Closing Bell - Closing Bell: Can Amazon Stop the Sell Off? 10/26/23

Episode Date: October 26, 2023

Tech has been feeling some serious pain. So, can Amazon stop the sell off or only add to it? All-star panel of Dan Greenhaus of Solus Alternative Asset Management, Big Technology’s Alex Kantrowitz and Evercore ISI’s Mark Mahaney weigh in. Plus, Sonia Meskin from BNY Mellon is making the case for caution into year end. And, top chip analyst Stacy Rasgon breaks down what he is watching when Intel reports after the bell. 

Kelly, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from CNBC Global Headquarters today. This make-or-break hour begins with stocks on the retreat again. And once again, it's tech at the center of that takedown. And if that's not enough, another moment of truth less than an hour away when Amazon reports earnings in overtime. Top analyst Mark Mahaney with me momentarily to size that up. In the meantime, your scorecard with 60 minutes to go in regulation. We start, of course, where else? The Nasdaq on pace now for a near 5% decline in just a couple of days. Trying to improve as this day stretches on.

We'll see how it goes. It's been a brutal stretch of selling. Apple under 170. Meta plunging even after its blowout earnings report. Nvidia threatening to close below 400. Not even Microsoft able to get much going. and it had really good earnings earlier this week. More broadly, yes, we are watching the S&P 500. It closed below that key 4,200 level yesterday.

You take a look here. It's moving further away from it. Healthcare energy among the weakest sectors in the session. It takes us to our talk of the tape, the state of this unsettled market, whether Amazon might help stop the sell-off or only add to it. Let's ask Dan Greenhouse, chief strategist for Solus Alternative Asset Management and Big Technologies, Alex Kantrowitz, also a CNBC contributor. Both, as you see, are with me at our global headquarters on set. Gentlemen, it's good to see you. Dan, you first. The trade's not been good.

So what do you make of the market, even in what's been pretty decent earnings for the most part? Yeah, listen, I don't I'll leave the the tech specifics to Alex, but I think the meta report looked fine. And some of the other reports, Microsoft, good, not bad at all. But obviously, it's a poor environment right now for a number of reasons. You've got the two wars everyone's worried about. You've got the budget story in Congress. And obviously, you've got interest rates doing what they're doing. So I'm not surprised that, at least for the moment, good enough is not good enough. I mean, GDP, you know, the read today was great. Inflation data, pretty good.

Rates, OK, they're backing up again towards 5%. But, you know, they look like they may be holding a bit steady here. Yeah, listen, I think the idea we were talking in the green room, I don't know that there's that many rate hikes left to come. And frankly, importantly, with respect to Google and Microsoft and Meta and NVIDIA and the names that we're talking about, the interest rate story is much less consequential. Like if you look since rates peaked for this part of the move, call it since mid-July, the FANG plus index, if you will, is down, call it 12 or 13 percent. The stock market's down about 10 percent off its highs. The unprofitable tech basket is down somewhere around 35 percent.

So the companies for which rates matter consequentially more from a valuation perspective are down two to three times as much as the FANG names. I don't know that it's a rate story so much. It is just nobody wants to own anything right now. So, Alex, the tech trade that everybody's been so focused on, we came into this week suggesting, look, this is it, right? This is the biggest week. You've got most of the mega cap companies reporting. And here we are with a Nasdaq, as I said, which has traded terribly over the last couple of days. Is this trade that so many have relied upon in trouble? I mean, just think what would have happened if they would have missed.

I mean, all these companies. Well, I'll tell you what you saw with Alphabet. Alphabet's down 10 and a half percent in the span of a week. Much of that within two and a half days. So Alphabet, I would say, is the only big tech company that's missed. We've seen nice reports from Microsoft, nice support from Meta. Meta, of course, guided that there might be some problems in the next quarter. Amazon, I expect, will do well. And you

will see that, yeah, if you're not going to be in line or you're not going to meet expectations, you're going to get punished the way that Google did. And I think that does show you that the market is a little bit jittery about where these companies stand and how big of a portion of the S&P 500 they are. And they could be at risk because their run up happened when there was you know, when we thought interest rates were going to be declining now. We didn't anticipate this war in the Middle East. And we thought Congress was going to be under Kevin McCarthy and not under, you know, the new leadership there and which might be taking us towards a shutdown. So it's a different environment now. And now people are starting to rethink some of these market cap run ups and say what's going to happen in this new world that is very different from the world we lived in even three months ago.

All right. So lots of questions about growth. Lots of questions about valuation. I want you to hear what Brad Gershner of Altimeter told me on Halftime Report today about where these stocks, which, by the way, he's heavily invested in, are likely to go in the near term. Listen. You're going to see a reversion to the mean, of course, here in the short run. You know, I told you we've taken our risk from 93 percent to 48 percent net exposure. So we anticipated that this was going to be choppy. There would be some consolidation. But I don't think you can say this is frothy. I don't think you can say these are overextended. In fact, we've seen multiple compression in technology this year, not multiple expansion.

