Closing Bell - Closing Bell: Winning Streak Ends, Tech Tumbles and Hilton CEO On Travel 10/26/22

Episode Date: October 26, 2022

The S&P 500 snapping a 3-day win streak following disappointing earnings from tech giants Alphabet and Microsoft. Wedbush's Sahak Manuelian and Citi's Scott Chronert discuss how investors should trade tech stocks ahead of earnings from Meta, Amazon & Apple. Elevation Partners' Roger McNamee, who was an early investor in Facebook, explains why he doesn't think Meta's strategy for the metaverse will work. Bank of America Securities' Ron Epstein on whether Boeing's big post-earnings sell off is a buying opportunity. Hilton CEO Chris Nassetta discusses whether concerns about the economy and inflation are starting to impact consumer spending on travel. And U.S. Trade Representative Katherine Tai discusses whether the White House could cut tariffs against China to help ease inflation.

Stocks have been proving resilient in the face of downbeat earnings from two of America's biggest companies, but we've come well off the highs. NASDAQ's taking a leg lower here. Dow just barely positive. This is the make or break hour for your money. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look at where we stand overall in the market right now. There's the NASDAQ down almost 2% right now. Obviously, communication services are the worst part of the market, and that's because of Alphabet, which is down almost 9%. Meta and Sympathy down 6% ahead of earnings. Later today, Warner Brothers, a lot of the tech names, Paramount, Global, News Corp,

all getting dragged into the selling. The S&P down three quarters of 1%. You still do have some pockets of strength, like energy. Healthcare is having a really good day. Materials strong. Consumer staples, industrials, and financials all remain

green at this hour. Small caps are actually higher by almost 1 percent. So kind of a divergence there. The tech names are under pressure. The 10 year yield is lower. There are the two earnings movers of the day. Alphabet down nine. Microsoft down 7 percent. Both getting crushed and dragging on tech, but actually not taking down the entire market too much. We're going to talk more about those moves in just a moment. Also ahead on today's show, we're going to get a read on the state of business and leisure travel. And we are joined by the CEO of Hilton, fresh off the back of earnings. Get his outlook for next year. Now let's take a closer look at the tech sell-off in today's market dashboard. Senior markets commentator, Mike Santoli, on just how big of a

bellwether these companies really are. They're huge index weights, Sarah, as we know. But I think the story really is the fact that the overall market did not get swamped by a couple of big and very clear disappointments coming from Alphabet and Microsoft. So without those two names, the S&P would be modestly positive. The majority of stocks are to the upside today. And it's continuing this story that's been evolving all month, which is we sort of spent some time retesting the June lows in the S&P 500. We definitely priced in a lot of concern about earnings, about the economy.

We're not having the overall economy look like it's cooperating with the recession, inevitable recession slide just yet, even though housing looks awful. And a lot of the leading indicators are there. So we carry higher. We higher about 11% above those intraday lows rallying on bad news which is an awful CPI less than two weeks ago and then of course the big tech earnings you can't take too many of these but so far looks okay now take a look at the NASDAQ 100 relative to the equal weighted S&P 500 on a year to date basis it's been a clear separation between the average stock in the market and the NASDAQ 100, as well as the equal-weighted NASDAQ 100, if we have that.

Here we go. Year-to-date. So this is equal-weight. This is a much stronger-looking chart, right? There's the June lows for the equal-weighted S&P. It's sturdily above that. Now, you have the NASDAQ 100. Look at this differentiation here. Fifteen percentage points between essentially the equal-weighted portfolio of large cap stocks and the NASDAQ 100. And that's the equal-weighted NASDAQ 100. Now, take a look here over the past five years, the same three indexes. And you'll see how much we're basically just the pendulum swinging in the other direction. Because on a five-year basis, the NASDAQ 100 is still trouncing the world. Right?

So it's all about overshooting to the upside and giving a lot of that back. And as long as it lasts, Sarah, the ability of the market to differentiate is a net positive. I think the other takeaway here today is that yields in the dollar trump earnings. Those have been the pressure points. And we continue to see yields coming down and the dollar weakening. And I would argue one of the biggest events of the day, psychologically, was the Bank of Canada. The central bank over there raising interest rates by 50 basis points. Most economists expected 75.

