Closing Bell - Closing Bell: Stocks Slide, December To Remember & Kroger CEO On Food Inflation 12/1/22

Episode Date: December 1, 2022

Stocks giving back some of Wednesday's huge gains as investors take profits ahead of Friday's key jobs report, which could have a big impact on the Fed's interest rate hike plans. Morgan Stanley Private Wealth Management's Katerina Simonetti says investors should remain defensive despite new signs the Fed's interest rate hikes may slow down. Wells Fargo's Jay Bryson explains why he thinks the economy remains relatively strong and any recession next year will likely be modest. Bespoke's Paul Hickey on whether the market will be able to carry its recent rally into December, which historically is a strong month for stocks. Kroger Chairman & CEO Rodney McMullen discusses the grocery chain's better than expected earnings, the outlook for food inflation and his testimony this week before the Senate over his company's pending merger with Albertsons. National Association of Manufacturers CEO Jay Timmons reacts to the looming Senate vote to avoid a massive rail strike and the outlook for the manufacturing sector amid concerns about the economy. And Evercore ISI's Mark Mahaney reveals the results of his annual online travel survey and the two stocks that should be the big winners from the current travel environment.

It has been an up and down session following Wednesday's big rally, though a bit more up than down at the moment. The Dow is, though, pulling back as we kick off the final month of the year. This is the Make or Break Hour for your money. Welcome to Closing Bell. I'm Mike Santoli in for Sarah Eisen. Here is where things stand. The S&P 500 just pulling into positive territory, barely preserving yesterday's 3.1% gain so far. It was down as much as three quarters of a percent earlier you see the Dow down quite a bit down almost half a percent a good chunk of that about half of it is Salesforce as a matter of fact that is the stock mover of the day take a look here at Salesforce

getting slammed weighing heavily on the Dow good for about 90 points of downside at the moment this is after a surprise departure of co-CEO Brett Taylor. We are going to have more on that move just ahead. Also ahead on today's show, we'll speak with the CEO of Kroger, fresh off earnings before the bell and testimony earlier this week to the Senate surrounding the pending mega deal with Albertsons. Now, take a look here at where we do stand for the S&P 500 after yesterday's rally. of course, that capped off a run we've started. October 13th was that one low. It sprinted up here, kind of pointed out that this downtrend line from the entire year,

the market peaked on January 3rd of this year, and it has been declining. It's still down about 15%, but here you have met that line. It's also in the vicinity yesterday, closed just above its 200 day average for the first time in several months. So there are some inklings that the market is trying to gather itself up right here with feasting on a little bit of a sense that the Fed's ultimate destination on rates is in reach or at least in sight and that the economy is holding together right now. Now, take a look at the stock and bond portfolio, the standard 60-40 version of that in ETF form. That's the AOR. This is a global 60-40 portfolio, but it very much tracks what a U.S.-based one would do as well. So what you saw most of the year is stocks and bonds declining

together. That is, yields going up as stocks were going down on balance. Remember, six months into the year and then eight or so months into the year, nine months into the year. It was the worst ever start for a calendar year for the 60-40 portfolio. Well, you've gotten some relief right here. And this one actually has kind of nosed above that downtrend line. So what that means is investors are perhaps suggesting or at least trying to bet a little more than they were a few months ago that an economic soft landing might be plausible, even if it's not something that we can bet on.

Let's talk a little bit more about this and what it's going to mean for the markets going into next year. This morning, we got October results for the Core PCE Index, showing a rise in inflation of 0.2% that was less than expected. Tomorrow, we'll get the highly anticipated jobs report for November. And joining us now are Jay Bryson from Wells Fargo and Katerina Simonetti from Morgan Stanley Private Wealth Management to kind of synthesize all of this stuff. Welcome to you both. And Jay, I'd love your take on where

you think we sit with the underlying economy. You look at things like manufacturing. The ISM indicator today was in contraction mode. Housing obviously is hurting. And yet incomes, jobs, consumer spending on services seems OK. How does that net out to you? Yeah, so my net net, I mean, it seems like the economy continues to expand right now, probably at a below trend pace. I mean, we're talking maybe one and a half percent, but it's not in negative territory just yet. But I mean, I guess the thing that I worry about is you still have a bunch of Fed previous tightening that's already in the pipeline and probably more

coming, as Chair Powell indicated yesterday. Yes, in fact, almost certainly more coming. But I guess the key question is how much more? And did did Chair Powell, Jay, suggest that there's just a little bit more of a balanced approach right here and waiting, in fact, for those lagged effects of what the Fed's already done to show up and respond accordingly? Well, the thing, Mike, that got all the headlines yesterday was his reference to, you know, we're going to back it off to 50 in December. But, you know, what he also said is a big question is how much further do they have to go? The market's priced for another 50 basis points after this one. I think it's going to be a little bit higher than that. And then he also said that, OK, it's not like we're going to start easing right away. We've got to keep rates restrictive in restrictive territory until we're sure that inflation comes down.

