Closing Bell - Closing Bell: Overtime: Stocks Swing Wildly But Finish Off Lows; Top Citi Dealmaker on M&A, IPO Markets 9/27/23

Episode Date: September 27, 2023

Stocks swung wildly during today’s session but the Nasdaq managed to close positive and the Dow recovered from a nearly 1% drop. BD8 Capital’s Barbara Doran and Profit Investments’ Eugene Profit break down the market action. Earnings from Micron and CFRA analyst Angelo Zino provides analysis. Satori Fund Founder Dan Niles on his favorite tech picks and why he sees a short-term bounce but a long-term drop. Citi dealmaker Tyler Dickson on if the IPO market is thawing. Nuveen Global Fixed Income CIO Anders Persson gives his playbook in an environment of higher for longer.  

Well, it's a whipsaw day for stocks as the major averages rebound in afternoon trading. Even with a 10-year yield at 4.6, a big market comeback. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. Coming up this hour, Satori Fund founder Dan Niles is making a big market call, saying there's a rising probability for a bounce in the S&P 500. What a day to have him on. He'll join us to break down why he's turning bullish, at least in the near term.

Plus, we're awaiting earnings this hour from Chipmaker Micron and also from Jeffries Financial Group. We'll bring you those numbers as soon as they cross. And as we await those numbers, let's begin with the market action. Stocks clawing back from significant losses this afternoon. The Dow had been down more than 300 points at the lows, though Treasury yields and oil prices both holding gains. And keeping that sentiment in check, let's bring in CNBC Senior Markets Commentator Mike Santoli for his first take. Mike, is that rebound convincing?

Not in itself, no, John. It really just shows you, I think, that we have a lot of the preconditions for some kind of a reflex bounce in place. Everyone's talking about how far we are down in a short period of time. 7%, 8% on the S&P 500. Also, before today, eight straight sessions of negative market breadth on the New York Stock Exchange. So you have had a fair bit of selling. But in terms of this rebound, I think until you get a little persuasive relief from the bond market, the energy market, the forex markets, it's probably not going to be able to necessarily pick itself up and recapture a lot of these gains. Everyone knows, you know, we're due for some kind of a bounce.

It'll happen before too long unless there's some kind of financial accident. Maybe somebody has to book a big loss on their bond portfolio and it scares people. But beyond that, I do think that we're still in this zone as we get to the end of September. Maybe there's going to be a reason to feel as if we've priced in enough if the bond market can calm down. So what you're saying is oversold conditions aren't enough. What else are you watching to know that we've seen at at least in the near term, a washout here? Is it the VIX? Is it something else? I mean, the VIX would be an ingredient to suggest that we're getting to extremes.

You know, maybe you get above 20. I guess you could benchmark it against what happened back in the spring, in March, when we had the regional bank crisis. You also had about a 7%, 8% pullback in the S&P, and the volatility index got up into the mid-20s. Maybe that's something you could look for. But also, if the bond market's able to settle down, and maybe we get the PCE inflation number on Friday that tells us whether disinflation is still in train or not,

and you have something fundamental to knit things to, because really we're not. We really have the market reacting to its own mechanics and to other asset markets right now, not really moving on any of the tangible here and now economic fundamentals. Okay. We got Micron earnings out. Our team is going through those results. Mike, stay close. We're going to see a little bit later this hour. Let's bring in our market panel. Joining us now are Barbara Duran from BD8 Capital Partners and Eugene Profit from Profit Investments. Good afternoon to you both. Barbara, I'll start with you. S&P finishing 42.74. We know we've been in a range here, but we're back towards levels of early June at this rate.

Is this is this a garden variety seasonal September correction or is it the start of something more? Well, I think it is a garden variety correction, because remember that over time, corrections are pretty normal. Every year and a half to two years, you can expect a pullback of 10 to 15 percent. And particularly this year, we know we and NASDAQ at one point was up 32 percent, the S&P up 17 percent. You know this. And we only had one minor correction back in the regional banking crisis in March. So I think this is not only had one minor correction back in the regional banking crisis in March. So I think this is not unexpected. And of course, the catalyst was the Fed last week saying they're going to keep rates higher for longer. But I think it's important to remember they said that because it's about economic growth, not because they're not seeing inflation come down.

