Closing Bell - Closing Bell Overtime: Big Earnings Hit the Tape 10/25/22

Episode Date: October 25, 2022

Alphabet, Microsoft, Texas Instruments and more all reported results in Overtime. An all-star panel of experts and shareholders weigh with instant reaction. Plus, top equity strategist Mark Kolanovic gives his forecast for the fed and stocks. And, market expert Mike Santoli weighs in on all the key reports and what he’s watching in the day ahead.

And what an hour we have in store for you today. We'll get right to our talk of the tape. Marquee earnings from Microsoft and Alphabet. They are imminent, with some calling it the most critical time for tech in years. Chipotle, Visa, Texas Instruments, Spotify also hitting momentarily. Our reporters, of course, are standing by. Our experts are with the numbers and the analysis. We've got the stock moves and the shareholders ready to weigh in. So let's welcome in Virtus Investment Partners Chief Market Strategist Joe Terranova. He's here with me on set today to kick things off. We're going to get Alphabet in a matter of seconds, then Microsoft and then all the others. So here we go. It's hard to overstate the importance of this. Confirmation

of the price action over the last several days market clearly gravitating back towards the 50 100 and 200 day moving averages trying to initiate some of that rules-based non-discretionary buying three months to 10 year it's inverted so you're getting the economic contraction feeling a little bit better that the federal reserve at some point might begin to moderate uh the rate of hikes we're going through these reports as they come out. Microsoft, we're told, has dropped. We will take a look at what the stock does. We could see it maybe down just a touch. We're going through it. As I said, Steve Kovac is our reporter. Our expert is going to pop on in a moment. You own it. I do. As does Joe Terranova. So what exactly are you looking for? Because you've got the key growth areas are all slowing.

They're expected to post the slowest revenue growth in some five years, the lowest income growth in two years. Azure, the cloud growth is also slowing. So how do you rate this? Well, you're pushing two dynamics. You clearly know that we've got a weak PC environment for sure. They've already telegraphed that they're seeing tremendous headwinds as it relates to a rising U.S. dollar. How strong is Azure going to be? How resilient can the cloud business be?

Can it ultimately save Microsoft from having a poor quarter and poor performance thereafter? I mean, it's going to be fine. The problem is all of the areas that we just talked about are not growing as rapidly as they were before. So you have to decide what you're going to pay for that as an investor in a slower growth, rising rate, slowing economy environment. So we'll hear from Microsoft and we'll hear from Alphabet. By the way, Alphabet's out, too. OK, so we're going through that as well. Deep Boats is going to be on the case.

So you have both you have both companies and one company trades at a discount to the s p that being alphabet the other company microsoft trades at a premium why does microsoft trade at that premium valuation because we look upon that business as being more diversified scott immune to maybe some of the ad spending slowdown that you've witnessed with alphabet we clearly saw that last week at snap so i I think you need validation from Microsoft in this earnings report that there's nothing in here that's going to dissipate the premium valuation that's being rewarded. And I think if that's the case, then you'll clearly see this be that defensive name. All right. You got Alphabet down about 4 percent or so. Deepos is ready to go. What do we see here? Scott, I'm seeing a miss on all the metrics that I'm looking at

at the moment. Let me break them down for you. Q3 revenue coming in at $69.09 billion, $70.6 was expected. And that is the slowest revenue growth we've seen from Google since about 2013. Also coming up short on the earnings per share coming in at $1.06, $1.25 was expected. Google Cloud, another area that we were watching very closely, also a little light here, $6.87 billion versus 6.09. I'm sorry, that is a small beat. YouTube though is another miss here, $7.07 billion versus $7.42 billion.

So a little bit of upside on the cloud, but of course this makes up a very small percentage still of the business. Ads are where it's at and coming up short in terms of revenue, earnings per share, and in particular, YouTube. I believe that's the slowest growth that we've seen in some time as well, about 3 percent. Scott, back to you. Tell you what, I know we're going to hear from you again, Dee, but what jumps out to me, I think more than anything else, is when I was leading up to this, I suggested that Alphabet was expected to post the slowest revenue growth in some two years. What I think I heard you say was that they actually posted the slowest revenue growth since 2013.

Did I hear that right? Let me check. I believe so. Yep, about 8% since the weakest expansion for any quarter since 2013. That's right. And YouTube, that growth has slowed to about 3%, Scott. So, yeah, that is weakest we've seen in a long time. Yeah. So, Dee, thank you.

As I said, we'll hear from you in a moment. I appreciate that. All right. What do you think? Alphabet first. Alphabet's more concerning. Clearly, you see the deceleration in revenue. Again, second consecutive quarter for YouTube, not enough for the cloud business.

