Closing Bell - Closing Bell: Playing the Volatility 11/04/24

Episode Date: November 4, 2024

How should investors play the next few weeks? Trivariate’s Adam Parker, Invesco’s Kristina Hooper and BMO’s Yung-Yu Ma reveal their playbooks. Plus, Aswath Damodaran from NYU Stern School of Business weighs in on tech valuations now that mega-cap earnings are in the rearview mirror. And, top technician Chris Verrone tells us how he is navigating the uncertainty surrounding the election and upcoming fed meeting. 

Welcome to Closing Bell. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with three critical days ahead, culminating with Thursday's Fed decision. What happens with stocks? Anyone's guess. The backdrop, though, still positive, most say, with the economy chugging along, interest rates expected to move lower. We'll ask our experts over this final stretch where this bull market is likely to go in the weeks ahead. In the meantime, there's a scorecard with 60 minutes to go in regulation. It has been a mostly red day for the majors, but we're trying to make a little run

at positive territory on both the NASDAQ and the S&P. We'll see. Apple is lower today. Berkshire Hathaway cutting its stake even further. That's interesting news. And Nvidia, though it's higher today, it's joining the Dow on Friday. Those two companies neck and neck today in terms of market cap.

We're going to track that right up to today's finish as well. Look at that. Elsewhere yields. They're a touch lower ahead of the Fed meeting. The dollar lower. Oil rising. We'll watch all that takes us to our talk of the tape. How to play what could be a more volatile couple of weeks ahead. Let's ask Adam Parker. He's the founder and CEO of Trivariate Research, a CNBC contributor with me, as you can see, at Post 9. Welcome back. Great to be here. It's really hard to try and game out the election and what you're supposed to do. So let's try and, I guess, look beyond. Is the backdrop for stocks, no matter what happens on Election Day, still positive? I think so. I think so. I mean, the question is, do you get a growth scare

that gets people afraid 2025, 2026 earnings are impaired? Probably not. I think the bull case is still intact, right? Gross margins are going up for a lot of companies. You might get a positive skew out of China stimulus. You see how NVIDIA acts. You might get some more case studies that there's productivity from AI deployment.

We're probably going to run a pretty big deficit next year, no matter who wins. So that usually finds its way into the biggest 20 or 30 U.S. equities, trickling its way down. So, yeah, I think the setup's still skewed to the positive, and the bull case is still intact, unless we get a new policy from a new political regime that looks like it's going to be more austere and then maybe you change your mind. Well, what happens if we do run the deficit that you suggest, which obviously we have a sizable deficit, we have to fund it and all that. What happens if that causes yields to back up further?

Yeah, I mean, the bond vigilante kind of scare thing is always out there. It hasn't really sustainably happened in the last 15 years, even though I hear about it periodically. It's in the distribution of what people talk about. You think it's overblown, overblown, overplayed? Usually when people really get nervous and it's risk off trade, bond yields go lower. I mean, that's kind of easier to show than it is that we're gonna have like fear about the health of the US financial system And bond yields gonna back up so if I look back in time And I look at like oh, there's a lot of supply coming online. It won't be bet to demand I'll make this call that yields are backing up usually it doesn't happen that way if I go back to like

QE 1 QE 2 QE 3 twist or repo like every time the experts would coming, and every time yields went lower because when the world was a riskier place, people got nervous and they bought the 10-year. So it could be different this time. But the institutional investors I talk to, you know, all focus on equities. They're not really positioning. I mean, I guess what I'd say is that's been a moving target. I remember years ago people say, ah, once we're at 3% on the 10-year, U.S. equities can't handle that.

And then it was 3.5, and then it was 4. Now what is it, 5, people are saying? Well, the 10-year's at 431. What if it does move towards 5? I think if it's because growth is better than people think, it's OK. I think it's because the consumer hangs in, it's OK. I think it's because people are worried about stagflation, then that's no bueno. All right. So as long as we have margins that are good, productivity that is rising rising and the Fed's cutting. And the Fed, by the way, cutting not through sort of historical precedent, I guess you could say, where it's not like the labor market is deteriorating. Unemployment's pretty good. To where the Fed has to start cutting rates. So maybe this time is different. Those three things, margins, productivity, Fed cutting, among a few others, if you wanted to put them on the list, that underlays the bullish backdrop.

I think so. And I think, you know, if you get some news out of China, then all of a sudden, if you're short equities, you're saying, I don't care about margins going up. I don't care about the Fed still being in the first half of their path. I don't care about a massive deficit and I don't care about China stimulating a ton. I mean, you're starting to really put together some, you know, you better be right that people are afraid of a growth scare in the next few months. And then in most years where the market's up this much in the first 10 months of the year,

it tends to actually fall through in year end also just because people are chasing that performance and, you know, that fear of missing out thing. So even like trading wise, usually when you're this strong, Jan 1 through October 31st, you end up with an up November, December 2. What do you like the most in the market?

