Closing Bell - Closing Bell: Rep. Waters on FTX collapse, Top strategist turns bearish, Holiday shopping outlook 11/17/22

Episode Date: November 17, 2022

Stocks pulled back a bit in Thursday trading as investors digested a wave of Fed commentary, and as Treasury yields moved higher. Eric Johnston from Cantor Fitzgerald makes the bear case for equities, saying he says very little upside to being long stocks right now. The collapse of FTX remained in focus as pressure builds on Sam Bankman-Fried. House Financial Services Committee chair Maxine Waters discusses her call for a hearing into the company and its former CEO. Plus, the head of the National Retail Federation shares his holiday sales outlook, and the latest on the housing market and Taylor Swift ticket drama.

Stocks are under some pressure following that hawkish Fed commentary and a jump in Treasury years, but we are well off the worst levels of the session. This is the make-or-break hour for your money. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look at where we stand right now in the market. Only one sector higher right now, and that's technology for a change, but it's not the sexy part of tech. It's the more boring part, like Cisco, which is jumping more than 5% off earnings.

NASDAQ comp down half a percent right now. There's the S&P 500. It's also down about half a percent. And the Dow as well. It's down two-tenths of a percent, 54 points. Amazon, Tesla, and Bidia Meta, those are still lower today. And the worst performing group right now is utilities, consumer discretionary, and materials. Check out some of the biggest earnings movers as well.

Macy's jumping on a big beat and materials. Check out some of the biggest earnings movers as well. Macy's jumping on a big beat and raise. Kohl's is higher as well, despite pulling its forecast for the year. Alibaba had a mixed quarter, but the stock is jumping today more than 7%. And Cisco, as I mentioned, higher after topping earnings. Coming up on today's show, we will speak with Congresswoman Maxine Waters, the chair of the House Financial Services Committee, fresh off her call for a hearing into the collapse of FTX. We'll also get her latest thinking on the Fed after she sent a letter to Fed Chair Jerome Powell voicing her concern about supersized interest rate hikes. We've got some news, though, first to get to on GM.

Steve Kovach with the details. Steve. Yeah, Sarah, this is coming out of General Motors Investor Day. They are raising their guidance now. This is only for free cash flow. They're saying free cash flow for this end of the year is going to be 10 to 11 billion dollars versus their previous guidance for free cash flow of 7 to 9 billion dollars. They're also narrowing their EBIT range here for the full year. It's going to be 13 to 15 billion. It was 13 and a half to 14 and a half. So a little bit higher on that end.

It looks like shares are slightly positive right now, just under 1%, Sarah. Steve Kovacs, Steve, thank you. Mary Barra, the CEO, will be on Mad Money with Jim tonight. Looking forward to that interview off this news. Let's head straight over to the market dashboard, though, for a check on where we stand with senior markets commentator Mike Santoli, as always. Was it really the Bullard effect? It didn't help. I think there's a general barrage of hawkish Fed speak that's keeping investors a little bit back on their heels. Also, though,

we had a 15 percent rally over the course of a month in the S&P 500 into Tuesday's high. Been on the defensive since then. Of course, it's that inverted Treasury yield curve, which reflects a lot of the Fed expectations that also is creating this unease. But so far, pretty controlled pullback, just a couple percent off the recent highs. Today's low was essentially at the October highs right there, just over 3,900.'s it's maintaining this little short term uptrend of course within the longer term downtrend but also say again if it sort of further goes down to the mid thirty eight hundred it's still very much a routine pullback we'll see

if it if it gets there and stops there now in terms of the growth versus value picture people that people have been very focused on that kind of binary way of looking at the market. But there are other factors and strategies such as dividends and growth at a reasonable price. There is an ETF for that, of course, the GARP strategy, which is more of a quality bias. This is over two years. So you can see how they've kind of outperformed the S&P 500 and also outperformed pure value over this period of time. Basically, investors, the market is rewarding solid cash flows that you can see today as opposed to expect in the distant future. We had some mixed economic

data to chew on. Philly Fed manufacturing, very weak. I think two and a half year low there. But jobless claims stay at these low, sort of strong levels. It's been this foundational fact of this part of the cycle, which is that the labor market has remained tighter than other measures of economic activity. Obviously, that is one of those things where do we convert that into a bad news story because it keeps the Fed on the offensive? That's definitely the question. Very, very little movement in continuing jobless claims. But yeah, it's a huge question as to whether that's going to have to soften up much next year and will. Despite all these layoff announcements still.

