Closing Bell - Closing Bell: Trading Market Pressure Points 8/18/23

Episode Date: August 18, 2023

Rates, earnings, China and the Fed all putting pressure on stocks … so what is an investor to do? Dan Greenhaus of Solus Alternative Asset Management gives his expert take. Plus, star analyst Dan Ives is raising the red flag on Palo Alto’s rare Friday quarterly report. He explains what he will be looking for when the numbers hit the tape after the bell.  And, we look ahead to a big week of retail earnings – and what could be at stake for the sector. 

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. On this Friday, this make-or-break hour begins with the market's lost momentum. When it might return? And the stock that now holds the key to everything, some say. Here's your scorecard with 60 minutes to go in regulation. The major averages are staring at their third straight week of declines. The Dow, well, it's posting its worst week since March. It's breached some key technical levels as well. More broadly, the S&P 500 dragged by discretionary and communication services stocks. Those are the two worst performing sectors over the past five days.

NASDAQ below its 50-day. Investors are closely watching Apple and Nvidia ahead of its critical earnings report next week. It takes us to our talk of the tape, the many pressure points for stocks, rates, earnings, China, of course, the Fed, too. So what's an investor to do? Let's ask Dan Greenhouse. He's Solus Alternative Asset Management's chief strategist here with me at Post 9. That's a growing list of pressure points, right? We've been sort of fixated on this Apple sell off. The rates have backed up, although at least today they're backing off, which is maybe why the market's kind of hanging in. Okay, how do you see things here? Yeah, I mean, listen, technically, obviously, we've sliced through the 50-day moving average on a number of indices, if not all the indices. But in the context of Apple, I'll take a somewhat optimistic spin on things. Apple and those types, they were up 60%, 70%. Meta and Nvidia are up

300%, 400% off their respective lows, either earlier this year or late last year. In the context of what's happened with rates, from the bottom, when rates bottomed earlier this year, the 10 years up call it 100 basis points. And the NASDAQ is up the whole time. The S&P is up the whole time. I think ultimately with all that as a backdrop, what you look at right now is it's not unusual late August, September, to have something of a seasonal pullback. I know this is something Josh Brown was talking about this afternoon. September's been down three years in a row, six of the last nine, et cetera, et cetera. Historically, it's not a great time.

It's not a great time. That's right. And when you have the run-up that you had into something like that, you have no catalyst right now. Jackson Hole's probably not going to be much of anything. And so you're sort of on hold at least in NVIDIA next week and then beyond. Okay. So all that said then, if we have a little swoon here, which, you know, some said was due anyway, are we still set up for a trend that's intact for the rest of this year to be constructive on stocks? So I think on balance, the answer is yes. I want to add one more data point or one more observation,

what I call the Terranova observation. Something he's been talking about is the distance the S&P, where the index has got from its 200-day moving average. The NASDAQ got almost 22% away from its 200-day moving average, a level that's basically only been exceeded 5% of the time over the last 40 years or so. So again, within the context of a correction, you were pretty extended in that sense. And Joe's been hitting that point, I think, correctly so. In terms of the rest of the year, listen, I think the bias is for no recession right now. And again, for context for the viewers, I'm someone who was arguing much of last year for a recession sometime around the middle of this year. Obviously, that is not going to be the case. And if anything, ironically, the economy appears to be accelerated. I know that you're aware of the Atlanta Fed GDP now

number that everyone's talking about. It's not going to be 5.8. Even if it's a point less, even if it's two points less. It's going to be about 3%. But let's say it's 3%. That's still an acceleration from Q2, which itself was an acceleration from Q1. So perversely, again, not only are we not having a recession, we appear to be accelerating. But it also appears as though we've entered a phase of the market where good news is bad news. I think that's right. Again, right? If you put a print that's too hot or you have a metric that's too hot, a report that comes out, it's too hot, that's not good now.

Whereas before, it was, okay, soft landing, hey, maybe even no landing. Now it's like soft landing good, no landing bad. Listen, again, I think we've been talking about this forever, but it bears repeating ad nauseum. We're not really talking about meaningful additional rate hikes on the part of the Federal Reserve. Well, you better hope not. The bulls better hope not, right? We've convinced ourselves that, okay, September is going to be a nothing burger.

And then, OK, maybe in November. Yep. And then that's it. If it's more than that, is that a problem? No, I don't know if one more hike is necessarily a problem, although I will say we know that the headline CPI accelerated last month. I'm not sure that everyone is aware that in the upcoming report, it'll probably accelerate again, perhaps meaningfully so, at least at the headline. And so you're going to have somewhat of a jitter, so to speak, around two consecutive months where headline CPI has gone up. But on the part of the Fed, again, and I can say that stress is enough for investors at home, it's not how many additional rate hikes, it's how long you leave rates up at these elevated levels. It's considerably more consequential for the economy and I think for your investments. Well, it's also the speed at which rates have gone up.