Australia came in a few weeks ago, less than expected. And the Bank of Mexico has made similar indications today as well. So is the Fed about to do less? Well, that's the inference, absolutely. And, again, you could also argue that yields really did, in a very short-term way, overshoot. They accelerated to do less. Well, that's the inference. Absolutely. And again, you could also argue that yields really did in a very short term way overshoot. They accelerated to the upside. We're having them reset a little bit lower. So I agree with you. I don't know that it's one over another. It's all of it matters. It just matters in a localized way to different parts of the

market. Well, and lately that's been where the pain has been. Higher yields, stronger dollar. Tech gets crushed. Mike, thank you. We'll see you in just a bit. Mike Santoli. Let's talk more about what to do with tech, because the sector is dragging down the entire market today after results from Microsoft and Alphabet injected a new level of uncertainty into an already anxious market environment. We've still got a number of key tech results coming up, though. Meta, Apple, Amazon, all in the next 24 hours. Let's bring in Sahak Manwellian, Wedbush Securities head of equity trading, and Scott Krohnert, Citigroup chief U.S. equity strategist. Scott, we were eager to talk

to you because you recently upgraded the sector, what, I think in September. Anything in these results today make you change your mind? No, nothing there. I mean, essentially, the premise was we'd been underweight since last November. We've been concerned about a hawkish Fed and rate implications. The multiple compression thus far this year has been pretty severe for the sector. And our positioning here is pretty clear. We think any relief on the rate side is a net positive, again, from a valuation perspective. And we do think as we enter sort of recession territory next year, we'll find that much of tech is surprisingly earnings resilient. Of course, we have to discount incremental news such as today, but we think the setup heading into recessionary conditions is for tech to

actually show a little bit better earnings resiliency relative to the rest of the market. So you still think they're defensive, even though Alphabet showed broad advertising weakness across YouTube and search and the stock is down 9 percent? I don't want to split hairs too much, but some of those companies are going to be over in communication services where we're underweight media. So I'll leave it at that. Our focus has been primarily in the software and the hardware side of tech, where we're overweight, we're market weight semi, so we're allowing for the fundamentals there to play out a little bit longer. So we're slicing and dicing just a little bit differently, Sarah. Sahak, what about you? How do you feel about the tech sector going into Apple and Amazon? Yeah, tech sector's been actually outperforming this month and this week for that matter.

And then we walk into today and we see Microsoft and Alphabet from last night really making for some headwinds for the broader markets in general. We've had a lot of different news coming out, getting through this earnings cycle, and tech's certainly been holding up OK. And then we've got a couple of big mega cap prints from last night really bringing some headwinds here today. I think the central bank narrative may be, you know, taking a touch more dovish this morning from the Bank of Canada, which you alluded to just earlier, Sarah, that helped out a little bit. We saw actually the S&P Tech Index get back to unched in early session trading. Unfortunately, we faded back towards the lows of the session. We were down about 250 basis points very early. We're kind of headed back in that direction. I think looking into Apple, Amazon, and we've got Metaverse tonight, you know, these stocks are still quite vulnerable and have been

really an area or a source of funds for many investors, as we've seen some of the small caps outperforming some of these mega caps. Having said that, we think that going into next year, these things start to fundamentally look a little bit better once fundamentals start taking presence over some of the macro headwinds and the Fed headwinds that they've all been really coming up. It's a good point, Zach. What is positioning like right now for a meta or an Amazon? It feels like everybody hates these names now and they've been totally beaten up, which is, I'm sure, one reason Scott likes them. Yeah, that's a great point. Positioning is extremely thin right now. And I think the thin positioning broadly within equities is really the

culprit to all the intraday volatility we've been seeing really all over the place. No profit tech names, unprofitable tech. Just a couple of days ago, we saw some ripping within that complex as folks go out and try to cover some positions and bring down exposure. Exposure has been coming down. Exposure to equities has been coming down as the bond markets come in and compete for investment dollars. And when you've got the two-year and the 10-year north of 4%, that's affecting equities, and especially tech and within tech, certainly many of the long-duration stocks. So I guess that the counterpoint, Scott, to your view, and I know you were nodding, you agree with the negative sentiment and the fact that a lot of pain is already in these stocks. But is the earnings pain in there?

