Closing Bell - Closing Bell: Nvidia Shares Back on the Run 01/06/25

Episode Date: January 6, 2025

Nvidia shares are back on the run as the stock looks to close about $150 a share for the first time since November. Kristina Partsinevelos tells us what’s at stake when CEO Jensen Huang speaks tonight. Plus, our all-star panel of Trivariate’s Adam Parker, NewEdge’s Cameron Dawson and American Century’s Mike Rode debate where stocks could be headed this year. Former Dallas Fed President Robert Kaplan tells us what he thinks is most important to the market right now. And, PIMCO’s Erin Browne breaks down her playbook for 2025.  

All right, Kelly, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This mega breakout begins with tech on a tear today. All eyes turning now to Vegas. That's where NVIDIA CEO Jensen Huang gives his keynote address at CES about six hours from now. The stock a big mover today, along with several other mega cap names. That's certainly helping, a big reason why NASDAQ is leading the action today. Take a look at the majors with 60 to go in regulation. We've softened, though, a bit. Look at the Dow. It is now negative. NASDAQ off its best levels of the day as well. S&P still hanging out with about one third of one percent. Record revenues from Foxconn today, sending most of the semi names higher. NVIDIA notwithstanding,

not the only name. Micron, Lam, Applied Materials. We just picked those three among the big winners today. Look at Micron, almost 11 percent. Uber is higher as well today. The company announcing an accelerated share buyback and United Airlines is surging after saying it's going to test Elon Musk's Starlink for Wi-Fi on its flights next month. We're watching Treasury yields. Big story today. The 10-year hovering near 461. We'll watch that story closely because former Dallas Fed President Robert Kaplan will be here in a bit for his outlook on the Fed, rates, the economy and more. It takes us to our talk of the tape back on the run. That is what NVIDIA appears to be as that stock looks to close above 150 a share for the first time since November. We're looking at a closing record high

as well. CNBC's Christina Partsenevelos is here with what CEO Jensen Wong could deliver tonight for shareholders. It's nice to see you. What do you think we should expect? Well, we should expect the fact that he's going to change the narrative once again. He has really a knack for building momentum around the stock and driving this AI theme. Last year at CES, shares actually jumped 6% on day one. This year, what are we going to focus on? Of course, AI data centers, specifically Blackwell. In November, Jensen Wong promised they'd ship more Blackwell platforms than originally planned this quarter.

So we'd like to know if there's any updates, financial updates to that. Investors will also be looking for any new Blackwell variants out later this year that have more memory for AI processing. And then lastly, whether the Rubin project, a new AI architecture set for 2026, it's gonna maybe come forward in timeline. AI does get all the buzz given how much it can contribute to revenues, but gamers are expecting Nvidia

to unveil new gaming graphics cards and some talk that Nvidia might actually jump into the AI PC processor market, which would put them in direct competition with Qualcomm, AMD and Intel. But overall, we know the keynote will be a driver today to set the tone for AI in general, but also tomorrow, the analyst Q&A just in the afternoon should be where we get some, if any, financial updates. So it will really help drive that stock. Scott? It has been a stock moving event, right? I mean, not just on the Monday that he delivers the address either. You've seen it on the Tuesday and the Wednesday following, and this comes at a time where the

stock really seems to need a jump. Precisely. And that's why I put emphasis on tomorrow, because I'm sure the analyst community will ask more specific questions about Blackwell. My assumption is that in the keynote, it will focus more on gaming, maybe Spectrum X, which is their Ethernet cables. Very important to bring all of those GPU clusters together. But all of the information that the world wants, investors want, is how are they going to move forward and get that continuous source of revenue and stay, you know, one to two years in advance of every other competitor out there. So those are the questions.

China restrictions, too, those are the questions they're going to get from analysts tomorrow afternoon and where you should start to see some movement in the stock, you know, depending on what sentence he happens to say. And it's going to be broadcast live, so everybody can watch it as well. And I'll obviously be following it for our audience tomorrow afternoon. All right. Six hours to go until we see Jensen Wang. Christina, thank you. Christina Partsenevelos.

