Closing Bell - Closing Bell Overtime: Stocks Sink, Fed Up & Weight Watchers' Big Deal 3/7/23

Episode Date: March 7, 2023

Stocks selling off on Wall Street after Fed Chair Jay Powell said interest rates are likely to be higher than previously thought. Morgan Stanley Global Chief Economist Seth Carpenter reacts to Powell and discusses whether he thinks the economy is heading for a recession. Fundstrat's Tom Lee explains why he is still so bullish on the market despite interest rate headwinds. NYU Stern Professor of Finance Aswatch Damodaran on how stubborn inflation is impacting the market's valuation. WW CEO Sima Sistani on why the company formerly known as Weight Watchers is getting into the prescription weight loss business.

Well, that's a scorecard on Wall Street, but winners stay late, and you've got to stay late to win today. Welcome to Closing Bell Overtime. I am John Fork with Morgan Brennan. Coming up on the show, Fundstrat's Tom Lee is going to join us with his thoughts on today's sell-off and where he sees the market heading from here. Plus, we'll discuss Fed Chair Powell's message to Congress today and the market reaction with Morgan Stanley Global Chief Economist Seth Carpenter, whose name has been mentioned in reports as a possible Fed vice chair candidate as well. Well, let's get straight to the sell-off with Senior Markets

Commentator Mike Santoli, who joins us here at CNBC headquarters. Yes. Great to see you here, guys. Very glad to be here. And, you know, plenty to talk about as we are together here. The S&P 500 backing off a percent and a half today gave back the majority, but not all of last week's gains. And it happens at this interesting crossroads. This takes you back all the way to the beginning of last year. That's the all time high right there at the far end, January 3rd of last year. And so you had this downtrend that was coming right through here. We broke above it. And then also you had this line coming up from the October lows. And so you have this confluence of areas. And look, granted, the bull case at these levels does require not too many things

from going wrong. You can't have the Fed get real hostile on the economy. You can't have the economy really overheat and build inflation higher. So that is why I think you see some hesitation, but really didn't fall apart today, even though it was a very negative breath date. But the bond response clearly stole the spotlight. Take a look at the one-year Treasury bill yield. Now, the two-year did get above 5 percent. Here's the one-year, almost to 5.25. So you see gradual increases. The Fed kind of hiked all last year. This is when the market thought, OK, we got the Fed figured out here. We know where they're going to land. They don't have much more to do. And then we got the hot jobs report and it's up and away from there. Now, this basically

encompasses all that the market anticipates the Fed's going to do, getting rates maybe to five and a half or thereabouts, maybe a little more than that. But then over the one year span, potentially going to have to cut if the economy weakens or inflation comes down. As you guys have discussed, this does create some competition for stocks. There's a tremendous amount of inflows into the very shortest dated bond funds over the last few weeks. Really nothing we've seen in years. People just looking to capture this kind of 5 percent lock it in no matter what the rate of inflation is right now. Yeah, I mean, we talk so much day in, day out, Mike, about volatility in the stock market, but really seeing, to your point today, volatility in the bond market. I mean,

just look at the Fed Fund futures market today. It's now pricing in, what, a 48 percent or so change chance of a 50 basis point hike in the next two weeks when we do get the Fed meeting. That's up from 28 percent yesterday. I mean, it's been pretty incredible, the reaction we've seen there today. And bond volatility was really the key driver last year of knocking stocks off balance. So if you just look at these measures. So that's the whole key. The market really felt as if the Fed, we could see the destination, that it was in sight and that was comforting. And not only was it in sight, but we were going to progress there slowly.

So today added a little bit of complication to that picture. I wouldn't say it completely unwound that idea that the Fed doesn't have a lot to do. Keep reminding folks, we went from zero to four and three quarters percent in like a year, less than a year. And so now we're talking about around the edges of exactly where it comes in. But it was a reminder today. I think what Powell had said was a reminder today that both inflation and the labor market tightness remain at uncomfortable levels for them. And they're never going to telegraph, you know, the fact that mission accomplished has has arrived at the risk of oversimplifying good luck. Didn't he say, don't believe the Fed, believe the bond market? And doesn't the action we saw today suggest that the bond market is

starting to believe the Fed? Well, I think about it as essentially sort of this sort of push-pull, right? They're kind of tied at the ankles. So one step will go forward, the other one will follow. It's not always the same foot that leads. So it's Fed guidance, along with the data that the Fed is going to react to, that got yields to where they are. By the way, let's remind everybody, Jeff Gondlach, at the beginning of these years, said the Fed's never going to get Fed funds up to 5 percent. Right? So you deal with the numbers that are in front of you. You have to pay attention to what the last, you know, status check on the economy was.

