Closing Bell - Closing Bell: Major gains for major averages, three CEOs talk earnings 7/19/22

Episode Date: July 19, 2022

The major averages saw big gains, with the Nasdaq leading the pack, climbing more than 3%. Part of that strength was driven by earnings, and the CEOs of three big-name companies joined to break down their quarters. Citizens Financial Group chief Bruce Van Saun talks about the consumer and the broader economic landscape. The CEO of Novartis discusses his drug pipeline and strength in the generics business. And the head of Hasbro weighs in on toy demand, the supply chain, and why Dungeons and Dragons is helping drive upside.

A big boost for the major averages today. Dow's up nearly 700 points near the highs of the day. NASDAQ soaring 3%. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look at where we stand right now in the market. It is broad, this rally.

We've got almost every Dow stock higher. The two that are lower, earnings-related, IBM and J&J, both getting dinged, especially by that stronger dollar. The dollar is weakening today, and that could be a big factor behind today's rally. S&P up nicely, 2.5 percent, every sector in the green. The leader today is industrials, along with communication services and financials. I will also note that big cap tech is really helping things out.

Look at the top performers in the Nasdaq 100. Apple, for instance, is reversing its decline from yesterday. Remember there were worries about Apple pulling back on spending and hiring. Today, it's one of the leaders. So are some of the hardest hit stocks in this market, like Match Group, which was trading near the lows, 52-week lows. Marvell Technologies, so the semiconductor is doing well. Meta, Netflix earnings after the bell. This group is going to be very key to watch. We've got a great lineup coming your way, including three CEOs of companies that just reported earnings. In a moment, we will talk to Citizens Financial Group CEO, his stock moving higher today on results, along with a boost

for the whole financial sector. Plus, the CEO of pharma giant Novartis, also making a move higher. And then later, the new boss at Hasbro, his first TV interview since taking the top job. Let's get to today's market dashboard as stocks rally. Mike, what are you focused on? Well, we basically have this buying stampede that seems to get going. Microphone issue. But now it is. We do have this buying stampede that seems to get going as we sort of approach the top end of this one month trading rate we got into.

Systematic traders seem like they piled on after we got into this mode for a little while above thirty nine hundred. I've been talking about the fact that for the past two weeks, the market has shown signs that big investors were lightly exposed to stocks coming into July. And that's proven. Now, it hasn't really gotten us very far. We're basically just barely breaking above that trend line. 50 day moving average also right here. So a lot of things have come together to allow this chase to occur right now. Up around 4000 on the S&P is really the line a lot of folks feel like we have to hurdle above. There's kind of a gap over there. So it's progress. I do think natural gas flowing back into Europe was part of the story this morning. And just a general easing back from the recession is imminent trade. Credit spreads coming in pretty hard.

Take a look at a measure of small cap relative performance. Small cap 600. This is the more profitable mature small caps relative to the Russell 2000. They're both up 3% today. This is a 10-year chart of small cap 600 relative to Russell 2000. General uptrend, when does it go down? In big speculative moves like we got in 2020 and 2021. So this is kind of a safety quality trade. We're kind of coming in off that a little bit. Maybe that means some of the speculative juices are starting to flow again.

You said one of the reasons behind the rally is this mentality that recession is not here yet. And maybe it looks like we could get a soft landing. I wanted to highlight earnings so far because CNBC puts together a scorecard. We're knee-deep in earnings season. It's still early, but look what's happening. Everyone's beating. And yes, there were some low expectations,

but the mantra was that the analysts are actually too optimistic. Guess what? Earnings per share are up 6% versus a year ago. Revenues up 11%. Doesn't that bode well for the economy? Well, it does. And we're beating at the usual rate.

Now, only about 10% of the S&P is reported so far. So, obviously, things can change. We have some bellwethers to come. The bank earnings basically said, we don't see the trouble right now. Maybe down the road it's going to get worse. But right now, the consumer and companies are in good shape. And yes, the beat rate is up around 80 percent on earnings. That's the typical rate. The big bear case was, yeah, sure, stock valuations are down, but wait until earnings estimates fall for the second half of the year and next year. And so far, it hasn't happened yet. It still could happen. We still

could have the economy soften up. But we're not seeing the evidence yet in the market. It's essentially just taking one step back from that idea that earnings are really going to erode fast. Mike, thank you. We'll see you in the market zone. We're going to pick right up what you said about the banks, because Citizen Financial, the latest report, shares in the green today after second quarter results, net interest income of 31 percent in the quarter, boosted by better margins and its recent acquisitions of HSBC's East Coast retail branches and investors, Bancorp. Shares, however, down about 20 percent year to date. Joining us now, Citizens Financial Group CEO Bruce Fonsan. Bruce, it's great to have you back on the show. And it does look like you put out

