Closing Bell - Closing Bell: Stocks Soar, Alzheimer’s Drug Study & “The Next Big Thing” 9/28/22

Episode Date: September 28, 2022

A big rally on Wall Street after the Bank of England announced it will buy bonds to stabilize its financial markets. Fmr. Fed Vice Chair Richard Clarida reacts to the Bank of England’s move and discusses whether the Federal Reserve is taking the right steps to fight inflation and manage a soft economic landing. Charles Schwab Chief Investment Strategist Liz Ann Sonders discusses the big rally and whether this could be more than an oversold bounce. RockCreek CEO Afseneh Beschloss reveals her best investing opportunities around the globe and the industry she thinks is the “next big thing”. And shares of Biogen and Japanese drugmaker Eisai soaring after positive test results for their experimental Alzheimer’s treatment. Eisai U.S. Chairman & CEO Ivan Cheung on how effective the drug is and when it could win FDA approval.

The S&P 500 breaking its six-day losing streak with a broad rally here across the board. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look. Stocks are rallying. Energy, communication services, and consumer discretionary right now leading the pack. But every sector is higher right now.

And it's all about what's happening in the bond market today. Bonds in the U.S. and the U.K. stabilizing. After the Bank of England announced this morning it would start looking at buying long-dated bonds. We're seeing a big drop in yields across the pond, trickling over here into the U.S. as well. Again, everything is out. Everything is doing well. The Dow, 29 out of 30 stocks up. The only one that's down is Apple on the report of production cuts. We'll talk about that later. Coming up on the show as well, former Vice Fed Chair Rich Clarida on whether the Federal Reserve is being too aggressive with its interest rate increases, as well as his reaction, of course, to the Bank of England's move to help stabilize

the slumping British economy and markets over there. Plus, Biogen and A-Size, experimental Alzheimer's drug yielding positive results in a new trial. A-Size U.S. chairman and CEO will join us live here first on CNBC. But first, let's get to today's market dashboard. Senior markets commentator Mike Santoli is here with a look at how small caps are faring. Why small caps? Well, we'll get to the small caps because it actually is pretty pronounced how inexpensive they look relative to large caps. But just in terms of today's market, Sarah, finally, the bond and currency market sort of cleared the way for an oversold stock market to have a half decent bounce. Now, at today's highs, a little bit over 3700 on the S&P.

We're still below the highs from earlier in the week. So we're trading in this very lower band of this trading range. You've been in for a while, but somewhat constructive that we got to 4% of the 10-year yield. They've crashed lower, and it sort of allowed what was already building up in the markets to finally release to the upside. Now, I've been pointing out, you go back a couple of years when we were just above $3,500. That's a slanted line. We're not quite down to that point yet. But giving up two years' worth of gain sometimes is a little bit of a stop and reassess type moment. That would be down here.

3,500 is also, believe it or not, halfway between the lows in March of 2020 and the COVID crash and the all-time highs to go down from 4,800 to 3,500. That's 1,300 points. It was 1,300 below that. So there's a lot of eyes on this area right below where we're trading right now and so far it looks like a short term save on small caps totally understandable they've been underperforming for a while they're lower quality companies more credit sensitive obviously rate sensitive and essentially don't have as much pricing power but look at what's on a long-term basis appears to be a steep discount to these companies relative

to the S&P and also on an absolute basis, about 10 times forward earnings. You're going to tell me the earnings are going to come down. I agree with you. So does the market agree with you? That's why they're paying 10 times for current consensus when there's likelihood that they do go down. But I'm interested in this period right here after the dotcom crash started in 2000. That's when you also had this extreme of relative valuation. I don't know what would trigger a rebound in relative performance, but it's a reminder that a lot more risk has come out of smaller stocks in the average stock than has so far come out of the very upper

end of the mega cap spectrum in the S&P. Perhaps one reason they're bouncing more than 3% today while the S&P is up less than two. Mike, thank you. We'll see you later. Mike Santoli. Let's bring in Lizanne Saunders from Charles Schwab. Lizanne, do you like small caps on a relative basis because they're cheap? Well, they are cheap, but I think you still have to have a quality filter. In fact, if you're just purely looking at the index levels, a lot of people don't realize that Russell 2000 small caps is just sort of put into the bucket by size, whereas the S&P 600, there's a profitability filter. So that's a way to think of it in index terms. But I think you want to look for quality factors, you know, decent earnings profile, somewhat reasonable valuations. I

