Closing Bell - Closing Bell Overtime: Trading the Market’s Next Move 1/27/23

Episode Date: January 27, 2023

Investors are gearing up for a massive week ahead. So, what’s at stake for your money? Wharton School professor Jeremy Siegel gives his forecast for the Fed, stocks and more. Plus, Courtney Garcia of Payne Capital says forget tech! She explains where she is seeing opportunity in the market right now. And, Capital Wealth Planning’s Kevin Simpson breaks down his latest trades and some new top picks for your portfolio.

All right, Sarah, thank you very much and welcome everybody to this Friday edition of Overtime. I'm Scott Wapner. You just heard the bells. We're just getting started from post nine here at the New York Stock Exchange. In just a little bit, I'll speak to investor Kevin Simpson. We've told you how he crushed the market last year, and now he's back with some new trades this hour that he will tell you about in just a bit.

We begin, though, with our talk of the tape, the massive week ahead for your money, why stocks are rallying ahead of it and what all of it means to the market's next move. Let's ask Professor Jeremy Siegel of the Wharton School. He makes his case right here that stocks can still go up a lot more. Professor, welcome back. It is good to see you. When I last visited with you on this show on December 30th, you said the S&P could do 15 percent this year and that the first half of the year might be a lot better than many people thought. What did you think people were missing when you said that? Well, I never saw so many people so bearish. And I think, as I mentioned,

when everyone's on one side of the market, the market's going to do the opposite thing. So much bearishness is built in that any crumb of good news, such as the inflation news that we've been getting, interpreted positively by the market. And of course, the hope of a pivot by the Fed next week is critically important. We have to get no more than 25 basis points. 50 would be, I think, a disaster. We need to get 25. But we also need to get the messaging that not only does the Fed see that their policy is working, but that they are very near the end of their tightening, not, oh, we have more work to do. I don't think the market will take those words very well. I think 25 basis points is all they should do. By the way, we got the December money supply, Scott, which is, as you know, something that I look at closely. 2022, the slowest, lowest growth of the money supply

since the Great Depression of the 1930s. Now, that's something to think about. We have the greatest inversion of the Treasury yield curve in over 40 years, the most reliable single indicator of a recession. That's something to think about. Why would the Fed want to continue and even increase the inversion of the yield curve? That's beyond me. All right. So there's a lot there, Professor.

And you used a very interesting word. You use the word hope about what the market hopes next week, about what you hope next week. And I remember the Shawshank Redemption professor when they said hope's a dangerous thing. And that's what some people say now, that it's a false hope, OK, that it's a false hope because the Fed is more intent on making sure that inflation is not only down, but that it doesn't come back and that this whole move predicated on this idea that the Fed is going to make a pivot or is near done is a false hope. How do you respond? Well, if you shrink the money supply, inflation is not going to come back. You know, you know, they talked about the stop and go policy of the 1970s. So really, in terms of money, they kept on pouring it on and

on and on. And there was continued inflation. We have a completely different situation today. And as I pointed out, if you use current housing data, not the misleading housing data of the Bureau, which is average, you know, months and months into the past, you have negative inflation right now. So we have nothing like the 1970s. They should recognize how tight they have become so quickly that risked the economy in a recession. It's not a stop and go situation like the 1970s at all. So they don't, you know, and they also have to recognize, and Chairman Powell says this himself, but then sometimes the way he talks, he doesn't seem like he understands it. Monetary policy works with legs. All that tightening, a lot of it is yet to be felt. You're in real negative territory for inflation.

You do see a slowing of the real economy. I mean, GDP was up, but the composition was not particularly good. The only thing is the labor market, that's still tight. That's the only thing is the labor market, that's still tight. That's the only thing. And as we pointed out, that's the worker trying to catch up to all the purchasing power that he and she lost over the last two and a half years. So when people say, but Professor, the economy is really strong, or it seems to be pretty strong, or at least resilient at this moment. Do you think that the economy is stronger than we thought at this moment or actually worse than it seems? How would you answer that question? We're getting divergent. On the real indicators, it's soft.