some decent numbers and guidance, a constructive tone on the conference call. Explain that disconnect from what we're seeing in the markets and the bank stocks like yours and what you're seeing in the economy. Yeah. So I thought we had a very strong quarter. So one of the things that was noteworthy is we closed on our investors acquisition. We had closed on HSBC acquisition in the middle of the first quarter. So we're hard at work in integrating those two and really pushing forward in the New York City metro area. The financials all are showing strong performance

across all metrics. So net interest income is benefiting from the rise in rates. We also have the benefit of bringing those two balance sheets or bigger now. And so we're benefiting from the higher spread income that goes along with those. Our fees have proven to be resilient. We're doing a good job on expenses and credit is about as pristine as it gets. So, yeah, so that raises the question. So why aren't the stocks- What is the market telling us?

There's a disconnect between what we're actually producing and what the market's valuing that at. And I think it all goes to the outlook for the future, that the market still feels a recession is maybe slightly more likely than not. And if there is a recession, bank credit costs tend to rise. And so that's getting priced in. And folks are kind of holding back from actually increasing their exposure to an economically sensitive sector like banks.

We'll see. Time will tell how things play out. But from where we sit, we have really our individual customers are very strong. They have high levels of liquidity. Employment is very good levels and prospects look good. Companies have weathered the pandemic very, very well. They've moved to a digital business model. They've leaned their expense bases. They're having great years. It could be even better if they weren't contending with labor tightness and supply chain issues. So, you know, you kind of take that as a backdrop, even if the Fed, you know, causes a recession. I

think it would be very shallow and very short. And that shouldn't really result in much of an increase in bank charge off rates. That's not in the past. You haven't seen that happen if you go in on a solid footing. We're going in now. I guess that's that's pretty bullish, a shallow and short lived recession, Bruce. Two spots, though, that you have to be feeling it, though, are mortgage mortgage loans and auto loans. How ugly is that going to get as the Fed continues to raise rates here? And what are you doing about that? Well, in the mortgage business, we actually have a bit of a hedge taking place. So production volumes are down, but our servicing book is throwing off more income in

the higher rate environment. So I'd say we're probably at the bottom in terms of our mortgage revenues at this point. We'll probably find stability here. You're seeing a lot of announcements that mortgage companies, including banks, are taking capacity out of the system, which should lift margins if you look out three, four, five quarters into the future. So anyway, I'm not that worried at this point about the mortgage. And then auto, we ramped up auto during the pandemic. Spreads widened, so there was an opportunity to play there. We said today that we're now going to start to put that back on a glide path down.

Spreads aren't as attractive, and so we see better opportunities to grow our balance sheet in some attractive areas. On the consumer side, home equity line of credit is interesting. Our citizens pay and unsecured business is interesting. And then, you know, on the corporate side, you know, there's there's line utilization is going to lift loan growth. And then there's also more deals are getting done in the loan syndication markets as the institutional market and public markets have been largely shut down for the past couple of months. You just called, I think you called the credit environment pristine. So you're not seeing any signs of credit deterioration, both in consumer and commercial, because this is, as you referenced, something that investors are really worried about. Yeah, it's remarkable, really.

So if you look at any metric, if you look at the criticizing commercial loans in the corporate side, those trends are favorable. If you look at delinquencies on the consumer side, no alarming trends, in fact, very, very stable. So to have a 14 basis point charge off rate for a bank our size with a mix of consumer and commercial is really pretty remarkable. And we keep thinking that things are going to normalize, but they don't. They continue to stay very solid. So feeling really good right now about the credit outlook, at least through the rest of this year. I interviewed the CFO of Wells Fargo and the CEO of Bank of America in the last week, and you may be the most bullish of all of them, which is actually generally a trend.

We're seeing more from regionals and super regionals. Bruce, thank you for joining me. Okay, my pleasure. Bruce Fonsan, the CEO of Citizens. After the break, shares of $200 billion pharma giant Novartis moving higher today as well after earnings and revenue topped estimates. We'll talk to that company's CEO about M&A opportunities, something that biotech investors have been waiting a long time for.

And also some pending drug price legislation potentially from the Senate. You're watching Closing Bell with the Dow up 700 points near the high of the session, a broad-based rally. We're all over it here on Closing Bell. Welcome back. Shares of $200 billion pharma giant Novartis moving higher today after the company topped earnings and revenue estimates before the bell. I spoke earlier with CEO Vasanar Asimian and began by asking him about the question investors are most focused on for the stock here, which is the future of its Sandoz business, the generic drugs, which drove the beat today. But the company has said before it's looking to put up for sale. Listen to what he said about it. Sandoz had a good quarter and it really was driven by a few factors.

