Closing Bell - Closing Bell: Mega-Caps or Mega-Traps? 2/19/25

Episode Date: February 19, 2025

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

Welcome to Closing Bell. I'm Scott Wobner live from Post 9 here at the New York Stock Exchange. This make or break hour begins with another new high for stocks in a resilient market that just keeps on chugging. How long can it last is the question. We'll pose that to our experts in just a moment. Show you the scorecard here with 60 to go in regulation. More talk of tariffs keeping the lid on the major averages a bit today. As you see, though, we're now green across the board. Dow a smidge but the others doing pretty decent sixty one forty six would be a new closing high for the S. and P.

Decent moves in tech as well today and video and Tesla leading the mag sevens. A rough session though for a risk to networks take a look shares getting clobbered today. On a softer than expected outlook. Garmin shares. Well it

is surging. That stock is on its earnings. Take a look. Eleven percent does take us to our talk of the tape. Where is this record setting rally heading from here? Let's welcome in Dan Greenhouse of Solus Alternative Asset Management and J.P. Morgan's Elise Asenbach. It's great to have you both with us.

Elise, when you look at this market, the word many come back with is resilient. Is that how you feel? We have been using the word resilient. We think that 2025 is going to be a year that investors have the chance to build on strength. We see more room for this market rally to run. We're expecting another kind of high single digit total return upside from here. And we're really focused on key themes and sort of alpha opportunities at the sector level. Kind of continuing, Dan, to climb this wall of worry, at least Bank of America talks that way, that there are all these bullish technical patterns. I think the general theme is bullish, but there is, in their words, a lot of nonbelievers out there. Why so?

I mean, there's been a lot of nonbelievers for several years now. I don't think that any arguments that are being advanced today are novel or new in any meaningful way. They're the same arguments that we've heard for the better part of, call it two, two and a half, maybe even three years now, about valuation, about concentration, about rates, about the Fed. Obviously, now you've got, as you were discussing today with Weiss, issues around the administration. There's always seems to have been something to have worried about over these last few years, and virtually all seems to have been something to have worried about over these last few years. And virtually all of them have proven not to come to pass. The market is, as we know, basically at a high. The Eagle 8 index, not at a high, but pretty close. So I don't

think participation is as broad as you would like, but there are a lot of stocks that are doing pretty well. I mean, if you look at the sector performance year to date, it is pretty broad. We have had the broadening. And maybe the one thing that we had worried about in the past that we haven't had to worry about now, earnings. Earnings have been pretty good. The market wouldn't be where it is without that because it's offset some of the noise and the concerns out of D.C. Exactly. And I think that's where we're really expecting to see the thrust of the broadening out trade really play out. I mean, you consider a sector like financials. It's one of our high conviction ones. It was leading the pack in terms

of the fourth quarter earnings reporting season. And we are expecting positive results from all 11 sectors by the time 2025 is said and done financials continue to get big flows if you're talking about a broadening market does that continue even on that surprising news yesterday that we got out of dc that the biden era m a rules are going to stay in place at least for now which was a surprise to many i will say you and i have discussed you won't remember because i'm not on repeating it enough. But one of my things that I thought that the market was getting wrong was this idea that there was going to be this total relaxation of the M&A rules. And everyone will famously remember that J.D. Vance said the only person in the Biden administration that he had any affinity for at all was Lena Kahn. Yeah, well, she she's not there anymore. So people

thought, OK, we know, Lena Khan's gone. It's going to be easier to make deals. People were using animal spirits to talk about the expectations, especially in the financials. Yeah, that's that's right. My point was just I wasn't so sure that was the case. Now, mind you, the continuation of the merger rules doesn't mean that they're going to be as onerous, perhaps, as the previous administration. It just means from a continuity standpoint, they wanted to keep them there. How they interpret those rules is really the question. But that's a story for another day. As it relates to the financials, listen, I've highlighted the asset managers like Aries and Blue Owl and KKR for a while. KKR had, relatively speaking,

a disappointing earnings report. But on balance, the financials have done very well. The banks are doing very well. There is an M&A hope in there. But you look at the charts of Goldman Sachs. You look at the chart of Wells Fargo, obviously, JP Morgan. There is a lot to like about that space, both fundamentally and technically. At least you're not looking for a great year, though, in terms of returns, right? Only about 5% from here, maybe even less than that. Why? Look, I think we have to kind of manage expectations and we are accepting that this is a market trading at a lofty valuation we're expecting to see that valuation come down and earnings really have to do the heavy lifting but then we're expecting another year of earnings in 2026 on top of that so we think the rally has

