Closing Bell - Closing Bell: Second Thoughts in the Second Half? 6/26/23

Episode Date: June 26, 2023

Will the second half of the year bring second thoughts about the tech trade? Star Wedbush Analyst Dan Ives gives his expert take. Plus,  Victoria Greene of G Squared Private Wealth drills down on the energy trade. And, Sofi’s Liz Young is breaking down her second half playbook. She explains her forecast for stocks and what the Fed might do next. 

Thanks so much. Welcome to Closing Bell. I'm Scott Wapner. This make or break hour begins with the road ahead for tech. It's magnificent run acting a little tired lately and raising questions now about whether it is about to hit some potholes. Star analyst Dan Ives along in just a moment to tackle that key issue for your money. In the meantime, here's your scorecard with 60 minutes to go in regulation. NASDAQ, our focus today is names like NVIDIA, Tesla, and Meta. Drag that index lower. There you see the losses there. The NASDAQ's eight-week winning streak coming to a close last week. Chevron, Nike, Home Depot helping the Dow saw its three-week run end as well. And Dow is showing modest gains at this moment. It takes us to our talk of the tape. Will the second half bring second thoughts

about the tech trade? It has been the runaway winner of the first six months of 23. Let's ask Dan Ives. He joins us here on set at Post 9. It's good to see you. Great to be here. So you had a note today,

12 to 15% more for tech. That's what you see in the second half? I mean, we believe this is the start of a new bull market for tech. And I think ultimately it's going to be broader. It's not just that, you know, call it seven or eight big tech stocks. We believe fundamentals are not just stabilizing, but actually starting to see for the first time upticks across cloud, across enterprise. And then, of course, you have this AI gold rush, which I view as the fourth industrial revolution. Would you be willing to admit that

the gains we've seen from the beginning of the year to now were multiple expansion? It wasn't based on fundamentals, right? I think the first half is multiple expansion. I think the second half is starting with earnings over the next month is going to be fundamentals. I think this is really where a lot of these companies, they ripped the Band-Aid off, and we're seeing really across the board, especially over the last four to six weeks, a much more dramatically different IT spending environment than we saw going back to February, March, even April.

So when you say ripped the Band-Aid off, you're talking about these companies that were really, I guess, at the forefront of becoming leaner, and in some cases, meaner. And they went through these rounds of layoffs first, and they're emerging on the other side first. Is that what you're alluding to? Yeah, I mean, 6% to 10% cuts, I think in some cases even more. And now you're actually starting to see, you're going to see those margins, I think, creep higher and higher as we go into the second half.

And when you look at software, you look at chips in terms of what's happened with inventory, I could tell you traveling the globe over the last month, what we've seen right now across enterprise is something I think this is going to put more fuel in the rally across the board as we go into this July and 2Q earnings. I mean, even those who are bullish on tech look at the way that multiples have expanded. And it makes them a little queasy. I want to show you where the forward PEs have gone for these stocks. OK, Apple, the stock you love more than any other from 20 to 30 times forward from the beginning of the year until now, okay? Microsoft, from 23 to 33. Alphabet, 17 to 23. NVIDIA, 34 to 56. Amazon, 46 to 89.

Those all make sense to you? In my opinion... I didn't even get to Tesla, by the way, which we're going to do later on in the program. Sure. I think this is a 1995 moment, not a 1999 bubble. I believe this is, in terms of a revolution

that we're seeing similar in terms of the internet. This is something that's really going to transform tech. And I think in terms of those multiples, in terms of what I think what's not really being factored in, this is potentially a trillion dollars of incremental IT spend that basically was not here six months ago. And that's why what you're seeing in Redmond with Nadella, obviously what we've seen with Jensen and NVIDIA, I think that's just the first start now of these second, third, fourth derivative players with this AI gold rush playing out. Can't it be both? I mean, can't it be 95 and still a bubble in this stage? It doesn't have to be the be-all end-all bubble like we saw in 2000. But what if we agree, OK, this is 95, not 99. This is the early to nascent feeling stages of this AI gold rush, as you put it. But these stocks have

run a lot in an environment that's highly uncertain. Why is it justified? Well, in my opinion, because really what you're seeing, first of all, these are fundamental in terms of these companies. They have fortresses in terms of balance sheets. You look in just a much healthier enterprise environment from a balance sheet perspective. And I think really it started off narrow. But this is something that's going to transform tech. I think from a software perspective, from a chip perspective, you look at numbers. I believe the street, as we go into 2024, could potentially be underestimating growth by 10%, 15%, 20%. And I think that's really where the rubber meets the road in terms of as this all starts to play out. And that's why I think the guidance heard around the world, the NVIDIA $4 billion raise. Sure, but not every company on this list is NVIDIA with the kind of guidance that they

gave. Are you expecting similar type guidance from other names on this list? I believe this quarter, for the first time, what you're going to hear from Redmond, what you'll see from Google, I think what we start to see, you're going to now start to see the signs of what ultimately is going to be just a massive expansion of growth that's coming in. That's why I believe multiple expansion was the story the first six months. Second six months is not just talking the talk, it's walking the walk. Yeah, but doesn't a potential recession or even further economic slowdown

hurt potential enterprise spend on some of these things that are enabling these AI-related stocks to soar? NVIDIA's not giving away its chips for free. No doubt, but I do believe what started to happen is it's this different IT spending environment that we've seen the last four to six weeks than really for the first four months of the year. And I think that's all going to start to play through.

