Closing Bell - Closing Bell Overtime: Big Tech Earnings on Deck 10/21/22

Episode Date: October 21, 2022

Microsoft, Alphabet, Amazon, Apple, Meta and key consumer names including Coca-Cola report earnings next week. Trivariate’s Adam Parker, Hightower’s Stephanie Link and G Squared’s Victoria Greene talk Friday’s rally and how to be positioned ahead of the results. Plus, Yardeni Research President Ed Yardeni calls for 15% upside by year-end. And, Veritas Financial’s Greg Branch makes the case for caution.

Hi, Mike. Thank you very much. And welcome, everybody, to Overtime. I'm Scott Wapner. On this Friday, you just heard the bell. We are just getting started for Post 9 here at the New York Stock Exchange. In just a little bit, I'll speak to Ed Yardeni about next week's make-or-break earnings from big tech and what's really at stake for your money, especially as some of those names have sputtered recently. So will the biggest stocks in the market deliver when it's needed the most? We will find out and we'll ask Ed that question. We begin, though, with our talk of the tape. Today's big Fed-fueled rally, one that enabled the Dow to post its first, believe it or not,

three-week winning streak of the entire year. So is it the start of something bigger? Let's ask Trivariate's Adam Parker. He's here with me on set at Post 9. It's good to see you again. Thanks for having me. Rare update when you're here, just throwing that out there. So it's nice to see you today. I'm sure everybody's happy you're on. Are you a believer in it or no? I mean, not in like a three-month

view, I'm not. I mean, we could always get a few more days of a rally here or there, but there's no question that conditions are slowly deteriorating for the economy. So when prices go up a lot and conditions are deteriorating it's hard to say I like it more now than I did three weeks ago. I think that'd be tough. Don't earnings sort of say that it's not deteriorating as fast as some people thought including you? Not really. So far what have we really, you know the bulk of S&P earnings as you just alluded to, are the next two weeks. We had a bank heavy set of earnings, insurance, some metals. It's not really the bulk of the economy. I think what you led with and teased with is industrials and tech

coming and more consumer after that. I think they're going to be better barometers than just the banks, which are a little bit more low-known growth interest rate plays. So I think you'll see slightly deteriorating news on the earnings front over the next two weeks. Do you think next week's going to be disappointing for big tech? I don't think it's going to be great. I don't think it's going to be great. Well, how good does it have to be? There are a lot.

Are we learning that, like, it doesn't have to be amazing, it just doesn't have to be, you know, a train wreck? If you sit here today and you say, do I think the market's going up 10% over the next three months or down 10%? I don't know. I'm like, I can see it either way. What do you think the risk is? I think we're, like, plus 10, minus 10 over the next three months. So, like, do I want to. I'm like, oh, yeah. What do you think the risk is? I think we're like plus 10 minus 10 over the next three months. So

like, do I want to buy something where I'm plus 10 minus 10, 50 50 chance? Or do I want to be a little bit more conservative? So I don't think it's time to get super excited with a rally here that's not really based on anything other than some dream the Fed's going to get dovish when they're probably not going to. What if they don't have to get dovish, but at least have what Mike Santoli coined earlier, which I thought was well said, was a two-way conversation. It's been like a one-way conversation, almost on autopilot. And now you've got some people coming out daily. We don't just keep going at 75 basis point increments. She said today you had the story that was in the journal earlier that maybe they go 75 in November and then they figure out how to message that they go 50 and then we'll see. What I've been focused on and investors have been asking us all week, the last two weeks we just published today, is is there anything that looks good now with prospects to 2023 that's really below where it

was in 2019? Like if you kind of say it's October 19, you didn't know there was COVID, you're looking out in the future. Now you compare. So we put out a list of some buy ideas, sort of 15 or so ideas that we thought might make sense, right? Whether it's PayPal, right? I have those, you know, whether it's, you know, Visa, right? Like, yeah, you's Visa. You get the research right. I forgot. Well, I have it in front of me. PayPal's gotten destroyed. Is that why you like it? Yeah, we just published it today saying estimates for 2023, and maybe they're all too high, are for 75% higher earnings and 100% higher

free cash flow in 2023 than in 2019. And the stock's below where it was three years ago. So I'm just trying to find ideas that, yeah, I'm not a believer like the train's left the station. We've hit the trough for forever and it's gone. And that was kind of where you started the conversation. But are there individual names that are starting to get maybe more and more attractive that even if the numbers are 10% too high next year, are probably pretty good businesses? Yeah, that's kind of where I am. Do you think rates have topped?