And right now, that was a half million jobs created in January and services inflation pretty sticky relative to where we expect. I mean, this is going to make Powell's testimony tomorrow that much more in focus at the House. It's going to make the Beige Book when you get that release tomorrow in focus. And don't even get me started on jobs report and then CPI next week. The data, I mean, it was always in focus, Joltz. It was always in focus. But now and now now we're spring loaded for for more of the type of action one way or the other that we saw today. We are. It's really ironic in the more of the type of action, one way or the other, that we saw today? We are. It's really ironic in the sense that the end of last year or toward the end of last year, it was kind of fashionable to say that the monthly jobs report kind of just lost its juice

because, you know, we know unemployment is what it is. It's just kind of $200,000 a month. It's $150,000 a month. And now all of a sudden it's back to being a pretty big swing factor in terms of what rates are going to do and whether they have to try and bring the hammer down on the economy. All right. We're going to dive deeper into that. So for more on the economy and the Fed's path, let's bring in Morgan Stanley, global chief economist, Seth Carpenter. He has been mentioned in reports as a possible candidate for Fed vice chair. I do want to ask you about that, Seth. But first, to the news of the moment, which is Powell's testimony. I think there's been a little bit of an expectation going into that hearing in front of the Senate committee this morning that maybe he would not try to make news, given the fact that we are expecting more data ahead of the Fed's next meeting. And yet you could argue that he did, to use Mike's term, drop the hammer. He basically made it clear that he's expecting the

terminal rate, data dependent, to now go higher and essentially put a 50 basis point hike back on the table, no? I think that's right. I think coming into his testimony today, I sort of saw two possible outcomes for him. One was to be hawkish because there was no version of the world where he would have gained from sounding dovish today. And then I was actually pushed by some colleagues who said, OK, if he was going to surprise the market to the hawkish side, how would he do it? And I said, you know, opening up the possibility of the change in the pace of rate hikes. And gosh, he went straight there, including in the written prepared remarks. And so I think that step is significant. I think he is being very, very clear that

if you look at what happened over the past year and a half, you know, maybe the call on what was going to go on with inflation didn't pan out. They started raising rates, they said 75, but it won't be there forever and kept going for four times. I think now Powell is very much on board with the idea that he does not want to get caught flat-footed again. And so opening the door very wide for a 50 basis point hike was exactly what he did today. So, Seth, how much do the job openings matter relative to the jobs report that we get at the end of the week, given how the market has just reacted to this? I mean, I don't know. It seems like maybe Powell was kind of saying this all along, but now the market has just reacted to this? I mean, I don't know. It seems like maybe Powell was kind of saying this all along, but now the market has been shaken from its illusions

that there was a dove in that hat. Yes, if anyone retained that illusion, they should be clearly disabused of that right now. I think the jobs report is super important. There's no two ways about it. The job openings data are interesting. I think Powell likes to refer to them because they tell a very good story, but the history that we have with them is much shorter than we do with the standard non-farm apparels data. And, you know, the January print, the 517,000 jobs, that was truly outsized. Everyone is scratching their heads. How much of it was the seasonals? How of it is real is the economy accelerating I think it's really important and there's no way to know for sure until we get at least Friday's data and we probably need

to see some more to be really convinced Powell also did note and we've heard this from other Fed officials in recent weeks that we haven't seen the full impact of the hiking we've had thus far. So you take that, you take, and I realize we've got question marks, jobs reports, CPI next week, et cetera, around that. But assuming that we're still seeing resiliency in the economy, is there a way in which, is there still a path by which the Fed can bring down inflation to a 2 percent target without inducing a recession? I think the answer to that question is yes. I think the key dimension that you left out of that characterization, though, is over what time horizon. So let's go back in time. It seems like

forever, but till December, the last time the Fed actually gave us their own projections, and they gave us a very clear window into their strategy. And so if you remember, in December of 2022, the median forecast for core PC inflation at the end of 2025 was 2.1%. So they're saying three years is about the amount of time to bring inflation down almost to target. So I do think if you're thinking about that kind of very gradual path, so long as the market and everyone else thinks that inflation is coming down, then I think over that kind of time period, yes, you can do it. And how do you do it? You have to slow the economy. So if we're staying at 500,000 nonfarm payrolls per month, that's clearly not doing it. We need to see it slow, get down to, say, below 100,000 per month. But if it stays

positive, then I think that kind of trajectory, that's the path for a soft landing. We still think it's possible. That's been our baseline forecast for a long time now. Even three months ago, six months ago, we had everyone telling us we were crazy. The economy is heading for recession, given how much the Fed has hiked. Now everyone's talking about acceleration, no landing. I think no landing is not a possibility because the Fed will just keep raising rates more if the economy is not coming down. But I do think there's still a path there. So, Mike, job openings. Yeah, I guess that kind of signals employers intent, right, which is an important forward looking signal as opposed to jobs, which in a sense I guess that kind of signals employers intent. Right.

