Closing Bell - Closing Bell Overtime: Parsing Powell; Former Netflix Exec On The New Bull Thesis After Blowout Earnings 10/19/23

Episode Date: October 19, 2023

Major averages tumbled again today. Ariel Investments Vice Chairman Charlie Bobrinskoy breaks down the market action as well as earnings from CSX, Intuitive Surgical and Knight-Swift. Investors keyed in to Fed Chair Jay Powell’s speech today in New York; Grant’s Interest Rate Observer Editor Jim Grant on the most important points. Former Netflix and Hulu exec Simon Gallagher on Netflix’s blowout quarter and the new bull thesis for the stock. Freeport-McMoRan CEO Richard Adkerson on the latest earnings, state of the global economy and commodity prices. Navan has partnered with Citi to help cut down on hassle for expense reports; CEO Ariel Cohen joins to talk the deal and what’s next for fintech players. 

Closing near the lows in what's been a choppy session for stocks as the 10-year treasury yield, KIST, came very close to 5%. That is the scorecard on Wall Street, but the action's just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. And we've got more earnings coming your way this hour, including key readings on the beaten down transports from CSX and Night Swift, along with numbers from Intuitive Surgical, which warned in July about the impact of weight loss drugs on some medical procedures. That's a conversation we've been having here. Plus, we'll talk exclusively with Fed watcher Jim Grant about today's speech from Chair Powell and the relentless March higher for interest rates.

And we begin with that speech from Fed Chair Powell. Let's bring in CNBC's senior economics reporter, Steve Leisman, with the highlights. Steve. Hey, John, thanks. Yeah, Fed Chair Jay Powell offering a largely, call it a neutral speech on the outlook for rates, suggesting the Fed could be on hold for a while here, but warning that if the economy doesn't slow, the Fed could go higher. We are attentive to recent data showing the resilience of economic growth and demand for labor. Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of policy.

Powell said not once but twice the Fed was still seeking that elusive, sufficiently restrictive level, a sign that he's at least not sure if the Fed has done enough yet. But the Fed chair did acknowledge there was risk on both sides, said he was still waiting for the effects of things like the considerable monetary policy lags at the economy, those higher bond yields, as well as the potential for geopolitical tensions to hurt the economy. The futures market took the speech as mostly dovish with a sharp decline in the outlook for hikes. Look at that, just like under 2%. It's really 1.6 for the probability for November hike, well under 30 now for November,

and just around 27, 28% for January. Powell made clear the Fed would proceed, and I quote here, carefully and seemed willing to give the economy at least a few more months, guys, to cool down before he would take any action. Tomorrow I get to talk to Rafael Bostic, the Atlanta Fed president exclusively, on Squawk Box at 7.30. And, guys, I'm going to listen to Jim Grant because I'm really interested in what he has to say about Powell's speech.

Yeah, we're looking forward to that. Steve, I know it's a fool's errand to try to look at the market reaction the day of Powell comments and try to really deduce anything from it. But this was particularly weird to me, right, because it seemed to be rising while he was talking, and then it fell, then it rose again, and then it really fell. Talking about the S&P specifically after that, isn't this much of what observers expected to hear? A slightly more dovish tone?

I like the way you called it a fool's errand, John. I do it every day. So I'll take that as, I don't know what, an insult or a compliment, one or the other. But you're right. And I think it reflected the very dual nature of this speech, John. You could hear what you want to hear. Remember, at the outset of any speech, there is black box trading. Don't forget that. Where headlines are read by computer programs and they are then programmed into having some trade. So humans aren't really involved until later on.

And then as the process goes on, I think more humans become involved here. But I think the initial take was kind of dovish, and it came from a Wall Street Journal take that was very dovish on the speech itself. I think later people said, you know, this is a little more even handed. In fact, there's a bit of a strong warning, which was the clip that I played, which is what I thought was important there, that if the economy doesn't cool down, the Fed may yet be back to the hiking game. So all that's in there and you don't know where people are positioned going in. That has a big effect on how they react on the other side. I guess he

still sounded data dependent, which Mohamed El-Erian doesn't like. You were talking to him this morning and maybe that had an impact, too, Steve. Thanks. Yeah. Now let's bring in our first guest. Joining us now, Charlie Bobrinskoy of Ariel Investments. Charlie, the market action today, tough for me to read. What's your read on where we are right now? I know you've been talking a lot about small and mid-cap value. Yeah, I think the problem was he talked about the economy and talked about growth still being excessive or above trend line. And first of all, I think that's delusional. We've had 2% GDP growth for a number of quarters. That's not above trend line.