legs but a big part of the conversation we're having with our clients is focusing on ways that you can not only lean into these opportunities, but renew portfolio resilience to protect those gains that you have made over the past couple of years. I mean, the Fed is an obvious wild card and certainly a question in all of this. On that note, the minutes were out within the last hour. Steve Leisman was following that for us. And the word of the moment is hold, right? Hold or hard stop, I would say, Scott. Fed officials making clear in the minutes to the January meeting that they're on hold, as you say, awaiting clarity on the outlook for inflation and new policies from the Trump administration. The minute saying the Fed is,

quote, well positioned to take time to assess the evolving outlook before adjusting rates. They want to see further progress on inflation before they make any changes, as long, by the way, as the unemployment rate doesn't deteriorate, the minute said. Minutes saying that specifically a, quote, high degree of uncertainty made it appropriate for the committee to take a careful approach and that changes to trade and immigration policy have the potential to hinder the disinflationary process. According to the minutes, business contacts are telling the Fed they would, quote, attempt to pass on to consumers higher input costs arising from potential tariffs and that Fed government policies were changes were increasing their own uncertainty, Federal Reserve

or federal government policies, that is. But business contacts also are optimistic about deregulation and tax policy that could be coming from the administration. So the message seems to be it's a hard stop for now on rate cuts and maybe for several months to come. Scott, I thought it was a bit of a harder stop than I had expected, given how I thought Fed Chair Powell described the meeting. If I said to you, yeah, but the the the idea is that the next move is definitely going to be a cut, and we're going to probably get one this year, does today's minutes make you rethink that? They don't, Scott, but they do make me wonder what the criteria is. We have to reassess the reaction function of the Federal Reserve here.

There's more concern, I think, about inflation. There was also a line in there that some people see that we're sort of closer to the neutral rate than we thought. So I feel a little bit less dovishness on this Fed than I thought perhaps was there. There are some who want to get going with rate cuts again as long as inflation comes down. But it's clear that there are two criteria here. One is clarity from the fiscal side and the other is inflation continuing to come down. Yeah. Good stuff, Steve. Thanks. You've set us up well for the next leg of our own conversation here. Does this matter? The prospect of higher rates, way fewer cuts. We talked about this last year. You couldn't get someone to come on either

the halftime show or closing bell who thought the Fed was going to cut six times. There wasn't a single person who came on here and endorsed that view. So in that sense, sucking that out of the market, not necessarily new news to virtually everybody who came up. No, but if now we're going from six to zero, that's a big deal. The other day when the inflation number came out, I took a look at the streets response to it, and I looked at maybe six or seven of the big banks. Virtually everybody is still forecasting at least a cut this year. Most people are still forecasting, too.

I think, and we talked about this, I think BAML was the only shop that even referenced rate hikes when they said it was not inconceivable. That was sort of the best you could get out of professional Fed watchers to say that a hike was possible, that it's not inconceivable. So my own personal view is I don't think that it's six or five or four zero. The issue is whether or not we actually get or begin to price in a rate hike, which is not the expectation now. That might be a bit of a problem for the market. How much of an issue would it be if there are no cuts this year? For stocks, I'm not sure that it would be that much of an issue. I mean, you saw the hemming and hawing in the market as we kind of started to price those cuts out since the start of the year. I think the bigger conversation and questions are with bond investors. I mean,

what you've seen in the 10 years since the Fed started cutting kind of defies the historical norm in terms of that floating higher. And so we've been calling for kind of an active go anywhere approach to the fixed income landscape that I think will continue to serve investors well in the year ahead. What if consumers really start to pull back? They're thinking about tariffs. They're tired of paying 10 bucks for eggs. You had the new Reuters Ipsos poll today. The share of Americans who think the economy is on the wrong track rose to 53 percent in that poll. That's up from 43 percent in late January. One of the reasons why this rally has prolonged the way it has is because the consumer has remained far more robust than

people ever expected in the face of generationally high inflation. I have completely been on the other side of the excess savings argument that persisted for way too long, call it two years. And a lot of the stuff that Solis has been doing has been around the consumer and consumer adjacent investing. If you take a look at the charts of Ralph Lauren, you take a look at a number of you've been you've been bullish in the face of a lot of negativity in that. But I bring that up because it has been the backbone of why I was more bullish on the market than perhaps some other people. But that said, yes, of course, if the labor market were to roll over,

if the consumer was to be hampered in some meaningful way, that'd be a problem, if only because Costco and Walmart would stop going up. And that, given their size, might be a problem for the market. But there's no sign of that right now. The labor market still remains strong. Jobless claims remain low. Obviously, tariffs are an impending issue that we have to deal with. And if you start to see them get implemented, obviously, consumers are probably going to react. Although, again, I'm taking a bit more of a optimistic view of things than some other people. I'm not positive that these tariffs are going to be quite as destabilizing,

quite as inflationary as some other people expect. But do you know what the worst sector of the market year to date is? Tell us. Discretionary. Yep. So what happens? Which is 50% Tesla. I understand, but it's not only Tesla and Amazon.

