Closing Bell - Closing Bell: Stocks’ Tireless Push to New Highs 10/14/24

Episode Date: October 14, 2024

How much life is left in this overachieving bull run? And will good news on the economy continue to be treated as good for stocks? iCapital’s Anastasia Amoroso, Invesco’s Kristina Hooper and Citi���s Scott Chronert reveal where they stand. Plus, Warren Pies from 3Fourteen tells us why he is expecting a soft landing and a year-end rally. And, top technician John Kolovos thinks there’s more room for stocks to run… but it could be a bit of a bumpy ride. He explains why. 

And welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner. This make or break hour begins with stocks tireless push to more new highs with those feared October ghosts nowhere in sight. Let's get a check on the scorecard with 60 minutes to go in regulation. The S&P 500 tracking for its 46th new record high of 2024. You see it up there about eight tenths of one percent uh the dow started soft uh in the morning but has flipped into the green now up half a percent the nasdaq though big tech is in the harness today galloping ahead that nasdaq composite outperforming up almost a full percent after it had lagged for most of the third quarter nvidia hunting for its first new high since June. You see the stock here up 2.5%, 2.8% on the day. The intraday high is just above 140 on this reignition of enthusiasm for the AI investment theme. The bond market closed today for the holiday, but treasury ETFs are trading lower in price. That implies further upside to yields with the economic data coming in a bit better in recent weeks and expectations for Fed rate cuts being pared back. That takes us to our talk of the day.

How much life is left in this overachieving bull run? And will good news on the economy continue to be treated as good for stocks? Let's ask Anastasia Amorosa, iCapital chief investment strategist, joins me here. Good to see you. Good to see you, Mike. So this bull market has outraced really pretty much all of the expectations of strategists and everyone from the beginning of the year. It's answered a lot of challenges, whether it's the seasonal weakness we were expecting or, you know, seen as too narrow in the first half. Is all that together encouraging or is it a reason for caution to wonder if we've

maybe gotten ahead of things? Yeah, I mean, I think investors did have a reason for caution to wonder if we've. Maybe got ahead of things yeah I mean I think investors did have some reason for caution to start October you know you had a number of outsized moves that had to be digested in the markets whether I'm talking about the yield spiking or the price of oil spiking or also

there's been quite a bit of resurgence in the dollar so we have to absorb that when I look at it Mike I think the market has actually managed to absorb that. And for example the fed said they were not likely going to cut 50 basis points for the consecutive meetings. And the markets have now repriced to 25 sequential basis point cuts.

So that makes more sense. And that's now reflected in the yield prices. You know, we've also had to account for a little bit better growth, better payroll, slightly higher inflation. And all of that is now in the rearview mirror, and it's also in the price. So I think what's been a bumpy start to October now sort of gives way to there's a soft landing momentum, and there's not much to get in the way of that. Yeah, I mean, it's been tough to actually look for soft spots in the fundamentals story, I suppose, at least in the last little while. You mentioned the Fed kind of curtailing

its promise of how big rate cuts might be. We do want to get to some headlines here by the Fed's Governor Christopher Waller. He's speaking as we speak. The economy is on solid footing, he says. And in fact, his revision suggests the economy is much stronger than previously thought. So clearly, you know, casting the economy in a positive light. Inflation progress has been uneven, but generally in the direction that the Fed wants to see. Baseline, he calls for reducing policy gradually over the next year. So obviously reducing rates and normalizing policy.

I guess maybe not too different from how the markets are set up, but it does reflect this idea that it's a moving target based on the last little run of numbers. I think we've always known that the Fed is going to react to the data, but it's not bad news that the data is surprising to the upside. And what's really interesting, it's not just the Fed that just now is talking about the economy being solid footing, but also corporations and specifically banks are talking about that. So one of the headlines from Friday, the fact that JP Morgan in its earnings report called this a soft landing, called this a Goldilocks scenario. I think that's what's really breathing new life into the market. And Mike, when you look at

Atlanta Fed GDP now, it's tracking three point two percent. You know, that's clearly supportive. And then also the city surprise index. It was actually negative for quite some time. Yeah. And the earnings revisions were negative because of this weaker economic data. But we've now flipped into positive territory in terms of economic surprises. And I think one of the things that we may see, if not in this reporting season, but in the months out, is that earnings revisions should start to pick back up again, given how solid the economy is right now. Yeah. I mean, I do think a lot of work on just how much estimates for the third quarter came down. It seems like it's going to be an easy hurdle for results to come in ahead of that. I guess the question is where within the market seems to still have a little bit of juice left in it,