So right now the economy is doing pretty well. But how's it going to be six months from now with rates even higher and probably on hold for quite some time? I think that's the big question. And that's where we still are a little bit skeptical. Gotcha. And Katarina, in terms of how the markets are trying to process all these things, you've seen another very good rally off of a low, at least some suggestion in there that the seasonal forces continue to be pretty strong as tailwinds. And maybe the markets priced in some muted expectations for earnings next year. Where do you think the probabilities sit? Well, Mike, we will take any kind of rally.

And in our view, it's a tactical rally that most likely is going to continue throughout the year end. And I agree with Jay. We most likely are going to see another rate hike in December, maybe one in January. And this is what this year was all about. We watched Fed action. We watched inflation. But 23 is going to be defined by two stories. One, whether we get the economic recession or not, and hopefully short and shallow, but we don't know yet what kind of recession it's going to be and whether we're going to get one. And two is earnings revisions.

And some of those revisions might take investors by surprise and result in another significant downside before we can comfortably call the end of this bear market. But on the other side, they're going to reflect the actual state of the market, which is very healthy for us and very healthy for the economy and will allow us to move on to the next cycle. So in our view, investors should know that and expect this and be prepared to still stay defensive and stay with sectors like health care, like financials and industrial, focus on dividend paying stocks and find some safe haven in bonds. I mean, it's good that we can finally generate

some real yields on the bond side, especially if we stay short term, you know, with high quality fixed income. This is also a great opportunity to increase the overall quality of the portfolios by finding some strategic buying opportunities. We have to be very tactical. This is definitely a stock picker's market, you know, but there might be some volatility and additional pain before things get significantly better in 23. Yeah. So defense and quality seem like continue to be your bets. They did help out this year, if that's the way you're positioned. Jay, just in terms of placing the odds on when we might get a recession, what the character of that recession might be,

I mean, what are you expecting for jobs tomorrow? And does that put us on a path to a broad recession or not? So tomorrow we're looking for 190,000. We're a little bit below consensus, but the consensus is more or less around 200,000. To put that in perspective, in October, we created 261,000 jobs. So we are slowing down right now. I wouldn't expect a recession here to materialize until late first quarter, second quarter, somewhere around there. And I would also think that any sort of thing, a downturn we're looking at, would tend to be a little bit more modest. If you just look at the health of the balance sheets of consumers, health of balance sheets of businesses, it's all pretty good right now. This is not 2006 ahead of the financial

crisis. So knock on wood, you know, like Katarina said earlier, you know, we hope that this is a modest sort of recession. And, you know, again, it's because of the underlying fundamentals of the economy remain to be pretty strong. Katarina, of course, you know, again, it's because of the underlying fundamentals of the economy remain to be pretty strong. Katerina, of course, you know, bond yields have already come in quite a bit. So clearly investors have taken advantage to some degree of the availability of safe yield out there. You still see value in higher grade bonds at these levels? Well, absolutely. And Mike, if you think about it, we've been waiting for this environment for quite some time, and especially the pain that we felt earlier this year, where both stocks and bonds were down at the same time. And what is unusual about this environment is that we finally can find some real yields and finally can really focus, like you talked earlier about the performance of 60-40 asset allocation. And a big part of the 40 is the fact that, you know, we weren't really

realizing yields in on the bond side. Well, now this is changing. And especially if we focus on, you know, diversification and a true, you know, appropriate asset allocation within the bond portfolio, we can lock in some of the higher rates and improve the quality, not only on the stock side, but also on the bond side of our portfolios. So this is a real chance to tactically position the portfolios for this recovery that might not be coming tomorrow. There might be some additional volatility but it also presents the opportunity and we definitely see this as more of a forward looking time. You know this is the time where we should take a look at the portfolio know we own and take advantage of these buying opportunities, both on the stock side and on the bond side.

Yeah, a bit of a cushion available, I guess, in bonds. It wasn't there a year ago, at least. Thanks to you both. Katerina, Jay, appreciate it. Thanks. All right, well, Kroger giving up a pre-market earnings pop amid regulatory uncertainty around its pending mega deal with rival Albertsons. Up next, we'll talk to Kroger CEO Rodney McMullin about the quarter and about his testimony this week before the Senate. You're watching Closing Bell on CNBC. S&P is up a few points.

