Closing Bell - Closing Bell: Stocks Soar, Apple's Big Announcement & Kellogg's CEO on Consumer Spending 9/7/22

Episode Date: September 7, 2022

Stocks rallying and the Nasdaq snapping a 7-day losing streak thanks to lower interest rates and oil prices. All eyes were on Apple today, which announced several new products including the iPhone 14 and new Apple Watches. Wedbush's Dan Ives says the price increase on Apple's new iPhone 14 will be a catalyst for the stock to rally. Kellogg CEO Steve Cahillane says he sees resilience in the state of the consumer and does not see people trading down to lower priced products, but does see some costs such as higher wages sticking around. Macquarie's Tim Nollen upgrading shares of Netflix and explains why he is bullish on the streaming giant's upcoming ad tier. And Lightspeed Partner Michael Mignano discusses the outlook for private company valuations and the IPO market.

We're at the highs of the day right now. Stocks posting a bit of a relief rally as the Nasdaq breaks its longest losing streak in almost six years. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look at where we stand right now in the market. The Dow is higher by about 150 points, about 466 points higher. The S&P 500 up 1.8 percent. Every sector is positive right now, except for

looks like energy. The leaders, it's kind of defensive. You've got utilities at the top, but consumer discretionary materials are right down there behind it. So it's broadening out this rally throughout the day. 29 out of 30 Dow stocks higher. Only Chevron is in the red. Home Depot is the biggest contributor to the gains. There's the sector heat map. As you can see, lots of green on the screen. 2% gains plus for all those groups, financials, communication services, materials, discretionary and utilities. Coming up this hour, we will discuss the strength of the consumer, inflation, supply chain issues. We've got an exclusive interview with the CEO of Kellogg. Apple, though, first up, announcing several new products just this

afternoon, including the highly anticipated iPhone 14. Our Steve Kovach in Cupertino, California, with all the highlights. Steve, what do we need to know? Hey there, Sarah. Yeah, let's start off with that iPhone 14. So we have two regular models announced. That's the iPhone 14, iPhone 14 Plus. They got rid of the iPhone 14 Mini, so no more small version of the iPhone. Those are going to go on sale starting next week. And then the iPhone 14 Pro line. Now,

this one looks a little different. New design for the first time in a few years for the iPhone. It has, instead of, they kind of squished those facial recognition centers into a pill-like cutout on the front of the screen, and they're calling that the dynamic island which is kind of a goofy name but basically it will show different status indicators for things like battery life and when you connect your airpods and speaking of airpods new airpods pro those are the noise canceling version uh better noise canceling this time better battery life all those kind of things and then uh we have the new apple watch This is something they spent probably more time on than the iPhone in some respects. The Apple Watch Ultra, this is a $800 rugged version of the Apple Watch.

It's designed for people who like extreme sports like mountain climbing, diving, hiking and extreme conditions. It's extremely durable, has a big bright screen and longer battery life and better GPS, which is really important for runners. What's really interesting is a lot of folks were expecting an increase on the price for iPhones. That didn't happen. The iPhone pricing is steady. So it's going to be interesting to see, Sarah, how that plays into margins when they report earnings in just a month or so. That's what I was going to ask you about, Steve, because I thought it was surprising that they

didn't raise the price specifically of the iPhone Pro, right? The high end. Isn't that what Wall Street was expecting in order to deal with some of the inflationary costs? Yeah, that's exactly right. It's going to be interesting to hear how they can make up any kind of price increase with these problems they're having in the supply chain. But also keep in mind, Sarah, those supply chain issues and inflation issues are hitting other lines more than they're hitting the iPhone line. So Macs have been suffering from that and iPad, but the most profitable product and which accounts for half of the sales or more is the iPhone. And so it sounds like they're able to protect those margins pretty well. Stock is up, which actually it doesn't often do on these

big launch days. Steve Kovach, thank actually it doesn't often do on these big launch days. Steve Kovach, thank you very much. For more on Apple, let's bring in our panel for what to do with the stock. Dan Ives from Wedbush Securities and Senior Markets Commentator Mike Santoli. Dan, you're super bullish on Apple. Anything surprise you today? Okay, I think it was really the new price increase. I mean, I think that just shows the power of the E16 chip. They have a lot of significant pricing power, and I think it was really the no price increase. I mean, I think that just shows the power of the A16 chip. They have a lot of significant pricing power, and I think that really showed. And then if you look, I mean, the models across the board, the fact they had this launch on time, especially given the supply chain issues that we've seen in China, I viewed as almost a superhero-like

