>> reporter: yeah. we don't know if they'll have an october event again this year, but i do think, like you said, consumers are educating themselves about whether they can save money. >> tiktok is like the new "consumers reports." annie, thanks. >> except probably half the people -- thanks for watching "power lunch." welcome to "closing bell." i'm mike santoli in for scott wapner this make-or-break hour is on the keeping -- the down side, the index is accelerating into the final hour after a tentative midday rebound attempt here's your scorecard. s&p 500 near the morning lows, actually traded positive for a bit, but notice 0.8% under 5550.

nasdaq down not quite as much, 0.9%, yes basically in a 5% setback from the nasdaq's all-time peak. it's cool off at a five-day rip, down about 3.5% from just a couple days ago. that takes us to the "talk of the tape." is this just a midsummer squall, or is a more threatening change in the market weather underway here is jersey terranova, as well as brian belski, and alicia le levine joe, extended periods of market followed by some action, turbulence we have that here. what is the message you read

you have done a great job talking about how q3 could be bumpy, and that seems to be what we're getting right now, for viewer, long-term investor, this is a tough environment right now. it looks like we're getting this roe station within the market. early this morning it and as that would continue. nasdaq came under pressure, small caps were lifting, but we have reversed that intraday. now, for the first time, really in the last couple weeks, you have a universal sell-off, a broad-based sell off, small caps are down, nasdaq is down, the momentum factor is down. a lot of leaders i about on halftime, i own that eli lilly. >> chip pot lay is down. >> i think what tells it all is

the vix. it's certainly higher than it's been over the last three months, at the highest level since april. we probably have the blossoming of a much-needed correction. maybe it's a remind tore investors that a broader market or one that's not anchored by a handful of huge stocks is not necessarily in the near term a more stable westbound or more predictable. how do you think investors should be reacting to it, if at all. >> i see this as the healthy correction in a broader up trend. as you said, we're coming into season at weakness august and september sort of never fade to disappoint on the index level. ultimately, i think to go forward structural, the large caps are going to take over here, simply because there's not

enough market cap to absorb the total rotation if you just look at the top ten stocks of the s&p, they're 5 1/2 times of the market cap of the russell. the s&p itself is 15 times the market cap of the russell, so it's a bit like putting an elephant through a needle, which is what we saw that has to be digested. it's very healthy, and an average year has a 12% drawdown on the index level for the s&p we barely had 6% in april. i think we're due for another 5% here >> you know, brian, the big versus small equation, or at least just a bit of a comeback from those extreme relatively performance metrics is only one way of viewing what's going on it's also a growth into value, the very top of the s&p, things like financials doing better here so, how do you read that and

what should we extrapolate, if anything, from the relative moves in the last week or so >> thanks for having us, mike. we would say what is happening is very normal we would say this is part of a very broad and big picture normalization process, believe it or not. what's happening in the market, we want eight months ago in print that the average correction during the second year of a bull market, which we have talking about now for two years, within a 25-year secular bull market, which we've been talking about since 2009, is 9.4% as alicia said we only have 5.5% that's not enough. on a near-term basis, obviously we were overheated i think it's normal to get broaders participation we're entering a golden age of stock picking, where you need to own a lot of everything, bur our theme for 2024 is everybody love everybody, so value is massively

oversold on a technical basis, so is small/mid cap. >> this is about fundamentals. we're talking about earnings discernment cash flow, balance sheet, the strongest in my 35-year career, a scarcity proposal in small/mid cap, too, nobody is buying small/mid cap lastly on value, a more gaar-y value makes sense, and it's happening right now. it all nets out for you, brian, at least in the near term? you're working with a 5600 s&p target for year end? >> yeah. here's the wake it works everyone has been chasing the market higher. we've been very blessed and fortunate to be consistently bullish. it bothers me that everyone kind

of changed their targets, and so now we have seen the results of that we've kind of blown up a bit too much into the up side, so let's go back to the second year of a bull market. so, the average correction since 1949 is 9.4% the average recovery is 15.5%. so, we do think that 5600 still looks pretty good. it probably could be higher. we're not going to adjust our price target, but we're very comfortable seeing higher prices biee end. >> joe, the earnings are going to start to flow here. >> yes >> it's interesting how the implied expectations got reset the big stocks, which will have the most predictable beat, have pulled back. i bet a month ago if you said a 15% discount of meta, nasdaq 500 off its high, you would have

said sign me up. it happens, and now we find reasons why it not be an opportunity. >> that's why it's important to understand what sentiment and positioning is and how full is sentiment and positioning. i think we ask defines the technology sector, megacaps, and areas this community indication services as having an extremity bullishness. i think you came in knowing that you'll have to compete expectations in those areas of the market, for us to see continued price appreciation here in the near term. i think we have now had an inflection point where looking at the market, the mentality has become over the last week more about selling rallies that can buying dips. once you get that shift, you need something to act as a very strong catalyst.

