a quick final check on the markets as we wrap up this edition of "squawk box". futures this morning up 640 points for the dow s&p up 85. nasdaq up 280. so, yeah, things are off and to the races. make sure you join us. right now it's time for "squawk on the street" good tuesday morning welcome to "squawk on the street". i david at the the active passive investor summit. bulls trying to go for seconds after the 20-1 day yesterday dow futures up 650 even though yields have not budged a road map begins with stocks in rally mode sharp gains on optimism on

earnings calmer conditions in bond markets. goldman beats. but a warning of recession risks ahead. activist investor starboard revealing a stake in salesforce. david has the scoop for us this morning. let's begin with david at 13d. a lot going on today, d. >> reporter: yeah. of course we brought earlier salesforce i think jeff smith is presenting right now. we're just going to go with the 13 d monitor conference. f forget this active-passive stuff. it's too much to say at one time we talked splunk yesterday, guys i assume this is in process if not concluded at this point. focused there on margins and we're going to have an opportunity to sit down with him and discuss in a lot greater detail the thoughts on salesforce i'm not a typical target so to

speak for starboard given its enormous size. but, again, jim, focused on an opportunity they see in terms of margin improvement even though for its part the company set ambitious targets. 25% operating margins by 2026. >> i think it's interesting, david, they say they got 13 highly qualified directors robin washington the director from gilead. it seems they're basically ready. i understand, as you do, that the discussions are constructive they have constructive discussions with everybody what's interesting is there is just instant reaction that there is too much fat at salesforce. mark he hires whoever he wants to hire. they have the new building

i think brett and mark have a disciplined company. there's a half dozen i would go after before them. unless you tell me this is literally the case where they think they can add expertise and they want very much to work with bretand mark >> my sense it is more that than not. there is always that possibility. however unlikely that it does get a little more ald very sayre -- adversarial. even though starboard is saying it is a significant and large position in a market cap of this type, it is not going to add up to a large. the world of activism as we have said is not relying any longer on having a filing position of any kind if you have influence and a track record, it can result in

that it is just trying to get them to improve on margins, get at least back to the level of many of their peers. it's funny having not looked at it in a while but recently having looked at it, the stock has underperformed given what had been outperformance not that long ago >> the dow jones was flying. i do believe, remember, enterprise software has been a hideous bear market. mark beneo did make the numbers last time. david, i think you could look at this company like any software company, like adobe, and said you haven't had your layoffs microsoft has had a lot of hraufs y -- layoffs. you mean to tell me you're not

lean the bull market is over. i would sure think if sasha is making cutbacks at microsoft, everyone can make cutbacks this is silicon valley incident to hear more from mark or bret again, i'm not getting the vibe that there's any animosity here. >> no. you know, i think we would have to wait and see over time as to whether that will take place it is always at least the potential often when you're dealing with a firm like this in starboard. but not necessarily part of the current playbook, as you say we have so much else to get to >> david box >> what about him? >> that became contested >> yeah, it did. oh, listen, we know they're willing to fight this is a big company, though. but there's frustration on the part of some shareholders.

i'm aware of another activist that may have considered it. this is not necessarily something that people have missed entirely. look, i'm looking at a slide here not generating meaningful operating leverage according to peers. they haven't gone up nearly as much as microsoft or adobe, intuits, sap, oregon cal >> i'm not sure sap and oracle is right on that one they have 40 billion in cash we are talking about performance obligations. the buyback was something new. they have had growth that has exceeded everybody in their particular speus space you can do a lot worse than what they've done and i know that's a very good quarter. well, let's just say i guess everybody -- i'm not calling for

a mulligan they don't need that they have made a lot of money for people >> how about today's action. is this the beginning of something new? >> look, you know what, the there's -- i've gone over what mike paulson said yesterday nine ways to sunday what he did nail was the level of negativity of the hedge funds and what people are saying is that this is indeed the worst five-year stretch, the least amount of money in the market, the highest revulsion to the market he timed it so perfectly there were many people i talked to yesterday that said i cannot believe he used the 200-week moving average but there are a lot of people in the hedge fund business who record maybe 3,200 is the bottom i spoke to a guy who said, yeah, take it to 4,000 play that range.

