growth from the bigger tech companies that's led the market now. so we'll have to see what they report in the next few weeks. >> exactly. about to move into that piece of the season. for now, thank you so much for joining us. paul hickey, michael santoli. now time for total coverage of the calls. thanks for watching. "fast money" starts right now. live from the nasdaq market site overlooking new york's times square. i'm scott wapner in for melissa lee. our traders on the desk, tim seymour, david seeburg, dan nathan and brian kelly. two major earnings reports tonight. netflix soaring after crushing its report, and ibm sinking after hours. we've got full team coverage on both conference calls, just kicking off now. in fact, julia boorstin is covering netflix. josh lipton on the ibm call. and suntrust analyst, bob peck, standing by on the red phone, of course, monitoring that netflix call for instant reaction. want to start with julia boorstin tonight for the very latest and what investors are expecting to hear this evening.

julia. >> reporter: well, netflix shares skyrocketing as much as 20% higher in after hours trading as its results blew apast expectations. netflix beating projections on revenue, earnings and subscriber numbers with guidance for the fourth quarter also better than expected. on the call, investors will be looking to understand what drove these results and whether this kind of growth is sustainable. some hot topics to watch in the video q and a just about to kick off now. the company's growing investment in original content production, which reed hastings said is less expensive than licensing a series or film. international growth in profitability is always in an area of interest. and we can look for some insight into the company's new china strategy. hastings just announced they plan to license content to existing online service providers, rather than operating their own service in china. there's always interest in reed hastings' perspective on competition on the heels of goldman sachs recommending that

apple start a streaming service. we shouldn't be surprised if he's concerned about that kind of rivalry from apple. we could also expect questions about pricing power. netflix says three quarters of members are paying fees an average of 10% higher than last year. hastings likely to stress the price hike is hardly hindering growth. focus more on the revenue number. >> thanks so much. want to trade netflix now. all well in netflix-ville? >> the street got totally caught off guard here, scott. on this trade. there is expectations for negative ads essentially for this quarter. they blew numbers away. 120 bucks a share, i'm not chasing it, though. i think it's a little rich here. 2017 is the year of change. we need to know that '17 guidance is what is on par. i need to hear guidance from the company before i jump in here. 120 bucks from a seller.

>> who is a buyer? >> not at 120. i'll never be a buyer of stock up 120%. what i will say, they lieutenant did exactly what they need to do. this is a company that is running off a down escalator. they have to continually have that subscriber growth. they have to continually grow. otherwise their business model kind of falls apart. so i'm never, ever going to buy it at 120. i'm not sure that 2017 is going to be something i feel comfortable about. >> look, so i have been quite negative on the stock. but let me at least go out -- that's what we do here. part of what we have learned today, netflix has no real understanding of their numbers. the third party data coming out has been terrible. what if netflix is growing faster internationally. what if, in fact, as we say, next year is a clean year. the price increase behind them. a story to set off 2017, and they have now launched around the world. and if china doesn't have to be a big part of it. >> but now you've got -- what do

you think amazon is going to do? amazon is going to promote the heck out of prime right now. multiple players coming into it. >> i'm going to put it this way. why can't everybody win? why can't netflix win and amazon win? >> they can when it comes to original content. who has got the best original content, in my opinion. look at the earnings ramp in '17-'18 for netflix when the costs fall out of the equation. i think we're 280 -- >> the last thing that julia said, that i think we all want to hear. the street -- investors were really disappointed earlier in the year when reed hastings didn't have a plan for china. and nobody on the internet from the u.s. has been successful in china ever. it's just a fact. so the idea they're going to spend all of this money on original content and then license it, that's a great business model. >> this is -- >> that's what i'm saying. i just want to make one really important point. this quarter, year over year, sales up 32%. that is the highest year over

year sales growth in the quarter since 20 is 1. that's the sort of thing i think people will focus on again. again, i'm not buying the stock. >> seasonally, very difficult period for them, as well. does it alleviate the fears? i think for the traders, trading desks and institutional investors -- >> over the subs. about the subs. >> alleviates the fears, near term. >> maybe -- we've been seeing tech has obviously had a great year, great last three months. a lot of the fang stocks, so-called -- perform great. except for netflix, the laggard out of that group. not that it's been miserable, y but the laggard. >> the thing i heard that is the most perplexing and also the most interesting, the thousand hours of original content versus 600 hours. you guys can do the math. 40% more than anyone expected for a company that's been spending a lot of content. that could be perceived as very good, especially when they're attributing their beat to

