Closing Bell - Closing Bell Overtime: Breaking Down Powell’s Testimony; Vistra CEO On Stock’s Wild Run YTD 7/9/24

Episode Date: July 9, 2024

Investors closely watching Fed Chair Jay Powell’s first day of testimony on Capital Hill. Rockefeller International’s Ruchir Sharma breaks down the major takeaways for investors while Goldman’s Lindsay Rosner talks the impact in the fixed-income market. Vistra is the third-best performing stock in the S&P 500 so far this year; CEO Jim Burke talks the AI demand story and what else is driving the company’s growth. Plus, our Phil LeBeau on the wild swings in used car prices and Julia Boorstin is in in Sun Valley tracking moves in the media sector.

Well, another record close for the Nasdaq, led in part by Tesla and NVIDIA, and plenty of action under the surface. We have Tesla extending its win streak to 10 days. You've got the banks getting a boost ahead of earnings. That's a scorecard on Wall Street. The action, though, is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Port. And coming up this hour, Rockefeller International's Rashir Sharma is going to join us with his take on the market highs in the parts of the world he's investing in now.

Plus, we will talk to the CEO of one of the surprise top performers in the S&P 500 this year, Vistacorp. Vistacorp, the energy company that has jumped more than 140 percent as an under-the-radar AI play. We will talk about the stock's big run and if AI will continue to be a strong tailwind for the power industry. But let's begin with our market panel. The Nasdaq setting a record. The S&P 500, we're still waiting for that to settle out. But it looks like we may have gotten a record there as well, albeit just barely. Vital Knowledge founder Adam Krzysztofulian, Aerial Investments Vice Chairman Charlie Babrynskoy. Join us now. It's great to have you both here. Adam, I'm going to start with you because we saw big tech lead to another record close for the Nasdaq here today. But we had Powell on the hill. And of course,

we're sitting on our hands ahead of key inflation data and bank earnings kicking us off with a season later this week. Yeah. So I think with Powell, and if you go back over the last week, we've had a lot of kind of monetary macro data points, all of which strengthen the case for a September cut. And so I think, you know, the market's already pricing that in. It's pricing a September cut and then 50 basis points in total for the year. You know, Powell sounds increasingly confident about inflation. The disinflationary process is back on track. I think what's most notable from Fed communications lately, though, is the tone around the employment market, where they seem to be a lot more concerned, not panicked, but definitely more concerned

about some of the trends that are occurring beneath the surface in labor markets. And you saw this on Friday within the jobs report for June, where private sector employment creation definitely cooled pretty significantly. You're seeing the jolt numbers come down well after highs. And I think that started to kind of seep into the Fed commentary. And that's something he talked a lot about today in the testimony. It was mentioned in the minutes last week. And so I think, you know, the monetary policy front, it's moving in the right direction for bulls. However, you know, you do have a growth issue that equities need to reckon with. You are seeing that play up beneath the surface. Like you said, tech is trading very well. It's doing a lot of heavy lifting for the S&P, but beneath the

surface, you know, the Russell continues to trade very poorly. A lot of the key cyclical groups, basic resources, materials, et cetera, banks did very well today. But looking back over the last couple of weeks, they've been underperforming as well. So you definitely are seeing the market react, I think, to some of these growth headwinds that are starting to become more prominent. Yeah. And case in point around job cuts, even just today, the most recent example, UiPath falling after announcing a 10 percent global workforce reduction as we start to see that play out perhaps increasingly as well. Something we'll have to watch as earnings season gets underway. Charlie, one of the outperformers today was Paramount, finished

the day up 3%. Ariel is, I believe, the ninth largest shareholder. Now that we have a deal for it to be sold, a rather complex deal, your thoughts, do you stay in the name? Yeah, we think there's a lot of value at Paramount and we don't think, frankly, that it's being reflected in the offer and the deal that was cut. We're disappointed. We've been shareholders in Paramount for a long time. I've talked to you and Kelly and Wilford and others about this name for a long time, and so we really think there's real value. The streaming business is growing.

They have a spectacular library, Mission Impossible, The Godfather, wonderful intellectual property, and this deal just doesn't reflect that. We're being offered basically a blended package worth something like $12.50, and that just doesn't reflect the value here. This is complicated stuff, but there is a concept that once a company has decided to sell itself, which it did here, it has to maximize value for all shareholders. And while I want to be careful in what I say here, we think this deal was designed to maximize the value for one shareholder. OK, I think we know what you're talking about there. More broadly on the subject of value, Charlie, I want to play you something, something as Watham Oteran said on CNBC's air last week. Here it is.