view of Cupertino to get through this. Street's going to like the no price increase. What do you make of the stock? It's already outperformed. It's only down 13% so far this year. Is this a catalyst at all? Oh, I view this as a catalyst combined with what we believe is just an underestimated demand cycle. I mean, I think 240 million of a billion iPhones are in a window of an upgrade opportunity. You got 30 percent of those coming out of China that

are in a window of an upgrade with no price increase. It just shows the power that E16 shipped to maintain margins. I believe street numbers continue to move up despite the macro. I view it as a positive catalyst. I think it just shows internally that they continue to have more control over that ecosystem. What do you think, Mike? I mean, Apple does what it does, which is the products get better all the time. They give kind of users more than they necessarily were asking for. But I do think that they've already won the benefit of the doubt in terms of being able to kind of smooth out this upgrade cycle over years. And just having

this huge install base that's why the stock has already kind of done its job in my opinion in terms of holding up better than almost anything else in the NASDAQ- trading at a forty percent premium to the market- based on expected earnings so I

don't know if what happened today is going to get the numbers going up for fiscal twenty twenty three which were basically- you know in right now or just about in. It's supposed to be 6% earnings growth. It's a huge, huge aircraft carrier of a company. It doesn't take a lot to move it, but that's because it's already so profitable that tacking on more is tough. So I feel like it's as steady as she goes. It's consistent with the Apple story. I don't know

that it's necessarily a real inflection point. Why do you disagree, Dan, with what Mike said, that it's already in the stock? Well, I think, I know, look, Mike raises great points. I just think it's really about the installings. I mean, when we do our checks coming out of the issue, even this week, it basically shows 90 million units coming out of the gate. That's flat with iPhone 13. No cuts.

And I think as we go through, and the street's not just under us, I mean, the product cycle, but I think it's ASP. The ASP's continue to shift much higher. And I think street's modeling. And I think that's going to be the big wow factor as we go into the next four to six quarters. And I still think sentiment right now is very negative on Apple and overall just big tech. And I think this is just the start of what I believe is going to be a carpet ride into this major upgrade cycle. Yeah, I mean, I don't know, Dan, if sentiment is that negative in terms of, you know, 80 percent buy ratings on the street. People are basically feeling as if, you know, it is a core

holding at seven point three percent of the S&P. I'm sure very few investors are overweighted because it's so big in the index. But to me, it seems like people are pretty respectful of the story now. No, I think respectful of the story, but I think with valuation, in my opinion, when you look at the services and the sum of the parts, I think that's really the key. I still believe services worth $1.2 to $1.4 trillion. That's not softening. And I think that dynamic is something right now from a buy side perspective, from a whisper. And the street does not believe there is upsides that call 220 million iPhones. You look at what we saw today with the launch and even on AirPods. I still think we look

out the next four to six quarters. I think Cook and Cupertino, yet again, despite the macro, are surprising the upside. What about China, Dan? What's happening there? Because how important is it for Apple right now in terms of profit, revenue, and growth? These rolling shutdowns, aren't they having an impact? You know, that, look, it was the hearts and lungs of the Apple story not just from a demand perspective but for supply. I think when you think about April and May being shut down

because of your code the fact that they had this launch today is really unfathomable relative to where we we look back a few months ago I think the irony is he gained about three hundred bits of market share in the China market. And I think

that's really gonna be a growth catalyst, despite geopolitical and everything we're seeing. Then you combine that with supply. I think the worst of the supply issues in the rearview mirror, and today was Cook and Cupertino flexing their muscles, coming out with all these new products, despite the unprecedented supply chain issues. Dan Ives, big fan of Apple. Thank you

very much. Mike Santoli, we'll see you later. Up next, we will discuss the outlook for the IPO market and tech sector with venture capitalist Michael Mignano. Find out which types of companies he's targeting straight ahead. The Dow at 465, again, at the highs of the day. Pretty broad rally with every sector positive in the S&P except for energy. You're watching Closing Bell on CNBC. Venture capital firm Lightspeed is making a big bet in New York City. It's opening a new office here in part because of growing sectors like fintech and crypto. The company also announcing a new partner today for their consumer team.

And that partner, Michael Mignano, joins us us now michael it's great to have you for those that don't know your founder as well you started anchor sold it to spotify ran ran their talk business obviously a leader in podcasts why are you doing venture now and why in new york city yeah thank you so much sarah thank you so much for having me you Like you said, it's a big day for technology startups and the New York City tech ecosystem. We announced that I'm joining Lightspeed today. We announced that we're opening up a new office here in New York City. And yeah, we think New York City is an amazing place to have an office. We view it as the hub to the rest of the world. When founders from all over the world come to the U.S., they often stop in New York. And having started a company here myself, Anchor, I can tell you that it's a

really great community and great ecosystem. So I'm really excited for this next chapter of my career and to invest in lots of amazing companies with Lightspeed. Are people actually going to be working in the office? You know, there's really no replacement for working live face-to-face in the office. But for even the companies that are working distributed and working remotely, there are still tons of activity and tons of meetings that are taking place right here in New York City. So absolutely. As you mentioned, I recently ran the talk business at Spotify after building and founding Anchor, the world's biggest podcasting platform. And I can tell you, even recently when I was still at Spotify, there were many of us in the office.

