Closing Bell - Closing Bell: The Record Rally’s Risk-Reward 1/23/25

Episode Date: January 23, 2025

Can stocks hit a new closing high and surge even higher from her? Solus’ Dan Greenhaus and New York Life Investments’ Lauren Goodwin weigh in. Plus, Goldman Sachs’ Meena Flynn – one of Barron���s 100 Most Influential Women in Finance – maps out her forecast for the market under a second Trump White House. And, top strategist Chris Verrone is flagging signs of life in one of 2024’s beaten down sectors. 

Kelly, thanks. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the risk and reward of this record-setting rally, which is going for yet another milestone today. An all-time closing high for the S&P, which is well within reach. In fact, we're basically there. We'll see how this transpires over the final 60. Take a look at the majors as we begin the end of regulation. Mostly green. NASDAQ seeing some give back today after its recent torrid pace here. Utilities, industrials among the better sectors. We are watching the banks, too, as President Trump addresses Davos today and takes a shot at Bank of America.

Putting CEO Brian Moynihan on the defensive. We'll have the very latest. It takes us to our talk of the tape, whether stocks can hit a new closing high and surge even higher from here. Let's ask our experts, Dan Greenhouse, Solus Alternative Asset Management's chief strategist. Lauren Goodwin is director of portfolio strategy at New York Life Investments. Both are with me at Post 9. As you see. Welcome. It's good to see you both again. Lauren, how about that? Is this just yet another stop on this sort of runaway bull market train? Look, this has been a Goldilocks setup for the beginning of year in markets. We

have good, strong economic backdrop, including a slightly more inline inflation report last week, which has taken yields off the top. Earnings are good. There's not a lot of economic data to grapple with this week. There was really nothing getting in the way of a good market week this week. So you had the president, Davos, Dan. I mean, the reason why we're even talking about record highs is because there's so much optimism about what this Trump 2.0 administration is going to bring. Lowest tax cuts in history, lowest corporate rate among developed countries, and on and on and on. And you get the point. That's why we continue to hit new highs, isn't it? Yeah, well, listen, America is exceptional.

And to Lauren's point, the economy is doing well. Profits are doing well. Earnings season thus far is going pretty good. Netflix is able to raise prices. No problem there. Capital One, I mean, everyone's concerned about the consumer, but Capital One reported. Take a look at the chart in that stock. No problem in Capital One. I mean, everyone's concerned about the consumer, but Capital One reported. Take a look at the chart in that stock. No problem in Capital One.

I'm sorry, Discover. No problem with the chart in Discover or Capital One for that matter. So things are doing pretty well. And I've made this point repeatedly in this program. It's just like OK to be OK with things. It's going well. Love this quote today from Sam Stovall at CFRA. It says, quote, new all-time highs can act like rusty doors and require several attempts before finally swinging open. I'm not surprised that we have a bit of profit taking today, but I would tend to think that the market will start to power its way through to an all-time high on a closing basis in the very near term. What do you think about this comment? Kind of sums it up pretty well, don't you think? I think so.

And again, with this sort of Goldilocks near-term backdrop, I don't see anything really getting in the way of that playing out. I think as we think, you know, four, five, six months into the future, there's a lot of push and pull with what this backdrop really looks like. And so from an asset allocation perspective, there's a couple of things that I'm holding tight to. One is that, as we've mentioned, the economic backdrop is really quite robust. I expect growth to slow this year, but closer to a trend level. That's a pretty constructive economic outlook. And we've seen credit and market performance really supported

by that reality. I think that what's getting in the way of investors at this point from putting more money to work is just valuations. And though we know that's not a very good market timing tool, it does make the bar for incremental return higher for investors. And so we are starting to broaden out diversifier allocation. Push a little bit on the Goldilocks deal. I mean, rates are still elevated. You're going to get fewer rate cuts than we thought. We're going to get tariffs. We just don't know how much and to whom, but we're going to get them. Is that Goldilocks? I think we've seen Goldilocks. When it comes to the risks looking forward, rates, I would say that an inflation, an upside

inflation surprise or rates moving substantially higher, that's one of the biggest risks to my view of market performance. The fact that we've had good market performance this week, I think, is entirely predicated on rates having come a bit off the top. And so, of course, it's a market risk, inflation risk from tariffs very much in the ballgame. And so, how does an investor grapple with that? Well, first of all, this move higher in rates since early December has given investors a second bite at the apple when it comes to credit or fixed income allocation. I think that's really important because as rates moved lower over the course of the fall, it was almost like, if you didn't get in early, you were really too late. Does this have another chance at that diversification here from equity into fixed

income, but also within equity away from some of the high flyers? I use the words risk and reward for a reason because you have the rewards of what the president was talking about today in Davos, tax cuts, deregulations, it's exceptionalism. Making America great is what he says he is going to do. He already has a great economy that he's coming into office with, so he thinks he can make it better. But there is the risk of what we talked about. The Fed doesn't play ball. Rates remain somewhat elevated, and the tariffs become more punitive,

and you start a trade war globally that is problematic for the equity market. I just got back from the Barclays Inflation and Macro Conference down in Florida. It must have been riveting. I thought it was riveting. Maybe not for you, but for me, it's right in my wheelhouse. Thank you, Barclays.

