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tv   Closing Bell  CNBC  November 22, 2022 3:00pm-4:00pm EST

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could come back into the market now but would they support prices or would prices continue to come down because these cash buyers have left you decide >> take both sides of the argument like the debate team. >> thank you very much we have a 350-point gain on the dow. thanks, everybody, for watching. "closing bell" starts right now. stocks are higher in today's trading as retailer names give a boost to sentiment we are sitting at session highs as we speak, up 350 on the dow this is the make-or-break hour welcome to "closing bell quigs i'm sara eisen up 1% on the dow nicely on the southwest 500 with every sector now in the green. energy takes the lead today. that sector up 3% as oil prices stabilize, materials, technology, communication services, that's all on the top of the market. it's why the nasdaq is rebounding after yesterday's weak close about a full percent right now. small caps up a little more than
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half a percent, they're lagging. treasuries getting a bid today yields are lower down. check out some of today's big earnings movers, abercrombie, american eagle, best buy, dick's, all getting a lift right now. we have a big hour coming your way. we'll talk to legendary investor mario gabelli about bob iger's return to disney he's known for his media calls plus, goldman sachs jan hatzius will break down the latest signals from the fed and abercrombie & fitch is spiking senior markets commentator mike santoli, what's on your radar? a pretty broad rally thanksgiving seems to be positive, right, seasonally? >> we've been talking about how the market was having this orderly low drama, consolidation of the rally, not any selling
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pressure coming in modest pullback and has gone sideways where we sit now right at this level just under 4,000 is slightly above the closing high for this rally which was a week ago friday we did get above that. it's inching in that direction, but you see since the low in october, you've seen a series of these higher lows, a stair step type action you want to see. of course the big test comes above here when you challenge the overall downturn on the tactical basis that's where if the market is goingto go to that point of kind of maximum mutual frustration or suspense, it's going to be more like 4100, 4200 and make the bulls and bears make a decision if this is sustainable pretty constructive. for the probability of recession in the next 12 months, most notable this is a very long-term survey, the philly fed goes back more than 50 years
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by far the highest percentage probability of people saying we're going to have a recession in 12 months less than 50% but it never gets to 50% what i find interesting is how much lead time there has been to prior recessions when you have one of these spikes. often very long, more than a year, and people think we're in the clear. and then weep get the recession right up against the 2020 covid recession. we are braced for it we have the 27% peak to trough, where the bear market related to a recession. my point being if we get the blow it will not be unanticipated. maybe it doesn't come on time or maybe the fed has been so explicit about how it has to cause pain to the economy we've gotten the message >> it's one of the most telegraphed recessions i can remember >> a very compressed cycle, too. stimulated our way >> not as compressed as the covid recession which was like a minute >> the cycle going from that
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point on, yeah, exactly. >> mike, thank you mike santoli, talk to you later. disney's bob iger already making changes after taking back the reins including a restructuring plan and firing a top executive after iger replaced his successor turned predecessor bob chapek giving up some of yesterday's big gains. joining me on this and many other stops, chairman and ceo mario gabelli. welcome back, mario. good to have you >> great to be with you particularly on a robust day and just before thanksgiving so i can wish you and traders and investors the best >> indeed. happy thanksgivingto everyone. so what about disney, mario? clearly this was celebrated by the markets, iger's return, yesterday. do you share is that optimism about his return >> great question. you go back when he left, he wanted frank wells to succeed
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him. frank died in an airplane crash. mike hobitz was hired. iger took over and now you have a similar change from my point of view the franchise is terrific. the stock is interesting and obviously with a market cap of $220 billion, enterprise value, that's the same enterprise value as comcast but when i look at this whole ecosystem of entertainment aside from -- we can talk about streaming music later but independent of that you have a company called paramount paramount has almost $20 billion of content spend and that compares with $30 billion for disney and it compares with a similar amount, smaller amounts for netflix and so on. and so when you look at a company with an enterprise value that is a $661 billion shares times $20 approximately, and
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then you add the debt of $11 trillion, minus what they will sell simon & schuster for, i have a double or triple and yet it's selling at a fraction, a fraction of the market value of disney i like the ecosystem i give the viewer what they want, how they want it, where they want it, when they want it at the lowest cost and they'll all do that. meanwhile, we talk about sports and entertainment. baseball -- >> i knew you were going to bring this up. mario, before you move to baseball, because i do want to talk to you about that, i want to zero in on something you said you are more excited about paramount than disney. you are a shareholder of both stocks you took that question and said paramount is trading in a better spot for you >> sara, if you're amazon, if you're looking at how much you're spending on content,