Before we dismiss these as risky tech companies, these are the money machines in this market. I think in many ways these have become the value stocks for investors who care about earnings and cash flows because these are the companies that are delivering those earnings and cash flows. Charlie, you've been feeling it, so you know better than anybody the way growth has been clobbering value in this market for the past, what, 10, 15 years. So how do you define value in this market? How do you draw the line? And which tech stocks do you consider to be value stocks right now? They're not many, John.

Frankly, these are very good companies. Nobody's denying that Apple and Microsoft and NVIDIA are good companies. The question is just, are they good stocks? And the stock multiples and the price you're paying of those cash flows are, in our opinion, inflated. Now, viewers of your show will note that I have said that for a while now, and these stocks continue to perform very well. It is hard to call a top in a momentum part of the market, and boy, do we have momentum

in these names. But these are not value stocks. They are stocks that are trading as if this growth and performance is going to last for a long time. And the history of growth stocks is the nifty-fifty look impregnable until they don't. Well, these have actually been growing for a long time, though, which some would argue. Adam, as we look further into the week, it seems to me we got tomorrow, but then we've got CPI and we get a bit of a micro consumer read with Pepsi, Conagra and Delta Thursday morning

reporting even ahead of the banks. How much do you expect to impact the market between now and Thursday? Basically, is there anything tomorrow that you see that you're looking to for signal? Not particularly. We'll get Powell before the House, but his prepared commentary will be the same, I doubt. He says anything different on the monetary front. So like you said, Thursday, we get the official start of the Q2 season with Delta. But it's Friday, the Friday names that I think investors are really looking forward to with the banks,

where you're going to get a lot insight into a lot of areas of the economy, just loan growth, credit quality, you know, et cetera. And so I think it's kind of the pivot is now on the CPI on Thursday and then those earnings reports, bank reports on Friday. And regarding the CPI, you are expected to see a pretty healthy dose of disinflation on the headline number with the core kind of holding steady. And, you know, Powell was pretty clear that if we get inflation numbers consistent with expectations, the threshold has been met for the most part, or it's on the brink of being met, for them to commence with recutting. This is going to be, though, a very gradual and modest easing cycle compared to the prior two, and that's something to keep in mind.

They're not going to move, absent some type of catastrophe, they're not going to be moving as aggressively as they did with COVID and as they did after the financial crisis. It's going to be kind of a much more 90s-esque type of easing move where they move, you know, again, 50, 75 basis points over several quarters and monitor data to see if inflation is still moving in the right direction. Normalization. We will see. Adam Christofoli and Charlie Babrinskoy, thanks for joining us with all the major averages. Basically hugging the flatline today, but still record closes, albeit barely, for the NASDAQ and the S&P. We have breaking news on Amazon. Kate Rooney has the details. Kate. Hey there, Morgan. Amazon just announcing its latest

version of a custom-designed chip. This is within AWS, Amazon Web Services. It's the fourth generation of an existing semiconductor called Graviton. These are CPUs, so specifically designed for more everyday general-purpose computing. So think of things like running websites and data centers, for example. These are not those AI chips known as GPUs. Executives at Amazon say this newer version brings 30% better performance versus some of the previous generations. They say it uses 60% less energy to process the same workloads.

If you compare that with an Intel x86 processor, which is what the vast majority of customers use at this point, all of that, they say, helps keep costs down. Amazon is partnering with ARM for the chip architecture, while AWS is working on its own in-house chips. It still partners with Intel and AMD on CPUs. I asked Dave Brown, AWS's VP of Compute and Networking Services, about that balance. You might call this co-opetition. He does say that those partnerships continue to get deeper and the

customers just want choice. So when the customer comes to AWS, they're able to look at, you know, do they want to use an Intel processor, an AMD processor, an NVIDIA accelerator, or would they want to look at one of the custom ones that AWS has? And they typically test them all, and they will find the one that works absolutely best for their application. And I think that choice is so important for customers, and it allows them to find the one that not only gives them the right performance for what they need, but also at the right price point. And so we do think that choice is a winning strategy. And guys, Graviton is still a relatively small portion of the chips that AWS customers use right now. They still mostly rely on Intel and AMD, but it is seen as an area with a lot of potential upside within AWS. Back over to you. Kate, in the grocery store of IT, this is like