Which is an important forward looking signal as opposed to jobs, which in a sense are a backward looking signal. If there's if they both come in hot. Yeah, then that's bad. But what if we get sort of mixed signals between the two? How do you think about that? Well, I think the job openings number itself, just openings, I think, is not the one that has a lot of sway. But within the Joltz report, you know, the voluntary quit rate, things like that, where you're actually seeing people make decisions as opposed to some company just leaving a help wanted listing out there. That's relevant, you know, especially in the context of Jay Powell continuing to say that we have to bring the labor market back into balance. There's too much demand relative to supply. And so, you know, I do think it matters. It's nothing that is really going to supersede the actual monthly report.

Look, I think the idea of kind of gliding the economy down toward a 2 percent inflation target over another two or three years, it absolutely is kind of plausible. That's what they laid out. But we're sitting here with three and a half percent unemployment. A lot of weird stuff has to happen to sit here with three and a half percent unemployment, with the yield curve disinverted, with the leading indicators, you know, plunging below the normal pre-recession levels and say we can skate for three years without some kind of down. Something is is amiss. And one of the things that's amiss is it's a really weird cycle. And it was a spring loaded in both directions. And so maybe that's what we're seeing right now. And a full employment

recession could be the flip side of the jobless recoveries that we saw in past decades. Yeah. In the meantime, I do want to get your thoughts, Seth, or your comments on the fact that your name has been floated in some reports, most notably Evercore's Tobin Marcus saying it as a possible contender or nominee to replace Lael Brannard at the Fed. I always get flattered by those sorts of remarks. Look, the other names that are on that list as well, Karen Dynan, Jen Eberle, those are extraordinarily talented, brilliant economists. I think they'd be fantastic at it. I wait with bated breath like everybody else to see how this evolves.

All right. We wait as well. Seth, thank you for joining us on Overtime. Thank you so much. Now let's bring in Fundstrat's Tom Lee. Tom, you're known to be bullish, and despite today's action, you're not moving off of that. And so I wonder, is it because you think the economy is actually getting weaker than it looks or because you think it's strong enough, but not too strong? And that's great. Hi, John. I mean, it's a it is a path that is sort of in the middle of that. You know, I think Powell today was kind of emphasizing that the Fed's reaction is changing, and that's why we saw March and May hikes actually increase. But if you ask, is the trajectory of inflation what changed or moved markets,

it hasn't. You know, in fact, if you look at the break evens for six months forward or 12 months, they actually went down today. So I think the stock market is going to care about the path of inflation. It does care about how the Fed reacts to it. But the reason we're constructive has a lot to do with leading indicators showing us that inflation could be a lot softer. I know January sort of changed a lot of people's minds, but, you know, we start to get some of the February data. And I do think some of this seasonal distortion, the gap between jolts and indeed, I mean, these gaps as they close actually show us that inflationary pressures could be easing actually a lot faster than expected. So that's keeping us constructive. So, Tom, then on a day like today, and I know you're bullish and you do think the market's

going to rally on a day like today where you have all the major averages down more than one percent, every sector in the S&P in the red, would you be buying? And if so, what? Yeah, I mean, today, you know, today's a day that, you know, someone hits the sell button and maybe not discriminating on price. So I would look at that as a buying opportunity. I mean, the VIX moved up, but the 10-year yield actually was pretty flat. And we did see some signs of panic, whether you're looking at arms index. It's not quite at the panic level or the put-call ratio. So I do think that this is a better entry point not to be selling here but to be buying. And we'd be sticking with what we liked at the start of the year, which is FANG and the industrials.

And then sort of a distant third is energy. But energy is probably tougher in the first half. Mike, I want to get your thoughts on this, too, because we did see broad-based selling today. Financials, the worst performing. Real estate, as you might expect, with yields moving higher as well, but also materials. I mean, it was really kind of across the selling today. Financials, the worst performing. Real estate, as you might expect, with yields moving higher as well, but also materials. I mean, it was really kind of across the board today. The way to think about this, just a knee-jerk reaction to what we saw in the bond market in response to Powell or something more in terms of the technicals?

I think it was mostly a reflex response, but a justified one to a fair degree. I mean, you have to reprice according to the rate path. I do think breadth was relatively negative, but we're working off of, I think, some money in the bank, so to speak, that the rally has earned us. So it's not as if you've kind of unwound the strength, even of last week's bounce.

So technically, I think it's okay. It's precarious, but it's probably not something that changed. The real weakness in regional bank stocks within financials, definitely noteworthy. If you look at like a five year chart of the regional banks ETF, it looks like it's kind of teetering near the edge of some some key levels. Basically, it hasn't been this low in a couple of years. So, you know, that's not a great economic message, but you've also had head fakes lower before in exactly that sector. Tom, would a 50 basis point hike change your opinion?