Because it feels like so far it's just been a valuation sell off on the back of higher rates, which, by the way, are still going higher. And at the same time, we're starting to see some of the fallout economically for a company like a Microsoft or an Alphabet that clearly hasn't been priced in fully? So I think we just have to consider relative to how we're thinking about the setup going into next year. So we're pretty clear on our view that we think recession conditions manifest in the first half, right? So we're looking for earnings pressure for many areas of the market. The view here is when we look at the shorter term fundamentals for a lot of the tech companies is going to come down to, is this a structural change in direction or is it an interim, shorter term change in response to a lot of the pressures that we're trying to navigate more broadly? And, you know, without kind of getting

too much into the company specifics here, I think that's the perspective from which we want to consider this. Our view is that the longer term growth trajectories for many of these companies are going to remain mostly intact and are going to look pretty compelling, particularly as we move into a more traditional recession circumstance next year. We'll leave it there.

Scott Cronert, thank you very much. Sahak Manwalean, good to see you too. And by the way, semiconductor equipment stocks are all higher, even though we are seeing tech and a broader Nasdaq sell-off dragged down by Microsoft, Apple, Google, Amazon, Meta, and NVIDIA. Look at shares of Hilton, handily outperforming the market over the last year and holding up better than the S&P today on the back of its earnings report. Up next, we'll talk to the company's CEO about whether or not economic uncertainty is starting to weigh on travel budgets. You're watching Closing Bell on CNBC. Dow down 25 points. Low of the day was down about 100. Got as high as up 335, though, earlier. We'll be right back. Welcome back. As recession fears grow, what does a slowing economy mean for the travel industry?

Well, we've heard from a number of CEOs this past week that are seeing headwinds, but say demand right now remains strong. Leisure demand is very strong. Corporate demand is increasing and increasing among larger corporates. Demand is coming back strong in all respects. From a leisure perspective, short haul international, which is really leisure, but also business. And then this blended trips, people are flying differently. Demand is out there. And you know what? We're doing a good job of servicing it. We see business travel coming back, of course, not in all parts of the world, but also with regard to our concur solution. We are by far the market leader in that space. We are innovating.

So we actually see a very good future also for this business in our portfolio. Yes, we definitely see that business travel is coming back also to the level pre-COVID. Joining us now exclusively is Hilton CEO Chris Nassetta. The company reporting third quarter earnings today, raising its profit forecast. So clearly, Chris, you too are seeing a very strong travel outlook on top of the numbers that we're getting. Tell us about it. Yeah, we are. Thanks for having me, Sarah. I agree with all of those that you just showed. We printed a really good third quarter where we had significant recovery across all the segments. By the end of the quarter, leisure remained well elevated

above historically high levels in 2019. But the big changes were really in business transient, which we just heard about, which by the end of the quarter was nearly back in terms of demand and at a higher price to pre-COVID levels. And then meetings and events, which while it's not back because of the lag time and the planning time associated with it, was back in the quarter to about 93% of prior levels

with forward-looking demand for the fourth quarter 5% over. And as we go into the fourth quarter, all of our segments, I would say, are showing really good momentum. And to the comments that you just heard, I would sort of say it's like wind in your face, wind in your sails. The wind in the face is an obviously macro environment that will start to slow as a result of what the Fed here and other central banks are doing around the world. And that will slow demand broadly for a lot of things.

But then the wind in our sails is very strong. And my own belief is going to stay strong, which is people are shifting the allocation of how they spend money from things to experiences. That's us. The world is opening up. International travel is opening up. And there's an immense amount of pent-up demand for business trips and meetings and events that I think put a lot of wind in our sails,

not just in the third quarter, but into the fourth. And for at least the next several quarters, even in the face of somewhat slowing macro conditions. So, you know, we were really pleased with the quarter. We're really pleased with the setup for the rest of the year. So are you saying this time is different? It's always dangerous to say that, Chris, because, you know, discretionary spending and travel spending in recessions goes down.

Businesses pull back. They don't have as much meeting and corporate travel. I get that you've got a big tailwind on pent-up demand, but how much longer can that last? I know. It's always dangerous to say you're different. I think why we are different than a lot of the companies that I won't pick on them that are showing reductions in revenues and earnings is that, you know, we were hammered during COVID. I mean, we, you know, the beginning of COVID, our industry was off 90 plus percent.

And so we're still very much in a recovery mode. And as I said, there are conditions that exist in the world in terms of desire and need to travel internationally, pent up demand for business trips, for meetings and events, you know, that just have not been able to happen. And so while that pent up demand it can't last forever, it does feel like we have momentum to take us through the next several quarters. And then I think the, you know, the big question is going to be how does the Fed here in the U.S. and how do central banks around the

world sort of in the effort to tame inflation, which they need to do, you know, what kind of landing, so to speak, do we have? And I think if we have sort of a, you know, bumpy landing, but not a really hard landing, you know, my own belief is that we have enough wind in our sails to sort of help us get through that. But that's the big question. And you're right. It's hard to say. We're certainly not immune to the broader macroeconomic environment.

