Closing Bell - Closing Bell: 3-Day Win Streak, Buyer Beware & SAP CEO On I.T. Spending 10/25/22

Episode Date: October 25, 2022

Stocks rallying for a third straight day on falling treasury yields and ahead of earnings from big tech companiesm but Canaccord Genuity's Tony Dwyer says investors shouldn't chase this rally. He reveals how he is advising clients to put money to work right now. Cowen CEO Jeff Solomon discusses how market volatility and higher interest rates will impact the outlook for dealmaking and the IPO market. And SAP CEO Christian Klein discusses the German software giant's strong quarterly results and the outlook for I.T. spending in a recession.

stocks are jumping again extending a strong three-day rally putting the dow on pace for its best month since 2020 this is the make or break hour for your money welcome everyone to closing bell i'm sarah eisen take a look at where we stand right now in the market up 268 high of the day was up 305 going strong look at the nasdaq leading the charge up almost two percent as we are seeing relief in the bond market. There's buying there. That's pressuring yields lower. It's helping those tech stocks and everybody else rally today, except for energy. It's the only sector in the red right now.

Everyone else is higher. The best performing groups, real estate, materials, consumer discretionary. As I mentioned, though, technology up almost 2%. The high of the day for the Nasdaq was up 234, up about 200 right now. Check out some of today's key earnings movers. That is very much part of the story today. Coca-Cola beating estimates, raising its outlook. Stock is responding well.

GM also topping estimates. 3M missing on revenue, citing the strong dollar, which, by the way, is weakening about a percent today. And UPS having a mixed quarter. The stock is lower by less than half a percent today. And UPS having a mixed quarter. The stock is lower by less than half a percent. Coming up on the show today, you will hear from the CEO of another earnings mover, European software giant SAP. We'll get a good read from him on corporate tech spending and how the company is navigating an uncertain market overseas. Very much a bellwether for cloud and software spend. Let's get straight, though, to the market dashboard for a read on this three-day rally

with senior markets commentator Mike Santoli. Where's the pressure on yields coming from? Globally, it seemed like overnight we got some very weak economic numbers out of Europe. It dragged yields down. Plus, I think a case could be made, and I was trying to maybe point to it the end of last week and over the weekend, that you did see a little bit of a capitulation in in bonds just in terms of the angle of ascent in yields and the volatility levels and some of the flows. Now, take a look at where that leaves us, Sarah, with the S&P 500 is giving a little bit of room once again for some hope for the bulls, at least temporarily. This little

downtrend from the August high has at this point been broken. That's a first step. You could look at this chart. There's a way step. You could look at this chart. There's a way of characterizing it as, OK, we spent some time here retesting the June lows. Gasoline prices are way down. Oil is no higher than it was a year ago. Europe has enough natural gas. October is a month when you often have significant lows and upside reversals. So all that together with the seasonal strength, I think, is giving at least an inkling that this could be more.

But there's so much to prove here. You got a couple hundred S&P points to the upside before you could even say that the trend is at risk of changing to a positive one longer term. Now, stocks versus bonds. We talked about what was going on with yields. There has been a little bit of detachment or loosening of that relationship between stocks and bonds. This is long term bonds. That's the price of the bonds going down relentlessly. You see right here in June, they were at the exact same spot on a year-to-date basis. Since then, stocks, no real downside. Bonds have continued lower, so yields

have gone higher. So to me, it's not the absolute level of where yields are. It's the message from yields. If they keep racing higher, that the Fed's still behind, inflation is not calming down. So those two things all together, right now we've had a little bit of a truce between these markets. Yeah, I asked the question on bonds. Obviously, that is a key driver of stocks. Got some weak data on housing, but we know housing is hurting right now. And in a recession, I was looking at some inflation expectations measures, and they're actually rising. We beat the August highs on the five-year, five-years. You know, it seems like whenever you get the sense out there, whether it's the Fed leaving hints that they're almost going to be done or pausing, it does tend to longer-term inflation expectations higher.

Think about it, right? So the Fed is going to back away. Maybe they're not going to wait until inflation has really wrestled to the mat before they stop raising rates. So I think some of that put together. Maybe they're not going to back away. Well, exactly. And that's what we don't know about. And in fact, you know, absolutely.

Talk to us in eight days and see what they're going to do. The market just whips itself into this hopeful period of pausing. Mike, thank you. We'll see what the market's like. Mike Zantoli, our next guest says, enjoy this rally while it lasts because the market, the bear market lows are still not in. Let's bring in Tony Dwyer, chief market strategist at Canaccord Genuity. So is this one of those calls, Tony, where you've seen a short-term bottom but not the bottom for the bear market?

