Closing Bell - Closing Bell: Is This Rotation the Real Deal? 12/6/23

Episode Date: December 6, 2023

Is the recent rotation real and is it truly time to turn your portfolio upside down as the new year approaches? Liz Young from Sofi gives her expert forecast. Plus, star chip analyst Stacy Rasgon breaks down all the biggest headlines from AMD’s big AI event. And, Alger’s Ankur Crawford is looking outside the magnificent seven for her 2024 playbook. She explains where she’s finding opportunity.

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 the best versus the rest. The best being Big Tech, which has rallied the most this year, as you know. The rest, well, that's all that hasn't. The question now is a lasting rotation underway to those once unloved areas. We'll ask our experts over this final stretch. In the meantime, your scorecard with 60 minutes to go and regulation looks like this. It is the Russell that's leading today.

Small caps continuing to see a bounce back. NASDAQ's a modest loser despite Apple hanging right around $3 trillion in market cap yet again. Interest rates, well, they're falling again. Labor costs falling, ADP employment coming in below expectations. So that's what we're watching. The two-year note yield is higher, but everything else is down. Takes us to our talk of the tape, whether that recent rotation is real and if it's truly time to turn your portfolio upside down as the new year approaches.

Let's ask Liz Young, SoFi's head of investment strategy, with me here at Post9. Nice to see you again. You too. That really feels like it's a conversation here. We're trying to gauge whether this is legit, whether these unloved areas that have bounced a lot since November are going to keep going at the expense of maybe mega cap tech. Well, I think a rotation is natural after we've seen such bifurcation, such a big group of laggards in the market all year.

And we're at a place where I think bullish sentiment is at the top. I don't know that we can get much more bullish. The spread between bullish and bearish sentiment in the AAII surveys is huge. So I don't think that we can get that much more optimistic. So now investors, instead of taking money out of the equity market, are just looking for other places to deploy it. Some of the things that are happening today that are a little bit confusing, though, and I've got this sort of theme of wrapped in contradictions for next year,

is that you've got this story of oil down so much, yet some of the cyclical sectors are rallying. So there's this contradiction between, well, if oil is down on the heels of supply cuts, yet we've got cyclical sectors rallying, the stock market doesn't agree, there's still something going on there that isn't quite making sense. And then you've got small caps doing okay, but the indexes themselves are mixed on a day when the 10-year yield is down. So the theme today is just not clear. You really think people are that positive?

I still feel like there's so much negativity that's out there. People are almost afraid to decide, OK, maybe the Fed's going to pull this off. Maybe we're going to have a soft landing. Maybe inflation is going to continue to come down and maybe the economy is going to hang in there despite some signs that it's weakening. And we just don't know to the degree in which it's going to continue to do that. I think that there have been a lot of people who have jumped over the fence into that more positive territory. And maybe it's more along the lines of there were so many that were positive, self-included. I felt pretty sure that we were going to at least find out this year whether or not we'd have a recession. And I think there were a lot of people that felt the same way. The fact that we didn't and that inflation has come down so quickly but other things

have held up so much has, I think, convinced people that at least maybe there's more of a possibility of this soft landing idea than before. You're not fully on the bullish boat, right? I mean, you've been reluctant to kind of move more aggressively in that direction. What's been holding you back? Because there's indicators that I can't ignore. I am absolutely aware and I fully recognize that the market is telling us cyclicals are doing okay, the economy is doing okay. Even economic data in a lot of cases is telling us that we're doing okay.

But the cooling is here and there are still signals out there that are worrisome. The yield curve inversions are worrisome. Some of the signals out there that are worrisome. The yield curve inversions are worrisome. Some of the behavior in yields is really worrisome. And the fact that we've got companies expecting really strong earnings next year, already at 19 times multiples on the S&P, I don't know how much further there really is to run. So if you just think about that idea in particular, if earnings go up next year, right, and the stock market stays exactly where it is, that takes care of the multiple problem. We will have PEs come down, but that doesn't make the market look all that attractive from here. So it's difficult for me to jump on a bullish bandwagon, especially in the face of what's going on in the rates market where you've got Fed cuts being pulled more and more forward. What do you think happens if the 10-year continues?

