Closing Bell - Closing Bell: The Sweet Spot for Stocks? 2/29/24

Episode Date: February 29, 2024

Are we really in a sweet spot for stocks? JP Morgan Asset Management’s Gabriela Santos and Virtus’ Joe Terranova give their expert market opinions. Plus, Professor Aswath Damodardan – known as the Dean of Valuation – is breaking down how he is navigating the mega caps right now. And, Lauren Goodwin from New York Life Investments still isn’t sold on the bull market. She explains why. 

All right, 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 rally as another big month comes to a close, a month where stocks have broadened and many say the bull case has hardened. We'll ask our experts over this final stretch what it means for your money in the weeks ahead. In the meantime, take a look at your scorecard with 60 minutes to go in regulation. It is the final trading day of the month. No big surprises from that highly anticipated PCE report today, and that's helping some tech and small cap stocks,

which are clearly more sensitive to moves in interest rates. You see what we're doing here, a bit mixed, but the S&P and NASDAQ are positive. Many of the mega caps higher with the exception of Apple. How many times have we said that? And AMD is a big gainer and approaching $300 billion in market cap. That's its largest ever. NVIDIA, what else? Closing out the month with yet another gain, almost $800. Not so much for Snowflake today.

It's tracking for its worst day ever following its earnings and guidance. It all takes us to our talk of the tape, whether we're really in a sweet spot now for stocks. Let's ask Gabriela Santos, the chief market strategist for J.P. Morgan Asset Management, as you see, live with us once again at Post 9. Nice to see you. Welcome back. Thank you. What a month it's been, you know, and it's been broad-based. NASDAQ's up 5%, the S&P up almost 5%, Russell better than 5%. Dow's the laggard. But are we set up now for what may be a sweet spot?

I think we are seeing signs of that broadening out. One thing we do is we track the contribution to year-to-date returns of the 10 largest companies. End of January, 90 percent. It was a carryover of last year's story. Where we sit today is with only 74 percent of returns being driven by just a handful of stocks. So we're getting closer to what would be normal, which would be about 60%. So we are starting to see other companies participate within tech, other sectors, healthcare. Industrials was a very strong sector that we do like. Yeah, industrials are up 6.5%, record high today. This is February, discretionary 7.5%, 52-week high.

Industrials, record high. Tech, record high. I think it's been, for me, two big themes this month. The first, we know, there was a readjustment of expectations for rates, just to more closely align with the Fed. But I think it's important to realize that high for longer is not the same thing as higher for longer. Good point.

It was the uncertainty of how much higher we have to go that was paralyzing. I think companies can adapt just knowing what the cost of capital is, hence why stocks did well, even as rates reset higher. But the second big thing was earnings. And I think the better than expected end of the earnings season was really, really positive. And you started seeing sectors like industrials start to deliver better earnings. Should we believe in a stat like this? Since 1930, the S&P has seen 16 cases in which the four-month period from November through February were all positive, and the full year has been positive in all 16 cases. I mean, that speaks to momentum. It speaks to why perhaps we got here in the first place and whether the trends that have been in

place are going to remain in place enough that stocks can actually have a good remainder of the year. Yeah, and I think it speaks to how low sentiment had gotten late October, right? It was that higher for longer. Is the 10-year going to 6, 7? What's going to happen with pockets of the economy? What's going to break next into now fully more appreciating that we can handle high rates and that you can have a soft landing or positive growth. So we do think there is a bit of a sweet spot here where growth is resilient, so good enough, at the same time that inflation is normalizing, but it's still there. So nominal growth is supportive of revenues and especially as margins are stabilizing. What I worry about,

though, Scott, for the rest of the year, is eventually that narrative goes too far, right? We're still talking about being later in the cycle, which means really a focus on quality is still important. It's too early to go after the kind of companies that are low quality or the kind of sectors that need rates to come down, which is actually what's up today. It's a bit early for that. Can we be so late cycle if the Russell is just starting to get going? Like if the

Russell is going to start working, how can we be so late? And it's a bit bizarre of a cycle. There are a bunch of different cycles within the cycle. But I think if you just look at one metric like the unemployment rate below 4% for 26 consecutive months, that's a sign that we have little spare capacity and that's a sign the economy's later in the cycle. But late cycle can last a long time. It just means that consumers are more focused on value. Companies need to be smarter about efficiency and cutting costs and that companies that are bigger and have more cash on the balance sheet stand to do better. But that's not just the MAC-7. There's other stuff there.

