Closing Bell - Closing Bell: Choppy session, Netflix soars, Palantir & Hertz CEOs on partnership 10/19/22

Episode Date: October 19, 2022

Stocks closed mostly lower after an up-and-down session, as investors weighed strong earnings against rising yields and weaker data. Katie Stockton from Fairlead Strategies joins with her call for a multi-week relief rally. Netflix was a major outperformer following blowout earnings and subscriber numbers. Macquarie analyst Tim Nollen breaks down how the company’s ad-tier could impact future results. Meantime Palantir and Hertz announced a partnership to use data to improve the rental car experience. The CEOs of both companies join exclusively to explain the deal. And the CEO of Citizens Financial Group discusses the plunge in mortgage demand and the impact on regional banks.

Stocks are pulling back in a choppy session again here as weak data and higher yields counter an upbeat earnings picture. Energy is the only sector right now in the green. 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. We are down on the Dow about 200 points. We were higher at one point in the day, but it looks like we've lost most of the steam there. The S&P 500 down a full percent. Again, energy the only sector higher. What's getting hit the hardest? Real estate, financials, health care and consumer discretionary. The Nasdaq's down 1.3 percent. The move in treasuries is catching a lot of people's attention today. We saw a fresh 14-year high on the 10-year yield, which is higher today. Netflix is certainly helping, but Nasdaq getting hit by Microsoft, Apple, Amazon, Alphabet. They're all weaker today.

Check out the big earnings movers. Netflix, definitely the stock story of the day. It's the top performer right now on the S&P on the back of strong results. More on that, of course, straight ahead. United also getting a nice bump on good results. P&G higher as well. We'll talk about that one. And Generac is falling hard on a warning. After the bell, we'll get results from Tesla and IBM.

Coming up on the show today, we've got a big interview with Palantir CEO Alex Karp and Hertz CEO Stephen Scher about their new partnership just announced to use data to improve the car rental experience. Let's begin, though, with the market and the economy. The Federal Reserve just releasing its Beige Book last hour, and Minneapolis Fed President Neil Kashkari making some fresh comments this afternoon. Our Steve Leisman here with all the highlights and investor takeaways, Steve. Yeah, thanks, Sarah. A very mixed Beige Book that hints at some progress on inflation

and supply disruptions in tight labor markets. But it's far from signaling all clear on those key factors that have been driving inflation. The Beige Book, a collection of economic anecdotes, as you know, from the Fed's 12 reserve districts, bank districts, said economic activity expanded modestly. That's an upgrade from the last report, which said it was unchanged. Looking at some of the key sectors that they cited there, retail was flat, autos were sluggish, travel and tourism, though, up strongly, housing weak due to high interest rates, low supply. Manufacturing was steady, and that caught my eye because manufacturing held steady because the Beige Book said there were some easing in supply chain

disruptions. I hadn't seen that in a while. Worth noting, the Beige Book was early in flagging supply chain problems for the economy at the beginning of 2021. Commentary, however, was mixed on labor and inflation. Looking at what they said about jobs, employment rose at a modest to moderate pace. Scattered mentions of hiring freezes, though, but labor market conditions overall remained tight and wages were rising due to inflation. On inflation, an important part of the Beige Book, prices remained elevated, but there was some easing again noted across several districts.

Hard to tell, though, if Minneapolis was one of those districts, as President Neal Kashkari in remarks this afternoon said he had seen little evidence that inflation is peaking or that the labor market is softening at all. He repeated those hawkish remarks from yesterday where he said the risk of undershooting on hiking rates was bigger than the risk of overshooting. And Sarah, as I think you probably know, we are just, I don't know, kissing or at the very edge of the peak rate being at 5%. It's at 497. Doesn't seem like they want to trade that April contract at five percent. The price is ninety five point zero three. So just point zero three separates us from what would be an historic trade on that April April peak funds contract. Yeah. No. God, you pointed it out, Steve. Thank

you. Higher and higher rates. Joining us now for more on the market, Katie Stockton, founder and managing partner of Fairlead Strategies. Katie, with a new call, I think, on Treasury yields as we are looking at at least making or matching the highs here on the 10-year yield. That's right. We do have an unconfirmed breakout above 4%. That happened as of last Friday. The breakout would be confirmed on a close above that level this Friday. We always wait for confirmation just given the propensity towards whipsaws. And if that's confirmed, the next resistance level is five and a quarter. And we didn't really think we'd be talking about that this year, and here we are. And yet that would be a longer term target, so maybe six months plus. So I don't

