Closing Bell - Stocks Rally, Merger Monday & No Time To Buy 12/12/22

Episode Date: December 12, 2022

Stocks surging on Wall Street and rebounding from the worst week since September. Investors bidding up stocks ahead of a key inflation reading and the latest Federal Reserve decision on interest rates. A trio of big mergers also giving the bulls momentum. Wells Fargo Investment Institute's Sameer Samana isn't a believer in today's rally. He lays out the case for staying bearish and why this is no time to buy. Lazard CEO of Financial Advisory Peter Orszag explains why he thinks the Fed should pause its interest rate hikes. Plus, he discusses whether the acquisitions of Horizon Therapeutics, Coupa Software and Weber are signalling a big year for dealmaking in 2023. RBC Capital Markets' Rishi Jaluria discusses whether the $8B buyout of Coupa could signal more acquisitions in the struggling software industry. And Bitfury CEO Brian Brooks discusses Sam Bankman-Fried's testimony before Congress tomorrow over FTX's collapse and how lawmakers should regulate the crypto industry to ensure another failure doesn't happen.

Just hitting session highs as we speak. Stocks are higher ahead of key inflation data tomorrow morning. Will that report clear the way for a year-end rally? 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 right now in the market. Getting a nice rally up 1% on the Dow, about 359 points or so.

The S&P 500 up almost a full percent. You've got 10 out of 11 sectors stronger right now. Consumer discretionary, only one in the red. That's because of Tesla, which is down more than 5%. Everybody else is higher. Energy is leading the pack of more than 2%. Crude oil rallying more than 3% today. The Nasdaq also bounces back up three quarters of a percent. Remember, we're coming off of a down week and a week where oil prices lost 11%. The market gets a boost following a trio of big deals as well. Amgen buying Horizon Therapeutics for more than $26 billion, biggest healthcare deal of the year. Private equity firm Toma Bravo acquiring Coupa Software for $8 billion.

And then BDT Capital Partners takes grill maker Weber Grill Private for nearly $4 billion. All of those stocks obviously moving higher today. Coming up on the show, Lazard CEO of Financial Advisory, Peter Orszag. Perfect day to have him on dealmaking. Find out whether the market is about to experience even more M&A. But first, let's get straight to the dashboard with Senior Markets Commentator Mike Santoli. On a week where we have the Fed, the ECB, and the Bank of England all expected to hike 50 basis points. They all are.

Of course, we get the CPI number before any of that. So the market realizes that, that really these decisive catalysts are ahead of it. But we've been kind of holding in this tight range. I think it's a pretty well-hedged market. You've actually seen the last 10 days or so some pretty high readings of people buying downside protection and put options. And the market has held up above where it sort of had to, 3,900-ish level at the lows recently. Today's action, even though we're pushing the highs on the day, basically is entirely contained within Friday's range. So, again, coiling pretty tightly here ahead of that CPI number.

And I keep pointing out you can go back to May and be at the same level. So up here, soft landing seems more likely. Down here seems less likely. We're somewhere in the middle at the moment. Now, take a look at this chart of the S&P 500 relative to an index of every stock that's not in the S&P 500. It's called the S&P Completion Index. That's the ETF that tracks it. In 2020 and 2021, this very high momentum bull market we were in, I kept pointing out how this was

really racing ahead and outperforming. Now, it's not just small cap stocks. It's large, no profit stocks that are not yet in the S&P 500. Things like Uber, things like Snowflake, as well as stocks like Blackstone and smaller cap stocks. So it seems that they were really the edge of the risk appetite there. And you've seen them give it all back and more. And then if you actually looked at the equal weighted S&P, it's more like up there. So really been this kind of ringing out of some of the more exciting, you might say, or speculative areas of the market.

We just don't know if that's done, Sarah. Well, one thing is the Fed and the inflation report tomorrow. I thought that the New York Fed data on household inflation expectations was very notable today and that we saw a big drop. For the one year, we saw a record drop. And for some of the other, that's got to be reassuring for the Fed. The market did respond to that, even though it seems like historically this is not something the market tends to move on. You did start to march higher in equity market when you got those numbers. Yeah, it sort of counteracts the hot PPI report we saw last week. Mike, thank you. We'll see you soon.

Mike Santoli, big week ahead for the U.S. As Mike mentioned, tomorrow we get November CPI, Consumer Price Index, the Fed decision out on Wednesday, and then November retail sales on Thursday. Joining us now is Samir Samana from Wells Fargo Investment Institute. Samir, it's good to have you. It looks like we're getting a tick up here in the market. You see this as positioning ahead of the inflation report tomorrow? Yeah, and, you know, it stands to reason. I mean, you've seen rates falling. You've seen credit spreads falling. You've seen the dollar falling. You've seen oil falling, which you pointed out. I mean, all of those are good for markets, at least from the standpoint of they

kind of take the pressure out of the system with respect to financial conditions easing. And then oil, you know, kind of being that double whammy of higher inflation and crimping consumer, that's been, you know, kind of a really nice thing going into the holiday season. So at least right now, things are looking, you know, pretty rosy for equity markets. I think the tricky part is, you know, probably the next 5% is driven by where CPI comes in. Unfortunately, after that, even if you get up to that 41, 4,200 level, things get a lot more difficult. Because, again, I think inflation comes down to 4% or so pretty easily. It's after that that things get tricky. Right. So that sort of sums up your view and your outlook.

