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tv   Closing Bell  CNBC  September 14, 2022 3:00pm-4:00pm EDT

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it -- some of them try to do it by -- by diversifying across sectors. >> right. >> and do the degree that they can do that okay, but, again, you end up with a really strange mix that often doesn't work out the way that you want it to. >> all right we'll have to leave it there scott, thanks so much for your time today we've run out of our hour and it was fast. >> it's over. >> thanks for watching "power lunch." >> "closing bell" starts right now. ♪ >> stocks struggling for direction following the worst day for wall street since 2020 the most important hour of trading starts now welcome, everyone, to "closing bell." i'm sara eisen take a look at where we stand in the mark kind of a mixed picture right now. we lost the gains. it's been most of the day up for stocks overall, but we're down about a tenth of 1% on the s&p the dow has turned negative as well, down 100 got at high at 175 nasdaq holding on to its gains, just bearly. the ten-year note yield
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elevated take a look at the s&p 500 sectors this hour. it's kind of a mixed picture energy is higher right now, but you do have most of the groups right now in the red on the day, as you can see real estate, materials, financials, those are at the bottom of the list right now technology is outperforming as the nasdaq attempts to bounce. kind of a weak one coming up, bridgewater's chief investment strategist rebecca patterson opens up his playbook following yesterday's big plunge plus, moderna is moving higher today on news that it's talking to china about supplying the country with covid vaccine one market expert says that could be a major catalyst for the entire market. he'll tell us why. let's get straight to today's dashboard with senior markets commentator mike santoli my, kind of a weak attempt at a bounce how much damage was done >> you know, typical tentative, indecisive action after a big one-play plunge like yesterday a significant amount of damage, sara, i think was done at least in terms of the near term
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tactical idea that we could pay the peak inflation theme in a decisive high conviction way and those people have been put back on the wheels. we're in this range maybe bearly spent a lot of time talking about 3,900 on the s&p 500 how there was really this bit of support. it sort of kept the lows from june in this separate zone right there. now, immediately, it would be a little bit surprising to be honest if we didn't test it in a more direct way over the next few days into next week when we have the fed meeting just because it had significance before on the other hand, can you still draw this particular line that says, okay, if that was an uptrend it's still not been bested just yet, so obviously a lot of back and forth in this market, but i think it's also interesting. a 4.3% drop in the s&p in a given day is rare and extreme but only dialed us back by five days because we did this this levitation going into the number take a look here at the measure of treasury market volatility, known as the move index, this is
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over two years it's essentially the vix of treasury bonds calculated a very similar way. 30-year options-based pricing of future volatility. you see right here this zone, when the stock market was very strong through 2021, yields were anchored, the fed was lower for longer you had top data at is.5% on treasury yields and massive indecision and flux about what the fed is going to do, what inflation will tell us and how high market-based yields can go. it's hard to see the overall markets having a real sustained recovery without this settling down just a little bit you need clarity on the fed's end point and need an actual back and forth of the fed trading to be a little smoother. had has been a little jumpy and ill liquid as people have taken losses on lost trading capital in those markets. >> a few positives in light of -- >> yeah. >> we haven't done too much damage in erasing the big moves despite the big loss yesterday
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i continue to hear that credit markets are doing well usually it would be more of a rush for the exits in the corporate bond market. haven't seen that, the vix, the volatility index which tends to measure, what, panic, fear, also not the kind of spike you would see with a 4%, 5% deficit. >> true. credit is really much more about a positioning shock in stocks yesterday, and the reason the volatility index and the equities isn't higher in my view is we're still in this range we've been doing this for months shopping around. you're not necessarily -- a lot of people have lightened up their exposures. they don't need to lighten up the upside we've had steep, vertical like drops and that's when you get the vix spiking up into the 40s is when you actually have one of these crash-like moves stocks have actually been a grind lower. >> wonder if also the credit market tells that you corporations are in healthier shape to deal with this rate shock that we're seeing. >> yes, and high inflation means revenues are pretty good, means
