Closing Bell - Closing Bell: Stocks Surge, Banks Boom & Game On! 10/17/22

Episode Date: October 17, 2022

Stocks staging a big rally following strong earnings and additional policy reversals by the UK government. Medley Global Advisors' Ben Emons explains why he thinks this rally is nothing more than a bear market bounce. Laffer Tengler CEO Nancy Tengler details her shopping list of stocks she thinks look too cheap to pass up. Bank stocks booming after a big earnings beat from Bank of America. Wells Fargo's Mike Mayo explains why he thinks this stock can double. William Blair's Jed Dorsheimer discusses why he is turning bullish on beaten down chip stocks. And Sensor Tower's Anthony Bartolacci discusses Roblox's bullish user growth last month and whether the stock looks cheap following a 60% plunge this year. He also weighs in on Netflix ahead of the streaming giant's earnings tomorrow.

Solid bank earnings and a calmer situation in the UK, helping send markets sharply higher to start the week. NASDAQ leading the charge, look at that, up 3.4%. This is the make or break hour for your money. Welcome everyone to Closing Bell. I'm Sarah Eisen. Here's where we stand right now in the markets. Higher across the board, we're near the session highs. High of the day for the Dow is up 677. We're up about 555 or so.

But it's a broad rally. The S&P 500 up 2.6%. Every sector is higher right now. The leaders are the places that have been hit the hardest during the spare market. Communication services, technology, consumer discretionary is actually the leader, up 4%. That is quite a rally right now. But again, everything's working. Consumer staples and energy, the least best, but they're each up more than one percent apiece. Coming up on the show today, market expert David Rosenberg weighs in on the sharp Monday rally. Tells us if he thinks it's just a bear market bounce, which I suspect he does.

Let's get straight, though, to this market rally with the market commentator, Mike Santoli. Mike, it's pretty broad, although I would note that Treasuries are not moving a whole lot. No, we did get a little back up in yields to start the morning. I think it did relax the equity market a bit, but the 10-year back to that 4% level. So it could present a little bit of a test right here. If you broaden it out a little bit, look at the S&P 500. We're basically today adding back what was lost on Friday. So it brings the S&P back to that level of the close on Thursday after that very dramatic kind of five percentage point low to high swing on Thursday. Now, it doesn't really get you too far off the year to date lows. You can try to make the case that the market hasn't really made a lot of net downside in the last four months. This right here is June 16th. Not sure how far that gets you. It could start to become defined as a little bit of the end of a trading range, if we're lucky. Volume's a bit light today, even though breadth is very,

very strong, skewed to the upside. So all that stuff into the mix. Now, as we get into earnings season, we're going to start to know just exactly how much the forecast might have to be adjusted, revised, lower, higher, whatever. But we're not paying nearly as much for each dollar of those earnings as we have before. Take a look at the valuation of the market. Forward PEs across the board broken into pieces here. S&P 500, certainly not cheap, but you're in the 15s right now. Forward earnings, this is the 12-month forward. Then you have the equal weighted S&P, a good deal less expensive. It's around 13.5 times. And it takes you back to these levels that you would have seen pretty much around the late 2018 sell-off. Obviously, we plunged briefly below that in early 2020. And then, have seen, you know, pretty much around the late 2018 sell-off.

Obviously, we plunged briefly below that in early 2020. And then, of course, small caps, very cheap. You got to go back 20 years or so. Now, the pushback, of course, is that the earnings estimates are likely to go down. And that's sort of, I grant that, and there's no doubt about it. But the valuation being compressed, part of that is expressing some doubt as to the forward estimates. And it's not as if every point along this chart, people were certain that the estimates were going to hold up. I brought up the 10-year also because, Mike, you know, lately that's been the market's concern, right? Higher interest rates, what the Fed is going to do, the fact that inflation is not coming down very quickly. I don't know if we can show the 10-year yield right now.

Matt Maley of Miller-Tabak pointed this out, that the level of interest is going to be a headwind for the stock market as long as it stays high or continues to rise. So if we don't see it coming down meaningfully, he doesn't think this can be more than a one- or two-day bounce on oversold conditions. Right. Because that is the fundamental headwind we are facing. That is without a doubt the main headwind. It brings up the cost of capital for everything, for equity and everything.

