Closing Bell - Closing Bell: Skittish Stocks 9/4/24

Episode Date: September 4, 2024

Are we heading for another stretch of volatility? Sofi’s Liz Young Thomas, iCapital’s Anastasia Amoroso and BMO’s Yung-Yu Ma give their forecasts for stocks. Plus, Wells Fargo’s Chris Harvey tells us how he will navigate a potential rate cut and the upcoming election. And, CNBC’s Jim Cramer storms Post Nine with some breaking news on Nvidia. 

Welcome to Closing Bill. I'm Scott Wapner, live from Post 9, right here at the New York Stock Exchange. This make or break hour begins with some big questions about the economy, the markets, your money, and where all of it is going from here. We'll ask our experts over this final stretch. Take a look at the scorecard now. With 60 minutes to go in regulation, stocks have been capped for much of the day, as you see. We're red across the board. Job openings. Well, that report today came in weaker, and that only added to concerns about the health of the labor market. It's showing up today almost everywhere. Yields, well, they fell on the news. Energy is the weakest sector today. Oil turning negative for 2024.

Healthcare a laggard. And as for big tech, all eyes there, all eyes on NVIDIA. They're getting a little bit back from yesterday's move lower, but even that has now rolled negative yet again. And that is down. That stock is by one and three quarters percent. It takes us to our talk of the tape now. Skittish stocks and whether we're heading for another stretch of volatility. Let's ask our panelists. Liz Young-Thomas of SoFi is the head of investment strategy. Anastasia Amoroso is chief investment strategist for iCapital, both here with us at Post9. Ladies, welcome. Thank you. Liz, you first. What is this? Is this just, you know, a growth scare and nothing more than that? What's happening here? I don't think people are scared of growth yet. We've got, we had strong retail sales feeding

through into GDP. GDP got revised upward for the third quarter. I think expectations for growth, actual growth numbers for the third quarter are still pretty strong. Today was a labor market scare. And obviously, we've got this big looming jobs report on Friday that could also be a scare. I think markets right now are in this state of restlessness, looking for direction, looking for a reason to either go up or down. So far, finding some reasons to go down and finding reasons to take profits in the big names that have led us to this point. And we've got a lot of highly anticipated events coming. We've already been through a couple of weeks of that. Like I

said, jobs this Friday. We've got CPI next week, Fed meeting the week after that. So there's just a lot to come. I don't think that the volatility and that restless feeling is going to go away in the coming weeks. Anastasia, what do you think? Well, I think the markets have been told that September is usually bad for markets, and that is becoming a bit of a self-fulfilling prophecy. It seems to me like coming into September, people chalk it up to saying it's going to be a bad month, and they've traded it such as it's going to be a bad month. So it's becoming this, you know, again, this virtual cycle, not a virtual cycle, self-fulfilling prophecy. But is it a good reason to not be in the market just because you have seasonality? I don't think that's the right reason.

I think you have to look at what do you believe fundamentally? And what I believe is there's a couple of myths in the market right now. They're simply not squaring with reality. You know, to your point about NVIDIA, NVIDIA traded poorly as if it delivered bad earnings. It didn't. It actually delivered very strong earnings results against elevated expectations. But that's another story. We'll talk about that. The other myth I would say that there is in the market right now is that, you know, this economy is headed for maybe once again a recession and bad data is really terrible. But is it really terrible when not a single economic indicator that the NBER looks for to determine a recession? Not a single one of them is actually in contraction. So that's why I say the markets seem to me they were trading on this notion that September is going to be bad.

But that's not the right reason to trade down. This feels more, Anastasia, not so much weather to be in the market, but where. Right. And now we're kind of confused about where. Growth rates, amazing for mega cap tech. Are they slowing a little bit from where they were? Yeah. Stocks are up a lot.

Valuations got stretched. All right. So let's go to the other areas. Do we want to be in some of the places that are more sensitive to the economy? I don't know. Do you? Because if you think the economy is slowing and we're going to now have these continual questions about that. Can I trust things like the small caps? Can I trust energy? Oil now negative for the year. Can I trust materials? China's weak. What's happening in those spaces? Do I want utilities and staples? Well, that's kind of defensive.

I guess I'm willing to hang out there. But even those aren't doing all that much now. Well, let's go with the notion that the economy is slowing because I think that is the predominant trend in the market right now. I'm not saying we're headed for a recession, but the economy is slowing and we're going into the first rate cut. What typically does well during that period of time, three months before, three months after, is the defensive sectors lead the way. And we've been talking about positioning defensively the core of the portfolio. Within equities, you can look at things like utilities, for example, and staples and health care. And by the way, those are the ones that have performed quite well. You could also look to bonds.

