On Monday's episode of Market Domination, hosts Julie Hyman and Josh Lipton delve into the intricacies of market dynamics, company updates, and the ever-evolving tech sector.

Markets take center stage as Wall Street finds itself awash with growing optimism surrounding the S&P 50 (^GSPC). Roth MKM Partners Chief Economist and Macro Strategist Michael Darda joins to discuss why several firms have raised their year-end price targets for the index, buoyed by promising growth prospects.

The show then turns to the stock reactions of notable companies, including Adobe (ADBE), Virgin Galactic (SPCE), and GameStop (GME). The video game retailer is in focus after the company saw shares plummet following its annual shareholder meeting.

As the episode draws to a close, the spotlight shifts to the Technology SPDR Select Fund (XLK), which is on the brink of a rebalancing due to the high concentration within the industry. Deepwater Asset Management Managing Partner Doug Clinton joins the conversation, offering his outlook on the best tech sector plays.

This post was written by Angel Smith

Video Transcript

Hello and welcome to market domination.

I'm Julie Hyman.

That's Josh in live from our New York City headquarters.

We are giving you the ultimate investing playbook to help tune out the noise and make the right moves for your money.

And here's your headline blitz getting you up to speed one hour before the closing bell rings on Wall Street.

There are gonna be multiple data points between now and the end of the year that would 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 dopo, there's going to be updates on inflation.

If we continue to see inflation moving in the right direction.

I think the fed is going to feel a little bit more confident that they'll be able to cut more than once this year.

Investors aren't all that confident uh about anything outside of the A I uh phenomenon and we haven't seen the big uh broadening out of earnings outside of the A I phenomenon.

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

Uh really, you know, seeing a big increase in earnings, 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 global taxi platform out there, not only from a hardware cost perspective, but also from the 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.

We got one hour to go until the market close.

So let's take a look at the major averages here.

We are seeing them push higher and in fact, we're seeing a number of Wall Street strategists also get more optimistic today.

Evercore.

I si coming out with the highest target on the street for the S and P 500 that's our friend Julian Emanuel putting it at 6000.

Potentially.

Meantime, Goldman Sachs and City strategists are also their targets for the S and P 500 to 5600 each.

So we've got the dow higher today by about 180 points, not a lot of fundamental news pushing things higher.

Although we are gonna see some treasury and corporate bond issuance this week that's pushed around the bond market.

We'll get to that in a moment.

The S and P 500 pushing to a new record today.

With this 9/10 of a percent increase that we are seeing and the NASDAQ as well, six days in a row that we have seen the NASDAQ composite set new records.

Now I mentioned the bond market.

So let's get a quick check there because uh we are seeing a little bit of pressure on prices, a little bit of uh uptick in yields happening here today up by 66 point still quite low though at 4.28%.

And then if we look at how all this is translating into the sector action here with those yields higher.

A little bit of pressure on utilities and real estate which tend to be interest rate sensitive, consumer, discretionary tech and industrials are helping lead the pack here and then quick check on the NASDAQ 100 here today because we see once again despite repeated discussions about how narrow the leadership is.

It's still narrow, NVIDIA trading and a record again, apple pushing higher Microsoft pushing higher.

So we are still seeing that ultra large cap tech strength, Josh, thank you Julie the NASDAQ and S and P 500 on track to close at new records of several big tech names helping drive the rally for more on the latest moves.

We now welcome in Michael Darta Roth MKM, partners, chief economist and Macro strategist Mike.

It is always good to see you.

So let's start here, Mike.

So Goldman raises his 2024 target for the S and P 500 to 5600 citigroup does the same ever core Mike goes to 6000, so maybe start there, Mike.

You know, how are you feeling about this mark?

Are you feeling as optimistic as some of your colleagues, Mike?

Well, thanks for having me on.

Always my pleasure.

Uh No, I am definitely not feeling as optimistic as uh some of my competitors out there.

Uh But look um credit to where credit is due.

If you've been bullish and you've just been following the trends and you've been following the momentum, that's been the right play this year and it was the right play last year.

So I think what's happening here is this, this market just taking off and now the chase is on.

Uh and folks are just going with the trend and extrapolating that out into the future.

And you know, that's a double edged sword because if the trend doesn't change, then, you know, you'll be right.

But if it does, then, you know, that's like walking straight off a cliff.

So I am, I am not optimistic.

I mean, it's gonna be difficult to time, but when valuations get this stretched and the leadership is this narrow, uh I think we are set up for pretty weak future returns.

Uh But you know, the timing is a real challenge.

Hey, Mike, it's Julie here.

So even if it's going to be difficult to time maybe you could give us an idea of what the contenders are for being that catalyst though, because things usually don't just change just because valuations get stretched.

For example, usually there's some kind of trigger.

