Closing Bell - Closing Bell: Market Frenzy Fading? 11/18/24

Episode Date: November 18, 2024

How does the risk-reward equation break down for the final six weeks of the year? New York Life Investments’ Lauren Goodwin, Vantage Rock’s Avery Sheffield and Invesco’s Brian Levitt tell us what they’re expecting into year end. Plus, Sung Cho of Goldman Sachs tells us what’s at stake when Nvidia reports results this week. And, top retail analyst Matt Boss from JP Morgan breaks down what he is watching from Walmart, Target and Nordstrom’s big reports. 

And welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner. This make or break hour begins with Scott's stocks continuing to regroup one week after setting their latest all-time high on that post-election reflex rally. Here's a look up by about four tenths of one percent right now. The Nasdaq is pacing the upside to start the week up six tenths carried by Tesla, Apple, some of the other crowd favorites of the Nasdaq 100. You see Tesla up almost four percent, a little bit off its highs and Apple up almost two percent. Now, we also have a turnabout in semis with Nvidia trading soft into Wednesday's earnings release. But the average chip stock finding some relief. That's the XSD ETF right there. That's been a big underperformer relative to Nvidia.

Now pressure from the bond and currency markets has eased a bit. The 10-year treasury yield slipping from recent four-month highs. It's down, you see, about 4.41%. The dollar index backing away from the top of a two-year range as well on the day. So that's allowing for a bounce in struggling commodities. Crude oil lifting by 3 percent to start the week. Again, that's been depressed in the last several weeks. And gold is firming after a pretty stiff post-election pullback. You see it up 1.7 percent on the day. All of that takes us to our talk of the tape.

With six weeks left in 2024 and the S&P on pace for a second straight 20% annual gain, how does the risk-reward equation break down for the rest of the calendar year? Let's ask the panel. New York Life Investments' Lauren Goodwin, Vantage Rock's Avery Sheffield, and Invesco's Brian Levitt. They are all, thankfully, with me here at Post 9. Good to see everybody. Good to see you. So, Lauren, it's a big question of kind of what's changed, how maybe it has changed,

how much has the market figured out over the, you know, two weeks or so since the election, and where that brings us right now. Because it seems interesting, we're having a little bit of a stop-and-think moment in the last several days. I'm having a stop-and-think moment right now, thinking about, you just We're having a little bit of a stop and think moment in the last several days. I'm having a stop and think right moment right now thinking about you just said there's six weeks left in the year. It's really hard to six weeks in one day. But you're exactly right. The market is trying to decide which of the Trump trades to fade and which to follow. And from our perspective, there's a pretty clear line on this. You follow the trades that are not just supported by potential policy change. We're all going to be going back and forth around what's likely over the next couple of

months, maybe a couple of quarters. But follow the trades that are related to the underlying economic trends that might be accentuated by that. So these dynamics we're seeing in interest rates, in currency, a little softer off the top today, but these are the trades that I expect are likely to persist. So you think that there therefore is more upside to things like treasury yields and the dollar at this point? And what does that mean perhaps for equities? I think we should expect to see inflation and interest rates in particular more volatile as well as higher over the next several quarters. And that's because we see not only a growth impulse from stronger economic data, but the likelihood that we see policy support

from the new administration in those areas. Now, in both cases, those dollar treasury yields moving higher are challenging for equities, not just from a valuations perspective, but also from a real economic activity perspective. Market rates moving higher. No one pays the Fed funds rate. Everyone pays some version of the market rate. And so that can be challenging to economic activity perspective, market rates moving higher. No one pays the Fed funds rate. Everyone pays some version of the market rate.

And so that can be challenging to economic activity over time. And I think that's why we've seen some of the indigestion over the past few days that we've seen. Avery, it's been fascinating because even on the up days of the last two weeks, it hasn't been one of these buy everything type of days. On down days, it's a little more mixed. There's rotation going on here. And the market is trying to separate out groups that are more or less advantaged in the current moment. Where does that bring you as somebody who tries to play both sides? Yes, I think it's a very dynamic time because, I mean, as Lauren was saying,

from an interest rate perspective, if rates don't go down meaningfully, you have a lot of cyclical stocks that are very expensive that have been pricing in meaningful rate cuts over the next year yet you also have other cyclical stocks that are still quite cheap trading like there might be a recession and so I think as the data comes in. On those less expensive

stocks that. When if the economic backdrop remains benign to potentially a bit positive. There's a lot of opportunity for upside. And yet, if you continue to see rates stay higher, I think it could be very challenging for certain areas, specifically within housing and certain industrials that are pricing in a real resurgence of demand next year.