And let's remember, the cloud business really isn't profitable. It's rated third behind Microsoft and Amazon. So if I have more concern, it's with Alphabet. Let's keep in mind, though, to temper that pessimism that I'm sharing, strong buyback in place for Alphabet. So that buffers the downside here. But of the two, more concerning with the economic exposure this company has. Stocks slipping a little bit more as we speak. Microsoft in the red in OT as well. Steve Kobach is ready to rock and roll on that one, Steve. Hey there, Scott. Yeah, it looks like a beat on

the top and bottom lines here for Microsoft. We got an EPS $2.35 versus $2.30 expected. Revenue is just a very slight beat here, $50.12 billion versus $49.61 billion expected. But Scott, I think it's the Azure Cloud growth here that's setting shares a little lower after hours. It came in at 35% versus the 36.4% we were expecting estimated. And on a constant currency basis, that number is 42% Azure cloud growth. That's the number investors always look for, Scott. Yeah, Steve, all right. I know we'll hear from you again to assess this one for me, right? He said it right there. It's the cloud growth, right? I mean, that's ultimately what you are paying for in these types of businesses. That's where the growth is. That's what has justified the kind of valuation you're paying. Expectation was for 36, 37 versus 50

a year ago, and they come in 35. Also impacted by the currency, though. Let's keep that in mind. Take away the currency effect, and now you move back above 40%. I think that clearly when you're talking about the growth with Azure, it is decelerating. But let's remember overall the theory is that we're seeing significant adoption for the public cloud and Microsoft is going to benefit tremendously from that, Scott. So I have limited concern here with Microsoft quite candidly. If you are not a holder of Microsoft shares, I think this is a company, after this report, you take advantage of the price discount you're getting here after the close. Let's bring in a couple more shareholders of both Microsoft and Google. CNBC contributor Brenda Vangelo of Sandhill Global, advisors Malcolm Etheridge of CIC Wealth.

As I said, both own Microsoft and Alphabet. But Brenda, I'll go to you first. Let's take Alphabet because that's the bigger mover right now, down some 6%, a miss and a miss. Yeah, I think we have to take this into context here and look at many of these large cap companies were huge beneficiaries of the environment they were in over the last couple of years. So I think it's natural in many ways that they're seeing trends slow and normalize. But when it comes to Alphabet, I think we've heard from many companies that digital ads as spend has been lower. And so I think the business has just matured so much that no one is really immune at this

point, including Alphabet. So it's not terribly surprising, but this is what we've all been thinking was likely to come, but expecting that search would likely be a little bit more immune than some other areas within digital ad spending. But nevertheless, here we are. So we need to hear more on the conference call, certainly, to get more details about exactly what the company is experiencing. But I think we have to take it from a big picture perspective and recognize that, you know, no one's really immune in this market if there is a digital slowdown and digital ad spend. Yep, that's for sure. Malcolm, what's your take?

Yeah, on the Google Alphabet side, I very much expected them to come in and report another quarter of slowing sales growth since I didn't know it was back to 2013. That was news to me, but I knew at least for the last six quarters they had been talking declining ads, declining revenue because of their ad sales, both in this paid search and on the YouTube side. And so I expected to hear issues surrounding the strong dollar coupled with slowing revenues. And that was going to bring down the stock pretty much in line with what ultimately happened. So I'm very much not shocked that Google is having the quarter that they're having and probably the opening tomorrow. I'm going to ask everybody to just hang on a moment because Christina Parts and Nevelos is ready with Texas Instruments, which is a good bellwether on the chip space considering, Christina, their chips are in everything. Yeah, their chips are in everything and they're considered more resilient because they have greater exposure to auto as well as industrials.

However, you are seeing shares fall 5% right now. The company did beat. You saw EPS come in at $2.47. Revenue came in higher by, well, it came in at $5.24 billion. The street was expecting $5.14 billion. The concern, though, is Q4 outlook. The outlook for EPS guidance in the fourth quarter is weaker on the range of $1.83 to $2.11. That's weaker than what the street estimates. Same thing for revenue, also a little bit

lighter. The company's CEO, there was a quote saying that during the quarter, we experienced expectant weakness in personal electronics and expanding weakness across industrials. That was the key message right there, because that is a sector that is considered or had been considered resilient. So we're going to be looking out for any more commentary, especially pertaining to China. And so that's what you have right now, and that's causing shares to drop about 5%. Scott? All right, Christina, thank you.

I'll hear from you in a moment as well. She hit it on the head right there. Expanding weakness in industrial. That's what you didn't want to hear. For a stock that you don't own anymore, but you used to, got out about a year ago in your ETF. So, and by the way, it'll be under consideration this Friday when we do the rebalance. We could go back into it once again.

This is bad for the industry. Marvell on Semi, they'll trade lower on this news. For Texas Instruments, not so bad. I think from a valuation perspective, you're okay here. Cash flow comes in right in line, if not a little bit better at 1.99 relative to 1.97. So this is a diversified analog semi-company. I think the guidance, which is clearly very conservative here, that presents a nice setup as you move into 2023 if you get a recovery. But overall for the industry, this doesn't send a good message, clearly. Yeah, get a recovery. I mean, we haven't even had what some say is the bulk of the downturn yet.

