Closing Bell - Closing Bell: Overtime: Dow Closes At Record High; SpaceX’s Booming Valuation 12/13/23

Episode Date: December 13, 2023

The Dow closed at a record high after Fed Chair Jay Powell’s dovish comments following the latest FOMC meeting. Jefferies’ David Zervos and our Steve Liesman break down what it all means for your portfolio. Davidson analyst Gil Luria on Adobe earnings. Samantha McLemore has worked with Bill Miller for more than two decades; she started her own firm recently and joins to discuss top stock picks that still have room to run despite the recent market rally. Plus, Evercore’s Krishan Guha on the Fed and SpaceX’s booming valuation.

Closing at session highs, a record close for the Dow Industrials, hitting 37,000 for the first time ever after a Fed policy pivot. New 52-week highs for the S&P and Nasdaq, too. The S&P finishing right above 4,700. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. And coming up this hour, we've got reaction to the Fed and the market's big rally. We're going to talk to David Zerbos from Jefferies and Krishna Guha from Evercore for their first takes on the Fed's path and the market's path forward. Plus, a rare cannot miss interview with investor Samantha McLemore, who worked for two decades with Bill Miller before starting her own shop. We'll get her top value picks to buy as stocks do scale to

these new heights. Let's get straight to the Fed decision and the big push higher for stocks during Chair Powell's news conference, though, sending the Dow to a record. Joining us now is Jeffrey's chief market strategist, David Zervos, and CNBC senior economics reporter Steve Leisman, who is in the room with Powell. So, Steve, we're going to start with you because I heard you talking about it in programming on the last hour, the fact that this does seem like Powell and the Fed moving towards a policy pivot. Pivot, a pirouette. I don't know what the exact word is, Morgan, but it's definitely a change. I thought he might have held the line a little bit for another month, perhaps. But I think perhaps two things happened that the the data made it untenable for him to stay quite so hawkish as he was, for example, just a couple of weeks ago in an interview that he did. I also think he was losing his committee. I think the committee has was moving on and acknowledging this notion that if it didn't start to forecast rates coming down with inflation coming down,

that he was going to lose votes and have some dissent on the committee that was going to, I think, ultimately hurt policy. I do want to, I don't know what to say, throw a little cold water on this, if I could for a second, Morgan. If you do the math, the Fed is not projecting that it's going to get any easier next year, okay? What the Fed is going to do is it sees itself bringing down interest rates exactly in line with the decline in inflation. If you do the simple math of the expected funds rate this year minus the core PCE next year, this year, you come up with a 2.2% real rate. Guess what the real rate that you would project from the new SEP is? It's 2.2% next year. Now, you could be happy because there's scope for

the Fed to come down more and become less restrictive. But at the moment, the only declines built in there are the Fed moving down in concert with the inflation numbers? Yes, they've taken off the table the notion that there could be additional hikes. I mean, they're at least notionally off the table. He didn't completely back off that. But in general, what's happening here is the Fed is coming down along with inflation. It does not see itself necessarily on average getting any easier next year. OK, love the context and the nuance there. David, want to get your thoughts on this. What what the dot plot signals to you, especially as we did see not just a rally in stocks, but a rally in treasuries as well,

with yields dropping pretty dramatically, lowest for the 10 year treasury yield since August. Yeah, and a rally in credit as well. Credit did great. I think that, look, from when I first saw the dot plot and I saw that the PCE core had only come down two-tenths, but the Fed funds rate came down 50 basis points for the end of 2024, I was a little surprised. But then listening to Jay, I think I understood where his head was and maybe where others on the committee are. They're really watching inflation expectations, and inflation expectations dropped dramatically in the last few months. We had a break even 10 year at two and a half percent. That's now two point one five percent fallen, 35 basis points. So I think they're looking closely

at inflation expectations. And that really added and probably got us that extra 25 basis points of projected rate cut in 2024, which was the fuel for the market. I think that's where the market really wanted to go. That's where the market wanted to see the Fed basically going fully into three rate cuts for next year. And that just set us off and set us off in bonds, credit and stocks. We'll roll the ox around. But I think that's what's mattered there. OK. OK, Steve Leisman, let's see if I can warm up the cold water that you just threw on this, because it seems like in a way, you know, Chair Powell was saying it's working, right? Like so many people were saying, oh, the Fed doesn't

