Heading into the 4th of July holiday, David Faber, Melissa Lee and Mike Santoli discussed what to make of big tech fueling the Nasdaq to a new all-time high. Microsoft, Apple and Amazon entered
Wednesday's trading session at record closing highs. Tesla shares continue to rebound in a big way one day after the EV maker's better-than-expected Q2 deliveries. The stock is closer to erasing its
steep losses for 2024. Paramount shares soared on M&A news: According to David’s sources, the company has reached a preliminary deal with Skydance. Also in focus: Ford Q2 auto sales, Southwest's "poison pill."
Marko Kolanovic reportedly out as J.P. Morgan Chief Market Strategist.
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Let's get to our roadmap this morning. It does begin with that big tech rally, Microsoft Apple, Amazon all at new all-time highs. Tesla also notching its longest-winning streak since last July. Plus, the Skydance Dance, it's back on with Paramount Cherry Redstone's now backing a deal. She previously rejected. We'll give you my latest reporting. That's just a few minutes. And Southwest Airlines adopting a poison pill to fend off activist Elliott management. Let's start with the markets though in record territory and new milestones for the tech sector. Great to have two of the greatest in terms of discussing the markets with me here on set. And yeah, you both of you. Oh, I mean, this is looking at who else besides her. No, no. Far from it, far from it. And so I just love to throw it over and get a sense, Mike, as to what your thoughts are given what we've seen so far this week. Don't seem to be taking a lead perhaps in the bond market as much as we have the last two days perhaps. Not as directly, although yesterday, the bond market sort of calmed down a little bit. Yields receded from the prior day's gain. It seemed to open the door. Yesterday's action was really slow in building. Late in the day, we got this rally. Yep, it was pretty much led by a handful of the mega caps. And what is interesting too is that the laggard among the mega caps get their turn. And that's what has been this story. Nvidia was down again yesterday and Amazon, which of course has broken through the $2 trillion market cap level, but has really done very little point to point for three and a half years or three years, let's say, and therefore has this catch up potential. And of course, Apple has gotten this little bit of a move too. And it's essentially been the formula. It's a very split market still. The S&P's up 6% since the end of the first quarter. The median stock and the S&P's down about 1% over that period. So you still have this critique that it's not fully in all-inclusive rally, although yesterday a little bit broader. Some sensitivity to signs of slowdown. Some sensitivity to signs that the continuing jobless claims today remain somewhat elevated. And it just creates this friction about is the Fed going to stay more patient than the investors can wait. You know, that's kind of the story. I mean, what we've heard in recent days from Fed officials is this concern about the tipping point where increasing joblessness will lead to a higher unemployment rate. We heard that from Mary Daly of San Francisco. We heard that from Jerome Powell yesterday in Cintra. And so there is that sort of worrying and that sort of playbook where you want to be a little bit more defensive. Do you still go to the, you know, the stalwarts in the market and that would be, of course, big tech? And you also have to wonder how much do politics have politics been playing into this whole thing? And I know that we're not political as a channel, but, you know, I know, seriously. But as, you know, more traders come around to the idea that there could be a Trump presidency in store and there is a prevailing sense that that would be better for the markets in general. I wonder if you then say, you know what, big tech has another sort of breath of air. Yeah. Although things haven't gone too badly over the last few years during the Biden presidency in terms of the markets and there was an impact. We were talking about it obviously in the bond market in the sense of a Trump presidency, which at this point certainly seems more likely than not conceivably would lead to even more spending, which at some point we could have a reckoning. And to me, that's where the trade has mostly been concentrated is in the bond market. I mean, gold is up. What I find interesting is the standard wisdom going into the initial Trump presidency was you were going to rotate away from the secular growth stocks and it was going to be about real economy and it was going to be, honestly, what the market picked up immediately after the 2016 election was we can have a higher nominal GDP economy. It can be a higher metabolism economy after slow growth, low inflation, because you were going to catalyze with the tax cuts and low regulation, catalyze domestic industry and consumption. And the market got there, but nothing worked to the disadvantage of tech along there. Yeah, banks did well for a while and domestic companies did well for a while with the corporate tax cut. But in general, everything comes back to, well, what are you going to do with these mega-cap companies that are basically nation states to themselves and have above average