Transcripts For CNBC Squawk 20240703

Delivery numbers that are of importance for us. We dont know how big. No. Kellogg nova set to begin trading today at the nyse. Well talk to the ceo later this hour. We talked about the pain we got through in q3. A bunch of new notes this morning of top pick lists out of the major strategists. So were guaranteed some data. Maybe the fed wont be flying blind into the next meeting. Well get the big jobs report on friday. Well get the jolts report before that to see if job openings have come down and the Inflation Report next week. Those will be the determinants. November is looking like a coin flip on whether the Federal Reserve raises rates. The back drop here of rising treasury yields. The market rates rising despite the fact that were still only expecting one more or no more rate hikes for the fed. The higher for longer mentality has really seeped in to the bond market and to the stock market as well. I think that thats what you saw in the performance of september. Thats going to be the big question of what happens in october. It was something we were discussing last week as we approached highs on the tenyear yield, though we backed off. What are the key reasons we continue to see this gravitation . Whats interesting is its coming in the face of softer Economic Data and falling stocks. That doesnt usually happen. Usually treasuries insulate you from falling stocks. They protect you. Theyre safe havens and you see yields come down as the economy softens. Then we wonder longterm is the market thinking about higher Inflation Numbers . Is the market thinking the fed will stay high for a very long time or are the fiscal concerns starting to creep in . I cant believe ill talk about this, but the risk premium for longterm rates turned positive for the First Time Since 2021. It basically is how much investors are demanding a premium to get paid for taking on the risk of holding longterm debt. When it goes positive it shows first of all, we have not been positive for most of the last decade or so. So they want to be paid more for taking on the risk. That could speak to the fiscal credibility we have going on in this country. We talked about that a lot. Were running large deficits. We have a lot of debt to sell, and we talk about supply demand imbalances as well. Thats the risk heading into 2024, look, we have to issue a lot of debt, and there are pressures internationally. Japan holds a lot of our debt. China holds a lot of our debt. Questions about whether they will continue to unload some of our debt and whether theres buyers. Remember, the fed is also u unloading some of that debt. All these factors coming together where where is the deficit . 1. 7 trillion . Deficit to gdp approaching 7 , which is usually not what you see during a time of full employment and an economy above trend. All this, of course, has been the topic of discussion for a series of voices over the past few days. Dalio with you last week. Jane frazier at citi at the conference on friday. Williams of the fed on friday as well. Then ackman on squawk this morning. I think the sound bite talks about the impact of real rates on the economy. Take a listen. I think the fed is probably done. I think the economy is slow. The level is high enough to slow things down. High mortgage rates, high car rates, high credit card rates, theyre having an impact on the economy. Economy is still solid but weakening. Seeing lots of evidence of weakening in the economy. Helps that we have gotten a bit of a disinflation trend in germany, france, japan, spain, of course with pce here on friday. The threemonth annualized going to 2. 2. Thats the one to cheer on. Thats what Lael Brainard was saying, back to prelevels. The core number is still in the high 3s. 3. 9 . As far as the economy, will it do the work for the fed . Jane frazier, this is what she sees in the spending data for the u. S. Right now and the overall economy. I do think the recession, if there is one here, it will be manageable. Its been elusive so far. Im not sitting there worried about the health of our consumers, worried about the health of corporates. They are strong. Their Balance Sheets have been resilient. A strong job market is also a good thing. Talked about cracks starting to appear in credit. I think that that feeling about the benign environment and Balance Sheets that consumers and corporates have going into any possible recession is why maybe the market has not been more freaked out before about the prospect of an economic downturn and her comments are in stark contrast to what weve heard from jamie dimon who is more worried about it. He is. He sees potentially higher rates longer than consensus certainly. Lead story in the journal today is the spending by the consumer. What a crazy piece. They interview a bunch of consumers who say, well, cant really buy an apartment or house, we will splurge on the taylor swift tickets and go to italy on a vacation and just not worry about it. I think covid changed our psychology. You have to live, prioritize whats in the moment. You want to go on that vacation . Stop saving for it, just do it. You hear thosesentiments, you see it in the spending data, if the savings rate is down to now lower than prepandemic levels, it cant go on forever. You can only splurge a few times before then you run out of steam. I think as the excess savings come down and student loan repayments start today, its been on moratorium they had deferred payments and zero Interest Rates since the beginning of covid. We dont know what that will do to the Consumer Spending environment. Every retail analyst and economist is paying attention for sure. Its a key cohort of people. Did you know theres more Student Loan Debt than Credit Card Debt outstanding . I think ive heard that a number of times. Its big. Yeah. Same with auto loans, in the its an enormous liability. Its unclear how many will go back to paying. There are efforts under the Biden Administration to somehow reinstate some ability not to pay. Right. Still its a burden. Its a headwind. I think about half of the debt on Student Loans is owned by 10 of borrowers who are in the upper quintile of income. Its not a lower income story. No, but it will hurt the lower and middle income consumer even worse. Thats a headwind going forward. At the same time, you talk to these companies and it depends on what industry youre talking to. Arvin was on friday, he was talking about tech spending two Percentage Points above gdp and he expects that to track. We look at what the demand signals are. Our demand signals are driven by our pipeline and forwardlooking bookings. It looks quite healthy for next year. All that said, we need the next three months to figure that out before being precise about 2024. It was more positive than julie sweet. She didnt seem indicate that there was an economic slowdown. The numbers did. Declining growth. It raises the question on whether tech is safe to get back in. Goldman sachs saying sell energy and rotate back into tech, the hedge funds they have been tracking saw a big trade in that direction last week. Notional selling of energy last week. Notional buying of tech, biggest in two months. Then you have the goldman also today adding nvidia and okta and isn cintas replacing those with crm and johnson controls. Its a muddy debate regarding q4 and the tech trend. The other debate is who is protected in this world of higher for longer Interest Rates . David kostin writing the key risk for s p r. O. E. Is the higher interest expenses and he picked out costco, cisco, paychex and visa. Weve got a lot of the strategists weighing in. Morgan stanleys mike wilson, hes using the opportunity for not having a particularly good quarter for stocks to once again say valuations look more ex extended today. This gets back to the heart of our conversation, nominal and real Interest Rates have risen amid supply and demand. And tom lee, who is constructive as ever on the u. S. Equity markets. No doubt its been a rough few weeks for his bullish call, he says the bottomsup s p forecast for q3 are rising. Expected to rise 6. 7 x Energy Improving on the 3. 6 seen over the last quarter. 7 out of 11 s p sectors expect todd show positive growth in the Third Quarter. Hes constructive and likes the negativity. Yeah. September didnt go his way. I think he was looking for a couple Percentage Points to the upside at the beginning of the month. We came in down about four. Take bank of americas top picks, boeing, kraft heinz, teva, you dont see a ton of tech in there. I will add some of the tactical ideas include microsoft. Whats so interesting is that even though the economy is softening and you see signs of this everywhere, some of the safest sectors have been beaten up the hardest. Sentiment is so negative on those. You have higher rates and that stands in the way, its more attractive than equities that pay fat dividends. If you think were going into recession, usually those sectors outperform. If you say so. We can ask the kellanova ceo about that. We have tesla delivery numbers out. Well get to phil lebeau on that after the break. Some of these numbers coming in even after estimates have been shaved. We have upgrades to names including rivian. Look at the premarket. Some red arrows to start q4. Eve is it possible . With comcast business. It is. Is it possible to help keep our Online Platform safe from cyberthreats . Absolutely. Can we provide health care virtually anywhere . We can help with that. Is it possible to use predictive monitoring to address operations issues . We can help with that, too. With the advanced connectivity and intelligence of global secure networking from comcast business. Its not just possible. Its happening. Heres why you should switch fo to duckduckgo on all your devie duckduckgo comes with a built n engine like google, but its pi and doesnt spy on your searchs and duckduckgo lets you browse like chrome, but it blocks cooi and creepy ads that follow youa from google and other companie. And theres no catch, its fre. We make money from ads, but they dont follow you aroud join the millions of people taking back their privacy by downloading duckduckgo on all your devices today. Teslas delivery numbers seem to be a bit below expectations. Lets go to phil lebeau for those numbers and some other numbers as well. Phil . They are below expectations. The street was expecting tesla to deliver 448,000 vehicles in the Third Quarter. Deliveries coming in at 435,000. Not well below, but definitely below expectations of 448,000. Production for the Third Quarter coming in at just over 430,000. For the year they delivered basically 1. 