Closing Bell - Jobs Jolt, Growth Stock Warning & Pricing In A GOP Win 11/4/22

Episode Date: November 4, 2022

Stocks rallying on Wall Street following the stronger than expected October jobs report, but the major averages all closed the week in the red. Investors were somewhat encouraged that the unemployment rate increased to 3.7%, which could help convince the Fed to slow its pace of rate hikes. The leisure and hospitality sector seeing gains of 35,000 jobs. Marriott CEO Tony Capuano discusses those gains and whether he sees any signs the red hot travel sector is slowing down. Strategas' Dan Clifton says the market is now pricing in a GOP win in the midterm election next week. He discusses how you should position your portfolio depending on who controls Congress. Bespoke's Paul Hickey explains why he sees major red flags for growth stocks right now. And Deputy Treasury Secretary Wally Capuano discusses his imminent trip to Europe to discuss additional sanctions against Russia with U.S. allies.

The major averages giving up a sizable post-jobs rally, though we are trending higher as we head toward the close here. The Dow was up more than 600 points at session highs. It is now up almost 200. This is the make or break hour for your money. Welcome, everyone, to Closing Bell on a Friday. I'm Sarah Eisen, coming to you live from D.C. today. Here's where we stand right now in the markets. So you see the Dow, the S&P 500 up three quarters of one percent. We were up as much as two percent earlier, but you've got a nice broad rally. Materials are your leading sector up more than three percent. Financials, communication services having a good day. The only sector lower right now is health care. Utilities are also lagging a bit.

The Nasdaq up a little more than half, a little less than half a percent and small caps the same. Here's a look at the action for the week. It has been a really rough one, especially for big tech and the NASDAQ. Look at that chart. The NASDAQ composite for the week is down 6.5%. So after that winning streak we saw in October, a lot of giveback. Obviously, the Fed meeting during the week was one of the highlights that spent stocks even sharply more lower than where we had been earlier in the week. We've got a big show coming your way here from Washington. In just a moment, we'll talk to Dan Clifton from Strategas about today's jobs report and the

business issues at play in the midterms. Plus, Deputy Treasury Secretary Wally Adeyemo will join us with his read on the economy and the latest on Russia's sanctions as he prepares for an overseas trip. And the CEO of Marriott will be with us, fresh off the back of earnings, with a look at labor in the hospitality industry and much more. It's been one of the bigger job gainers in this economy. Let's get straight to that big data point of the day, the jobs report coming in. Stronger than expected on the headline, initial market reaction was positive. CNBC senior economics correspondent Steve Leisman with more on the data, Steve,

and what it means for the Fed's plans and the economy next. Yeah, Sarah, it was an initial positive reaction, as you said, from a softer but still strong 261,000 jobs created in October, better than the estimates. But unfortunately, not much in there to make anyone think, least of all the Fed, that the Fed itself might do less, not after a harshly hawkish press conference this week from the Fed chair. Here's something to look at. Private sector job growth did soften at $233,000 and has generally eased, you can see, down during the year, but it remains well above normal and will have to have to get just back to average, let alone a level that the Fed would think

is creating any slack. Speaking of slack, take a look at the next chart. The number of unemployed ticked up by 306,000. But look at what happened in August. It ticked down. It declined again as the tight job market seemed to put the unemployed right back to work. Most of all, the Fed itself didn't see any way that this was a dovish side of the report here. Demand remains solid. The labor market remains tight. And, you know, you can point to the unemployment rate. You can point to wages. We're not getting much help on the supply side. Participation ticked down. And I just think firms are still holding on to workers. All right. What the market think of all this?

The peak funds rate, that's the June contract, ticked down to 509 for June. That was from around 518 before the number. But it's held on to most of the gains in those hawker marks from Powell on Wednesday. So not much help there, Sarah, when it comes to the jobs report. Big sell-off in the dollar, notable, though, as well. Steve, thank you. Steve Leisman. Let's talk more about the economy and how it plays into the midterms because we're just four days away from the election.

And more than 35 million votes have already been cast in early voting nationwide. Most forecasters have pegged Republicans to retake the House, while the Senate remains up for grabs. So how should you be positioning your portfolio to take advantage of whatever the outcome? Joining us now is Dan Clifton, partner and head of policy research for Strategas, a Baird company. What are you telling investors today? Well, the chances of the Republicans taking the House are 90 percent. The gains could be so large, 25 to 30 seats, that they're probably going to lock in that majority for two, not only the next two years, but possibly four years. That means no tax increases, little energy regulation, little health care regulation. The market generally will like that

