Closing Bell 9/25/26

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0:37Most tools pick a lane. VectorVest doesn't. Every stock gets three scores. Value, safety, timing. You decide what matters most. Stop overthinking what to buy and sell. Go to VectorVest.com slash closing bell. Get 30 days for just 99 cents. VectorVest provides stock analysis tools, not personalized investment advice. Terms at VectorVest.com. And welcome to Closing Bell. I am Frank Holland, in for the judge, Scott Wapner. This make or break hour, it starts with a run on rates, a mega week for the mega caps, and geopolitics taking center stage. We're going to get to all of it with our panel of experts.

1:13But first, here's your scorecard with 60 minutes to go in this trading week. Take a look at stocks green across the board right now. Even the Russell that swung into positive territory after some news on the U.S. and Iran. We'll certainly get to that. The Dow up over three quarters of 1%. The S &P up almost a half a percent. Same story for the NASDAQ. And we have to look at bonds, of course. Taking a look right now, we're seeing the 10-year at its highest level since 2004. Just talked to our data team about that. The 30-year at its highest level since 2007. They're coming in at 5.17 and 5.49, respectively.

1:45And that leads to our talk of the tape. What's next for your money as we ran out the last full week of September? Let's ask our panel. We've got Citi's Scott Kroener, Newbergers' Shannon Sakosha, and Wilmington Trust, Megan Hsu, Shannon and Megan, RCNBC contributors. Good afternoon to all of you. Great to have you here on this Friday. Thanks, Frank. Ladies, nice to see you, too. Scott, I'm going to start off with you since you said hi to me. We saw the markets move higher right around noon. I was here doing a halftime report. We got that news that the U.S. and Iran are having technical discussions.

2:15There was a report out there about that. So just looking at the moves, as I mentioned, small caps, they turned positive. They were a bit negative. Also a very slight back, slight pullback when it comes to oil. Mike Santoli, he was here earlier, he described this as kind of a pump fake for the markets. Are there implications if a deal doesn't actually come through and we continue to see this uncertain? Yeah, I think oil holds the key. That's the way we've been viewing this tape for a while now. And very simply, as goes oil, so goes inflation expectations. And therefore, so goes the interest rate drama.

2:48So basically, this does become pretty important. And then the question becomes, to your point, another head fake or is there actually some substance to this? Remains to be seen. We've been head faked several times. But the market reaction is what you would expect. You begin to see some of these more economic sensitive parts of the market rally. And that's in addition to the strength that we've had on the tape since what we will refer to as the Jackson Hole pivot and the Fed getting a bit more hawkish at that point. Shannon, I want to come over to you, looking at the flattening of the yield curve.

3:21As I mentioned, 10-year at its highest level since 2004, the 30-year also hitting multi-year highs. When you're looking at the flattening of the yield curve, do you see this as potentially continuing, continuing to rise even more, or is this simply investors just trying to get ahead of what the increasingly hawkish Fed is, what Scott's kind of calling a post-Jackson Hole pivot? I think the challenge, Frank, is that there is obviously some positioning here in terms of duration and looking ahead and how many hikes are you extrapolating out? Is it two? Is it three? Is it four into the end of the first quarter of 27?

3:57We think it's two. But I think the other challenge here is that the other piece of the Fed's commentary over the last several weeks and what we're seeing borne out in the data is that we are seeing evidence of acceleration in U.S. growth. And that is going to complicate the narrative for the Fed and for Treasury Secretary Besant if we see rates rising on the long end of the curve, not based on fiscal sustainability concerns or the potential cannibalization of Treasury demand by other investment grade corporate issuance. And instead, this is a growth expectation that you're going to have to see the curve react to that.

4:39And so while we admit that we're going to continue to see some oscillation in terms of sentiment over the course of the next couple of weeks, do we get some sort of understanding in the straight? Do we start to see oil flow more predictably through that area of the world? At the end of the day, we're just weighing what does growth look like in 2027? And so it's difficult for fixed income investors right now to know where to position. We've become a little less constructive, a little more conservative on credit. But you see a widening of credit and you see some duration opportunities created where the market starts to price in three or four interest rate hikes into next year.

5:18Well, that's going to create some opportunities for bond investors. And so I think you just need to remain very nimble here because expectations are changing quickly. And I think we'll continue to while we move closer to earnings season. You know, Shannon, we had a discussion earlier today here at PostNine. Can you hopefully sell it for us? So you saw flash ISM manufacturing, flash ISM services come in considerably better than expected. Also, consumer sentiment a bit better than expected. What does that mean? How does the Fed view that in your mind? Does that make them more hawkish? Does that make the bond yields move even higher, this economic strength that we're seeing?

