I feel quite confident sellers will come in. But remember, earnings don't come out until August 21st. So it's like the very end of earnings season. So there's definitely some time to digest, think about, let it sell off a little bit. But once again, I feel really confident sellers are going to come

in because they're going to have another spectacular earnings quarter on August 21st when they crush it year over year on revenues and earnings. Yeah. You know, I mentioned the meteoric rise, Malcolm, that this stock has had. I read this stat earlier on Halftime Report, and I find it astounding. Maybe the most incredible stat that I've ever seen. NVIDIA has added more than $880 billion in market cap in 21 trading days. In 21 days. That's incredible. Well, so your question about whether we're likely to see the slide continue

or if this was just sort of a blip, we just got, as quickly as NVIDIA has rallied, we just got a bear market that fast, right? So escalator up, elevator down. But I think it's a bad idea to bet against NVIDIA here. Right. The last couple of years, if you did from about 400 to today, you would have been wrong. Right. So I think NVIDIA is one of those that it's good to own in proportion to the rest of the portfolio. But it's a bad idea to go chasing here. This is not betting against.

Let's let's parse those words a bit, because, a bit because you could still love the stock and look at the rise that I said. And then when I read that number, the $880 billion in market cap, and just say now is the time to cash in or take a fair amount off the table rather than continue to buy in. That's what I'm assuming that clients are asking people like you who may not have as much exposure as their friends or others. They hear about this story, you know, nonstop and are wondering, what am I supposed to do now? So I was watching Halftime earlier, right?

I saw the guys talking about trimming their positions. Well, save for Jason, right? Yeah, two out of two of the three who own the stock. They're trimming their positions. But I didn't hear anybody talking about after I've taken those paper gains and turned them into cash and going and buying Apple, I'm going and buying Microsoft. Right. Those are the three horse race right now for the largest company. So what I do think there is potential for is for investors to be rotating some of that cash into other mega cap names that have fallen out of favor a little bit, especially with earnings

coming up in a couple of weeks. I think names like Meta, names like Amazon, they will start to get some love again. And so it's just rotating those winnings over to what you expect to be the next winning horse. Speaking of, didn't you buy some more Amazon? I did. I bought Amazon today, so I'm in a way talking my own book here. But I do think that Amazon is one of those names that has a lot of potential still locked up in it, and it's not quite getting the respect that it deserves just looking at the digital advertising component of it and their push into ad-supported revenue in addition to AWS and e-commerce. Steph, you've watched a lot of markets over the years. I mean, when you see something like NVIDIA, which has accounted for a third of the S&P 500's gains this month all by itself,

and then I told you the astronomical number of market cap that this stock has added since earnings in 21 trading days, what do you take away from that? Yeah, I mean, like, there's total euphoria over this name, and it's totally overcrowded, Scott. And you have 89 percent of the sell side analysts that have buys on it. So where's your incremental buyer and where's your incremental support on the sell side? So I think it's a little bit challenging. It got a little bit stretched to Bryn's point. I don't think the party is over, but it's had a heck of a run. And there are so many other places

within technology that offer better, attractive risk reward. And, you know, I've been a big fan of the PC refresh cycle. I think that area is very interesting. Not a lot of people are talking about that. And those stocks like HPE, HPQ, Dell, You know I like Seagate, CDW. Even Apple is going to have a Mac refresh. So I think that's an area where, or those are areas where are more attractive. Nothing is wrong with NVIDIA. It just got really overlooked really, really quickly. And so if it does take a pause, if it does pull back, there are going to be opportunities,

just like the last drawdown in March, where it fell 20%, went sideways for a while, and then eventually recaptured better gains ahead. Because the story for AI, it's not over. You're in the second innings at the least at this point. That's why when you say we're in the second innings, it's hard to actually know whether a stock like NVIDIA has, Bryn been gotten, quote unquote, overloved. Maybe it's justifiably loved. The target today at Mellius Research goes to 160 from 125.

Others are weighing in on the euphoria of what they sort of the the the commentary from some that suggests this is too euphoric. They say all-time highs. Yeah, okay, I'll give you that. 99? No, hardly. We're not like that. Is it overloved or is this totally justified? We're just not used to seeing anything like this. So to the layperson, you look at it and you're like, this is crazy.

