Closing Bell - Closing Bell: The Fall Fall, Focus on the Fed & Let's Make An EV Deal 9/20/22

Episode Date: September 20, 2022

Stocks selling off ahead of Wednesday's key Federal Reserve decision on interest rates. Canaccord's Tony Dwyer says stocks are setting up for a big fall in the Fall, but predicts a huge rally into the end of the year. Barclays' Adrienne Yih explains why she downgraded Nike, which was one of the worst performers in the Dow. National Economic Council Director Brian Deese on the mixed signals the market is getting from companies on the economy and whether the White House should accept any blame for inflation. GM CEO Mary Barra & Hertz CEO Stephen Scherr discuss the automaker's deal to sell up to 175,000 electric vehicles to Hertz. Plus, Barra weighs in on whether her company is experiencing the same rising supplier costs that Ford is warning about. And Lerer Hippeau Managing Partner Ben Lerer discusses how market volatility is impacting private company valuations, the IPO market and the SPAC industry.

Stocks are falling hard here as yields are rising again. The Fed meeting is getting underway. 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. Down across the board, the S&P 500 down 1.3%. Every sector is lower right now. Interestingly, with this rise in yields, the two-year, the 10-year note yield, you can see the 10-year yield almost at 3.6. Technology is faring a little bit better than some of the other sectors right now. You've got sectors like real estate, materials, consumer discretionary, and technology under pressure. Still, tech is getting hit. The Nasdaq's down 1%.

But there is strength in Apple, for instance. Tesla remains higher, even though names like Amazon, Microsoft, and Google are under a lot of pressure. Check out Ford. Here's the stock story of the day. It's at the very bottom of the S&P 500 getting crushed as the automaker joins a chorus of other firms warning about earnings. We'll talk about that on that note. Coming up this hour, GM CEO Mary Barra will join us along with the CEO of Hertz to talk about a big new deal for electric vehicles. And of course, we'll ask about that Ford warning as well.

Plus, Washington comes to Wall Street. National Economic Council Director Brian Deese will join us live here at Post 9 to talk about the diverging signals we are getting right now from corporate America. First up, though, today's market dashboard. Senior markets commentator Mike Santoli on this sell-off. We're giving back yesterday's gains and then some. We are, Sarah. Markets are struggling in the face of this continued March higher in yields, apprehensive ahead of tomorrow's Fed meeting,

pretty much bracing for a continued hawkish message, although also trying to find its footing. The S&P is at the lower end of basically a four- to five-month range. That's just over 3,800. I say that because if you draw a line right back this way, four months ago today, May 20th, the intraday low, it's not visible here, but the intraday low was thirty eight ten. We've kind of bounced off that a few times. The low each day this week has been or two days this week has been under thirty eight forty. So it's right in that zone. You see that overshoot down to the June lows. That's the thing that sort of looms

out there. Potentially it's a few percent down from here. But as you can see, still kind of a struggle and a churn sideways at best at these levels. Take a look at really one of the big overshadowing drivers here, which is the moving global yield to sell off in global bonds. This is the basically global global government bond ETF, basically the value of those bonds declining, yields globally going up, central banks across the world trying to chase inflation higher, driving yields up. And you see it's really been pretty closely tethered to global stocks. That's the ACWI, All Country World Index. So it's not the only thing going on. Clearly, there's economic slowing.

Clearly, earnings are in question. But this has been, to me, Sarah, the big mover. And the fact that you're losing on both stocks and bonds is sort of telling you that you have a hard time playing offense when that's the case if you're an investor. You were going to do global yields. I thought you were going to mention the Riksbank. Well, it's a big part of the story overnight, right? Swedish Central Bank goes 100 basis points. Yeah. A big surprise. And yet the dollar continues to strengthen here, indicating the Fed is leading the charge. Without a doubt. I mean, the dollar is essentially at new, your dollar index essentially at new highs. And that's right. Relative to other central banks, the Fed is ahead in this process.

And it has been more persuasive in saying it's going to essentially go as hard as it can to restrain inflation. Mike, thank you. We'll see you later on the Market Zone. Mike Santoli, for more on the sell-off and what to do, let's bring in Tony Dwyer, Canaccord Genuity Chief Market Strategist. So you said, Tony, your big call was that we'd get some relief in the summer, and we did, and the fall would be bumpy. And it is feeling that way. Is that what's unfolding? Right. We've called it the fall-fall, Sarah. And I think the last time I was on, you said, so you're not buying it. And the answer is, as oversold as we got during the summer, or as overbought as we got in the summer rally,

