Closing Bell - Closing Bell: Stocks scream higher, Amazon sits out the rally, Musk’s impact on Twitter advertisers 10/28/22

Episode Date: October 28, 2022

Stocks rallied hard, capping off a solid week of gains, even in the face of more uncertainty surrounding big tech. Adam Crisafulli from Vital Knowledge explains why there are now two markets that you should be watching. Jeff DeGraaf from Renaissance Macro Research breaks down his call for a “FOMO” rally into year-end. CFRA’s Arun Sundaram discusses the trade on Amazon following that stock’s pullback on earnings. Ad industry titan Sir Martin Sorrell talks about what Elon Musk’s ownership of Twitter means for advertisers. Plus the latest on Meta, Intel, and earnings from big oil.

Stocks are surging here on Wall Street, adding to strong gains on the week and the month, even in the face of Amazon's pullback. This is the make or break hour for your money. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. There's the Dow up 800 points. We're at the highs of the day right now. Every Dow stock is higher at the moment. What's fueling the biggest gains? Apple adding 72 points to the Dow. UNH, Microsoft, McDonald's right behind it. S&P 500 also in a broad rally mode of 2.4% right now. You've got almost every sector higher except for consumer discretionary, and you can thank Amazon for that, which is a big component of that group. Etsy is falling in sympathy. But everyone else is higher, and information technology is actually your best

performing sector right now. It's being led by the semiconductors and a big surge in Intel stock off earnings. The Nasdaq comp up almost 3 percent. So big comeback day for big tech and tech is actually the Nasdaq is higher for the week. Small caps up 2 percent. It comes in the face of some weak earnings, Amazon, but also higher treasury yields. Tenure yield goes back above 4 percent, the dollar stronger. Check out the action in two of the world's biggest companies, Amazon and Apple, moving in opposite directions on earnings. We're going to talk much more about those moves and where the opportunities are here for the stocks straight ahead. Also on the show today, we will

talk to British businessman and industry titan Sir Martin Sorrell about Elon Musk's completed deal for Twitter and how changes to content moderation will impact advertisers. First off, it's been a big week for the mega caps. Let's break it down over the market dashboard with Senior Markets Commentator Mike Santoli. The magnitude of the market cap swings in some of these stocks this week is ginormous. And what's more remarkable, Sarah, is you have tremendous declines in some of the biggest market caps, setting Apple aside. And yet the overall tape has been able to make further headway and have some follow through buying. Really,

the hallmark of this month has been the market's ability to rally on bad news. Remember, the low intraday was on a bad CPI number. That was October 13th. We got through a lot else in terms of poor earnings. Clearly, housing is cratering and still managing to get up there around this 3,900 level on the S&P 500. It's fairly impressive. It's 11% to 12% climb off of that intraday low. October living up to its reputation for upside reversals after a dramatic bottom. So, again, I'll point out we kind of broke this little downtrend. It's above the 50-day average.

So, on a technical basis and seasonal basis, there's some reason to think that maybe it's in a better position. Just for benchmarking's sake, you know, we were about right here when Jay Powell gave the Jackson Hole speech. It really spooked the market when he didn't like the fact that markets were assuming a friendlier Fed. We're at about 4,200 on the S&P there. The VIX was under 22. Credit spreads were a little narrower than they are now. But just keep that in mind as we head to a Fed meeting is the kind of market celebration that the Fed might want to push back against if it so chooses. Now, Apple, interestingly, has been pulling the shares of Berkshire Hathaway around over the last year or so. At least that's the way it looks here. Coincidentally, of course, Apple, the biggest single position Berkshire Hathaway owns.

Company has one hundred and forty four billion dollars worth of Apple shares at this price. Apple, the biggest single position Berkshire Hathaway owns. Company owns $144 billion worth of Apple shares at this price. That's about more than 20 percent of Berkshire Hathaway's total market cap. Also, Berkshire, an interesting combination. It's value, it's consumer staples, it's insurance, it's transportation and utilities and energy. And of course, it's Apple. Those are pretty well positioned in the current market moment. So we'll see how they've outperformed the S&P over the last year. See if that continues, Sarah. So the news today, if you're looking for moderation and inflation, you didn't you didn't get it. We got an employment cost index, which was a slight deceleration, but still very firm above one percent. We got the PCE, which is the Fed's preferred measure, showing more than one percent gain.

