Closing Bell - Closing Bell: What’s Next for Stocks? 10/2/24

Episode Date: October 2, 2024

Trivariate’s Adam Parker, JP Morgan Asset Management’s Jack Manley and Wealth Enhancement’s Aya Yoshioka reveal their outlooks. Plus, OpenAI closed its latest round of funding. Kate Rooney breaks down all the details and Intelligent Alpha’s Doug Clinton tells us what this could mean for the broader AI space. And, Lauren Goodwin tells us what she thinks the fed’s latest move could mean for your money. 

Welcome to Closing Bell. Thank you. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. And this Make or Break Hour begins with what matters most to markets? Earnings, the election, and geopolitical uncertainty, or the trend of an easing Fed and still strong economy? We'll ask our experts over this final stretch. With stocks a touch unsettled again today. Let's show you the scorecard. 60 minutes to go in regulation. It's tough to get stuff going. I mean, maybe we're looking ahead to the jobs report. We are lower there. We're headline driven.

We do have that jobs report, of course, in mind. A couple of days, probably some hesitation to place large bets either way. Notable names today. Well, they include Nike down sharply after pulling its guidance. You know about the CEO change that they're in the midst of, too. It is Humana's worst day in years on lower Medicare Advantage ratings. We're watching that stock today cut its losses in half. It's still a rough day.

It does take us to our talk of the tape. Where are these markets heading next? Let's ask Adam Parker. He's the founder and CEO of Trivariate Research, a CNBC contributor, and he's with me at Post 9. Welcome back. Thanks for having me. The thing that jumped out to me most of all from the notes you gave our producers are the fact we were more cautious on risk-taking last week than we are now. Why? Well, that's really consistent with what you just heard from

Tepper on the previous minute, which is I think the stimulus means something. You know, we look back at 11 times China stimulated in the last 13 thirteen years it's hard to say it works every time to sometimes were hiking rates here and other things are happening when you look at the market is a group of stocks that have somewhat low expectations are kinda hated and they had a trade like the a shares lot more energy materials industrials etcetera

so i think if your portfolio manager and you're trying to be the s and p five hundred you reacted to that news on the 24th, you said, all right, I can maybe buy a casino or I can buy a copper company or maybe what they did yet isn't enough to make the earnings change. But the risk-reward just got skewed to the positive with companies that have exposure there. That's how I think about it. Do you think that the risk-reward is now better overall here in part because of this. It just underscores the fact that central banks, governments around the world are flooding the zone, flooding the zone with liquidity again. When I thought it was just cutting rates alone, I was like, not sure, as we talked about,

when it's going to be fiscal stimulus and cutting rates, now you're building more of a story. I mean, at the beginning of the year, I went back to my year head outlook on January 1st. What did it say? I'm bullish, but I'll get negative if the consumer slows, China gets worse, or financial conditions tighten. We go into July. I say, you know what? I'm a little bit more 50-50 now. I'm not as bullish because the consumer's slowing.

You've been a little more cautious for the last couple of months. Yeah, I'm worried about the consumer slowing, right? But now you say, okay, well, China is not getting worse. Maybe it's getting better. And the very recent data points, the consumer isn't declining at a more rapid rate, right? I think it's sort of, depending on your interpretation of jobs on Friday, I think it's a big number. You know, there's some stuff coming.

It just reminds us that almost every single moment over the past 18 months where people have said, if this happens or this could happen or that could happen, it hasn't happened. Yeah. The market's been crazy resilient. Yeah. One of the most resilient markets I think we've ever seen. Yeah. And others point to a lot of noise distilled down into the facts of a Fed that's cutting and just starting and the economy that is still surprising people

with its resilience. Look, the two and 10 year old are 100 bips lower at the end of Q3 than they were at the end of Q2. Right. The Fed, I think, surprised if you nobody thought there was 50 bips or very few people thought it was 50 bips on July 1. Consumer slowed, and yet the market kind of had a healthy 5% plus, almost 6% total return for the S&P in the quarter. So I think things are slightly skewed to the positive. I'm a little worried about earnings season. Not so much the Q3 numbers, because we didn't really hear any of the big conferences corporates tell us. We've had some Nike and some FedEx and some things that are happening.

Nike is idiosyncratic. Nike is definitely FedEx, maybe. They're, I would say, a real company, $90 billion in revenue. They ship some stuff around. So we'll see if we get any pre-negs in the next five or six days. Normally that first 10 days of October, January, April, July, you could see a company take that. I don't think it's going to happen that much. I think it's more going to be the Q4 guidance because that's where I see the numbers hockey stick more than the normal hockey stick.

