Closing Bell - Closing Bell: What’s Next For Stocks? 5/16/24

Episode Date: May 16, 2024

Joe Terranova of Virtus and Ayako Yoshioka of Wealth Enhancement Group break down where they see markets headed – as the major averages hit record highs. Plus, Blackrock’s Rick Rieder reveals his forecast for the Fed, rates and the economy. And, Deere shares dropped in today’s session following some disappointing guidance. We dig into that report and what it could mean for the rest of that space in the months ahead.  

All right, guys, thanks so much. Welcome to Closing Bill. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange. This make-or-break hour begins with surging stocks, the break to new highs, and then what happens next. We will ask our experts over this final stretch, including BlackRock's Rick Reeder. He will join us exclusively in just a little bit on how to play the markets right now. In the meantime, take a look at the scorecard with 60 minutes to go in regulation, the Dow topping 40,000 for the first time ever earlier today. You know about that by now. All three of the major averages reaching new highs, and we'll track it over this final stretch. Apple, that is a big story lately. Its own comeback has helped that last mile, if you will, to 40K. Falling yields, a big part of

this too. Maybe not today, but certainly since Fed Chair Powell calmed the markets a few weeks ago. It does take us to our talk of the tape. What is next for stocks? Let's ask Joe Terranova of Virtus and a CNBC contributor. Ayako Yoshioka of Wealth Enhancement Groups. Great to see you both. Aya, you first. So here we are.

Now what? Yeah, it's a great backdrop. You know, we've had a nice rise in markets. Equity markets have been calmed down by the inflation print from yesterday. And so I think it's a good backdrop for stocks. Joe, what do we do here? We top out? Do we keep going?

Is there a message in how we rebounded so severely from the April lows? There absolutely is a message in how we rebounded. And it's about profitability, margin expansion. And think about it. We set the lows heading into the earnings season. It's been all about coming out of the earnings recession that really has been the catalyst behind the appreciation to new all-time highs. And I think we all collectively really have to breathe a sigh of relief from where we were in 2022 that we have the advancement of this technological innovation surrounding artificial intelligence degenerative ai because that has been the fuel for this bull market i think it's well entrenched and you asked what are we looking for

or what are we hoping for in the near term i'm actually hoping for a correction why because there are areas of the market there's areas of technology that I don't have exposure, that I want to get exposure to, because I think the bull market extends well beyond this year. OK, Joe, I mean, I think that's, you know, the most important question for you guys today. Do I stay with tech, which has rallied the most since the April lows, right? It's up 12 and a half5%. It's been reasonably broad, although of late, obviously, technology has had that burst back. Utilities are up 10.5% since the April lows, real estate, comm services, and on and on and on. Do I stay with those top

trades? Do I play for a bigger broadening? What do I do now? I don't think that you could move away from technology, Scott, in particular as we head into NVIDIA earnings. I think the importance of NVIDIA earnings is on the entire AI halo, whether it's AMD, Broadcom or Cadence Design. I think very similar to what Palo Alto delivered in February when it was a disappointing report, but they get the benefit of the doubt. Let's face it, if NVIDIA gives us a disappointing report, they're going to get the benefit of the doubt. Buyers are going to resurface there. So no, you don't want to move away from technology. And I think Apple taught us a very significant lesson, a very punishing lesson about if you move away from technology, we'll remind you about our balance sheet, the cash dollars on our balance sheet as a reason why you don't want to do so. I mean, the firm,

you know, your firm owns Apple and Alphabet and Microsoft and Meta. So you have a horse in this race, so to speak. So what do I do with those? Absolutely. And, you know, going back to something that I know you guys have talked about in the past is the capital spending from these large tech companies, the announcements about how much they're going to spend in 2024 were very, very large. And as you said, one company's capital spend is another company's revenue. And so we continue to believe that the overall outlook for technology remains positive. And as Joe mentioned, with NVIDIA coming up next week, you know, the expectations are that a lot of this capital spend is going straight to NVIDIA. Yeah. What do I do, Aya, with the consumer? I feel like if the bears are still hanging on to one little nugget, it's the recent, whether it's data, retail sales, not good. Starbucks,

their commentary, not good. What do I do with that trade? Do I need to be worried about it? How should I think about it? How are you thinking about it? Sure. I mean, we've definitely seen a bifurcated consumer. You know, the landscape has definitely been a little bit different but even Walmart today. Talked about how the can- the higher end consumer is looking for value right looking for value at places like Walmart and- and doing some- competitive shopping. So I think

we're going to continue to see that going forward higher interest rates are having a little bit of a lag. Impact the inflation is definitely hurting consumers- minutes broadening out to more than just the lower end consumer. Joe, worries about the consumer or not? I'm trying to think of what do the bears bring up? You know, it's, well, the consumer is weakening.