On the labor market indicators, I have to admit, I myself, looking at initial jobless claims, which I've always said is an early indicator, I am surprised on how tight that is, if that data is to be believed. But that's the last vestige of what I say is a tight market. All the other markets that you look at, we're going to get the K-Shore housing index next week. That's expected to be down, I think, for the fifth consecutive month. We're going to get an awful lot of data along with the Fed. It's one of the biggest weeks we had. The real data has been soft but holding up. But we have to take the warning. Monetary policy works with a leg. And I am worried that if they don't start tapering, not only tapering their increases, but stopping their

increases, that we could hit a recession in the second half. That's still a live possibility, I think, if the Fed makes a mistake and tightens three or four more times. Let me ask you your opinion on what's been leading this rally in many respects. It's the stuff that was most shorted. It's the not profitable tech. I mean, EV stocks are up 25 percent or more year to date. Professor Tesla's gone from $101 to $170. Crypto's ripping. Other unprofitable tech names are ripping as well. You really look at all of that and say that this is justified? Don't forget, all those assets you talked about

collapsed in the last two months of 2022. I mean, basically what's happened is, I mean, a lot of tax selling, a lot of technical selling. And now when the new year came along, that eased up. And by the way, another very important reason why a lot of those tech names have done better has been the drop of interest rates. I mean, you know, the Treasury rate is down, the TIPS rate is down, and that is very important for these long-duration assets. So I can explain that bounce back in tech. Do I think it has legs? I don't think it's going to outperform the rest of the market from this point on for the rest of the year. I think it's a technical snapback from intense selling in November and

December, aided by the drop in interest rates that we've seen. So you would urge investors to fade it, so to speak? I would fade the tech rally? I would fade the tech rally. I would fade the tech rally if I were doing relative allocation, for instance, between value and growth. I mean, we had a big outperformance of value stocks last year. And if you do historical studies, it's not usually a one-year phenomenon. It usually goes on for two or three years. You don't usually bounce back and forth. Again, you know, statistically anything can happen, but that's the way I would bet my money. Okay. I appreciate that. Let's expand the conversation, Professor. Let's bring in a couple more voices and we can debate this whole thing. Dan Greenhouse of Solus Alternative

Asset Management with me here at Post 9. Marcy McGregor of Maryland Bank of America Private Bank. It's great to have everybody with us. All right, Marcy, I go to you first. I would fade the tech rally. You just heard the professor say that. He doesn't believe in that. Tesla from 101 to 170 and some of these other shortened, highly shorted and unprofitable names. What do you make of that?

Well, I think the thing we're not talking about with tech is that, you know, the U.S. economy is like a balloon leaking air right now. That's going to impact IT budgets for the next year or so. So I think that's going to be the next headwind for tech as a sector. The one area I'm watching, though, is semis. Semis have perked up a little bit. They're a great leading indicator. So I would watch semis right now. But I agree with Professor. I would fade the tech rally and still be a bit cautious on tech. What's what's your view, Dan Greenhouse, on the market at large? Is this move something to believe and buy into or or fade? Not necessarily just talking about tech, but the whole thing, right? We're not that far away from 4,100 based on how we finished today. Yeah. Listen, the market is

reflecting some of the optimistic underpinnings. I think there's this whole idea that people are getting more optimistic because the market is going up. I would actually take the other side of that and say the market is going up for reasons for which you would be optimistic, and then people are following that. But if I could just pivot back to something Professor Siegel said, that is the most optimistic take on a series of negative data points I've ever seen in my life. And kudos to the professor for that. He talked about the yield curve, one of the most terrific leading indicators being as deeply negative as we've seen in decades. The housing market obviously is doing quite poorly, although there are some optimistic signs right now. It's spread to the manufacturing sector. There are a whole host of reasons you would want to be pessimistic right now. And oh, by the way,

the Federal Reserve is still raising rates and not likely to cut them anytime soon. And yet we put a terrifically optimistic spin on that. I find that I don't know what the right adjective would be, but we'll go with surprising. He really wants to say something stronger, Professor. No. But I will let you respond to what he said. Well, I guess I said 15 percent for the year. And, you know, what percent has been the S&P so far when we were talking at the very end of December? You know, listen, you know, earnings this year are expected to come in lower than last year. It's not like we're coming out of peak earnings into a recession. If worse comes to worse, that we have a recession, I'm going to tell you,

yeah, I don't, there's no way that stocks are going to make headlines. I mean, if there is going to if they don't get the message and stop and start lowering, not not just hold it for months and months on end, but lowering it and we have a recession, I don't see where I can make much progress from four thousand forty one hundred. Wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, lowering it. So, yeah, I think you're saying that in order lower rates like the Fed needs to cut rates to get to the target, which you you're suggesting. Yeah, I think the Fed I think it's likely the Fed is actually going to cut rates in the second half of the year. I think they're going to see the slowdown in the economy. They're going to pronounce inflation over. Remember, they think that if inflation is over, then, you know,

