Closing Bell - Closing Bell: Stocks pull back, Midterms impact on Biden agenda, Snack giant CEO on inflation 11/14/22

Episode Date: November 14, 2022

It was a choppy session for the major averages in Monday trading, following the best week for the S&P 500 since June, as investors closely watched comments from the Fed, a meeting between Presidents Xi and Biden, and the results of the midterms. Scott Wren from Wells Fargo discusses how those factors impact his market outlook. Bruce Richards from Marathon Asset Management breaks down opportunities in credit. The CEO of snack giant Utz gives his read on inflation and the consumer. Plus the latest on Coinbase, big biotech moves, and Amazon.

Stocks have been gaining steam, but pulling back just in this last hour, following the best week for the S&P since June. Welcome. This is the make or break hour for your money. Closing bell. I'm Sarah Eisen. Take a look at where we stand right now in the market. We're up 79 points or so on the Dow. S&P 500 is unchanged. If you look at the sectors, it kind of tells the story. They're strong in health care materials, energy today, industrials, consumer staples and technology. Those are all solid. We've got, though, in the red, real estate, financials, consumer discretionary, and utilities. The NASDAQ is falling.

Actually, it's spent most of the day higher. The 10-year note yield is higher, and the dollar is stronger. And that could be why we're losing some steam here. Check out the top-performing Dow stocks this hour. Just gives you a flavor for what's working. Merck, Johnson & Johnson, so healthcare names back on the rise. Visa, IBM, and Amgen. In fact, it's Amgen adding the most to the Dow right now, along with J&J. Home Depot and Microsoft are the biggest lags. Coming up on the show today, we will speak to Bruce Richards from Marathon Asset Management, which oversees $23

billion in capital. He has been very bearish lately. We'll find out where he's looking for opportunities right now in the credit market. Plus, we'll speak with the CEO of snacking giant Utz for a read on food inflation and just how much consumers are willing to pay right now at the grocery store. Let's get straight to the market action with our senior markets commentator, Mike Santoli, as always. What do you focus on steady after such a giant rally last week? Yes, I think that is really the observation is that the market's holding on to a nearly 6% gain in the S&P last week. For the second day in a row, though, hesitating right at the 4,000 level. We got there briefly on Friday, also traded above it a little bit today.

What's interesting to me in part is where it takes us back to. This market, as it kind of has come down since January, first cracked below 4,000 in the early part of May. That was when the Fed stepped up its rate of tightening to a half percentage point at the May meeting, early May. We got an April CPI report that was 8.3 percent, was supposed to be 8.1. It really caused another round of fear about tightening and inflation, which is what this has all been about this year. And yet we're at that level again after another three full percentage points of Fed tightening. And of course, inflation has only recently started to show signs of backing off. So, you know, you can look at that two different ways. One is the market's absorbed a whole lot of bad along the way, point to point over the last six months and not really lost much. On the other

hand, we still face those pressures. So maybe it's just a matter of time until it succumbs. We'll see. Now take a look here at the most volatile risky stocks in the S&P. That's the high beta ETF relative to the low volatility one. This is a six-month chart. Takes us right back to when the S&P was at 4,000. And you see on Thursday and Friday, it was another one of these bursts higher

in those risky high beta stocks. They're often lower quality. They're often heavily shorted. In this case, it's a lot of tech and a lot of consumer discretionary, not a lot of things like energy and staples. Now, we've seen this a few times before, right? You had the big jump here in June, another one toward the August high. We've always backed away. We'll see.

Even today, you're starting to see a little meaner version. You mentioned, Sarah, healthcare strong. That was a turnabout from Friday. So one of these rallies in risky stuff is going to stick. We'll see if Even today, you're starting to see a little meaner version. You mentioned, Sarah, health care strong. That was a turnabout from Friday. So one of these rallies in risky stuff is going to stick. We'll see if it's this one. What about Catalyst, Mike? Because we got that big inflation read, which felt to many like a game changer. And now we're getting all this Fed talk.

