Closing Bell - Closing Bell: Top Strategies for Your Money 8/29/24

Episode Date: August 29, 2024

What are the best strategies for your portfolio right now? NewEdge’s Cameron Dawson, Invesco’s Kristina Hooper and American Century’s Mike Rode reveal their playbooks. Plus, several reports surfacing today about Apple’s big AI push. We break down all the headlines and get instant analysis from an analyst. And, we tell you what’s at stake when retailers Lululemon and Ulta report in Overtime. 

Welcome to Closing Bell. I'm Scott Wobner, live at Post 9 here at the New York Stock Exchange. This make or break hour begins with shaky stocks. We're in the midst of a bit of a fade here in the final stretch. Dow is still hanging on to nice gains. It is pacing for another record close, but tech reversing a bit. That's hurting the Nasdaq and, of course, the S&P. Nvidia, it's the culprit today. It's sliding, and while most of mega cap tech was mostly higher throughout this day, it's rolling a little bit, too. We're going to keep our eyes peeled to those stocks as well over this final stretch. Let's show you the scorecard with 60 minutes to go now in regulation. Tech and com services are red now, along with consumer staples.

All other sectors within the S&P, though, they are green. And there's reflected there in the major averages exactly what's happening at this moment. We about halved the gains out of the Dow and certainly the S&P and the Nasdaq as well. Standouts today, industrials, discretionary, energy and the Russell is posting a strong session as well today. It does take us to our talk of the tape. Stock strategies. What's your best one right now? Let's ask Cameron Dawson, chief Investment Officer at New Edge Wealth, here with me as you see it post-9. Welcome back. Good to see you.

What do you make of the price action, first and foremost, post-NVIDIA earnings, what that stock's doing and then what the rest of the market was doing and is now doing as we begin our conversation? Yeah, the whipsaw is something that we've been expecting to continue to see simply because we still are in August. It still is light trading, and this is a time that we still are in August. It still is light trading and this is a time that we typically see higher volatility. Clearly, we are hitting some pretty formidable resistance when it comes to the S&P 500 at the July high and getting over that is a really

important step for this market. So until we do, we just expect to see more chop and churn. 5600 is sort of that number you're talking about. 5667 or so is where you have to get to to get a new high. Tech's been teetering a little bit, hasn't it? And do you feel like that's kind of where we are? We're still yet to resolve the future of that trade, at least the immediate future. Tech has certainly been losing steam. And if we look at the bounce off of the August lows, it hasn't been nearly as robust as the rest of the market. It still is well below its July high, which means that it's making a lower high. We've seen it trade now below its 50-day moving average, I think, today.

You also see some of that relative performance starting to deteriorate, which just suggests that some of the ultra dominance that we have seen in tech really over the last 18 months is starting to show signs of fading or at least a little bit of losing energy and meaning that the rest of the market has to take it up in order for this market to continue to move higher. And it kind of has been doing that. So isn't this good, right? If people argue, well, the market needs to broad. It's not broad enough. It's back towards mega cap tech. And that's really the only thing that's really, really working and that you can believe. And then you get broadening and tech sort of takes a bit of a backseat. And I don't like that either. What we'd say is that tech has to at least participate on average with the market.

It can't be down and it can't be lagging significantly because after all, it is 30 percent of the S&P 500. So that would be a big drag on overall performance. We think that the reason you've seen this broadening is because this expectation that the MAG7 is going to see lower earnings growth in 2025 than it did in 24, whereas the market now expects the rest of the market, the 493, to see a big acceleration next year.

The question is, can the 493 deliver? And we think that that remains a very much open question. Well, because you need to see what earnings do. Exactly. That's going to be the tell. Are you confident or not? We think 2025 estimates are too high. It doesn't necessarily mean that the market can completely lose steam and mean that we've hit a high in the market. We think that we will eventually start to see those estimates move lower as we get closer to 2025. And we think the fact that there is such a high bar for this 493 is something that makes it harder to jump over. Remember, at the beginning of 2024, the market expected a broadening as well, but it didn't get

it because earnings disappointed and things like energy and materials and tech and health care and industrials on down the list. Tech was the only place that was surprising to the upside, hence tech's leadership. Are you bothered by what some would characterize to be a more defensive nature of the recent price action in the market? Utilities and some of the other more defensive traditionally areas of the market had been leading. Is that a bad thing? Classic intermarket analysis would say yes. If utilities and staples and healthcare are leading, it's a sign of risk aversion and people having more growth fears. So if you see that performance continue, it is a sign that there is an underlying growth fear in this market that we shouldn't ignore. Also pay

