Closing Bell - Wild Market Swing, Inflation Cooling & Former Madoff Attorney On Sam Bankman-Fried 12/13/22

Episode Date: December 13, 2022

The Dow giving up a 700-point gain at the open despite new signs inflation is cooling. Investors now awaiting tomorrow's Federal Reserve's decision on interest rates. Neuberger Berman's Holly Newman Kroft thinks the market is getting ahead of itself on inflation and says investors should be selling into any rallies right now. Bank of America Head of U.S. Rate Strategy Mark Cabana explains why the bond market is sending signals that the economy may be heading for a soft landing and how that could impact the Fed's rate hike strategy. Jefferies' Michael Yee on whether investors should be buying shares of Moderna following optimistic data for its experimental skin cancer vaccine. And Mintz & Gold Partner Ira Lee Sorkin, who represented Bernie Madoff in his fraud trial, reacts to the government's charges against FTX Founder Sam Bankman-Fried and explains why he thinks there will be more indictments in this case.

Stocks are well off the highs. We lost a 700-point rally after that initial pop on cooler inflation data this morning. What does it all mean for tomorrow's big Fed decision? 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. S&P is up six-tenths of a percent. Again, well off the highs. The Nasdaq is still positive, up a percent. So you're seeing the most strength in technology.

If you break it down by sector, energy is in the lead today. Communication services right behind. Real estate also doing well. What's negative? Consumer staples are at the bottom of the pack and the only sector lower at the moment. The Dow is barely up. Again, at the high of the day, it was up 707 points. We're seeing big moves today in the Treasury market as well. Just wanted to point out yields falling sharply earlier in the session. They have come off of those lows, but you're still seeing a big rally in bonds and a big sell off in the U.S. dollar, which is down 1 percent, all in reaction to CPI or that falling rate of inflation. Coming up on the show much more today on the wild moves when we are joined by Neuberger Berman managing director Holly Newman Croft, who's been bearish on this market. Plus, we'll discuss the charges against FTX founder Sam Bankman-Fried when we are joined by

attorney Ira Lee Sorkin, who represented Bernie Madoff during his fraud trial. See if he's getting any flashbacks. We'll break down today's big swings right now, what they mean for the market. Mike Santoli on the dashboard. What happened to the rally? Well, Sarah, we obviously were talking for a while about how the market was getting very tightly coiled ahead of this number. And, of course, tomorrow's Fed meeting. We were really spring-loaded. In fact, remember yesterday afternoon, markets started to drift higher. We had a 1% in the last hour or so of trading yesterday in anticipation that a cooler-than-expected inflation number could cause a strong rally. Now, we got almost a 3% pop in the CPI. It went right exactly to that level right there, 4,100 intraday, which

was also the high from November 30th. So it was really this sort of tested level, repeatedly tested downtrend line. So far, backed off of that, we have the Fed meeting tomorrow. Clearly, we wanted multiple months of cooler inflation. We're getting it, but it's still not necessarily decisive in terms of what the economy does right now. I feel like we're checking off the box for disinflation. Now it's about what does growth mean and how does it interact with what the Fed is going to tell us tomorrow. Still holding up above the levels that it sort of had to for this month, around 3,900. Take a look here at the U.S. dollar index. You mentioned it, Sarah. Look at where it takes us back to, the decline today.

In fact, earlier, we were below 104 for a bit, basically back to the springtime, right? So where you have the S&P back to springtime levels around May. You've gotten the dollar index back there as well. That was also when the 10-year Treasury yield first really decisively got above 3%. So everything's back in this zone. We've had this multi-month inflation slash stagflation panic. We're coming out of that. What's left?

Well, obviously, what the lagged effects of the tightening is on the economy and what it all means for earnings. Well, yeah, and so I feel like the market is still sort of tentative about all these trends, whether the dollar's actually in a downtrend. We're also going to get ECB and BOE this week, whether stocks are actually in an uptrend. On the Fed, we were talking earlier, what strikes me is now the market takes out rate hikes because of the inflation number. That's good news. But ultimately, it sets up a little bit of a showdown between now what the Fed is going to expect on the dot plot and the rate forecast versus where the market is. And it's never good when the market and the Fed are not on the same page. Yes. So there definitely is room for a gap there. Now, the dot plot,

the committee's outlook was supposedly gets submitted, you know, last Friday. So it's kind of baked in there already. I wonder if the market's going to take it with a grain of salt. Now, most likely, it's going to show the terminal rate above 5 percent for the Fed funds rate. That's a little bit higher than what the market is now pricing in. But it's so close. After tomorrow's 50 basis point hike, we're going to be pretty much there. So I'm not sure that's still the decisive swing factor for this. And the Fed always follows the market anyway, or usually. Mike, thank you. We'll see you later. Mike Santoli. So inflation is coming down on the headline numbers. That's good news. If you dive deeper, you can see where the relief is actually happening. Energy, you've seen it at the gas pump.

