Closing Bell - Closing Bell: Trading a Broadening Tape 9/12/24

Episode Date: September 12, 2024

How should investors play the markets right now as the tape tries to broaden again? Solus’ Dan Greenhaus, Virtus’ Joe Terranova and Wealth Enhancement Group’s Ayako Yoshioka break down their market playbooks. Plus, Paul Rabil – Co-Founder and President of the Premier Lacrosse League – discusses all things sports and media rights and the league’s championship game this upcoming weekend. And, star analyst Stacey Rasgon weighs in on the recent comeback in chip stocks. 

All right, guys, thanks very much and welcome to Closing Bell. I'm Scott Walker live today from San Francisco. One market out here. This make or break hour begins with a continued rebound for stocks, which are now tracking for their fourth straight day of gains led by a big bounce for tech. Let's show you the scorecard with 60 minutes to go in regulation. Major averages are all higher today. You see the gains right here nicely for the Nasdaq. And there's the Russell leading the way today, getting a nice bid and that is following that inline ppi report today a big day for big tech nvidia is higher once again it's now up more than 15 this week alone several other chip names too they are up sharply as that trade gathers some steam a nice rebound across the board almost there's broadcom up more than 4 percent. AMD, Taiwan, Semi. How about Meta and Alphabet? They're jumping as well today. It does take us to our talk of the tape. How best to play the markets right now as the tape tries to broaden once again? Let's welcome in Dan Greenhouse. He's the chief strategist for Solus Alternative Asset Management. It's good to see you again. Thank you, sir. It's been really a fantastic three days here. What do you make of

this rebound? Listen, we've talked about this and all of us on the show have talked about this for some time. Recession worries are lingering in the air. The latest thing, obviously, are the comments coming out of some conferences. You were at one, the real estate conference, where some financials made some negative comments, gained some play. But listen, I think at the end of the day, my favorite saying, the U.S. consumer continues to do well. The economy continues to do well. Profits continue to print above expectations. And so while we had a meaningful sell-off driven by some of those AI names for sure, the rebound seems entirely justified to me.

Because it doesn't seem like these issues are broadening out beyond what we've seen for the last few quarters. What about the reversal yesterday? I mean, the price action in the market was so interesting to follow. If you had only tuned in at the end of the day, obviously, you would have missed a pretty good story. Here we are a week to date. NASDAQ's up better than 5 percent. S&P's up almost three and a half. What do you make of that? Yeah, I mean, I took a look earlier today. It's not unusual to see a market at one point, see the equity market at one point down a full percentage point and then close up a full percentage point. That's not completely unusual, but it is also the type of

thing that you sometimes see at market bottoms. You saw it in October of 22 when the market bottomed. You saw it around the time of the COVID low in 2020. You saw it back in 2011. There's a few more instances where it occurred and it was not necessarily a bottom. But that type of reversal, those of us that have been in markets for a while, you look at that action and you say, OK, it doesn't necessarily mean automatically capitulation, whatever your definition needs to be. But there are instances in which that signifies capitulation. And it's, of course, possible that yesterday was one of them. It's that 5600 level that here we are. Here we are again on the S&P. You know, that's sort of been the main line in the sand that we've had a reasonably tough time getting over. Yeah, listen, I mean, the latest thing, of course, is the yield curve on inverting.

And as a longstanding card carrying member of the Yield Curd Inversion Matters team on the show, it's obviously something to pay attention to that the two tens curve in particular is now in positive territory, although not firmly in positive territory. Call it a couple of basis points, three, four, five basis points. But the curve inversion is the latest thing that's giving people some worry. And obviously, that filters through the markets. But listen, whatever the inversion may or may not be saying, you could counter that by simply looking at something like credit spreads, which remain, IG and high yield both well contained. And so I think you look at cross assets and you continue to get the same message, which is that for now, everything looks a-okay and likely to continue

along that path. Does 50 or 25 or 50 basis points matter at this point? I mean, I ask you, I know obviously where expectations are, not just from most of the market participants that we speak to, but even CEOs. You mentioned the conference that I was at yesterday, spoke to David Solomon, chairman and CEO of Goldman Sachs. It was their conference, of course. And I want you to listen to what he told me about what he thinks is going to happen. Our best guess is 25. But, you know, I think there's a case to be made for 50 based on a little bit more softening of the labor market. I think we'll see. I think the percentage chance was in the low 30s.

