Closing Bell - Closing Bell: Sharp rally to start Q4, Box CEO on the record, Oil surges 10/3/22

Episode Date: October 3, 2022

Stocks started the fourth quarter with a bang, with the Dow climbing more than 700 points. David Zervos from Jefferies joins to discuss the rally, and what he makes of speculation over the weekend surrounding potential problems at Credit Suisse. Monica Erickson from DoubleLine talks about opportunities in the credit market. Box shares rallied after an upgrade from Morgan Stanley. CEO Aaron Levie joins to talk about the stock move and his outlook for the rest of the year. And John Kilduff from Again Capital breaks down the big pop in oil ahead of this week’s OPEC meeting.

Stocks having a strong start to the fourth quarter. Gains across the board, currently near session highs. Dow's having its best day since 2020. We're all about your money in this final hour of trading. Welcome to Closing Bell. I'm Carl Quintanilla in for Sarah Eisen. Let's check out where things stand this afternoon. Dow, as we said, on pace for the best day since November 2020.

9 to 1 up day. All sectors green. Lower yields definitely helping today. 10 year below 365. And then check out energy today as oil rallies back to 83 and change ahead of that OPEC Plus meeting later in the week. Coming up on today's show, shares of Boxer skyrocketing after Morgan Stanley ups the stock to overweight, citing some bullishness around return to work. We're going to talk to Box CEO Aaron Levy, get his read on enterprise tech spending. But

let's get straight to this market and this strong beginning to the fourth quarter. Joining us today, Jefferies Chief Market Strategist David Zervos with us. David, great to see you. We spoke last week. It sounded like you had spent some time talking some clients off the ledge. Does that get any easier today? Yeah, Carl, I guess it does. A three percent up move certainly feels a little better, although we had a pretty, pretty rough ending to the week. So it's not it's not all clear by any means. But I think the you know, the the big story was really financial instability between the Bank of England, between the rumors about Credit Suisse. And I think the continuation of this whole story of central banks trying to kind

of deal with financial stability issues and at the same time deal with inflation, it's got a lot of clients very confused and rightly so. But I do think I do think they're going to separate that out. And I think, you know, at the end of the day, there's there's more silver linings here than not. Yeah, we've seen Fed funds come off of their highs, you know, looking at 4.4 now for March. Two-year got within seven basis points of four today. Do you think we have seen the peak in some yields? You know, I think we're pretty close to it, Carl. You know, I've been of the opinion that after they get to sort of something in the fours, you know, maybe mid-fours, they're going to take a pause, have a look at what happens.

And also, if they need to do more, I think they may end up focusing a little bit more on the balance sheet. I think politically taking short rates up too much starts to really get, it starts to raise a little bit of eyebrows on Capitol Hill, too, because they're paying so much interest on reserves, so much money going back to the banks. It's just going to get people like Elizabeth Warren and Rand Paul very hot and bothered. And I think there's other ways to pull some punch away from the table, stepping up asset sales if they need to. So I think they can take the pause. They'll be able to.

Inflation expectations look very well behaved. I don't know if you've seen the five-year, five-year break-evens today look like. Last I looked, they were at 208 coming down and the curves inverting a little bit more. So all that is sort of helpful to the Fed's cause of having anchored long run inflation expectations, which is really this is the goal. This is what they need. And the more they get that, the more they can kind of look through some of the short term issues with inflation not coming down maybe as fast as they want it to over the next couple of years. To your point, though, to your point about political pressure today,

the journal piece on the U.N. calling on the Fed and other central banks to halt interest rate hikes, stories on the tape over the weekend about Brainerd and Daley sort of looking at the downside of hiking too much too fast. Do you think the dove hawk chatter right now is becoming more balanced? At the margin, I would say yes. And I think there's two reasons. One is the they've, you know, back at Jackson Hole, we had the equity market up at forty two hundred. Now we have the equity market, you know, you know, ending the quarter below thirty six hundred. They've done a lot to tighten financial conditions, and they can kind of ease back on us a little bit. I don't think they liked the idea going into Jackson Hole that the market was pricing in almost no landing, not just a soft landing, but almost no landing.