We brought you on to talk about the 2023 outlook. So are you telling your clients to fade any rally we're getting in the next few weeks? Because you're pretty bearish for next year. You know, in the near term, you know, we think the first half will be pretty dicey. That being said, our target for next year is 4,300 to 4,500. So we do see some gains from current levels. Unfortunately, I think markets are looking past the valley that we see probably kind of in that first quarter area. So weaker in the first half and then what? The Fed stops and you turn bullish?

Exactly. Is that the expectation? So inflation does come down. Exactly. So inflation will come down from four, probably closer to two and a half if we're right, into the very end of next year. And what that will do is it will set the stage for the Fed to cut interest rates. We also think that a recession should be the base case for investors next year. It's probably a much needed, you know, kind of ingredient for inflation to come down to have a recession. And so once that recession happens, once inflation comes down, the Fed then starts to cut interest rates. And with

markets being as sensitive as they are to easing policy, we think they'll have a pretty good recovery in the very last part of 2023. You really think inflation is going to come down to 2% by next year and they're going to be in a position to cut rates? We do. And a lot of that has to do with the base effect. How do you have the visibility there? That's not consensus. I feel like everyone expects it to come down next year, but not all the way down to 2%. Yeah. And a lot of it has to do with, again, we think they're going to be much tighter in the first part of the year, but not all the way down to 2%. Yeah, and a lot of it has to do with, again, we think they're going to be much tighter in the first part of the year, right? So the Fed's continuing to tell you that they are here to fight inflation,

and a lot of market participants have kind of dialed down the rate expectations. Again, we don't think that the Fed will be as complacent as markets think. So, you know, it could be that right now the biggest surprise in the first half is the Fed has to go a little bit further to fight inflation in terms of interest rate hikes that's why i think this week the big everybody's expecting a 50 basis point hike i think the mystery is around actually the dot plot which can be often confusing but it gives us a sense of where they expect that terminal rate or that peak rate to end up from the fed so you're saying you see that higher than what five percent how high well that's just it is we don't know but right now today given how from the Fed. So you're saying you see that higher than what, 5 percent? How high?

Well, that's just it. We don't know. But right now, today, given how complacent the market is, I think a bet that could be made is that it ends up being higher than the market expects, right? If markets are kind of driven off expectations versus reality, it's not so much that we're betting that the Fed will go to five and a quarter or five and a half. It's that they might have to, because the markets are easing financial conditions to an extent where inflation could be a problem for no other reason than markets are actually making it a problem, right? If all these speculative areas that Mike talked about start to do well again, right? More recently, you've seen crypto start to do better. You've seen smaller caps start to do better. If all those areas start to kind of come roaring back, it could lead to inflation from a market standpoint as opposed to initially, which was from a commodity standpoint. So talk us through the strategy. You expect the S&P to end higher

than where we are now next year, but a lot of turbulence sounds like on the way, especially in the first half. What sort of sectors do you think are not pricing in the recession that you expect? And which sectors would you want to be in on the other side? We think consumer discretionary real estate are probably two of the most vulnerable sectors. We think, again, the path to lower inflation leads through the consumer starting to feel worse about their situation. Again, if inflation is too much money chasing too few goods, you have to get consumers to pull back in their spending. And about the only way to do that is to drive up the unemployment rate and to tighten conditions to an extent where they really think twice about borrowing to pay for their spending.

And so we don't like consumer discretionary. Real estate is very heavily tilted towards still now residential real estate, towards back to the office. Again, not saying that there isn't progress being made, but it's still pretty slow, and they're very rate sensitive, so we would also be underweight on real estate. The areas that we like are energy, technology, and health care. We think there's a lot more durable demand for those types of goods and services, and we think they'll be able to power their way through the recession because of their earnings growth.

Samir, thank you for joining me with the full outlook and the strategy. Appreciate it. From Wells Fargo, Samir Samana. Sam Bankman-Fried set to testify remotely tomorrow during that House Financial Services Committee hearing on the failure of FTX. Up next, Bitfury CEO Brian Brooks on the regulations lawmakers should be putting in place here to avoid another crypto collapse and what he will be listening for tomorrow.

