Closing Bell - Closing Bell: The Fed's Foggy Path Forward 12/20/24

Episode Date: December 20, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

You're excused. We love you, Ty. We're certainly going to miss you. Not going to be the same without you, my friend. That's Tyler Matheson. Welcome to Closing Bell. Hard to follow that. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the rally renewed. An interview on this network turning stocks today. We will discuss that and ask our experts over this final stretch where the markets might head from here. In the meantime, let's show you the scorecard with 60 minutes to go in regulation. We are sharply higher across the board. And that after Chicago Fed President Austin Goolsbee told our very own Steve Leisman today

more cuts are coming and that inflation is heading back to 2%. Big jumps in rate-sensitive small caps today in other areas of the market where you would expect to see that. Mega caps are also higher. And how about volatility taking a nosedive today? I'll show you the VIX as well. A big jump on the Fed share the other day. But there it is.

That's what I was trying to say. It's down 23%. You get my idea. It takes us to our talk of the tape. Is the rally still okay? Did stocks overreact to the Fed chair on Wednesday? Let's ask Chris Toomey of Morgan Stanley Private Wealth. He's with us here at Post 9. It's good to see you. Welcome back. Happy holidays. Are we good? I mean, is the rally. It certainly felt like it may be in jeopardy a couple of days ago.

But here, did Austin Goolsbee save the day? Yeah, problem solved. Right. I mean, look, I think I think, look, this is the last important number for the end of the year. I think typically seasonality comes in, and I think people want to see the market go higher. So this was the catalyst with regards to sending it higher. If you look at kind of positioning, market was way oversold. So I think this was just the thing that the market needed in order to kind of rally going into the end of the year. Did anything really change this year? I mean, do we do we really do we need to rethink how we're thinking about the Fed? I want to read you what

Tony Pasquarello of Goldman Sachs had to say today, because it speaks to that, quote, the expectation of easier money was incremental fuel for equities, particularly in the higher velocity corners of the market. While the put is still alive and well, the Fed variable will now serve as more of a floor to the S&P rather than a catalyst. Is that fair? You see it that way? Absolutely. Now, I think he and I think if you continue, he spoke he spoke specifically to now it's going to be a question of whether or not you're going to actually see the growth in the stock market that's going to deserve this higher multiple. So I think the market itself has been bracing for rates to come down fairly dramatically over the last two or three years. I think the most important thing that we saw on Wednesday was the fact that

I think Powell conceded the fact that inflation is not going to get to their range until probably sometime in 2027. And you're in a situation where, you know, you really have to see what's going to happen with regards to what's coming out of Washington and what that sequencing looks like. Is this going to be a situation where Washington is going to focus specifically in on immigration and tariffs, which could be negative with regards to pushing up inflation? Or are they going to focus in on tax cuts, which could be stimulative with regards to also pushing up inflation? Why is it either or? I mean, it sounds like they're going to do both. Now, they may do what you said the former first, right? They say they're going to focus on tariffs, number one, and immigration, number one A, if maybe that, you know. I think that's what the Senate wants to do, right?

But if you know that the other stuff's coming, what do you do? I think it's just really a question of what it's going to look like. I mean, we're in a situation right now where we've got a potential shutdown of the government. And so I think we're in a situation where we don't know exactly what this is going to turn into. I think everyone assumes because you've had this red wave that, you know, the Republicans are going to be able to come together and get all this stuff done. But historically, having split government is usually a better outcome with regards to getting things done because you can get you have more room for compromise. Your constituents aren't necessarily as tough on their on their elected officials with regards to delivering everything

that they want. It feels like if if nothing else, the repricing of the Fed into the new year has taken the froth, if you will, out of certain parts of the market that started to look a little ridiculous. I mean, I feel like that's what Rick Reeder was talking about with us yesterday, where he said the last couple of weeks felt a little bubblish in terms of some of the sectors. Did you see the same things that Mr. Reeder did? Yeah, absolutely. I think if you look at, you know, some of the numbers that are coming out of places like, you know, these like Robin Hood and some of these other kind of more retail places where the amount of options buying that was going on, you know, I think that's a pretty good indication of speculation entering into the market. I think

the other thing, though, is I think the market kind of got off sides with regards to expecting additional rate cuts coming. If you look at kind of the sell off where it was particularly focused, anything that was down more than 10%, it was all of the stuff that was going to benefit with regards to rates coming down, whether it was utilities, whether it was real estate, or even looking at something like the Russell 2000 value, which has got a lot of financials in there. Oh, yeah, like the broadening trade. Yeah, and so it wasn't just repricing, I think, the more speculative areas.