5:51I mean, yes, there's no there's likely to be little alleviation. I mean, you know, taking oil off the table and the potential for energy pass through. You're still in a dynamic environment as it relates to economic growth. this continued capital intensity that we see for the U.S. economy, the desire for continued build out and those pockets of inflation coming from areas which frankly have been disinflationary or deflationary over the past 15 years. Chair Warsh's comments about the diffusion. They're looking at prices, not just at services and particularly super core services, shelter. They're looking across the gamut of categories.

6:29And I think that that's why we really need to take a step back, understand the Fed's calculus and ensure that we're positioned appropriately as we move into 27, because it's just changed. The type of inflation we're experiencing has changed. And therefore, the narrative and your response to it needs to change in turn. All right, Meg, I want to come over to you. A lot going on today and this week, but you're actually looking ahead to the midterms. And you say the risk around those midterms has become elevated. I'm just trying to figure out, is it simply because of the results or is it potentially how China and Iran may view the inflection point of the midterms.

7:02By the way, Cal Shia, 60 percent chance of the Dems winning the House, according to their data. We have to have a commercial agreement with them just about a month ago was about 47 percent. So it seems to be more optimism of the Dems winning the House. Yeah, I think midterm elections are always a source of volatility. They're typically not as important or critical for the direction of policy as a presidential election. But as we move into November, we have a number of risk catalysts kind of bubbling under the surface. We have a tough seasonality period. This is just another factor on top of that.

7:39And as you noted, coming into the summer and through most of the summer, it was looking like the Democrats would take the House, but Republicans would retain the Senate. And those odds have shifted also. So I think either way, you are still likely to see some form of divided government with a Republican president, even if the Democrats take the Senate. And divided government is generally rewarded by the stock market. So I think if we can make it into November, the geopolitical considerations are, you know, there's quite a calculus there in terms of the gaming out of how different political factions could be reacting to what's happening here in the U.S.

8:20But all told, I think divided government results in a little bit of a relief rally for the stock market. And we can refocus on the economic fundamentals, which, as Shannon noted, are very solid. And our view is that inflation will continue to move lower, especially as you get into early 2027. I think we might be a little bit surprised by the base effects and some of the really much more favorable readings from PCE inflation on a year over year basis. So this could be peak hawkishness. This could be the bottom for bonds. We don't really know. But I think investors should stay invested. We're overweight equities and we think we will chug through this and see better returns on the other side of midterms.

9:01OK, everybody stay with me. Speaking of bonds, rates on the move once again. Investors rethinking the path ahead for the Fed and what it could mean for their next policy decision. CNBC senior economics reporter Steve Leisman joins me now. Steve. Thanks, Frank. Yeah, along with higher yields and, you know, maybe because of the higher yields, markets are pricing in a much more aggressive path for the Fed, as you were just talking about. And that compares with the beginning of the year or even a few weeks ago. Here's where we are. 66 % probability of a hike in October, followed by 52 % for December, 60 % for March.

9:33So almost consecutive there. Not just one and done expected by markets. Now markets, they project a rate hike cycle with nearly 100 basis points of tightening price, but it's actually worse than that. Take a look at this. At the beginning of the year, we were looking for 62 basis points of cuts, easing, that is, bringing the funds rate down to 3%. Now they're looking for 75 basis points more of tightening. That would bring it up to 450 by March 27. Kevin, add the two together or go from three to four and a half. That's 150 basis points tighter in March than originally expected when the year began.

10:02Several Fed officials in the past several days saying some additional rate hikes might be needed. That included Fed Governor Michael Barr, New York Fed President John Williams, and Phillies Anna Paulson. But market expectations, they're more aggressive than the average Fed official forecast recently. Fed Chairman Kevin Warsh, he's not telling us either way what he's thinking, but has a series of market metrics he watches to determine the right level of the funds rate. Credit spreads are there. Private sector lending conditions, commodity prices, currency exchange rates, all of those are part of it.

10:30But the more important conclusion, he thinks credit conditions are easy. That creates scope for more rate hikes if inflation isn't under control. And with a chairman who's vague about the future, Frank, the market has decided to price for the worst and hope for the best. All right. Senior economics reporter Steve Leesman. A lot of information there. Steve, thank you very much. Shannon, I want to come back over to you again. You're very focused on bonds. 150 basis points swing. Very notable. Yeah, I mean, I think when we are looking at this potential tradeoff, there's a couple of things that investors are looking at coming into this fourth quarter.

11:06If you're attempting to potentially trim off some of your risk, we are seeing a bit more conservatism in terms of strategists and positioning going into this end quarter of 2026. then you think about the potential to lock in some of this yield. Yes, there are concerns and considerations about additional rate hikes. But if you think about being able to balance out some of the potential risk in your equity exposure, the potential for, for instance, while we anticipate a strong earnings season going into 2027, maybe some questions about year over year comparisons. And then you also have to think about the tenor of that underlying fixed income exposure.