That's the risk. Let me bring this point up. Yeah. That the broadening, whether it's taking the edge off, if you will, of the mega cap companies as they're going to report, as Goldman Sachs today is suggesting that it does. And I want you to listen to the commentary that they put out today, and I want you to react to it. They're talking about a lower bar for mega cap. Why? Recent experiences reaffirm the notion that the U.S. market can run on multiple engines and has supported the case for some diversification across segments. This dynamic makes the risks

more balanced going into the earnings season in a couple of weeks. A lower bar for mega cap tech opens upside path there that were harder to envisage in Q2. You've had a broadening. Mega cap stocks have come off the hot burner. Therefore, the expectations maybe have just dropped a touch. So that helps the overall scene as you really get into the thick of earnings season. Does that make sense to you? Does the Goldman Sachs comment make sense to me? You still feel like the bar is as high as it ever was for MegaCap?

All they really said, through the lens, they said is some of the big six weren't as good in Q3. And a lot of other stuff was. And the ones that people hated on July 1, Apple and Tesla, they were the best ones. And then the ones everyone thought were hyperscale

or beneficial, they were the worst. But the equal weight in the quarter was up 8% to the market cap weight, which was up 5%. Isn't that what you want? Isn't that what you wanted? I guess, yeah. What do you mean you guess? People said we need the broadening.

Right, but you need the broadening if the economy is improving, if companies' margins are expanding and all that. You've got a weird quarter, right? Value beat growth, but hyper growth beat growth. Junk beat quality. Like everyone says I buy quality. Well, the lowest quality quartile beat the highest quality.

It's a weird microstructure. I think really what happened is Apple and Tesla were good, and Microsoft and NVIDIA were flat to death. That would be like hyper growth. Palantir was really good. Palantir, right. That kind of stuff.

Right. I think it is generally good if the economy pauses and starts improving again. Last week, somebody said they were really confident it's going to reaccelerate. And I asked, why? Why? And what I heard back was, I don't know. Right. So I'm not, know. So I'm really focused on the consumer data, the data we're going to get here in the first 10 days of earnings season.

Do we get less 90-day credit card? The liquidity really haven't gotten worse. So some of the consumer data points I look at in the last 10 days make me think the consumer, which was declining for sure in July, is not declining at the same rate it was. I got a China stimulus. I'm a little bit more skewed to the positive, just reacting to the data that's coming in. You wanted to short some of these consumer names. I still don't like physical retailers, for sure. They have to have an online business. So, yeah, I'm always going to like, you know, Walmart and Amazon over Target.

Do you still think you should be buying the dips? Would you urge people to buy the dips as Oppenheimer is doing today and Barclays suggests the path of least resistance remains to the upside, in part because of what you're saying. Rate cuts, China, you put it all together, you can make a good story to tell. Yeah, look, it depends on the horizon. If we're saying like, you know, medium to long term, of course. If it's like for sure between now and the election, I'm more tortured. It's hard to make one month calls. If I were CFO or CEO, would I make a big capital deployment announcement or deal before the election? Maybe not. I might want to have a better view of what I think the regime is going to look like, make sure I understand where my

spending benefits could be. So we could get some choppy guidance from some companies for Q4. We could get a little uncertainty in October. That's possible. But if I'm looking out six, 12 months, then yeah, there's a lot of things to sink my teeth back into. All right. Let's bring in Jack Manley now of JPMorgan Asset Management and Ayako Yoshioka of Wealth Enhancement Groups. Great to have everybody with us. Ayako, I'll give you the first crack at this. What do you think about what Adam had to say? Does it match your own view of where the markets currently are? Sure. Hi, Scott. It's great to see you. And, you know, what Adam said resonates quite a bit with us in terms of, you know, what we're seeing in the markets, you know, in the short term. Sure. Could we see some more volatility? We've

seen it around, you know, the labor market data releases over the last couple of months. And so could we get that again on Friday? Maybe. And, you know, as Adam mentioned, there is a lot of geopolitical risk and earnings coming up. But over the long term, we think, you know, as dips have been bought in the past, we think these dips will be bought in future. OK, Jack, what about you? What makes sense to you right now? So I would say I actually am less reliant on this story of the U.S. economy speeding up and more reliant on some of the other macro data that are out there to support this broadening out of earnings. You know, if the economy grew, what, four, four and a half percent annualized in the back half of last year and the only game in town was still the MAG-7, then an acceleration in growth from here right now is not necessarily what's going to push them over the line or the S&P 493 necessarily over the line, right? Evidently, in that strong growth environment, high and rising interest rates, hot inflation, warm wage growth, all of these things

are bigger hurdles for that S&P 493 than the strong growth print. And when we look at what's going on with macro data right now, the wage growth is cooling. We see plenty of evidence of that. We'll see it again on Friday. Inflation has very clearly come off the boil and rates are moving lower. And that to me is the trifecta where you don't have to be the mag seven to make make money anymore. And that to me is a broadening out story for the rest of the year. We're expecting to see it particularly in the fourth quarter. So I like that. Let's call it equal weight versus market cap weight play for the next few months of the year. What do you think? I mean, yeah. I mean, the evidence is that as CPI comes down, it helps the margins of the smaller companies more than the big seven.

