Closing Bell - Closing Bell: Gundlach reacts to Fed’s Rate Hike 7/26/23

Episode Date: July 26, 2023

The fed raised rates another 25 basis points – the fed’s 11th since this all began a little more than a year ago. DoubleLine’s Jeffrey Gundlach gives his first reaction. Plus, New Edge’s Cameron Dawson weighs in on the fed decision and what it could mean for the markets. And, a break down of what to watch when Meta and Chipotle report after the bell. 

You're listening to Closing Bell in Progress. I'm Scott Wapner. We are live today from Double Line Capital in Los Angeles. And Jeffrey Gundlach joins me now for a CNBC exclusive interview. It's good to be back here in Los Angeles with you. Indeed. Welcome back. It's been a long time. It has. We continue our streak of Fed days with you. Your reaction to the decision when you were with me in June, you said, quote, I don't think the Fed is going to raise rates again. Yet here we are. Yeah, they raised again. And obviously,

the bond market was way ahead of this. I mean, the warp function, which gives you a probability from the shape of the short and the yield curve was over 99 percent. And I don't think we've had one meeting really since this all started where there's unanimity of opinion that, A, there was going to be a hike, but that there wasn't even a debate that was going to be 25 or 50. So they're obviously slowing down. The yield curve remains inverted. It de-inverted there in the aftermath of the regional banking problem with SVB. And that was a real recessionary sign. That was a moment where the markets were getting pretty nervous because the recessionary signals really, you get on a watch when the yield curve gets very inverted. But as

was brought up in some previous guests on your network today, it's when it starts to de-invert that you really get worried. And that stopped happening once the bank crisis calmed down. So the de-inversion is what you have to look for. And it hasn't really happened. I mean, we're back out at about 100 basis points, twos, tens. And we're really inverted from the three-month bill to the 10-year treasury. We're watching for that. We're also watching for the gap between consumers' views of the present start to deteriorate and meet up with sort of what they have with the view of the future, which is almost always on the pessimistic side. It's kind of weird.

They always think it's going to be a little worse in 12 months. That has started to narrow a little bit, but not enough yet. So the other thing that's really important, I think, why I thought that the Fed wouldn't raise rates, and I think they shouldn't have, I kind of agreed with David Kelly, who was on right before I think the statement was announced, that they have the right to be and a reason to be careful here. And we've been talking about this the last few appearances I did with you, that inflation is coming down. And the headline CPI went from 9.1 to, I mean, people say it's three, but amazingly, it actually has a two handle. If you go to the two decimal points, it's 2.98.

And there's big numbers rolling off for the PCE, particularly the core PCE, in the next three to four months. It's possible the PCE could go down to a three handle on the core level, really, this coming month, because there's a big number rolling off. And that the headline PCE, which nobody really talks very much about, but it could go down into the twos fairly soon. So we believe that the inflation rate is pretty much where the Fed should really be happy with where it is right now. I did a funny study. I said, we keep getting this rhetoric of the 2% average inflation rate over time. Do you know what the core CPI averaged over the last 20 years per annum? 2.0%. It's exactly there. So we're exactly there. And if you took headline CPI and replaced the

owner's equivalent rent, which is a big slug of the headline CPI, if you replaced it with actual home price movements from these indices, the CPI would not be 2.98% on the headline. You know what it would be? Zero, if you replaced owner's equivalent rent with home price appreciation. So I think the Fed should take David Kelly's advice and try not to just be on a programmatic sort of situation because the data seems to be getting a little bit better. What I hear you saying is that the Fed should declare victory in a sense

out of this whole thing and go home, that they shouldn't hike anymore because they don't need to. I don't think they do. That was kind of my point of view when we spoke last time. So I think, you know, obviously what's really changed a lot is psychology. I mean, the stock market, particularly the NASDAQ, is up a ton. But one thing that's interesting, it feels like it's in a nonstop tear. But the asset class that actually has the highest return since the last Fed meeting, amazingly, is commodities. The BCOM index, thanks to a lot of the surge in agriculture, it's up 8%. The NASDAQ's only up 4% since the last Fed meeting. It feels

