Closing Bell - Closing Bell: Volatility Until the Vote? 10/28/24

Episode Date: October 28, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the countdown to big tech earnings 24 hours before Alphabet reports and with the Nasdaq riding a seven-week winning streak. So we'll ask our experts what's really at stake over the next four days. In the meantime, let's show you the scorecard. With 60 minutes to go in regulation, we do have green across the board today. For the majors led by financials and utilities, it is the Dow outperforming up three quarters of one percent. Even a rise in yields not enough to derail stocks today as the 10 year hits its highest level since the summer. We'll get the jobs report this Friday as well. Fed meeting looming, the election and all of that.

It does take us to our talk of the tape. Where does this rally go from here? Let's ask our panel, Joe Terranova, chief market strategist, Virtus Investment Partners, and a CNBC contributor, along with Samir Samad, a Wells Fargo Investment Institute. Good to have you both with us. All right, Joe, what's riding on this week? Let's just lay it right out. I think plain and simple, it's the mega cap earnings. It's hearing from companies like Alphabet, Microsoft, and Apple, hearing, in fact, what

the direction of their revenue growth is, and really about what the future plans are related towards their spending with AI. Because I think, in particular, Alphabet, we've priced in the AI CapEx. You know, you look at two companies like Alphabet and Apple and you see two remarkably different conditions. Apple near an all-time high. Alphabet 12.7% off of its high earlier in the summer. And why is that? Because Apple, there's excitement, there's optimism, new iMac, excitement, optimism surrounding Apple intelligence. And then for Alphabet, there's concerns on the core strength. There's concerns. Is cloud still going to be a standout? And then there's concerns surrounding

the DOJ and really, more importantly, how much they have to spend on AI. So to me, it's all about mega caps. Yeah. Samir, I think we know that it's about that. Of course, you have the jobs report later in the week. But what's really riding on on this week's reports? I mean, how good do they have to be? Canaccord today suggests there's a higher bar because the Nasdaq's been rallying to these new all time highs. We just suggested we're on a seven week winning streak. Does that mean the bar for these reports is all the higher? I think so. I mean, look, I think I think not only do you need a beat, but I think you probably need a beat and raise on the guidance looking forward. Because you've seen a couple of things happen. I mean, to the good point about equities having been higher for the last few weeks, I think is a good one.

The other thing that maybe people don't appreciate is the fact that earnings estimates have been coming down for this quarter and the whole year over the past few weeks. So really what companies should be able to do with that lower bar is kind of set the tone in a much more positive way for the coming year. And if they can do that, then I think we can make further gains into the next year once we get past some of the election related uncertainty. Yeah. Joe, what do you want to address in terms of where the bar is for these reports? You know, the stocks went to sleep for a little bit in the third quarter. They did. They've woken up, to say the least. We've suggested, you know, this run that the Nasdaq has been on. A lot of the stocks have performed pretty well of late.

You could take Alphabet and Microsoft out of that because they've been the underperformers. Alphabet's the only negative one out of the group. But Microsoft's done virtually nothing in the last, you know, few months. Well, they were able to kind of go to sleep, as you suggest, because someone else got in the driver's seat. And that was other areas of the market that have underperformed, whether it's the 493 or your trade down in an equity size class towards certainly mid caps, or you could even make the argument small caps in Q3. So there were other areas of the market got in the driver's seat. I don't think as we look at the Q4, Scott, you're going to be blessed with that condition once again. I think if there's

a misstep this week with the mega caps, I'm not so sure other areas of the market are going to be there to pick up some of the corrective behavior that we're going to see. So, Mayor, do you think momentum is back in tech or are we still trying to figure out what the next leadership leg is going to look like? Oh, it's absolutely back in tech. I mean, it's hard to argue that tech and comm services aren't your leaders. But I think what is interesting, you know, a little bit to Joe's point, is financials, industrials, and, you know, some of the cyclical areas, you know, really have kind of stepped up. So, you know, I would say if there is a little bit of a stumble, it wouldn't surprise me if especially financials, given kind of the steepening of the yield curve, you know, kind of pick up the baton and run with it.

Yeah. We're getting some news out of the Treasury. I want to just interrupt the conversation for a moment and bring in our Steve Leisman, who has that breaking news for us. What do we learn, Steve? Yeah, we learned that the Treasury, Scott, expects to borrow $546 billion in the fourth quarter of 2024. That's $19 billion lower than announced in July 2024 when they put that estimate out. That's because they had a higher cash balance, as in more money in the bank and the Treasury, offset by some lower cash flows. Now, here's the forecast.

