Closing Bell - Closing Bell: What’s Next for the Rally? 12/15/23

Episode Date: December 15, 2023

Does the Fed relief rally have any juice left? New York Life Investment’s Lauren Goodwin and Jordan Jackson of JPMorgan Asset Management give their forecasts. Plus, Oppenheimer’s Brian Nagel breaks down his top picks for 2024 in the retail space.  And, Roku shares were under pressure in today’s session. Julia Boorstin explains what is behind that drop. 

Welcome to Closing Bell. I'm Sarah Eisen in today for Scott Wapner live from the New York Stock Exchange. This make or break hour begins with the S&P 500 on track for its seven straight week of gains. Here's your scorecard with 60 minutes to go in regulation. Tech and discretionary holding on to the green while utilities and real estate are the worst performing sectors right now. Boeing is the top Dow stock after a positive analyst call over at Bank of America. And the Dow is slightly lower in this final hour. We will look at whether the Dow can turn things around, maybe even notch another record close. And that brings us to our talk of the tape, whether this Fed rally has any juice left.

For that, we turn to Lauren Goodwin of New York Life Investments. She joins me here at Post 9. Lauren, does it? We've had a nice rally. We're up another 2.7% on the S&P just this week. What now? I think this is a Fed relief rally that the market's been waiting for for 18 months, and I think it has legs. Now, my economic view is a little bit less constructive than that, and so I'm worried that where we are in this moment of Goldilocks is just that, a stop on

the train towards a more difficult economic situation. But for the next several weeks, I don't see any opportunity for the data to knock the market off of this track. So if the data is coming in good, and it is, it's been pretty benign, even the fourth quarter GDP estimates are going up. Why are you worried about the outlook, the economic outlook? Well, the fourth quarter GDP estimates are where we are right now. And the market reflects that, which is that things have been going well. There's been no sign of recession over the course of this year. But that's been in part because of liquidity surprises that have come in over the course of the year, including liquidity from the consumer. As we turn the calendar into the new

year, I see more headwinds, mostly from the lagged impact of Fed rate hikes over the course of the year. And so that's an environment where, again, for the next few weeks, we probably see a broad range of risk assets continuing to perform well. I think we should use that opportunity to rebalance into sectors that might be more durable in the face of what is continued uncertainty for investors. You're saying recession next year? Yeah. So use the opportunity to what, get more defensive?

A little bit. I think there's a range of opportunities that take advantage of the cyclical environment we're seeing, which includes more defensive sectors and equity. It includes adding duration as a result of what we've been seeing lately. But there are also some structural themes that have come up over the course of the past year, artificial intelligence, digital infrastructure that we think are likely to be more resilient over the course of the past year, artificial intelligence, digital infrastructure, that we think are likely to be more resilient over the course of the year that investors can take advantage of as well? It's just hard to see right now when jobless claims are, what, a little bit above 200,000. That's not a lagging indicator.

There's very little stress in this labor market. So why are you more pessimistic about the economic outlook than most? When it comes to what we're seeing in the labor market, while this economic cycle is different in a lot of ways, what we do expect to happen, consistent with past economic cycles, is that the labor market is strong really until we're already in recession. Nine out of the last 10 recessions, we've seen employment improve, even accelerate, heading into a slowdown. And so, again, employment tells us where we are now, and that is absolutely not in recession. I wouldn't

expect the market to react to negative economic news until unemployment or earnings start to tick lower. For me, that number on the unemployment claims rate is about 275. So to your point, nowhere near there yet. Yeah. So is the disconnect that you're seeing with the earnings expectations for 2024 if the economy turns south? A couple of things. First, yes, with respect to earnings, no matter which way we slice it, expectations for 2024 look optimistic. While things are looking really nice right now, to me, there's not as many opportunities for clear upside from the earnings environment. And so we're concerned that those expectations are a bit too high.

I guess just on the flip side, if we do face a bigger downturn, as you expect, then doesn't the Fed just cut more? And won't the market cheer that on? I think it's a good point, but we're getting that cheer right now. Christmas cheer, holiday cheer, Fed cheer. Where the story does start to change is when the Fed is cutting for not benign reasons, but slowdown reasons. Then the market is likely to respond to recession risk. Let's bring Jordan Jackson into the conversation.

He's from JPMorgan Ascent Management. Also joins us here at Post 9. A treat. You're usually in Washington. Are you as pessimistic about the economic outlook as Lauren is? You know, from a market standpoint, it's kind of hard to be bearish right now. In fact, the bulls are out. I think there was a bull on the New Jersey transit yesterday morning. I thought people were joking about it because of the market. Or it was AI, maybe. I had no idea.