We are at the highs of the day, up 403 on the Dow. Consumer discretionary just went positive, which means every sector is now higher in the S&P, which is also rallying 1%. You're watching Closing Bell on CNBC. FTX CEO John Ray releasing his testimony ahead of tomorrow's House Financial Services Committee hearing on the crypto exchanges collapse. Our Ilan Moy with the details. And Ilan, this is the guy that oversaw the Enron bankruptcy as well. Yeah, he has seen many types of financial failures, but he really puts this one in a category of its own. In his statement, Ray promises to maximize value for FTX customers

and creditors to help mitigate the harm suffered by so many. He blamed the collapse of FTX on the absolute control wielded by a very small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls necessary. Just a few of the examples that he details. Senior management had access to systems that stored customer assets, private keys without effective security controls or encryption, the ability of Alameda to borrow funds from FTX without any effective limits, commingling of assets, and the lack of documentation for nearly 500 transactions

within FTX. Ray also defended the inclusion of FTX US in the company's bankruptcy filing. He said that FTX US was not operated independently and that Chapter 11 was necessary to prevent a run on the bank and allow his team to identify and preserve assets. Now, Ray would not comment on FTX founder Sam Bankman-Fried's recent public statements. He merely said that he's conducting a professional investigation in a professional manner, but he did keep open the potential for seeking information from Bankman-Fried as appropriate. And Sarah, of course, will hear both sides of this story when they testify before Congress tomorrow. There's a lot there. Thank you very much, Elon Moy. Joining us now to discuss is Brian Brooks, CEO of Bitfury Group. Previously, Brian served as the CEO of Binance U.S., was the

acting comptroller of the currency. I have so many questions for you. You're a lawyer. You were the chief legal officer, right, of Coinbase. What do you make of this testimony from the current CEO of FTX? Is there fraud here? I mean, Sarah, as you listen to Elon recount that bill in particular, it sounds like a fraud indictment to me. I mean, you know, there's been an attempt on Sam's part, I think, to characterize himself as an inexperienced and unsophisticated CEO. But every single thing on that list sounds pretty sophisticated to me, and I think it sounds like a scheme. So I think the testimony this week is going to be very, very telling. So who's looking into this?

You think it's the Department of Justice? Well, you're going to have a variety of agencies looking at this. This is one of the strengths and weaknesses of the American system, is so many regulators have an interest in all of this. But definitely the Department of Justice will be looking at mail fraud and wire fraud as a key part of what's going on here. But most importantly, you've got our elected representatives on the Senate Banking Committee and the House Financial Services Committee asking questions this week. These are the people who will decide what the policy response is and whether we overreact or appropriately react. I mean, he's been on this unusual sort of media blitz,

going back and forth on Twitter, attending conferences virtually and interviews. It's unusual for something like this with a company that has imploded and lost a lot of people money. So are you saying you don't buy this whole, he's innocent, he didn't knowingly commit fraud or do anything to harm people. I mean, Sarah, all I know is on The Sopranos, Junior Soprano lost his memory right before his trial. It's funny how that works. And you go on a charm offensive to try and show people just how little you remember and just how tough it was to operate such a big business. But this was a person

who was a high flyer and was leading the industry for a significant amount of time before he forgot everything. I'm not buying it. I think it's the Sopranos all over again. You have to be impacted. Is Bitfury impacted at all? I know you're on the board of Voyager, which was supposed to be bailed out by FTX. Yeah, well, I mean, look, FTX had fingers in a lot of pies, including Voyager and multiple others, including BlockFi, lots of other lenders and lots of mining platforms and the like.

Bitfury doesn't have a direct investment one way or the other with these guys, which is a good thing in circumstances like this. But one of the things Sam tried to do was to touch as many possible crypto businesses as he could so as to make himself the indispensable person. That's why the bankruptcy is so complicated, is because at the end of the day, it affects lots of people. Happily, Bitfury is not affected, but lots of others are. What about Voyager? What happens to that company? Well, you know, this is all going on in a public bankruptcy proceeding in New York,

and there will be new bidders that will come in. Voyager has lots of customers and lots of valuable assets, and so somebody will come in and pay a price to acquire that. But FTX submitted a strong bid in the first instance, which is why it's disappointing for the customers that this all has to go back to the beginning. Is it going to be harder to go after him because there was no regulation in place around the crypto industry and it's hard to define the assets themselves? Yeah, I don't think so, Sarah. I think this is one of the big misconceptions that both policymakers and the public have about the way crypto works. The fact is, if you lie to people, that's fraud. And if you take their money and they rely on your lies, that's criminal fraud. So you don't have to have a license or be regulated to be criminally responsible for

doing what happened in this case. The point of regulation really isn't to go and clean up disasters like this. The point of regulation is to prevent the disasters in advance. And that's one of the reasons why I've been calling for three years at this point to bring crypto inside of the regulatory perimeter. You know, if you're going to lend out money, that should happen inside of a bank. If you're going to trade securities, that should happen inside of a broker dealer. And I think the conundrum that the Senate Banking Committee will confront this week is, do we really want to