He makes good points. Alex, does he not? I mean, if you look at the valuation of some of these tech stocks, you know, six months ago, they were the valuations were richer than they are today. Absolutely. They're cheaper now than they were previously. But I think what Brad is missing in the big picture is that investors are spiritually, metaphysically, they're a little bit nervous about being in equities in a way that they weren't before. And I think, yeah, so even if they are cheaper now, the big tech names, it's just not the same environment. So I think that you could potentially see even further pullback. To take all the logic you want out of it, there's still a behavioral aspect to it. And I think that's something to concentrate on.

Yeah, but where are you going to get the growth? That's why people have been willing to pay up, Dan, for these stocks to begin with. That's why, you know, you were selling the hyper growth names and you were going into these names because even richer to the market multiple, this was deemed the place to have some safety. You get the better balance sheets. This is where the growth at an alleged reasonable price resided. And listen, I mean, listen, Apple is going to have mid single digit EPS growth, but the rest of them, Google, Meta, Microsoft all have meaningfully better growth profiles than the market as a whole. And Google, as we see on the screen right now, Google and Meta don't trade at a particularly rich multiple. I mean, for Google to have been down 10 percent, you'd think this was a 40 times, 50 times stock. It's not. It's,

depending on what you think EPS is going to be next year, somewhere in the upper teens to low 20s. So these aren't particularly expensive stocks. They still have tremendous growth profiles. Obviously, the issue with Google was a deceleration in the cloud. That's no surprise to anybody. But, you know, given all of that, attention now turns to Amazon, which is a richer valued stock. But again, from an investor standpoint, and I'm not making the case to buy these, it is undeniable that they have better growth profiles on a one, three and five year time horizon than does the market as a whole. Well, I know you're not making the case necessarily to buy them. But the biggest

question in the market, certainly one of them now, was if these stocks are going to pull back in any meaningful way, the dip buyers were going to buy them. And that was going to insulate the market from a bigger downturn. It was going to help these stocks hold in a little bit better. And by the way, let's track this last hour really closely because the Nasdaq is slowly and steadily. Now, I know it's down still one percent, but that story is improving as this final hour gets underway. The Dow, by the way, is only down 51 points now. So we're trending in an interesting direction to keep our eye on. The question, though, about the dip buyers. Yes. You think they still exist? Two two things. One, about the market.

I mean, listen, you've discussed this with Katie Stockton the other day, and everyone should be well aware. We're basically the 200-day moving average. And an upward-sloping 200-day moving average in a bull market is typically where you find support in these types of sell-offs. Plus, we're about 9%, 10% off the high. That's a pretty substantial sell-off. If you were to bounce around these levels is roughly where you would bounce. But the point about the dip buyers, I've been doing this long enough. I've been using the same saying for, call it, 10 years right now. It's no different than the Mike Tyson, everyone has a plan until you get punched in the face. Everyone says they're

going to buy the dip. And then once the dip comes, everyone runs for the hills. It's the same story over and over and over again. If you believe that the economy is not going into a recession, if you believe that these companies growth profiles are not meaningfully impaired, then presumably you want to continue to be exposed to stocks over the next call, three or six months at least, before we get a better view of what growth is going to be around the middle of the year. But again, over and over and over again, people say they want to buy the dip. If only the multiple came in one or two turns and then once it does, no one's no one's to be found. We'll see, because it looks like some people are starting to nibble a little bit at some of these mega cap names. All right, we're going to bring in Mark Mahaney in just a second, but last question to you before we do that on Amazon. What's riding on this? It's all about AWS and a

growth rebound. This whole earnings period for mega cap has been about cloud growth. If you're doing well, Microsoft, you get rewarded at least somewhat. If you're doing well, Microsoft, you get rewarded at least somewhat. If you're doing poorly, you get punished at least decent amount. Alphabet. Now Amazon. Yeah, I see good things on the horizon for Amazon. I think the last six quarters of revenue growth decline. And the reason why we're seeing that is because we've come off of the pandemic comps, right, where people were spending all their money on these tech companies because that was the entire economy. And then you had this moment of optimization, right, the last few quarters where, you know,

people were saying it's going to be a tougher economy. Let me take my spend and tighten it up a little bit. We obviously see Google is still going through that, or so they say, maybe they're making excuses. But last quarter, Angie Jassy said this was no longer about optimization, that they were getting new workloads in. And that should be the thing that bolsters these cloud companies as they go for the next basically year, is that they're going to start to have the comp of the tightening versus these pandemic highs.

And so for Amazon, that bodes well. If you follow what Jassy said and he was telling the truth last quarter, then they should see the growth start to come back in. Well, we will see. Let's bring in Mark Mahaney now of Evercore ISI. He has an outperform rating on Amazon. Mahaney, it's good to talk to you again. It's been a minute. And this is really important now, given what we've already gotten this week. Are we going to get a growth rebound in AWS? I think there's a probability greater than 50% chance we get it either in the September or the December quarter. So there, I invaded your question. The over-under here is 11%.

