Closing Bell - Closing Bell: Mega-Cap Tech Momentum 7/25/23

Episode Date: July 25, 2023

Today marks a make or break moment for mega-cap tech stocks with Alphabet and Microsoft reporting after the bell. Adam Parker of Trivariate, Bryn Talkington of Requisite Capital and Malcolm Ethridge of CIC Wealth give their expert takes on the big tech run. Plus, David Herro of Oakmark Funds breaks down what he is calling the most undervalued sectors globally. And, Bob Iger coming under fire amid the Hollywood strikes. Brian Cranston is the latest in a growing chorus of criticism aimed at the Disney CEO… we’ll tell you what he said and what it could mean for the stock. 

Welcome to Closing Bell, everybody. I am Brian. And once again for Scott, all right, this make or break hour begins with a make or break moment, maybe, for mega cap stocks. We are an hour away from earnings from both Alphabet, Google, and Microsoft. Those reports could pop this rally higher, or they could derail the tech run. So many bulls have been riding. All right, we're going to get to all that. But first, here is your scorecard on Wall Street. We are higher across the board, not by a lot. The Dow is up one tenth of one percent. NASDAQ up a little bit more. All ahead of those reports. And of course, you know by now, if the Dow ends today higher, and we're close, we've got an hour to go, it will be now a 12-day win streak. Tomorrow, if we're up,

that would tie the all-time record of 13 higher days in a row for the dow we did that only all the way back in 1987 just something that are tucking the back of your mind heading into the close and it is not just about tech today could a could a little up-and-coming arkansas-based retailer actually make you even more money than a microsoft all right you could probably guess the stock, Walmart. We're going to dive into it and a very bullish call on that name. But let us start the hour with our talk of the tape by diving into tech and your money overall and bring in Trivariates.

Adam Parker joining us here on set in Post 9. Do we care? 12 days up and over, does it matter? It's a neat headline. It's a neat headline it's a neat headline as you were reading that i was thinking what else happened in 1987 when october actually we ended we people know the that you know black monday or whatever it was but we actually ended the year higher in 87 a lot of people forget yeah yeah i guess i don't make much of it i think it's one of those things where you know things can happen i don't know if it really

means that much i mean uh i think what will more, the corporate earnings reports we're going to get, you know, here the rest of this week and next week. Yeah. I mean, it is a great headline if we finish up today, Dow up 12, because it'll make it'll make non-financial news. Right. It'll make nightly news on NBC, USA Today, things like that. Is there any way that it does generate return because it gets people, oh, the Dow's up. What's going on with the stock market? Gets those sideliners maybe back involved, Adam? There's no question that people are more bullish now than they were six, seven months ago when the market was way lower. I mean, I'm making these numbers up. But if zero is max bearish and 100 is max bullish, I think people started the year around a 10 and they're

around a 40 or 50 now. So I don't think we're euphoric when I talk to institutional investors. I don't think people are incredibly bullish and there could be more animal spirits for sure from here. I think what people struggle with is just the valuation, where we are now. You kind of have to pay a little bit more than 20 times 2024 earnings at the end of this year to get a 5,000 S&P. You know, get kind of a 10% upside from here. How much to get that multiple? Over 20 times the 2024 numbers right now. So I think what people are struggling with is it's a little high. It's not impossible, but it does sound difficult.

I think that's the challenge. I think you can create a case that the earnings season has been mixed but positive so far. We have big companies in front of us. And you could create a scenario that some of the margin pressures that companies faced are going to start to abate, right? Commodities have generally come down. Wage pressure could slow a little. You know, currency could help a little. So I think people are more optimistic than they were

uh certainly six seven months ago we talked about it yesterday on closing bell but i'd like to get your thought on it as well because we know about you know there's seven stocks ten stocks whatever that kind of seem to run the show right they top hundreds of major etfs their weight in the nasdaq 100 while recently reduced, is still spectacularly high. Right. Not to take anything away from any of our other great best in class earnings coverage. But literally, is it just Apple, Microsoft? Do any other earnings matter? I think they do. I think other companies do matter. You know, I think if you're trying to beat the S&P 500 and 30 percent of the index is in seven or eight names, then you have to manage your risk around those. I think you have to own all these

names in some sort of market weight. They're not particularly idiosyncratic. So it's not like you could know something about them that nobody else does. I think 60 sell side and, you know, eight million buy side analysts cover them. Right. So it's not like you're going to... There's no dearth of information that's going to give you some kind of a, you know, a delta. Yeah, you don't know something that's not on the price. 80% of the returns can be explained by some macro factors and they're really well covered. So my sense is they're risk management stocks. You got to own close to that 30% weight of them. Maybe you like, you know, Microsoft and Meta more than like, you know, you can mix and match, but your index weight should be pretty mirrored by your exposure.

