Closing Bell - Closing Bell: The Great Rotation, Tech's Big Rebound 7/12/24

Episode Date: July 12, 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.

Cal, thanks so much. 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 this major rally for stocks. Let's just go right to the scorecard with 60 minutes to go in regulation. Got a new intraday high for the Dow today, back above 40,000 for the first time since May. So that's been a minute since we've seen that. How about the Russell? In the midst of its strongest two-day run of the entire year. It's a broad-based move. Almost everything is working today,

especially when it comes to areas of the market tied to the economy. Materials, industrials, discretionary stocks, they're having a day. Tech right there as well. And several of the biggest names are bouncing from yesterday's sell-off. And we're going to watch Apple, Microsoft, and of course, look at Nvidia, up 3.5%. It does take us to our talk of the tape, the great rotation and whether this week really marked a change in tone for this market. Let's ask Cameron Dawson, chief investment officer for New Edge Wealth. She's with me here at Post 9.

It's nice to see you. Good to see you. This is quite a day. What do you make of the market reaction this week? There is enough of a short offsides position in those unloved areas of the market that just on positioning normalization alone, this rally can continue. Look at futures positioning in something like the Russell 2000. It's at its lowest level since 2022, which just says a lot of people are offside. So if you continue to see this fading in yields, this fading in inflation and growth holding up, all of those

things being very important for that to continue but if those things do continue this can continue to be a rip-roaring rally so UBS today says historically when the market experiences a significant one-day rotation from large to small caps the trend tends to continue for the following four weeks so we can expect this kind of activity, you think, for a month or so? It happened at the end of 2023. We saw a 20 percent rally in small caps on a 100 basis point decline in the 10-year treasury. Positioning was offsides then again as well. The question is, after you get that four weeks or a couple of months, what happens after that? Because the start of 2024 was terrible for small caps you

saw them give up all of that relative performance but that's what we'll judge once we see positioning really start to to re-orient itself and we think it comes down to earnings earnings have to play ball for the small caps and for value for this to last more than four weeks okay so let's get off of small caps but go to value and other places that just haven't performed as well. Week-to-date winners. Real estate up four and a half percent. Utilities up near four. Industrials up almost three. Materials the same amount. So these what have been unloved areas of the market, I mean, utilities had, you know, that AI-related moment. You know what I mean. But is it time to really seriously look at those areas? Forget about the small caps for a moment. Yeah, I think that they have a place in portfolios

because there's places where there simply isn't as much stretched valuations. And what we see is that when markets do eventually correct, you have this dynamic where the bigger they are, the harder they fall, meaning that very stretched valuations become a risk and an unwind. We don't think we're going to have one of those soon, but picking up names that trade at reasonable valuations makes a lot of sense. But we would emphasize that you have to stay quality. It's not about dumpster diving. It's not about value traps, but quality names that have just been left behind this year. Does that mean when you say quality names, are we talking large caps? It's just like, no? no no it doesn't have to be large caps there are quality names throughout the size spectrum we define it as things that have strong balance sheets strong free cash flow really good

earning stability right now it isn't everything rallies so junk is going to do better junk is your beta it goes up a lot more but in the event we do see that reversal, by sticking with quality, you protect yourself on the eventual downside. Is this a rate cut rally? That's how we framed it the other day with the chair was on the hill and made what some have termed another pivot, a pivot even closer to rate cuts and sort of left the belief to the market that they're definitely coming. The way that the data is shaping up, barring some major surprise, expect cuts and reasonably soon.

And it's cuts without a concomitant decrease in growth, meaning that you're getting the cuts without necessarily having growth fall off a cliff. And that, yes, there's fraying in the labor market, but it's not as if you're seeing mass job losses. There is still labor hoarding going on, which means consumers are still able to spend, even if some of them are just keeping their head above water. So if you get the cuts and you're not getting huge cuts to growth forecasts, that's why the market is up. Now, we are watching, though. Economic surprises are deeply negative and you are seeing trims to GDP forecasts. So that is a wild card. Well, I mean, you could make the, I think, credible argument that that's why the pivot, if you want to believe in that, happened in the first place this week. Unemployment rate getting above 4 percent woke a lot of people inside the Fed up. OK, and the idea that where the primary focus was on fighting inflation, now they have to

be equally minded, if not even more so at this point, on fighting the economy from slowing down too much and from unemployment picking up too much. And then you sort of wreck the story that you think you've written pretty well to this point. Yeah. And if you can get ahead of a larger weakening in the labor force by maybe enlivening animal spirits, helping to support the demand for interest rate sensitive goods.