think it's relevant in the near term, but it would be the next objective for Treasury yields if indeed this breakout is confirmed. And yet there are some signs of exhaustion based on our countertrend signals from the DeMarc indicators, for one. These are signals that we haven't seen the likes of since May and June. And it would suggest that we'll see some corrective action in yields here in the near term, maybe over the coming two months. So a peak, a near-term peak? Is that what you're calling? Yeah, it would be a short-term peak for yields. And then we'd expect the uptrend to resume on

the back of that. We always defer to these trends and their long-term momentum. Long-term momentum is still very much to the upside behind yields, and that goes for the dollar as well. And it's still very much to the downside, unfortunately, behind equities. There's a trade building there, because I was looking at the open interest for the TLT for bullish call contracts. In other words, betting that what you're saying is true is actually close to an all-time high. So that trade may be gathering steam. Katie, what would it mean for the stock market, which has been so tied to the direction of rates? Yeah, it really has been.

And it's funny because just in the last little oversold bounce that we saw in the S&P 500, up more than 7% off the recent low, leadership actually came from financials. And we think that could be more the case if indeed we do see yields pull back a bit here. So we also would expect technology to exhibit upside leadership as it often does during a relief rally. But just to the point that it would be a short-term peak in yields, we think it's just a short-term low that we have underway here perhaps in the S&P 500. We are looking for some upside, though. Today's action aside, it just seems like noise to us because our short-term indicators are now pointing higher, and overbought conditions, of course, are lacking as we come into the hard-of-earning season here.

So we do think that TLT trade probably makes sense, but we'd keep in mind it's counter trend. Anything counter trend holds more risk. What about for the market? It sounds like you're not willing to say that this is the bottom or anything like that. We're riding a two-day win streak. We're falling today. We've had several now of these bear market rallies. What have we learned about their staying power, how high they go, when to fade them, essentially? Well, I mean, we can go back to 2008 as our probably best analog for this current environment. And it really doesn't bode well for any kind of sustainable relief rally. But the relief rallies have historically been in the nature of 10 to maybe even 20 percent at times.

They tend to unfold very fast and furiously. We saw that over the summertime. And we do have indications that this rally could be of a duration of four plus weeks. So we also have some positive seasonal influences at hand, but also very, very difficult to trade. I mean, the whole point on the fast and furiously means that it's really difficult to capture these countertrend moves, and it is also high risk. So our recommendation has been more to sell strength and to wait to sell that strength until momentum starts to slow on the upside. So we're really, really attuned to the short-term trend following gauges to that end, with the thought that the S&P 500 will extend lower on the back of this, ultimately reaching perhaps 3,200 support sometime in 2023. Yeah, that's a lot lower. We're at 3,680 right

now. Katie, thank you. Good time to check in with you, always on the charts. Katie Stockton, Palantir and Hertz announcing a partnership today to use data to improve the rental car experience. We're going to talk to the CEOs of both companies in an exclusive interview next. You're watching Closing Bell on CNBC. Dow down about 200 points, 1% on the S&P. Hertz and Palantir announcing a new partnership today. The car rental company will utilize Palantir's foundry software to help manage its 500,000 car fleet. Joining us now, Palantir CEO Alex Karp and Hertz CEO Stephen Schur. Gentlemen,

welcome to both of you. Thank you for joining me. Stephen, you've been making a lot of deals since you've been CEO. A month ago, we had you on with Mary Barra and GM, and now with Palantir. What will this do for you? Well, part of our success will be the partners that we keep, and we're super happy to keep Palantir as a partner. What this will do for us is we're a business that sits on an enormous amount of data, both about our cars, about our customers and the like, and positioning those cars and managing those cars to their highest efficiency obviously brings positive outcomes for the company and for our customers. Palantir and their Foundry platform enables us to take very different forms of data, whether it's data about our vehicles, data about the weather, data about airline schedules, take

all of that, combine them in a way where we're not compelled to put them in a common form, and they give us output on which we can manage the company better. Alex, it's good to have you on the show, and really interesting to learn about all the different ways that your software is being put to work. How did the Hertz connection come together? Well, I mean, obviously, just from a purely data management perspective, it's one of the most interesting businesses in the world. You have this massive fleet of 500,000 cars. The cars are registered all over the U.S., which means re-registration and managing of the fleet becomes an asset allocation problem.