Now let's bring in Trivariate Research's Adam Parker. He's also a CNBC contributor. He's out with his 25 outlook this year, but of course used to be a semi-analyst in your prior days. Good to see you. Happy New Year. Happy New Year, Scott. Good to see you. You have AI-related semis as a key part of your market story for 2025, don't you? Yes. And I know you always accuse me of being a little bit biased toward the background in semis, but that's true. I like semis over software right now. And I know a lot of clients are out at CES waiting and hanging on every word, just like Christina

just said. So it's a big event. I think Jetson will outline a lot of applications to get people excited again, as he usually does when he goes out and talks to the street. How do I want to think about mega cap tech this year as we get going? You know, it's 33% of the market, the S&P 500 technology. So even if your market weight, it's still the biggest position you have in the, you know, in the portfolio. So I think folks have to think about owning big positions in tech. As you see today, a lot of the Semi caps and some of the non-NVIDIA Semis had really lagged, and so they're catching up.

I think there's other names you can own in Semis where the risk-reward skew to the positive, particularly because inventory for a lot of industrials has peaked and is coming down. So I think you want to own the big names, at least in the market weight, and I think you want to own Semis where the inventory's peaked and it's coming down. So I think you want to own the big names, at least in the market weight. And I think you want to own semis where the inventory is peaked. You know, the markets felt a little wobbly lately. You know, if you look at the price action and the year and even beginning

the new one, maybe we're trying to right some wrongs here over the course of this week. We'll see what happens. But you suggest more broadly that the equity market is increasingly risky. Those are your words. Why do you think that? Yeah. Yeah. And we kind of wrote we think maybe we're going to be down some in the first half. And, you know, as you and I talk week to week about the upside or the bull case of the market, I sort of felt like when we put, you know, pen to paper, so to speak, in December for this outlook we published today, that a lot of the pillars of the bull case look less compelling. I mean, margins, I don't think they have quite as much upside. I think there's risk that the CPI could be troughing or maybe rise in the second half of the year, as we alluded to a couple of weeks back when we chatted. I'm not

sure people are going to view extra accommodation from the Fed as that bullish. You talked about the 10-year hitting 4.6. So at some point, the interest rate environment's less benign. I'm not sure people are psyched about incremental U.S. spending and that working its way into the big cap tech stocks as much. I don't think people are as psyched about China as maybe they were. So if you go down some of the bull case, it's less compelling. And I think the last thing is sentiment. A year ago, you could have romanticized on your program your contrarian bull. Two years ago, you certainly could have. And you can't now. I mean, most of the strategists are out there with 66, 67, 7000 on the S&P. And so it's not like you can say, you know, I'm the contrarian bull.

So I think it's a little less compelling in the first half of the year when I look at the risk reward. I can see you on all of that. But what if I say, well, then I'll raise you tax cuts and a friendlier environment for business and dealmaking and animal spirits and pent up demand and all that stuff that has still a lot of folks thinking that this bull trend is well intact. Yeah, I think the two most compelling parts of the bull case that resonate with me are definitely the M&A cycle, which I think will be a big one. And I think if you do get a 5% or 10% sell-off, that'll probably start more deals.

You could see that as the floor in certain industries. And definitely, I think AI productivity, where you're going to get some companies telling you their earnings are improving or they're not going to hire like they would have in the past. Those are definitely bull case things I believe in. In terms of your animal spirits thing, I think there's offsetting points now, meaning out of the gate,

we were together on election night. There was definitely a benign interpretation about all the policies. I think now the dollar's strengthened a lot. Some of the policies may not be quite as bullish for the fundamentals of the company. Some CEOs might be a little bit more cautious about how to optimize their employee mix, US versus non-US. So I think you've got that initial positive interpretation. And now I'm looking for where will I see a fundamental support. And so I think it's more balanced on that, on the, on the, you know, on the kind of animal spirit side, it's really just M and A that I still think will be big. What if, what if the tariff teeth, so to speak, are not as sharp as we once expected that they might be at least out of

the gates? My view, and this could be wrong, but when I talk to institutional investors, I think people, and that's part of why I said benign i don't think people are embedding that in the price of the stocks i mean the only policy that i think is in the stocks has been the health care price action where everyone just assumes uh the incoming you know uh policies from rfk jr will impact the earnings of the health care companies that's why they've had the worst kind of two-year relative performance in 25 years. Interestingly, that's in the price, but not in the price, I think, are the potential for tariffs to raise prices and companies to maybe lose demand as they raise prices, that kind of stuff. So I don't think, even though that banter is out there and it's been regularly reported on, the stock market guys I talk to aren't saying I'm selling those stocks because of it yet.

