Closing Bell - Closing Bell: Navigating the Nasdaq’s Weakness 9/7/23

Episode Date: September 7, 2023

How at risk are stocks especially if the Nasdaq faces continued weakness? Charles Schwab’s Liz Ann Sonders gives her expert market forecast. Plus, star analyst Dan Ives says Apple concerns are overblown. He explains why … and how he is navigating the stock ahead of the company’s big product event next week. And, Julia Boorstin breaks down the slump in media stocks today amid the ongoing drama between Disney and Charter.

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. And this make or break hour begins with the reeling Nasdaq on pace now for its fourth straight losing day. By now, you know about Apple's continued weakness. That stock suffering its worst two-day trade in nearly three years raises so many questions about the winning tech trade itself and then the markets as a whole. We'll get you some answers on both fronts from Schwab's Lizanne Saunders joining us in just a moment. First, though, your scorecard with 60 minutes to go in regulation. Well, the Dow's been green mostly throughout the day.

Today, it's weakened a little bit. Nonetheless, it is still holding on to that. Carried by more defensive sectors, though, like healthcare, UnitedHealth and J&J. They've been outperforming today. NASDAQ, though, that's where the action is. Tech is teetering, and it's more than just Apple dragging. NVIDIA today is a loser, too.

It's down sharply. Chip stocks are staging a bit of a reversal there. Look at NVIDIA, down near $8, 1.2%. As for yields, they are lower across the curve today, 10-year, 426. We'll keep our eyes there as well over the next hour or so. It takes us to our talk of the tape. How at risk are stocks, especially if the Nasdaq faces continued weakness? Let's ask Lizanne Saunders, Schwab's chief investment strategist. Welcome back. Thank you. Thanks for having me.

Shall we be concerned about what's happening in the Nasdaq and Apple specifically? I think it's a little bit too soon to tell in terms of Apple. I'm not an expert on the company or what's going on in China, but it's certainly a balancing act in terms of what they're trying to do with regard to restrictions on government. But the popularity of the iPhone is significant, not to mention the impact on jobs. So we're all going to have to be in a wait and see mode. It's not necessarily a bad thing to see maybe a little bit of the air taken out of that component of the market, meaning the large cap tech techie oriented names just because of the concentration that that represented at its peak in early June.

And we were starting to head that way. If we can see it accompanied by broader improvement in breadth down the cap spectrum in other areas, that might be a fairly healthy convergence that I think would correct some of the excesses, both in terms of valuation and sentiment. Yeah, I think would correct some of the excesses, both in terms of valuation and sentiment. Yeah, I think people would certainly agree with that. The question is, if it doesn't happen, can the market itself withstand Nasdaq weakness? And especially from those mega cap names, that would be pretty suspect, wouldn't it? Well, you also have the bias in investing on the passive side of things so the sheer weight that these stocks

represent in cap weighted indexes is such that there's no question it puts downward pressure but you could have a situation like we saw a year ago in October when the indexes were taking out their prior June low driven down by the the weight on the larger cap names from the tightening cycle, you saw that positive divergence of breadth improving under the surface. And that was the setup for what we saw. So, yeah, there's no question that when you see weakness in those names, it brings the index down. But I think you have to look under the hood to see what's going on in the rest of the market in terms of whether there might be a lift after some of that selling pressure. The other issue we've seen in the market is energy, obviously. The stocks have been doing

well lately because oil has been going up. And some would suggest, like Jim Cramer, for example, that until oil starts going down and until yields start making a more meaningful move lower, market can't do anything under that scenario. Forget all the other talk about the apples and the NASDAQ and the NVIDIAs, et cetera. Oil needs to come down. Yields needs to come down. Or we got a problem. So I think it's actually a triple whammy.

I think I would throw the dollar into the mix as well. A little bit of a reprieve. And that's what's unique about this point in this cycle, is that we've got both the dollar and oil going up. Normally, they're inversely correlated, and it just points to the unique circumstances in terms of why oil is moving up. It's not a demand story. It's a supply story. But I think what had been a very yield driven equity market, I think, has now become driven by the combination of yields, oil and the dollar. So I would agree. I think it's tough if we were going to continue to see that upward trajectory across all three areas. It's hard to see a scenario where equities can do well under that environment.