But, and the weather. I was going to say, without Miami, I mean, were you really booking that ticket? If it was in Wisconsin somewhere, I might not have gone. But that's why it was in Florida. But anyway, the tone was, to echo the point you're sort of getting at, concerned. There is a concern about the immigration restrictions, about self-deportations, and what that means for the industries that are particularly reliant on this type of labor, whether it be construction or leisure or warehouses, agriculture, any of those types of industries. There's concern about

tariffs, how big they are. If you get a 10 percent universal tariff, 60 percent on China, et cetera, obviously that's going to be inflationary. And by extension, there was a lot of talk about Scott Besant's pledge to reduce the budget deficit from call it 7 percent down to 3 percent, which was universally viewed as being negative for growth in the short term. Leave aside the fact that there was a lot of questions about whether that could even be accomplished. That all said, those negative tones, if you will, those concerns permeated a lot of the conference. And this is a wide swath of investors from around the world who think about this stuff all day, every day, not just casually. So I, on the other hand, take that bullishly. The fact that those concerns still exist gives me some comfort that the market is not as euphoric as perhaps some would assert.

I just sat in a room with hundreds of investors who were pulling their hair out trying to figure out how all of this could go wrong. And just to be clear, you're not taking a shot at Wisconsin. No, it's just cold. You want the people to love you there. It's just cold. I was in the ocean for a moment. It was 70-something. You just want to make sure.

Sometimes they need to help you out of a situation you might create. Okay. So I just wanted to I was in the ocean for a moment. It was 70-something. Sometimes I need to help you out of a situation you might create. Okay. So I just wanted to make sure we were doing that. We might have to bring in regular guests to Liz Young and just tell her how you feel. Exactly. Liz Young Thomas is going to have a big problem with you next time. On the idea of where you want to be within the market, I've had people come on this program for the better part of the last year and say, now's the moment for small caps. Now's the moment for the Russell. Fed's going to be cutting. The economy is, what we said, really strong, and it's only going to get, theoretically, better from here. It hasn't really worked consistently. Wolf today, research says, quote, entering the year,

we thought small caps had a great shot to outperform, and we continue to stick with that call. Should resistance from the highs at 24.50 get taken out, we think the group could go on a massive run. Massive run. That make sense? I have not been one of the folks calling for broadening and exposure to small caps, and I am still not one of those people. So I'll have to take the con or the disagreement on what you've laid out. There's a couple of reasons for that. The first is purely economic. This is, as I've mentioned, what I see as a pretty constructive economic backdrop. But for small caps to durably outperform, you have to be re-accelerating. And that we do see business confidence ticking up, animal spirits looking really positive, the market sort of piling into this idea of U.S.

exceptionalism. Across history, even when the Fed's cutting rates, you don't typically see the economy re-accelerate. You see a stabilization. You see an extension of the cycle. That's not a period where I expect small caps to do well. And the second reason I'm not as convinced is that where we have seen good performance in small caps, it's been in the industrial sector. It's been stories around supply chain re-globalization, the digitization and electrification of the economy, more global themes rather than economic broadening. You haven't been a big fan of this trade either, but maybe now is the moment. Which trade is this?

Small cap. Have you been paying attention? No, I have not been a fan of small caps. But to be clear, not a fan of small caps was simply the idea that in order to a, quote, unquote, broadening out of the trade, you didn't need small caps. You could have mid caps. You could have the rest of the S&P 500. I mentioned earlier, look at a chart of Capital One or Discover. Everyone's concerned about the consumer.

Look at a chart of Decker's or Ralph Lauren. There's all industries that you can go to that are, quote, broadening out, i.e., not AI, that are doing well, one of which is financials. The bank stocks are doing terrific. The regionals, the large caps, Citigroup, J.P. Morgan, those reports looked fantastic. I wonder if we should talk more about it. Well, we will in a moment. I'm going to come back to you in just a second. Thank you for the segue.