This stock shouldn't be going up like it has. I think you're right on both points. It is overloved and it is justified. I feel really strongly the 99 comparison is a lazy comparison. Cisco never even remotely had the earnings power. None of those companies. I mean, NVIDIA from October of 2022, which was like the lows, had a $280 billion market cap and a Ford PE of 25. It's a $3.1 trillion company. And what does it have, a 33 or something like that PE? And so it's like justified the earnings have held up. And so I think we're in uncharted waters where I've never seen, I've been in the market since 94. I've never seen a company's earnings grow so quickly with their market cap.

I think what will ultimately happen, and maybe it's a 25 thing and the market will sniff this out early, maybe it's a 26, is when those year-over-year comps stop being 100% and start being 50 or 40 or what have you. Because you do have to digest. These Microsofts and Googles and Metas can't just keep buying the GPUs. They have to digest them and then start to monetize. So when that happens, there will absolutely be a sell-off in NVIDIA. But I think investors right now, I think to Malcolm's point, you have to size it right in your portfolio. I mean, I sold, when the stock hit 130, I sold on October 150 calls and got close to $10 a premium. So I'm really comfortable doing that.

I think it's going to trade sideways. But if in October it gets called away, the part that I sold, I'm comfortable with that. Because you don't want to fall in love with any stock, and you want to be smart about the position. It's hard not to fall in love with this one. I mean, because when you're at 900, you're like, I can't continue to go up like this. And then it gets to 1200, and then you have a split and now it goes off to the races again i'm just wondering malcolm whether you think this has in any way left the market unstable it's the word i used at the top because if you look at under the under the hood of the market as bespoke

suggests today more than half of all sectors within the S&P 500 haven't had a new high in at least two months. Two months. Energy, industrials, materials, healthcare, discretionary, and real estate. Yes, every sector but one is up on the year. But more recently, you've become very top-heavy. Has that made us unstable in any way or not? I don't think it's made us unstable as long as the AI narrative continues to have power. So as long as those names that lead the pack today, and there will be a reversion to the mean, right? We're looking at Apple, I think, just hit 30 times forward earnings. NVIDIA is at like 43 times forward earnings. You've got Microsoft at like 34, I think is the number, versus 27 or 28 on

the NASDAQ. So there will be a mean reversion and there will be some rotation, as I've been saying. But I think we can still continue to hang our hats on those five or 10 names that are really powering the AI narrative, because those are the only ones that are showing a true path toward monetization of the technology. And the market is going to continue rewarding those companies that can show that clear path quarter after quarter. Steph, you've been making bets in the areas of this market that I said are made up of the half that haven't had a new high in at least two months. Where others see more recent pain, you see more exposed opportunity perhaps that exists in those areas. But they need to

start performing again. Yeah, they do. But I do think that they will. I do think we're going to continue to see, like we started to see this week, a little bit of a rotation. It's only a little bit. But I think we're going to continue to see that, especially as we hit earnings. We have to wait until July 12th. So the next two weeks kind of might be choppy, but July 12th is when earnings start. And I think earnings for these other sectors are going to be pretty good. And I say that because I look back and I review all of the economic data. And I know the economic data this week was kind of mixed. I know it was weak on housing, but I still believe very strongly that you're running at about a two and two and a half percent clip on GDP. Inflation is coming down. Margins will be good. And there are certain themes that you're running at about a 2 and 2.5 percent clip on GDP. Inflation is coming

down. Margins will be good. And there are certain themes that you want to play in the industrial, certainly the grid and power and green and clean. And I think I'm very exposed in that theme. I think cybersecurity is going to be very strong. And it's really not loved. I mean, maybe CrowdStrike is. But for the most part, a lot of the other names are not doing as well. And I think they're going to come in with very good earnings. I think some of the consumer discretionary also will be good. The consumer is still solid. And so I think there are other areas, Scott, in addition to energy. Energy has been the most frustrating year to date. But I do think that if the fundamentals are there, eventually people will respect them and want to own good fundamental stories that are attractive. But the fundamentals have got to come through. I'm betting that it will.