the rate that they should be on federal funds is two and a half. I actually think it should be a little lower, but that's by what they say it should be. You know, as I keep on saying, don't look at the year over year that contains 11 months of old inflation. Take a look at what the new inflation is. We are very close to the target. If we use real housing data, we're below the target. So at that particular point, if the economy softens, if we see any sort of easing of that market, why wouldn't the Fed start moving back and should move back quickly to its two.5% Fed funds goal. Marcy, is this but a dream, but a dream from the professor that the Fed's going to cut rates in the second half of the year, and that's going to spur a rally in stocks that gets

you near a 15% gain this year? So I do think inflation is falling faster than many people are anticipating right now. But next week, while I think the Fed down shifts to 25 basis points, I think they're looking at the week, while I think the Fed downshifts to 25 basis points, I think they're looking at the labor market. I think they want to avoid any further easing of financial conditions. So I think we're going to have a Fed that sounds really cautious next week. My base case is that the Fed may pause in the spring, but they're going to hold policy tight for the bulk of this year. I do think by the end of this year, they're at least going to hold policy tight for the bulk of this year. I do think by the end of this year, they're at least going to sound a lot more dovish and probably be talking about rate lowering rates.

But, you know, I think they're going to spend a lot of this year in pause mode. And I think that's a risk. The economy is slowing. Inflation is falling quickly. But our base case is that you do get a mild recession because I think the Fed overcorrecting is a real risk right now. See, Dan, you suggest that, you know, you're more conflicted. That's the word that you used with our producers than you've been in years. And I feel like that goes back to the question in which I asked the professor, is the economy stronger than we thought or weaker than it seems? I'll go both. You know, we talked about this last time.

I think the economy is unquestionably stronger than we thought. Professor Siegel mentioned the strength in the labor market being surprising to him. I would agree. And everybody to whom I speak agrees the labor market is stronger than they would have thought, call it six or 12 months ago. Because stronger than we thought leads you to believe that you might have a soft landing. Weaker than it seems then brings the worry of the Fed overdoing it, as we've suggested. And that puts you over a tipping point because they're impatient and they don't get it. Yeah, well, listen, it's not that they don't get it. I mean, the economy is unquestionably weaker than

it seems. If it seems is defined by like the headline GDP number, which is called 3% in each of the last two quarters. The economy was much weaker than that number would suggest. I think the problem that I have, and it sounds like I'm maybe more aligned with something that Marcy alluded to, is as you get further into the year and companies start losing the pricing power that they've had, particularly last year, and margins start to be threatened, what's the first thing these companies are going to do, presumably, to hold those margins? And I assume it's going to be to at least stop hiring to the degree that we've seen, if not outright lay people off. And that is the last leg of the stool, as the professor alluded to, and we've all made the case for months. The last leg of the stool is to strengthen the

labor market. And if that gives out, you're left with weakness in housing, weakness in manufacturing, and now a weakening labor market and an elevated Fed funds rate that permeates the entire economy. That is not a terrific backdrop for stocks. Professor, what if we were to suggest that at this point, based on, as you said, what the Fed has already done, that a recession is all but a foregone conclusion at this point? It is simply a matter of whether it's a deeper recession or we just, you know, scratch below the surface, so to speak. And it's a soft, a milder recession. Well, yeah, there's two things that make stock prices.

One is earnings. And the second is the interest rate. If the interest rate falls, as I expect, that can offset a softer earnings picture. But I want to comment on further on that labor market. I think a lot of firms overhired over the last year, year and a half. I mean, we saw what happened with tax firms. I think it permeated the economy. I mean, we we saw record drop in productivity in 2022 output per hour work, a lot of overh, training, all that. As soon as we see that demand weakening and we do see layoffs, oh my God, you could say that that's bad. Actually, that might improve the margins of many corporations. Getting rid of excess workers, having a labor force,

we're saying, hey, I don't have to hire this person and keep them on because I, you know, think I can't get anyone else. But there is a labor market out there that I can pick if that demand comes back is an offset to weakness and demand that can keep margins and profits higher than many fear it might go down. You know, Marcy, I know we're so fixated on the Fed and rightfully so. But next week, obviously, is mega cap tech, right? Take Microsoft out. They've already recorded what's hanging on that. Just given how that sector has started the year, maybe the second or third best sector year to date is technology, as we said, that, you know, the Nasdaq's up something like 11 percent since the start of the year. What's hanging on next week ex-Fed? Yeah, I think a fair amount. You know, earnings have been pretty disappointing so far this quarter.