11:47As I mentioned, we're becoming a little bit more conservative on credit. But the reality is that for many fixed income investors, particularly with the large amount of investment grade issuance coming out of the hyperscalers, the universe of opportunities in the fixed income space has changed markedly over the last two years. And so trying to think more flexibly around fixed income, but acknowledging that for many investors, taking some of that equity exposure might feel off the table, might feel uncomfortable, despite the fact that looking at it historically over the last 15 years or so, these yields actually could be pretty compelling as we move into 27.

12:24Yeah, a lot of people talking about the bond market creating a lot of competition for the equity market. Going back to equity market, Scott, you've been looking at the valuation of the S &P. It has certainly pulled back quite a bit over the last year. Obviously, part of that is the rise in bond yields. Is it time to rethink the idea that certain parts of the market are cheap or expensive? Is it time just to kind of re-rate everything with the idea that inflation has been sticky, we're seeing a more hawkish Fed, and we have so much uncertainty around Iran and oil? Well, I think going back to what Megan was saying earlier, I would agree with this, that the question becomes, are we looking at maximum Fed hawkishness here?

12:59And I don't know for sure, but when you start pricing in another three, if not four Fed rate hikes from here and to the earlier point on how much the market has had to contend with in terms of implicit tightening, you do begin to set yourself up for some relief rally, given the news flow. And I think I keep coming back to the oil trigger on this. If you do that, you begin to set the stage for a pretty decent finish to the year. And it's a combination of things, Frank. It's going to be both the mega cap growth cohort that's going to benefit from some rate relief in terms of the issuance for data center debt and so forth.

13:38But at the same time, if you look at what's happened again in the past month or so from a sector performance action, you can see those traditionally rate sensitive parts of the market have been impaled. And so you provide some relief there. And what you get is both parts of the market, the AI influenced and everything else, potentially, potentially gives you that rally opportunity, particularly on the heels of the midterms into the end of the year. All right. Everybody stay with me once again. And speaking of AI, let's turn to tech and the big news out of Microsoft today that has those shares popping.

14:11Let's get to our Kate Rooney with much more. Kate. Hey, Frank. So Microsoft is revamping its biggest AI product right now as it tries to compete more with Anthropics Cloud. It's a new version of Copilot. It's bringing together coding, some of the knowledge work, and AI agents into one app. And the app really tries to marry co-work with these complex tasks, code for coding, as the name suggests, and then autopilot, which lets agents handle some of the work on the back end. The goal here is to make Copilot a lot more competitive with Anthropics Cloud, with OpenAI's co-work. And Microsoft, as part of this, is also changing how it charges for some of these tools.

14:48It's moving away from more of a flat subscription and then towards usage-based pricing. Right now, it's got about 450 million commercial office 365 seats, but fewer than 7 % are actually paying for that AI addition. So the big question going forward is now whether Microsoft can harness this massive installed base out of its office customers and turn Copilot into a must-have product. Also, Frank, at a time when Muse and Meta is getting so much attention, there's so much interest in agents right now. So Microsoft kind of jumping into the game here. All right, Kate Rooney on Microsoft's big day. Those shares up just about 3.5%.

15:24I want to come back to the panel. Megan, I want to come over to you. A lot of kind of like mixed messages, signals, whatever you want to call it, when it comes to AI, concerns about regulation, ideas about more tourism data center. But at the same time, we're seeing Muse and also this new co-pilot news move stocks higher. Your overweight comm services, your underweight tech, just kind of give me your take on Microsoft today and the broader tech landscape. Yeah, I mean, generally, I would say we like, you know, the mega cap tech companies. There's going to be disruption. The pace of change in technology is incredibly rapid.

15:57But these larger companies who do have the scale, they have the user base, and they have the data, I think still have an advantage. Microsoft obviously always excelling in the workplace and the integration of different desktop programs. On top of that, I think could stand to have an advantage. We've had a little bit of a pause and sentiment on technology over the last couple of months. And I think going forward, we could have a bit of a reset. Certainly data centers, fear around job losses and regulation of AI have been front and center, again, tied to some of the run-up to the midterm elections.

16:38But as we look at the different opportunities, broadly speaking, we see valuations that are reasonable. We see demand that continues to outstrip supply over the near term. And I think we are still in the early to middle innings of this build-out, so there is potential for these larger companies. And we've seen that in the recent outperformance of the cap weighted S &P 500 over the equal weighted as we've gotten a little bit of a return to those in favor of those stocks. Shannon, I want to come back over to you. Another big stock in the MAG7 this week has been meta, really popping off of that Muse news.

