Closing Bell 10/5/26

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0:55Scott Wapner: Thanks so much. Welcome to Closing Bell. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with stocks and bonds and how long this record-setting market can keep running if yields keep moving higher. It's a key question, one we will ask our experts over this final stretch, including BlackRock's Rick Reeder and Goldman's Tony Pascarello, both joining me in just a little bit. Here's the scorecard with 60 to go in regulation today. We are mostly green. Every S &P sector positive today. Another solid day for tech as well. NVIDIA extending its own record high up another two and a third percent.

1:27Scott Wapner: Speaking of, Dan Ives tells us how high it might go when he joins us in just a little bit. Many of the other mega caps, they are higher as well. There's Microsoft, Amazon and Alphabet. Take a look at SpaceX. Got a big upgrade today. A call from Morgan Stanley's Adam Jonas up near six percent is that name. Nice moves as well for some of the AI power names like Constellation and Vistro. We We follow everything over this last hour of trade. Takes us to our talk of the tape, the markets over the year's final stretch. Let's welcome in Rick Reeder. He is BlackRock's CIO of Global Fixed Income, head of the global allocation team.

2:02Scott Wapner: Welcome back. I feel like every time that we catch up, it's at a pivotal moment in the market. Last time, it was right before the Fed was going to do what it did, right, raise rates. And here we are with rates backed up. And you sat down and you said, the market just doesn't seem to care that rates are backing up. It's exactly the question you heard me ask at the very top of our show. How can stocks and bonds coexist at current levels, respectively? So, first of all, I think because I come on inflection points, I have to buy. I have to figure out the schedule and buy volatility in front of our in front of our meetings.

2:39It's pretty extraordinary. I would say there's a couple of things. One, you know, this idea I know we've talked about for a long time. There's an interest rate at which the market starts to have a problem. And I actually don't think there's an interest rate as long as it moves there slowly. That being said, this is a pretty big move. And I think we're seeing it, I will say we're seeing it in flows and people thinking about it. For years, what was that acronym? There is no alternative. Yeah, TINA. I actually think I was thinking about it today. What is it, TIAABA? There is a big alternative now.

3:10that I think what you're going to see is there are people, like in our funds, we're creating over 7 % return now or yield now, and you don't have to go out the yield curve. Like you can run a two-and-a-half, three-year duration, A-minus rated, and so for the first time in a while, you are starting to see that people are saying, gosh, you know what, I can bring down the risk of my portfolio. Equities have had a good run. But it is still mind-blowing that you move up like today, then the back end of the curve gets hit as much as it does. It's pretty incredible. And some of it is the technicals and equities relative to the supply we get in equities is pretty small.

3:45Basically nothing other than, you know, maybe another big IPO that comes. It's still pretty tiny in the bond market. We're getting supply every day.

3:53Scott Wapner: This idea that there's competition now is what you're really suggesting. Yeah. Is why you have said more recently that it's no longer the best investing environment that you've seen. Yeah. Because there is alternative now. Yeah. And you've determined that stocks are like a B minus. I mean, you did a few weeks ago. Yeah. No, I think stocks, by the way, I said it on the show when we talked about it, they're not a D, but they're just OK. If you said the money, think about what's driving the equity market. Immense spend on AI, immense spend on technology. You've got an economy that's growing. Our now cast on current growth is over 7%.

4:30Our sense is that you're peaking now in terms of that growth. Can you still grow? I'm growing 20%, 25 % earnings growth. I still think you can grow at 10 % to 15%. It's okay. It's pretty good. I think the volatility of equities will be higher. I mean, one of the beautiful things about equities today, we've brought down some of our equity exposure. But you can buy upside at really attractive levels. So you naturally get longer into these rallies. But, yeah, I think equities are okay. And particularly, I think, if I'm a pension fund endowment foundation and I said, okay, I've got a 7 % return target.

5:06I've gotten there for four years because equities have killed it. It used to be, oh, gosh, I got to own venture. I got to own private equity. I got to own private credit. I got to own real estate. Today, you don't have to really stretch, and you can hit 7 % return. And if you've got an expense budget you're trying to cover, that's pretty attractive today.

5:22Scott Wapner: So we last spoke like three weeks ago on California. And again, you said stocks at that point were like a B minus. But now you just said, well, they're not a D. Does that mean that you've taken them down from a B minus to, say, a C? relative to some of the opportunities in bonds? No. By the way, I wish I could be that granular in terms of where it is. But no, I said on the show back then the same thing. But not a D. They're just okay. Will they do their job? I think they'll do their job. If you have a one-year, two-year, three-year time frame on it, I think when we sit here again next year, I think if you say, gosh, stocks are up another 14%, that sounds about right.

