Closing Bell - Closing Bell: The Rally’s Resiliency 7/18/23

Episode Date: July 18, 2023

The S&P hitting another new 52-week high today. So how long can the bull run really last? Alger’s Ankur Crawford and Wealth Enhancement Group’s Nicole Webb give their expert takes. Plus, Schwab’s Kevin Gordon gives his forecast for earnings and the Fed. And, Plexo Capital’s Lo Toney weighs in on Microsoft’s record high… and what it might mean for the broader big tech battle. 

Welcome to Closing Bell. I'm Scott Wabner, live from Post 9 right here at the New York Stock Exchange. This make or break hour begins with another new high for stocks, and whether the fear of missing out might just keep this rally going for a while. We'll ask Aldridge's Ankur Crawford in just a moment. In the meantime, your scorecard with 60 minutes to go in regulation. The Dow up sharply for most of the day, better than 300, led mostly by, well, Microsoft's having a great day today. Another AI announcement, another gain for the stock, and those shares have been surging. UnitedHealth continuing its post-earnings rally, getting another upgrade today as well. There it is,

up nearly 3.5%. And a strong day for Morgan Stanley and Bank of America after those companies reported earnings. The CEOs on the network today, Wall Street liking what they had to say as well. Nice gains for both of those. NASDAQ gets higher too. A mixed day though for some of the more popular mega cap names. There's the NASDAQ. It's accelerating now almost at the highs of the day, near 1%. It leads us to our talk of the tape,

the rally's resiliency. The S&P hitting another new 52-week high today. The big question, of course, how long can this bull run really last? Aldridge Anka Crawford, I mentioned she is here at Post 9 with me. There she is. What's the answer? I mean, the market doesn't seem to want to go down. Yeah, and in part, it doesn't want to go down because the numbers for 2024 are moving up. As we go through this earnings season, the 245 that the street has for S&P earnings in 2024 likely moves higher. The multiple moves higher as the market, as the numbers move higher. I've heard from some people this week that the bear story's old. It's tired. It's like

yesterday's story, right? We've sort of turned the page. You believe that? I think that we have to take a hard landing scenario off the table. And in part, as we approach 2024, it becomes more difficult for us to believe in a downward trajectory to earnings. So if you look at, you know, a lot of the tech earnings, for example, we've troughed and now we're starting to reaccelerate and grow again. That is a very different scenario than where we entered the year where everyone thought earnings were just going to fall off a cliff and go to 180 on the S&P. The problem with that is that multiples have expanded. PEs have gotten richer in that period of time that you cite. We're not too expensive on some of those tech names now? Because that's the criticism and the pushback you get

is like, yes, these are the places to be and for good reason, but now they're just too rich. Yeah, and I would remind you, NVIDIA has always looked rich. At 150, it looked rich. At 300, it looked rich. At 460, it looks rich. And the numbers have followed suit.

So the stocks went up before the numbers went up. And so I think we're going to see that kind of revision again with Microsoft, with Meta. The numbers will go up. So the multiples will then look cheaper than they are today. To those who say it's too soon to say all clear, what's your response to that? Because there are a number of notes that have come out and said, OK, the path to a soft landing might be wider. The time for a recession may be further, but it's still hanging out there and it's way too soon to say everything's just great again.

Yeah, look, I don't think anyone can can sound the all clear signal, but we are coming to a point in time in 2024 where there's a lot of government stimulus that's coming in, whether it's a CHIPS Act, the JOBS Act. And I know this is a bit trite for everyday people are talking about Gen AI. The impact that Gen AI is going to have on the economy will start to bear fruit, I think, in 2024. Mega cap techs are going to take up their CapEx numbers, which will have a kind of a velocity in the economy that I think will be surprising. Overall, for earnings for tech, do you think the bar is higher for NVIDIA?

I'm going on stocks that you like and I know that you own. NVIDIA, Meta, Microsoft. Now, NVIDIA's up a ton. Meta's up a ton. Microsoft's not exactly up a ton. Meta is up a ton. Microsoft's not exactly up a ton, but it's up a lot. So theoretically, the bar for all three would be kind of high. Who do you think is the highest? Look, I think that the bar is high going into this earnings season.

Do I expect that the stocks can be up 10, 20 percent off earnings? Probably not. That's what we said before NVIDIA reported last time, right? Look what happened after that. That's right. And I don't think there's another number of vision up that for any of these names that is that significant in any one quarter. But I would focus on where the 24 numbers are going for each of these companies. And as long as that keeps rising, it will support the stocks. As long as rates don't rise as well, right? I mean, do you think that's part of the story here?