Look at the charge-off information that we continue to get. Higher for longer is eventually going to take a bite, and maybe we're seeing the earliest signs of it. I think the bearish argument needs the black swan. It needs the shock, whether it's geopolitical, and we've overcome so many geopolitical tensions, but it needs the black swan to get a precipitous decline in the market. I think when you look at the consumer,

the consumer is becoming more cost-conscious in the most recent portfolio rebalance. We reduced exposure towards consumer discretionary. I think that's the right thing to do. I think consumer staples, you want to elevate exposure there. And I think Walmart told you today that the consumer is getting more cost conscious., grocery division very strong, people are eating out less, fast food even, they're stepping back in that case. So if you're talking about sectors that have interest rate sensitivity, you have to be very tactical in your nature. But I'll go back to the opening remarks on technology.

Technology doesn't seem to care. It doesn't have the sensitivity to interest rates, and that's why it seems to be a core sector holding within a portfolio. Well, let's be honest, too, about technology. We don't get to Dow 40K in the speed, which we did, no doubt, without Apple, which is up 12 percent over the last month. So and we're almost to the day, really, of where you would say the the April low was. You recently rebalanced out. Look, you know, the timing is everything, obviously. And some timing you have no control over because the

rules dictate what you do in your ETF. But how should investors view this really rapid ramp back? Well, they should view it that there's a $110 billion buyback historic. We all know in its nature. And Apple reminded anyone that wanted to get bearish on the stock what they could do with their balance sheet. Stock's going higher. I've said the stock's going higher in terms of our holding of it. At the end of July, we'll address it. Obviously, from a fundamental perspective, it's a strong candidate. But we rebalanced two days prior to the earnings report. If, in fact, we had the benefit of that earnings report before we rebalanced, then the negative momentum that was present would have been neutralized.

That's very clear to me. So the biggest concern I had was if you were going to see post-Apple, the MAG-7, that concentration of performance, the outperformance begin to take hold again. It has to a certain extent, but it hasn't intensified to the degree that I thought it would, because it seems to me right now Apple and NVIDIA are the two MAG-7 names of choice. Okay. Joe, we'll see you in just a bit. You're going to hang around for the next block for us. Aya, thanks. We'll see you soon.

Look forward to that as well. Now let's bring in Rick Reeder. He is BlackRock's CIO of Global Fixed Income and head of the Global Allocation team. It's good to have you, and it's good to have you back here post-9. Okay, so your thoughts on stocks at record highs. Yeah. So can I go to something Joe said? Yeah. People don't realize $110 billion of an authorized stock buyback, the average S&P 500 market cap, strip out the MAG-7, is $65 billion. They're buying two S&P 500 average-sized companies per annum. That number is staggering. By the way, I was looking at the whole market cap in the New Zealand stock market is like $90 billion.

What they're doing, it's pretty incredible. By the way, you take the other MAG-7, I looked at four of them. They're buying back $320 billion of stock. The IPO calendar is $13 billion. The technicals in the equity market are truly staggering. So listen, I think the earnings, the revenue sales wasn't that good. I mean, if you go and we talk about retailers, we talk about consumer, wasn't that good. But the earnings are actually pretty good. There's stickiness to margins, the software development, AI implementation, et cetera. It's pretty impressive. Earnings are still pretty good. And so anyway, I know we've talked, it's pretty impressive. Earnings are still pretty good. And so anyway, I know we've talked about it a bunch of times.

I think people underestimate. You've got incredible technical inequities, and you're still throwing off 18%, 19% ROE for the average S&P 500 company. It's pretty impressive. Okay, so you were on with me, I think, right around the time of the April low. And I asked you your views on the markets,

and you just said plainly equities are going higher. What made you so sure? And is it earnings? The reason why? So, I mean, it's two things. I mean, so I, you know, I've learned in my career, sometimes the hard way, that the technicals matter arguably more than the fundamentals. When you buy back that much stock, a trillion one of equity buyback against 13 trillion IPO calendar, and you think about just normal, there's 9 trillion of money sitting in cash, the normal wealth creation, salary, X amount goes into 401k. The technicals are pretty good. The other side of it is, and we'll talk about consumer, there is definitely some moderation that you're seeing in the consumer. But gosh, when you talk about this sort of earnings, this persistent ROE and your buying

bank, think about what the equity market is today. It is functionally taking top line revenue, top line GDP of the economy, running at four and a half to 5% nominal GDP. And it's an operating leverage machine that's throwing off, you know, what are terrific earnings. So anyway, I still think it's going higher. Unless there's a multiple of figure too high, I think so. But I also think you'll work your way through that pretty quickly. How much higher? What makes sense? So, you know, if you said to me, how much more will I get? And we'll talk about what would you do in a balanced portfolio today?