Yeah, Sarah. It's throughout this whole year we've talked about a low versus the low. And historically, it would be, unfortunately, it would be historically unique since it's been a 500 stock index for the S&P 500 to make the low before the two-year bond yield made its peak. So if you count last Thursday as the peak in the two-year bond yield for the entire cycle, that would have meant for the first time in history since the mid-1950 1950s the S&P bottomed before bonds. So you're not convinced that, what, we've seen the highs on the yields? Well, it really comes down to, no, I've been wrong on that already. So I don't think the yield should have gone up so much. I don't think the Fed should be raising rates so much. But ultimately, the call from here is that when we were coming out of the summer rally, we talked

about the fall fall on the show. And what comes after that is the year end rally. Just because you were so oversold, Sarah, in early October, on October 3rd, eight of the prior nine days had less than 10 percent of the S&P 500 above their 10 day moving average. The VIX was at 32. The my weekly stochastic for the S&P was in the low teens. All of the sentiment measures were historically pessimistic. So whether it's a bond move or a currency move or all of the above, the market was like Tinder waiting for an oversold bounce. But again, the whole reason that you really need lower rates, as you know, comes down to if we have weak economic data coming, which I firmly believe we do.

The yield, all the yield curves are telling us that what you need is a way to look through that coming weakness. And that's what a dramatic reduction in bond yields does. It allows investors and traders to look through the economic and earnings weakness so that they're comfortable buying and holding stocks. And I just don't think we're at that point yet. No, I think, you know, we've got a Fed meeting. We've got a Fed trajectory. That's that's sort of unclear, Tony, because they don't know themselves how fast inflation is coming down. What are you gleaning from earnings right now, which always gives us a really good window, I think, into those issues, like earnings and like the economy, and certainly that the Fed should pay attention to. Well, we haven't had enough time, Sarah. I mean, think about it. Six months ago,

they're still buying mortgage and treasuries and quantitative easing. Interest rates were at 0%. The government was giving us money. At that point, it takes time. For example, if you're a company, a company management, which many of the viewers are, you're hiring somebody four months ago. You had to pay a bonus just to get them to walk in the door. You don't turn around within a couple of months and let them go. You need more durability and economic weakness that we haven't had yet. So our call for next for this year or for next year is that earnings will be about five percent below this year. And again, that's some margin compression, some weakness on the top line. But I think that's not recession, though, is that? Well,

no. So back in the last inflation related period, the way I came up with that is when nominal nominal growth stayed positive, meaning sales growth in the 1970s because of the higher level of inflation, even when it came down off peak. So where it really comes down to is the margin compression. And the margin compression, I just took a median of the margins for each sector going back from 1913 to 19 or 1913, 2013 to 2021. So ultimately, it's a guess to begin with. But I think you put it to the right point. It's all about interest rates and the ability to look through the coming weakness. Yeah, I was going to ask about margin compression in 1913. So your advice to clients is to not chase the rally.

To do what? To fade it? To shift into different sectors? What would you be going for? Sarah, to me, the time to, and it's so hard. And I get it. I've managed money before. It's so hard.

When the market is swooning, and those indicators are where I said they were, that's the time you want to start thinking about adding into some exposure. Up 10% on the Dow, up 7% on the S&P 500. I don't think so. Here's why. So we did a study and we looked back. Anytime the S&P 500 since 1950s was down 20% or more in the first three quarters of the year, so through September, your median gain was 7.9% in the fourth quarter. There are only five occurrences, so not that many. Only one was negative, and that was 2008 due to the Lehman crisis. The other ones, the gains in the fourth quarter range from 7.9% to 12%. So if you use that as your gauge, you're looking at we're already up 7%. So that leaves you maybe 1% to 4% upside. Again, by the close of the year, it doesn't mean it can't go up 10% in the next 15 minutes.

But by the close of the year, it should be plus or minus from where we are now, which means I would rather take profits for those that did buy when the market was getting smoked rather than chase the upside, hoping that you're going to get some kind of double-digit gain from here. Yeah, well, these upside days are big. Look, ARK Innovation ETF is up 6% right now. Of course, it's been absolutely hammered down 60% year-to-date. Tony Dwyer, it's tempting, right? It's on the up days, but there's the advice. Tony Dwyer, appreciate it from Canaccord. Shares of $100 billion software giant SAP jumping today on the back of earnings. Up next, we'll hear from the CEO, Christian Klein, about the state of enterprise tech spending and the different challenges that companies are facing

in the U.S. and Europe. You're watching Closing Bell on CNBC, 300-point rally, every sector higher except for energy. Real estate, interestingly, in the lead, with the S&P up 1.5%. In today's big picture, what are we learning about the economy from earnings? Number one, inflation is not coming down anytime soon. Pricing power still powering profits. In the face of rising cost inflation, these companies are still passing it on big time and able to do it. Kimberly-Clark saw prices rise 9% in the quarter, which did help offset a drop in volumes. UPS reported average rates rising 8.6%, again, helping offset a 2.1% drop in volumes. The CEO of Sherwin Williams, the paint company, saying margins improved as a result of pricing actions across its businesses.