You know, there's so many things. Really? Yeah. I mean, yeah. Let's list a few. Sure. I like health care services. That could be everything.

They have pricing power, and they're going to grow next year. Unless we get a massive recession, things like unh just tend to earn more money uh you know i think the semiconductors i like a lot i don't believe that the story about compute growing above gdp is remotely over and that's not just nvidia it's the whole semi-cap equipment space it's it's it's like amat lam kalak lam yeah it's also cadence synopsis, which sold off a lot. Yeah, ASML kind of blew up because there's Samsung. But I think ultimately these companies are going to earn a lot more two, three years from now. They are now.

I think it's a little bit less the diversified companies like Analog Devices and Texas Instruments and Microchip just because they have more broad-based industrial and auto exposure. That may be a little longer to burn off their excess inventory. But there's plenty of things to own in semis. I think there's things to own in housing and building materials. If we're short structures, whether it's multifamily or single family, I probably want to own building products. I own what's corning by Masonite. There's doors and there's insulation. You can buy BLDR. You can buy stocks that have blown up that probably have better earnings going forward. Mohawk, Beacon Rooking, Florida.

There's tons in the housing exposure sector. Probably power. I mean, you look at the stuff with Amazon you're talking about in the previous program, but definitely you're going to need more power, whether it's NatGas or others. We've had choppy stocks today, but I think if you look a year from now, they're going to be up. So power, housing, health care services, semis. What do you hate? Some of the stuff I've been anchored to hating are physical U.S. retailers.

You know, like the Targets and dollar stores of the world. I think they're just structurally challenged. They can't get back to the long-term average margin that they had and then comp, you know, well as a consumer is slowing. You know, I think the banks thing is interesting. I get the knee-jerk reaction that people think we'll have with less regulation and the specter of taxes at least not rising and why regional banks could go up. But the banks are up a lot from lows. And a lot of the big banks are not really cheap on tangible books. So I think it probably is more like selling if they go up and it is like building a position for a massive... If you going to make like the, you know, the, if you, if you're talking about some kind of reflation trade, I mean, you say we're going to run big deficits. That, you know, means that the likelihood that rates

are going to remain elevated on the long end of the curve. That's good for the banks. No, it should help. I guess lower regulation, theoretically, the bank strong economy, good for the bank should help. You know, they haven't pro rata participated that much in the last 15 years when we've had some of those conditions. So I think the question is, my caution, I guess, is more that while I think there are tons of inefficiencies in the banks and so many ways to improve processes, historically they just compete in a lot of their businesses on pricing. And so what happens is that they invest a ton for AI productivity, but they have to run systems in parallel. And so you don't see the benefit on the cost side until maybe later than you see it from other businesses that have lots of employees. You hate small caps, right?

Yeah, I don't. I mean, my argument is just more the S&P 500 is 16 times as big as small caps. So I had this epiphany last week I wrote about on the weekend, which is like, so if somebody wants to be over with small caps, great. You own 12 times as much S&P as you as small caps. So I had this epiphany last week I wrote about on the weekend, which is like, so if somebody wants to be able to wait small caps, great. You own 12 times as much S&P as you do small caps instead of the current wait 16 times as much. That's so much less to me than getting, like, the individual securities and sectors right within the S&P

that I'm almost just like, fine, already. Yes, they're cheap versus history. I think they're cheap for a reason that's mostly, if not all, merited, which is inferior margin profile, inferior cash flows, et cetera. But if somebody wants to bank on an accelerating economy or the election outcome, et cetera, I want a position for small caps to work for a two-week rally. They could. I mean, if you remember when Trump won in 2016, I think the Russell was up 3%, like, four days in a row.

So you could get a huge short-term trade if that's what's going to happen. But that's all you think it is. But, yeah, beyond that, I need to believe in accelerating earnings and margins. I set you up. I set you up. I'm sure she's going to. That's why I set you up. Yeah, she's going to put that on a tee and then smash it 300 yards down the center of the fairway.

No, I just put it on the tee for her. Yeah, exactly. It's an Ephus pitch. Christina Hooper. Yeah. Oh, my God. Here's the Ephus pitch. That's who we're talking about.

Here it is. Of Invesco. Yeah. You're my BMO wealth manager. It's great to have everybody. I mean, I did tee up. Yeah. It's okay, Christina. You get the first shot at Mr. Parker. Sometimes I need a little help. So thank you, Scott. So my argument is that we are cutting into growth, that this is an environment in which we're likely to see a very modest slowdown in the U.S. and then a re-acceleration

that starts next year. Markets will discount that in advance. And that means that the smaller and the mid caps, which might be the sweet spot that you might even be comfortable with, because they do have some of the characteristics of small caps. They're more sensitive to the economic cycle. And I think they could perform very well in now and into 2025. I get a lot of love on the desk these days for mid-caps, especially. Unpolished gems, that's what Tony Pasquarello Goldman has called them. I mean, there seems to be a good amount of momentum in that area.