And I still think many investors are expecting whether the next shoe to drop, numbers are going to come down. But ultimately, I think in terms of tech, that band-aid was ripped off, numbers are going to come down. But ultimately, I think in terms of tech, that band-aid was ripped off. These numbers start to come up. And I could tell you a lot of my institutional investor conversations, many still on the sidelines. And I believe after this earnings season, it's really going to cause what I view is really a tidal wave of growth coming through. Let me ask you about Apple before we broaden the conversation now. So it hits a new record high today than it pulls back just slightly. Can you make the

argument that of all the names on the list, the Microsoft's, Alphabet's, NVIDIA's, Amazon's, Meta, et cetera, that it has the least obvious AI play to this day? Tim Cook hasn't come out and given us any kind of definitive roadmap on what they're doing, what they see, and how it's going to benefit the bottom line of Apple. Yet the stock's up 43%. I'm not going to sit here and hate on Apple, but I'm saying if we're talking about stocks that have gotten a huge AI lift, how much of that 43% is on AI when yet we don't know what the AI, generally speaking, is going to be? I think 98% of it is actually not AI. I think it's really just investors' better understanding. This iPhone 15 is going to be what I'll call a mini super cycle.

$250 million of $1.2 billion still have not upgraded in four plus years. When it comes to AI, it's my view Cook continues to play chess. Others are playing checkers. This is really the start over the next 12 to 18 months of what eventually is going to be an AI app store. I know. What if the economy plays checkmate, right? I mean, what happens? So they come out with a phone in September, right? A thousand dollar phone. And the economy is tailing off right at that moment. There's no impact whatsoever. Sure. And that's a risk. But I believe right now, in terms of what we're seeing coming out of Asia checks, we're looking at what could be something from a growth

perspective that ultimately is 8%, 10%, 15% above where the street is from a unit. And also in terms of ASP is more and more pro that's going to be just more and more of a lift that's why for me from a valuation perspective i get many competitors getting off you know the train here i think apple i think ultimately in 2025 we're looking at four trillion dollar mark cap and i think this is just the start of the next wave there's no name on this list where even you start to get a little queasy with where valuations have gone. None of the names in your universe at all. As long as I do my checks and when I talk to CIOs and I talk to IT spend,

and now I see AI that could potentially be 8, 10% IT budgets, where it's 1% or less than that today. I believe this is really the start of a new bull market for tech that's going to broaden out. And I think big tech continues to lead what I view as really this AI game of thrones playing out across the board. Well, let's expand the conversation and bring in Lauren Goodwin of New York Life Investment Management. Welcome back. It's nice to see you. And when I look at your notes right up at the top, growth equity AI bubble could get popped if the labor market takes a hit. So you do think what we've witnessed within tech mega cap from the first part of the year is a bubble? I just think that you're both right to point out the push and pull between the game changing technology that is generative AI, and I do

agree with Dan that this is a total game changer, and the cyclical elements that we're facing, especially with respect to the Federal Reserve renewing its hawkish stance, which, of course, we expected over the course of this year. So for investors that are interested in playing this trend from a broader portfolio allocation perspective, there's three things that we're leaning into. First, with the tech names, got to focus on profitability, because we do see valuations as being stretched. You know, Scott, that I, along with many others, find these valuations to be queasy at these levels. But a second thing investors can do is think thematically. Look at the small and medium-cap growth companies that might be able to

leverage the ecosystem that we're likely to see as a result of generative AI. Just think about the shift from 3G to 4G technology and the ecosystem that was created by what we were able to do on the phones in our pockets. We can expect a broad range of winners and losers. And then third, there's all kinds of investment already being made and will continue to be made in the infrastructure that supports this trend. So that's the digital infrastructure, it's cybersecurity, it's all kinds of spend beyond the sort of traditional thought process

around bridge and tunnel infrastructure that is going to be a beneficiary of this trend. And so we're looking all the way around the AI investment bubble, so to speak, to find the areas where we see more staying power. Bubble word used right there twice. Warren does a phenomenal job. In my opinion, I think she lays out the grade from a macro perspective. I just view this 95 internet, iPhone 2007. I believe what we're at today could be bigger potential than either of them, which is why I view on the names that we believe are winners, we continue to ride them because I think we're just the start

of what's gonna be just a transformational trend across tech. What about that, Loren, that we're just not fully appreciating enough this transformative nature of what AI is gonna mean to these stocks, And if Dan is correct and he's nailed this move from the beginning of the year in terms of where tech was going to go, if he's right, then maybe it is the start of a new bull market for tech.