Look at the University of Michigan survey today. You saw a plummet in the is it a good time to buy a car or other durable purchases. Lower interest rates do help that. So if you were to be very optimistic, you'd say, hey, the Fed tweaks and we get a little bit of lift in that and that the slowing in the economy is not enough to necessarily say that corporate profits are going to take a plunge. Well, some are hesitant to say you're going to have a real rotation, that all you really have is an oversold bounce. And it's not a credible rotation yet because you can't really say that earnings are going to live up to expectations.

And before you can see it, it's a show me story. So you can't believe it. I think that the market will get ahead of itself just on the positioning because people are so short and underweight. So you can get that four week to two month kind of rally. The test comes when you're looking at earnings, because that is the critical thing if this continues, meaning that if you look at earnings revisions, earnings revisions for growth names are up 11 percent over the last year. For value, they're down four percent. So that explains this divergence in performance. And so unless value can get its act together and put better earnings up and see better earnings revisions,

then it will reverse the rally. And to your point, it'll be a dead cat bounce. Well, aren't earnings, the tendency here is that they're going to underscore the reasons why we continue to buy big. That's sort of the Tony Pasquarello note today. Quote, the supremacy of the tech space and the core growth inflation tradeoff are supportive of the market. I'm certainly not inclined to pick a fight with a primary trend that's been nearly bulletproof. It's kind of making that point, right? Are we going to be talking about this again in a few weeks after all of these mega cap companies report? And we're like, well, see, told you. Yeah, it happened in March. We got that rotation rally that was ephemeral. It faded in an instant and we were

back to being tech being the only game in town. Now, the plot twist comes in 2025 when MAG7 earnings decelerate significantly. And that's where the market already has priced in that the 493 will actually be growing faster than the MAG7. Now, you could take that as a bullish, this is great, broadening out of earnings. Or you could take that as the bar is really high for the 493 to deliver and there's actually room to disappoint to the downside. It doesn't have to be bad news either if there's somewhat of a rotation from mega cap. I was using the point earlier during halftime. It's not a suggestion or the idea that money necessarily comes out from current levels in mega cap.

It's just if you think over the next five, six months, you're going to have new money coming to the market. It can come from cash equivalents, money markets and things. As rates come down, they become less desirable. You got your 5 percent. Now you want to chase something more if you think you can get it. So why not go into this catch up trade like the 493? Yeah, simply that there's more room to run to the upside. If we see churn, that is reflective of just things moving under the surface versus look at today's price action where everything is up suggesting that there's just new money being put in the question that we have is that if you look at allocations institutional allocations are in the 90th percentile individual investor

allocations are one percentage point off of their peak in 2018 and 2021. people are invested despite the high money market balances that we have so the the question would be, do you get to new kind of all-time highs and where people are allocated to equities to push you that much higher? We would say positioning is stretched. It's not quite extreme, but we have to keep that in mind. But you also suggest, though, like keep riding that trend until you see the cracks. And we haven't seen the cracks yet. The question is, is earnings weak the critical week and where you may see things start to show up well look at the price reactions to the earnings

that we've gotten the banks today some of them weren't so bad had pretty negative price reactions look at to delta or pepsi the market isn't necessarily tolerating disappointment well and maybe it's because we're up so much and we're trading at such high valuations. So this could be an interesting kind of squirrely earnings season simply because people are expecting low volatility to continue. Maybe that is a surprise. All right. Well, let's bring in Greg Brantz of Brantz Global Capital Advisors and Adrian Yamaki of Strategic Wealth Capital. It's good to have both of you with us. Greg's a CNBC contributor. Greg, I'm going to begin with you. You know, maybe it's hard to get all bulled up here after being reasonably cautious, if not negative, for a long time.