Apparently it was real. Yep. So the bulls are out. And again, I think a lot of it is thanks to the Fed. The biggest surprise for me was I had come into Wednesday's meeting with the assumption that Chairman Powell was going to push back on the notion of rate cuts. But he actually leaned into the idea that the Fed can start to cut rates next year, even if inflation maybe doesn't have a 2.0 handle on it. And I think that was really powerful in kind of this Fed-induced rally that Lauren has highlighted. You know, markets are finally getting excited about it.

So you've got bonds rallying, you've got equities rallying. Liquidity is going to be light through the end of the year. November retail sales was pretty strong. Inflation seems to be coming down faster than the Fed would like. So all these things that the markets are cheering on,

I think they're cheering on for good reason. That's the Goldilocks soft landing. That's the immaculate disinflation. Goldilocks scenario playing out. So it's kind of hard to be bearish in the short term. You know, Fed Chair Powell did lean into cuts two days ago. But then this morning on Squawk Box, John Williams, president of the New York Fed, sounded pretty different. Here's what he said.

We aren't really talking about rate cuts right now. We're very focused on the question in front of us, which, as Chair Powell said, the question is, have we gotten monetary policy to a sufficiently restrictive stance in order to ensure that inflation comes back down to 2 percent? That's the question in front of us. That's what we've been really thinking about for the past five months. And I think we'll be continuing to think about for some time. So whether he was trying to walk back the statement or just injecting his own opinion that maybe there's too much emphasis on the cuts, I do wonder if we're at sort of Jordan peak cut optimism right now and whether that's already baked in. Because you both expect the rally to still continue. But, continue, but we're pricing in now 150 basis points of cuts next year.

Yeah, six cuts is pretty aggressive. And so I think it's really a timing issue, I think, between Powell's comments and Williams' comments. The timing is that Williams suggests that rates can remain higher for longer. If you look at the dot plot, there are no members to anticipate any more rate hikes over the cycle. So even those hawkish member does

anticipate that this is the highest that we're going to get on Fed funds it's really a question about. When they're going to start cutting and to the degree that they have to cut. Now. What what's what's been interesting when you look

at volatility both across interest rate markets as well as equity markets. Again I was coming into the Wednesday meeting with the anticipation that maybe equity vol has the scope to catch up to interest rate volatility. But now that the Fed has solidified that they're on hold, maybe interest rate vol can catch down to the very low levels of equity vol.

So it all ties back to this kind of hard to be bearish, at least tactically. And to that point, I mean, we have seen the rally broaden out this week. The small caps have been a huge story and a big comeback story of five point four percent on the week. So, Lauren, I get it in the next year. You don't want to be exposed to the to that kind of area. But do you think there's some catching up from left behind groups? I agree with Jordan that this this rally is broad and it's risk on. And I think that in the near term, yes, there's room for it to continue and room to be optimistic. The question for investors is how tactical you can be. When it comes to Fed speak, I do expect that we'll see a pattern that frankly we've seen all year, which is that the Fed and Chair Powell work pretty hard

within the construct of the meeting not to surprise markets. And then everybody's out talking the tape, trying to say, hey, inflation's still pretty high. We're not thinking about rate cuts just yet. In the new year, what matters for me about rate cuts is why the Fed's doing it. If we're getting six cuts next year, like the market suggests, from my perspective, that's because we're hitting recession. Yeah, I mean, the thinking now is that they will be cutting next year because inflation is heading all the way back down to 2%, their target. And they feel more confident bringing policy back to sort of normal levels so they don't wreck the job market, which is still good, and the economy, which is still good. Right. And that's what I've been thinking about a lot with respect to this argument, is that, A, it's economically and mathematically entirely correct.

As inflation moves lower, you should be able to adjust the policy rate just to keep real rates neutral. They're not going up. They are going to still go up. But if the Fed is cutting rates in March or May, as the market seems to think it might, and nothing is going wrong, then I expect we'll continue to see financial market conditions loosen. And that's an environment where confidence ticks higher, et cetera. It's hard for me to see that Goldilocks then not resulting in an overheating, a reheating of the economy. So it's something that we're— There's the other risk. Exactly.

It's a really delicate balance that we're, it's exactly, it's a really delicate balance that they're playing in. So Jordan, Lauren's using the opportunity, the strength to rebalance, shift into more defensive places where she wants to be in a weaker environment. What about you? What's the strategy around this year-round rally and does it continue? Sure. So I think, and I agree with a lot of Lauren's points, those tail risks in the broader economy are certainly there, that risk of potentially over... I'm trying to get you guys to disagree, not agree. But again, I think tactically, I'm bullish in the short term. I think we'll get a bit of wobbles in the market in the first quarter.

