Closing Bell - Closing Bell: Navigating a Neutral Market 8/10/23

Episode Date: August 10, 2023

What should investors make of today’s market stuck in neutral after not being able to capitalize on upbeat inflation news or better than expected earnings? NewEdge’s Cameron Dawson and Truist’s Keith Lerner give their expert take. Plus, Bank of America’s Francisco Blanch says the stars are finally aligning for oil. He explains why. And, Ed Yardeni gives his first reaction to the CPI number and weighs in on what might be next for the fed. 

Welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner here at Post 9 at the New York Stock Exchange. This make or break hour begins with the bulls fumbling the ball. A morning relief rally on some reassuring inflation data unwinding for the most part in the face of an uptick in bond yields. An ongoing pullback in the semiconductor stocks as well. The S&P 500 was up 1.3 percent at the morning highs. You see now up about a third of a percent. So we lost one percentage point off that rally in just a few minutes. We'll hear from Bank of America's head of global commodity research, Francisco Blanche,

his take on energy's move higher and where he sees oil prices heading from here. But first, our talk of the tape. What to make of a market stuck in neutral, which hasn't been able to capitalize on upbeat inflation news or better than expected earnings. For that, we welcome Cameron Dawson, New Edge Wealth Chief Investment Officer, and Keith Lerner, Truist Wealth Chief Market Strategist, both here at Post 9. Good to see both. Good to see you, Mike. So let's start there. I mean, we can frame this, Cameron, as this is perfectly routine.

The S&P had a total return of 20 percent through July. We're just digesting the gains. It's very normal if it's a bull market to have this happen, maybe even something deeper than what we've seen. And maybe the market is doing better than you'd expect, given the big Nasdaq stocks getting hit by 10 percentage points. On the other hand, we got 30 percent off the October low. Valuations got where they got. And we haven't been able to benefit from further evidence that maybe we have an economic soft landing. So take your pick. Yeah, I think it is the combination of all of those things. And we think it is probably right to start asking the question, did we hit the valuation ceiling?

Because we saw things like tech valuations up 50 percent from the October low. So how much further could they run? We've certainly pulled back a little bit. The other aspect is, yes, we've had those earnings beats, but they haven't resulted in earnings expectations getting revised higher for 23, 24 or even really 2025. So earnings coming in better than expected, but we're really not raising estimates, which helps kind of point to this sideways chop that we've been in. Now, the inflation numbers today, it's certainly consistent with this idea that inflation has been coming down faster than the economy has been weakening. But you have folks from either side of it saying we have no landing in train.

Long term bond yields have picked up. It seems as if we might have a reacceleration in the economy. What does the Fed do then? So that's the that's the fire scenario. But then also it's like, well, look, the leading indicators say things are slowing down. Bond market says so. Slower pace of job growth. You don't always see the recession coming. All those things mixed together. What do you what should we be afraid of? I think we are in that choose your own adventure mode, meaning that you could look at the data and interpret it two very different ways. And you could be a deflationist and say, look at all

these drivers of inflation coming lower and that the Fed has certainly done. Or you could be an inflationist and say, certainly there are signs that things are starting to reaccelerate. I think that the more that the market prices in rate cuts from the Fed, as well as this deceleration in inflation, we probably should be concerned about a reacceleration. And the question that we still ask, will this better growth that we can observe actually result in higher inflation? It didn't in prior cycles. Think of times like 2019, where you had efficiency gains. But we have a very low unemployment rate, and we have had this underlying inflation impulse. So I think that still very much remains to be seen and probably is the thing that should the market should watch out for if we see that reacceleration.

Keith, the risk reward across stocks, bonds, everything else. How does it look at this at this stage? Well, Mike, we are strongly neutral. And, you know, you just mentioned a lot of the cross-currents that we're seeing, and we're seeing that as well in the data. And it's not a time for us right now to be on offense or defense and be patient. Like you mentioned, we had a big run-up. And I think if you think about why do we have such a big run-up this year, well, we had very low expectations coming in the year, and we beat on the earnings side, we beat on the economy, we beat on the

inflation side. And now that bar has been raised, and we all know we're in this seasonally choppier period. I think the question here, Term, is what's the catalyst? The market held in there fine with today's inflation report, but it didn't have a big bang like it did historically. So that just tells me we're a little bit heavy right now. And then you're seeing the technology sector kind of tread water as well. So I think we're going to be just in a chop for a little bit,

a little bit unexciting. And I think being patient and waiting for an opportunity to be more aggressive makes sense. I mean, I get the idea that the bar has been raised. Once everybody acknowledges that, you know, the economy is in decent shape and inflation is coming down, it takes more than just confirmation of that, perhaps, to get the market going. On the other hand, the market was acting like a bull market for several months coming into this phase. Usually, the moment that people get bullish is not when it fails, when the market completely falls apart. So I just wonder how much there is to feed off of

through this choppy period later in this year, just because things are as we expected them to be. Yeah, I think it's a good point. First of all, having some bullishness is actually a positive. You need more bullishness to confirm the trend. So I don't see this as euphoric. You see some of the surveys, like the AAI bull survey showing the highest level in a few years. But then you look at fund flows for the year, and they're basically flat for equities, over $100 billion in fixed income.

