near me? google. >> it's the existential question for google search, that is certainly factors into it. that's what investors are fearful of. >> thank you very much. dow is down more than 600 days. >> it's not a good day. >> it's not horrible, but not a great start for september. we'll see you tomorrow. >> thank you for being here. "closing bell" starts now. ♪ guys, thanks so much. welcome to "closing bell." i'm scott wapner. the center of the action right now, the september start for stocks is not a good one, as the major averaging remain under pressure here. the scorecard with 60 minute to say go in regulation, dow is down by more than 600 points, but the big story is at the bottom of the list. it's tech, nasdaq down 3%,

nvidia and other tech names are trading sharply lower, and the other megacap names are as well. that's where the big laggards are down. alphabet down 3.%, if there's any strength, it's in the defensive areas of the market, staple, health care, utilities. that's the kind of day it's been. let's ask adam parker, the ceo of trivariant research. >> always good to be here. >> you've been warning us for weeks here. >> yeah. >> maybe the market was a little too optimistic. what is this about today? anything? you can't make a whole leap over one bay, but it's an ugly start to a typically bad month. >> i'm surprised it didn't happen a couple weeks ago.

i see a bigger than normal inconsistency. the fed, what's in the price is eight cuts in the next year. if we have eight cuts, i've got to assume economy is slowing, unemployment is rising, yet the earnings estimates haven't moved lower at all. i think you have to close the gap a little bit, so i think people come back in september, as we talked about, and they're going to get news that's probably that the consumer is slowing, that the data indicates the numbers have to come down some. i worry that everyone thinking september is going to be bad. >> eight cuts, doesn't it get you back to normal? >> it does, but why would you do that unless you get consistent data that things are slower. >> why don't you get back to normal? when you raise so much that the rate now, relative to inflation, i think most people would say

makes no sense. >> right. >> so they need to get it back to whatever level of normal. eight cuts, 25 apiece, that doesn't sound like a create amount of cuts. that doesn't mean the economy is so horrible, does it? >> i don't know what normal means. if we had this conversation ten years ago, we're just all disconnected from normal. i think most people are saying you fight the fed this time, because in the past when we've gotten 25 or 50 bips, we got incremental fiscal, and i think people are saying things are slowing, stocks are up a lot. i look at today, and it made sense to me. small caps are underperforming. we've talked about that like ten times. how does anyone think that small

comp caps can perform in a down trade. nvidia 140 to 98 to 125, the recovery was big. ultimately, i'm very bullish on the whole ai deployment, but i'm not surprised where when you get a question about cap ex, you get a bit of retrenchment. i don't think today is all that surp surprising. >> you think margins have peaked? >> yeah. >> are we at the begins of a earnings life. are we suggesting that earnings in the current cycle have peaked also? >> no, i don't think they have peaked. i think the market is ahead of the fed by a lot. i know i'm going to get stimulus. accelerate through 2025, and you're already willing to pay for some, not all, but some of that recovery, so to the extent you get afraid the recovery is muted, or things get worse

before they get better. we're still as 5500 and change, so it's not like one day corrects it all. i think, you know, we kind of said 10% of chance as well as down. i think health care is outperforming in a down day, and maybe i'm more bullish on health care than six, eight week ago. >> you're skewed more cautious, so the health care, staples, utilities -- >> yeah. >> -- the only areas of green today. >> right. >> and now health care has even got red. people would look at that and say those aren't exactly pillars of strength that you want to hang your hat on in this market. >> i'm mesmerized by health care right now. i took this course, ai for health care, i'm like, wildly optimistic about what could be

deployed over the next three to five years. i'm trying to think if it acts okay in a down tape, participating the up tape, and all of a sudden, you have a sector that's a leader for the next few years. there's no doubt -- we did our call this morning, first monday of the monday, you can't quite true up the fact that estimates of 15% growth, haven't come down in the last two months, when overall trends are slowing some. that is incongruity. >> pascarello, goldman sachs, i always cite thinks stuff. he said it feels like a long seven weeks from the fomc meeting to the november fomc, particular if the fed only goes 25 points in the opening salvo. the expectation is they're going to go 25 basis points unless they surprise people.

