Closing Bell - Closing Bell: Rattle Proof Rally? 2/16/24

Episode Date: February 16, 2024

What should investors make of a market that has been tough to rattle even amid a bumpy stretch for economic data and with some signs of froth surfacing in its more speculative corners? Cameron Dawson from NewEdge and Payne Capital’s Courtney Garcia give their expert takes. Plus, top technician John Kolovos sees rising odds of a correction brewing in the charts. He explains why. And, a big move in mortgage rates today – Diana Olick breaks down what it means for the health of the housing market. 

This make or break hour begins with pretty unflappable rally stocks recovering from early sell off, although wavering just in the last half hour. But it does put the S&P 500 within reach of another record high. Any positive close on the S&P today would be a new record. Also would be a 15th weekly gain out of the past 16. Now, this despite hotter than expected PPI inflation this morning. The upside surprise to CPI on Tuesday. A soft retail sales report for January along the way, as well as some uncharacteristic weakness in the Magnificent Seven and NASDAQ 100.

NASDAQ 100 down almost 1% on the week-to-date basis. But industrials, health care, grabbing the baton of leadership for the week anyway. And some old blue chips, such as Berkshire Hathaway, Walmart rushing to all-time highs. So this takes us to our talk of the tape, what to make of a market that so far has been tough to rattle, even at a bumpy stretch for economic data and with some signs of froth surfacing in its more speculative corners. Let's ask Cameron Dawson, New Edge Wealth Chief Investment Officer,

and Courtney Garcia, Payne Capital Management Senior Wealth Advisor. Courtney, also a CNBC contributor. So welcome to you both. You know, Cameron, coming into this week, it was possible to say we had hit a lot of levels that said mission accomplished, 5,000 on the S&P, 18,000 NASDAQ 100, Bitcoin crossed above 50. We're looking for an excuse to maybe have a pullback. Many would have said, I would have said, we got one day 1.3% on that CPI number and we picked it up. So is the market ignoring something or does it show underlying strength? What's your read on that? I think there is still very strong momentum in this market and that there is still room for positioning to get more long.

You're still in about that 85th percentile on positioning, according to the Deutsche Bank Consolidated Positioning Report, which just says momentum can keep on chugging along until you reach that point where you're at an extreme. I think the other important point is that it's not been about growth. There have not been growth fears that have been percolating, which just means that any kind of correction seems short and shallow and more to do with Fed expectations and really doesn't have that teeth in it that you would expect to see a deeper pullback. Yeah, I mean, there's no doubt we've had enough months of pretty resilient economic numbers to suggest that we're not going to panic out when you have a slightly soft retail sales report, which is what we had there. And, Cordy, I guess the question, too, is has the market answered some of the questions that people had for it? Meaning, I mentioned the Magnificent Seven down this week. I mean, Alphabet's down like five plus percent on the week. Adobe's been tough. You had NVIDIA hanging in there, Semicap doing fine. But the average stock has done better over the last week.

So the question is, is this another head fake? Does it does it show that we have something underlying here? Or again, is it noise? Yeah, and I think really investors have been rushing to those magnificent seven. Everybody thought this rally was going to broaden out. And this year that hasn't come to fruition. But weeks like this week are showing it may actually happen. There is still so much money on the sidelineselines there's now over six trillion dollars in cash

right now that's eventually going to make its way back into the market because what's happening right now is even though maybe with the cpi and ppi number inflation isn't going to come down as fast as people thought it still is likely going to come down later this year and so that money is going to come out of there and it's going to go into some of those other sectors what's happening is those magnificent seven are extremely expensive right it's going to go into some of those other sectors. What's happening is those Magnificent Seven are extremely expensive, right? I mean, just to put it in perspective, how congregated these are getting, those seven stocks are now bigger than the entire European stock market. Microsoft is bigger than the entire energy sector. I mean, people are rushed to those things. So with that cash coming off the sidelines,

it's got to go into some of these other areas. You want to own the Mag Seven, but if you haven't done anything, you're already overweight there. So you need to start looking at these other categories. I did see, you know, in the Bank of America's weekly kind of tracking of flows, there was some maybe $18 billion coming out of cash. I mean, a small amount, and you've had some flow. And the only real category of ETF equity inflows has been in tech. So I guess that's where the chase is happening. And Cameron, you did mention Fed expectations are the one thing that's really been moving around. And this has been a bit of a test case because there was a common line at the start of the year. It says market's ahead of

itself, thinking about six or seven rate cuts this year. Turns out, yep, that's probably right. The market's now at three to four. And yet stocks have held up fine. In fact, let's listen to what Rafael Bostic of the Atlanta Fed today said about kind of his stance on this and what he's expecting next. We've seen a lot of progress in terms of inflation. I am expecting that through the course of 2024, it'll be a little bumpy. I think the trend will continue, but the path all the way to two percent, I don't think we're going to get to that number immediately. So these sorts of numbers, they're kind of OK and I can live with it. And to me, it just says we just have to be patient and let's not get too far ahead. And assuming that the job is done because there's still work to do.