So it's not euphoric by any stretch. But I think what you've seen, even this little type of pullback, you're seeing people get more negative pretty quickly, which I think is healthy. We just have to burn things off a little bit. And even today, so far, we've seen the market pull back to that 50-day moving average. So far, hold that. So I think that's something in the term you want to key off of. I keep talking today about how we've crossed 4,500 the last six sessions in a row. So whether

that means we're sticky in this area, market doesn't have a lot of sellers there, or it's taking a lot of energy to kind of tread water here. I mean, that's always the debate that has no answer except for we'll see. Although I think if you said, Cameron, Apple, Microsoft, NVIDIA, all down 10%, 11% from their highs. Arguably a month ago, you might have said that's going to be curtains for the S&P 500. S&P is down 2% to 3%. Yeah, we've certainly seen that the rotation has been able to offset the weakness in the prior leadership, meaning that you've seen strength out of things like cyclical value sectors. Look at energy rallying. You have a lot of strength within the industrials, even pockets within materials. And so that is supportive that why

you've seen the market be able to stay flat, even though you've seen some of the tech give up weakness. I think it is important that we watch tech. We know it got very overbought into the end of July. It was trading up about 25 percent above its 200 day moving average. That's usually a sign that you need to digest. The question is now we're below the 50 day. Can we get right back above it and keep chugging higher or do we need to digest even more of these gains, which could just mean that we could stay in this sideways chop for some time? We just showed that level 43, 25-ish, whatever, that general zone.

Takes us back to late June, which I know a lot of folks are kind of framing it out and saying, well, that would just kind of, you know, test it, test this latter phase of this rally. I mean, do you think that's a likelihood or we just have to say that's what would be normal? Well, it would be normal in the context of normal pullbacks during any bull market and during any calendar year, mostly in a weaker seasonal stretch, which is what August and September is. The other interesting point about 43-28 is that that was the August high from 2022. So for the health of this advance that we've had, what we would like to see is prior resistance turn into support for this market. And so I think that's a really important line in the sand to watch. I mean, of course, August of last year,

when we hit those highs, Keith, was when, you know, Powell at Jackson Hall was more or less unequivocally saying we're not close yet in terms of where rates have to go for inflation. Now, I mean, within a rounding error, we seem to be kind of done or at least for now done. We'll see what happens. What is the fixed income part of the equation in your mind? Because we see yields migrating higher. The 10 years of 408 again. We have a lot of attention on the Treasury supply and pricing out recession risk. But is there anything else in there that we have to be concerned about? Well, first of all, directly on the 10-year, above 4%, we think the risk-reward is actually pretty good for fixed income. So even if you have an overshoot to own them,

to have fixed income in a more balanced portfolio. You know, listen, I think the earning trends, the way I look at the earning trends, the forward earning estimates, which we'll have to look at next year, they're actually an eight-month high. So to me, that's something we want to continue to watch. And really, I think the next news as we get through August is going to be more talk from Washington. The shutdown potentially is going to gear up a little bit. And probably something's going to come up that we're not talking about today that kind of shakes up the market. But near term, we're pretty much at a standstill between the bulls and the bears. And for what we talked about, as far as good earnings,

economy okay, this inflation every forces versus what's the next catalyst to drive us meaningfully higher. And, you know, valuations have corrected a little bit, but we're down to 19 from 19.6. So it's, you know, it is what it is. Yeah, I mean, and I think I've seen some interpretations of that to say, well, last year was not about resetting the cycle. Right. We didn't have a bear market that led right to a recession.