>> let's talk about one subgroup of technology. chip stocks i. >> translator:ing to stage a comeback after posting the worst day since march of 2020. seema mody is tracking that sector for us. >> michael, sort of a reversal chip stocks started the day strong following tieian semiconductors better than expected quarter the chip maker didn't address former president trump's taiwan comments head on, but they did say there's no change to the expansion plans. the stock, though, turned negative about two hours ago those shares quietly outperforming, up 14% this month compared to nvidia's 11% slide tonight investors will be parsing through trump's speech tonight, and bank of america analyst saying the volatility

could stay enshanned through the election and seasonality is also in play, on which underperforming in the third quarter, but reassuring news, the stocks tend to bounce back three to six months later. >> alicia, in addition to the policy flux, obviously the seasonal issues, it's also at the center of how much do you believe ai as a theme and whether it's been priced in, and whether the massive cap ex build-out is going to bear fruit. >> that's sort of the crux of the entire market, right it's not just the chips, not just the semis or hyper scalers, but it's the power companies, the utilities. it's kind of broadened out we are believers, you know, or analysts think it's real having said that, the charts on these stocks have gotten

parabolic, and that doesn't make investing charts, so time to get some froth out of this we're just coming down so quickly so hard. ultimately, we feel this is the right story, but makes no mistake. the ai story has to be real to support this entire market that's essentially what the story has been that's been the excitement for the last 18 months. >> exactly it has been unless something may come along to partially replace it brian, where do semis sit within the types of stock of fundamental trajectory that will or won't work, in your understanding? >> i think alicia is spot on many people, quite frankly, have forgotten that semiconductors are the most cyclical and often forgotten that the third quarter is typically the toughest

quarter for semis. we like to call it the super-six companies, and then frankly you want to trade down we think oar acal, amd, qualcomm, are going to be clear wingers. it doesn't mean big tech won't outperform, but just that money is going out i think this move is real, it's built some credibility that you can buy something and -- everything will go down together i think that's why you see more weakness here. you have to reallocate money in a small cap. >> joe, nvidia is actually up a bit today, but in a 15% drawdown we had about a two-month period earlier this year, where it went sideways, digested, consolidated the huge gains it's been in one of those for, whatever, since the beginning of

june, a month and a half where would that leave you as much as people would say it's not as expensive as it was a year ago -- that's because the earnings estimates were radically too low. >> you're talking about a stock you could place in that safety basket the safety basket, if we see further declines in the market, is exactly what you'll see investors and money managers reach towards. that's where you can get the quality, the reliability in earnings, and it will take you back to the megacaps i agree with alicia, i don't think you you want to move amp from megacaps and place yourself in a binary position megacaps will help you if we see a deeper correction and you can clearly define nvidia as having those characteristics. >> alicia, does that make sense? the market has treated that category of stocks as defensive. so, it was defensive, it was quality, it was also growth are

there other areas of the market -- >> it's been both offense and defense. it functions as both because of the cash flow, earnings and need not to borrow, right they work as defense so, historically, when the fed has cut into a stable economy, i.e. not because we're going into a recession, but simply because real rates are too high, historically financials have taken off. the mid 80s, mid 90s, financials took off when the fed cut into a soft landing so, you would want to expand here, not just large-cap, tech, both offense and defense, but if you believe in the soft landing, that does well i think it's an interesting story who depends on the white house. historically energy has been part of a reflashes trade, but when republicans are in office,

actually oil prices are lower, and the energy sector you don't see that well. >> it's a tricky thing, brian, in terms of not just handicap how the election probabilities evolved, what would be the priorities, and how will they actually be enacted and when, than whether the market has figured that out before it's time it's many things you have to get right in a rue, i think to have a view based on what the policy will go within a year. i also wonder, the starting place here is a bit different than the last time before president trump was elected after this percent of disinflationary slugger growth, and all of a sudden they looks like the thing they wanted. >> i think that's right, mike. we always say we don't like to give politics any kind of credit, butat the end of the day, if we go back and look at 2017, 2018, the 2018 correction