The same way that the big seven did great when CPI was rising, it didn't really affect them. They're sort of more immune because of technology boats, pricing stacks, etc. So through my U.S. only lens, I would say is what he just said is he thinks gross margins are going up for most companies over the next couple of quarters. And if that's right, yeah, the stock market goes up. That's the biggest thing you've said for the better part of the last two years that we've been having market conversations. It's the number one thing I focus on. Margins, margins, margins. It's why you had been as bullish, if not more than others, because you thought the margin story was going to hold up.

You started to question it more of late, which is why you got more cautious. And now there are suggestions suggestions Jack makes the case. I think that's right. Actually, hold up. I think if you get, I think the risks, like the real bull case, and I think if you look out five, six, seven years, the market's way higher, 10,000, whatever it's going to be more. It's because companies can do a lot of revenue growth to a lot of, not a lot of net hiring, right? Meaning they're not going to add heads at the rate they used to. And that's the way margins could really have yet another leg up. That'll come from more AI productivity stories we're going to hear in the next 18 months. We're probably not

going to hear a ton of them in October, but if the bold case of malicating capital, I work at J.B. Morgan, I got a zillion clients, then I'm thinking out medium, long-term, sure, you got to believe that there's pretty good risk reward to margins to margins being way higher. Yeah. The China news, Jack, I mean, is it as game-changing as some have made the case, including Adam, David Tepper, some others? The market's certainly making that bet as those stocks have just surged in the last week. Yeah, I mean, I think Adam made a great point that China's probably not getting any worse from where we are right now, given this combination of monetary stimulus and fiscal stimulus. But we have had a couple of instances in the past of exciting economic news that translates into an equity market rally that very quickly starts to deteriorate. And you go

back down to weaken confidence from both a consumer and business perspective. The issue with China for me right now is, A, the valuation tailwind that was super strong 20 plus percent ago is no longer as compelling. Markets are a lot more close to fair value now than they were just a couple of weeks ago before a lot of this policy was announced. And B, at the end of the day, you are still dealing with a command economy. China is something of a black box, and policymakers have made it very clear that they can flip a switch and turn off entire components of the equity market. So it's not to say that you can't get excited about the long-term story. I just think that a lot of American investors need to be cautious, right,

and that those returns wouldn't be so alluring if it was easy money, if it was shooting fish in the barrel. Yeah, what I've experienced through the years is it's very hard to get financial advisors to go overweight EM equities. They have to outperform by like 30 percent a year for three years in a row the U.S. before they pile in. So I think it's more about what can I do focused on the U.S. to get China exposure? Do I buy U.S.? Do I buy LVS or Freeport or Wynn or Melco? Do I do that? And we kind of did this nerdy thing where we said, how can we proxy the big tech companies in China through U.S. equities? And actually, it was a combination of U.S. semis and U.S. utilities that gave me the most exposure

to Baidu, Tencent and JD. Weirdly, they traded that way. So there's ways to try to get at it within the U.S. equities if you're too afraid to go, you know, go get it directly. What about this China story, Aya? I mean, is it a great opportunity for people who, I don't know, maybe they feel like they're overexposed at this point to the mega cap tech stocks, for example. So they're looking at the Babas and the Baidus and the JDs and these other names that have surged lately and think that it's just the beginning. So, you know, chasing after stocks that have surged this quickly is not always a great idea, I think, at least in the short term. You know, the valuations were much more attractive, like they said, about 20 percent ago. And so but, you know, over the long term, I think having the exposure makes sense,

especially in a diversified ETF is how we would look at it. How about this, Jack? I mean, UBS had an interesting note about valuations, and we debate this a lot on the desk of whether the market's too expensive or not. They suggest valuations are likely to move higher. At 21.5 times, market PEs are 1.5 standard deviations above the long-term average. However, the median company is less extremely priced in price to cash flow is more

reasonable this talks about the fact that the four nine you can't look necessarily at the overall market multiple and say well the markets expensive if it's been driven by seven stocks to get you to the x more expensive historical p e multiple that you're complaining about the i would i would completely agree with that assessment i think i think you come in from two different ways of the can make the point that you're complaining about. I would I would completely agree with that assessment. I mean, I think I think you can come at it from two different ways. I think you can make the point that you just made, Scott, which is that like, you know,