The Fed did not finish what it was doing last year before the market bottom. Therefore, we're still kind of late cycle. So it's like a 2019 type of a scenario when the market was chronically looking expensive as it kept going up. Right. Yeah. With very low volatility the entire time. I mean, the difference with 2019, though, is that we had a Fed pivot. That's right. We had the Fed cutting interest rates into a 50-year low in unemployment. That was something that was unprecedented at that time. And right now what we have is we have the anticipation of a Fed pivot. And that's been anticipated for quite some time. We were anticipating it back in the summer of a Fed pivot. And that's been anticipated for quite some time. We were

anticipating it back in the summer of last year. Not we were, but the market was. And what we see is that there's still about almost 150 basis points of cuts priced into 2024 into early 2025. Do those materialize? And if they don't, will the market care? It hasn't cared in the first half. Will it care in the second half? I know you both have emphasized, you know't, will the market care? It hasn't cared in the first half. Will it care in the second half? I know you both have emphasized, you know, areas of the market away from the very largest market cap weighted indexes, Keith. You know, the equal weighted S&P is closer to 15 than 19 times forward earnings, whatever it is. I know there's actually some kind of disagreement about whether that's a real valuation number. But nonetheless, what does look like it's still a reasonable risk reward within the market?

Yeah, so I just want to say one thing. On valuations, we all know that on a one-year basis, there's no saying that valuations can't be 19, 20, 21. We know it matters longer term. But I think if you said to me, what's one of the more attractive sectors, not only short-term but long-term, is industrials. I think Cameron used to be an industrials analyst, if I remember correctly. There's only two sectors that just have made a new high, all-time high. It's tech and industrials. I think Cameron used to be an industrials analyst, if I remember correctly. There's only two sectors that just have made a new high, all-time high, tech and industrials. So that tells me that industrial is likely long-term leadership. And I think all this stimulus on-shoring that's still going, the defense side as well, is a real positive. Now, it's not cheap, but I think there's a secular tailwind there. We're seeing

a little bit better action out of financials and energy, so we're a little bit more constructive here short term on that as well. And I think tech is going to be just fine. I think it's just resting after this big run-up as a whole. But we do like the average equal-weighted S&P to be paired along with the traditional S&P, just to hedge some of that top-heavy risk that we're seeing in the headline market. I do sometimes like when the market is in this indecisive zone, and it's kind of frustrating for both sides. And in a sense,

after a few weeks of this, people start to search for the next thing to worry about. And you start to rebuild, perhaps, that wall of concern that's out there. One of those things this week, OK, credit card debt in aggregate is at a trillion dollars, at a record. And so people have this sense out there that maybe we're kind of getting spent out on the economy. On the other hand, relative to the size of the economy, it's exactly where it probably should be long-term trend-wise. Relative to what it costs versus disposable income, it's okay. Are there major macro things, Cameron, that you're right now saying nobody's looking at this enough? We should probably be either worried about it or aware of what it could mean.

We are continuing to watch credit. That's been one of the areas that has been really benign this year. You've seen credit spreads continue to come in, but you are starting to see some signs of defaults taking up. And even on the consumer side of things, you have had delinquencies with credit cards starting to move up. Now, they're still below 2019 pre-COVID levels, but they are moving up rapidly. So what we could say is that we're not at the point where it's stressful, nowhere near where it was prior to the great financial crisis. But it's worth watching because you are starting to see a little bit of sign of stress emerge in certain pockets of the economy in their ballot sheets. And Keith, in terms of things like financials, which we used to think

was a bellwether, but hasn't really behaved that way, are there laggard parts of the market that seem like they're worth a salvage effort or not? I think out of the ones that have underperformed this year, which after outperforming a lot last year, energy is looking a bit more attractive here. I think, you know, real estate is still, you know, bottom of the barrel. And I'm not ready to say that's an upgrade yet. The technical trends are relatively weak. We know commercial real estate is a big story still out there. So, you know, I would probably say for more of a catch-up trade, I think energy is more of a place to look at. Yeah. And it's certainly done a chair of catching up, at least lately. Great to talk to you both. Thanks so much, Cameron and Keith.

Let's get to our question of the day. We want to know, has today's CPI print put the chance of a rate cut by March of next year back in play? Head to at CNBC closing bell on X, formerly known as Twitter, to vote on that. We'll share the results later this hour. Let's get a check on some top stocks to watch as we head into the close. Seema Modi is here with that. Seema. Hey, Mike, let's start with six flags. Earnings coming in a bit short of consensus amid price cuts and competition from SeaWorld. However, it does plan to spend more on upgrading its parks across the nation. CEO Selim Basel on the conference call saying, quote, our DNA at the end is thrill rides and we have to go back and reinvest in rides. Stock, you'll see, is down about 3.5% at this hour. AI software company Applovin doing something very different, seeing its shares surge by over 24%. The company crediting its strong earnings to its new artificial intelligence marketing tool that's helping increase its customers' return on investment.

