Closing Bell - Closing Bell Overtime: Nasdaq, S&P 500 Close Out Strong First Half; MoviePass CEO On Buying Company Back 6/28/24

Episode Date: June 28, 2024

After stocks closed out a strong first half and second quarter, Truist’s Keith Lerner and Citi’s Drew Petit, plus 3Fourteen Research’s Warren Pies, weigh in with their best ideas for the second half of 2024. Jon sits down with Nokia CEO Pekka Lundmark after the company buys Infinera for around $2B, plus an interview with MoviePass CEO Stacy Spikes on buying back the company and MoviePass’s second act. Former Kansas City Fed President Thomas Hoenig on recent data, Fedspeak and the consumer. 

Well, the S&P 500 and the Nasdaq touching record intraday highs on this final session of the first half, but gains faded as yields rose with Nike's plunge taking a big chunk out of the down. That is the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort. Morgan Brennan is off today, and it is a pivotal hour for anyone invested in the banks as firms release their capital allocation plans following Wednesday's stress test results. We're going to bring you that breaking news throughout the show. Plus, market strategist Warren Pies says we just locked in two years of S&P 500 gains in about six months.

But that doesn't mean the rally has to end. He's going to join us to break down his outlook for the rest of the year. But let's begin with the market action as we wrap up the month, the quarter and the first half. It was a strong first half for the S&P 500, up nearly 15 percent. The Nasdaq climbing more than 18 percent in the half. The Dow lagging up just three percent year to date. So where do stocks go from here? Let's bring in our market panel. Joining us now is Keith Lerner of Truist Wealth and Drew Pettit of Citi Research. Guys, happy Friday. Keith, how should investors rationalize the fact

that we're hearing broad justifications of why the economy is decent, stocks should go higher, but most stocks haven't been doing that great? Yeah, well, great to be with you on this Friday. I mean, that's right. I mean, overall, we have this market that's up about 15%. But when you look underneath the hood, year to date, about 40% of stocks in the S&P are actually down. So it's a split market. It's also reflective we have a split economy. And when you look at the S&P, we all know that the key drivers this year, that two key sectors, which are tech and communications and services, are really driving the gains. But that's the way the market composition is. And if you're in an

index fund, it doesn't really matter how you get there, right? This is more difficult for active managers. I will say, John, coming into this year, you got to think about it, for the economy also has been more resilient than most people expected. The consensus coming into this year was 1 percent GDP growth. That's now up to 2.3 percent. And forward earning estimates continue to move higher. On a short term basis, though, I do think we're into more choppy waters. We upgraded stocks at the end of April. But now we think after a 10 percent rise since then that we're more likely to digest these gains. Yeah, these index fund returns look like hedge fund returns in a really good year right now. Drew, what do you do from here with mega caps? That seems to me to be a core question. If an AI disillusionment period does set in, how will it start and how will it

affect investors? Look, I think it's going to start if you start to see the earnings revisions soften, especially for some of the AI high flyers. What we've recommended to clients in our thematic work is thinking about taking some of the outsized gains in the mega cap AI pure plays and rotating back towards more of the, let's call it the creators and some of the users of AI, not necessarily just the enablers like semiconductors. I really think cyclicals, especially large cap cyclicals can work here because we're in this new age of technology and efficiency. And I don't think the market is quite giving them credit yet. So take your AI gains and redeploy them into some of these areas of the market that are going to use AI to make their companies and products better. OK, so as we're mulling that over, Keith, you're saying that you think on a short term basis, markets are likely to consolidate these gains.

Short term basis, does that just mean over the next quarter? What are you thinking? How do both geopolitics and domestic politics, if at all, factor into market effects? Yeah, well, that's right. I think over the next, probably the next few months, I mean, if we zoom out a little bit, you know, this bull market has risen about 50 percent. The medium bull market rises about 100 percent. And I'll also say we just did a study today looking at when you have strong first half returns above 10%. In the second half, you're up 89% of the time. You add to those gains by year end. But I think, again, we've had these strong gains. You think about off the lows in April, semiconductors up almost 40%, technology up almost 30% in two months before this little bit of a pullback. And I think what I'm,

