Closing Bell - Closing Bell Overtime: Port Strike & Ford's EV Plan 9/30/24

Episode Date: September 30, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

That's the end of regulation. Pure Storage ringing the closing bell at the New York Stock Exchange. And Bessemer Venture Partners doing the honors at the Nasdaq. We've got some volatility as we wrap up the month of September and the third quarter. As comments from Fed Chair Powell spooked investors mid-session, though we did rally into the close here. We might potentially be seeing another record close for the Dow as we settle out. It is on a nice point here. That's a scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime.

I'm Morgan Brennan with John Ford. Yeah, and coming up this hour, industrial strength. The industrials finished the quarter as one of the top S&P 500 sectors, but can that outperformance persist into year end? Well, top analyst Stephen Tusa joins us to discuss. Plus, former Ford CEO Mark Fields will be with us to talk about the big drop for automakers today after warnings from two foreign manufacturers. And will a ports strike throw the whole U.S. supply chain into disarray?

Again, the chief policy officer from the Chamber of Commerce is going to join us with his call for the government to take action ahead of the midnight contract deadline. Well, we begin with the market as we do close the books and what's historically been a weak quarter, the third quarter, but it was different this year. The Dow climbed 8% since the beginning of July. The S&P 500 was up 5%. The Nasdaq is lagging, but still up 2% this quarter. The big winner, the Russell 2000, that was up nearly 9%. So let's bring in our market panel, Dan Skelly of Morgan Stanley Wealth Management and Emily Bowersock Hill of Bowersock Capital Partners. It's great to have you both here. It does look like maybe the Dow is finishing slightly lower. I can't totally tell on my screen. But we did finish higher on the S&P and the NASDAQ to finish off the month here. Dan, I want to start with you

and the fact that typically this is such a weak time of year. And we did actually see that sell off halfway through the quarter. The fact that we regained ground and then some tells us what about this market? Well, first, it's great to be back with you, Morgan. Thanks for having me on. So, look, we went down the elevator in late July and early August. We had a 9% drawdown extremely quickly. And as you noted, we came back. And I think what the comeback has really signaled is more strength and more resilience in the economy, tracking close to 3% GDP still. And finally, confirmation that Powell and the rest of the Fed is going to get ahead of any further labor weakening. And so I think it's just more confirmation that Powell and the rest of the Fed is going to get ahead of any further labor weakening.

And so I think it's just more confirmation that the runway to this soft landing is finally in sight. And Emily, I want to get your thoughts on what Powell did have to say. The Fed chair did have to say this afternoon that did ding markets at least temporarily here, especially given the fact that Fed officials have been leaning a little more dovish post-FOMC meeting and that 50 basis point hike. Have a listen. This is not a committee that feels like it's in a hurry to cut rates quickly. If the economy performs as expected, that would mean two more cuts this year, a total of 50 more. Which we know, Emily, is what the dot plot is indicating. However, we are also ahead of a busy week of macro data, including, of course, the jobs report on Friday. How much

is going to hinge on that? Well, first of all, I would say that Chairman Powell is remarkably adept at packaging and marketing Fed decisions. So he is able to come across as calmly proactive, even when the Fed is doing something like cutting rates 50 basis points. And one of the ways he does that is by very carefully telegraphing his plans along the way. And that is part of what he was doing today. With regard to the jobs data, I would agree with Dan that we are seeing a very resilient economy. And 3% GDP growth, I would expect jobs to come in in line with expectations. I think the economy has proved remarkably resilient during this period of rising rates. And the fact that inflation is now down to 2.2 percent and is essentially, in our view, in remission, gives the Fed room to do exactly what they said that they were going to

do, which is cut twice at a quarter point each before the end of the year. And Dan, you seem to be saying that maybe we can take our eye off the Fed a little bit, like relatively speaking. There's been so much talk about how much is the Fed going to cut? Is the Fed going to do this or that? You're saying that right now with the S&P at about, what, 21 times earnings, the economy is the key to the performance of stocks from here? I mean, we get to pay attention to the economy? Absolutely. And by the way, that's what some of the daily and weekly trading trends have told us over the last several months is that the economy is becoming way more important. And so, look, I think you have to think about and respect the rotation that's happened over the last three

