Closing Bell - Closing Bell: Seasonal Weakness & New Apple Watch 9/9/24

Episode Date: September 9, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

Welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner. This make or break hour begins with a tension release rally to start the week as the broad index has tried for their first positive session so far this month. Dip buyers emerge in the battered semiconductor sector. That's helping the S&P 500 to nearly a 1% gain. You see the VanEck semiconductor ETF up about 1.5% and NVIDIA bouncing by 2.5%. This while bond yields hold steady for the most part after the big drop on economic slowdown fears last week. You see the two-year holding around 370. The S&P 500 lifting modestly from oversold levels, as we said, 54.50,

actually where we ended the second quarter, so picking up a little bit less than 1% of the 4.2% loss last week. Volatility index has tumbled more than two points on the day. Clearly, traders clenched up for something a little bit worse coming into this week and able to relax just slightly. That all leads us to our talk of the day. Did the brutal start to September price in a bit too much near-term economic weakness? Or is this today a head fake relief bounce with the burden of proof still falling on the soft landing believers? We are going to debate all that. But first,

we turn to Apple, which just unveiled its latest generation of devices built for AI. Let's bring in Adam Parker of Trivariant Research, Alex Kantrowitz of Big Technology, Bryn Talkington of Requisite Capital Management, and our technology correspondent, Steve Kovach, who is on site. And Steve, let's start with you that you went in there with your kind of checklist of what we might get in terms of detail. We now know what Apple has unveiled. Were there any surprises? Was there anything you felt maybe you expected to hear that you didn't? That front mic. And this is something that Apple is calling visual intelligence.

This is going to be a unique feature on the iPhone 16 lineup that was just announced. And going into today, that was something I was looking for. Is there going to be a sort of unique AI feature that you're only going to get on the iPhone 16 and not the older devices? Visual intelligence, according to Apple, it's this thing where you can whip out your camera, take a picture of something in the real world, and it'll give you information about it. The example Apple did, for example, was you take a picture of a restaurant,

they'll show you the menu, let you take a reservation, things of that nature. This is nothing new, though. We've seen similar technologies from Meta, which is embedding it in those Ray-Ban glasses. We've also seen Google do something similar and OpenAI. So nothing new, but again, new for Apple putting it in there. And then the other thing I would note is this.

Still a lot of questions remain after today, Mike, about the rollout of Apple intelligence and when we're going to see certain features and when. We do know after today that, you know, after recapping some of the same features that they did three months ago when we were out here back in June, they still don't have a very strict timeline for when everything is going to be available. They said it's going to be rolling out over months. But they did announce some new languages that are coming next year, including Chinese. That is, of course, a very important one. Apple launching Apple intelligence over there in China where customers tend to gravitate towards these more late,

the latest and greatest features, maybe even more than the US. And of course, China is where up to a fifth of Apple sales happen, and they've been just struggling in that country recently. So they still have some regulatory things to work out there, but very interesting that the idea that Apple had for some kind of unique iPhone 16 AI feature was this visual intelligence thing. Whether or not that drives upgrades, we'll find out. But that's the idea

they're presenting today, Mike. Yeah, obviously a big question in terms of what it means in terms of whether it moves the needle, Alex, on this upgrade cycle. You do have people out there saying this might finally be a catalyst to have a lot of that older install base upgrade. What do you think in terms of what you heard today, just at least having these devices ready for what's coming in AI? Yeah, I think all the people running out and saying that Apple intelligence is going to spark a super cycle are wrong. I think we can confirm that today today some of these products that they're talking about for instance visual intelligence we've seen before like Steve mentioned with meta Google lens this is a Google lens rehash we also know that a lot of the Apple intelligence features

we're not going to see until 2025 and the ones that are going to ship with the new phones they're not that impressive I have the new uh iOS 18.1 2 on my phone, so I've seen these like notification summaries and they're not a needle mover for me. So to me, after watching today's event, I think this is really just going to be evolutionary for Apple, a typical upgrade cycle, which it really needed something bigger because we've seen sales stagnation, weakness in China, and a slowing consumer. And this is not going to really end up reversing some of those forces the way that Apple and some of its fans might have hoped. You know, Bryn, I mean, I know you own the stock. It's down one and a quarter percent. I mean,

that's not that atypical of a release date type reaction for the stock when we pretty much had some expectations baked in. But one thing that does occur to me is if you had existing iPhone users who had just a general reluctance to re-up to the new model because who knows what's coming down the road, it would seem as if this is at least one fewer impediment to getting somebody to refresh, considering that it's going to be equipped for whatever AI offerings are out there. Sure. And also, we don't really know. I think it'll be pretty extensive how much rebates or behind the scenes that AT&T and Verizon, the other U.S. carriers do to get people