wouldn't just blanketly go into small caps simply because they have a more domestic bent to them. Yeah, that's been your theme for a while now. So let's talk about the rally today. How does it feel to you? Is it just that we got oversold over a six day period or is it this new idea of central bank intervention? I went away for four days and there were two massive central bank interventions. I mean, major central bankers, Japan and now the U.K. and the bond market. So there may be some thinking that given the Fed has emphasized that they will not step in simply because of financial market volatility. Powell's been pressing that idea back to 2018 and making a point to say that there's a difference between financial market volatility and financial system instability. However, he has suggested that were financial system instability

to really pick up, that that would be a different story in terms of the Fed stepping back in, whatever that means, considering a pause. So there could be some of that at play from a macro perspective. You're right. We technically got very, very oversold the market. The S&P had more than 90 percent of stocks trading above 50-day moving averages back in mid-August. That dropped to less than 3 percent at yesterday's lows. Yet at the same time, a smaller percentage of stocks were trading at new lows. So there's some indication that under the surface, breadth is improving even as we retested, which is often the kind of sign you want to look for to get a sense of whether we're trying to find stability. It's probably not going to turn on a dime, but that's one potentially positive sign from a technical and breadth

perspective. Just want to point out to everyone, we are at session highs now up about 537 points on the Dow. Nasdaq's at session highs as well. Nasdaq comp up almost 2%. Remember, it's still about 32% off the highs. Lizanne, this idea of central bankers stepping in over financial stability. So is the point here that what we've learned over the last 24 hours is that financial market instability trumps inflation when it comes to the central bankers fight and that the markets contest the Fed to do the same? Financial system instability, again, to be differentiated from financial market volatility. In the case of the latter, the Fed has said that's not our mandate to keep financial market volatility low In the case of the latter, the Fed has said that's not our mandate to keep financial market volatility low. But if you start to see an infection of the

financial system, and there's no overt signs of that yet in the U.S., but given what the Bank of England decided to do, there may be some inference that that could be an impetus for the Fed to maybe at least slightly lift its foot off the brake. I'm not suggesting I think that's what they're going to do. I think they would have to see it more acutely in our own financial plumbing system. But that could be one of the background sort of stories behind why the market rallied today, or it simply could be an oversold bounce. So we're 23 percent off the highs on the S&P 500. What are the earnings expectations? And do they do you think at this point they line up with reality of what we're

facing in the economy? I don't think they line up with reality yet. You were closer to two hundred and thirty dollars in terms of dollar earnings estimated for calendar year 2022. That's now down to two twenty three. Last year was two oh8. Maybe we don't sink below that for this calendar year, but I think we still have a ways to go on the downside to a point where probably sometime in the next two or three quarters, we get to a point where that year-over-year change goes into negative territory, which would be very in keeping with what we've seen from a macroeconomic standpoint. I just don't think it's yet manifested itself fully in that re-rating of earnings. I think once the second quarter earnings or third quarter earnings season starts to get reported,

that'll give analysts more color. And I think the path of least resistance for earnings is still down. Lizanne Saunders, good to talk to you, especially on a day like today. Appreciate it. From Charles Schwab, we're getting a 2% in your rally on the S&P 500. Again, every sector higher led by energy. Take a look at these high flyers today. Shares of Biogen and Japanese drug maker Acai soaring on positive trial results for their Alzheimer's treatment. Up next, Acai's U.S. chairman and CEO on the prospects for the drug and when it could win regulatory approval. You're watching Closing Bell here on CNBC.

Dow soaring now above 500 points. We'll be right back. Take a look at drug makers Biogen and ASI surging today. This follows positive data in its latest Alzheimer's drug trial. Cognitive decline in the group that received the drug was reduced by 27% compared to those that received the placebo. Joining us here first on CNBC, ASI Chairman and CEO for the US, Ivan Chung. Ivan, it's great to have you here. Thank you for joining us. Thank you for having me, Sarah. So obviously it's a huge headline and really promising. My biggest question, Ivan, is on the 27%,

did it restore mental capacity or did it just stop the decline? It's a great question. The therapeutic goal for these individuals at this stage of early symptomatic stage of the disease is to give them as much time as possible staying in this stage of disease. So it does not restore or cure the disease,

but it gives these individuals more time at this stage, which is critical because these individuals are functional. Thank you. So that means as you would see this being used, it would be best for early-stage Alzheimer's patients? Yes, early, very early symptomatic stage. Remember, these individuals, they can take care of themselves at home. They can dress themselves.