growth rates, impenetrable balance sheets, and not too many competitors? You know what I mean? So it doesn't seem like that's too susceptible to the policy question. To me, it was much more about the way it inflamed the fiscal concerns that are really just barely below the surface at any given moment in the bond market. Right. Yeah. Of course, that will continue to be the case. In fact, the unassailable position seemingly of some of those mega-cap is even more so now as a result of the cap expending and that they are undertaking, which is simply not something that any of these other companies are capable of doing in terms of forging the generative AI future. You know, it's hard to imagine in some ways that this is going to change regardless other than perhaps the regulatory threat under a Trump presidency would be lessened in terms of at least the DOJ coming after some of these companies and saying you're just too big and too powerful. Right. And their ability to then do deals. Think of all the deal making that has just been, you know, when you think about all these sort of startups, these AI startups, you think, who can take them over? Well, it's not going to be the big guys because the government will not allow that. But in a regime change, could the government allow it? You know, it is conceivable. Yeah. It's hard to know. But that's certainly, you know, when it comes to M&A, there is certainly an expectation perhaps that there will be an ability for more consolidation. I mean, it feels in general a little bit early to really lock into the policy trade, but you can't keep people from doing it. The market's going to try to anticipate there probably will be turns where it seems like the probability shift around. And you know, we remember that from last time where you had, you know, the tariff basket and the, you know, the tariff immune basket that would trade off against each other. You see solar stocks getting hit, things like that. Right. But beyond that, I think in general, market is kind of on its own steam in terms of earnings growth, getting where it's supposed to go, skewed toward the upper end. And then this question of whether the economy is softening in a beneficial way or in a way that we have to be more concerned with. Right. 4 trillion. We're going to get some companies going to have a 4 trillion market value before long. Yeah. I mean, we're still at least what? A 25% move from there, I guess? Yeah. They're abouts. You know, so I don't like to-- But Nvidia went from 2 to 3 trillion in how many trading days? Yeah. It was like a month or something. The point of an eye, basically. Yeah. Incredible. Yeah. Great. All right. All right. All right. All right. I'm going to go ahead. All right. Yeah. All right. Let's go ahead. All right. Let's go ahead. Let's go ahead. Let's go ahead. All right. All right. Let's go ahead. All right. All right. Let's go ahead. All right. Let's go ahead. All right. All right. Let's go ahead. re-approached over these last couple of weeks. Also a lot of conversation is my understanding with with Sherry Sun Tyler as well and they got to a new agreement very similar to the old agreement in fact when it comes to the common shareholders who are probably watching right now nothing really changes. The only change was the addition of a roughly a hundred million dollars in terms of what they were willing to pay for NAI that is National Amism, it's for tolls of control stake and the addition of another hundred million towards potential indemnity and demifying Sherry Redstone if there is any litigation that arises from the transaction and should there be some sort of liability. So two hundred million more remember my reporting from some time back where I talked about the fact they took two hundred million out to give more to the common shareholders so they in a many ways restored that at least a hundred million for the equity and then as I said that hundred million in the indemnity fund if you want to call it that that was enough for a transaction to be fair that this Redstone had supported throughout into the last couple of weeks when they were getting very close to the finish line a handful of weeks ago and so the expectation at this point at least according to people familiar with the situation is they will get a deal done by the weekend could be as soon as Friday we'll see the special committee of the board of directors now has it they will obviously be once again reviewing as they said that the terms are essentially exactly the same as I'd reported them some time back 15 bucks for 50% of the stock so that's a premium obviously the A shares also getting some of them getting taken out a billion and a half added to the balance sheet as well and so you're talking about Larry Ellison and Skydance and Redbird spending close to eight billion dollars in equity to take control of paramount half of which will still remain out there once the deal closes but you will get a liquidity opportunity if you are a common shareholder at a premium so basically Sherry gets more money and so and so the deal looks like it's it's on better footing at this yes I mean it was a deal to be fair again that she had supported throughout it was a deal that she had brought to the special committee originally and said I want you guys to review this that was why it was so