keep crypto outside of regulation because somehow we think they don't deserve regulation? Or do we think the point of regulation is to protect people from this kind of a scam? And if these things had happened with bank supervisors on site, you know, Sam would never have been able to get away with this. Well, clearly it's the latter. But what is I feel like the solution, like like any tech regulation in Washington, is really hard to figure out even after a big blow up like this. Yeah, well, and part of the issue is you're going to have a disagreement among people as to whether imposing regulation somehow validates crypto. And this is why I say the other thing that's really critical to understand here, and that is crypto and crypto exchanges are not the same thing. You know,

crypto is all about achieving a decentralized financial system where individual bad actors don't have this kind of influence. Exchanges, on the other hand, are no different from investment banks. You know, FTX is not that different from Goldman Sachs. They're buying and selling an asset. And at Goldman Sachs, they do that under supervision. At FTX, they didn't. So to me, the solution is not that complicated. We just need to see it staring us in the face. Brian Brooks, really great to have you here today. Thank you for joining me. I'm sure we'll be talking to you soon, a bit, Gary. Let's check on the markets right now. Going strong, up 400 points on the Dow, just about the highs of the day.

Every sector, again, higher in the S&P. We're up 1%. Again, going into a big CPI report, an inflation number for November out tomorrow morning. The Nasdaq bounces back up almost a percent in itself. You know, Tesla's a laggard, but consumer discretionary has gone positive now in the session. Small caps are also having a good day, up more than 1%. Look at Tesla, though. Continues to fall, down 6%.

Wall Street is buzzing about whether Elon Musk is now hurting the EV maker's brand by what he's doing on Twitter. As we head out, check out today's top search tickers on CNBC.com. Ten-year Treasury tops the list. Sell-off in bonds today. Yields are a little bit higher. There's Tesla on there. Not surprising.

It's a sell-off for a lot of the EV makers. Rivium Automotive pulling its deal with Mercedes-Benz, getting some bad news there. It's down 6%. And then crude oil bounces back up more than 3%. Remember, down more than 10% last week. Microsoft, with a deal with the London Stock Exchange, rounds out the top five, up 2.25%. We'll be right back. Just want to show everyone that we are at session highs.

We continue to accelerate here in this final hour of trading. S&P now up 1.2%. The Dow rallying strongly, up about 460 points. NASDAQ up a full percent as we head into the close and into a big CPI report tomorrow. What's driving it higher? Well, energy is the leading sector by close and into a big CPI report tomorrow. What's driving it higher? Well, energy is the leading sector by far today on the big bounce in crude oil, but technology is having a really strong day. Information technology right behind it on some of the chip names that are rallying, some of the software names after we got a

software buyout from a private equity firm. Utilities, industrials are all strong. Remember, we're coming off of a week where the S&P lost a little more than 3%, biggest pullback since September. But positioning here potentially into inflation and the Fed resulting here in a rally. What is Wall Street buzzing about? Elon Musk, of course. Barron's out with a new piece today called Tesla's brand is suffering as Elon Musk tries to save civilization.

The article pointing to a survey from YouGov saying negative opinions on the brand are outweighing positive ones. This comes in the wake of Musk getting booed last night after comedian Dave Chappelle brought him out on stage at a show in San Francisco. Musk also drawing ire after tweeting on Sunday targeting the outgoing chief U.S. medical advisor Anthony Fau, and mocking the use of pronouns. Shares of Tesla are down more than 6% today. We're near the lows of the session for that stock, falling 25% now since he took over Twitter. And the effect on Tesla's brand is getting noticed by Wall Street.

New Street Research analyst Pierre Faragu writing on Friday, quote, impact on brand perception in the general public is both visible and material. Although he notes it isn't likely to affect car buying behavior in the near term. Let's bring in Mike Santoli. Hard to ignore the fact that Tesla is being dragged down by Twitter, which is no longer a public stock. There's no doubt. Does that make sense? Since the Twitter deal closed and Musk was the owner of it and started to very publicly, you know, kind of tweet and politicize things. There has been an acceleration lower in Tesla shares. It has underperformed

pretty profoundly since that point. There is a lot else going on, though. Yes, the brand perception, it does seem like it certainly hasn't helped in terms of potential Tesla buyers. The other piece of it, though, is, you know, this was one of the most expensive, overloved mega cap stocks one year ago. And that unwind has hit a lot of others. On a one-year basis, it's basically performed the way Amazon has, the way Nvidia has. So, you know, you can sort of say that's also happening, you know, below the surface. It's this general retreat from these stocks. By the way, Tesla's still up something like 600% on a three-year basis,

meaning there was just a lot of air to come out of it. And it continues to come out accelerated because of a lot of these issues. If I were a Tesla shareholder, I would be very annoyed. Exactly. It seems like he's, first of all, only focusing on Twitter at the moment. Distraction. Picking a lot of fights. What about financial liability?

