Closing Bell - Closing Bell: The March Towards New Highs 7/27/23

Episode Date: July 27, 2023

Dan Greenhaus from Solus Alternative Asset Management gives his forecast for stocks after yesterday’s fed decision. Plus, Big Technology’s Alex Kantrowitz weighs in on Meta’s quarter and what to watch when Apple reports next week. And, market expert Bob Pisani breaks down the crucial final moments of trade – amid the Dow’s intra-day slide. 

Guys, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9, right here at the New York Stock Exchange. Big interview ahead this hour. Goldman's Jan Hatsias will join us. That firm now says the Fed's done. We'll talk to him in just a few about that call. In the meantime, this make or break hour begins with the Dow's historic run. The index, as you know by now, trying for its 14th straight day of gains, something it hasn't done in more than 120 years. Underscoring just how this rally has broadened out. You can see, though, this late-day fade is putting all of that in jeopardy. Here's your scorecard with 60 minutes to go in regulation. Amgen, Boeing, Salesforce, Caterpillar have been leading the Dow higher and towards that milestone for much of the day.

They're still in the green, the index itself, though, rolling over a bit. Technology getting a big lift today from Meta on the back of its blowout earnings. Interest rates, well, they're moving modestly higher. Maybe that's part of the reason why you've had this late-day fade. The 10-year moving above 4%. You see it right there. GDP, a surprise this morning and also a day after, of course, the Fed share left the door open for another rate hike

at some point in the cycle. Takes us to our talk of the tape, this march towards new highs, whether we're likely to get there in the months ahead. Let's ask Dan Greenhouse, Solus Alternative Asset Management's chief strategist. He's here with me at Post 9. Welcome back. It's good to see you. Thank you, sir. What about that? Are we on that march to these new highs?

I went back and I took a look, and it turns out that the last time the Dow went up 14 days in a row, the market went up for the next 120 years. And so I think we're really setting up for a breakout to the upside. 1897 is when you're calling that out. But, you know, this fade that we're seeing because rates, you know, the 10-year moving above 4%. Just what do you think about that relationship? What do we have to keep our eye on when it comes to treasuries? And then what the relationship's going to be with stocks? I think people have a bit of a misconception about what rates mean in many circumstances.

Pre-2000, rates on balance were bad for risk assets, equities in particular, because rates were more linked to the inflation landscape. What you've seen post-2000, and I think increasingly what you're seeing right now, is that rates are going up, to borrow a phrase from Bachelorette, for the right reasons. You're seeing rates go up because the supposed economic weakness that people like myself were forecasting a year ago has not materialized. And as rates have gone up, the two years up about 100 basis points in the last month and a half or whatever, The stock market's gone straight up alongside of it, including technology, both large cap and small and mid. Are you in soft landing camp now? Is that your base case after thinking that, you know,

historically, when the Fed does what it's doing and has done already, you're going to get a recession, yield curve still inverted, LEI, leading economic indicators all pointing in that direction? Yeah, listen, I was one of the charter members of this group that said when the Fed does this sort of thing, then negative economic outcomes are almost always the outcome you should bet on. I think what's become clear is that this environment is a little different from a top down standpoint. The amount of money that we distributed people, the size of the fiscal deficit as it currently stands is still 8 percent of GDP. The strength in the labor market and obviously the relative high level of inflation has really complicated this environment. And so I think a lot of the observations that that camp

makes, in which I once was a charter member, I think still holds. But you also have to be, to borrow a phrase, tactical, so to speak. You can't sit here and be wed to your views when things are not going your way. And for the last six months or so, it's been clear that the economy and the corporate backdrop is certainly on balance, suggestive of higher equity prices. Many of the bears have been very much wed to their views. You've seen some capitulation from some. Not that Mike Wilson, for example, is all of a sudden bullish at Morgan Stanley,

but nonetheless says we were wrong in thinking that earnings were going to roll over, didn't see the AI thing coming, and not that anybody did, to the degree at which we've seen it. But are you saying that now you are in the soft landing camp? No recession? No, I don't know that I'd go that far.

