Closing Bell - Closing Bell: More Room to Run? 1/29/24

Episode Date: January 29, 2024

Does the three-month takeoff for stocks still have room to run? That question could be answered for us this week. Dan Greenhaus of Solus Alternative Asset Management breaks down what he is expecting. Plus, King Lip of BakerAvenue Wealth Management is mapping out what he is watching ahead of mega-cap earnings. And, Bank of America’s Chris Hyzy is breaking out his market playbook. He tells us what he is expecting from the Fed and what that might mean for stocks. 

Welcome to Closing Bell. I'm Scott Wapner live from Post 9 here at the New York Stock Exchange. This make or break hour begins with tech earnings, the Fed meeting on deck, and how best to position ahead of all of that, surely to be market moving events. We'll ask our experts over this final stretch. In the meantime, here's your scorecard with 60 minutes to go in regulations. It's been a mostly mixed day for the major averages, though we are getting a little bit of a pickup here. Take a look at the NASDAQ. It's leading the way today. Investors are assessing what really is at stake over the next four days. Should let you know, too, S&P is above 4,900.

It's going for its first ever close above that level. And we're going to keep our eye on that closely. NASDAQ, I said, has been the outperformer. Meta and Microsoft each hitting new highs. Been a decent day as well for the Russell. Small caps are catching a bit of a bid ahead of Wednesday's Fed decision. All of it takes us to our talk of the tape. Whether the three-month takeoff for stocks still has room to run, and if so, how much?

Lots of answers likely coming this week, but let's ask Dan Greenhouse of Solus Alternative Asset Management. He's here with me on set. It's nice to see you again. What's on the line this week between tech earnings, the Fed, jobs reports and Treasury news? Feels like this is make or break, perhaps. Yeah, it's a really important week for both the macro and the micro. The Treasury borrowing estimates are out now, which maybe we'll touch on in a second. But before we get into that, let's just take a look back, because I know the premise of the segment is the rally at risk. But when you look at what's happened already, I know obviously there's a lot of focus on the dominance of tech earnings in the context of the larger market.

But there's an article in The Wall Street Journal this morning about the strength in retail and how rent concessions have basically gone away. S.L. Green reported the other day, reported its second consecutive quarter of Manhattan office occupancies moving higher. United Rentals, the leasing company, 13% rental income growth, strength in all end markets. And then you've got all the different card companies. There's a lot of focus on credit metrics from Capital One and Discover. But Visa reported, I own it personally, have for 10 years or whatever. But as a macro indicator, their commentary continues to suggest that they see nothing from the consumer side of things that suggests recent trends are likely to change altogether. That's a pretty good backdrop heading into this week. You're pretty positive. I mean, because even as you know, as as the market continues to elevate, theoretically, it just raises the bar, if not the pressure on these companies to deliver what their valuations would suggest they have to, right?

Their valuations have been increasing on the idea that these are the ones you can count on. Yeah, I think that's right. I mean, I don't mean to dismiss the importance of these names or their contribution to either the performance of the market or earnings. But yes, I think there's obviously a lot of focus on these names given their strength. But listen, Microsoft always beats by a couple of percentage points. There's going to be a lot of focus on AI, on co-pilot, on co-pilot signups, which might become a new metric that we have to follow on a daily basis. Probably so.

I think that it's not as if these companies are not performing and valuations are expanding. They've done quite well on balance. I mean, obviously, Apple has some trouble in China and at the top line, but on balance as a group, Tesla aside, they've delivered quarter after quarter. And so, as we said, and everyone has discussed, they warrant higher valuations and that's effectively what they've gotten. So, Marko Kalanovic today, just a short time ago from J.P. Morgan, he's been negative for the last many, many months. And he says today valuations look even more stretched. So how do you sort of take that view? Look at that.

A few bad inflation prints would likely upset both bond and equity markets as risk markets, you know, could again start pricing in the higher probability of a hard landing. What do you make of that argument? Because even somebody who's really bullish, like Jeremy Siegel, says, I mean, 20 times is not exactly cheap. No, it's not. And listen, PEs leave you little room for error. That's true at the single stock level, and it's true at the index level as well. But listen, we came in last year, granted at a lower multiple, thinking EPS this year, we're going to be somewhere around, I think it was 225.