divided government. The Senate is obviously mixed, Sarah. So the question is, which way are the undecided voters going to turn? You can feel the market starting the position as if the undecided voters are going to turn to the Republicans. How do we know that? You could see it in stocks dedicated to immigration enforcement, which is a priority of the Republicans. You can see it in energy infrastructure, which will be a main priority if the Republicans have complete control. So the market, the forecasters and the betting odds, we're all suggesting that there's a slight probability of the Republicans taking the majority. And if that doesn't turn out to be the case, the biggest sector with the rally will be the clean energy stocks, which have priced in some negative reaction of a Republican sweep so far. So the administration doesn't and the Democrats don't get credit for better than expected jobs,

which it's been a string of good news on the jobs front. But I guess the inflation numbers on the other side. That's right. The big driver of voter behavior is after tax, after inflation income. So normally when you have low inflation, you get a lot of jobs, you get a lot of income. Now you're getting jobs, but the income's being eroded by inflation. And the best way to think about this is, this is the energy election. Gasoline prices, groceries, that's the driving issue for voters. And for a while, Sarah, that wasn't the main issue. But it came roaring back in September. The OPEC decision to cut production probably fueled it.

Gasoline prices are $3.85 today. That's what's really driving this, the voter today. And that's what's going to lead to the policy implications if the Republicans are able to take advantage of that. So there's also some some noise about the debt ceiling if Republicans gain control, because already we're dealing with very high levels of debt in this country and now a pushback against spending in an inflationary environment. What's going to happen there? What investors need to know is that we're at the return of deficit politics. This is really the first time in 30 years because the net interest cost on tax,

the net interest cost of interest is going up. And that's because interest rates are going up. And so now we have to feel the true cost of that debt. And that means that when we raise the debt ceiling, it's going to get meaningfully harder. The debt ceiling is being pulled forward into the first quarter. A new Republican majority would have a really hard time raising the debt ceiling immediately coming into office. They would demand spending cuts. We would likely we're likely going to see the debt ceiling get raised in the lame duck session of Congress right after the election in November and December as a way to defuse the issue. If you're able to take that risk off the table, I think that helps risk assets in the first quarter.

You think the Democrats are going to be able to get that done? There's a lot of talk. If this was last week, I would have said no. You're starting to see more and more people within the Democratic Party saying it might be better to do this to avoid being held hostage for spending cuts in the first quarter of next year. On the other hand, I know nobody's in the mood for spending right now, certainly what we saw in the UK and on the inflationary front. But if we do go into a recession and it gets ugly next year, it doesn't seem like there's going to be a whole lot of appetite to fight back with stimulus. That's correct. Right. So, number one, there's not going to be an appetite to do it and there's not going to be the fiscal capacity to do

it. OK, so what you've got to do is figure out where you can help the economy in other places. Improving the energy infrastructure and getting more oil and natural gas into the into the economy and bringing down oil prices would act as a stimulus without pulling the fiscal policy lever. So you've got to get creative in how you do it. And if you have too bad of a recession and you get to the end of next year, I think you'll start to see a little bit more appetite for fiscal policy, especially if inflation is coming down because of that recession. Most of those members of Congress are going to be up for reelection in 2024, and they're not going to want a bad economy in 2024. So we may have to eat our spinach in 2023. If it's too bad, I would expect to see some more candy at the end of the year. All right. So you said that, you know, by your metrics at Strategas, a lot of this is

priced in in terms of the shift toward Republicans taking both houses. Where do you guys see the opportunities within sectors? So when I say it's 70 percent priced in, that means there's still 30 percent upside. The key sectors I would focus on right now, energy, health care, particularly biotech and pharmaceuticals, financials, particularly in the insurance industry and in the defense sector. Why? Why? Well, this is all good for them. Less regulation. And again, again, the size of the Republican majority in the House is not only just a two year majority, could be a four year majority. And that means that you're lowering the probability of a full Democratic sweep in 2024.

You're creating some level of protection for those industries over the next four years overall. So I still think there's some room to go here, but a lot of it is starting to price in and the market's starting to realize that the Republicans have a chance for a full sweep come Tuesday. Dan Clifton, so good to talk to you. Thank you very much. Thank you. Enjoy your time in D.C. Good to see you. Shares of Marriott trending lower this week after the company reported revenue that missed estimates, though it did see a major benefit from the summer travel boom. Up next, CEO Tony Capuano will join us to talk about the quarter, his read on labor in the hospitality industry and travel demand. You're watching Closing Bell on CNBC.

