Closing Bell - Closing Bell: Stocks Sell Off Ahead of Big Mega Cap Results 8/1/24

Episode Date: August 1, 2024

The major averages sank in today’s session on the back of some weak data. Virtus’ Joe Terranova and CIC Wealth’s Malcolm Ethridge break down how they are navigating the big drop. Plus, Apple and Amazon are among some of the critical companies reporting earnings after the bell. Our expert panel tells us what to expect. And, legendary oil trader Mark Fisher reveals where he is seeing opportunity in the energy sector. 

Kelly, thanks. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This Make or Break hour begins with the critical countdown to some big-time earnings reports in overtime. Apple, Amazon, they are set to report their results. Our experts are at the ready with all you need to know. We're going to bring them in in just a moment. But, of course, we need to show you the scorecard here with 60 minutes to go in regulation. It is a very rough day for stocks today as a few reads on the economy came in weaker than expected. And that is raising questions now about just how

much growth is slowing in the U.S. economy. But there's your picture ugly pretty much everywhere. NASDAQ falling sharply down 3 percent. We're showing you the intraday because that's pretty much at the lows of the session here. That's a decline of more than 500 points. Got to show you bond yields. Probably the biggest story of the day today as the 10-year yield drops below 4% for the first time since February. There it is now. Take a look at that, 397. There is nervousness all across the street today, and that is clear.

Look at the Russell. It's today's biggest decliner, or one of certainly the biggest decliners, given its sensitivity to the economy. It's today's biggest decliner, one of certainly the biggest decliners given its sensitivity to the economy. Look at that. I mean, three and two thirds percent decline for the Russell today. We've got to show you crude oil because it's falling as well. Anything sensitive to the economy, for the most part, is down. And by the way, famed oil trader Mark Fisher, he's going to join us right here at Post 9 in just a bit on where to make money in that space right now. He always has some good ideas, and you want to hear from him today exclusively, and you will in just a bit.

It takes us to our talk of the tape. This unsettled market and those key earnings reports that are looming. Let's bring in our panel now. Joe Terranova, Chief Market Strategist with Virtus Investment Partners. Malcolm Etheridge is with CIC Wealth. And the star analyst, Mark Mahaney of Evercore ISI. It's good to have everybody with us. Mark, I'm going to hit this market first, so bear with me for a second because we're in the midst of, Joe, what is a pretty sizable

sell-off and a dramatic reversal from, it seems, how we felt not 24 hours ago. A very dramatic reversal that was led by a reversal in the Russell 2000 index. I was there. I was watching it. I was trading it. And I saw the reversal after Chairman Powell spoke. The mean reversion trade for small caps relative to mid caps and large caps and mega caps, it's over. It's over. The remainder of the year, I've been skeptical about the ability for small caps to outperform their equity cap size brother and sister for the remainder of the year. And I truly believe that's over. Look, everyone's going to come on the network in the next couple of days in the midst of this correction. They're going to say this is normal. This is ordinary. Everything's going to be fine.

I'm going to echo that same sentiment on the other side of this. We're going to be fine. But I think what the viewers have to understand is this is the month of August. The month of August and the month of September are the two worst months in a calendar year of the last 15 years. So the real message is elevated volatility is going to be present during these two months. And investors just have to be prepared for that environment and risk off days. And today's a classic risk off day. You can say anything about the economy. I mean, this is not about the Russell. This is about economic data. Hold on. Yep. About economic data that was weak. Obviously, the Russell is going to be more sensitive to that. Yep. Bond yields are falling,

as I said, below 4 percent for the first time since February. That's the story. Bad data is bad. There are serious questions as to whether the economy is weaker than people think, including the Fed chair, who talked yesterday about just being a normalization. There are pockets of weakness here and there, but nothing to be too alarmed about. That's what this is about. So the other day, we talked about it on halftime, the fact that the economy was weakening and that we saw. I remember sitting here with you. We said, oh, we've got a 10-year Treasury at a four-month low at 4.1%. And I said, well, why isn't that Russell 2000 rallying in the face of that? And it's exactly the reason that you are underscoring.

It is the fact that the economy is weakening. And Chairman Powell did nothing to assuage the concerns that investors have surrounding that. I'm troubled. I'm troubled about tomorrow. What do you mean he did nothing to assuage the concerns? I just said what he said. So he should have. He should have signaled that they are going to cut rates. He should have been firm in signaling that. He should have said to the market, we are going to begin cutting rates in September the same way he did in November of 2021. He said, we're going to raise rates.

He hinted around it. He hinted around the edges. Just come out and say it. Just say it. He said, we are going to raise rates. We are going to lower rates. He said, cuts are on the table. And he said it about 20 times when he was asked.