very good guy. swings around billions a lot of what i heard is everybody is so negative everybody is so negative the beginning of earnings period tends to have very good companies. the fact that wilson did not identify the banking leadership is interesting david said enterprise software and semis are the two great bear markets now. if we can get any traction in those, you could have some lift. and to say, look, half the market is in a bear market and half is in a bull market i listened to david solomon this morning. i know we have a clip. goldman at seven times earnings is just wrong. it's just wrong. it doesn't belong there. the book values -- i thought david made a very good case. and then you have j&j. give me a break. it had a fantastic quarter but the companies at the

beginning are goldman. >> solomon was on squawk pworbgs talked about the chance of a recession and the way in which clients are using it to restrategize here's what he aid >> i think it's a time to be cautious and i think that if you're running a risk-based business it's a time to think more cautiously about your risk box, your risk appetite i think you have to expect there's more volatility on the horizon. now, that doesn't mean for sure we have a difficult economic scenario but in the distribution of outcomes, a good chance we could have a recession >> state street will follow along, jim billion dollar buyback >> well, yeah. a consistent revenue stream. what he is basically saying is that's not us. we're not like that anymore. they have separated this fin

tech business which i didn't care for they are expanding their business with animal dramatically that's consistent revenue. they spent a lot of money getting up to do this direct to consumer they are merging with the rest of the business. i have to tell you, when i listen to goldman, we are episodic they said it before. i happen to think they meant it this time. >> we talked about it yesterday. that's what they want you to believe. they may believe it. book value up to 2$308.22. will exceed book value for the first time in a while, jim that is not saying much, is it some traded two, even three times book, which is absurd. this has been a consistent frustration for them they have traded discount to book which is shocking. i remember it used to be the

highest of the group i will say this, the level of desperation for the banks to get some valuation is the highest i've ever seen and it's working yesterday bank of america -- i know we jousted on bank of america. but they did have a great quarter. scharf is just printing money at wells fargo. jpmorgan fought itself they have the hammer thing going. the banking group, david, is the low multiple group with the best profile because of what the fed has done the group that's not working, thank heavens, are 200 times sales groups that has just plagued our market and fang are too expensive people are still sticking to apple. listen, they will offer guidance what i'm saying is tech is a

awful. >> there's a look at netflix tonight. the company is trying to get people to revisit with more frequentry, jim. something they were reportedly worried about people in the year >> this is what everybody is after. what do you think they want for meta nobody can figure out where these people went. there was a thing called covid you got this vaccine you got the second, third, and fourth you're still traveling >> have you seen this where the reservation list is 1,000 people. >> i'm in one where basically it was like don't bother michelin stars hey, you know? >> brian cornell at the yahoo!

event yesterday talking about a consumer that remains healthy in stores and online. jeffries upgrades. nordstrom. >> everything we heard from bank of america was basically, look, a little lower in spending we're doing okay i know this is -- no one ever wants to hear this what if jay pal is doing it right. tomatoes these great mexican tomatoes these hurricanes and the lack of fertilizer is going to make it so jay cannot do anything. we had a piece yesterday about food is down but my check said it is only chicken. >> yeah. buffalo wings. >> i went to fridays on friday night. i did. my wife loves fridays. no, she hated it but i have to tell you, i got

out of there no liquor. $27 for a fantastic meal i like fridays my wife is highly suspicious of my liking of fridays she said, oh, you think you're a man of the people. i said no, i've been going to fridays all my life. >> i know fridays. you went to the original in the '60s or '70s on third avenue >> i went to red lobster >> jim didn't need to really look it kind of kah imto him. >> it's like the michelin restaurants. no don't bother >> yeah. you and joe nameth, you were making the scene at fridays.