Dow's up 272, rebounding from a tough week. New jobs data out today showing stronger than expected growth in October. And we want to zero in on one specific part of the report. The leisure and hospitality sector seeing gains of 35,000 jobs, though the pace of increases has slowed a bit. On average, the sector saw gains of 78,000 jobs a month this year. Joining me here exclusively on set in Washington is Marriott CEO Tony Capuano. It's great to have you. Nice to see you. Nice to see you. Welcome to Washington. Thank you. We're talking about all these tech companies that are pausing hiring or laying off

workers. Not you guys. Not us. Demand is strong. We are. We just had earnings yesterday and a big quarter for us. Obviously, leisure continues to be really strong, almost up 10 percent over 19. But in the third quarter, group came back above 19. And even business travel, which has been heavily debated, we were only down about 11 percent to 19 versus 25 percent in the first quarter. So we've got to take care of those guests, which means we're hiring. But the worker levels are not back to 2019 levels. Overall, for the sector, I think they're about 6% or so,

6.5% below that. So is there appetite to fill those positions all the way back? There is, no question. And in fact, it's interesting. We're down about 8,000 positions in the U.S. and Canada, our biggest market. But they're a little more concentrated,

those vacancies in the markets where demand has come back most strongly. So the good news is we've got lots and lots of pricing power in those markets, but we've got to deliver on service, which is challenged when we're struggling to staff the hotel. At higher wages, though, big jump in wages, especially in your sector. We are, although we talked in the earnings call, even in the face of wage inflation, some of the efficiencies we identified over the last two years, our margins are up about 200 basis points at the property level. Because you found ways to cut costs? Yeah, we found some modifications to service. We've changed some of the staffing models because we knew we'd be challenged coming out of the pandemic.

Now, that demand, that strong demand in all the sectors, any signs of a slowdown? Not yet. So we talked a little bit on the call. The good news is we continue to see really strong demand. The forward bookings into Q4 look terrific. The early read on holiday looks terrific. But the one caveat I would get you, we're like any business. We are certainly subject to economic headwinds. Our booking window is almost historically short. The booking window is only about 21 days. So while we see nothing in the data other than good encouraging news, it obviously could shift. Corporates as well, because we are starting to see

companies tighten their belts. We are. So small and medium-sized businesses are meaningfully ahead of where they were pre-pandemic. The larger employers are not back. Are they going to come back? Well, I mean, they're coming back steadily, but they're not back to 2019. Again, what we're seeing in group is maybe most interesting. Pre-pandemic, in a normal year, only about 25% of our group business would have been booked in the year for the year because folks wanted to have some price negotiation leverage. Here, I think groups are negotiating for flexibility. They

understand they will likely pay a higher rate, but about 50% of our group business this year was booked in the year for the year. I know you mentioned also on the call that the strong dollar was helping Americans travel to Europe and abroad. On the flip side, is it hurting our tourism here in this country? Well, I mean, we look at it in aggregate and pre-pandemic about 20 percent of our global room nights were cross-border travel. In the depths of the pandemic, that dropped down to single digit, as you might expect, because so many borders were closed. By the end of the third quarter, we were back to about 15 percent.

And remember, that's back to 15 percent with effectively no travel, cross-border travel coming in or out of China. So we think there's still lots of run time. I was going to ask you about China because the stock did get hit on delayed plans for openings in China. There's word that they are softening their stance on the COVID zero policy. They're going to allow foreigners now to take BioNTech's vaccine. How have your plans changed in China? What do you anticipate? The plans haven't changed. The good news is when you look at our pipeline, which is a little over 500,000 rooms, big pipeline in China, the fallout from the pipeline is below historical norms. So we think about net unit growth from a when, not an if perspective, and that applies to China as well.

As the borders open, if in fact the rumors that came out over the last 48 hours are accurate, we would expect that construction activity to ramp up. I was going to say, the when is the big question, right? Do you have any guidance from the government or from your people on the ground there? No, although for us there is a significant silver lining even in China, and that's the volume of domestic travel we've seen. The challenge in China has been, at least during the zero COVID policy, we obviously price and sell our inventory anew every day. When you see a city locked down, we see demand fall off a cliff.

But as soon as that city reopens, we see the demand accelerate pretty quickly. You're also finally launching the Ritz-Cruz. Yeah, you should use past tense. We've launched. We had our first maiden voyage. Feels very bull market, Tony. Well, I mean, again, if you look at those bookings, that is a longer lead booking time. And it's really the power of our loyalty program, Bonvoy, that seems to be driving it. More than half the bookings we have both for this year and future years are Bonvoy members, and so our sense is we're getting a lot of folks that maybe historically have not been active in the cruise space,

but they like the endorsement of the Ritz-Carlton ship, and they like the scale of the ship. It's only 149 cabins. Is that something that, is that a growth opportunity for you? It is. Ships two and three are under construction. Tony, thank you for the update. My pleasure. Great to see you. Tony Caffiano, the CEO of Marriott. Show you what's happening right now.