where we retraced 50 percent of the decline and more than 90 percent of the S&P got above the 50-day moving average and all those tactical indicators that kind of kicked off where we got into this fight between don't fight the Fed and don't fight the tape. The thing that just has held us off and where we expected the fall fall is I can't find a major low, a major bear market low that turns while yields are going up. Typically, as I look back over the S&P 500, I look for times where you're down 18 to 20 percent. And the two year, when the market bottoms, the two year is typically already turned. And obviously that's not the case here. So as Mike, I think so appropriately points out, it's about the global yields as you as well. So the two year yield hitting four percent today, you're saying

as long as we continue to see this march higher in yields, the sell-off in Treasuries, stocks are going to be under pressure. Agreed. I mean, that's what's happening. So it's not, you know, people like me love to come on TV and Monday morning quarterback. It's what's happening. It's hard to get a rally going when the Fed is uber hawkish. Now, Sarah, as you know, our plan this year was to, as you outlined it, is I still don't want to feed into whooshes. So what's a whoosh? A whoosh is when you get less than 10% of stocks in the S&P 500 above their 10-day moving averages. It's down to single digits today. We're at another 88% downside volume day so far by my last look. So again, I'm very hesitant to come on TV and say, hey, everybody run for the hills when you're beginning to discount a recession, which wasn't

the case at the August peak. There was this magical soft landing hope, despite the Fed raising rates in a historic way into a generationally levered system with rising inventories and slackening demand. But now that we have FedEx, Ford, U.S. Steel, a blooming company of America, Nucor, we're starting to get that vibe that the recession is finally being priced in, is beginning to get priced in. Right. So the question then is, when do bond yields turn? And could that be a buying opportunity for the equity market? Because there's a lot of tightening priced in at this point. There is. And that's really so this week, what we wrote about was the narrative is going to change. Listen, the idea that you're going to take

a pendulum from one extreme where good news is bad news, which is obviously the inflation news means the Fed's going to tighten. The pendulum swung to the perfect spot for the summer rally. The yield, the idea that the Fed was going to be able to stop raising rates and we're going to have a soft landing. Eventually, you've got to swing to the other side of the pendulum, which is bad news is bad news. And we're getting to that point. So, again, I don't I don't we're in the fall fall. I don't think you have to go buy the next tick. But I think a lot of us are are kind of looking at it, saying, let's watch for the equal weighted market to act better than the S&P. And unfortunately, for the last couple of days, that's not true. So what what comes after the fall fall?

I think we're going to ramp into year end. Sarah, we've been doing this a long time. You and I even been doing interviews for a long time. Follow the money. I feel like you're always bullish at the end of the year. Well, you know, most of us are, right? But that's only if the fall plays out. The reason that you get the year-end rallies, our call that may be a little bit differentiated,

is that the narrative is going to change from the Fed needing to fight inflation to what happens in an election year when inflation has already peaked. Sir, for the life of me, I cannot understand why the Fed keeps letting the CPI be the narrative. They've said so many times in my career, it's about the core PCE, which peaked in February. So what if you actually get a further decline, not just in durable goods, non-durable goods as well inflation is coming down employment is ripping you know picking up and all of a sudden you're in an election period that could set that stage again for a turn so many people want to buy bonds here because the yields are attractive the bond yields come down into an oversold tape with such a degree of

pessimism you know that's what could turn it. So we've been cautious throughout the year. Now we're looking maybe on another, you know, as we retest that low to take advantage of it. Well, I don't know. I think it's going to be about the Fed's resolve and how satisfied they are with inflation coming down. They want to see it go all the way down. Well, they want to see it come down. It's feeling more like a Volcker. Right. You've got to be careful. You got to be careful. You get what you wish for, which we've talked about before. Everybody wants to channel the inner Volcker.

And that's great when you're in a generational low in debt to GDP, which we were in the 1970s and early 1980s. We're in a generational high in debt to GDP. So the idea that you can shut down a levered system with high inventories and slackening demand does not make any sense to me. And it's amazing how the markets always force the Fed to make a shift. And that's the call that nobody's making. We see the inflation.

Hell, I see the downside. I came out with a 220 estimate for next year in the S&P 500. It's not about the inflation. It's going to be about the bad news becoming bad news. So if we're right on the fall fall, that's when you want to start thinking about what's next. And whether it's at the very end of this year or into early next year, Sarah, I think there there and will be the opportunity. All right. We'll hold you to it. And no doubt we'll talk to you before then. Tony Dwyer, thank you very much. Appreciate it.