They're trying to walk it back or some of them are backing it up. It doesn't feel like there's a lot of movement related to the Fed rhetoric. We're sort of used to it. Not yet. That's true. And it's interesting because I remember saying last time that, well, maybe we just, you know, heard this before when the Fed comes out in a parade. Now, it's going to be 10 Fed speakers, I think, this week. So who knows if the cumulative effect will have an impact on the market, really, retail earnings, we're in this period where it doesn't seem as if there's kind of one big scary thing or one big promising thing directly ahead of us on the calendar. And so it's the market kind of figuring out if it can kind of absorb

what we've already taken. Is the seasonal rally in place or not? Do people feel underinvested if the market doesn't pull back and have to buy? Yeah. Walmart, Home Depot out tomorrow. Target the next day. Mike, thank you. We'll see you soon. Let's turn now to geopolitics, also front and center. President Biden holding extended talks with China's President Xi Jinping ahead of the G20 summit in Bali. Kayla Tausche with the big takeaways from that meeting. So is this a thawing, Kayla, in relations somewhat? Well, it depends on who you ask, Sarah. The two leaders covered a lot of ground in today's lengthy meeting, flanked by their top finance and foreign policy officials. There were no breakthroughs expected and there were no breakthroughs delivered apart from

an important pledge to keep the lines of communication open. But as for the most feared scenario of a possible Cold War or invasion of Taiwan. In a press conference following the meeting, President Biden said he didn't see that. I absolutely believe there need not be a new Cold War. I've met many times with Xi Jinping, and we were candid and clear with one another across the board. And I do not think there's any imminent attempt on the part of China to invade Taiwan and I made it clear that our policy in Taiwan has not changed at all.

But on the economic front, there is no love lost between these two powers, no sign that Trump-era tariffs are going away, and new moves by Washington to curtail Beijing's access to chips, seen as a precursor to more future hawkish moves. The official PRC readout said starting a trade war or a technology war, building walls and barriers and pushing for decoupling and severing supply chains runs counter to principles of market economy and undermine international trade rules. President Biden said he made clear he'd defend American interests, but certainly,

Sarah, there is still a lot that did not get worked out today. But I guess on the plus side, at least they're talking, which is something that investors like and pay attention to. Caleb, what about, so now we know that the Democrats are going to keep the Senate. We learned that over the weekend and Republicans likely to still get control of the House by a smaller margin. What does it mean for the Biden agenda, the lame duck session, and what investors can expect on policy, if anything? Well, you've heard it called the most consequential lame duck session in a generation, at least. And over the weekend, Anita Dunn, who's a top aide to President Biden, said

the first and foremost priority will be just keeping the lights on for the federal government. There's a funding deadline that runs out in mid-December. They'll try to add some additional COVID aid and Ukraine funding onto that package, I am told. And then there's a question about whether any of the signature social issues will see any movement, whether they will try to codify marriage equality or abortion rights. Today, President Biden was asked about that, and he said at least in the new Congress, there won't be enough votes in the House to do that. And then finally, there's the issue of the debt ceiling. Senator Chuck Schumer, the majority leader, said over the weekend that he wants to take that up sooner rather than later.

Dunn said that she wants it to be bipartisan. The White House believes that. So it seems like it's up to Congress to bring up the debt ceiling and to decide when to tackle that issue. But the White House at least believes that Republicans should be on the hook for that as well. Kayla Taucey, Kayla, thank you very much. Joining us now to talk about how all of this shapes the market outlook as well as Fargo senior global market strategist Scott Wren. Upshot of the elections. What does it mean for investors who were more excited about a red wave going in? Yes, Sarah, I think that the key here is that we're still going to have some split government. So that's probably going to have an effect on new spending, things like that.

But certainly it didn't turn out to be a red wave. I think the Senate was always dicey and I think most polls would have continued to show that. But certainly should the Republicans retain the House, which I think they will, it's going to be a very, very narrow margin. So what does that mean as far as expectations around fiscal policy? I think as far as the market goes, you know, typically after these election cycles, you might trade off the result for a couple of weeks, but you quickly get back to what are earnings going to do? What are the economy? What's the economy going to do? And we are very quickly going to be back into that because the question still remains,

is the Fed going to make a mistake? We think they will because we're going to have a recession. Is it going to be mild, moderate, or severe recession? We think it's going to be moderate. You know, how how deep the recession, how high the Fed's going to hike rates? You know, those are the questions that people are going to move quickly on. You know, once we get past this, this House finalization. It does feel like it's all about the Fed and not as much about the politics. So, OK, I wanted to share two quotes that seem to be getting the most attention from Fed speak in the last 24 hours. We got Fed Governor Waller, who really poured some cold water on that, on the better reaction to the weaker inflation number. He says the market seems to have gotten out front, gotten it's gotten way out, out in front over this one CPI report, and then caution that there's

still a lot more work to be done. Everyone should just take a deep breath, calm down. We've got a ways to go, he says. And then Lael Brainard, the vice chair of the Federal Reserve, Scott, goes the other way today and talks about the need to moderate interest rate hikes soon. I think it will probably be appropriate soon to move to a slower pace of rate increases and sounded a lot more dovish. So what do we make of these conflicting signals? Well, I think that as far as my little brainer goes, you know, that's absolutely no surprise. The market expects a slower pace. And I would say to the other Fed Governor Wallace, you know, the market thinks, yeah, inflation is high now, but this is not a secular pop that inflation is going to come off. We know they're going to hike rates, you know, a few more times here, probably 50 and then a couple of quarter point hikes.

