Closing Bell - Closing Bell: Jobs Report Jitters 9/5/24

Episode Date: September 5, 2024

How much does tomorrow’s jobs report matter to the bull market? Charles Schwab’s Liz Ann Sonders gives her take. Plus, LA Rams president Kevin Demoff reacts to being ranked #2 on CNBC’s inaugural NFL valuations list. And, we break down what is behind Tesla’s big charge higher today. 

All right, guys, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with high anxiety over tomorrow's jobs report and what it could mean to this unsettled market. We'll ask our experts over this final stretch. Take a look at the scorecard now with 60 minutes to go. In regulation, pretty tough day throughout. I mean, mostly red, though. There's some buying in the Nasdaq as we come on with you right now. That's following a weaker than expected ADP employment report. Not always a preview of the official jobs print, but nonetheless, adding to concerns over the strength of the economy. Most sectors today have been lower throughout.

You've got a few that are positive now. Financials, industrials, health care under some pressure. Tech's tried to get something going. As I've said, been a little difficult. We'll see what this final stretch holds, though. It does take us to our talk of the tape. How much that jobs report tomorrow really matters to this bull market still is a bull market. Let's ask Lizanne Saunders, Schwab's chief investment strategist. Welcome back. It's nice to see you. Nice to see you, too, Scott. Thanks for having me. Still a bull market, but it doesn't feel like one these

last few days, does it? Well, it's a bull market at the index doesn't feel like one these last few days, does it? Well, it's a bull market at the index level, although you did have a correction in the Nasdaq. But using the Nasdaq as an example, even at the all-time high, you had more than 40 percent of the stocks within the Nasdaq, or the average member maximum drawdown was 40 percent. Right now, it's even 18% for the S. and P. 500 so there's been a lot of weakness and churn and rotation under the surface it's just masked by the cap weighted index return so we we've had

bear market level declines. And that in turn I think was the setup for some of the broadening out that we've seen and the fact that there was money. That wanted to take advantage of some of that weakness under the surface. So there's a lot more to the story than just what you see at the index level. When people ask you what's what's going on here or what your view of the of the market is in the here and now, how are you answering that question? Well, it depends on what you mean by the market. I think this broadening out has

legs. Notwithstanding a day like today where the growth trio of sectors, consumer discretionary communication services and tech are doing well again, you do see a little bit of that exhaustion in that mega cap tech trade and the broadening out with equal weight trading at an all-time high, more action down the cap spectrum. What we are saying, though, to investors is you want to make sure you don't have similar concentration to what exists in the index, that you don't need to to perform well. I think that's one of the biggest misperceptions out there, is that for the individual investor, the only way for them to perform well is to be in those mega cap names and size. That's more of an institutional problem that may be running a fund benchmark to these cap weighted indexes.

It's not the case for individual investors of the top 10 best performing stocks in the S&P. Only one of them is in the Magnificent Seven. Not a single one of the 10 best performers in the Nasdaq is in the Magnificent Seven. So there are a lot of opportunities. What we are saying, though, looking for those opportunities outside of that small handful of mega cap names, you want to stay up in quality. That may seem like the ultimate duh statement, but there are times where you want to go down the quality spectrum, leveraging an upturn in the economy. We clearly don't think that's where we are in

the cycle. So staying up in quality with profitability and return on equity and cash flow, that's how we've been telling investors to navigate this unique market. But let's be clear here. When you say this broadening has legs, then clearly you must think that this is a growth scare, not a growth problem. Right now, it is a growth scare. I don't think a traditional NBER declared recession seems to be in the cards. That said, you and I have talked about on this program many times. We've had these rolling recessions going back to the early part of the pandemic where you had recessions, going back to the early part of the pandemic where you had recessions, maybe haven't

even clawed yourself out in areas like certain segments of manufacturing and housing and housing related and some consumer-oriented products. You just had the later offsetting strength on the services side. We saw some hope that manufacturing was going to pull itself out of its, using the ISM index, you know, sub-50 readings. That was false-lived. That ticked back down again. But we still have the offsetting strength on services. So it looks like we may still have this roll-through scenario where you've got that offset on services that keeps the NBER from, you know, kind of waving the flag and saying traditional recession. But the economy is slowing here, and the labor market really holds the key is to further slowing, especially through the confidence

