Dow Win Streak vs. Tech Sell-off, AmEx Shares Slump, Pres. Biden's Meeting With Major AI Companies 07/21/23

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David Faber (0:31)

Market insight and analysis. You're listening to the opening bell of CNBC's Squawk on the Street.

can Good Friday morning, everybody. Welcome to Squawk in the Street. I'm David Faber, along with Sara Eisen and Mike Santoli. We're live from Postline at the New York Stock Exchange. Jim and Carl have the morning off. Let's give you a look at futures as we get ready to start trading for the final day of this week. You can see set up for yet again, a move higher.

And our roadmap does start with, well, overall technology stocks, for example, bouncing back. This after the NASDAQ did stuff for what was its worst day since March.

Sara Eisen (1:12)

Plus, speaking of big tech, top AI companies like Microsoft, Meta and Amazon set to meet with the Biden administration later today after signing a White House pledge over AI risks.

And Amex shares falling in the pre-market despite posting another quarter of record revenue. We're gonna go through the numbers, figure out what it means about the consumer.

David Faber (1:32)

But let's start with the markets, of course, after what was the sell off yesterday, at least in technology. Although again, you did have other indexes a bit higher.

Nice to be able to turn to Mike Santoli at this time of the morning and just sort of give us a sense as to what you're watching, what you're thinking about as this weekend's. You know, and I wonder given we're only a little bit through earnings season, but we're getting there, I guess.

Mike Santoli (1:54)

Absolutely.

David Faber (1:54)

Are multiples higher because earnings really have not been?

Mike Santoli (1:58)

Yeah, multiples definitely have run higher. I mean, the whole real market recovery this year has mostly been about rebuilding the valuations because earnings, even though they've stabilized in terms of forecast and in terms of results, they haven't started to grow again. But I think that yesterday was interesting as an excuse for people to skim a bit off the biggest NASDAQ stocks with the Netflix and Tesla kind of mixed results. And so therefore, I do think that along with the fact that pretty much everybody has been on this theme of saying, what more can the very largest NASDAQ stocks do for us in the short term? Therefore, market needs to broaden out the market has been broadening out. We have seen better performance by the average stock and some laggard groups like Pharma, like the financials.

Also, there is this looming rebalancing of the NASDAQ 100 index. It's happening at the end of the day to day. I think most of the mechanical impact of that, almost all of it really registered on day one, a week ago, Monday. And then the NASDAQ 100 relative to the equal weight, you see there, it's been about two percentage points outperformance by the equal weight since that day. So that to me showed you that we know that the weights of the very largest stocks have to come down. By the way, the QQQ ETF, which follows this, is maybe a couple of others that indexed to the NASDAQ 100, it's like $300 billion.

The stocks that are having their market caps reduce are $10 trillion collectively in market caps. So, you know, dollar for dollar doesn't matter, but if it creates an excuse for people to say, these stocks are outgrowing the market, I mean, essentially, then it could continue in that fashion.

Sara Eisen (3:42)

You summed it up, the JP Morgan trading note this morning said, you know, as it relates to yesterday's 2% sell-off, was it the NASDAQ rebalance? Was it the 44% run-up year to date and the triple Qs? Was it disappointing earnings? Was it rising yields?

Yes, all of the above, right? So we had a bad day and the question is, do you read into it that a broader correction is coming after what has been a really big win streak led by tech?

Mike Santoli (4:05)

I mean, there's obviously a pullback waiting for us somewhere. I think we have been building toward a level of common complacency and technical, you know, extended...