shocking that day when I joined you on on your show that there was that reversal at the last moment you know there was some emotion involved there they seem to have got past that there is expectations on all sides now all sides that they will get this transaction done but of course this is a challenged industry you're still gonna have a very long period of regulatory review in which the buying group is not really going to have the ability to affect change there so to speak and it's you got a three-headed office of the CEO bizarre you know there's no shortage of potential risk here it would seem there's going to be a ghost shop for 45 days that doesn't matter but there's certainly go on an ironclad contract I would assume if you are if you are paramount and that's what the special committee will be ironing at the reporting this week that maybe paramount is exploring some kind of a joint venture for its streaming business maybe with Warner Brothers Discovery was that kind of a in case we remain independent type thing or is there everything being explored that's a great question Mike and you know I it's possible that that kind of a thing will still move forward at least in terms of potential conversation but I'm not certain as to exactly what they're going to be willing at this management team now they're supposed to be independent to agree to that said they have a control shareholder who's selling and so she may say you can't do that right but there is going to be a need for that you know the the incoming team if if and when this deal gets done led by David Ellison with assist from our old boss Jeff shell as well as I've reported many times has a big plan a big plan for cost cutting a big plan for what they believe will ultimately be the ability to actually grow this company Oracle is going to be involved from a technology perspective I don't really know what that means and Larry Ellison is there behind it all a guy whose net worth went up on that day that Oracle's stock jumped on earnings yeah well more I think almost double what the equity check is here I think he went up his net worth he owns 41.69% of Oracle so you can do the math and so in many ways you know that is something that gives a lot of people comfort here in terms of the ability of paramount to to weather the coming storm that and their NFL contract at CBS which still has a long way to yeah that's true does this deal change in your view the media landscape in terms of how these streamers stack up against each other and their ability to withstand this very difficult streaming environment not necessarily and not until you start to see what they really do you know is there the possibility of a tie up with Max in some really significant way but we've all come back to the same conclusion which is a very difficult environment which be spending all that money where churn continues for some of these players and the question is to whether they'll ever get to a significant level of profitability including obviously the indebtedness both at paramount with 14 billion in debt and also a Warner Brothers discovery which has an enormous amount of debt on its own balance sheet our own company as well is under some pressure because of losses at Peacock also so this will continue to be an issue if there is an incoming Trump administration that looks more leniently on the ability these companies to get together perhaps that will change things because there is a belief that you do need consolidation and you need to do need global scale yeah global yeah all right coming up we're going to have a closer look at the rebound and Tesla shares this is the company aims to or the stockings to erase what were losses for the year that were very significant only a couple of weeks ago let's give you a look at futures we get started with trading here at the NYC remember shortened session we conclude trading for equities at 1 p.m. more squat in the streets straight ahead Walmart plus members save on meeting up with friends save on having them over for dinner with free delivery with no hidden fees or markups that's groceries plus napkins plus that vegetable chopper to make things a bit easier plus member save on gas to go meet them in their neck of the woods plus when you're 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second quarter since 2019 also hybrid sales up 56% EV sales up 61% I know some people will say well the EV numbers are coming off of a smaller base but this is critical for Ford and really for all of the automakers separate from Tesla because as they ramp EV production they want to see those sales continue to grow and so you see that in the second quarter with Ford again EV sales up 61% guys back to you EV sales up 61% I mean Phil can you piece it together and say that there is a there's been an inflection point an EV demand I'm not sure if it's an inflection point Melissa but we are not seeing the drop off in EV sales that was predicted in the first half of this year when things slowed down we said it other said it we said EV sales are going to continue to grow they're just not going to grow as quickly as in the past but that was interpreted by the broader market as oh here we go people are pulling back you're not going to buy EVs that's not the case you are seeing EV sales continue to grow but just at a slower pace I