$823 billion in the first quarter of 2025. That's the largest on a nominal basis for the first quarter, but it also comes with a big cash balance they're going to keep. I'll talk about that in one more second. They borrowed $762 in the third quarter of 2024. That was $22 billion higher than the estimate because they've had more in the cash balance and offset by higher net cash flows.

One more thing, they expect to have a cash balance. I'm just looking up these numbers here of, I'll give it to you, Scott, $700 billion in the first quarter of $850 billion in the first quarter, 25 from $700 billion in the fourth quarter. They are kind of squirreling money away, Scott, because as you know, there's another debt ceiling fight brewing for the first part of the year. Yeah, it just makes us think, Steve, thank you about the deficit and all of that. We were watching yields of late, as we said, 10-year the highest in some three months. Leads me back to our panel.

Joe, the market's been uneasy with the rise in yields, the backup. Yields up today, stocks up today. So at some point, maybe we start focusing on the fact that growth is better than anticipated. Thus, the backup in yields is OK. Is that the right way to look at it? I think it's OK for now. OK, we have one day. We have one moment here towards the second half of October in which the cyclical part of the market is leading on an intraday basis with yields moving higher. You've got a 10-year up to 428. Okay, does that give me confidence that as we move through the entirety of the fourth quarter and we flip the calendar into 2025, if yields continue to move higher,

that we're going to be able to expect that same type of good behavior? I don't believe so. I really don't. And I think that's why over the last several weeks, I've kind of been emphasizing the point that trading up towards quality should be first and foremost what investors are thinking about. And secondarily, it's really making the return to the mega caps.

It's going back to those companies that don't have the sensitivity, the assets that are not long duration assets. They don't have the sensitivity, the assets that are not long duration assets. They don't have the sensitivity if, in fact, you see yields rise towards four and a half, four and three quarters. And yet, though, Joe, the Russell today is up one and two thirds percent. I know. But it's one day, Scott. I think that's one day more than anything else. Why would they be up, though, if yields are backing up to the highest since July? I think liquidity is light. You know, we're one week, eight days, rather, away from an election.

I think liquidity is light. I think there's a lot of dislocations within the market today. You've got the VIX is lower. Oil is down significantly. I think the correlation mix today is a little dislocated. So I'm not going to put too much into what we're seeing here for one day samir is there a problem with the backup in yields and and if so at what point yeah i mean probably not at these levels i mean look you were at five last year around this

time you were at 460 earlier this year you know we would argue probably something north of four and a half probably gives the market some pause but long reach probably do need to remain well behaved especially protect to continue leading the market but I'll give you a little bit of a dark horse pick. I mean, so we've liked energy for a while. It's our most favorable sector. It's very telling to me that oil is down 5 plus percent today and energy is barely down on the day. I think that sector is pretty much priced for almost all the bad news that we've gotten. And if you can get some of these different things to kind of fall into place on China, on energy demand, on the U.S. economic recovery we see next year, I think energy does really well.

And given that multiple, it probably doesn't face a lot of headwinds from interest rates. Yeah, there hasn't been a direct correlation at all times, really, about the movement in crude oil and the direction of energy stocks. So it's going to be interesting to watch. Let's bring it back to where we started as we count down to Alphabet's big report that hits the tape tomorrow in overtime. Deirdre Bosa joins us now for a look at what she thinks we need to be watching more than anything else. Yeah, Scott, as I told you earlier today, it is all about the core. It's core advertising revenue because any softness there could be seen as vulnerability in this new age of generative AI when people are using more chatbots and that could be pulling them away from traditional search. It's also as more competition

comes online from the likes of perplexity, which is going to be ramping up its advertising and in search in general. At the same time, as you guys know, while Google has facing this mountain of legal issues, so investors are going to be looking for color. As with last quarter, CapEx is going to be big as well. Investors want to know not just how much is Google spending here and willing to spend. Senator Pichai said that they couldn't spend too much, but also how that's going to show up in terms of growth and on the bottom line. Google also this quarter has been ramping up AI overviews. This is sort of the generative AI answers that they roll out to any user. You don't necessarily have to sign up for Gemini or

something else. So we're going to be looking for color. One, how are merchants and companies that are using the new advertising tools, how are they seeing it? And two, users, are they responding well to it? Are they spending as much time on Google now that they're being served up these AI overviews? Also, Scott, I want to mention this is the first quarter that we're going to hear from Google's new CFO, Alphabet's new CFO, Anat Ashnikazi. So that will be interesting also. Yeah, certainly. And, you know, it's obviously relative to, you know, this conversation and the kinds of conversations we've had on this show with, you know, the founder of Perplexity, for example, just a week or so ago, Dee.

