Closing Bell - Closing Bell: The Year Ahead for Your Money 12/7/23

Episode Date: December 7, 2023

What’s in store for your money in the new year? Tom Lee from Fundstrat is forecasting more strength for stocks in 2024. He makes his case and lays out his forecast. Plus, CIC Wealth’s Malcolm Ethridge reacts to the surge in Alphabet – a stock he sold earlier this year. He explains what he needs to see from the company before getting back in on that trade. And, Broadcom and Lululemon are reporting results in Overtime. Shareholder Joe Terranova breaks down what he’s expecting from those numbers. 

Kelly, thanks so much. Welcome to Closing Bell. I'm Scott Wabner, live from Post 9, right here at the New York Stock Exchange. This make or break hour begins with tech on a tear. Today, that sector surging back after a bit of a breather. We'll ask major market bull Tom Lee how far it can run in 2024. He's going to join us in just a few minutes. Also going to reveal his target for the S&P in the year ahead. In the meantime, take a look at your scorecard with 60 minutes to go in regulation all about the Nasdaq today. But it's green across the board. AI players dominating today. Alphabet and AMD leading the way with the big gains there. Take a look at that. AMD near 10 percent. Alphabet up five and a half percent. That is the largest percentage jump since

July for that stock. Broadcom bouncing to that company, getting set to report earnings in overtime. Tonight shares on a massive run this year as well. About 65 percent. Well, it's been another rough day for energy. That sector is sinking yet again. Take a look at the chart. It's been ugly of late. Crude getting back to 70 bucks momentarily.

And that's before a midday reversal. There you see it. A little bit of a rally back. Not much. Does take us to our talk of the tape. The year ahead for your money, as some bulls suggest, this market can keep running well into 2024. One of those optimists, an Uber one at that, is Tom Lee. He's Fundstrat's managing partner, head of research, back with us at Post 9. Welcome back. Great to be back, Scott. All right. So before we get to where you think we can go, you were pretty right as to where you thought we would be, right? You 4750 was your target for the end of this year. We're at 46. We'll call it. You said mega cap was going to

lead the way. In fact, it has. Why do you think things have gone right for you and investors and bulls for the most part, especially lately? I think people were fooled by the yield curve at the start of this year, thinking we'd have a hard landing. And they didn't want to fight a Fed, but they're forgetting the Fed was fighting an inflation war, not a business cycle. So our bet was inflation would be softer. You'd avoid a hard landing.

And then we've seen the Fed kind of take its foot off the neck of monetary policy. So I think it was economists were too bearish and the technical picture turned positive very quickly. It was a triumph of technicians. Yeah, it's not over yet, right? And there are those who still say that the cycle is going to end because of what the Fed has already done. We just haven't seen it yet. You've heard that. How do you respond to that? I think people should study market internal structure. We've seen a huge turnaround in cyclical stocks. The banks are turning. The regional banks are turning up. Small caps are leading. This is not end of cycle market behavior. This is early cycle expansion re-accelerating. What if it's just a late year,

run as fast as you can, catch up to what you missed? A lot of money has come in and it's just chasing everything to the end of the year as rates have come down. Well, if we thought this was a head fake, and I think if this is 98, we can run another 7% from today. To when? To year end. This year, year end? Well, I think $4,800 is more reasonable. But I think that if it was a head fake, we'd see credit calling baloney and we'd see spreads riding or high yield falling. But what's happened is spreads have rallied, high yields rallied. It's actually an improving liquidity rally while investors took $240 billion out of stocks this year. So you're a believer in the broadening of the move, and you think it carries beyond

the calendar turn? Yeah, because now as we get into next year, we'll have an FOMC decision, but I think it's going to show the Fed is no longer fighting an inflation war, but really shifting towards managing the business cycle. Huge change. I think interest rates could make a huge move lower. Mark Newton, our technician, thinks it could be three and a half percent, 3.2. And that would take mortgage rates down to five or under 5%. We know that would help the economy. And I think there's a

lot of pent up demand for CapEx. So I'd say that stocks could do very well next year. Well, you must if you think we're going to get to your target for 2024 S&P is 5,200. Yes. What gets us there? Well, it's earnings recovery. So we think earnings hit 265 by 2025. That's two years of like 9% growth. And you put a 20 PE. A 20 PE has happened 50% of the time when the 10 years between 4% and 5%. So it's the most common PE to apply, and that would be 5,200. But I think that's conservative because 265 is 5% of it's coming from cash, right? So there's like 3% organic growth. I mean, cash earnings is 5% growth right now per year. I hear bears say earnings aren't going to be as good because

