Closing Bell - Closing Bell: Room for a Year-End Run? 10/10/23

Episode Date: October 10, 2023

How much room is there for stocks to make a run into year end? New York Life Investments’ Lauren Goodwin and Schwab’s Liz Ann Sonders give their expert forecasts. Plus, Shannon Saccocia from NB Private Wealth is breaking out her playbook for earnings season and beyond. And, David Albrycht of Newfleet Asset Management tells us how he is navigating today’s sharp decline in yields. 

All right, guys, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with a big bounce back for stocks and drop in rates, easing investor anxiety, at least for the moment. Some of that might be due to the recent Fed speakers. And speaking of, Neil Kashkari delivering remarks this hour. We're going to have those breaking headlines from our own Steve Leisman when they hit right around 330, so about 30 minutes from now. In the meantime, your scorecard with 60 minutes to go in regulation. Dow higher on what's been a pretty broad day of gains. All S&P sectors have been in the green for much of the session. And there you go.

And that is still the case now. Russell 2000, though, it's the big outperformer as small caps to continue to get a much needed boost. The index now up for the past five straight days. And as for tech today, the Nasdaq 100 getting back above its 50 day moving average on an intraday basis. Alphabet hitting a new high today and some of that coming with that lower rate move as well. Take a look at the picture in yields because just about everywhere you look on the curve today, they are falling. There's red across the board showing that story well. Takes us to our talk of the tape.

How much room is there for stocks to make a run into year end? Let's ask Lauren Goodwin of New York Life Investments here at Post 9. Nice to see you. I mean, that's what some people are talking about, that we're set up or setting up for a run into the end of the year. Do you buy it or no? I think that we'll see some upside in equity towards the end of the year. But the challenge for investors is that when you're in this late cycle environment where market narratives are shifting back and forth, it's difficult to get meaningful sector or even style performance for

more than a couple of days at a time. And so I expect that we'll continue to see, frankly, what we've been seeing over the past few weeks, which is a range-bound and volatile market, but one in which you have to stay invested because we have not reached a recession or a bear market yet. What if rates continue to move lower? I mean, that's what this is largely about, right?

This rate relief, if you want to call it that, yields coming down and stocks going up. Well, if rates continue to move lower, I think that will be the primary driver of a reasonable rebound in the equity market. What I'm looking for to determine whether that's viable are a couple of things. First, of course, what we're hearing out of the Fed is important.

Of course, the CPI data that we're going to get this Thursday are important. But when it comes to market-driven rates, it's also about supply and demand dynamics. These past couple of days, we've had a little bit of relief from Fed narratives and also a little bit of risk- Fed narratives and also a little bit of risk mitigating type of buying. But treasury supply is still overwhelming. We expect it to remain that way. And so the term premium aspect of long term treasury yields, very much at play. So did you say whether it's viable or buyable? Because you could look at it both ways, right? And I was like, which one did I hear? Because I hear you saying, OK, well, viable. Is it really lasting? Is it going to you know, are they coming down and going to stay down because of all the issues that everybody's been talking about?

Supply, who the buyers are, or is it viable if you believe that rates are going to continue to go down? Therefore, you should play for a year and move move in stocks. When it, okay, so when it comes to buying into duration, which we're hearing a lot of institutional investors eager to do at yields where they've been, especially in the 10-year and further out in the curve, I'm hesitant to make aggressive moves in duration because when rates are moving around because of the term premium,

as opposed to meaningful changes in inflation or rates expectations, that leads to more volatile long end of the curve. And so it's just not my favorite place to add risk early. But when it comes to the equity market, I do expect that it can be a boon on a given day like today. I mean, you know, look, Fed speakers have been coming out almost one after the other. And I mentioned at the top of our show in about 27 minutes or so. We expect remarks from Minneapolis Fed Prez Neil Kashkari. We'll have the highlights of that.

But one after the other, they're coming out and looking at the action in the bond market over the last month and saying, you know what? Financial conditions have tightened considerably. We may not have to do anything else. What does that mean? The tricky thing is with that line of discourse is that by saying that, financial conditions today have eased. Right. And so you're.

Well, slightly. Slightly. They were up a lot in September rates. But relative to where monetary and bank lending conditions are, financial conditions are still relatively sanguine. So I think what the Fed is dealing with is an environment where the data has been stronger than expected since 12 out of 19 of them said in September that they would expect another rate hike later this year. But financial conditions, to your point, have been tightening. I do think that if we continue to see financial conditions tighten, and that's not what we're seeing today, right? So if we continue to see financial conditions tighten as they have been, then that could be a reason for the Fed to say we can pause another month or even pause for good. But see, at what point do you actually start playing for a soft landing? Because the market, as we know, moves before you have the definitive answer to many of these questions.