what are your thoughts on the notion, and then the election looming in 60-plus days. >> i'll make a generic statement. historically uncertainty was bat for stocks. if you're uncertain about the fed past, uncertain about the economy, uncertain about the election, you're uncertain about the market reaction to the outcomes in the election. that means maybe a slightly lower multiple until i get more clarity on the path. that might not be bad for stock pickers, but i don't think it means, hay next stop 6,000, the train left the stop, back up the truck. i think you see it with the growth winners, you have to sell some, trim some, and you're showing on the screen some of the ai plays, it's also in the

power side. so, i think the whole ai thing is taking a pause. >> when you talk about earnings, you lay out one of the key risks when you're worried about earnings to tech and com services. >> yeah. >> which is why you started for suggest, it feels like several weeks ago at this point, to maybe lighten up, not be overweight an already large group of the market? >> yeah. i mean, your outlook mid june, risk whether reward was more balanced. i was surprised about the august recovery, and now we're in a trading range. if you take out the profit, and look at the tech companies, and it's actually the highest it's been since 2011, so expectations for earnings are pretty high for tech. i think that probably means that

the relative achieve ability will be worse as we get through the octobersh so q3 expectations aren't as dramatic, but more than a normal hockey stick in q4. >> let's bring in brian and shannon. brian, you've been sitting here listening to adam. you want to agree? disagree? what do you think about where we are here. >> i think where we both agree, we've seen leading indicators of the economy that things will be slowing here a bit. it makes sense to be more defensive tactically in a slowdown. i actually would suggest we're starting to move towards better policy clarity than we've had in quite a while. if you think not that long ago we were dealing with 9.5 inflation, and the fed raising rates.

we're on the cusp of an easing cycle. if i was running a central bank, i would have eased earlier. the risk is, does this economy remain resilient. right now, basically everything you're seeing with regard to leading -- recession warnings signs are not flashing. leading indicators of the economy are slowing a bit, not collapsing, so it suggests a fairly resilient economy, but a slowdown,where investors getting more tactical. >> you would have done an insurance cut in july? >> yeah, i would have. to your earlier point. we're sitting at a 5.25 fed funds rate, where the preferred is 2.5%, when the ten-year treasury is below four. it doesn't make a sense to be this tight. of course, they're still focussing on an environment a year or two ago when inflation was significantly hot, but that

was the byproduct of a bizarre environment where we shut down the economy and didn't have enough on the shelves for a while. the economy is slowing, unemployment rate is picking up, and yeah, i would have been easing. >> shannon, i guess i want to jump off with you in a debate over where to be in this market. adam lays on the clearly his view about where he thinking you should be and where he thinking you shouldn't. he says, i don't understand the small caps idea, you've been arguing for broadening areas of the market, maybe small caps are part of that, too. are you having second thoughts about that? help us. >> no, we're not. i think, you know, scott, you and i have had this conversation very frequently, in terms of our view that we did think that

earning expectations for megacap tech and communication services, that they were a bit lofty. whether you want to look at valuation, which is certainly lofty, i think adam makes a good point, the vulnerability of the earnings estimates, they look more vulnerable than other parts of the market. you know, this barbell that i think a lot of people have on their portfolio, whether you have some semis on one side, health care on one size, and health care and reits on the other side, and the area that people are really not paying attention to. industrials is a hot topic, and adam and i have had conversations about this over the years about the opportunities in industrial, but really you're seeing alot of barbells, because investors are hesitant to not have thog positions in megacap tech, because every time we get a

sell-off, there's a lot of volume that comes back, we see the hockey stick, the sharp rebound and people don't want to miss it, but on the flip side, some of these estimates feel topi right now. so it comes back to, scott, what do you think is happening in the environment? do you think this noisy normalization, is enough to make you feel comfortable that this broadsening out, that this continue, albeit at a lower growth rate, or do you need to batten down the hatches and come completely over to the side of the defenses. i would argue some of the sectors that have been historically defensive have run up based on other trends like ai, so it's difficult to kind of -- to execute a true defensive trade in this market market, and i think that's why

