Closing Bell - Closing Bell: The Make-or-Break Week Ahead 1/26/24

Episode Date: January 26, 2024

What are stocks likely to do in the weeks ahead? Especially as we await a critical five days ahead. Professor Jeremy Siegel of the Wharton School maps out his forecast. Plus, Wedbush’s Dan Ives is changing his tune on Tesla. Earlier this week, he joined Scott Wapner at Post Nine and doubled down on his bull case for the EV maker. Now he’s saying he was “dead wrong.” He breaks down his updated take. And, Meta hit a fresh record today. Julia Boorstin explains what’s behind that major move. 

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. On this Friday, this make or break hour begins with a countdown to that critical week ahead. The Fed, the mega caps, and maybe just the fate of this rally. We will ask the Wharton School's Jeremy Siegel what is likely to happen and where your money is likely to go from here. He joins us in just a moment. We can't wait for that. In the meantime, your scorecard with 60 minutes to go in regulation looks like that. Well, the S&P, it's close to 4,900 yet again, and it's trying to close above that level. We will see over this final stretch if it can get there. NASDAQ, it's somewhat muted today ahead of those key tech earnings next week.

You see it just negative by a smidge. Intel, no smidge. It's sliding sharply after its disappointing guidance today. One of the worst stocks in the market today, down 12 percent. As far as rates go, take a look. The 10-year after that better than expected read on inflation today and a pretty nice real-time look at the economy this quarter as well. We're at 416. It takes us right to our talk of the tape. What stocks are likely to do in the weeks ahead and how the next five days will be critical to that outcome. Let's ask Wharton Professor of Finance, Jeremy Siegel.

You see him there as he joins us now. Professor, welcome back. Happy to be here, Scott. I'm so happy to have you with us today because we do have so much important lying ahead. The state of the market today to you is what? I'm still positive on the market. We are selling for 20 times earnings, although, I mean, if you're a growth stock, you're selling at 25 to 30. If you're a value stock, you're selling at 15, 14.

So there is a difference. Overall, 20 is OK. It's not cheap. And I still think we can get 8 to 10 percent for the year. The economy is still very strong i think we're actually going to beat 242 earnings on the s p 500 um and uh as a result i think stocks could advance i mean earnings haven't been really good though to start things off are are you kind of disappointed with the way we've started? Because, I mean, let's be honest, they just have not been good. Well, I mean, there's

been a few headline ones like Intel, particularly Tesla. I mean, that does describe Tesla, Intel. I mean, I could go on. OK, I thought I had read earlier that 70% had beat, which is, I think, a little bit lower than the historical average, which is about 75, 78%. I mean, we have to see how everything falls out of this. think all the news about a soft landing and no recession keeps on getting stronger and stronger with every day of data that we get. So you said, I think a moment ago, you could get 8 to 10 percent this year. I thought the last time we spoke, you were thinking maybe 10 to 15. Have you muted those expectations because what we did towards the end of the year and now where the overall multiple has gone to? Well, I'm talking about from today, we have gone up a few percent. So that that does bring us down a little bit. And the fact that, you know, take a look at the multiple. I don't think the Fed is I mean, we're going to hear next week. I think they're going to be

really reluctant to say they're going to be lowering rates soon because the economy is so strong they can afford to stay higher for longer. That might disappoint the street somewhat, although I've maintained that I much rather have a stronger economy with better earnings than the Fed rapidly lowering rates because they see a recession. So I don't think a bull market really depends on them lowering rates. It's quickly. But nonetheless, I think that, you know, I think the rates are going to be staying higher for longer. Maybe that will dampen stocks a bit. But I still think, I mean, look at even eight to 10 percent. That's still a very, very good return. Much better than you're going to get on bonds.

Do you think that the broadening out of the market happens more substantially, and that's how you get the 8% to 10%, 12%, whatever percent? Or is it still going to be a go-big-and-go-home market? It's so hard to say. I mean, you know, Tesla is the first of the Mag 7 to fall, if you want to call it that. I think you need more earnings disappointments on those growth stocks to change the momentum. But let's not put that out of consideration. I think there's a story about how fast things can change. I mean, we were just hearing about Florida passing laws against social media. I mean, what happens? I mean, there's a lot of anti-tech attitudes. What happens if the U.S.