That's why markets go down. However, I pointed before, S&P is right now at the same level it was in mid-June. Where was the 10-year in mid-June? Three and a half at the peak. Three and a half at the peak. So you can sort of get a push-pull and a little bit of two steps forward, one and a half steps back, or vice versa. I guess my point is it's absolutely a headwind as long as it's going up. If it's making new highs, not good. But it's not as if there's a perfect level of the stock market that corresponds to each absolute

level. And you're saying it's not the only, it's not necessarily the only headwind, including the Bank of England, which, and the British government, which appears to be coming to its senses and calming markets down. Mike, thanks. We'll see you later. Mike Zantoli, the banks are a big part of today's jump after strong results from Bank of America and BNY Mellon. I did speak last hour on Power Lunch with Bank of America CEO Brian Moynihan about what drove his results in the third quarter. Listen. As rates rise up, our zero interest deposits, which are a core part of our franchise and our low interest checking, obviously become a lot more valuable. And that's where you saw the strong gain in NII not only year over year, but also late quarter up over a billion plus from second quarter to third quarter.

And we told people it'd be up over a billion in the fourth quarter, a billion a quarter. And that that's the earnings power coming back as the rate structure comes off the floor. It was that for a couple of years during the pandemic. That is the key. For more on Bank of America earnings, let's bring in Mike Mayo from Wells Fargo. Just increased estimates for Bank of America to street high. BAC was also his top pick going into earnings. He joins us on the news line. It was the right call because we're seeing the biggest reaction, Mike, up more than 6 percent. And that is really the thing here, right? There's sensitivity on interest rates going higher. That's what's working, right?

Yes, but that's not the complete story. Look, it's showtime for Bank of America, and Act I looks great. It takes higher interest rates to show the strength of their deposit relationships. It's a lot more sticky than a lot of people thought, and that helps the traditional banking revenues. But it also takes more business to show the scalability of the model, the benefit of a decade of tech investments. Over the last three months, Bank America added almost $2 billion in revenues and zero in expenses. That is scalability. And it also takes a weaker economy to show the strength of the bank loan portfolios and Bank of America's credit, their loan portfolios still looks great.

I don't think it's too early to talk about a re-rating, not talking about Bank of America stock going from a little more than half of the P.E. of the stock market as a whole back to where it's been, like two-thirds or three-fourths. But even above that, once you get past this recession, I think Bank of America will re-rate higher, possibly. Even if they don't do that, we still see the stock about doubling over the next one to two years. But the problem, Mike, is what the market is concerned about, and that is recession and a turn in the credit cycle. And even if we're not seeing it now, even Moynihan acknowledged that they're gearing up for a change. And that's why the stock is underperformed. Isn't that a risk? Absolutely. I mean, if we have a hard landing,

then, you know, all bets are off and you have potential one third downside in the stock. If you don't, you can have a double over, you know, one to two years. So, you know, reward to risk ratio looks pretty good at three to four times. So that is a risk. We're not seeing it in the bank results right now. And by the way, we already have credit losses and credit costs, you know, doubling over the next few quarters. So it's not like it's not in our models. And even with that, you know, we're about 15% above consensus for 2023. So Bank America, it really is a microcosm for the benefit of what bank regulators forced on banks for the last 10 to 15 years, de-risk, more resilient business model. And what Bank America specifically has done, you know, investing technology, having these digital interactions, and getting that scalability.

That is what's really underappreciated here. So it's like a ship going through a storm. Yes, there's a storm out there. It could get worse. But what I found remarkable in your interview is that he's not positive. The CEO of Bank of America is not positive for the next four quarters. He said he expects negative growth. Negative growth.

Even while he expects negative growth, he's giving guidance that implies much higher earnings. And so that is the difference. That's why it's night and day versus before the global financial crisis. And one of the problems here is that there's so many investment professionals that have only seen one recession, the global financial crisis. Well, every recession is not a global financial crisis, and every recession is not a credit crisis for banks. And so I think what you'll see here is banks will outperform through the recession because a lot of the greatest risk has been pushed outside of the U.S. banking industry. That's not to say you won't have blowups, and there is a risk for banks to have a ricochet effect from blowups outside the banking industry. It is to say,

though, they do risk to an extent that's likely to lead to better than expected results. Now, I did say this is Act I. So Act I for Bank of America looks great. I mean, the results today, higher, 8% higher revenues in three months, flat expenses, great credit quality. I mean, the results today, you know, higher, 8% higher revenues in three months, flat expenses, great credit quality. I mean, this is a great act one, but it's only act one of maybe a four-act play. And so we'll have to still monitor this, but right now it looks pretty good. Why is it different or distinct than, say, J.P. Morgan, which also has the scalability that you talk about? Look, J.P. Morgan is a leader in technology. We talk about the industry in J.P. Morgan and Bank America transitioning to digital banking 2.0, where they offer products, relationships,

experiences, connections that were never possible in analog form. I think Bank America, though, is showing greater financial discipline, going more incrementalist, and showing greater distance between revenue growth and expense growth. So, look, our price target in James Morgan is higher. We're not recommending that now. We think Bank America is more in the sweet spot, more in the sweet spot for monetizing their deposits more in the sweet spot for showing the scalability of the model without investing uh the the the windfall from higher rates and by the way it's not really a windfall they've worked for this for a decade uh but showing more financial