Inflation is still here. It's still rising. Even the University of Michigan consumer sentiment showed that consumers expect inflation to rise in the coming years. It's true what the Fed wants to see. No, it doesn't. Now, you can really massage the numbers on the PCE and say over the last two quarters, you have seen deceleration past two months. You've seen it basically if you annualize where it's been over the past couple of quarters, that gets down to a more reasonable four to five percentage level. By the way, everyone keeps saying no tightening cycle ends till the Fed funds rate is above the inflation rate. Well, depending on the inflation rate you're looking at, if the Fed's getting above four percent, we're not that far away. I think that's somewhat less scary to the market,

if you put it that way. Let's talk more about the rally, Mike. Stay with us, if you will, because the market's been shrugging off some major misses from big tech this week. Take a look at the report card. Misses on both lines from Alphabet, a revenue miss from Amazon, spending worries at Meta, but the major averages are still pacing for big gains on the week. Our next guest says the current rally proves there are now two stock markets. Joining us now is Vital Knowledge founder, Adam Crisafulli, and we've got Michael Santoli with us as well. What do you mean, Adam, two stock markets? Well, you have this phenomenon over the last several years where the outperformance in these large tech companies, so Meta, Amazon, Apple, Microsoft, Google, has caused them to dominate the market.

And so you have now the equal weight S&P 500 and then the normal market cap weighted S&P 500. And this week up until today, but really Monday through Thursday of this week, you saw a very sharp divergence between the two indices where the market cap weighted S&P was held down by the mega caps. And you had the normal equal weight S&P actually trade very well. That's reversing today to a certain extent, but it still is the case that the equal weight S&P is having a little bit of a period of outperformance now. And what do you think is the big driver? Does it continue? Yeah, I mean, I think this week has been, the last several weeks have been a roller coaster. For me, the most important events that occurred in the market were, on Wednesday, you had Bank of Canada come out with a dovish hike. They hiked less than expected.

And then yesterday, the ECB suggested they're going to be slowing the pace of tightening. So for weeks, you've had this narrative start to seep into the market, whereby it looked like the central banks that were most aggressive earlier in the year with hiking are now coming to the end stages of that process. And so everyone assumes that the Fed now is going to be the next in line. We'll get 75 basis points next week. And it's widely assumed that there'll be some type of a signal sent by Powell that they'll be downshifting to 15 in December and then to 25 and zero at the meetings thereafter. And that, to me, has helped to overcome, you know, the big headwinds from large cap tech earnings, which certainly did disappoint. So you have earnings estimates. Sorry, go ahead.

No, I just want to bring Mike Santoli in here because, Mike, it does feel like there have been hopes before that the Fed is going to downshift on interest rates. And every time the market gets excited about that, then something comes up like inflation is persistently high or Powell and everyone else on the Fed is still very focused on controlling inflation. There's no doubt we've been through the routine before. I think you could say right now, well, if nothing else, time has moved on. They've done more. They're going to be at about 4 percent on the upper end after next week's meeting on the Fed funds rate. That's not far from where they're essentially projecting they need to get to.

So even just because of where we've come from and gotten to, you could say it's a little more plausible now to say they're going to decelerate in their hiking pace. That being said, you absolutely need inflation to cooperate here a little bit more before you can get real confidence that they're going to be able to step back in a big way. But the other piece of it is, even though it seems like the market's up a lot from the lows in a couple of weeks, I would argue that the reason the market went down in the first place, the S&P below like 3800, is because you had a lot of fears that the wheels were coming off. What was going on in the UK, obviously the Bank of Japan having to intervene, China, all these things seemed as if everything was teetering. The Credit Suisse's insolvent rumors, right, a couple of weeks ago, that was the low. And so I think that if you look at it

that way, we probably shouldn't have gone down as far as we did based on the way the economy is and the Fed expectations are. It's a little more reasonable that we've gotten back to this point. Or, Adam, do you have to pay attention to what big tech is telling us in terms of warning signs? A lot of the problems out there, Amazon's forecast, the pricing power of its web services, they're macro in nature and they're warning signs about the economy and could potentially have spillover effects, couldn't they? No, absolutely. I mean, you definitely are seeing a slowdown occur. Companies across the board throughout a lot of industries, not just tech, have a lot of them have acknowledged that they're seeing a softening in demand that's probably going to extend it to 2023. So I agree with what

Mike Santoli just said about how you're going to have to have the data cooperate a lot more than it has been in order to kind of really confirm the market narrative right now about the Fed slowing down. So for me next week, I'm actually more interested in the JILTS report and then the Friday jobs report. If you were to get really weak numbers on both those fronts, especially Friday, that could help propel the move that we've seen in the last couple of weeks about kind of the Fed downshifting. But if you're still printing jobs numbers of 200,000 plus, and you continue to have inflation where again,

you're seeing a mild deceleration, but not necessarily the type of sharp downtick that the Fed wants to see, then it's gonna be really hard to get to the S&P above, I think 3,900 on a sustainable basis. So earnings are moving in one direction. You now need the multiple to offset that, and that will be dependent on yields.