I mean, and this has been a very consistent message. I mean, every single Fed official is on this page. And so I guess, has the market proven that this is acceptable? In other words, as long as the next move is lower and as long as there's no economic emergency that they're not responding to, we can wait. The market has been shrugging off a tighter Fed for over a year now. Over the course of 23, the Fed was consistently tighter than what the market expected, and yet valuations continued to expand. I think that the thing that would get the market to get more skittish around the Fed is if inflation truly did reaccelerate in a much more meaningful way, which means that we have to watch those prices paid in the PMIs. We've seen those tick up recently. Gasoline prices have started to move up about 7% over the last month.

If that starts to move in the other direction, the Fed's tone will move from, yeah, it's okay, we're comfortable with this, to we might have to do something else and all of those cuts priced in have to get priced out. And then maybe the market would wake up to that kind of risk. But that remains to be seen. Sure. I mean, the bond market, it should be said, Courtney, has responded to a small degree this week to the inflation upside surprises. You have the 10-year. It's now about 430, 429 and change. It was about 415 to start the week.

This is sort of the upper end of the range where we've been since that December Fed meeting. So who knows where the point is where it becomes less comfortable for stocks. But I guess the other way to think about it is, is it creating value in longer term bonds as well? Because you did see a bid come in a couple of times around these levels. Absolutely. Because I think really what investors really got here is this is probably the peak that we're seeing in interest rates. Right. So the question is when they're going to come down. But there is a you know, it's not a non-zero chance that rates are going to go up, but it's as close to non-zero as we can get at this point. And so that's where you have to look at an investor and say,

OK, if this is what I'm getting on bonds, especially with things like your money markets at 5%, is your money better off in other assets? Like last year, I think a lot of people were enticed with money markets at 5%. Bonds were about 5.5% on average. But a lot of people missed out on about 26% in the S&P 500 last year. And I think that's what a lot of people are starting to get on board with is saying, OK, if rates are only going down from here, my money markets, my bonds may not be the best place to put my money. And that's where you're going to

start to see some of these flows elsewhere. You know, the other piece of this, I guess, in terms of adjusting what the Fed's going to do, Cameron, is all this research out there, Ned Davis has talked about this, that slower easing cycles have been better for the stock market than faster ones. And then, first of all, there aren't that many of any kind of cycle that we can generalize here. But in other words, if the Fed is not rushing to slash rates, usually it means the economy is OK, things are under control. It's a bit of a more orderly pattern. That would be 1995, by the way. Yeah, and here's the other interesting thing is that even in that 1995 scenario

where there was no recession, other scenarios like that, like 98, 2019, the Fed has never cut rates with PMIs accelerating. Every time the Fed cut rates, even when they were doing it in an orderly manner, they were doing it with growth fears, meaning PMIs were coming down. So if PMIs continue to reaccelerate, and let's say the Fed cuts in May or June, it would be the first time in modern history that they would be doing that. I would guess that that would not be the first pattern broken on this cycle, though. I mean, you're absolutely right. I understand it.

This is all kind of new territory. But I'm guessing, I think there was stuff when the S&P has been down 25 percent, Fed never kept hiking or something like that. And, you know, we did. So we'll see if we have to, you know, reconcile those things pretty soon. Let's bring in Keith Lerner of Truist Wealth to the conversation. Keith, good to see you. What's your assessment of how the market has kind of handled things this week? And and I guess even with it all, do you think that we're going to see some of that seasonal weakness or we have a little more fortitude underneath this market that's been displayed? Yeah, well, first, great to be with you, Mike and Courtney and Cameron. You know, in deference to Taylor Swift, the market has shaken it off this week and shown a lot of resilience. We had a one day gut check one day so far. We're still not above that high.

So I think that's something to key off of next week when we move into the new week after this long holiday. But in general, I mean, credit markets are remaining pretty well behaved. And what's notable is below the surface, you are seeing a bit more risk on with the broad market, as you mentioned earlier, outperforming, small caps outperforming. The average stock to equal index just made almost a two-year high. Industrial is at an all-time high. So from our perspective, the market is rightly focusing on that growth is still relatively firm. And as the conversation that you all had, we've been saying our motto here the last month has been, we think it's better for the economy to remain strong and to have less rate cuts than more rate cuts. And, you know, because of weaker economy and, and you all know this too, that 2001, 2008, we cut rates very aggressively. It didn't stop the stock market

from going down or save, save the economy. So all in all, I think the market, you can say, has had a good resilience this week. If we can assume that, I mean, it's a big assumption, but assume that the economy chugs along and we were tracking around maybe a 2% real growth rate in the first quarter. So far, it's only halfway over. But nonetheless, if you assume the economy hangs in there, as now seems to be the case, does that mean that we can kind of grow into full valuations and that there's not much of anything in the way of the stock market? Are we going to go looking for something else to be concerned about? Yeah, I mean, we're always looking for something to be concerned about.