you know, right now, you're really searching for new leadership, which really hasn't come out yet. So yes, there's potential for rotation, but we're really not seeing it yet. So I think it's more likely that we digest these gains. And as you get into deeper into the fall, historically, what tends to happen is closer to the election, you start to see a jump in the volatility index, especially around the September, October. Once you get through the elections, there tends to be a relief rally just as we get some clarity around who's in office, regardless who's in office. So I think that will likely play out. But I do think even as we look at that second half, even though you tend to have gains by the end of the year, you also tend to have one or two corrective periods as well. We'd be looking at

that as potentially an opportunity to get more aggressive on equities. But I think we have to be patient. And we're in a period that may be frustrating for both the bulls and the bears here short term. OK, finally, Drew, tell me about this complicated consumer picture we have. I mean, you can argue that Nike is about Nike, but it's a big consumer name. We've had a number of other sort of qualitative points with other earnings reports, some of which are bright spots, but some of which show concerns, particularly about that middle of the road consumer. Look, it's the strong gets stronger. And it's funny, John,

even the middle of the road consumer, they're still spending, but it's what they're spending on. You know, we've talked about this a lot on the consumer side. It's about experiences, whether it's your shopping experience or going to buy, go see a concert, go out and do something. Honestly, if you look at airline stocks, they look great year to date. Some of the cruise lines look really good. Some of the booking companies look really good. But the physical goods have struggled a little bit unless they have a self-help story behind them. So honestly, yeah, the picture's mixed. I agree with that. But you can still find good consumer stocks

with good fundamental stories. And the market, whether you're a mega cap AI stock or a consumer name, it's rewarding beaten raises where it can find it. I think that's how this bull market is narrowing, not necessarily into sectors or a particular theme, but into beaten raise names. And we saw that in Q1 earnings. We'll probably see that in Q2 earnings as well. All right. Drew, Keith, see you in the second half. Thanks for joining us.

Big Tech was the standout winner in the first half of the year with huge gains for NVIDIA, Meta, Amazon and Alphabet. Kate Rooney joins us now with a look at the key names to watch as we head into the backstretch of the year. Kate. Hey, John. So tech investors are describing this and the market so far this year as a split. You got the AI haves and the have-nots. They're now looking for opportunities in some of the beaten down software names in the back half of this year. You got MongoDB, Snowflake, UiPath. Those, of course, you can see the chart there. Those are the have-nots. They have been way underperforming in the S&P this year.

Compare that to the Meg 7, minus Tesla, really, having a banner year thanks to the AI story. And then strong earnings growth as well, especially NVIDIA. IT spending is a big dynamic here. It's a key part of it. Enterprise customers are feeling pressure to bulk up their own AI offerings with smaller budgets for the rest of software. So Gartner, for example, sees IT spending growing about 8% this year, but mostly for Gen AI, calling it a gold rush level spending. We are also seeing the same dynamic here in Silicon Valley. Venture capital investor telling me this week that it is the first question they hear in startup board meetings. People are asking, what is your AI strategy? So similar thing in private markets.

AI startups are the ones generating all the buzz out here. And then according to PitchBook, they account for now 45 percent of all so-called unicorns or those valued above a billion dollars and 60 percent of the added value so far this year. As for the back half, shift in rates could change the market growth and just that entire valuation picture. And the Mizuho today noting a recent move up in the IGV. That software ETF notes some semiconductor money has been rotating back into software and Internet names. John? Yeah, Kate, I think private equity is the big wild card for me that I wonder about

because the mega caps may be in a different era when regulators were less zealous. You would expect them to be doing more M&A. But arguably, they can't really. Even the large caps, lower than the mega caps, have had their hands slapped. But will PE see more value at this stage with some of these beaten down software names? Or are they more, you know, going to focus even earlier at some of these AI hopes that are out there? That's a great point, John. There's been all this talk about potential private equity roll-ups. And we've started to see that where there's opportunities and maybe a mismatch between private valuations and public markets.

You've seen some of the big PE firms start to look more to what some are calling zombie companies, the companies that went public at the top. They have not done much since. And there may be an opportunity for larger PE firms to sort of roll up those publicly traded companies that really haven't done much. The venture capital side of private equity has actually like they want to do that. They're like, that's really not our business model, but that would be a great opportunity. I was talking to a couple investors this week who were saying that's what private equity should be doing when it comes to venture. Their businesses are being turned on their heads because of mega caps coming in.

They're not able to come in and buy the startups. So they're going to invest and they're propping up valuations to a level where it makes it really expensive and really tough to get in. If you're sort of an average venture capital investor, you got Google, you got Amazon, you got Microsoft investing and competing for those deals. And it's really affecting valuations out here. Yeah, yeah, startups in some ways looking like the real estate market where it's hard to find an exit. Yeah, exactly. Kate Rooney, thanks. Let's turn now to Mike Santoli for a look at the effect of high momentum stocks on the overall market.