But do you have a, you know, I mean, we have a bigger debate about it. I think mid-caps make a lot more sense. A lot of them are high-quality businesses that can grow and have good pricing and they're not, you know, they don't get killed when CPI rises, if that's part of the bull case. Look, I think we talked about this when we were on the air together a month or two ago, which is if she's right that the economy re-accelerates, then yeah, you want to own kind of lower quality stuff that can benefit more. I think the question or the debate would be like, what gives you super confidence is going to re-accelerate? Let's say it's second half of 2015. I want to be anticipatory. Maybe I'll buy it in February and not November. There's a timing gauge too, right? So I think there could be debate about

it. I think when you look historically, small caps really outperform basically as you can see the recession. When blood's in the street, that's when you've got to gamble that you're going to get the recovery. And the question is, if now nobody's saying we're going to have a recession, then why am I kind of playing for the recovery on the other side of one, which now seems less likely than it was before? At least that's, I think, where the debate would land. Young Yu, what's your feel here on these markets? Ahead of the election, we got a Fed decision coming on Thursday. Obviously, it's going to color where we go in the near term, to say the least. I think, Scott, it's great to be here. We think the market's in a comfortable place here. We do think there's still a lot of uncertainty, obviously, and perhaps some disillusionment with

some of the AI spending not translating into profits quickly. But we think the overall backdrop is favorable. We think the case for economic acceleration actually into 2025 on the back of lower interest rates and greater business spending is a pretty sound thesis. And we actually think we'll see that growth and we'll see that improved productivity going into 2025 that will allow for a pretty broad-based rally, including small caps, where we see strong growth, where we see some areas of the economy that might benefit more from lower rates picking up a bit. Let me ask you this. Is that backdrop, is that bigger at this point than

whomever wins the election? Certain policies are going to be different. Certain sectors are going to go up and others may go down and stocks may make, you know, subsequent moves based on all that. But the backdrop itself, which the stock market's going to count on more than anything else, is that bigger than whosoever name is occupying 1600 Pennsylvania Avenue? That being strong economy, rate cuts coming, pent up demand for M&A, et cetera? We do think it is. We think that which sectors might outperform and which individual companies might get a bit extra tailwind or perhaps some having a headwind will differ depending on who's in the White House and what some of the policies are.

But we do think that backdrop is very strong. We think between lower interest rates, productivity improvements, business spending coming on strong in 2025, we think that's going to be the story of 2025. And yes, we could get disruptions for things such as tariffs. Yes, we could get tax negotiations that cause some hiccups along the way. But we do think that backdrop for 2025 is still a favorable one and is going to outweigh some of the noise that takes place on a month to month basis. Christine, you want to address that? I mean, it's kind of the crux of the Greg it piece the other day in the journal. It's like growth is is great. Whoever wins is going to inherit a very strong economy. And the quality of that growth is equally as impressive being the productivity that Young Yu was just talking about.

Absolutely. I think this is quite analogous to the mid-1990s, the last time that the Fed actually tightened and avoided a recession. When we saw those cuts start, we saw very good performance from stocks and other risk assets. And of course, then we started seeing a lot of investment going into technology related to the internet and then, of course, Y2K, which set us up for greater productivity. There was a really nice period in there for the stock market in terms of returns. It was tech heavy. I think it could be different this time. I think we'd see fuller participation from cyclicals, from smaller caps, and also from outside the U.S. I think U.K. equities, European equities look good, E.M. equities look good in this environment.

That, to me, is what I think we are headed for, and it has very little to do with who is elected tomorrow. It has so much to do with the Fed. So when I hear the Trump trade, all I think is, or the Harris trade, it is the Powell trade that we need to be focused on. How do you want to address that? Yeah, no, I think I agree with the panel on, you know, every regime, political regime will take credit or sign blame as it services them. And the reality is really cycles beyond them. I remember many,

many years ago, I was at one of these dog and pony shows. I think it was Bill Bennett, the Book of Virtues guy. And he said, I wake up every day and I walk my dog in the beach and we watch the sunrise. I just don't give my dog credit for it. And I think there's a lot of that sort of element to the economy's good. You say it was because you, when you were running the office, no matter what the party is. So I agree with that. It is more about the interest rate cycle, the business cycle and the like. I guess my point would be, are we at an inflection point that's going to be positive no matter what? Right. Because the economy's good the