What are your candidates for that trigger?

Yeah, great question.

I I think we have two dominant themes right now.

One is obviously the A I frenzy and so there is a tremendous amount of optimism that A I is going to bring tremendous broad-based benefits.

And so that's why the valuations are are going up.

Um you know, we have the Infotech index within the S and P 500 at a 34 multiple.

So that's even a little bit above where we were in late 21 early 22 when valuations got really high and then we had a more than 30% downdraft in in the sector in 2022.

Now, the causes were a bit different people, you know, were worried that we might be going into recession, we had rapid inflation, rapid rate hikes.

So this time around, I think something has to interrupt the story in terms of A I delivering all these benefits and that's going to take time to play out right now.

The expectations are quite high and the higher they go, you know, I think the bigger the risk is that we ultimately end up a bit disappointed about what's in front of us.

The other dominant theme in addition to the A I frenzy and a lot of enthusiasm there is the soft landing story which has been playing out, um, fears that, you know, the economy wouldn't make it through last year without a recession and we made it through.

Uh, and then some and, you know, payroll growth has stayed quite strong even though the, the Fed did all of these rate hikes, the most rapid, you know, tightening campaign in four decades and the economy is held in there.

And so the soft landing and we've essentially been in a soft landing since the Fed stopped raising rates last summer.

And so, so that theme has not been interrupted yet.

And there's a, you know, there's a lot of enthusiasm over the fact that the fed likely will cut rates, that will be the next move.

And I think the assumption is that any rate cuts at any time for any reason will simply be bullish.

And I would challenge uh those assumptions, all three of them.

Typically when the is cutting rates, things are going wrong with the business cycle.

And we don't have to look back that far to see markets peaking and starting to roll over just as the Fed is starting to ease.

That actually happened going into the 0709 recession, one of the longest and worst in history, one of the most significant bear markets.

So I think the idea that any rate cuts for any reason at any time is simply bullish.

I think we're on, you know, pretty flimsy ground with that assumption.

So, so Mike, so given that sort of that broader view, you've got, that's your backdrop for, for equity investors who are listening right now.

What, what are the investment implications of that, Mike?

Well, I think the implications are we have to be very careful about just chasing the momentum here.

Um You know, there's an old Bob Farrell quote that parabolic rising markets do not correct by going sideways.

And so it's very unlikely when you're in a frenzy like this with a lot of chasing uh that it just simply, you know, Peters out and levels off.

And so I my, you know, my advice would be not to get involved in a chase, not to be using leverage.

And then, you know, really just the basics uh diversify, maybe look at some areas that have been laggards all within the context of putting together a multiyear portfolio.

I mean, most of your viewers are probably not day traders.

I don't have any advice to anyone day trading.

Uh So if you're investing, it really should be a multiyear horizon.

And within that context, I would look at some of the areas that are lagging behind value stocks, maybe down the capitalization structure.

We have a rare moment in history uh where the Russell, the small cap stocks are at a lower forward valuation than the S and P 500 which has been dominated by these big big tech players.

So, you know, that's not a call for the next week or the next month.

But I think over a multiyear horizon with the individual investor should be doing is diversifying, not chasing momentum and maybe looking at some of the laggards as a contrary play and Mike, um when we try to figure out what this next period of time is gonna look like as well.

I one of the charts that caught my eye um in your latest note, you, you were talking about the inversion of the yield curve, right?

And the fact that that is usually a recession signal.

Um And you also have a chart of how stocks have done after past um, inversions and stocks right now have done a lot better for a lot longer than we have seen in prior cycles here.

So, what do you think that reflects?

And do you think that, you know, we're in that the recession is going to come even maybe before the end of the year or early next year?

Yeah, thanks for that question.

So the yield curve depending on which curve you look at inverted, you know, anywhere between uh the summer of 2022 in the fall.

So, you know, almost two years ago now and obviously, you know, the fall of 2022 was the bottom of the S and P 500 after a 25% correction.

And so we've zoomed from there.

It's been an enormous rise and it's mostly the price level because earning earnings estimates are only up 7 to 10% or so from there.

So we've had a huge valuation expansion for the S and P 500 because the economy didn't fall into recession.

And people are very excited about A I.

So it's been the best performance for the S and P 500 post inversion in history.

Now, part of that is that we also fell 25% going into the period where the, the curve first inverted.

And so, you know, what does that mean for the future?

You know, I think it means that we have a lot of gains in the bag here and the expectations are exceptionally high and maybe we shouldn't just assume that we're out of the woods and that the yield curve has failed as a recession signal, the the longest business cycles have survived after an inversion has been 2425 months.

And, and we're almost but not quite there uh in this environment.

And if you just looked at the equity market or, you know, risky credit, you would think, you know, no trouble ahead, everything's great.

