Closing Bell - Closing Bell: The New Rate Reality 10/23/24

Episode Date: October 23, 2024

How could the new rate reality impact the road ahead for stocks? Wells Fargo’s Chris Harvey, Requisite Capital Management’s Bryn Talkington and HSBC’s Max Kettner break down where they stand. Plus, Ashley MacNeill from Vista tells us where she is seeing opportunity in the software and tech space. And, we tell you what to watch from IBM and Tesla when they report after the bell. 

All right, guys, welcome to Closing Bell. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the sell-off and the sell-off in the Nasdaq today as this final stretch begins. I mean, the major averages across the board are lower, but the Nasdaq is our standout. It's down near 2 percent. Very weak today. Apple, a big culprit, as an influential analyst in Asia, slashes his iPhone production numbers by some 10 million units. NVIDIA, Amazon, Meta also lower on the session. They are dragging. Tesla is too ahead of its own earnings report.

That's coming in overtime tonight. We'll have more on that coming up. We're watching shares of McDonald's today following that E. coli outbreak. The stock hit with at least a couple of downgrades today, off by near 5%. It's been weak throughout the session. 3M has also been weighing on the Dow today, and we'll track that, too, over these last 60. It does take us to our talk of the tape, the new rate reality and how that could impact the road ahead for stocks. Let's welcome in Chris Harvey.

He's head of equity strategy at Wells Fargo Securities with us here at Post 9. It's good to see you. Welcome back. Good to see you, too. That's the story right now, right? I mean, the move, the backup in yields and the toll it's taking on stocks? He's with us here at Post 9. It's good to see you. Welcome back. Good to see you, too. That's the story right now, right? I mean, the move, the backup in yields and the toll it's taking on stocks? It's the Trump trade.

It's the backup in rates. And it's earnings season, so it's all about who just reported last, what that means, and what narrative we're going to go with. But you're right. And the other thing is, we've had a heck of a rally here, so it's time for a little bit of giveback. Why is it time for giveback? I mean, isn't this rally based on the fact that the economy's good and the Fed's cutting and the,

you know, you can say the move in yields is in part for the reasons you suggested, the reflation trade. But it's also because, you know, look, the economy's good. Scott, that's all fair. Right. And I think that all works longer term. But in the short term, typically what we see heading into a presidential election cycle is a bit of a risk-off, a bit of a sell-off. And we've really done the opposite. So after you see that rally, we've seen that rally before. And so I think we've gotten ahead of ourselves. And with rates backing up, I think people are just getting a little bit nervous.

And the odds of Trump winning appear to be going up. The odds of a sweep appear to be going up. The odds of a sweep appear to be going up. And people are worried about the fiscal side. I'm not sure that's the right thing to do, but in the short term, a little bit of giveback makes sense. Well, that's the thing. The fiscal side, like Rick Santelli was talking about a little while ago, we're worried about the deficit, worried about rates getting a little bit away from us because of that, whether

it's Trump or Harris who who ends up winning policies that are both really deemed to be inflationary? DAVID BROOKS, Former President of the United States of America, Yeah. So if you go back to Trump's first—well, first and only period, inflation was OK. So there's a lot of talk that he's going to blow out the balance sheet and things are going to be terrible. There's not a ton of evidence to say that. Do we have a fiscal

problem? Yes. Our fiscal house is not in order. The bigger issue is when does leverage bite? Leverage bites when you have a slowdown in growth. And we just don't have a slowdown in growth just yet. So for now, it's fine. It's not great that we're doing this. And no matter who's going in there or who will be elected, we're still going to have a fiscal problem. And it's really not on this. It's on the spending side and it's on the entitlement side. We just have to get a better handle on that. So your target for the end of this year is 55-35. That's a good amount lower than where we are now.

It is. Why do you stick to that? So we have about six months left in the year. We're going to start talking about 25 at this point in time. And when we talk about 25, we think it's going to be a good year but a bad vintage. And what I mean by that is we think we're going to probably see high single-digit returns. But when we look back from the perch of 2026 and 2027, we're going to say that was a year that too much leverage went on. That was a year that people took on too much risk.

They went too far out on the risk spectrum and down the capital structure. So we're really focused on 2025, not so much on 2024 at this point in time. No, I know. I was focused on 2024, though. I mean, 55-35, we're at 57-90. Yeah, so, Scott, we were bowling the street earlier on, and as we got closer, does it really make sense? Is it really useful for our clients, for me, to revisit that target? What we're saying is, hey, we're going to see a little bit of sell-off.