And like I said, you really can't replace that in-person connection. So Lightspeed is known for a lot of the investments. We're putting them up on the screen as well. Early Investor and Snap, I would add. What are you eyeing in the New York area when it comes to categories and areas for growth? Because we are at this sort of interesting period where a lot of technology in the startup scene is hurting right now and valuations have come down. So I'll be focused mostly on the consumer sector when I'm working with Lightspeed, but it's really a collaborative firm. It's a global firm and we all work collaboratively cross-sector, cross-geo. You know, technology really never rests despite whatever the market is doing. Technology companies are always being built

and they're always being pushed forward. And I think Lightspeed is in a fantastic position to be the top venture capital fund of the future. It's a truly global firm. We've been global for more than 15 years. We have deep domain expertise across a number of different sectors. We're a true partnership, a big flat organization, not just a handful of individuals. And we have full stack support. We recently raised $7 billion in capital to invest across all stages, which, you know, whatever the market conditions may be, having $7 billion in capital to invest across all stages, which, you know, whatever the market conditions may be, having $7 billion to deploy is going to be really, really helpful over the next few years. But what are you finding in terms of the startup ecosystem and how it's been impacted

by the volatility in the public market, of course, especially in the tech sector? Yeah, I mean, like I said, so I've actually been angel investing for the past couple of years. And even up until I accepted this job, you know, I was doing a number of really exciting deals. I've done about 50 over the past couple of years. And like I said, technology companies won't stop being built. Right. Technology is sort of how we as a collective humanity innovate and push ourselves forward. So we're seeing lots of exciting companies across consumer, enterprise, FinTech, health, growth. There's a lot of really exciting things going on

in the media and consumer sector, especially given some of the recent announcements from some of the big platforms towards recommendation media, more algorithmic content discovery. So it's really a great time to be building a company, and I'm excited to get to work. What about in your area of expertise in podcasts and audio business and media? Opportunity there? Absolutely. I mean, I think, you know, the Internet has taught us that any form of media, any form of content, always over time becomes democratized. It becomes easier and easier to create.

It's what inspired me to want to build Anchor. And now we're seeing that the friction is reducing even lower and people are able to make even more content. You know, one trend in particular we're seeing a lot of is podcasts, a medium that was all about audio up until recently, is starting to be more and more about video. All of the biggest platforms in the world are starting to add video to their podcast offerings. And I think that's only going to get easier and easier for creators to make. And therefore, there will be more and more companies catering to consumers in the sector. Yeah. And also makes you wonder, Michael, what's going to happen to the social media companies? Because it seems like, well, Facebook and TikTok have transitioned into what you're talking about, these video companies.

Absolutely. You know, TikTok really popularized this new means of content discovery, which I call recommendation media, where content is distributed based purely on platform recommendations and less so on social networks or who your friends are. So, you know, the platforms that will really be strong in the future will be the ones that invest in the best machine learning technology because that's what enables them to power these algorithms. Michael, thank you for joining us on your first day with the announcement. We appreciate it. Michael McNamara of Lightspeed. Thanks, Sarah.

Take care. Show you what's happening. You too with the markets right now. About a 460 plus point gain. What's driving it today? Well, you're getting a little bit of a breather in the treasury market. That's certainly helping. Yields are lower for the first time in a while.

They've been shooting straight up basically since Jackson Hole. That's put pressure on tech. Well, today it's rebounding with lower yields. The Nasdaq's up two and a quarter percent. Up next, a look at what elevated stress in the financial system could impact, how elevated stress could impact the market and the economy. And then as we had a break, check out some of today's top search tickers on CNBC.com. Tenure yield takes the top spot as well. As you can see, there's buying today for a change, as I just mentioned. Yield goes below 330. Crude oil gives back 5.5%, a big decline, continuing its decline lately.