So that's what the market is insisting that we're going to see, which is no acceleration from AWS. Our cloud channel checks were more positive than that. But it's a very hard thing to know. And the difference between 11% and 12% is pretty small. What I like about Amazon going into the print is that the expectations are low. So that usually gives you a good opportunity in the upside. The other things that you want out of Amazon, we want consistent operating margin expansion. Pretty sure we're going to get that. And you want that retail segment to maintain at that kind of 10% revenue growth level. Pretty sure we're going

to get that. And then finally, the advertising segment, which has been clipping along at 20, 25%. The reads you got from Google and from Meta, I thought were very positive for advertising. I know we've had other issues, but we were all looking for an acceleration and ad revenue growth in Q3. We've seen it.

There are other issues, but we saw that. So Amazon should benefit from that too. Yeah, I know you know what happens when people evade the question. I ask it again. And I'm going to do that because it seems like everything is riding on this, right? I mean, we need to see, we being investors, we need to see a reacceleration in AWS growth. Yes.

50-50 isn't good enough. What are the chances that we're going to see it this quarter? I think it's 50-50 you see it this quarter. I think the odds rise if you give me two quarters. So that's our best read. We think it comes in anywhere between, I wouldn't be surprised to see anywhere between 10 and 12 percent. How's that? I mean, that's about as precise as you can get for a moment like this, which may make you want to wait until buy it after the print. The advantage, again, you have as a stock picker going into the

print is that expectations are low on that AWS number. So I don't see a ton of downside to the stock if that happens. This is not like Google, where the expectations were that they could kind of maintain pretty decent, pretty robust high 20s Google Cloud revenue growth. And they disappointed everybody by coming in six points lower. I don't think you're going to have that kind of risk. I think the truth is probably going to be somewhere between Google and somewhere between what Microsoft did and probably more towards what Microsoft did. I think Microsoft's the better read into AWS. I'm confused, though. I mean, you told our producers that you see a, quote, attractive risk reward setup into the print,

yet you can only tell me that there's a 50-50 chance that we're going to return to growth in AWS. And then I would throw on top of that that 40 percent year to date gain in the stock. That says there's a lot of risk going into this, not great risk reward. How would you counter that? Oh, no, I think there is. I think you've seen this 20 percent pullback in the stock recently. This stock is pulled back in, sorry, more than any of the other big tech stocks have going into the print. So I actually think the setup's more constructive, Scott, for this stock, Amazon going into the print than it was for Microsoft. You know, there's greater fear factor with the stock off 20% and the expectations are low. I'll just stick with the point. This is

why they risk more to say symmetric. They print on 11%. Assuming everything else that I talked about would be okay. I don't think there's much downside in the stock. You get any whiff of acceleration this quarter or discussion of it for next quarter, you get material upside to the stock. That's the asymmetric risk reward we always look for in stocks going into prints. I think it was kind of evenly balanced, frankly, on both Google and Medic into the prints. I don't think that's the case with Amazon. Dan Greenhouse has a question for you, Mark. Hey, Mark, let's just say AWS was 10% or 10.5%, but the retail margins came in at 5% or 6% or something. Is that sufficient to offset the disappointment, so to speak, on the AWS side of things?

I think these expectations are so low on AWS. So I think it probably helps offset it a little bit. If they print 10, 10.5%, it's funny how we're changing this just on this half point. But yeah, the stock would probably trade off. I think it's a low single digit percent, depending on what else comes up. And then you also have the opportunity for the company to talk about better trends, what visibility they're seeing into the December quarter, whether AI workloads are starting to turn on. Our checks did suggest that we're seeing cloud budgets get unlocked. We think we sort of heard

that from Microsoft. We didn't hear that from Google, but Microsoft's the better read on this. And if you're willing to look out three to six months, you know, you want to be buying these stocks when perceptions, when expectations are on the lower side. I think that's where you are with Amazon. I'm looking at other notes that you have. You named Amazon your top large cap net long. And I note on your coverage list, I mean, Meta's on that list. So you like Amazon over Meta? Yeah.

And, you know, so this is because we had this 20% pullback and the expectations are super low on the cloud side. That's why. I think also valuation. This is about one of the cheapest points you've seen on Amazon in quite some time. We refer to this guy as our triple trough here for Amazon. We're close to a trough multiple. We were earlier this year.

We're close to trough margins. We're much closer to trough than we are to peak. And I think we're going to peak and higher. And we're close to trough revenue growth. We've got an accelerating revenue growth story for both cloud and for retail and maybe for advertising, too, kind of like all three of those going into 24. Is it going to show up this quarter? I don't know. But I want to be there because I think it's going to show up in one of these next two quarters. And I want to be long in anticipation of that, especially when a stock

pulls in 20 percent before print. Yeah. What about efficiency? Are we done hearing about efficiency from Andy Jassy? I think you're going to hear from Jassy a tone that's similar to what you heard from Meta Management. The three big names that I looked at, Google was kind of wishy-washy, I think, when it shouldn't have been on expense management. Although, Google is a rising margin story this year. Meta, I think, just stamped that point home last night. A year of efficiency has turned into the years of efficiency. I think you're going to see the same thing coming out of Amazon, but mostly because you had such an unnatural setup last year. Amazon's the most macro-exposed of any company I cover.