like it's up a lot more, doesn't it? And I think that because of the tear year to date for the NASDAQ, I think there's an opportunity now for investors to be more value-oriented. The Dow Jones Industrials is only up 8%. The NASDAQ is up, what, 38% or something like that? Well, the Dow's catching up. The Dow's going for its 13th straight day of gains. Every day, every day. But still, I still think there's catch up there. I think the manufacturing prices paid and so forth are looking somewhat encouraging. Also on the inflation side, Scott, I like to talk about certain types of inflation numbers. One of my favorite is import and export prices because they don't have any of

these hedonics. They don't have seasonal adjustments. They're just prices. And they were just off the charts a couple of years ago. And that's why I said everyone is way underestimating what's coming in inflation. But people don't pay enough attention to this. These are down in the negative double digits now year over year. The one of them, I can't remember which is which, but one of them is down about 11% or so. One's down 18% or so. That's a real disinflationary type of pressure. So I think that obviously if we just zoom out, when we dumped all that money into people's pockets and encouraged them not to work, it was obvious that we were going to have a bulge of economic distortions. And one of those everyone should have known was

going to be inflation. And that's still sort of bubbling through the system. One thing that a lot of economists talk about, and I think rightfully so, is M2 is negative year over year. And so when you start with that, you think, wow, inflation's really going to be shrinking. But one thing that people aren't really paying attention to is the bulge that occurred in 2020 and 2021 is still sort of with us. M2 is negative year over year, but the monetary base is still huge. There's still money sloshing around from all that stimulus. But isn't that then why Powell suggests, and he did again today, that recession is not his base case? That the cushion was so big, as you rightfully point out now, going in, that it can provide enough cushion on the backside as inflation, as you also said, is coming down.

Why does there have to be a bad ending? Well, I just feel like just historical patterns, when you have inverted yield curves and you have credit conditions tightening, I just think it almost always just leads to some sort of a catalyst occurs, and you start to realize why the bond market is sussing out this inverted yield curve and all other stuff. But I think you need some sort of a shock to the system, and that hasn't been happening. It felt really bad earlier this year, but things have really calmed down. The bond market yields and the Treasury market are the same as they were at year end.

They're the same as they were last September. They haven't changed at all. And that's led to a calming effect on psychology because the volatility of the bond market was such a stomach turner last year, and it led to bad returns everywhere. But the bond market's been completely well behaved this year. Returns are not terribly high. If you go down in credit, you've got good returns. Triple C corporates, which I don't really ever invest in heavily, but they're up double digits. Junk bonds, bank loans are up seven to eight percent. It's pretty good. And it's done it with not a lot of volatility, except for that window of the regional banking crisis

that scared everybody. Let me bring in our Steve Leisman, who was in the room, as you saw, asked the very first question. Steve, you heard Jeffrey Gundlach, and he's not the only one, suggesting that the Fed shouldn't have gone today, that they shouldn't do any more because they don't need to. It's not exactly the tone you got out of Chair Powell today. No. No, Powell is keeping all

of these meetings live. He wants you to believe that there is still the possibility of a rate hike. He's not ready to say that inflation has been vanquished or that the Fed's job is done. Maybe we'll just listen to what he said about the possibility of a hike in September. I would say it is certainly possible that we would raise funds again at the September meeting if the data warrant it. And I would also say it's possible that we would choose to hold steady at that meeting. We're gonna be making careful assessments as I said meeting by meeting and I'll close by saying we've raised the federal funds right now by 525 basis points since March 2022. Monetary policy we believe is restrictive and is

putting downward pressure on economic activity and inflation. Scott, Scott there's a bit a game going on here. Let me see if I can explain it. I'm interested in what Jeff thinks about it. I'm thinking about Powell like a jockey on a horse that's well known as a closer. And he's hanging back on the reins. He does not want that horse to run, at least not yet, because he does not want the market to believe that either the Fed is on a long-term pause or that it's eventually going to be cutting rates anytime soon it doesn't want to have a dramatic loosening of financial conditions because it doesn't feel like he's really vanquished inflation just yet so I think the reason why these quarter points hang out there,