And now we're getting to the point of taking a soft landing and making it a little more of a hard landing. And I think the Fed probably pushes back on that a little bit. That and the combination of what some of the break-evens have done, I think, gives them confidence. Look, it's not a pivot, Carl. It's not going to be like we're going to get some major change. It's just that the rhetoric is going to sound a little less nasty. And I think the market needed to hear that up at 4,200 on the S&P. And now they can kind of take their foot off our neck,

so to speak. Right. Well, you mentioned stability and some of the concerns over the weekend, especially regarding some big European banks. We want to get more on that situation. David, stay with us. Let's talk specifically about Credit Suisse after the slew of social media speculation over the weekend about problems there, our Leslie Picker has been all over that story and joins us with the latest. Hey, LP. Hey, Carl. A lot of concern out there on social media this weekend that Credit Suisse was the canary in the coal mine for the health of the financial system. are currently trading, it doesn't appear the market is too concerned about a broader systemic risk, at least at this time. But at least as it pertains to CS, a lot of the uncertainties and questions surrounding the firm are expected to be answered later this month. That's when the

firm's purported transformation plan is set to be unveiled when it reports third quarter earnings. The overhaul itself is expected to consist of divestitures and restructuring of various units, including reportedly siphoning off risky assets. Analysts estimate, though, that this process could be very costly. KBW says along the order of $6 billion. Asset sales and divestitures could fund some of that, but there's this general concern out there

that Credit Suisse will also need to tap the public markets for what could be a dilutive equity raise. Now, sources tell me that's not something they're engaging in right now, but it is kind of a catch 22 because investors wouldn't want to buy or be marketed newly issued shares without knowing what the transformation plan is and what the Q3 numbers look like. So as a result, it's likely we will see a lot more volatility in this name until the market gets more clarity. Carl? Leslie, I guess something you've been talking about all morning is whether or not the market will be patient enough to wait for that update on the 27th or whether they're going to have to announce something in the interim. That's right. It's a very, very good question.

Will the market allow them to do that? Because, I mean, obviously the shares have reversed. They're up about 2% right now. But as they keep getting lower and lower and lower, that becomes a much more punitive equity raise if that's what they need and choose to do. And of course, where you see the bonds are trading as well, makes any kind of financing event much more expensive, makes asset sales and divestitures look more desperate if the market is basically saying, we see this as more of a distressed entity. The longer you wait, the more uncertainty that's out there. That's the risk that you take. And so I have no direct evidence that they're going to pre-announce earnings, that they're

going to unveil this transformation plan any earlier. The CEO only took the helm in July, and they're already doing this at pretty light speed in just three months, just doing a complete overhaul of this massive bank. And so I don't think you can really hang your hat on anything coming earlier. That said, the market is going to be quite choppy, I would guess, until October 27th, if that is indeed the date. Yeah, still a ways away. Leslie, thanks for that. Leslie Picker watching Credit Suisse for us today. David, I know one thing you've been hammering is that there are better firewalls in place today than there were going into the great financial crisis? You know, there are, Carl. And, you know, I think our central banks have learned a whole heck of a lot in the last 14 years on how to how to kind of

dissect financial stability from monetary policy. I think they've gotten good at it. I think they'll continue to get good at it. And I think they'll do it. And I think they will continue this inflation fight. And, you know, it's not don't get too excited about some big pivot to save credit suites or the Italy or or the pension funds in the UK. They will target what's needed to kind of put out forced selling related systemic risks. And I think they've got facilities and structures that they can use to do that. But I think they're going to stay pretty committed across all of these central banks to this inflation fight. And the market should be in the long run applauding that, Carl, because there's nothing worse for the market in the long run than losing anchored long run inflation expectations. It's been a big message of ours at

Jeffries, continues to be the message today. We got to take some short run pain to get to the long run gain. And I'm really I'm excited to see that, you know, our central banks, in particular led by the Federal Reserve, have been so diligent in their fight against making sure against losing any anchoring. And you pointed out that politics of the UN. The politics is only going to get worse here, but they've come a long way fast. They still have a lot of room on the job market that they can play with. And I think the market's going to actually, in the end, after all this turmoil, reward any central bank that continues to be quite stalwart in its fight against inflation over the world.

David, that's good stuff. Appreciate it, as always. Thanks for kicking off the hour with us. David Zervos, John Hester, Jefferies. Meantime, shares of cloud software company Box handily outperforming the market this year and getting a nice boost today on this upgrade over at Morgan Stanley. We're going to talk to Box CEO Aaron Levy about the call, his forecast for cloud and software in Q4. You are watching Closing Bell on CNBC. Shares of Box getting a big lift today, up more than 9%. Morgan Stanley ups to outperform

with a target of 34. They say the value is underappreciated. Company will be hosting its Boxworks event this week. And joining us in a closing bell exclusive is a Box CEO, Aaron Levy. Aaron, great to have you. Thanks for the time. I'm sure you don't have a problem with the call out of Morgan Stanley today. They do point out higher net retention, lower churn, better deal momentum. I mean, thematically, is everything they're saying here in the right direction? Yeah, we're obviously happy about the upgrade. And a lot of that was kind of what we talked about in our last quarterly earnings call.

