>> a ceo last hour said according that their data, the selectives in they're seeing, it is coming out of some of these stocks. >> and it's not just at the low end. some luxury names are having trouble, and, of course, you can track all of this on "overtime" at 4:00 p.m. >> you have earns, too. we'll see you then, jon. "closing bell" starts right now. welcome to "closing bell." i'm mike santoli in for scott wapner. we begin with the gears grinding a bit in the great rho trace trade, a thorough shakeouts on semis, and as meeting profit taking in the whitehot small caps. here's your scorecard with 6 on minutes to go. it's dipped back below 5600.

the nat cause -- the dow is actually up about half a percent, thanks mainly to gains from unitedhealth and j & j. and the vix reflecting some of this choppier take, rising to a three-month high, basically matching the highs of may. that takes us to our talk of the tape. where does it leave the soft landing trade. let's bring in lauren goodwin. keith lerner, and peter chacinni. lauren, it's actually

refreshling with the stony lines. soft landing, on top of a maybe a trump trade. has it caused you to rethink where you want to be positioned? >> only on a tactical basis. this is a market, a fed pivot market two, three months before we expect a cut exactly as we would expect to see it. a lot of uplift in areas like small caps, where capital is unlocking. the reality for the market is we've already been in a soft landing for the next nine months. as we look to why the fed is cutting rates, it might be a couple months from now, but we expect that the economy is still liable to slow. portfolio balance is really the name of the game here. we can talk about politics all day, but of course that layer is important as well. >> when you say why the fed might be cutting, you suggest it's in response to slowdown fears or a slowdown underway as

opposed to, hey, inflation is back toward our zone and it's time to be less restrictive? >> right now it's the latter. the data is not reflecting a stressful amount of slowdown. we will continue to see improvements in breadth of areas. it's a risk-on really. that happens only when the fed is cutting at a moderate place. if we see the market deteriorate, that's when we would see reaction. >> keith, what's your read on just, i guess, the tactical rebalancing of this market that's happened in such a dramatic way. obviously the scene was set by just exactly how narrow and crowded the top of this market was for so long. we got this snap-back effect.

where does that leave us? >> first, mike, it's great to be here. we downgraded tech in june, because we had the best relatively performance on a one-month basis since 2002. we had a condition heading into last week, that means the most oversold conditions we've seen in about 20 years. and it's the slight cpi report. i think where we are today, i think the rotation to small caps has further to go. the rubber band was stretched so far, even right now, small caps are trailing by a wide margin. small caps are still below where they were at the end of 2021. i think we have a way to go. also, we're going into more of a seasonal weak period, but i think the market will start to chop around, and we'll expect to see more of this as we move into the back half of july into august.

ultimately, we think this market as legs, we think the bull market is impact and the money will rotate back into tech later this year, but at this point i think investors have to be patient on that trail. >> the market doesn't necessarily owe you a place to hide on returns, if one thing is not working, it doesn't mean everything else offsets it and works. what's your read on what is driving it, but whether it was more than mechanical and what the fundamental message might be? >> i great with you on that ubs mike. i agree with lauren. this is a pretty typical market act an infallible fed, the market will typically trade up across the board. there are obviously some differences this time around. typically it rallied into the

first cut. as the read-through is that the economy is slowing, that's actually the reason for the disinflation where you have this inflation and optimal growth the market sells off. so typically when the fed is deep into its rate-cutting cycle, markets tend to sell off. i think it's three to six months away, and into the end of the year, the fed will cut pretty hard, is our view. it's also a result of what keith said, small caps have been sidewaying for some time. meaning anyone that's tried to use the s&p as a hedge has lost a lot of money, so people were tending to use the russell as a hedge proxy, especially for credit portfolios. as a result, a lot of people

were wrong-way positioned, and which has been massive on a historical basis, a lot of people got squeezed in the russell. i think that's primarily what is responsible. >> no doubt very extreme positions. though, i guess, lauren, i do wonder how much we want to refer to our rely on the historical playbook for the tightening and easing cycles, that haven't really play the according to script recently. before the fed actually starts to tighten, you get a money moon period where the market thinking it's a good thing. i wonder at this point right now, either you can say it's going to be like the mid '90ers, the absolute perfect fed soft landing that peter refers to, or it's something different, just its own animal?