attention to things like IPOs and high beta stocks underperforming. That's the opposite side of that trade. And that has been showing weakness, which suggests that there is some brewing growth fear. So if you put a lot of these concerns on one side of the scale, tech may be teetering a little bit, more defensive nature of the market. But then on the other side of the scale, tech may be teetering a little bit, more defensive nature of the market. But then on the other side of the scale, I put coming rate cuts. Do we even ourselves out? Do rate cuts have more weight to the near-term direction of the market or no? I think that Jeff DeGraff has been making a really important point, which is that tech has classically underperformed after the first cut,

and that you have seen a leadership rotation. And it's been in favor of defensives over cyclicals. Now, that can resolve itself if the growth fears are allayed, meaning just that if you don't see growth deteriorate and the tech is in the Fed is cutting because it can not because it should, then the market can rally from here. So it just suggests a near-term chop, but not necessarily something that's fatal for the broader uptrend. I have some news I'm getting on Dell. Pardon me for a moment. Let's go to Steve Kovac, who has those details for us.

What are we learning here, Steve? Hey there, Scott. Yeah, according to Reuters, Dell isn't talking to sell its cybersecurity firm SecureWorks. That stock is halted right now. It's up 17%, but as soon as this report hit, it skyrocketed. That stock is halted right now. It's up 17 percent, but as soon as this report hit, it skyrocketed. Then they paused it due to volatility. This report says Dell's talking to Piper Sandler and Morgan Stanley to do this transaction here. By the way, we are getting Dell's earnings after the bell, so it's possible we'll learn more about the sale

after the bell, Scott. Its share is still halted now. Oh, it is moving now. It looks up 23%. It's exactly what I was thinking, that it's just interesting that this news is coming out now from Reuters ahead of the expected earnings in overtime. So we'll see what happens. Steve, thanks.

Sure, thanks. Very much for that. That's Steve Kovach. Just one more question related to growth, since we're talking about stocks like Dell for a moment. And you mentioned Jeff DeGraff, right, who looks at the charts

and sort of makes, you know, his calls on what he sees. Growth value, growth versus value. You're watching that closely. Yeah. Which has broken down lately. It has. We saw it move parabolically higher

in a straight line in June. It then corrected in a straight line down in July. And the bounce has been anemic. It's below its 50- day moving average, which just suggests that possibly as we go into 2025, you could see some of these bigger leadership rotations. The question is, does the broader market like that? The lesson from 22 is that value led, but we were in an overall bear market. So it could be a question of be careful what you wish for with growth versus value. All right, let's bring in Christina Hooper now of Invesco and Mike Rode of American Century

Investments. It's nice to have both of you with us. Mike, welcome to our program for the very first time. Christina, I'll go to you first. You've heard Cameron sitting right next to her here. Do you agree, disagree with her views? I agree with a lot of what she's saying. I do think the other 493 will be able to deliver enough to satisfy markets. So I agree, it's a high bar. They probably aren't going to get all the way there, but I think they'll get enough of the way there to satisfy markets and to at least in some way replace the high, high growth that we're seeing from some of the Megs 7. And that's adequate, in my opinion. I think we're going to see a rotation, and I think that's okay to see a rotation. What I've done is look back very carefully at 94 and 95. I think that's so instructive because

that's the last time we saw a tightening cycle that didn't end in a recession. And what we saw was that once the Fed started cutting, that's when value outperformed growth. It wasn't a dramatic outperformance. Both performed very well, but it outperformed. And I would argue that we have the chance for cyclicals to perform better this time because it's a more positive environment. The Fed only cut rates 75 basis points during that easing. This time we're looking at likely 75 basis points during that easing. This time, we're looking at likely 200 basis points in the next year. And we have a pretty resilient economy. I

would argue the consumer is more resilient today than they were then. Now, there are risks, and I worry about those risks, but my base case is a very positive one. What I find so interesting, Mike, is I feel like you generally agree with Christina on the parts of the market you want to lean into, that small caps are attractive. But yet you view the economy slowing reasonably over the next six months. So how can both be true? How can we have a slowing economy? Well, at the same time, I want to lean into small caps. Sure. It's a great question. Thanks for having me, Scott. Good to be here. So, yeah, so we're expecting a slowing economy over the next six months as higher rates take their time getting through the economy.

