Closing Bell - Closing Bell: The Fate of the Interrupted Rally 01/08/24

Episode Date: January 8, 2024

What does the road ahead for your money look like with earnings season about to get underway? AJ Oden from JP Morgan Private Bank and NewEdge’s Cameron Dawson lay out their forecasts. Plus, Nvidia shares popped on some big announcements at CES. Star chip analyst Stacy Rasgon breaks down how he sees this impacting the stock in the year ahead. And, Capital Wealth Planning’s Kevin Simpson breaks down his latest trades. 

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the bounce and whether the major averages can resume their rally during this critical week. We will ask our experts over this final stretch. In the meantime, there is your scorecard with 60 minutes to go in regulation. Pretty nice move today in the mega caps, and that is helping the Nasdaq outperform today. NVIDIA is leading there. It makes a new AI-related announcement. So what does that mean? Well, a more than 5% gain for that stock. And coming up, we're going to ask top chip checker Stacey Raskin what it means for shares going forward. Apple, well, it's jumping, too, after a

6% slide to start the year. Elsewhere, Boeing is the big drag this hour after that incident over the weekend grounding its 737 max jets stock trying to recover a little bit still down six and a half percent speaking of interest rates well there's the 10-year right at four percent they're declining today following a positive report on inflation expectations and ahead of this week's cpi report takes us to our talk of the tape what the road ahead for your money might look like with earnings season about to get underway and so much more ahead as well. Let's ask A.J. Oden, J.P. Morgan private bank global investment strategist with me here at Post 9. It's good to see you. Welcome back. It's a new to Scott. Interesting move we are seeing today in the market after a pretty rocky

road last week. What do you make of how this year started? Well, I think the way that this year started is we saw a lot of optimism priced in last year in those last few months, November, December. And then when you add to the fact that the Fed sort of came out with their SEP, adding a little bit more rate cuts, what we've been seeing lately is the market's really trying to figure out how many cuts we're going to have this year. And for us, we believe that more equities will see all time highs at the end of 2024. And the reason for that is we believe that technology will have a pretty strong year. And that'll sort of add to that tailwind that we're seeing in equities into the end of the year. All right. So a couple of things

there. Number one, rate cuts. When do you think we're going to get the cuts? Do you think we're going to get as many as the market has seemingly priced into this point? And is that the reason why you think we're going to do highs? Just don't fight the Fed. Well, I think the market is pricing a little bit too much optimism. Six rate cuts, I think, is what we're seeing priced in. And I think the expectation is about 50 percent for a March cut. We believe it probably won't see it until June, but we're not taking March completely off the table. We're looking at about 125 basis points of cuts. OK, now, technology, that's the interesting conversation. Do you think that is going to be the leadership group yet again? I don't necessarily think it's the leadership group, but we think investors should continue to lean into technology stocks,

especially driven by AI. And so I know everybody saw a lot of that optimism last year. But if we think about it, if we go back to the peak of technology in 2021 and we look at where tech stocks are today, the magnificent seven, they're actually only 7% above the peaks that we saw before. And so if you think about that, 2021 hadn't even priced in the AI move. And so if we think about AI and what we saw from the mid to late 90s and the contribution of private investment in intellectual property and how that contributed to steady growth in GDP, if we see that similarly in AI, then we believe this is a multi-year. This is not just a one-year trend. So you believe that the multiples that

they're currently trading for are justified? Yes, I think so. I think that there's an opportunity for continued growth and that the comps compared from last year for earnings, that we should see some positive earning results from those technology companies. And we should see some top line revenue results as we believe that essentially a lot of that AI investment will turn a revenue generation soon. What about non-tech areas? What do you like the best? Well, I think healthcare looks attractive as well, just from a valuation standpoint. We really like industrials just because of the fact that when you start to look at some of the thematic trends

of EV transition, the infrastructure build that's going to be needed there, we like mid-cap growth as a way to position there. So are you looking then, you're definitely in the no recession soft landing camp. Yeah, we're definitely in the soft landing camp. And I think because of the fact that we've seen inflation come down meaningfully without too much pain in the labor market. We've seen the quits rate return back to pre-pandemic levels. It's around 2.3 percent. We've seen job openings fall from that peak back in twenty twenty two down about three point two million. And we've seen all that happen and inflation come down. If we look about back to the past like six months, we're tracking around three percent. And then if

you look at over the past three months, you're tracking close to two percent. So the Fed has some room to start cutting. The Fed put is definitely back in play. What about the market multiple in general? We talked about what mega cap is doing across the board, but what about the overall market multiple? How do you justify that? Yeah, I guess it does seem to some people a little bit frothy, but it is trading right around where we see as our PE ratio for 2025. So if we're looking 12 months forward here, it's not as discounted as you would like to see. And I think that's why we really like mid-cap stocks, because they're still priced in recession. So you can get in there from a valuation standpoint. But what we're telling clients is, be dip buyers here. If you see pullbacks,

that's an opportunity to lean in and to try to move those cash positions over that way. You need growth to sort of hold up, rates to continue to go lower, to continue to justify this multiple, don't you? Well, growth is going to be somewhat muted this year. I think expectations for GDP is around 1.3 percent. And so we're seeing somewhat resilient growth. I mean, the IM services didn't come in as high as everybody expected, but we're still barely above 50. But we're still in expansionary territory.