What do you think accounts for that distinction between, okay, some cyclicals the market loves and is willing to pay up for and some have been left behind? Yes, I think those that are considered to have strong industry structures, the market just automatically projects any positivity onto. So, for example, people think there's a structural deficit in housing, but actually affordability is what drives housing, right? We would all love to live in a larger home in the best neighborhood with the biggest yard. We don't need more at these prices. But we need it. So I think that there is room. But because of the structural argument about housing,

housing has gotten a bid. You have areas in industrials and in transportation where there's considered to be strong industry structure that have gotten a bid. But if that doesn't come to play, come to fruition, it's going to be tougher. And then you have other areas like airlines, which are considered to be one of the worst industries ever, right? But we've had a really structural shift in the airline industry that could be very favorable playing out. And so those valuations are still very low. Interesting. Brian, you know, we can talk a lot about whether there was a pivot point two weeks ago in various policies or not. But leading up to that point, bull market was underway for a couple of years. We were up 60 percent. Earnings

were already rising and broadening out. Even yields were going higher. We were expecting a little bit less in the way of the Fed. In other words, a lot of the stuff that we we feel as if the election had a lot of bearing on, we're already underway. What does that mean for you in terms of an investor figuring out if things are played out or there's more to go? Yeah, they were very much underway. And in fact, I created a chart early in the year showing Trump v. Biden for their thousand days, and they were pretty much sitting on top of each other. So everybody gets all bulled up around a change in administrations. But you're right. They were sitting right on top of each other. Now, if you remember Trump's surprise victory in 2016, you did initially get a move up in rates. You did get cyclicals over defensives that faded.

And why did that fade really around the Fed having to raise rates in 2018, but even more so the uncertainty around the trade war, right? Business investment slowed, interest rates came down, defensives outperformed. You look back four years later, growth stocks won under Trump, growth stocks won under the eight years under Barack Obama. So therein lies the rub. I think what we're all kind of discussing here, it's almost like a Rorschach test, right? You see a butterfly. I see a sailboat, right? Some people look at it and say, I see tax cuts and deregulation, rates up, cyclicals. Others will look at it and say, I see fiscal consolidation. I see tariffs, a lot of uncertainty, hard to make industrial policy when you don't understand the rules. That's going to be a weight on economic activity.

So it's a bit of a challenge. Like Avery was saying, or like Lawrence said, I go back to the fundamentals. Leading indicators of the economy are pretty stable. Not accelerating. They're pretty stable. Fed's going to lower rates, but not as much as we once hoped. And that's why you're seeing a little bit of a shift back to quality and mega caps here. And to me, the question isn't so much, you know, let's figure out today what all the policy implications are and what the mix is going to be and how it bears on the market, but whether really just that hope among a lot of people of

relief on taxes, on regulation, you know, more leniency on M&A, like all these things that you can kind of bake in if it just makes investors more tolerant of valuations where they are or it acts as a psychological cushion. I think there's absolutely a psychological cushion, and that's part of what's making professional investors a little nervous. Because, first of all, none of these policies have happened yet. Right. And so you typically have a little bit of pullback in the election related trades just as the market adapts to. Oh, right. We're maybe six months away from a lot of these ideas. But also, you know, we think about tax cuts. It's likely that we'll see an extension of the individual tax cuts.

Beyond that, really, truly, who knows? It's not as if the market was carefully pricing in the tax cuts expiring and what that all meant after next year. Exactly. And then if you think about the growth impulse that that Brian's describing, that's an extension of something that already exists. So what type of reacceleration do you get from that? Not much. You think about the elements of trade and tariffs, the type of revenue that could bring in. Not very much. And you think about the underlying economic environment relative to 2016, the last time we had a new Trump administration, that was a, we hadn't seen inflation very much for

15 years. That's not the environment that we're in now. And so I think that the AI essentially extended the last cycle by a couple of years. And now a lot is looking a little long in the tooth, but there is some of this cyclical backdrop. So I think portfolio construction is coming more and more into focus, this idea that investors, even if they expect a good economic backdrop, are going to have to make some portfolio changes to make this next couple of years work. Avery, if you look at the areas below the surface where the market has really asserted its view that things are going to matter a lot in terms of policy, health care to the downside, banks to the upside. Those have been really the most persistent. Do those make sense to you? Would you like to push back against either of those? Certainly. They actually do make sense to me. I mean, I think from

a banking perspective, the likelihood that Basel III is pulled back, I think, is a decent likelihood. Certainly, I would expect more M&A. I mean, there is some debate about, like, is all M&A going to go through? Maybe not. But I think probably a better environment than we've seen. You know, there's always a question around consumer finance. Will there be more regulations? If there are more regulations, there's likely to be a lot less credit, which would be very bad for the economy.

