Closing Bell - Closing Bell: The Case for Caution Rising? 6/30/25

Episode Date: June 30, 2025

Have the bulls stolen back the benefit of the doubt for keeps or is the case for caution rising along with stock prices? We discuss with Strategas’ Chris Verrone, Requisite Capital’s Bryn Talkington and Capital Area’s Malcolm Ethridge. Plus, Former Dallas Fed President Richard Fisher reveals his forecast for the fed. And, Morgan Stanley’s Mike Wilson is mapping out where he sees stocks headed in the second half. 

And welcome to Closing Bell. I'm Mike Santoli in for Scott Waffner today. This make or break hour begins with stocks hovering at their highs to close out a headspinning first half. Got some gentle upside follow through to Friday's first new record high in the S&P 500 since February as investors take heart in the market's resilience, hints of trade deals, hopes of Fed rate cuts within a few months, and some seasonal tailwinds that tend to blow into July. Here's your scorecard with 60 minutes left in regulation. S&P 500 you see up about a third of one percent.

It's kind of wobbled toward the flat line but it stayed positive most of the day. The Dow is outperforming by a bit. Up four tenths. The NASDAQ just slightly lower in terms of the one day gain. It takes us to our talk of the tape. So have the bulls stolen back the benefit of the doubt for keeps, or is the case for caution rising along with stock prices?

Let's ask Chris Ferrone, market strategist at Strategus. Chris, good to see you. Thanks for coming by. What's the general playbook for when the market reattains a new high in your mind? Well, I think when you just look at the leadership fabric of this market, and if all I told you was hey Mike,

industrials are at new highs, financials are at new highs, tech is your leadership, you'd be very hard-pressed to come up with a bearish call on the market or the economy here and that's the tail the tape today and then conversely all the defensive continue to weaken. Staples, new relative lows, REITs are not there, nothing from health care. So if you just look at this purely from a leadership perspective, you wouldn't know anything happened in April, you wouldn't know anything happened last weekend. This is a very, very strong leadership profile that continues to drive this market. So going back to, I guess, sort of the initial weeks off the low, you know, the strength

and the breadth of that move higher, it did trigger some signals, right? And you were basically saying, okay, you have to maybe start to allow for further upside from here. Are we looking for anything right now? I mean, you mentioned a bunch of things, but in terms of confirmation or the next signpost in terms of how it tends from here? Well, Mike, I think that's right. When you go back to, I think it was the first week of May,

you had the big expansion in 20-day highs. And our rule is always, when the 20-day high list is expanding, spend more time thinking about what goes right as opposed to what go wrong. And we've certainly had follow through since then. Now we start July here, which is seasonally still very good. And in particular, the last decade, I think every July has been positive.

And you kind of think about that in context of broader call though, seasonality is influenced by the trend of the market. And the second half of the year tends to be strong when you enter it in an uptrend. So that's the setup here. I'm not saying we can't have a consolidation or a pause sometime August, September.

That would not be unusual. But are the ingredients there of some big top formation or some big weakness? We don't see it. What about more tactically? I mean, there's a few things that I'll hear mentioned, right? One is unusually low number of stocks making a new high themselves,

even as the index has done so. That's one thing. And then some of the speculative kind of aggression in certain parts of the market, not like an overall everyone's too bowled up, but something where it seems like there might be some, you know, some speculative stuff happening around the fringes.

So let's think about that in two ways. First, on the number of stocks making new highs. I mean, on Friday, you get half the financial sector make a new 20 day high. That's pretty good. I mean, look at the leadership you're getting from Goldman and from Wells Fargo and Morgan Stanley. There is certainly a very potent leadership tone

coming from that group. 40% of industrials made a new high, 40% of tech. Even discretionary, which basically been on the map for the last several months starting to show some signs of light here. So I'm not particularly concerned about the new hive data or the breadth data. I think it's certainly good enough here.

And then in terms of, I mean, the general sentiment picture, you would probably say, and I think you would, it's not flashing any kind of a yellow or red light at this point. But where are we in that process? We subscribe to the undefeated rule of Wall Street that what you think is influenced by what has happened, right? Attitudes follow price, not the other way around. And what I'm struck by is a market that's back at the highs, the attitudes are nowhere near as a-bullient or euphoric as we saw at the start of the year, certainly as we saw kind of going into the April

draw down here. So I think there's room, frankly, for behavior to catch up with price. At some point, this will be a threat again. If you were looking to find spots of maybe a little euphoria, you mentioned some of the meme-like stocks are the characteristics that the market's kind of taken on that front.