Could you get another 10, 15% of the equity market this year? I don't think it's much of a stretch at all. Could you get a bit more than that? Yeah, I think you could. 10 to 15%, not much of a stretch at all. And that's because of continued earnings power, along with all of these other levers that we see at play, whether it's buybacks and capex and everything else. So I think it's the buybacks. I think it's

the fact that the earnings are still pretty good. And listen, I do think as you get to the back half of the year, there's such an incredible focus, which I think, by the way, too intense about where the interest rate is. My sense is that we're moving to a Fed that's put the bar high for raising rates and would like to still get another cut or two in. And I think when people see that, you'll get another push in terms of the equity market. Listen, I'm not saying like jump all in today, given the move we had, but I do think you can build a balanced portfolio. And I would hold equity certainly for the next couple of years and they'll do their job. Do you think cuts matter at this point? So, I mean, I'll say one thing about it.

I've looked at companies for almost 40 years now. Companies today are not terribly sensitive to the interest rate move. They've actually, they turned out their debt. You think about how low rates were. Most companies turn their debt out. Actually, a lot of companies are sitting on huge amounts of cash that are benefiting for these high interest rates. The places that are the cyclical parts of the economy are definitely, you've seen some pressure in a lot of the cyclical parts of the economy. You're seeing that now in the consumer. But companies are much more insensitive to interest rates than

they've ever been before. Listen, markets will react to it. If you start to get those cuts, markets will react. But I think people will be surprised, like they've been here before, that if rates stay about where they are, equity market can move along. Is that one of the biggest surprises, you think, that, you know, expectations or fears that if you keep rates as high as they've been for as long as they've now been, that ultimately you would have corporate rollover, so to speak? They would just fall under the weight of these

heavy and high rates. You're suggesting counterintuitively that they've actually worked in their favor in some respects. It's pretty extraordinary. So you think about where we've come from. Well, since World War II, the largest transfer of money from the public sector to the private sector, massive amount of money that flowed through to households and corporates, and you kept interest rates extremely low, too low for as long a period of time. Companies turned their debt out. So now you have this dynamic. I always think it's funny when people come on the show and they say, gosh, if we go to 3.5% tenure, the equity market can't take it. If we go to 4, oh, 4.5 is the number. It's just not that impactful. You think about the MAG-7. They fund their CapEx or R&D through free cash flow generation.

They're not borrowing. They do do some borrowing to make sure their balance sheet, the cap structure of their balance sheet is right, but they're funding what they're doing through free cash flow. So I just think it's grossly overstated. In fact, I think much of the economy today is benefiting from high interest rates. High income is you see that in all the interest income coming in. I mean, it is significant, though, when, you know, rates are at five, for example, and then they dip below four and then they make a quick and steady march back towards five. That that was a little disconcerting. Now, it was the Fed chair who sort of calmed, as I said, the markets. And if you look at the yield on the 10-year, it's down substantially since the day that Powell came out and basically took rate hikes off the table.

Listen, rate of change is, I mean, if we were, there was a pretty scary moment in time where this inflation data was, which continue to accelerate. Listen, the number, by the way, I didn't think the number yesterday was so fantastic in terms of, gosh, now the Fed can cut. I thought it was pretty much on expectations. But we've been running for three months of higher levels of inflation and service level inflation. We're

still running six month moving average service inflation. That's five point six percent. Still pretty high. But the rate of change is in a better position today. Listen, if we start to get numbers again that show acceleration in service inflation, then, yeah, then it gets concerning. And could the equity market dip on the backside of it? For sure. I just think the durability of your ability to generate return and the technicals will push the market higher. When do you think we get the first cut?

So, listen, I think the Fed would like to get a couple of cuts in. So you think about the bifurcation of the economy today. Small businesses hurting these earnings. It was very clear that low income is having a tough time. You talked about credit card delinquencies, auto loan delinquencies, charge-offs, etc. It's very clear you're putting pressure on low income. I think they'd like to get a couple of cuts in this year. Could they get in July? I'd say there's a 25% chance you could start moving in July. I think

the base case is you start moving in September. But you need a couple of months of good data. And by the way, you know, when you look at the employment picture, which Chair Powell talked about in the press conference, you know, look at the jolts, the job openings are coming off, you see the quits rates starting to come off a bit. And now what's holding up payroll is health care and education. The cyclical components, leisure and hospitality, temp hiring are coming off. So I think there's going to be a window to do it. But I wouldn't bet my portfolio on, gosh, they've got to start cutting.

