Transcripts For CNBC Closing Bell 20221102

In many parts of the economy so our tools are well suited to work on that problem thats what were doing. Youre right, though, we dont the price of oil is set globally, and its not something we can affect. I think by the actions that we take, though, we help keep, you know, longer term Inflation Expectationsanchored and keep the public believing in 2 inflation by the things that we do, even in times when energys part of the story of why inflation is high. So the fed is facing two more ethics related incidents with the revision of the Financial Statements from president bostic and president bullard speaking at a closed event, so some senators like Elizabeth Warren are saying that this is a sign of greater ethics problems with the fed. Could you talk about what this does to the publicstrust in the bank and what the fed is going to prevent this kind of behavior from becoming common . Sure, so youre right the picks trust is really the feds and any Central Banks most important asset and anytime one of us, one of the policymakers violates or falls short of those rules, we do risk undermining that trust, and we take that very seriously we do. So at the beginning of our meeting yesterday, actually, we had a Committee Discussion of the full committee on the importance of holding ourselves individually and collectively accountable for knowing and following the High Standard thats set out in our existing rules with respect to both personal investment activities and external communications. And weve taken a number of steps and i would just say we do understand how important those issues are i would say that our new Investment Program that we have is up now and running, and actually, it was through that that the problems with president bostics disclosures were discovered when he filed his new disclosure we now have a Central Group here at the board of governors that looks into disclosures and follows them and approves peoples disclosures and also all of their trades. Any trade that was covered has to be approved, preapproved, and theres a lag. It has to be preapproved 45 days before it happens, so theres no ability to gain market its a really good system. It worked here and we i think we all said to each other today, yesterday actually, yesterday morning, we recommitted to each other and to this institution to hold ourselves to the highest standards and avoid these problems do you have an update on the investigations that are pending . I dont so as you know, i referred the matter concerning president bostic to the Inspector General. Once that happens, i dont i dont discuss it with the inspec Inspector General or anybody the Inspector General has the ability to do investigations we dont really have that so thats what hes doing Michael Mckee from Bloomberg Television and radio earlier this year you touted the threemonth bill yield out to 18 months as the yield curve with 100 explanatory power, and you said, quote, if its inverted, that means the feds going to cut, which means the economy is weak that curve is only two basis points away from inversion now, so im wondering why you are so confident that you have not over tightened particularly given that rates work with a lag. We do monitor the nearterm forward spread, youre right, and thats been our preferred measure. We think, you know, just empirically, it dominates the ones that people tend to look at, which is twos, tens and things like that its not inverted, and also, you have to look at why things you know, why the rate curve is doing what its doing. It can be doing that because it affects it expects cuts or it expects inflation to come down in this case if youre in a situation where the markets are pricing in significant declines in inflation, thats going to affect the forward curve so yes, we monitor it, youre right. And thats what i would say. If i could follow up, you also said several meetings ago that the ruisk of doing too little outweighed the risk of doing too much is what youre trying to tell us today is that Risk Assessment has changed a little bit well, whats happened is time has passed and weve raised Interest Rates by 375 basis points i would not change a word in that statement, though i think until we get inflation down, youll be hearing that from me. Again, if we over tighten, and we dont want to, you know, we want to get this exactly right if we over tighten, then we have the ability with our tools, which are powerful, as we showed at the beginning of the pandemic episode, we can support Economic Activity strongly if that happens, if thats necessary on the other hand, if you make the mistake in the other direction and you let this drag on, then its a year or two down the road, and youre realiziing inflation behaving the way it can, youre realizing you didnt actually get it and you have to go back in by then the risk is it has become entrenched in peoples thinking the employment costs, the costs to the people that we dont want to hurt, you know, they go up with the passage of time thats really how i look at it so that isnt going to change. What has changed were farther along now. As were father along, were now focused on that, you know, whats the place, whats the level we need to get to race and you know, you know what well do when we get there it doesnt well have to see. Theres been no decision or discussion around exactly what steps we would take at that point. The first thing is to find your way there. Thank you, Associated Press, just to go back to housing for a minute, you mentioned the impact that rate increases had on housing, home sales are down 25 in the past year, and so forth, but none of this is really showing up, as you know, in the governments inflation measures and as we go forward, private Realtime Data is clearly showing these housing. Are you going to need to put a greater weight on that in order to ascertain things like whether theres over tightening going on or will you still focus as much on the more lagging government indicators this is an interesting subject. So i start by