So I'm not sure that would actually happen. So overall, I do think the backdrop is favorable. But the credit card issuers flew on day one because they said, oh, that late fee cap's going away. Exactly. I mean, there's very specific things. There are these very specific things that, you know, if you want the economy to be good, the credit system evolved the way it did because you need to be able to fund the defaults. And then on health care, I also do think that it makes sense. I mean, RFK really is looking for a new paradigm in both food production and health care that has the potential to really revolutionize the health of this country and have very important economic implications for the

current companies that are benefiting from that. Probably not to the upside, except for those who would adapt dramatically. But also from an overall economic perspective, real opportunity for entrepreneurs in healthy food, in nutrition, in healthy, more preventative types of medicine. You know, RFK has said for the price of all that we would spend on Ozempic and Wachovic for the GLP-1 drugs, for half of that, you could give every American a healthy meal three times a day and every person who needs to lose weight a gym membership. I think he's actually really serious about trying to promote these policies. And so I would be cautious on companies that could be exposed to this. But from an economic standpoint, we're spending over $13,000 per person in this country. Talk about a tax on health care. That is a massive de facto tax. And we have the worst health outcomes

of all developing countries. So I think that there's really a mandate for change here that's very exciting, but does have important implications for stocks. But don't you have to, like, go all the way, start with he gets in there in the job. Yes, yes, yes. To he finds he can be effective in effecting this change in this massive segment of the economy within a couple of years and changing the behavior of the average person. I mean, it just feels like it's how do you put money behind that? Right. So, I mean, changing the behavior of an average person does take does absolutely take time. But when you have a food supply that is actually toxic, you just remove aspects of that food supply. You can make a difference very quickly. I mean, I've in my own life seen the difference of food on people's health.

I do wonder if you would have the other side of it being like, actually, Ozempic is a shortcut to doing a lot of those things, right? But RFK does not believe that. No, I know that. I'm just saying in general. Yes, yes. So I would say the political will behind this, I think, is very significant. Musk is behind this just as much.

Trump recognizes how he got elected. So we've never seen this level of political will behind this type of movement and to have people in power who can really make a difference. All right. That's an interesting take, because I really do feel as if, you know, if Donald Trump made the list of the reasons he got elected, I'm not sure healthy foods is near the top of it. But I know what you're saying in terms of implications of RFK in that. I mean, why is RFK being appointed for health and human?

Because he's an anti-vaxxer. That's not the only way to make America healthy again. Let's make America healthy again. Brian, you mentioned earlier that you feel like things have kind of migrated us back toward quality and mega cap. That is an interesting kind of dichotomy in terms of you had a quick rally in low quality, risky stuff, speculative, beta leverage right after the election. Maybe that's just a short covering move and a mean reversion move. But you think we're still in that mode where it's like the quality is going to continue to outperformperformance it has for a couple of years? I do. And, you know, typically you need some type of catalyst to

unlock the other parts of the market. Usually what we've been looking for is the rate cuts and a reacceleration of economic activity. Rate cuts aren't going to be the magnitude is not going to be as the same as what many had expected. And we'll see what we get on the policy front. But to your point, these things take time, right? This is not a shovel-ready country, we have found out. And, you know, what's the propensity to spend your tax cuts? So we'll see. I wouldn't be surprised if in 25, we see Fed lowering rates and leading indicators picking up again. But I'd rather see a little bit more evidence of that right now. For now, I think it still favors the higher qualities. And, you know, interestingly, with regards to sector leadership, it is always fun to look at the policy platforms of each of the candidates

or now the incoming administration, get a sense of what that means. I'm not sure how often it plays out precisely the way people think. One of the examples I used all last year was in 2016, everyone thought traditional energy would outperform clean outperformed. Right. Under Biden, everyone thought clean would outperform traditional. So it does depend on the direction of the economy and what the monetary policy authorities are doing. Lauren, you mentioned that portfolio construction kind of becomes more important now. Along what axes does that matter? Is it a U.S. versus the rest of the world?