I don't think anybody left yesterday's news conference confused about what's on the table in September. I agree, Scott. I think I think Chair Powell did everything he possibly could to say September is on the way. And I think that really what we saw was a Fed chair that did everything he possibly could to have his cake and eat it, too. He wanted to make sure that the Fed looks and stays apolitical, but also make sure that he did what he could to tip his hand in advance and let us know that cuts are coming and do what you will with that information. But those cuts will be coming in September. You want to redo on that? I mean, he was as explicit as a Fed chair could ever be. Let me ask you a question. Tomorrow,

if the unemployment rate comes out at 4.2 or 4.3 percent, now we have to wait until September to do what he should have done yesterday. The labor market should be the focus, not the inflation. He's clearly said that. OK, he said that we've gone from 3.7 towards 4.1. We're potentially going to go 4.2 or 4.3. I'm concerned tomorrow if you have a bad unemployment report. Josh said it today. Bad news is bad for the market. The market tomorrow on a bad unemployment report is not going to look good on a Friday.

I mean, he talked about the balance of risk changing, right? It used to be about fighting inflation. Now he's got much greater confidence that inflation is coming back towards target. It is now essentially all about the labor market. I'm not sitting here trying to place all the blame for the sell-off today on Chairman Powell. I'm just saying I would have liked him to have been more confident and direct. There was no reason not to be. And just say in September,

25 basis point cut is coming. It's warranted. We see the deterioration in labor conditions. He did it in November of 2021. He said we're going to start raising rates. He can clearly signal that. I am not. Listen, I don't want to place the blame on him because you're right. Well, this sell off is about the fact that the economy is not as strong as many people have suggested that it is. And the signs for that have been in place for the last several months. It's been in place when you listen to a lot of the earnings reports and when you hear the commentary in particular from CFOs. I don't know. Shake Shack's up like 20% today. So, I mean, consumers are spending somewhere.

It's not every subsector of the consumer picture. We're not headed towards a recession, but we don't need to be in such restrictive territory for monetary policy. You don't need the Fed funds rate at 5.5% when you're beginning to see a much better environment than the Fed was adversarial for. Jeffrey Gundlach was with us yesterday when Powell finished, when Chair Powell finished. Kind of agrees with you. He said they should have cut yesterday. He thinks we're going to get 150 basis points worth of cuts this year. And he agreed that he doesn't think the economy is strong as strong as people think. Let's listen. When we look at back at what today, and it'll be history

when we look back at it a couple of years from now, I kind of believe that we will say that we were in a recession in September of 2024. If you want to make your data better, you can manipulate it by having your area of the economy do some extra hiring. And that appears to be what's happening. Government unemployment was on a downtrend, flattened out, and now it's been rising. So I don't think the economy is that strong. Malcolm, should the Fed have cut yesterday? I actually, as I said, the Fed has a real big challenge with trying to make sure that they remain apolitical. And there's already been quite a bit of chatter on the Republican side against the Fed making

those cuts now because it would look like he was helping out the Democrats. And so I think he's in such a tight spot that it's really tough to criticize and say he should have cut at yesterday's meeting. But I definitely do think the Fed should have been cutting by now. So whether it was earlier in Q1 of this year or one of the meetings leading up to yesterday, I definitely think the Fed should have been cutting. And I think that we're going to look backwards on the graph and say it wasn't September of 2024 where that recession started. It was months earlier. All right. So we've got a couple of things at play here. We definitely have fears about the economy.

That's why bond yields are down. That's why stocks are down a lot. I'm looking at the Nasdaq's down 530 points right now. That's a loss of greater than three percent. So then, Joe, you tell me with another couple major earnings reports looming in overtime, being Amazon and Apple, the growing importance that they may have today is what? Is it a fact they now carry a greater importance because of the unsettling that's been going on within mega cap tech and the tech trade overall? Sure. I mean, when the opposing team gets up and hits a grand slam in the last inning and you got your number three and four hitter coming up in the following inning, you

want them to respond. So you're looking at Apple and Amazon reporting tonight. They're getting the benefit of the doubt in the tape today. They're down, I think, two percent each. A lot of the other mega caps are down worse than that. The Nasdaq's down over three percent. They're getting the benefit of the doubt. I believe that they should get the benefit of the other mega caps are down worse than that, and then NASDAQ's down over 3%. They're getting the benefit of the doubt. I believe that they should get the benefit of the doubt. I'm more excited about Amazon because I think Amazon has the ability to really deliver the type of quarter here that they haven't delivered in quite some time, whether it's a 17% AWS growth, the 11% revenue growth, or if they're able to do what I think a lot of shareholders

wanted to do, which is to accelerate their share buyback plan, similar to what we've witnessed from Apple and Alphabet and others in years past. They're sitting on nearly $100 billion worth of cash. They need to increase that buyback. I'd love to see them do it tonight. So, Mark Mahaney, thank you for your patience. Let's jump ahead here then to Amazon because Joe's talking about 17 percent AWS year on year revenue growth. I mean, I've heard numbers closer to 20 is like a whisper number. 17 to me sounds like it would be a disappointment. Set us straight on what the expectations of investors really should be tonight. Well, investors are going to want acceleration in AWS growth.