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amazon is spending, like, $17 billion. you can buy all of paramount -- now you'll have to pay up, but that's not the point the point is which is going to be successful? both if one is more successful, a double or triple out of paramount, eliminate the dividend, do a few other minor financial engineering and it works. so don't ignore paramount just because short-termism is having a challenge. the o&os at paramount if they sell them or spin them that would be more interesting to an amazon or an apple but basically you're going to have a tsunami in political spending and that's not baked into these companies in addition, the amount of losses and direct could consumer will start coming down you have to be positive. >> quite the opposite is being baked if right now, mario, concerns about a recession and a
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big slowdown in advertising, spending, layoffs, belt tightening >> we have all of that how bad is bad how long is it going to be bad what happens when it's good? i am very optimistic in 2024 about what china will be doing, what europe will be doing, the united states prior to -- i'll give you some examples i like baseball. it's not going to have an impact the atlanta braves are selling at 33. they have an active trader business they're doing financial engineering. the l.a. angels are up for sale. i think you're going to get a mid-40s type price play ball. secondly you have the aerospace and defense industry and there i like a couple of companies, the justice department turned down the deal this time around they will probably approve whoever they come with because of the hypersoniccapabilities they have there's a lot of stocks you want to own despite an economic contraction. give you another example, farm equipment, john deere is
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reporting tomorrow morning >> yes >> the american farmer works fence to fence and they are going to get $525 billion of cash flow from livestock and commodities care last year they got 400 will they be able to do automated farming? will they be able to do other things i like the stock is 15 they will earn a buck and a half it's a very attractive company run by a new guy who came out of polaris. so there's a lot to do and then, sara, i covered the auto industry for a long period of timeand i've gone through these economic cycles. the question is when will the market discount that tomorrow the minutes will come out. you'll figure out what they're doing and that's another telltale if i'm powell, i want to go down -- you know, we worry about covid rebounds
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you take a paxlovid, you have a chance to rebound. inflation could rebound. he has to stick with rates, with the run-off of the $4 trillion on the balance sheet he's taking down about $95 billion now versus putting in 125 to the negative and so on. he will keep the rhetoric up you have a lot of things going on >> you have a lot going on and a lot going on in your head. i want to hit a few of the stocks that you threw out there. maybe we'll start with deere, as you say, they report tomorrow. the stock has been really strong over the last year or so it's bucked the market trend farm incomes are very high can they deliver the equipment for the demand >> for your listeners, i'm picking case new holland and john deere has 350 million
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shares, you're talking about 120 billion market cap the other one is like 20 billion. so when i look at the morsels and you talk about iger coming back they have a new manager at cnh i like that. i like american farmer working i think, unfortunately, we have a crisis in the world on food and we have to figure out how to allocate it. we have to bring it to the farmer we have to deal with water, another crisis and then you have an energy crisis just think about the headlines yesterday, sara, about the saudis cutting production. well, the americans have been taking a million barrels a day out of the petroleum reserve they have to stop. the supply is reduced by a million barrels. there's a lot going on it's so much fun, it's so exciting -- >> so you like energy? >> yes the amount of money in capex has
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been relative to four years ago. the amount of capex by the majors and independents in the united states on a global basis is lower and with prices of oil at $70 or $80 a barrel, you start having to think about replenishing those locations and that equipment. i like that sector and i think they're going to benefit from this significant tail wind and you can't take a million barrels a day for the last six months out of the strategic petroleum reserve. you can't do it anymore. >> it's supposed to be, i know, for emergency reserves, and i think they will have to answer for that soon enough mario, back to -- >> the reserves for political reasons as well as practical ones >> well, the midterms are over >> i agree >> on the media stuff, let's just go back to that for a second because the disney story
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is a big deal, and you kind of downplayed your excitement over disney i think the presenceof a new investor is interesting as it relates to this story. do you think that he should get a board seat >> i applaud -- anyone that has proven ideas over an extraordinarily long period of time, you have to listen to them if nelson has a billion worth at disney and happens to like cinderella when you think about the a's, i gave you aerospace and defense, i gave you atlanta braves, and avatar the market will be excited when that movie breaks december 15th, whatever the today is. less than 30 days. so you have a lot of pluses in disney and iger is going to have a solid hand when i look at where i can make a higher percentage return, risk adjusted for my clients and i