Uh But there are signs of slowing and, you know, even a potential downturn, shaping up with the unemployment rate.

Now, 6/10 of a percentage point off of the lows of the cycle, that's only something that we've ever seen in history at the very end of the business cycle expansion or the early, early innings of a downturn.

GDP even payroll growth can get drastically revised and it's not uncommon, uh, or unprecedented rather that equity markets, you know, run right up until a recession hits.

I mean, in 1990 the S and P 500 peaked right as the business cycle peaked in 07. the S and P peaked just two months before the recession started.

So it's not like, you know, the the equity market is going to give us an all clear signal for, you know, quarters and in years ahead, sometimes it's just right on top of the business cycle.

Not really looking uh forward as much as people would think, Mike.

It's always good to get your insight.

Thanks a lot.

Appreciate your time anytime, my pleasure.

Thank you too.

Gamestop's annual shareholder meeting is taking place today following a technical issue last week that cut the meeting short, Yahoo finances and s has been following along.

She joins us now for more.

We even I believe got a few words publicly from Ryan Cohen.

Yes, that's right.

Uh Julie, he spoke at the top of the meeting in some prepared remarks and basically what Ryan Cohen said, he's the chairman and CEO of gamestop.

He said with respect to retail operations, we plan to continue reducing costs and focusing on profitability.

He also cited a smaller network of stores.

We've known that the company has been cutting costs.

He also said that this is really sort of the money where he sort of nods at all of the meme trading that has been taking place over the last month or so.

We are not here to make promises or hype things up.

We're here to work now.

The stock is down 10% now, but it was down as much as 15% during the meeting.

The company didn't say much as to how they are going to use all the cash that they have accumulated over the last few share of rings.

Remember that in this past month, they have offered millions of shares and they have raked in about more than $3 billion in proceeds from those sales.

The general counsel during the meeting said that they were getting a lot of questions about the future of gamestop plans going forward, but he wouldn't be commenting beyond what Ryan Cohen commented beyond those comments that he gave at the top of the meeting.

This all started really when we know last month when we saw the meme rise uh rally after Keith Gill started appearing on social media and uh the stock has been on a real whirlwind as far as Keith Gill A K A Roy roaring kitty.

He did, he did post more than an hour ago, a picture of John mcenroe.

He's one of the famous tennis player from the eighties known to be sort of controversial uh uh so to speak on the court.

So make of it what you will with that message, I don't know what to make of that.

He pulled a mcenroe.

No, then he would be throwing a racket mcenroe has mellowed a lot over the years.

All right, thanks.

Appreciate it.

Well, we're just getting started here on market domination.

Coming up more fed commentary today signaling one rate cut this year, we're going to speak to a former fed president later in the hour about the path ahead for the fight against inflation.

Plus tomorrow, we'll have an exclusive interview with Federal Reserve Bank of Boston, President Susan Collins.

She'll be discussing a rate cut trajectory in our four o'clock hour and this week, Yahoo Finance will be bringing you inside the 2024 can lines, International Festival of Creativity.

You'll be hearing from the movers and shakers in the world of marketing, advertising, sports and media.

Stay tuned, more market domination coming right up.

Let's check it on a few training tickers from Yahoo Finance right now.

Auto desk is on the list.

It's higher by about 7% on reports that activist starboard value has a about a $500 million stake in the company.

Yahoo Finance is at the 2024 cans, Lions International Festival of Creativity and had the chance to speak with Auto Desk's Chief Marketing Officer about the report.

One of the things that we are focused on is listening to our shareholders, right?

So we wanna hear what all our shareholders have to say, right?

As a board, as a management organization, we're focused on making sure that we're listening and, and you know, we, we take constructive input.

So we're making sure that we're learning, we're listening is important.

But, you know, we very confident in our strategic direction.

We're confident in how we are operating as an organization.

We just recently released our first quarter earnings for 2025 we had a 13% year over year increase in constant currency.

So we're proud of the result and we will continue to improve and continue to work.

So saying, you know, they're listening to shareholders, Jeff Smith at Starboard is not your typical, you know, everyday shareholder though and he wants some changes uh at the company wants governance improved according to the Wall Street Journal and that um margins need to get better as well.

Yeah.

According to Bloomberg, he has thoughts about a range of issues.

Julie Jeff does expenses, capital return acquisitions, wants these changes to the board apparently filed a lawsuit, get a delay, oo of the company's annual meeting.

It was set for, I guess next month, mid July, but trying to force them basically reopen that nomination window, right?

Because the company had been looking into its accounting practices and had found some, you know, stuff that maybe wasn't up to snuff, but then came out and ended up filing, um, UC DOJ.

Yeah, exactly.

So they ended up just coming out and coming out with their earnings as expected.

They didn't have any material changes to that.