That's part of the issue with the unsettled nature of this edgy market is, you know, the 10 years gone up a fair amount in a reasonably short period of time. It's made people nervous. Now, as I said, it's backed off today. But over the last couple of weeks where the uncertainty started to really creep into the picture, that's been the case. Yeah. Well, again, again, the issue is how do you want to view the backup rate? So I mentioned before, I'll repeat the 10 years up, call it 100 basis points or so in the last few months. It's a pretty rapid move. But is it going up because the economy appears to be accelerating, as I mentioned, in which case interest rates should be higher? Or is it going up because yield curve control out of Japan, or the higher

level of issuance, or perhaps people are getting more nervous about inflation? That tells you a lot from your own viewpoint about what you think about the investment landscape. I thought Goldman's Tony Pasquarello, frequent guest on this program, had a pretty good read on exactly what the environment looks like right now in his latest note, which I read earlier, quote, liquidity ebbing, price action skittish, tactical nerves are suddenly a bit frayed. That makes sense, right? Yeah, I think that sums it up very nicely. You know, but again, outside of the seasonally weak period in which we find ourselves,

what you have to wrestle with as an investor beyond the next few weeks, let's say through the end of the year, as you mentioned, is do you think there's going to be a problem on the earnings front or do you think there's going to be a problem on the earnings front or do you think there's going to be a problem on the economic front? Because if you do, you're making one of two arguments. On the earnings front, it's obviously earnings. On the economic front, perhaps I don't want to pay 20 times for the market anymore, although a lot of that is tech, in which case one of those two levers, so to speak, is going to be how you get the market lower. If you don't have those concerns, then you're probably just going to drift higher into your end, which is typically what happens.

You know, the other problem, as long as rates remain up, if you want to consider it a problem, in quotes, for stocks, as the Wall Street Journal says today, investors keep piling into money market funds. Such funds drew almost $36 billion over the past week. That's the largest haul since May. In other words, there's still good competition elsewhere for stocks. And until you get out of that dynamic, we're going to keep having these conversations, whether it's fixed income or money markets at 5 percent. You get where I'm going. No, of course. And admittedly, you don't have the same thrust behind the equity market if some of that money is diverted into money funds or into treasuries. And admittedly, when you again, when

you build a portfolio or you're thinking about your long-term investment horizon, if you can get at 5.5%, let's say, three quarters of your expected equity return in a so-called risk-free asset, it's very hard to turn down. Does that mean the equity market can't go up? I would argue no. And if we just need to look at the first six months of the year, money piled into money markets and the stock market went up the whole time. Well, because you've, Bryn Talkington, by the way, who's going to join us now, a CNBC contributor, Requisite Capital, of course. Bryn, you had more than a year's worth of gains in the Magnificent Seven, as we were calling them. So forgive people for taking some profits off the table

if the environment looks a little scattered. Yeah, I think we've had like five years of returns in those stocks in the first six months. And so I think there are certain things that the investors really need to know. And I want to talk about bonds because, you know, you and Dan just talked about it, that you've seen 100 basis point move, but the 10 years moved, I believe, 50 basis points in about 21 days. So that really overrides and really correlates with the sell-off in stocks. And so if you think about this, is that when you have an inverted yield curve, what that's telling you is that a recession is on the horizon. We've had an extremely inverted yield curve. Well, guess what? The bond market has been at odds with stocks, which stocks are saying, we're going to have a soft landing. And actually,

economic growth is accelerating. So to me, what I'm seeing is you're starting to see an un-inversion of the yield curve because as economic data improves, you actually get a steepening, meaning the long end goes higher. So that's just like bond 101. But then you add on top of that, we have all of this continued fiscal spending from chips, from IRA, and then you have quantitative tightening. And so I think we have these ingredients that were in somewhat unchartered water that if we actually, I just can't imagine the Atlanta Fed numbers are even remotely correct, but let's just say directionally it's in that way. And if you do see the 10 and the

two-year continuing to uninvert, that will absolutely put cold water on stocks. It just will. And so right now, we're bumping up against that technical resistance of October of 2022 for the 10-year and the pre-SVB for the two-year. And so I think we'll bounce along these levels. But I will say, though, why July is one of the best months in the market for the two-year. And so I think we'll bounce along these levels. But I will say, though, you know, why July is one of the best months in the market. September is the worst. And don't forget that by October 1st, Congress has to have a resolution on 12-budget, I mean, to not have a partial shutdown. And so I'm quite sure the political theatrics are going to kick up, especially from, you know, the fiscally conservative congresspeople that just don't want to continue to spend.