And then you try to make your alpha in the other 70 percent. I just wonder if there's alpha to be made in other areas of the market. To your point, I know we love the Microsofts in part because they are so big. They are so important. You also maybe like energy here. I like oil is about ready to hit 80 again. The OIH oil ETF is at 340. It broke above what looks to be some kind of resistance there. It's failed before. What kind of energy do you like? Well, I mean, starters, like I've been really wrong to recommend that this year. I mean, it's been our top choice for

three years. It worked great for three years. It's been terrible this year. I've been surprised a little bit by supply in some places and a little bit weaker demand. I like it a lot again now. And the reason is I think that the earnings expectations are incredibly low for energy, down 29% this year versus last year because oil's down. And yet the overall markets estimates probably come down. So my sense is where can I get upward revisions? Probably in energy if things tighten at the end of this year for next year. They're cheap. They generally run out of cash. The capital spending is down a ton.

And I think demand will be pretty good. I think the biggest difference is most vehicles are still gas guzzlers. You just don't have that many EV or hybrids. I posted something to Twitter slash X Today from quoting my friend Javier Blas over Bloomberg, which is gas demand in Europe is rising. Gasoline demand in the United States continues to not only go up, but the estimates continue to go up. Even with a couple million EVs on the road,

Americans driving bigger cars, less fuel efficient, more miles. Have you been on the New Jersey turnpike lately? So is that the one to the west of New York? It's the one that I'll spend six to seven hours on a day and I'm telling you it's full doesn't matter if it's 3 a.m. or 3 p.m. I stay on this island unless I'm going to the airport but you know but your point's well taken I think 82 percent of new sales are gas 18 percent EV or hybrid think about the install base of vehicles only eight percent are EV or hybrid. So the answer to your question is peak oil demand will be somewhere like 7, 8, 9 years from now. Then on the other side of that, it will roll back to today.

I'll take the over on that. Could be over. I think oil demand goes up in the United States and globally for the next 20 or 30 years. I think on the other side of that, you might be back where we are now 18 years from now. That could be reasonable. But I think the point is so much money can be made in the interim in the way these companies are going to generate cash. So I like the risk-reward of energy. I think what's priced in is not much.

I think people are negative. So tactically, I like it. And then, obviously, long-term, I like it a lot. All right. Let's add to the conversation and bring in two of our favorite people, CBC contributors, Bryn Tauke, the president of Requisite Capital Management, all the way down there in Houston. A little oil down there from what I hear as well. And Malcolm Etheridge of CIC Wealth. Welcome to you both. Brittany, see what I just did there?

Right, I'm filling in for Scott. I just diverted the entire conversation to energy because that's what I love to talk about as well. I know you like some of these names. We'll get to big tech in a moment. But do you have a macro take or some favorites in energy? Yeah, well, so, you know, I've been saying all year that I thought that energy long term, I think, is one of the fattest pitches out there. But especially as we were thinking we were going to go into a bigger slowdown than we've had, that hedge funds had been short. You know, you've had two years of massive gains that I didn't think the capital appreciation from energy would be all that much this year and you can get the dividends sell calls but this is a great year if you don't have exposure to

energy to start dollar cost averaging that into your portfolio and i think to you know you and adam's conversation is that as people are traveling across the country i promise you they're not taking their evs because for me to go from houston to in my car, my Tesla is five hours in my Jeep. It's three and a half. Right. So I got to stop two times. And so I think you have a Buc-ee's is lovely this time of year. So get the you to get the nuggets or whatever they are. I mean, come on. That's what it's like. By the way, there's no chargers there. I try to go from Vegas to San Francisco a couple of years ago was grim.

The video is up on CBC dot com. Malcolm, do you have a view on energy? Or before we get to tech, any non tech space that you think may be undervalued? Because, again, everybody's just kind of looking at the same stocks all the time, which says to me, maybe there's some some opportunities elsewhere. Yeah, I do think there's opportunities in health care specifically, but more broadly, to your point, Brian, maybe we find out today after Microsoft and Google report their earnings that just because we step away from the tech rally doesn't necessarily mean that the broader markets are going to take a breather here and can't power a little bit higher, too. So Adam made the case that you know where 30 to 40 of the s p uh gains are attributed to just seven names and so maybe that broadening out means tech takes a breather here hits the pause button and kind of trends sideways for a little bit while

the rest of the market continues to power on maybe it's not an energy but i definitely do think healthcare is worth a look yeah i mean look to, look, to me, if you're being really simplistic, what happened is CPI went up a ton and the big cap tech companies don't get hurt by their margins held in. They didn't really get hurt by rising CPI. A lot of other businesses did. Now that I think, you know, CPI is going to bottom and who knows, maybe go meaningfully lower. I think the case for a rally broadening is that some of these other companies will see less margin pressure and potentially even some headwinds turned into tailwinds, at least for a few months. We'll see. And I think that's the case for broadening. So