consumer's hanging in and the fed's cutting interest rates or are we at a later cycle point of view which matters in the context of this conversation if i use january 20th january 1st 2023 you were supposed to cover your nvidia and meta shorts and get long as possible right and it was because people thought we were close to the end of the hiking cycle and they could anticipate the end of it, right? So at some point, I think in 2025, people will say we're kind of more done cutting than not. And then they'll sort of discount when the Fed takes their foot off the front end. If you look at history, if you look at what's in the price, I think it's sometime toward the end of the first quarter, if we're kind of saying we're close to halfway being done,

that you're going to get less excited about the Fed still giving the accommodation. You're going to need to start believing and seeing some of the acceleration that people are calling for in the fundamentals. If you get that, then, yeah, you'll be fine. But if you don't, then I think that's the tension point. But for now, I think it's fine. Yeah. I think you get that. I think you've got a pretty significant Fed easing cycle ahead of us. We also have the potential for very significant

real wage growth. And I think we can't overlook that as a factor. I also think in the shorter term, one key catalyst is that the presidential election will be over. What we've seen in a lot of the earnings reports and also in the Federal Reserve Beige Book is that there has been a pause button hit by companies in terms of hiring and spending by consumers as well. And so that ends no matter who gets elected, just because we know who's been elected. I think that's a really critical point. Young Yu, best part of the market right now for the next, I don't know, six months. What do you think that is? We think it's infrastructure, U.S. infrastructure. And that does cover some of the areas that Adam mentioned. It does cover housing.

It covers data centers. It covers some of the large-scale projects that are being built. It covers enhancements to the electricity grid. A lot of money is going to a relatively small segment of the economy, both from spending by mega-cap tech companies, from fiscal spending, by onshoring, by international companies wanting to locate in the U.S. We think that trend continues and is very strong, regardless of who's in the White House and still has a lot of legs to it.

You know what I find interesting? We have this continual debate on the valuation of the market. You've been looking a little bit more micro rather than big picture valuation, looking at stocks, which are at 50 times their PEs as sort of a beware or at least trading above their fifth above 50 forward for the first time in at least three years. Costco and AMD are on that list. Why did you pick those out? What is it about that metric that gives you pause? Well, you know, I think everyone loves Costco, either going to the store or the stock,

because they like the high percentage of the operating margin that comes from the fee. Yeah, like an annuity. Right, an annuity. And maybe they had this Netflix moment where they're going to get better at you not using my card or vice versa. They're going to kind of clamp down on it. And so the stock kind of went from low 30s times forward earnings to 50 times. And while we might

all like the stock and the company, at some point you just wonder, is there a barrier? So what we decided to do was look for all the companies we could find in the last 25 years that sort of kind of reached that 50 times earnings and what the distribution of returns and multiples were for those securities. And the answer is like, you don't panic sell when it first gets there, but six to nine months later, you start seeing pretty dramatic underperformance, multiple contraction. I think only 24% of the companies two years later could maintain a multiple that high. So, you know, the list that we flag is just stocks. So when they first get to 50 times, you got to be a little bit more cautious about and thinking about selling. Not that Costco isn't a great business, but just more,

you're in that 30% hit rate, 35% hit rate land over two years now when you were probably 55 or 60 prior. So it's just sort of at some point elevated valuation is going to matter. But what about AMD? I mean, you said you like chips. You like semiconductors that are leveraged to AI.

Isn't this one of those? Yeah, I mean, AMD had a pretty big move last year. In February this year, they got to that 50 times earnings. If the data that we looked at is right, six months later, you start selling, that would have been August. It sort of makes some sense. I do think they'll benefit. I think most semiconductor experts think that you end up with some sort of 80-20 market share

and that if that panned out pro rata into the market cap, would you show 3.3 and change trillion for uh nvidia then they'd be somewhere 600 yeah 600b or so for amd so that'd be the bull case looking out a little bit let's just take an informal poll really before quickly before we go do we get how many cuts do we get between now and the end of the year one or two uh i'll go to the expert to my left i'm looking at you what do you got one or one or two? I'll say one. Okay. I have no idea.

Well, we only have two meetings left. Yeah, I'll say one. Okay. One 25 basis point cut and at least four cuts next year. Okay. Young, you? I'm going to go with two 25 basis point cuts to the end of this year. A few cuts next year, but probably just three because we think growth is going to accelerate and the labor market is going to be strong and the Fed will not be as aggressive cutting.

That's interesting. You guys just think one. I have no idea. All right. I have no idea. But what I do know is that people are worse at forecasting that than they are the stock market, and they're not good at forecasting the stock market. All right. We'll give you a pass no matter what. Thanks, everybody. Young, you a pass no matter what. Thanks, everybody. Young Yu, thank you. Christina, thanks. Adam, thanks as always. To Seema Modi now for the biggest names moving into the close.