haven't gotten the full Q2 numbers Melissa but the expectation is that they're up 10 11% year over year and we're going to continue to see that here over the next year and a half as more models come into the markets and Phil I know you were kind of talking all day yesterday about Tesla's delivering numbers as well as this move in the stock which as always has a lot more behind it than the here and now in terms of sales but what do you think the market is sort of suggesting about Tesla's relative position in EV sales because it did seem as if the fragmentation this market had people wondering if Tesla you know we're still going to retain as much of an advantage I don't know if people are drawing the connections between maybe fewer you know EV credits or subsidies for the traditional automakers would net help Tesla or something like that down the road but what's the read on that well I think Dave when you or Mike I'm sorry when you take a look at what you're seeing with Tesla and the numbers yesterday one thing stands out the EV business while it is not growing as it has been in the past in fact year over year the sales were down what 4.8% the market in terms of the investors they are focused on the lower priced models that are supposedly coming in the first half of next year as well as the robo taxi and that's when you look at the EV part of Tesla's portfolio that's what I think investors are focused on so they are not necessarily focused on the pure EV sales for you and I alone they're looking at this next generation of lower priced models as well as what happens with EVs in a robo taxi world that Elon will be outlining on August 8th right August 8th July 23rd the reporting earnings so those are the two dates in which we may get it incremental or additional news so to speak right fell yeah and the July 23rd the July 23rd numbers David remember the big focus there is going to be what's been the pricing impact in China we know that they're they're definitely in a middle of a brutal price war with the Chinese EV companies and we'll get a better sense of that after the bell on the 23rd yeah well I was you know we talked yesterday about BYD's deliveries which are very unjust EVs as you made the point not not including hybrids which are very close to Tesla's at this point in terms of numbers they're nipping at their heels real close fill thank you fill the bow you coming up an area where some are seeing a buyer's market stay tuned to find out all about it let's give you another kid futures we got a at nine minutes before we get started with this shortened trading session here you can see not looking for much right now more of squawk in the street when we return imagine earning a degree that prepares you with real skills for the real world Capella University's programs teach skills relevant to your career so you can apply what you learn right away learn how Capella can make a difference in your life at Capella.edu Take a look at the S&P gainers as we get ready to begin trading we talked about paramount you can see constellation on there you like beer apparently a lot of other people do too more perhaps some wine and spirits these days 8% net sales increase 7.6% rise in shipment volumes of beer for constellation opening bell coming up don't forget you catch us anytime and anywhere follow the squawk in the street opening bell podcast J.P. Morgan chief market strategist and co-head of global research Marco Kalanovic is reportedly out Bloomberg is reporting that Kalanovic is leaving the firm after two challenging years he was one of Wall Street's most high-profile strategist Kalanovic was bullish in much of 2022 when the S&P dropped almost 20% then he turned bearish just as a stock market bottom missing last years almost 25% rally in the S&P as well as this year's first half double digit gains he's been at the firm for close to two decades yeah so it's been with quite a run just chief market strategist go yeah tough to miss those two calls though it's been fighting the market I had about like a 4200 S&P 500 target that's what J.P. Morgan's been carrying so that's you know 20% down from here on the other hand that would be like 16 17 times this year's earnings it wouldn't be some absurdly low valuation for the market I do think one thing that of just reading his work all the time he really fixated on first sticky inflation was was basically going to undercut market valuation now he's been more focused on things like the ISM and the manufacturing PMI type survey numbers which really have been a false negative signal for the overall economy and certainly the stock market for a while and then if you're a strategist and you don't sort of acknowledge the power of the big growth stocks and their ability to support the index and create earnings where they otherwise wouldn't it's been tough to keep up so you know I think net net everyone's you know it's going to be a rush to say this is a contrarian sell signal for the market we had the biggest bear on Wall Street carried out it happened in 1999 with Chuck Cloud at Merrill Lynch it's tough to make those calls because honestly it's never that perfect and you know it just seems as if there's just lots of push and pull it here we had this report of Mike Wilson at Morgan Stanley maybe getting a little bit sidelined at the firm but he's