Well, 4% on the 10-year today. We've seen it come down a lot. Thank you very much, Adam. We'll leave it there. Adam, Chris, Chris O'Foley, and Mike Santoli. Elon Musk now officially the owner of Twitter. And one big question from a business perspective is how advertisers will react to a potentially less moderated version of the platform. We'll ask one of the titans of the ad world,

Sir Martin Sorrell, right after the break. You're watching Closing Bell on CNBC. It is a new era for Twitter. Elon Musk officially at the helm and changes already underway. Key executives are out, including the CEO and the CFO. As for the business model, Musk has told investors he wants

to quintuple revenue by 2028, but cut its reliance on ads to less than 50 percent. Ads make up more than 90 percent right now of Twitter's revenue. That's in the second quarter. And then on the content moderation, which is a key focus for advertisers, Musk just tweeted this afternoon, quote, Twitter will be forming a content moderation council with widely diverse viewpoints. No major content decisions or account reinstatements will happen before that council convenes. Joining us now, advertising executive Sir Martin Sorrell. He's currently the executive chairman of S4 Capital and former CEO of WPP. Sir Martin, you were one of the first people I wanted to ask about Elon Musk owning

Twitter now. Do you tell your big clients in advertising to do anything differently? Good evening, Sarah. Well, the answer is I think clients will want to wait and see. I mean, you just said the data that we had from Elon Musk early in the bid battle was he was going to quintuple revenue from about $5 billion to $25 billion. And advertising would fall from 90% of revenue to 50%. Well, you do the maths. That means that advertising would be about $12.5 billion, which is more than double where it is now. Now, that's tough. He's saying he wants to reduce the dependence on advertising, but he's de facto doubling up. Now, Twitter is only about

1% of the market. The global digital media market last year was probably about 450 billion. This year, it's about 500 billion. This year it's about $500 billion. It's growing this year despite what you see and hear by about 10%. Amazon, interestingly, last night grew its ad revenues or looks like it's going to grow its ad revenues from $30 to $40 billion. There's some bright spots at Microsoft, particularly if it snares Activision, bright spots at Apple. So I think it's not as gloomy a picture as some have painted. Even Google grew last quarter, the Q3, by about 11%. And the prognostication for

next year is that digital will grow. The ad revenue platforms will grow by 5% to 10%. But Twitter is a relatively small factor, about the same size as Snap, a bit bigger than Pinterest. So that's the interesting thing from Musk's point of view. He said he might flirt with subscription revenue as well, which would boost revenues. So that's one area. There's ad revenues. But effectively, what he's saying is he wants to double up or more than double up on ad revenues. And clients are going to be conservative until they see where he lands in moderation on content. You've referred to this moderation council, which is similar to the route that Meta and

Facebook have taken. So we have to see, you know, clients don't like controversy. They won't flirt with it. We've seen that with Kanye West just recently, another example of it. So I think we'll have to wait and see as to the potential. So Kanye West, I'm glad you brought it up. If he reinstates Kanye, who is, yay, his buddy, would that be a turnoff for advertisers? Would that be material? That would be definitely a turnoff. You've seen that with Adidas. You've seen that with maybe Adidas moved a little bit too slowly on it.

But eventually they got there. You've seen that with Harry Emanuel urging his clients and contacts to move away. So it would be. I mean, clients do not want controversy, particularly as we enter. What about President Trump? Well, same thing. I mean, people are going to be concerned about controversy and concerned about aligning themselves with it. So, as I said, I think we'll just have to wait and C. Having said that, when you look at the numbers with Twitter being roughly the same size as Snap, both offer interesting possibilities

if you can get the content moderation piece right. And to that point, Elon Musk tweeted his major advertisers on Twitter yesterday and seemed to be extending an olive branch to advertisers. And this move on the moderation council seems to indicate to me that he will be moderate in terms of content, too. Who does a good job at this? Does Facebook do a, I mean, in your opinion and an advertiser's opinion?

Facebook is the, you know, the root of all evil, according to some. I don't share that view. And every ill with the social media is blamed on Facebook. They have made strenuous efforts to increase the number of people that moderate their content. They are obviously concerned about modifications to Section 230 and being held responsible for their editorial content. And that's still out there as something they have to wrestle with. But I think they have exercised much more effort in this area to moderate content, to regulate content. And they've been spending an awful lot of money on boosting their editorial content. Google, the same.