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you can cover your interest payments and that's what the credit markets care about. >> mike, thank you mike santoli, we'll see you soon more on what to do in this environment. rebecca patterson joins us from bridgewater associates good to see you. i know you at bridgewater have been expecting inflation to stick around higher than the market do you think the market is finally getting that right or still -- still wishing that it comes down faster? >> well, even after yesterday's inflation print, the markets are discounting that inflation gets back to the fed's target by the end of next year and then stays there, and that's certainly possible i mean, we are seeing goods prices, things like autos coming down quickly as the commodity prices come lower. everything helps things will be sticky for a little longer like rents, but the big, big thing is wages, and that comes back to our really incredibly strong labor market, and with the labor market today, it's kind of resilient being a double-edged sword, you know
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a strong labor market means we have jobs. we have incomes we can spend, but it -- with so much nominal spending, that keeps inflation supported, especially in services, and with, still, two for one job openings per worker, wages are still tracking between 6%, 7%, so the fed has a lot of work it do in our opinion still to get this down, including taking it out the market expectations for easing starting as early as next year which we think is highly unlikely. >> soy think the market still is underestimating how much -- how much the fed is going to do in terms of rate hikes? >> definitely. i mean, we can look tat from an equity lens as well. when you think about the moves you're seeing so far this year down about 17%, and that's -- that's not a small thing, but when you look at the attribution for that move, it is still largely just a rise in discount rates, earnings expectations i'm looking broadly, not sector by sector. it hasn't changed that much as
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the fed continues to remove liquidity for quantitative tightening, we'll see more labor market weakness. the fed needs that to happen to get wages down we think that will take equities another leg lower. >> so you're in the camp that it's more of this bear market stuff. out of stocks, get out of bonds and into the dollar. is that the playbook >> well, you know, this is the challenge, right we haven't had inflation as a dominant driver for markets in decades. it's been growth and inflation has sort of been on the back burner at this point when you have rising risk premiums, you have rising interest rates, discount rates, it's bad for all assets, so there isn't an obvious easy place to hide. you know, this is where you want to look for alpha, whether, you know, it's picking stocks, picking a great manager to help you, rather than just rely on what the markets will give you, and it's diversification, and that's both for environments, so if inflation stays higher for longer, what inflation set of
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assets can you own in your portfolio to give you some stability in energy has been a great sector to own this year and extips, for example. commodities broadly, even though they are coming down right now, longer term can be some balance and then geographically. the u.s. feels like the safestnous a bad neighborhood these days, but it is somewhat scary to me that most investors are extremely overweight the u.s. foreign investors, exposure to the u.s. represents about 65% of their total exposure, so what happens if we have a shock in the u.s. caused by the fed or something else, so there's, you know, grow graphic, a tried and true boring thing, but it's one of those times when you say, gosh, europe looks bad china looks bad, but having that spreads out your risk, and right now people are very concentrated, so that's another thing i think i would look for in an environment where there's nowhere easy to hide >> okay. final question is the dollar an easy place to hide, rebecca? your first love and mine
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>> yeah. >> it feels as soon as the dollar strengthens the whole thing falls apart because we're already at the super strong levels do you continue to bet on it >> in the near term, yes we're still looking for additional dollar strength as the fed raises rates capital is continuing to come to the u.s. looking for that safe haven which, again, i think is vulnerable, but i'm not saying it's going to end tomorrow what's interesting to me, sara, right now about the dollar, is historically when we saw these sorts of moves, the next step might be some sort of joint intervention central banks coming together to limit dollar strength but this time around the fed needs a strong dollar to help control inflation so you might see one or two central banks here and there and intervening more forcefully in the coming weeks and months as this continues but historically that doesn't work for very long, and the u.s. is not going to do anything concerted as long as the dollar is helping them achieve their inflation goals so i think their countries are on their own to figure it out. >> i think japan is certainly one to watch, though they seem cool for it now.