And that's been the trend so far. And so one data point doesn't denote a trend. And so we're still seeing somewhat resilient growth here in the U.S. And the Fed is there to cut rates if necessary. What about fixed income? You want people to continue to buy bonds? I think bonds are still showing attractive yields. I mean, you're not going to get or we may not get that price appreciation that everybody was excited about last year. You've already seen rates. You already got a lot. You already got a lot of it. You got it. You know, 100 basis point move since the high that we saw back in the fall. However, as we move away from that sort of positive correlation that we've seen in equities and fixed income,

you have it there for protection as well. And 4% on a 10-year, and then you're getting your spread above that for corporates, that's an attractive yield. So if you're rebuilding bond portfolios, absolutely I want to lean into that. What's your big risk? What's the one thing that upsets your story? I think if any geopolitical tensions that could add any sort of reflation to the overall narrative and story, if oil prices pop up again like we saw in the fall, or if we do end up in sort of a recession.

Now, recession is still a risk that's out there, and we don't think if there is one, it'll be anything deeper than that. But if you get the exogenous event with a slowdown that's deeper than expected, that's how you could see a little bit more pain to markets. All right. Let's bring in Cameron Dawson now of New Edge Wealth into the conversation. It's nice to see you again. Agree? Disagree? What do you think? Yeah, I agree. Ditto to what AJ said on a lot of these points. I think that the key risk for the market would be a reacceleration in inflation. That's certainly not what priced into the bond market at this time with six cuts forecasted.

But then if you look at the growth picture, it is holding up and probably there's even upside to that 1.3 percent GDP estimates. The question is, does that upside to GDP translate to better earnings growth? Meaning that you already have 11 percent earnings growth baked in for this year and 2025. If you see better GDP growth, will that result in higher earnings estimates? That remains to be seen. Do you think it might? It didn't in 2023. We saw a big upside to GDP and really no upside to EPS estimates. We think for this year, the upside would have to come from the margin line, companies taking out more costs and possibly that productivity miracle, possibly from tech, possibly from AI, maybe too soon to tell on that. But we would also

look to things like M&A coming back, capital redeployment coming back, people feeling better about the outlook. Maybe that's another source of potential upside to earnings estimates, but a lot is already forecasted. I'm trying to figure out what the number one risk would be. If things seem kind of obvious to a lot of people at this point, like growth is stronger than expected. You saw from inflation expectations today that they're down across the board. We expect the Fed to cut. We expect earnings to be pretty good. What is the risk? What is the one thing that's out there that would make you concerned about what the market might do this year? It's the snowball effect of the labor market.

If a little bit of easing, things around the corners, things like jolts and quits rate easing, ends up turning into outright weakness within the labor market, I don't think a bad nonfarm payrolls print would be taken very welcomely by the market. But see, wouldn't that, I hear you on that and that makes perfect sense. But of course, then you're going to have people say, well, then the Fed's going to cut anyway. Yeah. But then you have to compare that to where earnings estimates are. So if you start to have the market say, no, it's a recession and earnings estimates need to be cut 10, 15 percent, the Fed stepping in doesn't offset that. If there's no recession and the Fed steps in to

tweak policy rates lower, the market loves that. You get the earnings growth, you get the valuation, but all of a sudden, if you start cutting earnings estimates, that's when the market gets scared. You get people taking risk off. And you think that earnings estimates, not just in mega cap, but across the board are going to hold up to the 11%. Is that realistic to you? I mean, historically, we see typically around 10 percent. So, you know, earnings estimates aren't too frothy. I mean, I think we're our estimate for this year is about 241, a little bit below the market, which I think is around 248. So we think they can. And we actually think even for Q1 that we should see closer to one and a half percent. I think the market's expecting about one percent.