know what it's doing. It's way behind the eight ball on this. It didn't hike soon enough. It's hiking too fast, blah, blah, blah, blah, blah. And now it seems like the Fed that was so hesitant to say we're getting inflation under control, it looks like we might actually achieve a soft landing, et cetera, et cetera. It sounds like maybe not dovish, but at least open to multiple types of birds. Yes. Yeah. Well, let me just be clear, John. The amount of cold water I'm throwing matters only to the extent that the fire is burning hot, and I don't think it's going to have that much of an effect. And I'll add to what you said, I agree completely with what you said,

that the other thing that's sort of taken off the table here is this idea that we're about to screw up massively and keep things too tight and create a recession before it's too late. I think that that is something that potential risk is eased a little bit today. He did talk a lot about being aware of the risk of doing too much. He's talked about that before, but I think he underscored that. I also think that today was, you know, a day when when the Fed pivoted, but didn't do so with any. There were no balloons. There were no party hats. There were no kazoos or anything like that. It just said, you know what, we're taking that other one off the table. We are in neutral now with a forecast to cut.

And those cuts are still speculative in the sense that the inflation data has to behave and come down. I think he got to a point where all of it added up. If you make a list and say, here's all the reasons I should cut, and here's all the reasons I should hike, the hike reasons got to be fewer and fewer along the line and became a weaker and weaker argument. Okay, now I do want to mention Adobe earnings are out. The initial move is down about 7% or more at the moment. We are going through those numbers and we'll bring them to you as soon as we can.

David Zervos, is there a risk here after this move higher, this high on the Dow, S&P above 4700, that there aren't enough people bearish on the other side of this trade anymore and things could be getting out of balance heading into 2024? You know, I do think people came into this year underweight, John. They were underweight credit risk. They were underweight equity risk. They've been chasing it all year. Look, Jay said this actually in the press conference when he asked,

why did everybody get it wrong? And he talked a lot about the supply side. He talked a lot about vertical supply curves and the fact that the inflation shock was a supply driven shock and the unwind of it was a positive supply shock. And that's been our view all along. And I really think that storyline and the fact that it could continue is something the market doesn't have priced at all. People came in wrong footed to this year. There's a lot of people still talking about recessions and they don't have a lot of credit risk. They don't have a lot of equity market risk. You're absolutely right. I think, John, I think there's a real reason why you could have some legs in the risk asset trade on all sides, on the on the credit side and on the the

equity side going into the end of the year and even into the beginning of next year. And I really think Jay's story is a pretty good story for risk assets all around. It's a soft landing. It's a calibrated cut, as Steve was saying, really to calibrate real rates so they're not getting more restrictive. And it's a story that's not the one that a lot of others who were forecasting rate cuts called for. It's not a recession rate cut story. It's actually kind of a positive, just get things back to neutral or keep things in check kind of rate cut story. It's actually kind of a positive, just get things back to neutral or keep things in check kind of rate cut story. And that should be pretty good for the equity market. And I think great for the credit markets, too, because yields will be coming down in that fire.

So is that where you would be investing right now in the credit market and in equities? How would you be positioning specifically? You know, Morgan, we've been advocating the junk bond trade all year. That's been, you know, I've been on your show, talked about that a lot, been on a lot of others. You know, that's been a great trade, up double digits this year with a much better sharp ratio than equities. Look, I'm tempted after this meeting and after watching Jay to be a lot more amenable to the equity side of the equation going into next year. I haven't taken the full plunge. I like where I was in junk credit, and I think we've had a great run with it. But, you know, a lot of things are adding up that Jay's view and the committee's view, really, of a relatively benign growth story, 1.4, 1.5 percent GDP growth,

inflation heading back down to, you know, the low twos, and a Fed that's slowly lowering rates. You know, that's kind of a pretty positive story all around for all the risk asset space. And as John was pointing out, I think, in his question, there's a lot of people that don't have it. And we just came into this year with people overweight duration risk and overweight, a kind of negativity that I've had to overcome in a lot of client meetings. And I don't think they've gotten that back. So I'm much more open to being even a little riskier than we were throughout this year in junk bonds and maybe going even a little more into the nether reaches of the capital structure of the U.S. economy, which involves equities.