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rebecca, thank you very much rebecca patterson from bridgewater. >> up next, we'll talk to the head of global insurance giant prudential as to how macro concerns in asia are impacting that business. and later chris harvey from wells fargo says there's a market opportunity developing but it won't last long a pre-fed play he'll join us to break down the call you're watching "closing bell" on cnbc. down 71 on the dow ♪♪ ♪♪
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global life inshurners prudential plc has spun off its u.s. operations and shed its
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european business and focuses solely on asia and africa. of course, this comes amid stability and restrictions that have dampened profits. hong kong its largest market seeing new income fall by the first half of the year joining us now is plc group chief executive mark fitzpatrick. good to see you in person. not sure a lot of people realize that prudential, old-school british institution is so heavily focused right now on asia it's a tricky time to be there, isn't it >> a huge change, massive change we've been working on this for the last five years. in 2018 we announced the spin of the uk operations, and last year we finished the spin of the u.s. operations, so now we are dedicated asia, africa play. covid has made life a lot more complex and tricky the border between hong kong and mainland china is still closed and covid is still very prevalent in some of the markets in which we operate in asia. notwithstanding that, actually in southeast asia our businesses
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continue to grow very, very strongly, and in chinese mainland, we've outgrown the market by a factor of four this half year. so it's been a great performance, nonetheless. >> your job is to literally forecast the macro trends and risks. that's very difficult right now in places like china. >> it is very difficult. that being said, it's not just in china, so half of our physical by sales, by new business profit and by soft profit is in southeast asia. it's not solely a china-hong kong play. we have general diversification geographically, 23 markets, 23 country, and we also have diversification in terms of channel, how we sell, whether it's through agents, through bank assurance or direct to consumers, and we have huge product diversification which gives us resilience as the macro economic plays out in the economy in different ways. >> what is it like in emerging markets and the part of asia that you're exposed to right now as we've had this bumpy recovery, lumpy recovery from
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covid and tightening of financial conditions >> sole, what we're seeing is the imf recently announced some new projections for gdp. emerging markets are lower, but nowhere near as much as developed markets or the west. nowhere near as much, and inflation is not as high as it is in this part of the world, so the economies there didn't have the same quantitative easing kind of heating up the economy, and, therefore, this isn't the same need to slow the economy down in the same way that being said, covid has made people massively aware of their own fallibility and the need for help in protection products, so last year we saw a 41% increase in health and protection products in terms of the volumes of policies sold so people are recognizing there isn't a social net for themselves in the markets and most of the markets in asia, so they need to self-ensure and that's where we step in and that's where we try to provide them with comfort and we try to provide them with some
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policy support. >> just showing our viewers the market right now because we are making new lows. down about 200 points. attempted to be positive earlier. this is the way it's been this year, mark my question is on the geopolitical tension and how you fit in there because the relationship between the west, u.s. in particular, and china has only gotten worse. isn't that a represent -- doesn't that represent a big risk for your business >> well, our business is more and more becoming seen by everybody as a pure asia-africa play, and when we speak to regulators or we speak to government officials, they are all saying the same thing to us, and that really is how can you do more? how did you do more to help our consumers? how do you do more to help our societies giving them a foundation, giving them some protection for safety, providing a pension net for them and providing some kind of health care for them, because the state doesn't have the wherewithal to many of the markets to provide them with this huge overall safety net, so that's where we
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try to step in, so while the economies and the geopolitics plays out, our role and the role of the governments with us is to work in terms of really focusing on the local consumer in the markets. >> we appreciate you coming by it's good to see you in person. >> thank you very much indeed. take care. >> again, let's show you what's happening down 200 now on the dow. again, the high of the day was up more than 170 the nasdaq also slipping into the red. it was holding on to gains at the top of the hour. just could not keep that tentative after yesterday's massive plunge for stocks. it was the big nest more than two years. s&p 500 now down about half a percent. energy, consumer discretionary and utilities stay strong. everybody else is red. materials in real estate down 2% financials taking a hit along with the broader market and even in the face of those higher interest rates we'll ask barclays analyst jason goldberg what he needs from the conference taking place this week and check out some of the top search tickers on
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it shows you where the investor heads are, concern of higher rates, the s&p 500 loses some steam here in this final hour. tesla up 2.5% though and apple is flat. we'll be right back.