Hey, Mike. Yeah, John, been a pretty big theme over the course of the year, and it's gone in these interesting patterns. So I'm suggesting maybe we have to be mindful of the breadth in this case, meaning the need perhaps for the high momentum segment of the market to take a breather at times. And it also does relate to the overall breadth of this rally. So what we saw in early March, I pointed out a few times, that was when NVIDIA had this other buying crescendo right into the first week of March. It had this big downside reversal.

And then from there, this is the momentum ETF relative to the equal weight S&P. So relative to the average stock, huge outperformance, a lot of sideways chop. Ultimately, in that period in April, we did get a broad market pullback, a modest 5 percent because of yields going up and the rotation slipping a little bit. So what we see here is a similar kind of peak, at least a short-term peak, and then initial sell-off, we bounce. And so I'm not saying we know that it's going to follow in the path of that box, but it's the kind of thing that wouldn't be too surprising given the degree of gains piled up by NVIDIA. Similarly, we just reached the end of a quarter, and it was the end of the first quarter

when some of that rotational stuff started to go a little bit looser. Also, you guys are talking about software versus semis. There's a momentum piece of this, too, and a market concentration element. So the SOX, that's the Philadelphia Semiconductor ETF. It is dominated by NVIDIA, Broadcom and a couple of the other big high momentum names. Clear Outperformer. This is the software. And of course, XSD is more equal weighted semiconductor stocks. So you actually have had that comeback from software after a long sideways period relative to semis. So there's some grabbing for the laggards and maybe they

they're kind of some of those companies growing into their new AI-related story, John. I wonder, Mike, does it look similar when the momentum stocks just totally run out of steam relative to the equal weights as it does when they're taking a breather? Or do you have enough data to be able to compare the tendencies? I mean, it's hard to know about being out of steam. The way it's worked recently is you see this big burst. They kind of consolidate and refresh themselves and reload. And maybe they wait until the next earnings reporting season and they catch another win. At some point, perhaps there will be a more kind of across the board reset where people aren't crowding into the high momentum names because fundamental momentum, earnings revision momentum isn't going to be so concentrated in those areas. So it's tough to know specifically how this is going to run. What I do know is

right here, you were at these multi-year highs in terms of momentum as accounting for so much of the market returns, a little bit less so up into that June peak. Mike, I just think 20 plus years ago, post dot com bust when people were saying, will software ever be good again? Maybe not. Maybe it was until, you know, post Google and Web 2.0 and the cloud started. Mobile started taking off. People said, oh, maybe. So it's been a long time. You and I remember that. Yes. No, there's no doubt about it.

And, you know, the pendulum swings back and forth between, oh, hardware is going to command most of the economics of this. And then it goes over to software eventually. All right. Mike, see you in a bit. Now, the annual Russell rebalance taking place as of today's close. That's an event usually met with high volume as fund managers adjust their holdings. Bob Pizzani joins us now to explain more about what's happening. Russell rebalancing. What's going on, Bob? What is this? It just happened. In fact, John, the rebalancing or the reconstitution,

as they call it, of the Russell index is one of the major trading events of the year. It's typically one of the largest volume days of the year. And indeed, that is exactly what happened. Now, this involves a rebalancing of the small cap Russell 2000, the large cap Russell 1000, and the Russell 3000, which is the two of them together, the 3000 largest publicly traded companies. Like the S&P indexes, these are market cap weighted indexes. And so they are rebalanced. In this case, they're rebalanced just once a year. That's it. To reflect changes in prices and changes in share counts as well. Now, fortunately, FTSE Russell, which runs these indexes, telegraphs which changes are going to be made several months in advance. So fortunately, there's rarely any real surprises here, but there's often changes in price. This used to be a mostly academic

exercise, but with the rise of ETFs and closet index funds tracking these indexes in the past 15 years, there's now several trillion dollars indexed to these funds. So rebalancings like today can move stocks as they go from one index to another because indexers have to buy or sell according to their weightings in these new indexes. Now, not surprisingly, given the tech rally in the last year, several tech companies that were in the small cap Russell 2000, including Supermicro Computer and MicroStrategy, are now graduating the big cap Russell 2000. And if you take a look here, you see Super Micro down about 8% today. John Micro Strategy down about 10%. Enormous volume here, more than