You know, obviously, the state of software right now is very dynamic. We've tried to put ourselves in a position where we're both driving both, you know, durable, steady growth, as well as increased profitability over time. And our platform is 100% focused on helping companies make the most out of their most valuable information, protecting their content, securing their data, helping automate workflows, and then ultimately lowering their cost of ownership of maybe their legacy and traditional systems as they move more of that data to the cloud. Yeah. Now, one point they do make is that you're not immune to macro headwinds, and you've talked about challenges for all kinds of businesses in all corners of the world. I mean, how acute are those when it comes to Box?

Yeah, I don't think any company is immune that's out there right now. I mean, we're all in an interconnected economy, and what we are really focused on is helping businesses that need to be able to operate more efficiently, be able to save money by moving more to the cloud, being able to reduce their vendor landscape by having a consolidated offering for managing their most important content. That has been our message to customers. And I think it's resonating quite well right now and helping customers really deal with this very dynamic environment. So very hard to obviously predict what's going to happen

next in the market and the overall economy. But we've tried to make sure that we're helping our customers in this environment, you know, get more efficient, save money and protect their most important data. Right. So implications then for your own revenue targets as investors are rained upon with news about macro headwinds? I would say that, you know, I would just go off of our last earnings call where, you know, we again have talked about that, you know, our focus is helping customers in this situation. We were able to maintain our revenue guidance that we had put out for the full year, as well as improve some of the bottom line targets. So that was certainly our message in the last earnings call.

And overall, we're really excited to continue to innovate on our platform. We have a massive conference this week, where we'll be announcing all new functionality and rolling out new products that will help customers, both with distributed work and digital transformation and helping secure their most important content. And then again, you know,

very dynamic environment that we're in right now. And our job is just to help customers manage their most important information through this. Yeah. One part of that dynamism, I guess, is this willingness of tech companies to really start to get serious about costs, about efficiencies. We've heard it from Google. We've heard it from Meta. Crunchbase has a tally now of tech workers that have been laid off this year. They say it's up to 42,000. What's your sense right now about whether or not they have implemented these enough or whether you think Q3 earnings season is just going to be another washout of hunkered down memos? You know, I don't want to do any breaking news across the industry, you know, in this conversation. But I do think that there is a broad-based change happening right now in the tech industry where, you know, there was a number of years of valuations that

only could go up higher. Obviously, growth rates that were in some cases, you know, probably hard to sustain just given the rate of growth that you were seeing, you know, greater than 100 or 200% growth of at-scale companies, which were obviously phenomenal, but eventually have to come down to some degree. And then cost bases that were built into those growth rates. And so I think you're seeing the industry really have to react to that, where, you know, we know that over the long run, companies are going to be measured by how profitable they are and the durability of their growth. And so I think companies are going to be measured by how profitable they are and the durability of their growth. And so I think companies are having to really transition to this new mode of operating, whether it's small series A or B startups, or some of the world's largest companies are grappling with this new reality. So hard to say what we're going to see in the Q3 earnings season. But I do

think that the tech industry is going through an evolution where you're going to see greater degrees of focus on profitability and long-term durable, more sustained ways of growing. Yeah, I wonder who wins in that scenario, Aaron. For example, we've talked a lot about the number of engineers that are likely getting let go at some tech companies. But then just in the last couple of weeks, American Express, J.P. Morgan, reiterating they've hired a couple thousand tech workers this year, and they're going to add maybe a couple thousand more before the year's out. Yeah, I think, you know, if you just remove this sort of near-term or individual or isolated,

you know, kind of pressures that companies might be facing or reacting to, and you sort of step back and you say, okay, what are the long-term trends that every enterprise is dealing with? Digital transformation still is a core focus area of every enterprise on the planet. Remote and distributed work, being able to serve our customers with better experiences, the role that AI will have in the future on business operations and customer experiences. So you kind of think about these macro trends, not economic trends, but macro business trends, and they still all point towards more digitization, more movement to the cloud, more modernizing of IT infrastructure. So I think you're still going to see large amounts of growth in tech, whether that's on the startup side, or you mentioned some more kind of traditional, in this case, financial