given that we've had not only a run in the indexes, but as I mentioned, the equal weighted S&P also did some catch up in the last two years. Well, on the surface, it's really hard to find those pockets. But I actually, first of all, would look at the artificial intelligence trade and the Mach 7 trade. You know, clearly we've had quite an upside here in the last couple of weeks. But if you look at AI theme performance, there was not much in terms of our performance in Q3. And in fact, a lot of the stocks are range bound or maybe they were even down a little bit. So I think after this period of

consolidation. What's happened is a lot of- earnings growth expectations have actually stay where they are or maybe they've even been revised higher for the A. I. trade. But the multiple have actually declined as a result. If I look at some

of the semiconductor- A. I. semiconductor multiples for example. Price to earnings adjusted for growth is now below one so it's actually one of the semiconductor AI semiconductor multiples, for example, price to earnings adjusted for growth is now below one. So it's actually one of the cheapest levels that we have seen in years. So I would look there. I would also look to financials. You know, Mike, the earnings season start has been absolutely rock solid for financials, whether you think about the net income margin that they're expecting to inflect higher in 2025, whether it's

loan growth with charge-offs. I think there's so much good progress that's being made by financials. It is worth noting, you mentioned the sort of MAG-7 type trade. You know, in terms of the S&P today, Nvidia, Apple, Microsoft, those three are good for about half of the net upside in the S&P today. So clearly, you know, you had this period where it was more broad and now it seems some of the secular growth names are doing their part. Does that make the market more fragile? You feel like we're just kind of rotating around these things? Yeah, I think people are chasing pockets of opportunity. And again, you know, you look at utilities and you had a 20 percent performance in Q3. So after that, you do a little bit of selling

and go to where there's been some underperformance. But there's so much enthusiasm that I think people have regained as they came into September and October because we had a slew of conferences. We had a slew of analyst meetings over the last couple of weeks. And, you know, this week in particular, I'm looking for Taiwan Semi to report on Thursday. I suspect all of that is going to continue to solidify very strong demand. You know, the reason why I think people might be looking back to the MAX 7, not just the semiconductors, but the other hyperscalers. In Q3, we worried about their overinvesting and are they going to monetize that?

But what's interesting, Mike, is they might have been overinvesting this year. You know, in terms of hyperscaler CapEx, it's up something like 40 or 50 percent, depending on the stock. But next year, they're likely to pair that back to 11 percent year over year. So could it be that the overinvestment occurred now and now going to 2025, we're going into the actual monetization phase? I think that's part of the reason why people are looking back at these MAC 7 again. For sure. It seems to be one of the talking points, no doubt about it. Let's bring in Christina Hooper of Invesco and Scott Cronert of Citi, broadening out the conversation here.

Good to see you both. Christina, the market itself has been migrating back in general toward more cyclical type stock. Does it have it right here? What has happened in the last few weeks that has made you either modulate your view on where the right place to be or not? So I think the market has it right in that we're likely to see cyclicals and small caps outperform. The economy is clearly slowing, but it's very modest. And I think we're going to see a reacceleration rather soon.

And so small caps and cyclicals would be anticipating that and behaving in advance of that. But we also have some opportunities in technology. I don't want to overlook how much significant earnings growth is coming out of the tech sector, and it's compelling. This is an environment, I think, that tolerates, that's a big tent and tolerates and supports a lot of different asset classes. And so it's one in which I think the bit of flip-flopping we're seeing in markets seems right. I think in the near term, because of uncertainty around the election and perhaps some uncertainty around the Fed, we're likely to see some kind of focus on quality. But at a certain point, I think we're going to see greater outperformance by small caps and cyclicals.

And Scott, I know you do a lot of work trying to figure out kind of what's priced into the market based on earnings anticipation and other factors. How does that all set up for you right now? Well, at 24 times trailing, I think we have to acknowledge that the S&P 500 is at least fairly, if not slightly, overvalued. But this can persist as long as the news flow supports it, Mike. And that's where we're going into the macro condition, of course, but increasingly the Q3 reporting period. Our sense there is that we're likely to get what we call a beat and hold, solid Q3 results, but no meaningful change in full-year estimates, which mean Q4 estimates have to come down. That said, importantly for the MAG7, this mega cap growth cohort, to some of the earlier comments, the implied growth setup relative

to where consensus is has gotten more reasonable going into Q4. So we're very comfortable with a growth versus cyclicals playbook going into Q4. We think that there's room for both to work. Defensives are probably the other odd man out in our view where they're not inexpensive. They're in bordering on more expensive and a little bit less underlying economic sensitivity and growth drivers to support them. Anastasia? Yeah, Mike, I want to jump in on the cyclicals conversation. I mean, I agree with Christina that I think we're on the cusp of reacceleration in the economy. And by the way, this is what we're seeing from some of those financial reports. You know, I have long been of the belief that some of the rate relief that's been kind of put into the system is already being