One, we had the recovery of health care systems around the world driving demand for generic medicines. And we also got back to launching medicines in our key geographies like Europe and Japan. You know, so we feel good about the growth outlook. We raised our overall top-line outlook for Sandoz. And so we feel good about where the business is. Now, looking ahead, we're on track to really read out our strategic review before the end of this year. That's consistent with the timelines we've had, continuing to evaluate either a spin, an exit or retaining the business. And I think we're on track to give the markets clarity on that before the end of this year. Got it. You mentioned the normalization that we have seen post-COVID in the trends for doctors visits and hospitals.

Is it at a sort of normal level right now that you would expect to see before we got into the pandemic? I would say generally, yes. There's, of course, some geographic variations, which I can say some more about. But I would say in key markets like the United States and Europe, whether we look at breast cancer diagnoses, diagnoses of new patients and dermatology or rheumatology visits and cardiology, we see really us getting back to pre-COVID levels, which is really positive, I think, for the outlook for our business and also for our sector and also for patients who need better therapies. Now, in China, we do see the impact of the rolling lockdowns on some of our brands. That was not the case in Q1. We saw a little bit

of that in Q2, but we are seeing that also stabilize. So that's one thing we're watching carefully is how the situation in China evolves. But overall, I'd say a pretty positive trend. You mentioned the inflationary environment. How does that impact you specifically? And how does it impact pricing as well? When you look at our sector, we're generally not significantly impacted by inflation simply because of the gross margins of many of the medicines that we bring to market. But one place we're definitely seeing an impact is energy prices, particularly energy prices in Europe. We have most of our manufacturing footprint in Europe. And so energy prices has been something

we've been watching. Now, I'm really happy to say we've been able to offset that through our productivity programs, as well as some of the transformation programs that we've announced. And so we haven't seen that impact the bottom line, hence you saw the core operating income growth of 5% in the quarter. But it's something we're going to have to keep working on and keep watching really, really carefully. Now, in our sector, we have limited ability to pass on cost increases with price increases. We can do that in some markets, and we're doing that appropriately wherever we can. But really, we have to leverage productivity to offset those higher energy costs. It brings us to the issue of drug pricing, which is ever present

here in the U.S. How are you thinking about this new Senate bill? If it should pass, what would be the impact? We're watching very carefully, seeing how the final language works out. I mean, for the sector overall, I think it has good elements, particularly the reform of Part D, capping patient out-of-pocket costs, but also damaging elements as well. Very onerous, I think, provisions that could impact innovation. Now, for Novartis specifically, the impact is relatively limited, given that we have a limited exposure to government pricing programs in the United States. We think this is manageable. It doesn't change our near and midterm growth outlook.

And of course, we'll have to evaluate once the final bill comes, what would be the longer term impact. But I would say relative to our peer set, we're at the lower end of the spectrum in terms of impact. Got it. So no meaningful change that you would make if this does go through in the business? That's right. No meaningful changes in the near and midterm. I think longer term, we'd have to just see how the details of the bill work out and see if that changes maybe the kind of pipeline programs we might prioritize in the future. But that's not something that we see that will impact us in the very near term. What about M&A? I always ask you about this, Vaz, but there's been a little bit of pickup. It's still way below expectations. Considering how much cash you and

other pharmaceutical giants have, what is it going to take? You know, there's certainly the fact that the XBI for the biotech index has adjusted significantly down. And so certainly valuations are at an interesting level. But that said, what we really focus on is the science. And it's a really good science that would support making M&A move. So we're continuing to evaluate, particularly at the lower bolt-on level, sub $2 billion, which I've talked to you in the past is really our focus, and trying to see are there assets that match up scientifically because we believe they could replace the standard of care or have a really compelling clinical benefit, and then the valuation works out. I do believe that some of the biotech companies are getting

more realistic about expectations, but that hasn't fully happened yet. That may take another quarter or two, I think, before that realization really sets in. What do you think is ahead for the industry? Your stock has been a little bit more defensive. You're obviously bigger, but we've been in a biotech bear market. We've seen layoffs. I know yours was due to the restructuring. But what do you predict as far as that, especially if we enter into a global recession? You know, I think our sector, healthcare in general, but the pharmaceutical sector in particular, we're a counter-cyclical sector. I mean, patients need their medicines. Demand is driven much more by healthcare, epidemiology, and aging than by macroeconomic factors. So my expectation is in this period,