to buy the iPhone 16. But I think Alex hit it spot on. I mean, I listened to the call. I own Apple. I mean, if you own the Q's, I own the Q's, JPQ, I own Apple outright. But I do think that, and I've been saying this, I feel over the next year, this is going to be incremental, not exponential. When we have these super cycles, you had people camping out at the iPhone store. It's just, it's, you have 1.5, 6 billion people by the end of this year will have an iPhone. I think when I distill it down today, what I hear is Apple focuses on security, health, memories via the phones, and then convenience and efficiency. And I think that this AI will

put that all on hyperdrive, which is great, but I don't think it's going to all of a sudden, you're going to get a step function up in iPhone sales. That being said, I think that the durability of earnings, the sustainability of earnings, even the revenues are low single digits. I don't think the stock is going to be a big outperformer or underperformer. I just think this is a nice move in Apple's journey to still have pole position on everybody wanting to have this device in there. Yeah. And Adam, I mean, I think that does get to the investment case, however you might size it up for Apple. It does trade as this very defensive kind of nation state, you know, in terms of its

financial capabilities. It doesn't necessarily need the growth. But then again, it's not also a boom bust story,bust story anymore. So how would you think about it? Maybe you don't want a big product cycle, right? You want something more evolutionary. I like that phrase by Bryn. Look, my view, because mostly I focus with institutional investors, is it's really hard to have a weight in Apple a lot different than the S&P weight.

Why? Do you really know something about the stock that nobody else knows? That's hard. It's covered by thousands of people on the buy side and 60 plus sell side analysts. It doesn't really mean, today's one of the rare days where it's acting differently than the tape, right? It's down a little when large cap growth is up, but usually it trades like the market, right? That's what kind of Bryn's point is. And I think the third thing is like, you know, it's really hard to replicate Apple with a basket of other securities and say, oh, I don't even own Apple.

I'll own 30 things and trade just like it at 3.3% position. It doesn't work that way. So I think you kind of have to be market weight and then make, you know, kind of make your bets elsewhere. At least that's how I frame it. I would argue a lot of portfolio managers find it somewhat easy to be underweight Apple, right, because it's a 6 plus percent S&P 500. They are underweight either because they have 525 rules, like literally from the Securities Act or because they have their own risk management rules, 3% max. So a lot of people are underweight. And that's why you heard most people come on the channel and complain about, when are we going to get breadth? Do I need breadth? Because really what they're saying is I'm underweight. And particularly a lot of hedge

funds. So I like holding a market weight position. I think the products, we talked about, I'm underweight. Sure. And, you know, particularly a lot of hedge funds. So I like holding a market weight position. I think the products, you know, we talked about, I'm not going to buy a $400 watch when I have the phone. But, you know, I don't think that matters. I think if it's elongated, lower cycle, they buy back a ton of stock. It's kind of defensive. I think it's an S&P performer.

Steve, I know you are hitting on the fact that the pricing, I guess there was a small question around how the phones would be priced. They're pretty much the same as the last generation. And that Apple is making a bit of a value proposition here and saying that you get a lot more for your money. Although I think arguably, you know, maintaining price when it comes to consumer electronics is, you know, de facto raising price, right? I mean, normally these things get cheaper over time. So who knows how you want to spend that, I guess.

Yeah, there's another way to do that. And they're also just talking about value in this presentation, Mike, more than they I've seen them in the past. We all know Apple products are expensive, but really talking up the trade in values that you can get. I think for the pro, they mentioned if you trade in last year's phone, you can get up to a thousand bucks back towards uh your new iphone we're of course waiting like uh they we just mentioned here uh for what the carriers are going to offer i'm sure my inbox is full of all the carrier offers by now and and then also just talking about the the length and duration these phones last it used to be a couple software updates and your phone starts to slow down or doesn't work as well as it used to and you need a new one really making a point today apple did about how the software updates last many years and you can hang on to even if you're spending a thousand bucks or more on one of these devices it can last you many many years and then on top of that the cherry on top is the

artificial intelligence stuff which as we've been saying still not really clear how compelling that's going to be to get people to run out and buy, especially with the slow and measured rollout that's going to extend well into 2025, Mike. Sure. And Alex, so you mentioned you're kind of skeptical. You think that this is really an accelerant to an iPhone upgrade cycle. On the other hand, you have people out there making the case that longer term, the economics of consumer AI is perhaps going to be, you know, concentrated in the smartphone. In other words, it's not going to be left behind.

It's not going to be just all about, you know, other devices or other ways of engaging with AI. Are you persuaded by that? And do you think Apple has enough to try and participate in that? I think longer term, that's true. But the question is, how long in the future are you going to go? We know it's not going to be a year, right? Can it be three, four, five, six, ten years? Because right now we're all expecting AI to get that much better.