How do you look at this idea of there's still just good competition elsewhere for people's money? You know, you're getting 5 percent or close to that on a variety of different products that are out there. So we still have other places to make things work without taking as much risk, perhaps, in a risky part of the year. I think that's part of the reason why there's been this correlation where yields go up and the equity market does not do well because it offers that alternative on the safer end of the risk spectrum. Certainly for investors who in the ZERP environment were forced out into the riskier segments, either of the fixed income market or the equity market that's not the case anymore

it's precisely why. Not withstanding a big move up today by utilities. Utilities have been significant underperformers relative to the S. and P. five hundred. Because I think that's where you're seeing some of the

money that would have otherwise been in. Yield oriented segments of the market. No longer need to take that added risk in equities because they can get it both on the short end of the yield curve and the longer end of the yield curve. So I think that absolutely has been a factor. So in terms of rates and the Fed, how much risk do you still think there is regarding the Fed that they're going to do more than we're willing to accept they might. And the Fed speak has been mixed.

You could say, well, you know, Waller and Bostick suggest that we can be both slow and or done, whereas, you know, Bullard and some others would suggest that if the economy remains as strong as it is, we might have to do more. How much real risk do you still think is to the upside on Fed policy? So, you know, the short answer is I don't know. That's the rub of the Fed being data dependent with the data they're dependent on in the case of inflation being lagging in nature. So they're not operating on a forward looking playbook. So we just all of us, including the Fed, waits for the incoming data where I think there's a disconnect. It's not so much what they're going to do at the September meeting, what they're going just all of us, including the Fed, waits for the incoming data. Where I think there's a disconnect

is not so much what they're going to do at the September meeting, what they're going to do at the November meeting. We can all look at the FedWatch tool on CME and see high likelihood of a pause in September, but still close to 50-50 in November. A lot of data, obviously, between now and November. But the four to five rate cuts priced in, that's where I think the disconnect still exists. And to me, that's what I'll be listening for most acutely when Powell has the press conference is, does he push back more forcefully on rate cuts being fairly aggressive in 2024 in an all else equal scenario, meaning even if disinflation continues to build in the pipeline, if we don't see more than just the cracks in the labor market that we've already seen and the economy does more

than just hang in there, it's hard to see that as a green light for rate cuts. So I think it's the for longer part of hire for longer that represents the disconnect between what maybe collectively Fed officials, particularly Powell, have been saying and what the market is still pricing in for next year. How do you feel about earnings? Do you think that projections are still too optimistic or not? I think that they're not realistic because we're in a unique period, really have been since the worst part of the pandemic, in terms of lack of precise guidance coming from companies. We're off that worst part of the pandemic where you had a record percentage of companies simply withdraw guidance altogether. There's more companies providing guidance. But I think, frankly, a lot of companies maybe took as an excuse the murky environment that meant withdrawn guidance. And when they're

bringing it back, they're taking advantage of that happening and saying, you know what, we're not operating our business on this quarter to quarter precise guide point in terms of cents per share. And what I think that's had the effect of doing is analysts are being a bit more near term and making adjustments to estimates. And for the most part, getting to the reporting season, listening to the commentary, maybe making an adjustment to one quarter down the road at most, too, which just means I think those out estimates don't really reflect reality. If the economy weakens from here, they're probably too high. What I think is really important, like it was in the second quarter for this upcoming season, is sort of two differentials, the differential between the beat on bottom line versus the beat on top line, nominal versus real. And what we saw through second quarter reporting season was even though the beat rate was higher than average, the percent by which companies beat was higher than average, the revenue beat rate was much lower,

showing that for companies that were beating, for the most part, it wasn't because demand was improving. It was because of cost cutting in order to protect those profit margins. And that's one of the reasons why stocks that beat didn't perform all that well on the day they beat relative to past seasons where the beat rate was similarly high. And I think that dynamic is probably going to still be in play once we get to third quarter earnings. But when I hear you say that you don't think earnings are realistic, my natural progression to the next question would be, well, then you must not think that the current valuation on the market is realistic either if you don't think that earnings are. So, yeah, I think the plug of the denominator in the P equation is is uncertain right now. We know with yields going up that, again, all else equals, but downward pressure on more highly valued segments

of the market. But the one thing I always remind investors of is that, number one, valuation is a terrible market timing tool. I don't know that there is any great market timing tool. That's why people shouldn't try to do it. But valuation we think of as sort of this quantifiable thing, even if you don't have a lot of certainty on one of the components like the E. But valuation we think of as sort of this quantifiable thing, even if you don't have a lot of certainty on one of the components like the E. But the reality is valuation is as much a sentiment indicator or an indicator of sentiment. And so swings can happen there that really have nothing to do with either the numerator or the denominator. It just has to do with the sentiment environment. So I think the market in a snapshot fashion is still fairly richly