So how, Dan, do I handle that? So 25, obviously likely, but the case for 50 implies that 50 might be needed. How do you see it? Well, listen, I know plenty of people in markets, informed, educated, astute followers of markets and economics that think no case, there's no case for a rate cut at all and think the Fed should stay pat. So I think this is one of the more confusing moments in time from a predictive standpoint. My own, as I've said repeatedly on the show, my own view is that I think this is one of the more confusing moments in time from a predictive standpoint. My own, as I've said repeatedly on the show, my own view is that I think they're probably going to cut by 25 basis points, and it will be the first of several cuts. The case for 50 is just, and being made by several people, is that the Fed is just too

far behind the curve, that inflation has now normalized. Depending on your measure, you're somewhere in the mid twos. And with the economy slowing down, although, again, from an exceedingly high pace in the end of last year and the labor market weakening, the Fed is increasingly looking like they're off sides. This is the 50 basis point argument. And so what is the reason to go slow to getting back on sides? You're going to have to cut by 100 basis points. You might as well get there more quickly than not to take out insurance. There's validity to that argument, as I find validity in my own argument,

which is that they should reduce by 25 basis points, as I find in the argument that they would be justified for standing pat. Again, I don't think there's a concrete case. There often is. But I don't think there's a concrete case this time around that they should cut by any one of those three scenarios. And I would mind you, when you look at markets, when you look at the homebuilders, when you look at some of the retail names, a lot of these cyclical parts of the stock market are at or near highs. And I don't think that I see in assets I mentioned earlier any sort of broad economic worries, the likes of which would justify a more rapid case of rate reduction. I just I can point to any number of sectors of the stock market that are doing just well with rates that call it 530 or whatever. What do you think the more important signal is right right now in the market?

Is it, as I mentioned off the very top, the bounce back in tech, the fact that the Nasdaq is having a little run here, or the weakness in the financials? I mean, listen, the banks had a good run. We talked, I mean, I haven't, but the show has been talking about JP Morgan and some of the comments that were made, but that stock's sitting at or near a high. The financials, I mean, again, the banks are sort of a separate story right now. For the market, I find the rebound in tech to be the most encouraging. You know, again, Jensen spoke the other day. I'm sure that's been discussed ad nauseum across the network. And you just, you don't get, and again, I don't follow this as closely as others, but I just don't see the case or any evidence of a demand slowdown coming from any of the major players in the space, be it NVIDIA or Broadcom or even a little further down the spectrum.

I just I don't see the data points. I don't see the commentary. We've heard from any number of important CEOs and individuals in the tech space making the case, as you discussed with Brad Gerstner, the case for overinvestment rather than underinvestment. They're quite clear about this. So for now, that hamster wheel is still spinning. So from a broad market standpoint, to the extent that you dance with who brought you, it's encouraging to see the tech stocks rebounding in the way that they have. Yeah, let's bring in Joe Terranova now of Virtus Investment Partners. Ayako Yoshioka, Wealth Enhancement Group.

It's great to have you both with us. Joe's a CNBC contributor, as you know. It's the price action, Joe, yesterday that did get your attention, especially in the Nasdaq. Dan alluded to the fact of what Bespoke was talking about. The last time the Nasdaq was down one plus percent intraday and finished up over one percent was back in October of 2022. You have to respect price. And certainly yesterday, what we witnessed in the futures market, in the options market, a tremendous amount of institutional buying, in particular when the S&P was between 54.25 and 54.50. That's a very strong message that the market is sending. And it appeared as though in the month of September, equities, in particular technology,

were trading as if they were guilty until proven innocent. I think yesterday is a compelling inflection point, and you now reverse that theory to where technology is once again innocent until it can be proven guilty, and we'll find that out when earnings are reported in October. So, Joe, you wouldn't sell into this strength. You know, I'm curious.

The issues that existed, if you, I've used issues in quotes, if you think there were issues in some of these tech names that maybe their valuations were extended, they sold off, now here they're back. So you wouldn't sell into that if you think those same issues persist. I don't know if I would say that valuation was the biggest concern that I had. It was more about the overwhelming enthusiasm. Sentiment was at a fever pitch.

And positioning, it appeared as though in the wake of the unwind of the carry trade through August, the positions were rebuilt rather quickly in mega caps and technology. And I think we ought to offer some relief to that positioning once again. the positions were rebuilt rather quickly in mega caps and technology. And I think we had to offer some relief to that positioning once again. So that's what I point towards. And I think that effort was successful. And it was indicative of the type of price action we saw yesterday morning. We had that reversal. Aya, what do you make of the markets here? I think all the issues that we've just been discussing just sort of ran into the seasonality issues of September.