You do this well because Bank of America, bank stocks in general, are all up today. Even as President Trump says his sights on that firm, calling Bank of America, his address to the World Economic Forum in Davos is what he said. By the way, speaking of you and you've done a fantastic job, but I hope you start opening your bank to conservatives, because many conservatives complain that the banks are not allowing them to do business within the bank. And that included a place called Bank of America, this conservative. They don't take conservative business. And I don't know if the regulators mandated that because of Biden or what. But you and Jamie and everybody, I hope you're going to open your banks to conservatives because what you're doing is wrong. All right. That was the president addressing Davos today from the United States.

Should let you know. Leslie Pickers here, our senior banking reporter. With the fallout from all of this, how the banks are responding to what the president said and what you think he's referring specifically to. Yeah. So, Scott, President Trump was, of course, addressing Bank of America and J.P. Morgan there, each of which have come under fire from former customers who allege they were dropped as customers due to their political or religious affiliations. Now, the firms are no strangers to the debanking controversy, something that has been the subject of attorneys general inquiries, shareholder proxy materials, and even mentioned while Trump was on the campaign trail. The banks say emphatically they do not discriminate against conservatives or anyone. Bia Bay is saying in a statement today, quote, we serve more than 70 million clients.

We welcome conservatives and have no political litmus test. JP Morgan in a separate statement telling CNBC, quote, we have never and would never close an account for political reasons. Full stop. For context, Scott, typically when an account is closed by a bank, the customer is not given a specific reason. So last April, 15 attorneys general wrote a letter to B of A accusing the firm of consistently discriminating against people

for political or religious reasons, citing specific examples. B of A wrote back, informed the AGs that one of the debanked entities did debt collection, which B of A wrote back, informed the AGs that one of the debanked entities did debt collection, which B of A can't service, and then another had projects in Cuba, a sanctioned country. I'm told after B of A's response, the issue was broadly dropped by the AGs, Scott. So kind of resurfacing more in this political environment, but in terms of that back and forth, that specific back and forth. The issue in the way that it was brought up today on the platform in which it was is theoretically going to put Brian Moynihan and Bank of America on the hot seat for a while. Whether today's response is, you know, is good enough, we shall see. But how do you think the firm will address it from here, if at all, just based on how you know of these places operating?

Well, it's interesting, Scott, because I received some reader mail on the issue. And one of the things that someone brought up was the idea of remember what happened with Bud Light. You know, when you find yourself on the wrong side of these political issues and you face a boycott and the like. With banking, deposits are very sticky. It's a lot easier to kind of switch your beer preference, perhaps, than it is to completely pull your money out of a bank and put it into a different one that you perceive to be more friendly toward the group that you support. So that in and of itself, you know, maybe something to watch, although I do think deposits are stickier than your average product there. In terms of B of A and JP Morgan

and the like, I mean, these are two banks that have a much bigger brick and mortar presence in middle America than any of their competitors, really. They've really gone full force in opening brick and mortar branches and being present in places that, you know, like I'm from, flyover country, and having, you know, more of a kind of hub and spoke model with these places. B of A, for example, has regional presidents across the country that service the communities there. They're heavily involved with the politicians in those local communities. And that's not just on the coast. That's, you know, all over the country. So, you know, we'll see kind of what their more immediate response is.

But that's the way that the business works. Fair to say that Moynihan was caught off guard. I think he was. Again, was one of a select few who was able to ask a question of the president after congratulating him, of course, on winning and all of the things that lie ahead for his agenda, which the bank CEOs were so optimistic about because they've been arguing, take the shackles off. Let us be banks. Let us lend more. Let us, you know, increase dividends. Let us buy back more of our stock. And then he was hit with this today. I can't imagine that he saw this coming.

Well, he didn't respond directly to those comments. He kind of changed the subject and the conversation moved on. But you're right. It's important in the context of everything that Wall Street has been advocating for, of which he has been a central figure in, which is the removal of some of these more restrictive capital requirements. Basel III endgame, which was first proposed in the summer of 2023. They're looking to massively water those down, if not scrap them entirely, or at least make them be capital neutral. They have a huge investment banking business as well.

So, you know, any kind of environment that makes it easier for their clients to transact is great for Bank of America and J.P. Morgan alike. And so they need a lot from this administration. They're looking for a lot of change from this administration. Well, I was just startling, startling, I'm sorry. In the context of, hey, you know, Mr. President, congratulations. You know, what you're doing is great. And the president, well, what you're doing is wrong. So we'll see where it goes from here. Yeah.

