Closing Bell - Storm Clouds Set to Clear? 10/6/23

Episode Date: October 6, 2023

Are storm clouds for stocks about to pass as earnings season kicks off in earnest next week. Fundstrat’s Tom Lee breaks down today’s big reversal in stocks. Plus, Sebastien Page from T. Rowe Price has been a reluctant bear… but he might be changing his tune. He explains why. And, NYU’s Aswath Damodaran – the so-called “Dean of Valuation” – weighs in on the tech trade. 

Boy, what a reversal. Welcome to Closing Bell. I'm Scott Wapner, front and center this hour. It is a reversal of fortune for stocks after the hotter than expected jobs report sends the S&P sliding only to stage a comeback as interest rates hop off the hot burner. Here's your scorecard with 60 minutes to go now in regulation. Well, there's your intraday S&P 500. The entire story is right on your screen right there because that's where the midday turnaround happened. Just as the 10 year note yield retreats from its new cycle high. Not hard to see what's happening. Rates down, stocks up, every sector green except for consumer staples.

They've had a miserable week. Names like Coca-Cola, Pepsi hit especially hard. We'll focus on all the green because that's really the story today. NASDAQ, another spot to take note of today. It's the outperformer as well this week. Even Apple up nicely despite getting that midweek downgrade. A strong week for Alphabet and NVIDIA as well. Take a look at those three having pretty good gains. Leads us to our talk of the tape. Whether the storm clouds for stocks are about to pass as earnings season kicks off in earnest next week. Let's ask Tom Lee, Fundstrat's co-founder and head of research. Welcome back. It's good to see you. It's been a while. Yeah, great. Great to see you, Scott. Now, I'm going to start calling you prescient Tom. I hope you don't mind because this morning

at 1023 in the morning, you said possibly this is the flush. Bottom line, possibility equities reverse into the close. Well, it looks like you called it, Tom. What do you think about this reversal and what it means? Well, I think if we think about the data for the past week, the stagflation story that gained a lot of prominence in the last 10 weeks, I think has diminished a lot because the jobs report showed good jobs, but soft on wages. We're making progress on the UAW strike. And then, of course, as you know, oils come off that boil. And these are all pointing to

an expansion that's not suffering from an acceleration of inflation. So I think it really helps the idea that, as you said, maybe the flush happened and we can be strong into year end. Do you really think that this is that moment that that turn is going to begin to happen, Tom? Part of the tactical view comes from Mark Newton, but I think it was going to be either today or early next week because we had that intraday reading of the put call reach 1.97 only 20 times the last 30 years. It's so rare, but it has almost always signaled an imminent bottom. And then today, as you point out, we had a really hot jobs number, a pretty big sell-off that is reversing in the face of people still saying nothing's gotten better. So I do

think the sellers are exhausted and there's a lot of firepower on the sidelines. And if a few things go right, I think we get a big rally. I know, but the one thing that's not really getting better, and I don't want to ignore it, rates are still high, right? So we were at $4.88 earlier today on the 10-year, so we're at $4.77. So we've come off, as you said, the boil, but we've still got a pot that's really simmering rapidly. That's right. I mean, these are very tight financial conditions. It's probably not a long-term killer if we were at $5 for years, because we know 5% is the average for 10 of the tenure for the last 90 years but at the moment that change has been very restrictive um if i was to be half

full on this we know this also means the fed has less work to do which means fewer hikes so in some ways as long as a market can absorb this change and it's very restrictive. I mean, it's uncomfortable. I think that's positive. More importantly, as Walter Diemer pointed out, you know, when you have a parabolic rise in rates, it's not going to take the escalator back down. If it does peak, it's going to be a sharp reversal. And of course, that's supportive for stocks. Yeah. You think the Fed's done? Do you think Mary Daly was a pretty big tell yesterday in thinking that San Francisco Fed president, of course, thinking that the move that we've seen in interest rates has caused financial conditions to tighten substantially,

in her mind, equal to at least one hike in rates, and that now that is the prevailing thought within the room, that credit conditions have tightened enough, we're restrictive, as you said. We're done. Yes, I think the Fed feels that they, you know, since September 20th, I think it was clear the market kind of got this new message, well, higher for longer. The market's priced it in. I don't know if the Fed has to keep jawboning it and even threaten further hikes if it's gotten to the place it wants to be. And as you're saying, when you have a Fed member saying it's a hike, another hike on top of that means that we're extra worried. How about valuations? Are you comfortable where they are and where, you know, just simply relative to rates being high and, you know, you still believe the economy to some degree is going to slow.

