Closing Bell - Closing Bell Overtime: What’s Next For Tesla After Musk Pay Package Approved; Former Walmart US CEO On Consumer 6/14/24

Episode Date: June 14, 2024

After another Nasdaq record close, where do stocks go from here? Wells Fargo’s Scott Wren and 3Fourteen Research’s Warren Pies weigh in. Our Phil Lebeau on what’s next for Tesla. RBC’s Helima Croft on oil’s push higher. Former Walmart US CEO Bill Simon talks the consumer health after some weak retail results. Goldman Sachs’ Asad Haider on top takeaways from the bank’s annual health care conference. 

Well, the NASDAQ outperforming. Looks like it closed in the green, going out with big gains for the week and, yeah, setting another record close. His name's like Adobe and Broadcom rally. 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. Coming up on today's show are more cracks forming in the consumer story. Sentiment data missing estimates today after RH plunged on results. We'll talk to an expert about the disconnect he sees between what the market is saying and what consumers are saying. Plus, oil wrapping up its best week of gains in more than two months. RBC's Halima Croft is going to join us with her forecast of where prices could

be heading next. And Goldman Sachs out with a new survey following its annual health care conference, naming one lagging company in that space that investors think will snap back in the second half. Goldman's head of health care will join us to reveal the name. Let's get straight to the market panel now. Joining us are Warren Pies from 314 Research and Scott Wren from Wells Fargo Investment Institute. Welcome to you both. Happy Friday. Scott, what was the marquee event of the week and did it change your perspective on where the market might go for the rest of the year? Well, I'll tell you, John, it looks like, you know, inflation. We had some good numbers there. I think

that was that was really the marquee news of the week. And I think the market, this is a momentum market, and it certainly likes less inflationary pressures. I don't think the Fed changed their tune whatsoever. They want to cut, shaving it by a cut or two here or there, I don't think is any big deal. So, you know, the market's on board with that. But I would say, and you mentioned this in your opener, you know, there's some consumer cracks going on. And I think that we're going to see spending slow. I think we're going to get a couple more quarters, at least a sub 2% GDP growth. And so, you know, this run, while it's been very strong,

I don't think this is something you want to just jump on and try to chase. Yeah. At the same time, Warren, listen to what Scott's saying about a momentum market. Nobody told the small caps, right? Look at the Russell ended up down today, one and a half percent. What does that tell you about the breadth of this rally or lack thereof? Well, thanks for having me, number one. And I'd say with small caps, we've been pretty negative on small caps all year. I think that you have to put that in a separate bucket. So come into the year, I think there were a lot of people who were bullish. They said just kind of a naive type

of bull plan was to buy the high beta small caps. And it hasn't worked out. I just don't think that's the point in the cycle or in late cycle. Small caps is an early cycle play. The breadth concern that I would really seize on to is in the equal weight S&P 500. So we had S&P 500 make a new high back on May 15th, and Equal Weight has been unable to rally. So it hasn't confirmed. And really, historically, if you don't get that confirmation of Equal Weight in a 90-day window, it's pretty bad for the market. So it's something we're watching. We still have some time there. But the real concern to me, if you're thinking about Equal Weighted, is we've gone from 4.7 to 4.2 on the

10-year, and the rally can't broaden. So yeah, you do see it in things like small caps, but small caps have been really trash for a year. It's really about the equal weighted. They made all-time highs back at the end of March and still just kind of chopping around here. So we're going to really take our signal from that and whether the rally can broaden. We're maintaining our equity positions. We've been riding this rally since the beginning of the year. But, yeah, I think it's getting stretched, and you want to see participation to keep this thing going. So, Scott Wren, senior market strategist, global market strategist at Wells Fargo, help us with some strategy here. If you're concerned about market breadth, if you've got one eye on the consumer here,

how do you protect yourself as an investor? What adjustments do you consider making to your portfolio, given those maybe yellow lights? Well, John, as I said, I don't think we're going to jump up and buy the S&P 500 here. But what we've been doing over the last few months is we've been trying to trim a little bit from tech, a little bit from communication services, from those two particular sectors. And as the economy slows, we still think there's going to be some good action in, let's say, data center building, infrastructure building. So we've been taking those funds. We've been buying some industrials because clearly the companies that are going to build all these data centers and do the electrical upgrades are in the industrial sector. They're going to need materials. They're going to use copper, aluminum, all those sorts of things.