buying the store brand milk or mac and cheese, right? I mean, you get a better value. And if the quality is there, it can also be more profitable for the hyperscaler that's providing the chip. Yeah, I like that analogy. It's sort of the Kirkland brand, right? And so they're making a trade off. I mean, the big picture that executives would say is that it's keeping costs down and that's what AWS customers want in the long run. But it is sort of an experiment at this point. It's a smaller portion of the chips that most AWS customers are using. And so they pointed out it was two million chips out there, about 50,000 customers. It sounds like a big scale, but if you put it in context of overall AWS and how many customers are out there, it is still

relatively small. So it's still sort of unproven, but it is a big bet. I mean, this is one side of the business, CPUs and sort of the general computing, but then there are the AI chips that they've got out there. I know you talked to Matt Garman about this with Inferentia and Tranium and the other side of the chip side of this coin, but they really, along with other big tech companies, are making a play at in-house chips and really trying to diversify here and sort of trying to start the balance of still partnering with Intel and AMD, maintaining those relationships, but building their own competitive chips in-house. It's sort of the same dynamic we see with AI as well and what they do with Bedrock. Still going to stock that Kraft mac and cheese too.

Exactly. You got to have it all. Annie's and Kraft. You got to have both. Thank you. And we're going to talk much more about AI ahead when we're joined by the CEO of Vistra, one of the big winners cashing in on AI's energy needs. Now let's turn to senior markets commentator Mike Santoli for a look at some disinflationary forces in parts of the economy. Mike. Yeah, John, and reflected even in some of the strongest parts of the stock market. Take a look here at shares of Costco relative to Chipotle here on a one year basis. See, they were very, very closely linked and extremely strong, massive outperformers as category killers in their own respective sectors. And then you see this real dive in Chipotle relative to Costco and on an absolute basis.

That pretty much dates to when the other fast food competitors started to get aggressive on their value price menus. Obviously, Chipotle, much more of a higher price leader, able to get pricing power, whereas Costco within retail is still kind of the value name. They basically capped their margins and they're still a place to go for keeping prices contained. So that's one way to at least visualize what's going on through segments of the economy. Also, take a look at Copart, which is a big auction house of used vehicles on the wholesale level, as well as the homebuilders sector right here. So you see they peaked months ago and it just sort of shows general pricing erosion when it comes to new homes. A little bit of slippage in the price, but obviously it's also where rates have have become a little bit more restrictive on activity right there. I could also point to Progressive, a proxy for auto insurance rates.

That stock has kind of flattened out over the last few months after a huge run, too. So kind of what the Fed wants to see, maybe not necessarily what all shareholders want to see, John. Yeah, Mike, maybe with Kate Rooney, I should have said Kirkland brand specifically when I was talking. And here we're talking about the value, right? Whether we're talking about people opting for used, how much they're having to pay for the used cars. Is that where we would expect to see in this upcoming earnings season, those disinflationary forces at work in the economy is in the trade downs and in the strengths, perhaps, of the store brands? Yeah, I think so. And in fact, you started to even hear it in last quarter's commentary from a lot of consumer company managements that they're back to pushing for volume as opposed to just maximizing pricing and dealing with lower volume. So in a weird way, it was a there was this couple of year period where

these companies thought that the rules had changed and, you know, two decades of basically disinflationary forces and the attempt to kind of maximize efficiency had ended. And now it seems like maybe they're having to go back to the older playbook for now, Morgan. All right. Well, we'll see a little bit later this hour. Mike Santoli, thank you. After the break, Rishir Sharma from Rockefeller International joins us with his thoughts on the market records and his take on the best parts of the world to invest in right now. And later, Goldman Sachs makes the case for bonds. We're going to talk to the firm's fixed income expert about why this could be the moment for bond investors. We'll be right back.

We have a news alert on Chipotle, which had a rough day, by the way, down about 3.5%. Kate Rogers has the details. Kate. Hey there, John. Yeah, and the stock looks to be slightly lower on this news. Chipotle announcing its current CFO, Jack Hartung, will be retiring effective March 31st, 2025. So next year, he's been CFO since 2002, and it was his decision, the statement says, to retire. Adam Reimer, who has been with CMG for 15 years, will become CFO on January 1st of 2025. He's currently the company's VP of Finance. And the statement says here that Hartung will also remain on board to ensure a smooth transition here. So a management change for Chipotle's CFO next year in 2025.

And as you can see, the stock is lower just under half a percent. Guys, back over to you. Wow, 2002. That's quite a tenure. Long time, exactly. All right. Kate Rogers, thank you. Well, the NATO summit kicking off in Washington today, marking the 75th anniversary of the alliance. Ahead of it, TD Cowan highlighted four key themes to watch. The election optics for President Biden hosting NATO leaders.