We know analysts tend to overestimate calendar year earnings coming into the year by a degree of about 5% to 8% points. So there could be that kind of over-optimism amongst analysts' expectations moving into 2024. But we have to remind ourselves that so far, year-to-date, earnings expectations for 2024 have come down by about 3%. Companies have done a heroic job, I'd argue, in protecting margins, and I think that sets us up for a margin stabilizing over the course of 2024. The big risk is going to be revenues, right? With inflation coming down, nominal GDP taking a step down. Nominal GDP growth is also going to take a step down. So probably volatility picking up a

little bit in equities in the first quarter of next year. But on the back of the Fed, potentially cutting rates more aggressively than inflation coming down, now the real policy race becomes more attractive, comes down, and that can allow markets to rally. Now, of course, next year is an election year. That's going to add a whole other layer of headlines and market uncertainty, especially moving towards the end of the year. But we know typically after that election result comes through, markets tend to rally towards the backup of the year.

So I'm calling for actually a low double-digit return year coming from the stock market next year. And what sectors lead? So I think growth actually leads the charge. And that's going to be valuation-driven. We're seeing that in the market today. I think that dynamic continues. So this month has been a preview. This month has really been a preview.

I think for the first half of 2024. The second half, though, you're going to want to be balanced, right? Assuming the Fed's not going to go back down to zero. We've looked at the data historically. Going back to 1980, when you look at prison with interest rates are between the 10-year, between 3% and 4%, the annualized return on value and growth are equal at about 5 percentage points. So I think, again, growth is going to lead the charge given that direction of rates are going to be lower, valuation-driven

rally and growth. But then you're going to want to be well-balanced across both value and growth. Finally, to both of you, this is the year where cash was king. All that money flowed into money market funds. They were chasing those short-term yields with cash. For the first time in eight weeks, Bank of America fund flows tracked outflows of cash. I wonder if you think that that continues what you would tell people to do if they're sitting on the, what, trillions of dollars now in money market funds. Time to take it out. I think the movement in bonds is what's spurring investors to move money away from cash. And as we look to the new year, though I see economic risks potentially rising, which may make you more cautious in an asset allocation, I think that remaining over-allocated to cash, especially for the average investor, is really tricky. Because

even after a market downturn, when you start to see the market rebounding, it's usually when the economy feels the worst. And so rebalancing in that environment is just really tricky to actually pull off. Typically, getting back into the market is best two to three months before a Fed pauses. You get the uptick that we've seen in the last couple of months. The best time other than that is right now. Right. And so I do expect that trend will continue. Into bonds because you want some protection? Into a balanced portfolio, but I think that increasingly in 2024, that favors bonds. That has to do with the quality that we see across bonds, especially in traditionally less favored sectors like high yield as the economy slows. And it's because yields are high. Do you guys expect this to be

a tailwind for the equity market, money coming out of money market funds? I think it at least provides a bit of a floor on just how much further stock prices can fall. You know, it's interesting. I was looking at the data earlier today. If we have a soft landing play out, maybe we can go back to 94, right? The stock market returns between 1995 and 1999, looking at the price on the S&P 500, on average, the stock market was up 26% per year, per annum, between 1995 and 1999. If you go back to the global financial crisis, outside of negative return years, in every year, maybe 2011 was a bit of a wild card, the stock market has been up double digits.

And so it's actually really hard to have a single digit return year in the stock market unless you're negative. And so that's why I think coming out of it- Unless Lauren gets her recession. Maybe unless, but then markets can whiplash, right? You can get that correction in the first half of 2024, and then markets go off to the races in the back half of the year, recouping those losses. And so I think, I agree of the year, recouping those losses. And so I think I agree that, you know, investors should remain well balanced. I think a 60-40 is probably where you want to be, at least over the near term. And then I'd probably start to tilt overweight stocks once the Fed starts cutting rates. Yeah, certainly working out right now.

Thank you, guys. Really good discussion to wrap up the week, Lauren and Jordan. We'll send it now over to Christina Partsenevelis for a look at the biggest names here. Moving into the close, Christina. I want to start with DocuSign because they're surging late in the day on a report that the e-signature company is working with advisors to explore sales. The Wall Street Journal reports that talks are in early stages and may not actually lead to a deal. The stock, though, had a market cap of roughly $11 billion before these headlines emerged,

so any transaction would likely be a very big one. Shares up almost 12% now. Lennar, under pressure despite beating expectations for earnings and revenue, but gross home sales margin fell from the prior year and came in below the company's forecast. While that's weighing on the stock this afternoon, Lennar was still able to notch an all-time high earlier in the session. Those shares, though, down about 3.5% right now.