He blames inflation on an overheated job market. We don't have an overheated job market. Wages are up barely in line with inflation. If you go for the last two or three years, they probably trailed inflation. So I think the concern is that he still is seeing an economy that's causing 3% inflation, when in fact inflation is where it is because we increased the money supply by 40%. Now the money supply is starting to come down, but effects are variable and lag, as Milton Friedman famously said. So it's going to take us a while. So I think that's the disappointment that he just doesn't get, that we are moving in the right direction. All right. We're going to bring you CSX earnings

right now because those have just crossed the tape. This is the Eastern Railroad Freight Railroad. And it looks like we have a miss on the bottom line. Forty two cents per share versus estimates of forty three cents. Revenue, though, beating three point five seven billion versus three point five five billion estimates. From reading this correctly, a two percent decline in volumes, operating ratio,.8 percent, so slightly higher than what the street had been anticipating and certainly higher than what we saw with the year ago. Levels fuel expenses is something that is here as a as one of those costs is something we've been following with the transports in general. Keep in mind, freight providers are able to eventually at some point push that out to their shippers, to their customers. But those expenses are up 20 percent year on year. And if I just take a look at this report

a little bit further, basically saying that the decline in intermodal more than offsets the effects of higher merchandise yields and actually coal volume growth, because we have seen the whole energy complex higher and demand for things, including coal, including export coal in Europe, have continued to be very strong. So you can see shares there, if we pull that back up, are down fractionally right now. I'd also just note, John, that CEO Joe Hinrichs will break down those results with me tomorrow, exclusively 10 a.m. Eastern on Squawk on the Street. note, John, that CEO Joe Hinrichs will break down those results with me tomorrow exclusively, 10 a.m. Eastern on Squawk on the Street. But one of the things to keep in mind when we talk about

a railroad like CSX is they touch so many different goods and parts of the economy, particularly the industrial economy, that it tends to be a broader economic look at where we're at in real time in terms of that activity here in the U.S. and North America. A couple things piqued my interest in what you said. I could have sworn that somebody else, perhaps a competitor, just hours ago had an increase in intramural. Maybe I'm remembering that wrong, so I wonder how that squares.

And then fuel and the pinch, perhaps, that the higher price of fuel causes. We're going to be talking about that with Freeport-McMoran in just a bit, right? We're going to be talking about it with Freeport. Freeport is a copper producer, a copper miner, but they're certainly seeing higher costs and inflation affect their ability to go in and extract more copper right now. And in general, when you talk about the industrial commodity complex, there have been a lot of cross currents affecting everything. Right. Rising costs from fuel and also from labor, which they're finding difficult to locate.

Charlie, I want to get back to you right now. Or do we have Charlie? We want to get back to you now. Not necessarily on those results, but I'm wondering, first of all, if you have anything to say about that, please do. But when you joined us in September, you thought, yes, the Fed will stop raising. That seems to be where we are right now. But also small and mid-cap value was the way to go because of valuation. Since then, I think the Russell 2000 value index down about 10 percent steeper than the S&P 500. What do you think is going on here?

And do you still think that's the way to go? We definitely, unfortunately, it has continued to underperform. Value has underperformed growth. It is really surprising. I think a lot of value stocks are considered cyclical. And there is has been talk coming out of the Fed. They continue to be stubborn that they are not happy with the slowdown in the economy. And if the Fed wants to cause a recession, they can. And a recession is always tougher on small cap value than, say, on growth. So what I said in September is still true, even more true. We have the Russell 2500 value index trading for less than 13 times earnings compared to the S&P at over 17. A lot of value in value right now. Yeah. Charlie, forgive me if I'm retreading ground. The two of you have already

walked here since I'm wearing two hats covering earnings as well. But I do want to get back to the notion of the Fed, because one of the things you note in your notes is that we really need to go back to basics in terms of how we understand interest rates and specifically the real rate, where that historically has tended to be, where we are now, and what the read-through is, not only in terms of monetary policy on the economy, but also on stocks. Yeah. Thanks, Morgan. This is very important. So Gene Fama won a Nobel Prize, and one of his most important findings was that the real rate of interest is actually very stable. And it tends to, over time, when the Fed is not influencing it, it tends to be about 1% per year. So that's the interest rate you earn on treasuries minus the inflation rate. Now, that's when the Fed is