17:13Your take on that? Well, I think it's interesting if you look at what's happened this week, whether it's for Muse or for Microsoft, as Megan just mentioned, there have been questions, you know, for instance, in the capabilities of Copilot and the ease of use of Copilot. And now with Muse, just another example of potential disintermediation of various services, but also disintermediation amongst the group. I think we maybe forget sometimes how much competition there was back in the dot-com era in terms of who would win out in terms of things like search engines. And I think we're going to continue to see this ebb and flow of whether it's talking about models or agents.

17:56there is going to be something new coming along all the time. And I think it's important, particularly for Meta, to show that they're executing because there have been some questions about execution, particularly around the compute and the supply and demand of that for that business. And so it'll be interesting to see how this evolves. But I wouldn't be surprised if you're an investor that these companies are going to continue to innovate and try to get ahead of the competition as we move into 2027. Scott, Shannon, Megan, great to see all of you. All of you have a great weekend. Thank you very much.

18:31We now want to send it over to our Christina Partsinevelis for a look at the names making the biggest moves going into the close. Christina, good to see you. Well, let's start with shares of Zscaler because they're sliding today after a shakeup in its sales leadership. Chief Revenue Officer Mike Rich is stepping down for personal reasons and head of worldwide sales Ross Tackett takes over October 1st. The stock is down dramatically, about 9%, but also caught up just in a broader sell-off within Cyber, Palo Alto, Okta, Cloudflare, all selling off today. Humana moving in the other direction, jumping over almost 6 % after Barclays upgraded the stock to overweight and raised its price target to$515 from$407.

19:09So a big increase there. The firm is just growing more confident that several of Humana's Medicare Advantage contracts will win back bonus level star ratings. Those shares you can see on pace for their best day since June. And Twilio tumbling today after HSBC cut the stock to reduce. That's its sell equivalent rating. The bank arguing the rally tied to Meta's new Muse AI agent has just gone too far. And that Twilio won't capture as much of the opportunity as investors have been pricing in. Shares down almost 8%, Frank. Christina Parsonovos, thank you very much. We'll see you coming up just a bit later in the show.

19:45We're just getting started here on Closing Bell. Coming up next, President Trump and Chinese President Xi Jinping wrapping up High Stakes Summit in Washington today. We're live at the White House with the very latest. We're live from the New York Stock Exchange. You are watching Closing Bell right here on CNBC.

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21:22Those protecting what they've got, those looking for solid returns, and those swinging big. Most tools pick a lane. VectorVest doesn't. Every stock gets three scores. Value, safety, timing. You decide what matters most. Stop overthinking what to buy and sell. Go to VectorVest.com slash Closing Bell. Get 30 days for just 99 cents. VectorVest provides stock analysis tools, not personalized investment advice. Terms at VectorVest.com. Welcome back to Closing Bell. President Trump and Chinese President Xi Jinping wrapping up a high-profile state visit to Washington. Eamon Javers is at the White House with much more Eamon.

22:01Frank, that's right. Chinese President Xi Jinping is wheels up for Beijing. But before he left, we did see a couple of final events here earlier today on the schedule of this enormous summit this week. And despite all the pomp and circumstance that we saw throughout the week, we didn't see a lot of substance in terms of actual deliverables, actual outcomes, at least not announced so far. Here's the president, though, earlier today, maybe giving a hint as to what we might expect to come. Take a listen. I think our farmers are going to be happy. A lot of very positive things happen. but America is very happy about this visit and I'm sure China is very happy also.

22:41Great things for both countries and it's been just very, very productive. So the president's saying it's been very, very productive as we look at the president and Xi Jinping here at the National Archives taking a look at a lot of the founding documents of the United States and I think that comment, Frank, about the farmers will like this visit does give you a sense that maybe the president expects a big announcement of Chinese agricultural purchases. We haven't seen that yet, but that's something to keep an eye out for. Meanwhile, all the other topics, including Iran, we just didn't get much indication of what had been said behind the scenes.

23:15The president did say the two had talked about Iran, but then just a short time ago, we did see this post from the president of Iran, Mazzoud Pazeshkian, who says, I appreciate President Xi Jinping's thoughtful and responsible support for a return to the Islamabad Memorandum of Understanding and for resolving differences through dialogue and diplomacy. Iran shares this approach and underscores the importance of returning to that understanding, honoring the commitments already agreed upon and creating the conditions necessary for serious, substantive and results-oriented negotiations to move forward.

23:49So that from the president of Iran, as we saw this visit between Xi Jinping and President Trump. So the question is, were Iran and China coordinating their message to President Trump this week in terms of a way out or a way to end anyway, the Iran war and reopen the Strait of Hormuz? We don't know the answer to that, but I think that tweet there from the Iranian leader is perhaps telling that there is some sort of joint diplomacy here going on between Beijing and Tehran. Frank. All right, Eamon Javris, the very latest from the White House. Eamon, thank you very much. You bet. For more, let's bring in Dennis Unkovich, partner and international attorney at Meyer Unkovich and Scott.