We know that September tends to be a seasonally rough month. All right. We're going to work on Aya's mic, as you can tell, as I hear you hear, that we're having a bit of an issue there. So we'll deal with that. But, Dan, I know we're going to try and get Aya back. She's going to make the argument that despite the sell-off that we've had recently, that the S&P 500 is too expensive. What would you say to that? I'm sure she's not the only one who thinks that valuations had simply gotten too rich, if you want to call it 21 times. Well, I think there's two arguments to be made. The first is who determines what's too expensive? And a corollary to that is I've been told the S&P has been too expensive for the better part of ten years.

The last time I heard it was attractive was somewhere around 2012 or 2013, I believe. And even then it started to get too expensive at 13, 14, 15 times. And the second part of that is the market is expended. We've all made this case or some version of this case for several quarters now. The broad market gets more expensive because tech is a larger portion of the market, as we know, the largest portion. And since it trades at a premium valuation to most other sectors and the market, it drags up the broad market valuation. And so I don't think it's a correct argument to say the market is expensive if you want to argue that technology is trading at too rich of a valuation. And so I don't think it's a correct argument to say the market is expensive. If you want to argue that technology is creating a too rich of a valuation, fine. But the argument that

the market is too expensive is just a second derivative argument of that. The better way of looking at this is to look at the equal weighted index and say, OK, this is a particular moment in time, a la 2000, where we need to look at each stock more equivalently than just these five or six names that are doing a lot of the heavy lifting weight wise. And there you see it's not cheap, but the equal weighted index is is much more reasonably valued than is the broad market index. Again, because of those those incredibly large tech names which traded a premium, justifiably so in many respects. I'll go to Aya now. I think we've gotten her audio fixed. Aya, welcome. It's good to have you. I did mention, I'm not sure if you heard, I'll rehash it, that you are making the argument today that despite the sell-off, you think that the valuation of the S&P is too expensive.

You want to state why? Sure. Hopefully my audio is okay. But, you know, we are expecting earnings growth, or at least the market is expecting earnings growth of over 14 percent in 2025. And so we think that's a little bit too high. You know, this year in 2024, we're going to get about 10 percent earnings growth off of 6 percent revenue growth. And, you know, the market's still expecting that 6 percent revenue growth in 2025. But they're expecting that acceleration in earnings. And, you know, the market's still expecting that six percent revenue growth in 2025. But they're expecting that acceleration in earnings. And we think it needs to come in a little bit. And JP Morgan's comments, I think, prove that there is a little bit of an overestimation in terms of estimates for 2025. OK, so I then I asked the question earlier, what was a more

important sign in the market right now, the tech rebound or the weakness in the financials? Sounds to me like you would answer that it's the latter, the weakness in financials and maybe some of those concerns that we heard out of conference season this week. I think it's more just a reflection of sentiment and the estimates going into 2025. I think we're working a lot of that off, whether it be the NVIDIA over-enthusiasm or just the over-expectations in 2025. Joe, you want to take issue with this? Let's debate it. Well, I think what has to happen now is we have to see at a certain point here a handoff where you need to see financials and One could make the argument that they're probably too high. I get that. But there's a lot of unknown variables that can affect earnings, the election result, what legislation might look like, what, in fact, is going to be the path of

monetary policy, how aggressive are the rate cuts ultimately going to be, how far is inflation going to come down, and what's going to happen is, are the Chinese going to be exporting the deflation that they're now exporting into Europe? Does that eventually come here? So I think there's a tremendous amount of variables where I'm not willing to say, OK, I expect earnings growth is going to implode. And therefore, I'm going to disregard the message that the market is clearly sending me, that the winners in the market are clearly sending me, and move to the sidelines. I think you have to pay heed to what we're seeing here this week because I view it as remarkably compelling. Dan, this becomes the critical argument here, and Adam Parker's made it on this very program

that earnings estimates, if they are too high down the road looking ahead, then the multiple is too high. So maybe we're not going to be able to answer this question for a quarter or a few. How's that impact how we want to think about the market then? Listen, the biggest driver of S&P 500 earnings growth is GDP growth. And if the economy continues to do fine, listen, clearly there are troubles at the low-income consumer domestically. Clearly there are troubles coming out of China where growth hasn't held up, although perhaps policy is going to address that somewhat. But an important driver, if not the biggest driver, of domestic earnings growth is economic growth.