Gasoline prices falling 2% from October to November. Transportation costs also declined in November. So did used cars and trucks. And airfares finally came down a bit. One other source of relief, medical costs. They're super important. They make up about 8% of the total number. They're declining as well. It's definitely a good sign that we're seeing actual declines here as well and not just gains that are moderating, which was the story. But on the flip side, there are spots where inflation remains stubbornly high.

Food, especially at the grocery store. That's still rising about half a percent. Less than last month. But if you go through and look at some of the categories in the food basket, bread, cookies, muffins, cereal, all of these products saw big jumps last month. Shelter prices, also problematic. They make up a third of the overall inflation rate, and they're still on the rise too. Rents, big culprit here. But they do tend to lag, And there are early signs that rent costs are starting to roll over.

We'll also watch some of the other services prices like education and recreation, which showed strength this month as well, but overall progress. And if you strip out food and energy from the overall number, that core rate, which the Fed really cares about, up 0.2% in November, that was the least since August, 2021.

For more on the markets and the reaction here, let's bring in Neuberger Berman's Holly Newman-Croft. Holly was with us last month as well when inflation surprised on the cooler side. It takes a lot to impress you, though. What about today's numbers? Yeah, I mean, unlike last month when I was here, the market was rallying big. Today, it's flat. And I think it's supporting our view that what we're seeing in this market uptick since the end of end of October is that this really is another bear market rally. Inflation is coming down and that's what we're looking for. But as you just mentioned, we're only seeing one component of inflation come down, and that's in the goods

sector. We still need to see service inflation come down. We need to see wage inflation come down. And that's also what the Fed is looking really closely at. We haven't seen that. And it's going to take some time for that to play through the system. So you're pushing back against the view that falling inflation rates give the Fed more breathing room when it comes to raising interest rates? I mean, they're certainly going to raise rates tomorrow. We think that's baked in. Yeah, 50 bps. And we think they'll continue to raise. We need 7%

it's a decline it's a very high inflation number and it is unsustainable so what we need to see is housing prices start to fall we're seeing the growth in the increase in those prices slow down but we want to see housing prices start to fall we want to see housing prices start to fall. We want to see wages start to come down. And our labor market is incredibly resilient and still so strong. That has not yet played out in the Fed's actions. So we need to see that.

So you're still fading the route. You would tell people to fade the route. Still fading the route, yeah. What about bonds? There's been a shift in bonds and a lot of folks say, even if we haven't seen inflation come down to where you want to see it or the Fed stop hiking rates to which you want to see, perhaps we've seen the high on treasury yields. What do you think? You know, the good news of 2022, perhaps the only silver lining in this market is that fixed income has seen a return

to normal. And at NB Private Wealth, we are reallocating our long-term views on the market. What we saw in the last decade in this zero interest rate environment, that is not normal. In all the preceding years, we've seen healthy interest rates, and we're back to that. So what investors can do today is take advantage of the yields that the bond market is offering you without taking excessive risk and still let the volatility play through the equity market. So recommending short duration, high quality bonds. Muni still? Muni still. The tax equivalent yield is still around 5%, which is a nice, healthy return.

We're in December. What should investors do today? Take losses. End of the year. Yeah, any losses that you can take. The growth companies, growth stocks have been disproportionately punished this year, but there are huge embedded gains in those stocks over the last decade. So offset those gains with some losses. Reorient your overall allocation a little bit more conservatively.

Park the money in short duration, high quality bonds and be patient. We are optimistic that the market will start to turn, perhaps not as quickly as people might have anticipated last month. We think the Fed's going to raise rates the next couple of meetings, and then they're going to pause. And I think that pause is going to be a little bit longer than some people hope, and that rates are going to stay high until we see the other components of inflation start to come down.

So cuts in 24? Is that what you're saying? Other components of inflation. Yeah, start to come down. So cuts in 24? I mean, I'm hoping, we're hoping that the second half of 2023, things will start to turn around and be more positive. So your outlook for next year is bumpy start. Bumpy start. How do you know when to add risk or get into some of these beaten down spots? So we're going to look for a few signs. You know, service inflation start to come down. Wage inflation start to beaten down. So we're going to look for a few few signs. You know, service inflation start

to come down. Wage inflation start to come down. China start to loosen their restrictions, open up their markets. That will have a huge impact on the international markets. So we're hoping that by mid next year we can start to reenter. If you have no international exposure, go in on the dips. We didn't exit international for our clients, but we are underweight. And we'll be looking to pivot both in terms of domestic equities and international and emerging market equities, hopefully the second half of next year. I was going to ask, international is what, European stocks? Yeah, developed international equities as well as emerging market equities. China loosening their zero COVID policy restriction, which has been, seems like forever, doesn't it?

