Closing Bell - Closing Bell: Major market rally to end the week, Fed in focus, Snap on the sidelines 10/21/22

Episode Date: October 21, 2022

Stocks surged in Friday trading as investors keyed in on more dovish commentary from the Fed. DoubleLine’s Jeff Sherman weighs in on the latest messaging from the central bank and the big move this week in bond yields. Snap was a major underperformer on the back of earnings, as advertising headwinds came into focus. Barton Crockett from Rosenblatt and Andrew Boone from JMP join to debate if you should buy the dip. Plus Ariel’s Charlie Bobrinskoy and Kristina Hooper from Invesco share thoughts on the rally and if they think it has legs.

Stocks are jumping to end a solid week for the Bulls as Fed commentary stays firmly in focus. This is the make or break hour for your money. Welcome to Closing Bell. I'm Mike Santoli in for Sarah Eisen. Here is where things stand in the market. A 2% gain for the S&P 500 started out much more hesitantly, but we have rallied throughout the day pretty much near the highs of the week, though not quite down up a similar percentage. NASDAQ slightly underperforming, as is the Russell 2000 as bond yields come in just a bit. And check out the stock chart of the day. Snap sitting out the rally quite in a big way after revenue missed estimates on advertising headwinds. We will talk much more about that name and the implications for Meta and Alphabet and more in just a bit. Also ahead on the show, former Ford CEO Mark Fields will join us to talk about GM's reveal of its new electric

pickup and where that company stands in the EV race. Let's begin, though, with the market. The major averages on pace to end the week firmly in the green. Treasury yields having a big week as well. Earlier in the session, the 10-year yield touched its highest level in just about 15 years. But a new report from reporter Nick Timoros at The Wall Street Journal calmed the bond market. The story indicating Fed officials are likely to raise rates by three quarters of a point at the November meeting in a couple of weeks, as expected, before debating if smaller hikes are warranted starting in December. Now, this messes with comments today from San Francisco Fed President Mary Daly that the Fed should avoid a, quote, unforced downturn in the economy, saying a slower pace of hikes should be considered. Joining us now is Jeff Sherman, Double Line Capital Deputy Chief Investment Officer.

And, Jeff, it's great to have you, especially with so much fast-moving action and expectations in the bond market here. Did today's, I guess, the hints that the Fed is looking perhaps for an opportunity to slow things down change the picture much at all? It seems like it's pretty well in sync with what the Fed told us in September, but maybe the market had kind of moved ahead of it. Yeah, I don't think there's really anything new there. I mean, we were discussing this across the desk today. And effectively, you know, this is this is all about inflation fighting. And this is a week where we didn't get really new inflation data. But guess what? Next week we do again. So it's like every other week is something we're getting here. But the comments are consistent with what the Fed has been telling us. I mean,

they're telling us that they're going to hike. They're following what the market is pricing in. And the market still has another 175 basis points of hikes priced in over the next four meetings. And so ultimately, it doesn't seem like they're really slowing down much. It's just all that was being conveyed there is that, well, we're probably not going to do a bunch of more 75 basis points hikes. So we've been advocates that the Fed should slow down, but they're going to have to see the inflation data start to cool in some capacity in order to do so. And so I think the reversal of the date doesn't really make a lot of sense, seeing the front end rally, the back end sell off.

Again, this is all about inflation by at this point. And really, I think, you know, until we see some cooling of that data, you're going to see just these whipsaw behaviors within the Treasury market. Well, I mean, if the pullback in yields today, the reversal, as you say, doesn't make a tremendous amount of sense. It was set up by a pretty dramatic upside move in yields, right? I mean, it looked like it was almost gaining downside momentum in terms of bond prices. So it seemed like it was getting a little bit crashy just how fast yields had moved. I just wonder if you think the levels we're at right now make sense based on what we should be expecting and what the market

has priced in from the Fed. No, you nailed it, Mike. And there's just been horrible momentum within the Treasury market. I'd even call it carnage. I mean, if you look at what's happened over the last three months in the Treasury market, I mean, we've repriced from Fed expectations, you know, what the hiking path will be at the end of it by another 175 basis points. So all the hikes I'm talking about were not even priced into the market three months ago. And so what we see in the Treasury market is that it's really starting

to offer a fair amount of value for those who want to offset risk in their portfolios. I know it's not working today, right? We have a nice stock market rally because the market really is hinging, the risk assets are hinging on a Fed pivot. But there is no signal yet, either in the data or in the Fed communication, that they're indeed going to pivot. So I think they continue to deliver here. I think the Treasury market is fairly priced today. I think it offers value for a lot of things that you own in your other parts of your portfolio. If we do have an over engineered fed we have recession risk