So that bogey is somewhere like 18, 19 percent. It may have been 19 prior to Azure and Microsoft. So it's somewhere in the 18 to 19 percent range. But people want acceleration and they'd want Amazon to talk about growing demand driven by a gen AI workloads in the back half of the year, like Microsoft talked about. And then they're going to want this double digit, you know, 10 percent plus retail revenue growth. And then they're going to want a rising operating margins, which they should be able to get. And I'm talking about, you know, clipping above the 14 billion high end of their operating income guidance range. And I think they'll be able to do that. I think fundamentals are actually in a very good position for Amazon. It'd be wonderful if they came out and started aggressively buying back stock. I don't think that's going to

happen. That's a great catalyst. It's a capital allocation catalyst. But I think that's still a year or two away for Amazon. I think the setup is good for Amazon. I like Amazon as a long and I like it going into the print tonight. We're talking about capital expenditures. All roads lead to AI. That's been the most central question for all of these mega caps that have been reporting, as you know, Mark. It's been, how much are you spending on AI, and what is the return on investment, and when can we expect the ROI to really start showing up. So in terms of what they're going to be spending, what is the street going to be tolerant of? Well, the street's going to be tolerant of aggressively rising AI capex if there's revenue and profits to back it up. That's

why Meta is trading up today or is materially outperformperforming the market even with the sell off. Because they're ramping up significantly. CapEx but- but they're showing revenue growth that's just staying at premium levels twenty percent from very large scale that's impressive. So Amazon needs to show that this a. eight of its

specifically eight W. S. revenue growth is accelerating and that that acceleration is kind of stable to continuing in the back half the year and is driven by Jenny I workloads. If they can can if they can make that pitch tonight i think people will give them a pass on significant growth in a ai driven capex okay so joe i think most of our viewers you certainly cross over once from halftime know that you have the etf that you

rebalance correct quarterly which we sort of led up to. It was going to happen now. It has. You bought Amazon. So you added Amazon. You also added Apple. But stick with me on Amazon. Why that? Why now? The momentum came into play. The balance sheet, the return on equity, the debt to equity, we saw significant improvement in those numbers. And Mark spoke about what we've seen, the improvement in margins and the improvement in revenue growth and all of those conditions came together really in a perfect classic perfect storm for this company I'm excited about the ownership that we have here because when I look at all the mega caps to me it seems to be the one that has the most potential to

see significant appreciation because let's remember the last several years it really didn't keep pace with some of the other mega caps in terms of their performance so malcolm how some have used the word perfect so i guess i'll use it with you i mean does this report have to be perfect tonight i actually don't think it does i think a little bit differently from joe and mark yes aws growth is definitely going to be important for the story here. But I think the real driver to the upside is going to be growth in the digital advertising unit. They've obviously found their stride now incorporating those ads into Prime Video. But I think looking out for this to be the earnings call where Andy Jassy maybe starts to discuss the opportunity that exists. With AI generated advertising that could be- the real catalyst

here because those margins are even more favorable. Than the traditional ads which themselves are estimated to be north of about 50% plus AI would give them the ability to target those ads at the perfect right customer at the perfect

right time. And so I think. At Amazon has the opportunity to yes surprises to the upside with a W. S. numbers with e-commerce numbers all those kinds of things but the real right time. And so I think Amazon has the opportunity to, yes, surprise us to the upside with AWS numbers, with e-commerce numbers, all those kinds of things. But the real opportunity going forward, and I am in agreement with these two guys, that Amazon is likely to be the best performer of all the mega cap techs reporting right now, Q2 earnings. But I think a different driver is going to be the cause of that. Mark, you take issue with anything that Malcolm suggested?

No, I think Malcolm makes a really good point about, you know, that Amazon has started to. And this may be and this may be one of the drag factors for other companies like Google. Amazon is really lighting up that inventory around Amazon Prime video. And Amazon's huge advantage in the advertising race is that they can completely close the circle. They can close the loop because the sale ends on Amazon. Whereas if you're shopping around on Meta or on Google, your best sale ends somewhere else.

So Amazon's always had this advantage. And to the extent that they can use AI as well, Meta is the classic example of how well somebody can use AI to really improve targeting. And if Amazon can prove that they have meta levels of advertising targeting and campaign management and add creative capabilities because of AI, yeah, I think it's a really interesting new part of the long thesis. I think Malcolm nailed it. So you're not concerned at all about AWS growth

when you see that Azure from Microsoft missed its estimates. Does that give you any kind of pause going into tonight or no? Well, it did when I first saw the Azure results and then I listened to Microsoft and it sounded like there was a capacity constraint issue, not a demand issue. And they seem confident about growth in the back half of the year. So I'm assuming that we're going to hear that from Amazon. Look at Amazon, Prince, you mentioned this earlier and Joe put up this bogey earlier about the 17 percent. I think 17 percent would be a disappointment to the market. I mean, if there's one thing that's going to really if there's one thing that's going to really tank

Amazon shares here, it's a disappointing AWS number. I don't think we'll get that. But, you know, if we're tomorrow, we're talking about Amazon down 10 percent. AWS came in at 16 or 17 percent. You'd see massive selling. That's why I threw out the 20 percent number, because when when you have stocks that have done what and you take out the most recent weeks, I know I get that they've pulled back. But when when you've had stocks that are still up 20 plus percent year to date, the bar then theoretically is higher. So you have to beat whatever those thought of numbers are. We're going to see. Mark, I'm going to let you run. I appreciate your help on this. That's Mark Mahaney Evercore. I do want to hit Apple quickly with these two gentlemen here before I let you run. You concerned going in? I mean, got to find out that, you know, China, is it bottoming, number one?

