Closing Bell - Closing Bell: The Outlook for Stocks 8/12/24

Episode Date: August 12, 2024

Investors anticipating a critical few days for stocks after a wild week on Wall Street. NewEdge’s Cameron Dawson, Wealth Enhancement’s Ayako Yoshioka and Greg Branch of Branch Global Capital Advisors debate their market forecasts. Plus, Stempoint Capital’s Michelle Ross maps out her playbook for the pharma and biotech space. And, Jetblue’s stock faced its worst day ever today. Phil Lebeau explains what is behind that drop. 

Tyler, thanks. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. And this make or break hour begins with the risk reward for stocks, whether it's gotten better following last week's volatility. We'll ask our experts over this final stretch. In the meantime, check out the scorecard with 60 minutes to go in regulation here. The major averages are sort of taking a wait and see approach to this week's data deluge. We have inflation data. We have retail sales. We got some key consumer earnings as well, all lying ahead. Will be a good test for the markets for sure, given all these questions now about the direction of the U.S. economy. NVIDIA, it is one of the standouts today, along with other chip names like Micron and AMD. They're

all positive across the board. Apple's higher, too. That's his analyst, Dan Ives. He's upped his iPhone 16 sales numbers. That stock's good for about two thirds of one percent. Takes us to our talk of the tape, the outlook for stocks, which have a lot riding on these next several days. That's an understatement. Let's ask Cameron Dawson what's really at stake. She's the chief investment officer for New Edge Wealth. Joins me here at Post 9. Welcome back. It's good to see you. Good to see you. Did we solve whatever issues we needed to solve last week? We definitely solved some of the issue with positioning. I think that is the one silver lining that came out of last week,

is that if you look at that Doincha Bank consolidated positioning report, it went from being way extended, way overweight, 96 percentile. Now it's just 31st percentile. So that just suggests that you shook out some loose hands, and that does set the stage to draw more money back into the equity market. Now, there are still overarching concerns. Do we have a growth scare? What's going on with earnings? But I think at least from the positioning front, it's good. Yeah. What about the carry trade that got all this attention? I guess no one really knows whether it's fully unwound or what else may lie overseas based on other central bank moves. We're so

fixated on the Fed here, but we're learning that other central banks hold the key very much so to where this market may go to. Certainly. If we look at things like CFTC positioning, which is not perfect for looking at yen positioning, it has bounced back a lot, meaning that a lot of shorts have been covered. But it does raise the point that we could still be in this world of higher volatility in FX markets. And we'd note mostly this week, high volatility within fixed income because we get CPI, PPI and retail sales. What do you think is most important, the inflation reads or the retail read, given this what felt like a panic attack we had a week

ago today? Because we think that there's a greater risk for downside to growth than there is a risk for upside to inflation, we think retail sales is actually more important. Of course, if CPI or PPI comes out hot, that could spark a lot of volatility, mostly in the bond market. Remember, the bond market still has quite a few cuts priced in, four cuts priced in through the end of the year. But if we think about that growth story, it really will give an eye to how accurate is the labor market data. If retail sales falls off, then we might know that the labor market could be weaker than maybe some of the headline data suggests. The way you put this to our production team was what happened last week, quote, reset the clock for equities to give them

more room to run. So it got through a lot of the issues that needed to be taken care of. And now what kind of runway do you actually see existing? Yeah, so in theory, it resets the clock, meaning because of that positioning reset, it does help to at least start from a point where we're not as stretched. I think one interesting observation, though, is we went from very overweight positioning to now neutral, slightly underweight with relatively little pain. So as people get brought back in, do we get the same kind of boost than if it had come with a bigger drawdown in within the market?

The other thing to note is markets got a little oversold last week, but on things like percentage of names above their 50 day moving average, we got not oversold at all, which just suggests we really didn't see a true flush. What surprised you more, do you think, the magnitude of the Monday sell-off or the magnitude of the rebound where we finished the week, let's just call it for the S&P at least, flat? Yeah, I think that it is absolutely incredible that you saw it end flat given the amount of pain that was absolutely anticipated at the beginning of Monday and that you quickly threw away this idea of growth fears.