So the big platforms have been faced with this issue, issues around privacy, around brand safety, about political interference in political advertising. All of these issues have made the platforms much more responsible in the way they're dealing with it. And the regulators, of course, not just in the United States, but elsewhere in Europe and other parts of the world, have put enormous pressure on them to try and moderate their approaches in these areas.

So they have actually responded. But there's still issues that they face. And in a way, Twitter is a microcosm, a smaller. I mean, if you look at the relative sizes, Facebook this year, despite their pressure on meta this year, will generate about one hundred and fifteen billion dollars in ad revenues. Google to thirty to twenty five billion this year. So the key platforms are much bigger. Amazon will go from about $30 to $40 billion. Apple is starting to build a $7 billion or so business in advertising. Microsoft will certainly be building its business too. So Twitter and really in respect...

Netflix is doing ads. There's going to be a lot of competition. Well, Netflix, Disney have both got advertising models. And I think what we'll see with Twitter is a sort of Netflix type approach. I think we will get subscriptions. I think that would make sense from Musk's point of view. And I think it would make sense for him to exercise more moderation on the content side to try and build his ad revenues. Because the simple fact is that despite what he said in

terms of reducing the importance of advertising, in an absolute sense, he has to double the size of his advertising revenues or more. So that's my final question, Sir Martin. Do you predict that he will be able to do that? I find, as journalists, we find Twitter very useful. I think on a day like today when Tom Brady and Giselle are breaking up, like Twitter is prime. But for an advertiser, value proposition, what is it and will he be able to do it? As Musk said, it is potentially the world's town hall. And if, as I said, he can moderate the extreme content or moderate the impact of extreme content and avoid too much controversy, I think he may surprise us. It's never paid to bet against him yet, and it probably won't pay to bet against him in the future. But

he has to do something, as you started to see today, and as you saw yesterday with his tweet to advertisers, today with his moderation counsel, he started to recognize the issues that he's had to face as he takes over as CEO of the business, kitchen sink and all. Yes. Doesn't want it to be a hellscape. I guess that was good news for your clients. Sir Martin Sorrell, thank you for joining me. Thank you very much. It's really good to have you today. Thank you.

Appreciate it. We're looking at about an 800-point rally here as we head into the close, just building on gains for the week and the month. 2.3% higher on the S&P 500. Everyone's up except for consumer discretionary, and that's because of Amazon. There's just one more trading day left here in October. The Dow is actually on pace for its best month since the Ford administration, 1976, and its best October ever. Coming up, chart watcher Jeff DeGraff explains why there could be even more upside into year end.

And as we head to break, check out some of today's top search tickers on CNBC.com. Amazon in the top spot. These big tech earnings movers really getting a lot of interest, down 7.2%. The 10-year's right behind it. Wevers really getting a lot of interest down 7.2 percent. The 10 years right behind it. We are seeing a little bit of higher yields today. Apple, Meta and then Twitter for a final time, which is up toward that deal price. We'll be right back. Check out today's stealth mover, O'Reilly Automotive, getting a green light again from investors after reporting earnings Wednesday. A look under the hood. There are a lot of puns on this one. Be

careful. The auto parts retailer beating profit and revenue estimates thanks to much better than expected same store sales. O'Reilly crossing the finish line with an intraday record every single day this week. And then the other auto parts stocks riding shotgun, advanced auto zone, genuine parts, all outperforming on the week. See, I told you. Up next, Amazon shares getting crushed, but we have an analyst who says this is a great buying opportunity. He'll make his case next on Closing Bell with Amazon stock down 7%, weighing on consumer discretionary stocks. Stocks are in rally mode, down more than 800 points, but Amazon is a notable exception, pulling back sharply here after weak revenue projections. But firm CFRA says the stock is

still a buy. The company says the issues are not structural and, quote, in fact, we still see Amazon's profitability and margins improving in 2023. Arun Sundaram of CFRA joins us now. Why? Everyone is so downbeat after that forecast, tough talk on the macro economy, slow down in cloud growth. Why do you say bye? Yeah, thanks Sarah.

Yeah, I think the narrative is starting to change. You know, we knew the top line growth was slowing. We saw that happen this quarter in the e-commerce side. I think what was kind of a surprise this quarter was that AWS was slowing, but think what was kind of a surprise this quarter was that AWS was slowing. But now that's kind of a burden that's now off of Amazon's shoulder. It was bound to happen eventually. We saw it happen this quarter.