Look, I think it's something that investors are grappling with as we speak. But I think it's obvious that we can't anticipate as investors the sheer gravity and the implications and even the sense of winners and losers that we'll see from a trend like this. I think in the near term, the biggest risk to the idea that we're entering a new bull market in tech is that the Fed, the multiple expansion first half of the year that you both have been talking about is at risk from the Fed's renewed hawkish stance. That said, as recession comes, as economic growth flows, that might actually be a period in which investors are, just like in the last cycle, renewing their investment in these growth assets, expecting that interest rates will come down and that will be a profitable play. Where I'd caution investors is in that expectation that as economic growth flows,

rates are going to come down. We've talked a lot about this, Scott, but even as economic growth flows, unless we're seeing inflation lower, unless we're seeing the labor market really stabilizing at higher rates of unemployment, lower wages, then I don't think rates are coming down. And so in the near term, these plays on technology, which are so uncertain for the long term, are likely going to be tactical. So what about that? What about Fed risk, more hawkish Fed that actually follows through on what the market doesn't seem to believe it will. Sure. It's a game of poker right now going on between market and Fed. And my view is that whether they do hike once or twice or they're done, ultimately in terms of just this tech bull market, I believe right now we are just the start. I know, but you said that, but there's no rate risk to that, despite how optimistic you are for where you think we are in that new cycle?

I just view it as when we look out through this, through another quarter hike, we are at the end. We are at the eighth, ninth inning one way or another in terms of what the feds do, despite the tough talk. And I just think being negative on tech here is the same thing as being negative at Brady in the 2000 draft coming out of Michigan. Well, I mean, you pull a needle out of a haystack not every day, right, as we witnessed with that. So I don't know if that's the best analogy ever. Lauren, do you think that we, as some have suggested today, that earnings are still going to implode, fair value on the S&P is 20% to 30% lower,

as OneNote read today. JP Morgan's talking about a 5% pullback. Goldman Sachs says two of the most powerful tailwinds are now gone in the market. What do you think? Look, as you know, I agree with the relatively concerned narrative on where the market goes from here. And that's in spite of our expectation that the upcoming recession, and I do expect that recession is coming, is going to be mild. Mild recessions are not historically sanguine for the equity market. When we look at just the median historical experience

of recessions in the U.S. since World War II, you have a peak to trough GDP growth or level of decline of 2.5%. The unemployment rate rises by almost 3.5%. And earnings deteriorate by 21% in real terms. Those are significant pain points. And so while, again, I agree that there have been important supports for the economy over the course of this cycle that are likely providing a cushion to the economy and real assets, that's still a meaningful downward expectation for the S&P 500. I think 13% to 17% from where we were before the AI uptick that we've seen in the last couple of weeks

does put us in terms of the potential of a 20% to 30 percent downturn in the S&P 500 being reasonable. Now, the one thing that I would say is that investors often ask, well, did we already see that last year? And as you've already very correctly pointed out, last year was all about multiple compression as interest rates rose. Recession is a totally different animal. And the S&P 500 has historically not foreseen recession. We see the equity markets only writing down recession probabilities as that evidence becomes more obvious that we're already in recession. What we're watching most closely to tell us that we're there is new unemployment claims. Picking up ever so slightly in the last couple of weeks, that for me is the tactical market indicator of where a near-term correction related to recession could lie.

You look like you wanted to respond. I was just going to say, great points, that CIOs that I talked to, they went from cautious to now spending more, especially over the last four to six weeks. I just believe what we're seeing from a macro perspective, we are seeing shifts from IT spend. And I think, ultimately, as it comes into earnings in July, that's where it's proven out.

But you don't think, I mean, is there any impact on further economic slowdown and a spend? You talk as if there's none. Of course there's a risk and no doubt. But what I see is... We're talking about like the degree of risk, Dan. Like we know the economy slowing. This is not like a pie in the sky risk. It's like a legitimate risk.

If the economy slows more dramatically than it is now and it approaches a recession, which some are saying looks almost inevitable. Whatever. We'll find out. It's what's the probability is more, than, you know, three. No doubt. And what I would just say is when I talk to the actual spenders of IT, when I talk to those in the channel, sales people, people that are actually spending, I see something that's a much different type of math. And this is sort of what, I mean, you've talked about from the beginning of the year. That's why, you know, I think many bears came into this year expecting the hard landing and what i'm saying

is i'm not saying it's rosy and rainbows but it's a lot better than i ever would have expected even six weeks ago you and a lot of people no no doubt about that given what we've seen year to date uh certainly in the nasdaq and some of these tech names it's just astounding thank you we'll see you later yeah great all right we'll talk some some Tesla coming up in the market zone. Lauren, thank you. We'll see you soon as well. Lauren Goodwin joining us. Let's get to our Twitter question of the day. We want to know, will tech's run continue for the rest of the year? You can head to at CNBC closing bell on Twitter to vote, share the results a little later on in the hour in which we're just getting started. Up next, drilling down on energy. That sector is going strong today. Our next guest still has some significant concerns, though. There's the S&P energy sector up 2 percent.

