Closing Bell - Closing Bell: Mester on the record, Iger returns, Stocks pull back 11/21/22

Episode Date: November 21, 2022

The major averages pulled back to kick off the holiday trading week, as investors keep a close eye on Fed commentary. Cleveland Fed President Loretta Mester joins exclusively with her outlook for the December meeting, plus thoughts on the inflation trajectory and if she thinks a recession is coming in 2023. David Rosenberg from Rosenberg Research breaks down her comments and the market impact. Disney was a winner on the upside after the surprise news that former CEO Bob Iger would resume his post. David Faber joins with the latest on Iger’s first priorities at the company. Plus the latest on FTX, Tesla’s tumble, and DraftKings.

Stocks mostly in the red today as we kick off a holiday trading week with the Nasdaq seeing the sharpest pullback now. It is down a full percent. 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 with the 10-year yield a little bit higher today above 3.85. Stocks are under pressure, though it's a tale of different sectors. You've got green for consumer staples, industrials having a good day, materials, utilities, real estate, health care and financials. They all are positive right now. What's holding back the market? Energy in particular, down 2 percent.

Consumer discretionary technology, that's why you're seeing the pressure right now on the Nasdaq. Some of the biggest cap tech names getting hit the hardest, as we're used to seeing. Apple, Tesla, Amazon, Alphabet and PayPal all weighing on that. Check out the stock of the day. It is Disney getting a big lift as Bob Iger makes his surprise comeback to the C-suite, though the stock is off the best levels of the day. We're going to talk much more about that news in just a moment. Also ahead on the show today, we will talk to Cleveland Fed President and FOMC voting member Loretta Mester. It's an exclusive interview coming for you in just a few minutes to go over what she plans to do at the all-important December Fed meeting. But first, let's get straight to the market dashboard. Senior Markets Commentator

Mike Santoli is here. What are you watching as we still go through some Fed speak, light on the economic data and earnings? Yeah, Sarah, it's been a similar theme for about really going on a week and a half right now. The market going sideways, sort of consolidating that big rally we got off the mid-October low. Market's seeming a little more confident that it's got the Fed outlook somewhat well-priced in terms of where the Fed's headed and how fast, but the economic overhang is still there. Inverted yield curve suggests that maybe the macro is at risk. I would say, again, if we get down into the mid to high 3800, still kind of a normal pullback if we get down in that direction. Seasonally, still things are pretty strong. But right now, really a kind of a sideways little shelf that's being built on the chart. Wanted to hit on Disney. Been such a

ride for this company and for this stock for a while right now. This goes back five years. Disney relative to Netflix, this is the enterprise value relative to cash flow, forward-looking EBITDA for both companies. And what you see here is now this little bump, by the way, that's the closing of the Fox acquisition by Disney. So the debt went up and the enterprise value went up in that sense. But right here is what's interesting is coming out of the pandemic, basically the market giving Disney a Netflix like valuation for the entire company, not just for Disney plus streaming. It was really signaling arguably to Disney management, spend, spend, spend, get subscribers. This is what the game is. And then it just goes down from there for both companies that were at parity for a little while here. Look at that going right sideways

with each other, Netflix versus Disney. And then, of course, Netflix has this recent rebound. Disney still seemingly a little bit caught in between. Really interesting. Mike, thank you. Mike Santoli for that setup. For more on Boggabiger's return, let's bring in CNBC's David Faber. Has long covered Disney.

This man, the stock. What was happening behind the scenes that led to this? You know, a lot of things, as you might imagine, although, frankly, I think very few people would have anticipated that it would mean Bob Iger's return. Not so much, though, perhaps surprised that Bob Chapek was not having the easiest go of it. We all know that over time in terms of some errors along the way. But really, it's only most recently, Sarah, that at least people close to the board indicate to me that there had been true concern or heightened concern about his leadership. And that was after this most recent earnings report, a significant miss from analyst estimates,

but even more so just the costs associated with the direct-to-consumer efforts, Disney+, and what seemed to be a growing disenchantment at the very top of the company amongst some executives, at least, with his leadership as well. One could imagine the board picked up on that. Maybe you're facing the possibility of certain people choosing to leave. And then they moved very quickly. So I also think it's notable that the Pelts and Tryon News came here. Obviously, the stock is up a lot, 6%. Warm welcome for Bob Iger.