So, you know, Sarah, those those those do sound a little bit at odds. I'd put more weight on what Lyle Burrard said today. And I think we have a lot. I think I think we lost you. Lost the shot. Are you there, Scott? I am. OK, we got you back. So you. OK, so you put more stock in the vice chair, even though I think Waller sounds more like Powell. But quickly, Scott, I want to know what you're telling us. He does, for sure. Yeah, and I think we've got Fed speakers. Mike mentioned we have a lot of Fed speakers. We're going to start to get a lot of clarity.

Are we doing 50 or 75 in December, which it seems like the odds would be 50? And then, yes, we're going to slow the pace of this as we enter the new year. So, you know, there's a lot of opportunity for those comments to start to get in the market this week. And I think that's probably going to happen. But you're still telling clients that there's more downside risk and not to get in yet. Well, we do. I mean, you know, this has been a bear market rally, in our opinion. Resistance up here at 40.80, which is a 200-day moving average. Above that, the big trend line off the record high. It's going to be really tough to get through that unless the market

really perceives that inflation is going to come up. Scott, our loss, we lost your shot and the connection. We'll have you back on, though, of course, Scott Wren. When we come back, look at shares of snackmaker Utz. They're handily outperforming the market this year, up nearly 10 percent. After the break, we'll talk to the company's CEO for the latest read on food inflation and, of course, his outlook on consumer spending as well. Dow's holding on to a slight gain of 54 points. You're watching Closing Bell on CNBC. Welcome back. We've got a news alert on Tiger Global's 13F filing. Christina Parts and Evalus with the details. Christina. Well, Tiger Global, an investment management fund run by Chase Coleman, tends to focus on tech, and the latest 13F filings are definitely on brand. Let's start with the mega cap tech holdings,

the firm increasing its stake in Alphabet by 148 percent, Microsoft by 16 percent, and a massive uptick in Uber stock for the third quarter. You can see that there isn't very much reaction, though, thus far, because it's been trending pretty much in line Microsoft down throughout the day. But there's some boost to software names like ServiceNow, Snowflake, Datadog, and a huge 86% decrease in CrowdStrike holdings. That means they sold over $5 million worth of shares

in the company. CrowdStrike down 28% year-to-date. Keep in mind, though, these filings are for the third quarter, ending September 30th, my birthday, and do not disclose short positions. Sarah? Everyone just wants to know about the FTX holding. Anyway, they were in that series C round, of course. Christina, thank you.

Christina Partsenevelos. Take a look at us. The snack maker has outperformed the S&P 500 since the start of the year. Despite rising food inflation, which showed persistence in the latest CPI report, consumer demand appears to remain healthy for this company. Last week, it posted better than expected earnings and guidance. Joining us now is outgoing Utz CEO, Dylan Lissette. Dylan, welcome back to the show. Just how high prices can consumers tolerate here?

Well, Sarah, thanks for having me back. And thanks for the nice intro. And yeah, I mean, we're definitely seeing a lot of inflation and we've been pricing the entire subcategory has been pricing to essentially try to overcome that inflation. It's been ongoing for quite some time. But as you note, the elasticity, the, you know, the resilience of the consumer is very high, especially in snacking. It's been something that's been going on for at least the 25, 27 years that I've been at UTS. Are consumer prices going to keep rising in food?

Are you still hiking prices? I'd say that we put in a lot of the increases that we have done. We're in 2020, 22. We don't have list price increases slated for 2023, although we do have inflation that we are going to see in 2023, especially around some of the commodities like cooking oils and stuff. So, you know, we have the lap over benefit of some of the pricing from earlier in 2022 that will benefit in 2023. But I mean, I think, you know, across the industry, at least for snacking entities and companies, there is still a lot of inflation. So it'll be interesting to see exactly, you know, how much pricing, you know, laps year over year, but also if there's

any new introduction of pricing as well. In other words, you don't see it coming down rapidly here, as some are getting excited about with overall inflation after we got that weaker CPI report last week. Yeah, I don't see it coming down. I mean, it's important to note that as opposed to, you know, buying a house or buying a new truck or a large ticket, you know, purchase for the consumer. Snacks are a very inexpensive treat that one can pick up and reward themselves or their family with a snack.