Everyone in Silicon Valley is talking about the next 12 months as this crucial moment for artificial intelligence. Well, guess what? Up until this point, consumer AI hasn't been adopted in the numbers that we've expected since the release of ChatGPT almost two years ago. So this is going to really take a revolution in consumer behavior. It can be pushed by the filmmakers, but they're going to have to be good at it. And for Apple to do it, it's basically it's going to have to bet the house on an improvement to Siri. And, you know, is that going to come within the next year or two years? Well, I don't know if we have any evidence that they're going to be able to do it given that their the past with siri has not

been great yes we have new technology yes they can apply it but they don't have the track record on this technology in particular that leads me to have faith in their ability to execute on this at least in the next you know one or two years yeah well we'll have to see look uh in the meantime i guess we have you know a better camera and a new phone camera button or something on the side of the phone. We'll see what ends up getting played with most out of this. Alex and Steve, thanks very much. Adam and Bryn, you're going to stay with us. And let's also bring in Kevin Gordon of Charles Schwab. Talk about the broader market. And Kevin, just start with your observation about how we've started this week. We really had, I guess, a pretty concentrated debate last week.

Are we slowing too much? Do we have this growth scare with us? And for some reason, we're moving on from that today. Yeah, I think so. I mean, I think the more important story that's being told is this shift in leadership that's occurred over the past month. I mean, evidenced by, you know, it's not affecting the broader tech sector today, but, you know, you look at a name like Apple. But over the past month, some of the price action, cap weighted, equal weighted, down the cap spectrum, even into small caps, it's been moving out of tech. It's been moving into other parts of the market. Broadly, I think that's a relatively healthy scenario because you've shown that even on a day like today, you can have relatively strong breadth, even as some of the index action up the cap spectrum and at the cap weighted level may not look as strong. So I think that's the better story that's been

told. Because within all of this, even with the implosion of the end carry trade a month ago and everything that's happened after that, long term breadth has basically been unfazed. So as long as you're kind of hanging above that 60 percent range for the percentage of companies that are above their 200 day moving average within the S&P in particular, I think it's a relatively good backdrop. It's no doubt that we have had breadth improve on a rolling basis. Today, it's a stronger day, although it's also defensive in tone to some degree. So in other words, what is the message about the economy in there? Yeah, I mean, it is defensive in nature, but I think if you zoom out a little bit and take a bigger look back to, in particular, when the bull market started October of 22, if you compare the moves in utilities or staples or even healthcare to some

extent, it's really more of a catch-up. It's not as much of this as this big leadership shift and the baton just going all the way to the defensives. Utilities and staples in particular, those sectors were down in the first year of this bull market, which does not happen. Even for defensive areas, it tends to, you know, the tide tends to live to every sector. It's not that you're going to get out performance. So in other words, it's a bit of a pendulum swing as opposed to, you know, anything that's a panic about a recession, perhaps. You know, Adam, we're going to get CPI this week, but it feels like the inflation debate maybe has cooled off to a fair degree. Naturally, we're going to continue to argue about what the Fed specifically is going to do next week. But you'll also get a lot of investment conferences

this week. So I wonder if we're going to finally get a little bit more of a refocusing on individual company metrics, sector stuff, earnings trends. I mean, what are you waiting for clarity on? I mean, last week, there's a couple of tech and health care conferences, there's industrials and some other this week. I didn't see the negative skew. I didn't see any prenegs yet. Maybe it's a little too early with three, four weeks of actual and the companies don't want to, you know, are hoping for a second half September, you know, stabilization. But I think the skews toward the negative and what the fundamentals are going to be. You're seeing some signs pricing power isn't as good across most corporates. You know, so look, I think things are slowing. I don't think you can debate that. The

U.S. consumer is slowing. Pricing power is harder for companies. I think the market's right about in the middle of the range. That makes sense to me. You know, plus 10 minus 10 seem about equally probable to me right now. So I'm not making a big market call. I don't think the breadth thing is is a big argument to me unless unless you're bullish. If you're very bullish, I think earnings go up and margins go up for other companies. Right now, the big companies are growing their earnings faster, right? Well, that transition is supposed to be underway. And it only will be underway if the economy accelerates.

So the way I think about it right now is let's say we can dream that we get some stimulus. The economy is this soft landing everyone wants. It bottoms sometime in the middle of next year, accelerates second half of next year. It seems a little early to bet on that a year in advance. I think, let's say it's a year from now. If the investors are three to six months anticipatory, then maybe February, March will be the geniuses who get it right because we're getting in front of it. I think it's just a little early as the economy is just starting to disappoint, really, the last two months to pay for a chunk of the recovery already. So I'm a little bit more 50-50.

