Closing Bell - Closing Bell: The Big Battle Between Tech and Energy 8/9/23

Episode Date: August 9, 2023

The brig growth stocks under pressure again with the oil and gas group an emerging bright spot in an indecisive tape ahead of a crucial CPI report tomorrow. So, will that report help confirm or undermine the now-popular soft-landing story and what will it mean for markets? NB Private Wealth’s Shannon Saccocia gives her expert market take. Plus, Roblox shares took a tumble today. We get reaction from Bryn Talkington who owns that name. And, Evercore ISI’s Roger Altman gives his forecast for CPI and what it might mean for the economy.

Welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner here at Post 9 at the New York Stock Exchange. This make or break hour begins with another intraday rebound rally along with a further round in the battle of tech versus energy. The big growth stocks still under pressure again with the oil and gas group an emerging bright spot in a somewhat indecisive tape this week ahead of a crucial inflation report tomorrow. In just a few minutes, we'll hear from Evercore ISI's Roger Altman with his forecast for CPI and what it all could mean for the economy. But first, to our talk of the tape, will the CPI numbers help confirm or maybe undermine the now popular soft landing economic story and what will it mean for markets? Here to help answer that is Shannon Sekosia, MB Private Wealth Chief Investment Officer and a CNBC contributor. Shannon, good to see you. Thank you so much for having me, Mike.

Absolutely. Now, first, on the intraday action, I mean, I know we don't want to make too much of it. We were only down about three quarters of a percent at the lows this morning, but it is two days in a row where it seemed like, OK, the expected August pullback is resuming. We have the big growth stocks. I mean, Apple, Microsoft, Nvidia, all 10, 11 percent below their highs. Yet the broader tape is holding together OK. Do you take heart in that? Do you feel like it's noise? Do you feel like it's delusion? Maybe a little bit of all of those. You know, I feel like there has been this sense of somewhat of this capitulation that's happening in the middle of the day, in the last couple of days. And I think there really continues to be a very strong underlying

bullish sentiment in the market. And I think it stems from the expectation that we're going to see soft landing or no landing. We've seen a lot of defectors from even the soft landing camp over the last couple of weeks. I think the other thing is that investors are trying to determine how much this CPI print tomorrow will change the narrative. And the thing is, is that a lot of the increases in energy prices, for instance, that we've experienced over the last couple of weeks probably aren't going to show up in this print. So I would say that this print tomorrow is likely to continue to be supportive of the fact that we're going to get a soft landing or perhaps no landing rather than taking into account some of the challenges that we've experienced over the last week.

Yeah, it would seem that the numbers themselves, certainly if the focus is on the core, we think there's a little more to go there in terms of the year-over-year impact based on what was happening a year ago. On the other hand, with energy prices on the rise, energy stocks seeming to take some strength out of that. In other words, it's not just a fleeting blip. And what that impact might have, what the impact might be on longer-term inflation expectations, which are ticking higher, and the fact that bond yields are near the upper end of their range, it just complicates the narrative that we have Goldilocks, it's a comfortable environment indefinitely. And the market can make headway

from here. That last mile of inflation, we've been talking about this for some time. And the last mile was expected to be pretty much wage driven and so impacting the services sector. If you start to anticipate not just disinflation, but deflation in those underlying food and energy costs, which is I think is what is being priced in from a consumer confidence perspective. If we go to the other side of that and say, wow, we could actually see some acceleration or reacceleration in the prices for food and energy, that's not just a core problem, that's a headline problem now. And so I think that investors really aren't anticipating that that data is going to start to flow through. How is the Fed going to react to that? And again, when you talk about what happens over the next six to nine months, I think what

isn't being talked about enough in the marketplace right now is the fact that not only could we see a delay or a cancellation of a recession, but that means we also see rate cuts happening much later than was anticipated in the middle of this year. That has a lot of implications, particularly for those growth stocks that you talked about. So it certainly has implications for the middle of this year. That has a lot of implications, particularly for those growth stocks that you talked about. So it certainly has implications for, you know, the cadence of rates and how far yields might be able to come down or or whatever. On the other hand, you know, we had rate cuts priced in at one point in the bond market in the latter part of this year, like starting next month, even that's gone. And the stock market's been OK with it. I just wonder if if we've observed that the relationship between the stock market and been OK with it. I just wonder if if we've observed that the

