Closing Bell - Closing Bell: Stocks Slump, M&A Outlook and More Food Price Hikes Ahead 10/6/22

Episode Date: October 6, 2022

The major averages in the red as investors take some gains from this week's rally ahead of tomorrow's September jobs report. Carlyle Group Co-Founder David Rubenstein weighs in on rising recession risk fears and the outlook for dealmaking in this volatile environment. Mondelez CEO Dirk Van de Put warns food inflation is not slowing down and more price hikes are coming. And Eurasia Group President Ian Bremmer on how a potential deal to loosen oil sanctions against Venezuela could impact the global energy market. Plus he explains why Elon Musk should stop trying to do geopolitics.

stocks pulling back we're sitting near session lows right now but still tracking for big gains on the week this is the make or break hour for your money welcome everyone to closing bell i'm sarah eisen coming to you live from washington today take a look at where we stand right now in the market the low for the dow is down about 400 points we're not too far away from that level of below 30 000 there s&p 500 down a percent. The only sector that's in positive territory right now is energy, oil prices holding near three-week highs after we got that decision from OPEC Plus to tighten crude supply, cut production. Everybody else is weaker. And there's some sharp declines in the S&P sector. Utilities, for instance, down 3 percent. Real estate down 3 percent. These were the more safe haven kind of places to hide, giving a lot back today.

Financials are also having a rough day, down 1.5%. The Nasdaq is performing a little bit better than the overall S&P 500, down about six-tenths. Yields are higher and the dollar is stronger. Bit of a reversal than what the easier financial conditions we've seen earlier this week. Here's a live look right now at the biggest Dow underperformers right now. There are plenty of them. UnitedHealthcare is the biggest drag right now on the Dow. You've also got names like 3M, IBM, Walgreens, Coca-Cola and Verizon. The only thing working right now in the Dow, Chevron, Caterpillar and Home Depot. Everybody else is lower. Coming up on the show this hour, we will talk to David Rubenstein, the co-founder of Washington-based private equity firm Carlisle Group, for a look at how market volatility and macro risks are impacting his

business. Plus, we will get a read on the strength of the consumer and the impact of food inflation when we are joined by the CEO of Snack Powerhouse, Mondelez. Let's get straight, though, to the market. Today's dashboard, Mike Santoli, is at the New York Stock Exchange for us. Mike, what are you focused on? We've turned lower here this afternoon. Yeah, we have, Sarah. A little bit of a test of nerves leading into tomorrow's jobs report. Of course, we've had the usual chorus of Fed speak, very resolute, very hawkish, but also very consistent message. So I don't think there's anything to do in what we've been hearing from the Fed except for, you know, status quo, which is they're not

going to anticipate a turn for the better in inflation. They've got to wait to see, including tomorrow's employment number. The market is still in the S&P 500, holding a little bit above yesterday's lows. So if you want to quantify how much sort of damage is being done today, we're still churning within yesterday's range, up 5.5%, 5.7% for two days, gave back just marginal pieces of that. Still definitely in the lower reaches of where we've traded this year. You know, the 3,800, 3,900 areas of the S&P is more the lower end of the prevailing range that lasted for quite a while. We're still looking up at those levels.

Now, you mentioned energy, Sarah. There's been an interesting split in energy stocks relative to crude oil, and that's relatively new over the last few months. You see this is a two-year chart for most of that period of time, very much in sync. And here you have energy stocks in the S&P 500 going higher as crude has settled lower. There's not necessarily over the long term a one-for-one kind of lockstep relationship, but it is interesting because investors seem willing to accept crude at these levels. Natural gas, of course, is higher and feeling that it can support the cash flows of these companies.

Also, some of the very few companies within the market that has rising earnings estimates and there's a confidence they can meet the estimates. So arguably, there's a little bit of crowding going on, people grabbing for energy or clinging to it when not a lot else to pin their hopes on, Sarah. So, Mike, as far as the market movers these days, there's so much Fed speak. It's hard to know what to hang your hat on. They're mostly singing the same tune, that they've got a lot more work to do when it comes to fighting inflation and they're not done hiking yet. Though Rafael Bostic out of Atlanta said that they'd like to see a pause after this year. Just wondering where the market is in

terms of Fed expectations and what might be the next surprise. With Fed expectations, direct Fed expectations of where rates will go, I think it's been pretty steady since the September Fed meeting, which is to say short-term rates get above 4% at the end of this year, the early part of next year, and then they're more or less in their target zone. And they'll go for a while at that level. But the market is not going to be able to resist reacting to incoming numbers, such as the prices paid going down in the ISM indexes, such as things like rents rolling a little bit, energy prices coming down. They're not going to it's not going to be able to resist trying to anticipate an improvement in inflation or a weakening of economic growth or tightening financial conditions that they think will lead to the Fed to maybe just pause.