channels into the consumption side of the economy. I think that the holdup in consumption is not about savings or the savings rate. Excess saving is largely worn down. The savings rate is under 3 percent right now. It's that confidence in the labor market. If we see more than just the cracks we've started to see, I think that could feed itself into weakness on the consumption side of the economy, which has been hanging in there. But if your sector rankings have financials, energy and materials at the very top, that would suggest to me that you think this too shall pass and that we'll get through whatever, you know, lumpy period we have in the labor market and we'll come out on the other side positively,

in part because the Fed is bringing rates down. Yeah, that's exactly it. It does not assume a recession in the near term. And it is also based on easier Fed policy to come, that more cyclical interest rate sensitive bias. And that's been to a large degree where leadership has been since the Fed started telegraphing the shift to easier monetary policy. We're in the 25 basis point camp, not the 50 basis point camp. And quite frankly, be careful what you wish for if you're hoping for a more aggressive Fed, because it probably means they're combating much more serious weakness in the economy, which would suggest more defensive leadership, not the kind of

cyclical interest rate sensitive leadership that's embedded in our current sector recommendations. But I would also say we are still have more of an emphasis on factor leadership than we do on sector leadership. We think that's where there has been and will continue to be more consistency in terms of leadership. Yeah, forgive me for jumping in there. You suggest that equity investors should hope the Fed is eyeing the escalator, not the elevator. 25 better than 50. 50 would signal something maybe is up, something's wrong. If you look at the history of shifts from pause mode to cutting mode, there's a lot of different scenarios in terms of how the market behaved. But one clear distinction is fast cutting cycles versus slow cutting cycles. So, you know, fast cutting elevator down there, they're dramatically or rapidly cutting interest rates, ostensibly

because they're combating a recession or a financial crisis or some combination thereof, versus slower cycles where it's more escalator down. The big differential between those two different cycles is the average maximum drawdown within the first year after the initial cuts. It's about twice as much of a maximum drawdown in those fast cutting cycles as it is relative to those slow cutting cycles. Hence the reason why we think if you want to cheer for a Fed that does the opposite of what they did when they were hiking, they clearly took the elevator up, not the escalator up. And I think at this point, they're eyeing the escalator on the way down. And I think that's a better backdrop for the

equity market. But you don't think the Fed's too late? Do you worry about that,, they're eyeing the escalator on the way down. And I think that's better backdrop for the equity market. But you don't think the Fed's too late? Do you worry about that, that they're too late already, that they should have started in July? And now, you know, it's the ultimate counterfactual. It's the ultimate counterfactual. You could argue that real rates are high and therefore the Fed maybe waited a little bit too long. But if they're true to their data dependency and their word around inflation getting to their target, starting to cut in July would have gone against both sides of their mandate and the emphasis on inflation getting to their target. And in a backdrop where you didn't see more than just some cracks in the

labor market and you still had inflation running above the target. And cutting in July would have been a bit of surprise relative to what they had been telegraphing and relative to market expectations. It's not the Fed's M.O., at least in this cycle, to go against embedded market expectations. So but, you know, could we armchair quarterback this and look back and say they, you know, should have, could have, would have? You know, who knows? I don't tend to be a critic of Fed policy. It is what it is. The data dependency approach, though, suggested that they didn't view July to be a period where they had a green light. Well, football starts tonight, so we can armchair quarterback everything from here forward. I think we're going to do that anyway.

Lizanne, let's bring in Joe Terranova now of Virtus Investment Partners and Max Kettner of HSBC Global Research. Good to have you guys with me as well. What's going on in the market, Joe? So I think we're in a situation, and I agree with Liz, you can't quarterback what the Federal Reserve has or hasn't done. But I think we're experiencing elevated volatility because, in fact, the eye, meaning the market, is actually quicker than the hands, being the Fed. It's a very similar circumstance to April of 2022. If you remember at that point, you had Treasury yields that rallied 70 basis points during the month of April, and the S&P fell from 4,600 to 3,00. Why? Because the hand was not moving as quick as the eye. The market at that point wanted the Federal Reserve to go faster. And we had an inflation

reading during that month where CPI jumped from 7.9 to 8.5. And I think the direction of the eco data today is the reasoning why the market is moving in the direction for Treasury yields that it is. It's concerned not about the data itself, but it's concerned about the direction. And the uncomfortable place I think we're going to be in is the Tony Pasquarello place, where, in fact, you get 25 basis points. And then you have to wait out the month of September and October till you get another 25 basis points if, in fact, the eco data is not good. So I don't think it makes a difference, 25 or 50. But for the market sentiment, I think 50 is better because it allows the clarity to be put in place for monetary policy

and it allows for what we get, the visibility of earnings in October, to shine most importantly. Yeah. Max, you've been really bullish. You haven't been shy about your views the last few times that we've been really bullish and you haven't, you know, you haven't been shy about your views the last few times that we've been on. You wavering on that? No, not at all. I think what we have at the moment is this kind of temporary growth scare. I wouldn't call it really sort of throwing in the towel. Look at, for example, today's ADB data. You kind of have the feeling that they're down 100K, not up 100K, right?