twice normal volume for both of them. I suspect the reason they were down is there's a lot more money indexed to the small cap Russell 2000 than there is to the 1000. So if they're graduating up, they would be selling out of the Russell 2000, where there's probably more money going into the $1,000. So I think that's probably what accounts for some of these weak prices towards the close. Any sense, Bob, of what tends to happen to the Russell 2000 after these rebalance periods? Because it's been lagging so much compared to the S&P 500. I think people have been looking for, when's the moment when it's time lagging so much compared to the S&P 500. I think people have

been looking for when's the moment when it's time to take another gander. Yeah. Unfortunately, it's been lagging for 15 years. There's maybe one or two years exception in the last 15 years. But you're right. The small caps have lagged the big caps and it has nothing to do with the reconstitution. Historically, academic evidence, the academic literature indicates that over long periods of time, small cap stocks do outperform big cap stocks because they're riskier and value stocks do outperform growth stocks over very long periods. Unfortunately, this hasn't happened with either one of them in the last 15 years. So it has value investors and small cap investors and small cap value investors pulling

out their hair, frankly. There's a lot of discussions about this. Some feel that value doesn't work as well anymore or buying small caps. Some feel that the rise of indexing and the fact that most people put their money in big cap index funds that are growth oriented like the S&P 500 is sort of distorting the returns overall. Just money keeps mechanically going into some of these big cap names and maybe that's a factor in it. But I can tell you it doesn't have anything. You're right. It's underperforming the Russell 2000 and doesn't have anything to do with the reconstitution, unfortunately. Oh, well, Bob Pisani, thanks. Well, when we come back, the S&P 500, as Bob was just saying,

off to a very strong start historically this year. Our next guest says the bull should continue to run in the second half. That doesn't mean there's an all clear to invest in equities. You'll find out why next. Plus, we're awaiting the bank's plans for buybacks and dividends following Wednesday's stress test results. We're going to bring you those breaking headlines as we get them. And remember MoviePass? The company gained fame for its unlimited $10 monthly movie subscriptions and it died and came back. It just received backing from a venture fund owned by CNBC's

parent company, Comcast. We're going to hear from MoviePass' co-founder and CEO about this second act. Overtime's back in two. Welcome back to Overtime. We've got a news alert out of the Treasury Department. Megan Casella has the details. Megan. John, the Treasury Department has finalized new rules to require brokers of digital assets to report all sales and proceeds to the IRS. It's a step essentially toward treating digital assets and crypto a lot more like equities. It's set to kick in in 2026, beginning for all sales from 2025. And Treasury officials note that it will not increase the amount of taxes owed at all, but it formalizes the reporting requirements for custodial brokers. The agency says more rules will be coming later this year for the non-custodial

brokers. Now, Treasury officials highlighted that the new rules should not change anything for crypto holders themselves, only for those brokers. Industry has not, though, been thrilled about this. Treasury received some 45,000 public comments when they initially published the rules last fall. Companies were complaining chiefly about the cost of compliance. Coinbase is one company that will be affected by these requirements, and they argued in the fall that compliance could cost the industry an estimated $419 billion in startup costs and then $76 billion annually after that. Guys.

All right. Thank you, Megan. Some software company is going to make money off of that. Well, back to the broader markets and the big question today, what does the second half hold in store? 36% of investors polled in CNBC's Delivering Alpha survey say they expect a 5% or greater drop in the S&P 500 and NASDAQ by autumn. Compared to 32%, we see a 5% move higher by fall and about another third who think will be range bound for the next few months. Our next guest says investors should not be underweight equities given the market's strong first half. Joining us now is 314 co-founder and strategist Warren Pies. Warren, good to see you. So going back to 1950, you say there have

been 23 years where the S&P was up 10 percent or more in the first half like this year, more than 80 percent of the time it was even higher in the first half like this year. More than 80% of the time, it was even higher in the second half, right? Yeah, thank you for having me, John. That's exactly right. I think to understand the second half of the year, you have to kind of shed some of these intuitions that aren't correct about the market. And one of those is that if you have a strong first half, you should give some of that back in the second half. And to really think about what's going on, in our view, mechanically in the market right now, is you have to strong first half, you should give some of that back in the second half. And to really think about what's going on in our view mechanically in the market right now is to go back to the beginning of the year. 2023 was a tough year for the consensus strategist community. And so they all were kind of moving into this normal playbook.