months or so. I know we'll get into it. But looking out into next year, you can't have both this aggressive Fed cutting that's currently priced by Fed funds and reach these 15 percent earnings expectations. So we frankly, we come out a little bit more confident in the idea of having better earnings than we do that the Fed's going to need to aggressively cut from here. And Emily, you expect a strong fourth quarter similar to the third, you say, but not without some chop. A lot of this depends on, you know, as we know, the market likes certainty. And I think we need a decisive outcome in November. And it's not entirely clear that that's going to be the case. The best outcome for markets would be, you know, Harris as president with the Republicans holding the House or the Senate or both, so that we would have divided government. The worst outcome for the market would be a protracted

period of uncertainty, legal challenges, violence in the streets, all of which are possible, as we know. So I think, yes, we are expecting, we think that the market was set up in the third quarter for a very strong finish, but I would expect volatility to continue and for that finish to be strong once the elections in November are resolved. All right. Speaking of a strong finish, the Dow did get that record closing up slightly. Emily, Dan, thank you both for joining us. Now let's turn to auto stocks moving in reverse today after warnings from two companies overseas. Phil LeBeau has details.

Phil? Yeah, John, one of those companies, though, Stellantis, has a huge footprint here in North America. It is the parent of Jeep and Ram and Dodge. And boy, that's where most of the problems are when you look at Stellantis. So the company out with a warning today saying that it is going to be looking at EBIT margins of five and a half to six percent. Previously, they were saying double digit for the year. So that's a huge cut right off the bat. Free cash flow, negative five billion to ten billion. They were previously expecting positive free cash flow, and they're cutting their North American production by about 200,000 vehicles. The inventories for Stellantis, this was a problem in the first quarter. You didn't have to go far to find a Jeep or a Ram dealer who was saying,

what are they doing? They're cranking out the product, and it's not selling as quickly because they didn't bring down the price. And as a result, there you have 71 days supply. That is higher than you would like within this industry, though it has improved over the last month or two. They have cut Jeep and Ram production. They report their Q3 sales tomorrow as you take a look at Stellantis. We're showing you a six-month chart. Why are we doing that? This stock is down 51% in the last six months. By the way, when you take a look at the other European automakers, and yes, we know that Stellantis has a big footprint in Europe as well. Daimler, BMW, Volkswagen, their profits are all falling. They've all issued warnings within the last couple of

weeks. And they're getting pressure both in terms of their footprints in China, seeing shrinking sales, and the Chinese exporting vehicles into Europe, which is undercutting their sales within Europe. Finally, when we're talking about China, you have to talk about the other warning today came from Aston Martin Lagonda. This is a chart of them over the last six months. They are cutting their outlook. China sales are falling. But Aston Martin's a niche automaker, guys, not on the same scale as Stellantis. The Stellantis warning, that's a huge deal. That is

yet another sign that there's just simply too much capacity in this world. And the problem is the capacity is not being cut in China. The Chinese keep cranking and they keep shipping it overseas. And that's putting pressure on automakers like Stellantis. And of course, that is what China does with its commoditized goods. And we've seen how all this is playing out now. U.S. policy, federal government trying to step in to counter some of this here in this market. I just want to go back to what we're seeing in North America for Stellantis, because I wonder if in a world where the Fed is now cutting rates, that begins to juice sales. It'll help. There's no doubt about that.

But they've made the decision that they are going to cut volume as opposed to cut prices. So they still are keeping their prices relatively elevated compared to what they were a couple of years ago. But incentives are going up. There's no doubt about that, Morgan. We'll see that with all of the automakers. And we'll hear more about that tomorrow and the next day as we start to get the Q3 sales reports. Yeah, we're going to keep talking about that here on Overtime, too, Phil. Thank you. For now, let's bring in Senior Markets Commentator Mike Santoli for a look at some of the moves under the surface during the third quarter. Mike?

Yeah, John, the story in large part in the first part of this year was how unbalanced the markets had grown. There was a huge divide between winners and losers globally, among sectors, within sectors. So here's how that has somewhat become more in balance over the course of the third quarter. It's a two-year chart of the S&P 500 relative to all stock indexes in the world, excluding the United States. So you see it's basically had this relative outperformance diminished as the rest of the world has rallied. Of course, Really pronounced moves in China over the last week has pushed in that direction as well. Now, take a look at J.P. Morgan relative to the banks index. And you'll see a pretty similar pattern, although one that is more flattened out over the course of a few quarters. It did reach a record high relative to banks.

