Closing Bell - Closing Bell: Shaky September in Store for Stocks? 8/28/23

Episode Date: August 28, 2023

What could a seasonably saggy September hold for your money? Liz Young from Sofi and Bryn Talkington of Requisite Capital both give their expert forecasts for the month ahead. Plus, top technician Jeff DeGraaf is forecasting a big breakout in energy. He makes that bull case. And, one fixed income expert says right now is the best time to buy bonds since 2009. He explains why. 

Welcome to Closing Bell. I'm Scott Wadner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the hunt for momentum. Whether this market can wrestle it back from the bears in the weeks ahead. Stocks are rallying as the final stretch to August gets going. There's your scorecard with 60 minutes to go in regulation. Green across the board, Dow looking for rare back-to-back gains. So far, so good. 3M, the big winner there, along with a nice bounce for Goldman and even Nike, which recently ended its historic losing streak. A drop in yields helping stocks broadly today. The industrials, tech and com services, the three best sectors. And speaking of NASDAQ, pretty strong, too. His names like Apple, Microsoft and Nvidia all see gains.

Well, there's Microsoft. It's dipped negative, but the other two are still green. We'll keep our eye there. It does take us to our talk of the tape. What a seasonably saggy September might hold for your money. Let's ask Liz Young, SoFi's head of investment strategy, here live with us at Post 9. Welcome. Good to see you. Good to be here. So it's not like August has been rocky. It has been horrible. But what does it mean as we as we close this month and the next couple of days and we move on? Well, I mean, we talked about this ahead of the show, really low volume. This is pretty normal for this time of year, kind of boring. The one thing that

low volume does present the opportunity for, though, is that if there's a surprise or a bad data point or some sort of shock, it's that things move much more quickly in either direction, particularly on the downside. And there is a lot of data coming in this week. We've got some GDP data. We've got PCE. We've got jobs coming. So there's still a lot going on, despite the fact that we're closing out summer, getting into what usually is a pretty trepidatious period for the market in September and October. It is. But as Bespoke points out today, when you have a year like you've had up until September, not so much. I mean, it's sort of overhyped how bad the fall can be. They say it's not typically a weak month when the S&P is already up double digit percentage points

year to date through the end of August. So maybe if things fall in the right way and you hit on one thing and that's the data, right, the data has got to cooperate. Yields have to cooperate. The data has got to be good, but not too good on the economy. Right. Earnings estimates can't get revised lower. I'm going down this checklist I made for what has to happen for September not to be bad, for it to go right. And then you need tech to perform, don't you? You do. But I think what's happened since July, I mean, July was such a strong month. Coming into August, I think most people expected that there would be some giveback. Even the bulls, even the tech bulls expected that there would be some giveback. So a lot of this decline that we've seen

since the end of July has been pretty orderly. That's not a bad thing. I think it's healthy for the market. I don't know that there's going to be a lot of earnings revisions or things that go on in that camp looking out through the end of the year into 2024. This week, I would expect earnings revisions to come in September, maybe if they're going to come. No, that's what I'm thinking in September for September to go right. I mean, you can't have earnings revisions lower. You can't have yields continue to go up. That's right. You can't have inflation data coming on the wrong side of what the narrative has been. And maybe some would say you can't have good economic data because that is now bad. Good is bad again or not.

I think I think good is bad from the Fed's perspective. But now we've all just sort of accepted the idea. And Jerome Powell reiterated this in Jackson Hole last week, accepted the idea that rates were going to be higher for longer, that they are not done fighting this. I think the PCE data is going to be really important because he reiterated that as well. We talk about CPI all the time. We're going to get PCE data. He's acknowledged that it's been good for a couple months, but a couple months does not a victory make, and they're still going to continue on this path. Still a 65% chance of a hike in November. So we might see another pause through September. Then you've got a built-in pause in

October. In November, if they hike again, personally, I don't think they need to, but if they hike again, that could be a part where you get to the market gets to the point where it says now we really cannot sustain these valuations anymore. And one or two of those lines has to move to get back into jive with what it's supposed to do from a relationship standpoint. I mean, you gave a list of things to our producers and said that none of them suggest there's any positive signals about the near to medium term. Do you really feel that way? I mean, we're down. What's the S&P down in a month? Three percent? Three or four percent. Maybe the Nasdaq's down five. So tech stocks have obviously had a bit more of a rough month than the others. Here's your major averages through August. Dow's down not even three percent. S&P three and a half percent. You really feel like

there's no positive signals about the near to medium term? I think a lot of the signals that we rest on right now that are positive are still backward looking. I acknowledge that the momentum in inflation has been cooling. That is positive. The fact that consumer confidence is rising, also positive. That's not backward looking. But it's very coincident, right? Consumers answer that survey based on the idea, okay, the market is up, inflation is down, I still have a job. So I don't think that it's really that much of a surprise that confidence and sentiment has risen after a really strong July, after we passed the peak in inflation year over year, and we had some of these lower readings,