And then for the next year, which is now this year, we're going to be somewhere around, I think it was 225. And then for the next year, which is now this year, we're going to be somewhere around 250. Both those numbers have come down by about 10 bucks, let's call it. And obviously the market had a terrific year last year, largely on the back of valuation expansion, which you're unlikely to get this year. But the linkages between valuations and multiples and market performance can be differentiated from one year to the next. But I think what you're saying is entirely true, that when you're trading at 20 plus times forward earnings, you have little room for error. Now, fortunately for the broader market, these

companies have quarter after quarter delivered more or less. Now, obviously, Tesla has fallen by the wayside and Apple has the troubles that we discussed earlier. But fortunately, again, for the market, they've done quite well. Now, listen, is 25, 30, 35 times earnings too much? I mean, that's for the market to decide. But again, fundamentally, I think they've delivered. What about the speed in which and the strength in which the market has gotten to today? Tony Pasquarello runs hedge fund client coverage. Goldman Sachs always has thoughtful notes, and I like to read them and let our viewers in on kind of what the conversation is with the big money out there. He's like, this has been one of the most powerful short cycle rallies we've ever seen.

For the avoidance of doubt, the 19% rip in the S&P over the past three months registers in the 99th percentile of market history. Goes on to say, like, enjoy it because it ain't going to last like that. Well, yes. So you're not going to go up at this rate ad infinitum. And listen, the market from a relative strength index is classically overbought here. And so you certainly could have maybe it's the Treasury Department news, although it seems like we're we're hanging in there right now. So certainly you could have some level of a digestion, although the strength of the rally historically doesn't necessarily automatically mean it. But I don't think Tony makes incorrect points. Hang on two seconds, because I mean, we see the market jump a little bit on the S&P and you reference this announcement out of the

Treasury Department. Let's go to Megan Casella, who has that news for us. What are we learning, Megan? Thanks, Scott. We're learning about Treasury's borrowing needs. The Treasury Department is estimating that they're going to need to borrow $760 billion for the current quarter, the January through March quarter. That's a little bit less than they had previously thought. They previously thought about $55 billion less than that is what they would need to borrow in privately held net marketable debt. They're also looking forward a bit. They're looking to the April to June quarter, and they're estimating that they'll need to borrow $202 billion in that quarter. And that's a pretty significant jump. That is a quarter where we see some variability.

It depends on individual taxes and corporate taxes that are coming due. It'll be the lowest amount of borrowing per quarter, if that holds true, than we've seen since April through June of 2022. So we are seeing that jump there. Both times, Treasury is expecting for both of these quarters to hold about $750 billion in cash on hand. But they are seeing that $760 billion in borrowing for the current quarter and $202 billion for the next quarter. Scott? Yeah, I appreciate that.

Megan, thank you. That's Megan Costello down in D.C., as you see. We were talking about this. Yields are down and the S&P is up. And presumably it is on this exact news that we're talking about here. They're just going to borrow less than anticipated. Yeah. I mean, listen, you know, I'm reading through the report right now. I think that the second quarter they provided their first estimate for the second quarter. That's a quarter, as Megan alluded to, that has variability because of tax payments.

That number looks a little high to me relative to what I think the street was looking at. But in the short term here, I think you have a lower number than expected for Q1, and that's going to calm people down a little bit. But, you know, again, this is separate from the larger story here, which is we're running $1.5 trillion deficits ad infinitum, a recession not in the forecast. These numbers, auctions for twos, fives, sevens, tens, et cetera, are only going up from here. Sure, but there was a point in time in which the market surely seemed a lot more concerned about those facts than it is today. We figure that, you know, even, you know, a couple

of the auctions of late that have been a little squirrely, that in total, we're going to be able to absorb all of the supply that's coming on in the market. And that maybe is why we've had the cooling of fears around this topic. Well, yeah, listen, when the news first broke last year, there was a concern that maybe after 40 years of people worrying about this, that this was going to be the moment that people woke up and imparted some fiscal restraint on the government. That proved to be obviously short-lived. And now we find ourselves in a moment where this headline comes and actually the market's rallying on it. And it looks like we're at the highs of the day. We are. Despite an exceedingly large number of borrowing that

the government's going to have to do treasury auctions the 10-year treasury auctions already call it 40 billion dollars that's probably going to be on wednesday when we get some of the details going to be closer to 42 you know about the relationship obviously between yields and both the nasdaq and the russell 2000 so if you we threw if we let's put up an intraday as well of the Nasdaq here, because you're going to see a similar chart response as we're looking in the S&P 500, because, you know, as yields have come down in these last moments, the Nasdaq has added some as well. It's up near one percent now. And the Russell 2000 is up about three quarters of one percent. That's a near 15 point gain there.

