Closing Bell - Closing Bell: Stocks Set to Stabilize? 10/5/23

Episode Date: October 5, 2023

When will stocks stabilize? Is tomorrow morning’s jobs report the key? Do we have to wait for earnings next week or beyond? The Wharton School’s Jeremy Siegel gives his forecast and explains why he likes stocks right now. Plus, BNY Mellon Investment Management’s Sonia Meskin is flagging serious downside ahead. She breaks down the parts of the market she is staying away from and where she is seeing strength. And, Bill Miller IV of Miller Value Partners is finding some opportunity amid the recent volatility. He explains where he is putting his money right now. 

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9, right here at the New York Stock Exchange. And this make or break hour begins with one of the biggest questions in the markets today. Have yields moved so far so fast that they've already forced the Fed to fold and thus eventually clear the way for a fourth quarter rally to materialize? We tackle that as we track this final hour. Your scorecard with 60 minutes to go in regulation looks a lot different than it did just one hour ago. Every S&P sector was negative, not so much anymore. In fact, we're green across the board here, even the Russell.

So staples, materials, utilities, that's where we were going to start because that's where the pain was being felt today. But now you've got comm service is green. Financials are green. Tech's green. Health care is green as well. So we were going to say, tech was mostly lower that gain in nvidia today not enough really to offset some of the weakness in microsoft amazon and meta but as we said the situation continues to change which is why we have to watch this final stretch so closely let's talk about our talk of the tape when will stocks

stabilize are they in the process of doing that? Is tomorrow morning's jobs report the key? Do we have to wait for earnings next week or even beyond that? Let's ask the Wharton School professor, Jeremy Siegel. He joins us once again from Philadelphia. Professor, welcome back. It's always good to see and talk to you. Good to see you, Scott. You know, market's changing, and a lot of people are concerned that we're in the process of moving lower because rates continue to move higher. How concerned are you right now? Well, I think there should be no question now that the Fed should be done. I mean, we've had almost 50 basis points of tightening on the long end since the last meeting. And by the way,

tightening on the long end, a 25 basis point increase on the long end, is far more powerful at restraining spending than at the short end. So, you know, and given the uncertainties, you know, again, another, you know, they're going to have the meeting November 1st, two weeks later, another potential government shutdown, UAW, you know, all those uncertainties on top of that. Now, all that said, the real economy is still, you know, going like fire. Goldman Sachs is near 4 percent on third quarter. The Atlanta Fed GDP now is near 5 percent. And we haven't seen these figures for a long time. So the economy is chugging. And that's one of the major reasons why yields are going up is because

strong economic growth does make for higher yields. But clearly, you know, there's a lot of things out there that can trip things up. Yeah. But what happens if rates keep chugging higher for whatever reason? You could say, well, the economy is good. Obviously, there's a lot of focus on the deficit, the amount of supply coming on the market, whether there's going to be enough buyers out there. What if they keep chugging higher? Well, again, it depends on why they keep chugging higher. I mean, if growth looks stronger, then earnings will keep up with those higher rates. Right now, we have the S&P selling for 17 times next year's earnings. I mean, to me, that is a very, very good price. X-Tech, you're selling at 14 times earnings. Europe is selling

at 10 to 11 times earnings. I mean, you know, a lot of these high rates are already discounted in the price of stocks. And, you know, it's my thesis that we should be in the high teens, if not 20, for the P-E ratio. So right now, you know, given the nearly 10 percent correction, I don't think we've quite got that far. I like stocks right now. Wow. Interesting to hear you say it. You know, you think that the multiple deserves to be high, maybe even a little higher than it is now. But how then do you justify what some have said is an easy market to decipher? We are no longer in a QE environment. We're in a QT environment. Rates going up. And for that

reason, this multiple can't be justified in any way, shape or form, especially against a backdrop, Professor, in which earnings expectations may be a bit ahead of themselves. Well, but, you know, the truth of the matter is, is that we will see, you know, the third quarter earnings coming out soon. But 2024 earnings are basically holding up better than average over the year, where they usually do come down. So, you know, right now, you know, I think the Fed has to be very sensitive. I mean, there's no question with mortgage rates near age.