But where's your psyche on this market as we have the Dow again, as I said, new intraday high there. We've had extended record gains for both the NASDAQ and the S&P. Well, you absolutely can't make a near-term bearish argument here. And you know that I did that for quite some time early on to some success. But in the last six months, obviously, it's been a difficult road to hoe. So the reason you can't is that the three things that I hold down the three things just to simplify it that gave a bearish outlook some credence is one, we kept seeing that core growth in the 30 to 40 basis points range. Two, we kept seeing unemployment persistently around that 3.6, 2.7 range. And three, we failed to see the housing component exhibit the disinflation that is

typical after a tightening. Well, all three of those things have been reasonably abolished. And you just can't put any credes down. And the key is that they're occurring together, Scott. We've seen that core growth dip out to 20 basis points before only to come back into that band while a zero percent basis point increase for may followed by 10 basis points for june followed by unemployment actually concurrent with unemployment taking up each of the last three months to bring us to 4.1 which by the way was not a surprise to the fed it's where they actually told us that they need to get that two percent inflation. Combined with the housing component showing 20 basis points increase, the lowest we've seen in three years,

should give everyone great confidence that we're experiencing another step down, which is why the Fed can now talk about the other side. It's hard to make an argument about the risk to unemployment. What you're trying to do is increase unemployment to get the inflation rate down. So in summary, I think this is absolutely a rate cut rally. Everything you said points to that, whether it be the banks coming in disappointing, which is a concern about net interest margin, whether it be the Russell 2000 uptick, which is obviously a relief in that financial duress is more acutely felt there in a higher rate environment. That abates the prospect of rate cuts or whether it's.

Why don't you get on the train then? I mean, if it's a rate cut rally, as you say it is, and we haven't even had a rate cut yet. Let's forecast what's to come here. It's it's some would say it's hard to look at this market and be bearish. I mean, bears keep getting proven wrong. Agreed. I'm making the argument that you can't be bearish here, myself included. So I changed my position to neutral.

It's hard to be bullish for me until I see that the change in leadership or the trend towards a change in leadership is lasting. For now I'm typifying this as a rate cut rally and as you as you rightly imply the work to do here is the value of the cycle is coming. The question

is when is it coming and the question is what will be the depth and duration of that slowdown? And there's still variables that we have to account for that we just can't get. Will they cut in September? Obviously, the Fed will have a role to play with that depth and duration looks like. Adrian, how do you see things? Oh, well, one thing we have to think about is that different sectors react very differently to rate cuts. So regardless of whether we're in a bull market, a bear market, I look a little bit

longer term than the next couple of months or quarters. So if we think about what sectors are undervalued and if rates go down in September, what will benefit? Financial services is a sector that does very well when rates are cut. It will increase personal spending, corporate spending. I mean, eminent activity. Jamie Dimon has said, you know, when we see rates going down, it's going to increase the M&A activity. I mean, look at net interest income and how much banks have to pay people to attract their cash. And when we saw earnings last week on Chase Wells Fargo, I mean, that's expensive for the banks. And if we go downstream and look at regional banks, high interest rates are very, very expensive for them. And a cut is a real tailwind to the financial sector. Are you a believer in the broadening or not? Absolutely, 100 percent.

When we are, I think one thing people might be missing, and it's very understandable, diversification right now is not what are the 493 stocks in the S&P. That's a big piece of it. But we're looking even broader. Absolutely. I like what you said about small caps. I like what Cameron was saying about valuations. There's so much other opportunity in different caps. But also, we've been bullish on international for such a long time. I mean, I'm even surprised that, I mean, the Acqui P&E is about 13. The S&P is 21.