relationship between the stock market and today's level of inflation, even though the Fed's target is 2 percent, it's not like the stock market says we've got to wait until 2 percent before we get bullish again. Well, there's also a perception that 2 percent isn't necessarily the hurdle that they're trying to trying to meet. Right. If you're if you're anticipating that they're going to get comfortable around two and a half percent. And again, it's not just about that terminal level or that target level of inflation. It's about the spread between where rates sit and where inflation is. And what is that spread should be over time, 150 basis points, 200 basis points, certainly not as wide as it's going to be now. And so I think the idea that we're going into this seasonally weak period, that we're coming off of an earnings

season that has been better than expected, and I would say has provided, again, this nice lift and foundation for the rally, we're going into a much more difficult time. And so I think every piece of data is going to be influential. But I do think, again, there's this underlying sentiment that people want to be bullish here because the economic story is better than expected. That is that is true. And that's been the dynamic. We've been feeding off of that in the markets for a few months now. Let's bring in Bryn Talkington of Requisite Capital Management and Peter Cicchini of Exxon Capital. Bryn, a CNBC contributor as well. Welcome to you both. And Peter, I'd love for you to weigh in here because I know you're a little bit of a, you know,

a dissenter from the soft landing consensus to a degree. Are we just observing longer lags between what the Fed has done and what the economy registers, or is there something else going on? Yeah, I'm one of the few non-defectors from the recession camp, apparently. Okay, put it that way. You know, I do believe that history makes a strong case for recession. And I do believe that long and variable lags are called variable for the very reason that there are other dynamics and factors affecting how long tighter policy impacts the economy and asset markets. And in this particular case, you know, one of the things that

we likely underestimated in calling for the recession a bit earlier was the wealth effect. And, you know, there's over $10 trillion in household equity now, and that's, I believe, at all-time highs. And that wealth effect, albeit if you want to draw it out on a heel lock, it's about eight to nine percent. But that wealth effect gives people a lot of confidence to continue spending. And in addition, the direct stimulus and deposits into people's checking accounts enabled them to heal their balance sheets, oddly enough, even during a relatively high unemployment period of time. And FICO scores went up and we see that in credit card spending. And in fact, the most recent New York Fed report showed that delinquencies on credit cards are beginning to

rise and that the consumer is starting to struggle more and more. That is true. Although, Bryn, I know you were taking a look at those numbers as well on the credit conditions or consumer credit. Aren't they just normalizing? I mean, everything you look at on a long-term chart, and especially if you look at the debt service costs relative to disposable income, it's just not necessarily at a point where you say, uh-oh, we're maxed out and we have trouble ahead. How are you thinking about it? So right now, the New York Fed in their report this week, 30-day delinquencies, which is what I watch, because very quickly, 30-day credit card delinquencies can go to 60 to 90. A year ago, Mike, we were at 4%, which is like not even on the charts. That was just historic lows. We have hockey sticked up to

almost 8%. So yes, you are correct. Why 8% 30-day delinquencies is just somewhat normalizing, the rate of change to me is relevant. So if the consumer is so strong, and we all understand the data about jobs, adults, et cetera, but if the consumer is so strong, why are we having 30-day delinquencies? And I do think, I mean, I'm pragmatic, right? I'm a long-term bull. I'm always long-term on America. But Peter brings up just like statistically accurate information. And I do think like this variable lags are important. And what I'm also seeing, if you look in the debt market, what's happening with downgrades in that C range, that single B range, those are moving up just with the same rate of changes as 30-day delinquencies. And so while I think

everyone's, the drumbeats of these soft landing, the consumer strong are statistically correct, I think that intellectually, they're potentially starting to become dishonest because I do see cracks starting to occur. That being said, I think this week, the CPI number is going to be the story of the week. And I think there is a wide range of outcomes depending on if we have a point two or point four. Point four is what the Cleveland Fed thinks. So we have a point four. That will be bad if we have a point two. It's the Goldilocks is back on track. You know, Shannon, I mean, is the soft landing premise.

I mean, we we're going to wear out the term, obviously. But, you know, we mean. In other words, an economy that decelerates but does not really tip into contraction. And that's what we seem to have for the moment. It doesn't necessarily mean that the consumer is super strong. It means the consumer is kind of hanging in there, going sideways. If I look at today's market action, just to bring it back to how the stock market is metabolizing all this stuff, the downside leaders in the S&P, downside contributors are NVIDIA, Broadcom, Tesla, Microsoft, Meta. They were up a lot. They probably overshot. They're having their valuation correction. People are taking money off the table.