She's going to explain how she's trading that uncertainty just after the break. We're live for the New York Stock Exchange. You're watching Closing Bell on CNBC. We are back. Let's get a check on some top stocks to watch as we head into the close. Christina Partsenevelos is here with that. Christina. Well, despite an earnings beat, shares of cruise operator Carnival are down right now. The worst performer on the S&P 500 down over 7 percent. Q3 profit projections were lower than anticipated, and that's because of higher labor and marketing costs. So here's CEO Josh Weinstein, who was on CNBC earlier, on where profit can go from here. Listen in.

It's going to be about 85% in the third quarter, back to 100% in the fourth quarter. So we're making the right moves and it's starting to show up in the results. An iconic British luxury automaker is looking for help from a U.S. EV maker. Shares of Lucid are up about 3%, but still off earlier highs that we saw where the stock soared about 15%. That's after it announced it will supply Aston Martin with powertrain components for future EV models. This will be the first time Lucid acts as a supplier

and could lead to diversification of revenue streams. Expect more from Closing Bell Overtime's interview with Lucid's CEO today, just at 4 p.m. Eastern. Scott. All right. Good stuff. Christina, thanks. We'll see you in just a bit. Energy, one of the top S&P sectors today as traders assess a failed insurrection in Russia. The group's still the worst performer of the year. And our next guest says energy stocks remain vulnerable, though there are some bright spots. Victoria Green of G Squared Private Wealth joins us right here at Post 9.

It's good to see you. Thanks, Scott. So we're up 2% as a sector today, but down 10% on the year. What's your outlook? I think energy is going to remain under pressure. We haven't been able to see oil prices break out of this range. They've been trading in all year. We've been bouncing around between 70 and 80, one breakup, couple breakdowns. But there really haven't been this catalyst.

And while energy companies have been extremely shareholder friendly, and they're not wildcatting anymore, there isn't this drill, baby drill mentality. It's cash, baby cash back to their investors. But still, it's a tough sector because you're you're up against speculations. You're up against oil price. You're still concerned on that recession. And then China's been moving so much slower. So you're seeing these energy stocks just really struggle to get momentum of how they're going to grow profits if oil prices remain anchored. Is there a part of the space that you do like, even in the face of everything that you just said, which is decidedly negative?

Of course, there's always bright spots. You know, one of the companies we love right now is Chenier. It's an LNG exporter company. They just signed a new deal with China. They've been exporting into Europe. And I do think energy security is a long-term play. Companies did not like what the countries didn't like what happened to them after the Russian invasion. People really care where they're going to get their stockpiles from. And so I think Chenier, the natural gas export play, and then I also like SLB. It used

to be Schlumberger, but they changed their name recently. The international drilling does remain more active, even while the shale plays are slowing down a little bit. Pivot to the market, if you would, for me. Second half of the year looks like what? From somebody who tried to get more optimistic on the market within the last, I don't know, six, eight weeks, I think. Yeah. And right now we're hitting a bit of a wall. If you even look at what the average street forecast is, it's about 4,500. We're pretty close to that. We're four or 5% off. And so I look at this and I say, if we have two more rate hikes, if this was a pause, not really a pivot, then you're up against an uphill battle and you had such narrow breadth. I think we're in for a lot of volatility.

That being said, July is a- Yeah, the VIX is like 14. Yeah, I know. Well, a low VIX is actually pretty good for stocks. Well, volatility meaning yes, we should bounce around a little bit. But look, the NASDAQ's been up in July 15 in the last years. The S&P's been up the last eight years in July. You have a lot of good technicals in there.

We stay above this 4319. We stay above 4200. You have good technicals. We just need earnings to cooperate with us. And that's a wild card. You know, we're getting all this liquidity stuck out of the system. What are the banks going to show us in mid-July? I think that's something we've got to look at. And then all this AI frenzy, at some point, you've got to start making more profits from your AI. So you've got to make sure you can back that up with a little better earnings. I think the NDX, by the way, as Jonathan Krinsky was pointing out today, hasn't had a down July since 07. And sort of given what, you know, obviously those stocks have done coming into July, it's primed for a pullback.

It is. But you suggest otherwise. You say there's too much technical momentum behind that trade to turn back now. Well, don't fight the tape, right? It's almost like don't fight the tech. You don't fight the Fed. You've got a lot of technical support here. And you also have the FOMO rally, the sentiment rally. You have cash coming off the sidelines and you have your historical precedence of July being a stronger month. I'm not saying it's going to be as strong as June. We've had a lot. I feel like earnings,

a lot of this performance got pulled forward here in this first half of the year. So I just think second half is going to be a lot more volatile. Maybe we'll get that VIX up to 20, you know, get it off this almost historically low 14, as you pointed out. But I think you really have to see what's under the hood here in earnings. And just we kind of got this liquidity put from the Fed, and they weren't necessarily actually putting money into the system, but they inadvertently put money into the system when they bailed out the banks in March, and that put more money that's going to get sucked back out. How many more hikes can the market withstand?