Congress decides to move in some way against tech? I mean, what happens to Meta? What happens to all these companies that depend on that? I mean, there's always threats out there. It isn't always smooth sailing. And as long as there's always threats out there. It isn't always, you know, smooth sailing. And as long as there's those threats out there, I would move to those lower PE stocks. They don't need the growth in order to get the great returns that I think are inherent in their company. You don't think that if there are, at the words that you just said, you know, these more earnings disappointments for growth stocks. Let's say that happens. OK, do you really think that those stocks can come down, have some kind of corrective phase, and yet the market can still go up because money is going to

rotate into those other areas? Yeah, I think so. I mean, look at the last two years. I mean, last year we saw an incredible increase in growth stocks at the expense of the rest of the market. And the year before, we saw exactly the opposite. We saw a collapse of growth stocks and the rest of the market actually held up very well. So there's a lot of times when you see one segment of the market really move forward without the other segment moving forward. So I can see growth stocks having perhaps a zero year, while value stocks could have that 10, 15 percent. Very possible.

A zero year. I mean, maybe the course of interest rates plays a role here, too, in the way that growth stocks trade. Now, you said earlier that you think the Fed can afford to stay higher for longer, but are you concerned at all that they stay too high for too long and snatch the defeat from the jaws of victory when maybe the data now says they actually should cut? Well, I think the inflation data is very good.

The sensitive inflation data is also very, very good. But the economy is strong. Listen, I don't think they're really going to be pushing strongly to lower rates until we see the real data weaken. And we have not seen the real data weaken. Now, you know, certainly it could happen. But I think you would have to see some rise in the unemployment report, rise in those jobless claims, some soft, real economic indicators that will persuade them to start moving the rate down. I think at the present time, the sticky parts of inflation are such that they can say, and I think that Jay Powell is going to be very reluctant to say anything about a March decrease or even beyond that.

He's going to say that, you know, the data dictates. I think the only thing that might be interesting next week is actually his discussion of whether he's going to end QT or not, or whether there's any discussion on that. But I think the rate unchanged, of course, next week and with no commitment to lower rates in the future, not with the strength of the economy that we see. Others are saying, you know, there's no reluctance at all. They're arguing that they should cut. On that note, let me bring in our senior economics correspondent, Steve Leisman, to the conversation, because you got my attention earlier, Steve, when you posted this thing from Capital Economics,

essentially suggesting that this immaculate disinflation story is here and that, quote, it's time for Fed officials to take the win and start dialing back the level of policy restrictiveness soon. They're arguing to cut and maybe they're arguing to cut as early as March. Yeah, I don't think that's going to happen. I understand what Capital is saying, and I agree with them generally that you do need to start taking some up. But there's a difference, Scott, and I think Professor Siegel laid it out, between what might be called tweaking the rate and cutting rates. And I think they're going to be tweaking. That'll be a few cuts down. And I think the question is, and this is, again, sort of same line of thinking as the professor,

which is, if the economy's not broke, how much fixing does the Fed actually have to do? The numbers we got yesterday in the GDP report were quite striking. We've been defying a lot of the textbooks with this strong growth and these declining inflation. And I'll just tell you, Scott, that the Atlanta Fed just printed the first quarter. Now, just be really wary of this number because there's not much to go with it. But it's a 3% first quarter growth. Now, that's double what our CNBC rapid update is. But still, it tells you what the trend has been. And the trend has been for stronger growth. So it may mean, Scott, and the Fed may take a lesson from these numbers and decide, it is not that far off the neutral rate that it seeks. And so it may decide, hey, we don't

need to cut down back to two and a half, which is where the neutral rate is. We may have to do a few on the edges. I still maintain, Scott, that three quarter point cuts is probably the best bet this year. Every other meeting where the Fed goes carefully, whether that begins in May, perhaps in June, so the Fed cuts on the meetings when they have projections. That's one strategy. I think March is too early, even though the numbers, Scott, are very good when it comes to inflation on three- and six-month annualized basis. I'll tell you what. I mean, you could build a case, Steve, that this is arguably the most perfect scenario for the Fed in that you have a robust economy. You have a robust stock market.