Coca-Cola CEO James Quincy telling me earlier to expect those higher prices to continue. Clearly, there's going to be above normal input costs, whether they be commodities or wages or other services going into next year. So we are expecting pricing to be ahead of normal next year on top of what's happened this year. So how much longer can the consumer hold up with all of these rising bills and prices going up on everything? GM CEO earlier on CNBC off earnings sounded pretty bullish. We're still seeing very strong demand for our products especially our full-size trucks, and allowing for strong pricing. We are starting to see inventory rise a little bit, but well below pre-pandemic levels. Koch CEO did tell me they're starting to see recession-like behavior creep in. Fewer big

ticket discretionary purchases, consumers trading down to cheaper brands or private label going to dollar stores. He says it's much more pronounced right now in Europe than the U.S. and more around the lower income bracket. But still, Koch raised guidance and sounded upbeat. So overall, it doesn't feel like the consumer is falling off a cliff. Tomorrow's numbers from Kraft, Heinz, Hilton and Ford will give us more clues on that. Now to another earnings mover with a big picture story. Shares of German software giant SAP jumping. The company confirmed its full year outlook while posting strong revenue growth, including an increase of 38% year over year cloud business.

I spoke with the CEO, Christian Klein, earlier and asked him about what he's seeing in terms of the macro economy right now. For us, of course, we see the challenging times a lot of our customers are facing out there. And now you have to do an even better job in order to make sure that the business case for our customers is stacking up. To give you a few examples, energy transition here in Europe, but also in other places in the world, a big topic. And it's a different way for companies to produce, deliver, and transport green energy. Technology plays a key role, and ERP and supply chain playing an even more important role, so SAP at the end. A lot of enterprises around the planet are ordering and procuring with SAP software. And now we are connecting them to build this resilient supply chain. Second very important factor. And third, also in these

challenging times, sustainability is very high on the agenda of many decision makers. So we are running many energy intensive business processes and now we start to record, report and act on ES. And so we are embedding this as another dimension in our software. And with that, we feel we have a very, very compelling portfolio. And the pipeline also shows that we can look confident in the quarters to come. So are you saying because of some of these secular trends around energy and supply chain that the business software spending is more recession resistant than it's proven in the past because IT spending always falls when the economy turns. Yeah, absolutely. We definitely see that customers are also cutting parts of the IT budget.

But when you talk about digital transformation, when you talk about the business model change, many customers have to do it, no matter which industry, to get more resilient. When you talk about supply chain and making those really resilient end-to-end, not only with your direct suppliers, and when you talk about sustainability and you have great technology to help your clients,

this is actually where you can see also very solid growth in the quarters to come. What are you seeing in terms of differences right now between the U.S. and Europe, which are experiencing the different pressures around inflation differently? Look, Sarah, what I definitely see is a big difference. I mean, the energy crisis here, especially in Germany, I have to say, is, of course, way more difficult compared to the U.S. And so here in the country, we need to help also here with our technology to build the energy grids, to calm down energy prices,

and with that, hopefully, inflation. In the U.S., we definitely see a better market environment, also, of course, challenges, high inflation. In the US, we definitely see a better market environment, also of course challenges high inflation, but also there we see also good business to grow also in the upcoming quarters. What's going to happen in Europe this winter? What's going to happen? I mean, I'm not an economist, but what I can say from what I'm also hearing also from my talks to our government here in Germany, is that it's safe to say that definitely we have energy also to come over the window,

which is very, very important for a country with a very heavy industry on manufacturing. And so now it's more about how to master this energy transition in a very fast way, but also how to digitize, you know, other parts of our industry. Because with that comes resiliency, which is especially important in these challenging times. What's happening with pricing, Christian, in your own industry, in software and cloud services? Of course, needless to say, with inflation rates going up in a significant way, there is pressure coming from our suppliers also on compensation next year, without any doubt. And we, of course, also made a decision

to moderately also increase our prices. But also against some of our peers, we didn't say we hand this over one-to-one over to our customers. That's not how we would like to also build trust with our customers. So we said a moderate price increase, but we definitely also need to work further on our own efficiency levels. And this is what we are going to do in order to, of course, also deliver on our promises to the capital market. I also wanted to ask for your read on business travel because you own the Concur system which clearly fell off a cliff during COVID. Is that fully back? Absolutely, Sarah. Actually, we are going to see now a journey that this business

will be next year bigger compared to the time before COVID. So the solution is going really well. We see business travel coming back. Of course, not in all parts of the world, but also with regard to our concur solution. We are by far the market leader in that space. We are innovating. So we actually see a very good future also for this business in our portfolio. But does it suggest that business travel is back to pre-pandemic levels or at least on the way?