So, yeah, we are getting these sort of headlines. Yeah, it's wavering and the labor market is showing those kind of cracks. But at the end of the day, it's still looking like slightly decelerating growth rates on the labor market side. Whereas, you know, on the overall growth side, when we look at the higher frequency data in particular in the US, it's still looking broadly OK. So look at the Dallas Fed's weekly activity index. It's still looking broadly OK if, in fact, it's been picking up in the last couple of weeks. So still nothing really where I'd be super, super concerned. I would say, you know, we're talking so much about the fed potentially being behind the curve i think that's

part of it that really particularly the institutional investor community is so obsessed with i don't want to be the one who's behind the curve in calling the recession i don't really care about the fed i don't care about what's happening on the macro side but i'm just so scared about this recession i don't want to be the one who's going to be, you know, the last one dancing. I want to be the one who's like, you know what, I'm going to cut maybe 5% too early, but at least I'm out on time. I think that's where this obsession with the recession is coming from, that there's still this much higher sensitivity with the weaker than expected data. Whereas, let's face it, for example, the last three months, retail sales data in the US, pretty rock solid. And, you know, the market's not really reacted to that. The cyclical

names haven't really reacted to that. Think about the leadership that Liz was talking about year to date. You know, we're talking most of the time about tech, about the semis, about AI. But in reality, semis are up less than 14% year to day. When you look at the S&P, what's up? What are the sectors that have gained the most? It's stuff like utilities. So clearly, there's been so much pessimism now creeping into the market and into sentiment where I would say, you know, what we are due a bit of a cyclical bounce in terms of the leadership going from here. Lizanne, I mean, how do you view what's been taking place in tech? I mean, chips have been really weak.

They've traded very, very poorly. Mega caps haven't done well lately either. Even though you suggest that you're a believer in the broadening, is there enough broadening to pick up the slack if you have a prolonged upset in the biggest part of the market? I think there is because there's opportunities even within the growthier sectors like tech or communication services or even consumer discretionary, which is not directly tech related, that is outside those mega cap

AI driven leadership. I think the fundamental shift that happened occurred somewhat subtly during second quarter earnings season when there was a lot of focus on the timing differential between the investments that have been made and will continue to need to be made in AI, the capex spend and the revenue generation associated with it. And I think now we're at that time of the year as well where we're looking ahead to 2025 earnings numbers. And if you look at just the S&P overall, you're actually seeing a huge pickup in growth expectations from around 9 percent or so in 2024 to about 15 percent in 2025. If you look at, say, a group like the Magnificent Seven, you're going very much in the opposite

direction where you're in the, you know, 50 percent plus growth range in 2024 and you're going very much in the opposite direction where you're in the you know 50% plus growth range. In 2024 and you're down into the teens in 2025 so I think when we're in that season of. Digesting what is being said during in this case second quarter season but looking ahead. Into calendar year 2025 to to to provide that plug for forward earnings. I think there has been an important shift in terms of the underlying fundamentals associated with the denominator and the forward PE. Joe, these earnings need to hold up. There's questions from Adam Parker and others that earnings expectations and estimates are too high going forward. And as they come down, the market multiple is going to come down

at 21 times. It's just too expensive based on earnings expectations that may in fact be unrealistic. How do you how do you respond to that? I think that's correct. In fact, if you continue to see a 10 year Treasury on the retreat and it looks like it's going to push closer to 350, then it is four percent at this point. Then earning estimates are too high. And I think if there's one thing to the points that Liz is making, if there's one thing that we know, it's that investors will chase performance. And I think we came into the third quarter with so many people having an overwhelming concentration in the direction of MAG-7. I would have conversations with people where I'd say, what does your portfolio look like? And they just recite the mag seven and wouldn't have anything else. And they'd say, oh, those

stocks are boring. I don't need the other 493. I think we're at an inflection point here. We're sounding the alarm bell. We're saying, yes, you need to have the mag seven in your portfolio. Carry them at market weight. I'm fine with that. But let's take a look around at the other 493, because so far in this quarter, financials are up 9%. You've got technology down 7%. Microsoft is struggling so far this quarter. Microsoft's down 9%. Alphabet's struggling down about 14%. Amazon's down about 9%. So there are other places in the 493 that I think it's right for investors to look, and they have to lose that recency bias of just chasing the performance in the MAG7. I think there are some other numbers that are relevant, not 7 or 493.