Check out the Renaissance IPO ETF getting caught up in the sell off again today. And the tech IPO market is in the midst of a historic drought. No listing worth more than $50 million in the last 230-day-plus day period. Up next, venture capitalist Ben Lehrer weighs in on the dry spell and why his firm is raising new money right now. You're watching Closing Bell on CNBC. We're down 440 on the Dow. Low of the day was down 458. We'll be right now. You're watching Closing Bell on CNBC. We're down 440 on the Dow. Low of the day was down 458. We'll be right back. Tamath Paliapatiya, the so-called SPAC king, is shutting down the two SPACs he created after failing to find companies to take public. The news comes, of course, as IPOs are getting slammed this year as well. The IPO ETF is down 47 percent

year to date. But venture capital firm Lear Hippo announced today it closed on 230 million dollars and two new funds. Joining us now is Lear Hippo managing director Ben Lear, who's joining the firm full time again. Ben, it's great to have you on the show. Welcome. Thank you so much for having me. So it's kind of a tough environment to raise one fund alone. How about two? Why now and what did you find? Well, I mean, for us, you know, we've been at this for a while. This is, we actually just raised our eighth seed fund and our fourth growth fund. And so this is more of the same, more of what we've been doing for, you know, the better part of

the last decade. And I think the, you I think the advantage that we have relative to the not so great late stage market right now is that we're typically first institutional check in any company that we're investing in. And so by the time the companies that we're investing in right now are thinking about exiting, the market will probably have gone from terrible to great to terrible to great several times. And so we really take a very long-term view, we're founder-focused, and actually feel like investing into a recession at the startup stage is an incredible opportunity. How is it impacting deal flow right now, all this market volatility? So early-stage deal flow has continued to be strong. It was a little slower over the summer, I think, as people were sort of getting used to this new normal.

But we've continued to see incredible opportunities. There's a bunch of people who have been who have spent the better part of the last decade working at a lot of the sort of companies that came out IPO had incredible runs in the public markets and maybe have experienced a little bit of or maybe a lot of pain over the last several quarters. And so there's actually lots of talent leaving traditional tech and folks are starting new companies. And I think that's going to benefit the early stage market. The reality is in the later stage right now, pre-IPO rounds, CDE rounds, those are largely shut down. I think that late stage investors are trying to figure out where pricing is relative to public markets. That's what I was going to ask you about pricing and valuations, because we got this deal last week adobe buying figma for 20 billion dollars a company of 50 times revenue valued at i think double what it was valued in 2021 which makes

you wonder what's happening with private valuations and whether they have some catching up to do with the public market well look i think that uh you know figma is an example of a uh of an extraordinary company uh built in the private markets that i think probably could have gone public if it had wanted to, but obviously had a bunch of strategic reasons to partner up with Adobe. You know, where the sort of delta between public and private markets, those multiples have fluctuated a ton. Last year, I think you saw all-time highs in both the private and public markets. Obviously, with the public market drawdowns, the private market has felt multiple compression. That has happened much more at the later stage. In the earlier stage,

we've seen pricing come down from highs of last year, but not close to the way that you've seen public market valuations change. And I think that's because it's proven itself to be clear over the last decade that early stage venture capital is a great asset. What about, speaking of exits, you mentioned how IPOs have dried up. What about SPACs? 21 SPACs have liquidated so far this year. Chamath Palihapitiya, the latest to wind down two today. Is this the death of SPACs? I don't think this is the death of SPACs, but I think you're going to see the SPAC market probably rebound, probably look a lot like it looked prior to the 2021 and maybe late 2020 boom.

There's a place in the market and sort of special situations where SPACs make a bunch of sense, but every financial institution in the country probably shouldn't have a SPAC. And I think you're going to see a lot more blood sort of clear its way through the system. And then we'll be back to the way that SPACs were used traditionally for the most part.

And then Ben, I sort of want to ask about you and your focus and your expertise. So you're back here with Lira Hippo after doing the deal with Vox Media for Group 9 and your Thrillist company. Obviously, you're an expert here on digital media. I'm curious what is ahead for that group with the lack of M&A, the lack of exits, and now worries about advertising spend hitting the big companies like a Meta or a Google. What's it going to mean for some of these digital media properties? Yeah, so, you know, I'm on the board of Vox now after the deal. And I think Vox is, you know, uniquely positioned. It's one of the reasons that we did the deal with Vox. I think

that they have one of the, you know, few truly premium uh portfolios from both a brand perspective from a um you know huge digital audience perspective as well as a really diversified base of revenue so advertising is the largest source of revenue in that company but it's not uh but they have a truly diversified suite from subscription to commerce and everything in between. I feel really bullish about Vox. But digital media, generally speaking, I think is a tough bet for venture. There's been an incredible amount of consolidation in traditional media, obviously some pain in social media. And I think that there's going to be more and more consolidation happening in digital media one of our portfolio companies that they're hippo Axios sold very recently had a great outcome