It's just hanging in so incredibly resilient. It's stunning. I don't know what else to say. Yes. I mean, I know intuitively investors think PE has to come down because interest rates have gone up. But history shows when the tenure is between 3.5% and 5.5%, the PE has averaged close to 20 times. Part of it is something that Sheila Baer had written about. It produces capital discipline, and that allows companies to have durable earnings, which means PE should be higher. But also, we're in an environment where nominal growth is higher, which means I also think we're in an EPS surprise environment. That's why P.E. should go up. It's really 16 times,

actually less than that, ex-fang. I think if it goes up four turns, that's a huge upside in equities. Okay. I'm glad you went to earnings because I wanted to get there anyway. So you don't think that estimates which have crept up incrementally positive this quarter, a little bit more next, and then more substantially, obviously, as we get into 2024, you don't think those are over their skis a little bit? I mean, earnings always have some risk because of optimism of analysts. So 70 percent of the time, earnings revisions are down. But the revisions to Q3 earnings are more consistent with the turn in the cycle. And we have to remember the headline earnings are still down year over year because of energy and basic materials.

Without those, it's close to 7% earnings growth in third quarter. I mean, that's a really nice, you know, companies are doing well. I think the greedflation is going to hurt. And, of course, we have some volatility with the strike. But I think the overall picture is demand is holding up and now wage costs are slowing. That should help be supportive of earnings, actually. Yeah, I mean, you said, you know, XFANG. So let's drill down on that a little bit more.

What are we talking, 15 times for XFANG, basically the 490 whatever stocks within the S&P 500 versus the mega caps. So if you think we're going to hang in there from an economic standpoint and you think the Fed is done and you think rates are not going to really go much higher from here, Do I want to start looking at XFANG or do I want to just dance with the stocks that got me here to begin with? Scott, I don't want to sound like I'm saying both, but when I think about how re-risk, like when institutions want to add risk in fourth quarter, They're going to buy what's liquid and what's worked. So I think that's why FAANG should lead. But the reason the rest of the S&P is attractive is that you have a level set of 7% earnings yield, or maybe 6%, but with earnings growth double digits. The total

return profile of equities here trounces what you can earn on a 10-year. And I don't think investors are convinced of that today, but a year from now they will be, and that's why the S&P could, you know, have more than double-digit gains over the next 12 months. I know, but you make a good argument, though, even as you argue for stocks relative to bonds. Others would say, look how cheap bonds have gotten as rates have gone up. So there's still considerable competition in a really uncertain environment, whether it's cash equivalents or treasuries themselves that still offer a safer, let's just use that word, safer alternative. Yes. I mean, I think it's

correct for people to have that view. How many additional make that decision in the next 12 months, I think, is what matters. We already have seen trillions flee out of risk assets. The stock market has been starved of retail and institutional equity flows. The movements have all been just prime brokerage leverage. Buybacks will continue. I think on the margin, if inflation is diminishing next year and people think the Fed is done or might cut, that's good because bonds could rally. But as we know, I mean, if that happens,

we know P.E. is going to go up a lot. So stocks will rally even more. Let's bring in CNBC contributor Bryn Talkington of Requisite Capital. Tom, she's going to join the conversation. So, Bryn, I believe you heard everything that Tom had to say. Do you agree? Well, I think that going back to like the technicals, let's just go back there. I think that we started the week with only about 15 stocks above their 50-day moving average. When it gets below 20%, that's really bullish from a short-term bottom. That was right on top of the S&P, almost getting to 4,200. So I think we were in this really oversold conditions. And I think, you know, great job on

Tom calling for a midday rally. And so I think we can definitely rally from here. Don't forget Monday, the bond market's closed. So this party can continue because there's nothing to stop it, because really this has been a rate-driven market. So I think that's going to help. I do think, though, over the next few months, outside of seasonality, which is a real thing, right, I would never discount it. I think over the next six months, though, we're going to be much more range bound between this, let's say, 4,200 to like 4,500, 4,600, because I still think there are so many cross currents. I think on the earnings front, though, if you look at Goldman Sachs, I think Koston does good research.