As soon as they loosen that, that will have a huge impact on Europe. Well, markets are already sniffing that out. Yeah. Internationals had a huge rally the last month. So we're starting to see that. It will dip. The volatility, I can't wait to come on and say I think the volatility is done. We are not there yet. Even if everything you're talking about means that we're in recession next year, would you still be buying stocks at that point? Whether we are or are not in a recession, it's going to feel like we're in a recession. And hopefully the strength of corporate balance sheets, the strength of consumer balance sheets and the oversupply in the labor markets will help lessen the effects of a recession if

in fact we're in one. So we don't expect that it will be a deep recession. And sure, you want to go in at or near the bottom. As I've said before, market timing is a fool's game, but it's good to go in when it makes you feel a little bit nauseous. Yeah, well, and you've given us some criteria at least. That's good. Holly, thank you. My inflation guest. It's becoming a tradition. See you next month. Yeah. Holly Newman-Groff of Neuberger Berman. We've actually gone negative on the Dow down 20, your fault. Just kidding. Down 21 points. We were trending that way. It's been, you know, we got this big rally up 700 points earlier this morning when the inflation number came in less than forecast. And we've given up all those gains. We went negative earlier this afternoon and just dipping

down again right now, 21 points or so on the Dow. S&P 500 also showing more weakness in terms of the sectors. You've got utilities and staples now negative. UnitedHealthcare is the biggest drag on the Dow as we speak. Up next, Ira Lee Sorkin. He is the attorney who represented Bernie Madoff in his fraud case. Reacts to the government's case against FTX founder Sam Bankman-Fried. You're watching Closing Bell on CNBC. Federal prosecutors charging FTX founder Sam Bankman-Fried with multiple counts of fraud related to the crypto exchange's collapse just a day after he was arrested in the Bahamas. Our Kate Rooney is in Washington now with the latest details on this fast-moving story.

These charges piling up, Kate. Yeah, absolutely, Sarah. The Southern District of New York just holding a press conference in the last hour on today's indictment of Sam Bankman-Fried and some parallel charges brought by the SEC and CFTC. Bankman-Fried is charged with eight counts, including wire fraud, money laundering. SDNY also says this was brazen fraud, as they call it. They say it started back in 2019. That's right around when FTX was founded. FBI Assistant Director Michael Driscoll saying that while this case involved crypto exchanges at the end of the day, it comes down to traditional financial fraud. And I want to be clear,

this case is about fraud. Fraud is fraud. It does not matter the complexity of the investment scheme. It does not matter the amount of money involved. If you mislead and deceive to take what does not belong to you, we will hold you accountable. We also heard from the CFTC at this press conference, that agency also accusing Bankman Freed of fraud and said the companies he founded, FTX and Alameda, all of those companies they accuse of fraud there. The SEC saying something pretty similar. They say Bankman Freed committed a massive years-long fraud. Word of the day. The SEC also warning some other crypto exchanges that they've got to register with the agency. They said they are ready with enforcement action if any of these exchanges

choose not to register. Bankman Freed, meanwhile, coming out with a statement, his lawyer is saying that he is reviewing the charges with his legal team and considering all of his legal options. Sarah, back to you. Okay, Rooney, Kate, thank you very much. Let's bring in someone who can help us break down the legal stakes here at play. Ira Lee Sorkin is a partner at the law firm Mince & Gold. He's perhaps best known for representing the late Bernie Madoff in his fraud case, but also was at the SEC and the U.S.

Attorney's Office in New York. So you're a perfect guest to have on with today. Someone with your background reading through these charges and the indictment, what stands out to you most? Well, what stands out most is that many of the charges are conspiracies. You can't have a conspiracy with yourself. You have a conspiracy of at least two people. And what I suspect is going to happen is there will be what we call a superseding indictment, where there will be other defendants charged who conspired with the main defendant here, and there'll be additional charges. But the fact that there are numerous conspiracies leads me to believe that this investigation is far from being over.

What about the timing here? What do you make of the fact that he was arrested the night before he was supposed to testify before the House Financial Services Committee? I'm not, it doesn't bother me at all. It could be that the timing was—and I'm speculating, totally speculating—there was some discussion perhaps that he was secreting money around the world in different countries, that he was going to skip to another country that didn't have a strong extradition treaty with the United States, and the government moved in as quickly as possible to prevent that from happening. That's pure speculation. I don't know.