6:01You know, multiple is reasonably high, but it's not egregious given the earnings growth. I think you're going to see earnings growth come down a bit, but still not bad. I will say one other thing. When I go through in our global alpha and gold allocation fund, when I go through different sectors and I say, okay, what do I really like to buy here? It's definitely narrowed down. I mean, part of why, you know, we've reduced some equity exposure. But as you know, I love tech. Tech's had a pretty good run. I mean, semi, semi-cap, you know, and those. But then I go away and I say, OK, what other sectors do I like today?

6:35They're not a ton that I really like. Financials, you know, multiple price to book is not terribly attractive. There are parts of health care that are OK, parts not. It's hard finding a lot of sectors that I say, wow, that seems reasonable today globally. You know, there's some interesting things in Korea and Japan. Globally, I think it's, you know, it's not like it used to be that you could say, gosh, I really like financials or health care or European bank stocks.

7:00Scott Wapner: It's tougher today. Aren't you, you're reflecting exactly what's been happening in the market. Yeah. You know, yes, the Nasdaq hits another record high today. Under the surface, though, the market's not great. You've got a lot of stocks that have hit 52-week lows more so than 52-week highs. Yeah. That's why it's almost, it's hard to say, well, the market has been acting well, even with rates elevated. A lot of stocks have not been acting well with rates elevated. Right. Can we talk about small caps? Let's go. No, I don't. You know, as you know, I'm not a big fan. No, I'm not a big fan. You've not liked.

7:34I think you have something today that's pretty extraordinary that the AI and we could debate what is the ROI coming off of AI two years forward, three years forward, four years forward. I think it's hard to debate the demand for memory, storage, compute, infra related to it over the next three or four years. the backlog that these companies are running. And by the way, many of them are trading in multiples that if you just fulfill the backlog, your cash flow makes up for where you trade today. So those sectors feel pretty good to me, and they're driving the equity market. Another thing that's pretty incredible about equities versus years ago, it's all about price return.

8:11Like years ago, remember, you used to buy dividend stocks, and those sectors have become a tiny part of the market today. Today, it's all about price return. You need earnings growth. As long as the earnings growth is pretty good, And where is the earnings growth good? Tech, it's really good.

8:25Scott Wapner: Well, I mean, the earnings growth is good kind of everywhere, but it's great in tech. I mean, if you're doing 14 or so percent on average, but you're doing 30 or 50 in tech, it kind of skews the whole thing. But the overall pie still tastes pretty good, doesn't it? Yeah. I mean, but you've got a market cap that is extraordinarily weighted towards tech today in towards big companies versus anything we've seen in the past, where when you looked at the entire stock market, you had a much greater diversity, a much greater breadth than you have today. The weighting is pretty darn. You've got to, and I'll say in fixed income, you know, I've been doing this for a really long time.

9:04Fixed income, the thing that is different, I'm trying to build portfolios that are diversified. There is a million and a half fixed income securities. Diversified, diversified, keep your yield high. In equities, I've got to get 25 stocks right. That is the whole gig. I mean, not to say that I don't own some some mid-cap companies, but I got to get 20 to 25 stocks right. I got to make five outsized calls on big cap names, and that's going to drive my return. That's really different than in the past.

9:30Scott Wapner: Do you think the concentration that we're seeing in the market now persists as long as yields remain elevated? Well, I think that concentration is going to exist forever. I mean, I think the dynamic around what data, and this is part of why I like these big companies. I like the companies that have data on their side, if you have data on your side, the way commerce is going to work going forward, the distinct advantage you have by being able to exploit data in every form of it. And I know I've talked about before in AI, people talk about AI, AI, AI. We're seeing productivity improvement of significant magnitude.

10:04That's well before AI kicks in and things like customer procurement. How do you get at your clients more efficiently? How do you manage your inventory? How do you manage your logistics within your business? I mean, we're watching what I think is pretty extraordinary dynamics around productivity. But you've got to be able to exploit it, and you've got to be one of those players. And that is largely the bigger companies have the ability to do that.

10:26Scott Wapner: But, I mean, higher rates are at least making other parts of the market. It's kind of crushed the broadening trade that looked really good until it didn't. Yeah, and listen, I think there's a robust dynamic to that. And I think for the next foreseeable future, with rates here and not coming down of any significance anytime soon, you will start to see some rollover financing challenges in some areas, whether it's commercial real estate, bilateral credit. There's definitely some rollover financing. Think about small business. You've got to now, I mean, think about big companies term their debt out.

11:01You're not terribly sensitive to smart. Certainly in the overnight funds rate, you're not sensitive at all. If you're not term funded and you have to fund small businesses, borrow a lot off floating and a lot off credit card, etc., yeah, there's some stress because you are talking about significant delta. And obviously the housing market, when you've got a mortgage rate closer to 8th and 7th, is pretty tricky.

11:24Scott Wapner: I mean, the credit markets have behaved pretty well. Are you wondering how long that can continue if rates remain elevated or back up even further? So we've done a little bit of work around upgrading the portfolio in investment grade. I still like the high yield market. But as yields have moved up, you can move up in quality. I mean, this idea that you can run a single-A portfolio. So I think, you know, a little bit of, by the way, not just U.S. and Europe as well, a little bit of, gosh, maybe I don't need, if we've got some rollover financing risk, if you've got some stress around the triple C part of the high yield market, you know, maybe I'll be higher quality in high yield, single B and above, as well as, gosh, maybe I could just rotate a bit more.