was about powell and trump sparring about tariffs, and then we had the pivot in 2019, which was very similar to the pivot in 1995, which brought in goldilocks, so i think the fundamental position of stocks quite frankly is actually in better shape right now than it was in 2016. remember, 2016 we had a lot of volatility with brexit, people forget about all of this i think from a fundamental perspective, the barbell makes sense, being overweight tech and financials you have to play themes and stock picks. again, buy some of these things that have been out of favor with good, strong fundamentals, like some of the small/mid cap stocks, but don't give politicians too much credit. you're way, way, way too early to try to build investment strategies around a political stance. >> though, joe, the market will

trade it. >> it is trading it. >> however the needle moves. >> i think the needle moved this week in the direction of a higher probability that legislation could get affected with a red wave and the republicans actually -- that was a probability that didn't exist. even if you believe that former president trump would win the election in november, you didn't think he was going to carry congress and senate along with him. that's where the needle has changed. brian is right, he's spot on we're in the middle of july, there's a long way to go we've had a couple quote, unquote black swans already surrounding this election. let's hope we don't have more. there's more to play out in this story. >> even if what you believe is the likely -- polls will ti tighten. >> did you see virtue's results? >> yes, up 20% today

thank you all. over to steve kovach for the big names. d.r. horton shares are surging as it topped wall street expectations for the third quarter, citing limited supply of new homes, keeping homebuyer demand as homebuyer interest climbs ctas is also topping expectations, beating earnings estimate for the fourth quarter in a row mike, back over to you. >> steve, thank so much. we are just getting started here as the market backs up the s&p a full percent we'll have the moment of truth for netflix. we have a pair of shareholders standing by, plus big technology alex canter with us to break down the set up. we're watching "closing bell" on cnbc

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there's always a new excuse. well if we got xfinity you wouldn't have to mess around with the connection. therapy's tough, huh? -mmm. it's like a lot about me. [laughs] a home router should never be a home wrecker. oo this is a good book title. investors are playing close attention to netflix, as consumers perhaps cut back on spending jockey us to discuss is joe terranova, jason snipe, and joe and jason are netflix shareholders alex, it seems like the conversation will be good, just how good, how rich have expectations gotten? >> expectations are high they should be, because this quarter is coating up to be a

quarter that netflix should crush. advertising subscribers are now at 40 million. there were 23 million in january. a massive jump they talked about how netflix can't grow people are saying we're at a year of password sharing crackdown this grows gradually, so they should see some benefit. if it doesn't beat, that's when we start asking questions. >> jason, this whole expect ace base is when you had the sell site trying to figure out what the buy side is expecting, relative to sell side expectations, and you get this wide range wells fargo's trading desk said today if the estimate is 5 million-ish, they're getting some high responses between 7

and 9 million. the funny point was, they said, well, the 9 million are the bears. they want to feel like the expectations is so high. it's a funny game to play. how are you thinking about the stock positioned here? >> yeah, i agree with alex i think the expectations are high they're expecting 16% revenue growth this is a seasonally weaker quarter i think they'll beat on earnings as well. i think we want to look for continued progress on an ad-supported tier. again last quarter it grew 65% quarter over quarter in the quarter price to that, it was 70%. the ad-supported tier, password sharing, and i think that's going to be important going forward. i like the stock and continue to

own it it remains the only real grower in media it's got a nasdaq 100-ish valuation, but it's smaller, not like the multi-trillion dollar market gap what is the ceiling here, in terms of how far this story can play out and compound? i think it takes out the november of 2021hide you're talking about a stock

i'd like to hear about another price hike i think ultimately that's coming the setup is really -- we know it's going to be good, the 650s are now 730, but here's your problem. over the last ten days, i own it personally, i'm not getting out if it goes down 10%, but the etf strategy, which is rules based, the momentum factor is weakenings,. >> alex, if we get the price increase, it's been a big part of the story, to what degree do you thing that netflix is

agnostic about ad subscribers? obviously they needed to build scale, and that's the only way it's any good for advertiser, you have to a pretty broad pool. are they as profitable will they be as good a customer in terms of churn? >> i think there's more potential in the ad tier than the premium tier you get the $6.99, that might go up no matter what happens, and madison avenue is saying this a yes, sir is in and watching -- it's very difficult to skip the ads. they're saying if we can get more data than linear television, we can reach 40 million people already that's a sizable ought yen i think that's the way they want to go.