So we've been buying some industrials, some materials. You know, health care is kind of a value play here. We don't think oil is going to go much lower. Energy stocks have gotten hit here a little bit lately. So we've liked energy as well. So we're trying to buy some stocks that have lagged here because really, if you look at it year to date, only two sectors have outperformed. And we think those valuations are pretty stretched there. So we're looking more under the hood. We're certainly, you know, as Warren mentioned, I mean, we've been underweight big time, small caps for a long time.

It's way too early for that, I think, and it might be a little different whenever we pull out of this next year and have a little bit better economy. So we're large over small, we're U.S. over international, and we're trying to work under the hood in terms of these sectors. Warren, what are your updated thoughts on oil, given what we're seeing with the consumer and the overall look of the economy? Yeah, I've been pretty downbeat on oil here for a little bit, but what we've gotten here recently, we did upgrade commodities this week earlier in the week because we got the positioning data out of the futures market and it showed that there's just extreme pessimism out of hedge funds and CTAs for oil. And that's been really a good bottom

setting type of indicator. I still don't expect much of a rally out of oil here. I think you should see a little bit of upside in the near term. If I look out through the year, though, I still think we probably saw the highs for oil for this year, and we've seen the highs for the yields for 10-year yields for this year. Those two things do support stocks. As we just zoom out as things that we can look at as positives, you go to Q4, OPEC's going to start adding oil back to the market, and that persists through 2025.

So I know it's a popular trade to get long energy. I still like it for diversification purposes, but you need to have a quick trigger. Everyone needs to understand you can't get too comfortable in these energy stocks at this point in the cycle, in my opinion. All right. Give it a little gasp, maybe not too much. Warren Pies, Scott Wren, thank you. Well, yesterday on Overtime, we brought you some of the play-by-play of Tesla's annual meeting where shareholders voted to ratify Elon Musk's massive pay package. Today, the stock is pulling back as investors look to the next catalyst for the company, and our Phil LeBeau joins us with a look at what is coming down the road. Phil.

And, John, over the next six weeks, there are going to be three events that will really determine what we see happening with shares of Boeing. The most noteworthy is going to be happening in the middle of July. But before we even get there, July 2nd, that's when we will get the Q2 deliveries from Tesla. They're not expected to be great, by the way. But then you have the results in mid-July. That's what people are going to be focused on. What kind of pressure are they seeing in terms of revenue generation, auto gross margins, the usual

metrics that we're focused on. And then there is the robo-taxi unveil on August 8th. And we'll talk more about that in a little bit. Goldman, along with a number of other firms today, putting out notes about Tesla's annual meeting, Elon Musk's hour of riffing about the potential for future, and said, we expect weaker market conditions to weigh on earnings in the near to intermediate term. And that was the general tenor of all of the notes. The notes were, hey, the performance was great. There weren't a whole lot of details there. So in the meantime, we got to focus on deliveries and financials. And when it comes to deliveries, the current estimate is for Tesla to deliver 1.83 million vehicles this year,

just a smidge more than they delivered last year. And again, July 2nd, we'll have the halfway point of the year. That'll give us some indication about where we might see deliveries end up for the full year. Finally, you should take a look at shares of Tesla. Remember, they have lower cost models, John, that are scheduled to come out maybe at the end of this year, more likely in 2025. At some point, we'll get some details about what these vehicles are, how much lower will the price be, will that actually goose the market? Because right now, it's price that's driving EV demand. It is not discussion about the robo-taxi, though everybody wants to focus on the robo-taxi. And again, that is on August 8th, when he will talk about the vehicle for the robo-taxi, the technology, as well as the way he envisions them having a fleet, as

well as Tesla owners putting their vehicles into the robo-taxi fleet from time to time. Phil, if I recall, the stock got a bit of a boost when Musk said that he was going to talk about the robo taxi in August. It had been under pressure. I forget what month that was. You probably remember. But how much meat do you think needs to be on the bone here, given that there's been anticipation of this and now arguably the stock's looking for a catalyst? Well, the street wants details. On paper, a robo taxi fleet makes a ton of sense on paper. But we don't live in a world on paper. We live in a world of reality here. And Elon Musk says, look, the technology for autonomous, fully unsupervised autonomous driving technology is taking off. And he believes it's only a matter of time very quickly before Tesla's will be able to leave your house,