Indeed, for next year, their inflation target, they think estimate is 2.6, down from the current 3.7%. And with growth, they're seeing also unemployment marginally up at 4.1% versus 3.8. So they're pretty, I think looking ahead, it looks pretty positive. I think right now the problem is we could get more of a sold, not only the bearish sentiment, but as Mike just said, there's a little vacuum of news here. So we have two important things coming up to watch. One is the PCE number Friday and CPI, PPI in a couple of weeks to see if that reinforces where we are in inflation. And two, earnings start in mid-October. And then we're going to have to hear what companies see, what they're saying about now, what they're seeing

about the future. And I think these all could be positive, in which case the market will really take off. So I think now's the be positive, in which case the market will really take off. And I think now's the time you start to do a little buying. OK. And right now we're watching Micron. You mentioned those numbers are out. The stock's initial move is down about two and a half percent. Let's bring in our Christina Parts and Nevelas with the numbers. Christina. Well, let's start with the Q4 numbers first. That was a beat on the top and bottom line. They posted a non-adjust or non-gap adjusted loss of $1.07. So that's slightly better than the loss of $1.18 the street was

anticipating on revenues of $4.01 billion. That's still over 35% lower year over year. That's stronger than what the street was anticipating. When we talk about Q1 guidance, that's where you're seeing some strength for Q1 revenue guidance at $4.4 billion, a little bit higher than what the street was anticipating. But they're expecting a larger loss per share, perhaps why you're seeing the negative reaction in the stock. All right, Christina, thank you. And I believe the CEO of Micron, yes, is going to be on CNBC tomorrow, 9.30 a.m. on Squawk on the Street. A lot of motion likely in the stock after hours. Now it's not down quite as much as it was.

Hey, looks like it might have even gone green. So you've got to watch for the call there and all of the information on inventories and whatnot. Let's get back to the panel. Eugene, I want to ask you about this market what does it mean to you that this rally fizzled after a rough day right as we're heading into a q4 that that leans heavy on the consumer yeah i think um john that on the consumers is weakening i think that um certainly um the market has held up strong and as Barbara said, market participants were a little bit rattled when the Fed stated higher for longer.

But we're going into the fourth quarter, as you said. Economists are lowering their GDP forecasts, going towards 1%, some going down lower. So I do think that we still are not out of the woods. I think we're kind of in a bear market type of rally. And outside of optimism around AI, that we still are not out of the woods. I think we're kind of in a bear market type of rally. And outside of optimism around AI, I'm concerned that higher for longer means that we have a little bit of a rough patch in the market going forward. We've done very well. The economy held in here very well. But I think there's still some downturn to come further later in the year.

Yeah. I mean, are stocks playing catch up to bonds right now, Eugene? In that sense, I mean, 4.6 percent on the 10 year. We've seen huge moves just since the start of the month in the bond market. And I wonder how much of that's already priced in to stocks and oh, by the way, the economy. economy yeah i think that in general um stocks are not pricing in sort of a little bit of a rougher lending i think that the market participants have kind of accepted um that the fed has kind of navigated this quite well however um as you say that when you can get a five percent um yield on a two year and over the past year you've gotten a year today you've gotten one percent of date, you've gotten 1%

of the rest of 2000 on where there's risk. I think investors are readjusting their perception of whether or not it's worthwhile to be in riskier assets. And that's kind of driven a lot of the bond market performance. Longer term, certainly stocks are the place to be. But I think here in the short term, you really do have to take into account whether or not it's worth going further out of a risk curve when you could sit in treasuries and wait and see which way the economy goes. Okay. So given all of this, Barb, why are you still feeling pretty good about mega cap tech? Well, because mega cap tech, as we know, got killed last year. And then when the perception, that's because people are really expecting a recession, you know, month by month, but it never happened. So at the beginning

of this year, it became much more the soft landing scenario by mid this year, I should say. And that's when tech stocks started to really outperform. It looked like the Fed would stay the course, was near done raising rates, which I still think they are. Maybe they've got another one to go. And then eventually they would cut. But and so that I think has hurt mega cap in the short term. But people are starting to distinguish, like you looked at Meta or Google up. Meta has had their earnings estimates up 30 percent. And a lot of these companies were early on cutting costs, restructuring, getting ready, you know, for a new macro environment. And of course, we've AI. And that is real. What is going on there? So there's really strong secular forces. There's real growth. And if

we do go into a much weaker economy, you do want to be looking at growth names, names that will grow more or less independently of the economy. All right. Barb, thank you. Eugene, good to see you as well. Now let's get back to Micron. Just reported that stock still a bit lower initially after those results crossed. Joining us now is the FRA analyst Angelo Zeno. He has a buy rating on the stock. Angelo, any surprises here and between inventories and China? Anything in particular you're wanting to hear more about? Yeah, I mean, as far as the results were concerned, I mean, fairly in line with our expectations. I think the guidance, you know, very mixed in nature, positive line side of things. But, you know, clearly a disappointment on the bottom line and definitely on the gross margin side of things were we're kind of below our expectations in terms of the guidance. I think we're looking for a negative 4% gross margin here for the upcoming quarter. So, but, you know, at the end of the day here, when we kind of look at the numbers, I'd say, you know, one thing that kind of sticks out to us in terms of the outlook was the fact that they