Leslie, thank you. What do you think of the banks? You just were talking about them. They have been performing really well for all the reasons that Leslie said, the optimism that's out there. They've done great. And the earnings season that we're going through right now, both large and small, has been terrific. Listen, the debanking story has been building for a while, and we don't need to go down this rabbit hole. I would disagree that Moynihan was probably caught off guard. The president's mentioned this, or the campaign mentioned it. He mentioned it on the campaign show. It's not that he was caught off guard by the issue. I think he was caught

off guard by the form in which it was mentioned. He did not go to the stage in Davos to ask the question of the president to get that. That's fair. I agree with that. That's fair. That said, leaving this issue aside, the banks are doing well. Loan growth is good. The consumer is good. The more trading-oriented banks, Goldman and Morgan Stanley, obviously just put together terrific quarters. The consumer is good. The more trading oriented banks, Goldman and Morgan Stanley, obviously just put together terrific quarters. The sector has been doing very well for a while. If you want to talk about the M&A story, look no further than KKR and Aries and Carlyle. Those stocks are doing extremely well. Obviously, there's valuation concerns, but that exists everywhere. So I think up and down the financial sector, the banks, the cards, the insurance companies,

obviously, it's very difficult to find some subsector industry within financials that is not doing well. And I think that speaks to Lauren's point to the strength of the economy and the consumer. I mean, by the way, Bank of America is one of the better performing bank stocks today. In fact, it is the best performing today of the large shows you how much they care. You like the group? I think it's where Dan ended is a really important point to emphasize, which is that the banks have been doing well, not just because of animal spirits related to deregulation or what have you.

And frankly, I think we could say this for a lot of sectors. It's not totally clear what the impact of new policy will be. There's a lot of push and pull. Banks have been performing well because the yield curve has disinverted, which incentivizes private credit growth and improves the ability for banks to make money. That's why banks are performing well. You mentioned earnings. That's a big part of why it's happening. And so we could look, if we take a half step back and look globally, I am a hook, line and sinker, a part of why it's happening. And so we could look, if we take a half step back and look globally. I am a hook, line and sinker, a part of the U.S. exceptionalism story. I think it's true.

I think there's a lot of staying power there. But where we've seen rate normalization happen more quickly, like in places like Europe, and growth is still not recession concerning, you've seen financials, industrials, even luxury do even better. And so it's it's a as we take our blinders off and sort of look at the global opportunity set. Again, we're not sellers of the U.S. markets, but incremental capital. I think we can leverage some of those economic and rates trends. All right, guys, we'll leave it there. Thanks so much for being with us today, Lauren and Dan. We'll see you again soon. Do you have some breaking news related to United Health? Bertha Coombs has that for us. Bertha?

Scott, this afternoon, UnitedHealth naming Tim Noel as the new CEO of UnitedHealthcare, the company's insurance segment, succeeding slain CEO Brian Thompson. Noel has been with the company since 2007. He has been the chief of the Medicare and retirement segment of UnitedHealthcare for just over five years. The company saying in a statement he brings unparalleled experience and a proven track record about how health care can work for consumers, physicians, governments, employers and other partners. Luigi Mangione, the suspect in the shooting, is due in court on February 17th on federal charges and February 21st on state charges in New York. Again, Tim Noel, the head of UnitedHealth's Medicare unit, now will be the CEO of UnitedHealthcare, its full insurance unit. Back over to you.

All right, Bertha, thank you for that update. That's Bertha Coombs. To Christina Partsenevelos now for a look at the biggest names moving into the close. Hi, Christina. Hi, Scott. Well, GE Aerospace climbing more than 6% right now after an influx of new jet orders, a $7 billion buyback program, and a dividend hike by 30%. The company also forecasts strong profit in 2025, pushing the stock to its highest level since 2001 and

on track for its best day since August 2020. Union Pacific shares also popping today on improved volumes, specifically in grain and then also higher pricing. Union Pacific's revenue lagged this quarter, but investors care more about management's promise for, at a minimum, high single-digit growth in 2025. Shares up almost 5 percent, Scott. All right, Christina, thanks. Come back to you in a little bit. Christina Partsenevelos. We're just getting started here on Closing Bell. Up next, Goldman's Mita Flynn is back, one of Barron's 100 most influential women in finance. She'll map out her forecast for the market under Trump 2.0. So join me right here at Post 9 after the break. S&P looking for a new closing high again today.

Investors, including private wealth managers, are assessing the Trump administration's policies. Mina Flynn is global co-head of Goldman Sachs' private wealth management, joins us back at Post. Nice to see you again. Thank you. All right, so right now, I mean, we're above the closing high on the S&P, but a nice run lately. You pretty optimistic about where we are mean, we're above the closing high on the S&P, but a nice run lately. You pretty optimistic about where we are and where we're going? We're still optimistic.