But it's not the first time that the government has moved quickly when those when that evidence is out there and they're concerned about what the defendant is going to do. So you expect more more indictments here come, more co-conspirators here. I mean, he's now being accused of conspiracy to commit wire fraud, cut on customers and lenders, money laundering, violations of campaign finance laws. There are eight criminal charges here. What is he looking at if convicted? We won't be around if he gets the maximum. Let me put it that way. And you're much younger than I am.

It is not likely that defendants get the maximum sentence. The mail fraud, the wire fraud, the conspiracies, the maximum is 20 years. And judges, of course, in sentencing are going to factor a lot of things in, none of which we know about at this time. But he's facing many, many, many years in prison. The statement that Kate Rooney read to us that he's exploring his legal options right now, what do you think he and his team are doing and discussing? I mean, first, there's the issue of whether he gets extradited, right? Yes. I don't think that's going to be an issue at all. But what his legal team is thinking about

now, and it factors in, where does he go from here? Does he decide to fight the charges? Does he decide he wants to cooperate and cut a cooperation deal with the U.S. attorney? The SEC and the CFTC in this are, I don't want to diminish their role, because most of the work done here is done by those two agencies, not the U.S. attorney's office. And that's not diminishing the role of the U.S. attorney. But the SEC and the CFTC have the expertise in ferreting out the complexity of these types of transactions. So in order to look at it from that perspective, what will generally happen is the SEC and the CFTC will step back. Their actions will be stayed. In other words, the Department of Justice does not want the civil cases to go ahead,

because the Department of Justice is concerned that if the civil cases do proceed ahead, it will impinge negatively on the ability to carry out the criminal case. I was wondering about the interplay of all of these regulatory agencies at this point. Everybody's on this, and whether they ultimately work together. So that answers that question. They do work together. So that answers that question. They do work. Yeah, I'm sorry. They do work together. But now that you've got three proceedings, the Department of Justice is going to want to carry the ball here because they do not want their case disclosed in the civil action where there's far more discovery and far more ability to learn what the government's case is, a criminal case, than there would be if there was only one criminal case. You know, we've also had this unusual development of hearing from Sam

Bankman-Fried over the last few weeks. Numerous times he spoke with our colleague, Andrew, at the Dealbook Conference, Good Morning America. I know you publicly reprimanded him for that and would tell your client not to do that. But it sounds like his thread is that there was no intentional wrongdoing and he wasn't aware of any commingling of the funds from FTX customers to Alameda Research. How difficult is that going to be for him to argue? Well, the first time I was quoted on this case, I specifically said he should shut up. I use those words because the only people who are listening to what he is saying are the regulators and the prosecutors. If he's out there trying to convince the general public that he did nothing wrong, no one's going to pay attention to to him what's going to count is what he says and what can be used against him in court false exculpatory statements is a legal concept where you say something that's false what he has said if they prove otherwise that's going to come out in a trial if he decides to fight the case

and it's going to be used against him. So what I was going to ask you is whether you were having any flashbacks to Bernie Madoff case. We're not hearing the word Ponzi scheme used but he's being accused of fraud, misappropriating customer deposits. What's similar and different? It's all fraud. But there's a big difference between the two. Bernie Madoff carried this scheme out, according to the government, for over 30, 40 years. And the reason he was caught was because his two boys tipped off the government. He confessed to his two boys. Unfortunately, neither of them are with us.

And the government then acted. Here, I suspect there are a number of people who, when this was not public, tipped off the government about what's been going on by Mr. Banksy. And that's where the investigation started. They didn't put this case together, at least from the standpoint of the SEC's numerous factual allegations, in a month. This is an investigation that's been going on. And generally these types of cases start off with somebody who walks into the government or somebodies walks into the government or somebody walks to the government

and says, I want to tell you about a fraud. So that's different than Madoff. And with Madoff, the amount of money the government said that he was solely responsible for was somewhere in the neighborhood of $20 billion. Most of that, when I say most of that, I'm overstating it. He said before he died and soon after he was arrested that investors are going to get back 70 to 80 cents on the dollar. And he was right. The amount of money clawed back in the bankruptcy and by the trustee is somewhere in the neighborhood of $15 billion, $20 billion, the government says, was the fraud. I don't think you're going to see that with this guy. I think the money is gone. Whether they can gain and claw it back is another issue which is going to take a long, long time to work out. Yeah, especially because it's digital. I mean,

it's not even paper money. So what do we watch next? What do you watch next? The one thing missing, of course, now that I'm a defense lawyer for many years, is none of the speakers ever said what the magic words, presumption of innocence they come up there they say we charged we charged we charged he did this he did this he did this the fact of the matter is these are charges uh there may be explanations not for all of the charges but for some of the charges what happens next they're going to proceed to an arraignment i believe he will be extradited if he doesn't voluntarily appear. Bail will be set. He made one comment, as I recall, that all he has left is $100,000. And the fact of the matter is, if bail is set in this particular case and he makes bail, then there are two reasons that you make bail.