highlighted calendar 24 demand growth is expected to exceed the long-term taker on the DRAM side of things. So, and, you know, clearly that's their bread and butter in terms of about 70% of their revenue. So the fact that there is going to be a strong recovery, we think, on the DRAM side of things in calendar 24, largely because of the AI theme out there, I think it's definitely a notable positive for the Micron story. That's exactly where I was going with you, Angelo. I mean, it says here in the press release, market recovery takes shape in 2024. How much should investors be pricing the AI possibilities into Micron versus everything else right now? Yeah, I mean, listen, I think when I think about the kind of the memory story overall, it's very mixed in nature, right?

So you think about kind of the bullish scenario out there, and that is the fact that, you know, you've got the high bandwidth memory story out there. AI workloads are going to drive eight times, potentially eight times more DRAM memory outside of, you know, versus your traditional workloads. But kind of the negative side of the memory story has been, you know clearly on more the consumer side of things right the pcs the smartphones out there which have seen kind of the the declines on a unit basis but also um the content story really hasn't you know been very good on that side of things to kind of look at iphone iphone 13 14 and 15 starting price uh starting memory essentially at 128 gigs outside of kind of the pro max here. So you just haven't seen that memory expansion story on the consumer side of things. But on the data center side of things, we're very bullish on that story. We think kind of that really gives you

kind of a long term trajectory for this name here over the next couple of years. So especially given the DRAM story on that side of things, we think investors should be buying given where we are in the cycle. Yeah, you got a buy rating, a $72 price target. Shares are trading right now after hours at just under $68 a share under a little bit of pressure here. We'll see what comes out of the call. Angela Zeno, thanks for joining us. We told him to stay close. Let's bring back Mike Santoli with a closer look at the key levels to watch in the S&P 500 during this bout of renewed volatility. Mike. Yeah, Morgan, I'm close. I'm in a different place, but still close enough to give you this on the

chart. S&P 500. Let's take a look at where this pullback has brought us to. We keep mentioning this 200 day average. Nothing magic about it, but it's just a pretty widely used intermediate-term trend line. It is still trending higher, so we still barely kind of have this uptrend going from the October lows of last year. As always, when you get to that high single-digit decline from a high, it seems precarious. It seems like you could plunge below, and certainly we could. So we get tested here. We also mentioned in March we got below that level. It was still kind of a flatter trend line at that point, but you did recover once we yo-yoed below that for a little while. Also, I pointed out yesterday that we got back to these levels from the very beginning of June, where on June 2nd, we got a really strong payrolls report, more than 300,000 new jobs.

It solidified the soft landing story after the regional bank crisis. Market gapped and ran higher from there. So now we're kind of testing that whole scenario here, both in the market and in the economy. We've got weekly job escapes tomorrow to help us out, perhaps, with that process. Now, in terms of valuation, one metric by which the market does not look particularly overvalued and has not looked that way is free cash flow. S&P 500 free cash flow yield. This is on a forward looking basis. It is now back up two levels toward five percent. That free cash flow yield about four point nine right now.

It's basically the 10 year average level. It's the zone where we traded most of the late 2010s. Even longer term, you go back to the mid 80s, roughly in this four and a half to five level is where it's traded. And of course, you've had decent equity returns from those levels from average. Now, again, it's very lopsided. The very biggest growth companies are producing most of the free cash flow. And so it's and obviously we have rates higher right now. Some people think that matters, though. Pre 2000, we had interest rates basically at or above current levels and we sustained this. So, hey, part of the job of a correction is to rebuild value in stocks. Maybe we got partway there with what we've had on the downside

in the indexes so far, guys. I mean, I love this chart because free cash flow, right? When you talk about getting defensive or you talk about getting risk off or even you just talk about getting fundamental, free cash flow is what comes into focus here. I got to ask you another question. This is much more near term, though. I'm going to put you on the spot. And that is this JP Morgan hedged equity fund that a lot of traders are chatting about that rolls off on Friday. How much is that contributing right now this week to all the volatility we are seeing in the market? It's part of it definitely is contributing. And I put this in two categories. One is the actual the actual impact of the rebalancing of that portfolio. What this does is it it basically deals with index options and it sells one, it buys another one,

it has to roll ahead. And everyone knows it's coming because it's basically a rules based strategy. So you have the actual impact and then you have the feared or expected impact and the idea that we know that there could be this selling coming. And that's that's true for a lot of mechanical systematic strategies right now. We know the levels by which the dealers have to hedge and sell into weakness. All this stuff, I think, just adds to the sense out there of there's no hurry to buy. And you look for the market on closed orders every day. And if they're really heavy, it's because you assume the machines had to sell some more. So I think it's relevant, but it's also part of the process

when people just get scared out of the market. We get washed out, we get oversold, and then we can pick up the pieces from there. All right. Yeah, it's a long game. Mike, thanks. Right now, we've got a market flash on Peloton. That stock spiking up more than 25 percent after hours. Pippa Stevens has details. Pippa? That's right. John, Peloton shares up nearly 30 percent in extended trading after announcing a five-year strategic global partnership with Lululemon.

