Closing Bell - Closing Bell Overtime: What Nvidia’s New AI Chip Means For Investors; What Both Sides Need From China-U.S. Sideline Talks This Week 11/13/23

Episode Date: November 13, 2023

Markets vacillated throughout the session but ended the day little changed after Friday’s rally. Solus’ Dan Greenhaus and Edward Jones’ Mona Mahajan break down the market action and what how they are recommending clients position their portfolios heading into year-end. Bernstein’s Stacy Rasgon on what investors need to know about Nvidia’s new AI chip, unveiled today. The Blueshirt Group’s Gary Dvorchak will be at the Xi Jinping banquet at this week’s APEC summit; he shares what both sides hope to gain from sideline talks. Janus Henderson’s Global Head of Multi-Asset, Adam Hetts, on where investors can find value right now. Plus, Courtney Reagan looking ahead to a major week of retail earnings and Morgan speaks with Tyson CEO on the changes in consumer behavior he is seeing. 

A mixed session for stocks to start the week, but the Nasdaq 100 snapping its Monday winning streak that had dated all the way back to the second quarter. It finished today fractionally lower. That's the scored card on Wall Street. The action, though, is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan, back with John Fort. I'm back.

Good to be back with you. And ahead on today's show, your year-end playbook from an asset manager with a quarter trillion dollars under management. I'm going to talk to Janice Henderson's head of multi-asset about his best ideas for the rest of 2023. Plus, EV maker Fisker is gearing up for earnings with shares off by more than 50% from their one-year highs. We're going to bring you those numbers as soon as they cross. And we begin with the market. A more tentative posture on Wall Street today after Friday's big rally and ahead of tomorrow's key inflation reading.

This week's meeting between Presidents Biden and Xi. CNBC's senior markets commentator Mike Santoli joins us now from the New York Stock Exchange. Mike, S&P sectors closed about split, half positive, half negative. And we're a week and a half from retail's Super Bowl and a major test of the consumer how the markets look yeah exactly I mean really just hesitating here John in terms of the S&P 500 right at the top end of its range I mean even if you looked at the the volume split below the surface it was about 50 50 today that's nothing wrong with that kind of just digesting what we have to go on right here we are in this moment where we've got to kind of question exactly what we're wishing for.

We're definitely wishing for inflation to become more friendly. We'll see if the market maybe looks through some of the technical adjustments in the core rate tomorrow and kind of gives the economy credit for cooling off on the inflation side, even as growth has remained okay. That's obviously the ideal scenario. We keep just sort of measuring each day's data based on the soft landing scale. You know, can we dial it up or dial it down? Yeah, I mean, this is really, we had a mixed picture for stocks,

but we didn't see large moves in either direction for any of the major averages today, Mike. It's really the calm before the storm, to your point. Retail earnings, retail sales, CPI, PPI, APEC, questions about government funding at the end of this week, and then a flurry of Fed speakers. What's going to matter the most here? I mean, I think that collectively what retailers tell us about where consumers are and how that compares with what I think is already a market braced for pretty bad news on that front probably is the more instructive side of things. I don't know that there's a lot of a lot of hopes or expectations invested in APEC,

even though we could you know, we could we could be surprised on that front at some point. Government shutdown. I think the market always prefers to look past it to the degree it allows itself to until it's a reality and even beyond that point. So all that together, Fed speak. I don't know what more they're going to tell us this week versus versus last week. I'm just sort of outsourcing my opinion to the bond market on what that all means. All right. Stay close, Mike, because we're going to come back to you in just a few moments. Let's get to our market panel. In the meantime, though, joining us now is Dan Greenhouse of Solus Alternative Asset Management and Mona Mahajan of Edward Jones.

Dan, you're here on set. I'm going to start with you because I'm looking at your notes here. You seem pretty bullish. I mean, the S&P just closed at 44.11. You think we go higher from here? Yeah, I certainly think the basis for the reason why we rallied so far probably takes you into the end of the year. And these are all views that have been articulated before. There's nothing new. You had the market down 10 percent or so from the the high you have you're entering the seasonally strongest period for the market uh rates have come off the highs and i think when you put that all together with an earnings season that went on balance pretty well i don't see why uh you shouldn't continue to rally into your end admittedly much of that has already happened but still i i don't see

why you can't have a little further gains into the end of December. Okay. Mona, I'd imagine you see it similarly looking at your notes. But the key question for me is, how does this set us up for 2024 then? Yeah, it's a great point. And look, I do think there's some momentum heading into year end as well. We think some of the winners of 2023 will continue to probably show some leadership as we head into year end. And we're seeing that already as the mega cap tech space, that magnificent seven, continue to lead while the rest of the market has kind of lagged. Now, as we think about 2024, this is an environment where perhaps the first half of the year, we see a little bit of consumer slowdown, which leads to a bit of an economic softness ahead. Keep in mind, we're already seeing consumer credit