So I think September you're going to continue to see volatility up for a number of reasons. So how much more do you think the correction legitimately has to go if we're in this period of consolidation? Yeah, I mean, I think that like from a technical perspective, that 43, maybe it's a 4320, you know, you really haven't seen the Nasdaq doesn't look great. If you look at the weekly moving averages, you definitely have seen some damage. And so I think outside of NVIDIA next week, which which I have no idea what type of animal spirits people are actually looking for NVIDIA to have. And so that could be a little bit of a short-term move, one or the other. But I would say 43.20 on the S&P is good support. And I'm not good at saying how far are we going to go down. I just look at the technicals and see what that tells us.

But I do know that September, to me, is setting up to be a consistently poor month with volatility. And so that's where, you know, we've had covered calls and a big portion of our portfolio this year, which has been a drag. But I think as the VIX goes higher, as stocks chop around, having that call premium kick up will actually be a tailwind to our portfolio in a September, October type environment. Greeney? Yeah, with the caveat that I think the government shutdown, which is almost 100 percent probability, is completely irrelevant. I will add to Bryn's list that the UAW is almost surely going to strike in the middle of September. And I don't know that that means the market's going to sell off in an immediate sense, but it does add to some of the near-term negative headlines, if you will, that'll pop up.

What's the significance, Dan, do you think, of watching the loss of leadership, if you will, from MegaCap Tech, which is having a bad month? You can look at a lot of the names. Apple, of course, is front and center because it's down 11.5% or so. Microsoft, too. Over the month. But all of those names are down by some degree. It's just Apple's the steepest decline.

But then NVIDIA is on the list, too. You've got to have something pick up the slack if you're going to lose leadership. So, listen, the Fang Plus Index, which includes a couple of other names, is off, call it, 10 or 12 percent from the high. The market's off about half that. Clearly, for the moment, leadership is in question. But I would add, when you look beneath the headline, beyond the tech plus name, so to speak, look at the things I've been talking about for a couple of months now, if not a year, the consumer areas, the hotels, the cruise lines, the movie theaters, the casinos,

to varying degrees, the performance of those stocks, particularly the hotels, has been exceptionally strong. And I think it speaks to something that's going on in the economy where obviously the consumer is spending on leisure and not goods, et cetera, et cetera. But listen, are those names large enough to carry the index if Apple and Microsoft are falling? No. But it doesn't mean that underneath the headline you can't find in the industrial space. I'm rambling a second here. But in the industrial space, the charts are a little off the highs because the market's selling off. But look at infrastructure related names, United Rentals and Eaton and Quanta, PWA. There's a lot of stuff going on in the industrial space that's incredibly attractive,

although I'm not arguing that anyone should buy any one of them. So, Bryn, you mentioned NVIDIA, and we're going to get set up for earnings next week. Is it overstating it to suggest that at this very moment, just given how unsettled things feel, particularly in the Nasdaq and with some of these mega cap names, this is a trillion dollar company after all, that it's the key to the market right now. It's the key to whether this correction indeed has further to go or whether, you know, mega cap in and of itself can stabilize and at least stop some of the bleeding. No, I think it's key to I think it's key to semis for sure.

But I mean, everyone I've listened to, everyone I've talked to has said that you cannot get the NVIDIA chips to at least Q1 of 2024. And so the demand is there. I don't think it's the key to the whole tech market even remotely, because remember, Scott, who are the buyers of tech? The hyperscalers, like who are the buyers of the semiconductor chips? It's the hyperscalers like NVIDIA, Google, et cetera, that have already spent their capex. So I don't think it's the key to the market or tech as a whole, but definitely within semis, I think it could either cool off that area, which has really just been phenomenal, just incredibly strong.

But if you look back 20 years, NVIDIA has had, I believe, eight or nine years where it's been up over 100 percent. So this is not that unique for NVIDIA to have this kind of year because it's just a powerhouse name. Yeah, but I mean, I guess I would push back only in the sense that it may not be unique for it to have this kind of year. But given the reason why it's had this kind of year, as the point Josh Brown was making on halftime earlier today, is because the AI story has fueled all of the excitement within tech. So because the earnings are next week, that story in and of itself, the point Josh was making, needs to stay intact. Right. It's been the whole show in MegaCap for the most part. You can't start losing it now. Yeah, but that's the thing about this. How many people are investors in NVIDIA

that owned NVIDIA prior to 2023? And how many are traders that got into it afterwards? And so I think you could flesh some of that out, right? But for these like long-term investors in NVIDIA, they're going to have a great quarter. Is it going to be great enough? I have no idea. There is so much hype in this name. And so I agree to that in the short term, it could cool things off. But listen, NVIDIA is a very specific name, Scott. And the only company that we're sure that is capitalizing and monetizing AI is NVIDIA. That's it. In the publicly traded space, everyone else is spending to buy NVIDIA chips. So that's why I just don't think they're all put together because they are the direct recipient of where everybody else is spending.