Let's show the 10-year if we could. Because it's been a remarkable drop from 5%. What happens if it continues to move in this direction and goes at or below 4%? What does that do to the narrative? What does that do to sentiment? Now, there may be some who suggest, well, it's going in that direction because the economy is weakening. Others are going to say, the bulls are going to say, well, it's coming down because inflation is coming down and the Fed's going to

cut and it's going down for the right reasons. I think they're both right. I think both sides are right. So if you remember what happened when we got that jobs data, I think it was November 3rd, that weaker jobs report, and we saw yields plummet, right? And we saw yields plummet again when we got a CPI report. We've got two big data releases coming. We've got jobs Friday this week, and then we've got CPI next week, obviously ahead of the Fed. I do think yields will continue to come down if we see cooler data. At some point, I don't know that it's going to be

this year. At some point, yields will come down so quickly that it does scare markets and it does scare investors. That's natural. If yields are plummeting, if they're moving really fast, it's not necessarily about the direction that they're moving. It's the velocity that they're moving. And that starts to spook people. Treasury yields should not be seeing the kind of volatility that we've had in 2023. Do you think one of the reasons why the market's kind of been, as Mike Santoli and others have said, digesting these gains that we had in November, is that because there really hasn't been anything to move the market all that much until you get to the jobs report, as you said, on Friday, and then you get more data heading into the Fed next week. And even then, they're not really, they're not

expected to do anything. Now, I suppose we'll be hanging on every single word, the tone, the inflection of the Fed share, as we always do. Yeah, we will. And I think this time we're going to be looking for a message shift. We're not necessarily looking for an announcement that they're done with hikes. We're not looking for an announcement that they're going to start cutting. But we're going to be looking for that tone shift of are they satisfied? And if they start to signal that they're satisfied with the pace of economic data, I think that supports markets through year end. Seems like we're just waiting for more information. Like we we we want to believe

the story, but we need more confirmation to fully convince ourselves almost. And maybe that is to your point. Jobs report on Friday. Another CPI that looks good, like the last one that set this whole thing off in the first place. Keith Lerner joins us now. Truist Advisory Services. He's the co-chief investment officer. It's good to see you. Look, you've been more positive of late, for sure. What now? Where do we go from here, and why do we go where you think we will? Yeah, well, great to be with you, Scott, you and Liz. It's been a quick market change from when we spoke at the end of October. Remember at the end of October, we were on with you on that Friday when the market found the low. And we said it was a

buying opportunity. You asked us, where would we nibble? And we said small caps. You know, small caps were down 17 percent. And we think the things that were the most oversold would bounce the most. So we've seen that play out now. As you mentioned, the market at the headline level has been digesting it. Underneath the surface, we've been seeing this rotation. You know, the way we look at it is I still think we can squeeze a bit higher here. I think that small cap trade probably has further to go. You have to realize we were, you know, on a one-year basis, we were trailing the large cap market by about 20%. That's the most since 2020, and the relative valuation

is at the cheapest since 1999. So I think there's a bit more to go here. I will say, as we get into 2024, the setup is a lot different than heading into last year, meaning, you know, last year in December, the market had corrected 7 or 8 percent. Bearishness was pervasive. Right. And this year we've had about a 13 percent ramp up in the market. And we're now, as Liz mentioned before, we're seeing sentiment shift a bit. So, listen, I think we still have further gains this year. I just think we're going to move into the new year and probably have a choppier period, which is also consistent with what tends to happen during an election year where you tend to chop around in the beginning of the year before

making further gains. You think this rotation is real? And I mean, I mean, real in terms of not just for another two to three weeks or, you know, a few days. Legit, real, carries on, and you actually see a meaningful rotation where it is prudent right now to start looking at those areas, even if it means, and this is the key, even if it means taking some profits out of mega cap tech. I think the thing I would have high conviction is saying that the distance between the mega cap stocks and the small cap stocks is going to compress significantly. And our worldview on small caps is still neutral. We're still overweight large caps. But I think as you move into next year, the large cap stocks, if you look at the S&P, the top 10 stocks accounted up until recently for about 80% of the gains.

That's a record over the last 30 years. That's unlikely to continue. So I think as you move into next year, you want to hedge that risk by having still large cap exposure, but you want to have small cap exposure. You want to have exposure to the equal weight. But to your point, are we all in that this is the big turn for small caps? I'm not there yet, Scott, to be frank with you, but I do think it makes sense to have exposure to those areas. And what I would also say is I still think the U.S. and small caps and the equal weight look better than international, like emerging markets and develop international, which isn't getting a lot of discussion either right now. This is such a great debate that people are having. And we've had it not only on this program, but on Halftime, too.

I've had it on stages with, you know, notable guests at conferences that our network has had. John Rogers, a famous value investor, says mega cap stocks are coming down and a renaissance for value investors like himself are going to go up. Then Brad Gerstner comes on, known as, you know, again, a famous tech investor, and says it's not rocket science. This is where the growth is. It's where the growth's not rocket science. This is where the growth is. It's where the growth is going to be. It's where the trend is. It's not going to stop anytime soon.