J.P. Morgan did right at the beginning of July. And that has been cut into it. Also got a downgrade today for Morgan Stanley. Finally, Eli Lilly versus the broad pharma sector, another similar one. So you had all these high momentum, anointed secular winners within a lot of these groups that did actually see their premium pulled back a little bit. Not to say it's going to have to unwind completely, but it shows you we have a somewhat more balanced market, John, than we had at the end of June. Mike, throughout the quarter, really for a long time now, we've been talking about market breadth, and there are a lot of different ways, I guess,

to get to that. The Russell had a strong quarter, I think, up 9%. You've highlighted some other ways. How much broader is the market now than it was at the end of Q2? It's significantly broader. One way to look at it is, for example, the percentage of stocks that are above their own moving average. Let's say they're in an uptrend. And that's now clicked higher toward 70 percent or so. Parts of the first half of the year, you were actually below half. So measures like that and then also just the cumulative tally of advancing versus declining stocks, that's the cumulative breadth measures that are also hitting all-time high. So a lot of it shows you there's more balance.

I don't think it means it's absolutely, objectively speaking, a better market, a stronger market if it's broader, but tends to be at least you're avoiding the possibility that the market is kind of feeling some macro pressure that's being covered up by just a handful of outperformers. So maybe a more resilient market. Well, Mike Santelli, yeah, we'll see you later this hour. Great to have that from you. The industrial sector. Speaking of this conversation, it jumped 10 percent in the third quarter, with names like 3M and GE Vernova seeing outsized gains.

Up next, top analyst Stephen Tusa lays out his top picks in the space for Q4. Plus, when the clock strikes midnight, more than 40,000 American port workers could go on strike, potentially snarling supply chains ahead of the holiday shopping season. We are going to talk to the head of policy at the Chamber of Commerce about why he wants the government to get involved. Overtime is back in two. Welcome back to Overtime. The industrial sector outperforming the S&P 500 in the quarter, driven by big moves in GE Vranova, up nearly 50 percent, 3M up about 33 percent, and Caterpillar up 17.

Joining us now for where he sees opportunity in the fourth quarter is J.P. Morgan Managing Director Stephen Tusa. Stephen, good to see you. So you like near-term Veralto, but we're also right up against your price target there. You also have overweights on Ansys, which is 15% below your price target. Tell us the why behind those calls. Well, first of all, thanks for having me. I'm not sure it's Viralto. It's Vertiv, which I think you and I have talked about before in the last several months. Oh, Vertiv.

Yeah. Yeah. It's Vertiv. So we are still very positive on Vertiv. It pulled back with the kind of AI trade scare of the summer, which we believe was a great buying opportunity. And it remains that way as the data center markets are far and away the best we've ever seen in our sector, really covering it for 25 years. And Vertiv with 75% exposure is still the best long on that. Now, we're a touch away from the price target here. But obviously, as we roll forward to discounting 25 and 26, which happens over the next couple of months, that that price target will invariably move up with a new year of earnings. And so we'll see how that analysis shakes out. But $100 should be thought of as,

you know, kind of a minimum fair value here at this point in the year. So still, we love that one as our top pick here. And on Ansys, a little bit of a nuance there. They're currently getting acquired by Synopsys. So it's not really an active call right now, given Synopsys has put in their bid and there's not going to be much of a change there. So still love the assets. But that one is, you know, more of a merger art play than a fundamental call right now.

And I know you don't cover software either with Rolto. Well, I do. Okay. I cover the industrial software companies, including PTC and Altair and Autodesk. But not Synopsys, I meant, in particular. So we'll have to keep an eye on Synopsys ourselves. In Q4, you also like 3M and Johnson controls. Tell us about how much of that is because of a turnaround, perhaps, in 3M there? What else is behind it? Yeah, it's almost the vast majority of both of those calls are because of

turnaround. So when you think about the barbell we have on in industrials, it's the growth names like Vertiv, like Eaton to a degree based on data center growth. The other side of the barbell is what we call idiosyncratic stories that have some sort of margin upside from a management play. And both of those stocks, new management at 3M came in. We think there's going to be a very nice trajectory on margins. They're going to unveil that probably in the first half of 25. But in the meantime, we see upside in numbers for a very cheap stock. And for JCI, there is a management transition that's going on here. The older CEO has announced