card balances accelerate. Delinquencies are starting to pick up. We have tight lending standards, as we know. So these are all headwinds for the consumer. But all that being said, as we look towards the back half of 2024, we could see a bit of reacceleration once again. So we do think as we come out of a period of softness, that is really when you get this broadening of market participation. So maybe it's not just a magnificent seven, maybe some of that S&P 493, which by the way, is very favorably valued now. So a little bit more scope for upside continues to show some leadership or starts to show a better leadership and more participation. So we think parts of the cyclical market, even small caps to some extent, and maybe even international, start to play catch up. And when we think about our balanced portfolios, we think bonds are a much more meaningful

part, even in 2024, of most client portfolios. OK, well, sticking with the consumer for a minute, Dan, my kids play piano and they can practice for months, but then there's a recital. And it feels like we're at recital time for the economy, right? Because is the consumer going to show up in Q4 and for whom? And that starts in about 10 days. How important is the level of consumer spending right off the bat, Black Friday, Cyber Monday? Are there specific stocks that you're looking at or sectors as being affected? Well, first of all, let me say with respect to the consumer, some of what Mona alluded to, the higher delinquencies and the credit card balances going up. And with all due respect to Mona, these are observations people have made for many months.

And for me, Mike Santoli made a joke earlier about how he was outsourcing his view on the Fed to the bond market. I outsourced my view on the consumer to Visa and MasterCard. Visa, full disclosure, a stock I've owned personally for 15 years or whatever it is. Visa and MasterCard had told us that consumer spending on balance was fine. Now, we've heard from them and a couple of other companies that maybe there's some problems at the lower end of the consumer. And you see this in the auto delinquencies happening at subprime. And you see this in some of the credit card balances. But on balance, the consumer is doing fine. And I don't see any reason. There's been no, nothing has changed meaningfully in the last few days or weeks to suggest that

this earning season or going into the Christmas time, so to speak, is going to be suddenly weak as compared to the previous couple of weeks. So I have a little bit more of an optimistic take on the consumer than it sounds like some other people. But Mona, aren't the stakes higher in terms of growth, not just on the top line, but also units during Q4? And that consumer who stretched credit-wise is just now starting to get those bills that have a higher percentage APR that are going to be harder and harder to pay off over time. We're starting to get that impact of the rate hikes on the consumer, right? Yeah. You know, look, they've been facing higher rates. And to Dan's point, I do think that

the consumer has been very resilient. You know, it's been remarkable since March of 2022, they've faced 500 basis points of rate hikes. They've faced inflationary environments, which, you know, notably are starting to cool somewhat. But what we'd say is q3 you know 4.9 percent gdp growth not only above trend but well above trend those are levels where we think you know that's probably not sustainable going forward and that was driven by a four percent consumption rate so as we're heading into q4 yes a consumer does have a propensity to spend in q4 so maybe those credit card balances get even more stretched and maybe we're taking debt limits to more maxes and we'll see delinquencies tick up even higher. But we do think over time we're going to start to see some cooling in that. Now, all that being said, again,

this isn't any sort of deeper prolonged economic downturn we're facing, but a slowdown in the consumer can be felt and the ripples probably will be felt in the broader economy as well. Probably starting to see a little bit of cooling in the labor market, at least a little bit better balance between the supply of labor and the demand for labor as well. So these are factors we put together on a backdrop of a very strong Q3. So Dan, are we seeing this rally begin to broaden out? What would you be looking for to know that the health of it is strong and sturdy? Where would you be putting money to work in it? I don't know that you need a broadening out to have great confidence in the market. And you guys all know this, but obviously the seven stocks, so to speak, have driven much of the

gains this year. But that's a function of their weight. It's impossible for Microsoft, which is breaking out to new highs, not to have an outsized impact on the index, given how much larger it is than the bottom 100 companies combined, let's say. But even beyond that, if we focus purely on the impact, you're going to miss several of the infrastructure-related industrial names that are at or near highs or have sold off and are bouncing again. The homebuilders, obviously, there's some problems there with respect to interest rates.

If you look at like Lenar and D.R. Horton, two of the largest, they're basically back to highs. Other tech names, Adobe, an AI name that gets left out of the conversation, basically at highs. And you can go throughout the hotels. Some of the restaurants which sold off because all of a sudden everyone's taking Ozempic and they're not eating anymore. Everyone's realizing that's going to take a minute. I mean, really, though?

I mean, it's like we're looking for these. But some of the things that we feel like are happening aren't really happening, right? Ozempic is definitely not happening. And, you know, the funny thing is Walmart's going to report, and we're all interested in margins and the health of the consumer. But on our last call, as we all know, they indicated they're starting to see some impact from Ozempic. I don't want to say it's patently false, but it seems really unlikely to me that everyone on the Upper East Side and L.A. where Ozempic is being subscribed are the ones shopping at Walmart and slowing down. I don't think so. But getting back to the restaurants, you know, like some of them have bounced.