discipline uh in letting the benefit fall to the benefit of investors. You expect this, a $55 target, you expect a doubling of the stock even, you said, in the next few years? Yeah, so that's over one year, $55. We do think over the next one to two years, we can see a doubling of Bank of America stock. By the way, that's not factoring in re-rating. When we talk about a re-rating of Bank of America stock, that's above where it had historically been. This price target and the doubling is simply going back to where they had been before. So, absent a hard landing, then we think that's where Bank of America goes. All right. Pretty bullish. Mike Mayo, thank you for joining us from Wells Fargo, senior banking analyst there. Appreciate it. With that stock leading the financials, which are strong outperformers.

By the way, Goldman Sachs set to report earnings tomorrow morning. Don't miss an exclusive interview with CEO David Solomon, 7.30 a.m. on Squawk Box. Let's show you where we are overall in the market, up 5.41 or so on the Dow. S&P is up 2.6%. The Nasdaq up 3.25% right now. We've got a lot of winners in the tech space. The Nasdaq up three and a quarter percent right now. We've got a lot of winners in the tech space. Clearly, whether it's a relief rally, some pressure coming off of the yields, what's happening in the UK.

Strong rally we've got on our hands. Small caps up almost 3%. Coming up, David Rosenberg from Rosenberg Research will join us to break down what he sees the market doing from here with his somewhat negative view we've heard lately on the economy. We'll be right back on Closing Bell. Don't go anywhere. A broad rally right now across the board. We're seeing the S&P 500 up 2.6 percent. Look at the Nasdaq, which is outperforming today. It is up more than 3 percent. Joining us now is Ben Edmonds of Medley Global Advisors.

Mike Santoli is still with us, of course. Ben, are you buying or do you just view this as we've seen other big rally days, as a bear market bounce? It still looks like a bear market bounce, Sarah. I think that it's encouraging to see this across the board rally. But, you know, as Mike will probably also uh confirmed is that we've seen this before right we see now i think the last three weeks if you get a bounce it's across the board every sector and then the following day it's taken back so we're actually dancing in earnings i mean today's numbers from bank of america were good for consumers and it immediately translates to consumer

discretionary with you know amazon is a big index heavyweight than driving up the stock market but just be wary because i think as much as the risk out of uk is now somewhat diffused there's more cpi data coming out including from the uk i think that will become a next big focus for markets as we try to move towards these earnings that's right amazon is the leader right now in the in the triple q's apple microsoft tes NVIDIA, they're all working today, and that's leading to a big rally. But I do wonder if earnings season, and we got a reminder from Bank of America, can be a source of relief. Yeah. I think there's potential for that without a doubt. You know, estimates came down outside of energy by seven percentage points heading into the numbers.

It seems like they'll be achievable. Typically, corporate America is going to warn you if they're going to miss big. So I think that to the extent that the rest of the world allows us to focus on those things, yes, that I think it can be a bit of relief. The question with every rally lately has been, is the bond market going to permit it? As we were just talking about a little while ago, are Fed speakers going to overtly try to push back against it? We don't have any Fed speak today. I think maybe only Wednesday is when we'll have it. So you have to put that into the mix with, OK, you have a suspect bounce, an untrustworthy one. At the same time, the seasonal factors are starting to work in your favor. Sentiment, all these atmospheric conditions start to look like the risk reward might be

getting slightly better. But again, those are the softer start to look like the risk reward might be getting slightly better. But again, those are the softer elements as opposed to the hard don't fight the Fed type of factors. And just to the point of big rallies in the last I was just looking at as 19 or 20 trading days. There have been five up days, including today. The smallest gain of the five up days is one point nine seven percent. So really, you get these big pops and then they haven't really strung together. Well, it's reminiscent of other bear markets and crisis type periods. My question, Ben, is specifically around technology heading into earnings. If there's a broader opportunity beyond a day or two just because of these valuations have

been hit the hardest. Yeah, I think there is, Sarah, because, you know, I was looking at EPS forecasts and the technology has now come up so hard in EPS growth and it looks like to be bottoming, at least by estimates. So if you do believe that you're going to get an environment where, you know, as ballers right over the weekend, we're going to get a bullish case for markets because we're reaching to a level of rates that push down inflation and knowing that technology is so sensitive to interest rates and we're seeing these EPS growth estimates start to move up again out of the trough, then for big tech that becomes an interesting opportunity, you play the conservative names, say like Microsoft. But I think it's an interesting moment here.