Watch the put call ratio here. The put calls are probably lower than we'd like to see. But I think on balance, when you look at any of the survey data, the flow data, in particularly the areas and flows that we care about, cyclicals, there is not a lot of euphoria or enthusiasm here despite a market back at the highs. You mentioned some of the reassuring kind of macro messages coming out of things like leadership from industrials, leadership within financials. I do wonder about industrials in terms of what's really driving that.

Is that kind of the AI adjacent trade plus I know Uber's in there as opposed to say transports within the industry? Yeah, it's a great question. So there's been this very transcendent theme across geographies and sectors of power, of which many of which are found in the industrial space. Even the HVAC names, you've probably have seen train or carrier, that whole group certainly is in the AI adjacent category.

But what I think's interesting that's happening recently is some of the real beaten down, dirty early cyclicals are actually starting to firm here. Transport's made a new three month roll of high versus the S&P on Friday. The home building stocks are quietly starting to firm here. Transport's made a new three-month roll of high versus the S&P on Friday. The home building stocks are quietly starting to perk up here. So I at least want to be open to the idea

that you get some kind of renewed vigor in what have been the very dirty cyclicals. And the real leading edge of this are the semis. If you remember, names like Micron and AMD and Lamb Research, they peaked a year ago, and they had a very, very difficult last 12 months. About eight weeks ago, they all started to turn. I think that was the leading edge of a more pro-cyclical tone that the market currently is starting to embrace.

Gotcha. Stay here, Chris. We're going to bring in Requisite Capital Management's Bryn Talkington and Capital Area Planning's Malcolm Etheridge. They are both CNBC contributors, and welcome to you both. Brynn, in general, how are you finding things as you maybe look stock by stock or sector by sector in terms of whether things look like they're better

for a buy or a sell? Yeah, I mean, I think you have the market, which has recovered nicely, but then you have these haves and have nots. And the haves are just extraordinary when you look at the Palantirs's, the Coralweaves, the Robinhood, et cetera, this group of names that seemingly goes up two to 3%, it seems, per day.

And then you have the have nots, whether it's healthcare, whether it's energy, obviously consumer stables, which you and Chris talked about. And so I think the market in general is like going down the fairway, making nice new highs. But if you don't own those have stocks, I think you really and you look at them, you really feel left behind. And I also think one of the things that y'all didn't touch on is rate, you know, rates continue to go lower the 10 years at what for for 20 something. And I just think that as we're most likely they're going to pass that bill

this week, I think Trump is going to pass that bill this week I think Trump is going to get get the votes he needs and then I think it's very positive that we see a 10-year at 420 and so as you know inflation is low all signs are that the Fed is going to be able to cut rates as well and so I just think you're going to continue to have this wind at the back of the market. Malcolm I mean mean, you know, I guess on some of those measures, it is sort of trading in a Goldilocks fashion, but I just wonder how much the actual economic numbers or the trend are really telling us that or if we're just kind of backfitting what the market's saying. Yeah, I think at the risk of stating the obvious, this all hinges on what earnings tell us about

this current quarter that we're about to close out, right? Quarter one was a bit of a surprise. The consensus estimate was something like a 5% earnings growth number, and we ended up with roughly 13%, I think, was the number, so an 8% upswing surprise. I doubt that we get that again in Q2, and so I think that guidance-wise, as long as we don't get negative guidance from too many retail or bank CEOs related to the consumer, related to tariffs, anything that suggests that there was a significant pull forward in Q1 numbers that we're just whistling past right now,

looking at all the positives. As long as we don't get any surprise like that in this next earnings season we're about to enter, then I think yes, all signals are green going forward. But if we do start to hear that type of guidance, I don't know that these massive numbers we're seeing from the AI trade are going to save us again like they did in Q1. Well, it's interesting. I mean, I think that the estimates for the second quarter have really been whittled down relatively low.

I think they're mid-single digits or something in terms of annual gains. But Malcolm, you allude to the AI trade. The market has certainly kind of made full use of that kind of revival of enthusiasm in that area. Do you think that's not gonna be supported by earnings or it just can't do it alone? Yeah, I just think that it can't do it alone. You look at somebody like Oracle, for example, who had the big announcement or leak,

whatever you wanna call it today, something like $30 billion in annual recurring revenue. They're adding to that number going forward. It explains why Soffercats and Larry Ellison were so giddy in that last earnings call. I think that if you look at companies like that and cherry pick them as Brendan was talking about, the haves, so to speak, it looks great. I just don't know that those seven to 10 names are gonna be able to rescue a flat Q2 earning season if we do in fact get more of those downbeat guidance. Bryn, in listing off the things that seem like,