saying i fguess that the measure thats in the cpi and the pce it captures for all tenants not just new leases and that makes sense actually. For that reason, conceptually that is sort of the right target for Monetary Policy. And the same thing is true for owners equivalent rent, which comes off of its a reweighting of tenant rents. The private measures are, of course, good at picking up the at the margin, the new leases, and you know, they tell you a couple of things one thing is i think right now, if you look at the pattern of that series of the new leases, its very procyclical rents went up much more than the pce rents did, and now theyre coming down faster so what the implication is that there are still, as people as nonnew leases roll over and become and expire, right, you still in the pipeline, theres still some significant rate increases coming. But at some point, once you get through that, the new leases are going to tell you, what theyre telling you is there will come a point at which rent inflation will start to come down. That point is well out from where we are now were well aware of that, of course, and we look at it, but i would say that in terms of the right way to think about inflation really is to look at the measure that we do look at but considering that we also know that at some point youll see rents coming down. Great, and just a quick follow it looks like stock and bond markets are reacting positively to your announcement so far. Is that something you were wanting to see is that a problem or what how might that affect your future policy, this policy of reaction . You know, were not were not targeting any one or wtwo particular things. Our message should be what im trying to do is make sure our message is clear, which is we think we have a ways to go. We have some ground to cover with Interest Rates before we get to that level of Associated Press rates that we think is restrictive. Putting that in a statement and identifying that as a goal is an important step, and its meant to put that question really as the important one now going forward. Ive also said that we think that the level of rates that we estimated in september, to suggest thats actually been higher, and thats been the pattern. I would have little confidence that the forecast, if we made a forecast today, if we were doing sep today, you know, the pattern has been that one after another they go up and, you know, that will end when it ends, but theres no sense that, you know, inflation is coming down if you look at the i have a table of the last 12 months readings, theres really no pattern there. Were exactly where we were a year ago so okay. So i would also say its premature this pausing, and its not something that were thinking about thats really not a conversation to be had. We have a ways to go and the last thing ill say is that i would want people to understand our commitment to getting this done and to not making the mistake of not doing enough or the mistake of withdrawing our strong policy and doing that too soon. So those i control those messages, and thats my job. Edward. Edward lawrence with fox business thank you, fed chairman so how big of a headwind is all the fiscal spending to what the Federal Reserves trying to do to get inflation back to the 2 target you know, in theory it was a headwind this year, but i to think the broader context is that you have households that have these significant amounts of savings and can keep spending so i think those two things do tend to sort of counterbalance each other out it appears Consumer Spending is still positive its at pretty modest growth levels its not shrinking people are and you know, the banks that deal with retail customers and many retailers will tell you that the consumers are still buying and theyre still, you know, theyre fine. So i dont know how big the fiscal headwinds are they havent shown up in the way that we thought they would in restraining spending so it must have to do with the savings that people have what about the spending theres tens of billions yet to be spent from the inflation reduction, act, the American Rescue plan, chips act, bipartisan infrastructure bill. How does that play into your thinking about the future . You know, demand is going to have some support from those savings and also from the Strong Demand thats still in the labor market we still see pretty significant demand and a tightening labor market in some respects, although i think overall i would say its not really tightening or loosening so we see those things, and what those things tell us is that our job is going to require some resolve and some patience over time were going to have to stick with this. And we take all of that as a given. We know what our objective is and we know what our tools can do thats how we think about it. The last question hi chair powell, nancy from marketplace. Im wondering has the window for a soft landing narrowed . Do you still think its possible has it narrowed yes. Is it still possible yes. I think weve always said it was going to be difficult, but i think to the extent rates have to go higher and stay higher for longer becomes harder to see the path its narrowed. I say the path has narrowed over the course of the last year really hard to say. Again, i would say that sort of a ray of data in the labor market is highly unusual and to many economists, there is a path to theres a relationship to gdp going down and vacancies declining, translating into unemployment so all those things are relationships that are in the data and theyre very real datas a little bit different this time because you have this tremendously high level of ray c vacancies and we think on a very steep part of the curve. The job losses may turn out to be less than would be indicated by those traditional measures because job openings are so elevated and because the labor market is so strong. Again, thats going to be something we discover empirically. I think no one knows whether theres going to be a recession or not and if so, how bad that recession would be and, you know, our