Well, I don't want to be in the housing sector. We've seen what happened with REITs. Again, the regional banks the Fed has got to be getting a lot of phone calls J-PAL's getting a lot of phone calls from the home builders those who want mortgages the banks I think we have seen the high

of Fed funds what I hope for is that if we do see a slowdown and I'm not saying we're going to but the Fed is just as nimble at reducing those rates as it surged rates in 2023. And if they are, then we've got that cushion with a reasonable piece of PE ratio. I think stocks do end higher than they are right now on December 31st. I've got Steve Leisman joining the conversation for a few moments as well, Professor. Of course, our senior economics reporter. And Steve, the idea of where Mary Daly was speaking today, that these tighter financial conditions, Steve,

are the equivalent of a hike that now the Fed might not have to do as a result of all this. Do you really believe that this move has moved them significantly enough? I believe it's a significant move. And I think in the face of a significant move, the Fed is going to move significantly. And if you look at things they've said, Scott, we went back and we looked at three key speakers over the past several days Mary Daly saying conditions have tightened Considerably might do away with a cut Bostick is talking about corporate debt refinancing could be significant drag on the economy Any official talking about lags is not one inclined to hike

Michael Barr talks about the need to monitor the impact of tightening on bank credit, very much what the professor was talking about. I'm also interested in the professor's view of my work here. If I look at the 10-year, Scott, I go back to mid-July. The 10-year move has moved by 100 basis points in that time. I can disaggregate it into the following moves. 50 basis points between mid-July and mid-September has been because of issues about issuance, a supply-demand question, along with a stronger economic growth. But 50 more basis points since mid-September

has been from Fed rhetoric. And I think what's interesting here, just to talk about how you began your show, what the Fed giveth, the Fed can taketh away. And if it feels like things are too tight or too restrictive, it can ease back. And it's not taking away that quarter point cut that it's the key for the market. It's the idea of building in more rate cuts, I would say, next year,

which they took away in the September meeting. They can put them back if inflation comes down, if the economy cools. Professor, how did student leasemen do? I think he did extremely well. I mean, Steve and I agree, you know, they may have an idea what they're going to do in the next meeting. Once you start going out six months, eight months, 12 months, you know, their guess is, you know, let's lick and see which way the wind is going. They're just going to wait and see. If we do get a slowdown from all these factors, I think there's really no direction to go. Don't forget, we're in a political year. There's a lot of political forces, the lending, the small, the small bower, the small,

look what happened to small caps, mostly because they don't they rely on the banks that are being pressured and community banks. You know, the political pressure is going to be extremely great for them not to keep on raising rates. I think we saw the last one. Once the market says, you know what, the Fed is done. Let's just hope they'll, you know, loosen as appropriately. But the sigh of relief that the Fed has done, I think, is going to give this market a rally. Goes back, Steve, to what we've talked about over the last month or so, this idea that the Fed has made a pivot of sorts, away from erring on the side of doing too much rather than too little and making the mistakes that were a few decades old that you know Jay Powell doesn't want to make to now not wanting to do too much undue

harm to an economy that's been largely hanging in there. And now you have the move in rates on top of all of that. I think Professor Shiger would believe that my having an English degree would not be good background for covering the Fed, except it is. OK, let's talk about the English that's been used, the language that's been used. OK, Mary Daly today saying that she believes monetary policy is restrictive. Rafael Bostic, hardly a radical or hardly a pioneer, used the phrase sufficiently restrictive. And that's really important. That's the metric that Chair Powell has used to say that we've done enough here. And I think the other thing that Mary Daly talked about using this language about risks being balanced, you have to go way back to

Greenspan, who when he said risks are balanced, that meant there was no longer any need for hikes. I don't know that the Fed is hearkening back to that language from 20 years ago, but certainly when risks are balanced, there's no predisposition in order to hike anymore. That is right. That's off the table. Just a little bit of argument, Professor Siegel. He is absolutely right. The Fed's forecasts are terrible. However, it does set the benchmark for where the market tries to figure out what is the trade here. If the Fed is hawkish and I have a more dovish outlook and a reason for that, then I make a trade based on the Fed's outlook. It is almost certainly wrong, but it's the benchmark I have to trade against. Yeah, Professor? Yeah, I mean, most certainly. I think what you said, Steve, early on is that neutral rate, you know, which the Fed thinks is a half a percent inflation corrected.

I mean, we now, you know, we're seeing real rates 10 year, two and a half. I mean, we haven't seen that in 20 years and the economy is still chugging. So the idea of what is that neutral rate is going up. We saw that in the dot plot. And I think that idea is what's being embedded in the long bonds. It's just not as low as it was for 10 years. The economy is chugging along in face of these rates. Basic, you know, take a look at claims, take a look at almost everything. It is so, we're really moving. And I think that is affecting the Fed.