33 million vehicles. The guidance, by the way, remains unchanged at 1. 8 million vehicles. The cyber truck is what people are looking at. As we look at shares of tesla. The original target was cybertruck deliveries to start in the Third Quarter. Q3 has come and gone. We still dont have cybertruck deliveries. That is not a huge surprise. Nobody in the auto world was saying this is a big deal if they miss q3. Theyll be coming at some point. But this is not a surprise that there is a slow first delivery and it will be a slow ramp up on cadence as well. Lets quickly talk about rivian. Those shares getting a pop after q3 deliveries were better than expected. Deliveries at 15,564 vehicles. The estimate was 14,000. For a long time it was 15,000, just within the last couple of weeks, wall street brought it down to 14,000. They produced just over 16,300 vehicles in the quarter and affirming its fullyear guidance once again of production of at least 52,000 vehicles. Finally all things auto, lets look at the big three automakers. Gm, ford, stellantis, we talked about this on friday. You now have 25,000 uaw workers who are theyve walked off the job. Theyre picketing out in front of facilities, five assembly plants. You had the automakers, executives voicing their frustration on friday. You had sean fain coming back and saying, no, we wont deal with the way these guys are how theyre handling things. Were nowhere closer to a resolution on this. Yeah. A lot of Different Things to get to. Im curious on rivian. They raised all that money on the ipo a bit back. Where are they in terms of potentially needing more cash or do they have enough to take them through this period . They have enough to get them to the r2 production. Now the question becomes, that r2 production, theyre in the process of building a facility down in georgia to the east of atlanta. Its going to probably come online. Youre looking at late 24, early 25, production is not going to really kick in until 25, thats the r2 model, the smaller suv, smaller crossover suv. That becomes the question, they have the money right now that will get them to where they need to be at least for the foreseeable future. Then you get to r2 and the question becomes how is your funding . Do you need more capital . Now weve seen the strike expand in terms of the number of workers and number of furloughed. This is something that everybody is watching as it could have an impact on the broader economy and probably already has. Any sense on where these negotiations go this week and how much longer well be dealing with this . I dont think it gets resolved soon. Weve been saying that for some time. Sean fain believes he has leverage and he has enough time on his side that he can push this further. A good example of that is on friday they said they got a lastminute offer from stellantis where stellantis has now said cost of living adjustments, were willing to throw those into the contract. For a long time it was, nope, were not doing cost of living adjustments. Now theyre saying we will put those in the contract. Thats the kind of progress sean fain is looking for. The fact that we have not seen it regularly is not a surprise. I think that sean fain and the uaw look at in as we can push this further. Were not to a point where public sentiment or people on the line are saying settle it. We need to get back to work. Therefore they will continue pushing this. Thats kind of backed up in some of the chart work in the last week or so showing either that the union wages should have a relatively muted impact on overall Wage Inflation or in some cases have not even kept pace with nonunion wage increases over the past couple of years. Thats what drives the workers. Whether you go to some of the plants whether in wayne, michigan or toledo, they truly feel like they have been shafted over the last four years. Yes, they were under contract and nobody is disputing that. But they look around at the rest of the manufacturing complex in this country and say, look at all these raises these people are getting. Look at the record profitability of the big three. Why am i getting 3 or 4 . Seriously . That is the attitude that you hear from people on the line. That goes back to sean fain and his negotiating style. He believes that he has that support. Its not eroding any time soon, which is why he believes he can push the automakers further. Hence why the lebeau meter is in negative territory. Yeah. Let me end where we started on tesla. As you said, still target around r. Round 1. 8 million vehicles for 2023. Will report numbers on october 18th. Any sense well get along the way in terms of demand in china and how much that may impact the overall number . I dont think we get it until they report. I think it will be during the analyst call that we get some better color from elon musk and his team in terms of what theyre seeing in china. Remember, earlier this year when they tesla along with a number of other automakers in china, there was a hope that perhaps they had reached the detente, that they werent going to continue to cut prices. That has not happened. I heard you talk about this, as a result it keeps getting pushed lower and lower in terms of the asking price in china. That is a huge driver of what well ultimately see for the q3 results for tesla. Phil, thanks. Well see who has the biggest tolerance for pain if the price cuts continue. Phil lebeau talking some union stuff and the deliveries. Lets look at the premarket here and get the first session of the week, month and quarter under way when the opening bell rings in about seven minutes. Uncertainty . Or opportunity. Whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined Risk Management are needed most. Drawing on deep expertise across the worlds public and private markets in pursuit of longterm returns. Pgim. Our investments shape tomorrow today. You know when you have those moments . That time to reflect. To be like wow. What did i do to get here . city ambient noise right. Work. You worked hard and its time for a bank thatll work hard for you. Everbank brings security and a guarantee. That youll earn a yield in the top 5 of competitive accounts. Going, got you where you want to be. Were the partners for your next move. Everbank. Advantage, you this is american infrastructure. Megawatts of power, rails and open road, and essential services of every kind. All running on countless invisible networks, making it a prime target for cyberattacks. But the same aipowered security that protects all of google also defends the systems running americas infrastructure. For these services. For the 336 million of us living here. Starting off the new quarter and month under pressure here with futures. Here are the biggest losers premarket. Tesla on the list on 2. 5 on deliveries missed forecast just out. Carnival cruise on there as well with more selling after the quarter, which was a good quarter and good profitability and some forecasts from the ceo on demand. Solaredge gets a target cut at barclays. Well hit all the movers for you and why including treasury yields which continue to drift gh wn e eng ll comes right back. Ip window has gotten more interesting. Today birkenstock. Well look at this as we take the temperature of the them. Lvmhs chairman and his family have been an investor in the past, may also buy stock in the ipo. Testing the waters is right. I talked on friday with adena friedman, the head of the nasdaq, she called the environment trepidatious. That was her word. She said ipos are kind of a question mark, they had strong debuts but since then have faded. Sequoia saying it has not made any money on its 2021 investment in instacart. Again, the big one is still trading above the price. Yeah. Lets get to the opening bell and at the big board, it is kellanova celebrating the launch of its cereal business. Steve cahillane will join us on set in a minute. At the nasdaq, hologic, marking Breast Cancer awareness month. The bulls may have been thinking we could enter october with a bit more heat. One thing on the plus side that we didnt talk about is the china data. It was a manufacturing number. It went above 50. Back in expansion territory. That was a little helpful and also played into the narrative that the china data has turned for the better. The stimulus is starting to work. Its not booming, but it is certainly important. That is the first above 50 since march. I noticed last week mizzuho tweaked higher. The world bank downgrading the asian economic forecast, both for this year and for next year. Part of it is on the weakness in china. I want to pull up the exact number. Growth for china they leave at 5. 1 this year. For 2024 they lowered the target to 4. 4 from 4. 