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Bullish S&P 500 calls, weak China industrial output: Morning Brief

On today's episode of Morning Brief, Yahoo Finance's Seana Smith and Madison Mills cover some of the biggest stories as the holiday-shortened trading week gets underway.

The major US indexes (^DJI, ^IXIC, ^GSPC) started Monday's trading session mixed, as the S&P 500 and Nasdaq Composite hold near their record highs achieved last week. As the tech sector continues to push the market to new heights, Evercore ISI has raised its year-end target of the S&P 500 to 6,000, while Goldman Sachs has raised it to 5,600.

Miller Tabak Managing Director and Chief Market Strategist Matt Maley says that the market rally signals that "investors aren't all that confident about anything outside of the AI phenomenon. And we haven't seen the big broadening out of earnings outside of the AI phenomenon."

Minneapolis Federal Reserve President Neel Kashkari has indicated optimism about potential interest rate cuts, stating that one cut in December is "reasonable." However, Wells Fargo Global Investment Strategist Veronica Willis believes that two rate cuts in 2024 are still possible, noting that more economic data showing disinflation would give the Federal Reserve enough "confidence" to enact more than one cut.


China's housing market continues to struggle as industrial output growth slowed to 5.6% in May, a decline of over 1% from the previous month's figure. Crude oil prices (CL=F, BZ=F) are climbing higher after China also reported weakening demand and oil refinery outputs. Energy Aspects Oil Analyst Christopher Haines explains that China is "transitioning to more of a consumer-based economy rather than an industrial-based economy... it's trying to decrease energy intensity. So actually, I think you can read [that] demand, or... some of that data that came out today is relatively constructive."

This post was written by Melanie Riehl

Video Transcript

I'm John Smith alongside a man at the mills.

And this is Yahoo.

Finance is like to show the morning brief stock futures relatively flat looking mildly mixed.

I would say the S and P down about 1/10 of a percent.

The dow moving to the downside, the NASDAQ just over to the upside here to kick off the holiday short and trading week.

This coming after the S and P 500 NASDAQ closed and record highs last week market now left looking for the next big catalyst.

So let's get to it.

Three things that you need to know this Monday morning as you prep for the trading day.

Yahoo finances, Joser Jared and Rick Newman have more stock futures are taking a breather this morning after the S and P 500 hit four straight record closes last week.

Investment banks are getting more bullish on the benchmark index.

However, with ever co I I and Goldman Sachs raising their 2024 year end price targets on the S and P 500 Goldman Sachs lifting its targets of 5600 from 5200 driven by stronger earnings growth.

Meanwhile, Evercore I SI S Julian Emanuel boosted his year end target on the S and P to 6000 from 4750.

Setting a promising path for inflation and momentum surrounding the A I trade plus the great rate debate.

Well on Minneapolis fed President Neil Kasha, he's saying on Sunday that it is a reasonable prediction that the FED will wait until December to cut interest rates.

This comes after softer than expected inflation that fueled investor optimism around interest rate cuts last week.

C cars latest comments reaffirmed the central bank stance that the fed still needs more data before making any decisions on rate cuts.

And China's battered property sector woes continue.

The country's latest factory output data shows new home prices in roughly 70 major Chinese cities fell in May from the month before.

According to the latest report from China's National Bureau of Statistics, the data also showing investment in the housing sector for the first five months of the year fell more than 10% during the last year.

Asian markets are falling on the disappointing results.

Let's get right to our top story this morning.

The S and P 500 coming off another record setting close, rising 1.5% last week closing above 5403 days in a row.

Now, Wall Street getting more optimistic about where stocks are heading from here.

Evercore I SI and Goldman Sachs both raising the year end forecast for the S and P 500.

Josh Schafer joining us.

Now with the latest Josh, I was just gonna say you can see the new targets right there on the screen.

But really, we have certainly started to see or continue to see this optimism, really sweep Wall Street.


So we have evercore moving from 4000, 750 to 6000.

So Julian Emanuel completely flipped.


He had been a little bit in the bear case there and now he's the most bullish strategist that we track Goldman coming up from 52 to 56.

And really you started to feel this after the inflation data last week, not everyone necessarily was moving their year end price target.

But Emanuel himself highlighted that inflation had been a key part of the bull case for stocks.

And if we see inflation coming lower, which we saw in last week's CP I and PP I data that would be good for stocks.

Here's the char he highlighted here.

You can see CP I and purple.

The S and P 500 isn't blue.

You'll sort of note as you look at the little lines there.

When you see a big tick down in purple, usually the next kick higher comes in white blue, right?

So it's been a little bit of a leading indicator for where the market's headed.

I think that's rather intuitive given the fed rate cut cycle we're in right now.

If inflation is coming down, that is largely good for not just the stock market but probably all of us in general.

And the other key thing that has been at work here has been earnings revisions have not been revised down by nearly as much as they normally are.

So that's something Goldman Sachs was highlighting and the key driver there is largely big tech.

You can see it right there.

You're looking at five names that have seen about 38% growth in their, in their earnings estimates.

And that's sort of carrying the S and P 500 to not have earnings estimates fall down.

We know those estimates usually come lower.

And so the big takeaway from a lot of this research was sort of maybe we're starting to accept that the A I trade can take us a little bit higher.