Well, the intention of equities in a portfolio is typically to produce growth. So I would imagine that people are going to look for growth in the places that they can find it. I want to go back to the conversation with Keith a little bit. I think the tipping point here when you were asking about is this rally real, the tipping point is if we get people starting to take money out of treasuries, out of money markets, and put it into the equity market, a rational investor would start doing that when they stop making as much in a coupon or whatever the interest rate is in those instruments,

and put it back into stocks because that's where you can earn more and that's where you have more capital appreciation opportunity. People won't do that if they're nervous, right? If treasury yields are dropping, even if they get low and it's no longer attractive to get that yield, if they're nervous and they're dropping for the wrong reason, they're not going to take their money out and put it back into the equity market. If they're dropping for good reasons and it makes more sense to put money into stocks and find more opportunity there, that's what makes the rally durable. At this point, the money is just moving. The same money is just moving around in the equity market.

What move to you looks more overdone? The buying of bonds or the buying of stocks? Buying of stocks. Looks more overdone? Yes, hands down. Because stocks right now, I think, this is my opinion, I think that they're pricing in, yes, a normalization of rates next year, the idea that the Fed can do it because they want to, not because they have to, but they're also pricing in pretty good earnings growth, almost a steady state of GDP growth, and a spendy consumer that keeps on spending. And I don't think that all of that is going to continue at this same clip.

So you think you're still going to get money going into bonds, but you're a wrong reasons person. That's why you think it, right? I mean, that's why you would say you don't think it's overdone. You're going to get more money going in there because as the economy worsens, people are going to get more. I think you use the word worried and continue to buy bonds. Yes. And the reason I think that we've shifted our focus from inflation now onto the labor market. This is a big week for labor data. We've gotten ADP that was below expectations. We've gotten jolts that was below expectations, recognizing jolts still way above where they were pre-pandemic. But things are coming in cooler and the market has liked it so far. We get that jobs date on Friday, right beneath 4% unemployment rate.

I'm willing to bet that as it moves above 4%, if it moves above 4%, people will start to get a little bit jittery. That's a number that we haven't seen. That's a handle that we haven't seen in a long time. And the problem with the unemployment rate is that it starts to gain velocity as it rises. We've had this really tiny turn, this slow turn up in the unemployment rate. As it does that, it usually starts slowly, but then it gains velocity on the upside. And that's what I'm concerned with. Keith, what's the probability, do you think, next year of a so-called everything rally?

Stocks go up. Bonds continue to go up. Gold continues to go up. Bitcoin continues to go up. Now you take oil out because oil is below 70 and it seems to be trending in one direction and one direction only. Famous last words, of course, until it reverses.

But you know my point. Yeah. Listen, that's a hard question to answer. But listen, don't forget, it's an election year. It tends to be a choppier period. We're going to have 40 elections around the globe. This kind of delicate balance with what the Fed's trying to maneuver between this kind of soft landing and recession. I think it's going to be difficult for everything to go up. And even we talked about, you know, you talked about is,

you know, bonds overdone or stocks overdone. They're moving the same way. You know, it's interesting. You look at the bond market and longer term bonds, they're up about 11 percent since the low, almost in line with stocks. So they're actually moving somewhere together. And when you look at the 10 year itself, we've had four times over the last 18 months where we've moved down about 80 basis points. So as we get closer to 4%, maybe a little bit below 4%, I actually think you'll start to see a little bit of stability there. And I just think it's going to be a market next year where there's going to be tactical opportunities, but I don't think it's going to be an everything market. I think it's going to be a selective market.

And I think you can see periods of time where stocks, you're going to have stocks up 10, 15% and others down 10, 15%. So unlike this year, which was a really difficult time for active managers because of the concentration, I think you have a much more fertile environment for just stopping. Don't you think, Liz, that if stocks can maintain some sort of reasonable pace and yields continue to come down because inflation continues to come down, why would somebody stay in a money market where you're not getting near 5% anymore, but you may get better than that in stocks? So you don't get a rotation out of mega cap into these other areas of the market, loved, unloved, hot to not, whatever. You just get it from cash. What's the probability of that?

That would be the soft landing probability. That wouldn't be my base case, but that's the idea that supports there being a continued rally or a continued catch up from the laggards. If you're deploying fresh cash into the market, you're looking for things that are priced attractively. And the things that would be priced attractively, especially if we're inching toward a scenario where people think we averted recession, the things that are priced attractively in that are going to be things like small caps and cyclicals. You're looking at financials, some of the sectors that we've been waiting on because we know that there are problems, but it hasn't been confirmed that there's going to be a bigger problem.