Hi, Seema. Hey, Scott. We've got our eyes on Marriott delivering a mixed third quarter, cutting its yearly outlook and revealing cost-cutting measures. Executives say the U.S. election has resulted in notable hesitancy in corporate bookings in November, but was also more bullish on international travel picking up, specifically in Europe, and that government stimulus in China

may signal a potential bottoming out. Shares down 1.6%. And then there's Bath and Body Works moving on significant volume, up almost or over 8%, unclear on the exact catalyst, but shares are on pace for their largest percentage increase since December of 2023. Scott? All right. Siva, thank you. Seema Modi. We're just getting started here up next. The Dean of Valuation, Aswath Damodaran, is here with his first take on the mega cap earnings reports and where those stocks might trade from here. That's after the break. We're

live at the New York Stock Exchange. You're watching Closing Bell on CNBC. We are back. Most mega cap names lower following last week's earnings reports, with the exception of NVIDIA, which has not reported yet. Those shares are rising on news. The company will join the Dow this week. Here to share his view on the MAG-7 is the dean of valuation himself, Aswath Damodaran of NYU Stern School of Business. Welcome back. It's nice to see you again. Thank you, Scott.

As a shareholder and an observer, and both are valuable to us, you've had a chance now to digest these. What's your takeaway? I think that these companies have become really good at playing the earnings game. I mean, look at them. They look at the expectations. They come in 2% to 3% above. At this point, you're wondering, why even bother with the expectations? They're going to beat it by 2% or 3%. I think the real story, though, is deeper in the earnings reports. And I think you see it play out with, for instance, Microsoft. The recognition that AI's products and services, the potential is there, but the promise is not being delivered in terms of monetization. So I look across the companies, no blowouts in either direction. But I think in many ways, what you need to be looking for is a change in narrative,

and it's not coming right now. It's pretty much the same narrative that's been running them all year long. Amazon, though, I don't know if I'd agree necessarily. If you look at Amazon, that seemed to have been maybe the standout that they've sort of figured it out. Right. Jassy has figured out a way to spend enormously and maintain a high level of profitability after they've gone through a bit of inefficiency. How would you assess what they've done? No, I think in many ways, I mean, I described Amazon as a field of dreams company 20 years ago, where is it? If we build it, they will come. And for decades, the market gave them room to

build up revenues. And I think we're finally starting to see the profit side deliver. So I think part of the rise in Amazon, the other companies all have sky high margins. Amazon has not. So when you see Amazon's margins increase, it's a delivery on a promise that's been long in the making. But finally, you're starting to see the numbers being delivered. And I think investors are, you know, that's part of the reason you're seeing the stock price reflect. Do you think that the Meta and Microsoft sell-offs were justified or overdone? I think they were justified because I think when I first heard of the AI products and services, I accept that the market can be huge, but every company in this space that's trying

to deliver products and services is discovering it's a lot more difficult to convert that promise into profits. People might say they want an AI product, but I'm not sure they want to pay for it as much as these companies expect them to pay. So I think we'll have some back and forth. If you do get a hit and it makes money on a subscription basis or as a transactional basis, I think we'll see the market reward the companies. But for the moment, I think the market is in pause mode saying, show me the money. You tell our producers that the MAG-7 are

at risk of a correction. And you think the election is one of the catalysts for that? Yeah, I was just listening in on the bull argument for markets. And the more I listen to the bullish argument, the less I think of it, because there's so little behind it. Because so much of what's being talked about is already baked in. The market is already baking in an expectation that earnings will be up 15% a year. For that to happen, all the good stuff you talked about has to happen. So at this stage, the expectations game for markets have been set up. So I'm not sure even if that good stuff happens after the election. I'm not sure it will. You know, that you're going to see the market go up as much as,

you know, the people on your panel thought it would. And to be honest, I don't think the Fed is going to be the player that drives this game. I mean, it's a follower more than the lead, more than a leader in this process. I mean, how would you assess the valuations of these? I'm looking at the forward P.E.'s in not in every case have they have they gone up? In fact, in a few cases, they've they've come in. Microsoft's has come in from the beginning of the year. Alphabets has done the same. Amazon's has done

that as well. Apple, more or less, is even. I mean, and I understand that these things have stopped trading as a monolith. So a monolith, it's hard for you to address them as a group. But do you look at these and say, well, the valuations in general are pretty reasonable? I mean, collectively, if you think the MAG-7 is overvalued, you're also telling me the market is overvalued. That's why I think if there's a correction that comes, it's going to come from the market correcting, not from these MAG-7 dropping off while the rest of the market goes up. In fact, I find it hard to visualize a scenario where the max 7 is down 10% and the market is up 10 or 15%. I mean, I just can't see that happening. So I think if you own these stocks already,