They can stay high for longer, restrictive in some measures, if you will, and avoid a Bernzian mistake, if you would, of the 70s. They don't have to hike again. They can stay where they are and feel good about it because the other data about the economy is letting them do it. I think that's right. I do think they need to take a little bit off the top. Simple math is that they're 300 points tight, which is you take their long run rate and do it, subtract the 538, it's a little under 300 points of restriction on the economy. Let's say their two and a half neutral rate is wrong,

and it's maybe three or three and a half. They're still tight I think there's still some room to let things run the question that the Fed has to ask itself is whether something And I'd love the professor's thought on this whether something more profound is happening beneath the economy Productivity has come back Scott to the point where we are back on trend There was talk about the idea that maybe we were losing the global supply chain. I'm not really quite sure that's true. And I'll give you an example, which is pretty a little offbeat, which is you look at what's happening in the Red

Sea, and we have not seen much in the way of pricing pressure. It may be that the global supply chain still exists, which is to suggest that some of the preconditions for the below 2% inflation that we had before the pandemic may still be in place, despite people believing that they're going away. I do have a question about corporate profitability in an environment of lowering prices. I think companies had it easier when prices were rising. I think things get a little tougher for companies, but there could be something profound happening beneath the surface. And that higher productivity may mean the Fed has room to reduce rates without creating inflation. Professor? Yeah, I mean, first of all, I agree with Steve. I think the neutral rate is three and a half percent. I know they had two and a half percent for years, but I think that that is so I think we're 2% high and not 3% high.

We might even be a little bit higher than that. And so I think that that's important. I think one of the reasons that the Fed has gotten away with this so-called immaculate disinflation is honestly because inflationary expectations never really rose during the last two years. And I think that that has enabled the Fed to slow it down without having to crush it to break expectations. If you take a look at those inflationary expectations, figures, yes, they bopped up a bit, but they're all the way back down. And I think that's all the difference between this business cycle and what we saw in the 1970s, where we had 10% inflationary expectations, took a crush to get that economy down. It's going to be exciting to

look forward to next week. I can't wait to see you, Steve, in the room. Wrap it up real quick, Steve, and then I want to bring in somebody else. Go ahead. I see you want to say something. I was just going to tell the professor I was talking this morning with Jeffrey Lacker about the 70s and trying to understand the differences. And Jeff Lacker talked about what he called a catastrophic loss of credibility by the Federal Reserve in the 1970s. That is not the case. The Fed stopped at 5%, way too high in the 1970s. That is not the case. The Fed stopped at 5 percent, way too high

in the 70s. The Fed's down near 2 percent now, and it's not going to be cutting very, very quickly. So I think there are big differences in the concern about this return of inflation. I mean, it doesn't, it won't, it won't not happen if the Fed doesn't hold firm on this, but it's not going to come back automatically. This is not the 1970s for a whole lot of reasons. Yeah, not going to come back automatically just because the economy remains robust is the key point where you're alluding to. Steve, we'll see you next week. I look forward to that. That's Steve Leisman. Let's bring in Shanice Okosha now of Enby Private Wealth into the conversation. So Shan, it's good to have you with us. You heard the professor. He's still bullish.

Eight to 10 percent, maybe you could still do. We've come a long way in a reasonably short period of time. But what's your own view here? Well, I think it's interesting because the professor talked a lot about this rotation, if you will, to the laggards that we've been talking about really since the fourth quarter of last year. You know, I'm a bit less optimistic, though, if we're talking about growth stocks returning zero this year, just from a benchmark perspective, that's not going to look and feel great for investors who happen to be overweighted to the S&P 500. But under the surface, I mean, you think about what's happened so far this year, Scott, we've seen a little bit of a

tick up in yield since the end of the year. We've seen some, I would say, softness or weakness in some of the interest rate sensitive sectors. But those sectors are the ones that could potentially benefit from a more robust economic environment. Of course, I agree with Steve's concern about top line. There's been a lot. It's been very easy to grow top line over the last couple of years given inflation. However, that bottom line opportunity for a recapture is much more present in our view in some of these sectors that haven't participated. So to the professor's point, do you see a rotation if we see some tech misses next week? The initial reaction is likely to be very negative to that. And then I think there is probably a taking a step back, looking elsewhere within the universe to see if there's perhaps opportunities where that threat of

multiple compression isn't so large. Professor, do you think we're late cycle or not? Because I find it hard to believe that you could think we are and then still think that growth stocks could return zero and that these cyclical plays are going to carry us to the gains you think we could do if we're at the end of the road? Well, it's hard to talk about late cycle because we just hit new highs a couple weeks ago. So some people say this is the start of a new bull market. I would hate to think it's near the end, but I do want to point out, I mean, productivity has gone up and AI promises productivity to go up. And that doesn't mean just the growth stocks. AI is designed really to reduce costs to the smaller stocks that have lagged so far behind. One thing is important. You don't

need a lot of earnings growth for a 12, 13 PE stock to give you a great return. For a 30 PE stock, you have to keep on churning and not fail. You know what, Professor? I was having a conversation with somebody who even suggested that these GLP-1 drugs, these weight loss drugs, are going to continue to increase productivity and continue to increase employee retention. And that's all going to be a stimulus for the economy as well that maybe we're not considering enough. And reducing health care, which, of course, in the United States has the highest proportion of costs of the OECD country. So if we can reduce that, we can add productivity to so many other parts of the economy. Well, you increase corporate profits, too, in that in that sense, too, if they're if they're shelling out less for their for their overall health care costs.