So I think as we move throughout this year, it's going to be really kind of like playing it quarter by quarter, but it's possible very much so that we see earnings estimates hold up. What do I want to do with small caps in your mind? I mean, small caps tended to perform, outperform in a recovery. Now, I know we didn't have the recession, but at the end of the day, we're seeing slowing economic growth and there's going to have to be a rebound at some point. We've had a lot of it already. We did more than five. I don't know. It's like almost 14 percent in just a few months. We do. We did. But we still like both both small caps and mid caps. I mean, you know, large caps perform, you know, very well last year. And we think,

you know, together, both of those sub asset classes can do well in 2024. What do I do with that? I think selectivity has to be the name of the game in small caps because small caps, there are so many unprofitable companies, highly leveraged companies. So if you have interest rates or inflation move in the wrong direction, a lot of these moves will be reversed. However, there are a lot of names within the small cap index that are trading at big discounts or their mid cap and large cap peers where you can find opportunities. So what we focus on is names that have strong free cash flow and good balance sheets as a way to discern between the junk and those that have better potential. What about areas that didn't do anything last year that are starting to show some signs of life? There's been a lot of M&A in health care already to start this year.

Is that a bright spot that you think carries on? Yeah, we really do like health care going into this year because you saw huge outflows from health care as a sector. So it's underloved, it's under-owned. It's also not very expensive. You add on top of that, the M&A that you talked about. Now we prefer in healthcare to look at pharma and biotech and stay away from managed care where we see less strong trends. And so that selectivity plays into healthcare as well. What do you think? I mean, we like healthcare as well. And then for us, it mean, we like health care as well. And for us, it's a valuation play. We really think that it was kind of didn't get a lot of love in 2023.

Yeah, that's for sure. We think it's an opportunity to lean in definitely into 2024. Yeah, energy. How about that? Because, you know, I feel like people are trying to place their bets there. But I think there's already skittishness that it's not going to work again. What do you think? Yeah, I think you have to think of energy as a hedge instead of an outright upside opportunity why is that meaning

that if you have higher inflation a lot of parts of the market are probably going to struggle with higher interest rates meaning that if you see oil prices go up that contributes to higher inflation energy will be your safe haven so see it as a position size more like a hedge instead of an outright bet on upside. You like energy or not? You know, with energy, when you're seeing a slowing economy like we are, I think demand is coming down. Ultimately, energy going through a lot of pain. I would say we prefer real assets in general as a way to tactically hedge against any sort of reinflation or exposure there.

But energy as a sector, not really loving it right now. I thought you just, I mean, but you paint the case, though, that you're in the firm, hey, the economy's going to be good camp. I mean, it's going to be good, we believe, in 2025. This is a slowing year. We're looking at 1.3%. GDP, I mean, that's below trend growth right there. And so as demand is slowing down and we're seeing a slowing economy,

energy isn't going to be that sector that has strong performance. Cameron, you feel like, you know, maybe today is the first kind of inkling of it that, you know, mega cap stocks come down a bunch. People get a little scared. But you had to believe at some point there's going to be a buy the dip. Now, you know, NVIDIA made some announcements today, which we're going to get into later with a top analyst. Stocks up 5 percent. Apple's had, you know, a terrible start to the year. You feel like that's the floor, though, underneath mega cap, that the buyers are just going to come in at every bit of unsettlement there?

Yeah. I mean, effectively, what you're saying is that the trend is your friend and that you have an uptrend in these tech and broader mega cap names. And so you haven't seen a breakdown in the absolute or relative trends. Apple, you mentioned, though, is probably the weakest of all the mega cap charts. And I think you have to watch that closely because unlike NVIDIA, where a lot of the upside was because earnings estimates went up so much, Apple was all multiple expansion. It was up 45 percent in its P multiple and its earnings estimates stayed about flat. So that's where you want to probably discern between different mega caps. And maybe that's where we'll start to see kind of some dispersion between the results. Do you think that's going to be the case this year? Because, I mean, I feel like it's like

today is a perfect example. People say, well, there's going to be more dispersion. Maybe Apple doesn't trade with the group. Everything kind of traded together, even though there were, you know, stark outperformances from some of the names, one up, all up. Yeah. Right? Yeah. I mean, it seems it's positioning, right? If you have flows into equities, these mega caps really do benefit.

And at the same time, you have kind of the own what you know dynamic with Apple of people always wanting to have a piece of it in portfolios. So I understand. I mean, I think it's a really good question because if you start to see those break down, can the overall cap weighted index continue to do well? And that remains a big question for 24. So you guys, I think, are reasonably optimistic about earnings and where they're going to begin. They begin with the financials. You like the group, finally?

Financials? Yeah. J.P. Morgan, notwithstanding, we don't have to opine on that one. Yeah, we're not going to opine on that one. At least you have a nice performance of the stock over the last year. Well, you know, financials tended to perform well also based on where the yield curve is positioned right now. We're still very much flat. If we start to see some normalization, we could begin to lean in there. But until we actually start to get rate cuts on the table, I think that headwind on the regionals still exists. And I think that's one question that all investors and all of us

we're going to be looking at is how do those regional banks fare in these Q4 results that will be coming out soon. So that's something we'll be looking at. But financials right now isn't something we're ready to step our toes into just yet. I'm just looking at performance of late. Obviously, they've done well of late. Is this the year for the banks? I think you have to be very selective as well.