Conservative names like Microsoft, would you put Apple, would you put, I don't know, Tesla moment here. Conservative names like Microsoft. Would you put Apple? Would you put, I don't know, Tesla? That doesn't seem very conservative. Right. So I'm not full disclosure on the analysts on Tesla or any of those names. But let's put it this way in a broader context. Technology is still a big driver of growth in the economy.

It's making its adjustments. It's overhired. It's probably showing up in the economy. It's making its adjustments. It's overhired. It's probably showing up in employment numbers. So if you think of big tech, it's obviously related to interest rates as the economy adjusts to inflation. So that's still a big macro factor here, driving these stocks. But I'm also encouraged to see the EPS estimates at least being troughing, so to speak. So I think you're getting to a point where, yeah, you're going to be able to capture an opportunity again for upside. Ben Emmons, thank you very much for joining me. By the way, Tesla rallying about six and a half

percent and then Amazon another six and a half makes consumer discretionary by far the best part of the market, more than four percent. But you've also got a nice rally in some of these casinos and retail names like TJX, Best Buy, Ross Stores. It's broad. Let's show you what's happening overall just again, because we're up 2.6% on the S&P 500. The Nasdaq's up almost 3.3% right now. Small caps joining the party up almost 3% as well. After the break, we're going to take a closer look at what is driving tech today with the Nasdaq outperforming. The Dow is up 557 points.

29 out of 30 Dow stocks are higher, which just gives you a sense of the better breath, as the traders say, of this rally. The biggest contributor to the Dow gains Microsoft, UnitedHealthcare, Goldman Sachs and Home Depot. You've got every sector positive in the S&P 500. Consumer discretionary leads the charge. Consumer staples lags, but it is up 1.2 percent. Up next, David Rosenberg weighs in on this rally and whether it could be more than a bear market bounce. And then later, we're going to talk to an analyst who is getting bullish on the chip stocks. He'll reveal his new buy ratings when Closing Bell comes right back. Strong rally here into the close. The Nasdaq's having a blowout session, making new highs up 3.4 percent, new session highs, that is. Let's get to Christina Partsenevelis, who's at the

Nasdaq market site with a look at some of the drivers behind tech's bounce, Christina, and what you're hearing about the case for tech right now. Yeah, well, there seems to be a little bit of a sentiment shift, a bull case for tech that's gaining traction. And there's several reoccurring themes that I'm finding in recent analysts' research. Firstly, the multiples have compressed. Companies have guided lower, for example, like AMD. The foreign exchange fluctuations may already be priced in, this according to Wedbush. And the China export ban may be overblown as it focuses primarily on high-tech AI chips and not all of the smartphone chips, and this according to Bernstein Research. So of course, all of these factors no doubt can get a lot worse. But with much of the Nasdaq and over a quarter of the S&P 500 representing technology,

this sector is critical to any index move higher. So where should investors move? Citi likes software names like Intuit and Workiva because of stable end markets. And you can see those. Look at that. Intuit is up 6 percent. Both of those companies up 6 percent. And then you've got Jabil for its IT hardware presence in EVs. That stock up three percent. And then Wedbush likes cybersecurity names like Zscaler and Palo Alto for the resilience in volatile markets. And then lastly, Trivariate Research warns names like Snowfake, Atlassian and Enphase are overcrowded and could be subject to extra volatility, which is expected in the coming months. Sarah? And some of those movers are at the very top of the market right now. Zscaler, Datadog, Atlassian, all up 7, 8, 9%.

Christina, thank you. Christina Parsonevelos. For more on the big rally, let's bring in Rosenberg Research founder, David Rosenberg, who, let me guess, David, thinks this is a bear market rally and there's nothing to be excited about. Am I right? Well, I mean, I'm not saying you can't be excited about a bear market rally and there's nothing to be excited about. Am I right? Well, I mean, I'm not saying you can't be excited about a bear market rally, but we all know that these are rallies that you can rent. You don't want to own them. So you want to have your hedges

and exit strategy in place. But it is a bear market rally. It's got all the hallmarks of a bear market rally. We've seen six of these already you know it reminds me of uh of um warren buffett's famous line about you know the one thing that uh we uh that we know about history is that people don't learn from history uh but you know the biggest rallies in the market historically have actually happened in bear markets not bull markets and this is one of them this is this is the seventh bear market rally this year. And we're still down, what, 23 percent on the S&P 500. So one pushback is on what we're hearing from corporate America. And today was Bank of America. David, I talked to Brian Moynihan last hour about what he is seeing right now from the consumer. Just want to play you this quick clip.