not that they're incredibly consequential necessarily by themselves on a nominal basis for tightening financial conditions, but they do, I believe, keep the market from running. And I think that hangs a bit like an anvil over the head of the market, the idea that you could get another quarter point down the road. Jeffrey, what's your reaction to that? I agree with that. I think that today's meeting I would characterize as being as bland as you can possibly get in that basically the answer to every single question is data dependency, which makes a lot of sense to me. The two-year yield has not gone to new highs. The 10-year yield is lower than it was

a year ago, or about the same as it was a year ago. And so I think the Fed should be data dependent, and they don't have a preconceived conception. It's quite clear to me. And I certainly agree, though, that they don't want to loosen financial conditions. But financial conditions have loosened if you look at some of these indicators. And it's largely because like the VIX index is down. It's that volatility is down. That's what's really, that's one of the biggest drivers of why financial conditions are looser. So they actually are pretty loose if you look at the that uh... that those uh... those those charts uh... and i do i do agree that the fed wouldn't want to uh... get more overvalued say s and p five hundred with a big a big running of the

horses steve uses the analogy because they have some people others people expecting re-scope you know ten percent or so by next year but if they don't you feel like what by half of that you're looking at a pretty high p uh... on it you got a forward basis of probably 21, 22 times. And that's kind of a lot. And a lot of this is driven, of course, by almost a mania type of feeling with that burst of the AI, the acceleration of the AI stocks, which reminds me a lot of the dot-com situation. I mean, it might end up being an excellent moneymaker, just like the dot-com situation. I mean, it might end up being an

excellent moneymaker, just like the dot-com stuff, if you held on to it, went to new highs, and some did super, super well. But it's got that feeling of a chase going on. Steve, you know, you've got a good handle on reading the room, I guess, as they say. And you know the chair well enough, I think, at this point, and certainly how to read him, and not only his language, his body language, etc. Do you think that this was the last move in this cycle? I thought you were going to ask me if you think he was going to go to another Dead & Company concert.

I could have answered that question a little more easily. He might. He might. I don't think he was going to go to another dead and company concert i could have answered that question a little more easily um he might i don't he might he might i i i don't think he's necessarily done yet i think he's got a committee scott and the committee was committed uh not committed they they have strongly forecast that second hike in there um they may yet do it but if the data does turn dramatically the other way um and some of the numbers that Jeff was talking about become reality, a 2% handle on maybe a headline PCE, that would be a very big deal. And you could see what would, I think, happen is I don't think Powell wants his committee to fray. And there would be, if there was enough data, another month of data. Friday, by the way, is a very important

day. We get another round of BCE data. And then the next one after that's going to be important. The idea that if you get a couple of these in a row, Scott, remember, they were burned badly in January, and I think this was very instructive for Powell. You know, not only was the February data lousy, but they went back and revised the November, December, January data that showed that improvement.

So he's going to be cautious here. If you do get a couple of good ones in a row, I think he likes this period. I wouldn't say he's going to move in September. I feel pretty confident he wants to, if he does anything, do it in every other meeting basis, even though he wouldn't commit to that. I think that's how he wants to do things. But I think he comes back. And if the data supports it in November, he would do it if you remain, as he keeps saying, far above target.

If you're still on a 4% or 5% core number, I think he'll hike again, if you ask me. I do want to say one other thing about his sense. confident and feel pretty good about the outcome here of being able to bring down inflation pretty sharply and not have a big negative effect on the job market. I think he feels pretty good and pretty confident and feeling pretty successful about the idea of this soft landing, Scott. Steve, I really appreciate it. I'm going to let you go. I love the engagement of you and Jeffrey as well. And I want to continue that, too, when we visit with you guys on Fed days. Thank you, Steve Leisman. Look, you guys don't think that Powell is going to pull this off. I mean, your deputy thinks we're going to have a deeper recession and that the Fed's going to have to cut 100 basis points.