I'm with you there. I think the part I'm most negative on and where I've gotten incrementally negative is on any place that has a store with a physical box. So I'm really negative on retailers. I think they... Why? By the way, we have an analyst who's extremely bullish on Walmart coming up a bit later on in the show. We call it the C-block, which is in about 10 minutes. Okay, well, I'll be in my car back to the office,

and I'll listen while they disagree with everything I say now. And it's not really Walmart-specific, although they won't be immune. My issues are threefold. One, I think they call it shrink. I think you and I used to call it stealing. Yeah. But there's a huge problem and there's no way to change it. We track every transcript and every word related to it. We're seeing a growth across multiple businesses. There's capbacks from it. They got to put stuff in plastic cases. There are op-backs. Some guys to unlock it for you. The inventory is mismanaged.

Your desire to go to the store again is impaired. So there's issues there. Two, the financing business is there. Generally, trends are starting to slow. A lot of these consumer companies lend people money to buy stuff on the website or in the store. There's a new term you've heard of now. It's called buy now, pay later. You and I used to call it something different.

And then the third thing is the urban growth that they were counting on in some of these boxes, now they're pushing back. You're seeing closings and less aggressive ramps. So I think there's issues across the board with a lot of these retailers. Lower margins are going to happen and lower revenue growth as a result of it. So I'm incrementally negative there. I mean, Walmart's got a hybrid of things that they have to deal with, and I would say not a particularly compelling valuation. So I'll let the later guests contradict me, but it wouldn't be my favorite place to park money right now. Okay. Definitely do not like retail. You know, Bryn Malcolm mentioned healthcare. I know biotech is not necessarily directly healthcare. It's not like a health insurance, obviously. You've owned the XBI, which is one of the bigger, more liquid biotech ETFs.

Do you still own it and why? Yeah, so, I mean, XBI or just biotech in general has done very poorly for the past few years. The way I've been managing that position is selling calls against that because I don't think it's going to get called away. It's got a very strong channel. But I think I agree with Malcolm. Healthcare is actually my sector pick for the year. It hasn't done well. But when you look at one of the best metrics, Brian, when you're valuing a company is free cash flow yield, not just free cash flow yield. Energy and healthcare have the two highest free cash flow yields of all of the sectors.

And so I think that as this market broadens out, both biotech, I think also because rates are higher and these companies, most of them don't make money. The higher interest rates is definitely a headwind to a lot of these biotech companies, but I'll just continue to sell calls within that channel. But I do think healthcare can redeem itself and have a good back half of the year as that free cash flow yield is so high. And it's so stable as well. It is. It is amazing, Malcolm. You know, I don't know if you have a view on biotechs. If you do, let us know, because you look at America and I'm going to say something unpopular. You know, we've got a lot of health. We came out of COVID. We got a lot of health issues.

Some of them were magnified by COVID, obviously, obesity crisis, diabetes, cancer rates are on the rise. I'm not trying to be negative. What I'm saying is that you think the market might reward more of these companies that are actively trying to solve many of these major crises that we've got going in health care. And yet, to Bryn's point, if you bring up a five or 10 year chart of the XBI, it's at six year ago. Has it made any money in six years unless you actively traded it? Yeah, you'd be a lot better off betting on our vanity and our interest in some of the weight loss drugs and the Botox drugs and things like that coming out of the biotech and healthcare names. But I'm more interested in the ways that the health insurers

are able to pass along the additional costs that UnitedHealthcare and other companies have told us they expect to see from seniors stepping out there and having some elective procedures done now that is a real cost driver near term. But I imagine that because of the way insurance works across all sectors, they will find a way to pass along those increased costs to the insurers through additional premiums, increased premiums. And so for the health care stocks and the health insurers more specifically, I just see a possible growth engine and profit engineer term bubbling up underneath the surface there. I agree with the guys as long as the market pulls back some. I think the service providers will have more achievable estimates. So they have huge pricing power for sure. I don't know if the market keeps rallying if they'll keep up.

So I think it's prudent defense if you think we're ultimately going to get a bit of a pause in the market. They look pretty attractive on next year's numbers, but I doubt they'll keep up if we keep ripping higher. Yeah, there you go. Adam, really appreciate it. Good to see you on set here. Good to see you.