Is there stress for certain consumers out there? No question, but they're employed and earning money and their account balances at Bank of America continue to be flat. August to September for cohorts, they had two to five thousand before the pandemic. An average of thirty four hundred. They're sitting with thirteen thousand account and it's not going down. It continues to be flattish and it was growing early in the year. Now it's flat. That means they have money to spend. That's really good news, isn't it? Well, you know, the thing is that these bank CEOs talk about consumer spending in nominal dollars. So he's not talking about volumes or the impact of what inflation has done. And we saw that firsthand with last Friday's retail sales number, Sarah, when you look at

real retail sales. And remember that recessions are not nominal variables. Recessions are about physical inputs into the economy. And real retail sales were negative two percent at an annual rate in the third quarter that's already baked in the cake and we have negative momentum being built into the fourth quarter so it's nice to talk about you know in in before covid and before this inflation burst that we've had to be nice to talk about nominal dollars in a one to two percent inflation world sure but what does nominal dollars mean when inflation is running at 8 percent? So, you know, what he's talking about, really classic money illusion. That's really what he's talking about. In real terms, consumer spending is actually starting to contract. He did. He did break down the spending picture and divided it by transactions, which are clearly up less than

the dollar amount to show that it was still growing, even with inflation. I think the point is that we're not hearing all bad news, certainly from the banks. We're going to get some other earnings really, really soon. But that there is a big cushion in the U.S. economy for dealing with, no doubt, our huge headwinds in the form of rate shocks and price shocks. Yeah, and a lot of that cushion was the lagged impact of the stimulus checks from last year. And that cushion is subsiding at a very quick rate. You know, what is happening actually is you're seeing credit card balances balloon and really at, you know, interest rates that are 16%, 17%, 18% because people are actually using their credit card to buy essentials.

And that was the big story, actually, Sarah. When you look at the retail sales numbers and you see what people are spending money on, they were spending money on food and spending money on drugs, pharmaceuticals, essentials. The hallmark, really, of the retail sales number that just came out was that everything else was down negative 0.1% month over month. And that's nominal. Real terms, even more negative. So look at the pattern of what people are spending money on. They are pulling back from the economic sensitive items. And, you know, we can talk about the banks and, you know, they were priced at or below book value.

So they were extremely depressed. They were down like 35 percent from their highs. And so they're seeing a nice bounce indeed. But the conference boards, the conference board produces a quarterly survey on business confidence. I wrote about it today. And it's gone down, you know, to its lowest levels, almost on record. I think the only time historically where it was weaker for the fourth quarter, CEO confidence, not just the banks, but the entire gamut of private and public companies, were down to their second lowest level on record. That really tells

you something was happening in the broad economy from a corporate side. David Rosenberg, thank you for the views. We always appreciate it. Weighing in today on what he calls the bear market rally. We're up 600 points right now on the Dow, continuing to climb in this final hour. S&P 500 up two and three quarters percent. The Nasdaq zooming. It's up three and a half percent.

Again, it's being led by the biggies. Amazon, Apple up nicely. A big move for Amazon. In fact, you don't see this every day. Six and a half percent higher. So whether it's a relief rally, a bounce, a better tone, a better view toward what's happening overseas and in the U.S., thanks to what we're hearing from corporate America, Apple's up three percent.

So it is strong and it is broad. We're going to have much more as we head into the final minutes of trading. And then also up next, Wall Street is buzzing about Fox and News Corp. Moving in opposite directions as Rupert Murdoch is exploring recombining the companies. We'll bring you the latest. And as we head to break, check out shares of Kano Health. It's one of the few stocks sitting out this rally. According to a published report, CBS is walking away from merger talks with Kano Health. It's one of the few stocks sitting out this rally. According to a published report,

CVS is walking away from merger talks with Kano, sending those shares sharply lower. We'll be right back. What is Wall Street buzzing about? The Murdoch empire. Fox and News Corp moving in opposite directions after the companies announced they were exploring whether to merge again

nearly a decade after they split. Julia Boorstin joins us now. What is the rationale and how close is this to actually happening? Well, the rationale is that now size matters. These companies need heft. They need to be able to have a greater scale to be able to negotiate. Now, the interesting thing is looking at the fact that both of these stocks were downgraded today by a couple of different analysts from buy to hold.

But the thing about Fox is that after those entertainment assets were sold off to Disney, it performed better than many had expected back when the two companies split up almost a decade ago. Now the question is, what kind of synergies are they really going to have? What are the advantages? How much cost cutting, et cetera? Got it, Julia. And do we know about whether this is actually going to materialize? Well, they're looking at it. I mean, I think that they would like to make this happen. And this is not the first time we've seen companies that have split up come back together. The most notable comparison is, of course, Viacom, CBS. Those two companies split up, then they re-merged. Now they're called Paramount. So I think this would be a very similar situation, except for now, many of those Fox assets are part of Disney. Yeah, I mean, the interesting reaction to Fox down to a 52-week low, 10% or so, is notable.