Is this correct? So in terms of your broad positioning, you're neutral stocks? Yeah, I think the idea is that you still have stocks have a supportive backdrop, but we've already rallied 20% plus in four months. So it's much more about what's happening beneath the surface to add alpha to the beta. And it's also an environment where yields are at 5% plus. So you can count on some income with low volatility on the fixed income side. There's room for both, frankly. Yeah. I like how you say high for longer is not the same thing as higher for longer. We can perhaps remain where we are. It's just any prospect of further rate hikes is going to be the issue. Stocks are proving to everybody that they can do

just fine as long as rates are here. And I think you can see that in corporate behavior, right, that they're no longer paralyzed by the uncertainty around the cost of capital. So issuance of investment grade bonds, record high for the month of February. M&A starting to pick up. Investors starting to poke around different areas of the market. I think really what's paralyzing, as always, is the uncertainty factor. What about Mag7? What about tech? You know, tech, as I said, has underperformed from a broad sector.

It's still done quite well, obviously. It's up 5%. And I said it hit a new record high. But it's underperformed some of the other areas of the market. What do I want to do with that now? I think you want to treat them as individual companies, and it's actually quite healthy to start to see a lot more dispersion in their performance and their earnings.

And we should reflect that in positioning, right? So, so far, we've got three magnificent ones, two meh, and then two actually underperforming or not so great. Which ones are the two that aren't performing? I mean, Apple, you put that. The ones that are down. The ones that are down would be Apple and Tesla and Google kind of joining that now, which is not to suggest dump these three and buy the other ones. It's just to say that they're behaving more like individual companies and that there are other companies joining. An interesting stat is this year, the top 50 global companies, 32 of them are not listed here.

They're abroad. So there's some interesting stuff happening, especially in Japan, that we're very excited. And so are our clients. Interesting. Let's bring in CNBC contributor Joe Terranova of Virtus Investment Partners with us as well. It's good to see you, too. OK, so we're going to turn the calendar into a new month. How should we view the market based on where we've been and where we are and where we think we can go? Well, I agree with what

Gabriella is saying. And what's interesting is that a lot of advisors that I'm talking to, Scott, they came into the month of February skeptical about the gains from January, thinking that the market needed to correct off of the strength at the end of 2023. You included. You thought February was going to be a down month. I did. I did. And why wasn't it?

And I cite it. It's interesting. Sometimes, you know, these statistics and historical probabilities don't work. There was this case where February is supposed to be a down month, in particular, the second half of February. And it just didn't work. And I think there's a lot of people still sitting on the sidelines in that cash yielding equivalent. And those people at some point are going to reengage with the market because I agree with your comments on the Federal Reserve. The Federal Reserve, yes, they are high.

But ultimately, the next move is going to be where you're going to see a rate cut. And the market has digested that fabulously. If you think about where was the market at the beginning of January when the market was expecting six rate cuts, 150 basis points of easing. At that point, the market was 7.7% lower and a 10 year treasury was 31 basis points lower. The markets now price that out and we've digested that remarkably well. You guys see what Ray Dalio put on LinkedIn today? Because when I heard that he had posted something, I was my first thought was, oh, man, is he really negative on the market? And he addresses the idea of whether this market is in some sort of bubble period of time.

He says, I define a bubble market as one that has a combination of the following in high degrees. It goes through a list of six items. High prices relative to traditional measures of value. Unsustainable conditions, many new and naive buyers attracted in because the market's gone up a lot, broad bullish sentiment, a high percentage of purchases being financed by debt, a lot of forward and speculative purchases made to bet on price gains. And he sums it all up and says, when I look at the U.S. stock market using these criteria, it doesn't look very bubbly. I was kind of surprised. I was almost expecting Dalio to say,

you know what, this just doesn't look sustainable. He's talked about so many times, you know, asymmetric risk to the downside in the past. He's sort of preconditioned to think what these great investors of our time may think at a period like this. And it's not true. Do you agree with what he says? Yes. And I think it's interesting. We were just speaking of Mag7 and I don't want to leave the impression that we think this is a bubble and that we should be out of some of these names because as he mentions in the article, they have also delivered the earnings. So as much as these companies are up, the valuations haven't exploded the way you would think just looking at the return. There are companies that are able to monetize artificial intelligence today, not a promise of it in the future, and also companies that are focused on profitability and cutting costs. And on sentiment, another thing he mentions, we were just

joking earlier. I think it was all T-, bill and chill last year until the end of your statement. And then we've had several clients look at it and say, hold on. But equities were up 25 percent. The 60-40 gave me three, could have given me three times that. A lot of people didn't actually participate in the gains yet. So sentiment is not. Remember, he was. Yeah, you jarred my memory. Now he was cash is king. Not that long ago either. And I think what he says about this, this idea of sentiment, there's still a lot of bears out there. I've had a few on the show this week. There are some who are not ready to capitulate to the bull case. They just think that, you know, their story is going to work eventually, that things are still ahead. So maybe it's not as euphoric as some would have you believe based on the gains that we've seen in the market thus far.