And they just had the kitchen sink in terms of cost inflation thrown at that model last year. As the growth recovers and as they find all these efficiencies quickly in their distribution centers, I think you're going to get back to not just the peak operating margins. I think you're going to get to record operating margins in that retail segment. I don't know if it's on this print tonight. It won't be. But the path will be there that we'll start seeing that in the next three, six, nine months. And that's a re-rater for me. That's why I like Amazon. That's why it's their top pick. Interesting. How thrown have you been by the sell-off in Alphabet? That was a real surprise. I get the disappointment. You know, we'd like a little bit more cost discipline.

There were some one-time items in there, and I didn't see that decel coming for Google Cloud. I think it's because Google Cloud is more of a secondary cloud provider. And so I think the optimization that Amazon, AWS, and Azure saw, I think that started earlier than it did for Google. So I think Google's probably just a delay, like a quarter, maybe two-quarter delay from the turn that you'll see from AWS and Microsoft. I think it's more of a timing thing rather than anything else. But, yeah, I've been very surprised by the stock being off that much. Hey, the warning to us all is, you know, the short term trade on when stocks are considered magnificent. That's a high bar. Alex Cantor, which has a question for you.

All right, Mr. Mahaney, I got a question. So we all know that the uplift that Microsoft has gotten with this open ideal. Right. They invest in open AI. All of a sudden, Microsoft is the hottest company on Wall Street. Amazon made an interesting move this quarter. Right. Invested one point.25 billion in Anthropic, which is an important OpenAI competitor. That might go up to $4 billion. Can they start to see a similar lift from that investment in the same way that Microsoft is getting theirs from OpenAI? I like the question, Alex. I don't think so, but you also pointed out something. You know, there's always these lucky breaks that happen in business.

And, you know, sometimes you get the right investment sometimes you lean into these create these opportunities called uh cloud sometimes you buy these assets called youtube and it really becomes this great new growth engine i think that's exactly where microsoft is and more power to them they made the right investment they got this right and they're ahead of the pack when it comes to ai i think the anthropic investment that uh aws made i interpreted that is we're getting out of just when it comes to AI. I think the anthropic investment that AWS made, I interpreted that as we're getting out of just, we're not just invented here. We're willing to make investments. I think they needed to do that. I think they bought an asset, I'm sorry, they invested in an asset that I think is pretty clearly one of the top AI assets out there. So

I think it's a smart, savvy move on AWS's part. And I think they're going to just see the same sort of boost to their growth on a much bigger scale. So it won't move the needle as much, but they're going to see that same boost to growth from AI workloads because the AI revolution, Gen AI, isn't going to be on-prem. So you're going to need to compute. You're going to need the storage capabilities. And AWS is there at that level. So that's why I think you get this material re-acceleration in AWS going into the next 12 months So that's why I think you get this material reacceleration in AWS going into the next 12 months. I don't know if we get it tonight. I think we start getting the first evidence of it. And all you need is that little evidence for the

stock to go up. I think we're all trying to assess, Mark, where the tech trade more broadly is. And I think there are more questions than answers at this point relative to how the stocks have traded, even ones that have done quite well. I want you to respond as well to what Brad Gerstner told me earlier about these stocks, about this space. I don't think you can say this is frothy, he said. I don't think you can say they're overextended. In fact, we've seen multiple compression in tech this year, not multiple expansion. Do you agree with that? Was there too much froth? Were some of these stocks too overextended? Well, we certainly had a lot of negatives. So that always sounds frothy. But I'm going to look

at these, you know, the PE multiples. I think you had some on your screens that just don't think were accurate, Scott. You know, Meta's sitting there at 15 times gap earnings. There's no funny earnings here. It's gap earnings. Google is sitting there at 18 times gap earnings. So Meta is actually trading at a discount to the market for 20% and accelerating revenue growth with 40% operating margins with $60 billion in cash on the balance sheet and with, you know, option value in a couple of different areas, AI, even the metaverse, even the metaverse. And so I just think that there's an enormous amount of value in there. I don't consider at all frothy uh and google i think is you know kind of a this is a uh what do you call it a uh an enduring

tech uh name it's kind of tech essential we're going to be using google for the next 5 10 15 years it's like a staple it's a tech staple and it's trading i think at a very very reasonable evaluation i don't think it's frothy at all so i'm willing to step in on these names i'm one of those dip buyers that dan was talking about earlier. That's me on these kind of names. We get these kind of pullbacks. We may not snap back anytime quickly, but you want to look back on this three to six months and say, I bought Google and Meta on those corrections. Glad to have you, Mark. Yeah, you've also you've also, by the way, set us up well for our question of the day, which I'll get to in a second. Mark, thanks so much. We'll talk to you soon. Mark Mahaney joining us. Gentlemen, thanks to you as well. Dan Greenhouse,

Alex Kantrowitz joining us here in the house at our global headquarters. Now to our question of the day. We want to know which of these big tech stocks could be due for a bounce. Amazon, Meta, Alphabet or Microsoft? Head to at CNBC closing bell on X. Please vote. The results are later on in the hour. In the meantime, a check on some top stocks to watch as we head into the close. Christina Partsenevelos is here with that. Christina. Scott, e-cigs are stealing market share away from Altria Group.