it allows you to really offset some of the treasuries but don't forget you know the the other darling of the cousin of the stock market are the credit markets and what we're seeing in credit today i mean you can buy investment grade bonds that yield eight nine plus percent today so it really makes sense for a lot of investors out there to really think about balancing a lot of these risks in their portfolios. And so you talk about 15 year high in treasuries. I mean, what we're seeing in the opportunity set in credit is stuff that we haven't seen really since, you know, the depths of the pandemic, which wasn't very tradable, but also going back to like 2009 and 2010. So from our perspective, really thinking about the

treasury market, it is something you should be owning. You probably have a little bit more upside pressure and yields, but we're getting close to the end, I think, of this rate rise regime. It's probably a little early. Again, it's going to be very data dependent. We have GDP next week. We have inflation data from the PCE next week. And so it's going to just continue to be driven by this narrative of the Fed. And then the following week, we get the Fed. So there's a lot on the calendar. Everything is still running through the bond market. But it's starting to get to the point where, like, as you mentioned, this negative momentum, this negative breath is looking like an opportunity

to start building positions. And that's what we've been doing over the last six weeks here at Double I. Yeah, it's no doubt that, you know, clearly inflation has to moderate to some degree for the Fed to consider slowing down at all. So clearly it's predicated on that. But as you say, kind of a bit of a cushion perhaps in value being created in fixed income. Do you think the Fed potentially has already gone too far in terms of what the economy can handle going into next year? Because that's another bull case for treasuries here, obviously, if we worry about a recession kicking in. Yeah, no, absolutely. I think treasuries are a great hedge to that recession risk or the deflationary side of overshooting to the other side. And so,

you know, when you start to think about kind of where the Fed's been, you know, we know monetary policy operates the lag. Jay himself admits it at the press conference, which is a good thing that they say, hey, maybe we need to take a pause at some point. And so, you know, the market has priced us in. It's been carnage, though, right? Look at the bond markets down almost as much as the Dow is at this point on a year to date basis. The S&P is still a bit worse. But what you found is just this repricing to the market is because the inflation data has not subsided. And so the Tim Ross story this morning, we were discussing it. It's very balanced, actually. It's not saying that they're going to ease. It's just saying that, look, they haven't been successful in fighting inflation either.

And so from the standpoint of thinking about what you should do to interpret it is you just got to be patient with bond investing. You don't trade it day to day. You start to build the positions and looking forward, you know, let's go out 12, 24 months. Could there be a reception? Absolutely. That's what the treasuries do. But if we don't get it or we get a mild one or it's very narrowly focused in certain parts of the market, credit offers a significant value. And so that's why we're so excited about the bond market. Look, looking in the rearview mirror, it's been ugly.

Looking forward, it's some of the best opportunities we've seen in over 12 years. Yeah, been a really dramatic repricing in just a few months across the bond market. Jeff, appreciate your thoughts today. Thank you. Yeah, thanks, Mike, for having me. All right, well, after the break, would you buy Snap after another rough quarter? We'll get the bull case from an analyst who's maintaining his outperform rating on the stock. And we'll also talk about the read through for names like Meta and Alphabet. You're watching Closing Bell on CNBC. Welcome back. S&P at its highs for the day, and it has been a strong week for the tech sector, second only to energy in terms of gains on the week.

The same cannot be said for Snap. That stock under serious pressure today after missing revenue estimates and saying it expects revenue growth to keep decelerating. The company noting in its release to add partners across industries are cutting their marketing budgets. Let's bring in two voices on this stock. Barton Crockett, Rosenblatt Securities, senior internet analyst with a neutral rating, and J&P Securities analyst Andrew Boone, who has a market outperform on Snap. Welcome to you both. Andrew, I guess the question is, look, this stock's now down 90 percent from its highs. I know the market doesn't care where a stock has been. But at this point, the guidance seemed to suggest things are going to worsen throughout the quarter. Is this a broken business model or is there something else going on that Snap is telling us about? At the end of the day, I think Snap has exceptional reach among younger users.