It really helped to focus in on that maybe all of the much ado that happened on Friday and Monday was just about positioning, and maybe the growth fears were just a narrative. But that doesn't mean we can't ignore growth risk, as we hear from companies like Walmart and Home Depot this week about the consumer. So let's go positioning then. I mean, what are we supposed to do now in terms of what the best portfolio might look like? We went from overexposed maybe to mega caps at the expense of a lot of other stuff. Then mega caps sold off in July and we had a nice reversal for some of these unloved areas.

Now we have reintroduced volatility. So I'm not sure what we're supposed to do from here. Yeah. For us, regardless of what the overarching narrative might be, we think quality is just so very important because what we found over the last week in our quality focused portfolios is that because we had valuation discipline, we had really good downside capture. Just means that we go down less than what the market goes down, but you can still participate in the upside because you're not full defensive.

So it's that needle to thread of saying we want companies that can block and tackle if the economy is weakening, but we don't want to be crowded in areas like utilities or staples, which we know are perking up, which does get our eye about the risk appetite in the market. But those tend to reverse gains if you do see a better growth environment. What about growth versus value? Predisposed to one side of that trade versus the other? We've been neutral growth versus value this year. Why?

Because if you look at growth, what it has going for it is better earnings, but it's also very expensive and very crowded. If you look at value, it's had worse earnings, earnings revisions down, but it's under-owned and under-loved. What we've seen over the last couple of weeks is growth versus value has reversed sharply, where value has outperformed growth. It is sitting right at its 200-day moving average. So it is the most critical point to see the direction of that trend. We think it all comes down to earnings. Unless value can get its act together and have better earnings, which some of that relies on things like energy and commodities,

then we think that growth can still outperform, maybe not to the magnitude, though, that it did at the first half of the year. What about small caps? Everybody's weighing in at the worst last week. The Russell was down 5.5% last Monday. It finished down 1.3%. So it had a nice comeback, but it didn't have as great a comeback as some of the other of the majors. Did you, I don't know if you saw the interview that I did with Tom Lee to end the week, but he's still optimistic, and you know he made a really big call months ago on where he thought that Russell could go, up 50%. I said, Tom, it's getting a little late for that.

He said, well, rate cuts are going to be good nonetheless for small caps. Let's listen to what he said, and we can react on the other side. Tom Lee on Friday. It's a lif what he said, and we can react on the other side. Tom Lee on Friday. It's a lifeline for reducing the cost of money for consumers, which helps the banks. You know, you have huge exposure in the Russell. So I think when the market believes the cuts are imminent, or maybe it's September, I think that's when the small cap call works.

I think, you know, we've been wrong on the timing. I would like to have seen us to be up 20% at this point, but I still think 50 percent could happen before year end. I was kind of surprised that he said that. I still think 50 percent could happen before year end. Yeah, mostly after we've already seen a big positioning reset. Since that early July kind of rebound within small caps, you've seen positioning get back almost back to the levels they got to in December of 2023. We think small caps have to have a very, very specific circumstance in order to outperform. You need rate cuts and you need lower yields, but you also have to have a strong growth backdrop. You can't have one or the other. You have to have both at the same time because if you're getting rate cuts because the economy is weakening, small caps are the most cyclical parts of the market. They're economically

sensitive. So that's why a lot has to go right for small caps to work. Do you think that's too heavy a lift? I think that it's possible, but to bet on that happening and to the magnitude of 50% is a really far reach. What we say is that we actually do like some parts of small caps, but we like names that don't need rate cuts in order to do well. We like names with better balance sheets, with less interest costs.

So it's highly selective. And we've been adding to small caps on that notion of if we can be picky, then that's where we think we can add value. People like Rick Reeder, he joined me, you know, Monday in the throes of it on this show, said, I don't understand that call in the first place of small caps. You're going to have money coming out of mega caps. You're going to go into small caps even with rate cuts because of

exactly what you said. You need everything to go right. You can't have any concerns about growth and then want to go into small cap stocks, can you? You have to believe in a true economic acceleration. The only time we see sustained outperformance for small caps is really at the beginning of an economic cycle. Fed cuts rates, you have interest rates that are low, and you're rebounding off of the lows, and economic growth is improving and accelerating. That's the time to go way overweight small caps,