markets are expensive right now because of a small handful of names. And if you strip out the mag seven and you're left with the S&P 493 valuations, there are a lot more reasonable, a lot closer to Earth. But you can also, I think, make the argument longer term, a little bit more structural. The composition of the U.S. equity market has fundamentally shifted. This is not a bank and oil company driven equity market anymore. It is technology driven. And you don't buy tech companies for 12 months of earnings. You buy them for 5, 10, 15 years worth of earnings. So next 12 month earnings as a valuation measure, maybe not as relevant. And also, by the way, while interest rates have been the highest they've been in about 20 years as of late, they're coming back down to earth pretty quickly, right? And

we're dealing with a fundamentally different environment in terms of the cost of capital. And when rates are lower, when the composition of the equity market has changed, and when in particular from a micro perspective, so much of the recent rally has been driven by a small handful of names, talking about the S&P 500 monolithically and focusing in on those stretched valuations, I think only gets you a little bit of the way there. Totally. I mean, look, the reason we focus all our work on gross margins, or a lot of as we've talked about for years, is because there's a very, very strong relationship between what you pay, EV to forecasted sales, enterprise value to sales, and the gross margin level.

The reason the market trades and oscillates at much higher multiples than it did when it was oil and banks is because the gross margins for the median company, the gross margin dollars, are way higher than they used to be. So, yeah, if I get my margins higher, I'll get an even non-linearly higher multiple. So I agree with that. We're going to trade at higher multiples in the future and the past. The only thing I would slightly disagree with is I like running to the party. So when stuff's up six or eight, I'm going to go in there and try to add. Right. I don't necessarily think, oh, just a big pop-up too late.

Well, you're talking about momentum. Yeah. I'm saying that's what he's talking about is momentum, which you suggest is maybe a deterrence. Maybe she means at the index level. I think at a stock level, if I'm a U.S. guy and Melco went up 20%, I'll get in there. It could go another 20, like it's a garbage Macau play that could have a lot of bounce. So it's a different view than I have than just because it's up 20%, it's over. I'm dreaming that, you know, I want to sell it to a circle with a much bigger dream later. Aya? Yeah. Sure. Now, I think momentum in certain stocks, as well as at the index level, you have to kind of dig into it more than just take the price action at its surface.

So, you know, we like to dig in and see where we're seeing the momentum and whether or not it's long term. It just needs to fit with your sort of time horizon. You know, if we go back to the mega caps for a moment and the news of the day, $6.6 billion, OpenAI raises $157 billion valuation. It's extraordinary, right? For what feels like a relatively young company. It's bigger than Citigroup, for example, or other big companies. Doesn't that just remind us of where the puck is going? Still, the puck is going towards the hyperscalers, who are in large part the investors here, who are the ones who are best able to capitalize on this revolution of AI.

What do we make of this? They certainly have the balance sheets to take this stuff on. But as of right now, I'm usually a glass half full kind of guy, but this is where I feel a little bit more skeptical. Show me the money. Like, we've been throwing so much money hand over fist at this situation. And a lot of this AI play hasn't really translated into meaningful, sustainable profitability. And is artificial intelligence solving any trillion dollar questions at the moment? I think that is a question that we really do need to ask ourselves.

I'd also remind investors that when you're in tech cycles like the ones that we might be in right now, the composition of the winners in the early days, fundamentally different than the composition of the winners later on when the technology is much more mature. You know, like the people that built the pipelines 40 years ago for the internet are still around. They're still big, but they're not as big as the social media giants that took advantage of that technology. What is the next big AI company? It might not even been cooked up yet. So I think it's all about a long-term time horizon, yes, but also willing to cast a pretty wide net in this space. It's not just MagSavvy. I'm more bullish than that on AI.

I think there are some examples where efficiencies are being gained. NVIDIA's revenue is probably the best way I can think about it. And when I read that Musk is having dinner with Jensen, begging him for chips, I don't think it's close to being done a couple weeks ago. So I think compute generally is going to grow way above GDP, a way higher margin for a decade. I think it's a clear winner. The area I'm most excited about seeing productivity in the next 18 months is in healthcare, an area that people don't love generally. I'm not saying it's going to be... People are trying to get more bullish on it. I'm trying to every year. There was a cover of

Barron's this past weekend, wasn't it? I think it was like their magical moment. They said it was a magical moment in healthcare, something of that regard. Yeah, I believe Trivariant might have been referencing that actually. Yeah, I believe Trivariate might have been referenced in that, actually. But, you know, then you get a Humana, you know, punching you in the face when you get excited too much about health care services. So it's a longer path. But I do think when I look at it, where can I be much more efficient distribution of drugs, you know, services, hospitals, life sciences and tools?