And so as linear TV continues to decay, I think it has a very strategic position and a place within advertisers' budgets as they have to build brands with younger users. Remember, they reach 90 percent of 13 to 24-year-olds across 20-plus countries. They are a strategic line item in a bunch of brands' budgets at this point. And I think that place continues. Okay, so that's the argument for, you know, this has a place in the industry. The product has uptake. Why has the company been unsuccessful in being able to monetize in this environment to the degree that it expected to? and just brands ability to allocate budgets. If you are a retailer at this point, there's no TikTok made me buy it equivalent on Snapchat. And so I think that Snap has been the victim of budgets moving over to TikTok.

What makes us a little bit more positive is if you look at third party data, it looks like TikTok engagement is starting to slow as of this summer. Now the numbers that we've seen suggest that TikTok was growing about 50 percent kind of in December. If you look at last month, that's now slowed to kind of high single digits. And so hopefully that cannibalization will start to slow as we look towards 23rd. Barton, is this the kind of environment?

I mean, are there things going on in a macro basis that you also think are at play with Snap? Or how are you thinking about the position that the company finds itself in right here? Look, I would agree that they're strong in terms of their audience position with a younger cohort. But I think that this equity is telling you, kind of screaming at you, that it is outside volatility in a world that's moving towards a recession. And, you know, I think what is surprising is that the stock is reacting this strongly to what everyone could have foresaw, which was a soft outlook for the fourth quarter based on macro, you know, not TikTok, but macro was really what the story was here. And, you know, I think that in this type of environment where things are only going to be, you know, more think that in this type of environment where things are only going to be,

you know, more difficult as the Fed steps on the brakes, you know, this is probably not the first place you want to sit for, you know, comfort over the next several weeks. So I would go up the value chain in internet media. I think there is this secular movement of money from traditional, from television towards internet. But I think you can get better, kind of safer sleep at night exposure through something like Alphabet, which also doesn't suffer from the kind of privacy hindrances that have been, you know, such a problem for Snap and for Meta. You know, plus you have some other kind of call options. So I'd go in another direction, bigger, higher quality. Yeah, Alphabet managing actually the claw into the green from a loss this morning.

And Barton, just along those lines, I mean, Meta has already kind of had its collapse in terms of valuation at this point. Is that a good option or are they sort of similarly challenged? Well, it's interesting. So I think that what Snap is telling us today is that, you know, even though we've all seen this ad recession coming, it's not fully priced in. So, you know, I think as numbers reset lower, you know, there's risks across the group. You know, I think for Meta, they have in particular a lot of exposure to this direct response form factor that was troubling, I think, in terms of volatility for Snap. And I think the, you know, other issues you have with Meta is audience erosion. So, you know, the loss of people looking at Facebook, you know, in that way kind of makes Snap kind of stronger than Meta at this point because you have a better audience position. You know, I think with media

stocks, internet media, if you have audience headwinds, it's hard to call a bottom evaluation. I think people shoot first and ask questions later when they see that happening. Yeah. And boy, though, aggregate valuation for Snap at this point is now down under $13 billion. We'll see if anything gets catalyzed here anytime soon. Barton, Andrew, appreciate the time today. Thanks a lot. Thank you. Let's check on the markets. The Dow is up now 700 points. S&P 500 making a new high for the day of 2.2%. It is an opposite expiration.

We get a little momentum toward the close. NASDAQ 100 now also up more than 2%. And the Russell 2000 participating as well. The high for the week on the S&P is above 3760 still to come we'll talk about another earnings decliner American Express falling today despite beating on the top and bottom lines and analysts will weigh in on what is pressuring that stock and as we head to a break check out some of today's top search tickers on CNBC.com the 10-year yield on top followed by Tesla the two-year Treasury yield and Verizon.

We'll be right back. Welcome back to this rally day on Wall Street. The Broad Index is extending their gains. And there you see the S&P sector heat map. All sectors are up as of right now with materials and energy leading the way. Those are inflation plays, interesting enough, and cyclicals. Consumer discretionary also outperforming as well as technology lagging a bit. Real estate, the yield sector, as well as defensive consumer staples. Now, check out today's stealth mover, Hawaiian Holdings, the parent company of Hawaiian Airlines.

That stock flying high today after the company issued warrants to Amazon to buy up to 15 percent of outstanding shares. That's part of an agreement whereby Hawaiian will fly Airbus cargo planes for Amazon starting in the fall of 2023. Hawaiian Holdings shares up just about 10 percent. From planes to cars, General Motors getting a pop today after taking another step forward in the EV race, revealing its electric pickup with a big price tag. We'll tell you about the unveil. And we'll talk to former Ford CEO Mark Fields about the company's best position to cash in on the electric vehicle revolution. Welcome back to Closing Bell.

