Closing Bell - Closing Bell: Stocks Rally Following Yesterday’s Big Rate Cut 9/19/24

Episode Date: September 19, 2024

How much fuel is left in the market’s rocket boosters after gains eight of the past nine days? Our all-star panel of NewEdge’s Cameron Dawson, Virtus’ Joe Terranova and Payne Capital’s Courtney Garcia debate where they stand right now.  Plus, Morgan Stanley’s Sherry Paul tells us why investors should be recalibrating their portfolios now that we are in a rate cutting cycle. And, Apple got a big boost in today’s session and led the tech sector higher. We break down what’s behind that bounce. 

Welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner today. This make or break hour begins with a rate cut rocket launch to new records on Wall Street. Investors globally embracing the Federal Reserve's half percent cut 24 hours ago as the right move for the right reasons, preserving a potential soft landing and stoking risk appetites. Here's your scorecard with 60 minutes to go in regulation. See the S&P 500 there. It is up about 1.9% just off the highs. It did click to a 2% gain earlier. That surpasses its former peak from mid-July.

The NASDAQ has been the laggard in recent months, but is playing a bit of catch-up. You see they're up 2.75%. The Dow about 42,000 for the first time and the Russell 2000 participating, although maybe not quite as much as one might expect on this Fed rate cut rally up 2.08%. Treasury yields responding to the outlook for more rate cuts from a Fed less worried in the moment about inflation. The 10-year yield is up a bit. The yield curve steepening 3.73%. You see twos down below 3.6%. We'll discuss what all this should mean for your portfolio with Sherry Paul,

Morgan Stanley private wealth advisor, in just a bit. But first, our talk of the tape. Can it be this simple? The Fed easing into a solid economy. Good news piled upon good. And how much fuel is left in the market's rocket boosters after gains in eight of the past nine days for the S&P 500? Let's ask Cameron Dawson of New Edge Wealth, Virtus Investments, Joe Terranova, and Payne Capital's Courtney Garcia.

Joe and Courtney, both CNBC contributors. Welcome to all. Good to see you. Plenty going on. Cameron, I guess if the top-down overarching rules are don't fight the Fed, don't fight the tape, did the market nail it here? And what else is to be said about where it might play out? Well, I think that it's important to note that we got this supersized cut, this move to easier, at least less restrictive policy, also in a week where we were raising

growth forecasts, which is fairly rare in the sense that we have this pretty strong economic backdrop, and yet we're getting the Fed taking its foot off the brake. And so I think that overall, that's a good environment for risk assets. We can't forget valuations, positioning, sentiment, growth expectations, all being fairly elevated. But at least in the short term, it's a lot to fight. It is tough to fight. I guess it's probably worth remembering, though, that it was just a couple of weeks ago where you did have a run of softer than expected economic numbers. And this drumbeat of the Fed's falling behind was getting pretty loud. And so then you got the 50 basis point chatter, which manifested itself. So I guess we can keep

swinging through that cycle for a bit. And it raises the point that if the Fed goes another 50 basis points, what is the backdrop that they would cause them to do that? Meaning that will another 50 basis point be because they can, because inflation has come down and they want to get to neutral, or because they should? It seemed from Powell yesterday that they said, look, let's not extrapolate the 50 basis points going in the future. Let's take a more measured pace.

So it's our view that they'll go 25 in November and December instead of laying on these big 50s and get to neutral as fast as possible. Yeah. And that neutral, even if it is higher based on what Powell said, then maybe the market had priced in. It's far enough away that I guess moving in that direction is enough for the moment. It is very interesting that we're talking about moving to neutral because this is actually the first Fed rate cutting cycle. It's been an explicit target, meaning that they only initiated a neutral Fed funds rate back in 2012 when it was at four and a quarter.

So this is pretty new, and it has been creeping up. It was two and a half. Now it's 2.9. Where we end up tells us how deep this cutting cycle goes. And as Powell's comments said, it's significantly higher than it was pre great or during post the great financial crisis. So that could be the ultimate floor of where the Fed goes, even if, as he says, we only know it by its works, which means it's not a number fixed in space. It's something that we have to see once we get closer to it. We'll trip it. Joe, I don't want to microanalyze the Fed's kind of delayed reaction. I mean, the market's delayed reaction to the Fed.