narcos, much higher margin products for the subs they're getting from their own content. this could be kind of a game-changer. >> so to answer your question, netflix hasn't had that growth. or i should say, hasn't been perceived to have the growth that the other fang stocks did. now you're seeing this growth. there is a plan for china. so i think at the very least, again, i'm never going to buy something -- >> not necessarily adjusted growth. it's the valuation question which has come into play with a lot of the other. >> valuation, still a very highly valued stock. would i rush in tomorrow and buy at 120 bucks a share? absolutely no way i'm buying tomorrow at 120 bucks a share. i think the long-term trajectory does painful a picture. a lot of people on the sidelines. they waited for this quarter as an all-clear at least until the end of the year. there could be some money to buy this thing and hold the stock up. >> it does -- it's 50 times ebitda.

this is why i have largely been bearish. i think this valuation is very difficult to defend, despite this quarter, even though 2017 now sets up for them as a clean quarter. >> all right. for more on that quarter, let's bring in suntrust, bob peck, listening on the call for us. on the red phone. all right, bob. so answer the question. does this allay some of those fears out there about the trajectory of subs. >> yeah, so a couple things. one, it was a really good quarter and good guide. but going into the quarter, there was a lot of concern from third party data that domestic could be negative and international a lot lower. so you really saw a good quarter across the board. plus, a good guide. now what investors are going to focus on here, a couple different things. one is what is the impact in the price increases on the call they just said that it was where they thought it was. and geography is very important and right now mr. hastings is not answering that question directly.

we'll see where that goes. but tim was pointing to the commitments, the $14 billion of content commitments. free cash flow was twice the loss you would have expected, about $500 million or so. so the question is going to be when they can turn profitable with this growth. >> or where we were just taking a look at the webcast, that obviously must have been -- >> kind of creepy. >> not reed hastings, of course. but bob, let me ask real quick. the valuation question. it's the overriding question at this -- certainly appears to be on the desk here. how do you view that? >> well, a couple different ways. it is the big point of contention. it trades at about 50 times, 5-0 times ebitda. >> that's the web cast. he, of course, the ceo. >> 50 times ebitda and 100 times plus on earnings. it still trades about five times international revenues, plus 15 times ebitda for domestic. it's a fully priced stocks. >> hey, bob, the one comment about licensing the original

content in china, is that something you've been thinking about here, and how profitable could that be when you consider the market over there? >> we've been very bearish on the opportunity in china. i think it was you that pointed out that not one u.s. internet company has ever been successful in china. we didn't think they would be able to do it as well. they must partner. therefore, a much lower impact to the p & l, but higher profit margin. we'll run those numbers. >> bob, real quick. i know timmy has something for you, too. what about m & a. are they a target or too rich? >> obviously no incremental insight there. you hear players mention apple all of the time. no insight there. pretty expensive. >> bob, what's the optimal mix between third party and original content? should they just be the guy that's actually relicensing and doing what they are doing, maybe in china? >> you know, it's a great question. probably the ultimate question for them. the further they go out on original content, the further out on the risk curve. the key part for them is they point to that every geography

thief rolled out pre2013 is profitable. so on a cohort basis. as long as that's profitable, should be okay. >> bob, good stuff. >> thank you. >> what you expect from this corner of the desk. what we do here. >> incredible bar. but you reached it. >> all right. we'll have more later. final word around the horn from the desk. you want to make a final call here? >> i'm chomping at the bit. i think you have to remember, when it comes to the valuation that this is a company that's going to have $8.5 billion in sales this year. and only about $500 million in ebitda. so to that point, if bob said and tim just said, if you can get to a licensing model that can get to tens of millions, maybe hundreds of millions of more consumers, it's not going to hit the p & l on a revenue basis but a lot more profitable. >> growth, right? >> that's what they do at amazon. >> nobody really -- people do care about the valuation, but people are buying growth. so if there's growth there, and this has lagged the other fangs,

then i do think at some point people -- >> on the charlottt, we know wh the support is between 82, 84 bucks. trading up to the old highs, let's see what it does. let it consolidate and that's how you look at it. >> i agree 100%. >> much more on netflix coming up. check out shares of ibm. they are sinking after hours. that call is under way, as well. it's been a hot stock whose performance this year illustrates a classic investment theory that is beating the market. we will explain coming up. plus, three hedge fund heavyweights talking to me exclusively today on the halftime report about the election. we've got the shocking comments that has all of wall street talking. and should apple ceo tim cook be taking a page from amazon prime? that's what goldman sachs says today. but one of our traders says goldman is making a critical error in its call. he'll tell us what that is, when "fast" returns.