institutions that have to invest in technology. But in every business that we talk to, there's still a meaningful investment going into technology and digital transformation. And so whether you have some fits and starts in the next couple of quarters or not, over the long run, it's very clear that this is still the wave of the future, which means it's a great time to be in technology or building technology or serving customers in a tech-oriented way. Hey, finally, Aaron, we love to chat with you about Web3, blockchain, NFTs, where quarter-on-quarter sales are still falling. Troublesome headlines regarding Celsius and Kardashian SEC. What do you think? Are we making a turn here in terms of

how fierce regulators are going to get? You know, I think there's some moves that are more symbolic in nature. You know, the Kardashian thing, it's hard to understand how that's different than a lot of the kind of promotions that are happening. But it is, you know, I think interesting to watch that regulation has started to emerge. You know, I have a really simple way of thinking about it, which is, you know, what is the underlying thing that you're buying or selling? And does that thing only go up in value if somebody else in the future believes it has value versus there's underlying utility or cash flow? And I think, unfortunately, in the case of crypto, there's a lot of, you know, spaces that don't really offer any kind

of core utility or, you know, underlying resource that is valuable. And so that means that you'll probably still have in in many categories, prices coming down where there's actually not really any bottom until zero. And I think the question then is, what does regulation look like? How do you decide what ends up being a security versus a commodity? And those are things that obviously the regulators are going to have to figure out. But it was clearly a space that had way too much hype and buzz for what it was delivering on. Yeah. And regulation, as we know, often lags the technology, certainly frustrating to some.

Aaron, I guess I say congratulations on the Morgan Stanley call. It's great to talk to you. Good luck this week. Thanks for the time. Thanks, man. Appreciate it. All right. Aaron Levy. Meantime, some comments from New York Fed President John Williams hitting the tape as he talks in Phoenix. Williams saying, quote, tighter monetary policy has begun to cool demand and reduce inflationary pressures. But our job is not yet done. Williams also says inflation could fall to three percent next year and close to the two percent target, quote quote in the next few years. Let's check the markets here this afternoon. Dow just off the session highs up 868. S&P still a stone's throw from 3700.

Still to come again, Capitals John Kilduff will join us. We'll talk about today's surge in oil as OPEC reportedly weighs this big cut to output this week. First, though, today's stealth mover could be a real treat for investors. We're going to reveal that name next. And as we go to break, check out some of today's top search tickers on CNBC.com. Once again, the 10-year Treasury is the top spot, followed by Tesla, Apple, the two-year, and the S&P. Let's check out today's stealth mover, Fresh Pet. Investors are going mutts for the stock. According to Barron's, the pet food company is hiring bankers to explore a possible sale. The move is a howling success for activist investor Jana Partners,

which recently took a nearly 10% stake in Fresh Pet in the hopes of persuading the company to pursue a sale. Stocks, meantime, soaring today. Dow's up 872 as yields fall from that nearly 10-year high. Our next guest reveals where investors might be seeking some safety with inflation and recession fears still lingering. As Wall Street worries about the Fed's aggressive rate hikes and a possible recession, our next guest says investors should be looking at one key part of the credit market for opportunity. Joining us here at Post 9 today, Monica Erickson, head of investment grade at DoubleLine.

It's great to have you. Thanks for the time on a pretty good day for the tape, I guess. Your point is looking at IG corporates, right? That's right. That's right. Yes. So I focus on investment grade corporates. What's the theme here? What's the thesis? The thesis is that the Fed needs to control inflation. So they have moved very aggressively, very quickly. We've had five rate hikes in six months. We're now at three quarter percent on the Fed funds rate. This is unprecedented kind of move in the federal funds. Right, and so the Fed really needs to control inflation. So interest rates are going up. And in that environment, it's been historically very difficult

for the Fed to do that without killing growth. And so our baseline is that instead of the Fed allowing rate hikes to flow through the system and have the natural effect that they would have, that they're going to continue raising rates. And so next year, we could see a recession, for sure, slower economic growth. So what do you do in that environment? Higher credit quality, bigger companies, better balance sheets, stronger business models and investment grade corporates.