Asset allocation problems that also include regulation require essentially next generation software. It makes use of both Foundry 1.0 and 2.0. So managing the data, getting it into one place, and also when you have like a world-class CEO, as they have at Hertz, being able to impose the decisions on the data. And there was just a lot of excitement. You know, Steve is kind of a cool dude and very, very into both the operations and the visions of the business. And that makes a discussion around how it'll be implemented

and implementing decisions just really, really exciting. And I believe that, you know, they're going to be winners both in the software industry and other industries and people who can combine business acumen, management of very, very large data sets against time-sensitive decisions will win. And so it's just very cool to be in a partnership where I think we're going to win. Well, Steve, a lot of love here. I mean, you've been building out the EV part of your fleet. How does this foundry software help you do that?

Well, this is central to it. I mean, part of what we do is we have telematics and intelligence in the car. We know where the cars are and where they're moving. But we want to know and anticipate things about the car. We want to know how much charge is an electric vehicle coming into our location with, how much time are we going to need to put that car back up to a charge and put it out again. We need to know if brakes are in need of repair, commission those parts ahead of time, have them there so we can turn the car quickly.

Understanding and knowing that data, digesting that data, I think is the core of what we're trying to do here. This is a unique intersection of software and hardware. And obviously what Alex and his team at Palantir bring forward is an ability to take reams of information and consolidate it into a coherent package so that we can take action and action the data that we're sitting on. And I think it's a super exciting opportunity, particularly around the electric vehicle,

which is obviously the direction we're going in terms of taking our fleet to an electric fleet to the tune of about 25% by the end of 2024. Alex, for Palantir, I've noticed that the Foundry software is being adopted by a number of transportation companies, not just Hertz. I think you have deals with United and Ferrari and Airbus. How big is this business going to get?

And why is there such a good match here with some of these transport companies? Well, you know, first of all, this is what makes this partnership particularly interesting, is that you just have this combination between things that Foundry has done in the past, like preventive maintenance, looking forward, cycle of life, predicting where an asset should be, with dramatic issues around registration and how these vehicles are registered, and then moving to a more climate-friendly fleet, all of which requires both integrating the data and then being able to decide against the data.

And these are very, very big steps. We do well with complicated, interesting problems where the software gets shown off to be valuable. As your listeners know, most software is kind of not super useful. And so we are always looking for industries where you can just really dominate through the integration of hardware and software and entrepreneurial acumen. And there's a lot of industries out there. Some of the most notable, though, are these very, very complicated, very regulated, super international or interjurisdictional businesses that involve large machines, cars, planes. And so, yeah, the software, you know, the harder the use case, the more the software has to

be performant, the less it revolves around sales. We're not, we don't think we're good at sales. We think a lot of software companies are great at sales and we want to show off software that works with partners that are the best. And so we seek them out and to some extent extent, they seek us out. Is it, is it, you know, go ahead, Steven. No, no. I was just going to say, you know, part of the success of our company rests on the level of utilization that we can put our cars out, right? The return on our assets is key to financial return to our shareholders. What that means is we need to use our cars. Utilization needs to be high. It means we need to bleed dead time out of the time a car is out of service. It means registering the cars quickly, repairing the cars quickly, charging the cars quickly.

Anticipating all of that and aggregating the data such that we can act on it is really at the core of what we're going to do with Palantir. It is all about taking up the utilization, the usable time a car is out on the road as a financial earning asset for the company. Yeah, I mean, it seems like you're bringing it to 2022. Renting a car is such an old school experience that often involves a lot of money. 2027. 2027. 2027. There you go. Into the future. So, Alex, what I was going to ask about was you say that you are attracting a lot of partners with complicated business. What's happening with spending right now? Because there are increasingly worries about the economy and companies having to cut back, batten the hatches,

as Jeff Bezos tweeted last night in response to something that was said on CNBC. So have you seen an impact in terms of software spending from your customers and potential customers? You know, we have a global business and, you know, Europe is slower slower both because of financial constraints, energy problems, war on the border and general kind of slowness and adoption of new technologies. In the US, our company's grown 67% year-on-year the last three years. What we see are tough times bring out great leaders and great leadership. And the way you win in tough times is by, as discussed as an example, you take an asset and make the asset more valuable.