and we're nearing 3%, 2%, we're hoping for a two- two handle. All of that is good. Those are good signs. The parts that, from a market perspective, still bother me and still worry me as far as signals go, I talk about the yield curve so often. I know I'm even sick of talking about the yield curve. But the fact that this inversion continues to be here and has actually gotten deeper again, at some point it does have to right itself. That usually is a problem. You can't get positive on the equity market until the yield curve is no longer inverted. Is that is that what you're saying? Somewhat. Yes, because as as the yield curve re steepens, we have to even out borrowing costs. We have to even out the constriction of capital that's

happened in the economy. The re steepening that happened recently was actually a bearish re-steepening. So that doesn't make me positive on equities either. If a re-steepening happens because the short end of the curve comes down, it's likely because the Fed finally says, OK, you know what? We're done with hikes. We probably have to cut sooner rather than later. Hopefully that happens not for a bad reason. Hopefully that happens because they can just normalize rates. I'm not optimistic that they'll be able to wait that long to just normalize everything without something breaking in the meantime. But I mean, we know they're getting towards the end. Does it really make a difference if there's one or two more hikes? I don't think so. I don't think it makes a

difference. I think it's all about messaging right now. And if Jerome Powell feels like he needs to continue to send the message that they might hike again in order to not let financial conditions loosen too much, then he'll keep sending that message. I don't think it makes much of a difference whatsoever. I think the damage or at least the hiking that's been done is really it. Right. We went as far as we could, as fast as we could. The idea is to constrict capital and constrict demand. It just hasn't happened in its entirety yet. And I still think there's more to come.

All right, let's bring in CNBC contributor Bryn Talkington now of Requisite Capital Management, also here at Post 9. It's good to see you. You heard the case that Liz made. Do you agree with it or disagree? Well, y'all made a few cases. Let's start with the recession. Well, she's definitely cautious.

Yeah, yeah. I mean, there's no question about that. Let's start with the yield curve inversion because that was the last comment. I think as an asset allocator, if you look back through time, when the yield curve inverts, you look at the 10 and 3 year, the average recession starts 589 days later. That's so it's a year and a half. That's the average. You've had a thousand days on the long end. You've had 300 on the short end.

So I think that looking at the yield curve, ultimately, the data tells you we'll get a recession. But to me as an asset allocator, I can't allocate around that because if it takes a year and a half, what are you sitting in cash? What are you sitting in and what assets? So I also, though, all year, like Liz, have been defensive. And as an asset allocation, we felt going into January of 2023, we are late stage economic cycle, right? And I think Jay Powell thought that as well, right? When he says, as is often the case, we are navigating by the stars under cloudy skies. I just had to laugh because that's like the opposite of Greenspan speak, which you couldn't understand any word he was saying. He was so

human about it. Like, this is so hard. And we are in such unchartered waters. And so I agree with Liz about being defensive. The way we're playing it is, you know, we're long equities. We do like energy, which is not defensive, by the way. That's very, very cyclical. But we also own a lot of covered calls, which clearly in the first half of the year, when you have the NASDAQ and the S&P going straight up, you're getting consistently called out of those names and not capturing the full upside. But as I heard Jay Powell last week, I just still am staunchly like ultimately I do think we're late cycle because at the end of the day, the question I ask myself, do rates matter? Do rates matter?

And that there's no way in my mind you can have 13 years of zero rates. We're a creditor economy, whether it's at fiscal level or at the consumer level. You can go from zero to five and a quarter and then higher. And then it's like no impact, no problem. I just don't buy that, that ultimately we're going to reaccelerate and have this new burst of growth. Just because I do think there's going to ultimately need to be a resetting of rates because most people still in general have very, very low yields on their credit, whether it's a consumer or at the corporate level. What if we're, Liz, not as late cycle as Bryn and others think, in fact, that we are? That if inflation continues to come down, growth is still pretty reasonable.

I mean, you look at the Atlanta Fed GDP now. Now, granted, that's not a definitive read of anything, but it sure as heck is better than a terrible read. And it at least suggests that the economy is growing far better even still than most had expected it would. What if the call that we're just that late cycle is wrong? It could be or it could be that this part of the late cycle is just lasting a really, really long time. I mean, I've been hearing for two years almost that we're in the late cycle. Well, it can last 18 months. So it could be that this is just taking longer. And there's a whole laundry list of reasons why that is, stimulus and all the things that we talk about

ad nauseum. I find it hard to believe, even if this is, let's say, late mid cycle or it's the early part of the late cycle, who knows where exactly. At some point, we do have to transition back to early cycle. And you're not hearing really a lot of people, if you're looking at economic data, even market data, aside from what happened in July, market data isn't telling you that we're early cycle. I don't see how we can transition from late back to early without a bump, which is usually a recession. It doesn't have to be Armageddon, but there needs to be some kind of resetting that brings all of this back into balance. What's the most important thing, Bryn, for whether September is this historically bad month or if it's not as bad as some people expect it to be? Does it boil down to just simply what yields do, first and foremost?