Yeah, absolutely, Sarah. We definitely see, look, after COVID, it's so important also for decision makers, for business people around the world. You can do a lot with virtual meetings, but you cannot do everything. Closing big deals, actually delivering customer projects, co-engineering in certain parts of our customer base requires business travel, and that's actually true for every industry. So yes, we definitely see that business travel is coming back also to the level pre-COVID.

Our thanks to Christian Klein, CEO of SAP. Stock had a good day. By the way, that weak euro is also very helpful for him. It's the reverse of American companies. It's been a 12.5% sell-off this year. That's a tailwind. But the stock has been under pressure all year long, down 30%, which I did address with Klein. He said his turnaround plan overall is working. I'll show you where we are in the market down. We're up about 300 points here on the Dow. That weaker dollar, it is losing about a percent today, along with lower treasury yields, is alleviating some of the pressure right now, leading stocks to rally.

The Nasdaq in the lead. It's up 2% or so, building on some gains in the last few moments. All the big tech players, Salesforce is one of the biggest drivers, and the Dow, big SAP contributor right now. The best performing group is real estate, though. Materials, consumer discretionary is rallying. Tesla and Amazon, a big part of that story. But the home builders are doing well. So is retail like Tapestry, Ralph Lauren, Bath & Body Works, some of the bigger winners right now.

Adidas, not a winner today. Finally, breaking up with Ye. Wall Street is buzzing about why it took so long and what the impact could be on the company's bottom line. That story next. And as we head to break, check out some of today's top search tickers on CNBC.com. The 10-year yield right on top. The rally in bonds is why it's green. Yields are coming down a little bit. Tesla bouncing 5% or so. S&P 500, the two-year yield, which is also seeing some relief, really the rally in the so-called belly of the curve today, right in the middle of the yield

curve. And then the Apple up almost 2% on some pricing moves, which we'll discuss later. We'll be right back. What is Wall Street buzzing about? Adidas has finally broken up with Ye. Finally, after his anti-Semitic hate speech and threats began over two weeks ago. We've been calling out Adidas' silence since October 11th on this show. Today, the company says Adidas does not tolerate anti-Semitism and any other sort of hate speech. Ye's recent comments and actions have been unacceptable, hateful, and dangerous, and they violate the company's values of diversity and inclusion, mutual respect and fairness. It's shocking the company has been silent for weeks while other businesses from Balenciaga

to CAA have moved to cut ties with him, especially with Adidas' own dark history of Nazis and anti-Semitism. So what now? The company says it will end production of Yeezy branded products, stop all payments to Yee, and that it will have an immediate impact of $246 million on net income in 2022, though analysts say it's likely to get worse. Morningstar estimates the Yeezy partnership, as we've been reporting, is worth up to 10% of sales, an even bigger percentage of net income because of strong pricing for the products. It matters for Adidas if they do, in fact, own the IP, which the company says it does.

Design, existing products, colors. It could move to rebrand those products since they're such a big part of the overall business. But Yeezy is really just the latest big problem for Adidas. The company cut guidance last week for the third time in six months. Russia, China, inventory pile up in North America. It's all weighing on the business. The stock is down more than 60% this year. And making matters worse, the CEO, Kasper Rorsted, is on his way out. The company has yet to name a replacement.

Adidas is also facing consumer backlash now for the silence over the past few weeks. The company reports November 9th. When we come back, Cowen CEO Jeff Solomon on how market volatility and rising interest rates could impact the outlook for dealmaking, IPOs, capital markets. Check out shares of Twitter as well. They're near session highs. Our David Faber reporting equity investors in Elon Musk's deal to take Twitter private have received paperwork from his lawyers. And the latest sign, the acquisition is on track to close by Friday. $52.95, just below that $54.20 deal price. We'll be right back.

Stocks rallying here for third straight session. Gains building throughout the day. Joining us now is Cowen CEO Jeffrey Solomon. Good to see you, Jeff. Good to be here. Always a good read on the capital markets. What is sentiment like right now? You know, I mean, I think people are still a little bit shocked from what's happened in equities.