We're going to see a little bit of give-back. As we go forward, we think things are good. But more importantly, how do we position? A lot of people have done really well in the growth and momentum trade. If you get the Trump trade here, there could be a bit of a give back. So we're working with clients more so on the positioning side than it is getting the right target. What about the price of stocks? David Einhorn writing to his investors last week that the market's as expensive as he can ever remember it, certainly as long as he's been at green light. Is that fair?

No, that's not fair. 1999, stocks were much more expensive. Fundamentals were much worse. And that was today is not then. But is today a problem nonetheless? Today, things are expensive. Today, you need to be looking more for your best risk awards, and you can't just close your eyes and just buy any

stock at this point in time. But the valuation isn't, prohibitive is not the right word, but it's not as if we were back in 1999 and we're setting up for a fall and valuation was just too high. Valuation is high because you have really good companies, really good growth companies, really good balance sheets, and you have a lot of optimism. But it's not so high where you can't make money going forward. No, but that's how much money you can make going forward seems to be a question, right? I mean, David Koston was asking that question earlier this week. I'm sure you saw that. Torsten Slocke over at Apollo also asking similar things, like when you have stocks this expensive, expect muted returns in the years ahead.

And they were using low single digits, not high single digits. Yeah, so if you go out five and ten years, mid-single digits makes more sense, more like growth-like, EPS growth-like returns with some multiple compression. But again, if you go back to 1999, you're looking at multiples in the high 20s. You're looking at growth rates that just didn't exist. You did not grow earnings for a number of years. I don't think that's true going forward. As we're looking at growth rates, they actually look pretty good for 25. Mid-cap growth. Gotten a lot of play this week. And that's where you think a lot of risk-reward is. Why? Good valuation, so it's at a discount to the market.

The technicals, they've underperformed for a number of years. They're up well into the double digits this year, so beginning to perform. They have self-help. I do think that M&A is going to improve, so if you're looking for a name that's going to get taken out, I think this is a space where you're doing it. And they're just not as picked over as others. And they're beginning to work. I'm interested in why you think that you can be tactical if, that's my word, not yours, in small caps. Right. If you have a backup in rates, the obvious pressure point is the Russell. I mean, the proof is in the pudding, right? Look

at what the Russell has done since rates started backing up. So why does that work? So it works because we think that growth is better than expected, in the short term at least. And people are coming around to our point of view. Credit spreads are still incredibly tight. Atlanta Fed is predicting 3-4. Yeah, that's a big figure, right?

If we go back to July, when we had a better than expected number, small caps on that day outperformed by about 2%. So there's a trade here. And if Trump wins and I still think it's a coin toss, then you're going to have a continuation for a couple of weeks and maybe into year end. The cost of capital for those same small firms is more elevated than I think some thought it would be, and they could still back up further and you'd still have that issue. Yeah, a little bit, but there's also this give and take, right? So when you issue debt, right, it's not just about the cost of corporate data as a combination of a credit spread and what you get in the treasury

market. And those credit spreads are really tight. Issuance is still very strong. And so that's very important. And as long as those markets are functioning and open, that's actually pretty good for small caps. That's good for M&A activity. And that's good for risk taking. All right. Let's bring in requisite capital management's Bryn Talkington now and HSBC's Max Kettner. Bryn's a CNBC contributor. Bryn, you've heard the conversation thus far. What do you agree with? What do you take issue with? Well, I think that, I think it makes sense what he's saying around trading small caps. I think you can, you can trade them, but I think writ large on the, on the market as a whole, I think right now, you know, we are in this seasonally weak period of specifically October.

So, and we did have such a great run-up. So I do think we have some just like regular sell-off, regular digestion. But I do think that rates, the market's finally waking up to the rate story, that as the economy is strong, the long end of the curve is starting to steepen. And so I think between the steepening of the yield curve because the economy is strong, and then the reality of whoever wins, we're going to get more deficit spending. I mean, ultimately, a few years ago, remember, everyone's like, well, what happens if the Chinese stop buying our treasuries? Well, they have stopped buying our treasuries for the most part, but the Japanese have picked up and

are buying them at all time highs. So I think there's like a lot of positioning around here. But the market's up 20 percent for the year. If we did nothing for the next, you know, for the next two and a half months, we would still have a banner 2024. Yeah. Max, I mean, what's the breaking point if there is one for a backup in yields? It feels like we're obviously a little tentative now, even where we're at 425, 422, or wherever it's sitting at this moment. But what's the breaking point if you see one? Yeah, I don't think it's quite yet. I think what we need is we need probably a bit more of a, in terms of the velocity, we need a more dramatic move. So typically what

you see is it's not really the level of yields alone that is really crucial for equities, for credit spreads, for high beta effects, for emerging market assets, really for risk assets in general. It is the yield level, but also the velocity. It's the move index. It's the volatility, particularly in long-end rates vol. If that picks up, once that picks up, then really you've got a bit of a problem ready for risk asset valuations. We're not quite at that point yet. What we're seeing genuinely in our models, we looked at that earlier this year, the pain point is probably around 450, 460. It's when the terminal rate expectations go towards around 370, 380.