Yeah, look, it's the expectation that here comes another bearish billionaire talking down the market. He obviously didn't do that. I agree with everything that he said. I also think when you look at the market, what's made the return and what's leading the market is quality. To your point before, there is a broadening out, but the broadening out is happening in quality. It's happening in mid and large cap names, industrials, financials. It's not happening in the non-profitable areas of the market. So the only place that I could look at and say to myself, well, is the speculation getting a little bit excessive? Is in crypto? But I don't claim to know anything about crypto. So that's just a personal observation. But other

than that, the market sees the quality. It sees the quality domestically. Yeah. And it sees the quality globally. I've had debates with people this week who say, oh, you know, you really don't want to put money in equities now. You want to go more towards quality, parts of credit. And I'm like, what do you mean? You're telling me that JP Morgan is not quality? Stocks at an all-time high in the past week. You're telling me that Berkshire Hathaway is not quality? That stock's at an all-time high in the last week.

Costco, Marathon, some of the refiners, some of the health care stocks that have picked up a lot. AbbVie, Cigna, Merck, Boston Scientific, GE Health Care. You want industrials? I'll give you Parker Hannafin, Masco, Fastenal, Defense, General Dynamics, Martin Marietta, Vulcan. Are these not quality? And I think you can focus on quality within equities, right? It doesn't mean that sends you all the way to the other extreme of fixed income markets. So a metric is just to think, for example, of quality cash on the balance sheet. And that's a big reason, by the way, why we had such strength in MagSav and tech and still leads us there to tech being

an important sector. But it also can lead you to other parts of the market. Health care is a perfect example of that. And for us, it still means expressing a preference for large over small cap. But back to your question earlier of why not overweight stocks, because there is also quality and fixed income. Frankly, spreads are quite tight, but there is much less credit risk than there has been later in the cycle historically. Yeah. Well, I mean, 60 40 is a 60 40 for. Exactly. It's not like, you know, 90-10. It's 60-40. There could be quality in stocks and quality in fixed income. So you want us to stick with semiconductors, I see in the notes.

And now this is interesting. You look at what AMD is doing today. I mentioned it off the top of the show. What NVIDIA has done of late is extraordinary. Pick 10 other chip stocks and the charts look similar. Low on the left, way high on the right, right? They've all gone in very basically the same direction. Why do I want to stick with that trade? Because they are the pillar of strength. They are the pillar of strength, along with, if you look internationally,

Japan, India, the momentum factor, industrials and financial financials and what I see internally in the market is for the very first time this momentum factor that I keep citing is now acting as a catalyst it's been dormant since November of twenty twenty one it's coming back once again that's a very powerful force and I think you want to focus on those areas of the market where that's extreme strength is, because that's your indicator for how long the strength can actually continue. Momentum. The JOTI is at an all-time high, correct? It is. Thank you for that. It is. Proud of that. You manage it, not me. You deserve the credit for it.

Proud of that. But again, it's- Two things we just talked about. Quality and momentum. Quality and momentum. Those two factors applied to large cap equities. That's the key. I just, I agree with you. I don't think small caps are there yet. And the other thing that's popular right now, I've heard so many people on the network talking about, hey, let's look at China in the month of March.

There's an opportunity here. There's a pivot where you're going to get some stimulus. Did you see the K-Web in February? I did. Up 10%. Absolutely. And I agree with that premise. I do think you get the stimulus from China. I think it's time to invest in China. But let me give you the low hanging fruit from a risk management perspective. Just buy oil. If you think that China is finally going to have a little bit of an economic revival and there's going to be some stimulus. Oil is not going to hover below 80 dollars. It's going above $80, energy equities of benefit. It's interesting, if I could add a little bit. I think in our conversations with our

institutional clients, China and Japan have completely swapped places, right? For many years, Japan was a tactical trade, buy it when the yen's weakening, get out, grow your strategic allocation to China. I think it's the opposite now. China's thought of as more of a tactical trade when valuations are cheap and there might be a catalyst around the corner. And Japan is growing as a buy and hold kind of allocation. To me, that is such an exciting change that's happening in Japan. What about, Joe? Well, since you went international, let me go there first. India. Yeah. The Gundlach trade.

