Closing Bell - Closing Bell: Have We Seen the Top in Rates? 10/23/23

Episode Date: October 23, 2023

What if we really have seen the top in rates just as tech earnings are about to roll in? Could it be enough to get stocks back on track toward a year end rally? JP Morgan Private Bank’s AJ Oden gives his take. Plus, Lo Toney from Plexo Capital breaks down what he is watching from mega cap tech earnings. And, top chip analyst Stacy Rasgon weighs in on the late-breaking report that Nvidia is making a big push into the PC chip space. 

Welcome to Closing Bell. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with a big market reversal and the question that might be at the center of it all. Did bond yields just peak today? That's what one billionaire investor is betting on apparently in a trade that appears to have turned stocks and rates today. Here's your scorecard with 60 minutes to go in regulation. It's mostly a tale of two sessions today. Yeah, the Dow is modestly negative, but everything was negative. Early on, the 10-year hitting a fresh new cycle high, pushing back above 5%. Stocks, as you might imagine, they were selling off. That is until late morning when hedge fund manager Bill

Ackman tweeted that he had covered his longstanding short in the long end of the treasury curve. Yields, they quickly fell. Stocks quickly recovered. The Nasdaq today, the big outperformer. Mega cap stocks, they took off. Take a look at the Nasdaq up near 1%. That, of course, just coming ahead of their earnings, which begin tomorrow with Microsoft and Alphabet, takes us to our talk of the tape. What if we really have seen the top in rates, just as tech earnings are about to roll in? Could it be enough to get stocks back on track towards a year-end rally? Let's ask A.J. Oden, J.P. Morgan's global investment strategist, with me here at Post 9. It's good to see you. Welcome back. Good seeing you too, Scott. It is an interesting market move today. What do you make of it? Well, I think, you know, when we saw rates almost touch that 5% mark, I mean, they were basically at a buy at 4%, but 5% just becomes

that point where you've got to lean in now. And so, you know, hearing that institutional investors are starting to lean in and add duration, it only makes sense for for the rest of the market to start to make that move as well. And maybe we saw too much of a sell for some of the geopolitical tensions that we've seen over the last couple of weeks that have brought the market down a bit. That's pretty much Ackman's point. We can show his tweet, of course, which happened, you know, earlier today and really did have an impact on the market. Just too much risk. There's too much risk, he says, in the world to remain short bonds at current long term rates. The economy is slowing faster than recent data suggests.

So he covers a short. What does it mean, though, for now, for the market itself, for stocks? If he's right, if we assume that rates have peaked, what's it mean? I think it means that investors should start to add in duration now. They've been waiting for that moment for rates to fall or for, you know, the market to sort of give them that point where they need to move out of rolling T-bills or those cash positions and start adding duration. So to me, this is that moment and they should actually take that opportunity to move in. Now, I understand that growth expectations are still pretty high. We've got GDP expected to come out later this week and, you know, expectations of above 4% on a quarter over quarter basis or year over year basis. So that to me, you know, that's probably one reason why yields have been up on top of all

the other things that we've been talking about. But I think clients need to or investors need to stop trying to time the market and lean in now because it's going to be a bottleneck when it actually starts to move. It's going to move pretty quickly now. You know, before rates really started to shoot higher, before we got above five percent, the narrative seemed to be, well, we might be primed for a late year rally. Seasonality is back on our side after being tough in September. And the table seems to be set. Is it still set? How do you view equities now? So earnings have been a bit muted, I think, you know, so far this point, you know, there's a little bit of disappointments in the regional and the health care space, but it's still early in the

game, right? We haven't seen, we've still got the big tech names the rest of this week and we're still optimistic that we've seen the trough. Those last three quarters were probably the last three negative quarters, at least in this cycle, that we'll see. And hopefully we'll get that positive back. I know the market has moved away and now is expecting, I think, about 0.4 percent contraction. But we believe that we're still going to see a positive earnings. And so from there, you should see a tailwind. And that soft landing is still very much in play, even though we've seen some economic data that may have spooked investors a little bit.

We expected volatility, and that's what we should expect from a couple of data points or just a few data points. I just want to underscore what we're watching on the screen here. I mean, a 10-year note yield down 17 basis points today, right? I mean, it was a smidge over 5%, and then it pulls back. Let's assume that rates back off instead of back up, right? They back off a bit. And tech earnings this week come in as expected, if not better than expected. Is that enough? If you just wrap your arms around that, is it enough to get stocks to where the bulls want them to go over the next, I don't know, two months? Oh, I think definitely. I think if rates start to come down, then the bulls definitely lean in. And that's why we're telling clients, you take advantage of both sides of this equation. The 60-40 portfolio has never looked this attractive. We actually took advantage of looking at it from a real yield perspective.