And that involved a presidential election year. And they said that playbook says weak first half, strong second half. So this immediate first half rally, which we were calling for, has really caught a lot of people off sides. And there's, quite frankly, just a lot of investors that are behind the eight ball. And when you get to the midpoint of a year like this, what history tells us is that there's basically a catch up, a chase of the rally through the second half into year end. And I would say that's the most likely outcome. As you said, there's been 23 years where we're up more than 10% in the first half. 19 out of those 23 years, you continue higher in the second half. And if you compare them to all other years in the market, it's a significantly better

second half. So it's a little bit unintuitive. But when you think about the chase and the pressure the calendar puts on asset management community, that's what I think is at work here going into H2. At the same time, this rally in equities has been historically narrow. So it's possible that a lot of stocks could do pretty well in the second half, but some big ones could not do well. And that could that could ruin the overall effect, right? Yeah, I mean, I think that it's that's been kind of a concern or a thought that a lot of people have been caught up in. If you go back to the beginning of last year, there was this mega cap tech divergence that happened again in the fall. It happened earlier in Q1 of this year. Each time this has happened, there's been a whole bunch of concerns like, will the big cap tech stocks fade? Will the rest of the market fail to catch

up? And really what's happened is every time we've had narrow breadth, the rest of the market, it hasn't fully caught up to big cap tech, but it's gotten dragged along for the ride. And that's kind of what I would anticipate to happen this time around, too. It's something we're watching. Equal weight S&P 500 hasn't made a new high confirming the S&P 500's new high back on May 15th. So you have like 90 days usually historically for that to happen. But in my opinion, the base case is a broadening out, you know, and it might not mean that the bottom 493 surpassed the mag seven, but I think they're going to get drug along for this H2 rally for sure. So in your opinion, how will we really know when we're entering a stock pickers market? Because it seems like we haven't been in one in quite a while.

If you just sort of stuck with the S&P 500 for a while now, you've been OK. You know, the truth is no one you know, it's hard to beat the market, but this is a stock pickers market. I mean, rather people want to admit or not, maybe you're just not a great stock picker. Our main system, it's a quality based system, and we pick 20 stocks every month and beat in the market for three straight years. And if you look at correlations in the in the in the market, you know, know we are pretty low right now we compare we take the correlation of every stock in the s&p 500 to the index and uh it's on the very low side historically so if not now when when are you if you're not a good stock picker now then maybe you're just not

a good stock picker is what i'd say and so um i think that it's important to understand the dynamics that are at play and in this broadening And there's a time and a place for value. There's a time and a place for small caps. I don't think that this is the time or the place, though, for either of those spots. All right. Yeah, I guess it's always a stock picker's market as long as you don't pick the wrong stocks. Warren Pius, thank you. Well, we are still awaiting news from the nation's biggest banks about their buyback and dividend plans following this week's Fed stress tests.

We're going to bring you those headlines as soon as they come. And after the break, the CEO of Nokia weighs in on his just announced $2.3 billion deal for Infinera as shares of that company jump more than 15 percent today. And some IPO news just crossing. Risk management software provider Solera just filed with the SEC to go public under the symbol SLRA. Overtime, we'll be right back. Welcome back to Overtime. Shares of networking gear maker Infinera popped nearly 16% today after Nokia announced plans to buy it for $2.3 billion. I spoke with Nokia CEO Pekka Lundmark today about the acquisition. He expects the deal

to close within 12 months and boost Nokia's chances in the battle with Huawei and Sienna. Well, first of all, it gives us more scale. The combined revenue of the two companies is around three and a half billion, which gives us the needed resources to continue to spend enough dollars on R&D. And of course, I mean, the service provider market will not be a growth market. The growth will be driven by AI and cloud and data centers. And there's two aspects of that. There is a highly attractive data center interconnect market. But then in addition to that, and this is a particular strength of Infinera, is intradata center connections, which is basically technologies that connect servers inside data centers to each other.

And optical technologies are playing a stronger and stronger role there to increase the speed, increase the efficiency of the data center, and very importantly, to drive down the power consumption of the data center. There are some regulatory hurdles that this deal would have to clear. And there's also the issue of making sure that as they're working through this potential buy, they don't lose a stride and let competitors eat their lunch. Pekka Lundmark said he was very determined, of course, for that not to happen. Well, time for a CNBC News update now with Kate Rogers. Kate. Hi, John. Former Trump White House aide Steve Bannon must report to prison by Monday.