give some people rides, come back, and nobody's behind the wheel at all. There are more than a few skeptics out there, John, who sit there and say, yeah, that ain't happening soon. So the August 8th event is important because it's not only his vision, but people are going to want some concrete details, dates, timelines, things that they can hang their hat on in terms of the robo taxi. All right. I don't even let my cat go out and meet strangers without me. I don't know if I would let my car, but we'll see how it works out. Philip Bo. Thank you. You bet. Well, Apple ending the day in the red, but still seeing big gains for the week after its AI announcements at the Worldwide Developers Conference. Senior markets commentator Mike Santoli joins us now for a closer look at that stock.

Hey, Mike. Hey, John. You know, one week ago, exactly, Apple shares were sitting in the high 190s. It was almost exactly the point where the stock had topped twice before. Big question as to when we had this huge pivot event with the developers conference as to whether that was going to be a triple top. Can we break it? Well, we obviously broke out with a little bit of a delay after the developers conference. So here you have it now at 198 ish level or whatever it is, is probably going to serve as the first stop. If you get a little bit of a pullback to say, are we still in now a higher range? This is a five-year chart.

So it shows you we've had these instances before where it kind of goes sideways for a while, looks like it's toppy at this level. Oh, look, it broke out. And then you sort of test the breakout level. That's sort of standard chart behavior. That's just crowd psychology in picture form. So we'll see how this goes from here. Take a look at one of the results of this big run Apple's been on, which is it's inflated its valuation. One way of looking at that is the dividend yield. Remember, big capital return story.

Apple has been for years. Dividends, generous buybacks. Here you have the dividend yield down below half a percent, also relative to the S&P 500, definitely at a low compared to the last decade. Now, that big buyback is something like three plus percent of cash basically going out the door. So essentially, if you own a $200 stock, three percent of that is being bought back, at least on an annual basis. And you get the half percent on top of that. Fifteen to sixteen billion dollars is how much they actually spend on the dividend. So this is not by way of saying, you know, the dividend should be reason one, two or three to own Apple or not own it. But it does show you that expectations have been built up inside this valuation pretty significantly. It's at 30 times forward earnings again.

Speaking of expectations, Mike, I don't remember the last time that a worldwide developer conference for Apple built up this kind of anticipation for the iPhone event, which normally comes late September, early October. Often people yawn at WWDC, but the AI story has made that difference. So I wonder how much that challenges the sell the news pattern that can happen with these Apple events when, you know, people initially sold right on the day of WWDC, but then bought a lot a couple of days after. It is true. I think the AI story is scrambling a lot of the rhythms of how these things trade relative to news. All you have to do, it seems right now, is have some kind of credible participation in the longer term theme, whatever that means to drive your ultimate business. The market's giving you the benefit of the doubt. I, by the way, would put stock splits

in this category as well. It's receiving every bit of news the market is from these names that have been anointed as players in AI as a positive. So, you know, we'll see how long that lasts. It definitely seems like it's an overexcitable little segment of this market. But it does mean probably people are expecting big things for the upgrades. You know, earnings estimates haven't gone up yet. We have to actually see the next rollout of the iPhone models. And then, of course, the orders coming through. Yeah, normally that's how it works.

Mike Zantoli, thanks. Well, speaking of AI excitement, Apple's not the only company affected by that. Adobe stock popped today after results beat on the top and bottom lines and signals stronger demand for its creative software. Still, the stock's 14% or so gain still has it down 18% from the February 52-week highs. A big question here on Adobe for investors, will AI help power this stock back to those levels from February over the next six to 12 months? Or will AI help rivals to disrupt Adobe? A big piece of the answer to that is going to come from the adoption of Firefly.