So I think that's where the tension is. I don't think anybody believes we're going to get an all clear signal anytime soon because you're going to need multiple months of the real inflation data. But just that idea that we're getting toward the end of this tightening process is one that I think the market keeps wanting to grab for. Well, Mike, thank you. We'll see you a little bit later and throughout the hour from the New York Stock Exchange. On that note, the IMF out with a warning today here in Washington saying global recession risks are rising and inflation must be stopped. I spoke earlier with managing director Kristalina Gorgieva and asked her what she thinks Fed Chair Powell should do right now. The path he has to walk is very, very narrow.

If he doesn't tighten enough, inflation may de-anchor. If he tightens too much, there could be recession. So Chair Powell is doing his best to watch the parameters in the economy to calibrate what he does. And I have trust that he would take the right, he would make the right call. Joining us now is co-founder and co-chairman of the Carlisle Group, David Rubenstein. Great to have you back on the show, David. My pleasure to be here. So what do you think is the bigger risk right now? What's your baseline view of what happens?

That he over-tightens, under-tightens, or gets it just right? Well, obviously, nobody knows for certain. I think there's a concern that the Fed could over-tighten because it's so interested in getting inflation down. But J-PAL is obviously smart, and the rest of the members of the Fed are smart, and they recognize that if they do too much, it could put us into a recession. The third quarter numbers are coming out in a couple weeks, and it doesn't look like we're heading into a recession because the numbers are suggesting something like about a 2.5 percent growth rate for the third quarter, which would say that we're not tipping into a recession.

Obviously, we've got the fourth quarter to worry about and other things. The Fed is, I think, doing as good a job as it can based on the information it currently has. Europe has the bigger problem than the United States. Europe is probably in a recession now. Certainly, I think the U.K. is. And therefore, I think we have to be careful when we deal with Europe because we recognize they could drag us down. But that seems unlikely at the moment.

Yeah, I mean, hard to believe that Europe and the UK in recession, China's slowing pretty sharply as well. And the U.S. would it would not get dragged in? Well, we are not as dependent on the European economy as we once were many, many years ago. Obviously, we have a big relationship with China as well. I think China is not in a recession, but it's obviously in a much lower growth mode than it would prefer. I think right now, the market's in a wait-and-see. And when you're in a wait-and-see mode, any bad news is overreacted to, and sometimes good news is overreacted to. So I think we're going to be treading water for a while. There's no clear sign that we're going to be in a recession right away or no clear sign that we're out of the woods with respect to inflation. The numbers on the

energy prices are not encouraging. Obviously, we prefer the energy prices and OPEC produce more oil than they appear to be producing. But I don't think that's as big a problem as it could be years ago when we didn't produce that much oil or gas ourselves. And by the way, on this note, Gorgieva did tell me that they expect, the IMF expects one-third of the global economy, countries that make up one-third of the global economy, to have more than two negative or at least two negative consecutive quarters of growth. So recession definition or not. But clearly that's going to be a bumpy road and that it's going to get worse next year, David, because growth is going to slow even further. How do you position for that kind of environment? Well, in the business of private equity or longer term

investments, we tend to invest for three to five years down the road. So worrying about each quarter each day is not quite as consequential as it is for people who are trading on a regular basis. But clearly, we are in a lower growth mode than we were years ago. And clearly we're in a higher inflation mode than we were years ago. When I went to college, the average inflation rate in textbooks was said to be roughly three to 4%.

Now we've gotten used to 2% inflation and maybe we have to get used to three to 4% inflation as the norm. We've been used to 2% the last 25 years and maybe the Fed should recognize that getting the 2% is not easy to do. It might require taking the inflation, the interest rates up to much higher rates than we probably could tolerate. So I suspect that the Fed will feel more and more pressure to not go down to 2 percent because that will probably tip us into a recession.

Yeah. How is it all impacting, David, investor appetite for what you do, alternative investments? Because there's some numbers out. The FT covered Prequin's latest numbers showing incredibly strong and they expect alt investment overall assets under management to double by 2027 to 18.3 trillion dollars. Is that what you're seeing? Well, yes, because what's happened is that over the last 10 years, 20 years, and 30 years, and even 40 years, the alternative investment world has outperformed public markets in stocks much fairly handily. And therefore, if you have a chance to invest in alternatives and are good firms they are investing with, you're probably going to beat the market averages for public indexes for