But nonetheless, Starboard says they want to get that window reopened, as you said, the meeting is set for July 16th and so they want more time to be able to nominate.

We'll see how it plays out.

We will.

Here's another one.

Adobe being sued by the FTC now alleging the software company violated consumer protection laws by making it too difficult for consumers to cancel their subscriptions and sponsor do be saying our priority is to always ensure our customers have a positive experience.

We are transparent with the terms and conditions of our subscription agreements and have a simple cancellation process.

We will refute the FT CS claims in court.

So we're gonna fight in our hands, Julie Bloomberg.

Uh by the way, does Cite Bloomberg cites an FTC official saying Adobe trapped customers into year long subscriptions through hidden early termination fees and numerous cancellation hurdles.

But sure Adobe's response, they're clearly uh putting up a fight and going to court on this one.

Yeah, I mean, we've all had the experience of having a hard time canceling subscriptions for various things and there are rules in place to try to prevent that from happening.

Um I saw one report that if you have the suite of apps, uh that Adobe Photoshop et cetera.

$700 is around the cost that you can incur.

And according to the FTC complaint, it has to at least partly to do with when you cancel.

In other words, if you don't, if you sign up and you don't cancel within a certain period of time, then you can get sort of a prorated penalty.

You can't get out of it easily.

Again, that is what the FTC is alleging here.

It was a 2010 consumer protection law that set the parameters for all of this that was designed to protect online shoppers.

And I, I had read that actually, Doby had disclosed late last year the FTC right was investigating subscription practices.

So pro you know, not a huge surprise here, I think for the street.

Right.

Exactly.

Although we don't always know what the outcome of this is.

And now we know in this case, what they're going ahead to try to do.

All right, final one here, check out shares of Virgin Galactic that continue to slide coming after the space companies.

Uh one for 20 reverse stock split taking effect today.

So we discussed this one, Julie.

Um obviously the company founded by uh Richard Branson reverse stock split, which we discussed the company looking to keep the stock price higher so it can meet certain requirements to stay listed.

Um And the issue here is I think maybe investors understand that probably, you know, things aren't going so great.

Often if you have to make these kind of moves and you can see the reaction there.

Yeah, I, I was looking at the sort of historical trajectory for the company, remember it came public in 2019, it was a DP, right?

A special purpose acquisition company.

Um, so came public through that kind of vehicle that was very, very popular, sort of in the early days of the pandemic.

The record price for it was 5591 in 2021.

Um So obviously, it's come way down from there.

And as we just so on Friday, the, the board voted to authorize this one for 20 reverse stock split.

And today it became effective.

That's why you're seeing the stock price is higher than it was um on Friday.

And as you say, if a stock trades below a buck for 30 days, it is then sometimes depending on the exchange eligible for delisting.

So that indeed is what this was aimed at stopping.

And as we talked about the other day too, the company has paused.

It's uh it's space flights because it's trying to now develop a new plane.

Um And so investors aren't gonna get anything from it for a little while.

In terms of news by Barons, reminds me that Barnes and Noble did a one for 101st so textbook sellers space tourism companies.

It's a trend.

They, they share a lot in common apparently still to come as the A I race heats up, Cadell be a major competitor in the hardware space, going to break it down in our call of the day.

On the other side, the Federal Reserve searching for more confidence before starting the rate cutting cycle.

Minneapolis fed President Neil Kashkari hinting at December as potentially the time for a cut this year.

And Philadelphia fed President Patrick Carer said one cut by the end of the year is now his base case.

But as the central bank awaits more data to inform future policy decisions, the risks to waiting begin pulling into focus, former Chicago Fed president and Ceo Charles Evans is joining us now to discuss Charlie.

Thank you so much for being here.

So there's a lot of chatter about this now and about uh the balance of risks here.

What, what is your outlook for?

How many cuts we could get this year?

Yeah, sure.

It's a very interesting uh situation.

The Fed has been looking for inflation to come down now for quite some time.

I mean, in um 2022 inflation hit 9% on the CP I 7% on the PC and it's much too high.

That's what every fed participant says.

And so they're looking to get it down to 2% sustainably and they've made great progress recently.

Um and labor markets have continued to be quite strong and so with uh core P CE at about two or three quarters right now, they're still a ways from that 2%.

So, as you just mentioned, uh 2% 2 participants just today sort of indicated one rate cut.

Uh This year is what their baseline is.

They're looking to have more confidence that inflation is gonna start coming down from two and three quarters to 2%.

And that's the hard part.

Um And so they're going to be looking for more months of uh improving inflation before they even really talk about.

I don't know, should they cut rates in December or, or what?

And what did you think there?

Um Charles just in terms of your own time.

I'm I'm interested because you, you, you saw Neil Kashkari over the weekend on another network, Charles and he was suggesting, you know, it's reasonable to think maybe the fed now, you know, it waits until December.