If you're scared about the payrolls report on Friday, if you think bad data is bad data, buy some bonds and yield typically decline into the first rate cut and also after that. So if you have this defensive core, also probably mix some infrastructure in there, that really allows you to stay invested throughout the slowing economy cycle. But then on the flip side, Scott, I would say the other certainty that we have is the Fed is going to deliver a first rate cut in two weeks time, give or take. So real estate, as well as banks, are tremendous beneficiaries of that. So that's what I would be adding to. Is Liz, is the rate cut, is that a positive for markets? I'm getting both sides from, you know, different people. I think you've suggested in the past it's not necessarily a great thing. You're not supposed to necessarily, it's not don't fight

the Fed. You may want to fight it, at least at the start. Maybe not, maybe not at the start. So when rate cuts begin, they are generally looked at positively because things haven't gone awry yet. And in this particular cycle, if we do get our first cut in a couple weeks, I'd be shocked if the data came in really poorly before then. So we're still not going to have any data, to Anastasia's point, that confirms we're in a bad spot. I mentioned growth is still intact. The consumer still seems to be spending just fine. So there's nothing right now that tells us a cut is because we're in trouble. It's the duration of the cutting cycle that tends to get a little bit

more dicey. And if you just overlay cutting cycles to the unemployment rate, most of the time in a cutting cycle, the unemployment rate rises pretty steeply. So that, but that takes a while. So it's not just that initial cut that's scary. I think right now, particularly the equity market, is cheering for cuts and is hoping for cuts and wants this cycle to begin. Initially, that typically is good for some cyclicals, and that is a boost for financials and REITs. And then later on in the cycle, as the yield curve tries to normalize, it gets a little bit more challenging for cyclical sectors because the data, the macro data just slows and tells us that, okay, activity is slowing down, perhaps getting too cool. And we're in this place where we've been so hot for so long, I think the market is going to have a hard time digesting cooler data. How do you view what the Fed is about to do and what it means? I think we've been pretty well conditioned since 2009 to think that we don't

fight the Fed on either side. And we've seen the results of major Fed action and the cause and effect that it can have and does have on stocks. Yeah. Is now different? No, I don't think it's different. I think there are two really important things that the Fed can deliver to the markets right now. First of all, the big takeaway for me from Jackson Hole is that the Federal Reserve is paying attention to the jobs markets, meaning if we have a weak labor market report, they're likely to act. They're likely to either jumpstart their rate cutting cycle or deliver more and more quickly, and they have a lot of room to work with. So in other words, the Fed can serve as a put to the markets to offset the labor market weakness. That's the first thing that's really important.

You know, the second one is even though the Federal Reserve has not cut interest rates yet, yields have fallen across the curve. If you look at the SOFA rates, they've fallen as well. So that means the benefits of rate cuts are already accruing to the economy. And so that's why I think when you look at the consumer behavior and corporates behavior, we'll likely see a little bit more interest in mortgages and car loans and commercial industrial loans. So I do think that what the Fed is doing is powerful and I wouldn't fight it.

How closely are we going to be watching polls for the election now? We're 60 days out. That's it. Yeah. Is that now going to start having a heavier role in where this tape trades? I think that's part of what's happening already in September, is that not only do we have seasonal factors in September, everybody knows about and was anticipating we're in an election year. September is usually more volatile and then it stretches out the September volatility into mid-October in an election year.

So I think we'll start watching polls, obviously, more closely and then the sectors to be careful in, depending on the policies that come out. You want to be careful in health care. Now, this is a time where health care typically does well with a steepening yield curve. So you want to be choosy there. I would choose medical devices if I was going to choose something in health care. And then you want to look at aerospace and defense as well. But yes, I do think we're going to start trading on polls. I would not position a portfolio for what polling is going to tell us. All right, let's bring in BMO Wealth Management Chief Investment Officer Young Yuma. Welcome. It's nice to have you on our program. You've heard what the ladies have had to say here about their views on this market. What's your own? Thanks, Scott. It's great to be here. I think we're in a market now where we just have a very high degree of uncertainty, and it's going to be taken, the mixed data that we have is going

to be taken in a glass-half-empty manner until the data starts turning more consistently positive. But it's very reasonable that we're in the last stage of a soft landing, that we get mixed data. But we have uncertainty about the Fed. We have uncertainty about the economy. We have uncertainty geopolitically and, of course, politically here regarding the elections. And that's just such a high degree of uncertainty when we're getting mixed data. And it's not really enough to generate momentum, we think, over the next couple of months. So we think we're in for a choppy couple of months, but we're pretty optimistic after that. Are you still in the soft landing camp?