That's where I think you start to see the cash be deployed to. You don't think we're seeing that already? In other words, there's nothing to... So the NASDAQ is underperformed lately. But as I look here, I mean, it's still up 5% in a month. But stocks like Apple, Apple has had such a great rebound. It's back above $3 trillion or right about there right now in market cap. So I find it hard to believe NVIDIA is $450. I find it hard to believe that money is just going to come out of these names. I don't think it would come out. I think they probably just hold steady. I don't think that they'll be the runaway winners next year, if that's the case. If we have the soft landing, if we avert recession, I don't think tech would be the runaway winner.

It doesn't necessarily mean they would lose money, but I think it would be more attractive to put new fresh capital into more attractively valued sectors. Keith, last point to you on that same question. Yeah, listen, I don't think it's time to give up on tech yet. Tech outperforms when earnings momentum starts to crack. Earnings momentum relative to the market is still strong. I think there's a rotation. I think you stick with the large cap area.

You definitely want to have more small caps than maybe you would have had a year ago. And be patient, you know, be patient for the rotation as opposed to trying to press that is happening, you know, right now. So I would just say, you know, I would not give up on big tech yet. Would you say you're you say your alarm, you thought this segment was going to be over at three sixteen and not seventeen? Is that what that was? You know, I didn't know you want to keep me on this long, but I certainly appreciate the extra time with you, Scott. Hey, man, the alarm goes off. I've got to call you out.

It's good having you on. Keith, thanks. Liz, thanks to you as well. Thank you. Liz Young. All right, let's get a check on some top stocks to watch as we head into the close. Steve Kovach is here with us today for that. Hey, Steve.

Hey, Scott. Yeah, plug power and bloom energy are both under pressure as Morgan Stanley issues a downbeat forecast for the fuel cell industry. Analysts say rising rates and renewable electricity prices are creating poor economics and uncertain futures for these companies. As a result, they're cutting their price targets for both stocks. And Avis budget is jumping after the car rental giant announced a special cash dividend of $10 a share. The company also says it plans to continue buying back stock through the end of the year. Shares up roughly 16% year to date, far outpacing rival Hertz, which is down 40% so far this year. Scott. All right, Steve, we'll see you in just a bit. Steve Kovac, thank you very much. We're just getting started here. Up next, AMD holding its big AI event this

afternoon. We're going to break down the new announcements they have, how it's impacting the stock, the chip wars and just about everything else with chip analyst, the star one, Stacey Raskin. Just after this break, we're live from the New York Stock Exchange a new AI chip at their Advancing AI event this afternoon. Let's bring in Bernstein's top chip analyst, Stacey Raskin, to discuss. Good to see you. Good to be here. Welcome back. Why is the stock down? You know, look, it was fine as it was, I think. You know, they announced the products.

They had some interesting benchmarks. They had some partner announcements. I don't think anything was really unexpected, though, from what we heard. And I mean, you've got sort of like a classical sell the news event. That's all. It was fine for what it was. Right. I mean, the bottom line is how quickly, I guess, how quickly they can produce these and how quickly they can better compete with NVIDIA and or others. How would you answer that? Yeah, you remember, so they already gave us some numbers for what they expected revenues to be next year. They said more than $2 billion, which is not a big number. You have to remember, like if NVIDIA does $70 billion in data center revenues

next year, that will be viewed as disappointing. $2 billion or even $3 billion or $4 billion or whatever. It's a rounding error in that sense. And I think that's part of the reason, frankly, that AMD stock has been strong. For NVIDIA, people are worried about an air pocket. They're worried the numbers are so big it just can't be sustainable. With AMD, I mean, the numbers are not enormous, but they can probably make them. And so that's why the stock has been OK. But I mean, in the grand scheme of things, it's not a big number relative to where the market seems to be going this by the way was the sort of the biggest if you want to talk about new things that they maybe gave you know they took up

their forecast for long-term uh prospects for the ai accelerator industry in 2027 you know they were saying 150 billion and now they're saying 400 billion and again like who knows but if that's anywhere close to try i mean it's it's presumably bullish for amd but it's probably bullish for everybody in the ecosystem, especially players like NVIDIA, if the market's going to be that big. We kind of already know what AMD is going to ship next year, and they didn't really give us

any color or any changes to that. Not that anybody expected them to. They just gave us the number a few weeks ago anyways. And you're confident that they have the capacity to do what they say? Yeah, I mean, they said more than two. Two billion by itself was reasonably disappointing. I think the bulls out there in AMD were quite a bit higher than that.

