me. >> yeah. >> the fully autonomous stuff i'm not sure it is there yet. >> this is the place where san francisco is letting waymo and those places do experimenting. on the other hand they are cracking down more heavily. so they are all over the place. >> dow is down 75 points right now. thanks for watching "power lunch." >> we turned sharply lower at least for the average. can the s&p hold it? it is up a couple points right now. "closing bell" begins now. >> thanks so much. welcome to "closing bell" right here at the new york stock exchange this make or break hour begins while stocks are largely hanging in there but a lot of volatility just within the last 15 minutes so it is going to be a wild ride over the final hour of trade. all of this coming of course after the slightly hotter than expected read on inflation. there is your score card with 60 mints to go. don't look away though because it could change at any moment. the dow, well, it dipped lower within the last hour. it was down more than a hundred a moment ago so it is bouncing

pretty heavily right now. you see the s&p and nasdaq are still in the green. nasdaq is the out performer. nvidia, microsoft, amazon all higher. the notable exception the same old story, apple. got to show you that one because it is down again today one day after the big iphone event. shares are off nearly 6% this month alone. actually now it is 7% as the shares continue to slide in this final hour of trade. yields are mostly lower. certainly from where they were early this morning after cpi. it is probably helping the tech trade a bit. it is a bit of a defensive day as well today. utilities are leading in terms of what's happening with sectors. we're watching the russell 2. small caps are under performing in a big way of late so we'll watch that over this final hour. there is your loss there about 1%. it brings us to our talk of the day. why stocks have been able to largely brush off today's cpi if in fact that is what they're doing and what it says if anything about where your money might go from here. let's ask our guest here at post

9. let's caveat all of this by saying it has been a little bit wild in the five or ten minutes we've been sitting here. for most of the day we've been able to get beyond this slightly hotter than expected cpi. why? >> because it was ultimately expected you were going to have a hotter top line and the core was going to come in better and for the first time in 12 months core grew slower than the top line. that was largely expected. having said that it was not a terrific print for the fed. and it just does raise the question if you get another one like this, does the fed come back into the picture? ultimately the market is still at 40% chance of a hike in november. that hasn't fundamentally changed. with that picture not changing the market can hang in there. this is the thing we've been waiting for since labor day. this print right here. we have to get through ppi tomorrow and some of the other prints going forward. >> you'll obviously get another inflation read before the fed meets again. as you may know i spoke with

jeffrey gunlock out in california yesterday and he says this is it. he doesn't think the fed is going to go again. >> i think they're done. i think we have enough weakness -- economic weakness. the one thing they need to change to be done is they need the core pce to drop below 4. it's been at 4 to 4.5 for about two and a half years. that is the one inflation indicator that is just sideways. >> all right. what if they are done? does that change your outlook for stocks if they don't do another one for november? >> it changes our -- our estimate is they are done here. even if you come in a little higher we just think the fed holds for much longer at this level and doesn't hike further. i think the issue is really what is going on with yield not on

the shortened but on the longer end since i've been on we've seen the ten year really take off and the market struggled to move higher and is consolidate hearing under the 4500 range, which makes sense with yields higher. >> you know, one of the reasons that has been discussed today is why -- as to why the market was largely hanging in there, certainly rates are lower but market continues to believe the earnings have troughed and the story is really going to change. that has to happen or stocks are probably mispriced. correct? >> we're right now almost at 19 times forward 12 months and that is with earnings ticking up ever higher. we troughed several months ago chlth we're moving higher to the end of '23 and '24. that has to happen to keep the market going. let's talk about the real economy. as we've spoken about, it is really exceeding everybody's expectations and 15 months, 18 months after the first rate hike