Because you have some banks that have better balance sheets than others. What about large banks? Yeah. Let's just say, to AJ's point, if the yield curve re-steepens, right, front end comes down, the long end goes up, re-steepen of the curve, better for net interest income, and the economy hangs in. And add on top of that a return of investment banking revenue. It's been practically dead for two years. IPOs, M&A, and all that. Exactly. And so if that happens, and as long as credit quality holds in, you have seen credit delinquencies pick

up for consumers. Is that an issue for those that have a bigger consumer business? And if it is, then that's probably what will discern the winners and the losers. Guys, we're going to make that the last word. I appreciate it very much. AJ, thanks. Good to see you again. Cameron, we'll see you again soon. That's Cameron Dawson. Shares of Boeing, they're under pressure. You know by now that incident on an Alaska Airlines flight causing dozens of 737 Maxes to be grounded. Phil LeBeau has been following this story from the outset. What do we know now, Phil? You know, Scott, we're still trying to find out exactly what the NTSB has learned so far in its investigation. Not surprisingly, they're not giving a whole lot of details.

We'll get an update from them tonight. If there's some good news here, especially if you are a Boeing shareholder, it's the fact that the protocol for inspections for the grounded 737 MAX-9s, well, that's been approved by the FAA. What does that mean? It means the airlines that have these grounded MAX-9ines will spend four to eight hours, four to eight hours, inspecting each aircraft. That's the expectation. If the aircraft is cleared, everything checks out. They do everything as they are mandated to do through the inspection protocol. Then theoretically, these planes can resume flying.

Some of them may be back in the air tomorrow or on Thursday relatively quickly. I'm sure the airlines want to get these back in service. And again, that's an important move here that the inspection protocol has been approved by the FAA. Take a look at United. You see the shares moving higher, especially after the approval came out. They have 79 max planes. They canceled 232 flights today. Not all were max nine related. That's the ripple effect of having all of these cancellations because of groundings. And then when you have Alaska, 65 MAX 9 planes, they canceled 147 flights, much like United. Not all of them are MAX 9, but there's a ripple effect there. In terms of the actual investigation by the NTSB, as I mentioned, it will be updating reporters tonight, 10 o'clock Eastern time, on what they have learned so far.

They do now have the fuselage plug, which was ripped off of the plane. They found it in suburban Portland. They are looking at that. They are obviously, as you can see here, looking at the plane. They have the flight data recorder in Washington now. So you take a look at shares of Boeing. The interesting thing will be, is this a one-off incident, Scott? Tomorrow, Boeing will be holding a town hall at the

Renton plant where they build the MAX. CEO Dave Calhoun will be there. Even if it is a one-off, this is a good opportunity. He doesn't want to waste a crisis to say to the rank and file, we've got to do a better job when it comes to keeping our eyes on the ball. Doesn't mean that Boeing's responsible for this, but he understands that people are looking at the Macs and saying, here we go again. Scott, back to you. Since we're talking about, you know, airlines, Delta obviously starts reporting their earnings later this week. What kind of story are the airlines going to tell, Phil? It'll be a strong one for the fourth quarter.

Look, you had a clean holiday for Thanksgiving and a clean holiday for Christmas and strong demand. The numbers are going to be pretty good for the airlines. And now the question becomes, how do you take that and leverage it into 2024? We know the first quarter is slow. It's always slow. But the airlines, and we'll find out from Ed Bastian when we talk to him on Friday, they are noticing that certain parts of the market obviously remain strong, international. And then what are they noticing in terms of business? It continues, that business traveler continues to come back little by little.

That'll be a focus of our conversation with him on Friday. Yeah, all right. Stocks on the move as well today. Phil, appreciate it. Phil LeBeau, we're just getting started here on Closing Bell. Up next, NVIDIA moving higher today thanks to a big announcement at the Consumer Electronics Show. We got the details coming up. We're also going to speak to Starship analyst Stacey Raskin about how he thinks these new developments could impact NVIDIA shares this year. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Let's send it to Christina Partsenevelis now for a look at the top stocks to watch as we head towards the close. Christina? Well, Twilio is higher as the enterprise software

giant's co-founder Jeff Lawson steps down as CEO. The move comes as activist investors Anson Funds and Legion Partners pressure the company to sell itself or divest one of its businesses. Twilio does say it expects its fourth quarter revenue to exceed its prior guidance. Shares are up almost 6%. CrowdStrike is higher after being named a top pick by RBC. Analysts say cybersecurity spending continues to be a top priority for companies, which should allow CrowdStrike to continue gaining customers and market share. And that's why you're seeing shares up 5.5%. Last but not least, NVIDIA is on the move higher after announcing three new desktop graphics chips with add-ons