he's stepping aside. There's going to be a new management team announced by year end. And we think some of the optimism we've seen at 3M will be analogous to what we see at JCI going forward. So both of those very different than the growthy names, but more of idiosyncratic margin upside with cheap valuation. Yeah, it feels like there's two buckets here. One are the AI-levered industrial names, and the other is some of these turnaround names like 3M and Johnson Controls. I'm curious how closely you're tracking some of these industrial players

that do have exposure to China, especially given the fact that China is now pulling out the stops with stimulus. Over the weekend, most recently some of these actions that are geared towards a turnaround in the real estate sector. I mean, a name like 3M, for example, this has been a drag for that company. Yeah, I mean, for 3M, China, it's a little bit of an indirect exposure because they sell into electronics markets that are then sold back to the U.S. So it's still a bit of an export play and not as much of exposure to what the government there is

trying to at least sustain and save, which would be the property markets. I think our Chinese analysts that cover this stuff would say that you have yet to see the bazooka style stimulus that you saw in 08, 09. So it's still a bit more of a stabilization exercise than a true effort to stimulate activity on the ground. But if that were to happen, we think the biggest beneficiary in our group would be either Otis. They make elevators. They have about 15 percent sales exposure over there. Obviously, a big play on the property markets. And then secondarily, DuPont, who has roughly 20 percent of sales to China, some of which comes back here through electronics, but a decent amount of which is being sold also, you know, into China for China.

So those are kind of the two most China lever names in my group that we're optimistic. We're more optimistic on those today than we have been in a while. We're recommending DuPont. Otis, we still think there's a bit of an earnings downside from China because there's a lagging impact from the downturn in the property market there. But both of those could look a little better in a few months as we get more visibility on the upturn there. But we're not bearish on China, you know, given what's happened in the last couple of weeks. OK, covered a lot there. Stephen Tusa, thanks for joining us. Thanks for having me. We're less than eight hours away from a potentially crippling strike at ports on the East Coast

and the Gulf of Mexico. Up next, the chief policy officer from the Chamber of Commerce on why he's asking the Biden administration to intervene. And later, we just talked about the strength in the industrials in Q3. Well, homebuilders did even better with the ITB homebuilder ETF jumping 25 percent. We'll talk about the names that will try to build on that strong foundation in Q4. We'll be right back. Let's get a CNBC News update with Bertha Coombs. Bertha. John, Israel is planning a limited ground operation that could begin immediately, according to U.S. officials.

Israel's operation into southern Lebanon could start as early as today, with the goal to push Hezbollah forces away from the border and to target infrastructure. And just moments ago, the Israeli military issued an urgent warning for residents in Beirut's southern suburbs to evacuate. The Biden administration announced today it will expand restrictions announced in June that made it tougher for illegal immigrants at the southern border to request asylum. Starting tomorrow, illegal crossings have to stay under 1,500 for 28 days before illegal immigrants are allowed to request asylum. The ACLU and other immigrant

advocacy groups are challenging the restrictions in court, saying the rules cut into vital protections for people fleeing persecution. And in Georgia, a state judge in Fulton County struck down Georgia's six-week abortion ban that went into effect in 2022. The judge's ruling now allows the procedure to resume, making it illegal or making it legal up to 22 weeks of pregnancy. Back over to you, Morgan. All right, Bertha Coombs, thank you. We're less than eight hours from tens of thousands of dock workers potentially beginning a strike that could shut down, would shut down,

ports across the East and Gulf coasts. We've heard from the National Retail Federation CEO Matt Shea this morning on Money Movers about the potential danger of a rebound in inflation in the case of a protracted strike. Whether it's retail or automotive or pharmaceuticals or food and drinks, beverages, all those things are going to be impacted at a time when we're finally turning the corner on inflation. We know that the job market and overall economic activity has moderated from the highs over the last several years. And this is really the last thing we need as a self-inflicted wound as we go into the fourth quarter of the year.