Professor, if there's a world of a higher neutral rate, that means a world of an economy that runs hotter than we previously thought, which also means a world of better profits? Yes. Yeah, I mean, absolutely. I mean, let's just go together, right? We're getting four and a half to five percent. Let's say the third quarter. Don't forget, the Fed at the beginning of this year said we would barely get to one percent.

We've had two quarters of two. This quarter, four to five. We're more than twice what they thought. I mean, if we can accelerate our long run to two to three by AI or whatever you say, I mean, that does mean higher rates, but it means higher profit growth. And, you know, equities can withstand that. And I think that that is one thing that's really important in terms of how to think. I mean, bonds, you know, they don't get the growth. You know, they get the promised return, whatever it is. The stocks will get the growth if AI actually does accelerate growth going into 2024,

25 and 26. You've taken us to our next segue. Steve Leisman, I say goodbye to you. And I also say thank you for being a part of this conversation. That's your senior economics reporter. I welcome in now CNBC contributor Joe Terranova of Virtus Investment Partners. So you heard, you know, the professor lay out his case. This can be good for stocks. Leisman talking about what the Fed may do and how they might be moved as a result of this move in rates. You're the guy who needs to make the investment decision. You do what? Well, I think stocks in Q4 will rally based on earnings.

And I think we've already been given a glimpse into what potentially is coming with a lot of earnings revisions that have moved higher towards the end of Q3, which is uncharacteristic relative to the past. I agree with Professor Siegel. I believe the Federal Reserve should be done. I think the Federal Reserve, unfortunately, is adding to the bond market volatility significantly. There are a lot of people who think they should be done. He says they are done. Are they done? I think they are done, yes. Because of in part of what we've witnessed in the bond market, yes? I believe that they are done because what has gone on in the long end of the curve is impacting the real economy. Households, corporations, the ability to go out and get capital at reasonable, reasonable yields. That's no longer present. That is going to choke off consumer spending.

That is going to choke off consumer spending. That is going to choke off CapEx. I think what we witnessed so far this week in the oil markets with gasoline demand plummeting, it's giving evidence to that in Q4, we are going to begin to see that the economy is contracting. I understand 3.7 percent GDP in Q3. That's looking in the rearview mirror. As we look forward, this is an economy that is going to contract significantly. And the Federal Reserve needs to be mindful of that. The Federal Reserve needs to be mindful of what they've done with their rhetoric. And they also need to be mindful that the price of oil is down 10 percent since their last Fed meeting. Right. But you also need

the fever to break in the in the move in rates. You need, you know, whether it's Fed rhetoric or what have you, weakening economy, something has to happen to break the fever. I never said. What is it? Yeah, and I never. Because if it doesn't break, the stock market patient's not going to feel very well. So, Scott, I never said that I think that the fever will break because I think the fever is going to persist. You always ask yourself the question, who is going to come in and be the significant buyer of treasuries? And quite candidly,

maybe lower equity prices is in fact what is the catalyst for there to be some buying in the treasury market. You want to look ahead to the jobs report tomorrow morning, which seems especially critical now, given the moving rates and coming off of ADP, which was weaker before we even get to the earnings conversation. Yeah, no, it's critical. But, you know, listen, next week, Thursday, CPI, that's important as well. So let's not just place solely tomorrow on what the jobs report is going to be. There's volatility in the bond market. So one way or another, tomorrow's jobs report is going to have a significant impact on which way the market is going to move. Because right now we are moving in such a volatile nature in fixed income.

And that's an uncomfortable place for investors to be in. What about earnings? What about earnings? Because you've got to tick up for earnings growth modestly for the current quarter. And then fourth quarter earnings tick up a little bit more beyond that. And then you get into 2024 and it's, hey, it's party time again. That's where earnings estimates are. Now, you have to decide whether, you know, as an investor, you believe in that or not, because that's everything to where you think the market, the price relative to earnings should

be trading. And the poison for earnings is leverage. Companies that have leverage, companies that are in need of leverage, those are the companies that I don't want to own. Listen, I know that we've had so many people come on the network and talk about the importance of quality, but quality is back. It's proving itself to be valuable in this marketplace. Companies that are profitable are outperforming companies that rely on leverage. And I think that's a theme within the equity market that's somewhat rare as we move towards the end of the year.