You have to sort of see what the market move is anticipating and then play it as such. If you wait until it's so obvious, you arguably miss the whole thing, like many had missed the move in tech this year, right? Hardly anybody was positioned for it coming into the year. And by the time it became so obvious that you should put money there, the stocks were already up 30 and 40 percent, if not more. So I have a slightly different take on the market heading into recession. The equity market in particular is really good at anticipating the recovery. And so on the other end of the recession, the equity market tends to beat how the economy is and feels. Heading into it, though, we get head fake after head fake.

And so when it comes to when is it time to move fully risk off, I'm looking at two things. I'm looking at one, unemployment claims rising, and two, earnings moving negative. And neither of those things are likely to happen in the next couple of months. So again, I think it's a market in which you have to stay invested and ride that sort of sideways and volatile dynamic. All right. So let's bring in Lizanne Saunders now as we expand our conversation. She's the chief investment strategist. Charles Schwab joins us on the CNBC Newsline. Lizanne, it's good to add you to our conversation.

Is that what this is today? Just pure rate relief? A couple days' worth of moves lower? I mean, yesterday it was just simply futures telling us that rates were likely to move lower today. And here they've come to fruition, So we have a bit of a move. Yeah. So I think rates is obviously a big part of it. And not withstanding their horrific events with Hamas and Israel, you would have the retreat in oil prices as well. And even with the pop in oil prices, they're not back up to the mid 90s where we were before that. Of course, you had the trifecta of the dollar moving up as well.

But I also think what happened in the aftermath of the Friday jobs report was a little bit of under the hood looking at some of the less sort of sanguine details aside from just the payrolls beat, but also the fact that you had the S&P come close to its 200-day moving average and hold. And on a breadth basis on Friday, all three of the major indexes, the S&P, the NASDAQ, and the S&P intraday at the low point had less than 10% of stocks trading above 50-day moving averages.

So I think that kind of triggered dip buyers to step in. But the broader answer is I think rates, for the most part, are still in the driver's seat for the equity market. I believe that's true. The question is, which way are they going to move? And then which direction are they going to drive stocks? I mentioned, as I was discussing with Lauren, this idea that, you know, as long as they sort of stabilize, maybe around here, even if they creep up a little bit more, that some are gaming for an equity rally into the end of the year. Do you buy that or not?

Well, I think stabilization is important because I think it's the speed of the move in rates more so than the level of rates that have been on selling for the equity market. So I think even a stabilization would probably be a benefit. What I think is worth considering is this idea that, given Fed speakers and a number of them saying, well, maybe the long end is doing the job for us. I think the fact that the Fed has not stepped in with another hike, given that they didn't promise it, but they said it was very much on the table, and the economic and inflation data haven't supported, you know, permanence of the pause. I just think maybe some of the riot in the bond market may be about sort of questioning the Fed, and it's maybe perverse to think that if the Fed does hike again or have they

hiked again, that that might have been actually better in terms of yields. Nothing would surprise me in the market these days, if only because, yeah, the market could continue to do well simply because of the whole notion of wall of worry. That's a powerful force. So it wouldn't surprise me, but I don't think we're without risks, even if yields settle down. And now we have a new one, obviously. I want you to listen to what Paul Tudor Jones said this morning on Squawk Box, both of you, if you would, and then we can discuss on the other side. Here's PTJ. It's a really challenging time to want to be an equity investor in U.S. stocks right now.

It's really hard because, again, you've got the geopolitical uncertainty, which we, I think, come to live with to a certain extent. But again, all those have the ability to have a nonlinear outcome. I mean, Lauren, he also suggested, you know, you get a recession, stocks could go down, you know, he said 12 percent, perhaps. Does that make sense, what he's talking about? I mean, Jamie Dimon, a couple of weeks ago, said he thought geopolitical risk was the biggest risk for investors still. When it comes to the equity market and a durable down market, I think that the biggest risk in terms of probability weighted scenarios is still

recession. I mean, the median recession over the last hundred years sees meaningful down draw in earnings with a 20 to 25 percent drawdown in the equity market. So even if we're talking about a milder scenario or even much milder scenario than that. That 12 to 13 percent down is a reasonable estimate. Geopolitical risk can be a meaningful risk because it takes the market by surprise, but it's really the underlying elements or structural elements of the risk that tend to actually drive the market behavior. And that tends to be narratives more around inflation. And if we're thinking about the risk that we're seeing right now, and that's a playbook that the market's gotten to know over the past couple of years.