So let's not put the cart before the horse. Pippa Stevens is ready with another JOTI stock that CMG Chipotle's out. Yeah. Hey, Scott, the company beating bottom line estimates. Earnings per share coming in at nine dollars and fifty one cents on an adjusted basis. That does exclude a number of items, including a three and a half million dollar charge related to an employee separation. Analysts were looking for $9.21. Revenue essentially in line at $2.22 billion. Same-store sales increasing 7.6 percent, which was slightly ahead of estimates. Now, in terms of guidance, the company sees fourth-quarter

same-store sales growth in the mid to high single digits. CEO Brian Nichols saying that consumer discretionary spending is tightening, so we'll be looking for more color on if and how that's impacting Chipotle's numbers. During the call last quarter, the company said it hadn't seen a slowdown from its higher income consumers. Scott? All right, that's Pippa Stevens with the latest on CMG. Consumer spending tightening for a company that's had the ability to raise its prices repeatedly. And now you wonder how much pricing power they actually have left.

Raised prices 4 percent in August. You've got some lower costs as it relates to food. But I think you're right here. A lot of feel good is in this stock. The Scots, Scott, this stock trades at such a premium valuation relative to its peers. So it needed to have a blockbuster quarter. Maybe the conference call will provide some form of a catalyst here for the stock. I'm going to stay in the stock. There's nothing here that concerns me. But let's understand the expectation here.

And let's hear from Brian Nickel exactly what the state of the consumer is from his perspective all right so let's go back and check on alphabet and microsoft and we can show both of them guys if we could do that i got alphabet down about five bucks uh or so uh there it is right there we have 568 stocks down about five percent you see what microsoft is doing down about one and a third percent malcolm i i go to you i mean mean, NASDAQ down 30 percent thereabouts on the year. What are these reports going to mean when we have a huge week ahead with Meta tomorrow, Amazon and Apple on Thursday? Yeah, I wish I had a stronger thesis on that for you, Scott. But honestly, prior to you guys reporting yesterday about Amazon pausing hiring at AWS I was like Joe T I was certain that

revenue growth from Microsoft's cloud business was going to be in the double digits and make up for any shortcomings in PC sales or enterprise software business units or wherever else they make money that got cut short now I'm not so sure that's the case going forward. Pausing hiring for the most aggressive hirer out there in a place that you know, every time I'm on here, you ask me, where do I like near term? My answers are software as a service and cloud computing, especially the public cloud. And if Amazon is telling us there's weakness there, them being the dominant player in the space. I'm starting to get

a little bit concerned about how strong demand is going to be for next quarter and the quarter after that. Brenda, how are we thinking about these? There's no denying the fact that growth at these big tech companies is slowing, whether it's cloud businesses that they have, many of them, if not most. You've got the consumer side, smartphones, what I'm thinking about, Apple. And as I mentioned, the Nasdaq down 30 percent, with some saying this is the most important reporting period in years for these big tech stocks, given the kind of environment that we are not only in now, but the one in which we may get into in a matter of months. Yeah, I this is going to be taking getting to keep from

getting used to because I think for investors. That have been in a lot of these large cap mega tech kept tech names. And then to a couple of business cycles owning them they've been relatively immune and certainly were enormous beneficiaries as

we go. Of the pandemic environment the fact during the financial crisis they were all it's such a earlier stage of their growth cycle. That many of them really sailed through rather unscathed I would say. That this time around I think it's different because

many of these businesses are just more mature. And that means they have more market share they're not immune from an economic slowdown and not as much as they were certainly during other cycles. So I don't necessarily think it's a bad

thing I think these are still very high quality companies and likely will be viewed as a good place to. Park money as it could give their safety in the strong balance sheets and everything else that goes along with that.

But I think this is going to be a different environment than these stocks have been through before particularly if the economy continues to slow. Yeah I mean maybe Joe you get some FX relief in the in the weeks and months ahead. You have some suggesting that the dollar may top out. That could help here.

But you also have a lot of these companies spending an awful lot of money into a slowdown and where investors are getting increasingly impatient with the amount of money being spent on various units of their businesses. Well, I think the larger question is, is it time to begin to diversify away from a lot of these mega cap companies? And I think ultimately we're going to look back upon this and realize that the answer to that is probably yes, that we probably stayed in these companies a little bit too long on the belief that they were going to deliver the type of growth that you are able to find in the economy or other places in the market. But I think we also have to put into context here, and let's speak specifically towards Alphabet and Microsoft, where we are month to date.

Month to date, Alphabet coming in was up 9%. Microsoft was up 7%. Well, they've all had good months coming in other than Meta for its own reasons. But I think it's important where we sit right now because you ask yourself the question, Scott, is there anything in these earnings tonight that reverses some of the positive sentiment that's developed over the last several days? I don't know if I see enough for that answer to be an absolute yes. Maybe the market bends a little bit tomorrow. I'm not sure it breaks on it. And it's almost as if now you turn the page forward and you look towards Apple, you look towards Amazon, you look towards all the other mega caps and see if you get some confirmation or if, unfortunately, you get that failure in sentiment.