we're still at 3.8% unemployment with wages growing over 4%. that is extraordinary. i think nobody would have thought that. i think you have to go back to the playbook of how we think about how rates affect the economy here. we're hanging in there. there is some question on housing whether we get, if we have housing prices move up again what does it do to activity? that is really held in as well. >> what if we're actually as gunlock suggested that we're weaker than people want to believe? it has taken longer to start showing up but you're going to start in his mind already seeing some of the weakness show up. there's been really squirrely, consumer related reports out of the last earning season. you could start to build a case if you wanted to that the consumer in fact after hanging in for so long and so strong is weakening now >> i think that is the case. the excess savings are largely gone by now. it took a good 18 months from the last of the stimulus on the child tax credit to finally work

its way through the system. on some of the consumer and discretionary reports you did see that. staples were hanging in better. that is what you expect in a slow down, student debt being repaid, $380 a month on average out of spending so that will slow as well. i do not think it is fatal. i think there is enough activity and clearing the hiring market is still so strong and people are still getting jobs. you have unions out there asking for 35% wage increases. obviously we are not having a weak labor market. >> since you went there, the auto strike possibility. that is a wild card really in what it could mean for the economy. something longed -- how should we view that as a risk? >> i think there are three risks here. oil prices really unknown,

right? the auto strike, and the government shutdown. those are the three things not embedded in the fundamental analysis that could be negative. on the auto strike i think if it lasts four to six weeks you can recover the activity on the other side of that. but if it goes on longer, then you really wind up hitting gross numbers and wind up hitting gdp going forward. it has to be short. >> let's bring in marsy mcgregor and ladies, good to see you as well. what do you make of what we got today with the cpi? market falling out of bed, not falling out of bed. rates didn't shoot to the moon. >> it was interesting. the reaction was quite muted to echo your comments earlier. i think it has to do with a couple things. the position coming into this, there wasn't a lot of implied volatility around this particular event where the majority of that is is really around fomc next week. and so there wasn't a lot of positioning coming into this day. the second thing is when you look through to the data and

parce through the various components of cpi what you see is that shelter came down and i think the market viewed that as a dovish signal. the reason for any of the increases whether air fares or headline inflation was due to energy prices. and so when you look through to that i think the overall trajectory was actually slightly dovish which is why you saw equities hold in there this morning and certainly for the majority of the day. >> do you agree the fed is done? if you are taking what you got today as dovish you heard him say i think they're done. alisha is modeling in done. what about you? >> whether we are done or have 25 more basis point hike in november the fed is always very adamant they'll be data dependent. i think it is really that difference. are we done here or do we have one more 25 basis point hike? the major debate on the table right now is really for how long? is it higher for longer and how long are we going to hold these

rates, which does impact your overall portfolio positioning. both from a fixed income standpoint as well as where you want to be from an equity standpoint. whether it is done here or 25 basis points the positioning is around how long we'll hold these rates for >> i think i heard steve liesman our senior economics reporter raise an interesting point here that you have to believe that the fed wants to be done. that they'd like to really lean on being patient here and no one expects them to do anything next week but if they have to do something in november that it might be more than one coming down the pike. if they feel the need that they have to do something again it is going to mean that inflation has taken a turn perhaps higher than it ticked today with the next inflation read. what is the risk there do you think? >> if you look back history tells us inflationary periods usually have more than one peak to inflation. that won't really surprise me. when i look at today's cpi we

are making progress on the core if you look at the 3 and 6-month trends. we're seeing indicators of the labor market start to norm lies but i think you need a little slack and clearly wages are still growing. our view is likely one more rate hike is in the hopper for november but i agree. i think the big question is how long does the fed hold tight? i don't think you get a cut until early next summer. >> yes. it is interesting. i look at the notes you gave our producers today where you say cash is king. so that implies that you're rather defensive on the market here and you don't expect anything to happen in the stock market much at all between now and the end of the year. that you want to stay in cash? >> no i do not want to stay in cash. however when i am adding my equity positions i want to look at cash on balance sheet. our positioning is actually very

