good tuesday morning i'm carl quintanilla with sara eisen. setting the agenda, the most accurate strategist is calling for 4000 on the s&p. barry bannister will break down why he's been so bullish and the sectors he says set to take over. a diplomatic progress between the u.s. and china not enough to calm wall street concerns about the outlook goldman sachs the latest to cut gdp forecast leland miller of the china beige book will join us. just a skip or the beginning of an extended pause krishna guha weighs in as key testimony from the fed chair begins tomorrow. let's take a look at where we stand in the market the s&p is down 0.75%. it's still declines across the board. most sectors are lower today

consumer discretionary faring the best keep in mind the context, carl, we're coming off the best week for the s&p and nasdaq since march, so it has been the strong run. still some sizeable gains for the month of june as we head into the final weeks of the year holiday-shortened week powell testimony is key, and a bit of economic data, including housing starts, which were very strong. >> we'll get bank of england, which has been -- obviously, they have some issues to deal with german ppi, 1%, is a lot better than the 45% we saw at the high water mark. >> yes, no doubt moderating inflation, good news we're seeing it across the board around the world as well just the china story, i think, is also front and center today could be some of the reasons for it the declines. you see it in energy, you see it in commodity prices, copper, for instance, has tracked the china recovery story even though they did cut rates as expected today, it was smaller than a lot of economists say they could have gone the data continues to disappoint

copper is down another 0.3 of 1% it hasn't joined the party with the rest of the markets that track risks like growth stocks here in the u.s. topping the tape for us today, the debate that continues on the market's future. credit suisse standing by its recession call, 70% chance by q1 of next year mike wilson says market participants wary of missing a potential. and wells fargo argues the fed's june pause pushes out any potential inflection point for equities let's bring in cnbc senior markets commentator mike santoli. the bears are sticking with their bearish call and the bulls are getting more bullish, it seems, as a result of some of the soft landing kind of narrative. where does that leave us >> the tape action has also encouraged the bulls the rhythm of the market a lot of the mechanics seem like you have better footing. all of them are responding to

what seems like an unusually long wait for that economic inflection point all of the leading indicators of a recession have been in place for so long that the recession callers don't want to give up on that because you're still within that 12 to 18-month window on the other hand, earnings are kind of firming up it seems like the no landing, higher for longer rate scenario also has to be considered. there's a lot of back and forth with it. i think tactically what we're seeing in the market today is really overbought in the index level. the week after that june options expiration where we had a squeeze higher last week is unusually to the downside. 80% of the time when you're up for the quarter. i think you have to work through this noisy period and say the bulls have won to a certain degree, but sentiment is no longer the tailwind it is. people are feeling better about the market i don't think we're out of that critical point of saying everyone is too greedy right now but it's getting in that direction.

when the market's higher, by definition, the news has to get better to keep it there than before when we were kind of depressed. i see that working into the market at this point up 15% year to date. typically that means decent follow-through with some good odds in the back half but not a full proof one it's interesting, sara, a lot of people would have said last year's 25% decline -- oh, that was the market discounting the recession -- >> that's what the bulls say. >> the problem is, we're getting too far from that 25% drop to say that it was really discounting an economic downturn that's not here yet. >> the market's not that good. it's not bad - >> discounting something else. higher rates that it had to reset for. >> interesting we did begin to see goldman, rbc, b of a bring up their year-end numbers either on the market or on earnings. i began to wonder if we were going to see a real chase on that but time is running out. >> it feels like they're marking that stuff to market it's not as if they're saying, oh, we're going to new all-time