Correct. Absolutely. Absolutely. Yeah. Shan, we've we've had these fits and starts with with some of these lagging areas of the market. Would you buy those today or would you feel better ahead of earnings? Let's not forget, mega cap earnings are going to be the talk of everything next week in terms of market positioning. Which is a better buy right now, laggards or the leaders? Yeah, I still think there's opportunities to add to the laggards because, Scott, if you look at, we do have a little bit of a push here in terms of health care and financials. We've seen better performance. They're certainly not performing from a sector perspective as strongly as technology and comm

services have thus far this year. But you are seeing a little bit of life, and maybe that's partially on GLP-1. But we saw that last year in those names. There's other parts of health care that are getting another look. And so I think if you're looking to position ahead of not necessarily whether it's March or May or whether it's three or four rate cuts, I think you're looking to position ahead of what could be the next part of this cycle. And whether we're late cycle or early cycle, Scott, we've had several rolling cycles. So I think in thinking about it just from a rates perspective, going into some of these interest rate sensitive areas, whether it's now or lagging in over the course of the next couple of weeks, most clients, most investors, most funds have exposure to the technology stocks that are reporting next week.

We could see some weakness that creates buying opportunities in those laggards. But likely those are not going to be the big movers next week. It's really going to be these big tech names. Professor, all laggards are not created equal, obviously. What's the best sector right now that you have your eye on? Well, you know, I don't actually do individual sectors. I like to do classes of stocks. And about value and growth stocks, let me say it's impossible to tell in the short run a week, a month, a quarter. But when you go through the data over the longer run, especially right now, we have a 40 to 50 percent premium on P.E. ratios of growth relative to value, relative to its historical mean. And that tells you you're set

up well for long term investing in exactly the stocks that we've been talking about, those that have those lower P.E. ratios. Professor, I always enjoy our conversations and the debate. I really do. You have a good weekend. We'll see you soon. That's Professor Jeremy Siegel of the Wharton School. Shan, thanks so much. Good weekend to you. We'll see you on the other side. Everyone talking today about Intel's big move. We mentioned it at the very top of the program. It's one of the worst stocks in the market today. It is not the only chip name taking it on the chin either. Christina Partsenevelos looking at that for us. Christina. Yeah, well, the theme for today, much like Intel, is underwhelming guidance, this time also with KLA. KLA is a chip equipment firm and they post a weak guidance, but they assured investors that a recovery was underway. Not everyone was convinced convinced though. That's why shares are down 6%. However, Goldman

Sachs was a little bit, which is why they're still maintaining a positive outlook. Switching gears, shares of chip data storage firm Western Digital are down a little bit better, down just under 3%. On concerns, why? Of weaker memory shipments, specifically with NAND. I was just reading a Mizuho note, and they said the bull thesis remains intact because the memory cycle recovery is underway. So they believe this is a buying opportunity specifically for Western Digital. And that's Mizuho. Back over to you, Scott. All right. Tough day for the chips. We'll see you in just a bit, Christina.

Thank you. We're just getting started. Up next, pumping the brakes on Tesla. Wedbush's Dan Ives is back. He's taken the EV maker off of his best ideas list. And that's just a few days after going to bat for the company and Elon Musk right here on this program. I still believe they continue to own the market along with BYD. But now you got to hold. You really have to hold serve

in terms of what's happened from a price perspective. Because this is all, in my opinion, the reason that we're long-term bullish. It's just the start of the next phase of the Tesla story. All right, Dan Ives joins us with the top 10 things Elon Musk must do to turn things around. We'll debate whether he can do it. We're live from the New York Stock Exchange. Closing bell. It's coming right back.

Welcome back. Shares of Tesla down 12% since reporting that big Q4 earnings missed the other day. Warning of a slowdown in vehicle volume growth this year as well. Joining me now at Post 9, Wedbush's analyst Dan Ives. He was with me the other day just ahead of that report. He doubled down on his just ahead of that report. He doubled down on his bullish case for that company. So he's back.