Exactly. Really impressive to see. Mike, thank you. Mike Santoli. Well, bonds are selling off. Interest rates are moving higher today after some hawkish Fed talk this morning. And Minneapolis Fed President Neil Kashkari is saying moments ago the Fed must preserve until they are certain inflation has stopped rising. And that one month's worth of data here on inflation cannot persuade the Fed.

Let's bring in Cantor Fitzgerald, head of equity derivatives and cross-asset strategy, Eric Johnston. Eric, so just for the record, you've been bearish pretty much all year. It's been a good call and then turned tactically bullish, what, a few months ago? And now you're switching it up again? Yeah, so early October, Sarah, thanks for having me. So early October, when the S&P was at 3,600, we closed our bearish call, called for a tactical rally. And essentially the reasons were,

we thought that positioning was quite offsides. CTAs were very short, hedge fund net exposures were at the lows. And we thought between short covering and then also we thought that the market would get to a place where they would think the Fed is almost done and that real world inflation is falling. So fast forward to where we are today at 39. That's happened. Yeah. So that all happened. And if you look at CTAs as an example, they've bought over $150 billion or more worth of global equities over the last month. Hedge funds have covered a fair amount of shorts over the last week, week and a half,

bringing their net exposure up. And we think that that by demand is now in the late innings, possibly seventh, eighth or ninth inning happening. And so now and by the way, now people think the Fed is almost done and inflation is falling. So that's now all priced into the market. Now, looking forward, the forward outlook fundamentally is very poor. And we can get into it, but it's essentially earnings estimates are far too high, valuations are far too high, and the economy is at significant risk over the next six to 12 months. But if we have seen the highs on inflation, doesn't that suggest that the Fed is going to slow down, December, possibly go 50,

maybe another 25 or so, and then pause. And so with that trajectory, if bonds are done selling off, wouldn't that be good for stocks? So one of the interesting things is that we looked back at all the times where inflation has spiked to levels that we're seeing you know approximately now and when inflation then falls off earnings get hit with it and this is a very important point earnings benefited from inflation over the last year and a half and when inflation rolls over then all of a sudden their wages are staying high and they're able to sell goods at a lower price and all of a sudden you get margin contraction. One of the things that's happened in history is that in 1994, for example, they raised rates, the Fed paused, and then we ripped in 1995. However, that was coming off of

a 13 multiple. And the same thing happened in 06, that was coming off of a 14 multiple. We're now at a 17 multiple one of the highest stocks haven't gotten cheap enough no exactly they're they're not pricing in um so yes it's great that the fed is done but the market's not like the market's pricing in recession and now the fed is done they're actually pricing in based on where the multiple is almost a soft landing yet we still haven haven't felt all the effects from the hikes. And by the way, on December 14th, I expect Powell to remain hawkish on December 14th. I was just going to say, it's not even clear that they're done.

The Bullard comments certainly shook people up today, saying that we have to go to at least 5% to 5.25% and probably should be higher than that. He only gets one more vote, though. He votes in December, and then next year he's not a voting member. So I still think he's kind of an outlier on that view that we have to that the Fed should be looking at models here. But I guess to the point, Eric, they're not done. Exactly. And I would agree with that. I think, you know, on December 14th, Powell's going to be looking at the unemployment rate at 3.5%. He's going to be looking at the S&P 500, which currently is at 39.50. I think it will be much lower by then.

And looking at an economy that's going to put up GDP in the fourth quarter somewhere around the 3%, 4%. So he's going to have the green light to be as hawkish as he wants. And I think he will take advantage of that. So despite the fact that we think inflation is falling and we're seeing that in the real world numbers we're looking at, that's beside the point because he's in charge. And that's the way that we think it goes. The pushback on your argument, Eric, is that we really could have either a soft landing or a mild and moderate recession, that consumers are in better shape than other times we go into recession, that corporates are in better shape than other times we go into

recession, that corporates are in better shape than other times we go into recession, that the credit market hasn't really flashed any super troubling worries, all of that to suggest that it could be a buying opportunity. So I think that argument is very valid, not the buying opportunity part, but the part about the potential for a soft landing. I don't think you can rule that out. The issue is that the market's pricing in, in my view, a soft landing. And I think when you think about housing as a great example, where housing starts are just beginning to roll over. There's a lag effect there for the higher mortgage rates to actually hit housing starts. And we're probably going to see that over the next six