Financial and military pledges for Ukraine with more orders for RTX made Patriot missile defenses and other systems expected to be announced, a path with what's expected to be very strong language for Ukraine's future NATO membership, and increased ties with Indo-Pacific partners, which could entail tapping those countries' defense industrial bases to help replenish global stockpiles. But the summit also highlights the global surge in military spending that manifested in large part after Russia's invasion of Ukraine. While many of NATO's members historically failed to meet the alliance's target of allocating 2% of GDP to military spending, this year, a record 23 of 32 countries will do it. That's up from just six in 2021. Poland and new member Sweden are among the biggest spenders as a percentage of GDP. Per the Atlantic Council, the war in Ukraine has prompted an unprecedented 18 percent increase in defense spending this year among NATO allies across Europe and Canada. John, we don't always talk about it as such, but when you see big defense programs, they

are, in a sense, their own version of fiscal stimulus and certainly have a direct contribution to economic activity. Interesting. OK, we'll keep an eye on that, of course. Now, the NATO summit comes after a surprising week of election results from France and the UK. So how should investors be thinking about geopolitics, elections and your money? Joining us now is Rashir Sharma from Rockefeller International, is also the author of the book What Went Wrong with Capitalism.

Rashir, thanks for being with us. So let me start with international stocks in general, looking at the All Country World X U.S. Index. Done pretty well this year, just not compared to the U.S. Given that growth is slowing in the U.S., should investors be looking more at international stocks? Exactly. I think that the U.S. economy is slowing. This is going to be the

second quarter in a row where growth comes in well below 2 percent. And I think that this trend is now seeming that it's going to go on. I won't be surprised if the U.S. economy comes to a virtual standstill in the next six months or so as the stimulus, which has, I think, kept growth artificially high, dries up. And I suspect that's what's going on just now. Whereas in the rest of the world, they were much less reliant on the stimulus. And I think that we're seeing that the breadth of the global expansion is increasing out here. So logically, yes, we should be seeing international investing make some sort of a comeback. The issue, of course, is that investors currently

are in the grip of the AI mania. So as long as that goes on, everything else gets shaded. So it's a very interesting comparison that the U.S. is outperforming, but it's almost all due to the mega cap tech stocks, particularly stocks like Nvidia. But on an equal weighted basis, if you look at the U.S. market or the European markets or emerging markets, the performance is pretty close. So I think that it's just that one sector that's keeping the U.S. outperformance going at this stage. So I think India is maybe the one major international market that's been a bull market in general on an equal weighted basis. But at the same time,

we've got Modi hugging Putin and very complicated global dynamics happening. So how safe is it to invest in some of these markets and even in emerging markets with so much geopolitical strife? Yeah, I think that India is a completely unique case on its own. As you know, it's the most expensive market in the world today. It's the one country, I would say, which is having a true bull market, even compared to the U.S., as you point out, that the breadth of the Indian bull market is what you typically see in bull markets, that everything is rising there with mid to small caps doing better than even the large caps. But I would not say that geopolitics is a major risk for investing in emerging markets

as such. In fact, if anything, I think we will look back in history at the time when the U.S. imposed sanctions on Russia in an unprecedented way by weaponizing the dollar, that that really is set in motion where countries are trying to find their own alliances, trying to reduce their dependence on the U.S US dollar. And that's something which is continuing and why the price of gold is doing so well with central banks around the world buying gold in record numbers. So I think that emerging markets at this stage outside of India, which is obviously very expensive, are extremely cheap. But this is a central issue which we are dealing with in the US. And I think we're dealing with global investing, that we can go on talking about markets being

cheap. The central issue is, is mean reversion dead or is it just dormant? I hope it's just dormant because if mean reversion is truly dead, this is going to be a pretty boring market where just the same few stocks keep piling on and keep doing well in a way that's never happened before. And I think as some sort of mean reversion returns, some of these emerging markets are going to do well. And we're seeing some signs of that already come back, particularly as the dollar has stopped appreciating after the great run that it's had. OK, I'm going to ask you the same question I asked Afsaneh Beschloss from Rock Creek on our show yesterday, and that is we've just come through, we just talked about NATO, so Europe's in focus from a geopolitical standpoint today,

but we did just come through the U.K. elections. We just came through this French election as well. It does seem like there's this theme out there of voters pushing against the establishment or the incumbents and looking for policy changes. Is Europe investable right now? Yeah, I'd say that as far as Europe's concerned, you know, like it's a very differentiated picture. So I think that the French election tells you just how disappointing things are in Europe, where in France, the best outcome investors hope for is gridlock, because there's going to be change in France. It seems to be it's going to be for the worse, given the fact that it already has very high

government spending as a share of GDP. And I think that it's so difficult to top it up when a government spending the share of GDP is already so high. So I think that as far as Europe's concerned, there's a cyclical story in Europe, which is that after the very depressed year that it had last year, we're seeing some sort of a revival in consumer spending. But on a long-term basis, if I were to pick a geography, I still think it's emerging markets, because emerging markets have both value and growth in terms of growth, meaning economic growth. Europe has value, but very little growth in the long term.