inflation is not going to be as good for earnings. And that's going to be a negative. And that's why the market's overvalued. And people like you at 260, $260 are just way too optimistic on where earnings are going to be. Well, I think people should study the PPI. Like four or five sectors are correlated to PPI, like materials, energy, meaning as inflation falls, they make less money, but tech and industrials have almost no correlation to inflation. And then financials are positively correlated. So I think you have more groups that could actually have better earnings power into next year. And especially if caution comes off companies, you know, CapEx, there's a lot of pent up demand in CapEx. Five out of 10 groups

actually sort of cut CapEx as a percentage of revenues last year. So you have a CapEx opportunity, you have a home recovery opportunity, and you have interest rates falling. It's hard to say stocks should fall next year. So the market thinks the Fed's going to cut first in March, three meetings from now. Is that what you think? I mean, to me, that intuitively seems aggressive. But what's going to matter more is what the bond market starts to price. And I think the two year is telling us the Fed does have to cut meaningfully next year, because if they don't cut and inflation weakens, the level of real Fed funds is associated with a hard landing. Like the Fed, if they're trying to manage the business cycle, would be cutting rates. Yeah, but you think it could be a little aggressive

in terms of March. Do you need the Fed to be somewhat aggressive in cutting to get to your 5,200? We just need the market to get comfortable with two things, that the curve can stay inverted, meaning the 10-year could actually go to 2.5 and the Fed's still at 4. And the second is that stocks and bonds don't have to be positively correlated. So yields could go up and stocks could rise. So I think that there's some protection or buffer against if the Fed doesn't cut rates. How much do you need cash to come in from money markets that's been sitting in safety and now it goes towards risk assets because rates have come down and you get better yield out of the equity market. Yeah. I mean, Scott, this year, if someone bought FANG, they'd be up 85%. That's 15 years of money market cash. If they buy small caps next year and small caps are at 50, that's 10 years. So I do think that $240 billion that left is coming back

in. But hedge funds also have very light positioning in equities. I mean, I don't know if you saw that there's almost a five-year low in hedge fund positioning in financials. And financials really should be where things turn next year. You think financials are going to be one of the leaderships? What about small caps? Because that's where a lot of the conversation has been of this awakening that the Russell has had. Yes. There's still a lot of non-believers. Yes.

I think there's the callous in place. We've had 12 years of underperformance. The price to book of small caps to the large caps is exactly where it was in 99, which was the start of a 12-year bull run. Banks are a huge weight in small caps. We know falling rates helps asset quality. So regional banks should rally. That should pull up small caps. It's clearly under-owned and they benefit from inflows. And then, of course, I think large cap banks are really good plays on a capex cycle. So to me, it's easy to see the 20,

30 percent kind of moves in those groups. I mean, small caps may be 50, whereas it's harder to say FANG can do 50 next year. The other big call that you're making today despite revealing your target at 5,200 is suggesting that mega caps, tech, not going to lead next year. That's right. Why? It's that I think the earnings growth they produce doesn't look as special if the PMIs are turning up.

If the ISM turns up, S&P earnings are going to grow 15, 20%. And then on terms of multiple expansion, I think people are going to be more willing to fade a FANG multiple expansion, whereas they'll buy a financials multiple expansion. So I want to be clear. So you think there's going to be a rotation out of mega cap into some of these, quote unquote, unloved areas? Yes. I mean, I'm, you know, FANG is still a number three pick, which means it outperforms. But if someone's saying, where will they get the best risk reward? I think it's clearly financials or industrials.

When you say that FANG still outperforms, the word you use, put some context to that. What does that mean? Well, let's say S&P is up 12 to 15 next year. FANG will be maybe a little bit better, whereas financials probably can be up 30 and industrials can be up 25 and small caps can be up 50. So we're going to really have that significant of a mean reversion trade, so to speak. Yeah, I think it's consistent. If you look at like the history of a stock like Amazon, they have great, you know, a step up year and then they consolidate. Wow. Let's expand the conversation, bring in CNBC contributor Joe Terranova of Virtus and Ayako Yoshioka of Wealth Enhancement Group. It's great to have everybody with us. Aya, I go to you first. really been defined by a very narrow market. And so it

makes a lot of sense that going into 2024, that we would see a broadening out of the market, especially if the economic data comes in, you know, relatively benign, you know, neither too hot or too cold. So you do think we're going to have a broadening. You agree with Tom that that we're going to have these lagging sectors are going to be the leaders that tech can still do well. It just doesn't have to carry all of the weight like it did this year. Absolutely. I mean, I think if the economy continues to stay relatively strong, I mean, some of the, you know, names in the lower half of the S&P 500 have a lot of room to have the multiple expansion, as well as perhaps some upside surprises to their earnings growth as people start to anticipate a recovery from the slowdown in 2025. Joe, is Tom too optimistic or not?

