The green, and tech continues to rebound. Nvidia, back above 800. We will show you some of these mega cap names. Meta, microsoft, alphabet, green, as well. They report their earnings over the next couple of days, that will be big. Tesla reporting tonight it, too, is struggling mightily this year. And the russell 2000, yes, it is up nice again, too. Yields have stabilized. And by the way, on that note, coming up, we will ask former fed chair Richard Clara to when the fed will cut rates, if at all this year. This does take us how to best move in this market. Lets ask our chief investment strategist with charles schwab. Good to see you back again. We had this nice move over the last couple of days. Do you believe in it . How you feeling about this market . The market got a little bit oversold especially in areas that had taken a drubbing and Technology Sector dropped to only 10 of stocks trading above a two day moving average. I do think that enticed some buyers, not to mention the earnings from some of the mega cap names this week, maybe elevating some interest on the buy side. I think it also didnt eliminate the froth, but ease some of the froth, which had been a concern. So, i think we probably revert back to the kind of leadership we were seeing before, but you are going to get these moves on a daytoday basis or some of the lacquered get a bid. You are suggesting that mega cap is going to once again take the lead and stay there . This idea of rotating or broadening is not believable . No, no. I am saying this years winners, until recently, will probably go back into the leadership position, meaning energy, and materials, and financials, to some degree. I think we get these relief rallies in areas that were last years darlings, but i believe more in the persistence on the traditional cyclicals, borrowing more significant weakness that shows up in the economy. So, you are on the same train as jamie diamond, who was speaking today at the Economic Club not too far from here, where he said the economic boom is unbelievable. Even if we go into a recession, the consumer is still in good shape. So, you are playing for the strong and continuing to be Strong Economy . So, i actually think that we may start to see a little bit of pressure on the consumption side of the economy. But, i think the more traditional, cyclical areas represented by given what is going on in commodities, materials, again, financials, i think there was a value trade that kicked in there, and energy, maybe for obvious reasons. So, those are scott, as you know, we relaunched schwab sector views earlier this year after a two year hiatus after we focused on factors, now we focus on both. Fortunately, the three outperformed ratings since we have been launched is energy, finance, and materials, and we have not changed. We think at least near term, that is where you will continue to see performance leadership. How do you think this bull market since the october bottom is based on rate cuts . And how much do you think it was based on the fact that the economy is just a strong, and that matters more than anything else at the end of the day . I think it is more the latter than the former, but i also think the lout rally was driven by what happened with treasury yields, rather than the Parliament Game of expectations around, when will the fed cut, and by how much . The move from 5 of the 10 year yield in october down to 3. 8 was just a powerful tailwind for the overall market and that is why you saw a significant move by small caps during that downturn and yield. The recent turn back up in yields initially was for the detriment down the cap spectrum for zombie Type Companies and more recently started to hit more of the larger cap companies, but i think the resilience in the market has to do with the resilience in the economy. There is a lot of churn under the surface. The average nasdaq member has had a 32 claw down this year, so you dont really get a full picture of what is going on in the market if you only look at index changes. The real story has been under the surface. If we get no cuts this year or maybe one, but it is pushed off way off until the end of the year are you still comfortable with this market as long as the economy reason remains resilient . If the economy remains resilient, we dont get a significant turn up in inflation, i think the market is okay. A significant turn up in inflation, or deterioration in the geopolitical environment, 100 oil, that starts to have deeper effects into other inflation. And the fed is stymied in a slowing economic environment by not being able to cut to combat the slowing economy because of inflation, that would not be a great scenario. If so, it would be the why behind what the fed does. What amazes me, again, this parlor game of, when will they start . How many cuts . There is very little that i hear behind that analysis. I think the fed is going to start fill in the blank july, september. The reason why is, here is what i anticipate in terms of monthly readings on core pce, or core pce services, housing, here is how the base affects work. So, this gets you something close to the feds target, and here is what i expect on the economy, that gives the green light for the fed to start cutting out, so it is more of throwing a star at the starting point. It is about the data and i think that gets lost in the parlor game. The but, a higher for longer idea eventually has an impact, does it not . It affects multiples and it may ultimately impact the economy. We are trying to figure out what exactly higher for longer means in an environment where rates are already backed up. What happens if they remain or backup more . I think you are right, it does affect multiples. In fact, the recent pullback was all multiple contraction. You didnt have it in the denominator earnings, have remained in positive territory. So, i think that was a contributor to multiple contraction. You maybe have started to see some hits on the housing side of things after what was a hope that we were starting to see some recovery when we were in the downtrend in yield. So, yes, that impact isnt just something perspective, it is something we are already seeing. But, i think you have to remember that a lot of the Mega Cap Companies