So it's not a very large purchase decision. There's a lot of other things that, you know, ways that we look at to take out costs, to increase our productivity, to pass that along, but also to try to, you know, ensure that we're reinvesting in the brands and innovation and distribution and the things that, you know, will help us to continue to grow. So as we go into 2023, it'll be a little bit interesting to see what happens. Yeah. Typically during recessionary periods, you know, we see consumers at the grocery trade down into private label, away from the bigger brands, shrink the size of their shopping carts. Are you seeing any of that kind of behavior? Not yet. I mean, traditionally, private label in the salty snack category is a relatively low

market share. I think a lot of it has to do with the route to market that people like Gutz and some of our peers or competitors, you know, use to go to market for this high volume snacking entity that, you know, that takes a lot of time and effort to get it on shelf and to keep it in stock. So there's not been a lot of private label penetration, but, you know, invariably to think that there won't be any into the future is somewhat short-sighted. So I think after, So I think after some time, you'll see a little bit of increase in private label. But typically, the branded players like ourselves, if we keep up our premium branding and our premium quality, our excellent route to market, I think we'll be fine as we look forward into 2023 and beyond for growth. And Dylan, while we're doing this deep dive on inflation, we talked about food and commodity

prices. But what about all the other sources out there that have gone into why we're paying higher prices, labor costs going up, supply chain issues? Are those things getting better, worse, the same? I'd say they're getting better in pockets for sure. I think it's funny, even in early 2022, when you wouldn't have thought it was going to be a concern, we were having trouble getting certain supplies just to meet demand. We don't spend a lot of time today talking about the lack of supply, the inputs that we would need to make our products.

And freight markets have lessened up a little bit, which has opened up some ability to, you know, ship more on time. Labor markets are getting a little less tight. More people are returning to work. We're definitely seeing that. We track that in a bunch of different measures. And across the board, most of those are slowly improving. So I do see some of the non-commodity aspects of inflation abating a little bit. And then hopefully that will allow us to not have to price more in the future

and return some of that to consumers in future pricing and future offerings. All right, that's something. I guess the cheese balls are too good. That's why, people are just willing to pay whatever for them. Dylan, thank you. Appreciate it. Thanks for having me.

Dylan Lissette of Utz. We're going to have much more on the state of the consumer and food inflation tomorrow. We've got an exclusive interview on this show with the Chipotle chairman and CEO, Brian Nickel. Let's check in on where we stand. Hanging on to a gain, though, it's coming down a little bit, up 12 points on the Dow. S&P 500 has turned negative. Real estate, financials, consumer discretionary, utilities, technology, and staples are all now red in the market. Healthcare holds strong. Small caps down about four-tenths of 1%. They're underperforming today. After the break, some magic is coming out

of one toy maker today. There's your clue. It's hitting the stock pretty hard. We'll reveal the stealth mover next. And then later, don't miss our interview with Bruce Richards, the head of Marathon, which has more than $20 billion under management. He says it is the best environment this century for one specific type of investment. Find out what that is. As we head to break, check out some of today's top search tickers on CNBC.com. The 10-year note, 10-year goes back to selling off after we saw that big rally last week. Remember, the bond market was closed Friday. Yields, though, remain under 4%, even though they're ticking a little higher today. Tesla's down. Amazon, even despite the word of layoffs from The New York Times, is under a little pressure. We've got AMD with a double upgrade,

and that's helping that stock. And Bitcoin continuing to suffer. We'll be right back. Check out today's stealth mover. It's Hasbro. The stock not having a fun day for investors, down 9%. Bank of America double downgrading the toy maker to underperform from buy, slashing its price target to $42 from 73, implying now more than 30% downside from here. The analyst there saying Hasbro is overproducing magic, the gathering cards, making the long-term value of that profitable business disappear. When we come back, Marathon Asset Management CEO Bruce Richards says this is the best environment for investing in credit this century. He's going to reveal the opportunities when Closing Bell comes right back.