publicly traded stocks. So there's a fair amount of interest out there still in alternatives. And I don't see any diminution in that interest. Clearly, there's been some slowdown a bit in fundraising because people have less money than they had before because the markets have gone down and therefore the denominator produces less money for them to be able to invest. But overall, I think the alternative sector is in pretty good shape and people are pretty used to the good returns that the alternative sectors have provided. What about dealmaking and with the money flowing in? There was a rumor about Compass today getting taken private by Vista. That was sort of rejected by the company. We'll see whether Mr. Musk's deal

goes through. It's looking likely at this point. Besides that, what what what do you see for private equity and overall dealmaking in this kind of environment? Are there good values yet? Are you through. It's looking likely at this point. Besides that, what do you see for private equity and overall dealmaking in this kind of environment? Are there good values yet? Are you ready to pounce? Well, dealmaking has slowed down clearly. There's less M&A than there was a couple of months ago. And that's because when you have a situation where prices have gone down as much as they have in public markets, people who are selling things say, well, this is a temporary aberration, and we would think the prices should be more normalized. And therefore, the price we want is much higher than the buyer really wants to pay. The financing is generally available for deals,

but you have to put in more equity than you did years ago for buyouts. Generally, there's a big gap between seller and buyer price expectations, and that can slow things down for a while. But generally, I think the markets are reasonable for doing deals. David Rubenstein, it's great to get some color from you on the business and the macro. Appreciate it from the Carlisle Group. We're getting some breaking news from right here in Washington. Kayla Tausche with the details. Kayla. Sarah, the White House announcing that President Biden will be pardoning all prior federal offenses for simple marijuana possession. Officials at the White House expect that this policy will impact roughly 6,500 people

who have previously been charged with the federal offense. And that President Biden is also calling on governors of all political parties and all states to take the same action. The White House saying that far too many lives have been upended by the simple possession of marijuana, which in many states has now become legal. And while senior officials acknowledge that it's fairly uncommon for people to be incarcerated simply because of this one offense,

they said it is very common for people to be turned away from apartments and jobs because of having this on their record. So they've instructed the attorney general to produce some sort of certificate for these individuals that they can then take to a landlord or a potential employer to prove that this offense has been pardoned. Additionally, the president is calling on the Department of Health and Human Services to study the classification of marijuana, suggesting that perhaps it should not be classified with other drugs like LSD and heroin, especially as it is becoming more

legal across the board across this country. Now, as for the operation of companies in this space, the White House didn't comment specifically on what potential policy changes could be impacting these companies. The statement does say that the president believes that certain regulations and marketing and trafficking should still stay in place. But we will certainly see a big impact in the lives of thousands of individuals from this policy, and we'll see how it impacts the corporate world as well. Sarah? Well, we're already seeing quite a move in some of these stocks, Kayla, shooting higher.

Again, they've been absolutely slammed in the bear market. But a name like Tilray right now, 14 percent just on the news, perhaps evidence that there will be further steps to decriminalize marijuana from this administration. Something that I know these companies have been very hopeful for in this country. Kayla Tausche, thank you. After the break, we're going to talk to the CEO of $80 billion snacking giant Mondelēz behind Nabisco, Oreos and more. Get his read on consumer spending and whether he sees food inflation starting to ease. You're watching Closing Bell here on CNBC. The Dow is down 381. Sharp strength here in the dollar, which is up 1% against the euro. We'll be right back. We're following the sell-off for you.

The Dow's down about 344 points. S&P is now down a full percent. So we picked up a little steam on the selling here in this final hour. Consumer staples are getting hit as well, down 1.5 percent, right at the bottom of the list with utilities and real estate. These are the somewhat safer groups that tend to do well, but they also get hit sometimes when rates are rising. Mondelez CEO Dirk van der Putt is ringing the Nasdaq closing bell.

He joins us now for a first on CNBC interview. Dirk, it's great to have you. Thank you for having me, Sarah. It's good to be back. So there are all sorts of concerns now about the consumer. Now we layer on top of the inflationary concerns, the rate shock, the interest rates going higher. What are you seeing at the moment? At the moment, we certainly see consumers shifting their spending.

I would say they spent less on clothing, on traveling, on big-tickum items. But so far, I would say in food, it's been mitigated. It has not been a big effect. If I look at our business, our volumes are still up versus last year. They've slowed down a little bit, but we don't see any signs of massive change. Now, we're in biscuits and chocolate, not necessarily categories that get immensely affected by a recession. But I would say we see changing spending. But so far, food seems to be relatively unscathed, I would say. And people haven't been trading down to private label brands, which we sometimes see during recessions? I think in other categories that we are in,

yes, I think that is happening. In ours, it's happening a little bit, but particularly, for instance, chocolate, there's almost no private label. In biscuits, yeah, there's something happening, but it's limited. It's not a real sort of worry at the moment. And what is happening with food prices, Dirk? Are we finally starting to see some relief there for consumers at the grocery? I'm afraid I have not good news there in the sense, what I can tell you that our input costs for next year