I thought you were about to go that far. My market religious journey over the last, call it, six to eight months was gradual. And so far be it from me to criticize someone for capitulating later than me or whatever it was. The technicals worked in your favor earlier in the year, and then the economic and the fundamentals came to support you thereafter. Am I in the soft landing camp? I mean, listen, the odds are higher today that there will be a soft landing and they can pull this off than they were three or six months ago, let's say, or even nine months ago. But getting back to the point, you brought up the yield curve and the leading economic indicators. Those sort of forward-looking

indicators have worked for decades. And while I think the current environment is more complicated and by extension different than what we've seen historically, you still have to sort of have some hesitancy on the idea that those indicators are eventually going to work. Well, I mean, I was out in L.A., obviously at Double Line with Jeffrey Gundlach yesterday for Fed Day, in which they still suggest he and his deputy do, Jeffrey Sherman, a recession's coming. They'd rather own treasuries than stocks. I think rates have peaked, he said. I'm completely comfortable owning treasuries. He also thinks that we're going to have a recession. The Fed's going to cut as a result. Listen to Gundlach. First rate cut will come next year, I think we'll get it. I think it will be encouraged by a drop in,

ultimately, a drop in two-year yields. And I think the steepening yield curve there and the lower inflation rate is a big part of that. I think we're going to see 2 percent inflation. Should you be more comfortable as well owning treasuries to stocks? Well, listen, I mean, if you're going to switch out of stocks to equities, the return profiles are entirely different. I mean, certainly you can build a functioning diversified portfolio with 5% or 6% paper at its core and then build around it with high yield bonds, corporate bonds and equities to try to get a high attractive return stream with a lower level of volatility. For sure, five and a half, six percent gives you that ability.

But at the end of the day, over the long term, equities are are a seven to 10 percent return vehicle. Yeah, but sure. But the whole issue over the last year was the risk reward was poor in stocks. Yes. And it was better in either treasuries or, you know, cash alternatives, whatever money markets, et cetera. Now the question is whether that dynamic has changed. Right. We've seen a rally to the magnitude we've had. We're now moving closer to what we think could be a soft landing. So has the dynamic now changed? Well, listen, I think certainly this phrase is getting a lot more attention lately. But it is true. It does always look like a soft landing before a hard landing. So you have to be very careful here as an investor in any asset class not to be fooled. And I can go back to 2007. I

can go back to 2000. In 1990, the stock market peaked basically on the day the U.S. entered a recession. So there was no forward-looking advice provided by the stock market, back to 2000. In 1990, the stock market peaked basically on the day the U.S. entered a recession. So there was no forward looking advice provided by the stock market, so to speak. But but again, I think from from a retail investor, for lack of a better word, because we're institutional. But from a retail investor standpoint, if you're trying to invest over a 5, 10, 15 year time horizon and you can invest in five and a half percent paper for three, six, nine, 12 months. That's incredibly attractive around which you should build a riskier portfolio. All right. Let's bring in CNBC contributors now. Stephanie Link of Hightower, Joe Terranova of Virtus. Good to have you both with us. Steph, to you first. Are we on track here for new highs in some time in the next few months? I mean, we're really not that far away at all on the S&P 500.

I think it's entirely possible, Scott. We've been talking about how we are in a soft landing. There's no disputing it at this moment in time. Does that change in six to eight, ten months from now? I don't know. We still have to wait and see what all these hikes will do to growth. But for now, the economy can handle it. We just saw an acceleration in GDP, 2% in the first quarter, 2.4% in the second quarter.

Durable goods at 4.7%, and new orders rose in every component. And at the same time, the core deflator fell to 3.8% from 4.9% sequentially. That's good. And then, of course, initial claims, the four week moving average of two hundred and thirty three thousand, far away from any recession numbers. And so when you add it all up, this is actually translating into better earnings. Forty four percent of the companies have reported so far. Eighty percent are beating. Fifteen percent are missing.

So we'll have to keep an eye on it. We have a long way to go on earnings, but it is broadening out. The industry, for example, I know I know we about technology, and the earnings have been really good, but the industrials' earnings on average are up about 7%. The banks' earnings on average are up 19%. Financials in general are up about 10%. So you are seeing this broadening, and numbers are actually going higher. And overall, we're seeing a 3% earnings growth for the S&P 500. So I think, you know, I've always learned that stocks follow profits. Profits are going higher,

not everywhere, but at least that's broadening out, which is very healthy. You know, Joe, the multiple on the S&P has obviously gotten to what some would suggest too rich for them. I think the market's too expensive where it is relative to everything else going on. How would you address that? So in the. I think the market's too expensive where it is relative to everything else going on. How would you address that? So in the near term, the market is technically overbought. That's unequivocable in terms of earnings. You have to exceed expectations or you're Chipotle.

Look at Chipotle today. It's down 9%. It's very clear to me that while in the near term you have that technically overbought nature, what Stephanie's underscoring is that we're going to come out of the earnings recession. In 2022, I believe we came out of the hard landing where technology in 2022 was in a recession. And the market discounted a lot of negativity that we're discussing here in 2023 already. And I think on the other side of that, if you come out of the earnings recession, if you get the near-term correction, and let's understand right now,

when you take the correlation between price and the moving averages, the 50-day moving average is 4.5% below price. The 200-day is 11% below price. On the other side of that potential correction, what you're going to see is a massive chase for performance and yes by the end of the year the s&p is going to take out the all-time high and it's going to be on the chase for performance and if in fact there is an economic recession or an economic contraction guess what the federal reserve is going to cut rates what if we don't get

the correction you're i hear you're calling for no No, no, no. I'm saying, what I'm saying is that the market is technically overbought. To your question on valuation, yes, the valuation is rich. And those conditions suggest to me that you could have a pullback. I'm not calling for a pullback. I'm just telling you that's the environment. And just to build off something else that Stephanie said, we're debating about this recession. The airlines, the CEO of American Airlines said he doesn't see a slowdown in demand anywhere.