At least two. I mean, the market's withstood the last 500 basis points. What's for another 50? Okay. We'll see. We'll leave it there. Victoria, thank you. Thanks, Scott.

Victoria Green joining us here. Up next, your second half playbook with SoFi's Liz Young. She breaks down her forecast for stocks and the Fed as we head into the back half of the year. And later, Pfizer shares are slipping today on some obesity drug concerns. We've got an analyst standing by with what this could mean for the stock long term. Closing bell right back. Just about through the first half of the year, and my next guest is calling the S&P run overdone at current valuations, saying to not expect more upside heading into the second half. Let's bring in SoFi's Liz Young.

It's good to see you. I mean, look, let's be honest. You were surprised. You've been surprised by how strong this market has been through the first half. And you say ultimately what? It's going to catch up with itself and it just can't continue? Well, Scott, this is the point in the year when everybody who writes an annual outlook has to sit back and say, how am I doing? How's it going? And the title to my annual outlook in 2023 was this ends one way or another.

I think we gave a good hard run at ending the cycle in March and it didn't quite do that. But we did have a little scare. And now here we find ourselves at valuations in the S&P above the five-year average, the 10-year average, and the 15-year average at a point in the cycle when we are sufficiently restrictive. I'll call it sufficiently restrictive on monetary policy and looking kind of down the barrel of will we have a recession or not. It becomes closer and closer in time as the months drag on. So I do

think that we're going to have to have some sort of give back. We're already seeing that a little bit in some of these tech names. I heard the interview with Dan Ives. I think that his thesis on AI and the idea that this is the beginning of a bull market for tech probably makes sense longer term. But there are a lot of investors who got in at pretty inflated valuations and are probably going to be looking for that gratification sooner rather than later. And I'm not sure that they're going to get it in the next three to six months. Is your problem with the market at its current levels that earnings are just not going to justify where multiples have expanded to? That's part of it, because you do want to hear something about the

fundamentals improving at the same rate as valuations are going up. And that's not necessarily something that we've heard. Now, I recognize we haven't had fundamentals that deteriorated as quickly as many of us expected, both on the macro side and on the company specific side. But as inflation comes down, there's a couple different forces. You look at how the consumer feels and you see how sentiment has sort of leveled out or even gone up over the past couple months, but that's a result of inflation coming down

and the market going up. Consumers are going to feel good about that and the labor market still being strong. As inflation continues to come down, which is what we all want, revenues come down with it because you just can't maintain that pricing power that companies have had for the most part of this cycle. And then

competition picks up again. And that happens right around the same time that consumers may be pulling back their spending if they're worried about a slowdown. So I'm skeptical of revenues hitting target for the rest of the year, in which case margins are going to be under pressure. And I think a lot of the expectations, particularly into 2024, are for margins to start expanding again. And the expectations for earnings in 2024, which we'll now start talking about after June finishes, are pretty lofty, given where we think inflation and revenues are going to kind of fall out.

You still say there's a good chance, though, that the Fed is done, to which some would suggest, well, that's just a positive no matter what, a net positive, because the next thing that comes if they're done is cuts. That's a net positive if you are in a different part of the cycle. I believe that we are decidedly late cycle right now. And this is something that when you look at some of the signals, this is much like the yield curve inversion. It's not the inversion that's the problem. It's the re-steepening that's the problem. Same thing with Fed moves. It's not the hikes necessarily that are the problem. It's not the pause that are the problem. It's the cuts that are the problem. And I think the optimistic view is that the Fed will be able

to slowly cut rates, get back down to a normal level as inflation cools without really breaking anything in the economy. But at these levels, number one of inversion and at these deep levels of LEI contraction, the leading economic indicators contracting, it's really never happened before that they've been able to normalize and get on that path without some pain in the midst of it. Now, of course, things that have never happened before happen all the time. I understand that. And I think that this cycle has been a surprise to many of us. But it is a difficult thing to imagine that we re-steepen a yield curve, come out of LEI contraction and kind of whistle on our merry way through the rest of this cycle without any bumps

in the road. What if we were late cycle, but then what's happened with AI has prolonged it to a degree that we can't understand at this point? I think there's some of that going on, at least in the market. I don't know that that's necessarily something that's affecting the macroeconomic indicators. But one of the things that has happened is that you look at just coming out of this pandemic, we didn't have a playbook for this. We didn't have a playbook for this in modern monetary theory times. So it's not something that we could have timed out. And I think there are parts of this where the reaction functions have actually gotten shorter. But

the appetite for consumers to continue spending and the amount of stimulus that we had in the system and the amount of liquidity that we had from multiple different directions has lengthened this out. I continue to believe that just because this part of the cycle, this late part of the cycle is taking a long time, doesn't mean it's going to end differently. But I do recognize that it's taken a very, very long time and it has made a lot of us question whether or not we're missing something. Liz, we'll talk to you soon. Thank you. Liz Young from SoFi joining us here on Closing Bell. Up next, we're tracking the biggest movers as we head into the close. Christina Parts-Novellos is back standing by with that. Christina? Well, Scott, I have a health care focus after the break,