Stocks spending most of the day in the green here. S&P just turned negative. The Nasdaq is also losing a bit of steam in this final hour. But, of course, this all comes after last week's gains that saw the best weekly performance for the S&P since June. The 10-year yield back on the rise a bit. So is the strong dollar. Joining us now exclusively is Bruce Richards, CEO of Marathon Asset Management. And Bruce, you've been bearish pretty much all year long. Has anything changed for you as a result of that softer inflation read that we got last week that got the market so excited? You know, I think, hi, Sarah, how are you? I think that it still has two

more hikes left in them and going to take Fed funds from 4% where it is now to four and three quarters, 5% range. So you'll see 50 base points in December, another 25 in February. And the Fed will maintain all year next year, this 5% Fed funds rate. So the rate's going to go sideways until sometime in 2024 there's a pivot. So yes, I think inflation's rolling over to your point. But I think it's probably stuck around 4%. And that will not allow the Fed to pivot. And so the markets are underestimating the lag in impact from the Fed tightening. Because by Q2 of next year, there's a recession. And by Q1, starts the earnings recession. And our base case is for earnings

to decline by about 8%. Next year, it takes you from about 220 earnings to about 202. And that 202 times a 16 multiple takes you somewhere around 3,200, 3,300 S&P, down from 4,000 where it is now. So we call for a 20% decline in the equity market and a decline in the bond market coming into this year. We've seen that. And we remain somewhat defensive. And so despite the better tone that we've seen the last few days, I think a lot of that is technically driven.

And the fundamentals will follow through in the coming quarters. And we think we'll see with that a little higher rates as the Fed continues to raise rates, as well as lower equity markets. Why do you think, Bruce, that the market is refusing to price in this earnings recession or deeper economic pain that you're describing? Because that's really what it is. Because you're saying the rate picture is priced in, right? But it's the economy and the earnings picture that will deteriorate while the Fed has to stay pat.

Well, I think every time, you know, there's something that pushes the markets, the Fed's there for a put. And the Fed's there, you know, to lower rates back down. But this time is different from inflation. And so unless if you're hopeful that inflation will roll back to two, I think that Powell does not want to go down as Arthur Burns. He wants to go down more like Paul Volcker in terms of how he's remembered. And I don't think

he wants to ease too soon, which will help reignite inflation, because a lot of the bubbles have been created between the 08 housing crisis bubble that was created and some of the security bubbles that were created back then. And what we saw in this most recent run is a lot to do with printing of money and Fed bringing rates to zero. And this activity, which is actually detrimental to long-term capital preservation, long-term capital growth in our country. So you were right to predict the pain for stocks and bonds this year, no doubt about it. And you're still expecting the stock market to fall into next year, Bruce.

But what does it mean for bonds? Is there a buying opportunity here now if you are expecting a recession? Yeah, I wouldn't say right now, right here, because rates just recently came down. But this is how we'd phrase it. When rates were zero coming into this year, you know, we could lend and earn a 6% rate, 600 base points over that risk-free rate. Today, that spread has widened to about 700 base points. So 700 base

points over the 5% rate gets you 12%. So rather than invest in the same credit at a 6, you can soon earn a 12 rate of return. So in the public credit markets, which is leveraged loans, high yield bonds, structured credit, we can buy those securities yielding 9% with 10 points of upside. So there's lots of price appreciation as well as current yield that's built in that makes this the best investing environment for credit. And if you look at long-term growth of like the equity market, say 7%, I think when you can earn 9, 10 or 12 in the credit markets, it's the biggest return profile you can earn in credit relative to equities because it was just recently that

you were earning 3, 4, 5% on your debt coming into this year. And now we've flipped it. What are some examples of company debt that you like? You know, there's, I mean, look at Twitter, for instance. You know, Wall Street is hung with $13 billion of debt. And if that comes out at, say, 60 cents a dollar, that becomes a very attractive piece of paper. Look at the fact that, who is it, Blackstone, which probably pays more fees to Wall Street than any other investment firm, wasn't able to get financing done when they bought the Ericsson

spinoff and they bought that division. And so they had to go to private credit markets and pay about 12 percent rate. Look at Petrobras, a big Latin American, you know, quasi sovereign issuer. Their debt pays like a 12 percent current cash flow at about 20, 30 point discount to par. So there's lots of examples of, you know, strong double B's and some strong 50 credits that are yielding in the double digits. And we have our whole, you know, portfolio shopping list waiting for the right time and the right time to buy. So there's a lot of dislocation, not a lot of illiquidity, not a lot of liquidity. And we're able to extract some pretty, you know, high lending rates as a result. How risky are you willing to get?

What about distress? And I know you've been expecting a distress cycle here to pile up, but would you go to Carvana, for instance, or Bed Bath & Beyond? Well, I think there's a lot of industries we should talk about, and I think it's across every industry that you're gonna see distressed. I don't think you'll see so much in the energy sector and some of the commodity companies, but basically every other sector

from technology-based companies to, you know, the most interest rate sensitive companies are, you know, are the home builders. So I think, you know, with interest rates having gone up a few hundred basis points, mortgage rates go up. For, you know, companies like D.R. Horton and Lenore and KB Homes are going to actually do very well because they've used their own experience to get their leverage way down. And they don't have the big land banks that they had in the past. And they have lower debt that finances their operation in terms of debt to EBITDA. But the building product companies, the floors, the doors, the windows, aluminum siding, the appliances, the bathtubs, the pools, you know, everything goes into a home builder.