By the way, Jan Hatsias over at Goldman Sachs, since we're on the topic of rates and the Fed, and we're going to get the decision on Wednesday, of course, he's sticking with his March cut, kind of doubling down on that belief that the Fed is going to cut in March. What do you make of that? Yeah, listen, I have not been in the March camp. I want to make a quick point to the viewers at home. If you're an average investor, whether they cut in March or in May or in June is largely irrelevant to you. The fact that they are cutting and they're cutting presumably for the quote unquote right reasons to borrow a phrase from The Bachelorette.

That's ultimately what matters for performance. But I haven't been in the March camp. I think they're probably going to use the data might be too strong. Some of the inflation data and certainly the economic data. And the truth is, if I have them cutting in May or even June, the larger idea for the broader market is irrelevant. The bias is to the upside. And the fact that they're cutting is a positive. Glad you have a life outside of finance. Your primetime viewing habits are interesting. Thank you very much for that. I didn't say I watched The Bachelor.

No, I appreciate it very much, obviously. Nicole Webb of Wealth Enhancement Group joins the conversation now. So what are your expectations heading into what is undoubtedly a critical week as we do have a spike in stocks as I ask you that question? Yeah, thanks, Scott. You know, last time you and I spoke, I delivered kind of some criticism of this equal weight S&P. All we need is a flexible Fed. We have disinflation, more disinflation in the pipeline. To Dan's great point, it doesn't matter when rates come down, they're coming down this year. And look, the economy is stronger than expected. And Dan made great points around credit cards, the consumer and yet and it's not a but to take all that away it's an and and this has not translated into earnings per share growth and so to us it's

not just a necessary given it's a story, of kind of two distinct markets. One where, as one of our analysts put it so perfectly today, you know, you have this scarcity premium on how to participate in AI. And you're seeing that play out in the NASDAQ and specifically in megatech. And then you have the rest of it, the rest of the market and curiosity around in a backdrop where we have deglobalization and the cost of doing business is higher and we've used the strength in being able to pass along pricing, can that all really translate into growth and specifically revenue growth and keeping up with margins and for us that that's still what we're watching carefully for

through this earnings season. What am I supposed to do if I was expecting the broadening out of the rally to continue, but yet I've seen this return back to so-called quality, which obviously means mega caps? Am I thinking that that's just the way it's going to be for a while and this week is only going to underscore why? Or is the Fed going to give us reason this week to think that maybe now really is the time to diversify and broaden out away from the mega caps exclusively? And I'll go back to saying it's both. long-term investor where you have the ability to still purchase what you didn't buy in 2023 because there's a lot of laggards there. And so one should participate. And just because Megatech hit it out of the water last year doesn't mean it has to do poorly this year.

Yes, it's crowded. Yes, it's expensive. And there's still momentum to the upside. And until we see more names come public that specifically are in this AI area, you're going to see investors, both institutionally and on the retail side, looking for a way to participate. And so it's this moment in time where we're going to see the front end of the yield curve come down this year. We have trillions in money market, and both sides of the market look primed for investment. I'll also add that the outperformance of large, if you will, is not exclusive to technology. It's true across basically every sector. I think the only two sectors where large is not outperforming small are industrials and materials. But if you take out Boeing in the case of industrials and Numont in the case of materials, then it is the case. So you've seen investors flocking to large more generally. And I can't help but feel that that's something to do

with passive flows. I can't bear it out and it's not part of my job description to do it, but I can't help but feel that the fact that more than 50 percent of AUM right now, give or take, is directed to passive flows is just going to perpetuate this continued inflow into the large names, particularly tech. Let's talk about then the most active of investors ourselves, right? Do you agree with Nicole that this is a great opportunity for both? I mean, do you think people should be looking more towards the broadening out trade or not? I mean, we came into this year thinking like this is going to be the place to be. New regime of the Fed. They're no longer hiking. They're cutting. Economy's hanging in. Soft landing. No landing says the economy is going to remain good. Now's the moment

for small and mid cash. I thought this into the end of last year, correct. I thought that coming into 2024, not correct. You're not alone. But that leaves us in this quandary of what to do now. But I would take issue with the word great because valuations are high, certainly inclusive of mega cap tech. But even if we X them out for the 493 or the equal weight, these valuations are not cheap. So we can dispute whether great is the right adjective or not.

