welcome back. the dow is hanging on to gains, but the nasdaq is in the red as losses continue across tech, nvidia, qualcomm, super micro, in particular, weighed down today. nvidia, there you site down about 6%. crowd strike down 10%, as well. 40% so far in july. a lot of people saying its problems are still lingering for the whole market. >> it has been a rough, rough past couple of weeks for technology. glad i was away for most of it. thanks for watching "power lunch," everybody. congratulations, swimmer torri huske, 100 meter gold medalist. went to my high school in arlington, virginia. >> congratulations to her. and the women's gymnastics team. >> they just won, spoiler alert. "closing bell" starts right now. see ya in a bit. welcome to "closing bell" at the new york stock exchange. this make or break hour begins with the countdown to microsoft earnings in overtime and what it could mean for the tech trade, under selling pressure again today. by the way, there are microsoft

shares. they are down ahead of the print. we'll ask our experts where the stock and the secretator is hea from here. we will start with the nasdaq because it is the laggard today, the big underperformer. several mega-cap names are dropping today. nvidia is the biggest drag. tesla is down. some of the other names, though, have actually come off the lows. a moment ago, apple was positive, though. it's still in negative territory. there's tesla, amazon. it's been a tough day for the d dow component amemerck, as well. it was down substantially earlier. still is by 9%. it is getting hammered. we'll watch that. so is crowdstrike yet again. the stock down heavily today. almost 11%. all of it takes us to our talk of the tape. the mega week for the mega caps. fed decision tomorrow, don't

forget. we'll bring in our cnbc contributor. good to see you. >> good to be here. >> your notes jump out. the probability of the bear case is higher than it was the beginning of july. >> yeah. >> why do you think that? >> i think i got more negative looking at the totality of the consumer health last week. i mean, if you really look at the major -- i try not to focus on one company that's small, that misses, and take a big picture. if you look at restaurants, visa, housing, you know, autos, like the consumer is slowing. when we articulate our bear case, one of the things that could get us more cautious is a consumer that's slowing down. that is what happened last week. on the margin, you have to be more negative on the economic health, i'd say. >> i'll see your slowing. >> yeah. >> but i'll raise you rate cuts. >> right. >> doesn't that matter? >> it does matter. i would argue that the market is a little bit ahead of the fed.

right? meaning the market was certainly anticipating some accommodation. >> you don't think it'll happen? >> well, i think it will. i think that some of it is in the price. we track this rolling relationship between fed fund futures. what people think the front end will be two years from now and the price to forwarding, so the multiples for growth stocks, and it is currently around zero. meaning the market doesn't actually know if it is going to be great at the moment. obviously, '21, '22, hawkish, terrible for equities and multiples. right now, people are confused. there's a lot of competing data. maybe they have to cut a couple times. next year, you get some tariffs and inflationary pressure. then i don't have a clear path that it's enough to hike. there's more confusion uncertainty, and i think that's why i'm not exactly sure it's like awesome for multiples and enough to offset the slowing earnings. >> you actually think that the fed cutting in september could be a sell the news event? >> i do. i wrote that in the second half

outlook. your facial expression is merited. in the last 15 years, i'd be certainly stupid to fight the fed. i and everyone else said don't fight the fed. i think this time, the question is, why are they doing this? the economy is slowing materially. >> both, they're doing it both. because inflation has come down. >> right. >> yeah, the labor market softened enough that they now need to err on the side of a little caution. before, we don't want to go goo soon. now, don't go too late. >> what i feel confident in, what was changed in the fed balance sheet was associated with the change in the equity market. it was going to be a ton in the balance sheet, in addition to the front end, i wouldn't be questioning. as i've been out marketing the last few weeks around, you know, i don't think it's as crazy when i talk to investors, people say, i could see selling news this time. it'd only be happening with more uncertainty and kind of a surprisingly slower consumer. i thought it was going to be a little out of consensus or crazy.