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welcome back to "fast money." a usual show, the halftime report kicked off its five-year anniversary today with three legends. the conversation veered towards the election, and here's what david tepper had to say. >> i think that the market would

still prefer, obviously, republican congress. and the democratic president and probably a republican senator, if it could get that way, but looks like the senate is not going that way. so the market is kind of dealing with that. i think you get some of those moves right now. >> but jeffrey gundlach, aka, the bond king, took a different view, and offered this. >> i actually don't think the election outcome is really all that important. because i think both candidates will be caught up in this trend of fiscal stimulus and supporting fiscal stimulus. and so i really think the bond market is saying that we are headed to a fiscal stimulus pivot. >> all right. what do we think? does the election matter? >> i think it -- >> or not? >> absolutely matters. >> i think in general, that market overall -- we got really comfortable around wrapping our heads around a democratic president in a republican congress. the moment you had trump come out and make those comments that were disparaging, if you will, and things shifted around, there

was concern about that. it sent the market in a massive tailspin. >> so in other words, the idea you could have a -- >> a massive super tailspin? the market hasn't had a palpitation about this yet. >> i do -- in fairness -- no. it doesn't have to be the magnitude of the move. it might be a little uneasy with the thought. democratic sweep. >> the sweep comes off the table, the market has motion and they sell oh. that's what -- >> can i tell you what's more dangerous? more dangerous is the rhetoric he's talking about, the rigged election, the idea we will not have a peaceful transfer of power. that he will not acknowledge -- he will not concede the loss. and that's a really dangerous situation. so if you -- >> especially with the supreme court justices. >> what i'm saying -- >> it's a little twisted. >> and the next few weeks could be the dangerous part of the con he's perpetrated on the people. >> i don't think the markets are looking at that as being dangerous. >> not yet. >> no, and i don't think they necessarily will.

unless it impedes on a republican-controlled congress. >> the most important thing going on here is what's going on in the reits market. if you see fixed income, looking at the market. look at the bond market, 9 to 16 up to 10 this morning, pulled back. the kind of moves in rates, be careful what bankers are saying -- rosengren yesterday. these guys are basically telling you, they think they're very behind the curve. rates are what it's all about here. >> let's frame it this way. let's say we believe the majority of the polls. and we take the average of the polls. do you buy stocks today, if you think that hillary clinton is going to be the next president of the united states, and that you'll have a republican congress still, and you'll have that balance? do you buy the market today? >> in a vacuum scott? seriously. we have to think about valuations now, we have to think about the rates markets. if you're asking me purely -- if clinton is elected with a republican congress, is that the best outcome for the market? absolutely, it is. absolutely. >> so -- >> it's the ability to control

certain parts of the spend or the taxation and i think that's interesting. but that's not what we're voting for. effectively in the market. the markets are -- i think dealing with bigger dynamics. that are really a function of what the next presidency can do with a world, really -- i don't think there is anything they can do other than figures fiscal. >> that's why gundlach says the election doesn't matter no matter who gets in. you'll get fiscal stimulus. >> that's not enough. >> the other idea, if you're going to sell bonds here because you think, okay, maybe the fed will -- maybe you're more apt to go into the stock market. what happens if you get a democratic sweep? maybe you've got a bid in bonds as a result of that. >> or -- even if you get a selloff in bonds, the dollar may go higher. now you have a better trade getting into the u.s. treasury market so you can get a higher dollar value, which will be horrible for stocks. i mean, we've already seen what the dollar has done over the last year when we had that massive rally over two years ago. so, again a dollar spike, i think, is the most concerning