12:13So we've done a decent amount of work. And let's get more into investor-grade credit. We've actually done some more in emerging markets as well that we feel pretty good about with the dollar stake.

12:23Scott Wapner: Why has the ETF that you manage done so well, the BINC, the INC? It's up like, I don't know, since inception, 23%, 22%, 3%. So we've had a good, you know, keeping it. And by the way, today, you know, today, and I think about this year, it's just keeping it as boring as possible, keeping our interest rate exposure down. And, you know, I always think about, you know, we've done some good things. So I'm proud of some things the team has been really, really good at. And then, you know, could we even gotten our interest rate exposure lower? We probably could have gotten it lower. I certainly didn't think you'd get this much of a move.

12:54But we keep most of our interest rate exposure front to the intermediate part of the curve. And we just keep it shorter. I mean, as much as I don't think the Fed should raise rates personally. Well, you didn't think they should have last time. But, you know, we talked about it, I think, the last couple of times on your show. That being said, I've learned that to invest relative to what they're going to do, not what I think they should do. And so we've kept our interest rate exposure quite moderate. We were short. And I think, you know, for the foreseeable future, you've got to be conservative around that.

13:23Scott Wapner: Well, I mean, you said you liked the front end the last time we spoke. Yes. I mean, what about now? I mean, do you think in some ways the front end got a little ahead of itself, thinking there are going to be more cuts, I mean, more hikes than there actually are? I mean, I'd say that I, listen, I mean, we're still running a shorter duration than any index by a lot. I think the front end, you're pricing in three and a half more hikes after a hike. Do I think they're going to go in December? I think they'll go in December. You do? Yes. But do I think they're going to hike significantly more than that?

13:53I really don't think so. That being said, you're pricing in three and a half more hikes. And so do I, you know, it's pretty, I mean, the break evens. By the way, to own the front end of the yield curve today, you need rates to back up 250 basis points to lose money. I don't think the Fed's going to hike that many times. So I think it's a good place to hide. It's a good place to just keep clipping coupon. Your carry's really good. And then wait for a better opportunity. And then, you know, I think I mentioned on your show, we've dabbled a bit in the back end of the yield curve. Yeah, you know that word.

14:27I was going to ask you if you're still dabbling. Yeah, so being a dabbler was not very fulfilling as an experience. So, you know, we're being conservative today. I backed off it and just, you know, wait, give it some time. I didn't have any. So, you know, the idea, well, gosh, these rates back up, you buy a little bit. But, you know, I'm keeping it pretty conservative.

14:45Scott Wapner: Dabbling's all relative, too, right, for the size of what you manage. Because I remember one Christmas Eve, Tepper told me he was dabbling in the market. And I'm like, well, you dabbling is like, oh, you know, a whale going out for lunch, not not a little, you know, some fish swimming around, doing a little dabbling or eating on the margins. Large dabbler. All right. So you think it would be a mistake? if the Fed hikes in December? Because you thought it would be a mistake if they went in September. I mean, listen, I don't. Would I do it? No, I wouldn't do it. There is, I mean, the whole argument about you need to do it for credibility, you need to protect the back end of the yield curve.

15:23Hiking the overnight funds rate to protect the back end of the yield curve, to me, is not a durable strategy. I do think that you need to talk about how do you utilize, how does the Fed utilize the back end or how do they think about the back end of the yield curve? But are they going to do it? My sense is you have a number of members of that committee who are hawkish, who feel like core PCE is running at 3%. You need to move the funds rate up. Do I think it actually does much? We talked about the acyclical parts of the economy of inflation are actually high. Interest rate doesn't really move that.

15:54Certainly, the overnight funds rate doesn't really move that. So do I think it's effective? I don't think it's terribly effective.

15:59Scott Wapner: How are you assessing what's happening in bond markets around the world, like France and other places where the rise in yields, you talk about what feels like untethered. I mean, how concerned are you? So the end of last week was I was in the Mideast. I was traveling all around the Mideast last week. But, you know, I stay tuned in roughly every minute. It was pretty dislocating, the moves you were seeing in France and then Italy. And, you know, there are a lot of levered players that are in those markets. Listen, it used to be, I mean, for a period of time, owning European rate, owning European credit.

16:35We've reduced some of that. You know, you've got obviously some elections coming up. And so for the time being, I think you stay conservative. I like EM. I like some of the longer rates in places like Japan as they're now moving to hike. And the carry is fantastic. So EM back in Japan. Europe, I think, is not terribly attractive.

