Closing Bell - Closing Bell: Weighing What’s Next For the Rally 12/11/23

Episode Date: December 11, 2023

Are the fed and the market aligned or at odds? And how might that influence the rally in the weeks ahead? JP Morgan Asset Management’s Gabriela Santos and Veritas Financial Group’s Greg Branch debate their forecasts. Plus, Ed Yardeni reveals the level he thinks the S&P could hit in 2024. And, we break down what to watch when Oracle reports results in Overtime. 

All right, Ty, thanks. Welcome to Closing Bell. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange. This make-or-break hour begins with a make-or-break week for the markets. The last Fed meeting of the year underway, less than 24 hours. So much potential riding on that outcome. We'll ask our experts over this final stretch where your money is likely to head from here. In the meantime, your scorecard with 60 minutes to go and regulation looks like that. Well, stocks, stocks, stocks, they're largely hanging in there. Not giving much of anything back after hitting that fresh 52-week high at the end of last week.

The Dow is outperforming. Tech remains red. Well, the Nasdaq has gone positive, albeit barely. S&P hanging above 4,600. Yields, they are steady after a couple of mediocre auctions earlier today. There's your picture. 423 is the 10-year note yield. Takes us to our talk of the tape, whether the market and Fed are aligned or at odds and how that could influence the rally in the weeks ahead. Let's ask Gabriela Santos, chief strategist for J.P. Morgan Asset Management, with me once again at

Post 9. Welcome back. It's good to see you. Good to see you. How are you thinking about what might happen this week? So it is the last big week of the year and really investors are going to be looking for that confirmation of growth without inflation and peak rates, looking to the other side of rate cuts and exactly what precipitates them. We think it'll take at this point a big surprise on the downside or the upside to get much movement when it comes to the stock market. And that actually, if you look at bond yields, we're still a bit vulnerable because of a little bit of dichotomy between what investors are expecting for the first rate cut and what the Fed is likely to do. OK, let's go there then,

because that's sort of how we set up this conversation, whether the market and the Fed is likely to do. OK, let's go there then, because that's sort of how we set up this conversation, whether the market and the Fed are aligned or whether they're at odds or offsides with one another. You think they're a little offsides? A little bit. I think in general, the direction is clear. We've seen the last rate hike. The next move is going to be a rate cut. But I think that if you look at probabilities, there's still a 40 percent chance of a rate cut in March. I think unless you have a big actual economic slowdown, we're unlikely to see that, even though we actually think inflation will come down faster than the Fed is expecting. So it's really just talking about pushing it back a few months, expecting the first rate cut to happen in June or July. So it's

nothing dramatic. You're expecting cuts, though, in 24. We do expect cuts. So it's nothing dramatically off sides. It's just in the very short term, you could see a pop in yields as those rate cut expectations are adjusted a little bit more in line with the Fed. Are they cuts because they can or cuts because they have to? So in our base case, we continue seeing growth without inflation, which is what the jobs data confirmed last week. And we hope to see also in the CPI retail sales this week. So in that environment, rate cuts by mid-year really are because they can, because inflation is coming down faster than they expect. And that opens the door to start actually lowering nominal rates so that

real rates don't increase much, much more from here. Do I make the leap and then say that you must be bullish stocks for 2024? I think the number one conclusion for us is a lot of investors are frustrated with the markets this year because they sat on too much cash. And despite all the ups and downs, the 60-40 still gave you 3x cash this year. It'll get even worse next year, given that we think the peak benefit of cash is behind us. So that's the number one thing to do. Use the popping yields when they happen to extend duration a little bit. Use pullbacks in the market to actually lean in to some of the laggards where it makes sense. You don't want to go too on the other extreme of risk. OK, so you're talking about a rotation from cash into the lagging sectors of the market,

the ones that really didn't wake up until the beginning of November. Yes. And I think it's it's a very fast changing market. We went very quickly late October to how high can rates go when it's a very concentrated, narrow leadership, all of a sudden to how low can rates go and an everything rally. So you don't want to be participating on either of those extremes. You do want to diversify exposure, but you don't want to lean into, for example, for us, not quite the time yet for small caps or financials or retail. Why not small caps? Because, like, you know, the Russells this year, it's Russells up almost 11 percent in a month.