I mean, 50 basis point hike is going to have to get priced into the stock market. I think today was maybe the start of how that's going to affect markets. But, you know, I think there's a misconception that as long as the Fed is hiking, that the stock market will go down because financial conditions are tightening. I mean, that was true of last year because the Fed was higher in a hurry. But if you look at the 14 Fed cycle since 1970, where the Fed was raising over more than a 24-month period, 11 of those 14 times stocks made new highs while the Fed was hiking. So what would it take? I'm wondering, what would it take? 75? Would it take just a 7% target?

What would it take to make you less bullish? John, I think if we were turtling towards a recession, I think that would be tough for stocks to actually rise. But as you know, there were predictions of recessions last year. And again, we're still waiting for those recession metrics to show up. So I think as long as inflation is improving and the Fed is doing its job, that's not a reason for someone to say the stock market has to go down 20 percent. Last year, we already had a 27 percent drawdown. So I think, you know, you have to keep in mind the market's been in an uptrend since October.

So we're six months into an uptrend. And if we have this test and we're up a percent this year, is someone going to say, where's the recession? Are we going to say that maybe it was a time to be adding risk? It kind of goes back to the conversation we were just having with Mike, though, Tom, and that is it's a very unusual time period, both in terms of the economic data and what the market is signaling as well right now. And we saw the 210 spread today, for example, and further, negative 100 basis points. The last time we saw that was September of 1981. That's not a recession indicator to you.

How do you see that? Well, we've been doing a lot of work on that yield inversion, you know, which is that I didn't, did you just say 10 year versus two year? And, you know, you have to keep in mind the nominal level of yields has to reflect the expected inflation over that time period plus inflation risk premium. So most of us intuitively would say inflation will be lower 10 years forward and the risk of inflation is lower. That can be measured by looking at the TIPS break evens for the two-year and 10-year.

That's almost 80 basis points now. Plus there is what you can measure using a Fed model of inflation risk premium, which is 20 basis points. That 100 basis points of inversion of curve is literally reflecting the difference in expected inflation. So, you know, I know people talk about the yield curve inversions. You know, you can you can go all the way back to 60. This this inversion is unusual because it's reflecting a backwardation of the inflation curve itself. Tom Lee, always great to get your thoughts. Thanks for joining us on a tumultuous market day.

We appreciate it. Wow. Thanks. Yeah, that charging bull statue, the famous one off Wall Street made of bronze, pretty solid. Might have to replace it with Tom Lee. Even more of a solid bull. CrowdStrike earnings, meanwhile, are out.

Steve Kovach has those numbers. Steve. There, John. Yeah, look at shares going up here after hours, after a solid beat on the top and bottom lines for CrowdStrike earnings, meanwhile, are out. Steve Kovac has those numbers. Steve. There, John. Yeah, look at shares going up here after hours, after a solid beat on the top and bottom lines for CrowdStrike. Let's go EPS for the quarter. Forty-seven cents was the result versus 43 cents Adjusted Street was looking for. Revenue also a beat, $637 million versus the $624.9 million the street was looking for. And guidance also strong, too, beating expectations

even for the full year. They're expecting up to 3 billion in sales for the rest of the year. John's shares are up about 7 percent. Back to you. Yeah, it looks to me like the annualized recurring revenue number is pretty good compared to what the street was looking for. I believe the street was looking for around $2.5 billion, up 45% year over year. And they're turning in $2.56, up 48% year over year. And that's the kind of news that you want to hear in this environment, right? Yeah, that's exactly it. And just this recurring revenue and subscriptions, that's the story behind this company. And yeah, just knocking out expectations here.

Shares were up as high as 8% earlier, John. All right. Steve Kovach, thank you. You got it. Let's get back to the sell-off. Bring in Oswald Damodaran from NYU Stern School of Business. Talk some valuations. Probably not going to be as bullish as Tom Lee.

So let's get your perspective. Always great to talk to you, Professor. So how do you factor in how fairly the market is valued right now based on what happens to earnings going forward? Not everybody's crowdstrike. I think at the moment there are two big issues, two macro issues that are driving markets. One is what will happen to inflation over the year, next year, the next two years, and what the economy will do. That was true at the start of the year. It was true on February 1st. It's true on March 1st. But it's amazing how much the story the market's telling keeps shifting from month to month. In January, it's all good news. Inflation is going to be benign. The economy is going to come in for a

soft landing. Stocks are up. February, the mood shifted. First couple of days in March, everything seemed great again. And today, the mood shifts. I have a feeling that this is what we're going to see for the rest of the year. And this is why I think market pundits need to step back from the fray because the reality is we really don't know where the market will go until we see our inflation and the economy play out. Because I think those are going to be the big players that drive the market forward. It's not what the Fed does or what the Fed does not do. I think the Fed is a side story now. It's really inflation in the economy that's going to drive the market. So in terms of inflation, it seems like