job is to restore price stability so that we can have a strong labor market that benefits all over time just real quickly, whey do you feel like the window has narrowed because we havent seen inflation coming down. If the implication of inflation not coming down, what we would expect by now to have seen is that as the really as the supply side problems had resolved themselves, we would have expected goods inflation to come down, long since by now it arent hasnt actually, it hasnt come down. Not to the extent we had hoped now you see services inflation, Core Services inflation moving up, and i just think that the inflation picture has become more and more challenging over the course of this year without question that means that we have to have policy be more restrictive, and that narrows the path to a soft landing i would say. Thanks very much fed chair jay powell just wrapping up his News Conference after the Federal Reserve lifts Interest Rates again 75 basis points, the fourth time in a row we have seen this jumbo sized Interest Rate hike a signal in there from the fed chair and from the statement that smaller hikes may be coming as soon as the next meeting in december that was welcome news initially to the market. You saw that spike earlier when the statement referenced the lags and cumulative impact of Monetary Policy. However, fed chair powell himself did sound more hawk ish in the News Conference he talked about the fact we might see the levels be higher than what we saw in the september meeting. He made it very clear we are in the mode of fighting inflation, and we are still seeing ongoing Interest Rate increases. He said basically its premature to be thinking about a pause in the Interest Rate. Theres the s p 500. It is now lower, down 1. 2 so we lost that initial gain on the hints and the enthusiasm about a potential smaller Interest Rate hike coming up on this special edition of closing bell, we have a great lineup to break down the fed decision, including bob diamond, bridgewaters, david zervos from jeffries and an exclusive interview with karen lynch, very busy hour. Lets get straight to our analysis of this fed decision. Joining me here is bob diamond, former barclays ceo. I thought, bob, one of the most interesting parts of that News Conference was when fed chair powell said not tightening enough raises the risk that inflation gets entrenched, tightening too much we have the ability to support the economy in other words, the risk is that we dont do enough so really dont get too kpexcit here that were slowing down what was your take im not surprised i think sarah, fed rhetoric has become a key fed policy tool i think that we both know that the fed moved, took way too long to move. And i think for chairman powell to kind of ease off before hes totally convinced, particularly in terms of his, you know, the questions and the statements i wouldnt expect. You mean to go with smaller hikes . Because he did open the door for december to go smaller. Listen, our view on this is consistent with what youre saying, which is weve now got to 4 to 4. 25, sorry, 3. 75 to 4 is kind of their range we think at the next meeting this year, 50 basis points or 75 basis points, maybe 75 then, maybe 50 in 25, but somewhere around there in that 4. 5 range, we think the fed will pause, but we dont think that can be a signal from the chairman, so were not surprised hes not signaling. The other thing you raised is that the question might not be what is the size of the next rate hike. Its how long they will be hiking rates, until what level and how long they will stay at this restrictive policy level. Are those questions the markets been focused on . It feels like the only question now is are they going to pivot and what does pivot even mean . Listen, i think, you know, i think the fed does look at the Market Reaction. You think that immediate slight move up in terms of equities and a little bit lower in terms of yields reversed its after the q a. Both of those things were reasonably small, so i think theyd be reasonably pleased its kind of landing where they want they want to keep their options open to continue to raise rates. But our view inside larry canter and myself is that inflation has peaked, but the economy has not bottomed so we have a tough year ahead in terms of continued correction in the economy. But we to believe inflation has peaked. Just because its peaked, does not mean its come down, certainly not even close to the 2 level what does that mean in terms of what the fed will have to do. One of the things we look at closely is intermediate prices, prices before final goods. If youll recall in the fall of 2021, its a 40 yearoveryear increase thats when people said my goodness, inflation is rampant, and i think that to us is a very key indicator. The intermediate crisis, which were a leading indicator of final prices for goods is trending down. We think inflation has peaked. We do believe theres another 50 to 75 basis points in december, but we think the fed very possibly could let that stay for a while and watch continued economic developments. Hang on, bob, were going to get a lot more thoughts from you, talk about this Market Reaction i do want to get to Kayla Tausche in the room for fed chair powells News Conference, asked a few questions. Kayla, your big takeaway. Sarah, it was very clear that the chair of the Federal Reserve was outlining a u. S. Economy that is still very strong and in his words the fed still has a ways to go before they would even think about pausing any Interest Rate hikes. He says ultimately the resting rate for Interest Rates will be higher than they originally expected and that rates could be restrictive or Monetary Policy could be restrictive for some time he acknowledged that the Global Economy is weak, that the strong dollar is challenging for many countries, and that some of those shocks from overseas might mean that the price for energy and food could stay high for some time. He said the risk is in doing too little, not doing too much and that the fed still has