So if, you know, you think there's going to be a broadening out and the economy is going to hang in there, the Fed cuts because they can, not because they have to. Why wouldn't I want small caps? So I think we do still want some allocation of small caps. And you still have valuation discounts, historically large versus large caps. So building some exposure. But if it's about overweights, that marginal dollar, we would still prefer quality large caps. And that's because a soft landing still doesn't mean things are great. And I think the discussion for next year is going to be a lot more, where are we in the cycle? Where do you see pressures late cycle? And that tends to be small

cap. Small caps also have a lot more floating rate debt. So they are already feeling the pinch of higher rates. And the Fed is unlikely to cut it fast enough to ease that pain in the immediate future. But it's fair to say you're a believer in the broadening. You think that can continue in the new year. You just have to be somewhat selective as to where you think the broadening is going to really come from. Exactly. Where do you see positive fundamentals and unjustifiably low valuations? And for us, that's across sectors, across styles. So examples for us would be taking advantage of the lagging performance in things like utilities, industrials, healthcare, international stocks. Those to us make sense to lean in,

versus some not quite there yet, small caps, large large scale banks, retail, not quite up. You didn't say energy. Where do you come down on energy? We look at the bottom of our new graphic look there. It's obviously had a disappointing year. So I think it's a bit tricky for energy. I think for us, medium term, we do still believe in having a good allocation to energy because of the underinvestment, the good return to shareholders. The trick for oil prices next year, it's a bit two-sided. We have here the war between

Israel and Hamas to be determined how much that escalates and could push oil prices higher. But then you also have Saudi Arabia, OPEC getting frustrated with U.S. production and perhaps could be setting us up for a flooding of the market next year and lower oil prices. So it's a bit of a tricky macro variable at this point. What's your outlook for tech in the new year, specifically large cap? So I think the distinction is we see a broadening out from the mega cap tech into large and mid cap tech. And I think it's a broadening of the AI theme. It's a broadening of the efficiency and cost cuts that the tech sector has been able to do. The stable, long term, high cash and elevated margins.

And I think today is a great example. Actually, you have the semiconductor index up three percent, whereas the poster child of semiconductors and videos actually down. So there's some of these stocks in that. I'm so glad you brought that up because they're not getting enough attention today. Broadcom, for example, is up near 10 percent on no news other than there's just money flowing into that area. AMD is up four percent. So you think there's something there? Something there. This realization that AI is for real, it's a transformative technology. Companies are already monetizing it, most importantly, but it's not concentrated in the handful of winners that have benefited from that structural

tailwind so far. And there's other winners to semiconductor software, as well as companies with a lot of customer data. All right. Our Christina Partsenevelos, by the way, is going to come up a little bit later on with exactly what is happening in the chip space, because it's exciting today. In the meantime, let's bring in CNBC contributor Greg Branch of Veritas Financial Group, who undoubtedly has come on today to say scott i've changed my view i've turned from a bear to a bull all the calls about the fed hiking are over i'm more positive on stocks that i've been in months correct oh scott you know me better than

that i wish i could say that but that is not my message today now why why is that why isn't that your message today so i will put it in the context of the things where I disagree with Gabriella, actually. I think that the Fed has gone out of their way in as much as everyone declares that this war is over and the rate hikes are done. They keep going out of their way to reserve judgment, to have us keep an open mind that if the data starts going a different way, that they will raise again. The part of the narrative focused on cuts, and by the way, I think that cutting because they can is a luxury that you and I can talk about,

but that the Fed does not have and does not enter their mindset. But the narrative, the part that that narrative missed, the part that it skips over, is that we haven't even seen the full effect of the 500 basis point raise yet. And the fact that where the correlation is broken down is not necessarily in the demise of credit, because we've seen credit growth fall off a cliff, but it's in the spending. We haven't seen the spending react the way we would necessarily expect from a 500 basis point hike. We haven't seen companies in terms of jobs in the job market affected the way we would necessarily expect from a 500 basis point hike. We haven't seen companies in terms of jobs in the job market affected the way we would expect. And the question becomes for the Fed, is that delayed? Is that structurally muted? But that question has to be answered first

before we can get to any discussion about rate cuts. And when we get to that discussion, it will be because they have to, not because they can't. Because they can is reserved for a time where we haven't seen generational inflation and we're not worried about it coming back. Now, in terms of that fight being over, I think that that's difficult to pinpoint when we haven't really seen significant disinflation in quite some time. We've been stuck in a 30 to 40 basis point core range for the last 16 months, absent three months, one of which was last month. It remains to be seen if 20 basis points is the new trend. But we certainly can't extrapolate that off of one day. All right. I'm going to let Gabriella respond. Let me let Gabriella respond

first and I'll come back to you, Greg, in just a moment. What do you have to say to that? Because look, Greg's not the only one who has a more cautious and bearish view who suggest, look, everything that the Fed has done, I know you think it's all fine and good now, but it's not going to be. It's just a matter of when, not if. So I do think the Fed will beat this drum that the inflation fight's not done quite yet when they release their decision and their dots and their press conference on Wednesday. And hence this idea that rate cuts are likely to come more mid next year, not quite early next year. And the Fed's not going to want to front run that.