Sure. There are a lot of other stocks, okay? It's a zero this year. Is this a potential issue out there? I don't think it is. Look, like I largely agree with what he was saying. Labor market looks better balanced. Both corporate and household balance sheets are in really good shape. And in terms of thinking through prospects for the labor market, like corporate profit margins are, you know, near highs and looking pretty stable. And so I am more concerned with what the consumer is actually doing versus what some of those sentiment indicators are telling us. Well, people have been going back to tech of late. That certainly really fueled the move to a new record high.

It is the best performing. That sector is in the month of February. Apple is in focus today as well as it announces a new iPhone. Steve Kovach is here with more. Not a big movement in the stock. I don't think we really expected one because we did expect this news. Yeah, that's right, Scott. This is the iPhone 16E. This announcement today, not exactly setting the world on fire. This is the budget-friendly phone, the model that they update

every couple years. Now they're calling it the 16E instead of the SE, which is the old nomenclature. And basically, they take an old design and put in more modern parts. But there are two important things I want to tell you about this that we need to pay attention to here. First is the price, Scott. At $599, that's $170 more than its predecessor and only $200 cheaper than the cheapest iPhone 16. And I can't help but wonder what this price would have looked like if it was announced before the tariffs in China went into place? There's a good note out today from Bank of America talking about the impact on earnings that these tariffs could potentially have and whether or not Apple will end up raising prices on the rest of the iPhone 16 family.

And then the other thing, Scott, we got to talk about is the modem inside here. Usually that doesn't get a lot of attention. We already know how these 5G connections work. But this is the first time Apple is making its own modem instead of using Qualcomm's technology. They're calling it the most power-efficient modem that they've ever put in an iPhone, but they left out the word fastest. So you can definitely bet that Qualcomm is going to be watching the performance of this because these two companies, if you remember, Scott, were in a battle not too long ago over the fees that Apple pays for every phone it makes to Qualcomm. Now they have their own modem.

They're claiming it's good enough by putting it out. And it will likely leak into the iPhone 17 lineup that we're going to expect to see this fall. And that's great for the iPhone margins. That means they don't have to pay Qualcomm, but they might be sacrificing a little performance. We'll wait and see how people test that, Scott. But those are the things to really watch with this launch. Not going to really turn around the sluggish iPhone sales, not going to really impact stuff in China, though this would be subject to their subsidies in China. But there's still a lot more room to go. It's really the phone they need to sell, the pro phones, not necessarily

the bottom of the barrel one, Scott. Yeah, I hear you, Steve. Thanks for that update. Yep. Appreciate that very much. That's Steve Kovach. What about tech and this resurgence? For Apple, we knew a phone was coming. I think the $599 price tag was probably a bit higher than a lot of people were expecting. I think $549 or something like that, $529 was probably in people's wheelhouse. But you see in the reaction to the stock today, which is de minimis, it's not really new news. We knew this was coming. And again, I don't think it, for Apple, is necessarily going to move the needle. For tech more generally, listen, the space still does very well. The AI story remains intact. There's been almost nothing to tell me otherwise. Obviously, you've had some trouble with some of the power providers. But most of the other names, look at the charts,

they're not exactly NVIDIA. But look at NXP, look at Lamb Research. You're starting to get some technical improvement on the back of not bad earnings reports. The space still looks pretty good. And again, as long as that AI story remains intact, which it appears to for now, then the space should probably be supported in general. What's your take on tech? Preference for software over hardware, but we are bullish on the sector. I think as you think about the way that the AI trade is evolving with these new, more efficient models, we really want to be leaning into those beneficiaries of increased adoption and applications of the technology. And software to us is really the

place to do that, both in public markets, but we also shouldn't ignore those private market opportunities. I want to add, someone made this analogy, I don't remember who, but it was really good. If you think of the freezer being invented or refrigeration way back when, you could have invested in GE or whoever was making the refrigerator, but the ultimate beneficiaries were the ice cream guys and the milk people who you could now store. At some point, it's not just going to be who can provide the best AI, but it's going to be who does the most with it. And I think that's the story for the next, when we get past this, you need to invest in the infrastructure. The story for the

next three to five years is going to be who best monetizes this. I'm not sure that we have that answer right now, but I think the conversation should probably be given the prevalence of how much this has permeated society should probably be moving in that direction sooner rather than later. Do you think AI can help make a better earpiece for you? You know, if it could, it should. I have obviously folks at home. It's a little distracting, I have to say. I have abnormally sized earlobes apparently.