Well, I think one fell swoop. I think what Sherman was saying there is just simply observing that. And I think this was David Kelly again, he said they take the escalator in bringing rates up and they take the elevator on bringing rates down. I just think that the pattern of this economy has been that when something happens, exogenous shock, that all of a sudden there's a radical rethink of the economic situation. And the history has been some pretty aggressive rate cuts when those problems occur. And I'm wondering about the housing market, which has really baffled everybody because you would have thought with mortgage rates going up by 500 basis points or 450 anyway, you'd have thought with the home prices up so much and the mortgage rates up so much that the housing trend would have weakened as it started to. But amazingly, they've gone up

four months in a row. And the drawdown on the average median home price is almost non-existent again. We're almost near where we were. And so the reason that's happening, though, is because there's a huge bid-ask spread that's going on. The sellers are reluctant to sell unless they get a really high price that they have in their mind because they've got this mortgage at 3%. And what are they going to do if they sell their house? I mean, their mortgage is one of their most valuable assets, actually. You can actually have your 3% mortgage and put in T-bills. Just put money in T-bills and you get an arbitrage

spread there of about 250 basis points. So the sellers are in a good, the owners are in a good situation, but the buyers, they have to confront the seven and a quarter mortgage rate on the 30-year bank rate as well. And their wages have been going up, which is good, but this recent move back up in housing prices is sort of problematic. I wonder at what point we're going to start seeing a shrinkage of jobs in the real estate market, because obviously this gap is creating what I call the bid-ask spread, if you will, on the home transactions. There's almost no activity at all. So this data could be highly misleading as a forward-looking indicator because there's

so few transactions that if there was a reason that would create catalysts for selling, I think that there could be a lot of downward movement in those markets that have gone up a lot. At what point do you say, you know what, I'll be darned, they actually pulled it off? They actually pulled off a soft landing, they were able to crush inflation without crushing the economy? If we get the 2s, 10s spread to be 100, 150 basis points, and inflation is at a two handle and not a zero handle, which is one thing that I still think is plausible here. Then, you know, I think if that happened,

you would say that we're in a normal situation again, and they pulled it off. But Powell has maybe learned from his big mistake of transitory inflation, because that's a real egg on the face sort of a thing. I mean, they thought it was going to stop at around four and it went to nine on the headline CPI. I think he's learned from that. But I think he needs to focus again on the fact that maybe he's making an echo of that mistake. Maybe inflation is going to go lower with these import export prices, with the balance sheet reduction, some of this. I'm not really worried about inflation in the short term at all. What's the best play then right now for you? You still like the long end? I have the long end. Long bond has not done much this year. It

feels like it's spent a lot of volatility, but it's only up a few percentage points. I still like for the short term, and this is something that you have to be careful with, because if the economy rolls over, you've got to be dancing near the door. But I like the BBB bank loan sector still. Their floating rate, their coupon just went up another 25 basis points today. They're cranking out returns in the first half of this year of about 8%. I don't like the lower tier of that asset class because the interest rate risk is so high and the yields they have to pay above the Fed funds rate or SOFR are so high that I think

there's really growing default risk. And I think that's one of the stories that's going to be coming that may make it so that they can't say that they pulled it off is the default rates could very well be going up as lending standards are tightening. And that is something that I think is in prospect for the next, I don't know, six to 12 months. I still like the asset class, particularly the BB category. At the present moment, the cash flow is really, really high compared to where it was even just 18 months ago. Do you think rates have peaked? We're looking at treasuries right there on the screen. 483 is where the two-year is today. Yeah, I said, Scott, when we were down in Orange County back last September at an event, I said, I think the 10-year's already peaked. And I was right. The 10-year has has been very very calm and is not not even that it's fairly far below

where its peak was i mean it's about 40 40 50 basis points below and even the two-year treasury has peaked uh with the fed raising rates you know since the regional bank crisis it hasn't put the two-year into any sort of form of distress. So yeah, I think rates have peaked. I'm completely comfortable owning treasuries. I say I like these bank loans, the higher quality bank loans. I think the dollar has started its weakening trend. We see that with the commodity price bump. I don't mind commodities that much now with the dollar weakening. And I think there's a good opportunity for emerging market debt investment that, unfortunately, I think is a little bit late because the spreads have tightened so much. We're down to only about 415 basis points on a basket of EM.