82 bucks a barrel. That's why energy stocks are underperforming. Tesla, Apple, and the S&P 500, all strong today, rounding out the top five. We'll be right back. time now for today's market dashboard senior markets commentator mike santoli with a health check from the global financial system so glad you're doing this yeah sir a lot of attention on sort of the blood pressure level of the markets coming into this week especially with the dollar racing higher bond yields as well dislocationslocations in European power markets, oil having an accelerated decline. Well, here's a measure of overall financial stress. This is the OFR, Office of Financial Research, Financial Stress Index. Goes back to the beginning of the year 2000. And you see it has become a bit elevated right here. Nothing compared to the COVID crash. That was that prior spike. This is 2016 or so. So you definitely see things like credit conditions, volatility, nothing really going on in bank funding markets.

That's another thing that's measured here. And equity valuations, they're just sort of lifting a little bit. This is the post-2000 bear market and recession. These shaded areas are recession. So I would say you have to be on alert. But nothing really is telling you that there's about to be some kind of a financial accident. Some strategists are pointing out, look, Fed usually tries to push things until something cries uncle in the financial markets. That hasn't really happened yet, except for valuation suffering. Are currencies in there?

No, they are. Yeah, I believe that the currencies are in there. They're getting kind of extreme. They are. And I think that's part of the idea as to why people are tensing up for something like this, is when you see the dollar racing higher this way against the Chinese and Japanese currencies, you do tend to think that somebody's upside down. Also, a lot of leverage money in the oil markets and the power markets specifically.

And there's some worry that somebody has margin calls out there. But, you know, today you're seeing a little bit of relaxation in the markets as those things ease up a little. Yeah, credit market's been remarkably calm. It's been resilient, yeah. Mike, thank you. We'll see you for Market Zone. Up next, though, the CEO of Kellogg on the outlook for inflation. Why he says the supply chain is still not back to normal.

We'll be right back. The consumer has proven very, very resilient. That's what the Kellogg CEO said he's seeing across his company as consumers deal with high inflation. And the stock is proving to be resilient as well. The company outperforming a number of other consumer staple stocks, take a look, up more than 13% so far this year. Joining us for an exclusive interview is from the Barclays Consumer Staples Conference, Kellogg CEO, Steve Cahillane. Steve, welcome back.

Nice to see you. Thanks, Sarah. Thanks for having me. Good to see you again. So tell us a little bit more about what you are seeing right now from the consumer who is dealing with a price shock across a number of fronts.

Yeah, so I don't want to overstate it when I say that the consumer is resilient, because clearly the consumer is under a lot of pressure in the United States and indeed around the world. But what we have seen is that despite the inflationary pressures, despite the ongoing challenges with COVID, that especially in our business and in other businesses, the consumer has proven resilient. I think there's still some benefits from, obviously, the incredible fiscal stimulus that was put in place. The employment prospects remain very, very strong. If you want a job, you can find a job. And so in the U.S., consumer remains strong. In emerging markets, the consumer, even before the pandemic for our

business, has proven incredibly resilient, starting with oil shocks, through the pandemic, and through the inflation that we're seeing. So quite surprisingly, I would say the consumer continues to show great resilience. So does that mean that you're not seeing a whole lot of evidence of trade downs, which we've been hearing about in different parts of retail and consumer sectors where they're going down in categories or to private label? We are not seeing that. Now, we don't take it for granted, but we continue to invest in our brands. We have to earn the right to be in our consumers' kitchens and on their breakfast tables

and in their pantries each and every day. And so we've continued to invest with value-added programs with our customers to make sure that we mind the price gap, that we earn the right, again, to be part of their shopping list each and every day. So we have not seen that trade down, but we think we've earned the right not to be traded down. Well, what's happening on pricing, Steve? How much have you taken and are you continuing to raise prices? Yeah, so, you know, we say each and every day that, you know, the first line of defense against high prices and input cost inflations for us is productivity. But when you're seeing high teens inflation and inputs,

no level of productivity savings is gonna match that. So, you know, we wanna protect our margins for the long-term health of our business. So we've had to take pricing to cover a gap between three to 4% up to 19%. So, you know, you're talking about, you know, mid-teens inflation and mid-teens cost increases that have had to happen.