well diversified. we like fixed income and a balanced approach in terms of taking advantage of some short term yield as well as extending duration out five years to lock in some of these rates. the cash comment was about what is going to drive equity market returns? if you look there's about ten companies responsible for 25% of the free cash flow generation of the entirety of the u.s. market. and so one of the things that's been confusing this year is when you look at the magnificent 7, top ten stocks, really growth stocks. when you look at their ratios of cash on balance sheet to debt is around 53% which positions them quite well compared to cyclicals or defenses significantly less than half of that positioning. you want the companies that will be able to go higher for longer or if we extend out you want them to be able to grow in these environment. >> that is why people have gn going to those stocks. on the top of the list of why

people have been gravitating toward megacap tech, the balance sheets. they have the best balance sheets. that is why they're viewed as defensive stocks in many ways. the amount of cash they have on hand at the balance sheet. one of the reasons. >> they don't have to borrow. they can grow without it. they can fund their growth. that is exactly the reason that everybody poured into them besides the fact that they sold off so much last year. that is exactly right. we, too, feel this is an excellent time to go a little bit out on the curve on fixed income as well. we think there is going to be differential growth going forward and we want our clients to take advantage of that. >> your overweight treasuries, neutral equities, when does the dynamic change? what has to happen? ultimately that is going to decide whether the stock market has any real strength over a longer period of time. you have to have cash, cash kwifl ens bonds, not be as attractive as stocks. >> when i look at this market

clearly the momentum has been fading everywhere but energy, the technical envy of this market which i think is healthy. this market is digesting the gains from the first seven months of the year. near term actually would point to cash and the record level sitting in money market funds where sentiment is improving a little bit in our work so that cash sitting in money markets could provide a near term boost call it between now and year end. big picture you need a fed pausing, earnings to turn around and i argue you really need the hard landing scenario off the table which i think it largely is to get a sustained up trend as we look into 2024 but it is all about earnings. markets will look ahead, try to find the trough, and see we are in a new earning place. that is ultimately where the turn-around comes from. >> are we too optimistic when it comes to earnings? the market is betting we've seen the trough. that we get the upturn now, better upturn next quarter, and even stronger as we enter 2024

>> i think we've seen the trough. however, i do think there is a little too much optimism priced in currently going into q3, q4 earnings and also into 2024. i think the important thing to look at, though, is in reality what we have seen, a rolling recession and recognizing that a lot of sectors already experienced recession. in q4 of last year you had 6 of 11 sectors, then 7 of 11 sectors. that continued through q2 earnings so i think the rolling recession component we have seen earnings trough. it is a little bit too aggressive in terms of where they go from here and what is priced into the market. >> if you look at things that perhaps have had some momentum of late energy prices at the highest levels of the year earlier this week. >> we're very positive energy and we actually have been and have a schematic basket that centers around energy actually because we think it is a supply issue that energy prices will stay higher. of course the stronger dollar is

helping as well. we think that is still a play to be had, a place to go also. >> how about the dollar that was just mentioned. is that enough head wind to be concerned about? would we think it has any sort of staying power? it had weakened and then it has been picking up steam over the last few weeks or so. do you think that lasts? that sort of head wind is that for the earnings picture we just talked about? >> absolutely. we saw it reach the second highest level in history and then it gave back a little bit and obviously has come back. when you just look at sheer flows whether into the u.s. market from a fixed income perspective, into the u.s. market from an equity perspective obviously it has created a lot of strength in the dollar. ultimately we think over the longer term it is not sustainable and creates some interesting opportunities overseas. i think if you go back to something earlier in the conversation you have to be schematic especially looking internationally. there are opportunities but you have to be thematic and look in

areas like health care, investing in longevity, targeting some of the long-term unstoppable trends as opposed to diversifying out of u.s. dollar for that sheer reason. >> maybe you got to think about rate cuts as well when you're thinking about where the dollar goes over the bigger picture. i want you to also listen to what i was told yesterday about when he thinks we get the first ones. >> i think the fed raises rates by taking the stairs and they cut rates by taking the elevator. >> when will they first cut rates you think? >> the first half of next year. i think it is going to be when the economy really weakens. >> how about you? >> i think we get our first rate cut in june of next year. i argue that gdp growth will flat line into the middle of 2024. we avoid a recession but of course it leaves the economy vulnerable to shock, right? the things we can't forecast. i don't think, i think the fed