The CEO of PNC, a humongous bank, said we're not even in a soft landing when questioned about the economic environment. In other words, no landing. In other words, no landing. Visa, MasterCard, American Express. American Express had some questionable things to say about small business, but all three of them about the consumer basically said everything is going fine. And when you take the industrial things that Stephanie pointed out, look at the charts of United Rentals, Vertiv, Quanta, like these things are going straight up for a number

of reasons. You take what's going on in the industrial side of things, you take what companies are saying about the consumer, then you layer in the manufacturing sector, which is growing again, perhaps, and like the homebuilders. And it's very difficult to make the case that there's going to be trouble in the near term. Well, only if, Steph, the biggest risk then becomes a Fed that has its eye too much on lagging indicators, doesn't acknowledge enough that inflation has come down, is, you know, overly fixated on this strength in the economy, thinking that it has to crush the economy when it's already won. It's already won. Yet they're certainly not talking about declaring victory

anytime soon. No, well, that's that's true. But I was encouraged yesterday that Powell did at least acknowledge that the CPI print was encouraging and that the higher rates do have a lag effect. So those are two pieces that I thought were important in his commentary. Now, he did say the CPI report was only one data point. So now, of course, everyone's talking about data dependence. So we get a second quarter ECI tomorrow, core PCE tomorrow. We have two CPIs and we have two nonfarm payroll numbers all before the next meeting. So we're going to have to see if we make progress. I think we will. We're not going to get to 2 percent. No way. But I think we will continue to make progress and maybe then they can assess the situation because it sounded like they were willing to do it.

They were going to go meeting by meeting. So they have this is a Fed that's been behind the whole time. And I give them an A plus for May of 2020 for sure for the big bazooka. But I give them a D for being so late in terms of changing their structure, their accommodative structure. So we'll have to see what happens. But I think that, you know, if we make progress on the inflation front, maybe they pause. That being said, we know rates are going to stay high for longer. And that's why we have to pay attention to what companies are saying. And that's exactly what Dan just said. And I can list a whole bunch of companies that are saying really, really good things like Boeing and GE and Pepsi and Coke and American Express and Schlumberger. And so they're not seeing it yet. And they're adapting, by the way, as best they can to produce

good results. I just want to push back on the Fed's already won line. Listen, you look at commodity prices. It's not just oil. it's wheat, it's gasoline, the price of the pump having a tremendous two-day move. The easy work is done. Easy work. But the easy work is done. Going, and we've talked about this ad nauseum for a year, going from four to two is a little bit harder.

And I don't think you've got to give the Fed a little bit of leeway here to say, OK, before we start popping the champagne, let's make sure we're on that final trajectory. Yeah, but even Powell yesterday said we're not going to if we if we continue to raise rates until we get to two percent. This is paraphrasing. Yeah. In my words, not his.

The economy is going to get crushed. You're not going to do that. I agree with that statement. But again, it gets back to what Stephanie just mentioned, which is leaving them up up there for a longer period of time which is something that we're all going to have to wrestle with they're not as adversarial anymore and i think that's what's most important if you look at the fed funds real rate in june of 2022 it was negative eight percent it's now positive two and a half percent they've accomplished what they needed to accomplish they're not raising rates 400 basis points over the course of seven months like they did in 2022.

If they're going to raise rates 25 basis points at one meeting and then skip the next meeting and come back and raise another 25 basis points, that's not adversarial to risk assets. No, but they're not going to get on the aircraft carrier either, Steph, with the sign that says mission accomplished. But at some point, they need to acknowledge the fact that inflation is on its way down. And at some point, they just need to be done. And at some point, they need to say as much. They don't need to continue to talk as like they're not looking at the right data or they're fixated on lagging indicators when the rest of us are looking at things and saying, you know what? What are they talking about? Well, they've been behind, as I mentioned, for so long. They really have. And to your point,

yeah, they are focusing on lagging indicators. But at least there was commentary yesterday that wasn't as hawkish as they have been. So I think this is just a slow moving Fed. And we have to focus on all of these data points that are going to come out within inflation. Right. And so, I mean, I think tomorrow is really a big deal, guys. I really do. Core PCE, that comes in, maybe it comes in at 4, 4.2 percent. It's down from 4.6, making huge strides from the 6.6 percent highs. So I just feel like we got to take it and we have to take it one day at a time, one data point at a time. And that kind of stinks being a long term investor. But it also gives you opportunities to buy really high quality companies, especially when I go back to earnings and the earnings are coming in better than expected.