thing. >> do you get a big pullback in stocks if you get a democratic sweep? >> i think with he we do. >> i don't think -- first of all, i do not think the s&p 500 is going to be below 2000 from here to the end of the year. if you have a democratic sweep, maybe you get to 2050 in the s&p. i think it probably gets bought. a lot has to do with seasonal. i think what tim is saying here -- i don't think people think hillary clinton is some crazy, lefty, or anything like when it comes to economics. >> no, but let's just say, okay, banks -- all right. if it's a democratic sweep, if elizabeth warren gets an elevated level of power, are the banks under even more pressure from the regulatory standpoint? health care. another major sector that's done well. is that becoming then off limits, or has -- the chance of going down? i mean -- you have to be very selective. >> i think we have had our election rallies. dan, it's interesting you're saying you don't think we can

break 2000. that's 5.5% from here. very concerned about a number of factors that haven't gotten better. >> let's do this. late june, brexit caught people offsides and what did we do? we sold off 3 or 4%. the second time it's likely to happen. if we had an anarchy vote, and went the other way and trump were to win, you -- we would be below 2050 like that, in my opinion, because people aren't positioned to are it. but at the end. day, i think it comes into the seasonal sort of thing. if there is not any big disaster one way or another, we're not going to let this thing fall apart. we're up 4% on the year right know. and then it's a 2017 thing. >> all right. we'll make that the last word. the big week continues tomorrow on the halftime report. we have jamie dinan and lazery tomorrow at noon. we'll fill out the next couple weeks. bob kraft, keith meister, bill miller. a lot of great investors over

the next couple weeks. do not miss "halftime report" at noon eastern. still ahead here, netflix is soaring afterhours. thr ceo reedngs on the web kat cass right now. we'll hear what he says later this hour. much more of that, as well. i'm scott wapner. you're watching "fast money" on cnbc, first in business worldwide. in the meantime, here's what else is coming up on "fast..." ♪ who let the dogs out >> whoever did is a genius. they're crushing the market again. which could lead the market next year. plus -- >> it's alive! it's alive! >> that's exactly what some traders are saying about trading activity on wall street. and that could mean great news for two stocks that report earnings. the names when "fast money" returns. new bikes aren't selling guys... what are we gonna do? how about we pump more into promotions? ♪ nah. what else?

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welcome back to "fast money." here is what's coming up in the second half of our show tonight. netflix shares surging in the after hours. the company's earnings webcast is under way. we'll bring you all of the headlines moving that stock tonight. plus, visa shares are lower after the ceo suddenly resigns. cnbc's kayla tausche monitoring that conference call. we'll bring the latest there, as well. however, bik is falling in the after hours, and cnbc's josh lipton out in san francisco with those details about a high level departure, josh. >> reporter: well, scott, so on the call, the focus being the strategic imper actives, emerging growth areas, cloud, analytics. here's what the company's cfo

had to say. >> over the last 12 months, strategic imperatives delivered $32 billion in revenue. cloud offerings up over 40%. we exited the third quarter with an as of service rate of $7.5 billion. that's up from $6.7 billion last quarter. so we're building scale in these businesses. >> so those strategic i am actives. when do the business lines in terms of size and scale and scope to overtake those more established traditional ones. of course, ibm is also a free cash flow story, a capital return story. ibm saying it generates $2.4 billion in cash flow in q3 and returned two-thirds in shareholders. back to you. >> yeah, josh. i misspoke. i got that confused with visa and so sorry for throwing you.

you handled it like a pro. my good. interestingly enough, the report marks a tenth year in a row ibm has fallen after a q3 earnings report. you guys want to trade this? old-school? >> i think it's become now a more interesting trade than it's been for a lot of the third quarters. as we hear the strategic imperatives are now getting to be close to 50% of the business. and if you want to think about some growth in free cash flow generation in the future, this title move of a company is starting to happen. infrastructure is a service. these are things that they're actually moving the needle on. not going to compete with microsoft. not going to compete with amazon. but at this valuation, should it be trading like a hardware company? probably not. the bottom of the stock is probably 140. risk/reward maybe around here. >> especially if you value the watson ai part. today they announced a genomic part. if they can get that growth area going, that is the future of this company. so at this valuation, at these prices, i think it's worth it.