selling to Cox there are still going to be good deals for good companies that get done but if you're not one of the true few leading companies in digital media I think you're gonna have a very tough go of it and you're probably going to get gobbled up or go away in the next 12 to 24 months. That's quite a prediction. Ben, thank you very much for joining us. Thank you so much for having me. Appreciate it. Yeah. And the big news today, Ben Lear. Let's give you a check of where we are in the markets. Down 400 now on the Dow, one and a quarter percent on the S&P 500,

about 1% on the Nasdaq. Watching the Treasury market very carefully, the two-year note yield after hitting 4% earlier today is bumping up right against that level. The 10-year yield, 3.56. We're looking at multi-year highs across the yield curve. After the break, National Economic Council Director Brian Deese joins us here at Post 9. We'll ask what the White House makes of some of the earnings warnings we've seen lately from the likes of FedEx and Ford. And then later, Hertz just inking a major deal to buy 175,000 electric vehicles from GM. We're going to talk to the CEOs of both of those companies about the big bet on EVs.

When Closing Bell comes back, down $3.59 now on the Dow. When it comes to the economy, well, it's complicated. Ford warning last night that supply chain issues and inflation are pushing costs a billion dollars higher than expected. This, of course, comes after the FedEx CEO says he thinks we're in a global recession. But executives from Home Depot, American Express and Intuit are seeing signs that the consumer is still strong. Joining us to discuss National Economic Council Director Brian Deese live here at Post 9. It's good to see you. Almost didn't recognize you not being in front of the White House long. It's great to be here. Welcome to New York. Thank you. So what do you make of some of these these warnings from corporate America,

especially Ford right now, which is getting shellacked on an extra billion dollars of costs related to the supply chain, which we thought was improving? Yeah. Well, look, these individual company announcements obviously are affected by individual circumstances. So we obviously look closely at them, but try to take a broader perspective. I think what we're seeing and what I'm hearing today and elsewhere from business leaders is that we continue to see a surprising degree of resilience in the economy. Resilience on the consumer side. There's certainly changes in the composition of spending, but there is real resilience there. And resilience on the business side as well. And capital investment continues to move forward. There's no doubt we're in a transition, and that transition is catching some companies and creating opportunities for others. So, no doubt we're in a transition and there are uncertainties, but I also think that we are

hearing a lot about companies being able to have some certainty now to invest for the longer term in areas like clean energy, in areas like semiconductors, because of the policy certainty that we've helped to create. And so I think that that will be helpful over the medium term, even as we navigate through, you know, the real uncertainty that is here in the medium term. We were hearing a lot about resiliency, too. And then that's why some of this news was so shocking, like FedEx coming out, lowering its guidance. The CEO saying we're going into a global recession and that the U.S. consumer is starting to feel the pain as well. In other words, it does make you, FedEx is as broad as it gets. It's not industry specific. They touch shipping

around the world in real time data. It makes you wonder whether we're going into a recession or a downturn even faster than the market was expecting and that you're expecting? Well, let me take that in a couple of pieces. Number one, there is uncertainty and we should be humble about that. Number two, where we sit today in the macro economy, if we look starting in the U.S. economy, we continue to have a very historically strong job market. Consumers do continue to spend. And again, the compositional elements do affect

different companies differently. Number three, the global environment is very challenging right now. And certainly Europe is facing challenges. China is facing challenges. I think what that reinforces, though, at least in what we're hearing and seeing, is just how uniquely well positioned the United States is to navigate through this challenging short-term period. And the last thing I'll say is, look, individual companies have made decisions over the course of the last several months to navigate through this transition in different ways. So they're going to find themselves differently positioned. But one thing that I am hearing consistently is that now, if you look beyond the near-term period, the incentive, the opportunity to invest in the United States,

to build in the United States, to take advantage of the resilience that comes from a more resilient supply chain, to build on the manufacturing progress that we've seen in the United States looks more promising than it has in years. That's going to take years, though. Chip manufacturing in this country? When is that going to happen, realistically? Well, the good news about the way that we have structured the policy incentives

is that they provide long-term certainty that actually pulls forward private investment. So certainly it will take some time to build fully out of fab to full operating capacity. The kind of forward investment will start immediately. We've seen that in a number of company announcements. We see that in other sectors like electric vehicle charging infrastructure, manufacturing that's happening here in the United States because of requirements that those are made here in the United States. That happens immediately, even as public funding is going out across time, because now companies finally have the certainty to know the United States is in this for 10 years or longer. In the meantime, you know, in the short term is the worrisome outlook. Tomorrow we're expecting another Fed decision.