felt by the markets. And so, for example, you look at the financials reporting and you see all the debt underwriting activity. That means that companies are taking on that extra debt at a lower interest rates. They might be refinancing. They might be doing something else with it. You look at the mortgage market. Obviously, it's still a challenged place. But at the same time, mortgage rates have dropped pretty significantly. And they're on the cusp of being at a place where a lot of people who've taken on a mortgage in the last 18 months who might be able to refinance that and actually have a monthly cost savings. So that's another benefit to the economy. And then, of course, there's not a whole lot of floating rate exposure across the U.S. economy,

but there's some. If you look at leverage loans, if you look at private credit loans, if you look at a portion of commercial real estate loans, they've all been pegged to some sort of SOFR or did not derivative. So as those rates reset I think that's a positive for those cash flows. So you take that on top of the already soft landing that we have. I think this bodes

well for sickle schools. So that's why for me my exam of the better trades are in the financial sector they are in the regional bank sector. So I'm looking forward for the rest of this week and next how the smaller banks- hopefully are also positively tied to some of these trends.

Now, Christina, your sense is that maybe we only get one more quarter point rate hike this year. I mean, how does that filter into the equation? Well, I think markets are getting more comfortable with that idea because it's for the right reasons, because the economy seems to be stronger, more resilient than many had expected just a month ago. And so it makes sense that there's a recalibration of the Fed's recalibration of monetary policy. And that would mean only one more rate cut this year, but that's OK. The Fed is going to be data dependent, and I think we will get significant cuts next year. It's just going to slow down the process. I guess the question is, Scott, as much as that does make sense and it fits together with

how this market is pricing it, the fact that we were in a growth scare, the Fed is too late panic a couple of months ago means that things can be fickle. And I just wonder, where do you think we are in terms of really being able to trust that this upswing in the economic numbers that we're seeing is going to have some staying power? Well, I just make two points on this. The first is I get it. We're at what looks to be an inflection in terms of underlying economic activity as pertains to the industrial production and production side of the economy. That said, we do have to be aware that there's going to be a lagging influence to fundamentals. So a sector like industrials is among the most expensive versus its own history versus other parts of the market. And there we're looking for some ongoing

fraying on a lagging basis as we go through Q3 reports. But all told, what I do think this underscores is that there's definitely room for Fed funds to continue to come down. And obviously, we're using two years and then 10 years as your indicator of where they might go. There's no question in my mind that the Fed should be and is on a path toward lessening its degree of restrictiveness, ultimately getting to neutral. But there's a transition phase between here and there where you're still net restrictive. You're not to the point where you're actually stimulating economic activity. So what comes with soft landing is sort of an unusual sort of risk in the markets that usually, usually when you get Fed pivots, it's in response to recession, which means earnings have gone down and they've given you a very strong snapback.

If they don't come down on the earnings resilience thing, then they don't have as much room to snap back. And that changes the valuation picture a little bit from our perspective. Christine, I want to give you a chance to kind of reconcile the idea of we're going to be living with perhaps fewer, slower rate cuts and the idea that small caps can actually play some catch up here? So the economy is in a very good place. The Fed is cutting into growth. We haven't seen this since the mid 1990s. We actually, interestingly, I don't know if it'll happen again this time, but I'm hopeful. Soon after the Fed ended its very brief easing cycle in 95, 96, we started getting GDP growth with a four handle. I remind us all of this because I think there is significant potential that's helped by things

like AI that are increasing, improving productivity, increasing growth potential. I think there's a lot of opportunity in this market. It's hard to necessarily see a crystal clear picture right now, but my gut tells me I think there are going to be better days ahead. Anastasia, we've been talking so much about, oh, two-year anniversary of the bull market. It's been an unorthodox one. I mean, there's a lot of quirks in terms of where it started. We haven't had a recession. It started and it's sort of continuing in what people consider a late cycle environment, whether that's true or not. Does that tell you anything about the pace of gains for here or whether we might expect any change in character?

Well, Mike, we haven't had a classic recession. We haven't had a recession that was determined to be a recession by NBER. But the truth is manufacturing has been going through a rolling recession for quite some time. You know, it has been a recession. It seemed to have popped up to start the year. The manufacturing gauges were over 50. And now they're sort of teetering on that breakeven territory once again. So I would argue there's been a lot of slowdown that's already baked into that.