So I got to tell you, it's not surprising, right? When we were coming out of the year last year and we were talking about our internally, you know, what do we think rates were going to do? What do we think the Fed was going to do? Well, we could see inflation on the horizon, right? Massive monetary spend, massive fiscal spend ends in inflation. So the Fed actually, they may have been a little late, but they've reacted quickly, you know, and I think we're going to be in a higher rate structure in the near term here. And that's exactly where we should be.

So equities took it on the chin, as they should have, in this kind of an environment. Best place to have been was cash, but now there's real opportunities for people to put money to work and yield assets, and three years from now, equities are probably gonna be higher. So if I'm an investor, I'm probably starting to wait in.

You think the worst is behind us? You know, it may not be, but you shouldn't be all in. It's one of those things where cash, you should still have cash, you should have flexibility to average down. But we're closer to the bottom than not, in my opinion, probabilistically, right? I think the likelihood is that we're closer to the bottom than not. And so if you've got cash and you've been smart about it, you can probably wade in here a little bit.

And again, if you've got a longer-term view, you don't need the cash. In two or three years, equities will be higher. What are you seeing in the IPO pipeline? When does that open up? I think you need the VIX to come in here and volatility to slow down a little bit, right? You know, companies that have access to private capital are going to be fine. So the ones that are probably nearest to the IPO are probably pretty well funded. If you're not well funded at this point, like that can be a little tight.

So the financing markets are definitely tighter. Leveraged lending market is still pretty tight. So, again, I think there's a lot of things in and around the edges that make it or making it difficult for companies to access capital. But if you can get, you know, I say if we get any sort of break here in the equity market or people start to get this idea that the Fed's going to pause towards the end of the year, you know, volatility will come in and people will raise money using equity. It's not over forever. How does it set us up? The fact that so many private companies aren't going public and have that access to capital, how does that set us up for next year? Well, I think that private companies, first of all, need to get readjustments on where their valuations are.

It's happening, isn't it? It is, but people are still latched on to where they did their last round. And, you know, it's like I say, that's not relevant. Like, it's where we are today. And I think it's interesting. Private equity players and venture players always sort of, let's say, they're better at investing. It's a better investment, risk-adjusted, in the public markets. Yet their entire value structure is based on what happens in the public market.

And so when the public market takes it on the chin, guess what happens to the private portfolios? So I think, again, they all have a lot of cash. This is Cliff Hasness' point. This is his problem with private equities. Like it's just not marked to market. It's artificially. Yeah, I mean, I'm not quite as, I don't know, flamboyant as Cliff is on this topic, but it's true.

We all look at the public markets to figure out where value is. When the public markets are down, you know, 20 plus percent, you have to think private markets are going to adjust. And it takes them longer to do that because people are reluctant. Here's what I'd say. Ton of money still raised in venture. Ton of money still in private equity. A lot of money in direct lending, especially in the middle market. And so when you look at M&A volumes and things like that,

people always want to look at the big deals. That's actually the fat tail that whips around the most. Middle market M&A is still happening. You know, maybe a little bit slower. Buyers are a little more selective. Those that are well-financed can be selective because, you know, the market is a little bit tougher. But stuff's still getting done.

And it should get done, even coming into the end of the year. Is it getting done in biotech and healthcare? That's where at Cowen, where you have been really focused and strong. Yeah, I mean, I think the IPO engine has slowed down there, but that's not a new story. That's been happening since really the second quarter of last year. But when companies are having good events, particularly in clinical trials and good readouts, and stocks are performing. What about M&A?

And in M&A, sure, I think there is. We're definitely seeing this is an opportunity for big pharma to fill pipelines and fill holes in their pipelines. I mean, again, I think everyone thinks that's going to happen en masse. It's not. It's usually very selective and strategic. And that's what we're seeing. Those companies are a lot cheaper today than they were 18 months ago. And so people have their shopping lists.

And if they can get them at the prices they like, they'll buy them. So it's not like the market's being cut off. No. It's a very different feeling. I just think buyers are being selected because they should be. Because they should maintain their flexibility. That's what I say to everybody. Maintain your flexibility because there's increased probabilities of bad stuff happening,

either geopolitically or in the economic environment. It's not my base case I'm not preparing for like a big tail that we just had one two years ago So probabilistically that's not likely to happen again But yeah dealing with a different rate structure dealing with maybe increased default rates or thinner margins You have to prepare for that and if you are well prepared for that There's gonna be plenty of value for you either as an investor or as an acquirer. It's the same analysis that you should be doing. In the meantime, you've sold your own business. So there's some deal making. To TD, who's going to be ringing the closing bell. Which was an accident. You're not here with them.