Shares of GM moving higher along with a number of other automakers today. The company just unveiling its electric GMC Sierra pickup truck with a hefty price tag. Phil LeBeau has the story. Hey, Phil. Mike, let's take a look at the GMC Sierra EV Denali. And the first editions, not surprisingly, we see there's a number of first editions, will come in over $100,000. They hope to have the mass market editions when they finally are starting production closer to $50,000. All of this comes at a time when a number of automakers have continually raised the price of their EVs because of the impact of higher commodity costs. Well, the president of GM says that is not what

they're planning to do here. I don't think jacking prices in a time when, you know, people may not be able to afford things is always the best move. So we've got an Ultium platform, which is, you know, a ground up platform, which allows scale and cost control, which our competitors do not have. He didn't say the name of those competitors, but let's be clear. He was talking about Ford in terms of raising prices and his belief that they're better positioned than Ford and others when it comes to cost control. Take a look at the U.S. EV market share right now, GM.

It's not on this list because it's only at 3.9%, but they still maintain, Mike, that they will have 1 million EVs on the road in North America by 2025. And no doubt the GMC Sierra EV Denali is one of those models they're counting on. Don't forget, GM and Ford earnings next week, Mike. All right. We'll have an eye on that. Two years and what, two months or so until 2025, Phil. Thank you. For more on what this means for the broader EV market, let's bring in former Ford CEO and CNBC contributor Mark Fields. Mark, you know, as Phil set it up there, pretty narrow up market entry by GMC into the electric pickup truck market. Is it enough to move the needle? What's the strategy here relative

to what Ford has done with the F-150? Well, I think overall what you're seeing with GM is they're introducing the high versions right now to garner some interest and some attention to what they're doing with their lineup. As Phil said, it's a limited edition model. Most of the OEMs are doing that right now. The real issue comes when you get to the mass adoption and the $50,000 to $60,000 pickup trucks trucks and you see two divergent strategies from ford and gm particularly from a product standpoint ford took the approach with the f-150 lighting lightning where they took an existing platform made some upgrades to it but electrified it and that allowed them to get to the market first and there's first mover advantage

in in evs these days and I think that's working for them. GM took a different approach, right? They have a ground-up platform that's tailored to their ultimate battery pack and has some performance advantages, but it did delay them into the market. The first Silverado EV is not coming into the market till mid-year next year. And so it'll be very interesting to see how that plays out and which ones customers prefer. Yeah, I mean, these multi-year goals for how many EVs these various makers are going to be producing and will be on the road and customers will want by 2025, 2030. Is it realistic at the pace we're moving at this point, both in production and infrastructure?

Well, it's a bit of, as you mentioned, Mike, it's a bit of a parlor game right now. Who can up who with their press releases on how many vehicles that they intend to sell ultimately comes down to what you actually do. That's how you earn a reputation. And when you look at the capacity that's been announced, clearly the automakers are putting in the capacity to build the EVs. They're working with the battery companies to put in battery capacity. But you have a couple of other elements here which are really important, like the charging

infrastructure has to go up in tandem with the automaker sales objectives, because at the end of the day, it's about convenience for the consumer. And that has to be paired with significant improvements in the electrical grid. In a state like California that says by 2035, they want 100% EVs, they have a lot of work to do there because they're already experiencing rolling blackouts today. Imagine really by 2030 when they say over two-thirds of the vehicles in the state must be EVs. That's going to be a challenge. Tesla has been operating on a premise of basically unlimited demand, they feel, for their cars, as many as they can produce. Clearly, the other makers don't have that confidence,

but they also, Tesla is vertically integrated, selling through their own stores and online. Are the other legacy automakers in a position to really be challenges? Does the dealership networks act as an impediment to the EV transition? Well, Tesla, obviously, Mike, is the is the leader in this space and they're going to continue to be the brand leader as the market moves to electrification. So I think they have a very good position in the marketplace. But do not underestimate the traditional automakers. You know, it's interesting. Every new EV maker struggles with building cars and doing it with quality. The established automakers have done that for a very long time. They're coming out with very compelling products. But clearly, Tesla's market share over the next five years or

so is going to go down just for the fact that the Fords and the GMs and the Hyundai Kias are going to be introducing new models. So I think it's going to be a very competitive market going forward and give a lot of credit to the traditional OEMs with the products that they're bringing out. They're very good. All right. We will certainly be tracking it. Mark, appreciate your perspective on it. Mark Fields. Thanks. Well, here's where we stand in the markets.