>> every single is its own animal to a certain extent. when we look at a cycle coming off historic support, we absolutely should be taking themes rather than exact lessons. what we are looking at is an environment where the fed is likely to begin the rate-cutting cycle when the common and the labor market are still okay. again, i expect that's likely to be the case heading into september, including in credit, not just the equity market, but where we have seen a pretty consistent story is when the markets start to weaken, the market is likely to spoke to that. so rather guess. i'm looking at unemployment claims, are they ticking how are, and how are earnings expectations looking, not just the beats, but how are the future expectations playing out.

both of those are still intact. keith, it's easy to fixate on the small-cap index. it's had the most dramatic move, obviously the most depressed. that's stretched pretty far to the down side. it's kind of everything buck suck heart megacap growth that's gotten some relief. equal-equitied s&p is outperforming today. financials are up today. big ones, too, not just the small ones. is it really just about a little bit of pressure being taken off the average stock as we have an unwind. things like mesa, i know you don't want to talk about a specific stock, but this is not specific. meta is now down 15% off its high. mike, i believe it's the latter. not only meta, but the three top stocks of the s&p were each over $3 trillion, which is more than

the entire small-cap index. as you move them into other areas of the market, that's a lot of energy to move stocks. i think the other thing, mike, all year long, people have talked about the broadening rally coming, so once folks in the market start to see that trade working, they don't want to be left behind. i think it's coming out of an overheated area. i will say, later in the year, probably more not fall, money will ultimately come back to tech, but i don't think this cycle is over yet. this cycle has been different, but the main theme is artificial intelligence, technology. for that to change in a meaningful way, so we're being packet. i think it's still relatively cheap. that's a six-month

underperformance, so probably more to go here. >> though, i keep pointing out the great performance of small caps mostly came back big caps fell apart. it wasn't just because of small caps going higher, but obviously maybe some differences here. peter, as people go down the checklist s. thinking that the market is in modest pullback mode, is there anything worrisome going on elsewhere. and then credit, people will point to it, saying not showing a lot of stress. it seems like that's kind of giving illustrates blessing to the macro space. what's your read on that? >> well, as john albright might say, finance has a small memory. deficit spending is probably the biggest, so i think the cycle hag extended or prolonged, but the things we question typically are with us.

speculative default rate is creeping up towards 5%. that's versus high-yield spreads. that's a massive disconnect. you look at the 2016 rally, you know, the fed funds rate was, and 2.5%. spreads were at 500 basis points. so, you know, you have to ask week they disconnects exist, especially when you're seeing a spry index, surprising to the down side for a number of consecutive months. consumers are talking about an accelerate d -- we do a lot of structured credit here. we look granularly at remit data for consumer finance companies. the delinquency data doesn't look great. it was improving for a while,

really the trend is for -- especially for subprime consumers, the trend is not good. there's a lot under the surface being maced by tighter credit spreads, which are being supported by equity market sentiments. >> so, in other words, you're suggesting, you think there's a rising chance or high likelihood of a hard landing, the credit markets are essentially blind to it or underpricing it? >> i think it's underpriced right now. that's how we in this business are able to make outsize returns is by understanding conceptually when things are, you know, not priced correctly. i think that's probably one of the most interesting pricings right now. where you can get, you know, 10% yield. you're looking at much lower yields with no collateral. i do think the credit market is the place to look. to lawrence's point, we need to see continuing claims pop up

above 300,000, and we'll see the whites of the eyes, if you will. >> initial claims i know you mean there above 300,000 a week. >> yeah. lauren, in terms of how to navigate the bond market, if you think the fed is cutting, cash won't be as attractive. where you would look to move? >> while i agree and believe the economic is likely to slow from here, another reason why we may not be seeing -- because the structural quality of credit has changed over the pandemic. it's been fed programs, well capitalized balance sheets, so i expect we may not see spreads widen quite as much, but importantly, as the fed starts moving -- this isn't just a fed-cutting cycle. this is a fed cutting cycle off the rates that we haven't seen

