shattered numbers t. the highest ever for an "r" rated film. >> i have not seen it, but we own disney, and also international. you never know. these are the surprises that can happen. serat, thank you for the great day. thank you. "closing bell" starts right now. >> kell, thanks so much. we will ask our experts what is really at stake this week. in the midst of just an incredible year. it's a bit modest now, all

higher ahead of their results, and they're trying to hold on to the gains. three straight weeks, the rotation trade -- it takes us to our talk of the tape, the state of megacap trade. he joins me now. welcome back. it's good to see you. given your holdings, it's not surprising, but i saw that. is that true? we're having a nice year. more importantly, i think things are setting up well for technology investors in the coming year.

>> some were wonders if that's the case, if this trade is now in trouble. how would you address that? >> we've all been doing this a long time. it's very typical for summer. we've a bit of a shatter correction here in the last month in the semiconductor universe, and some of the other large-cap tech companies. so it's norm at to see a pullback. >> i think it's healthy, you know, helps to keep things in check even though we think it's at the biggest investment cycle. we're excited about what's coming forward. >> is there a limit of sorts,

though, to the investment you are willing to accept? it seems as though one of the key questions that's in the market here. >> sure. i think you need to remember the biggest spenders in ai today, microsoft, google meta, these are some of the most profitable company in the world. they're also very disciplined. they have the capital. they understand they need to be at the leading edge of the next technology revolution, which i don't think you'll fid too many that will say it's something other than ai. they know they have to stay ahead of the curve inch eye

specially as people saw. i think it's interesting, if you look at morgan stanley's numbers, software ownership is at an eight-year low i think there's a lot of people leading back in the software investing. you know leaning somewhere forward, i think there's a healthy amount of skepticism the forward p/e is about 29 times, it's a touch less than 20.

so, when people say, well, the stocks have done a lot how do you justify that move, and even if it expands further, what would you say? >> i think the return on capital those that are spending the most on ai, if you look at that group of companies, i don't think you'll see the multiple be up as much as you are saying they are. we own about a market multiple for the nasdaq. you know, we see a lot of tailwinds coming in the next year, you know, so we're pretty comfortable with where we are. what are the multiples today versus when things got offtrack.

that was a whole different story. there's a talk track that some technology investors and generalists look the at technology say this is over time, we're in double territory you know, where we were when things broke down in tech, they were way higher than where we are today. so we're have a midsummer correction, totally normal. >> are you inferring that you well, it's just the summer, that it doesn't have the staying power that some would like to believe? >> i'm not betting on it. >> really? >> even in the face of expected rate cuts?

we might very well get the table said and perhaps expectations that it's going to continue to come down as well, those are two catalysts in and of itself? those are among the most in the world. we're very favorable on tsmc, for instance when i look at your average russell 2000 stock, especially the lower half of those stocks, i just don't see

companies leading in the next generation of technology. they're not the companies that are driving new solutions, that are bringing software, that actually helps customers make the decision, run their bit better, we don't see that. >> what i suggested might be able to come this week from the fed chair, is that along the lines that you're thinking about? do you expect that to happen? >> we do, yeah. i think there's enough signs that the consumer spending is softening. you know, customers are getting -- consumers are getting pickier at retail, looking for more deals. i think that the bennett large-cap tech as well.

how cuts do you expect this year? >> that's not my cup of tea. i'm a fundamental investor in technology. >> if you think we're going to get more than one in september, does that make you even more bullish on growth as a sector? >> when i'm talking to people that are in the know around what google is doing on cap ex, meta, amazon, oracle, tesla, and how reliant they are on gpus going forward. they're pushing forward on building the largest supercomputers ever built in our history. that's what make mess bullish.

wow suggesting you like them all, obviously you do. but which one do you think knocks them out of the park, if any do that this week? >> i'm not sure. i have a strong view on this quarter's earnings. i think meta has been on a heck of a good run and, you know, so i expect them to do well. amazon i think is still under-appreciated, the power of aws and the earnings power. this is a massive company, just the hosting side of amazon. it has high 20s, operating margins, and, you know, i think there was some that were investors, i think that's been proven to be wrong, so i sigh

those as great the company -- you not in that grouping, but intel, globalfoundries, i think those are companies we think -- there's been a bit of a push, okay, if we're going to onshore more of the industry -- i don't agree with that point of view. >> you have a long/short fund s. >> thank for you your time. >> great to see you. >> be well. dan greenhouse here. good to to see you. you heard glen of the rotation trade, i'm not betting on it. do you agree?

