Closing Bell - Closing Bell: Struggling for direction, Stealth catalyst, SoFi stands out 9/14/22

Episode Date: September 14, 2022

It was a choppy session on Wall Street following Tuesday’s major selloff, with stocks wavering between gains and losses. Bridgewater’s Rebecca Patterson joins with her outlook for the US relative to the rest of the world. Chris Harvey from Wells Fargo and Jim Paulsen from The Leuthold Group make the bull case for equities. An expert explains why Moderna’s talks with China could present a stealth catalyst for the whole market. And the analyst who just upgraded SoFi breaks down how student loans and the NFL could help the stock.

Sarah Eisen, take a look at where we stand in the market. It's kind of a mixed picture right now. We lost the gains. It's been most of the day up for stocks overall, but we're down about a tenth of one percent on the S&P. Now the Dow has turned negative as well. It's down 100 points. We got as high as 175. NASDAQ holding on to its gains just barely. The 10-year note yield continues to be high, elevated, 341. Dollars weaker, so that's supporting markets a bit. Take a look at the S&P 500 sectors this hour.

It's kind of a mixed picture. Energy is higher right now, but you do have most of the groups right now in the red on the day. As you can see, real estate, materials, financials, those are at the bottom of the list right now. Technology is outperforming as the Nasdaq attempts a bounce, kind of a weak one. Coming up on the show today, Bridgewater's chief investment strategist, Rebecca Patterson, opens up her playbook following yesterday's big plunge. Plus, Moderna is moving higher today on news that it's talking to China about supplying the country with COVID vaccines.

One market expert says that could be a major catalyst for the entire market. He'll tell us why. Let's get straight, though, to today's dashboard with Senior Markets Commentator Mike Santoli. Mike, kind of a weak attempt at a bounce. How much damage was done? You know, typical tentative, indecisive action after a big one-day plunge like yesterday. A significant amount of damage, Sarah, I think was done, at least in terms of the near-term tactical idea that we could play the peak inflation theme in a decisive, high-conviction way. And I think that those people have been put back on their heels. We're in this range, maybe barely.

You know, we've spent a lot of time talking about 3,900 on the S&P 500, how it was really this bit of support. It sort of kept the lows from June in this separate zone. We're right there now. I mean, it would be a little bit surprising, to be honest with you, if we didn't test it in a more direct way over the next few days into next week when we have the Fed meeting just because it had some significance before. On the other hand, you can still draw this particular line that says,

OK, if that was an uptrend, it's still not been busted just yet. So obviously a lot of back and forth in this market. But I think it's also interesting, a 4.3% drop in the S&P on a given day is rare and extreme, but it only dialed us back by five days because we did have this levitation going into the number. Take a look here at a measure of Treasury bond market volatility. It's known as the move index, the ICE B of A move index. This is over two years. It's essentially the VIX of Treasury bonds.

It's calculated in a very similar way, 30-year options-based pricing of future volatility. You see right here this zone when the stock market was very strong through 2021. Yields were anchored. The Fed was lower for longer. You had topped out at one and a half percent on Treasury yields and here massive indecision and flux about what the Fed's going to do, what inflation is going to tell us and how high market based yields can go. It's hard to see the overall markets having a real sustained recovery without this settling down just a little bit. You need clarity on the Fed's endpoint and you need the actual back and forth of Treasury trading to maybe be a little smoother because it has been very jumpy

and illiquid as people have taken losses on their bonds. There's less leverage and less trading capital in those markets there. So a few positives to note in light of that. And you mentioned one, we haven't done too much damage in terms of erasing some of the gains despite the big move yesterday. Credit market holding in relatively well. I continue to hear chatter from these desks that normally after a move like that

that you'd see in the stock market, it'd be more of a rush for the exits in the corporate bond market. Have not seen that. And the VIX, the volatility index, which tends to measure, what, panic, fear? Also, not the kind of spike you'd see with a 4%, 5% down. Both very true.