Well, first of all, Tom's been incredibly accurate so far in 2023. So congratulations for that. I run an equally weighted strategy, so I'm excited to hear your comments for 2024, because that obviously means the strategy is going to be favored. But there's three points I think we need to hit on. First of all, when you look at the market right now and you talk to advisors who have clients sitting in cash, the first thing that they will tell you is they expect the economy to slow. And the cash that Scott cites going into risk assets, those risk assets are in equities. They want to put those assets into credit because they believe they're also going to get price appreciation. How would you respond to that?

You know, I'm a fan of bonds. You know, high yield returns 80% of stocks with less volatility. But we know that if bonds rally next year, that actually has an expansionary effect on P.E. So to the extent people decide to allocate to bonds and spreads have a huge rally, it actually means there's upside to the S&P just because the multiple now has more room to expand. So, Joe, Tom says 20 times earnings make sense. Earnings at 260 make sense. Is that too aggressive or not? He's too aggressive with financials. I'm worried about financials. Let me explain why. What about the overall? Give me the give me the view.

He says 5200 on the S&P. Follow me. Stay with me. I'm staying with you, Scott. You know me a long time. I don't do S&P price targets. I do the environment. I'm not I've never sat here and said, OK, we're going to 5200.

All right. The environment is a favorable one. Let me rephrase it into a way that we can agree to have a conversation about this. Is is is the environment going to be optimistic enough? Absolutely enough that the S&P can get to 5,200? I don't know the answer to that. I don't think anyone knows the answer to that. I'm sorry, Tom. I don't think anyone knows the answer to that.

Can we have double-digit returns next year? Yes, absolutely, you can. Okay. Aya, what about you? What do you think? I think we could have double-digit returns, too. But I think the setup is very different going into 2024 than what we had in 2022. You know, we had a lot of upside surprises this year in 2023.

And I think we could have some jolts depending upon how the data really pans out and how earnings really pan out in 2024. I mean, for earnings to get to two hundred and sixty60, things have to go really right, don't they? I mean, how perfect, I hate to use that word, but in some sense, things need to be perfect. That inflation needs to come down to target. The Fed definitively needs to be done, if not cutting. The business cycle needs to keep humming. The labor market needs to remain robust so that consumers don't stop spending. Can all of those things mesh and make this a perfect, in quotes, scenario? I mean, never say never. But at the same time, it does create difficulties for 2024. I think you're going to get bouts of it, and it's not going to be a straight path to those potential double-digit

returns in 2024. I think the first half could be a little bit more murky, as everybody anticipates these rate cuts. And if we don't get them and the economic data, it really does slow and perhaps more so than everybody anticipates, then that bad news can really breed some havoc in market. Tom, how would you assess how I've described what needs to happen for you to be right? Am I overstating it or do things really need to be perfect for you to get to 5,200? I mean, here's some simple math to think about. Earnings this year, 225. So we say two years, 265, so $40. You know, 15 is going to come from just interest on the cash. So it's, you know, 25 from organic growth, which is 10% over two years. It's basically GDP of 3%, real. I think that's

pretty doable. So unless we have a recession, 265 is actually a low number. It could be 275, 280. Wow. For 2025. In earnings. In earnings. Because remember, buybacks is another five. I mean, just buybacks and cash is 10% a year. 2755, $280 will make you like, I mean, you're so high up, we can barely see you. We need a telescope to see your number on earnings relative to where everybody else on the street is. I haven't heard anybody suggest, gosh, you could get high as $280. I mean, just keep in mind, this year, healthcare earnings are down 20%. They won't be down 20% for two more years. And basic materials energy are down like 40, and staples are down. So we could, as those turn, those contribute to S&P earnings meaningfully, especially energy,

right? Energy was such a huge swing factor, it's been absent for this year. Why is it going to be better next year? Well, if let's say price stabilizes, so you just look off the curve, they won't be dragging earnings. You'll actually have a positive contribution because they're not declining. So it's not hard to get to 265, actually. Sounds strange. But that's two years from now. All right. Aya, financials, energy, do you like either in 2024? We like energy. I think the setup for energy still remains very favorable.

You know, valuations still aren't at extremes. I think, you know, you've had some big announcements in the industry that are consolidating. And, you know, you have earnings growth. And if the economy really doesn't slow that much, if we get that mild recession or the soft landing scenario, energy should continue to do well as we go into 2025 and beyond. Joe, you wanted to take on Tom about his financials call. Why? Financials and energy.