8. They cited longterm structural factors there, elevated debt levels, weakness in the property sector. East Asia Pacific Economy only expected to grow 5 , which is also lower because of some of these problems. Thats a focus because for investors its been a lot of hammering over the u. S. And europe lately. You need asia to grow as well, especially china. China continuing to grapple with serious issues in its property sector overall. We talked about evergrande and the detention of executives there. Theres a hope of it relisting and Country Garden and its issues in terms of potential defaults as you look at japans nikkei. The china and how the government responds to it and what they choose to do or choose not to do given its importance overall in the chinese economy and for the chinese consumer, where so much of their savings is really related to their ownership of property. East asia, too, they have been beneficiaries of the tensions between the u. S. And china, whats interesting in this report that the world bank puts out is theyre starting to hurt because of some of the measures like the Inflation Reduction Act and the more protectionist measures from the Biden Administration favoring u. S. Manufacturing and canada and mexico over places like that where they are actually seeing electronics and machinery exports from china and Southeast Asian countries get hit as a result of this. Just another Global Growth factor to watch. Wanted to come back to tesla. You heard the delivery numbers. 435,100. Phil had it at 448,000, others as high as 455,000. For tesla, it was a miss. Dan ives, friend of the show, nothing to write home about in these numbers. The street will be left wanting more. He does note they are still committed to delivering 1. 8 million overall vehicles for 2023. He does see momentum ahead. Better days ahead as well is another way he put it for the next year of 2024. Some of the estimates prior to last week were the 515 range and it got cut. Factory down time in shanghai. Tesla said that in the rel release. They said planned overhauls of the factories, which is something we announced and remain unchanged in the delivery numbers. Tesla is down a little bit, maybe thats why were not seeing a bigger decline there. It is interesting were seeing a bounce today in apple and nvidia and meta and google and microsoft. That wasnt the story for september. Especially with apple. Tech is the only thing working at the moment with infotech green. Fdx gets an upgrade today. Susquehanna goes to positive. They go to 315. Longtime opportunity they say in cost rationalization and much more favorable to fedex than they are to u. P. S. I mentioned apple. Apple, i guess the news today is theyll issue a Software Update to address the iphone 15 overheating complaints. Not sure if thats a factor and this report, im sure youre all over it as i am, from a trade magazine on f1 and the business of f1. A report that apple is looking at a global media rights deal for 2 billion. Its interesting because apple did the mls deal and its benefiting from that from messi. F1 never had a global deal like that. We can contemplate it. Is f1 stock up . Thats been down lately in part because tko, the merger of wwe a and the merger of wwe and ufc, that tko had been getting hit. You can see as a result of coming into a sports rights deal with our parent company, with nbc and peacock that was not at least what many investors had hoped. Formula 1 had also been down. Its a liberty company. I know youve been following closely. Yes. Larger questions when you bring up apple and sports rights about their commitment to it and how deep they want to get into sports rights because in a way, given that it was live programming, you can argue about wwe and live sports programming and it not coming in with the number anticipated. A concern that i picked up over the week about how that will ultimately play. Will the nba do as well as it expects to. The nfl is its own thing. You have to own it. Thats kind of a question and one of the keys is how big will the streamers be overall, particularly the ones that seemingly have no price cap, apple and amazon, but they have yet to be fully in. That would be an interesting deal if they were to go for 2 billion for global rights for f1. Espn has the u. S. Rights to formula 1. Thats locked up until 2025. This is a longerterm story. You can see it as having a Significant Impact on those shares. They had been down in part because of worries about their ability to negotiate given tko. Its a big number. Its a bigger number than anything f1 has gotten but it speaks to the rise of popularity in the sport. We finally have a meeting between the actors and the amptp. The first time in months. Not doing a lot for the legacy media names. Well see, david, if they can recreate some momentum that the writers got in a hurry. Yeah. A bit of a bump last week in many of those names after the writers did reach that deal. No updates that i heard of in terms of getting a sense as to how far or close they are to an agreement with the actors. Did you see that brutal downgrade of toast . We dont talk about toast that much. This is the restaurant tech company that went public in 2021. The name was downgraded 30 to 16 on the price target. You know why . The obesity drugs, the ozempics of the world, this is becoming a bigger theme. The concern is that americans and people around the world, because a lot of them are on these drugs will be eating less and dining out less. The threat to the Restaurant Industry because of these drugs is real in our view. I went back and looked at this. Darden last week reported results, got a question on the Conference Call about this drug. Cramer last week, we were charting hershey versus lilly, we looked at medtronic. Looked at mcdonalds as well. This has been a theme. Whether it proves correct or not, a lot of hedge fund managers, ive been talking about it over the last few months, theyve been wondering whether or not it was worth trying to short some of these names. Food names. Yeah. Or even fast food. Who knows. Cocacola as well. If jim were here, he would talk about alcohol. Smaller portions. Yeah. Cocktails in the uk are smaller. Cocktails. Cocktails. Yeah. Thats unfortunate. They dont want to drink as much. In the uk . So they have 20 of them . Have you ever been out for happy hour in london . Yes. At the fancy uk cocktail bars, i think theyre more trend setting than the pubs. Im not talking about the pubs. Got it. Kellanova, formerly known as Kellogg Company completing the separation of its north american cereal business today. The company will focus on snack, international cereal, noodles as well as north american frozen foods. Steve cahillane joins us on set after ringing the opening bell to talk about the spinoff. Its finally here. Finally here. Very excited to ring the bell. Its 18 months in the making. Kellanova is off to the races today. Do you want to remind viewers about the motivation and the thinking behind this one . We felt the vcereal business could flourish and 80 of our portfolio is snacking, driven by five of the largest brands, pringles, rice krispie treats, cheezeits and we think the market will appreciate that brand more than historically. How do you compensate about the lack of scale . Thats what it has always been about, shelf space, getting distribution. I guess now that youre leaner, you can be more nimble but the scale is a negative, isnt it . Youre talking about a 13 billion business. 2. 7 billion were spinning off. In north america, where were spinning it off, were still very much a scale player and growing faster than most retail. We provide a tailwind of growth. Pringles, rice krispie treats, pop tarts, great brands. Great brands, but are they growing market share . You have to look at a two or threeyear trend. Over that time period, yes, theyre all growing. Theyre growing share and growing nicely. Steve, are some of these new drugs a concern at all in terms of peoples willingness to eat a lot of pringles or pop tarts . Youre not on them. But i like pop tarts. Youre not on the obesity drug. I am not. In all seriousness, does it become a concern . Were not complacent about anything. Were being asked the questions, but its way too early and very premature to talk about. We dont know the penetration that these drugs will get. We dont know longitudinally what happens with consumer behavior. We know what people say theyre doing in terms of changing their diets. Its way too early to tell. Well watch it and understand who will be on it and then understanding what if anything behaviorally changes over a period of time. Its far too early to forecast this as a headwind in our opinion. When do you expect volume and price to cross paths again . We think its starting now and into next year. If you think about the last 18 to 24 months, weve taken 30 pricing, thats like 10 years to 12 years of pricing in a short period of time. Of course it will affect volume and the elasticities returning. As we get to 2024, our supply chain is back to precovid strengths and stronger so we can make our customers orders at a fill rate thats very high. We can bring innovation back to fold. Pricing doesnt have to continue to go up. Were looking at a more behind cost inflation environment into next year. All those things work to help us think about volume in a more construction fashion. To the degree youre discounting now, is it getting the reaction from consumers like you were expecting . Its starting to. Were not back to prepandemic levels but were getting there. Backtoschool was more prepandemic. As you get to the nfl and thinking about super bowl promotions, i think next year youll see an exciting retail environment. So the other concern around packaged food right now besides the fact you dont have the same Pricing Power is that were starting to see consumers trade down. That consumers are pinched, especially at the lowincome and its coming ahead even more headwinds like the student loan payment reduction. Are you seeing any of that . Theres no question that c consumers are feeling the strain. We work very hard to earn the right to be in that shoppers basket. We have to think about affordability. We have