Julia, thank you. Julia Boorstin. Roblox rocking today on strong monthly user growth. We're going to discuss whether investors should buy this stock, which is still down nearly 60% this year. That story plus bank stocks are booming and an analyst turning bullish on the chips when we take you inside the market zone. We are now in the closing bell market zone. CNBC Senior Markets commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, we've got Leslie Picker here on the banks and Sensor Towers' Anthony Bartolacci on Roblox and Netflix. Roblox making a huge move higher today. We'll kick it off with the broader market, though. The Nasdaq 100 up 3.6 percent,

obviously in rebound mode. And Mike, you were pointing out how common this is to see during a bear market when you see these snapbacks. I think the shorter term trading question would be how long could it last? Because we're coming from another very negative sentiment, oversold kind of place. Yes, we are. And that's why you have to have a little bit of an overlay of skepticism. On the other hand, one of these is going to stick or at least it's going to carry farther than people are positioned for. So that is the response to the U.K. reversal in policy is that maybe much of the prior few weeks weakness was partly about that, too. In other words, unwind and fear related to what that meant in the U.K. and the yields blowing out over there. And maybe the bear case in the very short term coming into the weekend required something in the way of some kind of a blow up to really get traction. So you don't want to

over extrapolate, but I would see all those things in the mix right now as we do still have an oversold market entering a good seasonal part of the year. I don't know the takeaways on the UK just as far as what it means for the Fed and everything is the market does not seem to want fiscal largesse right now. Clearly, one wants to see fiscal discipline, but at the same time, appears to be pushing the Fed and other central banks to slow down. Absolutely slow down. I wouldn't say reverse. I think the market is very impatient for clarity on the moment of when we're there, wherever we're going to, when are we going to get there, and what's that level? It keeps getting pushed out. The Fed seems like it's going to continue

to want to be aggressive in pushing that moment out. Although we'll see, because you started to see the makings of a little bit of disagreement last week in terms of Fed Speaker emphasis on the potential risk of overtightening as well. Got it. Look at the bank stocks, sharply higher today after Bank of America beat Wall Street's earnings estimates as rising net interest income did offset slowing investment banking activity. Earlier on Power Lunch, I did speak with CEO Brian Moynihan, who said the bank is holding its reserve based on bleak economic picture and that they are prepared for whatever happens. Listen. Our reserves that we put up this

quarter are built on a 5% unemployment in the fourth quarter of 22 and a 5.5% employment all during 23. That's how conservative the reserve building. We put up those reserves already. So the idea is that the way the rules work and accounting works and everything, you're putting up based on scenarios. And our scenarios weighted 40% to very adverse scenarios, which have high inflation and high unemployment built in. And when you average those together, the reserve is built on a 5.5 percent unemployment. So we are prepared for the hurricane. We're

prepared for whatever happens next. I was trying to ask him if he agrees with Jamie Dimon on whether we're going to have a hurricane. Clearly, he said that he's prepared if that happens. Investors will get another read on the banks tomorrow when Goldman Sachs reports results. Leslie Picker joins us. Leslie, what is the key thing to watch out of Goldman tomorrow after Morgan Stanley was a miss and some of the other banks like JPM, Wells Fargo and Bank of America that are tied more to the economy in these higher rates did better? Yeah, so this quarter, Sarah, to your point, was definitely met with a bifurcation of those banks and that side of things, JPMorgan, Bank of America, Wells Fargo, far more rate sensitive city also in that camp. And then on the other side, you've got Goldman

Sachs and Morgan Stanley, which are much more exposed relative to their peers to investment banking, sales and trading. Goldman Sachs, very strong historically in fixed income currencies and commodities, which saw some decent tailwinds during the quarter. However, there's just been a massive slump in investment banking across the board. There's no indication that Goldman Sachs will escape that during the quarter. Also, interestingly, we're anticipating a reorg, which has been heavily telegraphed in the media today, which would basically be the second reorganization of Goldman's business during David Solomon, CEO David Solomon's tenure at the firm over the past four years or so, which would make it look a little bit more like its peers in terms of a reporting standpoint.