What I worry about is that's just the consensus view that everyone worries September's volatile. And that feels, it always feels, you know, ugly to be a consensus bear. That's the ugliest quadrant to be in. And Brent, I guess to that point, I mean, the market has actually cooperated exactly with the playbook to some degree in terms of front-loading some weakness in September. Obviously, arguably starting in mid-summer, valuations got a little aggressive. People thought pretty much everything was going to line up right for this growth here. But how would you be, I guess, trying to navigate this period from here on out and whether you think investors are

going to be willing to just top up their risk budgets a little bit here? I mean, you have the elections, feels like a coin toss, I guess, to a lot of folks. And you have the sort of soft landing, no soft landing. Will the Fed do the right thing at the right time kind of questions? It's hard to know if they're going to get resolved just because we move out of September. So I think this weakness going into September 18th, when we assume Chairman Powell will cut rates, is actually a good setup that we've had this weakness. I do think for investors, when you think about positioning over the next couple of months, I think what's interesting is where, you know, people keep or certain people keep talking

about the small cap trade, which I'm still have been against that trade. And I think if you want to play the broadening, you know, equoid S&P, which is RRSP, to me is continually the way to go from a broad market exposure. And I think, Mike, what's interesting, if you look at, you know, RRSP is up close to 10% year-to-date, where the Russell 2000 is back to only plus 5. And so I think when you look at, is this market going to price in a soft landing, or will the traders or the algos price in a soft landing? I still think people like, I'll take more risk, but I still see potential weakness. And I think you're seeing that play through with like even the Russell 2000 is underperforming by about 50 basis points today, the S&P equal way. Yeah. Kevin, you really haven't been penalized for just saying I'll go with quality, reliability, dividend growth, any of those things.

It felt as if maybe for a while you were kind of a wallflower and everyone else was having fun. But point to point this year, that's been OK. Can that last? I think so. I mean, especially if you stay in an environment where, you know, yes, the Fed's poised to cut. But if they're are they going to cut aggressively and cut to zero? Probably not, barring some major crisis. So if you stay in an environment where rates are still elevated relative to where we were pre-pandemic, even pre-financial crisis, and you go back to something of a normal environment, because I think in many ways this cycle's sort of been flipped on its head, where in prior instances it was sort of the Fed was ready to go aggressively because they were responding to a financial crisis. This time, it seems they're a little bit more hesitant, barring some financial crisis. So if that is the case, then yeah, the quality play makes sense.

It has made sense. And if you use that as a factor and screen for it across sectors, it's worked pretty well. And it's actually delivered you pretty consistent outperformance over the past couple of years. So that's why we've been a lot more focused on factors like strong cash on the balance sheet, high interest coverage ratios, rather than feeling like you need to pick and choose sectors because there's been so many volatile sector leadership shifts. And we think that'll still be the case. Yeah, every sector seems to have one exceptional name that just sort of obliterates the rest. You can't gather assets by telling potential LPs that you buy garbage companies. Well, you know what know what I mean? So it has to be.

I think the question is when you come down the quality stack, it's when you think we're close to a bottom and the companies that are discounting some probability of bankruptcy or some impairment, you feel like they're going to recover. That's when value stocks work. That's when small cap works. That's when low quality works. It feels early. I agree.

It feels early to want to bet more than half the portfolio on that sort of transition. So, yeah, it always makes sense to buy low forecasted revenue growth, low beta, high quality growth stocks and stick to those themes. You know they're going to work. We know what's going to work. It's AI semis. It's AI software. It's life sciences. Those themes are there.

They didn't change because there was two weeks of debate about the return on the capital investment for the big cap. The semis aren't acting like they know it's going to work. I mean, they're down pretty big off the highs. Yeah, but NVIDIA is up 10x since last January. So I think when you look back at the history of all stocks that go up 10x, we just did this, the best one only had it down 25. The average has it down 50. There's no like, you know, top left to bottom right forever. So the question is, is it going to be more compute GDP plus a lot, three, five years? Well, of course there is. Yeah. Of course there is. So, yeah, I mean, I just think that right now we're in a pocket of the economy slowing.

The numbers are too high. And the Fed can't cut eight times without a growth scare. Yeah. So you've got to be more, you know, kind of picking winners from losers. Yeah. Yeah. Makes sense. Thanks. Yeah, good to be here. Adam, Kevin, kind of picking winners from losers. Yeah. Makes sense. Thanks.