not intervening. And for the last five years, they have been intervening in a dramatic way. First, they took the assets of the Fed from $4 trillion up to $9 trillion, buying in $5 trillion of bonds, forcing interest rates into a negative real return. Then they reversed course and started selling assets. And they've now sold a trillion dollars worth of bonds while everybody focuses on them increasing short term rates. It's actually just as influential that they have flooded the market with a trillion dollars worth of bonds. And that is one of the main reasons why the real rate after inflation has gone up. And now over the next 10 years,

you'd probably forecast inflation to be something like two.5%. We now have a 10-year real rate of return of 2.5%, which is way above normal. So we've got – and that has an implication for the stock market. The stock market uses interest rates to discount future cash flows back to the present, and that is one of the things putting pressure, no doubt about it, on value stocks. All right. Charlie Brinskoy from Ariel. Thank you. Thanks. Hope to see you again soon. Now, Intuitive Surgical results are out. Kate Rooney has the numbers with that stock down about 8% initially after hours. Kate? Yeah, John. So this was a mixed quarter here for Intuitive Surgical. Starting here with EPS,

this was a beat. This is the adjusted number, $1.46, a beat there by five cents. Revenue, a slight miss, $1.74 billion. That was up 12% year over year. They're talking here about Da Vinci procedures growing about 19%. Gary Guthard, the CEO, pointing to that in the quote here about strength. As you mentioned, stock is down here. We don't have any guidance and no talk in the release so far, at least about what some of the weight loss drugs might mean for this stock. They have warned about that, but we don't see anything quite yet. Again, those shares

are down more than 8% here after hours on a mixed quarter. Back to you. Okay, thanks. So we'll have to look into the Da Vinci commentary because that bariatric procedure is what they highlight as being potentially affected. So listen for that on the call. Kate, thanks. Now, I mean, this is a big story that's been going across MedTech. It's a big story going across MedTech. We've seen it with food companies and restaurants and packaged goods as well. I mean, we had this conversation on our air yesterday with Abbott, where he basically said they've actually seen folks that are using these GLP-1s, these weight loss drugs, also more engaged with their products, too, which I thought was very interesting and a little bit contradictory to the maybe perhaps not quite so tied to fundamental trading we've seen, selling we've seen in this sector more broadly. We'll have to see what Intuitive has to say. Now, Tesla posted its worst day since July today after a disappointing quarter.

Senior Markets Commentator Mike Santoli over at the market dashboard to put it in context. Mike? Yeah, John, returning to a juxtaposition of Tesla and NVIDIA that I've kind of checked in on from time to time. For a while, these two stocks were moving very much in sync and really feeding off of a similar source of energy, right? Their fans and a lot of the capital behind them were all about, you know, this one category killing product. It's going to help change the world. They were supply constrained. You couldn't make enough of them. Demand was seemingly unlimited. And you see the divergence here with NVIDIA over this time span. And this is basically a three year scale has just obviously taken off relative to Tesla as Tesla has had a bit of slowing growth, some margin pressure

with the price cutting and things like that, whereas NVIDIA still kind of has that sort of anointed status as the AI category killer at this point. The other interesting thing about Tesla and where this has brought the stock, I've also gone back to this point a couple of times. That is December 18th, 2020. That's when it entered the S&P 500 at a price of around $231 a share. And so we've been above and below that, but we have kind of cracked below that again. And I bring it up because in the lead up to Tesla joining the S&P, there was so much hype about how it was going to be a one way ticket higher for the stock forever because it was in the index. Never mind most stocks in the index, you know, go both up and

down. And now you see three years, almost three years later, it's it's underwater relative to where the index funds bought. I do want to take a peek at the volatility index because we closed above 20 for the first time in quite a while. 20 had been kind of the ceiling since the regional bank crisis there. And in fact, not just the ceiling, but always coinciding with when market pullbacks have been kind of culminating or basically getting to their lows. So clearly agitated about what's going on in the bond market here. You see last year, 20 was the floor. That was a bear market type activity where basically as soon as people got even as calm as a 20 VIX, which implies much more than a 1% daily move, it was time to start selling stocks again, guys. Well, Mike, going back

to that Tesla-NVIDIA comparison that you had, both of the stocks doing fine year to date. I'll note, you know, NVIDIA a lot more than fine. But it seems to me like around Q2, late winter through spring is where that gap really opened up. And I wonder how much of that has to do with pricing. NVIDIA's pricing on AI chips has remained so incredibly strong. But Tesla has been cutting prices. And some people say that that's strategically good. I don't know. But in this market, is that a big part of what it comes down to? Yeah, no, tremendously, because NVIDIA is still enjoying the fact that they basically can't make enough of it. Therefore, they have the pricing power. It's a scarcity economy.