that are falling in the market's favor here in terms of longer term yields going down, we're gonna most likely pass some version of the budget bill. How does that all fit together? And I ask that because either this budget bill is gonna be magic for future growth, and we don't need Fed rate cuts,

or the bond market is kind of missing some piece of it. I just kind of wonder how you're thinking about the sequencing of this, because you're right, confidence in the September rate cut has grown right alongside the fact we're going to get this budget deal and some of the cyclical parts of the stock market are doing well. Right. Well, I mean, I think the irony is that if Trump weren't so, you know, dead set on the trade deals, I think we'd already hear from Powell that they would be setting to

cut rates because obviously if it's fed funds are at what, four and a half in the 10 years at 420, the market's signaling that rates are too high on the short end. And so I think after this bill gets passed, I do think, though, that the White House is going to start talking about, and maybe it's in the bill, this deregulation that Secretary Bethen has really spent and President Trump has been talking about, which I think would be very bullish for many sectors. And so I think that the sequencing is the bill gets passed. If rates stay low, people are saying, well, we

don't have to worry about the deficit this year. Okay. And so the bond vigilantes will have to wait for another day. I think that the trade talks or what happens or doesn't happen is really the biggest outlier that we don't know. But I think ultimately level heads will prevail. And if the economy still is chugging along at two, two and a half, we get a rate cut. It's hard to see that the market doesn't continue

to move higher with the same winners continuing to take the market with it. All right, we are getting some news right now on Apple. We'll get to Steve Kovach for more on that. Hey Steve. Hey Mike, yeah take a look at shares at Apple. They're up about over a percent now. This is on a Bloomberg report saying Apple may actually consider using a third party

artificial intelligence system instead of its own next year in order to launch that delayed version of Siri that was supposed to come out this year. They're also, according to this report, Mike, they're looking at Anthropic as a leading contender. Now, there are a lot of different caveats here. This sounds like they're kind of holding onto this option in case they can't get their own AI language model system up to snuff in order to launch by their new target of 2026. And at the same time, they're also, according to this report, talking to these third parties and making sure it can run on their private cloud instead of those clouds from like Amazon

or OpenAI uses Microsoft and things like that. So this could be an answer Apple looks to partner with someone and license technology instead of building it in-house in order to fulfill that promise of that new AI. Siri, you see shares up, they're approaching 2% now. They were in the red most of the day, and also Apple was below that $3 trillion market cap.

Now it's back above there, Mike. All right, yeah, I guess they said the magic word. AI, AI, AI. One of those words is one of the magic ones. Thank you very much. Steve, Malcolm, does this change the story for you at all? Obviously Apple's been a disappointing performer for a little while here.

Yeah, not really. I've been saying for a couple of weeks now that I think Apple probably hit peak pessimism around that flat WWDC, and if they didn't already have something up their sleeve, they were definitely working on the answer in the short term to the the answer to the question of what Apple is going to do around AI to really wow us. But we also know

historically Apple likes to own whatever it powers its products with and so I don't know that a partnership with somebody like an open AI for example or Anthropic is really going to be the long-term solution and maybe that's the reason that the shares haven't really popped significantly it's just a positive swing for them on the day. So I think realistically, Apple still probably has a tough road to go. We're really asking them as investors to figure out a way to reinvent their way out of this rut that they've been in, innovate their way out of this rut.

And so I don't think that we've really seen that just yet. Chris, I mean, Apple has not only not been helped to the market, I mean, it's down 18% year to date still, obviously the S&P is up five-ish, five-plus. How is it positioned and what does it tell you that, you know, the second or third biggest stock can just do nothing and the index is okay? Well, I think it's encouraging for the market that the market can do what it's done even with Apple not involved. I agree with Malcolm on the sentiment front, it feels like we're pretty washed out in terms of attitudes towards There's Apple. But in our work, it's still a downtrend, still a relative downtrend. So it's going to take a lot more than a good day on a rumor or a headline to really

change that view. I do think Bryn touched on a very important topic, though, on the inflation front that I just want to hit back on. You know, when you look at the message of the market from a leadership standpoint, I really struggle to see what Chairman Powell is seeing on the inflation front. There is no sign of it. Materials new relative low, energy new relative lows. We obviously have seen what crude has done over the last two weeks. So it's really difficult to say that these risks

between growth and inflation are equally balanced when there's almost nothing in the market's viewpoint that says inflation is a big criteria. Yeah, but is the market telling you there's a concern about growth? I think if you started to lose 10-year yields, under 4 percent, this is where we got to be a little careful what we wish for. I know everyone out there's craving lower bond yields. Below 4, you begin to say, okay, well if nominal growth is 5 or 5.5, why is the 10-year rate at 4 or less? Now