First of all, with energy, what if the price doesn't go lower? It keeps, right? What if the price doesn't go higher? The price goes lower. You get a massive liquidation. Everyone is overweight energy, Tom. You know that. In addition, on financials, where's the earnings growth come from? Because if you think about it, you lose the effect of

interest income. Interest income was up 22 percent in 2022, was up 18 percent in 23. It's actually going to decline next year. J.P. Morgan and Citi told us yesterday at the Goldman Sachs conference that trading revenue is down. You've got all CEOs complaining about regulation in Basel III. What does that leave you with, dealmaking? Yeah, well, a couple things. One, what you've described is why no one owns financials, right? Because that's why hedge funds have the lowest long positions in five years. Second, as George Boyd, head of Kitter Research, famously says,

it takes a whole lot of E to offset PE. The financials trade next year is about price to book or price to earnings which means it doesn't mean it doesn't matter what earnings do next year it's how earnings power is transforming and look if we have lower interest rates we know that this saves commercial real estate it revives housing I don't think any investor says oh well your q2 numbers aren't gonna be great they're gonna say this is a switch and how we look at earnings power for the next couple of years. So I think financials have huge multiple expansion potential.

And then trading, as you know, trading is spontaneous. It's weak this quarter. It could be huge next year. I mean, $240 billion taken out, gross exposure is low. I'm not surprised there hasn't been much trading. It's going to pick up a lot next year. But in that scenario, you have to have a soft landing the way you're describing it. I hope we don't have a landing yet. I don't think Tom is suggesting anything other than that, if not no landing, right?

I mean, if you think we can 270, 280 on earnings, well, we can't even come close to a soft landing. That better be a no landing, no late cycle, reacceleration of the economy for all the factors that you suggested. Yes, Scott. And one thing I think people have lost perspective on is when the Fed went on their tightening campaign and brought rates in the U.S. above any other developed world, we already had a hard landing in Europe and China. So the U.S. avoided a hard landing because what broke was outside the U.S. If you think those economies worsen next year, then we're in trouble. But if they're turning around and the DAX is telling you things are turning around Europe, you don't need a landing in the U.S. because we had a landing elsewhere.

Aya, I give you the last word. No, I think Tom always makes some great points about uh you know the market outlook and betting against tom uh it has not been favorable i think to many investors so i would go and listen to what tom has to say all right dia thank you tom of course thank you as well joe we'll see in the market zone because we have a little broadcom to talk about before those earnings so let's get a check on some top stocks to watch as we head into the close. Pippa Stevens is here with that. Hi, Pippa.

Hey, Scott. Dish Network and Echo Star are in positive territory after the FCC approved their merger. Despite the agency's scrutiny on other big mergers, this deal was given the green light because billionaire Charlie Ergen is already the controlling shareholder of both companies. Those stocks up roughly 8%. because billionaire Charlie Ergen is already the controlling shareholder of both companies. Those stocks up roughly 8%. And Domino's Pizza is at its highest level in over a year as the pizza giant lays out its targets during its investor day. Executives are aiming for annual same-store sales growth of 3% through 2028

and say they're looking to add new menu items and rethink existing items. Those shares up 2%. Scott? All right, Pippa, thank you. We're just getting started here on Closing Bell. Up next, Alphabet shares. They are surging today. Investors are cheering the arrival of the company's AI model.

We're going to hear from CIC Wealth's Malcolm Etheridge. A lot is getting that trade. You know that. We'll find out how he's playing this announcement. Does he like Alphabet now? We'll find out after the break. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC.

Well, the AI arms race is heating up, that's for sure. Alphabet shares are surging today after the company announced their AI model, Gemini. Microsoft also getting a boost after having their own shareholder meeting earlier today. Let's bring in CNBC contributor Malcolm Etheridge of CIC Wealth to discuss all of this. So I look at Alphabet's having its best percentage day since July. You sold it and we made a whole big deal about that. So what do you think about this announcement? You write them off too soon?

Yes and no. So yesterday I got the same announcement everybody else got. And I thought, you know, this is finally their moment. This is what I, as a former shareholder, was asking for, you know, 12 months ago almost. It feels like at least. And this morning we're getting reporting from the information and others that maybe there's not as much there there as we thought. And Gemini is not as powerful as it was initially touted to be. Maybe it's the equivalent of what GPT-3 actually was. And so I'll say let's hold on for a second.