And tractor supply is also in the red after Bank of America downgraded the outdoor-focused retailer to underperform. Analysts say, quote, fewer backyard chickens, more back-to-office. Noting that the big boom in gardening, farming, and outdoor recreation that the pandemic fueled is starting to pull back. Price target goes from 207 to 171. Shares off by 3%.

Chickens. I wish I had chickens. I know someone who during the pandemic got chickens. I do as well. And then one of hers like flew away or disappeared. She got eggs, though. My friend, too, was attacked by another animal. Anyway. Whoa. It rings true. Thank you, Christina. Thanks. Christina Partsenevelis. We're just getting started here. Up next, trading consumer strength, strong data and positive analyst

chatter dominating the retail space this week. An analyst will give us his top picks for 2024 right after a break. We are live from the New York Stock Exchange. Dow's down 45 points. You're watching Closing Bell on CNBC. Bank of America out with a bullish note on consumer spending this week, saying November showed, quote, a good start to holiday spending. Treasury Secretary Janet Yellen speaking along the same lines when I spoke with her on Squawk on the Street earlier this week. Here's what she had to say about the consumer. Consumer spending we have seen remain solid. Consumers built up a buffer stock of saving and wealth during the pandemic. They've been spending that down gradually.

Here to discuss which retail stocks could benefit the most is Oppenheimer's Brian Nagel. Brian, it's good to see you. It really hasn't been the best year for retail and consumer names, unless you're like in the cruise industry or Amazon or a home builder, some of them are actually down year to date. So what do you do with these retail stocks? Well, good afternoon, Sarah. So, look, I mean, I think that's a fair assessment. I mean, it's been a very, very tough backdrop for consumer stocks. Now, I think the important point there is the stocks.

For the companies, and I agree with Jenna Yellen's comments, I mean, spending has held up remarkably well. Okay. And that's, you know, so from a fundamentals standpoint, the fundamentals have been much better, I think, than the stocks. Now, the Fed announcement this week to me is pivotal. You know, I think the idea now that the rates have likely topped out and are moving lower, I think it sets the stage very well for more discretionary consumer or discretionary stocks as we look into 2024. And so essentially, in my mind, you know, these these stocks will begin to catch up or track better solid underlying fundamentals that these companies that we've seen for a while now. Do you want to sort through some of the ones that have had the toughest go this year?

A Foot Locker. I'm just looking. Tapestry, Best Buy, Bath & Body Works, Tractor, so they're all down for the year. Yeah, so those are a few of those names you mentioned I don't cover. Like a Best Buy, I do cover. I would stay away from everything. The way I would play this, okay, as I look at what's happening now and then into 2024, you know, one message to my message to our clients has been, look, they're rate-sensitive names. So Home Depot and Lowe's on the home improvement side. The idea that rates are likely moving lower, that's a big positive for home improvement retail.

And then another names I talk about a lot on your show is athleisure. So names like Nike and Lululemon. I mean, Lululemon, we've seen fantastic results out of it. That stock's doing well. Nike's lag. Now, we're going to get a report from Nike next week. I think the report itself will be generally in line. But again, if you look beyond that report, with the backdrop of a still very solid consumer, lower rates, I think that's when that stock starts to work even more. Do you worry at all about revenue growth in a time where apparel and footwear prices are either disinflating or deflating because

companies benefited from those higher prices, didn't they? Absolutely. And so, you know, the key there is to really understand where elasticity of demand is. You know, so there's categories like the auto parts retailers. Now, my team and I downgraded the auto parts retailers a while ago, largely on that concept. Now, AutoZone, O'Reilly, extraordinarily well-run companies, but there's not much elasticity of demand. So they benefited from inflation. As inflation wanes, that means sales growth or revenue growth will be slower. But if you look at companies like Nike, again, I'm going to keep on highlighting Nike, there's more of an elasticity

of demand. I don't see Nike dropping prices, to be clear. I mean, Nike's done a really good job on the innovation side. But as inflationary pressures broadly subside, as the consumer feels better from an inflationary standpoint, you could very much see better improved unit demand for a Nike. So that's essentially how it went. Again, the companies you want to be careful of are those that are primarily driving sales growth through higher prices. And again, from my coverage, you would hire the auto parts retailers. So since you were zeroing in on Nike, let's talk about it. Reports earnings on Thursday. It has lagged. I think it's up like 3% this year, but it's still valued at 32 times next year's

earnings. Where's Lulu? In the 30s somewhere. Why do you think, first of all, Nike's been punished and what do you think it's worth? Yeah, so look, I mean, Nike to me, so a 32 multiple is not low, right? I mean, if you look across the market, that's not low. But for Nike, it is. OK, I mean, this is Nike. This is one of the most dominant global brands on the planet. Historically, we've seen that multiple significantly higher than 32 times. So when I think about where that stock should be priced, I look back at history, particularly in environments where rates are lower. That's when Nike tends to get a higher multiple. Now, fundamentally, this has been a classic wall of worry type stock. So as I talk