You like it? So India is the fourth largest stock market on the planet right now. And it also has the same return on equity as the U.S. So it's liquid, it's quality, and you've got positive themes happening with demographics and reforms. The thing about India and China and Japan is that they kind of work inversely these days. So if you believe in a China tactical rebound, that means it's going to come at the expense of India, Japan. But if you're trying to make a strategic allocation, we will grow exactly these two markets, Japan and India, for different reasons. Okay. Now let me go to energy, which I wanted to go to. But since we've finished with the international, I wanted to hit that. Do you agree with Joe that energy equities are about to catch a bid because they've done

virtually nothing this year? I think what's tricky about the China energy story is that China actually imported quite a lot of refined products last year because mobility has really rebounded back to normal. So our belief is more energy is a bit more range bound here in terms of oil prices around 80, 85 dollars. But it's an interesting hedge if you think about geopolitical risk and a lot of unanswered questions over there, and especially if you think about traditional energy and refiners. You know, we had the CEO, it reminds me as well, we had the CEO of Oxy on the other day, Joe, Vicky Holub. And we said, well, what's the break? I asked her, what's the break even for you?

And I said, how do you feel about oil prices? What's the break even? She said 40 bucks. Oil is almost 80. Yeah. Does that tell you that energy stocks are not getting enough respect that they deserve? They ultimately will, because we don't see, do we see a scenario in which energy and oil prices go lower from here? Forget NatGas, that's in the dumpster. But yeah, look, Scott, candidly, I just made the statement that if you believe that China has the economic revival and there's some stimulus, OK, I could own energy stocks in that setting. But prior to that, we've been paring back.

The strategy has been paring back our holdings of energy. We were significantly overweight. We literally cut that in half. There's extreme disappointment surrounding the performance of energy equities coming off of 2023 where you had so much significant merger activity and there was no price response to that. So I'm sorry not to give you a concrete answer, but I'm not giving you that answer because there's so much disappointment that's really been reflected in the price action of the last six to eight months. You're in a prove it scenario. You absolutely need some economic growth from China. You need central banks to cut. I think the ECB is

probably the first central bank to cut. I don't know if you agree with that, but I think they're going to cut before the Federal Reserve does. And you need that process to begin. Let me just point one more thing out before we go, because I'm looking at it right now. We've got the NASDAQ moving up a little bit as we begin the final stretch here. 16,057.44. That's the number you need to watch because that would be a new closing all-time high for the NASDAQ. And we're picking up a little bit of steam here. We have 40 minutes or so to go. We'll see what we do. But that would be yet a new milestone for that index. The S&P, obviously, and the Dow have been trading around record highs,

but we're watching the Nasdaq to see if we can get a closing one. Guys, love the conversation. Thanks so much. Thank you. Joe Chernova, Gabriel Santos, we'll talk to you soon. Let's send it to Christina Partinellos now for a look at the biggest names moving into the close. Christina. Let's start with food company Hormel seeing its shares pop today after beating estimates for the company's fiscal first quarter.

And customers are going nuts for nuts, apparently. The company saying the sales uptick was driven in part by planters, snack nuts and corn nuts, corn kernels. The icing on the cake though, the company reaffirmed its net sales growth outlook of one to three percent for the full year. Shares are up 13 percent. And don't miss the exclusive interview with Hormel CEO tonight on Mad Money, 6 p.m. Eastern. Okta also feeling the love today after Bank of America issued a double upgrade for the identity management company from an underperformed to a buy.

The firm pointed to Okta's overly conservative full-year guidance, noting that customer growth concerns have lessened. Not too shabby for a 22% stock price increase for Okta. Not at all, not at all. And we're gonna continue to watch the Nasdaq where you are. So we'll watch for that record today. Maybe we'll see. We're just getting started and we'll be back to you shortly. Christina, up next, are the MAG7 stocks too expensive?

Class is back in session with the dean of valuation, Aswath Damodaran. It's just after this break. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. All right, welcome back. It was just about a month ago on this very show that our next guest said he wouldn't put any fresh money into the mega caps because their valuations were already too rich. Well, with the Nasdaq up another 5% in February, what does the dean of valuation think now? Aswath Damodaran of NYU's Stern School of Business joins us live. Welcome, Bax. Good to see you again. Thanks for having me back, Scott. Here we are. I mean, February, the market's up nicely yet again. So I'll ask you to answer the question I posed in the intro. What do you think now? I mean, if it was overvalued a month ago, it can't be undervalued now.