Margins are tremendous because of that. And of course, the street and investors are projecting ahead for NVIDIA that this is going to continue. That, to me, is where the debate lies as to whether the pace of demand can continue, whereas Tesla's a bit beyond that point. They have to push volume. It's not a scarcity situation. The pricing does reflect that. All right. Mike Santoli, we'll see you in just a bit. After the break, Fed watcher Jim Grant joins us to break down Chair Powell's messaging today and where he thinks rates are headed next after reaching multi-year highs. And later, we'll get a read on the global economy when we're joined by the CEO of copper giant Freeport,

Mac Moran, fresh off the morning's earnings report. Overtime is back in two. SolarEdge sinking after warning on its third quarter results, saying it saw, quote, substantial unexpected cancellations of its existing backlog. The company cites higher inventory levels and slower install rates. SolarEdge is cutting its revenue outlook to between $720 million and $730 million from its prior view of 880 to 920 million dollars. You can see those shares are down 20 percent right now. The yield on the 10 year note, though, just about reaching 5 percent today after Fed Chair Jay Powell's speech this afternoon in New York.

Investors now predicting the Fed may be finished with rate hikes for the rest of the year. Joining us now, Grant's interest rate observer, Jim Grant. Jim, it's so good to have you on the show. Welcome. Thank you, Morgan. Nice to be here. I do want to start right there. What did you think of Powell's comments today? Well, I thought like every Delphic prophet, he was just ambiguous enough, but he said something that I don't think is borne out by what the Fed likes to call the data, and that is he said that monetary policy was restrictive. Now, there are four or five indices of financial conditions,

and four of the five say that notwithstanding this rise in rates and QT and the like, that conditions in finance generally are accommodative. So it makes you wonder what stringency would feel like, because certainly on a kind of a tactile basis, it does feel as if things are rather taut. But an interesting comparison to the 1970s, when these same indices or their predecessors were flashing tight and nothing like that today. So the problem, Morgan, may not be so much the 5%, but rather the many years preceding of 0% that introduced a fragility in the economy that 5% is now testing.

Yeah, the quest for yield over so many years of low interest rates we know tends to turbocharge risky behavior. How key is it going to be then to see the Fed hold with higher for longer? Because to your point, we saw this with consumers, with the housing market, with mortgages, for example, where they locked in or they refied on low mortgage rates. We saw it in corporate America, too, where they locked in on low interest rates on their debt. At some points, that starts to roll over. So how much does time matter here? Matters a great deal. You're starting to see things already that exactly suggest what you described as the characteristic consequences of very low kind of money grows on trees kind of interest rates.

There's a company called Convoy, which is a logistics and trucking company that had the imprimatur of Bill Gates and Jeffrey Bezos. And it was once valued in the private equity world or the venture capital world, rather, to $3.5 billion. $3.5 billion. It had 1,500 employees. And Bloomberg moved a story today saying that they were shutting down operations because they could find no one to buy them. CEO of Convoy Inc. said that stringent or contractionary capital markets is one of the reasons for their shutting down. As a margin, that is happening not yet far and wide, but it is beginning to happen.

And I think as time goes on, you'll see much more of it. But again, yeah. Jim, Mohamed El-Erian was on Squawk Box this morning arguing that the Fed is too data dependent at this point and needs to flat out say we're done. Because what do they know about the future looking backward at data anyway? What do you think about that? And is there a particular danger now in using backward-looking data to kind of affect what's happening 18 months out? Well, you know, the data are revision-prone and almost by definition backward-looking. Certainly they're historical. And yeah, one shouldn't be utterly dependent on them. Jay Powell, I think, in his summertime speech at Jackson Hole, said something like, the

Fed is navigating by the stars under cloudy skies, which I think is most apt. So you need not just the data, but you need a framework, a theory. You need a framework, a theory, and you need a way of thinking. And I would submit to you that a common sense approach might be helpful. And for example, you can reason that if you have been suppressing interest rates, you being the central banks collectively worldwide, have been suppressing them for the better part of ten years, and if at one point, extreme point, some 16 trillion of securities were priced to yield less than nothing, lowest rates in 4,000 years, if you please, of recorded rate history, in those circumstances, you'd expect that the proverbial beach ball held underwater would pop up again and not just stop at the surface, but rather shoot a little bit in the air.