you're seek the whip defend sawing in the volume. >> shannon has made the case you want to be in the others, including small caps? >> yeah. look, if i said here one of the themes going above gdp pretty much with certainly over the next year, we'll list them out of. ai, industrials, housing, life sciences. those are going to work. the problem is if i only own ai, semis and power, my whole portfolio is crushed. so i agree with shannon, you have to be barbelled somehow. i'm going to have days where some stuff is down, others is hanging in. >> i don't like the financials, that they have led -- >> yeah, i'm confused -- maybe i'm too old, but what rate environment is good to banks?

explain to me that. >> what about a normal vin? >> yeah, normal environment banks underperform. i need to believe in activity. none of their core businesses are great. i think after it rally, they're not that cheap on tangible relative -- so, yeah, to me that's an example. i lie industrials more, but i think there's things in there thematically that make more sense to me. i would rather own that. >> brian? >> i think the big debate, when you normalize the yield curve, it can lead to a broadening out, but the challenge is, do you have a recession on the interim? when the yield curve resteepens, you have an economic event. the hope is, this time, and the

suggestions is this time you don't get it. what the leading indicators are saying, you want to be more defensive, up in quality, as the yield curve normalizes, as the economy picks up activity, you shift into the smaller caps, the cyclicals, but in the near term, we have a bit of a challenge. we're waiting for the fed to get going, and the leading indicators are clearly pointing in the wrong direction. >> i thought we were supposed to be bullish on the idea of a soft landing. now we are defining a soft landing, the economy is slowing from where it was, and the fed's going to start cutting, getting rates back to normal. why are we not supposed to be bullish on that idea? isn't that the definition of a soft landing? why are we hating what we wished for? >> we could be, but we had 18

monster months of equity performance, on the notion they were done hiking. so clearly the market is ahead of some level. i would argue growth has been slowing, so it's already to start paying for a big recovery in, say, the second half to me feels early, as it was bullish on the market. i'm with you you're going to want to own small caps when we get three months from the bottom of the cycle. my best guest is that's the second half of '25. in the interim i have high number, and volatility around the election and other things. i think it's early and i want to be neutral on the risk september through october. >> shannon, how do you respond to that? the things you recommend may very well work, but maybe now is

a little too early. we have to worry about the near-term effect of the economy, and the dynamics around the election may have changed slightly in the last six weeks, to say the least, so maybe we're too early for areas of the market you like. how would you rebut that? >> the rebuttal is that, you know, it's very difficult to capture the bottom of that trade. i don't think adam would disagree with me, to captured the right point. i think the big fear is, as it relates to the election, what you're most fearful of are really the two ends of the spectrum, in terms of the outcome. that seems less likely, whether it's a democratic sweep or, you know, particularly on that side,

that seems less likely than maybe a couple years ago. that sort of takes that concern off the table. we're really concerned about your concern about soft landing, is normalization the new transitory? the fed's raegsly hanging their hat on the fact this is all normal behavior, so in order to position for that inflection point, it's going to be difficult. the credit card delinquency is moderating. that could be the impetus to take on more of the cyclical exposure, and i would argue it's difficult to hit that point exactly, so positioned may for the second half of 2025, i think it's earlier for that.

>> shannon is probably not the only one that has this idea, the fed was incorrect at the beginning. they managed it in the middle okay, but here we're trying for the land and it maybe not be as smooth for the market as it's made up its mind to be. japan, of course, to today. >> and therein lies the risk. a soft landing, yes, to your points, it's still on the table. if you have an economic downturn, i still think markets will be higher in year two, three from now, because you will have had peak inflation, peak tightening. so it's really about how defensive do you need to be? one last point i want to make, we've talked a couple times about the election.

the reality is if biden was elected, 958 trading days ago, the market is up. so, i hear people all the time talk about the election, it can bring volatility. there's very little to suggest in our nation's history that the occupant of the white house has a significant impact on markets. >> it could impact tax policy -- >> could be. >> -- at a time when we're debating the impact, and some people are worries about the impact of the deficit. >> oh, sure. but when trump won -- my point is to say people caught up too much in this tend to miss what's going on, the direction of the economy, and what the fed will do. >> last word to you.