Thanks for schlepping in. Brent Togginen, thank you. Good to see you guys. Malcolm Etheridge, thank you all. See you see you on set here. Good to see you. Thanks for schlepping in. Brent Togginen, thank you. Good to see you guys. Malcolm Etheridge, thank you all. See you, Brent. All right. Let's get now to our Twitter slash X. Still, I guess we'd call it Twitter, even though it's going to become X. Well, anyway, go to our Twitter question of the day.

We want to know which stock reporting today after the bell could see the biggest pop on earnings. Will it be Alphabet? Will it be Microsoft? Will it be Snap? Or will it be Texas Instruments? Head to at CNBC closing bell on Twitter to vote. I'm going to share the results later on in the hour. And then, of course, maybe tonight on last call, we'll revisit the poll and see who got it right. All right. In the meantime, let's get a check on some top stocks to watch as we head into the close. Christina Partsenevelos here with that. Christina. I'm betting on Texas Instruments because I'm reporting on that.

But let's move on to GM because investors right now are pumping the brakes on GM despite a revenue beat and upbeat guidance. But that particular upbeat guidance is dependent on successful talks with U.S. and Canadian labor unions in the months ahead. GM is also recommitting to the electric Chevy Bolt, but says a supplier delivery issue has slowed down its production of EVs. And that's why you're seeing shares down about three and a half percent ever since earnings came out yesterday. Now, let's talk about GE. It's at its highest

level, actually, since 2017, after handily beating earnings and revenue estimates. The industrial giant is also raising its full year profit guidance, citing strong aerospace demand and record orders in its renewable energy unit. You can see shares are up over 6%. And finally, Biogen is under pressure today as the biotech company slashes around 1,000 jobs to cut costs. This comes as the company rolls out its newly approved but unprofitable Alzheimer's drug in the United States. It also reported earnings and revenue at the top estimates, but those shares are still down about 3.2 percent right now. That's Biogen for you. Brian? We just talked about biotech not being able to get out of its own way, and there you go. Christina Partsenevel, see you in a few minutes. All right, folks, we got to take a

short break. We are just getting started. Up next, Going Global. Oakmark's David Harrow is here. He's going to break down some of the opportunities he is seeing around the world and what he calls one of the most undervalued sectors globally we are live at the nyse this is closing bell we're back right after this all right welcome back financials are pulling back a little bit today although the sector is up over five percent this month as part of the market's broadening out story. And your next guest is finding more opportunity outside of the U.S., calling European financials one of the most undervalued sectors globally. Let's bring in David Harrow of Oakmark Funds. David, it's been way too long, my man, since you and I have chatted.

It's got to be going on 20 years. It's good to see you again. Well, less than that, Brian. You've been avoiding me for some reason. I don't know why. Well, you didn't want to get up at 4 in the morning on my previous show as my guest. But good to see you here nonetheless. Listen, I feel like European financials, it's like that sign in Irish pubs,

free beer tomorrow, but it's always today. Tomorrow never comes. They've been undervalued for so long. We saw what happened with Credit Suisse. When do they get some love? Is there a catalyst that needs to happen? Yeah, there has been a little bit of love over the last 12, 18, 24 months. They've done pretty well. But the main catalyst is what we've seen happen since the global financial crisis, when banks had a rebuilt capital and you had this negative interest rates,

which in essence was a headwind, especially in Europe where you had negative rates. And really the catalyst is interest rate normalization. I mean, now that we have interest rates going to 3.5%, 3.75%, 4%, you still have some growth in assets, growth in lending. You have very restrained costs. You have rising fee income. And most important, Brian, most important is these

companies are overcapitalized. What this means is everything that they earn, they can either plow some of it back into growth, but more importantly, give it back to shareholders in terms of dividends and stock buybacks. And this is exactly what we see happening literally with every single, well, every major financial that we own and just about every financial in Europe is so overcapitalized that what they're generating today, which is good free cash,

is being distributed back to owners. So speaking of free cash flow yields, we're well into the low double digits, 11%, 12%, 13%. All right. So we know you like a Lloyd's. Not a pure play financial. Obviously a very kind of unique leader in insurance and maritime and a lot of things like that.

This is, excuse me, this is Lloyd's Bank. Oh, it's Lloyd's Banking Group. Okay, good. Well, it's kind of a new name then. I was looking forward to going down the path of like admiralty insurance. So this is a good thing. Who is Lloyd's Banking Group and why do you like them? Well, Lloyd's Bank is probably the single most, I would say, important banking franchise in the United Kingdom.