highs, it's a lock few are saying that. the s&p was 10% higher a year and a half ago when the economy was smaller and earnings were lower. >> the other thing the bulls have in their favor is the expansion of the broadening out of the market. is that for real >> it has shown exactly the signs you'd want to see. there's a lot farther to go to kind of go against that idea that it's been too narrow this year i was looking at the equal weighted consumer discretionary and industrial sectors, they're both up 13% to 14% year to date. while they're not contributing a huge amount to the overall s&p gain, they're still moving in the right direction. even the equal weighted s&p, it's up, i don't know, a few percent year to date in other words, it's on track for a pretty good year and it only looks like it's kind of this outlier to the downside because the nasdaq has driven the s&p up so much. >> it's not just ai? >> that's absolutely the kicker. it's absolutely animating people's animal spirits. >> mike, thank you mike santoli

let's continue the conversation with our next guest who reiterating his target of 4400 on the s&p 500 by the third quarter saying, cyclical value will join the growth rally it's what we were talking about. joining us is stifel chief equity strategy, barry bannister. why do you see cyclical value now in the krooifr's seat? even with the expansion of the rally, it's been all about growth this year >> yeah, about two weeks ago, tuesday two weeks ago, we said the s&p would just level out around 4400, but the equal weighted s&p, sort of a measure of growth of breadth, that would catch up it would go back to its february 2, 2023 high, which was nearly 10% at the time. about half of that is accomplished it's too soon to be defensive. i do like cyclical value the economy is holding up. the fed is in a transition i think they're going to passively tighten, meaning state

tight longer than expected where they are and as inflation fades, real rates go up. about an hour and a half ago, your bob pisani was talking about this very thing. it's at a point cash and bonds become very competitive against stocks as that real after-inflation interest rate rises. that's probably my concern around late august, september, october that we could have a correction of 10%, if that occurs >> got it. so, you say march in place as value catches up to growth here, and then year-end cash out >> well, if i were to put a picture of what the market's going to look like this year, it's sort of like the big dipper, that star formation. you'll be flattish into august you'll have a drop down, a consolidation, the fed's reaction functions just too slow, and then they'll cut rates by year end as the unemployment starts to rise

you get a strong santa claus type rally in december, and you end be up with a sort of big dipper in the back half. that's how i would picture the index level movements. within the short term we do make tactical trades, rst as an etf i think it will get back to its february 2nd high. i do like financials, industrials, basic materials and i would accumulate energy here and energy services this is just a bear trap pullback since last june we are not done yet with geopolitical risks in energy >> barry, your point about yields getting more attractive as inflation recedes, makes a lot of sense do you get to a sense that gets boring at least given the discussions around ai? how intense can that fomo chase get? >> ai is interesting and it's exciting. but the problem with all new

vast, big technologies is that initially they have a disruption event. in other words, they'll be highly disruptive for the economy, the stock market, and in a sense bearish then as they proliferate, they become bullish as the technology is adopted i do think that's what's likely with ai. we're overestimating the positives and underestimating the negatives that will be deriving from that >> you worry about china i know you like cyclical value because the economy's holding up here, but there were some high expectations for big growth coming from china this year that's not panning out >> yeah, china's got some balance sheet issues remember, they -- they've got the private sector pretty leveraged up the public sector's actually underleveraged what they could do is start to use more fiscal. and i think they're talking about doing that but when we analyze in detail the chinese stimulus as percent of chinese gdp and do a second

derivative or impulse, they have done enough already to more or less put a floor under the global pmi for manufacturing i think it's going to be 50 very soon and as a consequence into the summer months, the u.s. pmi manufacturing could pop up when that occurs, you get your cyclical value trade but as i said, at some point, good news is bad news. the fed is still out there and if inflation doesn't fall adequately, they're going to stay tight >> got it. barry bannister, thank you for joining us with your updated thoughts a tactical views, very specific, from stifel. china is in the headlines. a surprise meeting between the secretary of state and president xi, the first lending rate cut in a year by the pboc and another wall street bank cutting its outlook for the country. how does it add up for investors? we'll talk to leland miller, a igbo autha tt. stay with us