And what we've seen since 2010, real yielding at 5.5%. If you go forward about 12 months, on average, you get about a total return of about 18%. And right now, it's flashing around 5.6% from a real yield perspective. So we're telling clients to lean in. So take the opportunity on this entry point bonds, but also take that opportunity in equities right now. So I think they should both lean in on both sides. Wow. The 60-40 portfolio never looked this attractive because the narrative over the last couple of years was the 60-40 portfolio might be dead. Now we really have a change. Yeah, we definitely have a change now. I mean, when you finally see

yield on that fixed income position, you've got bonds doing what they're supposed to do. I think everybody, because of the last couple of years, you've seen sort of, you know, last year was one of the worst years on record for fixed income. Now investors don't want to get caught in the same situation. But now I think it's really, you know, it's saying that opportunity to lean in and I think they should take advantage of it. I want you to hold your thought for just a moment because I do have some developing news regarding the chip space. Christina Partsenevelos has that story. We're talking NVIDIA and Intel and maybe others. Christina, what's the story here?

Yeah, the story is right now coming from Reuters. I'm waiting to confirm it, but it appears that NVIDIA is working on a CPU, a.k.a. a PC chip. So this would be a computing chip for PCs used specifically with Microsoft. This is a big deal because that means that NVIDIA is not only going from dominating the AI chip space, but it is slowly moving into the PC space, which was or is dominated by Intel, which is why you're seeing the negative reaction in Intel. Stock price down 2.5%, NVIDIA up 4%. In this report, too, it's not just NVIDIA that's working on this new CPU chip for PCs. AMD is said to also be working on a version. Both AMD as well as NVIDIA are working on these

PC chips using ARMS. You can call it ARMS language, ARMS Blueprint. So there's a lot of collaboration between these companies. ARMS, we know, just went public not too long ago. But this is not good news for Intel, it dominates the space and now you have two big chip makers potentially entering I wanted to see arm I was just gonna ask for it but we throw it up there it's up so we did as you would expect right arm Nvidia higher Intel lower AMD well that remains to be seen but I appreciate that Christina very much we'll be back to you in just a little bit if we get any more on that story. But we'll certainly follow it. And NVIDIA, by the way, all those mega cap stocks reporting earnings this

week, NVIDIA doesn't report until in November. So we have a little bit of a minute before we get to that. And Apple, for the most part, too, is in that same boat. Let me ask you this. Is tech enough for the market? Do you feel like you need the market to broaden out more? Are you satisfied if just tech carries the load like it did for the better part of this year? I think we need the market to broaden out. I think that's one reason why investors should lean in now. You know, we've seen sort of the magnificent seven carry the way, but the valuations, once you strip out those seven names, looks a little bit more attractive. And so, you know, you brought up the semiconductor space and we think there are

opportunities in tech so not not to dismiss it completely because there are opportunities outside of the magnificent seven but even in some of the mid-cap growth or even in some of the smaller tech names for opportunities because you know we like sort of the electronic semiconductor space, electrification there, as opposed to some of the maybe analog space that has really sort of pulled back a bit because autos really haven't performed as well. But that's also part of where we are in the cycle. And so I think seeing, you know, the equal weight and the opportunity for, you know, equities to potentially reach all-time highs is our view in 2024. We need some broadening for that to happen. All right, let's broaden the conversation. Speaking of broadening, CNBC contributor Shannon Sikosha of NB Private Wealth joins us now as well. All right, so, Shan, interesting market

action today, as we said, and maybe a lot of it because of this Ackman tweet, which, you know, got a lot of people talking of whether it's time to figure that bond yields are maybe peaking. They're going to go down. Now, he didn't offer on Twitter anything regarding where he thinks stocks may be going, but he's obviously long equities. This was a way that he had hedged his bets, so to speak, on all of that. What do you make of it? Well, I think there's obviously, you know, there's a lot of attention paid to this tweet, but there's also just a lot of attention being paid to sort of this five percent

level. And I think that, you know, whether it's, you know, the perception that we are entering into a new phase where we have to start worrying about reinvestment risk or whether it's some of that repositioning, Scott, that we talk about that happens in this last sort of four or five weeks of the year. You know, I think that there is an acknowledgement that, you know, at some point, whether we are at peak yields here or whether we haven't yet crested that, we're still at the end, if you will, of this particular cycle. And so if you're sitting in the short end of the yield curve and you know that eventually those rates are going to come down and you want to make sure that especially given the dynamic of the last 15 years or so, that you're getting some yield on a long term basis. I do think that you're starting to see institutional investors, even some individual investors, start to push out on duration.