24:30Dennis, welcome to Closing Bell. Thank you, Frank. Nice to be here. All right. So Eamon hit on this a bit as well. But the way you saw it, it was a three hour meeting between Trump and Xi, a lot of pomp and circumstance. But you don't think really a lot got done. At the same time, you're saying that President Xi's on a plane back to China and he's saying mission accomplished. So how could it be both at the same time? I think President Xi wanted two things. Number one, he wanted to continue to out innovate the United States. Technology has been his number one priority. And as I can see, Trump went along with it.

25:06And so Xi is not going to have to have pressure put on him to slow down on AI, which in my opinion, they wouldn't have done anyway. Secondly, Taiwan is always the difficult issue for anybody. It doesn't appear to have been discussed. And if it was, clearly the president hasn't given up anything on Taiwan. But Xi constantly says, I want you to say that Taiwan will never be independent. The president didn't say that. But really, I think that Xi didn't want any problems. One other thing I might mention, if it's interesting, why did no one talk about why the sea did not go to the United Nations? You had all of the world leaders sitting there, but instead he just went to Washington.

25:52My idea is that he simply didn't want to face the Europeans and the Asians because China has been dumping enormous amounts of products across the world. And I think that the export picture is something that he didn't want to discuss with the Europeans. Certainly a lot of tension between Europe and China when it comes to exporting and, quote-unquote, dumping as well. I want to get back to this meeting between Trump and Xi, though. Axios says that Trump asked President Xi to stop supporting Iran. And we haven't heard it explicitly, but a lot of reports out there that, you know, President Xi was expected to ask Trump to shift the U.S.'s kind of strategic ambiguity when it comes to Taiwan.

26:31I want to ask you, which one of those is a bigger bargaining chip in these talks? Because a lot of other things on the table here, the trade truce was extended. So something did get done. It wasn't completely just pomp and circumstance. The trade truce was extended. But there's chips, as you mentioned, high end AI chips. There's agricultural purchases. There's a lot of things to talk about. I think the agricultural thing is something isn't very serious at this point. I don't know if you remember back to 2019, the Chinese agreed to buy enormous amounts of products. They never really did follow through with that.

27:03As far as the rest of it, what do you think? What is the one question you really want to know? Well, I'm asking you, I mean, when we're looking at these discussions, I left off rare earths. I mean, there's so many things to talk about. AI regulation, which you're saying that China wasn't going to do anyway. But Trump wants President Xi to basically stop supporting Iran. It seems like President Xi wants Trump to kind of be less ambiguous, I guess. I don't know exactly what you get from that when it comes to Taiwan. Who has more to gain in these negotiations in either one of those positions? I see no way that Xi Jinping, whom I've been studying for the last 50 years, is going to step away from supporting Iran any more than it is going to be separating itself from dealing with the Russians.

27:46I think that Taiwan is sitting in the background. And I think when there was no strong statement made on Taiwan by the president, I think that was helpful to see. Dennis Lunkovic, great to have you here. Thank you very much. Thank you for asking me. Coming up, 314's Warren Pies on September seasonality and the signals that could point to a broader pullback. Closing bell coming back in two. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more.

28:24No new tools, no extra logins. Just one subscription that gives you personalized AI right inside your actual workflow. Make work less work. Try Google Workspace with Gemini at goo.gle slash workspace with Gemini. There are three kinds of investors that listen to this show. Those protecting what they've got, those looking for solid returns, and those swinging big. Most tools pick a lane. VectorVest doesn't. Every stock gets three scores. Value, safety, timing. You decide what matters most. Stop overthinking what to buy and sell. Go to VectorVest.com slash closing bell. Get 30 days for just 99 cents.

29:04VectorVest provides stock analysis tools, not personalized investment advice. Terms at VectorVest.com. Still waiting in line? Again? That's time you will never get back. Save time and money with Stamps.com. Over 4 million businesses have skipped the line with Stamps.com. Join them to save up to 90 % off carrier rates from your computer or phone right now. Print postage for certified mail, registered mail, and packages in seconds. Get$20 in free postage when you sign up for the pro plan at stamps.com slash Black Friday 2026. Terms and conditions apply.

29:41Welcome back to Closing Bell. Stock's headed for a winning week. So what's in store for your money as we head into the final stretch of the year? Let's ask 314 Research co-founder Warren Pies. Warren, thank you for being here. Happy Friday. Happy Friday. Thanks for having me. All right. A lot of talk about the rise in bond yields. Just yesterday, you upgraded your perspective when it comes to bonds right now. Right now, you're saying the 10-year is fairly valued. What does that mean more broadly? Yeah. Well, we've been underweight bonds since June, and it just made that adjustment to benchmark weight.