Well, not number one. I mean, that's certainly a central question. Number one is iPhone 16. Give us an idea of where demand is. Give us an idea where demand is. By the way, first of all, let's return to growth. I think that's important. It's one of the reasons why it was added to the ETF, the expectation this quarter.

It is going to have a return to growth. But I do think it's about what is the consumer going to be able to utilize for functionality related to artificial intelligence in future phones. And will it look like that in the iPhone 16? Will it have capabilities? Will the consumer have the first product in their hands that's tangible to them regarding everything they've heard about the excitement of AI? I think that overwhelms everything. And I think if they fail on that message, then you're going to see some disappointment surrounding the stock. I'm not as excited about Apple as I am Amazon. It doesn't mean that I'm pessimistic going into the report. I'm somewhat, you know, apathetic towards the direction that ultimately it's going to move.

You know, if numbers are strong in China, that's OK. But if you don't tell me something really good about AI and the phone, that's where we're going to have a problem. Well, not only that, it's, you know, this is one of those quarters, Malcolm, where, you know, it's never a non-event. Apple is always a big event. But you're only going to get so much because it's never a non-event. Apple is always a big event. But you're only going to get so much because it's the September quarter, of course, where you start to hear more about the phone and the upgrade cycle.

And that's where all of the money is riding on. I agree with you guys, Scott, but I definitely think Q2 is going to be a bit of a yawn. But I do think this is the place where Apple shares look to take off. I've had to actually change my tune on Apple a little bit since the announcement of Apple intelligence, simply because I've gotten a chance to learn about the different ways in which they might be able to monetize the technology in the near future. You know, being able to call up an email using a voice assistant from your watch and then interact with ChatGPT to craft a response.

Consumers may be willing to pay up for that service, which obviously would go a considerable way to diversifying the revenue mix away from just the iPhone. And so I definitely think this is a pivotal place for Apple, but I also expect them to show up and prove it in the September quarter, to your point. And so this maybe is the place where you want to be getting in because the shares likely don't have a downside from here. It's all positive once we do get that upgrade to the iPhone. Yeah, you've already gotten the pullback, too, in the month of July. You want to say what? So you mentioned earlier in the conversation about consumer spending and Shake Shack. I think these two companies tonight maybe provide the best insight towards true consumer spending.

Certainly in the case of Amazon, that's clear. All right. We'll leave it there for now. Joe, you're going to hang around. Malcolm, I appreciate you. We'll talk to you soon, OK? That's Malcolm Etheridge of CIC joining us once again ahead of these critical earnings reports. And in the midst of what is a pretty dramatic sell-off on the street today, we'll keep our eyes there. We'll go to Pippa Stevens now, though, for a look at some of the biggest names that are moving. Pippa.

Hey, Scott. Well, shares of C.H. Robinson shot up 13 percent to their highest level in more than a year after the logistics company posted better-than-expected Q2 earnings. J.P. Morgan upgraded the stock to overweight following the report, citing the company's structural improvements and a second quarter of strong performance within a tough market. But Mobileye Global is plunging, heading for its second worst day on record after cutting its full year revenue and adjusted operating income forecast. The company facing a sluggish

demand in China, saying the automotive market there is, quote, very, very volatile. Those shares down 23 percent. Scott. All right, Pippa. I appreciate that. Pippa Stevens, come back to you in a little bit. We're just getting started. Up next, we're drilling down on energy today because the legendary oil trader Mark Fisher is here to reveal where he sees that sector heading. He'll join us right after the break, right here at Post 9. Of course, we're all over the sell-off as well. We're going to show you the major averages on your screen here. NASDAQ's leading it today, down near 3%. That's of the majors, but the Russell, 3.2% sell-off. We'll follow all of it. We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. Oil prices giving up earlier gains today, down more than one percent, about one and a third now amid rising concerns over the U.S. economy. Joining us now, Post 9,

famed oil trader Mark Fisher of MBF Clearing Corporation. Virtus' Joe Tiranova is also with us. This is great to have you here in person on post at Post 9. Welcome. Thanks, Scott. You one of your headlines today, which I think is the most important for sort of actionable advice for people who are trading. This is you say August will be the most bullish intraday for energy than it's been in the last four years. Why do you say that? We developed these systems kind of based on ridiculous concepts that I come up with,

my team comes up with. And from next Tuesday, for the final three weeks, we could see the most bullish intraday patterns that we've seen in the last three years. And that hasn't happened in like three, four years. In terms of being long crude? Long crude, long cracks, you know, that whole sector. Not natural gas, just the whole natural gas. I mean, crude, Brent, heating oil, distillate, Arbob, that whole sector. So you have your systems, but if you look for fundamentals to match up, maybe with that, is that because of heightened tensions in the Middle East? I mean, here we are talking about a potentially weakening economy dragging down the price of crude.