Scott has a problem with it. He's discriminating against me, and we'll discuss it off air. I couldn't help myself. NVIDIA is looming large. Speaking of AI, chips, you like software over that space. How big of a market event do you feel like this is leading up to next week? Look, I think it will absolutely be important. The market is craving some forward guidance on, you know, the outlook, especially with the introduction of

these new AI models. And with the amount of concentration that you've had in the Magnificent 7, the other chip makers, it is going to be important. But again, going back to that theme of the potential for the rally to really broaden out, I think investors would be well-served looking elsewhere for upside opportunities. Last quick point. Listen, we keep talking about the broadening out energy, financials, materials, the chemical names within that. There are a host of stories that are playing out here that are not AI related, that are not Constellation, that are not Vistra, that you could invest in right now. It's not as if the wheel needs to turn. It's happening right now. And I focus on AI deservedly so, given how important these stocks are. But there's a lot of other stuff going on in this market. And we see it each and every day. All right, guys, good stuff. Elise, thank you.

Dan Greenhouse, thank you as well. All right. Well, one spot of maybe waning momentum is Bitcoin. It's stalling a bit lately. Mackenzie Sigalos is here with more on that move. Mackenzie. Hey, Scott. So it's been a rough stretch for Bitcoin. The price of the world's largest cryptocurrency is down nearly 8% this month.

And part of that is simply due to the waning momentum from Trump's victory. Investors have already priced in the pro-crypto sentiment from his administration, including key nominee picks and an executive order that paves the way for friendlier regulation in the U.S. Now, at the same time, attention has shifted back to broader economic factors, tariffs, interest rates, and today's Fed minutes, which signaled a steady hold on rates. Meanwhile, one of Bitcoin's most prominent backers, Michael Saylor, is speaking now at the Saudi-backed FII summit in Miami. Saylor telling the audience there, quote,

you don't want anything almost anywhere other than dollars and Bitcoin, and that smart money is running from risk. Now, his company, Strategy, formerly called MicroStrategy, is the largest corporate holder of Bitcoin. In its latest quarterly update, it reported that it's nearly halfway to its ambitious capital raising goal, $21 billion in equity, $21 billion in fixed income, entirely for Bitcoin purchases. Now, we are closely monitoring this event and we'll bring you any updates as they come in. All right, Mackenzie, appreciate that. Thank you, Mackenzie Segal, as well,

from stalling out to breaking out. We're tracking shares of Supermicro and hims and hers today. Seema is here. Seema Modi is with the details on Supermicro. Brandon Gomez standing by with more on hims and hers. Seema, we'll start with you. Well, Scott, this rally in Supermicro continues following that business update that we got last week when its CEO, Charles Liang, set out sort of a bullish forecast for artificial intelligence servers. You'll see the stock has gained now over 17 percent at one point, now up about 11 percent on the day after it fell dramatically on fraud allegations in 2024.

But with today's gains, shares have now recouped those losses, now trading at its highest level since before short seller Hindenburg Research published its report, calling into question Supermicro's accounting practices. The company has denied any wrongdoing, hired a new auditor, said its delayed 10K filing will now be issued next week, February 25th, which will be an important read for investors and also reduce fears of a potential Nasdaq delisting. The company does supply Elon Musk's XAI with servers. NVIDIA, importantly, also a big customer, stock up over 100% since the start of 2025, Scott, and now the best performer on the S&P 500 this year.

All right. Seema, thank you for that. That's Seema Modi. Now to Brandon for more on hims and hers. What's happening here? Hey, Scott. Yeah, another pop for hims and hers. Surging after announcing it acquired at-home lab testing facility Tribe Labs.

Now, the deal will allow the telehealth company to offer at-home blood draws and more comprehensive whole-body testing. The terms were not disclosed, but HIMS said it funded the deal through cash on hand. Shares have been on a huge run. We've talked about it on this show. Up about 600% amid increasing demand for its compounded weight loss drugs. Now, some details I do want to note here about the deal. The devices being used are FDA cleared.

We don't have pricing details yet. HIMSS told me they'll share those during rollout this year. For context, though, Rho Health, which has offered a similar service since 2021, sells at-home blood testing kits for about $75. One more important note here is that HIMS said in its release they will use data for AI-informed developments in terms of health care offerings. And so that's something that investors are saying that they're waiting to learn more about, something we'll hear about on Monday

when the company reports earnings. Scott. Brandon, thank you. Appreciate that. That's Brandon Gomez. We're just getting started here on Closing Bill. Up next, the big business of sports investing. Atlanta Falcons limited partner, venture capitalist Rashawn Williams is here and former AMB sports and entertainment CEO Steve Cannon joins me at Post 9 just after the break. We're live at the New York Stock Exchange.