There was a little bit of a head fake earlier this summer around that July and August. There were a lot of people that were talking about potentially pushing out on duration and that we were at peak yields. So it cautioned that if you're making kind of a one stop binary type move into longer duration, you know, you might want to actually take it a little bit more slowly because we've seen a lot of volatility. You talked about this, the volatility we've seen today. There's a lot of volatility in the rate market and a lot of different things that are factoring in. I mean, Shan, part of the problem with the push and pull here of rates falling is, you know, maybe they're falling or going to fall because geopolitics are bad.

And as Ackman suggests, relative to the economy, maybe it's worse than we think. And on that note, Marko Kalanovic, J.P. Morgan, we always highlight his notes because he puts them out, you know, in the afternoon. He's been negative. He's closely followed. He says, quote, financial conditions remain a headwind. That's the title of his note, underscoring why he has been and seemingly remains negative U.S. stocks. What do you think about that? I think that one of the things that you have to take into account is that you're right. I mean, if we're seeing particularly movement into the longer end of the curve, we have seen three major buyers really kind of back off from that market,

Scott, China, Japan and obviously the Fed with with quantitative tightening. So if you're seeing people fall into and sop up some of that issuance in the longer end of the curve, the implication of that is that perhaps there is a little bit more uncertainty, and I wouldn't want to say negativity, but a bit more of a risk-off trade. And when you think about what that means for the equity market, we were just talking about the breadth that's needed for this rally to be sustained. Mid cap, small cap stocks, if you're starting to see a risk off appetite in the market, you're not going to see that broadening out across cap. And so I do think that there's a cautionary tale here. If we do see a real move down in yields, that likely implies that people

are looking to get a little bit more conservative in their positioning. Yeah, AJ, I mean, the whole notion, it's hard to cheer rates going down if they're going down because there's a flood of money coming into treasuries as a safe haven trade, because we're worried about geopolitics, what's happening in the Middle East, and then a deterioration of the U.S. economy forces people into treasuries. What are we to make of that? Yeah, I mean, you know, our overall view is a soft landing, but there is always the risk of potential recession or stronger for longer in a sense is a risk to even bonds or equities because then, you know, your yields can potentially go higher and equities will come down. But ultimately, you got to look past the wall of

worry and have a little bit further conviction on the long-term investment views. And if we look at earnings projections that have continued to be positive going forward, we have to really lean little bit further conviction on the long-term investment views. And if we look at earnings projections that have continued to be positive going forward, we have to really lean in right now because, you know, I guess when you think about it, there is still the upside probability of still our base case. And so you kind of have to add on when things are such oversold at these levels. So base case is soft landing over recession? Yes. Interesting. So, Shan, this idea of what AJ said earlier, 60-40 portfolio never looked more attractive, never looked this attractive. You know what the narrative's been, as we suggested and discussed a moment ago over the last couple of years. To some, the 60-40 portfolio never looked worse over the last couple of years.

Have we really seen now a change? Well, I mean, I think we go back to 2005, 2006. The 60-40 didn't look that bad either. over the last couple years have we really seen now a change well i mean i think we go back to two thousand five two thousand and six the sixty forty didn't look that bad either scott but you better make sure you had international exposure back then so i think it just changes in more silver time you know if you think about the sixty forty we're really looking for is you're really looking for uh... people that are uh... retired or savers that are getting enough income

off of their portfolio to sustain their lifestyle and, you know, with less volatility. And technically, even though we have seen a really volatile period from an interest rate perspective, on a go forward basis, that volatility is going to come down and therefore you're getting a lot more out of the 40 than you were, say, in 2017, 2018. I think the other thing is, thinking about the 60-40, is that diversifying it across regions, diversifying it across cap, I still think that's important because although we've been in this period where large cap U.S. has been the place to be, there's always reversion

to the mean. And so making sure that you're diversified sets you up better within that 60-40 than just a binary U.S. allocation. Yeah, AJ, in terms of areas where, you know, you favor, this is interesting from Marko Kalanovic, too. He favors a barbell of defense. You want to know how negative he is? Favor a barbell of defensive and energy. Do you agree or disagree? Well, I think we have a little bit defensive. And when it comes to, I guess, the defense sector, I mean, defensive stocks, we're moving maybe more neutral on some sectors just because from a valuations perspective. But for us, I think when we look at consumer discretionary or if it's aerospace and defense as well as industrials, we see that they haven't fully recovered from the pre-pandemic level. So we like that entry point from a valuation standpoint. Now, to go completely in the bunker, I don't think that's really where we are right now. I think for us, it's really the optimism, the upside. Looking at the growth

is actually a positive that essentially we are seeing sort of a trend of disinflation, cooling labor market, although obviously recent data points still hot. Things are moving in the right direction. You know, we can't take one data point and let it drive the whole train here. What about the banks? What about the banks? I mean, regionals have been under pressure. Rates going up, not good. Puts more pressure on that area.