I think they don't believe it'll be as negative as the banter. So you think we could have a bit of a rocky first half of the year, but you're still expecting a good year for stocks, right? It's just going to happen later than maybe some people would have liked to believe. I think so. I like looking at that shape of the estimates in terms of quarterly earnings, and they kind of plateau here the next couple quarters, accelerating Q4 of 2025. If the market is sort of three to six months anticipatory of that earnings growth, it kind of argues we'll be flattish and choppy here, and then six months anticipating the Q4

quarter that gets you March, April, May, where maybe we can get a more of a, an upward trend again. So I think we're likely to bounce around a little bit here, maybe even have a down tape just with all the, you know, kind of things we talked about the Fed rates, China, et cetera, et cetera. I don't think it looks as rosy as it did, you know, a year ago. I mentioned in the open today, we're watching shares of Uber because they announced this accelerated buyback. You make the case that you prefer this type of buyback rather than a traditional one. Am I reading those notes correctly? And why do we even make the difference between the two if we're getting to the goal line no matter what? It's a great question.

And I love it when we do research and then you get a real company, a big one, doing something. Obviously, we had no idea. But a buyback, what happens there, Scott, is boards authorize a buyback. And the companies can do it at their own discretion over any undisclosed timeframe. So, okay, you can do $10 billion., you can do a billion a quarter for 10 quarters or whatever. When we study the future returns of buybacks, the company's reducing their share count by a lot. They don't really even outperform those keeping their share count flat. So, in aggregate, the system looks like it doesn't add any value with the buybacks.

These so-called ASRs or or accelerated share purchases, are different. It's on average a larger commitment at a fixed price. You're getting one of the big banks to take down the shares at that time. And so the companies that do that tend to outperform, whereas the regular buyback... I think the problem with buybacks, Scott, is they're a signal. The management doesn't care about buying it correctly. They don't want you to say, oh, they did less than last quarter, therefore they must think the stock's expensive. They're more about perception, whereas the ASRs are more about trying to do the right thing at the right price.

Interesting. It's an interesting case you make. Let's broaden the conversation, Adam, if we could, and bring in Cameron Dawson of New Edge Wealth and Mike Rode of American Century Investments. It's great to have you both with us, Cameron. I'll turn to you. You heard Adam's view about what the first half could hold. Do you think we could be a little choppy as well? That is our base case. This idea that you're going into 2025 with such a higher bar that it sets up for some choppy price action when you consider the valuations that we're starting the year where positioning is, and where growth expectations are. I think Adam's point of the fact that everybody was so bearish

over the course of the last two years, you started with these low bars and things like GDP growth. Don't forget, last year we began the year with 0.5% expected for 2024. We ended the year at 2.7%. So this year's expectation of 2.1% for GDP growth looks to be healthy. It's just a higher bar that we think we have to digest and chop through. Not enough, though, to derail what the trend has been and what you still think it will be? We do think that the trend will start to flatten out a bit. If we look at the strong up and to the right, very low volatility trend that we've had over the last 24 months, we think we'll start to look more like a year like 2015 or 2018, where we did have that sideways chop action.

The good news in that environment is you do get buying opportunities and being ready, willing and able to buy when you see that volatility. You also tend to see some leadership rotations in markets like that. So we wouldn't be surprised if you start to see some shifting sands under the surface. You make the case, Mike, that we entered this year in a much stronger position than we entered twenty twenty four. We just clocked 20 percent on the S&P. What does that portend for this year then? Yeah, I think it's pretty widely consensus that the economy is in good shape. Inflation is moderating, maybe a little bit sticky, but the market is a pretty high expectation group right now. When I say the market, I mean the S&P 500 specifically.

As Adam was talking about large cap tech, large cap growth is trading at a 45% premium to historical valuations. AI stocks are, yes, their fundamentals are great. Valuation is getting expensive. So there are areas within the market where there's relative value. So small caps, mid caps, even the S&P 493. And they're relatively attractive on a valuation perspective. But they're also seeing a significant acceleration in earnings. So small caps going to swing from negative to positive positive and 19 percent positive swing this year. Mid caps, 14 percent positive. Look to Magnificent Seven. It's actually decelerating by about 13 percent. So our research shows that you want to be invested in companies with accelerating earnings.

And I think there are areas in which small cap, mid cap, S&P 493, we have that acceleration plus more attractive valuation. I'm glad you went there because, Adam, you don't you don't agree. I mean, you don't think that small caps look as cheap as some would like to believe. Mike included, as you just heard. Yeah, I don't see it that way. But, you know, obviously the devil's in the details. I agree with him on the point on revenue acceleration. You know, generally you want to buy stocks that have accelerating revenue and short those where it's decelerating. That factor failed miserably last year. We wrote in our outlook note, we think it'll probably start working.