You're watching Closing Bell on CNBC. The NFL has seen a streak of transactions following the approval last year of private equity groups and other wealthy investors. The Eagles explored selling to private equity before choosing high net worth investors, valuing that team at $8.3 billion. The Super Bowl champs, of course. The Miami Dolphins hit an $8.1 billion valuation after selling stakes to Aries management and the Alibaba co-founder Joe Tsai. CNBC reached out to the team, the 49ers that is, and they have had no comment at this time. For more on the business of sports, though, and sports investing, let's bring in Atlanta Falcons limited partner venture capitalist Rashawn Williams and the former AMB Sports and Entertainment CEO and vice chairman Steve Cannon. AMB Sports and Entertainment is comprised of the Atlanta Falcons, of the NFL, the MLS, Atlanta United FC,

among other entities, including the stadium, Mercedes-Benz. It's great to have both of you here. Great to be here. I saw at the corner of my eye when I was reading the story about the Niners and the valuation, you're sort of shaking your head in almost disbelief that these numbers are getting so big. I'm really excited about the asset class, sports in general. The numbers are big because the revenue numbers are large. The multiples are staying the same.

They're looking at 10, 11 times revenue for NBA, NFL teams, six times revenue for Major League Baseball teams. So it's a direct correlation between revenue and valuation. It's not just growing in isolation. As long as you've got the popularity, Steve, of something like the NFL, media properties like our company and others continue to pay top dollar for it, what's going to stop valuation? And by the way, the scarcity and the demand for stakes in these teams, if not the whole franchise itself, what's going to stop valuations from going straight to the moon? I don't see it. It's the most valuable content on television. It aggregates more eyeballs than anybody else.

I think 48 of the top 50 rated television programs were all NFL. So their content is the most valuable. The game is the most dramatic. I can't remember the number of finishes that all ended with that last field goal. So it's high drama, and teams are now getting much, much better at not just picking up the national media checks, but of really driving revenue in their local markets. Everybody knows, obviously, that the NFL has proven to be a great investment. One of your specialties in your day job, if you will, is looking for the next great investment.

Where is it in sports? Yeah, I think you have to separate sports as an investment category, early stage, growth stage, and late stage, just like you do in tech. Late stage being NFL, MLB, and NBA. Early stage being all of the emerging leagues, the pickleballs, the, you know, the sale GPs of the world. And then in the growth stage, you have stuff like MLS, you have WNBA growing high revenue but still unprofitable, and make sure you have the portfolio that's consistent with the risk that you want. When you talk about Sports 1.0 and the evolution into Sports 2.0, what are you exactly referring to?

Steve has really been helping me get educated on it. I'll pass it over to Steve for that one. So as valuations have increased, suddenly teams are finding themselves with these gigantic properties. And frankly, the table stakes have changed. Building stadiums that have just sort of seat benches and grab your popcorn and leave, those days are over. Now you've got to build multi-venue kind of entertainment properties. It's Disney World now. You've got to build multi-venue kind of entertainment properties. It's Disney World now. You've got to build Disney World.

And as you build that, the cost goes up. So the entry price for a good stadium these days starts at $2 billion. And then if you have that much overhead, you've got to keep that factory running 24-7. So for us, it was all about bringing in college football and bringing in concerts and bringing in private events to keep that factory running all the time. And that's really what's going on in the business of 2.0. So that's the game changing fact, which you just said as to why when we rank, you know, valuations of the league, if you own the building. Correct. You own the story. That's right. You're not only having your, you know, eight NFL home games plus maybe some playoff games, but the concerts and all of the other events

that you can put in the building, which only increases the value of the franchise. And that's why a lot of owners are getting into this space. You'll see casino owners and real estate owners, Washington Commanders, people were bidding for that. They wanted that new real estate that's being developed. Is there a buyer beware somewhere? Aside from the fact that

some say valuations are just not going to go to the moon? They just cannot go up forever. Now, they may go up for the foreseeable future in the NFL, but I don't know about how you feel about other sports, both large and small. So I think there's a buyer beware for some of these unproven other sports that want to be in and cut great national media deals, but they don't have any proven track record. So sticking with the big three, starting with the NFL, then with the NBA, then with Major League Baseball, those three proven assets that have been around for a long, long time, what's the likelihood of any one of those teams going out of business? And not all of these hobbies are going to be professional leagues.