And the reason why is because you've got ongoing GDP strength and you've got earnings growth. 90% of the time when you've got positive GDP, you actually get a positive equity return. That being said, we do anticipate that there's going to be more volatility and we could see more substantial drawdowns than we have in the past. And the reason for that is twofold. One is the sequencing of the Trump policies and the second is valuation levels right now. So as it relates to the sequencing, one thing that I will point to is some of the policies that could impact growth and inflation to the negative side are likely to hit first. Tariffs before tax cuts is sort of the sequencing you're talking about. Tariffs, immigration before tax cuts and deregulation. So it's probably going to be a little bit of a growth curve. If we know at least,

well, we think anyway, that the tax cuts are coming and the better growth is coming, are we able to look past the tariffs to the other side? I think there's a couple of things that I'm looking at when I'm looking at the tariffs. One is, is it going to be a universal tariff? To the extent it's a universal tariff, I do think that's probably the worst case. And it's going to hit inflation to the upside. That's not our base case. The other thing is, how much time is there between the moment that they suggest that they're going to put on tariffs to the time of enactment?

Because the greater the time period, the more likely it is that you're going to be able to get both parties to the table to be able to negotiate. And then the last thing I would point to is that is it going to be a one-time tariff or is it going to be rolling tariffs? Because if it's one time, you can manage the inflation hit. If it's rolling, it's going to be harder for the Fed to be able to monitor inflation from that vantage point. One of the interesting things and important things that you said, earnings growth. The multiple is reasonably full, right? I mean, how much more multiple expansion can you get

in this market? You need earnings and you need earnings to be really good, don't you? A hundred percent. And you're confident that we will get that? We're confident that you're going to get strong earnings. I mean, look at this quarter alone. You've got earnings that have beat estimates, and we're calling for plus 10 percent this year. And actually, to your point on where valuations are, if you look at the last 10 years, 70 percent of the return has actually come from earnings and dividend, not from multiple expansion. And then

the other thing I would point to, because this is a question we get most from clients, is this valuation question, is that we've been in the 10th decile of valuations on the S&P since December of 2016. Since that time, the market's returned 200%. In other words, don't pay too much attention to valuation. You can still make a lot of money in the stock market. In terms of where the liquidity is going to come from to help push this market higher, there's been a lot of money sitting in bonds. They've been more attractive again. There's been competition to stocks. Obviously, as rates have gone up, prices have come down. The fact that rates have been up, you've had money sticking around in money markets to take less risk.

Is money finally going to come out of money market funds and help fuel this rally? Yeah, I would say in addition to supportive earnings, we also see a couple other factors that are positive for stocks. So one is, to your point, money market funds. You're sitting on $7 trillion of assets there. And we are actually forecasting that the Fed's going to cut two times this year. So to the extent that you continue to get solid growth, we're probably going to see some of that capital cycle out of money markets and into riskier assets. The other thing I would point to are buybacks. We are preparing for a record

$1.5 trillion of buybacks this year. And so that market or the window is really starting to open up right now for companies to start being able to buy back. And then the other thing, which we heard about a little bit today from Davos, was tax cuts on the corporate side. And so to the extent you go from 21% to 15%, we anticipate that every 1% change in the corporate tax rate increases earnings EPS by 1% on the S&P. You're thinking about the deregulation story, I think, through increasing your exposure to alternatives. Within alternatives to private equity,

places that have not been able to have realizations. We've been sitting on almost no deals. And now we have more people than I can count talking about animal spirits. And the first place they look to are banks and private equity shops. Yeah. So definitely bullish on banks, to your point. Strong consumers, steeper yield curve, and also more activity on the deal front. And so we do see that because financial conditions are supportive, because CEO confidence is high, you've also had private and public market valuations really stabilize. And so these growth companies have had a couple of years to be able to grow into the exit valuation that GPs want. And then the third thing is if you look at the aftermarket performance of

IPOs and you look at the acquirers in an M&A situation, they both perform well in 2024. And so that, coupled with deregulation, really bodes well for deals across sectors and across market caps. But to your question, we actually did increase our allocation to alternatives. And we took that out of non-U.S. equities. So we still want exposure to non-U.S. equities, some of the best companies in the world. But we actually incrementally increased our allocation to both buyout and growth. When you say increasing your exposure to alternatives, can you give me more specifically sort of what it was in terms of the overall, you know, breakdown to what it might be now? Yeah. So it's very much customized to a

client's risk tolerance, but I would say we're anywhere from 25 to 30 to 35 percent. Some clients of alts. Yeah. And within all its private credit growth, buyout, venture, real estate. So a lot of subsectors within there. But buyout is the largest component. And as I said, we increased our allocation of both growth and buyout. And the reason why is there's a tremendous amount of innovation that's happening in growth. And then in buyout, especially middle and upper middle market, these GPs can just add a tremendous amount of operational value to the companies and they have multiple paths to exit. This is also a space where you've seen tremendous alpha versus public markets and the distribution

