Closing Bell - Closing Bell: PCE Looming Large 5/30/24

Episode Date: May 30, 2024

Is the narrowing rally a sign of an unhealthy market or one that’s just taking another well-deserved breather? Dan Greenhaus from Solus, Joe Terranova of Virtus and Bryn Talkington from Requisite Capital break down what they’re expecting. Plus, T. Rowe’s Sebastien Page tells us what he is expecting from PCE tomorrow. And, top technician Jeff DeGraaf tells us which much-loved sector he thinks could be due for a pullback. 

All right, guys, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live at Post 9 here at the New York Stock Exchange. This make or break hour begins with Inflation Eve. Tomorrow's PCE report looming especially large. Now the market's on edge ahead of it. We're going to ask our experts what's riding on that read and what it means for the rally no matter what. In the meantime, take a look at the scorecard. With 60 minutes to go in regulation, we are red today across the board. It is the Dow that is the biggest loser, and it's a Salesforce problem suffering its worst day in years after its earnings. Take a look at that. Down more than 20 percent, and other cloud software names like ServiceNow, they're a mess, too. Look at that. That's down near 12 percent. Elsewhere, most S&P sectors are actually green today, all but two. And small caps are outperforming. Yields are down.

That's a big part of that story. It does take us to our talk of the tape, the fate of the rally, which has gotten more narrow yet again. So is that a sign of an unhealthy market or one that is just taking another well-deserved breather? Let's ask Dan Greenhouse. He is chief strategist for Solus Alternative Asset Management with me here at Post 9. Welcome back. Thank you, sir. What's the story with this market?

It's been a little bit of a dicey week. We're pacing down 1% on the S&P. Yields are down today, but they've been backing up. Been a little nervous. What's going on? No, listen. We've had a really good run really all year. The stat, everyone seems to be tossing around.

The S&P is up, call up call 23 of the last 30 weeks. The type of run that you rarely have ever seen. There was a big rally off the 62 bear market that was comparable. Another one or two rallies you could find throughout history. So it's been pretty strong. Obviously, it's come alongside the backup and rates. So I don't really buy into the rate story. We've talked about that. But listen, there is something to the narrowness. It is being driven a lot by some of these AI names, although I will make one final quick point. The equal weight index is up, call it 3%, through today.

That's not great by any means, but it's average. So even if you want to balance out the overweight, so to speak, of NVIDIA, et cetera, et cetera, you're having a pretty decent year. It's not like it's dramatically narrowed. It's just NVIDIA's outsized performance makes it feel that way even more. I mean, for over a one-week period, for example, tech is up 1.5%. Like, everything else is down.

Comm service is 1.5%, like everything else is down. Com services, a half percent. Then you've got discretionary down one, materials down one, utilities, energy, one and a half. It gets a little worse for financial staples, a little worse for real estate, industrials, and then health care is down some 3%. So real quick on that point, there's a lot of people who come on the network and talk about rates, rates, rates, rates, rates, and stocks,

and why aren't we seeing more effect or rates, rates, and stocks, and why aren't we seeing more effect or this, that, and the next thing. But to combine the two points that we just made to synergize, if you will, I think you are seeing the effect. Again, as I mentioned, the equal weight's up, call it 2.8, 3% for the year, perfectly average. If you look at the market that way in the context of the backup and rates, call it 380 on the 10-year up to wherever we are now, 4.5, 4.55, you have seen a dampening effect on the market. It's just been overdone. It's been overburdened, so to speak. That's probably not the right adjective, but we'll go with it. Buy NVIDIA, buy Microsoft, et cetera, et cetera.

Do you think what I just read you, the sector performance is directly correlated to the backup in rates? Why tech has gone up? Why there's been, I go back to what Tony Pasquarello-Goldman said, why mega cap continues to outperform and why the money continues to flow because it's the sword and the shield. It's defense, offense, protection.

Large cap tech. Advancement, yeah. Mega caps. But listen, so yes, the answer to your question, rates does have an impact on flows and on valuations. But you've also had not great reports from Workday, et cetera, et cetera. So so there have been some fundamental reasons. Obviously, there's disappointment.

Right. And service now, you see, you just don't see these stocks move like they're moving today. It's like if if you've gotten a nice bump, and Salesforce hasn't really gotten that much of a bump, but if you've been up, and theoretically it's on this AI halo, and the expectations have gone up with your stock price, and then you deliver a dud like they did, especially their outlook,

the result right there, 20%. This is the flip side of the environment we're in where there's no tolerance for disappointment. But listen, I mean, any number of people who have come on the network today, I'm sure, and observed that it wasn't too bad of a report. I mean, the guidance, I'm not a large tech investor. Yeah, but the market votes more than the pundit. That's correct.