16:56Scott Wapner: When you say EM, like what about, you know, Brazil's obviously in the news. Yeah, it's been a pretty good, yeah. Given what's happening with the election. Yeah, we like Brazil. We like Max. And, you know, sort of the higher quality EM. And then some of the EM credit is also pretty interesting. What would you make of the Treasury Secretary? I guess he kind of backed off, if you want to say that, the I'm the House comment in an interview over the weekend. He admits now he can't control the bond market. What do you make of that whole dynamic? You know, I don't think that he was trying to control the bond market.

17:29You don't? No, I think he was trying to suggest that the Treasury has tools and the Treasury is keeping an eye on where the rate is. The Treasury is keeping an eye on the effective, you know, how the efficiency of the bond market is working. Can you do some things to show that you've got, I mean, if you ever want to use the tools, they can be pretty significant. You know, I think he was trying to show the markets he has that ability. And, you know, I think the more effective tool is at the Fed. If you want to actually keep the back end of the curve down, Fed can do it without actually increasing their balance sheet because you don't have to buy that much notion without the yield curve.

18:07But, yeah, I don't think Treasury, I think he's just trying to show he's got some tools.

18:12Scott Wapner: I mean, you think this is in any way the bond market saying, okay, yeah. You think you're the house, we'll show you. Yeah, you know, sometimes I think the bond market doesn't act as one unison voice. I think the bond market is looking at growth is pretty strong, inflation is still pretty high, and we've got to price a lot of supply, treasury supply, credit supply. And I think the market, I mean, today was a good example. The volume was pretty light. It's just like, you know, look at players like us. The incentive to buy the back end of the curve, you know, I was looking at it. The treasury market gets you 570 yield.

18:44It's got a 13 volatility. So why am I going to marry that to the equity market? I don't really need it. It's not helping me as a hedge. And so what happens, you don't see a lot of volume and rates just drift up because nobody gets in the way of it. And so I think that is, you know, where's the front end has a huge amount of buying that comes in when rates back up.

19:00Scott Wapner: But see, when you talk about rates backing up and all the reasons why, those reasons aren't going away. They're not going away. Issuance isn't going away. Inflation, though, you know, we hope is still continuing to come down, still doesn't seem like it's going away. Yeah. Growth is accelerating in the economy. And growth is pretty solid today. Point being is, like you said, like, why would I jump in and tell you don't have a lot of interest rate exposure today? That being said, if you had, if you think about, gosh, some of these real rates are pretty darn particularly in the front of the curve, pretty darn attractive.

19:34I'd love to buy some back end of the curve because the real rate is really attractive. Want to see the economy, you know, see a little bit of softness in the economy. By the way, the war is a big deal. If you started to see some better news around the war, yeah, we would start to own some back end of the yield curve. But today, like you say, most of these things, there's not a lot of incentive to do it. That 19 minutes went quick, didn't it? That was really quick. The questions are not easy, but that was great.

19:58Scott Wapner: Well, you answer them all right. We'll see you soon. Thanks. Thanks, as always. That's Rick Reeder, BlackRock. Let's get to some of today's top movers, starting with more on that big move. As we were just talking in that Brazil ETF, Seema Modi is tracking that for us perfectly timed, too, Seema. Yeah, it was a good conversation, Scott. Brazil's first round election result could push interest rates lower. That is a takeaway for Morgan Stanley's Latin America team following a strong showing for Flavio Bolsonaro. That is the 45-year-old senator who, like his father, former president Jair Bolsonaro, is campaigning on market-friendly economic policies.

20:32That's resonated with Brazil's 158 million voters. He's now expected to take the presidency and the market is pricing in a win up today. And get this, Brazil now outperforming other emerging markets and the S &P 500 by a wide margin. HSBC this morning says Brazilian equities can continue to outperform if Bolsonaro clinches the win. And even with this run that we've seen, the market is trading at a discount to its emerging market peers, right around nine times earnings. The move, though, could be predicated on whether Brazil's long-term interest rates continue to tread lower. They're currently at 13.7 percent, Scott.

21:07Okay.

21:08Scott Wapner: SEMA, thank you very much. That's SEMA Modi. We're watching SpaceX, both the stock side and the option side today. Oliver Rennick is flagging some interesting activity, joins us from the SIBO in Chicago. What do you see? Hey, Scott. SpaceX is making a big comeback after its Falcon 9 rocket made record time delivering astronauts to the International Space Station. Share has hit the highest since July 1st, and options volume is more than twice the 30-day average, with 375 ,000 calls likely bought versus under 200 ,000 puts. Right now, the most popular contract to buy is the 180-strike call expiring Friday.

21:47Friday, it's a 60-cent contract that needs SpaceX to rally another 8 % into the weekend. What's also key, though, is that it's not just speculative call buying in this name. It's also heavy put selling by some big money traders, which also points to confidence ahead of the next lockup opening, which is on Friday, Scott.