I do. I think it's the long end, because when the yield, just like, you know, basic yield, yield formula is when that long ends going higher it's telling you the economy is improving okay that's the typical base case the economy is improving so i don't know about that atlanta gdp number i think everyone's scratching their head on that but so i think that if yields the two year and the 10 year especially the 10-year continue to go higher that's really everything's priced off of. I think you're really going to challenge, I think tech specifically, especially like smaller mid-cap tech specifically will be challenged. And I think going into, especially September, no one's talking about this budget impasse that I promise we will be talking about in the next few weeks. I think

September and October will, as they have been historically, will be the bulls will be in hibernation over the next couple of months, just because of not only seasonality, but also the budget. And there's really not, I think, great news happening with the Fed's not going to be cutting rates unless something happens. That's not good news either. What if the better economy than expected is already in rates? That's why rates have gone up 50 to 60 basis points since the beginning of earnings season. Right. That's already in there.

Right. So why should we assume that if the Fed's closer to the end, which I think we believe that it is, that rates are just going to continue to go up from here? Well, they may not. I mean, so technically, the two in the 10-year, that five and that four and a quarter, are like very strong ceilings, and they've been bouncing around it. And so I think you'd have to have an economic fundamental like thrush

to get them to move over that and that to become now support. And so I'm not in the camp that they will move above it. But you asked, what's the most important thing? I definitely think yields come up there because we really don't have

any like macro data. That to me, the jolt is going to, I know what the jolt is going to say. It's like there's still, we have jobs are plentiful, but they're less plentiful. I don't think we're going to these big surprises. And so I just think that going back to those yields and that we're just going to have to muddle through the next couple of months until seasonality seasonally, November, December is when that that that that positive return gets gets steam again. Can we discuss tech and the importance that it has? I said NASDAQ was down 5% or whatever the exact number is at this point. We can show the performance again,

just to make sure that I'm accurate on that. But we know that it's obviously stumbled a bit. NVIDIA was the last out. There's your performance, mega cap, the August losses. I mean, Apple's the one to watch. Big in the market looked a little edgy. You know, the others have have done all right. The importance then of Apple to what happens in September and then perhaps beyond into another month is what? Well, I think some of this stuff, particularly for Apple, is probably more China related and everything that's going on in China. Maybe the expectation that we're going to have issues there. Tech is clearly very important to this market. I think it's even more important to investor sentiment and investor psyche. And things that happened with NVIDIA after they

really delivered on results and the stock couldn't hold on to those gains, I think shows that there has been a sentiment shift, if for nothing else, than just the fact that multiple expansion has been so strong and so feverish that we can't possibly continue at that clip forever in this environment. I mean, we had this conversation on Halftime today. Everybody's looking for this massive bump from NVIDIA on these blowout earnings again, not taking perhaps enough consideration that the stock had gone up like 50 percent in three months. Yeah. That if it would have powered forward, you would have heard the many, many calls. Oh, my gosh, I can't believe it's already up 200 percent and now it goes here. That's a sign of more froth in the market. Maybe the the rest was well needed, especially for,

you know, a market that at least in that part of it with that cohort, looking like it was perhaps a little bit overstretched. Right. Well, and single stock analysis is different than broad market analysis. But coming into that earnings report, NVIDIA was 70 percent above its 200-day moving average, right? Something like that. If the S&P was 70 percent above its 200-day moving average, people would be screaming that it was way overvalued, right? So you have to think about that just from what are you willing to pay for something? I think the pause is probably warranted in big tech, but I also think that there's a pullback warranted

in order to get valuations back to a more reasonable level, especially in the stocks that are being driven by this big AI craze. I think I've said this before on this program. We're not going to get gratification that AI has changed the world in the next six to 12 months. So those valuations that are placed on... NVIDIA might, by the virtue of the kind of business and the guidance that they've given, they may actually realize it a lot earlier than we thought. Well, but then they'd have to come out as the definitive winner in that space. And I don't think that we're going to be there yet.