Welcome back. Great. Did you come back today to say I was wrong? I mean, look, we talked about we were dead wrong in terms of the call into the quarter. I don't must go and say almost 25 years doing it, probably a top five worst call that we've had going into a quarter. We thought, as we talked about, that they'd put the line in the sand for margins. Price cuts are mostly over. And instead, it was a circus show from a conference call. They left the door open for price cuts, didn't give guidance, must

talk about the 25% in terms of the ownership and the AI, and it went off the rails. And that's why we're here today, basically, you know, looking at it and thinking, okay, now what's the step forward? Put out that top 10 list, which we believe could be an inflection point to how we ultimately get higher. Are you reassessing, essentially, now everything about this company going forward? Look, we took it off top picks list because in the near term from a catalyst perspective, no smoke and mirror. I mean you don't have the catalyst where you could ultimately say this is going to outperform in the next 30 or 60 days. Now in terms of the long-term thesis, we remain firmly

bullish because it's my view and it goes back to similar Netflix and 11 with the streaming you go back to jobs in 07 with iPhone. We've been through so many different evolutions of companies. I think view this more as an evolution into the next phase with AI. And I view the mass market vehicle sub $30,000. So we don't throw that out. But no doubt in the near term, I mean, it's been a disaster this week. I look at your rate. You still haven't outperformed, right? So you haven't taken that.

How do you fundamentally have an outperform at $1.2 trillion market cap and an outperform now that it's down to $581 billion? It's almost been cut in half. But how do you still have an outperform on it? Yeah, it's a great question. It's my view that going forward, the margin story, it's going to trough. So I view like when they cut costs, you could actually start to get margin expansion 20%, 30%. Then all of a sudden $5 earnings becomes 8 to 10 when you look out in the next two years, especially on AI. I mean, our view here is this could be the best long-term AI play out there. And that's what we talk about. I think it's ultimately going to form some sort of holding structure from an AI perspective with Optimus, Dojo, and others that must take this. The best AI play out there? I mean, what are you talking about? In terms of automakers? You're talking in total. Again, Microsoft? So I'm saying longer term, from an

automotive and from where they could go with Dojo and Optimus, you could argue that longer term, this is going to turn to much more of a broader company. Now, as we've talked about, the AI revolution is led by the godfather of AI, Jensen, NVIDIA, Microsoft, everything we're seeing in tech. But for Tesla to mis-evaluate that this will be an AI story, this will be what I view as almost, I'll call it an air pocket, and it's more than an air pocket, but I think we are going to see at one point two and a half, three million vehicles per year. And at that point, Scott, we look back at this. This is more the opportunity, a very bad bump in the road, rather than the time that this is a structural, you know, what I'd say, change in the story. Okay. So you mentioned your top 10 list, and I'm obviously not going to go through all of them. However, you suggest that they should do a $10 billion

share buyback because they have roughly $30 billion of cash on hand. In the same token down the list, you say that they should do an AI acquisition spree and an aggressive one because they have $30 billion of cash to fund deals. I mean, which is it? Do you want them to buy things or you want to do a buyback? Because you mentioned the same $30 billion in both cases. And it's not mutually exclusive, especially if they're coming in and generates cash. But first and foremost, you got to do a buyback because you mentioned the same $30 billion in both cases. And it's not mutually exclusive, especially if they're coming in and generating cash. But first and foremost, you've got to do a buyback.

I mean, the number one thing that you need here is you have to do a buyback because what I view is sort of their view of where the stock is. The cash situation, which really stopped them from buybacks in the past, but no longer. And you've got to show confidence. As much as we could talk about the story, you got to, instead of talk, talk, you got to walk the walk. But from an M&A perspective, it goes back to the thesis that the reason you are so bullish on Tesla here like ourselves over the years, it's because EV, auto, that's just the first step to a much broader AI strategy that I believe they're going to implement. I think they're in a strong position to do that. What about this 25% stuff that he keeps talking about? You say he should get a new comp package

after you get the Delaware legal issues taken care of. What are you alluding to? So the new comp package, and that will come out in the proxy, and that's something to really make sure Musk is here as CEO. You think the board should give him 25% control? So I don't believe the board should give him 25%. What I believe is ultimately going to happen, it's not going to be dual class or something in the comp package. I view it as a holding structure where AI, in terms of