still there yeah he is although who has the greatest influence these days if any amongst strategists because Wilson obviously had a great call for a while on stocks being strong then reverse course incorrectly for quite some time is there anyone just I'm not you know it's no longer the days of the Chuck Cloud or the Abbie Joseph Cohen over Goldman Sachs when you sort of put them on a pedestal right now it's like we're in a world we're trying to just they change the forecast I think the really is among the people who do that job and its knowledge meant that the prediction of the index is kind of a fool's game and they're just trying to give you a color around the themes that matter in the market yeah I mean right to present some fact the United States Coast card during the honors the New York sector celebrating July 4th of course over the NASDAQ friends of firefighters and non-profit providing mental health services for the FD&1 all right I'll throw it over to both of you see if there's anything in particular in terms of the market and or particular stock that's gotten your attention as we just get get opened here we do have you know Tesla following through to the upside I would just point that out in terms of you know it's one of those things that sort of so many purposes obviously it's it's sentiment toward the EV cycle but it's also this sort of feeds off of that familiar energy in a time when NVIDIA is on the downswing these two stocks can't both kind of be in the lead in terms of the buzz and the momentum at the same time I mentioned earlier Tesla just nosing above its 200-day average so the trend is still down for Tesla but it's making your bid to have sort of this multi-day move and we got the hype started on the robot I mean the move has been pretty extraordinary I remember the stock being down as much as 30% for the year it's now down 5% 5% oh yeah so that's a 25% move in a very short amount of time very quick moves yeah some analysts are also saying that's you know as meme stock mania kicked up again with Lauren Kitty there are some correlation albeit loose with the move in Tesla in the in the big game that we recently but I think what's most interesting about the Tesla move yesterday in particular in the follow through today is that it's moving big on these vehicle numbers when the bull case squarely says vehicle is not the big part of the case on Musk right he said famously don't even own my stock if you care about that I'm about I'm about robo and about full self-driving and robots right and so if you're for instance and Adam Jonas of our Morgan Stanley's got a $310 price target $67 worth of that price target of 20% is the core auto business you move you're move of 7% 8% 9% 10% yesterday and today that's all based on this small part of the business and you have this other part which could be catalyzed you know in terms of 8/8 the robo taxi in terms of remove the socks I think that's sort of you know the anticipation surrounded your bull if that meant this for the core auto business which is a tiny part of our case then think of the upside when we get that yeah you have to have an awareness to of where it's been right so it was at one point a $400 stock it went into the S&P 500 I mentioned earlier in December of 2020 at two hundred and thirty one dollars a share Wow so it's kind of it's basically sideways since then a massive massive a couple thousand percent gain you know from low to high in a couple of years but but it has settled out around these levels yeah should point out though with a seven hundred and fifty billion dollar market value remember Elon Musk now yeah I think it's back to a 20% ownership when you include the recently approved compensation whatever we want to call 50 plus billion exercise the I would assume yeah I mean but you have to include it by the way you're all net worth so he's got to be topping the charts again so you were talking about Larry Ellison yeah earlier about yeah obviously he's Oracle state I mean you can't really find he isn't has a reportable stake in Tesla but I think he's might still own one percent that's a good point yeah one point something percent of the company yeah yeah Ellison is yeah it okay he's really rich by the way you mentioned the memes I mean the chewy thing with Ryan with sorry Warren Kitty earlier this week two hundred and forty three million dollars worth of stocks six point six percent I think it was yeah stock went down though right yeah I don't know where it is right now into it run up a bit into the actual disclosure on the dog on the dog right and it's down yet again yeah there it is you get a sense for it this week but yeah it's so it's the classic trading stat strategy of you know you buy the dog cartoon post and you sell the SEC filing that is a classic strategy I know if Kalan if Kalanavic had known that he might still have a job yes I'm watching shares of Eli Lilly divergence from Novo Nordisk in today's session yesterday of course both were under pressure on that USA Today op-ed penned by President Biden and Senator Bernie Sanders urging these drug companies to lower prices to end their greed that's a drug quote from that op-ed or we will end it for them but then Lilly started to pick up mid-session yesterday on full approval of its early symptom Alzheimer's drug which is now named Kristinla