You know, if this trend continues, we're on track for our first negative year-over-year quarter of EPS since third quarter of 2020. Guidance has been really weak. So I do think a lot of attention will be paid to tech earnings. But I also think this market is giving us some opportunity elsewhere. I like health care as my favorite sector. That's been one of the real underperformers so far in this rally and so far this year. So I would be using this market that I think is pricing in this kind of late cycle optimism right now. And I would be using it to reposition. that I think is pricing in this kind of late cycle optimism right now. And I would be using it to reposition because I think while we have some volatility ahead,

if I think 12 months out, I'm a lot more positive than where I am today with the market that feels like it's pricing in perfection a little bit. Dan, you want to take that issue of what's at stake next week, right? Given what Microsoft said. Microsoft, by the way, was able to fight its way back pretty well. Really impressive. And I'm wondering at this point, like, what's really going to shock us, right? We know that sort of revenue growth from the larger technology companies, the mega caps, has slowed from the growth rates of the past at the same time when the multiples have already re-rated a lot. Yeah, I mean, listen, we know, as you mentioned, earnings and revenue growth is going to be the slowest for many of them in many quarters, if not years. We know that they've

already taken steps to lay people off and right-size the cost structure. But just on the labor side of things, the technology sector specifically is way out front in terms of adding headcount since 2009. I'm sorry, since 2019. And so you're talking about, for the tech sector specifically, I think it's about a 20% increase in headcount for the entire space relative to just the end of 2019. What we've seen so far, while sizable and awful for everybody involved that's lost a job, is just a fraction of the headcount that's been added since. And I think if this weakness continues, you're probably going to have to see more, at least from that sector. So, Professor, leave us with a thought here. As much as you look at the market and all parts of it,

what's cheap to you? If you said you'd fade the tech rally, what is still cheap? Well, for a long-term investor, valuation is everything. Short-term investor, momentum is almost everything. Long-term valuation, I just looked at the value. I think NASDAQ, now I know that's not just tech, selling for 25 times earnings projected. S&P is 17. The value part of S&P is 13 or 14. Europe, which was 10 last year, has rallied 10%. So it's now 11, 11.5. Asia is 12, 13. I mean, around the world, cheaper than the United States has the worm turned so that finally we might have outperformance of global stocks relative to the U.S. That very well could be in the cards for 2023. You guys all have a great weekend. I really enjoyed this conversation. Professor, thank you as always. Thank you. You always bring it. And we appreciate that. Marcy, we'll see you soon. Dan Greenhouse right here at Post 9. We'll catch you soon as well. Let's get to our Twitter question of the day. We want to know which big tech earnings are you most focused on next week?

Is it Meta or Alphabet or Amazon or Apple? Head to at CNBC Overtime on Twitter. Cast your vote. We will share the results a little later on in the hour. We're just getting started, though, here in Overtime. Up next, forget big tech. That is the message from Payne Capital's Courtney Garcia as we head into a huge week for tech earnings. She also, by the way, agrees with the professor on something he said. And I know what that is.

And you will, too, when she joins me here at Post 9 right after this. All right. You just heard Professor Siegel just a few moments ago say that maybe this is the year for international stocks over the U.S. Well, joining me now right now at Post 9, CNBC contributor Courtney Garcia of Payne Capital Managements. Welcome back. It's nice to see you. Thanks for having me. The minute the professor said that, I remember, you know what? I read Courtney's notes and she likes international over the U.S. too. Is that right? That's correct. Why? You know, what's really happened here, especially over the last year, is international just been so downcast and the valuation has become so much more attractive. I mean, take the NASDAQ.

That trades about 20 times earnings, whereas your emerging markets trade about 11 times earnings. Your European companies trade about 12 times earnings. And you're already seeing how much they've bounced back since middle of October. But especially with China reopening, we went from all of a sudden Europe was definitely going into recession to now we're saying, OK, well, maybe they can avoid a recession. China's coming back online. The picture has completely changed. I think that story is going to continue this year. You can do it through developed markets, ETFs and emerging market ETFs like both.

Both. Correct. OK, let's turn it back to how we were going to begin before the professor surprised me, frankly, in what he said. This idea of what's hanging on next week. I hope you heard him suggest that we should fade the rally in tech. Do you agree with that? Yeah, really, almost everything he said.