as i talked to, i'd say, 30% of the people agree with me, there could be a sell the news thing this time. >> would you think if the mega cap stocks and the sector in general wasn't underperforming lately, does that only add to your skepticism about the market as a whole? >> i mean, i actually think we're going to end up, you know, the end of earning season, i think, you know, nvidia at the end of august, that we're going to end up higher on some of these names. right now, there's a rotation. there was a little bit of -- for six months, it was innocent until proven guilty. if i can dream the dream, didn't get a negative data point, i was in. we had a little bit of a reality check, a little bit of people, you know, questioning the profit pools and the time to return on those investments. when we get to the end of the month, we're going to hear all these applications for nvidia. what's real? i think these stocks are going to end up being pretty good risk/reward, at pretty good valuation. you can't say they're crazy

expensive anymore. you're going to say, you know, nvidia is 105. what was it, 138 june 18th or something? it isn't like there's not a little frosting off the cake. >> you don't believe in the rotation? i talked to lightstreet yesterday. glen is heavily invested in big tech, incredible first half. obviously, if you're in the right stocks, you outperform. he's not believing in it. i want you to listen to what he told me, then react on the other side. this is on the rotation. >> sure. >> what i'd say is as a tech investor, i'm trying to invest in the companies i think are leading the next generation of great solutions and market leadership. those companies are amongst some of the largest market cap companies in the world. when i look at, you know, your average russell 2000 stock, especially the lower part, half of those stocks, i just don't see companies leading companies

in the next generation of technology. >> you believe that? >> well, i think it depends on the sub industry, but generally, i think that if you're bullish on this rotation, you think small caps outperform, you are to be bullish on equities. what you're saying is the earnings revisions and margins will be bigger than the big companies. i don't think it is a likely base case. you can get stuff on rotations, profit taking. to really believe it, that small caps work, you have to be bullish on the backdrop. i'm bullish toward his view, the big tech will be in positions, and they'll end up outperforming. >> it sounds like -- is your skepticism about the economy growing because you're worried ability the consumer? >> yeah, that's right. the consumer data points got worse. i try not to, you know, tether it to thesis, just react and get news and say, what did i learn? what i learned last week is consumer was slowing. i mean, across multiple areas. i'd say maybe a shade more than a month ago.

that's kind of why i phrase it that way. >> you also talked about, you know, at one point, wanting to be overweight, mega cap tech, which is already a massive part of the s&p 500. you'd changed your view, i don't know, a couple months ago, a few months ago. maybe that was a little bit early. it looks to be rather prescient. >> yeah. >> these stocks this week, starting with microsoft today, do these reports have to be perfect to go up from here or no? >> i think they could calm some fears, as long as the -- you know, the earnings estimates stay in tact and go up, stocks go up. you know, this week, we have a lot of big earnings. you know, some of the stocks are now down quite a bit, as we mentioned. i don't think they have to be perfect. they have to reiterate some of the major themes. if you're a growth pm, did anything happen to derail in your view there's going to be, you know, kind of a big a.i. semis, a.i. software, life

sciences, kind of five to ten year trajectory above gdp? i don't think so. i don't think you'll hear from the companies that derail that. we have meta coming, too. i think you're going to get a road map for what's going to work if you're a growth fund manager the next three to five years. nothing is going to derail that thesis this month. >> microsoft is the first one today, obviously, in overtime. steve cis following that for us when the report drops in about hour's time. >> scott, three things you should be watching here. first off, you have azure cloud growth. that's been reaccelerating in recent quarters after microsoft helps customers cut costs in 2022, 2023. the street is expecting it to print 30.2% growth there. secondly, an important number within the azure growth, microsoft is going to tell us how much of that growth came directly from artificial intelligence. that's, of course, microsoft charging companies to run a.i. applications on azure, among

other things. the third one, how ceo, nadella, and amy hood addressed the capital questions. alphabet shares were punished when those executives failed to give a coherent story, when the spending is either going to slow down or show a return, scott. >> the capex numbers across the board, as you point out, are enormous. year on year. we'll see what happens. we'll see you once again. steve kobach joining us there. you own microsoft and other names. are you nervous? >> i'm always nervous. the stocks have come in enough that i feel the risk/reward on a lot of them, as adam mentioned, is actually pretty good. the more they come in, the less nervous i get. >> when i asked about the perfect question, right, how perfect do these reports have to be, alphabet would suggest they need to be pretty close to that.