many powerful tools to use down the line if they need to start easing in the economy. Heres where he clarified the statement that moved the market earlier, sarah it is very premature to be thinking about pausing so people when they hear lags they think about pausing its very premature in my view to think about or be talking about pausing our rate hike. We have a ways to go our policy, we need ongoing rate hikes to get to that level of sufficiently restrictive and of course we dont really know exactly where that is. We have a sense. Of course the statement at todays meeting suggesting there is a lag between the actions that the fed takes and the impact overall on the economy, and he said that there would be a discussion at the december meeting about whether it might be prudent to start moderating the pace of some of those Interest Rate hikes suggesting that in one of the next two meetings, we could be in line for a 50 basis point hike, but certainly, sarah, that is not a pause by any sense of the imagination. Its just saying that perhaps were going to be extending the length of these rate hikes, and he said that policy is going to be restrictive for some time, and he said he doesnt want to get to a situation where you get years out into the future and they realize they havent tone enough sarah. Right, no, i know he said it in several different ways, premature to think of a pause, ongoing rate increases are appropriate. Kayla tausche, thank you very much bob diamond here with me he gave something for the hawks and doves really when it comes to what you are looking for. If you were looking for the fed to acknowledge the lagging impact of Monetary Policy and the fact that it is going to hurt our economy later on and potentially bring down inflation, you got that. He used the word lag or lagging several times and they mentioned it in the statement. But at the same time went to Great Lengths to say we have a lot more work to do. So what do you do as an Equity Investor listen, again, ill come back to what i said were beginning to see inflation roll over. Its going to be a challenging year next year for the economy we know that technically with a down quarter, First Quarter and second quarter, thats a technical recession, but the real question people are asking, sarah, in my mind, is this deep and dark and long . Is it mild is it shallow . Is it short . And i dont think we should expect, given the quality of personal balance sheets, the quality of corporate balance sheets, the strong labor market, that were going to see a deep, dark correction like we saw in the First Quarter of 2009. I do think it will be an economic correction. I think it will be reasonably mild, but we think it will be longish as opposed to shortish theres stul a lot of the economy that is strong bonds are now selling off. The tenyear yield is higher ask the dollar, which is weaker in much of the press conference has now turned higher, so the takeaway for the market is maybe we shouldnt get too excited about smaller Interest Rate hikes. This fed chair seems really determined. Its interesting, the Market Reaction after the statement was published was just the opposite. And after the q a, it was bearish. I would say again what i said earlier, if the fed is even thinking about pausing after another raise or two, thats the last thing theyre going tokz ri to say right now theyre going to wait until theyre ready to pause stay with us if you could weve got much more reaction to the fed. Were going to be joined by bridge waters karen karniol, every sector is lower in the s p 500, utilities hold up best, down half a percent. Consumer discretionary down 3. Its the biggest sector loser. Theres the dow down 300 well be right back. Power e trades awardwinning trading app makes trading easier. With its customizable options chain, easytouse tools, and paper trading to help sharpen your skills, you can stay on top of the market from wherever you are. Power e trades easytouse tools make complex trading less complicated. 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M. , some celebration there that there was an acknowledgment or hence an impact of higher Interest Rates on the economy that got the market excited about a pause or smaller Interest Rate hikes. Fed chair powell made that clear. Premature to think of a pause, still very much in tightening mode he said hed rather overdo it on higher Interest Rates than under do it on inflation by the way, this is all playing out in the dollar index. If you look at the u. S. Dollar intraday, big selloff on the news, and then we got a spike up it is the at the highs of the session. The tenyear and the twoyear yield are higher 4. 6 on the twoyear bob diamond is still with us as well karen, what was your impression of the fed chairs News Conference. I think that jay powell is doing the right thing. Hes making clear that at this point hes still seeing a pretty Strong Economy and the fed tradeoffs are not nearly as tough as theyre going to get once the economy actually slows skbh so at this point the fed is in a much easier position. The economy will turn over and needs to turn over because that is the only way to get inflation to start coming down at this point where we see the economy as strong as it is today, you should keep tightenin choice s are going to once the economy slows bob, do you agree that the fed is doing the right thing, even though theyre acknowledging that some of that pain will come with a lag, plowing on with higher Interest Rates . The fed was way behind the curve when this started. As recently as december or january talking with you about the tenyearfor 15 years had been 1. 5 to 3 it was still at the low end of that here we are less than a year later, and you know, its well just say 4. 