Kroger shares in the red today, down about 1%, though up off their lows, despite beating earnings expectations and raising fiscal year guidance. This comes after Kroger and Albertson's chief executives defended their mega grocery merger on Capitol Hill, facing tough questioning from Senators Amy Klobuchar and Mike Lee. Kroger CEO Rodney McMullin joins us now in a first on CNBC interview to talk about all that. Rodney, good to see you. Thanks for joining us. Great to see you, Michael. So first of the quarter, we certainly get to talk about the Albertsons deal as well.

But you did beat in terms of top and bottom line performance, also able to raise guidance. Coming at a time when I know you mentioned on the call that consumers seem like they're a little more careful, a little more value focusedfocused at the moment. So how do those things fit together? Are you seeing a little more of a cautious consumer yet raising guidance? Yeah, it's really, I'm super proud of our whole team. And when you look at our fundamental approach to the customer in terms of supporting fresh, our brands and fresh product, all those things together with a great value really is connecting with our customers well. And we would expect it to continue to connect well. And we're trying to

make sure that we do everything we can to minimize the impact of inflation. So it's really all those pieces working together. And I think, I know you said that, you know, private labels may be a bigger part of the mix. so that would make sense. We're seeing competitors of yours like Costco, some decelerating top-line growth and the shares getting hit. Walmart and their results said they're going to be pretty promotional in the grocery area. So I guess the bigger question is, is the tide turning for the grocery business to a degree in terms of the ability to push pricing through and really to meet the sort of sales targets that we got used to in the last couple of years? Yeah, it's really, if you look at the fresh departments, inflation is starting to stabilize. In the center store, there's still a little bit more inflation there. But our go-to-market strategy is, you know, price is obviously one

element of that, being promotional and targeted offers directly to each individual household. And one of the things that's special about us is our very strong strength in our fresh departments, especially produce and meat and seafood and our deli bakery. And those areas we're really continuing to focus on, continuing to get better. And then all of that is tied together with the friendliness of our associates. And we are really focused on supporting the communities that we operate in with our zero hunger, zero waste. There was some commentary among the analysts that the online growth rate at Kroger was lagging a little bit what the overall market is doing. Has there been any change there in terms of adoption of that e-commerce mode?

Yeah, if you look at this quarter, our e-commerce business was up right at 10%. That's two quarters in a row where we've been up nicely. And that's really being driven by our delivery business, both using third-party delivery services and our own delivery service through our shed. So we feel really good about the momentum there. And the other thing that's really fascinating is a customer that shops with us online,

they also physically come into the store as well. So it's really connecting that overall household experience that's so important. And then customers that formerly shopped online that stopped, what we're finding is we're still retaining all that business. They're just physically coming into the store as well again. And we think it's incredibly important to have,

to support a customer, and we call it seamless, any way they want to engage with us. Got it. Now, I do want to get to the Albertsons deal as it sits right now. Now, from the very beginning, you knew that there was going to be a long process in terms of getting regulatory approval, maybe up to a couple of years. You already built in the likelihood of having to shed some store locations. After speaking at Senate Subcommittee, hearing the questions that were pretty critical of perhaps what's going to happen in terms of consumer pricing and worker compensation, how are you feeling about the prospects right now? Yeah, we had incredible professional advisors working with us throughout the process,

and we've actually looked at it store by store. Obviously, we're actively engaged with the FTC in cooperating. We appreciated being able to come and share our story because we know day one after we merge we'll be able to lower prices for customers. We've committed to a billion dollar investment in continuing improving wages and a billion three in terms of supporting customers from the experience standpoint and pricing about a half a billion dollars. So those are things that we were appreciative of being asked to come and being able to share our story, which we think is an incredible, compelling benefit for customers, for our

associates and our communities. Just from a big-picture perspective, and this is the case with a lot of so-called horizontal mergers, on the one hand, investors have had the opportunity for a couple of years to own Albertsons in the public markets as well as Kroger. So if you make a deal, you have to tell investors, you know what, this is going to be more than just the sum of those two parts. It's going to be better than just those two independent companies. How can that kind of jibe with also saying it's going to be better for consumers and other stakeholders if, in fact, you're not taking the value from one to give to the other? Yeah, every merger that we've done, we've been able to identify things that the merged company