So now going forward, I think it's going to be less focused on the top line because we know revenue growth is going to slow. And there'll be more focus on the bottom line and operating profits. And I think there's a lot of things to be excited about on the bottom line. Really, the e-commerce side hasn't posted a profit in several quarters now. and operating profits. And I think there's a lot of things to be excited about on the bottom line. You know, really the e-commerce side hasn't posted a profit in several quarters now, but, you know, we think that has set the change in 2023 and 2024. You know, we expect Amazon services side of the business,

things like AWS, advertising, third-party fulfillment services, those revenue streams to really grow next year. And that should also help margins. You know, Amazon's also cutting back on their capital investments. They're pausing hiring in certain parts of their business. So these are all things that investors want to see right now. Investors want to see companies tighten their belt and manage costs in this environment. That's exactly what Amazon's doing. Amazon's focusing on what they can control. And I think that's a positive and a catalyst for the stock.

No, I think Jim Cramer also sticking with it and likes the story for that earlier in his morning meeting saying the expense management is really the key here. So why hasn't it yielded more results? Laura Martin of Needham on TechCheck said, we're not running a not-for-profit here. The scale is not resulting in profitability. Yeah, I mean, I think it's taking time. You know, if you look at how much they've invested over the past two years, it's an incredible amount of money they put into their fulfillment network, their transportation network and AWS. And now we're finally starting to see some of those capital investments pull back. You know, this year, Amazon is expected to decrease fulfillment and transportation capex

by $10 billion. And so now it's really allowing itself to grow into this supply chain network that it obviously overbuilt the supply chain network over the past two years. But now it's starting to finally allow itself to grow into this network. And I think that's going to bode well for margins. It's not going to happen overnight. It probably won't happen in a quarter. But I think we'll start to see pretty significant margin improvement in 2023 and even in 2024. You know, we're actually expecting operating margins to nearly double in 2023 compared to 2022.

So, again, the story, I think, is going to be the narrative is shifting from the top line to the bottom line. I think that's a big catalyst for the stock next year. Well, what about the top line now? Now, do we have to be worried about that, too? Just a quote from the conference call from the CFO. This is uncharted waters for a lot of consumers' budgets. And Amazon increasingly has looked more like a spending picture of Americans. Yeah, I mean, I think we all knew that e-commerce demand is slowing. Again, we saw that happen this quarter. You know, for Amazon, it's experiencing even slower growth in Europe. In Amazon's perspective, Europe is already in a recession. And that's where

a lot of their weakness in e-commerce lied. And in their AWS side, the slowdown in revenue growth, it was not necessarily that Amazon lost customers in the AWS business. It's more that its existing customers are looking to manage their costs. So they're coming to Amazon and being like, hey, we need lower price, more value options. Can you work with us? And Amazon is doing that. So it's not necessarily that they're losing customers.

They're not losing customers to, say, Microsoft or Google. They're actually still gaining customers. They said yesterday that their new customer pipeline is actually pretty strong. So again, it's all these macro factors that are really driving the weaker outlook right now. It's not so much idiosyncratic risks. And I think that's why, you know, the shares don't deserve to be down as much as it is today. Right. You lowered your target from 170, but 152, which would still be a big buy from here. Arun, thank you for joining me

on the call. Thanks, Sarah. The Dow on track for its best October ever. Our next guest explains why bullish seasonality and sentiment is setting investors up for a fear of missing out rally into year end. And a reminder, you can listen to Closing Bell on the go by following the Closing Bell podcast on your favorite podcast app. We're up 831 points right now on the Dow. We'll be right back. Stocks are staging quite a rally this week, despite tech's underwhelming earnings reports. And our next guest says it could have legs, saying the market is set up for a FOMO rally into year end. Let's bring in Renaissance Macro Research Chairman Jeff DeGraff on the charts. And Jeff, I believe you have been feeling bullish in recent months. So a good call for

October. You think it's just getting going? Well, you've got a couple of things going for the market. You know, one that's pretty powerful, but it's very simple, is the fourth quarter rally effect. And, you know, we even disaggregated that and looked at it when the Fed's raising versus Fed cutting or the Fed on hold. And it really holds true. It's even more powerful for midterm election years, which I think is part of what we're seeing here is this sort of discounting factor on the election. So yeah, I think there's more to it. But I think really the unique part of this, what makes it so powerful is that sentiment is so bearish. And so we've got this bearish sentiment. People are essentially offsides in

their positioning. And we'll get this fourth quarter rally. And nobody's had a very good year. And so they're going to look at their portfolios in December and say, man, I need to have some exposure here. And I think that's one of the risks, one of the real risks for clients here in the fourth quarter. So if it's just seasonality and sentiment, does that set us up for another tough year next year? You know, there's two things that we don't have working for us. One is valuation. When we have, you know, 4% on the treasury yield and you look at the free cash flow yield of the market, you don't have valuation support. And it's something really unique here because we have had valuation support for 40 years. Every time you've had a bear market, yields would come down, and that's not the case here. So I think that does put a fly in the