I mean, because don't tell me to buy a PayPal or any other tech names if you don't think rates have topped. No, I think it's a second derivative question, not a first derivative one, right? Like, in other words, are they going to raise rates at the rate they were? Is the perception about hawkishness going to increase? Probably not. I think CPI will remain stubbornly high, as I've said once a week on this channel for the last six months. I still think that's the case just because of the

owner's equivalent rent. But I like that phrase. I agree with you, Santoli, if you said that two-way conversation. I think that's a fair way of phrasing it. What I worry about holistically for the market, though, is that just when I want that price-to-earnings ratio to go and expand like crazy because the Fed gets a little more dovish, that's right when the earnings are going to be declining a little bit more than people think. And so you've got to get the price. You've got to multiply the price-to-earnings times the earnings, right? And if the earnings are declining while the P is expanding, it's not obvious we have an up 10 or 20 market. No, but maybe people are too negative in the near term for obvious reasons that, you know, we figured, okay, things look like they're getting

bleak. You've got the Fed doing QT and doing all these hikes. Inventories building. Right, but aren't we learning from earnings thus far, even in the early part of the season, that it's not as bad as feared? And maybe that runway, as I've said on this show over the last couple of days, has pushed further than some of it like you thought? Maybe. For me, we've been saying that we think there's a chance 2024 earnings are below

2023, and this whole thing's going to be slow from a high nominal GDP. So I don't think earnings are going to collapse. That's not my view. I just think you didn't really get a good read yet until you get more tech and industrial, see what happened to inventory. If we think inventory is that key performance indicator for earnings, we didn't really get any inventory data points this week. Because banks and insurance and airlines don't really supply that data.

So I think we've got to, yes, maybe it'll be a little bit better than people thought. But, no, we don't really know yet. It's too early to declare victory on that front is kind of my view. And I think earnings will slowly decline for the next several quarters relative to expectations. Do you think rates are near a top or not? I think the Fed is going to stay hawkish. I know, but isn't that in the market already? Is it in the market?

Look, we just had one of the worst six-month periods in the history of the equity markets in the last 100 years. So clearly some bad news is in stocks, right? I think we've only had it five times ever where we had a down 15 quarter and another down five quarter after it. So for sure, some of it's in the price. And you started to see some companies this week that kind of guided down, and the stocks went up, like LAM, which is on our list, right? So, you know, semi-cap equipment. So I think, yeah, a lot of it's in the price, except for, and that's why I keep coming back to this, the places where inventory surprises. One of the things that we don't know as investors is what is the whisper when it comes to inventory?

We know what the whisper is. What does the buy side think on revenues? Everyone knows that currency is going to hurt the big tech companies next week. That's not going to surprise people. But people don't know about inventory. So that could be a directional negative from where people's heads are. I don't understand how you can be negative, fundamentally negative on the market and pitch stocks like Qualcomm, Microchip, NXP, and LAM Research. Semis have gotten destroyed.

Right. But you've got to tell me there's more to the story than just they got destroyed. That's why I like them. For sure. I think there's a combination of a number of factors you know about, you know, profit expectations, margin expectations, inventory. The semis that are in that list don't really have inventory when it builds that impede their margins, like it does with NVIDIA and Micron and AMD. So they're

fundamentally different businesses. Not all chip stocks are the same. What's in there are businesses that I think, after all said and done, are going to have much more revenue and free cash flow in 2023 than they had in 2019, and the stocks aren't commensurately accounting for that. I'm not bearish on the market. I said I think it's plus 10, minus 10. I don't know. I don't think it's down 20. I think it's like mixed. You're certainly not Mr. Positive on the market. I don't think. I'm not. I'm not. And I don't think

your viewers should say trains left the station and it's off to the races. I think just, you know, just because everyone knows there's bad news doesn't make it awesome. Inventory is a real problem. Quantitative tending is a real problem. it awesome. Inventory is a real problem. Quantitative tending is a real problem. The Fed hoggishness is a real problem. Earnings expectations too high is a real problem. Margin impediment coming up, that is a problem. That doesn't mean underneath that, I'm not going to have 30% of the S&P 500 that beats the market

by 20% or more in the next 12 months. And that's where all of my focus is with my clients. I mean, Michael Hartnett of Bank of America has a good note out today, essentially. I know everybody's bearish. So what? I'm bearish because it's the right place to be. Right. I mean, exactly. So I think there's things we can own. The point of today's note was starting to get interesting to see some names that maybe are sold off too much. I mean, I could see somebody saying the same thing about Amazon. It didn't make our list because it's too expensive on price to forward earnings and currently doesn't have positive free cash flow. But I think $600 billion in revenue estimates for 2023, they did $250 or $300 billion in 2019. Like, they're fundamentals. They're going to have way

more profits. So at some point, that's going to look relatively attractive, even if the economy slows some of the markets down. All right, let's bring in CNBC contributor now, Stephanie Link of Hightower and Victoria Green of G Squared Private Wealth. It's great to add both of you to the conversation. Steph, you're sitting right here. You've heard all of it. What do you agree or disagree with AP? I do agree. We've been talking, the market's going to be choppy all year long.

The market's been choppy. Can we have rallies like today? Of course. Can we have sell-offs like last week? Absolutely. We can only have a rally like today? I mean, there are some who say that we can have a nice rally between now and into the end of the year. Do you agree or disagree with that? It's possible because seasonally, it's a strong period of the year for the markets. And also you have the midterms. And historically, it's been a good time after the midterms that the markets rally. But here's the thing.