I'm not suggesting we are. No. So my question on that is what about the pricing environment for you, which is very strong right now, and we all unfortunately feel that when we travel and stay at hotels. We do. What does that look like from here? Is that going to continue to rise? That has to cool off next year, doesn't it?

Yeah, it is. I mean, with demand cooling off, you would argue that at some point the pricing pressure will cool off. But here's the thing. It's just, you know, not to be pedantic about it. It's the loss of supply and demand. It's economics. We have very limited capacity. We have the lowest capacity numbers that we've seen pretty much historically in coming in terms of new inventory into our business. And that's going to be for a considerable period of time. And then we have the demand side of the equation that I just walked through. And there's an element of it, which I think is significant, that's pent up demand, things that need to happen almost no matter what, maybe short of a really hard landing.

And so with no incremental capacity and demand strong and gaining momentum, it gives us pricing power. Now, at some point, obviously, depending on what happens in the broader macro environment, you know, cooling demand will have, you know, will have some impact. But we have, I think, pretty darn good conditions for very good pricing power, at least into the next several quarters. What about internationally, Chris? We've got this super strong dollar, which is helping Americans go overseas, but certainly hurts the rest of the world in terms of travel. China is still going through rolling COVID lockdown.

So how lumpy is it when you look internationally about where you want to open hotels to invest and where you're seeing strong growth? Ironically, it's been, the recovery has been really strong. Europe, as many issues as they have with energy and a lot of people think they're already in recession, we're further ahead in recovery in Europe than anywhere in the world, including the United States. In the third quarter, we were 20% over in comparable revenue, or REBPAR, in Europe to 2019.

So it is recovering. But it is in different parts of the world a bit choppy. We're not really seeing a dramatic impact from a dollar point of view, in part because so much international travel has been diminished as a result of COVID. And while it's building back, it's still predominantly domestic travel that's occurring in all of

our markets. And then China has obviously been, was the first to recover. And given the zero COVID policies has certainly been the most choppy, but China's recovering. So we were probably running in early spring, 20% occupancy, and we're in the 50% to 60% range. And China does feel like within China, certainly it's starting to open up. Just everything you see on the ground and everything we're reading about does feel like slowly but surely that's happening. But that is really, I'd say China is the one that is lagging the most, so the rest of the world,

different speeds, but broadly very strong recovery. And again, broadly, I'd say 95% of our business it has been inter-regional or really domestically driven, which is much higher than normal. That will change over time. I mean, that'll change over the next couple of years for sure. Yeah. Interesting sort of post-COVID changes in consumer habits and trends. Chris, really great to get all the color on the results. Thank you so much for joining me. You bet. Thanks, Sarah. Great to see you. You too. Chris Nassetta, CEO of

Hilton. Let's show you where we stand right now. The S&P has recovered a little bit. It's down about seven tenths of a percent. The Dow fairly positive right now. Again, it's a tale of two different. You can see small caps are up almost a percent while the Nasdaq is down almost two percent. So you've got those heavyweight technology stocks, especially the earnings losers weighing on the Nasdaq. Microsoft, Apple now ahead of results. Alphabet, Amazon, Meta. Amazon reports tomorrow. Meta today after the bell. But then there's some pockets of strength, like the energy stocks, the health care stocks,

materials, staples, all doing well today. When we come back, what do downbeat advertising results from Snap and now Alphabet mean for Meta? We'll discuss with early investor Roger McNamee as that company gears up for earnings after the bell. We'll be right back. Today's stealth mover is Wingstop. Take a look. The stock delivering spicy returns after beating Wall Street's earnings estimates,

thanks to customers flocking to the company's restaurants and driving up those same-store sales. Wingstop also raising its full-year guidance due to a nearly 43 percent year over year decline in bone and chicken wing costs. The CEO has been on this show many times talking about that serious deflation and those bone and chicken wings. Up next, U.S. Trade Representative Catherine Tai on whether the White House plans to cut tariffs against China to help ease inflation. We got some answers. We'll be right back. Take a look at shares in three of the largest Chinese chip makers since October 10th. That was the first trading day after the U.S. announced stepped up export controls for the industry. I spoke just now with U.S. Trade Representative Ambassador Catherine Tai, started by asking her whether the White House trade policy is becoming more confrontational with China,

including those export controls and President Biden still not lifting tariffs on Chinese goods that President Trump instated. Here's what she said. The export controls that you're talking about are national security tools, and they have been put on in a targeted way to address specific national security concerns. The area where we work in trade policy, in the bread-and-butter trade, is much more about competitiveness. And there, you know, with respect to tariffs, I know everybody likes to ask me about tariffs because I am the trade representative. I think there, you know, on your point about inflation, we have economists who have conceded that the impact of the tariffs on inflation is minimal. And that the factors impacting inflation globally are complicated. And so tariffs are a strategic part of our trade tool set.