They specialize in higher net worth, SME banking, and they're just the United Kingdom. They don't have, it's not a universal bank. It has a somewhat narrow niche and a very strong and loyal deposit base. Probably mid-teens of the deposits in the UK banking system, if not higher. So it's a good, well-run, conservative bank that, in the next five or six years, barring any big shocks, they basically will return their enterprise value to owners and dividends and stock buybacks. So good, stable business franchise, efficient at costs, very well capitalized and very shareholder friendly capital return policies. Yeah. Another company, I guess, similar similar, would you consider Allianz?

Not exactly analogous. I get that, David. But Allianz, very well known to our viewers. But what makes their business attractive to you as a stockholder? As a stockholder, you have a situation where Allianz, of course, is a big global insurance company that That also owns PIMCO. So 25-ish percent of its value is from PIMCO, and the rest of it is selling mostly P&C insurance. And again, very well-run company, low 92s, 93s combined ratios, hugely cash generative. Again, and like I said about the other European financials,

distributing large sums of money to the owners. I think this is the theme. They're very well run, very low in costs, very good at managing claims. And as a result, they have all the surplus capital, which they're distributing. And then again, with higher interest rates, this lends itself to better investment income. And we recently interviewed the new newish CEO of C&H, Scott Wine. He was the CEO of Polaris here in America. Now he took over C&H, which people don't realize, Case New Holland. They make tractors, a John Deere competitor. But they also got this ownership structure involved with the Elk Hannon family,

of course, a fiat fame, C&H, industrial, truly global company, exposed to commodity prices. What's the bull case? The bull case is arable land is getting smaller and smaller and smaller. The world's population is getting larger and larger and larger. There are two main agricultural equipment companies in the world that have the technological wherewithal to help farmers and farming increase its yield. One is John Deere, one is CNH. CNH literally trades at almost half the valuation of John Deere. They're not so dissimilar.

Deere is, of course, a little better, has a little higher market shares. But CNH is very competitive. Scott is doing an excellent job. When he came in, there was a problem here and a problem there. They needed to clean up some of the automation in their tractors, et cetera. He's in the process of doing this. They will be very competitive with deer. It's a margin expansion story, and we're starting at a very low earnings base. And the big picture for agriculture, very important to have these types of players

who could get more productivity out of every acre of land david harrow we did we did arable land we did allianz and we did lloyd's banking group and that's why we love you thanks for coming on closing bell let's not make it like another few years david anytime anytime for you brian 6 p.m central for last. David, thank you very much. All right. All right. Up next, Bob Iger under fire. The Disney CEO facing some scathing criticism from the famed actor Brian Cranston. We're going to bring you his comments and what they could mean for Disney right after this. All right. Welcome back.

Award winning actor Brian Cranston, he of Breaking Bad fame, lashing out at Disney CEO Bob Iger at a SAG-AFTRA strike event in New York City earlier today. Listen. We've got a message for Mr. Iger. I know, sir, that you look through things through a different lens. We don't expect you to understand who we are. But we ask you to hear us and beyond that to listen to us when we tell you we will not be having our jobs taken away and giving to robots. We will not have you take away our right to work and earn a decent living. And lastly and most importantly, we will not allow you to take away our dignity. Powerful stuff. Krantz's comments are the latest at a growing chorus

of criticism, largely aimed at Bob Iger and a few others, in the wake of his interview with David Faber two weeks ago, where he weighed in on the heightened tensions in Hollywood following the start of the writer's strike. Remember this? There's a level of expectation that they have that is just not realistic. And they are adding to a set of expectation that they have that is just not realistic. And they are adding to a set of challenges that this business is already facing that is, quite frankly, very disruptive. All right, Julia Borson joining us now live from Los Angeles. Talk about what this could all mean, maybe for the stock in general. And Cranston was fired up, Julia. Cranston was fired up, and I would say that his comments and Iger's comments

really illustrate how far apart the two sides really are. Now, keep in mind that interview that Bob Iger did with our colleague David Faber. That was nearly two weeks ago now. And since then, which is when the actor strike started, we have not seen the two sides come back to the negotiating table. So from what I'm hearing, there's a lot of expectations here in Hollywood that this strike could continue to drag on. And one thing I have to point out, Brian, as someone who follows this very closely, months ago when there were rumors about what could happen with this strike and rumblings about what to expect, at the time, people thought that Bob Iger might be one of the people to lead a compromise. And then after his comments and

then some of the reaction to his comments, now people may be disappointed that he's not the sort of conciliatory one leading the compromise and that the two sides really are still so far apart. Yeah. Do we have any kind of an idea of how far apart they really are? I mean, it could be one of these things that is, you know, they make a deal tomorrow, like UPS kind of surprised us today. Or could this drag on a long time? Well, I don't think they're going to make a deal tomorrow because they have to come back to the negotiating table first. The first step with them would be both sides saying, OK, we're going to come back to the negotiating table now.