>> here's the thing. the cloud stuff is less than 10% of the overall sales. it is growing. but it's going to be something that -- you know, it's going to be a very commoditized product. and then you think about watson. >> 40%, as you said. they're moving. >> waiting for us not to be a hardware company. guess what, it's almost there. >> okay. so ai, watson, all this stuff is literally going to be less than $1 billion in sales this year. it has to start making a big chunk of the $80 billion in total to justify trading at 12 times. it trades where apple does. >> look, they say they're get to go scale with the growth initiatives. i say this is a company long thrown out the window for being a legacy company. free cash flow is great but they bolted on some strategic initiatives that allow the company to have a second life. i look and say at these levels, i would be a buyer. >> if anything, it's been -- >> time will pay off. >> it's been talked about as a financial engineering story, more than anything else. a company buying back stock.

>> you're right. >> that's been an overhang -- it's clouded the story that they have been trying to tell. >> here's the thing. i'm going to tell you -- you guys are correct with the cognitive stuff. this company is going to be forced to split up the faster-growing business. >> it's been a great -- >> i'm just saying. >> but the whole thing is trading at ten times, when, in fact, some parts should be trading high teens, low 20s. >> we're going to see a splittup of this company in 2017. >> predictions. >> write it down. >> forget tuna fish -- >> with all due respect -- >> if that doesn't happen next year, the ceo will be gone. >> maybe when i saw it -- >> i think that's crazy. >> she is like -- does wapner know something i don't?

>> look how successful it was. >> how many companies have been successful building out their businesses. new ventures the way ibm has? >> microsoft? >> well -- and look at their multiple. look where the stock is trading now and the performance of that -- they have been rewarded for that investment. >> but that wasn't the point you were going to make. it trades at 19 times. >> that quick -- >> that was a good response. >> all right. tonight's selloff, ibm one of the best performing dow stocks. year. that return underscoring a classic investment theory. the dogs of the dow. this is when investors rotate into the ten highest yielding dividend stocks in the dow jones industrial average. some of this year's stocks include caterpillar, merck, ibm, chevron and exxon. the once left for dead stocks leading the index. are any of them still worth a buy at these levels and which names could be a dog for next year? let's go off the charts with rich ross. >> hey, rich. >> hey, scott. with the benefit of 21/20

hindsight, no surprise 2016 has been the year of the dog. right now we're staring at zero. that's played right into the hands of the high-yielding companies that make up the dogs of the dow today. a couple ways to play it, not to play it. first we start with chevron. we know about crude oil doubling off the bottom 25 into this key resistance around 50, 52. but we believe supply and demand are on divergent courses. if crude goes higher, chevron goes higher. talk about having your cake and eat it too. up 14% and still one of the biggest dividends in the dow. you can see this key area of support. we think this 200-day holds and when crude gets above 52, you're going to get a trading range breakout that's going to take chevron higher. let's go the other way. cats and dogs living together. this is actually the best performing stock in the dow this year. up 28% year-to-date. 60% off this low. and admittedly, you have a very bullish base of support here. but you're into this critical

line of resistance around 90% and we heard earlier about the visa ceo leaving. today the caterpillar ceo goes out on a high note. talking about early retirement. so with the stock up 60%, into resistance, the ceo on the way out, i think this is where investors should look for a way out, as well. now, why is caterpillar doing so well? here is one great reason. tim knows this, the correlation between caterpillar and em. if you own cat and em, you own the same exact thing. high correlation going all the way back to 2008. both into resistance here. i've been skeptical, but clearly that skepticism has not paid off. and finally, we look at mcdonald's. this was a big winner earlier this year. look at the stock now. you're down 5%, year-to-date, 14% off the highs. and as you can see, they have the golden arches, itch the golden a arcs. the next move to this 200-week moving average. i could see $96 on mcdonald's. so i would not play mcdonald's

as it enters the dogs of the dow next year. >> another shoutout for timmy. >> i kind of like -- i mean, he's got some good stuff to say. >> should we invite him over? >> ghost busters, dogs and cats living together. that's killer. >> also, the golden arcs. >> that's pretty good. >> i got one. >> welcome. >> so you're talking about dogs. okay? >> yes. >> when you look at the dow 30, it's an industrial average. but the worst performing stocks in that index are all consumer discretiona discretionary. you mentioned it mcdonald's. disney a disaster. home depot looking bad. what's going on with the dow 30? >> when you talk about the consumer discretionary sector, one of the worst performing sectors in the s&p and the dow. keep in mind, the xrt equally weighted, discretionary, etf, unchanged for three years. this is against the backdrop of