Like even if it's just the five stocks that could mean that the market could run higher.

Goldman said if we have large cap exceptionalism, they see the S and P 500 closing above 6000.

So there's sort of different cases here.

But if you have that large cap out performance, people are starting to realize that if that continues, that would be very good for the broad index, how much of this is reliant on what the fed does moving forward?

Or because it's kind of like a scoop of CP I data with A I sprinkles.

Is it ok?

If the fed takes a little bit longer to start cutting.

I think so ma there's not a lot of people in these notes saying we believe the fed is going to cut two times this year and that is why the S and P 500 is going to hit 6000.

If you think the S and P 500 is gonna rally almost 10% or roughly 10% from where it is right now.

You're not that worried about the fed cutting.

What you're focused on is inflation is coming down.

That means yields are gonna be lower, moving forward.

And we've maybe seen the peak in the tenure.

That's something that a lot of strategists are highlighting when you look at this inflation data is OK, maybe we're at the peak of rates and that's sort of the key part of it.

And then the other chart I wanted to bring up because I thought this was really interesting when we talk about bubbles and sort of the, the concept of this A I trade going longer.

Julian Emanuel highlighted how long the S and P 500 in the past has traded above a 20 pe.

So right now everyone call stocks expensive, right?

Well, when stocks were expensive in the 19 of the late 19 nineties bubble, they traded at that level for over 700 days when they were expensive in the recent 2021 euphoria, they traded at that level for over 600 days right now, it's only been 140 days.

And so this is to sort of get to the point that a lot of people have highlighted as we've had.

This stocks are expensive conversation for a couple of months.

Now, stocks can be expensive for a while.

And that should not be a reason that investors don't want to get into the market or want to get out of the market.

This is not to say that history is a definite indicator and we're gonna get the 600 days of the S and P 500 trading above a 420 pe but I did think that's a fruitful reminder that just because things are expensive, doesn't mean that we're gonna just fall off a cliff can trade at these levels for a while.

And that's why everyone's talking about those earnings estimates, right?

It really depends on if we deliver.

If those companies deliver the earnings, then maybe we can just afford a high valuation for a lot longer than people thought.

That's such an important chart showing that we're basically like 20% of the way in to the longest running previous time period.

There's a lot, there's a lot of charts that show us that we are just not at the the 19 bubble euphoria.

If that's where you think we're headed, there's there's more to come in that aspect, higher for longer, maybe higher, higher, higher evaluations for longer evaluations for longer a great new phrase from Josh Shafer.


Thank you as always for bringing us your great reporting.

We really appreciate it.

Speaking of the Federal Reserve Minneapolis Fed Reserve President Neil Kashkari, now saying it's reasonable to predict a December rate cut.

Kashkari telling CBS has face the nation that the FED is in a good position to take its time and watch the data.

Joining us now to discuss, we have Veronica Willis Wells Fargo Investment Institute, Global Investment Strategist Veronica.

Thanks so much for being here.

So I I know that you still anticipate two cuts for this year.

Talk to me about what single piece of data you think the fed would have to see particularly for cash call in December to get moved up a bit to allocate enough time for two cuts.

I think it's not gonna be one single data point that the fed is looking at.

I think they're gonna be multiple data points between now and the end of the year that would uh give the fed more confidence to potentially do two rate cuts this year instead of the one that they've got penciled in in their latest do plot.

There's gonna be updates on inflation if we continue to see inflation moving in the right direction.

I think the Feds gonna feel a little bit more confident that they'll be able to cut rates more than once this year.

Uh We've got retail sales out this week that I think is going to be really important if uh that trend of slowing consumer spending still holds.

We're starting to see the economy soften a little bit but not too much.

We start to see inflation come down.

We start to see the labor market normalizing, getting a little bit closer to those pre panem levels.

I think the fed will get a little bit more confident about um potentially doing two rate cuts this year.

Bri when we talk about the prospect here of two rate cuts, what exactly is that going to look like here for equities?

Is that going to be the catalyst?

Do you think to really keep this momentum that we certainly have seen in the market alive?

I think, you know, once the fed starts to cut the market, I think has priced that in.

So we've seen a lot of exuberance in the market throughout this year as we've come down from, you know, six or seven rate cut expectations at the beginning of this year down to one or two.

the markets really still, you know, felt positive about, you know, the prospect of, you know, any cuts at all.

And I think that a lot of that's been priced in.

So I don't see a lot more exuberance once the fed starts to actually cut.

Um, but there is the potential for the, the market to still remain strong.

We're not expecting a major pullback or anything like that.

Yeah, we were just talking with our uh markets reporter Josh Schaffer about this and he was mentioning that it's really about the A I trade.

I'm curious from your perspective, I know that you trimmed tech to neutral, how do you maintain that perspective?

Given that tech is really driving this market even perhaps more than the FED is at this moment.

I think, you know, it's key to remember that tech is a huge sector within, if we're just thinking about the S and P 500 so even a neutral allocation, there is a significant waiting.

We're kind of cautioning our investors against getting over their skis in that tech exposure because we do believe that the, the A I play is a longer term theme that should be beneficial across multiple sectors.