30:12So we're not crazy bullish here, but I do think that, like you said, the 10-year is at fair value. So from our perspective, the Fed signaled that they have one more hike ahead of us and then a hiking bias going forward. And I think that when you look at the SEP that they laid out, we have a pretty high bar to that third hike. So under those conditions, I think you can start with the two year and say, I think a two year fair value is something like four, seven, five, maybe four, eight, five. If you want to price a little bit of a way to that third hike. And then you have to say what kind of yield curve is appropriate for that.

30:45I think 30 to 40 basis points that lands us right in that five, one to five, two level for the 10 year. So I think we've really digested the bottom line on that is I think the markets have digested much of this shift from if you go all the way back to early August, no one really expected a Fed hike in September. Here we have it and we're pricing in multiple hikes and it's all been digested, the equity markets within, you know, one, one and a half percent of all time highs, I think we're in good shape. And so going forward, I think it should be cease being a headwind to equities and at the very least just be a neutral for equities.

31:24All right. So you also upgraded equities to overweight just a day after the Fed meeting just about a week ago. When we're looking at the bond rates right now, you're also saying it's very important also to figure out if the Fed's basically adjusting or is this part of a cycle? So kind of explain that thesis to me, because a lot of talk now about two hikes that you said one hike kind of priced in and kind of signaling towards a bias towards another one. But other people see possibly even more hikes. Just kind of give me a sense of how an equity investor balances the rise in bond yields and potential for more hikes.

31:54Yeah, well, I mean, if you just zoom out, equity returns drop when you're in a hike cycle. And if you look at the start of every hike cycle going back to the mid 80s, you have a pretty, you know, it's nothing crazy, but the first two months in the start of a true hike cycle, equities are down something like 8 to 15 percent on average. There's one case where the Fed did just an adjustment hike, and that was 1997. We had a small dip in the S &P 500 and then the bull market resumed. We're looking for something closer to that. And that's really the the key determinant on whether rates are going to continue climbing from here or whether we're kind of peaking when it comes to the 10-year.

32:36So in our view, if you look at, say, the core PCE estimate, the SEP, the Fed said 3.4%. There's going to be revisions that make that a very tough bar to get over. So I think by the end of the year, the Fed's going to look around and say, hey, inflation is still above target, but it's not nearly as bad as we had thought it was going to be in our SEP. They'll take a little bit of a victory. You also look at their SEP and say they projected out 4.1 % unemployment through this year and all the way out through 2028. So any wobble in the unemployment rate would give the Fed a little bit of pause based on the SEP.

33:13So when I take all that in, I think we're looking at a 1997-ish adjustment versus a full hike cycle ahead of us. And then finally, you see the war starting to calm down. My expectation is that oil is going to kind of start alleviating some of the pressure on the Fed. And so all that comes together for a positive equity outlook. What about the narrowness of the market? LPR, with an earlier today, saying over the last two months, we went from about 73 percent of stocks in the S &P above their 200-day moving average. Now we're down to about 51. You see a tech-driven rally going forward. Is that narrowness?

33:50Is that a positive for the market if tech continues to lead? It's really been the rhythm of this bull market. You know, this has been a very, you've heard this really since 2023, since the AI bull has started, is that this is a narrow bull and there's just narrow leadership, only a few stocks going up. And I think that the truth is really that the rhythm is these mega cap tech stocks and tech in general has been leadership. And then they get out ahead of the rest of the market and the rest of the market has to catch up. So our view coming when we upgraded stocks, our view is that this next move in the S &P 500 is it has to be tech led.

34:25It has to be part of the story. I envision a world where mega cap tech and hyperscalers, along with semis, rally together. We really haven't had that this year. So I think that's going to be enough leadership to drag the index higher. I also thought it would be narrow until yields peaked, which I think we've gone ahead, like we said earlier in the conversation, and gotten a fair value on yields. So I think the breadth can probably improve from here, but I still expect this. The market's going to rise or fall with tech, really. All right, so narrowness is okay as long as tech stays pretty strong.

35:03You're saying it's okay. It's not ideal, but it's okay. So Warren, I can't help but notice you already kicked off Casual Friday. You're already relaxed. Give me a sense of your take on retail, consumer discretionary, other consumer sensitive parts of the market with rates higher, oil higher. What's your view of those sectors? Those sectors have the potential to maybe catch a bit. They've been a bit beaten down. No, I think these aren't areas I want to be overweight in my portfolio. So I want to be underweight consumer sectors at this stage of the cycle. I think the rate story hasn't crept all the way into it.