Let's wait to see after people get their hands on this Gemini model just how powerful it actually is. But I will say I'm also thankful that Google has finally woken up and joined the party. Yeah, look, I'm not going to be critical of the fact that you don't own Alphabet. You can't own everything. I think that's fair to say you own Amazon and Microsoft, of course, Apple and some other names as it relates to this space. But do you feel like we're going to get as we turn the calendar into 2024, we're going to get a more distinguishing line between the real winners and those who are pretenders? A hundred percent. I think we're we're probably turning the corner here where we're probably going to add another three, I think maybe four names to the magnificent seven, as we've been calling them this year.

That are all the names that are actually doing something tangible in the world of AI. And I think the ones that are going to be the dominant leaders of that 10 are the ones that show a way to actually commercialize and generate revenue using those tools sooner than later. So a lot of what we were promised in AI back in March was solely just the promise of this is what AI is going to do. I think we're now going to be a little more critical and say, show me the money. As I reference, you obviously have a significant exposure to mega caps, which Tom Lee, who's as bullish as anybody I've heard, suggests that they're not going to lead. They're going to outperform. But the mega caps are not going to lead in 2024. Do you share that view?

Absolutely not. I was shocked to hear Tom say the financials were actually going to be twice as good from an investment return perspective as mega cap tech. I think realistically what is happening is the broader economy is not doing so great right now, but it's being overshadowed by the fact that AI has just captivated our imagination and made us excited about the return potential as investors with these seven to 10 stocks, as I mentioned. And so I think all of the capital one way or another is going to flow into those 10 names in 2024. And that's what's going to end up dominating the S&P and the Nasdaq once again. Wow. So it's going to be the same thing that

happened this year. You must not. Does that mean you're not as sanguine on the economy as others or earnings? So we're going to once again just go balance sheet hunting for safety? Well, as I said, I think that the broader economy is not doing so great, right? We just got a note out. Well, it's not doing so bad. Not doing so bad. Maybe. But I think that what we're seeing is a dislocation between the stock market,

where we should have had a pretty flat stock market this year, not nearly as impressive as it is, except for the fact that AI came in in March, thanks to ChatGPT, and stoked everyone's excitement about investing all over again, and it's tech, tech, tech. And so I think we'll add a few names. Maybe we add Adobe. Maybe we add Adobe. Maybe we add Salesforce. Maybe we add AMD. Names like that that have actually shown a immediately commercial ability to generate revenue using these tools, specifically co-pilots that they've adapted. But I don't think that the broader stock market is necessarily in any better shape than it was the last couple of

quarters. I think we're just not seeing it because the S&P is getting led by AI once again. No, but the performance, let's just say since the end of October, if I would have asked you this question, then I would say, OK, yeah, you're right. Obviously, however, it is obviously a different story. Look, the Russell's up 8% in the last month. That's not a broadening out. That is far from a top heavy, more recent market. You could be highly critical if you want to be of the internal makeup of whatever the market did up until November. And then it's clearly been a much different and, dare I say, healthier story.

No, I think that's fair to say. I think that the AI high tide raised all the boats. I think what you're making a very good point that there was a giant gap between the Magnificent Seven and everybody else and the other stocks decided to gap up instead of the Mag Seven gapping down. But at the same time, I think what's going to continue that narrative is not going to be small caps. It's not going to be financials that narrative is not going to be small caps. It's not going to be financials. It's not going to be energy where people's imagination and excitement gets captivated. Once again, come earnings season is going to be AI once again. I think my point, though, is that it's not AI tide lifts all boats.

It was. But this has now morphed into we're actually going to pull this off tide. That's the the the soft landing tide is the one that's lifting all boats as rates have come down. That's why small caps and all of these other areas that did nothing are finally performing well. Yeah, I'm not a believer in the soft landing. I think what we probably did was just delay the period where we're going to have to take our medicine. It doesn't make sense to me logically that the Fed could raise the cost of short term borrowing on an economy that's built on consumption and on a consumer that's powered by borrowing. And we're not going to have anything negative happen in the economy as a consequence of that.