You think the market understands that right here? I mean, given what, how flows have been last few weeks? Well, I think what the market looks at are returns and the market's been down 18%, the investment grade corporate market. And again, unprecedented in terms of negative rate, negative returns, excuse me. So I think flows have been based on what's been going on in terms of the returns in the market. Right. How about it was a big weekend where we were looking again, starting to look at CDS and the threats of defaults and worrisome headlines. I think those are accurately reflecting risk right here. Or are we are we spooking ourselves? Well, I think what I look at, again, is the investment grade corporate market. And I look

at spreads in that market. And I think spreads in that market are fairly compensating investors. They're definitely not as wide as they could be if we are in a recessionary environment. Right now, we get about 150 basis points over the equivalent treasury in that market. But to your point, there have been some specific credits where there has been a lot of volatility. Right. And speaking of which, how do U.S. banks fit into your playbook at this point? U.S. banks, we like. Very well capitalized. They're more like utility companies at this point. Their capital ratios have actually been brought up recently. And I think the large money center banks like J.P. Morgan, Bank of America

are in a very good position, even in an environment with slower growth. And it comes back to really what's going on in their balance sheets. This is one thing where we're going to be on watch come earnings season to hear them talk about risks, certainly, and reserves. Do you think the picture is going to sound much different than what we're talking about right now, at least with the banks? Well, the banks, their earnings have already suffered. Last quarter, earnings were very bad with the U.S. banks. Investment banking was down something like 50%. So from a credit investor standpoint, it's a little bit different than what an equity investor is looking at. We're much more concerned with what they're doing on the balance sheets.

And the expectation is that earnings are probably not going to be that great. So we would expect more of that going forward. But at the same time, the banks have been shoring up their balance sheets. And I think their balance sheets can really withstand that economic weakness. Other industry verticals where you think balance sheet strength is comparable here? Yeah, and frankly, it's very different from some of the things that are going on in the equity market. For example, with retail, technology, those types of companies in the investment-grade corporate space tend to be companies like Microsoft, which is AAA.

So it's a little bit different than what might be going on with the equity where, you know, they've got more cash than they do have debt outstanding. On the retail side, you're looking at companies like Walmart, Target, again, super solid balance sheet. So while there might be volatility on the equity side, it's a much different analysis that you're doing when you're looking at investment grade corporates. You're not necessarily worried about inventories for back to school or holiday. Right. I just want to know that they can pay us back. Right. And they've got enough cash and cash flow that that they can pay their bondholders back. Finally, we're getting, you know, fair

amount of data the next few days, couple of weeks. Are you expecting are you calling for the Fed to pause in November or do 50 and wait or anything like that? I think our base, well, today things seem to have shifted a bit, but the base case is that the Fed is going to continue, that the Fed is going to continue raising rates. Inflation is still high. You've got, you know, one print today, an ISM number that came in lower than expected. I think it's just one print. I think inflation is still there. And I think the Fed is committed to reining in inflation. And so the probability of them continuing on the path, I think, is higher than them shifting paths at this point. It's a great way to look at the market through another cut in the diamond through the balance sheet as opposed to stocks, as we talk

about all day. Monica, thank you. Thank you so much for having me. Here's where we stand in the markets this afternoon. As we've been saying, pretty good action, pretty good breadth. Dow's up 851. High was 900 and change on pace for the best day since November 2020. Brazilian stocks booming after the first round of that country's elections. Up next, we'll talk about what that could mean for Brazil and for EM at large. And of course, you can always listen to Closing Bell on the go by following the Closing Bell podcast on your favorite podcast app. And throughout Hispanic Heritage Month, we're celebrating our CNBC teammates and contributors.

Here's Norwegian Cruise Line CEO Frank Del Rio. I've been both very lucky and very blessed to be Hispanic and I wear it proudly. Being a Cuban refugee in the 1960s and growing up in Connecticut, one of the things my parents instilled me at a young age was a standard of excellence. Whatever you do, be the best at it. Work hard and great things will come. And if I could only give someone two pieces of advice, that would be it. Reach for the stars. We can all get there. Very tight election race in Brazil, leading to no outright winner, setting off a runoff vote at the end of the month. Our Seema Mamouni has some details on why Brazilian stocks sharply higher

today, Seema. Yeah, a positive market reaction, Carl, to President Jair Bolsonaro's stronger than expected showing in this weekend's election. He is the far right leader who is promising reforms and efforts to curb energy prices while also calling into question the country's electorate system. Even if opposition candidate Lula da Silva wins, Capital Economics William Jackson, the strategist there, he says he will have to govern more towards the center given the number of right-wing leaders in the Senate. So that's also providing a little bit of relief for investors. Take a look at Brazil's currency, the real. It's up about 4.6 percent against the dollar and it also remains one of