We're not sure how this is all going to play out over the next two or three years. They're one of the definitive winners. I think we should probably say that. Right now. Yes. One of. They may not be the, but they're going to be at the top of the list. Maybe. Maybe. I mean, look back to the dot-com bubble, right? The ones that we maybe thought were winners two or three years later, maybe they weren't. So if it's a winner today, perhaps, but I don't think we're going to have a definitive answer of this is the one, this is the company that did it right and pulled ahead. I saw Bryn shaking her head. I want to hear from you before

we go. Okay. So listen, there is an AI craze. NVIDIA is the definitive winner. Let's just be clear there. Okay. Their year-year revenues were up 101%. Their expenses were only up 10%. What does that tell you? They can charge whatever they want. The use cases for all of the H100 devices they're selling is the big question. And how these other companies will be able to monetize that

is the big question mark. But as this craze is happening, definitively, NVIDIA will monetize it until the big question mark. But as this craze is happening, definitively, NVIDIA will monetize it until we all find out. And so I just think by the time we find out, the AMDs and the other companies, I just think they're too far behind all of this forward buying that everyone around the world is doing. And look at the forward PE of NVIDIA, which is below 36 now. Right. So people have looked at that. They've looked at the

incredible decline in the stock and they it's always, oh, it's so expensive. It's so expensive. It's so expensive. The PE has actually been coming down over the last two quarters worth of earnings periods after they reported earnings. And after they gave the incredible guidance they did, the PE came down and go up. Jensen said on the call, he said, we have, quote, incredible visibility into 2024. He's not just like, that's just real. Those are orders that are coming. And so I think that NVIDIA continues to be, I think for investors who are wanting to play the AI space, that to me is like the known place to go. The other companies, outside of Microsoft charging $30, you know, ahead for there, which I

don't know that much that's going to move the needle. To me, NVIDIA still is like the best way to play. What I agree with Liz is an unknown application of those H100 chips in the future. By the way, all of those PEs have come in since, you know, Apple was, what, 33? Now you see where it is now? It's under 29. I mean, so you've have you have had a bit of a reset, not not a full reset, obviously, relative to the multiple expansion you got in those names to get you where you were. But it's a little bit of a different story today than it was, you know, I don't know, three months ago. And we'll see. We'll see you later, Bryn. Liz, thank you. It's great seeing you here. Let's get to our question of the day. We want to know, will the S&P 500 rise or fall in September? Head to at CNBC closing bell on X to vote the results later on in the hour. In the meantime, a check on some top stocks to watch as we head into the

close. Christina Parts and Nevelos is here with that. Christina. Well, let's start with shares of Horizon Therapeutics. They're jumping about 5% right now after the Federal Trade Commission said it would pause its challenge to Amgen's $27.8 billion purchase of Horizon. So recall that the FTC initially filed this lawsuit against Amgen's takeover back in May, arguing anti-competitive practices, specifically within its treatments for thyroid eye disease and chronic gout, because they're saying there's no other competition in the market. The FTC's change of heart, though, occurred over the weekend as it considers a settlement that would allow the deal to close with conditions. Sticking within health care,

shares of Boston Scientific are also about 5% higher and one of the best performers on the S&P 500 after positive results from a trial for its system to treat atrial fibrillation, which I had to Google. It occurs in the upper chambers of heartbeats or I should say irregular heartbeats. And so that treatment went well and shares are almost 6 percent higher. Scott. All right, Christina, thank you. Christina Parts and Nevels. We're just getting started here coming up, breaking down the charts. Top technician Jeff DeGraff is flagging the one sector he thinks could be on the verge of a breakout as we head into the end of the year. He makes the case next. We're live from the New York Stock Exchange.

And you're watching Closing Bell on CNBC. We are back. Energy stocks trading higher today, the only positive sector over the past month, albeit slightly. And my next guest remains bullish, seeing relative strength for the charts in the charts for equipment and service names. He calls it his favorite area within the space. Let's bring in Jeff DeGraff of Renaissance Macro Research. Good to see you. Welcome back. Thanks, Scott. I mean, this space barely is going to eke out again, and it is barely a pulse, I would suggest. But why do you see that this is about to take a turn? Well, I think a couple of things really jump out to us. One is the group was, leadership in the first half of the year. The sentiment got a little aggressive and frothy and then transitioned to tech. Tech now shares that frothy sentiment and I think needs to cool off aaluation, when we look at valuation from a sector-specific basis, is still the most favorable for energy of any sector.