You look at McDonald's or Texas Roadhouse, Wingstop. Chipotle is at a new high, I think. So there are other things beyond the seven. Would I like to see that broaden out? Sure. My point would just be you don't need it to have confidence, so to speak, in the rally. I'll believe the Ozempic thing when Dress Barn and Chico's stock tank. Because conversely, listen, how this plays out, and all joking aside, how this plays out is really uncertain. But the positive side of it, we know everyone's going to stop eating, so they're not going to go to restaurants and the candy stocks and the Mondelēz are in trouble. But the flip side of this is when everyone starts looking phenomenal because they've lost hundreds of pounds, where are they going to go shopping for their new wardrobe? I'm not saying I have that answer, but figure that one out. All right. Okay. Well, thanks for kicking off the hour with but figure that one out. All right. Okay. Well, thanks for kicking off the hour with us, Dan and Mona.

Thank you. All right. Now let's bring back Michael Santoli to highlight some of the divergences that we currently see in the market. Mike? Yeah, it's compulsory, right, John? It's all we do is kind of slice up the market and either give it credit or withhold the credit for what it's been doing. Here's the S&P 500 against that now frequently quoted equal weighted version, but also against all stocks outside the U.S.

That's ACWX. It's all the indexes, equity indexes, except for the United States market. That looks a whole lot like the average U.S. stock, right? So the U.S. exceptionalism in performance, as often is the case, really is attributable to the fact that we almost monopolize the global tech platforms that have been valued so highly with the trillion dollar club and all the rest of it. Now, that said, you know, trying to hang in there a little bit near the springtime lows for both of the equal weight and also the non-U.S. stocks.

How about within the home related sector of the market? Home builders have really lifted off against Home Depot, whose earnings are going to be coming out in the morning. So home improvement, obviously much more reliant on absolute amount of housing turnover. And there's so little turnover and so little existing inventory that it's operating to the benefit of the builders for now. At least the market's giving them credit for basically being the only ones

who have a fix for all this stuff. And in the process, Home Depot goes sideways, been sideways for a couple of years now. And in theory, as earnings start to get back into growth mode, it is cheapened and some risk has come out of that part of the market. I think that's the part we don't often look at. Yep, when underperforming cyclicals are not doing well and they're kind of emphasizing the economic risk, it also means valuation risk is often coming out of that part of the market, John. All right, Mike Santoli, thank you. After the break, upping the ante on the AI race, NVIDIA is on a nine-day win streak and just unveiled a new chip today,

which competes with AMD's upcoming offering. We're going to talk to Top Chips analyst Stacey Rasgan about which company is pulling ahead of the pack. Overtime's back in two. NVIDIA shares getting a pop today after unveiling a new AI chip, the H200. It's an upgrade from the H100, more memory bandwidth to handle intensive generative AI work. The chips are going to be released in the second quarter of 2024. Shares ending the day in the green, marking a nine-day win streak. Stacey Raskin of Bernstein joins us now to discuss.

Stacey, NVIDIA is back at those levels where it was in September or kind of close to it getting up toward the 490s. But how much competition are they about to get from AMD, from Intel, from maybe Microsoft? We're expecting chips to be a part of Ignite out this year. Do investors need to consider that when they think about buying at these levels? I mean, look, you talked before the break about seeing who's pulling ahead of the pack. NVIDIA kind of is the pack. Let's be honest here. Everybody else is trying to catch up to them. And this is one reason I think we're seeing these new product introductions. NVIDIA is actually accelerating their progression. They used to go every, I don't know, every couple of years, two or three years, they'd have a new architecture out. They're moving to an annual cadence.

They've got, you know, revisions to the current architectures. You talked about the H200, which will launch, like I said, Q2 of next year. They'll have Blackwell, which is the next generation architecture, launches in the second half of next year. They're continually moving the goalposts, and everybody else is trying to catch up. And even if they catch up to where NVIDIA was, which I don't know that they are, NVIDIA is still moving ahead. I think it's really tough. That's kind of what I mean, Stacey, is is NVIDIA ahead of the pack priced into NVIDIA, especially now at what is it, 480, well, wherever close today, above 480. We've had this discussion before. I know the stock price

on an absolute level is high relative to where it's been. On a valuation basis, the stock is actually very cheap. It's actually quite a bit cheaper than it has been in a long time. And some of these other names, you could argue it's even cheaper than some of these other ones like AMD. And for a demand environment that's probably more certain, like AMD actually gave us some numbers already for what they expected for their AI sales next year. Maybe this puts it in some context. They said that their product next year is called the MI300. And they said they thought they would

do in excess of $2 billion in sales next year. I would say if NVIDIA does $50 billion in data center sales next year, that will be viewed as incredibly disappointing. They're going to do more than that. AMD is going to do two. It's single-digit percentage, probably, of what NVIDIA is likely to deliver. That's what I mean when I say they are the pack. If I dig into that a little bit further with you, Stacey, to your point, NVIDIA is up 230% plus since the start of this year. AMD sold off today, down 1.5%, presumably on this news.