did better than us. If you look at Harris Teeter, our seamless business really came out of that. If you look at merging with Fred Meyer, our marketplace stores. We would expect once we were able to sit down and really get into the details, some of those things will happen with Albertsons as well. Also when you look at like as an example from a supply chain standpoint, we know that we'll be able to leverage the two companies' warehouses and drive less miles. All of those things together will create savings,

and those savings is what allows us to be able to invest in pricing, invest in our associates. And we just have had so much experience, and I know Albertson's had the same experience with their mergers, And we just have had so much experience. And I know Albertson's had the same experience with their mergers. And we just know that we'll be able to do the same again. You talked about just a minute ago, your commitments on the price side of things, as well as worker compensation, improving customer experience. Is there any sense in which those would be formal commitments? other words as as as part of

approval to to get the deal done that you would actually have these enforceable commitments i know that was one of the lines of questioning uh from senator mike lee yesterday yeah you know it's a great question and and legally i'm i am not an attorney so i really don't know from a legal standpoint but you know professionally when we, when we talk about a commitment publicly, we feel that that's a responsibility and an obligation. So I realize technically there's a difference, but I can tell you the way our whole team looks at our commitments,

when we make a commitment publicly, we really view that as the same. All right, Rodney, fair enough. Appreciate your time today. Thanks very much. Thank you. Thanks for the invite. You got it from Kroger. Let's get a check on the markets right now. The Dow down about 210. Again, almost half of that is attributable to the decline in sales force. S&P 500 modestly negative at this point. The Nasdaq popped into the green. Russell 2000 marginally lower. Pretty small moves

preserving yesterday's upside pop. Coming up, the head of the National Association of Manufacturers weighs in on Washington's involvement in averting a rail strike. Plus, much more on the C-suite shakeup at Salesforce and the big pullback for the stock. Speaking of Salesforce, it's number two on the list of top search tickers today on CNBC.com, along with 10-year yield Tesla, Costco, and the Dow Jones Industrial Average. We'll be right back. Let's check out today's stealth mover, Okta. Its investors are on cloud nine today. Shares of the identity cloud management company are sky high after unexpectedly breaking even during the third quarter and beating revenue estimates. Okta also raising its fourth quarter

and full year guidance up 25% today. But even with today's huge gains, stocks still down roughly 70% this year, quite a bit like a lot of other cloud software providers. Up next, the CEO of the National Association of Manufacturers here to tell us if he supports Congress stepping in to help avoid a major rail strike. And coming up on Closing Bell Overtime, Altimeter Capital founder Brad Gerstner on the outlook for tech stocks and criticism of Meta for spending so much money on the Metaverse. Just breaking in the last hour, Senator

Chuck Schumer saying the Senate will vote today on a bill that would avoid a strike in the rail industry. It will need at least 60 votes. The legislation has already passed the House. Joining us now to talk about this and more is National Association of Manufacturers President and CEO Jay Timmons. Jay, good to see you.

Thanks for stopping by. Good to see you. This rail, I mean, presumably you and your members would be pretty pleased if we avoid disruption in rail service. Is this the way to do it through legislation? Is that ideal or not? Well, you know, the system was set up to do this. We've seen this actually happen about 18 times in the last hundred years. Congress has had to step in. And it does look like we're going to get a deal passed through the Congress. Some of the amendments have already failed, actually, as we speak. The last amendment just failed. And they're going to move on to a final vote. We hope it's

successful. You hope it is? Do you expect that it is? I do. I do. I think, look, I don't think Congress wants to see the economy shut down a few days before Christmas, that's never a good message. So I think we're going to see a good vote. All right. Now, is it your sense that there was a lot of suspense around this in terms of before this point that your members and just manufacturers in general would have been making contingency plans? Well, we've had to make contingency plans. We had to do it a couple of months ago, I guess six weeks ago, when the first round happened and there was a cooling off period and then there was a delay. So sure, you've got to make those contingency plans. And you think about not only manufacturers who are shipping goods, but you're also thinking about, well,

for instance, you've heard the story about chlorine being shipped and cities having to make contingency plans for the water supply. So this had ripple effects throughout the entire economy. Yeah, sure would have. Talking just in general about the state of the economy, manufacturing, employment and things like that, obviously a deceleration. The Fed's trying to initiate that kind of slowdown. Manufacturing had, you know, was kind of boom times and it's retrenched a little bit. You saw employment maybe on the decline, job openings in manufacturing off as well. But what's the general state of play there? Because it's not as if we're coming off very high levels of activity, I guess is the point.