record yields. crude at generational lows. almost full employment and yet stocks and housing back at all-time highs. where is the wealth effect? is a consume driven economy and the consumer at the bottom. so to your point, that's something you really want to be mindful of, not just as we finish this year but next year. >> the best chart he brought up was chevron, because it's got the best fundamental story. integrated in such a sweet spot. rising oil, lower costs. they've got cap x and discipline and chevron is probably the best story -- i would follow that chart. >> even with the move they have had. >> yeah. i think -- look at the earnings i think momentum and look at the comps for the energy sector. energy is -- they're going to be okay. at least relative to where they were in the second quarter. >> okay. >> rich, what about mcdonald's, mack donalds? >> if you have the longer term area of support, i think it's a nice entry point.

the clear breakdown from the well-defined head and shoulders top. i want to pause on that. not the bestin tree point for mcdonald's. to your point, 8, 10% lower, highly compelling on the pull backe. >> thanks. netflix shares surging. we hear from the company's ceo on what drove the quarter, what could drive the stock ahead. plus, is apple about to become a competitor to netflix? goldman sachs says it should. one of our traders, though, says that thinking is just way off. he's going to explain, when "fast money" returns. they say the world does not revolve around you. but today, maybe it can. i am helping 1-800-flowers find the perfect gift out of trillions of combinations. and working with the new york genome center to find treatments as personal as dna. and i am helping sesame street make education unique to every child. hello, my name is watson. working together, we can outthink anything.

welcome back to "fast money." i'm kayla tausche in the c flbs news room. where a call between visa and shareholders has just ended to discuss the surprise resignation of ceo charlie sharve. here he is discussing his resignation. >> we need to be on the east coast morning we were able and thereafter i don't feel i can spend the time necessary in san francisco to do the job properly. >> he was asked about exactly why he decided to leave, at what point he discussed this with the board. the board said it was in mid september, at which time they conducted an stenlsive search.

he was asked about whether he had a noncompete agreement with the company and exactly what that looked like. take a listen. >> i've not signed anything new as part of this, and i'm going to do everything i can to help with this transition. >> of course, he'll be assisting the transition to the incoming ceo, al kelly, who has been more than two decades in american express and served on the visa board for about two-and-a-half years. the board's independent chair saying on the call, we have had a two-and-a-half year interview with al. at which point they were able to get to know him and entrust in his leadership, a company that is a market leader. of course, scott, it is dealing with the didn't immigration of visa europe and said he'll be spending time in san francisco where the company's headquarters is, as well as in europe to oversee the integration. he'll be wherever the company needs him. the location being one of the reasons why he is resigning. has the respect for him putting role as father and son ahead of

ceo. >> thanks so much. well thought of ceo. well thought of stock. >> that's beautiful. >> here's an idea. maybe he should go run square, so he can counselors trait on twitter. >> but he doesn't want to be in san francisco. i think visa has had a good run and closed the gap to master card. what do you pay for the company? it's 23, 24 times 2017. these numbers republicwill be mh the integration. i don't need to do anything here. >> okay. >> let's stick -- >> okay. >> you said everything there is to be said. >> let's keep moving. >> on fire. >> i'll take the other side of that. i think it's a great stock. >> what took you so long? >> i figured -- >> you needed a prompt? >> ek usually jumps in. >> good point. >> go. >> buyer. i'm a buyer. i think the stock should be owned here, for crying out loud.

>> stick with the financials. banks kicking off earnings season with a bang. bank of america, surprising the street. but the stocks aren't budging on the better than expected results. bob pisani at the new york stock exchange to break it all down. hey, bob. >> hello, scottie. the earnings beats, including today's beat by bank of america had been a pleasant surprise for the markets. one major reason for the earnings outperformance, very simple right now. trading revenues, particularly in fixed income. currency, commodities. look at the numbers. really strong. jpmorgan, bank of america, citigroup. all reporting gains above 35% from the same period last year. wow. this is a good sign for goldman sachs. morgan stanley reports on thursday. both very large trading operations. now, bank of america and other banks have generally been reporting. despite low interest rates. fee income is up. the long growth modest. but there is growth in consumer loans like autos and credit cards. and credit is improving overall. there are fewer losses on bad