the only currencies higher on the year. Brazil's stocks have been outperforming emerging markets throughout this year as well. The rally has been more tied to the rebound in oil and energy prices than politics. But UBS and Capital Economics, they argue that whoever leads this country through a pending global recession, that could really inform investors on whether this remains a good trade. Carl. Seema, you know, central banks around the world are sort of in different chapters of fighting inflation. And there are some who have argued that maybe Brazil got an earlier start and can end a little bit sooner, too. How important is that? That's exactly right. And one of the reasons Brazilian stocks have outperformed is because its central bank started to raise rates

late last year, very much before the Fed and the ECB and other central banks around the world. And while inflation is still around 8% to 9% in Brazil, it has been coming down steadily over the past few months. That certainly helps Bolsonaro as well, who currently is the president, Carl. Yeah, I think JP Morgan the other day said maybe next time they stay pat, we'll find out. A hugely important election for sure. Thanks, Seema. Seema Modi this morning. Speaking of oil, prices spiking as OPEC Plus reportedly considers this production cut would be one of the biggest since the pandemic. We'll talk about how much higher crude could climb as it gets above 83 today. That story plus Tesla tumbling and this big upgrade for Wells when we take you inside the market zone. We're now in the closing bell market zone. JMP Security CEO Mark Lehman's here to break down these crucial moments of the trading day. Plus, again, Capitals John Kilduff will talk about this

move in oil today and Phil LeBeau on this pullback for Tesla. Meantime, all sectors in the green right now, Dow just up about 3%, one of the best days in a couple of years. Mark, I wonder what you make of the tape. Is this calendar at work or is there something bigger going on? I think it's a combination. Obviously, the third quarter in September

were such awful times for the market. We were due for a little bit of a bounce where the VIX had kind of climbed from 20 to 30. And everything that could have gone wrong, particularly last week with rates and what had gone on with currencies, happened. So now we're into the fourth quarter. We're into seeing earnings season. I haven't seen an earnings miss yet, which is a good sign so far. And I just think we were due for that bounce. We've been calling for it. And this is a pretty big bounce today. Yeah. Speaking of

earnings, you know, a big topic during September was that pre-announcements were a bit light. Now, eventually we did get FedEx and VF Corp and a few others, GE and Nucor. But I just wonder whether or not you think that sets us up well or not well for guidance when we get the Q3 prints. It's a great question. I haven't seen a lot of those like you just mentioned, although the gravity of them, you mentioned FedEx. And boy, that Carmex number last week was just just stunning for some people. So I think the depth and breadth of some of those misses are high and it's going to show some differentiation within sectors. So companies that anticipated the rate rise and some of the supply chain bottlenecks, I think, got ahead of it.

And those that didn't have been walloped like we see some of those stocks. So I think it's a positive sign. We haven't seen a ton of them. But the market is still punishing misses. And that, you know, doesn't bode well if you really haven't told the street what's going to happen, because if you miss and you haven't told the street in advance, you're going to get walloped. Yeah. Meantime, ISM today shows employment contracting, new orders contracting. And I wonder, there's some chatter that maybe finally some of the hiring freezes and layoffs that we've seen, even though that trend's a bit nascent, is beginning to make its way into the surveys and eventually whether that makes its way into data that the Fed really takes seriously.

It's clear that that has worked its way into the system. I mean, the rate rises and the speed and the breadth of the rate rises as well as currency moves, I think, have affected so many. And you're seeing some of those other signs, right? You're seeing container shipment rates as well as the amount of containers coming into ports, obviously slowing quickly. You saw some dramatic moves up on the 10-year and other indexes, and obviously those have come down dramatically. That's clearly having an effect. I think the Fed's going to start thinking about that next move, and is that the last

move? And that's a question I think you're going to hear a lot of news this week. You have a lot of the Fed governors speaking. But it's clearly bleeding its way into the system. I looked at that CarMax again. I mentioned it one more time. They were hit, I think, much more rapidly and much more intensely than they could have even imagined. And I just think that is a metaphor for what happened in the third quarter. And I think that activity that you talk about is obviously

happening on the slowdown in terms of hiring that we're going to see over the next couple of months. Yeah, I think somebody said Carmex was the embodiment of all the headwinds that we've seen across industries in the past few weeks. Interesting. Meantime, guys, the price of oil up sharply today, as we said. Reports of this potential production cut from OPEC helping boost the price back over 80. Got those weak global PMIs, the ongoing Chinese lockdowns, and then global growth continuing to weigh on the sector. John Kilduff is here, as we said. Again, capital founding partner and CNBC contributor. John, it seems like the most important thing is going to be whether these headlines on production potential cuts are actually going to come to fruition.