So I think that's some of what's happening. And, you know, so I agree with Mohammed that one can't be a prisoner to these data. You have to have a, you have to have a, I don't know, some grounding in financial history and some grounding in common sense, I suppose, too. Jim Grant, it's great to have you on. Thanks for joining us. Thank you. Knight Swift's transportation earnings are out. Kate Rooney has the numbers. Kate.

Hey, Morgan. So a comfortable beat here for the trucking company. Let's start with the adjusted number. This is EPS, 41 cents, better than expected, 5 cents better than expected there. It was down 67 percent year over year. Revenues also be better than expected, $2.02 billion. That was up about 6.5% year-over-year. They are lowering the high end of their EPS forecast for the full year. It's down by about $0.10. The previous high end was about $2.30. They're now looking for $2.20 at the high end.

So lowering EPS outlook there. Trucking revenue, guys, up 22 percent, intermodal down 23 percent. That is a much smaller segment for them. And again, a beat there for the trucking company up here. Well, more than 14 percent here after hours. Back to you guys. All right. Kate Rooney, thank you. The freight recession continues, it would seem. The question, I think, John, is, is this a return to pre-pandemic norms, or is this actually, when you see some of these different earnings, a sign of a broader economic slowdown? And is the theme trucks over trains? I don't know. I have to see. All right. Up next,

Netflix getting a huge, over airplanes though, getting a huge boost today as the company says it's cracked down in password sharing helped to drive a surge in subscribers and that price hikes are coming. Now, the big question, can other streamers like Disney follow the same playbook? We're going to discuss that next. And as we head to break, check out another big earnings winner today, AT&T, after beating on the top and bottom lines and reporting solid subscriber numbers. We'll be right back. Welcome back to Overtime. Netflix had its best day since January 2021, up 16% on the back of Q3 numbers that we brought you here on Overtime yesterday. Blowout earnings beat net new subscribers that topped analysts' estimates by nearly 40%. Joining us now, SPG Global Principal and Managing Director

Simon Gallagher. Simon, welcome. So this big Netflix rally today recovers most but not all of what the stock lost in the mid-September drop. So with this report, has the bull case for Netflix meaningfully changed or is it kind of just back where it was? No, I think it's a 180 degree change. I think you're going to see further gains in the next few days and weeks. I think this is about as good a quarter as you could ask for as a shareholder or as an employee or as an executive at the company. There's so many good news stories here that it's hard to know which one to pick. So which one is most significant in separating it from the pack? And by the pack, I mean Disney Plus, ESPN, Peacock, Max. What did they show that you think

those other names won't? Well, I think they showed continued and significant subscriber growth. It's obviously driving the revenue number significantly, and that was well in excess of what the street expected. Simon, what's more lucrative for Netflix and really for all the streamers right now to the extent that we know? Is it these ad-supported tiers or is it the premium tiers where Netflix, for example, is raising prices? Absolutely, the advertising funded tier is a higher revenue per user. And you've seen that there's a definite push by Netflix in their stepping up of their pricing tiers on the basic and the premium tier, which will be both going up. The standard tier is staying the same and the advertiser funded tier is staying the same.

So they're really trying to push people towards that advertiser funded layer. Yeah. I mean, when we talk about competitors building out their offerings, there's so much focus on sports rights right now, too. And the fact that this is basically the glue that's keeping the traditional cable bundle together and that the future lies with streamers. I mean, we saw Disney release these ESPN disclosures as well. Just want to get your thoughts on where we see this part of the media landscape evolving to and whether we do see a Netflix or others getting in in a more meaningful way, too. Well, what was really interesting in this quarter is that Netflix has announced their first live sporting event. So that's going to be a Netflix hosted golf event called the Netflix Cup, which will take place during the