22:06Scott Wapner: Oliver, thank you. Oliver Rennick. C.H. Robinson, we're watching that stock today as well. Frank Holland has more for us on what is behind this move. Hey there, Scott. C.H. Robinson, as you mentioned, moving lower after announcing its plans to acquire freight broker RxO in a cash and stock deal. That move will enhance Robinson's position as a top freight broker in North America, with RxO as a top five player. The company estimates a benefit of$300 million in savings from synergies as well. C.H. Robinson, also a leader in the use of AI in transports and expects to double the profitability of RxO's business with the use of AI and some other efficiencies.

22:39CEO Dave Bozeman appeared first on CNBC to explain the other benefits of the RxO acquisition. Going from steamship to front door, and that's what you get with C.H. Robinson and RxO. RxO has some capabilities that, quite frankly, at Robinson, we don't play in, and that would be expedite and last mile, two important segments that can click into our capabilities. Bozeman added he expects to see further consolidation in the freight industry because of concern and cost pressures from a May Supreme Court decision that increases the liability that freight brokers can face for incidents. C.H. Robinson is one of many companies speaking with lawmakers to try and address that issue.

23:23Scott.

23:24Scott Wapner: All right, Frank. Thank you. That's Frank Collin. We're just getting started here on The Bell. Coming up next, more on NVIDIA's record run as the AI giant closes in on$6 trillion in market cap. Star Tech analyst Dan Ives, he's here with where he sees that stock heading next. Legacy credit scores only look at a brief snapshot in time, and that limited view often leaves millions of qualified credit seekers out of the picture. Vantage Score is changing that by modernizing credit scoring. Vantage Score uses 400 % more credit and alternative data to create a fuller picture of financial behavior, including trended credit data, rental payments, and timely utility payments.

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25:26Scott Wapner: NVIDIA shares hitting another record high. The stock approaching$6 trillion in market cap. For more on where it's heading from here, we're joined by Yorkville Ives partner and senior managing director Dan Ives. Good to see you, man. Thanks for coming back. Good to see you. What's behind this recent burst in the stock, you think? I think the biggest thing is as all the checks are coming out of Asia, I think investors are realizing numbers are probably underestimated by 25, 30 percent over the next year. I mean, we've seen just a massive acceleration from all these enterprise AI use cases. And NVIDIA is the one chip in the world fueling the AI revolution.

26:03That's what you're seeing play out here.

26:05Scott Wapner: Underestimated by 20 % to 30 %? Really? I mean, that's a lot. How could we possibly be that far off? Yeah, Sky being chip demand, and if you go back to the last few quarters, there was sort of a shrug to shoulders with NVIDIA. But underneath, if I look at what's happening in Asia from all of our checks, it's accelerating. They went from 10 to 1, 11 to 1, to what looks demand supply, 13 to 1, 14 to 1. Because now physical AI, these other use cases on enterprises, it's all expanding. So it's not just about the hyperscalers. It comes down to there's one chip in the world fueling, and that's NVIDIA.

26:43And I think investors, to some extent, I think were maybe even cautious going into the last quarter. And now it's becoming pretty crystal clear that numbers are just massively underestimated, not just this quarter, but I think over the next called six to eight quarters.

26:59Scott Wapner: I mean, maybe the investors are betting on that by virtue of how they're pushing up the Nasdaq, which is at another record high. I want you to listen to a conversation, a comment that Josh Brown made from halftime today just about the mega caps, why they're running and where they can go. Well, listen. The truth is, if Apple is in a product cycle and making highs, and now you have NVIDIA after consolidating for God knows how long, starting to make new highs, and you've got earnings revisions going higher for those two names, Microsoft is in some sort of a stasis. Meta has gotten its groove back.

27:39They've gotten the narrative back. They're getting multiple expansion on top of a new earnings growth story. Those are the stocks that really matter for like, how does the S &P finish the year?

27:50Scott Wapner: I'm assuming you'd agree with that. I don't think that's a big shock, given the size of the market caps for those names. But on the idea of Microsoft, which, by the way, got an upgrade today at Mellius, $6.65 is the price target. You know, over the last month, outside of Meta, Microsoft is the best performer, albeit by a little, over its mega cap competitors. Why so? It's because of the enterprise. Because when you look at Azure and you look at where these use cases are going, it's ultimately Redmond and Adele that are winning so many of those deals. And I think it goes back to the last few quarters.

28:23Look, Microsoft was one. Everyone's very negative on it. But as you've seen it now play out, as the use cases expand, that Azure number, you could be looking at an incremental 10%, 15 % of revenue that the street's not accounting for. And I think it all dovetails into the NVIDIA theme and what we're seeing on the hyperscalers. As these accelerate over the next few quarters, big tech is ultimately its fucks and its muscles again. And then you add Meta and Muse, and that really, I think, solidifies the theme that investors that bet against these companies, whether it's Apple or Meta, the install base is the golden goose.

29:03And that's what these companies have.