But it is interesting that there was enough of a kind of a rethink of that noisy response yesterday, whereas people almost came in today and said, let's not overthink it. Well, we shut the machines off yesterday at 4 o'clock and everything that happened as far as the 2 o'clock to 4 p.m. price action. That's just quantitative trading. That's algorithms in the market taking advantage of volatility. It's not financial advisors saying, oh, gosh, the Federal Reserve won 50 basis points, not 25. We've got to make portfolio reallocation. So I don't put much credibility into the price action from 2 to 4 p.m. What happened overnight was you had a significant amount of overseas buying from Europe, from

the Middle East, from Asia, a lot of sovereign wealth funds getting into the marketplace again. And the trend is a very powerful force. The trend itself might be the most powerful force in the marketplace. And we've seen so many times over and over again this secular bull market that's well entrenched, which has these catalysts of secular bull market that's well entrenched, which has these catalysts of a Federal Reserve that's not adversarial, profit margin expansion. We've got disinflation. You've got innovation. All of that collectively leads to an environment where if

there's a dip, you're going to be buying it. And look today, what do we have? The S&P 500 at a new all-time high. Guess what? Of the MAG-7, only one MAG-7 is at a new all-time high. Guess what? Of the MAG7, only one MAG7 is at a new all-time high today, and that's Facebook. So it's telling you the market's giving you even more than it gave you last year. Yeah, Courtney, I mean, that's a good point in the sense that among the things we maybe had to complain about, let's say halfway through this year, too narrow a rally, too reliant on a handful of stocks. We're not sure if the Fed's actually going to kind of pull back a little bit on rates. A lot of that is coming together, those things being answered. How do you view it, though, if a client comes to you and says, did we miss it?

I mean, the market's already up pushing 20 percent year to date in the S&P. How do we think about returns from here? Yeah, and I think that it's a great question because you're already seeing there's been a move that's happened. So when you look at the last three months, you're seeing things like real estate, things like financials, all these interest rate sensitive sectors have already had huge moves.

Like real estate's up like 17% in the last three months. So yeah, the question is, have I missed this? And is that rally going to continue to broaden? And I think as the Fed lowers interest rates, what we can't forget is how much money is still sitting on the sidelines in cash. There's over $6.2 trillion sitting in cash, plus the trillions that are in short-term CDs right now that are about to mature. And all of that money is about to make its way back into

the markets. Because if the Fed does continue to lower rates at the rate that it's expected to be lowered, you're going to see those money markets probably in the 3% range over the next year. I suppose the 5% is in now. And as that money makes its way back in, that's going to be a boost for the stock markets. And that's where I think there's probably more of a risk of the markets almost melting up as the Fed lowers interest rates, as opposed to us being on the brinks

of a recession right now. That being said, I mean, I've looked back at this period. Like, you never saw a huge amount of money spill into the market all at once from cash, right? It seems to be a buffer to allow people to take more equity risk. But does not does not exact line of reasoning, if you were to tell a client that not sound like, well, there's a lot of people who are late and they're going to come buy it from you right now. You know what I mean? Isn't there other reasons? It seems to me, you know, after the

first Fed rate cut, history says if there's no recession, market goes up. You know what I mean? It's not about like who's going to be the next buyer coming in. Well, I think that's exactly right. And I think when you look at historically speaking, I mean, markets 70% of the time are higher six months after the first rate cut. So, I mean, data is definitely on your side. We're starting to see GDP is continuing to grow. The labor market looks strong. Inflation's coming down.

So all of the actual data absolutely backs that. But that cash on top of it, it's just going to be an added benefit. And I agree with you. We've been saying this for a long time, that money should make its way back in. It hasn't. But this is not just individual investors like us sitting here. These are institutions who have this money. They can't sit on it forever.

They've got investors they've got to talk to. Yeah. I mean, the more the market goes up, though, I guess you're getting the equity markets bringing your allocation up if you own any of it. Cameron, you mentioned positioning and valuation, maybe not exactly the sweetest starting points. If we look back at the mid-90s, you know, soft landing scenario, you went on to five-year returns for the S&P of like 24 percent per year. That was a cheaper market. It was a less exploited market.

You have more room for unemployment to go down. On the other hand, you know, we are actually cheaper a little bit than when we peaked in July. Sentiment is a little bit off the boil. Positioning, it just seems like we've reset to a fair degree, at least to where it's not necessarily as stretched at the moment. The one that's reset to the most degree is institutional positioning. So it's dropped down in the Deutsche Bank consolidated positioning report just to the 54th percentile. So that suggests that you have reset the shot clock at least there. Now, individual positioning is still about 1% off of its 20-year highs. So that doesn't seem to be washed out. As well as sentiment, that has come off its peaks, but it's certainly not washed out.

Where we're watching the closest is an earnings estimates and I think that's the wild card as we move into twenty five. Do Fed rate cuts make it more likely that we can reach the fourteen percent growth that's priced in. If the answer is

yes great for markets but if we start to see earnings estimates start to level off we've actually seen twenty s twenty five estimates get trimmed just slightly in the last month. If they start to level off that could suggest that because you're starting a higher valuations you get a bit more of a sideways choppy kind of market as you move into 25. Yeah. Yeah. For the third quarter of course estimates have come down quite a bit. So it's going to be maybe a little bit noisy although Joe I guess the question now is what parts of the market seem like they're either ripe for grabbing the baton or not? I mean, you see semis up almost 5 percent today.