So, you know, thinking in particular of kind of the infrastructure that's needed to maintain A I and as that is adopted broader across various industries, we think that that could actually be beneficial across more than just the tech sector.

And so we're wanting to kind of diversify our exposure there.

And I guess more specifically where what should investors be keeping in mind when, when, when they are trying to position themselves for that longer term A I play?

Is it utilities?

Is it energy, where should they be looking right now?

We're favorable on energy, industrials and um materials and those three sectors we think are, you know, positioned really well to benefit from the A I trade and the valuations are a lot more attractive than thinking about those more stretched valuations in the tech sector.

All right, Veronica Willis Wells Fargo Investment Institute, Global Investment strategist.

Thanks so much for hopping on with us this morning.

Thank you.

Coming up on Yahoo Finance tomorrow.

We will bring you an exclusive interview with Federal Reserve.

A Bank of Boston President Susan Collins.

She will be weighing in on the rate cut trajectory.

And also that's coming up in the four o'clock hour tomorrow.

Again, uh fed Boston President uh Susan Collins will be joined at Yahoo Finance tomorrow afternoon, 4 p.m. Eastern time.

You won't want to miss that.

Well, China's housing market still struggling to rebound even after record a stimulus with housing prices declining at a faster pace than initially anticipated industrial output also slowing to 5.6%.

That's down from 6.7%.

In April.

Meantime, industrial production has largely kept the country's growth on track despite its otherwise slowing economy.

So again, some concerning signs within this report really underscores what we have seen play out here in China, Mattie over the last several quarters the last several months specifically.

And that is that bumpy recovery.

And now specifically, I think the most concerning data point out of China here that we did get early this morning was the latest data that they have on the property sector.

Some of the weakness there and maybe what ultimately is going to be needed in order to prop up the economy, maybe in the longer term, it's so critical, particularly because the government has already been pushing a lot of stimulus into the housing sector to the tune of $350 billion.

That is clearly not helping prop up the housing market which is critical.

This is a market that has been in complete disarray over the course of the last couple of years coming out of COVID, we keep talking about when is China going to be in its post pandemic recovery mode?

The housing market is a very critical part of that puzzle.

And this is important because it's also part of the overall picture when we think about demand for things like iphones coming out of the region for evs the Chinese economy is such a critical part of so many of the companies that we talk about every single day until the consumer there starts to get on better footing.

It's gonna be a tough read through to some of those other names.

And as a final data point here, they still have a 5% growth target for the consumers in China over the course of this year.

So I wouldn't be surprised if we see more stimulus from the PB OC into the housing market in order to get to that 5% of Yeah, exactly.

And it's also, it's also important to point out what we saw on the retail side of things too because that there's lots of questions about how much obviously that we can trust some of this data coming out of China.

But when you take a look at those retail sales number, retail spending, at least picking up it remains weak when you compare it to some of those past readings that we have gone on and historically speaking.

But again, it does point to that mixed data that we are getting out of China.

And then again, ultimately, what that bumpy recovery could mean here to us investors as well, even just more broadly speaking about that global perspective.


Well, going global here as well, oil prices are higher today.

This comes after crude prices saw their first week we gain in about a month.

Now downbeat economic data out of China sparking fears that oil demand could falter even further.

Joining us for his outlook on the sector, we have Kit Haines energy aspects.

Global crude lead K. Thanks so much for being here.

As you heard, we were just talking about the demand picture in China continuing to weaken.

To what extent do you think that that could drive oil prices moving forward here?

I mean, look, I I just saw uh what you uh what you're posting and I I think your focus was there was more on the um industrial output side.

But actually, if you, if you do look at the retail side, it has been improving.

And one of the things that a lot of people are missing, I think with China is how it's uh transitioning to more of a consumer based economy rather than uh an industrial based economy.

You know, it's trying to decrease energy intensity.

So actually, I think you can read those demand.

Uh all that, some of that data that came out today is relatively constructive.

But I think, you know, as we go into like the second half of this year, um is it gonna get any worse?

I don't think so.

I think we're, we're looking at a good point now for uh global demand heading into the summer.

Uh And for China in particular, you know, I think um we have a couple of specific things like heavy rains, uh the fishing ban coming up and that's gonna kind of dampen, that's kind of dampening some of the sentiment around particularly diesel demand at the moment.

But I think heading into, uh you know, August September time, uh things are gonna look a lot better.

So, uh we're relatively constructive on, on that outlook.

So Kate, it does sound like you see a tighter market at least in the near term.

So what ultimately is that going to do to prices here over the next couple of months?

Look, I, I don't think we're gonna rock it higher, but I think, um you know, just if you look at fundamentals, um we're gonna have higher, higher runs, higher demand going into the summer.

And that's, it's kind of a uh a relatively seasonal thing.

So I think from where we are right now, we've just been in probably one of the, in the weakest demand point of the year and we pick up into the summer.

So, um you know, uh if you look at some of the flight data, some of the travel data, um and this isn't, you know, this isn't just in the U SI think it's in um all parts of the world.

Europe's looking pretty good, even China in terms of um uh gasoline demand and uh jet demand is looking very good.

So, uh you know, we, we see things picking up um probably moving towards the uh highs that we saw earlier this year, but I don't think beyond that.

I think um there's a lot of things in play.