>> yeah, but alphabet happened and everything moved down 5% to 10%. i think the risk/reward, again, is different today than it was two weeks ago. and, you know, i don't think they have to be perfect. i think the expectation for microsoft have come in a lot. i think they're somewhat muted. if they have an inline quarter, they speak positively about a.i. and the development of a.i., maybe the profit pools they can generate. that's good enough. >> so even with the valuations being elevated, like some of them are, microsoft is case in point, right? the valuation today is 31 times, 31.5. the ten-year average is almost 25. >> yeah, i think when growth companies are in a super cycle, you really can't value them on the next 12 month of earnings. in part, because they haven't fully blossomed into their earnings power. so when we look at microsoft's earnings, we think there's significant upside to the street numbers, which make it actually,

you know, not that egregious on the valuation. again, when we look at the risk/reward here from microsoft, we think, you know, there's 5% to 10% downside, and 50% upside. >> so you don't look at the, as i suggested, the capex numbers for almost every one of these companies is expected to be up 50% or so year on year. doesn't give you pause at all? you want to see that? because as was suggested yesterday, they're leaning into this transformative technology, and the spend is the spend. they have to do it. they'll get the return on the investment. >> the existential risk for all these companies is they actually underspend and don't meet the market when they need to meet the market. and they can't get left behind in this cycle. so, you know, i actually look forward to their capex spend going on. now, the only wrinkle in that is i'm not sure the street is thinking about the depreciation

correctly. as it work ints into the model, hampers or puts downward pressure on the gross margins. i do worry that, you know, microsoft's gross margins will have pressure over the next few years as the depreciation rolls in. >> it's funny. when, you know, you think about what these companies are spending on and how the market judges it, when meta, for example, which reports tomorrow, was spending all this money on this thing called the meta verse, which nobody really knew exactly what that was going to be, the company's stock got punished. you needed somebody like brad gershner writing a letter to the company saying, get the focus back. get more fit. now that a.i. has stolen the show and captured the narrative, you can spend what you want. as long as it's on that growth opportunity. at least the market seems to suggest that. >> i think we're innocent until proven guilty for 18 to 24

months on that spend. at some point, you have to show return on that. you're investing now for years three through ten, right? for the whole medium to long-term future. i agree. you can't afford not to be relevant if they're going to get a lot more, you know, kind of market share and earnings or holder share three for ten. you have to spend now. sure, there could be fits and starts for people getting nervous, but if i look at the totality of what i'll hear from microsoft, probably amazon, too, and nvidia, i'm not going to learn that, oh man, this investment is already not going to be worth it. i think it is going to be quite the contrary. you're going to realize why they need to do this investment. google, i think, is a little different. their management team historically cares a little less about street communications and so i can say that's a little bit company specific. i doubt you'll end the earning season on august 28th with nvidia and say i now doubt the return potential for a.i. that's unlikely. >> it sounds, ankur, as well, like you look at the pull back

that this space has suffered, right? a number of these stocks are significantly off of their highs hit not all that long ago. another thing glen kachur told me yesterday, do you make much of the pullback, he said, no, i don't see it as being a big deal at all. here's what he said. we can talk about it on the other side. >> it's very typical for summer to kind of have people go away. they want to reduce their books a little bit. we've had, you know, a little bit of a sharp correction here in the last month. it's normal to see a little pullback. it's healthy. a little bit of skepticism around a.i. helps, you know, keep things in check. even though we think it's the biggest investment cycle that, you know, we've seen in, you know, our careers. >> this is much to do about nothing, essentially is what kacher is saying, as i paraphrase that. >> i agree. i wholeheartedly agree with what he is saying, but i think there's another layer on top,