Yeah. Steve, I mean, we had CPI yesterday. Maybe you could call it a little bit warmer than expected, but largely in line. PPI today came in flat month over month. Core PPI was also unchanged. You take all of that, you take some of these other inflation expectations that we've gotten in recent reports. How does it set us up for PCE and how much is that going to matter for the Fed as we do head into a 2024 where that so-called last mile of inflation is going to be, at least if history has has anything to show us, the trickiest? Yeah, all good questions, Morgan. I mentioned it at 830 when the number came out. I mentioned it again at noon and then I was flattered that Powell mentioned it

again at his press conference. The PPI number does flatter the potential for the PCE number next week and you do see some of those estimates coming down or those with lower estimates were affirming it. You know, I was listening to David and nobody does better, I think, at connecting markets with Fed policy than he does. And I'm just and by the way, I do want to point out Jeff Gundlach in the last hour, he had the Fed cutting more because he believes there's a recession coming. I think that was important to point out Jeff Gundlach in the last hour, he had the Fed cutting more because he believes there's a recession coming. I think that was important to point out. That's the other side of the story from what David's talking about. But I wonder if there's a third possibility here,

which is that the Fed just cuts more because on a real basis, it doesn't have to be that restrictive, that there's no particular reason to maintain that 2.2% real rate or a 4.6% rate if inflation comes down and does better next year the way it's done better this year. So there were five members who were calling for 100 basis points of cuts or more. I called them the dissenting dots out there. I think they're a little bit more dovish out there, and we'll see if their call ends up being justified or backed up or supported by the data. Big day for the markets. The Dow up 500 plus. Steve Leisman, David Zervos, thank you both. I mentioned Adobe earnings are out. That stock is down more than 7% right now in overtime. Pippa

Stevens has the numbers. Pippa. That's right, John. The stock is down on weak guidance, but starting here with Adobe's Q4 results, the company did beat on the top and bottom line, earning $4.27 per share adjusted. That was $0.13 ahead of estimates. Revenue coming in at $5.05 billion. That was slightly ahead of expectations. But once again, it is that light guidance. So for full year 2024, the company sees revenue between 21.3 and 21.5 billion, while Wall Street was looking for 21.73 billion. The

conference call does kick off at 5 p.m. and right now shares are down about 7 percent. Back to you. All right, Pippa Stevens, thank you. Morgan, we said yesterday on overtime, watch out for a conservative guide on Adobe. But there's more to it, I think, than yesterday on Overtime, watch out for a conservative guide on Adobe. But there's more to it, I think, than just conservatism here, because if you look through the numbers, the digital media business for Q4 actually came in slightly above the guide and possibly above where some were expecting at 3.72 billion. It was the digital experience line of business that came in even light, really, of guidance at $1.12 billion to my eye. And digital experience is that part of the business that's taking data within a business, and the business itself uses that to get smarter about its operations and about dealing

with customers. That's really a very enterprise enterprising piece of what Adobe does with data. Also in the Q1 guide, you've got the overall revenue, yes, is a little bit light, but the digital media expectation was for 3.84 billion. The guide is to, let's see, I think right about that number, maybe a little higher. And the digital experience business, again, expectation was for one point three billion. They're guiding to just under one point three on digital experience.

So it seems to be that enterprise data, digital experience piece of the business where demand is lighter, which is some of what we saw from Oracle yesterday. We were wondering which side was going to win out. At least on the operational numbers and on the guide, it seems like that weakening demand in enterprise is affecting Adobe's numbers. When we start talking about some of the Gen AI tools that they've been rolling out this year, things like Firefly, where does that fit into the segment breakdown? That's in the part that's strong. You're going to see that in digital media, right? That's the efficiency piece of the story that we were talking about where some companies

have been winning. But we'll have to see what the color is on the call as well. It seems like at least the losses in the shares after hours are moderating a bit. It's now down a little bit less than 7 percent. Let's bring in senior markets commentator Mike Santoli now with a broader look at the inflation picture. Mike. Yeah, John, the market more emphatically treating inflation as last year's problem, yesterday's problem. David Zervos talked about inflation expectations. Here's what market implied 10 year inflation expectations look like. Pretty much almost normalized back down toward the 2% level, which we had seen largely pre-COVID. So it seems like there's really nothing to be concerned about here. Don't write this in ink in terms of what inflation is going to be over the next 10 years. It's not necessarily the most solid forecast, but it shows you that right now,