Because right now is a really, really loud consensus that U.S. is going to maintain its advantage. Or, you know, stock bonds. How do you treat fixed income in a portfolio? It's all of the above. I mean, for years we've been talking about an environment where inflation and rates were likely to be a little higher and potentially a lot more volatile and how that might be an environment where the quality large cap conversation that Brian's been having is maybe not a winner, right? You have to put together now a major megatrend with respect to not just AI, but the energy and infrastructure that are building it, alongside a very different rate and economic environment and concerns about debt and deficit moving forward. That's an environment with a strong economic backdrop where credit,

I believe, is incredibly healthy, but where duration is not necessarily, not at all really, our favorite place to take risk because we expect that rate volatility. So credit, but short duration credit. If you want to balance your duration, look at structured credit, look at the municipal curve, which funds a lot of the infrastructure we've been talking about. From an equity market perspective, I agree that as we look forward the next year or two, we're likely to see moments where economic growth surprises to the upside. We've been seeing those. But overall, you're looking at growth likely slowing from a very high base closer to the U.S.'s long-term trend. That's an environment where large caps are probably going to outperform over a couple of quarters, where mega cap tech is still an important part of your portfolio.

But again, balanced with some of the credit dynamic that helps bolster when you have a bad rates day. Sure. Avery, you mentioned the attention on industry structure and dynamics and also maybe M&A gets a longer leash. Are there industries you would look at where you could say, you know what, the structure can actually be improved or fixed and therefore is an opportunity or vice versa? So, I mean, I think you could see more M&A in financials in particular, right? All these regional banks kind of potentially rolling up over time. I mean, people talk a lot about biotech. I think the issues in health care make the large pharmaceutical companies and large biotech companies looking very acquisitive in their activities.

But I would say also, you know, something that we paid attention to is industries that have changed because of M&A. And so, one, I mean, I've spoken about in the past the telecommunications industry with three major players. And we think much stickier plans than people appreciate due to the preponderance of family plans, as well as the long runway that they have for rolling out broadband through fixed wireless and through fiber. So I think that's an industry where M&A has really helped. You have inexpensive stocks. And they're not as rate sensitive. They're not as economically sensitive. So it's nice to have parts of the portfolio that deliver a yield around 5% or actually more with buybacks for all three players where you don't have

to be constantly worrying about where rates are going tomorrow. Yeah, that's true. It's an interesting combination there. Great conversation. Hit a lot. Thanks a lot, Lauren, Avery, and Brian. Thank you. Let's send it over to Christina Partsenevelos for a look at the biggest names moving into

the close. Christina, hello. Hello, Mike. While shares of server maker Supermicrocomputer have been getting crushed just over the last month, down over 50% and a list of problems. But you can see the stock up 27% today on hopes that it could avoid one of those problems. That would be a NASDAQ delisting. Despite an almost 20% year-to-date stock drop,

Baird analysts urge investors not to overlook Roku shares. Their new bullish note on the streaming service highlights Roku's long-term potential in the improving streaming industry. They pumped up or bumped up their price target to $90 from $70 as well. And that's how you can see shares are up almost 7% on that note. Mike? Christina, thank you. See you again in just a moment. We are just getting started.

Up next, Goldman Sachs' Sung Cho is here to break down what he's expecting from NVIDIA's earnings this week and what's at stake for the tech sector in the year ahead. We're live from New York Stock Exchange. You're watching Closing Bell on CNBC. Tech trying to rebound after the Nasdaq's worst week in two months as investors brace for NVIDIA earnings later this week. Our next guest is looking through the volatility and sees more opportunity for tech in the year ahead. Sung Cho is co-head of public tech investing at Goldman Sachs Asset Management, joins me here at Post 9. Good to see you. Good to see you as well. Obviously, it's the event of the week, NVIDIA numbers. Stock is like backing off just a little bit here, a lot of noise around, you know, the pacing of Blackwell and all the rest of it. What's your read on what embedded

expectations are for NVIDIA and how it's prepared to trade? Yeah, certainly expectations are for a beat for NVIDIA. And I think in some ways, the reason why expectations are so NVIDIA and how it's prepared to trade. Yeah, certainly expectations are for a beat for NVIDIA. And I think in some ways, the reason why expectations are so high is because the cloud companies have actually given us NVIDIA's earnings already, right? It's like 50% of every dollar of CapEx is being spent on an NVIDIA GPU. Cloud CapEx went up by 9% this quarter in aggregate. So we expect fairly high bar for like them beating because that's um you know that's what they sell right um and so like um you know the key to watch is

going to be around blackwell right blackwell is the next generation you know uh platform and some early indicators around that are very very positive and we're going to continue to watch that so you have this report uh this morning or overnight about how maybe there's a little bit of a log jam and installations of Blackwell because of overheating issues. We've known this was something that was, you know, something had to be figured out. Yeah. At the same time, a bigger picture debate seems to me over the last several weeks happening about whether the pacing of improvement in the AI models is sufficient at this point to justify that much more, let's say, 2026 levels of further investment. How does that? So let me hit on both of them. So like Blackwell,

this is their first foray into doing something beyond just semiconductors, right? And so it's not just semiconductors that they're selling, but they're selling an entire system solution. So obviously there's going to be ups and downs because this is a relatively new foray for them. But this is one of the best executing companies out there. And we have no doubt they're going to be able to solve the heat dissipation issues over time. And your second question. Well, about the large language models, how the next generation is really not showing the same pace of improvement. Right. So that's the report that we saw. Yeah. Yeah. So in some ways you could spin that as a positive, right?