which is, you know, if the fed does start to cut, it will pull money into small and mid caps. whether or not they deserve to be getting that multiple or that capital, it will pull money as people hope that the earnings trajectories will start to grow again. at some point, six to nine months in the future, and that's a trade of hope. versus, you know, some of the a.i. trade, there are real examples today of the benefits of a.i. and how much money they can save. we can prove why you should be investing in a.i. today. you know, i wholeheartedly agree with him. can the rotation continue for a little while? i think it can. i think we can get a really choppy market for a bit. you know, agree with adam, that two, three months from now, we're higher. >> the dream is still powerful. what is equity investing? i buy my dream today, sell it to a sucker with a bigger dream later. that's what we're all trying to do. the dream got a little high, now

the dream is coming in. it is healthy. i totally a grew. i'm taking this course, a.i. for health care at m.i.t. it is six to eight hours a week. i'm already learning 70 things i didn't know. drug development and comp compositional chemistry, images. we're not in the first inning of this stuff. the idea that, oh, we first found out about a.i. with nvidia's upper revision in may '23 and it is over may 1st of '24 is preposterous. the stocks will be way higher in three to five years. we're in the pocket of the consumer slower, and the risk/reward in the stocks are up a lot. it makes sense they're in a little many month. >> isn't the consumer slower, i mean, how do you get a soft landing without something slowing? the whole point is it's not breaking. >> yeah, i don't think it's breaking. it is eroding, not imploding. >> you don't sound like if chair powell tomorrow takes the podium and leads the market to believe cutting with coming in september that that's a positive thing.

on top of what you said about making the case over the transformative a.i. >> it is better for the exposed companies and worse for retailers and, you know, real estate is up the most this month in the s&p. does that make sense in ? think the fundamentals will be better than semis? of course not. my bet is we're almost done with this rotation. we'll be higher because these company are the best companies. they are going to be in a winning position for multiple years. i don't think you're going to -- that dreams are going to get turned into a nightmare in the next month. if you're only going to take a step back and say, wow, i didn't realize, you know, all the things it could do. real-life examples now and dreams of more examples later. yeah, i like we scored on these big stocks. >> what happens tomorrow? what were you betting that powell does, says, and how the market will react? >> look, he probably signals for a rate cut. in part, because of what adam

said. the data points on the consumer got worse, and he has to react to it. he's talked about being data dependent. he'll signal for a rate cut maybe. he'll do a rate cut. if he does, iwm does take off. but, you know, it kind of doesn't matter when it comes to these big cap tech stocks to be frank in the long term. the free cash flow and the platformization of the technology will really drive a significant amount of growth. >> let me ask you quickly before we wrap it up, nvidia specifically. the move we're seeing in the stock, what are your thoughts about it? >> at points in time for a stock, they get overbought. this pullback is, you know, expected. i agree with glen that it's really healthy. i think, you know, we talked about $5 in earnings, which is where the whisper is on the street. we're trading at 21 times that. that's, you know, not including any cash they'll generate. i think it is probably close to being done. >> all right.

we'll see. it's down a little more than 6% today. perhaps microsoft will be a tell. you know, as to where all of these stocks go, even ones that are, you know, in a chip space relative to a software company, it is seemingly tied together. good to talk to you guys, ankur and adam. let's send it to kate rooney for the biggest names moving into the close. >> scott, let's start with shares of procter & gamble. those lost 6% today. the company reported better than expected earnings. quarterly revenue fell short of wall street estimates. disappointing demand in china weighed on its results. silver lining despite the weaker sales. company's volume increased for the first time in more than two years. then you have papal on the other side, one of the big winners, rallying around 9% after reporting second quarter results that were better than expected. wall street reacting to this boost, though, in the payment company's full-year earnings guidance. then this increase, as well, in share buybacks. q2 earnings and revenue were well ahead of analysts's

expectation. all of that to help. >> kate rooney, appreciate it. just getting started on "closing bell." up next, earnings and the fed front and center, with more megacap reports, a fed decision is looming over the market, as well. we discuss how to navigate the uncertainty and how it could impact your money with our all-star panel. plus, a.md results. it's a big prover today, too, as we watch those shares. we'll have a rundown of what to watch for ahead of the print. we're live at the new york stock exchange. you're watching "closing bell" on cnbc. awkward question... is there going to be anything left... —left over? —yeah. oh, absolutely. (inner monologue) my kids don't know what they want. you know who knows what she wants? me! i want a massage, in amalfi, from someone named giancarlo. and i didn't live in that shoebox for years. not just— with empower, we get all of our financial questions answered. so you don't have to worry. i guess i'll get the caviar...