And in my forecast and most people's forecast, there's no recession on the horizon. The economy should continue to grow. Are we going to grow 10%, 15 percent EPS growth? Maybe not. Maybe it'll be 7 to 9 percent, 7 to 11 percent. But I find that more than enough to continue supporting broad market gains. Listen, again, for the broad market, the valuation of the tech stocks is of paramount importance. If for some reason demand slows or someone suggests something's wrong with Blackwell or any of the number of issues that affect those top five or six names come to pass, then they're going to sell off and the broad market's going to go with it.

But just to get back to the equal weighted argument, look at the card stocks. If something was wrong with the consumer, Amex and those types of companies would not be doing what they're doing. I know this has been discussed ad nauseum, but Costco, Walmart, BJ's, those large retailers, raw stores, there's any number of companies that are working, of stories that are working that have nothing to do necessarily with interest rates that continue to suggest that the economy and the consumer is doing fine and exploitably, you can take advantage of that if you just step away

from the tech names. But again, those big names are doing a lot of the heavy lifting just because of their weight. And if something goes wrong there, the broad market's going to sell off. But otherwise, I think earnings should be fine. Ayo, what about volatility, which has all but imploded again this week? But we've learned not to get too over your skis on that because it can flare up at any moment. And as the two gentlemen have already said, there are plenty of reasons ahead that could cause volatility to spike again. Absolutely. I think we're just in that time frame in which, you know, seasonally volatility does pick up. And then usually after the election, there is a little bit of a lowering of overall volatility as we go into the new year. So I think we just have to wait it out.

You know, a lot of the headlines are going to come about and be an issue. But I think over the long term, you know, when you look out into 2025, as Dan said, whether we get, you know, 10 or 14 isn't going to matter too much in terms of earnings growth as long as it is positive. Joe, I'll give you the last word on volatility. One of the first things I looked at today, of course, the VIX, which is, you know, we've showed it barely above 17. Well, I do think volatility is going to remain elevated. And just because volatility is elevated, that doesn't mean that the market goes down. I think what you have to focus on is the fact that we're having significant range expansion here in the month of September, range expansion on bearish days, range expansion

on bullish days. And that's indicative of an environment that suggests a much higher volatility regime. So what does that mean to the viewers? That means if you're participating in the market, the way that you're sizing your position, you have to keep in mind that volatility is going to be extreme. And it's going to try and shake you out. Just look at the price action today. We've had multiple times where we've seen the S&P fall 25,

30 handles and then quickly recover. I think that's the environment that we're in here in the fall. So I don't think you want to bet on a lower volatility environment. Guys, we'll leave it there. I appreciate it very much, Joe. Thank you, Dan, as well. And of course, I will see all of you soon. To Steve Kovach now for a look at the biggest names moving into the close.

Steve. Hey, Scott. Yeah, let's look at shares of Moderna. They're tanking today after the drug maker said it would slash more than a billion dollars in research and development expenses by 2027. Moderna also said it plans to launch 10 new products through 2027, but will also put the brakes on some other products in its pipeline. It's part of the company's attempts to chart a path forward after the decline of its COVID business. And Gilead Sciences added 3% after

the biopharmaceutical company said its twice-yearly shot cut HIV infections by 96% in a new study. Jeffries Analysts called the data, quote, solid and consistent and said it sets the stage for likely FDA approval for the drug and market launch by 2025. Scott? All right, Steve. Thank you, Steve Kovac. We're just getting started here. Coming up next, Paul Rabel. He's the co-founder and president of the Premier Lacrosse League. He's going to join us to talk all things sports and media rights, the league's upcoming championship game this weekend. It's a big deal. We'll talk about all of that after this break when we come back. We're back.

The sixth season of the Premier Lacrosse League culminates this Sunday in Philadelphia with the championship game. Viewership continues to grow, as does the sport itself, which will be part of the Los Angeles Olympic Games in 2028, of course, on the networks of NBC and Peacock. Paul Rabel is the league's co-founder and president, joins us live from the New York Stock Exchange. I'm sorry that I'm not there with you, but it's great to have you with me. It's great to be back with you, Scott,

and I'm looking forward to seeing you in Philadelphia at the game. What exactly are you expecting this weekend? Well, we're expecting a big crowd, a live broadcast on ABC at 3 p.m. on Eastern Time, and we've eventized the weekend. So we have our end-of-year awards on Friday. We're running a street lacrosse event, which we built with Kevin Durant, Rich Kleiman, investors of the PLL. We have our Founders Dinner, then the big game. So it's a culminating moment for any league. I mentioned viewership being up. Your semifinal was the most watched game in the history of your league. Yeah. Why is that? What's happening?