Some of these are just hobbies, and they will remain that way. They've been hobbies for 100 hundred years and they haven't gotten there yet. Let me ask you about, I referenced your day job as a venture capitalist. I talked to one recently and we were sort of thinking about the way that the deep seek news was going to impact your world, where the kinds of companies that are going to be able to raise money, if they'll be able to raise as much, and the idea of businesses being able to do more with less. Yes.

How are you thinking about that? This is the blessing and the curse of tech investing. You build an entire platform and a thesis based on new technology emerging. Then you invest in these big companies that dominate that new technology. Then someone comes and clips you at the knees. So you always have to be aware when you're dealing with high-beta name investing that there's always a technological improvement that is coming down the pipeline. We didn't predict deep-seek as quickly as we should have, but what everyone's looking

at down the line is quantum computing, which is the holy grail, which is at early stages now. So in between now and quantum computing, there could still be four or five other things that could clip us at the knees. What about the pipeline of IPOs? Companies are staying private much longer, as we know. You probably know better than most. What changes that?

Does it change anytime soon? Will we start seeing the doors open to more IPOs, you think, in tech? The last few times I've been here and you and I have spoken, I've been the one beating the horn and the drum, saying all of these companies are going to go public. The pipeline is opening up, if we see one or two more things change, you'll see the floodgate open. I'm completely changing my mind now. After seeing the Toro remove their listing to go public, I think what's happening is people are getting deal fatigue.

And what I mean by that is, if you change your entire business around to become profitable, to be more appealing to public equity investors, and you literally stop all the revenue growth that you're accomplishing and you still can't go public, now people are reversing back. They just want to sell their businesses, go in and grow revenue, cut that profitability to reinvest in the growth. Good to see you here at Post 9 in person. Guys, thanks so much. Thank you. Good seeing you. Yeah, Rashawn Williams and Steve Cannon joining us right here.

Up next, top wealth advisor Sherry Paul from Morgan Stanley is standing by with the trend that she is watching in the markets right now. We're back on the bell right after this. Welcome back. S&P 500 hitting another all time closing high for a second day in a row. Now we're above that level. Joining me here at Post 9 for how to position at these levels is Morgan Stanley, Private Wealth Management's Sherry Paul. Welcome back. Thank you. So you look at this market and you think, what, are you amazed by where we are? You tell me. Well, I think the resilience of the market now speaks for itself. I mean, if you really listen to all of the different possible outcomes around tariffs and we haven't seen a tax bill yet and corporate profits are

sort of reimagining new supply chains that to see the market this resilient i think tells us everything about where we can head which is you know going to be higher you still think that the trend is up i think the trend is up you know the the likelihood that we get a three-peat though of a double-digit return just statistically is unlikely um but from a common sense standpoint and i think it's important with so much noise, there's so many data points we could look at just from a common sense standpoint. The rotation that we're seeing is really being driven by the tariff policy, deglobalization, some of the trends that we're seeing around longevity. And that means we see a broadening

out of the S&P versus last year where we had such a concentration. So that's where I'm positive on the market. So you're a believer in that continuing, the broadening out of the market. I am. I'm a believer in sector rotation right now and active rebalancing and common sense investing, which I think there's a sort of sense in that basic way that we can all just look at a little bit of the world and what we're contending with and start to look where money is going to find that new home. Right now it's in defense spending in addition to continuing to own tech. I like the idea of cutting through the noise.

I think our viewers are attracted to that idea. Cut through it and tell me where I'm going to make the most money. What do you like in that regard? Well, I love the U.S. equity markets, transparent capital markets, and the strongest democracy in the world I'm always a fan of, especially in moments of change like the one that we're in. And I believe that there's a portfolio for every investor that's better and beyond cash at this point. And so if you're unpacking the S&P, you can build your own beta against your own risk tolerance and profile, against an expected alpha, how much return you should get for the risk that you're taking, and really step into areas even like consumer staples.

You want to look for a good dividend, a lower beta to the market, get a decent return, that's amazing. Within tech, you're going to take on a lot more beta, but the opportunity for innovation sits, continues to sit within tech. So you're going to pay a premium and you'll be more volatile. You're going to position yourself for that J-curve return. You'd be, what, overweight tech? Or how would you play that as a group? I would overweight cloud within tech and continue to equal weight semiconductor and rotate and take gains.

If you've been in the semiconductor trade the way that my portfolios have for the last two years, then you should be taking gains and rotating into the installation phase and the adoption phase of this AI industrial revolution, which is now going to be as present as the air that we breathe. Interesting. There's been a considerable conversation of late about outside the U.S. Now, you just spoke about why you like the U.S. so much. But are you starting to think that there is better value elsewhere? Are you just not willing to take the risk that you talked about trying to avoid, right?