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i'll go to you first, sameer. what do you expect over the 48 hours? market going to like what they get? >> you know, i mean, we're pretty oversold. wouldn't surprise me if we get a short-term bounce. the pullback sticks around for a little bit. wouldn't surprise me if we're still talking a lot of what we're talking about today in three months when we're reporting q3 earnings. the doubts around a.i. linger. the elections and uncertainty linger. how soft the economy is, that's kind of to be decided. >> you don't believe the hype about the rotation, do you? >> no. we are not fans of small caps. if anything, we'd be fading the bounce there. i mean, you don't want to be heading into an economic slowdown and fed rate cuts with small caps as kind of your favorite position. >> why do you say that? some would make the case that that's where you want to lean into with the rate cuts coming and yields falling. >> yeah. look, what we learned with the rate hikes was they work with

long and variable lags. the rate cuts, which will be few and far apart, will also work with long and variable lags. small caps looking for relief, they might get it sometime next year. >> you continue to lean large. you think earnings this week from large cap tech sort of reverse what we've been seeing of late with the pullback of, you know, reasonable size from the highs these stocks hit not that long ago? >> yeah, i mean, i think maybe one day it moves. the end of the day, is a.i. going to make people want to buy more yoga pants, cheese burgers? i appreciate that maybe, you know, tech companies want to spend it on a.i., but consumer companies, what does it mean for people buying things? i'm not sure it necessarily moves the needle when people are struggling to buy, you know, kind of a $5 value meal. >> are you positive or negative on the overall economy? you want people to add to industrials and financials and materials. cyclical areas that would

theoretically suggest you think the economy is going to remain reasonably strong. >> sure. i would think about it as a br ball. unfavorable in consumer dispresentatd discre discretionary, real estate, gaps. you have sectors that are really going to struggle in the comes months, also cyclical. it's a little bit of a barbell. >> your year-end target is what for the s&p? i have your s&p 500 mid-point at 5200. what does that mean? >> yeah, so 51 to 0353 is the year-end target range. we were there kind of in the spring. that's when we started to sound a note of caution. then you had a lot of these tech stocks going to monsters tear. it's not surprising to see them revert back to where they were in the spring. >> i mean, a lot of strategists are chasing the market higher. why aren't you? >> i mean, it's not served investors well historically to

chase markets higher. the end of the day, you know, stocks do tend to follow earnings revisions higher, not necessarily multiples higher. from that standpoint, the tricky part is you're not seeing earnings revisions move higher on some of the reports. that could change after q2 earnings are completely out. at least right now, you're not seeing anybody, you know, blow the doors off from an earnings standpoint. >> i'm just saying what, you know, you hear many investors talk about. it's just, don't fight the fed. it worked well when they embarked on this whole thing initially with the rate hikes. why wouldn't it work the exact same way in reverse as they embark on cuts? >> it could. you know, in two months, if there is a further pullback, more consolidation, if earnings come through, i mean, we're looking for an opportunity. if things were to fall back into our target range, we could get interested.

>> but not if it continues to go higher? sounds like cuts will initiate the next rally. >> if you had a true rate cut easing start, maybe we could get interested. the tricky part is from our standpoint, we only see what we'd call adjustment cuts. maybe two to three, depending on kind of how the economy is doing. if you're in aggressive easing, something has gone incredibly wrong with the economy. you want to be up in cap, up in quality, and barbelled against some of the more consumer oriented bars of the market. >> aren't they moving rates back to what you would consider to be normal? they're considerably higher than where the, for example, the rate of inflation is now. >> absolutely. that's where a lot of the caution comes from. when you have real rates that are still positive, you know, it deputy lead to a lot of relief for consumers, doesn't lead to a lot of relief for smaller companies or indebted companies. that's exactly it.

they're not doing anything, except take the foot off the accelerator. >> thank you, sameer. up next, amd reporting in overtime. that stock had a rough ride, recently dropping 12% in the acth three mons. sty rasgon is going to talk about what he expects from the company next.