I know that, Bryn, down in your part of this country, you know, they're hopeful that the energy trade is legit, legitimately reemerging, if you will, because it looks like it's woken up lately. I don't know whether you believe that this is some, you know, a new run that these stocks are going to have as oil has continued to climb as well. So the energy complex in general had had earnings deceleration and there's a viewpoint and we'll see if that comes to fruition over the next couple of earnings quarters that that's actually going to start reaccelerating. But what I know for certain is there's a ton of M&A in this space. You can go from big to small, a ton of M&A. They are being active.

There's only so much oil in the ground. can put together a portfolio of names that can give you capital appreciation, but also dividends plus those flexible distributions that they make over time to put together a nice return. Is it going to be an NVIDIA return? No. But can it add consistent return over time? I would say absolutely yes. I think that capital discipline is going to stay in this space. And that's what investors need to continue to see to be comfortable taking a longer term allocation. You'd like that space, Malcolm? Energy? Yeah. I'd rather own cybersecurity. I think Stephanie set me up perfectly with the case for why cybersecurity is the next leg in tech. She talked about the fact that it doesn't get the respect

that it deserves. You've been hearing me. It doesn't get the respect that it deserves. You take a look at- One name, two names. Have you looked at CrowdStrike recently? I look at it every day. Palo Alto, I'm waiting on the resurgence. I was happy to see the major upgrade. But other than those two names, can you name me two more than anybody is as passionate about? Steph's passionate about Fortnite. She just didn't mention it because it hasn't done, it hasn't made her happy lately. Which is kind of my point. So I sold off Sentinel One. I sold off CyberArk and I bought CIBR, the ETF, because other than those two names we all talk about every day, there's really no clear consensus around which two or three other names are going to join the party. But I do think there's a case now for consolidation among a lot of the cybersecurity providers.

It's a very fragmented business that needs to have some consolidation to get to this platformization that we've been talking about. That's the word now that has all the juice in the world of cybersecurity. And so I think that when we talk about those two names, it's good to be directionally accurate. I'd rather not have to make that big bet on a name like Fortinet or some others. And so in my case, I decided to go ahead and buy the ETF and just see who emerges as the leader. Makes us wonder at least a little bit, Steph, whether the software trade, you know, these stocks obviously fall within that trade. And many of those stocks within the software sector have gotten clobbered. Whether money is going to start coming out of some of the biggest chip winners and then go into software at perceived value levels.

I think, didn't we see Salesforce, for example, was leading the Dow yesterday in what was a pretty good day? I don't know if that's the beginning of something or not. Well, there's certainly value in the software space. And when you look at the SMH as a whole, it's up 52% this year alone. That's incredible. So it's not just NVIDIA. And so I have no problem with people taking profits and rotating into where there is definitely value. I happen to think, as I mentioned, I think cybersecurity is one of the areas that's where I'm focused on. Yes, I didn't mention Fortinet, but I talk about it all the time. I feel like I'm associated with the name. I do think they're going to come through, especially in the second half of this year. Comparisons get easy. Their bookings are building. Their backlog is

also growing. Margins are expanding. Free cash flow is going higher. So I think there was just a pause in terms of spending from the CTOs. And I think you're going to see a resurgence from the CTOs because we're hearing from them that there are two places and only two places that they're spending money this year. And that is AI for obvious reasons. And that is cybersecurity, because, Scott, they're afraid of losing their jobs. You wake up one day and your business is blown out. I just point to UnitedHealthcare having a billion dollar plus problem overnight. So I don't have any doubt long term that this trend is going to be very good. Maybe short term, you have these puts and takes and volatility. But I want to use that volatility to be buying, especially the companies that haven't participated,

again, given these tailwinds for the long term. I'll tell you what's not lost on me either. It's 16 and a half minutes in today. We haven't talked about interest rates. We haven't talked about the Fed rate cuts or anything like that. And to me, that's representative, Bryn, of where this market is now. I think we're over the obsession because we feel like the economy is good enough, that earnings are going to be good enough, and that if rates are coming down a bit on their own because inflation is starting to get even closer to the Fed's target, that rate cuts at this moment are irrelevant to what this market is going to do over the next few months. I think we have settled in that we'll probably get one rate cut sometime this year when the market