Suzanne, you want to comment on what Paul told Squawk Box this morning? Yeah, well, I agree. I think it is a tough environment for the equity market. And there are so many cross-currents, which ties into what, Scott, you and I have talked about, which is what our thesis has been for quite some time now. We've had recessions in certain pockets of the market. It's this rolling recession thesis. You've had it in housing, housing-related manufacturing, a lot of consumer-oriented goods. If you look at the action in the bear market last year, a lot of the underlying action, I think,

was tied to those hard landings in some of those segments of the economy. We've just had this very funky cycle of a much later resurgence on the services side, which has been an offset. And to me, the soft landing versus recession debate is not a perspective thing. It's just whether we can continue to roll through whereby if and when services gets hit, you've got stabilization that starts to form indoor recovery in areas that have already gone through their hits. That's not a common set of circumstances, nor, by the way, is the bear steepening nature of what's happened with rising yields. Normally, at this point in the cycle, when the yield curve starts to uninvert, it's done with a bull

steepener because of the short end starting to reflect the likelihood of the Fed cutting. And I just don't think that's in the near-term calculus right now. You know, the other thing I want to discuss, since we're talking about recession, Lauren, is the idea of sectors that get hit, to Lizanne's point, you know, hit first in this rolling move. Well, small caps were crushed, and now they've been coming back a bit going for five up days in a row Wall Street Journal with an article today suggesting that they're screaming recession but that they can soar right here almost time to buy them is now the time has the time come to buy small caps small caps can outperform when the economic picture is improving.

And I don't think that's what we get first. Certainly from a valuations perspective, there's a lot of sort of energy and impetus to buy small caps. But the macro case, really, I mentioned this earlier, I don't see the macro case being decisive, frankly, for any equity style or sector until we are clearly on the other side of recession or clearly in a soft. What if we don't have one? What if we don't have one? I mean, what if you make the argument that, OK, the manufacturing data for a better part of a year has been terrible. So that sector was already in recession. It's troughed. Earnings expectations across the board are expected to go up. Tech looks pretty good. Those earnings are, you know, bankable, we think.

Then small caps, if they look pretty good, I mean, what if we're past it? We just don't know it. I don't think that we're past it. I wish we were, but I don't think that we are because Lizanne mentioned the underlying data in the jobs report. And I hate to quibble with what looks like just a stunning headline number, but what we're seeing in terms of payrolls with hours worked and wages earned is that the average consumer is now flat or negative in income growth. That is, when you think about the way the economic dominoes

tend to topple towards recession after manufacturing, that's what comes next and frankly last before we do see an economic slowdown. And I don't think that that has cleared the economy yet. Lizanne, what about this idea of these stocks that are in the journal's words today, screaming recession, but are going to be the beneficiaries of a big burst if we don't get one, or even if we get a mild one, but on the other side. But you've got to start gaming things out for when you think that's going to be, not wait for the moment that is. Well, I mean, that's the theory behind why small caps are

rallying, although for a very limited amount of time. And you can throw into the mix, too, you know, indexes like non-profitable tech, one of the Goldman Sachs indexes doing well. And when you go way down the quality spectrum into non-profitable areas and into small caps, it's often showing a pricing in of a coming very sharp inflection point in the economy. I agree. I just don't see that on the near-term horizon. But also, I think when you think about a segment like small caps, that's a huge segment to say, do you like or don't you like small caps? Well, which small caps? It's one of the reasons why I think if you're an index-oriented investor and you're looking for interesting small cap ideas, start with the S&P 600 as kind of a

basket because it's got a profitability filter. The Russell 2000 doesn't have a profitability filter and still has more than 30 percent of stocks are zombie companies. I just don't think this is the time you bet on zombie type companies. And look, I understand that a lot of regional banks are within small caps, too. So, I mean, your point's well taken. But, you know, Lizanne, do you think, speaking of banks, a couple of days away from, you know, earnings season really kicking off with the banks, how about that sector? Well, we need to start to see some greater participation because one year off, we're about to celebrate the one year anniversary of the low in terms of the S&P 500. And not only

has the S&P's performance been relatively anemic compared to past one-year points off of major lows, the fact that you've had zero participation, in fact, still negative for the bank index, KBW bank index, that's never before happened in history. So, yeah, I do think you need to start to hear some better news from the small and regional banks. I'm not sure it's going to be as soon as this quarter's reporting season. We're going to get out of the gates, okay, on earnings? Or are we going to just have everything that you talked about just bubble up to the surface? Uncertainty, the CEOs like Jamie Dimon saying, well, who knows, maybe another hurricane.