the thing you're worrying about is will there be a market correction? And if so, how much will the max 7 lose in terms of value? At 12 trillion, you have a lot to lose. I mean, you're much on the table that you can give up. Have you sold any of your own positions in these names? I just like to keep our viewers up to date since, as I suggested, you're an observer, but you're a shareholder in many of these names too. I sold half of my Nvidia about a year and a half ago, but since then I haven't traded down in any of them. And I haven't increased my position either. I feel pretty good about what I have because I frame it in terms of what I

originally paid for these stocks, not what they traded at their high three months ago, two months ago. So I'm OK with where I am. And that's the only thing that I have to be as an investor is to be OK with my own decisions. Well, that's why you're a professor of finance at the Stern School of Business, because you got into those names early. Let me ask you lastly, before I let you go, Berkshire, what do you make of them continuing to sell down their Apple position? Do you think they're done? I think that's something they should have been doing right from the beginning. I never understood Charlie Munger's point that if you have a great company, you shouldn't sell down on it because you can't get overexposed to a single stock,

no matter how great it is. So I think that some of this is an autopilot. It's really no reflection on what they think of Apple as a company. It's a desire to have a smaller exposure to Apple, and I think that's healthy. Professor, I appreciate your time, as always. Enjoy. We'll see you soon. Arthur Atamoto at NYU. All right, up next, top technician Chris Ferron. He's breaking down how he's navigating the uncertainty surrounding this week's election and Fed decision. He's here at Post 9 next. Welcome back. Volatility on the rise over the past few weeks.

Our next guest, though, says the S&P does remain in an uptrend. Joining me here, Post 9, Chris Ferron. A strategist recently named one of the top macro analysts on the street. No pressure then for this appearance to answer these questions that I have for you. All right, so we're consolidating a bit, but we're still in an uptrend. Why? Yeah, I mean, if you think about 70% of all stocks are above their 200-day moving average, and we just always default to trend, particularly around an event. I think surprises in this business typically break in the direction of the trend.

So it would take a lot for us to want to bet against that here. And I think what's interesting is others are. And if you look at the put buying over the last couple of days, I mean, put call ratios on Friday and today are the highest we've seen in years. So there is protection being put on here. We've seen VIX already go from, call it, 14 to 24 over the last month or so. And I think that's excessive, kind of given what the framework is into this. Why so? I mean, the VIX right now is like 22, a little north of 22. Why does that feel excessive to you? So I think there's two things here. When vol is rising without credit conditions

deteriorating, be skeptical of the rise in vol. And this entire move in VIX from 14 to 24, credit conditions have been remarkably, remarkably benign here. So we're not seeing the type of stress or weakness in double B spreads or triple B spreads that would suggest, hey, vol is telling us something about how it perceives the economy moving forward. I don't think that's what this is about. I think this is positions getting squared up ahead of an event, actually to this week. Yeah. Election and Fed decision. I'd be careful kind of leaning in that direction. Fifty seven hundred. Yeah. A key level you're watching. I mean, we're a little bit above it here. Not much. Yeah. I don't want to focus too much on precision. Put your thumb at fifty six fifty.

And I think within 50 points on either side, you'll get a good kind of post-election tradable low. The fact is, and as we've shown in our work just time and time again, into an election, whatever the prevailing trend of the market was going in, more times than not, it tends to persist on the other side. And I think what's been so key here over the last few weeks in particular is what hasn't changed. Largely, financials continue to lead. Industrials continue to lead. Discretionary has been better than staple. So it doesn't seem like the market is reevaluating how it feels about the economy. That's what I want to focus on as we kind of look to these last eight, ten weeks of the year.

Do I remember correctly in that one of your prior appearances, we talked about the trend of the market, and you suggested that as long as the financials remain firm, then it's OK. You don't want the financials to break down. It would be a bad sign for this leg of the bull market, if you want to put it that way. You know, Scott, I always like approaching the market from the perspective of what has been most consistent. Financials have been part of this tape for 12 months. So if our call is going to change, I think the tenets of the call that have been most reliable probably have to deteriorate. And I don't think you can make that case with financials yet. I don't think you can make it with industrials yet. I mean, if anything,

over the last four or five weeks, discretionary has actually gotten better here as well, certainly at the expense of staples. So what you're not seeing is money move wholesale into the defensive corners of the market. And I continue to want to say, OK, it looks like a market that's operating in the status quo. What about semis? We mentioned NVIDIA, you know, pushing Apple right there on the top of the market cap chain. It obviously has had an incredible run, but not every stock is in NVIDIA in this market. How are you judging the semis? This is the one place where I really think you've seen, and this has really been true all spring into the summer, into the fall, where you've seen leadership really fracture or split. We know how good the NVIDIA chart is. We know how good

Broadcom has been. Where's AMAT? Where's Lamb Research? Where's ASML? Where's Samsung? Of what is perceived as leadership, I think it's the faultiest of that. It's the weakest under the surface. Only 25% of semis are actually above their 200 day moving average here. You do get some good seasonality with semis the next four or six weeks. I think if you've got a bounce, I'd be more inclined to fade that bounce than semis. And I would be chasing. I've heard some suggest health care is a good place to be. You say it's nearing an oversold condition, but still in a very pronounced downtrend. Yeah, very pronounced. That might be generous.