Well, see, that's the thing, Malcolm. You know that, you know, speaking of Amazon, for example, Web Services, critical part of their business. That's where the money is, so to speak. That's where the growth is. And you have to figure that that's slowing. Apple, you know, considerable questions about production numbers, iPhone sales in the current environment, just what the consumer is doing. There was a corning warning today, which sort of sent shutters through the smartphone business. How do I assess all of that as I think about what's still to come so frankly I think you just talked talked about the two most important companies in this particular earning season that is Apple and Amazon I think Amazon is going to tell us a lot about whether the mega cap tech trade is over like Jyoti is talking about and I think Apple is going to tell us just how durable or just how

strong the consumer's appetite still is. Because Amazon, I mean, Apple has done the impossible in the sense that they came and brought the most expensive player out there in the handset space and made it the most widely adopted handset out there with the iPhone iPhone and they just came out yesterday and said hey guys just so you know. The add on services that you've been enjoying this whole time we're going to raise the cost of those by dollar just because we

can it hasn't made it any more expensive to offer these services to you. Apple TV and music streaming but we're going to raise the cost just because we can. The app though the way that- consumers reacted that is going to tell us a ton about whether

the mega cap tech trade has gotten beyond us and we hung on way too long. And I think that says everything we need to know about the market itself. So frankly, I will be very surprised if this rally continues through the remainder of this week. Tomorrow is probably going to be the biggest day for earnings so far just because we're going to get a chance to see how the market trades the app amazon i'm sorry microsoft and alphabet news uh but definitely by the end of the week i expect uh the market's not going to be so happy about uh what we've gotten so far through q3 earnings maybe they're voicing their displeasure to your point right now you take a look at amazon, Apple and Meta, all are down, perhaps in sympathy of what we're witnessing here with Microsoft and Alphabet. The question, Brenda, which I like the way that Joe and Malcolm have framed this as to whether we all stayed at the party too long in these mega cap tech names.

Yeah, I think I mean, this might be the moment when we all start really thinking about what's really gonna work over the next decade and I think. If we think about what's gonna leave the market it's probably not gonna be the same stocks that led. Over the prior decade. And many of these companies have been highly successful the law of large numbers as they have tremendous market share. It's

just they're likely not going to be at the stocks that ultimately end up leading the market of the next decade. And so I think maybe some of that's gonna flesh out now but I think certainly over the next year, we'll probably have more of that fleshing out. Let's comment to you two. Don't sleep on Texans' importance to the market right now, just given where the upset and chips were. Throw up Texas Instruments, guys,

if we could do, please, because the stock looks like it's down nine, ten bucks or thereabout. Again, expectations of the slowdown in consumer division, not a big shock, but expectation of a slowdown in the industrial division, I don't know so much. I mean, the auto industry, yes, you have constraints because of supply, but nonetheless is doing pretty well, as you got from General Motors and Mary Barra today. This has long been looked as an important stock, as I said before, because of all the areas in which they sell into. Well, a couple of things. Number one, the concerns about double ordering. And I think the investment committee on Halftime

have done a great job highlighting that. They're real. I mean, that's a clear concern. Analog pricing probably was expected to be a little bit stronger than we're witnessing here. And we all know that demand is weakening. So it is going to have a secondary effect on names like OnSemi, Marvell, but even through the entirety of the semi industry, NVIDIA, AMD. And I think it ultimately goes back to the environment we're in right now, Scott, what companies can sustain their margin? And we've heard from some companies after the close this evening. And one thing stands out to me. Chipotle's higher. Why? Their operating margin went from 12 percent to 15 percent. They know how to navigate the business

in this environment. You've got to protect your margins at all costs. And they're doing perhaps better than than many in their space as well. All right. We're going to leave it there. Joe, thank you. Brenda, my thanks to you. Malcolm as well. All right, we're going to leave it there. Joe, thank you. Brenda, my thanks to you. Malcolm as well. Let's get to our Twitter question of the day. We want to know how you're feeling about Meta, Apple, and Amazon now after hearing from Microsoft and Alphabet

just a few moments ago. Are you more or less bullish going into those most critical reports? You can head to at CNBC Overtime on Twitter, cast your vote. We'll share the results a little bit later on in the show and which, as always, we're just getting started here in overtime. Up next, we've got the street's number one ranked equity strategist. He's Marco Kalanovic. He joins us exclusively. We'll get his take on tonight's earnings, his forecast for stocks,

what it all means for his latest outlook for your money. We're live from the New York Stock Exchange. Overtime's back after this. Welcome back to Overtime. It is the question on the mind of every investor. How far can this rally go? Let's ask the top-ranked equity-linked strategist on Wall Street, J.P. Morgan's Marko Kalanovic. Just named to that top spot by institutional investor.