investors are not geared up for more inflation. They're not going to behave as if it's coming. That's good news for the Fed. It endorses their new pivot, if that's what we're going to call today's action. Now, what do stocks do after the Fed pauses? At this point, looks like the Fed's pause from July is the end of that tightening cycle. And that would be this mark right here, vertical line. So this is the current path of the market. That was before today's rally. So call it right up just a little bit higher from there. And you see that if we don't get a recession over the next, let's say, six to 12 months, this has been the average path of the S&P subsequent to that. And of course, the lower line was if there were a recession resulting after the end of the tightening cycle. Of course, the Fed will have cut before

that happens, too, usually. And you see why it matters so much as to whether we get the so-called soft landing or hard landing. Now, there's a variation around each of these lines. For example, 2007, the market did really quite well in the year or almost a year after the Fed paused. But then, of course, it fell apart in the financial crisis. So this is the crux of the debate from here on out. Of course, markets are feeling very comfortable. The economy is pretty sturdy and the Fed now has backed away. John. Mike, where do you think traders are seeing the greater danger now? Is it in a recession or in a consumer who's perhaps more more resilient even than we

expect and continues to spend and perhaps drive some inflationary pressure that the Fed isn't prepared for? I think it probably still leans toward incremental weakness in the economy from here. Now, obviously, remember last January, we actually had this huge run of really hot economic numbers. The consumers spent really heavily. We could get surprised by something like that again. I suppose given what's happened to gasoline prices, wages have still been growing around 4%. But I still think there's this residual sense out there that the clock is ticking toward consumer fatigue and an economic recession. Even though the evidence isn't showing it right now, we still got the inverted yield curve. You still have those lagged effects. You still have higher rates. You still have all these things that people are geared

in that direction. So I guess if I had to choose, I'd say people are still a little more apprehensive about the idea that the economy runs out of gas than that it re-accelerates. All right. Mike, thanks. And Morgan, a quick correction here. The digital media number on the guide for Adobe and Q1 was not in line. It was also a little bit under. The range is under that 3.84 that the street was looking for. Okay. We're going to dig into these numbers a little bit more later in the show.

In the meantime, ahead of this print, the stock was up something like 85% since the start of the year. Well, up next with the Dow at record highs. And oh, by the way, the Russell 2000 up 3.5% today. Where should you be looking to buy in this market? We're going to ask Samantha McLemore, the founder of Patient Capital Management and a longtime colleague of Bill Miller. She'll reveal her top value plays for 2024, including a big bank and a big three automaker. You don't want to miss this. Overtime's back in two. Welcome back. All the averages rallying today.

Record close for the Dow after Fed Chair Powell's latest comments and a dovish dot plot. Our next guest has some names she says are still attractive opportunities despite this latest push higher. Joining us now is Samantha McElmore, founder and CIO of Patient Capital. Formerly worked with famed value investor Bill Miller before starting her firm in 2020, brought in Miller's opportunity equity business earlier this year. And of course, he's still an advisor to you. Samantha, great to have you. In your January investor letter, which came after a rough 2022, you wrote, investors get spooked at exactly the wrong time.

Reversion to the mean is a powerful force in markets. Well, after a day like today, investors also get greedy at the wrong time and reversion to the mean from the highs we've got now could be painful. So to be consistent, what should investors think about differently now? Well, I think there definitely is a reversion to the mean potential, except markets go up 70 percent of the time. So I think your base case is for markets to continue to rise. When we look broadly, we still see a lot of skepticism and pessimism out there. So I think if you look, the market typically rises over the last five hiking cycles has risen 10 percent between the last hike and the first cut. So that would imply another six and a half percent upside, you know, into that first cut whenever that is between March and June college.

So we still see upside from here. OK, now I want to ask specifically about innovation stocks. Some would consider, even though it's big, Adobe, one of those. We just got its report. It is down about 5.5% right now in overtime. Unlike a lot of value investors, you don't stay away from these stocks. But what kind of filters are you putting on them now to understand what's worth buying at these levels? That's a great question. I think that those companies that can grow in compound value often are the best values. I think what we see now, though, is a generational buying opportunity in classic value or low multiple stocks.

So we've just gone through a decade of some of the best returns ever for growth and for these compounders. So that's taken expectations up. I think Adobe is a good example of that at 40 times earnings. So the results have to be very strong to continue to surpass that. And on the classic value side, I think we just see expectations that have been ground down to such a low level that the returns are much more attractive there. So what's an example of classic value and how do you differentiate between that and a value trap? Yes. So I think classic value, we would say, looks cheap on the multiples.