1 . So some of the impact is being seen while i think the fed was behind the curve, i think their behavior today is highly appropriate. I think theyre catching up with the curve, if i can make a phrase like that and i think the last thing he can do is publicly acknowledge that they see time for pause ahead. So karen, i mean, is it as simple as the old adage, dont fight the fed . That has worked in 2022. Its why bridgewater, i think, is up i dont know more than 40 or so ive heard shorting a lot of things because thats whats happening here with policy. I think if you look at markets, theyre just pricing an impossible scenario and thats why youre getting the kind of repricings youre seeing today at the end of the day, theyre pricing that somehow the economy can stay strong. We wont have a major earnings recession, and at the same time, inflation will sort of magically come back down to where it needs to be because the fed said so. Thats not going to work youre going to have to actually slow the economy, and so it makes sense that youre starting to get a slowing of the economy priced into stocks or that youll see higher inflation. When you look at the equity markets in situations like this, they just dont look at where we are today. The equity market keeps declining until its actually clear that the economy is slowing. And then the fed is willing to actually make a real turn because the economy is slowing theyve actually fallen enough to discount weakness that youd rather be there with cash. Right now cash looks a lot more attractive so cash over stocks, cash over bonds, would you still bet on the u. S. Dollar, karen . I think that the u. S. Dollar could still have some fight in it, if you will, because the challenges facing other countries are so much more severe theyre in that spot i talked about the fed getting into soon, where it is stagflation, the economy is weakening at the same time thats a much tougher set of circumstances to be in, and the feds not there yet. The economy is actually more resil resilient, cash looks better than stocks, better than long dated bonds, doesnt really rook better than a lot of the inflation linked bonds, whereas if i can pick up a couple percent of an actual real yield, which theyve been negative for so long, plus get paid cpi, whenever it comes out, thats not so bad. Do you agree, bob cash over stocks i agree cash or some fixed income instruments are startin to show real value i think as karen said, i think until we all believe theres a peak in Interest Rates, typically around the twoyear, youre not requesgoing to see a positive trend in equities so coin toss between cash and fixed income instruments. Karen, you know, you both are sort of saying echoing, what powell has said about the very strong labor market, and theres evidence of that, but the economy has slowed down. Weve seen it in the u. S weve seniorlcertainly seen it globally those rooting for smaller hikes, a pause in hikes thinking about the lagged impacts, thats still a valid place to be, isnt it . We dont know exactly how hard these its, what, almost 400 basis points of tightening in a short period of time it is one of the fastest paces of tightening weve seen i have no doubt its going to hit the economy, particularly when i look at households. It is remarkable that households are still in the mold from the most recent data of savings rates, spend down all that excess cash they accumulated over covid still some borrowing and careerly those things have to get hit as the rate hikes flow through. You know that slowing is happening and is in the economy, but the economy is just not that weak relative to the sticky inflation the fed is experiencing it doesnt feel like really a tough tradeoff and to imagine what a tough tradeoff is like is to look at what its like for europe, the uk where you have real stagflation problems where you know that head hiking rates may be enough to affect the inflation enough if part of the problem is you literally cant get enough energy to power the economy. The fed will get there once the economy slows more materially. Thank you very much great to get your first thoughts and trades off the fed meeting, powells comments, bob, final thought from you we go into midterm elections next tuesday theres already been noise, especially from some prominent Democratic Senators like warren, sanders and brown criticizing fed chair powell there were a few points where he explained why fighting inflation was so important for the strength of the labor market, for the Global Economy, why hes putting inflation over everything, but do you expect this political problem to intensify . I think right now the fed chairman has to put inflation above everything, and i think hes doing the right thing as we said, it was a little bit late, but its catching up i mean, i hate to use historical periods, but recall when Maggie Thatcher came into power in the uk in 1979 everyone thits of Maggie Thatcher as progrowth, in 197 she said theres one thing that matters, thats inflation and the fiscal situation for four years she brought rates up to 20 . And only after four years was it really about lowering taxes, reducing regulation, and really going pro growth i think right now the fed chair is doing the right thing. If i had to play devils advocates why should the fed be rooting for a softer labor market and lower wages over inflation . Just exactly that if inflation gets out of control, its the most dangerous thing and its going to impact labor, absolutely. If anyone tries to make the case of let inflation run and were going to have full employment, i dont agree with that. I think hes going to be explaining that for a little while in this political environment. Such a pleasure having you, thank you very much. Lets bring in cnbcs senior economic correspondent steve liesman. The market is telling you what they thought of this News Conference, dow down 350, yields higher across the board, and the dollar has shot right back up. And i am just looking right now at the may peak fund rates contract, which moments ago hit a new high in yield on that contract guys in the back im hoping you have that chart we just made which shows that yield at 509 and powell definitely opened the door for higher rates. Higher rates than even forecast in the september summary of Economic Projections there it is right there. 