Well, I would say audience growth, one. And then two, if you look at the proliferation of streaming, part of it is due to leagues deciding to go exclusive on the platform. So we saw it with Peacock in an NFL playoff game. And if you revisit old times of cable, when ESPN2 launched, one of the big turns in the 90s was putting UNC versus Duke basketball on there. So leagues and partnership networks have to make those bets. And you hope those bets are right. In our case, it was the most streamed game we've ever had. So we're looking forward to seeing those numbers continue to grow. You founded your league basically on the idea of a touring model,

right? Rather than having teams in home cities. You would think that you would need home cities to generate more fandom. In fact, there's been enough popularity and growth in the game that you've been able to kind of overcome that. Where are you on that touring versus home teams? Well, the touring model looks more similar to F1, UFC, WWE, tennis and golf than it does traditionally football, basketball or baseball. And we took a pretty practical look at the lacrosse audience size when we started. It was 15 million. Now we're at 46 million. We're still touring, but this was our first year where we took our eight home teams into cities, and we've been touring in those markets. The next iteration might look like a traditional home-and-away model where

we would be considering selling those teams to individual ownership groups. I think pro sports at a high level are about attention, aggregated across platforms, revenue, digging in and building community, and then real estate. What about the Olympics? We're obviously excited about it, given the fact that NBC and the networks of NBC, Peacock, etc. broadcast the Olympics. What are the Olympics going to mean for your sport?

Massive, Scott. As you know, it was a huge lift this past summer in Paris for NBC. I think the games were up on average about 86 percent compared to the Tokyo games. They were getting about 30 million people during that two to five o'clock window just in America watching, which is unbelievable exposure. That's football level exposure for emerging sports. So lacrosse was once in the Olympics in 1904, 1908. We're now back. So credit to Casey Washman and his team and folks like Joe Tai and Jim Shear on ours to sort of move us back into that direction. So if we look at where we're at now in 2024, we're going to be in 2028. A lot of those changes to our touring model might happen between then,

as well as a new media rights deal as we look beyond next year. Yeah. I mean, when you look at the media rights deals that have been done recently, I mean, the NBA most specifically, because it's the most recent deal that was done. What's the, what do you take from that as you look to your own? I think sports are just becoming more and more important and likely the best investment that a media company can make and I'll tell you why. You have your MVPDs, your cable service providers and now your virtual MVPDs in YouTube and Hulu live which are giving these networks affiliate fees and to have a live sport you're gonna see higher affiliate fees to the network.

Number two is advertising. So when you look at live sports, their appointment watching television entertainment is no longer that because of streaming a consumer like myself and you can watch whenever we want. Television is in about 60 million homes today on the cable side. That's still a 60 billion dollar advertising business. I think it's been more reconciliation than attrition if you look at ratings from a sports standpoint because sports fans are still showing up to television the third is direct to consumer streaming numbers are growing and then the last one is if you have sports and sports ip you can create original programming where you

either distribute and grow your subscription base support your advertisers or license like a lot of the folks at warner media are doing. You say popularity, then you throw in increasing media rights. It lifts valuations, obviously. What is your league now worth? And where do you go from here if there is an off-ramp? Well, Scott, you know, I can't tell you that right now. We have a great board led by Joe Tai, the Churning Group, Arctos. We have CAA and a number of great investors, people like David Blitzer, who were involved and helped us build this thing from scratch. We went the venture route.

Our first round we raised was just several million dollars so we could launch this thing. Since then, I would say we've done in the teens of a multiple in growth. And if you look at pro sports leagues and teams, evaluation multiples are anywhere from 8 to 12 times revenue. Depending on the time or the stage of the league. The most recent one I would point to is Angel City FC

and Bob and Willow Iger investing at a $250 million post. I mean, but do you think there's a trickle? Like, for example, we just came out with our own valuations list a week ago. Dallas Cowboys are $11 billion. The growth has been remarkable. But do you think there's a trickle-down effect, if you will, that as valuations of the biggest boats rise, for the smaller ones, it has that residual impact? Yeah, no doubt. And I think part of what I talked about with attention, revenue, community, and real estate, you have the enterprise valuation.