Well, joining us now is U.S. Chamber of Commerce Chief Policy Officer Neil Bradley. The chamber out with a new poll about the potential strike, saying a majority of Americans want the government to step in and stop it, and just sent a letter to President Biden urging him to intervene. Neil, it's great to have you on. I've seen numbers as high from J.P. Morgan as $5 billion a day in economic impact. But we also know that a lot of the shipping companies, a lot of the shippers who have their goods on those ships that would normally be coming into East and Gulf Coast ports have been diverting them and making other plans. So at what point could this truly become harmful and detrimental to the economy and impact start impacting consumers and businesses well Morgan thanks for having me on if we have a

strike at 1201 tonight which it does look like that's where we're heading within hours you will start to see some of the ripple effects so if you have just a one-day strike for, that creates a backlog within these affected ports that takes, on average, six days to clear. If this strike goes on for two days, you're talking about two weeks just to clear up the mess that's been created. So it's not hard to imagine a situation where even a strike that only lasted one week actually disrupts the economy well into November. And if you're a small business who's counting on goods coming in over the next two weeks, for example, for your holiday sales season,

you may miss out on the entire season if this strike actually occurs. Now, we just mentioned that you sent a letter to President Biden. I mean, he has the power as the president to potentially invoke the 1947 Taft-Hartley Act. That gives the federal government authority to step in in labor disputes. But he's also been pretty vocal in saying he's not going to do that. So what is your message to him today? And why do you think you can change his mind if it does involve invoking that act? Well, taking the invocation of Taft-Hartley off the table is just a mistake.

This is not like it's a new idea. As you pointed out, it's been in the law since 1947. And on 37 different occasions, President Biden's predecessors have used this act to ensure that striking workers can't bring our economy to a complete halt. And so our message to the president is that this is much bigger than one union and these ports this is a really a question for our entire economy he has the responsibility and the authority to use the powers under the law to protect our economy and by the way it happens to be what the american people want we just released a poll today 57 percent of americans say the president should use this authority to protect our economy and keep the ports open and operating.

You know, how many days you think before this becomes a sort of red line event for the economy? How many days of striking? Yeah, as I mentioned earlier, John, you know, it really only takes one day of strike to have these types of. But how bad is that, is what I'm asking. Sure, you have of ripple effects. But how bad is that, is what I'm asking. Sure, you have the ripple effects. You end up potentially with companies pursuing air freight instead, which costs a lot more, and I imagine those costs get passed along to the consumer, affecting inflation.

But how many days, if you've calculated that, before it becomes a really serious problem? Yeah, I think it's just a few days. Because as you point out, this is a compounding effect. Look, right now, look at spot shipping prices. Look at what's happened over the last few weeks as importers and exporters have tried to get ahead of this strike. They've actually driven up the cost of shipping goods into and out of the United States just by the threat of a strike. And so if we actually cross the threshold, if we actually end up in a strike, I think that is going to send shockwaves through the economy. Remember, we haven't had a strike on our eastern Gulf Coast ports since 1977. That strike lasted for 44 days. It is a much bigger, much more trade-reliant economy today. If we even come close to that,

you're talking about economic devastation for the United States. I mean, we've seen labor take a much more aggressive approach and have the leverage to do it in recent years because it's been a tight labor market. And obviously, we've got Boeing and its striking machinists right now and reports that those talks have broken down as well. You've got the possibility that UAW workers at Stellantis factories are actually going to start going on strike as well for what they see as violations to their labor agreement. It all raises the question, is this labor's last stand if we do have a cooling job market or does this unrest continue? Yeah, I think we've entered a situation in which the demands that are being put forward by many labor leaders just are out of touch with kind of economic reality. Even in this situation, you know, the port operators want to provide a big raise to workers.

But the 77 percent raise that the union is demanding, there's just no way that the economics can accommodate that. By the way, all of us who buy things would end up paying that price. And so I think we have a situation today where you're right, the unions are feeling more emboldened, the union leadership, but their tactics have real collateral damage from small businesses who can't get goods in to think about the restaurants around some of these factories that have been shuttered by recent strikes. There's no strike fund for the restaurant owner who loses all their business. There's no strike fund for the manufacturer who sells goods into these manufacturing plants. And so we're starting to see that this aggressive posture by labor leaders is really beginning

to drag on our economy. Well, we'll see what turns to a pumpkin when the clock strikes midnight. Neil Bradley from the Chamber, thank you. Thanks for having me, John. Automation of cranes, gates, and container-moving trucks is part of the argument here by these workers. AI, back in the spotlight with labor. It all goes back to AI. Well, coming up, putting the pedal to the metal. Mike Santoli explains why this chart of copper and gold prices is a telling signal of the strength of the global economy. And check out some of the names hitting record highs on this final trading day, final day of third quarter, including Lowe's, Jacob's Solutions and Lockheed Martin.