valued. And that's where the yield correlation comes into play. But if earnings are going to be on the trajectory embedded in the consensus, meaning go back up to double digit growth by the fourth quarter, then I think we're OK. I just think that that might be a bit unrealistic for all the reasons we already discussed. So let's broaden the conversation out, if we could then bring in Joe Terranova of Virtus Investment Partners and Nicole Webb of Wealth Enhancement Group. Joe's a CNBC contributor. And Joe, I'll begin with you just playing off what Lizanne just said, fairly richly valued valuations of the market because earnings are, in her words, not realistic. Your response? Well, I think it's fair to say that. I think we don't know ultimately where we're going to go with earnings until we begin to hear from companies in October. And I think

that's why you're in this period right now. It's almost a period of purgatory where we are beholden to the macro. I think Liz is spot on, Lizanne's spot on in terms of oil yields and the dollar leading ultimately where the tape is going to go. But let's remember, there's really nowhere to hide right now in the market. We keep pointing towards Apple. We keep pointing towards the NASDAQ. It's actually the Russell, which is down the most of the major indices. Russell's down 5% in a month, and it's the only of the three, only of the majors that's both

down over three and six months as well. Yeah, and people will tell you, you know, trade up high in quality. Well, we look at the debt market, investment grade is actually struggling in the last couple of days. Equal weighted strategies not performing. Look internationally, you're seeing emerging market currencies have wiped away the gains and even dividend strategies are not working so i think it takes me back to where we are right now and there's absolutely a domino effect scott with what's going on in apple and the domino effect is leading more towards what i believe is position management um i i can't remember the sixteen years I've been doing this. Where I came on air and I said the following. The short term chart for Intel looks better than the short term chart for Apple. Intel's up sixteen percent over the last nine trading days so I think within the market you've got this position risk management going on. It's affecting NVIDIA, which is down significantly. It's affecting Broadcom, which is down significantly. But to the benefit within technology, this is why I think the NASDAQ

hangs in there. Meta is OK. Alphabet's OK. Microsoft, Aural, Adobe, the software ETF, they're all OK. So, Nicole, if you go down the list, so Lizanne mentions oil is a problem. Rising yields are a problem. The strong dollar is earnings aren't realistic, nor are valuations. When you put it all in to the pot, you stir it up and you pull it out. Is that how you see it as well? I mean, look, the market's hung in there, too. And the market's been remarkably resilient through everything that's been thrown at it for the most part. And we've been through little fits of the like of which we're experiencing now, and we bounced right out of it in no time. Yeah. You know, Scott, last week, you and I talked about the freight train that is

mega technology heading into the end of the year and trying to make guesses around how we think about positioning into the end of the year and where that momentum comes from. And to your point and to Lizanne's point, you know, when we look at Apple, when we look at the trickle through effect, yes, elevated valuations, plus a little bit of geopolitical headline noise, the thought about competition entering, you know, a pretty heated space, look at NVIDIA, look at Qualcomm. And then we think about these headwinds that we have. Yes, interest rates. Yes, oil. Yes, the U.S. dollar. And then also the one that we haven't mentioned yet today, which is the consumer weakening.

And so the question then is, is there enough of a growth story in the tailwinds that are AI and productivity and perhaps a reacceleration in manufacturing and some of these pockets like normalizing that we're seeing in healthcare, is that enough? Is that enough to kind of look at once the noise settles in the NASDAQ trade, the repositioning underneath to lead us to, yes, it's a broadening, we're okay through year end, or maybe it is a flight to safety into the end of the year. And I think that's to be determined. We can't make a reflexive decision today based on recency bias. So, Lizanne, Nicole mentions the consumer. Maybe the biggest wildcard at this point, been incredibly strong, propped this market up,

propped the economy up more than I think anybody expected that the collective consumer would. The question is, really, is there weakening now or not? And if there is, what ultimately that's going to mean? How do you see that question playing out? So I think that there is weakening, particularly if you don't just look at dollar sales across the spectrum of, say, retailers, other areas where consumption resides, but unit sales. We all know what's happening in terms of the savings rate being down, the excess savings thesis, which you have to fine-tooth comb that a bit in terms of where you sit on the income spectrum. But that's starting to wane. The increase in student loan payments and then maybe less discussed is the impact on small business, which, of course, that goes directly to the consumer. Is the IRS sort of pulling back on

these employee retention tax credits? So I think there are a lot of forces now working against the consumer. But what clearly has kept the consumer relatively afloat has been tie into the labor market. And if we start to see more than the cracks that we're already seeing in terms of weakening payrolls, that I think could be the most important needle mover that would result in a much more clear picture of a weakening consumer. It's still that tied to the labor market. Joe, you got to worry about that now? Because it hasn't really been a worry at all. Well, no, I think you absolutely have to worry about it.