But I do, listen, I mentioned a whole bunch of companies earlier, and then there's a whole bunch more. With respect to the narrowness of the rally, you've got names as diverse as Cigna, Chipotle, Uber, Eaton, that are within one, two, 3, 4% of their 52-week highs. It's not as if these seven names are doing all the work and everybody else is languishing or down. Certainly, it's not as broad as you quote-unquote would like, but I think there are plenty of opportunities outside of large-cap tech to get large returns. A sector I mentioned repeatedly last year, and I'm sort of involved in myself, look at the hotels. Pull up a chart of Hilton or Hyatt or Marriott. Obviously, this is consumer, this is travel, and this story is played out, if not playing out. But you didn't

need to be in large cap tech to be exposed to any one of them. Yeah. There's an intraday, at least. You can pull up a longer period of time if you want to continue to show that. Nonetheless, Nicole, of the ones, the mega caps that are reporting this week, you own Microsoft, Alphabet, Meta, Apple. Which one is the most important, do you think? Dan Ives made the case today that Microsoft is, sounded like Dan Greenhouse was backing that view. And I had a couple of investors on halftime today doing just the same. You agree? Yeah, we do. And, you know, I think Microsoft is incredibly positioned, well diversified.

We can talk on and on about the strength, what we're going to hear out of Copilot. And I'll go back to something that you've heard us say before, which is we really do believe that Google had a fire lit under it in kind of the race against chat GPT and the army of coders behind their large language model and then overlaying that onto their enterprise system, not to mention the capacity for which YouTube can grow from where it is today, as really the largest media company in the world. And so, you know, Alphabet continues to be really interesting to us. And as we talk about mega tech, I think it's also to kind of go back and look at the sum of the parts

and the parts of the sum. And then one can really make strong cases for their valuations. I mean, but let's take the valuation, because you made the argument, I think I heard you correctly suggest that they're not expensive. Microsoft, let's just say it's 10 year historical average is something like 23, it's at 33. So how do you justify that even with the excitement around AI, right? Excitement can get out of hand as well from a valuation standpoint. We've learned throughout history the hard way when that happens. Unfortunately, it's hard to

see the signs as it's building. Yeah. And Scott, it's not to say that they're inexpensive or cheap. They are crowded and expensive. I'll go back to what I said before. And they are in momentum to the upside. And investors are going to continue to look for how does one participate in AI. There's so much buzz around it. Add in the cap weighted passive flows and then go deeper. buyer of Microsoft? Can I substantiate being a buyer of Alphabet? And this is where we look at the parts of the sum and can create some justification behind, yes, it's expensive. Yes, it's a little bit crowded. And what they are bringing to the marketplace today has the highest likelihood for continued growth, at least looking forward through 2024. And you think earnings are going to ultimately justify this move. And you do believe in the January, the so-called January effect. As goes January, often so goes the year, allegedly. Yeah. I mean, listen, when you dig in the data,

it certainly works. There's no doubt about that. There's the first five days and then there's January as a whole. There is a 900 basis point outperformance between an up January and a down January with respect to the subsequent 11 months. No other month of the year shows anything similar to that in terms of its quote unquote seasonality. So, yeah, I think an up January is better than a down January for sure. But to the point about Microsoft and the valuation, I'm making no argument one way or the other for the stock, but like they are, what is the open AI investment worth? What is Bard worth? What is Einstein worth? Like all these companies and not just these, there's ServiceNow, there's Adobe, there's Salesforce, a number of other ways to play this.

I don't think anybody really knows what the valuation is going to be on some of these businesses in which they're investing and ultimately rolling out. No, but at least you can, I think, I think you can more credibly, at least with some of these names, look at the path to monetization, if you will, see ones that are already doing it like a Microsoft or NVIDIA. The others are a bit of a guess. And even these are somewhat of a guess in terms of the magnitude of the monetization that you're going to get. But at least there's tangible evidence and money and data behind these moves to at least justify them in some respect. Entirely fair. And we're going to probably hear about that on a bunch of the calls. What I will say is historically, with a lot of these names, when you're trading at 20 or now 30, 35 times, the assumption is

that earnings are not correct and that ultimately over the next three years, it's actually in retrospect going to be look looking considerably cheaper cheaper than it does in real time. Let me just steer you back. Let me just remind our viewers, too. Let's show the S&P 500 again. We are going for our first ever close above 4,900 today. And barring a surprise in the last 40 minutes, it looks like we're going to get it because we continue to get a spike in stocks here over the final stretch. You take a look at the S&P here, 4,925 just about. And that is on this news apparently that the U.S. has cut its borrowing estimates, the Treasury has, from the January to March period. Yields fell, stocks took off. S&P, the Russell 2000 and the NASDAQ as well. But the