Well, I don't think we're in boom time, Mike. Look, we've got an average of 840,000 open jobs in manufacturing every month. We can't fill them. And our companies are just going gangbusters right now. Now, the real threat, of course, you know, the Fed activity, is that going to increase interest rates and the cost of borrowing? We've got concerns on the horizon with the legislative session right now with tax extenders. Are we going to get that done?

Because if we don't, that could harm investment, that could harm research and development and innovation. But right now, things are very good in the sector, and I think it pretends for a bright future for the economy. We just can't mess it up, and we can't... We got to rely on Congress to make sure they do their job and get some of these bills passed to make sure that we stay strong.

It's an interesting spot in another way, where you have the cyclical effects of whatever, higher interest rates and just some, you know, goods demand was pulled forward, and now it's coming off the boil. But also these initiatives for reshoring and doing more domestic production of a variety of different goods happening at the same time. So people trying to invest long term. I mean, we have the CHIPS Act, right? Right.

Do we have enough people to build what's authorized? No, again, we have 840,000 open jobs every month on average in manufacturing. So we need more people. We're the National Association of Manufacturers and the Manufacturing Institute has a Creators Wanted campaign trying to inspire that next generation, trying to bring more women into the workforce, trying to bring veterans into the workforce, working on second chance hiring. We're doing everything we can to attract folks into the sector and I think we're being successful in doing that. We got to make sure though, and I want to go back to you talked about the investments that are being made, that is possible

because of the right policies that we have in place. So those 2017 tax cuts, the tax reforms, were absolutely critical to our ability to invest and hire and raise wages. We want to protect those gains, and then we want to continue the path forward. You mentioned the extenders. So is there anything else, though? I mean, there's a perception out there that you're going to have probably some version of split Congress. There's not necessarily an overarching administration kind of business agenda in play. For this next couple of years, is there anything in terms of policy that you feel like is going to be a major swing factor?

Well, I think there could be, Mike. But I will say this. Politicians and elected officials on both sides of the aisle all support manufacturing, at least rhetorically. They all want manufacturing to succeed. They understand how important it is to a strong economy. Now, their actions don't always match up, but we try to make sure that they're doing the right thing. And so we were pleased not only for those tax cuts in 2017 in the Trump administration, but infrastructure investment, the Chips and

Science Act in the Biden administration. I think one of the things that we can get done over the course of the next few months is at least some movement on immigration reform. And I think that will help. It won't solve the whole problem, but it'll start to help ease that burden that we have in trying to fill those open jobs in manufacturing. Yeah, that's been stuck for sure. It's been stuck. So we'll see if that can change.

Jay, great to see you. Thanks very much. Good to see you. Thanks for having me. All right. And here's where we stand in the markets now with less than a half hour to go. You see the S&P 500 just about flat. The Dow still off 180. NASDAQ just above the flat line. Russell 2000 also slightly red as the S&P is. Evercore ISI releasing the results of its annual online travel survey. Up next, Mark Mahaney reveals the two stocks that should benefit the most

from the current travel environment. And check out Blackstone as we head to a break. Seeing a big move lower on pretty heavy volume on news that it is limiting withdrawals from a big real estate investment trust following a wave of redemption requests. That comes on the same day Blackstone sold its stakes in MGM Grand in Mandalay Bay.

You see the shares down about 7% so far this afternoon. Closing bell. We'll be right back. Evercore ISI out with results of its seventh annual online travel survey. And despite a cautious economic environment, demand for leisure travel next year remains resilient. Joining us now is Evercore ISI's Mark Mahaney to talk more about it. Hey, Mark. Good to see you. Hey, Mike. Good to see you, too. So just the general findings here.

I mean, there's a sense out there that, you know, consumers kind of got a lot of the ketchup travel out of the way in 2022 and maybe the streets bracing for a bit of a letdown next year. But what did you actually find? Well, I'm sorry. The street is absolutely bracing for a letdown in travel demand. It's been so robust. There was so much. It's the only part of consumer discretionary that was truly pent up.

And so that's why you had the summer of travel up this this last summer. And so that's going to create tough comp issues. But, you know, we're waiting for the shoe to drop. It just hasn't dropped yet. We should assume that that's going to create tough comp issues, but you know, we're waiting for the shoe to drop. It just hasn't dropped yet. We should assume that that's going to happen next year. The reason I still like these travel businesses going into next year is, you know, unlike most of the, a lot of the digital companies

that benefited so much from COVID and now find that they need to cut costs, travel companies cut costs way early on. So they already go into this softening environment with lean and mean uh cost structures so i i do appreciate that about their their business models and then if we peel back the results a little bit mike you know we found really good results for both airbnb and for booking and those are two of our top picks i'm interested in the in the booking call it has been the big outperformer relative to Expedia. What accounts for that? And why do you think that's likely to continue? They've got growth initiatives. They've been just

as careful with their cost structure as Expedia has been. It's this management team that's been in place for over two decades. So they executed through 9-11. They executed through the great financial crisis. They executed through the early days of the COVID crisis. This is a battle-tested management team. I give them a lot of props, props, Glenn Fogle and the team he's built around them. So I think that's it. And, you know, this is the largest player in lodging accommodations globally, and they're still the fastest growing. So you get scale and you get growth. And they also have new growth initiatives. So you're rolling out something called flights, a flights package, payments, and they're doing a lot more merchandising than they were in the past.