Does that sound like, you know, the timeline?

That makes sense to you, Charles?

Well, I was not surprised that the um media and sep for 2024 was only one rate cut this year.

The FO MC has been talking uniformly about how they need more confidence, confidence is what they need.

They are not very uh detailed, they are not detailed at all in what it takes in order for them to become more confident.

And so um it's this um currently, you know, somewhat opaque process as to how many good inflation reports are they going to need to see before they say, ok, I think we're finally going to get down to 2%.

They have the benefit of a strong economy right now.

The unemployment rate is 4%.

Um, you know, historically, that's quite low and the funds rates at 5.3%.

And they must be asking themselves why should I cut rates early until I absolutely know that I'm going to get down to 2%.

The economy is not really struggling, it is not struggling because of this, although individuals of course are, are struggling with uh higher debt interest costs.

Um So I, I think uh you know, I don't know how many good inflation reports they're gonna need to see and I don't know for sure if the most recent good inflation report is going to continue.

I'm hopeful that that's the case and if it is maybe they start thinking earlier than December.

But uh right now December looks like uh the modal bed and it definitely seems as though Federal Reserve members right now are are by and large more concerned about our re acceleration of inflation than they are about a slowing of the economy.

But we last week had the chance to talk with Allianz Chief Economic Advisor Mohammed Arian and he is not so convinced that that's sort of how the balance of risks are looking, listen to what he had to say.

So I think Chad Powell is correct in pointing out that there are two tails to the soft landing.

The soft landing is what he's targeting.

Um, but there are risks on both sides.

I think what he misses is the balance of that risk that the balance unfortunately is in favor of them being too late and the economy is slowing more than it should.

So, I, I'm curious, Charlie, if you think that the fed is appropriately cognizant of that risk, that Mohammed outlines.

Oh, I, I'm confident that they are cognizant of that risk.

I mean, Jay Powell has gotten that question at, you know, press conferences and he, you know, has said we are mindful of our dual mandate responsibilities and whether or not um you know, the labor market is going to soften whether or not demand is going to soften at the moment.

There's not enough evidence that that is actually happening now.

That does seem unusual because the funds rate has been at 5.3% for quite some period of time.

And um you know, interest rate, interest costs are higher.

And so that must be getting in the way of some investment opportunities that businesses would like to undertake.

But they really um are committed to getting inflation down to 2%.

They are undoubtedly embarrassed by the fact that inflation went up to 9% on the CP I 7% on the P CE and it's their job to get inflation down to 2%.

They don't want to get stuck at 22 and three quarters percent.

I would say that the risks are not that the most likely risk or not, that inflation is going to re accelerate the most likely upside risk is that it's going to stall out, that it's going to require a softening economy in order to get inflation down.

I think they're mindful of that.

They're looking for softening and if they get it then they're going to sort of try to split the difference probably, but they're really committed to getting inflation to 2%.

Um That's a very stiff performance bar and I think that's perhaps what made uh Mohammed Al Arian a little bit nervous that because they're focusing on that, they might not pay attention to the softening.

I'm pretty confident that the FO MC is going to be mindful of all of those things.

Uh Charles, another question I got for you switching gears a bit.

Retail sales tomorrow.

Charles, I should get your take.

General take on the American consumer.

How healthy, how, how resilient do they look to you?

The consumer has been surprisingly strong, they've been resilient throughout um you know, this episode.

Um I think that the, the high inflation has taken a toll on households.

Uh That's absolutely the case.

That's what every FOC member says for quite some time.

I would say that, you know, at the lowest income groups, they have seen stronger wage growth in part to make up for the high inflation.

It's still the case that food prices are high, gas prices are high unaffordable housing continues to be highly unaffordable.

Uh But the skew in income uh inequality, I think is sort of uh probably left us with stronger uh consumer, uh a resilient consumer uh because of that.

And yeah, it undoubtedly retail sales will soften at some point because of the higher interest rates.

That's part of the Fed playbook over some period of time.

But at the moment, um looking at the economy, it still looks resilient, it still looks uh strong enough.

It looks like a soft landing in terms of uh the economy being at trend growth and no evidence yet of the unemployment rate moving materially above 4%.

Charlie.

Thanks so much for your insight.

Appreciate it.

Former Chicago Fed President Charles Evans.

Thank you.

It's good to be here time now for our call of the day.

It's on Dell Technologies.

It's getting a lift as Morgan Stanley reiterates its top pick status on the stock noting that Dell will remain an outperforming this year.

The shares are up some 6% here.

Um And the the company is uh has a $155 price target.

Um from Morgan Stanley, the analysts over there, Eric Woodring, um talking about meetings that he and his team had with management here and he says those meetings reconfirm the company's competitive advantages.