Like there's so many examples where efficiencies can be gained. So I think we'll see the beneficiaries there first. And I bet you we see them in 2025. Okay. We'll leave it there. Good stuff. I enjoyed that conversation. Aya, thank you so much.

Jack, we'll see you soon. And Adam, you as well. Yeah, great. Thanks for being here. Let's send it to Steve Kovach now for the biggest names moving into the close. Hey, Steve. Hey there, Scott. Let's get shares of ConAgra brands.

They're sliding about 7% after the packaged food company reported disappointing Q1 results, sales falling 4%, mainly due to declines in refrigerated and frozen food unit, as well as manufacturing disruptions in its Hebrew national hot dog business. Also, Caesars Entertainment is the top performer today in the S&P 500 after it announced a $1 billion notes offering and said its board approved a stock buyback program of up to $500 million. Shares still off by almost 9% this year and down 65% from its all-time high. Scott? All right, Steve Kovach, thank you very much for that.

We're just getting started. Up next, OpenAI closing its long-awaited funding round. We got the details and what it might mean for the broader AI space. That's coming up. We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. OpenAI closing its latest funding round today. Kate Rooney has these details and some very big numbers, Kate. Big time, Scott. Yeah, this was a big day for OpenAI, the company officially closing one of the largest private funding rounds in Silicon Valley history. The total coming in at $6.6 billion.

This was at a $157 billion post-money valuation, I'm told by a source. It was led by Thrive. We had SoftBank and Microsoft doubling down, NVIDIA, and then the UAE-backed fund MGX. Coastal Ventures also in, Altimeter Capital. It just confirmed that Cathie Wood's ARK Invest also was in this round. OpenAI says the cash is going to help them with AI research to increase compute capacity as well,

and then build tools that, quote, help people solve hard problems. OpenAI is, of course, the maker of ChatGPT, which we did learn today now has 250 million weekly users. That has more than doubled from a year ago, and it's up by about 50 million in just the past two months. So this is one of the most valuable private American companies at this point. It's just behind SpaceX, ahead of Stripe. And then to put the value into some context, Scott, I was looking at the market cap of S&P 500 companies. It's bigger on paper,

at least, than Goldman Sachs, Uber, Lockheed Martin. It's about double the value of Chipotle. OpenAI is still in the process, I'm told, of becoming a for-profit. We are going to talk about this and a lot more in an exclusive interview tomorrow with OpenAI's CFO, Sarah Fryer, in the 10 a.m. Scott, back to you. Oh, that's great. So, Kate, we know about the recent move to be a for-profit company. You mentioned some of these other companies like Stripe. When are we going to start really thinking about an IPO, do you think? I'm sure now it's got to be the topic of conversation out where you are almost every day. Big time.

I mean, that is one of the big questions around Stripe. It's sort of the perennial example of when will they go public? I don't think there's a lot of pressure from investors to go public at this point. And the big reason is because employees at least are able to get liquidity. There's been some reporting around employees at least getting, being able to sell their shares. So as long as these private companies can keep their employees happy and make sure that they get liquidity, that they're able to sell their shares when they want to go out and buy a house and have a little bit of cash on the sideline, then there really is not as much pressure as you might think. So I think at this point, it's seen as not a near-term thing that they're going to go public.

But the hiring, I would say, of someone like Sarah Fryer does indicate that long-term, this company would take being a public company as something really serious to think about. I think that her hiring was seen as sort of a sign that this will be an eventual IPO. I think that is the expectation. But they're losing money at this point, from what I'm told. And they've got a lot of growth, a lot of competition out there, too, to deal with before they think about an IPO. Well, I'm sure you'll ask Sarah herself since she's joining you exclusively tomorrow. We look forward to that really big interview.

A great timing too, to get that. Kate, thank you. That's Kate Rooney. Appreciate it. Again, that's tomorrow. I think it's at 10.15 for Sarah Fryer tomorrow. All right, let's bring in Doug Clinton, Intelligent Alpha founder and CEO to discuss. I said before, you know, to our markets panel, if nothing else, this just reminds

you where the puck's going, where the flood of capital continues to go, whether it's in the private market or in the public markets by investors who want to capitalize on this incredible revolution in AI. That's right. I mean, valuations are forward-looking, Scott. You see the $150 billion number. We talk about Uber as a comp. We talk about double Chipotle, which I think OpenAI probably should be double Chipotle. But that's what I think investors are betting on is that today we've got a company with a $4 billion annualized run rate. Next year, I've heard rumors that they think they could hit 10, trading 15 times that run rate. It feels expensive today if you do the math, but looking out tomorrow,