409 right there. Its backed off just a little bit in the few minutes since we gave that. What happened here is this statement came out and as sara correctly said, it did have some dovish comments, this idea that the fed was now taking account for lags in the from Monetary Policy and effects on the economy. The market rallied, that fed funds contract i just showed you, it fell down to 493 from 502. Then powell took to the podium and in a way that is really remarkable that i have rarely scene in the past, he walked back any possible dovish interpretation from that statement by saying were not done yet, were not thinking about a pause. We have a ways to go to get to where we want to go, and well probably stay there for a while. So anybody who was hoping for or thinking about a possible cut in Interest Rates or even a pause in Interest Rates, they werent getting any help there from the fed chairman, sarah. It was a remarkable walk back i would say by the Federal Reserve chairman from a dovish statement. Very premature, dont get any ideas of a fed cause i feel like, steve, the next day story is going to be not so much what did december look like, so the markets pricing in 50 and he left the door open to that, its how long and how high, right . How high and for how long are we going to be in a restrictive territory because he really seemed to indicate that its going to have to stay higher for longer than what they were even expecting in september i think thats right, sara sk and i think you nailed the two questions that are out there i will say however, just a little bit of interesting commentary here, which is that im still seeing the market with a bid on that 75 in september. Im looking right now at the cme fed watch december. There is still a bid out there, sara, with a 39 probability of a 75 in december. So they have not completely walked back. In fact, theres very little change going in. It was 5545, its now 5540 with or 39 with some present bet present betting, they have a date or an appointment with 4. 5 or 5 sometime in the spring, and thats, i think, the best time you can think about a pause unless the inflation data turns sharply lower and gives the fed confidence its coming down. Those 75 basis point odds dropped a lot after the statement when we were all thinking he was going to talk the whole time about lagging cumulative impact and went straight back up after he didnt really go there. Steve, thank you very much great to have your analysis as always. Were going to go straight into the closing bell market zone, with the dow down significantly, the s p 500 every sector lower, dow down 354 or so the nasdaq down 2. 7 , tech stocks, Consumer Discretionary in the eye of the storm. Thats what happens when Interest Rates are in focus. Lets get straight to senior markets correspondent, mike santoli. Fed reaction i know you say it can always change it does feel like it already had that change after the statement where we saw the rally sfwr we get the backlash, sometimes next day its more of a rethink obviously the market to the extent anybody was leaning toward the idea that the fed was looking for excuses to ease back, powell basically said, no, you have a statement which, keep in mind has to reflect kind of the weight of opinion of the committee. That was written in a certain way to emphasize that there are lagged effects and then you have jay powell who really has to speak hawkishly until the moment he thinks that the path is clear to genuinely step down the pace of rate hikes. All that being said, i dont think the overall picture chachange all that much. Seven weeks until the next meeting. He also said you dont necessarily have to meet any particular test for how far inflation might have to moderate between here and the december meeting to have a 50 versus a 75 basis point hike that meeting. Those are small distinctions were drawing here the big picture is the front loading period of tightening might be just about over or, in fact, over but that doesnt mean that anything is in the clear hes willing to keep the parkt markets on their heels as they try to digest what higher for longer means. And the market was there anyway Consumer Discretionary, mike, is the worst performing sector right now in the s p 500 teslas down 5 . Some of the travel names are down, Bookings Holdings expedia, its a pretty broad selloff right now. Interestingly, the banks are holding up a little bit better along with utilities what stands out in terms of whats working and whats not . Thats kind of consistent with what weve been seeing. Consumer discretionary has really not shown any life whether its the big caps or the average stock in consumdiscreti and what is powell saying he needs to do . Continue to sap demand and how does inflation come down in the estimation of some people at the fed retail margins broadly speaking need to be compressed because thats where the inflation seems to be living right now that makes sense, something more defensive. The banks can benefit not just from the higher yields, but the idea that we have a savings cushion among consumers. The idea that were not really seeing solvency issues at least not yet in consumers and companies, meaning that they can kind of rally off of these relatively cheap levels that thigh reached a month or two ago stwl euro weaker, dollar stronger, but not as long as it was a moment ago up 3 10 of 1 . Amd mixed quarter for the chip maker. Gaming segments somewhat offset a steep decline in pc demand and forecast for the Fourth Quarter did come in below estimates as the company twworks to unload excess interview heres a taste what we have is we have a very diversified business we do have sort of a challenging backdrop in the pc market and that affected us in the third quarter. It will affect us here in the Fourth Quarter as well but we also have our data center business, which is actually proving to be relatively resilient, and we have our embedded business that has actually, you know, some significant positives amongst a broad base of industries when you look at all of that together, we