You know, I think the consumer has gone through its quasi-mini-recession back in the tail end of twenty twenty two and into early twenty twenty three because remember inflation was quite- elevated and wage growth was not actually keeping up with that. So therefore real wages were actually negative so. That's what we worried about the adjustment that's when we worried about a reset. But I

actually think we've had that reset. So now the fact that we're still starting from a break even of manufacturing the fact that we starting from. Consumer confidence that tour sort of took a step back because we're waiting with anticipation what the result on november 5th is going to be you know i actually think that's a nice reset uh for the economy you know even though the markets maybe have not had that reset so and by the way speaking

of the elections and speaking of the manufacturing and sort of the cyclical momentum, I think part of the slowdown that we've seen in Q3 is because people worry about putting dollars to work. I mean, in corporate capex, not knowing what the outcome of the election is going to be. So once we get past that, you've got the Fed rate cuts and

hopefully we have some more certainty of what the administration is going to be and what the policy is going to be. So that could actually help the industrials part of a cyclical trade. Scott, before we go, you mentioned energy as part of this sort of cyclical basket. You obviously have oil backing off again today. Does energy still have that leverage to a growing economy that it has traditionally had?

I don't think the direct read through is as clear as it's been in the past, Mike. But what you do get with energy on the cyclical rotation dynamic is a different setup. If the broader index is flirting with more aggressive valuations, that is not true for the energy sector, which is sort of midway in its sort of 20-year look back from a median valuation perspective. Revisions have been negative. Earnings growth expectations have been coming down. Everyone gets the picture here that oil prices have been under pressure. Going forward, though, that setup makes it a little bit less onerous for this sector to do well through the Q30 reporting period. And of course, on the fringes, we've got an improved China outlook potentially.

And the Mideast has a hotspot that continues to reckon with oil price direction from here. So as a contrarian trade going into Q4, we're pretty comfortable with energy from that perspective. Yeah, I guess a little bit of a different kind of nexus of factors there. Scott, Christina, Anastasia, thanks so much. Appreciate it. All right, we're getting some news on Google. Deirdre Bosa is here with that. Hi, De. Hey, Mike. So speaking of energy, Google announcing a deal to purchase nuclear energy from multiple small modular reactors or SMRs from Kairos Power.

Now, overall, it'll enable 500 megawatts of new energy. That's enough to power roughly 400,000 homes. The backdrop, of course, are the huge energy needs in the artificial intelligence shift. It's why all three hyperscalers are doing major energy deals this year. Now, Google wouldn't give us any financials around this agreement, but key for investors to note is this is more about developing the technology for future energy needs

versus deals to use existing infrastructure like the mega deals Microsoft and Amazon have done this year. Now, SMRs differ from traditional reactors in that they're much smaller, thus more adaptable for localized energy needs and can benefit from a more streamlined regulatory process. But because the technology still needs to be developed, Google does not expect it to be powering data centers for at least a decade. This is more of a bet that AI is going to be here for decades. And by going this route, what they're calling part of their energy portfolio, they will be better positioned in the future. Mike? It's fascinating how these big tech companies have found themselves getting involved in kind of building energy infrastructure.

And the different approaches. Yeah, for sure. Giorgio, thanks so much. All right, let's send it over to Seema Modi for a look at the biggest names moving into the close. Hi, Seema. Mike, 40 minutes left in trade. Sirius XM stock is surging today on news that Berkshire Hathaway has increased its stake

to 32 percent in the company. Berkshire bought 3.6 million shares in Sirius XM in multiple transactions Wednesday through Friday of last week. Warren Buffett has not publicly commented on the stake. SiriusXM still down around 50% so far this year. And Flutter Entertainment also getting a boost from Wells Fargo, upgrading the stock to overweight from equal weight and upgrading its price target to $2.95 from $2.24, saying to buy the dip on the FanDuel parent company.

The upgrade comes after a sell-off last week that saw the stock shed around 7%, but it's up about 5% at this hour, Mike. It is, Seema. Thank you. See you again in a bit. We are just getting started. Up next, 314's Warren Pies is revealing where he sees the rally heading from here and the key risks he's watching into year-end. He'll join me at Post 9 after this break. We are live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Stock indexes are green across the board with the S&P rising to an all-time intraday high earlier in the session.

Fed Governor Waller warning just moments ago about the need for more caution when it comes to lowering interest rates, though he says the economy is on solid footing. My next guest expects a soft landing, which could make way for a year-end rally. Joining me now at Post 9 is Warren Pies of 314 Research. Warren, great to have you here. Yeah, great to be here. Thanks for coming by. So, you know, this gets at this equation. Waller talking about, you know, what pace of cuts we might see. You know, the don't fight the tape, don't fight the Fed rules still seem to line up bullishly. But what about this adjustment to yields and to fed rhetoric yeah i to me like really when you when you step back rates are one of the big risks to market so thinking about long

term rates in particular uh in you i think a lot of the the rally we saw from mid-year was fueled by by rates falling a little bit and so uh when you think about what Waller's saying, he's saying neutral, we have a lot of room to cut before we get to neutral. But I think maybe the market has it wrong a bit. So if I was trying to pick a concern out, I would look at that and say, look, the Fed just cut 50 basis points