He is now with us on the phone. Congratulations. Thank you. Thank you. It's good to have you on. So what's your reaction to what you just heard from pretty important stocks, Microsoft and Alphabet? And put that into context of how you're thinking about the overall market in the here and now? So just sort of on earnings, you know, we are expecting this year to end up at $225 on S&P earnings, so slightly above consensus. So there's going to be some hits and misses, you know, this this earnings season. But we overall think it's going to be sort of in line with what we expected. You know, what we are a little bit concerned, and we have recently downgraded 2023 earnings for the S&P. So our previous forecast was $240, and we now took that down by about $15 to $225. So we are basically looking at the flat earnings next year. You know. And reasons are many.

There is some slowdown, no doubt about that. The dollar is pretty strong, and we have a slowdown in Europe at the back of the developments in Europe. So overall, we have basically toned down a notch. Our optimism, although we are still net-to-net positive on the market. Yes, see, I want to get a little deeper into that to help me understand how, given you've just reduced your earnings expectations, that you could possibly be as constructive as you seemingly are on the market. Is this a better-than-feared-now versus a reality check coming later? So, Scott, before sort of Fed pretty significant hawkish turn in Jackson Hole and then in September, we were a lot more positive.

So if you recall, our price target for S&P before that was $4,700 for even this year. You know, so we have concluded that given the Fed hawkishness, given the level of dollars, given a lot of the sort of problems there are in the world, that most likely we won't be able to make it this year to that target. But sometimes next year in anticipation of a shift in the Fed, you know, which has to happen, so. And then ideally at some point we do have some sort of progress in Europe.

So we are basically saying expectations are pretty negative right now. Positioning is pretty low. So bar to surprise is pretty low. That said, we have turned more cautious than, let's say, compared to where we were earlier this summer. Yeah, I mean, you admit your 4,700 target isn't going to happen. You said that pretty clear. Yeah. But what's also clear is that you continue to play for a pivot of sorts.

You think the Fed is going to pivot at some point in 2023? So that is correct. And I wouldn't say we are playing for a pivot. We think Fed will be forced to pivot. So we basically are not going to forecast that it happens sort of next month or two months or three months. We think it will happen. It can happen for a number of reasons. It can happen for sort of a sort of stress in financial system, which would not be good for risky asset classes.

So sort of as a respond to sort of stress in financial markets, a little bit what we are seeing in FX markets and in the bond markets internationally. If that is to happen in the U.S., their hand would be a little bit forced to pay. The other one is decline in inflation. You know, we are seeing from high-frequency data points signs that inflation will cool down. That said, you know, the measures that Fed is looking are a little bit stickier. Some of them are backwards looking. So also, it's very hard to say whether that happens in one, two, or three months. Certainly, when the inflation turns lower, hopefully, Fed will sort of acknowledge that. And finally, there is a recession risk. Recession risk is rising, you know.

And at some point, if the sort of employment situation starts deteriorating, Fed will also pay vote. So there are a number of reasons why the Fed can pay vote and we think will pay vote. The question is when. And we got a little bit burned with that last month. So I would say we will sort of take it one data print or one Fed meeting at a time, you know. So on timing of that pay vote, we are not playing it. We think it will happen, but we don't have a strong conviction of timing of it. Are you still looking for a soft landing or do you think a recession, albeit maybe a shallower one, is inevitable? So I wouldn't say inevitable. I would say that probability has increased. So sort of during this summer, our models were showing about 35 percent probability

of recession. And markets was pricing in close to 90. So, we were basically saying, look, markets are too pessimistic, hence that's a positive for the markets. That said, in the last month or two months, this fundamental probability of recession started creeping up, you know, and now it's somewhere in the 58th percentile, about 50%. So, probability has increased, you know, and it's very hard to have a strong conviction either way. But certainly over the last month, developments have been on a margin negative. So I want to spin you back to where we began our conversation, and that was reacting to what Microsoft and Alphabet delivered. And rather than ask you to speak directly to those earnings reports, because that's not what you do. Simply speaking to whether you like

technology, whether you like mega cap technology, the importance of that right now to the kind of legs that this rally may or may not have is what? So we are not sort of, that's not our topic. You know, that's something that we have been a bit cautious. In a rising rate environment or high rate environment, in a sort of environment where inflation is a bit of a problem, you know, that's not going to be your sector that will lead, you know. And that's also sector multiple has been coming down, no doubt about that, but it's still perhaps above historical average. So it's not our topic. You know, one of your speakers I heard mention last decade was a decade of sort of secular growth stocks and the tech. It was an environment of low inflation, declining yields. You know, this decade, 2020, might be a little bit of an opposite, might be a decade of inflation, pressures coming from inflation rates above zero.

So that may not be also for some foreseeable future your topic. You know, we have been pointing to sort of old industries and particularly industries that can benefit from inflation, such as energy, materials, and then a few other sectors maybe with a lesser conviction. But we were saying basically sort of old industries over tech. And we still believe that to be the case. Wow. So it sounds like you're making a call for value over growth. And does that suggest that you think rates have not peaked in the near term? So, you know, I wouldn't necessarily link it just to rates. You know, rates have been a factor, certainly in the value versus growth call that we had over the past two years.