And so maybe we just pushed it into 2024 where we would have been taking our medicine earlier this year. But I still think that that R word, the recession, even if it's a mild recession, is going to show up here at some point early in 2024. But I mean, we skewed the system going into the rate hikes, did we not, by stimulating the economy to a degree where you and others would probably suggest it was way too much. And that's why we are where we are. That changed the whole paradigm. I think you're also giving a little bit too much credit to a Fed who got us into this mess in the first place

and assuming that they will also perfectly time the cuts on the other side. So we've already heard the hire for longer rhetoric from Jerome Powell and others. And I think they'll continue to hammer that home at the next Fed meeting and the ones that follow. And we're going to assume then that the same folks who brought us transient were the same folks that are going to also perfectly time the cuts and bring us back down on the other side of that mountain. So the ascent has been, I won't say it's been great, but it's definitely gotten us where we need it to be. Now we have to focus on perfectly executing the descent back down the other side of the mountain. And I'm not so confident that the Fed will land that plane so perfectly. We'll make that the last word. Malcolm,

appreciate it as always. Thank you, Malcolm Etheridge. Joining us here on Closing Bell, up next, betting on an IPO bounce back. Star VC investor Rick Heitzman is back with us today. Breaks down his forecast for the market as we make the turn into 2024. We'll see if we are more open for business in a new year. Closing Bell is right back. We're back at the IPO market, seeing a sharp slowdown over the last two years. But will the IPO market finally start to thaw out in the new year? Let's ask Rick Heitzman now of First Mart Capital.

Welcome back. Thanks. I mean, we've had a tiny bit of a thaw, but you've still got some, like, big chunks of ice in that market. It's mainly ice. There's more of a couple drops that happened in September. But as we talked about, you know, 21 was a great year. Over 100 tech IPOs, 22 and 23 were generally terrible, except those couple drops that came in September of Clavio and Scarton Arm. And then I think the door is going to start slowly opening in the beginning of 24.

But, you know, as we've talked about before, the party was that big. It's going to take a while to heal. How much longer do you think it will take until you get back to what you and your colleagues in the field would suggest is normalcy? It's probably another year to 18 months. That long? So I think, you know, beginning of next year, you're probably going to see some smaller companies. They're not going to be the stripes of the world. It'll be more of a stub hub, more of a SeatGeek, more of a Toro that have approachable business models, have good growth, have profitability, aren't going to do a billion dollar financing, but are going to be a couple billion dollar or several billion dollar public companies that have been private for too long and just want to get out.

How do you assess what's happening with the AI arms race at this point? We've visited with you, you know, maybe it's been once a quarter-ish, something around that. And now here we are, it's the end of the year, and we're still talking about it in the same way we were at the beginning of the year when Microsoft sort of exploded this whole thing. And now we just had, you know, Alphabet with Gemini and AMD with a new chip. And you've got a couple of battle royals between AMD and NVIDIA and Alphabet and Microsoft. How does somebody like you assess that? Well, it was the we knew the hype was coming.

We felt that pressure coming. And with Chak GPT, even this time last year. And this year has really been a year about promise. And now they have to deliver next year. So I think more than other megatrends, we've seen the biggest companies jump on the trend earlier and more aggressively. So doing things like building factories for chips,

buying up as much GPU as they can find, over-promising their customers on the consumer enterprise what this is going to do. And now you're setting up as next year as a year, they really have to deliver. Well, I was going to ask you that. It sounds interesting because do they have the ability to deliver that soon? Are we assuming that all of these companies are going to be able to monetize what is such a new and transformational technology?

That's going to just take much longer. We're going to have to be patient. Multiples in these stocks don't necessarily suggest patience. No. I mean, it's been a little bit too much too soon. The promise was that big. I think a lot of those companies will disappoint because you're going to have to look at real return on investment, real companies buying the products and being pleased with them. And as all product market cycles, some of those products will be great and overperform. Some of those products will underperform. And I think you're going to see a really choppy market around this hype next year as just

announcing a chip isn't going to be enough to move billions of dollars in market. What do you think is next year's hype? What area do we need to pay more attention to? Is it these weight loss drugs have had a captivating impact much the way AI has? Now some of the stocks haven't done quite as well, but nonetheless, it's been this transformational trend that people, investors are trying to wrap their arms around. See how to take the most advantage of. How are you thinking about that? I still think it's early.

Differently from AI, those drugs work. They've been proven to work and provide incredible health benefits. So the promise seems to be coming to pass. There's still a shortage of almost all those drugs. You have seen a lot of value creation in Nova as well as Lilly this year. And so you've seen some of that value creation, but I think you're going to see the ongoing ripple effects with companies like Rowe or delivery mechanisms for that GLP-1 next trend in 2024. Is there another hot area you got your eye on that not enough people are talking about? I think there's a couple of places, one being financial technologies. A lot of the underpinning of the financial system, whether it's credit cards or whether it's enterprise banking, is getting thrown up in the air. That was accelerated by the fall of