Bear in mind, we're still pricing almost like 345, 350. So we're still about 20, 30 basis points away from that. So I would say the 10-year, yeah, around about 4.5%. I think from then onwards, it will become a bit painful for risk assets valuation in general. Up until then, I think, look, the talk to me feels a bit like we just entered a bear market, whereas in reality, we've just come up 1% of the all-time high. So we're just deflating a little bit of momentum. It feels a bit too bearish for me, whereas in reality, I think we're just taking a bit of a breather from really a bumper rally that we had over the last month and a half, two months. I'll let you respond to that because I see that you

want to. So where do rates really bite? If we're looking at 5%, I think that's a problem. Four and a half, market can handle it. If we go back to what happened with Trump, you had a 50 basis points bump after Trump was elected in 2016. We've had about a 50 basis points bump right here. I think you can see more upside. Maybe you get to four and a half. You get to five, then something's wrong. I feel like all bets would be off at five, but let's just face it head on. I feel like he called you too bearish. He thinks your view is too cautious on the environment. And by the way, Max has been one of the more bullish people who've come on the show of late. But are you too bearish? Are you too cautious? I don't think we're too cautious. What we're doing is we're constantly

looking for your best risk reward. We're not looking for the highest risk, highest reward. We're looking for the best risk reward. We're looking for good opportunity. In this market, I don't think you want to set your hair on fire. You don't want to go out on the end of the risk spectrum. And so I think, and especially with the run-up in front of the election, I think it's prudent to be a little bit more cautious. And then, you know, there's two, let's just call it two months left in the year. You want to be careful about what happened in the summertime. What happened in the summertime is a lot of people that did really well gave back a ton

of money, but they had another six months to make that back. They won't have six months to make that back. They'll have six weeks. And so if you're caught position wrong, it could be a big, big problem. So we're really focused more on positioning. Are we too bearish? I don't think so. I think now's a good time to be prudent.

I do think markets go higher. I think you buy some sort of healthy sell-off. But I just don't think this is a time where you get super aggressive. Max, what if we're setting ourselves up for a sell the news on the election? Yeah, I think that's a fair assumption. I mean, in terms of, you know, setting hair on fire, I think I probably would be disagreeing. I'm not saying, I mean, figuratively, I don't have too many left, so I wouldn't be setting my own hair on fire. But look, I guess right now, to be honest with us, I think we're still very, very long, but we're still going really, really bullish into the election.

I think where I'm starting to get worried is more about the post-election rally. What we're seeing right now is that consensus expectations for the Q3 earnings season are still utterly low. I think they're way, way, way too low, particularly for some of the cyclicals. So I do think the next couple of days, the next two weeks, it's a really great setup to be long cyclicals into the election. There is a genuine basis for perhaps some of the macro data coming in at least in line. And if that comes in line, that whole thing around, oh, maybe it's going to be much weaker because of the hurricane, that would, I think, prompt even more of a sell-off in rates and even more of a backup in cyclicals. I think where I'm starting to get skeptical is really this idea of the post-election rally.

Chris mentioned positioning. I think an awful lot of people are really looking for that post-election Santa rally. And I do think there's a genuine basis for people getting squeezed into the election. But once, like you were saying, once we get the election, there's a genuine basis then for saying, look, the bond proxies have rallied. Now the cyclicals have rallied. Now, you know, what's left, really, I think there is really, really a risk that the post-election, the Santa rally is not coming because everyone got squeezed into the election before that, really. That's a good point, Bryn. I mean, a lot of things have rallied,

a lot of cyclical areas of the market, financials, industrials, materials. You could go on and find other areas that are already up a lot. So have we pulled forward a fair amount and we're going to be disappointed over the final stretch? Well, it's actually like this quarter, if you look at like the 493 that we talk about minus the seven, this quarter is really like a low in earnings growth. For Q4 2024, we're expecting that 493 estimates to grow close to 15%. And so I don't think these other sectors that have started to do well really all year. I think there's more to come from that, especially as we get closer to the year and those expected earnings in Q4 are actually realized. So I still think this this widening

of the market, which is very good for a bull market, continues across multiple sectors. Chris, you want to take a stab at sort of mega caps as you know, a week from yesterday, we're going to be talking about these every day. It feels like we're talking about them every day for the last year. So what I do think, and what Bryn said, I agree with. There's a lot of talk about a melt-up. And what I think is going to happen is you're going to have a broadening out of the market. And that's going to be hard for a melt-up to occur, right? Because a melt-up usually occurs when you have a select number of companies really run the Magnificent Seven. But if suddenly we're talking about a pro-growth type situation...