Dow's up 263. We're off the highs of the day, but still got a nice rally going. S&P's up 1%. So we've actually gained some steam since we started this final hour of trade. Every sector is now higher. Healthcare joining in the positive territory.

It's materials that are really charging ahead today, up more than 3%. Still ahead, the Deputy Treasury Secretary of the U.S., Wally Adeyemo, will join us with his read on the economy and the latest on Russian sanctions ahead of his trip next week to meet with European allies. As we head to break, check out some of today's top search tickers on CNBC.com. Ten-year note right on top again.

Yields are higher today, so there's some selling in bonds, 4.16, although on the two-year, we're actually seeing yields come down. That's been the one tracking the Fed. Apple down for the fifth day in a row, three-quarters of 1%. There's the two-year. As I said, buying yields lower. Amazon gets a little relief after a tough week. And Twilio, which we will talk about in the market zone, down 36 percent on earnings. We'll be right back. What is Wall Street buzzing about?

That supermarket mega merger, Kroger buying Albertsons. The political opposition is already heating up. A state court in Washington has just blocked Albertsons from paying out a special $4 billion dividend to shareholders ahead of the deal scheduled for next week after the company was sued by the AG of Washington, California, and Illinois, alleging it had made Albertsons less able to compete, a claim Albertsons denies strongly, calling the suits meritless, saying it plans to challenge the restraining order next week at a hearing so it can pay that dividend to investors. This is a very contentious one because it combines two of the country's largest grocers, operating a total of 5,000 stores across the country with a 22 percent market share of U.S. grocery sales,

compared to Walmart's 33 percent, according to KeyBank. Remember when this deal was announced three weeks ago, I asked Kroger CEO Rodney McMullin repeatedly why this wouldn't be bad for consumers. We actually believe this will increase competition. If you look at the synergies that the combined companies will create, we will invest half a billion dollars or $500 million in lower prices for customers. And especially in this inflationary environment, that's a huge help. Regulators don't agree. It's not just the states. Lawmakers, including Senator Elizabeth Warren, took aim at Albertson's largest shareholder and former owner, private equity firm Cerberus

Capital Management, writing a letter to Cerberus this week saying the special dividend should have been used to invest in the business. Now, none of these are the antitrust authorities that actually can approve or block the deal, but it does show you the kind of political and regulatory opposition already building strongly against it, likely the reason why Albertson's stock is more than $10 below the offer price. When we come back, Deputy Treasury Secretary Wally Adeyemo is about to leave for Europe to discuss additional sanctions against Russia. Up next, he joins us in a first on CNBC interview to discuss that trip as well as to react to the

jobs report. And check out shares of Carvana, big mover on pace for their worst day ever, down 37.5%, the used car dealer missing earnings estimates, and raising liquidity concerns among Wall Street analysts. We'll be right back. Welcome back. As the war in Ukraine rages on, Deputy Treasury Secretary Wally Adiemo will travel to Europe next week to meet with allies, discuss imposing sanctions on russia and a price cap on russian oil reuters reporting today that the g7 has agreed to set a fixed price on that russian oil joining us here first on cnbc is deputy treasury secretary wally adiamo secretary adiamo nice to see you great to see you too sarah so what what can you tell us about where the price cap on russian oil stands and what that price might be so sarah i can't tell you anything about the price cap on Russian oil stands and what that price might be?

So Sarah, I can't tell you anything about the price because as we've said previously, it's gonna be set by the coalition of countries that are part of the price cap. And what we are doing is we're working closely with them at the moment to make sure that we have done the analysis that's needed to make sure that we set that price appropriately,

given our two overarching objectives. One, which is make sure that Russian oil continues to flow. And the second one is to try and deny Russia revenues, especially the revenues they have made because the war that they started in Ukraine. We've already seen this strategy be effective. Russian oil continues to flow today. And we've seen and heard from our allies and partner that Russia is offering discounts to countries in order to sign long-term contracts in anticipation of the price cap coming into

effect. As you know, Europe has decided to no longer purchase Russian oil as of December 5th. They've also said that as of December 5th, European services can't be used for the transportation of Russian oil. And Europe and the UK provide 90% of the world's insurance for the shipping of oil. The price cap actually creates an exception to that, saying that now you can use Western services for the transportation of Western oil, of Russian oil, as long as it's below that price cap. But we've seen China and India step up their purchases, and you mentioned that oil is still flowing.