You know, there could be other factors as well. That could be level of rates. You know, that can also be level of inflation. That can also be sort of some reversion towards long-term historical average valuations or long-term historical weights of certain sector and index. So specifically back to your question on rates, I do think that rates are probably coming closer to a ceiling. You know, rates have been moving higher pretty much in a straight line for a long period of time now. We don't believe sort of trees grow to the sky. So at some point,

rates will need to inflect and move perhaps lower. I think we are close to that point. That point is also going to be sort of driven by what the Fed does. It's also going to be driven by this recession probability, how close we are to recession, and also a little bit related to the strength of the dollar and developments internationally. But I don't think we are too far from it. Now, again, I don't think dollar collapse, sort of rates, inflation points or dollar inflection point is imminent sort of in a matter of days. But we think it is probably within months we are probably close to that point. You know, so same thing for the rates and dollar.

I think we are probably somewhere closer to the top than not much to go from here. OK, what about the rally itself? And then I got to go. Are we close to the top in the rally and not much to go from here? Or how do you the rally itself? And then I got to go. Are we close to the top in the rally and not much to go from here? Or how do you view what's currently been taking place in the market? So we had a bit of a relief rally. There was some sort of signs and indications and there was a Wall Street Journal article that said might sort of slow down the pace. I think that's a sort of one of the drivers of a rally. I don't think we are fully out of the

woods when it comes to Fed, you know, so we are about neutral at this point. All right. I don't think we are fully out of the woods when it comes to Fed, you know, so we are about neutral at this point. All right. I'll leave it there. Congratulations again to you on this honor. Number one, again, institutional investor. We will talk to you again. Again, top-ranked equity-linked strategist. That's Marco Kalanovic, J.P. Morgan, joining us. Visa earnings are out. CEO making some comments as well regarding the consumer. Kate Rooney has, it looks like a double beat, right, top and bottom? That's right. A pretty strong quarter for the fiscal fourth quarter here for Visa. Beat on the top and bottom line, though, Scott, you mentioned those comments from Visa CEO Al Kelly sounding pretty upbeat on the consumer. He says here, quote, we saw a

continuation of many of the spending trends present throughout 2022. He says strengthening consumer payments, resilience in e-commerce, and an ongoing recovery in cross-border travel. Also talks about the strong results here and says, despite the broader macro uncertainty and geopolitical turmoil, Visa did have a strong quarter. Says, as we look ahead, we do see some short-term uncertainty, but remains confident in the long-term growth trajectory.

Comes after Amex and the bank sounded also pretty rosy about the consumer in terms of spending. No stark warnings here from Visa or their credit card companies yet. Also want to point you, no full-year guidance quite yet here. We may get that in the earnings call, upping its dividend and a $12 billion share buyback from Visa as well. Back to you, Scott. All right, Kate Rooney, thank you very much for that. It's time for a CNBC News Update now with Shepard Smith. Hi, Shep. Hey, Scott. From the news on CNBC, here's what's happening. Ukraine's state energy company accusing Russia

of doing secret construction work at the Zaporizhia nuclear plant and that its goal is to use nuclear materials and radioactive waste stored there for an attack. Russia's controlled the plant since back in March. NBC News hasn't independently verified those claims. A Russian court today denying Brittany Griner's appeal of her nine-year prison sentence. The basketball star appeared at the video conference and again apologized for bringing cannabis oil into the country. She said she did so by mistake. The White House called the denial and denied appeal another sham judicial proceeding.

And Hope Hicks is being interviewed by the January 6th committee. That's according to NBC News. Hope Hicks served as a top advisor to former President Trump. She left the White House six days after the Capitol insurrection. Tonight, Adidas drops Kanye, a TikTok challenge turns deadly, and Luke Skywalker donates hundreds of drones to Ukraine. On the news, right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. All right, Shep, appreciate that. Thank you.

That's Shepard Smith. Up next, much more on tonight's marquee earnings from Alphabet and Microsoft. The stocks are on the move. Another shareholder standing by as well as we await those conference calls. Stay with us. We're back right after this. We're back in overtime. Take a look again at shares of Microsoft and Alphabet.

Both are lower. Alphabet, the bigger loser, down 6%. Both of these companies just reporting their results. Conference calls kicking off momentarily. Top of the hour. Larry Cordisco of Osterweiss Capital Management is a shareholder of both names. He's back with us. It's good to see you once again. Take Alphabet first. What's your reaction here to the double miss in the stock slide of some 6%? Well, it certainly shows that there is a slowing in the advertising industry. I mean, Google is the industry to some extent. So, you know, don't like to see it. But I think it's

the search number that's got more attention from us, at least than YouTube. So, you know, you had to distinguish between the two. Search is supposed to be a little bit more bulletproof, YouTube a little bit more cyclical. So I think the investors could have lived with a soft YouTube number, but it's the search number that being light, it's probably got people a little bit more exercised. What do you do with the fact, though, that revenue growth is slowing to a greater degree than many were expecting? Well, like I said, this is a sign maybe that the economy is slowing more than people were expecting. You know, certainly I think we want to hear what they say on the conference call. The stock's at 16 times earnings here. I think investors have accepted that it has more of a cyclical element than maybe it used to when it was just a secular grower.