Aren't we already talking about that? We are, but we're still kind of tentative. We think maybe possibly, and I do think the pain trade is for broadening out. I think many people are still in that growth and momentum trade. And if that turns around, that's going to be a problem. And somebody asked me, hey, where's all the dry powder? Well, it's not so much the dry powder. It's, hey, if I'm in a growth portfolio, if I'm in a high momentum portfolio, I got to move around really quickly,

or I got to hedge if Trump wins and we get into that pro-growth type environment. And that's going to cause a lot of things to turn around. That's going to cause a broadening of the market. And that's going to have your average stock do much better. But that's also going to keep that melt up from occurring. We're watching, speaking of mega caps, obviously watching what Apple's doing today. It's been under pressure. And I mentioned that at the outset of our program today. Steve Kovach has a deeper dive on that move today and the reasons that are causing it, Steve. Yeah, shares are down about two and a half percent right now, Scott. And this is from

Ming-Ching Kuo. He's the analyst at TF International Securities, and I consider him the best analyst out there following Apple's supply chain. Today, in a new note, he says Apple is cutting about 10 million iPhone 16 orders this quarter and through the first half of next year. He says the cuts may not reflect on Apple's results until next year, though. And but year over year, unit shipments are still expected to be down because of those cuts. Also says so far, no evidence that Apple Intelligence, which is launching next week, is driving sales if Apple is cutting now. And on top of that, let's look at AT&T CEO John Stanky this morning. He implied iPhone upgrades are less

than stellar so far. This was on this morning's earnings call. He said they're still waiting to see if that AI update will drive more sales, but also warned it's an iterative technology that could take a long time to adopt. By the way, Scott, app earnings just eight days away, October 31st. I can't believe it. We're going to be talking about that before we know it. Steve, thank you. Steve Kovach with some color on what's happening there today. So Bryn, what do you make of this news from a very influential analyst?

Maybe the most, according to Steve. Well, I mean, Apple's at basically an all-time high, right? So it's like, don't be sad for Apple shareholders. But I mean, I've been saying this really consistently. I mean, I do not think this upgrade is going to be exponential. I think it's going to be incremental. I mean, if I look at my own iPhone 14 Pro, I already have four AI apps on there. Chat GBT, which Apple's using.

And so I do think it's going to be incremental. And I think listening to John Stinkey, it's like, this is going to be slower because it's going to roll incremental. And I think listening to John Stinkey, it's like this is going to be slower because it's going to roll out. And I think we'll have to see. And so I don't think people are going to be buying iPhones for their kids for Christmas like they did 10 years ago just because it looks and feels like the old iPhone at this point. So I think Apple investors should expect a market perform, which is really what Apple's done year to date. It's right on top of the S&P. Yeah. Chris, last word to you.

I mean, it is interesting, you know, the bifurcation between some of the mega cap names, right, for an NVIDIA and an Apple going higher. There's been a Microsoft that's traded a little squirrelly. What does that mean to you? I think that's great, right? So the market is differentiating. And if everything was going up in sync, I would have a problem with that. The fact that the market's differentiating, it's a good thing. And I think that will continue going forward. And I think that's a healthy sign of the market. That's one of the reasons why we

think 25 will be a good year. All right, folks, we're going to leave it there. Chris, I appreciate you. Thanks for being here. Bryn, thank you. Max, we'll talk to you soon. To Pippa Stevens now for a look at the biggest names moving into the close. Hi, Pippa. Hey, Scott. Well, Enphase is sinking the worst performer in the S&P after the company missed Q3 estimates and gave weak guidance. CEO Bajie Kathandaraman told me the U.S. market has stabilized with revenue up 43 percent quarter over quarter, but that Europe is under stress, which is why the Q4 guide came up light. He added Enphase is still working through the impacts of SunPower, one of the largest solar installers, filing for bankruptcy. Northern Trust hitting a two-year high on the back of Q3 earnings. Net income rose 42 percent

year over year, with the company reporting better than expected revenues and lower non-interest expenses. Deutsche Bank calling it a, quote, very good Q3. And finally, Peloton is jumping after Greenlight Capital's David Einhorn reportedly pitched the company as a long idea at an industry conference just now. That's according to Seeking Alpha. This comes after Greenlight disclosed a position in the fitness name in August. We have reached out to Peloton and Greenlight, and those shares are up 9%. Scott?