I would build a durable portfolio assuming you're going to be here for a period of time. You think the other maybe great underestimation was the spending and investing power of the baby boomer cohort. That if you look at, you know, where rates have been elevated, so it's lower income and perhaps younger consumers hurt more. Wealthier consumers and baby boomers hurt less. All of the money in money market accounts just, you know, turning over 5 percent. And that leads to more investable income. So, Scott, you know, I think if you actually break down the numbers and exactly what you described, if you think about who owns, who holds the debt, who's a borrower today, lower income, younger people, that's where and by the way, that's who's getting hurt today by the spike in rates. But what's happened because of the demographic evolution, the population has aged, and because of this massive dividend from

the government, higher income and the older population are actually net creditors, net savers, and have gotten this huge boost. When you break down the aggregate spend in the country and you break it down by income cohort and age cohort, you see something that I've never seen. You've never seen before. Obviously, the high income cohort is spending a tremendous amount. It's part of why service inflation is hard to bring down. They're the ones spending on services. But also, the age group over 50 years old is actually becoming the bulk of our big portion of the spending, actually the largest cohort of spending today. And you haven't seen that before.

And those are the ones benefiting from these high real interest rates. So it's pretty amazing. So the point I would make, it's ambiguous to me at best that by keeping that rate high, that you're actually bringing down inflation because you're seeing this income flow through the system. That's interesting. And you don't think this spending power from that particular cohort, baby boomers, et cetera, is going to slow down? And by the way, the investing appetite and having the liquidity to actually do it for all the reasons you said, when does that start to slow?

Yeah. So, you know, it's interesting. You break down these earnings reports, and there was no ambiguity around low income. And when you saw it i mean we looked at uh there's bank of america this great report they showed 35 companies and every single one of them big retailers lower income lower income more promotion more couponing etc but you're definitely seeing some fatigue out to middle to higher income so is it it moderating a bit? I think it's moderating a bit. There is definitely some fatigue you see across certain businesses in the higher income strata.

The one that I'm pretty impressed by that's not really seeing a lot of fatigue is in experiences. You look at some of the, whether it's hotel, cruise lines, cruise lines are super impressive. Some of the airlines that are in the higher income strata are actually still doing pretty well. But would you, but at the margin, are we slowing a little bit? Yeah, I think we're slowing a little bit. You used the words balanced portfolio a couple of times. What does that mean in real terms for somebody who's head of the global allocation team for the world's largest asset manager? So I think it's different than it would have been a few years ago. So, you know, everybody talks about 60, 40. I got to buy long-end interest rates to protect my equity portfolio. I think that's over. I think

the concept of I got to own long interest rates. Think about if CPI was strong this week, long interest rates would have gotten hurt at the same time equity is going to get hurt. That's not balanced. I think today you can build a portfolio. I'd still hold the equities. I'd still hold 60 equities. And maybe I tilted a bit more to tech, to healthcare, some of the high free cash flowing areas like energy, et cetera. And then I take maybe 30% and I put in income, high income producing, you know, today and getting high income doesn't require taking a lot of risk. We launched this ETF and we're running almost 7% yield on it. Almost a year ago. Almost a year ago. It's gotten a tremendous amount of inflows because all we're doing is we're building six and a half to seven percent income and we're running a

high triple b average rating you think about in history if your return target is seven if you can get six and a half to seven from just owning fixed income marry that to some of my equities take in some private credit some alternatives you could build a pretty nice portfolio you mentioned i think I think, I don't know, it was about eight months ago, maybe. Maybe it was a little longer. In terms of fixed income and where you like best, the belly of the curve, I think, is how you portrayed what you like. Do you still like that, or are there more opportunities that exist? I mean, you know, you think about the amount of debt that's on the country. You think about we're going to go through an election season,

and it doesn't seem like anybody's going to be running on let's get debt that's on the country. You think about we're going to go through an election season, and it doesn't seem like anybody's going to be running on, let's get the debt down in the country. Why do I need to own the long end of the yield curve? I still like being the three- to five-year part of the yield curve. You carry really well. You don't give up anything. Historically, to be a lender, you had to go further out the yield curve to get income. You don't have to do it today.

So I still like hanging in the three- to five-year point. It's also the fulcrum of when the Fed starts cutting. You'll see a steepening of the curve. That part will do really well. You get some price return out of it. And, you know, you think about it. Let's say we're wrong and let's say rates move higher. Rates go 25 to 30 higher. If you build a portfolio in that part of the curve that clips six and a half percent yield, you make 55 base points a month just in carry. So I like hanging there, and then we'll worry about the election and figure out what to do from there. So I was going to ask you that.

At what point do you start to think about the election outcome, policy changes? I think former President Trump's already talking about sort of doubling down on tax cuts. You have the deficit issues that exist there. When is it right to start thinking about what your portfolio needs to look like based on an outcome? So I'd say a couple of things. First of all, I've learned in markets, they react to the shark that's right next to the boat. So they won't react until a shark gets really close. So I still think we have a little bit of time. But what would you do today when you've got two candidates on the presidential side that have such disparate views? Pretty hard to position the portfolio. There's some things

that I think make sense. First of all, volatility in the equity market is crazy low. You can rotate a bunch of what is Delta one with your pure equity exposure into call options, create some where you've got functionally downside protection because you're using it through call options versus outright equity. Building this idea of balance, both presidential candidates, one seems like he's going to cut taxes, the other seems like he's going to spend. Gosh, I'm going to stay in the front end. I'm not going to deal with the back end of the yield curve. Build some durability into the portfolio. And then look around the world.