Could he pull a SolarCity? I've been saying that the stock acts like it's a who- what could happen with this if Twitter really ends up in financial distress. Now, I think the more immediate issue is the reports that maybe it'll end up being a margin loan on his Twitter Tesla shares that replaces some of the debt on Twitter's books right now, which would maybe create a little more of an overhang. He's sold a lot of Tesla stock already to fund the initial purchase. But, yeah, I do think the general sense that, you know, if Twitter's in trouble, if you consider it all a cohesive, you know, Musk ecosystem, then you have to feel as if at some point maybe Tesla ends up, you know, being the backstop. I think that's a more distant issue. It's more immediately, what does it mean for the brand and management? But it's not like Tesla's business is falling apart at all.

No, it's not falling apart. And to be fair, the EV makers in general are struggling a bit here. People are worried about, first of all, gasoline prices are way down, worried about consumer ability to buy expensive cars. The China issue is obviously has nothing to do with Twitter.

Right, and that's a weight as well. Mike, thank you. We'll see you in the Market Zone. Mike Santoli, when we come back, Lazard CEO, financial advisory, Peter Orszag on whether today's huge day of dealmaking is a sign that there's more M&A on the horizon. We'll be right back. Today's been an old-fashioned merger Monday. Amgen buying Horizon Therapeutics for nearly $28 billion, biggest healthcare deal of the year. Toma Bravo buying Coupa Software for $8 billion,

and BDT Capital taking Weber Grill Private in a deal valued close to $4 billion. With us to break down the landscape is CEO of Financial Advisory at Lazard, Peter Orszag. He's the former head of Lazard North America Mergers and Acquisitions. So it's not debt out there, Peter. What is the signal to you? Well, look, what I think we're seeing is there are some big forces, sort of underlying tectonic plates that are pushing for more M&A. So the energy transition returns to scale from ongoing technological innovation, a revolution in biotech, the decoupling of or partial decoupling of the global economy with China and the rise of private capital,

which has really been a dominant force over the past five or 10 years. So you have those kind of drivers. And then on the countervailing forces, financing conditions, antitrust and generalized uncertainty. And so it's the interplay between, again, the underlying tectonic plate forces that are pushing forward and some of the constraints that are holding things back. And, you know, it will to and fro as the positive and negative forces interact with one another. Well, on the financing front, which is why a lot of the capital markets activity slowed down so much this year. What are you telling clients? Is that going to turn next year? There's been a little bit of a thawing or the early signs of thawing, I mean, especially in investment grade debt and credit. But we're not going to see a significant shift until there's a shift in monetary policy, which you and I have discussed before.

That will be the big moment. And, you know, I think the question for many non-investment grade companies will be this interplay between that phenomenon, the sort of central bank pivot, and the maturity wall of a lot of debt maturing in 2025, which is where a lot of credit market analysts are looking just just on a note on the cooper deal because it was a pandemic winner and and we're wondering about so many of these these valuations of these companies that have just been brutally taken down this year kuba was down 61 so far this year do you expect more private equity buying up software or other COVID winning type stocks? Is that an area of focus for you?

Well, I'm obviously not going to comment on a specific transaction, but I think one of the things that you're seeing also is that the longer that the new equity pricing is in play for, the more likely it is that you're going to get transactions for companies that are realizing, you know, this is partially the new normal. And that makes the transaction more possible. In addition to the financing constraints that you mentioned before, one of the other things that had been holding up M&A, at least in certain situations, is this disconnect where a company thought it was worth $100, then it traded down to $50, and the board of the selling company wants to hang on in the hope that it will get back to $100.

On the financing side, you said that... That changes over time. In other words, that changes... The more that you're in the new environment, the more likely it is that the seller will be amenable to a transaction. Got it. So you think the Fed should what, pause here? I think the Fed should pause here. Only about a third of what the Fed... What are you seeing that they are not? Well, it's not what I'm seeing that they're not. It's a judgment about the relative pros and cons and the risks. Something like two thirds of the impact of what they've already put into the pipeline has not yet hit the economy. In other words, we've only seen about a third of what they've done to date. So I think it would make sense to pause, wait and see what the impact of

what they've already put into play. That pipeline effect is going to be affecting the economy in a big way in 2023. See what the impact of that is, and also whether the disinflationary process continues. Obviously, we have an important report out tomorrow. There is a little bit of a disconnect that's happening between the price dynamics, where we had an encouraging CPI report last month. We'll have to see what tomorrow looks like. And the wage information, where wage growth remains unabated. But for right now, there's a lot more monetary policy tightening that is in play that they've already done that will be a hitting the economy. And I'd rather wait and see what that does, especially because