>> full disclosure for the audience, i'm biased. as i've said repeatedly, soloist -- it would be official. we invest in a lot of smaller companies that are way outside of the mag 7. that said, with that caveat, yeah, i think there's a bit of something here. you have just an valuation gap, and ultimatably you wouldn't have so much concentration. >> why do you think the here is here? what is it based on? >> look no further than what happened on the 11th with the cpi. it's the over-estimate, the concern about the return, but since the cpi and the idea that

rates will be coming down, what's done best since then? builders, managed care, a whole bunch of industry and sectors that are not tech. so, you have seen this rotation, the proximate cause of this -- >> so, you think that has staying power? i mean, do you expect the chair on wednesday does what people think he might do, and basically lead the market to believe that, yeah, we're cutting, and we're probably doing it in september? >> is he going to endorse within as soon as september? probably not, but will he lean strongly in that direction? >> what does that mean? he's not going to come out and say, just to let you know, we're cutting in september. >> sure.

>> but you know what i'm sort of suggesting, that he's going to make it clear that the variables are in place for him to do that. >> yes. >> inflation has been coming down, now the bias has shifted. >> the return much the mandate. i don't mean to aany official comes out and says yes, we're cutting next meetings, but there are degrees to this when you follow the language. i think they'll come pretty close to strongly signaling that a rate cut will happen in the fall. >> it is suggested that this is where the trend is. it is one of the biggest technological advancements of our time. >> agreed he suggests, how can you not intend if you need to ramp up for this ever-changing

technology? how do you address that? >> listen, with the caveat that we're not large tech investors, it seems there are two overriding techors. one there's over-investment, and some have corroborated the idea we'll have to overbuild in order to fall behind on that front, i must be missing something. on the call, sundar pichai said, quote, year to date for our solutions for cloud customers, we have already generated billions in revenue, being used by more than 2 million developers. my eyes have gone. i apologize. on the call, google told me they're building in revenue, is

that sufficient to justify the level of cap ex expenditures? i don't know. i'll leave that to large cap ex investors. >> so why should people move into -- >> i don't mean to suggest -- those names are not bad names. the question of rely activity comes into play here, do i find -- if my benchmark is the s&p 500 and i have to be cross-invested across sectors, you have no choice. >> but are you suggesting you'll get relatively outperformance over the final months of the year versus tech? >> here's what i will say. we think the names we are looking at, which again are mid but small you are names, meaning -- and none of them,

again, are large cap. >> do you feel comfortable that you can rely or count on the earnings from those companies to live up to what they need to do to adjust the fact that the rotation could happen. >> absolutely, yes. some of the names we're vesseled in are consumer-focused names. >> do you feel good about that? there's questions about the con consumer. >> hold on. yes, there's questions about the lower-end consumer. that's gotten worse this quarter. i say this every quarter. my favorite thing to do is read the visa transcript. for the first time, last quarter, no problems at all, this quarter visa said we're starting to see something in the lower-end consumer. you hear that from tractor supply, from any number of companies. >> mcdonald's i. their commentary about the consumer wasn't great at all. >> the names we are invested are not solely weighted to the

lower-end consumer. but they have been doing fine, based on our check and company commentary, we've seen no case that the consumer is slowing at all. >> the three-week in a row run the russell has had, do you feel like it's legit? >> legit, beginning sustainable, three different questions. probably sustainable not in the short term. >> even with rate cuts. >> to the degree of outperformance in the short term here as stephanie was talking about on the halftime show, you basically erased the entire performance gap. >> look, look, up 9% in a point. i get your point. >> over the next 30, 60, 90 days even, that's probably going to balance out somewhat, but again, do i think as an invest offer,