You explain it to the financial world that it will be more valuable. You show your customers more value. And then, in a weird way, the tough times make you a stronger business. Pounding your business turns your business to steel. And so what we're seeing, we're by and large seeing pretty significant uptick in demand in the U.S., both commercial and in government for very different reasons. And we think the bad times will force people to move away from software that's about churning your own data and looking in the mirror at it to decisions, figuring out how you can win,

better asset allocation, making your asset more valuable. And it'll push very strong leaders like Steve to the top, which we think is really a crucial part of why American industry is so strong. It's really interesting that you're seeing an uptick in business in the U.S. Stephen, curious about what you're seeing, because I was just going through the Beige Book put out by the Fed this afternoon, and a lot of the districts, because I was just going through the Beige Book put out by the Fed this afternoon. And a lot of the districts, including in New York, very strong in tourism. Some other parts of the economy are starting to weaken. But have you seen any slowdown?

Well, we'll report earnings next week. And so, you know, we'll provide quite a bit of detail on it. I will tell you that what you're hearing, for example, over the last two weeks from the airlines, for example, I think is indicative of the environment we're operating in, which is that leisure demand is very strong. Corporate demand is increasing and increasing among larger corporates. I think we first saw recovery among small and midsize businesses. Now we're seeing increasing travel among corporates. I'd also point out, and again, as you heard from the airlines, we're seeing longer rentals, which is suggestive of the fact that people are combining business and leisure, you know, in kind of the new order in which business is being conducted.

And then equally, we're starting to see a reintroduction of foreign inbound travelers to the United States. Again, we'll report next week and give all the details around it. Suffice to say that we're living among and we are operating among the same sort of, you know, trends that you've heard from United and Delta and others over the last week and a half. Yeah, which have been very strong. So thanks for sharing that. Alex, final question to you, because I always think of you at the center of some of these geopolitical issues. And I'm sure you read Xi Jinping's speech this week to his party at the Congress, a

lot of talk of technology and just overall reflective of the increasingly tense relationship between the U.S. and China. I was curious what you made of that speech and where you think this is going, given your vantage point into government defense. Well, you know, we at Palantir have been taking the threat of our adversaries, both in Russia and China, seriously for the last 18 years. We believe the West has a software advantage, a software advantage at war, but not in internal surveillance,

which I think is destructive of societies. You know, I think this is going to get much worse before it gets better, partly because the capabilities that the U.S. government has, both in software and hardware, are still underestimated despite recent events. And because our adversaries largely just underestimate us. They look at us and they see certain things that are obviously crazy, but they underestimate the entrepreneurial talent of the American people to rebuild things, redo things, to act quickly. And the impact of software-hardware combination, whether it's this partnership or on the battlefield, is just something that is clearly on display and still underestimated. So I predict bad before it gets good.

Alex, Stephen, thank you both for joining me to talk about the deal and, of course, other hot topics. Really appreciate it. Stephen Scher, Alex Karp. Thank you, sir. Let's show you what's happening overall with the markets here. We've recovered a little bit. The Dow's down 126.

We were down 200 just a moment ago. The S&P down three quarters of 1%. So it's still a weaker day, but it's coming off certainly the lows. Energy is still the only sector that's working. Oil prices are higher. Everything else is down. Financials getting hit especially hard today, along with real estate, health care and consumer discretionary. Again, those higher treasury yields are very much in the driver's seat. The 10 year is above 4 percent. It's matching a 14 year

high. Up next, Mike Santoli puts the Netflix pop in context for us in the race for streaming supremacy. And later, the CEO of Citizens Bank will join us to break down his quarter with a read on regional banking. The stock is up today on better results. We'll be right back. Welcome back to Closing Bell. Netflix right now, the top performer in a down tape following blowout results. CNBC's senior markets commentator, Mike Santoli, here to break it down in today's dashboard. So much needed relief here for Netflix. Yes, definitely some relief and

really fascinating over the last few years, just the sort of push and pull of changing fortunes between Netflix and Disney compared to the overall market. It was almost four years ago today. In fact, on November 8th, it'll be four years that Disney announced Disney Plus was coming, announced the launch date. So that was when the initial real revving up of excitement for Disney as a competitor came into this market. And you see right here, Netflix and Disney have been almost the same stock, even though vastly different business models. You've seen a huge push into the pandemic and both well underperforming the S&P 500. So it's a decent little lesson. And even though hundreds of millions of new subscribers have come into streaming, it's become more centralized.