in a long time. i expect to see capital moving into short duration credit, to lock in higher rates. that's a move especially with a maturity two, three years away that makes sense to me. for investors not as interested in a particular call or duration, i haven't to be in line with that. you can balance short-duration credit exposure with a long end of the municipal curve. but programs just as important. if we're expecting this make fed transition, there's other areas of the market prodeal flow has been completely locked up, as a result of just concerns about where the market is going. when we start to see the fed actually move. we're likely to see deal flow in private equity, even real estate start to unlock over the next six months. i think this is the big move in

capital's beginning. >> keith, you expect it to be choppier here, is that based on the seasonal events, pre-election nerves hitting that? >> it's based on part of that, but the technology sector that tends to peak in july, if that's the top-heavy market driving things, it's going to be hard for the market to make increase at the headline level. so i think more acwill be in the internals. last point, mike, after a strong first half, we tend to add the gains with a 0% hit rate, but at least one or two corrections along the way. that's what i think we'll see as we move into the august-september period. >> we're ahead the game a bit on that. lauren, keith, larry, thanks so

much. shares of elevance slipping today. it came in slight will you short of estimates, also a drop in medicaid enrollees. and johnson & johnson, the second-best performer, they have a top and bottom-line beats, citing performance in their cancer drug. 42 minutes left, mike? >> seema, doing the math. thanks. we we are just getting started. there's a new reports of growing political pressure. and we'll ask dan chung where he's navigated and where he's finding opportunity in the tech trade now. ear watching "closing bell" on cnbc.

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smh is pulling back, on worries that restrictions on china exports. joining me is danchung, also a portfolio for the alger capital appreciation fund, rachblged number one on the wall street winners' circle list. it comes in the context of we're seeing an unwind of this trade in megacap growth stocks, has anything changed in your view, in terms of what might drive growth in these areas? >> i don't think anything is going to change. it's the same driver as cloud computing, investmenting in our official intelligence, digital

business and marketing, general somics in health care, all of these trends are long-term trends still in place. >> we've got dealing with this for a while. one generation of chip is okay, one is not. it seems like that's not necessarily impacted a lot of the companies necessarily. is there reason to think the uncertainty can last for a while. >> they are are the most vite at part of the semiconductor industry. i still think we have more trade than we don't have trade with china. we still have trade with many

partners around the wort. >> it will potentially create one. >> you mentioned the ai being one of the principal themes. we see the cap ex numbers, with the revenue from nvidia and elsewhere. where is the payoff, where is the killer app? are we sure it's too early to say that most companies whether they will be winners or loser. companies like microsoft and nvidia, i think their positions are unassailable. as your of ai to improve its

official, there's a lot of others that are less clear. >> some of the franchises in business software, where you wonder if they're going to be dis-intermediatated. are there others you feel like got it figured out? >> i think one saturday is cybersecurity. this is absolutely an area of critical important, particularly crowdstrike in particular.

>> one of the reasons you got outperformance by a lot of big nasdaq names all year was the scarcity of conviction that you have multi-year earnings growth ahead of them. there's a handful of companies where you can be sure and the rest of the market, not so much. you obviously don't only own tech. only 40% -- 60% there's a renaissance, with renewable, also railroads. railroads are getting a lot of investment after a long down

cycle. a lot of noise about the consumer, but one thing we know about the american consumer, they're constantly looking for good deals, so things like online game ballistic missile, draftkings, do quite well. amazon did well. the maker of hoka running shoes and uggs, deckers, so pick your spots, look for the growth and, you know, this market as plenty of room to run. they have pretty successfully become a one and two in most markets. meanwhile, if you think about sports betting, online betting, this is a great add-on to the entertainment of watching sports, which we all love. >> everybody needs it.