He talks a lot also uh about the company, um doing well in terms of cloud service providers that, that, that they are going to be the main core demand driver for Dell's A I servers.

In other words, cloud service providers are their clients and there's a lot of demand for Dell's servers right now.

Um And so that's helping the company's numbers.

Yeah, this is, uh, I mean, this is a very bullish.

No.

And Morgan saying they went out there to Texas, they met with management clearly liked what they heard.

Um for a number of reasons really.

I mean, they talk about how, hey listen, bottom line, they look at A I server momentum.

They think those concerns about A I server margins.

Julie me, you know, we were talking about that after they reported, they think those are misguided in their words, they see a path to higher margins over time.

They talk about better storage ex execution and P CS they say are on track to benefit from enterprise refresh and just given Dell is over index, the commercial market.

They think um that's gonna be one of the key beneficiaries.

They will be one of the key beneficiaries of that kind of enterprise PC refresh they expect later this year into next year.

Yeah.

And Dell has already been a beneficiary, you know, to be clear here, the stock is up 80 8% year to date, which is pretty incredible.

I mean, we're talking, I I find it so fascinating.

Some of these sort of old tech companies that now are reinvigorated because of the um A I wave if you will and Dell is one of the prime examples.

Yeah, Dell has a great A I story to tell and cle investors are really buying it.

And Morgan Stanley is saying, listen, they would, they would take advantage of recent post earnings under perform performance by the dip.

They said on what they say is a leading A I infrastructure player.

Um So very bullish note targets 155 or they even outline a bull case where the target they say go to 200 so big fans.

All right, moving on paper and for products getting a bullish outlook on Wall Street Bank of America, raising its forecast across the sector and lifting grif to a buy, citing a better outlook and corrugated trends here with Moores B of a security senior paper and packaging analyst, George stats George.

It is good to see you.

So uh you cover a lot of interesting names, George, you know, you got some consumer it looks like.

So some industrial you do also cover these areas like container board, uh like corrugated um maybe just start there, George, what are the trends you're seeing in those areas just in terms of growth, backlog pricing?

Sure.

And first of all, thanks for having me, it's a pleasure being here.

So why should anyone care about the corrugated box market, uh basically 80% of the economy moves through corrugated boxes.

And even though the economy is progressing, we've been going through a packaging recession as you've been destocking for other reasons.

Really.

Since the second half of 2022 we've been doing a survey of the independent box makers to get a check on the packaging markets and the publicly traded companies for the last 20 years.

And that data, both our survey and coming out of industry data has been pretty negative really since the second half of 22.

Even through the first quarter of this year, vines were relatively flat off a very easy comparison.

Last year, first quarter box shipments were down 8%.

So that's your set up in our survey, we saw a very large pick up in the growth expectation for the next two quarters out of the independent box makers that we survey, we went from a 0.6% growth outlook to over 3% which in my world that's significant.

Additionally, what we're hearing from the respondents is an overwhelming sense that prices would continue to move higher.

It's mostly driven by cost, a lot of inflation, the cost structure, but nonetheless, a view that prices would continue to head higher.

And then also in some of the data that we look at, there is some encouraging things not to say it's all black and white positive.

But amongst other things, we saw a little bit of an uptick in the outlook for e commerce for the survey based on what we're getting from an independent.

As a result, we raised our forecasts 2 to 4% on pricing and on earnings as well.

And we talked about the companies that are affected.

Uh, packaging Corp is rated to buy.

It's been probably the best performing container board company over the last two decades.

But grif, uh, which is part industrial packaging, part paper board and within their container board, they've been lagging, they're down 20% year to date versus the market.

Uh We think their trends are getting better.

We think there's 30% upside and, and hence the upgrade today.

Um and just to get you to elaborate a little bit on some of the driving factors behind this, you mentioned inflation, you mentioned maybe uh an uptick in demand in e commerce.

Can you dig into those factors a little bit and, and sort of what we have?

I mean, because we've been seeing inflation, right?

So was that not, but then the deceleration in inflation?

Is this a sign that maybe there's a re acceleration in certain areas?

Talk me through that a little bit.

Yeah.

Well, certainly we can talk to what we see in our sector.

Let's take the demand sector first.

So box shipments which usually move along with the economy are at 2016 levels.

So the economy has been progressing.

But box shipments themselves have been not moving.

Now, what goes in a box, basically non durable goods, food, beverage, consumer products.

And so logic would say there's been a lot of destocking that's been occurring.

And we've been certainly reading about that over the last number of years.

So the fact that you're seeing an uptick suggests that maybe consumer demand is still relatively good and maybe there is some shipments.

Now, as you're seeing some restocking on the pricing front, uh prices went up.

Round numbers $200 a ton over 20% between the fourth quarter of 2020 through the first quarter of 2022.