Technology is where you're going to get all of the earnings growth next year. So they're looking for 10% earnings growth, you know, year over year from 23 to 24. And so we're going to have to get that because those stocks are more rich. And so I am not in the consensus that I think we're going to have this 12% earnings growth. And so when I break down the names, I do think you still want to own technology. But within technology, I think you have to be somewhat judicious because while if you look right now, Scott, Microsoft and Apple's charts look terrible. Their revenue and earnings growth haven't been as good as, let's say, a Google and Microsoft.

I mean, a Google and Meta, whose charts look really strong and continue to gain momentum. So it'll be interesting to see if we start getting some dispersion of those mega cap names, especially as earnings come out next quarter. We'll see. But I think that's a pretty decent probability. Some dispersion of the mega caps starts to play out. I feel like, Tom, that's a long way of saying that, you know, I'm not, Brent, I'm not necessarily as optimistic as you are, Tom, that earnings are going to reach the level that some, like Goldman and others, suggest that they might. Now, they might in mega caps. That jury's still out, but certainly not elsewhere. So, Tom, how do you respond to that?

Well, I mean, I think there is a pretty long list of worries out there, because, you know, if I were to add to Britain's concerns, I would add China and Europe and the war and escalation of the Ukraine war. But in this environment, which has been incredibly challenging for companies, they're able to produce 7% earnings growth now in the face of the Fed relentlessly raising rates. But in the next 12 months, they're taking their foot off that. Oil, I think, might have made a local top. Wage pressures went from nearly 6% on their way to 3.5%. And a 10-year environment like this with nominal GDP does point to very good earnings growth historically, and the PMIs have convincingly bottomed. The ISM was stuck below 46 for several months, now back to 49. So to me, it's pointing to an economic momentum that's materially improving.

So I think that rate of change is what's going to compel stocks to get PE expansion. Tom, what do you make of, you know, weakness that we've seen in utilities and staples and transports and things like that? Are they any bit attractive? I know that all of these other sectors, you know, the lights on the marquee, they're the ones that are there. I get it.

But sometimes you see the best opportunities where the greatest amount of carnage lies within the market. Utilities, staples, things like that. Are they attractive to you or not? Yeah, utilities. Look, for someone who's really great with timing, utilities, risk adjusted, probably are huge opportunities. I mean, I bet you it's going to follow TLT, right? TLT at some point is going to make a pretty tremendous

upside move if Mark Newton's right and the tenure goes back towards 4% next year. And on transports, it's tricky because you've got to pay attention to what's happening there. But there are a lot of interplay dynamics that are idiosyncratic and not necessarily simple macro. And then staples, I mean, it's tough because, you know, that's a greenflation sector. And now it's on the margins some strange stories about, you know, calorie consumption could be declining. I mean, it's on the margins, some strange stories about calorie consumption could be declining. I mean, it's tough. I think I'd rather own technology stocks over staples because at least technology stocks, you don't have to worry about calories. Yeah. I mean, I don't know that you'd find too many people fighting you on the idea of owning technology stocks over staples.

So I don't know if that's necessarily a fair fight. But Bryn, how would you address those two sectors or just simply other areas of the market that might work outside of big tech? So I think going back to utilities and Staples, you know, we were looking, if you look at the debt to the net debt to equity of every sector in the S&P. Which three sectors have the highest debt to equity ratios? Utilities, real estate and staples. And so I think that those three areas, and so we're talking about two of them, are just much more susceptible to the D of the D and the E, right? To rate rises. So I think this is a unique time, typically later stage in the economic cycle, those would

be doing well. We have a whole new playbook. I think that people can count on large cap technology to know what you're going to get. You might not get great revenue growth, but you're going to get good earnings because they're all buying back their shares. I think from an allocation perspective, what my concerns are is that I agree with Tom that the economy is probably going to stay really strong, but for the wrong reasons, because it's government-led. Because don't forget, we had the $1.9 trillion American Rescue Act and then three other ones underneath them. Those dollars, Scott, need to be spent. There's billions and billions of dollars

that need to be spent by 2025. And so you're going to continue to see municipalities doing very, very large infrastructure plans. And so bottom line that, what does that mean? That's good for the economy, but what else is that? It's inflationary. And so I just think we're in times where the government is spending like they're trying to get out of a recession and they're doing this pre-recession. And to me, that ends up causing just the higher probability that recession stays stickier because of government induced programs into the U.S. And so to me, that puts somewhat of a ceiling on rates as well as markets, because we're going to continue to be having this inflationary conversation. We're not getting to 2 percent anytime soon. Well, we seem to be on the march there, Tom. I think you'd probably disagree.