Dow's up near 200. You want to just give me one more note on why the market is viewing this in such a favorable way in what is a critically pivotal week? Yes. So as I look at the data here, so what this report is, it tells you how much the government has to borrow on a quarterly basis. And then they follow it up with the size of the Treasury auctions I mentioned. Everyone's been on edge about how high and how large those Treasury auctions are going to be. I'm looking at the 10-year here. You're down called 7, 8 basis points, closing back in on 406, 405. And when you think back to the end of last year, when did Treasury yields peak out and begin moving lower? The end of October. When did stocks bottom out and begin moving higher? The end of October. And while growth

is a very important component of equity valuations and earnings, et cetera, et cetera, so right now our yields. And so it's not unusual and not surprising at all to see this relationship on the on the heels of that Treasury. Well, just remember also, I think the midpoint of last week, if we have a one week on the 10 year note yield, you know, we were marching back up in the in the so-called wrong direction. Right. You were, you know, four in the in the teens. And now we, as you said, have just dropped down back in the, you could see it, right? We're almost approaching 420. Yet again, on the 10-year, it made people a little bit nervous. And that's why the market last week took, you know, a one step forward, maybe two steps back at certain occasions. But this sort of calms the, or takes it off the boil. Yeah, if I can if I can paraphrase Dave Chappelle yields, it's a heck of a drug. So we will we'll continue to watch that over this final stretch, see if we can get that close,

that first one ever over forty nine hundred. Nicole, thanks. Dan Greenhouse, we'll see you soon. All right. Let's send it to Julia Borson now for a look at the biggest names moving into the close. Julia. Hey, Scott. Well, SoFi is soaring after swinging to a profit in its fourth quarter, beating estimates on both earnings and revenue. The company is also expanding some of its investment options to include mutual funds and money market funds. And iRobot is in negative territory after agreeing to terminate its plan merger with Amazon, with the two companies saying they have no path to regulatory approval of the deal. iRobot's CEO is also stepping down immediately,

and the company plans to lay off 31 percent of its employees, around 350 people. Scott? All right, Julia, we'll see you in just a bit. Julia Borsten, we're just getting started here. Up next, more of your big tech setup. Apple, Alphabet, Amazon, Meta, among the big names reporting this week. We'll hear from a top tech strategist with how he's navigating this crucial week for the mega caps just ahead. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC, S&P 4925.

Dow's up almost 200. We're back towards quite the finish for stocks on that Treasury announcement just a short time ago. We're at the highs of the day across the board. Dow's good for a little more than 200, 230 points as we speak. S&P 500 going for its first ever close above 4,900. Looks to be on the way to doing that. And then, of course, as yields are coming down, the NASDAQ is starting to rip a little bit as well.

15,627. It's the outperformer today, up better than 1%. Speaking of tech stocks, they're moving higher to kick off this busy week of earnings with all of these mega cap stocks reporting their numbers this week. Microsoft, Alphabet, Amazon, Meta. You know who's reporting at this point, along with Apple.

Let's bring in King Lip of Baker Avenue to discuss. So these are at the top of your holdings as well. What are your expectations? Our outlook is still positive on all of these names. So overall sector positive. But we do recognize that a lot of these names have moved quite a bit already, and it's been just a couple of weeks in a year. So some of those good news may very well be already priced into some of these shares that are reporting this week. So how do you judge that versus the fear that there's just little room,

maybe not even little, no room for error? That's a good point. I think it has to do with valuation. So names like Microsoft and Apple for example have relatively high valuations relative to their 10-year historical valuations which you just showed us earlier on. So you really need to see sort of strong beats and raises on those types of stocks. On the other hand, stocks like Meta, Amazon, Google have relatively low valuations or inline valuations relative to their historical averages. So from that perspective, there is a lower hurdle to beat for those names. Talk to a few people already about what they perceive to be the most important one.

Microsoft seems to be at the very top of most lists. Is there one that you're most concerned about? And maybe Apple is the easiest one to pick on. You know, it's flat to start this year. Questions about where the revenue growth is. What about your concerns, if any? Yeah, I would say Apple is the low-hang fruit, pun intended. It is actually a little bit of a concern for us just because there are some channel checks that show the iPhone hasn't been particularly robust. China weakness has been a concern. Valuation, as we just mentioned, the shares have lagged.

However, longer term, we still like the name because the ecosystem is extremely valuable. The services growth is still extremely strong. Potential for new products is always lurking for Apple. And the strong cash flow. I think there's catalysts for the shares should the company decide to increase their earnings dividend. You tempted to trim any of these? I mean, because I mean, I guess I asked that in the context of even investors that I've been speaking with, whether it's this show or Halftime, who, you know, one in particular sold Meta, still loves it, but just can't ignore the fact that it had the best year ever in 2023.