Yeah, good to be here. Adam, Kevin, Brent, appreciate your time today. See you, Brent. All right, let's send it over to Kate Rooney for a look at the biggest names moving into the close. Hi, Kate. Hey there, Mike. So take a look at shares of Dell and Palantir, both of those stocks climbing today, with Palantir shares hitting their highest level in more than three years.

That's on the heels of news and an announcement late on Friday that both stocks are going to be joining the S&P. Later this month, Palantir will unseat American Airlines for a spot in that index, while Dell is replacing Etsy. And shares of Summit Therapeutics today soaring as much as 65%. That's a new all-time high for this stock after the biotech company announced its lung cancer drug candidate outperformed Merck's Keytruda. That was in a phase three clinical trial. That same news sending Merck shares in the other direction.

They're down about 2 percent or so, a little more than 2 percent. Mike, back over to you. OK, thank you. We are just getting started. Up next, a top technician reveals the three key market indicators he's watching right now. And later, Goldman Sachs' Elizabeth Burton is breaking out her volatility playbook. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC.

Stocks rallying into the close as the major averages try to recover from their worst week of the year. My next guest says while investors should expect to see some more upcoming seasonal weakness, the setup looks bullish for stocks into year end. Let's bring in B of A Securities' Stephen Sutmeier. Stephen, great to have you on here. So I guess the question is, how would you know when the market is maybe tripping into something a little more worrisome than just, I guess, some typical seasonal churn at this point? Right. I mean, I mean, that's the whole trick right here is determining whether it's just seasonal or if it's structural. And I would argue it's more seasonal.

First and foremost, I mean, everybody knows September is weak. But what a lot of people don't know is that that weakness can carry over into October and election years. So you tend to get a pre-election pause in the market followed by a post-election year and rally. Another reason why we think it could very well be just a seasonal pullback is, if you look at market breadth, and I know we were talking about breadth with your last guest, the S&P 500 advanced decline line, NYC advanced decline line, even the NASDAQ 100 advanced decline line have gone on to new highs. And what's interesting about that is new highs for the advanced decline line

are a leading indicator for new highs on the indices, meaning that the S&P sometime in the future should surpass the high that it hit in July around 5670. So those are a couple of things that we're looking at here. So we think it's more seasonal rather than structural. So we do think that seasonality offers an opportunity to buy into the market ahead of a year-end rally in our technical view. And there has, along with whatever's happening seasonally and along with maybe some moderated growth expectations that are filtering into the equity and fixed income markets, there has been this struggle to figure out what might lead the way. You've had this momentum sector of the market really has come in pretty hard. Maybe, yes, most stocks are up, but what are the themes that seem to be poised to lead at this point out?

Yes, so I think we're seeing rotation, as a lot of people have been talking about. And as a technical analyst, we view that as the lifeblood of a bull market. So you're getting sectors that are less extended starting to perform. Sure, there's a bit of a defensive bias with a little bit of a catch-up trade for the likes of utilities, staples, real estate, and healthcare. But where I think the real shift in leadership

is standing out is more with the financial sector. You are seeing a lot of financials, including banks, insurance companies, capital markets companies, even some regional banks, breaking out of what technical analysts would call bottoming patterns and even big bases. So I think what has been to the detriment of the growth stocks in tech over the last couple of months has benefited names and financials, which appear to be a, you know, could be very well a buy of a leadership group into the future. Another sector to keep an eye on would be industrials. I would

argue that's a little bit behind what we're seeing in financials, but industrials, a lot of them have firmed up as well. Is there a way, I mean, aside from essentially saying, you know, the uptrend remains in place, you should give the benefit of the doubt to maybe longer term advancing prices and breadth is good. Is there a way to try to handicap how much more upside we might have here? We're approaching, I guess, the second anniversary of the cyclical bull market, I guess. Right. Yeah. I mean, the interesting thing about these cyclical bull markets is if you take a big rallies off of big lows, which we argue that October 2022 was such a low, they tend to last about four years, and the market tends to rally on a median basis

just over 100%. So, you know, a little more, a little bit more than halfway there. But near term, right here, right now, I think if the S&P can hold somewhere within this 5400s to 5300 range, and, you know, just have a normal retracement somewhere within this 5400s to 5300 range. And, you know, just to have a normal retracement of the rally that we got from October 5th into October,

I'm sorry, August 5th into August 30th, we could break through the range highs. And then you would form a pattern like a cup and handle or something like that that would argue that you can make a move towards that 6,000 area in the market, which is, which is, you know, not just that technical pattern. We have other sorts of models that we run in recent weeks and months that suggest that the S&P should be heading towards that level. Could be the end of the year if this pullback is shallow and we just rip to the upside, or could be the middle of next year, which is where the presidential cycle

gets a lot less constructive on the market meaning that you might see um that that mid-term type in mid-term your type of interruption so um so that's that's all the things we're paying attention to here all right yeah that's uh i guess it comes to roughly 10 upside towards 6 000 uh if we uh if we get there steve all right thanks very much stephen setuttmeyer. Thank you. Up next, Goldman Sachs' Elizabeth Burton is revealing how she's advising her clients amid the recent market volatility. Closing bell. Be right back. Welcome back. Stocks trying to rebound after posting their worst week in more than a year. But with the recent spike in volatility and economic concerns, how should investors be positioning their portfolios into the final months of the year?