But Lizanne, 60-40. How are you at Schwab thinking about 60-40, the portfolio that most people said was dead and now may in fact that may have been greatly exaggerated or maybe it was sleeping for a while, but it certainly seems to be awake. Yeah, I think it is awake. I would also say that it's somewhat unrealistic to think about a classic portfolio allocation being limited to 60-40 right now, even for individual investors.

The access to other asset classes at a pretty low cost and low minimums means that there's very few people that are actually running a 60-40 portfolio. In terms of correlations, we think we're still in a somewhat long-term secular backdrop where bond yields and stock prices are inversely correlated, which means bond prices and stock prices are positively correlated. That's what we've seen shift short term. And I think that probably has legs, which is all the more reason why, number one, you might want to consider active management in addition to passive on both the equity side and fixed income side of things, but the inclusion of other uncorrelated assets to provide that diversification that you might have a more difficult time finding in just a simple 60-40 backdrop. Not to mention, you know, cash has been a pretty good asset class in terms of finally

having come off the zero bound and there is, you know, income and fixed income again. So I wouldn't throw out cash as an important diversifier from an asset class perspective. Max, do we feel like at least the near-term direction of this market hinges on what happens tomorrow morning, that bad news is going to be viewed as bad news, that if you get a bad report and we start talking about 50 basis points,

that's going to be viewed in a negative way? Yeah, I agree with that. I think we're no longer in that regime where, you know, bad news is being looked at as good news. I would say, you know, 50 basis points, if we do get the Fed cutting 50 basis points sometime in the next 12 months, sometime in the next couple of meetings, that is, that could be pretty constructive, right? That could actually be meaning hey look inflation is going the right way and we're going to cut more aggressively but we're taking disinflation as the reason whereas i would believe if we start with 50 i would side more with liz on that if we start with 50 basis points now it is most likely really down to growth it's's most likely really because, hey, you know what,

we're seeing something that you guys are not seeing, or it's really we are more concerned about the growth side of things. That's where I think the market sentiment would take that as pretty negative. So I would really, really prefer they go 25 the first one or two meetings. And then after that, maybe they go 51 meeting because they say, hey, look, inflation is down so much, we can afford to go a bit more aggressively. We can afford to really put a bit of a deeper floor on the rates. That, I think, would then be more positive. But you don't want to have it started. And I think tomorrow, absolutely, if we get a sort of roughly inline number or slightly higher than expected, I think we're off to the races.

I think it's really the cyclicals. It's the banks. It's also energy that's been beaten up. It's the materials that can really, really benefit from a bit of like, you know, let's say at least those imminent recession concerns being taken off the table for now. All right. We'll leave it there. Max, thank you, Joe. Thanks to you. Of course, Lizanne, we'll see you soon. Thanks so much for being with us today. That's leave it there. Max, thank you. Joe, thanks to you. Of course, Lizanne, we'll see you soon. Thanks so much for being with us today. Thanks. That's Lizanne Saunders of Schwab. Let's send it to Pippa Stevens now for a look at the biggest names moving into the close. Pippa. Hey, Scott. Well, shares of G3 Apparel Group are on track for their best day in a year. The owner of DKNY and Karl Lagerfeld posted second quarter results that beat estimates, though net sales were down compared to the same quarter last year. The company's CEO said despite

the uncertain macroeconomic environment, he's still optimistic about the remainder of the year. G3 also announced a new licensing agreement with Converse. But Hewlett Packard Enterprises slipping after the company reported its gross margins declined from a year ago. But fiscal third quarter results did beat estimates. The company cited accelerating demand for AI products, and the stock is on track for its third straight day of losses. Scott? All right, Pippa, thank you. That's Pippa Stevens. We're just getting started. Up next, CNBC unveiling its inaugural NFL valuations list. We're going to run through the big winners and losers. I mean, put losers in quotes. I mean, still in a franchise,

still worth billions of dollars. Plus, we'll hear from L.A. Rams president Kevin Demoff, his team ranked number two. We're back at the New York Stock Exchange after this break. All right, we are back on the bell. CNBC unveiling its inaugural NFL valuations list today. The Dallas Cowboys coming in at number one, valued at $11 billion. In second place, the L.A. Rams. We're going to hear, by the way, from Rams president Kevin Demoff just a moment. That team valued at $8 billion. Third place, the New England Patriots, almost 8, 7.9.