I was listening to the whole thing. And yeah, we were right on that page. Because I said NASDAQ's up like 11% to start the year. It's doing fantastic. But I don't think really what's changed is a lot of these companies are still really high valuations. And even, you know, regardless of what the Fed does, right? So even if they raise 25 basis points and even if they pause after that, we're still likely going to be in this higher rate

environment, this higher for longer environment. And those higher valuation companies are going to be under pressure. And I don't see this as that different than what happened in the early 2000s. You had a lot of these false starts with your tech companies where it seemed like the rally was, you know, the dip was over. You could go back in. But it wasn't right because you had several of those. But ultimately, the valuations came back down. And again, you know what happened over that same time period? International outperformed. I don't think this is that different environment than we were back then. Are you separating the ones we're looking at on the screen right now, the apples and the metas and the Microsoft, Amazon's alphabets from some of the ones that

I mentioned to the professor, like the most shorted name, some unprofitable tech, or is it just fade tech altogether? It's going to be a value over growth kind of year. We're definitely doing value over growth. That being said, we still, we still own growth, right? I'm just not actively adding to that currently. But yes, your, your higher risk assets. So think of like your Bitcoin's doing really well, your meme stock's doing really well. You have this big risk on assets. I would put your non-profitable companies in a different category as like your Apples and your girls or Microsofts. I'm not touching either of those, but it's those non-profitable companies. Those specifically are the ones I'm definitely not touching right now.

What you just mentioned, like, you know, Bitcoin rallying a lot, Tesla, et cetera. Does that make you less of a believer in the overall rally in the market itself? It doesn't. I think this rally can continue. I just think where you think it's real. I do. I do. But the tech rally is different than the overall market. Right. And I think this is where things get confused because tech has been such a large concentration of the S&P 500. So when you think of the markets, you're thinking of tech. So it has been that if tech does well, the markets do well and vice versa. But I think there's a lot of sectors of the market that can continue to do well, even if tech doesn't necessarily continue its course here.

Let me ask you this, then. Why do you think we're rallying? What's this about? I think the economy is on a lot better footing than I think people are giving it credit for, right? I mean, inflation is about six months of inflation coming down, which is really good news. That's really the biggest reason that the markets have been doing poorly the last year. China's reopening, which I think is going to be a bigger story, not just for China, but for the global economy as a whole.

And I think one of the big things is the labor force. I mean, even with a lot of layoffs are happening in tech, there's still a huge labor shortage of people are still having higher wages. They're still spending. They're still putting money into the economy. That's still going to drive things moving forward here. You heard the professor, though, who suggests that really the only way that you can get even close to 15 percent or that he has a lofty target, obviously, for the S&P is for the Fed to cut rates this year. He thinks the Fed is going to cut rates in the second half of the year. Is that false hope, as we suggested? Or do you believe in that scenario, too? And if not, can can stocks still do well if the Fed is still doing their thing? I mean, I think eventually they need the Fed to stop raising rates at a certain point,

which hopefully happens in the springtime. Bond markets really are pricing that there is going to be a cut later in the year. Whether or not that happens, I don't know. I'm not going to go as far as say I think there's going to be cuts later this year. But I am hopeful that they will level off at some point. But I, you know, seeing cuts, I think would be good for certain parts of the economy. But I don't think I'm going to go that far to say that I see that happening this year. So lastly, if you just told me you think this is real, right, this is legit. So how far do you think it goes, this rally?

Again, I think it looks, it depends on the sectors you're looking at. But I think it definitely has some legs here. But I'm favoring value over growth. I am favoring international over the U.S. I do still like things like energy. I actually think bonds have some room to run here. But I just think you're going to have to pick and choose the areas you're overweight in. OK, we will talk to you again soon. Thanks for having me. That's Courtney Garcia here at Post Nine, CNBC contributor. Of course, time for a CNBC News Update with Seema Modi. Hi, Seema. Scott, here's the update at this hour. A sixth victim has died in the shooting outside a synagogue in Jerusalem. Four others were wounded. Police say they shot a terrorist before more people

could be hurt. It is the worst attack on Israelis in years and comes just a day after an Israeli raid in the West Bank killed nine people. Ronna McDaniel will lead the Republican Party for another two years. She overcame a challenge from a MAGA-backed Trump attorney. McDaniel became the longest-serving head of the Republican National Committee since the Civil War, this despite lackluster performance by GOP candidates in the last three election cycles. And the SEC is reportedly investigating Elon Musk's role in shaping claims about Tesla's autopilot self-driving system. Bloomberg says the probe is part of a larger examination of Tesla comments on autopilot and allegations that the carmaker overstated

autopilot abilities. Scott, I'll send it back to you. I appreciate that. Seema, have a good weekend. That's Seema Modi. Coming up, five-star stock picks. Capital Wealth Planning's Kevin Simpson is back with us. He breaks down his latest trades and the sectors he thinks are best positioned for success. Right after this break, Overtime is coming back in a couple of minutes. Welcome back to Overtime. It's been a rough few days for health care down on the session and the worst performing sector on the week. That has not stopped our next guest from jumping in with the new trade. Joining us now, Capital Wealth Planning's Kevin Simpson. It's good to see you. Welcome back. Thanks, Scott. Thanks for having me. It's medical devices, really, right?