So I think this was just a big pause over the last six months, consolidating, buying some time, and turning. And I think one of the areas of this may be an improvement that we're seeing out of China. I know the data and the news flow is bad. But if you look at the chart of the Chinese market, it certainly looks a lot I know the data and the news flow is bad, but if you look at the chart of the Chinese market, it certainly looks a lot better to us than what the news reflects. It's not a bottom yet. It's not leadership, but it certainly is bobbing along. And I think there might be some upside surprises there as we go forward. Well, I mean, let's tackle that because the economy is different than the market, number one. And number two, the market may be anticipating more stimulus and easing from the Chinese. That's number two. I think you're hard-pressed to make

an argument that there's, quote-unquote, in the word you used, improvement in China, because I don't think many people see any. Well, in the data, right? And so the question is, are the markets anticipating that, to your point? I think what's interesting, when we go through and look at the data that we use to get an idea as to where we are in the cycle in China, we're actually in a pretty good spot. It's not the best spot, but some incremental improvement and growth goes a long way there because they really have tackled inflation. Inflation tends to be one of the biggest drivers of the equity markets there, and inflation is in a good spot for the Chinese in terms of the equity performance. So I think there's something to that. And we'll continue to watch it. I mean, I think it is early, but I don't think it's early by a year. And I don't think it's early by six months. It might be early by a month or three. But I think it's actually in a pretty interesting zone right here. You think there's more consolidation to come

in the fall in technology? I do. I think, you know, NVIDIA trades heavy, Microsoft trades heavy, the response to good news. Some of the data that we look at, the commitment of traders data on the NDX in particular shows that large speculators are pretty aggressively positioned in the NDX. They're not usually rewarded right away. They kind of have to go through this cleansing period. So I think we're going to have more of that. Again, I don't think they're tops. I don't think they're excessively dangerous. I just think that you're going to have more shakeout and really just kind of create this apathy in the group that frustrates the bulls. And then I think it's set up all right for the fourth quarter, but I think we're going to have a little bit more of this pain and indecision

over the next several weeks here. I mean, NVIDIA is only 35 bucks off of its recent high. That's that's not that heavy. And you can make the argument after, you know, an initial bit of upset on the backside of the earnings report. It's actually stabilized fairly well. Yeah, in the near term, absolutely. But if you look at the positioning, the SKUs, the put call data,, there's a lot of interest in the upside. And usually, that upside gets frustrated if it's that excessive. So I just think, again, 400 is really good support on NVIDIA. I think we can trade down to that level. We'd be buyers down at that level. But I do think that there is still

a process that we have to go through to digest these earnings. Nothing unusual, nothing bearish, nothing dramatic, but just the time. And a lot of times overbought conditions will correct themselves through time, not price. Those end up being very bullish in the long run, but they are frustrating in the near term. Well, 400 would get our attention. That's for certain. Jeff, I appreciate it. We'll see you soon. Thanks, Scott. All right, Jeff DeGraff joining us. Up next, Chinese EV companies popping in today's session. We'll break down what's driving those moves. In the meantime, Tesla on the receiving end of some positive analyst commentary. We'll discuss all that and more with a Tesla shareholder after this break.

And later, CrowdStrike shares are sinking. We'll tell you what's sending that software name lower today. It's just ahead of earnings to see if it could weigh on the rest of the cybersecurity space. Closing bell right back. We are back, Didi and Xpeng moving higher on some deal news today. There's both stocks up at least three and a half percent. Phil LeBeau here with the details, what it might mean for Tesla. Phil. Well, I'm not sure how much this is going to mean for Tesla, because that's basically a deal that is structured for the Chinese market. But when you talk about Tesla, the shares were moving earlier in the day, Scott, in part because of a note from Canaccord looking at full self-driving technology and how far along Tesla is and optimism that, well, look,

as they continue to develop this, especially as they focus on AI neural nets, the potential is going to be substantial. There is a buy rating, by the way, by Canaccord on shares of Tesla. Earlier in the session, the stocks moved a little bit higher. Today, in the last hour or so, they've given a little bit of that back. Not a whole lot of movement in shares of Tesla. Whether it was the Xpeng news or whether or not you look at other news out of China, the fact that we'll get the NIO quarterly results tomorrow morning, a number of the foreign EV stocks were moving higher today. As you take a look at shares, we're going to show you also Rivian and Fisker. VinFast, keep in mind, Scott, VinFast has a very thin float. This is going to be a very volatile stock. We saw a drop by double digits after its SPAC IPO

last week. Now it's up by 19 percent. Take that one with a major grain of salt. Do not count on that one continuing either higher or lower. It is all over the place. And remember, it's a very, very thin float on that stock. Sure. But I think the implication from from the way we came into you in this story is that, you know, Tesla's made no secret that they want a greater share of the Chinese market, too. And that's why they've been cutting prices there like everywhere else. Yes, but but so has Xpeng, so has NIO, so have all the Chinese automakers. We've got a price war. And the interesting thing here, Scott, is that they've all talked about, yeah, absolutely. And that does not seem to be ending anytime soon, despite earlier in the year, Tesla and a number of the other automakers signing an agreement that there would