Listen, tariffs are going to be something. You think about what they're going to debate. And then, you know, look around the world. Listen, tariffs are going to be something you think about what they're going to debate tariffs. China. I just want to be really thoughtful about what is my exposure to who is highly sensitive to global trade and obviously China. Lastly, because you mentioned it, other parts of the world, they're, you know, the exchanges, they've woken up. I mean, the performance is starting to be pretty darn good. Does that move you at all to move there? So, depends where they're. So, I think Japan is, there's a renaissance in Japan in a bunch of different ways. The money that used to go into China is going to Japan. Women in the workforce has buoyed real wages, real inflation,

real growth. That is exciting. India is an incredibly exciting region to be in. It's hard to invest there because equities, the big cap equities, what is big cap equity there, is hard to invest in. So you got to get underneath the surface. ATF here, you know, that obviously plays in the market. I would say I would do that. And then, quite frankly, I continue to think the U.S. is where technology will be. I like being a lender. I like buying fixed income in Europe. A, as a dollar investor, you get a benefit. But Europe's going to be slow growing. Europe has to get rates down.

You think about we're buying investment grade credit swapped to dollars at 5.5%. Remember, there were negative interest rates in Europe. They've got to move that rate down. And so I like being a lender in Europe, and I like owning equities and what I call the faster rivers of cash flow like the U.S. And that was that was chock full of actionable stuff. Thank you. Great to have that conversation with you, Rick Reeder of BlackRock, exclusively with us on Closing Bell. News out of the tech space right now. Deirdre Bosa here with that. Dee? Hey, Scott. Cloud-based design company Figma is pursuing a tender offer that values the company at $12.5 billion. That is a 25% premium from its last valuation in 2021, but it is below the $20 billion acquisition offer that Adobe made in 2022. That deal, our audience might remember,

was called off about six months ago. Following regulatory scrutiny, this new tender offer essentially allows employees and investors to sell their shares should they wish to, but doesn't raise any new capital. Figma expects the size of the tender to be between $600 and $900 million with support from more than 25 current and new investors, including Andreessen Horowitz, Sequoia and Kleiner Perkins, some of the most well-known names here in VC. I just met with Figma's CEO and CFO down the street at their headquarters in San Francisco. CEO Dylan Fields, he said that they did not stop the moment the acquisition with Adobe was announced. Rather, they doubled down on their vision of end-to-end software development. So, Scott, the private markets is still a place where you can do tender offers and a lot of deals. Yeah, activity in the public, activity in the private markets, too.

Dee, thank you. Deirdre Bosa, let's send it to Christina Partsenevelos now for aivity in the public, activity in the private markets, too. Dee, thank you. Deirdre Bosa, let's send it to Christina Partsenevelos now for a look at the biggest names moving into the close. Christina. Well, we have the European Commission that's investigating whether Meta's Facebook and Instagram platforms stimulate, quote, behavioral addiction in children as well as create so-called rabbit hole effects. The commission is also worried about age verifications as well as privacy risk linked to Meta's recommendation algorithms. And that's why you're seeing shares down about 1 percent. The Biden administration announced today that has taken steps or the next step to reclassify marijuana as a less dangerous drug under federal law.

This potential new rule would codify that marijuana has medicinal value and is less dangerous than previously thought. Pot stocks like Tilray, Canopy and the YOLO ETF on your screen. You see all higher. Canopy up by 14 percent. Scott. All right. Appreciate that. We'll see you soon. Christina Partsenevelos just getting started here at Post 9. Up next, trading the big bank bounce. JP Morgan and Goldman Sachs both hitting all time highs today. Break down those moves after this quick break and later we'll set you up for earnings and OT. Take two. One of the big names reporting tonight. The key metrics to look out for. We'll tell you.

We're live at the New York Stock Exchange. Closing bells coming right back. Welcome back. Goldman Sachs and J.P. Morgan both hitting all-time highs today. Joe Terranova, long both names, back here at Post 9 to discuss. It's good to see you. What about these trades now, right? We hit these levels, OK, 40K. Now what? New highs quite often for Goldman and JPM. Now what?