Pretty much cooking to new highs. The Dow is up 770 at this point. S&P 500 up nearly 2.5%. Just about to those early week highs. NASDAQ composite up just about as much. Russell 2000 involved as well. Stocks are on the upswing, but there's another red flag for the sluggish IPO market. We'll bring you up to speed on the latest company to reportedly pull its offering. That's next. Welcome back. Check out the Dow big board up seven, almost 750 right now,

up almost 5% for the week. It will be its third straight winning week in the first three week win streak of the year, making more new highs as we head into the close. So what's Wall Street buzzing about today? Another troubling sign for the IPO market, Instacart reportedly planning to pull its offering. Leslie Picker has the story for us. Hey, Leslie. Hey, Mike, or at least postpone it perhaps indefinitely. Market conditions are the culprit here. It's kind of weird to juxtapose that with what the market's doing today. But this is noteworthy because Instacart seemed to have been one of the few stalwart issuers in the IPO pipeline this year, having pulled together its S-1 filings earlier, early summer, which still remain confidential with the SEC. However, the company slashed its internal valuation three times this year alone,

most recently down to $13 billion, just one third the price tag it received in a funding round last year with Andreessen Horowitz, Sequoia, and D1 it received in a funding round last year with Andreessen Horowitz, Sequoia, and D1, to name a couple of those outside investors. Now, in a statement to CNBC, Instacart said, quote, our business has never been stronger. The company, quote, remains focused on building for the long term, and we are excited about the opportunity ahead. I guess the question is, when ahead means an IPO, Mike. Exactly. We'll have to wait. And I think given this year and how it's gone for the markets, market conditions is a legitimate excuse for Instacart at this point, even though we're up today. Leslie, thank you very much. After the

break, why American Express is sinking despite an earnings beat and should you consider buying the dip? That story in the final minutes of this wild week when we take you inside the Market Zone. We are now in the closing bell of Market Zone. Charlie Bobrinskoy from Ariel Investments is here to break down these crucial moments of the trading day. Plus, Pippa Stevens on a pop for energy stocks and Invesco's Christina Hooper on the market outlook. We are in the home stretch of a volatile but now winning week. The S&P 500 up two and a half

percent on the day. Hopes the Fed may ease the pace of rate hikes is adding to today's optimism. Charlie, you know, the market has kind of absorbed a fair bit, hasn't it, in the recent weeks? Just huge move in yields. A lot of hawkish Fed speak until today. S&P 500 has been bumping above the recent lows. Do you think that means that, you know, we're sort of in the clear for a bit or we have other shoes to drop? In the clear is a strong statement. I certainly wouldn't say that. But I would say there was an awful lot of negativity built into this market a week ago or three weeks ago. We monitor surveys of sentiment pretty closely. And a year ago, about 45 percent of advisers were bullish and 20 percent were bearish. That's now flipped to 45 percent being bearish and only 20 percent being bullish.

So the market was clearly ready to absorb some bad news. And particularly, the market was very worried about earnings. There was a lot of talk about Armageddon in earnings. You're never going to have 100 percent positive surprises. But in general, earnings have come in much better than feared. Yeah, we're getting, you know, roughly so far a 70 percent beat rate. That's roughly in the historical range of normal, which, of course, companies usually beat. But do you think it's a matter of, you know, companies actually have relatively strong outlooks or is it just we lowered the bar so much? I guess really the big question is, even if the Fed starts to slow down what it's doing and tightening,

is the economy in any condition to handle what's already been thrown at it? See, I think the economy is actually in pretty good shape if it were not for the Fed holding a knife to its throat. I feel like everything we've heard from banks and portfolio companies and credit card companies is that the consumer is in very good shape with very good balance sheets. The consumer feels good about his or her job, about their prospect to get another job.

It's very hard to go into a recession when you have a strong consumer who's with a strong labor market. So I think if we can get past the Fed, which who is trying to, as you and I have talked about a lot, is trying to make up for its past mistakes on inflation. If we can get past that, I think this economy is in good shape. And not to mention that China is a little bit of a coiled spring. Yeah, there you go. That's a that's an element that has not been been part of the bullish story for sure, is growth coming out of China reopening there. What about inflation, though? I mean, a lot of this is premised on the idea that inflation starts to cooperate a little bit and moderate or come down even relatively quickly. Is that part of the plan? Yeah. So, you know, I don't think

you have many guests that have been more bearish about inflation than I have a couple of years back. But the good news is this was caused by the money supply exploding up higher by 40 percent, which was caused by record deficits of more than three trillion dollars. The Fed then monetized the debt that was issued and bought in over $3 trillion. And that is coming to an end. The good news is they stopped expanding the money supply. They've stopped with quantitative easing. And so I think it's going to take a while. There's always a lag. Inflation is going to come down. I think we've seen peak inflation. It's not going to be low. Next year, it's going to be something like five to six. But that's a lot better than eight to nine.