How much do you think Alphabet is actually concerned about companies like Perplexity and the loss of share in search and advertising and the kinds of things that these companies say they're coming at Google for? I think they're very concerned. I mean, I've said this a few times, but we haven't seen a Google that has moved this quickly in a very long time. Of course, they had all of the tools to make generative AI possible, but it sat on them and let open AI steal that chat GPT moment. It's had some sort of hits over the last little bit. It integrated some of its AI features into its Pixel phones. We've talked about Notebook LM and those podcasting tools, which went kind of viral among tech.

So it's moving faster. I'm also hearing that they're doing things like hiring outside because they want to be able to move quickly and have that sort of scrappy startup edge. An example of that is hiring back one of those authors of that famous Transformers paper. So they are moving quickly, but is it fast enough? And I guess the big question, are they willing to cannibalize this bread and butter that has been such a good business, which is advertising and search, in order to move as quickly where, you know, Arvind, a perplexity, he doesn't have those kinds of stakes, right? He can do everything natively and is giving them a run for their money doing so. Yeah, I appreciate that, Dee. Thank you. That's George Bosa to

the shareholder. Joe, you have it in the Joe T. How are you thinking about it? Let's speak towards the price action first. First of all, could I see this stock below 150 in the near term? Absolutely, I could. Could the stock over the next 12 to 18 months recover and be back above $200? Absolutely it could. So it speaks towards long term. There's enough here in the story that if you are a true long term investor, you could stay with it. The problem is in the interim, there's a lot of questions that this company has to answer. And I'm not sure you're going to hear all the answers tomorrow night. I think the biggest question for me as a shareholder is you're talking about spending significant amount of

capital on AI. AI CapEx continues to increase. When does that show up in revenue growth? When does that show up in margin expansion? I don't think you're going to hear that story tomorrow. And then I've talked on Halftime over the last several months about this. The penetration as it relates to market share in search, it's real. And if you're a mega cap company, if you're a meta, if you're some of these giants and now you're introducing artificial intelligence tools, you want to control the search narrative. So I think that's a real impediment and problem for Alphabet. Samir, when you look at earnings and you look at the totality of where the growth is expected to come from and why there's such a heavy reliance on on tech and why the money continues to go there from investors, it's because the earnings growth year on year for tech. 13.5% expected year on year earnings growth for comm services. Minus 0.2% for the rest.

That tells a whole story. It really does, and it has for a while. I mean, I know people want to keep believing in this mean reversion broadening out story. And look, there's nothing wrong with that. We recently went neutral on small caps for most unfavorable in that early August pullback. So, I mean, there are probably brighter days ahead. Things probably get a little bit better at the margin for smaller companies. But you still want to favor kind of those larger, you know, mega cap names over, you know, smaller cap names. And I think, you know, at least probably until sometime next year, until you get the

manufacturing piece to work, until you get the lower socioeconomic rungs of the consumer to work. I think that's when things truly broaden out. Yeah. Another biggie this week, Thursday, Halloween. That's when Apple reports already launching its highly anticipated AI system today. And that is ahead of those numbers. Steve Kovach joining us now with that. Steve. Yes, Scott. It's time to test that narrative. If this Apple intelligence launch can juice iPhone 16 sales. Now, if you take a look, if you were hoping for

Siri to get smarter today, you're going to be a little disappointed. Only a few features are actually in this release. AI summaries of notifications, some writing tools, a new look for Siri. But there's better AI features, especially chat to BT integration, generating custom emojis and images, those are all several weeks away from launching. And the real update, the one everyone's waiting for, that big Siri update and the integration with all the apps on your phone, that's not going to come until next year. And in the meantime, as we've been saying on this program over and over again, some sour commentary on iPhone 16 demand so far. Last week, CEOs of AT&T and Verizon said demand for iPhone isn't as strong as last year, and they're unsure how long it's going to take for this AI rollout to change that.