But I think there's some two interesting debates here that Greg brings up. Number one, can inflation come down? Because a lot of it were supply chain issues and not structural changes that makes this economy more inflation prone. So can you have growth without inflation? We would say yes. And the second question, which is around the lag of higher interest rates, right? Are we yet to see it or have we learned this year this economy is less interest rate sensitive than it used to be? And we're more in the latter camp, hence why we have a more constructive outview next year, including the Fed cutting. That's right, Greg. Maybe it is just different this time. And there's so much focus I hear from you on what still might be. At some point,

you have to focus on what is and the might be may not happen. The only might be is that the stock market may continue to go up despite some of the concerns that the worst is yet to come. That may be right, Scott, except we are seeing signs that it is starting to happen, but in a delayed sense. And so we are seeing signs of the consumer balance sheet being stretched with delinquency rates rising, the second derivative rising at alarming rates. We are seeing signs of corporations being more discriminating about their hiring or at least adding jobs. Yes, while we don't have 12 million in terms of jolts opening anymore, you know, 8 million is still a healthy number.

And 200,000 of job ads is also a robust number when the break-even number is around 100 percent. And so we are starting to see on the fringes the impact of those rate hikes. And so I would not at this juncture be comfortable saying that we're just not going to see it anymore when we see it happen. Why don't you believe what the data continues to show about inflation? You keep suggesting that the Fed could go as many as, you know, as much as 50 basis points more. They're done unless the data suggests that they have to do more. Would you agree with that statement? A hundred percent.

And I'll tell you specifically what would cause them to do more. They have three things that are causing them a little bit of heartburn right now. Four, actually. Used to be four until last week. But the expectation, the inflation expectations were becoming rather less unanchored, as we saw in the survey. And that was a saw in the survey. And that was a problem for the Fed. And that was a huge relief to see at least the near term go from 4.5 percent expectation to 3.1 percent. But we'll see if that's holiday cheer. The other problem that they

have is, as Gabrielle had pointed out, yields are no longer rising of their own accord. They came back rather significantly and meaningfully. And the Fed had hoped for the macro environment to drive yields in and of themselves to continue the tightening that the Fed had done and do some of their work for them. Base effect becomes far less favorable as we go into the future months. And so these are all the things that are worried in the Fed. And as soon as we start to see that, as soon as we start to see that core on a trend line drop below the 20 basis points on a monthly basis, then we can say that the data favors them stopping. But I don't think we can say that right now, Scott. So tomorrow is going to be an important test of this debate, and

especially when we get core CPI, there's an expectation of it rising 0.3 percent. That's still very much consistent with this growth without inflation narrative. I think a good surprise would be a print of 0.2 percent or below. And we do think we'll actually start seeing that more next year because really the remaining inflationary pressures are due to lagged impacts on rent and auto prices through auto insurance. So as we see that feed in through to the data, that should continue bringing about better core CPI prints. But certainly a lot of it will be hinging on the progress on inflation versus the Fed's expectation. I'll give you, Greg, that March may be a little aggressive, let's say,

in terms of the market predicting that the first cuts, I think it's like 36 or 38 percent at this point. The first cut is going to come just three meetings from now in March. That might be a little too aggressive. But you make the argument that they're not going to cut at all in 2024. Now, for somebody who's now let me ask you this. For somebody who thinks that they're eventually going to have to cut because you obviously believe that the economy is going to take a pretty big turn for the worst, then wouldn't they cut in 2024?

I don't think it'll arrive that quickly. And I'll make a distinction between the way I'm thinking about this and the way Gabriella is. Everything she just said hinges on things that will happen. Nothing she said hinges on that last in that last segment. Nothing she said hinges on that last segment. Nothing she said hinges on something that has happened. Yes, we have seen 20 basis points last month. Inflation's come down a lot. Inflation's come down a lot. Come on. It's not 9% anymore. It's come down a lot. It's not 9%. It's not 9% anymore. It's not 5% or 4% either. Got it. You know what it's also not? It's not 2%. Well, not yet, but it's trending in that direction, though.