doesn't seem to care. But if it pushes into 25, that seems to be OK. I think the consensus is, especially as long as the long end, which the market controls, continues to have a solid low forehandle, people are like, that's OK. That's good for the economy. And I think that the consensus is if we start to have rate cuts, it's because unemployment is kicking up and something bad in the economy would have to happen. So I think that that's really positive, because you really want this market to have the invisible hand of the Fed out of our environment and let us just run on our own accord and have earnings momentum sentiment drive returns. Not what the Fed or Fed isn't doing or what Neil Kashkari is or isn't saying. That was the Keith Meister viewpoint this week when we talked to

him here on Closing Bell. Rate cuts are bad for the market because they're going to happen for the wrong reasons. They're going to happen because of a problem with the economy, whether it's unemployment going up or just the softness that could be apparent. And then they're going to have to cut. Ankur Crawford here yesterday said, I don't think they're going to cut at all this year. We've, Malcolm, we've sort of, we're going to have to cut. Ankur Crawford here yesterday said, I don't think they're going to cut at all this year. We've, Malcolm, we've sort of stopped talking about the Fed for, you know, the most part. We were leading almost every program talking about rate cuts, this, that, and the other thing. And now we don't talk about it that much, which is probably a good thing.

Well, big tech is in control of this market now, not the Fed. And I think for good reason, like you said, I think to your point, if a cut does happen this summer, maybe even September, it would startle the markets to think that something is underpinning that decision, whether it actually is or not. So it would be bad for markets, which is absurd to say at this point, when this time last year, we thought that we needed cuts in order for the market to get to where we are today. But now I'm in complete agreement that the Fed is not in control of this market. And I hope that they'll wait until 2025. I don't expect we'll get a cut this year. I hope that they'll wait until 2025 and then we can worry about making our markers from there. We'll see. All right. We'll leave it there. Bryn, thanks. Steph, you as well. And Malcolm here on set with us at Post

Nine. Thanks. We'll see you soon, too. Let's send it to Pippa Stevens now for a look at the biggest names moving into this Friday close. Pippa? Hey, Scott. Well, shares of Sarepta Therapeutics surging to the highest level in more than three years after the FDA expanded the market for the company's gene therapy for a rare form of muscular dystrophy. Evercore ISI saying the broad label is, quote, the best case outcome for Sarepta. For more, be sure to catch CEO Doug Ingram on Fast Money today at 5 p.m. Eastern. Meantime, Palo Alto Network's also in the green after DA Davidson initiated coverage with a buy rating and $380 target.

The firm's saying that three platforms are better than one, noting Palo Alto's total addressable market could more than double by 2028, shares up 2.5%. Scott? All right, good stuff, Pippa. We'll be back to you shortly. We're just getting started here. Up next, the high net worth strategy, how Morgan Stanley's Chris Toomey is positioning his clients amid this record run,

and why he's looking beyond mega cap tech for more upside. Makes his case next right here at Post 9. Welcome back. Bit of a middling end to a record-breaking week. S&P 500 and Nasdaq struggling for direction after hitting all-time highs yet again yesterday. Markets searching for whatever the next catalyst might be. Joining me now, post-9, Morgan Stanley's Managing Director of Private Wealth Management, Chris Toomey. Welcome back. Thank you. Good to see you. Number three, your team is ranked on Barron's top 100 private wealth management teams. That was as of a couple of years ago. $12 billion in assets under management. $16 billion. $16 billion. He's growing his AUM, too. That's what those health funds. That's the job. You're trying to preserve that money. I always

like to point out when people like you come on, the kind of clients that you have care more about keeping their wealth than they do taking a lot of risk to grow it to even higher levels, correct? Is that fair? Yeah. Of course, they want to see their money grow, but they'd rather preserve their capital. I think that's fair. At the end of the day. Look, I think that's the first part of it, right? They don't want, they worked really hard for this money and they don't want to see it go away. And the other thing is, is just the math of investing in such that,

you know, it feels more painful because it is. You lose 50 percent. You don't need 50 percent to get back to par. You need 100 percent. Right. So the name of the game is preserve capital and compound on it. It colors the way, though, that you not only, I think, view the market more broadly, but also the types of investments that you make. So we've sort of painted you as pretty cautious for the last at least year. That's not to say you haven't been invested. Obviously, you've been doing something right, but the market continues to go up. Okay.