to think about package sizes. We have to think about where consumers are in their journey from a monthly standpoint. At the beginning of the month, times are easy. At the end of the month, times are tough. The u. S. Consumer and the International Consumer have proven to be very, very resilient through what would be a challenging set of circumstances. You created this pure play now, but i wonder, do you expect to grow it simply organically or is it possible you still have a currency, there may be some brands out there that fit into the portfolio. How does m a if at all fit in . Our Balance Sheet is very strong. Our leverage ratios are down. We can make acquisitions. We will measure that against the organic opportunities in front of us. Were only starting to expand cheezeit out of the United States. If we see something inorganic that can add share value, well be a buyer. Kellanova is kellogg and nova meaning new, is that fair . We wanted to keep the iconic k and the beginning. When you see kellanova, we want people to think i recognize that, what is that . It starts the conversation around who we are and who we aim to be. I remember when we spoke and you first announced this split, the big concern was keeping the kellogg name. Were thrilled. One of the biggest things when we announced this is im so proud to say i work for kellogg. Please dont take that away from me. So, the Employee Base was excited when we announced kellanova. Theyre excited about the future. You know, it starts today. You maintained the dividend. I know that was a key throughout, correct . We maintained the dividend whole between the two companies. The vast majority of that goes with kellanova. Its an important thing to our stock, its important to the share owners. Yes, it remains completely hole. Congrats. Thank you. Great to be with you in person. Lets get some pmis out with rick santelli. These are much stronger than i expected. 49. 8, 49. 8, what it doesnt dismiss, even though its better than expectations, it still represents 9 out of 10 megtive numbers in a row thats the sixth in a row under 50 in contraction mode. However, 49. 8 after having said that is still the best since april when it was above 50. It was 50. 2. This is also a very important day, if were getting closer to 50, longdata treasury yields are all on track to make new cycle high yield closes. We want to pay close attention to that. Vernaculars were gums hot in treasuries. Squawk on the street will return after a short break. business can happen virtually anywhere. but theres nothing like being there. At national, you can skip the counter. And choose any car in the aisle. Even manage your rental right from the app. So you can give some quality time to a quality cause. Swing by to see one more customer. [audience cheering] and really get down to business. Go national. Go like a pro. You founded your Kayak Company because you love the ocean not spreadsheets. You need to hire. I need indeed. Indeed you do. Indeed instant match instantly delivers quality candidates matching your job description. Visit indeed. Com hire our therapists give their all each day. And while were in the business of taking care of others, its important to make sure our therapists know that with benefits from principal, theyre taken care of too. its been a rough six weeks for clorox after disclosing that cyber aattack. Lost about a fifth of its market since midaugust. Upgrades to buy said all manufacturing sites are finally operating and when they quantify the Impact Shares could rally. A target of 152. Well take a break here. Dow down 119 to start the month of october. Cmon, were right there. Cmon baby. Its the only we need. Go, go, go, go ah touchdown baby touchdown are your neighbors watching the same game . Yeah, my 5g Home Internet delays the game a bit. But you get used to it. Try these. Theyre noise cancelling earmuffs. I stole them from an airport. Its always something with you, man. Great solid greek salad . Exactly dont delay the game with verizon or tmobile 5g Home Internet. Catch it on the xfinity 10g network. It is the first trading day of the Fourth Quarter. Weve got the s p 500 a little bit lower. Tech is bucking the overall lower trend. Nasdaq up a third of 1 . Communication services and Information Technology the only sectors higher. Bob pisani joins us at post nine looking at the early movers. Good morning. September living up to its reputation as the worst month of the year. The hope is earnings kind of distract everybody from the rising Interest Rate situation. Well see. Nice tech is bouncing today. Commun Communication Services. The economically sectors still under pressure. The transport terrible performance, 13 , consumer discretionaries 10 off 55 week highs. The russell forget about it, 13, 14 off of their recent highs. Nice to see the tech bounce. Look at consumer discretionary. Its weak as tesla is weak. Decent reports from lennar and auto zone. Doing no real bounce here in the economically sensitive sector. We go into the earnings season. Heres the good news, the numbers have been going up for the Third Quarter and the Fourth Quarter. 15 have beat. Thats good news. The estimates are rising modestly here. Heres the problem. We have to see what september reporters are doing because thats when the Interest Rates went up. Pepsi starts the September Quarter october 10th. Not jpmorgan. Its pepsi that starts with these sent quarters. The problem we have is the estimates have been going up, but not enough to overwhelm the Interest Rate scenarios. Companies that have estimates raised by analysts, amazon, gm, horton, ford, meta, netflix, alphabet, Communication Services, tech, nvidia, apple, t intel. Rising expectations for earnings in the Biggest Companies that are throughout. Yet, its not helping because its overwhelmed by the macro situation being overwhelmed by this, the 10year yield weve been seeing such a problem for everybody and for all of the situation right now. Of course take a look at lennar. Want to show you this. September 15th, lennar came out, excellent earnings, beat on the top and bottom line. Look its been down, yet they said business is good, taking business away from existing home sales. Doesnt matter. Rising Interest Rates, you sell consumer discretionary, sell autos, home builders. Good earnings picture, overwhelmed by the macro situation and youve been talking about this, sara, that 10year yield is the biggest problem weve got throughout and thats what we want to hear. How much is the that impacting the consumer right now. You see what it did to lennar on a great earnings report, overwhelmed by that kind of situation. Well, it also means utilities, real estate and staples are the worst performers which would do well during economic softness. With the rising rates watch the high yield. Hyg. Watch high yield etfs right now. Because if, in fact, there is a problem there, those groups that have the most debt outstanding, theyre going to be the ones that are more sensitive right now. I would watch hyg. Thanks. Okay. Talk to you in a bit. Still to come this morning, whartons professor of finance Jeremy Siegel how to get ready for q4. captivating music the first law of thermodynamics states that energy cannot be created or destroyed. but it can be passed on to the next generation. its inspiring to work at a place where our patients succeed. And where we as therapists do, too. With great benefits from principal, our clinic shows they truly care about us. welcome to another hour of squawk on the street. Im sara eisen with Carl Quintanilla and david faber, live for you from post nine of the new york stock exchange. We begin the new month and quarter, a little bit soft, although coming back a bit. The s p 500 unchanged. Why . Because theres strength in Information Technology and Communication Services and thats offsetting the weaker parts of the market. Today its utilities, energy, materials, health care, consumer staples, financials, and real estate. Though the nasdaq composite has been higher. Its up about a half a percent led by apple, nvidia, meta and microsoft. A bit of a reversal in the trend we have seen inseptember where energy was the outperformer and technology hit hard. The dow weighed down by goldman sachs, mcdonalds and 3m, although cautiously still watching yields which have been the big headwind for the market rally and economy. And the 10year yield up 4. 63 . Were pushing near the highest levels in 16 years. Were 30 minutes into the trading session. Three movers were watching. Tesla is in the red after delivering numbers come in light. More on that. Norfolk southern is one of the biggest losers as bank of america downgrades the name to neutral cuts the price target on, quote, continued services challenges. Watching nvidia and okta today. Goldman sachs adding the names to the conviction buy list heading into q4. Getting some ism and construction spend for that we go back to rick santelli. Thank you, carl. Construction spending is out. Its up 0. 5 . If you have to go back in history to find if thats good or bad, well, the last two numbers, of course, have been better. You have to go all the way back to april to find a smaller number. Construction spending has been positive for the entire year, best month in january, up 2. 2 . Ism 49. 0, means 11 sub50 reads in a row. 11 sub50 reads in a row. And that number actually is equalled to november of last year. To find a higher number you have to go back to october. If we look at prices paid at 43. 8. Thats the best number outside of last month. You had one, two, two months that it was less than that and may it was a little bit better, so our comp there at least for the weakness was in may. New orders very important, 49. 2. That means 13 consecutive months sub50. 13. And finally on the employment front, the jobs report coming out, 51. 