They do impact the competitive terms of our relationship with other countries, in particular China. And so we are looking at the entire relationship through a lens to ensure that our approach is strategic, effective— They're staying on. —and deliberate. Right now, they are still on. Yeah. It sounds like you've ruled—you've ruled that out. Well, the decision is the administration's. It is the president's.

And I know that for those of us who have been covering trade for the last many years, those of us working in trade, we've gotten used to a certain kind of adrenaline rush when it comes to trade policy. But I think that in terms of this relationship, it is so important, again, for our own people, for our economy, for the world, that it is really important for us to be strategic and to be deliberate and to be very serious about the steps that we take. The export controls, I know you put that into the category of national security, but clearly there are trade implications when it comes to semiconductors. Do you expect China to retaliate? You know, as in everything in life, trade is also about relationships.

They are two-way, if not more than two-way, because of the interconnectedness of our global economy. And, you know, I think that an important part of the U.S.-China trade relationship is having those communication channels to be able to be honest and direct with each other. And so that is a question that I think is better posed to Beijing right now. And rule out retaliation. But she did go on to say that she has had many virtual interactions with her counterparts in China, made it clear that they are talking, clearly not visiting because of the COVID situation over there. But it does sound like they're not moving toward lifting those tariffs anytime soon,

at least the Biden administration, on Chinese goods. Up next, Wall Street is buzzing about the changing odds for control of the U.S. Senate and the impact that could have on your money. That's next. What is Wall Street buzzing about? The market, not stocks, but the betting market for the midterms. We're just two weeks, under two weeks away now. And the odds are changing quickly with last night's Pennsylvania Senate debate shifting momentum sharply toward the Republicans,

at least according to the oddsmakers on Predict It. That site also showing a big shift in the overall race to control the Senate. Democrats had been favored to win until mid-October, but now bettors are giving Republicans the edge. Wall Street is certainly paying close attention. Chris Harvey at Wells Fargo says Pennsylvania appears to be the keystone upon which Senate control hinges and notes that GOP Senate control has historically been associated with superior equity returns. Bank of America agrees, saying a divided government scenario with Republicans controlling at least one House of Congress and Democrats controlling the presidency is usually the best scenario for stocks. And as far as the economy goes, Credit Suisse says Republican control of Congress would raise the question of how the government

would respond to a recession, writing, quote, we think Republicans would be reluctant to pass stimulus in the event of a mild recession. But generally, most of these strategists agree a split government would ultimately be good for the markets. Relatively dramatic change in voter sentiment lately could be one reason the market has stayed firm in these recent days in the face of mixed earnings. Up next, early Facebook investor Roger McNamee on what he expects from Meta's results after the bell. That story plus Mobileye goes public and solar stocks shine

when we take you inside the Market Zone. We are now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day as always. Plus, we've got Pippa Stevens on solar stocks, which are surging. And Elevation Partners' Roger McNamee is here to talk a little meta. First off, though, we'll start with the broad market. Dow's higher, Mike, up 67 points. To your point earlier, we are seeing some real strength, energy, health care, materials, staples. If you would have said after the Microsoft and Alphabet reactions that the market would not fall apart. NASDAQ's down one and three quarters percent, but it really hasn't fallen apart. Some might be surprised. But then you look at yields

and they're lower. The dollar's weaker. I just talked about some of the swinging sentiment in terms of the midterms in favor of the GOP and add it all up. And it's been a pretty nice rally. Right. So the makings of what has gotten us this little bounce mostly remain in place. Mainly, nobody had come into this month leaning heavily in the direction of the news is going to be great. And therefore, I own a ton of risk right now. So that's been somewhat of a backstop to the market. We've gotten up 10, 11 percent from the lows. Even Alphabet and Microsoft, yes, decisively negative reactions. But they only took those stocks back to where they were several days ago.