Because these guys are not going to stop trying to improve their models. So in other words, the sunk cost fallacy says we've invested this much. Even if it's slowing down, we have to invest that much more. Yeah, so I think that's a big debate in the market right now, right? It's like everybody's looking around. We've spent a half a trillion dollars on AI infrastructure, and everybody's looking around and saying, where are all the applications? What are the use cases for this thing? And where is the ROI? And the natural conclusion is that, look, there must be some kind of slowdown coming. But I think what people are missing is that these

cloud companies are investing for their existential relevance over the next 20 years. Do you think Google or Amazon want to be your second or third best large language model out there? So they're pressing ahead. And I think this question about ROI is a good one, but I think there are other factors at play right now. At the same time, you've seen this recent burst of outperformance of software names relative to the average semiconductor, kind of like non-NVIDIA semis. Does that seem like it's sustainable?

And what do you think is behind that? Yeah, so I think it's really, really interesting to set up for software. And we're very bullish software as we go into 2025. Software has been one of the worst performing sectors over the last couple of years. And it's a combination of higher interest rates, weaker fundamentals, and some secular concerns around what AI is going to do to software, right? But we think that the non-AI parts of software are really set to rebound this year. And we saw it from results like Cisco. Cisco reported positive bookings for the first time. And so you have the AI ecosystem and then you have the non-AI ecosystem. And we're actually starting to see positive momentum for the

non-AI part of the ecosystem, which should read bullishly for a lot of the software companies. Does that mean, I mean, it doesn't have to be one or the other, but does that mean that there's going to be this shadow over other semis for a while, whether it's because of trade concerns or just the cycle? I don't think so. I think it's just really starting point matters, right? Semis have massively outperformed software as a starting point. They've benefited from the build out of this AI infrastructure and at the margin, there is some softness and some concern. But I think what you're seeing over the last week and you saw one of the biggest rotations, software versus semis, that we've seen in the past kind of 12 to 18 months is really just a function of the starting point. And, you know, we're at a moment where a lot of the themes people are most focused on almost seem like they're separate from tech, right? It's about the various policy things. It's about whether the cycle accelerates from here in

terms of the economy. Where do you think the cycle accelerates from here in terms of the economy. Where do you think the buy side is set up in terms of, OK, everyone was a little crowded in X7 at the midpoint of the year. Where are we now? There's a lot of enthusiasm. I think some of your prior guests have talked about AI infrastructure. There's a lot of enthusiasm around that. Those stocks have actually been some of the biggest performers. I was on the show last time talking about GE Vernova like three months ago.

And, you know, that's been a great stock. So I think, you know, we're continue to see upside in that group, but it's not the kind of ginormous upside that we've seen in the past. Right. And so we're kind of going back to the Mac seven. The Mac seven actually has retreated a little bit during this. I mean, Microsoft's done very little. Yeah. So like I think there's a little bit of this like enthusiasm around non Mac seven stocks, But we're actually starting to find more opportunities on the Mag7 side. And one of the names that we're getting increasingly very bullish on is Facebook and Meta. Right now, the market has been very, very focused on, like, who can build the most powerful and strongest model. But ultimately, the market's going to fixate on what models are actually getting used. And Lama, like if you look at the Fortune 1000 companies, Lama is being used by nearly 40% of them. And so, you know, they're winning.

Not to mention it's used internally at Meta every day. Yeah, yeah, exactly. And so, like, there's actually a tremendous amount of momentum. And if you look across the Mag7 and you say, who has the potential to be able to tap into a massive new, like, addressable market? We think it's meta. All right. Yeah, I mean, been a pretty popular stock. See if it can carry on from here.

Thanks very much. Yeah, thanks for having me. Appreciate it. All right, up next, the parade of retail earnings kicks off tomorrow. We'll hear from star retail analyst Matt Voss with what he'll be watching from Walmart, Target, and more. Closing bell. Be right back. Welcome back. Getting some crypto news that's just breaking. Kate Rooney has that for us. Hi, Kate.