2. Guess what . We break the string of three consecutive sub50s. 51. 2 the best level since may. When it was 51. 4. Look at yield kurn curve moves as long maturities continues to be guns hot. Back to you. No change after the data. Thank you. Rick santelli. That just kicks off a week of heavy Economic Data now that government has managed to stay open and thats surprise deal on saturday night, we are going to get data and rick mentioned the jobs report on friday, were also going to get jolts which the fed pays attention to. The openings come down but there are plenty of them. Speaking to the tight labor market, the adp private sector report, jobless claims, and then punctuated by jobs. Fed speak from jay powell speak at 11 00 today alongside harker. Not sure if he will give clues because its a roundtable discussion on workers. We Pay Attention to all of it, of course. The question is, what happens to tre treasury yields from here . Its about higher for longer and the fed reiterating that message for a while but feels like the market has glommed on to it in a bigger way in the last few weeks. We started september in the 420s on the 10year and ended in the high 4. 6s. Prices paid just now looking for 49. 43. 8. Might be one reason the s p has gone green. Its good news because it suggests that inflation is continuing to come down and will it be good enough for the fed to stop raising rates . Maybe. Cutting rates sooner . Thats the question. We have come down substantially and the last part could be the hardest parts with stickier Services Pricing and oil prices on the rise and whether that will seep into core inflation and whether they can ignore the headline inflation for core. The chart of the day as it relates to treasuries. It is the economic surprises so basically is the economy Getting Better or worse than expected versus treasury yields. And what you are seeing is that treasury yields are the orange line that continue to go up, up, up. The blue line are the economic surprises and they are coming down because were seeing a lot of missed economic reports, ie, softening economy, softer than expected. This is not what you typically see. The two usually track each other and this just proves the point that weve been trying to make which is the rise in yields isnt completely tied to a stronger or firmer economy and thats why its catching a lot of peoples attention and we have to figure out what it is and whether it will continue. Which takes us to something weve talked about a lot and will continue to. The underlying fundamentals dont necessarily call for higher rates and is it maybe were starting to see impact of supplydemand, the need for fund these deficits and unwillingness perhaps some of people to step out at ten years, for example, and give the u. S. Government its money what would be or should be a rate reflective of current economic conditions. You have totalk about the fiscal credibility, fitch downgrade, Government Shutdown averted, but its kicked the can to november 17 where the they have to figure out big issues like paying for the war in ukraine. Theres major divides not necessarily that thats why the treasury move is like this, but speaks to the overall dysfunctionen and lack of credibility when it comes to dealing with the debt problem and with the higher debt. Its coming at a time where Capital Gains track not contributing as much to the federal government at a time where debt Interest Payments are higher. Right. All of this is converging and, i dont know, people are getting flashbacks. We talked to ed last week who coined the bond vigilante term. Anything like the 90s. No. Crazy move in 1992, but we watch it. Will it be enough to impact politicians . Not at this point. Lets keep watching it. And the deficits are fwhakds. I suppose if you were to cut them over time it might have an impact. We know funding in terms of deficits for this year and next year, right . We know, yeah. But im saying in terms of forcing action, that the government could take, when it comes to austerity or reducing the deficit doesnt feel like were on the brink of anything like that. Not until mid november at the earliest. Meantime our next guest does not believe the fed will move rates on november 1st as Higher Oil Prices continue to pressure the market. Jeremy siegel joins us this morning to discuss. Professor, great to see you. Want to get to the q4 playbook but im curious about your views with what weve been discussing the separation between the movement in yields versus inflation products, break even, do you think thats largely technical and how much can it get reversed . Well, i think the economy is still very strong. Take a look at this ism report. You know, certainly is was above expectations. System of Third Quarter gdp are north of 3. 5 . I mean, some like the gdp now are north of 4. I think this economy is cooking. The economic surprises, some of them, have been negative, but on the whole, we have a strong economy. And, of course, the Rising Oil Prices which is really a supply shock because opec i think is at a record restriction from their capacity. Dont forget bond holders look at overall inflation. They dont just look at core inflation. Core inflation might be doing good. Overall inflation could be affected by the oil prices. You know, i think that the higher yields, thats whats been pressuring the equity markets. I think the recognition that hey, what happened last year, bonds not being the hedge that they had been for 20 years against stock declines, has sort of dented, do you want bonds in your portfolio when inflationary episodes are likely to be more frequently in our future. You cant say that bond yields are rising because the economy is strong because its not strengthening and a big part of the move happened in the last few weeks, professor siegel, where the economy, while coming from a good, strong base, is weakening, not strengthening, right . So theres Something Else going on. Im not you know, as i say, the third we just started the Fourth Quarter. Third quarter is going to be north of 3. 5 . Were going to get positive payrolls again. Whats happening is a rebound in product fichts remember 2022 was the worst productivity i think that we had in 75 years, and what we see is a rebound in productivity and, of course, the expectation that ai may perpetuate that rebound in productivity into 2024, so we dont need blowout payroll growth like 250, 300,000. We can have 150,000 and still have gdp growth above what weve had for the last two, three years. You know, i think that the economy is strong enough. I think that core inflation is going to be stubborn, but lets face it, the fed, you know, has to look at whats happened to the yields and that has affected home building, no question. Housing starts were down. Home building sentiment in the index has fallen quite a bit in the last two months. As you guys have mentioned, were getting 30year fixed mortgages beginning to move towards 8 . That has to have some depressing effect. Other than that, look at jobless claims, 200,000, wow. I mean, that thats one of the first indicators to really show weakness on the real side. I dont see it yet. Professor, i want to divert for a minute, you mentioned ai, and im curious about your students. Youre teaching the future hedge fund managers, private equity, Investment Bankers, and Business People of the world, how are your students viewing ai at this point and what it means for their ability to get a job, keep a job, and build a career . I think a lot of them are worried. What they did very best now can be done by ai. So theyre trying to get ahead of that. What could i add that ai isnt . Dont forget ai scrapes the web and theres a lot of false information on the web as we know, so ai is far from perfect. People have to be able to detect it. Clearly its something thats going to add productivity and except for those people that can interpret really big events that i dont think ai yet can do, it summarizes all the details extremely well, but to foresee the future or give you a context of the future and thats what we try to teach here at wharton, i dont think ai is there yet. Finally, professor, the fed, if you dont think they will move in november but talked about the resilience of the economy, why would they not to move again to show they mean business . Because again, take a look at the price report is. Outside of the stubborn super core, we keep on redefining it into a smaller amount and that takes so long to go down. You know, risk with a tightening of yields 50 to 100 basis points that will feed through in the Fourth Quarter to perhaps slow things down, not recession, but slow things down, i think november 14th is another data potential. We have the auto strike still there, the effect of the student loan repayments. You know, my feeling is at this particular point, he will opt to hold, but dont forget, we have four weeks more of data to see whats going to happen. Yeah. Luckily well be getting the data thanks to the averted shutdown. Professor, thanks. Talk soon. Jeremy siegel this morning. As we kick off a new month and quarter squawk on the street has a jampacked week of interviews including what investors need to know as we close out the year and wall streets top pick across tech, energy and more. Something thats going to sustain us in the coming days. All right. Shares of tesla actually not doing atoo badly. Lets go to phil lebeau for what may going on. David, we had the retooling of factories in shanghai as well as in texas. There was an expectation these numbers were going to come in light compared to q2. Theyre lighter than the system that were out there. When you take a look for the Third Quarter they delivered 435,000 vehicles, just over that a. The street was expecting 448,000 vehicles. The production rate was just over 430,000 vehicles. Lackluster would be one way to put those numbers into some context here. Again, people were expecting this as tesla forecasted were going to be bringing on texas as well as shanghai for a bit during the Third Quarter. In terms of the annual guidance that remains at 1. 