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welcome back. semis under pressure.

amd is in the red, and that name is reporting earnings tonight in overtime. joining me now, stacey stacy r >> great to be here. >> there's a lot in the report, but you suggest all that probably will matter to investors is the a.i. story. >> yeah, that's probably going to be top of mind for most investors. that seems to be for amd what they've cared about. frankly, it's what is really -- i know the stock is down off the peak, but if you look the last year or two, it's up quite a bit. numbers have actually mostly come down for them over that period. the whole thing that's been supporting the stock has been increasing expectations for the a.i. story. that's where investors will be focusing their story on tonight. >> what is most important to watch as it relates to that? >> i mean, it's the guide for their mi-300 business. they've been ticking it up through the year. they went from, i can't remember, 2 billion to 3.5, now the guide is 4 billion.

expectations have gotten higher than that. expectations for most of my clients have been in the 5 to $6 billion range. maybe given the drawdown of the stock, 4.5 to 5. they need to take that guidance for the year up. i think if they don't take it up, nothing else is going to matter regardless of what happens in the rest of the business. >> how much of amd's issue, issues -- i mean, if you even want to use that word. maybe i'm wrong to use it -- is simply the fact it's not nvidia? >> people have been looking at amd as a second source because there is a view that, you know, nvidia is clearly fairly dominant in what they do, and the market needs a second source. it is a big market in theory. throwing out numbers, you know, hundreds of billions of dollars, which actually is not implausible. the idea that they can get a relatively small piece of a very big market, that can drive a lot of upside. that thesis on the surface makes sense. i think the issue, such as it is, and i always say this, i don't want to knock amd for what

they are. i mean, they're doing -- even if they do $4 billion this year, it was zero a year ago. that's objectively by itself, that's quite the accomplishment. in the grand scheme of thing, frankly, it's a rounding error given the magnitude of what we're seeing from their competitors. if you're looking at sort of, especially as you're going forward, looking at the competitive road maps between the two, it's getting tougher, not easier. right now is probably the best position competitively that amd is going to be in if we're looking at what competitors have next year. again, if they can't significantly upside in that environment, like, how do you do it as the competitive environment gets tougher, as the road map evolves? that's the issue. it's not that they're doing anything wrong. i'm kind of impressed with what they've been able to do with what they have over the last year or two. you know, given what they're up against, it's a tough fight. that's all. >> it almost -- you sort of make my point of the question i asked you, right? they're doing all these things,

yet the stock is down 7% year-to-date. it's down 15% over a month. they theoretically have a good story to tell with a good storyteller at the top. yet, it's not nvidia. >> look, even nvidia in lots of the other a.i. names are down recently. like, the whole -- i don't want to say the shine is coming off the a.i. story. i'm still very bullish on a.i. stories in general. certainly, you know, that whole narrative has come under some pressure. amd has also been hit by more company specifics. there's been speculation of some of the issues, some potential technology issues with, like, the high bend of memory on parts and order pushouts or order cuts. as people are doing comparisons on the road map, it's tough. look where the expectations are. remember, this is a company where numbers overall for them have come down every single

quarter for the last, like, two years. right? it's not even like you had a fundamental, you know, backstop to help things. all of the stock performance has been multiple expansion. numbers have come down. we're at the point where a.i. now starts to need to drive upside to numbers and expectations are already high. you can't drive upside to the expectations, you may have an issue. >> what about pcs? where are we as it relates to that? what do we expect the company to say? >> we go through the non-a.i. business. pcs are going to do whatever they're going to do. shipments overall in q2 setis better than expected. they'll do whatever they're going to do. you can see upside potentially on data center, like server cpus. there's been incremental data points. after quite a few quarters of horrendous results, upside there. they have a gaming business. it's probably bad. i don't think anybody cares. then this embedded business they