Everyone would recognize it as value. Bill was criticized earlier in his career for not being a true value investor because he did invest in names like Amazon, Dell. Now people recognize that those can be the best values in the market. But we see a number of low multiple names that we think have been completely ignored. Names like Citigroup, like Delta, like General Motors, where expectations are just so low that you don't need a lot to go right for those stocks to compound. We think at rates above 20 percent per year from here. You just mentioned Citi, General Motors. You call this a misunderstood story. You've got another one to share with us, too. One main financial. I guess break down your theses around these names.

I think Citigroup has been a laggard and an underperformer for decades. So people think they can ignore it because it has low returns on tangible common equity. But I think Jane Fraser is finally making all the right moves to fix that and improve those returns. So they've gotten rid of businesses. They've simplified the organizational structure. They're investing in technology. They already have some businesses like their services business that she calls her crown jewel that's earning 20 plus percent returns. So we think Citigroup can earn $13 a share in 2026. The market's at seven. The market doesn't expect them to grow earnings at all. So we think that stock will be over $100, you know, by that time.

I want to zero in on the other part of Morgan's question on one main financial and really on regional banks, because I think the KRE actually closed above 50 today. It had been down in the 30s not long ago earlier this year. How are you distinguishing in this environment where regionals are catching a bit of a bid on where there's danger versus where there's value? Yeah, I think the interesting broadly, interesting thing broadly about these names is CECL requires banks to take reserves up front for losses. So most of these banks and credit companies have already reserved for an unemployment rate four and a half, five, even five and a half percent. So that's already baked into the current fundamentals. So people have been very concerned about things like commercial real estate, you know, other things. If we have a recession, it will be the best broadcast recession we've ever had, which have given these banks lots of time to prepare. But we're always looking at the balance sheet. So a name like Citigroup or

like OneMain Financial, we just don't see significant risks in those areas that might be of concern, like commercial real estate or credit cards. Are you modeling for a recession next year? Are you in the soft landing camp? We do a lot of scenario analysis we can't predict the future so you know a lot of people spend a lot of time trying but it's an exercise in futility so we look at if we have a recession what's that imply for our names if we don't what is that imply I think. The odds are growing you know of a soft landing I mean people are mostly there now. But income

real incomes are growing again. Consumer balance sheets are still in good shape. And finally, today we got the Fed. You know, I think the biggest risk has been that the Fed's, you know, is tight too long, just like they were loose too long. And now we finally got some data that they're moving, you know, in the right direction there. Amid the Fed decision today and what's been seen as somewhat of a policy pivot, perhaps, from Powell, we've seen the dollar weaken. We've seen yields come off, but we've seen gold move higher today and we've seen Bitcoin rally as well. In fact, Bitcoin's been rallying for a number of months here. When I think of Bill Miller, I do think of cryptocurrencies and

Bitcoin specifically. Do you do you see that as a value opportunity as well? How are you thinking about that within a portfolio? We do. I do believe I wish I was as early as Bill and Bitcoin. Unfortunately, I was a little later. But I think of Bitcoin like digital gold. And I think the psychological belief state around the value of Bitcoin is growing and supply is fixed there. So gold has a thirteen and a half trillion dollar market cap in bitcoin is eight hundred to you know eight

hundred and fifty. Billions so if it reaches that at some far off date that implies prices between five hundred thousand and a million so you could still have significant upside in bitcoin it's done very well this year. And finally

Samantha you're not in in video or Microsoft you've acknowledged that that was a mistake not to be in Bitcoin. It's done very well this year. And finally, Samantha, you're not in NVIDIA or Microsoft. You've acknowledged that that was a mistake not to be in those. Artificial intelligence is seen as another one of these generational or at least decade shifts in technology. What approach are you taking to play it, whether it's mega caps or focusing on small caps? No, I think AI is going to be a sustaining innovation that benefits the leaders. And we have a number of leaders in that space. So Amazon we own and we think is very attractive. Meta and Google or Alphabet are all names that we own. And of those magnificent seven, those mega caps, we still find valuation upside in all

of those names and think that they're very attractive. Samantha McLemore, thanks for joining us. We do hope you'll come back soon. Yes, thank you. Still ahead, much more on the strong post Fed rally and the Dow's push to new highs. Evercore Vice Chairman Krishna Guha joins us with his first take. And after the break, we'll ask an analyst what he wants to hear from Adobe's management when that call kicks off at the top of the hour with the shares down now just over five and a shares falling on weak guidance. That call kicks off at the top of the hour. Let's bring in Gil Luria of DA Davidson.