to investors out there, there's been worries about China. There's been worries about demand growth within the United States. There's been worries about inventory. There's been worries about demand growth within the United States. There's been worries about inventory. And one by one, Nike, with its very solid fundamentals, has essentially tackled those type of worries. And again, as we look into 24, I think those concerns that have weighed upon the stock further abate. You know, inventories are now clean. I think we're still seeing solid demand in the United States. I think that's going to get better as Nike ships more product to its wholesale partners. And everything we're hearing, despite the worries of some type of economic malaise in China,

what we hear from Nike and then, frankly, from Lululemon as well is that demand for these products is quite good. But they've all sounded a little bit cautious. I mean, even Lulu, which never just never sounds cautious. Remember when they came out, they they warned on the holiday season, at least that they were aware of what's happening with the overall environment and numbers missed estimates. Given everything you've heard from all the retail companies you cover, you expect the consumer to to hang in there next year, continue to show growth, even if we are seeing softness in the broader economy? I do. I look, I? I do. I think consumer spending has stayed solid, and I expect it to remain solid. I mean, the key, and this is not the most insightful of comments, is the job market. I mean, most consumer spending is driven by jobs. If consumers have jobs, they feel comfortable in that job. If they had to leave a job,

they could find another job. That's what drives most spending decisions. And, again, despite all the concerns about, you know, the U.S. economy, the global economy, the macro backdrop, the jobs market within the United States has remained very resilient. And I really think that's been the key driver to most spending. I, you know, from my standpoint, again, being a fundamental analyst, I think that holds in. Yeah, I mean, some people say the excess savings, though, being a fundamental analyst, I think that holds in. Yeah. I mean, some people say the excess savings, though, are running out. Janet Yellen said they're being spent gradually down. There's that. There's the student loan payment resumptions. There's,

you know, fewer SNAP benefits. You can make arguments on both sides, but I guess jobs is key. That's exactly right. All those factors play a piece. The jobs is the most important for general consumer spending. Got it. Thank you, Brian. Brian Nagel. Appreciate it from Oppenheimer. Up next, betting on a box office boom. The strike may have hit Hollywood hard, but now hopes are high for a strong holiday season. We're going to break down the stocks that could benefit the most when Closing Bell comes right back. Welcome back. Hollywood strikes swaying on the film industry this year, but now hopes are high for a strong holiday season and beyond.

Julia Borson here with more. Julia. Sarah, Warner Brothers' Wonka movie grossed $3.5 million from Thursday night previews. That puts it on track to gross as much as $40 million this weekend after opening with $43 million internationally. And Warner Brothers, whose stock is up about 7% this week, has the most on the line this holiday season with two other big budget films, an Aquaman sequel, as well as the Color Purple musical coming out over the holidays. So the question is whether those franchises, along with Oscar bait and

family films, can boost the year's box office across the $9 billion milestone. Now, year to date, this year's box office is $2 billion below 2019 levels, according to Comscore. Now, after a mixed year for theater chain stocks, J.P. Morgan is predicting that next year the box office will decline. This despite a range of big sequels and franchise films set to be released, including sequels to Dune, Deadpool, Transformers and Lord of the Rings. There's even a Mean Girls movie coming out. Now, J.P. Morgan forecasts, though, that the 2025 box office will rebound thanks to a new Mission Impossible movie and some more Marvel movies.

But Comscore's Paul DeGarabian warns us that franchises are no longer safe havens for studios. Sarah? What happened to AMC stock? Got hit harder than the other. Is that just like the correction from the meme trade? Yes, it's a meme stock. AMC sort of trades separately from the other theater stocks. If you look at Cinemark and IMAX, they tend to reflect more what's going on with the movie industry.

AMC was really bolstered by that meme stock moment. You see it's come down quite a bit. Yeah, doing equity offerings and everything. Julia, thank you. Up next, charting the rally. Why one top technician is betting on some serious upside for 2024. He'll make his case and break down the key levels to watch right after this break.

Closing bell, we'll be right back. Welcome back. The major averages are set to close out seventh week of gains here. That's the longest weekly win streak for the S&P 500 since back in 2017. Our next guest says a record high could be in the cards for 2024.