for as many people, as many market pundits as we have on, there are different analysis of the inflation data, both in terms of what we get with CPI and PCE and also more forward looking high frequency data factoring in rents, et cetera. What are you watching and how is that shaping your assessment of inflation and how quickly it's coming off? I think the one thing we can all agree on is that some of the inflation was caused by supply chains, COVID, and some of it is real. Some of it was caused by the spending we had during that period. I think the real question is how much of it is what? And I think that what I bring in is my age. I'm old enough to remember high inflation. And I know that one of

the things that I've always experienced with inflation is incredibly stubborn. You can bring it down a little, but it doesn't go away easily. So when people talked about bringing inflation down to 2% by the middle of the year, that goes against everything we know in history. So I have a feeling that inflation is going to be a lot more stubborn. And the words you're getting out of the Fed suggest that they do see the stubbornness of inflation staying up that the two percent is not going to be that easily reachable without something

breaking in the process okay so you got this matrix that that you showed us about what happens if there's no recession steep recession uh... in inflation subsides or inflation stays high it sounds like you think it's more likely inflation stays high and It sounds like you think it's more likely inflation stays high. And in that case, you think that the S&P, I think this is index value, is going to end up below 3800? Yeah, and I think that's what you're seeing on a day like today. On days when

you wake up to the recognition that inflation is still here, you're going to see the market under pressure. On days you wake up where you say inflation looks good. So that's what I mean about swinging back and forth. You get one good inflation report, people are going to overreact. You get one bad one, you're going to go to the other end of the spectrum. So volatility is the name of the game for this year. And I think that volatility is going to be driven less by what you see in the earnings reports and more by what you see in inflation in the real economy. It's a macro year, not a micro year. Oswald Damodaran, we appreciate it today. Thank you. Thank you. After the break, one major outperformer in today's down market, shares of Weight Watchers,

WWE, spiking today. After the company announced it's entering the Red Hot Prescription Weight Loss Drug business through an acquisition, we're going talk with a ceo in a first on cnbc interview about that deal next and later oil prices falling sharply in today's sell-off mike santoli is going to break down the charts on the commodities versus energy stocks next. Welcome back to Overtime. It is time now for a CNBC News update with Contessa Brewer. Hi, Contessa. Hello there, Morgan.

And the chief of the Capitol Police now is accusing Fox News of spreading what he calls offensive and misleading conclusions about the January 6th insurrection. Last night, Tucker Carlson characterized the day's events as mostly peaceful chaos, his words. And he showed clips from Capitol surveillance video provided by House Speaker Kevin McCarthy. The Senate's top Republican, Mitch McConnell, says he completely agrees with the chief's contention that Fox conveniently cherry-picked calmer moments out of 41,000 hours of video. 16 months after she was picked by President Biden for the Federal Communications Commission, Gigi Sohn is withdrawing her stalled nomination. She's citing unrelenting, dishonest and cruel attacks prompted by cable and media industry lobbyists. That leaves the FCC deadlocked with two Republican and two Democrat commissioners.

And federal regulators are opening a special investigation into Norfolk's southern safety practices and culture following several derailments highlighted by the release of toxic chemicals in Ohio last month. That's something we'll be keeping an eye on, John. Morgan in particular, Contessa, thank you. Check out, meanwhile, shares of Weight Watchers, the stock gaining nearly 80% after announcing it's going to enter the prescription weight loss drug business through an acquisition of telehealth company Sequence for $106 million in cash and stock. Sequence has approximately 24,000 members. Doctors can prescribe weight loss medications such as Ozempic, Wegovi and

Manjaro. Joining us now in a first on CNBC interview, WWE International CEO Seema Sistani, along with our very own Meg Terrell. Seema, welcome. Thank you. Big move, big news. Give me your perspective. It really seems like this could make or break Weight Watchers because the brand was built on this idea of community support, simplicity, and willpower being the foundation. And now it's like, also take this injection. Fair? Well, I would phrase it a little bit differently. So yes, we are built on providing weight loss management solutions across the full spectrum. And we've been known for, oh, this is our 60th year. We're going to turn 60 in May. And, you know, that whole time we've been known for being science-backed, providing behavior change and lifestyle therapies.

And what is incredibly exciting about this space is the science has advanced. And when the science advances, so do we. So we know now that there are biological underpinnings, genetic underpinnings for those who are living with overweight and obesity. And, you know, we want to be able to address those needs. And so this isn't just a, this isn't a pivot, it's an and. So alongside of these medications, it's really critical that you are also receiving the right lifestyle and behavior change so that you can live a healthful life with lots of longevity. Hey, Sam, it's Meg Terrell. You know, the response from the pharmaceutical world on this has been interesting. One biopharma analyst at BMO wrote, quote, while we don't doubt Weight Watchers' ability to adapt to the changing market, this move suggests a realization that its business model relying on behavioral modification and community support is incongruent with the data.