But we are expecting a soft landing. And in terms of why small caps, you have an asset class that is very cheap, is totally under-owned versus in the institutional marketplace. You mentioned earlier, Cameron mentioned accelerating earnings. NVIDIA is a great example of, yeah, amazing quarter, 100% plus growth, but growth is slowing. And our research shows that investors generally want and what will move stock prices are accelerating earnings. And you are getting that in small caps as we look out into next year. Earnings are expected are getting that in small caps as we look out into next year. Earnings are expected to be higher in small than large. Plus, you mentioned the yield curve steepening. That's a great catalyst for small caps historically. It helps the spread

type businesses like banks. It helps long duration assets like biotech. And then a big question we get is, well, why isn't this just a one or two quarter phenomenon? Well, reshoring is a real change in the global economy, and that's going to drive job growth here in the U.S. And small caps get 80 percent of their revenue from the U.S. So I think you have all the ingredients, especially on the valuation side, but also on the fundamental side, to make a case for small caps being a potential driver of alpha for our clients' portfolios going forward. I guess the question is whether those earnings estimates are too optimistic, and we're going to learn that in the coming quarters. Bear with me one second. I have a news alert on NVIDIA. It's important. Seema Modi joining us with that. Seema.

Scott, the obsession around OpenAI's $100 billion fundraising round continues with Bloomberg reporting that NVIDIA is in discussions to join this fundraising round. It's interesting, Scott, because OpenAI's chief executive, Sam Altman, and NVIDIA CEO, Jensen Wang, obviously know each other well. They both sit on the US AI Safety Board. OpenAI uses some of NVIDIA's infrastructure, including its chip. And there's also been rumors that separately, OpenAI and Broadcom are working on a chip that would rival NVIDIA. NVIDIA has declined to comment on this story. More as it comes, Scott. Yeah. And we keep talking about OpenAI's ever growing valuation as well, to which they're they're they're raising this money on.

Seema, thank you. That's Seema Modi. So, Mike, let me just come back to you, because as Sima brings us this news, we have news regarding Apple today and OpenAI, which we're going to get into in a moment as well. It just underscores why there's so much activity in these names. And it doesn't appear that it's willing to dissipate anytime soon. Do you feel like you have a tough time making the case that it's time to rotate? Yeah, a little bit. You know, large cap, mega cap tech has sucked all the air out of the room, all the flows out of the market for small caps and mid caps. But I think today is a great example of NVIDIA's stock price. Now, AI is real.

It's coming. No question about it. But ultimately, growth will start to slow and there'll be a lot of other winners from AI in the small cap space, just like we saw with the initial internet boom, right? A lot of the companies, and by the way, NVIDIA started as a small cap company many years ago, as did Amazon. So, you know, we believe that small caps is a great area to buy the early disruptors and innovators. And just on the other point with Dell looking to sell their business, you know, M&A has been increasing. And historically, when M&A picks up, that's a great driver for small cap outperformance. We had a local bank here in Kansas City acquired this week. So again, I think that's

another potential catalyst. As M&A picks up, as rates come down, M&A increases, that could help small cap performance as well. Yeah. Was that bank acquired out of a position of strength or weakness is the first thing that I think of, certainly because of what the current environment has been. No, so it wasn't a huge premium, but it was a position of strength. It was another sort of Midwest local regional bank. And we are overweight regional banks in our small cap value strategy. And that has been banks have been a four letter word. And we are overweight regional banks in our small cap value strategy. And banks have been a four-letter word. And I think there's some really good value. And I think the bad outcome is largely priced into these companies that will benefit as the yield curve

steepens. So you're going to see likely accelerating earnings growth from banks as they come out of this environment where the yield curve was inverted for well over a year. All right. Cam, you want to take that on? Yeah. I mean, technically, what we've seen following the first cut is that financials have done better. And so we've certainly seen that in anticipation of this move. On the small caps, I think that your point about can you deliver on those lofty expectations is the most important one. Remember that small cap earnings estimates have been cut for 2024 by about 20% over the last year. So that was the stance this time last year, that small caps would lead because of earnings being accelerating and it didn't materialize. Now, maybe with rate cuts and a resilient economy, a lot going right, you can see those earnings

deliver, but I do think that they don't necessarily deserve the benefit of the doubt, which is why we're selective. And we're being given the benefit of the doubt by our two other panelists. Christina, how would you respond? Well, I do believe that small caps are going to perform well in this environment. We have a recipe for an economic reacceleration that'll probably begin within the next six months. Certainly, there could be a short slowdown, but I think markets are going to discount that recovery. And I think small caps will do well. We might not get the earnings that are expected now, but I think we'll get enough. We'll get enough to satisfy markets. And we're likely to see what I think is going to be a very significant rotation when we look back. So, Mike, you want to respond as well to Cameron's

points? Yeah, it's a great point. And yeah, earnings expectations for next year for small caps are getting close to 20 percent. Is that too high? Probably. But I'll go back to the valuation. Small caps are trading below their historical average. The spread between large and small is the widest it's been in decades. So your starting point is really good. And if those earnings don't come through, you're not going to get hurt, right? How high is the window you want to fall out of? Even if we were to go into a recession, small caps have priced in, I think, a pretty bad downturn. And it really comes down to the direction of earnings, too. So if earnings growth for small caps are going in the right direction and inflecting higher, I think that's

enough to get the asset class working. What about alternatives to equities and how you're thinking about that, as some are expecting as yields come down, money is going to come out of money markets and other cash equivalent type asset classes and then go into stocks? It is less fungible, just meaning that we haven't necessarily seen the selling of money markets be directly into stocks. We've seen it more into fixed income. And we do think that bonds do play a role in portfolios that's far better than the role they played in 2022. 2022 was terrible because you had rising yields, rising inflation. So bonds couldn't be the kind of diversifier for equities.