Yesterday, Jeffrey Gundlach made a very compelling and important point, and that is that you've seen a significant calming in bond market volatility in 2023. And for us to believe we're going back to an environment of 2022, you have to see, once again, the return of that bond market volatility. All you need to do is take the trading range from 2022, compare it to the trading range of 2023, and you'll see, in most cases along the curve we're 40 to 50 percent lower in that volatility that's a calm environment and that's telling you 2022 is in the past all right well we'll see we have what 40 minutes or so to go before we can definitively say obviously if the dow is going to get this 14th day in a row which it hasn't done in more than 120 years it's still off about 170 so we'll see

guys thanks so much dan joe and steph we'll talk to all of you soon. Let's get to our Twitter question of the day. We want to know with the Dow on that historic run, which stock in the index are you most optimistic about for the rest of the year? Now, keep in mind what some of these stocks have already done, right? Apple up like 50 percent. So keep that in consideration as you vote for what you're more optimistic about for the rest of the year. Is it Microsoft, J.P. Morgan, Apple, or Boeing? You can head to at CNBC closing bell on Twitter to vote. We'll share the results a little later on in the hour.

In the meantime, some top stocks to watch as we head towards the close. Christina Partsinevelos is here with that. Christina. Thanks, Scott. Well, eBay having its worst day in more than a year as weak third quarter earnings guidance overshadows a beat on revenue and earnings per share. The company also saw its gross merchandise value, which is a really key metric within retail, fall about 2% during the second quarter. That's why shares are down 10.5% right now. And QuantumScape is moving in the opposite direction, popping over 13%, even though the company has never officially sold anything yet and reported a wider than

expected loss. It makes lithium metal EV batteries for next generation electric vehicles. Investors instead focused on the launch of its first commercial product with a prospective customer in the auto sector, keeping us guessing. And there was also some improvements in its manufacturing, and that's why shares are popping. Scott. All right, Christina, thank you. We'll talk to you just a bit. We're just getting started. Up next, Meta is moving higher. Big Technologies, Alex Kantrowicz, is giving us his first take on those numbers next. Plus, Apple and Amazon, they're front and center next week with their own earnings. He'll tell us what to watch for, what's at stake ahead of those reports.

That's when we come back. We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. Back on Closing Bell, MetaShares hitting a new 52-week high today after posting its largest revenue growth since the end of 2021. Joining me now to help break down the details behind that move, what it could mean for the broader tech earnings picture, is Alex Kantrowitz, a big technology, also a CNBC contributor. Nice to see you out in our bureau in San Francisco. Welcome back. Great to be back. And it's beautiful out here. You know, Kramer was saying about Meta Zuckerberg

proving he can cut costs and monetize the business at the same time. Give us your thoughts. Absolutely. Well, Mark Zuckerberg saying it was going to be a year of efficiency was brilliant in two ways. First, it signaled to Wall Street that he was going to work with less costs inside the business and start to play by the rules. The second thing it did was it told advertisers, we're in a new era and you need to make sure that you're efficient too, you're efficient in your spending. And by the way, we have a platform that can deliver that. You know, you might be wasting your money without really being able to measure it on

competitors like Snap. But if you spend money with Facebook, you can say that we put a dollar in, we get dollar times X out. And that's what they've done. They know that they can get results and they keep spending with Meta. They have consolidated their spend there because it is efficient. Same with Alphabet. And that's why both of those stocks, both those companies did really well this past quarter.

Alphabet hit a new high today, too. Are you surprised at all at how quickly Mark and Meta were able to turn the story around, that, you know, the stock bottomed last November, so we're not even a year into this turnaround, if you want to call it that. But the stock is a double over the last six months. Does any of that surprise you in any way? I'm definitely surprised. And I'll even say that I was wrong.

Last year, I was saying it's going to be meta metaverse or bust for Facebook. They needed to make the metaverse work or else they were in deep trouble. Actually, what they did was they revitalized their core business. Remember, there were there was a moment where they were shrinking users, at least in North America. That's rebounded. There was a minute where they were shrinking their sales. Their growth was down and that's rebounded. So it actually is quite impressive that they've been able to both return to growth on the user side and the revenue growth is impressive. 11 percent growth on the quarter led by, well, not led by, but actually the most

important number there is the 10 billion dollar run rate on Reels. Right. They've taken the TikTok business model. They've copied the product. They've put their ad systems on top of it. And now, you know, a 10 billion dollar new business. It's very impressive. You got to hand to them the execution and the rebound has been very impressive and to me surprising. And I'll admit that it definitely caught me off guard. Yeah, they beat on DAUs, you know, daily actives. They beat on monthly actives. Average revenue per user beat as well. Let's talk, and you alluded to it, threads. Is it a real and legitimate and lasting threat to Twitter or not, even as we've seen engagement come down from where it was right out of the gate?