Under that partnership, Lululemon will become Peloton's primary apparel partner, while Peloton will become the exclusive digital fitness partner for Lululemon and develop all of their content for Lululemon Studio beginning in early 2024. Lululemon also saying that it plans to discontinue selling the Lululemon Studio mirror. Once again, Peloton up 27 percent. John. Wow. Yeah, that mirror it purchased for a tidy sum. Pippa, thank you. And after the break, investor Dan Niles explains why he just covered most of his short positions and why he

says a near-term bounce could be in the cards. He will name his favorite stocks to own now. Overtime comes right back. Welcome back to Overtime. We have a news alert on Uber. Deirdre Bosa has the details. Hi, Dee. Hey, Morgan. Uber has hired a new chief financial officer. It will be Prasant Mahindra Raja. He's currently the CFO of Analog Devices. He replaces Nelson Chai. The company announced would step down on August 1st. He was supposed to stay in that CFO role until early January of 2024. But it looks like Mahindra Raja will come into the role as soon as November 13th, 2023. So only about a little more than a month away. Shares, as you can see, not reacting too much, about a quarter of 1% in the after hours.

So Uber will have a new chief financial officer. Back to you. All right. Dee Bosa, thank you. Meanwhile, major averages mostly reversing an afternoon slide, closing well off their worst levels. The NASDAQ managing to close higher. Our next guest says the worst might be over, at least in the short term. Joining us now, Satori Fund founder and portfolio manager, Dan Niles.

Dan, hey, so covering your shorts doesn't necessarily mean you're going long. So what is it exactly that you expect here? And is this sort of like an all clear for the rest of the year? I don't think so, John. Just to be clear, we're having to look at this day by day because I think I said this in a prior interview that I had, the number one thing I'm watching when I wake up every morning is what is oil doing? Because apart from everything on your screen, that's the one thing you should be watching because the market right now is being driven by oil, how it's affecting inflation because it feeds into everything else. And then ultimately, what does that mean for the Fed, which has been driving the market for, you know, you could argue the last 15 years and certainly for the last couple. So that's, you know, why I think you have to manage this day by day, which is what we're doing,

and see where that takes you. But that's also why, you know, I said in an interview early August that I thought a 10 percent correction in the S&P, you know, wouldn't surprise me before year end. And so we're sort of along the way to that. So overall, the S&P has done a lot better so far in 2023 than you expected. From what I recall talking to you toward the beginning of the year, you're watching oil. Are you also watching bond yields or do those not matter? Well, you're 100 percent right, John. It's oil.

Then how does that affect bond yields? And then how does that affect inflation, which ultimately impacts the Fed? So that's along the food chain. But I think it starts with oil. So what does this mean for the possibility of recession, Dan? Because we've seen it, you know, put all the all the possibilities that everybody was talking about the beginning of the year. They've been pushed out. We've seen so many strategists change their price targets now and say they got it wrong.

Is now the moment is now the moment that we're going to look back on and say the consumer cracked right here? Yeah, I think you're exactly right, Morgan. I mean, it's interesting. People just assume, well, the Fed's raising rates and there's going to be an immediate impact. And that's just not how it works. If you go back through, you know, 100 years of history, it takes about a year and a half up to two years for from when you start the rate hikes to when you start to see it impact the economy. And typically what happens is the market keeps running up even while the Fed's raising. And then when it looks like you're about to get punched

in the face, to borrow a quote from Mike Tyson, right? Everybody has a plan until they're punched in the face. You get punched in the face and you realize, oh, there is actually a recession. And then multiples start to get compressed and you run into problems. And that's sort of why I'm calling it, you know, Goldilocks meets the three bears. because you get to the end of the year and you have three very

big things, I think, that are happening with student loan repayments starting on October 1st, excess savings from the consumer, you know, being depleted from all the COVID checks that they got. And then, you know, how does oil impact inflation, which has already started to increase? If you look at CPI, which has gone from 3 percent to 3.7 over the last two readings. And that obviously has a big impact on multiples. So that's kind of how I'm thinking about it as we go through the rest of this year. But I'm managing this, as I said, day by day and looking at all the different inputs coming in. So so where would you be invested in the market right now?