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china did cut lending rates in a effort to spur interest rates. as the recovery there fizzles, banks are cutting their year-end forecasts. hsbc, the latest today, following cuts from citi, goldman, jpmorgan and others in the past week. joining us with his outlook and china beige book ceo, leland

miller it's great to have you back. i'm curious to know what your message would be to investors who are pinning their hopes on some kind of june stimulus surprise >> well, we've seen this story before i mean, look what happened in 2022, 2021 if people are constantly waiting for this big stimulus package, they're going to be very disappointed it's not that china doesn't want to add any additional stimulus, there's a -- there's a reality to what china's growth -- china's economic policy making is right now that is they are being very incremental, very restrained, and, you know, we have already seen -- you talked about the interest rate cuts we've seen monetary easing throughout this year which has done a little bit to help growth, but none of these are the big save of the economy that people are expecting and been led -- is somehow in the pipeline. >> to the degree they are stuck with some macro issues, i wonder, how much of it is due to the notion that corporates around the world are trying to diversify supply chain

i noticed "the times" piece today. they talk about youth unemployment but they also say foreign investment is below last year is that trend really working against them right now >> well, there's certain peculiarities with the numbers because there's a long of hong kong round-tripping. all of these are serious concerns in the medium term. the reason that the markets are so upset about the china recovery right now is they had absolutely ludicrous expectations of this being this whiz bang early year china recovery, which was never realistic. one of the things we've been yelling from the tree tops in december, january and february is, we're not going to get a recovery early on because everyone will be sick for covid. for hundreds of millions of people get covid, get through that, and then you have to break down the structure of the zero covid administrative state now we're getting to the second quarter and i think the recovery is a little better than markets expect they were expecting something so high so they're disappointed but they should realize things are not quite as bad as they think. >> so that's why the economic

recovery has been disappointing, le leland, because you think people have been sick >> well, i think early in the year there was never going to be a recovery second quarter the question is, why are people disappointed with the chinese economic recovery? it hasn't been great if you look at what really sort of knocked people off their feet it was the may manufacturing pmi. there's some weird data peculiarities this year. april was really, really weak a year ago because of the china lockdowns in shanghai and elsewhere. may was stronger you had from april to may, you had to compare a different base of comparison and so you saw what people thought was a deceleration of growth there was no deceleration of growth they have shown improvement five straight months in the chinese economy. there's a complete misinterpretation of what's happening right now. >> when i talk to retailers, global retailers and brands that do a lot of business there, they say that it's booming in the local market, in the chinese market that consumers are out in force, they're saying a big growth

bounceback they're not traveling as much. the mobility is a little different, but that there is a lot of pent-up demand from consumers there. is that not what you're seeing >> no, sara, i agree with you completely if your expectations are sky high, you're going to be disappointed by what china has to deliver -- going to be delivering in the second quarter. but if you are looking at whether there's sequential improvement, are things getting better, yes? property is a mess right now which is why there's so much talk about property stimulus coming down the pipeline the consumption is improving manufacturing is coming off three years of absolutely gang busters growth and still doing relatively okay. i think we're still seeing improvement in 2023. again, we're not here to say everything is peachy in the chinese economy. that's not us. but things are better than people understand. there's much too much gloom on what's happening with the recovery >> i wonder how important you think some of these recent trips by executives to china, goldman, for example, showing commitment

to the country, how key is that? and the blinken visit and whatever summit we may or may not get between xi and potus how does that all fit? >> i think investors in the medium and long term are trying to figure out how much of an investment destination china's going to be, how many of their -- what percentage of supply chains can still go through china versus having to be ripped out and put in southeast asia or mexico or somewhere else these are important for investors to understand, do we have a longer term story here in china or is this coming to an end? but that's sort of different than the cyclical bounceback we're seeing right now you're going to have a cyclical bounceback in 2023 may not be as great as people originally thought but we're in the middle of seeing what degree that will be long-term china will have a significant structural slowdown. within that investors are trying to get comfortable with where they fit and how much investment they should be sending to china. >> what do you think we should make of the currency move? it's been weakening.