It can go through, you know, economic cycles go through economic cycles unscathed historically. That's not the case anymore. And in my mind, this actually puts a lot more emphasis on Google Cloud and the need for that segment to accelerate to profitability over the next couple of years, because there's a dollar of earnings power there. And I think that's going to be a big deal to unlocking value for the stock over the next couple of years. These companies need to get more lean. I was looking at a stat that I just saw now that Alphabet has added 25% growth in their employee base year on year from Q3 of a year ago. Does that number concern you? Well, management has absolutely been signaling a need to reduce headcount. And

now we're seeing a little bit why. In fact, their margins were, you know, revenue was a miss and margins were a miss. So there's clearly a headcount issue at Google. I think management's going to deal with it. But yeah, I think you're hitting one of the nails on the head right there, for sure. So hold your thought, because we're going to get more details here as I go back to Deirdre Bosa. She just literally got off the phone with Alphabet CFO Ruth Porat. Dee, what'd she tell you? And Scott, I asked that exact same question. Are there further cuts expected? How do they feel about headcount? She reiterated what we've already heard from Sundar Pichai, and that is that they are slowing hiring, but she did not say anything about actually cutting headcount. They actually added a good number of employees this past quarter. So

she said they'll continue to slow down the pace going forward. On the macro climate, she called it challenging, said it remains complicated. She said foreign exchange had a six percentage point impact. She also called out lapping strong results from the third quarter of last year. Now, in terms of capital allocation, I asked her if that changed at all, because that may give us an indication of how Google or Alphabet is thinking about the year ahead and the quarters ahead. And she said that the capital framework overall remains on track. So that means the buyback remains intact. They're going to continue to focus on long-term growth and strategic investments when it comes to M&A. She said that the macroeconomic environment gives added focus around prioritization. So,

you know, I tried once again to ask her if anything was on the cutting block, like other bets. This is the unit of Alphabet that has the Moonshot projects. She said that Sundar Pichai, CEO, would address this on the call. She added, we are sharpening our focus. That's true across Alphabet. So maybe a hint there. We'll certainly be listening very closely when that call kicks off in just about over 15 minutes. Yeah. Dee, thank you for that update.

That's Deirdre Bosa. Scott, I'm sorry. I want to correct one more thing. I want to correct something I said earlier. I said that YouTube revenue growth actually increased. Those were the expectations. It was negative year over year. It actually declined nearly 2 percent. So just to correct that, Scott. Gotcha. All right. A little housekeeping. Appreciate that. Thank you. That's Deirdre Bosa just off the call with Ruth Porat. The more important call, I think you could say, with the CEO, top of the hour.

And Larry, I know you'll be on there, too, because it's going to be critical given the kinds of questions that we both raised and the ones that I know you still have and the ones that Deirdre tried to get to the bottom of on that conversation that she had with Ruth Porat. But let me spin you in the time that I have left to Microsoft. Dan Ives of Wedbush says, slight miss from Azure, growth still strong, PC's weak, no big surprise there. It's all about Nadella, the CEO, of course, on the call as well, which was a double beat for Microsoft. It's down, but not all that much. Yeah, I think that's probably right. And actually, just real quick on Google, just to point out, because there is massive operating leverage from that search business, and that's why I mentioned it earlier. And you get that billion dollars back that people were expecting, and they probably don't have an earnings miss. So to Deirdre's point about the

operating leverage in that model, we're seeing a bit of a negative leverage there now. Maybe they don't have to cut. We'll see what they say. And with respect to Microsoft, there's noise. And we're going to hear on the conference call what they had to say. There was a lot of concern going into this order about the small and medium business segment for Azure. Azure was pretty much where we wanted it to be, but we are in an environment where people are very nervous. So I think the management commentary is going to be really important. And the outlook for Azure is going to be very important, not just for next quarter, but going forward for the next couple of quarters, because that's a big part of all these mega cap tech stories. Yeah. It's great to get your insight

as always, Larry. Appreciate it. Take care. That's Larry Cordisco, Osterweiss, joining us once again here in overtime. Coming up, we're tracking all the big stock movers, and there are many beyond the ones that we've just mentioned. Christina Partsenevella standing by with all of that. Christina. Well, Scott, I'm noticing two major themes amongst earnings today. Higher labor costs eating into margins and those awaited full-year guidance cuts. Shares of Barbie Maker Mattel and Shoemaker Skechers dropping right now. I'll explain all of this after the break. All right. Welcome back. We want to show you shares of Alphabet and Microsoft. Yet again, Alphabet was a double miss. Sales growth slowing there as well. That's why the stock is down more than 5 percent this hour. Microsoft shares, it did beat on the

top of the bottom lines. You do have a stock decline of some one and three quarters percent. Let's get to Christina Partseneva tracking some other big movers here in overtime. Christina. Let's start with the Shoemaker-Sketchers plunging right now down over 11 percent after posting a Q3 revenue beat, but earnings fell short by 15 cents a share. Q4 guidance also very light. Gross margins came in a little bit weaker than expected, but it's operating margins at 6.9%, which is much lower than the 8.8% expected. And that much bigger graph that we're talking about is driven by higher labor costs and warehouse expenses. So that was what was eating into operating margins. Sticking with retail,