Hey, Mike. So we've got a couple of crypto headlines here. I'm going to start first with a report here from the Financial Times that Donald Trump's social media company is in advanced talks to buy back. That is a crypto trading venue owned by the Intercontinental Exchange. That's the New York Stock Exchange parent company. As True Social does look to expand beyond online conversations. Again, this is according to the FT. The media group here is owned by President-elect Donald Trump. And according to this report, is closing in on an all-share purchase of that crypto exchange. They're citing two people familiar with those talks. We've reached out to both companies. But you can see shares of Trump media up more than 8 percent and then backed was up as much as 40 percent, but is now halted for volatility. And then separately, Wall Street Journal now reporting that President-elect Trump is meeting with the CEO of crypto exchange Coinbase.

That is Brian Armstrong of the Journal here, citing people familiar with the matter. They are expected, according to this report, to discuss personal appointments to his second administration. Trump has been an avid backer of crypto. He's showed up at some of these crypto conferences and is, according to this report, talking to Brian Armstrong about the SEC commissioner in particular. Armstrong has backed publicly Hester Pierce as a potential SEC commissioner, Mike. But a couple headlines to bring you there. We don't see shares of Coinbase moving on that, but anyway, back to you. Well, we do have Bitcoin itself up close to $92,000, up a couple percent, Kate. Maybe on some of that as well.

So good to get that. And we'll, I'm sure, check in with you on that a bit later. Now, it's a big week for retailers on Wall Street. Walmart, TJX, Gap, and Ross stores all getting ready to report results. Joining me now at Post 9 to discuss the setup and his top picks into year-end is J.P. Morgan's Matt Boss. Matt, good to see you. Great to be back, Mike. So the backdrop is, I mean, I guess the consumer continues to kind of be resilient and consumer confidence levels have gone up a little bit post-election. On the other hand, maybe got some tariff questions, but just more specifically in terms of potential winners and losers

this earnings season, what has your focus? Yeah, so you nailed it on the resiliency of the consumer. I'd actually make the argument in 2025, the wealth effect is material. We calculate $54 trillion in wealth that's been created since 2019. You have the equity gains, you have housing, and then on top of it, even dynamics such as Bitcoin are important for the middle income consumer. It's the low end where, as you cited, that's where there's still a bit more pressure in terms of the inflationary pressure that remains at peak. That's where I think the tariff dynamic could bring a wild card to watch. But into earnings, it's value and convenience off pricers we think stand very solidly. And we're

looking at the global brands. We're looking for global brands with a discount that can compound Birkenstock, Lululemon. I would put Tapestry in that camp, Ralph Lauren. So a number of different opportunities. So those would seem to be obviously beneficiaries of the sort of wealth effect and generally flush consumer. And then when the value changes, it seems like that's been a consistent story for so long. I mean, I look at a TJX and it trades at this premium valuation. It's two and a half times sales. And then Kohl's is at like 0.1 times sales.

It's below $2 billion market cap. Can that just keep diverging in that way? So what we've coined this as is a selective recession, where again, you have the high income consumer where the dollars are plentiful. They're being choiceful. And the low income consumer, that's what's holding back. But what's interesting is nearly 50 percent of consumption is coming from the high end. So that's really the consumer that matters. That's where that 54 trillion in opportunity, what's happening, that consumer is being choiceful. So that consumer is still shopping for value. You're seeing the trade down. And now I think if you can see

stabilization at the low end, that would be the next leg, for example, for off-price retailers, which Burlington would be your growth story. TJX would be your compounder. Ross Stores would also be your compounder. I wouldn't forget about Ollie's as well on the off-price component, more in small cap. Burlington, and maybe it's just like a totally outdated conception of it as being skewed toward outerwear, but there has been this weather dynamic at work, right? Yes. So near term, we were out with a preview today on 3Q. The weather has been tough. If you're trying to sell outerwear, it's been golf weather nearly every day in September and October.

In the whole country. Precisely. Now, some outliers. Again, we actually raised numbers on Burlington into the print coming up. Abercrombie, I think, is setting up for a beat. As you noted, Kohl's, we took numbers down. Bath & Body Works, we took numbers down. So I think it's a real mixed bag with winners and losers. That's for the third quarter. Now into the fourth quarter,

again, I go back to some of these macro factors. And to me, I actually think holiday is going to be robust. We're modeling 2% to 3% across apparel. That's basically back to pre-pandemic. And that's what I think we now have this setup is we're normalized. You have the brick and mortar relative to e-commerce growth that's back to normalize. And what matters going forward is, as you said, consumer confidence with now the election behind us. And what do some of these drivers look like for both the high and the low income in 25? We have heard plenty of commentary about some retailers trying to get ahead of potential tariff impacts. Is that going to start to be material in one direction or another in terms of a pull forward or anything in the next few months? So it's a great point. Across our coverage,