we've only been at these weak levels at one time post-covid environment and that's as the fed was raising interest rates in a big way last year what is the signal here for the currency >> the currency is relatively weak you have to remember the currency is soft pegged to the dollar everyone likes to talk about the basket but it's a rhetorical device beijing doesn't want to move in lockstep with the dollar what's happening in america right now, the fed is hiking rates, keeping rates very high this is potential pressure point for china. look, they're blowing off a little bit of steam with the currency all of this, if you look and you're not looking at day to day or month to month but the windows china's maintained for years now, they're still within the outer bounds of the windows they have maintained you're not going to see a one-devaluation but there is pressure on the economy to slightly weaken the currency. >> pretty fascinating. hugely important to global growth leland, thanks for the help. leland miller, china beige book. later this hour, fed chair

powell set to testify before congress tomorrow as investors weigh the contrast between the june weight pause and the hawkishness of some fed memories krishna guha with a look at what it means to investors. this data today showed home construction surged in may by the fastest pace in more than a year a low inventory boosting home inventory confidence, lennar, pulte and toll brothers all at all-time highs the people who live and work there. because you call these communities home, and we do too. pnc bank.

european markets set to close. a mixed session ahead of key inflation data in england. ecb governing councilmember weighed in on that yesterday, saying rate hikes in europe may end this year while warning of a recession. on that note, germany's may ppi rising at its slowest pace in over two years, as carl mentioned earlier. good news for the ecb. the story abroad continues to be

optimism in japan. warren buffett raising his stakes across those five japanese trading houses this week, with japanese stocks already currently trading at a 33-year high another vote of confidence boy, did buffett get this one right being in japan, talking about that market because it has been a surprise star >> it's always hard to sort of separate the play versus the play with his involvement in it, right? you can't separate yourself from the story. once he went there, he drew a lot of attention to it and probably created a nice little tailwind. >> combine that with the reforms that have been going on in the japanese economy, the inflation that is starting to be sparked in the japanese economy and the easy monetary policy and it's been this recipe for a world-beating rally so far this year, 30%. >> we mention japan almost every day. didn't always happen like that by the way, goldman raising their u.s. gdp number in the wake of that housing data. pretty close to atlanta fed. >> we'll get a new update to

atlanta fed gdp today. hopefully -- the last time we got it it was at 1.8% for the quarter. goldman currently updating it. and the idea there is that, you know, residential investment has been a subtraction from gdp growth in the last year and a half or so since the fed's been raising rates. mortgage rates have gotten so high it's interesting to see these growth figures now factoring into the growth. >> yeah. we'll see how the quarter comes in. let's get a news update with our bertha coombs. >> carl, trump allied attorney is facing disbarment proceedings in california. john eastman created a memo arguing then vice president mike pence could overturn joe biden's 2020 election win. counsel for the state bar of california is asking a court to revoke eastman's license to practice law in that state eastman's disciplinary hearings are expected to last at least eight days french investigators searched the headquarters of

paris olympic into two proebs into suspected corruption. one investigation was opened the year paris was picked as the 2024 host looking into suspected embezzlement of public funds and favoritism the second opened last year concerning suspected conflict of interest and favoritism involving several olympic contracts. the games are set to take place in july and august of next year. forecasters warn a tropical storm brewing in the central atlantic could strengthen into a hurricane in the next couple of days there's a lot of uncertainty about the storm's path right now, but it is expected to pummel some eastern caribbean islands. and the name will be brett, so no bertha this year in the hurricanes i'm quite relieved. >> bertha, thank you very much up next, deutsche bank says strong auto demand could lead to a series of q2 beats and guidance raises for that sector.