Credit, it really is much more about a positioning shock in stocks yesterday. And the reason that the volatility index and the equities isn't higher, in my view, is we're still in this range. We've been doing this for months, chopping around. A lot of people have already lightened up their exposures. They've been doing this for months, chopping around. You're not necessarily a lot of people have already lightened up their exposures. They don't need to hedge 30 day downside in S&P puts. And we haven't had one of these more steep, almost vertical like drops. That's when you get the VIX spiking up into the 40s is when you actually have one of these crash like moves. This is mostly in the stocks have been kind of a grind lower. Well, and also the

credit market tells you that that just corporations are in healthier shape to deal with this rate shock that we're seeing. And high inflation means revenues are pretty good, means you can cover your interest payments. And that's what the credit markets care about. Mike, thank you. Mike Santoli, we'll see you soon. For more on what to do in this environment, Rebecca Patterson joins us from Bridgewater Associates. Rebecca, it's always good to see you. I know that you guys at Bridgewater have been expecting inflation to stick around higher than the market. Do you think the market is finally getting that right or still wishing that it comes down faster? Well, even after yesterday's inflation print, the markets are discounting that inflation gets back to the

Fed's target by the end of next year and then stays there. And that's certainly possible. I mean, we are seeing goods prices like things like autos coming down quickly as supply chains normalize, the strong dollar, lower commodity prices, all those things help. There are a few things that are going to be stickier for a little longer, like rents. But the big, big thing is wages. And that comes back to our really incredibly strong labor market. And with the labor market today, it's kind of resilience being a double-edged sword. A strong labor market means we have jobs, we have incomes, we can spend. But with so much nominal spending, that keeps inflation supported, especially in services. And with

still two for one job openings per worker, wages are still tracking between six and seven percent. So the Fed has a lot of work to do in our in our opinion still to get this down, including taking out the market expectations for easing starting as early as next year, which we think is highly unlikely. So you think the market still is underestimating how much how much the Fed is going to do in terms of rate hikes? Definitely. I mean, we can look at it from an equity lens as well. If you think about the moves we've seen so far this year, down about 17 percent. And that's that's not a small thing. But when you look at the attribution for that move, it is still largely just a rise in discount rates, earnings expectations. I'm looking broadly, not sector by sector, but it hasn't

changed that much. As the Fed continues to remove liquidity through quantitative tightening and continues to raise interest rates, we are going to see more labor market weakness. The Fed needs that to happen, to get wages down. That's going to flow through to earnings. And we think that's going to take equities another leg lower. So you're in the camp that it's more of this sort of bear market stuff, out of stocks, get out of bonds, into the dollar. Is that the playbook? Well, you know, this is the challenge, right? We haven't had inflation as a dominant driver for markets in decades. It's been growth and inflation sort of been on the back burner. At this point, when you have rising risk

premiums, you have rising interest rates, discount rates, it's bad for all assets. So there isn't an obvious, easy place to hide. You know, this is where you want to look for alpha, whether, you know, it's picking stocks, picking a great manager to help you rather than just rely on what the markets will give you and it's diversification and that's both for environments so if inflation stays higher for longer what inflation sensitive assets can you own in your portfolio to give you some stability energy has been a great sector to own this year in equities for an example commodities broadly even though they're coming down right now, longer term can be some balance. And then geographically, I know the U.S. feels like the safest house in a bad neighborhood these days, but it is somewhat scary to me that most investors are extremely overweight. The U.S.

foreign investors exposure to the U.S. represents about 65 percent of their total exposure. So what happens if we have a shock in the U.S. caused by the Fed or something else? So there's geographic diversification. It's kind of this tried and true boring thing. But it's one of those times where you might say, well, gosh, Europe looks bad. China looks bad. But having that spreads out your risks. And right now, people are very concentrated. So that's another thing I think I would look for in an environment where there's nowhere easy to hide. Okay. Final question. Is the dollar an easy place to hide, Rebecca? Your first love and mine,