there is plenty of uncertainty coming in 2023 from the debt limit on. And it would be better to pause and wait and see than to go up and then be forced to come down, which I think is a risk for both the Fed and the ECB in 2023. That's not good for their credibility either. But they've been saying the opposite. The Fed is saying we'd rather overdo it on the tightening side on the economy than underdo it on inflation. And they haven't seen enough evidence that inflation is down. So with that in mind, what are your expectations for the economy next year? Are you more bearish than the consensus, which sounds like it's somewhere between a soft landing and a shallow recession? We just don't know. But one of the problems is

the only thing that we're going to have to help us out if we do get in trouble in 2023 is monetary policy, because fiscal policy is going to be a mess. And that's both because there won't be the political consensus to provide relief to the economy if we need it, and because it looks like the debt ceiling will not be addressed in the lame duck session in 2022. And so it'll be hanging out there in 2023. So I don't know. No one knows. So far, the consumer, especially higher income consumers, seem to be holding up remarkably well, given the effect of the higher interest rates and equity prices seem to be holding up so far. But my point is, if we get in trouble in 2023, we've really got no safety valve other than the Fed reversing itself

because the other avenues or the other vectors are kind of blocked. So you think they might be forced to cut rates, is what you're saying? Well, and that's actually what the market's also expecting. And I'd rather kind of, again, I'm repeating myself, but wait and see and then adjust further. If you see inflation picking up or if you see inflationary expectations taking off. That's the other thing that, you know, is really important to remember, which is inflationary expectations, unlike in the 1970s, remain remarkably well anchored so far. And we don't want to take a risk with that. I understand that. But still, it gives you room to adopt a sort of more wait and see approach than the Fed is pursuing right now. Peter, thank you so much for your time.

It's great to have you on such a big deal day as well. Peter Orszag of Lazard. By the way, we continue to climb, making new highs here on the session. Look at the Dow. It's up 510 points. S&P up 1.3 percent. When we started the hour, the S&P was up less than a percent. The NASDAQ now rallying also quite strongly, up a full percent. Microsoft, Apple, Nvidia, Amazon

leading the way. Tesla is still a big loser on the session. It's down six and a quarter percent. The transports are really taking off today. Find out what's behind that big outperformance, one single stock in particular, when we come back. Check out today's stealth mover. It is Boeing. The stock is a high flyer today. Shares are lifting the Dow on a report that Air India is nearing a deal for up to 15737 MAX jets. That deal would really help get Boeing off the ground in India's fast-growing aviation industry, which is still currently dominated by rival Airbus. Boeing up 3.5%. The only Dow stock that is down right now is Amgen, as we've seen this big rally with the Dow up 471 points. Amgen, of course, announcing that more than $25 billion deal. Up next on the

show, a top analyst on what Toma Bravo's acquisition of Hupa means for the rest of the software industry. Who could be next? That story plus transports driving higher and investors taking a big bite out of a pair of restaurant stocks. When we take you inside the Market Zone next. We are now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here as always to break down these crucial moments of the trading day. Plus, RBC Capital Markets Rishi Jaloria on Coupa Software and Frank Holland joins us on Oracle. First off, let's talk about this rally we've seen in the final hour of trade. We're right off the session highs right now. The Dow's up 470 points, S&P 500 up one and a quarter percent, and the Nasdaq, Mike, also zooming. So are small caps. It's getting broader and it's getting stronger throughout the hour.

Why? It's got the look, Sarah, of a rally that people deciding let's not get too negative heading into the CPI number tomorrow. I'm not sure the market's necessarily sniffing out anything specific, but the S&P was down nine of the last 11 trading days coming into today. We're down, you know, coming into today a couple percent off of what we finished November. So it seems as if getting into neutral means perhaps buying or at least covering some shorts. At the same time, volatility index is up a couple of points. So we have the makings of people seeing the ability for the market to have a pretty sharp move one way or the other. There are also these reports of JP Morgan

coming out saying if we get a super light CPI number tomorrow, like well under 7%, there could be a real ripping rally in the S&P. But they say there's only a 5% chance of that. So not sure who's putting big money behind a call like that. Maybe people are just getting overly negative after PPI last week and some of maybe the mixed signals. I wanted to hit the transports in particular because look at those stocks. They're leading the rally today. The Dow Transport's up more than 3% right now, rebounding from the worst week for this group since September. It's also one of the best performers so far this quarter after soaring 18%. Some of the big winners today include J.B. Hunt, American Airlines, Norfolk Southern and UPS. We always watch this, Mike, because, you know, if the recession probabilities are piling up, it wouldn't necessarily be so strong.