that may be a mix of the inflation and the growth side, but 4 is really the line in the sand or I would not want to see the belly of the curve or the long end really drift much underneath that. Yeah. Chris, Bryn, Malcolm, stay with me. We're now going to send it over to Phil LeBeau for more on today's move in Tesla. Hey, Phil. Hey, five straight days, Mike, that we've seen Tesla start to give back the advancements that were locked in after the unveiling of the RoboTaxi launch in Austin. And since then, over the last five days,

have you seen the stock pull back a little bit? It's become a question of, if you are a Tesla bull, is the glass half full? If you believe that, then you'll like the note that's out from William Blair today. Jed Dorsheimer out saying, look, autonomous vehicle technology, specifically the RoboTaxi and then the CyberCab in the years to come. He believes that by 2040, 30% of the rideshare market will be owned by Tesla with 60%, near 60% EBITDA margins, and up to $250 billion in revenue.

Again, that's by 2040. That's the glass half full side of the story if you are a Tesla investor. The glass half empty, we get it on Wednesday. It will be the quarter deliveries, Q2 deliveries. The estimate right now is for 387,000 vehicles. By the way, it keeps coming down a little bit at a time. And if you read the analyst notes, Mike, they are far more bearish than that. Many are saying 360, 355, 365, not 387. We'll get those numbers likely before the bell on Wednesday. That's many saying 360, 355, 365, not 387.

We'll get those numbers likely before the bell on Wednesday. That's the expectation, though Tesla doesn't say exactly when it will release those numbers. And as you take a look at shares of Tesla over the last three months, remember that for the full year, the estimate is now down to 1.65 million vehicles being delivered. For a point of reference, Mike, Tesla delivered just over 1.89

million last year. And again, glass half full, glass half empty. It's how you look at it if you're a Tesla investor. Yeah, exactly, Phil. Thanks for that. And Brynn, I mean, another way of

phrasing that is, do you focus on what's apparent today or do you focus on what you think might happen in 15 years in 2040. How do you manage this position? Not by looking at 2040. That's way too far. I think that, you know, have we seen peak?

I don't think it's a bull or bear case. I just think it's you have to look at this rationally. Have we reached peak auto sales? I think that's a real question that you could say in the short term, yes. And really in order of importance, it's China, Europe, and then the US. When I was just in Europe,

and there's so much competition there, there's so much competition in China. And so with their business at hand today, you continue to see fundamentals deteriorating. And so I think that investors just, the way I've been doing it is you can drive a truck through the the moves of the stock and like right now it's in a trading range around 250 to around 370. So that's why the options market on on Tesla is so large. So I continue to

think you know you sell calls when it moves up close them, wait for it to fall back by it, and then just kind of repeat that, rinse and repeat, until because the unsupervised FSD, I think that last mile is gonna take a lot longer. I use it all the time, and so I think investors have to be patient because we're not gonna get those new revenue contributors until I think two or three years out. Investors have to be patient, traders aren't.

It's like its own ecosystem, the options flow around that stock every single day. Chris, Brynn, Malcolm, thanks so much. Appreciate the time today. Let's send it over to Pippa Stevens for a look at the biggest names that are moving into the close. Hi, Pippa. Hey, Michael, Robinhood is popping

after announcing an expansion to its crypto offerings, including tokenized US stocks and ETFs for the European Union, meaning it creates a blockchain-based asset that follows the stock and ETF prices. Those shares are touching a new 52-week high today. And shares of GMS surging after Home Depot announced it was buying the company for $110 per share. That's about $4.3 billion or five and a half billion dollars in total enterprise value The offer tops an unsolicited bid by QXO, which is higher on the news while Home Depot is slightly lower Mike

But thank you We are just getting started here up next former Dallas Fed President Richard Fisher is back his forecast for the Fed and what he's expecting From Powell tomorrow that is coming up and later Morgan Stanley's Mike Wilson out tells us where he thinks stocks are headed in the second half. We're live in New York Stock Exchange. You're watching closing bell on CNBC. Welcome back. The economic outlook has improved a bit, but it's perhaps not nearly as positive as the market seems to be. Steve Leesman is here with more on that.