They could arguably grow faster post-COVID, post-normalization than they were back in 2019. That's a good story to put together. And they're very shareholder friendly. They've reduced their float by something like 20 percent over the last five years in other words unlike uh... like some other internet companies to generate a lot of cash flow unlike most of them they return it to shareholders their very shareholder friendly to good car play yeah i'm certainly a the company certain stretches back to pass the beyond the last boom and bust so they

they kind of uh... have been through it all. I do wonder about Airbnb, because you said that some of these travel companies were not necessarily big pandemic beneficiaries, didn't extrapolate the demand there for years to come. Is that not something that Airbnb might have found itself with? I know I think Airbnb fell in that same category, Mike. You know, at the very beginning of the COVID crisis, we had dramatic rifts, you know, reduction in forces at booking. At Expedia, at Airbnb, they had to do it. They went negative. I mean, they had negative bookings, i.e and the June quarters back in 2020. So they took out the costs and it probably, you know, frankly, for a name like Airbnb, that was at a lot of private capital, I think they were run kind of inefficiently. They needed that cost discipline imposed on them. And I think they came out of the COVID crisis a better business model and with stronger demand. That's actually one of the things that came through in our survey.

You know, we've seen a structural increase in the interest in vacation rentals, alternative accommodations, post-COVID and pre-COVID. And Airbnb has been the single biggest beneficiary of that. It's more expensive than booking. So I do prefer booking to Airbnb. But if you're, you know, it's a pure growth investor, I think Airbnb has a lot to offer. And, you know, we like the business and a heck of a lot of really good product innovation out of that company as well. It seems like the market's implying that, you know, some of the leverage is returning to hotels as opposed, you know, as opposed to Airbnb and other such sites. In other words, you know, not as many extended stays. And

it seems like the way the hotel stocks have held up better, that that's the takeaway. Is that wrong? I think that is wrong. And for reason is that the dirty secret behind online travel is that the supply has been dramatically fragmented. It may not feel that way to a U.S. traveler, but you leave the U.S. chain hotels are a small percentage of, you know percentage of bookings. You go to the Amalfi Coast, those are just as one random example. You're going to find just a lot of mom-and-pop boutique hotels, and that's really what travel is like in most parts of the world. And so the more fragmented the supply base, the more fragmented the lodging options. And if you throw in vacation rentals and alternative accommodations, you've just, by a factor of 10, increased the total amount of lodging supply. So it's actually

a great supply environment for those intermediaries like booking, like Expedia, like Airbnb. And I just don't think that the large chain hotels, I think they become smaller and smaller for those OTAs and for Airbnb. All right. It's almost like you knew I stayed in Airbnb in the Amalfi Coast a few months ago. So that works out well. You sold me. Yeah. Hi, Mark. Hey, I appreciate it. Thank you very much. Thanks, Michael. All right. And don't miss Mark tomorrow on the final day of Pro Week. It's all interactive and he'll be taking your questions. Go to CNBC.com slash Pro Talks. Up next, bespokes Paul Hickey on whether the market will keep rallying in December, which is traditionally a strong month for stocks. That story, plus Salesforce slides and a pair of big retailers selling off when we

take you inside the market. Breaking news on the Senate rail strike vote. Ilan Moy has the details. Hi, Ilan. Hi, Mike. Well, the Senate now has the votes to pass that rail strike bill, averting a potentially crippling shutdown of the rails by forcing workers to accept their negotiated contract. Now, the current vote tally is about 71 in favor, 12 against. It only needs 60 votes to pass. And remember, the House already cleared this measure. So once it passes the Senate, it would go on to the

president's desk. And in fact, it was President Biden himself who had called on Congress to intervene this week after several unions voted against the contract. They were upset about the lack of paid sick time. But that dispute could have halted the transport of goods across the country. Now it appears we are on track to avert disaster with, once again, the Senate having the votes to pass this bill, 71 in favor, now 13 against. And after that, it would go to the president's desk. Mike. Elon, thank you so much. Not too many 70-plus before votes in the Senate lately. So that one looks like it is in. Let's get to the closing bell market zone.