and rates ripped on the back of that. So if we do a thought experiment where we say the Fed came out tomorrow and they took the Fed funds rate down to 3%, which is like, say, what they think neutral is, what happens to the 10-year? I'm not quite sure the 10-year actually goes down in that scenario. And so I think that's a risk the market is going to have to work with and struggle through here as we go out to the end of the year and into 2025. yeah those long-term yields have risen of course along with you know

market implied inflation expectations once the fed cut but also the economy the numbers coming in a little bit firmer than expected so i guess is there a level on yields that you would get more concerned yeah i mean our view we've done a lot of work on this, is that it's not so much about a level. It's more about rate of change. And so at this moment in time, given where we came from, we look at really like a 63-day window, which is like one quarter. And if we were to see a quick move up to like 4.15, 4.2 on the 10-year, I think historically, at least going back to 2022,

you start seeing the market get some indigestion. So it's less about a level and more about the pace of the moving rates. And the slower moving rates seems to be that stocks can digest that, just like earlier in the year we had rates rising, market rallied. And so it's really about the pace. So if that's potentially one of the visible risks out there in terms of what happens on rates getting a little bit unanchored. What's the baseline from your point of view in terms of, you know, the market have it right here in terms of saying, look, the Fed's easing into, you know, earnings recovery and and all the rest that we've been talking about? Yeah. Well, that's the big picture. You know, we keep oscillating between growth scare and now we're seeing a reacceleration. And if you zoom out, that is what a soft landing looks like, right? That's the back and forth

that a soft landing looks like. So we're still positive on the market. And when you look out to year end, it feels like we're pretty bullish, right? But strategist targets are 6% out to year end below where the market trades right now. If you go back to history on October 15th, historically, that's the most bearish relative to the market that's the strategists have ever been so when i look at it there's still fuel for this chase and that's the dynamic we've been playing all years that we think that strategists were too bearish people were too under position coming into the year and they're going to continue to chase that market and that takes us to next year i think when we can we turn the calendar next year it's going to be about chase that market. And that takes us to next year. I think when we turn the calendar next year, it's going to be about valuations and rates and things like that.

Yeah. It's interesting because in the first half of this year, folks who were underinvested or didn't think the market could do a lot to the upside were kind of resorting to saying, well, but it's such a narrow rally. Like, is it really as strong as it looks? That's been really undermined over the last three months, right? You had a broadening out. The mega caps have really reset on a relative basis, and maybe the market's in better balance.

Where from here do you think that dynamic goes? Yeah, well, I think a big part of the broadening out has been a rate sensitivity story. And so I would expect to see some mean reversion where the cap-weighted S&P 500 starts to outperform equal weight through year end at least. I would avoid, given this period we're at where I think the bond market is kind of pricing out that recession risk that it had priced in from mid-year, I would avoid the utilities and real estate and rate sensitive sectors right now. And I would be looking more to buy into high quality tech that's been pulling back and has really kind of reset sentiment a lot of ways. And so that's our playbook. I think you have to go back to something more of the dynamics we saw, like first half versus Q3, where market big, big cap tech outperformed in some of these other areas versus rates.

It's a tangible and swinging back possibly just quickly. I know you look a lot at housing trends and the momentum within housing activity. I mean, is that something we're going to have to be worried about as rates go where they're going? Yeah. I mean, that to me, again, that gets wrapped into the risks side of it is that if the 10-year is, we've seen the lows in the 10-year for a bit, which I think we have. And a lot of people are arguing and saying, we want to see the 10-year at 3.5 or 3.25 or something like that. And I've heard people actually say and saying, we want to see the 10-year at 3.5 or 3.25 or something like that. And I've heard people actually say the Fed needs to go slower to invoke that.

From my point of view, the only way we get that is if recession fears come back into the market. And so you don't really want that. You don't really want that reason to drive rates down. So the mortgage market is going to have to start to work more in that, I think, 6.25, 6.5 range. I think we six and a quarter, six and a half range. I think we're good enough for a muddle through environment. Got to find a new equilibrium there, I guess. Hey, Warren, great to talk to you. Thank you. Appreciate you having me. Good to have

you here. All right. Up next, top technician John Kolobis is back and breaking down why he's forecasting a bit of a bumpy ride for stocks ahead. Closing bell. We'll be right back. The bull market starting off its third year with the S&P 500 hitting a record high. Our next guest sees more room for stocks to run from here, but says it could be a bit of a bumpy ride. Let's bring in macro risk advisors, chief technical market strategist John Kolobis right here at Post 9. Good to see you, John. Good to see you, Mike. So you're deferring to the trend.