That's Adobe's generative AI offering that's both a standalone product and a feature in Adobe's big money-making Creative Cloud subscription. Here's how it works. Free users can create a limited number of AI images per month before they're prompted to upgrade to a subscription. Paid users get bigger buckets, then, of AI tokens to spend. So, the stock impact? Well, Adobe said back in March that AI efforts like Firefly wouldn't start to generate real revenue growth until the second half of the year and beyond, since the company was giving away credits to give customers a taste of what

Firefly could do. On the call yesterday, Adobe president David Wadwani said upgrades to premium plans with more of those AI tokens, those credits, not only drove growth in the quarter, but also are going to be the strongest AI monetization mechanism going forward. Well, Adobe argues its tools are like a gourmet kitchen and AI is providing raw ingredients to customers who weren't in the market for its subscriptions before. The counter argument is that AI is maybe like DoorDash and eventually Adobe's customers won't need to cook in a kitchen at all. Well, we'll see. Oil, oil meantime making a solid push higher this week turning in its best weekly performance in more than two months up next rbc's halima croft is going to join us and break down what's behind the move and the wild card factor she says is one of the most

underappreciated stories in the market at the moment and one biotech name that's down double digits this year could be poised for a second half rebound. That's according to a new investor survey from Goldman Sachs. Stay tuned to find out what it is. Overtime's back in two. Welcome back to Overtime. We've got a news alert on advanced auto parts. Contessa Brewer has the story. Contessa. The company is reporting a cyber intrusion, they said, in a third-party cloud computing company

where some of its data is kept. And this actor, it says, a criminal actor, alleged that it had company data for sale. So advanced auto parts notified the authorities. They say there has been no material disruption to the business operations because of the incident and that they do have insurance to cover this. Right now, they expect expense of about $3 million related to the response and the remediation outside of what the insurance would cover. So you can see the stock is down about 2% right now, and it appears that they have not paid this person who wanted to sell the data, according to this release from Advanced Auto Parts.

John? Well, we'll see. The mention of insurance certainly makes one wonder, and the regulations making it so that companies have to disclose these attacks, make it an interesting environment. Yeah, absolutely. Well, oil prices climbing nearly 4% this week, with crude breaking a three-week losing streak, posting its best week since April.

Joining me now with her forecast about where prices are heading from here is Salima Croft of RBC Capital Markets, also a CNBC contributor. Halima, happy Friday. So what's been the biggest factor driving this oil spurge, spike, surge, both? Is it likely to continue? I think the market has gotten over the taper tantrum that occurred right after the OPEC meeting when a lot of market participants really went into that agreement and looked at the fact that OPEC said that they could potentially start bringing some barrels back in Q4 and then bring in more next year if market conditions could accept those barrels. And a lot of people went to OPEC's going to overflood the market. I think now there's a view that if the market is on shaky

grounds, OPEC is not going to start phasing in those barrels. So now we're focused on the likely inventory draws that we're expecting in Q3. So we're expecting about 850,000 barrel a day inventory draws. Other shops have higher draws forecasted. So I think that is part of the reason why we've had this recovery in prices. And so, again, I think it's more of a sense that this market is likely to get tighter as we go deeper into summer. So what about the impact of the turmoil in the Middle East? Well, this is so interesting, John, because the market has essentially faded all geopolitical risk in this market. If you ask why oil prices have been softer as of late, once you had that Israel-Iran dust up, the market said, you know what, we didn't get a

bigger war. I'm going to move on from that story. But I would say there is this story that we should be paying attention to. We should be watching what is happening on Israel's northern border. We've had a very serious escalation in terms of cross-border rocket attacks between Hezbollah and Israeli forces. And there is real concern in Washington, where I am now, that this could be a potential pathway to a wider war, given Iran's staunch support for its most important proxy, Hezbollah. There's a lot of shrugging off of things happening. I'm looking at the VIX still under 13. Yes. I mean, you know, it's practically asleep, although you could argue it rolled over up 6 percent today. What sort of thing tends to shift investor sentiment and whether geopolitical factors

and the impact on oil might suddenly be relevant? So I think what the market is saying right now is we want to see that there's actually some physical risk to supply. And again, that's why we had this sort of run up earlier when we had the actual back and forth between Iran and Israel, because there were concerns about potential closure of the Straits of Hormuz, potential attacks on Iranian oil facilities. And when that didn't happen, everybody said, I'm done with that for now. But again, why we say focus on Lebanon is that experts in this town have been following the Middle East for decades, have said Iran is pretty clear that they're willing to lose Hamas or the Houthis, but Hezbollah is their most

important asset. And so if you do have Israel rolling tanks across the border, something similar to what we saw in 2006, there is real concern that Iran will become involved in this conflict in a much more meaningful way. And that's why you have senior Biden administration officials on their way to the region to try to prevent this flashpoint from erupting. All right. Kalima Croft, thank you. And Spurge, let's see if we can make that new word happen. Maybe it's like fetch, just not going to happen.