Nice pop there. Pip, thanks. Pip of Stevens for us. We're just getting started. Up next, Vista Equity Partners, Ashley McNeil. She's with us next. She'll reveal where she's seeing opportunity in the software and tech space right now. Join me at Post 9 just after this break. We're live at the New York Stock Exchange. You're watching The Bell on CNBC. Tech and software stocks taking a backseat today with investors bracing for the hyperscalers reports next week. Vista Equity Partners is a private equity firm investing exclusively in enterprise software with portfolio companies across various industries.

Ashley McNeil is the head of equity capital markets at Vista. She joins us here at Post 9. It's good to see you. You too. Welcome to our show. Thank you. So you take a lot of companies private and then you sometimes re-IPO them. The market for IPOs has been really, really slow. Why? Well, for the IPO asset class

to really be functioning well, you kind of need three things all working together. One, you need a stable macro environment. And realistically, we haven't really had that until we started seeing the rate cutting cycle start in earnest this fall. Then two, you need investor appetite. You need investors to be risk on. You need them to want to deploy capital in the asset class. And then third, and that's I think has really come together this year, is you need companies being able to report consistently and clearly with investors. So IPOs work by companies communicating earnings the next three to five years. And companies just haven't had that yet. And I think they really are starting to. I mean, the irony in the whole thing is that here we talk

every day about how strong the economy is and how the stock market's been hitting record high after record high after record high. And yet the IPO market has been all but dead. It's like something has to change soon, doesn't it? Well, I think you have to bifurcate a little bit the tech IPO market versus the broader IPO market. But yeah, I think that we're starting to see companies get a lot more comfortable with communicating their story to investors. And that's really coming around sort of on both how the Gen AI narrative fits into their story, but also their ability to digest everything going on in the macro environment. Companies are staying private longer. That's been a big theme that we've been talking about now for some time. What role do you think the growth in private credit has played

in that as an alternate source of capital so companies don't feel like they need to go to the public markets. The private markets are exploding with money. Yeah, I look, I think it's definitely played into the delay of the IPO markets returning back to a sense of normalcy. That being said, the capital markets are efficient and creative, and we're going to continue to see like the evolution of the IPO. And I do think that the public markets will start to have an appeal, particularly, as you point out, the high valuations, as well as the pull from investors to see these companies public. Your founder and CEO, Robert Smith, sounded reasonably optimistic a week ago when

I was with him out in Beverly Hills at the conference we were both at on a panel conversation about topics like this. I sat down with Todd Boley, famed investor, and I frankly was surprised at how optimistic he was. I want you to listen to what he said and we can react on the other side. Here's Todd Boley of Eldridge. I think we're in the process of having lots of M&A get started.

I think we're seeing more and more activity. I think we're seeing people want to transact. People have to kind of get back to the transaction business. So across our portfolio, we're seeing lots of kind of merger and consolidation discussions going on. I think some of them are in their earlier days. But I think the animal spirits are coming back and people want to get back to it. I've raised a lot of eyebrows. I mean, animal spirits are coming back and people want to get back to it. I've raised a lot of eyebrows. I mean, animal spirits are coming back. And by the way, I've talked to people offline who think the same

thing, that we're about to have that. I think that's right. I mean, investors, there is a palpable energy from public investors wanting to deploy capital in this asset class. And I think it's because right now, particularly if you think of tech, there's so much innovation going on and there's so much ways to kind of play this Gen AI technology. And people want in today because it's so exciting. So I think he's right. You know, he's speaking my language. We need IPOs back.

That's why I wanted your opinion on it. What about higher rates, right? We see the impact on the stock market here. What about, you know, if we are in a backing up yield environment, what's the impact on what you do? Look, cost of capital is always going to come into play. And whenever you IPO, there's a decision that the company has to make around the cost of equity. And do we need the capital? And can we find the capital cheaper elsewhere? So a raising rate environment traditionally has not been good for IPOs. That being said, I want to balance that with the fact

that we are starting to see those three things line up, macro environment, investor appetite, and the corporates. You guys, like private equity is sitting on a lot of dry powder. You guys raised a $20 billion fund not that long ago. Is most, if not all of that, going to go towards generative AI, enterprise software companies? I know it's the hottest area, but is it the only area that's of real interest right now? Look, we view generative AI and investing in generative AI similar to how you might think about the Internet and how the Internet came about, that this is a very early inning cycle that we're in and that there is going to be length and depth to this investment