That would be a reversal of philosophy that would upend everything I think about value. But that said, though, I mean, even a month ago, I said only one of the stocks looked significantly overvalued, which is NVIDIA. And it's actually the stock that's gone up the most. So that can be taken as an indication that I either have no idea what I'm talking about or the market's doing things that I just don't understand. I mean, far be it from me to debate somebody who knows valuation better than anybody. But maybe the valuation wasn't as overstretched as you thought about a month ago. Maybe we're not looking at things. Maybe we're looking at things in a way that we used to,

but now you can't because we're having a hard time assessing what AI is really going to mean to some of these companies. And I bring that up, noting that when you were last on, NVIDIA was at 682. Now it's pushing 800. I asked Stacey Raskin of Bernstein. He's one of the best analysts around. What's up with NVIDIA and the valuation?

I want you to listen to what he told me and I'd love your reaction on the other side. Okay. NVIDIA is still not expensive. It's actually still the cheapest of all of the AI stocks. It's way cheaper than AMD. It's cheaper than Marvell. It's way cheaper than AMD. It's cheaper than Marvell. It's even cheaper than Intel at this point, right? So I still think there is room

for expectations to continue to go up. I think so. I mean, this was right before they reported earnings and it was another blockbuster. So how should we view this now? Damning with faint praise, right? That's like saying I'm short relative to a typical NBA player. I mean, when you make pricing statements against a subgroup stocks, in this case, AI stocks, and say it's the cheapest of the AI stocks, that might very well be true, but they might all be overvalued. I think at the moment, the fact that I think we have to accept is AI is real. It's going to make a real difference to business.

And I think NVIDIA is in the front seat of that market. That said, though, that pathway is not as easy and as open to profits as the market seems to be assuming it is. I mean, right now, NVIDIA is in a strange place, if you ask me. It's a great trade, but not a very good investment. Trading is about mood and momentum. And if you think about mood and momentum, I don't think I've ever seen a company celebrated as much as NVIDIA. Jensen Wang is the greatest CEO who ever walked the face of the earth. And this company cannot be stopped.

At least that's the perception. And at least in the near term, how do you stop that perception from driving prices up? The problem with the momentum is everything at some point in time, the fever breaks. And the question is when that will happen for NVIDIA. It will still be a great company. But I think the pricing is a little bit out of control in the company. Now, this surprises me in the sense that I feel like I could almost make the argument the exact reverse of what you said, that it's actually a great investment. Why bother trying to trade around? I've had people

come on my, you know, other program and say, well, I took 20 percent off my Nvidia holding because this is unbelievable. Well, now the stock has elevated a lot. So how are you going to get back in now? But it's proven to be an unbelievable investment for those. And by the way, I think you're one of them who got in really early and has been riding that wave ever since. You're not a trader. You're an investor. And I'm glad I got in when I did. But the question to ask now, if you're an investor, is if I get in now, what am I pricing it?

I mean, if you back out from the pricing, the $2 trillion market cap, what Nvidia has to do, break even, it's got to add about $400 billion in revenues. It's got to add $400 billion revenues to what it has as revenues right now. That's a daunting task. It's plausible. But if investing is about the game of the probable and you play the plausible game you're setting yourself up to lose near term they will beat their revenue and earnings targets because there are you know all engines are firing it for at at full force right now so i wouldn't be surprised if on the next earnings report they took their earnings expectations and beat them again which is what pricing is all about that's why I said it's a good trade is in the near term, they're more likely to deliver upside

surprises. But in the long term, when you price the company to be the best company ever, where is the upside? I want to get your opinion on what Ray Dalio posted today on LinkedIn, which I read earlier, and I'm not sure if you had a chance to hear that or not. So I'll recap it for you. Looking at whether we're in some sort of bubble period, obviously insinuating that if you think we are, that would assume that valuations are out of whack. Well, he says, I define a bubble market as one that has a combination of the following in high degrees, high prices relative to traditional measures of value, unsustainable conditions, many new and naive buyers, broad bullish sentiment, a high percentage of purchases by debt, financed by debt, and a lot of forward and speculative purchases made to bet on price gains.

He says when he looks at all of that, this doesn't look very bubbly to him. Do you agree? I agree, but I'd have agreed with that statement pretty much any time over the last 10 years because we were surrounded by bubblers, basically people who make an argument for a bubble. And I've always been uncomfortable with that word because it suggests that the people who are buying stocks are shallow and that the people making these statements are deep thinkers. And I think that's a very dangerous place to be in markets. Right now, the markets price, the overall equity markets price to earn about 8% a year. That's about what we've earned historically as an expected return. So from that perspective, it doesn't look massively mispriced. Are there sectors that might be in a bubble?