Medtronic is one of two new buys. Let's hit that first. It's a stock that we've owned in the past. And to your point with the teaser, you want to buy things when they're down. Sometimes good things happen they're down. Sometimes good things happen to cheap stocks. But this is a company that's had quite a few problems over the past few years. And since the highs of 2021, we're 50% off of those levels. We're looking at this with a forward PE of around 15, pretty strong dividends in excess of 3%.

And we like the management changes that have taken place, the restructuring. There's going to be some inventory issues that are still going to be a lag. I don't know that this is something that you need to jump on today with every penny in your portfolio. But we intend to build out this position. We'd like the baby boomer markets post-pandemic, getting back to putting health as a priority. And I think this is a stock that can do very well with strong dividend growth- for years to come. The other one is is is it marathon petroleum. Yeah and and

marathon if you remember is a stock that we've owned off and on quite a bit over the past year and it had been called away from us we rotated into Devin. And his luck would have it last Friday Devin got called away from us. And we were able to- luck would have it last friday devon got called away from us

and we were able to uh redeploy some of that capital not just into medtronic but also back in the marathon petroleum you know crack spreads right now are close to forty dollars which is a really big differential it means that the inventories are getting tight for jet fuel diesel refined gasoline if that continues and we have a strong driving season this summer, we should continue to see that stock accelerate. Both energy and health care are sectors that we really like for this year. But Marathon specifically, that dividend has been rock solid and increasing. When we get earnings next week, they could surprise us with another dividend hike. And nothing I love more than increasing dividends, Scott. Yeah, I know that. You, I think it's fair to say,

you've been pretty cautious, right? Since most of these times that we've caught up with you recently, you've not been a big believer that the market had a lot left in it to the upside for all of the obvious reasons that everybody always suggests. Here we are though, right?

In the midst of a pretty decent move. Are you more of a believer in it today than you have been thus far? Oh, no, absolutely not. Short short term trends don't make a long a long term decision change because and I love listening to Dan and the professor. But the reality is we're just a little bit ahead of our skis. You know, you've you've seen a pattern develop this month in the market. When we get dovish and excited, we see strong rallies. And that's been the case for the past couple of weeks when we get hawkish and nervous and maybe we get some of that at the next Fed meeting and then markets cool off a little bit. But there's a lot of repositioning

taking place for, you know, whatever may have been tax loss selling last year. Things were probably oversold and there's reason for reentering positions. But this is not the start of the next bull market. We're not in the clear by any means. And I would continue to be as defensive now, if not more so, just based on how the Nasdaq's traded out of the gate. Well, I'm glad you mentioned the Nasdaq, because that was one point that I asked the professor about specifically, whether he was a believer in what's happened in tech to start the year. I want you to listen to what he said and we'll we'll we'll talk about it on the other side. I can explain that bounce back in tech. Do I think it has legs? I don't think it's going to outperform the rest of the market from this point on for the rest of the year.

I think it's a technical snapback from intense selling in November and December, aided by the drop in interest rates that we've seen. So you would urge investors to fade it, so to speak? I would fade the tech rally. I would fade the tech rally if I were doing relative allocation, for instance, between value and growth. All right, Kevin, I mean, there's the professor. He faded. Sounds like you agree. I couldn't have said it better myself. I mean, kudos. Touche. And he's spot on. on you know if we're looking at a continued rising interest rate environment which we're in. Yes inflation's coming down PCE was good today four

point four percent- best month over month number probably from a pullback perspective since October of twenty one. But we can't forget it's still over two times where the fed wants to see it. So everything that the professor just articulated there in terms of valuations moving forward is spot on. We have a little bit of growth in our portfolio. We're absolutely value centric, value heavy. And we're going to have to continue to be that way until his prognostication comes true and the Fed actually starts lowering rates. And then you get a growth rally like crazy. The only question is, could it happen this year as he's professing or is it something that I see happening next year just

because of the way the data and the Fed are reacting? All right. I appreciate it. You have a good weekend. We'll see you soon. That's Kevin Simpson joining us once again in overtime. Coming up, we're wrapping up a really busy week, heading into another one, too. Steve Kovac, there he is. He's standing by with our rapid recap. Hey, Steve. Yeah, that's right. It was a great week, Scott, for the S&P 500, but we'll tell you about two sectors that were still in the red. Also, takeover rumors and record sales. We'll tell you about the big week for a couple EV names. And finally, like we've been talking about all hour, tech's looking pretty good ahead of those highly anticipated earnings reports next week.