Three quarters of a percentage point baked in in terms of interest rate hikes. That's baked in for November as well. And then 50 basis points. It's a lot of tightening happening in a short amount of time in a period where the tightening usually hits with a lag. So what is that going to do to our economy?

Well, look, the Fed is making decisions on monetary policy. They have charted a course and we're going to leave them to make those independent judgments. But you make forecasts, right, on the economy. Sure. As we look forward, we continue to see a lot of reasons to believe that this resilience can continue and that we can actually achieve that goal of bringing prices down without having to give up all of the economic gains that we've made. We see that resilience.

As I said, you know, we should not underestimate the underlying strength of the labor market. And obviously we anticipate and we expect some cooling from, you know, 500,000, 600,000 jobs a month on average. But as we see that cooling, the continued increase in labor force participation, we saw historic increases in female labor force participation last month. Those are things that can help in this transition. And like I said, policy is going to contribute and be a tailwind. And that's an important point here because the legislation that we have passed, policy is going to be a tailwind over the course of the next

several months, encouraging long term investment in high productivity areas, bringing down healthcare costs, bringing down energy costs. Those are important elements as well. Policy though was a tail, was a headwind when it comes to inflation. Do you, does the administration take any responsibility for what we're seeing in terms of an overheated economy? Well I think where we are reflects the unique nature of the pandemic crisis and the unique nature of the pandemic crisis and the unique nature of the pandemic recovery. I also think we're in a better position than almost any other country in the world, and that is due in no small part to policy choices that have been

made. Strong labor market, resilient consumer, resilient business sector. Those are all strengths that we have here in the United States, uniquely as we look globally, to navigate through this transition. So that's our focus. And again, our focus now is on implementing these historic policy measures, whether it be about semiconductors or clean energy manufacturing, to make sure that we get the most out of this for the economy and for workers. Brian Deese, thank you for coming by Post 9 for an update. We appreciate it. It's great to be here. Yeah, here for the U.N. General Assembly. Up next, the CEOs of GM and the CEO of Hertz on their new electric vehicle deal

and Ford's warning about higher supplier costs. We'll be right back here on Closing Bell. The Dow is down about 350 points. Again, low of the day was down 550. GM and Hertz announcing a deal today where GM will sell up to 175,000 electric vehicles to Hertz over the next five years. This comes after Hertz has made similar agreements with Tesla and others to help build out the rental company's EV fleet. GM CEO Mary Barra and Hertz CEO Stephen Scher join us now exclusively with, of course, our own Phil LeBeau. Phil, take it away.

Thank you very much, Sarah. Mary, let's start first with you. You heard the outline of the deal that you guys have made, 175,000 vehicles over the next five years. How much will this help General Motors reach its goal of selling 1 million EVs annually by 2025? Well, I think this is very important, and I really have valued the partnership with Hertz. We've had it for a long time, and the look that they're doing and commitment to EVs, doing a long-term agreement, I think is going to help us achieve that goal because what we've learned is when a customer experiences an EV, they're twice as likely to purchase. So this is going to be a wonderful opportunity to showcase General Motors EVs from Chevrolet all through all of our brands,

even including Bright Drop. Well, let's talk about that customer experience. Stephen Schur, the CEO of Hertz, joining us. And Stephen, you're on the line, the phone line with us. What's your perspective in terms of you've got Teslas, you have Polestars right now, electric vehicles that people are renting. What are you finding in terms of when people are saying, I want an electric vehicle? Are they booking that in advance or is this more a case where they get to an airport or a location and they say, you know what, there's an EV. I think I want to drive that instead and I'll upgrade to that. Hey, Phil. Well well thanks for the question um our customers are uh making an affirmative statement up front uh that they want to ride

in an electric vehicle and i think this deal really gives us the opportunity to expand the choice that they have uh through and across general motors product as well as polestar and tesla and we're seeing this by the way across all segments Tesla. And we're seeing this, by the way, across all segments of our business. We're seeing it in the leisure traveler who wants to get into the car. We're seeing it in and among corporate travelers where companies are looking to fulfill their own carbon footprint objective. And then importantly, we're seeing it in ride sharing, where we are renting electric vehicles to Uber and Tesla. And so this is a very affirmative demonstration of interest on the part of our customers. Mary, it's Sarah Eisen in New York. I would think your stock would be up today

on this deal. It's not. And perhaps that's because Ford is getting crushed today. Your competitor warning of a billion dollar hit because of part shortages and inflation and a warning on the on the third quarter. And I was wondering if you're experiencing the same kind of issues still, just when we thought things were turning in the supply chain. Well, you know, as we announced previously, we did have some units that we built shy in Q2, and we said between Q3 and Q4, we would be completing those vehicles. We are on track to do that. So we are seeing an improved situation. And then as it relates to suppliers, you know, challenges and issues with suppliers is not new. We've been dealing with this, you know, ever since the beginning of the pandemic