I think your indicator is financials and banks. And just look at what banks are doing right now and how banks are in such a difficult position with the inability to really grow their loan books and also the concerns with regional banking. Well, hold on a second. I'm just going to stop you because, I mean, their performance of financial stocks have not been a barometer

of what the consumer is doing in any way, shape, or form. Bank stocks have not done well. The consumer's been really strong. Why would I look at the banks for the tell on what the consumer's doing when I can look at the Nordstroms, the Macy's, when those CEOs are the ones who are saying, you know what, delinquencies are going up. And then there are reports from other areas, too, related to the consumer that appear to be weakening.

OK, because I think we're reaching a moment where the consumer is going to need the banks. The consumer has not needed the banks over the last 24 months because they were draining down the savings rate and relying on a lot of stimulus that was afforded to them as a result of the pandemic. Now, I think you're approaching the point where the reliance back on the banking industry is going to be there from the consumer, where you're going to have auto leases that are coming off of the zero percent or the one percent private sector borrowing costs. And the maturity now is leading to the moment where they're going to realize, okay, now I'm going to have to go for that car lease, which is going to be financed at a much higher level. I think that is why the banks now are more prominent

in seeing where the consumer is ultimately going to go and hearing what the CEOs are saying about the ability to grow the revenue books. The other thing on that as well is regional banks. Let's not forget. I don't think regional banks have recovered at all. Well, that's why we talk about weakness in the Russell is made up mostly of smaller regional banks is the biggest part of it and why there's no confidence that those are good stocks to invest in now, which is why the drag has been so dramatic on the Russell. And I think that's all. I think that is clearly a fundamental contribution versus some of the other areas of the market, which I think are more technically oriented. I think the regionals are trading off very poor fundamentals. So, Lizanne, we look at tech pulling back. We look at other

areas of the market, which we say, OK, as long as there's some money going into areas, particularly underperforming ones, market can be OK. It brings me to energy, which has been on a roll lately, as we talked about one of the headwinds itself for the market, that being rising oil prices. Do you see any kind of catch up trade for what was last year's best and has been this year's big underperformer? Yeah, until recently, energy was this year's big underperformer. And that has to do with the obvious fundamental shift from energy having been the only dominant sector in terms of earnings growth, not just market performance, but earnings growth. It's part of the reason why when S&P did their growth and value index rebalancings, and this is really important for index investors who don't necessarily pay attention to what's in indexes. But in mid-December, when S&P rebalanced, number one, all eight of the mega cap eight used to be in S&P pure growth. After the December rebalancing, only one was left in pure growth, and that was

Apple. The other seven went into a combination of growth and value. And as a result of that, pure growth went from being 37 percent tech to only 13 percent tech. Energy became the most dominant sector. Russell didn't do their rebalancing until the end of June, at which point energy didn't have those growth characteristics. So it basically stayed with a heavy bias toward technology. So we can talk about energy and tech and being these strange bedfellows, sometimes at the opposite end of the spectrum. But if you're an index investor, boy, the message in a year like this is make sure you understand what's in these indexes. Yeah, yeah. Good advice for sure.

Last word to you, Nicole, on energy. Since we're talking about it, we've been talking about it a lot this week. At points, it's been the only sector to even talk about that's been in the green. How do you see that? Now we're going to go. We see it playing out well into the end of the year. We see it as a laggard. And again, from a relative valuation standpoint, what we're seeking for, we expect to see trimming across the megatech names. And so when we look at where that money is likely to be repositioned,

we think there is going to be fear of missing out. This of missing out this idea that if you didn't if you believed in the risk off mentality heading into 2023, you're not going to be you're not going to want to be caught in that in 2024. So looking at the laggard names heading heading into end of year is going to be a thoughtful repositioning. All right, good. Thanks, everybody. Lizanne, we'll see you soon. Nicole, you as well. Joe, of course, see you back here at Post 9. Joe Turnover, our question of the day. We asked, is Apple's current valuation of 29 times forward earnings justified or not? Two choices here. Yes, it's justified, or no, it's too expensive.