if that's the future, then it won't look so bad. Would you guys be lining up to get something on the IPO at this one? Well, we did invest at Deepwater and XAI, so we are big believers in these foundation model companies. We didn't participate in this round. It doesn't mean that we wouldn't look to in the future. Right. How are you thinking about tech right now? We said in this quarter, which just ended, it took a bit of a backseat to the rest of the market. Some say that's a great sign, you know, better late than never. But what about that? What about the sector here? We're going to talk about earnings in a few weeks. We still feel bullish about tech and our view hasn't changed at all. I mean, we've been talking about a two to four year window here where we think AI will continue its bull run. I've used the word bubble in the past to describe

what I think the ultimate outcome is. It's hard to see a scenario where if AI is as profound as we all think it is, that it doesn't end in bubble because typically every breakthrough technology does. You need that excess capital to just make sure that all of the access is cheap. All of the bad ideas out there that might turn out to be good ones get tried. And that's what we're seeing now. But I mean, that just means that some eggs in the carton get broken. It doesn't mean that the whole thing gets destroyed. That's right. I think the carton gets dropped and maybe even some of the good eggs maybe roll around on the floor for a little while. But you need to go as an investor who is paying attention this close attention

and say which are the ones that ultimately should have long-term value and I think private market investors certainly are voting names that you continue to bet on most of all our meta and Nvidia is that right that's right why have you sort of pushed the others to the side and focused more heavily on those we do have some videos rather obvious but if you want to say let's say meta over alphabet over over some of the others sure we do also do own some alphabet so the way we think of it is kind of nvidia meta alphabet as the big three within mega cap tech they control their own destiny in AI. Meta and Google are building their own models.

They can self-fund building their own models. They don't need to go raise $6 billion. They can make that in a month. And so those companies, I think, are just in a unique position as we think about this future of AI. They kind of control where they can go. NVIDIA, of course, is the arms supplier, and so that's the bet there. So PDD and Tencent, you're in, or it's our top

holdings in the ETF. How are you thinking about these stocks, which have just ripped over the last week? Too much? Time to get off the boat? What do you think? Well, so what's really interesting about this new ETF we launched that holds these Chinese equities is it's actually powered by AI. We have built Intelligent Alpha, we've launched it as a new firm out of Deepwater, where our first product is the Livermore ETF, the ticker is LIVR, and we use an AI-powered investment committee,

which consists of GPT, Claude and Gemini, three large language models, to go and pick these stocks. And so one of the themes when we launched that the AI committee loved was China. And I mean, timing is lucky, right? We couldn't have predicted that a week later the Chinese bank would be cutting rates as aggressively as they did.

But AI kind of saw that, I think as we were talking about in the prior panel, China just felt like it was in the tank. It was probably as cheap as it could get. AI made that bet and it's paying off right now. Do you feel like lastly, that that is a game changer for the way we should view the overall market, just the power, the bazooka, as some have referred it? I think it's hard to ignore it. I mean, given the history of the last 20 years, we've kind of seen the Fed here use it a few times

quite effectively. I don't know why we would think it might be different in China. All right. It's good having you back. Likewise. Good to see you again. Doug, thank you. I want to remind you once again, don't miss NVIDIA CEO Jensen Wong, Accenture CEO Julie Sweet. That's on overtime today to discuss their new AI partnership. It's at four o'clock Eastern time, of course. And you definitely don't want to miss that. Up next, New York Life Investments. Lauren Goodwin is back to tell us why she says the Fed's recent rate cut is not a cure-all for investors. She explains next. Still on edge a bit in the stock market to begin the fourth quarter as investors look for developments in the Middle East

and a critical read on the labor market coming this Friday. Joining me now at Post 9 is Lauren Goodwin of New York Life Investments. Welcome back. Thanks for having me. How are you feeling about the markets here as this quarter begins? I anticipate that on a six-month basis, the equity market rally has room to run. Risk assets have room to run. It's a constructive risk asset scenario. That said, the economy is really walking a tightrope, not teetering on the edge of recession or anything like that, but a real balance between overheating and the

market being concerned about growth. And so in that environment, though I expect risk asset performance to be average, that might not feel as good for investors as the last couple of years. And so we're looking at portfolio construction really closely to try and take advantage of big picture themes like, for example, the Fed moving lower in interest rates. Feels like, though, tightrope to me sounds a little extreme. I mean, connotation being that one wrong step and you fall over, where it feels like the road is a little bit smoother than many people thought it would be. Sure, there are potholes in front of us, but this has been really resilient and we've been able to

steer around most anything that's been thrown our way. How would you respond to that? I think that's really fair from an economic perspective. And as you know, we were quite concerned about the economy in the first half of this year, moving much more constructive because of that resilience and specifically the resilience in profit margins. And so the balance beam is less about teetering off into an abyss and more about how does the market absorb the reasonable economic data that we have. So, for example, a weaker than expected jobs report that's likely to be a concern for growth,

potentially volatility in risk assets, maybe expectations that the Fed might cut a little faster, whereas even just a little smidge of data in the opposite direction gets you the exact opposite result. That's a challenging environment for anyone who's trying to invest for longer than a day. And so that's the tightrope that I see really more for risk asset. But what if we just say, you know, net net, you've been using the word distill a lot lately, I have, because there's a lot out there. But some would distill it all down and say Fed's cutting, economy's still good. And that's really, at the end of the day, those are the two most important things that matter more than anything else.