Yes. I mean, to the extent that I don't think it's a fait accompli that inflation is going to be accelerating or sticky. I mean, as we know, the only sticky part of core inflation right now is shelter and housing is going to get walloped as mortgage rates stay here at eight. So to an extent, this rising rates is accomplishing what the Fed wants to see, which is kind of put a ceiling on home prices for now. And that's going to really restrict CPI. I mean, 40% of core CPI is basically housing related anyways. Autos, that makes it close to 57%. So as long as cars and housing aren't accelerating, inflation is on a glide path lower. Tom, what's your target for the end of the year for the S&P? You still have one, correct?

Yes. Scott, I think we're going to rally double digits. So I think we're going to get over 4,800 by year end. I mean, a lot has to go right. And I'll tell you, there's a lot of damage in the last few weeks. So, you know, it may not get to 48, but I think directionally is the correct that I think we have a very strong reflexive recovery because interest rates are nearing an end of a parabolic rise. Wow. Well, we'll see for sure. And we'll talk to you plenty of times about it. I appreciate it, everybody.

Thank you, Bryn. We'll talk to you soon. And Tom Lee, of course, Fundstrat. Let's get to our question of the day. We want to know, do you believe in the soft landing scenario for the economy, just like Tom Lee does? You can head to at CNBC closing bell on X to vote. The results are coming up a little later on in the hour. We're just getting started here.

Up next, mapping out the market. T. Rowe prices. Sebastian Page is still reluctantly bearish. Will he ever change? We'll ask him next. Let's get a check on some of the top stocks to watch as we headed to the close on this Friday. Courtney Reagan is here with that. Hey, Court. Hi, Scott. So the automaker is firmly in positive territory just in the last hour of trading here as UAW signals progress on talks.

The union doesn't plan on expanding its strikes against the automakers given that progress, including an agreement from GM to cover battery cell workers. And in energy, Pioneer Natural Resources is higher as ExxonMobil nears a deal to acquire the company, she said, according to CNBC sources. Dow Jones reports the deal could be worth about $60 billion. Shares of Pioneer up 10 percent. All right, Court, we'll see you in just a bit. Thank you. Courtney Reagan, stock staging a big reversal following today's hot jobs report.

Here to discuss T. Rowe Price is Sebastian Page. He's been a longtime reluctant bear, self-described, I might add. He might be getting closer to neutral, however. Welcome back. It's good to see you. One of these times, I know you're just going to show up and say, you know what, Scott, I'm a reluctant bull now. And why are we at that moment yet?

Scott, I think we're getting closer. We would probably consider closing our underweight, which is about a percent now, so close to neutral, around 4,100 with a higher VIX and negative sentiment. That might be enough to get us back in. I'm still worried about three big macro risks. Rising rates, obviously. Inflation, I think, has risk to the upside. And valuations, just a compressed equity premium. But no, Scott, we're not panicking. But these are serious macro risks to worry about. I know. But those macro risks, Sebastian, have existed since the beginning of the year, arguably. And we're later along in the Fed cycle and we're stronger along in the economy than many thought we would be. So, you know, I guess I would say I've heard this, I've seen this movie before. And yet the market's up quite nicely this year.

The S&P is, I don't care whether it's been driven by a handful and a half of stocks or not. It is what it is and it is where it is. So how do we deal with all of that? Look, I think the rising rates risk is heating up as we speak. The 10-year is up 150 basis points in six months. With that velocity in rate hikes and in rate spikes, especially in the long end and the disinversion, things can break. So that remains a risk. And the passage of time, we still have yet to see a lot of the lagged effects of the Fed hikes. But Scott, you're right that growth is surprised on the upside if you look at gdp

growth expectations starting of q3 this quarter we were at 0.3 and we're now at three percent so this is just annualized for this quarter and it tells you how quickly gdp growth expectations have come up and the other thing we've talked about sc, a reason why things aren't cracking yet is this massive amount of money in the system. And we talk about excess savings running out. Excess savings is a bit of a wonky definition. If you look at money market funds, AUM, and you look at checking accounts, the amount of money that's in the system, a lot

of it is at the top and the bottom quintile of earners is really tapped out and loading up on debt. But the total aggregate amount of money, I call it the blob of money, it eats all the negative headlines, Scott. So those explain what's happened this year and with growth surprising on the upside. And, you know, ultimately, and the reason why we're close to neutral is there is oxygen for markets above 5 percent. Just look at the 60 years before the great financial crisis. The average 10 year was 5.8 percent. So we have to deal with the acceleration in the hikes and the rates.