doesn't roll off the tongue but that's what it's called right now and so we're seeing some follow through from that turning point yesterday's session in today's session higher by 1% that drugs can be $32,000 a year but it is probably it is seen right now as the front runner in Alzheimer's and it really does sort of underscore Lilly's pipeline when it comes to life beyond GLP1's as much promises GLP1's have and their next gen sort of versions of the GLP1's there is a whole other side to Lilly that they are working on that they're getting to market so do we know where the government stands in terms of covering an all Alzheimer's drug that costs $32,000 a year now for from Medicare I mean that's gonna be a pain point it always is when a drug comes out of the gate when it's that expensive yeah whether it will be covered yeah I mean it's sort of remarkable before GLP1's I mean that this was the main thing that Eli seemed to trade off actually was the prospects for these three right so it's sort of remarkable that now it's a little bit of an add-in right it's like a call off about it's not a call often cuz it's out on the market now but it does put it out in front in terms of the race for an Alzheimer's treatment it surpasses now it is viewed as surpassing biogen's lakambi which is currently on the market so that's an issue but Lilly is up by almost a percent and we've got no go down up one and a quarter percent of course that CEO it's gonna be reporting earnings in about a month or so and then the SEO will be appearing in front of Senator Sanders committee in September yeah on the topic of drug pricing I mean Lilly it should be pointed out is twice the size of any other pharma company in terms of its you saw at the bottom it's market cap there little news this morning out of Southwest Airlines they put a poison pill in largely because Elliott has a large stake there not much more to it it's one year it essentially says you know if you go beyond a certain point you get massively diluted if you're just paying attention now Elliott has said or it's been reported about 11% economic interest a lot of times they build that not just with straight stock but with with the rivetives as well and so they say plan effective immediately expires in a year and in consultation with their advisors it is in part done because Elliott has accumulated a significant economic interest and in light of the potential for Elliott to significantly increase the board determined adopting a rights plan to prove was is prudent to fulfill its fiduciary duties to all shareholders they do go on to say they've made a good faith effort to engage constructively since the initial investment they do remain open to any ideas for lasting value creation it is you know just big picture remarkable that you know Southwest Airlines is now down at a market cap level of 17 billion where it seems like they have to be wary of you know being able to be muscled around a little bit I guess even if I mean we're not really contemplating that they would be a bid for the entire company no I mean that is not right when it's come when it has come to some tech companies of a certain size Elliott has obviously well and they've even taken some of them private as they do have a significant presence in terms of private equity in the ability to do that I don't believe that was a thought here in Maryland owning an airline not not not a chance so it is kind of odd in a sense of typically the playbook for Elliott it's all right either you do what we want or we're going to potentially at least threaten a challenge for the board and we'll see what what comes of it but not to your point Mike hard to imagine they would ever want to take control of an airline yeah remember Southwest Lordeth's revenue guidance what it was at last week because of booking patterns and having to adjust booking patterns it's also an airline which has been under the most pressure when it comes to Boeing issues they're much exposed to Boeing more so than any other airline so they've got a whole host of issues that they're they're facing so Elliott might be stepping in very vulnerable points for Southwest at this point but you mentioned consolation yes we can come back to those well yeah the stock is up a bit on earnings yeah it is amazing what the beer category has done for it and the continued gains and market share that they made after the but the Bud Light boycott a year ago now you know their beer brands the Mexican loggers Pacifica modello they've outpaced the growth dollar sales volume growth compared to the whole beer category so it's really working and there's the Corona Sun Brew a modello gelada now it's a lot of yes it's a lot of yeah if you want that it's fresh pecante there's also a I love pecante do you a nigra conchile as well a modello gelada so you've got a conchile I that's what it says that's that's what it says sounds like a lot of yeah they probably refer to that I may be reading it incorrectly innovation at its worst but wines and spirits is going the other way yes and that has been much more challenging both for the company which continues to say it's sort of on the right trajectory there but nonetheless is seeing obviously declines when it comes to wines and spirits which quarter to quarter has been unsteady decline for some time but it did