The market is, the economy is strong. The job market is extremely strong, extremely tight. That's not changing overnight. And inflation remains quite hot. And so the Fed has to stay hawkish. So today, when people think that they pivoted or they're getting close, they're not even close. We have a very important ECI number, employment cost index number next week. That's one of the main inflation gauges that the Fed uses. And I think that's

going to be market moving. Should it come in below expectations, then you can have further fuel to this rally. But the bottom line is the Fed is going to stay hawkish for a long time. Rates are going to stay high. Maybe they have peaked, but they're going to stay high for longer because inflation is going to stay high for longer. And if that's the case, growth is going to slow. Right. And so what happens when growth slows? To Adam's point, earnings get hit. So you could have multiple expansion for sure. But I think you have earnings risk for 2023. Victoria, what are your thoughts on the market here finishing a good week? As I said, first three week winning streak of the entire year.

That's the kind of year it's been. And now we come into the storm next week of who knows what's going to happen. Exactly. And I think it's a question of where the earnings next week come in. But look, we look at a rally like this and they happen. Every bear market has their rallies. So similar to the summer where we saw them move off the June lows, we're not getting super excited yet because I think today's rally was more driven by the bond market and the BOJ than it had anything to do with earnings. You know, if you looked at what came out, you know, Amex with lost provisions higher,

Ally Financial got walloped this week a little bit, lost provisions higher, concerns on the used car market. You had Whirlpool that struggled. So it's not rising tides lifting all boats at all. And one of the best examples of that, AT&T and Verizon. AT&T did well with survivor growth. Verizon struggled. So you're going to have companies outperform even in their individual sectors. But going into next week, you've got to be concerned by what Snap said for your Googles and your Facebooks or your Metaverse.

The Metaverse doesn't seem very popular. You know, you had Apple and some news leaking about chips, and then obviously inventories, Amazon and inflation. So I think next week's a bit make or break for to see if this kind of midterm balance here continues. But we see this still as a downtrend and a bear market. And as you pointed out, yes, expectations are low. And even if it's a miss or a slight beat or something wrong with the numbers, not a complete, I'm not sure if it's a dumpster fire or what term we want to use train wreck but as long as it's not one of those they seem to do well like look at sam adams was not necessarily great news but it wasn't as bad as anticipated so i think you need to watch your

data but it's still about the fed the fed is still at 75 and that's a near-lucked uncertainty and then december now we did back off right we're down from 67 to about 55 56 now is the the expectation so maybe it's only 50 basis points in december but we're still looking at terminal rate four nine five percent what if i told you steph that the fed was gonna be done after de. Would that change your view? Who cares what they say? But if they're done, watch what they do, not what they say. If they do 75 in November and they do 50, as might be the case if you believe what you read about where they may be going, and then they're done for a while. Does that change your view on stocks? Not really. Not really. Again, we could get a bounce off that news. We could have a longer period rally. But the Fed is going to remain high and hawkish, right? The rates are

going to remain high. And so at the end of the day, what does that do to the overall economy? That's six months, nine months down the road because there's always a lag impact. So, yeah, again, we could have a relief rally, but it's not going to really change my mind at this point, especially for long duration assets, right, and technology we could have a relief rally, but it's not going to really change my mind at this point, especially for long duration assets. Right. And technology and growth. So there's pockets of places that you can actually be investing in if they are if they take a pause. There's a lot of names I'm already invested in. Right. But it's going to I think the dynamic is going to be different in terms of what works and what doesn't. So you mentioned long duration assets and growth and tech and you're in meta. OK. Yeah. And maybe I don't know, maybe Snap is its own to borrow from Victoria, its own dumpster fire. And it doesn't portend anything for what Facebook and Alphabet are going to deliver. Are you

how are you feeling going into next week? I know you're going to mention. Well, how could we not? I know. And look, I own a lot of it. I really do. And I have and have been wrong. But I do think that Facebook is a much different story than Snap. They have size. They have scale. They have eyeballs, right? Billions of users, right? They've got a huge free cash flow.

They're not an experienced kind of an advertised interest company, right? So that's what Snap is. I think at the end of the day, the valuation makes a lot of sense, too, because they're profitable. So it's like 11 times earnings. Margins are actually OK. And they have places that they can cut costs to flex the model. But as next week goes, that's where the rally goes. You've got to get through.

You've got to get over those big waves before you can get to smoother seas. I mean, it's funny. To me, if I think about a 10-year view of equities, I think, oh, we get 5% or 6% per year. We get a buyback. We're getting half a year's returns in 20 minutes, lost or gained. So is this volatility we're seeing in the equity market normal?