So what's the push-pull on those two variables? All those systems are all technical, AI-based systems. They don't really look at fundamentals. But again, typically what happens in energy is on every weekend, the market usually sells off if nothing happens over a weekend. During the rolls, the market's usually weak. But this is the most intraday bullish week period we've seen in like years. Is it related to the hurricane season? No, not yet. No, hurricanes, maybe it could be. I mean, I guess the hurricane seasons is,

you know, coming up. And I think that obviously what's going on with, you know, I call it climate uncertainty, right? You know, it could be, you know, people, you know, thinking that, you know, cracks could explode, you know, if something happens, you know, in the refiners in the south. I feel like you nailed the call, I don't know, it feels like more than a year ago for certain, where you suggested that crude was going to stay in a range of like 70 to 90, which it basically has. Given what you've said, and you're certainly talking on an intraday thing, so you're really talking about day trading crude. What's a number that we should keep in our heads about where you think crude oil could trade to.

Is it coming out of that range? No, it's not coming. I just think that it's a bullish pattern. We're coming out of that range for sure next year, though. We're breaking out of the $70 to $90. One way or the other? I think probably both. I think next year, every major Wall Street firm is bearish oil.

And with that being said, the index funds are going to be long, you know, the Bloomberg and the commodity index funds. And the way the market really goes up is like what just happened the past couple of days ago. The market rallied $4 on the Iran news, and that happened because no one's long. And so the way you really get the market to move is by getting, you know, shorts in the market. And that's what's going to happen. I mean, everybody on Wall Street is bearish next year. They all think crude is going to 60, 50.

And when that happens, that usually surprises a lot of people. Are they thinking that because they're thinking, well, if there's going to be a recession or a larger slowdown in the economy, well, naturally, oil is going to be one of those things that gets hit. One of the reasons, you know, if Trump wins, you know, they think, you know, drill, baby, drill, drill, baby, drill. But really, that's all convoluted, in my opinion. You know, I think that next year you're going to see you can see the prices above 90 bucks next year. Interesting. So if I believe that, where do I want to invest most to take advantage of that? What part of the energy spectrum plays that the best?

Well, first of all, to me being long refinery spreads, heating oil against crude, distillate against crude, gasoline against crude. Again, you're coming into a hurricane season, who knows what's going to happen here. And the layup trade for me is eventually hopefully sooner rather than later when there's a ceasefire in Gaza right and everyone's just gonna sell puke the energies you wait no no joke 48 hours 24 hours that'll be the bottom because who's gonna pay for the reconstruction that whole area it's gonna be the oil consumer right who's gonna I mean right so my opinion that going to be that will be the tipping point.

What about refinery stocks? Talk to him. I know the sector in general, you know, I think is, you know, is bulletproof. Valero, Phillips, 66, both very strong momentum, good looking charts. And they've benefited from the tight range that you've talked about and a stronger economy. And if the input of crude gets cheaper, you know, and the cracks stay wider, that only helps them, right? In a convoluted way, you know? I mean, this is going to be going to the La Nina.

You've got a lot of weather uncertainty out there, right? I just don't see how the refineries get really hit, you know? You know what I'm doing with the whole, you know, hurricane nonsense we're doing in Florida with, you know, with all the products we're doing and stuff. Can you talk about, you sort of, you didn't go specific on it, but the usage of AI to trade like you suggested you are. Your firm designing what sounded like proprietary AI models to help you trade. Is that what the future of certainly day trading is going to look like? Well, you use

intraday trading, but you're... Yeah, but that's not just been the future. That's been what's been going on for the past five years. The world's just woken up to it. Nothing's really changed. Every day we learn something new. But that whole learning curve and learning from past that and learning from past price performances and price charts, that's been going on forever. Is it a universal application to all commodities or is it just specific to oil? We really only apply it to energy

but I'm sure if we're applying it to energy people applying it to grains people applying it to other things we just don't have the expertise in that stuff. I just feel like AI models can never take into account moves in the economy geopolitical flare-ups around the world so how do you factor all that in? Well that's where the human element comes in. Because again, I think the AI models are going to get commoditized themselves. Eventually, it's going to be AI models competing with AI models, right? If you don't have some of the brain going, well, this is ridiculous, or this is, you know, they're not going to work. You know, you're still going to need the man, you know,

behind the strings to look at all the information. Because otherwise, this whole space is going to just be, everyone's going to eat everyone else's lunch. Let me ask you lastly, Joe, because it plays into the rebalance. You bought Exxon, right? So that's new in the ETF and you sold a handful of names, including Marathon Petroleum. Yeah. The headline is, well, we kept in terms of refiners. I mentioned Phillips 66 and Valero. But the headline is that the energy exposure came down, and it should have come down. The energy exposure basically was cut in half from 10% to 5.5%. S&P energy exposure is around 3.3%, I think.