These are the two kind of consensus net winners with scale in this world. And they're still kind of fighting it out to try to make it financially attractive for investors. Now, just going to a different little bit of kind of compare and contrast between two different approaches to investing. Tesla against Berkshire Hathaway, almost the same market cap again. And this, of course, Tesla just surges past Berkshire Hathaway, a vastly bigger economic entity. And right now it's almost come back down. So it's really about are investors willing to bet on the big open-ended future or do they want the here and now of solid book value that you can calculate today with Berkshire Hathaway? Why did you put these two together?

Because they're very close in market cap size. And so you kind of say, OK, the market's willing to pay $650 billion for something. On the one hand, it's massively about the future and changing the world. On the other hand, it's a portfolio of very solid businesses and insurance companies that you really kind of have a feeling for what it's worth. So different styles. Very different. Now same size. Mega growth versus value. Yeah. Mike Santoli, citizens of financial beating Wall Street's earnings estimates, but actually did give up some gains along with the rest of the market here. Up next, the bank CEO discusses the results and whether plunging mortgage demand could impact the bottom line in the future. We'll talk housing and the economy and much more.

Take a look at the S&P 500 sector heat map right now. That one little square of green, that is energy, which is up 3 percent as a sector on the back of higher oil prices. Despite the Biden administration's new efforts to tamp down the price of oil, everybody else is lower. Real estate's at the bottom of the pack, along with financials down almost 2 percent today. The regional banks down more than 2%, with M&T Bank in particular getting slammed on lower than expected earnings. Meantime, Citizens Financial beats slightly on the top and bottom lines. And joining us exclusively is Citizens Financial CEO Bruce Fonson. Bruce, always good to talk to you and get some color

about what you're seeing. Clearly, the higher rates are helping in net interest income. How would you describe the current environment, which has helped you and some of the other big banks we've talked to, like Bank of America and Wells Fargo, do better this quarter? Yeah, I think it's really powerful when we get off the zero bound of interest rates and all of a sudden the value of our deposit franchises can come through. So we saw our net interest margin go up by 21 basis points this quarter and we're up to three and a quarter for net interest margin. We think as the Fed keeps going higher that we should see that rise to 3.5 percent over next year, which will continue to power impressive earnings performance and return on equity.

Our return on equity actually hit 18% this quarter, and everything looks good. Fees were stable, expenses stable, balance sheets in good shape, capital ratios are strong, and our credit position continues to be really, really good. Yeah, credit trends were solid. So the question is, the market is worried about a turn, though, in the cycle and the economic weakness that follows those higher rates. Are you seeing any evidence? Not yet. So I think I mentioned last time I spoke to you that credit was pristine and you poked at that a little bit. But, you, but it still is pretty pristine. Interestingly,

we have the consumer in great shape. Generally, we're lending to more affluent and mass affluent customers. They still have very high liquidity in their deposit accounts. They have plenty of opportunities to work. Unemployment's low. So consumers in good shape. And most companies still did a great job getting through the pandemic, leaning their expense base, lengthening their maturities on their financing, locking in low cost debt. So not a lot of concern at the moment, although, you know, you start to batten down the hatches a little bit. You start to play a little bit of defense. You start monitoring areas like commercial real estate and leveraged lending, which have typically been the areas where you've seen some rising

charge-offs in a period of economic weakness. But so far, so good. Wow. So still almost pristine credit, even though the market clearly is concerned about it. So, Bruce, what about housing in general? Because that is a weak spot, right, with mortgage activity. We got word from the Mortgage Bankers Association that mortgages are plummeting and refinancing are falling off a cliff. What do you see? Yeah. So clearly, production volumes are way off. We saw refinances pretty much evaporate earlier this year. We're now starting to see the seasonal slowdown in the purchase market. We're starting to see in overheated markets, we're starting to see prices start to drop and the time that houses are on the market starts to lengthen. So seeing a slowdown in housing.

The good news from our standpoint is that we have a big servicing book and that serves as a hedge. When you see your production revenues fall, your servicing can pick up the slack. So we're not really seeing much leakage on the mortgage revenue line, which is good. One area that's related in housing is the home equity line of credit activity has seen a lot of growth. So what's interesting now is that folks who locked in and refinanced and have low mortgages on their house, and they've had that run up in value on their house, they don't want to give up that low cost mortgage. So they say, hmm, maybe I should tap into that equity on my house, take out a home equity line of credit, do a renovation, put a new deck out back. And so we're really seeing some