Hey, Steve. Hey, Mike Yann. An interesting contradiction. Most forecasters still see tariff effects weakening growth and driving inflation higher, though somewhat less and later than they did in our last look. The average 15 of 15 forecasts in the CMC rapid update is up almost a percentage point for the second quarter for GDP to two and a half percent from 1.6 in April. That's good but you can see growth is still seen weaker in the third and fourth quarters before returning back towards a trend trend line beginning of 2026. six average core PCE inflation also came down

for the second quarter with what looks to be an expectation of a delayed tariff impact. But it's forecast to shoot back up in the third and fourth quarter towards 3 percent again before coming back down next year.

That remains a percentage point above the Fed's target and fuels the debate about whether the Fed should cut now or wait in Fed speak today Chicago Fed president Austin Gould we said he worries about the possibility of both higher inflation and weaker growth but that inflation and employment are both relatively low right now Atlantis Rafael Bostic he's sticking his forecast of just a single cut this year with three possible for next year so the economic forecast have changed

only a bit while the market has surged. One part of that bet looks to be the idea that whatever price increases come from tariffs end up being a one-time event. And of course, Mike, this is exactly what the Fed chair is talking about, that most forecasters see inflation going up. So we checked and it is true. Yeah, I guess that's how it works its way through their models, Steve. It can't not show up somewhere. Appreciate that. Let's bring in former Dallas Fed President Richard Fischer. Richard also, Jeffrey's senior advisor and a CNBC contributor. And it's good to have

you here, Richard. Well, if Steve says something, it is true. I just want you to know that. All right. Well, I guess we're done here. No, so I do have a, I think it's really fascinating this moment that we're in. A lot of assumptions have to kind of be pulled into service to figure out what the proper stance is. Now, part of what Chair Powell has been saying is that the committee does not believe that the cost of waiting and seeing

is particularly high right now. Does that make sense to you? I think it does from an economic and monetary standpoint. Obviously the President of the United States is not happy with it and so it creates a little anguish on that front and frankly it has no impact on monetary policy whatsoever. They'll do what they think is right. And right now, I just ask you to consider, as with all businesses in America, until we get clarity, we're getting a little bit more, but until we have clarity in terms of tariffs and other actions on the economy, the bill that's hopefully about to be passed, you can't make a decision.

You can't input the variables needed to model out the economy, which the Fed needs to do. So, just like other businesses, they're sort of stymied here. They'd like to get more clarity, better understanding. And in the meantime, they're pausing. And I can understand that. I would be advocating for it as well. Yeah, I mean, and obviously the president

just today has kind of reiterated his stance that that Chair Powell is too late, you know, making making the United States pay more and interest payments and all the rest of it, but it's interesting how it's all playing out, isn't it though? One, we know that Powell's not going to be renominated, so he realizes he's got like 10, 11 months left in the job. The Supreme Court has said he can't be fired. So what we have is what we have. And therefore, you would think, especially given the committee as it's leaning right now,

that they will just kind of call it as they see it for the next couple of meetings. Meantime, who knows? Maybe the data start to converge around the Fed doing exactly what the president is hoping it does. Well again, they're data driven and until they get a better feeling for what the data are likely to be like or where they're leading us, I doubt they're going to move.

Now I just like to remind people and Steve knows this as well as I do, this is not the first president to take on the Federal Reserve. He does it in a different manner, rather obtuse, very publicly. Again, don't forget what LBJ did to Chairman Martin. And also, before that, or after that, rather, what Ronald Reagan tried to do to Paul Volcker. He tried to get him impeached. They didn't talk about it like this president does that openly. And I like to say Donald Trump's approach is actually milder than LBJ's was with Chairman Martin. He took him to his ranch. He beat him up physically, literally slammed him against the wall. The boys are dying in Vietnam. You're not going to accommodate

us on monetary policy. Martin did, and he wrote his memoirs. He went to his death bed ashamed of himself. J-PAL's not going to do that. No one on the committee wants to do that. So let's keep this in perspective here. This is not unusual. It's over the top, the way this president likes to do things. That's his mannerism.

He gets things done that way. It's not going gonna affect monetary policy. And- What about looking into next year? And the chair, et cetera. No, that's- And in terms of who the replacement to Powell might be and whether that would change the formula.

Well, I'm of the view that unless it is Scott Besson, who's outstanding, and every time he speaks, he's getting better and better, he's in control of the Treasury, I'm glad he's there. And on CNBC on Friday, he said, we're in favor of a stronger dollar. That was a happy thing to hear because the president and vice president

talked about a weaker dollar. But other than him, anybody else who might be named early, I like to say we'll have a stamp on their forehead that says Arthur Burns. Remember, what happened after Martin, Arthur Burns took over the Fed, he led to the greatest inflation because he accommodated two presidents and just gave into them. So I think there's a real risk here. Anybody who is qualified here, Scott or anybody else,

especially the others that don't have business credibility, if they're named early, they're gonna be known as the new Arthur Burns. I don't think anybody who wants that job would want that nomenclature. And I don't think it'd be good for the markets either. So we have a lot of history here. I think people should be aware of it.