Geopolitics are still front and center. Brian Moynihan saying, well, consumer spending and credit. You know what I'm getting at. I do. Look, I think earnings are probably going to be OK, but the messaging, especially from the banks, may be a little less sanguine. Now, one of the things that we've seen as a trend all throughout this year, despite the upward move in the equity market, has been top line revenues have already been decelerating. Now, when you have an environment where, yes, consumer price inflation has been decelerating as well, wages have been stickier. And so what I'll be looking at at the banks, but across the board, are whether those still sticky costs and declining revenues are resulting

in the earnings compression that probably not for the third quarter, but maybe for the fourth quarter, due to start to signal pressure for the broader economy. Good having you here, Lauren Goodwin. Lizanne, I appreciate you as well. Sorry for those technological issues we had, but appreciate you joining us on the phone nonetheless. And we'll catch up to you again soon. I know that. Let's get to our question of the day. We want to know, do you believe in a year-end rally for stocks? You can head to at CNBC closing bell on X to vote. The results are coming up a little later on in the hour. In the meantime, a check on some top stocks to watch as we head

into the close here. Courtney Reagan here with that. Court. Hi, Scott. Yeah, so solar stocks actually getting some relief today with SunPower, SunRun, and SunNova among some of the biggest gainers, if we can show you here. One of the ETFs that tracks that group ticker TAN, it's also having its best day since last November, but it's still down around 10 percent in the past month as growth oriented sectors have come under pressure and block is firmly higher as Bank of America reiterates its buy rating. Analysts say its recent pullback is unjustified and shares are too cheap relative to the company's fundamentals. The firm has a $71 price target on the stock, currently trading, as you can see here, just under $46 a share. Scott, back over to you. All right, Court, we'll see you in just a bit.

Courtney Reagan, breaking news now out of the Sam Bankman freed trial. Kate Rooney here with that from outside the courthouse. Kate, what do we know now? Hey, Scott, so Caroline Ellison is on the witness stand. We just got some news involving another crypto company, Binance. Ellison saying that in order to buy back a stake in FTX that Binance owned Sam Bankman-Fried, told Ellison, she said, to borrow from FTX for the buyout because we, quote, have to get it done. That entire stake was worth about $2 billion. She also went on to say that she started working for SBF back in 2018 and after being hired, found out that Alameda, the hedge fund that he also controls, was in much worse financial shape than she thought. It had suffered some large losses. She described lenders pulling out and said that more than half of the staff had quit. The prosecution really came out swinging today.

She was the CEO of this hedge fund that Sam Bankman Freed majority owned. She said they asked if she committed financial crimes when running that hedge fund. She said without hesitation, yes, and said, quote, Sam directed me to commit these crimes. We're getting more. We're in a slight break right now, Scott, heading back into the courtroom, but we'll keep you posted as this all plays out. Oh, I know you will. Kate Rooney, thank you so much. Appreciate that. We're just getting started here on Closing Bell. Up next, searching for opportunity. NB Private Wealth's Shannon Sikosha is back with us, outlining her market playbook as we round out a busy week, about to

get even busier as we head into earnings season. She joins us after the break. We're monitoring as well Minneapolis Fed President Neil Kashkari's remarks. Speaking there, you see Steve Leisman monitoring those. We'll get you the biggest headlines as soon as we get those. You're watching Closing Bell on CNBC. Welcome back to Closing Bell. Stocks in the green. Off the highs, though, as we head towards the close, let's bring in now CNBC contributor Shannon Sekosha of MB Private.

Well, so what do you make, Shannon, of the price action that we've seen really since, let's call it late day yesterday and now through today? Well, and I think you can somewhat include late day Friday in that, Scott. And I think many of us who are obviously grappling with the devastation that we're seeing in Israel are wondering, you know, what does that mean for the markets for the rest of this year? And I think, you know, the story is really all about yields. You know, why are yields higher? I think Lizanne made an excellent point in the previous segment. Are they higher on higher inflation expectations?