Oh, we are. We think we're very much in the latter stages of a soft landing. We think that the underlying fundamentals of the economy remain healthy. And we actually think once this rate cutting campaign by the Fed is further underway and we get maybe 100 basis points or more of interest rate cuts by the end of the year and in the next year, you're actually going to see some positive economic surprises. We think that for the same reasons that the economy didn't slow as much from higher interest rates when the Fed was raising rates, that there's just underlying demand. And we think that underlying demand will start to come through once we get lower interest rates, because right now in the economy, interest rates are the problem. The underlying fundamentals remain healthy. Does that suggest that you believe in this

broadening story, which looked legit? And I think people are still trying to score whether it is or it isn't. Well, we believe in it. We just think it's going to be on pause for a few months because this high degree of uncertainty we have right now, there's just too much that needs to be resolved over the coming months and it will be resolved probably around year-end time but right now when we have mixed data coming in it's just very hard for that broadening of the market theme to really gather momentum but we think when we get those positive economic surprises into 2025 on the back of lower interest rates that theme will re-emerge so we'd like to position for that theme and look for opportunities as we go in to the back of lower interest rates, that theme will reemerge. So we'd like to position

for that theme and look for opportunities as we go into the end of the year, these last few months. Anastasia, how do you view that? I feel like there's a good debate as to whether this is just too soon to go into. People come on, they say, yeah, I like small caps and I like mid caps here because things are going to remain OK and then they're going to get even better. I'm OK. I'm willing to be a little bit early rather than late. What's your view? I think we have an opportunity that may last a few weeks or maybe a few months, the opportunity to position for what is likely to be resumed as a soft landing. I think, as we all talked about, volatility does spike into the election, going into the election.

Typically, the markets do consolidate in the months right after the first rate cut so i i think we have this uncertainty also amidst the slowing economy but if you look three months out six months out typically after the first rate cut and after the election stocks typically do resume their upside i'm in the soft landing camp i don't think we have the debt overhang issues as we did in 2009, for example. So I think this can be a 1995 type scenario where what happens after the Fed actually cuts rates, financials outperform, health care outperforms, and cyclicals tend to outperform as well. So I think, Scott, the opportunity that I see in the market now going back to NVIDIA and going back to the semiconductors, they've traded very poorly, probably as they should, given elevated expectations and also the economy that's slowing. But if you fast forward, let's

say into the end of the year or beyond, I think we have a great opportunity to be adding to those semiconductors on weakness. And Scott, we've said during the summer that we don't have a whole lot of catalysts past July because we didn't have conferences. We didn't have a whole lot of earnings reports outside of NVIDIA. But what we have this week, we have the Citi Tech Conference. Next week, we have the Goldman Tech Conference. We're going to hear, I think, some reassuring commentary on the semiconductor side. So that's the opportunity I see to add. Wow. So you'd be adding right here to this semi-weakness. I should note that AMD today is positive. Broadcom's positive. Broadcom has earnings tomorrow, I think. NVIDIA is still negative, but there are a host of other stocks

here that have gone green. You'd add to them. I would be adding to it. And that's a really important point that outside NVIDIA, there's other players in the artificial intelligence infrastructure. And for example, companies like AMD did have strong data center growth. Broadcom is expected to deliver positive results. Marvell is another company that reported last week actually had a beat and raise quarter. So I do think there's a lot of momentum on AI infrastructure spend. And there's also the cyclical momentum when it comes to semiconductors. In terms of unit growth, they flipped into year-over-year positive territory, and I think there's more of that because we are hearing that auto demand is stabilizing, industrial demand is stabilizing.

So what I'm saying, Scott, and we've been guiding this way for a few months, is don't add it all right here, right now, but do gradually use this period of economic uncertainty to add to what are secular growers. That points, Liz, to the question of whether you buy the dip in the mega caps in general, like people have. They've had periods of upset like they're going through right now, but the buyers didn't let that last for very long. That's in part what got us right back to close to highs on the S&P. Yeah. You know, if you're going to buy dips, I would buy them in large caps. I'm not in the camp of wanting small caps and mid caps right here. But the other thing

I would say is, obviously, I skew more macro. I am more concerned about the labor market than anything else. And the fact that regardless of whether the Fed cuts rates, cutting rates does not support the labor market, in my opinion, and it does not help the labor market from staying out of trouble. So I think we have to get more information on that first. I am concerned about the JOLTS data today, and I want to hear what happens on Friday before I'd be telling anybody to put more risk on the table, particularly in tech.