We'll be right back. Welcome back. Mike Santoli returns for a read on global growth by looking at commodities and mining stocks. Mike. Yeah, Morgan, perking up by these measures. So HG, of course, is copper. GC is gold. This is a five year chart of that relationship. They've come together at almost exactly the same place. But you see there right at the end, just copper shooting higher, going just about to its highs from this range in 2021 when you had the supply chain issues. And, of course, the global reopening as well as the Ukraine war eventually. And gold has been strong for different reasons, obviously, outside of growth, whatever you want to talk about, capital flight and all the rest, maybe deficit spending.

But it is a net positive view on the China stimulus and how that might flow through to the global economy. Now, take a look at mining stocks relative to energy stocks. I feel like this is very conspicuous. It's commodities that are really responding well, aside from oil, because of supply issues ongoing right there. So this is a two year of the mining and metals ETF really having its way with energy at this point. Energy is looking a little washed out and oversold in the short term. So maybe watch for some convergence here, Morgan. I mean, the irony to me of that, too, is that a lot of those commodities like copper, for example, are used in the electrification process. So all this infrastructure build out that takes you starts to take you away from fossil fuels and crude and energy stocks is actually part of what's propelling

the investor sentiment for these other commodities. Yeah, in large part. And of course, you have the tailwind of, as you guys were talking about, everything coming back to AI. I mean, the data center build out. So even, you know, it's the power, it's the data centers. And then it's just in general. Look, I mean, the absolute levels for copper, for example, are not extreme on a long term historical perspective, but they definitely have perked up now and it's seen as if they're somewhat tight market at this point. All right. Mike Santoli, thank you. Well, will homebuilder stocks be able to build on this year's big gains in the fourth quarter? Well, housing expert Ivy Zellman is going to weigh in next.

Welcome back to Overtime. Homebuilders rallying hard in the third quarter, handily outperforming the S&P 500. Can the sector keep building on the momentum in the fourth quarter? Well, joining us with names that should be on your radar is Zellman & Associates co-founder Ivy Zellman. Ivy, it's great to have you back on. I mean, it's kind of incredible. I'm looking at a chart right now of the ITB Homebuilders Index. I mean, we had gains through the first half of the year, then we gave them all up,

and then we had a big rebound starting in July. Can the gains continue? Well, first, thanks for having me. And the builders have been on a tear. They're actually trading at cycle highs. Looking at multiples, they're trading about 2.3 times book value. And while the stocks have gone up, they've gone up really with the growth of book value, not because of higher multiples, but a higher book. And I think for them to break out here, we think it's going to be challenging. They are definitely at cycle highs, though. And they've benefited, as they always have, when the Fed is anticipated to be cutting and rates are going down, our home building stocks always work, historically, other than obsession.

Then they don't work. Gotcha. So, I mean, so this is really just a buy the rumor, sell the news type of dynamic for home builders. What would it take then to see a breakout? Well, I think that the necessarily buy on the rumor, sell the news, but, you know, their performance has been very resilient despite the backup and rates that we saw. What people want to see now is not only a continuation of strong volume, but they want to see a resumption of pricing power, which I don't think they're going to have, unfortunately, because they're heavily incentivizing, especially for that first time buyer. They're buying mortgage rates down into the fours, even into the high threes for 30 years, which is a great buy for the consumer. But that won't translate into margin expansion.

And frankly, they're going to run out of low cost land that they bought pre-2020, likely not till 26. But I think margins are in the process of a downward trajectory back to more normalized levels. And that might not be as favorable with investors. So, Ivy, looking at the different segments between luxury home builders and more mainstream, who's better positioned here? Well, frankly, we think the higher end is better positioned. I think that that consumer is not stretched. They're definitely benefiting from substantial wealth appreciation through their home, their piggy bank. And we're seeing continued strong demand in that segment. So I think those builders will outperform.