Are they higher on growth? Are they really higher because we have a supply, demand, and balance in treasuries? And I think what you're seeing is that you're seeing some of that additional supply being sopped up in the market over the last two days. It's putting a cap on the 10-year. And that's creating a more fundamentally foundational opportunity for people to buy equities kind of coming into what will be an interesting next 10 weeks or so. But you don't really believe in the market. I mean, as it sits

here, you certainly don't believe we're having a year-end move higher because you want to overweight cash and investment-grade bonds over equities, which you're neutral on. What does that say about your psyche about the market? So I think it's a tale of two time frames, and I'm so glad you asked me, Scott. Again, the next 10 weeks or so, if you look historically over the last several years when we've had a tough September, you know, the markets have yielded generally a fairly positive outcome in the fourth quarter if you look at the S&P 500. And so it's really all about positioning right now. If we get that cap on yields that I talked about and we get a little less volatility from a rate perspective, equity investors are going to digest that and position appropriately through the end of the year, which implies that they may plow some cash

back into equity markets. Instead, looking forward to 2024, however, this higher for longer implies that we should be longer the stronger parts of the market, which are cash, investment grade, fixed income, and even within equities, thinking about lower beta, higher earnings quality to set up for what we think will be a continued slowing of the economy and perhaps a mild recession. But to your point, it's very difficult to time

when that switch will flip from late cycle to early cycle. And so just preparing for that continued volatility and compression, if you will, in valuations is how we're positioning into 2024. So you're willing to forego a rally between now and the end of the year. That's clear. And you don't sound very optimistic. Well, can I make a comment on that? We are neutral in equity, Scott. I want to make it very clear aren't are we have a neutral position at equities we are exposed to the equity market we are not underweight however within equities are our view is that you should be rotating perhaps into names not these high growth names with no profitability not into deep cyclicals

but instead into companies that are stronger and can withstand some of these forces that are going to buffet them into 2024. I understand. But if by virtue of your being overweight cash and investment grade bonds and neutral equities, your bias is negative on the stock market right now. It just is. Well, there are other places that we can be underweight in our allocations, and I think that's important. We invest globally, Scott, so we're a little less excited about non-U.S. developed bond markets, for instance, and emerging market debt, debt for instance is something that we have been more optimistic about in the past than we are today so there are opportunities if you're a global investor we do we are we

are overweight and believe that the US equity market is better positioned right now because of our because of the US economy's services led economy versus the manufacturing-led economies of europe and china and so we are putting our emphasis here at in the u.s from an equity perspective and from a fixed income perspective understand i mean you can like u.s better than the rest but doesn't even sound like you're expecting much out of, let's call it the first half of 2024, where I think you said yourself you expect these conditions to sort of last for a while in your mind. I think we are waiting for that inflection point.

You know, I think when you look at what's happening, you talked about the jobs report from Fridayiday in your um in your last segment scott and you know underlying that data does show a slowdown and and we are seeing a tick up in credit card delinquencies we do anticipate that the consumer will become more stretched now the flip side of that is if we continue to see inflation move in the right direction if this recent re-acceleration in energy and food prices abates and we start to see a little less pressure on the consumer coming into 2024, that could certainly yield a more optimistic projection for us in 2024. But right now, those are not the cards that we're being handed. We are seeing slowing in economic data underlying the economy. And I think that from a positioning standpoint,

you can still expect that stronger companies should be able to grow on the top and bottom line. We've seen earnings likely trough in this last quarter. But being very careful and thoughtful about allocating capital is going to be important in 2024, even if we get a nice little run in the next 10 weeks with a potential cap in yields, at least in the near term. All right, Shannon, thank you. We'll talk to you soon. Shannon Sikosha joining us once again. Up next, Neil Kashkari delivering remarks as we speak. Our Steve Leisman monitoring that. He'll bring us all of the highlights from Mr. Kashkari right there when we come back.

Welcome back to Closing Bell. Minneapolis Fed President Neil Kashkari speaking right there live this hour. Steve Leisman joins us now with the headlines. Steve, what's he saying? He's saying that we seem to be on track for a soft landing, but of course he says it's too soon to declare victory. And just when you thought that there might be a bit of victory, he warns that if inflation remains high in the economy, too resilient, the Fed may have to step on the brakes harder than it's been. Ultimately, I haven't heard him in the last, I don't know, 33 minutes of speaking really come down on that issue of whether he believes the Fed needs to do more or not.