Essentially meaning, you know, lifestyle change is really hard to do to maintain weight loss. And questioning, does this mean that Weight Watchers' model up until this point, is this an admission it doesn't work? No, I don't think that's true at all. In fact, like I said before, these medications help your adherence such that you are more likely to be able to resume these behavior change and lifestyle therapies. You know, over the course of 60 years, we've helped many people, including myself, lose weight on the program. And I just think it is an absolute innovation that we're seeing with these drugs, particularly the GLP-1s, that are allowing us to better serve members who do have biological components. This is no different than the hypertension industry

in the 60s and 70s, or even our recognition around mental health. Some people need medications. That doesn't mean that you should not also, you know, practice movement or meditation alongside of those things. That doesn't mean if you have high cholesterol and you're taking a statin that you shouldn't also eat a diet low in sodium, for instance. So these things have to happen together in order to have the best consumer outcomes. Hey, it's Morgan. Your sales forecast, you put out earnings yesterday. Your sales forecast fell short. Subscriber numbers are down. Are you hearing from subscribers that they want to have a service such as this? Is this in part reaction to what the marketplace is asking for and why you have been losing subscribers? So we, no, what I would say, this market is still developing. So yes, we have

been experiencing cultural, what I would call demand pressures. I think we're, you know, currently particularly catalyzed by COVID. We are seeing more people do things on their own through DIY mechanisms, social media. There's a lot of content out there advising people how they should lose weight. That doesn't mean that there isn't room in the space for evidence-based treatments. And in fact, even more so now with clinical, it's really critical that we come in and we address the misinformation that is out there, the bad actors in the space. And so alongside, again, our behavior change and lifestyle therapies, I think that we can provide a holistic, comprehensive care solution.

And look, this is a turnaround. I joined last year. I think that what we have done that has been best in class for so many years is the science-backed program underpinned with community enablement, peer-to-peer relationships, not just peer-to-coach. And over COVID, 80% of our members went digital. Right. And that's a big mischief. And they are not experiencing our best in class, our gold label program, which were the workshops. And that's why I'm here. Makes sense. I got to ask you, what guardrails are you going to have to put in place to make sure not only that that consumers don't try to abuse this, but that your own organization, which might have a revenue and profit motive to oversubscribe, to oversubscribe, prescribe, thank you, prescribe these medications that you

continue to do what's right for the patient. How do you put that in place? And are you prepared yet to explain what your framework for that is? I'm really happy that you asked that question because it's an important one. The business that we acquired is a platform. It's a technology platform. It has put the pre-authorization for insurance on tech rails. It's created a simple UX for both the clinician and the patient. But what it is not is, you know, getting in the way between the provider and the patient experience. We are not in the business of employing doctors to prescribe these medications. We make it an easy pathway for them to then access the provider who either will decide that it is medically appropriate or not. And either way, the good news is they have options with Weight Watchers.

These drugs are meant for people who have a BMI of over 30 or a BMI over 27 with other conditions alongside. So they're not for everyone. And I think that that's an important thing for us to really note and understand that it is about being able to come to the market, educate people, give a comprehensive consumer, excuse me, care experience. And get in front of what are bad actors in the space. And in some cases, you know, look, I come from the startup background. We always said move fast, break things. Weight loss is emotional. Health is critical.

This is not a place to move fast. Absolutely. Thank you for joining us. Thank you. CEO of Weight Watchers, WW. Meg, she talked about hypertension, but this reminds me more of Viagra and maybe Botox, the way that people are clamoring to get these, even if they're not morbidly obese. Oh, yeah. I mean, the demand for this is absolutely crazy. And I think the fact

that you're seeing Weight Watchers stock react the way it is, but you're not seeing Lilly and Novo Nordisk stock react very much, really shows that it is Weight Watchers stock react the way it is, but you're not seeing Lilly and Novo Nordisk stock react very much, really shows that it is Weight Watchers that the market sees as needing to get into this space, not as Weight Watchers helping actually increase the demand for these drugs because the demand is already so high the companies can't meet it yet. So that tells you what you need to know about that space. Yeah, it sort of speaks to the guardrails portion of that conversation as well. Meg Terrell, thanks for joining us for that.

We have a news alert. PayPal. Christina Partsenevel has the details. Hi, Christina. Hi, Margaret. Well, we're learning just now that PayPal CFO Blake Jorgensen is stepping down immediately. He already took a leave of absence previously, and the company says this isn't over any dispute. He will stay on as a senior advisor, but Jorgensen's departure is yet another change at the top ranks of PayPal. You had longtime CEO Dan Shulman, who said he was going to be leaving at the end of this year. There's no word on the CFO or CEO replacement. Shares are down about eight tenths of a percent. Guys. Okay. Christina, thank you. Crude prices seeing their biggest pullback since January 4th, But energy stocks are holding up better than that.