The Marlboro maker said domestic cigarette shipment fell or volume fell almost 12% driven by wider competition across the industry and from illicit e-vape products. On the earnings call, the CEO said, the lack of regulation of illicit e-vape products comes at the expense of legal operators. Altra shares are down over 8 percent. UPS shares right now, they're down about 5 percent lower after reporting a drop in Q3 earnings,

primarily due to the new labor deal with the Teamsters union that was just ratified in August. The company, though, also warning of a lower of lower revenue and thinner profit margins just in the near future. Not because of labor issues, but because of a slowing global economy. Shares again down 5 percent. Scott. All right. Christina, thank you. We'll see in just a bit. Christina Parts and Nevelos. We're just getting started here on Closing Bell. Up next, Sam Bankman Freed taking the stand today without a jury present. A live report from outside that New York City courthouse is just ahead. Plus, making the case for caution.

BNY Mellon's Sonia Meskin is flagging some downside into the end of the year. She'll make her case after the break. We're live from CNBC's global headquarters. You're watching Closing Bell. Dow's down 111. I'll see you in two minutes. All right, back on Closing Bell. Following the latest developments now out of the Sam

Bankman-Fried trial, Kate Rooney outside the courthouse in New York City with the very latest. Kate? Hey, Scott. So Sam Bankman-Fried is on the stand, but there is no jury in that courtroom behind me. You can think of it as sort of a dress rehearsal. The judge wants to hear what the defense has to say and decide if that's admissible. The jury will return tomorrow morning. In the meantime, we are getting a flavor of what the defense's arguments are. Bankman-Fried's lawyers are trying to show that he did not have criminal intent. The play so far is to blame all of this on the FTX lawyers at the time. Dan Friedberg, the main name we're hearing, Bankman-Fried saying that he signed off on bank accounts that misused customer money, and the Bankman-Fried thought all of this was allowed in the terms of service.

It was written by the lawyers. This is known as an advice of counsel defense, which the judge pushed back on earlier in the trial, but the lawyers now say it's relevant and it speaks to Bankman-Fried's state of mind. He is sounding calm up there, giving short, clear answers, much shorter hair on the stand. It is a risky strategy, though, Scott. He is expected to face intense cross-examination by the government. He's under oath. And if the judge suspects that Bankman-Fried at any time lied in his sworn testimony,

he could have years added to his sentence. There's already a lot of tension between Bankman-Fried and the judge in this case, Judge Kaplan. Over the summer, he revoked Bankman-Ffried's bail, accusing him of witness tampering. The upside would be potentially persuading at least one juror that he did not have criminal intent. That's all that's needed for a hung jury, which could result in a retrial. Scott, back to you. Thank you. About to get real interesting.

That courthouse. Appreciate that very much. Stocks in the red across the board, as you know, NASDAQ falling below its 200 day moving average. That for the first time since March. My next guest expects even more downside ahead for stocks going into the end of the year. Let's bring in Sonia Meskin of BNY Mellon Investment Management. Nice to see you out here. So what's going to take us lower? Why are we going to go lower?

You know, we really thought that stocks were priced to perfection a month or so ago. And it seems, you know, with the term premium rising, with the economy doing very, very well, sometimes the good news turned out to be bad news for stocks. This seems to be one of those examples. Is a fallout in tech going to be the straw that breaks the camel's back, as they say, and that's going to start us on that road lower? Potentially for stocks, yes. Not necessarily for the broader economy. We do think part of the reason the term premium is rising is actually because the economy is doing quite well. I mean, of course, another reason could be the fiscal situation. And it is an unusual time that we're having a very strong labor market and a lot of fiscal stimulus in the

system. When do we look at good economic data like we got today as just an undoubted good, and we're not worried about anything but the fact that GDP is so strong, employment's still good, and that's ultimately what matters more than anything else. When do we focus on that? That is an excellent question, but unfortunately in the late cycle stages, which is likely where we find ourselves now, this is probably not the case. Once rates have truly declined on the policy side, at least, that's probably where we started looking at, you know, good news is good news. But that could happen for the reasons that are not necessarily that auspicious at the start, such as a recession. What happens at the Fed meeting in November where

most people, including the market, expects nothing? Well, in fact, I think they've communicated very well that they're not going to do very much. Their guidance for December and for next year will be important because that tension between strong data, stronger than they have been expecting, and the fact that they're pausing, they're saying because financial conditions have tightened in part because of the rise in rates across the curve. But they're still pausing in face of strong data. That tension is going to remain. What are they going to do in 2024? Is it going to be high for longer? Is it going to be potentially high for two more? That is still an open question. What do we do with the issues that we're talking