The upside contributors today are ExxonMobil, a bunch of industrials and pharma stocks, Home Depot, flight to safety. Right. So in other words, it's not as if the market is saying off to the races with the consumer. It's saying we have a little bit of a push pull inside the economy. Maybe it's the rolling recession versus expansion situation. I guess the question is, how much longer can we, you know, can rotate towards strength and away from danger? Well, I think that the potential danger is, to your point, the expectation that the consumer can continue to make up. But the fact that we have two major catalysts in the economy, in the global economy that we were anticipating being impactful this year, manufacturing, reshoring in China. And neither of those two things have happened. Right. So coming into this year, what was more popular than saying there was going to be a recession

in late 2023 and early 2024? The fact that manufacturing, reshoring, and China was going to recover. So now what is that next catalyst for growth? We are continuing to see the fact that we've got student loan payments on the horizon. Those are going to cut into discretionary income. We have the expectation. We see the delinquency data that Bryn pointed out. The assumption that the consumer can continue to be just as strong and that we don't need to see other growth drivers coming in to take ownership

of this story. Energy rallying right now because energy prices are higher actually doesn't support a lot of the other narrative that people are trading on. And so I think we're in a difficult position over the next couple of weeks as we try to reconcile those two things. Yeah. Arguably, energy is still within an acceptable range. But yes, without a doubt, it pulls against the resilience of the consumer. Peter, in terms of the investment implications of all this, does it simply make you kind of skeptical about credit markets and favoring government bonds? Do you think there are opportunities that have been generated by what you, I think, see as a mismatch between how the markets have behaved and how the economy is going to develop? Yeah, certainly, Mike. You know, the the Treasury market, whether you look at the short end or the long end, presents opportunities. When I think about equity risk premium versus the two-year, it's negative with, you know, the forward P.E. multiple on the S&P 500 above 20.

So, you know, we see opportunities in the short end. Our cash position is ample, you know, awaiting to take advantage of opportunities when spreads widen somewhat. And interestingly, you know, in esoteric markets like structured credit, where we tend to play quite a bit, there are very interesting double digit yield opportunities in senior parts of capital structures and sort of misunderstood consumer securitization stacks. And in other places where we think there's safety and where we have the ability to watch and to wait for opportunities to materialize where we can get even higher equity like returns without taking equity like risk. Let me just have a quick follow on that, Peter, because you're talking about kind of the private provision of capital, right, from you and your clients that are stepping in

where there might be these dislocations in parts of the market. At the same time, you're pointing to things like bank loan officer surveys that are getting more tight and therefore maybe it's going to drag on the economy. Is one of the answers to why the economy is OK is that we're not just relying just on banks and that private capital is just flowing through the economy in a way it never did before? You know, that's a that's a great point, Mike. Look, private lending and alternative lenders are filling bigger holes in the lending ecosystem than they have ever before. But there's still a small fraction of overall credit provision when you compare them to regional banks and large money center banks. So it's an opportunity for us. I'm still of the belief that lending standards, while there's some multicolinearity to the yield curve,

are still quite predictive of what happens with future growth as consumers and businesses lose access to credit, which, by the way, we're seeing sort of under the covers, if you will. Shannon, if you do think maybe we have a little bit of a more tougher few weeks or longer than that to reconcile some of these unknowns, what does it mean you would do now? I mean, would you just be in buy deeper pullbacks mode or or just kind of lightening up and waiting? I think if you're certainly if you're overweight, some of these names that have done really well, Mike. I mean, I have a hard time looking at what we've done from an earnings perspective and looking at the multiple expansion that we've experienced in the top seven or ten or whatever that number is stock,

and feeling like if my position has doubled, tripled, quadrupled in this time, that I shouldn't take some of that off the table. I do think that the good thing about a soft landing scenario or a no landing scenario is that there's an opportunity to add to some cyclical names. There's opportunity to put money back into some of the things that in the first half of this year perhaps have not gotten the love as people have reverted back to make a cap tech. And so I think being very thoughtful about wanting to perhaps doing some rebalancing at this time. But I think Jackson Hole is going to be a pivotal point for all of us to determine what that path of rates is going to look like. And so I would I would be more constructive in your in a rebalance right now than taking on a lot of additional exposure in different parts of the market until we get some more clarity from the Fed coming out of August. All right. We'll see if they inject some drama again from Jackson Hole. Shannon,

thank you very much, Peter. Talk to you again soon. Bryn, stick around. We will see you again in just a bit. Let's now get to our question of the day. We want to know, what are you expecting from tomorrow's CPI report? Will it be hotter than anticipated, cooler than expected, or right in line with expectations? Head to at CNBC closing bell on X, formerly known as Twitter, to vote. We'll share the results later in the hour. Let's now get a check on some top stocks to watch as we head into the close. Seema Modi here with that. Hi, Seema. And Mike, I want to draw your attention to Rivian.