Young, is that what we should be focused on most? Young Yu, is this jobs report on Friday, which, look, we had the employment report pre-August 5th. That was the first sort of thing that started to snowball us into that Monday decline, along with what was taking place, obviously, with Japan. We had a retail sales report following, which was good. We had Walmart earnings, which calmed fears. And here we are again, tensed up for this Friday event relative to jobs. The market is definitely tensed up. I think the market is going to focus on those numbers a lot. And there's been some weakening over the past

few months. And the question is going to be whether or not the Fed is behind the curve and how much they cut rates by in September, whether it's a quarter point or half point, and how that relates to the data that's actually coming out. We actually think just as important a number, maybe even more important a number, is every Thursday we get the weekly initial unemployment claims. That's more of a forward-looking indicator. As long as those stay low, people have jobs, people remain confident in the ability to find jobs or comfortable in the jobs that they have. We think they'll continue to spend. So as long as those numbers stay low, if we get some blips in the overall monthly jobs report that shows weakness on the edges,

we're not quite as concerned. If all of those were to turn negative and we started getting jumpy numbers in the weekly initial unemployment claims, we think that's very different. But that hasn't happened. We don't think it's going to happen. And we think getting jumpy numbers in the weekly initial unemployment claims. We think that's very different, but that hasn't happened. We don't think it's going to happen. And we think the underlying fundamentals of the labor market remain healthy and corporate profits are high. There's not a huge impetus to have mass layoffs here. You know, Anastasia, it's funny. Market participants at the high level institutions may be getting nervous, but it seems the typical American investor doesn't seem to be.

There was the article yesterday in the Wall Street Journal, quote, Americans are really, really bullish on stocks. Lori Calvacina of RBC Today talks about challenges for equities are still lurking. And she points to bullishness. Net bullishness is once again flirting with levels suggesting the stock market has gotten overbought. Are people too bullish? Are others too concerned about problems that don't exist? I mean, I think it very much depends on what part of the market you look at. I mean, you do have the more active trading community that has become pretty concerned about the outlook for stocks.

And I'm talking about the systematic traders. They pared back some of those exposures, and they only incrementally increased it in the last few weeks. You have hedge funds that have actually also been selling and especially tech in the last few weeks. But the point that I made in the very beginning is, you know, if you're going to trade this market, fine, you can trade on September seasonality. But if you're going to be an investor like most of American consumers are, you're going to look through what do you expect for this economy? And I think at this moment in time American consumers are, you can look through what do you expect for this economy. And I think at this moment in time, consumers are still convinced that we are headed for a soft landing.

And they have a job. They have real incomes that are going up. And I think that's what boosts the investor sentiment as well. We'll leave it there. Ladies, thank you. Young Yu, thanks to you as well. We'll see everybody again soon. I'm sure of that. Check out Shares of Intel.

They're following the CFO just wrapping up speaking at Citi's Global Tech Conference. Seema Modi joins us now with the details. What are we learning here, Seema? Here's some comments, Scott, from CFO David Zinsner reiterating that Intel has not received any funds from the CHIPS Act as of yet. And on that $10 billion cost-cutting plan that Intel announced in August, he said majority should be done by the next earnings report, so sometime in the fall. When asked about whether more cost cuts could be on the table, he said they're largely done, but never say never. Now, on restructuring, Zinsner said that separating Intel's fabs from its chip design business made sense and that it's important for customers. On the domestic chip fabs timeline, Intel CFO said that he expects wafer revenue to start to flow through in 2026.

But 2027, Scott, is when he expects material revenue to come in. That is a similar timeline to what Intel has shared in the past. But it is, of course, a long time for Wall Street to wait to see that revenue come in for Intel's fabs here in the U.S. Stock now down nearly 4%. Yeah, been a rough stretch, as we know, Seema, for shares of Intel. Thanks for that update. That's Seema Modi. We'll watch those shares for the remainder of our program for certain. We're just getting started, though. Up next, Wells Fargo Securities' Chris Harvey. He's back, revealing how he'll navigate a potential rate cut

and the upcoming election. We're live with the New York Stock Exchange. You're watching Closing Bell on CNBC. Let's send it to Pippa Stevens now for a look at the biggest names moving into the close. Hi, Pippa. Hey, Scott. Well, Dick's Sporting Goods is in the red. The retailer did beat Q2 estimates, but its full-year outlook came up short of expectations. The aggressive markdowns and store theft that plagued the company a year ago appear to be under control, but executives noted macroeconomic uncertainties and an under-pressure consumer. And sticking with retailer, Dollar Tree is plunging, pacing for the worst day in 23 years after the company slashed its full-year outlook, citing increasing pressures on middle-income and higher-income customers. The report comes one week after rival Dollar General also cut its outlook.

Dollar Tree now down 25 percent. Scott? Pippa, thanks. That's Pippa Stevens. Well, stocks are wavering, heading into the close as they try to recover from yesterday's sell-off. Investors looking ahead to Friday's jobs report as a key indicator of the first rate cut, which is expected to happen at the Fed meeting just a couple weeks from today.

Joining me now with his playbook is Wells Fargo's Chris Harvey. Welcome back. Thank you. Let me first get your thoughts just generally on this market activity over the last couple of days. What do you think? It's more or less what I would expect. There's a lot of event risk out there, whether it's the Fed, whether it's the election, whether it's conference season.