we will continue to be a defensive sector. I mean, relatively speaking, our industry has held up pretty well over the recent quarters. And then I think what I'm really excited about longer term is this new kind of era of innovation that you and I have talked about in the past that we're in, where we move not just from chemical drugs and monoclonal antibodies, biologic drugs, but into this whole new era of RNA therapeutic cell therapies, gene therapies, radioligin therapies. These are all areas where Novartis has a leading position. And what I believe over the next decade, that science will continue to mature and we'll get many more medicines out, which will drive the next wave of growth in this sector and hopefully for our company. I followed up and asked him about the pipeline specifically in the near

term. He pointed to a technology to treat prostate cancer using micro doses of radiation, along with the breast cancer treatment that he said could be a $7 to $9 billion market opportunity as potential near-term catalysts here for the stock in the next year or two. Let's give you a check on the markets right now. By the way, IBB Biotech up 3%. The NASDAQ is up about 3% right now, just about at session highs, up 2.6 on the S&P with every sector rallying today. It's big cap tech.

It's also smaller tech. The ARK Innovation Fund, for instance, is up 3.5%. It's being led by some of these, some of their actually pharma plays, DNA plays, like Beam Therapeutics up 12%. A lot of these stocks that have been absolutely hammered over the past few months. Coming up, Hasbro CEO joins us for his first TV interview since taking on the role as CEO. The stock's a bit higher today off earnings, but still near a 52-week low. He's going to join us with his game plan to turn things around. And then later, the Musk Twitter drama gets real. The first hearing in the case took place today at a Delaware court. We'll bring you up to speed on the latest when we come back.

Check out some of today's top search tickers right now on CNBC.com. The 10-year Treasury yield taking the top spot. And actually, we're seeing yields a little bit higher today. There's some selling of bonds. The market managing to rally even technology, despite the fact that we're back over 3% on the 10-year. Perhaps that's softening dollars, really helping things out. There's a lot of focus on the ECB meeting this week,

potentially getting more aggressive, maybe a 50 basis point hike. Maybe that's driving up yields globally. IBM is an earnings loser, down 5.7 percent. We'll hit that later. Tesla up 2 percent. Apple rebounding fully. It's now higher on the week, rebounding from yesterday's sell-off, I should say, after some concerns about a spending slowdown. And the S&P 500 having a nice broad rally today, up 2.6 percent, just about at the highs of the day, led by the industrials. Hasbro beating Wall Street's profit estimates thanks to higher prices and strong growth in its Magic the Gathering franchise and some others. Up next, the company CEO here to discuss whether consumers are pushing back on these price hikes. It's his first TV

interview since taking the Toymaker's top job. We'll be right back here with the Dow up just about 690 points. Take a look at shares of Hasbro getting a slight pop today after beating earnings estimates but falling a little short on revenue. Country's largest Toymaker reporting its biggest quarter yet for Wizards of the Coast, which is the publisher behind Dungeons and Dragons. Despite a decent quarter, stock is still trading around lows that we haven't seen since back in September 2020. And joining us now for a Closing Bell exclusive is Hasbro CEO Chris Cox.

Chris, welcome. I know it's your first TV interview. It's good to have you. CHRIS COX, CEO, Hasbro. Thanks for having me, Sarah. So let's start with Wizards of the Coast, the magic game, Dungeons & Dragons. What is driving the growth in this unit, which is, we should say, where you come from? Well, yeah, Wizards has grown for 12 out of the last 13 years, and over the last six years, we've more than doubled the business. You know, I think it's just fundamentally strong brands, a highly engaged consumer base,

and a great set of channel partners and some really good product innovation. Is there a Stranger Things boost happening there? Oh, yeah. I mean, I think, generally speaking, D&D, Magic, they've really started to inhabit the zeitgeist of popular culture. Stranger Things, the Big Bang Theory, you know,

multiple movies and TV shows. Nerd culture is culture now. Nerd culture is culture. Did not realize that. But also, it seems to be a certain nostalgia of the old school games in your portfolio coming back? Is that a growth driver? Yeah, we call it multi-generational play and entertainment. It really is this insight that play is not just for kids, it's ageless. And people who really got into games and toys back in the 80s, 90s, when I was a little kid, or really I started playing, they're coming back, just like kind of classic cars. You want to go back and play the games that were big when you were a kid.