But obviously it tells you it couldn't have been that great or that average, or else you wouldn't be down, as we see on the screen here, 21%. But listen, you have seen pain throughout tech. Again, we listed a bunch of the names workday adobe et cetera et cetera it's just the the size of nvidia the size of microsoft and their performance google obviously their performance has been so strong both both fundamentally and with respect to price performance that it's just overwhelming uh all these other names nvidia is such an outlier on the week it's up six percent yeah every other mega NVIDIA is such an outlier on the week. It's up 6%. Every other mega cap is negative except for Apple,

and that's up just shy of 1%, shy of 192. But listen, the positioning data that flows to those names are still extraordinary. They're a huge portion of the market. They are still, to borrow Tony's phrase again, the sword and the shield. They do give you defensive characteristics and offensive characteristics. And so I understand why, as a manager, you'd want to have a tremendous amount of exposure to them. Well, it's why Krinsky over at BTIG says the trend's hard to fight, right? I mean, you're going to expect money to continue to go there. That is a trend that has been your friend.

Let's bring in CNBC contributors Joe Terranova of Virtus Investment Partners now and Bryn Talkington of Requisite Capital Management. Bryn, it's nice to have you. Joe, good to have you here at Post 9. Bryn, how do you see it, right? We said this is inflation eve because we get PCE in the morning. And given what rates have done lately, this is even more critical. Yeah, I mean, I think it'll be another data point. I think about rates. If you look at the 10-year yield and just draw a line, we're still in this like 45-degree uptrend. And so I think that rates on the long end still have a bias to the upside. I think PCE, you know, we'll see what happens.

It's a data point. I don't think it'll be especially dovish. And so I think we won't have any resolve on what the Fed's going to do. But I also think what's interesting today, and we'll see if that can continue for more than a day, is to Dan's point, you know, RSP or Equal Weight, which we own, it's had a fine year up three. Small caps are still negative. But actually, if I look across the sectors, today is a wonderful day. I think the, you know, Salesforce, the S&P and the NASDAQ are actually masking the really strong performance. And also, Scott, as we've been talking about breadth narrowing, today is really budding that trend.

And so I think where the algos are selling Salesforce, selling ServiceNow, they're not leaving the market. I think they're moving into these other sectors. And we'll see if that trend can continue. Yeah, Joe, that's why I said, I mean, you've got, right, every sector, but two are green. Red is tech and comm services for obvious reasons. You're being dragged by those stocks that we mentioned. So how do you see it setting up ahead of PCE tomorrow morning? And therefore, by the way, momentum is having an awful day. The factor is down one and a half percent because of the allocation towards a lot of those software names. I think everything right now is dependent upon the direction of rates. And the question is, are we at the ceiling for rates? Global yields,

we've got some rate relief today in global yields, not only here in the U.S. We're going to need further evidence in a lot of the eco data that comes out that we are at the ceiling. If you're at the ceiling, then you could go back and revisit the broadening out of the rally. Like the Russell 2000 today up 1%, dramatically outperforming everything else? Correct. Now, Dan said something that is just so important impression, and that is that rates impact flows. And as someone that works for an asset management company, boy, that's just brilliant because that is the case. If you think about it, as rates rise, the propensity for active management to benefit from inflows is lessened dramatically because the actual capital that's going into

the market at that point, it's money that's on autopilot. It's passive investing. And where's it going? It's going to the super six, the super six, which coming into today are now 30 percent of the S&P 500. Scott, yesterday with that number, that's the highest in history. We've never been at that significant awaiting for the Super 6. You want to pick up where he said he obviously wants something from you. That's why he was very complimentary of you at the outset, but we can deal with that later. He wants to take us to the Rangers game tonight. It's obvious. So I can see the Panthers win. We'll talk about that later. But listen, I mean,

everything he said about me is correct. And so I'll take it. But listen, I think that this breeds a conversation about the dominance of the Super 6, if you will, about NVIDIA and how it can't go on and if there's a slowdown and how similar this is to Cisco in 2000. I would have made the case, why isn't this similar to Cisco in 1999 or 1998 or 1997 when top line growth was 40 or 50 percent and bottom line growth was 40 or 50 percent? In fact, I went and looked, not today, but recently. NVIDIA is not forecast to have Cisco's growth rates for another two or three years. What NVIDIA is doing today, you didn't see those companies doing it in the late 1990s, 1999 and 2000.