Of course it's not normal. How could anybody say that? So yeah, I think we're going to get calmer eventually when people get a better grip on when earnings are going to trough and when they're going to improve and what the Fed's going to do. In the interim, I guess we're going to think about, what did she say, Sam Adam? Like, truly? She's drinking some trulies and dumpster fire? I mean, people are trying to figure out a lot of volatility. I know that earnings are going to come down. I don't think it's a collapse because we have the highest nominal GDP in all of our lifetimes. It's going to be slow and good businesses that are well run are going to be able to weather the storm better than others. And that's

the whole game investors are playing. Relative estimate of achievability, find the better names that can handle it. And that's how you're going to make margins, margins, stable profit margins. And that's been the surprise, even in the face of higher input. Well, we're going to talk about one of yours later, Nike, right, with some margin issues like some others who are stuck with a lot of inventory and are cutting prices. But we'll get there later. So this idea, Victoria, of the debate, if you will, of bonds versus stocks, right, it's dictated a lot of the conversation over the last six to eight weeks, whether bonds were now a better value than stocks. The whole there is no alternative ideas dead and buried. I asked a Wharton professor, Jeremy Siegel, about that very idea yesterday when he was here at the Stock Exchange sitting where Adam is today. Listen to what he said. We can talk on the other side.

I'll bet stocks over any of this fixed income. I think they're both going to go up. I mean, I think the yields will go down, but you're going to get a bigger bang for your buck in the stock market. That flies in the face of what some others are suggesting. What about you? I mean, I agree. I think the upside is always better in the equity market, even though the fixed income market has been hit extremely hard.

Unless you're going to go somewhere crazy in the fixed income and buy some triple Cs, 30-year crazy stuff, I think you would be better off investing in quality equities. I do think you're going to get a bounce. I think yields are oversold. Really interesting movements this year, this week across the yield curve. The two-year actually was flat or down a little bit, but the 30-year finally came up, meaning what does that do to expectations or was that more a liquidity problem? So I don't think we're out of the woods yet on the bond market. And I still would prefer either to stay ultra short, right, the zero to six months. You're starting to make some real money there. So there is an alternative. It's higher than the S&P 500 dividend yield. But I think your upside, obviously,

there is extremely, extremely limited. And I think it's too early to push out on the curve, take your duration risk or take your credit risk. So I'll still buy my quality equities, which I think will have more upside in the long term than the bond market. But it is definitely a difficult bond market right now. And what's happening isn't just about economies anymore. It's the Fed. It's the currency market. And I think this week was really, really driven a lot by the dollar and the currency market moves. I want you to weigh in on that question. I disagree with the professor. You know, I don't, and I'm surprised he said that because that's in the face of what all academic research show, right? If bond yields go down, it's because people are afraid. It's risk

off, right? That's, you know, kind of what you learn in school, right? Economy is strong, bond yields back up, market's great, right? I think the real challenge is the price-earnings ratio is capped, right? Because I get 4.5% for the two-year. So I'm sitting here right now, and I could say, all right, I'll get 4.5% guaranteed by the U.S. government per year for the next two years. So that's going to get me, you know, after tax, a pretty good number. Am I sure the equity market's going to be up that much over the next two years? I need a pretty good premium for me to take that risk with all the vol. So I think that, you know, kind of academic research is the exact opposite of what the professor said.

Well, even somebody who puts together a list of stocks that we should buy. Again, what we're trying to do is beat the S&P, right? I think the S&P is up 5%, 6% per year on average for the next 10 years. Do I think names can go up? We'll look back a year from now, and there'll be a bunch of names that beat the market by 20 and lag by 20. So the names that are down 50, 60, they're going to have better fundamentals next year, seem like a good starting point to start doing some more research. But there's always individual names. I just want to hit on energy real quick before we go because you've cited Schlumberger, your stock, Steph,

as maybe the best thus far in earnings season. What do we see? Up 10% today? Yeah. I'm surprised by the move, but it was a great, great quarter. I mean, they beat total revenues, earnings, margins. Margins were the best. EBITDA margins were the best since 2015.

Total revenues, the best growth since 2011. So I think you stay long this stock. There's an analyst day on November 3rd. They're going to showcase technology, and that's what this company is. It's a hidden technology gem. Great, very good management team as well. Last thought, Victoria, 20 seconds to you, and then we're out. Yeah, I'd still like the energy market as well.

Maybe rig counts are coming up a little bit, but it's so constrained. So SPRs are about done. So I'm still staying long my energy, and I'm collecting my big fat dividends. So I love my U.S. EMPs. And I think you want to say stay defensive and collect your collect your cash flow where you can right now. All right. Got to leave it there. Guys, thank you so much, Victoria. Thank you, Steph. Adam Parker sitting right here as well. See all of you soon. I'm sure. Let's get to our Twitter question of the day. We want to know which of these tech names reporting next week has the most upside by year end.

Is it Apple or Microsoft, Alphabet or Meta? You can head to at CNBC Overtime on Twitter to vote. We'll share the results, as we always do, a little bit later on in the show, in which we are just getting started here on a Friday in overtime. Up next, a bold call for your money from Ed Yardeni. He says stocks could rally 15 percent by the end of the year. He's going to tell us how they're going to get there. We'll test him on that.