But the other piece is scarcity. When it comes to pro sports, especially if you're a top league with the best talent, that's the only place to go. So that's where I see the valuations continue to grow. And if you look at historically, even the NBA, I believe from 2002 to 2021, the NBA teams are up 1000%. So that beats the S&P, that beats real estate and major markets in America, that beats the NHL and MLB. So there's this intersection of pro sports into entertainment and to culture, which is also a big part of driving those valuations. Good luck this weekend. We'll see you again soon. That's Paul Rabel joining us from the New York Stock Exchange today, Premier Lacrosse League. For more on sports, my colleague Mike Ozanian breaking a story today that former NBA player Junior Bridgman is buying a stake in the Milwaukee Bucks. You can get more

on that story at CNBC.com forward slash sport. Up next, semi stocks making a big comeback. The SMH gaining nearly 9% this week alone. We hear from Starship analyst Stacey Raskin ahead with the names he is betting most on right now. And not just NVIDIA. We're back on the bell after this. We're at the beginning of a new industrial revolution. And this industry is going to be producing intelligence. And what it takes is energy and, of course, a lot of great computer science and large computing systems that NVIDIA makes. And so

we've got to make sure that everybody understands the needs coming, the opportunities of it, the challenges of it, and do it in the most efficient and scalable way we can. Well, that, of course, was NVIDIA CEO Jensen Wong speaking to CNBC outside the White House today. He was there for a meeting about the outlook for AI and how to meet the energy demand needed to power that industry. NVIDIA shares making a huge comeback this week. And top chip analyst Bernstein Stacey Raskin says it remains one of the best names in the industry. Joins me now. It's good to see you again. So we heard a lot from from Jensen this week, whether it was in the leather jacket or the business suit.

What was your biggest takeaway from either Communicopia out here where we were in San Francisco or from what he said outside the White House today? Yeah, look, I think he's right. You know, like you're right. The stock has been through the ringer up and down and sideways over the last few weeks. There have been concerns about Blackwell, their next generation platform, the Blackwell delays and sustainability of demand and everything else. And look, at this point, from everything that we can see, the demand remains off the charts, right? I mean, it seems like their customers just still cannot get enough of what it is that they're delivering. And I think he's right. I think as we go forward, like you can almost, you can never have too much compute and they are, you know, they're the ones that are supplying the most of it at this point. I think the concerns around Blackwell delays,

which was from a few weeks ago, those have sort of proven to be mostly a nothing burger. They've got a good amount of that, billions of dollars of Blackwell revenue ramping in Q4. We'll have all of next year to ramp that platform as well. I still think that this one has legs. I still think it has room to run. You know, he described the demand that they're seeing when he was on stage yesterday with David Solomon is still being great. He also talked about, Stacey, I think something more powerful, and that's the idea of this installed base that they have, whether it's through gaming or supercomputing, the likes of which we always talk about relative to Apple,

but not so much as it relates to NVIDIA. The implication being that it doesn't even matter, really, about some of the competitors who are out there because the customers of NVIDIA are just going to keep coming back only for updated chips that they produce throughout the years. Yeah, so this gets into the concept of what's known as the ecosystem. So it's an issue. Like a lot of their competitors, like the pitch is, you know,

we have a chip that's better than NVIDIA, which, by the way, is always open for debate. But even if it were true, it's probably not enough. It's not just about the chip. It's the chip. And it's the software. And it's the hardware. And it's the systems engineering. And everything that goes around it, it makes it very, very easy to just buy their NVIDIA stuff and adopt it and install it.

And you can be up and running in days without having to monkey around with anything else. Many of their other competitive stuff, you can buy it and you try to install it, and it may be months before you're up and running with it. We've even seen evidence of this. You know, AMD now, they've recently, they've just bought ZT Systems. That was to gain the systems expertise that NVIDIA themselves have sort of built up organically. AMD's been doing, they've been, they've bought other acquisitions and other things. They're trying to assemble some of those capabilities that's on the software side and everything else that they

have been less successful building up internally because they just don't have the scale. But it's clearly about the silicon, but it's much more than just the silicon. It is everything that goes around it that makes it easy to adopt. And then once you're adopted and once you're established, then you really do have that installed base, a tailwind. Once your customers are using your parts, they're used to programming on your parts, it makes it much easier just to keep doing that. The super bullish investors would suggest then the implication is that they actually have a moat, that this is not simply you've you've said that for sure. But more broadly, this is not just a first mover advantage. It's actually something more powerful and durable.