not when we're having this debate as to whether or not we could be near the end of the cycle and slipping into a recession. All right. Let's bring in Ayako Yoshioka of Wealth Enhancement Group and CNBC contributor Greg Branch of Branch Global Capital Advisor. It's good to see you both. Ayako, it's good to have you back. You say to our producers today volatility is likely to be with us for a while. So we're still going to be stuck on a bit of a roller coaster for a while. I think so. I think we've got a lot of global macro headline risks that could always disrupt markets. I think there's the focus, though, on the long term and the fundamentals that can sort of balance those out so that we don't have too much volatility, you know, over the long term. Greg Branch, a week ago today, you were thinking what, excuse me, and given the comeback that we've

had, did you did that force you to change your view for for our viewers who have followed our conversations? You've been largely cautious for a pretty long time. I'm sure Monday was one of those instances you said, OK, this may be what I've been talking about, but what now? Yeah, Monday was a surprise to me. And to go back to the question you started the show with, I think it revealed a problem. And I think Cameron hinted at some of this is that I think we are at least parts of us are in denial that a cycle needs to occur. So nothing happened two weeks ago that should have been surprising. The Fed has always represented to us that they needed to get to mid-4% employment for price stability. 114,000 jobs number is not

out of line and certainly not even reaching neutral yet. We saw 150,000 in October. So I was surprised at the reaction when all we saw was the evidence that the Fed's program was working. And what we should have expected when we saw the inflation numbers put up a very stark pivot for May, where we had zero bps of core month-over-month growth, and June, where we had 10 bps of core month-over-month growth. But a cycle needs to happen. And because a cycle needs to happen, I agree with Cameron that I'm cautious of any permanent or long-sustained rotation into small caps at this juncture. And I think that once we realize that a cycle needs to happen and that growth will, in fact, slow and that it's the

only way to embed a sustainable 2 percent inflation, that growth will, in fact, slow and that it's the only way to embed a sustainable 2 percent inflation, that investors will flock back to where the earnings are. And there will be a stark difference between those companies that can grow 20 percent and those that will grow mid single digits. But you are you implying that the cycle is ending now because the data doesn't necessarily confirm that. Slowing, yes. Ending, no. How do you respond?

Not ending. The slowing is in front of us. The Fed will not cut rates unless it needs to reaccelerate the economy. And it's unclear, and I'm in the minority on this, it's unclear if that will be September. We had 2.8% GDP growth in the minority on this it's un i'm unclear if that will be september we had 2.8 gdp growth in the second quarter the atlanta fed projects third quarter to be at 2.9 percent earnings growth is going to come in at 11 we've had 90 of the s p report we're at 11 that's the highest since the fourth quarter of 2021. consumer spending is basically unchanged the last few months yes we had a contractionary

ISM manufacturing report, but that's in line with what we've had the last year. The services report was 51.8 percent, which implies, roughly speaking, a 1.2, 1.3 percent GDP growth. So we haven't seen the economy crack yet. It's in front of us. And we're talking about rate cuts as though it will automatically alleviate that slowing. And it won't because the hiking cycle will be slower. Sorry, the cutting cycle will be slower than the hiking cycle will. And it will take its time to work its way through the economy. Cameron, you want to you want to take issue with anything that Greg said? The Fed will not cut interest rates unless it needs to reaccelerate the economy. Does he have it backwards? I think it's this great debate as to where we are versus where we're going.

And it seems that the Fed is looking at where we are. They're looking at the data today, and it seems that they don't have much urgency. The bond market is looking at potentially where we're going, and that's where the urgency is being priced in. The bond market still has one supersized cut priced in into 2024. And the bond market has been getting ahead of itself multiple times. There's been many pivot parties over the last few years. And so it seems like those two are at odds and that the Fed saying really no urgency, even doves on the Fed like Goolsbee not coming out and sounding the alarm suggests that maybe the bond

market will get disappointed. Aya, how do you see this playing out? Because I have people coming on the program suggesting that you should sell the first rate cut, not embrace it and buy it. Hi, Scott. Yeah, no, I think that the labor market is going to dictate a lot of this. You know, I think why we had the sell-off on Friday with the labor market data, and, you know, we're going to be paying attention to all the weekly jobless claims data that we get. That's going to really dictate how quickly the Fed moves, how much they move. And that's going to determine more than anything else. I mean, Greg, the Fed, I think, is making it clear there.