Yeah. I mean, part of the point, though, is you can't afford to lose NVIDIA, certainly not at the current time. I mean, Chris Harvey over at Wells suggests today, quote, next week's NVIDIA reports and an AI sell the news reaction may help mark the near-term equity bottom. So if you're looking for signals of when some of the selling could stop in mega cap tech, do you need a sell the news thing in NVIDIA to clean it out a little bit?

I don't know. Maybe, but my inclination is opposite Bryn's. I think that this is a crucially important earnings report and I think you could make a case, one of the most important earnings reports we've seen in quite some time. That's why we ask the question, is it

right now, excuse me, the most important stock in the market? I think for sure. Part of why I disagree with Brian is like, we know the rest of the semi space is a disaster. We know that the chips and PCs, et cetera, are not obviously doing what they once were. And some are not.

Like, you know, Broadcom obviously is benefiting from AI too. It's one of those power players. There's a company like OwnSemi, which makes auto and industrial chips, which is doing okay. But yes, I think given its size, given its importance importance and given how much it shifted the narrative earlier this year, I would argue a disappointment out of them. That's not to say that like if they miss by a penny or something like that. I mean, some sort of disappointing commentary about the level of spend is, I think, near term problematic.

Bryn, how about that? I mean, right. Let's let's be honest. Markets markets move on fundamentals. They move on all sorts of things, and they certainly move on narratives, right? That's what fueled the whole tech thing to begin with. We haven't seen realized gains, for the most part, from what AI is going to deliver for these companies, but the narrative is that we will,

and that's why we're willing to pay up in the future today. We're willing to pay up today for these earnings that are going to come down the road because of AI. Yeah, I mean, I totally agree. That's what I'm saying. The only company that's actually realizing money right now is NVIDIA. Like, I don't know how Salesforce monetizes AI except just like charge more for your product. Right. So I think there's so much hype around this.

I don't think NVIDIA is going to disappoint, though. And that's where maybe the expectations are just like outlandish and i think some of the smaller players in like that are like the smaller like the unities of the world maybe those sell off because they don't they're not making money at this point but i just don't think they're going to disappoint because everything i read is like they're booked out to q1 of 2024. And so I don't know. I just think it's going to be a good number. Is it good enough? I don't know. And so I think it's clearly important,

especially there's no more earnings left. I just don't think it's going to be bad. And so that's where I don't think it's going to be some watershed event that all of a sudden tech just falls out of bed because NVIDIA is not going to miss. That doesn't make sense to me. I could be wrong. I'm wrong all the time. But in this case, I don't think I am. Beat miss. It doesn't maybe matter as much as guide. And I think we learned that last quarter.

The guide was so out of the water, outrageous that the stock took off and then everything else followed suit. Before I let you go, Bryn, your position is somewhat hedged, I think. In what way and how can people who are in NVIDIA maybe questioning what is really going to happen if Chris Harvey is right, how can they protect themselves and their position? Well, you know, we're big fans of covered calls. So in my personal position, when NVIDIA last quarter, after they released earnings, when it was around $420, I sold the September $450 calls and collected $23. So, I mean, that could easily get called away for me if it's September 15th, it's at $450. But I collected $23 because the volatility is so high.

And I'm very happy with that position. So I've got some long-term position, but also I'm collecting really big premium. And so that's a really safe way for me to own the stock. If it runs up and it calls away, that's fine. If not, I just collected a ton of premium for three months. All right. Good stuff. We're going to leave it there. Bryn, thank you so much. Dan Greenhouse, thanks to you as well. Good to see you here at Post 9. Good weekend to you both. That brings us to our question of the day. We want to know, will Nvidia earnings be a sell the news event? Head at CNBC closing bell on X, formerly known as Twitter, to vote the results later on in the hour. Let's get a check now on some top stocks to watch as we head towards this Friday close. Christina Partsenevelos is here with

that. Christina. Well, it's been a tough week for Chinese tech stocks, and it's not getting any prettier today. JD.com, Alibaba, PDD, Holdings, all in the red right now. You have the KWeb ETF that tracks many of those names. It's on pace for its worst week in two months as concerns over a slowing Chinese economy weighs on the group. So KWeb is down about 3.4%, over 6.5% on the week. And the EV makers haven't been immune either, with names like NIO, Xpeng, and Lee Auto all tracking for sharp weekly declines. NIO is on pace for its worst week since January 22, get this, down 17%. And Xpeng, which is making matters worse today after posting its biggest quarterly loss since

going public in 2020, those shares down about 5%. Scott. All right, Christina, we'll talk to you soon. Thank you, Christina Partsenevelos. We're just getting started here. Up next, a disaster timing move for the ages, quote unquote. That is what star analyst Dan Ives is calling Palo Alto's rare Friday night quarterly earnings release. He'll join us after the break with what he is expecting, maybe what he's fearing from this oddly timed release, I think we can call it. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Shares of Palo Alto Network slightly higher today ahead of a highly unusual Friday afternoon earnings release.