29:05Scott Wapner: What did you make of this? I think it was an Axios story over the weekend, a company called Reflection, NVIDIA backed, that they've got this powerful new open weight model that's not only going to shake up what's been happening in China, but also has ramifications for the anthropics and the open AIs of the world. What do you make of that story? Yeah, I think it's one of Jensen's best bets. Because if you look at Reflection, you look at the open source model, really going after DeepSeek and others. But you take a step back, it's about this is going to be something that I think changes the game across the board in AI.

29:41Because it can't just be about the frontier models, given how expensive they are. Look what happened with Muse, and now look what's going to happen here. Because as costs go down and ultimately open weight starts to expand, more demand is accelerated across consumer and across enterprises. And that speaks to what Jensen recognizes. He sees around the corner. And that's why I think this from NVIDIA just speaks to the opportunities because they're building, like I said, they're building the Vegas Strip 1955. These are just brick by brick what they're doing. It's across the whole ecosystem.

30:15Scott Wapner: I know, but can you be bullish on this reflection story and remain bullish on OpenAI, Anthropic, and in some respects, Google? If it is a cheaper alternative that companies essentially pay for the services of those other businesses, if they can now do things cheaper themselves, is there any risk there? Yeah, it's a great question. Look, I don't see equilibrium until late 2020, 2029. just overall from a demand supply when it comes to chips on the frontier side. But we need cheaper models. You need open source because the value is going to be in the data. It goes back to sovereign AI. That's the second, third, fourth derivative.

30:58So I'd argue it is very bullish for the broader sector as these things come out. And I think that, combined with what Apple is doing, combined with what Meta is doing, third inning of the AI revolution now playing out.

31:12Scott Wapner: All right. We'll talk to you soon. Dan, thanks. Thank you. All right, Goldman's Tony Pascarello waiting in the wings right here at Post 9. Tell us where he sees the market heading over this final stretch of the year. Some of the most important design choices are the ones that go unnoticed, the details that together make an experience feel intuitive, comfortable, and above all, exhilarating. At Acura, that means looking closely at how every detail can make your experience behind the wheel more rewarding. Every lesson learned and every idea refined becomes part of what comes next, and it lives inside every MDX, ADX, and Integra.

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32:46Scott Wapner: What will the final stretch of the year hold for the markets? Let's ask Goldman's head of hedge fund coverage, Tony Pascarillo. He's back at Post 9. It's good to have you back. Thanks, Scott. Put a note out, I don't know, an hour or so ago. You said you think we're going to stay choppy between now and the end of the year, right? I think the basic framework is constructive. I think the primary trend is higher. The trading environment is pretty complicated. I mean, there's a lot going on. I'm sure we'll talk about fixed income and the impingement you're seeing in the equity market. But I think the basic framework is still intact, which is the economy is performing very well.

33:17Earnings have been, choose your superlative, terrific, superb. I think money flow is supportive. And we're still moving through this kind of investment super cycle. Now, I was on with you two months ago. I basically said the exact same thing by way of an outlook. The market's essentially in the same place. NASDAQ has done better. The S &P is a little bit higher. but that hasn't gotten you particularly far in recent months. Again, obviously because of the impingement of the bond market. And so that's where I think the choppiness comes from. But between now and the end of the year, my guess is S &P finishes higher.

33:46Scott Wapner: I mean, Rick Reeder was just here. He said, stocks are like a B -. They're not bad, still constructive. But now the competitive environment, if you will, between stocks and bonds has changed. You're kind of alluding to that, aren't you? So Rick is one of the biggest money managers on planet Earth, so you ordered this correctly. For sure. So let's take Rick's advice. Don't sell yourself short, TP. Let's go. Let's say this, though. I think stocks have done, parts of the market have really struggled in the context of the rate move. And you've narrated this along the way. But it's small cap, home builders, utilities, REITs, biotech, on and on.

34:24And the multiple, for sure, has been under pressure. So S &P was 23 times a year ago. It's 19 times today. You've had this offset, though, which has been mega cap tech and earnings. mega cap tech and energy, rather, and that's really rooted in earnings. Earnings have been the counterbalance to the rate pressure. And so it's been choppy. It's been kind of unfulfilling. But I still think that is the North Star for the market that gets us through.

34:46Scott Wapner: So if you continue to bet on the most durable earnings growth, then you must think that the market's going to, the composition of the market's going to remain largely how it is now. that tilt towards large cap tech, mostly. Maybe energy is in the mix, too. But the dispersion between sort of tech and energy performance relative to the divergence, I should say, between those two sectors and everything else is dramatic to the point where people are saying, we've only seen this a few times before. I understand why it makes people uncomfortable. I understand why this top heaviness and this concentration is a worry.

35:25I mean, the reality is, you and I have been talking about this for years, if all one has done is complain about the narrowness of the market, they've missed an incredible four-year rally led by MegaCap Tech. You say it's offense and defense. I'd say it's sword and shield. I want to stick with that.