What you pay for stocks matters. And earnings abroad, their money is just as green as earnings of companies in the S&P, but you will pay a lot less for them. And I think that's something to really focus on. And it's been a long time. And that's the rotation we're focused on, is broadening portfolios, diversification, and looking internationally. What do you think about that? Yeah, I think that in order to have a sustained international EM rally, you have to see a weaker dollar. And the dollar has weakened on this idea that the Fed can start cutting interest rates. So if this is a

deeper rate cutting cycle that weakens the dollar, that gives some life to international and EM, which have done really well over the last couple of days, valuation is not a catalyst. And in many ways, these areas have been true value traps. They've been underperforming the S&P 500 for 14 years. So we have to see a weaker dollar. We have to see an inflection in the earnings in order for this to be more than just a flash in the pan. So, Greg, I'm going to come back to you because, look, you've moved from, you know, underweight to neutral or bearish to neutral or what have you. But you like Microsoft and you like NVIDIA and you like Palantir and Alphabet and Palo Alto and CrowdStrike. And you like Lilly and you like Novo. And then you like shipping names like Maersk and Zim Integrated.

And then you like miners and metals and things that are directly tied to the global economy. I mean, your positioning screams bullish, but your tone says neutral. I don't get it. Well, let's put these things in different buckets. As you know, even through my most bearish phase, where we chose to have our exposure, because we did have exposure, we chose to have our exposure where the things tethered to generational secular tailwinds. I think folks are probably tired of hearing me say that, that phrase, but you know, the thinking was, was that even the harshest of environments,

things tethered to the generational secular tailwinds of AI and cloud, we're going to put up 20% plus earnings growth either way. And in doing so in an environment where everything else is putting up single digits was going to lead to very narrow leadership, which is basically what we've seen play out thus far. So that's a separate bucket. As we become more neutral and as we've expanded and continue to expand our exposure, we're looking for things that are in a structural supply and demand imbalance. And so when you look at some of those miners, what we're looking at is the green inflation trade. We're looking at the core metals and minerals that are required for transition to EVs or transition to clean energy.

And when you look at where their valuations are and how they performed over the past year, we think that's an opportunity. In terms of shipping, same thing. Supply, demand, structural imbalance are largely caused by turmoil in the Red Sea. Nonetheless, the shipping rates of a 40-foot container from Asia to Europe have gone up five times since this time last year. And so I think you're going to see a very strong acceleration in earnings for these companies through the second and third quarter as those increased rates translate onto the balance sheet. Adrian, I'm going to end it with you. I mean, I mentioned this earlier that real estate is the week's big winner in terms of a sector. It's up four and a half percent. I mean, you know, real rates are

still high. I know you like this space, but it's not out of the danger zone. So I look at it again a little bit longer term. So a lot of us are looking to November. How is fiscal policy going to change if it's Trump versus Biden or somebody else. There was a really good piece yesterday in the Wall Street Journal about a number of economists saying if Trump is elected, inflation may be even higher than under Biden. Maybe his fiscal policy is looser, but he said he's going to crack down on illegal immigration. He's going to put tariffs in place. All of these things are inflationary. Less competition means higher costs.

And if we look at what are the asset classes that can buffer against inflation, real estate, and real estate's not just office space or homes. I mean, it's labs, it's gas stations, it's hospitals, it's schools. I mean, it's so broad. It's a very broad asset class. And it is a good hedge against inflation. And I think that's something, again, in broadening diversification, looking further out than just what's going to happen this year, next year. But what are the trends that that is going to put in place? And I think that's important to consider. Now, you make good points. I mean, here we are in July. We know we're only four months away from from the election.

Are you starting to think about positioning around November? If it is inflationary, then I don't think anybody is positioned for that, meaning that the bond market, the Fed, isn't expecting a reacceleration inflation in 2025. So we should keep that on our bingo card, potentially as a source of market volatility. All right, guys, we're going to leave it there. Everybody have a great weekend. Greg, we'll see you soon. Adrienne, you as well. And Cameron, of course, back here post-9 sometime soon.

Let's send it to Kate Rooney now for a look at the biggest names moving into the close. What do you see, Kate? Hey, Scott. Yeah, let's start with Deckers. Outdoor adding about 2% today after the company's board approved a 6-for-1 stock split. That move is still going to need a green light from shareholders,

but the footwear and apparel maker has been on a tear lately. Stocks up about 35% year to date. And then you've got a couple of pharmaceutical stocks losing ground in today's session. That was after their price targets were slashed. Align is now the second worst performer in the S&P, dropping about 5% after Morgan Stanley took its target down to 328. That is still above where Align's been trading today. And then you've got Biogen sliding as well after Piper Sandler took its target down to 313 from 335.