They're not going to wait around and let the economy fall apart and then first cut interest rates like you're implying. They want to prevent the whole thing from happening because I think they feel pretty good about where they are, where they somehow have been able to bring this plane along a way that many predicted was going to be a much more difficult landing than may be in the cards. Right. And I'm not being critical. And in fact, I was very specific about what I was implying. If we have two point nine percent GDP growth in the third quarter, as the Atlanta Fed is projecting, then we haven't seen the economy slow yet, Scott. And so we're putting up 114,000 new jobs. That is not a neutral number. Is it coming? Sure. Of course. 80 percent of Americans have liquid assets that are about 13

percent. This was a study from the San Francisco Fed, 13 percent less than what they were projected to be pre-pandemic. So, you know, the bottom 80 percent of earners are certainly stretched. But even in the retail numbers, they're the same. They're unchanged. Is it coming? Of course. Can the Fed avert it? I don't think that they want to. You've got to remember, one of their mandates is price stability, and they have a failing grade against that for three years. So will they endure 4.3, 4.2 percent unemployment to make sure that our newfound price stability, which is probably imminent, is maintained? I think that they will. A failing grade on price stability for three years. I mean, I think anybody would admit that they were sort of late to raise rates, but

they seem by virtue of their efforts to be both swift and large in what they've done that they may actually be winning. Yeah, look, it is going the way that they anticipated, but we're not at 2 percent. And we had generational inflation for two years. So, look, I don't mean it to be minimizing. It's a hard job. But, yeah, we're not at 2 percent. We've had generational inflation for two years. I would call that a failing grade in terms of price stability. I think if you ask 80 percent of Americans, they'd agree. Well, I mean, people who are sick and tired of paying higher prices for so many different daily products, I hear you. But they're also going to cut rates before inflation

gets actually down to two percent. So anyway, when you look at positioning, because that's ultimately I feel like what the last week has been about, as Cameron said, off the top. What positioning is best right now? I think we have to remember that diversification is your friend. I think we got lost in focusing so much on the mega cap tech companies that have really been the workhorses of the market for so long. But we can see that the broadening out of the market is actually a good thing for all of us. Diversification is positive for everybody in their portfolio. Yeah. And we have, what, two weeks and a couple of days, Cameron, lastly to you,

on NVIDIA. Is that the next catalyst for mega cap stocks? Is it the only sort of thing that's going to be the determining factor as to whether this trade has a renewed leg, whether it truly is in trouble? Is that the moment? I mean, we are in this August quiet period. And so all eyes will be on it. And we do think it could be a source of volatility. And it will be probably more interesting, not the numbers, but the reaction to the numbers, because there's pretty high confidence that the numbers will be good based on all the trends inter quarter that we've heard from NVIDIA. It's the reaction and is good,

good enough for a stock that's trading at these levels. Good reaction today. You see it up better than four percent. It was a wild week, obviously, within the last seven. We'll see what happens. Aya, thank you very much. Greg Branch, good to see you as always. Cameron Dawson, it's good to have you back here at Post 9 as well. To Pippa Stevens now for a look at the other names moving into the close. Pippa? Hey, Scott.

Well, shares of Hawaiian Electric are sinking on track for the worst day of the year after disclosing a going concern warning, saying it doesn't yet have a financing plan in place for the $1.7 billion in fees for the Maui Windstorm and Wildfire settlement. The company also suspended its dividend and posted a consolidated net loss of $1.3 billion in the second quarter. Shares of Marathon Digital also in the red after the crypto miner announced plans for a $250 million private debt offering, which could later be converted to stock. The company said

it plans to use proceeds from the sale to acquire additional Bitcoin as well as for general corporate purposes, though shares down 9 percent. Scott? All right, Pippa, thanks. See you in a little bit. Pippa Stevens, we're just getting started here. Up next, your pharma playbook. Eli Lilly seeing some serious gains over the last week. StemPoint's Michelle Ross is back with us today to break down that rally. Find out if there's any more room to run there and where she sees big opportunities elsewhere in the biotech and pharma space. We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back.

Eli Lilly taking a breather today after a scorching two-day rally to stock up more than 14% in the past week. And that's after hiking full-year guidance on demand for its weight-loss drugs. Deutsche Bank upgrading that stock to buy this morning, calling it a, quote, low beta, high growth unicorn. Joining me now with our outlook on the stock in the broader biopharma space is StemPoint Capital's Michelle Ross. Welcome back. Thanks so much for having me. OK, what is our big takeaway from GOP's last week, whether it's Novo or Lilly? Yeah, so I think Novo set the stage and I think it caused a little bit of concern in the midst of what is a tremendous growth market in anticipation of this growth to what is the pricing dynamic on these specific drugs in this class of drug. And that was a fair question.