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we're about two hours into trading. it's been soft since the open. let's go post to post with bob pisani >> the issue for the market is how do we advance it at this point? and people want to see some of the laggards advance, materials, consumer names this is one of those days even the modest advances we see there are not working. this is a little downside of the markets. i'll give you an example

here's slb, it's down 12% on the year oil service names have tried and tried to rally they had a nice rally at the end of last year and then sort of fell back again. we have spurts where they kind of work and then they just sort of die that's what's been going on. these are having a tough time rallying here. the energy sector is not really participating. then we talk about the materials. there are some global materials doing okay, but here's lyondell, they are huge in plastics. tech stocks were so strong, they had a hard time advancing. it's up about 7% for the year. this is the problem, all the big material names have, like dow, inc, for example, they're not terrible but they don't have any strong upward momentum then one of these periods, ford and gm, and jim was with ford

this morning where it's had a great month. it's up over 20% and so is gm. we get the periodic spurt. again, it doesn't hold up long term long term it's not been a great investment overall you get these short spurts and then they just kind of fall back again. what we're left with is essentially tech names and a small smattering of other names. you all know what's going on, every housing stock has been fabulous this is another historic high for dr horton here today and had huge volume on friday. of course, we had a rebalancing, a quarterly rebalancing. you get heavy volume these stocks, all thele home builders have had great volume that's the problem, carl, how do we broad with the market and let's just say so far, the broadening story has been very, very modest. carl >> definitely the bulls are hoping for a little bit more we'll see what happens, bob. thanks bob pisani let's turn to a note catching our attention, deutsche wrapping up conference and publishing key

takeaways. bottom line, automakers are optimistic, consumers aren't slowing down and major automakers could be prime to beat and raise joining us is deutsche's lead auto analyst the tone you argue is pretty optimistic. >> thanks for having me, carl. so, we had close to 50 automotive corporates last week at our conference. and the tone was optimistic across the board, but from these traditionally from automakers. ford and gm essentially saying, look, the consumer hasn't weakened we're not seeing a weakening in auto demands prices have held up really strong incentives have only crept up a little bit so far so good, essentially. demand is there, pricing is there. that should result in profitability like we've seep so far. no real reason to be worried about the second half. now, it's clearly a positive surprise versus, you know,

expectation. the most investors would expect prices to moderate eventually as other companies have done as well, but it doesn't look like it's happening as we speak, which could set up for probably pretty strong second quarter earnings from these guys as well as potential upside for in the full half year. >> that's pretty interesting there had been some who argued the ev strategy for both gm and ford was just going to be too expensive, the adoption curve too shallow. they would have to make some tough choices on the ice business versus the ev business. it sounds like they were stubborn in their commitment going forward with it? >> we're seeing a fairly decent amount of doubling down on i.c.e. as well we've seen many -- billions just announced over the last few weeks by general motors for future generation of pickups and suvs and the combustion energy side they're managing their cash cow and also where they need to invest in electrification. gm and ford have had issues

getting them produced really, but mostly doing that profitably their message is very much, we're taking costs as fast as possible and also we're going to be opportunistic look at these partnerships announced over the last couple of weeks with tesla to essentially enable their users to use the charging stations from tesla that's a way for gm and ford -- it's a way for them to save on capex and reduce their own costs and boost adoption, you know, of the ev technology among their customer base. so, i think overall the message from these automakers is we're at it, we're committed and we're having some traction >> did you have tesla at your conference wasn't a concern they just control the market when it comes to pricing and have been lowering prices repeatedly, which will ultimately hurt the profitability of their competitors because they have to follow >> yeah. so, we did have tesla at the

conference they were not presenting necessarily. mostly in meetings with investors. i think that's exactly right i think tesla's message is we will remain low on price and it's one of the main levers they have to keep boosting demand and tesla has strong growth aspirations like more vehicles to sell, and in order to sell those in a potentially softening market, they would be looking to lower prices accordingly our view has been the direct competition to tesla is not really the gm and fords of this world. gm and ford really make their money from pickups, suvs, from very large vehicles, which are extremely profitable and that's their strategy in the ev world as well. i think that's where tesla is cutting prices, model 3s, model ys, smaller crossovers there's no real direct competition to overlap with gm and ford i would worry much more about japanese automakers, korean