ointment for 2023. The other is credit. The credit conditions right now are okay. They're not terrible, but they certainly wouldn't take much for them to deteriorate. So those are two things that are working against equities. I think tactically, that's not going to be that important, again, between now and the end of the year. But I do think that that's something to keep in mind for 2023 and probably what if we do get back into this bear market and downtrend, I think that's going to be the culprit. It's going to be both credit and the valuation story. Good week this week in the credit market. Tons of issuance, I think the most since September. So the credit markets are open, there's no doubt. They're open. And we've seen that,

especially on relief periods for the equity market. So what about the yield story? You mentioned it a lot hinges on this, and I think you've seen signs of peak in yields. Do you think we have seen those highs? I think you're right there. If you look at real yields and, you know, we've got the data back to the mid-1980s, you look at real yields where they are today, you know, roughly 175 basis points of real yield that you're getting from a treasury. That historically is in the zone that yields tend to top out. In fact, if anything, we would say the value proposition in the market is probably in triple B corporate credits versus equities here. But, yeah, I think you're in the zone of peak yields, you know, with the concerns around the inflation prints and the like.

I think we're right there. Maybe we get up to 425, maybe 450, but I don't think it's much more than that. Well, that would still be a big jump, 450 from 4 on the 10-year. Yeah. I mean, the trends are still in place, so I want to be careful with that. But the conditions are set up that historically would start to push against yields moving substantially higher at the long end. Jeff DeGraff, thank you. Good to check in with you on Renaissance Macro. Up next, we will hear from one asset manager who just bought shares of Meta following that huge post-earnings sell-off. That story plus Intel and a pair of energy giants rallying on the backup results when we take you

inside the market zone with the Dow up 836 points. 18 minutes till the close. We are now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day, as always. Plus, we've got Pippa Stevens here on Exxon and Chevron and BDA Capital's Barbara Duran, who just bought shares of Meta. First up, though, we'll start with the broad market because, Mike, we're up 800 points on the Dow, 2.4 percent on the S&P. We're tracking for a strong week and a strong month. And it's like, where did this rally come from? We've had a lot of high profile, big tech earnings misses, except for Apple. Yields have, we've seen relief and we've seen relief for the dollar as well, but that's going the other way today. So what is the

best explanation besides seasonality and sentiment? Well, those two are important because where a lot of rallies come from when the market's been at a low is the depths of despair and people being underinvested and expecting incremental further bad news, not getting it. But I do think you did have also the economic numbers have not been great, but they've not really cooperated with the idea that we have passed the point of no return into imminent recession, that corporate earnings are going to fall apart suddenly because they've more or less come in according to plan. 70% of companies beating the whole routine is pretty much in place. But I do think it's very important to consider that the pent up negativity coming into October is part of what we got. Moderation in yield. So there doesn't seem like this really disorderly surge in bond yields. That has given some relief. We're in a Fed quiet period.

Maybe that has something to do with it. And the seasonals and the burning off of excessively pessimistic sentiment, I think all that together more or less gets you to where we are, which is a five-week high, let's keep in mind. Yeah, and I guess to your point, you can spin the numbers however you want with PCE and employment cost index, which people are looking for some signs of moderation. If you're looking at the tech sector in particular, it's interesting, Mike, that the Nasdaq is higher week to date by 2.2 percent, even with the heavy market cap weighted sell-offs

shedding, I don't know, 80 to 150 billion dollars in the stock market values this week. It is remarkable. Now, clearly, Apple's doing a tremendous amount of work there, especially today. It's accounting for, I don't know, something like a quarter of the overall S&P gain. If it were flat, the market would be that much lower. But no, it's kind of incredible. Even the Amazon move today after the overnight sell off, it's up maybe 10 bucks off of the low print after the earnings results. So part of that is these stocks have not exactly been coming off a high. They've been punished all year. Expectations were low.

Meta is now a smaller part of the market than it's been in years. So therefore, it's not as much of a drag. So put it all together. I think it makes sense. I don't think it means the good times are back for NASDAQ leadership, but it shows you that we priced in quite a bit before this week. Well, let's hit energy because that sector is underperforming the broader market today, despite pretty strong earnings from ExxonMobil and Chevron. Exxon easily beating analyst estimates on the bottom line and Chevron topping both profit and revenue expectations.