That, you know, what, I don't know, two weeks ago, we're talking about the 10-year at 4%. And now we're below 380 the last I looked. I think it was something like 378 so rates have come back down again how critical is that to your tech story i think rate stabilizing is more crucial to the duration and buying duration story versus you know we we went from 0% Fed funds rate to 5.5, 5.25, that was a bigger impact to the duration on names than I think what the 10-year is doing in the near term. Are we getting past the stage as well where the competition elsewhere just isn't that great anymore, that it's too risky in some sense to be out of the equity market, whereas before

there was too much risk in. You go money market, 5%, treasuries, 5%. At the shortest end of the curve, you were getting that. What about now? Risk reward for equities versus elsewhere? So for a long time, we had this idea of TINA, where there was no alternative to equities because of the bond market. I do think that there is more competition for each dollar now in terms of equities and bonds. However, bondholders got taken out last year, you know, it's pretty high still.

The free cash flow yield on the market is two and a half to three percent. So, you know, there is compelling risk reward in the market. And I do think it's a stock picker's market, and you have to be selective. At what point do you think, and maybe we're in it now, you tell me, fear of missing out, this FOMO market where too many people were offsides, bad positioning, and now some of that money is finally coming into the market. And that's the real sort of engine behind what could be the next leg if we in fact have one. I do think that that is happening. Funds had a lot of cash. There was a lot of

retail money on the sidelines. And that is coming into the market as the market goes up every day. Again, if you look at the ping pong, and we talked about this ping ponging range of the market, $3,600 to $4,200. Well, maybe that new range is $4,000 to $4,800. Well, that's the thing. It's like, you know, the range keeps moving higher, that the market is taking the range higher. People are raising their targets as a result of maybe a better late than never. But people are raising their targets. Well, when the numbers are moving higher, the market will move higher. Right. That is just a natural phenomenon if the multiple stays the same.

So, you know, I do expect that the market could very well go kiss the previous highs. Wow. This year? This year. Wow. You get new highs this year. S&P 4800 north of that. That sound unreasonable? Well, I think I think we could get there. And in part, again, numbers are moving higher. The multiple and the market can move higher. All right. Nicole Webb of Wealth Enhancement Groups with us as well today. It's nice to see you again. What do you think about that call? I would say Wealth Enhancement Group's stance is that we are in the exact same camp. I would follow all sentiment that as the multiple moves higher, the numbers move higher. It is the natural phenomenon of the market. And from our portfolio positioning all year has been, as we see stability regain in the trajectory of where rates are headed,

we have a positive outlook. And the really friendly component to all of this that sits below kind of this bifurcation between what we talk about in terms of economic threats and then where the market has been headed is that relative outperformance for being in risk assets versus risk free at five has driven more of this money into the market. It's perpetuating this idea that you are paid to be risk-off and that it's more expensive to be on the sidelines, which is helping move this money that we knew was parked, waiting for entry into the market. And from our perspective,

the faster we get this money to work, the faster we regain stability in pricing and this ability for us to stay sticky in these higher range bans. And all of that is really working towards fruition. And so we see legs to this market forward. You know, when I hear more people start to get more bullish, I feel like there's nothing like a bull market for people to make people more bullish.

The big question is, is it too late to get all bulled up, given the run that we've already had and the risks that still remain? The interesting thing about the market is known risks are generally priced into the market in good time. And to your point, Scott, there's been a lot of positive narratives that have come to fruition in 2023. The story of AI, the story of tech cost cutting. We think about travel, leisure, the strength and resilience of the consumer. Look at Home Depot lows. Fine, if I can't switch homes, then I'm going to invest in my current home. This next leg, well, from our perspective is we start

to actually look at consumer goods again. We look at these companies who have been beat up by underperforming sales, the change in the psychology of the consumer to invest in experiences versus goods. But again, the more resilience we see in the consumer, the more we believe that they will start to even out how they spend money. And so there are still these really beat up names, beat up because of inventory, beat up because of consumer spending, you know, the Targets, the Nikes, the Estee Lauders of the world, where we actually see, you know, kind of forward momentum there, which brings us, you know, to the stock pickers market, the narrative of what is still relatively beat up and available out there and on trend as we look forward.