As we look into the future and next year, we see the same challenging situation exist. We're going through our plans right now, so we have nothing to announce, but we don't see a mitigation of inflation happening, unfortunately. I heard the same message yesterday from Alan Joke, the CEO of Unilever, who said we're still raising prices, we're still seeing the high costs. And, of course, then people wonder, the pushback is, are you just using it as an excuse to raise prices for consumers? And by you, I mean the industry and all of these companies right now, because you're not seeing a whole lot of pushback. When, in fact, some of these costs are starting to come down. You can just look at the commodity prices yes sarah you know they're starting to come down off historic

highs year over year the cost inflation is still real and it's pervasive and i'd say as an industry you know i haven't seen that you know we we want to maintain our affordability and the the retailers out there the customer base is doing their job exceptionally well. They are not, you know, they are not happily taking price increases. They're challenging everything as they should. And, you know, we want to maintain our affordability. So we're not looking at this as an opportunity to take undue price increases. And when you look at our margins and, you know, obviously we talked about our second quarter results, you know, our margins are still under pressure. We're doing a good job covering input cost inflation,

but we're not necessarily covering the, you know, the disruptive costs, the bottlenecks and the shortages and the unforecastable, unforeseeable increases. You know, we're having to eat that. And so I think all in the industry are looking at affordability and making sure that we're keeping the consumer at the heart and soul of everything we do. At Kellogg, we certainly are. Last time we spoke, Steve, it was on the day that you announced the big plan for breaking the company into three different companies. And I know you've been working on that. Are you on target?

I know you've appointed, named a CEO of the new cereal company. How's it all going? It's going very well. We are definitely on track for the end of next year to spin off the North American cereal business and the plant-based Morningstar Farms business. And, yes, we announced Gary Pilnick, a 22-year veteran for Kellogg, as the new CEO of the business. That was very, very well received inside the company and really gave a lot of energy to the folks in the cereal business.

We announced about half of his leadership team, six individuals with over 100 years of collective experience, very, very widely respected veterans like Doug Vandevelde, Bruce Brown, Sherry Williamson as part of that team running the commercial operations in the supply chain. Very well-respected veterans of Kellogg and definitely shows that we're on track and, in fact, ahead of track because we'd said we'd announce that management team at the latest in the first quarter of next year. And so to get it out this early, I think, was a very positive sign. Yeah, we'll expect more news on that, I guess, into next year. What is

happening on, you mentioned the supply chain, what's happening there? Still seeing problems? Still challenges, Sarah, each and every day. And so the manual and human intervention that has to happen in what were otherwise automated processes continues. In the month of July, in fact, the level of escalations that we had that go all the way to the top of the house was at a record high. And so it's a little bit like the old whack-a-mole game. You know, something gets better and then something else is a little disrupted. And so we're managing through it, but we're not where we want to be in terms of the level of service levels to our customers. We're working hard to get there, but there is just a dislocation

that has happened that continues to happen. It's not just us. It's everybody. You hear it at this conference I'm at. Everybody's working hard to get to a better place, but it continues to be a real challenge. And then there's the retail inventory issue. I'm watching shares of Newell brands today, which are sharply lower. The company cut guidance this quarter for the full year, and they didn't really talk about weakening demand. They talked about retailers pulling back on orders as a primary reason. I'm wondering what you're seeing on that front, if that's an industry-wide issue or something more specific to their categories, which isn't necessarily food. It's other kind of staples and discretionary items.

Yeah, we're not seeing it. You know, we've worked very, very hard to get our inventory levels back to an acceptable level and build our retailers' inventories to an acceptable level so that we have full shelves and good promotional activity for consumers. And so we're at that level. You know, we're always happy to operate at a lower inventory level if we can. But right now we're at acceptable levels for us, for our retailers, and don't really see any changes to that and have not engaged in any

conversations with our retail partners around lowering inventory levels. Right now we've got safety stocks where we need to be so we can satisfy the consumer demand that we have. Well, like I said, the stock has been an outperformer lately. Steve, appreciate you taking the time from the Barclays Back to School Conference. Thank you, Sarah. Thank you. Steve Cahillane, CEO of Kellogg. Take a look at where we stand right now in the markets. A strong day. It's broad. We're breaking the losing streak for the Nasdaq. It was down seven days in a row. It's up two and a quarter percent right now. We're going to discuss whether it's a dead cat bounce

or something more meaningful. Also, Netflix shares rallying after a big upgrade today. The analyst behind that call explains why he is bullish on Netflix's upcoming ad tier. And a reminder, you can listen to Closing Bell on the go. Just follow the Closing Bell podcast on your favorite podcast app. Dow's up 469. We'll be right back. Airline stocks are soaring following a guidance hike by a major carrier. We'll share the details straight ahead. Plus, a Netflix bear changes his tune. All coming up for you in the market zone.