And what's great about it is you want to share it with your kids. So we're seeing this multi-modal distribution of our fans where you've got like this big boost in Gen X and Boomers, and now you're seeing it in Gen Z and Millennials. I remember playing Magic cards when I was in high school maybe or maybe a little bit earlier. So, Chris, the one part of the portfolio that didn't work this quarter was entertainment,

a decline there. What's happening? Well, I think you have to kind of piece apart entertainment a little bit. We sold our music business in Q3 of last year. When you take out the music business, our overall entertainment segment was up 9% year over year through the first half. Our TV and our entertainment segment was down in Q2, but really that's just a function of when we do deliveries of different movies and TV shows. For the full year, we're still projecting mid-single-digit growth on the top line and improving margins. Inventory was also an interesting number, up 75% from a year ago.

So what is happening there? Because we have some reporting. We do some deep dives into the supply chain and the ports. And some of the ports that you import your products from are really backed up and really clogged. So are you stockpiling ahead of the holidays? What's the story here? Well, I think for the last two years since the pandemic began, particularly in the back half of the year, we've had a lot of out-of-stock issues, which has hurt our overall top line and bottom line performance. And so this year,

we moved up our builds of key products, particularly a lot of our big chase items for the holiday, by about two to three months. And so you're seeing that reflected in our inventory and in our retailer's inventory. Now, this inventory is of great quality. It's a sought-after product, and we're already seeing green shoots on point of sales early in Q3. For instance, we just got through prime days with Amazon, which last year was in June, this year was in July, and we saw an uptick of 20%. And we think that's reflective of really strong product and our ability to chase it and aggressively promote with our retailers because we have it on hand. But what is actually happening with the ports problem and the supply chain

issues? Is it getting better or worse? We're seeing it getting better. You know, our days on boat has declined by about half versus where it was at the peak of the pandemic, but it's still elevated versus pre-pandemic. Our supply chain team has been working with freight forwarders and the holistic supply chain, and we feel good about our position to be able to work with our retailers and make sure that we're able to supply them for hot product this holiday.

What about prices? I know you've raised prices on the Nerf blasters, the My Little Pony. How is the consumer responding? And do you think that you have more room to keep doing that? Yeah, we entered the year with a relatively measured outlook for where we saw the overall economy and where the category is going. And we're maintaining that guidance. You know, on a constant currency basis, we see Hasbro growing in the low single digits and our operating profit margins growing from 15.5 percent last year to 16 percent this year. You know, certainly we're seeing a little bit of an impact on inflation with the consumer.

But I think you have to take that in stride and recognize that toys and games and entertainment tend to be very economically resilient categories. And we're certainly seeing that in our results and what we're calling for our guidance. That's what I was going to ask, because clearly the stock has been hit and there are concerns about consumer and discretionary items. I'm wondering how you look at the portfolio and the resilience going into a recession. You think it's defensive, actually? Well, I think you can control what you control and you try to not participate in a down economy. And that's exactly what we're doing. You know, when we look at the consumer and we look at the consumer profile, we certainly see inflation pinching kind of the value in mass consumer. And so we're making sure that we have great OPP product, opening price point product,

that's at attractive price points that consumers can build from. And then when we look at the high discretionary consumer, you know, people who are making $100,000, $150,000 or more a year in terms of their household income, we continue to see very resilient personal balance sheets there, great employment rates and a high willingness to spend and a relative inelasticity in terms of price points. And we think our product lineup this year, whether it's Nerf with our new gel fire blasters or inside of games with what we're doing with Magic and Dungeons and Dragons or what we're

doing with action figures with our new selfie series where you're able to scan your face in with an app and literally create your own action figure of yourself, literally take yourself to shelf. We see a lot of demand among that consumer segment despite headwinds in the economy. No, there's a lot of excitement about that one. Also about the new Wordle board game that you're working on with the New York Times. So Wordle's not just a fad? No, I think it's the next social phenomenon. We've had great success with that over time with our board game portfolio. We're excited to be partnering with the New York Times.

In fact, it's only been available for a couple of days via pre-order, and it's already been setting records for us in terms of the number of people who've been buying it. So what is the problem, Chris, with the stock? What do you hear from investors as you've begun, you know, as CEO listening in the last few months? You're undergoing the strategic review and we're waiting to hear an update maybe on Investor Day in early October. But what do you think is the big concern now that you're past the activist fight where

you prevailed in that proxy battle? Well, I certainly think there's concerns about the general macroeconomic conditions of the consumer. And as I said, I think we're seeing a lot of robust demand in that. And historically, we've seen that inside of entertainment, games, and toys. You know, I think we've had an amazing growth run in our Wizards of the Coast and our digital gaming segment. We are pleased with how that's performing.