You're saying there's really nothing that the S&P is doing wrong right here. But fill in the story a little bit. All right. So, yeah, there's nothing really wrong with it. A good, solid uptrend, higher highs, higher lows, above moving averages, no discernible top patterns, all that. My job was just to call the S&P. Easy, easy peasy. Still think 6,000 before the end of the year. When I look into next year, perhaps at first quarter,

6,300, maybe even a 66 handle at some point next year. We keep grinding higher in this uptrend. Support at 65.50. Until we break underneath that, I think we can continue. 56.50. I'm sorry, sorry. Yes, yes. Yeah, the numbers get confusing. OK. So what else, though, is there to actually keep an eye on if that's the case? I mean, what's happening under the surface or across markets? So there's a couple of things going on here. One, when it comes to volatility, I think there is a potential for a liquidity like vacuum the more that we push up higher. So I do think we will get that election sort of shakeout. But I think it'll be at a higher perch, maybe closer to $59,000 or $6,000. Then we'll get the pullback. But that pullback should be embraced and pushed up to the upside.

You know, you keep buying cyclicals. I really like the cyclical areas of the market, emerging markets, et cetera, et cetera. So there's a lot to go on underneath the surface, a lot of rotation. But yeah, the trend for the equity markets is still on track. Yeah, I was going to say, I mean, $6,000 is like less than 3% from here, right. So we're still we continue to kind of run ahead of our mental model for a kind of where we should be. But so that's how bull markets go on the bond market side. You know, yields definitely have gotten more than perky. In fact, if anything, they look a little stretched in the short term. But how do you see that going and how should we be thinking about that? Yeah, you're totally right. I think we have to pay very, very close attention to what's going

on here with interest rates. If you take a step back, interest rates are in a secular uptrend. They put the low end around COVID. They're going to be going up for my lifetime. We're talking about yields. Yields, sorry, yields, right? Tenure yield going up over time. So going into this year, I felt as though they were going to consolidate. Low end was going to be at 325, but I was really looking at that 360 level. When the Fed cut 50, where was the tenure? 360, and then it ripped higher. When that happens as a chartist,

you've got to pay very, very close attention to that. So now the question is, is that consolidation phase over or not? And I'm leaning towards the case that, yeah, you're pretty darn close to the end of that consolidation phase. You're right, extended in the near term, maybe 420 acts as a bit of a resistance level,

but as long as 385 holds, you're kind of backing and filling. I think the consolidation phase is pretty much close to being over when it comes to interest rates. So therefore, we should be prepared for yet higher yields from here. Correct. Yeah. And what's your take on the interplay between that and stocks and the kinds of stocks in the economy? In other words, is it going to be OK if it's happening for the right reasons? Yes, correct. And currently, it's still OK for the right reasons. Cyclical stocks are acting very, very well. I've shown a chart in the past that would show the inverse relationship between interest rates and breadth. So if interest rates were to go up,

breadth will go down, right? Interest are going up. And guess what's going on with breadth? It's actually gotten better. So the market's shaking that off. So so long as it's not a huge spike up, maybe it's the fiscal grenade that may go off that's going to freak people out, that doesn't seem to be the case. The way I approached it was, macro sentiment was so bearish going into the Fed that this is part of the resetting. I didn't see this as being a hard landing. I thought this was going to be a soft or no landing.

And the interest rates have been showing us that. It's been an orderly pullback to a certain extent, and now we're resolving higher. So the way I would play it would be to look more towards cyclicals. And it's interesting because, you know, the bond market was maybe hunched down for a potential hard landing, but, you know, the stock market up five months in a row and the S&P doing what it's been doing, that doesn't in itself suggest that recession is near in sight.

That's correct. Yeah, it's kind of important just to kind of trade what you see and what you think and kind of get biased by all the noise. Listen, I'm on the sell side. You've got to publish apparel. You're the same on the media. But if you in reality take a step back, everything has been fine with the S&P. What's been interesting in my regard for the last six or seven months or so is that breadth has gotten so much better. So most of the stock market was in a bear market and now just started to join the party.

So there's been some stats out there that's been saying that this is the second year of a bull market. I would argue that maybe we're still in the first year of it since it's now just becoming broad based. Yeah, that first year, I mean, it was really noisy because the AI thing hit and it seemed to sort of take over for the rest of the market. So it's hard to handicap all that. What's your read right now of sentiment and whether we have to be wary of it at any point?

I would say when it comes to sentiment, it's bullish, but I would not go so far as to say that it's euphoric. There's still a lot of haters out there. When I talk about buying cyclicals, I was talking about buying cyclicals a couple weeks ago. Crickets. Really? Wanting to buy oil. No way. I think EM in China is a generational bull market.