Joining me here at Post 9 is Elizabeth Burton of Goldman Sachs. Elizabeth, great to have you here. Thanks for having me. So the S&P 500, it's only 3.5% off a record high. Seems like that's no big deal. We're up nicely for the year. On the other hand, some of the big winners of the first half have had a hard time and it's been tough to figure out if the market's fragile based on the economic outlook. So I guess what are the conversations you're having right now with a lot of your clients with those things in mind? Well, first of all, the conversation has shifted a little bit. So back in May and June, a lot of clients were still asking about inflation and what the outlook was like. The past two weeks of travel for me, no one's really asking about inflation. They're asking about U.S. growth

risk. So as you know, I mostly serve our U.S. institutional client base. And even though they've got diversified portfolios, at the end of the day, 80, 90 percent of the risk is still tied to U.S. growth risk. So they're asking about what do I deal with that? How and when should I add back duration? Some of them have cash balances. What should I be doing with that? How and when should I add back duration? Some of them have cash balances. What should I be doing with that? And what are you telling them on those scores? Yeah, fair enough. So on the equity side, you know, some of the similar things have been repeating throughout the year. We're still constructive on small caps. We think

now you might want to look at low vol and defensive strategies to kind of tamp down some of the risk in your portfolio and look abroad as usual one thing we're liking right now is UK equities footsie 250 over MSCI world for instance so trying to diversify from that perspective also long short exposures and you know extension strategies maybe lowering tracking error on the flip side on the duration side of the equation I think that's really hard for me as a former allocator in this environment to sort of thinking about lugging back into duration. But we still have clients that are rebuilding their fixed income positions. Just because you've had such a run in terms of longer term bonds.

So, and adding it back in. I think, well, look, the position of Goldman Sachs is that the inflation story is looking better. Rates are going to come down. But having been an allocator, I'd still be concerned that inflation might stay sticky and there's risk to the upside. And tenure might have risk to the upside, thinking as an allocator. In yield, yeah. In yield, right.

So those are some things that I would have concern about. And also, a lot of these institutions have to rebuild their fixed income. They actually took it down, let's say, from 20% of their portfolio to 5% of their portfolio when rates were near zero because you're not earning anything. And now they're saying, OK, I've got to get back in. But how and where do I get back in? The idea of equity long short strategies being somewhat attractive here, I guess, what role are they supposed to play in a portfolio? And is that a call on you think stock selection is going to all of a sudden be rewarded in a bigger way now? Yes. So you'll always find me saying I think stock selection is important and active management is important.

For one thing, for institutions, adding long short equity might be easier than literally looking for deviations from your benchmark. Right. So if your benchmark is MSCI World, it might be hard to add a telecom manager, but it might be easier to add long short in that context exposure to get rid of some of that beta risk that you have in your portfolio. So I think that's one facet of it. What's the current thinking on private credit as we, I guess the whole boom is getting somewhat tested by a period when at least we're worried about slower growth. We're worried about the possibility of default risk going up. Private credit is still a hot topic for investors. I think we're shifting a little bit from private credit 1.0 to private credit 2.0. We're looking more at specialty

finance and more niche sectors of the private trade. But look, we're still super constructive on private credit as a whole. There's a lot more room to run there. I think you'll see who's wearing the bathing suits when the tide goes out on this one because we really didn't see much of a blip in the last cycle. But things still look pretty good. It's still an attractive way to lock in yields. Yeah, I mean, obviously, overall, credit markets have been hanging in very well. It's not as if people are really getting super nervous. How are you thinking about just expected returns at this point? I mean, it's been commonplace to say, well, valuations are elevated and equities and yields aren't that high.