about rates? The fact that many would suggest there's just better value, better risk reward in the bond market still than there is in the stock market. And that dynamic is not necessarily going to change anytime soon. Yes, this is our expectation as well, especially for the strong corporates with strong balance sheets that can withstand higher rates, that are benefiting from the strong consumer, strong labor market. This is where we think the value lies. Yeah. What kind of target do you have on the S&P? We saw where we are today. We're below 4,200. Seems to be sort of a critical, if you will, line in the sand in some respects. Where do we go between the end of the year and now in the end of the year when all the hopes were on a year-end rally? Yeah, yeah. Well, we actually are a bit

less sanguine on equities. We don't expect a lot of downside. We think around 4,000 for the S&P is our, that's our central expectation. That's important to emphasize. There is quite a bit of uncertainty around that view, even internally for us, and even more so in 2024. All right. It's good to see you. Thanks for coming out here. Sonia Meskin, BNY Mellon, joining us here on Closing Bell. Up next, Countdown to Intel. That is on. Top chip analyst Stacey Raskin is back with us, breaking out his playbook ahead of tonight's highly anticipated results. That is after this quick break. We're back on Closing Bell after this. Welcome back.

Despite an initially strong start to October, semi-stocks down nearly 5% this month. Now, all eyes on Intel as they set to report earnings in overtime. Here to discuss Bernstein's top chip analyst, Stacey Raskin. We do this every quarter. You bet. You've come off the true lows as it relates to Intel. Not that you're on any level of high, but what do we really expect today? Yeah, yeah, you bet. So the quarter should be fine. They actually already effectively positively preannounced that.

They said they're coming in kind of in the upper half of guidance and street numbers haven't been broadly reset yet, so they ought to beat the quarter. Going forward, there's some puts and takes. I think the PC environment looks better, at least like the channel inventory situation's kind of normalized and demand was okay. I'm a little nervous about traditional data center. There's still some inventory correction going there and there's shift of spending from CPUs that they sell to GPUs and other accelerators that they really don't sell very much of. And going into next year, the company recently made some comments around gross margins that were not taken all that well. What they said was that they expected gross margins next year to expand,

but not by, quote unquote, hundreds and hundreds of basis points. And so I don't know exactly what hundreds and hundreds means, but street numbers at that point had gross margins next year up 500 or six hundred basis points. And so that's probably more than hundreds and hundreds. And so there's some controversy, I think, going forward on where do gross margins need to come in. And just, you know, into the print this week, we actually took our revenue estimates up, but I took my earnings estimates down actually because of those gross margin claims. So any color they can give us on that, I think, would be helpful, at least in terms of setting like the expectations for next year. And since you took those down, is that what keeps us from buying the stock here?

Because I was going to say, I mean, the risk reward. I mean, why not? Right. I mean, at some point, these things get so bad that they're good. Yeah. That's almost kind of how you were on the on the the upgrade. Yeah. To be to be fair be fair though the stock at that point was pretty close to book value it was like 25 bucks a share so it's higher than that now right um and they just do have a lot of wood to chop so again you don't exactly know where the numbers need to go next year both on revenues and particularly on margins um and i'll be honest like i don't know what it looks like if i'm looking out in in three four

five years i mean is you know are are GPUs and data center going to take share away from CPUs? Is the CPU data center, Tam, in five years bigger or smaller than it is today? Can they succeed on their process roadmap? And can they build a successful foundry business? And even if they do, what do the economics of that look like? Do they look like TSMC or do they look like Samsung or do they look worse? There's just a lot of uncertainty. I'm comfortable staying on the sidelines at this point until we get a little more clarity on what that trajectory is. And we're not going to get like a lot of color on that yet. See, I was going to use the word clarity myself as you were saying that,

because you feel like you have more clarity when it comes to NVIDIA or Broadcom. And that's the story. Yeah, at least for NVIDIA, look, people worry about, you know, the sustainability of demand. And is there an air pocket just because the numbers are getting so big so quickly? But there is real demand for their products. Clearly, there is demand. They can't supply everything that's there for now. Broadcom is interesting. So there is demand for their AI parts as well. They sell these to Google and they're benefiting on the networking side. Broadcom's core business actually did get a little weaker. That was a worry when they reported a couple of months ago. But the AI piece is actually big enough. It's actually stronger than they thought. It's actually

bridging the gap. So their numbers were fine. The core sort of numbers are actually reset as you get into next year. So it makes numbers easier rather than tougher as we get into next year. And then we'll see if they close VMware next week or not. I don't know yet. But if they manage to close that deal, it's another potentially 20% accretion that's not in the numbers. And even without it, the numbers are, the stock's still very, very cheap.

So I like Broadcom as well. Notable at all that I'm looking at Texan right now, Texas Instruments, right? It's such a bad day in the market. Texan's up, up near 2%. I mean, you do have it underperform and the price target is where it's at now. Yeah, yeah.