of outcomes from a performance perspective has been more narrow. Great to catch up with you again. Thanks for coming by. Thank you. That's Goldman's Mina Flynn joining us back at Post 9. Up next, star strategist Chris Ferron. He breaks down the charts. He's flagging signs of life in one of 2024's beaten down sectors. He'll tell you which one next. Welcome back. S&P 500 hovering near a new closing high. And some of the sectors that sat last year's rally out are showing signs of life, too.

Our next guest sees some bullish technical signs in one of those sectors. Here to share, Strategas' head of technical and macro research is Chris Ferron. Good to see you again. Great to be here, Scott. Overall, the market looked pretty good to you. I mean, there were a couple of days where breadth was kind of squirrely. How do we read all that? I think we're in decent hands here. I mean, this was an important week. We had about half the S&P make a one-month high. That's generally a pretty decent sign. And I think the key, you know, at the start of any year is as quickly as possible getting in gear with the leadership, recognizing what is holding over from last year and also looking for signs of change.

I think the good news is the financials and the industrials, which are the holdovers from last year, are still very much involved in this market. I think the change we're beginning to see is maybe some shot of life from health care here, finally starting to perk up after what's not just been a dismal 24, but really a pretty bad last several years. I mean, to your point, for those who are looking at their returns of the last year and you see gains in almost every space, 25, 30, 32 percent, 36 percent. Materials sticks out like a sore thumb at only up seven. But healthcare was horrible.

Yeah, it was awful. It hasn't done anything. It hasn't done anything. If you may not know, healthcare's weight in the S&P is at its lowest weight in about 25 years. So you have this generational oversold condition in healthcare's weighting versus S&P. You also have a very apocalyptic sentiment backdrop. Those are interesting in their own regard to kind of set the table or set the stage for what could change. What we need to see as followers of the charts is hints of life or a spark of momentum. And I think

we got that this week. The best new high reading in healthcare, about 60% of healthcare been a new high this week. First time in two years, we've seen something of that magnitude. You're starting to see some breakouts. You're beginning to see some life in the relative performance. And it's all against the backdrop of what has been liquidation in flows. If you look at the ETF flows out of health care, they've just been totally liquidated. So I like this setup as a contrarian play through 25 here. Within that space, you like medical devices. Why did you single those out?

It's the first to turn. It's the place where you're seeing the biggest price improvement. Names that come to mind, Agilent, Abbott, ABT. You're starting to see some hints of life in pharma, too. Bristol-Myers is one we own that has started to turn here as well. So it's starting to brew, I think, importantly from a behavioral perspective. The fact that Lilly's broken down was actually necessary to get this going. I didn't think you could have health care in aggregate turn until the leader actually succumbed.

And we certainly have seen Lilly succumb here. Investors are clearly banking on American exceptionalism. Yeah. Right. We've heard that three million times already in the early part of this year. And that's what obviously Trump 2.0 hopes to deliver on. Within that, though, you suggest there's too much pessimism about outside the U.S. Yeah, you know, it's funny.

One of the things that we always look for in our work is when the price action differs from the consensus view of the world. And the front page of the FT this morning was Christine Lagarde talking about how pessimistic she is on Europe. I want to be a buyer of pessimistic central bankers. That's good for monetary policy. And when you see... Well, because you think they're going to just continuously cut rates into that? Yeah. Because their economies are not great. Yeah. But when you look at the price action, Eurobanks new highs, Euroindustrials new high,

Euro luxury stocks turning up, European credit conditions very benign, European outflow is very pronounced, and a pessimistic central bank. That's a very bullish combination that I have help from the monetary policymakers. At the same time, price is beginning to respond. So I think we really ought to consider Europe here undergoing some pretty important turn. Think about these luxury stocks, LVMH, Hermes, Richemont, they had terrible, terrible numbers, and they didn't make new lows on it. They've all bottomed over the last three or four months. And I think the reality of this business is things don't bottom on good news.