And with that uncertainty, there should be a bid for risk aversion. And that's pretty much what you're seeing right now. You think there's more of this? I think there's more volatility, more of a pullback? Yeah. I think what we saw with the ISM manufacturing yesterday, the respondents were saying, hey, we're worried about monetary policy. We don't know what it is. We're worried about rates. We're worried about the election. And we're going to wait. We're going to slow down activity, we're going to slow down purchasing. And when you see that, you should see a bid to risk aversion. So this is pretty typical, this is what you should expect.

Do you buy it? Eventually, you do. I think... What does that mean? What does eventually mean? So eventually means... So there's a belief out here you should sell the first cut. We don't think that's true.

What you should be doing is buy the election. If you look at the returns one month out, excuse me, one year out from the election, you're looking at double-digit returns across the board, right? No matter what? Well, it's not a guarantee, but for the last six presidential election cycles, you've had double-digit returns across the board. And that's pretty good, right? Again, it's not a guarantee, but that's pretty good. When I say no matter what, I mean no matter which side wins? Yeah, no matter which side wins. It's this belief that what happens before the election, everything slows down.

I'm not sure. I don't know how to plan. And what you see after is I have certainty. There are different betas, but ultimately I have certainty now. And now I can move forward. Now I can plan. What do I do with the pullback in mega cap tech? How do you view it? So what we did, we have a signature picks portfolio. We had some cash laying on the sidelines, and we just added Adobe.

We added Microsoft today, right? So what we're saying is, yeah, we can jump into some of these names. We think they're pretty good risk rewards, not across the board, but a couple, Microsoft being one of them. And what we're really positive on, we're positive on the communication space. We've been positive on the communication space all year long, some big cap tech in there, and we think it's a pretty good value. So you're a dip buyer. We are a dip buyer. We've been a dip buyer on momentum and some growth names in recent weeks. What I would say is that the rotation, this belief about small caps,

we still think that needs to get worse before it gets better. But with things that are pretty good risk-rewards, yeah, we think you can buy them with, you know, with pretty good confidence. Do you think there are enough dip buyers out there? Are there enough dip buyers out there? You know, because these stocks,

this is not the first time that these stocks have looked this way. But the dip buyers have not let them go down too far. They've come in and pushed them back meaningfully higher. Are they still out there to do that again? Or do we have renewed questions about the growth rates, the spending rates, and the ROI on the money? It's a great question.

So the belief is, so the way I think about it, the way we phrase it is, has the momentum broken? The momentum did not break. What happened with momentum, momentum stocks, growth stocks in the middle of the summertime, they bent, but they didn't break. The underlying fundamentals are still strong. One of the things that people keep talking about

with small caps is, hey, the expected growth rates are so high or so much higher than the large cap. Yeah, those are the expected. That may not be what you're going to get. What we're going to get, where we feel comfortable, is in those mega cap tech, in those growth names. Those are the names where revisions are going up, not down. Okay, so you don't believe then in the broadening story lasting that long. The durability of it, you sound like you're questioning. Yeah. What we think is up to capitalization should be a little bit more balanced than we've been in the last six, 12 months. But this belief that small caps are just going to take off, we think that's not the right call. The economy is not strong enough for small caps. You need a really

strong economy for that to work. And we're just not seeing signs of that. You think earnings and Expectations for future earnings are too optimistic right now So okay a couple things about let's just talk about S&P earnings what you're seeing is the winners keep winning So the bigger the higher margin businesses are gaining more and more market share It's not because the economy is really strong. It's because these stocks are doing well and their contribution is increasing. This is why mid-cap and small caps aren't doing well.

They're more tied to the economy, right? These are more tied to those secular trades. And so numbers are going higher. What we're seeing is we're seeing negative revisions for small caps per mid-caps, but we're seeing positive revisions for some of your larger caps and your mega caps. And it's really a difference between the secular story and the economy.

21 times roughly what the market trades for. Yeah. Is that, is that okay? I had someone on halftime report earlier today say the math doesn't work. It's okay. I think that's the right word. It's okay. And you'll find places where it's justified and places where it's not justified. The S&P 500 is a large cap growth company. What would you pay for a growth company? What would you pay for better balance sheets? 20, 21 times? If EPS numbers are going to go up and go up double digits, if balance sheets are strong, yeah, it's okay.

Math doesn't work? No, I don't believe that. But when you look at the disparity between the valuations of, say, the handful of mega caps versus the everything else, you say that the everything else is cheaper for a reason. It's cheap for a reason. The quality is lower. The balance sheets are worse. The belief in the E isn't there. I believe the E more up the capitalization than I do down the capitalization.