I mean, is it still the mega cap tech names that are the safest place to be, especially on a day where Meta, for example, just unveiled more of its AI strategy, just put the prices out that had been expected on its new AR, VR headsets? We saw the stock down 2%, 3% today, but it climbed back toward the flat line to end the session. Well, I think you're exactly right, Morgan. You have to pick stocks, and some of the tech stocks are my favorite. So we still own Meta. We still own Google. We actually bought some Amazon today. We bought some NVIDIA today.

We'd gotten out of Oracle. We saw Oracle Cloud World last week. We actually started to buy some more. We actually bought some today of that as well. And so the names we like are sort of AI related, but we're also short Apple. And, you know, we've talked about that before where, you know, I don't want to pay nearly 30 times for a company that's growing revenues 2% last year and 1% this year. And over the last nine months, the top line estimates keep coming down. To me, that doesn't make sense with the S&P trading at 20 times. And so I think it really, and we're not involved in, you know, a Tesla,

for example, right now either. Even though we love the company, we go auto financing rates are way up just given what interest rates are doing. So I think you have to go through each of these name by name. And if you have disappointments, the stocks are going to just get absolutely obliterated. And we've seen that. Oracle is a great example. When they reported the most recent quarter, they've been talking up AI. And then, you know, the numbers went down for the next quarter and the stock had the biggest one day drop in 20 years. So that's what you have to work your way through. And it's a name by name basis. So, Dan, that's that's why I wonder about you saying you like mega cap tech, because the the equal weighted S&P is way underperformed.

The S&P 500 overall, in large part because of these really big names. It's pretty top heavy. And if things turn down as you expect in the medium term, won't those AI names get hit harder than everything else? So why would you like them now? Well, again, it comes down to what do you think is going to happen to estimates? I think you're going to have more disappointments come up during this reporting season, because I think as much as everybody talks AI and you had a segment on just talking about Micron, right? And Micron, which just reported, has been talking up AI and all of this stuff. And then they just guided to negative gross margins for the next quarter. And so that's why, even if you go back, the poster child for AI,

arguably, which is Microsoft, because they own almost half of OpenAI, which produced ChatGPT, they guided below the street, not much, but a little bit below for their cloud division when they guided to the September quarter. So I think you have to go ahead. I don't like Microsoft, to be clear. And so I think that's why you have to go through it one by one. But remember, we're a hedge fund, John. So for us, we're up this month. It's not because of our longs, but our shorts have done very well for us. And it's the same, you know, the prior month. And so I think you have to balance those two things out. And that's how we try to make money. You say, well, Facebook, Google, they're

trading just above a market multiple in the low 20s, I can pair an Apple against it where it wouldn't surprise me if numbers have to go down again. And that's trading near a 30p. And so you're trying to construct a portfolio where the guys that actually have estimates going up, you own those. And the guys that have estimates actually going down, even though they say AI 50 times on a conference call, that's not working. And then hopefully you can make money that way. And that's what, knock on wood, you can make money that way. And that's what, knock on wood, we've been able to do so far this year. Okay. Dan Niles, great to get your thoughts. Thank you. Still sounds pretty cautious, at least on the longer term. And I think the key

takeaway there is watch oil and what happens to prices there and what it's doing to other markets. Important in what he's saying to separate the short term from the medium term and the long term. Exactly. Well, after the break, RCNBC delivering Alpha Investor Survey asked investors for their views on the IPO market following a trio of high profile listings in the past week. The results may surprise you and we'll tell you what respondents said and we'll talk to the top dealmaker from Citi, which was a bookrunner on Instacart, Arm, and Klaviyo. Welcome back to Overtime. Jeffrey's earnings are out. Mike Santoli has the numbers for us. Mike. Yeah, Morgan, the midsize investment bank, often seen as a little bit of a preview of what the bigger Wall Street firms might report. Reported earnings of 22 cents a share. That's down from 82 cents a year earlier, but really not comparable either to a consensus estimate because there are not that many analysts that cover it, but also not really to last year's numbers because it does include a pretty significant non-operating loss.