We get that good news is good news and bad news is bad news. A bad jobs report would obviously be concerning. But net-net, cutting, still strong, that's what matters. I tend to agree with that. And so if the economy is still strong or resilient, let's say, and the Fed's cutting, what do you do? I mean, the number one concern for investors then becomes reinvestment risk. Don't you buy equities? I think that you buy risk assets, but I strongly prefer

credit. And the reason is not that I think equities are going to do poorly in this environment, but that the upside relative to credit is limited. And that's because both assets have really performed quite well on a price or valuation level. And so the question for investors becomes, how can you generate income and manage what might be, again, a sort of a middling, still reasonable, but middling risk asset performance over the next couple of quarters? And so that's why, from our perspective, credit is such an interesting opportunity. And where equity is concerned, rate cuts really are still a big part of that story. When some of the structural themes that we've thought are really interesting around the semiconductor supply chain, around energy, those are sectors that tend to do well when rates are moving lower.

And so it's really a commingled story between debt and equity. I mean, there are others, you know, there are plenty of people, by the way, who agree with you. I think Rick Reeder sat in that chair and made the case, look, a lot is in the equity market already. There's a lot of good news priced in. Valuations are rich. They may not be too rich, but they're rich nonetheless. Thus, the better risk-reward right now is in credit. I know he's a credit guy, or certainly he's the CIO of fixed income at

BlackRock, the world's largest asset manager, but he is head of the global asset allocation team, too, so he thinks about stocks. But the point is the same, that a lot's in the stock market and the better risk rewards in credit. And you agree? I do agree. Now, for investors that are looking for equity market ideas, there's a couple of areas where I think are really interesting to play. I just mentioned that some of the secular themes around semiconductors, around energy, those are the sectors that tend to benefit as well from the cyclical reality that's cutting rates. So those are high conviction opportunities from my perspective.

They also are likely to be relatively supported regardless of what happens in November. And I see a lot of investors waiting until November to make big allocation moves. You feel like this market's kind of been a little choppy. It hasn't been a tremendous amount of activity. Do you think this is a precursor for what we should expect now up until for the next 30 plus days, almost 40 days? Yeah, I think that's the case. Now, when it comes to what difference will the election make, a couple of things. First, I think if we have a sweep in either direction, that's a plus one for growth, inflation and potentially for rates. So I do expect that the market is going to have to adjust over time this rate cutting expectation down a little bit,

meaning the Fed will have to cut a little less than the market thinks, that would be accelerated by a sweep scenario. Other themes that we're looking at, the president. Whoever's in charge has the right to levy tariffs, regardless of who's in Congress, and so that's another potential inflationary risk we're looking at that. But sectors are something that we actually think some of the old sector norms around Republicans versus Democrats, not likely to apply this time around. Both candidates have moved differently from the past as much as they're different from each other. All right. Well said. We'll see you again soon.

That's Lauren Goodwin right here post night. Up next, we're tracking the biggest movers into the close. Our Steve Kovach is back with the highlights. Steve. Yeah, Scott, I'm not going to hog too much of your airtime. We've got two different transportation names moving in opposite directions, and I'll reveal them after this break. All right, we're less than 15 from the bell.

Let's get back now to Steve Kovac with a look at the stocks that he is watching. Steve. Hey there, Scott. Let's start with hog. Harley-Davidson shares down about 4% now on a downgrade to neutral from buy over at Baird. The analysts say that he's sitting at this ride

out after dealers reported weak retail, excess inventory and critical sentiments. Shares are roughly flat year to date. Also, Joby Aviation shares are soaring more than 25 percent after the company announced a 500 million dollar investment from Toyota. The money will be used to support certification and production of its electric air taxis. After the investment, Toyota will own about 22 percent of Joby's outstanding shares. Scott. Steve, thank you very much. Steve Kovacs still ahead. Eli Lilly is ticking higher today. The company making a big investment in how it produces medications. We've got the details coming up on the bell. We're now in the closing bell market zone. CNBC senior markets commentator Mike

Zantoli here to break down the crucial moments of this trading day, plus Angelica Peebles on how Eli Lilly is making moves to hold its lead in the world of GLP-1s. And Tesla is falling today. Their third quarter deliveries were out. Stock reacting. Phil LeBeau is going to have those details for us. But Mike, what's on your mind today? You know, big picture, it's still a bull market. It looks like it and acts like it in every significant respect. But it really has slowed down and it's, you know, come across this leadership shift. It's been absorbing that kind of retreat on a relative basis in mega cap tech. We're up since mid-July, two and a half months, less than 1% in the S&P 500.