Will they? That's right. I think they will to a degree, Carl. Certainly, the Saudis, our good friends, are leading the charge here to reduce oil supplies, it would appear, to the global market. I remember a couple of weeks ago we had the Saudi energy minister crying about the futures market somehow being broken. For a gentleman who's been in the industry as long as he has, I was very surprised at those comments, because you just had a great discussion about the headwinds that are hitting the global economy, and that translates directly into slack global oil demand. That's why these prices have been coming down. I'll tell you, though,

the devil will be in the details here in the next couple of days when these numbers come out, because OPEC has been terribly under their production quota for the past several months, to the tune of about two million plus barrels a day. So this will only merely be a quota adjustment for the most part, but it will be the Saudi production that will be closely eyed and what they step up to do. So once again, you know, with friends like the Saudis, we don't necessarily need enemies. Yeah, it seems like just the other day, the president was getting that $100K deal, which obviously didn't go too far. John, what happens if we get a cut and then President Xi, who, by the way, was seen without masks with his team over the weekend activity in China

really rebounds? What is the upside for oil here? Look, the vulnerabilities abound here, Carl. If we do get a China reopening, of course, the big question is, will it last? Because a non-vaccine regime doesn't seem to be a lasting solution, but let them keep going for it. But look, the northern hemisphere winter is upon us. The China reopening, this production cut is going to be an ill-timed one potentially by OPEC. So $100 oil is easily back on the table here. I will tell you, though, the strong dollar is making oil very expensive for everyone else who's got to do the currency translation. They're not getting the break in the rest of the world. And again, when OPEC starts to have to try and cut to prop up the oil price in the face of severe economic headwinds, they've had a difficult time with that historically.

So I wouldn't get too overly concerned about it. But certainly here, there's going to be a lot of anxiety rushing into this market now as we get into late October, November, December. And we have to sort of really assess where we are in terms of global winter fuel inventories. And if they end up being okay, though, and the winter ends up being, you know, moderate, the prices will come back down again rapidly. Such a key point, John, as we've been bracing ourselves for this coming winter for, it seems like forever now. I appreciate that, John Kilduff, watching Energy Today. We are getting some news out of the crypto space.

Our Kate Rooney has details on that. Kate. Hey there, Carl. That's right. Another government agency warning about potential risks in crypto. This time it's the Treasury Department's Financial Stability Oversight Committee in a new report out today. FSOC, as it's also called, saying crypto assets could pose a risk to U.S. financial stability if their interconnections with traditional finance or overall scale were to grow without adherence to or being paired with appropriate regulation. That would include existing enforcement of the existing regulatory structure. The report goes on to say that the scale of crypto asset activities has increased and so has the overlap with Wall

Street. Right now, they say those are relatively limited, but it could increase rapidly. One big area of concern they call out here is stable coins. Those are the cryptocurrencies pegged to the price of a dollar. It does note many of these are backed by traditional bank assets like treasuries or short-term debt. FSOC also points out some more traditional Wall Street firms now offering crypto services. It does say that some players in the market here are opaque. It calls out a lack of transparency and makes some recommendations as well. It asks for more enforcement, more work between state and federal regulators,

and then reducing some of the regulatory gaps it sees out there, potential regulatory arbitrage as well. It does ask Congress to pass legislation, but FSOC stops short here of backing any particular bill or endorsing any of the bills that are heading to Congress eventually. Back to you. What a day for crypto oversight. Kate, thank you. Kay Rooney. Meantime, shares of Tesla under some pressure today after missing Wall Street's third quarter delivery estimates, the EV maker blaming shipping logistics for the disappointing numbers.

Meantime, traditional automaker stocks higher after reporting quarterly sales that were pretty much in line with analysts' expectations. Our Phil LeBeau joins us. Phil, Tesla may have missed on deliveries, but the production was pretty close. What are expectations going into 4Q? Big expectations, Carl. The expectation is that they're going to deliver 1.36 million vehicles this year so far they've delivered 907 000 you do the math it means the fourth quarter they've got to come up with about 450 000 vehicles and if for them to do that to go from where they

were in the third quarter that would be about a 24, 25 percent increase in production. Now, we know that Texas, Germany and China, the plants are all ramping up production, but that's a big increase. So it'll be interesting to see whether or not one of two things is going to happen. Analysts are going to bring down their estimates or we get some sense from Tesla when they report earnings in three weeks that, yeah, we think we can hit, you know, 450, 425 in terms of quarterly production. Mark, I was thinking of something that Morgan Stanley asked earlier today. Are we sure the problem is only supply and not related to demand? It would be unreasonable to assume that the company was not exposed to at least some decelerating macro growth. I think you got to think that. I mean, we saw, as you know,