I mean, obviously, valuations are rich. They've been rich. You know, valuations on a short term basis don't tend to mean a lot. I do think what's important, what's been holding this market up is we have forward earning estimates that every week make a new high. So that's something we're really following. If that starts to weaken, that would be a concern. But so far, they're actually increasing to the upside. So, you know, I think what happens, Mike, is you're more likely to start to move into a little bit of a choppier period as opposed to this move up. I think also, you know, we'll be curious next week with NVIDIA, you know, the expectations are so high. So what happens there? I mean, there's two scenarios, right? Well, three. But, you know, one of them is if even if the numbers are good, what does tech do? And then do you see some more

rotation because of how high expectations are there and the other parts of the market do well? So right now, the way we're playing this is we still like large cap, we're still overweight tech, but we certainly think for folks that are underweight, like small caps, mid caps, equal weight, you know, we would be leaning into those areas right now. Yeah, I mean, the frenzy of activity and expectation around NVIDIA, you know, you almost can't overstate it. And then you have the phenomenon that's been super micro. People have been commenting on this. Made a high this morning of $1,077. It's now at $807. So you've had this 25% drop from the morning high.

I mean, this is where the fever is right now. And Cameron, I know you made note of this too, but I've been talking about how it's 1.8% weight in the Russell 2000. So we're celebrating that the Russell 2000 is playing along to the upside this week. And it's not just about cyclical stocks and financials performing. So how do you read that in terms of, you know, the market's sentiment profile

and all this other kind of animal spirit side of things? Yeah, clearly there's a clamoring for risk. And we can see that in the IWM, the Russell 2000 ETF, call option volume has really started to take up. So people effectively saying, I want some exposure to the upside, some juiced up exposure to the upside. The Russell 2000 has been holding up relatively well based on its 50-day moving average, interacting with it really well, even with higher yields, which gets our attention. Of course, how much

can you read into that, given that a lot of it has been SMCI? Strategas talked about that this morning, 75% of the gain year to date. So maybe it deserves a little bit of doubt. Yeah, I always hesitate. And this happens with the Magnificent 7, too, of saying what percentage of a net change is attributable to one or a few stocks? because all those other stocks not going to zero, you know, got the index to where it is, too. But you're right. It's been unusual in terms of that profile, crypto related stocks, all that stuff moving in that environment. Courtney, do you kind of ride that current or do you say there are things being left behind we'd rather participate in? I think it's a little bit of both. Right. I mean, I don't think you want to get out of the Magnificent Seven, but they are just getting disproportionately more expensive to the markets. And so I do think you want to add more into things like your small caps,

things like your real estate, some of your underperforming sectors, because especially if interest rates do start to come down those year, those will likely outperform. And I think it's just one of those things that's really not an instant gratification trade here. Everybody was saying that that was going to happen earlier in the year. It's not happening. But I think it's just one of those things that's really not an instant gratification trade here. Everybody was saying that that was going to happen earlier in the year. It's not happening. But I think as an investor, you need to make sure that you're well positioned because things can shift. And when they shift, they shift very quickly. So you need to make sure you're positioned beforehand.

Cameron, I know you've been emphasizing quality and it's worked, right? So quality, free cash flow, good balance sheets has been the way to outperform for a while now. And I just wonder if that's still going to be the case if you start to feel as if Fed's cutting, the economic cycle has longer to run, other stuff might actually have its day. Yeah, I think quality should be the core of a portfolio for the long run, because what we find is that, yes, there are periods where low quality will outperform times like 2020, 2021. However, it's ephemeral outperformance. You see big rallies up and then you give it all back. So for long term investors that are tax sensitive, instead of trying to time everything,

trade in and out, that compounding through cycles. But to your point, having some exposure in the periphery of portfolios to more beta, to more risk on in an environment of strong growth and a friendly Fed would be supported. I think the question that we're asking is, can you really get much lower yields and a much friendlier Fed if growth is very much that strong? Keith, quick last word in terms of parts of the market that you still think are underexploited, that you feel as if they might actually be discovered here? Yeah, well, we're still overweight tech, but I think that's going to I think we're going to have a cooling period there. So on a short term basis, we actually like financials,