But if they're saying more than two, you know, again, if they did three or they did four, you can look at some of the supply chain checks and assuming all the orders are real, you could get numbers like that. But in the grand scheme of where I think the overall market is going next year, it's still very, very small. So that's not great

because it's small, but it's also good because it gives you more confidence that they can actually get there. Who's going to buy these? And I guess I asked that in the context of, will customers who are already in relationships with NVIDIA or had planned to buy NVIDIA chips, are they had planned to buy Nvidia chips, are they going to also buy AMD chips? You know, so the hyperscalers will, and they had some partner announce,

you know, they had Microsoft up on stage with them and they had Oracle and they had Meta. And those guys will buy both and they'll deploy both. I think it's a question of magnitude and degree though. I mean, you can buy Nvidia and you can buy A and B and you can be deploying both. But I think the difference in scale between the two is still gonna be pretty massive.

We still don't know what the enterprise side of things looked like. You know, they had Dell and Lenovo and Supermicro. So they will have, those guys will have platforms that they will be offering to enterprise customers. I think it remains to be seen how much demand there may actually be from the enterprise. I would say right now, by the way, you have to remember there is demand for these things

in part because there's demand for data center GPUs in general. And there just aren't enough to go around, right? And so I think at least right now you're probably exploring anything you can because there just aren't enough like hopper chips and everything to buy. I also suspect that there's a degree of, you know, like you don't really want to have a single source for anything. And, you know, if you're a customer, you'd love to have something else in your pocket when you're sitting across the table from Jensen at NVIDIA and like negotiating on this. And so there's an aspect of that as well. But I'd say like NVIDIA, at least just,

just given the magnitudes of the dollars, there's an NVIDIA is clearly in the driver's seat here. Like AMD is, is, is a piece of this. There's a thesis on AMD that I have some sympathy for, which says the opportunity is so big that even they just get the dribs and drabs of it, it's enough. Right. You know, it's 100 billion dollars. You know, they'll get 5 percent. Again, there's maybe some some validity to that. Right. But it also suggests that there are other players in the ecosystem that are likely to get far more than that. Well, and that's where AMD is right now. All right. Well, let's go there then. Lastly, because Broadcom's going to report tomorrow, right? What does all this mean for it?

Yeah, so on the AI side, Broadcom does, they do networking. AMD actually had Broadcom up on stage with them. They were talking about Ethernet, and they're opening up their Infinity Fabric. Broadcom's going to support it. Broadcom also does some of the custom chips for the hyperscalers, Google in particular.

And that's been a very strong driver of revenue growth this year, and it will be a strong driver next year. I suspect people are a little nervous about the core business, like Cisco and some of the others who do networking were not so great. The math suggests that for the quarter they're about to report, Broadcom, I think,

is already implicitly guiding for this quarter their non-AI, non-wireless business. If you do the math, probably down double-digit sequentially already. AI is actually bridging the gap. I suspect that AI revenue is going to be stronger next quarter. We're seeing it stronger everywhere else. And then the really important thing that people are looking at is VMware. They closed the VMware deal.

I think it's significantly accretive. And they are going to guide with VMware in the numbers for next quarter. Broadly, it's not in the street numbers. I suspect regardless, numbers probably go up. That may be enough for Broadcom. So lastly, before I let you go, just to tease an interview that's coming up, because Christine is going to speak with Lisa Su of AMD, of course, at 4.30. What's the most important thing you think you need to hear from her as you assess what all of this is going to mean, you think you know, what does she need to say to you? I mean, look, we've got some of this.

Like, we saw some of the partner announcements, and that's most of what I was looking for today was who is up on stage with them. And, again, I don't know if it was unexpected, but they had Microsoft and some others up there, so that's good. I mean, ultimately, we want to see, like, what the trajectory is. Where are the orders? Who is buying? How much are they buying? Can is buying? How much are they buying? Can they upside? We're not going to know that today. I doubt she's going to say anything about that this afternoon. But as we go through the next several quarters, I mean, that's what

people want to know. How big can this be and how much share can they get? And that's something that they will just have to deliver on as we go for the next several quarters and through next year. Appreciate you giving us your rundown of what happened and what you think lies ahead. Stacey, thank you. Appreciate it very much. That's Stacey Raskin joining us once again here on Closing Bell. Up next, looking beyond the Magnificent Seven, Alger's Anka Crawford is back with us.

Says her winning strategy is actually outside of the mega caps. She's going to break down her 2024 playbook after the break. Closing Bell, right back. We're back on closing bell. Value has been outperforming over the past few weeks with the group coming off its best month in more than a year. But my next guest says 2024 will be a year for the growth trade and that investors should be looking beyond the mega caps. Joining me here at Post 9, Algers Ankur Crawford is back. Welcome back.