Yep. And we continue to set these records every week, it feels like. Correct. So has that changed your view to be a bit more positive than you've been? I mean, look, I think we have been cautious. We have been underweight equities. Part of the reason why we've been underweight equities. Part of the reason why we've been underweight equities has been there's other things that have been more

attractive to us that are giving us kind of an equity-like return, right? So we talked about private credit. We talked about triple net lease. We talked about secondaries. All of those things, because rates are at these levels, provide us almost an equity-like return with a lot less risk to your earlier point. I think the thing that's concerning us, and I know that you were talking about how we haven't talked about the Fed, I'm going to talk about the Fed, is the fact that we really have a bifurcated economy and we've got a bifurcated market right now. So if you look at the economy right now, if you look at 80% of consumers, you know, the bottom obviously struggling the most, but up to that top of the 80% range are really struggling, right? They've got credit card debt that's over $1.3

trillion. They've got delinquencies picking up. They've got deficits continue to rise. And you're in a situation where that part of the economy is really struggling. And then the 20% is doing exceptionally well. And it goes back to Rick Reeder's point made earlier this week about abundant income, right? So that 20% that has assets that's locked in financing, they're benefiting from this higher rate that's giving them almost $1.3 trillion worth of new income that they can put back into the market. The other 80%, though, is dealing with $1.3 trillion worth of credit card debt. So you've got this bifurcated market or economy, and then you've got a bifurcated market with regards to, I think, the top 10 stocks now account for almost 80% of the returns, right? So in an environment where the market is making new highs every day, you'd expect a place like

small caps to be doing exceptionally well. Why? Because they typically lead those rallies, right? If you're getting a real bull market, right, smaller companies should be doing well. Not with rates where they are. Well, that's the point, right? So they're struggling. So 50% of small cap companies are struggling right now. They're in a situation where they can't refinance debt. And they're in a situation where their return on equity continues to be lower and lower because of that debt debt. And they're in a situation where their return on equity continues to be lower and lower because of that debt burden. And so the market is punishing them for that. And so that's where you've got this kind of dichotomy where it looks like, on average, the market's doing great. It looks like the economy is doing great. But it's really in the

polls. And I think the thing from an asset allocation standpoint that's really working for everyone, and this is something we talked about before, is they own high quality right now. So they don't own highly levered companies. They own the secular growers, and that's the core part of their portfolio. They're not allocating to international. They're allocating to small cap. It keeps going into these high quality names, right? The question is, and I think you're posing this right, is this unstable, right? And I would pose that this is not healthy, right? If you look at the technicals right now, we're way overbought with regards to technology. And granted, it is validated by the earnings power that these companies have.

But at some point, price has to matter, right? And so price in the short term doesn't matter. In the long term, it definitely does matter. And especially when it's as concentrated as it is, you only need one small slip up for the market to start come crashing down. Right. And so I think that's the concern we have with regards to equities and why we want to control our exposure there. So, I mean, there's no look until until there is that moment, this market can continue to go up. And, you know, for people like Ed Yardeni, whom I cited earlier, say it's not just a multiple expansion market anymore. It's an earnings driven

in part as well. Like you have to give earnings some credit somewhere. Totally. So, I mean, take last year, right? So if you look at the market, you had the Magnificent Seven or the top 10 companies, they generated over 40% in earnings growth, but the stocks were up over 100%. So you had almost 50% in PE expansion. The rest of the market was basically flat to negative, right? This year, it's this same continued response where the majority of the return on equity is coming from these 10 stocks and the rest of the market is being left behind. And I don't think that's healthy. And I think at some point you're going to start to see breakage. I think the key concept here is we're in this Goldilocks situation. We're in a situation where economic growth is good enough and inflation

is coming down well enough that the Fed's in a position where they don't have to raise rates, which is providing some good things. You've just made the bull case. Why are you underweight equities? Because what's going to happen is that bifurcation is only going to get worse. So those 80 percent are going to continue to suffer within the economy and the rest of the stock market is going to continue to... I don't think it's correct, honestly, to suggest that 80% of consumers are in as much trouble as you would pretend them to be. 80%? I don't think the economy would be printing what it's printing if 80% so of the 70 percent of the consumption that happens in this country is in in that dire of straits now i obviously understand that there