bought a couple years ago. that's been pretty lousy. they've been guiding for growth in the back half, but you have some competitors, i think latladis reported, wasn't great. embedded is probably not going to be great. again, they have a bit of a lift in the back half. gives and takes in the core business. if a.i. is bad, none matters, even if the core business is good. >> i hear you. your point is well-made. we'll talk soon. appreciate it. >> you bet. >> stacy rasgon. >> don't miss lisa su on"squawk on the street," 9:15 a.m. eastern time. that'll be an interesting interview and important one to watch, as well, on the other side of the earnings report. up next, tracking the biggest movers into the close. kate rooney is back with that. >> scott, next up, you remember the outages that caused thousands of flight delays and cancellations a couple weeks back? one of the companies involved is having a pretty tough day. we'll tell you why.

speak of flights, we have an airline stock on the move after a blowout earnings report. more when "closing bell" returns.

about 15 from the bell.watc

>> it's been a tough month for crowdstrike, sinking 10% after delta airlines hired legal counsel to seek compensation for the network outage that led to thousands of flight cancellations earlier in july. companies off by 40% in the past month alone. then jetblue soaring 12% after the airline posted a surprise profit. said it was going to defer another $3 billion in aircraft spending through 2029. that's to improve cash flow. jetblue cut on profitable routes and trying to stem some of the losses as it faces higher expensings and oversupplied domestic market. don't miss ceo joanne gerith on "closing bell." the stock is sinking after weaker guidance. down 10%. we're going to drill down on the report. what it might mean f torhe rest of the drug makers. they're down, too. we'll do it next. even social po. in minutes! -how? -a.i.

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first one's free. now in the "closing bell," senior markets correspondent, bob -- i did it last time, too -- breaking down the trading details of the day. and also, one last look at microsoft ahead of the results. kate rogers with the set upon starbucks, also reporting in overtime tonight. bob, good to see you. this rotation in full effect. >> yes. i'm happy because i like rotation. reverse of the mean is a good thing. too much overweight in tech, not healthy. s&p 500 down. equal weight, s&p 500 up. russell 2000 up again today. up 10 mkt this month. s&p is flat. and we have s&p mid cap also on

the upside. that's a rotation. look at that. if you can't do any better than that on a rotation, in terms of sectors, look at the rotation. even with the s&p 500, this is rotation. energy is again outperforming. banks had been on a tear since earnings came out with jpmorgan. just on a tear. retail has been strong. real estate, industrials, there's the rotation play. at the same time, what's been going on with technology? well, it's lagging again today. nvidia down. there ya go. microsoft, of course, we're waiting here for that to happen. what is microsoft at today? 105? excuse me, 424. we're 10% off the recent highs for microsoft? >> all the stocks are down. you know, reasonably substantially from their recent highs. what is this about, rate cut rotation? >> it's about the fact that tech earnings are still growing but decelerating. so the story is still in tact, but people are paying too much

money for the forward stream of earnings. now starting to look elsewhere. yes, rate cuts certainly help small cap stocks, but they've been underperforming a decade now. it's about time we got some mean reversion. >> skepticism as to whether it's lasting. >> there should be. there's a lot of companies in the bottom that don't make a lot of money. if you select out for profitable companies in the s&p 600, there are ways to do this. plenty of companies that were doing fine. i'm hopeful this is doing to last if the rate cuts materialize, actually, and we get a relatively soft landing, this elusive soft landing. it's a good sign that this is going off for more than a few days now. >> i mean, the dow is up 300. angelica peebles, it'd be up even more if not for the drag amer merck is today. >> yeah, gardasil is driving today's move. second quarter sales of $2.48

billion coming up just short of analysts's estimates. the bigger concern is china. that market representing 70% of gardasil's international sales. merck seeing a, quote, significant step down in shipments of gardasil in china. executives saying they were surprised by the sudden change and have a few ideas about what's going on. there's china's anti-bribery and anti-corruption campaign. merck's chinese distributor focused on other priority. overall decline in the hpv market. merck executives are still confident gardasil can reach $11 billion in sales by 2030. clearly, this is shaking some investors. people don't like surprises. that's especially important because gardasil is merck's second largest pharmaceutical product and key to the future beyond cancer drug keytruda, which should go off patent in 2028. >> angelica, appreciate that. bryn joining us now on microsoft. give us your feelings ahead of this critical report. >> so first of all, we know they're going to talk about