Broad-based rally with a Dow bear changes his tune. All coming up for you in the Market Zone. Broad-based rally with a doubt more than 450. 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, McQuarrie's Tim Nolan on Netflix and Phil LeBeau on the airlines. We'll kick it off with the broader market. The Dow is having a strong day. So is the rest of the market. The S&P 500 up almost 2 percent. The Nasdaq up more than 2 percent. Mike, you wonder if it just got oversold coming in today, whether we should read anything into a rally like this. Well, we definitely were oversold on a short-term basis. Mentioned that yesterday. The key question

is whether the market is going to respond to those conditions. And we have, maybe one day later than a lot of folks were expecting. S&P 500 has sort of spent a lot of time chopping around the 3,900 level. It was seen as a sort of a significant area to hold, and we did. I think the other thing that happened today is, you know, Treasury yields eased back. They were up a lot yesterday, in part on huge corporate debt issuance. The dollar calmed down a little bit, and we stress-tested the stock market for some more somewhat hawkish-sounding Fed news. The Wall Street Journal is saying it'll be three-quarters of a point likely in September

when the Fed meets. And then Lael Brainard coming out again and essentially reiterating their stance that they're not done with the inflation fighting campaign. But it seemed balanced enough. It seemed like not so much new news. When Powell delivered that message, you know, late August, Jackson Hole, the S&P was at 4,200. Here at 3,900, it was net bullish or at least not scary. Right. The hawkish commentary from the Fed members today, including the vice chair, Lael Brainard, saying we're going to have to be there for a while. The fact that the market didn't react to that shows that a lot of that is in. Same with the three quarters of a percentage point hike. That was already,

it didn't come as a huge surprise. I do think the question, Mike, is whether the bond market has it right that the Fed is going to stop hiking in March 2023. Right. And that is the big question. I think the key is that nothing that the Fed officials are saying right now is inconsistent with that idea that there'll be a pause within the next several months. It seems as if they really would love 2022 to be the year where they got rates to where they think they have to be, as opposed to letting it bleed into next year. I think Jim Bullard of St. Louis Fed more or less said that. So I do think that there is sort of the market taking in the hawkish speak, saying they can't rest and they can't wait. You know, they can't necessarily become complacent, wanting to see more help on inflation in a few months worth of data.

But it still could mean that by March, they're mostly where they have to be on rates. That's it, Twitter. Shares are on a tear today after a Delaware court slapped down Elon Musk's request to delay a trial, which could determine whether he needs to move forward with his $44 billion purchase of Twitter. Look at the stock. It's up 6.4%, still a long way from $54.20, the deal price. Julia Boorstin has more. So this one didn't go his way, Julia. It did not go his way.

I mean, there was a little bit of this ruling that did work in his favor, and that was that the judge said that Musk's team will be allowed to take some of the information from the whistleblower, Peter Zatko, and incorporate that into their case. Because, of course, the allegations from the whistleblower do change the argument a little bit. But the fact that the judge decided not to change the date of the trial, it's still set for the week of October 17th. It's going to be a five-day trial.

The fact that she didn't budge on that indicates that she doesn't think the whistleblower's allegations are a game changer. So we're seeing the stock move higher because there's this sense that based on what the judge said today, that she is going to be holding a pretty hard line in terms of making sure that Musk goes forward with the terms of the agreement and really sticking to his original argument when he refused to go through the sale of the company. So very interesting here to see her comments. And we're seeing some analysts weigh in here saying that the fact that she's holding a hard line on the date of the trial reflects the magnitude of the damage that the Musk circus has already done and continue to do. That's a quote from CFRA. So interesting to watch those shares up 6.5% today. Yeah, well, now we wait for the trial, I guess.

Do you have any sense, Julia, of what is happening inside Twitter? I know you interviewed Snap's today, Snap CEO, Evan Spiegel. They're trying to move forward and get through the macroeconomic headwinds, Meta's focusing on video. How is this company running day to day with this kind of distraction and cloud hanging over it? Well, look, there is no doubt this is a massive distraction. Any company that would have to reckon with this, you know, the fact that there's a lawsuit, never mind the fact that all of their employees are probably watching the headlines and waiting for Elon Musk to tweet in any second, there is a massive distraction.

I did talk to some sources there who said they were surprised that the judge didn't split the difference. There was some anticipation that maybe she would say, hey, we won't grant a four-week delay, which is what Musk was looking for. Maybe she would delay by a week or two. The fact that she didn't delay at all, I bet some people there are breathing a big sigh of relief today. Julia Borson. Julia, thank you. Starbucks shares getting a jolt ahead of the coffee chain's investor day next Tuesday.