So I still think from an allocation standpoint, from a CapEx standpoint, this is much closer to the 95 Netscape IPO than it is to the Intel 01 profit warning. So it's closer than we're into the beginning rather than the end. I think people are trying to make that argument that we're in the very early innings of this AI boom, nowhere near the later stages of it when we think that, you know, then all bets are off. Who knows?

Yeah, I mean, I think if you go back, Bespoke had a good piece the day before yesterday showing like from the lows of 1996 to 2000, the NASDAQ was up 700%. If you do the same adjusted look at COVID to today, the NASDAQ is only up 200%. So I think that the statistic that Joe shares about these six names being 30%, I think it's something we are mindful of. But if you look at NVIDIA, NVIDIA is up tenfold over the past few years from a price, but also earnings and free cash flow. So I think that that's what we haven't seen before, especially in NVIDIA, is that earnings and free cash flow are equivalent with the price movement. And that's where I think this is somewhat unique. And I agree with both Joe and Dan that I feel like

this is the earlier days in 96 or 97 This is the 99 comparative just doesn't doesn't hold water today Let me just add one one point on this You had tremendous earnings reports from Cisco and Sun micro and everybody at the time It wasn't until the middle to later part of 2000 that you started to get year-over-year declines and profit warnings you had You had a warning. Downgrades of JDS, Uniphase. We're going to go down with the globe. Like, we're going to go down memory.

But the point is you had warnings. You didn't go from 1,300 NVIDIA to 600 or the equivalent thereof overnight. There were multiple profit warnings, multiple misses, et cetera, et cetera. We haven't even had a slowdown, let alone a warning. Is it fair, Joe, to critique the valuation of tech as a sector versus historical periods? If we want to go history, it doesn't necessarily repeat. Rhymes. The forward P.E. of the tech sector right now is 29 percent, 29 times.

The 10 year average, this forward is below 20, 29 versus below 20. I don't think I don't think it's fair to draw the comparisons. I think we're in a unique position. We just gave the significant weighting of the Super 6. I think the next question you ask yourself is, does that 30% go to 35% before it goes to 25%? I'm not willing to bet against that. I think there's a good possibility that, in fact, that is actually what happens. I also think what's going on right now is, last week, the earnings for NVIDIA closed out the earnings season unofficially.

Now you get into this period where, unfortunately, you're listening to all the Fed speakers. You're analyzing all the economic data on a daily basis. And that's a tough place for speculators and investors to be. It creates a degree of paralysis. It creates a degree of, OK, let's just go back to where we know we have the reliability and earnings and profit margin expansion and the purest definition of quality. And it's represented in those companies. And that's why technology is up 9% in the month of May alone. Is tech too expensive?

Are we ignoring numbers that jump out at you like that? Now, the promise of AI for some of the largest stocks in the market may be skewing the forward PE overall, but it still is 29 times versus 19 and a half. If you focus in on software, where there's lofty valuations all over the place, software, I believe, is trading at an ev to forward sales ratio of call it six something like that six and a half seven yeah it was just 10 and it peaked out i'm sorry it's average over the last five or 10 years or something is 10 and its peak in 21 before it sold off was 20 it's trading at six multiple year average call it 10 and its peak before selling off was 20 you see what these stocks a lot of these stocks have done year-to-date right some I mean Z scalers down 28 percent snowflakes down 28 Shopify's down 25 workdays down

25 Twilio's down 24 Adobe's down 24 yeah and again to the point about the equal weight versus the like there is pain under the headline but but to flip the conversation and I'm sure Bryn would agree, like, we do a disservice to viewers by not constantly, and we do, but not constantly articulating that there is other things to do besides technology. The banks are doing well. The insurance names are doing well. The actual picks and shovels of building data centers are doing well.

We're doing well. Were doing well. Were. Dependent upon rates. Banks over the last month are up 1%. Well, people don't invest on one month time. I'm just saying they were doing really well. And all these other sectors like utilities were doing really well. Your point's well taken, but that speaks to, Bryn, the narrowness that we've seen, as some of those groups that made us feel like we had a healthy market have since rolled a little bit,

making some suggest this is now unhealthy again. Well, as one month doesn't necessarily make a trend, neither does a day. And so that's what's, to me, as interesting as today, that question about narrowness of breath gets turned on its head because everything minus tech is up. And so I do think going throughout the year, for the back half of the year, I mean, energy is up around 10% for the year. Financials are the same. Utilities are up 13%. And those sectors and the underlying securities continue that momentum. Because if you think about it, we are almost halfway through the year and you've got low double digits for pretty much every main sector.