Yeah, it certainly felt like that out of the gate. It seemed like it had what it needed, right, a built-in interest graph and the backing of a company like Meta, the fact that you could go on there and it felt lively right away. I don't know. Part of the way that you evaluate these social networks, especially the text based one, is sort of you got to go by the vibes and the vibes have tailed off threads. Right. It was so vibrant and so interesting at the beginning. And now it just feels a lot emptier than it did before. So I

think it still has the potential. It has the backing of meta. It's built off the back of Instagram. It has the right algorithms and a good product team on it. But I'm not willing to say at this point that it's a legitimate threat to Twitter. Maybe give it a few months and it might build up to that, but it's just not there yet. Interesting. Let's turn our attention ahead to next week, Amazon and Apple. Of Apple, our Josh Brown on a halftime report today said, quote, you can like the stock and not like the setup. Right. People are pointing to 31 times earnings. It's gotten expensive relative to what the fundamentals would suggest.

How do you assess Apple? And then we'll hit Amazon quickly. Yeah, the Apple valuation is just so high. Right. It's held above three trillion dollars since it hit that mark. That's pretty impressive. But the other side is that its sales growth has gone down in the past couple of quarters and probably will again this time. So the real question for Apple is going to be an endurance question, right? How long can it stay at this level if sales continue to go down? You know, obviously, it's a money printing business. It's a mainstay. People hold it. And that's why it's been able to get to where it is. But, you know, again, if the if the if the feeling shift a little bit, is there a chance that it's going to drop below that level? I think that's quite possible.

Look at that valuation for Amazon, 43.5 to start the year, now 75 times. Stock is obviously having a great run, too. And there's a lot of optimism about what they're going to do when it comes to AI, including from you, right? You were at an event yesterday here in New York City, right, their summit? That's right. So I spoke with Amazon's VP of product, Matt Wood, who's on AWS and he works on AI there. And I said, you know, this is kind of a throwaway question

that they usually don't really answer with specifics because of setting up the expectations that they will later have to match. And what I asked him was, how big can this be? And he said that he believes just the AI programs within AWS itself can grow bigger than AWS, the entire AWS today. Again, just the AI programs within AWS can be bigger than what AWS is today. That's just an astounding proclamation.

And it's not one that you make unless you have real hope in the business. And you think it can grow that level because ultimately people are going to hold you to that. You're going to become accountable to it. And if you're not going to be able to meet those expectations, you're in trouble. So I think that they have a strategy that's underappreciated in AI. They're not as splashy as, let's say, the Microsoft or the OpenAI, for instance, or Facebook, which is brought out as Lambda model and made a lot of noise about it. But they have a pretty impressive, underappreciated strategy there where they're going to try to get everybody's models baked into their technology. And by the way, when you run these applications, you have to support them.

You have to pay for the computing. And their services are positioned well to make the money from that. So I'm impressed. Alex, thank you very much. That's Alex Kantrowicz joining us once again. Quick check on the DAO, too. We were on the road to the 14th straight day of gains. Hadn't done it in 120 years. Then we blew a tire. Not that long ago, either. Dow's down 220. Still have some time to fight it out. About 30 minutes or so.

We'll see where we shake out here. Up next, the road ahead for the Fed and the economy. Goldman Sachs' chief economist, Jan Hatzius, is with us. He says the Fed's done hiking, at least for now. He'll give us his rate cut forecast ahead. And later, top chip analyst Stacey Raskin is here to count us down to Intel's results in overtime. The key figures and themes he'll be watching, he'll tell us. Closing bell right back. Treasury yields rising modestly after this morning's stronger-than-expected GDP report. That's on the heels of yesterday's 25-basis-point rate hike by the Federal Reserve.

Our next guest expects that to be the last one of the cycle. Goldman Sachs' chief economist Jan Hatzi is joining me now. Postline, welcome. It's good to see you. Great to be here. Fed's done, huh? I think probably. I certainly think that September is pretty unlikely, even though Chair Powell was careful not to say careful pace. I wouldn't expect a September hike.

November is a possibility. I do think that the economy is going to continue to grow and probably continue to outperform expectations, at least as the Fed has laid them down in the summary of economic projections. But best guess is that this is it and we'll be at 5.25 to 5.5 for a while. When are they going to cut, then? We have them cutting very, very gradually, starting in the second quarter of next year. Basically, inflation continuing to come down. The economy is still holding up. But some concern about the real funds rate rising as inflation comes down.