Where do you have high degree of confidence to invest in the equity market? In energy, which right now is pulling back, but I believe that- You have a high degree of confidence in energy if you've seen this really remarkable pullback in the price of crude from where it was just a week or so ago. What gives you confidence to invest in energy with oil pulling back and then you're talking about the economy taking a hit from the move in rates? Because I believe that what is going on with the supply demand and balance in energy it's secular secular in its nature it's secular in its nature and in fact what we've seen over the last several days with oil pulling back is is nothing more than kind of repositioning the

market which was at historically long levels when you look at the commitment of traders for speculators. You want to know what energy stocks have done over the last week? The sector? Down 4%. Down almost 8%. Almost 8%. Double what I thought.

OK. Not only double what you thought, double the underperformance of everything else. So as oil is pulled back, because look, when oil was going up, it's not like these stocks went up perfectly in tandem. No, they did not. Now that oil is coming down hard. Now, who knows if that continues or not? These stocks are going down even harder than that. Yeah. And you're and you're probably looking and I'll pull it up as we're speaking. You're probably looking at the XLE, which is what you're looking at. So there are stocks in the energy universe which are more high beta stocks, which are down even significantly more than that. But I still believe the fundamentals are strong in the energy market. And it's one of

the few places that you can find that type of conviction beyond the Magnificent Seven, because the Magnificent Seven, they are the very definition of what quality is. Jobs report in the morning. Just give me a quick thought on that. After ADP, it seems to be binary. Weaker number, good for stocks. Hotter number, no good. Because you get a hotter number, then you have the risk of rates continuing to go up and stocks continuing to go down.

Is that fair? It's fair, but I also see significant volatility either way. So I think tomorrow is going to be a very dramatic rollercoaster ride. All right. We'll see you, Joe. Thanks. Our thanks to the professor as well. Had some technical issues there at the end with Professor Siegel. We appreciate your patience for that. Professor, we'll talk to you soon. Trust me on that. Let's get to our question of the day. We want to know how many more times will the Fed raise rates? One, two or none? You can head to at CNBC closing bell on X to vote. The results are coming up a little later on in the hour. Now let's get a check on some top stocks to

watch as we head into the close. Pippa Stevens, excuse me, is here with that. Hey, Pippa. Hey, Scott. Well, GM shares are hitting their lowest level since 2020, as the Wall Street Journal reports that at least 20 million of the automaker's vehicles have a potentially dangerous airbag part. U.S. regulators are weighing a recall which would be among the largest in U.S. history, according to the report. And elsewhere in autos, Rivian is having its worst day on record as the EV maker announces plans to offer $1.5 billion worth of convertible green bonds. It's the second time Rivian has sought to raise capital through a green bond in less than a year, though shares got down 22 percent. All right, Pippa Stevens,

thank you so much. We'll talk to you in just a little bit because we're just getting started here. Up next, navigating recession risks, BNY Mellon Investment Management's Sonia Meskin is flagging some serious downside ahead. She'll break down the parts of the market she's steering clear of and where she is seeing some strength. That's right after the break. We're live for the New York Stock Exchange. You're watching Closing Bell on CNBC. All right, welcome back to Closing Bell. Stock struggling a bit again today, making a run at positive territory for the close. We'll see ahead of the jobs report tomorrow morning, of course. Here to share her outlook on what's to come is Sonia Meskin of BNY Mellon Investment

Management. Welcome. Nice to have you on our program. Everything hang on rates? Is that just where this conversation begins and ends? If rates continue to go up, stocks are going to have a problem? Well, I think the data matters too, but sometimes, you know, in certain regimes, it so happens that good news is actually bad news. And we may actually get that kind of result tomorrow as well. Yeah. What is your general outlook for where the stock market goes from here? We are relatively sanguine on the market, actually, because a lot hinges on actual profits, right, profit margins. And if the consumer remains strong, then profit margins may actually remain relatively robust.

But of course, rates present an issue and refinancing next year present an issue. So we're cautiously optimistic. One of the issues also with, you know, as rates go up, prices go down, it presents the opportunity to a greater extent that's already existed outside of the stock market. So it's like, OK, I go to the bank. I can get more on my cash in the bank and I take less risk than I feel like I might take in the market. Bonds may present for some a better opportunity there as well. So risk-reward is still skewed in some people's minds away from equities. Absolutely.