He says he does see the higher yields out there, but he hasn't seen a rise in inflation expectations, which suggests more of a real yield or an economic growth-fueled rise in yields. Inflation, he says, is headed down. Governor Chris Waller earlier today, Scott, saying in a speech that the Fed had taken forceful action to reduce inflation, quote, we will stay on the job to achieve our objective of 2 percent inflation. He did not hint also whether he thinks the Fed needed to hike again. For that, you got to go to Rafael Bostic. He did talk about this. He used the phrase again that rates are, quote, sufficiently restrictive, which tells you he thinks they've done enough, but still a long

way to go bringing inflation down. So he thinks there's still further to go in terms of keeping rates high, but not necessarily higher than they are already. I'll leave it there, Scott, except to say that, as you know, the outlook for that last rate hike of the year is way down with a 14% probability for November, and it looks like just under 30%, 29% for December. So market pretty much thinks the Fed is done here. One thing quickly, I see another headline here, Steve, in which he suggests that the recent rise in the 10-year yield is, quote, perplexing. Does that go to your point where he says that economic growth or alludes to the fact, insinuates that that's what's been driving it more so than this issue that seemingly everybody is now talking about and this oversupply on the market? Yeah, he went through the three things, Scott, that we've been talking about for weeks now that have been potentially responsible for the rise in yields.

Higher growth, more hawkish Fed, as well as greater issuance. And he says all those three things are out there, but kind of disaggregating them and saying how much comes from where is what's perplexing and a little difficult to figure out. He's watching, and he did not say, like others have said, that this is something that could cause the Fed to do less. But it's a kind of funky thing. He's talking more to college students, so he's being very simplistic and not really getting into the weeds of the stuff that we want to know. But we're listening and trying to call it out, Scott. All right, Steve, thank you very much. We appreciate that. That's Steve Leisman, our senior economics reporter. For more on what all of this means for the bond market and rates, let's bring in new fleet asset management's Dave Albright. Welcome

back. Hey, thanks. Want to react to what Kashkari is saying on track for soft landing? Also the idea of, you know, why rates have been going up the way they have. And to your point, I'd love to hear from you whether they're done or not going up. Yeah, well, we had the 10-year Treasury peak at about 380. Then we had a little rally based on the Israeli war. We got down to about a 360, back to 370 today, and now they're back to 365. So it's been extremely volatile. I would agree with Kashkari, a soft landing, mild recession due to the fact that the consumer's in better shape. Corporate balance sheets have been termed out and now there's an additional 1.5 trillion of

private credit available for liquidity. If only there were 365. You misspoke. They're 465. I'm sorry, 465. I'm sorry about that. Maybe that's a tell. Wishful thinking. Maybe that's a tell on where you think they're going. I mean, have they peaked out? You know, I think that, you know, rates have gotten higher than people anticipated for the reasons that, you know, Steve told us, you know, excess issuance, you know, things that we're still concerned about. The economy is still growing relatively strong. Services inflation is still relatively high and there may be still growing relatively strong. Services inflation is still relatively high, and there may be one more rate increase. So we'll have to wait and see. CPI comes out later this week. We'll watch it very, very closely. But the bottom line, Scott,

is value has been restored to fixed income, and yields right now are at levels that we haven't seen going back to the global financial crisis. Yeah, still offering to some better value than equities. What especially do you like within credit right now? I would say, you know, the G-SIB banks in investment grade, UBS, 10-year, 200 over, single-aid credit, you're getting almost 7%. You know, right now in high yield, we did Hertz, which was yielding a little over 10%. And then the bank loan market, you know, which is giving you a very nice current coupon, 8.5% to 9%. You know, there we like Allied Systems. We like, you know, Verint Medical, which is 9% to 10% type yield.

So you know, value has been restored to fixed income. You have to be investing in the bond market if you're an investor. If you have an allocation, you have to be investing. So you must not be, you know, uber negative then on the economy or thinking that, you know, rates are going to push, you know, dramatically much higher from here if you're even talking about high yield. That's a great point. High yield has cheapened up. So I think those are one-off names that we actually like. But our bias has been up in quality in loans, up in quality in high yield. We have treasuries in the portfolio, so I have plenty of liquidity.

And if things start to move in our way, we could actually go and start buying some of the lower quality stuff if valuations get to a point where we feel we want to enter the market. But bonds are good value across the curve. Treasury rates haven't been this attractive. If you look at IG corporates at 620, high yield at 920, emerging markets at mid-8s, it's all good value. Yeah. Fed done? When do they start cutting? Yeah, I'd say the Fed, you know, we'll have to wait and see the data this week. To get to your 365. I'd say maybe possibly one more 25 basis point increase, but not really meaningful on an economic front. And then we'll have to wait and see. The market's saying maybe another six months to start cutting. Possibly one more 25 basis point increase, but not really meaningful on an economic front.