I think it was also repricing the areas that would benefit the most with regards to rates coming down. I hear you, but rates are still coming down. And that's what I alluded to at the very top of the program where Austin Goolsbee told Steve, quote, I think rates come down a fair bit more. And he went on to really underscore that, really hammering the fact that inflation is heading towards their 2 percent target. We're not that close to neutral yet, or there's still a fair amount to go till you get to neutral, right? I mean, rates are coming down. I don't know about that.

I mean, look, if you look at the three-month, three-month has come down with rates. You look at the 10-year, the 10-year's actually up versus where it was a year ago today, right? And so we're in a situation where mortgages are going back up. And so, right? And so we're in a situation where mortgages are going back up. And so I don't know necessarily we're in a situation where you're going to actually see rates come down dramatically. I think we are probably more likely than not in a situation where

rates are going to be higher for longer. The net neutral rate, you know, going back to 2012 was significantly higher than where it was today at 3%. And so I think we're in a situation where you could be a situation where rates stay here, and then companies and industries that are really dependent on rates coming down really start to suffer. Yeah, but those are the ones you just talked about, like, you know, regional banks and things like that. But if rates are going up or at least staying near here for the right reason, not because we're refiring inflation, but because growth is actually going to be better. No. And I think that's and I think that's the key. That's going to be the give and take. I think if you do see, you know, some of these initiatives coming through, we talked a little bit about M&A the last time I was here.

We think that that's coming. We also think that there's going to be a fair amount of IPO activity coming into 2025. All of that should be stimulative for the market. But I think you really are in a situation where this will be a trader's market. You will see some areas of the market really struggle with regards to a higher rate environment versus other areas where you're going to see tremendous growth upside. And so I think it might be a situation where the indices don't do a whole lot, but there's a lot going on underneath it. What do I want to lean into in this? What is a somewhat uncertain environment? I feel pretty good, but I'm not exactly sure of the timing of certain policy initiatives that are going to come down the pike next year. Do I want to just stay

large in the market? I mean, I would I would look at, you know, obviously this is an overused term, higher quality, meaning companies that don't necessarily need to access the financing markets, or if they do, it's not necessarily going to be as painful. People, areas where you can see some cyclical growth on the more aggressive side, places like cybersecurity and data centers and AI, we think there's going to be a continued secular tailwind. I think interesting in small and mid-cap, we think that somewhere in there is going to be some real good opportunities. We wouldn't be buying the indices in those areas. We would be looking selectively at companies that we think are probably great

M&A targets. Okay, so you got to do your work. I mean, you got to be a real bottoms-up stock picker when it comes to small and mid-caps because of all the other issues we talked about with rates. Exactly, exactly. So, like, not all small caps are built the same way. I think you're going to see some real opportunities for great moves in that area of the market, but I wouldn't necessarily just be buying the market. All right, let's bring in Shannon Sakosha now of MB Private Wealth

and Jason Snipe of Odyssey Capital Advisors. Both are CNBC contributors. Good to have you, of course, on this Friday. Shannon, you first. Did anything change this week, or are we still good? We think we're still good, Scott. So we were on the camp where we were anticipating a pause. And so I think the market just really wanted to see three rate cuts rather than two.

That stepped down from four to two, which is really wanted to see three rate cuts rather than two. That stepped down from four to two, which is really difficult to digest. To your point, I feel like the other thing that we really need to keep in mind is that, you know, while the potential for significantly lower rates would certainly prop up certain parts of the market, particularly some of the cyclical trades and some of the small cap stocks that you guys were just talking about. Our view is that we really have been able to be fairly resilient from an economic perspective through this rate hiking cycle. And therefore, if you accept the expectation that we will have above trend growth in 2025, we do think that there's probably an offset there from a nominal sales perspective and that we can deliver that there's probably an offset there from a nominal sales perspective and that

we can deliver that earnings growth that would justify certainly some of the more depressed multiples in some of those value sectors or small and mid-cap stocks. And so even without a very significant rate cutting tailwind, to your point, rates are still coming down lower. Most companies have actually, you know, digested that fairly well. And so we think that we're set up for a good year in the equity market next year, even with some of this policy uncertainty that might create volatility in the first quarter. Jason, you think the rally is intact or is the rally in jeopardy? No, I think I think the rally is intact, but I am a little bit concerned. I think Shannon just alluded to a point that I think is giving me more positive momentum, which is going into next year.