That's debatable how much of a negative impulse that would be. But I think there'd be some sentiment in the committee to ease very gradually. You're suggesting that they cut not as a necessity because the economy has dictated that they must, but because inflation's come in enough that they can. That's right. Our forecast is no recession, growth not too far from trend, but inflation continuing to come down as the remaining supply chain issues and rent inflation in the CPI and the remaining labor market imbalances gradually work themselves out. I mean, you've been sort of lessening your predictions for a recession to begin with and rather steadily.

Now, with the GDP report today, are you are you now firmly all the way in on soft or no landing? Well, we've been in the no recession camp all along. We did take down the probability over the next 12 months further. We're now 20% probability. I would think of this as still a little bit elevated relative to your average cyclical situation. The average would be 15%, one recession every seven years or so. But I think we're moving in the direction where it's no longer at all elevated. But at the moment, the labor market is still somewhat tight,

and there's still some work to do. Even though you think the Fed is not going to have to continue to raise rates because inflation's coming in enough? Are you worried at all that they're going to go too far, that they still don't, in some people's mind, get it and they're going to push it too far rather than just stop and see what happens? Well, I think they're going to be data dependent. I mean, of course, it's possible that they make a move that ultimately they want to reverse.

I guess I don't view it as that dramatic when we're talking about 25 basis points on a six-week horizon or three-month horizon. I mean, we were in a world where they were going 75 basis points every six weeks. So that's, you know, now it's really more fine-tuning. If they end up doing, you know, an extra 25 basis points that they shouldn't have done, I don't think it's the end of the world. Have earnings surprised you, even as, you know, let's say less negative you've been on the overall picture?

They've held up pretty well. They've held up. Surprising to you? They've held up pretty well. And our portfolio strategist, David Koston, who you know well, has been saying that second quarter earnings looked like they were probably not going to be as weak as the market and the consensus at least was projecting. So in that sense, no. How sensitive do you feel the market still is to rates and what other central banks are doing? BOJ policy meeting is tomorrow.

I mean, the Dow's down 250. Rates are moving a little bit higher today, the 10 years back above 4%. The relationship between the two and how sensitive equities are to what happens in yields. Well, I still think that the U.S. monetary policy and the drivers of U.S. monetary policy, especially via inflation and economic overheating. That is an important driver of the equity market. The BOJ, obviously very important for some markets. U.S. equity is probably a little bit less so. Last question, the consumer.

One of the reasons, if not the principal reason, we're having this conversation, why your probabilities of recession have come down the way they have. And many have been surprised at the resiliency of this economy because the consumer, two-thirds of it, has held up better than most thought. How long does that last? Well, I think the consumer is holding up better, mainly because real disposable income is now growing pretty strongly.

It's actually up almost 4% year on year. That's a big shift from where we were in 2022, where you had real disposable income declining, consumers having to dip into the excess savings. But now it's actually income growth that is supporting the consumer. And I expect that to last. Appreciate you being here. Thanks for coming over in person. Jan Hatzis, Goldman Sachs. We'll see you soon. Good to be here. All right. Up next, we're tracking the biggest movers as we head into the close. Christina Partsenevelos is back and standing by with that. Christina. Well, travel demand, is it up or down? Two large companies are seeing conflicting trends. I'll explain all of that next.

20 minutes to go before the close. Christina Partsenevelos is looking at the stocks that are leading the way, maybe in some cases declining too. Christina? Well, we'll start with the declining because Southwest is firmly in negative territory right now, down almost 10 percent as earnings come in below expectations and the company projects rising costs in this current quarter. The report is also amplifying some concerns of slowing domestic air travel demand. International airlines aren't seeing the same trends. But that's not the case out on the ocean, with cruise demand still booming. Royal Caribbean posted earnings per share 17 percent above Wall Street estimates,

with more growth expected this year. The CEO saying, quote, another step or step change in booking volumes and pricing, leading us to now expect double-digit net yield growth for the full year. Carnival and Norwegian also rallying. You can see Royal up 8%. Scott. All right. Christina, thank you. It's the last chance to weigh in on our Twitter question.

We asked with the Dow on this historic run, which stock in that index are you most optimistic about for the rest of the year? Is it Microsoft, JP Morgan, Apple, or Boeing? At CNBC Closing Bell on Twitter, think about the stocks that have already had huge gains too, not just the ones you like the best. The results are after the break. To the results of our Twitter question, we asked, with the Dow on its historic run, which stock in the index are you most optimistic about for the rest of the year? Microsoft, J.P. Morgan, Apple, or Boeing?