automakers, chinese automakers that are competing directly with tesla in the models where tesla is cutting prices rather than the gm and ford in terms of the direct tesla impact from lowering prices. but certainly on tesla itself, this is an absolute risk i think further price cuts, i'm not sure to what extent the market is ready for it the demand is there, the deliveries are there but the risk of price cuts is something we're mindful of. >> right in terms of the charging network gathering around this tesla standard, who do you think is being more savvy, tesla or the legacies >> well, absolutely tesla won that round, no question about that they were there early. they right away range anxiety something nonexistent for most tesla owners, they put in the capital and they get to basically have full capacity ut sdmrags because so many other automakers are going to be having their drivers use their network. they also with this new

charging -- with the charging standard that everyone is followingtesla, tesla will be setting up standards for this industry for years to come if tesla makes changes, everybody will have to change. there's no question at all that tesla is the winner. i would just say from the other automakers' perspective, it's an interesting tactical move. it certainly will save them money and capital in the near term it's something that's extremely expensive to develop, and i think this would be helpful and potentially also help adoption with their core buyers base, adoption of ev. >> so, bottom line, you sound super positive about tesla, the legacy automakers and expect earnings revisions higher but the stocks have done well. they've had a nice runup at this point, what's reflected in the price where's the opportunity? >> that's a great question that's exactly right i think to a certain extent the automaker stocks have run up early quite a bit. essentially noting monthly data

has not shown prices deteriorating or demand deteriorating. i still believe that with automakers coming, confirming that printing good earnings potentially as well as, you know, boosting the year outlook and essentially saying, hey, we don't really see good reason why the second half would be weaker than the first half, there still may be room to essentially run you're right, they've hada fairly decent rupp it still feels tactically a good place to be for potential earnings tesla is a different situation tesla has run tremendously on also some other news, the demand side, artificial intelligence, among other things and i think now we're probably heading to a fairly decent second quarterly deliveries number i think that will be okay. the question after that is whether second quarter is the trough for their margins or not. i think tesla's message at our conference was very much, look, our costs are coming down, prices are coming down as well so, this is something that people will have to -- investors

will have to take another hard look at. >> yeah. we'll see how much of a wild card labor is as well for the business pretty fascinating moment, though thank you. emanuel rosna at deutsche. >> tesla and nvidia going strong. after a break, the leadership shakeup at alibaba. plus, speaking of autos, we're watching avis today. morgan stanley goes to overweight, bullish on their flrieet sk management. target of $230 stay with us a million different ways i should be trading. look! what's up my trade dogs? you should be listening to me. you want to be rich like me? you want to trust me on this one. [inaudible] wow! yeah! it's time to take control of your investing education. cut through the noise with best-in-class education resources that match your preferred style of learning. learn your way. not theirs. td ameritrade.

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pressure after the internet giant announced its ceo and chairman, daniel zhang, will be stepping down to focus on the cloud business that's the focus of today's "techcheck" segment with deirdre bosa deirdre, what's behind this move >> this is more of a leadership shuffle than a major change or upheaval that does matter because it could signal that jack ma, founder of the company, is still calling the shots and a crackdown that essentially saw him go into hiding two veterans of the company and jack ma insiders, joe tsai and eddie wu tsai is the owner of the brooklyn nets so he's the more international-facing executive and eddie wu is more of a technologist, helping develop taobao and ali and the