It's been 30 to 40 basis points for 16 months, Scott. It's been that regularly, except for three months where it was 20 basis points. We have to see something less than the trend it's been in order for us to get to the destination. We're never going to get to the destination if it continues to be order for us to get to the destination. We're never going to get to the destination if it continues to be in the 30 to 40 basis points gap. So the problem is with the market, like the market is going to going to sniff all of this out. One of the reasons why we've rallied the way we have is because, you know, that prior CPI report started this whole thing. Right. That started the whole rally back to, you know, now we're at a 52

week high in the S&P 500. So once the market believes that inflation is, in fact, heading back towards target, that train is going to be further down those tracks, right? Until data shows that the market is thinking wrongly about it, which has happened over the last two years, Scott. And so I'm just saying that it will happen again, that the market is thinking wrongly about it, which has happened over the last two years, Scott. And so I'm just saying that it will happen again, that the market is extrapolating things that we just can't extrapolate yet. When I have a series of data showing 20 basis points and less, I'll reconsider my position. We simply don't have that yet. I would say one thing that gave me more comfort about our thesis in terms of the data that's actually happened, besides lower auto prices and lower new rents, is the dynamic around wages, right? What we're

seeing in the labor market is a normalization of the demand and the supply side. And as a result, a very important data point last week was lower quits rates, which tends to be very correlated, as it was last week, with lower wage growth. And at this point, we've unwound 75 percent of the wage surge and we continue trending in the right direction. The slowest year over year, I think, in since 21. Since early 2021. Is it there yet? No, but it's trending in the right direction. And to us, that signals that this economy hasn't structurally changed. It's just taking a normal amount of time to get back to normal. So, Greg, before we wrap this up, I mean, what is the ideal portfolio right now? Do you look to you to be what what portion would you want to be in cash fixed income? And then I would assume that

the smallest portion of your pie is in equities. That would be right, Scott. And so, you know, it's a little bit different, although I do agree in some respects with what Gabriela was saying. Where I disagree is I do think that breadth will re-narrow. Not only was it the jobs report, but it certainly was yields coming in that kicked off this everything, everywhere, every time kind of rally, where we saw lots of things that, as you took a five-hour sleep, surge 11%, 12%, 15% in a month. And so I think we'll see some reverses on that as the market realizes that the view that we're getting cuts in March is likely wrong, that the view that the Fed has definitively done is likely wrong.

And, yes, I may be wrong on that and one of the things I'm watching is whether or not we continue to see continued disinflation in the housing component remember last last report was the first time we actually saw that and so if that becomes a trend then I could very well be wrong but while I while I continue to have this view I'm focused on the short end of the curve because I believe that yields will continue to rise and I don't want to commit to a lengthier duration than I need to to get the curve because I believe that yields will continue to rise and I don't want to commit to a lengthier duration than I need to to get the return that I want. It's going to be an exciting week, to say the least, and it's just getting started. Greg, thanks as always. I appreciate the

conversation and the debate. Gabrielle, of course, thanks to you as well for being here. Gabriella Santos, let's get it over to Christina Partsenevelis now for a look at the biggest names moving into the close. Christina. Well, I'm going to focus on chip makers right now. Broadcom popping was 10 percent after Citi resumed coverage with a buy rating and a target of eleven hundred dollars. They believe that the AI business will actually double from four billion right now to eight billion by 2024 and more than offset any correction in the cyclical semiconductor business. They also point to revenue and cost benefits from the recent VMware acquisition and chip equipment makers like LAM,

Applied Materials, KLA are also jumping today. You can see almost all of them, almost 5% on news that the Commerce Department will allocate $35 million of the CHIPS Act funding to BAE Systems so they can upgrade all of their old chip manufacturing equipment. Separately, New York State, along with other chip companies like Micron, Applied Materials, and IBM, are investing roughly $10 billion in a research facility in Albany. They'll use some of the state funds to acquire chip equipment from ASML and others, and both of those announcements bode well for manufacturing equipment names. Last but not least, NVIDIA, the only outlier right now, down about over 1%, almost 2%, despite TD naming it a top 2024 pick. The stock has more than tripled this year, so maybe just a little steam coming out of that trade right now. Scott. All right, Christina,