That's a different story, which leads us to the point today, which is that as we see yields back up, that's when we want to be taking cash and reallocating longer duration, taking advantage of a backup in yields. Let's say we get stickier inflation data or hotter growth data. That would all be an opportunity to extend duration. I agree. I think the sweet spots are investment grade credit, high quality, high yields and municipal bonds. There are a lot of opportunities within the fixed income space as money moves out of cash. The other point, I guess, Mike, is I'm hearing a lot this week about the 60 40 portfolio being back that, you know, after a rough go over over a couple

of years that it's back because of the prospect of lower rates and that both stocks and bonds can work well together. Yeah, we would agree with that. We see very likely positive returns for fixed income this year. You know, one area, and I agree with the panelists, but one area that I also think is worth a look, we believe is worth a look, is dividend paying stocks. the dividend paying stocks have not performed very well. When you're getting 5% plus in the money market- but if you could

get a 4% yield that can grow over time plus- opportunity to grow with earnings. I think dividend paying stocks both in- large cap mid cap and small cap may represent. A pretty attractive opportunity as that money comes flowing back into

the market- in the search of yield. Do we Cameron have a and small cap may represent a pretty attractive opportunity as that money comes flowing back into the market in the search of yield. Do we, Cameron, have a renaissance of the 60-40 portfolio? I think that it has breathed new life into it and that to use 2022 as the baseline for why 60-40 is dead is not as relevant. If we have a growth scare, which means that you would have a flight to safety that would benefit bonds, 60-40 will be a good diversifier. And so we do think that it is not dead. It still deserves a place in portfolios. But we think we have to be very selective, mostly within credit, because you have seen spreads get so tight, kind of price for perfection. All right. We'll leave it there. Great conversation, everybody. I appreciate it. Christina, thanks for being here along with Cameron. And Mike, it's good to meet you. We'll welcome you there. Great conversation, everybody. I appreciate it. Christina, thanks for being here along with Cameron and Mike. It's good to meet you. We'll welcome you back soon.

Thanks. That's Mike Rode from American Century. Let's send it to Pippa Stevens for a look at the biggest names moving into the close. Pippa. Hey, Scott, shares of buy now, pay later company, a firm surging more than 30 percent, tracking for the third best day since its 2021 IPO. The company beat on the top and bottom lines with revenue in its fiscal fourth quarter jumping 48 percent from the prior year, with losses also narrowing. Mizuho calling it a, quote, killer quarter for a firm. But Okta is in the red. Q2 results did top estimates, but billings came in below expectations, with the company also noting a challenging macro environment. Bank of America doubled downgrading the stock to underperform following that print, saying the headwinds are too big to ignore. Scott. All right, Pippa. Thank you, Pippa Stevens. We're just getting started up next. Apple shares are moving higher today

on multiple reports. It is upping its A.I. game. We got the details and the analysis just after the break. We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. We are back on the bell. Apple's moving higher today on a few key announcements. Our Steve Kovach is here with all the headlines you need to know about, Steve. Yes, Scott. I'm starting to think we're the only ones not investing in OpenAI because we just got that news from Bloomberg that NVIDIA is in talks to invest in that $100 billion round,

and the WSJ reporting Apple is joining the funding round for OpenAI along with Microsoft and Thrive Capital. NVIDIA, by the way, did not comment, neither did Apple, but this would be a rare move for Apple. It did invest, had some big investments before. It invested $1 billion in this ride-sharing startup, Didi. That's a Chinese company. But this would be a rare move for Apple. It did invest, had some big investments before. It invested a billion dollars in this ride-sharing startup, Didi. That's a Chinese company.