are earning more interest on their cash and they are paying interest on debt. We know the impact on the Mortgage Market has been somewhat muted by the fact that a lot of mortgage owners share turned out their debt and the average Mortgage Rate is lower, a lot of corporations turned out their debt. So, i am not sure im in the camp that believes higher for longer is all good for the economy. But, there have been some unique characteristics of this cycle, especially on the corporate side of things and on the sort of household side of things that has clearly muted the impact, at least for now, of higher Interest Rates. How are you feeling about earnings . Next couple of days are going to be pivotable with microsoft, alphabet, and maybe we can talk about those stocks in the first place, or we are given the reason now what you think, for example, that it is the others that are going to continue to do well. So, it is a pivotal week, because you have, you know, a hefty dose of the magnificent seven, and that can break the nearterm perspective that we have on earnings, because that is clearly where the majority of strength has been come in earnings. But, i think it is the outlooks that are important, too. I think some of the concerns about some of these stocks is that there was a lot of extrapolating of these huge beads, both on top line and bottom line. The real key, given the forward looking nature that is the stock market, whether that can be maintained. But, i would equally focus on earnings outside of those areas, in areas like the effort mentioned sectors of financials and energy, because we have some of those cyclical sectors that as we are now in a reporting season, estimates have actually been trending a little bit higher, relative to where they were before reporting season. That is what i will focus on. You cant say that for all 11 sectors, what is that trend from prereporting season to where we are now . Not just for the current quarter, but for the next couple of quarters. I feel like one of the biggest battlegrounds is small caps. Certainly, a suggestion that they cant do anything in a high rate environment and maybe that is born out of the fact that when rates backed up, they had a rough go of it. So, back at 2000 now, rates have stabilized, they have even come in a little bit. So, we are not surprisingly looking at a russell that is outperforming today by almost double, up 2 . Would you touch small caps here . Welcome a small caps is a big universe. The russell 2000 has, i dont know, 1850 stocks in it. So, in an environment of lower realized correlations, and dispersion, you do not want to go with this trend. And even the Zombie Companies, which are much more dominant in an index like that, it is not just about whether you are a zombie, meaning you dont have special cash flow to pay interest on the debt. It is, what is your actual revenue and earnings profile . You can be a zombie company, but if you have decent, nominal growth, you can grow those revenues and it can be an offset. It is the Zombie Companies in the nonprofitable category that represent the truly nonprofitable companies and that is what i would stay away from. But, i think you have to have a fine tooth comb with the kind of mecca part truck market backdrop that we have now, not as it relates to a category as large as small caps. Lets bring in a couple of other voices now, liz young, and malcolm, cnbc contributor. Good to have you both. Good to be her. Liz, you heard liz ann. What do you think . Hi hi, liz. How are you . I think what is happening with this rally is there is a game of, put this money back where it came from. A lot of this has been macro driven, and liz ann mentioned that it was multiple contractions. She is absolutely right because earnings have held in there, if not gotten better as far as expectations go. So, this was macro driven by rates, macro driven by geopolitical risks rising, and by people worrying that it was going to threaten the cyclical recovery or cyclical expansion that we had traded into for the beginning of the year. So, a lot of that was given back. Now, you are seeing this rally over the last couple of days in banks, in durables, and you are seeing it in small caps. Again, i think that is because rates sort of stopped out, they stopped rising. And because we have this relief that, okay, geopolitical tensions didnt escalate into something larger and spread across the globe. What i am worried about at this point is i think the market is so shortterm oriented that we are hanging on every bit of data, we are hanging on every word of the fed because we dont know what is going to happen with cuts and i am not sure it matters whether it is september, november, december, or 2025. I almost feel like we have come to peace with the idea that the fed is not going to cut rates anytime soon. As long as rates right now are stable, and dont continue to back up, i would almost take the other side of that and suggest that we have gotten okay, we are tired of the feds speak. Lets go ahead and carry on with a good economy, like jamie dimond was talking about, and liz ann agreed with that sentiment on the economy. And that is fine, as long as earnings stay well and the economy is good. That is the key, that last part. We are fine with them continuing to push cuts back, as long as the data stays how it is. As soon as the data turns if it does turn the longer they keep rates high, it will slow things down, it just hasnt, materially, yet. If and when the data does turn and cool off, that is when i think markets will start to grapple with, is it too cool . Are we now turning in the opposite direction . And if they come in with cuts, the timing of that is going to matter because if inflation isnt solved, it is reigniting everything to soon. So, i think youre absolutely right. We are over the fence, so to speak, and i think that is a good thing. But, we are over it, as long as Everything Else is held constant. Well, the economy is not going to all of a sudden fall out of bed tomorrow. Not suddenly. Interest rates have come down, but they are still expected to be positive. Now, the bar is so low, it doesnt seem difficult to leap over it. The earnings, or the economy . The earnings bar. Well, the earnings bar for q1 