are a lot of people as part of that you know consumer cohort who have been dealing with these levels of inflation which has made their livings miserable to try and keep up. But to suggest that 80% of the consumer is in that bad a shape, I feel like is not exactly correct. So if you look at our consumer studies, what you'll see is the bottom 20% is the one that's really suffering. But what you'll see within that top four is the fact that consumption is coming down, okay? And things are slowing. And what's happening is, is because that top 20% is over 40% of consumption, they themselves are lifting the economy, as well as the fact that if you look at the fiscal stimulus that's going on in the economy right now, typically we have about a 2.5% to 4% deficit. Right now we're at about 10%.

So we're actually pumping liquidity into the system, right, at a time where rates are at 5%, right, and we're having to issue more and more treasuries. So next year our anticipation is that they're going to increase issuance by over 35% at this level. So that deficit is only going to get worse. So my point is rising rates are going to create a problem within the economy. Now, the good news is I think if we do start to see the market sell off, right,

because we are extended, we could see a 5% or 10% pullback. We had a 5% pullback not that long ago. No, we had a 4% pullback. We had a 5% pullback. And I think if we had a 5% pullback not that long ago. No, we had a 4% pullback. We had a 5% pullback in October. The thing is, is that typically we have about a 1% move up or down in the market 20% of the time. We're probably trending around 5%. We typically have a 5% pullback three times a year. And we're in a situation where we haven't had one since October so we are due is my point and the thing is is that I think once you start to see kind of the tech situation come down there are going to be opportunities in some of these ifs. I think it's when I don't

necessarily think it's if I think we will see a pullback maybe not right now we're going into the end of the quarter so you're getting a lot of rebalancing with regards to indexes. You're seeing a lot of window dressing with regards to active managers that are increasing their exposure to certain stocks. So they look good in their marketing position. But I think come earnings season, you can start to see some rotation. It's going to be interesting. It's not that far away either. It's good to have you back. It's good to be here. All right, Chris Toomey. Coming up, a small price to pay. T-Rose, Sebastian Page is back. It's good to be here. All right, Chris Toomey. Coming up, a small price to pay. T-Rose, Sebastian Page is back. He's bringing a new trade idea to help investors generate alpha

from here. We have the reveal. We'll find out how he's navigating this rally and closing bell returns. All right, we're back. The growth ETF has been outperforming the value ETF by more than 15% so far this year. No big surprise to anybody who's been watching this market, obviously. Well, my next guest is recommending taking profits from growth and further allocating them towards value. Joining me now, Sebastian Page of T. Rowe Price. Good to see you again. Great to see you, Scott. I feel like this is a controversial call

of sorts to go overweight value. I read that stat about all those sectors that are perceived value that are like 20 percent off their highs that are not even close to performing as well as growth. Yeah, it's contrarian move, Scott. You know, I've been watching you and your guests on halftime and closing bell last couple of days, and I have two takeaways. One is, of your guests have said this is not 2000. But at the same time, Scott, pretty much everybody now is getting uncomfortable with the level of market concentration. I think this level of market concentration longer term is not sustainable. So, you know, you start looking at value for broadening. The valuation case is not sustainable. So you start looking at value for broadening, the valuation case is clearly compelling. Historically, when it's been in that range,

you get 5% average 12-month outperformance from value. And if you look at catalysts, I'm interested in fundamentals here. Because by the end of the year, the year-over-year earnings growth for value is actually expected to outpace year-over-year earnings growth for growth stocks. And that is because of the comparables, those being much, much easier for value. From a lower base, I mean, so to speak. Yeah, so it's potentially a passing of the baton.

And then you look at macro. Are there macro catalysts that could help? Well, I was on our allocation committee this morning, and we were talking about the election and how the election could actually be a catalyst if you get less regulation, lower taxes, potentially more M&A. This could favor value. We have a view that, you know, at 1.6 percent market pricing for inflation, one year break even, we have a view that we're going to get more stickiness than that. And, you know, potentially slightly higher rates or upward pressures on rates. All of those could favor value and be the catalyst that would unlock that valuation advantage.