They can interact with patients and families without impairment. We want to keep them there for as long as possible. How big of an effect was it in terms of the measured reduction in cognitive decline, 1 through 10? We believe these results are very clinically meaningful. 25% slowing in this large-scale trial, which is already a bit higher bar than the 20% that some other experts and companies tend to use. Even at this higher bar, 25% recrossed this bar at 27%, as you said earlier. So we are very excited about this convincing outcome. How is it different than the drug that Biogen was testing before? And how is it different from some of the other ones that

are being tested by Roche and Lilly? Licanumab, this drug, has what we believe an optimal way to interrupt the amyloid pathophysiology in the brain. Actually, the primary mode of action of licanumab is not to target the plaque in the brain, actually the primary mode of action of lacanimab is not to target the plaque in the brain, but the toxic amyloid protein aggregates called protofibrils, which is actually a couple steps before the plaque. And we believe this is the reason why you see the definitively positive results in this large-scale trial.

What can you tell us, Ivan, about the cost of the drug? This is a very important question, and ASI has been in Alzheimer's research for four decades. Actually, 25 years ago, we introduced our first treatment for Alzheimer's disease patients. We've been in this space for a long time. We understand the sensitivity for all the families and patients and the Alzheimer's community. Socially responsible pricing is a critical guiding principle at ASI. Thank you. Well, do you think Medicare will pay for it? As you know, the CMS has come out with the national coverage determination policy, and we believe these results from Clarity AED, this large-scale trial,

answers all the key questions in the CMS policy. We cannot wait to share these important data with the CMS and to continue the productive dialogue we've had with the CMS for the past few months already. And really quickly, Ivan, can you just take me through the timeline, if you have it, on when you will seek approval? Sarah, as you may know, the Canimep is already under accelerated approval review by the FDA based on the mid-stage trial with an action date in January 2023. Actually, it's coming up in a couple months. And the process is once we have the accelerated approval from the FDA, the ASI team will immediately file for the full approval based on the Clarity AD large-scale phase three data. So we expect full approval to come in the middle of next year.

Ivan, thank you. A lot of information there. Appreciate you taking the questions and coming on. Very hopeful. Ivan Chang from A5. Watching those stocks as one analyst, Guggenheim, says mega blockbuster potential for this drug. They like Biogen. Take a look at the markets right now. S&P rallying more than 2%. The Nasdaq's up more than that. The Dow up 571 points. We're looking at our session high. Small caps, as Mike highlighted earlier, up 3.3%. Up next, Rock Creek Capital CEO gives us her best investment ideas from the Delivering Alpha

conference. And then later, former Fed Vice Chair Richard Clarida on whether the Fed is taking the right steps right now to fight inflation and ensure an economic soft landing, if they can manage that one. We'll be right back. Don't fight investing in China. It's a hugely complex market, but very uncorrelated with assets that most people hold. And it's a country that is going to emerge from COVID. It's a country that is going to put its 22 youth employment back to work it's an it's a it's an economy that is going to continue to invest in evs semis etc and it is a and it is a country that has declared that China 2025 made in China 2025 is a real thing that was Mary erdosPMorgan asset and wealth management CEO,

and why she's bullish for the long term on China. She made her case earlier on stage with me at the Delivering Alpha conference. Here now to join with her take is Afsaneh Bashlos. She's the founder and CEO of Rock Creek, also joining us from our Delivering Alpha conference. Afsaneh, thank you for joining us. It's good to see you. I think that you have a differing view. It's good to see you too. I think you have a different view

on China. Explain. Absolutely. I think the World Bank just downgraded China's growth rate to about 2.8 percent, down from 5 percent. The way I look at China is that we had this incredible growth rate the last 10, 20 years, and that just cannot go on forever. So even without all the things that have been going on, that we have been seeing in China politically, geopolitically, economically, and in the tech sector, you would have seen growth rates come down, number one. Number two, they may not stay at 2.8%, but they might be somewhere between 2% and let's say 4% versus 4% and 6%, 7%. Number two, the demographics of China is such that actually people are having fewer kids. And so the population is dwindling. Obviously,

they'll use AI, they'll use robots, they'll use all the other tools, but the number of people in China is coming down, which affects both their labor force and the wages of the labor force. Export has been very healthy this year, but given all the geopolitics that we're all very much aware of and other countries becoming more nationalistic in terms of made in the U.S. or made in Europe, likely that that will impact China's exports. You are absolutely right in terms of what Mary just said about local markets. Their local market will continue to grow, but I think it will be impacted by exports. So where in the world do you go? Do you chase returns that could be potentially better overseas at this point, given the underperformance, or stay in the U.S.?