Let's bring in John Kolovos. He's head of technical strategy at Macro Risk Advisors. John, what do the technicals tell you about how much more legs this rally has? Yeah, thanks for having me, Sarah. Look, listen, we take a step back and we take a look at the trend of the S&P 500 going back to 2009. There is a series of higher highs and higher lows in place here. And when I do my forecasting, my trend work, I think the S&P can get to about as high as 52.80 on the upside. But really the technical fair value, as I call it,

is somewhere closer to around 5,000. So I think we can continue to push up higher on a trend basis to about that 5,000 area. And also the other way to kind of think about how we can keep pushing up higher would be with breadth. We've had significant breadth thrust as of late, a good spike in new highs, good volume to the upside, and also market cycles are favorable into next year. Do bonds have to keep rallying for all that to happen? Yeah. So bonds would be a huge part to all of this. Basically, this inverse relationship between

stocks and interest rates has to keep, right? So lower rates, higher stocks. What typically happens going into a recession or a recessionary bear is that the correlation turns to similar, turns the same. So then if stocks were to start falling rates lower, and I do think rates go lower next year. I think they're going to consolidate consolidate 10 year to about 325 ish or so. If stocks stop falling down, falling them lower, then yeah, 5,000 may be hard to be hit. Who is going to lead this rally? Which sectors do you like? So my models are overweight industrials. I really like our industrials look. I'm still overweight technology. There's parts of softwareals look. I'm still overweight.

Technology, there's parts of software that look really, really compelling. Yeah, I get it. Semis have been great, but there's some really great base breakouts that are forming within the small mid-cap area of technology. I like that quite a bit. What I would be avoiding into next year, at least at this stage of the game, would be energy. While I am bullish longer term on oil, I just don't think it's done going lower. So I want to be avoiding energy for the time being. Same with health care. A lot of the equipment names there just aren't doing well.

You'll find a few biotechs are OK, but I would be avoiding them. So basically, industrials and technology look really good. And then also parts of financials. Ex-banks, insurance look pretty strong. Capital markets look good. So those are the areas. Why ex-banks? Because we're finally getting the curve steepening. That's good for banks. Yeah, to an extent. So what I look at it from a longer term perspective is these stocks are just getting off the ground. Sure, they're up a lot over the last couple of weeks, but they're barely above moving averages. Their 200 days aren't sloping higher. They're early stages. Not enough repair has been done. Constructive, less bearish as they were,

but they really just feel kind of counter-trendish to me. So the strength right now, and that's what I do in my process, I want to lean on long-term winners, and they tend to not be within banks right now. So you see lower yields, higher stocks. The third ingredient has been a weaker dollar. It's down 1.5% this week. Also helpful for risk appetite. Where do you think that goes? Yeah, I'm a dollar bear.

I've been a dollar bear for a while. 95 is where I'm looking for on the DXY. Had a major structural peak about two years ago there, and it's been progressing nicely. So long as those correlations hold in place, a dollar down to 95 would be pretty good. But I think on a short-term basis, though, what we should keep an eye on is the emerging market currencies like the peso and whatnot. Those are tied to risk assets. The peso does look like it wants to keep working lower

for the time being, but I think we're pretty close to a reversal higher shorter term. It's had a great year. Mexican peso up like 12 percent. Thank you, John. Good to talk to you. John Kulibos. Up next, we are tracking the biggest movers as we head into the close. Christina Partsenevela standing by with that. Christina. Scholastic book fairs not doing as well in U.S. schools lately and renewable energy names climbing higher. I'll have details on both those stories next. About 14 minutes until the closing bell. Let's get back to Christina Partsenevelos for a look at the key stocks to watch right now. Christina.

Well, Scholastic is deep in the red this afternoon as the children's book publisher posts a sharp decline in revenue from last year. The company also cited a complex environment in U.S. schools and saw big drops in its book club revenues. Those shares are down over 11 percent right now. And some solar stocks are seeing more relief today as Jefferies initiates coverage of First Solar and Phase and Sunrun with buy ratings. Analysts see better risk reward dynamics for companies with exposure to utility scale, strong backlogs, and balance sheets. The group has been hard hit this year because of rising rates, but optimism, of course, around the Fed's moves in the new year and overall stabilizing of rates has allowed some

of these names to rebound in recent weeks. For example, you're seeing Sunrun on your screen right now. It's up about 60% just in the last month or so, but zoom out on the year, it's still lower, up almost 2.5% today. Sarah? Yeah, first solar, top of the S&P right now, up 6%. Thank you, Christina. Thanks. Up next, Coinbase shares slipping. That stock down now 4% or so. We're going to break down what's weighing on the name. That and much more when we take you inside the market zone. Be right back. We are now in the closing bell market zone. Citigroup U.S. equity strategist Scott Croner is here to break down these crucial moments of the trading day. Plus, Kate Rooney with the latest on the ongoing struggle between