One, the judge concludes that you're not going to flee the jurisdiction. You're not going to run away. Or two, you're a danger to the community. If he makes one of those findings, he's going to be put in jail. I don't think that's going to happen. He's going to have to surrender his passport. He's going to be monitored. So there's no danger that he's going to flee.

As for a threat to the community, I don't think you're going to see that at all. So it's conceivable he will make bail. And then the case will proceed along the lines of every criminal case, discovery, judge, trial date, and so forth. One with very public high interest, members of Congress, folks at home, a lot of people affected by this as well. I think the interesting thing, and the last point, I know you're, you've got a time table.

The interesting thing here is the political contributions. Which congressman, politicos, are going to come forward and say, you know, he gave me a donation and I'm going to give the money back. That was not discussed. And I think it's going to be fascinating to see how much money was given to politicians and whether these politicians are going to step forward and say, you gave me somebody else's money. Take the money back. Right. I tried to ask Maxine Waters that question.

She said if it's found to be fraudulent, she will try to, not that she took money, but a lot of members of the House Financial Services Committee did. So that's one place to start. Ira Lee Sorkin, thank you so much for weighing in on all this, your contributions today. It's good to have you. Thank you very much. Good luck. Thank you.

Let's show you what's happening. Dow's gone back into positive territory as we speak, up 57 points. But again, well off those highs. We were up 700 earlier this morning. We're seeing above average trading volumes. If we can close positive, it's the fourth in the last five days. Goldman Sachs adding the most points right now to the Dow. Moderna, by far the best performer in the S&P 500, following optimistic new data on its skin cancer vaccine. Coming up, a top biotech analyst on whether this stock has more room to run. It's up 20, more than that, percent today. We'll be right back on Closing Bell.

Check out our stealth mover today. It is Norwegian Cruise Line. Investors are disembarking from this stock. It's down 3%. UBS issuing a stern call, downgrading the company to neutral from buy, trimming its price target to 19 from 24, citing valuation concerns. The stock has rallied more than 30% since October, thanks to a wave of improving consumer demand. But still, the cruises have not recovered as much as some of the other travel stocks, especially the hotels and the airlines. Up next, Bank of America's head of rates strategy on what today's big decline in treasury yields means for the market and your money ahead of the big Fed decision tomorrow.

We'll be right back. The action in bonds front and center today. Treasury yields fell sharply after that November inflation report out this morning. The 10-year yield slipping to 3.4 percent earlier in the session, but moving off those lows right now, the two-year yielding 4.2 percent as markets are pricing in a higher chance that the Fed won't have to hike quite as aggressively. Joining us now is Mark Cabana, head of U.S. rate strategy at Bank of America Securities. Interpret, Mark, if you could, what the bond market is telling you in reaction to this inflation report today. Sure. To us, we think the bond market is signaling that the opportunity of a soft landing is widening to some extent for the Fed. Inflation seems to be falling quite rapidly, certainly more than expectations. And that just suggests that the Fed may not need to

tighten as much, nor might they need to keep rates as high for as long. Inflation is certainly working in favor of the Fed right now. And as long as inflation starts to fall, then that means that the Fed will be able to keep policy in less restrictive terms than would have otherwise been the case. Yes. But here's my question. Is the market getting too excited and ahead of itself, as we have seen in the recent past when Fed Chair Powell will come out tomorrow and talk tough and say, we're still seeing services inflation, we're still seeing wage inflation, we're not seeing enough signs that inflation is really coming down? I'm just speculating here, but it's happened before.

Sure. I think that Powell will reiterate the message that there's still more work to be done and that even though we've seen inflation missed the downside now two months in a row, inflation is still far too high. Annually, we're still running on a headline basis at over 7 percent on a core basis at 6 percent. That's still unacceptable for the Fed. But the data is surprising in the right direction for them. And while he will say that there's still more work to be done, he's going to probably sound a little bit more confident that the Fed will be able to see inflation fall. And again, as I mentioned earlier, the odds of a soft landing are increasing modestly. That window is widening a bit for the Fed. So do you see rates falling from here,

continuing to fall into 23? Yeah. So our rate forecasts of the 10-year at the end of the year at 3.25 percent. We're at 3.5 percent now. Rates have moved a lot very, very quickly, really, after the October CPI report and again today after the November report, suggesting that the inflation data is certainly moving in the right direction for the Fed. We do think that over the course of 2023, we're going to see rates continue to fall. And that will be especially true if the Fed is able to pause here in the next few months and then wait and see how the economy and inflation evolve. Certainly the trend has been that inflation is surprising to the downside.