It's very cyclically sensitive for the year. Transport's down about 14 percent? What does it tell you? It seems a similar move as the broader market here, where it's just, you know, let's make sure that we don't foreclose on the possibility of getting a little bit of a refresh on growth. The China reopening story greeted everybody this morning. You have diesel fuel is down cheaper than it was before the Ukraine war started. So there's a few things out there that say if you really were selling the cyclicals and the transports in particular because you thought the economy was quickly skidding, maybe that doesn't seem like a solid bet just now. Again,

I don't really see it as being very news driven, but the likes of FedEx, UPS up a couple of percent each tells you it's much more about folks making sure that they're not leaning against this economy too hard. No, and oil up 3.4 percent, to your point. Very strong. Energy stocks up nicely. They're at the top of the market right now. Coupa Software soaring today on news. Private equity firm Toma Bravo will buy out the company in an $8 billion deal. The purchase at $81 a share puts Coupa stock at roughly seventy seven percent premium to its stock price three weeks ago before reports of the deal surfaced for what it means for the rest of software stocks let's bring in Rishi Jaluri a software analyst and managing director at RBC Capital Markets how many Kupa software deals like

this are there Rishi in your space hey and that thanks so much for having me. Look I think there's no shortage of you know if I think about with Coupa you have an asset that has a strategic value that has good technology that hit a lot of speed bumps along the way and had some execution issues and maybe even lost a little bit of investor confidence over time. And so you know we refer to these as kind of stalled growth companies right where we're just the acid is not the last but they're still. Technology and strategic value

we think that there's a number of them right we can look at- you know a new relic we could look at a box- you know there there you know maybe DocuSign if the stock was a little bit cheaper. There's a lot of these businesses out that we think

would be great fits in private equity for all those reasons. What it what did you take away from some of the details on this deal? The price, the fact that reports indicate there were multiple interested parties. Looks like Vista was one of them and Comabravo came in above it. And where this fits in in the PE portfolios? Yeah, absolutely. I think a number of things were surprising.

I think number one was maybe the weakness of the business. You know, and they talk about some of the forward-looking indicators. It's really tough, and I think it speaks to, you know, some of the macro pressures plus sales execution issues that Coupa was facing. But I think the biggest surprise was the amount of parties that were interested in Coupa. I mean, it was a double-digit number of parties, both financial and strategic, that were looking at Coupa. I mean, it was a double digit number of parties, both financial and strategic, that were looking at Coupa. And, you know, most likely it was a bidding war between Vista and Toma and Toma ended up winning. You know, in terms of where it fits in the portfolio, I think the one that everyone's kind of leaning on right now is Toma Bravo closed Anaplan earlier. And so there's a fit of having kind of a back office systems where it's spend management and planning all

together in one. And, you know, it's obviously easier said than done, but it could be really interesting. Mike Santoli, what do you make of the deal price and, you know, the argument that there are other software stocks in here that just look too cheap? There's no doubt that private equity in this particular area, really dedicated to software and other kinds of technology platform companies, are going to be active. The lucky ones, so to speak, like Coupa, can get taken out at a decent valuation relative to sales compared to the way the rest of the group is trading. Although, let's keep in mind the deal price is like one quarter of the stock's peak from back a year and a half or so ago. So that's the equation that you need to solve for, which is what's a management company willing to take on today's numbers

relative to where the stock has traded in the past. So there's going to be more deals. If you look at the whole cloud space in general, it is trading at valuations on sales not too far, in fact, below where Coupa is being taken out of. The thing is, there's just not enough, I don't think, M&A capacity, private equity capacity to really mop up, you know, dozens of these necessarily in short order, but certainly more than a few. You mentioned, Rishi, a few names. DocuSign is at the top of the list, at least in the market right now.

It's up 9% today. Of course, it's been hammered. Who would you bet on. Yeah you know in terms of if I think about. Companies I could get taken out and you know I would maybe expand that to not just private equity but

strategic because I think really strategic so are all in the back acquisitions here. You know look I think about companies like. Not just DocuSign I think about. Zoom for example would be a great fit in a in you know a larger portfolio of strategic vendorsSign, I think about Zoom, for example, would be a great fit in a larger

portfolio of strategic vendors. Dropbox, I think, would be another one that I would look at and say this would make a lot of sense. I think about companies like New Relic, where there is an opportunity to layer on different pieces of technology at the observability puzzle, and that would be a great kind of private equity asset to look at and do a lot of the turnaround behind the scenes. So as I really just kind of think out, I mean at and do a lot of the turnaround behind the scenes. So as I really just kind of think out, I mean, there's no shortage of candidates out there. And these are all stocks trading significantly below where Coupa is getting taken out for. And, you know, just seems to make a lot of sense within either financial or strategic portfolio.

Rishi, thank you. Appreciate you joining us and naming some names for us as well. Managing Director, RBC Capital Markets. Goldman Sachs serving up two calls on the restaurant stocks today. So is the downgrade of Cheesecake Factory and Chili's parent Brinker International to sell from neutral? Analysts there are seeing underperforming traffic trends at both of these chains and are warning elevated prices at the Cheesecake Factory could squeeze the mid- to higher-income consumer that they serve. Then on Brinker, Goldman does see long-term profitable growth, especially given turnaround efforts at Chili's, but warns of sales and margin pressure at least through next year.