One of the reasons we like Toll Brothers right now is one of our top picks. And regionally, how much does inventory play in? What areas geographically look like they have the best opportunity? Well, right now, the markets that are most challenged are really those in the southeast that had the biggest home price appreciation Florida is probably top of the list as

most challenged where inventories have already increased substantially along with many Texas markets I think in the northeast we're seeing stronger demand- given limited supply and I think where there's a divergence in the

market it's where inventories are rising we see more competitive pressure, home prices having to capitulate for buyers to move that inventory, whereas in the Northeast and in the Midwest, there's really nothing for consumers to choose from. So we continue to see home prices rising in those segments of the market or those regions of the market. Given the hurricane that we just had ripped through part of the southeastern U.S., you have economic losses now being estimated in the hundreds of billions of dollars. We put it in top five hurricanes from an economic loss standpoint. How much impact does that have on the housing market in some of these hotter areas of the country? Yeah, it's just catastrophic.

So obviously horrible for those families. Roughly 4% of the public homebuilders communities were impacted. NVR had the largest exposure along with DR Horton, I believe. But I think as we think about these families and having to contemplate where they're going to live, we're going to see what we've seen historically as multifamily or multigenerational living, people doubling up with friends and family and trying to figure out where their next home is going to be. But I would say that builders, as you can imagine, traffic is pretty much non-existence. People are not looking out right now in the communities that have been impacted.

There's millions of people without power. So it's going to slow down the sales for builders that are more concentrated in that part of the country. And we'll see that reflected in the fourth quarter results, I'm sure. Does a potential port strike affect home builders at all? Are they mostly looking at stuff that's not coming in on a boat? It will affect the products that they utilize to build their homes. So we'll see more inflation and that's not going to be good for the outlook for their margin profile. So I'd say that it's just going to create more supply chain disruption as it did during COVID. I would anticipate it's not going to be good for any industry and the builders will be impacted. OK, Ivy Zellman, thank you for joining us.

Thank you. Up next, former Ford CEO Mark Fields on whether warnings from two major automakers are a red flag for the industry. And Apple, the big winner in the Dow today after analyst notes from J.P. Morgan and Morgan Stanley pointed to improving demand. How about that? A lot of Morgans. For the iPhone 16 Pro, yes. Big day for Morgans. Welcome back to Overtime. to overtime. The auto sector took a hit today after Stellantis issued a full year profit warning

because of deterioration in the global industry backdrop and growing competition in China. Aston Martin also warning about its profit. Joining us now is Mark Fields, former Ford CEO and a CNBC contributor. Mark, good to see you. So hard to sell cars in China because its consumer is strapped. Hard to sell cars profitably in Europe with Chinese cars flooding in. How does this resolve? Well, it's a really tough environment, John, as you mentioned. You know, it's a worsening outlook, particularly in Europe and in China. And if you're a German or a European based OEM, it's going to get really tough.

And particularly the German brands. I mean, part of it is because they get a lot of their sales and profitability from China, and that market has slowed. You also have, at the same time, you could say, is it a cyclical change or a secular change as the Chinese consumers start preferring more domestic brands. So it's going to get tough. So I think what you're going to see from the European automakers because of this situation, you're going to see job cuts. I think you're going to see factory closures. And in particular, I think you're going to see a factory closure, too, in Germany. And at the same time, some of the governments, maybe the German government, you know, creating a cash-for-cunkers type of incentives to support

the industry. But it's going to be very, very tough. And at the same time, particularly in the European market, they've opened the door to these very affordable EVs that the European automakers have to sell to meet their CO2 emission requirements from the regulations. So because of that, are we less likely to see tariffs widespread in the Western world against these Chinese EVs? Well, I think obviously you're seeing that here in the U.S. You know, Europe has given us a precursor of what may potentially happen here in the U.S. I think that's why you saw the U.S. government increase the tariffs from about 27 percent to over 100 percent. In Europe, what I thought was interesting, John, was, you know, originally a couple of months ago, six months ago, they were talking about 35,