You know, the math seemed to say low returns is what you should expect, but we haven't really gotten them. That's fair. I was talking to an allocator the other day whose target is 7%. And while to some that may sound low, that's actually very hard to achieve. Well, sure, for an aggregate portfolio. For an aggregate portfolio. But the good news is that actually the outlook for a 60-40 type portfolio, which not a lot of folks have, but let's say that's our base case, those actually look less risky and in a better place than they have been before. We actually did some work at Goldman Sachs, not my group, but another group,

and showed that sort of the ideal portfolio you might want going forward is a third equities, third bonds, and a third real assets. But then take those real assets and put about 20% into real estate equities, infrastructure equities, commodity equities, and then the rest into TITs. That's sort of the ideal, but that also still gets you back to 60-40. So look, we're in a pretty decent environment, but we do think we are a late cycle, which in general would mean overweight equities, underweight credit, sort of construction on a constructive on parts of the commodities complex, but not a lot of investors on the institutional side have any commodities exposure. Sure. Interesting way to kind of synthesize it,

I guess, in that part of the real asset portfolio. Elizabeth, great to see you. Thank you. Thanks for having me. All right. Up next, we are tracking the biggest movers as we head into the close. Kate Rooney is back with those. Hey, Mike. So a couple of things flying higher today. That's the key word. One, it's an airline stock. The other has to do with marijuana. We're going to bring you all the details coming up next. 17 minutes till the closing bell. The S&P 500 up about 1.1%.

Let's get back to Kate for a look at the key stocks to watch. Hey again, Mike. So JetBlue, take a look at that stock. Popping as much as 8% today after Bank of America upgraded the airline to neutral. That was from sell. The bank also doubled its price target to six bucks. They talk about improving conditions, for example, falling fuel prices. And just last week, JetBlue hiked its third quarter revenue estimates. And then you got cannabis stocks higher today after former President Donald Trump posted on social media that he supports legalizing adult marijuana use in Florida.

That's part of a Biden administration ballot referendum that would also lower the federal classification of cannabis to a less restrictive level. Shares of Tilray, for example, climbing about 6 percent. And then cannabis related ETFs also higher today. Mike. All right, Kate, thank you. Still ahead, Boeing shares popping thanks to a critical union deal. We'll break down the details and what it could mean for the stock in the months ahead. That's coming up a critical union deal. We'll break down the details and what it could mean for the stock in the months ahead. That's coming up. Closing Bell will be right back. We're keeping an eye on the shares of Rubrik, the cloud company set to report

earnings at the top of the hour. The shares ahead by 4.7 percent ahead of that. Don't miss the CEO of that company exclusively on Closing Bell Overtime today. That's at 4 p.m. Eastern right here on CNBC. And up next, Oracle's quarterly report also on the docket in overtime. We'll tell you what to watch from those numbers when we take you inside the Market Zone. We are now in the Closing Bell Market Zone. Boeing shares giving the Dow a big boost. Phil LeBeau has the details. Plus, AMD CEO Lisa Su taking the stage

at Goldman Sachs Commutacopia this afternoon. Sima Modi brings us those headlines. And Deirdre Bosa looks ahead to Oracle reporting in overtime today. So, Phil, map out the story here behind Boeing and this union deal. Well, they're partially towards getting a contract locked in with the machinist union, all 33,000 members. I say partially because it has been tentatively agreed to by the union leadership, along with the leadership of Boeing. Now the question is the vote, which will happen on Thursday. Here's what the contract comes down to. 25% wage increase over the next four years, 33% if you add in the wage progression of various jobs within the union, cost of living adjustments are there. And a commitment by Boeing to build its next airplane, which is likely going to come somewhere in the early 2030s, to build it in Seattle.

That's important for the machinists. And again, the union leadership is recommending approval. But we'll see what the rank and file have to say, Mike. The vote is on Thursday, about 33,000 members. And while the leadership says this is a good deal, we think you should take it. Keep in mind, there are a lot of rank and file members who are still smarting from the way that their contract negotiations have gone in the past. And they believe that they probably should get more than 25 percent. Not all of them, but there are certainly going to be some who feel that way.

You know, Phil, an investor in Boeing, and I'm sure that if they made a list of the things that they thought they had to be concerned about, you know, in terms of the production and safety issues and CEO opening and all the rest of the space business, I'm not sure labor, you know, a lack of labor piece was high on the list. But so how important is this in terms of what it says for Boeing's cost level and also just its ability to kind of produce from here? I think for new CEO Kelly Ortberg, this is important because if he can get this locked up without any type of a labor stoppage, that's important. They've got so many things that need to be fixed at this company. The last thing they need to do is have further delays.

So if they don't have any delays because there's not a strike, it's one important hurdle that he clears. There you go. Stock up three and a half percent, as we know to fill. Thank you. Meanwhile, we have a news alert on Norfolk Southern. The Wall Street Journal reporting Norfolk Southern CEO Alan Shaw is expected to exit the company as soon as this week. That's amid a board investigation into an undisclosed relationship Shaw allegedly had with an employee. We'll bring you more details as we have them. Right now, the stock actually higher by about 2.7 percent on the day. Seema, Lisa Su speaking to, I'm sure, an eager audience. What did she have to say? She is on stage right now, Mike, and here are the headlines. AMD CEO says

that artificial intelligence remains a huge opportunity for AMD. The data center component, she says, is very important. It's the majority of their sales. But the goal is to provide end-to-end solutions. So really touting that recent acquisition of ZT Systems that gives AMD more access to AI servers. Sue also saying that while training language models is getting a lot of attention, so is inference over the next couple of years. Sue originally talked about AI being a $400 billion total addressable market in 2027.