And also the SoftBank Vision Fund. But that was a long time ago. On top of all that, Nikkei is reporting today that Apple ordered 10% more iPhones than it did last year. That is a huge sign. It is preparing for that AI-driven upgrade cycle we just keep hearing about. Nikkei's report, of course, is in line with many estimates for the iPhone 16 line. On top of that, Citi today naming Apple its top pick for 2025 because of those anticipated iPhone 16 upgrades. But forget the iPhone 16. Let's talk about the iPhone 17, Scott, because analyst Ming-Ching Kuo, he's the top analyst, I believe every word he says. He says next year's iPhone 17 Pro Max is going to have better specs for artificial

intelligence compared to the other lower-end models. That is, of course, Apple's most expensive and most important phone. It could be capable of doing more AI tasks than the other lineup, driving more people to the upside and buy that more expensive model, Scott. When do we have to wait for the 17 Pro Max? That's going to be next year. But it's just really interesting to see this new theme kind of emerge at Apple that if you want AI, you're going to have to upgrade your phone. Right now, it's only the 15 Pro.

That's last year's phone. It will be the entire lineup of the iPhone 16. And then maybe down the line, they say, hey, if you want even more exclusive or capable AI features, you're going to have to get even more advanced hardware because, of course, that's where Apple specializes in. So this is a really budding trend that's emerging here that you should definitely watch into next year, Scott. You could read it both ways. You could say, well, I mean, 17 Pro Max sounds like it's going to be great. That's really bullish. But doesn't that hurt the prospects for a robust upgrade cycle with the 16? I don't think so, because think of it this way, Scott.

This rollout on the software side of artificial intelligence is going to be very slow and measured. This fall, it's only going to be available in the United States. It's only going to be available in English. And even then, it's not going to be everything, all those features that we saw back in June. A lot of those, including the Siri features, are not going to happen for many more months, even into 2025. And then beyond that, we've got to see how China works out and other countries that are important to Apple, including the European Union, which has strict regulations. So this is going to be a multi-year upgrade cycle.

At least that's what so many people on Wall Street think. And that iPhone 17 report that we're getting today kind of plays into that narrative. All right. To be continued, I suppose. Steve, thanks for the insight and the reporting. Steve Kovach. Joining me now is Deepwater Asset Management's Doug Clinton. It's good to see you again. Welcome back. Thanks, Ken. Good to see you.

Why don't you own Apple? We prefer to own companies that control their own AI destiny, is how we think about it. And when you look at what Apple's doing, and I think that this potential investment in open AI speaks to it, they're really going to be reliant on third parties to deliver the richest AI experiences that will ultimately come on the iPhone. Yes, their technology with Apple intelligence will sort of be the gateway for their users. But then I think they'll handle a lot of the harder tasks by using, whether it's GPT from OpenAI, maybe Gemini from Google. And that puts them at the whims of

ultimately, I think, paying those companies money to use their technology. But I mean, isn't almost every hyperscaler reliant on somebody else at this point? We I don't even know that we'd be having the kind of conversation that we're trying to have right now if it wasn't for the announcement between Microsoft and OpenAI 18 months ago. They are not. Well, I think of it in sort of tiers. Right. I think you can look at Google and Meta are two. They've long been our two favorite names in the mega cap space. They have their own control, I think, of Destiny because they have models. They have data. They're working on their own compute.

Obviously, they still rely on NVIDIA. But they, I think, are in a class by themselves where they're not reliant on a third party. Then you have companies like Apple, like a Microsoft, like an Amazon. They've gone out and they've looked for these kinds of partnerships. Microsoft has the super deep one with OpenAI. Anthropic and Amazon have been good partners. And now we're seeing Apple kind of jumping into the fray with OpenAI. So how are you assessing NVIDIA now in the aftermath of these incredible numbers, obviously, but maybe not as incredible as they had to be. As crazy as it might sound, I think this reaction to the stock was about as good as you probably

could have hoped for as an NVIDIA shareholder, which we are. I think you look at the setup coming into the quarter, right? The stock was down 20 plus percent about a month ago at its bottom. Then it rallied almost 30. And so just the movement, that momentum for the bar that they needed to hit to continue that momentum, I think it was so high it was unattainable. You know, the options coming into this earnings price, something like a 10 plus percent move, we're obviously not moving that much on the stock. And so I think it's kind of a win. But even more importantly, in bigger picture for us as longer term oriented shareholders, I think it shows that the story about AI is still intact. I think there was a lot of questions coming into the quarter. Could this be the quarter that, you know, NVIDIA misses, that the end of the