For sure. We'll see if we get there. Let's get another check on Snap. This stock certainly sitting out the rally, losing around a third of its market cap today after a big revenue miss. Worries over weaker ad demand taking down other social stocks as well. Meta, Pinterest and Twitter, all of those selling off. Julia Borsten joins us with more. So, Julia, what is now the biggest concern for Snap? What seems to be driving this latest round of negativity? You know, what's so interesting here is that the revenue miss for this quarter was very slight.

The big miss, though, was for the fourth quarter and the outlook for how the fourth quarter is going to end up. The first three weeks of the quarter were relatively strong. Snap said they saw 9 percent revenue growth, but they anticipate the overall quarter will be flat with a year ago period. And that's because they think the back half of the quarter is going to see some very negative trends in terms of this overall contraction in the ad space. So what's happening here in the social space as a whole is that you see all these players competing for a smaller pie. They're all looking to try to get a bigger piece of a smaller pie. And the question going into

meta earnings is whether or not they are better positioned to navigate some of those Apple operating system changes that made it harder to target ads and measure the impact of that targeting. So, Mike, I'm going to be really curious to see whether we see a similar contraction, a similar slowdown in Meta and what kind of guidance, if any, Meta gives about Q4. And also, maybe if Meta is going to talk about hunkering down and focusing on the ad side of the business, maybe investing a little bit less in the Metaverse. Yeah, it would seem they have plenty of room to do that if they choose to. When it comes to Snap, I mean, it talked about, you know, daily active users up. So the number of people on the platform not going down, it's a different issue than with some others.

Is it just a matter of the time engaged or simply about, you know, TikTok kind of grabbing share from advertisers? Yeah, I mean, you're absolutely right. User growth actually accelerated. They added more users, daily active users, in the third quarter than they did in the second quarter. So people are using the service, but the time spent, especially that time spent watching videos in the U.S., so that's the most valuable time in terms of advertising, that did decline in the quarter. So maybe Snap is more useful for that core messaging capability and less so for the kind of TikTok consumption of videos with ads in there. I wish we got access to the stats about

how much revenue TikTok is bringing in, Mike, because I would be so curious to see it. But I think we will hear a little bit about the TikTok effect for Meta as well. We definitely did see it eating into that sort of content viewing time on Snap. Absolutely. TikTok's business is like this huge bit of dark matter in the industry. We have no real good window into how well it's doing. Julia, thank you very much. Energy, the top sector this week.

Schlumberger, one of the top performing stocks in the S&P 500 today. That is on the back of strong third quarter numbers, including revenue increasing 28 percent year over year. The CEO saying the company saw margin expansion and the quarter was led by the international segment. Let's bring in Pippa Stevens for more color on Schlumberger and the group. Pippa. Yeah, Michael, those shares of Schlumberger are popping more than 10 percent here after the company did beat third quarter estimates on both the top and bottom line against what some were saying was really elevated expectations. And as JP Morgan summarized it, they, quote, cleared the bar with a significant quality beat. And they also raised their full year guidance, posting the highest quarterly profit since 2015. And this really all came down to that international division where they saw a lot of growth.

And the company also expects that to be a major growth driver looking forward, especially in the Middle East. The CEO said that that region has seen the largest ever investment cycle. And Schlumberger, given its leader in the oil field services division, does predict that it will be a beneficiary of that increased spending. And, you know, for a while there, we saw a lot more interest in the upstream players, given how high oil, how high WTI and Brent were. But with WTI now at around 85 bucks per barrel, you got to wonder if we'll continue to see momentum, Mike, behind the services names. Yeah, absolutely. We've got to see how those dollars migrate if they do at all. Pippa, thank you very much. And Charlie, there has been an interesting bit of a disconnect, right? Oil prices basically flat on a 12 month basis, really well off their highs. The stocks

themselves, though, have continued to do pretty well and open up a lead here. What's your read on that in terms of why equity investors are still excited about this area? One thing everybody always has to remember is oil is priced in dollars. So if I am a Saudi prince, I am getting a lot more of my local currency, even if the price of oil stays constant, because the dollars that I'm getting have appreciated so much in value. So we would have had a much bigger move up in oil had it not been for the dollar's strength. I think, look, the oil companies can make a lot of money at $84 oil in an inflationary environment, which you and I think we're probably going to have for the next year and a half.