you know, had that commercial real estate concern a few weeks ago and they got oversold and they bounced. I think that's a positive. And what's surprising about financials off off the October low, they were up about the same amount of tech. And that price momentum, we think, likely has further to go in an environment where the economy stays somewhat steady and interest rates stay somewhat elevated as well. So I think that's an interesting area. I mean, one area that we're also keeping an eye on, it's more of a neutral, is health care starting to act a lot better in our overall work. Obviously, a bifurcated area, but one that's starting to improve that we're keeping an eye on. It's more of a neutral. Is health care starting to act a lot better in our overall work? Obviously, a bifurcated area, but one that's starting to improve that we're keeping an eye on. Yeah, for sure. That has been an early theme in 2020 for the strength in health care. Cameron, Courtney, Keith, appreciate it. Thanks very much for the conversation today. Let's now send it over to Christina Partsenevelis for a look at the biggest names moving into the close. Hi, Christina.

Thanks, Mike. Hi. Well, let's talk about shares of Nike right now because they're falling just over 2% right now in news that it needs to cut 2% of its workforce or roughly 1,500 employees. And this is part of a broader restructuring. The sneaker giant is also faced with a slowdown, and that's what's driving a lot of this in consumer spending, and says it was a better use in capital to invest in growth areas.

And that's what they're planning to do, such as women's running as well as the Jordan brand. The first round of layoffs actually begin this week. Dropbox faced with several analyst downgrades from Bank of America to J.P. Morgan today after posting an outlook that fell short of estimates. Bank of America arguing that Dropbox's bull thesis has, quote, played out as total paying users are actually declining. Dropbox's CEO warning on the call, the earnings call that is, that customers are more cautious with their spending and are very price sensitive right now.

But man, Dropbox is dropping 24. Oh, yes. Yeah, almost 24% right now. All right, Christina, thanks very much. Well, we are just getting started here. Up next, trouble in the charts. A top technician is raising the red flag on a key market risk that he is seeing right now. Those details after the break.

We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Stocks losing just a bit of steam here. The S&P 500 down a bit more than a quarter of a percent as we head toward the close. After yet another hot inflation report this morning and what has been a choppy week for stocks, our next guest sees rising odds of a potential correction brewing in the charts. Joining us now is John Kolov, chief technical market strategist at Macro Risk Advisors. John, it's good to talk to you. You know, started off by talking about how this market has actually, you know, been pretty tough in the face of some excuses to go down.

Market kind of recovered that Tuesday drop. But I guess we haven't really cleared the old high. So are we bumping up against the ceiling? What's your read on it? Yeah, great to be on, Mike. I would say the market is setting itself up to transition into a bit of a trading range environment. When I go through all my different indicators and quant work, I think the market's going to be stalling out approximately around 5,100. You take your thumb, put it on the chart,

5,100 or so will be with the ceiling. And downside risk to about 4,700 4700, maybe 46 to the downside. So I think we're entering into a bit of a trading range environment. And would it be the same profile in terms of what led the pullback? I mean, I know you'd want to emphasize the relatively strong parts of the market probably. But what does that mean right now when there's at least been the stirrings of some broadening out away from the mega cap growth area? Yeah, that's a fair point. I think we need to remember that we're operating with two different types of markets. We have the S&P 500 and we have the market of stocks. Right. So the S&P 500 being driven by the MAG 7, frothy for sure, needs to consolidate.

It's pretty hot out there right now with those typical with those stocks. The decline, I would assume, listen, would have to have to come from some of those names. But outside of a paradigm shift, I can't imagine anything more than just a mere correction or pullback, you know, to like I said, to the 4700 and maybe 4600 level, given that. But beneath the surface, Mike, I'm telling you, things aren't as bad as I think most people are making it out to seem. You mean that the market hasn't been as narrow as people have portrayed? Or what do you mean by that? Yeah, absolutely. So I think one distinction we need to make, particularly those who follow the charts like I do, is that the momentum of breadth has

slowed, like the percentage of stocks above moving averages and how many stocks are making new highs. Yes, those have declined over recent weeks, but the trend of breath remains positive. So take a look at the RRSP, the equal weighted S&P 500. That just broke out out of a four-week, five-week trading range yesterday. That looks pretty healthy to me, and even small caps, they really tried to break it down and they couldn't. So one way I've been framing it with clients at Mra is this like can't breath take a breather too and i think that's essentially what's been going on there's been there was a lot of good technical goodwill at the end of last year i don't think we've negated that quite yet yeah it's it's