the SEC and Coinbase. And Julia Borsten on what's behind the sell off in Roku shares today. Scott, let's start with you. Fun to be back in the market zone with you. So another more than 2% up week here for the S&P 500. The Fed certainly was the big deal and the big event. How much of a game changer was it when it comes to the outlook for stocks? Well, I think it clearly was a game changer. And again, as we've been saying for a few weeks now, focus a little bit less on Fed funds, focus a little bit more on 10-year nominals. And so you see what's happened here in response to the perception that we're getting closer and closer to a Fed pivot. And so as 10-year nominals have come down below 4%, you really have kind of changed the landscape in terms of how investors are thinking about both the macro picture, but then also the valuation picture for discounting future earnings. So the setups here are pretty constructive. You might argue that we're running

a little bit ahead of ourselves in terms of where valuations are gone, but certainly have to acknowledge that the trend in terms of getting to a closer to end of Fed hike cycle is rapidly approaching. Your end target for you is 5,100 by the end of next year. Are you thinking of raising that? I know it's early to be doing such things, but you said it was a game changer, what we got from the Fed. Yeah, so let's just put it in context. So our 5,100 is essentially 245 in S&P earnings, which is well ahead of where sell-side consensus is in terms of other strategists. And we're putting a 21 times multiple on that, which we get a lot of questions on.

So I feel pretty good about that framework. What has to happen, quite honestly, for us to end up pushing that target higher is to go to our, let's call it more bull case, which is a more defined soft landing where you can actually get upside to your earnings projections and then the year closer to 260, let's say, and then talk about a more aggressive multiple. Again, it's a little premature to get there, Sarah, but that's the way we have to start thinking about it. But here's the thing. The market is so enthusiastic about rate cuts after this week that already you have Fed members out there walking back expectations in terms of March being premature. I expect a whole lot more of that kind of speak in the next few weeks.

Is the market going to pull back and start to adjust the timing for the cuts? Yeah, let's I mean, our narrative, you know, and I think this is a well, is it's a good narrative? Is that look at, you know, we've had this great move. You don't get this type of move in the S&P without digesting it at some point. It is going to be, you know, sort of news dependent on that. You know, we're expecting as you go into the Q4 reporting period, which is still, let's call it a month away, we're probably going to see a downward revision bias to full year consensus numbers as companies are still expressing caution, right? So if you

think about that in the context of a Fed that's going to argue for, hey, look at premature to get too aggressive on rate cuts here, we do think you set up for a pullback, but we want to be very clear that into said pullback, we're looking to aggressively position and specifically broaden out with a focus on the cyclical side of the market. Does that include small caps, which have had quite a banner week? Yeah, we've been arguing for, I don't know, a month or two now, Sarah, that when you think about the small mid cap setup, the valuations here are attractive and everybody sort of has had a pretty good perspective on that. But what we look at is that what you get with small mid is a leveraged alternative to S&P equal weight or

even S&P enhanced value. So what we think you get with small cap is a little bit more of a more aggressive play on an eventual Fed pivot and risk on dynamic on the other side of recession fears. So if you expect the market to keep broadening out, what do you do if you have a lot of exposure to the Magnificent Seven, the mega cap tech stocks that have led this market all year long? You know, in talking to investors, I mean, one of the narratives that comes out here is that you have pretty outsized gains relative to benchmark weights. And so what we're arguing is that the S&P cannot move materially higher without that mega cap growth leadership participating. OK, but on the heels of this year's performance, it's not a huge leap to say, hey,

can you look at as we think about reducing weights down to a more comfortable benchmark level, where do we reemploy those funds? And that's where you really begin to set the stage for a broadening. That and the opportunity, we think, with cash that's still on the sidelines, that thought it had time to move out the duration curve that is now sort of second guessing itself. Really quickly, what's the biggest risk to your forecast at this point for next year? I think it's going to be careful what you wish for, right? So what ends up happening with the potential Fed pivot and a weaker Fed funds perspective, hey, they're going to do that in response to macro concerns and maybe even micro concerns. So just because we're getting closer to this peaking Fed and the fall of the Fed narrative says we want to own equities. You have to be prepared that volatility is going to come with that. So that's essentially the argument would be be careful what you wish for. We're going to have to navigate some volatility next year. Be prepared and be prepared to to buy into said pullbacks. Improvement as we speak here, Scott, just into the close. Thank you very much, Scott Kroener, with the S&P and the Dow going positive here in the final moments of trade.