Although we saw that sector in the red today, too. It's something that's been happening for a while, though. This energy stock outperformance. Mike Santoli is going to break it down for us in the charts. That's next. Welcome back to Overtime. Stocks pulling back sharply today and oil prices falling hard as well. Mike Santoli is back with a look at oil and energy stocks.

Mike. Yeah, Morgan. And depending on how you frame it, it's kind of a divergence right here. Crude oil itself has had a hard time getting out of its own way. It's really been mired in this $70-ish area for quite some time. And here's a two-year chart of the energy sector ETF against WTI crude. You see, they were working pretty much in tandem up until the early part of 2022, that huge spike with the Russian invasion of Ukraine,

and then declines here in crude. But, you know, look at how we've stayed aloft on energy stocks. Now, part of the explanation there has been that's one of the few areas of the market they did have earnings growth to project. But if you look at a longer term time frame on this five years, it looks a little bit less remarkable. And in fact, they look pretty much in tune with one another from a five year span. So you've kind of arrived at the same place through a slightly different route. I do think it's worth asking, though, the crude market starting to act pretty well supplied right now.

Maybe it is. Maybe it isn't. But that's the way the price action seems at this point. Energy stocks not really getting the big lift that things like industrials are in terms of kind of playing for a global reacceleration. So an interesting spot, but doesn't necessarily seem like there's a real disagreement here between the commodity and the stocks, Jen. I always love that your charts put so much into context, Mike. But I'm also curious about what the impact of a stronger dollar has. And the fact that we saw, especially where energy stocks are concerned, such a huge year of outperformance for them last year.

Yes. There's no doubt that the energy stocks themselves are digesting a massive outperformance last year. So it wouldn't be surprising to see them roll over this way. In terms of crude and the dollar, I mean, typically somewhat inverse related, but you didn't necessarily see crude oil rally that much when the dollar index really did come in pretty hard. So it's part of the mix, but to me it's not the main driver at this point. You would have to say, by the way, also,

that even though crude oil has kind of been bumping along here, it has not really decisively broken down yet either, even though natural gas has plunged to multi-year lows. Wow. OK. Well, if you've got a fever and the only thing that'll cure it is more Mike Santoli, then you are in luck. Tonight, he is hosting the CNBC special Taking Stock at 6 p.m. Eastern. Morgan? Must watch TV. Up next, the CEO of Siemens on his company's new $220 million investment in the U.S. Why he doesn't think a global recession will happen.

Stay with us. Welcome back to Overtime. Here is a look at how we wrapped up a rough session on Wall Street, sparked by Fed Chair Powell's comments. The Dow dropping 574 points, giving up all its gains for the year. The S&P 500 falling below the 4,000 mark. And the NASDAQ outperforming the other two, but still off 1.25%. Morgan. Well, Siemens announcing today it will spend

$220 million on a new rail manufacturing facility in Lexington, North Carolina, with production expected to start next year, expanding upon a U.S. footprint that already includes a facility in Sacramento. I spoke with Siemens CEO Roland Bush earlier, and I asked him about why here and why now. So it's U.S. best demand. Actually we are serving the whole North American market from out of Sacramento and then the future Lexington. It's passenger and freight. So we are not only loaded on manufacturing capacities with coaches, trainsets, light

rail, but also locomotives. And this is the next thing is, of course, not only locomotives, which are electrified, but also for the long overhaul, we go with battery or hydrogen trains. This is another technology which we are going to bring to the country. And yes, and then we are looking also for high speed connections. Maybe the first one in the United States. I think the States deserves a high-speed connection, too. Well, since Siemens is a multinational conglomerate operating in so many industries across so many markets, I also asked Bush what he's seeing right now in terms of the global economy and whether risk of recession is factoring into the business.

Take a listen. Well, the inflation is going up. The interest rates are going up. But on the other side, what we see, at least for our markets, for our customers, they're all sitting on a high order backlog, and supply chains are gradually easing. And so that means it's a good combination. We have a big order impact, like supply chain is easing, and you have a very, very low unemployment rate, which means people have the money to spend. So this is a counter argument against high inflation and interest rates. I mean,

the big question, of course, is how is China coming over this COVID crisis? We believe it will be fast and the money, the people start spending money again so that the market is catching up along the year. So I don't feel that we're running into a big recession. Some countries maybe, but not really. I'm more bullish on the global economy. We do have the Federal Reserve Chairman Jerome Powell testifying on the Hill today and talking about the possibility of having to raise rates higher than expected because inflation here in the U.S. has continued to be pretty sticky. We're seeing some similar data coming out of other parts of the world, too. For example, Europe.