nice growth in home equity line of credit. And we've capitalized on that. We've also redesigned the process so it's much less cumbersome to get a home equity line of credit. And in the trailing 12 months, we're the top home equity line of credit originator in the country, in spite of just being a regional bank. Thought all that work was done during COVID when people focused on their homes. Guess not. What about autos? I wanted to ask you about autos because I don't know if you saw Ally Financial. The shares took a dive on concerns about profitability there, and they're the biggest auto lender in the country. So what are you seeing

in that space? Well, you know, we've seen certainly the slowdown overall that's been less new manufacturing of autos. And we're starting to see the prices on used cars come down a little bit. The good news for us is that we decided to start to step back from the auto market, you know, probably three, four quarters ago because the returns there, the spreads were getting compressed and it wasn't a good use of our capital. So not much impact on us. And again, where we play is in the very safe high prime and super prime space. So no real losses or any big news there from our standpoint. Bruce, really, really great to get some color from you. Thank you very much. Okay. my pleasure. Appreciate it. Oh, wait, Bruce Bonson, the CEO of Citizens. Semiconductor stocks are outperforming the broader market right now.

Up next, why comments from a big chipmaker are driving these stocks higher. And don't miss the first episode of Special Edition with Andrew Ross Sorkin featuring featuring Pfizer CEO Albert Bourla. That's tonight, 1030 p.m. on NBC News Now. We'll be right back here on Closing Bell. Dow's down about 150. Check out shares of chip equipment maker ASML, which are rallying after reporting strong earnings and guidance and saying new rules on exporting chips to China will have little impact on their business. Christina Partsenevelos here with the details. What are the big takeaways, Christina? Well, little impact because demand

for ASML machines is actually outpacing supply. They make lithography machines, which are pretty much imperative to the chip making process. And those machines can cost up to $200 million per machine. So essentially, ASML is a monopoly since no one else makes these same machines, adding to their confidence that even if they lose orders in China, they can sell those tools elsewhere. It's not the case for all equipment makers. I should say Applied Materials cut its forecast last week, blaming the new China export rules.

They predict a $400 million sales cut in Q4. And then Nvidia also warning of a $400 million impact. And we see the stock on the screen. When the news came out, the shares have dropped 22.5% since that announcement. Christina, thank you. It's been a rough ride for Tesla this year. Up next, a top analyst on whether investors should buy this beaten down stock out of its earnings after the bell. That story plus plus United flies high and Netflix rallies when we take you inside the market zone. 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, McQuarrie's Tim Noland on Netflix and CFRA's Garrett Nelson on Tesla. We'll kick it off with a broad market, though.

The Dow's down 122, so we continue to recover here throughout this final hour of trade. Could have been worse, Mike, I guess we can say, every time with all the volatility we've had lately. You've got some earnings winners in there, like Netflix. Oil is higher, and energy is the only sector that is actually outperforming. What's the read on energy and oil right now after we heard from the president? Well, you actually had a pretty decent correction across the board. I think the idea that prices at these levels in oil and maybe natural gas are going to be have a floor under them to some degree, right? The going to refill the strategic petroleum reserve, perhaps, with a bid around $70 a

barrel. That's probably giving people some confidence. When it comes to the companies, I think it's mostly about the fact that earnings just seem pretty easily beatable from here on out. And they're one of the few sectors where you can say that across the board, that, in fact, they have earnings estimates going up and they seem like they're achievable. Yeah. And in the Beige Book, the Dallas Fed noted that there's some pessimism growing except for energy.

Yeah. Energy firms are feeling good. Look at Netflix, the best performer in the S&P 500 today, the streaming giant adding more than 2 million paid users in Q3 after back-to-back quarters of declining subs. Let's bring in Tim Noland, Macquarie Senior Media Analyst. Upgraded the stock about six months ago, six weeks ago, I think, to a neutral from a sell. You're still not a buyer, but the results were better. You saw some progress there, didn't you, Tim? That's right. Yes, definitely progress. I mean, the sub number spoke for itself. I mean,

that's always the number that people are looking for first. Interestingly, of course, Netflix won't be providing sub guidance anymore. So we'll be having to build our own models. But yeah, definitely, definitely, I think the sentiment is improving on the likely success of the ad tier. We've estimated that will be revenue, positive incremental revenue to be generated next year. But it really is going to be, you know, an effort to get there. I mean, there's high demand to be placing ads in those slots, but it's going to be largely, you know, contextual based ads using just kind of basic, you know, age and gender data. So the real upside over time could come from better programmatic delivery of those ads, better targeting, therefore higher pricing. That will take time to develop. Meanwhile, you know, foreign currencies