I think as you bring in more exposure to patients, when you include Medicaid coverage and Medicare coverage, you are talking about potentially different price points. However, when Lilly came out and discussed their view of the market, what they are seeing currently, I think they really did dispel any major fear that we were going into, really a reversion to pushing on price. You actually had Dave Ricks, the CEO of Lilly, on the show after their earnings, and he defined this as maybe late in the first inning

in terms of the growth dynamic. They are not promoting this. There are many different options and optionalities of how they can grow this product going forward. Okay, so you're as bullish today as you have been, it sounds like, about GLP-1s. I believe that the GLP-1 class has multitude of additional areas

that they can keep moving into. And we're going to see that card turn on more indications and more potential areas for expansion going forward. Yes. What about health care as a space by itself? It's sort of it's in the lower part of the middle of the pack, if you will. Right. Yeah. It hasn't had a bad year. No. But when you look at nine point three percent year to date versus some of these other sectors, it just doesn't had a bad year. No. But when you look at 9.3 percent year to date versus some of these other sectors, it just doesn't really excite you. Yeah. Is that going to change? There's a little bit of an identity crisis in health care broadly. If we are talking about the pharmaceutical complex, especially in weeks like we had last week, I think there's an element

of the defense, the defensive nature of those companies that really stands out and stands true. And you saw that during a very volatile week, in fact, and the liquidity, the cash flow parameters around those companies. And then on the flip side, you have something near and dear to my heart, which is SmidCap Biotech. And it is almost the poster child of what we're seeing when we talk about the small caps. You were speaking to the guests earlier about that front, the volatility that you expect to see from the small cap universe is going to be just that and then add in the idea of the volatility of clinical trials and catalysts. And that's what Smidcap Biotech has offered this year. So extreme growth potential with a large amount of volatility and then the defensive

characteristics and nature of large cap pharma have been the barbell effect we're seeing right now. Where do interest rates come into this conversation, if at all, when you're talking about enormous sums of money that are being bet on these drugs eventually coming to market? Theoretically, you're going to have to borrow money at some point at what was high rates. Does that play into this picture? Absolutely. And I think one of the issues for biotech over the last number of years has been how it is the poster child for that long duration asset. Biotech typically is raising money consistently from the equity capital markets and investors to fund these trials. They are long term. It's not a fast adoption to be able to bring something to market.

It can take upwards of five to 10 years. So when you do talk about the correlation of the XBI, the biotech ETF, to the rates markets, it is real. It's an inverse correlation. And what we have seen historically in prior periods and what many are expecting going forward is that when rates start being cut, you will see a tailwind to the biotech sector. How active have you been of late in the space? Are you an active, you know, looker for names, a buyer? Give me a name from one of the most recent purchases that you've made. Yeah. So one name that's relatively new, I would say in the last couple of quarters, is based on a large theme that we've been following and it really is a cornerstone of biotech is the regulatory environment and the regulatory

environment in biotech is very much predicated on the FDA and when you see major changes or ways that the FDA is streamlining the ability to bring a drug to market you take notice. If there's new people at the helm, if there's new approaches to create pilot programs and we saw that in the rare disease and orphan disease category these are diseases that usually affect less than 200,000 patients the ultra orphan can be less than 20 15 or 20 thousand patients in the US and the question is how do you bring drugs to that market it's a very small market one such company that's doing something in this space is called Applied Therapeutics, APLT. And they may be a very

large beneficiary of some of these changes that are occurring. They are going in front of the FDA over the next couple of quarters with two different programs in the rare disease field. And it is incredibly volatile. It will have a lot of binary outcomes here going forward, but that's something that has definitely caught our attention for the potential outcome for patients here as well. Okay. A name, Syndax, I have on my list. Is that something you've owned for a while? We have owned it for some time. It is one that I absolutely believe is going to see some major inflection this year on the back of their two late stage programs.

And they are also going in front of the FDA regarding two different drugs in the oncology space. One is for pediatric AML, acute myeloid leukemia. They are set to get a decision before year end on that front. And graft versus host disease. This is a company that we believe has the potential for multi-billion dollar peak sales of these two products. And again, very importantly, the demand and the necessity is there for patients.