So I think we have to distinguish these two things that, yes, this year in Europe, there's a cyclical pickup. So I think Europe does OK. But over the long term, emerging markets are a better geography because they're both value and growth. U.S. has some growth, but obviously it's so expensive compared to all these other regions. OK. And we will keep our eye on gold, as you just highlighted, and the dollar in light of but obviously it's so expensive compared to all these other regions. Okay. And we will keep our eye on gold as you just highlighted and the dollar in light of this conversation as well. Rasheer Sharma, thanks for joining us. Thank you.

Up next, we're gonna talk to the CEO of one of the big AI winners of the year, Texas-based electricity company, power company, Vistra, which has been riding the wave of a surge in AI power needs. Stay with us. Welcome back to Overtime. Shares of power generation company Vistra are up 137 percent this year due to increased demand for energy in the data centers powering the AI revolution. Only two, two S&P 500 companies, Supermicro and NVIDIA, are outpacing Vistra year to date.

Joining us now in an exclusive interview is Vistra CEO Jim Burke, who's here on set with us. Welcome. Thank you. Thank you, Morgan, for having me. Have you been surprised by the move in the stock this year? And are investors right to be thinking about Vistra as this AI play or AI infrastructure power play? You know, I think we are always surprised when you see a move the size that we've seen, but I think it's been a long time building. For seven years, we've been growing our company with this electrification theme in mind. And so we've tripled revenues. We've tripled the

earnings power. That's all before this latest wave of AI interest. So I think once we got included in the S&P 400 mid-cap last fall and then in the S&P 500 this May, all of a sudden we became on a radar screen. But our people have been working at this for a long time. So you were growing even before we started talking about or started seeing this massive AI data center build out. That being said, hyperscalers, AI startups, NVIDIAs, are these companies that you're working with right now? It is a good chunk of my day is to have conversations with these large customers because everybody we serve, we serve nearly 5 million homes and businesses they all have choice of provider so they're talking to us they're talking to other

people and they need their needs met well we have assets we have 41,000 megawatts and what that means is we have enough power to power 20 million homes across the United States so folks are coming to Fistra and they're saying, I need a large scale data center and I need power and I need it quickly. And because we're a competitive company, we can move quickly. And so we're having lots of conversations with all these biggest customers. And obviously there's plenty of work to do for everybody, but our people are really excited about this opportunity. How do you capitalize on this moment and maybe the currency of your stock right now to make this expand beyond a moment,

whether it's through acquisitions, whether it's through spinning up new businesses in consulting or other areas that allow you to grow along with the AI phenomenon? Yeah, it's a great question. In fact, we just completed in March the acquisition of three nuclear sites, two in Ohio, one in Pennsylvania.

So we have a large fleet of nuclear. We also have a very large fleet of natural gas fired units. Those are actually attracting interest as well because those are flexible units. I think what we have focused on is dispatchable power, which is the power you can turn on that meets the needs of customers when they need it. So we're always open to new acquisitions. We are always mindful, though, of the fact that you've got to run a great operation, and these acquisitions come if the value is right. If the value is not right, we have a great business to run every day. And the one thing we know is electricity is essential to everyday life, And people are electrifying everything. It's not simply about AI.

That is the last burst of activity. And whether we build organically to support it or acquire to support it or just use our existing assets will depend on the customer need. You're unique being three quarters nuclear and nat gas, mostly nat gas right now. How much, given the constraints that are out there regulation-wise, are you going to be able to expand particularly in nuclear? Yeah, look, I think nuclear is really about how fast does the technology evolve. I think what the markets have learned over time, and certainly large customers understand, is 24 by 7 power is not provided by the current fleet of renewable resources.