not be major moves in pricing. Look, the market is what the market is. And as long as that pricing continues to be challenged by others in that market, and there are scores of them, we're not even talking about smaller EV makers in that market. As long as that happens, Tesla and Xpeng and NIO and the others will have to respond. Yeah. Good stuff, Phil. Appreciate it very much. That's Phil LeBeau. Requisites, Bryn Talkington. She's back with us because she owns Tesla. What do you make of this story? I mean, it is arguably the most competitive EV market in the world and Tesla wants a bigger piece of it. And Musk, you know what? He doesn't care about profitability so much as he does growth. Well, first of all, the Didi story, this should be a cautionary tale for U.S. investors to steer

clear of these Chinese stocks, because in 2021, Didi was at 18. It's at three, right? It's a terrible investment. So that's number one. Number two is that I think that you are very right. This is a price war. But why this war? I think we'll have multiple winners is that just to give some perspective, in 2022, global EV sales were around 9 million. It's expected for 2023, China will sell 9 million EVs. And so the U.S. market, we all talk about Ford, GM and Tesla. Doesn't really, I mean, it matters because Tesla's an American company. You really have to put your footprint and sell volume in China. You know what China's share of the EV market is? It's 60%. You know what the U.S. is? Nine. Right. Right. So that's what I'm saying. You have to be in the EV market. And to Phil's point, there's so many other competitors. So

Tesla wants to focus on volume, not margins at this point. Ultimately, though, and Elon has been very, very clear that for Tesla as a company to succeed, they have to be able to monetize full self-driving. They have to do more in solar, right? And so we saw some green shoots will say that we're having adoption in the U.S. of the supercharger. Ultimately, though, that full self-driving, which I think is much, much further away, Tesla's doing a lot with their Dojo system, which we'll say is their own AI network that's going to embed itself in some very sophisticated way. But I think ultimately the proof will be in the pudding is that we saw in San Francisco with, with, with Cruz, I think it was Cruz, correct me if I'm wrong, you know,

had gotten into some wrecks or maybe it was Waymo. And so the firefighters, it's like these, these autonomous cars are just hitting, hitting firefighters. So I think it's a long, a long road out for all of this FSD. What about the stock here forward? It's not had a great month, right? Over one month, it's down almost 11%. Right. Now, if tech overall, if NASDAQ comes in more, this is right in the middle of that, right?

It's right in the middle of it. I think also Goldman's recent report, I think it's the number one shorted hedge fund stock. One of. One of. I think it's the top, though, in Goldman's list. Ultimately, this company is in the S&P. What is it? The number six holding of the S&P. So everybody owns it, by the way.

Is that in the U.S., within U.S. companies, we want companies that have profit margins and growth. And so I think ultimately investors love Elon, love the story, net-net. But at the end of the day, you have to have margins. You have to have growth. And full self-driving can't be 10 years out. It's got to be in the next few years. And to me, that's the risk in the name that this keeps getting pushed out and investors get kind of exacerbated with the story. All right. Good stuff. It's good to have you back. A Daily Double with Bryn talking. And we'll see you soon. All right. Up next, fixed income expert Dave Albright. He is back. What a time to have him, too. Says right now is the biggest buying opportunity in bonds since 2009. Why? He'll tell you after this break.

Closing bell right back. Short term Treasury yields on the rise with the one year hitting a 23 year high. And our next guest says the potential returns for bonds haven't been better since the financial crisis, all the way back to 09. Joining us now, Dave Albright of New Fleet Asset Management. Welcome back. It's good to see you. Thanks. Why? Why is this the best time for those returns since 09? Because we're seeing discount dollar prices that we haven't seen before, you know, going all the way back to the global financial crisis, you know, 88 on IG corporates, 88 on high yield bonds. We're getting yields, all in yields that we haven't seen going back to the global financial crisis. And it's a great time to, you know, if you're not in fixed income to be dollar cost averaging, if you're in fixed income, stay and think real hard

about your reinvestment risk and also your timing if you're sitting in, you know, money market or CDs. It was the right move to get out of, you know, your bank account, your deposit account. But think about dollar cost averaging in the fixed income, especially if the Fed can orchestrate a softer landing or a mild recession. And then we look at maybe some rate cuts in the next, you know, 12 months. I mean, the bottom line is you're looking for yields to go lower. Absolutely. Absolutely. I think, you know, we've hit peak yields. The Fed's near the end of its tightening cycle. Defaults are starting from a very low point. And if they can orchestrate and thread the needle and orchestrate a soft landing, IG corporate's giving you right around 6%. You look

at bank loans yielding over 10. High-yield corporates giving you about 870. And then structured product giving you anywhere from 6% to 8% with investment-grade ratings. It's pretty attractive. You think the Fed's done? So I'd say that, you know, you have to really take a hard look at, you know, going forward, take a hard look at the numbers. I think they made that clear at Jackson Hole that, you know, looks like the market's saying 50-50 for one more rate increase. Sort of the wildcard would be if inflation picks up and they have to do more than that. You know, it looks like the market's saying 50-50 for one more rate increase. Sort of the wild card would be if inflation picks up and they have to do more than that. You know, our bet is that you get a rate increase, they're on pause, maybe later in the year, November, December. And then they take a hard look and really have enough time to absorb the data.