You know, our tabletop revenues were up 15 percent in Q2. Magic the Gathering was up 11 percent. And we continue to see that moving forward. So, you know, I took over as CEO about five months ago. We'll continue the dialogue with our shareholders. And I think they're going to like the thesis that we're going to share with them, both in what we do in terms of earnings calls and what we have coming up at our investor day in October. Chris Cox, thank you very much for coming on to talk about the quarter and what you're seeing. We appreciate it. Thank you so much. What did he say? Nerd culture is back. Mike Santoli was very happy to hear that. Here's where we stand right now in the markets. The NASDAQ, look at it, zooming up almost 3%, S&P up 2.6. So we're holding on to these gains, and we are near the highs of the session.

Really a few losers, and they have to do with earnings. IBM and J&J and the Dow will hit both of those in the market zone. In the S&P 500, you've got every sector higher. And particular strength in financial groups, in industrial groups, and in some of the fintech areas, which will also hit. Look at Netflix. It's rallying ahead of earnings after the bell. Shares are up now roughly 13% or so over the past month. Coming up, we'll discuss whether subscriber loss concerns could sink this stock. It's already down more than 60% this year. As we

had to break, check out the automakers. GM's getting a boost. News today of a deal with the U.S. Army to provide electric vehicles for analysis and demonstration. Plus, a new EV Chevy Blazer. Ford's moving higher as well. So is Tesla. We'll be right back. Check out today's stealth mover. It is Cinemark. Morgan Stanley upgrading the movie theater chain to overweight from equal weight.

The analyst there does not believe the return of consumers to theaters is currently reflected in the stock price. Says that the target is 36 bucks and that assumes a full box office recovery in 2023. It is currently being driven by younger men with releases like Spider-Man and Top Gun. The crypto rally is on. We will discuss what is driving those gains straight ahead. That story plus travel stocks and cruises. Also, casinos sharply higher today. And the latest on Twitter versus Musk

when we take you inside the Market Zone next. We are now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, we've got Kate Rooney here on another big day for cryptos. And Julia Borson on the latest in the Twitter saga. We're seeing a pretty nice rally here with the Nasdaq outperforming up 3%. Mike, if you look at what is leading the S&P right now, auto parts and equipment, apparel, accessories and luxury goods, hotels, resorts and cruise lines, three of the hardest hit areas of the market, very cyclically oriented. It does feel like we're in this market where one day it feels like we're going into a sharp, deep recession.

And the next day it feels like, hey, maybe we'll get a soft landing. And that today is one of those days. Exactly right. I mean, all you have to do is sort of turn the dial down a little bit on the imminent recession fears. And you do have a lot of the market that is spring loaded to react to that. It wasn't one single bright flashing headline that had people saying, hey, maybe the economy is going to be OK for a while. But the I think accumulation of the bank earnings telling you that things seem OK for now. Again, that natural gas may be flowing back into Europe,

the dollar down three days in a row. Credit spreads really coming in hard from, you know, relatively wide levels, all of it incrementally working in the direction of having an under invested kind of professional investor base feeling like they needed to top up exposures. I wouldn't go farther than that, except to say it's constructive and it's broad without being decisive. But how do we how will we know whether it is something longer lasting or if it's just a bear market rally? We've been fooled before. I would say it's the persistence of a move like this. If we do get little pullbacks, they're not back to the lows of this trading range around $3,700. If you do get further follow through to the upside, Getting above 4000 is a start. I would say navigating through this thick kind of outlook of earnings reports over the next week and a half, plus the Fed meeting.

You know, that all looms pretty large. The market's going to have to absorb whatever comes along with that to prove that this is more than just another relief rally. Yeah. And the commodity story, the sort of anti-inflation story continues to be mixed. Brent is lower. WTI is higher. Crude WTI back at $100 per barrel. Check out IBM. It's sitting out the rally. In fact, it is the Dow's biggest loser right now. Better quarterly numbers. The company did post 9% revenue growth. Would have been 16 without the currency hit from the strong dollar. Profits, 3 cents ahead of forecast, too. But IBM did change the outlook for cash flow, which is what everyone's focused on, saying $10 billion is now more realistic. The prior range

was $10 to $10.5 billion. And it reflects two things, the suspension of Russian operations and foreign exchange. I did speak this morning with Arvind Krishna, the CEO of IBM. He says the stock today is an overreaction because the bulk of the gap is the currency. And that, he says, shouldn't come as a surprise. We have covered the dollar, and it's marched higher to multi-year highs against the euro and against the yen. IBM has a big business in Japan. And Krishna says that we're not going to back off strategically in that business. They do the business in local currency.