Okay. When you look at the relative performance of health care, it's been making lower lows in any relative sense for the better part of the last two years. I need to see that inflect. There are some short-term positives here. You have seen maybe a little bit of life get breathed into some pharma and some biotech. But to say that health care is about to make some massive leadership change, I think would be premature here. All right. We'll leave it there. Good seeing you as

always. Good seeing you. That's Chris Perrone, Strategas. Up next, we're tracking the biggest movers into this close. Seema Modi is back with that. Hi, Seema. Hey, Scott. Investors are loving results from a major fast food operator abroad. We'll find out the name right after this short break. We're about 15 minutes from the closing bell. Back to Seema Modi now for a look at the key stocks she's watching. Hi, Seema. Hey, Scott. Stocks tied to the nuclear energy trade are falling today after a federal commission rejected a request to increase the amount of power for a key Amazon data center, Talon Energy, which sold the data center to Amazon, down more than 2%. Constellation, Vistra also tumbling. They were expected to announce similar deals in the future.

And then Yum China shares, rallying after they posted better than expected third quarter results. Revenue grew 5% year over year. The company also said it's accelerating new store openings for KFC and Pizza Hut in underserved markets across China. Finally, Scott, we're watching shares of Intel. Reuters reporting just now that Silver Lake and Bain Capital are preparing a multi-billion dollar stake in Intel's Altera unit. Shares of the chipmaker were a little changed on the news, but down nearly 3% following its upcoming exclusion from the Dow stock, trading at $22 and change. All right, Seema, thank you very much. We're also tracking shares today of The New York Times.

Julia Boorstin here with what's behind that move. We're seeing down 7%. Julia? Yeah, down 7%. Now, The New York Times company may have reported earnings that beat expectations, but the stock is now down 7.5% as investors question slowing subscriber growth. The company added 260,000 digital subscribers in the quarter. That was 20,000 less than expected and 40,000 less than in the prior quarter. Another concern, 600 of the company's tech workers went on strike today.

That includes data analysts and designers who support the likes of live blogs and mobile push alerts, these things that are seen as essential to the New York Times election coverage. Now, the company did say it's prepared for a range of scenarios, but it acknowledged that the effects on operations and results will depend on further development. So, Scott, we'll have to see if they strike a deal before tomorrow. Okay, Julia, thanks so much. That's Julia Borson still ahead. What to watch when hims and hers reports in overtime. It's coming up on The Bell. Welcome back.

Quick programming note. CNBC Live all night. Tomorrow, election night. We'll have the results as they come in and reaction from the biggest names in business. It all starts at 7 o'clock Eastern from the New York Stock Exchange. Don't miss that. Up next, we get you set for earnings and OT. What to watch for when NXP reports at the top of the hour.

That and much more when we take you inside the Market Zone next. We're now in the closing bell market zone cnbc senior markets commentator mike santoli here to break down the crucial moments of this trading day plus two earnings reports we are watching closely in overtime brandon gomez on hims and hers sima modi on nxp michael to you first just tell us what's on your mind we have a i don't know 72 hours that are gonna be really interesting say the least for sure and the market is showing that there's not a lot of super strong conviction on either side of what happens tomorrow in terms of the election, but also really not a lot of underlying panic. You can see some hedging very near term in terms of the put call ratio being high.

You can see a little bit of a cautious wait and see type action. No big bets. Nobody wants to be leaning too far in one direction on a super short term tactical basis. But I think one of the reasons the market has been able to hang in there, the S&P is within 3 percent of its all time high. Even as it digests the gains coming into the middle part of this month is the big picture is OK. Right. I mean, the election, no matter what happens, no matter what the implications is not a make or break swing factor for, you know, an economy that's still growing pretty well. The Fed is going to likely cut in a couple of days and you have earnings coming through OK, even if they're not particularly dazzling investors with the beat rate. I asked you earlier about Berkshire selling Apple. So let me flip it and ask you about about NVIDIA now and the inclusion in the Dow and how you're thinking about that based on what you've seen through the years.