that'll not only allow gamers, but computer users in general to make better use of AI on their personal computers without having to rely on the cloud and services over the internet. So it's the AI PC everyone keeps talking about. NVIDIA isn't alone. AMD and Intel are all pushing the new AIPC with hopes that it'll revitalize the PC market. NVIDIA up over five and a half percent. All right, perfect setup. Christina, thank you. We'll see you soon. Christina Partsinevelos for more on today's Semi-Search and NVIDIA and this new news. Let's bring in Bernstein Senior Analyst Stacey Raskin. Welcome back. Good to be here. Watching this stock today really outrun the market. It's up five and a half percent. Is that on this AI at home, if you want to call it news? To be fair, I think it was actually up before they made any

announcements. So was AMD and some of the others. The sector in general is having a pretty strong day after kind of a lousy week last week. So I don't know if it's entirely because of the announcements, but the announcements certainly aren't hurting. What about this announcement? I mean, what do you make of it? How significant is it? How should we think about this AI PC? Yeah, yeah.

So look, in terms of NVIDIA's actual numbers, none of this probably matters very much. It's really much more around their data center business, which is getting close to like 80% of the revenues anyways. But I think the idea that like AI in general is proliferating is a good thing. And some of these announcements, they announced the new gaming parts. They made some healthcare partnership announcements and some other things. I think those are all good in terms of just driving home the idea that AI is starting to proliferate. I think specifically around AI PCs, we've been hearing a

lot of talk around those from Intel and from AMD. And, you know, it's kind of nice finally to get sort of the king of AI, at least talking about AI PCs. That's something that we actually haven't had really until today. And so the fact that they can actually be pushing that a little bit, I think, is maybe a good thing from that standpoint. Are we at the point now where we're beyond the rising tide lifts all boats thing? I mean, last year, the SMH had the best year in 20. So so many different things went up. We don't even know which ones that went up really are capable of monetizing AI over the long run. So do we get

more? Do we get more dispersion this year? Yeah, even for the sector? Yeah, not just. Yeah. So look, semis had a really strong year last year. Semiconductors in 2023, the SOX was up 65%. It was pretty amazing. And this was on... During a downturn year, I mean, the semiconductor industry

probably down 10%, give or take, in terms of revenues. And we've had some fairly significant cuts to earnings and everything else. And I think the easy money has probably been made. So 2024 will be an interesting year. Broadly, it should be a growth year

after some fairly nasty results in 23 around memory and some other things. Not all end markets, though. It's been an asynchronous cycle and different end markets are at different points. Things like PCs and smartphones, I think, are through their inventory cycles. So they should have a decent year after a horrendous 2023.

I think things like AI clearly are off the charts strong right now, and they will be. Traditional data center, networking, server CPUs have been weak. They're probably still weak. And I think things like auto and industrial actually have just started to roll. Industrial actually is rolling over hard. Auto, we've been seeing some cracks until last week. You know, we had Mobileye, which had a pretty nasty negative pre-nation on inventory flush. And so auto is going to be something to watch this year as well.

Some of the analog names may be a little more challenged because of those industrial and auto trends, I think. You know, I admittedly forgot because, you know, every time we talk, I feel like it's NVIDIA's world and we're just living in it. I didn't realize that Broadcom's your top overall pick. Why is that? I like Broadcom. So look, so Broadcom has a number of things going for it. And for those who aren't familiar, it's got a semiconductor business and a software business. Software business is much bigger now.

They just closed on their VMware acquisition. Software is like 40 or 45 percent of much bigger now. They just closed on their VMware acquisition. Software is like 40% or 45% of the revenue now. For their semiconductor business, I think, again, in a world where people worry about numbers, they've kind of de-risked that semiconductor segment. I think they're guiding their non-AI pieces anywhere down from high single digits even to high teens, depending on the segment. But they actually have a good AI story. It's actually the second best AI story in the space,

I think, after NVIDIA. They're involved in making custom compute offload ASICs for the hyperscalers doing their own AI chips, as well as the networking side. And that is very strong. And that's actually bridging the gap from the shortfalls in some of their other core businesses, which are cyclical shortfalls.