In other words, it's not this uncontained sell everything because we thought things were going to be good and they're bad. We'll see how long it carries us higher, if at all. We did have the S&P 500 sort of no longer particularly oversold in the short term. We hit the 50 day average. So technically, maybe that's why we did lose a little altitude from the morning highs. We did have a bright spot on a down day for technology in Mobileye, which soared in its first day of trading an IPO today. The self-driving tech company up more than 30 percent, well above its IPO price of 21 bucks, a share which it had already exceeded expectations there. That gives Mobileye roughly $22 billion valuation. Intel had bought Mobileye for just $15 billion back in 2017. Still holds a majority stake. Mobileye's successful debut, a welcome

sign for the depressed IPO market. IPO activity in the U.S. is down 92% so far this year, according to Dealogic. The Mobileye CEO was on Tech Check earlier today discussing the importance of its return to the public markets. It had prior been public before Intel's purchase. Listen. What we get from being public again is amplified attention. In the past five years, kind of under stealth, I've been working on building a great product portfolio. And now being back to the public eye, we'll be able to communicate the

entire rainbow of solutions that we have. And this attention amplification is very, very important for our business. Mike, here's my question on Mobileye. A positive sign for the IPO market or showing how investors feel about self-driving technology? I remember when Mobileye went public before it was bought by Intel. It was really exciting and people were super positive. They're a leader in this technology. So I do wonder how much of it is company and sector specific. It's a slight positive that the window is not entirely closed. I think this is much more about a very motivated seller, essentially, Intel wanting to monetize this cut this- asset again. The fact

that it's somewhat familiar to investors you don't have to introduce the street. To what the company is. And does there is also a history of when the IPO market is in a really rough spot. The deals that do manage to get out are often pretty

good longer term for investors because it's usually. You know they have something going for them or. Again the seller needs to get out the deal and therefore it's maybe underpriced at the outset. I'm thinking about Visa back in 08. Even Google came into a pretty rough IPO market in 04. So I'm not saying these are going to be huge winners like that, but it does show you that a very selective market, the ones that get through probably have something going for them. Let's talk Boeing, because it is plummeting. It's taking about 78 points or so off the Dow.

Right now, worst performer after posting a surprise quarterly loss. One drag on the quarter was weakness in its defense unit, including a billion dollar loss tied to a contract for a new Air Force One jet. Demand for commercial jets, though, was strong. Let's discuss with Ron Epstein of B of A Securities. Has a neutral rating and $175 price target on the stock. What's the big disappointment here? Yeah, I think there was a couple of different things. You pointed out one. I don't think anybody was thinking that we'd see another defense charge. The total charge was $2.8 billion. That's a big number. And the most surprising part was across multiple programs. There was the Air Force tanker program, the presidential jet, M225, T7A, commercial crew, and others. It was across the board. And I think the thing that was most alarming for investors is they're losing money in defense this year, and they said they're going to lose money again

in defense next year, in a backdrop where most defense companies today are actually pretty darn profitable generating a lot of cash. You know, we saw Lockheed report that that's what happened. Raytheon reported the same thing happened. And then on the commercial side of the business, they're only going to deliver 375 737s this year. You know, the original target was 500. Right. So they're off of that target by 125 airplanes. And then probably the third piece that got investors that really caught them by surprise was that the company was going

to generate free cash flow this year. That was the target they were going to do. They wanted to turn free cash flow positive. It looks like they are. But a billion and a half of that from a tax refund and that tax refund they didn't tell anybody about until today. So that came as a surprise. And investors don't like that, you know, being surprised by things like that. Well, it's a long list of disappointments you just outlined there. One thing I found interesting in your note, Ron, was an upside risk for Boeing is the involvement of an activist shareholder. And I just wonder how much of a candidate Boeing would be. This is not its first big disappointment. The stock is down more than 30% this year,

even in such a strong time for airlines. Yeah, so it's, you know, that's a great question. It's a question I get all the time from investors. I mean, it's hard for me to speculate on that. So I really can't. But it's a question that I get all the time because of the series of disappointments that the company has had. Would you buy the stock? Because your target is even at neutral is still a lot higher than

Boeing is right now. Yeah, it's been in a trading range. We've seen the stock trade from these levels up to about the $170 level. You know, it's traded back and forth. So, I mean, I wouldn't be surprised as we go into the latter part of the year if the stock rallies on just commercial aerospace. But it seems range-bound, right? And I think that's until something gets sorted out, until there's some clarity with the investment community, what they're doing, you know, the stock seems range-bound. And to be clear, you're seeing probably some rotation today out of Boeing into Raytheon Technologies.