and certainly with the semiconductor shortage and all the other challenges. And we just we have a great relationship with our suppliers. We keep working, solving issues, looking for efficiencies as a normal course. And we're going to continue to do that. What about on the demand side? Is there any shift in demand as we've seen economic conditions and financial conditions tighten? We still are in a supply-constrained market, and from General Motors' perspective, we have a really strong product portfolio. We just had a major upgrade to our full-size trucks, the Chevrolet Silverado, as well as the GMC Sierra. And so we're seeing very strong demand and very strong demand for trucks and full-size SUVs. So that continues. It's something we're watching carefully, but right

now, demand is still very strong. Speaking of demand, I want to ask Stephen what you're seeing, Stephen, in terms of the consumer out there and the corporate traveler. It's so critical to Hertz's bottom line. And I know that in the past you have said, look, we're seeing corporate travel increase. What's the outlook right now that you're seeing in terms of how many people are out on the road for business? Bill, the question is really timely. I mean, as you know, leisure travel has bounced back almost to at or above where we were in 19. Corporate travel as of late has been accelerating and improving quite noticeably. And I say that particularly with reference to small and mid-sized businesses,

as well as some of our corporate clients. We are now back to about 80 to 90 percent of where pre-pandemic demand was, and we continue to see that grow. Now, we're mindful of all of the issues that have been spoken about on the show in terms of risk of recession and the like, and so we mind ourselves in terms of all of that. But if I was just to look through the lens of where demand sits, demand is improving and growing in the corporate space. It's been there on the leisure side. And so near as we see, you know, consumer demand and corporate demand remains quite strong and is growing. Stephen, one last question with regard to the EV deal with General Motors and

EVs in general being offered by Hertz. As somebody who does a lot of travel himself, I can tell you that the last thing I'm thinking about when I am heading to the airport is I got to stop. And well, with gas, I obviously have to refuel, but I'm not going to want to stop and recharge. Are you concerned about the lack of public charging stations and infrastructure that it might slow down demand for EV rentals? Well, for now, we're making it quite easy for our customers. We're asking you to come back with a minimum of a 10 percent charge. So that will relieve the near term anxiety that people people may feel. What you will see us announce over time, and including an announcement later this week, is we are engaging with multiple parties that are building and developing charging networks around the country. Such that a Hertz customer can be indifferent as to the network they use.

We will aggregate those networks in an app. We'll leave it to the customer to make a choice. They will be available all across the country. And then we'll bill the customer at that cost when they close out the rental. So we're focused on it. We're engaged to develop a relationship. We obviously know where cars are going. We're a big buyer and will be a big consumer of charging networks. And we're looking to make it much easier for our customers to overcome any, I think, unfounded anxiety they may have. All right, we'll leave it there. Philobo, thank you. Mary Barra, Stephen Scherr, it's good to have all of you here today on that big announcement.

Appreciate it. Just want to show you where we stand in the markets because we've had a little recovery here. The Dow is down 245, only 245. Again, low of the day was down 553 points about an hour ago. We've come back a bit. The S&P 500 is now down a little less than 1%. We're still seeing every sector weaker, but information technology is faring the best. It's only down two-tenths of 1%, thanks in part to Apple, which is holding up really well today. Tesla is also one of the gainers. Barclays downgrading Nike. And that stock is one of the biggest drags right now on the Dow. We'll talk to the analyst behind the call on the market zone.

That's coming up. And don't forget to register still for CNBC's Delivering Alpha. This is our big conference featuring top investing picks from some of the biggest names on Wall Street. You can scan the QR code right there on the screen to register now. We'll be right back. Welcome back. Take a look at shares of Gap under pressure again today, down 3%. CNBC confirming that Gap is cutting roughly 500 corporate jobs, mainly at its offices in New York, San Francisco, and Asia. As the retailer deals with falling sales and profits, they still are looking for a CEO. And of course, this comes right after last week's big drama at Gap when Kanye West, or Ye, decided to terminate his contract