After the break, former Walmart U.S. CEO Bill Simon weighs in on potentially concerning signals about the consumer after a big miss on sentiment and a big drop for retailer RH. And check out the cruise stocks as we head to break. Big part of the weakness in the consumer discretionary sector today. Bank of America raising concerns in a new note about the industry's pricing power after softer prices in the earlier part of this month. We'll be right back. Welcome back to Overtime. The University of Michigan out with a new survey this morning showing a sharp decline in June consumer sentiment, falling to the weakest level since November of last year, as higher prices continue to hit customer wallets across the country. Now, this also comes a day

after luxury retailer RH posted a bigger than expected loss per share, that stock closing lower by 17% today. Joining us now with his read on the consumer is former Walmart U.S. CEO Bill Simon. Bill, happy Friday. So it's a weird week where investor excitement peaked with the CPI and PPI prints showing consumer prices in May were up less than expected. Producer prices actually dropped and yet consumer sentiment doesn't reflect that. What does that tell you? Yeah, I think there's this huge disconnect between Wall Street and Main Street, right? Like everybody's exuberant. The S&P is hitting all time highs. And we saw the wholesale price index start to even peak or moderate even a little bit. And yet, people are going into the grocery store and buying a box of Cheerios and passing out because the price is so high.

And so they don't understand why there's this exuberance on Wall Street. And Wall Street clearly doesn't understand where the consumer is. They're hurting. They're struggling. They've got food prices that are up 30 plus percent since the pandemic. They got housing prices that are up in the 30s. And you got transportation costs in the 20s. And that's 70 or 75 percent of middle America's budget right there. And it's just chewed right up. And yet the consumer is still spending

and spending on experiences. Normally, if the consumer felt this bad, shouldn't we expect to see other indications in areas like that? Well, I think you do. I think what you find is that people go, you know, go to they're going to needs and they're they're shying away from from wants and into experiences. I think they're trying to find a way to ease the pain. And you see certain categories in retail that are really struggling. They're they're discretionary and people are just not going there because there's so much of their so much of their income that's being tied up with wants. And then what little they do have, I think there's been a trend over the last four or five years towards experiences, and they're spending their money there. So who wins in a situation like this where perhaps the overall market hasn't factored in the amount of pain that a consumer is under? Is it the dollar stores? Is it the discounters

or somebody else? Well, in retail, I think it's the food stores right now. And I think Walmart has done well recently because they have such a high proportion of food. They get the food shopping trip that comes with the weekly grocery purchase. And then whatever discretionary non-food items, well, I might as well buy it. I'm already in Walmart and their prices are good. So I think Walmart's benefiting from that. I think you're seeing Costco do pretty well in the same vein. And so for me, it's anybody who's got a large proportion of food will probably do pretty well. Now, it's dangerous to extrapolate too much from micro stories, but we're just talking about the cruise lines getting hit today on concerns about their pricing power, RH, which is not appeal to the Walmart customer, taking a hit

here, too, as it tries to engineer a turnaround. Might we be seeing the beginnings of consumer fatigue in a wealthier set? And is that something that we should watch? You know, it's a really good indicator when people who don't have to watch prices are shocked by the price. You know, the prices are too high, right? Like I'm not typically a guy who looks at the price of stuff, but I just bought a cut container of watermelon yesterday in the grocery store. And it was $16. And you're like, that shouldn't be $16, should it?

Like, I didn't. I bought it anyway. But you know what I mean? When you notice prices are high, then prices are high. Show me with your hands how big a container of watermelon did you get for $16? No, not. It wasn't like a truckload, right? Yeah.

Okay. Like, maybe you just get a couple of the fruits themselves. I don't know. Okay, so. Maybe I should get a knife, yeah. I just had to ask. Like, if I were just watching, how big a container do you get for $16? So, what does this say about Q4, perhaps, at a time where we've seen a lot of retailers trying to, or at least suppliers to retailers, trying to get

goods into the supply chain early because of problems out there in logistics? Yeah, I think you're going to see the products coming early because of supply chain issues, which means that I think the discounting is going to start early, which means I think we're going to have a very, very aggressive price battle over the Christmas holiday. Because if the goods arrive early, retailers can't sit on them by and large. They need to turn them into cash. And so we'll start to see the contest start for who's going to pull the trigger fastest here on price action, discounting on holiday merchandise.