Shares are under pressure despite a narrower than expected loss. Analysts are pointing to a number of headwinds from the electric vehicle maker with Goldman Sachs saying it could have a longer path to profitability. There's also some concern around lower pricing for EVs in North America. After Tesla's recent price cuts, you'll see shares of Rivian down more than 7%, 8% today. And shares of Upstart are heading for their worst day in over a year. This is the AI lender's weak revenue guidance. That's what's outweighing a surprise adjusted profit. Shares are down more than 33% at this hour. Mike?

Seema, thank you very much. Talk to you again soon. We are just getting started here. Up next, Roblox shares slam, now down more than 20 percent on the day. We'll break down that move lower and get reaction from a Roblox shareholder after this break. And later, the White House expected to announce an executive order banning some U.S. investments in China. Evercore ISI's Roger Altman weighs in on how this could impact global tensions and the markets. We're live from the New York Stock Exchange.

You're watching Closing Bell on CNBC. Roblox shares having their worst day of the year, reporting second quarter results. Steve Kovach joins us now to break down the numbers. Hey, Steve. Yeah, Mike. It's not just the miss on the top and the bottom lines dragging shares down 21 percent now today. Investors concerned about all the spending going on at the company as well. That was a big focus on the earnings call this morning when spending on things like personnel, trust and safety and infrastructure

is going to finally ease up. Now, I caught up with CFO Mike Guthrie about that, and it's something he reiterated on the call, that spending is already starting to slow and will continue to do so into next year. Roblox had to spend a lot to keep up with the surge in its business during the pandemic, and CEO Dave Buzuki said on the call the company still needs to hire, though those costs will moderate next year. And on the bright side, Roblox continues to grow. It has 65.5 million players a day on average. That's up 25% from a year ago. And top line growth, well, that was up 22% despite those net losses. And there's another piece of the puzzle here, Mike, advertising. That's been rolling out slowly since first announced last year. And Guthrie, the company's CEO, said there will be more updates on that part

of the business later this fall. So people really look at Roblox, Mike, as kind of a proto-Facebook, part social network with advertising and part video game, Mike. Absolutely. We'll see at what stage they're at relative to where Facebook was years ago. Steve, thanks very much. Requisite Sprint Talkington owns Roblox. She is back with us. Bryn, Steve lays it out well. I mean, the platform itself is thriving. Usage, engagement, revenues all look good. But for a shareholder, you really can't see very clearly to that moment when you're going to get your share, when it's going to fall to the bottom line. Yeah, I mean, you never know what's going to happen, how the street's going to react. If you just listen to the call, which I did this morning, it was a great call, right? Their bookings are up. I mean,

I won't go through the things Steve went through, but also if you think about their international market, which from a base, the majority of their revenues are from U.S., Canada, and Europe. When they talk about Japan, once again, growing 107 percent, that's a huge gaming market. India was up 40%. They have 3 billion cash. Yes. I mean, to me, the big issue is their revenue growth and their cost of revenues are growing at the same level. And so ultimately, you need that revenue growth to be growing much faster than how much it's costing you to create that revenue. And I think that's where the knock on the stock is today. But I think 20% is so extreme, like it doesn't really make any sense to have the stock down 20. But it doesn't make sense. Well, down 20 and also really not far above the, you know,

the bear market lows. It's not been a public company for very long, but clearly there's been a little bit of a walking away from this name based on a little frustration around something. I mean, look, they're one of these companies that have a very heavy stock-based compensation burden. That's going to be with them for a while. And as you say, they're not showing any real profit leverage as they continue to spend. I guess you could probably take a bright side view and say, you know, isn't this what Amazon taught us to want out of a company that is building towards scale? Big question is, can they can they really get big enough to outgrow the spending?

Right. I mean, they they have big expectations for themselves. I do think the India market, the Japanese market, these are really future growth engines. I also think, though, that we're in a five and a quarter Fed funds rate and we've got inflation and this is not a good week. We have a sell off in the Nasdaq. So I think this kind of company that doesn't have an E is hard for the general population to get around, much less it's a gaming, right? It's a gaming platform, which I think a lot of people think it's just for kids. But what's interesting on this call, Mike, is that 13 and over 13 plus is now five times larger than 13 and under. So if I didn't look at the price today, I would have been like, you know what?