But we also got that revelation that Nelson Pelts is in this company building a stake and wants to potentially be on the board. And I think his track record lately, especially, you know I've covered the P&G story really closely. And there are similarities with Disney and P&G in terms of best in brand and that sort of thing. Well, even in terms of cost as well. And cost as well. And so maybe, you know, the idea that there's a sheriff in town here to impose some discipline, especially if Iger does choose to work with him or even they add him to the board, could be a very positive thing. Possibly. I would say, from what I understand, Peltz had very little to do, if anything at all. The board was aware of his presence. And so you have to take that into account.

But that said, he had nothing to do with Chapek leaving and Iger coming in. That was not anything having to do with, or Dan Loeb, for that matter, another activist who actually was in there trying to be supportive of JPEG previously, although Loeb did, I think, of all the arguments that he made when he first came with his letter not that long ago, the SG&A argument was the one that perhaps resonated most deeply. Seemed to with JPEG as well when I talked to him, because when you do look across apples to apples comparisons, certainly to Netflix, even Disney is spending more in terms of at least on an apples to apples comparison. By a lot, right? The margins are much higher at Netflix than Disney. Correct.

On over the top. But that's that. Listen, to your point, I think Peltz bears watching whether or not he's going to end up with a board seat, I think, is very much unclear. Another shareholder also bears watching is Ike Perlmutter, who sold Mar-Vell to Disney some time back, but has been fairly vocal. He's not on the board, but he's a very large shareholder. So you're right. Although at this point, if you're Iger, this is not number one, two or three on your list of things you're worrying about. What is number one, two, three? I think first it's just reestablishing morale. I mean, and really getting people to be optimistic again, because there has been a feeling that at the company that has not been the case, stabilizing things. And to your point,

then organizationally sort of moving forward in terms of what you're thinking about. And then from there, you sort of take it to operational. And then maybe if he only is there for really the two year period, they say, do you get to strategic? I don't know. But sort of focusing on the organization, the operations, which would be, of course, costs. Right. Because the track record on Bob Iger, obviously, the market really likes him. Right. He did some some great deals. But but there's been criticism also of some of the deals that he did. Well, the last one in particular, Fox. The Fox deal, which added a lot of debt. Many people say they overpaid for the asset. That said, they didn't get Sky and that would

have been even bigger. Right. Although they didn't. In fact, they actually got a very big price for Sky. They also were lucky that, in fact, the Department of Justice wanted them to divest the RSNs. And they did so when they did, because the value of those assets has declined dramatically. But there's no doubt, listen, those are the assets that allowed them to offer what they would say is a fairly robust direct-to-consumer product. But they did add a good amount of debt. Now, the $71 billion, remember, they did lower that because, again, of those sales that we just mentioned in terms of the overall cost. But you're right. But they've got to figure out. It's a different world. I mean, Mike just pointed it out. You know, everybody was chasing the Netflix multiple,

Sarah. That's what they wanted. In fact, Disney was able to accomplish that in part just by adding a lot of subs. That's not the case any longer. Now you've got everybody focused on don't tell me your sub numbers. Tell me your profitability. And when you're looking for profitability, it's not that easy to find so far in streaming. And by by the way should do a better job at succession planning next time around well that's another question for the board as well it is eiger was was also though involved in chapek being chosen as his successor and you're right it was it was not a good choice uh it would seem at least david faber thank you you're welcome thanks for sticking around so late only for you in the evening only for you after the break we will be joined exclusively by Cleveland Fed President Loretta

Mester as the market looks for clues about the rate policy ahead of the December meeting. We've got the Dow down three points. We've pretty much been lower all day, at least for the S&P and the Nasdaq, which is getting hit the hardest right now. You're watching Closing Bell on CNBC. San Francisco Fed President Mary Daly saying in prepared remarks today that the Fed should be mindful of lags as it tightens rates further. This comes, of course, after Rafael Bostic from the Atlanta Fed said over the weekend he favors slowing the pace of rate hikes. Joining us now exclusively is Cleveland Fed President and also an FOMC voting member this year, Loretta Mester. It's great to have you, President Mester. Welcome back.