While bonds also could present a good opportunity, especially the strong balance sheets that some of the corporates exhibit, actually means that a higher risk premium also means higher potential returns for certain corporates. You mentioned profits. You feel like earnings expectations have gotten too optimistic. How do you view where we've gone? We've had, you know, three or so consecutive quarters of negative earnings growth. This is the quarter where we turn. We've troughed, the bulls would suggest, and now we're going to move up, up, up and away. Does that sound logical? Well, we had gotten very pessimistic, I think, at the start of the year, for sure.

And some of this pessimism hasn't actually materialized, right? But on the other hand, we've had a stronger economic growth that we anticipated at the start of the year. And that's a positive. Soft landing, then? Potentially, yeah. We do think the probability has risen compared to the start of the year. We also think that the tails, though, of the distribution are fatter than maybe the market is pricing in, even with a higher term premium now.

Well, I was going to say, okay, so you say there's more possibility of a soft landing. The rise in rates, though, sort of throws that into question, does it not? Yes, yes. There's also a possibility that I think is being priced in a bit more now of a delayed landing, right? A landing that, you know, may materialize towards the end of the year and maybe a little bit harsher than a soft landing. So if profits get squeezed, if, you know, inflation stays relatively strong, the labor market stays strong, and the Fed not only stays higher for longer, but feels they need to step on the brakes a little harder,

well, in that case, we might get a harsher landing. How do you view technology here with so much focus on the NASDAQ and the so-called Magnificent Seven? How do you view it moving forward from here? Yeah, great question. So long-duration stocks obviously suffer when the term premium goes up. At the same time, I think longer-term growth expectations for these Magn these magnificent seven are higher right now as well, right? And for some good reason. So it's a balancing act for them. How do you view utilities and what's been going

on there? A sector, quite honestly, that no one really ever talks about until you witness the upset to the degree that we've had in that space, which has been epic, to say the least. Right. So they don't have the growth expectations of AI price then, right? So that's, I think that brings them down a little bit more when term premium rises. But these are fundamentally fairly safe, you know, fairly safe companies. So that should be a positive longer term, especially when the cycle turns, as it inevitably will at some point. Well, it's good to welcome you to our program and we'll see you soon. Thank you for being here. All right, Sonia Meskin, joining us here post nine. Up next, trading the volatility, Bill Miller, the fourth of Miller Value Partners.

He breaks out his investment playbook for us. Tell us where he sees opportunity, if anywhere right now, just after the break. And as CNBC celebrates Hispanic heritage, we are sharing the stories of influential Hispanic business leaders with you. Here's Citi Head of Investments for Latin America. My Dominican roots have really shaped the person who I am today and have allowed me to bring the best of me and my culture to work. Being Latino can be your superpower. I believe it generates a diversity of thought and inclusion. and my culture to work. Being Latino can be your superpower. I believe it generates a diversity of thought and inclusion.

My advice for Latinos is really to bring your full self to work, to allow yourself to not forget your raices, your roots, and actually maintain your sense of belonging to your community. We're back on Closing Bell. The major average is well off session lows, but the S&P 500 still on pace for its longest weekly losing streak since May of 2022. Our next guest, finding some opportunity amidst the volatility lately, joining me now, Bill Miller IV of Miller Value Partners.

Welcome back. It's nice to see you. Awesome. Great to see you, Scott. Thanks for having me. Yeah. Where is this opportunity? Because, you know, these markets have been rocky, to say the least. There's opportunity all over the place. So we're value investors. We like to look where the expectation gaps are the biggest between what we think is going to happen and what the market implied expectations are. So there are a lot of things out there that are actually highly investable and we find very, very compelling. One of the groups we don't find as compelling are these tech names that trade at 20 to 40 times earnings with massive expectations for continued growth at a time when people are increasingly concerned about the economy. But if you look at what's been going on more broadly within the markets, the Fed has been taking capital out of the system. But if you look at what's been going on more broadly within the markets,

the Fed has been taking capital out of the system. So capital is becoming more scarce, which means that things that rely on external financing, whether that's real estate, whether that's venture backed deals, those things are not doing too well because capital has a cost. And so things are working normally again, unlike how they may have for the past decade. So there are a lot of opportunities actually out there. We like things that aren't invested heavily in these Magnificent Sevens. So the Magnificent Stock names, you know, obviously none of which you own, trade at the valuations they do because of the perceived more dependable growth that they provide, while at the same time having balance sheets that look a lot better than a lot of those companies that value investors are perusing, wondering about where's the economy going to be, et cetera. How do you answer that?