So I think on that point, I agree. In terms of small caps and aggregate, though, the way we look at it, when you kind of adjust for style, meaning compare the valuation of small cap growth to mega large cap growth, small cap growth are mega large cap growth. Small cap growth are more expensive in absolute terms, and both are pretty expensive versus their own history, 70, 80th percentile. And when you look at value, small cap value is cheaper than large cap value. But when I look at it adjusted for quality, it's cheaper for a reason. And the reason is it relatively stinks, meaning mega large cap value is becoming increasingly higher quality and less junk. That is not true for small cap value.

So when I adjust the overall basic small large cap argument by style and by quality, I don't see it as that cheap. And then what makes small cap work on a relative basis is when you have a recession recovery. And so what I'm struggling with a little bit is we didn't have a recession. They went up pretty sharply after the red sweep under a view that we would get less regulation, lower taxes, all that kind of stuff. And so now for me to believe there's really that earnings acceleration coming, I guess the departure for Mike might be I don't believe the estimates are going to be as achievable for small cap value. I don't think it's – I think it's cheaper for a reason, and the reason is it's worse. Do you have a rebuttal to that, Mike?

Yeah, well, that's fair. I'd say the Russell 2000 value, there are a lot of lower quality companies in there, and I think that's where active management comes into play. Active works best in small caps. You can also benefit from from that trend that m a increasing m a as those companies will be bought at likely larger premiums um yeah so hey it's it's a fair point uh but and consensus estimates they're never right right the question is how off are they i think and we believe that if you get the direction right and you get that

acceleration while you're getting the deceleration, the Magnificent Seven, plus you have the valuation disparity, that's a pretty good setup versus great earnings in Magnificent Seven, but slowing significantly year over year. And just a lot of expectations built in. They're over-owned. They're a huge piece of people's portfolios. When you look at small caps, they're under-owned. The mid-caps are under-owned. So I think there's opportunities within the broader market. The good thing about having three people... Go ahead. Go ahead. I was going to say the part I agree with most, and then I'm sure you want to talk to Cameron more than either one of us. The part I agree with most is just that you need someone to pick the stocks

there more. And so if you have a good stock picker like they do at American Century, then it probably makes sense to pick stocks there. I agree with that point the most. I wanted Cameron to settle the debate. I want your perspective. Some like small caps, others don't like small caps. What about you? It's your day, Adam, which is that we do think that, first of all, consensus, just because it thinks it's going to happen, doesn't mean it's going to happen. And small caps haven't necessarily earned your benefit of the

doubt. Don't forget that a big acceleration in small cap earnings was expected for 24, and we didn't get it. And the next question would be, is how much of this acceleration in small cap earnings is based on the hope that interest rates are going to fall? And if interest rates don't fall and you continue to see balance sheet pressure from the small cap standpoint, we don't think that those earnings estimates are going to be achievable, which means that the Russell 2000

is still in an earnings revision down cycle, which means that those stocks could still continue to struggle on a relative basis. No surprise then, Mike, why you have mega cap at least getting some life once again, even with elevated rates, because in times of uncertainty, this has been the trade that you give the benefit of the doubt to. And that doesn't look to be changing anytime soon. Well, I think it may start to change soon on January 20th, two weeks from today when Trump

takes office. You're going to see a lot of executive orders. You're going to see changes in the administration, which potentially could lead to deregulation, CEOs feeling better about their businesses. You mentioned tax cuts earlier. So if you start to get investment, so there was a pent-up demand from CEOs kind of waiting to see what happens with the election. That's now behind us. And if you start to get incremental demand, if CEOs feel more confident in their business prospects because of the new, more business-friendly administration, that could really accelerate earnings for a lot of smaller cap companies, which, by the way, are really a U.S. pure play. Eighty percent of revenue for small caps come from inside the U.S. So if you're bullish on the U.S., there's no better place to be than small caps and mid-caps.

Is that why you say to diversify away from the MAG-7? Because you believe that January 20th at noon is going to be such a significant moment for the rest of the market? I would not invest based on a catalyst, say, two weeks from now. But they're the Trump's policies are clearly more beneficiary for smaller cap companies. Have the crux of many of his policies is reshoring, bringing businesses and jobs back to the U.S. That's the goal of tariffs. And if that happens, small caps are probably in the best position and mid caps to benefit from that reshoring. Now, the question is, what if the policies are inflationary? What does that do to interest rates?