The renewables are valuable, but if you need power 24-7 and you want a low carbon or no carbon footprint, nuclear has to be part of that equation. There's over 20 companies pursuing new technologies in nuclear, both large scale and small scale. But they've got to get through the licensing and they've got to get to a proof of concept that investors are willing to bet on that technology. I expect that if we can find the customer arrangements, particularly these large technology companies, we would love to partner with the nuclear technology companies to put a package together so that we can meet their long-term needs. So whether it's the AI build-out or electrification of everything, the fact that we're coming out of a high inflation cycle that really cast a light on energy and power generation and the costs associated with that,

or even just national security implications? You think about Russia invading Ukraine and what that did to energy prices globally. How quickly can you bring power online, whether it's nuclear or other? And have you found that there is more appetite from regulators, from governments to be able to move or work with you to do it? There's definitely concern about how quickly can new resources come on to the electric grid. Keep in mind, though, we're retiring resources at the same time, particularly coal resources. The environmental regulations are suggesting there's even more coal to retire across the country. So we not only have to meet the growth of electric demand, we have to meet the replacement of some of these resources that are currently out there.

Having existing sites, we have over 80 sites already connected to the transmission system. Those are the first places to start because you can move the quickest at those sites. So if you have access to sites, you have access to water, you have land, you can bring new resources to market more quickly. Jim Burke of Vistra, thanks for joining us. Great to have you here on set. Great to have you. Thank you.

Well, time for a CNBC News Update now with Pippa Stevens. Pippa. Hey, John. Nikki Haley is releasing her 97 delegates so they can back Donald Trump at next week's Republican convention in Milwaukee. Haley said the convention was a time for Republican unity and encouraged her delegates to support Trump. According to her spokesperson, she was not invited to the convention. Treasury Secretary Janet Yellen said her department would continue with its rulemaking efforts

despite the Supreme Court's Chevron decision. On Capitol Hill today, she said she had concerns about the decision to overturn a 40-year legal standard that allowed federal agencies to interpret laws passed by Congress. Yellen said the department's studying its implications, but was not aware of any restrictions so far. And one of the rarest Olympic torches ever made is currently up for bid at the Boston-based RR Auctions. Bidding for the 1960 Squaw Valley Winter Olympic Torch is already over $137,000,

and the online auction house says it's worth more than half a million. Bidding for the torch and other memorabilia runs through July 18th. I'm sure that Paris hype is helping things here. Yeah, the timing cannot be denied. Pippa Stevens, thank you. Well, the European-built Ariane 6 rocket making its long-awaited maiden flight, lifting off from French Guiana at 3 p.m. Eastern, so just a short while ago, returning launch capability to the European continent and offering the region an alternative to Elon Musk's SpaceX, which dominates the global launch industry.

Standing over 200 feet tall, the rocket is a combined roughly $4.5 billion effort overseen by the European Space Agency, ESA, and built by Ariane Group, which is an Airbus-Safran joint venture. Today's inaugural flight is a demo mission for the European Space Agency. It's carrying 11 small satellites and spacecraft on a flight that will last four hours. Notably, like its predecessors and unlike SpaceX and some of the other companies that are developing new rockets, Arianne 6 is not reusable. You can check out Manifest Space, my podcast, for more on space, industry and

coverage. But when we come back, Mike Santoli looks at tech's dominance in the market and how the upcoming earnings season could shift the narrative. And later, we're going to talk to Goldman's co-head of fixed income investing about why she says it's time to invest in bonds when overtime returns. Welcome back. Tech stocks have had a massive run, but will earnings season change the market dynamics? Let's ask Mike Santoli. Mike. Well, Morgan, you know, the huge outperformance of the Nasdaq 100 relative to the S&P 500 has It's been going on for quite a while, but it really does seem in this latest phase linked to the fact that NASDAQ 100 companies

are also delivering more than their proportional share of total S&P 500 earnings. That's what this chart from Bank of America suggests. They've been moving in locks up. The orange line is the relative index performance. The blue line is the percentage of S&P earnings accounted for by NASDAQ 100 companies. You see here, that's the tech bubble.

Back in the late 90s, you had a massive disconnect and a very much less mature NASDAQ 100. Percentage of S&P earnings accounted for by Nasdaq 100 companies. You see here, that's the tech bubble. Back in the late 90s, you had a massive disconnect and a very much less mature Nasdaq 100. And also even in the pandemic. So the question now is, earnings expectations hold in the coming quarters. You're going to have a broadening out. In other words, the tech stocks are going to have less of an earnings growth advantage relative to all the rest of the companies. And so will that create a relative performance shift? That's the big question. I think a lot of active portfolio managers are wishing that to be the case. Whether that happens in the context of a still rising index or some kind of a consolidation would be a relevant question. But that is where we are