are gonna be up as much as they are up this year. So which means that we need to keep on pricing. Now there will be an effect of what was priced in 2022 into 23, so you won't see the same size of price increases, but there will be more price increases coming in food, in my opinion. Even though we're starting to see commodities prices come down, so ingredients, oil prices come down, shipping rates come down, shouldn't all of that be helping? Well, it depends from company to company. In our case what is

happening is yes all those things are coming down. They are still much higher as they were last year so still an increase there. We hedge so we have to we're well protected for 2022 but we have to deal with that extra effect for 23 and then we have other input costs particularly for instance in Europe which is big for us energy that is really going through the roof. Packaging costs are not coming down that much yet. So it's sort of a shift of what's going up in cost, but it's still there. The other thing that has shot up that I'm sure you are not too happy about is this dollar.

And it's getting a big boost today, perhaps one reason behind the equity selling. You're a company that does, what, still 80 percent of sales overseas. How are you managing this? Well, that's declining because the other currencies are all getting smaller against the dollar. But that's not really what we want to see. Well, we have to compete locally. We cannot have our people in India or in China think in US dollars and price our products in US dollars. We compete locally and we're competing well. Our business on a country by country basis is probably doing better than it has ever done. And at constant currency, we will have the best year by far with very strong growth versus last year. If you translate those currency in dollars, that's where the weakness comes in our bottom line

Roughly stays flat for the year. That's only one year. I would say We don't try to manage the business in line with that because I think that would be wrong we manage the business to win in the local markets and I'm sure that the dollar will lose a little bit of its strength and then our our Translation into dollars will look a little bit of its strength and then our translation into dollars will look a lot better for us. So because you have such a good grasp on the international picture and we're seeing different growth slowdowns everywhere, what can you tell us about what you're seeing from the

consumer, for instance, in China or Europe or the U.K. versus the U.S.? Categories, preferences, economics, what stands out? Well for sure I think the consumer you have to be worried about at the moment is Europe. They are starting to see the effect of energy into their electricity bills. And some of these effects are, I think some of them will see 200% price increase of their electricity. And it's hitting now between October and March of next year. That's when most families will see it. So we can see that there is a lot of worry and that I assume that that will clearly be reflected in different spending or in less spending. The country that's probably hardest hit

is the UK, where the inflation rate is very high, together with some of the political turmoil that's going on, and the consumer in the UK particularly feels very anxious. In other places around the world, not so much, I would say. Consumers in Latin America are doing quite well. Our markets are great. China for us is doing well. We have effects from the lockdown and we see a shifting consumption between categories, but nothing that says that consumers are really very preoccupied.

And I'm largely talking for our business, of course. Dirk van der Putt, great to get some insight into what you're seeing and what you're dealing with. Costs, consumer, global, appreciate it very much. Thank you. Dirk Van De Putt, CEO of Mondely, is ringing the closing bell over at the Nasdaq. We are following the sell-off for you. The S&P 500 down about eight-tenths of one percent. Mike Santoli, I noticed that the dollar's strong and treasury yields are high, not something that equity investors want to see. Any spark? Didn't seem like there was a specific spark, Sarah, except that we get later

in the day we're that much closer to tomorrow's jobs number. And when the markets are anticipating an event like this, I think they're going to just retrace their last big move. In that case, it was down in the dollar in yields and it was up in stocks. And so those things moving a little bit in reverse. Again, I mentioned earlier, the S&P for now is still trading within yesterday's range. So in other words, not a new low for the week. Smaller cap stocks are actually holding up fine. It doesn't seem like a real rush away from risk, but absolutely a tightening up of conditions. And by the way, the volatility index blipped above 30. That's, again, a retracement of the recent decline. Well, the labor market, while there are some hints around the edges that it

is weakening, it's still remarkably strong. Even claims today, which were higher, jobless claims, are still near historically low levels. To your point about how it's not all a runaway from risky stocks or risk, Microsoft, Apple, Pepsi, that's weighing on the Nasdaq. But you've got names like Netflix, Google, Costco, Meta, all higher. Adobe, higher right now. And that's what's keeping the Nasdaq from underperforming, which is something we've been used to lately in these types of sell-offs. Yeah. In the last few days, actually, the Nasdaq's been managing to hang in there. Of course, it's in a deeper decline off of its highs than the rest of the market. So I don't think there's a lot of specific targeted storylines here. It's just, look, we had a very strong bounce. It's completely debatable as to

whether that was a decisive low or just an interim one. And as you mentioned, you know, today we had a little bit of an upside surprise in weekly unemployment claims, like, I don't know, 15,000 jobs in the week. Not much. And briefly, the market wanted to celebrate it. And then it got unwound. So it shows you we're very sensitive to every little wrinkle in what's happening with the labor market. Well, and it's also this weird, perverse world where the market celebrates bad news on the idea that the Fed will stop or calm down. Bad, but hopefully not too bad, exactly. Bad, but not terrible. Right.