Um A L A lot of potential levers that could, could still be pulled if prices do get high such as an spr release that I think Amos Hochstein was talking about yesterday.

Well, let's talk about that.

According to the ft here, Biden is ready to reopen us oil reserves if gas prices jump, that is of course heading into the election.

How much is that potential move from the Biden administration already priced in?

Yeah, I mean, look, I think the that announcement kind of uh does go towards capping your upside in prices.

I think people are gonna be looking at the opportunity here.

Um, you know, your Brent's trading around 83 $83.

Yeah, it's probably, you know, 5 $10 of upside there.

Um, but I think if we do head into the nineties, that's when people start to kind of look at, um, you know, are we too high and what can we do to try and, um, you know, stem the rally here?

So I think that's, that tends to be, uh, that range.

I think 80 to $90 most people are relatively happy with it when we go above that.

That's, that's when we start to see red flags.

Ok. We've seen the market, uh, largely shrug off the geopolitical risk aspect of this.

Is this something that you think investors maybe should be paying a bit more attention to and ultimately, how do you see that impacting prices here over the coming months?

Yeah, it's a good, it's a good point.

And I mean, I think some of the, you know, geopolitical tensions we've seen this year haven't, uh, really sparked the kind of reaction we'd expected to, but I think um, oil investors are getting more savvy to the market after what we saw in 2022 where, uh, you know, the, the sanctions put in place on Russia, a lot of people were expecting us to lose a huge amount of oil and at the end of the day we didn't.

So I think what we're seeing now is people reading this market as, um, ok, we're, you know, we're not going to put a risk premium on until we actually see an impact on production.

And uh, a lot of the geopolitical risks at the moment aren't impacting production.

You know, like the, the houthis are causing disruption with uh shipping and, you know, obviously Israel Gaza is a, a pretty, pretty big thing at the moment.

And uh Russia Ukraine of course, but none of it is actually um taking any oil out of the market.

So for now, um I think that's, it's priced as, as it should be.

All right kid Haines energy aspects, a global crude lead.

Thanks so much for joining us here this morning.

Thank you.

Well, we're just getting started on morning brief coming up.

Best Buy and Toll Brothers both getting upgrades from the street.

We're going to break down some top trending takers next and stocks hovering near record highs.

But can the rally last through the summer?

That's quite a lot of question we're going to discuss during our 10 a.m. hour of catalyst and our very own Jennifer Sha Burger is going to bring us an exclusive interview with Boston fed President Susan Collins.

That's coming up tomorrow at 4:40 p.m. Eastern time.

You won't want to miss that all this and more.

You're watching Yahoo Finance Auto that shares moving higher on reports that activist a Starboard value has a $500 million stake in the company.

That's according to the Wall Street Journal.

Starboard value is reportedly seeking changes within auto desk including a potential board shake up.

Now, this is all stemming from what has played out at auto desk here over the last several months, they did have an internal probe regarding some accounting questions into the company.

Now, they what that investigation did result in it didn't lead to any changes here to auto desks previously disclosed financial reports, although the company ultimately did remove or did move its CFO into a new position.

So now Starboard, the question of, of they at least their issue with what has played out here over the last several weeks or the real issue has been the timing of when Auto Desk did disclose that probe saying that they disclosed it right after a window had closed for board nominations.

And now they are pushing here to have that window reopened because they think that maybe they a new board members could potentially help address some of the issues here at audit us.

So again, we're seeing auditor shares move higher on this news here today.

Starboard value of $500 million day here in Auto desk and now pushing for some changes here in the letter to auto desk executives.

Yeah, and this comes as the stock under a little bit of pressure, at least they're down about 3.5% year to date over the past year.

Though up nearly 7% it does appear that according to Bloomberg, they reached out and Auto desk said they were confident in their direction, the Starboard letter in an email.

But that is just according to Bloomberg reporting there having said that like you mentioned, Sean, I think the critical part here is this investigation that is going to be the key piece of Starboard's argument, at least moving forward here about kind of concerns with the start the software company's performance and how they have handled that accounting probe in particular, that seems to be the sticking point, at least for Starboard here.

Well, that's why getting a boost from a bullish call from U BS, the firm upgrading the stock to buy from neutral and raising their price target to $106 from 85.

They cited the company's restructuring efforts and new product cycle and interestingly citing the timing here, Shana upcoming appliance upgrades as a potential boon, which is interesting to me given what we've been saying about the struggles of the housing market, but it is still cyclical, right.

At some point, your appliances will just start to break and that is a boon for a company like a best buy the analyst, Michael Lasser also saying that this would be about a 22% upside.

It should be evident that the company's market share tends to flourish at the earlier stages of a product cycle.

But their restructuring efforts could be a boon for the company's earnings moving forward.


Yeah, and this is a stock that over the last year at least up just around 12%.

So lots of questions about what exactly consumer demand looks like, how so many of these names similar to best buy are positioned right now.

But U Bs at least coming out saying that they really see this potential forthcoming appliance upgrade cycle and they think that is going to be enough here to lift a best buy here from current levels.

You can see it at least for today or at least where it closed on Friday closed just above 87 bucks a share.

We are seeing a bit of a move to the upside here in early trading on the heels of this call here from U BS.