That will be interesting to see indeed. Bill Simon, thank you. You bet. See you. Well, time now for a CNBC News update with Bertha Coombs. Bertha. Hey, John. Attorney General Merrick Garland will not be prosecuted for contempt of Congress. The Justice Department, in a letter to House Speaker Mike Johnson, pointed to its longstanding position of not prosecuting executive branch officials who withhold information under executive privilege. The move came one day after the House Republicans voted to hold Garland in contempt for refusing to turn over audio of President Biden's classified documents interview. The cost of rebuilding Ukraine will top the best estimated $46 billion the world banks had earlier this year. That's

according to a U.S. official who spoke with Reuters during the Group of Seven summit in Italy. G7 members also agreed Russia should pay for that reconstruction. And Taylor Swift could delay an interest rate cut from the Bank of England. Analysts at investment bank TD Security said today the economic impact from the tour could defer a possible September rate cut. Edinburgh, Scotland, where Swift began her UK leg, said the concert added an estimated. Let me get my glasses on just to make sure I get this right. Ninety eight million dollars to the local economy.

That's just in Edinburgh. I'm telling you, the Taylor Swift GDP effect is real. Wow. Move over, Roaring Kitty. You can move GameStop, but Taylor Swift can move interest rates, apparently. All right. Keep them from moving. Bertha Coombs, thank you. Coming up, the industrial is seeing a big pullback today with nearly every name in that

sector finishing in the red. Mike Santoli is going to look at what's behind the weakness next. And check out the biggest winners of the week in the NASDAQ 100 as tech handily outperformed. Look at Broadcom, Adobe, CrowdStrike, NVIDIA leading the pack there. We'll be right back. Welcome back to Overtime. Industrials ending the day as the worst performing S&P sector, edging out materials for that title. Among the worst for the week, Mike Santoli is back with a look at what's driving that weakness.

Mike? Yeah, John. Well, industrials had been leadership to the upside. That's one thing to know. And it seems as if, you know, valuations got pretty full. The storyline that there were these big beneficiaries of this CapEx boom in multiple areas pretty much got integrated into the consensus. What you see here is the equal weighted industrials as well as equal weighted consumer discretionary against the S&P 500 from the October lows of last year. You see it was all pretty much in sync on the way up through the first quarter. And then you've seen them cyclical areas falter just a little bit as tech drives the headline S&P much higher.

Now, I would say these trends are still fine. They're kind of holding it relatively healthy levels. And I think also encouragingly, the absolute defensive parts of the market, you know, consumer staples and such have not really perked up. So that's not sending a real nasty broad message. But there were some areas of industrials probably clearly overheated in the short term. Take a look at Eaton. I've highlighted this electrical component sub-industry, which, of course, has a big role in power generation and data centers and things like that. So Eaton

against Broadcom. I just wanted to show you over two years the parallels in the trajectories here as the AI story really built up ahead of steam. And naturally, we diverge here because Broadcom had that massive beat this week on earnings guidance and then the stock split. And Eaton sort of flattens out here a little bit. But again, not really falling apart, just more taking a breather, John. Is it possible, Mike, that there was a trend in the market that some investors are trying to look beyond mega cap tech for AI possibilities and look to industrials and then just went back to mega cap tech and some of those typical tech AI plays? had a bounce off of these lows. I never thought that was mostly about AI, but that sort of was the overlay of the narrative that got placed on it. And then they sort of they turned lower again. And so it seems as if if you want the thing by the thing, don't buy the kind of echo effect in other areas. Although I would say that industrials in certain areas, the electrical components and such, they have had very high earnings estimate revision. So there's a real story there. It just isn't purely levered to the AI theme. We'll have to figure out how much that

story is worth over time here on Overtime. Mike, thanks. When we come back, Goldman Sachs just wrapping up its annual health care conference and revealing a list of beaten down names in the space that investors think will snap back in the second half. We will chew over the results with Goldman's head of the health care business next. And speaking of chewing things over, cue the QR code to sign up for my On the Other Hand newsletter. This week's debate, has the sponsorship economy gone too far in the wake of Joey Chestnut being forced to drop out of the Nathan's July 4th hot dog eating contest because of a sponsorship conflict.