is going to be really patient and try to hold rates this tight as long as they can. i think that puts us at early next summer. >> you on the same page? >> i think we have a slowdown but not an outright recession. early next summer. isn manufacturing looks to have bottomed. if that is the case earnings moved higher. >> kristen, lastly you. rate cuts next year, mid year, second half? >> i would say mid year second half of the year but i think the one year to be cautious of and a slight difference from gunlock is the fact if we don't see a hard landing this concept of taking the elevator down i think the fed would be much more reserved in terms of rate cuts if we are in a soft landing scenario and they're just trying to balance out some of the data being contractionary. >> he doesn't believe the soft landing scenario yesterday as he told me. he does expect a recession early next year. we will see. ladies, thank you so much. good having everybody.

let's get to our question of the day. we want to know, do you think the fed is done raising interest rates? the results are coming up a little later on in the hour. in the meantime a check on top stocks to watch as we head into the close. let's draw your attention to unity software lower as the gaming giant faces backlash from developers over new fees based on how often a game is down loaded. analysts are sort of down playing the backlash today with webb bush securities saying it does not expect developers to rush for the exit given the value proposition that unity services provides. nonetheless shares are down over 5%. animal health names like zoetis are lower today on concerns about potential head winds in the space. at morgan stanley's health care conference the cfo of zoetis noting foreign currency head winds and said veterinary visits moderated. while china is less than 5% of

their total business they are seeing a big drop in consumer confidence there. stock down about 3.4%. >> we'll see you in a bit. thank you so much. we are just getting started. up next tracking the tech trade the sector struggling this month. our next guest still flagging key reasons to believe in some serious upside as we head into year end. he'll make his case just after the break, live from the new york stock exchange. you're watching "closing bell" on cnbc. to duckduckgo on all your devie

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welcome back to closing bell. this year's check rally has run into head winds recently with the sector currently on pace for the worst month since december. our next guest staying bullish believes there is still more upside ahead for the space. joining us is the chief strategist at baker avenue wealth. good to see you. you don't think the momentum is lost for a while? >> hi, scott. no. august was a slow month for tech. it gave back some profits. september also is lagging a little bit. we think there are two reasons. one is seasonality. august and september tends to be weak for the tech sector. secondly rates also were higher during the month of august so tech sector is particularly sensitive to that. that being said we tend to see seasonality improve in october and november. we expect a rebound there. frankly with the overall sector trades, the tech sector looks one of the best in terms of

earnings growth going into the fourth quarter and looking into calendar year 2024. >> you are assuming earnings expectations aren't too optimistic. >> that is definitely the case. however, what we are hearing from a lot of these companies is the guidance continues to be decent. we have had outliers like oracle recently reported cloud growth slowing a little bit. that being said, the forward earnings for a lot of these tech companies, large cap tech specifically have seen their shares gotten cheaper as earnings estimates have gotten higher. for that reason we think the hurdle for companies to beat is lower going forward >> i hear you. some would suggest, yes, but they're still over priced, over valued. right? valuations that were really ridiculous in some of these names have come in but still have more room to go.