Let's bring in the man behind the valuations list, CNBC senior sports reporter Mike Ozanian. Welcome. It's good to have you here. Great to be here, Scott. You are known as the guru of all of this. What factored into your rankings? Sports teams, NFL teams included, Scott, are sold on multiples of revenue. So when you're trying to determine the value of an NFL team, look at the Commanders.

They sold for 11 times revenue. Prior to that, the Denver Broncos sold for about nine times revenue. So you're always looking at revenue comps. Any surprises? What I'm really surprised about, number one, is how far ahead of every other team the Dallas Cowboys are in sponsorship revenue and in local revenue, revenue generated at the stadium. For example, the Cowboys this year are pushing $250 million in stadium sponsorship revenue. No other team has hit $200 million yet. All right. So stadiums count for a

lot. In fact, you say that non NFL events like the Taylor Swift concert, for example, factors in to all of this. But how do we think of that? And a lot of those are one off events. So how do you think about that over the longer term when you're coming up with your valuations? That's a great question, because when you look at this, what sports bankers will say is local revenue, stadium revenue, as opposed to the national TV money, which will be $350 million this year, that local money is really determined by how entrepreneurial your owner is. So you apply a lower multiple of revenue to that than you would be the national money. That's split evenly.

Every year goes up 6%, 7%, 8%. It doesn't matter whether you win or lose. You're in Cincinnati or Dallas. Everybody gets the same amount. All right. Speaking of Dallas, how the Cowboys go from losing a million dollars a month to this. Jerry Jones is a marketing genius. He created the economic blueprint for NFL teams.

What he specifically did was he became the first team, Scott, to secure big naming rights deals for a stadium. Brought in Pepsi, brought in American Express, very cleverly by Jerry. Their rivals, those rivals of those brands were big sponsors for the NFL already. So they really wanted in. Jerry's world, as we call it down there, has been looking pretty good for him. All right. The Chicago Bears, number 10, 6.4 billion. How much do great players like a Caleb Williams expected to be a great player? Do you have to have great players, like a Caleb Williams, expected to be a great player? Do you have to have great players to have a great valuation?

It helps a lot. But, again, a lot's determined by the ownership. So in the case of the Jets, they bring in Aaron Rodgers. He only played four plays last year. Hopefully he stays healthy this year. But the Jets were able to really market him, get a big boost to ticket revenue, a big boost to sponsorships. The Bears haven't been that great at marketing the great brand of the Bears, which has a big tradition. Let me ask you one more question before we bring in our guest.

Rams, Chargers. Why are the Rams worth so much more than the Chargers in the same market? Kroenke owns the Rams and the arena, stadium, SoFi Stadium. So the Rams get about 85% of the revenue. The Chargers only get about 15%. The Chargers are paying Kroenke some lease payments. That's right. That helps a lot.

Mike, it's great having you here. Great being here, Scott. And it's great to see the list, too. Thank you. Mike Ozanian, again, joining us here. Now let's bring in, oh, by the way, for more on the valuations, you can go to CNBC.com slash sport. Forgive me for that, but please check that out. You'll see the whole list. All right. Now let's bring in Los Angeles Rams president Kevin Demoff. Rams, as we said, number two on our list. It's nice to see

you again. Welcome. See you again, Scott. We saw you last year in L.A. talking with Stan Kroenke about SoFi Stadium in Hollywood Park, and here we are a year later. Yeah, absolutely. You guys have been doing it right. Number two on our list. What's your reaction? It's great to be number two up on the podium. You get a silver medal, but we're closer to 32 than we are to one. So I would say that's the work ahead of us. Yeah. So how have you guys maximized the business around the franchise to get to this level? As we said, there's a lot more than having a wealthy owner and having a stadium. You still got to put all the pieces together. Look, I think we all will always quibble with Mike quietly about the valuations,

but he said something that I think is perfectly accurate, which is the entrepreneurial nature of your owner is going to be what drives your local revenue. And I think when Stan Kroenke envisioned building SoFi Stadium, Hollywood Park, reinventing a sports and entertainment district in the heart of Los Angeles, it was about bringing the world's best sports events to SoFi Stadium in Los Angeles, not just NFL football, but Super Bowl, World Cup. We're fortunate to host the opening ceremonies and swimming in the 2028 Olympics. And six nights at Taylor Swift doesn't hurt. Well, help us understand that a little bit better. I think most people, when they talk about NFL football valuations, they only think about the action that actually takes place on the football