Scott, back to you. All right, Kate, thank you. That's Kate Rooney. We're just getting started here. Up next, big tech's bounce back. The sector rebounding from one of the worst days of the year. NASDAQ now pacing for its sixth week of gains. Baker Avenue's King Lip, he's going to be with us to break down his strategy.

The names, he says, still have the most upside. We're live with the New York Stock Exchange. You're watching Closing stocks rebounding today. They're leading the market comeback, though still off record high set earlier in the week. Here to share whether the run can continue and how to play the next leg is King Lip of Baker Avenue Wealth Management. Welcome back. It's good to see you, man. Hi, Scott. Happy Friday. Yeah, you as well. Take me into your psyche here over the last 24 hours.

Yesterday was was something. And then here we are with a bounce back. Yeah. You know, we're still overweight tech. One day doesn't make a trend. But I do think that the pullback was mainly due to profit-taking. Shares of tech names have run quite a bit, as we know. The catalyst was lower rates. We had good CPI report. I think investors took an opportunity

to rebalance into names that perhaps can benefit more from lower interest rates. So we saw small caps rally. In fact, we're rallying again today, real estate dividend payers. That being said, we still think there's a lot more leg in the tech sector. You know, we have earnings announcements coming out later this month. We have high expectations for that and also positive seasonality. In the last 10 years, July has been one of the strongest months for the tech sector. So we think there's more room to run. But are we are we starting a legitimate trend shift where I'm not suggesting in any way that tech can't continue to do well. It's just not going to have the kind of outperformance that it has so thoroughly enjoyed. And maybe that's

where we need to be thinking. Yeah, I think it would be tough for us to expect years like a name like Nvidia, which investors have enjoyed triple digit returns for the last two years, if you would. We can't expect that every single year. So we do expect perhaps the tech sector to fall more in line with historical returns. That being said, I do see room for other sectors to perform. A lot of these sectors are coming out of their earnings bear markets, if you would, in the second half of the year. That should be a catalyst where year-over-year earnings announcements are going to be stronger. And I think investors will start to pay attention. But what if I need to be more concerned about the economy than I've been? I mean, it has been strong, but it's obviously

weakening. The consumer feels like it's weakening. The unemployment rate's going up. It's not like we're fully out of the woods yet. Yeah, you know, we take a little different view on that. We think that the economy is going into what we call a Goldilocks scenario where we have steady growth. It's not as robust as we saw at the beginning of the year or even last year. But call it a Goldilocks scenario where you have steady growth. It's not so hot that it causes inflation. And you've coupled that with strong earnings growth, which we're expecting this year and in 2025. We still think there's a tailwind for stocks.

But, I mean, where does the strong earnings growth come from? A lot of it is just great management by companies. The underlying fundamentals of the economy, despite the slowing, is still strong. I think there's still cash in the sidelines to funnel growth into other areas of the economy. And if we have the benefit of slightly lower interest rates, I think that's also going to be a tailwind for the economy as a whole. Well, what's your take on what's going on with the banks today, like J.P. Morgan down one and a quarter percent? You own that stock. We do.

I would say J.P. Morgan out of the whole of bank stocks is the best run bank on Wall Street. I think the earnings quarter was OK. It was a mixed quarter, if you would say. I think the core results were quite strong. The capital markets business, the fee revenue business was quite strong, even excluding the visa gain. I think where the concern perhaps was with the higher loan loss provisions, higher expenses. J.P. Morgan's had a wonderful run this year. So near term, probably not more upside, not a lot more upside from here. But our long-term prospects remain very optimistic for J.P. Morgan. What about the banking sector in general?

Combined with what lower rates would do, and if there are some concerns about the strength of the economy, maybe that's why these stocks aren't necessarily working on a day where their earnings are pretty good. You know, I think it's a combination of two things. One is banks generally do better with lower interest rates, and we need to see quite a bit of lower interest rates for banks to work. There is still some lingering concerns of the commercial real estate market and how that's going to affect earnings on a going forward basis. We personally don't have too much concern about that in light of the recent stress tests that show a lot of these banks, despite some very terrible scenarios, can come through quite well. I think it's just it's not a favorite trade among investors now. But I do think as rates come down, they start to look a lot better.