So let's get to the headline right away. I think J.P. Morgan's got another 10% to it. So we're talking about 225. Goldman Sachs think JP Morgan's got another 10% to it. So we're talking about 225. Goldman Sachs, I think, has another 10% to it. So we're talking about a stock north of 500. There's been a reawakening in the financial sector, and we took our exposure to the financial sector above 20%. Now, we had exposure below 10% for the better part of a year from the first quarter of 22 through the end of 2023. Now we're increasing that exposure. I think what you're going to see is we obviously have a more cost-conscious consumer. Let's look at the yield curve and you're going to see the steepening.

The long end of the curve is going to stay sticky. It's going to stay high. Front end of the curve is going to come down. It's going to benefit a lot of the money center banks, asset managers. And Goldman Sachs and J.P. Morgan, they're just best in breed. Goldman Sachs has repositioned themselves over the last several years. Executive management has done a phenomenal job in shedding the businesses that were not working. Now they're focused on the businesses that are. It's the capital markets. It's the advisory business. And the investment that J.P. Morgan has made in technology the last several years, nearly $10 billion, it's coming to fruition.

All right. So there was a lot there. 23% is a lot. That's a lot of exposure, right? It is. It's especially leveraged to the space, just given your strategy. Yep. Right. You can't move quick. You'd have to wait things out to see however, you know, things move in a quarterly year. The space over the last month, financials as a group is up near near seven percent. It's been a good move. It's really going to continue. You call it a sweet spot for this. I do. I think it is. And look at the activity that we're seeing in the insurance industry. We've been in the insurance names consistently, whether it's Progressive, Hartford, Chubb.

And you have Chubb? We have Chubb. We've had Chubb all along. I've recommended on Halftime Report. Chubb's been my final trade multiple times. Maybe Berkshire was listening because that's their, you know, the secrets revealed. I doubt they're listening. The secrets revealed. Well, they're listening to somebody. They're watching the Halftime Report. We know that for sure. Because that was their big sort of secret, the position that they had been building. We all know as consumers, that's where the inflationary pressure is and the insurance costs. It's a great place to be. Private equity is there as well.

And we have ownership of Apollo. We have ownership of KKR. Think about each of those private equity companies. They have the exposure to insurance as well. KKR with the exposure to Global Atlantic. So insurance is a popular thing. Asset managers making a return. Interactive brokers in the financial sector has been a wonderful position. More recently, we added the CME. The exchanges are benefiting from an overall capital environment, capital market environment, rather, it is a very favorable one.

Why have private equity stocks in general, that group, off to the races? I mean, if you look at, I don't know, you could back up a six-month, 12-month chart of some of these stocks. They all look up and to the right. Why is that? I think, first of all, they have the flexibility to take advantage of distressed situations that individual investors can't take advantage of. They've done a remarkable job in doing that. I like the exposure, as I said before, that they've had to the insurance industry. And going beyond that, they're able to capitalize on exposure to growth areas of the economy with less pressure, less pressure on having to sell out of those companies. They're able to ride through the volatility that we know the markets always deliver to you.

I mean, KKR is up 118 percent over over the last month, over the last 12 months. That's why I bring it up. But all those stocks look similar. Aries, for example, is up 81 percent over the last year. So your points will take and Joe, thanks, Joe Terranova. All right. Up next, we're charting out the rally. The Dow and the S&P are trying for another record close today. J.P. Morgan's Jason Hunter breaks down his technical take, tells us where we go from here. We'll do it next. Welcome back.

Stocks making fresh intraday record highs earlier today. But J.P. Morgan's head of technical strategy, Jason Hunter, warns this could mark the terminal phase for the bull run. Joins me now to make that case. Good to see you again. The terminal phase, why isn't this confirming that the next leg is upon us? Well, if you look at the rebound we've had from the 49-85,000 target zone, that was our initial target zone when you saw that March-April short-term top build. The markets rallied from that, and clearly it's carried inertia again. These new highs aren't being confirmed by momentum. So what we think we're seeing potentially is, you know, starting in March-April,

that deceleration, the pullback, and now another push to a new high. If the market can't sustain these highs, and right on top of next resistance at 53.20 to 53.50, we suspect the market will stall out there, a pullback that then breaks the 50-day average again. We think you have to take that very seriously. Ultimately, the entire first half of the year, this price action we're seeing, let's call it a range between 5,000 and 5,300, may turn out to be a distribution pattern. It's hard to have a lot of conviction in that until we see the price action develop and the failure from the new high. But that would set what technicians call momentum divergences on the lower frequency charts, the weekly timeframes, the monthly timeframes that

are already in place. You know, that would set those signals, given the curve inversion. Historically, that tends to mark the terminal phase, like we said in our note earlier this week. I know, but there's like a lot of potentially, a maybe. I mean, I'm wondering why wouldn't the market be able to sustain this move? There's a lot of suggestion that it won't be able to handle that. Why? Well, so, you know, again, taking a big step back, looking at the cross-market contextual data, the yield curve, three-month, five-year curve has been inverted now for 18 months.