believe that well be flattish as we go into the Fourth Quarter we knew pc demand was weak, right mike what are you fetie getting fromd some of the others on end markets and just how much economy or their clients are slowing. Right, so the pc market has now acknowledged its now in the numbers in terms of forecast that its just not going to be any help at all in terms of growth it seems like the forecast has settled out a little bit for amd call it 17, 16 times forward earnings its definitely now a call as to whether the longer term secular trends are still in place, and whether amd can capitalize back six, eight months ago you really had to believe that the cycle was going to remain strong and amd was going to remain at the edge of it the risk has come out, even if its not going to be quick gratification, because were not going to have clarity about whether we have more views to drop in data center, the overall Cloud Infrastructure looks like its got some challenging headwinds, but i think its a much more, you know, kind of even bet on the stock than it was six, eight months ago. Semiconductors are selling off today, be sure to tune in to the full interview with amd ceo lisa su on mad money tonight 6 00 p. M. Eastern. Ill let you know, thank you very much. I know you have to get ready for overtime at the top of the hour. In the meantime, another big mover, cvs health. Shares rallying. The company beating on both lines for q3 and boosting its fullyear outlook for the Second Straight Quarter revenue rose almost 10 from last year. The numbers dont include a 5. 2 billion charge for a settlement related to the Opioid Crisis the company saying it resolves all existing claims relating to opioid distribution. The stock is up nearly 3 , and cvs president and Ceo Karen Lynch joins us now exclusively welcome back, karen, nice to see you. Hi, sara, nice to see you as well were just coming off of the fed chair, powells News Conference and debating what the shape of the economy is going to look like. You have a significant Retail Business whats your sense of how consumers are holding up right now and whether that lasts in the quarter we have had very strong retail results as you think about our company, were in the Everyday Essentials business, and people come into our Retail Locations to fill prescriptions, to go to the Minute Clinic and to pick up their health and wellness products so weve had a very resilient stores and our Retail Business is performing quite well as we think about the future and inflation, what weve been doing is weve been really, you know, pushing towards the cvs Health Branded products weve wibeen adjusting pricing were looking at our extra care card to really help consumers, you know, adjust to the impact of inflation what about the Health Care Benefits segment i had to go sort of buzzsiness business with you. How close are we to being back to precovid levels i know the fact that its been under that has helped earnings. Well, our business in general is generally back in our commercial business. Were back to precovid levels in our medicare segment, were slightly below we have been seeing people using their Health Care Benefits in an appropriate fashion. Were really looking at appropriate utilization, and weve been actually encouraging our consumers to make sure that theyre getting their followup exams, getting their checkups, and weve been doing that throughout the entire covid experience so one thing that was discussed on the call, and i know that analysts were curious about were the insurance plan, the Medicare Insurance plan lowered ratings for Aetna National ppo to three and a half stars, to four and a half stars. Why did this happen, and how are you fixing this, which i know you said you were doing on the call yeah, this is an industry related stars methodology change, and we were very disappointed that we moved back to 3. 5 stars we have been historically for over a decade a leader in stars. Essentially what we saw was a change in customer surveys it was a very small sample size. We do have specific actions in place to mitigate that risk, and we feel like well be in a position to improve our star rating performance in 2024 it wont have any impact on 2022 for the rest of the year, and were in the open enrollment part and we dont expect it to have any impact on 2023. What about covid, karen, by the way, session lows. Thats the sound youre hearing, down 450 on the dow, 2. 3 on the s p. Karen, what do you expect for covid this winter . It feels like its going to be a bad flu, cold season my kids have basically been sick since theyve been back in school in september. What is that going to look like, and how do you anticipate how much business youll get from it yeah, so what we anticipate is that well have a flu season. Were starting to see children experience higher levels of flu. We havent seen that come through our numbers. We think part of that ask people have been getting vaccinated people have been coming into our stores to get their vaccinations were also seeing across the board an increase in cough and cold and flu sales in our front store. Were balancing it what i would suggest to people is make sure that you get your flu shot, your covid booster all of that will mitigate the severeness of the overall flu in covid season this fall karen lynch, we so appreciate it good to see you. Thank you, good to see you too. Thats karen lynch. Stocks are hitting fresh lows here near the close. Lets get more Market Reaction jeffries chief Market Strategist david zervos joins us. Not liking the tone from fed chair jay powell who said its very premature to think about a pause, and hed rather overdo it on rate headaches. Whats your take sara, his message all year has been pretty hawkish. I dont think weve seen jay give us any dovish tidbits until today, in fact, and i think today he kind of did a little bit of a baby step talking about the cumulative impacts of these rate hikes, which is going to be large. And i think he acknowledged that but he still has the same message, which is that theres a