So it does get devalued when IBM brings it back home and switches it into U.S. dollars. Krishna also says it's not a perpetual issue as well. So he does expect the comps to look a little bit easier next time around. Now, the other question some have been worried about in a slowdown where we're seeing GDP decline and a recession potentially is what would it mean for tech spending? Well, IBM CEO says he does not see any evidence of that slowdown. And Krishna says he expects technology to stay three to five points ahead of GDP for two main reasons. Number one, tech is a source of competitive advantage for companies. And also, we're in this tight labor market where wages are rising. And in that case, tech is a solution. Investors have been worried about a slowdown in the consulting business, but IBM CEO says his clients don't have

the expertise in-house, so they're actually not cutting back on that. So I would say, Mike, really pushing back against some of the slowdown narratives out there on the stock. Some are also complaining about a slowdown in Red Hat, but he says that that's just an accounting issue. He's going to talk much more about this when Jim Cramer interviews IBM CEO Arvind Krishnan on Mad Money tonight from the brand new set here at the New York Stock Exchange at 6 p.m. Eastern. Looking forward to that. But Mike, there have been people that are still not fully convinced of this turnaround story, even though the underlying growth was good. The currency, I think, continues to surprise. Definitely one of the issues. First of all, the stock was up year to date coming into the report. Very few stocks were.

It clearly has been this complete counter move to the rest of the market. You know, it was kind of neglected and looking cheap. So I think all those reasons people bought it was because it did have those financial characteristics. You know, look, if you want to be bullish on IBM, you still have to, I guess, through a lot of these kind of seeming one-offs that are constant. And the fact that there's an implicit margin warrant in the rest of the year guidance. And, you know, there's some revenue growth that had been coming from its former subsidiary, Kindrel, that maybe is not going to be. My point is, it's always a noisy report. You have to fight your way through it to figure out what the underlying trend is. Which, according to figure out what the underlying trend is.

Which, according to the CEO, the underlying trend is pretty good. Let's hit Bitcoin, Mike, because it's booming again. We're back above 23K, actually at the highest level now since mid-June. Kate Rooney joins us. Kate, how much of the crypto rally related to broader market sentiment, the fact that stocks are up and there seems to be some relief around the economy and inflation. Hi, Sarah. Yeah, it does really go back to what you and Mike were talking about. Crypto, though, is still very much a macro story.

So this week it's getting help from some of that optimism, especially around tech stocks and those high growth names. And on the crypto specific front, we've talked about some of the liquidity issues, bankruptcies in the industry. And people I'm talking to say that's really cleared a massive amount of leverage from the system. So investors are hoping that the worst is over for prices, at least, and say crypto, for the most part, was able to survive this shock. There's a little bit of hope now that Bitcoin may be nearing a bottom. One positive signal is investor sentiment now rebounding. If you look at something called the fear and greed index, it's around a 30. So it's still at fear, but it's been an extreme fear in recent weeks. It was as low as a six a couple of weeks ago. This could be very much a relief bounce, like you and Mike talked about when it comes to stocks. On Bitcoin, though, there's still very much a lack of new demand that might prevent Bitcoin

from getting back to that all time high anytime soon. Either way, though, Bitcoin rallying. That's good news for some of the crypto related stocks. You had Coinbase up double digits today. Block and PayPal getting a boost. MicroStrategy has been a Bitcoin proxy. And then some of the mining stocks. So one big winner today, Marathon Digital, that was up 28 percent at one point earlier today. Back to you guys. Anything related, it's crypto, but also some of the fintech stocks, Kate, really making a move higher. And it extends beyond crypto. I know we had some good credit card data from the top issuers and earnings, like a JP Morgan and a Citigroup and Bank of America. What else are you hearing?

Because we're seeing some double-digit moves in some of these stocks. Upstart was another big winner. I know you're spot on there when it comes to fintech. I think the expectations were so low and have been so low for some of the lending companies, buy now, pay later, that that has really been baked into the stock price. So anything that points to the opposite or points to things even being normal has been a great sign for fintech and has really helped these stocks upstart, especially today. But some of them, like a PayPal, very exposed to that stronger dollar. So beware some of these warnings that we're starting to get.