the regional banks and the SVB crisis as people are rethinking about their banking relationships and emerging companies are taking advantage of that. And we've done a lot of things this year on the infrastructure fintech side, planting seeds that hopefully will start to bloom next year. Interesting, because that area specifically didn't end so well. It hasn't ended, but my point is a lot of those stocks that were so red hot, PayPal, Square, things like that, obviously had a major drop down to earth. What's going to prevent that from happening again, just to different symbol companies? And we've seen that in the private markets also a lot of the private companies have were way overvalued and they've come back we're

probably less involved in the consumer new fintechs or the neo banks that are out there more involved in the underlying infrastructure of those things so if you can have a credit card that's private labeled, but has a different infrastructure, which is more efficient, can do KYC and AML, can do all the things a bank needs to do, but built on a new software platform. All right. Appreciate you being back. Rick Heitzman from FirstMark joining us here. Up next, we're tracking the biggest movers as we head into the close. Pippa Stevens is standing by for us today again with that. Pippa? Hey, Scott. Well, one airline stock is taking off on an improved forecast

while an AI darling pulls back on disappointing results. We'll bring you those names from the close. Let's get back to Pippa Stevens now for a look at the key stocks she's watching. Hey, Pippa. Hey, Scott. JetBlue is having its best day in three years after raising its fourth quarter and full-year guidance. The airline says bookings have exceeded expectations for both holiday and non-holiday travel periods since late October. That has shares up roughly 15 percent heading into the close.

And C3AI is having a rough session as a revenue miss overshadows a narrower-than-expected loss per share. The AI giant also issued disappointing third third quarter and full year guidance. But despite today's pullback, the stock is still up over 130 percent so far this year. Scott. All right, Pippa, talking about AI yet again. Pippa Stevens joining us there. Still to come, breaking down Broadcom. That's semiconductor giant AI Play 2 reporting at the top of the hour.

We're going to hear from shareholder Joe Terranova with what he'll be watching when those numbers hit. Closing bell right back. Up next, Lululemon reporting results in overtime. It's seen some serious gains this year at more than 40%. We'll give you a rundown of what to watch for when those numbers hit the tape just after this break when we take you inside the Market Zone. All right, we're in the closing bell Market Zone now. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day.

Plus, Kate Rooney looking ahead to Lulu Lemon earnings. They're out in overtime. And Lulu and Broadcom shareholder Joe Terranova is back to share what he expects out of both of those reports in OT. First, though, Mike Santoli. See Tom Lee? Yeah. Tom Lee says, hey, could get to 4,800 before the end of this year, 5,200 by the end of next. And he threw out some pretty stratospheric earnings predictions as well. 4,800 by the end of next. And he threw out some pretty stratospheric earnings predictions as well. 4,800 by the end of this year would be, it's interesting, we were exactly at this point two years ago. And what you got was 4,800 by the end of that year, as he said. So it maps to that.

And it was sort of on nothing. If you think back to it, it wasn't as if you got some great reassurance on where inflation was going or any of that in 2021. So you can't rule anything out, obviously. I think mostly what the market seems is pretty relaxed about the general backdrop and then going into payrolls tomorrow. The last two jobs Fridays, market was up 1% each day, just about 0.9%, 1.1% last two months. So I think there's a sense out there that the accumulating evidence of moderating but not falling apart growth is good enough that even if you get a wild card tomorrow, maybe it doesn't knock it too far off course. Now, in terms of the earnings outlook for next year, I'm all for the idea that you can make the numbers for double-digit growth.

There's some very specific ways you get there. Pharma, massive drops this year can come back. Then you got the big six, the NASDAQ, that are just going to grow off huge bases. The other piece of it is, every bank is expected to have down earnings next year. I mean, something could happen that maybe they can be flat and not down. So I don't know about getting $15 a share for the S&P 500 earnings off of just interest on the cash, as Tom said? I mean, I don't think that math works, but maybe it does. No, I mean, look, 260 sounded optimistic. Then

it wanted to outdo him, certainly, throughout the even bigger numbers. Speaking of numbers, we get some from Lulu, Kate Rooney and OT. What do we expect? We do, Scott. So Lululemon coming up here. We're going to get another read on the consumer when Lululemon reports after the bell today. Wall Street's watching international sales. China's been a big growth area for Lululemon reports after the bell today. Wall Street's watching international sales. China's been a big growth area for Lululemon. And then same-store sales in North America. Then any commentary around consumer and holiday sales recently, which could affect guidance going forward. Analysts are anticipating 14 percent earnings growth and then 18 percent revenue growth. Stock's up more than 40 percent this year. It's up 20 percent or so

since getting added to the S&P in October. Lulu did see a couple of analysts downgrades today ahead of that report. Raymond James citing the rally, saying the price gains are already factored in at this point. And then Wells Fargo saying that confidence in the stock has played out still. Got about 70 percent of analysts right now with a buy rating on that stock. All right. We'll see you in OT when the report hits. Kate Rooney, thank you so much. All right. So Joe Terranova is here. Let's take Lulu first. Been in that stock and a believer for on that stock. All right, we'll see you in OT when the report hits. Kate Rooney, thanks so much. All right, so Joe Terranova's here. Let's take Lulu first.