Outgoing CEO Howard Schultz voicing his support for incoming CEO Lakshman Narasimhan on CNBC earlier today. He's set to join in October. The Starbucks customer also proving remarkably resilient in the face of inflation, according to Mr. Schultz. Listen. The price of Starbucks coffee is not something that customers are,

they want to give up. And so the demand for Starbucks, despite the fact that we had to raise prices about 5% over the past year because of inflation, our business is quite strong and it's still an affordable luxury. Mike, my question to you is, where is the street on Starbucks? Because the business is strong. Schultz has come back. The market is excited about that. They're excited about the new CEO. But the reason Schultz came in to begin with is because they had a real problem on their hands coming out of COVID with employees and getting back to the kind of growth they were seeing pre-COVID. Yeah, I think the street is a little bit mixed on the

story, basically respectful of the fact that it's a core brand, one of the great kind of American consumer brands and steadier in its financial performance than almost anything else in consumer discretionary for the most part, except for McDonald's maybe. But it seems as if it's at an awkward stage in its global growth build out and just having a lot of operational issues to worry about. I don't, I would actually tend to agree with Howard Schultz on the idea that one of the things that is not a big concern is acute price sensitivity of the customer base. I can remember in the 90s when it was one of the great growth stocks of the decade, and the bear case on Starbucks was always who was ever going to pay $2 for a cup of coffee.

And so it seems like they've not reached that limit to where we're talking about, as he says, still relatively affordable indulgences. Yes, even more so when it's pumpkin spice season and you have your pumpkin spice latte. What about China? It's very heavily exposed to China. Are any of these consumer stocks, I asked about Apple before, Dan Ives, about that one, Nike.

Are any of them really feeling the impact from what's been happening in China, which are millions of people being locked down? I absolutely think they're feeling the impact on the growth side, on the sales side. What they're not seeing, I think, is that confusion about whether the authorities in China are hostile to the brand or they don't really want to replace it with their own domestic providers. That's the case with some tech and some manufacturing businesses.

Not really the case when it comes to, you know, the Western consumer brand. So I think that you have to worry about it cyclically, but not over the very, very long term, because it's still in a pretty aggressive growth mode, or at least was until, you know, the last couple of years in China. Well, unless the geopolitics get worse, that could be a problem between the U.S. and China. Look at Netflix shares rising in today's session. A new report from The Wall Street Journal saying the company is taking a wide range of steps to cut costs in the face of what it's been seeing, slowing subscriber growth, including hiring more junior staff, better controlling cloud computing costs, and also limiting its real estate footprint

and corporate swag. Joining us for more on the stock is Macquarie Capital senior media analyst, Tim Nolen, who just upgraded Netflix to neutral from underperformed, Tim, have a $230 price target on the stock, which is basically where we are right now. So it's not exactly a bullish call. What's your feeling on Netflix? Right.

Well, we were bearish on Netflix because we just saw these streaming wars taking off and so much competition from Disney Plus and so many other players. And just pressure on consumers' time to spend with streaming and the amount they're willing to spend on all these different services. When Netflix came out with the discussion of launching an ad-supported tier, that began to pique our interest again. And so what we've done today is produced a report that really digs into how the math works behind this. And we estimate that it could be not only a strong ad revenue business for Netflix if they roll it out smoothly, but in terms of incremental revenue to the company and earnings, of course, factoring in, you'll have some migration of paid subs to this lower

price tier, still leads to some good incremental revenue and earnings performance for Netflix over a few years time. So do you see that as already being priced into the stock at $228? It's still down almost 70 percent year to date. Year to date, yeah. It's up from its lowest quite a bit. We just felt that it's past the worst. Now, who knows what the next sub number might be when they report Q3. That's always the primary driver of the stock. But the fundamental view that we're taking here is that ad companies receive on the ads that they place can be actually very high. And so the ad-supported streaming services can be actually more lucrative than the ad-free services. Netflix has woken up to this. They may be launching the service already on November 1st is what we're reading most recently.

And that, we think, can actually lead to some nice incremental revenue growth, again, over the next few years. Now, it's still a very crowded marketplace, right? And we didn't go to an outperform. We went to a neutral. It's also a difficult ad market we're going into. If we have an ad slowdown, which appears to be underway as the economy slows, it's not exactly the best market to be entering into. But Netflix has great brand recognition, great user base, good data to target ads to those consumers. And it's a structural shift from linear traditional TV into more connected, over-the-top streaming TV advertising.

What I liked about your note also, Tim, is that you mentioned a few other stock winners that could be part of the whole ecosystem here with the Netflix ad tier pricing. The Trade Desk, I think, was mentioned and Roku. Do you like those names? I don't know if you cover those stocks, but what's the benefit for some of those companies? I do cover them and I do have buy ratings of both of those two stocks as well. You know, there's a lot of hubbub over the news that Microsoft is going to be the exclusive tech partner to Netflix when it rolled out its ad tier. I'm not fully on board with the view that Microsoft will be exclusive. I think there are opportunities for companies like the Trade Desk to be buying those ads on Netflix. And I think there's an opportunity for Roku as well to be trying to monetize some of the revenue that

Netflix will be generating on the app, on the Roku platform when it launches its streaming service. So I think there are opportunities for their ad tech. I think this is a good opportunity for the connected TV ad ecosystem as a whole. Again, Netflix is the single largest subscription service in all of streaming TV, and they are opening their inventory now to advertising for the first time.