Thank you very much. Thanks for having me. So the market investors are obsessed with this idea of the Fed slowing down and eventually pausing interest rate hikes. How close are we to that? Well, I think we're entering a period now where Fed policy, the funds rate, is just at entering a restrictive stance. So that's the way I like to think about it. We moved rates up very expeditiously. I mean, we did four 75 basis point raises in a row. We're up 375 basis points on the year. And right now, we're at a point where we're going to enter a restrictive stance of policy. And at that point, I think it makes sense that we can slow down a bit the rate of pace or the pace of increases. We're still going

to have to raise the funds rate. But we're at a reasonable point now where we can then sort of now be very deliberate um in setting monetary policy to get back to price stability and be more judicious in balancing the risk so as to minimize the pain of that journey back to price stability and so that's how i see the next phase of policy so i don't think we're anywhere near to stopping though in terms of you would phrase the question like slowing and then eventually pausing. We still have more work to do because we need to see inflation really on a sustainable downward path back to 2 percent. We've had some good news there on the inflation front, but we need to see more good news and sustain good news to make sure that we're returning

to price stability as quickly as we can for the economy. And that's a message, we've heard that from a lot of your colleagues just in the last week as we've had a lot of Fed speakers. Fed still has work to do. It almost feels like a concerted effort by the Fed to talk down the market's very positive response to the inflation number. Is that what's happening? Yeah. No, when I come on your show, I'm not trying to channel anyone except my own views, because I think it's really important for people to hear what a policymaker, how they're framing their own decisions. So that's why I like to be,

you know, out there, because I am not an elected official. I think I owe it to the public that I represent so they understand how I'm thinking. But I am thinking that we need to see more positive news on the inflation front. I'm very grateful that we've seen some of that. I think policy is beginning to do its work. And of course, our policy, by tightening monetary policy, our aim is to slow down and moderate demand so it becomes into better balance with supply, both in product markets and in labor markets, so that we alleviate price pressures. I think we're beginning to see some of that working. We've certainly seen a broader tightening in financial conditions. And now the

question is, how do we calibrate our policy to continue to get that good news on inflation so that we are back to 2% so we can return to price stability? It will take some time, but I'm hoping that we continue to see that positive news. And we're gonna just have to continue to do some work, I believe, to get the funds rate into a restrictive stance

and an appropriately restrictive stance so that we get back to 2% inflation. Well, a few days ago, your colleague at the St. Louis Fed, Jim Bullard, said we should be in 5% to 7% in the target rate to really bring down inflation, which sounded very high. And I think it shook investors a little bit. Do you agree with that? Where are you? Yeah. So, I mean, I don't think the market expectation is really off. If you remember in September, subsequent to the September meeting, I had said, you know, I had a little bit stronger inflation forecast for next year than the median SEP. And so I had a somewhat higher policy path

than the median policy path. So right now we're in the process of preparing for the December FOMC meeting. And the December meeting, there'll be another set of projections. I do think we have to get into restrictive territory. My view is that we're to get into restrictive territory. My view is that we're just basically entering restrictive territory. And then we'll have to see, right? So we need to

bring rates up further, I believe. And we said that in our last FOMC statement at our last meeting in early November, that we expected the Fed funds rate will have to move up further. But then we have to be judicious about sort of evaluating and letting the economy tell us, you know, is inflation indeed moving down in a timely way or do we have to even move rates higher and where will that be? So, again, I think we're moving into a different sort of cadence of policy now that we are entering restrictive territory, that we're going to be more letting the data and when i say data i also mean the information we gather from talking to firms and businesses and labor market people and community development uh people because that's

more forward-looking some of our data lags um and we don't want to just be basing policy on lagged data. We really want to be forward-looking. And that's why having our Fed banks distributed across the country is really important, because we get a really good group of forward-looking indicators to really assess how the economy is doing. So you talk about this shift in the way you're thinking about interest rate increases now that we're in restrictive territory, which I think translation to the market is, OK, 50 in December, 25, 25 until the Fed sees progress. Is that right? Is that the right way to interpret that? Well, I mean, I think we can slow down from the 75 at the next meeting. I don't have a problem with that. I think that is very appropriate.