Because there's typically a lag effect with the slowdown, as we know. You know, 525 basis points, 11 rate increases is a lot. So we'll have to see what the ultimate impact, and if we do get that, slow down. But opportunities are abundant, Scott. You mentioned high yield. Are you at all surprised that there's little to no stress at all in that part of the market? We see defaults in the high yield market on an issuer basis of about 1.53, long-term average about 4.1. So stress is definitely down, but it comes to the highest

credit quality in that market we've seen in history. More importantly, the access to liquidity, Scott. Not only the liquid markets are wide open, but also now you have another 1.5 trillion of private credit. So, I mean, we like it. It's a good way to get duration. We like a name like Hilton Hotels giving you a solid double B credit yielding a little over 7%. We think that makes sense. A life point yielding about 7 to 8% solid credit fundamentals. So there's value there. Maybe spreads are maybe fair value, but that's what we like up in quality. Dave, we'll see you soon. I appreciate your insights very much. Dave Albright, New Fleet, joining us. Last chance, by the way, to weigh in on our question of the day.

We asked, will the S&P 500 rise or fall in September? You can head to at CNBC closing bell on X. The results are next. All right. The results of our question of the day. We asked, will the S&P 500 rise or fall in September? The vote is split. Oh, that's interesting. Near identical. Wow.

Near break-even. Rise. We'll give rise the win. We will. Up next, speaking of rising, 3M shares are soaring. All the details about the potential settlement sending that stock higher today coming up. That and much more when we take you inside the market zone. This is the Closing Bell Market Zone.

CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of the trading day. Plus, SEMA Modi on 3M's potential multi-billion dollar settlement. That stock surging today. Christina Partsenevelos here on what's behind the sell-off in CrowdStrike ahead of its earnings this week. Turn to you, Mike. Up 200 now on the Dow. And just because September is historically bad doesn't mean it has to be.

No, it doesn't. In fact, I was just looking back to see how bad September has tended to be if August was also down. Don't have the full numbers, but there's been plenty of instances where they both were down. You know, if you want to go back to 1930, I do think we're giving almost outsized attention to the seasonal patterns this year. And I think part of it is because they've held so well. Yeah. I mean, almost all year they've actually been pretty much on point. Because we're a little jittery about, you know, where we are.

We're like, oh, boy, this is what's happened in August. And now that's looming. Well, exactly. And, you know, I think there's been a lot of squinting at the rally every step of the way because it was somehow imperfect. It somehow wasn't living up to our ideals of what it ought to be because it was too narrow or because it was going up when yields were also rising, and maybe that wasn't supposed to be the case. Right now, I mean, the market hasn't, with this, you know, call it a two-day bounce,

hasn't really proven a whole lot, but definitely showed you that once we got past the big known catalysts of the NVIDIA. Well, granted, tech did not rally on good news, but that doesn't mean the news wasn't good. So I think you still have the earnings base is pretty good. And the fact that we're trying to make our peace with a 4.2 percent 10 year yield. You had a two yearyear note auction today. Went out at some pretty high yields. Didn't really disturb the stock market.

Breath has been good today. But I still think you need another 1 or 2 percent in the S&P from here in the short term to say that this downtrend since the beginning of August is broken. Been kind of crazy. I thought the craziest stat I've seen is the S&P not having back-to-back gains all month. Exactly. It's an incredible stat. No, it is. And, you know, it's three quarters of the way through with the month. So it shows you that it has been a very much a mean reverting market. And that's part of that notion that Goldman was putting out there, that it wasn't a very strong

buy-the-dips reflex right now. It shows you that it's much more about we think the market's capped right here. No reason to chase it. On the other hand, you know, as you've been saying, five percent high to low is is sort of a pullback in name only. Yeah. I mean, the narrative makes it sound like it was a much worse month than in the reality. And look, I mean, you did have you did have the majority of stocks go down well below their moving averages. You've had some breakage under the surface, but not terrible. Yep. Good stock today. Sima Modi, 3M, leading the Dow up better than 5%.

What's going on? Well, Scott, it's no doubt seen as a positive development, this potential settlement, as J.P. Morgan analyst Stephen analyst Stephen Tusa wrote in his note to clients, this earplugs lawsuit involving roughly 300,000 veterans, Scott, has weighed on the stock. It's down about 13% so far this year, underperforming its peers in the industrial space. So again, this potential settlement is giving investors a sense that the end is near. I'm hearing that 3M's board is meeting today to discuss or finalize a settlement. However, this is just one of the legal overhangs that 3M is facing.