Ankur, you know, Bob Bopazani published a piece today in which he said, bullishness is rising and that's not necessarily good. And he points to a Bank of America fund manager survey. More than 200 global fund managers, 68 percent percent expect a soft landing. Only 10 percent say they're underweight U.S. stocks. You get the point that he's sort of making that once, you know, everybody gets in the pool, the pool's a little crowded and it's not necessarily the greatest place to be. What's your opinion of that? Well, first, everyone has to get in the pool and then we can decide it's too crowded. So if you look at funds today, I do think they're still underweight. Some

of the big tech names that are moving, that are working against them in the benchmarks. I don't think everyone is overweight the digital advertising names yet. I don't think they're overweight Amazon yet. So I still think there's room to go. But first and foremost, we should look at the fundamental valuations on these names. Well, I mean, let's look at valuations, though, on the whole market. You don't think the current 19 times is too rich for the S&P, which is well above the historical average? Well, according to, you know, 20 minutes ago, the S&P, the street earnings were at 245 for 2024. That's an 18.3 multiple on the market. I don't think that's too rich.

Now, is it more fair value? Is there, could we run to 20 times? We could run to 20 times, especially if that 245 is moving up. If I told you next year was 260 and not 245, you know, you would tell me the market's going up. Sure, but some people would that 245 is moving up. If I told you next year was 260 and not 245, you know, you would tell me the market's going up. Sure, but some people would say 245 looks like a pipe dream at this point. I mean, we're still expecting an earnings decline this quarter.

So, I mean, we still have to get to a point where we really think that that's a realistic number. And you do? 245 sounds legit. What I would say is we have to start with baby steps first. This earnings season, I believe numbers in aggregate for the market will move up. Our 220 or 219 on the street will highly likely move up. And in part off the backs of the earnings for 40% of the market,

which is all the digital advertising and the tech names. So given that, we'll compound into 2024 and that number should rise as well. What do I make, Nicole, of the fact that and it's not getting talked about that much because tech has sort of sucked all the air out of the room. Industrials, some of these cyclical areas like transports, transports have been at a high. Is that any kind of confirmation to you that this is, in fact, a more healthy market than some would otherwise have you believe? Absolutely. I mean, you hit the nail on the head for us. We led with economic data that suggested that you still had these cyclical and credit-sensitive areas of the market with high demand. We're getting a read-through

from the banks that have reported thus far into loan demand. We see some of these incremental costs come down when we think about aluminum, costs of transport. All of that in aggregation together for us supports this short-term bull narrative where there is a lot of momentum in the market. And so, yes, you are moving towards greater consensus that we have dodged the imminent recession that we have been talking about ad nauseum. So as we start to see more support, and yes, it is not until the pool is completely full that we can discuss if it's too crowded, but we believe that earnings revisions, we are going to continue to see posted better than expected. We're going to see forward guidance that takes the aggregate of this data, supporting strength

and resilience, not just in in labor but in how the consumer is responding and then how businesses are adjusting as a result of ai and then also watching and learning from the narrative of your largest companies cutting costs and seeing incremental benefits that that really invest back into the business all of this plays into there is still room to continue forward. So, Ankur, lastly to you, I'm looking at the Nasdaq. Can we show the Nasdaq intraday, guys, please? Because it looks to me like we're at the highs of the day. You know, an index in a sector that was sort of lagging the rest of the market today, there you go. It's better than 1%. Let's see Apple as well,

because I've just noticed, too, that on an intraday basis, what was a negative stock looks like it's trying to go positive as well. And there you go. It is positive now. So we're going to start really talking about these companies in the next couple of weeks. They're the ones who really have to live up to the hype. Right. So I'm going to point you to what Satya Nadella said today at Microsoft Inspire. Satya talked about how Gen AI was going to add $10 trillion to global GDP, a 10% increase on a relative basis to GDP over the next decade. And I think that's kind of the vision that we have to look to as we think through where these where these companies can go and the earnings power of these companies and these businesses over the long term. You don't often see Microsoft with a five percent gain in a day. It just doesn't tend to move like that.