Las Vegas F1 Grand Prix here in the United States later in the year. And that's a really clever move by them in terms of combining the talent that have featured on their show Full Swing, also the talent that featured on Drive to Survive. So again, a very clever move, a way of dipping their toe in the sports, live sports water, but without spending too much money, without paying up for NBA rights. Simon Gallagher, thanks for joining us. It's time now for a CNBC News Update with Kate Rooney. Kate. Hi, Morgan. So a Defense Department official says the naval destroyer, the USS Kearney,

shot down more than one dozen drones and three attack cruise missiles, potentially going towards Israel. No sailors or personnel were killed. The Pentagon says the ship was in the Red Sea at the time and the drones and missiles were fired from Yemen. The State Department says it's working with Israel and Egypt to deliver aid within days to Gaza as the region remains cut off from humanitarian access. It comes as the U.N. calls for a ceasefire to break the bottleneck at the Rafah Crossing, which is controlled by Egypt and has been shut down since Israel started bombing

Gaza. Officials said the U.S. will be watching to ensure that those supplies will not benefit Hamas as Israel prepares for a reported ground assault in Gaza. An Israeli defense minister told soldiers at the border today that they will soon see Gaza from the inside. Back to you guys. Kate, thank you. After the break, we'll talk to the CEO of Freeport, Mac Moran, fresh off earnings about his read on the copper market, a key bellwether of global economic growth. Stay with us.

Welcome back to Overtime. Global mining giant Freeport-McMoran reporting Q3 results this morning, beating estimates on the top and bottom lines, but warning that high capital costs and the weakness in copper prices are impacting project development. Copper prices down 12 percent over the last six months. CEO and chair Richard Adkerson joins us now for an exclusive interview. Richard, it's great to have you back on. And that is exactly where I want to start with you, is the fact that just earlier this week we saw copper futures hitting their lowest level of the year. How much is that a reflection of the state of the global economy right now? There is some impact for it, particularly in Europe right now. China has its issues that CBC reports regularly on. But actually, China set a record for copper

demand last year, and the weakness in their property industrial sectors is being offset by growth in the green economy, alternative energy, electric cars, and so forth. So big picture, copper demand's good. Investor sentiment, though, is very negative about commodities like ours and equities like ours for the reasons that are well known. And so we're having to deal with lower prices. And at Freeport, our cash flows are driven by copper prices because copper is our strategy. Yeah, and I think you trimmed cash flow guidance for the year in part due to that.

We've talked about it before, Richard, but it's worth reviewing it again. And that's the fact that there is, as you've argued, the structural mismatch between supply and demand. When you have prices come off the way they have this year, what does that mean in terms of future investment with the electrification and the greenification of the global economy happening. At what point would you anticipate that we do start to see this shortfall and thus a reversal in prices? Well, it is dependent on the economy because half of copper demand comes out of China, and it is, as you said in your lead-in, a measure of the global economy. It's not only low prices, Morgan, but it's also the effect of inflation on development

costs. So you've got an issue with lower prices, higher development costs. Developing new copper mines are really challenging wherever you are for a variety of reasons. And so that is delaying the decisions to make major new investments in mines for companies like ours and others in the industry. It's delaying that. And that is simply bolstering what I'm very confident is going to be a coming shortage in copper. So we're preparing ourselves for that. We're being very prudent in the way we spend money and manage our operations.

Got a very strong balance sheet, but we're extremely confident about the long-term future and where our company's positioned. How do geopolitical events factor into all this? And I ask that knowing that you have mines in the U.S., Indonesia and Latin America. But given the uncertainty in the world right now, more broadly, how do you decide where to invest and how to invest from that standpoint? So we are we benefit because we have a very large level of current production that doesn't have near term declines of significance. So we're not forced to invest. We can make our decisions about when to invest.

We don't have time limits on projects. And so we monitor current economic and geopolitical events. We look at the economics of individual projects, how they fit volumes through technology advancing and the process called leaching and other technology deals. You can see from our results today, our worldwide organisation is performing very strongly in the face of some challenges this year. We answered the bell and rang the bell. So we're doing really well operationally. We've got a great set of assets. And we're just being prudent in the current situation about when do we pull the trigger on these big projects. They're multi-billion dollar

projects. They take years to execute, you know, 10 years or more. We're preparing for them and we'll be investing, but we're being prudent right now. All right. Those technological advances in the copper leaching, certainly getting a lot of attention among analysts on Wall Street as well. Richard Adkerson, thank you so much for joining us. Thank you, Maureen. And now we've got a news alert on HP Enterprise. The stock down about 3%, I believe, after hours. Yeah, right, bang on. The company is lowering its adjusted operating profit growth outlook to 4%. That's down from its prior guidance of 6% to 7% growth year over year.