It feels like that's still a show me situation. In other words, they kind of surrendered a leadership role here. NVIDIA trying to make a comeback, not quite able to bump through that ceiling. It's been in place for a little while. How do you think about that category of stocks relative to other things that are moving today i think what we're seeing today is a classic example of a lot of capital trying to go to the places that have not made the all-time high or not at the all-time high uh utilities are down today real estate is down today right defensive stuff that's worked recently yeah so you, value is at its all-time high.

We're still below the July highs for semis, for the NASDAQ 100, for six of the MAG 7. So I think capital is flowing in that direction. I still think you have to stay up in the equity size class with large cap. I'm not sold on the premise that small caps are going to experience this dramatic outperformance because everything's fine with the economy and the Federal Reserve. Here they go coming to the rescue. And, you know, one other point on the Federal Reserve, you always hear don't fight the Fed. Keep in mind, as has been cited several times in the network today, since the first rate hike in March, the S&P is actually up 35 percent.

So if you went into cash, that didn't work out so well for you. We're in a seasonally weak period. It seems as though everything that we've known in the past, we're defying all these, quote unquote, historical metrics that tell us where we're going. I think Cameron's correct to focus on earnings because earnings really are the ultimate wildcard. Are earnings estimates too high? And if earnings estimates are too high, then I think you've got a marketplace. I like you said sideways choppy action because I don't think you flip the switch where you go trend goes bull to bear. But then I do think you run in place a little bit.

And in that environment, you focus on quality, you focus on large caps and make sure you have the major sectors like financials, health care and technology. I mean, in fairness, in terms of that don't fight the Fed idea being tested, you know, from January of 22, when it became very clear we were going to have rate hikes, you went down 25 percent in the S&P and then you're up 50. So that that gets you to 32 or whatever. You know, the numbers come out. And in other words, for a while, Fed got its way. Well, and again, but I think that the market, the reason for the significant decline, more than anything else,

is the market efficiently discounted that we were going to have an earnings recession. And we did. We had an earnings recession for all of the three major indexes. So we're still waiting on the Russell to come out of its earnings recession. Thankfully, the NASDAQ and the S&P came out. But I think that's what the majority of the decline was really about in 22. Right. Well, obviously, you know, once inflation peaked, you know, the winds turned as well back in 22, I guess. Courtney, do you have a differing view on the small cap trade or anything else that seems like it might be, I guess, underexploited at this point? Yeah, and I actually probably would take the other side of this, where I think small caps do present an opportunity here, because as we face a lowering rate environment, they're kind of uniquely positioned to benefit because they have a lot of debt on their balance sheets.

They're really dependent on banks, which have higher rates right now. So as those come down, it's going to benefit their balance sheets. So I think it's something you don't want to be overexposed there. I don't think that large cap check trade is over. I just think when you're looking at the forward earnings, they're expected to grow at a slower pace than some of those interest rate sensitive sectors. So I want to see what has an earnings accelerating as opposed to decelerating.

And I think some things like your small caps, like your real estate, like your financials, I think those actually are well positioned here. So I think it's just kind of that classic story. You do want to make sure you stay properly diversified here. I wouldn't get out of tech, but I wouldn't chase it right now, not with the valuations they're at. So yes, have some in small caps, have some in real estate. You want to make sure you take advantage of that. It's one of

those moments where it feels like, okay, we're going to have to go in search of a few more things to worry about because some things have been taken care of. Now, a few things that get flagged are, well, guess what? The yen keeps going up. And we cared about that for a while. Do we still care about that? I think that Jeff DeGraff was interesting this morning in flagging that yen bulls are now at an extreme. So positioning has flipped where it was very, very short to now being very long. So possibly that's not as much of a risk. Yeah. So in other words, it's not going to come out of the blue and surprise us this way by some kind of sharp rally in the yen that scares money out of certain trades.