crowdstrike right up on the bat. i think that as it relates to what happened, how microsoft obviously was involved, i think that can be another bad day for crowdstrike. as it relates to microsoft, this is a very different company that's google. they have openai and that unique relationship embedded inside the company. just like last quarter, as they talk about cloud a.i., github a.i., co-pilot a.i., you'll continue to see that narrative build. don't forget, the last quarter, they had double digit revenue and earnings growth. their revenues were almost $62 billion. amy hood talked about capex at $14 billion . i think it is important to do a numerator/denominated with a company with $21 billion of free cash flow. you want them to spend. they're a little unique. co-pilot is my one concern because it is expensive. we're going to see how many people that were beta testing stuck with it. outside of that, i think it'll

be a strong quarter. with the negative segment in the market, we'll see how it reacts to the actual numbers. >> yeah, we will. we definitely will. bryn, thank you. i appreciate that. kate rogers on starbucks. correct me if i'm wrong, the report the last time was a disaster that won't soon be forgotten. there's a lot to make up for with this current report, right? >> that's right. they cut guidance for the full year. i'll take you through the numbers. starbucks will report earnings after market close today. analysts looking for eps of 93 cents adjusted on revenues of $9.24 billion for the quarter. key figure to watch, same-store sales projected to fall in all markets, dropping 2.7%. internationally, 5.1%. in north america, sales declined to drop 2.2%. starbucks is taking steps to remedy the situation. we reported on a new training system for baristas meant to improve the experience for the

workers and customers in cafes, including speeding up service times, which is key. it's opened up its app to non-rewards members and uncharacteristically began to offer a value deal of its own with a coffee and food item for $5, to capture back business. stock is down 21% year-to-date. we will see what the quarter looks like. back to you. >> can't wait for it. kate rogers, thank you for that. we'll chat with bob into the close. so the september table set for rate cut, if we get it tomorrow from chair powell, is it already in the market or no? >> the market is anticipating no rate cut tomorrow and at least two more rate cuts on the year. that's priced into the market. powell needs to sound moderately dovish here. that's really important. if he suddenly says, well, we're going to wait further for a longer time, he has to give some signal. if he doesn't, we'll have a little bit of a problem tomorrow. let me talk about microsoft quickly. this is a really good sign of decelerating earnings growth. we have 294 on fax set we're expecting, up about 11%

year-over-year. that's good. the last four quarters, it's been very flat. 299 in the september 2023. this is what i'm talking about. earnings still will be growing in the next couple quarters but not nearly as fast as they have been in the last couple of years. then it gets to the question, how much are you willing to spend? what is the multiple you're willing to spend for that? investors have been saying, we're not sure we're willing to spend as much on that. 10%, there's the chart there, off the recent highs. >> how about starbucks, right? you remember what happened the last time, right? >> a mess. >> they shocked the market. that's a fair word. i mean, they shocked the market. they shocked cramer. they shocked the market. this is an important report, too. >> consumer stocks are having a really -- look at procter & gamble, pushed back on prices. mcdonald's getting pushback on prices. starbucks getting pushback on prices. it's great. this is how you slow inflation down. consumers say, enough of the $6,

$7 lattes and the $12 mcdonald's big macs, the high prices. when you get that, the companies get a lot more sensitive about it. this is painful. it hurts margins, for example. overall, that's the theme of consumers. pushing back on prices. >> good to see you, as always. bell is going to ring in a moment. dow will have a gain. elsewhere, a little struggle with the rotation again out of tech and into these other areas. the s&p and the nasdaq will be negative. amd, starbucks, microsoft in moments. [ bell ringing ] that's the end of regulation. people's financial services doing the honor at the nasdaq. tech taking a bath. as nvidia and crowdstrike sink, will the after-hours earnings change the mood. that's the scorecard on wall street.

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