Thanks for having me. This is beyond, not instead of, the mega cap trade, right? Because you own a lot of the mega caps, right? Yeah, it's beyond and not instead of. I mean, look, 2023 was what I call a discovery year. We discovered Gen AI and the mega caps ended up having these discovery type moves in which they were the drivers of this Gen AI trade. But now they've been discovered. So there's still earnings growth ahead. The valuations we don't think are ridiculously stretched in part because the numbers have come up so much through the course of the year. However, we have to see a market that is broader than just the MAG7.

Do you still think the MAG7, though, are going to have a good 2024? Like, what do you think the returns are going to be? I don't need to be 20% or higher for each stock, but are there ones that you still think have more upside than others based on what you own? I think there is. I think there is going to be a bifurcation in the Mag 7, i.e., you know, Microsoft that has a definitive AI growth driver behind it right now. And we start to monetize Copilot or NVIDIA that really trades it up.

And might I say a measly 20 multiple. Well, it is less than it was. It is less than it was. I think those stocks can work. Meta that has definitive product cycle drivers work. Google, unclear. So I think what you end up seeing is a bifurcation in the Mag7. And we talk about it being a stock picker's

market. It's going to be a stock picker's market even inside of that MAG7 group. Okay. So let's talk about these beyond stocks, if you will. Quanta. Why do you like it? Okay. So before we talk about Quanta, you know, one important thing, AMD today got on stage. Oh, right. We just talked about that with Stacey Raskin. Oh, so one of the things Lisa Su said, the data center, the accelerated data center market is going to go to $400 billion in 2027, a 70% CAGR. That is a huge positive for a company like Quanta Services, in part because if you think about the data center architecture, as we add more and more GPU compute it is highly power intensive I mean there's some parts of our economy or of our country right now that don't have enough electricity to accommodate these big data centers anymore so we're gonna have a huge capex build we think 160 billion

dollars of capex from utilities more or less goes to 200 billion by 2028 to 2029. Qantas Service is a net beneficiary of that as they build the T&D. Okay. What about Vertiv? Yeah, so Vertiv also a net beneficiary of this changing data center market where the architecture is being revamped. They are a power management and thermal management company. And, you know, you have an environment where these GPUs run really hot and you need to change the way that they are cooling. Vertiv is a key player in that market. They're gaining share and

they're growing content. Twenty-four times I'm looking at their forward PE. That doesn't feel a little...I don't know what the historical average is on a stock like this, but how would you assess that? Yeah, so we don't think it's a 24 multiple. We think that the guidance that they've given has been conservative. And if you look at just PWR's backlog, the backlog would imply a much higher revenue growth rate. They have a 30% backlog going into the end of the year for 2024.

That's their 12 month backlog. So, you know, that has to translate to revenue and it's not going to be at the rate that the street has. You're talking about PWR, not Vertiv? Oh, I was talking about PWR. What about Vertiv? I think that's the one I was referencing. It looked like 24 times to me. I don't want to confuse you or our viewers, but that's what I was talking about. OK, so for Vertiv, I think same thing. They've given 8% to 11% type growth range over the next few years. We think that's conservative in part because the data center market, we think, is going to accelerate at a rate that is going to surprise people. What's your broader market call? Do you have one for next year or what you think is likely to happen?

Are you more on the bullish side? I think next year is going to be tougher than it was in 2023. And in part because, A, it's an election year. Election years always bring a lot of uncertainty. The consumer, it's hard to tell what way the consumer will break. You know, will consumer break or will it hold to be resilient? And I think that question is still out there. We don't really know. You know, we keep pushing out this recession. Does it get pushed out to the end of 2024 as we go into it, into the election? Who gets elected? So I think it's not going to be like an easy year. Well, this year wasn't an easy year.

I mean, it was anything but. It looks easy. If you don't know anything under the surface, you look at the returns this year and you're like, well, stocks have had a great year. They really haven't outside of the seven. Now, of late, they've certainly looked better. But you know my point. Yeah.

I mean, it felt easier, I think, than 2024 will be, especially if you had picked the right stocks. Like, no wonder why you feel like that. I forgot are the stocks you own to Microsoft, NVIDIA. Of course you think it was easy. But next year is it will be a different regime and it will become more of a stock pickers market where you kind of have to find that needle in a haystack. And you have to be agile in your thinking because the data is going to dictate the direction of the market. All right. I appreciate you being back, Ankur. Thanks.

Thank you. That's Ankur Crawford at Post 9. Up next, we're tracking the biggest movers as we head into the close. Steve Kovach is standing by once again with that. Steve? Hey, Scott. Yeah, shares of one tobacco company getting smoked today and a cybersecurity company having its best day ever following a Strong's earnings report. We'll reveal the names when Closing Bell returns after this. cybersecurity company having its best day ever following a Strong's earnings report. We'll reveal the names when Closing Bell returns after this. Got about 17, 18 minutes to go before the Closing Bell. Steve Kovac is looking at the stocks that we need to pay attention to as we approach the close.