Well, it comes down to the expectations for that growth moving forward and what sort of continued growth at a massive, massive scale you need to justify those valuations. So if Apple's a shrinking company trading at 28 times earnings, you want to own that? And they're buying back stock, overvalued stock? I don't want to own that. So there are actually things out there that we want to own, things that might make people throw up in their mouth, actually. So one name I really like right here is AT&T. It trades at the biggest discount on a price-to-earnings basis relative to the market it ever has. A lot of people look at it and they hate it. They go, it's at a multi-decade low. But guess what? It's got a 16% free cash flow yield, half of which is coming back to you as

the investor, and the other half of which is going to pay down debt. So they're doing very value-accretive things with a huge free cash flow yield and a low valuation. And there's a lot of things out there like that that we want to buy. I know you like Stellantis. And, you know, so you obviously must have an opinion on how the UAW strike is is going to turn out, how it's going to end and when it might, because right now the two sides seem as far apart as they've been since the very beginning of this whole affair. So how do you think about that as it relates to the performance of these stocks? Yeah, my only opinion on when that may end is that it will end eventually because the workers need money and the car companies need workers. And so there's a good

exchange there to be had. The way I look at it is the land is traded at one and a half times trailing EBIT, which, you know, that's a very low valuation. It effectively is assuming that profits are going to collapse in the near future. They might, or they might keep printing money. Who knows? Either way, it's kicking off a ton of excess free cash flow, buying back stock. Its entire debt stack is covered by cash on the balance sheet. It's yielding 8%. So yeah, I understand there's a strike going on. That will eventually get worked out. And the expectations here are so low that we're getting paid to wait, and why not? And you feel like that's the better play than either General Motors or Ford?

I think in a lot of these cases, the entire sectors have gotten smacked around. I like Stellantis personally because the management team there is heavily aligned. And Carlos Tavares is doing a great job. He's got a great track record executing against the goals. And so we like that one. You could ask about Verizon versus AT&T. We think AT&T is marginally cheaper, but they're both good bets in this environment. Yeah. How do you view what's been happening in the bond market with rates going up and the pressure that's been putting on stocks and when that reaches a real significant breaking point? Yes, stocks have been upset a bit by it, but we haven't seen any massive pullback in equities by any degree. Some of the proprietary measures we look at

regarding liquidity are starting to dry up pretty significantly in the past couple of weeks. So it is starting to reach a breaking point. We certainly hope we see some sort of tone shift in the next Fed meeting to either a dovish hold or potentially even a cut. The rates are well above where inflation readings are coming in now.

So the system works. They are taking air out of the balloon here. And the system is working, Scott. So agree, rates are slowing things down. Bonds are investable again. They weren't for a while. You know, the volatility has knocked them down a lot and they are investable again. So I think, you know, having an actual cost of capital out there in the world is a good thing. It hurts your case, though, does it not, for saying that, look, I like small cap and mid cap stocks in this environment because it puts more potential pressure on the economy. They're obviously more sensitive, as we've seen from the performance of the Russell 2000. They sure are.

But again, valuation wise, they trade some of the biggest discounts they ever have relative to the market. It's important to keep in mind that the other problem on the Fed's mandate is maximum employment or output. So the Fed does not want to crash the economy. And when you look at the actual volatility in the bond market and the expectations for continued volatility in the bond market, that means you've got to put less of a signal value on what's coming out around rates because they're subject to change at any time. So you look at the two to 10 year spread, which people say, oh, it's forecasting recession. Well, it's changed a ton in the past couple of days. So maybe not.

Are you looking to put more cash to work? Or I mean, you just said about opportunities that exist in bonds that, you know, haven't for an awfully long time until the Fed started doing this whole thing? Or is there still too much opportunity elsewhere for cash that you would have otherwise deployed into stocks? Well, there are, again, AT&T at 7.5% and a very consistent free cash flow generation there. We think that ongoing reliability deserves much more of a premium than it trades at today, given some of the volatility out there. We think that ongoing reliability deserves much more of a premium than it trades at today, given some of the volatility out there. So there are a lot of really compelling equities to buy. I mean, I think you can buy bonds or equities here, but as long as you pay attention to the valuation on them. All right, Bill, we'll see you soon.