Absolutely. But that's always going to be the case. Do you believe in the broadening story that I feel like hasn't gotten enough respect. If you look at all of these other sectors, as I read at the top of the program as well, that have done tremendously well this month, outpacing the gains in technology, for example, which is no slouch, obviously, but, you know, discretionary and industrials have looked awfully good. But maybe we haven't talked about them enough. No, I think it's broadening. But I think the final break in the dam is when risk capital finally comes back to the market. The Reddit IPO, I think, is going to be a good indicator

because risk capital has been on the sidelines in spite of the market going up for much of the last year and a half. Risk capital or a year and three months. Risk capital has been on the sideline much of this period. Risk capital is in the sense of venture capital money, money invested in young companies, IPOs. And I think that's going to be the next segment of this market. If we're going to truly have a bull market with staying power is where the risk capital comes back. So it'd be interesting to see the IPOs start to make their way back into the market because that will be a sign that the market is truly back. Aren't we already in some sense seeing this with biotechs and Bitcoin?

Yeah, we're starting to see it. Bitcoin, I think, is one of those things which is kind of a noisy indicator. Bitcoin, I think of as very risky stocks. So from that perspective, I'm not surprised at the surge in Bitcoin pricing because it tracks what the Nasdaq is doing with the riskiest segments. So I think it is a good sign for risk capital when you see cryptos going up because that's become the ultimate speculative trade for risky capital. Professor, I always enjoy our conversations. Look forward to the next one. Thank you. Thank you, Scott. I'll spot the motor in. NYU Stern joining us once again.

Coming up, we're weighing risks to the rally. New York Life Investments' Lauren Goodwin flagging some potential market headwinds that she says could impact your portfolio in a big way. She's going to explain next. We're also keeping a close eye on the NASDAQ, as we said, trying to get that record closing high, 16,057.44. Well, we're almost there. Once again, we're going to see in the last 28 minutes or so of trade if we can actually get there.

We're back after this. All right, welcome back. We're showing you the NASDAQ because we are currently trading at a new all-time closing high. 16,057.44 is the critical number to watch. So in these last minutes of trade, we are above that level now. We'll see if we can hold it. But it's been far from technology in the month of February, as we're about to put in the fourth positive month in a row for this market.

Our next guest still isn't sold on the bull market. Here to tell us why, Lauren Goodwin, chief market strategist for New York Life Investments. OK, the market's gotten a lot more broad. That's like one of the last things the bears wanted to see because it chops further at their story. And eventually you keep chopping away at the story that the tree falls. Are you not on the page of the bulls yet? I want to clarify where I'm a bear. Okay. I mean, could you admit it? Come on. You have to admit you've been pretty cautious, if not negative on the equity market. Fair? I don't think that that's fair, actually. I've

been very cautious on the U.S. economy. And there we can talk about all kinds of risks or risks to that view. OK. But when it comes to being invested, we've actually been very constructive even on mega cap tech, which is a lot of where the conversation has played out. And I've been talking about how to play all different sides of, for example, the Nasdaq story that we're seeing today and the broadening market rally. And so actually, if I look at the risks to the rally, it's all kinds of things I don't see likely to happen in the next couple of weeks, maybe even the next couple of months. So we're staying fully invested. You are. I mean, I wouldn't describe you, though, as somebody who comes on the program and is

bullish U.S. stocks. I don't think you've been bullish U.S. stocks. That's fair. We haven't been chomping at the bit. And a lot of that has to do with being tactical for us is six month moves. And so that's you have to move carefully, slowly, thoughtfully, whatever the case may be. But when I look at this rally and the broadening that we've seen this month that you've pointed out and I say, how could that broaden further? There's a couple of things that we would need to see. Earnings broaden further from here. We're not likely to see that in the next couple of months, right?

We're wrapping up on earnings season. And they've been better than expected. Better than expected. You'd also like to see rates expectations move back lower. And so really, though I think we've probably been saying it for three years, we being all of us, is that this market all comes down to not just rates but expectations of rates, and that comes down to inflation. Yeah, but the – okay, so no big surprise in PCE, and the expectation still exists that the Fed's going to cut. And maybe we don't care as much today as we did yesterday, so to speak, on how much and when it starts. We know it's coming.

And that's all that matters. That is all that matters. And I think that's one of the reasons that investors should be making the most allocation shifts right now. And some of those things we've talked quite a bit about, moving cash off the sidelines into bonds. The move that we saw in terms of bond performance at the end of last year, we've only seen the beginning of it when the Fed starts actually cutting rates. There is still so much caution, so much cash on the sidelines that can move in this market. And so we're choosing to be a bit early on that front, moving into short-duration credit and municipal bonds as a starting point. Okay, so why do you favor taking cash off the sidelines and putting it into bonds rather than stocks? Feels like your favored position is into credit, not into equities.