Both those manufacturers and distributors, they're highly levered companies. There's about 30 to 40 of them. They're good companies, but they have over levered balance sheets with sales that are going to be falling 30 to 40 percent. You look at a company like Open Door, right, versus, you know, Innovation Homes. And Open Door is in a very bad way. Innovation homes is the biggest, you know, home rental companies that there is. And they've rented all those homes. Open door has all the homes and they're unrented because they simply bought it to flip it with higher financing costs. Eight billion dollars in debt. It's no wonder their equity is down 90 percent when, you know, the company that actually

owns their homes and have long term locked in financing like innovation homes, you know, is down with S&P. So I'm for, you know, hard assets and income producing and cash flowing all day, you know, over, you know, some of the more speculative tech-based companies. And you also see a lot of noise, I think, also in cable and media, another industry that the stocks are getting hammered and their business models are being questioned right now. That's a whole other segment for another day, Bruce. We appreciate the examples, though. Thank you very much.

Pleasure. On what you call the greatest opportunity for credit in a century. Bruce Richards from Marathon. Up next, a new survey suggesting this could be a rough holiday shopping season for retailers. The big picture on which names could be the big winners and losers. Straight ahead. In today's big picture, we are now in the fourth quarter, which means holiday spending is upon us. And with all the mixed economic signals lately, what exactly can we expect from consumers this season?

Well, a new survey out today from Stiefel shows consumers are still in the mood to spend, but there are some warning signs. So-called spending intentions for November stayed positive and near the averages we've seen since May. But if you dig down deeper, consumers earning less than $75,000 a year anticipate spending 27% less this holiday. Analysts say it doesn't bode well for general merchandise. 40% of respondents plan to purchase more private-label offerings, modestly above where that's been lately. And while gas prices aren't as big of a drag on spending intentions as summer months, back in June, for instance,

63 percent of those surveyed still say it is having an impact on their spending now, including at the upper income level. So the upshot here, Stifel likes Costco, Walmart and Target in this environment as consumers opt for value and groceries insulate them from lower traffic and general merchandise sales. Walmart and Home Depot report earnings tomorrow morning, target Wednesday. Investors are looking to see just how strong the consumer is and how promotional these retailers are after inventories got bloated. Retail consultant Jan Niffen likes dollar stores, too, for the holiday season. Five Below, Dollar Tree, Dollar General. He says because the low-end consumer needs a place to buy small quantities at good prices. When we come back, Coinbase may be getting crushed today, but up

next, you'll hear from an analyst who says the stock could be a big winner from the FTX bankruptcy. That story, plus Amazon removed from a top picks list and biotech stocks making big moves when we take you inside the Market Zone next. We are now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli is here to break down these crucial moments of the trading day. Plus, Mizzou host Salim Syed on the impact of a new Alzheimer's drug study and Cowan Stephen Glagola on Coinbase. We'll kick it off broad, Mike, because we are seeing stocks fade here a little bit in the final hour. Nothing extreme, but the S&P is down 17 points, about four-tenths of 1%. And there's some weakness. Energy stocks are holding up, even though crude oil prices are

down 4%. And you've got real estate, consumer discretionary financials, and utilities all weaker. What is your read on this market reaction after such a stunning week last week? I would say mostly digestion. It's pretty modest in terms of the degree of this very minor pullback. You still only have it isolated in some stocks that overshot a fair bit last week. I think there is, though, probably a fairly comfortable consensus among people who have been trained by the market this year to not believe fully in any rallies. I think there's a general sense out there the next 2% to 5% higher in the S&P is probably a relatively low-risk sell or short. And I think that's an interesting dynamic in the stronger seasonal part of the year.

We'll see if the market can challenge that and maybe overshoot it so that it seems like a little bit less of an obvious trade, you know, to just assume the downtrend is in place. Let's hit Amazon, because Amazon joining Twitter and Meta as the latest tech giant to announce that it's cutting jobs, or at least reports that it is cutting jobs. The New York Times is reporting that it will lay off approximately 10,000 employees in corporate and technology roles starting as soon as this week. It will be the largest round of job cuts in history for Amazon. Shares are also lower today after Bank of America removed the stock from its U.S. one list,

though analysts did maintain a buy rating. Remember, Amazon in late October gave softer guidance for the holiday quarter. A sign the e-commerce spending spree during the pandemic would be waning. Mike, not getting rewarded for job cuts. Saw that from Disney as well on Friday after hours. What do you make of it? Yeah, it's obviously, you know, it's a theme that's going to wash over a lot of these larger companies, especially ones that are coming out of a pretty aggressive investment phase.