So we're still above the benchmark on the S&P. But given what we've witnessed with a very tight range in energy, there's really not very much there in terms of momentum that you could capture. The one area that I did see is the excitement surrounding acquisitions. And there has been a lot of consolidation. There's been a lot of acquisitions that have happened in the energy space. And if Mark is talking about a 2025 with an oil price above $90 for the viewers, I think that's the real tailwind trying to identify the targets because you're going to

see a lot more activity in that direction. We'll leave it there. It's good to see you guys, Joe. Thanks for hanging around. Of course, Fish, good to see you here at Post 9 exclusively with us on your view on what's happening in energy. Up next, we're trading the turbulence today. Citi's Lucy Baldwin is back. She'll tell us how she's navigating today's big sell-off in the areas of the market where she still sees big opportunities ahead just after the break. Welcome back. Stocks giving back their post-Powell pop today on the heels of some weak economic data. Investors weighing a possible September rate cut against the risk of a greater economic slowdown. Joining me now is Lucy Baldwin, Global Head of City Research. Welcome back. It's good to see you.

Thanks, Scott. Great to be back. Is that what this is about today? Now we're worried about the economy slowing down too much and the Fed being too late. Well, you're right, Scott. We've had quite the week, haven't we, for the U.S. market to digest. And in terms of what we've learned this week from the FOMC and from Powell is this massive focus on the softening of the labor market. Right. If you think about where we've been over the course of this year, we came into the year with most people expecting six or seven rate cuts. And then, obviously, only a few months ago, most people in the town were not going to see that magnitude of rate cuts. Some people were even calling for the odd hike, right? Our view has been for a long time that you're going to see this stuff come through in the labour market. And I think we are

now finally really seeing that rhetoric bear out. And obviously, Powell very much focused on those asymmetric risks to the downside. And I think the way that unemployment has obviously crept up from 3.5% to 4.1%, it's crept up in a pattern that often precedes a more meaningful downturn. So, that's got a lot of people quite nervous. And I also think now we can kind of finally say we probably won this war on inflation, right? Some of the stickiest areas where you really struggle to bring inflation down earlier in the year, areas like shelter, that looks like it's finally under control. So, the Fed can finally focus its attention on actually looking at this labor market in an awful lot of detail. And I think they're really quite concerned. And that's certainly our view. So our view is you're going to get this first cut in

September. That's obviously now a view that everybody shares in the market, pretty much looking for these three cuts this year and even sort of pricing five in for next year predicated on these concerns. But it's a massive change that we've seen over the course of this year. And it's an awful lot for the market to digest. I mean, I think people may agree with you that the Fed may have won the war on inflation. And I think they would believe that at this point. But the collateral damage, of course, is what have they done to the rest of the economy and to the consumer? And those long and variable lags that were really longer and really variable, perhaps much longer and more so than people expected them to be, but

that they're finally showing up and that history is going to at least rhyme and that the Fed always sort of does what, you know, when they start cutting rates, it's always too late, just like they were too late when they started hiking. And then it's just going to be too late to get out of that mess. I think you may see a mild technical recession, right? But we're very constructive still, actually, in aggregate on equity markets. And I'll tell you a little bit about why that is and why we're not saying this is going to be some kind of major, major downturn here. I think when you look at the shape of earnings that we're seeing so far, obviously, the U.S. is faring significantly better than Europe, right?

You're seeing a number of companies at least come out and beat and hold their guidance. When we came in to this third quarter, we had the view from the S&P that you'd get to a 5,600 target at the end of the year. It's implicitly we were saying buy the pullbacks rather than being too brutal bullish. But it was still fairly selectively risk on. And our feeling is that within that market, you should hold on to your large cap, your MAG7. And you should be adding selectively some of the interest rate exposed areas, whether that's banks, whether that's real estate, whether it's parts of consumer. But you're right, the big test is going to be how well the consumer can hold up and whether the Fed is going to do enough. Now, I think if you listen to the rhetoric that's coming out of Powell and the FOMC,

these 50 basis point cuts are not off the table, right? They're going to be looking at this data with a laser focus. That isn't our forecast. We think we're going to get the 325 cuts this year starting in September. But I think there is that risk that if they need to do more, they will do more to try and ensure as close to a soft landing as we can possibly get. You make the argument that the small cap trade has legs. It certainly doesn't look like it today. And if there remain questions about the durability of the economy, how's that trade going to work? And you're right.