But, yeah, I feel like you're almost rebutting yourself by suggesting, yeah, I know the rates are 5%, but we're just normalizing. And it's like, yeah, I know that the economy's strong, but that's just because of all the stimulus that's in the system. And I'm thinking like, yeah, and maybe that's enough of a reason

that we're not gonna have the gloom and doom lag effects that we otherwise would without all of the stimulus in the system. And that's been the most difficult thing to calculate and to quantify is because all the stimulus that no one really could understand what it was truly meaning for the consumer and the economy that's gotten us to this point. Well, maybe it was just enough to stave off any really bad scenario from the economy. In fact, maybe the Fed's going to pull this off. I think that's right, Scott. And where we stand now, we're just waiting for a pullback and a spike in the VIX, a real deterioration in sentiment. I think we're getting closer. And in the meantime,

where we've been adding to stocks this year has been in parts of the markets that haven't participated in the rally. We like real asset stocks, for example, stocks of energy companies, utilities, stocks of real estate companies, and with a lot of active management and stock picking in it, but also metals and mining stocks. So those real asset equities have been an area where we've been incrementally adding to stocks. They haven't participated and we think there's upside risk to inflation. The labor market remains incredibly strong. And that explains the strength of the consumer. But also it poses upside risk to inflation. I think the prints today aren't that encouraging if you put them in the context of all the

other numbers we're getting on the labor markets. Yeah, they are strong. But if there's I got to clean my ears out when you said utilities that are attractive to you. If you're looking for upside risk to inflation, therefore, you know, high rates. Why are utilities going to work in an environment where obviously they're moving in the opposite direction to where rates are going? Right. It's part of a diversified portfolio that has some measures of protection for the ability to raise cash flows with regulation and with inflation over time. Now we like to protect against inflation across different types of stocks and different

types of inflation. So when regulators allow price hikes for the utilities that helps you over time protect against inflation meanwhile you get pops in energy stocks and metals and mining so it's all part of a diversified portfolio that we call real asset stocks but tech's not at the top of your list sorry tech is not at the top of your like list no look we're neutral between value and growth. There are reasons to like growth stocks, just the valuation is really high. At the end of the day, when I talk about my three big risks, I talk about rising interest rates, I think about inflation, I think about valuation. Really the one that bugs me a little is the valuation, the compressed equity risk premium.

So we're neutral. We think AI is real. We think it's going to help growth stocks. I think my colleague, Dom Rizzo, was on your show talking about this. We think it's real. He likes them all. But the valuation is expensive. The value is interesting because it also has some inflation protection capabilities, but it's also cyclical. So we end up neutral there. But it's so interesting because he loves them all. I mean, I've had conversations with him,

not to talk about somebody who can't come and defend themselves on their own, but when I've questioned him about the valuation of some of the very technology stocks that he loves, he loves them. You know, valuation at this point, be darned. Yeah, look, we don't have a house view, but in the asset allocation committee, when we look at the asset class overall, growth stocks overall, we end up neutral. But if I look at our research platform where it sits right now, it's quite favorable on AI. And I got to say, in past technology innovations, we've been technology investors for decades.

We have not necessarily made the same statements. So, yeah, I stand by his statement that AI is real. But as asset allocators, you know, Dom selects securities. As asset allocators, we've got to look at growth stocks overall. And that's how we come up at neutral with value. All right. Well, NASDAQ, anything but neutral today. Highs of the day. Big burst for the NASDAQ. Sebastian, I appreciate it as

always. We'll see you soon. Thank you. All right. That's T. Rose, Sebastian Page. Up next, class is in session, even on this Friday. The dean of valuation, Aswath Damodaran of NYU. He's back. He'll break down his take on the recent market swings and the one upcoming IPO he says looks promising. That's after the break. And as CNBC celebrates Hispanic heritage, we're sharing the stories of influential Hispanic business leaders with you. Since I was a little girl, I have been surrounded by beauty in our Latina culture, watching my mom take care of her skin, put on makeup, my aunt. Beauty is such an inherent part of who we are as Latinas and so I took that passion that I had for beauty growing up as a Latina and