dojo optimists, a lot of the AI technology that they're developing, Musk has some ownership structure of that holding with incentives. And that, through incentives, will ultimately get him to 25%. But we do not believe that a dual class will be there or the comp package is going to get him to 25%. I appreciate you coming on. After the call you made the other day and after what happened, we referenced going in that the prior three times the day after was ugly for the stock, and we've seen a fourth. And, Scott, we're going to be here, obviously, all the good calls,

but when you make a mistake like here, you've got to own it. Well, I appreciate you owning that. I know our viewers do, too. Dan, thank you. Thank you. That's Dan Ives. Up next, five-star stock picks. Capital Wealth Planning's Kevin Simpson is back with us to break down his latest trades,

including the big tech name he is buying ahead of earnings. That and more after this quick break. Welcome back. Next week, marking the busiest of this earnings season, one-fifth of the S&P 500 set to report on their recent quarters. Let's bring in Capital Wealth Planning's Kevin Simpson with how he is positioning. Nice to see you again. Hey, Scott. Let's run through some stocks here. I see that you bought Apple again when it reached down to 183, 185. It's been back towards the march towards 200.

Yeah. For those of you following at home, what do you mean you bought back Apple? Because, Scott, you and I talk about it all the time, but we had the position called away around Thanksgiving, effectively at 187 and a half. The rest of the shares we sold at 192. And of course, as Murphy's Law would have it, it continued to move up to about 200. Now, I'm not crying over spilled milk. We bought Broadcom. I think it's up 30 percent since there. But Apple specifically, it backed off 10 percent, got into the low 180s over the last week and a half, two weeks, and we started reinitiating that position. I still think it's a little stretched. I think the multiple is a little bit higher. Maybe we're over our skis. We heard earnings coming out next week. Scott, I expect them to be tepid at best. But Apple's a unique

stock. And I when I had the opportunity to get back into it more cheaply, less expensively, we absolutely wanted to reinitiate that position. You sold out of SLB, but you're bullish on energy. Tell us. Yeah, we got stopped out of it. I mean, I I can't stand when that happens, but we follow a rules based strategy. And as much as we like energy, and we own Chevron, we own ConocoPhillips. Chevron, by the way, had pretty lousy earnings last quarter, so we're going to be watching that very closely. But on a pure price action play, SLB came down and we got stopped out. I think very, very highly of the company. But if the price action isn't there, we've got to recognize and acknowledge our rules-based process.

Still owning Chevron, still owning ConocoPhillips gives us good exposure to energy. And I'm not suggesting that we're wrong on that call. I just think maybe we were a little bit early. You bought sell to open calls on Microsoft and Cisco. Explain what that is. Well, we wrote the calls because we have earnings coming out. And volatility has been so low for the past few years, it's been difficult for us to write options. But when you get into earnings season, you can have some fun with it. away. Earnings should be good next week and you never know what's going to happen. But it allows us to supplement the dividend. And if for some reason

Microsoft disappoints, which I'm not expecting, it gives you a little bit of a buffer to the drawdown on the downside. And that's how we look at covered calls, not as a means of generating cash flow just for the sake of cash flow, Scott, but for helping to buffer our portfolio and essentially over time to smooth out the ride. Jeremy Siegel was with me earlier and suggested since we're on the topic of mega caps that you could get zero out of the mega caps this year and still have a really good market year of maybe eight to 10 percent more from here. You buy that from from from the professor's mouth to God's ears, because as a value manager and a dividend growth manager, I mean, it's incredibly challenging.

And I speak on this firsthand when your entire asset class or your entire category is basically catatonic in a closet for two years and you're watching a handful of tech stocks go up. So it would be great if he's right. Here's why I don't think he is, because if we see a Fed that's decreasing their interest rate policy, meaning if rates are going down, doesn't matter if it starts in March or it starts in September, if rates are coming down, I think it's constructive for stocks across the board. And I tend to think that people will pay up for growth so that it wouldn't be a growth versus value trade or a tech versus non-tech. But his point about P.E. ratios, I mean, that really, really resonates with me.

So maybe we don't need to see zero growth there. We can see modest growth. But the broadening and the breadth of the market that we started to see at the end of October happened to continue in November, December and here in January. He and I are totally on the same page with that moving forward for 2024. Well, you could tell that the 20 times multiple was making him a little nervous on the market. Does it the same for you? Yeah, but he also points out way better than I could that that 20 multiple on the market doesn't represent all the stocks. Like so many of the names in our portfolios are well below 16. So that breadth is really important. We haven't seen it in two years, but it started. It's those big names that have really expanded their multiples,

which is why we sold Apple. You start to get a little nervous up there. Now, we're not a big tech name manager. We can't own these non-dividend growth stocks. But when they get a little bit ahead of their skis, they don't need to fall off the cliff. They can just level out and the rest of the market can play catch up. And that's really what we've started to see. And I would expect that to continue for the rest of the year, because for the most part, like most stocks, maybe with the exception of Nvidia, most stocks are where they were at the end of 2021. So there's certainly upward trajectories for these companies that are profitable businesses.