You can scan that QR code on your screen right now to join the conversation. We'll be right back. Welcome back. Goldman Sachs releasing a new investor sentiment survey following the conclusion of its annual health care conference this week. Joining us now with the key takeaways is Asad Haider, Goldman Sachs sector strategist and head of the health care business unit. Asad, good to have you. First question is just about, I don't know if you track this over time, but does this sentiment survey tend to be at all predictive? Thank you for having me. It's a great question. This sentiment survey actually tends to be quite contrarian. It is usually reflective of investors' current positions. And when you go back and you

do a back test and you score investors on what they had predicted, it actually tends to be quite contrarian. There has been one exception. Actually, Eli Lilly is the name that during last year's survey, investors did vote to be one of the best, the top performers over the course of the year. And it got voted again this year as one of the top performers. And obviously that, you know, the outperformance of Lilly has been a big theme in healthcare and we'll see if it continues to play out. But that has been one exception where the survey has actually not been as contrarian as it has in other areas. I say when you say contrarian, it sounds like you're saying people are talking their books and in a lot of cases they end up being wrong. So maybe in a way you want to bet against them.

So that's great context. Tell me, what's the beaten down name that they expect to rebound? And you think that's because maybe a lot of these investors are holding it? Yeah, it's a great question. I think it's important just to contextualize where we're coming from in health care. I mean, health care has been struggling for I mean, it was one of the you know, it's trailing the market year to date. It's up about 6% on the year versus the broader S&P, which is up about 14%. It was a big underperformer last year. But when you scratch beneath the surface, there has been, similar to the rest of the market, a concentration of outperformance in some of the secular winners. Obviously,

Eli Lilly is at the top of that. It's up about 50% on the year. And it's really carried the index. But right beneath that as well, there's been a bunch of, a handful rather, of names where investors have been leaning into for either product cycle momentum or upward earnings revisions momentum. And there's not many. There's about six or seven of them, Intuitive Surgical and MedTech, Boston Scientific. But when you start getting below that, there's not a lot of excitement on a potential snapback. And I think there's three things at a high level that are driving sort of sentiment headwinds towards the sector broadly. Number one, on the micro end, this is probably the most important. We've been sort of caught in a

negative earnings revision cycle across swaths of healthcare. Remember, the sector was a big beneficiary of the pandemic, and you're now coming out on the other side of that. And so you're still seeing downward earnings revisions in multiple areas, particularly things like life sciences tools, parts of pharma, parts of managed care. Second, on the macro, you know, you've had these rotations into tech and leaning into cyclicals and industrials, et cetera. And then there's also policy concerns as you move into an election year. And I think that latter point is probably going to be really important when you go back and you look at prior election cycles. What tends to drive stocks is earnings revisions rather than valuations.

Well, I got a call out. I got a call out before we run out of time. Biogen, because that's a name that's been beaten down. It's off of its April lows, but but not not not far enough for a lot of investors. And in the survey, a lot of people thought that it would do a lot better in the back half. Does that reflect an overall expectation here about the area that Biogen is in? Yeah, I think, I mean, they are obviously, they are, you know, they are in the Alzheimer's product cycle. They have a new drug called Lekembe, which launched for Alzheimer's about 10 months ago. And I think part of the problem

with Biogen is, is that the early launch has been very slow. It hasn't really been translating into numbers upside. And so that's led to the stock struggling and people have been trying to call that inflection for a while. But I think what's driving that optimism right now is that in the first quarter, for the first time in several quarters, you actually saw earnings inflect and it was an earnings growth quarter. And at our conference, the company sounded very confident that the accelerating momentum that you're finally getting behind the KEMBI is starting to pick up. And they were citing some real-time examples of, you know, doctor feedback

and other things that they look at just to measure the launch. And it seems like you're finally at a point where things are starting to inflect. And I think that's driving that optimism. And so if that does play out, that probably, you know, the stock probably does have a does snap back. Well, we'll see if the respondents have another Lilly moment and if they're right. Assad Hader, thank you. Thank you. Well, sticking with health care up next, we are taking time out with the founder of Fertility and Wellness Services Clinic, Kind Body, in a week filled with relevant news, including the Supreme Court's ruling on abortion pills and a Southern Baptist vote on IVF. Be right back.