We're going to sit down. We're going to hash out different ways we can compromise on these different issues. And remember, it's not just Bryan Cranston speaking on behalf of actors. There's also a writer strike going on as well. These two simultaneous strikes with some very similar issues, but also their own distinct issues. These two issues have to be worked out. And we have the AMPTP, that's the Association of the Major Movie Studios and TV Studios. That's what's negotiating with both the WGA and SAG-AFTRA. So I think that this is not going to be resolved in the next week.

A number of people have told me this is something that's going to drag on for months, not weeks. I've heard speculation that at first people were hoping it would end September 1st. Now people are saying November 1st, even December. It'll be a long time before this is resolved. And you just heard it in the fire in both of those men's voices. They really feel like there's some major differences here. Julia Borsten, Julia, thank you very much. By the way, Julia will be joining us live from CNBC and Boardroom's Game Plan event

that begins at the top of the hour, brings together some of the most influential people in sports, business, money. For details, scan the QR code or go to CNBCEvents.com slash Game Plan. All right, we've got a news alert on Bank of California. Those shares are halted for news pending. Remember last hour, Leslie Picker reporting the company was in advanced talks with PacWest Company for a deal. It could be announced as early as today. Bank of California halted up 11 percent. PacWest down.

And you're wondering why would PacWest be down if they're the ones getting bought? It's because, according to The Wall Street Journal, which broke the story, it could largely be a take under. That maybe PacWest is bought out for less than the stock is like no premium because you've got to remember, you've got to take on a lot of assets if you're buying some of these regional banks. And remember all the problems with regional banks that began earlier this year. They're not all resolved. Still some issues that are floating out there. So PacWest collapsing by a quarter of one percent on the news that it may get taken out or taken under by bunk. What's the difference between a bank and a bunk? Anyway,

bunk of California. All right. Up next, one Wall Street analyst is flagging just a, you know, slightly large retailer based in Bentonville, Arkansas. You might know who they are that could benefit from any kind of turn down in grocery prices. We're going to get the analyst's take on Walmart next. All right, welcome back to Closing Bell. Walmart stock hitting a 15-month high earlier today, pulled back a little bit since then. But your next guest says there could be more gains ahead. Piper Sandler's Ed Yeruma upgrading the stock to overweight today.

And he joins us now. Ed, thanks for joining us. How much is, thankfully, a slowdown in the increase, not a decrease, but a slowdown in the increase of grocery prices helping or going to help Walmart? So we think we've started to see this process begin. You've seen it in areas like dairy, protein. But I think what's interesting now is we've detected a significant uptick in the amount of rollbacks. So these might be packaged food. This could be other goods. And so it seems like these vendors are trying to drive volume at Walmart. Walmart's partnering with them and they're driving prices lower for consumers. You've even seen back to school right now, you know, back to school at last year's prices. So it seems like a lot of this inflation pressure is starting to abate. Yeah, I mean, and again, I was reading your note and I live and I'm married to a consumer products executive.

So I know about these how Walmart works internally, which is kind of this mysterious thing with these rollbacks. And, you know, you get these vendors and all is the way that way that works. Tell us in layman's terms, what exactly is happening and how Walmart is benefiting from companies, you know, the suppliers who basically will temporarily lower prices to increase volumes, I'm told. So suppliers have been clearly struggling with volumes and they've been raising price. And I think what's happening is they're going and partnering with Walmart, reducing prices for 60 to 90 days. Walmart, in turn, buys more units of those items and they feature them prominently. So if you're walking past that great item that's on rollback, Walmart's buying more of that and the vendors providing that decrease in price for a stipulated

period of time. Yeah. And so these are all temporary programs. So what's the longer term bull case on Walmart because that because they simply get more people back in the stores? Are they taking market share from others? And if they are, Ed, who is Walmart taking market share from? So we think they're taking market share from a lot of the large grocery competitors, from the regional grocery peers. And I think it's a couple of fold, right? First, it's reintroducing some of these consumers back to Walmart, that it's a great place to buy grocery. They've called out that they're seeing a higher uptake of household income above $100,000. So for them, that's not their power customer. But I think as they bring that customer in,

it's maybe feeling a little stretched. They're showing them there's a great grocery experience. And over time, we think they'll convert those grocery customers into buying other areas of the store, which, by the way, they're making some significant improvements in. All right. Ed, your room bullish on Walmart. We're watching the name. Ed, thank you for coming on. Closing bell. Appreciate it. All right, folks. Kind of like a, you know, a short term discount. It's the last chance to weigh in on our Twitter question of the day where we asked you which stock reporting after the bell could see the biggest pop. Is it A, Alphabet, B, Microsoft, C, Snap, or D, Texas Instruments?