And look, complacency is always something that sits on the back of our mind. If you look at things like credit markets, yesterday you saw the spread of CCC, the junkiest of the junk, to B bonds effectively get to its lowest level in over two years. People are racing into risk. You're seeing it with the small cap trade today. So we have to be aware that as people pile into risk, does that create complacency and effectively create a coiled spring for volatility, which is exactly what we saw on August 5th. It is. And yeah, Joe, it seems to me the driver of the correction in 2024 has been extremes in positioning and sentiment more than anything else. And that's what happened in April. That's what happened in July. So I think that, yes, we're going to get to a point clearly right in the next several weeks

where we're going to get extreme bullishness all over again in terms of positioning and sentiment. And the market, as you always say, has to kind of have that relief valve and release some of the stress and pressure from it. And I think investors just have to expect that. But you're still in this secular bull trend. And I don't think you want to look at that type of price action and say, OK, we're at this inflection point, because until you are proven wrong with the earnings or the temperament of the Federal Reserve or even inflation itself, this is a bull market. Right. Although I still think that there's enough mixed macro data coming through that at some point we'll get a bad number. The market will be up here. It'll seem like it's, you know, maybe a start of a trend.

And all of a sudden it's we have to keep the economy on a short leash again. Well, and the non-discretionary funds will have a lot of fun in that environment with the volatility being elevated. Quick, Courtney, in terms of bonds right here, interesting reactions. Is there anything to be done in terms of repositioning within or into or out of bonds? Yeah, and I think this is something we've actually been working with clients

over the last several months of really extending duration on bonds with the expectation that rates are coming down here. And I, again, think the question is, is it too late? Have I missed that trend? And no, I do think you want to make sure that you are starting to extend your duration because if rates keep coming down here, and that's what expected to do, you're going to keep getting lower rates there. So you want to make sure that you're taking advantage of that opportunity. A little

bit of a race out the curve. We'll see how it goes. Great to talk to you all. Thank you very much. Cameron, Joe, Courtney. Let's send it over to Pippa Stevens for a look at the biggest names moving into the close. Hi, Pippa. Hey, Mike. Shares of Mobileye are having their best day on record after Intel said it has no plans to sell at stake in the Israel-based self-driving technology company. In a statement, Intel said it believes in the future of autonomous driving technology and in what it calls Mobileye's unique role as a leader in that lane. Still, it's been a rocky year for Mobileye, and the company cut guidance back in August amid weakness in China,

and the stock is down nearly 70% in 2024. And NextEra Energy Partners is in the green after Jefferies initiated coverage on the stock with a buy rating. The firm said that while the company will likely have to cut its dividends substantially, the market has already digested that outcome. Jefferies has a $28 target on the stock. Those shares up three and a half percent. Mike? Pippa, thank you. We are just getting started here. Up next, much more on today's market rally. Plus, what's next for the housing sector

now that we're in a rate-cutting cycle? We'll discuss that with an analyst after this break. We are live from the New York Stock Exchange. The S&P up 1.8%. You're watching Closing Bell on CNBC. I think that's the real wild card for the inflation rate and the economy, is what happens to the housing market. And I don't think any of us really know. And the reason is that we've always experienced lower rates during recessions and we have not had in hiking cycles such strong housing prices. So will they go down if they cut rates because of unlocked supply? I don't really know the answer to that and I'm very anxious to see the data as it develops. That was DoubleLine's Jeffrey Gundlach on Closing Bell yesterday,

voicing concern about how Fed rate cuts might impact housing prices. Those stocks, though, rallying today. The XHB homebuilder ETF hitting record highs for the third session in a row, up 2 percent today. This ahead of Lenar earnings out after the bell. Joining us now is Wedbush Senior Vice President of Equity Research, Jay McCandless, to talk more about this group. Jay, obviously we've seen some response to lower mortgage rates in some of the new home data, the mortgage apps and things like that. What are your expectations for where volumes, I guess, first industry-wide should go from here? Are we actually going to see some prolonged relief or not? Yeah, thanks for having me on. I think what

we should see for volumes this year, probably low single digit growth and starts in existing home sales. But then when you start to think in terms of 25, what we're expecting there is probably about 10 percent resales. And then on the new home side, thinking five to seven percent growth is our realistic targets for next year. OK, which seems reasonable. I mean, the line in terms of homebuilder stocks in particular has been emphasizing the advantages that new builders have had. You know, we've got scarcity of supply, their ability to buy down rates. Is that advantage diminishing or is it just, you know, there's so much that we that we need to meet demand that they'll be OK? I think the in terms of the demand that's out

there, you think about the millennials and now the Gen Z's. Those are two of the largest population groups, largest population groups we've seen since the baby boomers. So, you know, we can't build build into until into the sunset, but I do think there's a lot of opportunities for the home builders still. The other way that we think about supply is about 76% of outseeing mortgages right now have a rate below 5%. So I think a lot of people, you know, if mortgage rates stay in low sixes, high fives context as we move into the spring. Maybe that prolongs the lock-in effect. Some of those people who are in the homes at those lower rates don't move unless they have to move. And so, yeah, I think that's going to help the builders continue to take market share

away from existing homes. It may not be permanent market share gains, but I think at least in this environment, if we stay with a five handle or above on a mortgage rate, that's going to be beneficial for the home builders who, like you said, can buy down mortgage rates, can offer incentives. They can do some things that your average existing home seller can't do. I mean, the builder stocks obviously have had just a great run, among them. You've also been focused, though, on this tendency for a seasonal trade to develop in this group. What does that tell you based on history? Yeah, historically, buying the homebuilders in October or November and then selling them around April or May, call it right around tax season, historically has been a good trade.