You still own Marist? I do. Yeah. I do. Still as optimistic about this name? Still as optimistic as ever. They're going to have additional data in the head and neck cancer space going into the end of the year. Again, the platform that Miris has, not only do we believe that what they showed in

their trial in head and neck cancer was a success, but we believe there was a validation effect, the platform they have in oncology in bispecifics. So very, very excited about what they're doing there. Thanks for coming by and visiting with us again. We'll see you soon. Very nice to see you. That's Michelle Ross joining us here at Post 9. Up next, the case for caution. Stocks lower after a very volatile week, as you know, on Wall Street. Rockefeller's Jimmy Chang is back with us today. He'll have his latest forecast for the market and the sectors he says are seeing some serious strength right now. We'll make his case after the break. We're struggling today to hold on to the momentum from late last week. Seesong a bit here as we head towards the close of trading on this Monday. Investors looking to this week's critical economic data, including CPI on Wednesday. Joining me now,

Post 9, Jimmy Chang of the Rockefeller family office. Welcome back. It's nice to see you. You say in the notes today that the market psychology has been altered. In what sense? Yeah, I think prior to the recent sell-off, there was this expectation of a Goldilocks environment with the Fed about to cut interest rates. At the same time, people expect a soft landing. But then we got a number of economic releases that tend to point to a somewhat weaker than expected environment. You saw the Citi surprise index already falling below zero for about two months now. And then on top of that, the trigger for the sell-off with the Bank of Japan, unexpected rate cut, along with a weak jobs data.

So that led to this so-called unwinding of the yen carry trade. But I think while that issue is put to rest for now, given that the BOJ has capitulated and indicated they're not going to cut interest rates, given the elevated volatility. I do think there's a sense of, you know, less conviction about the state of the economy. There's more concern that bad news could potentially be bad news for the market. Do you think that the upset last week in the market was warranted? Was it justified or was it an overreaction to, you know, let's be honest,

I mean, the labor market, I mean, the labor report may have been a touch disappointing, but it's kind of a stretch to suggest that it was really weak. Yeah. Still at a hundred and something thousand jobs. Right. I do believe that coming into July, the sentiment was extremely euphoric and you start to see a little bit of correction leading into month end. You saw the big tech selling off, you saw the rotationings to small cap stocks and back then they were also doing the Trump trade but since then a number of things have changed. I think the election is now too close to call. There are actually people talking about a potential blue sweep now with Kamala Harris gaining a lot of momentum.

So I do believe that the market was still for a pullback. And this was just a catalyst happening with the BOJ being given this unexpected rate hike. So that was an easy excuse. And I do think what happened on Monday was over down, especially that 12 percent drawdown in Japan that bounced back very quickly. And that was all tied to the yen's action. You point to the debate over mid versus late cycle. I don't know if you heard the conversation we had at the very top of our program with one of our guests making the argument that all cycles come to an end. And this one's probably getting

close to the point that it is certainly implying that we're more late cycle than maybe some would like to believe. How do you weigh in on that? Yeah, that's the big question right now, and there are no conclusive data at this point. We have very mixed data. If you believe that we're in the mid-cycle, meaning there are several more years of expansion, every pullback is to be bought because in that context, earnings will continue to grow. You're still in the middle of a bull market. If you're more cautious that we're perhaps close to the beginning of that late cycle or already in the late cycle, then we may be the pullback may be part of a topping process, in which case you want to get incrementally more cautious.

And again, at this point, it's hard to say because we do have additional stimulus coming into the economy. If you talk about the employee retention tax credit, the IRS just announced on Friday they're resuming payment of that very strong, very powerful stimulus, and that's coming to the rescue. Beyond that, we also have another $300 billion in the overnight reverse repo that will get shifted into the market between now and year end. So those will keep the market somewhat elevated.