loans. that's good news. and a smaller build of reserves for future losses. all right. good news. so why have banks been selling off over the last couple days? has all this good news coming in. they were down again today. first, these banks have had big run-ups going into earnings season. as rates rose steadily with many up double digits. look at the gains in the third quarter. second, concerns. fourth quarter estimates too high and may need to come down, because the loan growth may not be as strong as expected. probably the biggest problem. finally, a whole regulatory overhang from the wells fargo scandal. scott, i have to say, these better earnings from these five big banks have lifted the s&p 500 earnings are. we were negative a few days ago, now essentially flat and could go positive in the next couple days. scottie? >> thanks so much. what do the results mean for morgan stanley and what do they mean for goldman sachs? >> equity capital markets and certainly underwriting i think were a big part.

fick was a big part of the stouff story. if you look even with the money center banks, that part of the business was really the strong point. the problem here is you usually get that rally. on jpmorgan's numbers. the expectation all numbers are better. i don't think goldman is someone you have to run into, not before these numbers. there may be something we don't know, of course. but i think you're range-bound. 170 is a big level on the stock. >> i saw my bank exposure a week or so ago. when i look at it, yes, they have the trade attention doing better. let's just say there is -- rate increase in december. what's going to happen after that? do which think the fed is going to be on a rate-hiking cycle? i don't. one and done at best. >> let's stay with goldman and morgan stanley. what does the options market see? dan has made his way to the telestrator. >> both report in the next couple days. goldman sachs reports tomorrow before the open. the options market implying a 2 mercedes move in either direction. that's in line with how much the

stock has moved over the last four quarters. you know, it's really important to note that like bob pisani just said, there is a whole bunch of headwinds here. expectations are not particularly high. and despite the fact that they're putting up numbers that seemed to be agreeable to investors, the stocks aren't moving higher. that's really something to keep an eye on here. morgan stanley is wednesday, before the opening. the implied move is about approximate%, moved on average 2.25%. so the options not implying big moves. this is what is important. the guys talking about goldman. the stock had this move up here. but here, look. this is really important. look at that down trend the thing has been in. 170 a big range. last week there was some short-dated, 170, 175 call-buying. that's really into the print looking to pay for a pop. scott, you had jeffrey gundlach on your show. made a really interesting point about rates. he said when i hear rates is never higher, or whatever, he says it's about to do the exact

opposite. look at the to-year chart of the ten-year treasury yield. it's been ground down. maybe you see a pop on a rate increase where the treasury yields get in front of it. i agree with these guys. i don't think they're going to be hiking into a generally weak economy. >> all right. you going to come back over here? >> yeah. >> you can check out the full show, 5:30 p.m. eastern on friday. still ahead, shares of netflix surging as we have said in the after hours. the company's webcast wrapping up. we hear from ceo reed hastings. you're watching "fast money" on cnbc. first in business worldwide. now what? how will you keep up with the new demands of today's digital economy? the fact is: some believe they won't need a traditional bank down the road, so at cognizant, we're helping banking and financial services companies think digital,

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welcome back to "fast." a slam dunk quarter for netflix. julia boorstin standing by with what ceo reed hastings had to say on the call. >> he talked about how the come's investment in premium content is paying off, saying they expect the positive trend to continue. >> it's time for me to apologize for the volatility again. this time, it's in a good direction. but i think more and more

investors, you know, are able to look at the multiyear picture. and they see the patterns emerging and so less and less about our guidance. >> as for questions about whether he plans to raise prices again, hastings said there isn't a plan for now. just focused on adding subscribers at the new prices and more content they produce themselves so it becomes more cost-efficient. >> we've had a great couple years at these price points. and there's a lot of competition entering the market. what we're focused on is just how do we increase value to the consumer by having more spectacular shows. so that people watch more of netflix. and over time, that will take care of itself. but we don't want to get overconfident, just because we've had a good couple years here. >> hastings was asked a number of times about growing combination and about amazon in particular. here's what he said about all of the companies vying for screen time along with netflix.