And so what does the back half of the year bring? And I think there'll be certain sectors and securities like we're still really positive on energy. I think commodities, energy looks like it's rolling. Energy looks like it's rolling over. I mean, energy is only up 8 percent now year to date. It's the worst over the last month. It's down 3%, as I said. Speaks to sectors that were, that now are not. Right, but I'm saying that that's where you look as an investor and say, well, you're up 10, you're down 1.5 from there. I think that, especially with energy, earnings are actually bottoming out, and think we'll start to re-accelerate. You're obviously seeing a ton of M&A and so I think this is an area where investors the back half of

the year are gonna say hmm there's probably going to continue to be M&A in this sector. It's still cheap, earnings are bottoming out and I can get really nice dividend and special dividends with these companies that have a ton of free cash flow. So I think this sector will continue to do quite nicely the rest of the year. And I wouldn't take the one month view and extrapolate that out, Scott, the next six months. Okay. We need to take care of some business with Joe. I know you want to weigh in on what we've been talking about. However, you personally bought Netflix yesterday, as you said you would. Speaking of tech,

speaking of things that have gone up a lot, remember the stock was at 700. Yes. Goes down to 400. Now it looks like it's going to make a round trip back to seven. Yes. Up 33 percent year to date, November of 2021. It was the 700 price that you referenced. The stock has incredibly strong momentum, both technically and fundamentally. Ad tier, password crackdown. They've got past both of those moments. Both of those dynamics were additive to the company itself. And now their focus is on live sports. And they've begun to introduce live sports.

We already know what they're doing with future announcements. I think that's going to be a big part of the evolution for this company. And I think this company exceeds well above 700. I need to hear from you on Salesforce, too, because you have it in your ETF. Listen, we went through this yesterday on Halftime. I was not excited about Salesforce going into the print. It was down 12% since March. They really had to prove themselves.

I mean, cost efficiency only takes you so far. If you're going to have single-digit revenue growth, something that we haven't seen for this company, you can't wash away cost. You can't use cost efficiency to wash that away. It's ultimately going to matter. So I think software, unfortunately, is in a place where if you are, and Stephanie Link has done a great job on this, and she said this, if you're a CTO, you're focused on cybersecurity, you're focused on AI. That's going to lead you to semiconductors and cybersecurity names. I'll tell you this. CrowdStrike's down 8% today.

I would tell you if there's... Make it 9. Okay, make it 9. If there's further deterioration in CrowdStrike, I'm long the name, and that's the name I think you ought to buy. Listen, Netflix is a perfect example. A company that's executing for all the reasons that Joe just articulated. The password crackdown has been surprising to everybody in terms of success.

It hasn't seen really any churn of substance. The content continues to be good. Gaming's been a success. They're going into live sports. They announced the reality competitions. Like, this is a bundle in and of itself here. And this is a perfect example of the type of company. Obviously, we talk about it on the network a bunch,

but it is not one of the... Deservedly so. I mean, when it was 400, you're like, the story's over. Well, there was a concern at that moment about subscriber churn, and there was a worry, which I shared, and I work with people who bought it instantaneously, and they've been rewarded, who bought it personally, I should say.

But this is a perfect example of the type of company that should be getting much more attention, as much as some of the MAG-6 or 7, and doesn't, and evidence that there is plenty of places to make money that isn't NVIDIA. All right. We're going to have to leave it there. Guys, thank you very much, everybody. Bryn, we'll see you soon. Thanks, Joe and Dan Greenhouse here at Post 9.

To Christina Partsenevelis now for a look at the biggest movers into the close. Christina. Scott, while investors couldn't stomach Hormel Foods' decline in retail sales, sending shares down about 9% right now, management warned that consumers were pushing back on higher prices. They bought fewer whole turkeys, higher margins on that, and fewer ready-to-eat meals. The food company did, though, maintain its annual sales target. You see shares down 9% for turkey troubles and spending habits for consumers. Tune in to Mad Money tonight with Hormel's CEO and Jim Cramer. C3.ai is turning

higher right now. It's its fifth consecutive quarter of accelerating growth. Profitability was much better than guided. The software firm's management noted that demand for enterprise AI is intensifying. You can see shares up almost 22%. AI's earnings beat was a bright spot when compared to other software names. I know you just talked about it, but Salesforce.com, UI Path, and Workday. Just a sea of red right now. Scott? Yeah, yep. All right, good stuff. Back to you shortly.