Asset and wealth management in one bucket, investment banking, sales and trading in another bucket, and then newer consumer businesses, including recent acquisitions in a third bucket. So that is something to look for tomorrow. Any announcements on that front, as well as, of course, what it's done in its kind of core competency with regard to investment banking and sales and trading. Got it. Thank you, Leslie. We will look for all of that. Also, there's an exclusive interview tomorrow with Goldman Sachs CEO David Solomon on CNBC, 730 a.m. on Squawk Box. Look at Roblox shares. They're surging right now. Huge turnaround for a stock that is down nearly 70

percent from a record set just over a year ago. Investors cheering on these stronger September numbers out from the gaming company. Daily active users closing in on 58 million. That is up 23 percent from last year. Hours engaged, rising to four billion. Let's bring in Anthony Bertolacci from Sensor Tower, which tracks key metrics of digital providers. So, Anthony, how much of this is a fundamental shift for Roblox? Yeah. Thanks for having me, Sarah. So I think what we saw in the September numbers is a bit of the end of a pattern of a summer swoon where Roblox, because of its younger skewing demographics, does really well during the summer months when kids are not at school and they see a bit of a decline in September when real life resumes. And when you

look at our data at SensorTower from August to September, and obviously when you look at the report that Roblox put out today, they did not see such a decline from summer to fall. In fact, SensorTower has on the mobile side a slight increase of users from August to September. So that is a bit of a reversal. But as you outlined at the beginning, the stock has been really beaten up this year, down 55, 56% year to date. And that's part of a greater industry trend of there being headwinds in in-app purchase revenue from mobile games. The entire category per sensor tower data is down about 14 percent through the first three quarters and that's on the heels of multiple years of double-digit growth. What about Netflix? What

do your numbers show about what we can expect from that stock which has rallied about 30 percent in the last three months but still down sharply over the last year. Yeah. So as we look at our third quarter data on Netflix, and SensorTower is a few different ways to measure the performance of the Netflix app, we are seeing accelerating declines in active users, which is a number that you might want to benchmark against drivers and total use of the platform. So in the third quarter, we're showing that down low double digits year over year, an uptick over eight or nine percent losses in the second quarter. And I think what stands out to us is two things. One is that Netflix started the third quarter on a bit of

a hot streak as it was just launching Stranger Things for part two in English speaking markets, which was an incredible success. Then we saw trends really curtail from there. And second, I think there's been a lot of talk about the return to normal hurting a lot of mobile and digital properties. Well, Netflix has not only given back those pandemic gains from 20 and 21, but SensorTower estimates that daily active users on the mobile app are actually down versus 2019, so pre-pandemic times. Okay, one quick question as a user, Anthony, about what these numbers are going to be like.

So it's obviously very hit-driven, and I've read your notes, you know, looking at the new Stranger Things, helped Netflix in the beginning. Now we're watching House of Dragons, we, me, and everybody else on HBO. How much does that create lasting users for people in a difficult economic environment where inflation is very high? Are we seeing more people give up

those subscriptions after they've watched the hit shows? Yeah, that's a great question and one that we've studied within our data set. So the benefit from these pieces of tentpole content, whether it's Stranger Things, whether it's the Game of Thrones prequel, whether it's Prime having Thursday night football, is material but in the moment. And then we do see it quickly subside. So I think actually the rapid nature of the release of these tentpole pieces of content, and everyone seems to have a flagship show right now, is creating an environment where consumers are incentivized to switch around from various platforms. I will say the one thing that Netflix has going for it is when you look at the sensor tower data, it has the lowest rate of churn amongst the big streaming providers, Netflix, Disney, Hulu, Amazon, and also has the greatest percentage of power users, which is a way to measure

user loyalty. So Netflix users are opening the app at a much greater rate than some of its streaming competitors. Got it. Thank you very much for joining us. Really interesting conversation there, Anthony. The Nasdaq just hitting a fresh high for this session. Take a look. It's up about three and a half percent, more than that right now. The chip stocks are certainly joining the tech rally today. That group beaten down over the past month over worries, over falling demand, those new U.S. export restrictions targeting China. But three semiconductor stocks stand to make an even bigger rebound, according to our next guest. Let's bring in Jed Dorsheimer from William Blair.

And they're not the ones, Jed, that we typically talk about, the big sort of bellwethers in the chip industry. What are you choosing and why? Hey, Sarah, that's right. So we're actually looking at silicon carbide, which is a compound semiconductor. And so this little material has a niche that makes electric vehicles operate more efficiently. So you hear a lot about, copper and lithium, and this semiconductor will allow us to do more with less to allow that bigger trend to unlock. So you like, what's in here, Wolfspeed is one of the makers, right? So yeah, if you look at the long-term trends here, we like