Also, analyst Ming-Ching Kuo of TF International Securities, he said Apple cut iPhone 16 orders by $10 million. That's higher than usual for this time of the year. But we're going to get some more information. Earnings are coming this Thursday, Scott. Yeah, thank you for that setup. Steve Kovac, back to Joe. I mean, there's been a lot of noise in the marketplace. But as you said, though, the stock has almost avoided it completely. It's up 1% today.

It's up 21% year to date. And over a month, it's up about one percent. A classic example of the resiliency you like to speak about within the market. Apple is the truest representation of that resiliency because we've heard so much since Labor Day about potential disappointment for the iPhone 16. Almost three percent year to date. Excuse me, I made a mistake. Go ahead. So we've had that. I mean, over a month. We've we've done digging a deeper hole for myself. We keep going. We've digested a lot of negative potential news surrounding it. Look, I'm excited about the iMac, the potential for a new iMac, which is coming in November.

Remember, it was the iMac that saved this company back in the 90s. Now you're talking about Apple intelligence. You're talking about, OK, I get Apple intelligence on my iPhone. How about Apple intelligence on my iMac? That's exciting to me. That's real. And I think this company right now is experiencing very strong positive momentum. And it's probably unexplained for some reason, based on a lot of the headlines we've heard over the last six weeks. All right. So we're likely to get, you know, a reasonably volatile market this week, given given these reports. And then, of course, you have the jobs report and then the election a week from tomorrow. So, Samir, talk to me about the volatility that you expect

as a result of the jobs report, what it might mean for the Fed. And then, of course, the election, how you're thinking about the aftermath of that for how the stock market might do. Yeah, I mean, the jobs report, I mean, not take anything away from it. Maybe, you know, it leads the Fed to rethink rate cuts for probably sometime next year. But we think it's pretty much locked in. They'll probably cut a couple more times this year. The Fed's just a very slow moving body. Now, around the elections, I think you'll probably see one or two scenarios. I think we get a pull back before then or probably one right after, because it might be one of those buy the rumor, sell the news, or a true surprise, given that the market slowly seems to be drifting in one direction. If there's a pullback, I guess our North Star would be three different trades. One would be

stocks and commodities over bonds. We want to own those over the coming 12 to 15 months. We want to own the U.S. over international, especially emerging markets. We're not believers in the China rebound story. And then the third thing would be anything but defenses is how we've been terming it out. So cyclicals, growth, we like those over the defensive sectors because, again, if the economy bottoms in the first part of next year, then the market runs probably about three months ahead of that, and now is the time to start positioning. Okay. What about you, Joe?

From everything that I can see in the market fundamentally, this is still a secular bull market. For those that disagree with that, for those that are skeptical, this is also a very calm market. I think you would agree with that. We talked about at the beginning of the show, you've got a 10-year treasury at 428, and cyclicals are actually rallying in that environment. So you're skeptical. You don't believe that this is a secular bull market. It's very easy to go out and get the risk management that you need within the market, whether you're utilizing the options market or you want to allocate towards more defensive holdings. It's there.

It's a calm environment. You could go do it. I will leave it there, Joe. Thanks, Samir. Thanks to you as well. We'll talk to you both soon. To Kate Rooney now for a look at the biggest names moving into the close. Hey there, Scott. So Delta Airlines hired today getting a boost from lower oil prices. Shares popped after a sharp decline in crude, which was down about 6% in the session amid escalating tensions in the Middle East. Delta is one of the largest carriers in the U.S. Should benefit from lower fuel prices.

That tends to be a major variable cost for those airlines. Delta today also suing cybersecurity company CrowdStrike over those tech outages. We saw back in July accused CrowdStrike today of gross negligence. And then you got electric vehicle maker NIO popping today on a bullish analyst call. The Tesla rival jumping 10 percent or so after Macquarie upgraded that name to outperform. That was from Neutral, citing strong orders from the Envo L60 model. Scott, back to you. Thank you very much for that. We're just getting started here on The Bell.

Up next, Goldman Sachs' Tony Pasquarello is back with us. He's breaking down how investors should be positioning their portfolios ahead of a few critical weeks for the market. We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. As we enter a critical stretch for stocks, mega cap earnings, the election, a Fed decision, job support all within the next two weeks. So how should investors be positioning ahead of those market moving events? Well, let's ask Tony Pasquarello. He's the global head of hedge fund coverage at Goldman Sachs.