Barbie Maker, Mattel, seeing its shares drop right now. Not as bad as Skechers, down over 4%, but still down after posting a slight earnings beat. But revenue, that's what fell light. And I'm starting to sense a trend right now. That was the trend I was talking about before the break. Full year guidance estimates also coming in lower, the company cutting it despite the company

heading into the important holiday shopping season. You have Mattel saying because of this market volatility, they won't be providing a 2023 outlook just yet. I want to point out, you don't want to miss the CEO of Mattel on Mad Money Tonight with Jim Cramer coming up at 6 p.m. Eastern, so very soon. And let's end on a positive note. Hardware and software maker Juniper Network's moving higher in overtime. The company reporting revenues that increased 19% year over year while expanding its operating margin.

The CEO saying he expects solid revenue growth in the current quarter, driven by a strong demand forecast, the current backlog, and an improved supply outlook. Shares are up 2.8%. Scott? All right, Christina, thank you. That's Christina Parts of Nevelos. Spotify earnings are out. Let's go to Julia Forsten. What looks like a pretty good quarter, but yet I see a stock down some nine

bucks. That's right. The biggest beat was in monthly active users, though surpassing expectations by quite a bit. The company added 23 million monthly active users in the quarter rather than the 17 million expected. But that stock is down about 6.5% on a bigger loss than expected, with revenue coming in pretty much in line. Now, this as average revenue per user did fall short of analyst projections. I just spoke with Spotify CEO Daniel Ek and CFO Paul Vogel. They said that while they saw some weakness in advertising in the third quarter, the fact that advertising is a minor part of their business, just about 13% does offer an advantage to Spotify. Now, in terms of the outlook for Spotify's

premium subscription business, Daniel Ek noted that in the last two years, they've done more than 46 price increases in markets around the world, many of which are in markets that have worse inflation and economic issues than the U.S. He said that those subscribers held up better than expected, indicating his confidence that this subscription service will be bullish and will be able to continue to grow despite inflation and recessionary fears. Scott? All right. Appreciate that. Julia, thank you.

Stock down about six bucks or so, not the nine that I suggested originally. Let's call call last call to weigh in on our Twitter question. We asked how you're feeling right now about Meta, Apple and Amazon after hearing from Microsoft and Alphabet. You can head to CNBC Overtime to vote. We'll bring you the results in just a moment. Plus Santoli back with his last word next. The last call to weigh in on our Twitter question. We asked how you're feeling about Meta, Apple and Amazon after hearing from Microsoft and Alphabet. Head to at CNBC Overtime and vote. The results in Santoli are next.

To the results now of our Twitter question, we asked how you're feeling about Meta and Apple and Amazon after tonight's earnings. Sixty six percent of you saying less bullish. Not a big surprise, I suppose, after you see, Michael, the stock moves in in overtime for Mike Santoli here. Last word. Yeah, I would say certainly they could have been better. The stocks have been registering some concern, to say the least. The things aren't that great. A couple of takeaways. One is these companies are not as special as they were considered before in terms of their immunity to overall macro forces. They're not the anointed magical growth machines that they might have been priced as. But that being said, I mean,

they're all up 10, 15 percent off the lows, the relatively for them undemanding valuations. And the moves are orderly and relatively muted. So wait for the call. See what happens. And I'll be watching tomorrow, to be honest, the equal weighted S&P to see the average stock, seeing if this has coattails after you did have a 10 percent move off the S&P low in 12 days. Yeah. Did you listen to Kalanovic, Mark Kalanovic? I'm wondering what you make of what he said. He's been more positive, I think it's fair to say, than most. Yes.

Though he dialed it back just a little bit. Right. He dialed it back just when it seemed like it was hard to find, you know, little openings in the clouds back a couple of months ago. I think it makes a lot of sense. It's very difficult to say if the Fed is going to say, fine, we did what we need to do. And that seems to be the all clear everyone's waiting for. I do get it, though. And he has been correct in saying that steer away from the mega cap, you know, things that led in the last upswing. And he said it again. Yeah. And so that's that's usually the rule is whatever led in the prior cycle is not really the thing that's going to carry you out of the downturn. Although there have been so many head fakes on value versus growth over the last handful of years. That's why you got to, you know, it's a show me story to me that it's pure value that that would work. It's just maybe kind of quality and, you know, defensible stuff and maybe

other elements as opposed to just pure cheap stuff. You make a good point, too. You know, irrespective of what the numbers were, listen to the calls, which began in a matter of seconds. And we'll see you tomorrow and we'll figure out where this all goes from here. Does it for us. I'll see you then, too. Fast monies now.