And as long as that remains the case, then the Fed has more flexibility to remain patient. So again, we do think that risks are skewed to the downside on rates, but a lot of the work has already been done, at least based upon our forecasts. Mark, thank you for joining me. Thanks for having me.

First, what the bond market is telling us today. Mark Cabana, Bank of America, Merrill Lynch. Take a look at where we stand right now. NASDAQ still holding on to a 1% gain, even though most of the Dow gains have been lost today. There's the NASDAQ. It's a bright spot today, thanks in part to Moderna, which is up 20%, but also some big gains

in the beaten down stocks, like Match Group is up 8.25%. Meta up more than 4.5% as well. But also some big gains in the beaten down stocks like Match Group is up eight and a quarter percent. Meta up more than four and a half percent as well. Alphabet, some of the big the big tech names. The only sector that's down right now is consumer staples. Energy is at the top of the market. I mentioned Meta. It's been a mess this year, down more than 60 percent.

But a pair of Wall Street firms think the stock can do a major about face next year. We'll share the details next. Welcome back. Wall Street firms have been rolling out their top picks for 2023. Meta, we noticed, a popular name on those lists. Goldman Sachs and Citigroup both naming the social media giant a top pick, citing improving engagement trends across feed stories and reels altogether. That stock has been especially hit hard. KICK, CITING IMPROVING ENGAGEMENT TRENDS ACROSS FEED STORIES AND REELS. ALL TOGETHER, THAT STOCK HAS BEEN ESPECIALLY HIT HARD. IT'S DOWN MORE THAN 65% FROM ITS HIGHS, HAVING A NICE REBOUND TODAY

UP 5%, AND REALLY SINCE MARK SUCKERBERG STARTED TALKING ABOUT COST CUTS AND NOT FOCUSING ALL OF HIS ATTENTION ON THE METAVERSE. WHEN WE COME BACK, JET BLUE GIVING INVESTORS THE BLUES TODAY, DRAGGING DOWN THE REST OF THE AIRLINES. UP NEXT, WE WILL DISCUSS WHAT THE CARRIER'S DEMAND WARNING MEANS FOR THE INDUSTRY. giving investors the blues today, dragging down the rest of the airlines. Up next, we will discuss what the carrier's demand warning means for the industry. Plus, Moderna rallies and Walmart's CEO speaks out on inflation when we take you inside the Market Zone. We are now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down all the crucial moments of the trading day.

Plus, we've got Frank Holland here on Walmart and Jeff Rees, Michael Yee on Moderna. We'll kick it off with the broad market, though, Mike, because we actually are accelerating. Took a little leg higher, up 124 now on the Dow. Started the hour, went negative at one point. Still not the kind of gains that we were expecting when we saw the reaction to the inflation report this morning. And interestingly, it's real estate that's at the top of the market now is energy. But now those REITs that have had a tough few months are bouncing back, I guess, on the rate relief. Yeah, as well as big tech actually driving a lot of the S&P 500 gains as well. And that suggests, aside from the energy move, that it is just sort of a reversion to the mean action with stuff that's been beaten down a lot. If you wanted to look inside the market and say, you know, is

the market now more confident that the economy is going to be in good shape? Well, not by today's action. You see banks are down, consumer cyclicals not leading, materials not really doing anything, industrials as well kind of sitting it out. So I don't want to draw large conclusions, but there's a general sense out there that we're able to move a little bit beyond the acute inflation fears and assume that disinflation is now the trend while also being wary of exactly what it's going to mean for the economy down the road. But we are holding in this area, not giving up all the gains and staying, you know, one or two percent above yesterday's lows. I mean, your point is well taken, but Bank of America rate strategist just told us that it's not giving up all the gains and staying, you know, one or two percent above yesterday's lows. I mean, your point is well taken, but Bank of America rates strategist just told us that it's a signal for a soft landing.

The bond market is telling you today. But if that's really the case, then why wouldn't we see more cyclical groups rallying? It's all a probability spectrum. So if we moved a little bit in that direction of where a soft landing is more likely, I don't think it necessarily means those are the groups that are going to race ahead today. So, you know, we'll see. I think obviously with a Fed day tomorrow, with the 200-day average of the S&P right here, there's just a lot of static in this market and probably get a cleaner read in 24 hours. Also, some of the defensive names continue to make new highs here. Conagra, PepsiCo, somehow Ulta Beauty became the recession play. That one makes a new high every day.