Good to catch up with you again. Yep. Bill Miller, the fourth joining us right there. Up next, we're tracking the biggest movers as we head into the close. Pippa Stevens standing by with that. Pippa. Hey, Scott. Well, one consumer stock hitting a five year low after a cyber attack. We've got all the details coming up next. We're about 15 away from the close. Let's get back to Pippa Stevens now for a look at the key stocks she's watching. Pippa. Hey, Scott. Clorox is hitting its lowest level since 2018 after saying that it now expects net sales to fall 23 to 28 percent due to the impacts of a cyber attack. That's compared with its previous guidance for a slight gain. The company is also forecasting an adjusted loss, which is well below the adjusted profit analysts had expected, though shares currently down almost 6%. On the other hand, Lamb Weston is a bright spot in consumer staples as the potato producer raises its full year revenue and profit forecast.

The company cites solid demand and price actions. That stock having its best day since 2020, with shares up 8.5%. Scott? Yeah, but Stephens, thank you so much. Last chance now to weigh in on our question of the day. We asked how many more times will the Fed raise interest rates? One, two, or none? You can head to at CNBC Closing Bill on X. The results are just after this break. The results now of our question of the day.

We asked how many more times will the Fed raise interest rates? One, two, or none? Well, most of you said none. Agreeing with Professor Siegel, near half, 48%. Up next, your earnings set up. Levi's just reported in the, is reporting in just a few minutes. Excuse me, we'll tell you what to watch for when those numbers hit in overtime. That and much more when we take you inside the Market Zone.

We're now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of the trading day, plus Staples having their worst day since January. We dig into whether this breakdown is a sign of worse to come. Courtney Reagan shares what to expect from Levi's. The earnings out in overtime today. Mike, what's on your mind? Interesting reversal. Late, late day. Market often, as I say, almost every month, likes to kind of put itself in a neutral spot before the jobs number.

The fact that you have had the bond yields come off the boil clearly is the sort of prerequisite for stock stabilizing. I wonder if you've been bearish and correct for two months, and you say we've got an 8% pullback in the S&P. The average stock's down maybe twice as much as that from its high. The index has held above this 4,200 level for three days. You've got higher lows each day. You have to at least be asking yourself if it's enough for now on the downside. Now, the jobs number and the yield response tomorrow is going to probably, you know, tell you one way or the other if that's the case. And it is a little bit of a make or break type area for this market. It's just a routine pullback or something worse.

Pretty telling comments today from the San Francisco Fed President, Mary Daly, who was at the New York Economic Club and suggested that the move that we've seen in the bond market, this tightening of credit financial conditions is equivalent to a rate hike. Sure. And thus they may be done. In fact, Professor Siegel was just on with us, as you heard at the top of the show and said, stocks can go up because the Fed is done. Listen. We have seen the high of Fed funds. What I hope for is that if we do see a slowdown, and I'm not saying we're going to, but the Fed is just as nimble at reducing those rates as its surge rates in 2023.

And if they are, then we've got that cushion with a reasonable P.E. ratio. I think stocks do end higher than they are right now on December 31st. Okay, so that's Professor Siegel. Hope. Hope is a dangerous thing. Remember who said that in Shawshank? Is the professor going to be disappointed, hoping for something that doesn't come in terms of rate cuts? I think the first question would be as to whether that is what you would want to hope for. I mean, not to be too literal about it, but I doubt the Fed's going to be cutting in 75 basis point chunks, three or four meetings in a row, as they did last year in hiking. And I also don't think the Fed

needs to be outright done in a declarative way for stocks to recover and get back up toward the July highs under the right conditions, mainly because the Fed hasn't been done since October of last year when stocks bottomed. There were 3% Fed funds. We're about 5% right now. But I do think, to your point about Mary Daly, the sensitivity to the overall picture in terms of what rates at this level is doing to the growth picture, and for that matter, to the inflation story. So much that's going on right now is disinflationary, not just the gasoline stuff. But you talk about pricing power threat, the economy,

investors are questioning it. So I do think that there's some clearance in there where we could be okay. And historically, a Fed pause is more bullish than the first cut, because that usually means maybe the economy is taking a leg down. Just go back to like, we just got the dot plot from the last meeting, and why you need to be so careful reading into too much of what is essentially a projection that means almost next to nothing, because it's not really a prediction of anything. And the movement in rates has dictated a lot since that last meeting.

Absolutely. And the movement in rates has been so sharp and dramatic in magnitude that it's created so many rationales behind it. So, yes, it's part of it is what the Fed is expected to do and what they've tried to convey about their intention in not cutting rates anytime soon. But it's also, everyone's talking about positioning and supply and everything around the sun.