He is back with us again. It's good to see you. Thank you, Scott. I mean, what should we be thinking about the market? How are you feeling about it right now? I think the big dynamics in the game are pretty favorable for risk. Let's start with growth. We think Q3 GDP this week will print 3%. Alongside that, we've got earnings growth plus 8% this year, and as the market looks forward, plus 11% and then the fed we think they cut 200 basis points through the cycle we've got 50 in our pocket obviously another 150 from here until next june interplay between the fed and the economy is in a remarkably friendly place for the stock market okay i think that's probably pretty well known to the market s p is looking to be up 11

of the past 12 months and so where I keep coming out is it's a bull market. The primary trend is higher. The setup's pretty demanding. And so I don't love risk reward. We've got a lot of wood to chop in the next two weeks. And so my guess is it's a trader's market with an overarching bias, which is positive. Are you talking about the wood to chop being tactically over the next two weeks is difficult, but get past that. And then we go towards what you said the bigger themes are, stronger growth. Fed's still going to cut, maybe not as much or as big as we once thought, but it's still a bull market despite what could be a messy next couple of weeks. I think that's right. The sequence being mega cap tech, payrolls, of course, the election, and then the Fed.

I think if you get through that sequence, which is a lot of sequence, it's a lot. But on the other side of that, presuming on net, that's a non-traumatic series of events. I think what you're going to be looking at is a market which has two months left on the board. The seasonals turn very favorable. And there's probably a lot of buybacks to be done in the last two months of the year. November is the single best month of the entire year for stock buybacks. That is the single biggest technical in the market. We know the seasonal story, which tends to be very favorable at the end of the year, in addition to election dynamics. And so it sets up well, again, knowing we have to clear a series of hurdles from here to there.

So you use the words traumatic, not specifically referenced to the election itself or the post election period. But if that period proves to be more traumatic than maybe some are expecting, would you be a buyer of the dip if it happened in the stock market? I think there's actually a little bit of risk premium in the price already. And so take a look at the VIX, for example. All year long, S&P 500 has made higher all-time highs. If you look at the 35-year history of the VIX, when S&P makes an all-time high, the average level is 15, not even. We sit here today, it's between 19 and 20. Now, we don't know how much of that is risk premium for the election

versus earnings versus payrolls versus the Fed. I mean, again, that's all kind of on the to-do list. But I think that alone, once we get over the hurdle, that decompression of risk premium, I think would stabilize the market. Okay. The backup in yields. I get the feeling, based on what you've already said, you think it's just a product of stronger than expected growth, not something else to be overly concerned about? Hard to disassociate exactly what the drivers have been. I think to my eye, it has started with a better than expected run of economic data, which leads to the second point, which is the markets pulled back a little bit some of the expectation for what the Fed will be doing between now and the middle of next year. You've also had

some technicals. And then again, I think you also have a market which is telling you the bias of the election is one of reflation. And so that to this point in the game, I think it's been fine. It clearly hasn't stood in the way of parts of the market I like the most, like financials and tech. A rule of thumb is, if you ask the question, when does basically the bond market impinge on the stock market? It's a two standard deviation move in 10-year note yields that is 60 basis points in today's terms. We're about there. And so I do think the further you go in yields, particularly if it comes from a less friendly place, that could that could impinge on the stock market a little bit. OK, you said financials and tech, your two favorite places. Let's take them with the latter first tech, because we're going to have the mega cap earnings this week, which you have really favored throughout the duration of the year, throughout the last really two years of this bull market is there any reason to change the bias now towards mega caps still like them the setup today

the starting point today is not what it was one year ago when we made that local low or two years ago we made the big low in october of 2022 right? That's just the law of large numbers. That's the market cap appreciation we've seen since then. I'm still drawn to the earnings power. I'm still drawn to the return of capital. I'm still drawn to the reinvestment of capital. And again, we're going to learn a lot about these buyback numbers and these CapEx numbers this week. I think if I squint, Scott, I can tell myself a story that the setup for Q3 earnings

is actually a little bit easier than it was for Q1 earnings and Q2 earnings. I say that with respect to earnings expectation and also positioning. So Goldman Sachs clients, as measured by our prime brokerage data, were sellers of tech stocks in June, July, August, and September. So I actually think even though Nasdaq's up seven weeks in a row, thankfully, I actually think there's some room here for these stocks to trade well on good prints. What I didn't realize until I read your note today is that November's the single strongest month of the entire year for buybacks. Check. Why so?