I think energy names, which are trading at extremely low multiples. My favorite APA is trading at about five times earnings. I think these names are positioned to do extremely well, particularly if we get an unfortunate continuation of the war in Russia and Ukraine. There's a lot of positives. Again, China coming out of lockdown would be very positive for oil markets. Yeah, for sure. And energy, one of the rare places you can find any earnings momentum in this market at the moment anyway. Let's get back to the broader market as we approach the

close. Joining us is Christina Hooper of Invesco. We do have the Dow still up about 750 points on pace for a winning week. Christina, you know, we've had a lot of agitation in the markets based on what's been going on globally and in a macro basis with the Fed, with the U.K. bond market earthquake. Even today, Japanese yen was at a 30-year high or so. Bank of Japan intervened, actually tried to, 30-year low, tried to strengthen the yen against the dollar. How does that all filter into what an investor should be thinking about here in terms of where markets finish out the year? Well, Mike, it's harder than ever, but my job is to remind investors to think about the longer term. And while we're seeing very significant volatility and we could see some earnings misses, after all, only about 20 percent of the S&P 500 companies have reported thus far.

What we need to think about if we have a long time horizon is that these represent opportunities. And it's hard to do. But in fact, there can be even greater opportunities when we see the kind of frightening headlines and extreme volatility that we've seen in both the stock market and the bond market. Well, that's certainly true, I suppose, on a longer term basis. You know, the risk comes out of the market to a degree as prices and valuations come down, Christina, although I do wonder if enough has been done, just given our starting point and the fact that both stocks and bonds have have gone down so much in sync. How does that leave an investor to try to decide if it's yet safe to try and increase exposures? Well, it is very, very hard for humans to pinpoint exactly when to get it.

And we'll never know the optimal time until it's in our rearview mirror. But what we can do is start to dollar cost average and recognizing that certainly valuations are more attractive especially in some parts of the market than others- but that in general- this is a better looking market than it was last

year. Now we have to recognize that the Fed is going to still be a key driver going forward. And we don't know exactly what the Fed is going to do because we don't know what the data is going to tell the Fed to do. But having said that, we can start to move in, start to acquire greater exposure to areas like equities and fixed income, and perhaps enjoy some of the things that have happened this year, like higher yields for fixed income. So it's not easy to do. But for the longer term, it can be a payoff in a very, very impressive way.

Charlie, as you look around as a value oriented investor, have any particular types of stocks or stocks from any particular industry started to surface more than others as you're looking for what's been kind of unduly cheapened by this move down in the markets? Absolutely. Anything economically sensitive. And it's this quick answer, an obvious answer, but a true answer. Particularly anything having to do with housing has gotten extremely cheap. So we're finding names like Mohawk carpeting and floors that's trading at seven times earnings. Borg Warner that makes powertrains for

cars trading at seven times earnings. Anything that's economically sensitive. Right now, people are petrified of a recession. I'm not denying that one might come, but we're going to get to the other side of it. And when we do, these are good companies that are going to go back to normal earnings. And they are right now very economically sensitive and very cheap. Yeah, absolutely do. Christina, in terms of whether you should be on the more defensive side of things as you perhaps wade back into equities or or look to buy or just, you know, essentially look at the most beaten down or most cyclical names like Charlie was saying? What makes more sense here?

Well, if you're going to be tactical, I think you want to be more defensive in the shorter term. And there are actually some great opportunities that are going to present themselves, especially in the tech space, which is arguably a more defensive part of the stock market these days. But, of course, we're going to see the economy start to recover and the stock market is likely to discount that in advance. So investors should be open to also starting to add to economically cyclical names in coming months. But the name of the game right now is more defensive. Gotcha. Christina, appreciate your time today. Christina Hooper. American Express is a big name slumping today.

Quarterly earnings and revenue beating estimates, but the future looking a bit more uncertain, at least in Wall Street's mind. The company prepping for a potentially higher rate of defaults. Loan loss provisions above $770 million coming in, greater than analysts' expectations. Charlie, you focus a fair bit on financials of all sorts. They seem to be stuck in this place of business seems OK. Our customers seem like they're in decent shape, but we're worried perhaps or at least the market's worried about where we go in a recession. How does Amex fit into that picture? Yeah, Amex is a little different, I would argue, than some of the names that I own.