And then we'll have to wait and see. The market's saying maybe another six months to start cutting. Three rate cuts are in the mix, and we'll have to wait and see. Lastly, short end versus long end. What do you like better? I think there's value across the whole front of the curve, I think. The front part of the curve has value with securitized product yielding over seven. Then I think long rates, if the Fed has to start cutting sooner rather than later,

you're going to benefit from having duration in the portfolio. I appreciate you being here. Thanks so much. Dave Albright, New Fleet, joining us. Up next, we're tracking the biggest movers as we head into the close. Courtney Reagan is standing by once again with that. Hey, Court. Hi, Scott. I do trading serious business, but I'm watching some movers in gaming and publishing with a sudden executive shakeup sending one stock sinking. We've got the details coming up next on Closing Bell.

About 15 to go before the Closing Bell. Let's get back now to Courtney Reagan for a look at the key stocks she's watching. Court. Hi, Scott. So Electronic Arts is higher after Bank of America upgrades the stock to buy from neutral. Analysts say fears around the rebrand of EA's FIFA franchise have been overblown. The company's partnership with FIFA ended last year, and it renamed the series EA Sports FC. Shares actually are up 3% on that upgrade.

And John Wiley & Sons is having its worst day since June, after the academic publishing company announced the sudden departure of its CEO. The company was slated to hold an investor day this Thursday, but now says it's going to be rescheduled. Shares are down almost 10% on that, Scott. Well, Courtney, thank you. That's Courtney Reagan. Last chance to weigh in on our question of the day. We asked, do you believe in a year-end rally for stocks?

Head to at CNBC closing bell on X, the results after this break. The results now of our question of the day. Do you believe in a year end rally for stocks? The majority of you said yes, almost two thirds. In fact, up next, financials outperforming today. We'll tell you what's behind that bounce, what it could mean for the broader market earnings just a couple of days away there. That and much more when we take you inside the Market Zone. All right, closing about Market Zone time. CNBC Senior Markets Commentator Mike Santoli is here to break down the crucial moments of this trading day.

Plus, we dig into the rally in financials ahead of those big bank earnings on Friday. Phil LeBeau will join us on the move in EV stocks today. First, though, Mike, with your first word, what's your thought on today? You know, third day, really, of this oversold bounce happening pretty much where it had to, right? It held that sort of uptrend line from last October, the 200-day average, as yields peak, as oil kind of goes into retreat. So all those things falling into place. Where has it brought us? About 3%, 3.5% higher versus the closing low of last week. It's still just a bounce for now with an opportunity to be a little bit better than that

as we head into earnings season, and you feel like you'll probably get a little bit of the company-by-company back and forth, but a decent setup, it seems. You know, the economic surprise index was very positive for the entirety of the third quarter. Deutsche Bank has pointed this out, which implies that there should be upside in general to earnings reports if you had to do some betting on red or black. I feel like you've gotten much less hostile, if you want to use that word, Fed, in terms of rhetoric, at least. Because one after the other, you're getting, well, the move in the bond market's done a lot of work for us, might not have to do anything else. We brought you some 20 minutes ago

or so these headlines from Neil Kashkari, who is also suggesting it's, quote unquote, possible that rising yields may mean the Fed has to do less. So he's yet another who's suggesting the same thing. Yeah. I mean, I think that being receptive to the market's message, whatever it is, is always welcome when you hear the evidence that that is what they're saying. And, you know, they're running out of time to solidify expectations for a hike November 1st. Right. It's only three weeks away. They're going to have a blackout period. So the market has some comfort in there. And I think the reason for it is not that another quarter point in the short end is going to matter that much, but because if they were just intent on doing it, no matter what the bond market was saying, it would mean that they intend to bring the economy

screeching to a halt. And every time they say, no, we have to be, you know, a little bit flexible about this, it implies they're happy to allow a soft landing to occur. We don't know how it's going to play out, but that's at least what we take from this bond market panic that we've had for weeks. Because, you know, when there's a suggestion that the Fed is on, quote, unquote, autopilot, it makes people a little nervous that they're not paying attention to things that seem obvious around them. And in this case, they are. Now, as it relates to rates, the banks, OK, they're leading today. They got earnings later this week. There was a period of time where rising rates would be good for financial stocks. In this case, it hasn't been because we start worrying about tightening financial conditions and credit and all of the implications there forward for the banks.