>> i never disagree with shannon, so i think a rebuttal is in the range of things that makes sense. he went to the university of michigan. he's obviously an intelligent guy. what i don't get is i don't think the fed has a plan. the uncertainly seems now different from the fed of the past. i'll focus on the perception about growth, the perception about growth is the worse than it was two months ago. that's my dennis miller, you know -- >> we'll leave it there. guys, take care. >> thank you. >> brian, shannon, and of course, adam. pippa stevens has a look at the biggest names into the rough close. >> boeing shares are falling

after wells fargo's downgrade -- the firm said there should have been a free cash flow generational opportunity. and morgan stanley upgrades unity, noting after a rough year, the shares are down 60%. it's now in a position to capitalize on up sides for mobile and gaming. thank you, pitcha. we're just getting started. chris hyzy, we'll see what he thinking about the volatility. the vix is up. we'll discuss, with the dow down 600 points. you're watching "closing bell" on cnbc. your skin is ever-changing, take care of it with gold bond's age renew formulations

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we're in the midst of a bill sell-off todays as september begins. my next guest says markets will likely stay on edge through year end. chris myzy, good to see you. >> you too. >> what do you make of this? >> things happen so quickly. things are fine and something happens. >> are they still fine? >> oh, yeah. you look at the high-yield index, they hit highs in august. earnings are going back up and financial conditions are easy. it's not that simple, but i think people push that off to the side when you get days like in. >> adam parker was just suggesting that earnings may be going up and estimates are not realistic. what do you think?

>> maybe for some of the ones that carried the market before, but the other 493 or so, we're starting to see different. we're seeing earnings go up and broaden out. now you're starting to see it in an absolute manner. next year, adam could be right, where you see a slowdown in left of growth. >> isn't that a problem, though. if you agree that earnings are going to likely come down for the largest part of the market, while at the same time you're suggesting that all of these other areas are going to continue go go up at the same time that the economy is decelerating, how does that make sense? >> the economy is decelerating, but i would put it more or less and say it's marching toward normal. >> it's still slowing. >> and that's actually a pretty good thing overall, when you think about where we were in overall real and nominal gdp. so coming down, broadening out,

i would say it's healthy. you don't want a corner of the market driving things automatic time. i would argue overall, heading into next year, returns mike lower on an annual basis, but deeper. >> i think it's healthy that things like staple, health care, if not leading, are doll quite well. that's not typically the makeup of what we would discuss being a healthy market? >> you're right, you're right. that's a short-term move toward hedging some of your excessive beta, perhaps. longer-term investors may want that lower -- but actually, the next eight weeks should be a

prime opportunity to rebalance your portfolio, and let the market activity go in your favor. >> the next eight weeks, let's take that time period. we're going to be whipsawed by data, fed meetings, these other areas, you're going to rely on the areas of the market at the same time we have all of that, and we're worried about a slowdown and an election at the end of these eight weeks? >> it depends on whether or not you're looking at just the next eight weeks and you're going to stop, or if you're going to position those next weeks, which we think technicaling could at the time you although 5% to the down side -- >> you're willing to be early? >> and prescriptively. use your discipline, make the

emotion out, as they march toward a dehumidifying type of atmosphere. you don't create enough dryness where you see cracks. >> you say the consumeris stable, so do you like discretionary as a staple? >> we're seeing consistency, but not a pullback. what is most interesting to us is financials the fed is just going to play catch-up now. that could uppin a tailwind to the financials. >> i'm getting you and adam parker together. it feels like you disagree on every viewpoint. he doesn't like the financials. i said, what happens in a normal environment? >> he says, they don't do well. they've been leading the market

since the august 5th low, but rates are coming down, the economy will be slower, why is that good for how banks make money? >> because the way the traditional financials made money yesteryear is not the same as today. it's a very different movement going on, better capital levels, actually be able to take an m&a cycle. you can't look at the past from a yield curve perspective and say that will happened in the future. there's a lot of different makeups going on right now, that many people haven't seen before. one thing hasn't changed. when the earnings are stable, that's a good market. >> so don't fight the fed. i've had some people suggesting sell the first rate cut. >> that's okay, but what happens when the rally happens next

jeer? >> hyzy versus parker, coming to this set. mark it off, folks. coming up, warren pies is flagging in key buying opportunities in the dip today. we'll break it all down, next. but all you did was plug it in, you didn't do anything neither did you exactly exactly exactly exactly impressed? honestly, a little exactly (slurp)