8 million vehicles. Thats what tesla expects to deliver. Its 1. 32 million when you add in the Third Quarter. Thats what they have to make up in the Fourth Quarter. The expectation is they will get there. By the way, the cyber truck a lot of people were saying, wasnt it supposed to come out in the Third Quarter . Thats not happened. Well see if that happens in the Fourth Quarter with production by some system likely to start late october, early november. Those are guesses at this point. Take a look at shares of rivian. Take a look at the stock and the day when the Company Reported its initially there was a pop after these numbers came out. Reporting q2 or q3 deliveries of 15,564. The street was expecting 14,000. Better than expected with production coming in at 16,304. The full year guidance remains at 52,000 vehicles. Thats where they are right now. Tomorrow we will be at the rivian plant in normal, illinois. You do not want to miss our exclusive with rj scaringe and how its looking 24 into 25. As you pointed out and david pointed out, sara, the question becomes, will liquidity, the capital that they have on hand, will they need to raise more capital . They believe theyre in good shape at least leading up to the beginning of r 2 production in 25. As youre reporting the ev delivery numbers, phil, im wondering if the ford and gms of the world because of the strike, if their plans which are pretty ambitious and start to ramp up get delayed . I dont think so. Not at this point. I dont think that the strike is so catastrophic where they have to dial back their plans. Jim farley says there is a limit to how far they can go. Say you have a super extended strike, that may change the calculus in detroit for the automakers in terms of their ev investments at least near term. Were nowhere close to that at this point. Detroit three manufacturing losses 1. 2 billion from anderson economics tracking this thing. Thank you. As we lead to break our road map for the rest of the hour. Birkenstock sticks off its road show ahead of a potential debut this week. What investors need to know. Insurers are hitting fresh highs, some warning of big risks ahead for that sector. The q4 playbook for two beaten down sectors, financials and energy. 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Now you can stay reliably connected through Power Outages with unlimited cellular data and up to 4 hours of battery backup to keep you online. Only from xfinity. Home of the xfinity 10g network. Here s and all of our stuff where we want to go. But, our cars cant take us e with unpaid tolls. Vehicles with overdue, unpaid tolls may not be able to renew their registration until outstanding balances are paid. Payment assistance is available. Visit bayareafastrak. Org ase so go pay your unpaid tolls y and keep your wheels on the final trading quarter of the year is under way. Q3 was a rough ride following a huge rally at the beginning of the year. Were kicking off our series looking at specific sectors and stocks that investors need to be watching as we head into q4. Today, energy. Up 11 over the last three months but only up 3 year to date. Joining us to discuss the outlook for energy and oil prices is the Energy Aspects founder and director of research. Interesting to see it flip lower today. A reason to expect the reversal of the trend in q4 that weve beening me. I mean, look, weve been saying and i think in the near term last week and this week as well, some consolidation is likely given we are, you know, weve moved higher substantially. Some risks are for sure around kind of options positioning but thats very much a near term phenomena fundamentally. This is a market that should move higher. We never move higher in a straight line. They make great headlines but overall hasnt really changed in terms of whether the direction of prices are you. You think prices can continue to rise from here . You dont think the administration might step in or some type of other supply side issue . No. Look, for me, opec plus continue to remain cautious. They continue to remain very much of the opinion that the macro is weak and they need to remain vigilant rather than bringing back production quickly and early. Even russia, whos enforced some oil product export ban, isnt jumping up and down to export more crude. They came out and said that because both saudi arabia and russia and opec as a whole are realizing significantly more higher revenues and as a result of that, i think they are fine in terms of letting prices go up a little bit simply because even at these price levels because gasoline has been coming off youre not seeing a negative impact on consumers and, you know, we do believe oil prices need to go up substantially from here if gasoline prices continue to come off before it makes a negative. In terms of the administration, we think an sbr release i shouldnt say its likely but definitely something they could use. Maybe they use it for thanksgiving. Thats something theyve done in the past. 13 Million Barrels is what happened in november 2021. I wouldnt rule out a repeat of that given its an Election Year and they will probably do everything they can to lower prices. Its going to be a temporary impact because the market is tight enough to absorb that. When would you argue that inventories in the spr are dangerous . A threat to security . Its a great question. It depends. Look, right now with what u. S. Demand is and u. S. Production is, we think you could draw down another 120 to 140 Million Barrels and still have some cover, but, of course, in the event of an actual outage, you would want more than that. That would be the bear minimum. If they were to draw it down another 120 to 140, thats absolutely the bear minimum you would fwhants an sb, r. There are potential issues with stability and can you actually draw that much down without collapsing. Those i dont think anybody knows the answers to those questions, but theres definitely, you know, when you talk to some of the technical folks they will highlight what to watch out for. Youre a buyer of energy today . Sorry. Could you repeat that . So your upshot youre a buyer of the dips in Energy Stocks . Yes. Yes. I mean, look, absolutely yes. Like i said, i dont think its going to go up immediately, but i do think even if we consolidate a little bit and we correct lower, i think ultimately this is headed higher given how law of entries are. Were fighting for crude everywhere in the atlantic basin. We should continue to edge higher. Thank you for joining us to kick off our playbook series. Thank you. After the break, shoe Company Birkenstock kicks off its road show amid whats been a pretty tough market for recenipost. Details in its updated filing next. The cheapest gas in town. And which supermarket gives you the most bang for your buck. Something else thats good to know . If you have medicare and medicaid, you may be able to get more Healthcare Benefits through a humana Medicare Advantage dualeligible special needs plan. Call now to see if theres a plan in your area and to see if you qualify. 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As we go into the second half or the Fourth Quarter really, we could see Interesting Companies come out, but we also would expect pore companies to be planning for the first half of next year. That was Adina Friedman giving her outlook on whats a volatile outlook market. Sounds optimistic. Her comments come as birkenstock becomes the latest company to test the waters filing an amended f1 kicking off its road show. Birkenstock planning to raise as much as 1. 6 billion selling 32 million shares between 44 and 49 apiece at these levels, birkenstocks valuation would be as high as 9. 2 billion in an ipo on a nondiluted basis. I think it was valued about 4 billion a few years ago when bernard arno invested in it. His son goes on the board. Theyre back in style again. This is a company that goes back to the late 1700s and used to be just for hippies late when . 1700s. Like 200 years old. 1774. Things you learn on this show. Who was wearing john adams was wearing birkenstock . Founding father. He was a young guy. Hard to farm in birkenstocks. They were hippieish and now back. They got a bump from barbie. They were featured prominently in barbie. Huge exposure to 4 x pressure in this case. Because its an international market. Obviously, its subject to the trends and the consumer and the manufacturing. David is going through the risk factors. Its a long lot of risk factors always important to read them in the s1. The performance of ipos has been okay. You talked to rene haas from arm last week. Thats hanging in there about above the 51 bid. Instacart. Not. And then the klaviyo has done the best, like 15 above. I always get the name wrong. That one interestingly is doing well. Klaviyo is. Software as a Service Model recurring revenues, enterprise is the tart, not as much consumer, so thats been an interesting barometer for some of the private Software Companies that want to go. Different directions. Yeah. Birkenstock, wow. See how it goes. In the meantime still ahead, you can take any news cycle and throw it out the window. The market is following the yield. That was ubss art cashin the first week of september. Were going to get his take on whats ahead now when were back in a couple minutes. Icy hot. Ice works fast. Heat makes it last. Feel the power of contrast therapy. So you can rise from pain. Icy hot. Welcome back. Im Silvana Henao with your cnbc news update. Donald trump stopped to speak to reporters at a new york court this morning as a 250 million fraud trial against the former president began. Prosecutors accused trump, his company, and two of his adult sons of over valuing and under valuing his assets to benefit his business empire. Trump once again denied wrongdoing on his way into court and called the trial a witch hunt. Meanwhile, a massive search effort is under way for the 9yearold girl believed to be in imminent danger after she vanished from an upstate new york camp ground. Authorities fear Charlotte Sena was abducted while on a bike ride saturday evening. They have deployed dogs, drones, boats and dozens of Law Enforcement personnel to look for charlotte. And two scientists whose crucial work paved the way for covid19 mrna vaccines won the nobel prize in medicine. The panel says the previous work on the messenger rna set the stage for the unprecedented Quick Development of covid19 vaccines which the package said saved lives and paved a path out of the pandemic. Guys . Back to you. Thank you. Just about an hour into trading and its kind of up and down kind of day on the s p 500 at least. Which is lower by 0. 