Kate, thank you. Kate Rooney. Let's hit the travel stocks as well. They are rallying for a second day in a row, led by the cruise lines, which are among the biggest winners today in the S&P 500. On the cruises, the CDC announced it will no longer track COVID cases on these ships. But it's not just about the cruise stocks. Look at Expedia, booking holdings, also sharply higher. Sim it's not just about the cruise stocks. Look at Expedia,

Booking Holdings, also sharply higher. Sima Modi, so are the casinos. What is driving this move? Part of it could be, Sarah, what we're seeing in the currency world. We've now seen a 27% increase in bookings from the U.S. to Europe this summer versus last. And that has coincided with a dollar that has strengthened in recent months. The removal of the pre-departure testing requirement, that was a big help, as the CEO of Marriott, Tony Capuano, told me yesterday. And as you rightfully said, the CDC is sort of loosening its oversight of the cruise lines, Stifel analysts writing that this is a big win for an industry that desperately needs

it. They say that it'll improve perception around cruising and give the major operators, Carnival, Norwegian, Royal, more flexibility on how they approach testing and the number of people that they allow on board. Just looking at the price action today, Carnival now trading at a nearly three week high. The bookings numbers, as always, in the next few weeks,

that will be key in understanding whether the lower prices that they're offering and now the CDC news is helping them generate more demand. And if this price action is a one-day bounce or if it can really build on these gains, we know these big operators are down nearly 40% or more this year, Sarah. No, Caesars Entertainment right at the top of the S&P. That one's down 55. Carnival, you mentioned Expedia, also in the top 10 right now. Seema Modi, Seema, thank you. Look at Twitter shares. They got a pop today, midday, right after a Delaware judge overseeing the lawsuit against

Elon Musk ruled in favor of Twitter, saying the expedited trial will go ahead in October rather than next year, which is what Musk had been pushing for. Julia Borson is here. Julia, what does it all mean for Twitter? Looks like they got a little bit of a win here in the first shot. This is definitely a win. I mean, Twitter wanted a four-day trial in September. Musk wanted a 14-day trial in February. The judge saying that it's going to be a five-day trial in October is certainly much closer to what Twitter was asking for. But I would just point out that in the judge's comments, she definitely seems to understand the risk of this whole situation to Twitter. I'm

just going to call out what she said about how the delay in this deal risks irreparable harm to the company. So indicating that she is sensitive to how challenging and problematic this has been to Twitter. And I would say that it really indicates that there's a chance that things could go in Twitter's direction, much more so than if she had ruled in anything closer to what Musk was asking for. All right. Well, so we've got to ask you about Netflix, which is the big name to watch on earnings. The stock is rallying into this report, but obviously has been a big loser so far this year. What should we watch? The key number to watch with Netflix, as always, it's subscribers. Netflix warned it

would lose 2 million subscribers in the second quarter. Analysts expect most of those losses be in the U.S. and Canada. But the other subscriber number to watch is guidance for the third quarter. The company told investors that expected subscriber growth in the second half of the year analysts are projecting it'll forecast a gain of 1.8 million subs in q3 now disappointing numbers could hammer netflix shares it lost 22 percent after its january report and 35 after its april report so we will be watching. Sarah? Thank you very much, Julia Borson. And also, Mike, a potential spillover effect on some of these other streaming names like a Disney or a Time Warner.

We saw that last time. A Warner discovery, I should say. Two minutes to go in the trading day. Every sector is still higher, near the highs of the day. What do you see in the internals? It's very broad, this rally, Sarah. If you take a look at the New York Stock Exchange volume breakdown, been pretty close to 90% to the upside all day.

This comes after Friday was similarly, if not quite as broad. So it might fall just short of 90%. But people look at these clusters of very, very broad rallies as maybe giving some credence to the idea that you finally have some real demand coming. And we'll see if that does play out. I mentioned credit a couple of times. If you look at the high-yield ETF relative to a similar treasury bond ETF, you see an outperformance over the last month or so.

Now, this is a catch-up move, still underperforming on a year-to-date basis, but there's been a little more firmness in the credit markets. That underwrites equity valuations on some level. Volatility index receding down in the 24s, low end of the range. Real bullish would be a crack down to 20. But, you know, when the S&P 500 is up almost 2.5% in a day, you're not going to have the implied volatility embedded in the VIX go down too much. So we'll have to monitor that, Sarah. Mike, thank you. 2.5% almost gain for the Dow as well. Take a look at the Dow Jones Industrial Average of 741. We are now making new highs for the day. A bit of a rally here, pop into the close. The biggest positive

contribution is Goldman Sachs continuing its strong earnings reaction. UnitedHealthcare, Boeing and Caterpillar also contributing the most to the Dow gains. The only losers in the Dow right now are IBM and J&J, both responding to weaker earnings, both responding to a stronger dollar. The dollar's weaker today. That may be a force behind the rally. If you look at the S&P 500, you've got every sector higher. Industrials are the leading ones. It's cyclically driven.

Energy's doing well. Financials are having a good day. Pretty much everyone in this rally, with the Nasdaq popping 3.1%.