But again, this, this is all surrounding this new product cycle.

What exactly they think that that is going to do here for Best Buy and a lot of this just hinges on the consumer.

We will get another reading on the consumer tomorrow when we get retail sales.

But again, this willingness to spend especially on these larger ticket items.

I think a lot of that is still in question given where we are in the economic cycle.

All right.

Well, Toll brother is also getting a bullish called this morning this time it's from Goldman Sachs, the firm upgrading the stock from sell to neutral.

So raising their price target from 100 and 12 bucks a share to 124.

Now, their argument is that the company is going to benefit from out performance in new home sales.

We have seen many of these home builders outperform here.

Many people who are out there are still in the market looking for homes.

Existing home market inventory remains extremely low.

New home sales are on our new homes are really the almost the only game in town for so many of those who are out there hunting for homes looking to purchase, maybe their new home are looking to move from their current location.

So again, many of these home builders getting that boost, seeing that demand and their real issue has been supply need, demand and their ability to do that in a timely fashion.

That's really been what has been, uh, coming up on the earnings calls here over the last several quarters.

Yeah, and it's interesting.

This is another name.

We are sensing a little bit of a theme here of a company that's going to benefit from hopes about rate cuts moving forward and the impact that could have on the housing market.

I wonder if that is a little bit of the best buy story here as well.

The idea that home buyers and potential home buyers might get a little bit of relief as are starting to get priced in as potentially having some cuts this year that is leading to a lot of upward momentum in real estate stocks in general post CP I rally.

So perhaps that is playing into this upgrade a little bit as well.

All right.

Well, we are just minutes away from the opening bell on Wall Street.

Keep it right here.


You're looking at all the major averages on track to open the trading day in negative territory.

The that right at the flat line now, we will be right back.

Welcome back to the morning brief on Yahoo Finance.

You are taking a look at futures right now.

Dow and SB under a bit of pressure.

But remember last week, it was a record setting week here for the markets, lots of optimism about the latest readings that we got on inflation and what exactly that could mean for the Feds next move for cutting rates here as we kick off a new trading week here on Wall Street, a shortened holiday trading week.

Again, you're seeing that excitement play out the NASDAQ and the New York Stock Exchange here, Matty.

But as we take a look at the major averages, we are looking at a bit of a mixed picture here at the open.

At least you've got the dow off just about 3/10 of a percent.

You also have the S and P off about 1/10 of a percent here.

But again, well above that 5400 level all above that record high too.

But it's interesting to look at the amount of pressure on the S and P equal weighted index down 7/10 of a percent even more than the broader.

That is telling to us about the narrowness, the concentration of this rally, the tech rally and the market cap weighted S and P potentially holding that index up just a little bit.

But our very own Jared Bli, he's standing by with a little bit more on the market action today.

Jared, what are you watching?

Well, thank you, Matty.

Since we're already talking about the S and P 500 equal weight, I'm just going to begin there because there's a lot of talk about market concentration.

And indeed, we have seen the mega caps and especially NVIDIA and the chip stocks lead this rally higher and a lot of other stocks and sectors have been left behind.

But here is a three year chart of the S and P 500 equal weight and what we can see here, it's still holding what was prior resistance.

And so just on a technical level, I am not concerned about this market unless 6500 goes in the equal weight at S and P 500 index.

Now, I just want to talk about some divergences that have been building up in the market.

Here is the NASDAQ versus the Dow over the last month and pretty striking.

You can see the NASDAQ is up 6% while the dow is down 4%.

And on a year to date chart, you can see both are positive, but the NASDAQ has really just had a much better year of it.

And so the argument goes, are we in a situation where breadth is deteriorating and leaving too much of the market behind?

I go back to the S and P 500 equal weight.

I don't think we're there just yet.

We can also take a look at the S and P 500 those two markets equal weight versus market cap.

And it's a very similar story.

I'm going to just kind of skip over bonds in the dollar by the way, those are up a little bit today.

And so that could be weighing on certain parts of the risk market, but here's a sector action and what you will notice is there's only one sector in the green that is XL K up about one third of a percent utilities in real estate leading to the downside, those are interest rate sensitive and sectors.

And as we do have uh we do have interest rates heading up today.

So that makes a lot of sense confirmation there.

Wanna close here with semiconductors, nvidia and Broadcom at record highs, you can see Broadcom up about 3%.

So is Taiwan semi and really the chip sector as a whole has just been on fire recently.

And so I guess the question now is how long does it take for the rest of the market to catch up or catch down?

All right, Jared.

Great stuff.

Thanks so much.

Well, Jared just mentioned it and you're taking a look at it right now.

You've got NVIDIA notching a fresh record high this morning.

Big Tech has been driving this record setting rally that we have seen play out, especially some of the excitement in the markets last week.

Now, the sector accounting for over 61% of the S and P five hundred's gains so far this year here to discuss tech's outsized, impact on markets and much more we wanna bring in Matt Maley.

He is Miller Ta Ta uh managing director and equity strategist, Matt.

It's great to see you here.

So let's talk about that concentration that we saw have seen play out here in the markets.

We are initially, we're talking about some concerns, some risk that that might signal here for the broader market.

What do you think just about where we are the current valuations and whether or not maybe there is too much worry about that narrow concentration.