it feels like as soon as the dollar strengthens, the whole thing falls apart because we're already at these super strong levels. Do you continue to bet on it? In the near term, yes. We are still looking for additional dollar strength as the Fed raises rates, as capital is continuing to come to the U.S., looking for that safe haven, which, again, I think is vulnerable, but I'm not saying it's going to end tomorrow. What's interesting to me, Sarah, right now about the dollar is historically when we saw these sorts of moves, the next step might be some sort of joint intervention, central banks coming together to limit dollar strength. But this time time around the fed needs a strong dollar to help control

inflation so you might see one or two central banks here and they're intervening probably more forcefully in the coming weeks and months if this continues but historically that doesn't work for very long and the u.s is not going to do anything concerted as long as the dollar is helping them achieve their inflation goals. So I think other countries are just on their own to figure it out. I think Japan is certainly one to watch, though. They seem cool with it for now. Rebecca, thank you very much. Rebecca Patterson from Bridgewater. Up next, we will talk to the head of global insurance giant Prudential, ask how macro concerns in Asia are impacting that business. And later,

Chris Harvey from Wells Fargo said there's a market opportunity developing, but it won't last long. A pre-Fed play. He'll join us to break down the call. You're watching Closing Bell on CNBC, down 71 on the Dow. Global life insurer Prudential PLC in the last few years has spun off its U.S. operations, shed its European business, and now focuses solely on Asia and Africa. Of course, this comes amid geopolitical instability and pandemic restrictions that have dampened profits. Hong Kong, its largest market, seeing new enterprise income fall by a third for the first half of the year. Joining us now is Prudential PLC Group Chief Executive Mark Fitzpatrick. It's good to see you in person. I'm not sure a lot of people realize that Prudential,

sort of old school British institution, is so heavily focused right now on Asia. It's a tricky time to be there, isn't it? It's a massive change, huge change. We've been working on this for the last five years. In 2018, we announced the spin of the UK operations. And last year, we finished the spin of the UK operations and last year we finished the spin of the US operations. So now we are dedicated Asia-Africa play. COVID has made life a lot more complex and a lot more tricky. The border between Hong Kong and mainland China is still closed and COVID is still very

prevalent in some of the markets in which we operate in Asia. Notwithstanding that, actually, in Southeast Asia, our businesses continue to grow very, very strongly. And in Chinese mainland, we've outgrown the market by a factor of four this half year. So it's been great performance nonetheless. But your job is literally to forecast the macro trends and risks. That's very difficult right now in places like China. It is very difficult. That being said, it's not just in China. So half of our business by sales, by new business profit and by IFRS up profit is in Southeast Asia. It's not solely a China-Hong Kong play. So we have phenomenal diversification geographically. We're in 23

countries, 23 markets. And we also have diversification in terms of channel, how we sell, whether it's through agents, through bank assurance or direct to consumers. And we have huge product diversification, which gives us resilience as the macroeconomic plays out in the economy in different ways. So what is it like in emerging markets and the part of Asia that you're exposed to right now as we've had this bumpy recovery, lumpy recovery from COVID and tightening of financial conditions? So what we've seen is the IMF recently announced some new projections for GDP. Emerging markets are lower, but nowhere near as much as developed markets or the West, nowhere near as much. And inflation is the West. Nowhere near as much. And inflation is not as high as it is in this part of the world. So the economies there didn't have the same quantitative easing kind of heating up the economy. And therefore, this isn't the same need to slow the economy down in the same way.

That being said, COVID has made people massively aware of their own fallibility and the need for health and protection products. So last year, we saw a 41% increase in health and protection products in terms of the volume of policies sold. So people are recognizing that there isn't a social net for themselves in most of the markets in Asia. So they need to self-insure. And that's where we step in and that's where we try and provide them with comfort and we try and provide them with some policy support. Just showing our viewers the market right now

because we are making new lows down about 200 points. Attempted to be positive earlier. This is the way it's been this year, Mark. My question is on the geopolitical tension and how you fit in there, because the relationship between the West, U.S. in particular, and China has only gotten worse. Isn't that a representative risk for your business? Well, our business is more and more becoming seen by everybody as a pure Asia-Africa play.