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look at paramount and then itch the family controlling 30 million of the 40 million shares and my clients own 4 million of the 10 million, i have to applaud the efforts of warren buffett, 92 million shares now so there's a lot of interest >> what about deals? >> what? >> what about deals? a lot of people look at paramount, a lot of people look at warner discovery, valuation has been cut in half this year i think you own as well. >> sara, that's a good point i left out david he added 1.7 billion that was given to at&t. they dumped it on the market etfs couldn't own it they are taking stocks losses and you multiply ten times 2.4 billion is 24 billion and then 50 billion in debt, but the smart guy, may be 45 billion, but he has 80% of the debt fixed
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at 4% interest he will do quite well the next two or three years and at some point when the tax selling is over, five weeks more, then you're going to have basically fundamentals come to the forefront. and it's going to be a slog and he has his job cut out he's going to pull it off. >> which do you think is the more likely acquisition target >> i have this company that will try to merge >> you have a lot of props >> what? >> you have a lot of props what are you holding >> i'm holding annual reports that came out within the last three weeks of fox and newscorp trying to figure out how they should make love to each other from my point of view if i were murdoch i would take one share of fox and give it to newscorp and give a contingent value
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rights saying the combined merger will have a fox over 35 or 40 within a certain period of time, and they're going to have six times ebitda and x dollars of debt and have sports and news and maybe will spin off something in the interim there's a lot going on in the entertainment business and, you know, what does iger do with hulu and how does he pay for it and how does he negotiate with comcast. you have a lot to talk about over the next 18 months. >> you have a lot to talk about over the next 18 months. mario, we're lucky to have you thank you very much. >> good to see you again, thanksgiving to all and good-bye >> thank you mario gabelli. take a look at shares of abercrombie & fitch. they're soaring today gaining back some of the big losses they've seen over the year as the company posts an unexpected profit for the third quarter solid outlook as well.
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investors excited about inventories and margins. a lot to talk about with fran horowitz what she is seeingfor the holiday season you're watching "closing bell.
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the office and getting together more jing joining us now is ceo fran horowitz from columbus, ohio fran, nice to see you. >> hey, sara, nice to see you as well thank you for having me today. >> you're welcome. so sales and margins, looks like, came in better what was the big surprise that caused the improvement this past quarter? >> a great day for the team here on campus. our q3 results beat our expectations on the top line and bottom line, to your point aberc abercrombie's momentum is terrific 500 basis points better than last quarter,a nice improvemen in hollister as well in fact, a confidence to raise our outlook. the consumer is responding so nicely to our product. the weather turning has been very helpful, seeing great response to our cold weather categories lots of exciting things happening. >> and it sounds like you expect the improvement to continue into the holidays you raised guidance. how should we look at that in
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the context of the other warnings from other retailers? i'm thinking target especially warning on the big slowdown in consumer spending especially on discretionary items like apparel? >> we're seeing an interesting thing from our consumer, a bifurcation fromabercrombie brae had our little stepback during back to school we got close to our customer, we understood what they were looking for, will shift our receipts to make sure we leaned into the categories they were looking for and additionally were able to reduce our receipts relative to trends. inventorsies are in low for the last quarter >> and the analysts were happy about the inventory. what does it mean for pricing? every holiday is promotional but this will be even more because all of that inventory needs to
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clear out and the supply chain is finally improving what does that look like for you? >> it's interesting. the real question you have to ask is what is the value and the content of that inventory and how current is the inventory it's 92% current we are pleased with the way and healthy it is by brand, by gender, by category. so the real issue is what is the content of the inventory and we are well positioned as we head into the fourth quarter >> one other thing i jotted down that i heard you say on the call today, you are a net store opener for the first time in a decade and it just strikes me -- remember the death of the mall how many malls are you in in america and what has happened to mall traffic post covid? is it back >> stores matter