I'm wondering, you know, you've been leading a lot of the portfolio around sanctions on Russia. Is it working as you expected? Is it devastating enough because this war is still ongoing? And I think the thing that we're doing with sanctions is it's part of an overarching foreign policy strategy. And part of that strategy is diplomacy. But another part is providing the Ukrainians with the weapons they're using to defend themselves in Ukraine. At the same time that Ukraine is getting those weapons, we're using sanctions to deny Russia the ability to purchase the weapons that they need and to build the weapons that they need. One of the things that we learned from COVID-19 was about the vulnerability of supply chains. And Russia's military industrialized complex

has a very vulnerable supply chain that we've went over, what we've went after. Part of that has been denying them the ability to get access to the most complicated semiconductors, the ones that go into the building of their precision missiles and some of their tanks. And other machinery. And you're seeing that they're unable

to build those things today because they don't have access to that. So that's hurting them. And you're seeing that they're unable to build those things today because they don't have access to that. So that's one element, going after a military industrialized complex. The second element is going after their revenue, the money they're making to pay for this war. And that's where the price cap comes in. And our goal here is not to stop China or India from buying Russian oil. It's to make sure that any country that buys Russian oil going forward is paying Russia

far less for it, so that Russia has less money, but we have oil on the global market. What more is there to be done on the sanctions front? A big piece of this is continue to go after the military industrialized complex, because what Russia is doing is that as they see that we're cutting off access to supplies they need, they're building new networks. And a big piece for us is making sure that we cut off those networks as they rebuild them.

Russia is very good at evading sanctions. They've been doing it for decades. So a goal for us and part of my conversations in Europe are going to be around what can we do to make sure that we take additional steps to stop evasion. So which is a bigger risk? The Europeans lose appetite for supporting Ukraine

because they're about to go into a cold winter where they're having to ration gas and power and electricity, or that the Republicans gain control in the midterm elections and we start to lose appetite politically in this country for supporting Ukraine because you're already hearing some movement from some of the Trump Republicans around that. I think people overestimate those risks

because when people look at it, ultimately, the thing that we all agree on is that we believe deeply in democracies and the idea of sovereignty. And what Europe has done over the course of the last several months as part of this war has taken a number of steps that have been important in order to make clear to Russia that they're going to pay a price for this invasion. I think the Europeans have done a better job than people expected in terms of taking steps to guarantee their energy security going into this winter. And their stores are more full than people expected, and the winter to date has been less cold. And what they've demonstrated is a willingness to do things that will create some pain for them,

but in order to make sure that they're sending a clear message to Russia. For example, earlier this year, they stopped the purchase of Russian coal by Europe. They've stopped the purchase of oil. They've still got less than 10% of gas, though. And the reality for them is that they found alternative sources of that gas, including from LNG shipped from the United States. What I've heard from my European counterparts and what we expect from them is for them to continue taking steps.

We're going to talk about how we put in place the price cap, but about how we take additional actions. And here in the United States, as you've seen over the course of this year, we've seen bipartisan majorities in both houses support packages for Ukraine. And we expect that to continue. You do. OK, that was the question. Well, I did want to ask you about the U.S. economy. We've got another strong jobs reading and I know the administration is happy. I saw Secretary Yellen's tweet about it. I guess the concern would be, as we continue to get these strong jobs numbers coming in better than expectations and higher wages,

while that's great for Americans, it just means the Federal Reserve is going to tighten even more and potentially sink us deeper into recession. So doesn't that concern you? So, Sarah, I think we can do two things at the same time, both bring down costs for the American people while continuing to have a robust, healthy labor market. And we're seeing that that's possible because of the underlying strength of the US economy. You think about where we are today, we've created more than 10 million jobs during the Biden administration, and we expect that to continue. But at the same time, we're taking steps alongside the Fed to try and make sure that we bring down costs for the American people. You're right that the Fed has primary responsibility, and what they're trying to do is make sure that they take steps to bring down costs

in order to both support the American people, but also because it's critical to the businesses in America. And the administration thinks we can do that while making needed investments in the future of our economy. Investments like the CHIPS Act, which we were talking about before, which is going to lead to massive investments by companies like Micron and Intel in the United States. They're going to create jobs of the future and bring investment back to the United States while we take steps in the near term to bring down costs in the U.S. economy. But are you frustrated that inflation hasn't come down faster, given we are coming off of four jumbo-sized rate hikes, six in total this year, including some of the administration's

efforts to fight, like releasing oil from the Strategic Petroleum Reserve, and we're still stuck with very high inflation? So, Sarah, as you know, inflation is a global phenomenon. When you look around the world, I was just in Asia two weeks ago, and when I talked to those economies, they too are facing high inflation because we're all coming off of dealing with COVID-19 and also the impact of Russia's war on Ukraine. The difference between the United States and the rest of the world is that we start from a position of strength in dealing with this

versus a number of other countries, given the policy choices we've made. We've created more than 10 million jobs, as I mentioned. We all know that the high levels of inflation are having an impact on the American people. That's why the president's been so focused on it. I've released energy from the Strategic Petroleum Reserve, which has helped to bring down the cost of gas by more than $1.20 over the last several months,