But beyond that, I think it gets really tricky after the January election. Your positioning perspective sounds to me to be cautious. I mean, income-oriented investments are better than equities. You make the argument. Defensive parts of the market are better than perceived offensive parts of the market. MAG7 stocks are likely to go sideways. Have I characterized your view correctly? Yes, indeed. And that stems from the valuation differences. If you look at interest rates, we have normalized to the pre-grade financial crisis levels, and the Fed is about to start cutting interest rates. So that makes fixed income relatively more attractive. Equities on the index level still look pretty expensive on a valuation basis, and part of

that is due to MAC-7. I do believe that MAC-7 is likely to mark time for a while to let the earnings catch up to valuation. And at the same time, the other part, the rest of the market looks more interesting. And indeed some of these dividend paying stocks, telecom equipment stocks for example, you get P.E. below 10 times, you get 5, 6 percent yield. That combination is pretty attractive in a normal market. What kind of volatility do you think we're going to have between now and the election?

Was last week a warm up act for what you could have based on polling as we get closer to election day? You referenced some of the more recent polls, which suggest a much tighter race, if not a different potential outcome than some were gaming out not a month ago. Yeah, I do believe volatility will be elevated relative to where we have been in the first half. However, I doubt that we'll shoot up to 65 intraday like we did on Monday. Yeah, that was something. Right. But something between 20 and 30 is likely.

20 and 30 is likely. Let me ask you something. A week ago this morning, markets are going haywire. There's like a panic attack over just about everywhere. The carry trade unwind. We're worried about the economy. What was happening on the front lines where you were? Were you thinking this, okay,

this could be something more substantial than maybe we were prepared for? What was the note to clients? Put me inside the room. Yeah. So our stance was that as long-term investors, we're not going to look at the knee-jerk reactions in the market to certain catalysts. Our view has been that we're perhaps getting late in the business cycle.

We favor fixed income. Equities look somewhat more elevated on the valuation side. So it wasn't a surprise that we have a pullback. And in fact, our message was try not to catch a falling knife. But individually, as a portfolio manager on the equity side, that's the time you look for opportunities. Jimmy, we'll talk to you soon. Thanks for being here.

Sure, pleasure. Jimmy Chang. All right, up next, we're tracking the biggest movers into the close. Pippa Stevens is back with us once again. With that, what do you see? Well, Scott, one financial player is banking on another, taking a stake and sending shares, soaring the bank stock to watch. Coming up next. Kjell Andersen, FNK.no We're 15 from the closing bell on this Monday. Let's get back to Pippa Stevens now for the stocks she's watching.

Pippa? Well, Key Corp is the top performer in the S&P 500. The share is pacing for their best day since November 2020 after Bank of Nova Scotia took a 14.9% stake worth $2.8 billion in the regional bank. Keycorp CEO Chris Gorman telling CNBC it gives the bank strategic latitude to look at and restructure some of its balance sheet. And shares of Monday.com are having their strongest day since May, hitting a new 52-week high after the Israeli-based software company posted better-than-expected second-quarter results. Needham and Piper Sandler both boosting their price targets after the report, though shares up 12 percent. Scott?

All right, Pippa, appreciate that. Thank you. Pippa Stevens still ahead. JetBlue shares are pacing for their worst day ever. We're going to break down what's driving the stock lower today. We're back on the Closing Bell Market Zone. CBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, JetBlue facing its worst day ever, that stock is. Phil LeBeau is going to give us the details why. Julia Borsten on Disney's big theme park spending plans. Mike, I'll begin with you. It's clear we're not going to go in heavy until we get some numbers, whether it's retail or inflation or all the above. Yeah, it's going to

take a little bit of time and data to rebuild any conviction that we are on firm ground in terms of where the economy is headed. Obviously, nobody's saying soft landing is off the table. But at the July highs, you pretty much had 100% chance, pretty much priced into the consensus. So today's activity, it's definitely a little bit on the softer side, kind of a hangover from the rebound rally last week. You have a lot more stocks down than up. You have a lot more 52-week lows than highs. But it's low intensity. And every day that passes when you don't see that kind of price-insensitive mechanized selling

or anything like that that says there's stress in the system, I think you're kind of still in normal pullback zone where you need a little bit of reassurance about the macro, but it's not something where we're just running straight away from the credit markets. They keep taking on more new corporate debt, perfectly fine, digesting things in a normal way. So we do have the VIX popping up up 21 again as oil goes higher. That just could be flinching ahead of some potential geopolitical headlines. Yeah, I think we are readying ourselves for the possibility of some geopolitical headlines really any time. Exactly. So it's, again, yet another issue in the face of the bulls to try and—

