Trading ahead of the Apple iPhone event & the upcoming CPI report

TERRANOVA, JIM LEVINTHAL, BRIAN BELSKI. WE'RE RIGHT ACROSS THE BOARD. YOU KNOW THE STORY BY NOW. OIL'S UP WTI HIGHEST SINCE JUNE. THE GLOBAL ENERGY ETF IS AT AN ALL TIME HIGH. GOLDMAN IS TALKING ABOUT $120 A BARREL. IF THINGS INTENSIFY IN THE MIDDLE EAST. LABOR DAY TALK DOMINATED BY A RECORD HIGH FOR GASOLINE ABOVE FOUR BUCKS. YIELDS ARE UP. CPI IS LOOMING. WE'LL GET TO APPLE IN A MOMENT. 60% CHANCE IN THE MARKET OF A 25 BASIS POINT HIKE. SO THAT'S KIND OF THE STUFF THAT'S GOING TO BE IN YOUR FACE THIS WEEK IS. >> PUSHING UP AGAINST VERY STRONG VERY STRONG TAILWINDS. AND THOSE ARE THE EARNINGS RIGHT. THE EARNINGS ARE REALLY HAVE BEEN SPECTACULAR. I DON'T KNOW I FEEL PRETTY GOOD TODAY. THE MOMENTUM FACTOR WHICH WE IDENTIFIED LAST WEEK IS KIND OF BEING WASHED OUT. IT'S ACTUALLY REBOUNDING TODAY. I'VE GOT THE SEMIS UP. I HAVE OPTICAL UP. I'VE GOT THE INFRASTRUCTURE HIGHER. THE WEAKNESS TODAY. TO ME IT'S ATTRIBUTABLE TO AMGEN. AMGEN IS 5% OF THE DOW. AMGEN IS DOWN 9%. WE'LL GET INTO THE REASONING BEHIND THAT LATER. BUT I FEEL PRETTY GOOD ABOUT THE FACT THAT MOMENTUM SEEMS TO HAVE FOUND A LITTLE BIT OF A TEMPORARY BOTTOM. AND IF THE MARKET WANTS TO ROTATE HERE, WANTS TO MOVE AWAY FROM WHERE WE KIND OF HELD SERVE AND FINANCIALS AND HEALTH CARE AND GO BACK INTO THAT MOMENTUM AI TRADE, I THINK THE MARKET WILL BE COMFORTABLE WITH THAT. >> COMFORTABLE UNLESS, YOU KNOW, UNLESS OIL GETS AWAY FROM YOU, LESS YIELDS GET AWAY FROM YOU. TEN DAYS FROM THE FED MEETING. UNLESS THAT SORT OF GETS AWAY FROM YOU. AND WHAT IS A 60% CHANCE IN THE MARKET? I DON'T KNOW THAT PEOPLE REALLY BELIEVE THAT IT'S THAT HIGH. I'M SURE YOU PROBABLY DON'T KNOW, NOR DOES PROBABLY ANYBODY SITTING ON THIS DESK TODAY, BUT THAT'S GOING TO BE DOMINATING THE NARRATIVE AS WE FIGURE OUT WHAT TO DO FROM HERE TO THERE AND SEE WHAT HAPPENS IN THE MARKETS, MIDDLE EAST AND EVERYWHERE ELSE. >> I LIKE THE I LIKE THE TERM THAT JOE SAID ABOUT HOLDING SERVE, NOT JUST BECAUSE OF THE U.S. OPEN, BUT IT REALLY MAKES A LOT OF SENSE BECAUSE WE'RE IN THIS VACUUM OF NO NO NEWS. FROM A FUNDAMENTAL PERSPECTIVE, EARNINGS CLEARLY ARE THE KEY. WE DON'T KNOW WHAT THE FED IS GOING TO DO, BUT WE KIND OF KNOW WHAT THE FED IS GOING TO DO. FED IS NOT GOING TO CUT. AND WE'LL SEE WHAT HAPPENS. >> FROM THERE. >> YEAH WE'RE NOT GOING TO. >> THEY'RE DEFINITELY NOT GOING TO CUT. >> I'M SORRY. I'M NOT GOING TO THANK YOU. THEY'RE NOT GOING TO HIKE. >> YOU'RE WRONG. >> BUT YOU'RE RIGHT. I'M WRONG. PERFECT. BUT YOU KNOW WHAT'S REALLY INTERESTING. YOU TAKE TWO STEPS BACK AND YOU LOOK AT ALL THE MACRO STUFF THROWN YOUR WAY. YOU GET HIGHER OIL PRICES, YOU