If things bottomed on good news, it'd be easy. Things bottom on bad news. You have to recognize when stocks become resilient to it, and you're seeing that all throughout Europe here. I would only say, what role, though, does China play in a turnaround in those stocks? I mean, there's still a lot of pessimism about what's happening in China. Yeah. And I mean, it's another place where the outflows are pretty pronounced. So the sentiment or the cushion is probably much larger in those places than it is here, where I think the margin for error in the U.S. Well, everything still looks

OK. The margin for error is probably smaller because sentiment is certainly more robust than we're seeing in other parts of the world. But this turn in Europe, we're having a hard time convincing people of it. Yet when you look at the charts, particularly the European banks, it's hard to say there's a financial crisis or a recession that's getting worse in Europe when the European bank stocks are making new highs across the board. All right. We'll leave it there. Good insight. Thank you for that. That's Chris Ferron, Strategas. Getting some news out of Washington yet again today.

Eamon Jabbers has that for us. What do we learn now, Eamon? Scott, the president has been talking to reporters inside the Oval Office as he's been signing some executive orders over the past couple of minutes. We'll have that tape out here momentarily. But a couple of headlines to bring you as we talk about that. One is that the president talked about interest rates and the Federal Reserve. He has told the reporters

that he would consider talking to Jay Powell about interest rates. He said to the reporters that he does expect the Fed to listen to him on interest rates. And this is, of course, the president who earlier today, speaking to that crowd in Davos, said that he wants, he will demand that interest rates come down. So that's one bucket of headlines around the Fed and his relationship with Jay Powell. Another one is going to be on an executive order here on cryptocurrency. We're waiting for a little bit more detail from the White House on exactly what this document that he signed is, but he's creating a working group on crypto, which will have David Sachs involved. David Sachs was in the Oval Office with the president moments ago explaining the details of it to reporters who will explain it to us when they come out to the press briefing room. But it does look like there's a working group here and maybe

some more details from the White House changing federal policy on crypto. So a couple of different buckets there to watch for. But particularly interesting in terms of his relationship with Jay Powell, Scott, and so much attention had been focused on whether or not he would try to remove Powell, whether that would even be legal. He has signaled that he wouldn't do that. But clearly today we're seeing an effort by the White House to rattle the cage a little bit over the Fed. The president saying he expects the Fed to listen to him when he talks about interest rates. Yeah, we'll follow that for certain. The crypto news interesting. But just to underscore a working group, not a definitive national digital asset stockpile of yet.

Correct. Yeah, we're going to wait for some details here, Scott, and I've got to go back in the building and get the actual document in writing to see exactly what's in there. But what we know right now is that Sachs was talking to reporters about this working group. But we'll get more detail here in terms of what's in the black and white, because a lot of this can be whispered down the lane from people who are in the room to us, to you, and we want to make sure we get it right. Yeah, I got you. I got you. I'll let you go do reporting on that. Eamon, thanks so much for that update.

That's Eamon Jabbers, as you see, on the North Lawn of the White House. Up next, we track the biggest movers into the close. Back to Christina for that. What do you see? Well, we're seeing a major gaming company seeing its stock crater due to disappointing sales while a legacy airline struggles with mounting losses. Details next. 15 from the bell back to Christina now for the stocks that she is watching. Hi there. Electric or electronic arts.

EA shares plummeting 17% right now, marking their steepest decline since the great recession, 2008, the gaming company warning that its financial results will be weaker due to slower sales of its soccer game. that would be EA Sports FC 2025, that's soccer in the UK, and its role-playing game Dragon Age. Wedbush calling shares dead money for another quarter, but sees a rebound once the company provides a release schedule for all their new games in 2025-2026. American Airlines disappointed investors with a wider than expected loss, attributing the miss to higher fuel and labor costs, as well as an increased mix of regional jet flying.

These results sharply contrast with Alaska Air's rising profits and stock performance. Today, you can see up over 1 percent, American down nine. Scott. Thank you for that. Christina Parts and Novelos. Moderna shares jumping into that company working towards developing a norovirus vaccine. Angelica Peebles here with those details. Hi, Angelica. Hey, Scott. Moderna telling me that the 25,000-person trial is enrolling ahead of schedule and that there's clearly a lot of interest in this vaccine.

Now, they can't say definitively if that's because of this year's spike, but it's no doubt that this has been a bad year for norovirus. Outbreaks are already up 36% this season compared to the last one. Now, whether we see the data later this year or next year depends on how quickly Moderna gets enough cases to go in and analyze how well their vaccine works. And the goal here isn't to keep you from getting norovirus. It's to make you feel a little less awful if you do get it. If you're lucky enough to not know from firsthand experience, norovirus is a really nasty stomach bug, and the goal is to keep people out of the hospital. That's especially important for seniors. They make up the majority of the 900 norovirus deaths that we see in the U.S. every year on average. Scott. Angelica, thank you.

Angelica Beeble is still ahead. Texas Instruments reporting top of the hour. We'll tell you what to watch for when those numbers hit the tape. We're back on the bell just after this. Up next, we'll get you set for earnings in OT. What to watch for from Texas Instruments and CSX. We'll do that in the Market Zone. We're now in the closing bell Market Zone. CBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day.