Hewlett Packard Enterprise also reiterating its full-year EPS outlook, though it's a bit lighter than analysts had hoped. As I mentioned, shares down about 3% right now in overtime. Up next, Mike Santoli is going to look at whether the economy will be able to avoid a recession despite a key economic indicator that's falling for the 18th straight month. We'll be right back. Welcome back to Overtime. Fed Chair Jay Powell saying today that inflation is still too high and the economy needs to cool further. Let's get back to Mike Santoli, who's flagging a divergence in key indicators. Mike. Yeah, Morgan, of course, Chair Powell was also talking about the lags in

monetary policy hitting the economy. So we've been waiting for the leading economic indicators, which were reported again today and were negative for the 18th straight month, waiting for that to show up in actual economic activity. Right here, you see those leading economic indicators, the year over year change compared to the year over year change in GDP. Pretty big gap opening up right here. As a matter of fact, you had an upturn in GDP and that doesn't even count the past quarter and the third quarter when, in fact, it's expected to have accelerated. We have seen similar gaps before and also long leads between when we peaked in LEI and when we got a recession. That would include, of course, this big gap here right ahead of the global financial crisis, although even there you didn't really see much of a pronounced uptrend in GDP. So this is what we're on alert for. It's now the record long lag between the peak in the LEI and a recession, presuming we haven't been one in one right now. So very fascinating.

A lot of the LEI is manufacturing based as well as the yield curve. So some conversation about whether, in fact, those are the relevant factors. But look, they've worked in the past. Eventually, we'll see how it goes this time, John. All right. Navigating by the stars in the cloudy skies. Thanks. Well, never file an expense report again. That's what Citi is going to be able to tell commercial clients after inking a deal with fintech startup Navon, which competes with SAP's Concur. SAP up four and a half percent after earnings. Who's CEO? That's Navon's CEO. He's going to join us next to discuss that partnership. And of course, he's got plans to go public. Try to find out. We'll be right back. Welcome back. Wouldn't it be nice if AI could do your expense reports for you? Well, that's what

Citi, the third largest bank in the U.S., is offering to commercial clients after teaming up with expense management startup Navon. Joining us now to discuss Navon CEO Ariel Cohen. Ariel, welcome. I know you've got a large office in Tel Aviv, a good portion of your workforce there. Our thoughts are with them and all the innocent civilian lives at risk in the region, first of all, and on the business, though, what is the significance of partnering with a bank of this size on AI for expense management when it comes to your growth rate? Hi, John. First of all, thank you for having me. And it's great to be here with you. And I think two or three months ago, we've talked and I've explained about our Navant Connect strategy. And the idea was that we have this really amazing expense management system that is basically using technology to capture all of your expense automatically.

So, you know, I'll give you an example. I'm going to the hotel. I need to check out. I'm getting this receipt. And now my company will ask me to describe the receipt, right, to basically itemize it, describing the taxes. What did i take from the mini bar what did i do in the you know in the bar of the hotel and we automated it to your point using ai so now citibank a cardholder is uh the commercial cardholders will be able to enjoy that and in fact our entire travel platform if you have that card you'll be able to book your trips from us you can you will be able to automatically expense everything and your company will be able to reconcile, to control it, to put policy in place. So this is a very unique offering. Now, what is the impact on the financial

sector? I mean, I guess maybe it's an opportunity for you to make a sales pitch, but it seems to me I've been tracking this cooperation between large banks and fintech companies. You're talking about J.P. Morgan and Gusto just a few weeks ago. There's a chance that these larger banks use technology to pull ahead, providing this high-touch service to small and medium business clients. Are enough regional banks working with you? Yeah, we are talking with more banks. This is the first partnership that we've announced. We've announced three months ago a partnership with Visa and MasterCard to enable all of these things from a technology perspective. And now we are starting to roll it out with the different banks. And Citibank is the

first one. And to your point, it's the third largest bank in the U.S. At the end, I think that banks are really good on being banks, right, on creating credit, on underwriting you, on understanding how to provide loans. And tech companies like us are really good on creating really good technology. And teaming up, like you've mentioned, between tech companies and banks can create amazing, amazing offerings for their customers, right? Our customers and the Citibank customer in this case that can completely eliminate expense management, can book their trips in five minutes. So I think that if companies will focus on what they're really good at, banks on really providing credit, credit cards and so on, and will provide the technology, the offering in the marketplace will be really good. Aero, it's no secret that you guys are a late-stage startup that a lot of people are watching,