He's got a buy rating and a $640 price target. Gil, it seems to be the experience cloud business that's struggling the most, no? It did okay. The digital media business did well. The digital experience did okay. The quarter itself was good. 13% constant currency growth. That's the same as last quarter. They wrapped up a very good fiscal 23. As it happens, it's the end of their fiscal 23. So they're guiding the fiscal 24 and they're guiding conservatively. This is a pill all software companies are going to have to take between now and when they report their own fourth

quarter. Adobe's taking it early. And that's what we're seeing here. They're conservative guidance. It's it set them up well for next year. It's what they did exactly a year ago. They've had a good year. And we don't think much more than that. And I expected the conservative guide and all, but I wonder about the experience part of it, where they're doing, like you said, OK. I shouldn't have said struggling. They're doing OK. But it comes also on the heels of this Oracle report, where we saw that they had some issues with demand. And there have been a number of other enterprise names reporting something similar. So is it fair to say that they could be suffering from the same just overall

macro challenges? No, that's right. So if you look at Oracle, it's Salesforce's marketing cloud. Those are the businesses that support a marketing organization where enterprise spend is limited. And I'd be more worried if enterprise spend wasn't already limited this year and they've already done well. But it is, you're right, it is the line we have to really look at in terms of what's going to happen with enterprise spend next year. Is it going to be as constrained as it was this year? Or are CIOs and CTOs going to loosen up a little bit and

invest more for Adobe? That's the business where you look for that. In the 8K filing disclosure that the FTC is scrutinizing Adobe over subscription cancellation practices, this has apparently been, they've been cooperating with the FTC and regulators since June of 2022. What to make of that? Well, good news is regulators now consider Adobe big tech, right? They're approaching $300 billion in market cap. And so they're getting bundled with Microsoft, Amazon, Google, and Meta as a big cap technology company that needs to be constrained. That's why it's so hard for them to get the Figma deal approved. And that's why there's now additional scrutiny about their practices. That is something they have to contend with, the fact that they can't do business as they were able to do when they're a

much smaller company. They are a big tech now and they have to behave like a big tech, which means to make sure they're not doing anything anti-competitive because if they don't make sure, regulators will do that for them. Will they get Figma approved? It's really hard to tell. Microsoft snuck Activision through, so I would think Adobe would be able to sneak Figma through. The problem is it's taken so long that that business can't be as strong as when they initially bought it. In the meantime, maybe they haven't invested in that product as much as they could have otherwise. Eventually, they'll probably be able to close it with some

concessions, and that'll really reinforce the collaborative product that's so important to their customers trying to create creative products. Okay. Gil Lurie of DA Davidson, thanks for joining us. Buy rating on the stock price target of $640 a share. It's time now for a CNBC News update with Contessa Brewer. Contessa. Morgan, the former police officer facing charges in a deadly botched raid on Breonna Taylor's apartment in Louisville, Kentucky, we'll face a retrial. A judge declared a mistrial in Brett Hankins' case last month. A jury deadlocked on the two counts against him.

He's accused of violating Taylor's civil rights and using excessive force for blindly firing 10 shots into her apartment during the raid, which led to her death. For the first time in more than half a century, the U.S. just approved a permit for a new type of nuclear reactor, one that uses molten salt to cool its core. The reactor is set to be constructed in Tennessee and will be used as a testing ground to build a larger version able to generate commercial electricity with this new technology by the beginning of the next decade. And a different kind of football is coming to one of Brazil's largest soccer stadiums. The NFL announced today will play a regular season game in the Arena Corinthians in Sao Paulo in 2024. It would be

the first league game played in South America, but of course the NFL has spent lots of time abroad. In fact, regular season games we saw in London and Frankfurt, Germany this season. But that should be wild, John. Indeed. Contessa Brewer, thank you. Up next, Evercourse Krishna Guha gives us his first take on Fed Chair Powell's comments and the Dow's push to record highs. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast

on your favorite podcast app. We will be right back. Welcome back to Overtime. The Dow soared to a record closing high today after the Fed signaled rate cuts could come next year. For more on the Fed, let's bring in Krishna Guha. He is vice chairman at Evercore ISI. Krishna, it's great to have you on on this Fed day. I think heading into this, you had been maybe perhaps more cautious