All that when Closing Bell Overtime comes back after this. We're wrapping up a busy week here on Wall Street. Steve Kovach is here with our rapid recap. Steve. Yeah, it's got a strong week for the S&P ahead of the Fed decision and all those earnings reports next week. But two sectors did close in the red, health care and utilities. Health care ending the week down nearly 1 percent and utilities down about half a percent. Overall, though, the S&P was up two and a half percent thanks to big runs from names like Tesla, American Express and L3 Harris Technologies. Speaking of Tesla's share soared this week, up more than 33 percent after the company reported record quarterly earnings. CEO Elon Musk sounding

optimistic on that earnings call, saying January was the strongest month for orders ever at the company following those price cuts. Meanwhile, another EV maker, Lucid, saw shares more than double at one point today on rumors the Saudi public investment fund would buy out the rest of the company. Lucid said, though, it does not comment on market rumor or speculation. And finally, you know I'm going to talk tech, Scott. Take a look at the Nasdaq 100 up 4.7%. It's best since mid-November. And the overall Nasdaq composite up 4.3% this week. It's fourth straight in the green. Of course, just before we get all those earnings reports from the major tech names next week, with Meta, Amazon, Alphabet, and Apple on deck.

By the way, those last three are reporting all on Thursday, by the way. Take it. I'll send it back to you, Scott. All right. We're going to lean on you heavily. We're going to lean on you next week, Kovac. I'll be here. Get some rest this weekend.

I'm going to. All right. That's Steve Kovac with our rapid recap. Up next, trouble in the semi-space. Intel sinking on its brutal quarterly results. So what could it mean, if anything, for the broader chip sector? We'll just debate that in today's Halftime Overtime. We're right back. Intel has very specific operational problems that it's had for several years.

I am not happy saying this. This was once a great company, but it's now many years that they have been behind the curve in terms of the leading-edge technology for chips, which is how narrow the circuits are. And there's just no sign that they're coming out of it. Well, that was halftime committee member Jim Labenthal on Intel's quarter. That stock sinking on a double digit revenue decline. And it looks like the other big chip names have managed to hold up pretty well today. So is this really an Intel problem or should the rest of the semis brace for

paying this earnings season? Let's ask Douglas C. Lane managing partner, Surat Sethi, joins us now on the news line. I appreciate you joining me. I mean, you've got what, NVIDIA and Qualcomm. Are you worried in any way as a result of what you got from Intel? No, I think this is very specific. Jim hit it on the head. They also pulled in all this inventory that we had during COVID. That affected their earnings, and I think the demand there, that was totally miscalculated on PCs and even data centers. I think NVIDIA and Qualcomm are very different animals. They're also much higher-end chips, higher gross margins. NVIDIA has to also be a little bit careful just because they do have the data center.

And Qualcomm, of course, we can tell with Apple and Google in terms of really the semiconductors that go to chips and auto production. But I think it's a very different animal. I think we're going to have, you know, this will be hard sailing for Intel for a little while. And it could also affect other commodity chips as well. But you don't think, I mean, even I'm just thinking of maybe a more Qualcomm than Nvidia, if you were concerned about either of the two. You know, if you're thinking about where the economy is going from here, handset sales, demand, things like that. Less, I mean, Qualcomm, yes, but also Qualcomm doesn't produce their set. So it's all IP and royalty for them. And they've also, if you think of kind of where Qualcomm trades, it's, you know, 12 times earnings. It's already been hurt with some pain. They have a lot of cash on

their balance sheet. I think it'll be a little slow for the next two quarters, but you really buy Qualcomm for their IP that they keep on creating for the chips that go into phones, cars, and a lot of the 5G. I want your opinion on something Professor Siegel told me a short time ago, and I don't know whether you had a chance to see it or not, asked him about this rally in tech to start the year, whether he's a believer in it. And he said, well, he totally understands why tech has rallied, but that he'd fade it. What do you make of that? Yeah, I mean, Scott, I've been talking about this for a little while.