And if you're going to buy something at 21 times, you have to believe in the E. And so at 21 times, I'm still seeing growth. I'm still seeing opportunity. I have good balance sheets. And these are quote unquote good risk rewards Okay, so stay stay large, right? So if you can answer this question, and I hope you can please do if you can I guess you can right? Outside of mega cap tech and I only ask you this because you're willing to say

Microsoft and Adobe so you must be willing at some respect in some respects to talk about individual names Outside of tech staying high up right on the market cap spectrum what's what's attractive so it again we'll go back to names in the communication space and what's what's in the communication space it's it's netflix it's it's meta it's google it's comcast disney so on and so forth i't name individual names, but those are some of the names that are driving that. Or big contributors. I mean, do you like financials, for example? We do.

So we turn positive on banks in the summertime, right? And one of the reasons why, we've had 15 years of upward pressure on regulation. Now what we think is regulation has peaked and is beginning to come down. So you can start to have multiple expansion in this group, something we haven't seen in a long, long time. All right, we'll leave it there. Chris, I appreciate your time very much. Thanks for being here. Thank you. It's Chris Harvey joining us here at Post 9. All right, coming up next, coming up next, Carson Group's Ryan Dietrich maps out how to best position your portfolio during a seasonally weak time for the market. We're back on the bell after this break.

We're back. Stocks are falling again after yesterday's big sell-off. And while our next guest expects more pain ahead, he does see one area of the market that could offer a safe haven. Let's bring in Carson Group Chief Market Strategist Ryan Dietrich. Welcome back. It's good to see you. Thank you for having me back, Scott.

Appreciate it. You've been pretty bullish, if I recall. Are you still or are you wavering because of the market, the price action in this market? Yeah, we've definitely been bullish. Still remain there, similar to probably every guest you've had on for the past day and a half. Yes, the calendar is a potential worry. The first rate cuts coming, the election. We all know those things. I'll just say this. You know, yesterday was the third two percent down day of the year. Obviously, wasn't very fun for the S&P 500, most stocks in general. But Scott, look at it. The US dollar

was barely higher. If you look at what happened the last two days with high-yield corporate bonds, they're actually higher than they were on Friday. What in the world does that mean? This isn't a major risk-off scenario, but some more volatility. It does make sense in September, we think, and October, to be honest. October of an election year is usually pretty rough. We wouldn't be surprised at all if we had, you know, 5% to 7% pullback. Makes a lot of sense. Well, let's just get to the heart of the matter. Can the market go up if NVIDIA goes down? Yeah, we think it can. I mean, it's proven that. I mean, it did last week. I know that's just one small example. You know, we're more neutral technology in general technology in general. And again, you see what's happening.

I love Chris's conversation. We're a little different than what Chris thinks. We do think this broadening out is real. You look at various advanced and client lines hitting new highs. You've got small caps and mid caps. No small caps is kind of a dirty word a lot of times. But mid caps quietly are doing really well. That's our biggest overweight.

So we think the market can hang in there just fine if Nvidia has trouble, if tech in general falls apart. Sure, that might put a little damper on things. But overall, there's still some positives out there. Just one final comment, you know, on Friday, okay? On Friday, all-time highs for industrials and for financials. That's not what you tend to see, you know, if an economy is truly about to fall off a ledge here. No, but I mean, there are legitimate questions about the durability of the economy, the labor market, and thus the broadening trade for good

reason. No, you're absolutely right. I mean, look at today's data. I'm going to talk about the jolts. There's some concerns there. You look at hirings up 5%, but hey, layoffs up, you know, over double digits. I mean, so there are some cracks that are out there. And again, that's why we've been in the camp. The Fed probably should have cut last time. No, they did not. But, you know, we think the we know the cuts are coming. But we think this is, again, more of a mid cycle slowdown, not the beginning of a recession. I looked when the Dow hits a new high, went back to nineteen hundred. Six months later, you're in a recession, you know, less than 10 percent of the time. It's not very likely that people need to remember this. The best leading indicator we have is the stock market on the economy. So the economy

might slow down. But with stocks doing what they're doing, it's just hard for us to see a recession the next six months or so. What if the Fed's already too late? Yeah, well, honest to goodness, they probably are. I mean, you look at the inflation data, I've come on with you guys for a while saying inflation is last year's problem. But again, the Fed's voice goes a long way. And that's a big debate. You talk about all day. Is it 25 basis points? Is it 50 basis points? I think if it's 50, it's kind of the Fed saying, well, we were behind the curve. Market might not like that. I think ideally a 25 basis point cut with clear lingo that there are more cuts coming again is every time we see date like today's data.