35:42Scott Wapner: Right. That's what we've been talking about. It's exactly why you think those stocks have been working. You get the defensiveness of great balance sheets, tried and true earnings, and then you just play offense, obviously, on the story of the moment. There really isn't another space that allows you to do that. What I find super interesting, and I mentioned this a few times along the way, and I'm borrowing from John Arnold when I do this, and this is not the way everyone manages money, of course, but if you put 50 % of your risk in energy and 50 % of your risk in tech, you haven't had a down year since 2018.

36:17That's been basically the perfect marriage along the way. So the bar is high. Those stocks are well-owned. Earnings expectations are high for Q3, so it'll be in the doing. But I still want to stick with that kind of balance.

36:29Scott Wapner: Are you surprised that financials haven't done better, just given rates, growth? I think financials are wearing a little bit of the wear and tear that the other cyclical parts of the market are going through. The yield curve has been flattening, so the prism of NIM, that's a talking point. When global bond markets, particularly Europe, start to get a little bit edgy, people worry about tail risk. I also think there's something to be said for the current level of animal spirits. I think we can both agree it's down a little bit from where it was in Q2. So you roll that all together into a sector that was pretty well-owned.

37:09I think what you see is what you get. I still feel fine about the mega-cap banks.

37:13Scott Wapner: You have a great vantage point and visibility into how a lot of the biggest money managers in the world feel. Where would you put what's happening in global bond markets on a scale of 1 to 10 as to how they feel about the current state of risk? Some people talk about the contagion risk, contagion risk, things like that. Is it sort of elevating itself? I think the average go-anywhere manager who can do anything as Rick does is pretty worried about the impingement of interest rates on both the equity market and the credit risk. So here's how I think about this, right? And I always use the minus 10 to plus 10 scale.

37:55If I translate that into equity length, if we were here in June, I think it was a plus 9 or a plus 10. When I was on two months ago, I put it at plus 6. Today, I put that plus two because I do think that is the asset class, the neighboring asset class that people are worried about. One translation of that is if you're long risky assets and you're long stocks, to be short of the bond market has been the perfect pairing for your equity length.

38:18Scott Wapner: All right. We'll talk to you soon. Tony, thanks as always. Thanks, Doug. It's Tony Pasquarello of Goldman Sachs. Up next, the biggest movers as we head into the close. Closing bell is back right after this. About 10 from the bell. Back to Brandon Gomez now for a look at the key stocks we're watching. What do you see? Hey there, Scott. First up, shares of DraftKings climbing today on a Bank of America upgrade to buy. Now, despite last year's revenue decline, analysts say the betting platform could generate$400 million from prediction market fee revenue in 2027. Stock is up about 5 % today, but remains down 42 % year to date.

38:49Next up, we have Vistra also in the green after the U.S. Department of Energy confirmed a conditional loan of$4.2 billion to boost power output across the company's nuclear fleet in Pennsylvania and Ohio. That stock up, you can see now about 3.5%. And then finally ending on shares of Harley-Davidson, surging after Citi upgraded the company to a buy rating from a prior neutral. And despite the motorcycle manufacturer's multi-year slump, the Citi analyst believes that a turnaround is in the works.

39:16Scott Wapner: That stock up almost 7 % now after being down about 10 % in the past three years, Scott. All right, good stuff, Brandon. Thanks, Brandon Gomez. Still ahead, Nasdaq heading for another record close. The market zone's next. We're now in the closing bell markets on Mike Santoli and iCapital's Shonali Bassek are here to break down these crucial moments of the trading day. Oliver Rennick standing by live from the SIBO Global Markets in Chicago. And Seema Modi is tracking the big moves in shares of Cerebris today. We'll get to that in a minute. Mike, you first. Rates still elevated, yet every sector in the market's in the green.

39:49Yeah, I mean, obviously, we no longer have the sticker shock at these levels of rates. Now, clearly, the cost of capital is rising. It's going to have real world effects. But for now, the market seems to be happy that we are emerging from this period of macro focus and potential kind of macro stress coming through the jobs number coming through the Fed meeting. And so you do have the assertion that the A.I. theme is impervious to rates for now. That said, it's never all one thing. You have consumer doing almost nothing today. Banks still not really coming off the sidelines. So I still think it's a give and take type market.

40:26But there have been these periods from June to the first week of August. We were in a two month sideways range, got a marginal new high in early August. Guess what it's been since that early August high? Exactly two months. So the market is trying to make a bid that we've actually been kind of digesting for a while. We'll see if we ever get to if we actually get soon to those old highs. But it seems like it's a familiar pattern in that respect.

40:49Scott Wapner: How do you take it on in five minutes on in overtime? We're really going to attack that idea of can the stock market stay impervious to rates? We've got a couple of voices from Bernstein Wealth as well as Wellington from the stock and fixed income side. Going to do that right off the top. All right. Good stuff. We'll look for you then. That's Mike Santoli coming up in just a bit, of course, in overtime. Let's go to Chicago. Oliver Rennick playing options action. Where are we looking today? Hey, Scott, in that very good tape, it was a very bad day for home builder Lenar, and options traders think it could get worse.