China exposure on the sourcing side is down roughly 700 basis points in the last four years. So a number of retailers and brands across our coverage have really moved their feet in anticipation of this potential outcome. Now, looking forward to me, it all comes down to pricing power. So as I look across the space, athletic, active with innovation, handbags and accessories where you can really illustrate value as well as quality. And then I think looking at pricing that you've taken in the U.S., a number of brands have really been on this value spectrum. And so I think in a scenario, if tariffs do in fact happen, as are being proposed, I think what you'd want to avoid would be companies battling on price. But companies with a quality value perception today, I think that there's meaningful opportunity

for price increases, as long as you can back it up with product. I assume you mentioned Lulu, and I assume it kind of covers a lot of those things you mentioned in there, but I guess you feel as if whatever competitive issues have been discounted? I think the real key is if you go back 18 months ago, their creative designer passed away. They took a very conservative posture with newness as a result. That's what you see on the floor today. As the calendar turns into early 25, I think you have a catalyst with newness. You have a catalyst in addition on sizing and then the innovation ramps as well as the marketing. I think you're already starting to see it in the fourth quarter. I think the inflection for the return

to growth in North America is in the front half of 25, and then it scales into the back half of 25 and into 26. Competition, to your point, is fierce, but I think Lulu is still a winner multi-year. Interesting. Yeah, we're showing that chart. Looks like we'd have some room to run if it worked out. Matt, good to see you. Thank you. Great to be on. All right, appreciate it. Up next, we're tracking the biggest movers as we head into the close.

Christina is standing by with those. Take a stand. Well, we have an activist investor winning board seats at a health care giant. And the NBA has settled its legal fight with a media company. Details on that new deal next. Less than 16 minutes until the closing bell. Let's get back to Christina for a look at the key stocks to watch. Thanks, Mike. Well, CBS shares popping today after it struck a deal with activist investor Glenview Capital for four board seats. It comes after months of pressure from investors to boost shareholder value. Glenview CEO Larry Robbins, who will get one of those seats, told Squawk on the street earlier today

the company has to reverse losses from its Medicare Advantage business. Listen in. We think that the board members that are joining, particularly Guy, Leslie, and Doug, bring tremendous operating experience, tremendous health care experience, and can be helpful as the board unifies in order to try to improve the execution on this phenomenal collection. Warner Brothers Discovery also in the green today after it reached a settlement with the NBA over a breached TV contract. The TNT parent will not receive a package of live games in the U.S. starting next season, but will receive some international rights and free access to those highlights. You can see shares up almost 3 percent, Mike.

All right, Christina, thank you. Still ahead robin hood stock soaring we'll tell you what's behind that big bounce it's coming up on the belt We are now in the closing bell market zone. Robinhood hitting a three-year high today. Kate Rooney has more on that move. Plus, Deirdre Bosa on why good news for Tesla is taking down Uber shares. And Pippa Stevens on the high profile cabinet pick, pushing some of the energy names higher. Kate, quite a move in Robinhood here on this analyst call. Yeah, Mike, up about 10 percent today.

It's been continuing this post-election rally we've seen in Robinhood. That analyst upgrade, though, as you mentioned, appears to be the driver today. So you had Needham upgrading Robinhood to a buy about 40 percent upside baked into that call today. Analysts over there writing Robinhood is positioned to be a major beneficiary, they say, of more positive regulation within the crypto space while emerging as a leader in its equity and options offering. They also point out that Robinhood has had to kind of play it safe on some of the product offerings to try to avoid enforcement action from the SEC. But under a new SEC chair with President-elect Donald Trump, that could allow the brokerage firm to launch products a bit faster without fear of retribution.

They were issued a Wells notice by Gary Gensler's SEC on crypto in particular. It has been reported also that Dan Gallagher, who is Robinhood's chief legal officer, former SEC commissioner, is now leading the shortlist for Trump's SEC chair. Stock already up about 180, 180 percent so far this year, Mike. Yeah, Kate. In fact, the chart since its IPO is extraordinary at this point. We mentioned it's a three year high. Of course, it did trade much higher in that initial burst of enthusiasm about meme stocks and crypto. But all that you've laid out there really does underscore that it's basically a crypto proxy right now. As much as Robinhood talks about retirement assets and all the rest of it, that seems to be how it trades. 100 percent, Mike. It's been interesting to watch sort of

the juxtaposition between some of the product offerings, whether it's options and derivatives and them getting into sort of an interactive broker side of the business and the more professional kind of boring side of the business. We've talked about this a bit that them looking a little bit more like a bank. While, as you said, they are really a high growth, almost meme stock tied name at this point. You've got crypto, you've got DJT really picking up in some of the volatility. That's really what some folks have been chasing. And you see in the chart And if you zoom out, as you mentioned, since the IPO, it's really, it went through sort of the high during the pandemic and GameStop interest rates started to go up.