field. But it's the ability to book many lucrative non-football events that actually puts you towards the top of this list? Well, I'll give you a great example on someone who's a frequent guest on CNBC. Anthony Noto is the SoFi CEO, right? Taylor Swift shot her movie about the tour at SoFi Stadium over three nights. The amount of visibility that created for SoFi as a brand is why SoFi pays us a significant amount for naming rights. When you look at our partners, they're not just paying for 10 Rams games and 10 Chargers games. They're looking for those extra 25, 30 events a year. Our suite holders, we have 270 suites at SoFi Stadium, which is the second largest amount in the NFL.

Those people are looking for revenue in events outside of NFL football to entertain their clients. They know they're getting the NFL. They know they're going to get great games through the two teams. What they're looking for is that little bit extra to put them over the top. And that's where we can really turn that into a revenue generating machine,

hopefully to go catch the Cowboys. Well, I think what's interesting too is that you and Mr. Kroenke are both thinking globally as well. The marketing rights deals that you have in many international markets, including Australia, New Zealand, China, Japan, South Korea and Mexico. Can you talk to me about the presence you have there and why that matters so much? Well, I think it matters, you know, first and foremost for us to grow our brand, grow our game. You sit in Los Angeles, one of the

largest cities in the world, one of the most multicultural cities in the world. Having the Pacific Rim in Mexico as part of your marketing rights is just about marketing locally to the many diverse fans we have here in Los Angeles. But as you think about Cronky Sports Entertainment globally, our five teams, including Arsenal and the English Premier League, we think of ourselves as an international brand, an international company. And having rights in those markets allows us to bring the Rams, to bring Arsenal, to bring the Debra Nuggets, the Cotter Avalanche to those markets so that we can really try to highlight the growth of American and North American sports in those markets. And if the Rams can benefit from that, even better. There's big news, obviously, in the last couple of weeks, the NFL voting to allow private equity in investing for the very first time. It's a bit of a toe dip, if you will, because it's fairly limited in size and scope. But is it just that?

Is it the initial stages of what you think is going to be a much bigger part of the investing landscape in NFL teams in the future? Well, I think one of the things that Mike highlights with the NFL currently in the valuations is the NFL is a growth business and you need capital to continue to grow that business in every sense or form. And whether you were just talking about the Bears and their stadium push they're looking at, you talked about Washington with Mike and the stadium push they're looking at, you have 15 to 20 stadiums that are probably on the horizon to be built or have major renovations. When you look at the investments in flag football,

when you look at the investments of international, you have a game on Peacock tomorrow night in Brazil. I think that's where the additional investment in that capital is going to go to continue to make the NFL a growth property across all 32 teams in the league. Kevin, I appreciate your time so very much today. You guys have a good season and stand our regards, would you? I will make sure to do so. Thank you very much, Scott. All right. We'll talk to you soon. That's Kevin Demoff, Los Angeles Rams. As we said, by the way, do not miss NFL Commissioner Roger Goodell.

He's going to be on Squawk Box. That's tomorrow morning and it's 8 a.m. Eastern time. And of course, big game tonight, NFL and Peacock starting at seven. How could we forget about that? We can't wait. Up next, Plexo Capital's Lowe Tony. He's back, breaking down how he's navigating the tech sector's recent weakness and where he sees valuations heading from here. Welcome back, NASDAQ. Well, it's modestly higher today. Some of the mega cap tech stocks are attempting a rebound.

Tesla, Nvidia, Apple leading those gains. We're just clawing back, though. A fraction of the losses suffered earlier this week. Joining me now, Lo Tony, Plexo Capital, a CNBC contributor. It's nice to see you again. Welcome back. Hey, thanks for having me. How are you thinking about this space?