So the countries that are benefiting from what's going on in China are the ASEAN countries. In fact, a lot of Chinese companies are moving, let's say, to Vietnam and building their new plants in Vietnam. You also have around Vietnam, you have countries like Malaysia, Indonesia that are very resource rich and have a fairly sophisticated labor force. And then, of course, we should really talk about India, because India is one country where you're having the exact opposite of what's happening in China. What you're having is Modi, their leader, and their business community are all very aligned on going very big on the green economy and really investing a lot on both sides in

the renewable area. Why does that matter? Because a lot of things that may not come to the U.S. from China, let's say, on solar panels, et cetera, might start coming in from India in a few years. And last but not least, I would venture to say, just like you had the big outsourcing that we saw with Infosys and others from India into the rest of the world,

you might see that with the green economy. So you're there at Delivering Alpha to speak on a panel that's called The Next Big Thing. And I have a feeling for you that might be in climate tech or climate investing. Is that what you're focused on? Absolutely. And I think we see the prices of solar, wind, other technologies have come down a lot. And also with the Inflation Act in the U.S., you have the wind on your back when it comes to climate smart investments. Plus, you have the new generation that's buying the goods, whether it is retrofitting your house, whether it is where you're going to work, or what kind of car you drive. Afsaneh, look forward to your panel coming up from Delivering Alpha. We appreciate it. Thank you very much. Good to see you. Great to be with you. Earlier today,

billionaire investor Stanley Druckenmiller also making waves at Delivering Alpha by saying he sees a hard landing for the economy next year. Up next, former Fed Vice Chair Richard Claridon, whether he thinks a deep recession is inevitable. We'll be right back. The big news moving markets came from the Bank of England today. The central bank looking to try and stabilize its debt market by starting to buy long-dated bonds on, quote, whatever scale is necessary. The move turned futures around here in the U.S. Joining me at Post 9 with his take is former Federal Reserve Vice Chair Richard

Clare. Boy, you got out just in time for this craziness in the world of central banking. What is this going to work with what the British Central Bank is trying to do? Well, I think it will work. They're putting their full faith and force behind it. The real question for markets is what happens in a month when this program is is over. And obviously their hiking rates. So right now it's a little bit of an awkward situation to be tightening policy and intervening. But I think they explained it very well. So we'll have to see. I mean, the real question is what's going to happen with the government policy and these tax cuts and expansive policy at a time where they're trying to fight inflation, getting a rebuke from the IMF.

Wow. Been a while, huh? That's like an emerging market. Yes. Yes. Well, anyway, obviously, the new government came in with its own ideas on tax policy at a time when the Bank of England is trying to reduce inflation. So they're trying to work it out in real time.

And that's what we're seeing, I think. So the question is, can you invest in that country right now, given these opposing policies? Well, certainly, if you do invest right now, there's a lot of volatility that you're going to have to stomach. So I imagine a lot of investors will be on the sidelines to see how this shakes out. Mary Erdos was on a panel with Pan Delivering Alpha today.

Listen to what she said about potential investment opportunities in the UK. Last week, people said don't invest in a single thing in the UK. That is exactly when people like us and people in the room think, let's go look right there. I think UK banks might be the most interesting thing you could invest in. UK banks in this kind of environment, what's ahead for that economy? Well, obviously, inflation is way too high and there's a new there's a new government in place. So there's a lot of uncertainty. Look, sir, the global economy, inflation is too high in most countries and most central banks are tightening. And there's going to be a slowdown as a result of that, as well as Ukraine.

So I think, you know, you can't paint a rosy picture right now. All right. So now there's the question of the Fed, which it looks like markets are stable in this country. Do you think that they would intervene or pivot like the UK did if we start to get sort of out of whack with our bond market? Is that what the market is trying to figure out today? I think the hurdle to do that is very high and appropriately high. But certainly during my time, we saw periods of dislocation in the Treasury and the repo markets. And the Fed does have a financial stability responsibility. But bottom line is, I think the hurdle to do that is very high. And I don't think they're expecting

to do it. But one thing I learned in my three and a half years is never say never. So I won't give you an absolute no. We've got we're getting a lot of Fed speak these days. Oh, my. And you can help interpret this today. Today we heard from Rafael Bostic of the Atlanta Fed. He said, and I think we have the quote here, we have to get to a moderately restrictive stance. And for me, that is in the four point two five to four and a half range for our policy by the end of the year. My preference is we get there by year end. Interpret that for me, that is in the 4.25 to 4.5 range for our policy by the end of the year. My preference is we get there by year end. Interpret that for us, if you would.