And when we speak to regulators or we speak to government officials, they're all saying the same thing to us. And that really is, how can you do more? How can you do more to help our consumers? How can you do more to help our societies? Giving them a foundation, giving them some protection for safety, providing a pension net for them and providing some kind of health care for them. Because the state doesn't have the wherewithal in many of the markets to provide them with this huge overall safety net. So that's where we try and step in. So while the economies and the geopolitics plays out, our role and the role of the governments with us is to work in terms of really focusing on the local consumer in the markets. We appreciate you coming by. It's good to see you in person. Thank you very much indeed.

Appreciate it. Take care. From Prudential, you too. Again, let's show you what's happening down 200 now on the Dow. Again, the high of the day was up more than 170. The Nasdaq also slipping into the red. It was holding on to gains at the top of the hour, just could not keep that tentative. After yesterday's massive plunge for stocks, it was the biggest in more than two years. S&P 500 right now down about half a percent. Energy, consumer discretionary and utilities stay strong. Everybody else is red. Materials and real estate each down 2 percent. Financials are also taking a hit this week, along with the broader market, even in the face of those higher interest rates. We're going to ask Barclays analyst Jason Goldberg what he's hearing from bank executives at his firm's financial services conference,

which is taking place this week. And then as we head out, check out some of today's top search tickers on CNBC.com. Two-year Treasury yield joins the 10-year at the top of the list, which just shows you where investors' heads are right now. The concern about higher rates, sell-off again in the two-year with yields going higher, almost 380. 10-year goes the other way. The S&P 500 loses some steam here in this final hour. Tesla up 2.5 percent, though, and Apple's flat. We'll be right back. Check out today's stealth mover, Funko. Shares are getting a pop. It's the maker of bobbleheads and vinyl figurines, other pop culture collectibles. The company forecasting sales will double by 2026 through developing new product lines and expanding into accessories, games and, of course, NFTs. D.A. Davidson reiterating its buy rating on the company.

The analysts, they're saying Funko is not being valued as a growth stock despite multiple growth levers. It's up 2 percent right now in a down market. Moderna also is a winner today after its CEO said the company is open to supplying COVID vaccines to China. And our next guest says that could be a big catalyst for the entire market. He's here to explain why. When Closing Bell returns down 130, we dipped it down 200 just a moment ago. Coming back a little bit as we head into this final half hour of trading. We'll be right back.

What is Wall Street buzzing about today? Moderna CEO telling Reuters he's held talks with the Chinese government about supplying COVID-19 vaccines. However, no decision has been made yet. This, of course, comes as China continues to lock down large parts of the country to conduct mass testing. So far, China hasn't approved any foreign COVID vaccines. Our next guest says the Moderna news could be a major positive catalyst for the whole market. Joining us is Vital Knowledge president Adam Crisafulli. Adam, it's good to have you. Thanks for having me on. I also took, I took note of the story as well, but it doesn't appear to be doing much for the overall market right now. Why do you think this

could be a game changer? Well, I think China is a really it's a big outlier right now in the world as far as implementing a very stringent and aggressive covid policy. It's still pursuing a policy that most countries have been abandoning now for several months. And it's an enormous headwind for not only its economy, but the global one as well. I think two main reasons, the first of which, as you mentioned, they haven't approved any non-domestic vaccines and the domestic vaccines it has aren't the most effective. And the second is the health care system in the country, especially in some of the more rural areas, isn't as developed in other countries. And there is a legitimate concern about it being overwhelmed if they were to see, you know, an increase in sick

patients. So if they were to approve any of these foreign mRNA vaccines, which are effective, especially at suppressing severity of illness, you know, they could start to move away from the zero tolerance approach to COVID. And that would be an enormous tailwind for its economy. I feel like the market, though, has moved on from worrying about the Chinese economy to worrying about the Fed and the U.S. economy and the ECB and the European economy as inflation has stayed very high. And if China does almost ultimately go through with this and then we see its economy turn around, doesn't that add inflationary pressure?