kind of hurt Netflix currently into next year. We've only got kind of very slight upside to earnings. So that's why we're still neutral on the stock. But you're raising estimates. Is it on the ad tier? Yeah, we've raised estimates. Well, it was a pretty nice beat versus the guidance they had given in Q3. The Q4 guidance looks decent as well. And yes, we are now working in gradually more upside from the ad tier. You know, the news last week, this was last week when it came out with a lot more detail on the ad tier. Basically, we were only assuming US and Canada being the market launches, you know, really for the first part of even 23. They're coming out with 12 countries and they are 12 large, sophisticated ad markets

over the next, starting in early November. So that basically means more ad revenue, more business coming into Netflix in 2023. That could be somewhere around a billion dollars of total ad revenues next year. So it's a good start. It's a good start. And that does factor into the numbers, factors into a higher target price as well. Thank you for joining us, Tim Nollin, with your reaction from Aquaria on Netflix. $285 target raised today. Turning now to another earnings mover. This one offers a warning for any company doing business overseas. You just heard it from Netflix, Procter & Gamble.

Take a look. Shares are moving higher today. The consumer giant, which makes Pampers and Tide and Swiffer, beating estimates on both lines despite facing headwinds from rising raw materials costs and a stronger dollar. The company was able to offset lower volumes with higher prices. They actually were able to offset the inflation story with those higher prices. But it did lower revenue guidance, and P&G expects that to fall now, 1% to 3%, instead of coming in flat to 2%. This is a story of the stronger dollar and the havoc it is wreaking on corporate earnings. Here's the deal. The strong dollar cut P&G sales this quarter by 6%. The reason P&G cut guidance, currencies, the dollar headwind,

has now doubled its projections from just three months ago. Full year earnings are likely to come in at the low end of the range, according to P&G. Bottom line, it's not a weak consumer. It's not inflation. They dealt with that through higher prices. It is all about the strong dollar. And the problem is it's getting worse as the dollar gets stronger. And just to highlight the point, Nestle reported today, another consumer giant, raised its outlook, says it had its best nine-month sales stretch in 14 years. It doesn't have to deal with the dollar because it has the Swiss franc, which is more competitive. And, in fact, it had a positive currency impact.

Hence, they were able to lift guidance. Not so much a problem with the consumer. It's really on currencies. We'll turn now to United Airlines, which is soaring after beating Wall Street's earnings estimates and issuing a bullish fourth quarter guidance thanks to strong travel demand. Earlier on Squawk Box, CEO Scott Kirby discussed the current travel trends that could insulate the carrier from rising recession fears. Listen. Well, I think there is a headwind from a slowing economy and a recession coming.

There's three trends which we can talk about that are more than offsetting that economic recession headwind that are durable, long term trends that mean I think travel demand for airlines is permanently higher. It's at a higher level. Philip Boe joins us. Why is Kirby, you spoke to him, why is he so convinced that this is the new normal? He used the word durable when it comes to travel demand, clearly countering some of the market's worries that this is temporary. Well, first of all, there was the pent-up demand from the pandemic, and that's going to continue at least through the fourth quarter. And then everybody, not just Scott Kirby, but within the airline industry,

believes it continues after the new year, after the holidays. In addition, their supply is constrained, not just for United, but for all airlines. Look, their capacity is down about 9 or 10 percent compared to pre-pandemic. That's not changing anytime soon. Boeing and Airbus, while they would like to deliver more aircraft, they're not going to be able to ramp up in order to let these airlines add as many new aircraft as they would like. Yes, they will add them, but it's going to be in a very more, it's much more constrained pace. And then finally, you've got what could be a shift in travel patterns, Sarah.