Jeffries has this merchant banking portfolio of businesses that they're kind of winding down. I think the key here is investment banking and capital markets revenue for the quarter up about 5 percent year year. Basically seems to be stabilizing, if not really growing at this point. That's the core of the business, of course. And the company saying in the release, our third quarter net revenues of $1.18 billion reflect an improving market environment. We're increasingly optimistic that we have come off the bottom of the cycle and that momentum in investment banking will continue, Morgan. All right. Mike, thank you. Shares ofrey's down seven percent right now cnbc is delivering alpha investor survey asked investors and strategists to weigh in on the ipo market following listings from instacart arm and clavio with this question do you think the ipo market is heating up again

more than half of respondents, 57%, said no. So joining us now, Tyler Dixon, Citi's head of investment banking. Citi acted as book runner for Instacart, Arm, and Klaviyo. Tyler, it's great to have you on the show. It's great to see you. Are you surprised by that survey response, or do you see it the same way? I think, as you would have known from your two prior speakers, we've got some uncertainty in the economic backdrop. I think there's cautious enthusiasm about a soft landing, but there's certainly other scenarios that could play out. I think the new issue market and investment banking

activity have been impacted by that. And so we haven't seen a lot of IPO data points. I think we would look towards the three IPOs that you've referenced as green shoots, but I'd say they're light green shoots. And let me give you context for that. I think they were oversubscribed with high quality investors, both long only mutual funds and hedge funds, and they priced well against that backdrop. But they've traded against an uncertain backdrop in secondary market equity volatility. And so in that regard, they traded up nicely and have retreated a bit with, you know, increasing concerns about the economic picture that might be unfolding. Yeah. And we keep talking about the IPO pipeline and this idea that maybe it's thawing.

But but even it even if that's happening, it doesn't seem like the entire iceberg has melted yet. So so I wonder, what is it going to take to see more of these companies, these mature companies in the private markets, begin to think about going public now? Is it stabilization of the broader markets or is it something else? Yes, I think that's a fundamental, important foundational issue. I also think you have to see the transactions that price the market trade well. These IPOs came to market with very defensive structures, right? Anchor or cornerstone investors really validating valuation, very clear sets of comparables, and oversubscribed transactions that in the short term traded well. I think we're going to need to see more data points to have conviction. When we talk to CEOs and boards and founders, I think they take constructively the pricings. But there's an IPO

backlog of 45 registered IPOs and probably another 25 confidentially filed IPOs that are going to be important data points that we'll look to bring into the market in a relatively defensive posture. And we'll look to those data points to define the rest of the year. I think there's more enthusiasm about strength of IPO market conditions in 24. Well, so maybe the market isn't exciting enough for a lot of folks to really line up right now to go public. But is it stable enough for M&A to get done? Eric Mandel was just telling us yesterday that it sure is. And will it stay that way when we got strikes, shutdown, soaring oil, stretched consumer, all happening in Q4? Well, I know you were laser focused on IPOs. I'd say the equity capital markets have been quite a bit more active for public companies. The M&A market, we would also say, has had levels

of activity that give us some confidence that we've stabilized. We've got about $2 trillion of M&A activity. That's pretty low relative to annual activities looking backwards, but probably better than the market was anticipating. When we're talking to CEOs and boards, I think there is an increasing opportunity on the buy side for strong companies to take advantage of the potential market correction, and they're thinking about that. We also see activism making it important for folks to have a defensive posture if they're running companies. We also have the private equity firms awash with cash, and we're seeing a lot of activity of portfolio reengineering or separation transactions.

And so when we look at those activity levels, we're excited about the prospects of building from here. And so we would expect M&A activity to pick up as we approach year end and, more importantly, as we move towards 24. When the IPO market does reaccelerate, are we going to hear again about direct listings and SPACs, or is that just an icon of a now bygone era? I think there's room for solutions in the equity capital markets that are specific to companies with unique needs. And so we think the regular way IPO, given its stability and strength and repetition as a great tool, is out there. We do think there's room for direct listings. And in the right places, in the right ways, SPACs will play an important role. Okay. Final question for you then. When do we know that this is a window in the market versus the new normal, especially amid rates higher for longer? It's a great question. I think if you look at history

and the future doesn't necessarily path with history, it's rare that you would see six or seven quarters of depressed activity without a combination of fundamentals and technicals being in equilibrium for more activity in the equity markets, the M&A markets, and the debt markets. And so as we look forward, while economic uncertainty is certainly out there, I think the ability to find equilibrium between fundamentals and technicals and buyers and sellers is closer to an inflection point as we look forward than we were looking behind. Okay. Tyler, thank you. Tyler Dixon, Citi's co-head of Banking, Capital Markets, and Advisory. Up next, the confusing consumer. Mike Santola is going to look at an interesting divergence

between what consumers expect is going to happen to the economy versus their actual present situation. We'll be right back. Welcome back. Today's consumer stat of the day, 42 weeks. That's how many weeks of income it would take a typical American household to buy a new car, up from 33 weeks three years ago. That's according to Mark Zandi from Moody's Analytics. This comes as the conference board's consumer confidence index dropped this month from August and expectations for a recession in the next year