You know, people talk about that, what's happening in real estate. How do you see that? Well, the regional banks are going to continue to have pressure until the Fed starts to cut rates. I mean, that's really just been the story since March here. We understand what's going on there. And we don't expect that sort of headwind to really come off until we start to get maybe into 2024. And, you know, if the SDP is right, if the Fed's summary of economic projections, until we start seeing cuts then. Now, you know, with energy, it's tough because obviously, with everything going on in the Middle East,

there's the possibility for energy prices to go higher. But we're in a different position than we were in the 70s and 80s, net producers as opposed to net importers. So, you know, the risks are always going to be out there. But ultimately, you know, we're kind of leaning away from sort of the regionals and even some of the office spaces because we haven't seen essentially, you know, activity come back to pre-pandemic levels. Shan, what about energy? I'm looking at crude. I mean, it is interesting today. Crude's at, you know, 86 bucks. It's down two and a half percent. You know, people have been picking energy as a sector lately because it had gotten going again. Are you one of them? Yeah, I mean, listen, Scott, you look at the valuations and then you talk about, oh, where are there still opportunities from a valuation perspective in the U.S. market?

It's certainly there. I think the other thing that's happened is that energy companies, you know, in the last decade or so have really shown an increased discipline around CapEx and really anticipating that oil prices would be sort of lower than they have been more recently in this range. And so I think the other thing to think about is that, you know, there isn't a one for one movement between energy prices and energy stocks. And so you want to make sure that if you're if you're buying energy here from a stock perspective, you're really anticipating that this supply constraint will continue into next year and 2025. You really shouldn't be basing it on what's happening in the Middle East because we really haven't seen a strong correlation. I mean, look what happened. Oil prices recovered or fell again after Ukraine after a couple of months.

And so I really would be looking out on that supply mismatch coming into 2024 and 2025 if you're investing here. So, AJ, lastly to you, it's interesting that you like discretionary. Over the last week, discretionary is the worst of all of the major sectors. And there's a lot of discussion now as to whether the consumer's tapped out. But you can't have the consumer tap out if you think we are base case soft landing. Well, wage inflation is outpacing headline inflation. So wage inflation around 4.1, 4.2 percent, headline inflation at 3.7. The consumer seems to be in solid footing now.

Obviously, household savings rate is the lowest level that we've seen in some time. But the consumer is still spending and being resilient. That can play to both sides. So for us, we still see that being more positive for the softest landing. However, it does obviously put into play the idea for stronger for longer. But we think that ultimately, for one, because consumer discretionary hasn't fully rebounded and the consumer is on good footing, that it's a good opportunity to lean in right now. All right. We'll leave it there for now.

A.J. Oden, thank you so much. Good to see you. Shannon, we'll talk to you soon. Shannon Sekosha, NB Private Wealth joining us once again. Let's get to our question of the day. Do you think interest rates have now peaked? You can head to at CNBC closing bell on X to vote. The results coming up a little later on in the hour. In the meantime, a check on some top stocks to watch as we head into the close. And for that, we bring back Christina Partsenevelos. Hi, Christina. Hi, Scott. Let's start with FMC Corporation. It's hitting its lowest level since 2017 after lowering its third quarter and full year guidance. This is an agricultural chemical giant, and they say it has seen substantially lower sales volumes in Latin

America. And this is primarily due to destocking, especially in Brazil. And that's why you're seeing shares sell off 12.5%. Okta is extending its recent declines as the cybersecurity giant reels from a cyber attack on its customer service system. Citi and Evercore both opened negative catalyst watches on the firm, saying the breach could cause near-term impacts. Shares are off by 20% in a week and down over 7.5% right now. Scott? A lot of stuff going on in tech today, chips and software. Christina, thanks. We'll see you in just a bit. Christina Partsinevelos. We're just getting started here. Up next, we're following that late breaking story. Intel is down near 3% now on a report. NVIDIA is making a push into the PC chip market. It is big news. We'll hear next from Plexo

Capital's Lo Tony just after the break. And later, top chip analyst Stacey Raskin will give his first take on the news as well. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. All right, welcome back. NASDAQ's higher today. Investors prepare to kick off a major week of mega cap earnings. Microsoft, Alphabet, Amazon, Meta all up in the days ahead. Here to discuss Lowe Tony, founding managing partner of Plexo Capital.

It's good to see you. There is a lot riding on this. That's probably the understatement of the year. Are they going to deliver? That's what I need to know. We expect them to deliver. I think they're going to meet or beat. I would say, you know, a lot of this has likely already been priced in by investors. We've got two dynamics at play here. Without question, a big push on some of these stocks has been around the excitement. I don't want to use the word hype, but let's use the word excitement around AI as a new platform. But when we look at the actual numbers and we look at

what IT managers are spending money on, they're actually still driven by, you know, cloud and cyber. I mean, that's really where a lot of this is heading. Gartner just released a report that confirms that. And I think Gartner is expecting generative AI to really start to become a significant factor for revenues around 25. But that doesn't stop the excitement around AI from being able to propel these stocks. I think I heard you correctly just now. And you said you think that the good news is priced in at this point? Because, look, the Nasdaq's down over the last three months, right, since the report, since these last reports, about 7%.