An excuse to hang back, if nothing else. What do you make of some of the chip action today I find interesting? And not just NVIDIA, you know, AMD, Micron hanging in there pretty well. Yeah, there's a little bit of a return to what did win in the first half of the year going on in the markets here. Now, they had a 25 percent retrenchment in the sector. So there's plenty of room where it has to really rebuild and prove that it's more than just a reflex bounce here. So it's I think it's positive. I think that what's interesting is the doubts about whether the cloud platforms and the other investors in AI capacity are going to get a payback. It returns people to, well, all we know is they're going to be buying a lot of this stuff and

building for a while. So it seems like that's the sell side trying to push that line a little bit. Philip Bo, give us the details here on JetBlue. As we said, the stock's pacing for its worst day ever. And as we learned last week, it feels like travel stocks in general are guilty until proven innocent. Well, and this is a specific issue with JetBlue. They have been making moves in order to defer costs in terms of plane deliveries, cap expenses. They need to conserve as much cash as

possible and raise cash. And that's what they've done today. In fact, when you take a look at the debt offerings today, $3.21 billion in debt that they are going to be raising through three different offerings, including a convertible note. Now, most of this will be backed by the company's loyalty program. But it comes down to this, Scott. When you take a look at shares of JetBlue, and yes, they are on track for their worst day ever. What you're looking at is a company here that has had their credit ratings cut by Moody's and S&P, and they're expected to burn through about $2 billion in cash this year. So Joanna Garrity and her team are moving as quickly as possible to cut costs and at the same time build up as much cash cushion as possible.

Under $5 stock. Something to look at there. Phil, thank you. That's our Phil LeBeau following JetBlue. And what we've said could very well be the worst day ever for that stock. Disney, Julia Borsten, tell us what's going on here. Theme park enthusiasts are excited today. Now, remember, just last week, Disney reported a slowdown in its theme parks as part of its quarterly report. But at this past weekend's D23 fan event, Disney detailed its $60 billion 10-year plan to make parks and cruises a key growth driver for the long term. Now, the Magic

Kingdom is expanding with a new Villains Land and a Frontier Land upgrade, while California Adventure is building two new attractions. Disney just announced four new cruise ships in addition to four in the works and five already at sea. Morgan Stanley rating the stock overweight, flagging the Experiences Division's history of high and rising return on invested capital. And building on the success of this

summer's franchises, films, franchise films of the seven movies that Disney showcased at D23, five were sequels, including sequels to Toy Story and to Frozen. And as Disney works to diversify away from the struggling linear TV business, we're seeing its bet on Epic Games with more details coming out on his plan to integrate characters into Fortnite with some new launches as early as this week, Scott. Julia, thank you. Two minute warning. Julia Borsten, thanks for setting us up for that. I'm looking at yields. Yeah. You know, they're down obviously across the board today, other than at the very, very, very, very short end of the curve. Are we in a situation

where falling yields for the meantime reviewed as a negative because they're reflecting some caution in the market? I think if they're falling quickly, if they get toward the recent lows, which are under 3.7 for the 10-year, probably so. Probably a beneficial effect today of the lower inflation expectation numbers, the three-year inflation expectations really coming into line. And so the market's positioned for benign inflation data. But I definitely don't think you want to root for a huge rally in bonds. The good news part of that is, you know, in the last several months, bonds are kind of acting as the proper offset to equity risk the way that they, you that they do in the textbooks.

And so if you have a little more turbulence in equities, presumably your bonds are going to hold up or even appreciate a little bit here. I don't think it's going to make up for any possible further correction if we go back toward the lows, which is only a few percent down from here from last Monday. But it is something that I think helps act as a buffer in the overall market. So tech number one today, it's an NVIDIA and Apple-led story there, utilities. So as you said, a touch defensive. It's energy in its own way defensive because of concerns geopolitically. Yeah, defensive and quality and consumer cyclicals.

I mean, Disney not getting a bid on that news. It shows you if you really do have a strong view that the economy is strong here and it's going to re-accelerate, so much stuff looks cheap, but nobody can really make that leap right now. We're going to have to hear from Home Depot and Walmart to get a better sense. It looks red mostly today. You see the NASDAQ, though, looks like it's going to eke out a gain here. That'll do it for us here at the New York Stock Exchange. We'll say volleyball.

Our ladies, the silver medalists, are doing the honors today. It's great to have them here. Congratulations. I'll see you tomorrow. End of overtime.