So, you know, they reported the other day and we were concerned going into the print for two reasons. One was we thought gross. We thought Q4 was just modeled wrong. It was just way too high. And then structurally, the gross margins were too high. We thought they trend down to 60 percent or even lower. And actually they guided Q4, I don't know, eight or 10 points below the street in terms of sequential growth. And they're they don't guide the gross margins, but you can kind of back it out. They were implicitly guiding gross margins in Q4 to 60 percent or lower. The stock did take a breath, although it was funny yesterday, everything was taking a breath. TI, funnily enough, actually was horrible, but it outperformed the

broader semiconductor yesterday. I still think that there were enough structural headwinds on TI that make me a little nervous. They're in a massive investment phase into a cycle peak, which is what's driving this. Although, again, I'm not going to knock what they're doing. I understand what they're doing and why they're doing it. They're looking 10, 15 years out over that time frame. I think it's fine. Over the next 12 months, I think it does make things challenging. It's hard for me to see a catalyst for structural outperformance, at least at this point.

Is there a best stock in your orbit that not enough people are talking about? Best stock in my orbit? I mean, people kind of talk about everything these days in my orbit. Not really. I mean, you know what I mean. It's dominated by, you know, AMD and NVIDIA and Broadcom. Of the ones that are sort of not as sort of mainstream like household names, probably Broadcom. I'd love to get more incoming on Broadcom.

Broadcom is in a little bit of a purgatory round until they settle out the VMware deal that they're doing one way or the other. But that is a stock that I've always loved. And frankly, I feel like it doesn't get the respect and the valuation that it deserves given the financials of what it is. So that is one probably that I'd love to get a little more attention on, frankly. But it's not like a household name. It's not like an NVIDIA or an Intel. I thought maybe you were going to say applied materials or something like that. Oh, maybe.

I'm a long-term, like, big semi-cap bull over the long term. So, yeah, maybe. I enjoyed it as always. Stacey, be well. We'll see you soon. Thanks. You bet. Stacey Raskin.

Up next, tracking the biggest movers as we head into the close. Christina Partsenevelos back with us for that. Christina. Well, despite the many, many Barbie and Ken Halloween costumes you're going to see this year, the movie isn't enough to lift toy makers' future outlooks. Toys and credit card spending trends. That's next. We're 15 from the closing bell. Let's get back to Christina Partsenevelis now for a look at

the stock she's watching. Christina. We may have a toy problem this holiday season after Hasbro gave a poor outlook along with posting top and bottom line misses. Hasbro blamed a quote softer toy outlook in consumer products. And this is something we heard from competitor Mattel just a day ago, sounding alarm over holiday spending. Even after the blockbuster success of the Barbie movie, there are signs of weakening demand. And that's why you're seeing shares of Hasbro down 12%, Mattel almost 8%. Speaking of spending, shares of MasterCard actually touched a two-year low today after forecasting weaker revenue growth despite strength from international travel.

What we know is that wage growth helped customers spend on travel, restaurants, entertainment, despite inflation. But some analysts now are warning spending trends in October are starting to weaken. MasterCard down five and a half percent. Scott, will you be Ken for Halloween? Negative. OK. Negative. But I appreciate the question. Christina Partsenevelos. Last chance to weigh in on our question of the day. We asked which of these big tech stocks could be due for a bounce. Amazon, Meta, Alphabet or Microsoft. And to add CNBC closing bell on X.

The results just after this break. Welcome back to Closing Bell. We do have some sad news to report today. Byron Ween, the vice chairman of Blackstone's Private Wealth Solutions Group and a frequent CNBC guest over the years, has died. Ween was known for his annual 10 surprises list, which he published for 38 straight years, was widely read on Wall Street. Mr. Ween was 90 years old, a legend, and he certainly will be missed.

All right, let's do it. We're in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli is here to break down the crucial moments of this trading day. Plus, another wave of earnings and overtime today. Phil LeBeau on Ford, Kate Rogers on Chipotle, Deirdre Bosa on the biggie, Amazon. Mike, I turn to you first. We did ask in our Twitter question, which mega cap stock is poised for a bounce? We're going to reveal the answer now because I want your response to it.

The answer is Amazon. You surprised? I was kind of surprised. From a game theory perspective, which is to say it's down most from its high. It's down like 18 percent off the high. It has participated the least on the way up over the last year plus. And it's reporting earnings in a few minutes. So the point being, if you're looking for a catalyst and the fact that the setup looks like it might be a little bit favorable, it makes sense there. But it is surprising in the sense that the fundamental story and how it plays through to their bottom line is murkier than it is with the likes of Meta or Microsoft. I mean, AWS and the growth and, you know, the returning to that is going to be key. So how would you assess so far

this week now that we're basically through this batch? We'll get Amazon, of course, and what we make of it and what it tells us, if anything. I mean, you have some definite surrender happening in the names people thought were safe to hold through this rough period. That's part of the process. You know, these corrections go through these waves. That being said, the wear and tear on the S&P 500 has been significant. And you've been cracking through these hope for support levels pretty consistently. Now, today, decent little intraday rally off the lows, more stocks up than down on the New York Stock Exchange. Thank you, Russell. Yeah. Well, the equal weight S&P is actually like barely down on the week. You know, it just already had its