Yeah, I mean, it always starts with the first mover advantage. But you have to remember, like, let's just take a look at the software. It's called CUDA and cuda is a variety of different things by the way but they they started building cuda over 15 years ago i mean that that's that's that's a massive first first first mover advantage right you've got lots of other players now that are just getting started now and even if you even if you've been trying to build out your software and ecosystem from a competing standpoint for you know two three four years nvidia still have a they haveIA still have a decade head start on you in that case. And again, once ecosystems get established, they're really, really difficult to

crack. Even like one of the other well-known ones, what they call the Wintel ecosystem. This is X86 and Windows and PCs. It's just sort of barely starting to crack now, but it's been around for decades. Once these things get established, they become very, very powerful. What's the takeaway as well from a Broadcom, for example? Why is it up 20% this week? You've detailed it here as the number two play right after NVIDIA,

that that's the one to keep your eye on most. I'll be honest. It got hammered a little bit after their print a week or two. And I thought that was overdone. I'll be honest, I didn't think, I think it was on, I was on here when those results broke. I didn't actually think it was that bad of a print. I thought the AI trajectory was fine. And frankly, I think that there's a lot of room for that to run. Their core business is weak. Many of the folks that play in those markets are weak right now. It's cyclical. It looks like it's bottomed. The orders are picking up. I think the setup in the next year for that is very good. And they've been buying software

companies. They bought VMware. VMware already is looking like a home run. They're already delivering on that. And so I think you've got that sort of play as it goes forward. And I think on top of all that, just to get back to the AI side, Broadcom's been out there talking as well. And I mean, it's becoming increasingly clear, I think, that it's not just NVIDIA that can be the winner here. If you're looking for what is the reasonable second source, I've actually been coming more and more around to the idea that it probably is Broadcom who does the custom chip design for the hyperscalers. I think we're still very early

on that trajectory. If there is any sort of second source to NVIDIA, I think it's going to be that. And I think we're still very early on that path. People are starting to realize that this could potentially be maybe bigger than where people have been modeling it up into this point. So you put all that together. I'm not exactly surprised. I was disappointed that it got hit as much as it did a week ago. Well, pretty bullish. Stace, we'll catch up with you soon. Thanks so much once again. Stacey Raskin.

Up next, tracking the biggest movers as we head into the close. Steve Kovach is standing by once again with that. Hi, Steve. Well, Scott, sit down and buckle up because I'm going to tell you what's going on with some airline stocks coming up after this. We're 15 from the closing bell. Let's get back to Steve Kovach now for a look at the key stocks that he's watching. Tell us what you see. Hey, Scott.

Shares of Alaska Air, they're headed higher after the carrier lifted its third quarter outlook on the heels of strong summer demand. And Delta edged ahead after the airline said it expects fiscal 24 earnings to be in line above estimates. But this is the big but. Delta is warning it expects an earnings hit of 45 cents a share due to that global CrowdStrike outage back in July. Also, streaming platform Roku added more than 5 percent after Wolf Research upgraded the stock to outage back in July. Also, streaming platform Roku added more than 5% after Wolf Research upgraded the stock to outperform from peer-performed. Company says it thinks Roku's sales growth is poised to accelerate on the back of trim cost structure and new sales strategies. Scott? All right, Steve, thanks. Steve Kovach still ahead. Adobe

reporting top of the hour. We hear from an analyst with what he's expecting from those numbers coming up. The bell is coming right back. Coming up next, we're going to run you through what to watch for when Adobe and RH report their results in just a few moments. And don't miss the Adobe CEO in overtime. That's coming up four o'clock. Eastern Market Zone's next. We're now in the closing bell market zone. CNBC senior markets commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, Mizzou host Greg Moskowitz with what he is expecting from Adobe when it reports in overtime. RH also out in overtime.

Julie Horson is going to tell us what to watch for there. Mike, I'll go to you. Some calling what happened yesterday an inflection point in this market. There's at least a pretty good chance of it. You know, the history of those big upside reversals is a little bit ambiguous, but there were some pretty interesting telltale signs. You know, the S&P 500 is up like 3.7% from late morning yesterday to now. Went from 5,400 basically to 5,600.

A couple of technical things. It retested 5,400. That's last week's low. That's the level we were at before the disappointing July jobs report. It seemed like a bit of a line of defense. And then Treasury yields stopped going down. You stopped having people have a sense that the bond market was really handicapping a hard landing. Decent weekly jobless claims. Of course, semiconductors really ripped higher and they had been very oversold.