We're live from the New York Stock Exchange. Overtime's back in two minutes. All right, we're back in overtime. Stocks rallying to close out the week. And my next guest says this breakout is just the beginning. He's calling for another 15% upside for the S&P by year end. Joining me now, Ed Yardeni, president of Yardeni Research. That's optimistic, Ed. It's good to see you.

I'm sure a lot of people are happy to hear you say it, but how do you justify such a move? Well, I think we're in a trading range from the June low of 3,666. We did recently drop below that, but I think we're just kind of making another bottom here right around that level. And then in the summer, we went from all the way up to 4,305 in August 16th, obviously still well below the record high we had at the beginning of the year. But I think we're in that kind of range. And I think that we're going to get another Santa Claus rally. And Santa Claus rallies are particularly predictable and strong as a result of midterm elections. And it almost really doesn't matter whether which way the House and the Senate go. The midterm elections, no matter what, have a tendency to be very bullish. And the

Santa Claus rally just continues right for the next three, six, 12 months. I'll give you the data if you want it. But I don't know if you want me to throw data at you this late in the afternoon on a Friday. Well, I mean, you're talking about a Santa Claus rally, but what if it's too icy and dicey because of the Fed, right? And rates are going to remain high, the Fed's going to remain hawkish, and stocks aren't going to be able to rally nearly the amount that you suggest they might be able to. Well, Scott, I listened into your show earlier, and I heard you mention something about the possibility that the market might already be discounting all that. I think at this point, the market knows they're going to do 75 basis points in early

November. And now only the market's confused about whether it's going to be 75 or 50 basis points in December. I thought it was going to be 275s one after the other. But now the Fed's throwing some uncertainty about that. I think what the market's looking for is for a pause. I don't think they're looking for a pivot. They're looking for a pause. The Fed's been awfully aggressive. 300 basis points so far since March. Another 75 basis points in early November. And I think they will go ahead with another 75 basis points in December. But I think the market knows all that. And I think the market, as we saw today, got a lift from the idea that it might be only 50 basis points, and then there might be a pause for a while. Now, the economy is doing pretty well under the circumstances when all things considered.

I think one of the reasons it's doing so well is because the strong dollar looks like it should be weighing on the economy. But the dollar is strong because money is absolutely pouring in to our capital markets. Over $1.6 trillion, $1.6 trillion came into the into our markets from from overseas on balance over the 12 months. And that's through August. And the strong dollar is telling me money is still coming in. And that's a big positive for our economy. I just wonder, you know, if we're being misled by what appears to be a clearer road in front of us, but trouble ahead further than we can see through the windshield. Right.

We say, OK, earnings suggest that the road may be OK in the near term, but we can't see the pile up. That's a couple of miles down the road and we're not going to get there for a while. But when we do, it's not going to be pretty. Well, I've been arguing that we're actually in a recession now. It's a rolling recession. I don't think we're going to have a hard landing. I think we're going to have more of the soft landing. Call it a growth recession. Call it a mid-cycle slowdown. But the housing industry is already in a very, very serious recession. The auto industry was starting to recover as parts were becoming more available. But when people now go to buy a car and see what rates are, that's

really a turnoff for a lot of buyers. Retailers have been stuck with a lot of inventories. So when you look at all that, it sure feels like a recession. And yet, real GDP for the third quarter is tracking at a 3% annualized rate. So I think it's a mix of strength and weakness in the economy. We know the labor market is extremely strong because there is a labor shortage and companies are hoarding labor. So it all adds up to me to a rolling recession, which allows earnings to go sideways. They don't have to come crashing down. They don't have to go straight up. And the market doesn't have to do either as well. It doesn't have to take a big dive from here and it doesn't have to go straight up. But I think it could be in a very interesting trading range, which is what

it's been in, in my opinion. All right. We'll leave it there. Enjoy the weekend, Ed. We'll see you on the other side of it, I'm sure. Thanks so much. All right. Thank you. That's Ed Yardeni joining us there. Up next, Veritas Group's Greg Branch. He says today's rally is a head fake. So we're going to give you all sides. You heard the more bullish perspective from Yardeni. Branch doesn't believe in the bounce. He'll tell you why. And later, we're gearing up for the Super Bowl of earnings. Just look at all the big names reporting next week. I know we highlight big tech, but there are a lot of other names on that board you need to know about. We've got the setup when overtime returns. All right, welcome back. It's time for a CNBC News Update now with Tyler Matheson.