cycle and that Gen-AI enabled software is the path to the future. I think you have to look for breadcrumbs and proof points along that. But I do think that there is no investment without being focused on Gen-AI in some capacity. What about what has that done to valuations and multiples of private companies that are getting a boost based on the whole craze? And now you guys have to assess what are higher valuations than maybe you're willing to pay for and just how you see the whole environment. It's definitely changing the dynamic. That being said, we are starting to see, and particularly this earnings cycle, which I think is going to be really exciting, because it's going to provide some really measurable proof points for Gen AI to justify some of these valuation numbers you've heard about. It's really hard whenever there's new technology to really pinpoint what is it worth. And so we use traditional metrics like growth, et cetera. etc and I think that this earning cycle we're gonna start seeing from both the public and private companies some real proof points that gen AI is innovating

is creating new revenue streams and is making these companies more efficient so you'll be watching the SAP's the service now's and all those companies right right for ideas and details about what's really happening absolutely and also how their strategy and how they're thinking about it are they focused on product innovation is the product innovation cycle longer or shorter because of Gen AI? And then where are they putting that on the efficiency line? How is it making them a more efficient company? I appreciate you being with us today.

Thank you so much. That's Ashley McNeil, Vista Equity Partners. Up next, hoop season is back. We're breaking down the top NBA teams to watch what might be next for that league as well. And as we head out, a quick check on the major averages as we head towards the close. We still have a down day. Maybe we're off the worst levels for sure on the Dow. NASDAQ's off about one and three quarters percent, though.

We're back on the bell after this. Businesses can't afford to not look at the value of the disabled human experience. When we start to embed disability inclusion into the philosophy of business, businesses are better off for it. It drives revenue. There's a return on investment that transcends much farther than one boardroom table. All right, we're back on the bell. NBA season just getting underway. Commissioner Adam Silver saying league expansion is now on the table.

Here to discuss, CNBC senior sports reporter Mike Ozanian. It's good to have you back here. Scott, great to be here. What's he talking about? What's Adam Silver saying? I think what Adam Silver is saying is maybe like in a couple of years, put a team in Las Vegas, probably get an expansion fee of at least seven billion dollars. So is he only looking at one additional franchise or is he looking to grow the league even further than that?

I think you'll see to another one, maybe Seattle. Right. You got a new arena there, just a hockey team right now. It's built also for basketball. It's amazing the evolution of professional sports in Vegas. If you look at how it was like the third rail of sports, and now, of course, you have the Raiders, and now you're talking about an NBA team. This was just a partnership that had to happen at some point. They couldn't wait any longer, could the professional sports leagues. You're absolutely right, Scott.

And the most interesting thing is not only do we have pro teams there, but they're all doing very well. The Raiders are among the top NFL teams in revenue. The Vegas Golden Knights, they've already won a Stanley Cup. They have a great fan base. That's right, I forgot them. My apologies, of course. They were good right from the beginning, too. And they were selling out their arena. So the marketplace was always there.

It was just getting over the hurdle of being in the epicenter of gaming. Right. It's perfect for the NFL because you can make a three day weekend out of it, four day weekend out of it. With the Vegas Golden Knights, they did a great job marketing the team and the league did a super job of making sure that in the expansion draft, the team got good players. Yeah, they were good quick. Celtics, they raised their banner last night. They give out these beautiful rings. We're still waiting for word on their sale.

Any nibbles on that? What I've heard, and I have to say I have not spoken to Wick Grousbeck about this, the controlling owner, is that he may be working on some moves to actually keep the team. Maybe get some financing in there and so forth where he can keep it. Because, you know, you and I both know he loves owning that team. He loves it and he's done a great job with it. So we'll see what happens. Yeah. The final season of the media deal, before we embark, and we're excited, obviously, at our parent company

to have a piece of that action, too. What do you make of that entering the final deal? And then we're going to step up into this new one. Well, it's a two point six times increase, right? It's an 11 year, 76 billion dollar deal. And I think one of the interesting parts, Scott, is they brought in Amazon. So like we've seen with the NFL where they're streaming more, the NBA is now doing that. And I think this is their plan as they expand reach. So the in-season tournament is now the Emirates NBA Cup. Last year, viewership was up 46 percent. For the final game, they had almost 5.9 million viewers.

So people talk about the NBA Finals not doing the viewership when Michael Jordan was playing. When you look at that and then add this new tournament to it, you're basically at the same point. All right. NBA valuations coming in January, right? We rolled out the big one with the NFL. You've got another one coming soon, too, don't you? Yeah, we're going to come out with the National Hockey League in November. OK, good. We'll look forward to all that. Mike, thanks. Thank you, Scott.