not large-cap tech names, that i'll have better flows, yes, i do. that's not to suggest they're bad or -- >> you're putting owl 45 disclaimers. >> i'm not trying to get my compliance department not to fire me. breaking news out of the treasury, what do we know? >> scott, it's out with the latest borrows forecast. it's $106 billion lower than the earlier forecast, largely due to the reserve's moves last month officials say they expect to end the war with a balance of $850 billion. the treasury expects to borrow $565 billion in the third quarter of this year, roughly in line with previous fourth quarters, but some forecasters have noted how difficult it is

to make fourth quarter projections. even still, for both q3 and q4, the estimates are below expectations. that should come as a relief. we do have to wait until wednesday to hear the breakdown, but we know it anticipates to hold auction prices steady from previous quarters. >> megan, appreciate the update. we'll follow it. to pippa stevens now for a look at the biggest names moving into the closes. >> share of alibaba, following a bloom better report that the company plans to boost merchant fees, a basic software service fee of 0.6%, instead of the fixed amount it currently

charging. a by box office debut for "doddpeel & wolverine" it out paced analysts from 160 to 180 million, and saw a record opening weekend for an r-rated film. >> pippa, appreciate it. we're just getting started, up next, chris toomey is back with you. we'll find out what he's expecting from stocks in the months ahead, how he's advising his clients right now. you're watchi ing "closing bell" on cnbc. ♪ (alarm sound) ♪ amelia, turn off alarm. amelia, weather. 70 degrees and sunny today. amelia, unlock the door. i'm afraid i can't do that, jen. ♪ (suspenseful music) ♪ why not? did you forget something? ♪ (suspenseful music) ♪ my protein shake. the future isn't scary. not investing in it is.

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my next guest says expectations for megacap tech has gotten, quote, out of hasn't. joining me is chris toomey. welcome back. why is it out of hand? >> well, i don't know that it's necessarily out of hand we're about 73%. and it was time for a breather. the last time we sea a fair amount of complacency now, they

were being raised. seasonality period, particularly rusk markets don't do well. >> if you had this, i don't know, nasdaq is down, like, 7% from the high. over the last month, we have the russell, which is ripped. the dow is up near 4%. what is more representative, do you think about where stocks are going to go from here? >> to be honest, i think it's probably both. we saw mega-cap tech companies were way overbought, and many undersold. you can see the pullback, and shooting up. if you look at the dynamics now, some of those names are actually

oversold. some of those names that have been up are now overbought. you can see that with short sale reports, those are the names that are doing particularly well right now. >> i think expectations are probably too rich. p/e multi-wall is too rich. seeing these tech companies come down to earth is healthy, i think it's presenting an opportunity going into earnings where expectations aren't as high to actually start outperforming. you have a lot of names that have done well, the market has probably overexpend sayed for that growth, so you can see that last week with move megacap names that beat earnings, some of these names that had been ignored, where earnings haven't been great, those expectations

are pretty low, those are some opportunities to see the market spread out and do better. >> what does that mean? what word would you use to describe yourself? are you cautious? >> i'm definitely cautious. i think in this situation, earnings will be a key part to this. we expect kind of the monetary policies, basically trading along as we would expect better growth, normalizing it's the multiple coming in and stock selection right now. how do you use goldilocks and caution in the same sentence? >> the concern is that, you know, people kin to follow in trend? perpetuity until it gets overextended. still having a rotation, though. >> i don't necessarily see this as completely following through. with regard to small caps, the

trade is it's starting to do well, we'll get rate cuts, but that doesn't necessarily mean it will be great for all small-cap companies. broadly speaking, they're not the place to be, but there's specific areas within small caps and one 493 that we think are opportunities we're taking advantage of some of these pullbacks and opportunities to invest selectively in these different markets. >> if rates continue to come in and thed for signals they're going to cut in september, you don't think money will come out of the cash equivalents into the equity market? >> i think what you'll probably start to see is a situation where, looking at these earnings, it's not going to be a solve everything. you have a situation where it's almost 40% of the russell 2000 is unprofitable and dependent on

the debt markets. you're also very dependent on the consumers. going just 25 basis points in september, that's like your curd card company saying we're taking your rates from 20% to 25%. >> it's not like russell is the only thing that's done well. that's obviously not the case. >> to my point, i think selective areas particularly i mean, industrials look attractive to us. they're under-appreciated, undervalued. there's an expectation that are lower, that we think they can benefit from, as well as the fact we are changing our relationship. we're in an environment where the fed is signaling, which could benefit them. what i think is misunderstood, i think when the fed starts cutting, the expectation is that