And we'll just have to see what happens. But in the meantime, it's not gonna impact monetary policy. Powell will conduct the committee and the committee will go as they see is proper for the sake of the economy. All right, we can rest assured in that at least. Richard, thanks so much.

Appreciate it. Well, if we name Leesman, that's another story to run the Fed. I'd be all in favor. Got you. All right. Thanks for having me. Up next Morgan Stanley's Mike Wilson standing by with his

take on the rally and how much longer market strength can really last. Get the S&P up about half a percent helped by that pop in Apple closing bell be right back. Welcome back. We are green across the board with both the S&P and the NASDAQ notching fresh all time highs to close out the final trading day of the month

and the quarter and the first half. My next guest is bullish on equities for the remainder of the year. Joining me now is Mike Wilson, Morgan Stanley's chief US equity Strategist and CIO. Mike, great to have you with me here. It's a fascinating round trip we've had, right, since early, I guess since February in a sense.

Where does the market sit in your mind relative to all the kind of important drivers, right? I mean, we had this tariff policy scare and then a little bit of relief off of that. But in terms of the fundamental picture, technicals, demand for stocks and all the rest of it. Yeah, good afternoon, Mike. Yeah, I would say, I mean, the tariff scare

was sort of the final piece of what had been a correction that started almost a year ago. I think you've had some guests on today even talking about, you know, like semiconductors, for example. I mean, they had a horrible second half of the year, as did many other groups. And I always like to say that markets

sort of bottom on bad news. They also top on good news. And we basically had a lot of bad news through the end of last year, in the first quarter, that people didn't acknowledge. Most notably, just all the policy headwinds we had on immigration enforcement. We had Doge, which was supposed to cut a bunch of spending

Not very growth positive and of course tariffs. We also had you know, AI AI cap X deceleration and the deep-seek announcement So we just combined a lot of information into a short period of time and the Fed of course has been on hold And I kind of view Liberation Day more as capitulation day and we sort of cleaned out a lot of things. Now, throw on top of all of that, the sequencing of the policy going kind of growth negative, and now we're looking at some of the growth positive policy changes. For example, the tax incentives in this bill, deregulation, some of the things we're talking about doing with capital controls.

That's what we have to look forward to, and that's what the market has gotten ahead of. And the one variable, I think as you know, Mike, we've have to look forward to, and that's what the market has gotten ahead of. And the one variable, I think, as you know, Mike, we've talked about this many times, the most important variable for stocks is earnings, and more importantly, earnings revision and earnings revision breadth. And if you looked at a chart of earnings revision breadth, which we published in today's note,

it's a V-shaped recovery. And it's powerful as we've seen since COVID. So the expectations just got too low. And so it's not a rational at all for stocks to also show a V-shaped recovery here since April. Yeah, in fact, we're showing that chart right now. And it is pretty stark. Also though, I would note that it was a pretty similar trajectory into the spring of 2023.

We're up at about the same level. We bottomed around the same point in terms of earnings revision breadth. What's different now versus then when I think you weren't so pleased with the risk reward for stocks? Well, back in 2023, what I would say the difference then was it was extremely narrow. Now, it's still a little bit narrow, but nothing like 2023. 2023 was coming off of what was a very sharp earnings recession in 22, particularly in technology shares and some of the consumer names payback from COVID.

And the Fed, they were still sort of in hike mode. They weren't even close to thinking about cutting rates. So that's different this time. We think this is gonna be a broader recovery. We've gone through a massive, so I would call rolling recession. And I think with the Fed cutting in the second half of this year or next year,

we could see a rolling recovery because now there's quite a bit of pent-up demand, particularly in those interest rates sensitive parts of the market. So where are we rolling into next, I guess, is the question. You know, you could sort of observe just from a top-down level,

okay, we're back up to 22 times forward earnings on the S&P 500. Obviously, you can slice and dice it and come up with something lower for the typical stock. But in terms of this technology, large cap growth bias that the market has had for a while, is that changing? Are we finally going to broaden out? I think we're going to see those stocks continue to do well. They have tremendous earnings power. But what can broaden out is financials, some of the industrial space, which I think Chris was talking about earlier in the show, and then even some of the mid and small cap companies, once the Fed starts cutting interest rates.