>> right. the ability to bet on -- with in-game betting is actually exciting. consumers' entertainment value. >> dan, great to see you. >> thank you, matt. kate rooney joins us. >> it's day two of amazon prime day. amazon is on track to break some reports. consumers so far have spend 7.2 billion, it's the biggest e-commerce day of the year. biggest fitsness trackers as well. they're capture a lot of

back-to-school spending, spending up 210%. think of things like backpacks, lunchboxes, stationary for example, and overall apparel for kids up 159%. so those installment loans accounted for 7.5% of sales, up 17% year over year. adobe expects to drive about -- roughly 18% to 19% growth from a year ago. these two day adobe is expecting -- wall street is watching closely for retail sales bump for amazon in the quarter, plus some adjacent area as well. jpmorgan expect a bump in advertising revenue around prime day, and will drive the subscriptions as well. >> yeah, 11.7 overall growth at a time when inflation has calmed

down. thank you very much. all right. coming up, rethinking the pullback potential, and the market leading megacaps all moved lower. he's bringing a warning for investors. "closing bell" will be back after a break. it should be called wiffle tennis. pickle! yeah, aw! whoo! ♪♪ these guys are intense. we got nothing to worry about. with e*trade from morgan stanley, we're ready for whatever gets served up. dude, you gotta work on your trash talk. i'd rather work on saving for retirement. or college, since you like to get schooled. that's a pretty good burn, right? got him. good game. thanks for coming to our clinic, first one's free.

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welcome back. the recent major market rotation taking a breather today. it's said to snap a five-day win streets. since 1979, i believe, when the index was created. here to share whether the rotation can find its footing again is eric johnston. good to see you, eric. >> great to see you. funny, a lot of folks were calling for this time of rotation, but where does that leave us? >> people have been calling for it for a long time. as the short part of their book. from a retail perspective, a lot

of that has been where the dollars have gone many the same price as we are about two, they're years ago, earnings for the russell 2000 was 76 in 2021. earnings have gone exactly sideways. it obviously they don't have the exposure clearly. number two, they are levered to

a tighter fed policy environment, right? and so -- and we don't see that environment really changing, right? they're going to start cutting in september, but you'll have restricted fed policy -- very restrictive for the next six to nine months, and some restrictions far beyond that. >> aside from actual small caps, what about the rest of the market just outside the big trillion dollar club winners. do you feel as if it can become more of an inclusive market, or time for a general pullback. >> when you go to the.

>> -- until we have that economic cleansing, and i don't think the events over the last five days or what the fed will do in september is going to change that. obviously on a tactical basis, there's a lot of nuances. >> you basically need a genuine down turn in the economy, or a reaccelerations somehow? >> i think a further slow down. right now the economy is slowing at a slow pace, and one of the things we're looking at, what are the causes of the slowdown? and are those causes going to change in the coming 6 to 12 months? you think of the causes, restrictive fed policy, but i would expect the fed funds rate

above the inflation race, and will likely decline to 2 percent over the next year, but still in restrictive territory, and the consumer is still battling high prices. we have an inflation rate down to 2%, but still above trend, albeit being offset by the fiscal situation with doctor 2 trillion into the economy, and the wealth effect. higher prices have helped this economy. until that changes, that would be another buffer for, you know, for the economic outlook. we are slowing, and we don't see a change to that path. it's just a matter of whether it picks up or not. >> so looking out. next couple months, we're dealing with whatever the election sentiment swings are, whatever we're going to try to handicap in terms of that. even if it doesn't matter over the cycle very much, it matters

a lot 1/2 near term. then the defensive parts of the market are all these, like, 30 times earnings secular growers. is that what you would say? just take shelter there? >> i think we're entering a period from a volatility perspective, we're entering a trickier part seasonally, and when we -- we'll have a lot of events around the election, and also trading at a high multiple. when you're trading as a high multiple, you never know what will come at you that will cause an issue. you're just much more vulnerable at 22 times earnings than if you are at 18 times earning. >> which is where the s&p is, right. >> right. i would also say we've done a lot of back testing, from a technical standpoint, where the rsi and s&p got high, it god to 81 july 10th.

>> we are down 10 to 12 times, and where he saw a drawdown -- average drawdown, and then if you look at just the returns when it's been strong over. >> you've seen, you know, a drawdown from that june 30th price. >> right. >> so we are just -- these things are out there. we're susceptible from a number of different per spect tichs. >> maybe a stronger finish to the year, but definitely not without some payback. up next, more on today's mark sell-off. we'll be back after this break.