Do you feel better about the chip space after Taiwan Semi this week? And, you know, the space in general had pulled back, you know, obviously in tandem with the NVIDIA correction, but it wasn't the only one to correct. And the SOX this week has been at new highs. Is the trouble over there? You know, the semiconductor industry continues to be a very hot space. Of course, given the AI trade, Taiwan Semi just eclipsed, you know, $1 trillion this week. And I think the expectations going into the earnings

were high and the company was able to deliver. I think there's a lot of levers that the company can continue to do well. And it bodes well for downstream. I mean, NVIDIA is a big customer, as is Apple. So it bodes well for their earnings down the line. All right. King, we'll see you soon earnings down the line. All right, King, we'll see you soon. Enjoy the weekend. That's King Lip, Baker Avenue. Coming up, the rotation situation, small caps, real estate, utilities, materials taking the lead this week. Now,

one top money manager is calling for more opportunity in this year's market laggards. Rockefeller's Jimmy Chang makes that case after the break. It's a big day for stocks today with the Dow and the S&P hitting all time highs amid this market broadening. My next guest says stocks could soon start to lose steam and finding some opportunity among this year's laggards. Joining me now is Jimmy Chang. He's the Rockefeller family office CIO. It's good to see you, Jimmy. How are you? Good. How are you, Scott? Good, thanks. Losing steam. I mean, some people think there's still a lot to go here.

Well, I don't mean losing steam in the sense that there is a bear market around the corner. But given a strong run into the earnings season with expectations fairly high and looking at a recent deceleration in the economic surprise indices around the world, there are higher odds of a potential downward guidance revision going forward. So potentially, we could run into a sideways market. I can see why you would say that. But on the other side of it, of course, is the expectation of rate cuts. So how do I view everything that you just said, but knowing that the Fed's going to cut rates and traditionally we say don't fight the Fed. Why should we fight it this time? Yes, indeed. Historically, when the Fed starts easing, initially, equities do well,

because there's expectation. On one hand, you argue for soft landing. On the other hand, you don't want to fight against the Fed. So equities indeed perform well. But I'm trying to take a longer-term view beyond the election. It's always difficult to call where the market would be in the next few weeks. But seasonally, once you get into September, early October timeframe, historically, that's a more choppy period. Plus, given the political uncertainty and also what happens with the stimulus after the election. I will argue that the years 2020 through 2024 have been supported by unusually strong, what I call a sugar high, in both monetary and fiscal stimulus, especially on the liquidity front. And a lot of those will dry up probably by year end. So that sets up for a more challenging 2025. So while we're not

turning bearish right now, I do want to do some rebalancing where appropriate. Okay. To where? I would say if you look broadly, about 50% of the index is tied to tech, communication services, and a couple of max seven stocks in discretionary. That to me is too high for comfort on a long-term basis. At the same time, you look at sectors such as energy, less than 4% of the weight. Now, we're all excited about AI. You cannot run AI, you cannot run these data centers without energy.

I do think natural gas is well positioned. So there are interesting opportunities in the rest of the market where valuations are still reasonable. We look at index level, it is elevated. So you then are a deep believer in the broadening story over the next couple of years i feel like it sounds yeah on a multi-year basis you have to believe in the broadening out or you're really bearish right because concentration means you're hiding in some of the secular growth names and you're implying that the rest of the market will not do well because of economic challenges so fact, when you buy into the broadening thesis on a multi-year basis, that's actually an optimistic view. I mean, or you just want to maximize your gains and where the highest growth areas of the market

are. It's not necessarily an indictment of other parts, but if you think that the best growth is going to come from the NVIDIAs of the world, assuming that their earnings can continue to deliver, wouldn't you just stay there? Yeah, but it's not a one variable market, right? So you're talking about growth. At the same time, we're looking at expectations and valuations. So you can have very strong growth. But if it underperforms the expectations, then the valuations could potentially contract. These stocks will