Hey, Ty. Hey, Scott. Thank you very much. Here's your CNBC News Update up to the minute. The January 6th House Committee issuing a subpoena to former President Donald Trump demanding he appear for deposition testimony beginning November 14th. The panel also outlining a request for a series of corresponding documents in addition to the testimony. Trump's legal team yet to respond. Meanwhile, former top Trump White House advisor

Steve Bannon is being sentenced to four months behind bars for contempt of Congress. Bannon found guilty back in July after he ignored a subpoena request from the January 6th committee. Bannon's lawyers argued the court should delay any sentence until an appeals court hears the case. Ukrainian forces are preparing for a potential full-scale assault in Kherson to reclaim one of the first urban areas Russia captured after invading the country. Russia urging residents to evacuate immediately and relocate to surrounding areas as thousands of residents have already fled to Crimea and other nearby regions. Tonight on the news, the race to replace UK Prime Minister Liz Truss. It's heating up with two front runners starting to pull ahead of the pack. That's right after Jim Cramer at seven o'clock eastern time.

I'll see you then, Scott. Meantime, back to you. All right. Appreciate that. We'll look for you then. Tyler Matheson, thank you very much. The major average is finishing the week in the green. The Dow notching its first three week winning streak of the entire year. Our next guest, though, says don't believe the hype or the bounce. And we could see a 10 percent drawdown from here. Let's bring in CNBC contributor Greg Branch. He's the founder of Veritas Financial Group, reigning on everybody's parade with a smile today, I guess. I guess we've been doing that for a better part of a year now, right, Scott? Yeah, but why are we changing yet? Ed Yardeni said you could get 15 percent. Why is it a head

fake? Yeah. So, you know, the roadmap that I laid out at the beginning of the year, we still haven't completed it, Scott. At the end of the day, yes, most of the Fed hikes are behind us, but we still don't have agreement even as recently as a week ago or two weeks ago and what the fed's gonna do in november and they've all but laid out the fact that they're going to get to that 4.75 rate if not a five percent terminal rate i was hearing whispers of that three weeks ago and now that those whispers are a little more public uh the estimates are still way too high, Scott. What we saw in the third quarter, the beginning of the quarter, is that earnings expectations were about

10% growth, 9.8 to be exact. Now we're at 1.5% for the quarter. I believe that the fourth quarter, which started around 7%, now is down to around 4%, needs a similar downward revision. And think about that for a second. Next year, 2023, even if you just believe that the economy stays flat, that no further deterioration occurs from here, which we know is not the case because the actions the Fed is taking have a lag effect. But at the end of the day, even if you just believe flat, that means that 2023 earnings estimates need to come down seven percentage points. And equities just aren't safe in the wake of those headwinds, combined with the macro global turmoil, combined with us being at the beginning of QT.

What about the idea that at least now you have a debate, perhaps, in the room? You've got a hawkish Harker and a dovish Daly in the last 24 hours, all sort of making their cases on where they they see policy perhaps going from here. So it's no longer a one way road. Does that factor into anything that if I told you, OK, 75 next month, 50 in December and then we'll see. That doesn't change your view at all. It doesn't change my view at all, because as soon as we get the relief that they've reached the 4.75 or the 5%, wherever they think the terminal rate needs to be, we're likely to stay there for a while, Scott. Remember, the thing that's going to make them pivot, we need to see one of three things. We either need to see the labor market approach

5% unemployment. We need to see a major contraction in the economy, which we haven't seen yet. So I'm talking about 3% or north of that. Or we need to see inflation come down by about 200 basis points. We haven't seen any of those things happen. And so we can't even begin to think about a true pivot, which would be cutting rates until we start to see some traction on one of those three things. And we just haven't seen it yet. So we'll just remain in a... But maybe a pause is enough. Maybe just a pause is fine. We don't need a pivot. I think a pause will be fine in the short term. And then we'll get another head fake rally like we got in July, like we got three weeks ago, and like we're seeing right now. At the end of the day, yes, it will bring a sentiment relief and then we'll start to pull our pencils out and do the actual work and forecast what those

heightened interest rates mean for consumption, what those heightened interest rates mean for the growth in the economy and the growth of corporate earnings. So tell me then how you see next week, tell me how you see next week shaping up with these critical earnings ahead. Big tech. Make or break? I don't think it's make or break. But I think on the most, the news will be more disappointing than I think people are expecting right now. Remember, we have some of the few safe havens that I saw in Equityland reporting next week. And I expect some

of those reports to be disappointing. Remember, cloud was something that I have always articulated as a safe haven, given the constant consistent growth that we're seeing, given relative insulation from the inflationary pressures, and given the margin expansion that they've been able to continue to show. However, what throws a kink into that thinking is if we have decreased consumption and decreased IT spending, that will make growth decelerate even a little faster than I anticipated. So I think we'll get, I think they'll come in in line, but they will talk very worrisome about the coming quarters, I believe. I think we'll see the same thing in digital advertising aside from search. I think we'll see the same thing in PC and chiplet. We'll leave it there and we'll see you soon. I'm certain. Greg Branch, thank you.

Have a good weekend. Up next, the ultimate trap. That's what one halftime committee member is calling that stock on your screen right there. We'll bring you the name and debate the call in today's halftime overtime. And don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. Overtime is right back. All right. In today's halftime overtime, Under Armour, under big time pressure, shares finishing the day in the green today, despite a downgrade from Telsey Advisory Group. But they're at the lowest level. It's been the worst period of the stock in some 12 years. And the company's growth story remains in serious question. That's according to Virtus' Joe Terranova. Listen.