Generate alpha without too much beta. Right. Well, you know, I'm going to go back to the common sense lens. If you take a look at Europe, for example, woefully underperforming the U.S. for the last decade at a minimum. And the conditions for investing there are only getting more challenging in terms of what the, you know, what the EU is now facing from a political and combined body standpoint. And so the other problem with Europe is that the correlation between the European markets and the U.S. markets are like at 97%. So if you're taking on the same beta risk, then you need to look at what's the idea of investing there. And even with the discounts we're seeing, I think it's more of a trade than a trend at this point.

So I'm staying in the U.S. How do you feel about China, which people are trying to feel warmer about these days? Well, it's funny. You know, I always tell my clients that feelings are not an investment strategy. So I'm going to take my own advice. Look, I think it's probably, I love investing in markets that are transparent and liquid, where we can quantify outcomes and really lean into leadership that's giving good guidance around where shareholder value is going to be created. And I think that continues to sit within the United States.

And we can pick up that overseas exposure through S&P earnings in a much more transparent way. How do you view the prospect of tariffs for your investing strategy? Well, tariffs are fundamentally inflationary. So we just all have to accept that. Whether or not the inflation is worth the outcome from an identity as a nation, that's for someone else to discuss. But they're fundamentally inflationary. I mean, there are some in the administration, if they were here, they'd fight you on it and they'd say they're not. Well, you know, but from a practical standpoint, we know that they're a form of taxation and kind of a carrot and a stick incentive.

So, for example, we heard from the Fed, the Fed will likely keep rates where they are, which means they're higher for longer, and that's bad for small caps. So what we're doing now is rotating out of small caps, which we did in early January, and instead went into the big cap trade that centered on defense, which is another practical reality of moving away from collaborative, interconnected economies to more tariff-oriented, deal-making style that has a win-lose outcome. And in doing that, I think you want to stay close to home. All right. Good to see you again here at our home, the New York Times. Sherry Paul.

Up next, we're tracking the biggest moves into the close today. Seema Modi is standing by with that. Hi, Seema. Hey, Scott. 18 minutes left in trade. And one of the biggest winners on the year, Palantir, plunging Modi is standing by with that. Hi, Seema. Hey, Scott. 18 minutes left in trade. And one of the biggest winners on the year, Palantir, plunging on comments made by President Trump. We'll get you that full story after this short break. All right, we're 15 from the bell.

Back to Seema now for a look at the stocks that she is watching, starting with a big drop for a very popular name. Yeah, we want to draw your attention, Scott, to Palantir tumbling on pace for its worst day since May 2024. The stock falling after a report that the Trump administration ordered the Pentagon to cut 8% from the defense budget in each of the next five years. We know Palantir and the federal government is a customer of Palantir's. You'll see stock down about 10%, 12% now on the day. And then take a look at shares of Garmin climbing after the company posted a 23% jump in revenue year over year with the fitness segment specifically growing 31%. The company's also issuing full year revenue forecasts that came in above Wall Street estimates and raised its dividend. Garmin is currently trading at an all-time high with the

stock up over 11%. On the flip side, Scott, Bumble is sliding the online dating platform, issuing weak first quarter guidance, saying it expects to see a decline in paying users in the near term. And BTIG analysts writing that this feeds into this view that the dating app category has hit a wall. Shares at Bumble are looking at it right now, down nearly 30% right now, Scott. All right, Seema, appreciate that. Seema Modi, still ahead. What to watch for when Carvana reports top of the hour. We're back on the bell just after this break.

Coming up next, we run you through what to watch for when Carvana and Klaviyo report in OT. That and much more in the Market Zone, which is coming up next. Now the closing bell, Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, two earnings market zone which is coming up next now the closing bell market zone cbc senior markets commentator mike santoli here to break down these crucial moments of the trading day plus two earnings releases out no t on our radar phil lebeau watching carvana sima modi watching clavio

mike got turned to you first uh we just keep to climbing up slowly but surely yeah um and and within it it's almost like um the market's doing just enough to kind of keep its nose above water. Interesting how much erratic action there remains below the surface. You know, whether you want to point to the Palantir or the SMCI moves today, even, you know, things like Robin Hood that have been really strong coming into this week, Meta down again today. And yet the market just kind of takes it. I might have thought that in a week when it's kind of a no news backdrop in terms of big macro, in terms of big earnings or or any anything like that, that you might have just gotten a little

more of a levitation type effect, broadly speaking. We haven't gotten that, which is, I guess, fine. It's not as if it's indicting this move. And as I said before, if you just look back at the history of when markets behave like this, making a new high in February, being up 4 percent by this point in the year, usually there is positive forward going implications. But it just fails to sort of impress you with the energy on a day to day basis. Yet another reminder today, the Fed is locked in place for the foreseeable future. The market seems to understand that fully. It was interesting.