benefits smaller caps, but in reality it benefits large caps. when the fed is cutting, typically it's too late and something bad has happened. >> maybe that's not the case this time? >> remember, we're in a situation where we're pressing the gas, and the brakes. it's tough to drive the car when you do that. the expectation is we're going to easily land this as being priced in the market, and in our view, that's something you need to ask for. >> there's still a fair amount of skepticism in the market overall. i know it's gone up a lot. >> if you look at strategists, they're all raising their numbers higher, they're chasing it, you know.

when, in reality, earns have been -- the p/e has been much greater, the reasonable they're only up about 5% is because earnings are not that exciting. in our minds, we want to see the market come back a little bit and select i have beenly start buys. >> when do you sit back and say, you know what? the goal posts have moved in a very significant way and this market is just going up. when the fed said they were hiking, the market couldn't get out of its own way? >> i think it's not necessarily a situation with regards to whether or not we think the economic environment is okay. i don't think the earning profile justifies the price. we have a where prices came back. we would be more excited with the names we have.

>> we're talking about a small number of stocks with an especially large weighting to the overall performance. >> let me put it this way. we think those names are probably expensive right now, maybe they could come back 10% to 15%. that being said, excellent businesses, excellent growth profile. what we also like is tons of cash and cash generation. they own 40% of the market cap, but only 6% of the investment grade, which means near not dependent on debt. if we see a situation of rates higher for longer, they'll continue to benefit. okay. chris toomey, good to see you again. >> good to see you. and up next, we'll talk about a regard stance with mark

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we are back, the federal reserve's two-day policy meeting kicks off tomorrow, set to release its decision on wednesday. our next guest is calling it the fed's pivot party. good to see you. >> good to see you, scott.

>> the fed has been everything, to you and your view of how the market has change d. >> the move they announced in december was massive. that's the price of money, and that determines everything we do. >> don't fight the fed? >> that's pretty simple. it can't be too complicated. the big picture, when the fed is not in your face, that's a good thing, let's go get the risk. it's been a good call. >> does he set the table for cuts in september? >> i hope so. it's prid in. it's all priced in now. >> yeah. all these valuations are betting on a september rate cut. if it doesn't happen, it's kind of upsetting, or even this week,

that would be upsetting. >> there's no reason to see anything we don't see. inflation has been coming down. labor market has softening, kind of getting everything they needed to have happen. >> yeah. >> when you say it's a good time for risk, where? >> you know, i'm a credit guy. credit has been good. the call was based on fundamentals, based on yields, based on liquidity. so this would price you, but the amount of distressed debt outstanding today is less than pre-covid. with all the people coming on, they're talking about their distressed funds, it's a little

dising di di dis -- spreads are title. leveraged loans are kind of in the 50%, but when you look at yields, the earnings yield in i.t. is better than the s&p yield. that doesn't happen very often. also, the yield on a lot of stuff we do is in the 80th, 90th percentile. if i can make 6% or 7%, i usually have to make risks, and now we can can make eight, and not a lot of risks. >> so you don't think we're going to have a recession. >> no, we don't see it. the gdp numbers, pce, even the consumer stuff is weakening from a pretty strong place. i don't see the recession anytime soon. people come on and talk about it, but i don't see it. so, we don't see that. liquidity, the last piece, has

been good. >> how many cuts do you think we'll get? >> that's a great question. one they start this, they need to be measured. the reason they're doing this, right is they see some cracks in the labor market, and they have done their job on inflation. one and done wouldn't seem to work that way. i think at some point we'll get two or three of these. 75, 100 basis points wouldn't surprise me. i think we would be in a recessionary environment if they went beyond something like that. >> or they do it because they have to. >> the economy and the labor market would be forcing it. >> how does a credit guy view the stock market day this latest