Wolfspeed on semiconductor and air test systems, which is a little equipment company. And we think that those three make up a cohort that will benefit from roughly a $2 billion market growing to a $20 billion market over the next eight years. Are they less immune to the cyclical worries about this industry, which seem to really hit these stocks every time there's a concern about rising rates or also the geopolitical issues with the export controls around China? Actually, they benefit from a lot of that. So when you hear about reshoring in the geopolitical challenges with China and Taiwan, that's prompting the U. S. and the chips act to look at a reshoring activity so- one of the questions is. If you have

to reshore and start from scratch do you go with the leading edge silicon- plant and for analog semiconductors we don't think you do so we think that benefits silicon carbide and they're kind of been a sweet spot of where we

think growth is going- the benefits from some of the geopoliticalical turmoil that we're seeing today. Interesting call. Thank you for joining us, Jed Dorsheimer. Thanks for having me. Let's get back to the broader market. Rally building steam. The S&P is up two and three quarters percent as we head into the close. Nancy Tangler, CIO at Lafleur Tangler Investments, joins us now. Nancy, what do you do as a firm on days like today? Are you in there buying? No, no, we're not, Sarah. We try to buy, you know, when the market's down, obviously,

but that's been tricky, too. So we've got hedges on our portfolio and we just take a very deliberate approach. We have a list of names we want to buy. And when we get price weakness, we step in and we add to those names. And on a day like today, we just sit back and take a sigh of relief for the moment. So you're not convinced that the turbulence we felt in the markets lately is behind us? No, I don't think so. I mean, I don't know how much longer we have to go to work our way out of this. I know there's a lot of people that are lobbying that this is going to be long-lived, this bear market. But I'm starting to see, we're starting to see inflation, signs of inflation roll over.

We're starting to, you know, the economy is still pretty strong. And, you know, your interview with Moynihan was excellent and pointed out what we've been thinking, which is the consumer is in decent shape. So when you add all that together, that could change, of course. But housing has already rolled over. We've seen PMIs roll over. is in decent shape. So when you add all that together, that could change, of course. But housing has already rolled over. We've seen PMIs roll over. Money supply is down dramatically. So we think you're going to start to see not a return to 2 percent inflation, but at the margin, an improvement in inflation that will slow the Fed down eventually. And I'll just say that we're

getting closer to that every day. So if you have midterms with divided government, the market's going to like that. If you have a slowdown in the Fed, the market's going to like that. And we'll see what happens in the Ukraine. But that that might be ultimately improving in the spring. Yeah, the problem, Mike, is that the market has gotten excited before about the rollover of inflation, only to be fooled when we get these CPI reports that are stubbornly high and the Fed sort of justified and vindicated when the Fed members come out and say that we've still got a lot more work to do. That's true. Although last week's number did come when the market was already in a nervous state and you didn't see downside follow through on a disappointingly high CPI

number. I think it still makes sense to think of it as a when rather than if. Inflation becomes a little bit more friendly, at least down to a certain level, which we don't know about. Maybe it's going to be closer to where short-term rates are, and it could be kind of a wait-and-see moment at that point. But I think the bigger thing is when we see these bank earnings, as Nancy was saying, the consumer and Main Street started this whole tightening process in a very advantageous position, whereas the stock market, because of its valuations, did not. And so that's why I think you see a mismatch between Wall Street,

Main Street fortunes to this point. Yeah, clearly we've seen that with some of the banks, and we'll see what we get from some of the other earnings. So, Nancy, who's on your shopping list? Who's gotten too cheap or levels that you have to step in? So, you know, our list doesn't change very often. So I've talked about some of these names before, but we still like many of the software names. So on weakness and on severe weakness, we've added to Adobe. We add a little bit to Microsoft. We've added to Amazon, definitely with a bias towards the cloud and Palo Alto networks. And then we like consumer discretionary. And many of those stocks were the best performers or had positive performance in the third quarter. So we're starting to nibble back at Home Depot.

We added to Chipotle early in the third quarter, along with initiated a position in Lululemon. We still like those names. It's somewhat counterintuitive, but we think that coming out the other side of this, these are the kind of names that you're going to want to own. And energy still. And energy still. No, they're all up today. Thank you very much, Nancy Tingler. We've got to leave it there and get into the close here. Consumer discretionary is the biggest winner in the session right now. It's up popping more than 4%, but big gains for Tesla and Amazon will do that, and that is what we are seeing today,

although it is broad. Real estate is the second best performer in terms of indexes or sectors. Communication services, technology also doing very well. Consumer staples are at the bottom of the list, but it's up more than 1%. The Dow Jones Industrial Average up 539 points. Not quite the highs of the day, but still going out strong. The Nasdaq Comp up 3.4%. Thank you, Amazon,

which is having a very strong rally, 6.4%. Microsoft, which is also strong, up almost 4%. Apple is up there, up more than 3% today. Tesla, NVIDIA, SMB 500 going out with a gain of 2.6% after another sell-off last week. That's going to do it for me here on Closing Bell. See you tomorrow, everyone. Now into overtime with Scott Wapner.