I mean, you did get yields come down a bit, and the stock market popped just slightly on the minutes today, even though it was very much in tune with what we expected the Fed to have said. I do think there's sometimes a little more suspense when you've had a meeting that didn't have the dots. So when you didn't have the dots, there's always that, hey, did Powell characterize it the way it really went on in the room? I think it honestly was just getting it out of the way and a no surprises type of response, because I agree. Hold before,

hold during and hold after is basically the message. Yeah. Leaning maybe even a touch more hawkish than some. I mean, that was Leesman's take. Yes, totally, perhaps. Yeah, yeah, yeah. I'll come back to you in a minute. Phil LeBeau is going to watch Carvana for us in OT. Phil. Scott, three things we're looking for from Carvana when it reports its Q4 results.

Obviously, number of units sold. That's going to be the main metric that people will be focused on, and whether or not the street, which has been a little shy shy of expectation or they've exceeded expectations last several quarters does that continue in the fourth quarter profit per unit and margin obviously a focus as both have increased over the last year and then the guidance for 2025 as you take a look at shares of carvana remember it was under a lot of pressure when the short seller report came out in november it's bounced back from that now at a 52 week high. Scott, the number to look for when we get the results after the bell, 29 cents a share.

That's what the street is expecting for a profit. Back to you. All right, Phil. Thank you, Phil LeBeau. Seema's going to watch Klaviyo for us. What should we look out for? Well, Scott, Klaviyo is among the AI software names that has outperformed as of late. It provides centralized data platforming to clients and it's been working to expand overseas. Revenue in the third quarter grew by 34% year over year. The street will want to know if the company can sustain that level of growth going forward. There's more competition on the rise. It's got the Justice Department also out with a new memo yesterday that it's keeping the Biden administration's stringent rules on mergers and acquisitions until further notice.

The street will want to know or get more clarity on whether this affects software companies as a whole, how they're thinking about those inorganic opportunities. We know a number of them have been talking about being more acquisitive in 2025. Seema, thanks. We will watch out for that. They're here at the New York Stock Exchange, too. They're going to do the honors at the close today. Let's just hit Palantir again on these apparently moving like this. Worst day in a long time on these headlines about prospective defense cuts.

Yes. And I think it's telling that you do get this dramatic response. And it tells you how stretched and kind of unstable the stock move had become up 350 percent on a one year basis. Been a leader year to date. Overbought like for the ages, 200 times forward earnings. CEO this morning made a new stock sale plan. He's going to sell a billion dollars worth of stock.

That hasn't mattered on the way up. And so even though you might come back and say, hey, Palantir is an efficiency play for defense spending, it's not really the big iron that they're going to cut. It shows you that it provided at least a short-term excuse for this one to kind of come out of the treetops. You had a quantum computing announcement from Microsoft today. That stocks up one and a quarter percent. It's very interesting. It did pop on the news one and a quarter percent. It's been a non-participant

in this latest bit of the rally. It also got the kind of old, really flimsy, speculative quantum names moving from really low basis. So again, you still have this willingness to just buy lottery tickets around the market, even while the center core of the indexes remain pretty calm, orderly, coloring within the lines. You have a thought of Bitcoin, you know, which is, you know, it's down eight and a half percent in a month. What's your view here? I mean, I mostly view it as, you know, a kind of the whip end of risk appetites. It's not quite conforming to what you're seeing in some other parts of the market. I know there's been a bit of a divergence with how, for example, the Nasdaq 100 has moved recently. So I don't think there's been a bit of a divergence with how for example the Nasdaq 100 has moved

recently. So I don't think there's a. Important level I know some people feel like there is a risk of a bit of a real breakdown here- but it has been more of a. Kind of coincident indicator to me than it is. A leading one so. I don't think

it's like the Dow the old Dow theory where I if Bitcoin doesn't make a new high don't believe the new high in the S&P 500. But it is something to keep on the screen. And again, I see sort of this weird overlay. I think we've been in this range long enough, 6,000, 6,100 in the S&P.

It's sapped conviction both from bulls and bears. So there's a little bit of an indecisiveness out there. I don't think it's about people need to calm down and therefore Bitcoin should have to pull back. But it's worth keeping on your screen as a major. Thank you very much for that, Mike. We're going to notch another closing high on the S&P. There doesn't seem to be any doubt about that. In fact, we look positive across the board for the three majors as the bell rings.