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check out today's self-maneuver, funko shares are getting a pop making of bobbleheads and other pop culture collectibles the industry will double by 2026 they are developing new product lines and expanding into accessories, games and, of course, nfts they are reiterating the buy rating on the company. they are saying funko is not being valued as a growth stock despite multiple growth lovers up 2% in a down market moderna is also a winner today after the ceo said the company is open to supplying covid vaccines to china, and our next
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guest says that could be a big catalyst for the entire market he's here to explain why when "closing bell" runcheturns the dow down 130 as we head into the final trading half hour. we'll be right back. this is redefining storytelling, at the speed of now. this is tracking and publishing your content in real time. this is the system you built, captivating a global audience. this is how. airtable. your record label is taking off. but so is your sound engineer. you need to hire. i need indeed. indeed you do.
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what is wall street buzzing about today? moderna ceo telling reuters he's held talks with the chinese government about supplying covid-19 vaccines. however, no decision has been made yet this, of course, comes as china continues to lock down large parts of the country to conduct mass testing so far, china hasn't approved any foreign covid vaccines our next guest says the moderna news could be a major positive catalyst joining us is company president adam kristofoli. does this appear to be doing much for the overall market right now? >> no. >> why do you think this could be a game-changer? >> i think china is a big outlying in the world as far as implementing a very stringent and aggressive covid policy, still pursuing a policy most countries have abandoning for several months it's a head wwind for global an
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local economies. they haven't approved any foreign vaccines and the health care system in the country, especially the more rural areas, isn't as developed about other parts of the country and there's worries that they will be overwhelmed if they see an increase in sick patients. if they were to approve any of the foreign mrna vaccines which are effective, especially at suppression severity of illness, they could start to move away from the zero tolerance approach to covid and that would be an enormous tailwind for its economy. >> i feel like the market though has moved on from worrying about the chinese economy to worrying about the fed and the u.s. economy and the ecb and the european economy as inflation has stayed very high, and if china -- >> definitely. >> does ultimately go through with this and then we see this economy turn around, doesn't that add inflationary pressure >> 100%. chip has been a big source in the world right now.
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pretty much the only major source right now of disinflation, and it's actually helped europe survive the gas war that putin is waging against it because europe has been able to purchase surplus gas that china is consuming because the world has been so depressed. if you were to see the world economy rebound there, would no longer be the source of inflation and it could possiblience as bait the cpi pain you're witnessing in europe, the u.s. and elsewhere that's definitely a good point and maybe why the market is somewhat ambivalent. also, you know, the ceo didn't sound like something was imminent so that's one factor. the other one, like you said, could exacerbate global inflation tensions >> though i do wonder if it helps a bit on the supply chain front, not sure exactly, but these starts and stops in the chinese economy certainly affect production and shipping. there's still a lot made in china. >> no, absolutely. >> so i think over time, once china gets back to full speed and the supply chain is operating at a normal level, you
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know, the supply chain disruptions have been an enormous contributor to inflakes so i think in the near term if you see china ramp up aggressively, that could add to inflation but overtime if global supply chains normalized, you know, that certainly will relieve some of the pressures that you've been seeing throughout corporate america and the economy. >> well, we'll see if that actually happens if they make these orders because that would be super interesting because they haven't ordered anything out there. thank you. >> thanks for having me. >> appreciate it, from vital knowledge. here's where we stand right now in the markets the dow down about 157 points. the nasdaq is the one that joined the losers category this final hour of trade. it's flat right now, but it started hour higher. it's been higher most of the day. tuesday's market meltdown has many investors running to the hills, but up next we'll be joined by two market bulls to tell us where they are finding opportunities right now. and you can find more "closing bell" on your favorite
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welcome blacack to "closing bell." we found two strategists who remain bullish and see major upside joining me now is jim polsen and jim harvey everybody accuses me of always bringing on bearish guests ahead of the market close which we