And the feedback we're getting from investors is, that's just a cleaner story. It's easier. Boeing's become very, very complicated because it seems like almost every quarter there's a surprise that nobody saw coming of pretty big magnitude. So if you want to play large cap and you want exposure to commercial aerospace, Raytheon Technologies just seems like a cleaner way to do it. But on Boeing, if you look at the chart over the last year, it's bounced around between call it 120 to about 170. And it's just been kind of stuck in that range and probably will be stuck in that range until they get things sorted out. No, much, much better outperformer Raytheon that is today and over the last year where it's pretty much flat. Boeing's down 36 percent. Ron, thank you

for joining me on Boeing. Appreciate it. Ron Epstein. Let's hit the solar stocks. They're shining today after stronger than expected quarterly results from Enphase Energy. Pippa Stevens joins us. Pippa, are these Enphase results enough to spark a comeback in a sector that has sort of fallen out of favor after the passage of the Inflation Reduction Act? Yes, Sarah. Well, it was a very strong quarter for Enphase. The company's revenue jumped 80 percent year over year to a record $634 million. And they also gave very optimistic guidance for the current quarter as the demand picture remains strong, particularly in Europe. That region's revenue jumped 70 percent quarter over quarter as natural gas prices surge, which makes the case for solar more attractive.

But North America is also a growth driver here, particularly, as you said, after the IRA. CEO Bhaji Kathandaraman telling me that the company wants to build between four and six factories in the U.S. as a direct result of the climate bill. And right now they manufacture nothing here. And so this report is clearly lifting the entire industry. But looking forward, as rising rate fears kind of hit solar sentiment,

it is important to differentiate between business models. Enphase makes microinverters and backup storage products, and so they aren't quite as sensitive to rising rates as, say, a company that's a residential installer, since they have to access capital markets much more frequently. And Sarah, Sanova is set to report earnings coming up after the market closes today. So we'll get a better idea of how they're navigating this environment. Pippa Stevens, Pippa, thank you. Meta also set to report earnings after the bell.

It's a biggie. The stock is under pressure ahead of those results off the alphabet disappointment. Julia Borson joins us now. What is the key number that we should be watching for, Julia? It's revenue growth, or rather revenue deceleration. Analysts expect Meta's revenue to decelerate, to decline by about 5.5% compared to last year. Now, what's key is that's a big change from the prior quarter, where revenue declined by just 1%. So the question here, the reason why I'm so interested in revenue is it'll show, A, how well Meta is navigating an overall ad contraction,

B, what you're looking at here in terms of navigating those Apple operating system changes, and then C, this issue of Reels, making money on Reels, which is the TikTok competitor, whether or not Meta is making progress there and trying to generate more revenue from them and also how they're doing just in terms of competing with TikTok in general. So, Sarah, that's why I'm so interested in those top line numbers. We'll also be listening for any commentary from Mark Zuckerberg on how he wants to handle cost cutting and also, of course, the all important investments in that long term metaverse plan. Julia Borson, Julia, thank you.

Let's bring in Roger McNamee on this. He's co-founder of Elevation Partners, was an early investor in Facebook. Roger, you've been critical on issues like antitrust and societal contributions or lack thereof for Facebook, but it was always the financial performance was never in doubt. Now, that's not the case.

The stock is down more than 60 percent so far this year. What do you think is going on? So, Sarah, I want to build on what Julia just said. I think there are three headwinds that remain in place that started a few quarters ago. You know, first is the impact of TikTok. TikTok has essentially taken all of the young people who in prior years had been going on to Instagram. Instagram has been the growth driver at Meta. And so TikTok's actions there are really dangerous for the stock longer term. I think in the short run, it's also an issue, but it becomes a bigger problem with the passage of time as the Instagram audience ages. The second issue is Apple's application tracking transparency

product, which essentially has made it easy for Apple users, who are more than half of the U.S. cellular marketplace, to opt out of having their data shared with apps like Facebook. And Facebook announced, was it six months ago, the impact would be about 10 billion this year I imagine Facebook is doing things work around this but it remains an issue and I think it will remain an issue for the foreseeable future and then the third problem is the investments in the metaverse and those are voluntary but they've been running what 10 billion dollars a year and when you put those things together, the total question here is really about investor expectations. Facebook's clearly been guiding expectations downward. Have they guided them down enough so that the stock doesn't get