Earlier on CNBC, the CEOs of both companies discussed finally seeing profits from investors that were made when energy prices were much lower. Listen. You reflect back on the last five to six years when most in our industry were stepping back. Our company was leaning in, investing at a rate much higher than our competitors in anticipation of what was to come. And as a result of that, when the call came, we were here. We answered it. We had the volumes. We've been investing steadily in growing our production. We had a record in the Permian Basin, up 15% year to date versus the same period last year. We had our strongest ever

production out of our Australian liquefied natural gas business. The world needs more supply and we're delivering that. Pippa Stevens joins us. Pippa, it almost sounds, both of these statements from the CEOs we just played, that they're gearing up for scrutiny from politicians. We answered the call. The world needs more oil. We've stepped up on production. I mean, clearly good numbers for them draw attention. Yeah, exactly. And President Biden weighing in yet again today in direct response to Exxon CEO Darren Woods. Woods had said that the company is returning money to consumers via its dividend, which prompted Biden

to tweet, I quote, can't believe I have to say this, but giving profits to shareholders is not the same as bringing prices down for American families. Yesterday, Biden criticized Shell's capital return program. And, of course, earlier this year, he said that Exxon is making more money than God. And as you noted in those bites you just played, these companies are trying to emphasize that they're growing production and that these are long-term businesses. And, of course, the conversation just two years ago was incredibly different. Still, it is hard to ignore these bumper profits.

Exxon's profit nearly tripled year over year to a record $19.7 billion, while Chevron's was its second-best quarter ever at $11.2 billion in net income. And I think on Exxon's earnings call, Bank of America's energy analyst kind of summarized the whole thing by saying that everyone was happy with these results, except perhaps not the administration. So, Pippa, what are you getting from some of these earnings calls and commentary about where they think the price of oil is going? Are they positioning for longer term,

higher prices right now? Are you able to glean that? Well, we've asked that before. And I think a lot of these executives are reluctant to give actual firm price forecasts. And instead, they always emphasize that this is a multi-year cycle and that investments now pay off in the years to come. And so they are investing and growing their business no matter where the direction of oil is. However, we have heard from Darren Woods specifically that he doesn't think a price cap is a good idea for the industry. He's criticized some of those policies that would artificially kind of move the price of oil. So really, the party line there is that they're investing no matter the environment. Got it. Pippa Stevens. Pippa, thank you. Look at Intel. It's the big

winner in the Dow for a change after beating earnings estimates, announcing it will cut up to $10 billion in costs through 2025. But the chipmaker announcing lower than expected full year guidance, something CEO Pat Gelsinger discussed earlier on Tech Check. Listen. There is no good news on the horizon. U.S., Europe, Asia, all of them look to have headwinds for the foreseeable future. So we took down our range for the rest of the year. Christina Partsenevelis joins us. Is that what the market is celebrating, the cost cuts? Is there anything else that Intel is doing to make investors more bullish? It's gone are the days of unrealistic optimism, pretty much. But yeah, they do like the cost cutting. They are going to be a slowdown in the expansion. There's a few other details. They are operating their foundry as a separate business

entity, which means different accounting. And they're hoping to be a little bit more efficient with that. They are operating the actual foundry like a chip contractor, which means they'll service external customers instead of just Intel product lines. And of course, lower CapEx. But we didn't really get any details as to specifically what they're going to do with each of those points. And you have to keep in mind, just over the last seven quarters, Intel hired 21,000 workers. So headcount is going to be an issue. It's not going to be the whole part of that $3 billion cost cutting, but it is going to be something that we're going to see over the coming weeks or so. But I think the market is celebrating the fact that Intel is pulling the cost lever down hard, hard,

which is what they wanted to see. But we can't take away from the results. Q4 revenue guidance, not good. Full year, not good. Right. Well, the stock also has been weak, Mike. It's down, what, still 43 percent year to date. Can you buy this stock with still concerns about the core business with the PC market set to decline, those sort of issues? I mean, the Intel shares have long discounted a pretty bleak environment, which is why I think

you have a CEO that's willing to say it's not going to get better. For a little while it's super cheap it's been super cheap for a while- should they be cutting the dividend maybe that's a question that investors are going to have for a while it seems like it's not the moment to keep. A dividend

a level that has you know that high a yield- so I think there's still a lot of questions but. At some point. What cut what investors want is these companies. To invest. For the next cycle and the one after that. And Intel is absolutely doing that, but I don't expect it to be a kind of quick payback on that kind of enthusiasm. But it's really taken its pain already.

People thought this was going to have some traction in the mid-30s, and clearly it didn't. No. Christina, thank you. Christina Partsenevelos. Meta will close out as the worst performer on the S&P 500 this week. Most of those losses coming yesterday after earnings disappointed and the planned spending on the metaverse rattled investors, but not all investors. Our next guest picked up some meta in the sell-off.