Well, you know, you never like to see a narrow rally having said that uh you know, this time last year, we had a very similar narrow rally and yet it kept going for another month and a half and it really didn't see a pullback until we got to August.

Um But, you know, it, it, one of the things that does tell us is that, you know, investors aren't all that confident about anything outside of the A I uh phenomenon and we haven't seen the big, uh, broadening out of Ernie outside of the A I phenomenon.

We have this, you know, the people are making the chips, the picks and the shovels are doing well, but it's not, you know, it's, we're not seeing the end users of these chips really, you know, seeing a big increase in earnings.

So that's going to be a big concern.

I mean, the the and P weight index that you guys were talking about, it's down four weeks in a row while, while the SNP has been rallying uh quite nicely.

So this divergence is something we do need to be concerned about.

You know.

Uh yes, maybe it does need to fall a little bit further before it creates some problems.

But um whenever you see a, a narrow market, especially when it's as incredibly narrow as this one is, uh it does raise some questions.

So ma'am, what does that tell us about the 6440 portfolio?

And I asked because I'm on the phone with my mom over the weekend talking to her about what should be she should be doing with her retirement funds.

And I know you're not gonna give us investment advice, but when you do have that level of concentration, should you be pouring in more doubling down getting in on just tech or should you be hedging your risks a little bit because concentration could go bad really quickly.


And one of the things right, right now, uh, mat is, is that we have this, this situation where, uh, it's interesting this in the last week or so.

So we heard some people talk about, you know, using a barbell strategy, which is something we've heard a lot in the past, but this seems to make a little bit of sense.

I mean, these, these companies that are, you know, out performing so well are making money.

I mean, NVIDIA, uh it is not an expensive stock if you look at it on a, on a long term basis, but you getting 5% in, in cash right now, which is outperforming, as I mentioned, I mean, you know, the S and P equal weight, uh index of Russell 2000 is down on the year.

Uh You know, a lot of this stuff in the middle is not acting very well.

So why not have, if you're going to be overweight in those, those and those big caps that are doing so well and are, uh are getting some, some nice earnings, why not have a little bit in cash on the other side, uh for protection if the thing does start to turn down, man, when you take a look at what the fed is going to do next, it's, it's too much influence being placed or too much emphasis, I should say, being placed on the exact timing from of a, of a fed rate cut.

And ultimately, we don't get one this year.

What's that going to do to investor sentiment, do you think?

Well, yeah, that's certainly gonna be, I mean, let's say we went to what, expecting seven rate cuts and down to three.

Now we're down to one and, you know, we couldn't even get zero.

that would certainly throw a wrench into the works because I mean, let's face it.

The market is trading at 22 times, uh, forward earnings for, well, for 2024 and 21 or more than 21 times the next 12 months.

So the, you know, so now we have a situation where the markets principle, we don't have ultra low interest rates to kind of justify that big high valuation.

So that does create problems.

And then the other side, we also have to worry about what happens if they, if they suddenly start to cut rates in a meaningful way.

Uh, you know, that, you know, in other words, what reason would they have to cut rates more, uh, more quickly?

And that would be, of course, that the economy is slowing down and that's not what we want.

Uh, because that there would be a negative impact for earnings and an expensive market.

That's not a, that's not a big thing.

So we, you know, we're definitely as we move into the summer months, we are, uh, you know, have some concerns out there and that's why I think some, a little bit more cash on hand is not a bad, is not a bad investment idea.

How high does that put the bar then for the next earnings cycle?

And is that bar so high that at a certain point, these tech companies are not going to be able to keep up with the amount of growth that the street is looking for.

That's the big concern.

I mean, it is an election year.

We know we've got a lot of fiscal uh uh stimulus in, in the marketplace and it's going to be there.

It's not like Congress has to pass anything more.

They've already passed it a long time ago and the administration back and loaded it.

So, so, uh into this year.

So we, we, we get some nice uh liquidity but earnings, you know, remember last year, the stock market rallied 25% on zero earnings growth.

So, I mean, you know, if, if we're and we're already up, you know, so since the beginning of 2023 we've had a 38 39% rally in the S and P 500 yet their earnings have only grown are expected to grow over the two years.

Uh, you know, 23 and 24 12% at some point, we have to get a big increase in se in the second half.

We are looking for, you know, a nice increase in 3rd, 3rd quarter or fourth quarter, but it's going to have to be even better than the expectations are right now or, or it's just, I just think this evaluation thing is, is become a problem.

Matt le le let's talk about what's going on in the rest of the world here and the impact that that could ultimately have on the US markets and, and investors watching this show, when you take a look at what is playing out right now in France, when you take a look, even from a geopolitical risk perspective, the latest on the war in Israel, uh Israel's war with Hamas, what should investors keep in mind here just in terms of the risk that that could ultimately pose here to the global markets and what that could mean to the US.

Yeah, I, you know, II I sea, I just really think that the, the, the situation is the complacency surrounding these uh uh geopolitical risk is, is awfully high.

Again, some of that has to do with the, the liquidity in the marketplace and the market keeps going higher.

I I can't worry about these things.

I mean, let's face it.

Uh the, the situation in the Middle East has been going on for 778 months now and it hasn't had an impact.