how do you counter that? >> you have to pick and choose. your names between the large cap tech stocks, there are some that have i would say from an historic perspective are trading at two to three standard deviations above historical averages and certainly names like nvidia come to mind. having said that there are names like adobe which is reporting earnings in the next few days selling below historical averages growing earnings double digits. i think you have to pick and choose between large cap tech names and there are still values to be found. >> on that note are you suggesting then that the megacap names are still over valued? >> relative to the historical valuations i would say they're elevated but if we do see the earnings growth come to fruition as we expect i think the valuations are roughly in line with where they should be. >> let's just take a name like

apple for example. that is well above its ten-year historical average and what is it, 29 times forward? somewhere around there. what about the stock? you own it. there are questions about, you know, the growth rate at this point and there are questions about the valuation so how do you tackle both? >> so apple is a good example of a company that has been selling at a premium but i think selling at a premium for good reason. one historically they've been able to grow their earnings very consistently. i think the reason why the shares have been down at least on the product launch is, one, the product was, the iphone 15 is more evolutionary than revolutionary but as i look into 2024 and into some of the early specs, rumors going into iphone 16 that is the even numbers for the iphone refresh tend to be the strongest. iphone 4, iphone 6 actually the

best selling iphone so we expect iphone 16 looking a little forward to do quite well and that investors are going to start looking at those earnings growth numbers rather than just this year's. >> you think the nasdaq as a whole can stabilize if you want to use that word without apple? or does it need it just by simple math? trillion dollars of market cap? >> certainly an important component in the overall index for the nasdaq. having said that if you look at the five-year pe ratio for just the s&p, with apple being the largest component in there it is now slightly below the average pe ratio of the last five years despite the fact you had some of the large cap tech companies at a higher valuation than historic. so overall we think the market doesn't look too expensive even with the nasdaq and the s&p 500 >> i want to ask you one more

thing about apple because it is sticky with me. this idea that the phone, the new phone launch wasn't as great because it was in your words evolutionary not revolutionary. haven't all of their phone launches been exactly that and that is good enough just being evolutionary? it is not like they're reinventing the phone each time. they just continue to evolve in a way that they cause a big upgrade cycle among what is without question the most powerful installed base in the history of consumer electronics. >> right. it will continue to be for the foreseeable future. i think what is going to be the catalyst for the next revolutionary iphone is the number of technology that is going to be embedded in that phone. the iphone 15 is very good but

it is more as we just discussed evolutionary that the internals of the phone are a little better. a lot of the newer technologies we think are going to be installed into the new iterations so for that reason i think the catalyst for new phone upgrades will be much greater going into 2024 of iphone 16 than say iphone 15 >> i don't even mean it as a knock. it is a simple fact. they are not necessarily first but just had the knack for being better than the products they've already brought to market to the degree they have this massive installed base. we'll see. i appreciate your time as always. what is next for the fed? charles schwab, kevin gordon back breaking down his rate forecast after the high cpi print just after the break. register for cnbc's delivering alpha conference. i'll be there thwi can't miss interviews, september 28th, new

york city. the qr code is on your screen.

we are back. today's cpi report came in hotter than expected with inflation posting its biggest monthly increase of the year. my next guest says the report will cause the fed to keep another rate hike on the table in november. joining me now kevin gordon senior investment strategist at charles schwab. good to see you. it might not be the case but it really does nothing to upset the narrative of what investors have been saying or for that matter really what the fed thinks >> i think it keeps it on the table in november. i'm not sure it definitively pushes that in the direction of a hike because as of now if you were to just take the jobs report, most recent jobs report and the cpi report we got today i think there is enough cover actually in the jobs report to give the fed for holding it in september. if you don't get a continuation in some of the pops higher within the services category

this morning within cpi all of that combined i think would probably keep, you know, a pause in september maybe nothing in november. too soon to tell. you have a lot of data to get. >> do you think they're done or not? >> they could be. i am not sure one more hike matters as much when you were talking at the opening of the show it seemed to be a big debate. to us that is not as much the focus as what the fed signals from whenever they pause. >> i thought steve liesman made a good point earlier where he suggested that if they want to, they'd like to be done. >> yep. >> if they have to go in november, that is not a good sign. that means that it might not just be november because if they see inflation data progressing to the point next month that they feel like uh-oh. it's over heating again, one might not be enough. >> that is the tough part because if you look at actually all of the disinflation progress so far or the disinflation we've seen, most of that's been driven on the good side not as much on