There is no all of the above. You have to make a decision. Head to CNBC Closing Bell on Twitter. We're going to bring you the results after the break. And then at some point tonight, maybe we'll see who won. Stick around. break and then at some point tonight maybe we'll see who won stick around let's get now to the results of your twitter question of the day which stock reporting after the bell could see the biggest pop on its earnings is it alphabet microsoft snap or ti the winner by the way microsoft with 43 of the the vote. Alphabet coming in second.

Nobody cared about Texas Instruments. I voted for Snapchat. By the way, this show's off air in 13 minutes, so maybe we should redo this poll tonight on Last Call and see which of you got it right. Microsoft, though, the big winner in the poll. All right, up next, your big earnings setup. We're going to bring you a rundown of what to watch

when those numbers hit the tape in a few minutes. And do not forget to tune in to last call tonight, pending traffic. If I can make it from here to there in like three hours, there'll be a show. And by the way, it's 15 miles. There have been times where it almost didn't happen. Welcome to New York. We're going to bring down all the big results after that, the conference calls and much more. It's a great show. Great team. Decent anchor. We're back after this. All right, welcome back. We, all of us together, are now in the closing bell market zone. And we're joined by Citigroup's Scott Cronert here to break down these crucial moments, plus two mega cap tech earnings out after the bell. You may have heard something about this.

Deirdre Bosa all over the alphabet watch. Steve Kovac on what to expect from Microsoft. We've got to put Alice in the middle. There we go. All right, guys. Welcome to the market zone. We're about ready to make it 12 positive sessions for the Dow in a row. Multi-year streak.

The record is 13 set back in 1987. Close high unless we get a big downturn in the next 10 minutes, which we could. Tomorrow will be kind of an historic day. Scott Cronert, first to you. I know you're pessimistic. You got a $4,000 target on the S&P 500. I know no one trades off the Dow. The moves haven't been great, but come on. 12-day streak?

More than just a headline or no? Yeah, I think it's more than just a headline. I think it's a couple of things. We're going to be talking about these mega cap earnings, that's for sure. And that is one hurdle that we thought we had to get over going into the third quarter. The other, I think, is probably as important as the broadening we're getting is you're getting the soft landing narrative beginning to take a little bit stronger hold. And this is leading to some broadening that ultimately supports some of the

action you're talking about, Brian. Yeah. And listen, you got the $4,000 target. What do you see happening in the second half of the year that would send the market down that much? Would it start tonight if we get an earnings whiff from one or both of Microsoft or Alphabet? We've seen a couple of instances already. Your big seven, if you will. You've had two kind of pretty good quarters that resulted in sell-offs. And so that becomes an issue. But the market seems to be taking that in stride right now. I think what you're going to need to see is, you know, in addition to the earnings coming out, we've got the Fed coming

up. We probably have another 25 basis points coming at us. We're watching 10-year yields moving higher here. So the issue is, is there something in the macro circumstance aligned with what's happening in the micro with the big seven, that begins to change the narrative here. It's hard to say we're seeing it just yet, but we think that's the risk in the markets in the shorter term. I'm going to ask a question that has like a 25% chance of me getting fired on the spot. Does the Federal Reserve matter right now? I think as long as 10 years are below 4%, I think the market's pricing in a peaking of the Fed rate hike cycle. I mean, that's my point. I mean, as of tomorrow, the Fed decision, we kind of know

if it's not, could they change the game or is the market, what I mean is not that they matter, have we looked past it? It's been two and a half years of Fed, Fed, Fed, Fed, Fed, Fed, Fed. Is that it? Yep. Market's looking past it for now, right? And so that's what I'm saying. It's going to need, you need some incremental shock effect. And it's hard to say where that's coming from, given the way that we're now pushing out the recession risk scenario. So where's that shock effect going to come from? I think it's going to be a materially higher, you know, curve move as you look at that longer duration part of the curve. And that's not very visible yet, but that, I think, becomes a big risk factor going forward. All right, Scott Cronin, $4,000.

Bold, Scott. We appreciate bold. Thank you very much. All right, now, let's get a preview on these two things we talked about. And I was kind of thinking, okay, we've got Microsoft and Alphabet. How do we decide who goes first? I love all my coworkers equally, but then I thought we'd go Deirdre in alphabetical order. All right, that works. I thought you were going to say it's because I was your favorite, but I'll take it.