Well, right now, Sarah, we have an unusual situation where virtually every Fed speaker is singing from the same hymnal, the same playbook. Under Chair Powell's leadership, there's really been a hawkish pivot this year since the March meeting. I think the chair made it very clear. He thinks rakes are going to that level that Bostick referred to, 425 to 450. I do think there's a sense on the committee to get the hard medicine out of the way this year. I really do think that they're trying to front load as much of this as they can. And then hopefully next year, the data starts to improve and they can pause. And I think that's certainly what they're thinking right now.

That's what the SEP indicated. So 75 November? That's what I would guess right now. 50 in December. And then one more hike either in January or March of next year, I think, is what I call the plausible best case scenario. And then they pause. And then they pause. Because why?

They'll pause because they will have done a lot. And many folks, including Vice Chair Brainard, has said at some point it would be appropriate to step back and assess. But again, it is going to be data dependent. They're hoping the inflation data starts to improve. It's been slower to improve than they and others thought. But I think the baseline is next year that we do get a pause. But they'll push back against a cut. You know, when Jay Powell says pause, the markets will hear a cut and they will definitely try to push back against that. Well, I think it depends how bad the economy turns and unemployment gets. Yeah. What is your guess on what happens there? Well, I do give the committee credit for,

I think, being more realistic that some pain is going to include a rise in the unemployment rate. Now, admittedly, from a very low level, three and a half percent recently, I do think in the end that to get inflation down into the twos will probably require a larger increase in unemployment, say perhaps up to five percent. So that would be a point and a half, whereas they have a little bit less than that right now. So I do think that they're moving in a more realistic direction on the projection. But we can't kid ourselves. Inflation is too high. The Fed started in March of this year to hike. And there will be some time before we see evidence that inflation is coming down towards 2 percent. Is that true, though? I think the worry now is that inflation is starting to come down. You can look in commodities. You can listen to these companies' conference calls on logistics and supply chain. And the Fed is not pulling back

on its supersized interest rate increases. The concern is that they're going to do more damage than good at a time when inflation is falling. And that's an excellent question, Sarah. And that is a risk. I think the risk, unfortunately, because the inflation overshoot was so large last year, it's so persistent that Jay Powell and his colleagues are worried about price stability and inflation expectations remain anchored. So I think if there is a bias, if there is a skew, it's probably towards over-tightening. But I think that that is something that they're willing to live with because the alternative, I think, they think is worse. Are they watching the dollar here? They've got to be.

I think they probably are, although they're probably not commenting publicly on, you know, the usual answer is- That's why I'm asking you. You're out. You can tell us. Well, I think the strong dollar, I think they understand the strong dollar. We have a lot of Fed rate hikes,

and US rates are now higher than in most other major countries in the world. So that would support the dollar. A stronger dollar does help to reduce inflation at the margin, but it also hurts everybody. Exactly. It has some adverse consequences, especially for emerging economies that borrow in dollars. I think the way the Fed thinks about the dollar, as the chair and Janet Yellen and Bernanke said, is look, the U.S. has a U.S. mandate, U.S. inflation, U.S. employment. But of course, the Fed wants to understand how its policies impact the global outlook. And I think they're factoring it in. But ultimately, they're going to be judged on U.S. inflation and U.S. employment.

But we are getting to the point where Japan intervened in the currency market to boost its yen for the first time since the 90s. The U.K. is now intervening in the bond market. Who knows if they would do that in the currency market with the pound at 106 overnight. We're getting to the point where there are questions about whether we could see something globally coordinated. How close are we to that? Well, I think we're not as close maybe as some in the markets guess. That would be an effort that would be led by Treasury Secretary Yellen, as you know, from your many years covering the Treasury that leads the currency negotiation efforts.

Right now, I think, again, I think the hurdle would be high to doing that. Again, never say never. I don't think it's imminent, though. All right. On the U.S. economy, Sean Druckenmiller earlier on in delivering Alpha, pretty negative on the Fed, on the policies and where we're headed. Listen to what he said. Yeah. Our central case is a hard landing by the end of 23, but I don't know, I've been wrong on a lot of things. I could be wrong on this, but since I do it for a living,

that's our forecast, which is a recession in 23. Recession, hard landing in 23. What is the likelihood? I think we'll likely have a recession. It may be a mild recession. It may be a growth recession. But yes, I do think we'll have a recession. I don't necessarily think it's a hard landing recession, as Stan appeared to imply.

What's a hard landing? When unemployment spikes? Yes. Well, you know, the last two recessions, Sarah, were the two worst ones since the Depression. We can have a recession when growth slows. The unemployment rate rises, say, a point and a half. Obviously, that's not good if you're losing your job, but it's not cataclysmic.