AI story is sort of writing itself through NVIDIA's report? We didn't get that for sure. And I think the hyperscalers are going to continue to spend and ramp with Blackwell, as NVIDIA talked about. But you're new to the NVIDIA ownership story. Do you look at today as a buying opportunity? I mean, you're getting a 6% sell-off of what you think is a laughable reaction to these numbers. We have a full position. So just mechanically, we wouldn't be buyers here. But I think the stock certainly looks much more attractive. We've got this issue, right, the concern around what could happen with earnings sort of out of the way. And now I think we can go full steam into what will Blackwell ultimately mean. The delay that

was rumored is now sort of priced in. And I think we're pretty happy to be owners here. How about of the mega cap tech trade in general? I feel like there's a legit question now about where these stocks are going from here. We're still buyers and we're still owners, right, of the big three that we talked about, NVIDIA, Google Meta. Those are our favorites in the mega cap space. And I think that when we zoom out, there's so much concern about AI. There's talk about rotations maybe to small cap. Will we get a recession? If you just think about AI specifically, and that's what we focus on as tech investors,

we still think we're in the earlier stages of this AI bull market. I think it will probably last two to four years. And so with that context, if that turns out to be true, these are the kinds of companies you want to be owning because they will be some of the biggest beneficiaries of it, and it won't be fully priced in for some time yet. But I mean, I just had two or three people that we had in our opening panel make the case for broadening and for small caps. You're not a believer. I'm not. I think you may be able to get a broadening and maybe the mega caps don't go up as much. But I think the idea of rotating out of the mega caps, I'm not a believer of that. I think that investors will continue to look at those mega cap companies and say, look, there is a defensive

reality to those companies. They all have strong balance sheets. They don't trade at egregious multiples. They're rich, but not egregious. And they have this upside of AI that most of these companies that we're talking about rotating into, they may look cheap, but very few of those, I think, have any real optionality for AI, which if it's as big as we think it is, that should make the numbers that we think we're paying for on these big companies today look a lot cheaper in the future. Doug, we'll leave it there. Appreciate your time as always. That's Doug Clinton joining us today. Up next, Lulu and Ulta. They both report in overtime. We hear from a top retail analyst with exactly what you need to know.

Closing bells coming right back. shares of the gap climbing after an early release of the company's strong q2 earnings report lulu lemon and ulta now set to report their results in overtime tonight joining me now wells fargo's like borchow covers all three names welcome so why don't you just give me your reaction to the gap since he was probably you were taken as surprised as anybody else. Yes, Scott, it's always fun when you get a report eight hours before you're expecting it. But look, Gap has been one of our top picks for about a year now. We think it's one of the best turnaround stories in retail. Their new CEO, Richard Dixon, is doing phenomenal things across the entire portfolio, led by

Old Navy, followed by Gap. Athleta is kind of turning the corner as well. Margins are low, and there's just a lot of really good things they're doing structurally to that business. I think it's the best leader Gap has had in over a decade. And I think that business and that stock can continue to re-rage from here. We kind of got better proof points of that today. I think we're going to see a little bit of a different setup when we have a Lulu and Alta that are going to report after four o'clock today. All right. Well, let's do then Lulu first. What are your expectations there? Not from a numbers standpoint. I don't want to know about the EPS and revenues and all that. I want to know how this company is doing because the stock has

not done well. And it feels like there are legitimate questions from very seasoned analysts on the street about execution, about competition, about market share and the whole thing. What I would say, Scott, is that I would agree that something feels off here. And Lulu typically will trip up every couple of years, kind of get back on their feet, dust themselves off and kind of keep on ticking. This feels different to us. Based on the work that we've done, I think there's some issues internally at the business. We're seeing key people leaving the company, both from the merchandising and the marketing side. a question about culture in the organization. They just lost their chief designer, Sun Cho, who went to BF Corp. There's real question marks about the direction of the business, and I don't think that competition

is causing it, but I do think that competition is benefiting from their shortfall. So without going into numbers and what have you, I'd say this feels different. I feel like there's innovation questions, there's execution questions, and there's culture questions. It feels very much like Nike two to three years ago, which is a little bit scary to think about.

I mean, it just feels like when the conversation is around that type of apparel, for lack of a better characterization, Viore comes up, other names come up, whereas it used to be only Lulu that came up. Yeah, I agree. So I've covered the company since the IPO. I feel like every couple of years,

the competition question would come up and there's been so many competitors out there to talk about. I've never really taken it seriously. It's never really created a real dialogue from our perspective. But I think today it's different. I think Viore is doing a great job in San Diego, kind of taking that grassroots organic culture and really running with it. I think Aloe is doing a great job on the fashion side. So I do think that there are real competitors who are starting to make a name for themselves and Lulu needs to really be on their toes. And it feels like they're not on solid

footing right now. Let's talk Ulta. How are your expectations measuring up there? I think we continue to be the only analysts on the street with an underweight rating. I think they have big problems. I think they have big structural problems. And I think that we are probably going to hear a lot more about how they plan to combat those issues over the next couple of months. They've got an analyst day coming up in October. What are we expecting to hear later today? I think comps are continuing to slow. They could possibly be in negative territory. I think they have competition coming at them from all angles. I think they're losing share to Sephora on the prestige cosmetic side. I think that Amazon as a threat is very real today