interesting i i'm definitely in that camp of saying just because you can tabulate how much of the upside has come from a few stocks doesn't mean the rest of the stocks have been poor or, you know, or losing the benefit of the doubt necessary. It's kind of like I remember at some point along the way in high school, they allowed you to have more than a four, you know, GPA, you know, and the other stocks were getting B pluses, even if they weren't, you know, the best students. I guess the question is within the market, what looks interesting at this point in terms of, you know, emerging leadership or things to stay away from? Yeah, fair point. Right. We already know what's working. We're already focused on the shiny objects, which is the mag seven. So what what

what's improving? Energy has caught my eye as of late. Take a look at WTI. It looks like a nice little base formation that's forming there. You get WTI above 80, then I think the rest of energy is going to follow. Refiners have been great, but now I think the rest of energy could benefit from that. So I think it's a good source of chart diversification in one's portfolio. So start sniffing around the energy sector. The other part that I've been focusing on has been within healthcare. And it's not just Lilly that looks good.

It's like the biotechs and some of the other pharmas. Take a look at the health care ETF. That just broke out of a, what, 18-month trading range? That projects about 20% higher on the charts. A lot of good, interesting names there. So that's where I think some of the fresher money could be. Look at energy, dip your toes in energy as oil is stabilized. And also, health care looks pretty decent. And in terms of just, I guess, the big picture, you framed out maybe we are kind of putting in the upper end of a trading range. If you see a pullback to forty seven hundred, let's say that's like eight percent there, thereabouts from the highs. Not terrible. Those types of corrections tend to happen most years. Is that just kind of a stop along the way?

I mean, where are we in the longer cycle? Because you do hear some folks assuming we're kind of in the latter innings. We're kind of stretching valuations. On the other hand, it was only a month ago we broke to a new high that had previously been set two years earlier. You know, it's not as if we've really been running away to the upside for that long. That's a fantastic question. And I wrestle with it as well in talking to clients. We do try to thread that needle a little bit. A couple of ways to think about it. Yes,

there are some technical red flags to say, hey, look, listen, we're ready to fall into a secular bear market given how stretched the markets have been since the 09 low. I'm not in that camp. And one reason why I'm not in that camp, and I appreciate the the AI craze and all that. I think one thing we need to remember is that transformative technologies have led every bull market for the last hundred years. Number two, I had a front seat view of the tech bubble, and you did too. And I would say the wall of worry is incredibly higher now than it was then. So I just think this is par for the

course. AI is doing its thing. But, you know, autos did their thing in the 20s and railroads did it in the 1800s. This is kind of like how things operate over the long run. Yeah, I'm with you on that for sure. It seems as if the dominance of the of the Mag 7 has made people reluctant to trust the market, which kind of rebuilds the wall of war. I guess the warning is that you may never get anywhere close to 99 anytime soon, so don't bank on it. John, great to talk to you. Appreciate the time. Have a good weekend. All right. Up next, your retail rundown. Walmart preparing to report results next week. We'll speak to the analyst with the highest price target on the street

for what he's watching ahead of the print. Closing Bell will be right back. 31% of Russell 1000 companies conduct race or ethnicity based pay analysis, according to Just Capital. This type of analysis is done to manage equal pay for equal work. Celebrating black heritage. I'm Sharon Epperson. Welcome back. Walmart shares moving higher, hitting record highs today. In fact, the head of earnings out on Tuesday morning. And our next guest says the stock's just getting started. Eddie

Ruma, managing director of Piper Sandler, has a street high price target of $210 on Walmart. He joins me now. Ed, thanks for joining. I guess the question, first of all, perhaps, is what type of retail environment is Walmart operating in and what would you most be looking for in the report on Tuesday? Look, certainly the consumer has been very challenged. Inflation was a significant pressure to the consumer in 23. But what we're starting to look at is as inflation begins to dissipate, does the consumer shift a little bit away from some of these necessities, from groceries that starts buying some of this what they call general merchandise, right? This is higher margin goods, might be apparel, toys. And those sales have been pretty weak through 23. So I think hearing commentary on that would be really interesting. Now, if that were to happen, would it diminish Walmart's perceived advantage here? Because it

would seem like that was what was weighing on the likes of Target, Walmart, you know, being, you know, better positioned in everyday essentials was the net beneficiary there. Well, look, I think clearly Walmart does a great job with everyday essentials. They've done a great job with grocery. But I think one of the stories that hasn't been told yet is how much better Walmart's gotten at things like apparel, how much they've gotten in toys and baby. And so I think as the consumer starts to rotate back to that, as they have more disposable dollars, Walmart could benefit from that as well. What's your sense of investor kind of attitudes and positioning toward Walmart? As you talk to clients, is it really just being owned as it's looked, it's the quality name in the group and, you know, obviously this is the time when, you know, smaller players are having a harder time