Take a look at the stock year to date. It's tripled and DA Davidson sees more opportunity raising its price target on the stock from $32 to $40 a share. Mike? Seema, thank you. We are just getting started. Up next, drilling down on oil, the energy space seeing steady gains lately, the XLE up more than 10% in the last three months. And our next guest is betting on even more upside in oil. He'll make his case after this break. We are live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. Shares of Plug Power plunging today. Pippa Stevens is here with what is behind that move. Hi, Pippa. Hey, Mick. Yeah, Plug Power is dropping on track for

its worst day in more than three years after the company posted a larger than expected loss during the second quarter. But it's the production guidance that's weighing on the stock today. The hydrogen fuel cell maker pushed out targets at key facilities by about three to six months, meaning the majority of its U.S. green hydrogen network will now probably reach targeted production capacity in 2024. Higher costs as the company ramps up those new facilities, also hitting margins, which declined year over year and missed street estimates. The stock is now 70 percent below its 52-week high, with T.D. Cowan noting scar tissue built up over the past quarters and continued delays. Still, the firm reiterated its outperformed rating, as did Evercore ISI, Bernstein and Oppenheimer. Roth MKM, though, cut the stock to a neutral rating. Following their

report, shares down 16 percent. Mike. Pippa, thanks so much. The broader energy space has recently been outperforming, however, with the sector leading the S&P 500 over the past month as crude and natural gas prices try to regain some momentum. Joining us now is B of A Securities Head of Global Commodities Research, Francisco Blanche. Francisco, good to have you with us. Hey, Mike. Thanks for having me. Sure, sure. Now, I guess the first step is what do you think has crude prices firming up recently in terms of the macro and then also just what might be

happening on the supply-demand front? Look, I think we've had two main forces diverging over the course of the last six months. On the one hand, we've had the Fed tightening monetary policy. On the other, we've had OPEC essentially curtailing supply, which is a very different macro cycle compared to what we normally have. Historically, oil prices, when they started to come down and crashed, the Fed would cut rates and OPEC would cut production, and we will see a trend emerging from that. It's been a different cycle. The Fed's been hiking, and OPEC has been cutting production preemptively. So we've ended up with, if you like, the two main rowers of this boat going in different directions.

So the boat has been kind of spinning. And oil has been range-bound for much of the last year. So that's been one factor. Peak rates, I think, has been a factor that has encouraged asset allocators to come back into the market. Second factor has been russia russia which for much of the past nine months has been maximizing uh export volumes and and really uh and doing a little bit of what saudi arabia was doing cutting back supplies has actually realigned itself with opec plus so now we're seeing peak rates and lower russian volumes finally starting to bring people back into the market.

And you see it really very much so in the price of Russian oil, which has gone up already $13, $14 above the actual price cap set out by the U.S. and Europe. Interesting. And where do you think that takes us in terms of where Brent prices might get to this year? So I think we have a little more upside. We're looking for $90 a barrel average for next year. So heading into year end and 24. I think one big factor that could push us higher, of course, is China. That's perhaps another big driver of this market. Again, we talked about rates,

we talked about Saudi Arabian cuts, we talked about Russia cuts. But the real issue, I think, what is China going to do stimulus-wise? We saw them falling into deflation this week. So will we see a bad bank emerging to take care of all those real estate assets that are underwater? Will the Chinese government stimulate the economy more aggressively?

I think that could take us a lot higher than $90 a barrel if we start to see that. On the flip side, the Saudis could unwind the so-called lollipop cut, which so far has been extended a couple of times if prices do shoot up over $90. So I think those are the balancing items there. I think the messaging from Saudi Arabia this week has been more on the constructive side than not. So I think they will probably end up going maybe overshooting a little bit before some of those cuts are reversed. And definitely, I think we're all watching China and see what comes out from a stimulus perspective.

And then just to get you to hit on natural gas as well, I mean, obviously, it has a lot of momentum in the short term. If you look at a longer term chart, these are not necessarily alarming absolute price levels. Is it just a weather effect? Is there other supply issues we're concerned about again in Europe? There's a bit of both, Mike. There's the element of weather. We've had extreme heat. And we've been saying for a while,

these extreme weather events are going to lead to extreme energy price movements. And we're starting to see that in the global gas market. To some extent in the US, the US a bit less so, to be honest. But then the other issue is

if you lose supply in gas, you're going to have a very tight European gas market. So TTF, the European benchmark, was up 30, 40 percent for the last couple of days. And a lot of it's been driven by supply losses and potential losses in Australia, but also the fact that we've seen the emergence of a global gas price floor very much driven by China. China again moved away from the gas market last year when prices spiked globally, but it's come back in as prices reverted and came down 90 percent. So the Chinese are buying eight, nine, ten dollars per mbtu gas. It's an attractive gas for China even though it's very expensive for North America. Remember, they