It's a little dicey, to say the least. Yeah, you know, I think we're going to see a little more choppiness. There's so much concentration, particularly in the tech sector, some around the general excitement and exuberance around AI. So there's a lot of concentration in the the Magnificent Seven. And so the more that we see those stocks have their gyrations, that's going to dramatically impact the overall market, given the concentration there. It's tough. We generally don't care so much about crazy growth and we're willing to pay some big time multiple for that crazy growth. It seems we're having a hard time deciding what we're willing to pay for still

amazing growth, but not quite as crazy as it was. Yeah, that's right. Especially for the near term investor, those that have a shorter look may call it 12 months or so. I think, you know, longer term, again, I always say we'll often look back on these periods and see that these were tremendous buying opportunities. We've got so much momentum, I think, to look ahead and look forward to, especially given that we're now starting to see the tangible results of those early investments into AI, both on the Magnificent 7 side and shifting their models to serve their massive customer bases, as well as the actual enterprises that are incorporating AI, moving from experimentation to actual deployment on the customer facing side and the operations. Do you look at these and say valuations still seem reasonable? So, you know, I think, look, as a private market investor, when we look to the public markets for a little bit of guidance, we do see that exuberance, I think, still holding

steady with the Magnificent Seven, given that those are the most obvious plays for the public investors in the AI space and to follow that trend. However, when we start to look a little deeper, what we see in the private markets is that we've had this massive valuation adjustment, which was due in most industries with the exception of AI, especially for the pure play AI models. So, you know, look, I think we're still going to continue to see some exuberance on the public side, but I do think it's important for investors to look beyond the Magnificent Seven and recognize that trends like AI are present in other business models as well. Well, what is the current state of the private markets then in tech?

Yeah, so in the private markets, we continue to see an emphasis shifting towards profitability, you know, primarily on the defensive end of the spectrum. And on the offensive end of the spectrum, we're seeing a lot of excitement continued around AI. I would say in particular, vertical AI is going to be a trend to watch both in the private and the public markets in 25. So this whole concept around taking more specific solutions that have access to data around specific use cases and industries, you know, one of the massive opportunities exists within health care as well as other opportunities in financial services and legal. Are we pushing off, though, the run of expected IPOs and things like that, the more that we ask questions about the current state of the economy? We hear about pipelines at investment banks being full and, you know, ready to move,

but just can't get that push yet. Yeah, like as I I mentioned I think we had a conversation at the end of or towards the end of last year I was excited about an opening for a few companies in 24 but I continue to hold firm that it's gonna take to 25 even 26 for us to get back to a nice, steady flow and what I would call a new normal. Now, that said, if I look back to the comment on vertical AI, I think that's one of the places where we're going to see a shorter timeline to either an IPO or massive acquisitions.

You know, when you look at a lot of these opportunities with vertical AI, number one, the market is moving exceptionally fast. I think faster than we even thought it would move 12 months ago. A recent report by Bessemer even talked about this phenomenon with vertical AI because these markets like healthcare, not only are they massive, probably up to about a $10 trillion opportunity, but they also provide the ability to create a moat. You know, what does that mean? Warren Buffett used that term moat first in business going back to the medieval days when castles had moats around them. It speaks to

defensibility. And I think in particular, when we look at a sector like healthcare for vertical AI, the benefit it has over a horizontal solution is the proprietary data. So because of the concerns around regulatory, privacy, et cetera, there's only going to be a few companies that will have access to that type of data to be able to truly produce a defensible solution or a solution that has a large moat around it. So those are the types of opportunities that if I were a public market investor, I would be looking out for, you know, what are companies like Oracle doing there? What are some of these other SaaS players doing that have existing massive customer bases that could make an acquisition of a vertical solution and immediately

deploy it and have a creative cash flow. Low I appreciate it as always we'll see you soon that's a low Tony of Plexo capital joining us once again. Thank you closing Bell and speaking of tech speaking of investment banks. I'm gonna have an exclusive interview. Next

Wednesday during halftime with Goldman Sachs as chairman and CEO David Solomon it's from their communicable via and tech conference. Very excited about that. I hope you join me then up next we're tracking the Chairman and CEO David Solomon. It's from their Communicopia and Tech Conference. We're very excited about that. I hope you join me then. Up next, we're tracking the biggest movers as we head into to go before the closing bell. Let's get back to Pippa Stevens now for the stocks that she is watching. Pippa?

Hey, Scott. Old Dominion is tumbling after the company said year over year daily revenue slumped more than 5 percent in August as less than truckload tonnage fell. The company's president and CEO said the results reflect continued softness in the domestic economy. CSX and Union Pacific are also lower. But airlines are higher, led by JetBlue, which bumped up its capacity and revenue guidance for Q3. The carrier is also expecting slightly lower fuel prices and increased bookings for the quarter. That's lifting other airlines, including American United and Southwest. Scott?