And then in the meantime, they did just buy VMware. It is massively accretive. And you're going to run into a 2025 sort of Broadcom by the time all the synergies are in. They'll be doing pretty close to $60 a share in EPS and high 70s bumping up on 80% gross margin and $30 billion in free cash flow. And it's cheap. It's a multiple expansion, but it's still very, very cheap relative to the space and relative to the quality of the business. I really like Bronco. You know, AMD has had a really good run of late, you know, and Dr. Lisa

Su has really been out there making the case for that company that, hey, we're here, too, and we're going to be real players. You suggest that the stock might be over its skis and you do have a perform rating on it why is that yeah it's funny so i didn't say this on tv you probably shouldn't listen to me for amd i seem to be incapable of calling that stock properly we we downgraded it actually early last year and it was on a thesis that gross margins were too high and numbers were too high. That was absolutely true. That happened and nobody cared. They did something really, really smart. When the AI story from Nvidia actually, there was one that when they had sort of the print heard around the world in the middle of last year,

AMD latched onto that and to their credit, they actually do have a roadmap with products on it. There is some demand because people are looking for a second source and they left themselves some room for that narrative to run. roadmap with products on it. There is some demand because people are looking for a second source. And they left themselves some room for that narrative to run. They've said that they'll do quote unquote more than $2 billion in AI revenues. MI300 is the product. They'll do more than $2 billion in revenue this year. They left room. That could be three, it could be four, it could be five. It's a rounding error relative to the size of the business but for amd that may be good enough and it is very possible that as long as that ai narrative in with can

can hold that people may continue to overlook some of the shortfalls in the rest of the business which have clearly been there and i worry are still there as we go into next year but that ai story for them they don't need to do 6060 billion or $80 billion, whatever it is that NVIDIA is going to do. Right. If they do four or three, that may be enough. And that may keep the stock going for now. But that's kind of my point of what I asked you earlier. It's like you mentioned AI, you talk about it a lot and then bang, you get the AI bump. But then the rubber has to meet the road at some point.

At any I guess we'll see. I guess we'll see. I got to leave it there, Stacey. I still worry numbers could be a little high, but like I said, that narrative could carry them. It's been carrying them for the last several quarters, even as numbers have proved to be too high. I appreciate your honesty on your AMD calls. We'll talk soon.

That's Stacy Raskin joining us back from closing. Bill, up next, a deal making frenzy in healthcare. Not just today, but to start this year. We're going to bring you up to date of all of the stocks being impacted and what it could mean for not only M&A going forward, but for that sector and your money. Closing Bell is coming right back. About 25 minutes of the Closing Bell, several health care deals being announced today. Leslie Picker here with all of those details for us. Hi, Leslie.

Hey, Scott. Yeah, this is what one might call a healthy amount of deal activity. This morning alone, we saw an announcement from Boston Scientific to acquire Exonix for $3.7 billion. That expands their position in urinary and bowel dysfunction to cancer treatment deals, J&J buying Ambrex for $2 billion and Merck buying Harpoon for $680 million. And then the journal reporting a short while ago that Novartis is close to inking a takeover of cytokinetics, which has a promising heart drug and a $10 billion market valuation. Of course, this flurry of dealmaking, not a coincidence. It comes

amid the JP Morgan Healthcare Conference taking place in San Francisco. There are reportedly 8,000 people attending this year's event. It's an annual occurrence where healthcare companies can talk up their recent deals and discuss future ones. The conference comes on the heels of an active December where just three pharma giants, AbbVie, Bristol-Myers Squibb, and AstraZeneca scooped up nearly $30 billion worth of drug makers. And the prospect of more dealmaking, as well as those declining interest rates, sent the SPDR S&P Biotech ETF surging about 25% since the start of December. So lots of hype, lots of excitement surrounding this space, Scott. Are we going to be talking, Leslie, about other sectors than health care

when it comes to deals and a pickup? Is this just the beginning, do you think? You know, it's interesting because one of the key drivers of M&A is very health care specific. It is that a lot of these companies are facing patent cliffs, whereby some of their key drugs, the patents are expiring and they're able to, you know, other companies are able to create generic versions of those. So that's kind of driving the M&A here, as well as, of course, those declining interest rates that we saw at the end of the year. When you think about the IPO pipeline, when you think about the M&A pipeline and how that interplays with rates, we could start to see some more activity if rates do stabilize.

But there still are some concerns surrounding regulation. Private equity says that there's still some disconnect between what the buyer is willing to pay and what the seller is willing to sell at in terms of valuation. So a lot of the hurdles that we saw last year are still in place. That said, activist activity is something that people are pointing to as a key driver of potential M&A in 2024. All right. Appreciate that, Leslie. Thank you. We'll see you in the market zone with another report as you follow the money. All right. Up next, five-star stock picks, capital wealth planning's Kevin Simpson. He is back to break down his latest trades, how he's also playing earnings season as it gets ready to get underway. Closing bell back in just two minutes. All right. Welcome back. Stocks rebounding

today after a weak start to the year. This ahead of earnings from the big banks later in the week. Let's bring in Capital Wealth Planning's Kevin Simpson. It's good to see you. Welcome back. Hey, Scott. You're always active. And here you are. I see that you sold JP Morgan. We're talking about earnings starting at the end of the week, this one included. It was a big winner. Why'd you sell it? Well, you know, we trim this position, Scott. We love JP Morgan. It's been our top bank position for a long time. Over the past two months, the stock's up 25 percent. So that gives us an opportunity to sell into strength. We still have it as a full position. But when you've got something that makes that kind of move,