1 . The nasdaq up 0. 4 . Did get manufacturing numbers better than expected but not expanding. New orders better, not expanding. More disinflation momentum. Dominic chu with more on whats moving. Most sectors as you point out in the s p are trading lower today but its the heavy weight sectors like tech and com services are keeping things near the glass line. On the other hand, on the other end of the spectrum, utilities down about 3. 5 right now. Far and away the biggest under performing sector extending its recent declines. The sector is down around 10 just this past week alone. Names like aes, constellation energy, pg e, among the biggest laggards in the sector today. Along with Nextstar Energy which has fallen 20 . Analyst says under performance is over done and next era should be able to manage above average growth. They note higher costs of capital and renewables and things like that in the high Interest Rate environments will persist as challenges. Keep an eye on the challenges, nextera, back down to you at the stock exchange. Thank you very much. For more on whats ahead for stocks lets bring in ubs director art cashin. Its great to take your temperature again, especially regarding the markets fascination with yields. You brought this to our attention weeks ago, but what do you think breaks the spell . I think what you saw, carl, was a recently the yield on the 10year spiked suddenly up to 4. 70. And then it recoiled and came back. A lot of us old timers say that looks very much like a parabolic exhaustion rally that they peaked out and eased. From that weve got this multiday autumnal rally in equities that popped up. I wrote in my morning comments today that you have to be careful. The yield on the 10year was creeping back up toward that 4. 70. Now if it goes back up to or through 4. 70 that violates that whole idea it was a top. That would make everybody nervous. So what i said coming in preopening, was that if the yield today gets up above 4. 60, up into the 4. 63, 64 area, it will put pressure on equities and sure enough, what were seeing they got up to 4. 65 briefly and that cut the rug out from under the dow jones, so i think viewers at home, your yardstick or rule of thumb will be once that yield on the 10 yea year, as it begins to inch up, it will put more pressure on equities. If it eases back that may give them a sigh of relief, 4. 60 or what not. And then just to diverge a little bit, carl. Yep. October is the month of bottoms. Okay. People you talk about weak months and strong months. October is a month of bottoms. Usually they come after some kind of climatic selloff. I dont know if we can call september climatic, but ordinarily you see in october a bottom is reached. Weve seen it in, heaven forbid, 1987 and the crash of 87 and crash of 29. 6 we had the same thing happen. On and on for 60 years weve been watching this thing. Somewhere in october were going to get a bottom. And where could that come from . Well, earlier you guys were talking about student debt repayments are going to start today. Guess what . In the middle of the month, on the 15th, there are billions of dollars in tax payments that have been deferred on the west coast because of the absolutely dreadful weather a year ago. October 15th, billions of dollars in back tax payments are going to come due. Its going to be a squeeze on the banking system. Its going to be a squeeze on liquidity. That may be a factor on bonds and stocks. Get ready for an adventure this month, ladies and gentlemen. Great. Art, what do you think is driving this yield move . Do you think its the fed talking higher for longer . Do you think its something about longer term inflation . Or fiscal concerns starting to be a problem . What do you think it is and where do you think it goes . Its a little bit of the combination. Once again, quite accurate to be on top of it. The fiscal side is beginning to pile up. Its not there yet. Were starting to see deposits leaving the banking system. People are using them for x, y and z. We had surplus money because they poured an awful lot of money into the pandemic and postpandemic relief problems, trillions of dollars. Some of that is drying up and that money is starting to come out of the banking system. Thats one of the factors on yields and the others are, as i say, youre going to get deferred tax payments, Student Loans. All these things are coming together in the month of october as we begin the Fourth Quarter. Were looking at a crab claw here and theyre afraid of getting pinched. Appreciate that. You have another pothole to monitor and truly appreciate the granular look at what the 10year means for equities, at least at the moment. Look forward to talking soon. Art cashin, thanks. My pleasure. Froinancials are on pace, higher for longer rates and new capital requemtss ll om the fed. The q4 playbook next. 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. Hi, my name is sam davis and im going to tell you about Medicare Advantage Prescription Drug plans that can provide more coverage than original medicare, including Prescription Drug coverage, all wrapped up into one convenient plan. With original medicare youre covered for hospital stays and Doctor Office visits, but you have to meet a deductible for each. And then youre still responsible for 20 of the cost. Next, lets look at Medicare Supplement plans. If a service is covered under original medicare, then a Medicare Supplement plan pays for some or all of your medicare deductibles and the 20 coinsurance. But they may have higher monthly premiums and no Prescription Drug coverage. Humana Medicare Advantage Prescription Drug plans include medical coverage, plus Prescription Drug coverage. As well as dental coverage that includes two free cleanings a year, plus a yearly exam. Vision coverage includes vision exams and a yearly allowance toward eyewear such as lenses or contacts. And hearing benefits include routine hearing exams and coverage toward hearing aids. Youre covered for Preventive Services like annual mammograms and prostate exams. Theres a zerodollar copay for routine vaccines and telehealth visits. And you get worldwide coverage for emergencies when you travel. You get all of this in one convenient plan. Plus, theres a cap on your outofpocket costs so, call or go online today to see if theres a humana plan in your area, to find out if your doctor is in one of our networks, and to get our free decision guide. Theres no obligation, just good information. Humana a more human way to healthcare. Welcome back to squawk on the street. The feds Capital Requirements for all large banks went into effect yesterday. Financials posted losses for the Third Quarter, but still outperformed the broader markets amid soaring yields. Rbc Capital Markets us to discuss the outlook for financials. Its not a pretty picture other than jpmorgan stock i dont have any of the big guys up at all for the year. What do you tell investors to get them excited, if anything, as we finish out the year . Thank you for having me on the presume. I would suggest its going to come down to when the fed reaches its terminal rates for fed funds. What weve seen in past tightening periods is when the fed reaches that terminal rate, the bank stocks, thats the catalyst for stocks to do better. What happens is six months after the terminal rate the deposit rates stop going higher but the yields on assets when they reinvest the cash flows from the bond portfolios, loan portfolios, theyre reinvested in much higher yields and margins start to expand again. I think thats the real catalyst. If you believe the fed is finished by the end of this year, margins should bottom out some time in the Second Quarter of next year if not sooner and that would be a positive event for the banks. Obviously, we debate that endlessly here on cnbc. When do you buy the stocks typically in advance of your expectation for rates topping snout. Thats a really good question. If you look at 94 and 95 you might remember, greenspan raised rates from 3 in february of 49 to 6 in 95. Stocks bottomed out in the late fall of 94. Same thing 04 to 06. Stocks bottomed at the end of 05. Now would be the time if you believe that fed is finished or about to be, right now is the time to buy based upon the past history of how these stocks have behaved. What about citigroup . I wonder if theres a catalyst here with the reorg . It under performed in the past quarter, under performed for a long time, the past few years. I spoke with jane fraser, the ceo, on friday, about what shes trying to do. Listen to this. Were focused on simplifying the bank. Its much more about eliminating the complexity, flattening the organization, taking out layers, getting easier for people to Work Together and deliver to clients. We will give a number in the Fourth Quarter earnings once weve begun the