But the average stock has done better. So all that is context as this bull market gets ready to enter its third year. Third year, it's often a more kind of sober plotting type of a tone to a bull market. But everything else is kind of clicking together. And I think the fact that it can wait and see near the highs as we get this data on Friday is certainly not a negative. Time flies, huh? It's hard to believe. Just about two years. Two years for this bull market. In a couple of weeks.

Yeah, we'll see what happens on Friday with the jobs report for, you know, where this next step goes, I suppose. Angelica Peebles following Eli Lilly for us today. What can you tell us? Yeah, Scott. Today, Lilly is announcing a $4.5 billion center that will be focused on R&D manufacturing. So this new site will be about a 40-minute drive from where we are at Eli Lilly's headquarters in Indianapolis. Now, this is all part of the company's investment after the success of its obesity drugs.

The company has committed more than $20 billion to capital investments in the U.S. since 2020. And, of course, obesity is the big focus, but there's a lot more that Lilly is working on. Take a listen to what Lilly's CEO, Dave Ricks, has to say. Assuming obesity is not our only aim, we're a human health company. We want to make meaningful medicines in all sorts of difficult diseases.

Neuroscience, we mentioned earlier. Neuropsych is a huge unmet need. Addiction and mental health. But also neurodegenerative conditions. So we're investing heavily there, and perhaps the gains we've made in obesity can help fund the research in new areas. So as you heard there, Scott, there is a lot that we should be watching out for

from Lilly, and we'll be looking at that, especially as the company gets close to potentially becoming the first trillion-dollar health care company. Back to you. All right, Angelica. Thank you. That's Angelica Peebles. Phil LeBeau now on Tesla and these deliveries. You know, Phil, I've seen some commentary that suggests the stock is moving more on just sell the news rather than necessarily a big disappointment over the number itself. I would agree with that, Scott. Look, they were essentially in line with estimates. Some people are saying, well, there are 500 short of the fact set street account consensus. Give me a break. It was 463,000 vehicles, essentially what they delivered, roughly in

line with expectations. Best quarter since the fourth quarter of last year. China was strong. Incentives also help in certain markets, while Europe is slower. They don't report by region, but that's what you get when you look at the sales in those markets of electric vehicles. All right, so it sets up the question, what are the catalysts for Tesla shares over the next couple of weeks? The big one is next week with the robo-taxi unveil. Then you get Q3 financials a couple of weeks later. And if EV demand starts to improve in the fourth quarter, that will also help out Tesla. It also raises the question, could they possibly hit more than a half million vehicles delivered in the quarter? They're going to need to do that if they're going to hit last year's total of 1.8 million vehicles delivered. Right now, the consensus estimate is for 1.78 million vehicles delivered.

They'd have to come up with about 485,000 deliveries to hit that number. Scott, back to you. All right, good context, Phil. Thank you. That's our Phil LeBeau. Mike, I turn it back to you. You know, discretionary as a sector is up a little less than 6% over a month. Tesla's a big reason why.

The stock is up 16%. Amazon gets a lot of credit for that, too. But the stock... Yeah, Tesla's up like 40% since the early August low. So it had this huge rip. Obviously, it's somewhat seldom news. But also, think of all the things Phil said right there. OK, it's going to be nip and tuck if they match last year's volumes.

So it's days like today when they just come in, I'm barely on target and maybe short of the whisper and some of the street estimates when people who care about the here and now fundamentals of the business sell to people who say Robotex, the event is going to be this eye opener and it's going to be kind of restoring the magic of Tesla as a forward looking thing. You know, one of the price targets from the sell side, $280 a share, right? So it's $250 right now. How do you get there? It said 15 times 2026 calendar cash flow.

Okay, fine. 15 times, two years out cash. That's the point is there's a lot of stress on any fundamental valuation story in Tesla. So if it comes in on target. And so, yes, it has been a big tailwind to the consumer discretionary right now. But I am also looking at things like, you know, home related spending. In fact, Home Depot and Lowe's charts looking better. So to me, the equal way to consumer cyclicals are at least hanging in there and not necessarily giving you a fresh reason to worry at overall spending level. Good stuff. I'll see you tomorrow. That's Mike Santoli.

Dow's going to go out with a win. We're going to fight to the finish here on the S&P. And don't forget, coming up in overtime, Jensen Wong of NVIDIA. Big interview. You don't want to miss it with Morgan and John.