you know we just within the category within the food and beverage stocks it just has superior growth it's got this like 12 13% earnings growth path that's pretty you know it makes it stand out and it gets the valuation for that we spend one of the stronger stocks. Our next guest says great first halves often be getting more in the second half especially in presidential election years but this time may be different Morgan Stanley wealth management CIO Lisa Shallot joins us Lisa great to see you. Good to see you guys. You sound pretty defensive when it comes to the markets path into the second half of the year highlighting a lot of risks geopolitical fiscal etc I mean the list goes on and on. Well actually we're not all that defensive I mean our piece was our piece was really about what is defense in this market and so our concerns are about the lack of breadth the concentration in the market cap weighted index and the MAG 7 if we're in a soft landing this should be a market that's broadening out we think that we are in a soft landing and I don't think what investors are really paying attention to quite yet is the fact that MAG 7 earnings for the remainder of the year are going to massively decelerate from growth rates this year quarter over quarter of about 27 28 percent year-over-year profit growth to something closer to their normalized range of somewhere between 12 and 15 percent at the same time if were to believe bottoms up analyst estimates the rest of the 493 are actually going to see their profit growth accelerate from year over year comparisons that are virtually flat this quarter to something that exits the year well over 10 percent so we want to be owning the stocks where earnings growth is accelerating and so what we're saying is look you know everyone wants to crowd into the same old same old names that's where the risk is that's not defense to own the MAG 7 at this point defense is to own breadth to own the equal weighted to be an active stock picker to own things like financials like energy like industrials like health care like utilities like breach all these things that have been lagging the market and yet are much more apt to put up earnings surprises and earnings acceleration in the second half than the same old same old names that have led us here for the last two and a half years you're not saying they'll need to get out of the MAG 7 right it's just to allocate some money elsewhere I would imagine it's a hard sell for you to say to investors pull some money out of NVIDIA and put in health care which has not done very well this year so far in and could be under political pressures itself no absolutely look we're not we're not saying you know that any of those names are not you know decent companies and shouldn't be in your portfolio we just don't want to chase them at these levels and and as I said I think that as people see their earnings growth normalized right there they've grown into their recovery trend you know one of the reasons that the year over year profit numbers over the last 18 months have been so great is people need to remember tech earnings collapsed in 2022 right and so we're gonna lap all of that we're gonna have much tougher comparisons and that year over year earnings growth advantage that the MAG 7 had where they were growing it you know over 30 percent and the rest of the market was not growing that's gonna shrink and you're gonna have a lot more companies putting up very decent year over year earnings growth whereas you know the MAG 7 are gonna start to normalize into that you know 12 to 15% year over year range Lisa is there a way to handicap what might turn investors focus in that direction because it seems as if the unusual nature this cycle maybe is is keeping folks from from really emphasizing those types of ideas because it would seem like that's an early cycle thing right we you basically say oh we have an earnings recovery story you can buy riskier financially you know lower quality stuff whatever it might be more cyclical stocks and that makes sense maybe it's when the Fed cuts and you've averted the down part of the cycle but I just wonder how you're thinking about that yeah no great question so I think that there are a couple of things to catalyze it to your point I do think it's first is rate cuts but the second really has to do with you know starting to put some reality around the mythology that is generative AI right it's great you know for these companies to be telling stories about all the great catbacks that they're putting in the ground all the capacity that they're building in data centers for all the sale the software and services that they're gonna sell to all the adopters of AI but we've got to see that next chapter of monetization happen and that's where I think that that we've got some skepticism there's no doubt that generative AI is an enterprise wide transformational technology like the internet was but like the internet was it is going to take many years for us to actually understand who the true winners and losers are here and we think that a lot of this enthusiasm has gotten over its skis and not all this catbacks is actually gonna have very high are we attached to it in the near term least I great to speak with you thanks it's always great to see you guys thank you we have services PMI was out