If you go back to the 1960s, leave out the period of 1970s when the monetary policy was so volatile, the equity market just followed the yield curve. If you look at the 1960s and the post-1980 world, it was roughly an 11 to 23 month lag between curve inversion and equity market peak before you got a bear market that was associated with recession. Like I said, we're at 18 months in now, right inside that window. So that's where you start to look for problem areas. Like I said, we're at 18 months in now, right inside that window. So that's where you start to look for problem areas. Like I said, we're not aggressively saying go short the market right now. In fact, on a near-term basis, tactically, until we see that deceleration, as long as

the S&P is above 51.50, where it broke out from earlier this month, it still carries bullish momentum with it. We're not saying aggressively go short. But if you do see that reversal unfold and then you get a break below the 50 day average, that's something I think you need to take very seriously given where we are in the cycle. I understand. But if we obsessed over the inverted yield curve for the past 18 months, we would have missed the entire bull market. We would have missed the entire thing because we've had an inverted yield curve for that long. And all we have talked about is whenever you have a inverted yield curve, well, got to watch out. Going to have a recession. You know, don't don't be too bullish.

And we've taken out these higher levels and we're still talking about an inverted yield curve. Yeah, so the entire 18 months is in the window. Like I said, it's once you cross the 11-month in. And if you look at that iteration when 11 months was ahead of the market peak, that was the COVID recession. So I think you could take that away. It's really 15 months to 23 months if you look at the bulk of the recessions in that time window. Now that we're at 18 months, you're now in that window. It wasn't the entire period that you look

at the yield curve and say, oh, the second you go inverted, you get bearish. That's not the case. But like I said, it's now you've had monetary policy in restrictive territory for quite a while. And the pattern's the pattern. You know, historically, when you get in this window, that's when you tend to see equity markets decelerate, form distribution patterns and roll over. I understand. But but again, I think it's important to point out, OK, I'll give people the fact that you you don't have a recession without an inverted yield curve. But an inverted yield curve doesn't always mean you're going to have a recession. Right. It doesn't. There's not one in the same. So to the extent like you could have an inverted yield curve for a long period of time and not have a recession. That's why this time, for a variety of reasons, I know that you get killed for saying stuff like this, that it actually could be different. Sure. And if you look, the two

times you've had the three month, five year curve, even marginally inverted without a recession was the mid 1960s had an iteration where the curve barely got inverted and then immediately started to move in the other direction because the Fed eased aggressively. And the other time was the mid-1990s. Again, curve marginally inverted and the Fed immediately started to ease aggressively and caused the steepening. If the Fed throws caution to the wind and just starts easing aggressively here, sure, that changes the picture. But for right now, like I said, the curve's not just inverted, it changes the picture. But for right now, like I said, the curve's not just inverted, it's deeply inverted. It's been that way for a while. Those

two times where you had that mid-cycle slowdown via curve inversion, it was very marginal, barely went below zero, and it wasn't there for a very long period of time at all before the Fed started to move the narrative in the other direction. So I mean, this time, could it be different? Sure, it could. I think that's what the market's trying to say right now. And, I mean, this time, could it be different? Sure, it could. I think that's what the market's trying to say right now. And like I said, we're not aggressively short. We'll wait for the pattern to show up and the break to happen before we would suggest that aggressive, bearish view to actually execute on that. But for right now, it's something to watch very closely and be mindful of. All right, Jason, we'll talk to you soon. Thank you, Jason Hunter. Thank you,

JP Morgan. Up next, we're tracking the biggest movers into the close. Back to Christina for that. What do we see? Could it be AMD a better stock pick than NVIDIA? I'll explain that argument and more next. We are less than 15 minutes from the closing bell. Back to Christina Partsenevelos now for the stock that she is watching. What do we see? Well, move over, NVIDIA. Wolf analysts want AMD instead.

It has nothing to do with fundamentals. Don't worry. They just think NVIDIA shares have climbed a lot this year, went up over almost 100%, while AMD could see a bounce from its new GPU launch later this year. You can see AMD shares up 2%. Canada goose earnings were more than three times greater than the street's Q4 earnings expectations,

the beat enough to offset the fact that the co-maker withdrew its long-term financial targets amid the, quote, more challenging consumer spending environment that has caused its direct-to-consumer and wholesale business to have not performed, quote, according to their expectations. And yet the stock is soaring 16 percent. Scott. Christina, thank you. Still ahead, deers dropping today. That stock near session lows as we speak. There's the chart down near 5 percent. That's after some weaker than expected guidance. We dig into that report, what it might mean for the rest of the space coming up as we head out. Another look at the major averages. We're all trying for another record close. Dow, they get it. It's going to be a fight to the finish. We're back after this.