the services side. given you've made that round trip with goods and it looked relatively transitory. i know that is a bad word but the good side looked transitory, services has been taking much longer to come down even if you take out the shelter component. if there was a little bit of an uptick in goods, services took a lot longer to come down, the fed somehow felt they needed to adjust for that all wrapped in under this umbrella of a tighter labor market, you know, and the good news for august was you had a little bit of labor supply come back. there was a large boost. that is why the unemployment rate came back up. but if you still have relative tightness in the labor market and you have inflation hanging in there, then they probably would be convinced they just have to be a little more restrictive. >> how does the market look right now? seasonally obviously everybody knows who watches this that we are seasonally weak. we've been saying it a lot coming into the month. saying it a lot now that we are in the month. what does it mean? >> i don't pay as much attention to seasonals as to focus on the back drop of this. in particular for this market just yesterday 11 months off the

low from last october i still find it remarkable that the banks are still down. that you haven't had any participation from small cap, so to suggest that from here you can continue to do remarkably well across the market spectrum as you move down the cap spectrum it is a harder argument to make because as of now the september broadening out looked to be like a head fake and particularly i will say one good thing at least is it has not shifted back into just the megacap trade. you haven't gone back to what you saw in the may/june period where you had at one point a record percentage of companies under performing the broader benchmark. all the leadership has changed into the energy sector. at some point you have to start seeing more of a convincing, broadening out especially within breadth metrics like percentages of stocks moving above their 15 day, 200 day. throughout the summer and end of summer it has not looked very good at all. >> yesterday the b of a had their fund manager survey where

it was overweight u.s. stocks in the survey for the first time in like 18 months. >> yeah. >> emerging markets had taken a tick lower in the same in the same questioning. what do you make of that? >> it is probably in keeping with the growth differential that seems to be emerging between the u.s. and the rest of the world. if you separate the rest of the world into blocs of eurozone and china clearly china hasn't been nearly as exciting as people thought it would be this year. that is mostly known. on the euro side you have heavy contractionary data in germany. that is starting to spread throughout the rest of the area there. so, you know, even with the ecb still looking aggressive and you have a little bit of differential working that way in favor of the euro sersus the dollar i think dollar strength right now is more synonymous with the fact the u.s. just looks a little better than the rest of the world. >> so you'd want to be overweight u.s. stocks as well? >> no. i actually think in terms of u.s. vs. international the way we think about factors and taking a quality based approach and looking at characteristics

like strong cash, you know, lots of earning strength, profit margin, and revenue strength you can apply that across the world. it is not necessarily an overweight the u.s. versus non-u.s. because i think thinking too monl ithically that way can trip you up in this market whether focusing on a single country or going across the world. in generally think if the data continued to deteriorate in recessionary territory, true recessionary territory in the eurozone if that is the case, then you probably want to take a little bit more of a step back. >> but your call on stocks has no bearing on whether the fed is actually done or not? at some point you have to make a call. >> but i don't think anybody should be investing based on whether the fed is done. you go back in all of the tightening cycles and when the fed has been done and you look at market performance for u.s. stocks at least after that, there is an average but the problem with that is that there is a huge range. so the best, if you go 12 months after the fed has been done the best has been up 30% and the worst down 30%.

you can't make a call and say just because the fed is done stocks will rally. i've heard it a lot and that misses the analysis in my view of what the underlying picture is for the economy. >> every underlying picture is different and every underlying period. that is why i wouldn't look back at history to make any sort of suggestion. if you think they're done and the economy is largely hung in there and the next move is going to be cuts because inflation has come down enough while the economy has come in, why can't you make a call? >> it depends on why there are cuts. if there are gradual cuts because they see inflation continuing to roll over and that is going to put upper pressure on real rates, then yeah. keeping nominal rates steady or cutting a little bit and making it more surgical, that would make sense if real rates are staying at restricted territory. if they pivot right away to aggressive rate cuts history in that case is consistent with the economy and the labor market being in pretty bad shape. that at the outset is not good for risk assets and eventually gets you more into the carnage area where sentiment gets dower and it provides the good buying