in the inroads that Amazon is making with brands, with beauty brands kind of pushing onto their platform. I think when you look at the margin structure, when you look at the competition, when you look at the direction of the business, they're in a lot of trouble. And I think there's a big reset that's going to be needed in this company. I mean, give me one or two things that you say are at the top of the list that they need to do. If you feel like you're an outlier here relative to the other analysts on the street, what's the most important thing they need to do if you feel like you're an outlier here relative to the other analysts on the street what's the most important thing they need to do well so let's just take those two examples let's take sephora and amazon so if you're losing share of sephora and sephora's

got a better mousetrap than you do how do you combat that usually you have to think about demand creation marketing just investments in that sense to build up your brand, create a bigger moat. Pricing is also a lever. Those things cost money, they cost margin. So we got to hear about that. Think about Amazon. What is Amazon going to do if they push into the beauty space and make a real big impact? They're going to cause deflation. They're going to lean on Prime. They're going to push down free shipping thresholds. They're going to push up speed of delivery. Alta can't keep up with them from a fulfillment and speed of delivery standpoint.

So, again, that costs money. So these are all things that are fixable, but you've got to take down numbers. You've got to take up your investments. That's usually not a tough space for a stock to work when you're kind of going through that. But I think that's kind of where we're headed right now for Alta. All right. We'll leave it there. We'll see what happens. I appreciate your time very much. Ike Borchow joining us on Closing Bell. Up next, we track the biggest movers into the close. Pippa Stevens is back once again with that. Pippa. Well, one restaurant has gotten a downgrade after shares more than doubled this year. The details coming up next. All right, we're 15 from the bell.

Let's get back now to Pippa Stevens for the stocks that she's watching. Pippa. Hey, Scott. Shares of Kava are in the red after a downgrade to equal weight by Morgan Stanley based on valuation. The stock has more than doubled this year, with the firm saying Kava has pulled forward growth, profitability, and cash flow. And speaking of valuation, Bernstein upgrading Marriott to outperform, saying there's a record valuation gap between it and its competitor, Hilton, the firm pointing to opportunity from the upscale and international markets. Scott? All right, Pippa, thank you. Still ahead, Dollar General shares are plummeting. We're going to

drill down on what's sending that name lower today and how the rest of the discount retail space is faring today. Bell's coming right back. A reminder not to miss CNBC and Boardroom's Game Plan Conference, an event bringing together athletes, owners, investors and innovators to explore the intersection of business, sports, music and entertainment. It's September 10th in L.A. It's coming up soon. You can scan the QR code or visit CNBC events dot com slash game plan to register. Up next, your big earnings set up. Lulu, Ulta, Dell, they're among the names we're watching for in OT.

We'll tell you what to watch for after this break. We're in the closing bell market zone. CNBC senior markets commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, Dollar General having its worst day ever. Gabby Fon Rouge has those details. Steve Kovac back to look ahead to Dell. Those earnings in overtime today. Mike, I'll turn to you first. I mean, kind of squirrely price action today.

It started out looking like kind of gangbusters, like, wow, OK, the market can just look right through anything with NVIDIA. And then we sit down at almost three o'clock. It's a different story. Yeah, kind of swaying in the breeze a little bit. I mean, even at the highs of the day we talked earlier, it seemed as if there was just this mechanical like, OK, we're going to sell NVIDIA down modestly and then just spread it out around the laggard big tech stocks that hadn't really participated very much this month, kind of lost a little bit of oomph out of that trade. I mean, you have Microsoft, Meta, Alphabet down, let's say 2-ish percent off their intraday highs. And to me, it maybe reveals once again where the weaker hands are right now in this type of market. Just lower conviction that they can be leaders.

I don't think it's really, you know, a big problem. It's not like we had this aha moment that says that the market's really vulnerable here. What you do see is if 24 hours ago you said NVIDIA is going to be down 6%, 7%, or let's call it 6%, and the NASDAQ 100 is going to be flat, and the S&P equal weight is going to be up half a percent, and two out of three stocks in the market are going to be up on the day, you'd say, fine, that shows you you have a little bit of resilience. But we didn't really nudge past those old highs. And I just wonder if that's sort of not the business for August at this point. You know, if you're going to re-risk, it's not necessarily going to be today.

I find it interesting that, you know, a couple of stories today on investing in OpenAI, it just underscores that these hyperscalers are scaling fast and they're spending a lot, whether it's through pure CapEx or investing in firms like OpenAI. Sure. And the investor is just going to have to become comfortable with that dynamic. Yeah. And I guess there's a way of inferring that there's not desperation, but there's such a sense of urgency that it's a shotgun approach. Everyone's got to participate. The absolute dollar numbers we're talking about investing in OpenAI are not big for any of these companies involved.