It's not all bad news in the restaurant space, though, today. Goldman maintains its buy ratings on Chipotle, McDonald's, Yum, and Sweetgreen. Mike, I wonder how much of it has to do with the income bracket that these companies are catering to and where the pain is being felt right now in the economy. Yeah, it certainly has something to do with it. We're getting into a year where you're not going to have any kind of broad sort of reopening effect, pent-up demand for people going out, tougher comparisons,

and probably limits to how much they can further raise menu prices at a time when it's still a pretty sticky labor market for them to try and hire. And so I think all those things fitting in. Now, food costs are definitely eased back. So I don't think it's dire necessarily if the economy as a whole holds up. Probably isn't as if these stocks are in real trouble. But just those preferences to, you know, Chipotle, McDonald's, those are much more the defensive steady areas. Even though Chipotle is an expensive stock, it's shown that it can grow in a lot of environments. Yeah. Yum Brands, too, would put in that basket. Look at Oracle. It's a big name set to report earnings after the bell. Our Frank Holland here with the key number to watch for post-close.

Frank. Hey there, Sarah. Oracle shares are performing, moving 30% higher in Q4. The big question for this report will be cloud revenue. Last quarter, the company saw substantial growth breaking from the previous four quarters. You see the trend right there. Oracle provides subscription services and infrastructure for cloud, making it an option, if not a true competitor to the hyperscalers. These numbers will provide a lot of insight into Oracle's growth. We also want to look at deferred revenue numbers. This is yet another proxy for demand. We've seen

softness from many other cloud players, most notably Salesforce, recently when it comes to demand. If they see a better showing in these numbers than the estimates, it could lead to a big pop for this stock, according to analysts. Got it. Frank Holland. Frank, thank you very much. Up 1.5% into earnings. Mike, just want to hit the broader market because we are seeing this big rally. We've talked about it ahead of a bigger inflation report for the month of November due tomorrow. We're out up about 1.36%, so just about the highs of the day. Let's just game this out. So within the inflation report, I'm going to be watching food because that one's been stubbornly high, especially at-home food, which is a grocery price sort of indicator. What else? Rent prices have been a big component for why inflation has

remained high. We hear anecdotally they're starting to roll over, but who knows? Yeah, and it just isn't going to show up in a timely way in the government numbers. I think rent and just in general, the services side of the economy is where people are more concerned about the stickiness of inflation. BlackRock out today saying, look, it just doesn't look like it's easing up. They're pretty bearish on stocks because of that. But I do think that's going to be where the focus is. And then, of course, is the number going to be any different than consensus to the point where it disturbs the current outlook for what the Fed's going to do and say the next day? Is it going to move the ultimate consensus upside target rate for the Fed funds rate just with this one number?

Probably not, but I think the market's going to have to necessarily trade that prospect after we do get that result. And, of course, as we said earlier, folks are at least open to the possibility that a very cool CPI number means that there could be some pent up rally potential just because we are getting into that year end phase and people feeling underinvested. Yeah, but a very hot CPI number then could go the opposite, especially with a setup like this. Dollars stronger, Treasury selling off, a little bit of curve flattening here, but higher yields. We've got just about two minutes to go in the trading day. What are you seeing in the internals as we go into the close at the highs? Yeah, they strengthened throughout the day, as you might expect, Sarah. So there you see, better than 2 to 1 advancing to declining. Again, not a super high volume, heavily traded day. Did want to take

a look at the pharmaceutical stocks relative to biotech. We're talking about M&A, talking about the prospects for deals. That's a two-year chart. So it shows you big pharma is a defensive group. They obviously have been very stable. Biotech has suffered, and its opportunistic deals no doubt are likely to happen, even if it's not going to drag the entire biotech index to close that big gap. Volatility index mentioned earlier has really perked up in the mid-20s. Clearly, people see the ability for a pretty sharp reaction to whatever happens tomorrow. We're well up off the lows there, too. So we bottomed out around 19 not too long ago, about a week ago. Here we are at 25, Sarah. All right, Mike, as we head into the close, up 522 points on the Dow. One Dow stock in the red today,

and that is Amgen, on a huge mega deal that it is buying, Horizon. Everybody else is higher. Home Depot, Microsoft, and Boeing add the most points to the Dow's rally right now. S&P up 1.4%. Again, we're coming off of a week where it lost more than 3%, worst week since September. But quite a sharp rally here into the close ahead of that CPI report. The Nasdaq comp, it's up 1.25% as well. What's leading? Microsoft, Apple, NVIDIA, Amazon, Comcast with a positive rating for our parent company today on the sell side

research firm. Tesla is a big, notable loser on the day with all the Elon Musk Twitter drama. Tesla is going to close down more than 6% with the S&P 500 closing up almost one and a half percent. That's it for me on Closing Bell. See you tomorrow into overtime with Scott Wapner.