Meanwhile, watching Coinbase shares, they're coming under pressure today. Kate Rooney has the details behind that move. Kate. Hey, Sarah. So the SEC today denying Coinbase's request for new crypto rules. They said the existing rules that govern things like stocks, ETFs, they work just fine when it comes to crypto. SEC Chair Gary Gensler repeating a point that he has made before. He says existing laws and regulations already apply to the crypto securities market. Also said the SEC addresses crypto markets through rulemaking already, emphasized that while crypto does see outsized fraud, for example, relative to its size, it's still a very small portion of the $110 trillion capital markets out there, and said that it's important that the commission maintain discretion to focus on

whichever parts of the market they think need updated regulation. Coinbase's chief legal officer, Paul Grewal, I spoke to him earlier. He told me the company did plan to respond in court. They actually just did. They called it the SEC's denial of this arbitrary and capricious in what they just filed. Today's news, though, hitting shares of Coinbase. You can also see it's hitting shares of Robinhood, which has lead heavily into crypto in recent years, down today more than 3 percent. Both of those companies,

Sarah. Does it mean anything, Kate, for the big decision that the market is very much anticipating around the spot Bitcoin ETF and also very enthusiastic will pass this time? It does in the sense of you can just get the tone of Gary Gensler. I know you spoke to him recently as well. He has not showed his hand at all when it comes to that ETF decision. Pours more cold water on Coinbase's more specific sort of idiosyncratic legal battles that they're fighting. And these are very specific cases, not much to read into in terms of what it means for a Bitcoin ETF approval, other than Gary Gensler's repeated statement that this market needs to be regulated like any other traditional financial market, including stocks and bonds.

He thinks that these things are securities and also, again, called that fraud, which has been one of the big reasons why they have not approved a spot Bitcoin ETF, at least. Yeah, no, he did that yesterday in the interview as well. Thank you, Kate. Kate Rooney. Now back over to Julia Borsten with a look at what is sending Roku shares lower right now, Julia. Well, Sarah, Roku shares have been plummeting after Moffitt Nathanson downgraded the stock to sell, saying that the valuation is stretched relative to its top line risks that they see. You see shares are down nearly 7% right now.

Now, Roku shares have been on a tear. The stock is still up 106% in the past 12 months and is up 26% in the past three months. Michael Nathanson, though, warning that Roku's revenue growth was fueled in part by massive price increases at streaming video-on-demand services. And they expect a sluggish streaming video-on-demand market, tough comparisons to this year, as well as increasing competition going forward. So after Roku's big gains in the past year, now 12 percent of analysts have a sell rating on the stock. 48 percent have a hold and 39 percent have a buy. Sarah, what's been going on with growth at the company? They've had a few good quarters, haven't they? They've had a few good quarters, but one of the issues coming up is that they're going to be lapping a lot of that.

So the question is, the digital ad market, will it be robust? And so much of their business is fueled by these streaming services selling through Roku and really using Roku as the platform that they're based on. And we've had some big quarters of that, but there might be a slowdown there as well. Got it. Roku shares under pressure, down 7%. Still a big winner this year. Julia Boorstin. Julia, thank you. Two minutes to go until the close. Take a look at where we are in the market right now. We've turned green across the board. The Dow spent a good chunk of the day in the red, but getting a boost here into the close. What's helping out today? Well,

it looks like the biggest contributor to the Dow gain is Boeing, adding about 50 points. Salesforce, Microsoft, American Express, Home Depot also adding to the Dow's rally. Some of the stocks getting left behind today, McDonald's, UNH, it's the defensive groups. Goldman Sachs is lower, but has been a big winner this week as well. Look at the S&P 500. It's also positive, just barely in these final moments of trade. It's tech that's been outperforming all day today. Information technology, communication services, consumer discretionary, and staples are all positive. Everybody else

looks like is negative on the close. The NASDAQ up four-tenths of 1%, adding to the gains for the week. So now we're up almost 3% here to close out the week for the NASDAQ. The S&P up 2.5%. The Dow up 3% on the week. And a reminder, if the Dow can close positive here at these levels, that will be another record high close for the Dow. The biggest winner of the week, though, is the Nasdaq 100, up more than 3 percent. You've got strength in places like Costco after reporting earnings, a beat on the top and bottom line, good membership numbers, good grocery business there. JD.com is having a nearly 5% up day. And then the Magnificent Seven, Microsoft, Amazon, NVIDIA, they're all working today. Meta making a move higher as well. That is certainly helping. The biggest story, though, of the week has been the Federal Reserve. First, we got benign inflation number earlier in the week,

CPI and PPI. And then a Fed that really leaned into that, pretty much signaling that they're done raising rates and talking about cutting rates. That has been an added catalyst to an already very bullish month for the market. There's the close, a record close for the Dow Jones Industrial Average. We are now sitting nicely above that 37,000 mark. S&P goes negative right at the close, but a big up week.

Seven in a row. That's it for Closing Bell.