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i say it all the time. in order to be a successful omni channel retailer you have to have stores. we are a net store opener, the first time in ten years. 60 stores we will open last weekend i was in roosevelt field. you look at our four new stores that were opening all new concepts and fresh stores and one of the most important malls in the country we have said consistently stores matter and our customers back out shopping in them >> what about hollister? that's the one that obviously is lagging and investors are looking for more progress on what is the plan to turn things around there >> sure. we did make progress and saw sequential improvement from the second quarter to the third quarter. we see that consumer more pressured than the be abercrombie consumer inflation is more challenging for them last year they had a lot of money to spend coming off stimulus but we're focused on what we can control, our
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inventory, leaning into the categories that are working and expect to see improvement quarter over quarter >> fran, appreciate the update thanks for joining us. big move for the stock today >> thanks, sara. have a nice thanksgiving thanks for having me >> you, too. take a look at where we stand. we continue to accelerate here on the gains up 1.3% on the s&p 500. every sector higher led by energy, materials and technology it's why the nasdaq is rebounding today up 1.1% the small caps are lagging a bit but also up nicely all the big cap tech is helping the nasdaq in particular, apple, nvidia, best buy, also with better reception to earnings there reinstating their buyback. still ahead goldman sachs' jan hatzius with his latest thinking on interest rate policy and whether he expects a recession in the year ahead. but first, lawyers for ftx are meeting in a delaware court for
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a bankruptcy hearing on the collapse of the former crypto giant. we'll bring you the highlights when "closing bell" comes right back at about 10 more times! (laughs) no stress. i just discovered yieldstreet. they vet investments that don't ride the stock market rollercoaster. - [narrator] yieldstreet: private market investing. at humana we believe your healthcare should evolve with you and part of that evolution means choosing the right medicare plan for you. humana can help. with original medicare you are covered for hospital stays and doctor office visits but you'll have to pay a deductible for each. a medicare supplement plan can cover your deductibles and coinsurance but you may pay higher premiums and still not get prescription drug coverage. but with an all-in-one humana medicare advantage plan you could get all that coverage plus part d prescription drug benefits. with no copays or deductibles on tier 1 prescriptions. you get all this coverage for as
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we have a news alert from washington on student loans. contessa brewer with the details. president biden has announced the secretary of education will pause the requirement for people to repay their student loans until june 30, 2023 as the department of justice applies to the supreme court for a decision about those student loan debt relief remember the white house announced that $10,000 worth of student loans could be wiped out. the president just tweeted out a video where he put blame squarely on republicans for suing over this plan the courts have paused those plans for the student debt relief to move forward, so now an application to the supreme court and until then the president says students can have some relief from repaying their
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student loans until summer of next year. we'll keep our eye on the next step, sara >> this is the one that keeps getting delayed and delayed from the pandemic contessa, thank you. it's been about two weeks now since the epic meltdown of ftx rocked the entire crypto industry and the fallout continues to grow. today "the wall street journal" reporting sequoia capital apologized to investors for the $150 million loss on ftx lawyers for the exchange met in delaware in a court today for bankruptcy proceedings eamon javers joins us from delaware with a look at what we learned today, eamon it did not sound pretty. >> reporter: sara, that's right. this was the first day of the bankruptcy proceedings here in wilmington, delaware, and a chance for the lawyers for the new management of ftx under john ray who replaced sam bankman-fried last week to argue their theory of the case here and they did not paint, as you say, a very pretty picture of this company they say this was one of the
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most abrupt collapses and difficult collapses in the history of corporate america they say when it comes to the previous management under sam bankman-fried, sbf as he's known, the emperor had no clothes and there are a lot of problems here with the way that this company has been running. so we're getting a peek under the hood, so to speak. attorneys here in wilmington suspect this process is now going to take years to unwind as all of the different creditors sue, countersue, argue with each other over who gets whatever remaining assets are inside this firm ftx said it is experiencing cyber attacks on an ongoing basis. they've hired a cyber security firm to protect the company. they won't name which firm they've hired to protect the firm that's protecting the company's assets they say substantial assets were either stolen or are just missing now from inside this company. they are trying to hunt for those as they go along here and we had a dispute about the customer names inside the
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company, sara. will you get a big list of all the individuals and all the entities that had assets on the exchange here? the judge ruled in favor of the company, and that means that the client names will remain confidential for now so there's some question whether we'll ever learn who all the customers were for now those names will stay confidential, sara, back over to you. >> and what is left, can anybody retrieve it. eamon, thank you very much >> reporter: there will be a lot of litigation. >> unbelievable. stunning fall from grace eamon javers in wilmington jan hatzius and why the economy may be able to avoid a recession.