And the average spread has come in a fair amount, but what's really come in is the low, the dregs, the triple C categories. Thanks to the stock market going up so much, particularly the NASDAQ from about February or March on, I guess, there's been a little bit of a rush to lower credits and grabbing at yield and stuff like that. Do you still like India? I do. It's doing okay this year. It's not up as much as the United States, but that's a long, long-term play. I think the demographic set up there

and the need for political and legal reform is very acute because they need to deal with the same type of demographic bulge that China was faced with about 30 years ago. And you know what happened to China? Their GDP went up 10 times or more over that time period. And now they've went from 10% of the U.S. GDP to 75 or 80. I think that's going to happen in India. And so I've been invested there for a long time. And I just would put that in a core portfolio and just don't worry about it because it's a long-term play for your grandchildren's college fund. When do we get the first rate cut,

do you think? I think the first rate cut will come next year, I think we'll get it. I think it will be encouraged by a drop in, ultimately a drop in two-year yields. And I think the steepening yield curve there and the lower inflation rate is a big part of that. I think we're going to see 2% inflation in the PCE. I don't know about the core PCE being quite that low, maybe at a three number. I think the core, I think CPI is going to be living in a two handle. And I think we're going to get there in a few months. And I think we're going to stay there.

I mean, who knows? I mean, oil prices go to 200 or something. All bets are off. But I think it can stay there. And that's why I think Fed, what you said, I mean, I think they sort of have a little bit of a mission accomplished mindset, or at least they're entertaining that idea. They're playing with it because this meeting was a lot different than a couple of meetings ago where there was dissensions. And is it 25? Is it 50? And now it's just unanimous.

25, data dependent, data dependent, data dependent. And I think the data is not going to be supportive of more rate hikes. I mean, he's still fixated on the core, as he said today, which he suggested is still too elevated. Yeah, the PCE core, but that's coming down. There's 1.8% that's rolling off in the next four months or so, and it could drop another percent. So that number could definitely be in the threes, in below three and a half this year, before the end of the year. And I think that if you have the core PCE in the below three and a half,

and you have the headline CPI at two and a quarter, which is our base case, based upon today's commodity complex. I just don't I don't don't think there's any reason to hike at all. I mean, he still suggests that it's it's just way too elevated and that it's going to be more sticky, perhaps, than than people would suggest. That's why I say I think he's doing an echo of his transitory mistake. I just think it was so obvious that inflation was going to go up much higher than the Fed thought in 2022. And everything that we're looking at, we think it's going to be the trend remains in place for these lower inflation prints. I think I think Jay Powell is just a little afraid to buy into that because if it doesn't happen, he's got a problem.

But I think it's going to happen. Well, also, you have to take into consideration, too, I think what Leisman in some respects suggested, and maybe you did as well, words versus action. They have to talk the way they are. He has to say the things he is saying on days like today. Whether the actions follow the words remains the central question. That's right. But nobody's even pushing back in this present moment, this present environment that the Fed just says we might raise, we might cut, we're data dependent. The market is completely accepting of that. Well, don't you want that? Why wouldn't you want that?

I'm not saying it's a bad thing. And I think that's why the stock market went up so much in the middle of this year. I think that they were being increasingly calmed that we're slowing the pace, right? We went from 75 to 50 to 25 to nothing, and now we're 25. I mean, the trend is fairly obvious here. And the market moves ahead.

I mean, it discounts. It's amazing. Last March, everybody thought, the bearers, it was like all-time bearish readings. And, you know, we have a big rally, and now everybody's feeling bearers, it was like all-time bearish readings. And, you know, we have a big rally and now everybody's feeling comfortable again and kind of Fed's feeling good. But, you know, things don't stay stable indefinitely. It's just been a good run of economic statistics. We will make that the last word and we will look forward to speaking with you in September. September it is. Yes, we have two job reports, two rounds of inflation reports.

And I think they're going to be such that the Fed won't be raising rates. But I was wrong last time. So I'm wrong 30% of the time. So don't hold me to everything I say. All right. Well, you'd be in the Hall of Fame if you were a baseball player. So I appreciate you having us back. Thanks, Judge.