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let's get back to seema mody. >> the corporation catching our eye, up 14%. v.f. corporation is up more than

20% this month. and gever defend noaa, they're investigatesing a blade issues for a turbine off the coast of martha's vineyard. it's the worst day on record. earnings are out next week. mike? >> interesting, a lot of giveback on a spin-off stock since it became independent. thank you, seema. >> you got it. shares gaining more than 5% this week adheing into the spring. "closing bell" will be right back.

small caps currently on track to snap a win streak. cnbc pro is out with a new piece looking at the technical setup for small caps. for the full story head to cnbc.com/propick. up next, the weight of the world, some pressure on industry leaders eli lilly and novo nor nordisk. next we'll take you inside the market zone.

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we are now in the "closing bell" market zone. angela peeples bring you are the latest, kate rooney on discover financial, and jeffries' sheila kalouy, anjelica, interesting response today. >> yeah, a lot of moves after the pill 4i8d people look 6% of their body weight in four weeks. there's a ton of interest. there's that i wee you're roche up so much. this is the second set of

promising obesity results from roche this year. the first one was for a shot, both the experimental pill and the shot are from roche's almost $3 billion acquisition of karma therapeutics. roche will need to do years of research before this pill could reach the market, if ever, but even that project is gives the stock a boost, and is hitting other hopefuls. >> anjelica, we do see them down on which otherwise thef pharmas are strong. >> these stocks have have had such a big year. i think it speaks to the appetite here for any development in the space,

especially a pill that might affect the market here. >> the market defend le want to see more. looking at discover after coming after a bunch of bank earnings. >> it's been sort of in a limbo if you remember, agreed to a $30 million merger, pending regulatory approval, and in earnings today, we are expected for eps at least to slow. investors are watching the regular things like net interest income, net charge-offs, but stabilizing, loan loss provisions as well. delinquencies for the card network could have some read-throughs. earlier today, it said it decide to sell the student loan profile, about 7% on the week shares are higher by about 25%

this year. that was a premium when the deal was announced back in february. it's interest trading dynamics. kate, thank you very much. it feels like it's not necessarily going to be an exuberant outlook? >> i think the only thing that can help is lowering fuel costs. i think airlines are in a pretty bad spot, you know, i think the case of consumer weakness at its best. spirit was down 11%, united down 1.3%, that looks a little light. american will probably by worse than that as well as southwest. so, pretty bad story on the

pricing side. >> how does that fit with record tsa volumes? is it really just a pricing issue? >> pricing and airlines are saying we have too much capacity in the market, up 5% in q2 versus last year, so 5% more aircraft in the u.s. meanwhile, what if boeing actually gets its act together, and we have low-cost players being rational. i think it's a case of consumer weakness. >> one because of its premium se

seats. >> so more premium seats delta is getting eaten up by the lower-cost carriers in the sunbelt. >> of course, the stocks have struggled a bit in the last few months, but you look at ual, it's under five times expected earnings. i know that's not always exactly on face value, but what does that imply in terms of what we think this company can earning? so despite the -- they're trading at a 70% discount to the market. that's what they're trading at?

it's not helping the cyclic cal it doesn't really exist, but premium i think it's going to be the best out of airlines, but overall not a good -- >> now, you said said what if boeing gets its act together? so the market will rationalize pretty quickly. that number will change up 5%, so i think in 2025, eventually it will deliver more aircraft

so, i do think you're going to get this problem persist in the airline industry, because boeing will improve its delivery rate off covid levels today. i mean, is it workanswer? where does that all sit? is it expected deliveries? >> it's cut cam exa ton it probably won't by certified until 2026, if you think about new york markets, we're flying 40% more people into new york city versus pre-pandemic levels, so there's no way to get that number higher. you've got to do it with bigger plans. >> i support the idea of no more. great to talk with you. thank you so much. as we head into the close, the

s&p 500 sit sitting at a loss and nasdaq still the downside leader off. volatility will go out above 14. that will do it for "closing bell." we'll send it into "overtime." >> capital group, the financial women's association at the nasdaq a bifurcated market crossing above 41,000. small caps also taking a breather. the act is just getting started. i'm motionen brennan. >> a big hour coming your way.