But I do think we're going to have to let the economy tell us going forward what pace we have to be at. So, you know, right now, my forecast is that we're going to see some real good progress on inflation next year. We won't be back to 2 percent, but we'll see some meaningful progress next year. But if we don't see that, then we're going to have to make sure our policy really reacts to the incoming information. So I can't tell you today what the path going forward will be necessarily. I can tell you what I expect it to be given what my forecast is. But then we're going to have to really be allowing the way the economy evolves and the risks around our forecast really guide our policy decisions. Well, the other question is just how much pain you're willing to take on the economy,

even if we're not at your target on inflation. You are tightening into a very inverted yield curve already, and there's already pain out there. If you look at the housing market, nine months of falling home sales. So what is that threshold where it becomes harder to decide whether you should be raising rates to fight inflation to hurt the economy? Yeah, I don't disagree that the journey itself is not going to be, you know, it's going to have some pain involved. We're going to try, our aim is to do this as painlessly as possible. But I also want to point people to the fact that the inflation itself is very painful. This is not something that's easy, right? Businesses are

having a hard time making business decisions. Households have a hard time making decisions because prices aren't stable. So this is already inflicting pain. And the longer we're away from price stability, it can have long run implications for our economy. It can affect our our potential growth rate as well, because investments that are needed for the long run health of the economy aren't being made. So, again, when you're doing this evaluation. Right. I don't think we should underestimate the consequences of continued elevated inflation in the long run for the health of our economy. That said, we do want to be judicious. I want to over tighten and tighten more than we need to. But we don't want to under tighten either and potentially drive inflation to be even more persistent than it's been so far. And that's the balancing evaluation that has to be done as we move forward. It's a tricky one. I want to ask you how the balance sheet factors in here as

well, because it doesn't get a lot of airtime, but we are, what, a few hundred billion off the peak a few months ago of where it was. How do you view that as a tool? For instance, would you be flexible to stopping the tightening or the drawing down of the balance sheet if things get worse in the markets and the economy? Yeah, I mean, the balance sheet is another tool that we, that does, you know, it's another factor that's in this removing accommodation and now tightening policy, no doubt. But the way we've set up the balance sheet is via through runoff, and we're allowing it to run off passively, so in the background, right? That is going to have an

effect on the economy, and then we use our funds rate as our active tool of policy. Now, as you pointed out, when we're doing this, we have to be cognizant of market functioning whenever we're doing any change in the stance of monetary policy, whether it be through the funds rate or the balance sheet. And so we're very much monitoring those types of issues, right? Are markets functioning? Is our balance sheet run off working the way we expect it to in terms of not imposing costs unduly on the functioning and operation of the financial market. So far, it's been running in the background as expected, but we're very attuned to that. And we would be flexible, as we said, when we put out the guidelines about how we're going to be doing our balance sheet reduction, that if conditions change, you know, we would be attuned to that.

But so far, I see no reason that we would want to change that right now. Finally, where do you think the economy is headed? The consumer's held up relatively well, but there are increasing signs of slowing. Do you predict recession for next year? I don't have that in my forecast. I do think, though, that growth is going to be well below trend. And when you're in that kind of very low growth environment, there is a risk that a shock could send us into negative growth. But again, right, the focus at this moment, because inflation is so high and has been so persistent, has got to be on getting back to price stability. And that's what's dominating my thoughts in terms of our policy right now. Loretta Mester, we appreciate you taking the time. Thanks for having me. Happy Thanksgiving. Happy Thanksgiving. President of the Cleveland Fed, Loretta Mester. Let's show you where we stand right now, down 23 points or so on the Dow. The S&P 500 down a third of 1%. It's the Nasdaq that's getting hit harder than the rest today, down a full percent.

And it's because you've got all the big cap tech names weaker, consumer discretionary and information technology, both weaker as a sector as well as communication services within the S&P 500. When we come back, we will take you live to the Bahamas for an update on the FTX saga as Washington ramps up pressure on the entire crypto industry. And as we head to break, check out some of today's top search tickers on CNBC.com. No surprise, Disney right on top. Stock is up almost 6% off the highs of the day. And it has unseated the 10-year note, which is right behind it,

and which is selling off. Yield's a little bit higher today. Tesla, oil prices lower. And Bitcoin down to 4.5%. Rounding out the top five. We'll be right back. Welcome back. Washington is turning up the heat on crypto companies, announcing two new hearings today

aimed at FTX and SoFi's crypto moves. Our Kate Rooney is live in the Bahamas where FTX is headquartered with the latest. So, Kate, you spoke to Sam Bankman-Fried there? I did, Sarah. Yeah, absolutely. We're here in the Bahamas, in Nassau, where Sam Bankman-Fried is located. I do want to bring you some news, though. First out of D.C., all of this FTX fallout is having a ripple effect from what we're seeing in Washington. The chairs of the Senate Agriculture Committee, which oversees the CFTC, announcing a December 1st hearing called Why Congress Needs to Act.