I mean, 10,000 jobs is significant in absolute terms relative to the 1.6 million employees that Amazon is not terribly much. We already knew Amazon was definitely in this mode of figuring out where to become a little bit overextended in terms of closing logistical centers and things like that. Bigger picture, you know, the stock has underperformed the S&P now on a four year lookback basis. So you have to go back five years to get to a point where Amazon has outperformed. And yet, you still have 90% buy ratings on this thing. So it's not like the street has turned on it. It's been a little bit of a sense of complacency out there just because it was such a long-term winner, just because

Amazon itself trained investors and analysts not to worry about short-term quarterly results. So it's an interesting dynamic here in terms of people figuring out what form of maturity Amazon is entering right now. I think the other implication, Mike, is for the jobs report in November, because we have yet to really see any impact of these tech layoffs. But after Meta and Twitter and now Amazon, that's going to hurt, isn't it? It's going to be an undertow for sure. In terms of the employment picture, there is a definite question as to how much is actually going to show up in numbers right away in terms of payroll surveys and even in the household

survey. You know, a lot of times you're eliminating a position that may or may not be filled. A lot of times there's a runway to it. And tech jobs are only a couple percent of total employment. So it'll matter, but I don't think it's going to be the kind of thing where we'll see it in a dramatic sense over the course of one month. Good perspective. So we are watching a number of moves in the biotech space today after Swiss pharmaceutical company Roche says its Alzheimer drug had failed to slow patients' decline in phase three studies. Both Biogen and Eli Lilly moved higher. Remember, they had their own treatments in development. Biogen said in September that its drug had shown promising

results. Let's bring in Salim Syed, senior biotech analyst at Mizuho. He's got a buy rating and a $325 price target on Biogen. Was the Roche news a big surprise? Hey, thanks for having me, Sarah. I mean, look, the Roche trial of the three big trials in Alzheimer's, Biogen, ASI, Eli Lilly, and the Roche trial, of course, this was the riskiest one of the bunch. We haven't seen actually any promising phase three data prior. So the street was actually not putting in too much into models for this particular product, but it was a longer trial. So it could have gone either way. We're not terribly surprised by the news,

but there was a little bit probably we'd say in consensus numbers for Roche. Does it make sense that Biogen would go up on this news from a competitive position? I know theirs is faring better in terms of trial data, but was there a question really about the size of it? We know there's a ton of demand, in other words. Oh, yeah, for sure. I mean, this is a positive for Biogen, I would say, probably on two fronts here. The first one is obviously that we wipe out a competitor from

the space, right? So it's one of the key questions that investors are trying to figure out at the moment. What is the size of the Alzheimer's market and how does it eventually get split up? So today's news removes one of those variables from the picture here in that Roche does not now have a horse in the race. I think the second question here is obviously, what does this mean for Biogen? This is a company where there is a growing thesis amongst the investor base in terms of acquisition.

And if Roche is now out of the picture, would they be interested in a company like Biogen? Oh, you think there's a potential deal to happen here? I mean, look, it is a growing thesis amongst some of the biotech specialists that we speak to. And Roche and Biogen are already partnered on a couple of other products, right? So if Roche would like to stay in Alzheimer's, this would be an avenue for them. They do have enough purchasing power to do such a deal.

If they wanted to, you know, probably they'd have to issue a little bit of stock for that sort of thing. But, you know, this they wanted to um you know probably they'd have to issue a little bit of stock for that sort of thing uh but you know this is something that you know amongst the larger alzheimer's picture i mean just remember you know this is a company this is a company here where you know alex denner prominent investor who's on on the board of biogen once sold uh you know genzyme uh was part of that in two Sanofi, when Chris Wiebacher, Biogen's newly appointed CEO, you know, to Sanofi, right? To Chris Wiebacher.