with the brand to partner on Yeezy products. He joined us to discuss that. No, unclear whether the layoffs are related to that because we learned from Gap subsequently that they are, in fact, ending that partnership. The stock has been under pressure all year long. Investors applauding Apple's decision here to raise App Store prices in multiple countries. That stock is a notable standout in today's session, up 2 percent. That story plus downgrades for Nike and PayPal when we take you inside the market zone. Continued mini recovery here, down 241 on the Dow. 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 Steve Kovach on Apple and Barclays Adrian Yee on Nike with a downgrade today. We'll start off with the broader market, though, Mike, because we're coming back a little bit. Plus, we've got Steve Kovach on Apple and Barclays Adrian Yee on Nike with a downgrade today. We'll start off with the broader market, though, Mike, because we're coming back a little bit. Dow down 264. It's kind of been a pattern in this final hour of trade that things have improved, which is very different than earlier in the year when we were in the throes of the bear market and the final hour was ugly, ugly, ugly. Any any reason for it? Are we just tracking treasuries? Largely tracking treasuries. I mean, we've been going down for the better part of five weeks in terms of, you know, that decline off the mid-August low. And really in the last week, it's been almost straight down.

So, yeah, getting a little bit of traction as we get close to the Fed meeting around this 3,800-plus level in the S&P 500. I don't know if the headlines saying that Vladimir Putin is not going to make a speech today seem to coincide when the market firmed up. I do think it's much more about nobody wants to be leaning maybe too heavily in any one direction ahead of the Fed, meaning the bond market seems to have done a pretty good job of pricing in a rather hawkish outlook. The stock market thinks it has, but it remains to be seen. I think it's sloppy, but you're getting, once again, some of those kind of oversold conditions build up to a degree that would create some buy powder if there were any relief tomorrow. Eleven and 15-year highs for Treasury yields. Look at Apple, though. It is one of the bright spots right now for the Dow. After announcing

it will increase App Store purchase prices in the EU and some countries in Asia in order to offset inflation and the strong dollar. Steve Kovach joins us. Steve, investors seem to really like the news. I guess they think Apple has the pricing power here. Yeah, that's right, Sarah. And look, this is something we expected to see from Apple. I was talking with CFO Luca Maestri a couple of months ago when they reported earnings, and I asked him this, what are you doing to combat inflation and the strong dollar? And he said, in not so many words, we will consider raising prices in the countries where the dollar is the strongest. And for this decision here, it's going to be throughout the EU, some countries in Asia like South Korea and Vietnam, and some countries in South America.

So let's just use the EU as an example. Right now, priced in euros, the base price for an app is 99 cents. That's the cheapest a developer is allowed to charge for an example. Right now, priced in euros, the base price for an app is 99 cents. That's the cheapest a developer is allowed to charge for an app. That's going to go up to 1 euro 19. That's about a 20 percent bump. And of course, Apple takes a 30 percent or up to a 30 percent cut of each transaction. So this is going to help protect their margins in the services business. And in addition to just the app, Sarah, they also, remember, two weeks ago, raised the prices of the iPhone in many of these same countries for many of the same reasons. So, yes, their pricing power is working. Remember, Sarah is with you last Friday standing in front of the Apple store. People still lined up for those iPhones. So

the pricing power does work for Apple. And they're not alone in raising prices either. Look at Sony. They raised prices internationally for the PlayStation 5, and Meta did it in the U.S. and elsewhere for their virtual reality headsets. This is something you don't see very often in tech, where older devices and current devices get a price increase as they age. So a really weird environment here, but it's working out for Apple today. Well, it's an inflationary environment, and it just shows that it's strong. The price increases are still coming, even though the Fed is trying to fight it. Thank you, Steve Kovac, Apple winner today. Nike is falling and dragging on the dafter. Barclays downgraded the stock to equal weight.

Volatility in China and weaker demand in North America, two reasons for the move. Also, some worries about inventory. We've got the analyst behind the call. Adrienne Yee joins us now. Adrienne, so you're downgrading to equal weight, $110 price target. Nike's trading at $102. So it does feel like a little bit of a catch-up or catch-down kind of call. Yeah, you know, the price target that we have is at the end of next year. So it's

kind of, you know, we roll out kind of, it's more like a 15-month price target. So I think there's a lot of volatility during that 12 to 15 months. I think the near term is probably the next couple of quarters are going to be very tough. They have excess inventory to work through in the North American market. And really, you know, the recovery, if there is going to be a recovery in stock price margin and EPS, it's going to be in the back half of the calendar next year. So Nike reports earnings next week on Thursday. You're expecting it's been it's been a few tough quarters here. You're expecting more pain? It's been five consecutive tough quarters. Remember, this all started in March of 2021 with the PR issue that they had. And then it's just been a rolling kind of one thing after another, right?