but also taking steps like bringing down the cost of prescription drugs. We know more needs to be done, but I think the thing we have to recognize is that compared to the rest of the world, we're coming at doing this from a position of strength, which will give us the ability to bring down inflation over time while also making sure we have a healthy labor market here in the United States. Well, we appreciate the update. Safe travels. Keep us posted. Thanks for coming on to discuss. Wally Adiemo, the Deputy Treasury Secretary of the United States. Take a look at where we stand. The S&P 500 holding on to

a 1% gain for the week overall, though still sharply lower, down more than 6.5% for the NASDAQ this week. It's up three quarters of a percent today. A little bit of a rebound. Materials, financials and communication services, your best performing sectors. Still ahead, besp's Paul Hickey, here to explain why he sees a growth stock warning sign in the market right now. And then check out shares of DraftPings, which are being destroyed after the company warned it does not expect to become profitable until the third quarter of next year. Not good enough for investors. That stock taking it on the chin, down 27%. We'll be right back. Check out today's stealth mover, Topgolf Callaway Brands, the stock hitting a hole-in-one with

investors today. The golf equipment and entertainment company beating earnings estimates and raising its fourth quarter forecast. As a result, Jeffries driving its price target up to $56, implying more than 200% upside from here, citing the company's huge market share gains, rising margins and emerging apparel business. When we come back, we discuss whether the huge rally in Chinese internet stocks this week can last. By the way, it's having a spillover effect on a lot of China exposure names like Estee Lauder up 8.3 percent. Everything tied to China, metals also rallying right now. That plus Twilio tanking and a warning for growth stocks when we take you inside the market zone next. We are now in the closing bell market zone.

Bespoke's Paul Hickey is here to break down these crucial moments of the trading day. Mike Santoli is off today. Deirdre Bosa is here as well on Chinese stocks. And Kate Rooney on the fintech movers. We'll start with you, Paul, on the broad market. The Dow's up 360. The S&P is ending the week. It looks like we've just taken a leg higher, up 1.25%. And tech is rebounding.

But Apple's lower fifth day in a row. Tesla is not part of the tech rally. Microsoft, Nvidia, Alphabet getting a little bit of a bid today. This week, clearly all about the Fed. Higher interest rates for longer, more restrictive for longer. Is the takeaway that these stocks are still too risky? You know, I think what you to your point, Sarah, is that this week has all been about the mega cap stocks coming in. If you look at the performance of the S&P 500, the relative strength of the equal weight versus the cap weighted index, you've seen outperformance from the cap weighted index.

There are some good things to like about the market here. But every time the Fed comes up, every time something good happens, a Fed official rears their head. And they seem to think that they need to be very aggressive, continued, very aggressive going forward, even when the economy is showing signs of slower momentum. Housing's basically dead right now. Manufacturing's slowing. Even employment. Today's report was better than expected. But the pace of job growth has been slowing relative to 2021 averages versus the average earlier in this year versus now. So you almost have to take a step back.

The Fed should and see what's going to happen. It's interesting. Six months ago today, Powell took 75 basis points off the table. And now over the last five minutes, five months, we've seen four hikes of 75 basis points. So, you know, these things take time to work their way to the economy. And I think the Fed should look at that and take a step back and let that happen, because it's not like if things do turn south that they can just flip a switch and make things, everything right again. That policy takes time to work itself through. So back to the growth trade question. I know you've been looking at the relative strength of the S&P and the Nasdaq for clues about where this goes next. Yeah. So if you go all the way back to the financial crisis,

there's a trend line of the relative strength of the Nasdaq versus the S&P 500. The Nasdaq has steadily outperformed in this ever since the Fed's become increasingly aggressive in hiking rates over the last six months to year. We've seen the relative strength of those growth stocks really come in at a critical point at this level. So I think in the next few weeks here, as we get into Thanksgiving, we'll have some clues as to whether that level will hold or if the growth stocks trade is going to see some notable weakness going forward, continued notable weakness going forward. Yeah. And we're showing that now. I guess a lot depends on where yields go, right? As long as the two year yield continues to make new highs. It's down a little bit today, but the 10 year is a little higher. Yeah. I mean, every day to day doesn't necessarily matter. The

overall trend is higher. We've seen unprecedented increases in the Fed funds rate over the last five months. And so that's going to be, you know, that you can't get anything worse for growth stocks than that, you know, aggressive hiking of rates. Well, one thing that's helping today is the semiconductor stocks are rallying near the top of the market. That sector has been hit hard. Stay with us, Paul. Let's hit Chinese tech stocks as well. They're surging today, capping off a big week even as American tech stocks fell. The K-Web Chinese Internet ETF on a tear on these reports of easing COVID restrictions in China. Some of the biggest winners this week, Tencent,