Coming up next, we set you up for earnings and OT. Take two is hitting at the top of the hour. We'll tell you what to look for in that report when we take inside the market zone next. We are 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, Sima Modi on the post-earnings sell-off in Deere. And Steve Kovach looking ahead to take two earnings out in OT today. Mike, I turn to you first. Anything positive anywhere? Are the majors today is going to be a new record high? Your thoughts on Dow 40K, where we go from here? Makes sense to have a little bit of a breather here. I mean, the Dow's up 5% in two weeks, so it's not just that it hit 40,000. Everything pretty much still working in line. And I think to sort of suggest we had a completed scare. And what was the scare about? The scare was, are we no longer in that really comfortable mid-cycle type environment? All it took was bond yields going from 430 to 470 and a little bit of a wobble in the economic surprise index, and we went down 5%. And now we kind of have this sensibility now

that it was probably a false alarm. We're back to where we were. I do think the fact that banks continue to rally is a very positive thing. The market's been able to rotate. When earnings are growing in a bull market, it's hard to bet against it in an outright way. But again, we're back up to these levels where it's probably going to take a little more. I still hear some people, you know, trying to bring up, you know, 40K and go away, like it's marking a top in the market because the kind of

number that it is. I wouldn't say because of the number. I mean, you know, we hit 30,000 in November of 2020, went up an immediate 10% from there, and held it until the bear market of 2022. So it's not as if somehow people want to lock it in when the Dow gets to a certain level. It's a reminder of how far we've traveled. It's a reminder that markets are at new highs. But that should probably suggest to people more

that things are positive than that they're dangerous. All right. Seema Modi, what's happening with Deere today? Well, on the conference call, Scott, Deere really talked about how they're focused on inventory management, cost discipline, and the impact of falling crop prices, how that's weighing on farmer sentiment. It's holding farmers back from making big purchases of tractors and combines. We also got a read on the consumer, Scott, with Deere mentioning that riding lawn equipment sales were down due to higher interest rates. And that follows several years of strong market demand. The company cut its 2024 guidance for the second time this year.

And the stock, which was one of the better performing industrial names over the past two years. Now, a key laggard. Executives did seem laser focused on reducing costs. There were some layoffs earlier this year. The other big topic was destocking, a similar trend that we saw at Caterpillar a couple weeks ago. And you'll see shares are underperforming, not just the XLI, but the S&P so far this year, Scott. All right. Good stuff, Seema Modi. Thank you very much for that. Steve Kovac, let's pivot to take two. Tell us what to look for. Yeah, take two, not immune to those video game trends we've been seeing throughout the industry. Lots of layoffs, basically every major company. As for take two, they cut five percent of their workforce recently. That was about 600 people. It's also they can focus on bigger money making games. And of course,

in take two, that means Grand Theft Auto. Now, there have been some stock fluctuations over the quarter based on some really thin rumors that Grand Theft Auto 6, the next game, could be delayed. The company is still sticking with its 2025 launch window. So we're going to be paying attention to more precise timing from Take-Two on when GTA 6 could launch and that also could show up in the guidance as Take-Two wraps up its fiscal 2024, Scott. All right, Steve Kovac, thank you very much for that. I appreciate it. Less than two minutes to go, Mike. So what do we need to turn our attention to now? I mean, we get, you know, Fed speak doesn't really seem to move the needle all that much. I mean, I don't

know, rates will keep an eye there, but what's all going to be on your plate? I think it's, you're right. The Fed rhetoric is now kind of more of the same. And we're fine with their benign patience type of role. I really do think it's about the pace of economic growth. It's really not so much about every wiggle in yields from here. I mentioned the Citi Economic Surprise Index. It's pretty much as negative as it's been since early 2022 or 2023 for a moment, meaning we are decelerating relative to expectations. So weekly claims are going to matter, and the ISMs are maybe going to start to matter a little bit more. But to your point, the reason that we're at 12.4 on the VIX is that the market doesn't see a lot of the big threats. We made it through this period with a lot of things

that could have knocked us off course. They haven't done so. So obviously we got Nvidia earnings next week. It is gonna matter quite a bit. We are still in this mode, I think, of asking what ultimately is gonna be the payback from all of this tech spending in AI-related capabilities. Nvidia's collecting it right now.

Who's getting paid on the other side? So we'll see if we get any enlightenment on that. Meta still hasn't come back from its post-earnings drop. Pretty amazing, too, to hear Rick Reeder of BlackRock say, hey, 10% to 15% more out of stocks this year. Not out of the realm of possibility. Looks at volatilities very cheap, sticking out like a sore thumb right now.

But the market's up 20% in a year, a lot more than it's up 10% in a year. We're up 11% right now. All right, we're ringing the bell. We'll see if we can eat the gain out anywhere and extend those record highs. I'll see you tomorrow in the OT with Morgan and John.