Steve? Hey, Scott. Yeah, British American tobacco is having its worst day in over three years after saying it would take a roughly $31 billion impairment on its U.S. cigarette brands. The move comes as the company shifts away from traditional smoking products, saying the write-down reflects the economic future of its cigarette brands. And Sentinel-1 is having its best day ever after reporting better-than-expected results and strong fourth-quarter guidance. Morningstar analysts say the cybersecurity company is an emerging challenger in a space that includes large rivals like CrowdStrike and Microsoft, Scott.

All right, Steve, appreciate that. Steve Kovac up next, a big bank bounce. Shares of Citigroup are rallying today. Now up nearly 3%. We'll tell you what's behind that leg higher just ahead. Closing bell right back. Tonight, CNBC is launching its new cross-platform franchise, Cities of Success. The new series explores cities that have transformed into hubs for big business.

First stop, Nashville. It's tonight, 10 o'clock Eastern, right here on CNBC. Do not miss that. Up next, shares of Exxon slumping. We're going to drill down on that dip and what it might mean for the oil giant as we head into the new year. That and much more when we take you inside the Market Zone. We're the closing bell market zone. CNBC Senior Markets commentator Mike Santoli here to break down the crucial moments of this trading day.

Plus, Leslie Picker on what's behind that rally in Citigroup shares today. ExxonMobil just forecast a big boost to earnings over the next few years. Pippa Stevens following those details for us. Mike Santoli, you first. We're at kind of the lows of the day, I think, and the Russells giving it all up. Russell was up like 1.5%, I think, earlier today, and now it's just gone negative. Banks were up more than 2% at the open. It was definitely an effortful

move to resume the rotation from the few into the many. We're right at that borderline between, you know, you get into these situations, up 11% in three weeks in the market. Everybody says, it's got to cool off. We need to consolidate. You've got to work off this overbought condition. Ideally, it does it by going sideways. That's what's happening. But then you quickly also then tip into, well, you've got waning momentum.

The market seems tired. We can't break through resistance. So we're in that zone right now. Clearly, also the context being waiting for the jobs report, the CPI, the next group of things that are going to help us figure out if, in fact, we've transitioned to genuine economic resilience and easing financial conditions at an easier Fed, or if we're going to have to start worrying about more of a slowdown, plus the early December tendency to just have some choppiness and give back after a strong November. Yeah, I mean, it's not just your average strong November. I mean, it was a rip-roaring November. So forgive the market if it needs a little bit extra digestive period

if you go to the buffet a little too long. And I also have said for a while, like, okay, what would be a normal pullback if that's what we're going to get? And you go down to the low 4,400s, you know, where the market gapped higher from there in mid-November, that would be perfectly routine and wouldn't really disturb the trend. But if you do it, the storyline is going to gather up along the way to say, OK, that was a failed rally.

That showed you the market got ahead of itself. That showed you that we can't counter all these things. Also, the dollar is perking up. And maybe yields are going to find finally some traction here. So maybe, you know, a lot of that can be tested at once. All right, Leslie Picker, Citigroup is up 2.5% as we speak. What's the news driving it? Hey, Scott.

Yeah, you guys were just talking about the banks. Citi shares currently up 2.5%. CFO Mark Mason giving a whole host of guidance at this Goldman Sachs Financial Services Conference, which is in its second day today. He shared that net interest income for the year will come in, quote, a little bit better than the previous guidance figure, $47.5 billion, although Mason notes that would suggest a bit of tapering down in Q4.

Full-year revenue, Mason said, will be at the lower end of the $78 to $79 billion guidance range, closer to $78 billion. That's thanks in part to FX pressures after the Argentina elections. Mason also shared some updates on the massive firm-wide reorganization, saying a combination of restructuring and repositioning will cost about $1 billion of the year's $54 billion in expected expenses. Mason added that the firm is on track to have that reorganization completed by the end of the first quarter. Scott. All right, Leslie, thank you. Mike Santoli, your view here of the financials. Well, Citigroup is that one massive laggard that can just be

doing better because things are less bad and they're doing better capital allocation and cost. You know, the financials were at the absolute wrong place if the economy is going to hang in there. So we've got the yield benefit. That obviously just helps the balance sheet, takes the pressure off of the unrealized loss. We know all that. I don't think we're going to get resolution. We're not going to get an all clear signal that says the consumer is not going to erode

anymore. So they're probably stuck in terms of, you know, making headway toward the early year highs. But I take it as a positive that they've made this much progress. They've made a multi-month high. And again, they look like they're not representing any particular risk because there's not anything crazy going on in the capital markets. They haven't been relying on, you know, volatile deal flow or trading or anything like that because it's all been quiet. Yeah. Speaking of multi-month highs, how about multi-month lows? Pippa Stevens, I guess that's what I think about when I think of crude oil going below $70.