don't have shale, they have to import a lot. So to me, that's kind of the price floor. And the U.S. Henry Hub price will ultimately be also connected to the global gas export market through the liquid natural gas LNG export channel. So those are the main drivers. I do expect stronger gas prices next year for sure. There is going to be more LNG exports and the market will take it at these price points. All right. We look for that. Francisco, appreciate it. Thank you. Thank you. All right. Up next, the big streaming battle. It's not just Disney that's looking to charge more for its content. We'll tell you what company is upping its price tag after the break. And later, GM and Ford dipping in today's session. We'll drill down on those moves and how it might impact the broader auto space. Closing bell. We'll be right back. Dow up 107.

Welcome back to Closing Bell. The NFL heading into its second season with its streaming service, NFL Plus, and it's shaking up its cost and its offerings. Julia Boorstin here with the details. Hi, Julia. Well, Mike, the NFL is adding some new live content to its own direct-to-consumer service, NFL Plus, and it is also raising prices. So it's adding live coverage of NFL Network to its base NFL Plus streaming plan and then hiking that price by $2 a month to $6.99. Meanwhile, its NFL Plus premium tier is now getting red zone. That's coverage of NFL Sunday games. And price of that premium tier is increasing by $5 to $14.99.

Now, this all shows the league's focus on streaming. This season marks its first with Sunday Ticket on YouTube TV and its second season with Thursday Night Games on Amazon. This also gives fans another way to access live content without a paid TV subscription. So it shows yet another threat to the TV bundle. And of course, another price increase for another streaming service after just yesterday, Disney announced $3 price hikes for its ad-free Disney Plus and Hulu subscriptions. Guys, I'm calling this trend streamflation. I mean, it's it's well underway and interesting. It's certainly feeding into everybody's cynical thought that essentially we're getting kind of a version of the old cable bundle inflation back just in terms of these one off direct to consumer ones. The NFL network, though,

it's so interesting because they have certain a certain selection of their games and content sold directly this way. Others are, you know, accounted for by rights to Sunday Ticket and other networks. I mean, could a person just take one and have everything or you'd basically have to knit it together? You still have to knit it together. Remember, there's still games on linear TV. I think the interesting thing is for so long, if you paid for a TV bundle, you're going to get all the NFL you wanted. But now and then you could add the direct TV, you know, the Sunday ticket piece, which now, of course, is switched over to YouTube. But now if you if you want all those those regular games, you also need to have Amazon Prime Video. So I think it's interesting to see how the NFL has figured out how to monetize their games and the really dedicated fan base

on so many different platforms. But for consumers, there is this question of whether it's kind of hard to figure out where your game is going to be, and that is one factor that may have put pressure on the Thursday night game ratings of those Amazon games this past year. Yeah, that does make sense. And then just on the trend of people pushing price increases through from streamers, I thought it was interesting what Disney CEO Bob Iger suggested about

widening the spread between the ad-free tier of Disney Plus and the ad-supported tier. It makes a lot of sense, actually, that you would actually want to have people pay up for no commercials. Then you open up that market to have a mass audience to sell advertising against. Yeah, absolutely. If you make people pay up to have more commercials, to have no commercials, you're going to have more people opt into commercials. And then you get the dual revenue stream, subscription plus advertising. Again, all of this seems like it's going back to a little bit of what's old is new again. Reminds me a lot of those cable TV days. And we're seeing sort of more of this re-bundling as well.

So my new word of the day is streamflation. And I think we're going to see even more of it. All right. You've now staked your claim to that one. You have the you have the copyright until further notice, Julia. Thank you. All right, breaking down today's data, Ed Yardeni is back with his first reaction to the critical CPI number and what it could mean for the Fed and for your money. That is after this break. And later, don't miss a special edition of Last Call live from the Tin Building.

Hear from a star lineup on the pulse of the consumer, New York's economy, and much more. That is at 7 p.m. Eastern tonight. Closing bell. Be right back. Hear from a star lineup on the pulse of the consumer, New York's economy and much more. That is at 7 p.m. Eastern tonight. Closing bell. Be right back. Stocks just off session lows after the S&P 500 gave up a 1.3 percent rally following July's CPI print today. My next guest says today's read confirms inflation is still on a downward trend and that the Fed can take the rest of the year off. Let's bring in Ed Yardeni of Yardeni Research. Ed, I don't know that they're going to necessarily immediately say that they're that they're taking the rest of the

year off, but it's certainly in wait and see mode. And I guess you're not afraid, as many are, that we're going to get to a sticky place in terms of inflation and and the Fed's going to have to tighten things a little more? I think we're past the sticky side of things, because if you look at the CPI headline inflation rate excluding shelter, which includes that annoying component called rent, we get a two% increase on a year-over-year basis. If you look at the CPI core rate, excluding food and energy, and then take out shelter, you get 2.5%. So we're actually below 3% on these kind of measures. And so it's really all up to shelter. And shelter has been sticky. But I think it's starting to come down and it's coming down because it's starting to reflect the fact that inflation on new leases has come down sharply. It's actually down on a year over year basis, according to apartmentlist.com.