GET HIGHER BOND YIELDS. WHY ARE WHY ARE SMALL CAPS STILL DOING SO? WELL? YOU WOULD HAVE NEVER THOUGHT THAT. WELL I THINK IT'S BECAUSE OF FUNDAMENTALS BECAUSE OF EARNINGS. THEY WERE REALLY THE FIRST EARNINGS DRIVER IN THE PRICE TO FREE CASH FLOW DRIVER. THAT HAS REALLY BEEN THE FUNDAMENTAL BACKING OF THESE SMALL CAPS. AND NOW THE REVIVAL OF THE MAG-7. AND WE'RE GOING INTO APPLE TOMORROW. IT'S SET UP PERFECTLY TO AGAIN OUTPERFORM. AND SO WE'RE VERY POSITIVE ON THE MARKET NEAR TERM. >> THAT'S A GOOD POINT THAT BRIAN BRINGS UP WHAT WE WERE DISCUSSING LAST WEEK QUITE HEAVILY THE RESURGENCE OF THE MAG-7. WE'LL SHOW YOU THE CHART AGAIN OVER THE LAST SIX MONTHS TO MAKE THE POINT THAT MIKE SANTOLI WAS MAKING ON FRIDAY MORNING, WHICH SET UP OUR ENTIRE CONVERSATION, JUMP OFF THE FACT THAT THE MAG-7 HAD UNDERPERFORMED THE S&P BY A FAIRLY GOOD AMOUNT OVER JUNE AND JULY. AND YOU CAN SEE THE BLUE DIP LOW, RIGHT. AND THE ORANGE LINE IS THE S&P 500. THAT GAP NARROWING AND THEN TO THE POINT WHERE THEY'RE BASICALLY EVEN MAG-7 DOESN'T HAVE TO OUTPERFORM THE S&P 500 TO MAKE THIS POINT. IT'S MERELY THE FACT THAT IT WAS A VERY UNEVEN TRADE FOR A GOOD PERIOD OF TIME HAS CORRECTED ITSELF. AND THESE STOCKS HAVE COME BACK THE BIGGEST IN THE MARKET. WE'LL GET TO APPLE IN A MINUTE. BUT THAT'S BEEN A TREND WORTH WATCHING. >> ABSOLUTELY. AND THE. >> VALUATIONS ARE FRANKLY SUPPORTIVE. I THINK WE'VE JUST GONE THROUGH A CONSOLIDATION PHASE IN THESE NAMES. SCOTT. YOU KNOW WHETHER IT'S ALPHABET WHETHER IT'S NVIDIA IN PARTICULAR WHICH OUT OF THE SEVEN IS THE ONE THAT I LOOK TO MOST FOR LEADERSHIP. NOW I REALIZE IT'S DOWN TODAY. IT DID START THE MORNING UP. IT'S WITHIN A HAIR'S BREADTH OF AN ALL TIME HIGH. I THINK IT'S VERY LIKELY THAT IT TAKES THAT OUT. AND ONCE IT DOES, WE'RE GOING TO BE TALKING ABOUT THAT. IT'S NOT GOING TO LOOK BACK AND GO DOWN FROM AN ALL TIME HIGH. IT'S LIKELY TO GO FURTHER HIGHER ON AROUND ROUGHLY 19 TIMES FORWARD EARNINGS. WE KNOW WHAT THEY SAID TWO WEEKS AGO ABOUT REVENUE GROWTH RATE IN THE COMING YEAR, 70%, WHICH BY THE WAY, IS SUPPLY CONSTRAINED. SO IT COULD BE HIGHER IF THINGS ON THE SUPPLY CHAIN BECOME A LITTLE BIT UNSTUCK. ALL THIS IS NOT TO SAY THAT THE OTHER STOCKS DON'T HAVE SOMETHING GOING FOR THEM. WE'VE TALKED ABOUT MICROSOFT A LOT. VERY FORGIVING VALUATION. AND MOST IMPORTANTLY, JOE, MAYBE YOU'LL BACK ME UP ON THIS. THE SENTIMENT IS COMING BACK TO MICROSOFT. THIS WAS A STOCK UNDER $400 JUST A FEW MONTHS AGO. AND PEOPLE WERE LOOKING AT IT, ACTUALLY TOSSING IT INTO THE HEAP OF THE SAAS NAMES AND THINKING THAT IT MIGHT SOMEHOW BECOME DISENFRANCHIZED. I THINK THAT WILL BE LOOKED BACK AS FOLLY. THE POINT BEING IS, EACH OF THESE