Chris Wiebacher is now the new CEO of Biogen, right? So you wonder, like, you know, some of these things, you know, is there something behind closed doors that was discussed in terms of dual tracking something here, keeping Biogen as a standalone, or perhaps, you know, selling the company within the next couple of years? So the M&A question gets to my broader question site about where we are in biotech right now. IBB, it's had a great month, obviously rebounding double digits

and has actually outperformed the S&P 500 this year, although it's coming off of a rough stretch. Where are we in the innovation, M&A cycle that would make this group a good bet right now? Well, look, 2021 and 2022 have been tough years for biotech investors. It's very rare that we actually see two really bad years for the biotech sector. My particular view here is that we've bottomed, we've bottomed, you know, in the summer of this year in terms of, you know, decline and pressure on the sector. You know, as we go into 2023, you know, we would think folks become constructive again. We now have two broad themes in biotech. One is obviously Alzheimer's. The other here is obesity. Both of these are newly created $10

billion plus categories for the space. And one question that, you know, I'm starting to think about now is whether generalists would also come into the sector, you know, in 23 and 24, especially now that we've had the Inflation Reduction Act put into place, the drug pricing discussions, you know, sort of been addressed. All right. Well, we've got to leave it there. I appreciate you joining me. Thank you very much. We got to hit Bitcoin, Bitcoin and other cryptos stabilizing a bit after a wild week and weekend of FTX headlines. There are many losers in the FTX downfall, of course, but our next guest sees a clear winner. Cowan, Stephen Gorgola joins us now. He just reiterated a bull case for Coinbase. Market, Stephen, is not taking this as a bullish sign for Coinbase. Why do you disagree? Yeah, so, I mean, last week was a week that will live in infamy for the crypto markets for some

time. I think we put on a note today just trying to gauge some early read-throughs of, you know, how the FPX bankruptcy impacted, you bankruptcy impacted broader centralized exchanges across the market. What we saw is that Coinbase has taken some early share along with some other regulatory compliant players in the United States like Gemini and Kraken. I think when you look at that in contrast to some of the global players that are less transparent that, you know, similar to sort of I'm not going to say they're FTXs, but offshore operating less regulatory compliance, their volumes declined prior to the turmoil that we saw with FTX. So just some early read throughs there. And again, I think our view is that investors underappreciate that Coinbase is the most regulatory, compliant, secure, and transparent crypto platform globally.

And we think that was legitimized to a certain extent last week. But isn't it overshadowed by the fact that there's a huge trust problem right now in the entire ecosystem, even if they're able to pick up some market share from FTX. I think there's a real rethink of crypto given how prominent and institutionalized in a way FTX was. You're exactly right. And look, this doesn't necessarily imply, you know, three days of market share data doesn't necessarily imply that Coinbase know, Coinbase is going to, you know, grow volumes this quarter. I think that the broader crypto drawdown is going to weigh on the transaction revenues there. But, you know, I would say we do see some positive catalysts on the horizon, one being, you know, derivatives business and them getting regulated in that regard and the potential for regulatory clarity as a catalyst off

this and helping that to bring liquidity back into the United States. I think investors have to remember the vast majority of liquidity in these crypto markets is happening offshore and that trading volume. So any extent that that can get brought back onshore, I think that will be a benefit to Coinbase longer term. Also, I think the businesses liquidity and expense management remains sound in this environment. $5.6 billion liquidity on the balance sheet ending last quarter, and they just did another round of layoffs the other week.

Yeah, they just announced it. I think that just highlights that they're continuing to be prudent in this environment and they're executing on product in a multi-year downturn. All right. No, we've got to leave it there. I got to wrap up. We got to go to the bell. But Stephen, it's an interesting, provocative theory, and we hope to talk to you about it again. Stephen Gugola from Cowan. We're at session lows, down 188 on the Dow, less than two minutes to go in the trading day. Mike, only sector now higher is healthcare. What's happening in the internals?

Yeah, it's softened up quite a bit, Sarah. We were about 50-50 through about noon today in terms of up and down volume. It is weakened as we've gotten a little bit of profit taking here. So it's basically 2 to 1 declining to advancing volume. Take a look, though, at the new 52-week highs versus lows on the New York Stock Exchange. One of the rare days recently. It's not too many either way, but twice as many highs as lows. It's starting to show you that we've sort of peaked, at least for now, in terms of new lows with the downside momentum halting. The VIX has perked up

with this little pullback and with the fact it's being Monday, looking ahead to potentially the market hitting just a little bit of a short-term resistance around 4,000, the S&P. Softened up indeed, down 200 points now on the Dow, just really selling off in this final few minutes or so. You've got Hasbro and Dominion Energy as the new lows. Both of those stocks have lows we haven't seen since March 2020 right now. A lot of the gains have disappeared just in this final hour and in these final moments. As I mentioned, health care is the only sector, it looks like, that is going to close higher. The S&P down almost a full percent here at the close.

And the NASDAQ selling off even harder. It is down more than 1 percent. Perhaps some selling in treasuries, some buying in the dollar. Back to those trends, not helping stocks out. Down more than 200 at the close. That's it for me on Closing Bell. See you tomorrow, everyone.