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welcome back stocks are rallying today. in fact we're just hitting new highs for the session as we speak, up nearly 400 points on the dow, more than 1% gain, 1.3% for the s&p. yesterday we spoke with cleveland federal reserve president loretta mester on the show here is what she said. >> i don't have any in my forecast i do think growth will be well below trend. when you're in that kind of very low growth environment there is a risk of a shock that could
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send you into negative growth for a few quarters so, again, i don't have that built into my forecast i sympathy we have to be attuned to the fact there are risks out there. >> let's bring in chief economist jan hatzius who also does not have a recession built into his forecast and i guess i'm wondering why if we're seeing the fastest, biggest tightening that we have seen in decades to literally put pain and pressure into the economy, how do we avoid recession? >> i think we do need a period of below trend growth and we probably do need loosening in the labor market the labor market is overheated that's why the fed is tightening so aggressively. there are other factors that are important. income in particular real income was very weak in the first half of 2022, but it's now starting to grow again i think that will be a source of support next year. so you have those two factors when you put them together i get
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below trend growth but i don't get negatives. >> does that mean you think the labor market can hold up >> we have the labor market holding up as far as the unemployment rate is concerned, that goes up by half a percentage point in our forecast we do see a very significant labor market adjustment when you look at job openings or wage growth and i think all those things have started to show up in the data and there's a lot more i think we're going to see. that's fundamentally i think a healthy development. that's what we need to get back to an environment where inflation can come back down towards 2% >> you think the fed can pull this off, a soft landing >> that's our baseline forecast. we do have a 35% probability of a recession so that is a higher number, of course, than normal normal might be 15% for any 12-month period. but we still think it's more likely that growth is positive >> you did recently raise, i
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think, what, the terminal rate, the peak of how high the fed is going to go. why did you do that and where do you think it's going >> we have lifted it further we're at 5% to 5.25% now the reason we lifted it, we have become more optimistic on the income side and, again, real income is sort of support but the fed still once below trend growth still want an adjustment and need to lean against it and that's our expectation 50 basis points at the next meeting and then three 25s next year >> it was published today that they are sort of coordinating this hawkish slowing of interest rate increases, and he's paying more attention to the slowing part in other words, we're going to get smaller increases but last meeting the market focused o powell's hawkishness as it related to smaller increases which is it going to be? >> well, that was the new news
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at the meeting in november he basically said we have added to our cumulative increases and that's what the market responded to i mean, i think we'll see a similar type of message. i wouldn't expect anything dramatically different from what we -- from what the message was, our current forecast does imply that the terminal rate goes up and our forecast by 50 basis points >> do you think they will raise that as soon as december, the terminal rate? >> yes, because the september number is stale, there was a meeting in between their views have gone up and that will show up in december. >> the market expects that it depends on what happens with inflation numbers. >> sure. >> do you expect we will continue to move south in terms of these headline numbers from here >> yes headline more sharply than core. headline i think is going to
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come down a lot. we're at 7.7% for the cpi right now. we have that coming down to about 3% by the end of 2023 and we've got core pce also at about 3% but that's at about 5 at the moment that's a more gentle pace of decline and it's partly just because commodity prices were a major inflation driver and the level has come down somewhat, the increases are coming down substantially and that will mean a lot of different things. >> supply chain as well. >> supply chain on the core is a very important part of the story. wage growth is an important part of the story we have seen some deceleration not as much in the employment cost index but if you look at the average earnings numbers, those have slowed, and rents are a very important part of the inflation numbers and as we go through 2023 that's going to