correction has been getting some attention from where we sit, so, the move has been pretty amazing. i'm trying to figure out where that's coming from. people talk about earnings, talk about rotations. the one place that i think that seems to make sense to me is what's happened with the yen. so onual 10th, 11th, the bank of japan probably intervened. we don't know, they won't tell you, but the yen has moved 5% from that date. that's the only big mac rho move that i have seen that would explain any of this. short yen/long tech has been a policy ullr, boring a yen to invest in any risk has been working great. so you move 5% in the end, in a three-week period, you'll take out a lot of those yen carry

trades. that seems to be kind of interesting to me. it seems early, too, because the amount of short sell in yen is pretty big. that forced selling could keep going. >> so you think that could have more pressure on performance of tech? >> it feels like it to me. i'm not a stock guy, but -- >> you can see something in one market, which has a cause and effect as you're suggesting it does, to another. >> exactly. the sort of volatility we have across a lot of things that were set. we thought the election was set. it's not set. we thought they would know what policy would be between these two candidates. that doesn't seem to be set. there's a lot of political volatility that the market has to deal with right now. and then we can talk about the whole debacle and potential for

that, but that seems to be getting worse and worse, and the bond market seems to not care. i hope it never cares. if it start to be care -- >> we get a respite today. the treasury said a short time ago, they'll borrow less, yields take a bit of a move lower. that means we need to talk more often. >> thanks for having me. >> mark okada from sycamore street. pippa stevens is back. >> two companies making big move post-earnings. all the details are coming up, next.

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we're less than 15 from the closing bell. pippa? >> it's jumping 12%. after the company beet expectations. it's the top performer, and second bestsh after a stronger than expected q2 earnings report and updated full-year guidance. still ahead, mcdonald's surprising pop today, jumping today. we're going to drill down on that, what's at stake for the

stock coming up. we're back right after this.

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...and full bed protection... trucks are totally covered. you just got weatherteched. yeah, buddy. let's get dirty. [bikes in mud.] drive worry free with these american made products at weathertech.com. we are in the "closing bell" market zone. indicate rogers joins -- phil lebeau on what sparking today's rally. we're here to break down the crucial moments of the trading day. kate, not such a great earnings report, what is happening? >> scott, i think a lot was forecast by executives previously. as for same-store sales, these also missed the market in every segment.

the ceo said the consumer slowdown was most pronounced with low-income consumers. while 93% of restaurants will extent the offer into august, management teams are thinking about tun the it. we have as affordable gap to close. that clearly speaking to upcoming decisions. scott? >> indicate rogers, thank you for that. phil lebeau, apparently investors listen. >> when you change your top pick, it used to be ford, now it's tesla. they say there's about a 40% up side. he gives a whole bench of reasons. three primary reasons, first of all, the cost cutting put in

place, the restructuring of the auto business and/or the ev business, that limits downside risk. they're days ago way more with consumer credits, and also managing their china exposure. one change in terms of how the street looks at tesla, in terms of annual delivers yesterday, it used been to the street was expected 1.82 million. no longer, the consensus is 1.79 million in that ends up being the actual number. finally. adam jonas points out the robo-taxi event, that dialed back the expectations, probably the prudent thing to do. it doesn't mean he's giving up on it. he just thing that people might have gotten too worked up. that's phil le bow. to sebastian page, good to see you.

staying power or not, that seems to be a good point of debate on today's program. >> yes, i think there's staying power for the rotation. if he look on the about 12 months, scott, i would rather play to value than in small. it's interesting. i've been following on "halftime report" and "closing bell," it's the star of the show neutral between small and large. where are you on the market ove

overall. >> the bears have been saying that for a year. >> i know, the bulls are saying earnings are coming up, rates are coming down so we're comfortable being neutral. >> even though -- you've been neutral for a wise. >> right now we're playing the rotation, we're long value. i would love to see the vix go into the 25, 30 range, and the market pull back. we haven't had a big pullback. in terms of valuations, 21 is

elevated by historical standards. the s&p is up 36% in two years, so, you know, i think we're due for a pullback, and these are the times we look to go long on stocks. >> sebastian, thank you. i'll see you tomorrow. i'm going to send it over to "overtime." the dow is lower because of 3m and caterpillar. we kick off one of the most consequentially weeks of the summer. winners stay late. welcome to "closing bell" overtime. >> a massive week, when check apiece.

>>