The stock has been in a free fall this month as part of a broader pullback in cloud stocks. Woodbush's Dan Ives has an outperformed rating on that stock. Joins us now with more on what to expect. It's good to see you. I mean, you think part of this pullback is due to the announcement they made that this was going to happen in the first place? I think 70 to 80 percent of it is because of this Friday night after the market in the summer earnings call. I mean, Scott, I think it's a debacle of epic proportions to do something like this. Lack of emotional intelligence and Palo Alto, you know, potentially the board. And I could tell you, investors, you know, they've been running for the elevators in this situation. Just it's stunning. I mean, you call it, quote, head scratching, one of the biggest PR

disasters, black eyes, et cetera, et cetera. I mean, what do you what do you think's at play here? What are you fearing most? I think the medium term guidance. I mean, it could be off, call it 100, 200 bips. The reality of this wasn't this Friday night special disaster. Stocks may be off a bit. We're looking at $230, $240 stock here. And now I think the bark will be worse than the bite. Our long-term thesis remains here on Powell. I continue to think they're one of the best players in cybersecurity. And I think it's really about medium-term guidance.

And I think that's really the issue at play here. But I think it's the timing here that, in my opinion, this is a case study for investor relations for years to come. What not to do. Sorry to interrupt you. I mean, it's been a monster stock, one that you yourself sitting right to my left have suggested was a table pounder, right? Those are the words you use to describe a stock that you love. Do you love it today as much as you did in the past? Yeah, we still love it. It's still one of our top picks. I think it's a stock that ultimately a year

from now is probably close to $300. But ultimately, in the near term, we didn't take it off top picks list over the last week or two just because the uncertainty from this, what could be in this twilight zone situation or Friday night, I think that's really the near term sort of situation. I do think it's a stock that ultimately moves much higher over the coming months and year. But at least in the near term, this is ultimately a self-inflicted wound. I mean, you think it's, I don't know. I'm trying to, do you think it's really that bizarre? Are we making more of it than than should be made? It makes for a nice headline in the words that you've put in some of your your notes.

But maybe it's much ado about nothing. Yeah. And Scott, I mean, we've probably heard 60, 70 investors in the last week or two on this. I mean, the point is, like, this is something that has really alerted and really been a red flag in the investor community. So it's not just me. And I think that's why when I look at it, 70%, 80% of the sell-off is because of what they did. And something I haven't seen in 23 years covering tech stocks,

80, 90 public companies that I've covered, they are still the gold standard for cybersecurity. Now, if you look, Fortinet had softness. That's caused some fears here as well. And it's surprising for a company that I think is normally has high emotional intelligence. I mean, CrowdStrike's down 12.5% since the August 2nd announcement that we were going to have today after the bell. Fortinet's down 26.5%. You know, some of the other cloud- going to have today after the bell. Fortinet's down 26 and a half. You know, some of the other cloud type stocks have fallen hard, too. So maybe, you know, maybe it's nothing more than just a space that got a little overheated,

needed to come back to earth a bit. Yeah, look, I think across the board, we've seen that across tech in terms of the self. Cybersecurity, I think, is going to be one of the beneficiaries as we go into more and more cloud spend, AI spend. I think you're also going to see more and more consolidation. But when you look at what's happened here, I do think as a barometer for the sector, not just public but private, I mean, it's been a soap opera. Talk of the town since they did this the last few weeks. Now it's ripped the bandaid off. Get this over with. I think this is a stock that's probably up on Monday. How concerned are you about Apple? Just to switch you to that before I let you run. Stock hasn't traded well, down 11 and a half percent this month. You know,

got some technical ugliness to it as well. Give us your let's just I know I know your big picture view. I don't necessarily want to hear that. But give me your tactical view, if you could, over the next few weeks. What you're looking for? Tactical is, I think this is, I mean, I'll use a table pounder term in terms of my view of this going into an iPhone 15 cycle. Mid-September when they launch, we believe 25% of the install base have been upgraded in four plus years. Our checks out of Asia, even as in the last day or two, continue to show ultimately units that will be up from iPhone 14. So, Scott, I mean, I get the ultimate pullback on tech, and obviously Apple is a barometer, but I believe this is