The Supreme Court rejecting today Bannon's last-minute bid to delay his four-month prison sentence. Bannon was convicted in 2022 on two counts of contempt of Congress for defying subpoenas from the House January 6th committee. 47.9 million people tuned in to watch Thursday's presidential debate across all networks and streaming platforms, according to CNN, but that's still lower than 2020, when 73 million tuned in to watch the first Biden-Trump debate. Thursday's debate was aired across all major broadcast and cable news networks. And the Boeing Starliner and its two astronauts won't be returning to Earth until engineers are done testing to investigate issues with the Starcraft's thrusters. NASA engineers said earlier this afternoon that the testing could take a couple of weeks. The Starliner has been docked at the ISS since June 6th, its mission drawn out due to

a series of issues involving its thrusters and helium leaks. John, back over to you. All right, Kate, thanks. Now we've got breaking news on bank capital return plans. Leslie Picker has details. Leslie? Hi, John. Yes, we received a statement from Bank of America. They put out a press release saying the firm would be increasing by 8 percent its quarterly dividend to 26 cents per share. Of course this is following the results of the stress tests from earlier this week. Increasing the quarterly dividend 8 percent to 26 cents per share. You can see Bank of America shares moving slightly higher in after hours trading on this news. We're going to keep monitoring the wires for further announcements following those stress tests on Wednesday evening, guys. All right.

Leslie, thank you. Going to keep looking out for those. And up next, is the Fed missing the big picture? Mike Santoli is going to look at whether policy is starting to look too tight after today's inflation print. We'll be right back. Welcome back. Recent economic data shows cooling inflation. Is it time for the Fed to loosen up? Mike Santoli, what does the data say?

Well, the data say the case is building for that, John, but also the Fed's own framework would suggest that they might be nearing that point. So with this morning's numbers, core PCE coming in at a two point six percent annualized rate. That's down, as you can see, that's the orange line there. And it has gone well below about two and a half percentage points below the federal funds rate that is controlled by the Fed. And that has been steady since last July. Now, you see in prior cycles, you did have long periods where Fed funds rate vastly exceeded core PCE. The difference this time, the Fed was chasing inflation higher

as opposed to being proactive in raising rates. And you see those shaded areas are recessions. So sometimes the predicate for a recession is too tight policy. We're less interest rate sensitive this time around, I would argue. But it does leave room for those so-called insurance or optional cuts, maybe a couple or a few of them, once we get maybe a little more confirmation to the downside on inflation. At least that's the way the Fed and most of Wall Street's looking at it, John. All right. What does the data say? What do

the data say? I don't know. Mike, thanks. We have more bank capital return plans. I know that. Leslie Picker has the details. Leslie. Hi, John. Yeah, some sizable headlines here. J.P. Morgan increasing its dividend again. If you recall, they did kind of an off-cycle dividend increase recently, and they also authorized a $30 billion repurchase program that's effective July 1st. So the increase in dividend is to $1.25 per share. That's the quarterly common stock dividend up from $1.15 per share for the third quarter of 2024. And the board of directors authorized a new common share repurchase program of $30 billion. They say that will be used at the management's discretion and timing of repurchases and the exact amount that may be repurchased will be subject to various considerations.

Chairman and CEO of JPMorgan Chase, Jamie Dimon, also has a statement here saying, quote, "'The strength of our company allows us "'to continually invest in building our businesses "'for the future, pay a sustainable dividend, "'and return any remaining excess capital to our shareholders as we see fit. The board's intended dividend increase, our second this year, would represent a sustainable level of capital distribution to our shareholders, which is

supported by our strong financial performance and continuous investments in the business. We also got a separate press release from Citigroup, which plans to increase its dividend as well, increasing its quarterly dividend from 53 cents per share to 56 cents per share, again, on the basis of these stress tests from Wednesday. And Citi CEO Jane Frazier also has a statement in this press release saying the results of this year's stress test again demonstrate Citi's financial strength and the resilience of our business model. So we're going to keep monitoring these as they come out today. But again, some significant dividend and buyback announcements from J.P. Morgan, as well as a dividend announcement from Citigroup as well, guys. All right, Leslie, thanks. My back of the envelope shows Citi's dividend up 5.6%.