They've just seen a little bit of multiple compression and when they catch a bid that's when you see the rest of the market move higher so so i agree with everything he said i just i'm not sure that we would see zero growth out of these mega caps they're they're they're just too productive a company we'll get some clues next week with earnings kev thanks i appreciate it kevin simpson we'll see you soon thanks up next we're tracking the biggest movers as we head into this Friday close. Christina Partsenevelos is standing by with that. Christina. A company stronger than people realize and management tougher than people think.

Those are words used to describe, yes, Coinbase. I'll explain this new bullish thesis next. We're just about 15 away from the closing bell. Back to Christina Partsenevelis now for the stock. She has her eye on Christina. Colgate stock, which is up about 2 percent, even though developed markets saw weak to flat volumes in the quarter. Revenue growth is actually propelled not by demand, but by higher prices. Interestingly, China was a talking point during Colgate's call this morning. The company noted, quote, continued softness in China, similar to what we heard from P&G earlier this week.

We can still see shares are up about 2%. Coinbase shares getting some love from Oppenheimer analysts with a new outperform rating. They argue that the company will benefit from the recent approval of 10-spot Bitcoin ETFs, and they also bet Coinbase has a pretty good chance of winning its lawsuit against the SEC. This is about operating as an unregistered exchange. But not everyone agrees. Earlier this week, JP Morgan actually downgraded the name. Nonetheless, Coinbase shares are up about 3%. Happy Friday. Yes, you as well. Thanks so much. We'll see you next week. Christina Partinella still to come. Meta hitting a fresh record. We'll tell you what's behind that big move

and what this red hot start to 2024 could mean for the rest of the FANG names ahead. Closing bell's coming right back. You saw through the third quarter. You know, we saw some good spending. In the holidays, we talked about good consumer spending all the way from, you know, Thanksgiving into Cyber Monday. Well, that was the CEO of American Express one week ago with me on Halftime Report.

Today, that stock, take a look at it, 7%. It's surging after reporting earnings this morning. We'll have more on what's behind that move when we take you inside the market zone. We'll do it next. For now, the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, Kate Rooney on American Express rallying after its earnings. And Julia Boorstin on the analysts getting even more bullish now on Meta ahead of its own earnings report next week.

Michael, I'll begin with you. We keep trying to make a run at this close. I know you know where I'm going. 4,900. You mentioned earlier about trying to do this at 4,800. Well, here we are again. And that was just the occasion for about three or four weeks of kind of sideways, churning around, digesting the previous rally. I don't know if somehow it's going to be a ceiling. If 4,900 is really going to be friction, if we're just hesitating here. But it is the way a market would trade if the bear cases were priced for

perfection. The bull cases, things look pretty perfect. You know, in other words, all the economic numbers coming through, you know, you couldn't really ask for that much more in terms of the direction of inflation was stronger than expected growth and real personal income and all this stuff staying ahead of what we thought it was going to be. So who knows? You know, tactically speaking, six or so days up in a row at a new record. It's a rare streak. When you get these persistent rallies, it means there's underlying strength, but it also means you have to just expect that you're going to hit an air pocket

for some reason or none at all. It is pretty incredible. If, you know, let's just say a year ago you would have said, OK, today you're going to get PCE with a two-handle and you're going to get GDP now with a three-handle. That's right. You'd be like, you are crazy. And oh, by the way, and you're going to be at forty nine hundred on the S&P. Right. And so you add it all up and it's five percent plus nominal GDP with three percent of it now coming from the good part, which is real growth. So, again, it may be too much to ask that it continues exactly this way. But going into the Fed next week, there's actually not as much, I think, anxiety or suspense around it,

even though, sure, we're going to trade around whether we get a potential rate cut in March or not. Yeah, absolutely. I think you nailed that. Kate Rooney, American Express. We heard from Stephen Squirey with me last Friday. Now they've delivered their earnings and the market obviously likes it. Yeah, Scott, he gave you a great preview. A lot of what he said this morning on the call really echoed that interview last week. But Amex has been the winner for the card companies, leading the Dow today. At least if you look at the stock, the big winner.