A hundred percent. So that's a great point. China has been a big source in the world right now, pretty much the only major source right now of disinflation. And it's actually helped Europe survive the gas war that Putin is waging against it because Europe has been able to purchase surplus gas that China isn't consuming because growth has been so depressed. So if you were to see the Chinese economy rebound, it would no longer be that source of disinflation and could possibly exacerbate the CPI pain that you're witnessing in Europe, the U.S. and elsewhere. So that's definitely a good point. And that's maybe one reason why the market's somewhat ambivalent. It also, you know, the CEO didn't sound like something was imminent.

So that's one factor. But the other one is, like you said, this could exacerbate global inflation tensions. Though I do wonder if it helps a bit on the supply chain front. Not sure exactly, but these starts and stops in the Chinese economy certainly affect production and shipping. There's still a lot made in China. No, absolutely. So I think over time, once China gets back to full speed and the supply chain is operating at a normal level, you know, the supply chain disruptions have been an enormous contributor to inflation.

So I think in the near term, if you see China ramp up aggressively, that could add to inflation. But over time, if global supply chains normalize, you know, that certainly will alleviate some of the pressures that you've been seeing throughout corporate America and the economy. Well, we'll see if that actually happens,

if they make these orders, because that would be super interesting because they haven't they haven't ordered any anything. Thank you for having me relying on their own vaccine. Appreciate it from vital knowledge. Here's where we stand right now in the markets. The Dow down about one hundred and fifty seven points. The Nasdaq is the one that joined the losers category this final hour of trade. It's flat right now, but it started the hour higher. It's been higher most of the day. Tuesday's market meltdown has many investors running to the hills.

But up next, we're going to be joined by two market bulls. Tell us where they're finding opportunities right now. And a reminder, you can listen to Closing Bell on the go by following the Closing Bell podcast on your favorite podcast app. Down 177 now. We'll be right back. We are now in the Closing Bell Market Zone. BDA Capital CEO Barbara Duran here to break down these crucial moments of the trading day. Plus, Barclays' Jason Goldberg on the banks.

And Bank of America's Mihir Bhatia on SoFi. His big call today moving that stock higher. We'll kick it off with the broader markets. Down 100 on the Dow. NASDAQ has gone back into positive territory. Barb, we weren't sure which way we would end up. It's been up and down here for the final hour of trade after the huge drop in stocks yesterday. Are you adding on this weakness?

No, I'm not. And as you know, throughout the summer and before, I've been adding on weakness but not here. I think yesterday the surprise numbers for the PPI and the CPI and today's core PPI really unnerved investors you know who were expecting to see we all see signs of the economy slowing whether it's in housing or commodities or purchasing managers index and so people are a little bit afraid and wondering what is the true market multiple. So I'm not surprised today is a little bit swishing around because I think we are now we're going to be in a trading range higher than in the past. But I think somewhere between the lows of June, the highs of August. And I think until we have

another CPI number in October or the third quarter earnings start and we see they're going to be just as the second quarter earnings were which is not so bad I think we're going to be stuck here with investors now assuming inflation is going to be stubbornly higher for longer and the Fed will have to get super aggressive into a weakening economy so I am just waiting till sentiment improves I still have my view that inflation could come down much more quickly. And at this point, I think there's much more still more upside risk than downside risk, because when markets do move, it tends to be front loaded, you know, when they decide the coast is clear. So kind of bullish, but that CPI number made you made you think twice. It sounds like I was expecting to see more. Everybody was. Let's talk about the banks for a moment, because the big banks are at a crossroads here with rates on the rise and a crucial decision from the Fed next week.

Barclays is senior equity analyst Jason Goldberg, fresh off of their 20th annual Global Financial Services Conference for some top takeaways on the state of the industry. Jason, what did you learn? Yeah, I know we had 175 of the world's largest global financials, the top 25 U.S. banks there. And by and large, you know, I hear about all this, you know, talk of a recession weighing on the economy. But what they're seeing from their customer base is good. I mean, loans continue to grow. The banks are benefiting from higher interest rates and expanding interest margins. And loan losses are at historic lows. And it doesn't sound like they're going up anytime soon. So I think the general China takeaway was quite constructive. But I guess the problem is the yield curve inverts even further, especially on a move like this week, as the market worries about the Fed going even harder to raise interest rates.