used car pricing and supplies for new cars almost fall off the cliff as the year began because of supply chain. I don't know about you, but I watch a lot of TV this week and watch a little football. There's a lot of ads for cars on TV, zero financing. So there is more supply out there. And obviously, a lot of people are buying the three, which is what I would say kind of an affordable luxury car for some people. A lot of those people are watching their 401k shrink and watching their account shrink. That's got to affect demand. And I would not be surprised. What we haven't talked about as well, Elon Musk funded his potential acquisition of Twitter by selling a lot of stock a lot higher ago. And so he's probably a little upset with the stock price here, but boy, did he sell a lot of stock at the right time. That's a good point. Very good point. Certainly, inventory is much higher ending Q3 than they were

Q3 a year ago. Phil, thank you. That's our Phil LeBeau. Meantime, Wells Fargo getting a boost today. Goldman ups that stock to buy from neutral, raises the target to 48. Analysts there say the bank has an underappreciated earnings growth story due to best in class revenue upside. Interesting call here, Mark, because a lot of the research on banks has really been about operating leverage and which banks finally have a couple more levers to pull, at least say on expenses. Yeah, and we know Wells Fargo has had many, many issues over the last few years and decades, frankly, all the investigations and some of the amelioration that they've done for some of the suits that they've come up with. I think, listen, I think there's a

lot of pessimism with the banks. Obviously, there's been a lot of fear about loan quality and loan growth and what's going to happen now. A lot of it is probably baked into these stocks right now. I think you've got to look at these third quarter reports. We saw some fear when J.P. Morgan and others reported their second quarters. Let's watch those earnings. They're the first ones to come out when the third quarter reports come out in the next few weeks. And I think if we see any whiff, that it's not as bad as some people thought.

These stocks are primed for going a lot higher. That's interesting. Yeah, you're right. It's kind of hard to go back and cue the memory about this past summer. But a lot of that was about the reversal in reserve flow and whether or not that was prepping us for a day when delinquencies would finally start to bite. But there hasn't been, I would argue, huge evidence that that's going to be a problem in the near term anyway. We haven't seen it. I mean, you're seeing some of the news out of the low FICO scores and what you're seeing for some of the credit card data.

But with some of the things that you're describing, we just have not seen yet. And I think Jamie Dimon likes to get ahead of the bad news so he can get ready for the good news. He hasn't spoken since that bad second quarter report. I wonder if that's a sign that they've gotten their house in order a little bit and the bad news may not be over, but it's not as bad as he feared. That's a good point. We're going to watch that, obviously, at the front end of earnings season. Mark, as we wrap up, certainly this session, Dow up 2.6, 750 points off of the highs of the session. But what do you think is going to be the important dynamic to consider over the next couple of weeks? We're going to get jolts tomorrow. We got a jobs number coming. Obviously, yields are important to watch. But how do you think the market is prepped for a month that at least could unwind some of the September weakness?

I see the VIX still at 30. So there's just a lot more fear than we saw going in at the June report. Obviously, we saw some positive news in the stocks in July and early August, and that quickly got erased in September. I'm looking at the political landscape as well. Some of the things going on in Russia, obviously, that we've got to make sure we watch this guy. They're clearly doing poorly in Ukraine. And as long as that rhetoric doesn't heat up, the market's really found, I think, everything that could go wrong with it. We get a whiff of good news on earnings and balance sheets are OK. Carl, I think the fourth quarter could be a little bit spry to the upside. We're certainly closer to the end of the rate rises than the beginning. And I think we're setting ourselves up for a better

end of this quarter once we get all the bad news out of the way. And I'm not saying we're going to thrive in 2023 and we're back to the races. But just a little change in tone will be a big refresher for the market. And everybody's pessimistic. The short interest is higher. The fixed index is higher. Stocks are a lot lower. That sets up for a good backdrop for a little bit of a relief rally.

You're right about sentiment. Definitely got ugly in the month of September. Mark, really appreciate your insight today on a pretty important day for the tape, certainly an important day for the beginning of a new month and a quarter. Thank you. Mark Lehman joining us from J&P Securities.

So we're going to wrap up this first day of October and this first day of Q4 with some decent gains, not quite the 900 points that we had earlier in the session, but Dow's up 760. S&P reclaimed 3650 early in the session and managed to tack on just a little bit in these last couple of hours, just south of 3680.