Alibaba, Pinduoduo, JD.com. Those stocks even shaking off reports key investor Tiger Global has cut its exposure and will not take any new positions in Chinese equities on concerns over President Xi's recent moves to solidify power. Our Deirdre Bosa joins us now. Deirdre, any indication that other funds or companies could follow Tiger's lead or maybe do the opposite now that we're getting some clarity on China? That's a good point. They may be getting out at just the time when others are seeing a lot of opportunity here. I know that Chinese stocks have been doing well this week. You pointed out some of the big winners today from the K-Web.

But zoom out a little further. Take a look at the K-Web versus the S&P since late 2020. What a remarkable dispersion here. The K-Web is down 70% compared to the S&P, which is actually up nearly 9%. And that tells you sort of the bigger story going on in Chinese stocks that some have called uninvestable over the last few years because of Beijing's crackdown, the scrutiny, the idea that Xi Jinping

is going to take another term as president and not willing to give up any power. Sort of leads some, like Tiger, to believe that it's going to be harder to invest in this market going forward. Certainly others have been burned, like SoftBank. Its Vision Fund has taken stakes

and invested in Chinese companies like Didi. We know what happened there. Even Uber that has a stake in Didi said when it reported results that that is no longer a strategic investment. So you could see some pulling back. But Sarah, some of the investors that I talked to on the ground in China say that the long-term story is intact. Xi Jinping is trying to switch this to a consumption based economy. The middle class continues to grow. So there's opportunity if you're willing to do your due diligence. But of course, for American investors, you need a very high risk threshold. I mean, the zoom out just shows how beaten down some of these stocks got. Deirdre, is there anything solid that we know about China actually making a turn on the COVID-0 policy?

I've seen speculation. There was some social media reporting, a Bloomberg report, that they were relaxing rules to penalize airlines for carrying COVID passengers. But is there anything real to this that would make those stocks more investable? It is so hard to know, which is why I think American investors struggle with this without knowing what Beijing is thinking, the ins and outs, what to believe in terms of state media reports or media reports elsewhere. That's what makes this so difficult. You know, the latest, of course, is that Xi Jinping, if he's thinking

about relaxing this, the propaganda minister is going to have to get involved. It's certainly an interesting one because propaganda has been so much behind this zero COVID policy. To get out of it, you think you would need that as well. But again, that's why this is so difficult. And this is why these markets are so volatile, because you really don't know. It's impossible to see inside the Beijing administration. Yeah, very hard to get a picture there. Thank you, Deirdre. And as I mentioned, it's having an impact on some U.S. stocks like Estee Lauder, which got hit on China on results

this week. It's up 8.3 percent. A lot of the metals and mining stocks are rallying hard today as well. A trio of Fin stocks, big movers, FinTech, I should say, after reporting quarterly earnings. Block is booming after beating on the top and bottom lines thanks to a 51 percent increase in gross profit at its cash app business. PayPal under pressure, though, after issuing a weaker fourth quarter revenue forecast. And then there's Coinbase, which is higher as higher than expected. User numbers offset a wider loss and a revenue miss. Kate Rooney joins us. Kate, what was the tone on those earnings calls from some of these fintech executives as their stocks have been hit very hard this year and some getting some relief today.

Yeah, Sarah, I got to say the tone was a lot more conservative than what we've heard in prior years and prior quarters. So PayPal, Block and Coinbase, you think about these as really the growth names, the big winners during the pandemic. Talk about what's happened to their stocks this year. And they used to talk about customer acquisition and a lot of those ambitious plans to take on the banks being sort of a one stop shop for finance. Definitely not this quarter. It was all about cost cutting. A lot of the talk also mentioned the uncertain macro backdrop. Dan Schulman of PayPal called it a difficult economic cycle. And they all talked about lowering OPEX. That was really the theme throughout these three companies in Robinhood earlier this week.