And that trade, as we talk about in our note, has generated on average more alpha than holding the S&P 500 during that period. I do think there's a potential certainly this year for the group to see a seasonal trade again. The ITB is up about 28 percent since July 1st, which is the ITB and the XHB or the ETFs that we monitor. So maybe that is working against it. But I would also say that if mortgage rates continue to move lower, again, into a five handle instead of a six handle, that should be good for affordability and I think would probably be good for demand this spring. What in particular should we be looking for in the Lennar results in terms of where the bar is set for expectations? I know you also have talked about this idea of a potential spinoff of the land.

Sure. So if you think about what mortgage rates did during their quarter, and it's an August quarter end, mortgage rates went down pretty dramatically from called 6.8 percent on 30-year at the beginning of August down to now we're sitting at 6.1%. So what I think we'll hear is that demand may have started a little slow in June for the quarter, but then July and August, I'm expecting to hear that demand improved. And I would assume for September, they're still seeing the same trends as mortgage rates continue to move lower. They have mentioned the last couple of conference calls that they are wanting to spend off some of their work in process land assets. We gave it the name land spend.

That's not a Lenore term. That's something we came up with. But basically, it would, if they're able to achieve the land spend, would help improve their return on equity metrics and some of the other metrics that we watch on the stocks. And I think also what we might hear from them is that with prices, with mortgage rates coming down, that might give them a little more pricing power than what we're expecting, which could potentially be positive for gross margins for the balance of this year and into fiscal 25. All right, Jay McCandless, thanks for helping us get ready for those numbers. Appreciate it. Thank you. All right, up next, Morgan Stanley's Sherry Paul is here with her playbook following yesterday's big rate cut

and why she says it's time to recalibrate your portfolio. She'll join me at Post 9 after this break. And don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. We'll be right back. With an appropriate recalibration of our policy stance, strength in the labor market can be maintained. This recalibration of our policy stance, it's a process of recalibrating to recalibrate. We're recalibrating policy, recalibration of our policy, begin to recalibrate, recalibrating it. We're recalibrating our policy over time to a stance that will be more neutral. Fed Chair Powell using the word recalibrate nine times in yesterday's news conference, following the Fed's 50 basis point rate cut. My next guest says, as the Fed recalibrates,

so should your portfolio. Joining me now at Post 9 is Sherry Paul of Morgan Stanley Private Wealth. Sherry, great to see you. Great to be here. Thank you. In what ways should we be fine-tuning or rethinking how we're invested in this market? Yeah, recalibrates, the word of the day for sure. I think there are three things that investors should be recalibrating. Number one would be your mindset. And to really get discipline from worrying about what could possibly happen to planning for what will

probably happen as the timelines around uncertainty get shorter and shorter and we can talk a little bit more about that but like obviously we know rates are going lower we're getting closer to elections and things like that number two would be to obviously recalibrate your portfolio to meet the current economic and policy environment and then the third thing would be obviously recalibrate your portfolio to meet the current economic and policy environment. And then the third thing would be to recalibrate expectations about how to evaluate risk adjusted rate of return as we go forward in this sort of innovation driven earnings, you know, sort of expansion. But at the same time, we're hitting new highs and that causes investors concern. So preparing for more volatility. Yeah. And hitting new highs both in the equity indexes and also in a balanced portfolio finally did hit a new high,

too. So I guess it's time to to figure out exactly what that means from here on out. So you mentioned to focus on what's probable. Yes. Rate cuts from here on out look extremely probable. But in what context, I guess, they're happening. In other words, do we still have to be worried about it tipping into recession or not or how you might handle any of those scenarios? Yeah, thank you for that. Well, we are in a slowdown, an earnings slowdown, all right, and an economic slowdown. We know that that's different than a recession, which is a contraction, and ultimately it's a reset.