It is very much a trade. And I think when you think about where we've come from this year, if you look at the first half performance of the S&P, a third of it is obviously one very large mega cap chip design company. The other mag seven make up another third of that 15 performance and the other third is the other 493 days in this thesis that we've had and others have had for a while which is that you just don't see this broadening out and of course we have that one day after the june cpi print when you saw uh the nasdaq underperforming the small caps by six percent which was quite

extraordinary and a lot of clients asking asking us, can that continue? Now, as you say, we think that it could be a trade that makes some sense. But you have to look at the long term. And if you go back over 80 years, there's only about half a dozen times in history when small cap names have actually outperformed large cap for a sustainable period in the US. And that's for very good reason. If you look at large cap earnings over multiple downturns, and if you certainly look since the GFC, they've been significantly more resilient during periods of pullback, much less volatility, as well as just overall better growth. And every metric, whether it's free cash flow margin, whether it's returns, whether it's the debt profile and debt dynamics, you would argue that fundamentally those large cap names are structurally much better placed. It's something like 40% now,

the small cap names that are actually unprofitable. So, although we would say, yes, because valuation has become unbelievably stretched and they look incredibly cheap in aggregate, those small cap names versus history, we would tread pretty carefully. And we would very much view it as a trade that is a trade to take advantage of the fact that we likely see these rate cuts coming through and that narrative around a soft landing starting to come back into the market as people get confidence that the Fed is going to manage to land this plane in a soft fashion, Scott. Okay. We'll talk to you soon. Lucy, thank you. Lucy Baldwin of Citi. Up next, we're tracking the biggest movers as we head towards the close. Shares of Eli Lilly are popping and hims and hers dropping.

We're going to tell you what's behind both of those moves. And as we head out, another look at the majors. We're heading towards the close. Looks like it's going to be a little bit of a nasty one too. Closing bells coming right back. We're less than 15 from the closing bell to Angelica Peebles now for a look at a pair of stocks moving into the close. Angelica. Yeah, Scott. Lilly sharing some new data today showing that it's obesity drugs.

Zepound can help with heart failure. Now, Zepound cuts the risk of heart failure worsening by 38 percent compared to placebo. And you're now seeing those shares up about 3 percent today. And Lilly CEO David Rick speaking in Paris, saying that Zepound should come off the FDA shortage list soon. Now, hims and hers are taking a big hit on those comments. Remember, it wasn't that long ago that the company said that they will start selling a compounded version of Novo's Wigobi. Generally, you can only compound large amounts of a drug when it's in shortage,

and that's been a big risk since the beginning, that these drugs would eventually come out of shortage. Now, a Lilly spokesperson telling me that supply remains dynamic, and that ultimately the FDA will decide when to update the shortage list. We'll let you know when we learn more. Scott. Angelica, thank you. Angelica Peebles up next.

Amazon and Intel reporting at the top of the hour. We are less than an hour away as well from Apple's results. We're going to run you through all of the key themes you need to look out for from all of those names. We'll do it in the zone. We're now in the closing bell market zone Zone, CNBC Senior Markets Correspondent Bob Pisani here to break down these crucial moments of the trading day. Plus, we're just moments away from three key earnings reports in overtime. Pippa Stevens on Intel, Kate Rooney on Amazon, Big Technologies, Alex Kantrowitz gets us ready for Apple. Bob, I begin with you. What a reversal from yesterday. The good feeling about rate cuts coming seems to be gone. Yeah. We talked about this yesterday after the Fed meeting. There's two macro risks for August and September. One is an inflation scare where the data suddenly comes in a lot hotter than expected.

That seems a little bit unlikely. We seem to be moving in the right direction. But the other one is a growth slowdown, job slowdown, where the consumer pulls back in some significant way that we haven't seen before. That's exactly what happened today. We got the ISM numbers, usually fairly routine, but the employment component of that was really subpar. That ticked up the concerns about employment slowing down faster than we had been anticipating. And boom, you saw those yields.

You've been talking about it all day. It was straight down. Ten-year yield below 4%. That was a little bit of a shock to the markets. Look how fast we've been moving down in the 10-year in the last four days. Bad news is bad news. At least it's being taken that way today. That's the story. Yeah. And remember, rates are moving down generally is a good sign because the Fed, it may even accelerate what the Fed's going to do or increase the amount of rate cuts that we're seeing. Nonetheless, here, you're right. Generally, lower rates are good, for example, for small cap stocks.

However, if there's a higher unemployment situation, that's not necessarily good. So this gets a little more complicated. The stew in the second half of the year is getting more complicated. You throw in the election. You throw in some uncertainty about the consumer. We're seeing some pushback on the earnings reports here.

The food companies are clearly getting pushback on numbers, on price hikes. Donald's is getting pushback. Even the high-end consumers. Shake Shack's not getting any pushback. You see that stock today? That was an exception. I know, but it's not the only one. You can throw up an intraday of Shack.