From cash. From cash into credit because when the Fed starts cutting rates, and especially if the Fed's cutting rates faster than the market expects, it'll be because growth is slowing. And in our view, that favors credit not only from a risk adjusted basis, but also because part of the reason to move from cash into credit as the Fed cuts rates is because you're trying to lock in higher yields that we have right now. Sure. Well, yeah, of course, because you think then yields are going to come down considerably. But you still, I get a sense, think that the Fed is not going to cut necessarily for the right reason. You think they're going to be forced to cut because the economy is going to weaken more than people maybe think today it will.

Is that fair? I think that's fair. I expect, I hope that the Fed starts cutting for the right reasons. That they've seen that their policy is starting to take the impact that they thought it would take. Inflation is coming down, which I do expect will continue to be the case, that this inflation risk that we've seen near term is just a temporary blip in the data, part of the disinflationary process. But my expectation is that as we move throughout the year, growth is still liable to slow and that the Fed will actually cut more assertively than the market expects right now. And frankly, at least for the next few months, bad news in the economy is good news for the market. And investors, even economic bears like I tend to be, have to be market bears in the very near term in that circumstance. I see. I mean, you know, the Fed isn't necessarily ever

proactive. They're always sort of reactive, it would seem, to certain things that emerge. But this is going to be interesting. They don't want to wait too long either and cause a problem that they don't want to snatch defeat from the jaws of victory. Right. That's exactly right. And one of the examples that I see cited the most recently is the example of Fed Chair Greenspan, who in the 90s, similar in a lot of ways, economic experience to now where the economy was looking pretty good and rates didn't look so very restrictive. So why do you start cutting? In that environment, one really big difference between then and now is that the globalization, global productivity story looked a lot different.

You had China just starting to enter the global economy, labor markets looking like a lot of labor was coming online. This is an environment where we're looking more at deglobalization or maybe reglobalization, an environment where labor markets globally are pretty tight. And so the inflation backdrop, so to speak, is a little higher than it was back then. I think that's why the Fed's been pretty clear that later in the year is probably better.

But that doesn't mean that they'll try to tank the thing at this point now that they've done a pretty good job bringing it lower. No, but productivity is another aspect of surprising a lot of people and AI playing a large role in that. So we'll see where it all goes and we'll continue our conversations. Thanks for being here. Lauren Goodwin, New York Life. Up next, we're tracking the biggest movers into the close. Christina Partsenevelos is back with that. Christina.

Oh, we've got a chip stock pop and drama at a chemical firm. Those stocks are moving and I'll have all the scoop next. We're less than 15 from the closing bell and the NASDAQ is tracking for a new record closing high, 16,057.44. I keep mentioning the number to watch because we're above it right now, about six points or so. So we're going to see what happens over the last several minutes of trade here. Let's get back in the meantime to the Nasdaq, where Cristina Partsenevelos is with the key stocks she is watching. So you had a seat right with the action today.

I do. If only there was a room full of traders behind me because it's all electronic. But let's talk about AMD because that's adding to it. AMD stock is up 9% right now. There's no major news catalyst, but I was chatting with Jordan Klein from Mizuho who pointed to Snowflake's weak guidance, which came out yesterday after the bout. The cloud computing firm warned the demand for new silicon chips and GPUs is putting pressure on their revenue growth, which creates a bullish setup for key AI winners like AMD, NVIDIA, Marvell, etc. Citi also issuing a bullish chips note today, and they mentioned AMD. Not sure if that's the real catalyst for this 9% bump, but AMD hitting an all-time high, dating back to its IPO back in 1972, the year the Godfather movie came out.

Switching gears completely, drama at chemical giant Chemours. After it announced it was putting one of its top executives on leave and delaying its financial filings because of an internal investigation into its accounting practices. And that's why you're seeing shares down almost 32 percent right now. Scott. Christina, thanks so much. Christina Partinello still ahead. A tough three

months for HPE. That company preparing to report results at the top of the hour is now the time to get in, given that weakness. We're looking at the fundamentals ahead of the print. Closing bell. We'll be right back. A reminder not to miss a new CNBC documentary. Big shot, The Ozempic Revolution, tonight, 10 p.m. Eastern. Don't miss that. Up next, HPE and Dell, both gearing up to report results at the top of the hour in overtime. We're going to tell you what to watch for

when those numbers hit the tape. We're going to take you inside the market zone, and we're going to do that next. Well, here we go. We're in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli is here to break down these crucial moments of the trading day. Plus, we're watching two tech earnings out in overtime today. Steve Kovac on what to expect from HPE and Christina Partsinevelos is back with us to look ahead to Dell's results. Michael, I'll turn to you first. $16,057.44. We're well ahead of that right now.