But, you know, like all your guests over the last couple of days, you got to be respectful of the AI freight train. So this is a tilt where you own growth stocks. And as you said in the intro, you're making a lot of money on growth stocks. So why not sell some, take the profits and start to diversify into value? Only because value has been unreliable, right? That's why people have such an issue with it. There are a lot has to go right, you would think,

for value stocks to start really doing well. And I don't mean doing well for two weeks like they have in the past or one month because it's reversed and we've gotten back concentrated into growth. Yeah, Scott, I think it's a combination of a correction in this extreme concentration of the growth side and also a passing of the baton in the fundamentals where you get accelerated earnings growth because the comparables are much easier for value. And then you have some macro factors that can come into play. So that scenario, if you take like a 12-month horizon, I think it's quite likely. I still believe there's a very good secular long-term case for technology and for growth stocks. But if you take a 12-month horizon and you look at the level of concentration and all

this discomfort that many of your guests have expressed at halftime or closing bell over the last couple of days, I think you can begin to make the case for value, especially since you're taking profits, you've just made so much on growth and you're just balancing your portfolio. A lot of portfolio managers are hitting concentration limits anyways on some of these stocks. I appreciate you promoting both programs. Sebastian Page, doing work for us. Thank you. We'll talk to you soon. Thank you. Have a good weekend. All right. Sebastian from T. Raw, obviously. Up next, we're tracking the biggest movers as we head into the close. Pippa Stevens back with that. What do we see now, Pippa? Hey, Scott. Well, one air-flying parts

manufacturer taking off on a potential deal. The details coming up next. Just less than 15 minutes to go before the closing bell. Back to Pippa Stevens now for a look at the key stocks as she is watching Pippa. Hey, Scott, Spirit Aerosystems rising after Reuters reported Boeing is nearing a deal to buy back the supplier. The two sides have been in talks for months, and Reuters, citing people familiar with the matter, reported a hurdle involving Airbus has been cleared. And Hertz is jumping after upsizing a bond offering to $1 billion, more than the initial plan of $750 million. It comes as Hertz looks to revamp its fleet away from higher capital cost vehicles. That includes selling 30,000 EVs, with Hertz saying it's already sold 19,000. The stock

up nearly 16 percent. Scott? All right, Pip, appreciate that. Thank you. Still ahead. Don't bank on it. Those stocks coming under pressure recently, falling nearly 6 percent in the past month. Now regulators are flagging issues with their, quote, living wills of four big U.S. banks. We have the details coming up. Stress tests are next week as well. We'll see you in a little bit. Coming up next, a run for your money. Nike shares down more than 20 percent in six months. One Wall Street firm now says it's time to buy ahead of earnings next week. That story and much more inside the Market Zone next. We're not the closing bell market zone CBC

senior markets commentator Mike Santoli here to break down the crucial moments of this trading day. Plus U. S. regulators finding faults today. With the living wills of four major banks Leslie picker of course following.

The money for us there what it means for the group Mike I. Turn to you first we do have. An upgrade today from Nike. Yeah which I want to you first. We do have an upgrade today from Nike, which I want to chat with you about real quick, because we did a screener on Pro, which gave a number of stocks today that could be on the comeback. And they believe Oppenheimer does as well. They forecast a 25 percent rally. Yeah. Part of the premise here is that when Nike reports next week that it's going to be, quote, the last bad quarter. So they've been a serial

disappointer. The idea is they may trim guidance again for the current fiscal year, but that then you kind of have it behind you. I wouldn't say you're talking about a washed out stock. The majority of the street is still recommending it, but it is at a pretty low premium valuation to the market relative to its own history. I think that you can hang your hat on that a little bit. Is it getting down to, you know, sort of that core brand value at this point for the franchise? You handled that well. I threw you out of order. So you tap danced around that pretty well.