And it's in part on what you're talking about, what Satya Nadella had to say today at that event. And that stock really started to take off. So it's at the highs of the day, and then we see tech as well following suit. Yeah, and I think we were talking about these numbers moving up. One of the big surprises out of the event was they introduced Microsoft Copilot at a $30 per seat per month pricing. The street is looking at $8 to $10 per seat per month. So automatically, that's $20 extra per seat per month in everyone's models. That pushes the numbers up, pushes the stock up. We'll leave it there. It's a great place to leave it. Ankur, thank you. Good to see you. Nicole,

thank you as well. We'll talk to you soon. Let's get to our Twitter question of the day. We want to know which stock is more in danger of a post-earning sell-off, Netflix or Tesla? You can head to at CBC Closing Bell on Twitter. Please vote. The results are coming up a little later on in the hour. In the meantime, a check on some top stocks to watch as we head into the close. Christina Partsenevelos joins us now, as always, with that. Christina. Thank you, Scott. Well, Pinterest jumping higher following an upgrade to outperform from Evercore ISI. The analysts predict digital ad spending will stabilize and there might be indications of a recovery for this stock in the second half of the year. And that's why it's up about four and a half percent on this bullish call.

You can see it came out just in the afternoon. Meanwhile, Pelagis, let's switch to that. Pelagis shares are dropping despite the company posting a record quarterly earnings report. And they even boosted their outlook for the year. But investors are focused on the fact that the Industrial Real Estate Investment Trust, which is Prologis, lowered its rent growth forecast. They're expecting vacancies to increase in the second half of this year. Shares are down almost 4%.

The Prologis CEO will be on the show in just a little while to talk about the latest quarter and what the company plans to be doing or focusing on going forward. Scott. All right. Good stuff. We'll see that in overtime. Thank you very much, Christina. We're just getting started here. Up next, ruining the rally. Stocks are higher across the board as we head towards the close.

Our next guest, though, thinks this next leg higher could be in jeopardy. Schwab's Kevin Gordon is back. He's been cautious. He'll talk to us now about why it sounds like he still is, even in the face of this rally. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back to Closing Bell. Stocks higher so far this month. Investors cheering softer inflation data that could give the Fed reason to pause soon. Morgan Stanley CEO James Gorman giving his Fed predictions on CNBC earlier today.

Another one based on the recent numbers. It's hard to argue for more rate increases, but a counter number could push that. You could get one more after this. I think the odds are definitely against that. Those who are calling for a rate cut this year, that won't happen. Our next guest says the Fed won't be as quick, won't be as quick to as investors to declare victory, excuse me, on inflation. Kevin Gordon, Charles Schwab, senior investment strategist, is with me now. You know what the first question I want to ask you is because you've been cautious for a while since we've been having these conversations.

What it's like to be cautious like you've been in the face of the market, which goes up in your face almost every day and looks like it wants to keep going that way. What's the psyche around that? Caution has lessened as breadth has started to improve. So over the past couple of months, I think June was a pretty important turning point, if it holds, where you start to get more of a widening out in breadth. I know the last time we talked about this, I sort of mentioned a checklist that you kind of need to start seeing and checking boxes off of to determine whether it's a healthier bull or a durable bull market. And you started to see that in June. So number of new highs for number of new 52-week highs for the S&P into double digit territory in a percentage basis. You can start to see that hasn't yet made its way to the Nasdaq or the Russell 2000,

but participation is getting a little bit better there. So I think the caution can come down as that breadth improves. And that's what you look for when you get nine months off of a major market low. I think that's really what you have to pay attention to. But you still don't sound like you're fully on board with this bull market. I mean, let's just call it what it is. Yeah. Oh, yeah. More so, I would say more so on board over the past month because of the participation, because of the broadening out. And I think now you probably need to see more of the confirmation from an earnings perspective. And hopefully you get a better trajectory in Q2 like you did in Q1. Probably still going to end up down unless you get some miraculous move higher. But I think part of the

reason that the market did well in the first half was because it sort of correctly looked at this improvement in the earnings trajectory over the next 12 months. So if that holds, then I think you probably have more room for this to run. And especially as some of the air gets taken out of the top heaviness part of the market, and then you get more participation under the surface. That's what we've been looking for, and it's starting to happen. of the air gets taken out of the top heaviness part of the market and then you get more participation under the surface. That's what we've been looking for and it's starting to happen. You think the bear case has played out or not?

Depends on, I think, which part of the market you talk about. But I think the bear case for the economy, probably not as much so because data, at least in the near term, has looked better. Probably not recessionary, but our view has been, you you know you push out the recession so called the NBER declared recession further into the future it's probably a worst case for the market as you go further into the future better now because you can have rallies when the you know yield curves inverted you can have rallies when you're in you know a deeper earnings recession so I wouldn't

use that specifically just to say that the markets going to do poor I feel like you know you're in some respects representative of a number of people who've been cautious, who look like they're looking for the towel to throw it in, throwing the towel on being negative. Is that fair? I think from a broader investor perspective, you started to see it. And you were just talking about sentiment at the open of the show. I think that's an important thing to watch for as you get a lot more people now kind of piling in. We had it on the attitudinal side of sentiment.