Apple is already up 50%. Nonetheless, it is still leading slightly ahead of Microsoft. Up next, your earnings rundown. Intel and Ford are both on the docket in OT. We'll tell you what to watch when those numbers hit. We're going to take you inside the Market Zone next. We're now in the closing bell Market Zone. CNBC Senior Markets Correspondent Bob Pisani is here to break down the crucial moments of the trading day.

Stacey Raskin of Bernstein looking ahead to Intel and the earnings in overtime. It's not the only major report either. Philobo shares what to watch in Ford's numbers. Bob, we begin with you. I've got rates pulled up here only because they ticked a little bit higher. Maybe the stock market was unnerved for a moment by that. There's a lot of focus on the BOJ as well. What are your thoughts? Two things happened at 1 p.m. that kind of derailed us. We were hoping for 14 straight days for the Dow. Maybe a new record for that. Unlucky 13.

Yep, there we go. But you're right about the yields. Let's put up the 10-year yield. We went over 4%. We had a poor seven-year auction, number one. Rick gave it a D. Number two, you mentioned the Bank of Japan. At that time, a headline crossed, BOJ to discuss tweak to allow rates over 0.5%.

The 10-year's like 0.45. Peter Bukvar's been all over this all day. That was an important level. We moved over 4% on the 10-year. And stocks kind of moved to the downside rather decisively. Look, we were at 4,600 on the S&P 500. We've moved almost 40 points since then, 50 points essentially, straight down since those two headlines at 1 o'clock. Tech stocks especially to the downside here. And of course, the pain trade, that's the pain trade right there. The pain trade would be rates rise because the market is positioned for stable rates and earnings to slowly start coming up. Second quarter is the drop. So there's the pain trade. Market got caught unaware by a sudden move up

in interest rates. Yeah, I mean, it's been a broadening move, and we've talked about that. It's no longer, you can no longer, you know, if you're a bear, it's hard to make the negative argument, oh, it's just a small group of stocks, because it's been anything but that lately. That's right, and we got the market broadening out story.

This is the great news for the start of the third quarter. July, we've seen energy stocks up, material stocks up, health care stocks up, market broadening out. But because technology is so stretched, any sign interest rates are going to move up. We saw that XLK, the tech stock, move straight down in the middle of the day. So there's your weakness. Again, I go back to that pain trade story here. Good story overall for the market broadening out. Tough story if rates start moving up. So, Stacey Raskin, Intel. Now, I'm looking at a call of yours from April 3rd, right? You upgraded it and you said, we hate it, but we think it's the right one. Well, it's why

you're as good as you are in what you do, because the stock's up, what, 15% or so since that call. So, what now? What are they going to deliver today? Yeah, you bet. The quarter should be fine. They already sort of softly, positively prayed during conference season a month or so ago. They said they're coming into the upper half of the guidance. So the quarter should be okay. I actually think there can be upside into the back half of the year.

And it goes back to that April fall. It's more on pc channel normalization than anything else um i think pcs the end market shipments have bottomed they're sort of back on a pre-covid trajectory and the cpu shipments the stuff that intel sells i mean at the peak they were over shipping the market by 25 or 30 percent end of last year beginning of this year they were under shipping by 20 25 percent so as that normalizes through the end of the year I actually think that can drive some upside to numbers as we go into the back half. Now, will they get credit if it's just PCs? I don't know. I mean, people are going to be looking at the trajectory of data center, especially given a lot of the

hype recently around AI, and they're not viewed as benefiting as much as some other names are within that, and people are worried what it might mean for CPU sales and data center. So we'll see what that mix looks like. But overall, I actually do think numbers can show a positive bias in the back half of that. You know, the question I've seen, you know, some speculating on today or at least trying to entertain themselves is, can Intel, can they work, can they compete in this new era of AI where, you know, other players like NVIDIA and some others, too, have kind of sucked all the air out of the room. I'm thinking Broadcom and others. How do you address that issue?

Yeah, I mean, so they have AI products. They do have a data center GPU roadmap. They've kind of, it's been challenged, though. They've got other products. They've got a product called Gaudi that they bought. They bought a company called Hibana, which made AI accelerators, and so they have that. But they are not viewed as having as much of a roadmap. And again, you can look at a company like AMD. People are getting bulled up on their people. They're looking for who could be the second source supplier. At AMD, at least to their credit,

they have a roadmap with products on it that Intel is not perceived to have as much at this point. And so it is a problem. It's one reason that it's certainly not getting the kind of lift. Even though you could argue in general, if there is going to be more compute, they sell compute. They benefit at least peripherally from that. I mentioned the upgrade. Now, it's not exactly to buy or anything like that.