40 million kind of splinters. >> yeah, definitely. it's a technology story. the empire story about advertising online has been about technology, not necessarily bulk audience. it has the audience, but more importantly, it has the technology something like snap chat can't make the money the same way, because its tech doesn't work as well netflix can go out and say we're not just performance, not teens and preteens we're people leaning back, watching premium television. and they're going to say come on home to netflix, and that would work. >> we'll see what we get guys, we appreciate the conversation, alex, jason and joe, thanks.

we're getting new on broad com and openai kate rooney has more. >> they are reporting that openai is in talks and has talked to broadcom about developing a new ai chip they also report here that the chatgpt maker has been hiring former members of a google team, trying to take employees from google this is according to three people with the matter, and openai has been talking to certain chip designers, including broadcom shares are jumping around on this news, slightly higher mike, back over to you. still power to move a stock. kate, thank you. coming up nuveen saira malick has her new playbook. where investors should be

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it is red across the board do our next guest has eyes on three market possibilities

saira, it's great to talk with you. boy, these three forces that you isolate here absolutely have been blowing through the markets and then, of course, the election dynamics. how should investors be thinking about these things. >> first, let's start with the rotation, seeing some of the best phi-day gains we've seen in history. this is based on the rate cut possibility in september i think one question is how long can this last? history says this rotation usually lasts four weeks the bar is high, and also, as we get to the first rate cut in september, i think that will be a sell on the news event and around the time for small caps din continuing their

outperformance >> so september, you suggest would be a sell the news event for the small caps or small cap outperformance trade you also suggest tech earning could complicate that. if you're an investor largely passively indexing, you've mostly been righting those big growth stocks. what might you do right now to make sure you have some balance and the right kinds of exposures? >> if you look at the market cap weight s&p, it's weighing above its historical average that's the risk there if you look at tech stocks in their recent underperformance, that's a drop in the budget just a couple weeks ago, semiconductors were outperforming software by over 45%, so there's more room for tech to go down at this point, especially if earnings don't

meet investors' expectations. >> is it your expectations that the market is correct in assuming a pretty benign soft landing type of environment for the economy? we've gotten mixed economic signals, but things like retail sales holding up better than expected. >> that's why i don't see long-term legs around this i think we're seeing higher delinquencies with the consumer. unemployment, claims came in today above consensus expectation. the consumer is weakening. i think the risk is exactly the fed will likely start the rate cut psych the in september, but will it be enough to stave off a recession? i think a soft landing is hard to achieve we're in the camp of a recession possibly in early 2025. >> if we can say anything will be typically here with the

election, in terms of when the markets tends to back off a bit in the late summer, and the actual implications of whatever the probable outcome in. what is the best way to tune it all out, or, i guess, position prudently for that >> typical election year dynamics are twofold markets go up two double digits, and we see increased volatility. i think the volatility is occurring now. some of sectors have been outperforming recently like financials if we move to where investors think we have a more divided government, some of the sectors may unwind or decline. i think there's a lot to come with the election and hose to position with that healthcare tends to underperform during an election year, but closer to the election it could hit an inflection point. i would be cautious given the run that the finances have had you say you expect more

volatility does that mean substantial down side from here in the indexes? would you be, i guess sort of waiting to make use of those lower prices at some point >> i'm concerned specifically about the s&p 500, given the heavy weighting, and that it's trading at a significant premium. so areas with growth stocks, they tend to lack, but outperform in down markets switching out of equities, let's go to fixed income, where i think it's an interesting segment as the fed moves to rate cuts, you can lock in longer duration, like where some of the yields even preferred securities where the backing is bent, and bank fundamentals are also very strong that leads you to say you want that bank exposure >> interesting is that based on the idea that,

let's say benchmark treasury yields remain at these levels, or it seems like they're attractive >> i think both. benchmash treasury yields, we expect to decline a bit. that's the risk for people keeping their cash on the sidelines. they need to look for areas where they can earn yields, which likely cash yields will likely deteriorate over time here >> saira, really great to catch up i appreciate the time. >> good to see you. up next, we're tracking the biggest movers steve kovach is back with those. >> drug makers are feels the heat we'll have details after this.