Now it's starting to happen on the behavioral side where flows are actually starting to move back into equities, really embracing a more risk-on message. Is that good or bad? You know, in and of itself, not bad. Sets you up for more vulnerability in the face of a negative catalyst. So to the extent you get something earnings or Fed-related, then, yeah, maybe. That just sets you up for vulnerabilities. By the way, it works on the downside too. So back in October, and we've talked about this, when you have conditions and sentiment that are as dour as they were, that sets you up for a bit of a bounce and a strong bounce in the case of October, especially in the cap weighted S&P. So I think it works in both

directions, but frothy sentiment in and of itself is not going to be the thing that you should use to just turn automatically bearish on the market. Does the Fed burst our bubble at the next meeting? Because, I mean, it's not like we think they're going to go at the next meeting. The market doesn't even seem to care. And I guess the market doesn't think that they'll go again. But even if they do, this doesn't look like a market that's much upset about anything. You mean go again after July? Yeah. Yeah.

I think, well, you know, the Fed, for all the, you know, flack they get, I think they do a pretty good job at kind of guiding the market to where they're going to go meeting by meeting now. That's how it's working. So I think July is probably baked in, barring some major surprise between now and then. But I also don't think, you know, from this financial conditions perspective, them trying to really put financial conditions, you know, back down. I don't think that the market-based financial conditions indexes, and Powell has alluded to this most recently, I don't think that's what they're specifically looking at. They're looking at broader metrics, whether it's, you know,

percentage of banks that are tightening standards, whether it's, you know, access to credit on a small business level. They're taking a broader view. I don't think they're just looking at the stock market and saying, oh, because equities are higher, we have to bring it down. Barring some, you know, major resurgence in inflation, which thankfully it looks like we're on the downward trajectory in a firm sense. What's the biggest risk, do you think, in the market right now? Earnings? I'd say near-term sentiment and then if you take some sort of negative catalyst, maybe in the form of earnings. So if you combine the two, I'd say near-term sentiment and then if you take some sort of negative catalyst, maybe in the form of earnings.

So if you combine the two, I would say— You mean—hold on. You mean sentiment getting too positive, like too much euphoria? A little too much euphoria mixed with maybe a miss on earnings in terms of Q2 not looking as good as it was in Q1. Because you have to keep in mind, too, for all the moves up in estimates for all of 2023 for earnings, all of that came from just Q1. It wasn't carried through from the rest of the quarters. So if you get that similar trajectory in Q2, I think it's a positive

signal. And then if that carries on to the third and fourth quarter, I think that's great too. One of the risks now that we're kicking off the second half of the year, I would just look to, and not in a dire sense, but I think this expected resurgence that you get in 2024 earnings doesn't really match with, I think, a sub subtrend growth environment that the Fed is looking for. So maybe that's where you get more of a kind of a pain point for them. I mean, we just had a guess before you suggest that 245 of earnings next year seems reasonable. I mean, it could be, but I also think it's pretty, you know, that's really far out. I mean, look how much earnings have been adjusted just throughout the course of,

not even since October, the October low, but just year to date. I mean, you've had significant revisions down in areas like tech. You've had significant revisions higher in areas like communication services. So I think you have to kind of take it quarter by quarter because, you know, it's a tough, I mean, it's just a murky environment for companies in general. So being able to guide really well a year out, I don't think that's easy at all. Microsoft reminds us today of what this AI hype machine is all about. Hype, hope, and in some cases backing it up. The stock's up near 5%. What does that mean just going into earnings for tech specifically given the run in those stocks that

we've seen? Yeah, I mean, I get the hype around AI in general. I think actually one of the mistakes you could probably make in looking out over the long term would be just describing it to only the tech sector. I think you can apply it. I mean, clearly the technology is helpful to sectors like ours being financials, industrials. I think it's part of the reason you've started to see breadth widen out a little bit, not just within tech. I mean, tech and industrials have some of the best breadth profiles right now amongst all sectors. So I think the mistake would be just thinking it's only a tech story and not investing in any other part of the market because of that.