right now when the broadening of the fundamentals should be taking hold, guys. This is a really fascinating chart to me, Mike, because it would suggest that we're actually, what we're seeing, the dynamics in the market and maybe even some of that narrowness is a function of actual investing from a fundamental standpoint. I would also wonder how much of that chart, especially more recently with the line going parabolic, that blue line, how much of that is just NVIDIA alone? Yeah, a huge percentage of at least the incremental growth, definitely. So, yeah, that's definitely the conclusion. It's been fundamentally based, or as I've been saying, there's a scarcity of fundamental conviction out there,

and it's mostly concentrated in these names. NASDAQ 100 to 28 times forward earnings, S&P at 21. That accounts for that difference in perceived reliability of growth. All right, Mike, thank you. Meantime, bonds have more fun. Up next, Goldman Sachs co-head of multi-asset fixed income investing lays out the case for why fixed income could go on a bond ambition tour and be a better bet than stocks for the second half of the year. We'll be right back. welcome back more breaking news on amazon let's get back to kate rooney kate hey morgan so amazon's founder and former ceo jeff bezos plans to sell another 865 3 rather 0.5 million shares that's according to a million dollars worth of shares that's the dollar amount according to a million dollars worth of shares. That's the dollar amount, according to a regulatory filing that just came out.

It comes after Bezos filed last week saying that he planned to sell another 25 million dollars worth of shares or 25 million shares worth roughly five billion dollars. Amazon's last filing indicated that Bezos had adopted what's known as a 10B51 plan, a stock sale plan that allows him to sell these shares through the end of 2025. Bezos has been funding some private endeavors like Blue Origin, for example. He's also been giving shares of Amazon as part of his philanthropy efforts. Guys, back over to you. And with the stock touching all-time highs, I guess it's not a bad time either. Kate, thanks. Exactly.

Meantime, yields on the 10-year rising during Fed Chair Jay Powell's testimony today. Joining us now is Lindsay Rosner. She is Goldman Sachs Asset Management Multi-Asset Fixed Income Investing Co-Head. Lindsay, welcome. So Bill Gross has been saying total returns dead. James Bianco disagrees. Who's right? I've got to say I disagree with it being dead as well.

As you said in the lead-in before, fixed income, bonds, they're fun. Now is the time for fixed income. And the reason why is because monetary policy is going to be wins at the sales. And there's actually real yields to harvest in fixed income right now. So not dead at all, very much alive. How does tax strategy factor into how you're looking at the space and really the questions that investors, particularly those in higher tax brackets, might have about it now? Sure. So there are an array of products that are more tax aware than others. You can think about investing in fixed income on an after-tax basis or a pre-tax basis. But there are a lot of

options from a tax perspective, tax advantaged in the muni space. But we have also a lot of clients that are not looking for us to do a tax aware strategy. There's a lot of opportunities in fixed income and there's something for everyone. There's a lot of chatter that one of the big trades that we can potentially see materialize here through the second half of the year and maybe beyond is going to be the steepening of the treasury yield curve. Want to get your thoughts on that and whether this is something to position into? Absolutely. We are positioned for a curve steepener. And the idea is, is that the front end of the curve is likely to come lower and yields on the back end of the curve, call it 10 year plus, can stay put or maybe even move a little bit higher. And the reasoning for that is twofold. One, if you think about just lending to a friend, you are going to lend to them out

into the future at a rate that compensates you for what their fiscal balance sheet looks like. And as we know, right now, with the election coming up, neither candidate is talking about any kind of fiscal constraint or restraint. So as a result, from a fiscal perspective, there's a very high likelihood that there's going to be more issuance in Treasuries going forward, and that means that there will probably be higher yields or need for term premium to compensate you, to lend to the government further out the curve for a longer duration. And in the front end of the curve,

today was very interesting. We heard a very balanced Powell. But I think what was really important was we heard from Powell, remember, it's a dual mandate. They're looking, yes, at price stability, but they're also very much looking at the labor market. And the labor market is starting to show some signs of softness. Now, we think it's a normalization. We don't think it's anything to be worried about. But the Fed is looking at both things. And therefore, we very much think that a cut is on the horizon as soon as September. And so if those cuts happen, you can very much think about the front end of that curve, that those cuts are going to translate through pretty quickly. So do credit spreads stay this tight? Well, they can if the economy continues to grow at trend and stay with a consumer as robust as

it's been. It is possible that if we see some volatility, we could have some spread widening from here. But really what pushes spreads very wide would be default risk, recession risk. Those are just not things we're seeing. And back to monetary policy, we've got four central banks across developed markets already cutting. We think the Fed is very likely to cut soon. That's actually good for total return back to the dead or alive conversation we started with. We just went full circle. Lindsay Rosner, thanks for joining us. Thanks. Well, the cost to buy a new car may be stabilizing, but previously owned EV prices keep plunging. What that could mean for the auto industry and inflation, straight ahead.