I mean, you know, the jobs data, the employment labor backdrop continues to weaken, so more cuts need to come. But, I mean, if the Fed is already too late and you admit that they may be, these cyclical areas of the market are the ones that would likely get hit first, right? I mean, if you go right back to the playbook, if I'm worried, well, I'll just play some offense and some defense in the mega caps. Why take the risk elsewhere? Well, no, you made some good points there. Again, I'm kind of an old school message of the markets person. I mean, we are seeing the leadership. So clearly the message market is not worried yet. But I will say this, you know, we've got advisors in 42 states and we manage a lot of money at the Carson Group. And we actually added some low volatility ETFs in a period of high volatility. You want to have low volatility. That's the way you combat that. And what's interesting about

these low volatility, yes, there's consumer staples in there and utilities, but it's actually a decent amount when you peel back the onion, so they say, of financials and industrials in there. So that's one way that we've been very bullish for a while, added some low volatility. If we get, again, a little standard volatility scare ahead of the election, we should be OK. But honestly, Scott, we still think financials, industrials are the groups you want to be in the next six to 12 months as this economy is simply having a slowdown, not entering recession, probably accelerate later this year. Sure. But if you're going to hang on the message of the market, I mean, the message of Staples

health care and utilities outperforming is not exactly the greatest message to hang on, is it? No, it's not. Now, I'll just push back a little bit. In the fourth quarter, 21, what did we see? Utilities were leading. Staples were leading. They were like the only groups really leading, though. But right now, again, what are we seeing just saw on Friday, right? We've seen industrials. We've seen financials doing well. I know healthcare is kind of that group in the middle. But as long as we are still seeing that leadership out of financials and in industrials, it's hard for us to think that the leading out of the more defensive areas is truly a risk off scenario.

It's probably just kind of what previous guests have talked about. This choppy, well-deserved break could be needed. But again, that's where we're overweight and we're still we're still in that boat there all right we'll leave it there right appreciate it we'll see you soon it's ryan dietrich joining us once again here on closing bell up next we track the biggest movers into this close pippa stevens back with that pippa one material stock is tumbling as a potential merger is caught in washington's crosshairs the name to watch coming up next all right we're about 15 from the close let Let's get back now to Pippa Stevens for the stocks that

she is watching. Tell us, Pippa. Well, U.S. steel is plunging as new reports emerge that President Biden may be preparing to block the deal with Japan's Nippon Steel. U.S. steel's CEO has warned of plant closures and job losses if the companies do not merge. Now, U.S. steel is saying just now that it has not received any update and that it fully expects to pursue all possible options to ensure the transaction closes. The stock is having its worst day since 2017. And Zscaler shares having their second worst day on record after the cloud security company's full-year outlook disappointed Wall Street. Zscaler noting that the first half of 23 and 24 were challenging

environments and those lower scheduled billings are now coming through. Now, don't miss an exclusive interview with Zscaler CEO Jay Chowdhury coming up on Closing Bell Overtime. Scott? All right, Pippa, appreciate that. Pippa Stevens still ahead. Verizon shares are falling on reports the company's nearing a new deal. We'll break down those details. Closing bell's coming right back. Big day tomorrow, right here on CNBC. We dig into NFL teams' soaring valuations. CNBC's Mike Ozanian reveals all the details. It starts on Squawk Box tomorrow morning, 6 a.m. Eastern.

And don't miss it. Coming up next, HPE reporting in overtime. We'll run you through the key metrics and themes to watch for inside the Market Zone next. All right, welcome back. I want to pull up shares of NVIDIA here and welcome our Jim Kramer. Of course, mad money is Jim Kramer to the set because he has some new reporting regarding these reports yesterday. Yeah, I just got off the phone with the company. Of a subpoena that the company had allegedly received. And you have some new reporting.

Right. I just got off the phone with them. And here's their statement. We have inquired with the U.S. Department of Justice and have not been subpoenaed. Nevertheless, we are happy to answer any question regulators may have about our business. They're going to say, of course, they went on murder as reflected in our benchmark results. Valued customers and customers can choose whatever solution is best for them. But no subpoena. So the crux of the story yesterday in, you know, look, it was an already a dicey tape yesterday for this company was a report by Bloomberg picked up by many other news

outlets that NVIDIA had in fact received a subpoena by Justice. Your reporting today directly from the company says no subpoena. Wait, now look, I mean it's possible that there could be one, but the fact is that they have not received one. And those are very different things.

But I think it's important for viewers. A lot of people feel that it's gotten very formal, could get very aggressive. It still could. But the important thing to point out is that they've received nothing. It's been relatively informal, could we say, to this point. The company has said that it has gotten requests for information questionnaire in the past. But that's far different than an actual subpoena. But can you just speak to whatever kind of regulatory risk of any kind that you see around, whether it's this stock or others?

We've been talking about Alphabet, Apple, and others. Sure. Look, I do think that one of the hallmarks of administrations that are running to an end is that the agencies kind of go nuts in terms of regulation. They can get away with it. Now, I mean, look, there's this trial start next week with Alphabet that Dears has been talking about. But the fact is, is that if you are a if you have almost all the market, it doesn't make you a some company that's manipulating things. You can be a monopolist just because that you've got it. But if you abuse the monopoly, obviously they can go after you. And there's been if they were obviously if the government thought that there was abuse, they would have given a subpoena.