Obviously, we're expecting double-digit earnings growth. But one of the things that has kind of muted some of my excitement is what we've seen from a breadth perspective. We've had almost two weeks of negative breadth, albeit on the short term. Longer term breadth, I think, is positive. But, you know, what has kept the markets hanging on is obviously the performance of the generals. Now, this faltered a little bit with all that we've seen this week. And we've got kind of the ghoul speed bump this morning. And obviously, PCE was relatively benign, which has obviously lifted the market today.

But, you know, as as we move forward, we definitely want to see broader participation, you know, in the markets going into next year. You know, I think the generals will do fine. The hyperscalers will be OK. But I would like to see other areas in the market really participate. And I think that could happen via earnings. What do you what do you take from the fact of what they were suggesting about breadth being really bad? It's like 10 days, you know, more stocks are down than up. Obviously, the mega caps have been driving the truck here over this last leg. Is that going to continue? Is that the way it's going to be? Look, I think if your

expectation is rates are going to go higher because inflation is going to be stickier, I think you have to look at what are the companies that are going to be able to power through an environment where inflation is higher just hiding in these names like they have in the past and that you would naturally see some money coming out of the 493 because of that. I think that's just the natural trade that you would see. You know, inflation up, rates go higher. Where do I hide in the equity market? You're going to hide in those companies that are just, you know, blue chip companies that continue to grow. I mean this quite literally. Do I need to wait until January 21st or January 20th at 12.01 p.m. to see if tariffs are put on right away, to see if there's an advancement of any sort of immigration movement and then make my investment decisions? I mean, look, I think the question is, I think everybody thought, OK, Trump is in, red wave,

all of this stuff is going to be priced into the market. Now, not so much, right? We're in a situation where we actually might have a government shutdown. I don't know if that's changed since we've gotten on um and so i think it's going to be a fairly messy process and so i think to shannon's point i think there's going to be a fair amount of volatility between now and then which is why we would probably be looking to hide in some of these higher quality areas or these areas where we're not necessarily as dependent on policy to move forward you know jason we're really not that far away from earnings either. We maybe have a little bit of distance between us and the mega cap numbers coming in,

but we're going to start getting earnings once you make the turn into 25. And what sort of pressure is going to be on those given I hear a lot, well, the multiple can't expand anymore. Don't count on multiple expansion for any gains in 2025. It has to come through earnings growth. And especially if you think that rates are going to be higher. Rates could pressure the multiple of the market, but earnings can offset all of that. A hundred percent, Scott. And what we'll start with in earnings in earnest is obviously the financials in a couple of weeks, which we feel really strongly about going forward because we do think IB and capital markets activity has bottomed and we expect to see double digit returns there going into next year. So I think that could be obviously

a catalyst for going forward. I think the other area of the market that we continue to like, which I know I've talked about before, is obviously software. We've done a lot of CapEx spend, a lot of talk about CapEx spend as it relates to AI and AI compute. But I think, again, as we look forward, we're going to be looking at use cases. How do we turn the profitability engine on? And that's why we continue to like software. But I do think the story will be earnings. This year, a lot of it has been about multiple expansion. There's been some earnings growth here as well. But I think next year, that's absolutely going to be the major theme. How do you see that, Shan, the earnings question?

Well, every year, Scott, we talk about how it's got to come from earnings and not multiple expansion. And somehow we keep getting multiple expansion. So I think the important thing here is that outside of mega cap tech and the other sectors and the more cyclical sectors of the S&P 500, as well as small and mid cap, you actually could get both. You could get earnings growth and some multiple expansion, which I think would be very beneficial for the trade going forward. All right. Chris Toomey.

So the ideal portfolio right now. I asked Gunlock that question. Shannon, get some water. It's all right. I'll give you a minute. Don't worry. The ideal portfolio. OK, now I'll preface it by saying he's a bond guy. OK. And he admitted in the answer, I mean, I'm a bond guy. okay? And he admitted in the answer, I mean, I'm a bond guy. It's like, you know, this is where I like to lean in. But he said 30% cash, just because of the uncertainty that you have,

and with higher rates, you once again have competition. Yep. Bonds, for obvious reasons. And then 20% U.S. stocks. How does that sound to somebody like you? 30, 50, 20. 30 cash, 50 bonds, 20 stocks. It seems a little light to me.