Goldman Sachs has been around 10 10 11 times earnings for the last year american express was at 21 pe a year ago i would say american express was that classic great company not a great stock a year ago there were uh good expectations for the company they are one of these companies that benefits from inflation when the prices go up they get paid a percentage of transactions and so if there's 10 inflation and everything holds constant their revenue When the prices go up, they get paid a percentage of transactions. And so if there's 10 percent inflation and everything holds constant, their revenue will naturally grow by 10 percent. So I think there were some pretty high expectations built in. And the quarter over quarter per customer numbers weren't great.

They they did well versus a year ago, but not so great versus a quarter ago. And so people are worried that their business is slow. Yeah, for sure. And just when it comes to, I guess, the broader financial area, you mentioned Goldman Sachs. Again, it seems as if people are wary of committing to these stocks because it feels as if there's obviously heightened recession risk out there and you don't want to necessarily be buying before we get to the valley. Absolutely. But what is the best adage for investing? And it's hard for us to be short term investors.

Nobody's good at it. But the one thing you want to do is be greedy when others are fearful and fearful when others are greedy. And right now, it's just not deniable that people are fearful, that people think a recession is coming. And you can see it in just not deniable that people are fearful, that people think a recession is coming. And you can see it in Goldman Sachs stock price. If you charted Goldman Sachs stock price versus book, it trades in a very tight range between 0.75 and two times book. Right now, it's at about one times book, which is a clear indication that people are fearful.

That is the time to own a name like Goldman Sachs. You know, we started talking this hour about how, you know, just this little hint, perhaps, from Fed officials that they're looking to ease off the pace here, gave a little bit of relief and kind of released the market from its worst fears. But are we going to get into a situation where risk assets can rally themselves into another, you know, splash of cold water from the Fed that does not want financial conditions to ease much? From your lips to God's ears, that that was what we're all hoping is going to happen. And I think it absolutely can happen if it was not for the Fed. If the Fed was not telling everybody that's going to try and beat inflation by causing a recession, As I said at the beginning

of your show, I think that this economy is in fundamentally very good shape. And so if they start signaling, which they did a little bit today, that the end of rate hikes might be in sight, then I think this economy can do very well. We still have a lot of pent up demand. We have a lot of people that would like to buy cars. We're seeing it in the numbers. People want to go on vacations, go to restaurants. Unemployment is low. Wages are strong. Balance sheets are strong.

I think we are poised to have a really good economy if the Fed would get out of the way. I guess the other side of that, though, is inventories are high and we binged on a lot of stuff over the pandemic and we have to normalize on that front. And you mentioned housing

is struggling right now. That is OK. I'm glad you brought that up. That is the one thing you're going to say. What's the major risk? I do think we did have a little bit of a housing bubble. We had prices on houses go up way too much as mortgages were so low. And so that is going to take a while to even itself out. New home starts, though, never got crazy. We didn't build too many homes. If anything, inventory levels have stayed pretty low for homes. So, yes, the price of homes is going to come down a little bit. But I think there's still good. There's household formation going on. I think we're still going to have a decent housing numbers in terms of starts. But I am willing to acknowledge that there was a little

bit of a bubble in the housing market. Yeah, well, we'll see if we get some relief on rates at some point. Maybe they can just stop going up. Could help that story. Charlie, great to talk to you. Thanks a lot for the time today, Charlie. As we had one minute left to go into the close, we are on pace for better than 2 percent gains across the board. All the major averages here, S&P 500 above 3750. There's the breadth numbers on the New York Stock Exchange. Very strong, about 80% upside volume. Take a look at the U.S. dollar index. A soaring dollar has been a big headwind for equities all year. You did see some relief right here. 1% drop in the U.S. dollar index. Pretty significant. I mentioned Bank of Japan intervening to try to strengthen the yen against the dollar. That has worked to some degree.

CBO, volatility index. The VIX really not giving up very much, considering it's a Friday and considering the S&P is up more than 2%. Shows you we're still on edge, still uneasy, right around 30 there. Perhaps that's going to be the case as we head into the end of the month. Another big earnings week as well as that Fed meeting. The decision should come on November 2nd. S&P 500 up 2.4 percent. That's going to do it for Closing Bell. Let's send it into overtime with Scott Wapner.