And it tells quite the story if you zoom out there. Yeah, it's a high volatility play on other high volatility plays, essentially, Kate. All right, thank you. Deirdre, Uber, pretty high volume sell-off today. Yes. And you know what? This isn't a new story, but I'll tell it to you through a stock chart. Look at Uber and Tesla share performance over the last few months, and especially since the end of October, they really moved in opposite directions, largely on this idea that a robo-taxi fleet from Tesla would bypass the existing rideshare apps

and come for their customers with self-driving cars. A better regulatory landscape is thought that it could speed up that disruption. Still, though, it is a big stretch. Even if there is more favorable federal framework, Tesla still needs proven technology and its FSD software still far from fully autonomous. Mike, the bigger, maybe less appreciated threat to Uber and Lyft is Waymo, which is right now delivering over 150,000 paid driverless rides per week in key markets like San Francisco and LA. Yes,

Waymo is also partnering with Uber in its next expansion markets, Austin and Atlanta, but it is not clear that Waymo needs a platform versus using its own, which again, it is doing very successfully here in San Francisco and expanding very quickly. It really is fascinating, Dee, because right now, I mean, Uber, of course, is a solidly profitable company. This is an $8 billion swing lower in market cap based on these things that may happen way down the road. Well, the Tesla may happen way down the road. Waymo Robotaxi fleet, even though it's 700 vehicles, but they're delivering 150,000 rides per week.

So that is the clear and present threat. The bull case is that Uber and Lyft could be fleet managers and that these Robotaxis would sit on top of these apps. But Mike, I remember when Uber and Lyft used to say that they needed to create the app. I mean, Waymo has been able to do so just fine here in San Francisco. So it's still this kind of push and pull. We don't know where it's going to go, but I'd say the threat's already here with Waymo. Yeah, that's a good point. And so we're, you know, markets questioning that first mover advantage. Thank you very much, Dee. Pippa, we have some personnel moves for the Department of Energy. That's right, Mike. And we are seeing shares of two energy stocks jumping after President-elect

Trump's nomination of Shell executive Chris Wright for energy secretary. He's the founder and CEO of oilfield services company Liberty Energy and also sits on the board of directors of Oklo. That's the small modular nuclear reactor company that's backed by Sam Altman. Wright is aligned with Trump's call to increase fossil fuel production, and the executive has said, quote, there is no climate crisis, and we're not in the midst of an energy transition. Now, energy is the top S&P sector today, and every component is in the green, led to the upside by EQT, Diamondback, and Halliburton. One of the immediate actions could be a reversal of the pause on new LNG

permits. But beyond that, the permitting reform the industry is seeking isn't directly controlled by the DOE. But still, the energy secretary has an outsized role in communicating the U.S.'s energy policy and can also make recommendations. So that, Mike, is part of the reason why we're seeing this response in oil and gas stocks. And Pippa, would there be a kind of a mirror image effect on, you know, the alternative energy plays? Obviously, there's been some move, the suggestion of clawing back some of the green energy type money given Wright's stated suspicion of that side of things. So that is definitely an open question here.

And what's interesting about Wright is that Liberty Energy has not been investing in things like direct air capture and carbon capture that other majors like Shell, Exxon, Chevron, and Oxy have all invested in. So they don't have the same skin in the game, as it were, which does speak to a little bit of Wright's thinking for the industry. But on the flip side, a lot of these renewable projects are now economics driven. And so there's a lot that say that they while the incentives are nice to have at this point, it is not a need to have. The other thing is the most impactful incentives, the ITC and the PTC. Those were in existence before the Inflation Reduction Act. So everyone I speak to says

that those look pretty safe. And certainly not under the direct command of the Energy Secretary in any case, I assume. Pippa, thank you very much. All right, as we head about 30 seconds till the close, you see the S&P 500 is up a little more than one-third of 1%, fairly narrow range all day. The Dow just below the flat line. NASDAQ is up six-tenths of one percent, thanks in part to moves in Tesla. You did see a big pop in crude oil, up three percent,

a little bit of a bounce as the dollar has backed off and given some relief to utilities. That's going to do it for Closing Bell. We'll now send it into overtime with Morgan Brennan and John Ford.