and one name is soaring 75 percent after, what else? A positive drug trial. I'll have that and much more after the break. Almost exactly 20 minutes to go before the closing bell. Let's get back to Christina Partsenevelos for a look at the stock she's watching. Christina. Thank you, Scott. Well, UBS thinks Moderna is underappreciated by the market, with the stock down about 33 percent year to date and 75 percent from pandemic highs. The new buy rating is driven by a pipeline that extends beyond just COVID-19 vaccines. This is according to the analysts. And they like Moderna's CMV vaccine, which is used to treat birth defects. UBS says it'll be a major driver in the next two years,

although they did lower their price target to $191 a share. Shares of Moonlake Immunotherapeutics are surging 78% right now. It's an all-time high after its skin disorder drug reached a main target in its mid-stage trial. After 12 weeks, a statistically significant portion of patients who received Moonlake's drug showed at least a 75% reduction in under-the-skin abscesses.

Scott. All right, Christina, thank you. Christina Partsenevelos, last chance to weigh in on our Twitter question. We asked, will text run continue for the rest of the year? You can head to at CNBC closing bell on Twitter. The results are coming up just after this break. It is a yes or no question. Twitter question results we asked, will tech's run continue for the rest of the year? The majority of you are in Camp Ives, as in Dan Ives, who says it will as well. 58% of you think so. Coming up, speaking of Dan Ives, Tesla shares slipping today.

The EV maker getting hit with a downgrade, too, from one of Wall Street's top firms. Ives is standing by with his take on that. That and much more when we take you inside the Market Zone. We're now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of the trading day. Plus, Dan Ives of Wedbush is back for reaction on Goldman's downgrade of Tesla. And BMO's Evan Seegerman on what's next for Pfizer after its obesity drug setback.

That stock is selling off today. First, though, I turn to Mike Santoli. What are you watching here as we begin the final week of June? And it's been a continuation of, really, you could characterize it as a fairly textbook kind of digestion phase for this market. Started at the beginning of last week, really, even two Fridays ago, where you did have the market a little bit out of balance, running too hot. Too many of the big mega caps were dominating the action. And today's another day where you have rotation into the many versus the few.

It almost feels like anti-window dressing or window undressing or something, because it's the stuff that's performed really well. I think people are just kind of, as a matter of discipline, rebalancing out of some of the higher beta big performers. You know, hard to say where it lands. I think that the S&P is just very comfortably in normal pullback range. We'll see. It feels like there are scenarios people are spinning out there for saying market's gotten too far ahead of itself. We're going to start to recognize whether the Fed has to do more or the economy is going to soften up. But right now, it seems like a comfortable zone between major catalysts.

Two of the poster stocks for that argument are NVIDIA and Tesla, which, as you said, on halftime today, have been trading sort of in tandem recently. And both were pulling back somewhat significantly midday. And that led to the weakness in the Nasdaq, which has progressed towards the end here. It's down 1 percent even. Yeah, exactly. I mean, these two stocks in particular over the last several weeks have gotten reattached at the ankles. And that was something we remember from 2021. They

are kind of the big picture, open-ended, secular growth stories that retail loves. And you can kind of, you know, place a huge value on what their potential destiny is. And that's why I do think, you know, you dial that in reverse for a day or so, and it makes sense that they're moving in this direction. But it was very interesting that there was a rally attempt in Tesla in the morning going against that downgrade. And that's that's unwound. Yeah. Check that out. Down six percent. Speaking of Dan Ives, this downgrade today at Goldman to neutral from buy valuation. But this stock now better reflects our positive long term view of the company's growth potential and competitive positioning post the substantial move higher year to date. What do you think about this call? And Jonas last week from Morgan

Stanley, also a downgraded valuation. Why not Ives? Because look, these are analysts that I have huge respect for and understand the valuation perspective. My view is that if you just look at a face value on units, then I get it. But in my opinion, Tesla, under some of the parts, because of what's happened on the battery technology, because of supercharger, and I believe on the AI perspective, when it comes to FSD and Optimus and others, when I look out over the next 12, 18 months, Scott, I believe we're still in the middle innings of really this growth story playing out. See, Mike, I mean, the bulls on Tesla, they'll justify the valuation. They'll justify the year-to-date move

by any means necessary. It's true. And like I said, it's an open-ended story. So we can actually have lots of varying estimates. You tweak what you think the potential is for some of these businesses. I'd be interested, actually, Dan, on the AI side. They've been working on full-staff self-driving forever.