Mike, thank you. We'll see you soon. Stay close. Mike Santoli at the Stock Exchange. Well, first Gap, now Adidas. After the break, we're going to bring you the latest buzz on Kanye West's growing battle with retailers. We've got some news for you. And later, we'll talk to Eurasia Group President Ian Bremmer about the political fallout from OPEC's surprise production cut today and why he just tweeted

to Elon Musk, quote, dude, stop trying to do geopolitics. We'll be right back. What is Wall Street buzzing about? Adidas finally responds. After weeks of Kanye West, or Ye, lashing out on social media and on our air, Adidas is finally commenting on the status of their Yeezy partnership. In a statement, the company saying, quote, the partnership is one of the most successful collaborations in our history, in our industry's history. But after repeated efforts to privately resolve the situation,

we have taken the decision to place the partnership under review. We will continue to co-manage the current product this period. This is a big deal for Adidas and its shareholders if the partnership ends. It's bigger than the Gap breakup. Why? Because Yeezy and Adidas signed back in 2016, and according to Cowan's John Kernan, Yeezy makes up seven to 12% of footwear revenues for Adidas. About four to 8% of total Adidas revenues.

Here's what CEO Kasper Rorstedt told me just back in august about kanye kanye is our most important partner worldwide we have a very very good relationship with him we communicate with him on a very ongoing basis and you know we're very proud of that relationship of course i asked yay about that relationship just a few weeks ago when he joined us on this show to talk about the gap breakup. Any of these relationships that I'm in, like I have to have a say so, you know, on the colorways. They were doing colorways. They were naming things. They were sending guys and telling me, don't tell your audience that you didn't name that.

And they were slowing down, you know, my allotments and then copying the ideas that took. Some things took us two years. West helped turn around Adidas and make it cool again when it was losing ground to Nike in the U.S. Just look at the stock chart before and since Ye dropped those first Yeezy Boost 750s boot-like sneakers. They're still going for thousands of dollars on sneaker retail sites. Yeezy aside, Cowan analyst John Kernan did say the Adidas brand is struggling big time right now. And he predicts that they're going to have to cut guidance for the third quarter. Consensus numbers for next year are too high, he said, given the foreign exchange environment.

The stock is down about 3% trading here in the U.S., though it is down 61% over the last 12 months. Up next, Eurasia Group President Ian Bremmer on reports the U.S. is preparing a deal to loosen oil sanctions against Venezuela and the impact that could have on the global energy market when we come back. Take a look at oil. More strength today, up more than 9% now for the week. This comes after the Wall Street Journal reported that the Biden administration is preparing to ease sanctions on Venezuela, enabling Chevron to pump oil. President Biden was asked specifically about Venezuela today, saying there's lots of alternatives and we haven't made up our mind.

Joining us now is Eurasia Group founder and president Ian Bremmer. Also comes on the day in that OPEC Plus decides to cut its production quotas, two million barrels per day, something that President Biden said he was disappointed about after he visited the country and fist bumped the crown prince in July. What is happening here? Fist bumps not moving oil production. I'll tell you that.

I mean, the Saudis, the Russians, the Emiratis and the rest of the OPEC plus countries are a supply cartel and they are interested in higher prices in the context of lower demand. And that is, of course, what they're seeing, given China's zero covid policies and reduced consumption as a consequence, as well as expectations for a significant recession coming up in Europe. So, I mean, they made that decision. That decision was clearly not taken with any concern about how Biden would react or the importance of the U.S. relationship. I don't think it was meant to alienate him. I think it was purely indifferent to the United States. And that says something to the U.S. about the Saudis. And I think going forward, Biden is going to be more cautious and more transactional in the U.S. about the Saudis. And I think going forward, Biden is going to be more cautious and more transactional in the relationship. Coincidence that the report about Venezuelan production comes today? I don't think it's a coincidence, but we're not talking about a big move with Venezuela. It's probably going to be about 200,000 barrels a day, assuming it goes

forward. I think it will. That Chevron will then be refining uh in the gulf and bringing on to the united states i i think it's very unlikely that you would see any reduction in sanctions against petavesa the venezuelan state owned oil producer um or more broadly um for the financial sanctions that venezuela is facing there's also the issue that col that Colombia has a new president right now, President Petro, who has just said that he's going to reach out to the Venezuelan government, try to reestablish relations that former President Duque had cut off in Brazil. Of course, Lula is likely to win the second round and become the next president in Brazil. That's going to align the Brazilians toward reengagement with Venezuela. This leftward