40% gain this year, year to date for Alphabet shares, and that has largely been on the back of that promise of generative AI. But for now, the core advertising business is expected to still reflect a somewhat softer macro backdrop. You've also got cloud growth and investors are really looking from not just Alphabet, but Microsoft and Amazon as well. Signs of a bottoming here that IT spend back is coming back rather. And related to that, AI monetization. I don't want to jump the gun here, but look at what happened earlier this week with Microsoft.

They came out with pricing and the stock jumped. So investors may want something similar from Alphabet, especially if they're not going to show how they're monetizing it right now. Investors are going to want to know how they're going to. So those are the things we're looking for, Brian. Well, OK, you live there. You're in all that. You know all the heavy hitters. Is anybody quietly whispering to you that AI could be actually not a benefit, but a threat to Google's business? Why would I need to Google? Why would I need to Google anything if I can just talk into a phone and then AI tells me what to do?

What's the best restaurant near me? Right. Why do I need to Google that? Right. The whole idea that generative AI chatbots are going to kill Google search. There's that. That's maybe further out on the horizon. But what may be very important for this quarter right in front of us is CapEx. All of those NVIDIA chips got to go somewhere. They're expensive. Who's buying them? The hyperscalers like Alphabet. So does that change their capital investment they're spending this year? That's going to be an important question, especially as the core business in cloud remains perhaps a little slower. That is it. I love it. We'll let you get ready. Numbers crossing after the bell. Earnings call. Deer to thank you. Now let's go to the other one.

My equal favorite colleague, Steve Kovach. Steve, what's the under over on how many times Microsoft executives say AI or artificial intelligence on the call? Under or over 50? Oh, my God. I'm not even going to bet, but if you play a drinking game, you might pass out hearing AI so much. Don't do that. But look, Brian, it is all about AI. And like Deirdre alluded to just now, Microsoft gave investors a huge gift last week by announcing pricing, monetization, real sales for how much they're going to charge for this AI co-pilot that they're putting in

Office apps like Outlook and Teams and Microsoft Word. $30 per month per user. That's on top of the $36 that many enterprises are already paying. So you can do the math there there are a few hundred million users for Microsoft 365 so look there's a huge opportunity there but what we haven't heard from Microsoft yet is when they're gonna actually start selling it they're only testing it for a small number of their current customers here's a question you probably can't answer so I don't mean to put you on the spot see maybe you can't Microsoft is so I don't mean to put you on the spot, Steve. Maybe you can't. Microsoft is really known for, like, adding everything together, and then you just have the stuff that you didn't even really want. Like, I've got PowerPoint, but I don't use it, but I got it.

Is everybody going to have to pay the $30 a month, or is it going to be an optional thing? Like, if you use 365 and NBCUniversal, are they going to automatically have to pay, or is it an option? It's an option, and that means the burden is on Microsoft, Brian, to prove that this co-pilot, this AI is so good that you can charge almost double what you're already charging. So look, they had their B2B event last week when they announced this. These are the people in the room who are actually making the purchasing decisions, including probably people from our own company. So if you see that pop up in your Outlook pretty soon, Brian, that means NBCUniversal has ponied up.

Well, by the way, I use Edge. Edge is better than Chrome, my opinion, as a browser, better than Safari. And now they've got the AI kind of built into an extension on Edge, which is cool. But is this going to be like Clippy? Remember that paper? Yeah. Annoying paperclip dude. It was always I wish they would bring Clippy

back, but this is Clippy on steroids, or at least according to them. This is a much more advanced version. It can do much more than kind of suggest or kind of, oh, it looks like you're writing a letter. Let me figure that out for you. This, for example, if you do it, if you miss a meeting on Teams, for example, Brian,

it can actually listen into that conversation. And then when you come on and log on later, it can collate everything and say, Brian, here's what you missed. Here are the action items you need to do. Again, Microsoft has to prove it works well and that it's worth that extra $30 a month per user. That's amazing. I never have to listen on any Teams. I just have to be on the call. I can ignore the whole thing.

And at the end, I'm just going to say what just happened. Exactly. That's exactly how it's supposed to work. We'll see if it actually does. Now, that is news I can use. There you go. Steve Kovac lets you get in position as well. Microsoft after the bell. I heard they're kind of big and important. Alphabet as well. I voted for Snap, by the way, on the poll. Maybe we'll revisit the poll on last call tonight, 7 p.m..m eastern by the way to see who won all right so the dow is up now is up right now i can't where there it is now is up barely but we're going to finish higher i think i don't want to i don't want to ruin anything yeah thank you

for clapping we close higher we're 33 points up 12 days in a row. A streak. The S&P, NASDAQ also higher as well. Russell 2000 trying to literally squeak out some kind of a gain. Looks like we're going to close higher. Tomorrow will be lucky. Taylor Swift 13.