You know, look, I think in our mind we would be significantly more overweight U.S. domestic, higher quality, large cap, small cap. I would also throw in their private markets. We see a lot of activity in the private markets. To Jason's point, we like financials benefiting from that activity. Like private equity. You're talking about that? Private equity, as well as some of the banks that participate in the IPO market and the M&A market. We think all of that kind of virtuous cycle should do really well in 2025. But see, there were times where we had these conversations a couple of years ago, you know, when the Fed was at the peak of its hiking cycle,

where you did have more cash than a lot of others. And for the reason that, well, you're getting a great return on it. Plus, you don't take as much risk. No, are we are we in that? Are we are we on the doorstep of that kind of environment

again, potentially? Well, look, I watched your show at halftime and you were giving one of the guests a hard time with regards to not buying anything. Not me. I wasn't, look, I watched your show at halftime and you were giving one of the guests a hard time with regards to not buying anything. Not me. I wasn't. Yeah, I heard it from somebody else. OK. But, you know, the fact of the matter is, is is if everything's moving down like we saw in this market, it's tough to sell some of those names to buy other names. So having some cash in the portfolio is always a good idea. And particularly right now, with the fact that, to your point, interest rates are in a pretty good place right now, we wouldn't necessarily

be extending duration. So having some short-term cash makes a lot of sense. We're not at anywhere near the levels that we were two or three years ago. But we do think having a significant amount of cash and kind of core fixed income makes a lot of sense. But you still figure you like U.S. stocks of any region in the world, U.S. stocks. Yeah, we think we think outside of the U.S. there's a reason that they traded a discount. You see from the political situation there, from the growth situation, from demographics, all of those things are pointing that more and more money is going to be coming to the U.S. If the U.S. is higher for longer, the rest of these economies have to start cutting rates. That's going to continue to push capital into the U.S. If we continue to see this IPO and M&A activity, that's going to bring more

capital in the U.S. So in our mind, we continue to believe in kind of this U.S. exceptionalism from the equity standpoint. Stan, what about stocks versus bonds? If yields are going to be maybe where they are now, if not a little bit higher? Well, I mean, that makes bonds more attractive, right, Scott? If we look at the pre-pandemic period and the really low yields we had, the challenge here is credit spreads are really tight. You know, whether you're talking about investment grade or high yield. And so if you compare what we're seeing from a credit spread perspective in high yield versus, you know, the same level of yield in private debt, for instance, that's the challenge today.

So even if you feel that credit fundamentals are fairly strong, we've seen some deterioration, I think, in the high yield market, especially in certain subsectors and industries. But I think the challenge is here, if you're looking at equities versus bonds, and you're looking at valuations, wow, valuations seem expensive in the equity market. But on the corporate side, they're pretty darn expensive in the bond market, too. And then you layer in debt sustainability. So it's pretty tough right now. You can do a balanced portfolio. You get some nice yields on the bond side. But we think there might be an opportunity, Scott, with some volatility in the first half of the year,

especially around policy, to get some of that spread widening. And that's where corporates are going to become a lot more attractive in our view. We'll leave it there. Good weekend, everybody. Jason, we'll talk to you soon. Shan, we'll see you soon. And Chris Toomey, welcome back. It's good to have you again. Thanks. Happy holidays. Yeah, you as well.

Just Seema Modi now for the biggest names moving into the close. Hi, Seema. Scott, less than 40 minutes left in trade, and Novo Nordisk is sliding here after the pharmaceutical giant reported weaker-than-expected late-stage trial results for its experimental weight-loss drug. However, the company telling CNBC that this new drug outperformed its popular E popular obesity drug in weight production

reduction and was on par with best in class treatments. Now we're looking at shares of Novodermatis down about 17% at this hour. Take a look at rival obesity drug maker, Eli Lilly, jumping following these disappointing results. Dexcom, the maker of diabetes management devices, also making gains. Eli Lilly, you'll see up about 2.6 percent. Dexom up about 6 percent. Scott? All right, Seema. Thank you, Seema Modi. We're getting some news on the IPO front. Pippa Stevens has that for us. Hi, Pippa. Hey, Scott. Well, Venture Global, they are an exporter of nat gas as filed to go public, according to an S1 posted just now. Now, the proposed size and price of the IPO have not yet been released.

Bloomberg did report earlier this fall that the company was looking to raise $3 billion through its IPO. They are already exporting at their Calcasieu Pass down south. They have been exporting there since 2022. And this, of course, comes as we are expecting to see a demand in LNG exports, particularly towards the end of the decade. So, once again, Venture Global has filed to go public. Scott? Pippa, thank you.