swing in South America, you saw this play out in the summit of the Americas that went very badly for Biden, means that the United States is kind of on the wrong side of Venezuela right now. And I think Biden does want to try to find a way to address that. So I want to also get to some of your tweets, because you have been tweeting at Elon Musk, who has been tweeting about potentially resolving the Russian war in Ukraine. What do you make? You've called some of his positions irresponsible. You're clearly not in agreement. The fact that he's weighing in, what do you think about that? Because he obviously carries enormous influence, has a ton of Twitter flowers, is about to buy the platform and take it private, and is now tweeting out about geopolitical solutions to wars.

Yes, Sarah. These are Russian talking points. When Putin met with a number of the Shanghai Cooperation Organization heads of state, Kazakhstan, India, China, he was saying, yeah, we're prepared to negotiate if we have the annexed territories, the insurance that we can actually supply water to Crimea, have the land bridge. And and and that is exactly what we have seen from Elon Musk and supporting that. He's put up disinformation saying that all these territories in southeast Ukraine are majority ethnic Russian, which isn't true. The only territory in Ukraine

that's majority Russian is Crimea. So, I mean, these are there's no surprise that Russia is promoting Elon Musk's tweets in state media over the course of the day. It's deeply damaging. And also, you mentioned, Sarah, that if he takes over Twitter, he's likely to reinstate President Trump. I've already seen Trump Jr., Donald Trump Jr., I've seen J.D. Vance and others start posting, why is the United States supporting Ukraine? This could lead to nuclear war. This is none of our business. Spend money at the U.S. If former President Trump takes on the positions that Elon Musk is presently tweeting on Russian Ukraine, that will absolutely drive a wedge

in the U.S. position on leadership of this issue across the West. Wow. Ian Bremmer, thank you very much for joining us. Appreciate it. On a lot of hot topics right now going on in geopolitical world. Here's where we stand right now in the markets, though. Down 314 on the Dow, S&P 500 down a little less than 1%. NASDAQ's holding up better. It's actually only down now half a percent. So it's recovered just in the last few moments or so. The small caps are also doing a little better, only down half a percent, something Mike highlighted. It's not sort of a washout like we've seen. Some of the bigger multi-cap Dow stocks are under more pressure. Some of the safer groups like utilities and real estate getting hit a little harder today.

Pinterest shares are popping, though, after a big upgrade. Coming up, why Goldman Sachs thinks that stock can rally nearly 30% from here. We'll be right back. 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. Plus, we've got Julia Borson here for you on a pop for Pinterest and Crossmarks Victoria Fernandez on the market. We'll kick it off broad, Mike, because we have seen a sell-off in this final hour. Dow's down a percent, 290, though it's off the worst levels.

S&P down 0.8%. NASDAQ faring better. Small caps faring better. Higher yields. Stronger dollar. Similar playbook. As we all try to figure out, Mike, you know, this week was a better week. There was a better tone.

We strung together a few days of up of gains in the market. And there are some real there were some real, I think, views that something in the financial markets might break or force the Fed to think that it's done a lot. And it should just wait to see what comes next. Something we heard from Bostick, for instance, the Atlanta Fed president about the end of the year. Does that ring true or is it just back here? Here we go again. Fed talks hawkishly. Yields go up. Stocks go down. That idea is in the air that, in fact, you know, the Fed is perhaps going to risk some kind of a stress event out there in the market. But I also think you can't get away from the fact that we finished a very weak September and a very weak third quarter on the lows. Very oversold. Very strong snapback rally Monday and Tuesday.

Right now, I think it's digesting it and waiting for tomorrow's jobs number to see if, in fact, we can build a narrative toward, hey, things are moving in the Fed's direction in terms of labor conditions softening up. And maybe that's going to allow yields in the dollar to stay more tame. It's a big if, but that's where we're at. It's going to be wages and participation. Those are the keys tomorrow, right, because that's what's been putting upward pressure. Lack of participation, higher wages, shortages of jobs. Look at Peloton shares.

They are rising today, outperforming the market. CNBC.com obtained a memo from CEO Barry McCarthy to staff disputing an earlier report from The Wall Street Journal. The main dispute over a line in the journal story attributed to McCarthy saying the company had to make significant changes or else it may only have six months to survive on its own. McCarthy writing in the memo that that characterization is, quote, at odds with the story we told and the state of the business. That's on me and I apologize. But Peloton did today announce another round of layoffs, this time about 500 jobs being cut, roughly 12 percent of its remaining workforce. McCarthy's been on the job now eight months. Stock is down nearly 70 percent in that time.