So consumer inflation cooling in November, but the pain may not be over just yet. Walmart CEO Doug McMillan telling our Frank Holland that higher prices in certain categories will be sticking around. Dry grocery and consumables is where we're seeing the most stubborn and persistent inflation, mid-double-digit inflation. And we're not hearing from our suppliers looking forward that that's gonna come down soon. General merchandise categories have started to adjust because demand has softened and inflation is adjusting as appropriate.

But we think there's gonna be persistent inflation with us for a while in dry grocery and consumables. Frank Collin joins us. So Frank, after speaking with Walmart CEO, what was your take on his impression about the consumer overall right now? Well, Sarah, he certainly believes the consumer's ability to pay is softening, maybe even their willingness. And of course, he has a great sample size here in the U.S. Walmart has 160 million customers per week. And we really touched on the fact that those

rising food prices, CPI showed food prices rising by 10 percent year over year, even increasing month over month, despite that cooling when it comes to overall inflation. And it's certainly impacting things. He said Walmart's adjusting its inventory when getting into specifics, but says it's adjusting its inventory just to basically deal with this consumer that's facing higher inflation and potential recession. And also said that some of this inflation that we're seeing and the softening consumer is one of the reasons why Walmart is going to be launching a buy now, pay later option through the startup one. Walmart is the lead investor in one. He said overall, Walmart's pushing more

into financial products to reduce fees for its customers, not saying specifically when it comes to buy now, pay later. I also asked him, would a firm still be offered along with one? And that buy now, pay later option, he wouldn't answer, said didn't want to comment, said he wasn't looking to make any news today. All right, Frank Allen. Frank, thank you very much. Let's hit Moderna because, boy, those shares are rallying today at more than 20 percent after promising results from a melanoma study. The biopharma company saying its experimental vaccine developed with Merck had cut skin cancer recurrence by 44 percent in one mid-stage trial. For what this means for the company, let's bring in Michael Yee of Jefferies. He's got a hold rating and a $170 price target on Moderna. I don't think we've gotten to your target low price, Michael, for you to step in

and say buy Moderna if you're still on hold. Does this news today change anything for you? It's great to be here. And I do think that the news today should make people more positive on Moderna, particularly because of what we talked about before, which is the applications of the platform to a whole broader array of applications beyond just COVID. COVID has been moving behind us. Nobody's really talking about the vaccine or utilization that's moving behind us. And there's a lot more pipeline stuff to come. So while it didn't get to the super cheap levels you and I talked about

weeks ago and we missed it, obviously today's cancer news makes people more excited about the pipeline. And just so people understand, so this is for people who have diagnosed melanoma, have had it surgically removed, and then they use this? That's correct. So you've had melanoma, you resect the tumor out, you get Keytruda PD-1 plus the personal cancer vaccine, and there's a significant 44 percent reduction in the rate of the chances of the melanoma coming back. Mike, this has been a crazy stock to watch. Moderna. Yes. No, it has been wild.

I mean, it's actually just a little bit over two years ago, right? Late November 9th of 2020, when we did get the initial vaccine results on COVID. The stock trades super cheap because it trades like one of these pharmaceutical companies or biotechs with one massive product that the market assumes either it solved the problem or it's going to just be declined from there. Right. So it trades eight, nine times earnings, you know, kind of the way Gilead has traded for for a while. So the next thing is very important, I think, for the longer term story to show that there is more of a pipeline and more adaptations of this kind of technology to make it a multi-year story from here. So, Michael, on the Moderna, on the melanoma vaccine, what is the timeline here for FDA

approvals and potential time to get it to market? And what does the cost look like and the price? And how does it impact revenues? All in one answer. All great questions. And I think it goes to the story of Mike just said, COVID's moved behind us. Now we focus on a lot more pipeline stuff. They are going to talk with the FDA. However, I do believe they will need to run a phase three. This is a few years from the market. So it's a few years from generating revenues. This is a 2025 2030 application. But again, these stocks trade on what's coming in the future. And as COVID passes us both melanoma and I would point out in the next coming month or two or three phase three RSV vaccine data as well. So there's more to come on that. And I do think the story

is transition away from COVID. I think that's super important. God, we need that RSV vaccine. It's everywhere. Michael, thank you very much. Michael Yee on Moderna's 20 percent pop. Take a look at JetBlue shares. They're getting crushed today, weighing on the rest of the airline industry after the company warned demand this month is coming in below expectations. As a result, the company says revenue per available seat mile will be at the low end of the previous range. Phil LeBeau joins us. Bill, is it a JetBlue problem or a broader airline demand problem? A little of both is the reason for the airlines, Fox, being under pressure today, Sarah. First of all, for JetBlue, you talked about what they're expecting for December coming in lower than what many people were previously expecting from the company.