How is that integration going? What's it meant for some of your clients? Yeah. I mean, so we're still in the early days. We just cleared hard Scott Rodino, so it's still early days. We're running our business. They're running their business, but we're working at how we can make really big impact. The feedback we've gotten from clients has been phenomenal and the industrial logic which holds up that the things that we do at Cowen are things that they don't necessarily do specifically at TD, especially here in the States and vice versa. Like there's so much that they don't necessarily do specifically at TD, especially here in the States, and vice versa. Like, there's so much that they do here in the United States that we don't do.

And so there's just a natural affinity. And as we've gotten to know more people over the past few months, you know, beyond just the senior management, culturally it's a great fit, and we are really looking forward to it. I actually can't wait to get started, and I think that's a pretty pervasive feeling on both sides. Jeff, thank you for coming by. Yeah, good to see you.

It's good to talk to you. Jeff Solomon, CEO of Cowen. Take a look at where we stand. Just took a little leg up here to the highs of the day. Highs of the session up more than 350 on the Dow. S&P up 1.6%. And the Nasdaq jumps 2.3%, third day in a row, going strong. It helps to have those lower

treasury yields, weaker dollar. Oil prices are a little bit firmer, though oil is the only, energy is the only sector that's lower right now in the S&P 500. And a bunch of mixed earnings, including some upbeat ones with raised guidance, like Coke. It's been a volatile day for shares of Alphabet, though, ahead of its earnings report after the bell. Though it is picking up steam here into the close, we're going to break down the key number to watch coming up. And a reminder, you can listen to Closing Bell on the go by following the Closing Bell podcast on your favorite podcast app. We'll be right back with the Dow up 350. Check out our stealth mover today. It's Planet Fitness. Stock is putting on some muscle today.

Piper Sandler pumping up its rating on the stock to overweight from neutral, citing valuation following a more than 30% decline this year. The analysts, they're saying also teenagers are increasingly interested in Planet Fitness, which should work out well for investors. PayPal shares are popping on a big e-commerce partnership for its Venmo business. We'll share the details straight ahead. That story, plus GM revving higher and a countdown to Alphabet earnings when we take you inside the market zone. The Dow is up 357. Home Depot, American Express, and Salesforce, biggest contributors.

We'll be right back. We are now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, we've got Philip Bo on GM and Deirdre Bosa on Alphabet. We'll kick it off with the broad market because we've really climbed here throughout this final hour of trading. It's been strong all day, but now we're up 350 on the Dow. Mike, energy about to go positive, which means every sector is higher. And the S&P is up 1.65 percent. Not bad if you're stringing together a few days of gains.

I know seasonality is working in favor and things like the buyback window is starting to open. But fundamentally, has anything changed? I don't think too much has changed in a radical way in terms of corporate fundamentals. I do think that, you know, we basically arguably priced in an awful lot near the lows. I keep saying that we're up six days out of the last nine, more than one percent in the S&P 500. So clearly there was a sense of being underinvested if things weren't going to be getting a lot worse in a hurry. I think the companies, you know know it's obviously a lot of give and take with the earnings reports but there's not a sense out there that it's really spilling over the edge that you're seeing reason for radically downgrading X estimates for next

quarter next year. There's an undertow for sure. But it seems as if when you got down toward 15 times forward earnings in the S&P it wasn't as if we were expecting great things. So for now, technically, people chase it a little bit higher. The market's up for its next test. It has just now clicked up to its 50-day average. It's at the minus 20 percent level the S&P is from its all-time high. Well, right. So Matt Maley just sends me an email from Miller Tabak Technical Strategist saying it's not oversold anymore. So that just raises the pressure on earnings tonight and into this tech earnings period that we're going to get to in the next few days. Speaking of earnings, look at Coke shares moving higher today, adding to 5% gains this month, proving people are paying up for beverages. Coca-Cola's organic revenue climbing

16%. And while a big chunk of those gains came from higher prices, it is passing on to the consumer right now. Volumes also grew four percent. So demand was strong as well. And it was broad, double digit growth for Coke Zero, but also in other categories like Fair Life Milk. And growth came at home and also away from home. Coke is also raising guidance for the year, despite economic uncertainty right now in the rising dollar, both of which are weighing on the business. I asked CEO James Quincy about his upbeat outlook, why he had the confidence to raise guidance this morning. Good number of years refocusing on getting better marketing, better innovation, really revenue growth management, that combination of the right package and price point, and really executed by our bottling partners.