went up. Mike Santoli is back with a deeper dive into that data. Mike. Yeah, John, you could break down the overall consumer confidence number into how consumers assess their current situation or the economy's current situation and their expectations for the future. And we can see here that current situation is still holding OK, right? Unemployment's low. Things seem fine right now. Expectations, which is a little more of a judgment call, has declined to the lower end of its range over the last couple of years. The conference board, which runs the survey, says below 80, which it did dip below 80, is sort of on alert for recession, although I would note that we really operated there for a

lot of the post-global financial crisis period, the 2010s, where there was a lot of malaise. People didn't think the economy was performing well for them or anyone else. I'll just point out one other thing about this survey, which is they also ask about people's own personal financial situation. And folks still continue to say that there are more people saying it's good than bad or positive than negative. So it's usually one of these matters of, yeah, what I can see in front of me looks fine for now, but I'm anxious about what the future might hold. So it's kind of the I think I can, I think I can situation, right? I mean, in the economy, consumers really can manifest

and if they're feeling bad about the future, maybe they spend less. So, but are they right all the time or might this This just right. OK, I would say no. And that's that's kind of my point in here. I mean, things were improving, even if they didn't feel good, because, of course, it was such a massive shock in the financial system. And then you do when you get the current situation looking a whole lot better than expectations. You have to be on alert for a turn in the cycle. Things like durable goods purchases. Obviously, everything's getting more expensive to buy on credit. So there are real things that people are reacting to.

But I wouldn't say that the expectations component purely is predictive. And by the way, going into a recession, that's the angle it took in the global financial crisis. And, of course, once COVID hit there. How much does this factor into the big sell-off that we've seen in consumer discretionary? I mean, I know you've got oil prices, you've got student loan repayments, you've got how consumers themselves are feeling about everything. I mean, you put it all together, is the expectation that we're going to continue to see pressure in that part of the market? Yeah, well, that's absolutely what the market is trying to figure out

and is essentially pricing in more stress in that area. I don't know that it's about people's wherewithal to spend at a decent clip right now or even their willingness. It's more about, look, if you just pinch people on all sides when it comes to energy costs as well as rates, what's it going to mean? Also, if people are really starting to think, and I think this is a leap, that the Fed wants to target 4 percent plus unemployment as they're estimating it might get to next year. That, by definition, means, you know, it's going to be less for consumer cycle companies to feed on. Yeah. Tomorrow we'll be covering Nike earnings. Those are such a key proxy for this entire conversation. You've also got Carnival on the cruise side of

things on Friday. Mike Santoli, thank you. Treasury yields taking off again today and shaking investors with a 10 year yield hitting its highest level since 2007. It was a fresh high. Up next, Nuveen's Global Fixed Income Chief Investment Officer reveals where he sees opportunities in the bond market right now. Stay with us. Welcome back. Take a look at the 10-year note. Yields soaring past 4.6% today, touching their highest level in more than 15 years.

It's a story all of Wall Street has been focusing on. Our next guest is bringing his fixed income playbook for what to buy right now. Joining us now, Nuveen Global Fixed Income CIO, Anders Persson. Anders, investors might be spooked with bond funds, ETFs, down where they were around this time last year. What should they think about that? Yeah, I mean, certainly last year was a tough year from a fixed income perspective and quite unprecedented, I have to say. and you know i think we're really more focused on where we are today and and we're we're quite constructive kind of going into q4 here from a fixed income perspective we're really focused on where the yield levels are

right now as you said you know treasuries have been moving higher and higher and therefore fixed income is is offering very attractive yield levels at this point. We continue to stress to investors that vast majority of returns of fixed income come from the income side and the yield side. So when we're starting at these much higher levels, the opportunity set is a lot more interesting. And we also think the risk-reward is a lot more balanced now than it was a year ago, even a year and a half ago, of course, as well. You compare that to some of the other asset classes, we do think fixing promise offering a lot more interesting opportunities at this point. But I don't know if your folks are getting questions. I mean, we've sort of accepted all year that we're near the end of the rate hike cycle. So why the roller coaster this year? And is it really safe to build a bigger position in bonds right now? Yeah, I would say the roller coaster term is one I've been using a fair bit. And from a

pressure yield side perspective, there's no question that the market is still trying to get their arms around the inflation kind of type higher for longer type backdrop that we're seeing. But I think we have a lot of confidence. I think the market is starting to get a lot more confidence you know the inflation kind of type of higher for longer type backdrop that we're seeing but i think we have a lot of confidence i think the market is starting a lot more confidence that the fed is is getting close to right to wrapping up its hiking cycle we may see one more hike at some point that the market is pricing in roughly 40 probability of that but once we're done with that i think we're going to see a much more stable backdrop than yields. We're actually even expecting 10 years yields to start moving lower at that point. So I think we just need to try to see through this a little bit further, look around the corn