a golden buying opportunity rather than the time to sell this name tactically into the next, call it, 45, 60 days. How critical, before I let you go also, NVIDIA? You know, we've made the case in some respects that right now it could be the most critical stock in the entire stock market. Yeah, and no doubt. I mean, Jensen, NVIDIA, that will be the guidance heard around the world next week. But we're expecting strength. Everything we're seeing at Asia, we're looking at ultimately things that are almost sold

out through 2Q, 3Q next year. And I actually think this just speaks to, I know you were talking about before, the reality of what we're seeing with AI spend. This is not hype. It's real. It's a 1995 moment. Nothing we've seen since the start of the internet. And that's our view in terms of as this all plays out next week, we'll be a guidance heard around the world in a positive. All right. Appreciate you sharing your views with us. Dan Ives, enjoy the weekend. We'll see you soon. Up next, the major averages heading towards weekly losses yet again. But John Spallanzani of the Miller family office is still seeing some serious upside for stocks as we wrap the summer. He'll make his case next. Closing bell right back after this.

All right, we're back on the bell. Summer seasonality hitting stocks again this week. The S&P 500 closing in on its longest weekly losing streak since February. But our next guest believes the bull thesis is still intact. He's right here at Post 9 to make the case. John Spallanzani, the Miller family office. Good to see you. Welcome back. Thanks. There's a lot of like uncertainty in the market suddenly. Tell me why the bull thesis is still good. Yeah, I think that the market was a little overbought, obviously, as we got into August and

we see this correction that was not kind of foreshadowed. It's never one thing. I think we had the Fitch downgrade. Obviously, we have Jackson Hole coming up. We had some backup in rates. Well, backup in rates, yeah. I think that's kind of almost run its course, just because if you look at the yield curves around the world, right, we have bonds at 2.6%. We have Switzerland 1%.

You have Portugal 3.9%. And then you have Japan. Everybody said people are going to sell treasuries. Same thing with China. But why would they do that when their currencies are weakening? So if anything, if your currency is being devalued, you want to get the money out of the country and probably into treasuries, not out of treasuries. So I think there's an underlying bid for treasuries over 4%, obviously. I think the Fed continues to talk tough, but they'll pivot on a dime once they see employment

or any other indicators kind of go in the opposite direction. There are some who are trying to make, if we're talking about the bullish thesis, that what was the thesis, this, you know, soft landing or no landing has suddenly turned into a bearish thesis that no landing is no good anymore because it's going

to keep rates elevated for longer. And just who knows what the Fed's going to do. But at the very least, you're going to keep rates at these elevated levels and that's going to put a cap on valuations and stocks. I think people forget how bad 2022 was. It was one of the worst years for bonds, equities and just about every other asset class since the 1930s. So we have this recency bias where everything was really bad last year, and now we're just kind of coming out of it a little bit. And I'm with Laszlo Barini, who says, you know, the bull market in NASDAQ started probably around the time that SBB, and we had the regional banking crisis.

And then the actual bull market, we're going to take 20 percent from the low for the S&P, probably start in June. So this is a little bit of a correction. If we look out, we have student loans coming due. We have China blowing up. We have gas prices back over. I mean, I paid $4.50 today for a gallon of gas. So we have all these drags going into an election year. Powell already made the transitory mistake where he said inflation was transitory. Is he going to want to make another mistake and have a major recession on his hands going in? So, again, I hear people talking about, well, the market's pricing five rate cuts for next year and all these ridiculous assumptions. But the fact of the matter is when

you hike rates, you hike at 25 point increments, right? 25 basis points. When you cut, they could cut 50 and 50. That's 100 basis points real quick. So do we consider that four cuts or is that two cuts? So we get into these semantics. And I think that right now, everything's rosy, but the Fed is doing quantitative tightening. The market yields have backed up. We have mortgage resets coming, which are going to be big. We have student loan debt. So there's a lot of unknowns that he's kind of like treading into this fall. And those are the reasons why I think that the market's going to continue to do well,

because they're not going to be able to stay this tight. But even, I mean, seasonality is not great. You mentioned some of the other risks. We didn't really mention China. Yeah, China looks kind of ugly in terms of where growth was projected to be at this point coming out of the pandemic. Like, where is it? Right. That's disinflationary, along with the AI story is also disinflationary. So we saw UPS and UAW, two unions had very big contracts and that kind of scared a lot of people. But remember, most of the workers in the United States are not union workers. They're going to be fired, God forbid, if there's a downturn in the economy.

And that's the last thing Jay Powell wants. We already have unemployment tipping up a little bit, claims almost to 250. The last nonfarm payroll was pretty much in line, but almost in that 100,000, under 100,000. If they start seeing non-farm payroll employment print under 100,000, they're going to be in the easing camp pretty quick. Do you need mega cap tech to stop going down, to stabilize? Or do you say it doesn't matter as much because there's something else to pick up the slack? How do you say it doesn't matter as much because there's something else to pick up the slack? How do you view that?