But you know, that issue is not, it stopped escalating.

It's only been escalating very gradually, but it keeps escalating.

And now we start thinking everything with uh in the north of Israel and Hezbollah and the conflicts there, if this becomes a wider, you know, a wider war and that impacts the stock prices, you know, with the straits of war move, shutting down or something like that.

You got a big problem and uh it's, it's, I just worry that and of course, with this thing with France, everybody is saying, don't worry about it, but we've seen what sovereign debt crisis done in the past.

So again, with 5% cash, I'm not saying, oh jeez, you should suddenly go to 50% cash or even 20% cash.

But you know, it, it gives you a little bit easier to sleep at night when you have some of these things going on over there and you're actually paid to wait and actually paid uh to have a little bit of cash.

So raising that level a little bit I think is a good idea, very important for investors to consider.

All right, Matt Maley, always great to talk to you.

Thanks so much for making the time for us here this morning, Miller Tayback, managing director and equity strategist.

Thanks, Matt.

Thank you.

Well, coming up a deep dive into Tesla's growth story, we are going to talk to one analyst on why he sees sentiment improving for the EV giant in the coming months.

You're looking at gains of just about 1% here for Tesla and early market trading.

We'll be right back.

Tesla shares moving to the upside here of nearly 1.5% after the EV giants shareholder meeting at that meeting.

Musk predicted that Tesla's optimist robots could eventually lift the company's market cap to $25 trillion.

One of the other catalyst that Wall Street is watching for deeper dive in a Tesla's growth story.

We are joined by the AM US auto parts and analyst here.

Thank you so much for joining us here.

I want to start on what you are anticipating based on what we heard from Musk specifically with regards to new product announcement.

Sometimes it's tough to kind of suss out whether or not Musk's approach is necessarily going to prove to come to fruition.

What did you make of the teasing out of certain new products to come at that meeting?

Absolutely good morning and thank you for having me.

Yeah, there is a lot of anticipation for the next round of new products from Tesla.

Uh last quarter.

They did allude to launching uh more affordable electric vehicles uh off some of the same platforms they have today and leveraging some of the manufacturing capacity they have today and launching these vehicles next year.

There are really two things people are looking for in these vehicles.

The first of course is the price just given that EVs do need to become more affordable and, and you know, there's some opportunity for growth uh at lower price points.

But the second thing that we're particularly looking for is really just the overall design and content of these vehicles.

Because the ultimate question I think for investors is going to be that will these vehicles generate the same type of excitement we've seen for other high volume vehicles in the past, such as of course the model three and the model Y if the answer to that question is yes, we do see scope for sentiment to improve as the focus would then turn to these new products driving additional growth uh versus which is really needed just given some of the demand, uh headwinds that both electric vehicles of what we're seeing around the world that a Tesla specifically is, is facing given some of the aging out of their current portfolio.

So Todd two follow up questions on that one.

What do you think prices should be at or need to be at to really spark that demand?

We've been talking a lot about lower prices, but I guess more specifically is there a range that you think is critical for Tesla to get to?

And then two, when you talk about the Tesla story specifically and what these new products, what these new uh vehicles need to be equipped with in order to generate that excitement.

What do you think needs to be incorporated?

In order to see uh that excitement play out in the market.

Yeah, there's a lot of technologies but whether it's uh in the interior of the vehicle or, or, or even others uh that, that could just create more of a change, right?

When you think about large car companies as they grow, there does need to be different design languages, even different sub brands in those vehicles to really appeal to a wider audience uh around, around the world.

Because when you look at different regional tastes and regional consumer preference that they do tend to vary not only by, by country, but even within regions in certain countries, including here in the US.

So, you know, we want to see a lot of innovation, maybe different design languages, but really whatever it takes.

Of course, Tesla is very good at innovation and very good at product to create a lot of uh incremental excitement and, and price points are are clearly important, but we've been on the view.

Uh The price isn't Tesla's number one issue today.

We would actually rank just the overall aging of the portfolio as being maybe a bigger issue for the company today than just price alone.

So of course, we want to see 30 40,000 and eventually even lower than that.

Of course, Tesla's had aspirations to launch a $25,000 ev of course, so we're mindful of the price points.

Uh and of course, the price points relative to the content you're getting, it's all ultimately all about the value for dollars.

Uh But we really are focus is overall on the content on the design, on the innovation.

Um to really undersee whether you know, investors and consumers, of course, can get really excited about new vehicles.

Uh that could be very high volume vehicles for the company.

So it is a very significant focal point here over the next few months.

Itai I wonder if you can talk a little bit about the path to autonomous vehicles.

And you sort of mentioned the varying global appetite for a variety of things coming from Tesla to what extent is the kind of bifurcation and interest in being in a full self driving vehicle across countries globally?

Sort of a potential headwind for Tesla moving forward.


No, it really all depends on, on kind of the the different opportunities within how you think about launching autonomous vehicles.

So we are very bullish on the opportunity within autonomous vehicles overall lower cost per mile and new business models and the opportunity not only to increase revenue streams, but even to grab revenue streams that exist in the value chain today and bring it kind of back up to that automaker ecosystem.

I think autonomous vehicles tend to be um often defined as sort of one business model of the so called urban Robo taxi.