remain great companies, but valuations could contract. At the same time, in the rest of the market, where expectations may be low, and that's reflected in a more reasonable valuation range, that presents the opportunity should we get a broadening out economic growth around the world in the coming years. Do you think the overall valuation of the market now is too expensive or is the whole thing skewed? Because you said it right at the at the index level, we have record highs under the surface. We don't. There are a lot of stocks that haven't performed as well. The top heavy nature of the market has skewed the overall valuation read of the entire picture. Yeah, if you look at it historically and also just mathematically, we have a 10-year yield

at about 4 plus percent. The PE, the reasonable range for PE is probably around 16 to 18 times. Currently, on index level, we're at 23 times. So that's way above the fair value range. Again, that's not a timing indicator, but in the long run, that's a warning sign. At the same time, the median PE for the market is still around 17 times. So that's where the values are. There are a lot of interesting names. The dilemma for active managers is that if you have a diversified portfolio, if you start to shift into these laggards, you run the risk of underperforming in the near term. And indeed, only about a quarter

of the active funds are outperforming year to date. But I actually find it more interesting because they're doing their job by being diversified. Yeah, but they're also worried about the two words that no, you know, money manager ever wants to think about, job security. You just nailed it. It is a tough market. It is a humbling business, isn't it? I have the luxury of being as allocated rather than the fund manager as I was once upon a time. We'll talk to you soon. Have a good weekend, Jimmy. It's good to see you. Thank you, Scott. All right, it's Jimmy Chang. Up next, we're tracking the biggest movers as we head into the close. Kate Rooney standing by once again with that. Tell us what you see now, Kate.

Hey there, Scott. So a data breach hitting shares of one major telecom company and its data partner, and then sunny skies for solar stocks. We're going to bring you the winners in that slice of the energy sector coming up on Closing Bell right after the break. We're 15 from the bell. Let's get back to Kate Rooney now for a look at the key stocks to watch. Kate. Hey, Scott. So AT&T is the first one.

It says hackers stole six months' worth of calls and text. This was in a cyber attack that the company admits includes nearly all of its customers. They say the data was illegally downloaded from Snowflake. The FCC is investigating the incident and shares of both companies are lower on that news. And then shares of Array Technologies up more than 11 percent today after Citi upgraded the solar energy and tech company to buy. That's from Neutral citing the potential for the stock to bounce back after losing about 30% so far this year. It is a strong day overall for solar stocks. Sunrun, for example, bouncing 8%.

And then you've got Enphase Energy also adding 7%. Scott, back over to you. All right, Kate. Appreciate it. That's Kate Rooney. Still ahead, a bumpy start for the banks. Wells Fargo, Citi, J.P. Morgan all under pressure after reporting their results this morning. We're going to dig into the details behind the moves. Get you set up for the big names reporting next week as well.

We're back on the bell right after this. We're now in the closing bell market zone. CNBC senior markets commentator Mike Santoli is here to break down these crucial moments of the trading day. Leslie Picker with the big bank results, plus the ones to watch for next week. And Sima Modi on the latest wave of NVIDIA price target hikes. Michael, I'll begin with you. Fading a little bit into the finish here, but sum up this week as you see it. Just a lot to ask, I guess, to do a lot of buying at the highs at the end of the week.

Market's not making any missteps here in terms of big picture. I mean, there's 300 new 52-week highs in the New York Stock Exchange today against eight new lows. So it is pretty much, you know, let's empty the tank. Everybody get involved. So I think this broadening trade, the greater participation is absolutely welcome. What it didn't do is change the fact that going into it, the S&P 500 was kind of overbought. You would have thought it was going to cool off a little bit. Second half of July, maybe you have fewer seasonal tailwinds. We're going to get earning season, a lot of two-way action most likely when we do get it. So again, nothing bad. It's more about

how many times have you priced in the soft landing in the first rate cut? Maybe not enough. Maybe we've done it. Okay. So you got two sides to this. It's like one part of the market looked really overbought. The other part of the market looked really oversold. This is why I've been saying, if you want to say the market needs to correct, you have to say the index needs to correct because industrials and consumer cyclicals and of course, small caps have done nothing or worse for three or four months. And so it doesn't seem like there's a lot of air under those groups, which maybe means we can turn around and chop around or who knows, we want to keep melting up. That can happen, too, if the chase is on. I think it's just too early to say now the character of the market has totally changed and we can write a different script. Yeah. Jury's still