Nancy Tangler joins us. Excuse me, Barbara Duran joins us at BDA Capital Partners. Barbara, the stock is down 24% this week. It's now down 70% for the year. Did it just get too cheap for you? Yes, actually, it has. The valuation is, starting the year, was 23, 24 times. It's now 13 times. Of course, earnings have come down since then. And unfortunately, for those of us who also own it, it is the cheapest it's been since late 2015. So it has been quite a drop. But that, I think, is always when you want to look at these things, because

we were just talking about Intel, for instance, and that investors like to see them investing for the future, which is what I believe that Meta is doing. You know, they've got 95 percent of their revenues are from ads. OK, so they and they missed on that, which a lot of believe that Meta is doing. You know, they've got 95 percent of their revenues are from ads. OK, so they and they missed on that, which a lot of them are because that is a macro economic uncertainty weakness we've been talking about for a long time now. The other part that really spooked investors was that even though they were always going to be spending a lot, like 120 billion in capex and operating expenses, they increased it yet again on the call, saying they would spend another $5 to $10 billion. And with no clarity when the metaverse,

this magical metaverse, when this is going to come into reality and when that's going to start contributing. So there's a big question in investors' minds, is this going to be worth it? And they'd rather see the approach that some other technology companies are taking to try to balance the short-term concerns with the long-term. And Zuckerberg is not. However, you have to remember, this is the biggest social media platform in the world. They've got 3 billion monthly active users, 2 billion daily active users, and both measurements increased. The engagement increased. And that's key.

If that wasn't happening, the story is not so interesting. But I think that plus their balance sheet, $48 billion, their free cash flow will be impacted next year. Their margins will be down. Last year, they were about 40%. They're down to mid-20s this year. They'll stay under pressure next year. But 2024 is when you should start to see all of this start to pay off in terms of revenues, margins coming back. And I think that's where you have to look forward to. And so right now, if you base it on next year's earnings, it is not that attractive. But I think they will rebound in a big way. So I'm trying to parse your words because you just laid out the bull case and the bear case in a way, Barb. So is your view, so Facebook, our meta obviously got knocked for the spending

and you called it the magical metaverse, right? It's not here. Investors clearly don't want that kind of spending in this kind of environment, but there were questions about doing that at a time where the core business is weakening, including revenues in this macroeconomic environment. Is your point that you expect the core business to be fine and for Reels to monetize and for that to fund the metaverse vision and that will work? No, I think you're already seeing it. Reels, there's a number of businesses they are trying to monetize. WhatsApp, they haven't really begun in earnest. And that also has 2 billion daily users. You're starting to see a big pickup in reels. I think the ad revenue is up 145 percent quarter over quarter. And they're just in the early stages of that. So they're gaining

traction there. And I think over the next year, you're going to see a lot of improvement in the monetization of their different apps. So it's not just relying on the ad revenue in the existing business as it is. And so I think it all comes down to your view on the macro environment. And that is what we're seeing in the rally this last few weeks. Is it really because people think once again the Fed is about to pivot? And if you do, then the high-tech names in a Facebook, this is probably going to be the low. If you have a view that we're going to a deep recession, then all bets are off. But yeah, I think that it's a stock you could probably wait a bit, but I don't see the risk. I think the downside risk is practically zero at this point. And you never know when these kind of stocks are to the upside.

Well, it's up 1.1 percent. So you've got to start there. Barbara Duran. Barbara, thank you very much from BDH. We've got under two minutes to go here in the trading day. Mike, what do you see in the internal? Yeah, good, not great, I would say, Sarah. You look at the New York Stock Exchange breath for a day when the market is up some 2.5%. It's a little better than 2 to 1 advancing and declining volume. Not too bad. A lot of talk about the Dow. Best month since 1976.

Look at the tortoise versus the hare story here. This is since the March 23, 2020 low. Dow has now pulled ahead. It makes its performance in tougher markets and underperforms in really strong bull markets. That's what's going on today. Volatility index finally easing back. We're under 26. It's relaxing a little bit. A lot of stock by stock action is coming coming into play. And of course, we have the Fed meeting tomorrow. It can only go next week, can only go down so far. But right now it's cooperating with that story of tension

release, Sarah. Take a look at the major averages. We are going to close out at the highs of the day. The Dow up 830 points or so, with nearly every Dow stock higher except for Dow Chemical. We're having our best day since about October 13th, and for the week, up almost 6%. Not too bad. For the month, it's up 14.5%.. Remember, one more trading day for the month of October. But we're tracking for our best monthly performance for the Dow since 1976, going out strong with the Nasdaq up almost 3 percent and the S&P up 2.5 percent.