But actually there are a lot of different business models in theory that a company could launch Tesla has a couple of very unique advantages in our view.

One being that we do think that they could probably launch perhaps the cheapest and lowest cost Robo taxi platform out there, not only from a hardware cost perspective, but also from an operating cost and network cost perspective.

And if we're right about that, that could actually lead to potential new opportunities of how to deploy autonomous vehicles.

For example, you might not need to deploy the most dense areas.

You can actually maybe go to relatively easier areas and then maybe even launch some services on your current ecosystem of, of consumer vehicles and Robo taxi vehicles, things like peer to peer uh vehicle landing, things like uh you know, you order something at nine o'clock at night and the vehicle travels to get it for you at 2 a.m. Y 2 a.m. because you know, the safest autonomous vehicles aren't gonna be the one driving without any uh person in the vehicle uh in, in, in relative times where a few people are out on the road.

Uh and the vehicle can kind of bring you those items that you ordered uh in the morning.

And so there's a lot of different ecosystem effects.

So we think that you can create uh to sell more vehicles, create new revenue streams and ultimately try to supplement uh the consumer fleet with, with Robo Taxi because the number one, you know, fact that we think they have to get right.

Uh When they kind of reveal that the Robo Taxi Day uh is of course the cost and then the vehicle itself, but ultimately is how are you going to deploy autonomous vehicles in a way that's first and foremost, safe, but also can lead to additional revenue streams that maybe people aren't really thinking about today.


Before we let you go, if Tesla is in fact able to do all of that, what is the upside then look like for Tesla?

Yeah, we're still neutral on the stock.

Just give me some near term, you know, fundamental headwinds.

We talked about.

Uh I think our estimates are still actually below consensus.

But if you can turn the story into a the new evs we talked about and B if the company can craft a credible autonomous vehicle deployment plan that leverages their advantages, we think there is scope for sentiment to improve here in the next few months.

It's gonna be a very important few months for them uh to kind of try to reshape the narrative given some of the near term headwinds that they're facing Ty Malley.

Always great to have you.

Thanks so much for joining us here this morning.

City's us Autos and auto parts analyst.

Thanks so much, Atty.

Well, coming up, Disney is back with its blockbuster debut of inside out too with the signals for the summer box office.

And how big of a boost this could be here for Disney.

We've got that for you.

Next, Disney is back at the box office smashing expectations with its new release inside out to bringing in 100 and $55 million domestically.

Just in first weekend, the first film since last year's Barbie that's debuted above that $100 million mark.

Young Finances, Alexander now has the details for us all.

This is a big deal for the box office and finally, a little bit of optimism about people coming back in.

Yes big deal for the box office.

Also a big deal for Disney that is really struggled with its Pixar films and animated films.

The film was the second highest theatrical opening of an animated movie and the first film since Barbie to cross that 100 million mark in its debut and we have seen Pixar really struggle when it comes to the relevancy at the box office when it comes to getting those butts and seats.

But recently, there's been a strategy shift from Pixar when it comes to the types of films that they not only that they're producing, but how many films they plan to show in theaters?

We've heard Disney Ceo I preached this quality over quantity strategy and that's echo throughout multiple facets of this business.

And when it comes to Pixar, their strategy is going to be Sequels, sequel, Sequels and less movies than previous.

So three movies every two years with every other film being either a sequel or a spin off.

Now, this comes as it still continues to face pretty stiff competition from movie producers like NBC Universal and Sony.

So the point here is to drive home this built in audience that if you continue to create movies that have that loyal fan base up to a point, people will continue to come out.

So of course, we, we've seen the strategy fail before, I mean light year that was a sequel in 2022 that really did not perform well at all.

So they need to pick and choose what types of movies they wanna recreate for spinoffs and Sequels.

And also a big emphasis on the box office.

Not as much Disney plus because that was a point of confusion as well.

Yeah, exactly.

And it is interesting just how many people went out and saw inside out too and really the excitement that they were able to build surrounding this release.

So Ali it looks like that's good news here, at least for Disney.

I also want to talk about a headline that came out over the weekend in regards to Deadpool being released in China because this could also be a big break for Disney potentially as well.


And look the China relationship with the US when it comes to films, it's been a bit strained.

We saw Top Gun Maverick, it was not approved to be released in China, which was a big surprise.

Considering those big action films to do well in the country.

But Deadpool Two has been restricted.

The first Deadpool movie was barred in the country when it was released in 2016.

Then they allowed a PG 13 version of 2018 Deadpool Two.

And now we have this approval here.

So, so this could be a big boon when we think about the opportunity for international exposure, the opportunity to bring some of those more overseas dollars to these films, especially at a time when in the US, we're seeing a bit of a pull back when it comes to the types of movies that people and want to see in the theater.

Although I do expect that the Deadpool franchise is, is one that often gets the people going when it comes to going to that theater, you wanna be with other people, you wanna cheer and, and laugh at some of that as a loyal fan base and we'll see how exactly it does and what the reception is like there.



Great stuff.


Well, coming up, can the markets rally?

Keep going?

We're gonna dive into the catalyst behind the stock markets, climb higher.

What it's going to take to continue that march to the upside.

We've got that for you next on the catalyst.