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.. we are back. the market is starting off

september on a sour note. the major averages are at their lows of the week. welcome back, warren. >> i think today is about and really what we'll hear about over the next couple months are the headline risks. i've listened to the last hour of programming, and everybody says the same thing, which i agree with. the next eight weeks are a tough period of time. seasonal september, obviously the election is a big deal. fed quits. neverousness nervousness around the economy, so basically is the economy going into a recession or not?

if we're not going into a recession, i think you look for this weak opportunity seasonally to buy in if you're underweight. if you think for some reason the economy is going into a recession, obviously you need to play defense. that's our view, we're not going into recession. >> but earnings expectations going forward can still be too optimistic even in that environment, wouldn't you agree? >> yeah, i mean, i think there's a decent amount priced in, and we have seen that consistently over the years, where you get a boldness in the future priced in. each quarter you go through, and the countries have to either talk you up or down, but we've

soon a hockey stick up in earnings here. the expectations were high, but under a soft landing scenario, if you think the fed will support this economy, i think the earnings estimates, while aggressive, odds are we hit those out of a recession. >> i just want to note, the dow is now down by 700. we're at the lows of the session, which we know is a seasonally bad time. what areas would you lean into? >> well, i think it's a process of elimination. so number one, we're late cycle. even though i think the soft landing is the base case, the risk you have to control for is the economy is weaker than we

anticipate. i've seen people go to an early cycle playbook, which i still don't get. the big small-cap rally, we have been fading that. i would avoid small caps, avoid cycl cyclicals. i think i would expect the ten-year to fall further, so i think as you get days like this where high-quality tech is selling off, i think you're buying that dip in high-quality tech. avoid low quality, lean into high quality. that would be a playbuy. >> when you say lean into high quality, and the megacaps are at the top of that list, things like, wow -- let's throw up an intraday, if we could of nvidia. it's down 10%. a lot of these chip names, it's nvidia, amd down almost eight,

broadcom is down, as we speak, by more than six. applied materials, taiwan semi about the same amount. micron down 7.5%, would you go as far as suggest the chip stocks, which were underperforming pretty dramatically relative to some of these other tech stocks? >> it's a dicey area of the market, but i think so. no guts, no glory. i think there are select areas, in our fund -- we don't own nvidia, but some chip-adjacent stocks are starting to to look attractive. we've been off the mag 6 train for really during the q2 part of the week, but i think there's some opportunities. if you're going to look to deploy capital, mag 7 is significantly below its midyear

hides, and we've had that rotation which has been successful, but if you're going to see a falter in that area, it should accrues to the hyper scalers. they can't just all fall apart. i think this is a correction, and those are some of the neighborhoods i would be shopping in. >> utilities, health care, you talked about the expectations that yields are going to come down, and you mentioned yield plays. are we talking about that? >> yeah. i mean, i think the utilities, real estate, health care, staples, those are good places to hide out during this, say, eight-week period that everybody is afraid of. we've been overweight bonds since july 5th. you see yields really fall in anticipate. that's going to power this area. we have this kind of

traditionally defensive leadership going on, that this signals something for the economy, and to me, this is really just rates. a rates sensitivity story, and people are reading too deeply into it. with that said, we're positive on the economy going out. i think you can do well in those pockets, defensive pockets over the next eight weeks or so, and you're just rotating as those stocks really out of those stocks and more economically sensitive areas that we discussed. >> warren, i appreciate your time as always. thank you. up next, tracking the biggest movers into this ugly close. pippa? >> vice president harris weighing in on the potential materials merger. the names to watch, coming up next.