It's true. You'll have others talk about 4.4 percent annualized wage growth and the fact that we have a lot of these union contracts getting pushed through and diesel costs can get passed along into core services. However, all that being being the case, has the market already kind of gotten to that spot where it's assuming that the Fed's just about done and we have the soft landing in place? Or is there more upside to be gathered from that being confirmed? Mike, I've been forecasting 4,600 on the S&P 500 by year end. We got there on July 31st. So we got there about five months early. So now what do I do?

I don't really feel like it's appropriate to raise my target here because valuations are stretched. And I do want to see that earnings kind of catch up with the market. So I think we're going to be kind of trading around this level, just below 4600, around 4600 through year end. And then I think we have another good year next year. But for now, I think that the market has discounted the likelihood that the Fed has finished raising interest rates for now and that inflation is going to continue to moderate and that the Fed has finished raising interest rates for now, and that inflation is going to continue to moderate, and that the economy is going to continue to hang in there pretty well. It is remarkable, given that, you know, one month into the third quarter,

you have the real-time Atlanta Fed estimate for GDP growth pushing 4%. Nobody really accepts that on its face. However, even with that, you have plenty of folks saying deceleration is is observable elsewhere. And, you know, we got under 200000 jobs last month. It's probably headed down from there. In other words, the recession call has mostly been deferred and not taken off the table. Does that make sense at this stage? Well, I think you've got fewer economists predicting a recession, but you're right. I mean, we're not out of the woods yet. The fact is the Fed has raised the short-term rates by

over 500 basis points. The fact is mortgage rates are back up over 7 percent. So there's still some kind of restrictive policies out there. And we saw that in the Moody's downgrade at the banks. We saw that in March in the banking crisis, and we've seen it in the sluice, the senior loan officer's opinion survey that the Fed puts out. So credit conditions are going to keep the economy from booming here. But I don't think we're going to go into recession. I think we've been in a rolling recession, hitting different industries at different times. I think now we're actually probably seeing something of a rolling recovery, particularly in the goods sector. I think the worst of the recession in goods is behind us. And from here on, consumers are probably going to be a little

bit more even in their spending. They've gone on a buying binge in services after they're buying binge in goods. Now, I think services slows, goods picks up, and then the consumer continues to spend. I mean, consumer spending, according to that Atlanta Fed survey you mentioned, is tracking at 3.5%. And I think a lot of that, as Steve Lissman has said, it's a lot of it's because the June number ended up in a strong note. And you're kind of comparing averages over averages.

So these are legitimate numbers. Yeah. And, yeah, certainly the B of A credit card numbers today for the latest month were pretty good as well. I like to ask, you know, for you, like like I remember the nine, the mid 90s soft landing. And it seemed as if one of the reasons it was considered unlikely with the Fed tightening so much was that people didn't think inflation could get down below, let's say, 6% or 5% without having this massive inflation. Have we learned something similar, do you think, this cycle in terms of how inflation can stay low and have an economy decelerate and have the Fed do what it has to do and inflation come back? I mean, I'm just wondering structurally if anything has been taught to us.

Well, yeah, I think this is another one of those off landings, mid cycle slowdowns, growth recessions, whatever you want to call it. But it's very reminiscent not just of what happened in the mid 1990s, but it's reminiscent of what happened in the mid 1980s. We've we've been through this before. And it's it's it's it beats going into a hard landing. And I think the economy this time is once again proven to be quite resilient. I think a lot of the folks who've been focusing on the tightening of monetary policy forgot to focus also on how extraordinarily stimulated fiscal policy has been. And then the consumers may run out of excess saving. But meanwhile, the labor market has been strong. And, you know, $180,000 per month is pretty good.

It's kind of going back to normal. I wouldn't mind some more normal up ahead here. No, exactly. And, you know, slow and steady. There's nothing wrong with that, if that's where we land. Absolutely. Ed, thanks very much. Talk to you soon. Thank you, exactly. And, you know, slow and steady is nothing wrong with that if that's where we land. Ed, thanks very much. Talk to you soon. Thank you, Mike.