monetization behind them they will replace zhang. this comes after years of turmoil that has wiped out hundreds of billions of dollars of market value. it saw e-commerce competitor make inroads internationally and split alibaba into six units that process is ongoing now. jack ma was the face of alibaba for years who grew alibaba into the e-commerce delivery giant as he was about to bring another company public beijing authorities started a crackdown on him and alibaba you would think beijing had to approve these and allow ma to install two insiders, tsai and wu tsai is now leading -- or head of one of the biggest chinese companies. and he himself doesn't hold a chinese passport, so that could signal that alibaba is going to make a bigger international

push this comes after rival temu's success. had that commercial during the super bowl and more price conscious shoppers have been turning to this app, which is owned by pendao. >> it's interesting with the disappearance of jack ma, do we know where he is, what his influence is and why whether some of these decisions get made because of sort of larger political questions there. >> right so, he's no longer sort of persona nongratis. he's been around and insiders would say they hear from him at the company. he's not totally stepped away but certainly as the face of the company he has his future sort of -- i'm not sure we exactly know he said he wants to focus on philanthropy it is so interesting, remember, over the last few years, and this kind of went under the radar, but beijing taking what they called golden shares in

some of the biggest companies, alibaba as well as jd.com. and that essentially gives them veto rights or kind of behind-the-scenes control. so, that's why this is so interesting, too, that these two are placed at the top because they are seen as being close to jack ma. so, maybe that relationship is getting a little better between beijing and alibaba. however, i would note, hundreds of billions of dollars of market value wiped away later that's happening in the wake of that when pen dodua has become r a rival. >> deirdre bosa inside alibaba. fed chair jay powell testifying before congress tomorrow and thursday. their actions say one thing but the dot plots say another. that's evercore's krishna guha will weigh in after the break about what that means for investors.

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we moved out of the city so our little sophie could appreciate nature. but then he got us t-mobile home internet. i was just trying to improve our signal, so some of the trees had to go. i might've taken it a step too far. (chainsaw revs) (tree crashes) (chainsaw continues) (daughter screams) let's pretend for a second that you didn't let down your entire family. what would that reality look like? well i guess i would've gotten us xfinity... and we'd have a better view. do you need mulch? what, we have a ton of mulch.

getting a news alert on elon musk and tesla's possible ambitions in india seema mody has more on that. >> carl tesla ceo elon musk is scheduled to meet india's prime minister modi today in new york city, according to two sources the goal is to discuss the electric vehicle makers' presence in the current, setting up battery production, that's what we've been told

tesla, we have reached out to the company for comment. musk will be the first ceo to immediate modi during his visit to the u.s., but not the first executive of a visit to the white house, which begins on w microsoft, google, and other ceos will be in attendance >> all right, musk has been doing a lot of meeting of world leaders lately seema, thank you wall street sees another rate hike over the next month from the fed, but the fed indicates that two more potential rises are on the horizon. it showed that in its forecast or dot plot. the next guest says the base case is a second rate will be dropped. joining us is christian. they're going to get away with one more in july and that's it, is that your expectation >> i think what the fed signaled is, one hike and another soft

hike that if the data evolves in a favorable way, they would be more than happy to drop down the line it was a very interesting message from the last fed meeting because they delivered that hawkish baseline of two hikes but powell's message in the press conference is they'll be very careful, they're slowing down to find out more about the time lag effects of the monetary tightening they have already done, as well as what credit tightening if any is going to emerge in the period ahead so my working hypothesis is we're now moving at this every other meeting pace the first one scheduled for july very likely to happen. second one probably not. >> the one reason why i always bash the dots, and i know you have a good line about they get cheaper as they go farther, which is true. they have no way of knowing, is that we just have to see what the data shows us. if they're data dependent, why

do they give us dots let's see how much inflation moderates, right >> fundamentally on any medium term horizon, the data rules we know what the fed is trying to achieve they are being wary right now, as to how much progress is achieved they have been burned obviously over the last year plus by the strength and persistence of inflation. if the data turns in a more favorable way, at the right moment, the fed would be more than willing to capitulate to that dovish good news. it's just that they haven't seen yet enough to make them confident that inflation really is going to head back to 2, as opposed to moderate a bit more and maybe get stuck in that 3 1/2 to 4% range. what i would say about the dots themselves is that they're giving you a little bit of a sense of how they think the world is going to evolve, but more than providing a private