especially a company that isn't an AI related stock, you want to take advantage of that, right size your positions. We still think it's going to do very well. They beat earnings 82 percent of the time. They might be a little bit light year over year, but they're talking about 10 percent growth. We also sold a covered call on it heading into earnings because you do get a little bit of volatility increases when earnings season starts. So it's another little trade technique that we were able to take advantage of. Are you are you bullish more or less of financials in general or not? Yeah, you know, I'm bullish on the market. I think if we look at this year from a longer term perspective and we think about where we start this year from a longer term perspective we think about

where we start the year where we end the year- we're positive on how that shakes out. Whether the Fed starts cutting rates in March- you know I don't know that might be a little premature. Whether there's as many as the markets hoping for

in terms of six or seven cuts. I'm not sure that's the case either. But from a broader perspective we think stocks are going to be higher. So we want to we want to sell into some strength modestly and we definitely want to be buyers on pullbacks. So you think earnings are going to be good? Yeah. Yeah, I think they're going to because we're looking at a low bar. You know, we always talk about earnings season is this, you know, this majestic goal.

But we always tend to set the bar just to the point where we can look smart and get over it. But that's not a new story. Home Depot, you added to it. Same thing in terms of our thought process on Home Depot. We think lower rates are going to do good things for the consumer. We think it'll do good things for Home Depot on larger purchases, home renovations. This is a stock that's done well in the period of this rate spike. And looking at this position and right-sizing it, there was a little bit of a pullback last week. We added it. We rounded it out to a 5% position.

What I like most about Home Depot at this time of year is that they traditionally give you a dividend boost in January. For the past five years, that dividend increase, Scott, has averaged about 16 percent annualized. So if we're looking at a hedge against inflation, strong dividend growth is the lifeblood of our portfolio. And we're expecting Home Depot to raise their dividend again when they announce quarterly earnings in Q1 here. Is that your preferred housing-related play? It is, yeah, 100%. In the retail space, we also own Walmart, but we've always been fans of Home Depot,

and for the past decade, we've favored it over Lowe's. Gotcha. We'll see you soon. Kev, thanks. Kevin Simpson. Thank you. Up next, shares of Crocs are surging in today's session. We'll tell you what's behind that move and more. Closing Bell comes right back. We're now in the Closing Bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Courtney Reagan on the headlines moving retailers and Leslie Picker

back with data on how hedge funds fared last year and what may lie ahead this. But Mike Santoli, your first pretty good bounce to start the week. Yeah, one week, a little bit of a reset. I wouldn't say that you can declare it over, but it showed you that last week you had that sort of pent up selling that carried, you know, into a new year. But you knew it was going to collide with people's interest in getting involved into a new year. I know the discussion is, you know, will we get new highs? We're 1% away from a new closing high. I mean, it's nothing from here to get there. I do think that it was nice and broad throughout the day. So the combination, I think, of just bad things

continuing not to happen, the inflation expectations going down, bond yields staying tame, and the corporate commentary, the focus you're able to have on the consumer stocks, on the health care names as things kind of ramp toward earnings season. I think it was enough for now. Again, I don't think you completely skimmed away the optimism that you came in, you know, a little bit over allocated to in the in the start of the year. And, you know, so far, so good in terms of the dip buyers feeling active this year. Yeah, this inflation expectations thing, if nothing else, helped yields sort of just steady for a while. It seemed like it. And, you know, I've been sort of like not dismissive of the expectations piece, but basically that's just not the game.

The game is the numbers. And we know what gasoline prices are doing. It's very linked with that. But all of the leading indicators of what the actual inflation data are going to do are also friendly, which I think is why the focus is a little more on downside risk to growth. You're not really seeing reason to get too panicky about it. There was an uptick in corporate revolving credit, I mean, consumer revolving credit in November. But all this stuff is still good enough, I think, to accommodate this idea that you're not too far off the soft landing path. Yeah, you mentioned what's going on in retail. Courtney Reagan, why don't you tell us

more? Because I see a number of names are getting a nice bump today. Yeah, absolutely. And a lot of these have to do with retailers presenting at the ICR conference in Orlando. So let's go through some of them. Crocs, the biggest mover, up 20 percent. Better than expected fourth quarter revenue. Company executives also call 2023 a year with share gains. Also successful holiday season. Boot Barn up 7%. Citi calls its quarterly pre-announcement better than feared. Its ICR presentation showing comps improved in December from November.