Your spokesman, Paul Hickey, is here to break down these crucial moments of the trading day. Plus, Frank Holland on Salesforce and Melissa Repko on retail. Markets kind of just holding on to yesterday's rally, been above and below the flat line on all the major indexes, the S&P almost exactly flat at the moment. Paul, we've been in this tricky spot for a while here where you had this pretty strong rally off of an October low. That's a pretty common way for bear markets to end. On the other hand, you know, the start of a new bull market looks a lot like just another bear market rally. So how do you sift through the evidence to figure out which one this is? Yeah, so good afternoon, Mike. Like you've been highlighting a lot over the past couple of months, you know, the market has been trying to,

you know, stabilize, doing a whole lot of nothing, actually, if you look at it over the last six months. But what we've seen and what we, you know, ever since mid-October when the market made new lows, what was encouraging to us is the fact that the list of new individual stock lows was shrinking compared to what we saw in June. And throughout that period, it's continued to shrink. And we've actually, you know, routinely seen more new highs than new lows. So that internal, coupled with the fact that credit spreads didn't blow out to new highs and remained pretty well contained, was an encouraging signal for us there. You've also seen this week, you saw the market at pretty very overbought levels that had led to sell-offs every other time this year. This week, we've actually seen the market continue to rally. So that's an encouraging sign for us as well. So those internals are

diametrically opposed to what has been some very weak economic data. And it seems every day we see a new indicator telling us that a recession is either imminent or we're in one. But when we're forced to choose between those two, we always will side with the message of the market. And that's been more positive right now. What do you say to those, Paul, who say that the message of the bond market is that we ought to basically bake in expectations of a recession, given how the yield curve is set up, the Fed tightening into a slowdown, et cetera? Yeah. So, I mean, I think the Fed is basically seems to be looking at things on a tape delay these days because they're last to see inflation coming through. And as inflation

has shown signs of easing, we've continued to see the Fed talk hawkish. Every indication we see on a day by day basis tells us that inflation is coming in. I mean when we look at the economic data and the bond market interest rates coming in. You know I'm as you know confused as anybody else as to you know it doesn't look good. But whenever you see this situation where things don't look good. But the

market is. Is telling you a different message market usually ends up being right. Yeah or at least it gets there if it gets there before the consensus does, usually anyway. Well, let's get to Salesforce. That stock is tumbling on pace for its worst day in a year. That is after co-CEO Brett Taylor said he would step down, leaving chair Mark Benioff as sole CEO.

Here's Benioff discussing the departure on Mad Money last night. You work to find and bring these folks, but you can't keep a wild tiger in a cage. And I've learned that. And you do your best. You bring up great talent. And if they need to leave, they need to leave. The company also beating earnings estimates, although bookings were light and guidance was mixed. Frank Holland joins us. And Frank, so how much of today's stock performance seems related to Taylor's departure as opposed to the results and guidance? Well, many people believe that the departure of Brett Taylor is the primary reason for the price action in the stock that we're seeing today. That includes Wedbush's Dan Ives. But long term, most analysts have a lot of confidence in this

stock. In fact, Callum put out a note today maintaining their price target for CRM at 195. That's about a 30% rise from where it opened up today. But the company's miss on current remaining performance obligation, that's a metric that's kind of a proxy for demand, that did raise the eyebrows of Cowan's Derek Wood. The company also guided for a 7% increase in CRPO. That would be well below the kind of increase that we've seen in previous quarters, and that would also be below estimates. So the question is, is demand slowing down or are deals simply taking longer to close, as Mark Benioff has said in the past? Mark Benioff also referred to Brett Taylor as a tiger in a cage that he had to let out and leave to explore his entrepreneurial goals.

But there's also an elephant in the room. Another big factor in the earnings that we saw in the light guidance is the impact of the dollar rising. But the strength of the dollar has weakened significantly since Salesforce's Investor Day back in September. If you look at how it's fallen, it's fallen about 5% since then. So a lot less pressure when it comes to that. So again, the real question is, is demand lessening or is it taking longer for deals to close? Today's action about Brett Taylor, but there are some longer term things that need to be looked at. Yeah, or of course, things are taking longer to close because demand is a little weaker than it was. We'll see how that all shakes out, Frank. Thanks so much. Big moves meantime in the retail space today,

Costco and Dollar General both selling off among the worst S&P performers. Costco reporting slowing sales and a sharp drop in e-commerce revenue in November. And Dollar General missing profit estimates and cutting its full year earnings outlook as it struggles with warehouse logistics. Meanwhile, PVH and Five Below both rallying after beating on the top and bottom lines and far-fetched plunging the online luxury fashion retailer issuing a disappointing forecast for next year. Melissa Repko joins us. And Melissa, a lot there, but what clues are Costco and Dollar General in particular giving investors about the state of retail right now? Mike, groceries are still a big seller, but it's getting harder to sell the other stuff. That was really the takeaway today from both companies.