Because it's undeniably one of the reasons why we're even having this conversation, why the S&P is down 5.5% this month. And the Nasdaq's down 6%, 7%. Tesla's down 22%. I mean, that's a big move in one month, right? Well, Apple's down 11.5%, right? These stocks matter a lot. They matter on the way up.

They sure as heck matter on the way down. Well, we have, you know, the last 13 years we had Dan Loeb pile into AI related stocks. David Tepper went all in as well. So I think that that's a longer term story that's going to play out, not just till the end of the year. That's going to play out over the next, you know, five years, 10 years. And that's a major story that I don't think is getting a lot of credit. But those stocks obviously have were kind of everybody piled in at once. They've come off. And I think that towards the end of the year, we're going to end higher than we are right now. And I think even at the end of the month of August, we should end higher than where we are

right now. Oh, we'll make that the last word. John Spallanzani, thank you. Thank you. It's good to see you. All right. Up next, we're tracking the biggest movers as we head into the close on this Friday. Christina Partsenevelos is standing by with that. Christina? Outback Steakhouse catching the eye of not only some steak lovers, but an activist investor who believes the parent company's shares are undervalued. Stay tuned for more to chew on. It's Friday.

About 15 to go before the close. Let's get back to Christina Partsenevelis with a look at the stocks that she is watching. Christina. Well, I'm watching Deere right now because it's sinking despite beating estimates on both earnings per share and revenue. The farm equipment maker also raised its full year guidance and said its order books remain robust. But the stock is down on concerns that sales could be slower going forward, especially as used equipment inventories rise. Deere's shares are down 5.5% right now. And Outback Steakhouse parent Blooming Brands is hired today

as activist firm Starboard Value reveals that it has taken a nearly 10% stake in the company. Starboard's filing didn't really include any details on what they're pushing for at the company, but sources tell CNBC that the fund views blooming brands' shares as undervalued and plans to hold a meaty dialogue with management about the company. Shares are blooming up 8%. Scott. All right, Christina, thank you. Christina Partsenevelis, last chance to weigh in on our question of the day. We asked, will NVIDIA earnings be a sell the news event like some suggest it could? Head to at CNBC closing bell on X. The results are just after this break.

I want to show you the markets here because we are green across the board, including the NASDAQ. Look at that down at the bottom of your screen. Now positive, albeit slightly, but it's been red all day. And now the Dow Jones Industrial Average is at pretty much its highs of the day, up 83, quarter of a percent. S&P 500 is green as well. Now the results of our question of the day. We want to know, will NVIDIA earnings be a sell the news event? The majority of you said yes, so maybe sentiments turned a bit about one of the biggest stocks in the market. Fifty seven and a half percent of you say yes, it will. Well, we shall see.

Up next, speaking of earnings, your earnings set up for Palo Alto. That Friday night earnings report. It's just a few minutes away. We'll give you a rundown of what to expect. And it's another big week of earnings ahead. Retail is front and center once again. We'll tell you the key names you need to be watching. What's at stake for that sector and the markets at large.

We'll do it after the break. That and much more when we take you inside the market zone. We're now in the closing bell market zone. CNBC senior markets commentator Mike Santoli is here to break down the crucial moments of the trading day. Plus, Courtney Reagan on two retail movers today and what to expect from another busy week of retail earnings in the week ahead. And Christina Partsenevelos on what to watch out for Palo Alto's release. We've talked a lot about it. It's coming in overtime today. It is a rarity to say the least. Mike Santoli, though, how about this move late in the day?

Get a little green across the board. At least a sense out there of relief that it's not one of these daily self-reinforcing sell-offs. We still very firmly have this multi-week downtrend in place. Today didn't do a lot to change that, but it shows a little bit of calm in the bond market. It goes a relatively long way after we've gotten just slightly oversold in stock. Still not the broadest rally, but I do think it makes sense that we're able to at least find a little bit of footing. We do have options expiration today. Maybe that does clean up positioning a little bit going into next week.

All right. And Courtney Reagan, speaking of next week, what about the two retail movers today? Give me that first, and then we can look ahead to what's at stake next week. Yeah, so two retail movers with very different businesses moving in very different directions. So Ross Stores did report the results after the bell. So today was the first day of trading that we got to react to it. And really, it was very strong across the board. This is an off-price retailer, so it has a model like a TJX, and it reported much stronger than expected results. It upped its guidance, but a number of analysts actually think it might even be conservative with its guidance. And it just goes to show you that

sometimes you can sell discretionary goods if you've got them at a value proposition and consumers will be interested. On the flip side, you've got shares of Farfetch absolutely tanking. So this is an online marketplace for luxury goods. You want to see profitability in any company that you invest in, right? And so that bar has gotten higher and higher and higher for some of these online e-commerce, used to be formerly sort of startup names. They were not able to put up profitability. Their revenue projections going forward are dour, to say the least. Analysts are even a little confused on the business model,