35:37And if the Fed is going to hike rates and try and slow inflation by curbing demand, the parts of the economy most sensitive to demand are really consumer led areas. So you're talking housing and consumer spending and things like that. It's going to take more work for them to dent like the AI build out story. And they really can't impact the oil story through rate increases. So I think the losers in this part of the cycle and why it's probably going to be a more narrow market, a more AI-led market, the losers are going to be those consumers sectors. So, yeah, not areas I really want to make prominent positions in my portfolio.

36:15Warren Pies, happy Friday. Thank you very much. Good to see you. Same to you. Coming up next, we're tracking the biggest movers as we head to the close. Our Christina Parts and Evelis is standing by with that. Christina. An AI giant opens his wallet for the cloud. A buyer becomes the target in a media takeover twist. And a data center scare just reverses. Those stocks on the move next.

36:38Just about 14 minutes to the closing bell. Let's get back to our Christina Parts in Evelis for a look at some key stocks to watch. Christina. Well, let's start with shows of Akamai Technologies climbing higher today after Anthropic committed to spend at least$11.6 billion on its cloud infrastructure and software just over the course of seven years. with potential expansion of up to roughly$20 billion. And so that's what's pushing shares higher, almost 4 % right now. People Inc. soaring today after a report from the Wall Street Journal that MGM is weighing a bid to purchase the publishing giant.

37:08It comes just, what, two days after People withdrew its own bid to acquire the casino operator. So reverse there, and that's why you're seeing shares up 12%. Last but not least, Bloom Energy rebounding higher today. The stock did tumble more than 6 % just yesterday after Oracle's Force Majeure notice related to its New Mexico data center product sparked AI build-out concerns. But in a post on X just yesterday, Bloom reassured investors that Oracle remains, quote, committed to Project Jupiter and its contract with Bloom. Stock up 9.5%. Frank? Christina, thank you very much. You have a great weekend.

37:43And I like the use of French, too. All right, coming up next, Nike getting knocked down ahead of earnings next week. Details on the downgrade when we take you inside the market zone. That's coming up next.

37:59And welcome back to Closing Bell. We're now in the Closing Bell Market Zone. Mike Santoli and MJP's Brian Bendig are here to break down the crucial moments of this trading day. Plus, Oliver Rennick is standing by live from the CBO Global Markets in Chicago. Diana Olick has a look at the huge move in mortgage rates this week. And Brandon Gomez is watching shares of Nike after a big downgrade. Mike, let's start with you. Looking at the Dow right now, Now, it's jumped up about 500 points in general. The markets have moved to the upside after the news about those technical discussions between the U.S.

38:28and Iran. Yeah, and I don't think, Frank, that represents really a lot of clarity or conviction around exactly how this plays out. But maybe after a difficult few weeks, especially for the majority of stocks where you've had this, you know, buildup of anxiety around what was happening with rates in oil, that you at least don't want to be too negative just in case we have some constructive movement in that direction. So I still think this is it's obviously a very split market, as you've been discussing. But the AI theme has proven that it's both defense against macro pressures as well as offense on the excitement about the consumption of AI.

39:06And for a week, at least, that has worked. And for that matter, for the month of September so far, it's actually held the headline indexes pretty firm. All right, Mike, thank you. We'll see you coming up in OT. Want to get over to our Oliver Renick at the CBO Global Markets over in Chicago. Oliver. Hey, Frank, options played a key role in stabilizing markets this week as a buildup in puts early in the month rolls off worthless and call buying pushes options volume ratios in SPY and the Qs back towards even. That's despite bond volatility hitting the highest since March, as the S &P 500 and NASDAQ are currently positively correlated with Treasury yields.

39:46The exception is small caps, where we did see put buying pick up. But in SPY, the most aggressive bulls we saw were buying the 800 strike calls in March, looking for another 7 % the next six months. But going into next week, the strike with the most open interest is the 772 in SPI, suggesting traders may want to expect a little more chop when there are bulls ready to take profits still just a couple bucks away. Oliver, thank you very much. Also, look at some big moves in mortgage rates. Let's get to our Diana Olick with much more on that. Well, Frank, mortgage rates moved higher yet again today, hitting 7.49 percent on the 30-year fixed, according to Mortgage News Daily.

40:27added up, and that's 32 basis points in just three days. And we are well over a full percentage point higher than this same day a year ago. Now, the builder stocks have had a rough go of September. Take a look at the home building ETF, ITB, going back a month. It's off about 9%. And big names like Deer Horton, Lenar, and Pulte, they're up today along with the broader market, but also way down for the month. In recent earnings, the builders have all pointed to rising rates as a major headwind going forward, already slowing new demand and, of course, squeezing margins as they buy down these rates just in order to sell the homes.