And that's driven the momentum of the Coke system. Confident in our strategy in terms of seeing us through in the year to go. That's why we raised our guidance. Even though Coke's results are strong, Quincy did say there are increasing signs in Europe and the US that the consumer is starting to hurt,

sacrificing discretionary spending. But Coca-Cola is not adjusting its strategy on ads, for instance. I asked if he was cutting back on ad spending. Not yet. Or the portfolio at this point, which has led to share gains and growth, Mike, which does make you wonder that some of these defensive parts of the market, especially beverages, even within consumer staples, have worked really, really well. So what are the valuations like? And do you continue to bet on them? Yeah, the valuations are, you would say, still on the richer side relative to the overall market. But that's the way they tend to stay when you do have that earnings reliability. The dollar coming off the highs a little bit

doesn't hurt. Clearly, they've taken their price actions. It's not clear that's going to be a very strong part of the story from here on out. Coca-Cola, one way of thinking about it is the dividend yields right around 3%. When it's gotten much below 3% in recent years, it means the stock is looking a little richer. But I wouldn't say that's a hard and fast rule, but that just has been generally how it's tended to trade. Let's hit GM as well, because it's one of the best performers right now in the S&P after beating Wall Street's profit estimates, although it did post a slight revenue miss. The automaker also reaffirming full year guidance. Earlier today on CNBC on Squawk Box, CEO Mary Barra said demand remains strong despite

economic headwinds and discussed the ongoing chip shortage challenges. Listen. We are seeing a steady improvement. And again, very proud of the team that we were able to clear 75 percent of what we had, you know, in inventory because of a chip shortage. I wouldn't say we're completely out of it yet. It's more volatile than I would expect at this point. But we're continuing to work through the different challenges and quarter by quarter, we're seeing it improve. Phil LeBeau joins us. Phil, so when will the chip shortage be in the rearview mirror for GM and other automakers as a swing factor for earnings? I think it's diminished in terms of impact on earnings, Sarah. But having said that, everybody we've talked with in the auto industry says the chip crisis will be around in some fashion, at least through the first half of

next year. Now, are we expecting the kind of impact that we saw, let's say, in the first quarter or the second quarter, where you would get a complete miss because, like General Motors in the second quarter, they couldn't deliver about 95,000 vehicles. I don't think we're going to see that. And the proof is that you're seeing greater inventory at dealerships. It's still low relative to the historical norms, but gradually the industry is starting to build more vehicles that are ending up at dealerships. And on demand, Phil, she sounded pretty bullish. So hearing, I know we have Ford tomorrow. Are you

hearing anything differently as far as consumers just with the rise in rates and what that's going to do to auto loans and just overall high ticket discretionary spending? I think in terms of if you see weakness within the auto industry right now, we're seeing it at the lower end of the market, especially because of higher interest rates, what you're seeing in terms of auto loan payments. That's the area that's feeling it the most at this point. But let's be clear, Sarah, you see rates continue to move higher and higher over an extended period of time. That will have an impact. It will slow down demand in some fashion. But right now, there's still more demand than supply. And it's probably going to be like that at least through the first quarter. Phil LeBeau, very helpful.

Phil, thank you. GM working well today. Amazon announcing it will allow customers to use PayPal's Venmo as a payment option on both its website and its app. That news, look at that, sending PayPal shares sharply higher today, 7.2%. Kate Rooney joins us. Kate, what does the Venmo news mean strategically for PayPal? Can we see other deals like this? I guess Amazon is as big as it gets when it comes to deals. That's true. It doesn't get much bigger than Amazon, Sarah, but it does speak to PayPal's

focus and this turnaround plan that they've been under and more discipline in general. You've seen that in Silicon Valley. PayPal is a great example of this, based on that Elliott Investment. Elliott Management invested about $2 billion, or has a $2 billion stake in PayPal right now, really driving more discipline. And they are talking a lot about checkout, and that's what most people use PayPal for at this point. They're looking to strategically take that over to Venmo, which in the past has really been more about sending money to friends and family. It started as a free service, and that has completely worked if you look at growing users. So it's got about 90 million active users at that point. It hasn't quite translated to PayPal's bottom line yet. So checkout and these big partnerships with the likes of Amazon fit

into that story, making checkout more viable, letting people use Venmo and spend out of their Venmo accounts versus just cashing out and going straight to your bank account. And that's a good point there on more partnerships ahead. They've made a couple strategic partnerships here, but Amazon, absolutely the biggest. And you could see more of this because you really do need to drive that consumer side of it. If you offer it on Venmo, you need to make sure people are aware of it and are actually going to use it and implement it. But ahead of Black Friday, so we'll see the results soon, hopefully.