You should think about this category as coming under pressure. This is discretionary for consumers. And I think, unfortunately, this is a company that has failed to kind of re-establish a lot of the growth story, the ultimate trap. I mean, that's what it's become. They've never been able to reignite the growth story at this company. Brutal. Stephanie Link, right, who's back sitting next to me. You own Nike. And, you know, yesterday when Adidas warned, again, Nike went down. Today you got Under Armour down. This space is not good.

Nothing is really good in discretionary. Discretionary is down 30% year to date. These stocks are down a heck of a lot more. You know I own Nike. I have been buying it and adding to it on the way down. I'm not down 47%, which is down 47% year to date. Year to date, 47%. Yeah. Well, I like it, though. Year-to-date, 47%. Yeah.

Well, I like it, though. I do think the valuation here is very interesting. It's 24 times forward earnings. The long-term average is 27 times, so three turns lower. And those earnings, Scott, importantly, they lowered the numbers already, right? They already set the bar really, really low. And so I think it's a real valuation is my point. They have a very strong global brand.

They're gaining market share. Remember last quarter, they actually beat on revenues. It was the margin problem. It was the inventory problem. But everybody has high inventories. Eventually, that's going to get worked down. Eventually, China is going to reopen. That's 20% of total revenue.

In the meantime, they've got great initiatives, which digital grew 16% last quarter. And DTC, they're now at 40% of total revenue. In the meantime, they've got great initiatives, which digital grew 16 percent last quarter and DTC, they're now at 40 percent of total revenues. That will help margins in the long run. So the space is really crummy. Under Armour is is pathetic, quite frankly, and it has been for such a long time. I think you used to own that way back in the day, didn't you? Way back in the day. And I actually made money in it. But they have a lot of problems. Right. And it's just compounded because they're just a weaker player. They're losing share. And Nike's taking share from them. Let me ask you this. So I was writing it down when you said it's three turns lower in terms of their historical valuation, but it's many turns higher than the market multiple is now. And now matters more than then. So how do I put all of that into perspective? And by the way, the stock trades at the same price pre-COVID, right?

So I understand what you're saying. This is always an expensive stock because of the global franchise, because of the market share, because of the balance sheet, because everybody knows just do it, right? So this is a wonderful company, and it's like Costco. We talk about Costco all the time. That stock trades from 30 to 40 times, right? It never goes below 30 times, right?

Because they have this recurring revenue for all the subscription business. They do. They do, right? But my point is there are some stocks that always just have a higher multiple. And it's this franchise. It's the reason why they have a higher multiple, right? And so when inventories turn, when they get that right, the operating leverage is huge. Same thing for Target as well.

We talked about that as well. All right. Thank you for sticking around. That's Stephanie Link. We'll see you. Have a good weekend. All right. Still ahead, we're breaking down some standout stats from this big week on Wall Street. Christina Partsenevalos is standing by with our rapid recap. Christina. Can you guess which sector surged eight percent on the week and which stock just hit an all time high dating back to the year presidential campaigns were first aired on TV. Can you guess the date? I'll have the answer and your rapid recap next. All right, welcome back to Overtime. We're wrapping up another big week for your money and let's get to Christina Parts of Nevelos now. For the rapid recap, Christina.

Ah, Scott, despite some choppy trading earlier this week, markets made it past the green finish line. The S&P, the Dow, the Nasdaq all closed just about below 5%. The Nasdaq passed 5%, having their best week since the end of June this past summer. All sectors finishing higher with energy, did you guess? The biggest gainer up 8%, followed by technology. Utilities were the worst of the group, but still closed 2% higher. For Dow gainers, you got Salesforce. That was the biggest winner, up over 12%. It got a vote of confidence after activist hedge fund Starboard Value took a stake in the enterprise software firm. And then you had better than expected earnings that helped investors who were bracing for the worst this week. Netflix added more subscribers. AT&T wireless revenue jumped over 5%. Both of those companies part of the best performers in the S&P 500.

Week to date, though, natural gas fell a whopping 23% for its worst weekly performance since December 2021. You can blame mild weather, easing demand, and rising inventory levels for its ninth negative week in a row. And lastly, I'm hoping some of our viewers did try to guess. Eli Lilly hit an all-time high dating back to 1952, the year that presidential campaigns were first broadcast on TV and the popular Mr. Potato Head toy was first sold. Have a nice weekend, Scott. Wow. Wow. Wow. Do you know how many things happened in 1952? The average house is priced at $9,000.

The first contraceptive pill was made. I think the United States detonated something to do with the hydrogen bomb. There's a list of things, but I chose those two things. I appreciate that very much. Christina, thank you. Enjoy the weekend. Thank you. Christina Partsinevlos. All right. Up next, big tech front and center next week with earnings, of course. One tech investor tells us how they're positioned in our two minute drill coming up. And at the top of the hour, our health care stocks heading to new highs. The Fast Money team has a checkup on that trade. Stick around. Overtime is back in two minutes. All right. Time for our two-minute drill now, earnings edition.