And a lot of these other stocks over the last three months, Apple's down almost 10%. Microsoft down 4%. Amazon's negative. NVIDIA is negative. We know about Tesla, obviously, in the wake of their own results. But what about where the state of tech is right now going into these numbers? Yeah, I think the state of tech is actually in firm positioning. When I think about how investors' behavior typically flows, we look at tech stocks historically to really be focused more on those investors looking for growth. You know, but with the push, I would

say both in the private and the public sector, use Meta as one example in their drive towards efficiency, a lot of these tech companies have been focused on profitability. You know, so much so that I would say the tech investors today are joined by other investors that almost see big tech in particular, I would say the Magnificent Seven, almost as somewhat of a safe haven. And, you know, I think when we look at the amount of the S&P that the Magnificent Seven comprise in terms of market value. You know, so goes tech, so goes the S&P. And we need to see these companies meet or beat their earnings. Otherwise, we could see an unfortunate situation similar to what we saw with Tesla when those

expectations were not quite met. Who's going to knock it out of the park? And who would you be worried about out of these magnificent seven stocks, if anybody? Yeah, well, look, I think without question, you know, there's still a lot of excitement around NVIDIA in particular, and we expect their revenues to grow significantly. I think they're going to beat earnings. And then I would also look to Meta. You know, Meta has actually done a really good job in their push towards efficiency and navigating some of the headwinds that they faced earlier on with some of the privacy changes on the iPhone platform in

particular. And then I would say, you know, Steady Eddie around, you know, what we should expect from Microsoft and Google. Again, I go back to the fact that IT folks are still focused on cloud and cyber, and that's going to be a contributing factor. I would take a little bit of a lens and look into Apple based on some of the news that we've seen over the past couple of weeks. You know, there are some headwinds that Apple faces in China. China now accounts for about 24% of iPhone sales, taking that throne away from the United States, which is now at 21%. And when we look at the amount of competition coming from those local manufacturers in China on Android devices, you know, Android has now, you know, kind of taking that title away from iPhone for the smartphones. Couple that with the, you know, the Chinese government basically telling their folks you can't use the iPhone.

I think also just a little bit of a sluggish consumer demand in China as well, you know, which is broad based, but definitely impacting smartphone sales. That's where I might take a look. You know, we've seen the low-end iPhone 15 actually seeing discounts already, you know, 15, 16 percent on that low-end model. So, you know, I would definitely take a look. I would also look into the news around some of the manufacturing side, supply chain issues. Foxconn and the lens the Chinese government has under Foxconn right now based on some tax issues and land use issues. That's today's news, right? That's the news that came out today that had this stock negative now like the rest of the Nasdaq. It's turned positive, though. That's right. That's right. Yeah. But, you know, I think we should still take a look.

We don't know how much that will, that lens that the Chinese government is using to look into Foxconn's activities. I don't know how much that's going to impact the supply chain for Apple. Apple's done a great job of diversifying their supply chain to reduce their dependence and reliance on those activities that happen in China. But nonetheless, you know, who knows?

You know, investors never want to see those types of pressures. Lo, we'll talk to you soon. I appreciate it very much. It's going to be an interesting week. Thanks for having me. All right. Lo Tony, Plexo Capital. Up next, PIMCO's playbook. Erin Brown is back to tell us how she's positioning her portfolio as we head into the end of the year. The key theme she is watching when we kick off 2024. Also, Stacey Raskin going to join us for more on this NVIDIA news that has that stock up and Intel down. We're back right after this

on Closing Bell. Welcome back. Big market reversal for stocks today. NASDAQ now on pace to break a four-day losing streak. The 10-year Treasury yield lower after hitting 5% yet again. You can see, though, the S&P is now negative, too. NASDAQ's still holding on, but it's about half as strong as it's been. So we'll have to track this right up until the close with less than 30 minutes to go. For more now on how to position through the quarter and the end of the year, PIMCO's Aaron Brown. Welcome back. It's good to see you. Nice to see you as well, Scott.