PayPal still down 64% or so in the last 12 months, but 30% off the high. So some signs of life. Outperforming fintech, believe it or not. I know, one of the better performers. Yeah, no, since the activist. Kate, thank you. Kate Rooney. Alphabet shares will take a look higher ahead of its earnings of the better performers. Yeah, no, since the activist. Kate, thank you. Kate Rooney. Alphabet shares will take a look higher ahead of its earnings after the bell today.

Deirdre Bosa joins us. Deirdre, what is the key number we should be watching for? Sarah, I would say it's guidance, but Alphabet doesn't give guidance. So I'm going to fall back on revenue, which is expected to be north, just north of $70 billion in the quarter. The reason I say this is going to be important is because this is a business model that has held up better than those of Meta and Snap because search engine ads are seen as more resilient than those kinds of ads. That said, though, take a look at YouTube revenue as well. That's going

to be key here because it's a little more vulnerable to a slowdown in ad spending. Also look for cloud and remember that this is a division, their cloud division, that is, that is still unprofitable. So will losses widen here as it continues to be an investment mode and, you know, take market share? I guess the key question as well is, are there going to be more cuts ahead? Remember, Sundar Pichai said just a few months ago that he wanted to see 20 percent more efficiency. Have they got there? What do they need to do to get there? All right. We'll be watching. Deirdre, thank you very much. And Mike, you have been watching the valuation gap between Microsoft and Alphabet. Yeah, and in particular how Alphabet itself has really had its valuation compressed, mostly because of what's going on with its peers

and the concerns in general about digital advertising, but also wherever their business bumps up against TikTok on the YouTube side of things. If you look at the way that the forward PE of Alphabet has come down, it's pretty close to where the overall market is. It's been rare over its history for Google to trade in line with the S&P 500,

whereas Microsoft is down quite a bit too from well over 30 times forward earnings. But it's still got a little more of that stability premium in there. So this is the market's way of saying we're not that confident that Google can continue to grow at the rates we've become accustomed to, which used to be close to 15%, 20% top line. Now it's closer, I guess, to 10% in this quarter. So the stakes are higher for the company, but the market's already gone a long way, I think, to lowering expectations. Also going to get Meta and Amazon. What is the broader tech setup in earnings? It's all pretty similar. I mean, Meta has really been beaten up. I think really that's about the strategic long-term investment plans and whether

they can continue to hang on to the cash flows they already have captive. That's a separate story. The rest of them is all about, look, we got overexcited. These stocks got crowded. We've had rates go up. All the reasons that you know. But the other piece of it is they used to have scarcity value for having reliable double-digit top-line growth back in the pandemic. The S&P 500 as a whole has double-digit top-line growth right now because the nominal economy has been growing faster. That's not going to continue forever, but that's the case right now.

If you look at what's leading right now, Apple, Tesla, Meta, Microsoft, those are what's driving the gains. We've got two minutes to go in the trading day. What do you see in the internals as we have seen improvement, Mike, throughout the hour? Yeah, it's actually been pretty strong in terms of inclusiveness of how many stocks are to the upside and then the volumes. But about 80 percent upside volume, a little better than that. As a matter of fact, yesterday was not so good on the breadth side. So this is a switch.

We've referred a couple of times, Sarah, to the dollar coming off the highs. This is the way the U.S. dollar index looks on a year to date basis. It has really rolled 110. If it gets below that, you might start to say that maybe the uptrend has started to undo itself. That's not quite the case yet, but it's close. The volatility index also finally giving way down about a point and a half under 29. It's been very grudging on the downside. We have the P.C. inflation number coming up at the end of the week, obviously the Fed meeting a week from tomorrow. So a lot of reasons for people to stay a little bit uneasy. But so far, the market's

performance itself, the stock market's performance, has taken a little bit of that anxiety out of the VIX. Well, it looks like we're going to get three days in a row of gains here. First time we've strung together three gains since September or so. The Dow at 323, near the highs of the day. The biggest contributors to the Dow gains right now, Home Depot, American Express, Salesforce, Boeing. But you've got a number of winners. The drag is Travelers, UnitedHealth, and Amgen. That's what's lagging today. S&P 500 going to go out with a 1.6 or so percent gain. Every sector except for

energy is higher right now. You've still got real estate in the lead. Materials, communication services, consumer discretionary, all strong. Tech is the winner today, though. Look at the NASDAQ up 2.25%. It's Apple, Tesla, Meta, Microsoft, NVIDIA, PayPal, and Alphabet, which does report in just a moment from now. That's going to do it here for me on Closing Bell. See you tomorrow, everyone. Now into overtime with Scott Wapner.