we'll see you in just a bit. Thank you, Christina Partsenevelos. As we go to break, you've obviously noticed your screen looks a little bit different today. Well, it's because we have a new graphics look here at CNBC, and we're excited about it. Some of the information and data may be in different spots than you're used to seeing. We're going to continue, though, to bring you the same great market coverage. You'll get used to it. We'll get used to it and we'll do it together. We're just getting started. Up next, it's been a tough year for dealmaking, as you know. So what about the rise of AI? Could that weigh on the sector in a big way in the new year? We'll discuss after the break. We're live at the New York Stock Exchange and you're watching Closing Bell on CNBC. All right, welcome back to Closing Bell,

a pair of headlines in the M&A space today. Occidental Petroleum agreeing to buy Crown Rock for $12 billion, the company also raising its quarterly dividend. Separately, shares of Macy's surging today after the retailer received a $5.8 billion buyout offer from Ark House Management and Brigade Capital Management. Despite today's news, the year's been relatively weak, as you know, for M&A. And now some are questioning whether the rise of AI could actually impact the future of dealmaking. Our Leslie Picker following the money on that angle for us today. Hey, Leslie.

Hey, Scott. Yeah, global M&A volume is on pace to be down about 20 percent this year, and that's off an already low base from 2022. Everything from geopolitics to rates are to blame, but another culprit, the rise of AI. I asked JP Morgan's global head of M&A, Anu Iyengar, about this dynamic. To be clear, just the advent of AI and its ubiquitous, you know, the risk of its ubiquity is causing some kind of parallelization in the in the boardrooms in terms of doing deals yeah and because a lot of people want to analyze it understand it and then say well what impact will it have on our business pretty hard to answer pretty hard to

definitely answer and get a range of scenarios or when you're looking at some business and say, well, can AI do this? Let's say it's a technology capability. Probably. So should I pay this much to buy this? Or should I wait and find something better, some better capability that is cheaper or better or faster or something like that. To be sure, AI has also been a driver of M&A, with Databricks inking a deal for OpenAI competitor Mosaic ML for over a billion dollars in June, as well as Thomson Reuters' acquisition of Casetext,

an AI legal assistant. But that uncertainty element is still very much present in the boardroom as well, Scott. Sure, Les, but I can also see companies obviously looking to acquire AI-related businesses rather than try and do something organically where they just don't have the capability to do so that quickly. Absolutely. And there's been a whole host of startups that have cropped up this year, especially to kind of try and capitalize on that big tech. Definitely a key driver of that. The question, though, remains everything else, things that are

kind of in those more traditional businesses. A lot of private equity executives and potential acquirers, if they're looking to just do generic non-AI adjacent deals, they're wondering, is it worth even doing this deal at all, given the potential for AI to disrupt it in the future? It's just a big question mark that's playing out in boardrooms across America. All right, Les, appreciate it. Leslie Picker, thanks so much. Up next, doubling down on the bull case. Ed Yardeni is back. He'll tell us why he thinks the economy will remain resilient in 2024. And he has a very big target for the S&P for the year after that. He'll join us after the break. Closing bell right back.

We're back. Stocks starting off the week on a positive note with the major averages in the green right now. My next guest is betting that this year's rally will continue into year end and potentially all the way through 2025. Let's bring in Ed Yardeni of Yardeni Research. Welcome back. I mean, it's one thing to be bullish, but that's like off the charts bullish. Why so? Well, I don't know that it's really off the charts. It's actually consistent with the underlying trend of earnings and the stock market for years.

Every now and then we do get these recessions and corrections. We certainly had a bear market last year. It was a fairly conventional one with a 25 percent drop. Then we made a low in October of last year and we're up substantially since then. We had a conventional correction during the summer. And now since October 27th, we're back in what I think has been a bull market since the year before that. And I think the economy has proven to be resilient. I didn't buy the idea that it's going to fall into recession. It's been more of a rolling recession. But earnings are about to hit an all-time record high. And I think next year's economy is going to get a big boost from productivity. Everybody talks about AI and all the other technologies.

They're all out there to increase productivity. And I think that's what's going to happen. Yeah, I mean, I'm looking at your targets, right? 2024 year-end is $5,400. 2025 year-end, it seems hard to look out that far. But nonetheless, $6, thousand on the S&P. I mean, so the the implication here is that this isn't just a bull market. This is a new, very powerful bull market that we've started.