And so I think that we can likely avoid a severe recession, but a technical downturn is probably more likely than not. I think so. So my final question is, you're going back to PIMCO. Yeah. You've always got an eye on the markets. Yeah. Question is, are we starting to see the peak in treasury yields?

With the two-year yield having soared past 4.2 and the 10-year above 4%. You think there's more to go there as the Fed raises rates? Or are we getting near the top? I think we're close because I think this Fed does have credibility in terms of inflation. Breakeven inflation in the TIPS market is basically voting a vote of confidence in the Fed, even surveys. So I think we'll be near the peak in the bond yields when we get near the peak in the Fed funds rate, which could be January. So we're probably closer than not right now. Richard Clarida, great to have you.

As always. Good to have you back here at the New York Stock Exchange. Thank you. Here's where we stand, everyone, right now in the market. The Dow has taken another leg up. We're up more than 600 points right now. Remember, we're coming off of six down days in the market, but quite a nice snapback here.

It follows lower yields, following the Bank of England intervention, of course, and a weaker dollar for a change. The NASDAQ is up 2.3%, and small caps are roaring, up 3.65. Could Netflix's upcoming ad tier be a stream come true for the beaten down stock? It is higher by more than 8% today. Look, more than nine. At least one Wall Street firm thinks so. Coming up, we'll have details of a big upgrade for Netflix. And a reminder, you can listen to Closing Bell on the go by following the

Closing Bell podcast on your favorite podcast app. We will be right back with the Dow up 605. Apple, the big loser in the Dow, the only loser in the Dow right now on concerns about iPhone 14 demand. That story plus an upgrade for Netflix sends its share soaring and a big deal for Boeing. All when we take you inside the market zone next. We are at the highs of the day, up almost 650 points on the Dow, more than 2% on the S&P. We are now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santelli

here to break down these crucial moments of the trading day as always. Plus, we've got Steve Kovac on Apple and Julia Boorstin on Netflix going in opposite directions today. We'll kick it off with the broader market because, boy, what a nice rally we're having here. 650 points higher on the Dow, 2.35 percent higher now on the S&P. And those small caps, Mike, you highlighted earlier, soaring up more than three and three quarters percent. They say the best rallies always happen in the middle of bear markets. Well, that is true. And, you know, we obviously can't declare that this is anything but one of those again, but it just shows you how tightly wound the markets were. Even coming into this

week, the setup was, you know, stocks looking almost as washed out as they did in mid-June at that low. You had very unstable, intense moves higher in both the dollar and the treasury yields, all of it kind of lining up that something had to give. And today it's a buying frenzy in bonds, obviously touched off what the Bank of England was forced to do with its long-term bonds. Yields coming crashing down. It just essentially kind of puts everything in reverse, frees up the system and allows the oversold market to have this lift right here. We are at a new high for the week in the S&P 500 going toward, you know, where we sort of fell out of bed late last week. But for how long is the question? I am rich, Clare. I don't know if you just heard the interview saying what they'll be able to put a Band-Aid on this for the bond market. But what happens when this program expires in about a month?

You're still dealing with a fiscal policy that basically woke up the bond vigilantes in the U.K. and makes it very hard for that central bank to fight inflation. And what sort of ramifications does that have around the world? This is not some emerging markets country. Yeah. No, we absolutely don't know if this is anything but a temporary fix. But even that would seem to buy time for both the markets and potentially for UK policymakers to make some adjustments. And also just for everyone to decide, you know, if it's not a one way market where yields do nothing but go higher, if you wanted to lock

in these levels and clearly a lot of people are talking about finding bonds attractive at these in this area, then you might actually have a little more slow moving capital into into bonds. It's not the whole fix. It's not meaning that earnings are going to be great, but we are emerging out of the worst of the seasonal period. At the same time, you have a very oversold stock market. So, you know, you wouldn't want to just say it's going to be one day and done. Right. And how about that 10 year spending some time above 4 percent, really pulling back to 3.7 right now? Quite a move. Apple is the notable loser in the doubt today on a report that the company is no longer planning

to increase production of the new iPhone 14 because of weaker than expected demand. That report sending shares of Apple suppliers lower as well. Semis are underperforming in the rally today as well. Steve Kovac joins us. Steve, investors obviously don't like the news. How are the analysts reacting? How much stock should we put into it? Yeah, Sarah. So analysts are actually pushing back against this today. And it really comes down to this tension to the way Apple actually reports their iPhone sales. You might remember a few years ago it used to be by unit. And that's what this report is focusing on. They're not going to make as many units as they had anticipated.