just a few moments ago let's get over to Rick Santelli for those numbers Rick yes thank you David these are S&P global maybe the most important aspect is they're in the service sector with a composite and of course we are replacing the mid-month read with the June final 55.1 was the mid-month read on services headline 55.3 is the new final so it increased by a couple of tens and it still remains the best in over two years going back to April of 22 the composite very similar 54.6 was the mid-month it improved a couple of tens to 54.8 and it also remains the best level the highest level over 50 since April of 22 a little over two years we still have the ISM services yet to come at top of the hour along with factory orders and durable goods but squawk on the street a return after a short break I've noticed the crew is at a two-month high driving season just getting underway of course with the July 4th holiday and you can see it right there having an impact as well as you might expect on some of the big oils which are both Exxon and Chevron at least last I checked both up we're back right to this welcome back Manhattan apartment prices are falling creating what many see as a buyers market Robert Frank joins us now with all the details Robert good morning listed good to see well the average apartment price of Manhattan fell 3 percent in the second quarter it now only costs you two million dollars to buy an apartment in Manhattan median prices also fell and one big reason is rising inventory unlike a lot of the country where inventory still remains very tight unsold apartments are piling up in New York there now eight thousand apartments for sale so at the current sales rate it would take about ten months to sell all of that if new apartments weren't listed brokers say anything over six month basically signals a buyers market so we're in a buyers market right now and they are buying the number of sales closed in the quarter jump 12% over last year that is the first increase in two years brokers say more sellers are listing their properties and dropping prices just to get deals done and more buyers are biting the bullet because prices are down and the rents remain high at over five thousand dollars a month on average brokers say they expect the rest of the year to be stronger especially if rates start to fall and by the way mortgage rates are not much of a factor in Manhattan 62 percent of deals in the quarter were all cash that is near the all-time record so you don't have the same lock-in effect here so you're seeing a bit more inventory free up faster and that's gonna drive down prices even more in the next quarter and hopefully get some deals done because we've had this sort of two-year standoff where buyers and sellers were so far apart on their price expectations now the sellers look like they're coming down are there parts of the market that are more all cash than other parts of the market I'm wondering if there's a lock in effect for certain parts of the market much more so than others absolutely so above 10 million about 88% is all cash and who are people with a lot of cash and below three it's something like 35 35 so it's the middle so it's it's really it's really the middle and the bottom is very mortgage-dependent so and what's interesting now is the top usually does the best in New York City right now the top is the weakest in terms of sales and prices and I think that has to do with just confidence I think wealthy buyers have a lot more discretion on when they buy they're waiting for the uncertainty of the election what happens with interest rates etc so they're sort of holding off but the rest of the market is finally seeing a sales uptick so brokers are finally getting some deals there's some untapped buying demand though out there that we're unaware of or or is this going to continue I guess is my question for some time the untapped demand to the extent it exists is sitting in the rental market and keeping that's what's keeping those rental rates high because Dave you know vacancy rate and the office market is still very it's very low it's like you know we're still half occupied right so you say who are all these rentals a lot of people are hiding out in the rental market they're gonna come back in and I think to the extent that we'll see how much untapped demand there are it's New York City and you know some people love it here and some people don't as I always like to say if you love scaffolding you're gonna love yeah we set records yeah for scaffolding like litter it's got a little better there's any number of other things yeah no I'm a lifer come on yeah we're all right Robert great to thank you guys all right that does it for us right here of course Mike Santoli thank you as always for chipping in we're going to keep a close eye on all the markets and ask that kidding a new record intraday hi by the way you've been listening to the opening bell one CNBC's squawk on the street all opinions expressed by the squawk on the street participants are solely their opinions and do not reflect the opinions of CNBC NBC Universal or their parent company or affiliates and may have been previously disseminated by them on television radio internet or another medium you should not treat any opinion expressed on this 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