a little bit and kind of focus around, again, the yield opportunity, the income opportunity that we have. Because you look at investment grade corporates at 6%, high-yield bonds at 9%. If you go into senior loans, offering double-digit 10% at this point. These are really attractive yield opportunities that we think investors should take a very hard look at. So that's where you think that investors should be focusing their time and energy. It sounds like steer clear of stuff that's riskier, like high yield. I would say there are parts of high yield that we're still constructed on. Double B kind of rated high yield bonds are still offering quite good value in our minds.

The fundamentals are holding up quite well. And a lot of those companies, they've been locking in very low coupons and being very proactive, making sure that they're not going to get exposed for these high rates. So I would say BBB and BBB part of credit in general is offering opportunities. Senior loans, I mentioned, if you think this higher for longer may stick around,

floating rate exposure is quite attractive. Again, you can get yields over 10% when you find that. That's to be very interesting and it's already pricing in a lot of uncertainties around a potential recession but there are opportunities pretty much across fixed income parts of secure class for instance is an area that that's very large and is very vast but if you're doing your work there we're finding attractive sub-sectors there as well. So even CMBS,

despite being tied into commercial real estate, there are pockets that are very interesting and been banged up a bit that's offering very attractive yields as well. So diversification is probably my key theme when it comes to fixed income right now. It's like you read my mind because I was just going to ask you about mortgage-backed securities and commercial mortgage-backed securities because, I mean, we see quantitative tightening. It's like you read my mind because I was just going to ask you about mortgage-backed securities and commercial mortgage-backed securities because, I mean, we see quantitative tightening. It's not just treasuries that are rolling off the Fed's balance sheet right now. It is MBS. You've got banks recalibrating their investment portfolios, and you do have a flurry of credit rating downgrades. So when you talk about doing your work in this area of securitized,

what does that involve? Yeah, I would say for both MBS and NCMBS, you really have to dig quite deep, make sure you leverage your broader team. And I think in MBS, you know, obviously tied into the housing sector, as you're alluding to, and despite higher mortgage rates, housing prices are holding up really well. And we're looking for opportunities where we have particularly significant cushion where you know basically bonds have been issued quite some time ago built up a very you know significant cushion that we can go in and really find that attractive risk reward and same thing on the cms side if you're looking at more seasoned bonds maybe with eight to ten years of property value increases built into them, you can find single A rated bonds at 11, 12 percent, which in our mind is really offering attractive risk reward.

But again, you need to do your work. You need to make sure you understand the risks here as well because there are some headwinds, as you said, in this broader space. Okay. Andrew Sperson, thanks for joining us. Up next, all the after hours action that needs to be on your radar. Plus, we're monitoring Micron's earnings call, and we're going to bring you any of those highlights. You can see right there, two earnings movers, both to the downside on overtime. Let's check in with Christina Partsenevelis for more on Micron as that earnings

call rolls on. Christina. We know that it was a beat, but honestly, when you look at the numbers, it's a drop 40 percent in revenue for Q4 year over year. And on the call, Micron CEO starting it off by actually saying that it was a challenging year, that their total addressable market reached a multi-year low and that it's had a significant impact on financial performance. They went on to say that traditional service demand remains lackluster. They're forecasting 2023 PC and smartphone volume to decline this year and possibly return to normal levels next year. There is a bright spot and that's their high bandwidth memory chips, but that is only expected to ramp in 2024 meaningfully and meaningfully add to revenue. And there's one line that he just said right now that stands out to me. And I quote,

while supply demand is supply. Let me replace that. While supply demand balance is improving due to the excess inventory, profitability and cash flow will remain extremely challenged for some time. So there's a lot of warning signs in what I'm hearing so far just from this call and possibly why we're seeing the stock a little bit lower now that it's going on, down 4%. Christina Parts and Avalos, thank you. Nike hasn't been able to just do it for investors in 2023. Find out whether tomorrow's earnings could help turn around the struggling stock when overtime returns.

Welcome back. Nike earnings tomorrow. One of the worst Dow performers this year. Look for any color on the consumer and sales in China. We'll have full team coverage here on Overtime. And also tomorrow, CNBC is delivering Alpha Conference takes place in New York with big name guests, including Pershing Square's Bill Ackman. I will be hosting a discussion with Blackstone's co-head of real estate, Kathleen McCarthy. You can scan the QR code on the screen to register. Eking out gains, although barely,

John, today. That's going to do it for us here at Overtime.