>> a snapchat, youtube, facebook video. all of that -- takes a lot of hours. probably much more so than amazon. but there are so many competitors out there for screen time. and we win today such a small percentage of total screen time. that moves by specific competitors are unlikely to have a material effect. >> now there were a couple of questions about disney in particular. hastings wouldn't way in on the acquisition rumors but praise disney as a unique partner for netflix in its ability for content to drive viewership. >> thank you so much, julia boorstin. bob peck, your reaction to reed. >> a solid quarter. they did weigh in on q 1. the free cash flow is unclear. at the heart of the debate, this is a disruptive company riding a massive tech trend versus

valuation. 50 times ebitda, 110 times earnings for the quarter. even a grade a-minute us. >> conundrum. a 20% stock move after hours. >> 10% short interest. let's just break it down for a second here. if they're going to be a content company valued different than a tech company. i think that's probably what you were going to say. you know, at the end. day, they trade five times sale. ultimately, if you get in more of a licensing thing -- >> talk about the volatility pattern. definitely a pattern, their cash burn. they're spending more and more money to do this. it's interesting he's dropping all of this good news. by the way, we're definitely going to come to the market and raise more money. >> they miss their sub -- this is one quarter they have done well. and he's 100% right. this is a nice conversation to have on the street. don't get too overconfident in buying at stock at 120 bucks. >> julia mentions the disney rumor, speculation -- whatever you want to call it. >> i wouldn't be buying -- >> expensive. the company is too expensive for

disney to walk in and by the company, in my opinion. i do not believe this is a legacy buy for disney. at these valuations. >> bob, good to see you, as always. thanks so much. >> thanks for having me. >> bob peck of suntrust. we'll see him again soon. with fresh demand for netflix is apple sitting on a prime opportunity? goldman sachs says yes. that firm publishing a note calling for apple to go big in content. what do you make of this? apple has had this reboot. >> they're out of their mind. first of all, that's not what apple does. apple hasn't made major acquisitions like that. apple talked about doing these things but comes back to the fact they are a handset company. that's it. remember we got all excited about apple tv? what happened to that? then we heard today they're not going to make a car any more. >> hold on. don't you back up data to amazon's cloud? i mean, to apple's cloud? they are -- they're stwereaming and all the things they want you to do. they want to have your data.

>> does that mean they should have an apple prime? spend money on content and burn money? >> it's a no-brainer. if they want to condition people to pay $750 and -- they have 45% margins? they have to add something else. just remember, i've been poo-pooing the services thing. in the quarter they reported in july, services grew 19% year over year. that did not exactly gang busters. it was about 15% of the total. they really need to do the -- they need to do the tv deals, streaming video deal. they need to replicate amazon's prime and netflix if they're not going to buy one and have to package it -- >> what are you saying? >> i'm saying they have to do this. if their going to maintain the margins -- >> can't do it organically. that ship sailed, people. there is no way that apple can have it really move the needle in this business. they failed at music, failed in content? right? you look and say they need to bolt on something, it needs to

be through acquisition, can't be through organic growth, period. >> what gives you the confidence? >> that's the point. they cannot do it organically. >> they have a solid base of loyal customers. >> they haven't been able to make it work. they have had itunes for years. >> they have not focused on the service side of their business. >> why not? that's my point. >> they have been destroying everyone r everybody else on the handset side. we don't know they're going to stop growing. >> do you know what the market share android is? it's a crazy percentage and going higher. apple is not even competing there. >> it's not going higher. low 80%. not going higher. >> it could go higher. >> it's going higher. >> who is going to get it? >> all right. still ahead, the traders tell you what they're watching for tomorrow, right after the break. hey nicole. hey! i just wanted to thank your support team for walking me through my first options trade.

we only do it for everyone gary. well, i feel pretty smart. well, we're all about educating people on options strategies. well, don't worry, i won't let this accomplishment go to my head. i'm still the same old gary. wait, you forgot your french dictionary. oh, mucho gracias. get help on options trading with thinkorswim, only at td ameritrade.

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>> don't chase it. >> timmy? >> best of breed. cvx, cash flow. take it. >> thanks guys. "fast money" again, 5:00 p.m. eastern tomorrow. "mad money" with our man, jim cramer, begins right now. my mission is simple, to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just trying to make you some money. my job is not just to entertain but to educate and teach you. so call me at 1-800-743-cnbc or tweet me @jimcramer. dow losing 52 points. s&p dripping 0.3%. nasdaq declining