And speaking of EVs, check out shares of Tesla now on a 10-day winning streak. Stock rallying more than 40% over that span of more than 3.5% today. We'll be right back. Welcome back to Overtime. New data suggests the big decline in used car prices may finally be stabilizing. Philip Bowe has the details for us. Hi, Phil. Hi, Morgan.

This is the normalization of the used car market, which means we're seeing year-over-year declines that are still substantial, but month-to-month, you can see that the pace of the drop in prices, it's really starting to slow down. Cox Automotive says that in June, it was down 10% year-over-year, but just 2.2% compared to May. And when you look at EVs, that's the segment where you're seeing huge declines. Yes, it's not a big part of the market volume-wise, but if you're looking for a used EV, this is the time down 16.6% compared to the same time last year, 6.5% compared to May. Vehicles coming off lease, the number of them is slowing down. There's a three-year window, and it's going to be dropping considerably in the second half of this year. That means that the supply of vehicles is going to be a little bit constricted in the second half of this year. That will help firm pricing a little bit. As you take a look at some of the

dealership stocks here, the thing to keep in mind here is that this is the normalization that everybody has expected, guys. We may see a little bit more decline over the next couple of months, but don't be surprised by the end of the year if you see a slight, I mean a very slight, 1% increase month over month. So this is what the industry has been expecting for some time. All right. Phil LeBeau, thank you. Well, wheeling and dealing of a different sort could be on the agenda this week as some of the biggest names in media and tech descend on Sun Valley, Idaho. Our Julia Borson is there. Julia. That's right, John. The Allen & Co. Conference is back in Sun Valley and the moguls and tech

titans are starting to arrive just in the last few hours. We'll have the hot topics for this high profile gathering that's coming up after the break. Welcome back to Overtime. Streaming and sports rights taking center stage in Sun Valley, Idaho, as the annual Allen & Co. Conference gets set to kick off. Julia Boorstin is there with more on why this event is so important. Julia? Well, John, the annual conference here in Sun Valley, Idaho, convenes media moguls, tech titans, and deep-pocketed investors. And it comes at a time of massive uncertainty.

At this conference known for originating media mega-deals, discussions will surely revolve around the just-announced merger of Paramount Global and Skydance, with Paramount's controlling shareholder Sherry Redstone here arriving earlier today, as well as other media moguls, including Disney CEO Bob Iger and Warner Brothers Discovery CEO David Zaslav, who we just spoke to about the M&A landscape. I think over probably over the next year or two, you're going to see some real consolidation. Now, whether that happens with companies buying each other or jointly going after streaming together, we have a Disney bundle that we're

launching this summer, which will be Disney Plus, Hulu, and Max. It's a really compelling product, so we're excited about that. AI is also very much in focus and its impact on the economy. So far, we've seen OpenAI Chair Brett Taylor with OpenAI Sam Altman also on this list. We have a great lineup of guests all week starting tomorrow morning at Squawk Box with SoFi CEO Anthony Noto. And then, John, many more interviews. Back over to you. Yeah, we're looking forward to it. It sounded like one of those private jets was flying overhead as you were talking to us there, too, since we know they all descend on the area. Just to go back to the M&A piece of this, how much is talk of the election and what that could mean in terms of regulatory dynamics looking to 2025 and beyond as you do

have an industry that's looking to consolidate? How much is that going to matter here this year? I expect there to be a lot of talk about the election and what this next administration will mean for business. I do have to point out that there are five governors on the attendee list, and three of them are Democratic governors who've been mentioned as even potential replacements for Biden on the next Democratic ticket. Were he to step down? Gretchen Whitmer from Michigan being one of them. So I think there's a lot of conversation here about what's going to happen with this next election and what it does mean for the business ecosystem. And then, of course, in terms of the M&A landscape, even though that Skydance and Paramount Global deal is expected to go through with no regulatory issues, it does seem like going forward, having a looser regulatory sense of oversight

could really mean more mega deals get through because there's been a lot of frustration here in years past that it's hard to get major deal through because of such stringent regulatory oversight. All right. Julia Borson with the live shot of the week from Sun Valley. Looking forward to all of that content. Indeed. Media stock's not doing well now, so we'll have to see how they figure out how to grow and spend less. All right.

Records for the S&P and the NASDAQ, albeit barely. That's going to do it for us here at Overtime. Fast Money starts now.