or is there a specific strategic issues that people like about, you know, what's going on at the company right now? Yeah, I think a couple of things, right? I think first, you know, what's going on at the company right now? Yeah, I think a couple of things. I think first, you know, it is viewed as kind of a safer way to play the consumer, given its strong focus on things like essentials and groceries. But I think what's been interesting is that Walmart last year articulated this idea that they would grow earnings faster than revenue. Right. So now you have this dynamic of Walmart, which seemingly getting a little more discipline on costs and really focusing on growing EBIT margin, which I think could be very interesting. The other piece of it, which they announced a couple weeks ago,

is this idea of opening 150 new super stores, remodeling more stores. And so, you know, Walmart, which has been very reliant on comp store sales in part due to inflation, may now have a growth story to tell in the medium term as they start opening new stores. And in terms of, you know, the $210 price target, I mean, what builds into that in terms of where it would be valued and how that compares to where it's traded in the past? Yeah, so that would sound like 15 times EBITDA, EBITDA multiple. And I think what kind of goes into that is this idea that Walmart is really adding some strength behind what we view as kind of more annuity businesses. They're building in this advertising business, which is very profitable, which is sticky. They're growing their Walmart plus subscriber base.

We're seeing stronger results in Sam's. And so certainly Walmart is a retailer. But I think when you add some of these components that are probably less volatile, we think over time that helps give them a stronger valuation than they've seen in the past. And along those lines, I mean, obviously there were the reports this week that Walmart maybe talks to acquire Vizio, the TV maker. It would seem as if this interest in having that type of customer data and maybe a platform for further advertising sales is a part of that? Look, I certainly don't have any insight into whether they acquired this business

or not specifically, but I would just say that advertising has been one successful as a Walmart. Data is a core component of that. You've seen them use in-store data. You've seen them use other types of data. And so certainly the more, the closer they get to the consumer, understanding what they're watching, what they're doing, will make them a more valuable platform for advertisers going forward. And where is Walmart postured in terms of pricing at this point? They've been a bit of a bellwether in their commentary about the ability to push price or pull back in the last couple of quarters specifically. Yeah, I mean, I think a couple of things, right? They're seeing pockets of deflation and disinflation within grocery in particular. And so I think you're starting to see more of what they call a rollback, which is where

they will have a kind of one-time change in price, where they're, in some instances, lowering prices. So I think you're starting to see that seep into the store. On the general merchandise side, there's certainly deflation there as well. So I think pricing is kind of starting to moderate. Relative to peers, though, their pricing gaps remain as strong as ever. So Walmart's been really committed to maintaining strong price gaps versus peers. And I think what we're now seeing is this inflationary push is starting to really evade. Yeah. And then I suppose on the labor expense side of things, is that now working to their advantage?

It was a while. It seemed like a pressure point. Yeah. I don't know that it would say working to their advantage, but I think the upward pressure on wages is starting to abate. You know, they did announce that they're giving their store managers a stock grant. Again, this is a relatively small number of people relative to the size of the employee base. And so I think, you know, certainly wages are exerting some pressure, but the kind of upward pressure that we've been seeing in the past 24 months are beginning to abate. I think

the other piece, though, longer term is Walmart's adding more automation. They're adding more capabilities around digital pick. And so certainly that will help kind of bend the cost curve over the medium term. All right, Ed, great to speak with you today. Appreciate the time. Thanks. We'll see how those numbers come through on Tuesday for Walmart. Up next, we're tracking the biggest movers as we head into the close. Christina standing by with those. Yeah, and we're seeing a new record day for one chipmaker and a

strong outlook in the advertising industry that's driving one name higher. I'll, of course, explain those details right after this short break. Got about 19 and a half minutes till the closing bell S&P 500 down about a third of a percent. I'll be just shy of a record if it closed here. Let's get back to Christina for a look at the key stocks to watch. Christina. Well, after two years of dealing with customer inventory digestion, the chip equipment makers are finally seeing a return to growth. Applied Materials, the latest and largest U.S. semi-cap equipment maker,

is or did provide an upbeat guidance because of increases, one, in cloud cap expend. We've talked about that. Higher spending on manufacturing hubs. Think the CHIPS Act, which is a major driver here in the U.S., and then normalization of memory prices and inventory levels. That's why shares are up almost 7% right now. Advertising software firm TradeDesk also posting a strong revenue guidance. Management says the connected TV market, which really means a TV that's integrated with the internet, your photos

on your phone, etc. And that market is expected to grow in 2024 and should be a driver, of course, for advertising. Trade Desk also approved more share buybacks. So that's definitely helping the stock right now up almost 17%. Scott? Mike? Sorry. So used to saying that. I apologize. Understood. Understood. You're great, though. Great. I appreciate it. As you have a good weekend. I'm not going to call you any funny names. Nothing like that. All right. Still to come, the health of housing. New data today shedding some light on the sector.