Ok. And then you saw prices decline as there was a slowdown as we went through that destocking period as we were saying that recession about $100 per ton.

Meantime, costs are going up labor, freight and the cost of fiber.

One of the things that's very interesting about the packaging sector and container boards.

There are a lot of recycled fiber.

It's a green market.

Uh recycled fiber has gone up when you consider transportation premiums as much as $100 per ton.

So the container board companies are raising pricing now to off that inflation that they're seeing in their cost structure and hopefully because demand is picking up as well.

George, let's let's get some picks here for people too.

So, uh we mentioned how you like greif uh ticker Gef uh stock, it looks like it's in the red this year and over the last 12 months.

But you, you obviously see better times ahead, George.

That's correct.

I mean, the stock is down about 20% year to date relative to the market.

Obviously, the market has been a tough comparison for a lot of sectors.

Uh Greif is a leading producer of industrial packaging, think metal drums, plastic drums, bulk containers, that's call it half the business, but they also have another half that's in paper board.

Uh One of the portions of their paper board business is container board and producing corrugated that goes into ultimately making corrugated boxes.

Now that's been under pressure uh largely because of inflation.

Uh You did see sequentially better trends coming out of their fiscal second quarter which they just reported.

And so based on our research, based on our data, we think that sequential trend will continue to improve into the second half for them.

George.

Thank you so much.

Interesting stuff on your industry.

Appreciate it.

Thanks so much for having me coming up.

The tech sector, getting a lot of love from investors.

Is it time to shake things up or market domination on the other side?

A rebalancing is in order for one popular tech sector.

ETF this is according to Spiders America research for more on what will come of these changes.

Let's get right to Yahoo Finance's Jared blicker, Jared.

You know, we, we look at the screen quite a bit, but I don't always, always break it down.

This represents 11 different large cap sectors and the ETF that represent them for the S and P 500 that would be large cap stocks.

And today we're talking about XL K and in fact, that is the number one performing sector this year in the S and P 500 XL K. This contains Apple Microsoft, NVIDIA and many of the chip names that we have seen performance for this year.

But something interesting has happened because of the out performance of not only Microsoft but also Apple and NVIDIA.

They've done so far, they've done so much better than the rest of the market that we are now facing market, market concentration issues with respect to the make up of XL K. So if you took a look at the S and P 500 Infotech performance, going back, let's say to October of 2022 there is a huge disparity between the performance of the theoretical index value and XL K itself because of this.

Now, currently Microsoft is making up 22% of the index right there.

You can see Apple is 21% and NVIDIA is only 6%.

But if without these rules, we would see each of those numbers closer to 20.

So because of what happened last Friday, that's uh NVIDIA closing higher than Apple with a bigger weight, uh we are going to have them switch place in the index.

So Apple is going to go from 21% of the index all the way down to 5%.

Nvidia is going to go from 6% all the way up to 20%.

And this represents some pretty big dollar movements.

So that's going to be $11.4 billion worth of selling for Apple, which represents an entire day on average and about $10 billion gains, a $10 billion in buying for NVIDIA.

That's about one quarter of the daily volume enough to say that it could cause hiccups in the market except to say that this is very well telegraphed and the rebalancing is expected to happen on Friday.

It's quite possible that we've already seen the market moves out of a kind of representative and that that's because we saw an Apple that closed down on Friday afternoon and that was something that was anticipated.

So the bottom line is, investors are probably ahead of this in this one.

But I think it would come as a surprise to me, the investors that they have been under performing their benchmark index, that would be uh the, the S and P 500 technology index by such a large degree because of these kind of archaic concentration holdings and arch uh concentration rules that are in effect and that are now being applied.

I hope that clears everything up.

Yeah, really interesting and comprehensive look at this whole process, Jared and, and why it's important.

Also, a lot of money follows this stuff.

Thank you.

Tech is on a hot streak as we have discussed frequently, the NASDAQ composite hitting Intraday highs after notching a perfect week in Friday session, five straight record closes while Tech Giant Apple maintains its weekly streak of gains as well.

We're looking at how to navigate the big picture with the Yahoo Finance playbook and Doug Clinton, managing partner, Deepwater Asset Management is joining us now to discuss Doug, it's good to see you and we continue to see these sort of mega cap tech giants continuing to climb here.

I know that you watch them closely, but you also watch a lot of the sort of ones that maybe we don't talk about every day.

So just big picture here.

Are you feeling like things are getting overstretched or do you feel like there is a lot more upside?

We do still feel that there's more upside and the bottom line for us, Julie is we still think we're in the relatively early innings of this A I driven bull market.