Pippa Stevens. We're just getting started. Up next, rebounding retail. The sector having its best day in a month, heading into a critical holiday shopping weekend. Top retail analyst Matthew Boss is here to break it all down, give the setup as well. And his top picks for next year. We're live with the New York Stock Exchange. You're watching Closing Bell on CNBC. We're back.

Retail stocks getting a boost today with the broader market. Joining me now post-9 is J.P. Morgan's Matthew Boss with his top pick in the retail space as we head into the holiday season. It's good to see you. Welcome back. Great to be back. Let's go through the list here. I want to start with the dud, if you will, Nike. We've talked many, many times.

Yep. I know that there's a reboot going on here. What do you attribute to the stock action, the price action in that stock today? It was rather interesting, right? Wasn't it up and then it was down? Why? Yeah, so 2Q results were in line with expectations. That created immediately on the printer a relief rally post-close. Then as the call progressed, you heard the storyline of that this is going to take longer and that the divot is going to be deeper. So the actions are just beginning in terms of clearing the inventory, which is heavy right now in both North America and Europe, as well as some of the actions to get back to a pull market. So it's going to be three Q of next year, basically one full year before Nike is

prepared to actually be able to have inventory in the market with the inventory clean. And then from there, you need to scale the storytelling and the digital around the marketing. And that's going to create earnings that, on our numbers, are now 50% below the street for next year. What do you think the main issue is? What has prevented this brand from resonating with people now the way that some of these upstarts are doing? I heard another analyst suggest, could you name a current Nike commercial, a big marketing campaign? I'm thinking about, you know, some of the biggest athletes on earth over the years who were all Nike athletes, but now who have either retired and then, you know, moved on to other

brands. Like Steph Curry is still the thing in the NBA, but he's not a Nike guy. No, he's an under-under guy. LeBron's in the, you know, November of his career in the NBA. Serena doesn't play anymore. Tiger is in the December of his career. Is that a problem? I actually think it's larger. I think there's two structural changes that have happened. The first is, if you think about historically, Nike was a marketing company, and then it was innovation-led, as they have the ability with size and scale to spend more than anybody else out there. What changed is two things, e-commerce and the advent and more of the growth from global brands coming online. It lowered the barriers to entry, so you don't have to be the largest. It's not necessarily that you can catch Jordan and you have a halo effect.

It's now the social influencers. And then secondarily, as you think about the barriers to entry coming down, necessarily that you can catch Jordan and you have a halo effect. It's now the social influencers. And then secondarily, as you think about the barriers to entry coming down, I would say in 20 years covering this space, I've never had a time when you hear about New Balance with a turnaround, Hoka, On, you have Arc'teryx, Salomon in the outdoor space, just the sheer number of competitors. It's not just Adidas relative to Nike like it was in 2014. That's why I think this is going to be longer and this is going to take more effort to get back on stable footing. Do I think they can get back to growing at industry? Absolutely. But I think it's more two to three years out, not one to two. And that, I think, is what the market was potentially

wrong on. Well, growing at industry is one thing. Growing above to justify a higher multiple where the stock used to be, that's the problem. That's precisely it. So on my numbers, stocks trading at nearly 40 times earnings. And that is anticipating 400 to 500 basis points of margin recapture. And to your point, getting back to the Nike growth profile that was of old, that was where it traded 27 to 30 times. And obviously, the market is anticipating a turnaround dynamic playing out under new leadership. And look, look, I think culturally, I think some of the people that they brought in in every change that Elliott laid out last night, I do think are the right changes to make here. It's just that it

does not happen overnight. And he was pretty clear about that. When you talk about barriers to entry being easier, you're describing a situation where the goalposts have moved. Absolutely. Once they move, they don't move back. No, no. And the other thing that changed is if you think about the percentage of what they call lifestyle. I think of lifestyle, it brings in a fashion element that creates more volatility. And to your point, back to multiple, that's a different profile.

Nearly 50% of the business is now lifestyle. They talk about more people wear a basketball shoe with jeans than wear it on the court today. That's a material change from Nike of old that was much more performance led and could catch the best athletes because they were the largest and the biggest. And it's not necessarily the same today. Yours truly, by the way, no foot shots. So who's getting it right? Who's getting it most right? Yeah, so I think you want global brands that have structurally stuck to their correct dynamics around marketing and flywheel investing. So I would put Tapestry, which is led by the Coach brand in that camp. I think Birkenstock, where the demand for the product is materially higher than the supply.