We'll bring you all the details and how it could impact housing stocks in the months ahead. Plus, shares of Roku sinking. Here with the company's CEO says it might be their biggest challenge yet. That's coming up. Closing bell. Be right back. Let's get a check on where we stand as we head toward the close of the week. A bit of pressure on the index.

Is the S&P 500 down? Not quite half a percent. It's also down for the week. It closed last week 5026. And this would be its first down week in the last six. NASDAQ down three-quarters of 1%, the Russell 2000 giving back. Some of its strong gains for the week down 1.2%. All right, last call for nominations for CNBC's 12th annual Disruptor 50 list of private venture-backed companies.

To learn more, scan the QR code on your screen or go to cnbc.com slash disruptors. Up next, Wells Fargo's Scott Wren here to wrap up the final moments of what has been a pretty wild week for stocks, how he's navigating the volatility, that and much more when we take you inside the Market Zone. We are now in the closing bell market zone. Wells Fargo's Scott Wren is here to break down these crucial moments of the trading day as we close out a wild week for stocks. Plus, Diana Olick on the jump in mortgage rates and the big drop in housing starts last month. And Roku could close out its worst day ever.

Julia Boorstin on what is moving that stock. Scott, in terms of the market here, we're losing a little bit of altitude, although still hanging in there OK. The S&P is up almost 5% year to date. Probably not many thought we'd be there six weeks into the year, even as we've reduced the amount of Fed easing that the market is positioned for right now. What does it tell you and what's the risk reward look like to you? Well, Mike, I tell you, I think the risk reward is not good right here. And we certainly wouldn't just go out and buy the S&P 500. But like you said, you know, you look at CPI, PPI. I mean, those were some nasty numbers if you're worried about inflation or if you're, you know, the

Federal Reserve. And the market's done really nothing but keep grinding higher for the most part. So for us, we don't want to go out there and buy the S&P 500. We don't want to go out there and buy the Russell 2000, that's for sure. But I think there's a few things under the hood that you can do. Was it really nasty numbers, though, coming out of the PPI and the CPI? I mean, obviously more than you wanted to see. And it seems like there's at least a hesitation in this whole disinflation trend. But I don't know, what was it, 2% year over year core in the PPI? Yeah, you know, you can't complain

a lot about that. And you're right. You know, the trend in inflation is down. It's not going to move down in a linear fashion. There's going to be a few stumbles along the way. This is kind of a stall here. But, you know, certainly we have some confidence, and I think the market has a lot of confidence that inflation is going to keep crawling lower. So that's why after a week like we've had, really the S&P 500 is going to close pretty close to the all-time record high. I think the market's pretty comfortable with that. A lot of people would have said the market's very married to six, seven interest rate cuts out of the Fed. You warn the camp that we're going to see three. And I think really, you know, when the market digests that, it might digest it a little bit better than we would have anticipated.

Because, you know, I think the market's going to be pretty comfortable with three cuts this year. Yeah, market was just flirting with six or seven rate cuts, not married to it. At least it looks like that at this point. So if the S&P 500 doesn't look like it's at a great entry point right here for you and the Russell 2000, which has started to come around, is also not, where would be? Well, I tell you, here's what we're doing, Mike. We're taking the sectors that have really outperformed. And if you look at calendar year 23, it was tech, communication services, consumer discretionary that just dramatically outperformed the other eight sectors.

And, of course, consumer discretionary has coughed up some ground here this year. But what we're doing is trimming from there. So we're taking, you know, if our clients have been following our advice, they're overweight, all three of those sectors, we're recommending that they trim back tech to a neutral, communication services to a neutral. We want them to take consumer discretionary to an underweight. And then we're taking those funds and we're looking at some sectors that haven't outperformed that we think will do well over the coming year or so. Industrials, health care, materials, energy.

We made a swap with energy and financials. Financials ran a little too far too fast. We backed off of that and ended up buying energy. We just don't think oil prices are going to go much below $70. So those are the things that we've been doing. But as I said, we've been avoiding just going out there and buying the S&P 500. Sure. And I should mention, we backed off a little bit further here. The S&P is down about a half a percent.