Lessons learned from the FTX collapse. We also heard from Senator Sherrod Brown, chair of the Senate Committee on Banking. He is now calling for a hearing on SoFi's crypto activities. SoFi responded saying that it takes regulatory compliance seriously and believes they have been fully compliant with the mandates of their banking license and laws. And Sarah, all of this stems from the downfall of the crypto conglomerate based right here. NASA, I spoke briefly to Sam Bankman-Fried on Friday. He said despite being ousted from the company and its bankruptcy, he is still spending most of his time trying to broker a bailout.

He declined to talk about some of the financial details around the fallout of FTX and an on-camera interview. We also tried to get a longer talk on the record. Wouldn't answer some of those questions. We really are dying to know about the financial side of everything, but he is hunkered down here in an upscale neighborhood in the Bahamas called the Albany Club. He did tell me there are billions of dollars of potential funding out there to make customers holy. He also talked about getting as much value back to users. He says he hates what happened and wishes he had been more careful. He also maintains that there are billions of dollars in customer assets available despite not having access to his corporate emails or any FTX systems

right now. And Sarah, to be clear, this is, of course, a long shot. Any sort of bailout is a long shot here. The legal experts do tell me that Sam Bankman-Fried would be no different than any other third-party bidder at this point. But legal experts also tell me that being part of the solution may actually help him in criminal or civil courts. No response from him on that. FTX's new CEO, John Ray, over the weekend,

saying that he's also exploring sale options for FTX. Back to you. Kate Rooney. Kate, thank you very much. With the update from the Bahamas where Sam Bankman-Fried has camped out. By the way, SoFi shares under a lot of pressure on this news of the investigation. The stock is down 6.3% or so. The company issuing a statement saying, we do not partner with FDX nor have any direct exposure to FDX and that it's not a hugely material part of the business. Clearly, investors are shaken by it anyway. When we come back, we're going to get reaction to our interview with Cleveland Fed President Loretta Mester, what we just heard on the Fed rate path. When we are joined by David Rosenberg of Rosenberg Research, he'll tell us where he sees Fed policy

heading and his outlook for the market into year end. Dow's down 55 points. We're moving south here as we head into the close. Well, we just heard from the Cleveland Fed president, Loretta Mester, moments ago on this show. She said that she is fine with slowing the rate of interest rate increases, but needs to see a meaningful inflation slowdown before any sort of pause. Listen. I think we can slow down from the 75 at the next meeting. I don't have a problem with that. I think that is very appropriate. But I do think we're going to have to let the economy tell us going forward what pace we have to be at. So, you know, right now, my forecast is that we're going to see some real good progress on inflation next year. We won't be back to 2 percent, but we'll

see some meaningful progress next year. But if we don't see that, then we're going to have to make sure our policy really reacts to the incoming information. Let's bring in David Rosenberg, Rosenberg Research Founder and President. What I thought was notable, David, in her comments, she's sort of center to hawkish lately. I don't know if you'd agree, but she's not saying I need to wait to see if the data is still hot before ruling out another 75 basis point hike. So that's a meaningful downshift in terms of her own policy view. But they're not talking about a pause anytime soon. What's your take?

No, they're not talking about a pause. And they're all talking basically within shades of gray of being, you know, non-hawkish or hawkish. I think to a T, they're all signaling, including Loretta Mester, 50 basis points at the next meeting and probably more into 2023. You know, whether they go into 2023 remains to be seen, but that's what they want the markets to believe right now. And, you know, you have to be sitting here shrugging your shoulders that, you know, to be talking about slowing the pace from a steady diet of 75 basis points into an inverted yield curve and really what was a flat economy this year is pretty incredible. So you're still of the view that they're doing too much and you should sell the rallies because the Fed is still hiking into an economy that is deteriorating? Is it as simple as that? I think it's pretty well as simple as that.

And, you know, just remembering, you know, the famous Warren Buffett refrain, that the one thing that we don't learn from history is that we just don't learn from history. And the historical record is pretty simple, that bear market bottoms happen 70% of the way into the easing cycle when the Fed has reached deep in the yield curve to a positive shape. We're nowhere close to that.