I mean, that stocks up a paltry 80% as well. I mean, at these levels, do you still invest in NVIDIA? Is it still compelling, or do you put your money to work in something like AMD or Intel or another chip name that you cover? I'll be honest. So like NVIDIA, I do like it. Again, you mentioned the stock's up, whatever it is, two or three X earnings are probably up four or five X though. So again, the stock's actually gotten cheaper as it is, as it has gone up. Everybody with NVIDIA there, what they're worried about is that the numbers are getting so big so quickly, you just worry about sustainability, you worry about an air pocket coming. And again, I

get it. We've seen these air pockets with NVIDIA in the past around crypto and everything else. And I always say the chance of them hitting something like that at some point in the future, it's probably 100%. We've seen them before. We'll see them again. Now, that being said, I still think the A opportunity is massive. I still think we're really early. I'm convinced in five years, in 10 years, we'll be talking about numbers that are materially higher than what we are talking about today. So with NVIDIA, as always, I think you need a strong stomach. That stock has its ups and its downs. But I still think we're really early. I think the opportunity is massive.

I think they're in the driver's seat. I think you have to own it. Okay. We got APEC this week. For better or worse, semiconductors have become the lightning rod of those geopolitical dynamics

between the U.S. and China. You had the commentary from SMIC, China's largest chipmaker, last week about boosting CapEx, warning about geopolitical tensions. Speaking of NVIDIA, you've got the NVIDIA chips that are going straight into China and moving around some of these export controls that are in place from the U.S. And then, of course, you've got Broadcom, which has this Chinese review on it

as it's trying to buy VMware. How do these tensions continue to evolve? How does it affect, how much of a risk, I guess is what I'm asking, to semiconductor sector? I mean, it's always a risk, but it's not new, right? We've been dealing with this for years and years, ever since, you know, even well into the Trump administration with Huawei sanctions and export controls and everything. So it's not new. I do think that like semiconductors are kind of the lightning rod for a lot of this that is going on. It is a very strategic sector, strategic industry. It's very important to the U.S. and China. And the U.S. is very clearly trying to constrain China in

terms of what they can and cannot do in this industry. I mean, that that is clear. So it's a risk in the sense that China is a big market. And, you know, if companies cannot sell that stuff into China, you know, and it can't get replaced elsewhere, it results in markets that are smaller. So that's a risk. Now, that being said, I mean, there are there are, you know, I would say the sanctions that they've been put in on so far, they've been trying to constrain them as much as possible. Right. And in fact, the ones that have the only ones that have really seen any sort of material revenue impact up until this point has been the Semicat players. They were hit by several

billion dollars of tools that they could not ship into China, and they did not ship into China. They've got strong demand from other stuff, which is supporting, but they did see some impact. With NVIDIA, I think it's TBD if they see impact. We saw the broadening of the export controls recently. It impacts almost everything that NVIDIA is currently shipping. They can no longer ship that stuff to China. Right now, their demand is so high elsewhere, they'll ship it elsewhere. And it looks like they are developing new chips that will have fairly significantly impaired performance, but will come in under the thresholds. They're going to try to sell those into China, I think, by year

end. I want to ask you, Stacey, before we have to go, about the role of the hyperscalers, the biggest cloud players in this AI chip game, Amazon, Microsoft, Google. They'd all like to pay less for AI infrastructure. Right now, NVIDIA is a big piece of this. How much of a risk is it that all of those companies, each of those companies comes up with some effective semiconductor design that powers enough of their AI strategy that they don't have to buy it from outside, including NVIDIA,

AMD, Intel, et cetera? I don't think so. So it's not new, right? So Google has been deploying their own internal silicon. They call it a TPU, Tensor Processing Unit. They've been deploying them for eight years. You're right. Every single hyperscaler is likely working on their own chips. Google's deployed in size for many, many years. It hasn't slowed anything down. You tend to use those chips for their own internal workloads, where the workloads are more static rather than dynamic, where you don't need the programmability and the flexibility. That's the trade-off. These chips are going to be more efficient because they're custom designed for specific workloads, but they

lack flexibility. There's no free lunch. Anytime you need the flexibility where the workloads are dynamic, and in particular where you need the NVIDIA software ecosystem, I think you're going to go GPU. This is why, for example, with Google, you can go on Google Cloud as an end customer and rent a GPU instance. Nobody really bothers, right? Because end customers, they use CUDA. They want to use the GPUs. And so I think it's a risk in the sense that it's going to happen, but it's already happening.

And I think the market is so big that I think there's plenty to go around for everybody. Certainly, that's been the case up until this point. Okay, or plenty for NVIDIA, depending on how you look at it. Stacy Wiles, thank you. Speaking of which, we are expecting Microsoft to make some AI announcements during the Ignite Developer Conference in Seattle this week. I will be there speaking exclusively to Microsoft CEO Satya Nadella Wednesday, 1 p.m. on The Exchange.