Well, Father's Day is Sunday, and while families take on lots of different shapes these days, one thing that hasn't changed is that fatherhood starts with a baby. Well, today I'm taking time out with a founder whose startup is helping to make more babies and more fathers in the process. Gina Bartese is a chairman of KindBody, whose 35 tech-enabled fertility clinics CEO role as the company says it's turned profitable and expects to post up to a quarter billion dollars in revenue for 2024. When I first spoke to Bartesi for my Fort Knox series four years ago, she told me about the trends driving demand. The most rapidly growing patient populations are the elective egg freezing, but it's also these single dads by choice, single moms by choice, and the LGBTQ plus audience. And so you really are seeing employers be generous and listen to their member population

that same-sex couples think about family building differently and uniquely. Again, historically, even if you had a fertility benefit through your carrier, you had to wait for 12 months to try to conceive before you took advantage of the fertility benefit. Well, if you're same-sex men or same-sex women, you could be trying 12 months, 12 minutes, or 12 years, and you're not going to have any success. And so the employers really have done a nice job, again, listening to the LGBTQ plus the other communities that have been inadvertently discriminated against from a family building standpoint. And they are the employers are rising to the occasion now. Well, one thing that has changed since then, the market environment,

just like small cap stocks have come under pressure with higher rates, so have health startups that chase top line growth but lacked a sustainable strategy. Bartesi said KindBody is now in position to be a consolidator in the space. The priority at 2021 was growth at all costs. And so you did, you had companies arguably that went public that should not have been public and they've been, you know, they've been trounced in the public markets because they don't, they can't, they don't have a path to profitability. valuation because a digital health company and standing up an app with a call center or care navigation is easy. It's capital light. There's no barriers to entry. And so there was too much of that, arguably too much of that in 2021. As we reset in 23 and 24, it is no longer growth at all costs. There is a return to profitability and cash flow positive businesses.

So the timeout takeaway, small profits needed. Even though the overall equity markets are at record highs, the economy for startups and smaller businesses isn't booming in the same way. It's harder to get capital as a startup, more expensive to borrow it as a small company. So companies with a bit of profit will have more fertile ground for growth. Well, a slew of data on one specific part of the market is coming next week, plus a key corporate hearing on Capitol Hill and a handful of earnings reports you need to watch. Your Wall Street look ahead is next. Another big week is on the way, especially for the real estate market. We are expecting earnings from home builders Lennar and KB Home, along with new housing starts and existing home sales data. Outside of housing, we will also hear from Boeing's outgoing CEO, Dave Calhoun,

who's set to testify on Capitol Hill to answer questions about the aircraft maker's whistleblower allegations and quality control issues. That stock is down by about a third year to date. Mike Santoli back with us, Mike, on real estate first. Lenar ahead of earnings, closer to the lows of the year than the highs. KB doing a lot better, but the real estate sector overall not doing great. And I guess higher for longer, as we see in the dot plot, too, not getting relief on interest rates into that industry is bound to have an effect. Well, for sure. I would say that's absolutely the case on commercial real estate. When it comes to the homebuilders, it's actually been a little bit more interesting in the sense that as a group, they're down 10, 11 percent off their highs. And really, the financing of homes is much more based on the 10 year treasury yield. We're down from 4.6 to 4.2 on the 10 year in a couple of weeks. You would think that should give a little bit of wind in

the sails to the homebuilders. But that's one of the several groups that's not really responding positively to this decline in yields. It just seems that the affordability issues and really consumer sentiment being on the downside today, a lot of that seems to reflect lack of housing affordability. So we'll see what the numbers look like because their reports have actually been really strong in terms of orders and the pricing they're getting. Not sure what, if anything, Dave Calhoun can say to help Boeing stock next week. But there's a lot that seems to be hurting it recently. For sure. I mean, there's a part of me that has the instinct to say, look, when you have the CEO called on the carpet in Congress,

you know, has to explain a corporate scandal or what went wrong. A lot of times that's just when the story maybe is bottoming out. How much worse can it get? It's a little too cute to say all of a sudden that means the stock's going to work. But it's hard to believe that there's some bad news about Boeing's business that's not already been aired. So I'll be looking at that. Also, by the way, retail sales on Tuesday, probably relevant. The market craves reassurance that the consumer is still in the game. Also, happy Father's Day, Mike. Oh, John, you as well. Thank you. I mean, you know, we dads are going to have ourselves a weekend. Always good to see you. See you next week. Or

at least a day. That's going to do it for overtime. Fast Money starts now.