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don't. bring on a variety of opinions we had rebecca patterson who is very bearish you see there's a window of opportunity between now and next wednesday which is the fed meeting to buy what are you telling people? >> yeah. that's right, sara so we think there's a buying opportunity. we're constructive on the market into 12/31 and what happened is you had a massive liquidity event yesterday. a lot of cpi traders got it wrong and when they say i'm out and they ran for the hills, right, they demanded a lot of liquidity and we had a gapping-down process that won't go away in a day, may take a day or two or three and what we have is a catalyst that catalyst is the fed we think the fed is going to do 75 and that's probably the last time you see 75 for some time. in an environment where the fed is beginning to decelerate and fundamentals are still pretty good we think there's a buy opportunity and we think it's that simple. >> we said that last time. everyone was saying that they are going to do 75, and then that's probably going to be the last 75 you're going see because
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inflation is coming down and that turned out to be wrong. >> well, that -- that's not what we said so let's start there the second thing i would say is that, you know, we are seeing inflation expectations if you look at break-evens or what's baked into bonds. break-evens are down at the two and five and ten-year level. oil is coming down we're seeing a consumer last year that was price unconscious is now changing his or her behavior we're seeing them come into the year with stunning balance sheets and now the balance sheets are being stretched, right, and the economy, the overall economy is slowing down, so what you would expect is for inflation to come down what happened yesterday was really about a relative move versus cpi if you look at the absolute move of cpi cpi, ex food and energy has been peaking for a couple of months that tells me things are slowing down at the end of the day what did the fed tell you the fed said we're going to
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front load this. doing a handful of 75 basis-point increases, that's front loading, so in order to front load, the second part you have to start desell rate, and that's what we think we'll see going forward in time, and that's really what the market thinks as well. >> jim, you have been at 4,800 by the end of the year. >> right. >> is this predicated on the fed not going as big after next week's meeting and inflation coming down? >> yeah, it certainly is if the fed wants to go up over 4%, you know, they can probably take it high enough to create even more damage i just don't think that case is going away i agree a lot with chris' comments it's very clear to me that inflation, number one, has peaked, and, number two, it's coming down broadly. that was one report yesterday. there's a whole array of reports that show that inflation has been decelerating from the stuff
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that chris mentioned in addition to retail inventory price discounts and now the ability price index for tech price, you know there's just a number of things, commodity prices, across the board, not just energy but also industrialsry just set a new low this month going back to may of 2021, so to me it's pretty clear. this keeps me bullish. if you go back and look, sara, back to 1940, there's been six major inflationary spikes, and i define that as those over 6% year-on-year cpi of those six, there was only one time that the market low and the stock market wasn't in when the inflation high year on year was in, and i think we're -- we're there. the other time in 1970 it was just a matter of a few more months the market went down a little while and then it win the and recovered all but within a few month, so on major inflationary
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peaks, you can't wait for inflation to get all the way back down do where the fed wants it to get. you have to buy when inflation peaks, and that's exactly where we're at you know, of those previous six that we've had, four of them recessions resulted, doesn't matter the stock market went up anyway. >> that was my next question. >> i'm sure there were concerns about yields at that point and concerns about how much higher inflation could stay high, but the fact of the matter is once it peaks, the stock market has bottomed, and i think the next move is probably up. >> jim and chris, thank you both for joining me very simpatico views appreciate it. bank of america upgrading sofi to buy. the stock is moving up 4%. the outlook for bank stocks and starbucks surge when we keta you inside the market zone next. e in order to thrive in an ever-changing market. the right relationship with a bank who understands your industry, as well as the local markets where you do business,
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so you won't miss an opportunity . we are now in the "closing bell" market zone. barbara duran is here to break down the crucial moment of the day. plus, bay clarence jason goldberg on the baines and bank of america as we have batthia here to discuss that nasdaq back down into positive territory, barb. we're not sure which way we would end up it's been up and down for the final hour of trade after the huge drop in stocks yesterday. are you adding on this weakness? >> no, i'm not, and as you know throughout the summer and before i've been adding on weakness and not here i think yesterday the surprise