actually was never that high. And for q1, i dont think that is about what happened in q1, it is about looking forward to what is going to happen in the rest of the year and can we justify these valuations based on what ceos say will happen for the rest of the year, and i think companies will be punished if guidance isnt raised, like it has been raised for the past few months or so. So q1, the hurdle is low but i dont think it is low, it is not as much as the low as it is about actual guidance for 2024. Malcolm, golds as we are still vulnerable. Berkeley says to yield any bounce for the higher yields. After what the two ladies have to say, what is your opinion . I am not sure we will see cuts at all, and that is basically where i have gone to. I want to talk about what else is on the table, besides just the inflation conversation, there is an election that is going to happen later this year, and what we have to keep in mind is that the Biden Administration has a conflicting goal in mind right now with jerome powell. Jerome powell cares only about inflation. The Biden Administration is focused on jobs, as well. As long as jobs stay strong, inflation is going to stay a problem. But, if you are a sitting president who is looking to get reelected, you have to be focused on keeping that jobs number and employment rate of up more than you care about inflation going from 3 to 2 , because consumers arent going to notice the difference between 2 or 3 but they will notice if you have a job or not. That is what is going to come in and make a significant difference as to whether powell will cut or not. If we dont get any cuts but by july, how can you initiate it than without it looking political . What if we dont need to worry about cuts until later in the fall . I mean, lets just take the fed chair at his word, when he suggests over and over that they are not going to be political and politics are not going to have anything to do with it. Lets just assume we believe him, for the arguments sake, even if you dont. I dont, but i will take the setup you just gave me, and i will say do you feel like we need rate cuts . We need it in certain parts of the economy. You mentioned earlier small caps, and you mentioned earlier that the mega cap tactic, to rotate back, put the money back where it came from. For everybody else that is not a mega cap name, i think Interest Rates will matter. Goldman put out a piece earlier this week talking about how within the russell 2000, i think it is 20 or so we are at a floating rate. Within the s p, it is just 6 . If you consider, how much is that risk . The longer we go higher for longer, you have to start to wonder, windows the reckoning start to come . And i think that does happen later in the year. Liz ann, you made the point that there are a lot of other areas outside of caltech, and outside of the small caps, and the 1850 stocks, you said we are in that index that could still work. And if you want to call this a high rate environment, fine, 4 1 2 on the tenure, what have you, whatever. But, it sounds like you would take the other side of malcolms argument . Well, i think you want to stay up in quality and that has been a quality of ours for some time. That might seem like an obvious statement. Why would anybody want to be in lowquality companies . But there is a point in the cycle when there is leverage to a big turn up in the economy, a move down in Interest Rates, often when you are coming out of a recession, that it does make sense, at least for a short time to go down the quality spectrum where there is that leverage, going into negative earnings territory. Clearly, i dont think that is the part of the cycle that we are in right now. So, it is sort of this mix we have of the sector biases that are more traditionally cyclical, but staying up in quality, looking for strong Balance Sheets and high interest coverage, and strong key cash flow, and play it in that combination of both sector analysis, as well as factors. Malcolm, you are the one who is heavily invested in the mega cap names, so you need these stocks to continue to be standouts. Do you think they will be . I think we have to consider that investor psychology has changed. Where we would normally think about safe havens, things like staples, and treasuries, and maybe utilities, we are now looking within mega cap tech as our safe haven trade, that is why we are putting the money back where it came from. I think we have to recognize that investors dont really care about the 10 year yield being a ford half percent, or even 5 for the entire year, if you can get that in every quarter within the s p, and the major s p constituents that are, to your point, helping my portfolio. Are those mega cap tech names that we are focused on this week. That is where the market has shifted, even though we want things to go back to the way they were. I just dont think nearterm, that is the market we are going to get. You continue, liz young, to make the argument back toward the short end of the curve, right . It ordered today. You want to be able to buy the two year, some six months ago, and the stock market went off to the races, and here we are again. And you like that, still. I continue to believe that we are in an elongated, late part of the cycle. So, what do you want in that part of the cycle . Largecap, dividend paying stocks, you do want to treasuries. Because at some point, if the economy hits the skids, people get scared. Or, at some point, the fed normalizes policy, yields are likely to come down. We also have done some analysis last week on, what is the upside risk in yields in the two years from here . It turns out the upside risk is lower than the downside move can be, given all of the uncertainty that is out there. So, i am willing to stomach a little bit more move in the yields in the two years to benefit from it on the other side. I am confident sometime in the next two years, the fed will have to cut rates, so that is where i sit. I think most people would be in your camp on that. I enjoyed it. Everybody, we will see you soon. Lets send it to kristina partsinevelos, for a look at the biggest names moving into the close. One of those is spotify, their best day since october 2019, precovid. After surprising investor