They also blamed Hurricane Nicole in the Caribbean, hurting traffic. And just overall, it's just not a very robust report. That's JetBlue specific. But then when you add in a couple of comments in the last week from Alaska and from Spirit in terms of the RASM figures being a little below what people were expecting, that's enough to spook investors. The good news is, Sarah, tomorrow we will get a big report. It will be the expected Q4 guidance and 2023 guidance. That's the expectation when Delta holds its investor day. And we're going to be talking with Ed Bastian exclusively on Squawk Box. So we'll put it right to him. What are you noticing in terms of revenue? Is there a slowdown in demand? We'll get a better read tomorrow, at least a more updated read, when we talk with Delta. It feels like the sector is so sensitive to bad news. It's now at the very

bottom of the S&P in terms of subsectors, down 4.2 percent. Why the underperformance of JetBlue? What's happened in the last few months, basically since the spirit drama, right? Sure. Well, I'm not sure that it's underperformance. I think it's more a case that the guidance, which was pretty broad, is just not going to the upper end of what people were expecting. So all it takes, all it takes is one mention of things slowing down a little bit in December. Boom. That's enough to spook people, especially not just with JetBlue, but with all of the airline stocks. The number of people I talk with, Sarah, who say, I hear about great demand,

but I think we're going into a recession, doesn't add up to me. I think that's at play here for the most part. No question. Thank you, Phil. Phil LeBeau, JetBlue down almost 8% right now. Mike, if you look at what's selling off today, airlines, automobile manufacturers, some of the food retailers are getting hit. Staples are underperforming, but interestingly, a good day for technology. Definitely a good day for the REITs, the office REITs in particular, home improvement.

So some of the sectors that are sensitive to rates, perhaps. A lot of it is the rate move, and a lot of it is just laggards catching up. So some of the sectors that are sensitive to rates, perhaps. What else? A lot of it is the rate move and a lot of it is just laggards catching up. I mean, I'm not sure that you necessarily want to see the huge Nasdaq stocks be the main driver of upside on a day like this. Now, it's broad enough that it's not all that's going on. But with Tesla sitting it out, it's still a pretty good gain for the Nasdaq 100. And that, to me, feels more like mean in a version of Apple acting pretty well in the afternoon. So, you know, you would prefer to see some of the cycles do a little bit better.

But right now, it's not really what the story of the day is. Well, I'm glad you mentioned Tesla. It's down another 4 percent. It's now down 10.5 percent this week. It's only Tuesday. And for the month, Mike, down 17 percent. So Tesla certainly sitting out the rally, especially with big tech. What are you seeing in the internals?

Yeah, it's been relatively strong, but nothing decisive. You know, when we were up 2.7 percent in the S&P, it was going to be one of those, OK, are we going to get one of those overwhelming upside thrust days? Nothing like that going on right now. Barely more advancing volume than declining volume. So it's solid solid but it's not really decisive in any way look at the home builders though this is an unsurprising reaction to that backup in treasury yields up a percent and a half really not too far below the august low it's been acting somewhat better as if that housing market can restart without too much trouble the volatility index really giving back yesterday's pop there was a real tensing up ahead of the CPI number. We're down again below 23, certainly not back toward

those lows. But after the Fed meeting tomorrow, assuming no real additional market stress, that'll probably become further lower. Yeah, here we go. From one big market day on inflation to another on the Fed day tomorrow. Take a look at where we stand. The Dow's up 100 points. This morning, after that softer inflation number that we saw, the Dow was up 700 points. We lost all of it and then some, went negative a few times today in the afternoon, managed to recover. We're up about 89 points. Goldman Sachs, Home Depot and Microsoft adding the most to the Dow. UnitedHealthcare and Jenna McDonald's taking the most away. S&P 500 is still higher and most of the sectors are higher.

There's the Nasdaq. It's up 1%. The S&P is up almost three-quarters of 1%. Weeds are leaving. Real estate, energy, communication services, the only sector to close down. It looks like our computers stay closed. And the Nasdaq, as I mentioned, gets a gain of 1% driven by

Microsoft, Moderna, Amazon, and Meta. Tesla sits out the rally yet again. That's it for me on Closing Bell. See you tomorrow, everyone, for Fed Day.