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less than 15 from the closing bell. pippa has more stocks she's watching. >> micro shares are in the green after the ceo charles lang issued a letter saying the claims were misleading, as well as a delayed annual report filing. shares of u.s. steel are filing after vice president

harris opposed the plan of the sale to nippon steel. in a labor day rally in pittsburgh, appearing alongside joe biden, the shares down 6%. still ahead, chip makers are sinks, as well. intel is leading the dow lower. "closing bell" is coming right back.

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call the number on your screen. coventry direct, redefining insurance. we're in the "closing bell" market zone. mike santoli is here to break down the crucial parts of the day. >> mike, one day does that a -- >> trying to fit all weakness we're expected to see in september into a single day.

we kind of had a growth share all of that stuff filled in the august 5th low. the economy declined today. >> walmart earnings, weekly claims, great. >> the soft landing is constant doubts.

>> i also think the rotation failed today. even though down, they're outperforming. we were concerned with a while ago. there was also the back the mind sense that you don't get a spike in the vix, and then not have a bit of an aftershock. we're up to 20, but we're on alert for something like that. all of that is where i sort of see things, sort of set up by the super mechanical leave station at the end of friday's trading. it seems to make things loser.

we had convinced ourselves that the japanese central bank had gotten the message we didn't have to worry about that issue anymore. maybe that's true, but to your point we're going to be constantly reminded about different swings in the economic data. >> obviously that was sort of gratified don't know if weed get that. the earnings, as you were talking about have mostly held up, but look, there's no constitutional right to trade a -- if things aren't perfect. i think that's why you see some of the chop there.

>> there's just a lot swirling around. >>. seema, semiconductors we have highlighted all day long, but it is one of the biggest, if not the biggest drags on the dow today. to zoom out here, the worst performers right now. itches looking at a chart of nvidia, now down about 15% when it reported second quarter earnings last wednesday. some of is peers in the space are down as well, this as the market awaits earnings from broadcom this thursday. yes, intel out with a new windows pc chip, 30% faster than the previous generation. the stock didn't move on that announcements. investors continue to debate what a restructuring could look like. bernstein is less positive on

the sale. he's sticking with a $25 price target. what's on the table is a specific sale of altera, as it's telling down its stake, a short list will be at the board meeting this month, so time is of the essence. that stock price target for bernstein is $25 a share. the stock currently trading at 20, scott. >> seema, thank you. i appreciate that. deirdre, what is going on with alphabet today? all of these megacap stocks are lower, whether it's it's nvidia, ap apple, et cetera, but this one is off more than the others. >> catalyst was it 205 in it.

they concluded that long-term uncertainty will keep it range bound. that said, the req latory pressure is only set to increase for google, yes, but some of the others also, into the fall. this has been weighing on google's multiple the larger fear here is antitrust pressure will weigh on google, and this speak to say mike's point from just a few moments ago. we haven't resolved that question. are we going to see the monetization of ai? that's what's dragging a lot of the megacap.

we have 90 seconds. a lot of these sectors closely tied to the economy are down almost the same amounts you get mize drift. >> absolutely. the defensive turn, the non-cyclicals have definitely been support. i know warren pies tas talking t how that's a rate play, and that's true. sure, megacap tech cause dominating the first half, but you also have cyclicals over defensive. now cyclicals and defensives have gotten more wobbly. it could be a phase, we have a bit of a reset. i don't think we're selling off that "wall street journal" was screaming about how everybody is bullish on stocks, but i don't think that hurts. frankly, i don't think that retail is over its skis as it was in 2021, or anything like that.

it's all in the move. we came back to work, realizing that not every single think has been solved. we've had many of these days, new closing high for the dow. [ bell ringing ] i'll see you tome. we go as to "closing bell" overtime. the bell marks the end of regulation. good thin, van guard ringing the closing bell. and weak manufacturing data helping to send stocks sharply lower to start this shortened trading week. nvidia falling more than 9%, nasdaq shedding more than 3%. welcome to