Mike Ozanian. Tomorrow, by the way, don't miss the CNBC Sport exclusive videocast. Our own Alex Sherman sitting down with NBA commissioner Adam Silver. We're excited about that. We're getting some news out of the CFPB. Steve Kovach has that for us. Steve. Hey there, Scott. This is, I just got a statement here from Apple responding to that fine that was levied against them by the CFPB earlier this morning. That's related to the Goldman Sachs and Apple card. Let me just read you the most relevant part of the statement here. They say, quote, upon learning about these inadvertent issues years ago, Apple worked closely with Goldman Sachs to quickly address them and help impacted customers. While we strongly disagree with the CFPB's characterization of Apple's conduct, we have

aligned with them on an agreement. That agreement, of course, is a $25 million fine pocket change for Apple. But this was related to things the CFPB said about the Apple card, promoting interest-free payments for Apple products, and also customers having trouble when they had to dispute a charge and getting their money back between Goldman and Apple. That's what this was all related to. And again, shares of Apple are down 2%, but that's mostly off of that iPhone news I was telling you about earlier. Got it. All right, Steve, thank you. Thanks, guys.

Steve Kovac. Up next, tracking the biggest movers into the close. Pippa Stevens is standing by with that. Pippa? Hey, Scott. Well, one tech company could be exploring one of its largest ever acquisitions. The names to watch coming up next. We're about 15 from the closing bell. Back now to Pippa Stephens for a look at the key stocks that she is watching.

Pippa. Scott, well, Siemens is reportedly in talks to potentially acquire software maker Altair Engineering, according to a Bloomberg report citing sources familiar in what would be one of Siemens' largest ever acquisition, shares of Altair Engineering jumping on the news on pace for the best week since June, Altair did decline to comment. And Florida chemical maker Element Solutions reportedly exploring a sale, according to Bloomberg. Goldman Sachs and Bank of America are reportedly working with the chemical maker,

though shares up nearly 10 percent on the news. Scott? All right, Pippa, thank you. Still ahead, we're going to run you through what is at stake when Tesla reports earnings top of the hour in overtime. Bell's coming right back. Coming up next, we get you set up for earnings in overtime. What to watch for when IBM and Tesla hit the tape top of the hour.

Don't miss CNBC's Your Money event tomorrow. That's 1 p.m. You can get advice on how to grow your wealth and achieve your investment goals. Visit CNBCEvents.com slash your money or scan the QR code on your screen for more information. Market Zone's next. All right, we're now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of the trading day

plus two earnings reports in OT that we're watching closely. Seema Modi on IBM, Phil LeBeau on Tesla. Mike, I'll turn to you. We've been sort of sitting with these declines of about 1% for a while now. It looked like it might get a little bit out of hand around 2 o'clock or so. What's interesting is, is there significance to where it stopped, I think is the question. It was right exactly at the September highs in the S&P 500. So if you sort of see it as the market sort of defending this October range and trying to stay in a sort of upper register

for the third quarter. Also, Treasury yields obviously have been the pressure point. They've been on the upside all day, but right around the same time stocks bottomed, they backed off a little bit. That's often how this goes when stocks are nervous about how high yields are getting if yields start to back off because bonds get a safety bid. Now, these are small moves. It's not a big deal. We came into this week probably with some pent-up selling. So post-options expiration and pre-election, you really should expect a little bit more chop. And that's

what we're getting. Majority of stocks, clear majority, down all day. So I do think we're still in this mode. We had to work off some of the built-up optimism. There hasn't been a ton. I don't think it was crazy extremes, but that's the process we're in right now. Yeah. Apple, obviously, an issue today. Nvidia's lower, but Apple on this news out of this analyst. So you didn't get rescued by any of the big mega caps. Apple to the downside, some sloppy reactions to earnings, I would call it. I mean, Coca-Cola, nothing is saleable in the numbers, but you get a little bit of a sell the news. And so I think all that's building toward, again, just this little reset in the context of, you know, an uptrend that people thought would have taken a pause before

it did. Yeah, I mean, the Dow looks, I mean, not McDonald's a problem. McDonald's is over 100 points in the Dow. Coca-Cola, Apple. So you see what the stories are. Michael, come back to you in a second. Seema, talk to us about IBM. Well, Scott, for the first time in a decade, IBM is outperforming its software peers and the broader market since its last earnings report.

Shares up 25% in the past three months, right around a record high. Excitement is growing around its AI business with bookings topping $1.5 billion last quarter. Analysts will want CEO Arvind Krishna to quantify how big the enterprise AI opportunity is for IBM. One area of concern for analysts is the consulting business after competitor Accenture delivered softer than expected results. We'll also look to Krishna for a broader view on the economy, given the strength that we're seeing in the U.S., but weakness in Europe, the potential rebound in China, Scott.