What do you make of this market action? I mean, I'll just ask you plain and simple. Have yields peaked? So I think it's really hard to call the peak in yields. We still have massive Treasury supply, which is coming. I think key date is going to be the next Treasury refunding on November 1st. But I think absent that, with term premiums continue to rise, I think you can definitely say that the curve is likely to steepen from here. And it's very hard right now to call the peak in yields. Are we on recession watch then? Or how do you assess that? I do think that we're heading to a much slower growth environment over the next year. Whether

or not we tip over into recession you know I think is a really hard call to make this point but I do expect that we're going to see growth flow below potential we're going to have inflation gradually come down and I think that the tails for the outcome you know are are particularly wide right now which does make uncertainty high and make it a really tough environment to be directionally long equities. You know, between now and year end, I think it's fine, you know,

because of seasonal effects, because, you know, we've sold off recently. I think it's fine to have a little bit of a long going into year end. But as we turn the page into next year, I think those interest rate sensitive sectors of the economy are going to be hit hard and they've done pretty well the year to date. So I think that's really the key area to watch. Interesting, though, you do think that we could actually rally between now and the end of the year? Because I don't know, you know, the last handful of days as rates, 5 percent seem to be the line in the sand. You know, if you're going to continue to go above 5 percent, it's like, OK, well, maybe that's going to upset plans that the bulls had for a late year run. So I think the market's largely been pricing in higher and higher yields,

you know, really for the bulk of 2023 and 2022. And that's why, you know, we've come off pretty significantly over the last three months and really in the third quarter with respect to equities. Going into year end, we have an earnings season which is set up optically to look actually pretty decent. We're going to get a lot, about a third of the S&P reporting this week, but I think you're going to have and hear pretty decent earnings coming off of what continues to be a pretty strong economic environment. So I think for that could set up pretty nicely for a year-end rally. You know, that said, I think what's going to be really key is how companies are indicating for the year ahead. And I think you could see a lot more ambiguity, a lot more uncertainty.

So, you know, while I expect that we'll see pretty decent earnings this year, you know, for the rest of this year, I think as we move into pretty decent earnings for the rest of this year, I think as we move into 2024, the earnings setup is going to be a lot more difficult. So I would say buy on a tactical basis, but get ready to start to sell as we move into 2024 on what I think is going to be much tougher comps next year. I'm sorry to step on your toes there. You are a PM over there, a portfolio manager. What's your biggest position right now? Right now, our biggest position is in duration. I mean, we think that duration right now,

you know, not too dissimilar from the comments that were made, you know, overnight by some of the tweets we've heard from some hedge fund managers. We think duration is, you know, pretty attractive at these levels, particularly for medium to longer term investors. Mortgages, agency mortgages, just given the sell off are really cheap versus intrinsic value. So we also think that that looks attractive. In equity space, we're long quality, we're long some more defensive assets and short some of the cyclicals, specifically consumer cyclicals like autos and homebuilders against it. Oh, you're short those against that. I mean, mortgage rates, 8 percent.

I don't think you don't have to be a rocket scientist to think that the, you know, the housing market could be in a little bit of a tough go if our mortgage rates remain elevated. Right. You know, I think that's exactly right. But, you know, look at the home building index. It's up 18% year to date. You look at some of the auto manufacturers, both here and as well as in Europe, and, you know, they've done pretty decently well as, you know, despite, you know,

what's been a really challenging environment. And so what we've seen is a lot of backlog been worked off and that's bolstered these sectors. But I think as we move into an environment where the consumer is going to be increasingly constrained to put on any type of leverage given interest rates, I just don't see how those sectors of the economy are going to stand up. Yeah. Erin, good to see you again. We'll talk to you soon. Erin Brown, PIMCO joining us here on Closing Bell. Up next, shares of Intel, as we mentioned, taking a hit on news that NVIDIA is making a big push into the PC chip space.

Top chip analyst Stacey Raskin joins us next with how he thinks this could impact the sector. AMD's on the move, so is ARM. We'll discuss it next. We are back. Shares of NVIDIA nearly 4% higher on the news that the chipmaker is developing ARM-based PC chips to challenge Intel. Shares of Dow Component Intel sinking on that news. Joining me now to discuss, Stacey Raskin of Bernstein Research. First person I needed to hear from. How significant is this news? For who?

For all these players. I mean, it's stark, right? NVIDIA surging. Intel sinking. The market's voting. Are we getting it right i look so there have already been other players that were going to be doing uh arm-based pcs qualcomm is is when they've actually been talking about it for quite a while they're actually going to be introducing uh arm-based pc chips into next year and of course you have apple i think that's

actually the impetus for all this apple's moved over to their own arm-based architecture over the last several years, and their market share has actually gone up quite a bit. It's increased since they've delivered these own self-designed chips. So I think there's a desire to see if this architecture can roll out more broadly. This is not new, by the way. Microsoft has had Windows running on ARM for a decade, probably, since 2012 I think. They used to call it Windows RT, we used to call it WART. And in fact, the very first Microsoft Surface tablet, which is kind of a PC, actually did have an ARM-based processor. It actually had an NVIDIA Tegra processor back in, you know, in the early 2010s. So this has been tried for a while,