But the analysts pushing back on that and saying, hey, look, they may not be selling or unit sales may be flat year over year. But they are selling more of those pro lines of iPhones. Those are the more expensive ones that will actually help boost iPhone revenue and show some growth year over year. So that's where the tension is happening here, Sarah, that people are kind of conflating these two things. But look, it is true that maybe they saw some signals here that there were going to be increased demand for the iPhone, more so than they had anticipated. But now that's not happening. And there are some signals, in fact, outside of China that could be the culprit.

Jeffrey's had a note out earlier this week saying sales in the first three days of iPhones were down 3%. But again, analysts pushing back. Morgan Stanley said, you know, more bark than bite to this report. I think I saw one from Evercore questioning, is this fake news? It's a little bit of a gray area here. But what's really happening is on a unit basis, they're saying iPhone sales will be pretty flat year over year on revenue because of the strength of the iPhone Pro and prioritizing that manufacturing of the iPhone 14 Pro could help revenue continue to grow, Sarah. It always feels like a guessing game after they release these new products.

Usually the reports come out of Asia. On the supplier side, this one out of Bloomberg, has Apple said anything about demand or expectations? No comments yet, but you better bet that's going to be the first question to ask Tim Cook on earnings. What does the next look like of iPhone sales? Is it truly like we're hearing about on the on the pro end selling better? I think Citi estimated 76 percent of new iPhones sold in so far this cycle are the pro line. So that might not be good news for Apple if they want more iPhones in people's hands. But it is good for the metric that investors actually care about, which is the revenue growth. Well, Apple is sitting out the rally today, and information technology is the weakest sector in

the market right now, though it is still up about 1.2 percent. Steve Kovacs, Steve, thank you. Thanks. Meanwhile, Boeing is certainly helping the Dow soar today. The aerospace giant announcing a deal to sell 16 Dreamliner jets to Taiwan's China Airlines. The deal includes an option for an additional eight planes as well. No financial details were announced, but it could be worth more than $4 billion at list prices. And Morgan Stanley reiterating its buy rating on Boeing, citing valuation, Boeing has been significantly underperforming the Dow and the S&P over the

last week. Our Phil LeBeau joins us. Phil, big deal for Boeing. Is the market for wide body planes starting to pick up? How do you read this? Oh, that's definitely the way to read it, Sarah, because the market for wide body planes has been subdued. And that's there's an understandable reason why international travel remains the one part of the airline business that is most depressed relative to 2019 levels. China, you can't get in there, you know, from a lot of places around the world. Still, Europe is a little bit better. Transatlantic travel is improving. Trans-Pacific still dicey at best. As you start to see all of those markets improve in terms of travel, you'll start to see airlines like China Airlines make

these types of orders because they want to start replenishing their supply of wide body aircraft. I'm looking, Mike, at the stock chart. It's down 33 percent year to date. It's actually one of the bottom performers, along with Cisco, 3M, Disney, Walgreens, Nike on the Dow. So how does the stock look here? I mean, and on a three-year basis, it's that much worse. If you obviously remember before the pandemic, look, it's at the bottom end of this range. Nothing would keep it from going back above 150 or so. I think there's a little bit of a theme emerging that because the defense contractor stocks have done so well that the implied valuation of Boeing's defense business really does now account for a pretty good share of the overall company valuation.

So maybe there's a bit of a cushion there. But with all the debt that the company was forced to take on, you know, if you kind of bundle that into it, it doesn't necessarily look cheap, but it's just going to be news driven. If you tell me cash flows are coming back to a more normal level in two years, we keep pushing off that date when it's going to be, then the stock can probably work a little bit better. Boeing adding about 41 points to the Dow's rally today, which is up more than 650. Home Depot adding about 100. Phil, a bow. Phil, thank you. Netflix is also a winner today. Atlantic Equity is upgrading the streaming giant to overweight from neutral. Price target of $283. That implies an upside of more than 20% from here. The analysts

saying the benefits of Netflix's upcoming ad tier are not currently reflected in the stock. And Wolf Research issuing a bullish earnings outlook for Netflix because of the ad tier. Julia Boorstin joins us. Julia, Wall Street seems to be coming around to the ad strategy, but what are the persistent risks here for the company, along with that bullish narrative? Well, look, Wolf Research pointed out that there is significant FX risk, saying that FX could impact earnings by as much as 10 percent. But the overall sentiment here is that the ad move for Netflix will be very, very beneficial. Just want to point out that Atlantic estimates that ad revenues could reach eight billion dollars in 2025, accounting for as much as 20% of total revenues.