And other things followed. Today, by the way, you got some further upside around midday after the Wall Street Journal report, sort of tilting a little more in the direction of a possible 50 basis point rate cut next week. I don't think it was a real tell, a real signal, but it definitely got people thinking that might be the case. And, you know, ISI, Evercore ISI's Ed Hyman flipped his call from a hard to a soft landing this morning. So all that stuff together, I think, has been enough to stabilize the tape. It's been a really powerful reemergence of tech, hasn't it? It has, yes. And of course, you know, I think a lot of people for good reasons saying that tech leadership, the outperformance trend that had been so persistent, looks like it was

broken, at least until further notice. This is now, I think, testing that idea to some degree. It's not all tech. It's, you know, obviously still concentrated among the favored semiconductors and a few other names. But there's no doubt that those stocks take the floor. Volatility comes down. You don't have to rely on four other things going right with the bond market and banks and small caps. And it does tend to create a firmer tone into equities. Come back to you in a few. Mike, thank you.

To Greg Moskowitz now for Adobe, what should we expect? Yeah, well, thank you. To Greg Moskowitz now for Adobe, what should we expect? Yeah, well, thank you for having me. So I think a couple of things that are very important to look for here. The most important metric would be net new digital media ARR. They've got the 460 million. They need to beat that number fairly solidly, not as dramatically as last quarter where they had a $50 million beat and the stock was remarkably strong. But they do need to share with decent beat. They also have said that within digital media, if you look at Creative Cloud,

their creative suite is Adobe's flagship product essentially. Their net new Creative Cloud AR metric, the second most important thing to look for, Adobe has guided to year-over-year growth, a return to year-over-year growth in this quarter. There are many investors who are still skeptical on that point. So if that does, in fact, turn from a negative into a positive, you will see some more confidence on the street as a result. Why has the stock underperformed so dramatically this year? To remind people, it's down 2% year to date? Sure. So I think it comes back to expectations. I think after AI and specifically Adobe's, you know, product name for

it is Firefly and it is infused throughout their product portfolio. That came available in November and there was a lot of euphoria and people were expecting that this was going to start to really you know materialize in the numbers in the business model and things got off to a little bit of a slower start than people expected and so I think that's the biggest reason for the underperformance again relative to expectations however our call has been that as we get into the back half of this year, and that starts with this Q3, and I would say especially in the Q4 period, you will see tangible evidence of all of these different monetization levers associated with Firefly start to show up in the model and start to help drive additional growth for Adobe. And that obviously would go a long way, we think, in terms of changing that investor sentiment and to have it become more positive. Greg, appreciate it. We'll see what happens. Thank you very much.

RH also out. Julia, speaking of underperformers this year. So we get the numbers in overtime. And what I guess we expect is the always colorful commentary, too, from the company. Commentary and, of course, always eyes on guidance. Now, with RH shares down 10% since it reported earnings in June and the stock is down 17% in the past year, the 43% of analysts with a buy or overweight rating on the stock are hoping for a turnaround. The majority of analysts, 52% have a hold rating on the stock. Now RH is expected to grow revenue 3% to $825 million

and to guide to accelerating growth of 11% in the third quarter. Now, earnings per share are projected to decline to $1.56, down from $3.93 in the year-ago period. Now, Wedbush, which has a neutral rating on the stock, says they believe RH gained share in the second quarter with new products and new mailings driving demand, while Stiefel with a buy rating on the stock says they believe trends through the quarter have been mixed, but generally supportive of an inflection point for premium furnishing. Back over to you, Scott. All right, Julia. Thank you. That's Julia Borson. We will see what happens in just a little bit. Michael, I'll send it back to you. Got less than 90 seconds. Nice broad day

to every sector as we speak is in the green. Yes. And that is a bit of a switch from yesterday when it was was pretty narrow. I think breadth is one of the things that probably still lines up as a net asset because it was so strong coming off the the early August low. We did mention coming into the week that some folks were going to try to map the August experience onto September in terms of a lot of weakness packed into the first several trading days of the month. Everyone kind of geared up for some more seasonal declines and then maybe the market can can pull a rabbit out of the hat. So here we are. We have most of the information we're going to have going into next week's Fed meeting. So it's going to be a little bit about

eye of the beholder. We know the real GDP and annualized inflation are both running in this comfortable 2% to 3% zone. The entire debate is about whether that's a stable or a fragile equilibrium for now and whether the Fed is willing to go a little bit farther as a gesture to make sure that people realize they're not behind the curve and all the rest. That's why that journal story today, I think, got some traction, this idea that there could be a pretty healthy case for 50 basis points in the room next week. Good stuff, Mike, as always. Bell's ringing. Good a book for the S&P NAS. Four updates in a row, so we're streaking once again. That does it for us on Closing Bell. I'll send it into overtime.