months. One example is the Fed funds rate in 2022 averaged about 1.3%. QT in 2022 is going to be about $100 billion. Next year, we're having Fed funds rated 5%, a 10-year yield much higher. We're going to have QT of $1 trillion. And we're going to have all these lagged impacts from the Fed hikes. And then you look at excess savings. So excess savings have been coming down over the last year. They're still very high. But every day that goes by, those pandemic excess savings are dwindling. And that excess savings are are dwindling. And that- you know excess demand is also dwindling so. It's possible we

could have a soft landing because you're right we're coming from a very strong place. But I think it's very unlikely- and I think you're looking at everything the likely scenario is that we see some sort of negative growth.

In twenty three whether it's mild or deep. And either one will be a problem for stock prices. Eric Johnston from Canna, resuming the bearish view. Thank you for joining us. Thanks, Sarah. Appreciate it. When we come back,

the CEO of the National Retail Federation gives us his read on consumer spending, including a first look at some new results from a holiday shopping survey. Plus, don't miss our exclusive interview coming your way with House Financial Services Chair Maxine Waters. Her call on a hearing,

including Sam Bankman-Fried, to hear about the collapse of FTX, as well as her comments to Fed Chair Jay Powell. You're watching Closing Bell on CNBC. Dow's down 94 points. The holiday season is upon us and consumers are ready to spend. That is according to a brand new survey just out from the National Retail Federation. They're expecting a record 166 million people to start shopping on Thanksgiving Day through Cyber Monday. That is 8 million more people than last year.

And it's also the highest estimate since 2017 when they began tracking the data. Joining us now is Matt Shea, CEO of the National Retail Federation. It sort of surprises me, Matt, after what we heard from Target this week, which is that consumer spending has really started to deteriorate. Yeah, Sarah, it's good to see you. It's a bit of a mixed bag. We saw the October retail sales numbers come out yesterday showing a 30th consecutive month of consumer spending increases. So, and we know that a whole separate conversation about how the Federal Reserve feels about the resilience and the consumer side of the economy. But I'm not sure it's inconsistent with what we're really

seeing, because we know that consumers are looking for value. We know that this is going to be more likely to be a promotional holiday season, something more like 2017, 18, 19, not like the last couple of years. So consumers are going to get back out and revert to some of that older pre-pandemic behaviors. They're going to be out in the stores. They're going to look for opportunities and deals later in the season because they're trying to stretch their dollars as far as they can in a really highly inflationary environment. Is the consumer in good shape still, Matt? We keep saying they have all these savings and they're coming out of the pandemic when their balance sheets are in better shape. But now that

we have been through several months of abnormally high inflation, is the consumer still in healthy shape? Well, you know, Sarah, you know, this is a really complicated picture and you talk about it all the time. I think it's beyond a simplistic description of this is just a bifurcated environment. I think it's really stratified because you're seeing consumers, even at the higher income levels now, at $100,000 and above, those households, they're looking for value too. They're trading into other brands, into other storefronts, into other experiences. So it's really starting to impact households at a variety of income levels having said that at the higher income levels those

households are still relatively well off and and even at the lower income levels you know we know inflation has taken a bigger bite out of food prices and energy and rent but they're still finding value out there so So I think it's a complicated picture. Certainly there's more pressure on the lower income households because the greater proportion of their income is devoted to those necessities. And they're really going to be looking for bargains and promotions this season. And you've said already it's going to be a promotional season. We've heard that from most all retailers at this point. How promotional is it, Matt? And is it because of the supply chain thawing? They've just got so much

more inventory? Well, you know, Sarah, that's another one. I think the inventory question, you know, in the aggregate, our inventory levels are relatively low compared to historic levels. Usually it's a dollar and a half or so in inventory for every dollar of sales. Now we're down to about a dollar twenty in inventory for every dollar of sales. So in the aggregate, the levels are lower, but in certain categories and for certain retailers and brands, those levels are elevated. And so I think the way to look at inventory is that that inventory levels have normalized. They're certainly much better than late spring, early summer. And that inventory alone isn't going to determine the success or