Mike, what happens to to this name? Where's the valuation? Any chance someone could step in? I've been I've been trying to make calls on this. I don't know why they would now, especially some big players that get rumored about, like an Apple or a Nike, when it's been cheap for a long time. Well, it's been cheap in terms of the absolute dollar value of the company, which is under $3 billion right now. That seems modest relative to maybe the power of the brand and the peak revenues, which were fiscal 2021 that ended in June of 2021 at $4 billion. They went down to $3 billion. They're only expected in fiscal 2024 to get up to $3.5.

So that's where they're at. They built this company to be growing a lot faster. That's why all the cutting on a price to sales basis, because they're not going to be profitable in the foreseeable. Price to sales, you know, it's under one, but it's, you know, a premium to where Nautilus trades, a premium to where GoPro even trades. So I'm not sure where it shakes out. There also is a little bit of debt, nothing urgent. But I think you have to keep all those things in mind, figuring out long term if they can justify where they're valued. Also, it'd be a long shot to get a struggling company that's unprofitable to give them to give themselves six months to turn it around. Seems like a tough I'm not surprised he walked it back. Anyway, Pinterest is a big winner

today. Goldman Sachs upgrading that stock to buy from neutral, hiking its price target to 31 from 24, implying upside of nearly 30 percent, citing strong potential revenue growth. Earlier on Tech Check, analyst Eric Sheridan also praised CEO Bill Reddy's strategy. Listen. Bill laid out a really interesting long-term narrative about where he wants to take Pinterest. A focus around commerce, a focus around bringing more shopping to the platform. And we think this is really the future of Pinterest. It's not as much a social media company as we believe it's more of a commerce engine. Julia Borshton joins us, covers the stock. Why, Julia, is Goldman so bullish now on a company that's really struggled post-pandemic? It all comes down to the fact that maybe people were thinking about Pinterest wrong

and this idea that it should be thought of not as a social platform, but as an e-commerce engine. And I have to point out that today is Bill Reddy's 100th day as CEO of the company. He was brought in because he has that e-commerce background, because he understands the potential of this to be a platform to drive e-commerce growth. So the Goldman Sachs note, they looked at how some of the channel checks, some insight of where advertisers are spending is very positive on Pinterest, but also the fact that brands are bringing over their full catalog into Pinterest and that both brands and the platform understand the potential of understanding consumer intent. People are

searching for account. They're searching for address. And Pinterest can use that information to not just serve them ideas, but objects and products to purchase. And I think that's the real potential of Pinterest here. And Bill Reddy is the guy who seems to be leading the charge here. And it all comes down to just changing the definition of what Pinterest is, especially ahead of this key holiday season. Yeah. And so much of these stocks is about the narrative, right? And the definition and where investors think the potential is. Julia, thank you. A winner today at four and a half percent. Mike, as we as we head into the close, I'm just watching where the weakness is today. I don't know that we've talked about this yet. Utilities, real estate, health care and consumer staples,

defensive plays. So if so, if you think that the market has further to go, you might want to be in those sectors to protect yourself, especially if you think we're going into recession. Why are they getting especially hard? I think it's a matter of what is held up better. In fact, one of the bullish points coming into the week was that some of those perceived safe havens had started to buckle. You like this idea. There's nowhere easy to hide.

You take a look at the internal action today in terms of breadth. You're three to one negative to positive in terms of volumes on the New York Stock Exchange. So that's clearly giving back some of the very strong upside breadth, but not all of it that we got early in the week. Also, you mentioned real estate. I think it's worth looking at, you know, a six month chart of real estate versus the financial sector, which it used to be a part of. Real estate's really been for sale hard. And it's the it's the tower stocks to sell tower stocks and the data storage REITs. That's what's really driving that as well as commercial real estate.

It's not just about yield. It's about long-dated assets losing some value. And they also started at very high valuations. Volatility index definitely bracing for the potential of a hot jobs number perhaps tomorrow above 30. Kind of panicking a little bit in advance, but in a modest way so far. We were, of course, up in the mid-30s at the highs of September. ADP, private sector read, shows that there's a lot of strength there in the jobs market still. Mike, so as we wait for jobs tomorrow, we get a lot of the Fed speakers. The data has weakened. Saw ISM this week. We saw even job openings come down this week. How much weakness do you think we need to

see to either get a Fed pivot or get a market that feels more confident that that's going to happen? It probably needs to be months of pretty decisive moves in that direction. And honestly, the Fed has sort of shifted the focus multiple times along the way because they clearly feel as if rates just have to keep going up fast in the near term until the inflation data itself buckles. They're not going to try to triangulate it and say, maybe there's some inputs to inflation that are going our way and therefore will change policy.