All right. Last chance to weigh in on our question of the day. We asked, has today's CPI print put the chance of a rate cut by next March back in play? Head to at CNBC closing bell on X. Formerly known as Twitter. We'll bring you the results right after this break. 14 minutes till the closing bell. The index is losing some further ground. The S&P down one-seventh of one percent. Let's get back to Seema Modi for a look at the key stocks to watch. Seema. Hey, Mike, we've got our eyes on Dillard's. The firm is trading firmly in positive territory today after smashing earnings estimates on revenues that also came in ahead of expectations. Those results are fueling the stock today, which shares up over 10 percent.

And this would be Dillard's best day since last October. Elsewhere, Sonos is lower despite beating on revenues and reporting a narrower than expected loss per share. The smart speaker giant says market conditions in this category have returned to normal with soft consumer demand in several regions. Those shares off by roughly 6 percent at this hour. Mike Seaman, thank you. All right. Let's get the results of our question of the day. We asked, has today's CPI print put the chance of a rate cut by March back in play? The majority saying no,. Almost, let's call it by more than 60%, suggesting that the Fed will not be in cut mode next year,

as some of the market pricing implies. Up next, a luxury mega merger, Capri and Tapestry, moving in opposite directions on the back of their deal today. We'll break down those moves and what this tie-up could mean for the rest of high-end retailers. That and much more when we take you inside the market zone. Breaking news out of the Supreme Court, Eamon Javers here with that, Eamon. Hey there, Michael. The Supreme Court is putting on hold the bankruptcy reorganization of opioid maker Purdue Pharma. This coming in response to an emergency

request from the Biden administration to block that deal, largely following complaints that the Sackler family, which profited wildly from Purdue Pharma during the course of all of its years of marketing opioids, would be protected here from liability as part of this deal. The Biden administration doesn't like that. There were some allegations in this deal that the Sackler family were able to extract about $11 billion from the company and protect that from liability as part of this deal. Now the Supreme Court's saying this bankruptcy reorganization will be put on hold. Not clear where we go from here. It's not likely that we'll get a final resolution of all this until maybe next year, because the Supreme Court will then put it into their regular calendar to see what they're going to ultimately decide here. But the bankruptcy reorganization for Purdue,

the opioid manufacturer, which of course was widely blamed for the spread of opioid addiction, it was so devastating throughout the first couple of decades of this century, that bankruptcy reorganization now on hold, Mike. All right. Interesting turn in that story, Eamon. Thank you. We are now in the closing bell market zone. Virtus Investment Partners' Joe Terranova is here to break down these crucial moments into the close, plus Courtney Reagan on a multi-billion dollar deal in luxury retail and Phil LeBeau on the sell-off in Ford and GM shares. Hello to you all. Joe, kind of the gears slipping in this market a little bit. It feels as if, you know, the rally attempts have been unwound and even some of the intraday declines have been picked up. What do

you make of the churn? We seem to have a pattern over the last several weeks where any rally attempt is being met with sellers and reversing intraday. Clearly, post the 30-year auction at 1 p.m., we saw the long end of the curve. Yields begin to spike. Equities fall back. So, you know, Mike, people could talk at nauseam about the fact of you could replace the leadership for mega cap technology and technology,

but can you really? Because we haven't done that in the last 10 days, clearly. And it looks to me like the price wants to go down and shake the hand of the moving averages 50 days down to 44.32. It's about time we touch it. So the yield pressure, do you feel as if that's mostly about we're recognizing there's a lot of supply out here? We're not imminently going to be tipping into recession? Or is there something more going on? Well, I think there's two dynamics. I think there is the increase in issuance. That's clearly leading to a little bit of nervousness. It's less about the Fitch debt downgrade, but there's also this dynamic. The asset management industry is long duration and wants to get longer

duration. Hedge funds, speculators, they're short duration, they're short treasuries. So you have a little bit of this battle going on. It's playing out at a time, a seasonally weak period for equities where there's not much liquidity. So you're going to see a lot of intraday volatility in the bond market. All right. Tapestry announcing today it will acquire Capri for $8.5 billion, a luxury deal that brings brands such as Coach and Michael Kors under the same umbrella. Tapestry CEO explained the strategy behind the acquisition on CNBC earlier. Take a listen.

It was very clear that Capri represented a unique and strategic fit for our portfolio. It builds in this resilient category that we play in, a $200 billion category for accessories, footwear and apparel, luxury accessories, footwear and apparel with complementary brands. So that's important. On paper, Courtney, I mean, you have two companies that were both collections of brands, kind of roll-ups. Makes sense, perhaps, to put them together. What's the main takeaway? Yeah, I think that's right, Mike. And most everyone I talk to says this does make sense. They don't believe that this will be any kind of a regulatory issue because consumers most likely won't be able to tell much of a difference in the end.