failure of a certain retail company or segment, but it might exacerbate existing problems even further relative to how consumers are behaving this season. So what is the chief challenge right now for retail, Matt? For a long time, it was supply chain and just getting product. Now, has that shifted? Is it demand? You know, I think, again, you know, you look at those households that are facing greater pressures at the lower income levels, and those are really the households that need the most help. And so trying to find value and delivering the right product assortment and delivering it with the right experience, I think that's the opportunity for retailers this season. The higher income level households are going to

continue to spend as they have been in luxury and other categories. So it's those households at the lower and middle income levels that are really looking for deals and opportunities. And I think the challenge for retailers now, if last year or for 18 months, this was an environment in which truly a rising tide lifted all ships, it's much more complicated now. And so the inventory levels and management, the execution, the pricing and promotion, I think is all going to be at a premium this season. Well, middle market Kohl's today withdrew its full year guidance, citing a volatile retail economic environment. So, Matt, are you still lobbying the administration to get rid of the tariffs on Chinese goods? Is that still in play or has the Biden administration decided against it?

Well, I'm not sure that they've officially announced a decision one way or the other. We certainly see that as an opportunity to deliver some relief to households. On average, the tariffs on goods that come into this country cost $1,200 per family. That's an easy thing to fix and to correct and to provide almost instantaneous relief to those families. So that's certainly high on our list. The other area that's driven costs up enormously, billions and billions of dollars for all consumers, is the area of organized retail crime, theft, shoplifting. And so that's an issue. Well, it's not getting any better.

And, you know, if we're up to the retail industry and it was something we could fix on our own, I can assure you it'd be fixed by now. But it's a much bigger problem than that. It's obviously got national attention, but it really requires state and local solutions and real partnerships. So just today, the House of Representatives here passed a piece of legislation called the Inform Act, which will provide greater transparency for goods sold online. But there's other legislation we can pursue and promote, and there are other partnerships we've got to create. That's another big challenge our country's facing. Yeah, I know. I'm glad you brought it up. I thought it was really notable that Target mentioned that in the earnings call this week twice. Matt Shea, thank you. Appreciate you joining us. Thanks, Sarah. Thank you. NRF President Matt Shea. Let's show you where we stand right now. Down 158 on the Dow.

So we have taken a leg lower. S&P 500 down almost a full percent. Every sector has gone red. And that includes technology, which was hanging in there. Not anymore. Tech, healthcare, and consumer staples are faring the best. But again, everyone lower. The NASDAQ down a full percent.

When we come back, House Financial Services Chair Maxine Waters joins me exclusively for her call for a hearing into FDX and Sam Bankman-Fried, plus her criticism of Fed Chair Powell's rate hike policy. As we head to break, check out some of today's top search tickers on CNBC.com. Tenure Note takes the top spot. A sell-off in bonds today. Yields are pushing a little higher, 377, though they're well off the highs we saw early last week, up 4.2. NVIDIA down 2% post-earnings. Tesla pulls back 3%. And the S&P 500 in the two-year

note rounding out the top five. We'll be right back. Down about 150 now on the Dow. Our stealth mover today is Bath & Body Works. The rest of the market can't hold a candle to this stock today. Shares of the retailer, which sells lotions, fragrances, and of course candles, giving off a sweet smell to investors after reporting a big bottom line beat and raising its full year guidance above Wall Street's estimates. It's up 24%, but we should know this is a stock that is down nearly 50% over the last year. As Simeon Siegel of BMO, the retail analyst, said, when you guide conservatively enough,

then you are bound to beat here healthily. And that's what happened with Bath & Body Works. Still ahead, we'll break down today's other big retail earnings movers with top analyst Dana Telty. We'll hear which names she likes most heading into Black Friday. And up next, an exclusive interview

with Congresswoman Maxine Waters on her call for a hearing about Sam Bankman-Fried and the collapse of FTX. We'll be right back. What is Wall Street buzzing about? Ticketmaster's Taylor Swift disaster. The great war for tickets is over because Ticketmaster just announced it's canceling public ticket sales that were scheduled for tomorrow for Swift's Eros tour. The company just tweeting, the move was related to extraordinarily high demands on ticketing systems and insufficient remaining ticket inventory. Shares of Live Nation, which owns Ticketmaster,

are down a little more than 3% right now. Unclear whether it's on this or the broader market, but the cancellation is coming after the attorney general in Tennessee announced he's launching an investigation because Swifties flooded his office with complaints about not being able to get tickets. Ticketmaster is facing mounting scrutiny here after millions of fans waited hours only to run into glitches and error messages on the website. And some politicians are accusing Ticketmaster of acting as a monopoly after its 2010 merger with Live Nation.