So you get these tradable rallies. It gets people excited. We saw multiples of these in 01 and 02, and again in 07 and 08. And so we get these bear market rallies. They tend to fail the 200-day moving average like the last one did, the most recent one. But, you know, in terms of talking about, you know, can we get a year-end rally, I mean, with five weeks to go, that's more of a question for traders and technical strategists. But in terms of identifying the real low, it doesn't happen when the yield curve is inverted and the Fed is still tightening policy. So you've been very bearish on the economy as well, David, and we have started to see

increasing signs of weakness, certainly the housing market in recession. But I think, did it surprise you at how strongly the consumer has held up? And does it shape your view of how deep of a potential recession we could be in next year? Well, it seems to me as though the consumer has been feeding off these fumes of all the savings that were accumulated during the pandemic. So that still provided some impetus. And we saw that in the retail sales numbers that came out last week. We're also seeing a tremendous run-up in consumer credit and especially credit cards. So that's keeping the consumer alive, dot, dot, dot, right now. But you'd mentioned the housing market. And we know that the housing

market is the quintessential leading indicator for the overall economy and the lags can be long and variable we know that but just go back to that last cycle you know housing really goes into a tailspin in 06 and then the cracks really emerge in the mortgage market in 07 and then the next thing you know in 08 we're in a full-blown recession so I think your comment actually on housing is apropos. The consumer is hanging in much better than I would have thought. There's no doubt about that. But the question would be, if you stripped out this relentless run-up in credit card usage, which is a classic transition indicator from expansion to recession, it wouldn't be nearly as strong as it is.

David Rosenberg, good to get your latest thoughts. Always appreciate you joining me of Rosenberg Research. Take a look at where we stand. We're down 56 points on the Dow, UnitedHealthcare and Visa taking the most off the Dow. Disney is adding the most, adding 35 points on its big rise today. The Nasdaq is down a little more than 1% right now. You've got tech, communication services and consumer discretionary all down in the S&P along with energy. And that's what's leading to about a half a percent pullback. Look at DraftKings. Losing bet on Wall Street today as the stock sinks following a report of a hack. We'll tell you about it next. When we come back, we'll tell you why Tesla is pulling back sharply today

and adding to big losses on the year. That story, plus more on Bob Iger's priorities at Disney and the news that is sending DraftKings sharply lower when we take you inside the market zone. Down 57 points on the Dow. We're back in a moment. 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 Julia Boorstin on Bob Iger's return to Disney and Philip Oh on a big Tesla recall. We'll kick it off broad, though, Mike, because we are seeing stocks decline down 48 points on the Dow, bigger decline on the Nasdaq. We started the day off worrying about China and COVID cases and potentially more lockdowns. And also, it's notable what we're seeing with oil, that turnaround during the day and a very strong dollar. What are

you focused on? Yeah, general sense, putting all that together, Sarah, that there's still this overlay of concern about the pace of growth going into next year globally. You know, earlier, Treasury yields were lower as well, which would have fit into that picture. But they perked up just a little bit. Perhaps it was after we heard from from Mary Daly, the San Francisco Fed talking about maybe policies even more restrictive than than we measure it. But in general, I feel like the market has just been in this low drama way, consolidating, but has very low momentum. So it's so far a benign pullback over the last week and a half from those highs of the early part of this month. But really

nothing really getting out of its own way just yet. Let's hit Disney because it is the top performer on the Dow right now. As former CEO Bob Iger retakes the reins at the company, despite today's pop, it's still among the worst Dow stocks this year and tracking for its biggest annual decline since 1974. Let's bring in Julia Boorstin to discuss. So, Julia, you cover this company very well. He's got a lot on his to-do list. What do we expect to change right up front? Well, a lot on his to-do list. And I would say today, based on the Zooms or video calls I understand he's having with many of Disney's employees, it seems like his first priority is addressing morale, morale, which has been pretty low, especially in the wake of those disappointing earnings a couple of weeks ago. So I think morale is first

off and then figuring out the structure of the streaming business in particular. His predecessor, Bob Chapek, split up the content creation and the content distribution businesses. And many people telling me that that that pitted those two divisions against each other. So I think he's going to be trying to figure out how to restructure the company to be more successful in terms of driving the ROI in the streaming business going forward. Mike, what what what is what what is the analyst's reaction to to all of this at Disney and just how stuck is Disney in this downtrend for the stock? Well, generally positive response here. Obviously, the street's very accustomed to having Bob Iger tell the story of Disney,

to try to set priorities. He does get some benefit of the doubt for being able to do that. They want greater confidence that there's going to be some discipline when it comes to the streaming priorities in terms of spending and whether those losses, in fact, are going to trend toward break even in the next year or so. All those things, I think, are key. I'm not sure there's a particular big strategic move that is anticipated here, but much more about somebody who knows the business well, has a lot of focus on cultivation of talent and content creators,

and the ability to try and create and preserve these big franchises that can be cross-sold across the entire company. Julia, I think the presence of another activist here in that, Nelson Peltz is now a shareholder and Tryon is in the stock, is also potentially a positive here for investors that have looked at some of his other his other companies. He's gotten involved in P&G where he joined the board and that stock went up a lot. And and there's a question mark about how much Disney and Iger and the board is going to be engaging with him. What have we learned about their relationships with Loeb and and other activists that have been in this stock?