then I turned it into a career. And I don't work a day in my life because I'm having so much fun. We're back. Big tech rebounding today. Microsoft, Amazon, Alphabet, Apple. There you go. All surging to put the Nasdaq 100 on track for its best day since the end of August. So is this the resumption of the tech-led bull run or just a relief rally? The Dean of Valuation, Aswath Damodaran of the NYU Stern School of Business, is here to break it all down. Professor, welcome back. It's good to see you. Thank you for having me. I'm glad we led into this segment the way we did, talking about technology. I'm not sure if you

heard the conversation that I just had with Sebastian Page of T. Rowe, who says, you know, tech valuations are just too rich. How would you address that? You know, one of the terms I used to describe what's happening in the market today is one of my favorite movies, Groundhog Day. I wager that if you took the show on January 3rd of this year, you blanked out the screen behind you, you'd be having exactly the same conversation you had just a few minutes ago. It's almost like it's a rehash of the same argument over and over and over again. And at some point you got to ask, is there something original that we can add to the

discussion? The truth is, at the start of the year, it was about inflation and the economy. Truth is, right now, it's about inflation and the economy. At the start of the year, tech had had a bad year and then it rebounded. And through the course of the now, it's about inflation in the economy. At the start of the year, tech had had a bad year, and then it rebounded. And through the course of the year, it's carried the market upwards. So I think that while it's easy to look at the pricing and say, this is the peak I'm not getting in, I mean, I own five of those seven winning stocks that have carried the market. And I thank the stars that I have them in my portfolio.

I just got lucky. I can't imagine being an active investor without any of those stocks trying to beat this market right now. So much impossible to do. But in a sense, Professor, it is different, at least as it relates to tech. And let's really drill down there

because at the beginning of the year, we were coming off a miserable year for technology stocks. Many on the street were mispositioned, right, for the run that we're about to have, which was fueled almost entirely by the hype over AI. So whereas now we've traveled a good road from much lower valuations, now we're a little bit off the peak of where we were six to eight weeks ago, but we're still higher substantially than where we were. And in many cases, we're higher almost across the board for 10 year historical averages for those same stocks that I'm talking about. So that is different. That's why it begs the question now about that space in particular, which has carried us to even have this positive market conversation. I'd push back on the AI story. I know for Microsoft and NVIDIA, AI has been a big part of what's caused the price to go up. For the other five companies in this group, though, the reason I think that pricing is up is because they've shown incredible pricing power. And one

of the big questions we had coming into inflation is, are these tech companies going to be able to deal with inflation and pass it through? And the resounding answer we've got over the last 18 questions we had coming into inflation is, are these tech companies going to be able to deal with inflation and pass it through? And the resounding answer we've got over the last 18 months is they have more pricing power than the traditional consumer product companies or brand name companies. So part of what you're seeing in this run up is the recognition that these companies are much better at handling both inflation and economic potential shocks than we thought they would coming into this. And I'm not saying it explains away everything that we've seen here, but it explains, I think, a significant component of the rise in pricing you've seen in these

companies. So let's talk about Apple specifically, because it was certainly one of the stocks of the week. I think it's fair to say you just don't see a downgrade of it as very often. And we did get one this week. And one of the premises of the piece was we're at peak multiples for Apple. Now, again, that's one of those stocks that was I think it was like 31, 32 times. So it's backed off that a bit, but it's still well ahead of its 10 year historical average. So how would we address that? Do you agree with a downgrade like that, which was certainly based on other fundamental aspects as well? You know what I'd be more worried of? There were seven upgrades in the last week than downgrades. I mean, historically, the best contraindicator for a stock is what analysts think about it.

So if you get these upgrades coming out, you almost have to stop and ask, what am I missing here? What's the downside I'm missing that's causing analysts to kind of jump onto the bandwagon? So maybe it's a good thing that you're getting some downgrades here, some realism in expectations, because I think that the company's fundamentals are driven. It's an iPhone company. I mean, you can dress this up as much as you want. It's got a services business on the side. This is a iPhone company. I mean, you can dress this up as much as you want. It's got a services business on the side. This is a smartphone company. My risk with Apple is you live from upgrade to upgrade, iPhone 15 to the iPhone 16 to the iPhone 17. That is potentially the biggest

risk in this company is the next upgrade is not going to catch on. I don't see the company giving up a big chunk of its earnings, even in a down in economy or if inflation goes up. So from that perspective, with all the ups and downs, I think there'll be more ups than downs during the course of the year. So if you have it in your portfolio, hold on to it. If you don't have it, wait for a correction somewhere along the way and try to buy it. Because I think it's become the equivalent of what Warren Buffett would have called a company for all seasons, is essentially being able to deliver results no matter what. Well, that's why it's the largest Berkshire position by a mile, I think, at this point,