that the market was expecting too much from the Fed, that the Fed may even lowball what we're going to get next year. How do you see it now? So I think the Fed came out significantly more dovish than I was anticipating today, full disclosure. You saw the Fed signal a baseline median projection of three cuts next year rather than two. That might have been influenced by the most recent PPI data this morning that will have led them to realize that what looked initially like a somewhat firm core CPI print this week was going to map into a lower inflation read on their preferred PCE measure. But bottom line,

there's no doubt that even before that, they were transitioning, reorienting towards rate cuts a bit faster than I had anticipated. And Powell's press conference, I think, was really dovish right across the board, almost surprisingly so in the sense that there was no effort to restrain financial conditions from easing sharply further, which they have, that he was very optimistic about progress on inflation and talked about how that discussion as to how long to stay on hold and when to cut is starting to get going on the committee. So is pivot the right word to use for the messaging from Powell and in terms of the dot plot today? And is March now on the table as

a possibility for cuts, assuming that inflation continues to move in the right direction? So is a pivot, I mean, a pivot's a process, maybe not a single day. The Fed oversteered way too hawkish in September. We said that at the time. They've course corrected now in December by a little more than I was anticipating. So certainly, I would say, you know, maybe the early stages of that final pivot are now starting to roll. I think Powell was still not leaning towards March. I think if you look carefully, there are signs that he's leaning more to Q2 than to March. So a couple of things there. One is they continue to describe inflation as elevated in the statement. Another is that instead of retiring the hiking bias outright, they did a sort of halfway step

referring to any further tightening that might be required. You'd expect that language to have to transition further in the dovish direction before you're really zooming in on rate cuts. And that plus the need to see, as he said, some more evidence on inflation, wages as well, seems to point more to a June or May first cut than March. But I think it's certainly fair to say that March cannot be excluded on the basis of today's communications. Yeah, there was that Fed hawkishness, but it was a transitory hawkishness. You say this should fuel the risk rally, and you say it in a way that makes it sound like investors shouldn't chase it, no? Oh, no, I think, to be honest, this is something that you want to get on board with. You know, the Fed can't believe its luck. I think that's what's really the case here,

right? The data is going their way faster than they had possibly contemplated. Here's one example of that really telling example. Three months ago, the Fed, median Fed official thought core PCE inflation, their preferred measure, was going to be 3.7% at the end of this year. Three months later, they're estimating it's going to be 3.2%. That's a huge, huge improvement in the inflation outlook. In other words, they were too hawkish beforehand. We said that. But the data has come in so good that they're not just making a small adjustment. They're making a much bigger adjustment to their assessment of where we're going to be on inflation at the end of this year. When you look at the six-month annualized measures,

they're showing a lot of improvement, which will slowly, of course, pass into that 12-month annual measure that is still, you know, capturing some of the lagged effects of the earlier inflation heat that's really over. So, Christian, then what does this mean for some of the defensive sectors that some had wanted to migrate to, thinking that we're late in the cycle? Well, look, the debate around recession risk is not going to go away, right? Powell acknowledged today that the most recent data is showing signs of quite a significant slowdown from the blistering pace of Q3. One could even interpret his dovish tone and the Fed's messaging more broadly in the statement and the SEP

as suggesting that they may be just wanting to be a little careful that they haven't overdone things here and that they don't overstay their welcome. So that is a sign that, you know, that recession risk has not gone away. But of course, to the extent that the Fed is indicating it may be a little bit more nimble, I said I'm still not focused on March, still more focused on QT, too. But to the extent the Fed is seeing this progress on inflation and indicating that it's going to be a little bit more nimble, maybe a little less inertial, that's good for moderating recession risk. Okay. All right. Krishna Guha from Evercore. Thank you. Thank you. Up next, could earnings derail this record-setting rally? Mike Santoli is back with a look

at whether the increase in guidance warnings is a red flag for Wall Street. We'll be right back. Welcome back to Overtime. While the Dow hit a record high today, shares of Pfizer fell to a 52-week low after its 2024 revenue and profit guidance came in below estimates. Is the trend of lower guidance a big red flag that Wall Street is ignoring? Well, Mike Santoli is back with his take. Mike, how do you see it? Morgan, maybe a small yellow flag at this point. It's pretty well understood. Fourth quarter earnings forecasts have been in a pretty significant slide since the beginning of the quarter. You see right here, taking that dip lower. Now, in terms of guidance, a bit more