Yeah, I think also an interesting point you make about Netflix shows may be available on the Roku channel. Something to watch. Tim, thank you. Thank you. Tim Nolen, look at the airline stocks. They're flying high today after United Airlines raised both its third quarter revenue guidance and adjusted operating margin forecast thanks to strong travel demand. Bill LeBeau joins us. Bill, is this still leisure

travel or is corporate travel making a comeback? Well, it's primarily leisure that is carrying most of the freight right now for the airlines. But we are seeing an increase in corporate bookings. Look, it's not at pre-pandemic levels yet, but it is gradually increasing. The question is, how much more will it increase over the next couple of months? Because remember, September and October are primarily where you see the corporate bookings do most of the business for the airlines. And then you've got capacity being trimmed, which also helps the airlines. Overall, when you look at what was heard from a number of airline executives today at the Cowan Conference, very upbeat about the state of the industry right now, what they're expecting heading into the holidays, Sarah. Well, right now is the key phrase that you just

mentioned. What are they expecting into the holidays? And then beyond that, where the market is expecting a slowdown? Well, there's going to be a slowdown in the beginning of next year. That's expected in terms of travel. That always happens right after the Christmas, New Year's holiday rush. We're going to see strong demand for the holiday traffic season. You're going to see airfares rising from here, maybe not as high as they were at the peak this summer, but they are going to go up. I think it's going to be a strong fourth quarter for the airlines, and I think that's what they're expecting at this point. Phil LeBeau. Phil, thank you. If you look at a group, Mike, like the airlines, it's still about 30 percent off the recent highs.

Hasn't exactly been trading well because of the fundamental concern about the consumer and slowdowns, what we might see in Europe and the UK as a result of the energy crisis. Yes. What what what expectations are baked in here, especially after a surprise announcement like we got from United? Pretty low expectations. I mean, the airline index is where it was exactly two years ago. So you've essentially had the huge rush of enthusiasm around the reopening and kind of the rebirth of global travel, and then it's unwound entirely. I don't think the ceiling is particularly high for the stocks just because of what happened to their balance sheets over the course. Of you know of the pandemic that issue so much equity in debt but things can

be better than feared and when you do a few cost down as much as they are it seems like it should. Create a little bit of a little breathing room in terms of their numbers if things are not terrible but the global piece of it. Is

tremendous I mean I've seen even just these charts of collapsing you know internal flight. Schedules within China is tremendous. I mean, I've seen even just these charts of collapsing internal flight schedules within China. Essentially, very difficult to get going unless you have the rest of the world coming along. You just heard the two-minute mark. Mike, what do you see in the market internals? Yeah, it's been a pretty comprehensive upside day. If you look at the up versus down volume, not overwhelming, not one of those 90%

up days that gets everybody excited to make you feel like there's a decisive reversal higher for the overall market. But more than 80 percent to the upside is pretty good. You see that in the New York Stock Exchange data. Now, look at energy relative to retail. Look at it on a quarter to date basis. Kind of tells you the story of a turnabout here. This is actually year to date, but retail relative to energy is actually flipped so far since June 30th, where energy is actually underperforming. So you're basically seeing a real give back there. And it's a tax break, as you know, to the rest of the

consumer economy. Volatility index has shown a little bit of an easing back, two points lower, actually bordering on one of these short term buy signals, which would be three points below its recent high above 27. You see, it's basically been from 19 to 35. So we're in the bottom third of that one-year range, Sarah. Looking at oil prices, crude oil just tipping below $82 a barrel, $81.88. So it continues to move south pretty sharply here. We're talking about an almost 6% move as we speak. And as Carl mentioned earlier in the day, it's only up about 8%

year-to-date. Could go flat on the year. Pretty remarkable sell-off that we've seen. That's why energy stocks are underperforming here into the close. The only sector that is weaker on the day. Everything else is higher. The best performing sector is consumer discretionary now, 3% gain there thanks to a rally in some of the beaten up names in retail, raw stores, Norwegian Cruise Lines, VF, PVH, TJ Maxx. Utilities are strong. Materials are strong. The NASDAQ composite going out with a gain of more than 2.1%. Lower treasury yields a part of the story. Also just breaking a seven-day losing streak. That's going to do it for Closing Bell. See you tomorrow in Dover Time with Scott Wapner.