So probably we stay out of recession, and clients should understand that and start moving out of cash because we know rates are going lower. And if you want to guarantee yourself a pay cut, then keep your money in cash. We also know that we're probably going to see more investment banking deals go down as the cost of capital gets cheaper. And what we're advising clients in the portfolio pivot around that is to own that small cap type return on a big cap balance sheet. So we start to really lean into where innovation is taking place and it still continues to be in the U.S. big cap space over small caps, as an example, which tend to not perform when we have a slowing economy, even if they get to pick up on the cheaper money. Does that imply remaining focused on those large tech companies

that have already been recognized as being the leading platforms and the innovators to here on out? Because they have obviously taken a little bit of a backseat in the last couple of months. Yeah, well, you should have a meaningful exposure to them. But what we're seeing this year towards the end of the year, since June, is a broadening out of performance in the market, which investors should be cheering despite any other kind of geopolitical concerns or domestic political concerns that might be weighing on them. So it is really crucial to decouple the

two and find the corridor of opportunity. And there are plenty of them in the market right now. You mentioned, obviously, we're six, seven weeks from an election. And, you know, it seems to me that investors that over fixate on policy and politics and even potentially potential tax implications, you know, maybe get distracted from what they ought to be doing or maybe the returns aren't necessarily worth the effort there. How do you advise people navigating around those? Yeah, the simple advice is don't trade the politics. What's happening in the markets right now, the decision a company makes about raising the dividend has nothing to do with who sits in the president, with the presidency. AI, underpinnings of innovation, and that's an earnings, you know, it's an expansion and a cost-cutting bull market that we're in,

has nothing to do with who sits in the presidency. And we're probably, from a policy standpoint, Morgan Stanley's policy team in D.C. believes that we end up with, you know, a split Congress. So in that case, that's a good hedge on whatever is getting propagated from a political standpoint about at the presidential campaign level. We probably end up with largely the same with one big exception, which is we probably see the Trump tax cuts expire, and clients should be preparing for that now from an estate tax standpoint in particular. And in terms of, you mentioned that we'll probably get a pickup in investment banking activity. For an investor, what are the direct implications of that?

Is it just be prepared to maybe have access to IPOs? Is it about an active M&A environment or something else? Well, for most retail investors, it's just really investing in those balance sheets that can pivot quickly to purchasing new revenue streams. That can be opportunistic. Yeah, absolutely. We know that interest rates are going down and we've started to see dividend rates go up. So psychologically, if you're willing to hold a bond for 10 years, why not hold that great company, get the cash flow plus the appreciation.

So investing in balance sheets to kind of, you know, get that integration of the IB transaction would be the best way for most investors to go about it. In a sense that you buy the buyers or the ones that could be smart buyers. That's right. Yeah, exactly. Final point about setting expectations in terms of returns from here on out. Do you feel you more often have to tell clients, listen, lower your sights a little bit or make sure you're invested to capture potential higher returns? Yeah, well, it's a little bit of both. But planning, financial planning is crucial right now. So setting expectations around cash needs and then basically bifurcating that out of a diversified portfolio, which remember is for most investors is to distinguish between strategic investing and diversification, which is correlation, right? So we have stocks, bonds and cash and maybe some commodities.

But within the asset class itself, that non-d diversifiable risk, let's say in your stock portfolio, you've got to be strategically placing cash across these different sectors because not every sector is going to be an equal beneficiary of the climate going forward. And that becomes super key. Yeah. No, no. Where your bets are, I guess. Yeah. Yeah, exactly. Sorry. Great to talk to you. Thank you. Thank you. All right. up next, we're tracking the biggest movers as we head into the close. Pippa is back with those. Hey, Pippa. Hey, Mike. A ride share and restaurant are teaming up, and the possibilities are endless. The names to watch coming up next. Just about 19 minutes till the closing bell. Let's get back to Pippa for a look at the key stocks to watch. Darden shares are popping. It's the best stock in the S&P 500 after the company announced a multi-year partnership

with Uber for Olive Garden Delivery. The two-year exclusive deal is a departure for the company, which has traditionally shunned third-party delivery companies. That partnership is overshadowing Darden's weaker-than-expected earnings report, which missed on the top and bottom lines. Olive Garden's same-store sales shrank 2.9 percent during the quarter, with Eddie V's and the Capitol Grill also showing weakness. And sticking with delivery companies, DoorDash is higher. BTIG upgraded the stock to buy from neutral, saying it sees signs pointing to ongoing near-term strength, as well as what it calls

underappreciated longer-term drivers. The company also says DoorDash is hitting important milestones, including positive net income expected in the second half of the year. Those shares up nearly 4%. Mike? Pippa, thank you. Talk to you again soon. Still ahead, your earnings setup. We'll tell you what to watch when FedEx and Lenar report after the bell. And don't miss the new CNBC Sport Digital documentary, WNBA Rising, Inside the Season that Changed the League. That's on CNBC.com slash sport. Closing bell.