Must watch TV. After the break, Presidents Biden and Xi are getting set to meet in San Francisco 48 hours from now in a closely watched confab that could have big business implications. We're going to talk to an expert who advises companies on U.S.-China relations and who will be meeting with President Xi this week about what he wants to hear from these leaders? Stay with us. Welcome back to Overtime. Boeing stock notching its second best day of the year today, partly on the back of a report that China is considering ending its freeze on new purchases of 737 MAX aircraft. That 737 MAX news could come during this week's APEC summit in San Francisco,

where President Biden and Xi Jinping are set to have a sideline discussion. Boeing investors also cheering a major wide body sale to Gulf carrier Emirates. But joining us now is Blue Shirt Group managing director Gary Dvorak, who will be attending Xi Jinping's banquet at the APEC summit on Wednesday. Gary, it's great to have you. And I do want to start right there because this has been anticipated for a while, the Boeing news, and it certainly seems like it could be a potential, dare I use the phrase, olive branch in terms of these two leaders getting together. Is it right for the market to expect such a news announcement to take place?

I think it is. It's probably not the only big announcement we're going to get. But in fact, the whole fact that Xi Jinping is coming to San Francisco and that Biden is meeting him is really more of the olive branches, because probably sometime last year, the relationship hit a really low point and it was very contentious. And certainly the U.S. has been reaching out and sending senior officials to China. Xi Jinping coming to America is not common. And until probably about a month ago, it was unknown whether he would even come. And so it's important for economics, but it's really more important at a more base level in terms of the relationship. And just

turning down the heat at the rhetoric and the contentiousness, I think everyone knows the Chinese put a list of demands, or maybe not demands is the right word, but the things that they wanted to see before they would agree to the president coming to San Francisco, top of the list is mutual respect, right? And it makes sense. I mean, we can't have a good relationship on trading, you know, in any other way without some level of mutual respect between the two countries, because we really are both of us are the two most powerful countries in the world. Yeah. So in light of that, how much actual policy do you expect to be crafted here this week? Or is it really more about that communication and the optics of that communication? Yeah, I don't know that we'll have policy breakthroughs. I mean,

the devil's in the details. And it's about the negotiations that happen after the fact. It's really setting the tone, right? And the fact that Xi Jinping that happen after the fact. It's really setting the tone, right? And the fact that Xi Jinping comes here, the fact that Biden's willing to meet him, it sets the tone at the top, that the leaders are willing to put down their guns, hold up the olive branches, as you say, but basically talk to each other and try to find some common ground. And as you know, one of the reasons I'm going, and this news kind of broke over the weekend, is that a lot of Xi Jinping's old friends from Iowa, who we met in 1985, were invited to the meeting. And it was a little bit of an eye-opener because people expected this really to be a

business event more than anything else. But Xi Jinping uses that Iowa relationship to humanize himself, to humanize the relationship between the two countries, and really emphasize the fact that when you get below the senior government leaders and you look at people, right, people-to-people relationships, just like he experienced 35 years ago, that's the base where both countries can have a better relationship together. That does sound nice, Gary, but it also makes me wonder, what's the biggest economic miscalculation that the U.S. risks making, not just at this summit, but going on from here when it comes to China?

I think the biggest economic miscalculation we all make is to view trade as war. And it's often spoken about in military terms. And look, we don't lose by having more trade with China. Right. I mean, we already look. Americans love China. We walk into Walmart every day. It's full of products from China. Americans vote with their dollars. Right. They they like China. Americans vote with their dollars, right? They like China.

The relationship is fine. So we don't lose by having the Chinese manufacture for us. We don't lose when Chinese, as they enter the middle class, they want Teslas, they want iPhones, they want Western luxury goods. So trade is a win. And so not on a policy level, but on a more philosophical level, I think we need to dial back from the trade is warfare. And if China wins, America loses and really get, understand more that it is a win-win as much as that can be a cliche. Right. We both win if we work for each other. Gary, you mentioned iPhones. This is a critical few weeks, several weeks for Apple in Q4 with

iPhone sales. China is where they're made and there's been pressure on Apple's sales in China, particularly when it comes to the government, but more broadly than that, is there potential upside for a company, a stock like Apple, if this goes well? I definitely think to the extent that it cools off the negative rhetoric and creates a more friendly underlying foundation than absolutely. Certainly there's a lot of tit for tat after we banned Huawei and the Chinese was cracking down. We need reverse tit for tat. So a small move on their part, a small move on our part.

And certainly Apple, certainly Tesla, there's a number of American beneficiaries if things just cool off even a little bit because China is such a big market. All right. Gary, thank you. Gary Dvorak. Great. Thanks, everyone. Time now for a CNBC News update from Julia Boorstin. Julia. John, the Real Estate Board of New York is being accused of conspiring to artificially inflate buyers' brokers' commissions.