Okay. Been in that stock and a believer for a long time. Quite some time. So what do we think? So listen, you should expect strong profitability. You should expect strong sales. I think two numbers to look at, direct to consumer. Does that grow above 15%?

Gross margins, can you sustain above 57%? And is the growth in international present once again? I also think the guidance on revenue is important. Let's keep in mind they'll do about $2.2 billion in the current quarter. They're going to look to do $3.2 billion in the upcoming quarter. Does the stock, I mean, it's a lot to live up to. The stock's up better than 12% in a month. I've got a lot of things on my screen here, and AMD's up 13% in a month,

but nothing else pops like this one on my screen here. No, I think the November 2021 price at $4.85, which is the all-time high, seems to be where the gravitation wants to be. The options are pricing in a 5% move over the last eight quarters. The mean move is about 8%. So it's a little less volatility, which is somewhat surprising. But this is a stock that's outperformed the consumer environment with so much friction. You know what, Mike? Also, in the last, I want to say, 10 days, you've had a couple of different notes. One of them was,

you know, the US one list. Hey, we're putting Nike on. We're taking Lulu off. And then there was another note with very similar calls. Yeah, people are looking for laggards, I think. So you either have the commitment that the market is able to reward winners and they're going to keep going. That's the Lulu story. That's like the Chipotle story where you have big secular growers. They still have a ton of room for store expansion and everything else. And they have this demographic sweet spot and pricing power, all that stuff. And if you want to make the bet that that's largely in the stock and maybe the other quality names in the group can come around, that's where you get the Nike story. Nike's like flat for the year. All right, Joe. Broadcom was a thousand dollar stock. That's the 52 week high.

It's been working its way back and it hasn't gotten the headlines that the NVIDIAs or the AMDs or some of these other AI plays have gotten. But those who know, know. And they've been trying to tell that story. Oh, for sure. And this has been the we call it the valuation alternative to a more expensive NVIDIA. I will tell you, this is an interesting report tonight because you're going to need AI to save the day because there's a little bit of embedded weakness. When you look at wireless, Apple units are going to begin to decelerate. So you need AI to really step forward here. In addition to that, it's infrastructure software, which is now inclusive of VMware.

That's 43% of the business overall. But I'll tell you what my position's got on some strength. I think I'm going to do what a lot of money managers did in NVIDIA, and that's probably pare back the position a little bit. Look, we look into 2024. What do we see? Sell the winners, right? Mike calls them the crowded. Sell a little bit of the crowded. Buy the neglected. I think Broadcom might be a little bit of evidence of exactly that. You might get a little bit of similar NVIDIA reaction. Yeah, what do you think, Mike, about Broadcom? It's been a great stock.

It has been a great stock. I think people feel comfortable with it because you do have a decent valuation cushion underneath you. It's not one of these all-or-nothing, really, earnings momentum stories. But historically, the market doesn't love having to play a secular theme with a small subcomponent of a company. Now, look, arguably, IBM is benefiting from a little bit of this Halo 2, where you have a good cash flow story alongside this idea that they can be in the orbit of AI beneficiaries.

So, you know, we'll see on that front. All semis working today, by the way, on the back of that AMD news. Joe, I appreciate you sticking around. Thank you. That's Joe Chernova. Mike, we've got a minute left. Let's set the scene here for the morning. Jobs report, 830.

Yields have steadily been coming down. Yeah, they stabilized a little bit today, but you're still looking at a 10-year as we speak at 414. Do we get a greater move towards 4%? That's going to be really fun to watch. It will, and I think it would probably have to happen on the wage growth side for that to soften up a lot because the long end, in theory, shouldn't necessarily be the main thing moving according to Fed expectations. Maybe the two-year yoke comes down a little bit more if all of a sudden it seems like the job market is wobbly. I think if we get an on-consensus type number for job growth, it's still healthy growth,

you know, 150 to 200,000. That, to me, doesn't mean the Fed's got to get a lot more dovish than we think today. That'll just play right into the soft landing pan. All right, Mike, thank you. I'll see you tomorrow. I'll see all of you as well. Look forward to that. Dow's going to go out plus 61 in the O.C. with Morgan and John.