I think you kind of have to broaden your lens a little bit. We'll see you soon. Thanks, Scott. All right, Kevin Gordon. Thanks. With Schwab joining us once again here at Post 9. Up next, Microsoft. We just mentioned it.

A new record high. We're going to drill down on the details behind that major move, what it might mean for the big tech battle. We'll be right back. The S&P 500 tech sector pacing for its longest monthly win streak now since early 2014. That move being driven in part by today's Microsoft announcement. The stock hitting a record high after the company gave new details on pricing for its AI products. Joining me now with his read on all things tech, CNBC contributor Lowe Toney of Plexo Capital. Welcome back. It's nice to see you.

Good to see you as well. Microsoft, I guess, just reminding us all that they're in the driver's seat, it would seem, as it relates to AI. That is true. Or maybe the chat GPT, maybe the product manager said, hey, chat GPT, the street thinks you should be 10 bucks a month. What are your thoughts? 30. You know what? And it's not lost on me either that as we see those shares higher, I'm looking squarely at Alphabet, right? That stock's in the red today. And to my guess, my earlier point, this alleged arms race between the two is Alphabet closer to Microsoft. Or is Microsoft just still with announcements like they did today? Just keep telling you why they're ahead.

Yeah, I think when we look back, we saw some of the data that showed that the adoption of Bing had slowed somewhat. And I think that offered a little bit of hope. But look, Microsoft really keeps bringing it. We've heard everyone in earnings calls talk about the promise of AI, how AI is getting incorporated into products. But now Microsoft is showing that they're going to be really aggressive on monetizing. So, you know, this is yet another step ahead that Microsoft is taking in the market. You know, as the stocks go up, in many cases, these valuations keep growing, too. The multiples get richer. It's largely why we're here. Multiple expansion. How do you assess whether valuations have gotten a little ahead of themselves or a lot, for that matter? Yeah, you know, it's really

interesting. I think one of the things that we need to look at, especially if we're going to talk specifically about AI and Microsoft right now, is the adoption that will happen as a result of this new pricing. You know, the Microsoft sales team has always been very aggressive in how they price things like 365. And now we need to see, you know, will the market adopt this? I think there are some very compelling use cases. And I think one of the things that might have also gone a little bit unnoticed is how Microsoft is using bringing all these services to the cloud as a carrot to bring people from the on-prem world to the cloud. Because those capabilities from the AI co-pilot won't be available on-prem. But yes, back to your question, we need to see the monetization happen to justify these ever-increasing prices. Well, how soon do you think we'll start seeing that, right? At some point, Wall Street says, we'll give you the benefit. We say now, we'll give you the benefit of the doubt.

And that's why the stocks go up. Valuations are where they are. But at some point, the proof has to be in the pudding. What kind of runway are we talking about before we see tangible results? I think the next two quarters is about as much patience as Wall Street is going to have. Wall Street has shown patience in trying to better understand how these companies are going to incorporate some of these new technologies, specifically AI. And now I think we're going to want to see that. Perhaps we'll give runway to companies that we don't deem as particularly tech focused, although you could argue every company is a tech company now. I think first, we'll want to see the big tech or the magnificent seven for the next two quarters and see how the

performance goes. And then I think we'll look to see what some of the other companies are doing to incorporate these changes in the technology landscape to be able to accelerate their businesses. The other thing I'd like your take on, because you got such a firsthand look at it, is the state of the so-called IPO ice age. And whether you think we're closer to a thaw. We'll just, where are we?

Last time I was on your show, we talked a little bit about this and, you know, I think I'm going to stand firm that we're going to, I believe, see a little bit of an opening in Q1 of next year. I just don't see how it could possibly happen. We're about to enter, you know, the summer months in full force with August coming up.

So there'll be a little bit of a window in between the holidays. But I really think that we'll look to see how earnings play out. Look, we also are seeing a much more broad based rally within the stock market. I mean, you know, at first it was really driven by the tech stocks and the tech stocks were reacting primarily, I think, to the data that we're seeing around inflation. We'll wait and see how the Fed looks at that. But look, now we're seeing a broader based rally to show that this isn't constrained just to the tech stocks. I think that also bodes well for the overall market and the IPO market thawing a little bit, even though most of the IPO pipeline are going to be those tech companies. I think the market kind of seeing that there is support

to be able to increase valuations more broadly beyond tech is a good sign as well. When startups come to you with their hands out, what's your reaction today relative to, say, excuse me, eight to 10 months ago? Yeah, it's a much different environment. I think although there are no hard and fast numbers for those early stages of investing, it's more of a feel for how the company's progress has been. There is no question that we have definitely tightened the ability for companies to be able to raise money as quickly as they had in the past, the amounts that they had raised and the associated valuations.