sector type forecast, they're really trying to illustrate the fed's reaction function. that's to say that every time they have to upgrade their path to inflation, they're going to add more hiking to convince everyone they are going to bend inflation back to target, whatever it takes. >> they did take pains last week to say they remain committed to the target, although we have talked to some, alan blinder comes to mind, who argues there is a good enough number out there, and i wonder if clients are asking you what it is and how the fed would communicate that if in fact there is one and we got there >> so i think this isn't a black and white type question. i think the fed is very, very focused on making sure that inflation doesn't get stuck on an underline basis, 3 1/2 to 4 or higher. i think once you get inflation under 3, degrees of freedom open

up to you to be a bit more patient. you're not going to cause a recession on purpose to get inflation down from say 2.6, 2.7 to 2.0 unless you see something weird happening in inflation expectations and that kind of thing. it's not that 3 is the new target it's that there's some kind of nonlinarity there. cow can take it a bit easier in terms of the later stage you can take longer, be more opportunistic. i think in the long run, giving we still have a zero band issue down the line potentially, they would be happy to see inflation during the upswing of the business cycle in the slightly above 2, let's say 2, 2.5% range. for now, those nuances are just too far away because the fed is still focused on doing what it needs to do to make sure that it puts inflation on that trajectory where it's going below 3 and heading down to

below 2. i actually think they're making more headway than they think they won't have to do as much as they think, they'll be coming down faster than they think. but the data ultimately will decide that. >> yep thank you. they're not there yet. appreciate it. after the break, wall street's buzzing about a key sales number for bud light, a new e. tas,on gaway

what wall street is buzzing about this morning hits keep coming for bud light a new note showing data that indicate volumes are decreasing even further last week, they were down more than 30% on the year compared to a 28% decline the week before as consumers continue to boycott this brand following the collaboration with the transgender influencer earlier in the ving. we know of the news last week that they lost the top selling u.s. beer spot to modelo in may. and it doesn't look -- these analysts are looking for signs of stabilization and not seeing it yet >> it's true, and we're beginning to get a hinlt of maye some kind of marketing bounceback from bud, trying to reset the conversation now you're in a period of the year where you're counting on

post memorial day beer sales it's one thing to lose market share in the first quarter once you get into q2, the stakes get higher >> this is going to be studied for a long time, the mistake they clearly made. just as far as the overall action, i'm watching the home builders today having a decent day. they actually had a nice run and some are at highs. all-time highs at a time where mortgage rates are above 7%. the fed has indicated that high rates are here for longer. and yet, we're seeing this burst of activity in housing the starts number rising by the most since 2016, showing activity is bouncing back, whether it's the low supply or people just getting used to high mortgages, it's amazing to see in this period of an interest rate hiking cycle. >> we have been saying throughout the hike cycle we're structurally underhoused -- >> it's like labor >> people do adapt to some degree it's remarkable, though. the amount of time it took home

builder sentiment to get back above 50 was incredibly short. >> right, and so now you wonder what that's going to do for prices because it's a big part of inflation and consumer price index. the fed doesn't want to see that turn up. it's been a problem that it's stubbornly high. >> no doubt the fed chair will be asked about that tomorrow and thursday it's time for the judge. >> carl, thanks so much. welcome to the halftime report is the $3 trillion club about to get its founding member? apple approaching that incredible milestone a reminder of the tech run to start this year. our investment committee sizing up the rally, how much longer it might last joining me right here at post nine, josh brown, liz young, joe terranova, and steve weiss we'll take you to the markets this holiday shortened week. you have a down day for stocks across the board however, we're focused on apple, for obvious reasons. new all-time high today,