It would be the all-time closing high for the Nasdaq, first since November of 21. Yeah. So, look, it's been a long repair process in that part of the market. It peaked before the rest of the market, and obviously, it's been slower to get back to a new high. It's a symptom of the fact that investors are going to second and third tier plays, feeling more comfortable about the macro outlook. You have this upturn in annual earnings estimates. All this stuff is working. And with PCE today, not a really dramatic market response, but it's worth keeping in mind the S&P was headed for about a 30% drop before the report came out.

We're going to be at more than half a percent. So there's genuine comfort being spread by this. I do think we're at a point where you can say the market has passed so many tests that I'm on the lookout for what could upset the story at least a little bit. You have to be. Yes. And so it's one of those deals where you no longer have to persuade a lot of people the economy's in good shape.

The fact that the Fed is not going to cut rates six or seven times this year, most likely, and the market's OK with it is something that people needed to be convinced of. I was saying that for months, that the market wasn't here because we wanted lots of rate cuts. But now it's in the price. So, you know, I think it's a bull market. You get the benefit of the doubt to the bulls when that's the case. The first dip is probably not going to be deep or nasty. But again, you've gotten to a points when that's the case. The first dip is probably not going to be deeper or nasty. But again, you've gotten to a point where you can respect the tape without necessarily extrapolating this kind of move for directly for months to come. Yeah, obsession highs. I mean, Dow really wasn't doing much today. It's up nearly 100.

The Nasdaq now is up more than 162 points. Again, this would be a new record close for the Nasdaq if it closes above that level that we said earlier, 16,057.34. We're well above it now. Bell's not ringing yet, but the cheering's already started. I guess for obvious reasons, we're going to put in our fourth straight month of gains. We've got more earnings coming in over time. Steve Kovach, HPE, what should we look for? Yeah, Scott, there's a bit of an AI story here with HPE. Of course, there's that fast-growing segment for high-performance computing and AI. That was at 37% last quarter. And the biggest segment was growing faster than ever.

That's Intelligent Edge. That was at 41%. Very high-margin business there. But the storage and compute segments, they're shrinking. And overall, streets expecting sales to be down year on year. And also, we've got to talk about HP's buying Juniper Networks. They announced that last month. $14 billion deal.

They say that's going to help with edge computing and AI, Scott. All right. Steve Kovach, thank you very much. Christina Partsinevolos is back with us looking ahead now to Dell's results. Well, Dell is thought to be in a sweet spot for exposure right now. They sell data center infrastructure, which is currently in hot demand off of AI adoption, and then endpoint devices like servers, PCs, and storage appliances. Dell holds considerable market share, 15% of the server market, 35% of storage, and 18% of the PC market. But softer PC

sales impacted both HP Inc. and Best Buy earnings recently and could impact Dell in the near term, which is why UBS expects Q4 revenues to stay in line at best. But it's the long-term setup that makes this name a favorite among analysts because Dell's data center for structure customers are largely enterprise firms, which is a customer segment that has yet to pick up their AI demand. JP Morgan estimates AI server revenue can go from practically nothing now to 15% of total earnings by 2027. And that's why tonight's focus

will be around the PC recovery and AI backlog, which Dell said last quarter was 1.6 billion. Cut. All right, Christina, thank you once again. Christina Partsenevelos. We're going to turn back to Mike Santoli right now. We have just about a minute or so to go. What do you make of Ray Dalio? Yeah Dalio assessing the landscape and saying, I don't

see really a bubble here. And I've seen a lot of them in my day. Yeah, I mean, honestly, how many have there actually been over even over 50 years? I don't think it's surprising to say things might be expensive. We've had some buying psychologically by the public. But for me, a definition of a bubble is something that can plausibly go down 75% to go back to the mean trend. I mean, that's not anything like what you see broadly in equities right here. Arguably, we saw it in the most speculative parts

of the market that crashed three years ago. People forget we're only a year plus off of a bear market low, even though it was a modest bear market. So I don't know. It's a little early to be talking bubbles just yet. All right, I appreciate it. I'll see you tomorrow.

Another big month for stocks is just about in the books, and what a way to go out. The NASDAQ, a new all-time record high. I will see you tomorrow. Let's send it to O.T. and John Ford.