I think this actually bodes well. It'll be a little bit of a psychology reset for founders. But at the end of the day, we'll see fewer companies getting funded. Companies that probably should not have been funded will not get funded in this new environment, meaning lower amounts of competition for the true winners, both in terms of acquiring customers and also getting employees. So I think overall, this is a good situation. And back to that psychology for the founders, a lower valuation takes a lot of pressure off of them in being able to have more optionality and to have a little bit more patience with

the business model. Yeah. Good to catch up with you again, Lo. We'll see you soon. Thanks so much. All right. You bet. That's Lo Tony joining us once again.

Up next, we're tracking the biggest movers as we head into the close. Christina Partinovalos, of course, standing by. Christina. Cracker Barrel gets a new CEO. Novartis forecasts strong sales ahead. I'll explain all the details after this short break. We got almost 15 minutes before the close. Christina Partinovalos has the stock she's watching.

Christina. Well, for the second time this year, Swiss drugmaker Novartis raised its full-year earnings forecast driven by strong sales and margin expansion. The board also greenlit plans to spin off its generic medicines unit called Sandoz in Q4. That's, of course, pending shareholder approval. The stock, though, is probably also popping because of the newly announced $15 billion share buyback for this year, up about a little bit over 4%. Let's switch gears

completely and talk about pharma. Shares of medical device maker Massimo forecast a lower than expected sales number for its second quarter. Why? Hospitals are cutting back on equipment spending and they're also dealing with increased personnel costs and that's why shares are down, look at that, over 20% lower. Last but not least, Cracker Barrel shares are jumping nearly 5% after naming Julie Fels Massano as the company's new president and chief executive officer. The former Taco Bell executive will take over for outgoing CEO Sandra Cochran, who will be departing the role in November following a transitionary period. She was at the company for 12 years, so it is a change.

Shares are up almost 5%. Scott? All right, Christina, thank you very much. Christina Parts and Novelist. Last chance to weigh in on our Twitter question. We asked which stock is more in danger of a post-earning sell off Netflix or Tesla? Both up big time this year. Head to at CNBC closing bell on Twitter. The results after the break. The results of our Twitter question, we asked which stocks are more in danger of a post-earning sell-off, Netflix or Tesla? I was hoping we were going to get one or the other. In fact, we are basically split as both stocks have risen a lot. But right now, it's Netflix in the lead, 51 percent. Up next, shares of Schwab shooting higher. We drill down on that move and more in the market zone.

All right, we're in the zone, the market zone. CNBC senior markets commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, the outlook for the banks is financials earnings draw to a close. Kate Rooney joining us on Charles Schwab's big rally today. Micah, turn it to you. We're going to look at the highs of the day. We're certainly staring at them in the NASDAQ. Yeah, for sure.

Getting a little bit melty. You know, we've been waiting for that kind of a moment. When Microsoft is able to add about $150 billion in market cap on a headline. And by the way, it also tells you why something has a $2.5 trillion valuation in the first place, because if they're charging $30 per user of this new AI twist on 365, there's 350 million users of 365. You don't have to have that many. Take it up. My point is, you can just do the math, and the breadth of these platforms is so big

that somebody can make an excuse why we have to buy it up here, even though it's already 30 times earnings. So I think that's kind of making its way through a lot of the NASDAQ. Almost all the earnings forecast for this year started to go higher around March 31st. So we're seeing that effect take place. I do think we also have this magnetic effect of, you know, the monthly expiration on Friday, this idea that people still have to turn cash into equity exposure at some level. And, yep, we're getting a little bit, you know, kind of greedy in the video game stuff is starting with the intraday options chase and all the rest of it. But you also have other things working, such as banks

looking like a real bottom is in. And as you said earlier, the industrials helping out. Well, because for banks, the earnings coming in mostly above estimates. And top CEOs were on our network today offering a cautiously positive outlook for the industry and the economy. Here's Morgan Stanley's James Gorman and Bank of America's Brian Moynihan. What they told CNBC earlier today. I think we bottomed in this business, you know, four or six weeks ago. Now, how much it improves from that for the rest of the year is unknown. Next year, definitely a pickup. So I think, you know, and I'm seeing it with the conversations I'm having with other CEOs.