opportunity for stocks. we are pretty far from that right now mostly given what you were talking about with kristen and she mentioned this rolling nature of recession we've been in. i think that as it continues to roll through now to some parts of services in the labor market probably keeps the push and pull fits and starts part of the market or theme for the market in play. >> see you soon. >> thanks a lot. >> thank you. up next double dose of biotech movers. we'll tell you what is sending shares of moderna and rocket pharmaceuticals higher just after this break. later netflix nosedive. what is weighing on that stock? what it might mean for the rest of the streaming services just ahead. netflix down 5%.

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15 to go before the closing bell. a pair of biotech movers today. what is behind those moves? >> shares of moderna higher as the company says its experimental flu shot produces a strong immune response which could help moderna expand its portfolio. one analyst i spoke to worries the company's decision to focus on that metric alone instead of outright efficacy could make the shot a tough sell. especially since the vaccine produces more side effects than what people are used to. moderna says it is speaking with

regulators about bringing its flu shot to the u.s. market. check out this under the radar mover. shares of rocket pharmaceuticals are soaring the fda signing off on plans for a pivotal trial of an experimental gene therapy for danon disease a rare heart condition that affects nearly 30,000 people in the u.s. and europe. scott? >> thank you. last chance to weigh in on our question of the day. do you think the fed is done raising interest rates? the results just after break. xxxx

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two-thirds in fact. up next it is official arm day. we are counting you down to that cesk's pricing. itom in overtime tonight. don't miss that. we'll give you a rundown of what to expect just ahead. that and much more when we take you inside the "market zone." and invest accordingly. you can call us christmas eve at four o'clock in the morning. we're gonna always make sure that you have all of the financial tools and support to secure your financial future. that means a lot for my community and for every community. ♪

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that first time you take a step back. i made that. with your very own online store. i sold that. and you can manage it all in one place. i built this. and it was easy, with a partner that puts you first. godaddy. we are in the closing bell markets. mike santoli is here to break down crucial moments of the trading day. julia boorstin is here on netflix cfo comment weighing on the stock and big time. and looking ahead to arm's hotly anticipated ohio as well. mike going to you first i guess it was you i heard earlier suggest the reason the market is

hanging in there today even though the cpi was hotter than expected by a touch just doesn't upset the story or the narrative. >> not in a big way. it was roughly around expectations. i don't think there was really a lot of build up to this idea that we're going to get some kind of benign surprise today. but also it is really close to expectations and consensus all year on cpi. so yes. as an absence of a negative shock it doesn't mean it was a source of energy of relief or really something that says we have, you know, a new landscape here that means we want to jump into risk. i still think it is about fed probably done but more importantly the fed has not been the main character of the story all year. in my view it's been except to the extent they more or less moved aside and said we are largely done. we'll go slow if we do anything. i think you should keep in mind the fed's own published forecast, their outlook from june which they'll update next week doesn't have them getting to the 2% inflation target until

two years from now. >> 2025. >> it is not as if they are on, the clock is really ticking loudly for them to do it. they can kind of find their way. the bigger question is, look. if the bond market was okay with cpi and it was stock market won't freak out about it. >> the biggest point, i think you made this earlier, too, until the earnings have troughed story is upset, we're all right. if you mess that up, yeah. >> we're all right. i think it is a split market because even the source of the upside in earnings going into next year is relatively narrow at this point. that is why today a little fatigue. 3m not saying great things about the outlook next year for them. the airline. a general sense of we're still in some is suspense as to wlt economy and consume kearn handle rates at this level. it's already been done. the real upside way of viewing it, the positive way, is we had a 5% gdp economy in july.