I think tech has been overbought even at these areas. We've been cutting back our tech even for some of the high-value companies there just because the P's in the 20s and 30s are still pretty high. And I think people will find other areas to put money in, especially as we're getting a slower economy. All the indicators are showing we're getting a slower economy. So I think multiples will compress. And unless you have super growth, it's going to be very high to sustain some of these multiples. Wow. So when you say 20s and 30s, you're not talking about,

you know, these crazy high, high, higher flying tech ones. You're even referring to some of the mega caps that are in the mid 20s. I am. I am. And, you know, cutting back my exposure to Microsoft and some of the others, I'm just not taking the market weight that they have because I do think there's other potential. And I think there's more downside to these, especially when the market kind of pulls back because that's going to be the source of funds. That's where investors are going to capital. Well, we'll see you next week. Obviously, all these are. Thank you. All right. Absolutely. Good weekend to you. Yep, we'll see you soon.

Back here in overtime. Still ahead, Santoli's last word. We'll find out what he is watching as we head into the weekend and then the busiest week of earnings season, a Fed meeting, and more when overtime comes back. All right. Last call to weigh in on our Twitter question. We want to know which big tech earnings are you most focused on next week? Meta or Alphabet, Amazon or Apple? Head to at CNBC Overtime Vote. We'll bring you the results in Santoli's last word next. Let's get the results of our Twitter question now.

We asked, which big tech earnings are you most focused on next week? I guess I'm not surprised. Apple is the big winner. Let's get to Mike Santoli now for his last word. Wait, this is a big week, right? Yes. Mega cap tech, Fed meeting and a rally in stocks going into all of it. Yeah. It sort of maximizes suspense in a way, just the fact that we are going into an out pretty far out on a limb in terms of how the market

has gotten stretched. I'm interested in the in the Fed call at this point that nothing has happened, whether in the market or in the data, to disturb the idea that quarter point move is it. And when you're a quarter point pace, it means you're six or seven weeks between potential quarter point rate hikes. So the market's not incorrect, I think, to build in this expectation that we're pulling to an end of that process. And the question being, have we priced a lot of that in? And if you're hoping, as the market seems to be positioning for, that we eventually cut rates, usually the first cut isn't the one you buy because it's for a bad reason. John Spallanzani would send out something

before our show today that really tells an interesting story about what's gotten us here. I mean, it's been a broad-based move, and you've cited that, but there's most shorted names, unprofitable tech, Tesla. Tesla was 101, I feel like yesterday. No, now it's 170. Incredible. So those are the things that have moved the most off the lowest depths, I would say. And so if you're doing a what's one for the for the month, which is the year. Yeah, it's that kind of stock. But I'm also very focused on steel stocks making new highs. And you do have consumer cyclicals doing fine outside of housing related. So it's a good mix. And it is the majority of stocks. I think you've if you look for let me find some real demand building in for stocks in here, you've seen the clues.

It's in the footprints of how the market has behaved. So I wouldn't say you embrace the idea that it's just going to be like, let's play the old game again and get silly with these stocks because that's not what you want to happen. But what I struggle with is if you were talking about the real move off the low that's going to last forever, you'd also see this stuff flying. It just wouldn't continue to lead. So at some point it has to essentially settle back. I remember the echo Internet bubble in like 2003. People were like, uh-oh, you know, Yahoo's up again. That's no good for this rally.

We still had a bull market that lasted a few years. I guess the greatest question, controversial thing, is what the Fed's going to do, when it's going to do it, and how much it's going to do. I want you to listen to what Professor Siegel told me a little while ago in overtime about that idea of a rate cut. Listen. I think the Fed, I think it's likely the Fed is actually going to cut rates in the second half of the year. I think they're going to see the slowdown in the economy. They're going to pronounce inflation over. Remember, they think that if inflation is over, then, you know, the rate that they should be on federal funds is two and a half. I actually think it should be a little lower, but that's by what they say it should be. One of the reasons why he thinks that stocks are going to have a big year, right? He threw out 15

percent on December 30th with me right here in overtime for the S&P. Yeah. And we're over a third of the way there. So he might have. We're only getting there the rest of the way if they cut rates, though, he said. Well, here's what we know about from history is the average time between the Fed's last hike in a cycle and the first cut median is five months. That's just all of all rate hiking cycles in the past. There's been as few as two months in six out of the last 13 cycles. That's how long it took to go from hiking to cutting. So that's why the market sees the possibility for it. I question whether inflation can go down enough after a final rate hike in March for them to actually decide they have to cut after speaking

for months and months how higher for longer is going to be the rule. I also don't think it requires a cut for the market to do OK. I think stabilizing at five ish percent, four point seven percent or whatever in Fed funds is probably enough for a little while if earnings can confirm. We'll continue to have the debate of who's right, the Fed, so to speak, or the market. Great weekend to you. All of you. Fast monies now.