And that doesn't bode well for the economy down the road and certainly not for banks. Yeah, no, certainly in the near term, they'll benefit from higher rates. I think given how they're entering this period of uncertainty, both the banks with record capital and strong liquidity, as well as both their consumer and corporate clients, whereas, you know, if loan losses do begin to rise, you know, into 2023 and beyond, they're just well positioned to handle that, benefiting from both strong balance sheets and really record pre-provisioned net revenues. So where do you want to be in the banking sector? It sounds like you find it all a little more optimistic than the market is telling us.

Yeah, particularly, you know, if you look at what relative valuations are, you're trading at, you know, call it 55 percent or so of the S&P 500. So, valuations have come in quite a bit. You know, listen, I think some of the bigger banks, you know, J.P. Morgan, Bank of America, you know, were pretty constructive. Also, some of the regionals, you know, Regions Financial stood out as giving particularly upbeat presentations. What about you, Barb? Which of the banks do you like? Well, I would stick with J.P. Morgan. That is the class act and it's underperformed its peers. And I think the bad news or any of the worries about the bank are more than discounted in the stock. So I think that is one that I would focus on first.

Got it. Thank you very much, Jason. We appreciate you joining us from the conference to share some of the highlights. Jason Goldberg, look at shares of SoFi getting a boost today. Bank of America upgrading the fintech lender to buy from neutral, raising the price target to nine dollars. The team writing the Biden student debt cancellation removes a major overhang for the stock and that NFL season should provide a meaningful boost in engagement. The NFL season. Joining us now is the analyst behind the call, B of A Securities, Mihir Bhatia. thought that the student loan cancellation of debt and postponement of payment was a headwind for SoFi. Hi, Sarah. Thank you for having me. No, you're right. For the last two years, students haven't had to make payments on their student loans.

And as a result, they weren't really thinking about refinancing those loans to maybe a better rate or a lower rate away from the federal loan market. What the Biden administration announced was that in addition to the debt, forgiving some debt, they also announced that this will be the final extension of the payment moratorium. As a result, what you're going to have is a lot of loan services reaching out to borrowers, letting them know that, hey, you're going to have to start making your student loan payments starting in 2023. And we think what that's going to do is drive refinance volumes back to normal levels at SoFi. SoFi was doing $2 billion of refinance volume a quarter before COVID, and they were down to $400 million last quarter. So we think that's going to

bounce back pretty nicely here as borrowers think about the fact that they're going to have to start making those monthly payments. And they try to find a lower rate, frankly. The stock is still down about 60 percent over the last 12 months. And then on the NFL season, we know they have the name of the L.A. stadium, which won the Super Bowl last year. Is this a marketing thesis here? No, it absolutely is marketing. You know, it's interesting. We did some analysis around just engagement,

user engagement, Google Trends searches, app downloads for SoFi. And it's pretty remarkable that there's a nice uptake typically around Sundays and Mondays, and even more so when it's L.A. Rams home game. And so far, you see the benefit in engagement. And, you know, you had the CEO also mentioned at a conference just this week, they gave us some internal numbers where, you know, a brand awareness went from 2 percent to 8 percent last year during the NFL season,

and it's now back down to 4. and they expect it to increase further this year. So you have a $9 target, Meir. The street is worried about the turn in the credit cycle, higher interest rates, more speculative names like this that have been recently come public. Do you think it's overdone? We think so. I would point out that we had downgraded the stock previously just on some of the concerns you mentioned.

But we do think what's happening now is that there's a fundamental improvement in the operations, right? Now, whether the stock gets to nine, you know, in the short term, it's a little more difficult to say. Certainly the market is a little more challenging now. But I think it's inarguable that the operating fundamentals for SoFi are going to improve as student loans come back. That is one of their most profitable businesses. It is their oldest business. Also, on the engagement side, you have seen a nice uptick in member growth. You're starting to see them monetize their members, adding more products and increasing engagement. So we do think that the operating, the business is going to be operating at a higher level and operations will certainly improve. And we think valuation will follow.