And you've got Exxon making some news today as well. Yeah, it's gotten really not a great day for an oil and gas company to issue an update when WTI falls below 70. But Exxon on the positive side did forecast earnings doubling by 2027 from 2019's levels and also boosted its buyback to $20 billion per year after the Pioneer deal closes, up from $17.5 billion now, perhaps in an effort to compete with rival Chevron's monster buyback. But the stock is moving lower on some concerns around the CapEx plan, higher than prior expectations, although still below pre-pandemic levels. At the high end, Exxon said it could spend

$27 billion per year between 2025 and 2027, partly thanks to an increase in spending for its low carbon solutions division. Now, Stuart Glickman at CRFA said it's about as adjacent as one can get to their core competencies, adding it's a longer time frame in terms of positive earnings impact. Now, CEO Darren Woods did look to assuage some of those concerns, saying the division has the most potential for growth, but does remain less certain since it requires definitive policy and regulation. And speaking of Darren Woods, he'll join CNBC tomorrow at 9 a.m.

for an exclusive conversation. Not one, Scott, that you want to miss. Yep, and we won't. Pippa, thank you. That's Pippa Stevens joining us with what's happening with Exxon and Crude. And Mike, $69.35 for WTI. Yeah, in a way, what's happened to Crude over the last couple of months sort of indicates the way the exxons of the world have been proceeding obviously they've been trying to replenish their reserves and and produce at a certain level but just the idea that you know people screaming at them that we were going to have tight supplies forever and they really should be investing more they're very much in the mode of you know we need to find new avenues we're going to be sharing as much cash flow as we can with investors.

$20 billion buyback is material. That's 5% of the market value of Exxon right now. If they threw it all in there, they've been reducing the share count, let's say 5% over the last couple of years. So it's all working in that direction of trying to get the company in a spot that it doesn't need much from the crude market to survive, or really rising gasoline demand. I think we should all remember that miles driven are down from the peak, and therefore, cost per miles down, everything is working against them in terms of long-term

headwinds. So it makes sense that they're operating this way. Now, in terms of what does it mean to be a $69 WTI crude, I don't want to overthink it. It does seem to be relentless supply. OPEC can't get any kind of output cuts together, it seems. And for now, it's also seasonally weak. So we can wait for things to gather up. As I mentioned, you know, dollars has firmed in all the things that we look at that sort of didn't really work to get the crude price moving, have been, you know, have been well in place for a couple months. Energy is down 1.6% today. It's down 11% quarter to date. Utilities are an outperformer in a big way today.

And I know, you know, that's no surprise, obviously, where yields continue to head. Yeah. So the pure yield plays are, you know, getting a little bit of a boost on this. Real estate has been an interesting spot. They've sort of broken a downtrend and have definitely gotten the benefit of this idea that both yields are helping. And we haven't seen the sort of blowups we've been waiting for in that area either. So again, we see the sort of attempt at rotation this morning. And I view it more as not so much you sell one group of stocks to buy the other, but literally every, almost literally every long only fund owns Microsoft. You already own it if you're in the market. And so it's a matter of what you do with the incremental dollar. And do you put it elsewhere? Do you spread it around a little bit and just feel as if there

are some darker corners of the market that nobody's playing in? Well, speaking of that, it makes me think of what's been going on in the market, that all of the so-called chasers are already now in the race. There's nobody left to push this market higher between now and the end of the year. Yeah, I mean, well, look, there's always somebody who can want to get more along, or if the market does catch a spark, you're going to have people get levered to it. But I agree that the people who felt forced to participate, that happened. The Goldman data is very clear about that in terms of CTAs binging on stocks just to make sure they had enough of the index.

That's commodity trading advisors, the systematic hedge funds, and all the rest. So now it's about, do the numbers come through? Do fourth and first quarter earnings look plausible or not? And, you know, whatever little seasonal fairy dust gets sprinkled on the market, we'll see if that can work, too. If you really get more, you know, Goldilocks-type data, as we've had for a while, it's hard to see, you know, a truly big shock hitting this market, but remains to be seen. Makes me think that tomorrow you get a holding pattern, Jay, because you're not going to want to get ahead of jobs on Friday.

No, exactly. I agree. And we're back to jobs mattering. We're back to you want good enough news, if not blistering hot economic numbers from this point on. Yeah, we kind of got it with ADT. We'll see what the big numbers have backed it up. But for us, we're out red. I'll see you tomorrow. Into OT with Morgan and John.