What are you seeing in terms of the inflation picture at Siemens? And is there a point at which rates, whether it's here in the U.S. or whether it's elsewhere in the world, is a point at which rates could actually start to have a biting impact on your customers? Absolutely. It could be. I mean, at a certain point, it will definitely throttle the growth and customers will then hold back investing. This is this is one point. And the point that there's another increase for obvious reasons is well understood. And that could really throttle growth. On the other side, if you put yourself in the shoes of a car manufacturer and they have to introduce new cars, electric cars, I mean, you cannot stop investing. So we are not delivering into the car. We are delivering in the investment.

So, therefore, this is something which we believe has a more resilient market. That was a wide-ranging interview, which should be noted. Siemens also manufactures and services passenger railroads. That's a big part of the investment it's making in North Carolina. But it also works with freight, and that's also going to be in focus when that facility comes online. So I also discussed with him what the increased focus on rail safety here in the U.S. in the wake of the Norfolk Southern derailment in East Palestine could mean for the demand for products and services that Siemens sells. And John, he used the example, and this wouldn't necessarily pertain to the derailment we saw in East Palestine, but he used the example of

the signaling system, which Siemens has been able to fully digitize. They're also bringing it to the cloud. And this idea of basically being able to not only increase efficiency, but increase safety through the use of ever more technology. And in some ways, it kind of reminds me of the conversation I had with Alan Shaw, the CEO of Norfolk Southern, a couple weeks ago, when he said they clearly need to think more about safety in their network, make more investments. And when I asked what could some examples of that be, he said more technology, more things that people can't do. Interesting, too, I think how incentives might have played into this, both from the North

Carolina side and then that infrastructure law that, I guess, creates demand from Siemens customers. Great stuff, Morgan, as always. Up next, the CEO of Sonos on why he is so confident about the state of his consumer, despite overall concerns about the economy. We'll be right back. Time for today's tech check on overtime. Home audio company Sonos unveiling new premium wireless speakers today and making a big bet that consumers are still willing to spend on discretionary devices. Deirdre Bosa spoke to the CEO and joins us now.

Hey, Dee. Well, John, it may be counterintuitive, especially in the current macro and inflation backdrop, to release a pair of higher price premium products. That is exactly what Sonos did today, though. The Aera 100 replaces the Sonos One, but at a 14% premium in the Aera 300. That is a $450 speaker designed for a still niche spatial audio format. I asked Sonos CEO Patrick Spence what he's seeing that's telling him that demand will hold up at these higher prices. In calendar Q4, we saw that in terms of our ARC sales, which is a premium product, our sub, our sub-MIDI, some of these products.

And so we are seeing it. And I think the economy is bifurcating a bit, right, where you do see premium and luxury, you know, continuing to be pretty strong in the face of it. And then you see, you know, at the entry level as well, there's not a lot of middle ground, but we feel pretty good about the way we're positioned. I also asked him if he would consider a lower price product to capture another set of consumers, something that players like big tech, Amazon and Google have tried to do with their lineup of smart speakers. We're always looking at what are the right price points? How do we do that? If we could build something great for less money, we would do it. But I think as you've seen, you know, even from Apple with the iPhone, you want to be packing the latest and greatest technology and innovating. And when you do that, that comes at a cost. But consumers have proven that they're willing to

pay that cost for our products. And again, they last for so long. Sonos, of course, coming off a pandemic bump and with the housing market softening too, Morgan and John, we will have to see if demand for those premium speakers hold up as well. Back over to you. We will keep an eye on it. Deirdre Bosa, thank you. Up next, we will round up today's

after hours earnings movers and the key earnings and data that could move the market tomorrow. So stay with us. Welcome back to Overtime. We're tracking a number of movers in the after-hours session. Crowd strike jumping after beating on the top and bottom lines with strong first quarter and full-year guidance. You can see those shares are up 6.5% right now. Stitch fix, though,

moving in the other direction, down almost 2% after missing on EPS and revenue and giving mixed guidance. And we've got some big market events to watch tomorrow, including Fed Chair Powell's second day of testimony on the Hill, the Fed's beige book of economic conditions at 2 p.m. Eastern, plus ADP employment and the data from earnings from Campbell, Adidas, and MongoDB. I thought CrowdStrike was particularly interesting. I mean, Stitch Fix kind of just gave back the gains it got on the session. But CrowdStrike, after Zscaler and that weird reaction

we saw after hours, the shares tanked, even though they beat the numbers and guided pretty aggressively. Maybe some people were disappointed on the guidance, but it didn't seem like 12 percent down disappointed. It looks like this is the reaction you would have expected from strong numbers without those concerns. Yeah. And cybersecurity, it seems to be very much a secular growth area, no matter what's going on with the macro economy. Maybe you tighten your belt elsewhere, but if it's coming to protecting and to data security, et cetera, this is where the dollars are going to continue to flow, at least for now in an uncertain world. Yeah. In your house, you don't shut off the alarm system

just because the economy is bad. You don't want to get robbed on top of having losses. All right. That's going to do it for overtime. Fast money starts now.