They're spending the spending's coming down. But it was another solid quarter. But the market has another thing to tell me about that, though. Yeah, at least in the short term, still about an 18 billion dollar market cap. Not really that big for the size of the franchise. Bryn, thanks very much. Appreciate you staying with us. Up next, countdown to CPI, that crucial number hitting tomorrow morning. Evercore's Roger Altman is here with his prediction on the data and how it could impact the Fed's next move. That's after this quick break.

Closing bell. We'll be right back. See the Dow just about back to the flat line after having lost more than 200 earlier in the session. The market is off session lows from this morning. The S&P was down three quarters of a percent before as investors await tomorrow's critical July CPI print. My next guest says while he expects the report to be encouraging, it likely won't be enough to conclude that the Fed is done hiking. Let's bring in Evercore's Roger Altman on the news line. Roger, it's great to have you. I mean, it seemed like a month ago or so when we got the prior CPI report, it was three percent. We kind of celebrated that maybe the job was close

to being done on inflation, maybe a little more choppiness in the data, energy prices up. How do you think that sets us up for the Fed and how close it is to its destination? Well, first of all, I don't know, as no one else does, what tomorrow's actual figure will be. But I suspect there'll be a lot of noise in it in the following sense. I think the headline CPI figure may be up slightly. You just mentioned that it was 3% year over year last month. I think it could be a little higher, although, you know, it would be great if it wasn't. But I think core CPI is going to be too high from the Fed's point of view.

It's going to be in the fours, I think. And I think that's why. And that is the main reason I say that I don't think the data tomorrow will be sufficient for financial markets, or for that matter, the Fed itself, to conclude that the job is done. And the underlying economy is surprisingly strong. We all know that. The 2.4% real growth figure for the second quarter was pretty strong by standards of this late in the recovery. The recovery is about three years old. And the very, very anecdotal data about this current quarter, obviously very early in the quarter,

so still is showing even more strength. So if you're the Fed, you look at that strength, you look at what I'll call a noisy number tomorrow that is not low enough, and you say to yourself, the job is not done. I'm not suggesting, therefore, the Fed will hike further. That will be dependent on additional data. But I don't think the Fed will conclude that the job is done and will suggest that publicly. Some governors may, of course, talk like that.

You saw that from the Philly Fed governor just a little while ago. But I don't think the overall message will be we can relax now. There'll be no more rate hikes at all. Sure. And certainly most Fed officials are far from sounding at all clear and they want to make sure that they're still on the case. On the other hand, the message seems to be that they're happy to allow time to do some of the work here. We have rates roughly where they need to be. Higher for longer is the message, which maybe is enough as parts of the economy decelerate from here.

So it seems that the market's made its peace with that idea that, you know, OK, every six or seven weeks we might have to contend with a quarter point bump, but otherwise it's status quo. Well, the markets are buying the soft landing school of thought in a big way. A few weeks ago, I thought that there was about a 50-50 split in the global financial community as to whether we were going to see a soft landing or a hard landing. And now the major narrative, as you well know, is that of a soft landing, meaning no recession. And so that's the main reason, I think, why the equity markets have been strong in recent weeks. I mean, the S&P 500 is up between 17 and 18 percent for the year. And we all know the Nasdaq up more than that and so forth. And that's what the market is thinking now.

We're going to avoid a recession. And based on the, as I said, the most recent economic data, that seems to be a logical conclusion. I personally think it's too soon to tell because monetary policy operates with such a long lag. And we really are seeing remarkable tightening between both the nominal funds rate and the impact of quantitative tightening on the so-called proxy rate, which the San Francisco Fed publishes. But the markets at the moment see the soft landing school as the main picture, and that's what they're responding to. Yeah. And it's obviously the direction of surprise would be anything that complicates that view. Roger, before we let you go,

we'd love your thoughts on this executive order we're expecting the president to come out with soon about restricting some forms of investment by U.S. firms into areas of Chinese technology. Do you think it'll have an impact and how does it fit into the broader policy push against a lot of these linkages with China? Well, first of all, there's no surprise here. This executive order has been worked on for about a year, and it's well known to have been worked on. So it's not a surprise to see it about to happen. Secondly, I don't think it'll have almost any impact because of two things. First, if you look at the latest data on incoming or ingoing investment into China, American investment

into China, putting aside even technology, just all investment, the figures are tiny. And secondly, I don't think financial sponsors, and this executive order is primarily aimed at them, private equity, venture capital, and so forth, we're going to invest in these three areas in China anyway, quantum computing, artificial intelligence, and semiconductors. I don't think you are going to see any investment from financial sponsors to speak of in those segments anyway. So I don't think it's going to have much effect. In the broader context, it's part of the, in my view, unfortunate Cold War between the United States and China, especially centering on technology.