Christina Partsenevelos. We're just getting started. Up next, banking on a slowdown. Wall Street is awaiting tomorrow's key PCE inflation report. T. Rowe Prices. Sebastian Page is back mapping out what it might mean for the markets and your money. He joins us after the break. We're live at the New York Stock Exchange.

You're watching Closing Bell on CNBC. We're in the red across the board today amid a tough holiday short in trading week. The S&P 500 and NASDAQ now both on track to snap their five-week win streaks. Investors turning their attention to tomorrow morning's all-important PCE report. Joining me now, Sebastian Page, T. Rowe Price. Good to see you again. Great to see you, Scott. Ben, this market's been resilient. I know we had a little bit of a speed bump this week, but how do you see things from here? Look, I think today is interesting because my two themes for the trading today are rates, and you were just talking about this with your other guests, and rotation. You are seeing a market broadening.

Tomorrow for PCE, we're looking at 0.3% month over month. Scott, economists are going to tell me do not look at one month data. Unfortunately, the market is now very sensitive to one month data because the Fed has said we are data dependent. Well, if I'm like a runner, I look at my watch and I see how quick I'm how fast I'm running. 0.3% month over month is over 3.5%. So I expect sticky inflation from here, Scott. Are you more positive on the market than you've been in a long time? Because in my notes, it says you expect the market to broaden over the next 12 months because we're gently cooling and earnings growth should broaden. That suggests that you're not as cautious. I'll use that word. I don't want to say negative. Is that fair? Yeah, look, my view is that investors should be close to their risk

tolerance, their normal sort of long-term risk tolerance. So call it neutral. You've been talking about concentration. The bears on my asset allocation committee are worried about concentration. It is an economic slowdown. And Scott, from here, the sentiment, sort of shorter term indicator, is running pretty hot. Yeah, today, software's not doing well and tech is selling off,

but sentiment, if you look at retail surveys, or even the VIX touched 11 last week. It's 13 this week. So this sort of positioning and these high expectations, Scott, a wise person once told me that the secret to happiness in life is to have low expectations. The expectations, and you see this in software today, but for tech and for AI, are just really, really high. All that being said, Scott, earnings are coming up, rates over time are coming down. I don't expect a recession. I think stocks will do okay.

I think credit will do okay. And I'm pretty comfortable for the next 12 months. But that's a change. I mean, let's be honest, right? That definitely sounds like you have changed more positive on these markets. And I was going to ask you, how could you possibly be negative if those are your views? Don't expect a recession. A hike is unlikely. Market's going to broaden.

Earnings are good, right? I mean, you're building the case that maybe you want to be more invested in this market than you were before, or at least more overweight U.S. equities than you were willing to be prior. Yeah, looks, you we've been talking for a while, Scott. We closed our underweight stocks back in October. Right. And the market at the time was down 10 percent. You called me a reluctant bear. I call myself a reluctant bear for parts of 2023. You called yourself that. I just kept calling you that because even when the market was

showing signs of bull market, you were still a reluctant bear. Right. And so in October, we closed it. And I wish we'd done more, but we closed it pretty fast. We bought three billions worth of stocks and we've been neutral since then. We've actually added a little bit to Scott, to stocks, Scott, to your point. Look, I think it just comes down to being aware of the short term risks with very high expectations. AI is like a tidal wave. And right now, as Stephanie Link talked about that during lunch and her conversation with you at lunch, but right now it's sort of building AI, semiconductors, cloud computing. And now it's spilling. The wave is going to, you know, copper prices, utility. But ultimately, we believe this is real. It's going to be a wave that's going to go into more traditional companies to create productivity. And all I'm saying is the expectations for that wave are extremely high, especially right now. So that's what you're seeing in terms of disappointment

in tech today. So, you know, stick to your long term risk tolerance as an investor. How much risk do you want to take? And Scott, if you allow me to talk about longer term asset allocation, if you're far away from retirement, if you look at lifecycle models, which we use in some of our portfolios, you should be. Let's say you're 10, 15 years from retirement. You should be, according to lifecycle models, 70, 80 percent stocks. Right. So what I'm talking about is understand your risk tolerance. And this is the kind of market where you kind of want to be where your risk tolerance is. Understood. Well said. You're still long cash. What does that say and why?