It was only to market perform from basically out of the dumpster. But what has to happen for you to say, you know what? This stock's a buy. This stock is now a buy. What do you need to see? Yeah, so the current situation, again, numbers and upward bias, you can start to argue that at least it can't get any worse. So that is a start, right? They've given some more color around some of the cost savings that if they can execute on might drive more upside to gross margins so that would be good but ultimately they have to fix their competitive situation right they've got to reverse the share losses um that we've been seeing to amd and others the market

has to get comfortable that the whole transition to ai and accelerated compute is not going to eat into the cpu tam and then clearly they've got to fix that process roadmap and actually be able to demonstrate um real leadership on that front it's still going to be a while. It's a slog. They're doing the right things. Again, maybe it doesn't get any worse from here, but it's going to be a ride still until we know for sure whether or not this can succeed. Stace, I appreciate it. As always. Yeah, Stacey Raskin joining us once again to fill a bow on Ford, talking about stocks that really can't get out of their own way, whether the news is good, bad, or indifferent. This stock just really doesn't do much, Phil. Why?

No, it hasn't done much for a while. Well, we're living in a world where people want to know, when is the EV business going to grow? And when you look at the things to watch from Ford, when these numbers come out in a few minutes, it's going to be primarily focused on the EV division. What are the losses there? Have they grown? Are they expected to come down? What's going on with F-150 Lightning, the demand for that? We had the report about a week, week and a half ago from dealers saying, look, nobody's really buying these. That's why they cut the prices by up to $10,000. And then you've got Q3 guidance. So you put that all together, that's going to be the primary focus.

We know that the internal combustion engine business is strong. We know that the commercial vehicle business is red hot. You know what, Scott? That means bupkis with investors right now. Maybe it shouldn't, but that's the way it is right now. So it's going to be the EV business that is going to get the most attention once these numbers come out and then on the conference call, which is at five o'clock. Yeah. Stay with me for a second, Phil, because I got Bob Pisani, as you know, here. I mean, Bob, these stocks, to my point, in six months, Ford's up less than four percent. In a year, it's up four percent. It's not like the auto market has been weak. But Phil's absolutely right. This stock has done nothing for years and years the preferreds it's it's a it's what you would call a value trap in a certain way investors haven't been able to pull anything out they've made great efforts great strides to get into the ev market and it still doesn't seem to matter that much believe me when i get to talk to

investors i know so many people that have had ideas and faith and ford for years and years and years and they haven't been years and years and years, and they haven't been rewarded. And Phil can address the reasons why. But I can tell you it's a source of great frustration for a lot of investors. Yeah, Phil, quickly, maybe tomorrow turns it. We'll have to see what Farley says. Jim Farley, of course, the CEO on the back of the numbers.

Yeah. Look, I think he's going to talk about how he's optimistic that they are on the right path when it comes to electric vehicles. That optimism is great, Scott. But when you cut the prices by up to 16%, which they did a week and a half ago, that sends a clear signal to investors. And that's what they're dealing with near term. Phil, thanks. We'll see what happens.

And I know we'll see you. That's for certain. Two-minute warning. Bafizani, we turn our attention to another key inflation read tomorrow, don't we? Yeah. Personal consumption expenditure. This is the Fed's preferred gauge of inflation. Remember, we've been talking about this jitteriness in rates that we've been seeing all throughout the day today. The important thing tomorrow, headline expected up 3 percent. Now, it was 7 percent back in June of 2022. This is the headline number. If we get a print of 2, that may go a long way towards calming this move up in rates that we've seen today.

We'll see. The core, which is what the Fed looks at and is the preferred read, is 4.2%. That was up 5.5% or so. We'll see. If you can get a 3 print on that again, that's a good thing. At this point, with these jitteriness in rates, we need a calmer print. That's going to be the key. You want to look ahead to next week?

We've had a good week for mega cap for the most part. You know, Microsoft shares were down on the back of the results there, but elsewhere it's been good. And now we talk about Apple and Amazon. The key story here is that earnings for the second quarter generally have been better than expected. The beats have been slightly stronger than expected. And most importantly, Q2, the second quarter, is the trough for earnings. Q3 and Q4 numbers are higher. They have not been coming down for months.

They were coming down in the first part of the year. They haven't been for a long time. And there's the soft landing. The analysts have been right. The bottoms up guys have said we want to see evidence that there's a real recession before we really cut our numbers dramatically or there's going into one. Hasn't happened and the numbers have held up. So that's the key story going into the second half of the year. They're clapping and we're inching towards the close here. We're not going to get 14. Doesn't look like it on the down unless we have a dramatic reversal in 10 seconds.

But 13 will take it. Longest streak since 87. I'll send it into overtime. I'll see you tomorrow. Morgan and John, take it away.