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numbers for the ppi and the cpi a today's core ppi really unnerved investors who were expecting to see signs of the economy slowing whether it's in housing, commodities and purchasing managers index and people are afraid and wondering what is the true market multiple so i'm not surprised today it's a little bit switching around so i think now we'll in a trading range higher than in the past, but i think somewhere between the lows of june, the highs of august, and i think until we have another cpi number in october or the third quarter earnings start and we see that they are going to be just the second quarter earnings where which is not so bad, i think we'll be stuck here with investors assuming that inflation is going to be stubbornly higher for longer and the fed will have to get super aggressive into a weakening economy, so i am just waiting until sentiment improvements i still have my view that inflation could come down much more quickly, and at this point i think there's still more upside risk than downside risk
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because when markets do move, it tend to be front-loaded, you know, when they decide the coast is clear >> so kind of bullish, but that cpi number made you think twice, it sounds like, barb. >> i was looking to see more. >> everybody was. let's talk about the banks for a moment because the big banks are at a crossroads with rates on the rise and a crucial decision from last week. jason goldaber fresh off the 20th annual global services conference for some some takeaways on the state of the industry, jason. what did you learn >> is 75 of the world eats largest global financials and the top 25 u.s. banks there, and by and large, you know, i hear about all this, you know, talk of a recession weighing on the economy, but what they are seeing from their customer base is -- is good. i mean, loans continue to grow the banks are benefitting from higher interest rates, and expanding margins, and loan losses are at historic lows and it doesn't sound like they are going up any time soon so i think the general takeaway was
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quite constructive. >> but i guess the problem is the yield curve inverts even further, especially on a move like this week as the market worries about the fed going even harder to raise interest rates, and that doesn't bode well for the economy down the road and certainly not for banks. >> yeah. you know, certainly in the near term they will benefit from higher rates i think given how they are entering this period of uncertainty both the ranges with record capital and strong liquidity as well as both their consumer and corporate clients whereas, you know, the loan losses do begin to rise, you know, into 2023 and beyond, they are just well-positioned to handle that, benefiting from strong balance sheets and really record pre-provision revenues. >> where do you want to be in the banking sector it sounds like you find it all a little more optimistic than the market is telling us. >> yeah, if you look at where relative valuations are we're trading at 55% or so of the s&p 500, so valuations have come in quite a bit. you know, listen, i think some of the bigger banks, jpmorgan,
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bank of america, you know, were pretty constructive. also some of the regionals, you know, regions financial stood out as given particularly upbeat presentations. >> what about you, barb? which of the banks do you like >> well, i would stick with jpmorgan that is the class act, and it's underperformed its pence, and i think the bad news or any of the worries about the bank are more than discounted in the stock, so i think that that is one that i would focus on first. >> got it. thank you very much, jason we appreciate you joining us from the conference to share some of the highlights jason goldaber, shares of sofi get an upgraderation the price target to $1 the biden student debt cancellation remains a major overhang for the stock and that nfl season should provide a meaningful boost in engagement, the nfl season of the joining us is the analyst behind the call mahir bhattia. thought the student loan cancellation of debt and
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postponement of payment was a headwind so far. >> sara thanks for having me you know, you're right for the last two years students haven't had to make payments on their student loans and as a result they weren't thinking about refinancing those loans to a better rate or lower rate away from the federal loans market. what the biden administration announced was that, you know, in addition to the debt of forgiving some debt, they also announced that this will be the final extension of the payment moratorium as a result, what they are going to have is a lot of loan servicers reaching out to borrowers and letting them know that, hey, you'll have to start making a student loan payment in the next -- starting in 2023, and we think what that is going to do is drive refinance volumes back to normal levels at sofi. sofi was doing $2 billion of refinance a quarter heading into the -- before covid and they were down to 400 million last quarter, so we think that's going to bounce back pretty nicely as borrowers think about the fact that they will have to
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start making monthly payments and try to find a lower rate frankly. >> the stock is still down about 60% over the last 12 months, and then on the nfl season we know they have the name of the l.a. stadium which won the super bowl last year is this a marketing thesis here? >> no, it absolutely is marketing. you know, it's interesting we did some analysis around just engagement using engage president, google, trend searches, app downloads for sofi, and it's pretty remarkable, you know, there's a nice uptick typically around sundays and mondays and even more so when it's the l.a. rams home game, and sofi you see benefiting in the engagement you had the ceo also mention at a conference just this week, they gave us some internal numbers. the brand went from 2% 208% during the nfl season and it's back down to 4, and they expect an increase for this year. >> so you have a $9 target,