it doesn't hurt to have a lot of head winds collide with the 5% momentum if it is in the form of higher rates, gasoline prices, student loan repayments. all of the stuff we're talking about if that just creates a nice goldilocks scenario that is fine. if it means those things will weigh us down it is a problem for stocks. >> two stocks stick out like a sore thumb today. apple and the stock you are talking about netflix. what is going on? >> netflix shares down over 5% going into the close after the cfo spence newman warned the bank of america media conference that netflix' ad business is still in the very early stages and so far not material to the overall revenue of netflix' business. he said they'll have to build out the ad business over time and it is not easy to build an ad business from scratch. on the upside he did say they are nowhere near peak margins and the positive impact from cracking down on password sharing will be felt through

2024 but newman said spin-off accounts from the password sharing are skewing toward sign ups for the ad free option. that does have negative implications for the company's potential to build ad viewership and ad inventory. newman also shot down speculation that netflix could buy sports rights or other media assets and said it is hard to see the return on billions of dollars of investment in live sports. also he said there are more likely to build than to buy. that's been their trend over time. >> julia, thank you. just quickly to you, mike, depends through what prism you want to look at this netflix thing from 700 to when it got destroyed and then had to rip back. now you have to assess it. >> you do. >> taking all of that into consideration. >> part of the rip back was the sell side getting very excited from having to grow an ad business that was incremental revenue starting at zero. the street loves to be able to do that, say this is a new organic growth source. part of their commentary today is also, look.

average revenue per subscriber is a little muted because most of the growth is over seas. just a message of we are pretty fully penetrated here and we don't exactly have hypergrowth and we trade at 20 times enterprise value. we trade at adobe's multiple. not that much cheap thaern nvidia. pandemic times, so yeah. a little bit of a higher bar for things getting better at 400 bucks a share. >> all right. tomorrow all about arm. tell us. >> true. valuation of roughly $54 billion which is by the way less than we saw a month ago from soft bank. they wanted 54. you have anchor investors like nvidia, tsmc. it makes a good set up. there are some risks investors should be aware of. let's start with the basics. arm is a language used by developers. it is in 99% of cell phones and the standard blueprint for many

electronic devices. the company charges a licensing fee and also a royalty fee for every product that uses its chip designs. based on its prospectus the balance sheet shows more assets than liabilities, virtually no debt. no wonder all of the big time anchor investors like nvidia wanted in. but with that massive penetration raises questions about future growth especially since arm is so focused on the cell phone market and cpus not unite bic us to with large language models and the company also, these are some of the cons deriefs roughly 50% of the revenue from only five customers. that means concentration risk and a quarter from arm china which is an independent entity that operates in a black box. we have to trust it. there is also risk of open source platforms that could steal market share away. arm has the backing from large investors but should not be equated to just an ai play just

yet given exposure to cpi and smart phones. >> look forward to seeing you tomorrow. mike santoli if you are rooting for a return of capital markets and more ipos this better go well. >> it should. for all the reasons said, it is a special case just because it is not some untested company that really is going to require huge expectations for massive total addressable market assumptions and that stuff. you want to see the market receive it well. it seems like it probably will at least on the demand for the deal itself. then we see what follows it. you know, if it was an ai bubble, haven't been enough ipos to justify the idea it was a true, true bubble in full fledge rather than just a little sub theme that got people excited. >> five or six stocks going to declare a bubble it is harder to do. >> yeah. and only ten months as opposed to a couple years. that is the, you know, the generous way of looking at the environment right now. it is still again a winners and

losers market. weak breadth. you still have equal weight down 2% this month. >> small caps ugly too. something to keep an eye on as well. that does it for us. we'll look ahead to arm. you don't want to miss that and you don't have to because morgan and john pick it up right now. the score card on wall street. welcome to "closing bell overtime." i'm jon fortt with morgan brennan. ai leaders meet this hour in washington as the senate hosts its artificial intelligence forum. we will talk about the regulations that could come with former head of ai andrew ng. >> we'll break down today's hotter than expected inflation print hwan it means for the fed when joined by morgan stanley chief global