The lawsuit filed today is seeking damages for Manhattan sellers from the last four years who paid buyer brokers' commissions. The suit follows a similar case in Missouri that awarded home sellers more than $1.7 billion. The Federal Communications Commission is expected to pass new regulations this week that could make cell phones a more useful tool for domestic violence survivors. Under the rules, telecommunications companies would be required to adopt three new programs. These programs include quickly removing users

from family billing, providing low-cost emergency phone replacements for domestic violence victims, and cloaking records to domestic violence resources. New York City Mayor Eric Adams announced plans to add infrastructure for electric helicopters to the city's largest teleport. The mayor said the city wants to take sustainability to the sky. Joby Aviation reported the first- ever electric air taxi flight in the city yesterday and showed off two huge drone-like choppers at the press conference today. John, seems like a

good way to avoid traffic. Back to you. I hope so. We need lots of ways for that, Julia. Thanks. Up next with earnings season mostly behind us, Mike Santoli is going to look at profit expectations through next year and the one part of the market that is clouding the broader picture. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We will be right back. Check out shares of life sciences company Azenta getting a boost after hours, though losing about half of its after hours pop. The two billion dollar firm notching a beat on earnings, 13 cents per share versus estimates of two cents. Also topping revenue estimates. Shares right now up just over six and a half percent.

All right. Well, Fisker earnings are out and Phil LeBeau has those numbers as well. Phil. Hey, Morgan, take a look at shares of Fisker showing some pressure after the company reported a Q3 loss that was greater than expected, a loss of 27 cents a share. The street was expecting a loss of 19 cents a share, revenue coming in at $75 million. But it's the numbers within the numbers. That's what's putting pressure on the stock right now. Deliveries of 1,097 vehicles last quarter. The street was expecting Fisker to deliver 4,233 vehicles. It produced 4,725 vehicles. You add that with the second quarter, I think you're around 6,000 vehicles produced in the second and the third quarter. The previous guidance, which, by the way, there was no mention of in this earnings report, was for production of 20,000 to 23,000 vehicles this year. That would mean they really got to get on their high horse in the fourth quarter and produce about 16,000, 17,000 vehicles in order to hit that benchmark.

The conference call begins in about, what, 20 minutes? 20 minutes. We will hear from Henrik Fisker, founder and CEO of Fisker. Again, a wider than expected loss for Fisker and deliveries coming in well below expectations. Guys, back to you. All right, Philippo, thank you. Shares are down 10% right now. Let's get back to Mike Santoli with a look at earnings revisions. Mike.

Yeah, Morgan, they have been heading down for the last couple of months. That's somewhat normal. But what's interesting is the different slices of the market and how much they account for this decline. So this is for 2024 S&P 500 earnings forecast. Goldman Sachs puts this together. So the index as a whole since August has tacked lower by a couple of percent. Now, remember, this is the change in the forward estimate. It's not the absolute growth level for next year. Now, if you exclude health care, which interestingly has been one of the worst areas in terms of downward revision, then things look a little bit better for the S&P 500. But then what everyone is saying is if you exclude the magnificent seven big Nasdaq mega cap growth stocks, then you're all the way down here. However, that's very similar to what the normal average path since 2004 has been in year ahead earnings this time of year. So the point is, you almost always see some erosion in forward earnings estimates. Without the Magnificent

7, it would look like the normal, pretty much normal trajectory with them, which, of course, they account for something like 30 percent of the market cap of the S&P. It's looking a little bit more healthy, which is also explaining why the market is valued as it is. Look at the Nasdaq 100, which is really dominated by those seven or eight stocks against the equal weighted S&P. So you're at 24 times for the Nasdaq 100. Now that's down from 30 ish at the peak and you're around 14 for the equal weight. So that's pretty much normal, in fact, a little bit low based on history. It shows you that it's no surprise to the market that that's where the earnings growth is. And I'm not saying that we've already accounted for all the potential economic struggle among the other stocks,

but we've gone some distance toward doing so, Morgan. Yeah, it's really interesting. More than 90 percent of the S&P has reported Q3 earnings. We've seen 6 percent plus year over year growth in profit, according to LSEG. Revenue, though, that has been slowing. That's up only 1.4 percent year on year. I guess along these lines to what you're saying, Mike, is the fact that there's just a lot of focus on the XLK tech ETF being so close to all-time highs. And I guess, again, going back to this point you're making about where we're seeing all this heavy lifting within earnings season more broadly. For sure. The XLK, the S&P tech sector, I mean, Microsoft, Apple, and Nvidia are basically half of it.