On the other hand, the rhetoric is going to stay this hawkish until the very minute they're either forced to change policy or they decide they have to pause, because it doesn't pay for them to rhetorically ease before they're actually ready to ease because they know the market will run with it. All right, Mike, thank you very much. We're going to see you at the top of overtime. You're hosting Closing Bottle Overtime at the top of the hour. We want to get straight to David Faber, who's phoning in with some news, David, on Twitter and the deal with Elon Musk.

Now what? Never ends. Yeah. And here I am. You know, you take the subway to Midtown, you think your day's over, but not these days. It's the bizarro world of Twitter and Elon Musk. We've gotten a motion that's been filed by by Musk for the judge to basically stay the litigation. This is something we've been waiting for, but we've been hoping it would be, or I shouldn't say we, investors have been hoping it would be a joint stipulation going through all the points and saying,

yeah, we will stay the litigation on both sides. But no, this is them asking Chancellor McCormick to stay the litigation and talking about, well, any number of reasons why it would make sense at this point. But the things that stand out are some of the questions, or at least their concerns about how long it will take to put together or for the financing banks to prepare for close, saying that funding will take time because the parties are working through a complex process of arranging that $12.5 billion of debt financing

and drafting required documents, security interests, and on and on. Sarah, they say basically they'd hope to close by October 28th. That's a long way from now. That's one reason why the stock has continued to weaken. Don't expect Chancellor McCormick to grant the stay. That seems unlikely. As do some of the claims here about how long it would take the banks to actually get together. I mean, as I've said many times, they have a 15-day marketing period should they choose to use it, although at this point it seems unlikely any of them would actually

move forward with marketing their commitments into this current market for leveraged finance. And so, you know, a lot of these claims seem somewhat hollow, but it goes back to the idea that, Sarah, we don't have a deal still. You know, we have Musk offering 5420 saying I'm ready to come do it, but Twitter basically saying we need assurances when we drop this litigation that you're actually going to buy us, that you're not trying to pull a fast one on us. Neither side really trusts each other. And so maybe Chancellor McCormick will be able to figure it out. Maybe she'll call the parties for a hearing of some kind tomorrow. I don't know. But and then we've got weird headlines from Musk's lawyer, Alex Spiro, talking to Bloomberg, apparently talking about lower offers that were made. But

it's you know what? This is the world of Musk. What can I tell you? It's bizarre. And, you know, there are investors who are just choosing to say, see you later, as likely as they still may feel it is that this will close at 5420, they don't want to take the risk. Right. So Twitter stock is now below $50 per share, I guess. So it looks likely, right, David? They just have to get through some of these litigation and debt issues. Yeah, I mean, the funding is not an issue. As I reported earlier, you know, people close to the funding banks indicate they are fully ready to stand up to their commitment.

You know, whether they want to exercise their 15 day marketing window is certainly up to them, but it is not a function of them somehow saying we are not going to finance. And even that seems clear from from the filing we just got from from Musk. But beyond that, the questions are, well, you know, Twitter doesn't want to be left in any moment where they've given up the litigation and yet they haven't actually been bought. And so how they bridge that gap is sort of been something that has proved to be perhaps more difficult than they might have anticipated, Sarah. And it's something we'll continue to watch closely. All right. Don't take your afternoon nap, David. Stay close. And Musk will be deposed on Monday, by the way. That's what it's been pushed to.

We may see that deposition happen. Yeah, I mean, I guess if this if this case holds, the litigation holds as they want. David Faber, thank you very much. We got to get into the closing bell right now. We've got one minute left of trading. The Dow is down about three hundred sixty three points. The low of the session came just around the top of the hour there, the final hour of trading, down about 400 or so. But it's a pretty broad-based decline on the Dow right now. UnitedHealth, McDonald's, Goldman Sachs, and 3M, the biggest drags. The only gainers are Chevron, Home Depot, Caterpillar, and Boeing.

Oil prices are higher today, and that's why energy stocks are doing well. The only sector in the green in the S&P 500 right now. Everybody else weaker. Utilities, the worst performing, down 3.3%. The Nasdaq has held up a little better today thanks to some strength in Netflix, Costco, PayPal, Adobe. It's not all losers in tech today, though. Microsoft, Apple, Tesla, Amazon are weighing on that index. Small caps also holding up a little bit better, down about a half a percent,

with the Nasdaq going out with a decline of three- of one percent. That's it for me on Closing Bell. See you from the Stock Exchange tomorrow. Now into overtime with Mike Santoli.