Yeah. Well, I've been discussing the alternative scenarios for the decade since the beginning of the decade. In 2020, I said, look, it's either going to be a repeat of the great inflation of the 1970s, or it could very well be something more like the 1920s, the roaring 2020s. And I'm increasingly convinced that it's going to be the roaring 2020s with the technological innovations solving the major economic problem we have right now is labor shortages, skilled labor shortages. Productivity, I think, is going to be growing three and a half to four and a half percent within the next couple of years, within this decade. And that may sound far-fetched, but that's the kind of peak you usually get in the productivity, the last three productivity booms we've had. So historically, it's possible. And I think this productivity boom that I see has more going for

it in terms of the ability of technology to really apply to almost any business. I think any business these days is a technology company. They either make it or they use it. If they don't use it, they're going to be at a competitive disadvantage. How many Fed cuts do you think we get next year? Well, again, I'm not in the recession camp. I see there's still some what I call diehard hardlanders out there that are still expecting recession. I don't think we're going to have a recession in that case. I think the Fed is going to cut rates twice, not four times or more, which is what those who are looking for recession expect. Look, I think the reason the Fed is going to be lowering interest rates next year isn't because of a recession, because inflation is going to continue

to surprise everybody and come down substantially. We've been in the camp that has argued that inflation could turn out to be relatively transitory after all. And it's certainly come down a lot faster than has been widely anticipated. What are you worried about, if anything? I mean, rising deficit, not even rising. I mean, it's like out of control, right? Many would describe it as the cost of funding that messy election. What, if anything, worries you? Well, look, I pay close attention to the bears and the pessimists. They've done an outstanding job of telling us everything that can go wrong. Just they haven't been balanced and suggested what could go right. And yeah, I'm very concerned about the debt and the deficit. I was especially concerned this summer.

I've been saying for a long time, I won't really care about debt and deficits until the bond market cares. And the bond market seemed to care. But, you know, there's a saying, don't fight the Fed. I think on November 1st, we learned, don't fight Janet Yellen at the Treasury. She cut back on the amount of bonds and notes and bond market like that. I think the bond market also liked that inflation has come down. So on the bearish side, you have profit out of control fiscal policy. On the bullish side for bonds, you've got inflation coming down substantially.

I think we'll be down at a 2 percent, the Fed's 2 percent inflation rate target by the second half of the year. I think they were hoping they would get closer to it in 2025. You said something powerful there, this notion of not fighting the Fed, because it cuts both ways, as you know, right? Are we in one of those environments again, where we get a everything kind of rally because the Fed becomes more friend than foe? I think that's partly right. I think what we're really seeing here is everybody's been characterizing the Fed's raising interest rates by 500 basis points as tightening. And certainly there's a lot to be said for that. But I think it's also been normalizing. We're actually back

to normal. We had a very abnormal environment between the great financial crisis and the great virus crisis. Now we're seeing interest rates back to where they should be, where the capital markets can actually properly allocate capital. So from that perspective, I think that we don't have to fight the Fed because I think they're done raising interest rates. And now the big debate is how much they'll be lowering interest rates but i'm arguing economy can live just fine with interest rates where they are today sure but the other argument is what's yet to come from what the feds already done

and because what they've already done we must be late cycle that that's the argument from from bears. How would you respond to that? Well, I mean, they've been making this argument for a while. I've been referring to their forecast as the Godot recession. It just refuses to show up. I'm not saying it can't show up. I'm not saying it's impossible to have a recession in twenty twenty four. But I think it's less and less likely. I've been arguing that we've we've been in a recession since the beginning of last year. It just happened to be a rolling recession. It certainly hit single-family housing.

It certainly hit retailers. Now it's going to hit some areas of commercial real estate. But here we've got productivity at an all-time record high, showing signs of actually picking up in the second and third quarter. We've got construction employment at an all-time record high. You've seen the charts on the construction of manufacturing facilities. It's just vertical, straight up. There's just so much that's going right that's offsetting what could possibly go wrong. So the late cycle's over. We've already rolled over. It was just rolling in that

rollover, so to speak. And then now we have a new business cycle underway. Well, I think I think that's the case. I think that we're getting out of a rolling recession environment. And now I think we're going to see 2024 as a rolling recovery environment. I think we'll find that housing starts to improve as interest rates go down. I think we're going to discover that commercial real estate is far more resilient and can withstand a rolling recession in old office buildings and downtowns. I think we're going to discover that the consumer has a lot of excess savings after all. And it's not just what they saved during the pandemic. Households have $150 trillion in net worth, all-time record high. Baby boomers happen to hold on to half of that. And a lot of them are retiring. And guess what they're doing?

They're retiring and they're spending all this money that they accumulated. Ed, we'll talk to you soon. I always appreciate it. Thank you. My pleasure. That's Ed Yardeni. Up next, we're tracking the biggest movers as we head into the close. Christina Partsenevelos is back with that. Christina. Well, investors not convinced about a new drug despite FDA approval and cryptocurrencies taking a little breather today. We go over the numbers right after this break.