Democrat Senator Amy Klobuchar, chair of the subcommittee on antitrust issues, sending a letter to the CEO of Live Nation yesterday saying she's got serious concerns about the state of competition in the ticketing industry and its harmful impact on consumers. She's demanding answers, including just how much the company spent to upgrade technology. Ticketmaster and Live Nation did not immediately respond to a request for comment. Live Nation chairman and Liberty Media CEO Greg Maffei, though, did apologize to fans on Spock on the Street today and did blame demand. The site was supposed to be opened up for 1.5 million verified Taylor Swift fans.

We had 14 million people hit the site, including bots, another story, which are not supposed to be there. This isn't the first time Live Nation and Ticketmaster have come under fire. Last year, Democratic Congressman David Cicilline of Rhode Island and others sent a letter to the Department of Justice

and to the Federal Trade Commission asking for an investigation into the company's practices. So unclear if at this point, this time will be different, because nothing really came of that. In the meantime, the company reports it sold a record 2 million tickets in the first day of those pre-sales. And resale prices are already soaring on platforms like StubHub, some hitting tens of thousands of dollars. We even found one for sale today for $100,000 at one of Swift's Chicago shows. I'm a Swifty, but there's a line. Here's where we stand right now in the markets. We are down about 125 on the Dow. We took a little leg lower here in the final hour of trade. The S&P

500 down eight-tenths of one percent and the Nasdaq down a little more than that, almost one percent today. It's getting weighed down in particular by Amazon, Tesla, NVIDIA, Netflix, Meta, and Alphabet. Apple and Cisco both higher, though, on the offset. Coming up, the pressure is on Sam Bankman-Fried and FTX. The House Financial Services Committee saying this week it is planning a hearing into the collapse. We'll talk to the chair of that committee, Representative Maxine Waters, next. And a reminder, you can listen to Closing Bell on the go by following the Closing Bell podcast on your favorite podcast app. We'll talk to the chair of that committee, Representative Maxine Waters, next. And a reminder, you can listen to Closing Bell on the go by following the Closing Bell podcast on your favorite podcast app. We'll be right back. Welcome back to Closing Bell.

New FTX CEO John Ray, who also oversaw Enron's bankruptcy, is out with a fiery commentary aimed at Sam Bankman-Fried in a court filing, writing in part, quote, listen to this, never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. He goes on to point out faulty oversight led by a small group of inexperienced, unsophisticated, and potentially compromised individuals, calling the situation unprecedented. The CEO of Binance, which, remember, briefly planned to take over FTX, joined Squawk Box this morning with his perspective on who knew about the scale of mismanagement. Sam knows that he was using the user funds to do trading for Alameda,

and he has been probably doing this for quite a while that nobody else knew until very recently. Well, a small number of people in FTX probably knew, but most of the other normal employees probably did not know. I think that's probably the most likely situation. Meantime, the pressure is building in Washington. The House Financial Services Committee calling for a hearing into the collapse of FTX this week. And joining us now is the chair of that committee, Representative Maxine Waters. Congresswoman, it's great to see you again. Thanks for joining me.

I'm pleased to be with you today. And I'm anxious to talk about the fact that we in my committee have been working, we've been learning, we've been planning, and we're on top of the fact that we need to have regulations for cryptocurrency. And we're moving toward hearings on FTX. Do you regret the fact that it hasn't happened so far and this could have potentially been

prevented? Well, what I'm pleased about is the fact that we are far ahead of many other countries in taking a look at cryptocurrency. It is very complicated. We have members with a lot of different thoughts about it. But McHenry and I, the ranking member, have been working closely together so that we can increase the learning and get many of our members to have a basic understanding about cryptocurrency, even though we started with stable coins and we're moving very rapidly on that. We, too, have been focused on creating roundtables and task forces to deal with what we have to do to develop regulations of cryptocurrency. As it relates to this particular case, FTX, in that bankruptcy court filing, it was very revealing, I thought, in very detailed.