Yeah, I mean, obviously, on some level, the inclusion of Intel previously and not having a play on NVIDIA, which is 7 percent of the S&P 500, probably just made the Dow feel a little bit unrepresentative of the economy right now. Now, you could definitely make the case that it's just grabbing onto a high momentum play way after the fact, after its greatest gains. I was just looking at the NVIDIA versus Apple equation in terms of market cap neck and neck right now. Well, NVIDIA has about a third of the revenue in the coming year and about half the net income. So you could obviously say it's a more expensive stock, but it's growing so much more quickly. So in the short term, first of all, there's no brand new reason to buy a stock because it's in the Dow. History says that's not at all a reason to buy.

There's not a lot of money indexed in the Dow. It's much more about, you know, the way that it's validating its current role in the new tech economy, which we sort of knew already. So, again, I don't think it's a sell the news. Maybe it's a buy because of the capitulation on Intel. But at this point, it seems much more about the Dow trying to stay relevant. All right, good stuff. Back to you in a little bit.

Brandon Gomez watching HIMS and HERS after the bell. Hey, Scott. Earnings in a few short minutes. HIMS exceeding expectations three quarters in a row. Shares, though, most recently took a turn after the FDA said dosages of Novo's weight loss drugs, Wagovi and Ozempic, were available. Now, that means HIMS would have to stop production of its compounded versions. Remember, the FDA made a similar call a few weeks ago with Lilly's drugs, but quickly flipped, now allowing the compounded versions to be sold while it completes a secondary review.

So really, supply remains a big question mark heading into results today after the bell. Investors will be looking at the GLP-1 revenues from HIMSS this quarter for more clarity. But candidly, Scott, it's a small fraction of revenue growth here at the company. Still, though, shares live and die on these headlines. Check out some of these recent swings I tracked around GLP-1 news. Plus or minus, double digits. Piper Sandler, one firm saying, you know, it's a warning. This is much more, there isn't much more room for an upside here. I'll hear from the company's CFO in a little bit and bring you more. All right, good stuff, Brandon. Thank you. Brandon Gomez,

to see Mamodi on NXPI, what should we look out for? Well, Scott, unlike some of the other big names, NXPI has underperformed the semiconductor index by a wide margin this year. It's up only 3% versus the SMH's 40% run. The big reason is over half of its sales comes from the automotive sector. That remains very challenged. However, Texas Instruments and OnSemi both mentioned strength in China, which analysts say could bode well for NXPI given its exposure to that market. Earnings tonight, followed by the company's analyst day on Thursday,

where Morgan Stanley expects gross margins to be revised higher. We'll look out for that, Scott. Yes, we will. Seema, thank you so much. That's Seema Modi. All right, Mike, take stock of the VIX, if you would, at 22, which we talked about with Chris Verone earlier, who suggested it was a little

overdone at this level, given what the backdrop looks like. Well, you'd have to agree. I mean, statistically, it is definitely overdone. It's juiced well above where, for example, the actual realized volatility of the index has been, the fact that the S&P has been making new highs pretty consistently over the last several weeks. And it shows you that it's really just the very near term, you know, right after the election. It's all people are basically willing to do is, you know, keep their positions, keep exposure to the market. But if you feel like you want to just hedge against some volatility event, whether it's an indeterminate election result, whether it's some other kind of, you know, contentious outcome, then you can just buy some index volatility protection that way. So everybody expects as far as, you know, casually

speaking, everybody expects November and December to be this sort of tension release rally in stocks, likely volatility gets, you know, kind of smashed because there's not a specific thing that we're going to be looking at and fixating on to worry about. We'll see if that does come to pass. It might not be as perfectly smooth as all that, but it seems like that's the setup that we have going into the election in the Fed. But how do you think yields factor into that, though? I mean, we are kind of fixated on what that, you know, what they're doing. Yeah, it is true. And Treasury volatility has really spiked. So that could be one part of it. As Chris was saying, though, credit spreads have been really tame. So it's not really telling

you about a macro event. It's really just about repricing of the Treasury curve and maybe Fed expectations. I do think Treasuries rallied almost exactly where they needed to, so to speak, before getting out of hand. So therefore, yields come in with the help of that kind of noisy, soft jobs report on Friday. And then today, a little bit of a bid that just seemed like whatever the big move was over the prior couple of weeks, the market's taking some of that back. Some of that, for example, in bank stocks today is going on. So I don't think it's decisive. I think if yields shot up from here, equity markets probably wouldn't love it, wouldn't take you very well.

But right now in this range, it seems okay, given where the economic growth numbers seem to be trying. I appreciate you, Mike. Thank you. That's Mike Santoli. We'll go red across the border today. Dallas and TNR's got, they're going to be that way with the bell ringing here. I'll see you tomorrow.

We've got a busy one on election day here in the United States. We'll go overtime. More young John. We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back.

We'll be right back. We'll be right back. We'll be right back. We'll be right back.