And what is so interesting here is they believe that if people trade down from the ad-free version to the lower-cost ad-supported version, that will actually be beneficial for Netflix. even more ad revenue per user because people just simply spend so much time streaming on Netflix and they actually estimate that ad advertising revenue per user could be much more than what Hulu gets. So a really bullish sentiment here on the ad potential. And they're expecting that we could see this ad supported version of Netflix launches early as soon as early November. Isn't that and isn't the bear case persistently, Julia, now that sort of everyone woke up to this year that they lost their library, right, as all the other companies have tried to take their own streaming content and try to bring in users. And it's so expensive to make these hit shows and they just don't have that many. They can't have that many to keep people engaged for

so long, especially when people are on a budget. That's how I would sum up the conversations I've had with bearish ones around Netflix. Yes, and it's so hard to build franchises and have really appealing IP that people are going to tune in for, or I would say stream for. And so what I think is so interesting here is many would say that Netflix is late to the ad-supported game.

You have consumers who are struggling with inflation. They want to spend less on content. There are so many streaming services out there. And as Netflix loses some of its content, it's already so big, then maybe they're going to be churning out. Maybe they're going to be dropping after their favorite show is over. The other thing I hear a lot about, Sarah, is this idea that the binge model that Netflix pioneered that was so effective for it when it was really the only one in the game, it just doesn't work anymore. And it's not good if you can quickly stream all the episodes in your favorite show and then drop the service. And I'm hearing that we're likely to see them shift to more of a drip feed model where you have to keep coming back week after week

because they have to figure out how to make the service appealing over the long run. That's why they're doing things like games. They want to give you a lot of reasons not to drop Netflix. Julia Borsten. Julia, thank you. Well, Mike, Netflix is up nine and a half percent. It's the second best performer in the triple Qs because Biogen is up 40 percent on that Alzheimer's drug that we that we talked about. Also, we're seeing some reaction in some of the other ones that have similar drugs, like Lily is trading now at an all time high. Eli Lilly. What else is standing out to you about what is getting bought as the market clearly comes back? Also, ARK Innovation, it's up 5%, that ETF that has been- So a combination of the stuff that has been beaten down the most, that's pretty common when

you have an oversold market that's coming back. But also, some of the very largest, more blue-chippy NASDAQ stocks that really did underperform Apple very badly, like an Amazon. In terms of contributors to the upside in the S&P, they're a big piece of it. You know, Apple's for sale. Sure, you had the reports of iPhone production cuts. Perhaps it's really much more about Apple was considered to be the safe haven at the end of a sell off. Those things kind of back off and crack a little bit. That, to me, is the main dynamic going on right now. We've got two minutes to go in the trading day. Losing a bit of steam, but still holding on to an almost 600-point rally here on the Dow. What do you see in the internals? Yeah, it's very strong, Sarah. So again, you have a 9 to 1, almost 10 to 1

advancing to declining volume. That's obviously very strong, Brett, something like 90%. That's what you look for. We've been talking about the bond market move take a look at year to date the 10-year treasury yield and what you'll see is three pretty well defined sort of spikes up to a high and then down the first one in may was when it ran above three percent the second one in june it ran above uh three and a half percent and this latest one ran above 4%. All dramatic spikes down from those round numbers. And it did usher in a more stable equity market once the market got convinced that those were going to stick as a short-term spike. So we'll see if that repeats. Volatility index is backing off.

The good news is it went up to the mid-30s, where it has peaked out over the last year or so. It's coming in as the market stabilizes. But that was another thing that flashed that the market was getting pretty well stressed. And now we're relaxing a bit. Yeah. Breaking a six day losing streak. It looks like we're going to do that and have our best day for the Dow since mid-July or so. Best day for the S&P since August. Take a look at where we stand right now. Every Dow stock is higher at the moment, except for Apple. Home Depot is contributing the most, along with Goldman Sachs, UnitedHealthcare and Boeing.

Dow's up 561 points. S&P 500 is also in rally mode with every sector strong right now here into the close. The worst performing sector is information technology. It's up 1 percent. The best performing is energy, which is up 4.5 percent today. The Nasdaq comp up 2 percent and is actually higher for the week right now. Small caps are the biggest winners of all, up 3.2%. Dollars weaker and Treasuries are getting bought for a change, all after reaction to Bank of England stepping into the debt market. That's it for me on Closing Bell. See you tomorrow into overtime with Scott Wapner.