Yeah, I mean, if you look at the relationship that ChaPEG had with Loeb, they said they were making progress. They said that they had come to certain agreements. We saw some of their recommended board members be appointed to the board. But ultimately, it seemed like they were not happy with the performance, particularly in this most recent quarter. And I think the issue was that Disney had managed to add more subscribers than expected to its streaming business. But the profitability was far falling short of expectations and those losses were growing. So I think that, you know, Iger is very conciliatory and very easy to deal with in terms of managing the relationship with investors. And I would expect that to

continue. So as we see the stock up over 6% today, it seems like the expectation is that he will work with all shareholders of the company. Julia Borsten, Julia, thank you very much. Appreciate it. Adding the most to the Dow right now, though you have UnitedHealth, Visa, Apple, Salesforce, Chevron, Nike all taking off from the Dow gains. Let's hit Tesla because it is tumbling again on another recall. It's at the bottom of the S&P 500 right now. This recall affecting 321,000 vehicles in the U.S. over faulty taillights. That's according to the carmaker. Just last week, Tesla recalled roughly 30,000 Model X cars over an airbag issue. Shares are now trading at their lowest level in two years.

Let's get to Philip Bo for more. There's also the Twitter preoccupation. I mean, he's clearly, Musk is clearly very involved in some of the changes over there. And that seems to have been weighing on the stock here as well. Sarah, I think that weighs on the stock 10 times more than any recall. Look, that recall, there are recalls and there are recalls. The 321,000 vehicles because the the taillight intermittently is not working in the world of recalls. That's a small one. There are no accidents or deaths related to it. And over the air software update will take care of it. And look, there are tons of automakers. They have similar types of recalls. We don't report on them. They don't get a ton of attention.

But because it's Tesla, it gets a lot of attention. I think your point about the Twitter overhang, that is far more the reason why this stock is under pressure right now. And remember, Tesla has always been a story momentum stock. Where's the momentum coming from right now? The next big event, if you will, is the Tesla Semi deliveries beginning on December 1st. That's not going to be a huge revenue generator. The Tesla Semi is important because it's another product and potentially they could grow that business. But that's not going to help the bottom line right away. So there's really no momentum story driver right now. And it's certainly not Elon Musk because his focus right now is on Twitter. What do we know about the I feel like we've talked about this before, but it's not widely known about the leadership of Tesla.

Who is running it in Musk's place? Is there a successor in place of Musk? He's got a strong making it work. He's got a strong bench. He's got a strong bench. Now, whether or not he has a designated successor at this point, that's unclear. And while he has talked about someday stepping back from day to day operations running Tesla, he has said that many times over the years. And I think most people look at those comments and they say, OK, well, when you finally do decide that you're going to put a succession plan in place, then we'll sit there and do an in-depth analysis. But in terms of his team there, it's a strong team. They just don't get a lot of attention publicly where people say, well, this is the person who's going to run it next. No, can't think of that at all. Phil LeBeau, Phil, thank you. Mike, the stock is down 6.4 percent. So for the year, it's now down 52 percent. It got some attention on Drudge Report

on the cover about the stock's underperformance. I wonder if that's a tell. I don't know, a contraindicator of some sort. But what does Tesla, what do these levels look like to you? Well, it's interesting because it's tough to separate out what's been going on with Tesla from the general aggressive unwind of what's gone on with the mega cap, kind of glamour-crowded growth stocks that we had a year, year and a half ago. So Tesla, for its part, has essentially made a round trip over the last two years.