work all the way through the organization cascading it down, so we expect to be in a place that all of that change will have finished by the end of the first quarter. News on the timeframe and that a shes going to lay out numbers on potentially job cuts and cost savings Fourth Quarter earnings, do you buy it . Its going to be interesting saishgs, because citi as you know over the years has a number of reorganizations and has struggled. Jane frasier is turning around a battleship and what we really need to see is the outcomes of these changes. As the outcomes become apparent or materialize, thats when the stock starts work to. The effort is, obviously, very good. What shes doing needs to be done, but i think investors, because theyve been scarred with this stock for so many years, theyll tiake a wait and see attitude. We expect the stock to react favorably to the moves. What about broader fundamentals in the economy . Loan growth doesnt appear to be strong right now. Im curious to get your take in terms of how that will impact even if we expect rate have topped out . Its interesting, david, because loan growth has slowed down. It typically slows down with the slowing economy. If you go back over 50 plus years, loan growth in the u. S. Banking industry mimics the nominal rate of growth of gdp. The next question investors have to ask themselves is whats going to happen to credit quality because if we go into a soft landing like we did in 95 the stocks are going to have a marvelous year in 2024. If we have a real credit problem, not as bad as 08 or 09, but a credit problem will weigh on the stocks in 2024. Credit is the picture everybody has to focus on. Credit continues to be strong with the exception, as you know, you twice have talked about it, Downtown Office real estate in major urban markets is a problem. Finally, gerard, you have a number of buys on your coverage list. Any that stands out above all the others . Yes, david. The two i would point to, pnc, that Management Team has done a very good job in integrating the transaction and acquisition they did, costsavings program coming up, they also own the class b visa shares. You might recall visa announced theyre going to start allowing banks to sell that starting as soon as the fourth irst quarter. Pnc would be a top pick. The second one would be going into the quarter, we would throw in keycorp, key. They disappointed heavily this year, but we think thats behind them and their Balance Sheet is positioned to benefit over the next 18 months from a number of securities that wilma tour and they will have nice positive Revenue Growth in 2024 while the industry is going to be struggling with Revenue Growth. All right. Couple of names, good snapshot. Thank you. Youre welcome. Thank you. Still ahead, some on the street warning of headwinds ahead for the insurers as names like all state and travelers sit in the red today. Find out why after the break. Were back in just a moment with e dow getting worse down 150 now. The break. Were back in just a moment with the dow getting a little worse. Down 150 now. So, the question is. Cyber attack as cyber criminals expand their toolkit, we must expand as well. We need to rethink. Next level moments, need the next level network. [speaker continues in the background] the network with 24 7 builtin security. Chip . At t business. Take a look at some of the heavy rain, we had on friday into saturday last week. An unpredictable year for weather events and starting to impact insurers. Contessa brewer is here with that part of the story. They must see that and see potential losses. They do. Much of that flooding may not actually be covered by insurance because Flood Insurance is a specialty line. A lot of people who are not in a flood zone would not buy that. If they do, much would be issued through the national Flood Insurance program. But comprehensive Car Insurance does cover flooding. Allstate, progressive, Berkshire Hathaways geico, travelers, they might expect to see a flood of claims. It illustrates the unpredictable weather catastrophes. In the first half of this year, guys, thunderstorms across the United States accounted for 35 billion in insured damage. That was 70 of the total across the globe. Thunderstorms. Its a big reason why property insurance premiums are rising. Plus, of course, Insurance Companies are trying to manage their own risk. They buy reinsurance for, say, billion dollar plus catastrophes and the cost of that reinsurance has been skyrocketing. Over the last 12 months, the demand and the increased rates in reinsurance have sent those stocks soaring. Look at arch capital group, up 75 . Renaissance up more than 40 . Everstreet, same thin. The ceo told me that the general expectation is for a 10 increase in demand for reinsurance heading into 2024. Inflation has had a lot to do with this. Theres a lot of demand for reinsurance products because we live in a heightened risk environment, so insurance values have gone up. Theres social inflation in the u. S. , which has basically increased litigation. Theres also geopolitical risks out there. All these things have led to more demand for reinsurance and insurance products. Estimates reinsurance will fetch a return on equity of 14 this year and next. What were seeing is a lot of capital coming in because of the returns that are available here. And andrade told me, weve had a switch for protection from earnings, the insurers taking out reinsurance to protect their earnings, to now protection of capital. Thats a reversion to what we saw before rates were rising. Its a big deal. What would you say the poster child is for insurers who just withdrawal from the market . Is it florida . Is it california . Its california because the core problems are still not being addressed in california. You have to charge enough to justify the rate, but californias trying. They just recently changed the rules a little bit, trying to encourage insurers to come in. You can charge more but you have to agree youll issue coverage in wildfire prone places. In florida we saw a law change, no oneway Attorney Fees or assigned benefits. That was driving the cost of insurance up an incredible amount where 80 of lawsuits filed over property insurance came from florida, which only accounted for 8 of the total property claims nationwide. Wow. Has Climate Change overall changed the entire thesis for this group . Yeah. I think Climate Change is a big deal. Look, its not just Climate Change. Its climate risk. But if you look, as i said, at things like hail, which previously may not have been a massive billion dollar plus event, you wouldnt have seen it going to insurers, but when you look now at these massive i mean, Hurricane Ian was a big one because it covered half of the United States. That was a huge an existential change in insurance that made them say, weve got to charge more premiums because now it doesnt justice affect florida. Its going to affect the whole eastern half of the United States. Yeah. And our homeowner premiums keep going up. Everybodys. That thunderstorm statistic was surprising. Amazing how many. But, you know, of course, a lot of trees come down and that just causes all sorts of damage. Contessa, thank you. Squawk on the street is back rightft ts. Aerhi when youre looking for answers, its good to have help. Because the right information, at the right time, may make all the difference. At humana, we know thats especially true when youre looking for a Medicare Supplement insurance plan. Thats why were offering seven things every Medicare Supplement should have. Its yours free, just for calling the number on your screen. And when you call, a knowledgeable, licensed agentproducer can answer any questions you have and help you choose the plan thats right for you. The call is free, and theres no obligation. You see, medicare covers only about 80 of your part b medical expenses. The rest is up to you. Thats why so many people purchase Medicare Supplement insurance plans like those offered by humana. Theyre designed to help you save money, and pay some of the costs medicare doesnt. Depending on the Medicare Supplement plan you select, you could have no deductibles or copayments for doctor visits, hospital stays, emergency care, and more. You can keep the doctors you have now, ones you know and trust, with no referrals needed. Plus, you can get medical care anywhere in the country, even when youre traveling with humana, you get a competitive monthly premium, and personalized service, from a healthcare partner working to make healthcare simpler and easier for you. You can choose from a wide range of standardized plans. Each one is designed to work seamlessly with medicare and help save you money so how do you find the plan thats right for you . One that fits your needs and your budget . Call humana now at the number on your screen for this free guide. Its just one of the ways that humana is making healthcare simpler. And when you call, a knowledgeable, licensed agentproducer can answer any questions you have and help you choose the plan thats right for you. The call is free, and theres no obligation. You know medicare wont cover all your medical costs. So, call now and see why a Medicare Supplement plan from a company like humana just might be the answer. Good monday morning. Im sara eisen with Carl Quintanilla live on the floor of the new york stock exchange. Has there been enough pain to generate gain . Tiffany wilding weighs in on how this market and how to get ready for the Fourth Quarter. A clean start. Da davidson says enough damage has been done to clorox recently and the stock is ready for a breakout. Hell join us for that call. Is the hulu drama getting closer to an end . Look at what comes next for comcast and disney this hour. Kicking off q4 and the month of october, dow down 140. S p down almost 8. Nasdaq up half a percent