B of A, you said 8%. JPM's second hike at 8.7% plus a buyback. All right. Up next, much more on the Fed and the banks. Former Kansas City Fed President Tom Honig is going to join us with his outlook for rates, his reaction to bank stress test results, and the capital allocation. Be right back. Welcome back to Overtime. Today's PCE data showing inflation coming in in line with estimates.

San Francisco Fed President Mary Daly saying the recent data is a sign that monetary policy is working. Joining us now to discuss is Thomas Honig, former president of the Kansas City Federal Reserve. Thomas, good to see you. So Mike Santoli was just telling us the data shows is getting closer to a point where the Fed can loosen up. You seem to be saying not so close. Well, I think it's not so close when you think about it. The month over month data on this on the PCE was pretty good, 0.1%, but year-over-year, it's still 2.6, down slightly from 2.7. So you still have inflationary impulse in the economy. And I think hopefully the Fed has learned from their what I'll call air of late last year when they got ahead of themselves with suggesting there's more cuts ahead.

When the inflation number stays around 3%, which I think it is, and the growth rate is around 2%, you have pretty much a steady state. And I think inflation will continue to come down in this mildly tight position, but very slowly. I really would be surprised if the Fed suddenly changed its mind and began to talk about rate cuts in September or sometime in the fall. Okay. Well, there's not much a year left. So is it your suggestion that there's no clear sign that we need one this year? I think there's no clear sign by any means. I think inflation is still fairly high. When you look at the CPI, which is well above 3 percent, while that's not the Fed's preferred, it's still an important indicator of inflation. And I don't think I don't think they're ready for cuts right now. And I think

they know that. What do you make of the stress tests and particularly the point about consumer credit and the stress that certain consumers are feeling? Well, I think the stress test was good to turn towards that issue. Credit card debt has increased. Non-performings on credit cards have also increased, as well as commercial industrial loans, kind of the mainstay of these banks that are in the stress test. So I think those were important tests. They all passed. But I think caution is always a good idea when you're in a higher interest rate environment. And the future is a little bit uncertain as we go forward from here in terms of the growth of

the economy. So far on track, and we'll see how the interest rate effects continue through the end of the year. What broader impact do you think this strong first half performance of the S&P 500 is going to have? Well, I think that's reflecting the fact that they are anticipating rate cuts, and therefore you kind of have a one-side bet. I think clearly everyone knows that the next move will be down. And I think the market recognizes that and is pricing that into the stock market as they go forward from here. So I think one follows the other. The environment is that there will be a rate cut, no win. But in

that environment, with the economy doing fairly well, the market should do well also, and it is. And one of the things, there's still a lot of liquidity in the market. Quantitative tiding has been tapered back. There's a lot of liquidity in the market. And that's, I think, food for growth in the stock market going forward from here. All right. Thomas Honig, thank you. Good to be with you. Thank you for having me. Well, now we've got more bank capital return plans. Leslie Picker's back. Leslie? Hi, John. Yes, two more of these. We'll start with Wells Fargo because that firm announcing its intention to raise its dividend by 14 percent to 40 cents per share from 35 cents per share on a quarterly basis subject to board approval.

The firm also says it routinely assesses the capacity to buy back stock. But no new plan is announced today as a result of these stress tests from earlier this week. We also received news from Morgan Stanley with plans to increase its dividend of 7.5 cents per share for the third year in a row. So they're increasing the dividend by 7.5 cents per share for the third year in a row, making the quarterly common stock dividend of 0.925 of a dollar per share. So it's basically, if you round it up, 93 cents, but 0.925 of a dollar per share from Morgan Stanley, also renewing a $20 billion share repurchase program at that firm. We're continuing to monitor these as they come out out and we'll bring it to you when we have them, John. All right. Leslie Picker, thank you. Now, remember MoviePass,

it's getting a second act. Up next, you're going to hear from the company's co-founder and CEO about what's different this time around and why consumers are still spending on experiences. We'll be right back. Well, summer movie season is off to a strong start. Inside Out 2 this weekend could become the fastest animated movie to a billion dollars at the box office. Today, let's take time out with a CEO who loves movie theaters and believes there's still room for innovation in ticketing. Stacey Spikes is the co-founder and CEO of MoviePass. Yes, you heard me right. MoviePass. It still exists, or maybe I should say it exists again. Stacey was running it when it was successful before private equity bought it out and brought in new leaders who