Our senior markets commentator, Mike Santoli, is here with us, as you obviously saw. This just, you know, again, circles around these companies as an issue that you're going to have to contend with. Yes, and it's going to hang over the stock or the segment of the market, in part because, you know, the anxiety already is that NVIDIA seems to be over-earning in the moment. I know. And they dominate this phase of the whole build-out. And can it get better from here, whether it's because of their bundling stuff, they're trying to integrate other products into their GPUs, or it's just, you know, can it stay this good

for much longer? You're so right. I mean, let's think of it like this. You're on the desk at a brokerage house and you've got a hot deal. Do you give the deal to customers who do the most work and most business with you? Or do you give the deal to people who say, hey, you know what, there's a site here, you get hot stock. No, you give the hot stock to the best customers. Well, how do we know that NVIDIA isn't saying, you know what, look, if you buy all our stuff, we're going to give you the next stuff. That's not illegal. That was illegal. This is like the good old days where you run down, you come on the set.

And because you've done that, I'm not going to let you leave so easily because I do want your opinion on on what we're seeing in the markets over the last couple of days for our viewers ahead of your own program this evening. I don't like it at all. I just don't like the market at all. In part because, you know, we're like we have a big employment number on Friday, and people are obviously jittery. We've got people who just say, you know what? We want our Fed rate cuts, but it's important that business stays strong. It doesn't work like that. And so we're in that dicey moment a few weeks before. Michael, you've done some great stuff in this. A few weeks before we read a possible cut, and yet we still expect everything to be great. It's just not the way it really is.

So there's tremendous anxiety that things are actually getting weaker. But that's why the Fed might cut. So right now you're in that kind of period which just says who's next to fall apart. But the answer is, is that we've already had reporting. No one's next. You use the words, you know, tensed up of how the market has has been in recent weeks around events, particularly about the labor market. Absolutely. I mean, and that's why the job market has basically become paramount in terms of the thing we're going to be most sensitive to. The Beige Book, in my view, should almost never really be a market mover. It's this contextual thing. It's kind of this impressionistic thing. But today, it seemed to add just a little bit of pressure because it pushes in the same direction

where everybody's already nervous, which is it's slowing more than desired. Maybe it means that in two weeks the Fed cuts by whatever amount and it's either not enough or we're not sure if it's enough. I would just say just because we have low visibility, it doesn't mean you're running into the iceberg, but you just think you might. How are you, Jimmy, thinking about the broadening of the market, whether it's healthy if it's in areas like health care and staples and utilities and the durability of the mega cap trade as it stands? Thank you for this question. I'm writing my top. I mean, typically I'm like furiously writing and thinking.

And I said, OK, so suddenly we want a big broadening, right? We want health care. We want finance. We want utilities. Oh, no, no. What we really want is NVIDIA and we want Microsoft. No, no. It's great that we're getting other groups in. It's great that you made us up, Big United Health doing incredibly well, Abbott coming back major. It's great that we're having that broadening. The worst thing, JP Morgan gets downgrade for heaven's sake. But, you know, look, this is what we wanted, the great broadening.

And so we can't again say, oh, no, it's Amazon's got to be at 182 before I like the market again. We talked about that, Mike. Right. It's like, hey, where's the broadening? Where's the broadening? No, we don't like the broadening. It's too defensive feeling. Well, it's too defensive or it's a little bit chaotic. It's a little bit less stable than when seven stocks went up every day, discounting the same good news. So I think it's sort of a you have to kind of pick which type of climate you're more comfortable with. The equal weight S&P is less than 2 percent off its record high. Let's kind of keep things in perspective of where we are.

Thank you. How much has has already been been been paid in terms of pricing in the slowdown. Some of these mega caps have been green for part of the day, Jim. I mean, people have proven that they're not willing to wait that long to let these things fall too far. And we'll see if we're in that kind of a market still. Well, the biggest five one-day declines before NVIDIA, four of five was the greatest buy opportunity for those stocks and agents versus the S&P. One wasn't. Alphabet didn't do as well.

But again, I mean, this is what you want to have happen. But people are so gloomy about it. I mean, Mike, you do so much great work with the S&P. You know that the S&P is actually pretty strong. Yeah. Look, we're still playing with house money. I don't think you want to see bonds rally very much more. Right.

375 on the 10-year. You don't want it crashing down through that level too hard. That sends a poor message. Great reporting by you. Thanks for coming down. We'll see you tonight on Mad Money at 6 o'clock. Thank you. We'll appreciate it.

So we'll go out mixed here as the bell rings.