Meher, thank you. Barb, I don't think of you typically in a name like this, but would you be interested because of valuations? Anytime a stock has gotten cheap and it has growth drivers, just as described, I think one has to take a look. So, yeah, I'm intrigued by his analysis. But not a buyer yet? No, no. I'd have to do a little more work on this. All right.

Mihir Bhatia, thank you very much. Look at Netflix shares. They're also getting a midday pop on a report that the streaming giant expects its upcoming ad-supported tier will reach 40 million viewers by the end of next year. Julia Boorstin joins us. So that's a strong number, Julia. Where do these forecasts come from? That's a strong number. So the Wall Street Journal is reporting that these are forecasts that Netflix is giving to potential ad buyers. They're out there now. We know that they're out there now talking to potential advertisers to try to drum up demand before they launch the ad supported service. Now, just to give a sense of things right now, Netflix has 220 million total paid membership. Seventy three million of them are here in the U.S. So the outlook is that they're

going to be hitting 40 million by Q3 of next year and that 13 million of them would be here in the U.S. Now, of course, the big question is how much is this service going to cost? The number of subscribers they get for an ad supported tier will depend a lot on how much they're charging for that tier and whether they raise prices for their ad free tier, which is, of course, what Disney is doing ahead of the launch of its ad supported service. So it seems like the stock goes up whenever we get any more details about Netflix's push to embrace this ad supported tier. And the other thing we have to keep in mind, Sarah, is it's not just about getting new subscribers, people who have never paid for Netflix before,

but also trying to deal with churn, making sure that if someone doesn't feel like they want to pay for the full ad-free version, then maybe they will just downgrade to ad-supported instead of dropping the service entirely. So as you said, it's been this trickle of slightly bullish news around the Netflix ad model. Has it changed Wall Street's view of the stock, which got so negative around the subscriber loss and the competition thesis? Well, look, it's interesting because I always have to cite the comment that Netflix gives me whenever there's one of these headlines.

And they say, we're still in the early days of deciding how to launch a lower priced ad supported tier. No decisions have been made. So I think Wall Street is waiting for details. I mean, one thing I do have to point out is that Netflix just announced Tadum. That's its fan event. That's going to be on September 24th. And I have to wonder whether we'll get more details there. But it does seem like there's this optimism

around the fact that they're getting closer to launching and maybe it won't be in early next year. Maybe it'll be sooner than that. So, so many unknowns here still, whether it's around pricing, what the ads are going to look like. Netflix has made it really clear that this is going to be an evolutionary process. The way this ad tier starts out is not how it's going to look in a couple of quarters as they keep iterating it and making it better using data, which is what they do. Right. Stocks sold about 70 percent off the highs. Julia, thank you. Barb, Netflix, do you like this, what you're learning about the ad-supported

version? Well, I do, because I've been an owner for a long time. And I've been wondering, right this moment, the street is assuming worst case. It's post-pandemic. They're losing subscribers. The competition has really heated up. You know, street I think is taking out okay that's show show me what's happening they are not rolling out. This ad supported campaign until the first quarter next year is going to be a few markets you've also got the

password protected effort. Which actually- could be out the password sharing effort that could be end up being significant but we don't know. The other the only other thing though is that this is still a secular growth industry you've got some 500 million subscribers to cable

and satellite and the the move towards streaming continues and they are the leader but for now it was very hard to buy it here it's still at a 23 24 pe on next year's earnings and the question is what will the earnings be i think it could be a gradual improvement. It should stop the churn, bring in some incremental new subscribers. How many? We don't know. Just want to show you the Dow has gone positive again, everyone. The Dow is now up about, well, it's up about eight. There we go. It's unchanged. It's notable because we were down 200 just about 20 minutes or so. And it didn't look like we were going to hold on to earlier gains in this session. Looks like so far we've had a little comeback just in the last few minutes or so. The Nasdaq composite is back in positive territory. It's actually up six-tenths of 1 percent.