We just felt like, you know, April was weak and first half of May also weak. And then it started picking up second half in June. Consumers are spending, they're employed, they're earning more money, and they do have a lot of money in their accounts left over. The question is, if times get tougher, will they, will there be less employment, more unemployment, will there be more layoffs and things like that? Let me make it what they said. I mean, they're reasonably, especially Gorman, I thought was reasonably optimistic.

People have jobs. Wages are going up now at a faster pace than inflation is. Sure. That's why they're having the tone that they do. I mean, and of course, Morgan Stanley's got the window really on the wealth effect flowing through their own bottom line. Bank of America, you know, in one hand, essentially ratifying what the aggregate numbers are telling us in terms of incomes and jobs and consumers and the relatively low debt burden still in terms of the actual interest service for now. So I think it's positive. I think the question is, are they going to be running their businesses as if they're assuming that those good times last, in which case you might be a little bit freer with lending, in which case you might be adding a little more risk to parts of the business and even

holding on to more people. I'm not sure that's the case. I think they're more just saying we don't see any blowups in here. And bigger picture, you know, we were talking about it late last week. If the rest of the market's somewhat correct about a soft landing, the banks don't belong down at those levels of valuation. So now you're having some of that getting made up in the way the stocks are going higher. Again, the bear case becoming, again, harder when you have now, if the banks are going to start working,

when the transports are working and industrials are working, you have other things to talk about than tech. I think the bear case, based on the internal market action itself has become much tougher. Up 25% in the S&P from below. You have not really seen a rally like that that has reversed in history. And then, as you say, broadening out, things moving in the same direction, smaller stocks working. It could all be maybe just a final culmination of this leg of the rally where we say, let's buy the laggards,

and then you have some kind of an air pocket down the road. But for now, it's tough to find too much direct fall. All right, Kate Rooney to you. Schwab, what a great day. And Interactive Brokers, talk to me about those. Yeah, Scott. So Charles Schwab, we had this morning reporting really surprising to the upside. Pretty bright outlook from executives. That's what you're seeing there in the stock lifting. Schwab as much as 13 percent or so today. Revenue was down 9 percent in the quarter, but that was a lot better than expected. Net interest income and interest expenses were also a beat in a trend that had been weighing on Schwab called cash sorting. That's when customers essentially move from lower yielding sweep accounts to higher yielding options. That's moderated. Executives also noted a deceleration

of outflows. And as Schwab's CEO talked about on the earnings call on CNBC earlier, he called it a fog that's been around the company, covering up progress around things like a successful integration of TD Ameritrade. We've seen that lift in the stock today. The optimistic tone comes after a tough year for the discount broker. The street had concerns about its balance sheet and outflows after the fall of Silicon Valley Bank and some of the regional lenders. CEO earlier on CNBC noting more investor optimism and exposure to stocks that could bode well for interactive brokers. We've got reporting in a couple minutes here, Scott. All right. Yep. Nice. Kate Rooney, thank you very much for that. You just heard the sound of the two-minute warning. We do have the Dow up 364. We said the Nasdaq sort of ramping as we headed towards the closer, up better than 1%. There's

your Dow picture. And Mike, you know, rates, we talked about it on the half. They keep cooperating too. They're going in the right direction for the bulls. Yes. And it's somewhat interesting to see it play out over the course of a day where we got some softish economic numbers in the morning industrial production retail sales not great really at the headline level yields back off and then the stock market says oh that's a little bit of an opening for us to actually add more market cap as opposed to be concerned about the economy so right now everything is sort of working in concert at this point you know oil can't get out of its own way so all this stuff is in a good spot. It does seem as if it gets a little mechanical at these levels.

If you looked at the angle up in the morning in the Russell 2000, it seems like people are just sort of, you know, trying to play the momentum and not be the last one in. And I think that's been working for something. But I'll keep pointing out, we were 300 points higher, 6% higher on the S&P 500 in January of last year. The economy and earnings were lower. There's nothing weird about us getting back to those levels when the Fed's almost done and the economy still hasn't buckled. I was also thinking a little bit this morning when you saw the retail miss, the market taking that as a positive. It's like, all right, a little cool off.

Let's cool down for a minute and assess where we are. Good stuff. We'll see you tomorrow. All of you as well. We're green across the board, and that's the way we're going to go out today.