And if we were to get the Fed hiking rates this year and if the yield curve were to re-invert after being inverted for two years and now steepening, that would be a tough environment for small caps well then I go back to well valuation is not that high large caps trading in very high valuations. As I mentioned small cap values trading below average so your. Your window that you're falling out is pretty low. Versus large caps your there's again very

very high expectations there. We'll leave it there. Thanks everybody appreciate it Mike we'll talk. Yeah. Adam you see you guys. We'll be back here. On the set with us. Soon as well nice to see you. We're just it there. Thanks, everybody. Appreciate it, Mike. We'll talk to you soon. Adam, you as well. Cameron will be back here on the set with us soon as well. Nice to see you. We're just getting started here. Up next, speaking of rates, former Dallas Fed President Robert Kaplan. He's standing by with what he thinks is the most important thing to the market right now. He'll tell you after the break. We're live at the New York Stock Exchange.

You're watching Closing Bell on CNBC. Welcome back. What is the most important thing to markets right now? Is it this week's jobs report? Maybe the Fed's rate cut potential. Well, what if it's neither? That's the take today from former Dallas Fed President Robert Kaplan, now vice chairman at Goldman Sachs, and he joins us live. Happy New Year. Welcome back. Happy New Year, Scott. So you make that case, right, that that is singularly the most important thing right now, the Trump administration and its policies. Why? I think monetary policy, it will take a little bit of a seat off stage and fiscal policy and other structural shifts are now center stage. That includes what we do on fiscal policy, what we do on tariffs, immigration, regulatory review, energy transition. And the rate, ironically, as we head in approaching January 20th, I'm much more interested in where the 10-year Treasury rate is than I am the Fed funds rate. And that people haven't focused as much on this. The 10-year Treasury since mid-December has backed up from

about 415 to now 462, 463. And I think that has a lot more to do with concerns about fiscal policy and supply demand of treasuries than it does about inflation or what the Fed's going to do. And so I think we just have to be aware of that. How much more I think what the 10-year backup says to me is the bond market and bond buyers are taking a wait-and-see approach and are showing reluctance to buy duration. And so you could have a sequence of actions after January 20th that could show that the new administration is going to very seriously address these dramatic fiscal deficits and try to take real action that bend the curve, in which case, I think the duration might react favorably. But I think right now the jury's out. And there's a whole sequence of decisions that will be made in the first 90 days. And the truth is, we don't know yet exactly what's going to be decided. But I think bending this

fiscal curve, we've gone from 70% debt to GDP to over 100%, and deficits last year, six and a half percent plus. I think I think the bond market is showing reluctance to go along with that and particularly showing reluctance to buy duration. People will buy the short end of the curve, but are reluctant to buy duration. Sure. You make the case that because of the structural changes that we're about to undergo, deregulation, fiscal policy, immigration, the cuts that you mentioned, that it's going to force the Fed to be much more reactive, perhaps, than it traditionally has been. Can you elaborate on that before I ask you a question related to it? Yes. So the Fed is by its nature very focused on cyclical developments. And when the structural underpinning is clear, when fiscal policy is clear,

when other elements regarding the job market, immigration and so on is clear, it's easier to judge data and judge cyclical developments. We're about to get a total reshuffling, significant reshuffling, of these underlying structural elements. And in that kind of situation, the Fed, I think, really needs to wait and let some of these developments clarify before it has a better grip on what the outlook is. And I think that's why one of the reasons, among others, why they'll pause in January and take some time to let this clarify. Aren't there risks, though, that are inherent with doing that, that, you know, while they're

waiting, maybe the economy starts to show softening, but they can't do anything about it initially because they're unsure how all of this is going to play out. I guess in some respects, it goes towards at least some criticism of the Fed in general, that they're more reactive to situations rather than being proactive and expecting certain outcomes. Well, let me reframe that. And you know from talking to me in the past, I was critical that the Fed waited a year plus too long in slowing its bond buying and beginning to raise rates. Having said that, once it shifted, I think it was very proactive and very deliberate for a couple of years in raising rates, getting the Fed funds rate to 5.25, 5.5.