Be right back. Welcome back. Metashare is headed toward a record close. Julia Boorstin here with more on that move. Hi, Julia. That's right. Metashares are up over 4% following post-Fed optimism and well on their way to close at a record high. Now, Meta has been on a tear. It's up over 83% over the past 12 months. Today's move higher, along with the rest of mega-cap tech tech comes despite two pieces of negative news the ftc issued a report finding that meta and other social media companies are collecting and using consumer data in a way that endangers people's privacy recommending that congress pass comprehensive

federal privacy legislation and better safeguard for kids and teens plus the ft reports met is facing a big fine in the eu over its alleged efforts to dominate classified advertising with its marketplace service. But Mike, that's not stopping the stock now up 4.25 percent. No, not at all stopping. In fact, it's really the only one of the mega cap tech stocks that is now making new highs. And it's hard not to notice the outperformance of Meta relative to Alphabet. Probably the biggest gap between those, you know, over a one-year period on a 60 percentage point gain in Meta relative to Alphabet. I mean, for as much as Meta faces some regulatory friction, perhaps nothing compared to what Alphabet's up against. Yeah, nothing compared to what Alphabet's up against. And also, Meta has so consistently outperformed in terms of advertising revenue growth.

And next week, we have Meta Connect. I'm going to be there on Wednesday. That's where we expect Meta to unveil all sorts of new AI features and also new hardware. And it seems like there's a lot of optimism that Meta is going to be able to continue that growth rate when it comes to advertising. And perhaps we'll see you on the hardware side as well. Oh, there you go. So a potential catalyst just ahead. Julia, thanks so much.

All right, up next, Apple shares popping, leading the tech sector higher today. What's behind that big move coming up? And don't miss Apollo Global CEO Mark Rowan on CNBC Leaders tonight at 7 p.m. Eastern right here on CNBC. The Market Zone is that. We are now in the closing bell market zone Apple leading tech stocks today Steve Kovac on what's behind that move.

Plus two earnings reports out in overtime today that we're watching Diana Olick on Lennar and TD Cowen Jason Seidel on what he expects from FedEx. Steve, Apple, we were just talking about, oh, selling off on low new orders for the latest generation of iPhones. What do we have today with these gains? Yeah, what a difference just a couple of days make, right, Mike? So this is really coming off what T-Mobile CEO Mike Sievert

said at the company's Capital Markets Day yesterday. This was also highlighted this morning by Morgan Stanley's Eric Woodring in his note. Let me see, this is what Sievert said. He said, quote, about the iPhone, quote, "'Sales are higher than last year,' which is saying something because last year's sales were strong."

And so this is pretty much the opposite of what we heard. Monday, the analysts like Ming-Ching Kuo were looking at these smaller pre-order windows as sort of evidence that demand for the iPhone 16 has been lower than expected. We saw shares drop that day, but keep in mind, this is also just one carrier T-Mobile and all these US carriers, including AT&T and Verizon, they offer those major deals to get customers upgrading,

even offering free phones or great trade-in values and the like. But look, the iPhone 16, it goes on sale tomorrow. So we're going to expect more analysis and data points coming in the coming days, probably early next week on what iPhone 16 demand looks like. And by the way, we still got another month or so before the key selling point of these phones, Mike. Artificial intelligence launches on these devices as a software update. You mentioned that the maybe a little bit of disappointment a few days ago was mostly based on these shorter order times, delivery times. So people are trying to triangulate into the level of demand from that.

And then you at the time would say, look, it could just be that they're better supplied and that's why you can get the exact quicker. So we're sitting here watching the shadows of the actual activity trying to figure out what's going on you mentioned. Next week we'll have more analysis but will it be hard data. In terms of how this

is pacing. The only hard data we're actually going to get is when Apple reports earnings it gives us some guidance- at either when their report earnings probably end of October early November- that's going to be the best we get until we really hear from that December quarter results, which will represent the first full quarter of iPhone 16 sales.

That's where we're going to know. Until then, it's just up to everyone to kind of read the tea leaves. What do those wait times look like on the online orders or in-store pickups? Just the Wall Street analysts are going to be all over that, picking apart what little scraps of data they can. And again today, just you see one comment from the T-Mobile CEO, send shares up 4%. Yeah, I guess it doesn't hurt that the NASDAQ 100 is up 2.5% today and boosting it. So, Steve, thank you very much. Diana, we wait for Lenore. What should we look for?