40 percent tariffs on Chinese EVs. I think that's only in the final documents, only around 10 or 12 percent. You know, you're going to have the politicians, you know, discussing with the OEMs their cost reduction closures, cost reduction actions, which may include plant closures and job cuts, which runs right into their decisions to allowing these Chinese EVs to come in, you know, take a lot of market share from the automakers. And they're going to have to take some cost actions to right their businesses. And it does seem like the U.S. is taking its cue from some of these lessons we're learning in Europe with China sending so many of its EVs into that market, whether it's 100 percent tariffs on Chinese made EVs here, which was

implemented during the summer or now just in the past week, this proposal to ban Chinese software and hardware on connected vehicles on American roads. I want to get your thoughts on that and how that policy, all of that policy continues to evolve here. Well, I think, you know, Morgan, as you know, the Chinese government has supported, whether it's through subsidies, incentives or otherwise to Chinese manufacturers to develop their EV ecosystem. And they now have nine million units of excess capacity that they're going to sell somewhere outside of China. So I think it's very appropriate for the U.S. government to take actions not only on economic, but as you mentioned, security guidelines. But make no mistake about it. You know, the automakers, the Western automakers

have to face off with the Chinese brands across the globe. So they get a little bit of breathing room to get their act together and get their costs down, particularly around EVs here in the U.S. But they have to compete globally. And that's why it's so important for automakers like Ford and GM and others to create low-cost EVs to fight this challenge that the Chinese brands are presenting around the world. Speaking of, the fact that Ford is set to offer free chargers to EV buyers through year-end, what does that signal? Well, listen, all the projections of how the market was going to grow have not come to fruition. And you've had the automakers put in products and capacity and they're faced with a decision. Right. They're faced with a decision. Do they increase incentives or giveaways to increase demand or do they cut production?

And I think what you're seeing, Morgan, across the OEMs, you're seeing them do both. And in the case of Ford, you know, I do think they have the right strategy because it's not only about EVs, they have hybrids. But they said, listen, rather than putting more incentive on their F-150 Lightning or their Mach-E, let's give the customer a free charging infrastructure for their home where they may see that as a better value. But the bottom line is the OEMs have to incentivize the markets or they have to cut production. Okay. Mark Fields, thanks for joining us. Thanks.

We have a news alert on SpaceX. The FAA just issuing a statement saying it is requiring an investigation into an incident with a SpaceX Crew-9 mission that launched over the weekend. This is focused on the Falcon 9 rocket's second stage, which landed in the ocean as planned, according to SpaceX, but thanks to a, quote, an off-nominal de-orbit burn, actually landed outside the designated hazard area. Now, the launch, which did successfully deliver NASA's Crew-9 astronauts to the International Space Station, is the next development surrounding the other NASA astronauts that are still on the ISS, who arrived with the Boeing Starliner capsule back in June. Now, SpaceX's Crew Dragon capsule for this mission, it's the same spacecraft that is poised to return Sonny Williams and Butch Wilmore with Crew-9 back to Earth in early 2025,

around eight months after their original, what was supposed to be a week long, Boeing test mission launched. Well, up next, the earnings on tomorrow's calendar that need to be on your radar and the clues they could give about the state of consumer spending. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Got breaking news on a chip maker just filing to go public. Seema Modi has the details. Seema.

Yeah, that's right, John. We have Cerebrus filing for an S1 with plans to go public sometime in the fall under the ticker CBRS on the NASDAQ. Cerebrus is a company that designs chips for inference and training on this IPO. It's being co-led by Citi and Barclays. Just looking through some of the financials, Morgan and John, $79 million in 2023 full year sales, up 220% year over year. Net losses of $127 million. We're still looking through the results here but of course the main takeaway here is we have a new semiconductor company that is expected to go public this year back to you all right team emoti thank you it's time for your wall street look

ahead nike is the big name on the earnings calendar but investors will also get results from lamb weston mccormick cal main foods and paychecks that's just tomorrow and on the economic front we will get the august construction spending and job openings and labor turnover reports and the September ISM manufacturing plus auto sales data. Jolt is going to be one to watch all of this labor data, especially amid the commentary we got from Fed Chair Powell and others today and coming off of that 50 basis point cut just less than two weeks ago. For sure. But Nike is bound to be spicy with the executive changes at the top that we're anticipating there. Well, not just anticipating, that are happening and figure out where that fits

in with the broader retail environment. Yeah. And of course, they have so much more competition. He doesn't actually take the helm until October 14th. A key question we don't know yet, I haven't seen anything on it, is whether he's actually going to jump on the call to make any comments. But regardless, analysts are going to want to know how this all shakes out where Nike fits in with everything else going on. Yeah, and we'll be covering it here on Overtime. Meantime, Dow record close again today to finish out the Q3. That does it for us here at Overtime.