Plus, what to watch out of two key earnings reports in OT. Christina Partinevalos on Texas Instruments, Frank Holland on CSX. Mike, I'll go to you. We are on track to get that closing high on the S&P, which we just missed out on yesterday. Yeah, I mean, pretty low volume, very mixed breath, but just enough lift internally in the market, especially in a handful of the big names. To get us. This record it feels like the markets in a relatively comfortable place. Given what

we know what we can absolutely actually actually observe. In front of us we're not pricing in speculative policy moves I think it's basically. Built upon. What we know and what we can plausibly expect from earnings. I think every day

that we do get some kind of hints or pronouncements and it's not across the board stiff tariffs, it's fine with the market. Honestly, I don't think we're reacting to anything else. The two year note yield took a tiny blip lower when the president said he wants rates lower at 11 a.m. Eastern time this morning. But it's not as if we've really repriced everything for that purpose. So I feel like, you know, we have 57 new all time highs last year. We're sort of just continuing along that along that track. Oil's down today, perhaps on those presidential comments as well, addressing Davos. Christina Partsenevelos, we have earnings to deal with. Texas Instruments,

what to watch out for? Yeah, I'm saying it's like a reliable workhorse in your investment stable. Its chips are everywhere from the old calculator in your desk drawer to the smart fridge keeping your groceries cool. And that's why it's seen as a bellwether for non-AI cyclical plays. Wells Fargo noting some industry headwinds in the industrial sector, but also spotting a silver lining in China's auto market, thanks in part to some fresh government stimulus. Texas Instruments is over 70% exposed to auto and industrial markets. The big question, though, with earnings, gross margins. The street wants 57% dip below that, and investors might get a little bit jittery. Jeffries actually ran a buy-side poll asking when analog semis start,

or when analog semis should start to outperform the stocks. Net-net, investors expect, or expectations outperform the socks. Net net, investors expect our expectations are for the second half of 2025, meaning that bottom may not be here just yet. All right. We'll see you with those numbers. Thank you, Christina. Frank Holland, tell me about CSX. Hey there, Scott. CSX shares, they're flat since the last quarter, underperforming the market and the Dow Transports. Revenue is forecast to decline 3% year-over-year, profit to fall by 6%. The merchandise segment is where CSX gets about 60% of revenue. That's where they move chemicals, petroleum products, food products, auto parts, etc. It's expected to see a very slight year-over-year increase. The pull ahead of goods

ahead of a potential port strike on the east and Gulf Coast ports where CSX operates, likely a tailwind for that segment. However, analysts are expecting that the rail will face price pressures with Bernstein forecasting a 5% decline in revenue per unit. CSX is coming off five consecutive quarters of revenue per unit declines. Analysts will also be looking for any commentary on the coal franchise that generates about 15% of revenue for CSX. The EIA data shows that U.S. coal consumption is by 32 percent sequentially in Q3. That's the most recent month of data. Also, coal consumption is forecast to increase very slightly in the U.S. in 2025. Back over to you.

All right, Frank. Thank you. Frank Holland, we'll see those numbers in just a little bit as well. Mike, I'll turn back to you. 60-90-27 is the old closing high to watch. We're going to take that out, barring something unforeseen here at the finish. And by the way, NASDAQ's now gone positive. One of the reasons why the S&P has been so strong is because of mega cap tech of late. NVIDIA's green, Microsoft green, Meta, Amazon green as well. And Netflix, of course, is still

up another 3%. Meta in particular today is giving you the big push to the upside. Actually pretty balanced. If you look year to date, the S&P 500 is up almost 4%. It's the third week of trading this year. The Russell up almost that much. Equal weight S&P up almost that much. So we keep trading off as to whether this is a broad or a narrow rally. It's been fine for now, I think, to have that rotational action in there. I think it's also worth noting that December 6th, I think it was, when we had the previous all-time closing high on the S&P 500,

banyos were a lot lower, right? So you're kind of up about probably half a percent in the 10-year Treasury yield, and you've been able to absorb it for the right reasons. You keep dialing forward to a new 12-year block of forward earnings, and the market can make its peace with the idea that the economy was able to withstand rates at this level, at least so far. All right, so thank you. I'll see you tomorrow. We'll get that new closing high on the S&P, as I mentioned.

And a big shout-out as well today. Wall Street bound. Fifth anniversary. Troy Prince. The great work that they are doing. They are ringing the closing bell here at the New York Stock Exchange, looking for the next generation of Wall Streeters, and we salute them for that. That was for us in the OT.