Well, look, Mike, Lenore is the first of the big builders to report, so it'll give us an idea of what's to come. Lenore reported strong revenue gains last quarter, beating expectations, but a disappointing sales backlog, and that was likely due to higher mortgage rates. Now, this quarter runs through August 31st, so most but not all of it saw falling mortgage rates. The average on the 30-year fix started June at around 7.11 percent and had fallen to 6.4 percent by the end of August. Falling rates have juiced the builder stocks recently, with Lennar now sitting near a record high. For this report, we're going to be less interested in performance over the last quarter and much more interested in commentary on what they're seeing now, now that mortgage

rates have come down and the Fed, of course, made its first cut. Remember, builders aren't just facing high mortgage rates for their buyers. They're also up against higher construction costs because of those higher interest rates, Mike. Exactly. So in that way, everyone points to the 10-year yield, which is actually up a bit today. That's what 30-year mortgage rates are going to be based off of. But for the builders themselves, it would seem they can borrow at different places on the curve and maybe lower Fed rates can start to help. Yeah, they definitely can. And actually, mortgage rates went up yesterday and today. Not a lot, but just six basis points. But you're right on the builders. They've been buying down mortgage rates for their buyers, but it's going to help

them on their side, whether it's land, labor, materials, all that, to see lower interest rates. And Lenar, in terms of its position within the industry, it's a little more entry level? Well, so it's the second largest home builder. I wouldn't call it entirely entry level. It's not. It's a little bit more of a move up. D.R. Horton tends to be your really entry level, and then Toll Brothers is on the high end, the luxury. But Lenore definitely has entry level products for sure. So it'll be a pretty broad look at demand at the moment. Diana, thank you. And Jason, FedEx, this is a stock that's definitely been a sort of a recovery operation. It's done better recently. What are you looking for in today's results? Yeah, well, we think they're going to be in line and maybe even slightly better right now as we report the fiscal first quarter that ended August 31st. You know, I look for sort of muted volume gains here. They're going to be

looking for a lot of cost savings out of their drive program as well as their network 2.0. That's going to probably help them throughout the entire fiscal year 25 for FedEx. I think we're going to get a look into peak season, which we should have a better feel for as they report here. And also, how are they going to cope with the loss of the USPS business here in 2Q? You mentioned, you know, probably maybe unimpressive volumes in general. To what degree are we going to learn about, you know, the macro from their numbers? I mean, because it has been a story where they're restructuring the company. It's not all about just, you know, a play on aggregate volumes. Yeah, I think if you look across the transportation

sector and all the contacts that we have here in our universe, it's been pretty sluggish still, whether you look at the rails or you look at trucking or you look at logistics companies. You know, I still think we're in a very low growth, maybe slightly negative environment. I mean, the CAST freight index came out the other day. It showed some sequential improvement, but was still on the negative side. So, you know, I don't think we're going to see a lot from the overall macro side of things. But the look we're getting at the peak season is going to be key. Because remember, last year, we really didn't have much of a peak season.

This year, the peak season is actually a lot more condensed in terms of total days. And so what we have seen both of the parcel giants do is push out some GRIs. And the GRIs that are out there were pretty strong. And I think they're using this condensed peak season to push through both higher prices and more type of surcharges to help pad their bottom lines. And which do you prefer at this point? I mean, obviously, UPS has struggled. The valuation gap between FedEx and UPS

has closed to some degree. Yeah, no, we're still favoring FedEx right now. We have a $334 price target. I wouldn't say we don't like UPS, but we just favor FedEx right now we have a $334 price target. I wouldn't say we don't like UPS but we just favor FedEx right now. And that's based on just the mix and exposure? I think it's based on not only the mix but I think it's yeah I think the big thing for us is I think there's a lot of cost savings again $2.2 billion through the network and I think FedEx has done a very good job of it. We have the potential spin of their LTL division which when you look at it is one of the top ranked ltl carriers uh in the

universe right now and so you know we we come to our price target by using the sum of the parts by putting a six times multiple on their express and ground division and about a 12 multiple on their ltl division again that's right below the leader, Old Dominion, but slightly above SIA and XPO. All right, we're looking at the stock. Kind of struggling to hold on to those earlier gains, but up half a percent today, FedEx, that is. Jason, thanks very much for the time today. Appreciate it.

Just over a minute before the close, market's still holding on to most of its gains, though off the highs. The S&P 500 is up about one and two-thirds percent at this point. It did have a full 2 percent gain earlier in the session around midday. You see the Dow. It's at forty one six twenty two, kind of looking for a record close. As a matter of fact, it's above forty two thousand right now for the first time. The Russell 2000 is up two percent at the moment. And the Nasdaq has finally played some catch-up. NASDAQ is up 2.5%

as we speak. Getting past the Fed meeting and the Fed rate cut has really drained volatility out of this market. You see 1.8 point drop in the volatility index. And it is also a very broad rally, not just at the index level. You have about 75% of all volume on the New York Stock Exchange is to the upside. As we close in on record highs, the S&P 500 last hit a peak on a closing basis, July 16th. And it's going to log on right now just about 1% above that prior high level. That's us at the closing bell. We'll send it into overtime with Morgan Brennan and John Ford.