How do you see this? They've never really reaped the benefit of that expected tailwind from net interest margin once the Fed started hiking. It happened too fast. The bond market cracked too hard. And it all of a sudden became recession watch immediately, as opposed to that bit of a honeymoon period. Now it's much more about what are the paper losses say, the bond portfolios, and the direction of credit delinquencies.

All that stuff is going to be front and center at a time when even the big banks as a group trade below book value. So I think you've built in a fair amount of worry to the valuations. It doesn't mean that they have to go up from here. It doesn't mean everything's going to look great in the numbers. They don't have a lot of wiggle room. I do think the truest move today to potentially sell this insurance brokerage business, it's a decent sized number in terms of the expected sale price. Ten bill, I think. Yeah, it sort of just reminds people that there are some options, there are some levers to pull at a lot of the bigger, more diversified

institutions, that it's not as if they're just sitting there at the mercy of deposit flight and bond market losses. You know, NASDAQ 100 at one point today was above its 50-day moving average on an intraday basis. Some of those stocks have then turned red. Phil LeBeau, Tesla, though, is still green today, up 1.5%. It's not the only EV stock on the move, But that was up about 7% in a week. What's happening here? Well, when you take a look at the EVs, there's no single catalyst for today. There were a couple of analyst notes that got some attention.

You had Jeffries out questioning the fundamentals of Tesla, even as that stock has moved higher in the last week. And then you've got UBS upgrading Rivian. That was enough, along with the market overall, to move the U.S. EV players up higher. Look at Lucid up almost 9% on the day. Remember, the EV market in terms of sales this year, while Tesla's market share is down under 60%, by the way, under 50% in the month of September, here in the U.S., the overall sales continue to grow, Scott, now up to 7.8% of the market. Quickly take a look at the Chinese EV players. You know the story there. They've been

beaten down to a certain extent out of concern about price cuts in that market. And yet, people, when they get a chance to move higher, move into them, they do. Scott, back to you. Appreciate that, Bill LeBeau. Thank you very much. The other thing, Mike, that's on my mind, small caps. The Russell's up one and a third percent. It's up three percent in a week. I think we're up for five days in a row. Read an article earlier today that suggested these things are screaming recession and they're going to be a great place to be on the other side of whatever slowdown happens and to what magnitude it does. And maybe some people are trying to get ahead of it now. Right. I do think that kind of thinking requires that you're prepared to go through that downturn whenever it does come. Unless we've already had

it and they priced it in. For recession. And on the other side of it, they're going to be able to build off these levels. In the moment, usually you're still going to take on some water because you don't know how bad the recession might get. But all that being said, I agree that that's been the case, that the idea of the S&P being up, you know, at one point this year, 25 percent year to date, was not about people saying there's no recession risk because the rest of the market was suggesting that there is. And I was looking today and we talked about the banks, the consumer finance stuff, ally financial bumping along these really depressed levels. Capital One, that's where I look to to say, how afraid is the market of a potential downturn? And it's pretty significant. I agree on the small caps front, but I also think you have a general squeeze happening. So you had all the stuff that was most aggressively sold and discarded and unloved is getting the best in the way of the rebound rally.

It always, always happens that way. You have a little bit of fuel there because Goldman Sachs, remember last week, was saying it had been very, very heavy, new shorting activity by hedge funds. So basically they were deciding to take all their market risk on fresh, short ideas. And then you have the trend-following hedge funds, the CTAs, got radically short. And they were a source of a lot of the selling pressure over the prior two weeks. So this is the way it goes. You get whipsawed when the market turns a little bit. We don't really know exactly how long a lead time we have with that activity burning off.

But that's the moment we're in right now. 465 is the yield on the 10-year. So I'm sure as you wake up tomorrow, that's going to be one of the first things you look at when you're trying to gauge where the market's going. And oil, too, OK? Oil down today in the red. And that's going to be a key thing to keep an eye on as well, just given what's happening over in the Middle East. 488 was the high on the 10-year yield last week.

So down 23 basis points. It's pretty significant, but also shows it's a level of volatility and fixed income that usually keeps you uncomfortable for a while. All right, so it's going to be a green finish here for everything. We said that Russell is going to be the outperformer. It's always

obvious today in some respects. Oil down, yields down, stocks up. I'll see you tomorrow. Into OC with Morgan and John.