You can head to at CNBC closing bell on X to vote. The results are coming up a little later on in the hour. Let's send it over now to Christina Parts of Nevelos for a look at the top stocks she's watching as we head into the close. Christina. Well, since you just mentioned Apple, let's talk about the drop in Apple shares sparking a sell-off in tech stocks overall after reports that China has increased restrictions, as Scott alluded to, on iPhone use by government staff. So Apple suppliers with large China exposure, including Broadcom, Qualcomm, Texas Instruments, you can see on your screen all lower Qualcomm,

the largest exposure, down over 7%. Speaking of China, several Chinese tech names are also lower, like PDD Holdings, Alibaba, Baidu. Take your pick of reasons, the rising trade tensions with the United States or its failed rebound post-COVID shows economic challenges in China. Speaking of trade tensions, Baidu, Tencent, and Alibaba, we know, have ordered roughly, what, $5 million worth of NVIDIA chips, as the FT reported. And investors right now are wondering if those orders are going to be at risk. NVIDIA shares down again today almost 2% and on track to break a three-week win streak. Scott? All right, Christina, thank you. We'll see you soon.

We're just getting started. Up next, Apple shares slumping again today. Stock down near seven percent in just the past two sessions. So where does it bottom out? We'll ask star analyst Dan Ives. He's here at Post 9 with his take. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. We've got some news out of FTX and a hearing regarding that story. Kate Rooney has it for us. Kate? Hi, Scott. So a fourth FTX executive now pleading guilty.

We have Ryan Salem, who was charged with conspiracy to make unlawful contributions and defraud the federal election committee. He plans to plead guilty to those criminal charges. This is according to Salem's lawyer in a court hearing that's going on right now in lower Manhattan. Again, this is the fourth FTX executive. Ryan Salem was the co-chief executive officer of FTX Digital Markets. He is in court right now. Sam Bankman-Fried's trial is kicking off in early October. But again, Ryan Salem here officially pleading guilty to those criminal charges.

Okay. All right. Kate, thank you. That officially pleading guilty to those criminal charges. OK. All right. OK, thank you. That's Kate Rooney with the latest there. Shares of Apple trading lower, extending losses on the back of China's reported iPhone ban for government officials. That stock suffering its worst back to back days in roughly three years. My next guest, though, thinks the setback in China, among other headwinds, are overblown. Joining us live at Post 9 is Wedbush's Dan Ives. Good to see you. So let's just take the movement in the stock in and of itself for a couple of days. What's happening, you think? Look, I think the biggest fear for Apple has always been the China exposure.

And I think the worry is that they were ultimately going to be caught in this cold tech war between the US and China. And I think when you look at these reports, now it's 20% of iPhone sales, 98% of actual production. Could this disrupt the golden jewel of the Cupertino growth story? Could it? So in my opinion, based on all the work we've done, I believe this is bark a lot worse than a bite. I mean, when I quantify it in terms of what this could be, I've heard some of the numbers out there. I think worst case, we're talking about 500,000 units relative to what's going to be 45 million units sold in China.

But now look, we've been here before. I mean, I think year after year, there's always the worries here. But all the work that we've done being in and out of Asia and China, I think right now, actually, China is going to be up in terms of year over year. And I think that market share gains continues to be some of the hearts and lungs of Apple. That's fair, but doesn't it have the possibility of just revealing a more hostile environment in a real critical market where we just said 20% of revenues come from China. Yeah, look, this is putting gasoline on the fire in terms of the worries. Could this ultimately be the moment that the bears, many that have been fearing for Apple in China? I don't believe so.

I think when you look at it, especially when you think about Foxconn, you're talking about basically one of the biggest employers in China. Cook, obviously, has been something where I think this is within Beijing. It's been a big part of his strategy in terms of the success. And I think most importantly, when you look at the Huawei phone and you look at can this be a risk, we're still talking about the B team. I mean, in other words, when you look at from an actual nanometer, from an actual technology perspective, the Chinese consumer continues to want iPhones, and we believe you have about 80 and 90 million of those in an upgrade opportunity. So we asked our question of the day to our viewers about the multiple, 29 times forward.