So I think we have some upside risk for rates from here. So within fixed income, we have this interesting barbell where you get a lot of yield in cash because the curve's inverted. But we're also long a diversified credit portfolio. They can call it the magic barbell. It's performing really well when rates back up, but you don't have a recession so that credit gets in trouble. And we like that positioning more than sort of traditional, longer duration bond portfolios. So we're going to position for a little bit of upside on rates relative to expectations. That's what it means, Scott. But I'm a multi-asset investor, so I like having that fixed income positioning together with an equity positioning where we're tilted

towards value in equity. So today you see the market broaden. That's kind of the theme I'm looking for. Scott, if you allow me to go to equities for a second. Yeah. Earnings are going to broaden. By the end of the year, the expectations are that year-over-year earnings for the value style or sector are actually going to grow faster than growth earnings, growth stocks earnings,

in great part because value stocks have really easy comparables. But there is a passing of the baton here in the equity market that should be healthy, reasonably healthy for the stock market and, you know, be part of that broadening or rotation, if you will. Appreciate your time, as always. Sebastian, thank you. Thank you, Scott. All right. Up next, top technician Jeff DeGraff is back and breaking down the charts for us. He is forecasting a pullback in one of the market's top sectors. He'll make his case to you and tell you how it might impact the broader rally just after the break. We are back with the Nasdaq again, retreating from records set earlier in the week. Our next guest says one of the most loved corners of the

tech space could be at risk of a bigger pullback. Joining me now, Jeff DeGraff, Renaissance Macros chair and head of technical research. Good to see you. Welcome back. Thanks, Scott. What are we talking about here? Well, your previous guest talked about expectations. And one of the things that we look at is option pricing along with momentum. And when we see excessive momentum and more momentum players, so we actually like momentum. But when we see the option pricing betting that the momentum is going to continue or actually exceed history, that becomes a problem for us. And so we're seeing that in semiconductors, names like Qualcomm, names like Convidia. And just says to us, look, there's probably a better opportunity, a pullback here. They might consolidate over the summer, but this isn't the place to be putting in fresh

money. So I think the expectations are pretty filled up here. And we just want to be careful and we're advising our clients on that, particularly given the overall sentiment and this post-momentum peak that we hit in April. It's kind of been rolling here. We saw it in industrials yesterday and we're seeing it in software today. And we think we'll start seeing it in semis at some point here in the early summer months. I mean, it's hard to look at just technicals and think that trends are over. I mean, for example, if Salesforce knocked it out of the park, we wouldn't be looking at a software picture that looks like it does today.

Isn't that more of a fundamental story than a technical one? Boy, I don't think so, Scott. I mean, there's been several. In fact, we did a report earlier this week that focused on the weakness that we're seeing in software. So for us, it was a little bit more telling that we were seeing it across the board. That wasn't in Microsoft, but we were certainly seeing it in some other facets of it. And we made that distinction on Tuesday and just said, look, not all tech is equal here. Tech generally is okay.

Semis are getting extended, but there's still enough trends. And software actually has some vulnerability here. And our take is that the hardware and peripherals and those names, the net apps of the world, et cetera, look pretty interesting here. So we think there's a lot of rotation going on in tech. But you think that the semis as a group can pull back by as much as 20 percent? Is that correct? Yeah.

I mean, that doesn't keep in mind. I mean, NVIDIA came very close to that. If it didn't do it, it got down to like 750 intraday. So, you know, that's not that unusual given the volatility of that space. So, again, you know, putting fresh money to work here just says that you're opening yourself up to the risks of a drawdown. I'm not saying a bear market in the case of NVIDIA. But you're certainly opening yourself up to a drawdown that you'll probably regret and weak hands tend to be sellers of those oversold conditions and we'd actually rather be a buyer of that oversold condition.

It's just crazy. I mean, you know, we could have said some of these similar things about Nvidia, for example, wouldn't put fresh money in at 950, wouldn't put fresh money in at 975 or 1000 or 1050. And now your stock money in at $9.75 or $1,000 or $1,050. And now your stock was basically at $1,150. It's pulled back a bit, obviously. It's down $32.50 today. But this market can get away from people quickly, even when they're hesitant to put money in.

Well, keep in mind that each one of those that you mentioned when when we had the options that were again priced where they are today we actually did get those pullbacks we had better opportunities to be a buyer of those stocks and that just happened for Nvidia yesterday for us again previously it had happened in March so you know it does have a timing impact where once we get through that, once we get the oversold condition, we'll play it. And then we'll play it until we get this signal from our option work that just says, hey, we got to take a break here and look at better opportunities. Well, lastly and quickly, what's the most oversold opportunity to buy? Oh, the most oversold opportunity to buy.