Now, I know that that was after the worst year ever in 2022, but the stock has ripped a lot. Yeah, you know, the good thing about the way we manage our tech positions is that we trim along the way. So as long as we like the name for the long term, we'll continue to hold them. But we do trim along the way to take some profits, to diversify the portfolio. So for those reasons, we still hold those. Those are our top holdings in our firm.

If for any reason the sort of long-term story is no longer attractive, then we'll completely sell them out. Is there one that you have your eye on that you don't own? I've also had, you know, some suggest that we need to move away from the, you know, these magnificent seven names and look at more of a so-called AI5 and include names like Broadcom and AMD, for example, within that mix. I don't think I see those on your top holdings. That doesn't mean you don't own them, but enlighten us further if you could.

Yeah, one that we've been following that we have, we're starting to build a small position is Adobe actually. And the reason why we like Adobe is we think its generative AI business is extremely compelling. It makes content publishing, content creation that much easier for creatives. And it doesn't get as much AI

sort of highlights as the other names, but it's a company that we think will see extremely strong earnings growth for the upcoming quarters. Cool. King, I appreciate it as always. We'll see you soon. King Lip, up next, positioning your portfolio. Bank of America's Chris Heisey is back with us. He'll tell us how he's breaking down how to navigate this crucial week for your money just after the break. welcome back to market swing as we head towards the close here you take a look there dow jones industrial average good for about 200 points there's the s&p though right in the middle 49 26 as we know i keep repeating it but it's significant 49 26 we go for our first ever close

above that 4900 level yields came down on that Treasury announcement. NASDAQ up better than one percent. It is a crucial moment for the market this week. It's the busiest in terms of earning season. You know about the Fed meeting a jobs report etc. Joining me now post nine to make sense of all of it. Chris Heisey CIO of Maryland Bank of America private bank. Got a nice little move here. Good to see you. Yeah good to see, Scott. Market likes this treasury funding a little bit less than anticipated. Yields came down and stocks jumped. Very similar to late last year when we had the big two-month move. Afterwards, it's, you know, you take the wedge out of the market. Most of last year was the inflation wedge. That was removed. Then it became a yield backdrop, wide deficit. Where are we going on the 10-year cut? Took that out. Now it seems to be this slow drumbeat once again of taking that yield wedge out of the market. Obviously, it's just one announcement, but it's a big one. Does it last? I mean, do you think where the markets come to in a pretty quick three-month period of time that it's A, justified and can continue,

has more legs? Yeah, I think we've been covering the markets for quite some time, both you and I. And when you see something priced in like that, it's justified because it's priced in. Question is, is it going to have follow through? I think that's where you're going. Yeah, I mean, let's put this way. Let me be more specific. Are valuations justified of the market? Right.

Dr. Jeremy Siegel was on with us Friday, said, well, I mean, 20 times is not exactly cheap, but he still thinks we have more to go. I'm not so sure it's important to look at the valuation levels today and say, I remember when. The makeup of the market's different, et cetera. But if the market's willing to price this in at these levels and they have certainty, ex-geopolitical activity. So for instance, certainty that this next week of big time earnings are going to be relatively decent and they're happy paying that, great. If yields are coming down, inflation coming down and

financial conditions are still easy, yes, I think those are justified. So I like the way you put that because it's not like we ever have complete certainty. It just feels today we have a lot less uncertainty than we did over the past 12 to 18 months. Especially the two most important jobs when it comes to what our worries are, the Treasury and the Fed. And when they're working in concert together, it makes people feel like it's okay to take a little bit more risk. Goldman's doubled down today with their March call. I think there's going to be a cut. What's your house view? What's your view? House view is March. It is also. Yeah, it's still there. And it's quarterly from there. A very measured, moderate pace of removing the excess real yields that are out there overall

or absolute yields. Yeah, that's our call. You know, it's going to come. We have two more CPI prints right before then. And jobs, it's jobs, right right we'll know in the job market if we're turning from soft landing which is basically drumbeat of wall street to a harder landing you know over time well i mean there's no indication that we are no there is right and i don't think you know a few days from now it's going to be telling much of a different story there's no indication anyway that it's going to right yeah i completely agree And that's one of the reasons why this transparency factor is staring us there. And we know the playbook. And if the playbook doesn't change, then you can continue to go to new highs. So conventional wisdom would say, OK, if I believe what Heisey's saying, that would suggest that

I want to go into these broader areas of the market. I want the small and mid cap names. And I want these more cyclical names that aren't all condensed into these large cap stocks. Yeah. Why is that not working lately? I think because the comfort level with a good portion of the lower quality areas of the market isn't there yet. They're waiting for a few signs that those unprofitable areas can turn to a little bit more profits. And they're very comfortable owning the areas that have been working and what what's that flare gun that goes up maybe just maybe it's the first couple cuts that the Fed engineers do you like the other areas of the market or are you still you know mega caps are the way to go we're still high quality we are still mega caps however on our

upgrade watch list has been small and mid-cap stocks, some parts of value. What's driving the market right now, and you see it every day, Scott, is more the factor end of things. Last year was interest coverage. This year, it's earning momentum. Until that switches to the broader part of the market, these are subtle head fakes, but it's good to see the basing out. And you think stocks and bonds are going to go up together this year? The yields are going to continue to come in? Yes.