So you've got those three stocks really driving things. They all have their own, you know, whether it's an earnings growth story or a balance sheet story, they have been leadership of this market for a long time. And again, it really is an outgrowth of the market's preference for predictability and quality and insulation from macro pressures as well as disruption. That only kind of only a handful of stocks qualify for that right now. The economy reaccelerates. Maybe things can become a little bit more inclusive. Okay, Mike. Yeah, makes sense. Mike Santoli, thank you. Janice Henderson now has more than a quarter trillion dollars under management and the firm's global head of multi asset is joining us next to open up his year end playbook. He's going to break down whether

investors should be getting aggressive or defensive as we wind down 2023. Be right back. Welcome back. We have what we'll call a cautious day of trading as Wall Street waits for tomorrow's CPI data as anticipation for a potentially slowing economy grows. Our next guest says it is time to get defensive. Joining us now is Adam Hetz, the head of global multi-asset at Janus Henderson. Adam, good to have you. So with rates as high as they are, can the U.S. consumer spend enough in Q4 to not only satisfy expectations, but inspire some solid Q1 guidance or no? Maybe.

Well, we had a great Q3 GDP print of 4.9%. I mean, that was categorically in blowout territory as per the headlines. A lot of that was driven by the consumer. And we had this summer of love maybe with all the Barbenheimer and Taylor Swiftonomics really driving that 4.9%. And we're tracking 2% right now, but the consumer, it really can't physically keep up that

level of spending. It's starting to be a little bit overstretched. So that's part of the good that's been driving the market return year to date in the 16% S&P. But I think there is a bad and maybe ugly counterpoint to all that good, given that the consumer, as much as it's pushed things this year, it maybe is getting a little bit overstretched. So how does an investor position her or himself for that maybe? Well, I think it's defensiveness. You mentioned defensiveness. We were very defensive in our model portfolios coming into this year. The dominant narrative in the market was hard landing. It was the most anticipated recession ever, supposedly. And we were with that kind of consensus narrative. But I think like the rest of the market, we've also gotten a little less defensive as market conditions have improved.

But I think maybe one of the most profound themes in the market that we're going to feel through 2024 and 2025 is the long and variable lag of this historic spike in interest rates we've been feeling. If you think about it as a doomsday clock of sorts, not to get too pessimistic, but think about where we're at right now in this hiking cycle and map it to the 2004 hiking cycle that ended in 2008. You could say that today is January 2006 only in terms of we don't know what could be ahead of us in the next year or two as far as the repercussions of all those higher rates transmitting through the economy. But it doesn't mean it's literally January 2006 and we're literally headed towards a global financial crisis. It doesn't mean investors need to be balanced. I think the risks are a bit asymmetric after we're up 16% year to

date. And on margin, investors should stay invested, not move out of the market, not move to cash, even if those 5% cash rates are really enticing. Stay invested, stay balanced. But I think Aaron's side of being defensive through higher quality equities and very high quality investment grade fixed income. It sure sounds like you think this tightening cycle is not different than ones we've seen that are historic, you know, that to fight inflation that we've seen throughout history, that maybe it's just taking a little longer. I'd imagine then you're not necessarily in the soft landing camp. And it

raises the question, what does this defensive actually look like if you're not? Yeah, thanks, Morgan. I think that it's unprecedented in its own way as far as the inflation that we're dealing with, as far as this post-COVID demand rebound that we're still kind of accepting and wrestling with. So what I think defensiveness means in a model portfolio, if you break down to 60-40 portfolio, within that 60, it's looking for quality in the sense that if there is some sort of a hard landing ahead, or at least some kind of economic weakness going forward because of that restrictive backdrop we're all dealing with, well, part of the problem with that could be that we're at peak earnings in US equities. And in a recessionary environment, there's room for a 10 or 20% drop in earnings.

So that's looking for quality in terms of wide, stable margins through those fortress-like balance sheets that can withstand the stresses on liquidity and financing going forward within the equity space. I mean, that's part of why the Magnificent Seven has driven such strong returns in the S&P this year, is they exhibit quality and strong earnings. But we can't forget about the other 493 stocks where you can find stable earnings. And unlike the Magnificent Seven, where valuations are unforgiving, there are some valuation buffers in the other 493 stocks. Okay. Adam Hetz, thanks for joining us.

Thanks, Morgan. Thanks, John. A lot of Magnificent Seven chatter today on the show. Pretty magnificent, yeah. I know. I guess not surprising when you look at the rally this year. Well, Tyson Foods is one of the worst performers in the S&P 500 today after a revenue miss and disappointing guidance. But up next, we will get some nuggets on the state of the consumer and inflation when we heard from the company's CEO, stay with us. Welcome back. Tyson Foods ending the day in the red after reporting mixed earnings results today and issuing full-year guidance that will show improved cash flow and profitability,

but still disappointed the street. I spoke with Tyson CEO Donnie King earlier today about what he's seeing as the company's core proteins, beef, chicken, pork, come off a, quote, very challenging year. King telling me chicken is recovering after an oversupply in 2023, coupled with high feed costs, similar dynamics in pork. Tyson's planning to produce more bacon to offset the glut in pork, seeing some signs of recovery in chicken. For beef, the largest unit, U.S. cattle inventories are decades low. That's pushed costs up, which has pushed retail prices up, causing consumers to trade into less expensive chicken or pork. Beef sales dropped 6.7 percent last quarter as prices jumped more than 10 percent. Tyson expects 2024 to be another