Look forward to the next one. All right. That's Jeffrey Gundlach. By the way, Dow's up about 40 or so points, as I suggested at the top, going for its 13th straight day of gains. That'd be the longest streak since 1987. To the results of our crash. Yeah, believe me, people here, 87, they get nervous. They get nervous if it goes if it gets 14 days in a row, by the way, I think you got to go back to 18 something. But we'll we'll cross that bridge when we get there. Again get nervous. If it goes if it gets 14 days in a row, by the way, I think you got to go back to 18 something. But we'll we'll cross that bridge when we get there. Again, Jeffrey Gundlach having us here at Double Line. The results of our poll coming up, we asked followers, was today's Fed rate hike the final one?

And the majority of you said no. It was close, but the majority of you said no. Up next, we'll talk to New Edge's Cameron Dawson. We'll get her first take on the hike, what she thinks Powell's next move might be, and most importantly, what it could mean to your money. Plus, we're setting you up for the big earnings in overtime. Meta and Chipotle still set to hit the tape in a few moments. We'll break down the key themes you need to watch there. We'll do that, of course, in the Market Zone.

We're now in the closing belt market zone, new edge wealth. Cameron Dawson here with her reaction to the Fed decision, these crucial moments into the close. Plus, we do have two key earnings reports coming out in overtime. Julia Borsten on what to expect from Meta and Kay Rogers with what to watch for with Chipotle. Cameron, begin with you. Was this the last move by the Fed, the last hike? Well, as you heard from Powell, it is still very data dependent, which just means that if we do get a hot inflation print sometime in the next couple of months, then it may not be the last hike.

But if the current trajectory in inflation continues, then yes, it is the last hike. We don't think that the Fed wants to take a victory lap on inflation just yet. As Steve Leisman talked about a bit today, that they've been so burned by calling disinflation too soon, which just means that this will remain a market that's hypersensitive to incoming inflation data

and probably hypersensitive to good data coming in from a growth perspective, meaning we could still be in this good news for the economy is bad news for markets. Well, what happens now to the rally? Because the market certainly doesn't seem to be upset by what it what it heard today. Either the bond market and the stock market might suggest that this was the last one. Yeah. And what we've seen this year is that the Fed hasn't mattered for markets really at all. We've seen the pricing for the terminal rate go up quite significantly through the course of the year. And we've seen the push out of the start of interest rate cuts. And yet we've seen market valuations continue to expand. You have the S&P up 40% or 20% in its P valuation, NASDAQ up 40%,

which just tells you that the pricing of the Fed's expectations this year really has not mattered for markets and really what matters more is positioning becoming deeply underweight moving to be more overweight things like AI boosting optimism so really it is a question for going into 2024 if the Fed if we continue to push out the start of cuts if that will matter at all for markets. It remains to be seen. But, I mean, you've been pretty cautious, right?

And too cautious, I think you would have to admit at this point. Are you starting to come more positive on the market? Well, we have been cautious in the sense that we haven't been expecting the big lead in some of the more speculative parts of the market to be the leaders as they have this year. You can see things like meme stocks up 70 percent. We weren't expecting that with a Fed that was continuing to remain tight. Now, we stayed invested through 2022 and into 2023 by focusing on quality, focusing on those names that we want to own for the long run. The question for us is then where do we find value in adding new capital

today? Back at the beginning of June, we started talking about how the equal weight index was actually really cheap if you looked compared to the cap weighted index, which was being boosted by just a couple of tech names. So we still find value in pockets of this market. We remain valuation disciplined because we are long-term investors. And that's where we look to things like value, maybe not focusing as much on financials and equal weight in order to put new capital to work. Yeah, well, speaking of tech, Meta is going to report in overtime tonight. Julia Boorstin, what should we expect?

Well, investors are hoping Meta will accelerate its revenue growth after the stock's 147 percent gains this year, with 83 percent of analysts still rating the stock a buy. The social giant has been struggling with the same ad market weakness the whole industry has seen. But Meta has the advantage of massive scale and new revenue drivers, including better monetization of reels and also AI as a tool to improve ad targeting and measurement. Analysts are expecting the company to grow revenue about 8% in the quarter, accelerated from 3% revenue growth in the prior quarter. Meanwhile, thanks to cost-cutting earnings, are expected to grow 18.5%.