even as the executives are talking about making things more efficient going forward. Obviously, investors just are not convinced today. Yeah. So let's take from today to next week. What should we be watching for most, you think, next week? Oh, my gosh, Scott. We have so many names reporting next week, and so many of them lean heavily in apparel, in these discretionary goods that have been soft for companies that have lots of different categories. And so I think the way that you operate, the way that you execute is really going to define the winners from the losers, because we know that you've got to give consumers

an awful lot of incentive to buy these type of goods right now. And so I'm really watching to see if any of these players can do that. I'm talking about Nordstrom and Kohl's and Macy's and Abercrombie, Dick's Sporting Goods and Foot Locker. Little different businesses, of course, there. We also have Lowe's and we heard from Home Depot. I expect to see a somewhat similar quarter, sort of some moderating consumer spending when it comes to the home, focus on smaller projects, less on those tackling those really big, expensive product projects in the home space as rates obviously continue to move higher. So we'll see what we get. All right. Yes, we will. Appreciate it, Courtney. Thank you, Courtney Reagan. All right. What will we get from Palo Alto Networks?

Christina Partsenevelos, that is the biggest wildcard question of this day. Which is great because that means people are going to be tuning in to CNBC and us breaking the earnings. But let's talk about the stock. It was down with roughly 18% since announcing a Friday afternoon session on August 2nd. And also, don't forget, a two-hour earnings conference call and a one-on-one sell-side chat if any of these analysts need clarification. Of course, there is speculation that the company could be hiding something bad since attention tends to dissipate on Friday summer afternoons, but not today, folks. There are other factors, though, that could be at play in the recent stock drop. Firstly, Palo Alto was added to the S&P 500 on June 20th, replacing DISH. It jumped 7% that day,

so maybe it's coming down from that. Secondly, Microsoft announced it would expand its cybersecurity offerings, which won't really affect this quarter or even maybe the next quarter, but could have long-term ramifications for Palo Alto, which is why Palo Alto shares fell when that news came out. Lastly, competitor Fortinet's earnings were weak and they got lower on customer billings, which is a key metric for these cyber security firms possibly setting a lower bar for tonight's earnings but the negativity Scott could be a little overblown and Palo Alto's press release that I was just

checking out earlier today they did say they would provide a full year 2024 guidance and update medium-term financial goals through 2026 so maybe they're being considerate to analysts, giving them some time to update their models. Well, I can't wait. I cannot wait to overtime to find out exactly what this is. Are you going to stay tuned up until like, you know, past five o'clock on a Friday? Sure. Sure. I'll be watching. I'm trying to see your expression right now. You don't want to see it. Everybody else, please stay tuned. That's what we want to know. There you go. Thank you. All right.

Christina, thank you very much. Christina Parts of Nevel. Back to Mike Santoli. We're talking earnings. Can't help but look to next week, Mike, and think of NVIDIA. The two-minute warning just went off here, so we're still green, at least on the Dow. S&P has gone negative. NASDAQ looks like it's tracking negative now, too. But it all sets up for NVIDIA next week. Your thoughts? It does.

You know, I wish there were a way to handicap this in any way whatsoever. We were a few weeks ago saying, hey, we've got to look ahead to Apple and Microsoft. Both those had just fine numbers. There was really nothing wrong with the earnings. And yet, they both traded terribly often. So this is when the market will show its hand as to whether it has too many eggs in that one basket of Nvidia. And we'll see how it breaks from there. I don't think that people are as far out on a limb, super bullish in the short term on the stock as they had been a little while ago.

So if one of the jobs of this pullback has been to moderate sentiment, get valuations off the nosebleed levels, it started to happen. So we'll see how that if that continues into the report. So we're going to look ahead, Mike. Six o'clock tonight, of course, you and Josh Brown are hosting your special taking stock. What kinds of things are you going to be tackling? I mean, the markets are really a good time to have this special with two people who know the markets cold. What should we be expecting? I mean, stocks and are really a good time to have this special with two people who know the markets cold. What should we be expecting? I mean, stocks and bonds both on the move and actually multiple interpretations of what the message is of all these moves. We also are going to be sort of ranking the big worry points of the market.

What's a real concern and what can we kind of dismiss? So we may not exactly agree on what the order of those things should be, but we're going to try. Yeah. Well, we'll be watching. Wish you well. Have a good show. Lots to talk about, obviously. So you hear the clapping here. Dow looks like it's going to give it up, too. What a difference a few minutes make, really. So we're going to have three straight weeks of losses here for the major averages. We have some technical damage. There's the bell. Everybody have a good weekend.