out. We need more evidence of that. Leslie Picker, talk to us about the banks. Yeah, so some evidence here, Scott, at least in terms of the story that we saw with the three reporters today. You got J.P. Morgan, Citigroup and Wells Fargo is the extent to which non-interest income is offsetting their more muted net interest income. Now, non-interest income that encompasses line items like fees as opposed to net interest income, which is largely driven from loan making. This was the case in point at Wells Fargo, which was able to beat earnings estimates even as it missed on net interest income because of a jump in investment banking, trading activities, and brokerage fees. For J.P. Morgan, investment banking fees jumped 50% to $2.4 billion. That was something, though, that CFO Jeremy Barnum said may

be attributable to some pull-forward refinancings in debt capital markets that took place in the first half of the year. And its Citi net interest income was down 3% from last year, while its markets had surprised growth in the quarter to be the biggest revenue generator among Citi's five business lines. Now, look at another snapshot, of course, of non-interest income when Goldman reports Monday and again on Tuesday with Morgan Stanley and Bank of America. Scott. All right.

We'll look for your coverage then. Leslie, thank you. Leslie Picker, Nassima Modi. All right. So, NVIDIA gets some price target hikes. Not much new on that end, obviously, but it's enough to get the stock rebounding. It is, Scott.

The stock is moving here right around $130 a share following two more price target raises, this time from Benchmark and Oppenheimer. Oppenheimer is pointing to second-half tailwinds, including China's purchase of NVIDIA's older chips, the H100. Benchmark team's channel checks suggest demand is still outstripping supply despite new players. Speaking of new players in competition, SoftBank purchasing AI startup GraphCore billed as a competitor to NVIDIA.

However, the Financial Times reporting that scale has been an issue for this startup. And that's really been the challenge for any company really trying to rival NVIDIA right now. Speaking of those price target raises, we've seen 10 so far in the month of July. And next week, we will get a good read on the broader semiconductor space, two of NVIDIA's suppliers, ASML, that specializes in lithography machines, and full earnings from chipmaker Taiwan Semi.

Those two names out next week. So big week ahead, Scott. Yep, Seema, thank you so much for that. Seema Modi. All right, Mike, two minutes to go here. We're going to fight it out for 40K on the Dow to the close. Right. We were nicely above it last time. Right. We sort of went above it in May. I'm not sure we actually held it into the close. So, yeah, I mean, obviously, we'll see if this is anything more than just a little bit of an exhausted buyers market at this point right now. I think that one of the things I'm seeing in the confusing

signals is it just doesn't feel like the beginning of something. I mean, when we talk about, you know, OK, now we have a clear path to see the Fed's first rate cut. And, you know, now we're getting greater confidence that the soft landing equation is in place. Sure, maybe that's an excuse to go rescue some of those stocks that have been left behind. But on a market wide basis, it doesn't feel as if we need to burn off a lot of skepticism that's already built up along the way here. And so these signals that we got yesterday, massive reversals to the upside, you know, the kind of momentum move in small versus large, for example, that you only ever see near major market lows when the market's been super volatile and weak for a long

time. So that's why I feel like it's, you know, you have to respect it. And you say it's probably not a one day wonder or a fluke, but it's probably also not going to be some kind of seamless transition to a market where somehow we stay levitated on the index level, but all the rest of the stocks catch up. The Russell's the most durable of the two days. I mean, it's keeping a gain better than 1%. And, of course, yesterday was its best day of the year. That was because it was the most stretched to the down. You have to keep in mind, I mean, the all-time highs in the Russell are like 2,400.

We're at 2,150 right now. It chopped around for a long period of time above 2,200. So if we get there, my guess is it's going to have a little bit of friction to get through those levels. Okay. Good weekend to you. You as well. Thanks, Anthony. A little more than meets the eye, obviously, as you look at the majors here.

Sure. Good day, obviously. But not as strong as it was for most of this Friday. Nonetheless, have a great weekend, everybody. I'll see you next time.