This is a road to normalization. Now, is it going to last all year? It's not that easy. But a stair-step type of grind it out, climb the wall of worry, great transparency, yields coming down, inflation participating the way we want, resilient job market, resilient consumer. Yeah. We start talking about 60-40 is back. 60-40 is back. People were like writing it off, like the demise of the 60-40 was greatly exaggerated. It's hard to argue with 100 years of math. Yeah. All right. It's good to see you again. Thanks for being here. You too, Scott. That's Chris Heise. Up next, we're drilling down on the energy sector. NatGas taking another nosedive today. We'll tell you what's behind the move just after the break. Closing bell's coming right back. We're backing, tracking yet another big move in natural gas today pippa stevens is here

with the details pippa like seems like around the range of two dollars and fifty cents is where we're at for a while yeah big declines here scott and tumbling another nine percent today into the contract's expiration so there was pretty light trading volume but still the sentiment here is negative with the next month's contract for March delivery trading below where we closed today. So the latest headwind is Freeport saying that one of its three LNG trains is going to be offline for roughly one month following damages to a refrigeration electric motor during winter storm Heather. And that weighs on Henry Hub prices since it cuts demand for gas feedstock. And this of of course, comes as production

hovers around record levels and forecasts shift to warmer temperatures. So prices right now at around $2.46. Scott? Yeah, been a stunning decline. Pippa, thank you very much. Pippa Stevens. Up next, we're tracking the biggest movers as we head into the close. Julia Boorstin is standing by with us today. Julia? Well, Scott, a couple of stocks are getting hit with downgrades today that are sending their shares lower, one name in the energy space and another in media. I'll have those details after the break. Got less than 15 to go before the closing bell. Let's get back to Julia Borsten now for a look at the stock she's watching. Julia? Well, Scott, Bloom Energy is lower as Bank of America downgrades the hydrogen fuel cell maker to underperform from neutral.

Analysts expect revenues to be flat through 2025 and note that the company's recent COO replacement adds some uncertainty during a critical growth period. And Warner Brothers' discovery is in negative territory as Wells Fargo downgrades its stock to equal weight. See, it's now down over 1%. Analysts there expect the media giant's earnings to remain under pressure, citing headwinds such as subscription cancellations and declining ratings in its networks business. Scott, a lot of headwinds in the media space. Yeah, no doubt. Julia, thank you. Julia Borson still ahead. Your earnings rundown. Some big names are reporting in overtime tonight. It's not all about the mega caps.

We're going to tell you what to watch for from those reports when we come back. And tomorrow morning, we're going to hear from UPS as well. We're going to break down the key metrics you need to watch tonight ahead of that report when we take you inside the Market Zone. We're now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, we're watching three key earnings reports coming out over the next 24 hours. Pippa Stevens is on Whirlpool and Cleveland Cliffs.

That's in overtime tonight. Frank Holland looking ahead to UPS. That is tomorrow morning. I begin with you, Mike Santoli, in the here and now. And that is the market liking this Treasury funding announcement because yields came down and stocks went up. And we're probably going to get that forty nine hundred above close on the S&P. It looks like it wouldn't have thought necessarily the PTSD from the Treasury supply story of last fall was still that strong. I think it might have just been this market has had no give whatsoever.

It's like eight straight days of higher lows day by day. There was not even a 1% pullback in the last few days. And maybe it was the last chance for maybe some selling pressure to come out. But the 10-year yield did give on the announcement. So things are moving in the right direction. The market's still, you know, I was saying last week, we're playing by bull market rules. Persistent rallies, those that don't really let you in comfortably with deep pullbacks, are generally to be respected, not to be faded. All that being said, you know, we're up almost 20% in three months.