lot of work to do. Theres no quitting early. Theres no premature celebrations that just because Inflation Expectations look well contained that theyre going to take solace from that. Everything sounded like the jay weve heard all year but there was a kind of baby step move toward this idea that theyre getting more toward the end game and i think hes acknowledging that, and i think the market obviously wants more the markets excited about when this is going to end, and they can kind of take their foot off the brake a little bit but it is early. We all knew there was another rate hike in december, likely one in january, the size of which is splitting hairs we just did 400 basis points in the last eight months and were talking about is it going to be 50 or 75 who really cares at the end of the day, you can make money off of it from the impact from the economy, this is the fine tuning part of the exercise i do think we have to look at least to the idea that hes prepping us for, you know, some sort of end game here as we go into q1 of 2023. So whats the move, the gut reaction here on all of that is get out of stocks. Were seeing every sector down, utilities are down 1 . You know, the market came in wanting a little bit more, thinking, you know, there was some more pivoting, not a baby step, a bigger step. Jay may have been a little more aggressive just because the political rhetoric heated up you had the Sherrod Brown letter, the letter from the other senators obviously we saw him in 2018 get very unhappy about political rhetoric and meddling in the feds moves, and actually, by the end of 18 he went a little overboard and had to reconfigure things in 2019 he may be seeing that side of jay a little bit, drawing some lines in the sand with politicians, which wouldnt surprise me. I dont think the bigger message should be missed, which is that this 400 basis points is a lot theyre acknowledging that its a lot. Theres some more to do. Theres a ways to go he didnt say a long way from neutral. He said a long way to go, which is similar but a little less disconcerting than what he saidg this fine tuning bit and the markets going to want more of it. If thats where we are, david, when is the time to buy bonds . Sell them on higher rates but it could shift to buy them on recession, right yeah, and i think another thing he did acknowledge is that the probability of a deeper recession is morese vvere becaue inflation isnt coming down that fast and he does seem to be comfortable making the mistake of overtightening. Again, things that we wouldnt be surprised at hearing all year, but were hoping to hear a little less of them. The bond market didnt react much today, sara last i looked, tenyear notes have moved three or four basis points i dont think the rate market is that out of siync here were going something in the yield curve 4. 5 to 4 now, we might have to go up to 4. 75 to 5. In the end were fine tuning this fixed income move really the question for the fixed income market is how long do we have to stay here . I think jay told you youll probably have to stay here a little longer. The fixed income bull story is just a little bit less comexcitg after this meeting. So karen said cash over bonds, cash over stocks, still think the dollar has fight left. Does that make sense to you . Im not that excited about that trade you do get paid 1 and 4. 5 on cash pretty soon so its going to look ttractive. I think youre getting to the point where you can play the ranges in the equity market a little bit more comfortably, down 3,500 to 3,600, the lows we hit in june and recently hit i think are more buying targets sara and i think jays going to make it hard on the market like he did at jackson hole at 4,200, 4,300. Hes going to say if you really want to take it up there, im going to try to get inflation down faster. Youre going to need that opportunity. So some opportunistic disinflation if you will i think youve got ranges settling in here i would be more likely want to play range trades especially with high volatility like this than i would be to just go park myself in cash and not partake in some these roots. We can bounce from jim the mid 3,000s to 4,000 thats a big move. I want to be ready to pounce really because i think the downside story based on the earnings crash that people have been forecasting all year is really a poor story and weve talked about that. We can talk about that another time i think theres some reason for a cushion on the downside, but i do think the upside has a lot of cap. Im really much more in this range bound edges trade as we go into 2023. David zervos always good to get your first take on fed chair powell or jay as you call him. Thank you very much. From jeffries. Take a look at where we stand heading into the close weve deteriorated and were near the lows of the session the dow down 472 points. Fw goldman sachs, boeing, and dow che chemical those are the standouts. Which tells you where the brunt of the pain is its in Consumer Discretionary tesla off 5 hitting that group. Technology is weak as well today. Communication services, but every sector is lower here in the close. If you look at the nasdaq, its getting hit the hardest. Apple is a big drag on the qqqs. Apples down 3. 5 . Microsoft is also down 3 . Weakness in these big cap tech names, amazon which has had a terrible stretch here. Another 5 were at the lowest levels since 2020 those small caps which had been outperforming pretty much this week are also getting sold off hard, more than 3 lower the s p 500 is going to go out down 2. 5 which brings the week down to 3. 6 rhed heading into thursday into overtime now with mike santoli. Welcome to overtime, im mike santoli scott wapner will join us shortly with an exclusive interview with jeffrey gundloch. Earnings from qualcomm, robinhood and others we will get to them as they filter in. We begin with our talk of the tape a postfed selloff after chair powell says the tightening Campaign Still has, quote, a ways to go even if the pace of rate hikes eventually slows. Stocks down, buying yiel u