spanked? Yeah, in that context, I was curious what you made of Brad Gerstner, if you saw it, of Altimeter Capital. He wrote an open letter to Mark Zuckerberg, an investor, saying you've got to reduce expense headcount by 20 percent and cut the spending on the metaverse to no more than $5 billion per year, so about half. Is that something you think Zuckerberg would realistically do with control of this company? I have no idea. I haven't had a chance to talk to Mark in a few years. You can imagine I have not been particularly popular around there. But my observation is this. I do believe that meta strategy in the metaverse is actually not one that's going to work. History shows that in tech, if you want to be really successful, you start with a very

narrow focus and do one thing spectacularly well. And after you build a large audience for that, you then expand. What meta is trying to do is to create an entire metaverse, the whole nine yards, with no special features. It's really an operating system for the whole virtual reality environment. That's an unbelievably difficult thing to do. They will eventually be successful, but I don't think on a time frame that's interesting to investors. And I think they could burn literally $100 billion in the effort without actually having appreciable positive results. I don't know that that's what's going to happen, but I think that's what the danger is. And I think the other problem for

Facebook, and this is in Facebook product and the Instagram product, is that they're in danger of negative network effects kicking in, which is that as the population of people using the product ages, the content gets less interesting. As it gets less interesting, people spend less time on the product, which causes the content to become less interesting again. And you get this circular thing going on, which unwinds all the positives that built up for years. And I don't know for certain that that's what's going on, but it certainly appears that way. And the way that Mark is going after it, the kind of headcount freezes, the expenses reductions that he's been talking about, those are really bad for morale. And I can imagine that inside Facebook, it's gotten a lot harder to recruit and a lot harder to keep the employees really

focused on their jobs. Tell us how you really feel, Roger. Instagram, I still I think is still very relevant. Mike, just on the stock, it's down more than 60 percent year to date. It feels like everybody hates it, which may be the one thing it has going for it. Definitely. Actors, investors have acted as if they hated it because they've been selling it down. The street, unfortunately, is still a little bit kind of clinging to the whole valuation story. There's still a net 60% buy ratings on it. But I think in general, what the stock has been telling you is that the market believes that the company's been over-earning, that it's a down path from here in terms of profitability, because otherwise it wouldn't be trading at 10 or 11 times. And they're very concerned about the zero or little foreseeable return on this capital that's being spent

strategically. So I think they want to see cost discipline that's persuasive, as well as some signs that maybe they're withstanding the macro pressures on digital ads in the near term. Well, we'll leave it there with you, Roger, because we've got to go to the bell. But thank you very much for joining us ahead of those meta results. Roger McNamee of Elevation Partners. Two minutes to go here in the trading day. Mike, what do you see in the internals? Yeah, they've been positive all day, Sarah, although slipped from the best levels earlier.

It was about 80 percent upside volume in the morning. It's now down to less than two to one advancing to declining volume. Similar story of looking at net 52 week highs. So there are now just about the same number of highs and lows on the Nasdaq. Earlier again, you had more highs than lows. That would have been a big shift because that hasn't been the case for quite some time, a couple of months since that happened. Still not going to make it today, but it's something to watch as you try to look for a trend change as opposed to just a bounce. And the volatility index has given back some of that inflated reading. We're down not quite a point, so under 28. It looks like a slow motion spike in that chart, sort of confirming that kind of push-pull under the

surface of the index that says the overall index level volatility maybe has peaked for the moment. Are we going to get a positive close for the Dow? Well, we're down one point. So it looks like we're going to break a three-day win streak here. Biggest drag by far on the Dow heading into the close is Microsoft taking 125 points off the Dow on those disappointing earning results. Boeing right behind taking 81 points off the Dow, though there's a lot of strength there. Visa, Amgen, 3M, Goldman Sachs all contributing higher, which is why the Dow is not down all that much. The S&P 500 down three quarters of one percent. Energy, health care materials all very strong today. In fact, health care and energy are up more than one percent.

And ExxonMobil is trading at a record high right now. Financial is also having a good day. What's not? Communication services. Thank you, Alphabet, Meta, everything else getting dragged down along with that. Some of the media names. Technology is also hurting. The Nasdaq comps down about 2%. We are still higher for the week, though, going into a Thursday, 2% or so on the S&P 500. But a decline today and a positive close just barely for the Dow

and for small caps up 0.5%. That's it for me. I'm closing bell into overtime with Scott Wapner.