Well, you know, we've talked about it. We talk about China and Hong Kong, and they're actually pulling back after changing trends they're not quite oversold yet but if we look at that from a call three-year perspective they're very very oversold they've changed trends which is good that's important confirmation and then tactically they've actually consolidated here I think those are pretty interesting you know in terms of a longer term thematic idea called for the next year plus uh or called the remainder of this year plus i think those are pretty yeah that's a pretty good opportunity right there that's why it's a it's

your answer is telling in and of itself right it's hard to find many things that are oversold in the u.s market because the rally's been so strong since the april low we'll talk to you soon jeff thank you. I appreciate it very much. That's Jeff DeGraff joining us once again. Up next, we're tracking the biggest movers into the close. Christina's back with that. What do you say?

Well, we've got a tale of two retailers. One is suffering from too many discount sales, while the other is gaining in popularity with sneakerheads. Those names and some details about AMD and NVIDIA next. We're just about 15 from the closing bell. Back to Christina now for the stocks that she is watching. Footlocker's turnaround plan is starting to look promising. On the earnings call yesterday, management said they were confident

that their brand momentum would continue, especially among basketball and sneaker culture shoppers. A contrast, actually, to last quarter when they warned profitability goals would be delayed by years. Here's CEO Mary Dillon I should say this morning on Squawkbox. Listen in. The customer has been under pressure

so there's no question about that. Prolonged inflation, interest rates that affects everything from your house payment to your student loan payment, less savings. So that's all true, but people tend to have discretionary categories that they care about. So if you care about sneakers, you know, our job is to offer up the best in the best way. So that's one retailer. On the downside, Kohl's shares are on pace for

their worst day ever, plunging 23% after posting a surprise loss per share. Kohl's CEO told CNBC the department store had higher clearance levels as it tried to clear inventory and jumpstart a turnaround plan. And now we're going to switch gears completely because there's a new report coming from Bloomberg that U.S. officials are delaying the issuance of licenses for exports of AI chips produced by NVIDIA and AMD to countries in the Middle East. The concern is those chips going to the Middle East would be diverted to China. So I'm waiting for comment from both NVIDIA and AMD. But just last week on NVIDIA's conference call, they said that sovereign AI would hit high single digit billions in revenues this

year. And this is as more nations build up their AI infrastructures. Keep in mind that NVIDIA said back in November it was working with customers in China and the Middle East to obtain export licenses for new products that would comply with U.S. rules. So right now, we don't know exactly if NVIDIA has been stopped, but they have been working with the Middle East. And now it seems like U.S. officials are looking into that and may delay that relationship. Yeah. And we see the stock, I think, about the lows of the day here, potentially on that news. Christina, thank you.

Thanks. we see the stock, I think about the lows of the day here, potentially on that news. Christina, thank you. That's Christina Partsenevelos, as we see Nvidia shares down by, it looked like $40. Still ahead, Dell's numbers dropping at the top of the hour. That stock is having a strong year thus far. So can that momentum continue? We will break down the metrics to watch. The bell is coming right back. We are back and we are getting some news on TikTok that has shares of Meta and Snap on the move. Our Julia Boorstin joining us now with those details. Julia. Now, shares of Meta and Snap moving on a headline from Reuters about TikTok. Reuters reporting that TikTok is working to prepare a U.S. copy of the AppScore algorithm for its 170 million U.S. users, Reuters citing sources. Now, this comes as the company faces a potential forced breakup with a hearing in that lawsuit against the company set for September. When contacted for comment, TikTok said this story is inaccurate and directed me to its filing,

which said that this qualified divestiture demanded by the act to allow TikTok to continue operating in the United States is simply not possible, not commercially, not technologically and not legally. And they say certainly not in the 270 day timeline required by the act. So they're arguing that what Reuters is suggesting is not possible. Julie, I appreciate it. Thank you for the update there. That's our Julia Borsten. Up next, a rundown of what to expect from Costco and Dell's earnings in overtime. That and much more when we take you inside the Market Zone next. We are in the closing bell market zone now. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day.