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mihir. the street is worried in the turn in the credit cycle, higher interest rates, more speculative names like this that have been recently become public do you think it's overdone >> we think so you know, i would point out that we had downgraded the stock previously just on the concerns that you mentioned, but we do think what's happening now is there is a fundamental improvement in the operations, right. whether the stock gets to 9, you know, in the short-term, it's a little more difficult to say certainly the market is little more challenging now, but i think it's inarguable that the operating fundamentals for sofi are going to improve as student loans come back. that is one of the most profitable businesses. it is a -- it is the oldest business also object engagement side you have seen a nice uptick in member growth. you're starting to see them monetize their members, adding more products and increasing engagement, so we do think that
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they are -- that the business will be operating at a higher level and operations will certainly improve and we think valuation will follow. >> mihir, thank you. barb, i don't think of you particularly in a name like this, but would you be interested because of valuations >> any time a stock has gotten cheap and it has growth drivers just as described, i think one has to take a look, so, yeah i'm intrigued by his analysis. >> but not a buyer yet >> no, no. i'd have to do it a little more work thon. >> all right mihir, thank you so much >> netflix shares getting a pop on a report that the streaming giant expects its upcoming ad tier will reach 40 million viewers by the end of next year. julia boorstin joins us. so that's a strong number, julia. where do these forecasts come from >> those are strong numbers. "the wall street journal" is reporting that these are forecasts then flicks is giving to potential ad buyers they are out there now we know that they are out there now talking to potential
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advertisers to try to drum up demand before they launch the ad-supported business. right now netflix has 220 million paid memberships, 73 million of them are here in the u.s. so the outlook is that they are going to be hitting 40 million by q3 of next year and that 13 million of them would be here in the u.s. now, of course, the big question is how much is this service going to cost? the number of subscribers they get for an ad-supported tier will depend a lot on how much they are charging for that tier and whether they raise prize for the ad--free tier which, of course, is what disney is doing ahead of the ad supported service. seems like the stock is up whenever we get more details ben flicks's push to embrace the ad supported tier they are not just getting new subscribers, people who have never paid for netflix before but also trying to deal with turn, making sure if someone doesn't feel like they want to
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pay for the full ad-free version, then maybe they will downgrade to ad-supported instead of dropping the service entirely. so as you said, it's been this trickle of slightly bullish news around the netflix ad model. has it changed wall street's view of the stock which got so negative around the subscriber loss and the competition thesis? >> well, look, it's interesting. i have to cite the comment that netflix gives me whenever there's one of these headlines we're still in the early days of trying to decide how to launch an ad-supported tier no. decision has been made wall street is waiting for details. one thing i do have to point out sen flicks just announced a fan event that's going to be on september 24, and i have to wonder whether we'll get more details there, but it does seem like there's this optimism around the fact that they are getting closer to launching and maybe it won't be early next year maybe it will be sooner than, that so so many unknowns here still. whether it's around pricing, what the ads are going to look
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like netflix has made it really clear this will be an evolutionary process the way the ad tier starts out it's not how it's going to look in a couple of quarters as they keep it rating it and making it better using data which is what they do. >> the stock sold about 80% off the highs. julia, thank you barb, netflix, do you like this, what you're learning about the ad-supported version >> well, i do, because i've been an owner for a long time, and i've been wondering, you know, right at this moment the street is assuming worst case it's post-pandemic they are losing subscribers. the competition has really heated up. you know, the street i think is taking it, okay, show me what's happening. they are not rolling out this ad-supported campaign until the first quarter of next year and it's going to be in a few markets. you've also got the passport protected effort which actually could be the password sharing effort that could end up being significant, but we don't know the only other thing though is that this is still a secular growth industry.