And that war has been intensifying to the downside. And this is part of that picture. I think it's not in either country's long-term interest, but it is what it is. And it's definitely front and center right now. Yeah, for sure. And so many companies reacting to the new realities there, too, in directing their investments. Roger, thanks so much. Good to speak with you. Roger Altman. Thanks a lot. Bye bye. Up next, the Escalade is going electric and the price tag might surprise you or reveal the lofty cost and what it could mean for GM stock in the long run. Closing bell. We'll be right back. Welcome back. GM's Cadillac Escalade is

going electric and with a pretty hefty price tag. Phil LeBeau is here with all the details. Hi, Phil. Hey, Mike, take a look at the next electric caddy. This is the Escalade IQ unveiled by the company today coming in 2025. You mentioned the price tag. It is expected to start at around $130,000 with a range of 450 miles. There's going to be a 10-minute fast charge capability on this vehicle that will give you 100 miles within 10 minutes of being charged. This vehicle comes at a time when a lot of people say, well, look, is EV demand going to hold up? The president of General Motors believes it will. I think the real data supports, you know, pretty high adoption, openness and conversion rate. And of course, the market's got to have the right products at the right price points to do it. But the willingness piece of it, I think,

is really, really high. And they're very optimistic that the IQ will do well. Remember that the Cadillac brand is expected to be all electric by 2030. And as you take a look at shares of General Motors, Mike, I would be remiss to say if I didn't point out the fact that the UAW contract ends on September 14th, that's really what's driving this stock right now. I think people are more, investors are more focused on that than anything else. Oh, sure. There's no doubt when it comes to the near-term outlook for the stock. Although, when it comes to the escalate, clearly Cadillac is the pinnacle of the kind of luxury for GM. They don't sell a massive number of these standard ones, right? It's like 40,000 a year. So it's defining one part of the market. And how does it compare to the cost of the standard models?

Well, I think that hasn't been finalized yet. But in terms of how well it will do in terms of being profitable, I think it's going to do very well, especially if you have a price point up there at $120,000 or $130,000. And look, in that category, there are not a lot of competitors there, but the Escalade stands apart from a lot of the competition. For sure. Phil, thanks very much. Let's now get back to Seema Modi for a look at the key stocks to watch. Seema. My 20 minutes left in trade and Celsius is trading at an all time high after nearly doubling earnings expectations on revenues that also topped estimates. The energy drink maker says increased consumer awareness about the

brand is really fueling results. Stock up nearly 20 percent at this hour. And toast is surging after the fintech company posted positive adjusted EBITDA and free cash flow for the first time since going public. Efforts to grow its market share are paying off. Strong full year guidance fueled by price increases. And you'll see shares are up nearly 15 percent right now. Mike. Seema, thank you. Last chance to weigh in on our question of the day. We asked, what are you expecting from tomorrow's CPI report? Hotter than forecast, cooler than forecast or right in line with expectations? Head to at CNBC closing bell on X, formerly known as Twitter. We'll bring you the results after this break. All right, let's get the results of our question of the day.

We asked, what are you expecting from tomorrow's CPI report? Pretty close, in line with expectations, nosing out a win, 39%. Although, a pretty big cohort thinks it'll be hotter than expected, maybe inflation not quite under control yet. Up next, your earnings setup, Disney and Wynn reporting in just a few minutes. We'll bring you the full rundown of what to look for when numbers hit. That and much more when we take you inside the Market Zone. We are now in the closing bell Market Zone. PC's Amanda Agati is here to break down these crucial moments of the trading

day plus Contessa Brewer is watching win earnings after the bell and brings us the latest on a major deal in the world of sports gambling and Crossmark Global's Victoria Fernandez on how she's playing Disney ahead of earnings in overtime today

welcome to you all we have a little bit of a pullback from that intraday high we got to a little while ago in the broad market, Amanda. I wonder how you're viewing the backdrop in general. 4472, the S&P closed on July 12th. That's basically where we are right now. So we're kind of going sideways.