And joining me now is Crossmark Global's Victoria Fernandez. Half of her biggest holdings report next week. So it's all on the line. Nervous going in? Not too nervous. I mean, look, Scott, we've had a pretty decent earnings season so far. We've been beating expectations for a lot of these companies. And I think some of these names have been beaten down so much.

It doesn't mean they can't go more. I mean, we saw that with Snap, but they have been beaten down so much. I think they'll have decent earnings and maybe we get a little bit of a bounce. Let's take them in groups. Apple, Microsoft, confident or concerned? Yeah, I think maybe I lay somewhere in the middle, and I know that's probably not the answer you want to hear, but look, it's coming down to,

it was really poor earnings or poor reporting last quarter for Microsoft when it comes to Azure. We want to see that do better. Ad business, obviously, we just mentioned Snap. That could give some concern for the ad business here. We want to see that go better, and we want to get an update on the Activision Blizzard and how it relates to their gaming and

what we're going to see there. So I think there's components as a longer-term holding. Both Microsoft and Apple are both longer-term holdings. Apple is a demand story. It purely comes down to the strength of the consumer, the pricing power of Apple, seeing the level of base devices continue to grow broadly across all their products, those are the things we're looking for. Coca-Cola and McDonald's, too. Expectations there are what? Yeah, again, we're talking about a consumer.

And when you've got a labor market that is as strong as it is and you have corporate balance sheets that are pretty decent, that's going to be support for the consumer. So I think you're going to see something like a McDonald's where they've had good same store sales over the last couple of quarters. They're going to continue to do well. Obviously, when you look at Coca-Cola, PepsiCo had really strong quarter. Their demand was solid. There's pricing power there again. And you've got dividends for these names that helps with the stock. So I think we'll see pretty good earnings coming out of these names. All right. Fifteen seconds. UPS reports you own it after FedEx. How do you feel? Yeah, I think there are two different stories. UPS changed its business

model during COVID. They focus more on that small and medium business and their revenue per piece was up significantly. We want to see that happen again here in this fourth quarter. We will leave it there. We'll talk to you soon, Victoria. Thank you. Thanks, Scott. All right. That's Victoria Fernandez up next.

It's Santoli. To the results of our Twitter question, we asked which big tech company reporting next week has the biggest upside by year and? And Alphabet was the winner. That's interesting. Okay, Microsoft was number two, Apple three, and then Meta four. Mike Santoli here for his last word. It's got those, speaking of them, next week. Yeah.

All the marbles? A lot of them, yeah. Alphabet was interesting today because it comes in, you know, pretty much cheaper relative to the market than it's been in memory. Managed to claw into the green today. So we'll see. I do think that's the one that's considered to be kind of the survivor in social media. Interesting spot, though, that we finished. It looks like today was like this big, excited upside move on this idea of a Fed push.

80% up day, I think you said earlier, right? Nothing wrong with it. And certainly up 5% for the week in the S&P. But I would look at it almost as a prolonged pause. That's been very, very, you know, uncomfortable. One month ago, September 22nd, we close it in the 37 50s. We close today in the 37 50s. June 22nd, 37 50. So, yeah, you've had some upside and downside volatility around that, but you've kind of stuck there. And I think today's action really, obviously the response of the Fed reports, but it really does look like a pause in the dollar rally,

a pause in the upside in yield. So I think it's refreshing. I think you can sort of stop and say, how much have assets repriced this year? Tremendously. Look, I think you had the line of the day, frankly, in our conversation, your midday word of this,

the two-way conversation that maybe they're having in the room, they being the Fed, where before it was a sort of one-track mind. Now you're getting some other stuff thrown in the mix, and maybe that's just good enough for the time being to take you someplace. I think it is. Yeah, we got to get confirmation of that, right? I mean, you don't want to have risk assets just all of a sudden start to melt up again and people feel like there's an all clear and then have the Fed feel compelled to say absolutely no. We still need to to be kind of leaning against it. But, you know, at some point we were going to get to that moment when it was some people on the committee are going to say, guys, let's just not overdo it. And I think it's we're going to look back and say, this is a one-year span.

The first hike was in March. The market's saying the last one's going to be next March. So it's going to basically be one year, maybe almost five percentage points. It's a ton. They've got to be careful, too, as was noted in the journal piece today, of signaling what lies ahead without spurring a huge rally in the stock market. And that's really, really tough because at any hint, as we learned today, boom. Very sensitive to that. And again, I just think they're restoring the kind of

flexibility and responsiveness to the data that the market wants to see. Again, you know, we have to see what that means. We don't know if they've already kind of gone past the point when they needed to. Good stuff. Thank you. Great weekend to you and all of you. I'll see you next week. Fast monies now.