41:04Right. Diana, thank you very much. You have a great weekend. We'll look at Nike now getting a downgrade ahead of earnings coming up next week. Let's get to our Brandon Gomez with much more. Brandon. Hey there, Frank. Yeah, that downgrade coming from Bank of America, the latest firm to downgrade Nike, making it the fifth downgrade for shares since the start of August, moving the stock to underperform on the expectation that it turns around takes longer, with a growing list of concerns, including downside risk EPS estimates and valuation, as Nike's innovation continues to be overshadowed by a pressured classic business.

41:34Now, there's been broader weakness in the footwear category. Macro pressures are building. Bank of America also citing wholesale momentum slowing and a tougher China reset. There are some green shoots on product innovation. And with earnings slotted for next week as well, we'll hear from management on any of those innovations that may appease investors. Shares, though, do remain down 44 % year-to-date, Frank. Brandon, thank you very much. You have a great weekend as well. As we head to the close, let's bring in MJP's Brian Vendig. Brian, thank you so much for being here. Great to see you, Frank.

42:03All right, just talking about this earlier, Dow up just about 500 points right now. We saw gains for all the major indexes, I should say, including the Russell that swung into positive territory earlier. Just what's your view of just, I guess, the optimism over U.S. and Iran that's moving the markets now? And if we don't get a deal, what does that mean for sentiment going forward? Yeah, great points. I mean, first of all, this is still a momentum based market. What we've seen this week with technology, health care and energy still being in the top positions. And I think under the hood, Frank, it's still that rotational market.

42:35Sixty five percent of S &P 500 companies are in uptrend. So, you know, the moderation of tensions in the Middle East, I would say, is critical both for the stock and the bond market since they've been trading in tandem. And if we get some sense that there is a process plan with some international coalition, I think that's going to help, as we've seen today, with both the price of oil as well as rates to moderate. And going into earnings season, I think that's going to help provide a little bit more bullish sentiment regarding the split market. But don't forget the Fed. Don't forget the potential for rate increases because it's not just oil that's driving up rates.

43:10It's also economic growth when you think about the Atlanta Fed and recent projections on GDP for the quarter. So, again, I think earnings is the story, but we see some resilience in the market, Frank, that's going to help us, I think, grind higher by the balance of the year. All right. I want to point out your S &P price target for the year is 7950. You also see the MAG-7 taking leadership. It's become a much more narrow market. Do you believe that you can actually hit that price target by the end of the year with the MAG-7 in tech leading in other parts of the market, struggling because of higher interest rate costs, higher energy costs, et cetera?

43:43That's a great point. Look, I think it's a really interesting market because right now, as I said before, with health care performing so well, you normally see that as a defensive sector, but it's actually trading in tandem with technology. So I think what we're looking for right now are areas of the market where investors can get comfortable with free cash flow, stable profits and those earnings outlooks. There's definitely been some oversold areas in the market like industrials, which I think has a chance to bounce back considering the CapEx cycle is still strong for next year, tax write-offs for investments, onshoring and supply chains, and of course, demand for energy.

44:21So I still think the theme of AI, of course, is now hitting on other sectors as more adoption is playing out. But below the surface, there's still, I think a bullish sentiment there regarding consumers and spending and investment across the supply chain. I just want to go to one point. Healthcare is actually down about 2 % over the last month. So I want to make sure I understand your point. You're saying it's trading in tandem with the MAG-7. But over the last month, as those names have rallied, healthcare has actually pulled back. In the short term. But if you look back a little bit farther, Frank, going into the spring from the second quarter and beyond, you've seen a bounce back at life sciences, biotech, big pharma.

45:03And I think going into a midterm election cycle, healthcare usually ends up being that defensive sector when you think about volatility. But lately, it's been playing some offense over the last couple of months. And MAG7 recently have broken out. We weren't there, obviously, back in the springtime. All right. Industrials have also pulled back more than 4 % over the last month. You say they're oversold. What would be the catalyst for them to rally or kind of catch a bid, especially with the rate hike expectations? Sure. So I'm looking at this past the midterm election. I think there's been a lot of discussion, obviously, considering data centers and concerns of build out, you know, and political posturing, which has really impacted a lot of the names in the industrial space, concerned that the data center build out It's going to slow.

45:53I'm taking the other side of that post-midterm election, that there's still going to be a steady pace of investment in the industrial space. It's not just about data centers. It's about supply chains. It's about the need to create energy and also retooling that needs to happen within the economy. Brian Bendig, thank you very much. You have a great weekend as well. Good to see you. Quick look at the markets before we let you go. As you mentioned earlier, all the major indexes, they are in the green. We saw markets move to the upside. After those reports, right around noontime, you can do it from the one that's going to be a technical consultant to answer the conflict.

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