That's their version of AI in that mode. What about the new large language models is going to help or enable the market to place a more accurate long-term value on that part of the business? It's a great question. I'd say most of my conversations, even over the last week on Tesla, it's, okay, this FSD, what's the next step clearly there have been a lot of issues they've had I believe over the next year from from beta to what we're seeing just from ingestion of data more and more beta users I believe over the next year they cracked a code in other words I think this could be a seminal inflection point on AI and then you just the backdrop ultimately in terms of what

we're seeing on the sum of the parts, with the Detroit, the 313 area code, calling Tesla on supercharger. Ford and GM, you're referring to the news of the last few weeks. So Ford and GM, I think what that's done is it's opened up the story now. I'll call it an AWS moment for Tesla. It's superchargers, it's batteries next, then what potentially could be AI. On the sum of the parts, that's why I view you could start to rationalize the valuation that starts to get into one and a half trillion. But this changes the way that you think investors should look at the valuation of this company. Now look, some...

We're now in the Closing Bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of the trading day. Plus, Dan Ives of Wedbush is back for reaction on Goldman's downgrade of Tesla. And BMO's Evan Seegerman on what's next for Pfizer after its obesity drug setback. That stock is selling off today. First, though, I turn to Mike Santoli. What are you watching here as we begin the final week of June? And it's been a continuation of, really, you could characterize

it as a fairly textbook kind of digestion phase for this market. Started at the beginning of last week, really even two Fridays ago, where you did have the market a little bit out of balance, running too hot. Too many of the big mega caps were were dominant in the action. And today's another day where you have rotation into the the many versus the few. It's almost feels like anti window dressing or window undressing or something, because it's the stuff that's performed really well. I think people are just kind of as a matter of discipline, rebalancing out of some of the higher beta big performers. You know, hard to say where it lands.

I think that the S&P is just very comfortably in normal pullback range. We'll see. It feels like there are scenarios people are spinning out there for saying market's gotten too far ahead of itself. We're going to start to recognize whether the Fed has to do more or the economy is going to soften up. But right now, it seems like a comfortable zone between major catalysts. Two of the poster stocks for that argument are NVIDIA and Tesla, which, as you said, on halftime today, have been trading sort of in tandem recently. And both were pulling back somewhat significantly midday.

And that led to the weakness in the Nasdaq, which has progressed towards the end here. It's down 1% even. Yeah, exactly. I mean, these two stocks in particular over the last several weeks have gotten reattached at the ankles. And that was something we remember from 2021. They are kind of the big picture, open-ended, secular growth stories that retail loves. And you can kind of, you know, place a huge value on what their potential destiny is. And that's why I do think, you know, you dial that in reverse for a day or so,

and it makes sense that they're moving in this direction. But it was very interesting that there was a rally attempt in Tesla in the morning going against that downgrade, and that's unwound. Yeah, check that out, down 6%. Speaking of, Dan Ives, this downgrade today at Goldman to neutral from buy valuation. This stock now better reflects our positive long-term view of the company's growth potential

and competitive positioning post the substantial move higher year to date. What do you think about this call? And Jonas last week from Morgan Stanley, also downgraded valuation. Why not Ives? Because, look, these are analysts that I have huge respect for and understand the valuation respect. And my view is that if you just look at a face value on units, then I get it. But in my opinion, Tesla on the sum of the parts, because of what's happened on the battery technology, because of Supercharger, and I believe on the AI perspective when it comes to FSD and Optimus and others,

when I look out over the next 12, 18 months, Scott, I believe we're still in the middle innings of really this growth story playing out. See, Mike, I mean, the bulls on Tesla, they'll justify the valuation. They'll justify the year-to-date move by any means necessary. It's true. And like I said, it's an open-ended story. So we can actually have lots of varying estimates. You tweak what you think the potential is for some of these businesses. I'd be interested, actually, Dan, on the AI side. They've been working on full-staff self-driving forever.

That's their version of AI in that mode. What about the new large language models is going to help or enable the market to place a more accurate long-term value on that part of the business? It's a great question. I'd say most of my conversations, even over the last week on Tesla, it's, okay, this FSD, what's the next step? Clearly, there have been a lot of issues they've had, I believe, over the next year from beta to what we're seeing just from ingestion of data,

more and more beta users. I believe over the next year, they cracked the code. In other words, I think this could be a seminal inflection point on AI. And then you just, the backdrop ultimately in terms of what we're seeing on the sum of the parts with the Detroit, the 313 area code, Colin Tasson, supercharger. Ford and GM, you're referring to the news of the last few weeks. So Ford and GM, I think what that's done is it's opened up the story now. I'll call it ans moment for tesla it's superchargers is batteries next then what potentially could be ai on the sum of the parts that's why i view you could start to rationalize the valuation that starts to get into one and a half trillion but

this changes the way that you think investors should look at the valuation of this company exactly now look some will disagree and you've seen the valuation downgrades which I totally respect. In my view, I believe the story in Tesla's changed. I think this now starts to reflect, I'll call it a cloud story with Microsoft and AWS, what we saw at Amazon, a services story with Cook and Cupertino. That's what's happening right now. That's what's playing out with Tesla. And then of course next week we'll get deliveries from Musk and Tesla.