41:21Shares are now down almost 30 % year-to-date, and traders rush to buy protective puts as options volume surged to 13 times the 30-day average. The most popular contract was the 74-strike put, expiring next Friday, which is just barely out of the money now. That contract was bought more than 6 ,000 times today, despite there only being 60 open trades in the contract coming into the session. The most popular trade expiring this Friday was buying the 70 strike put, which needs another 6 % drop to work, Scott.

41:55Scott Wapner: Yeah, keep seeing mortgage rates back up. You get those trades. Oliver, thank you. Oliver Rennick at the Cibo Global Markets in Chicago. Let's go to SEMA on Cerebris shares. Tell us more there. Well, here's a story, Scott. When OpenAI revealed its latest model, GPT 6.1 had mentioned NVIDIA as a key supplier, which raised some questions about its relationship with Cerebris. Cerebris. The stock responded, dropping 17 percent last week. Now, over the weekend, OpenAI CEO Sam Altman clarifying that Cerebris is a close partner and that the two companies have deep engagement, pushing on the, quote, frontiers of speed.

42:28This plus raised price targets has helped shares rebound today with two bullish notes from Barclays and Mizuho. The stock has underperformed recently, due in part to lock up expirations. But analysts at Mizuho see the focus on cybersecurity, enhancing inference workloads. They see this as a long-term win for Cerebras. That stock up 9%, Scott.

42:45Scott Wapner: All right, good stuff. Seema, thank you. That's Seema Modi, Shinaldi Basics here at Post9. To my left, so this idea of, you know, stocks and bonds coexisting at current levels, how long can that last, do you think? For a while longer. I mean, I don't think we're at the height of the 10-year yet. I think that would be catching a falling knife here. Should we get to 5. Really? Yeah, I do. I don't think that it's over yet. I don't note that we get too much higher from here, but I don't think that it's a great sign that you're seeing the short end start to find some relief and the long end stays sticky.

43:20And there are too many things going on in the world that would risk spillover effects, right? You look at global bond markets. You even look at inflation, right? I mean, the Fed is just starting its hiking cycle.

43:32Scott Wapner: So how closely then are you watching global bond markets, right? We've talked about that with our marquee guests today. So what's your take on that? Very closely. You have to. And even if you can absorb yields at these levels, there is still a transmission mechanism here. We don't know where we're heading into the end of the year and into next year. And I think it's a risk. Only if we go too high too fast. I think that the market can absorb these levels. Wow, we've moved pretty fast, right? I mean, the 10-year is up like 50 basis points in a month. You know what's crazy? You know, you look at the 150-day rolling average of the 10-year, and we're not at historic moves by any stretch of the imagination.

44:09We are just elevated relative to the last three years.

44:13Scott Wapner: When does it start to impact stocks more broadly, more strongly? I mean, it has impacted stocks more broadly because a big part of the market hasn't performed as well as the mega caps. I think it's a mistake to just look at yields. It's a K-shaped economy, so it's a K-shaped market. And I think you're going to start to see that once earnings starts to roll around. You were talking about it a little earlier. Too much tech is accounting for too much of the earnings growth. And so what about everybody else? I do think you're going to find pockets of brightness. Financials, for example, I think have been a little too negative in terms of the investor sentiment lately.

44:49Scott Wapner: You think so? Why so? Well, because I do think that steeper yield curve is actually very good for the banks. I know, but the yield curve's been flattening. That's why the trade hasn't really worked. It's steepened quite meaningfully since the beginning of last week, for example. And this is kind of what I mean. I think that the short end, we're probably tapering off because we may or may not get that October hike. The volatility is in next week because not only do you have earnings, you have that CPI print, which I think counts for a lot more than that jobs print. You think the two-year probably got ahead of itself, thinking that the Fed was going to be maybe more aggressive more quickly than it actually is?

45:19Oh, yeah, I do.

45:20Scott Wapner: That's why the curve was flattening the way it was. Exactly, but we're back to that steepener. We're about 45 basis points heading into this week. And again, that long end is where that uncertainty lies. and you have those two treasury auctions 10 and 30 years later this week. Let's see how it behaves. Earnings breadth has been pretty robust, too. I know that tech's sort of stolen the show, but it's not like everything else has been a slouch. No, I do think earnings growth is going to decelerate, though, from the prior quarters. You don't have those one-time items, and then you have energy accounting for a lot of those potential gains, which, once you strip that out, let's see how exciting it can get.

45:54Scott Wapner: All right, Shinali, we'll see you soon. That's Shinali Bassick joining us back here at Post 9. Okay, we're going to ring the bell a little bit. So we're green across the board. Every sector within the S &P 500 is still green. Yes, we are watching interest rates. It remains very much the story today. But the market's been dealing with all of that really well. Another new high for the NASDAQ, another new high for NVIDIA. And that's how we'll leave it as the bell rings. CorPay was built on a simple idea. Give businesses more control over spending. Because managing spend today means managing a lot.

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