tough year for beef. King's longer-term bet? Growing Tyson's prepared foods business, which could post a billion-dollar profit in 2024. Tyson owns Hillshire Farm, which could post a billion dollar profit in 2024. Tyson owns Hillshire Farm, Ballpark, Jimmy Dean, and of course, branded chicken products like the nuggets. And King saying, quote, a lot of upside from household penetration perspective there. On consumer behavior and inflation overall, King seeing, quote, movement from food service, so eating out, to people preparing more meals at home or picking up to take home, saying, quote, this is not uncommon when the consumer is feeling some pressure. Also seeing consumers buying less expensive cuts of meat or smaller packs.

King honing in on labor as well, telling me, quote, I have no belief whatsoever that what we're paying our team members to work for us is going to do anything but continue to go up over time. Adding that's why Tyson is spending on automation and new tech to modernize factories, even as it cuts costs, cuts jobs, and closes eight facilities this year, and even lowered CapEx for fiscal 2024 versus the heavy spending it's been doing coming out of the pandemic. Shares end of the day down about 2.5%, so off the worst levels of the session. The good news I took away from that, more bacon. So that's good. More bacon, yes.

Home Depot kicks off a major week of retail earnings tomorrow. Find out what to expect and what all these results could say about the state of the consumer when overtime returns. Well, investors, get ready for an avalanche of retail earnings this week with Home Depot, Target, and Walmart, just a few of the big names set to report. Courtney Reagan, investors aren't expecting great news. Yeah, and really, many retail stocks are pretty low today, much lower, really, than the broader averages. It just seems general sentiment for retail is pretty negative, even as U.S. consumers have been largely resilient in the face of inflation, rising rates, student loan payment resumption, and more.

Retailers, though, have been cautious with their expectations. Placer.ai data shows foot traffic at Home Depot fell more than 4% in the quarter. Home Depot is calling 2023 a year of moderation for home improvement, though October's unseasonably warm weather might have extended timing for some outdoor projects. But that warm weather likely didn't help apparel sellers like Macy's. Credit card spending data from Bank of America shows clothing spend fell more than nine percent in October and more than four percent in September year over year. Warmer weather likely hasn't helped target reverse trend and see it pick up

in more discretionary categories like clothing, though strength and beauty, health and wellness may help offset some of that. Placer.ai says target store traffic fell 2.5% in the quarter, and Walmart's had a positive steady streak thanks to its large grocery business that's been attracting higher income consumers over the last several quarters. Though again, Placer.ai says store traffic dropped 3% in the quarter. So we'll see what happens. Obviously a very busy month for retail and we always pay attention to what the guidance is looking forward. But this quarter, probably more than every other quarter, that's what the focus is, right? Because Black Friday is next week. My head's going to explode just when I think about that. Gross margins,

it's what I see a lot of analysts talking about coming into this quarter. Inventory destocking, even if maybe you continue to see sluggish demand, the fact that that's going to matter. How much? Yeah, a lot, right? I mean, profitability matters for every kind of company. It really matters for retailers. And I think margins have gotten slimmer depending on what kind of retail you sell, particularly if you're in the grocery business or consumable business, which obviously has been doing fairly well, but then your margins are going to be slimmer there.

Obviously, margins have been hit by things like the theft and how much will be quantified or not. I don't expect a lot of it to be quantified. So that leaves a lot of us sort of filling in the blanks. Well, was that margin hit really from theft or was that from something else? Inventory mismanagement. We knew we had all of this sort of out of place inventory for a long time. How much of that has been settled out? I don't think all of it, but I don't think we'll yet know until at least next year. How closely are you going to be watching TJX earnings given that they've got TJ

Maxx, they've got home goods. So really interesting insight into how much people want bargains. Yeah. And they, and they also have an international business. And I do think that that's really interesting. Also, they have a very small online business for the most part. You can order a little online, but not so much. It's been a formula that's worked for them, which obviously has not been the case for many others that have really needed to serve customers in all areas in a much more deep way than they have been able to. But I think that treasure hunt is still really valuable to a lot of shoppers. And I think people that did trade down during tougher times, whether it was the financial crisis, maybe during the pandemic or otherwise, have really found some good value there. If they

like it, they continue to go back, higher income or not. Okay. Courtney Reagan, thank you. Thank you. Ahead of a very busy week, Courtney. And we, of course, we also get retail sales. We mentioned it earlier, CPI tomorrow, PPI on Wednesday. You have potential government funding issues and APEC. The biggest representative of the Magnificent Seven with news this week is Microsoft, though, of course. I'll be there, bring that to you. All right, that does it for us here at Overtime. Fast Money starts now.