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you've got some 500 million subscribers to cable and satellite in the move towards streaming continues. they are the leader, but for now it is very hard to buy it here it's still a 23 and 24 pe on next year's earnings, and the question is what will the earnings be? i think it could be a gradual improvement. it should stop the churn, bring in incremental new subscribers how many we don't know. >> just want to show you the dow has gone positive again, everyone the dow is now up about, well, it's -- it's about -- there we go it's unchanged it's notable because we were down 200 just about 20 minutes or so, and it didn't look like we were going to hold on to earlier gains in the session looks like so far we've had a little comeback just in the last few minutes or so much the nasdaq composite is back in positive territory, up .6 of 1% so it's got a gain right now what's fueling that? tesla, apple, amazon, starbucks. let's talk about starbucks because the company is liking what that stock is serving up. the stock is up 5%, 5.5% after
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it offered guide as and outlined a reinvention plan that includes new equipment to speed up service and exandled loyalty program. also a goal of 45,000 locations worldwide by 2025. interim ceo howard schultz spoke to our own jim cramer about some of the moves. >> the guidance that we talked about today for the future, for the next year or so, double-digit revenue, double-digit eps, accelerated growth in our store base and strengthening in our comps >> barb, you own this stock, correct? you've been pretty bushel on it, why? >> well, i've owned it for almost ten years in various accounts because it's been a solid premium name, and it was interesting because what he said today, i mean, this new ceo doesn't start until october 1 so i think it's very unusual to come out with such bullish information just before a new ceo starts the one thing he didn't mention is that pricing power for this company has been terrific. over the last five years they have been able to raise prices
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almost 7% each year, and in this kind of market that is the kind of company you are looking for that has pricing power with all the increases in their estimates i think you'll see a pe expansion stock is down 20% year to date it's not cheap, but it's also still at a discount to its historical valuation, so i think the stock will continue to move higher here. this is a great name >> as we head into the close here, barb, we're seeing a rally, as i mentioned in tech stocks of .6 of a percent. maybe some hope to the bulls who were looking for a bounce after yesterday's big wipeout, worst day for the s&p, dow and nasdaq in more than two years, though it didn't look like it would come for the s&p it is higher by a quarter percent. dow down 200, now florida. you said you're waiting to buy what are you waiting for are you waiting for a fed meeting next week, more inflation data what do you need to see? >> right there's going to be more inflation data coming. there's going to be, you know,
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jobless claims everybody is watching that because i think there's a new awareness. i've been saying that the consumer is strong balance sheets are strong. wages are good, even though they are moderating which is what we need to see because it looks like investors fear now that the fed is hellbent on bringing down ploirnlgts stopping the wage growth and that's what i think people will be watching. for me it's going to be watching valuations and letting things set. the stock market could go lower here so i'm not surprised today is just back and forth it could have ended lower. >> what's the first thing on your shopping list >> ah, that's a good question. i have been buying on weakness things like walmart when this got hurt in their earnings, unh. i still like uber a lot. i think they have got a lot going for thrnlgs and i think, y think all of us who own meta are in pain, particularly going to the news today, but i think meta is underestimated. they will figure things out in
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the metaverse, in their reels and in their advertising algorithms, so i think the stock is very cheap here, so -- but i think there's also questions over advertising, and i think inflation will ease up so we'll see. we'll see. i think a lot of bad us? discounted in this stock right here. >> all right meta down another percent today, even with the nasdaq real. barb, great to have you, as always barbara duran. bba. as we head into the close, take a look at what's moving right now. let's start with the dow because you saw the big drop, as i mentioned, in the final hour to down 200, although we did spend most of the day higher the high of the day was up 171 so not a very convincing bounce-back if you're looking at the dow. chevron, salesforce and boeing the big contributors on the plus side minus side, honeywell, unh, honeywell and home depot s&p 500 faring a little bit better because technology is working today. energy is working as well. up 3%. utilities are strong
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consumer discretionary is the group that i would highlight because you're seeing a rebound in names like starbucks, some of the cruise lines, tesla is up. that's helping the nasdaq up .8 of 1%, so it ends the highest of the big three and it did climb in the last three minutes of trade. small caps adding with a gain of .4 of 1%. a mini bell after yesterday's selloff. that's for "closing bell." it's "overtime" with mike santoli. welcome to "overtime." i'm mike santoli in for scott wapner you just heard the bells, but we're just getting started in just moments, we'll hear expect i had from bill nygren and where he sees the biggest upside in the market right now. we begin with our talk of the tape, taking stock investors treading lightly today as they assess the damage from yesterday's shocking selloff all three major averages finishing near the flat line and pulling green. kind of a modest balance after yesterday's 3.4% loss in the


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