It's just kind of a normal consolidation after a big rally. Or do you think that we might have a little more tough stuff on the downside as we get into the inflation numbers and try to test this soft landing hypothesis? Well, it's so great to be with all of you. Thanks so much for having me. I've been saying all year that this is a straight up delusional market rally in the face of some pretty significant macro headwinds and challenges that haven't really fully come home to roost yet. And so I'm feeling like this consolidation is a little bit more of a sanity check and a reality check. And so while we're not expecting a really significant drop from here, like a quick snap necessarily, I do think it's going to be a pretty slow grind

lower. Earnings season is doing a little bit better than expected. I'd think it's going to be a pretty slow grind lower. Earnings season is doing a little bit better than expected. I'd say it's better than feared. But revisions are certainly coming down for the second half. And that's going to be an important story for the trajectory of the market from here. Well, for sure. Although I guess the market has at least been behaving as if we've just seen the trough in earnings on a year-over-year basis, down about 5% in the second quarter. They're projected to firm up from here and start to grow next year. You could probably say the Fed, if not done, is pretty much in the ballpark of being finished with the tightening plans. Yields have held the upper end of their range. In other words, they're not breaking out. And the economy, we've seen to be pushing off the expected

recession further. So where within that do you think the market has it wrong? Well, I think the market's just so quick to claim victory in this war on inflation. You know, we're expected to get an important CPI report. There will be a reacceleration there. We're not back to the 2% long-term target the Fed is continuing to focus on. Poor drivers of inflation continue to be pretty sticky here and so. While we're not of the mindset that the Fed

needs to do a lot more. Aggressive- rate hikes to wrangle this we do think we're still in a longer for longer dynamics so. Higher terminal rate than what the market is expecting just a longer overall tightening cycle and. Really

the lag the facts of all of what the Fed has done. These last ten or eleven- plus is expecting and just a longer overall tightening cycle. And really, the lagged effects of all of what the Fed has done these last 10 or 11 plus actions is really going to start to come home to roost here. So we think earnings growth expectations for the second half and certainly for 2024 are still just way too high. All right. Maybe a further sanity check, as you call it. Amanda, thanks so much. Contessa, Wynn, after the bell, stock has had a pretty good run off the lows. Where does it set it up?

Well, first of all, they just like a little spotlight on a day like today. But the big focus for Wynn Resorts will be the luxury consumer, both in the United States and in Macau. This is really the core demographic for the company. And investors will be looking for any indication that there's been a pullback in spending. That's especially important in Macau because you have travel involved and questions about the overall Chinese economy. But we have already seen strong Macau gross gaming revenue numbers for July. And Las Vegas Sands and MGM Resorts have reported earnings. We've seen it there as well. The street is expecting for when $1.54 billion in revenue for the quarter and earnings of 59 cents a share, a vast improvement over last year. So we wait and see what happens. You know, we've seen already strong numbers in Las Vegas. Will we see that in, for instance, in Boston as well? And certainly what's the picture

looking like overseas? I do want to get your thoughts. I know you've been talking all day about this sports betting deal. So Disney's ESPN with Penn National, market reaction pretty dramatic. Penn's up eight and a half percent. People think it makes them a player. But DraftKings losing more than 10 percent. It seems to suggest investors are concerned that the sports gambling market's going to become less disciplined, more promotional. Well, I think that what we heard from Penn on the earnings call today was that, look, we are no longer anticipating that we are going to be profitable in the fourth quarter of 2023. Why? Because we're going to have to ramp up our marketing spend associated with relaunching ESPN Bet, where before it was Barstool, and they've said sayonara to Barstool.

So now the question becomes for DraftKings and for Fandle, too. Don't forget that there's going to be a public listing in the United States of parent company Flutter. The question really is, do we see DraftKings throwing in the towel on its more constrained spending, which they made a big deal about on their earnings call last Friday, to preempt or keep up with ESPN bet. Well, an ESPN bet is essentially written into the agreement that they need to just gun for market share, right? Absolutely. And that's pretty much the way you do. Yeah. Although, you know, they wouldn't be specific about what that target market share exactly is. So, right. Jay Snowden, by the way, is coming on with us. So we're going to ask him on Mad Money. Absolutely.

We will absolutely be watching that. Thank you very much. And Victoria, I mean, obviously not a huge piece of the Disney story economically, but representative of a rethink of strategy that Disney is doing right now. What are you hoping or expecting to hear out of the numbers today? Well, the good thing about Disney is you really get a peek into so many different areas with Disney, right? We look at streaming services.