I would put Ralph Lauren in this camp. That's a multi-year. It took them five years in terms of some of the structural actions to pull the product back out of the wrong channels of distribution and back into the correct and go forward. And you and I have talked about this one, but I think Lulu is much more performance-led in terms of relative to some of this lifestyle product. And that's why I think they went through

this dynamic where they didn't have the newness, but now they're coming back on the other side of it. Oh, so they made the turn. Absolutely. Lulu's made the turn. You've stabilized. And now in the front half of 25, that's where the newness and the sizing and getting the growth back in North America. But you never lost the growth in international. You never had the excess inventory. And so you've never had to go through these clearance dynamics. You still love Ralph? I think Ralph is compounding from here.

So you have a mid-teens margin structure that's moving higher on continued average unit retail expansion. And what I really like is the white space opportunity that's been opened up because luxury prices are now 50% higher off of a much larger base. So I think Ralph fits into the affordable luxury and they've upscaled their customer. What's the holiday going to look like? I think holiday is good. So I think it started out strong. You had the break of the colder weather in November. Then you had the value catalyst with Black Friday. But I think the bigger overlying dynamic here is now that you have a wealth effect. I mean, the numbers are nearly $60 trillion of wealth creation since 2019. So I think high-income consumer, the dollars are there.

I think the discretionary dollars are there. The catalyst to spend is there. Low income is where we're more, I would say, we're more tepid into next year because you still have the wild cards of what's going to happen is there. Low income is where we're more, I would say we're more tepid into next year because you still have the wild cards of what's going to happen with tariffs. How's that going to affect pricing? And inflation remains the biggest headwind to that lower income consumer. Shorter spending time period have any impact, right? Thanksgiving was so late. The funny thing is, I actually think all it did is it compressed the lull. So I think people came out for Black Friday.

I think that weather coming off of the September and October, it was the warmest September and October in 30 years. Apparel and footwear did well in November. That's when you do your full price selling. Next thing you know, the calendar turned and it was two to three weeks until Christmas. And now you have people in the last minute frenzy. And so I think especially for destination type of shops, as I mentioned, a Ralph, a Tapestry on the coach side, or a Lululemon. Abercrombie.

And Abercrombie. We were actually just in Columbus yesterday. Look, that's a mispriced security. That is a global brand that's being treated like a specialty retailer, mid-teens margin structure, moving higher, and growing double-digit top line for four years straight now. Well, enjoyed the conversation. It's good to catch up with you again, Matt. Thanks. Great to be back.

All right, to Matthew Boss right here at Post 9. Up next, more on the bounce back in stocks today as we head into the close. DataTrek's Nick Colas is with us next. Why he sees double-digit upside in the year ahead in sectors that he thinks could lead the way. We're back on the belt right after this break. All right, we're back. Stocks are rallying today, partially reversing losses suffered earlier this week. Our next guest says a key level on the VIX is waving a green flag for investors. Joining me now to explain, Data Trek Research co-founder, Nick Kolas. Good to see you again.

Welcome back. Thank you so much. Man, the VIX has been all over the place this week. What's the message here with it now down 20% today, under 20? Yeah, the VIX is during a mid-cycle rally like we've had since the beginning of October 2022, a very important signal about

where you can step in and buy a dip. And we got a very key buy signal on Wednesday with the VIX closing at 27.6. That's just over one standard deviation. Only happened two times since October 22, right at the beginning of this rally, and then again in August 5, 6, and 7 of this year. And in both times, the S&P was up 4% to five percent in the month after the VIX hit those levels. So we've gotten that buy signal again, and we're very bullish here. That's what I was just thinking, you know, when you were talking about the VIX spike, I was thinking back to, I think it was August 5th, you know, when we had all those concerns about Japan, and I think the VIX went to like 60 or whatever it was. And I mean, you're essentially telling me that whenever the VIX has a massive spike, that it's generally a buy. It is. The only

exception, and think back to 2022, we had several VIX spikes to 36, which is two standard deviations above the mean. Those weren't great buy signals because we were still in a bear market. The point is that when we're in a bull market, these VIX spikes are a real signal from the market saying fear is overblown and it's a good time to buy. And that's what we're seeing here. OK, so buy the dip. I mean, it's not like we don't have concerns to think about. Right. I mean, if the Fed's going to cut much less than we originally thought, and we're still not sure exactly how many times, just because they tell us, well, it's likely to be two next year, that doesn't really mean anything. That's our baseline to go off of. We have policy

uncertainty and everything else. I mean, there are reasons to be a little cautious now. Oh, absolutely. Absolutely. And, you know, Powell's press conference on Wednesday was kind of a disaster. We started with a comment that the rate cut on Wednesday was a close call. And we ended the press conference with his comments saying that he couldn't guarantee there were no rate hikes next year. And everything in the middle was just the same kind of mishmash of if this, then that. So there's a lot of rate uncertainty. You're right. But at the same time, we've got a good economy, a good labor market, and growing corporate earnings. And that's the recipe to keep this rally going.