At these transition points, though, where structural decisions are changing key elements of the economy, it's the right thing for the Fed to slow down, be more deliberate, let things develop. Yes, if you saw in the near term a severe weakening, the Fed would react to that. But I would guess it's far more likely that you're going to see solid job numbers, maybe not great job numbers, but solid numbers. And we've been seeing over the last number of months inflation going a little bit sideways. So I think the Fed would be pausing even if we weren't about to do this reshuffling of structural factors. But with the structural changes,

I think it adds to the reasoning for them to take their time, slow down, at a minimum skip January. Fed's not handcuffed. It'll act if you see severe weakness. But I think it would be prudent of them to let the situation clarify, and I think they will. We've discussed the relationship between the Fed chair and the president many times in the past. But given everything that you just said, how are you thinking about the possibility of significant discourse between the two from a president who has made no argument about the fact that he likes low rates, right? That's part of the business that he grew up doing. Lower rates are more beneficial to the kind of

business that he's made his living in. The Fed chair, to some extent, has his hands tied by the current situation. A little bit sticky. Inflation feels pretty good about where we are. But, you know, this is a president who's not worried about running for reelection, who wants to get specific programs through. And he wants to do it while at the same time keeping the economy really strong. So I just picture a situation that could get a little dicey from time to time. That could happen. And that's part of the Fed job. If you're chair or if I were in my old seat, you've got to analyze the situation and make

the best decisions you can, knowing you're going to criticize whatever you do. And I don't think Jay Powell will worry about the reaction, nor should he. And I think people around the FOMC table, based on everything I know, will just try to make the best decisions they can. But people out there should just understand, yeah, inflation has gone a little bit sideways, which is one reason to slow down. And then these structural shifts are another reason. And I think part of doing your job is to be a risk manager, not to be a prognosticator if you're at the Fed. You give the same advice to clients also. And I think you've got to let this situation

clarify. And that's OK. I think the biggest mistake you can make is act like you know more than you do, launch in and take further action when the situation's unclear. It'll clarify as we head past January and into the spring, and they'll act accordingly and act appropriately as becomes clear what the next step ought to be. Mr. Kaplan, we'll leave it there. I appreciate your time very much, as always. We'll see you soon. Good to talk to you, Scott. All right. That's Robert Kaplan. We do have some news breaking on medical device maker Stryker. Angelica Peebles has those details for us. Angelica. Hey, Scott, that's right. Reuters

is reporting that Stryker is in advanced talks to acquire Inari Medical. Now, that's a company that makes medical devices to treat venous diseases. And take a look at that stock right now. It's up about 25 percent. Reuters is citing people familiar with the matter, saying that this deal could be announced as soon as this week. We've reached out to the companies and we'll let you know what we hear back, Scott. Angelica, appreciate that. We'll watch the stocks. Thank you, Angelica Peebles. Up next, PIMCO's 2025 playbook. Erin Brown is back, breaking down how she's navigating the market in the months ahead. We're back on the bell just after this break.

We're back. Stocks having a pretty strong day, down three of the past four weeks, though, and weakening a little bit here as we approach the close. For more on what 2025 might hold for your money, let's welcome in PIMCO's Erin Brown with her playbook. Nice to see you. Happy New Year. Happy New Year. So are you optimistic heading into this new year? Yeah, I am optimistic. I mean, the economy is ending, you know, 2024 and going into 2025 on pretty solid footing. Earnings projections for this year look to be up 13 percent. And I actually think that it's pretty achievable as we see a broadening out of really sectors in the economy that should do well. But I think you really have to focus on those economy, those sectors rather, that are really U.S. domestically focused,

that are going to do well in a Trump 2.0 presidency. So like the utilities, like some of the financials as well, transports look interesting. They've underperformed of late and really like the power names that are really levered to AI. Staying away from those sectors that are going to be really exposed to higher tariffs because that hasn't been priced into the market as of late. What about higher rates? I mean, do you worry about that being the variable that has the potential of wrecking this story? You know, I do, especially as we get close to 5%. I think that's going to put a bit of a hindrance on further upside in equity markets. It's been really interesting to see the bifurcation of the rates market and the equities. Equities are trading 2% from their all-time highs. Rates have obviously backed up pretty considerably over the last month or so. And equities are kind of ignoring the rate move that we've seen. So it does get

harder, particularly if we see rates move up and growth starts to slow. So that's really what I'm focused on right now. At these levels, we're probably comfortable. But if we start getting close to 5%, equities are going to come under pressure. I mean, I don't know if the market's been ignoring the move in rates. Certainly, you know, over the last month, if you look at the performance of the Russell 2000s down more than 5 percent and the Dow hasn't really done much either. The only reason the S&P looks reasonable and the Nasdaq doesn't look terrible is because big tech has had a bit of a resurgence, especially of late. Right. And that's true. But you would think that big tech would be one of the sectors that would come under pressure, under higher rates, just given that it tends to be a longer duration asset.