And you heard Stephen Schur talking about this from Hertz. You have people who can now work remotely, so they may take a trip, leave on a Tuesday and then stay through the weekend as opposed to just going on the weekend. And to back that up, Scott Kirby says, look at the load factors. The percentage of seats filled on the planes on Tuesdays, on Wednesdays used to be the slow time of the week for air travel up eight to 10 percent. Load factors up eight to 10 percent now compared to pre-pandemic. That tells you there's a shift in patterns. Absolutely, Phil. Thank you. Yeah, I thought that was super interesting, the whole combining of business and leisure

leading to longer rental car times and clearly changing the game for airlines. Phil LeBeau, look at Tesla shares. They're moving higher today. The company reports Q3 numbers after the bell. And joining us with a preview is CFRI senior analyst Garrett Nelson. Stock has sold off really into this report. Garrett, is this an opportunity? You like this stock. We do think it's an opportunity. Tesla shares are down close to 30 percent over the last month after a big run up. And, you know, we really

wouldn't bet against Tesla. Their earnings track record has been outstanding over the last few years. In fact, they've beat in 11 of the past 12 quarters. I think what's different this time is we think there's a reasonable chance that Tesla is going to announce a stock buyback. Some major investors have been urging Elon Musk to do so. And the company's balance sheet is in really good shape. They had about $19 billion of cash at the end of June. Their credit rating was recently upgraded to investment grade. And so we think they're in position to really take advantage of this pullback in the stock. We think there could be a fairly sizable repurchase

plan announced in tandem with earnings. Which you think is not factored in and would push up the stock? That's right. But even absent that, we view Tesla as one of the market's best earnings growth stories at a time when earnings are being broadly impacted by inflation and slowing consumer spending. This is a company, if you take a three-year view, we see Tesla's earnings per share roughly tripling between 2021 and 2024. They were the auto industry's biggest winner from the Inflation Reduction Act law that was signed in August. And then they have some near-term catalysts. The semi-truck first deliveries are expected in December, followed by the cyber truck next year. And we know they continue to ramp up their two new factories in Austin and Berlin.

And they recently completed an upgrade, a capacity expansion of the factory in Shanghai. But, Gary, you're talking about all the good things for Tesla, and clearly that's the bull case. But there's the supply chain issues. There's the China demand issues, geopolitical concerns there, and the Shanghai factory. There's the fact that he's going to buy Twitter now and some of the concerns around distraction and potential share sales. So that's the other side of the coin. You think that that's overdone? We really view these concerns as priced in, you know, given the decline in the stock over the past month. As far as Twitter, if you look at the amount of stock he's sold in the past year, we think he has the cash, you know, in order to close that transaction. It's just a matter of whether his investor group remains together and whether or not he's been able to find additional investors

or get additional commitments. But we could see a scenario where potentially he doesn't have to sell any more Tesla stock in order to close that. Garrett, thank you for joining us with what to expect here from Tesla. I appreciate it very much. Garrett Nelson from CFRA. Two minutes to go on the trading day. You've got Netflix and Twitter on one side and then Microsoft, Amazon, Alphabet on the other. NASDAQ's under pressure. Ten-year yield over 4%. What do you see in the internals? Yeah, it's pretty heavy, Sarah. We had a couple of good breath days to the upside. It's

about 3 to 1 to the downside. New York Stock Exchange declining over advancing volume. Small caps actually pretty conspicuously giving back some of their recent underperformance. Those indexes down almost 2%. So it's definitely a bit of a payback day on some of the recent under performance those indexes down almost. 2% so it's definitely a bit of a payback day and some of the recent trends but we still have about. 200 points of. S. and P. upside since the lows a week ago- and we have energy we

talked about that the stocks really outperforming the commodity natural gas is strong and the idea. That in this range crude is high enough for the companies to make their numbers- on a multi year basis that's what supporting, crude is high enough for the companies to make their numbers on a multi-year basis. That's what's supporting the equity sector there.

And the VIX, very sticky around 30. It's very reluctantly rolling over from the recent highs. It's not quite giving you that bond market volatility. They keep saying it's keeping it propped up. Yeah. What else is up? The U.S. dollar up another seven-tenths of one percent. The euro and now the pound today also getting hammered. As we go into the close, we're down 100 points on the Dow. So we've gained back 100 points since the top of the

hour here. Biggest drag on the Dow today is Home Depot taking 60 points off. Amgen, JP Morgan, Microsoft and American Express. Biggest gainers or biggest contributors on the upside are Traveler, Chevron and Procter & Gamble off those earnings. Energy is the only sector that's going to end up with a gain here. The S&P 500 down six-tenths of one percent. We're still nicely higher for the week, thanks to Monday, Tuesday, up three percent or so, a little more than that for the S&P 500. For the Nasdaq, up three and a half percent on the week. But today, we're down eight-tenths of one percent. Again, the focus is on higher treasury yields, the stronger dollar, despite better

earnings from Netflix. We'll see what Tesla and IBM have to show. That's it for Closing Bell. See you tomorrow into overtime with Scott.