NAMES HAS THEIR OWN IDIOSYNCRATIC REASONS FOR GOING HIGHER, AND THE VALUATIONS GIVE SUPPORT. >> BEFORE WE GO SORT OF HEAVY INTO THE MAG-7 IDEA. IF YOU ON THE GENERAL MARKET IDEA THAT, OKAY, YOU HAVE WHAT FEELS LIKE A NEW DEGREE OF RISK INTRODUCED BY RISING OIL, RISING YIELDS, RISING FED RISK, AT LEAST AS THE MARKET'S CONCERNED. AND IF YOU PUT ALL OF THAT ONTO ONE SIDE OF A SCALE, AND THEN ON THE OTHER SIDE OF THE SCALE, ALL YOU HAVE IS EARNINGS. BUT THE WEIGHT OF EARNINGS IS SO SUBSTANTIAL, SO SUBSTANTIAL, THAT IT AT MINIMUM, BALANCES OUT THE RISKS THAT I PUT ON THE OTHER SIDE, IF NOT OUTWEIGHS THEM IN TERMS OF WHY THE MARKET WOULD CONTINUE TO GO HIGHER IN THE FACE OF THE RISKS THAT WE PUT ON THE OTHER SIDE. IS THAT IS THAT FAIR? DOES IT STILL EXIST? AND IF IT DOES, THEN ESSENTIALLY WHAT'S ON THIS SIDE IS ALL NOISE UNTIL IT BECOMES SOMETHING MORE. >> ACCURATELY STATED. THAT'S EXACTLY HOW I LOOK UPON ALL OF IT. THE STRENGTH OF EARNINGS, FOR ME, OUTWEIGHS THE RISE IN OIL PRICES AND THE RISE IN YIELDS. MY PERSPECTIVE IS, I THINK, FOR THE FEDERAL RESERVE TO RESPOND WITH A 25 BASIS POINT RATE HIKE WILL LITERALLY DO NOTHING AS IT RELATES TO INFLATION. AND THE ONLY THING IT WILL DO, IT'LL FURTHER FREEZE THIS RESIDENTIAL HOUSING RECESSION THAT WE'RE IN. YOU'RE JUST GOING TO DAMAGE HOUSING MORE. WHY WOULD YOU DO THAT? I THINK A LOT OF PEOPLE LOOK AT THE PRICE OF OIL IN SOMEWHAT OF DISBELIEF TO SEE IT WHERE IT IS HERE IN THE MID 90S AND THINK THAT BY ELECTION DAY IN NOVEMBER, YOU'RE GOING TO BE LOOKING MORE AT A SEVEN HANDLE ON THE PRICE OF OIL. AND I KIND OF AM ONE OF THOSE. SO I THINK YOU LOOK AT EVERYTHING IN TOTALITY RIGHT NOW, AND TO YOUR POINT, UNTIL YOU TELL ME THAT THERE'S EARNINGS DEGRADATION, I THINK YOU STILL HAVE TO WEIGH THE TAILWIND OF EARNINGS OVER EVERYTHING ELSE. >> THAT'S WHY HSBC TODAY GOES TO 8100 ON EARNINGS. THEY SAY IT OKAY. MIKE WILSON TALKS ABOUT EARNINGS AND THE MOMENTUM THAT IS STILL BEHIND THIS MARKET. DEUTSCHE BANK SENTIMENT HAS TURNED BULLISH AGAIN FOR THE FIRST TIME IN SEVEN WEEKS. THAT'S HOW THEY ARE REPORTING THINGS. UBS MARKET OUTLOOK STILL BULLISH GROWTH NOT FULLY PRICED IN. WHAT DO YOU MAKE THAT LOOK. >> I GET THAT AS FAR AS WHEN WE'RE IN THE FOURTH QUARTER OF THE YEAR. BUT I'M GOING TO SLIGHTLY TAKE THE OTHER SIDE OF WHAT YOU WERE JUST SAYING. >> WHAT DO YOU MEAN IN THE FOURTH QUARTER OF THE YEAR. ISN'T THAT WHERE WE ARE NOW? I MEAN, NOT IN THE FOURTH QUARTER, BUT EVERYTHING THAT THESE PEOPLE ARE TALKING ABOUT IS THE HERE AND NOW THAT EARNINGS CONTINUE TO DROP. >> SO IN THE HERE AND NOW FOR THE MONTH OF SEPTEMBER, I'M NOT AS CONVINCED. AND HERE'S WHY. YOU KNOW, YOU'RE TALKING ABOUT OIL JOE. BUT I THINK