All right. It's been good having you here, Dan. Thank you so much. Bookending our show, as Dan Ives done today. Evan Sigerman, I'm looking at Pfizer. It's down three and a half percent today on this news of their obesity drug, the twice daily pill rather than the single dose. That's what's the drag today, correct? That is correct. So this morning we got word that their once daily had some liver toxin phase one and phase two testing. They're moving forward with the twice daily. I think the nuance here is they're working at some point to reformulate that to a once daily. And I think that's what you need to be competitive with the likes of lily lily had some great data for their oral glp-1 at the ada meeting um this weekend you're making no change to your

outlook on this company or the stock price of 49 bucks other analysts that i've read today are calling this quote a clear setback uh or quote incrementally negative from other analysts as well? Do you not see it that way? Well, I think it is a setback because clearly, you know, we wanted this one to move forward. But I'm not throwing in the towel yet with Daniel Klipron, which is the asset that they're moving forward. They actually designed this program to reduce the risk. So they had two assets moving forward. One didn't work, so they have the other one. If we didn't have any GLP-1 in development, that I think would be a problem. I am really focused on to see if they can formulate this to a once daily. That's pretty important in my view.

So I'm not throwing in the towel here at this point because they did design this program to kind of spread the risk out. What about the competition from the likes of Lilly and Novo? And I realize this is not going to be the greatest analogy in the world, but who's talking about J&J's COVID vaccine, which was a twice daily, you know, not a daily, it was a double dose. And it was upstaged, for lack of a better word, by others. Why wouldn't the same thing happen here that if you're into one of these drugs, you're just going to go where the ease is? So that's very fair. I think when it comes to Daniel, I want to emphasize that they're moving this into phase three. So it's in striking distance of Lilly's drug. The key is that twice daily formulation, which is what's the issue. But they are well within the bounds. And the data we saw from this drug, which was published in JAMA last month, the stock was up 5 percent.

You're still getting that ozempic like efficacy. So I don't think that it is quite the J&J and Moderna Pfizer comparison with covid vaccines. These are all very close. I agree that it is a setback, but I don't think it's catastrophic at this point. How are you looking at this? Yeah, I was going to say the other distinction would be that if one of these products gets to market, it's a very long life of that usage. In other words, it's not just kind of like vaccine. You've got a couple of years where Pfizer over-earns. And that is what the market is kind of saying. It's a forever thing, correct? The market, though, with the reaction today is interesting because the stock has really gotten to look cheap. It's got a 4.4 percent dividend yield. It's 10, 11 times forward earnings. So it shows you that the market feels as if the company has kind of over-earned during this period.

And they don't know exactly what's next in terms of being able to produce another earnings driver. And so that's the disappointment. It's not a huge drop on a single day, but it's more of the same in terms of underperformance by this stock, and even in a tape where big pharma's had a little bit of a struggle. How many players are there really room for, Evan, in this space? Is it reasonably infinite? I don't think it's infinite, but I think there's definitely room for multiple players. You have Lilly and Nova with the injectables. You have Pfizer, Lilly, this company called Structure that I cover with Orals. There are other players in earlier development. So I think that there is room for more than one or even a few. You know,

this could be 100 plus billion dollar market. So I ascribe five billion in peak sales for Pfizer's GLP-1 franchise, which is just five percent of what that whole market is. Wow. All right. We'll talk to you soon. Appreciate you coming on. Evan Seidman joining us today from BMO Capital Markets. As we turn to Mike Santoli, we're about 15 seconds or so away from our two-minute warning. And again, the Nasdaq's the big drag. You heard Dan Ives at the very top of the show. Start of a new bull market for tech.

I mean, you know, the way the market has behaved is somewhat reminiscent of a general new bull market. I think the big question is that whole 1995 call that we hit the dawn of the Internet, which is what he says it is. Yes. I would say, you know, that's a high hurdle at this point, mostly because these are this is a category of stock that's already had an incredible run. It's already had the valuations inflated by high hopes for what can get done in this mode. I was around in 95. The Netscape IPO took the entire world by surprise. We did not see it coming. Nobody was there predicting that 1995 was going to be 1995. So I do think you have to be careful about that. Interestingly, in a different regard, 95 as the ultimate soft landing for the economy

when the Fed orchestrated that tightening mode and then backed off a bit and then cut slightly and the economy stayed strong. That's an interesting, I think, analog for what the bull case is right now, which is it has happened in the past. Yep, unemployment was higher, had more room to fall than we have right now. All the rest of the distinctions, market's more expensive than it was back then. But in 95, the stock market was not cheap based on the prior 30 years, okay? Because we entered in 1990 this different valuation regime. So I think there's a good argument to be had that that might represent the kind of the beacon of bullishness that you might be able to apply to this current market.

I don't think that when I look at Tesla at $800 billion and Nvidia at a trillion, that somehow it's an unrecognized big picture bull case that they could enter this new age of AI prosperity. Very hard for people to look at this market and think they have a real good grip on what a fair, quote-unquote, valuation truly is. Just given, you know, where Fed policy is, where the economy may be going, what AI is going to mean. The oddities of this cycle. Yeah, yeah. Like this stuff. Mike, thank you. Mike Santoli will join us again. That does it for us on Closing Bell. Into overtime now with Morgan and John.