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come down, we think, substantially. we're seeing that in the more leading indicators of median new rents but only a small part of that has shown up in the cpi >> even if the u.s. can manage to get through it given we'd have strong fundamentals here, globally it's sort of a mess china is in and out of the zero covid policy europe and the uk are dealing with serious stagflationary forces at some point isn't that going to weigh on us >> you're right. europe is in a tougher spot because in addition to all of the post-pandemic issues we're dealing with globally they also have the gas shock and the russia shock, andso we do thin recession is likely. that said, we actually think the recession might be milder than it looked a few months ago we've seen declines in gas
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prices, so that shock isn't quite as large and europe has managed to economyize without a huge hit i think the recession is still likely, but, to me, it looks like a mild one. >> jan hatzius, good to get your view thank you for coming in, cutting through the fed speak. take a look at where we stand right now. we're still going strong up 380 points, 17 minutes into the close. it's energy, materials and technology real estate and industrials are lagging but they're all up today. there's the nasdaq up 1.25 a rebound from yesterday apple, nvidia, microsoft and alphabet are the leaders home builders are outperforming today. coming up a top analyst and why he upgraded the industry for housing. gamestop is moving higher today even after news carl icahn had
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been short the stock our scott wopner reporting he still has the short on it's up 3.4% we'll be right back. power e*trade's award-winning trading app makes trading easier. with its customizable options chain, easy-to-use tools, and paper trading to help sharpen your skills, you can stay on top of the market from wherever you are. power e*trade's easy-to-use tools make complex trading less complicated. custom scans help you find new trading opportunities. while an earnings tool helps you plan your trades and stay on top of the market. ♪ ♪ connecting to opportunity is just part of the hustle. ♪ ♪ opportunity is using data to create a competitive advantage. ♪ ♪ it's raising capital that helps companies change the world.
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look at the retailers rallying despite a mixed bag of earnings should that group be on your shopping list heading into the holiday season that story when we take you insidehe t market zone
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we are in the "closing bell mark zone. the crucial moments of the trading day plus retail movers and jpmorgan's michael on home builders mike, the dow is up about 400 points here. home depot, chevron, united health adding the most to the dow. i don't know if you heard jan hatzius, chief economist of goldman sachs, laid out why he thinks the fed can achieve a soft landing even as he is raising the rate that he expects them to hit to 5 to 5.25 next year, and it does feel like that's where the market is as far as the fed and the expectations for the economy >> i agree the market is building up that probability to a greater degree than it was willing to do a few
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months ago i've been pointing out if the s&p 500 is not down on the six-month basis. it's absorbed the last fed rate hikes and a big jump in treasury yields, some relief on those fronts the fed speak is no longer taken as toxic the market kind of gets it and the economic activity is healthy enough that you still have to see the wear and tear on demand areas before you can say we're definitely going to not be able to hit a soft landing, hit a recession. it's not a done deal housing is in the tank there's a lot of parts of the economy that are struggling. more to come it doesn't seem as if we have that scenario bake just yet. the market is reflecting that, the s&p a little over 4,000. >> another big batch of retail earnings today am a lot of winners, best buy, dick's sporting goods, both beating wall street's earnings estimates, raising full-year guidance american eagle reporting stronger than expected revenues.