And that's why we're bullish. Yeah. Where do you want to lean into then? We really still like financials. They've had a great run this year, obviously. But they're still the second cheapest group in the S&P at 17 times forward earnings. You have tailwinds from lower than expected loan loss reserves because the economy will stay good. And the potential for deregulation. So the financials are still an area to definitely

lean into. They've done the best this year, and they should have a strong 2025. What about tech before I let you go? Sure. Tech is another area we still like. We do still like big tech as a group. We don't call it single names, but those eight companies that dominate the top of the S&P should outperform next year as well. And that's another reason to be bullish. But it's not just tech. It's also financial. It's a much more broad-based rally than we had in 23. Well, let me just ask you real quick then. I mean, maybe are you saying you're not allowed to name single names or because these things sort of stop trading like a monolith? Your answer sort of suggests that you think as a group they're going to go up. Can

you just clarify that so i understand where we're coming yes you've got you you've got it exactly right it's you know if you want to play that space then the cues are a perfectly viable way to play we think they outperform okay i got you i just wanted to make sure we're on the level um that you weren't talking about these all going up to the same degree um i'll talk to you soon nick thank you thank you nick colas up next we're tracking the biggest movers as we head into the close today. Seema Modi standing by with that. Hi, Seema. Hey, Scott. One name in particular, the meme stock BlackBerry surging 25% in today's trade.

We've got the full story coming up after this break. Kjell Andersen, KFN. All right. We're 15 minutes from the closing bell. Let's get back to Seema for the stocks that she is watching. Tell us what you see. Okay, Scott, shares of U.S. Steel are sliding down around 5% after the steel producer issued fourth quarter guidance that was weaker than expected. The company citing a continued slump in steel prices and higher costs related to the ramp up of its big River 2 facility. It also said the demand and pricing environment in Europe has

been weak, shares down 5%. And then let's talk BlackBerry, surging by more than 20% after the company posted Q3 results that came in above analyst estimates. TD Cowen upgraded the stock to buy from hold following the report, citing low valuation and improved cash flow expectations. Scott, back to you. All right, Seema. Thank you, Seema Modi. Still ahead, running a tight ship. Carnival leading the S&P today after reporting its results. We're bringing the key numbers and the bullish comments from the CEO

that have those shares cruising higher today. We're back right after the break. All right we're now in the closing bell market zone CBC senior markets commentator Mike Santoli is here to break down these crucial moments of the trading day. Plus Pippa Stevens

on Warren Buffett's bet on Occidental Petroleum and Sima Modi on what is behind the pop today in carnival shares I'll go to you Mike as we close out what's been a pretty volatile week. And maybe Austin Goolsby today helping things along as we headed towards the end.

Sure. I mean, the fever has broken a little bit here. You did have that real welling up of volatility. And also just, I think, a sense out there that there was some deferred selling in the largest leading stocks that had to happen. We've wiped a little bit of that away. The biggest issue coming into this month was elevated sentiment, elevated expectations for next year. This sense out there that everything was firing in the bullish direction. And now I

think you have a little more of a nuanced picture, which is probably healthy. You don't necessarily want to be out there figuring nothing can go wrong. So, so far, OK, the indexes have checked back to Election Day levels. I was saying earlier it was a 90 percent upside volume day. It's moderated since then. So not a huge buying stampede, but definitely enough to sort of take the pressure off. Well, I mean, you know, between now and the end of the now, really in the end of the year, I mean, lower volumes. I mean, what's really hanging out there to drive us? You got the developments in D.C. Right. The C.R. We'll see if it passes and where we go with the government shutdown. And then you start thinking about earnings, I guess. You really do kind of clear

the way if we if we're not completely sort of clenched up and feeling like the market is under a lot of stress because of liquidation, because of something going on with bonds, for example, then you can just sort of allow yourself to coast into the seasonally strong and seasonally calm days. Again, I was saying early December, hey, we keep going like this. We're going to finish the year way, way out of the limb. Everyone's going to be way too overexcited and optimistic and overpositioned. And now we've reset a little bit. That's probably OK. Markets had a really, really great ability to do that to itself. That's right.