It's just getting started. Crickets. So there's still a lot of hate out there. So I always use that kind of line, which is when people stop worrying, then I start to worry. It's still a hated bull market in my opinion. Interesting, at least in those pockets, yeah. All right, John, great to see you. Good to catch up, thank you.

All right, up next, we're tracking the biggest movers as we head into the close. Seema is back with those. Hey, Seema. Hey, Mike, coming up, we will reveal why one mobile tech company is moving higher and what analysts at Goldman Sachs have to say about it. Next. Coming up on 17 minutes, till the closing bell, the S&P 500 up 9 tenths of 1%. Let's get back to Seema for a look at the key stocks to watch. And we'll start with Ibotta shares, Mike.

After Goldman Sachs upgraded the stock to buy from neutral, Goldman saying the risk to reward is attractive, inciting the cashback mobile platform's partnerships with Walmart and Instacart as attractive growth opportunities. The company's shares are still down about 20% year to date. And HIMS and HERS Health surging by more than 6%, 9% at this hour after it said the FDA

would allow compounding pharmacies to sell their own versions of Eli Lilly's Monjaro for the first time. For the time being, the FDA agreeing to reconsider its last one decision to take the drug, the active ingredient in Monjaro, off of its shortage list, which would have limited compounders' ability to sell their versions of the drug. The telehealth provider is up more than 120% year-to-date. Pretty nice run. Mike?

It is, and tacking on a bit at the end here, as you mentioned, Seema, as the S&P also trades at the highs of the day. Seema, thank you. Let's send it over to Kate Rooney for a look at the move in SoFi today. Hi, Kate. Hey, Mike. So, SoFi is getting a boost after the company announced a $2 billion deal for its loan platform business.

This is with Fortress. It's been a key part of SoFi's strategy, a way to generate more fee-based revenue for the company. SoFi plays sort of a matchmaker here. It's matching pre-qualified borrowers to loan origination partners and then originates loans on behalf of third parties. CEO Anthony Noto saying, quote, the platform business is an important part of our strategy to serve the financial needs of members and diversify towards less capital-intensive and more fee-based sources of revenue. Street is liking this one. KBW analysts saying that details were limited, but they view the agreement, quote,

positively and potentially demonstrates some improving investor demand for SoFi's paper. Dan Dolev over at Mizuho telling me it's a rebuttal, as he called it, for the bears out there, saying that Fortress, the deal here is a vote of confidence. And Dolev says it's also helping shares of Upstart, which are up more than 16 percent today. And you can see SoFi up double digits as well, Mike. Yeah, familiar names, Kate. Interesting looking, you know, four-year charts. It's a huge mountain and then a decline and now a big recovery. So we'll see how that goes, Kate. Thank you.

Exactly. Still ahead, we'll tell you what's behind the rally in chip stocks with NVIDIA on track to close at a new record. Plus, Ned Davis researchers Ed Klisold is standing by to break down the final moments of today's trade. Closing bell. We'll be right back. Tomorrow, don't miss Scott. We'll be live from the Case Alternatives Conference. We'll hear all about the top opportunities outside of stocks and bonds, the growing interest in private equity and credit, and more with leaders in the alts business. That is tomorrow on both the Halftime Report and Closing Bell. Right up next, several big banks reporting tomorrow morning before the bell. We'll

run you through what to watch and when we take you inside the market zone. We are now in the closing bell market zone. NVIDIA heading for a record closing high today. Seema Modi has the details and Leslie Picker on what to expect from the rest of the banks reporting in the next few days. Plus, Ned Davis Research's Ed Klissel breaks down these final crucial moments of the trading day. Seema, four months without a record high, yet the stock is still up 180% year-to-date. Getting a lot closer, though, in conversation with investor Brad Gerstner, NVIDIA CEO Jensen Huang,

he shared his plans on how NVIDIA plans to protect its competitive advantage and deliver faster and more powerful chips every year. There's two parts of building AI applications, right? There's training the model and then actually applying the AI applications, also known as inference, which Huang says is becoming a bigger opportunity right now, accounting for 40% of NVIDIA's data center revenue with that number set to go up. And a pretty positive reaction to those comments he made over the weekend. Milius Research Analysts writing that NVIDIA's chips are, yes, expensive optically, but its architecture offers the best return on investment. And then Goldman upping its price target to $150 from $135. TD Cowan naming NVIDIA its top pick. This week, Mike,

earnings from chip suppliers TSMC and ASML will provide important color really for the entire sector. Yeah, it'd be an interesting tell. And I guess we're, you know, we're that much closer to visibility into 2025 when some were worried that all this CapEx spending on AI processors might slow. Yeah, exactly. So in that CapEx number, of course, will once again be a topic of interest from the hyperscalers as they get set to report. We know the semiconductors at the end of the day are the biggest beneficiary of those large budgets going towards artificial intelligence, Mike. Gotcha. Seema, thank you. Leslie, you know, the banks continue to run after those early reports we got last week. Yeah, that's right. Most large bank stocks