And she says she's sticking with that estimate, Mike. She's adding that the industry is still in the early innings. Workloads will require more compute and get more complex. And therefore, that will increase demand not only for GPUs but custom silicon. So in other words, it sort of gets to that question about whether hyperscale or demand has changed. She says it hasn't. We're looking at shares of AMD higher right now. Mike? I guess we also have heard total addressable market estimates upward of a trillion. Who knows what people are necessarily including or not including in those various estimates.

Seema, where does it stand right now, though, in terms of the way the street views AMD as really being leveraged or not quite as leveraged to the AI boom as, let's say, NVIDIA and other competitors? Well, AMD is certainly making strides, Mike, and being that distant second rival to NVIDIA, making a number of acquisitions, not just ZTE systems earlier this summer, to really allow it to be

one of the dominant players in AI servers. And again, she's really making that point that they don't want to just provide graphic processing units. They want to provide the end-to-end systems for their clients, which is really something that NVIDIA is doing right now. So yes, well behind NVIDIA, but they're really trying to play catch up here. Certainly. Stock up 2.6 percent. Everybody wants to do the value-added solutions, I guess. Seema, thank you very much. Dee, Oracle about to report. Stocks really had a great run the last couple of years. What should we expect? A really great run. Now, Oracle is not the first name you think of when you think about generative AI, but it certainly is AI adjacent. As you said, Mike, it has certainly benefited from that position.

I found this chart to be really interesting. It's Oracle versus Microsoft since the open AI chat GPT movement began back in November of 2022. Oracle has actually outperformed Microsoft since then. So it's kind of been this sneaky play that has just gone up and up since that moment. It is therefore a key indicator

in this ROI, return on investment versus CapEx conversation around AI play. So its cycle and comments around CapEx, which is increasing, that's going to tell us something about AI spend and GPU demand. In focus will be the growth rate of Oracle's cloud infrastructure business, or OCI as it is known. It's a crucial part of Oracle's shift to enterprise cloud services provider and puts it in competition, though at a much smaller scale with the likes of the hyperscalers like Amazon and Microsoft's Azure. That infrastructure revenue increased from 42% year over year to $2 billion for its May quarter. Before that, sales were at 49%, 52%, 66%. So this is really a unit that has been

growing very, very quickly. Also keep in mind that Oracle Cloud World is taking place this week, so we could get more announcements separate of these. Back to you. Yeah, one of the many conferences we have to keep track of this week. I guess the obvious leverage Oracle has to a lot of these big picture trends you mentioned there, but the other parts of the business, various types of application software, is any of that seen as being potentially in the crosshairs of AI solutions? That's a good question. This whole debate over what is generative AI going to sort of like make obsolete the conversation that we have around Salesforce and Workday as well. You know, Oracle, as this sort of AI-adjacent play,

it's been able to bake it into all of its offerings. So I think that's still undetermined. And I would look to Oracle World happening this week for more evidence that it's going to be useful. Some of these applications that are not in cloud infrastructure, that they're going to be useful in the age of AI. Yeah, certainly market willing to endorse that view. And also the valuation relative

to some other AI plays seems probably pretty reasonable to many around 22 times expected earnings. Dee, thank you very much. All right, as we approach one minute into the close, the S&P 500 on track for about a 1.1% gain. Remember, it'd be the first up day this month. We were down all four days last week and declined a total of 4.2%. The NASDAQ hanging in there have been the underperformer for much of the day. Small caps not really keeping pace, up about one-third of 1%. So it is a little bit of a return to some of those mega caps. Probably want to take a look at Apple into the close after its big event today. It actually has pulled even. It is slightly green after being down by about 1.2 percent or

something like that at the low. So basically holding its own around the 220 mark. Market breadth also very positive. People have been pointing to the fact that the majority of stocks are up, even as the S&P 500 has turned around to the downside. So far this month, you have about two to one upside to downside volume in the S&P 500. And treasuries have held in there. The big rally in treasuries that got yields down to these levels has sort of slowed just a little bit. The two year note yield actually up slightly as we look ahead to that Fed meeting tomorrow. The volatility index is going to go up below 20, down two and three quarters percent on the day after having folks get a very heads up into the weekend.

That's going to do it for Closing Bound.