than 20 percent of S&P 500 companies have issued guidance for the quarter. About 65 percent of all those guidance changes have been negative. That's a little higher than the historical average percentage of negative guidance. That's basically 59 to 63 percent. So not terrible, but definitely a little bit of a skew toward the downside. The issue is it hasn't necessarily bled over into full year 2024 estimates. If you look at how steady the consensus is for next year, right around $246 on S&P 500 earnings for 2024. And it's more or less bumped around that level for some time. Now, it is back end loaded and it is reliant on a handful of big companies going to be growing absolute dollar earnings a lot, such as, you know, the alphabets in the Microsoft's of the world,

along with interesting when it comes to Pfizer. Pfizer and Merck are penciled in as being some of the biggest net contributors next year to earnings because they had massive multibillion dollar extraordinary charges this year, which are just going to not occur next year. So that's just a cosmetic lift to earnings. I think the market can handle this if rates are lower and if you whittle down earnings growth forecast, but they remain positive. Usually the market can find a way through that. I mean, how realistic is it to think that you're going to see lower revisions to 2024, just based on the fact that you tend to see lower revisions in years past as well. It happens almost every year. It's just a question of how

steep those downward revisions are and whether it goes negative. And what's interesting to me is if I look a lot of individual economically sensitive companies, whether they're banks or auto related or retailers. And there isn't any projected earnings growth next year. It's kind of flat to down to up marginally. So to me, it's not as if every company is expected to grow earnings 10 percent. It's just that you have this lumpiness in terms of earnings growth expectations. So I would expect we have room for upside surprise in the fourth quarter. Then we'll see what they say about next year. Keep in mind, everyone celebrated the Fed's outlook today, but it also included a 4.1 percent unemployment rate and a 1.9 percent or 1.8 percent GDP growth. Kind of slow. Yeah. All right. Mike Santoli, thank you.

I think we also got to keep an eye on job cuts. We had Hasbro earlier this week, Etsy today cutting 11 percent of staff as well. Yeah. Signaling the, very challenging environment is what they said. So maybe even some of those cuts being taken as bad news by the market, too. We haven't even seen if the consumer keeps spending. Still ahead, much more on today's big post Fed rally as the doubt closes in on record territory. And take a look at Toll Brothers up sharply during the session and

higher in overtime after the company announced a new $20 million share, $20 million share buyback. You can see shares are up 1% right now. We'll be right back. A tender offer helping the valuation of Elon Musk's SpaceX lift off into the stratosphere. Details straight ahead. And it wasn't just the Dow that set a record today. Its most valuable stock, Apple, closing at a record high of 197.96, now up 52% this year. Overtime will be right back. Welcome back.

Elon Musk's SpaceX soaring to a $180 billion valuation, potentially, based on a tender offer currently underway. A person familiar telling CNBC Insider stock to be sold could be offered at 97 bucks a share. That represents a 20 percent jump in valuation from a July secondary stock offering. Worth noting, the company doesn't seem to be raising capital. This is purely for employees and other insiders looking to cash out. SpaceX is the second most valuable private company behind ByteDance. At $180 billion, it would be worth more than the largest publicly traded aerospace and defense companies, Lockheed Martin and Boeing as well. Why? Well, Justice Parmar, founder and CEO of Fortuna Investments, tells me his VC firm is in discussions to buy a block of shares in this offering. He compares SpaceX to Amazon or Microsoft, world-class

generational companies that, quote, only increase in value as time goes on. And he would unequivocally put SpaceX in that bucket. He thinks it will be potentially worth more than Tesla, perhaps before the end of the decade. A current shareholder asserting to me SpaceX is the most important company in the world from national security's perspective alone. Look at Ukraine, which has connectivity largely due to the Starlink broadband service. Starlink is key to the valuation, 2 million subscribers. As of September, about 5,000 satellites in orbit so far. A national security version, Starshield, which enables classified government work.

SpaceX also has a near monopoly on launches, more than 90 missions so far this year, many of them for Starlink. And the next-gen rocket starship poised to change the space economy paradigm when it comes online. SpaceX is reportedly on track for $9 billion in revenue this year, and sales expected to grow to $15 billion next year. There have also been other reports, John, that the company turned a profit in the first quarter of this year. Interesting. I'll also note that Nordson, which I mentioned yesterday, did come out with earnings.

It beat and guided to 4% to 9 percent growth, which is strong. And then we've got Lenar and Costco after hours. All right. Tomorrow. Huge surge in stocks today. That's going to do it for us here in overtime. Fast money starts now.