It's still awaiting a final approval of the forever chemicals lawsuits that have been tied to illnesses. And that's why the focus has really turned to how 3M is going to pay for all of this. Tusa did add that 3M's high dividend payout is a risk. The stock is currently yielding around a 6.1% dividend. And other analysts have also said that 3M may have to cut its dividend after the company spins off its health care business, Scott. All right, Seema, thank you. Seema Modi, now to CrowdStrike.

Christina Partsenevelos, this company reports earnings this week and a downgrade ahead of that? Exactly. And the reason we're seeing that downgrade is it's all about cuts to spending, and more specifically, IT spending. Morgan Stanley downgrading CrowdStrike to equal weight with a lower price target of $167, like you said, ahead of earnings that are out on Wednesday. The analysts are worried that larger customers like Home Depot, Target, are spending more cautiously. That means spreading out

the costs over time with smaller deal sizes. They also anticipate a cut to net new annual reoccurring revenue estimates, which is a key metric for a lot of the software space. But it's not just about CrowdStrike. Morgan Stanley also says that the cut to cybersecurity spending in general could continue next year with a recovery only in 2025. So negative for a lot of the names that you're seeing on your screen. But I'd like to point out, we're talking about Morgan Stanley. Yes, the stock is down because of this downgrade, but it runs counter to a lot of other brokers that I was reading some reports from RBC, UBS, Wells Fargo. All of them increased their price target ahead of CrowdStrike's earnings. Separately, Scott, Bloomberg reported just last Friday that

cloud cybersecurity startup Wiz is considering buying publicly traded SentinelOne, which is a competitor to CrowdStrike. I bring this up even though it's still early days. This would be a new larger platform and that would intensify competition. And why you see the divergence in stock prices ever since Friday? Yeah, I think they should report on Labor Day Friday. I mean, why not? Why not? Why Wednesday? Why Friday? Is this just like punishment for me to stay late? Well, I'm alluding back to Palo Alto. Come on. You know where I was going with that. I know. I know. I know that's what you're doing. And it worked out for them because we spoke about it so many times they didn't you know below the earnings or anything like that if anything the stock bump was up uh because so many people were paying attention

yeah thank you christina parts and nevelos micah hot i don't understand that whole uh punishment to stay late it's an opportunity to stay late and cover something exciting um no i do think it was interesting that down is the guy who's done taking stock on a couple of Fridays past. That's right, exactly. That was entirely my choice. So look, what really I think is interesting about the downgrade too is just this window on the entire cloud services food chain and the attention on the fact that it's often a layer of service on top of an AWS contract. And so you have the client still in this mode of trying to restrict spending or try to meter the spending more carefully. And what does that mean flowing through? So I don't think this is part of that story of, well, if everybody's spending hand over fist on AI capabilities, what's getting left behind or what's being foregone?

But it's still in that idea that we still have a disciplined IT buyer right now. Stock has held up better than many software stocks. So maybe not a big deal that it's backing off a little bit. All right. So we're going to turn the calendar in a couple of days. We just had the two-minute warning. We talk about what's going to make the most difference. Yields are down today. That's obviously stocks getting a boost. That's going to remain key. What about the idea of earnings revisions? You can't we're not going to be able to handle all of a sudden, you know, these earnings revisions coming in lower as September hits. No, although I also

don't think there's a really strong reason to expect there to be a big wave of downward revisions. Right. If you think about the way GDP is tracking right now, you know, the credit side of things has been OK. Yeah, there's been some kind of, I guess, hot and cold with when it comes to the consumer this quarter. My point being, it doesn't feel as if there's necessarily a lot of shock value to what might happen in September. The difference is and this is strangely enough, this is one of those storylines as to why sometimes you get downward revisions in September is everyone's away in August and you come back and analysts have to update their models and you have the regular pre-announcements and the regular kind of nip and tuck of what we're going to expect in the consensus. And that sometimes does hit.

But I totally agree. I mean, if the market pullback was just about. You know moderating sentiment and valuation and positioning it's done a lot of that but the valuation side has only been helped out. If the consensus forward earnings don't fall the heart of the bear argument right you can get the same

bears are making the same arguments earnings are too high absolutely they're staying twenty twenty four is too high right now especially. You can hear the cheering and we are going to go out to match it in the second half. We can hear the cheering. We are going to go out to match it in the green. Dow's going to go out. Looks like better

than 200 points. S&P 500 took about a half a percent gain. Two-thirds of a percent. I'll see you tomorrow.