And you've been on the buyback thing for a while as being pretty stimulating for stocks. That's right. So on our estimates, U.S. corporates will buy back a trillion dollars of stock this year and a trillion dollars next year. So, again, it is the biggest sponsor in the market by a mile. The best two-month period of the year is November plus December. As you said and I said, November is the single best month. I don't know why exactly that is. It may be given Treasurer or CFO endeavors to buy back X.

They don't get the dip they want to buy. And so at the end of the year, you just kind of tie to your desk and get it done. Use the money that's left in the budget. Use the money that's left in the budget. That could be $6 billion a day once we're fully clear of the blackout window. How do you view what is undoubtedly the most controversial and oft talked about part of the market, small caps? What am I supposed to do with a stronger economic backdrop, but a backup in yields, which has put pressure on that area of the market?

You are supposed to buy mid cap, not small cap. I don't love small cap. I think to myself, hey, four in 10 companies are not profitable at a time when nominal GDP growth is 5% and financial conditions are easy. What is my margin of safety when the tide goes out? And so I look to mid cap, but I think to myself, this is like an unpolished gem. So you go back, I tuck this in my note, you go back to 1985, that's 40 years ago. Mid cap has outperformed large cap. It has beaten the pants off of small cap. And as we sit here today, it's outperformed small cap. Showing it right as you're talking, we're showing it on the screen. That's the chart. It trades on a 15 PE versus Russell on roughly a 30. So for half the valuation, I'm getting the

better asset. I think that is like beginning, middle, end. I always feel like you lay out a really easy to understand market story, Tony. Thank you. Thanks, Scott. Tony Pasquarello, Goldman Sachs. Joining us once again up next, the former Dallas Fed president, Richard Fisher, is standing by. We get his take on rising yields and what he is expecting from the Fed decision next week. He joins us after the break. Welcome back. Stocks green across the board. The 10-year yield is hovering around a three-month high now. Investors looking ahead to this Friday's jobs report and what it might mean for the next Fed meeting. Joining me now to discuss Richard Fisher. He's the former Dallas Fed President, the Jeffrey Senior Advisor, also a CNBC

contributor. Welcome. It's nice to see you. Thank Jeffrey's senior advisor, also a CNBC contributor. Welcome. It's nice to see you. Thank you, Scott. Thanks for having me. Appreciate it. What are they going to do in this meeting after the election, do you think? I don't know, to be honest with you. I always think of what I would be arguing if I were sitting still at that table. And as was just pointed out by Tony and others, we have good economic growth at 3 percent or so, most likely in this quarter. Pretty full employment. Manufacturing continues to suffer, but there still is demand for services. So if I were sitting at the table, Scott, I would probably be almost arguing there's no need to do anything. We don't do it to satisfy the stock market betters that are depending on every little

bitty move. We have to realize that after the last 50 basis point cut, from the six-month all the way out the yield curve on Treasuries, rates are higher. You just pointed out the 10-year. It's also true for the one-year, for the two-year, for the six-month all the way out the yield curve on Treasuries, rates are higher. You just pointed out the 10-year. It's also true for the one-year, for the two-year, for the six-month, and the 30-year. So the question is, why is that happening? And as you know, I have my own theories about that. But I'm not sure it makes a difference, frankly, at this point.

And I would probably be arguing, let's just settle in here. I'm willing to accept 25 if the rest of the committee wants to do it. But I'm not sure it's necessary at this point. Well, what what what do you actually think the chances are of a pause, either at the November meeting or the last one of the year? It's you're not the only one suggesting at this point that you know what, maybe they only go one more time this year. You're not the only one suggesting at this point that, you know what, maybe they only go one more time this year. Maybe they go next week and then they sit back and they just wait and see what happens. I would expect another quarter sometime this year. It could be at either meeting. But again, for this meeting, I don't think it's necessary. There's still a lot of data that we

want to see. And if you take an extra month or an extra six weeks, that's the way the clock works. It gives you more time to examine the data. Is this also because, you know, I think what's what's being proven out, obviously, I don't think I'm breaking any new territory with suggesting this, but the neutral rates obviously higher than where they once thought, by virtue of the fact that growth is as strong as it is. So they're not as restrictive as they probably thought they were, which gives them the luxury maybe of just doing that one you suggest and then taking their time to see what happens with the data. How would you assess that?