Professor. We'll see you soon. I appreciate the time, as always. Thank you. All right. Aswath Damodaran joining us there, the dean evaluation. Up next, we're tracking the biggest movers as we head into the close. Courtney Reagan standing by once again with that. Courtney. Hi, Scott. So how much do you want to bet me it has to do with cybersecurity? You'll see what I mean coming up after the break.

Fifteen minutes before the close on this Friday, Courtney Reagan has a look at the stocks she is watching for us. Courtney. So MGM is higher, Scott, after saying it expects its recent cyber attack to have a negative impact of about $100 million on its third quarter results, but it doesn't anticipate an impact on its full year financials. The casino operator also believes its insurance will be enough to cover the impact. MGM shares up around 5%, but still down 15% over the past month. And speaking of cybersecurity, many of those stocks are among the top performers today. That includes names like CrowdStrike, Zscaler, Palo Alto Networks, and Fortinet. And one of the ETFs that tracks those names, aptly named with the ticker of CIBR, is heading for a weekly gain and only around three and a half percent off of its August high. Back over to you. All right, Court. Thank you, Courtney Reagan. Last chance to weigh in on our question of the day.

We asked, do you believe in the soft landing scenario for the economy? You can head to at CNBC closing bell on X. The results are just after this break. All right. The results of our question of the day. Do you believe in miracles? No, I'm the day. Do you believe in miracles? No, I'm just kidding. Do you believe in the soft landing scenario for the economy? Some say that would be a miracle.

It's neck and neck. No is winning right now, barely. We'll see what happens after the break. Up next, big techs, big pops. Some of the top names in that sector making serious gains today. We will tell you what's behind that bounce just ahead. That and much more when we take you inside the Market Zone. All right, we're in the closing bell Market Zone.

CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, Julia Borsten on the latest bullish calls on Disney. And Steve Kovach on today's big tech rebound. Mike, you first. What a rebound. Yeah. Many times, this is one of those times, the setup matters a lot.

You know, and the setup was we were definitely kind of in a defensive crouch, both stocks and bonds, selling off hard, going into this number. And, you know, I think it would have been easy to say going into it, Michael Hartnett at B of A came into it saying, if we get above 225,000 new jobs, S&P is going down to 3950. Right. It just made sense. Too hot was going to get the bond market inflamed even further. And stocks couldn't handle it. In reality, all we did is test the recent highs on yields. It told us disinflation is still happening in wages while we get a resilient labor market. All good for now, but I think most of all, it just kind of opened up that window for an oversold market to have this nice snapback

and definitely a chase for the biggest index names to get exposure. That's another feature of this rally. Now, you know, it doesn't guarantee anything about a soft landing, but you can't have a soft landing without a good economy. That's the whole premise. Exactly. At some point, you have to either embrace it or say it's just not going to happen. But the leading indicators at this point suggest it's a real possibility.

It remains a possibility. I mean, you absolutely have some sensitivity about in the next three to six months when these yield levels work their way through and you already have seen some stress on the consumer in pockets, are we going to be able to weather? No doubt about it. But when you have unemployment at 3.8 and you have wage growth still at a decent clip, it's not falling apart all at once. Now, maybe there's going to be some

corporate credit stress that pops up there. It hasn't really been that conspicuous. So for now, nobody is able to disprove a soft landing. But I also understand why there's residual skepticism about it. Oh, well, sure. It's not a high probability scenario. Let me be clear, too. I don't mean so literally like the leading indicators. I know the leading. I know. I just want to make sure everybody else does, too.