So two years ago was when it first started to really accelerate higher, had a massive move before that, right as the pandemic started, but really started to get going. As it was added to the S&P, it was having a stock split and people just crowded into a handful of favorite names. So that's been unwound. You have Musk selling all the stock. Musk seeming like he's kind of bored with Tesla and running it and preoccupied, as you say, with Twitter and also tweeting constantly and having his kind of chaotic management style on display for the entire world. So it's tough to tease out exactly what of that is pressuring Tesla. Now, car stocks in general struggling a little bit right here. EV stocks in general having a hard

time. The China sales outlook maybe not looking so great. So there's lots of reasons why it would be trading down here. But, you know, the Twitter involvement is obviously unavoidable. Now, the China factor looms large as well. As I mentioned, you're seeing that in the market today, China exposure getting hit. Let's hit DraftKings, though, because it's under some pressure today as well. Gambling news outlet Action Network reporting overnight that DraftKings users were hacked. Our Contessa Brewer here with more. So what happened and how deep does this go?

Well, DraftKings says it wasn't hacked so much as it was broken into by a burglar who actually had a key. Basically, they're saying some other sites got hacked, third-party sites where people had used either their DraftKings username and login information or they used those username and login information across websites like for your bank or your utilities or whatever. That gets hacked. Somebody finds out what that is and uses it to break into your DraftKings account. They say at this point, they think less than $300,000 was stolen out of those accounts from DraftKings and that they do plan to make whole the customers who lost money. But in the meantime, they're going back and saying, one, you need to have strong authentication in place, use different usernames and passwords.

And we're hearing the same thing from FanDuel at this point, that they're encouraging their customers to report anything suspicious. And to be careful, they've reported an increase in activity. We're asking around. The real problem, Sarah, is there are questions now about how safe is your money? I've asked Jason Robbins, the CEO of DraftKings, this question, and they put a lot of time, energy and effort into cybersecurity. So it was not the DraftKings site that got hacked. It was rather a backdoor entrance through third party sites. It's just the latest in a string of concerns about this stock. It's down now, what, 60 percent over the last 12 months. What is the consensus, Contessa, about what's happening with the business?

Yeah, I mean, I think that this path to profitability is still under great scrutiny, especially after earnings. Jason Robbins had said they plan to be profitable in the fourth quarter of 2023, even as some of their competitors, Caesars and Penn, had said, hey, we might be profitable in our digital business in the fourth quarter of 22, depending on what happens with Mattress Mac. If you're that close that a bet from a guy in Houston could make or break profitability, you've set the bar rather higher. And DraftKings has just steady edged, said, no, it's going to be fourth quarter. They're still planning to spend while they're rolling out. Contessa Brewer, Contessa, thank you. Drop King's down another 5% on top of an already tough, tough year it's having. Mike, if you look at the 52-week lows, Tesla's on the list now, low since June 2021. Some of the highs are interesting as well. The staples continue to go up. PepsiCo is trading at an all-time high.

Who else is on that list? Monster Beverage. O'Reilly Auto. I don't know. Trading like a staple. All-time high levels. That stock is amazing. What else do you see? Yeah, within retail, the auto parts retailers have been generally pretty good. And, yes, it's sort of almost counter-cyclical and staple-like. In general, the internal, Sarah, they're soft, but not really dramatically so.

The market's been in a narrow range all day at the headline indexes. The equal weight S&P outperforming the market cap weighted when you see there. Less than 2 to 1 declining to advancing volume. Energy, as you mentioned, a weak spot today. Take a look at the XOP, the exploration and production ETF. It's kind of rolled a little bit here. Never got up to the June highs. And it's sort of hovering right above the August highs now. So threatening a little bit of a breakdown, but not quite there. Obviously been an outperforming group all year. Volatility index is kind of asleep here. It's backing off about 0.7 again.

Narrow range bound trading, as well as we're going to get a holiday interrupted week. So seems like calm, but still kind of grudgingly getting down into the low 20s on the VIX, Sarah. Yep. NASDAQ's getting hit the hardest as we go into the close. It's now 32% off its highs. It's down about 30% for the year. There's the Dow. It's down 37 points right now. It's being helped by Disney, Home Depot, Honeywell, Procter & Gamble,

a lot of stocks trying to prop up the Dow, which is making it outperform today. UnitedHealth is the biggest drag, taking 90 points off the Dow. Visa, Apple, Salesforce, Chevron, also losers. Within the S&P 500, which is lower right now by about a third of 1%, it is the tech stocks and the energy stocks which are doing the worst today. Consumer staples are up a full percent. Real estate, utilities. So it's the defensive groups, recession-type stocks that are working best today.

Industrials, materials, financials, and health care also going to close out in positive territory. Small caps underperformed. They're down six-tenths of 1%. That's going to do it for me here on Closing Bell.