Now, it was over 30 not that long ago, but even now it's far above its historical 10-year average, okay? Can you justify that? And if so, how? So I've always viewed it that you have to view the services business as almost a SaaS business. Caught $100 billion of revenue next year, growing now low double digits. I believe that's worth $1.4 to $1.5 trillion, the services business.

The rest of the business, even base case, call it $1.4 to $1.5 trillion. We ultimately think more, which is how we have a $230 price target. I believe if you look at it on a straight PE, you underestimate what I view the value of the services piece, which is a key part of the re-rating that we've seen in Apple the last few years. I understand that, but how can you have an expanding multiple at a time where you've had a decreasing sales growth? Sure. Tell me how that makes sense. I think first off, I think when you take out FX, when you actually look at what iPhone

sales are, I think when you look into the next year, you're going to have called mid single digit iPhone growth from a unit perspective, based on all of our checks coming out of Asia. You have an ASP now, which is actually lifting. That'll be the big thing next week with iPhone 15. Let's talk that they'll raise it. And we believe $100 price increase, really, first time in years. But that's important from an ASP uplift. Wait, hang on real quick.

So you think that's going to happen? Because there's, you know, chatter in the market, well, it's just rumor and this, that, the other. You think it's going to happen? Yeah, I think NFL starts this weekend and Apple raises by $100. And you think that's a good thing? I think it's a great thing because ultimately when you look at the promotion activity that's going to happen from a carrier perspective within the U.S., I think it's going to take away a lot of that sting in terms of any sort of price increase. And the most important thing right now is 25% of Apple's install base. If there's one number that's important, 25% have an upgrade in four plus years. And that's why we believe the bar's going to be worse than a bite here. China ultimately is going to continue to be a growth

engine. And I think we sit here three, six months now, especially as we go into the holidays, we view this more as a golden buying opportunity, not the time that structurally it fell apart. Okay, I'll see you out in California, out at Future Proof. And we're going to be there together as Apple does reveal that phone. And it's such an important time, not just because of what it typically is every year, but because now the pressures, especially coming out of Beijing, we perceive pressures. OK, I'll catch up with you there. That's Dan Ives of Wedbush joining us right here post nine up next.

School's in session because the dean of valuation is with us, Aswath Damodaran. He is going to give us his take on the recent pullback in tech. Nobody knows valuations better. Is the space overvalued or not? Does it need to come in more? He'll tell us. And don't forget to register for CNBC's Delivering Alpha conference. I'll be there with some can't miss interviews, including a sit down with Altimeter Capital's Brad Gerstner at September 28th in New York City.

The QR code is on the screen. We are right back. Welcome back to Closing Bell. The tech trade coming under more selling pressure. The sector leading to the downside for the second straight day. So is this a start of a greater September slump or just a pause in this year's tech-led rally? Let's ask the Dean of Valuation, Aswath Damodaran of the NYU Stern School of Business. Professor, it's good to see you again. Good to be back. So how should we look at valuation of, let's just take mega cap in general, because it's

not so absolute. Just because something is deemed to be overvalued in somebody's mind doesn't A, necessarily mean it is, or doesn't B, mean that it matters at all. Right. I mean, I think that both parts of that statement are true. First is, I think on a pricing basis, when you have as much of a run up as you've had in the FANGAM stocks, the Facebook, you know, Alphabet, Netflix. So in a sense, you go through the list. You are more likely to be overvalued than undervalued. You don't get a 40 percent run up on companies of this size without expecting some degree of overvaluation. So right now, if I look

at these companies, they're all either fully valued or overvalued. Just as a contrast, at the start of this year, four of those six stocks looked undervalued. Middle of last year, all six looked undervalued. So I think it's part of the boom and bust of these companies. And I think that if the market's going to be carried for the rest of the year, I don't think these companies. And I think that if the market's going to be carried for the rest of the year, I don't think these companies can do it. So something else is to step in and take their place. And that's going to be tough to do because they're big companies, huge market cap companies. But I think the big ride up on these stocks is pretty much done. But how do we quantify, Professor, the AI opportunity that many of these stocks have

gone up on and have seen their multiples expand by? Microsoft and Nvidia have something concrete to point to. They are direct beneficiaries of AI as it stands now. So some of that run-up is justified on those stocks. The question is, how much of a run-up? The remaining stocks, it's more theory than actual numbers right now. I mean, you can't point to something at Apple and say AI created that for Apple. And I'm a little skeptical about how much AI can add to the revenues of some of these. Just because you're big tech doesn't mean you're going to benefit from AI. So I wait