Dollar General saw more store visits and more sales, but a lot of those sales are coming from things like food. And food is just not as profitable as selling home goods or apparel or other categories. We heard the same dynamic from Costco, which said it was seeing slower sales, but also weakness in categories like consumer electronics and also in jewelry. And so that does set us some warning bells potentially for investors going into the all-important holiday season. Yes, and the warning bells are on the loud side. And Paul, you know, consumer cyclicals have not really been the source of most of the strength we've seen in the market recently in the last couple of months, but kind of hung in there. Where does it sit in terms of whether it's the moment for those types of stocks to do better or worse? We obviously see still low unemployment, but maybe it can only go one way from here. Yeah, I mean, I think with just take a name like

Costco, their sales were the lowest since April 2020. You know, the days of the high single digits, the low double digits sales growth for that company, I think, are behind it. You know, we're back to the range of the pre-COVID levels. And those pre-COVID levels were in this mid single digit range. But if that's the case, if you just draw a steady trend of the stock prior to COVID, you would have the stock more, still some more moderate downside in store for the stock. And I think some of these names that had this big glow from the post-COVID environment, they have some getting back to earth in store for them. You know, but, you know, some of these beaten down names may, you know, it didn't quite recover. You know, you can look at it. I think it's a stock by stock basis there. But for a name like Costco, I think the days of that real big strength are behind it. Yeah, it is kind of a remarkable the plateau that the stock has been at well above pre-COVID levels and always kind of a pricey stock as well historically.

Now, it is a good day for gold up 3 percent. That's its best gain since April of 2020. As the dollar weakens, today's gains come on the back of a strong November as well. Gold now trading at its highest level nearly four months. So, Paul, I mean, is it is it strictly just about the dollar? I mean, we've also gotten real yields come in a little bit off the recent high. Sometimes that matters for gold. And then you've seen digital gold kind of implode with the crypto meltdown. Yeah. So digital gold, you know, everyone who thought digital gold was going to be,

you know, the safe haven, you know, maybe is going back into the real thing now. I mean, I think long term, you know, Bitcoin has shown, you know, been held up a lot better than some of these other BS tokens. So I think that's somewhat positive for Bitcoin here. But look at gold. I mean, look at gold. And you were touching on it, gold in the dollar. The day the dollar peaked, gold bottomed. And ever since then, they've been moving in the opposite direction.

And over the last 20 years, they've been inversely correlated. So if you think that the dollar is going to see some more prolonged weakness here, if you think the Fed is going to start taking a less hawkish tone and that Europe is going to start doing a little bit better here after underperforming, gold may be a positive place to have some investments here. Yeah. And just quick on the overall market here as we get into December, I know you kind of crunched the numbers on what seasonally the market tends to do on balance. I've also seen some numbers on good Novembers, like 5% November gains. And it's mixed in terms of what the forward performance is in the short term. But how do the numbers look to you? Yeah, so two things. When you're down year to date, 10% or more heading into December. And like you said, when you have a strong November or strong fourth quarter to date heading into December, December has historically not been as

strong as the overall. But what people don't realize about December is it's typically a back-end loaded month. On average, the S&P is flat heading into mid-month. It's all at the end of the month when you see the majority of the gains for the month. Yeah. So that's something that maybe you have to keep in mind. It's not just a pure melt-up through the end of the year. Paul, great to talk to you. I appreciate it. We'll catch up again soon. Paul Hickey. Let's take a look at how the market's finishing up here. The S&P 500 still pretty much hugging the flat line. The Dow down 195. UNH as well as Salesforce are weak right there. Advancing and declining volume almost exactly evenly matched. A slight advantage to

falling volume. Dow is looking like it's down half a percent. The equal-weighted ETF continues to do better than the largest stocks in the index, and the volatility index is still kind of struggling. It's under 20, as a matter of fact. It's going to be its first close under 20 in some time. 19 or so has been the low for the year, so we'll see if a cal common market 15% off the lows is enough to keep volatility in check.

That does it now for Closing Bell.