And then sort of before it really gets out of hand. It's been one of the characteristics over this period of the bull two year bull market that's been most impressive, I think. All right. Pippa Stevens, tell us about Occidental. Yes, Scott. Well, Occidental jumping today after Warren Buffett's Berkshire Hathaway bought additional shares of the oil producer. A regulatory filing late Thursday showed an increase of 8.9 million shares purchased for $405 million across Tuesday, Wednesday and Thursday, coinciding with a downturn in the stock. buying spree. Berkshire now has a stake above 28 percent in Oxy, according to the filing,

worth $12.5 billion and making it the sixth biggest equity holding, although Buffett has ruled out a full takeover. Now, Berkshire's interest is not enough to push Oxy into the green for the year, still dropping 21 percent for 2024, as oil prices have essentially gone nowhere and been stuck in a tight range. But, Scott, the stock is up 4% today. Yeah. All right, Pippa. Thank you, Pippa. Steve, I should go real quick to you, Mike, because you know Berkshire and Warren Buffett so well. While they have been either liquidating or paring down positions everywhere else, Oxy continues to get the ball.

Yeah. There's a particular math that's involved with the Occidental stake, which is that Berkshire holds these warrants to buy the stock in the high 50s. I think it is like 58 and change. So the math pencils out that every time the stock, you know, it's a big discount at that level. It just makes sense to buy it in the open market. You're lowering your ultimate cost base.

And clearly, Buffett is a great thing to say about the management of Occidental. And even though he says doesn't want to buy 100% of a major oil producer, he's always going to buy when he feels as if it's below intrinsic value. Okay. All right, Seema. Carnival, what's happening here today? Well, Carnival came out with better than expected results, Scott. CEO Josh Weinstein joined us earlier today.

He talked about how it's really been able to accelerate onboard spending every quarter this year, and that's translating into higher sales expectations. He sees net income jumping 20% next year from this year's record, also helping the ability to continue to raise prices on their customer. Plus, Carnival is investing in new experiences like Celebration Key. That's a new private island owned by the cruise operator that Weinstein says is fueling interest from returning and new cruise travelers. That was a similar message from Norwegian cruise CEO Harry Sommer, who joined me on air yesterday. All three major cruise operators posting big gains this year, led by Royal Caribbean up over 75%. Carnival, you'll see up about 44% this year. Scott. All right, Seema. Thank

you, Seema Modi. Talked a lot, Mike, about travel-related stocks on Halftime today. Take a look at the year-to-date return, let's say, on a United, which I think is like 130-something percent. Delta's had a great year. We just had a buyer of a stock in that space, TripAdvisor, which has not. So not everything's participated in the healthy consumer wants to travel everywhere all the time market. Not quite. Certainly TripAdvisor has been considered kind of the distant number two in that or even three in that particular niche. But I do think it says the services economy is where the heat is and it remains the case. Goods based inflation is kind of taking a seat to sort of services basedbased. And also, that's where the emphasis of spending has been.

So, I mean, that all kind of is to the good. I think if there's one thing I'm looking at to say, okay, when might this action in the market today not be, you know, a short-term all-clear, not a huge rally in bonds. I mean, yields are down a little bit on the long end, but not very much. So, we'll see if there's going to be a rethink.

The two-year yield is actually kind of firm at this point. So look, we can, again, make some accommodation with a 4.5% 10-year if other things are going correctly. But there is also, the dollar has backed off a bit. So those are the two areas that we're threatening to just get a little bit too hot for comfort for the equity market. And by the way, it's also the thing that's going to restrain the real economy on some level. And that's not the worst thing in the world if you think that's what's necessary for inflation. But again, that's why we have this delicate trade-off

between Fed policy, rates, anticipated inflation, and economic growth. The stock market's trying to dance around all those things. The Fed's going to be data-dependent, and we as investors are going to be especially data-dependent now, too, knowing that a little bit unknown is baked into the cake now. And no jobs report until I think January 10th. Good point. We've got a weekend to you as always, Mike. Thank you so much for that.

All right. We'll go out green to finish this week. There's the bell. Great weekend, everybody. And I'll see you tomorrow. Thanks, y'all.