getting a boost today after Wells Fargo and JP Morgan gave better than expected forecasts on Friday. Today, we have a one day break from bank earnings and then tomorrow we'll get numbers from Bank of America, Goldman Sachs and Citigroup. Top lines are expected to hold steady for those three firms. Analysts say Bank of America and Citi will report EPS declines. As net interest income, the profitability metric for loanmaking comes in lower for the quarter. Goldman Sachs is expected to show a jump in earnings due to several special items, if you recall from a year ago, including that write-down on its balance sheet investments that created a

hit to earnings at the time in 2023. As was the case with Friday's reporters, the outlooks tomorrow will be key. Analysts and investors want a clearer sense of how these firms are navigating the new rate environment. And be sure to tune in to Squawk on the Street tomorrow for our interview with Bank of America CEO Brian Moynihan. Mike? All right, for sure. Leslie, thank you very much. Ed, let's talk about just where this market sits here. As we get through October and it seems as if we had people kind of tensed up perhaps for some volatility, have not gotten it. If you go down your bull market checklist, what does it tell you right now?

Usually when the market does really well during a seasonally weak time of the year, we interpret that as being bullish that the market can withstand those headwinds rather than saying, oh, the market's really overbought. For example, when the S&P has been up 20% through September, during the fourth quarter, it's up an average of another 4 percent. Now, fourth quarter is usually a pretty good quarter, so it's not marginally better than all fourth quarters. But it tells you the rally tends to continue when you have a good start to the year. And so we also are, I guess, paying some attention here to this maybe equilibrium that's moving around between where bond yields are, where expectations for what the Fed might do. You have earnings coming up as support, but you have a relatively high valuation.

So where does that all come together for you? It's a really fine balancing line. And so far, the market's been able to walk that line very well- for example the Citigroup economic surprise index- which had been really positive meaning a lot of economic data coming better than expected. Was negative for a few months

earlier this year recently turned positive that tends to be good for stocks. The caveat to that is. When the economic data looks a little bit better interest rates tend to rise you've already seen a decent move from the ten year treasury yield. We still rates tend to rise. We've already seen a decent move from the 10-year Treasury yield. We just don't want that to rise too quickly. So if we

get, say, 430, 450 just in the next few weeks in the 10-year, I think that could change that balance where there's more concern about a no landing, the Fed not being able to cut rates as much as the Fed wants to. So right now, that's in pretty good shape. And throwing on the earnings side of things, we're looking at quarter-on-quarter acceleration earnings growth again in Q3, which is positive. The difference between Q3 and what we saw in Q2 and Q1 is that the expectations are much higher. Consensus estimates are jumping from mid-single digits year-over-year to more like mid teens year over year. So it's a little bit of a higher hurdle for the market to climb. So you have to balance all these things out. But overall, it's a pretty positive environment. And Ed, I know you've been making

the case from from way back that if the Fed is actually moving more slowly as it lowers interest rates, doing it in a deliberate way, that tends to be better for stocks. Obviously, it means they're not rushing to save an economy that's faltering. That seems to be what we're headed for right now. It actually brings me around to this idea of, you know, in this pileup of positives, what would you look for to suggest that maybe, you know, people are overbelieving it or investors are getting a little bit too overexcited about admittedly good fundamentals. You're right, Michael.

When the Fed has cut four or fewer times in a year, on average, the S&P is up about 25 percent in that first year. Not a prediction, just to tell you historically what's happened versus only 5 percent when the Fed has cut very quickly. So in terms of what could go wrong, I think we want to go back to that earnings discussion. If analysts who usually are pretty optimistic, if those estimates prove to be wildly optimistic, that would be a big concern. And so if that happens, or if interest rates will rise too quickly,

we'd be pretty concerned that the Fed won't be able to cut at all. And that's a pretty dangerous environment where the Fed only cuts once or twice and has to reverse course because they lose credibility. Inflation rears its head again. And then we have to deal with, to some extent, what we were dealing with a few years ago with higher than expected inflation. All right. We seem a little bit short of that threshold for now. We'll see how it goes, Ed. Thank you very much. Appreciate it. As we get into the close, market gains moderating just slightly, but still a very positive day. You have the S&P 500 up more than three quarters of one percent. It will close at a new high of 58.60 or thereabouts. All the other indexes higher as well

with the NasDAQ reading. That's going to do it for Cozy Bell. We'll send it into overtime with Morgan Brennan and Jon Coyne.