set it on a path to bankruptcy. Remember unlimited movies for 10 bucks a month? That couldn't last. Well, MoviePass now lets you see up to three movies a month for $10 depending on the day and time. Spikes was no stranger to the entertainment industry when he started the original MoviePass. He moved from Houston to LA at 18 and worked his way up the ladder in the music industry, then in film. By the time I was 21, because everyone joining the label wanted Boyz II Men's product manager, I had Queen Latifah, Boyz II Men, Eddie Murphy, Spike Lee, and I was doing Spike's soundtracks like Jungle Fever and Do the Right Thing. And so it's crazy how at such a young age, I was already four or five years

on interns, right? I had that much time ahead of them because I was already in the mix. In 2011, Spikes and his co-founder launched MoviePass, which cracked the code to letting people buy movie tickets with the help of a smartphone and a subscription service. Scaling the company, though, was expensive, and an investor put new management in charge that pushed Spikes out, spent wildly, bankrupted the company. And then two and a half years ago, during COVID, Spikes bought MoviePass's assets out of bankruptcy when few believed that theaters had a future. You know, there's this moment sitting at home that I realized what made those companies, they didn't take, they may have gotten the company, but they didn't get what created the company. And I don't, it was just like this, ah, you know what I have, I have everything that I need.

And, um, and so I created another startup and I got it funded. I, I, we raised $3 million pretty fast and, um, got going out of the gate. And then when MoviePass went into bankruptcy, I looked around and found out no one had bought it. I went and bought it back. So I took my intelligence, made a new company, funded that company, and went and bought the asset back. And now I have that company and this company. So the timeout takeaway, what's old is new. Consumers might be stretched, but they're still spending on experiences, including the right movies. And theaters are only 30 percent full overall, less outside of weekends. Spikes thinks he can use subscriptions and A.I. to drive incremental spending for theaters and get movie watchers a deal. He says MoviePass just turned its first annual profit earlier this year.

And this month it got an equity investment from Forecast Labs. That's a venture group owned by CNBC's parent, Comcast. We'll see if the sequel to MoviePass turns out better than the original. Well, we have more bank capital return plans. Leslie Picker is back with those. Leslie. Hi, John. Yes, we want to flag a few interesting movers for you. BNY reporting a quarterly cash

dividend hike of about 12% to 47 cents per share from 42 cents per share. That announcement coming a little bit ago, you can see shares up 0.2%. They were up a little bit more when the announcement first hit. They've come back a little bit. Also, Citizens announcing a $656 million increase in share repurchase authorization to $1.25 billion at Citizens. Again, this is on the heels of the stress test results we saw earlier this week, John. All right. A lot of money flowing, Leslie Picker. Thank you. Up next, all the key economic data that could move the market next week, including the June jobs report, plus a can't-miss interview on Monday that we're going to tell you all about.

We'll be right back. Welcome back to Overtime. Earnings season slows to a trickle next week with Constellation Brands, the only S&P 500 stock set to report. But it's going to be another huge week of economic data. On Monday, we'll get the ISM manufacturing and construction spending reports. Tuesday brings June auto sales and jolts. That's a job openings and labor turnover survey. Wednesday is a holiday shortened trading session with a special edition of overtime from 1 to 2.30 p.m. Eastern. That's

going to cover the latest Fed minutes. The market is closed Thursday for July 4th, and investors are going to closely watch the June jobs report on Friday. But also on Monday, a big interview you don't want to miss. I'll be speaking with new Amazon Web Services CEO Matt Garman. It's his first major interview since taking the role earlier this month as the stock hits all-time highs, topping a $2 trillion market cap this week. I've spoken in the past extensively with former AWS CEOs Andy Jassy and Adam Solipski, and Matt Garman is going to be the third in that chair at a critical time for the stock and for the strategy. Mike Santoli with AI being such a key factor in mega cap domination of the markets.

Yeah. And investors kind of arguably belatedly trying to build in a premium with Amazon in terms of the valuation, in terms of where it's been in the last couple of years, because probably seen as having some optionality in that direction. Also, I think also just defensive consumer play, as people are a little bit concerned about the state of the consumer. Next week, as you mentioned, we're going to be back to macro data. We're going to know what the setup is for the Fed in a couple of weeks. And this week has been mostly about earnings. We're going to transition over to the big picture.

What a first half it was, Mike. 15% higher on the S&P. That's quite something. You're going to hear a lot of talk on Monday about how that usually foretells further upside down the road. But obviously nothing guaranteed. Nothing guaranteed, of course, Mike. See you on the other side. That's going to do it for overtime.

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