I can reshuffle. So what's your, are we having to reshuffle the market since so you use that word it's at least an incipient one yeah I wouldn't say right now it's some kind of really forceful rotation into other themes but without a doubt the break in NVIDIA was the cue for the high momentum stocks to really sell off a little bit get some profit taking the top five stocks performing today in the S&P 500 Are all down on the year on the performers the bottom five stocks. Are up between twenty two and one hundred fifty percent on the year that just shows straight

mechanical mean reversion on an expiration Friday we'll see if that cleans up. The landscape for trading on Monday I don't think it's necessarily the all of a sudden. Hey we're going to go back. And we're going to buy all the sick goals in the

industrials it could happen. You do have these things happen on the fly once in a while. I would say energy and financials are up nicely this week. But for that to really take hold, you need greater conviction in the soft landing story, the broadening of earnings story. And I don't think we're coming from a low base on that, but we need confirmation. Have you ever seen a stock add $880 billion in market cap in 21 trading days? No, no, no. There's no chance. I mean, you're down like, NVIDIA's down, what, 8%, 9% off the high yesterday.

It's only back to where it was a week ago. So it's gone vertical. Everything we said in terms of the superlatives is true and valid in terms of how much it's piled on value in a short period of time. How much of that needs to unspool is a good question. I do see some echoes with what happened back in March. And you did get like a 15% plus pullback in NVIDIA. It didn't seem to amount to much. It certainly didn't change the trend.

But it did, I think, put people on notice that these are not necessarily necessarily going to be a smooth ride, even if the long term trends are good. All right. We're watching the financials, which you mentioned as well, because regulators talking about the living wills today and not exactly giving a grades. Now, say Leslie Picker, who follows this for us. What are we learning? Not a great. It's kind of a slap on the wrist for most on these. Regulators finding weaknesses associated with the 2023 living wills of four major banks, the Fed and the FDIC, said today that each of the 2023 plans submitted by Bank of America, Citigroup, Goldman Sachs, and JPMorgan contained a specific shortcoming. That is the regulator's term, the shortcoming in the firm's strategies if there were material distress or failure. The agencies were divided, though, on Citigroup. The

FDIC determined that the Citi plan wouldn't facilitate an orderly resolution and deemed its weakness kind of a notch down, a so-called deficiency. But the Fed said that Citi's plan had a shortcoming, that's the less severe mark, and because they disagreed, they gave Citi the less severe shortcoming result. Citi said in a statement to CNBC, quote, while we've made substantial progress on our transformation, we've acknowledged that we have had to accelerate our work in certain areas, including improving data quality and regulatory processes, such as resolution planning. The firm said it continues to, quote,

have confidence that Citi could be resolved without an adverse systemic impact or the need for taxpayer funds. Goldman Sachs and J.P. Morgan declined to comment. Haven't heard back from B of A yet, but the shortcomings are expected to be addressed in the next plans due July 2025. Scott, didn't you say earlier today that the stress tests are the results of that or next week? Yes. More important, I think we can say to stock direction than this. Absolutely more important because these are what determines how the banks perform in an adverse economic

scenario. And so based on those results, which we see every year, they get a certain stress capital buffer, which is a number by the regulators, which determines how much they can, if they so choose, return capital to shareholders. And that is much more indicative of the stock price than these shortcomings. Leslie Picker, have a good weekend. All right, Mike, you had the two-minute warning. You heard the sound effect. Triple witching. Maybe we're looking for a little more volatility. Not so much as we head towards the close, but it's on the other side of this that some people have suggested. Sometimes the market kind of starts to move a little more freely. I do think that what you're still seeing, even though it's the different set of stocks that are

up versus down, you're still seeing wide divergences you have a very even split today. In terms of what's up. And what's down just this general sense out there. That the overall index. Is being held captive by the offsetting currents of. You know either it's. Growth secular growth

momentum. Or it's sick goals on the other side. I guess that that trade is not yet. Quite been banished and so. It's not just about I think, the mechanics of it. It is about the macro backdrop, which says nothing we have to rush to price in just now in terms of the Fed path, in terms of growth faltering at the moment. But it is fascinating to see the way that the market can maintain

this really slow orderly action at the index level, even while a stock goes to $3.3 trillion and loses 9% in two days. All right. Well, the bell's going to ring in a second. It's going to be a mixed close here. Dow looks like it's going to eke a gain out. S&P will be a modest loser. Of course, we're watching the NASDAQ, too, which is modestly dead. NVIDIA is certainly the big story. We'll track it all as we begin a new week on Monday. Have a great weekend, everybody.

And I'll see you next time.