Usually that means good things for the coming months. But, you know, something can come along to knock us off course at any moment. There's definitely a consciousness among traders of upside risk. Yeah. In addition to the potential that we finally get a little bit of a reset lower. Tony P. over at Goldman, obviously, was talking about that. It's like, look, this has been incredible. It's got to simmer down at some point. Kalanovic puts out a note this afternoon that says, well, now valuations are just even more stretched. Well, yeah, sure. There's no doubt about it. The valuation is not going to make

the top of your list of reasons to be mega bullish in terms of expecting great returns. But when yields are tame, the Fed is not looking to be aggressive in terms of tightening and earnings are at least on an upward path. Then valuation reckonings tend not to happen

while those things are true. It doesn't mean that we're just up and away from here. 5,000 continues to feel to me like a, you know, reassess moment because of how far we've come. We're at 49.20 as we speak. All right. Let's go to Pippa Stevens. You have the first two of those key earnings reports. We have Whirlpool and Cliffs. Tell us. Well, Scott, we'll get another read on the health of the consumer when Whirlpool reports. During Q3, the company said the market environment was still challenging and that

discretionary purchases had been softer than anticipated. The appliance maker pointed to higher mortgage rates and low consumer confidence as reasons for the weakness, adding they thought it would continue into Q4. So an update on the consumer is top of mind, as are margins. Now, turning over to Cleveland Cliffs, the steelmaker reporting after earlier this month announcing plans to increase prices for hot rolled, cold rolled and coated steel products. Automotive is the company's largest market, and so investors will be looking out for the health of that division. Now, JP Morgan recently giving the company an overweight rating, saying it should generate ample cash in 2024 amid easing cost pressure and minimal capex requirements, supporting focus on shareholder returns and further debt reduction.

Scott? All right, Pippa, thank you. Pippa Stevens, now to Frank Holland, looking ahead to UPS, that coming tomorrow morning. Frank, what should we expect? Wait, Scott. Well, first off, UPS shares are down 15% since announcing the tentative contract deal with the Teamsters Union underperforming the market and its rival FedEx. As investors, they worried about the impact to profit and to margin. So the company said that nearly half of the financial impact of that deal will be realized last fiscal year. The two key areas to watch are

U.S. margin and guidance for the current fiscal year. You can see on this bar chart right here, margin dropped sharply in the report after the deal. Estimates have revenue increasing by 4.5 percent, EPS by 8.5 percent. Another area to watch, the next step of CEO Carol Tomei's Better and Bolder plan. Over the last 18 months, UPS has made a number of acquisitions focused on health care, returns, last mile delivery, and same day delivery. The company has also said it would increase the use of artificial intelligence and triple the use of bots and facilities this year. Scott, back over to you. Frank, I appreciate that. That's Frank Holland. Mike, I turn back to you. I mean, we had a long list of things we need to check the boxes on this week. So treasury funding,

check, that right goes in our favor. You got mega caps, you got the Fed, you got more mega caps and then you got a jobs report. You want to talk about mega caps, sort of what's on the line given what these stocks have done, especially what they've now done again since the beginning of this year. Yeah. And that changes the field position a bit versus last quarter. As we know, we were in the midst of a deep correction when they reported in late October. So they are going to be relied upon in terms of this gross dollar value, creating a huge percentage of the overall earnings growth and substantiating the valuation of the market by coming through. I don't know where the bar sits, you know, with one versus another. But we did get through a sloppy bank earning season. We're kind of, you know, making new highs, even though

overall you're not seeing great guidance by the average company out there. So it seems as if the market has a willingness to say, we think the broad themes are in place and we'll see, you know, obviously if the Fed and the bigger tech companies reporting this week, you know, underscore that or not. But it is interesting when you talk about today's reports, a whirlpool and a Cleveland Cliffs. People, it's very easy to come on here and say, you know, cyclicals look cheap. You should look at the stuff that hasn't participated. And then it's exactly whirlpool at under eight times earnings. But those earnings estimates have been slashed and burned for six months. Same thing with Cleveland Cliffs. You have to buy

things with hair on them or you're going to perhaps overpay for the sure thing, which is something like Meta at this point at 28 times earnings. Yeah, it's interesting. Last week, we talked many times about the number of Fed folks who were talking the market off of March. And you had the 10-year note yield sort of moving back towards 420. I felt a little nervous about that. Now you have March in focus again as hot CS at Goldman sort of doubles down. You heard Chris Heise, Bank of America, Merrill Private Bank say, yep, our view is March as well, all leading into the Fed chair on Wednesday. Yeah, I don't think he's going to forcibly try to pull the market off of March. But he also, because there's still some data to come between January and March. Seven weeks,

you're not going to necessarily promise it either. I'm not surprised. People think it's a likely thing because of everything the Fed's already said and where inflation sits relative to the Fed fund rate. You hear the bell there. And it is marking the first ever

close for the S&P 500 above 4,900. We're green across the board. I'll see you tomorrow.