You know, I would have a button at the table and just play what you just said. Financial conditions are still fairly lenient. Spreads, as you know, are narrow, even though the rates have risen. The credit markets are fairly flush still. We have a lot of private credit out there. And I think still, and look at the stock market, we are accommodative here. So what's the need to push on that string? I'm not sure. I mean, do you worry about what inflation is going to do in the future. I mean, we can spin that towards the election and where we think, you know, certain policy may land depending on a particular outcome or not. I'm obviously

thinking about the deficit, which I know you're spending a lot of time thinking about. Most, most, you know, market observers and financial participants are thinking about that. I want to play you something that Jamie Dimon said today when he was speaking of just about how strong growth is, what kind of landing we might have and his own concerns about the deficit. We'll talk on the other side of that. Listen, please. So we know during COVID we gave a lot of money out. I think they did the right stuff to move early and quick. But I think it was clearly overdone, which led to the inflation and things like that.

But it's still that way. And now, you know, the deficit 7%, which is the largest peacetime deficit we ever had, is $2 trillion. What I just said is true around the world. And I just, my concern is inflation, in my view, may not go away so quickly, okay? And so you might go into next year, 2026, where it starts ticking up a little bit like it did in the 70s. So, Richard, instead of saying, yeah, you know, the deficit's a problem, like everybody has, we know it's an issue. The question is, what do we do about it? How do we solve this problem?

As we just had a report from Steve Leisman earlier on how much the Treasury's borrowing, how much they're going to continue to borrow, how we finance this ever-growing deficit. What do we do? Well, let me just put what Steve was saying in the harshest perspective. And I think what Jamie Dimon, who I have tremendous respect for, is really pointing to.

We spent in fiscal year 2023 $950 billion on interest. And by the way, only $826 billion on defense. That's a horrific imbalance. We have issues that are coming due, the U.S. government, that are maturing, particularly if you go out further on the yield curve, that were financed at 2%. Now the cost to carry is 4.5% or 4% plus, which means that our interest payments are going to increase further. Again, I try to stay away from the politics of the moment, but both of these candidates are proposing programs that if you take them for their word and if you assume Congress

would pass them through are going to lead to still further deficit expansion and still higher spending on interest, above $950 billion, which is what was spent on interest in 2023. The only way to get out of this, there are two. One is to grow more rapidly. We did that during the Clinton administration. You may remember Scott. And we ended up having a balanced budget, paying down the government debt. Or you can inflate your way out of it.

And I am firmly convinced that under this leadership of the Fed right now, this FOMC, this chairman in Jay Powell, there is no instinct to ever even contemplate that. Now, what we will have in 2026 in the spring is whoever is elected president gets to appoint the next Fed chair. Then you have the Senate who has to confirm them. So there's a lot in the air right here, Scott, in terms of what may be coming longer term. But I think it would be a grievous error for the central bank to inflate our way out of this debt. The tough decisions, Scott, are on mandatory spending programs, whether it's welfare, Medicare, Medicaid, all the support programs. And the only way to deal with this in terms of the cost side is to make some very difficult decisions to contain that growth over time.

And I don't hear either candidate talking about that. I don't hear either candidate pointing out that not a single great nation has survived when their interest payments exceed their defense spending. No great power going back to the Roman Empire. I mean, the reason the candidates aren't talking about it i i we know why it's because you know their their constituents don't want to touch entitlements that's true it's a deeply unpopular suggestion to do it yeah look at what happened to george hw but read my lips remember and then he changed?

That was the end of his campaign. Very good man, an outstanding individual. So, no, you don't want to talk about it, but Scott, what's leadership? I understand during the campaign, neither is going to touch that horrible hot rail. But once they're in office, and particularly if Trump gets elected, he only has four years. He will have to make some very tough decisions. And there doesn't seem to be any indication that he's leaning in that direction. I hope that's not the case. If she gets elected, Harris, she's going to be looking at eight years.

And then it makes it very difficult to do. But let's not pin it all on the president. It is the Congress which is the problem. And as I've told you and we've talked about before, as George Shultz used to say, there's no difference in Congress between Republicans and Democrats when it comes to spending money. With one exception, Democrats enjoy it more. But Republicans do the same thing. We've got to reverse that. Tough decision making. Real leadership.