One of the revelations is that Sam Bankman Freed himself, as well as two other top FTX executives, took direct loans from the affiliated trading arm, Almeda Research. Should there be an indictment? Doesn't that sound criminal to you? Well, first, there should be an investigation. We believe that there's fraud and that citizens' investments have been compromised. And we think that an investigation is absolutely necessary to really understand what has taken place with FTX. And if FTX is found to have contributed to the criminal activity that is being alleged, then certainly they should be accountable. You know Sam Bankman-Fried, right? He's testified before in front of your committee, hasn't he? Yes. And he was in support of regulations,

which is very interesting because he never showed any attempts to deny that regulations were needed. As a matter of fact, he supported along with other crypto companies, and that's what we were moving toward. Well, he may have said that he supported it, but in communications that have followed, I don't know if you saw this Vox report. He had a DM conversation on Twitter with a Vox reporter where he admitted that the lobbying and the overtures to Congress were basically nonsense. And he used a curse word about the regulators and said it was, quote, just PR. So do you feel like you got duped here? Well, I have not seen that. But this is not uncommon as we deal with the biggest corporations in America, the biggest banking systems in the country. We oftentimes are told information that's not quite true. And so we understand that this does happen.

We don't like it. And when we have an opportunity to deal with it, we do. When we can reveal lies that have been told, disinformation, we go at it and we expose it and we make sure that it is looked at in ways that could cause indictments. What do you say to the cynics that are looking at all those campaign contributions that he made, including many to Democrats, $40 million in the midterms, which made it the Democrats' second largest donor, and wonder if there wasn't oversight and regulation of him

and his firm because he was such an important donor to your party? What we understand about the election systems in this country is there are rules to give in donations. And when one follows those rules, then you cannot object to the fact that they give contributions and they follow the law in the way that they give them. But as I understand it, without the investigation having gone on, that there were contributions made to Democrats and Republicans. And certainly those contributions may have been done in an attempt to influence. But, of course, we have to deal everything that we can to expose any violations that were obviously made.

AMY GOODMAN- Well, he gave half a million dollars to the Democratic National Committee, and we just showed a number of your colleagues on the House Financial Services Committee that took donations from him. Should the DNC and your fellow lawmakers return that money? Well, usually that's up to individuals about whether or not they return contributions that have been made. We have seen instances in the past where many members returned contributions that they discovered had, you know, some fault, that they didn't want to be, you know, blamed for having taken that contribution. And so we don't know what is going to happen with the return of contributions by Democrats or Republicans. But as we move forward with the hearings, we'll learn an awful lot more.

No, I mean, it appeared to be ill-gotten gains. So it sounds like you would suggest that if the investigations find that, you would advocate for returning that money. I possibly could do that. I could certainly say to members, if you thought that this was the kind of contribution that you would feel proud of, then fine. But if you know there's new information that leads you to understand that perhaps you do not feel comfortable now that you know these cryptocurrency companies, particularly FTX, have given contributions in spite of the fact that they have undermined consumers in the way that they have committed fraud. I would say you might want to do that. You might want to give that back.

Right. And so, congressman, woman, we also wanted to talk to you about your letter recently to the Fed chair, Jay Powell, in which you said that you were deeply troubled by what you see happening, which is these interest rate hikes that are trying to fight inflation but ultimately hurting our economy and could drag us into recession and hurt the very strong labor market that we've seen. I guess my main question to you is what would be his alternative right now where we have sky high inflation? We have identified that there are supply chain problems, that there's a war in Ukraine, and there's gouging that's going on. And much of this is adding to the inflation that we're experiencing. And so I think the president has done a good job in using the bully pulpit with some of the biggest corporations in America, warning them not to gouge. The supply chain is

getting better as we move past this pandemic. And so we think that it is absolutely correct that you have some interest rates, but it is the size of them and it is how fast they're being done that causes me some trouble. I guess the problem is inflation is also really damaging for Americans. And ultimately, Fed Chair Powell himself has said that if we continue to see sky-high inflation, that will hurt the economy in the long term and the prospects for jobs.