Its positive outlook has been the big driver. Amex forecasted better-than-expected profits for this year and boosted its dividend. I caught up with Amex's CFO, who told me that higher income consumer that they serve, it's still looking strong, still spending. He pointed to restaurants in particular as a bright spot, topping $100 billion for the first time. Spending was up 11% on restaurants compared to about 6% across the board. Airline spending did slow a bit, though. He also said they're gaining momentum and traction among younger consumers.

So Gen Z also told me Apple Pay's growth is benefiting Amex. They've got this partnership. He called a win-win for both of those companies. Amex saw record revenue, although revenue and earnings were a bit light of expectations. We also had Visa this week calling the consumer resilient, citing holiday and travel spending. So overall, consumers looking strong based on what the card companies are saying, Scott. Yeah, no doubt. Kay Rooney, thank you so much for that. I mean, it's consistent, Mike, with the story that we were just talking about. It is. So Visa, American Express, I'll also point to Capital One. It's up almost 5% today. It's up 8.5% on the week. And it also

has kind of gotten clear of a lot of the worst worries that you had about rising credit delinquencies operating in a broader, different part of the market than American Express. So it all looks good. Obviously, it's backward looking and you got to see if we get fatigue in there in terms of the consumer. But there's it's an offset to some of the other cyclical companies that have had a little bit more of a downbeat thing to say, whether it's 3M or or, you know, some of the banks even saying that things look like they might be a slog. So far, it's kind of holding the earnings season together from from seeming like it's more give and take than all all negative. Yeah, I would just also throw out what these luxury retailers have reported. And those stocks were absolutely bonkers today to the upside to to to Julia Borsten on Meta.

As I look here, it's pushing towards 400 bucks. That's right. Meta is hitting more record highs today ahead of earnings, which are coming up on Thursday of next week. And despite the fact that the stock's up nearly 170 percent in the past 12 months, analysts are increasingly bullish. In fact, Deutsche Bank raising its price target for Meta from three hundred5 to $450, saying their ad checks show that fourth quarter ad spend was strong, saying AI investments have improved monetization across Meta's ad products and enabled efficiency gains. And Baird naming Meta a top pick, seeing ongoing strength in its core ad performance, reels monetization, messaging monetization, and ramping AI initiatives. Now, Scott, we have counted at least 10 price target increases this month, and we're going to be watching this stock now at $3.94 ahead of those earnings next week.

Yeah, I know you will. It's going to be a big week. Julia, thank you. It's Julia Borson. Do you want to look ahead to mega caps next week? Yeah. And, you know, meta in particular, it's gone from being these guys can't get it right to can they finally get margins in line to now trading at a pretty hefty premium again. Fact set, calculated what companies are supposed to contribute the most

to fourth quarter earnings growth. Meta, the single largest contributor based on current forecast, bigger than NVIDIA on year-over-year earnings growth contribution. And even in the first quarter, so the current quarter, four companies are accounting for like 80% of projected earnings growth contribution. And even in the first quarter, so the current quarter, four companies are accounting for like 80 percent of projected earnings growth. That includes Meta,

Amazon, Alphabet, NVIDIA. So it shows you why the market has been as concentrated as it has been. It definitely raises the bar for next week. I think everyone remembers three months ago, that final week of October was when the market bottomed. And partly that coincided with all these companies coming out and saying, you know, business as usual for us. We're making money hand over fist and we're actually out doing expectations. So, yeah, you can see there being a little sell on the news stuff. But, you know, I would have perhaps said that about Netflix as well. And you managed to build on it.

I want your take, too, on what Professor Siegel told me earlier, because I think the most controversial thing that he said out of everything and the most memorable, perhaps, is that you could get zero out of the mega caps this year and the market would be just fine because you get a rotation. You could still do eight to 10 percent. You believe that? I mean, mathematically, it's possible to do just fine depending on how you determine that. You talk about 70 percent of the market is not the big seven, call it. So sure, in theory, if that all moved the right direction, you can't really absorb a lot of outright weakness in those stocks and then still have the S&P do OK. But I think what a lot of people are looking at is you can kind of churn around and digest and have more stocks up than down. You get 55 percent of all days to the upside for most stocks, and you can build

towards something. So it's doable, and I think it's much more about it just not being an either-or market. You don't have to be zero-sum about it. It's doable if you've got what Howard Marks terms like this. That's a lot of compounding. That's what he would be. I can't wait to see you next week, because we've got a big one in store. Great weekend, everybody.