We're about 17 minutes from the closing bell. Let's get back now to Christina Partsenevelos for the key stocks she's watching. Christina. Well, I'm watching CRISPR Therapeutics. It's down about 7% despite the FDA approving one of its gene editing treatments for sickle cell anemia. Analysts are mixed on the approval with TD Cowan downgrading CRISPR. They don't actually believe the treatment will be used broadly enough to support CRISPR's elevated valuation. We'll also have an exclusive interview with CRISPR's CEO in less than an hour on Closing Bell Overtime. Switching gears, let's talk about cryptocurrencies taking a breather after their recent run on the notion that the SEC would approve a spot Bitcoin ETF.

But today we're seeing Ethereum and Bitcoin down about 7%. You also have crypto brokers like Coinbase down about 6%. MicroStrategy, almost 8% at the moment. Those names are some of the biggest areas of retail inflows just in the last few weeks. Marathon, down almost 13%, Scott. All right. Christina, thanks. Christina Partinello is up next.

Social stocks getting a boost today. We'll break down what's behind the move. Higher there for Pinterest and Snap. Just ahead, closing bell. Right back. Want to give you a quick check on shares of Nike. Take a look. That stock is up today by two and a quarter percent.

Citi upgraded it to buy from neutral. They say the strategy for controlling costs should help Nike beat earnings estimates. Separately, Barclays also named Nike a best idea for 2020 for many positive notes on that stock of late. Up next, Oracle. The results are out in OT. We'll bring you a rundown of what to watch for when those numbers hit the tape. 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 here to break down the crucial moments of this trading day.

Plus, Julia Borsten on what's sending Snap and Pinterest shares higher. Christina Partsinello is joining us with the numbers to watch when Oracle earnings hit the tape in OT. Mike, I'll begin with you. A pivotal couple of days coming up, starting with CPI in the morning. And the streets pretty comfortable, it seems, with what might come. Some justified confidence that the disinflationary trend is pretty well entrenched. Probably get some confirmation tomorrow. And if not, there's been enough evidence that maybe you can write it off as a little bit of a fluky number. Very similar to Friday, where we just sort of chop around, do nothing in the morning, and then right after

midday, just hop on the escalator for lack of a reason not to. I mean, I really couldn't find much else. Now, it is getting a little bit, again, just technically overbought. Just look at the rate of change stuff. We're clicking around the 20% year-to-date gain number in the S&P 500. And this is happening on a day when the very largest stocks are for sale, right, because of this index reweighting in the NASDAQ. So all to the good, I think the only thing you would take issue with is, you know, people getting a little bit too comfortable, isn't feeling as if we have it in the bag in terms of not just disinflation,

but the Fed's kind of reaction playbook there, you know, from from there. Let's see if Powell pushes back on that. I mean, that's probably the biggest risk of the week above and beyond a CPI, because we figure we know the trend of where inflation is going. We're still not certain that Powell is our friend, so to speak, if you're a bull on this market. And my take has always been that we're far enough out from any move whatsoever that it is much more about, does that act as an excuse? Because we got positioning a little bit on one side of the boat, and we're going to have to correct that a little bit. We over-anticipated a cut. Also, just yields in general have a little lift to them right now. So see if that makes any kind of a difference. But I don't think that the story will go. The economy's fine, but hawkish words from the Fed chair and therefore

a cut farther out in the future than expected is going to somehow be the thing that brings on the big one, anything more than a modest pullback. Yeah, we'll see where the so-called dot plot lies and we get an outlook. So we'll have a better handle on how members of the Fed see the road ahead, at least from their own projections. Julia Borsten, so I got Snap up 4 percent. Pinterest is up about one and a half. What's happening? Well, we have those big meters, big movers in social media. Snap shares soaring about 5 percent after Wells Fargo upgraded Snap to outperform with 46% upside in its price target. The company also raising its 2024 and 2025 revenue expectations, saying the company is poised for positive growth as its investment in direct response advertising pays off. Meanwhile,

Pinterest shares are up about 2%, 1.5% after RBC upgraded the stock on its e-commerce growth, praising it for reducing the friction to make purchases through direct links. Also, its partnership with Amazon, generating new products as well as ad supply. Bank of America also naming Pinterest to its top mid-cap pick. They also cited the impact of that Amazon deal. Meanwhile, Meta is B of A's top large cap pick. And for all of these companies, Snap, Pins and Meta, the growth in direct response as the ability to directly drive sales has been key to their growth. Scott? Yeah, the other stock I know you're watching is Netflix, which we are today because Rafa and Alcaraz are going to have a little tennis match on Netflix, I see. That's right. Netflix announcing the Netflix Slam. Rafa and Alcaraz are going to have a little tennis match on Netflix, I see.