Seaman, thank you to fill a bow on Tesla, the first of the larger cap Nasdaq stocks to report, Bill. Yeah, that's coming up in a couple of minutes, Scott. Three things that people will on Tesla, the first of the larger cap Nasdaq stocks to report. Bill? Yeah, that's coming up in a couple of minutes, Scott. Three things that people will be watching for, not only with the numbers, but also on the conference call a little bit later on with Elon Musk. First of all, what are the company's auto gross margins X the zero emission vehicle credits? The expectation is it's going to be somewhere close to 15 percent. If it's in that area, I wouldn't expect much reaction from the stock. What do they say about a lower priced model? Are they close to production? Where do things stand there? And then what does Elon Musk say during the conference call? The expectation has been that he's probably not going to dive into politics, though we should point out that

the forum where people can submit questions has more than a few where people do raise questions about his political activity. So we'll see what happens during that conference call, which comes up at five o'clock Eastern or five o'clock Eastern time. Yeah. And we'll be talking about this in just a few minutes when the numbers come out. Scott, back to you. I look forward to that. Yeah. I mean, I certainly wouldn't be surprised if you have some analysts bring up his political activities at all. But we'll see. And you'll let us know. Phil, thank you. That's Phil LeBeau. You're watching this one, I know.

Sure. You know, you imagine maybe questions would come up in the context of, you know, are your attentions further split? And might they get a little bit more diluted if you have some kind of a role in a new administration? But the other piece of it is I always view Tesla as a little bit of a tell on the market's willingness to believe and willingness to just gamble on the next huge thing. It's been a struggle around this price area for a while. The earnings estimates have been just hacked away over the last year. I mean, going to earn a little over two bucks a share this year. It was supposed to be twice that a year ago. So obviously, it's all about what's the next thing. And so I do think it's been trading kind of soft. The implied move is, you know, I don't know, maybe four or five, six percent on the news. So we'll see, you know, if we sort of pre-sold into the number

or if there's a little more to absorb there. I feel like we'll get now, you know, as you just inch closer to Election Day, just, you know, you're susceptible to more volatility as that day gets near? Yeah, and I think it's only because anytime you present in front of the market something that feels roughly 50-50, I mean, you just can't handicap it that much better than that, you're going to have just a cranking up of that anxiety or an unwillingness to take on further risks.

I'm sure there's going to be gambits. We've obviously seen things consistent with the textbook Trump trade work. But they've also been the things, again, as I keep saying, that would work if the Fed was cutting into a strong economy and you had, you know, essentially the dollar ripping and all the other things that are happening. What's interesting today is as the dollar puts in another strong day and you have this perceived tightening of financial conditions, gold down 1%, which is absolutely nothing compared to the massive rally it's had,

but it just does give you this sense that people are taking a half step back from the stuff that's worked for a while and are willing to kind of sit there and reassess. You've got the two-minute warning, of course. There are some suggesting, like Chris Harvey was, maybe we get a sell the news event. We're pulling all these trades forward.

And maybe November 5th turns out to be a sell the news event for some. Yeah, and I could see the makings of that, even just in a weird game theory way. Because if you have two camps that are, you know, a little bit confident that it might go their way, whoever's right hangs with their trade. Whoever's wrong has to unwind or express disappointment some other way. But the other piece of it is, you know, as I was saying before, if it's a reflationary policy set that you're going to be betting on, if former President Trump gets back in there, well, when he got in there in 2016, inflation was running under 2% for a year. We were chronically falling short of growth. You needed exactly that to try and get

us out of this decade-long fix we were in after the global financial crisis. And that's why the market celebrated it. By the way, the S&P 500 at this point before the 2016 election was flat over the prior 18 months. It had been this chop fest in 2015 and 2016. The point is, we're up a lot. We've already built in this expectation. The economy is performing well. And if anything, you know, we get nervous when it's too well. So I think it's just a different setup. So I don't know if there's a linear way to say, if I know outcome X, I'm going to bet Y.

Sure, but we've flooded the zone with so much money over the last handful of years. It's a totally different deal. We're in a more, I don't know, some would suggest dire deficit situation. Well, that's the other piece of it. That's the other part of it. You have the potential immediate market-based downsides of even more of that, which is higher yields, which, by the way, the higher yields are just the seeds planted for the next growth scare

because that's what's going to happen at some point if they keep going up. All right, good stuff. Mike, thank you. That's Mike Jankowski. We'll be right with about 1% declines on the S&P and the Dow, maybe a touch lighter than that. NASDAQ about 1.5. But again, Tesla coming up in a moment.