So with the Fed having a dual mandate on jobs and inflation, and we already have a full labor market, I just don't see what his alternative is for trying to aggressively fight that right now. Well, I think that the responsibility of the feds is a mission to deal with monetary policy, to deal with jobs and ensure that the economy is working in the best possible way. And so, again, we have to consider all of the indications that I alluded to in dealing with inflation. And it is not just America. It is worldwide that we can cure it, but I do not want to see housing harmed in the way

that it is being done. First of all, we have fewer people purchasing homes. We have the rents that are increasing. We have millennials and first-time generation people who are not able to, you know, get into these homes with down payments, et cetera. And so we think that this is harming housing. And as a matter of fact, that there should be more attention given to what they could do to increase housing in some ways that will help the economy.

By design, though, the problem is demand. They have to crush demand to bring these prices down. That's the tool that they have, and that is demand. They have to crush demand to bring these prices down. That's the tool that they have, and that is the mandate they have. So I guess my final question to you is, are you trying to just put political pressure on him? I mean, you, Congress, regulate the Fed. You have given them a dual mandate. Is this, are you, is it something you'd reconsider, taking away the price stability mandate? No. As a matter of fact, I don't consider our concerns that we're addressing as putting pressure on the feds. I think that it is

responsible for us to indicate our concerns and to share information and have them share information with us. When we see that there's a 7% increase in interest rates and some homeowners will be in a position where they have to spend $1,000 more than the mortgage that they first entered into, then we need to talk about it. We need to have discussions. We need to know that everything is being done. And we're not trying to in any way run the Fed. That's their mission. That's their responsibility. But we, too, have oversight responsibility.

And it is important that we raise these questions. We certainly appreciate you coming on to talk about both fiery issues that everyone's talking about. Congresswoman Maxine Waters, thank you. You're certainly welcome, And thank you very much. Chair of the House Financial Services Committee. Speaking of housing, look at the homebuilders. They're among the biggest losers on Wall Street today. We will discuss the ongoing fallout from rising interest rates, what the congresswoman was just talking about next. When we take you inside the market zone, we've recovered nicely here. Dow's now down only about 44 points.

The S&P 500 still down eight tenths. We'll be right back. We are now in the closing bell market zone. San B.C. Senior Markets commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, Diana Olick is here following the homebuilders. And Telsey Advisory Group CEO Dana Telsey on retail movers. We'll kick it off broad, Mike, because the Dow has recovered this final hour of trade. It first took a leg lower. Now it's down only 43 points or so. The S&P 500 also off the lows, down four tenths. Technology goes positive again, thanks

to Cisco and some of the other tech companies outside of Amazon, Tesla. What is driving the trade today? Is it back to bear market? Eric Johnston turns bearish again from Cantor? Well, we certainly didn't never prove that we were out of anything like a bear market. We're still in this downtrend. The rally was strong. It was a week ago today, as a matter of fact, that we had that big up 5.5% day after the CPI number. So it shows you that we're hanging on to most of those gains, consolidating after a 15% move. Doesn't seem like the market's quite showing its hand yet as to whether it has to give back more of this. The dollar's firmed up, yields of stuff going down. So it's sort of on alert for potential that this could go deeper. But so far, it seems pretty

run of the mill in terms of a slight pullback. Yeah, up a third of a percent on the dollar. Bonds also sell off. Let's hit the homebuilders. They are significantly underperforming the broader market right now. Take a look after a new report showing home construction, new home construction fell by a larger than expected 4.2 percent last month. The latest sign that those rising mortgage rates are hurting the housing market. Diana Olick joins us. Diana, how deep do you think this housing recession is going to get for both construction and home prices? You just heard the congresswoman, Maxine Waters, voice a lot of concern about these rising rates and home buying. Yeah, absolutely.

But they're both dependent on each other. Look, we need more supply into the market. That's the only way you're going to bring the prices down. And when you talk about home sales slowing because of affordability, not just rising mortgage rates, but rising home prices, up 41% since the start of the pandemic,

even though those prices are beginning to come back a little bit, they're not making up for that 6.5% or 7% mortgage rate that potential home buyers are looking at. So you've got this kind of support under prices right now because you've still got low supply and you do still have some demand out there. Look, you've got millennials who really want to buy homes, the largest generations and Gen Z coming up, getting ready to buy. What we need is more houses. And then we saw from the construction numbers today,

we're just not going to get that many more new houses because the builders aren't able to sell at the prices that they need to sell at. It's a question of the costs the builders are up against. That's what they're talking about. Even more so than rising mortgage rates is their cost for land, labor, materials. All of that inflation is hitting their bottom line. And so they're just not putting up on many houses. Sarah? I guess on the silver lining is we got a big drop in mortgage rates, 6.6 percent for the 30 year from 7.08. Well, it's all relative a little bit. I mean, yeah, it pulled back to 6.5. Now we're up a little bit more, 6.6.