Well, I'll go back again to interest rate sensitive parts of the market. I could name six or seven different areas that have been in a recession for the most part for the last two years, whether it's manufacturing, housing, housing related, autos, consumer goods, and all of those are very interest rate sensitive. So I think those parts of the economy is what we're looking forward to for 2026. And then of course, AI, right? So AI, we spent all the money on CapEx,

but now what we have to look forward to is the application layer. It's why a lot of these software stocks are doing better and the answer to the diffusion of that technology into the broader economy. I think that's what the market is getting excited about now. That's why multiples are high. They're saying the earnings power potentially could be higher than anybody's

expecting next year because of margin expansion from AI efficiencies. And I think that's something to think about as we as the market broadens out next year. In order for all those positive factors to really take hold, what do you have to assume about where the tariff rates and the breadth of the tariff protection settle out? Yeah, I mean, we've had a view for quite a while. We've always viewed this as sort of an import tax, a VAT tax, a consumption tax. And I think what they're driving towards is sort of a 10% VAT, is essentially the way I think about it. It's a consumption tax. And it's a tax, okay? No doubt about it. But it's shared amongst importers, exporters, and consumers. Consumers will not eat all of that. And I don't think there's a ton of pricing power.

But if we can kind of get to that point sooner rather than later, the market will look forward. Because companies can mitigate that. Companies can manage that. What they can't manage is the back and forth, you know, 30%, 40%, 50 percent tariffs and then how am I going to get my supply chains reordered. But if we can kind of settle on that 10 percent number, which is a big revenue generator by the way, that's three to four hundred billion dollars a year, that's a good place. And I think there's a decent chance by the second half of the year we could get there. Yeah, I mean, arguably that's what the market was essentially pricing in before we got the liberation day, you know, details out. So make my circle right back to that.

Mike, thanks very much. Really appreciate it. Good to see you. All right. Take care. Up next, we are tracking the biggest movers as we head into the close. Pippa, standing by with those. Well, solar stocks are split following the latest version of the tax bill.

We've got the details on the winners and losers coming up on 60 minutes of the closing bell the S. and P. from under which 6200 for the first time let's get back to Pippa for a look at the key stocks to watch hey max solar stocks are split on the Senate's markup of the tax bill residential installers Sun run is surging since leased systems would once again qualify for credits. First Solar is also higher amid favorable credits for domestic manufacturers. But on the flip side, developers like AES, Nextair, and Clearway in the red, thanks to stricter timelines for projects to qualify for the incentives.

Meantime, Hewlett Packard Enterprise is leading the S&P by a sizable margin after the DOJ gave the green light for the proposed $14 billion acquisition of Juniper Networks. Juniper is also jumping on the announcement, hitting its highest level since 2011 with shares up some 8.5%. Mike? All right, yeah, I guess there was some doubt in the market about whether that was going to be approved. Thank you, Pippa.

Still ahead, Ed Klessel of Ned Davis research is standing by to break down the final moment of the trading day. Closing bell, we'll be right back. We are now in the closing belt market zone. Kate Rogers is watching two big stock moves in the fast casual space. Taneya McHale is looking at Coinbase's huge run and Ned Davis Research's chief US strategist Ed Klessel is helping us count down into the close as the S&P goes further into record territory up almost two thirds of one percent.

We'll start with you Kate in these two restaurant moves. Hey Mike, yeah so two of the restaurant sector's hardest hit names for the year are rallying today. Cava up around eight percent on the day. It has had a good June so far up around three and a half percent but down 25 percent year to date. In the last two weeks Stiefel encouraging investors to take advantage of its recent dip as it lapsed some tough comps from last year's steak launch that happened over the summer. And also Sweetgreen following a similar pattern in today's trade up around 10% today, 11% in June, down over 50% though year to date so far. Now, these names were very popular, remember, with investors last year. They've taken a hit even more so than fast food though lately as consumers continue to be very discerning with their spending in this environment.

Casual dining names oddly have performed better than others being seen as more bang for your buck in this economy, Mike. Very interesting trend. All right. It certainly is. Those were two stocks also kind of heavily shorted, and some of those stocks have been flying recently too. Kate, thank you very much.

Taneya, Coinbase, bring us up to date. Yeah, Mike, up more than 40% in June for its best month since November, third monthly gain in a row and first three month rally since 2023. Not just the best performing S&P stock this month, it's also the only S&P stock to double quarter to date. Some clear themes driving the gains including the Senate's passage of the Genius Act and Circle's successful IPO. Also, of course, it's very inclusion in the S&P 500 in late May, so quite the debut here. This is also happening, Micah's investor attention shifts away from trading Coinbase's core business to non-trading uses of crypto, so particularly stablecoins.