There are some other key issues to watch, including, of course, threads, with the question of whether it's held on to the users after its big launch. And after YouTube reported 4.4% advertising growth and Google had better-than-expected results, a number of analysts do expect Meta to follow suit. Back over to you, Scott. Yeah, Cameron, I mean, is there any reason to believe that this trade is not going to continue to work? You know, we got some numbers yesterday from some of the mega caps. We're going to get this now. We've got Apple and Amazon coming next week, too. Yeah, I think that what we've seen so far is that strength in other parts of the

market haven't been coming at the expense of leadership and tech names. Maybe there's some consolidation, digesting of recent moves to be had, mostly because we have seen so much valuation expansion. But if earnings deliver, then the trade can continue. What encourages us the most is what we're seeing outside of just the tech names. Look at names like Union Pacific and Boeing today and the cyclical industrials. It's likely that we start to see industrial activities start to recover and reaccelerate, which just points to a continued broadening out of the market, which then, if you look again, that supports the equal weight look of things where you aren't paying top dollar, top valuation, and you can continue to see a bit of a catch-up trade and rotation.

Well, we'll have another closely watched earnings report in overtime as well. Julia Boorstin, thank you very much. Kate Rogers to you now on Chipotle. Scott, analysts are looking for $12.31 adjusted on revenues of $2.52 billion for the second quarter. Same-store sales, an important metric, projected to increase 7.5 percent, according to FactSet. A few key things will be of note this quarter. Commodity inflation and if it's cooled at all for Chipotle, which has two high-priced items featured heavily on its menu in beef and avocados. Any color on consumer sentiment will also be notable.

Chipotle's been able to really hang on to consumers and even grow traffic in the face of higher prices over the last year. And CEO Brian Nicol has long touted the brand's pricing power. And there's been really little resistance there from customers. And finally, more details on its international expansion plans. We reported last week that Chipotle signed its first franchise partner in the Middle East. So any details on what might come next will be of note. Remember, this is one of the best performing names in the restaurant sector year to date, up about 50 percent so far. Back over to you. All right, Kate Rogers, thank you

very much. We'll see what the numbers are. Cameron, the consumer's been hanging in for how long, I suppose, is the question. Yeah, I mean, I think that the consumer will continue to spend as long as they have jobs. So as long as the labor market remains tight, we can see resilient consumer spending. Interesting, what we've been seeing this earnings season is a little bit of pushback against higher prices. You heard from folks like Kimberly Clark or Danone that they're raising prices. They're raising prices at about 8%, but it is starting to come at the expense of volume. So if that continues, maybe we see a slowing in price gains. But overall, the consumer is healthy because they have jobs.

Yes, we're seeing an uptick in defaults in consumer loans. However, it's just getting back to pre-pandemic levels. So we think we have a fair amount to go before we get to a point where the consumer, from a balance sheet perspective or an income perspective, really gets pinched. We got about two minutes to go before the close. Dow is still positive again again going for its 13th

straight day of gains something it has not done since 1987 and on that note you know cameron it's been carried a bit by these lagging sectors i'm wondering if you think we're going to see a continued catch-up trade from some of those more cyclical and lagging areas of the market like financials maybe energy you tell me yeah i think that is the story for theging areas of the market like financials, maybe energy? You tell me. Yeah, I think that is the story for the second half of the year, which is that as we start to continue to see this better economic growth, that you should see cyclical sectors do better. You should see things like energy move higher, oil prices move higher if we truly are reverting the recession, which was feared in the first half of the year. We also know that we have had a big flow of positioning into tech and out of these cyclical areas like energy, which

just means that as we see that positioning kind of get offside towards growth tech, there is an opportunity for a rebalance, repositioning and that catch up trade to continue. Yeah, I mean, things like the transports have done really well. They've been trading near a high. That broadening out of the market has people feeling a lot better about where the market is as it's continued its gains. It hasn't been just technology. Yeah, that is very supportive of the rally continuing. And what we would look for is a continuation of earnings to get better, meaning that you see earnings and earnings in the fire

as the recession is going to stop. So we'll be watching that very closely as we move into the back half of the year. It's so loud on the floor, I can't even tell if Cameron has stopped talking or not, so I'm just going to take it. Cameron Dawson, thank you very much. The Dow ramping a little bit into the close.

It's going to get its 13th straight day of gains again. That's the longest streak since 1987.