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♪ we have a little over 16 minutes before the closing bell. steve kovach has key stocks to watch. they've had a report that

they've been working to field takeover interests about five and change now. infosys is popping, the digital service company is raising full-year outlook, citing recovery in demand eli lilly is sinking as competition intensifies with obesity drug developers, novo nordisk also moving lower. mike >> steve, thank you, we've keeping an eye on by movers with domino's pizza and beyond meat down >> domino's a mixed quarter for the company, revenues were right in line for the quarter. the news wall streeting on the stock, the company suspending net new restaurants, due to challenges with the intern international.

transaction growth, and loyal redemptions, particularly with the carry-out. beyond plate also taking a hit on a headline from "wall street journal" yesterday, with debt restructuring, citing sources the cash burn has an ongoing issue, the company declined to comment on this one. down over 10%. kate, thank you so much. still ahead, a healthcare headache, novartis under pressure after earnings, on track for its worst day in more 'll vehree years wedi into the details. "closing bell" will be right back

there are stick pockets of strength under the surface cn pro is out with a new piece scan the qr code on your screen. up next, counting down to netflix earnings the key metrics to watch, and much more, when we take you inside the market zone

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we are now in the "closing bell" market, leslie picker is here, julia boorstin looks ahead to, leslie blackstone, a pretty good day under after some of the big investment banks. >> don't let a double miss get in the way of another otherwise decent report. that's thanks to the capital deployment

>> for you, it was a strong quarter, because we see a bunch of positive forward indicators, including this deployment of capital. we committed to more than $53 billion. we want to invest before the all clear sign >> executives on the call spoke about, quote, positive signs emerging in the overall real estate picture sentiment that needs to shift a bit. >> i get hopeful on the real estate side, leslie. though you would have to pair it with what are market expectations for ipos, so the realizations can be attractive there was a lot of talk, i know,

about how the makings of a private equity investment are also maybe in place. >> that's right. >> david solomon said on their conference call earlier in the week, that they're basically expecting it will take a few quarters for the sponsor activity to really restart in earnest. but it appears that at least the trends are moving in the right direction. >> thank you, leslie anjelica, what is behind nov novartis. >> they're saying questions about growth it's maintaining a sales outlook for the year one drug getting a lot of -- sales are up from the same time last year, but still short of

annual it's estimates. i spoke to the ceo earlier today about it >> i any we're going to you a transition assert now, into the community, and get broader use of the medicine. >> mike, one interesting thing he did say in that conversation is novartis is out there looking for next-generation obesity drug and early research on their own. they're focusing on the cutting edge, so not interested in this current class, but they're still out there looking for what's next. >> it's interesting. if you look at the way eli lilly and novo nordisk have traded this year, you wouldn't expect that the obese people in the 2030s, because they had been treated. is this potential other

competition? >> it's interesting. yesterday we were talking about the roche data you wonder if people don't expect other competitors we are still seeing the weakness. julia, netflix is up, expectations seem pretty high. >> expectations are high analysts expect the company to mean its own guidance for the quarter, as they focus on market expansion, this as it prepares to stop reporting subscriber numbers next year. 16394% revenue growth, that's the forecast accelerating, also projecting 44% growth, this comes after last quarter, the 9 million subscriber additions soared past expectations now analysts are looking for 4.8

million new subscribers. the company's profitability will hinge partially on the ad business 60% of analyst versus a buy rating 36% have a hold rating luke capital just this week reiterating the target -- forecasting a slight increase this year. guys, back over to you. >> julia, as always, the themes are where they are in terms of the pad work sharing, if there's more juice to be squeezed from additional revenue there who knows about any content surprises in the slate ahead >> yeah, i think netflix's content is so diversified, so international, it's really rare to have one, two or three pieces of content make a difference it's really about the portfolio

approach netflix traditionally invested in the new content to bring in describers to hold on to subscribers. i think the question now is, can it hold on to subscribers with a lower cost ad-supported option, and having the low-cost option, to broaden the variety of people who have the ability to subscribe to netflix right now password sharing, no doubt, was the thing that drove netflix subscriber additions in the past year now the question is whether the ad-supported tier can subscribe subscriptions over the next year presumably, even though they'll start reporting subscribesers reportedly, i guess they'll give guidance on the coming quarter they're expected to give guidance on revenue growth, and there's a focus on margins,. >> excellent ju julia, thanks so much. let's see, the s&p 500 down

about 0.75%, it's picked up off the lows in the last half hour, so the russell 2000 is on pace for 1.8% loss, and the nasdaq down about 0.6%. that will do it for "closing bell." we'll set it to "overtime" with morgan brennan and jon fortt >> that is the end of regulation stocks are lower across the board today. the worst day since 2022 while small caps got hit the harders, they'll state late. >> that would kick off big-tech earnings