Right. The leading economic indicators have been squirrely, especially in manufacturing for many, many, many months. So the jury is still out. However, you can't have a soft landing without what we got kind of today. What's weird is that the leading economic indicators have now gone longer in forecasting a recession than any time prior. So it's sort of like, was it too early? Is there something wrong with the signals based on today's economy? Did we invert the yield curve way earlier than we otherwise would have because the Fed

was so aggressive in coming from zero? These are questions that we'll only know the answers to in retrospect. Yeah, Julia Borsten, I mean, not many people are giving Disney stock a lot of love these days, though it did get some today. It did get some today, that's right. Disney shares gaining nearly 3%. After this week, the stock hit its lowest level since 2014. Bernstein coming out with an outperform and a $103 price target on the stock,

calling Disney the only credible challenger to Netflix. Forecasting direct-to-consumer revenue will surpass linear revenue in 2024, saying that Disney has more to gain from buying out the remainder of Hulu, also saying that they believe that the park's long-term growth potential is still intact. Meanwhile, Seaport issuing a report with a buy rating and a $93 price target, saying, quote, take advantage of the maximum pessimism as a way to benefit from two leadership areas, sports, ESPN, and experiences, parks, resorts, cruise lines. Now, with the stocks sell-off, Disney shares are down about 17% in the past 12 months.

73% of analysts have a buy rating on the stock. 21 percent have a hold. So I guess they see some opportunity there. Yeah. All right, Julia, thank you. Good weekend to you, Julia Borson. All right, Steve Kovac, you know the saying, if you mess with the bulls, you get the horns. Well, you downgrade Apple a few days ago and you're getting the horns because the stock is up uh three and two-thirds percent on the week and it's up for the third straight day yeah that's right scott and look 72 hours ago in fact i was sitting right in this chair with you and the nasdaq and mega cap tech names are all selling off dramatically and now look look at the tab at the bottom of the screen dip and rip we have a

bounce back nasdaq's up better than one and a half percent but let's dig into those mega cap names apple up about one and a5%. And like you said, that KeyBank downgrade earlier this week tied to conserved weakness in smartphones, well, that was just basically shrugged off by investors. Let's move over to Microsoft. Microsoft's up more than 2.5%. Meta up better than 3%. Alphabet up 2%. NVIDIA up 2%, and Amazon up better than 1.5%. And so, look, the question, Scott, is did we hit the bottom for tech, and now we're seeing it come back up? Citi analysts actually had a good note out this morning

highlighting the, quote, meaningful pullback from all of those names I just went over over the last few months. And actually, they don't see a recession coming for tech earnings, but are expecting a slowdown in earnings performance going into 2024. And look, we're just a few weeks away from most of those names reporting. Netflix is up first in less than two weeks, Scott. Back to you. All right. Steve Kovach, thank you very much for that. Turn back to Mike Santoli as we approach two minutes left. I mean, that's the premise of Tom Lee getting to 4,800 on the S&P,

or the market's still getting there, is because you're going to have a pile into mega cap between now and the end of the year. Yeah, it's always plausible. And in this case, too, that is where the earnings growth is coming from. If you looked at the, you know, let's say the one year path of earnings consensus, mega cap tech is like a hockey stick higher over the last six or eight months, whereas everything else is up just slightly off the lows. And so that makes sense. So what you've had is a big pullback in the big index names because the index itself was under a lot of pressure. They're obviously more expensive than the market. And the market periodically rethinks that and then sort of circles back around and says the fundamental story hasn't quite changed very much. As many have said, they're not real direct victims of higher yields. In fact,

maybe net beneficiaries on a financial basis. So I do think it makes sense. For me, bigger picture, this is an opportunity if we're getting some reassurance about the state of the real economy for the rest of the market to make a bid to catch up. Not to catch up entirely, not to have a massive rotation out of tech, but to participate. Because we really haven't seen that except in little episodes. And so I do think you want to see banks and consumer cyclicals and consumer finance and all this stuff that kind of priced for a high probability of recession maybe get a little bit of relief. And certainly one day, dozen day trend reversal make.

CPI next week, PPI, there are really important events, not to mention at the end of the week earnings. And they better live up to some hype. Yeah, the CPI and how the bond market digests whatever we're to see. Because I really do think that the disinflationary story is now the premise. And you have to go out on a limb to sort of try to take exception with it. And CPI has not been a huge market mover.

It's becoming close to estimates so we'll see. Every now and then they jump the gun. That's what happens. You hit the button a little early. That's what happens around here.

But everybody's happy because the market. Don't worry they're still trading. Yeah. They staged a big reverse. There we go. There we go.

We're green. Most important, have a good weekend. We'll see you on the other side of it. Send it in to OHC with Morgan.