pain. So that more favorably, you could say that's a catch-down move by the stuff that just hadn't been hit yet. The problem, I think, is trying to draw the macro message out of this market. It hasn't been a positive one for a while despite the GDP numbers. I mean, I have been trying to make the case

that the areas of the market that should have been hurt the most by slowdown fears and rates have already been hit. And then today, you see UPS, Whirlpool. You know, you see Harley-Davidson getting taken apart on bad numbers when you might have been able to make the case that they look cheap enough already. So I think it's another wave in that process. So more earnings Messiah. I know Amazon's sucking all the air out of the room.

But Phil Ford coming up. I suspect most of the commentary is going to be around the strike and the deal with the UAW. But nonetheless, what should we be looking for? Well, look, they're going to have strong numbers. It was a solid summer, with the exception of the last two weeks when you had the UAW strike. But that had a minimal impact in terms of the bottom line in the third quarter. So the focus, not only for the earnings report, but during the analyst call this evening, will come down to this. When you look at the Q3 consensus, the estimate is that the profits are going to be up about 50 percent. But I don't think

people are going to be too out of whack if the numbers are dramatically, unless they're dramatically higher or lower. The UAW contract cost is what the analyst will be talking with Jim Farley about. And what's happening with EV investments? You know, that was a major contentious issue that the UAW brought up, that they wanted to have representation at Ford's future battery plants. No doubt that question will come up during the conference call as well. A couple other things to keep in mind. Scott, this is a contract that's going to cost Ford an additional 25 percent for all of their 57,000 UAW workers over the next four and a half years.

And, you know, the other question is what happens with the strike now that it's over? How quickly will they be able to resume production, fully resume production? Some workers have already gone back to work, but it's going to take some time in order for these three plants to get back up and running. As you take a look at shares of Ford over the last year, keep in mind that this is a company that is trying to pivot to more hybrid vehicles as EV demand is slowing in this country. Scott? All right, Phil, we'll see. Thank you.

Phil LeBeau on Ford. Kate Rogers on Chipotle. What should we look out for? Hey, Scott. So analysts are expecting EPS adjusted $10.55 on revenues of $2.472 billion for the quarter. Comps expected to increase 4.6% compared to the guidance of low to mid single digits. Pricing, of course, a key focus for Chipotle. It's really maintained its pricing power over the last year, not seeing consumers pull back or trade down in the face of higher costs. It did confirm to CNBC

earlier this month it would be taking a modest price increase to offset inflation, adding it's the first time it's doing that in over a year. The company saw some higher prices for some of its items like tortillas and dairy, along with beef last quarter. But avocados, a key ingredient, came down in price. So we'll see how that impacts its margins. The stock has come off some of its highs, but it's still up about 30 percent. A year to date, one of the best performers in the sector for the year. We've seen companies that do have that higher price point for consumers like a CMG, a Shaq or Sweetgreen do a bit better in terms of stock performance this year versus others in the space. We're also, of course, going to have a CNBC exclusive with CEO Brian Nicol today after

earnings next hour. So tune in for much more on all of this. All right. We'll see you in overtime. Kate Rogers, thank you very much. Finally, D, Amazon, AWS, reemergence. Are we going to get it or not? Mark Mahaney, you heard him. Only 50-50 chance. That's exactly it, that we need to see a reemergence. We need to see the bottom of that AWS growth deceleration. It's been six straight quarters. We've seen margin contraction as well. This is the profit engine of all of Amazon. So it needs to be on the upswing. And so that's really what kind of the quarter rests on. Can Andy Jassy and his team say that we've seen the bottom, then it's going to come up. This also relates to its AI push, because a lot of this is happening in the cloud unit, that massive investment into Anthropic. Microsoft essentially told us that, you know, it can monetize this now. Customers are going to be paying for some of these tools. So the bar is not much higher for Amazon. Last thing I'll say, Scott, is that, of course, this is an e-commerce company, although that is not the profit engine. The margins are much thinner there.

We're heading into the holiday quarter, so Amazon will give guidance, and that's got to be good for the street. Well, we'll see in the next few minutes with that. Joe Drabosa, thank you very much. I turn back to Mike Santola. You look at tech, these losses over a one-week period, Alphabet down 11, Meta down near 8, Intel's almost down 9, AMD down 9. Pretty astounding. Yeah, they've become essentially the source of funds to do anything else, which is possibly to put it in cash,

just because they have held up that much better. Look, they are growing more reliably than the rest of the market, but they just probably got too much credit for that in the short term. Most of them still in uptrends, the likes of Intel not so much. But I do think it'll be interesting to see what they can make out of this. Will it be three of these days in a row with big cap tech earnings being reported and you sell the number? That would be unusual and worrisome. And we will find out in a very short period of time. Thanks so much. Amazon on deck inT, which I send it to now with Morgan and John.