And I think, you know, what you've seen is a lot of the unwind of the optimism in the post-Trump election period. A lot of that optimism has unwound. But that seems to be, you know, a lot of the driver of some of the moves that we've seen under the surface in equities rather than the move in higher rates. And, you know, equities, you know, still trading at pretty comfortable levels right now, haven't really seen that much of a bite yet, I think, from higher rates outside of, like you note, the smaller cap sectors, which seem to have unwound a lot of the Trump optimism. Yeah. We seem to be trying to, you know, whether it's investors, people on Wall Street, the Fed, trying to game out what the tariffs are going to mean,

which we do expect. We just don't really know the degree to which they're going to be put in place, not to mention more restrictive immigration policies. You argue that neither of those are priced into the market. Why? I think that's right. I mean, if you look at the sectors that would be most exposed to higher tariffs, they really haven't underperformed at all. They've performed fairly in line with the S&P 500. Similarly, those economies, those sectors, even those countries like Mexico, equities, that would be most exposed to higher tariffs,

you know, vis-a-vis the U.S. and Mexico, also haven't underperformed. So you've seen pretty resilient performance. Those sectors that have higher use of immigrants also haven't really underperformed. So, you know, as of today, we really haven't seen underperformance or any unwind from the Trump trades that are going to become, you know, most in the crosshairs of higher or tighter immigration and higher tariffs. Obviously, China underperformed a lot last year, but I think a lot of that is just due to the fits and starts that China have had in terms of revitalizing their economy,

and their economy continues to slow. So Chinese equities have fallen on the back of just the Chinese economy, not necessarily tighter tariffs. I think that those sectors that came under pressure in the mid part of 2018 and into 2019 are going to be hit hard, particularly as we come to the back half of this year. So I think there's going to be a little bit of a period of sort of optimism in the first half of this year. You know, you're not going to see significant moves, I think, in tariffs right away. But I think as we start moving to the back half, middle and to the back half of the year, that's when you're going to start to see some of these tariff names really come under pressure. And I'm positioning my portfolio now, no reason to be long them, going into a year where, you know, tariffs is going to be on the table as a hot topic for the

Trump administration. It's interesting. I guess that's what makes a market. you know tariffs is going to be on the table as a hot topic for the Trump administration. It's interesting. I guess that's what makes a market. You know, a couple of guests earlier in the program today saying, well, first half could be a little rocky, wobbly or dicey. And then the second half is when things could be a little bit smoother. But I suppose we shall see. Aaron, it's good to talk to you as always. Thank you. That's Aaron Brown, PIMCO. Up next, we track the biggest movers into the close today. Christina Partsenevelos is standing by for us with that. Hi, Christina.

Why shares of one AI darling could fall 25% and why crypto traders are excited about what you just talked about, Trump's return to office. I'll explain all of that after this short break. 15 out from the bell to Christina Partsenevelos once again for the stocks that she's watching. Tell us what you see. Palantir shares, they're on track for their worst day since November, down roughly almost 5% right now.

Morgan Stanley analysts argue that despite its early AI success, much of that upside is already priced into this stock. They're also saying the risk-reward ratio is skewed towards the downside. That's why they bet shares will fall to $60. It's at $76.25 right now. And meantime, Bitcoin is back above the $100,000 mark for the first time this year. $102, I should say. A few factors.

First, the January effect where fresh capital gets injected to the market. We've seen that just in the past two days, business days. And then secondly, the upcoming inauguration of Donald Trump, who has promised to grow the crypto space, and the departure of SEC Chair Gary Gensler, who led a crackdown on cryptocurrencies. And that's why you're seeing Bitcoin up. Scott.

All right. Christina, thank you. Christina Ponce-Novlos. Still ahead, Wells Fargo and Citi moving higher today following the Fed's top bank regulator resigning. What that move might mean for the rest of that space coming up. We're back on the bell after the break. We are back as we show you shares of FuboTV surging on news of a deal with Disney's Hulu Plus Live TV. Look at that stock. Unbelievable. For more on that story, don't miss a first on CNBC interview, by the way, with the CEO of Fubo TV.

That's coming up in overtime. Just a short time from now. And up next, GE Vinova hitting an all-time high today. We'll tell you what's behind that big move inside the market zone next. We are now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, the Fed's top banking regulator is stepping down. Leslie Picker on what all that means for the industry.