It's pushing back towards 7. But remember, it's still more than twice where we were in January. Remember those 3% mortgage rates, 2.75 last year? They weren't that long ago, of course. Yeah, no, it was barely a year ago. So, yes, they came back a bit. That's good news. But, you know, not enough. Right. Still very high. Diana, thank you. Diana Olick.

We got a new batch of retail earnings this morning. Macy's is surging after reporting a profit beat and a guidance boost. Shares of Kohl's are also having a pretty decent day despite a revenue drop and a withdrawal of full year guidance. Joining us now is Dana Telsey, CEO of Telsey Advisory Group. Dana, do you like either of these companies right now? I like Macy's. I think Macy's is going to be the winner for the holiday season. We talked about it when we first put out our holiday expectations. And look what you have going on. They're basically managing through data, putting in a lot of newness. 55% of the assortment is new this year. I think they could be a positive surprise. And look what all the companies have done. They've basically de-risked the fourth quarter and de-risked their earnings because they do have the conservatism. We do know that sales are weak.

So it was expected. We had many of these stocks at 52-week lows. And I think that's why they're running a little bit today. But if you take what Target said to heart, and there was a lot of commentary on their conference call, I talked to the CFO about it. It's general merchandise that's getting hit right now from the consumer discretionary slowdown. It's apparel, it's appliances, hard lines. Doesn't that mean that it's going to be tough for department stores? It is tough for department stores. I think that's why Kohl's retracted their guidance that they had. I think Macy's, all of a sudden, the improvements that they've made in the enhancements, they're basically out there telling you what it's going to look like. And they also said, just like Target said, as with all retailers, the beginning of November has been soft.

We don't know what this season is going to look like. Will it look more like 2019? I would believe we're going to have a better Black Friday this year than we did last year. But the headwinds of inventory levels, the headwinds of markdowns, those are known quantities. And I think people are looking towards the future a little bit. Really quickly, Dana, besides Macy's, what else do you what's your top pick for the holiday season? Bath and Body Works. They're always the winner for Black Friday and holiday. They're doing it again. And that's certainly a good thing. You saw their numbers today and they're not even back to the $50 and $60 the stock had been at. There's room to go there. You think it can go? Yeah, up 25% today. And they said inflation has peaked, which I thought was notable as well. Dana, tell me, thank you very much.

Thank you. Appreciate it. That's BBWI. Dana likes. Two minutes to go here on the trading day. Dana, thank you very much. Thank you. Appreciate it. That's BBWI. Dana likes two minutes to go here on the trading day. Mike, what do you see in the internals? Looks like volumes are a little softer on this sell off. Yes. In fact, yesterday and today, relatively light volumes. Market's more tentative than it is fearful at the moment, but still softness in the volume split. If you take a look at it, not quite two to one decline to advancing volume. Want to take a look at energy is coming off the boil a bit here had reached just barely above the June highs. The XLE the sector fund there. It's you see it's opened up this huge lead relative to crude prices. We talked about this before over a two year span. It's a little bit closer but it's really been outperforming the commodity because the companies are pretty profitable at this level. People chasing earnings growth in the rare places they can find it. VIX pretty calm coming back around 24. The index moves

have been contained. We've been within this multi-day range and we got a holiday coming next week. Should slow things down, Sarah. We'll see. As we head into the close, down 37 points, second down day in a row. S&P 500 is also lower for the week now. We're down about 1.3 or so percent, though we are having a little bit of a recovery here, maybe some buying into the close, down four-tenths of a percent. Energy actually just goes positive as a sector, joining technology in the green, everybody else in the red today. The worst-performing sectors are utilities, consumer discretionary materials, and real estate. The Nasdaq comp on underperforming. You could say

bonds are selling off and the dollar is stronger. That hurts technology stocks. Some of those names in the firing line like Amazon, Tesla, Nvidia off earnings under pressure today. But we are well off the lows of the session. The Dow got as low as down more than 300 points. Looks like we're going to close almost positive, down 20 points on the Dow. That's it for me here on Closing Bell.