All right, Pip, I appreciate that. It's Pipa Stevens still ahead. Tesla shares charging higher today. We're going to tell you what's behind the big bounce. So a good impact the rest of the EV space when the bell comes back. Up next we're going to run you through what to watch for when Broadcom reports in overtime

the market zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Phil LeBeau is going to join us on what's behind the moves in Tesla and NIO today. And Sima Modi looking ahead to a very important earnings report. It's Broadcom, and that's an OT. First, though, Mike, set the scene here. How the market reacted today ahead of tomorrow morning's highly anticipated jobs report. Still apprehensive, although not really panicky in any stretch of the imagination.

So I do think what's interesting to me is the VIX down a point. As people just kind of retreat to neutral corners ahead of this number tomorrow morning. We're still suspect of the perfect seamless soft landing case, but definitely not eliminating that as a possibility. I think the ISM services number today actually acted as a little bit of a comfort that things are still holding together in that regard. I do still think that we are in a world where good economic news is good for the market. It's what investors should be wishing for. Once you know the Fed's going to cut and they're not trying to undermine the economy, you want the economy to hang in there.

It does seem as if we got pretty hedged up in the last couple of days. We did a lot of selling. We did a defensive turn in terms of leadership. And maybe that's why the volatility index is just going to hover at 20 as we hang around these levels, which I keep saying take us back to mid-August when we needed our last bout of reassurance that the economy was going to be OK. Yeah. Phil LeBeau, talk to us about Tesla and NIO. Let's start with Tesla, Scott. Late yesterday on X, Elon Musk posted that they are getting close to what they believe will be the rollout of full self-driving technology.

Now, remember, in July, he said that they're close to full self-driving technology, I should say, in China and in Europe. We already have it here in North America. If they can get approval from the regulators in those two regions, then you will likely see full self-driving technology being offered to Tesla owners sometime in the first quarter of next year. Obviously, that would be a benefit to the bottom line of the company. To what extent remains unclear, because it's still unclear how many Tesla owners actually have a take rate in terms of saying, yeah, I'll subscribe on a monthly basis. Don't forget, the big event coming up next month, the Robotaxi unveil on October 10th.

That's really where I think we see some movement, dramatic movement possibly, with shares of Tesla. NIO is the stock of the day when it comes to the EV business. The Chinese electric vehicle company jumping 14 percent today. Why? It reported a Q2 loss that was smaller than expected, with revenue jumping 98.9 percent. That lit a fire under all of the Chinese EV stocks today. No surprise, Scott. They tend to go up a lot or down a lot in unison. Back to you. Yep.

All right, Phil. Appreciate that. Phil LeBeau. All right, Seema. Broadcom's always important, okay? We know that. But even more so now, given what's happened with the chip stocks, and especially NVIDIA. Exactly.

And we're expecting a big move in the stock options market, expecting a 7% move in either direction when the company reports. Wall Street looking for earnings of $1.20, revenue of $12.9 billion. The big focus, Scott, will be AI sales projections for this year and next. Similar to NVIDIA, Broadcom is anticipated capital spend. That will be big from big tech to remain strong for the foreseeable future. Broadcom does specialize in networking equipment and has been working with Google and Meta on their in-house chips. The stock is trading at 28 times earnings, a bit higher than its average.

Shares have sold off along with the broader semi sector over the past 10 days. So we'll wait to see if earnings can change that story, Scott. Yeah, we will. We'll see you then. Seema, thank you so much. That's Seema Modi. Mike, I mean, let's see how Broadcom trades. It's a pretty interesting tell on the psychology of the market right now. And the traders have kind of run hot and cold on whether we're going to really generously capitalize the AI business because there still is a lot of legacy. We went through that cycle with Dell. There was a big burst of enthusiasm. Hey, it's an AI play. Then

you sold it off because maybe it's still old tech. And now Dell participating back again. So, yep, the reaction is going to be interesting. Meantime, look, the Treasury market is definitely pricing in a higher chance of something like a harder landing here. I think you have to observe a 3.72 10-year Treasury yield and say, you know, at least that's what we're braced for, the possibility of it. I don't think it's decisive. It's not predictive. But I think that might color how we react to the jobs number tomorrow, whatever it is. So, again, we want good news. We want confirmation that the labor market's not falling apart. But I do wonder how we're going to read through to that next week or week after

next with the Fed. Yeah, all ahead of us. Can't wait for that. There's the bell. We'll take us out. We'll take us out red. NASDAQ is going to eke out a gain in part because of Tesla and some of the other large caps. We know the time, but more than a dime.