They had the factory shutdowns with the massive exposure to the Vietnam market, to the back half of last year, the supply chain issues. They finally caught up with that inventory. And so all that inventory that they bought, you know, excess weeks in supply, it all showed up in May of this year. Just at a point in time, right, this last quarter through the July, you know, reports that we've seen from retailers has been abysmal. It's been, you know, one day after another of demand destruction in the North American market, in the U.S. market. And so that's really where we see the risk. If you look at their inventory, they actually extracted by region, and there's a lot of inventory. Inventory in the North American market is growing 40% faster than sales. So the problem, Adrienne, the flip side to your argument and why so many of your colleagues

stick with Nike and are so bullish, because if you talk to the company and you listen to the company, they've still got really strong brand heat. They're not having a problem with demand. And they're outperforming both Adidas and Under Armour on certainly sneaker sales, but also apparel. They've still got the style, and they're still resonating with the consumer. Everything you're talking about is related to macro and COVID and some of these other external pressures.

And so as long as they can continue to maintain brand heat, then that ultimately should benefit. That's the flip side argument that you hear from a lot of the analysts. And I would wholeheartedly agree with that over a multi-year horizon. Unfortunately, investors have near-term 12-month targets, end-of-year targets. I think that the next, the rest of this calendar year going into next year, and even into 2024, remember the way that wholesalers make their business. And although Nike is trying to move to DTC as quickly as possible, they still generate 55% of their business from wholesale. Wholesale is the next shoe to drop. Frontline retail, right, is having its toughest demand-destroying year from the consumer this year. They buy from their vendors about six months out.

So, you know, just in general, the weakness that we would see, it would not be showing up today. It would be showing up in spring of 2023. And that's what we're worried about. Yeah, it's a bearish view there on top of a 40 percent plunge in Nike stock this year. Thank you, Adrian, for joining us to discuss it. Adrian Yee. Look at PayPal. That's under pressure as well today.

The stock also getting a downgrade. This one from Susquehanna. Analysts, they're moving to neutral from positive. Price target of 100 from 115. The reason? A subsidiary of PayPal with lower margins is encroaching on PayPal's core business. And Susquehanna expects the trend to continue. PayPal down 3.5%.

Already pretty low valuations, Mike. What are the expectations around PayPal at this point? There was some excitement that things might start to turn. They had an activist in there. Yeah, I would say lower valuations. And it is an interesting rationale. Braintree is the subsidiary. It was an acquisition that PayPal made.

And really, if you read between the lines, it says, well, PayPal's business is evolving more toward a basic kind of wholesale transaction processing business, which is kind of what they're supposed to be maturing into. It's just lower margin than a lot of the kind of consumer-facing stuff that they've gotten used to, Venmo, whatever else. So I do think that that's sort of a sign of the stage this company that still 100 billion dollar plus market cap MasterCard and Visa are 300 and 400 billion dollars. Valuation of PayPal doesn't really look bad relative to those just that the estimates have been coming down pretty hard. The street is still clinging to it. I think it's still have mostly buy ratings on the stock. So as bad as it's done people haven't quite given

it up. I still think it's kind of a core transaction processing payments play. It's just not that exciting on a growth rate basis at the moment. Mike, we've got just about two minutes to go. We've got a stronger dollar. Bonds are selling off. Oil prices are weaker and stocks are down, but they are off the lows, about 1% declines across the board. What do you see in the internals? Yeah, it's been pretty weak. I mean, most of the day, the breadth has been running 7 to 8 to 1 on the downside. It's right around there now. It's called, you know, 6 to 1 declining to advancing volume.

You mentioned, Sarah, earlier the dollar really does encapsulate a lot of the story here in terms of global yields, the inflation outlook, central banks. And it did tick earlier above that prior high from August. It's, you know, 110.21, the U.S. dollar index, give or take. That's a good looking chart. If it was a stock, you'd say, hey, I wouldn't fight that trend. Take a look at the volatility index. It's elevated a little bit. Of course, we have the Fed meeting a known catalyst tomorrow, but it's still chopping around this high 20s range. I continue to consider it a sort of non-signal at this level, neither bearish nor bullish, given where the index has

been mostly in a range for a few months. All right, Mike, as we go into the close ahead of the big Fed decision out tomorrow, again, we're going to get dots, projections of future interest rates and economic projections from the Fed tomorrow. We've got the market under pressure. The Dow is down 332 points. Low of the day was down 553. Only two gainers right now in the Dow. Apple, we mentioned, and Boeing. Everybody else is weaker. Home Depot is the biggest drag. S&P 500 also down a little more than 1%. Every sector is weaker. It's technology and energy that are faring better today. Materials and consumer discretionary that are worse today. Amazon is a part of that. That is under a lot of pressure. The Nasdaq comps down 1 percent.

So we've erased the gains from yesterday and then some, down about four-tenths of a percent for the week in the S&P. That's it for me on Closing Bell. See you tomorrow on Fed Day.