I mean, things up like, what, 20%? And the utilities and REITs are up today because of the lower rates. So it's not a complete disaster. But again, when we get these numbers a little bit further away from what we anticipated, it changes the narrative a little, the soft landing idea. We're slowing the economy down, but not too much. When you get a number like today, like the employment component of the ISM, way, way below expectations, then everybody says, this narrative has to change maybe a

little bit quicker. Yeah, it's showing up in the market today. Bob, thank you. Pippa Stevens with the setup now on Intel. What do we expect? Well, Scott, Intel shares are down 40% this year as the company fails to convince the street that its turnaround is in place. Expectations are muted ahead of the print after the company previously issued weak guidance for Q2 and also saw the loss of its Huawei export license. Analysts expect Intel to

earn 10 cents per share during Q2. That's down from 35 cents per share a year ago. Wedbush noting that while the overall server market has improved this year, much of the growth is in cloud, where AMD is better positioned than Intel, adding the Intel competitors taking share in both cloud and enterprise. Now, the guidance here is going to be really important with some analysts calling for a back half recovery with updates around the execution of its fab strategy, also top of mind, including expenses after pushing back construction at the 20 billion Ohio chip fab. Ahead of the report, Bernstein's Stacey Raskon

saying, quote, the AI story still feels mostly MIA. Those shares, Scott, down 5 percent. Stephens, thanks so much to Kate Rooney now on one of the biggies, Amazon. Yeah, Scott. So Amazon's cloud business, AWS, is going to be the big priority for investors. In today's report, they're watching this higher margin side of Amazon's portfolio. Growth there at AWS expected to be 17.6%. That is the bar. It's the number to beat. CapEx, another big area to watch. And like other tech companies we've seen report in recent weeks, Amazon is going to need to really thread this needle on spending, especially when it comes to AI. Investors want to see some evidence as well that the company can monetize AI. So Amazon is really known for these cash burning cycles. We've seen this before. A couple of years ago,

they went really big on faster shipping. That has resulted in better unit economics. So the street has been willing to give Amazon a bit of a hall pass as long as executives do show that they can return that capital. And then on e-commerce, investors are really looking at North American margins. So that's key to the profitability story. And then finally, you've got the ad business. It's been a big part of the bull case as well, Scott. All right, Kate Rooney, thank you. We'll see you in OT when those numbers hit.

Alex Kantrowicz, big technology, is here with us as well. Oh, yeah, Apple, still waiting on that. Some suggest it's not that important this quarter because you're only going to get so much info on where iPhone demand is. How do you see it? I think it is important. And you are going to get a little bit of info of how they expect the iPhone 16 to sell. But it is a very important week or week and a half that they're going to give guidance on.

So I think that's important. And by the way, it's underscored by the fact that we've been hearing for so long about Apple intelligence, right? This is supposed to be the phone where we figure out how Apple intelligence will propel the company's flagship products. So, okay, week, two weeks, that is, that's meaningful. And when we get that guidance, that matters. Yeah. You know, what about those reports that were out, I guess, in the last handful of days, suggesting that maybe some of the AI components are going to be delayed a little later than expected. Any validity to that in your mind? It doesn't matter?

I think there is validity to it. I'll tell you, I have Apple intelligence installed on my phone as of today. The developer version, so the beta, right? It's kind of buggy. It's going to get better over time. But Siri still doesn't work very well. Now, I expect that to improve over time. But this is not like, think about the dynamic island, right?

They put something in the phone. It's this shiny thing. They show off and they say, okay, you're now going to be able to see information live on the top of your device and you should go out and upgrade because it's going to be there on the next iteration. This thing is going to come over time. It's a software update above all else. And so it doesn't have to show up on the day that the next device happens. From what you've seen so far though, now I'm going to put you on the spot. Okay. Since you said you had it early. Has what you've seen so far get you excited to think that consumers are going to get excited about what the potential is here?

I need a caveat first to say you can't judge what's going to happen based off of what I've been using. Okay. Because it's going to get a lot better. But I'll answer your question. It hasn't gotten me very excited. I mean, the features in there right now just aren't what they need to be to say this is our big unveil. It's still, the series is still dumb. It's got to get smarter.

I tried to use the voice recording where you get the notes transcribed onto your phone. It didn't work. So Apple has a lot of work to do between now and the fall. We expect this to get to maturity. I think they should get excited. And you're right, Scott. It's going to be 18.1. I think that Apple intelligence is going to come.

So I'm with you. I think you're right about that. But I'm excited because if Apple can figure out a way to keep the data resident on the phone, and then you're going to have a personal digital assistant that has some security guarantees on it, this is going to change people's lives. This is going to be Bob 2.0. And you know what else is going to happen. It's going to be your personal friend sitting there. And that sort of cracks open the entire ecosystem for them. I'm running out of

time. So real quick, do we need to know tonight that China has bottomed or is bottoming? I think it's very important, right? This is the big concern. We've heard what's going on with the iPhone. iPhone growth is going to go down, but they need to turn the story around around Apple. We've heard what's going on with the iPhone. iPhone growth is going to go down. But they need to turn the story around on China. And this is the moment where people are looking for it to turn around. So we need to hear that tonight.

We'll see what they deliver. Got a lot coming up in overtime. Alex Kanchowitz, thank you. Bob Pagani, of course, for you as well. Had an ugly day on the street. Certainly a different story than just 24 hours ago

when I left you. We'll see what happens tonight. I'll see you tomorrow in overtime.