And it's an expiration, monthly expiration Friday. And here we are right at that round number, 5,000 number. So, Scott, just real quick, it seems as if you're not necessarily saying the economy is really going to struggle here. Or are you? Well, you know, Mike, I think probably we're going to see a couple of quarters, maybe the second, third quarter where, you know, you've got a one handle or right around one in terms of GDP. It looks like so far anyway, the first quarter is coming in OK. So we're definitely expecting a slowdown. You know, when you and I talked, you know, last

year, this time last year, you know, we thought there was a pretty high probability of a recession. That probability certainly isn't zero, but it's a heck of a lot lower than it was, you know, six or nine months ago. So we expect a slowdown. We expect the consumer to pull back here. We think the Fed, as I said, we're only going to get three cuts out of them this year. And so I think that consumer spending, higher unemployment, you know, that's going to take a little wind out of the economy. And it's not going to be a disaster, but it's going to be a slowdown that's noticeable. Yep. All right. We'll be on the lookout for it. Scott, thanks very much. Appreciate it. Thanks, Mike. Diana, a little bit of a move in mortgage rates that you're taking a

look at. Yeah, a little bit of a big move, Mike, on mortgage rates. The average on the 30-year fix jumped this morning to 7.14 percent, that according to Mortgage News Daily. And that after the producer price index, as we all know all know came in hot that is the highest mortgage rate in two months then we got the january read on residential construction down nearly 15 percent from december multifamily was the main driver down nearly 36 month to month apartment developers are pulling back because there are just so many new units already coming on the market this year single family though was also down much more than expected. And that was surprising, at least to me, given the strong new home sales that we saw in December. That sent stocks of the big names like Lenar, Pulte and D.R. Horton down,

now off around 2 to 3 percent on the day. Interesting, though, while starts were way down, single family building permits, which are an indicator of future construction, actually rose 1.6 percent month to month and were up 36 percent from January of last year. So builders still see a runway ahead, given what little existing home supply there is on the market. Mike. So, Dan, I hate to reach for the easy excuse. Are people talking about whether impacting the single family unit starts at this point or Or what else are we thinking about at this point? Because it seems as if, you know, you had a lot of the ingredients there to have a rebound. Yeah, I mean, you always get the weather excuse in January, but these numbers are seasonally

adjusted. And so guess what happens in January? It's cold and it snows a lot. So I don't really buy into the weather picture. I think this is just more concern about interest rates rising. I will note, though, that builder sentiment has been rising for three straight months, up again in February, even though rates pop back up. They're seeing more demand in their showrooms. The question is, does that translate into signed contracts? Gotcha. All right. So we'll look to see if that's an inflection point down the road. Diana, thank you very much. Julia Roku, rough day, very heavy volume as well in that stock. That's right. A bigger loss than expected. And warning

about the year ahead, sending Roku shares plummeting down about 23 percent. This despite better than expected revenue and better than expected active accounts. Roku CEO Anthony Wood addressing lower than anticipated average revenue per user and telling me that the pullback on spending marketing new streaming apps will continue. And then there's a part of our business called media and entertainment, which is where we focus on, you know, helping helping media companies promote their services on our platform. And it's something that we're really good at. It're probably the industry leader of that. It's a strong business for us. But it's been challenged and pressured for the last four quarters, and it's probably going to continue to be pressured for the rest of this year. Wood did say that the ad business is rebounding in a new sports streaming joint venture, the one coming from Warner Brothers, Discovery, Disney and Fox. It would be a win,

but investors are concerned about his warnings about macroeconomic uncertainty. Mike. Yeah, Julia, it's very interesting to hear would talk about that factor, that basically they are a key way that other streaming services promote themselves. I guess if you're talking about a leaner industry and disinvestment from that area, that could be, you know, a lasting struggle. Yeah, look, they really benefit when there are new apps that launch and those apps market themselves on Roku, trying to get people to download to them, to subscribe to them. But they also generate revenue from advertising. The fact that that business is rebounding, not balancing out, at least in an investor's mind, with a stock down about 24 percent, not balancing out the fact that they see sort of an ongoing contraction in that space. Yeah, for sure. Julia, thanks very much. Have a good weekend.

Let's see how we're set up here into the close. We have had some weakness in the last hour, the NASDAQ 100 down about 1%. It had hit 18,000 at a high about a week ago. We are a good deal below that at this point. The S&P 500 just above that 5000 level. So down half a percent. It looks like it's going to miss a sixth straight up week that would also have been 15 out of 16 up weeks. And it is going to fall short of a record high. The Russell 2000 small cap has actually outperformed on the week, although it is giving back one point three percent. A lot of focus on the bond market as well after the hot CPI number, as well as the PPI. Ten-year note yield finishing around 4.29%.

So above that four and a quarter level that some folks thought might be an issue in terms of the stock market absorbing it. But overall, market has managed to hang in there. Market breadth has been better than it had been in prior weeks, although today you have about 40% upside volume in the New York Stock Exchange stocks at this point. The volatility index is going to go out back above 14, suggesting not a real agitated market,

but one that is also not so calm. There is an options expiration Friday. Keep in mind, too, last two weeks in February tend to be seasonally weak. We'll see if that happens. That does it for Closing Bell. We'll send it into overtime with Morgan Brennan and John Ford.