That's right. Netflix announcing the Netflix Slam. This is just its second live sports event ever and its fourth ever live streamed event. It's a one-night tennis match between Rafael Nadal and Carlos Alcaraz. It's set for March 3rd in Las Vegas, and they say additional players and matchups will be announced later. Now, this news comes after last month, Netflix hosted the Netflix Cup, a tournament with athletes from two of its popular sports documentaries, Drive to Survive and Full Swing. Now, Amazon, Google, all the media companies have been investing in media rights, and they come up rarely. But Netflix is taking a totally different

tactic, creating their own sporting events. Scott? All right, Julia Borson, interesting news there. Christina Parts and Nevelos, Oracle shares are higher heading into the print in OT. What do we expect today? There's a lot of focus on Oracle's cloud infrastructure business, which is its public cloud business. It remains one of the most important metrics this earnings season. Morgan Stanley's Keith Weiss says that segment needs to reach about 60% to 65% year-over-year growth to actually hit similar levels as of last year. Investors will be looking specifically if cloud demand recovers after the big miss last quarter, a.k.a. it's called the OCI business, so just look out for that. Oracle's Cerner business, which provides health information technology, is also expected to continue to remain weak and weigh on licensing revenue.

The AI backlog, though, should move higher from about $4 billion last quarter to roughly $4.5 to $5 billion this quarter, especially considering Oracle actually has greater GPU availability, given its strong partnership with NVIDIA. And so those chips help Oracle make inroads with AI startups that want access to those chips. So the consensus right now on Wall Street is that last quarter's miss, where the stock actually traded down 13%, was pretty bad, and that lowered expectations. But that's setting the stock up for a rebound this quarter, possibly. Morgan Stanley even titled their latest analyst note on Oracle, playing for the bounce back. Scott. All right, Christina, we will see what happens in overtime.

Christina Partsenevelos, thanks for everything today. Mike, that stock's had a great year. Yeah, I was going to say, bounce back from a 40% year-to-date return. It's at about a 20-year high in terms of valuation, about 20 times earnings. And this would be a good test as to whether the market really wants to further revalue this company based on the AI kicker in the business. You know, I think back to the build out of the Internet originally, and you had these old telephone equipment companies like Lucent and Nortel recast as, you know, fiber leaders. And they were going to be and they were revalued to a tremendous degree. I'm not putting Oracle in that exact category as a kind of a big, dumb equipment maker.

They are a central and very well-run software company, but it's interesting to see everyone try and see if you can change the stripes midway. So you'll be watching yields, obviously, closely over the next 48 hours. Considering where they were at the last Fed meeting compared to where they are now, the 10 years at 423. Yes. And it seems like that's OK. It's not at the lows, but we're not necessarily jeopardizing this recent little downtrend. policymakers on the Fed almost have to incorporate an acknowledgement that policy is relatively tight right now with inflation now lower than they anticipated it would be at this point in September. It's just three months ago. And they basically said we wouldn't be here yet in terms of inflation.

They're not projecting to actually get to target until 2025 or six. All of that put together, it says they're in no hurry. They think policy is in a good spot. And I don't really even think the Fed is the crucial thing at this point. It really is, does the economy continue to chug away such that this quarter and next quarter look like earnings estimates are good? That's to me what it is. Today, you know, consumer cyclicals on an equal weighted basis are up more than 1%. People are feeling better about the fact that the economy seems like it's not quite out of gas. Equal weight's the outperformer over the past month.

It's been one heck of a ride. It's why we've become as broad as we've been. Yeah, and a total return basis, right, so you include the dividends, equal weight S&P is up like 8.5% year to date. So you've basically had more or less the historical annual rate of return in a year when people did nothing but complain that the average stock was out of the game. So that's all happened in the last month. So for much of the year, that was the case.

It was very uneven. We've had some comebacks along that front. We'll see you tomorrow. Mike Santola. As Mike said, it's really fitting this pattern, kind of hanging in. And then as we get in the final stretch on closing bell, we get a little bit of a ramp up here. Dow's going to go out of more than 150, more than 160 or so higher. Gets real tomorrow morning with CPI.

I'll send it in to OC with Morgan and John.