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burlington stores missing on both the top and bottom line but shares rallying. 19% after management says trends were improving late in the quarter and then there's dollar tree reporting strong earnings but shares are slumping because of the full-year outlook came in at the lower half of its prior range. melissa, a lot to go through here basically what are retailers like best buy and dick's doing so well or differently in this environment as opposed to a company like target that continues to struggle with discretionary spending >> yes, a lot of it boils down to inventory and execution for best buy their inventory has been well controlled, their inventory is down 15% year over year which is helped because the market for consumer electronics has softened and able to better hold the line with promotions. for dick's sporting goods it has a wide array of name brand people are seeking out, one of them being nike, one titleist. a lot of the brands have allowed it to have pricing power in this
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tougher environment and what it has had extra merchandise is move that out to its going, going, gone stores, which has allowed it to clear out excess merchandise, keep everything looking sharp and fresh. >> the other thing, melissa, i feel like the common thread between all of these that had better reactions to the earnings and better numbers than expected is they've all been really poor performers this year best buy, everyone was anticipating weakness and it's not like we're seeing strong sales growth here. we're still seeing sales declines they're just not as bad as feared i feel that has to be a theme here that expectations were really low and things are coming in better because some of these companies are executing. >> that's a great point. i think that best buy lowered its own bar this summer by cutting its forecast it beat that and was better than feared can dick's sporting goods it's a different scenario no tradedown not like best buy was talking about today.
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i spoke to best buy and there was some tradedown to things like cheaper tvs, dick's sporting goods, is really not seeing that show up. it's finding there's a lot of strength in the category still >> ath-leisure continues to be a bright spot. home builders are adding to ga gains the past month or so weaker activity in the housing market our next guest is getting more bullish on this group. jpmorgan senior analyst michael reihart upgraded toll brothers to overweight, dr horton, pulte and kb home. why now when we don't knowhow high rates are going to go yet >> thanks for having me on so we've been less constructive for most of this year, and really one of the key concerns has been the rising rate backdrop
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as we look into 2023 our economic and rate strategy teams are expecting the fed tightening cycle to end in the first half historically towards the end -- falling the end of a rising rate period that's been a very positive catalyst for the stocks in addition we think a mild recession is something that the stocks today are already pricing in and absent a medium to larger session you are looking at pretty solid book value growth along strong balance sheets the next two years >> so is it all just a rate-driven move in the stocks and lower sales activity >> the way we're looking at it is more of a positive risk/reward. we think that at this point the stocks are baking in a lot of negativity, a lot of soft fundamentals over the next 6 to 12 months.
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on the flip side, there's still a lot of upside to the extent that we do reach the end of that rising rate period rates certainly can go higher from here. again, absent a medium to large recession, we see valuations pricing in a lot of down side risk in fact, our earnings are down almost 50% in '23 versus '22 yet, again, the real danger scenario in the medium to large recession standpoint another key participate of our view here is that structurally the housing market is in significantly better shape than it was going into the great financial crisis you had at that time a third of the mortgage market being adjustable rate mortgage driven, all sorts of problematic loans today arms are in the
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outstanding market the balance sheets are in much better position to withstand weakness over the next 6 to 12 months >> well, thank you for joining us, michael, on the call it's a notable one given all the pressure michael rehaut from jpmorgan that group is up, mike santoli, 2.4% home improvement stocks are doing really well. there are a lot of winners out there. computer and electronics retail shows you a lot of the tech stocks are rebounding today. >> best buy is a huge part of that subsector we'll take a look at that in a second relatively strong day in terms of the market. definitely not an overwhelming buying stampede but certainly pretty strong as the market levitates again over 4,000 we have not closed above there on this rally since october. take a look at consumer
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discretionary relative to consumer staples trouncing discretionary but there's been a little bit of traction here in the consumer cyclicals and that's been reflecting what we were talking about before not completely off the board. we have the holiday coming up, only one and a half days of trading over the next five that's been about the bottom of the range for the year, sara >> up 400 points on the dow jones industrial average home depot and caterpillar, the only losers are amgen, disney, and boeing which is barely lower. s&p 500 is up 1.4% which means it's up a percent for the week nasdaq up 1. %
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every sector closing out in the green. bonds are catching all very supportive. apple, nvidia, microsoft and alphabet are rebounding in a big way. that's it for me on "closing bell." now to "overtime" with scott wopner sara, thank you very much. welcome, everybody, to "overtime. i'm scott wopner you heard the bells. just getting started from post 9 here at the stock exchange sofi's liz young will be with me and whether she reignites stocks to the end of the year the push/pull of the market and the catalyst that could cut pull the catapult your money. does a catalyst

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