And to your point, they're all sort of different, unique brands and they're all run as such, albeit perhaps with some synergies at the top of the parent company. Obviously, shares moving in opposite directions. As you might expect, the acquirer tapestry is much lower, down 16%. Capri Holdings is higher by 56%. So perhaps that extreme divergence, though, is some worry from investors' part that tapestry will be able to pull this off. Tapestry in the past has not had the greatest track record when it comes to integrating the brands. They struggled a little bit sort of acquiring Kate Spade right around the time it was starting to falter. And then with Stuart Weitzman, it kind of fumbled over some supply chain issues. However, it's also worth noting that that was a different management team than it is in place currently at Tapestry. They are forecasting $200 million in synergies.

We'll see if they can get there. But by and large, this seems to make sense. If you want to really compete in luxury or what I would call this more an aspiration of luxury, scale matters. I think there are unique benefits that each can give to one another when it comes to things like international or accessory understanding on behalf of tapestry that perhaps Capri did not really fully capitalize on after acquiring the Versace brand. Yeah. And that deal happening at a good premium, except below a price that Capri has traded at over the last year or two. So clearly there was a little bit of a struggle that was implied in the valuation beforehand. Courtney, thank you very much. Let's bring in Phil on GM and Ford.

What seems to be behind these declines today, Phil? I think it's the general concern over the looming UAW contract ending in mid-September and the possibility of a lengthy and costly UAW strike. There was no immediate catalyst today to both of these stocks moving down. GM down more than 5%, Ford down more than 4%. And when you look at the UAW demands for this next contract, it's clear that they are way far apart from where GM and Ford and Stellantis will be. Yes, they're going to pay up more in terms of their hourly labor. Are they going to get 40% raise

over four years, which is what the UAW is demanding? No, that's not going to happen, but it is going to be costly. They also want a 32-hour work week. They also want job guarantees. Bottom line is, when you look at these three companies, the big three, they are facing the prospects of what could be a lengthy and costly strike come mid-September, at least where the rhetoric is right now, Mike. Yeah, for sure. It did get a lot of folks' attention, Phil. Thank you, Joe. You know, you also, we're kind of celebrating some softening up of used car prices and by implication, new car prices as well. Is the market becoming more promotional here? You obviously have borrowing rates up as well. Yeah, I think it is. I think there's a lot of concerns for both GM and Ford. GM has indicated that they want to cut $2 billion in costs.

Ford is shedding headcount. So these are two companies that now have to face a condition that I think a lot of management is going to have to deal with as we move forward, and that's the return of union worker leverage. We just witnessed that with UPS and the Teamsters. It's kind of like 1997, which you and I remember, where UPS in 15 days conceded to what the workers wanted. So it's about better wages, better security, better benefits. And these car makers are going to have to deal with that. And it comes at a time where if you think about it, Mike, really, what's the price return on GM and Ford in the last 10 years? Basically flat. Almost nothing. Almost nothing. So on the total return, you get a little dividend. I think you may be up 20 or 30 percent, but that's really it. Yeah. I mean, the stocks almost trade just like these kind of equity

stubs on the big debt load and maybe some option value or what the EV market can do. To broaden it out to the overall tape here, you mentioned you think that the indexes seem inclined to go down and do some testing. What does that really imply in terms of the velocity, what you would do if we did get there? Well, I think the buy the dip mentality should be in place and it will be in place for me personally. In the last several days, there's been some concern about energy prices. Intraday today, energy prices hit their high for the year. They reversed. That should have been good news.

But the Treasury yields kind of washed that away, if you would. So we're past the point of earnings. We're thinking about what now? Jackson Hole. Jackson Hole, what's the guidance going to be there? Remember what Jackson Hole did to the market last year when we had the August rally. So, again, halfway through the third quarter, which is the seasonally weakest quarter of the four quarters in 2023. But I don't think

it defeats the overall bull trend that we created in the first half of the year. What would it take? I would say, I mean, some people are saying, oh, the S&P can go down to 4,200. That would be a pretty big bite. Probably people would doubt that it's still a bull market at that point. I think there'd be a lot of doubters. I think you want to be a buyer there, barring some exogenous shock, like oil prices spiking significantly or some tensions flaring up in the world. Sure, and usually it does take a shock

to make it more than a correction. Joe, thanks very much. We do have the indexes going out with very modest gains. The S&P 500 essentially fly after that good CPI report, giving up a 1.3% rally, basically at the levels it traded at around a month ago. That's going to do it for Closing Bell.