And the numbers and guidance for these really varied. But we just heard a lot more about a disciplined approach to spending. The word prudent was thrown out a lot on these various analyst calls. So they're really trying to show Wall Street that they can be more disciplined through what's looking like a lot tougher of an economic cycle than obviously a year ago. And for Coinbase in particular, with what's going on in crypto markets, they're really getting hit by that slowdown. Yeah, boy, have times changed. The era of being prudent. Paul, are you excited about any of these valuations? Well, I mean, they've come in so much. I think the key here with block was the fact that it was riding that crypto wave and the buy

now pay pay later wave way higher uh in 2021 and then it got hit hard as both of those waves crashed this year uh what's encouraging about uh when you on the prior screen you showed both block and coinbase higher and they both have the most exposure to crypto and crypto market is really stabilized. The chart of block almost looks like a chart of Bitcoin. And so you've seen really leveling out since June. So I think on that respect, stabilization in crypto will certainly help Coinbase, but I think it'll also have some benefit for block there as well. A nearly 2 percent sell off right now in the U.S. dollar. That's certainly helping Bitcoin today. Let's hit Twilio, down more than 30%, easily its worst day ever after reporting earnings,

swinging to a net loss compared to a year earlier, posting a quarter-on-quarter slowdown in sales growth as well. And crucially, Q4 revenue guidance fell short of analysts' estimates. Here's Twilio's CEO on CNBC earlier today. Customers, when end users are using more of our customers' applications,

well, we'll tend to make more revenue. And if they're using them less, then we will make less revenue. And that's not a dynamic of like, did we sign new customers or did we lose customers, or any of that, it's just a matter of what's the economic activity going on out there with all those B2C

companies. Twilio also taking down other cloud stocks like Cloudflare, Snowflake, Okta. Some really sharp declines here, Paul. Okta down 10, Snowflake down 13, Cloudflare down 19. This is on the back of not another surge in interest rates. Conc about weaker demand. Right. I guess these were the pandemic winners. Right. I mean, you've seen where the layoffs happening in the market right now. They're happening in the tech space. And, you know, so these tech stocks that are most of their customers are in the tech are technology companies. That's going to hurt the that's going to hurt them. Twilio and these others are a perfect example of what happens when the Fed takes on a mandate of crushing the stock market in addition to its other mandates.

So look at this stock. It traded at 37 times sales in early 2021. It trades at two times sales now. So, I mean, it's just been decimated. It's like, I mean, it's like getting interest rates to these stocks are like getting carrot sticks for Halloween from somebody. It's not going to be met kindly. So I think in this respect, as long as the Fed continues to be aggressively hiking rates, these areas of the market are going to be under pressure. Twilio is a very interesting company. Again, their technology is

essential to mobile. And eventually the sentiment will shift. But I don't know when that's going to happen. I just want to bring up Apple again, because it's lower, not significantly, but it's been lower every day this week, Paul. It had that big rally at the end of last week, which actually helped the broader market. But it's given all of that back and then some. And I wonder what you think that signals about the growth trade and the broader market, how much of a bellwether this is. You know, I don't necessarily think Apple is a bellwether for tech. I mean, it trades, you know, it's more like almost, you know, valued like a consumer staple stock in some in some respects. And when you talk about Buffett owning such a large share of it, he tends to be in these consumer staple stocks.

But I think to see a stock like Apple, which has held up relatively well, suddenly fall under pressure, hey, maybe that's a sign that, you know, everybody has to get hit hard during a sell-off like this. And so I think in that respect, you know, no one's going to be immune. And so Apple's, you know, taking its medicine right now, too. So what's your strategy right now? So I think when you look at the overall market here, you know, technology is still overvalued relative to the market, and it still trades at a higher premium than it normally does. That premium has come in a lot over the last couple of years, or that last so far this year, but it's still at a premium. So I think in this market, in the smaller to mid-cap space, you can find so many companies out there that trade under 10 times earnings, which offer pretty attractive opportunities for investors. They have less

exposure overseas and more exposure domestically. So I think if investors want to take a stock by stock attitude, you can certainly find some good opportunities there. Paul Hickey, thank you for joining me from Bespoken Investment Group. As we head out for the weekend and just taking a look at this final trades year, a number of 52 week lows right now. Salesforce is trading at lows that we haven't seen since April 2020. Live Nation, lowest since February 21. Edward Life Sciences, Broadridge Financial, Camden Property Trust, all at new 52-week lows today. If you look at the S&P 500, we're up 1.2 percent right now, so a healthy move, but we're still down more than 3 percent for the week overall. Materials leading the market today, along with financials higher. Communication services are having a nice rebound day.

It's been a hard hit sector overall. Alphabet is up, and that's part of the reason, up almost 4%. You've got Meta as well, a little bit higher, 2%. Our parent company, Comcast, News Corp, all helping that group. Industrials are there as well. But for the week in general, it's been a tough one.

The only three sectors to close higher for the week are industrials, materials and energy stocks. Energy stocks, again, the winner for the week, for the month and for the year. Just if you're keeping score, we're looking at the Dow as we're going to close out the week. You've got three losers, Salesforce, UNH, UnitedHealth and Apple. Caterpillar, the biggest contributor there on the upside. But overall, down week for stocks, double the loss for the Nasdaq as the S&P. That does it for me on Closing Bell.