it's never really caught up until this point. But I'd say Apple is an existence proof, at least that you can actually develop now today, compelling platforms on ARM. And I think there is a desire on Microsoft's part to see if they can stretch that further. I'm not necessarily surprised to see other vendors besides Qualcomm into this mix. Again, I don't know that Microsoft was going to get Qualcomm exclusivity forever. If they can actually grow, and I think it's an if, but if they could actually grow an ARM-based ecosystem, clearly it's bad for Intel. But there's no way that this is positive for Intel. Like, best case, it doesn't take off and it's neutral. Worst case, it starts to take short and it's bad. And for any of these other guys, whether it's Qualcomm or NVIDIA,

it'll be incremental to anything they're doing right now because they don't do any of that. And so, yeah, it's positive for them. Sure. What about AMD? Why is AMD down on this announcement if they're going to make chips with arms technology as well? Yeah, well, they also make chips with X86. I mean, you could probably argue either way. It's not as good, right? I guess if there's a shift in architectures and they're making arm based chips, they can benefit from that. But clearly, if it starts to take share from x86, you know, they make that stuff, too. So it's not as incremental. I guess Intel as well. I mean, there's nothing necessarily stopping Intel from making an ARM chip if they decided, except themselves, right?

If they decided that was the right thing to do. Intel is also trying to build a foundry business. So, you know, in theory, once they can get that off the ground, there will be nothing stopping them from fabbing or manufacturing those chips, whether for themselves or potentially for other folks. So maybe there's other opportunities across the chain to monetize this. But, I mean, clearly it's a better option for you if you're not cannibalizing anything that you're already doing, right? If it's something that's wholly new, I mean, that's going to be better. Well, we're also not talking about, you know, years and years and years off. Like we have been for the most part talking about NVIDIA in some respects for AI. Here, what I read is that they could actually start NVIDIA and AMD could start selling PC chips as soon as 2025.

Should that surprise us? No, I don't think so. I mean, Qualcomm was absolutely going to start selling chips in 2024, next year. That's known. For Qualcomm, at least, we've been looking at more as an option value. I sort of thought when Qualcomm and Analyst did a couple of years ago and they gave some targets for these things, they actually didn't put any of this in those targets. They talked about it as an option. And so my view for qualcomm at least always look if arm based windows pc become a thing they're they're in a good spot

to to benefit from that clearly there are others that could benefit from that as well if arm based windows pcs do become a thing um qualcomm be here next year you know and yeah 2025 that seems like a reasonable time frame for others to deliver sure all. All right. We'll leave it there. I appreciate you coming on with us as quickly as you possibly could, Stace. I really wanted to hear from you on this. I know our viewers did, too. Stacey Raskin joining us here on Closing Bell. Last chance now to weigh in on our question of the day. We asked, do you think interest rates have now peaked? You can head to at CNBC Closing Bell on X. The results after the break. The results now of our question of the day. We asked, do you think interest rates have now peaked?

The majority of you said, nope, don't. 52.5% to 47.5%. Thanks for voting. Up next, casinos popping in today's session. We'll tell you what's behind that sector's move higher. That is just ahead when we take you inside the Market Zone. We're now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day,

plus Pippa Stevens on the latest multi-billion dollar acquisition in the energy space, and Katessa Brewer on why HSBC is bullish on two casino names. Mike, I begin with you. Interesting session, to say the least. What do you think of it? Ended up with a kind of a don't just do something, sit there type of market because there's a lot going to be coming at us this week in the way of earnings,

some of the GDP and inflation numbers. None of it today. And no Fed speak. So I think it was about kind of the intermarket technicals. Nice move down in Treasury yields. A 10-year from over 5 down to, you know, 43. But it only gets you back to where you were six days ago. So I think that's why you haven't had this bigger kind of relaxation effect in the markets.

Banks couldn't even hold a weak bounce. So there's a lot of things that tells you we're still under some pressure. You're still kind of in a little bit of a slippery spot right here. Any bit of relief, though, on the Treasury front is going to be welcomed at least somewhat. Now, you need a lot of other things to get followed. Takes the pressure off. You know, a big move down starts with a 17 basis point move down. But I do think it's very contingent. And you haven't had if we need a real kind of desperate washout type move to set up that, you know, relief rally. Maybe haven't gotten it yet, although could be close enough as we were back in September.

All right, Pippa Stevens to you. Anything you can do, I can do better. I don't know. Maybe that's what Chevron is thinking about Exxon today. Yes, got another mega merger here. And of course, less than two weeks after Exxon bought Pioneer Natural Resources. And so Chevron's bet here really seems to be the Guyana assets that Hess has, given that there was some speculation that Chevron didn't have the most attractive long-term asset growth portfolio. And Guyana is a key resource here, as Peter McNally from Third Bridge told me. It is the prize in their portfolio. And across the industry, Guyana is seen as a key area of non-OPEC oil production growth. But Wall Street maybe not loving this deal all that much. Mike Worth did say that the deal is not going to be accretive to cash flow until 2025, emphasizing the long-term benefits at perhaps maybe the expense of the short term.