And right now it's questionable whether we're going to have it. We'll talk to you many times. Excuse me, I'm sorry. We'll talk to you many times, Richard, in the weeks and months ahead. I know that on this very topic. We'll see you soon. I greatly appreciate your time as always. Scott, I always appreciate being with you. Thank you. Appreciate that. Richard Fisher joining us. Up next, we're tracking the biggest movers into the close. Kate Rooney is standing by once again with that, Kate. Hey, Scott. So up next, one brokerage name jumping into the election betting market ahead of next week and an analyst upgrade sending shares of a music streaming giant higher. All those names

and details after the break. We're less than 15 from the closing bell. Back to Kate Rooney now for the stock she's watching. Kate. Hey there, Scott. So Robinhood first. We'll start with that name getting a boost today after jumping into the elections betting market, announcing earlier today that users can place trades on the 2024 election outcome. That's as long as they meet certain criteria, including being a U.S. citizen. Spotify, meanwhile, getting a boost from an analyst upgrade. This one from Wells Fargo. The firm calls Spotify a top pick this year, ups that price target to $4.70. That's up from $4.20.

Maintaining an overweight rating, they say. They do expect margin expansion well ahead of consensus. And finally, cybersecurity firm Rapid7 reportedly exploring options with bankers after attracting interest from buyout firms. News of that potential deal. Sending shares, you can see, up more than 5 percent. We're up 7 percent ahead of the close.

Scott, back to you. All right, Kate, thank you. Kate Rooney still ahead. Oil sinking on pace now for its worst day in some two years. We'll drill down on the big leg lower coming up. We are in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of the trading day. Plus, Pippa Stevens with the details on today's energy slump and Sima Modi on why 3M shares are leading the Dow.

We do start, though, with you, Pippa, as oil is having its worst day in two years. Tell us more. That's right, Scott. Oil is sinking 5.5 percent with the market viewing Israel's attack on Iran, which avoided nuclear and oil facilities as de-escalatory. As JP Morgan put it, quote, quote, the softest of the possible responses and opens the door for Tehran to de-escalate. Now, the geopolitical risk premium is now being unwound and the focus has shifted back to fundamentals, which points to an oversupplied market. The weakness is spilling over into nat gas as well. The front month tumbling 11 percent. That contract does roll tomorrow with the December contract about 60 cents higher, but also down 8 percent.

Now, the commodity drop is hitting energy stocks, which are the only negative group on the day with the upstream drillers, APA, Diamondback and Oxy leading those declines. Scott. All right. But thank you, Pippa Stevens. Just see him on 3M. We're talking about an upgrade today and a stock that's doing quite well, right? And you talked to him, Scott. J.B. Morgan analyst Stephen Tusa, he upgraded the stock in spring, but is now raising his price target on 3M to $165 from $160. And while the company has gone

through this massive transformation, multi-billion dollar settlements over toxic chemicals, restructuring, spinning off health care, Tusa saying that he's bullish on 3M's new management at the helm. A lot of this is driven by productivity, restructuring, price cost. So if they get any revenue growth, anything north of like 3%, that's all gravy on top of what we're expecting. The question is whether focus on change and restructuring pivots to real earnings growth. 3M has had a tough 24 months, but since the health care spinoff in April, the stock has rebounded sharply by 46 percent.

Average price target on Wall Street, Scott, is $149 a share. I'd point out the stock is trading at $130. All right, Seema, thank you. Seema Modi with the update on 3M. Mike Santoli joins us now for his own last word of the day. Pretty good day as we're about to get hot and heavy on these earnings and the jobs report at the end of the week. It's been pretty good. The S&P 500 just sort of hanging in there. It's this low momentum move.

For two weeks, it's been sideways. But picking spots, starting to get overexcited. I mean, banks up another 2% today as a group. Small caps got this bid. Also watching for areas that are just looking a little bit jumpy and have all that hot money flowing in, like GameStop's up 10% today. DJT is kind of a meme stock. Bitcoin may be breaking out.

So it's odd. The overall market is in wait and see mode. Let's see if yields break to a scary place. And you also have, though, this sort of retail money that maybe suggests people are getting overconfident in certain themes in the short term. So all that in the mix, the earnings are really going to overtake whatever those things are going on from here, as well as the bond market response data the rest of the week. All right, we're going to ring the bell. We're going to be green across the board. And 24 hours from now,

we are going to start delivering those mega cap earnings. Alphabet's going to ring the bell. We're going to be green across the board. And 24 hours from now, we are going to start delivering those mega cap earnings. Alphabet's going to kick it off and continue to cover that huge story of what lies ahead for stocks.