Promotions also remaining in check. American Eagle raising its fourth quarter guidance on record holiday sales. Also raising revenue and operating income guidance. Those shares up 6%, 5% below, reaffirming quarterly earnings and revenue guidance, but failing to top street expectations for those. So shares down about 4%. Genesco, that's the company that owns Journey as a couple other international shoe retailers. It cut its full year guidance, saying holiday sales decelerated after a strong start to the season. Shares, they're down. They were down 2%. They have paired some of those losses down just about 1% now. Scott? Yeah, Court, appreciate it. By the way, we do have the CEOs

of Abercrombie and Five Below. They sit down with Morgan Brennan today in overtime, so you want to catch those. Mike, just a comment from you. I mean, Nike sort of got people a little concerned about the consumer, but maybe that was a little more nuanced. And today's more evidence of that when you hear from some of these others. Yeah, a little more specific maybe to Nike, but also the setup for Nike was a little bit unfriendly. Lulu tried to talk down their prospects. Nobody kind of believed them. So, yeah, I think it's still steady as she goes. Not really eye catching growth numbers on the top line across the board, but there's enough strength there. J.P. Morgan again pointing to this sort of reservoir of excess savings. It's still not down to zero. So, you know, if on Friday you wanted to be worried about four point two percent annual wage growth because it was made sticky inflation. There's also obviously a really good element of that in terms of spending power. Get some good new data on what hedge funds are doing, at least what they did last year and how things are setting up for 2024. Leslie Picker.

Yes, we do, Scott. Full year hedge fund numbers are in. And according to these new numbers just published by data collector HFR, the fund rate weighted composite index gained seven point five percent in twenty twenty three. Now, while not all funds are equity focused and therefore compared to the S&P, the broader index, of course, was up about twenty four percent last year. The big move in equities, though, served as a tailwind to the activist strategies, which added to their November gains in December, making them the best performers at the end of the year. Among the laggards included macro, particularly funds that are uncorrelated with the market. Uncorrelated macro funds were effectively flat in December as commodities and interest rates declined. Still, HFR's president says the outlook for 2024 has, quote, improved with higher nominal levels of bond yields,

continuation of powerful AI-driven technology trends, expanding cryptocurrency liquidity, and strength in M&A. Scott. All right, Leslie Picker, I appreciate that very much. Well, the Dow is at, we're basically session highs across the board. And frankly, the Dow would look a whole lot better if it wasn't for Boeing today, which is a huge drag. We do have even more developments now on those inspections of the 737 MAX 9 airplanes. Phil LeBeau, what can you tell us from some headlines that we see moving here, dragging the shares lower?

Yeah, Scott, take a look at shares of Boeing. The reason that they're being dragged lower, this is a report that first came out about 15 minutes ago from the air current matched by our Leslie Josephs at CNBC.com. Essentially comes down to this. United Airlines has found loose bolts on door plugs of several Boeing 737 MAX 9 planes during inspections. Now, remember, some of these planes were inspected initially by United as well as Alaska on Saturday after there was the incident with the Alaska Airlines plane on Friday night. That was before the FAA said, no, we're going to ground all of these until we have protocol here. But this reporting from CNBC.com's Leslie Joseph, as well

as the air current, John Ostrower, essentially says, look, some of these planes that were checked out have loose bolts in the door plug on the 737 MAX 9. And if that's the case, Scott, it raises the question, which is the primary drag on Boeing, which is the quality controls and the lack of them or appearance of the lack of them at the Renton Washington factory. So that's the latest, Scott. And we have reached out to both United as well as the FAA, as well as Boeing. We'll let you know if they have any comments at all. Scott, you know, Phil, and forgive me for putting you on the spot if you don't. But just from people you've been talking to assume these bolts have been found and they're loose. Are we talking about something as simple as just tightening the bolts to get the planes back in the air or something more significant?

Hard to say, Scott. I don't know exactly. And look, I don't imagine that this is like a bolt that you and I see around our house and we tighten it up and that's the end of it. It's far more intricate than that. Having said that, Scott, loose bolts is just a terminology that I can imagine people who are Boeing shareholders are looking at this going, if this is true, if this is part of the problem here, what's going on? I mean, this sort of comes down to craftsmanship 101. And why would this problem be cropping up now on these 737 MAX 9s? Yeah, no, that's a fair point. I appreciate you dancing

with that, Phil. It's going to be interesting to see what shares do from here. I mean, you know, Jim Labenthal, for example, who's been as big a Boeing share supporter as I can remember, dumped those shares today, said enough is enough. Just tired of watching that story unfold. Phil, thank you. Let us know if you get anything else between now and the end of this day. That's Phil LeBeau. Mike, we're going to go out here with some nice games.

We are. And we got another little uptick when you saw the sort of market on closed orders. So that showed that there's some urgency to get money into this market before it gets away from you. We'll see if that was enough. 2% from a two-year high to really bring out some forceful buying

or just the big caps got down too much. I mean, Boeing would be up, their Dow would be up by $3.50 if not more. So keep that in mind on a pretty strong day across the board.

We'll send it into OT with Morgan and John.