and see to see whether Meta can benefit from AI as much as Microsoft can. I don't think it can, but we just have to wait on that. What about the market overall? You know, given where interest rates are, we just had an interview, for example, with Lizanne Saunders, who suggested that earnings expectations are not realistic, at least in her mind. So then that would suggest that you can't possibly justify the current valuation of the S&P if you don't think that current earnings projections are legit. You know what? I've been hearing that about earnings projections now for six quarters

and every quarter what happens at the end of the quarter is people reset expectations. So you know what? This quarter it didn't happen, but next quarter it will. At some point in time, you've got to wonder whether the people are making these statements about earnings projections not being reasonable or perhaps themselves making an assumption that is not worthy of putting into the numbers. Because, I mean, I've been watching the earnings projection,

how you do it every month. And earnings expectations are lower than they were a year ago, but not by that much, 3%, 4%. So in a sense, analysts seem to be projecting the expectation that earnings will be down because there's going to be some softening of the economy. But it's not going to be the kind of fall that puts stocks at risk. So let me lastly ask you, do you think the current market is fairly valued or not? I think given interest rates where they

are and the earnings expectations taken at face value, I'm OK with the market now. Now, one or both of those numbers can be at risk. But we could have said that about the market at any point in time over the last decade. So while we wait for interest rates and inflation to play out, now I'm looking at the market and say this is about where I'd expect the market to be, given where we are on the other fundamentals. Really? Interesting.

That's why we like having you, Professor. Thank you. Going back to school with us, Wathamotor. We'll see you soon. Up next, we're tracking the biggest movers as we head into the close. Christina Partsenevelos is standing by with that. Christina? Well, the weight loss drug market is expected to explode beyond $100 billion

by the end of this decade, and one ticker could be a big winner. I'll explain why next. We're 15 from the close. Let's get back to Christina for a look at the stock she's watching. Well, let's start with shares of Eli Lilly rising today after a bullish call on the weight loss industry. J.P. Morgan saying the emerging obesity and diabetes drug market could grow to $100 billion just in the next seven years, which could mean big gains for Eli Lilly diabetes drug, which is expected to be approved by regulators soon to treat obesity. And that's why shares are up over 2%.

Shares of hard drive provider Seagate, though, are going in the opposite direction, down over 10% right now. Barclays analyst downgrading the name, blaming poor fundamentals and a recovery that could take longer than expected. Separately, Seagate just yesterday also announced plans to sell up to $1.5 billion in convertible notes in order to pay down debt, both of those contributing to the 10.5% drop. All right, Christina, thank you. Christina Partsenevelos, last chance to weigh in on our question of the day. We asked, is Apple's current valuation of 29 times forward earnings justified

or not? Yes, it is, or no, it's too expensive. Head to at CNBC Closing Bell on X, the results after this break. And do not miss a CNBC exclusive interview. Goldman Sachs' CEO, David Solomon, sitting down with David Faber, 4.15 Eastern during overtime. Closing Bell, right back. A quick reminder this weekend, you can get an inside glimpse of CNBC and Boardroom's Game Plan Summit. It's where athletes, owners and other leaders across the sports landscape break down their rapidly evolving businesses. Watch Game Plan at Saturday, 3 p.m. Eastern, right here on CNBC. The results now of our question of the day.

We asked, is Apple's current valuation justified or not? The majority of you said no, that it's too expensive. More than 57% of you voting there. Up next, media stock slammed. We'll tell you what's driving that group lower just ahead. That and much more when we take you inside the Market Zone. We are now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of the trading day. Plus, Julia Borsten tracking some big moves in the media space today, including the escalating drama between Disney and Charter. And Pippa Stevens looking ahead to DocuSign those earnings out in OT today.