So it's got a gain right now. What's fueling that? Tesla, Apple, Amazon, Starbucks. Let's talk about Starbucks because investors are certainly liking what that company is serving up. The stock is up more than 5 percent, five and a half, after it offered upbeat guidance and outlined a reinvention plan that includes new equipment to speed up service and expanded loyalty program. Also, a goal of 45,000 locations worldwide by 2025. Interim CEO Howard Schultz spoke to our own Jim Cramer about some of the moves. The guidance that we talked about today for the future, for the next year or so, double-digit revenue, double-digit EPS, accelerated growth in our store base, and strengthening in our comps.

Barb, you own this stock, correct? You've been pretty bullish on it. Why? Well, I've owned it for almost 10 years in various accounts because it's been a solid premium name. And it was interesting because what he said today, I mean, this new CEO doesn't start until October 1. So I think very unusual to come out with such bullish information just before a new CEO starts. The one thing he didn't mention- is that pricing power for this company has been terrific. Over the last five years they have been able to raise prices. Almost 7% each

year. And this kind of market that is the kind of company you are looking for. That has pricing power. So with all the increases in their estimates I think you're gonna see a P. E. expansion here. Stock is down 20% year to date it is still it is not, but it is also still at a discount to its historical

valuation. So I think the stock will continue to move higher here. This is a great thing. As we head into the close here, Barb, we're seeing a rally, as I mentioned, in tech stocks of six tenths of a percent, maybe some hope to the bulls that we're looking for a bounce after yesterday's big wipeout, worst day for the S&P, the Dow and the Nasdaq in more than two years. Though it didn't look like it was going to come for the S&P. It is higher by about a quarter of a percent. The Dow was down, as I mentioned, 200. It's now flat.

You said you're waiting to buy. What are you waiting for? Are you waiting for a Fed meeting next week? More inflation data? What do you need to see? Right. Well, I think it's not even that there's going to be more inflation data coming. do you need to see? Right. Well, I think it's not even that there's going to be more inflation data coming. There's going to be jobless claims. Everybody's

watching that because I think there's a new awareness. I've been saying that the consumer is strong. Balance sheets are strong. Wages are good, even though they're moderating, which is what we need to see, because it looks like investors fear now that the Fed is hellbent on bringing down employment, stopping the wage growth. And that's what I think people are going to be watching. For me, it's just going to be really watching values and letting things settle, because the stock market could go lower here. So I'm not surprised today is just back and forth. It could end lower. What's the first thing on your shopping list? Ah, that's a good question.

I have been buying on weakness. Things like Walmart, when it got hurt in their earnings. UNH, I still like Uber a lot. I think they've got a lot going for them. And I think, you know, Meta, I mean, all of those of us who own Meta are in pain, particularly going to new roads today. But Meta, I think, is really underestimated. They will figure things out in the Metaverse, in their reels, and in their advertising algorithms.

So I think the stock is very cheap here. But I think there's also concerns over advertising. But I think inflation is going to ease up. So we'll see. We'll see. I think a lot of bad news is discounted in this stock right here. All right. Meta down another percent today, even with the Nasdaq rally.

Barb, great to have you, as always. Barbara Duran, BD8. As we head into the close, take a look at what is moving right now. Let's start with the Dow, because you saw this big drop, as I mentioned, in the final hour to down 200, although we did spend most of the day higher. The high of the day was up 171, so not a very convincing bounce back if you're looking at the Dow. Chevron, J&J, Salesforce, and Boeing, the biggest contributors on the plus side. And then on the minus side, you've got Honeywell, UNH, UnitedHealth, 3M, and Home Depot.

S&P 500 faring a little bit better. That's because technology is working today. Energy is working as well. It's up 3%. Utilities are strong. Consumer discretionary is the group that I would highlight because you're seeing a rebound in names like Starbucks, some of the cruise lines. Tesla's up. That's helping. The Nasdaq up 0.8% of 1%. So it is the highest of the big three. And it has climbed just in the last few minutes of trade small caps also ending with a gain of four tenths of one percent a mini bounce after yesterday's big sell-off that's it for me on closing bell into overtime with mike santoli