So why not try to participate? Have a say. Nobody knows exactly what the future application is going to look like. Might as well have some kind of a call option on this version of it. So I don't know that that's necessarily a good or bad thing, but it definitely reflects this environment where it's full speed ahead. We think that the risk of, you know, investing too little is too great not to take. Sure. It's like, what would you rather them do at this point? They've got buybacks. Some have dividends. And now they're investing in the place where all the action is.

For now, there's no painful tradeoffs. There's enough to go around. All right. Let's talk about Dollar General. Gabby, tell us what's happening here. Worst day ever. Yeah, it's been a rough day for Dollar General, Scott. Shares have been cratering all day after it slashed its sales and profit guidance for the full year. The company is now expecting same-store sales to be up 1% to up 1.6%, and that's down from a prior outlook of 2% to 2.1%. It also cut its profit guidance as the company's core, lower-income consumer pulls back on spending. Now, sales were up about 4% during the quarter, but that's largely because of new store openings. Same-store sales, which is a better metric, were only up half a percent, which is far worse than the 2.3 percent uptick that analysts had expected. CEO Todd Basso said slower spending from its core, lower-income shopper, is part of the problem,

but some of Dollar General's issues are also self-inflicted. It has work to do to improve its stores and how it handles inventory. Shrink, which is lost inventory from theft or damage, is once again weighing on profits. Scott? All right, Gabby, appreciate that. Gabby Fonrouge with Dollar General. Steve Kovach now. Tell us what to watch for with Dell.

Yep, this one is all about the AI server market. We saw last quarter that just really low margins there that sent shares down after that report. And there are also a lot of cross currents in the AI server market, with Supermicro reporting those weaker-than-expected margins, and then Hindenburg, of course, launching that short position. Dell, of course, competes with Supermicro, and investors will want to know how its AI server market is holding up amid broader focus on AI that's spending by hyperscalers, following NVIDIA's report yesterday. Shares of Dell up 45%. They see one more bonus thing, Copilot plus PCs. That's that

big hardware push from Microsoft with those AI PCs. Dell is making those. Look for commentary on that too as well, Scott. All right. I appreciate that, Steve Kovach. Thank you very much, Mike. As we turn back to you, we've got about three minutes left. We're looking at another closing high for the Dow. Again, it speaks to the makeup of this market. Yeah, the Dow, which, you know, was kind of the doormat for a lot of this bull market, especially in the first half of this year, you know, it's got enough behind it in terms of, you know, the defensive, the health care, the quality type stocks that are now distinguishing themselves, that it can make a little bit of progress. And that's usually the way it goes. Dow's going to outperform in a slightly less aggressive tape.

And I don't necessarily think you look at the defensive tone to some of the recent leadership you talked about earlier, rate sensitive, as well as things like, you know, health care as necessarily being an absolute solid negative verdict on the economy. What it definitely shows, though, is we need constant reassurance that the economy is hanging in there. And so the way you express that concern that maybe it's not going to go that way is you rotate into things that don't look as expensive and don't need really great economic growth to work. We get the PCE numbers tomorrow. It feels like the inflation side of it should have lower stakes at this point, of course, because we're no longer really in that full-on inflation fight.

We get the personal income and spending parts of it. We got the GDP revision today. It seems like what we see right in front of us looks OK. Well, I mean, the flip side of the way you express your view on the econo trade is the Russell in some respects. And the Russell's up almost one percent. It is. It's up almost one percent. It's It's, again, kind of going back and forth along this same patch of ground we've been through for a little while here. It really is trading instinctively as a dovish trade. So if we think, if it's a playbook says, exactly, it's the laggard, soft landing, Fed rate cut trade, all bundled into one, as well as a little bit of juice there. It feels like you're not getting it out of mega cap high beta anymore. So we'll see. I think, again, there's a little bit of reservoir

of skepticism here that it really can be a leader and break out in a decisive way. But for now, it's doing fine. As I said, the Equal Weight S&P also up half a percent today. Well, those doubts are exactly why as you said at the the outset of your answer about the russell that we keep coming back to this kind of place fits and starts big gains some losses then we regain our ground but we because we can't make a decision wholly on what's going to happen we can't and i think look it's it's an odd point in the economic cycle to decide small caps are going to rip from here. It certainly could happen if you execute the perfect soft landing, if the rate cuts are coming and the financials can keep strong.

Huge component within the Russell. And, you know, you have some unprofitable companies that get some relief. I get it. You know, it sort of remains to be seen. Burden approved. OK, we'll go out here with a new closing high for the Dow Jones Industrial Average. That's it for us. Into overtime with John Ford.