It may feel like we're late in the cycle here and we actually just did a survey 1300 people on X, almost 90% of respondents either said they think we're already in a bubble that's about to keep going or crash or that we're not in a bubble yet, we're going to get one and So the bottom line is, it feels like the market is really attuned to the realities of A I right now.

And our view is that it is still early the way to position yourself for it though is I think where you can kind of add alpha and prepare your portfolio properly.

What we like to do in deep water is invest in both the public and private markets.

On the public side, we really like the hardware space.

It's been the outperforming space, the best performing space of the year.

We still think there's a lot of room to go in terms of A I infrastructure spend.

That's still to come on the private side.

That's where we're getting our A I software exposure because that's where the pure play A I companies like a data bricks like a hugging face.

Uh and like Xa I, which we just recently invested in a deep water.

That's where you can find those types of investments.

And hey, Doug, you know, in, in the public markets, these some of these A I hardware names, Doug, you know, Arria, it's had such a, you know, that's had a strong run away.

Doug, would you be, would you be adding there or, or maybe waiting for a pullback at this point?

We do own Aisa, Josh, we still like Aisa and it actually had a great week last week on top of those Broadcom earnings, Broadcom talked about strong networking demands and they actually upped their networking revenue guidance on the, the reality that there is strong demand for Ethernet based products in A I data centers, a risk that has built their portfolio around Ethernet.

And so I think they stand to be a good beneficiary of that trend that we're seeing from Broadcom.

Um and also you, you know, what strikes me as I looked at, at your various picks, whether you're talking about Arria or some of the memory chip makers, like an SK he like a Mikron, is that for lack of a better word, they're sort of the less sexy areas that, in other words, they haven't gotten as much attention, right?

Um, during this whole situation, does that mean was, I mean, the, the stocks have still done well, but do you think that they maybe are more attractively valued than some of those that are getting more attention?

I think some are and I think what's even beyond that is to think about kind of what's been priced in so far, you look at a stock like NVIDIA, obviously, they've had incredible earnings growth that has supported how that stock has moved.

Um I think companies like an ERISA Verta is another name that we like that does Liquid Cooling Solutions.

I think those are stocks that actually still have upside to numbers and that's really what we're trying to find as we look beyond the big cat names like the NVIDIA, like the Broad coms, we want to see that there's still potential that hasn't been fully recognized yet by the market.

And I think that makes these stocks actually probably cheaper than they might appear if you just look at the numbers and Doug, you know, I, I haven't had the chance to talk to you since Apple's Big software show.

I'm, I'm curious to get your take Doug because, you know, the narrative there heading into the show, I mean, at least in some quarters was, well, you know, Apple's falling behind in this A I race and, and, and Tim Cook obviously tried to take the stage and really kind of change that narrative change that story.

Doug.

Do you think he did it?

There's two sides to it.

It's hard because if you're an A I nerd like me, you probably weren't blown away.

We didn't see anything from Apple if you're really closely following the A I space that we haven't really seen before from Google from open A I. Um And so I wasn't blown away, but what I think is important, more important is that the average Apple customer, the person who doesn't care about chat GP T maybe doesn't even use it on any regular basis.

I think they probably saw some features, for example, a Siri that might actually just work for once.

I think that that is a big deal for the average Apple customer when you think about customers that need to upgrade and really drive device growth where we haven't seen that device growth from Apple for the last kind of 18 months or so.

I think those are the customers that matter.

And I think Apple probably did enough with A I to excite them to come and get a new iphone over the next year or two with these A I features.

So, were you one of the folks buying Apple shares sort of the day after the beginning of the presentation as the, as we saw the stock surge to a new record, I couldn't speak to, to kind of recent trading activity for us.

But what I would tell you is this on the large cap side for this whole year, really Google and Meta have been our two favored names.

And the reason is because they both are leaders in the A I generative model space.

I think there's only four companies really that have a chance at creating artificial general intelligence and sort of winning the A I race.

It's open A I, it's Google, it's Meta and it's Xa I Elon's company that as I mentioned, Deepwater did actually invest in that one as well.

We think that's a good space to deploy capital too well.

And that I think that's a really interesting point because a lot of people don't necessarily have access to, you know, you talk about that on the software side in A I A lot of the exciting stuff is happening with still private companies?

So what can people who maybe don't have access to those raises?

How can they get access or as you brought up earlier?

Is it better to sort of play on the vendors maybe to those companies?

I think that's the easy answer is you want to probably look back to some of those hardware companies uh and maybe wait until some of these A I companies come public or if you do have access, if you have a vendor that you can work with to get access to private markets, that might be something worth exploring too.

But I think the easiest path is and I do think the window is open right now for a lot of these A I companies is probably to wait for them to come public.

And I do expect we'll see some of that happening over the next 6 to 12 months.

Doug always great to have you on the show.

Thanks for coming on my friend.

Thanks, Josh, thanks Julie.

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