And Sima Modi on what's driving GE Vrnova to all-time highs today. Michael, we've taken a little bit of steam out of the market here, but NASDAQ's leading the show today. It is, and that's still how this market plays defense against macro stress, against pressure from bond yields. And that has been the story. You probably, if you were bullish coming into this year, you'd want to see more than a one-day rally on Friday being, you know, kind of coming after how washed out the average stock was coming into the day. So, you know, no grand conclusions except to say that yields at this level make the majority of the market uncomfortable. We're still on wait and see mode to see the trajectory of growth into the jobs report. I do find it interesting that NVIDIA gets this big kind of

almost forced mechanical bid as new index money comes into the market. We'll see if it comes through after CES and if it's more than just, you know, let's find the stocks that haven't moved much yet on the familiar themes. Jonathan Krinsky, BTIG, the technician over there, watching all this action like you are, says, yeah, nice rally, but not a game changer yet.

It's oversold bounce, but you're getting into some resistance. Exactly. And so I think pretty much everybody who looks at the whole chart structure says 6,100, is basically the all time highs from early December. It looks like it might on on the first revisit of it be a bit of a tough ceiling to crack through. That's just because it seemed like this culmination point. I don't think that we're really moving that dramatically on headlines, but it doesn't help when you have the equity futures get a little bit of a quick boost off of this headline that we might have a moderate tariff approach.

President-elect Trump comes out and kind of contradicts it. And it's kind of like, oh, here we are again, where we have to actually surf the headlines and worry about the kind of unwelcome policy moves coming before the stuff that we're wanting to price in. Yeah, to play this game again. the kind of unwelcome policy moves coming before the stuff that we were wanting to price in. Yeah, to play this game again. Leslie Picker is following news of the banking industry's top regulator stepping down. Right, Les? Yeah, so, Scott, bank stocks gaining earlier on this news that Michael Barr would soon step down from his post as vice chair of supervision, although these names are kind of losing steam with the broader markets later in today's session. While some had speculated that President-elect Trump would seek to fire Barr,

his resignation was unexpected. The new Basel III capital rules were the brainchild of Barr and faced fierce pushback from the industry and beyond. Stiefel saying in a note today that the news means that the Basel III endgame proposal is, quote, dead. The firm's chief Washington strategist, Brian Gardner, wrote that Barr's replacement, which he believes will be Fed Governor Michelle Bowman, may propose new capital rules, but they would likely be neutral. Bowman voted against the Basel III proposal.

Additional upside for the industry may include quicker M&A process and more favorable maximum debit interchange fees, Stiefel says. Scott. Leslie, thank you. That is Leslie Picker. Seema, tell us about GE Vrnova today. Well, Scott, Microsoft promised to invest about $80 billion in data centers this year. That's fueling shares of GE Vrnova, which has become this key supplier of gas power and operator of smart grids. It's seen in the industry as an important partner in the build-out of data centers, which require a whole lot of power. It's the main reason GE Venova has been accelerating

its timeline to increase gas turbine orders and capacity overall, a key topic at the company's investor day in December. GE Venova currently forecasting about 23 gigawatts of new orders in the next three years, which Wells Fargo analysts call, quote, conservative. Shares at a new high today, trading, though, in line with Wall Street's average price target of $370. Scott. All right. Good stuff, Seema. Thank you. That's Seema Modi. Michael, I'm looking at NVIDIA here as we approach the close today because 148.88. Above that would be a new record closing high. We are at 149. So we are right there. A handful of hours before Jensen Wang gives his keynote at CES in Las Vegas, which has been a stock moving event. It has. And, you know, a little bit of front running. It's interesting. I mean, you've had dozens of new record highs in the S&P 500 since, you know, NVIDIA decisively went up into the 140s actually cracked above 140 in June of last year so the big question is did the market lose its ability to keep rallying on the basically the same observations in the same news about the AI investment story or you know is this just kind of letting fundamentals catch up to the valuation valuation itself on in itself, in NVIDIA terms, doesn't look super demanding anymore.

It's like in the mid-30s, forward multiple, not that different from Microsoft and Apple. So it will be interesting. I think that's a test of the market's willingness to believe that there really is an aggressive new upline here. We'll see if it gets that record-closing high. It's still above that level. It hasn't closed above $150, by the way, since November. So it looks to be right there as well. That's all the press.

We'll see you tomorrow in the OT with Morgan and John.