Also, the variability of the inflation story in years out. That's something, in theory, you should want to build in a premium and longer-term yields. All that stuff on the table. It burns itself out at some level. Bonds are more oversold than stocks are. We'll see if it matters. Staples, speaking of burning out, they're getting burned out big time. Clorox,

they have the cyber attack. Staples stocks, it's the worst sector today. Keeping your eye on it? Absolutely. Especially the food-based ones. You know, the soft drink companies, Pepsi's been awful. Coca-Cola today, Smucker. Yes. PepsiCo has been, you know, over the years, the massive outperformer in food. Obviously, what Walmart had to say about consumer behavior, also what Conagra had to say about trading down. So the concerns about maybe people are going to be consuming less in the way of snack food, packaged food over time with these weight loss drugs, that's one piece of it. Another piece is I think the street became convinced that they got too aggressive on pricing

when they had the ability to do that. And people are trading down, or the unit growth is going to be a struggle for a while. So all that stuff in the mix. And at this point, I think you might be able to say it's starting to look kind of capitulatory in terms of the stock action. But fundamentally, I don't know where you call the turn.

All right. So, Courtney Reagan, Levi's, what should we look for here in OT? Yeah, Scott. So they're out after the bell to full earnings. Investors are going to want to know if Levi's business has improved here in the United States, its biggest region and its wholesale business. Those were areas that were really weak last quarter and actually led the denim maker to slash its profit forecast for the year. CEO Chip Berg said when reporting in July that so far into Q3, so the quarter it's reporting today, that U.S. wholesale trends were improving thanks to better in-stock inventory. But the big question is, did that continue as the quarter wore on? We'll find out here pretty soon. Levi also said it was lowering prices on some of its more price

sensitive items like the 502 and 512 jeans, just about 10 bucks. So has that impacted margins? Look, China has been better for Levi than some others, frankly. And Berg actually said Levi's China business is back. That's what he said last quarter. So does that hold up? Levi Strauss shares down more than 6% since it last reported, slightly better than the XRT over that same period of time. But we'll have to see what they report. And some of these details are going to be important in this one, Scott. For that. Yeah. Courtney, thank you. Courtney Reagan. We'll see Courtney O.T. when Levi's hits the tape. So we we're approaching two minutes left in the session. A binary tomorrow.

Jobs report needs to come in. You know, no shocker. Yeah. In line with ADP or something weaker would probably be cheered by the market. I think so. I don't think people are going to be too concerned by a somewhat softer than expected number. I think it is worth remembering, though, that the last jobs report, we had a bunch of downward revisions. We're in that moment when people are wondering if the numbers can be taken at face value. The jobs report itself since, let's say, June has not been some massive market mover,

but it's important as part of this picture right now. Weekly claims today, they continue to look really reassuring in terms of, you know, right around that 200,000 level and not seeing a spike. So, you know, I think the market is going to sort of outsource its reaction to what treasuries do. If it seems as if, know I can't imagine it's going to be some kind of acceleration wage growth that's going to further

inflame the treasury yields but that is the last thing we you know we have to get out of the way and very often we just want the number to get out of the way and see if the oversold borderline washout conditions in parts of the stock market, especially the cyclical parts of the market, gets kind of a reversal. I'm looking at the biggest stock in the market, Apple. Maybe the key to Apple stabilizing was downgrading it because it's up two days in a row since that call. You just don't see every day. Yeah, it's you know, it had obviously had a pretty steep pullback. I'm joking, of course.

No, I know you are. You know what I mean. But the point is that, you know, people did kind of give up on it in the very short term. At that point, the big ones, the big stocks are still acting somewhat as defensive. Yeah. NVIDIA up one and a half percent. You know, players in this market. Microsoft.

It's split today. Tesla's in the red, as is Meta, Alphabet, Amazon, Broadcom barely hanging on. Yeah. So it's one of those things where the largest stocks in the market are killing the smallest stocks. The microcap ETF is kind of in free fall. So yeah, they are the ones that generate cash. They don't actually have to soak up capital and liquidity. I guess that still matters for now. To me, it's about macro for the moment. But investors deeply want to, I think, turn their sights to company-specific stuff, starting in about a week's time, when you start to get the

earnings coming through and all that. You see those macro worries showing up in the Russell down more than 3% in a week. So keep your eyes there. Looks like we're going to go out modestly in the red. Sets us up for tomorrow.