We look at linear TV. I mean, we heard from the interview with David Faber that that's not going to be a core part of their business maybe going forward. So then we look at subscriber growth. We've got two quarters of negative subscriber growth, right? So what is that going to be this time? I mean, look, I have Disney Plus, I have Hulu Plus, so I can get live sports. If they combine that, am I less willing then to, you know, take that away? Probably. But we get parks. We get to see the consumer and the strength of the consumer, which has been holding

up this economy. There's a lot of elements here we want to hear. And the cost cutting, five and a half billion of cost cutting they want to do. Where do we stand on that? That's true. Very ambitious cost cutting goal. It should be well underway. Obviously, the strikes, bad news in the long term, but saves you money in the short term. But the stock has really been abandoned. I mean, in a big way, people are not really satisfied to wait around and assume it's going to have a profitable outcome. Right. I mean, the stock's down 20 percent since early February. Right. In six months, we've come down 20 percent. Historically, it's cheap right now. Right.

It's trading 17 times. That's pretty cheap. But is it cheap if you don't think they're going to be able to bring these things to fruition that they're talking about? We use it in a covered call strategy so we can use it in order to generate income write calls off of it that's how we use Disney and our strategies I'm not sure I would make a big bet on it right now before the earnings you know the setup has been for a long time that high cash flow but declining linear TV networks there were something there were something to somebody else if not to Disney how do you rationalize that piece of it as you try to you know grow the streaming to scale what would if not to Disney. How do you rationalize that piece of it as you try to,

you know, grow the streaming to scale? What would you like to see the company be doing on that score, if anything, frankly, because, you know, one option is keep it as it is. It isn't. I mean, they've done that for a while. It hasn't been working. Can they make that turnaround? I'm not so sure. The landscape has really changed. There's so much competition in that streaming space. So do they start to pull off some of the different elements? Do they take ABC out? Do you change that linear TV approach? That's what I want to hear because I think that's where Iger is going to really start focusing. Yeah. And it is worth recalling that that piece of the business broadcast has been strategically shrunk for many, many years now. In terms of theme parks, there hasn't even been some concern

about that previously, you know, indisputably strong part of the business. It's been so strong. I mean, and it would tie in with the movies and things, which also has been weak as of late. But I mean, I was at the parks a few months ago. It was packed. But again, is the consumer starting to pull back?

We listen to what airlines are saying. We listen to what hotels are saying. Are we seeing a pullback in some of that discretionary spending? I think reading into what the parks numbers are will help us get a good insight for the coming up quarters. For sure. Yeah, they certainly blamed weather and it was hot in Florida, but we'll see if that was the whole story. In terms of the broader market, Victoria, how are you thinking about things with CPI tomorrow? Is it more likely to be an occasion for relief or a little bit more of a rethink of the environment? You know, Mike, look, we look at oil prices, right? We're up 20%

since the middle of June. How can that not make your headline number? If it's not tomorrow's number, the next CPI number move higher. I don't think we're in a continual downtrend in inflation. And I think that's going to push the Fed to do another 25 basis point hike, maybe even 50 if the labor market continues to be strong, which means wages are going to be strong and we continue to have that. So I would be prepared for maybe a little bit of a pullback later this year. It's what we've been talking about all year. We think we can see some consolidation maybe around 42.50, 43.00 in the S&P,

another 4.5, 5.5% pullback here. So I'd be a little cautious. Yeah, that would be a high single-digit pullback from the highs. And just quickly, in terms of the energy move, a lot of people are warming up to the stocks, breaking out, looking better on the charts. It seems like maybe they have some momentum. Is that a place you'd focus? So at Houston Girl, I like to support the energy stocks as much as we can. But I think you have to have energy in your portfolio.

ConocoPhillips is probably our biggest weight within the energy sector right now. But you need to have exposure there. I think they're going to continue to do well with supply of concern. All right. Victoria, thanks so much. As we head into the close, about one minute left. We have lost a bit of that intraday rally. The S&P 500 down about two-thirds of 1%.

We keep returning to this area just below 4,500 near last week's lows. Although on a week-to-date basis, the S&P is still down only 0.2%. So not a lot of movement either direction there. Bond yields have actually calmed down this week, although the shorter-term yields are rising in advance of that CPI number, perhaps tensing up for the potential that we get a little bit more of a hot number. Although another strong Treasury auction today was something that gave the market a little bit of relief. In terms of the volatility index, we're back above 16.

We popped above 18 yesterday as the market got a little bit nervous. We have pulled back and relaxed a bit from there. Market threat still negative, though, as the tape seemed a little indecisive heading into the day to tomorrow. That's going to do it for Closing Bell. We'll send it to overtime with Morgan Brent.