Mike, you first. What's on your mind? More of the same, right? Apple is front and center. So more of the same for sure. But I think that, you know, if you thought that Apple being under severe pressure for a few days in a row was going to be, you know, the real thing that broke this market's back, I don't think you're seeing the evidence of that. It's a lot of differentiation in the market. You have Apple month to date, which, of course, is just four trading days, is down 5.5%. NVIDIA down 6%, four trading days. In September, the S&P is down 1.5%, which means outside of those two stocks, the S&P slipped 1%. You have Alphabet and Amazon both up

today. So it's not as if the entire NASDAQ is being swamped by what's happening in Apple. And I think aside from that, none of the other big macro asset moves have gone full tilt. In other words, oil is hovering and backing off a little bit. The dollar definitely looking like it's stretched to the upside and maybe going to be a challenge, but yields are quiet. So all that boiled together suggests that it's just a little bit, like you said, more of the same. But to me, more of the same means we're just kind of in this pullback. We have a lot of put buying the last couple of days and a huge amount of corporate debt sold. And we've kind of absorbed it. So to me, I don't look at this tape and say it's super fragile right here. You have, as I said earlier,

banks down 5 percent, you know, this week. And the VIX is yawning at 14.5%. Because losses have been bought on most of these occasions. And we'll see what happens. If tech does pull back more, the buyers are probably, you would think, going to just come right in and snap these stocks out. At some point, perhaps. I mean, look, maybe you have to do a little more work and get really oversold and have a better perceived risk-reward tactically to get back in and get moving to the upside. You know, you mentioned, I was mentioning in August that the pullback, we really didn't pull the slingshot back all that far, didn't get super oversold.

We barely touched the 5%. So sometimes you need a little more than that. But in general, we're tracking the 2021 path, which suggests that, you know, September could still be a little bit messy. But beyond that, it know, September could still be a little bit messy. But beyond that, it's not necessarily game over. So, Julia Borsten, media stocks obviously front and center today in some respects. And Disney, too, which was below $80. That's, I think, a four-year pre-pandemic low. You know, here we are. It's right at that level now. What are you watching?

Well, it's not just Disney. Media stocks are really moving today on the heels of a number of CEOs sharing some commentary at the Goldman Sachs Communicopia conference over the past couple of days. Warner Brothers Discovery share is down about 4% after last night CEO David Zaslav spoke about pushing a new type of bundle. Forget about a la carte. The bundle is the thing. He also talked about the cost of the strikes potentially extending through the end of the year, which has prompted the company to lower its earnings expectations. Meanwhile, Paramount shares are down about 3%

after CEO Bob Backish yesterday spoke about the pressures on the TV business and his plans to raise prices again on the direct-to-consumer streaming services. Meanwhile, Roku shares are down another 3% after yesterday announcing that the company is laying off 10% of its workforce with Loop downgrading the company to hold. And there was one big winner today. FuboTV now up 13%, up about 30% for the week after Charter offered its subscribers a discount on FuboTV streaming sports service in the absence of access to ABC or ESPN given there's so much attention right now on that Charter versus Disney standoff. All right, Julia, thank you. Julia Boris and now to Pippa Stevens. DocuSign earnings in overtime talking about a pandemic name. This was one of

them. Yeah, that's right, Scott. Really a poster child for the pandemic surge and expectations are perhaps muted here for DocuSign's results after some peers pointed to ongoing secular headwinds. And last quarter, DocuSign's CFO said that macro uncertainty for customers led to smaller deal sizes and lower expansion rates as customers scrutinized their budgets. So Billings' growth and guidance are the key things to watch here. Although J.P. Morgan noted that some conservatism is already baked in, meaning there could be a surprise to the upside.

Now, updates around the company's product diversification strategy is also key. As you said, it was a pandemic darling, and its post-pandemic growth has really been sputtering here. Shares are down about 20 percent over the last six months. Underperforming competitors, Scott, including Box and Dropbox. OK, Pippa, thank you. We'll see what happens in overtime. Mike, I turn to you. We obviously had the sound effect for the two minute warning. You know, this this pullback of sorts in tech has allowed some other sectors to wake up. Health care. Yes care and energy.

Yeah, energy has definitely sort of asserted itself over the past few weeks. That seems like it's interesting because over a long cycle, I'm persuaded by the Renaissance macro folks on this, over a long point to point, multi years, energy doesn't tend to either be fully cyclical or to be fully defensive or always to be value. But it does tend to diversify against those other types of bets. And so right now, at a time when cyclical outperformance has pulled back, the pure safe haven trades aren't working, energy is able to take up the slack. There has been a little bit of a bid in the pure defensives here, which always kind of happens as a, you know, as a pullback matures. Proctor was one of the winners today, for example.

And then, of course, people talking about utilities have been just radically washed out in this move. So we'll see if that really means a change in sentiment and tone or if that's just kind of, you know, look, we sent these things too deep in their pullbacks for the short term and see what comes of it. You know, but energy with crude kind of hesitating here. We'll see what comes of it.