Plus, we are watching two earnings releases in OT today. Christina Partsenevelos looking ahead to Dell. Melissa Repko on what to expect from Costco. Mike, I'll begin with you. Salesforce ugly. Some of the software name service now ugly as well. But we're going to turn our attention to PCE in the morning. Yeah. You know, the market's been out of gear for a while. So for weeks, it's been a stealth pullback. The majority of stocks churning lower, yields higher, but masked to some degree by

Nvidia and a few other strong stocks. You have a tentative partial reversal of that dynamic today. We have the Salesforce, you know, miss and the blast radius around that in enterprise software. Nvidia on this news seemingly down four and a half percent from its intraday high. And it just creates this little added bit of tension, even as three stocks are up for everyone that's down today. So to me, it was about the market not wanting to lean too far in one direction going into the PCE number, which will tell us whether this stealth pullback was enough, whether there was still this sort of ongoing two-month reset process that we have to get expectations lower and test earnings estimates and the economic expectations for somewhat higher yields. People knew they shouldn't have put on those Dow 40K hats. That was Dow 40K, Nasdaq 17,000. We can name all the round numbers. 2,000 points off that level. Microsoft bumping its head on the old line. Yeah, exactly. Christina Partsinevelos on Dell and looking ahead to these earnings in overtime. Well, expectations are really high. And you can see that by a Dell share price going up, what, 130% this year. But should we trust that AI narrative, or is Dell a much less levered story to AI than

perceived? Well, let's start with Dell stock. It's jumped just in the last month because of one, NVIDIA's CEO recently hyping up its relationship with Dell on stage. Jensen Wong, when he speaks, the investor community pays attention. And number two, Microsoft's AI PC event just last Monday helped reinvigorate the AI PC narrative. But I have to say, optimized AI servers, so that first point, were only 3.5% of total revenues last quarter. It's going to probably increase this quarter, but won't have

an outsized impact on total revenues. And the PC refresh cycle is underway, but just last night, HP Inc.'s management warned that AI PCs would only be 10% of total PC sales. So adoption is going to take some time. So you may not see that big AI push. AI server backlog is going to be the number one focus for this earnings call and comments about storage as well as the PC refresh cycle. But this stock is definitely a mover. It was up 32% post-earnings last quarter. The options market is pricing in a 9% swing. You can see hesitation heading into earnings, hence the 5% drop.

Scott? All right. Thank you so much, Christina Partinovalos. Melissa Repko with Costco and the look ahead to its own earnings in OT. Yes, Costco has been a hotly watched stock because the Club Channel has been a very strong one. And so investors have high hopes for the stock. They're expecting $3.70 for earnings per share and $58.7 billion expected. And we will see if its resilience has held up. We've heard from a lot of retailers like Walmart

and Target that are seeing discretionary pressure. But Costco thus far has been able to withstand that and benefit from people turning to it for cheaper options. Back to you. All right, Melissa, thanks so much. What do you think about this Costco report? I mean, it's universally expected to be a net winner in this whole environment. Everyone always says, you know, Costco, it's always expensive. It never gives you a chance to get it on the cheap. But now it's 47 times forward earnings. It's 30 years. It hasn't been this expensive ever. So it better live up to it. I don't know that it's necessarily going to be the verdict on the overall condition of the consumer.

It's much more verdict on Costco's ability to execute in a more price competitive world and kind of a value oriented customer. So we'll see. I mean, you know, you know, the monthly sales in advance. So sometimes it's not a lot of suspense in the actual numbers, but we'll see how it goes. All right, so let's throw NVIDIA up because it's a big loser today. It's been a massive winner, as we know, getting hit potentially on some of this news that we talked about or Christina did, down more than $40. Jeff DeGraff, you know, on a little while ago suggesting these chip stocks are at some pretty good risk because they're so overbought. They're so overbought and the risk adjusted returns have just been too good and people are trying to extrapolate that. Very sympathetic to that idea. It's been NVIDIA, Qualcomm, AMD,

Broadcom to a lesser degree. So it matters a lot if the market is not going to decide it's just going to rotate away from the overbought areas. I mean, in theory, we've done that. There's some parts of this market that have actually sold off a little bit and maybe created entry points. We'll see. Breath divergences, as we've had for weeks, where breath has been weak as the index has held up okay, they more often than not resolve in a positive direction eventually. But it's hard to rely in the immediate term

as we're getting this big macro number tomorrow. All right, we'll be red today, obviously. As you know, Salesforce will be the big story, at least from a single stock standpoint. But all turns are to the PCE in the morning. See what happens there, and then we'll take you through the trade tomorrow. I look forward to that. The market seemed like it was willing to be open for a positive surprise for most of the day on PCE. We'll see if that follows.

Yes, we will. That's Mike Santoli. He'll be back with us again tomorrow into OC now with Morgan and John.