But looking forward, Scott, you've got to wonder, there's been so much consolidation already in this space. And now that the two largest players are seemingly off the table, is this all that we're going to hear for M&A in the energy sector? Or is this just the beginning? It's certainly something to watch going forward. Yeah, which we will. Pippa Stevens, thank you so much, Mike. It's, you know, it's the inevitable questions like, OK, who's next? Yeah. And, you know, regulatory issues are either of the deals that Pippa was just telling us about going to get through the regulatory door. From real big picture perspective, it seems like, you know, the two biggest U.S. majors making relatively sizable deals would probably invite some scrutiny.

Maybe the administration would want to find a rationale to block them. But this is a commodity business, literally. It's not like there's consumer pricing power. They're a very small percentage of overall production, you know, no matter how much they buy. So I just wonder exactly how much of a fight it'll be. I do think it's interesting from a corporate strategy point of view, though, the idea of kind of trying to buy your growth as opposed to invest yourself. And, you know, the other, it looks a little bit reactive on Chevron's part.

I'll not be, you know, not to really step around that. No, which is why we asked the next obvious question. I mean, sure, they've been talking beforehand, but they talked to a lot of people. And taking them out at no premium, what does it mean for the exploration production companies still on the board if Hess got no premium off their last trade? Well, Joe Terranova today at halftime was like, okay, now what, does ConocoPhillips go out and do something? So keep your eyes on the space. Very possible, absolutely.

Keep your eyes on the space. All right, MGM and Wynn are leading the S&P 500 today. Bullish notes on both today from HSBC. Contessa Brewer following these moves. What can you tell us? Initiated to buy HSBC puts a price target of $111 on Wynn, currently trading just a little bit higher than $90. They say, look, opportunities abound in Las Vegas.

There's a rebound in Macau. There's a new project in the Middle East. All of that, HSBC says, is largely ignored and underpriced by the markets. We saw wind shares up about 2.5% today. MGM shares up about the same, fueled by optimism over some of those same factors. Plus, of course, MGM has investment in the digital world and acquisitions internationally. Price target from HSBC, $49, where you can see it sits at a little more than $36 now.

Las Vegas Sands got a boost today for some of those same reasons. Macau just on fire. DraftKings and Penn shares popped today as well. Look at DraftKings, up like 5% on the day. Sports betting handle grew 32% over last year. New Jersey, Scott, had a 50% spike in September handle over last year. And it was, of course, the longest established state for legalized sports betting outside of Nevada. So when they can make a 50% pop in handle, you know something's going on in the sports world. Yeah, no doubt about that. All right,

Contessa, thank you. Contessa Brewer, the two-minute warning. There's the sound effect, which means I go back to Mike Santoli. Well, the real fun begins tomorrow. The mega caps that we've been waiting for, that's when the parade begins. Yes, you have some decent pullbacks in most of them, although Meta and Alphabet are actually really not far from their high. So those are the two that have, I think, the most confidence in the fundamental stories, communication services, the upside leader today. None of that is a surprise. Those are the only two, by the way, that are up over a three-month period. The ones you said, Alphabet's up near 15 percent and Meta's up seven.

Yes. And so, you know, maybe the bar is higher there, but you got, you know, Microsoft's at 10 percent pullback. Amazon also has had a little bit of a retrenchment. So in theory, bar has has had a little bit of a retrenchment. So in theory, bar has come down a little bit. The market in general has been scoffing at even pretty good earnings so far. On the other hand, it's been, you know, more or less the preliminaries. The banks, we know that they're kind of wounded. So even if they have a good quarter, you're not going to necessarily

let your Tesla. Right. Then your Tesla, you got punished. Tesla, you know, obviously, that's a one-off story, as is Netflix. But no, you know, there's a lot of back and forth to it, but it's not as if we've had an embrace of the idea that we have, you know, companies beating by 500 basis points on average versus the estimates. That's not the way the market has traded.

It's been weighed down by every other concern we've been talking about for weeks. Yeah, all right, good stuff. I will see you tomorrow. So we're red now. Dow's down near 200. By the way, I want to show you some pictures, too, because it's a special day up in Midtown at the Nasdaq. We're ringing the closing bell up there. Members of the CNBC Tech Executive Council alongside our CNBC Councils and Events team. And that is in honor of the fifth annual Tech Summit happening

tomorrow right here in New York City. They're clapping, but I said, boy, what an interesting session. Bells ringing. We're ready and everything with the NASDAQ. I'll see you tomorrow.