YOU AGREE. AND I'M SURE BRIAN PROBABLY WILL TOO, THAT IT'S NOT OIL. IT'S DIESEL, WHICH IS AT A RECORD AND SHOWS NO SIGN OF ABATING. THERE'S NO INVENTORIES TO FALL BACK ON. THERE'S NO CHINA CUTTING DEMAND AND DIESEL DIESEL FACTORS INTO EVERYTHING. IT'S TRUCK SHIPPING, IT'S FARMS, IT'S CROP PRICES, THINGS LIKE THAT. AND SO TO THE EXTENT THAT WE'RE HOPING IF THE FED DOES NOTHING THIS THIS MEETING AND THAT THEY WON'T, I MEAN, HOPEFULLY ONE WEEK BEFORE THE ELECTION, HOPEFULLY THEY WON'T. BUT THAT DIESEL PRICE IS GOING TO FACTOR ITS WAY THROUGH INTO INFLATION. AND I THINK WE'RE GOING TO BE TALKING ABOUT INFLATION AND THE FED FOR THE REST OF THE MONTH. AND WE DON'T HAVE EARNINGS. SCOTT, TO YOUR POINT, WE DON'T HAVE EARNINGS TO TALK ABOUT THIS MONTH. IT WON'T REALLY START UNTIL A MONTH FROM NOW. SO I THINK IT LEAVES US IN A SORT OF NO MAN'S LAND FOR THE MONTH OF SEPTEMBER, WITH THE TREND TO THE DOWNSIDE AS INFLATION FIGURES CONTINUE TO DISAPPOINT. >> DO YOU HAVE AN AIR POCKET OF NOT MUCH GOING ON OTHER THAN ALL THESE MACRO EVENTS WHICH DO HAVE THE ABILITY TO TO PUSH THE MARKET AROUND, THOUGH VOLUMES ARE PROBABLY GOING TO PICK UP. PEOPLE ARE BACK NOW, RIGHT? >> YEAH, PEOPLE ARE BACK TYPICALLY. AND HISTORICALLY, WHEN YOU HAVE A GOOD AUGUST, YOU HAVE A BETTER SEPTEMBER. AND, AND MORE, MORE APTLY, IF YOU HAVE A MORE NEGATIVE AUGUST, THE OPPOSITE. THE DIFFERENCE HAPPENS. WE KNOW HISTORICALLY THAT SEPTEMBER IS THE WORST MONTH OF THE YEAR. WE KNOW, LIKE I SAID IN THE VERY BEGINNING, WE HAVE NO EARNINGS NEWS. HOWEVER, I THINK THE KEY IS RATES, THE KEYS RATES FOR SURE. AND SO IF THE FED SIGNALS THAT THEY WANT TO BE MORE DOVISH AND SAYS SOMETHING DIFFERENT, YIELDS ARE GOING TO YIELDS ARE GOING TO RALLY, YIELDS ARE GOING TO GO UP. AND THAT'S GOING TO SPOOK THE MARKET. I THINK MORE THAN PEOPLE ARE ANTICIPATING. THAT'S KIND OF NUMBER ONE. BUT JUST LISTENING TO THE TALK YOU THINK ABOUT TECHNOLOGY. REMEMBER HOW MANY TIMES ON THIS NET WE SAT HERE AND TALKED ABOUT 30 TO 35 TIME MULTIPLE ON THE S&P 500 IS WHERE EVERYTHING PEAKED IN 99, 2000. YOU HAVE AN NVIDIA AT 17.5 TIMES THE LARGEST THE LARGEST STOCK IN THE MARKET. THAT'S THAT TELLS A LOT. WE'RE NOT TALKING ABOUT VALUATION RISK. >> YOU PICKED UP, BUT YOU'RE JUST YOU'RE NITPICKING OR CHERRY PICKING ON ONE NAME. >> I'M JUST SAYING. >> S&P S MULTIPLE IS HIGHER THAN 17 TIMES AT A TIME WHEN YIELDS ARE RISING. >> LOOK AT THE WEIGHT OF THAT STOCK IN THE. THAT'S WHY YOU HAVE THE MAG-7 MATCHING THE PERFORMANCE OF THE S&P 500. YEAH IT'S GOT A BIG WEIGHT IN THAT. BUT WHAT'S ALSO RALLYING ARE THE EARNINGS NUMBERS OF THE OTHER FIVE 493 STOCKS. AND I DON'T UNDERESTIMATE HOW STRONG THE CASH FLOW IS IN THE IN THE EARN