Trading volume on Coinbase trending lower in Q2. That's usually viewed as a risk, but analysts say shares have lots of room to run here, putting that largely on Coinbase's close tightest circles stablecoin revenue which the market is still connecting the dots on. Mike. Yes, certainly a lot of work trying to connect the dots there today. Thank you very much. Ed, we now have a market that you know is kind of completed whatever we're going to

call what happened in the spring that severe correction. In fact, one of the fastest rebounds from a 15% plus pullback in the S&P 500 we've seen. What does that tell us? And I guess what does the overall market behavior suggest to you? Yeah, Mike, it certainly has been a risk on since the April lows.

We went through a retesting period for a couple of weeks, but then once we got into late April, it's been very much risk on. You look at low quality stocks versus high quality stocks, they've outperformed non-dividend paying stocks, which tend to be high beta, have outperformed dividend paying stocks. The one area that usually is early cycle that hasn't participated as much are small caps, Russell 2000 and Russell 1000, roughly in line with each other. What's picked up the slack has been the mega cap growth stocks.

Those were hit so hard during the correction, they bounced back and then some. That's why you've seen the NASDAQ make a record high as well as the S&P. This kind of behavior, again, with the exception, small caps, is generally consistent with the market trying to move higher and probably can make some further new highs in the second half of the year. Of course, there's always some more work to be done, more things to keep an eye on, but overall, the market is telling us it wants to move higher.

Yeah, I mean, I guess you can probably view that in multiple different ways in terms of, you know, some of the aggressive post IPO stock moves and things like that. You know, it's interesting though, it depends on where your starting point is. I've been pointing out that since the February peak, the previous peak in the S&P 500,

you know, earnings forecasts are higher, yields are lower, oil prices lower, the dollar lower. So it feels like it's a kind of accommodating backdrop. On the other hand, if you go back to the beginning of the year relative to what we expected then, maybe it's not as positive. So what does it tell us about the second half outlook? Yeah, let's go back to December

when everybody was making their forecast for the year and versus then think GDP growth expected to be a little bit slower. Earning GDP growth expected to be a little bit slower earnings growth expected to be a little bit lower and inflation expected to be a little bit higher. Now there's room for the market to I want to say thread the needle because it's not that narrow of a path forward. There's a path forward for the market to move higher but probably not quite as positive

as it was at the beginning of the year. And there's room for upside surprises here, particularly if the Fed goes ahead and cuts rates. When there's been long pauses in between Fed cuts longer than six months, the market's done really well. So three months before and three months after, which basically coincide with a September rate cut, the S&P risen after 14%.

So that's a potential upside surprise for the market in the second half. Interesting, yeah. And I know you've, you know, I guess one of the debate points out there is the market's valuation. Now, typically you'd say elevated valuation means forward returns maybe are going to be

lower than you would normally expect. Well if I go back five years the S&P was trading pretty much at 22-23 times earnings you've had a pretty decent five-year return so how do we reconcile these things? Well valuations just frankly aren't a great timing tool they tell you where the risks are and just frankly aren't a great timing tool. They tell you where the risks are. And when the next hiccup comes to the market, these valuations probably mean that the decline will be larger than it would have been otherwise. I think that's part of the reason why

you got a nearly 20% decline in just a few weeks earlier in the year. And what we wanna look at here is what the tariff impact is gonna be. We just back the envelope analysis of that could take about 50 basis points off of earnings. That's probably not enough to be a problem. But if it winds up being bigger than that, that's when the valuation, the high valuations could come home to Bruce.

And in terms of what has been leadership in this market, what are the relevant characteristics of that leadership at this point? And do we expect as long as this move continues that that will remain consistent? Well, so far it's been early phase type of behavior with low quality stocks and non-dividend payers and the high-flying growth stocks doing well. As we move forward, I think we need to look at

what happens with inflation. If it becomes more traditional cyclical, you could see cyclical value sectors start to do better, like a industrial will have already done pretty well, but you could see energy materials catch up. And financials, which have started to act done pretty well, but you can see energy materials catch up and financials which have started to act better as well could participate too. So that's where the inflation comes into play

as long as it's not so much that it causes a major correction in the market. So maybe rotation from the cyclical growth into the cyclical value part of the market. Got it we certainly watch out for all that and really appreciate you are running through with us today as we headed to close about 25 seconds left we are going to be well into further record territory, the S P 500 up more

than half a percent now surperforming by a little bit. Apple, part of the Dow and the S&T, is a big part of that, up 2% on some way-breaking headlines on its AI initiatives. That's us at the Cochlear Bell. Hello, citizens, over time with Morgan Brennan.