tantalized for when the IPO window is open wide enough. I know it can be, people often get cagey talking about that kind of stuff, but when you see what has happened with Arm, with some of the other companies that have come public, different from you, software as a service, how do you feel? Yeah, I think the market is probably there were two or three weeks that it looked a little bit better. But if you look at the market generally, it still has a lot of room to go for a company like ours to feel that that's the time to go public. You and I talked about it in the past. We don't have new news around that. The company, to your point, is late stage. Our revenue, our numbers are of a late stage company.

But the market is not open for this right now. So we are doing our thing. We are creating value for our customers. We are partnering. We are expanding our time time which this partnership is about expanding the time. And eventually when the time would be right from the market

perspective. You'll probably see us talking about it. All right well not cagey at all. Thank you for. For clarifying that. Arrow good to see you. CEO. Thank you good to see you as well. Thank you. I mean. We want to see a similar kind of deal happen at

CNBC, I'm all for not ever having to deal with expense reports ever again. All right. Regional bank earnings take center stage on Wall Street tomorrow. A top analyst tells us what investors should expect from those results on the other side of this break when overtime returns. Regional bank earnings are in full swing tomorrow. Comerica, Huntington, and Regents Financial all reporting before the bell. Let's bring in CFRA analyst Alexander Yocum. Alexander, let's take the odd one out first. Comerica is the only one you don't have a buy on. It's a hold. Why? Yeah, so I actually have a sell on Comerica. Yeah, unfortunately for them, they have something that used to be good that has now become a headwind.

So they have high levels of non-interest bearing deposits. So those were good, but now those clients are starting to look for yield. So we're a little bit worried with them that they're going to see those non-interest-bearing deposits get replaced with interest-bearing deposits. And that would likely impact their net interest margin. They also have the problem with large unrealized securities losses. So we think with a bank like that, they're probably going to have to build capital for a while. And they're just sort of facing an uphill battle right now. Okay. So where do you see an opportunity to buy right now?

Where is their value across the regional bank sector space? Yeah. So we really like a bank like East West Bancorp. East West Bancorp is a bank that has outperformed the industry in terms of loans and deposits over the last 10 years. They cater to Asian Americans. So they kind of get rid of a lot of those competitive pressures of banking. They're also one of the best capitalized banks in the industry. So they actually announced this quarter that they're going to return to share repurchases, where virtually no other regional bank can do that. And they also don't have large unrealized securities losses. So that's a benefit as well. We actually think they'll have positive earnings this year, whereas most regional banks will see pretty significant contraction. KRE, regional bank indexes, is down considerably.

Can investors buy it here, or do they have to be choosy about names? Yeah, even though it is down a lot, you know, we are on pace for the worst year since 2008. But I do think you have to be choosy. You know, we are facing regulatory pressures. Then there's rising funding costs. Credits is getting worse. And then loan demand is quite weak. So we definitely think you have to be choosy in this environment.

And buying the space will not necessarily lead to our performance. Okay. Alexander Yochum, thanks for joining us. Thank you. Before we go, take another look at shares of Intuitive Surgical. Those are under pressure right now. The company's CFO just making comments on the earnings call saying that last quarter, they noted the growth rate of bariatric procedures had slowed because more people are using weight loss drugs. This quarter, he says they are seeing a lower growth rate than Q2, but that they still see double digit growth. He also noted they still believe they are gaining share in the bariatric surgical market.

Nonetheless, those shares are down 7 percent right now, John. Yeah. So growth is slowing, but they say that they're gaining share. This contrasts somewhat with what Abbott's CEO was telling us where he was saying, hey, this issue about GLP-1s, it's overdone, affecting, you know, other med tech players. But, you know, we see it affecting intuitive surgical. That one's down almost 7% right now after hours. Yeah, we get more earnings tomorrow morning, including American Express, which will be one to watch as we've seen credit balances for consumers grow.

And then SLB, which really kicks off the energy parade, energy earnings parade as well. Yeah. And with American Express, particularly well-heeled consumers. So that's going to be one to watch. And if there's a difference between how it compares versus the others. That's right. President Biden, foreign policy address tonight, one to watch, too. That's going to do it for us here at Overtime. Fast Money starts now.