1973 >> broadway jim. industrial production coming up. it's going to be a busy day. jim, we have been free of fed speak for a few days >> thank heavens >> is that in danger, whatever rally we put together? >> yes, it does. we only had these one-day wonders. i also think, by the way, the tech companies are really struggling we have to find out back to work that's expensive they are expensive >> guys, are we going to santelli with data let's get to rick on ip. hey, rick. >> hi, carl. our september read on industrial production a strong number 0.1 of 1%. we ended up 0.4. that is the best only since july the problem is august went negative on us

now, when we look at utilization rates, we expect the number 80%. 80.3%. 80.3%. what's interesting about 80.3, it is one of the highest levels of utilization rates going back to 2018. you have to jump all the way to '08 to find numbers that hover at 80.4. they are strong rates. there are issues with mining we need to pay very close attention to we will still have national association of home builders index. that will be released at the top of the hour by diana interest rates are down across the board. 30-year bonds with selling pressure pushing their yields up on the session "squk t see wl awonhetrt"il return after a short break ♪♪

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more job cuts. microsoft confirming it has laid off additional employees this week as the company anticipates slower sales growth on top of cuts announce indeed july. a spokesperson tells cnbc, like all companies we evaluate our business priorities on a regular basis, make structural adjustments accordingly. "axios" said the number was around 1,000, which we didn't get clarity on >> i don't think people realize

the depth of decline in the cycle. there was a lot of double ordering you didn't understand how many pcs were needed. it doesn't matter. they have other horses and gaming which is good linkedin, which is good. they have a big corporate business and azure. i would not sell it. they're doing the right thing. i think that no one is used to -- i was talking to people at silicon valley they were like basically how do you fire people? >> it's been a while what's your suggestion on how to let people do do you do a soft or hard do you do a reduction in force david, you know the people in technology are not used having to fire people >> no, they're not jim, i know you've talked about

the fact that a number of these companies are reducing their workforces what i hear more often, though, is they are no longer herring. in a sense, it accomplishes the same thing because you have to roll off people who choose in a given year to leave and you're not replacing them >> have you heard of some reports making their rounds of people that work at home are far less productive than people who work at the office and so therefore you're saying come back to the office or sayonara are you hearing that because i'm getting that >> absolutely. yes. certain companies feel less emboldened to do that than others in tech in particular where they have been more open, lenient,

willing to let people work from wherever they want, it's a tougher ask. jim, yes, i do believe that to be the case. and certainly in certain areas more certain than others >> i think they are saying we are located at what you're doing. we are seeing you're playing a lot of video games on fridays. >> they have tracking software. >> they're watching on thursday night they're not working. they're looking at the game. >> i noticed solomon said prepandemic on any given day, 75% of employees were in office. that number is now 65. it didn't sound like he thought we would get back to 75. >> they need to be out there selling. they didn't want to see me david, that's what we had pay phones >> that was 75% when they had people out there selling the idea that people are coming

to the office even if financial service is on a friday probably unlikely to the point you guys were making, if you can get them to work at least, you're happy. you're not getting people in five days a week no way, no how in most businesses it's just not happening. >> david, you can only watch -- >> other than us >> these people, i'm told they have data, they are watching hulu on fridays. they're not working, david they're on netflix >> the bear is really good i would watch it >> hey, chef, chef, how are you doing? >> we'll get cramer's mad dash and count down to the opening bell as the bulls are looking for seconds here today futures well above the flat line we're back in a month emit -- moment

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cramer's mad dash as we count down to the opening bell >> as typical, he is understated

philadelphian, which is very rare incredible numbers from med tech, replacement of different parts and, more importantly, neutrogena, tylenol, will allow the splitoff i think there won't be any overhang, to be spectacular. better than all the other of these getting rid of consumer products 5% growth is really great. the slowest in u.s. pharma but made up in international pharma, very strong quarter. they returned a huge amount of capital. i've got to tell you that this is the kind of -- again, this is the kind of thing mike wilson -- remember, mike wilson likes

health care. j&j have an amaze oncology franchise. >> on the consumer side, the journal does a piece about procter not cutting price and instead upping their marketing because they are convinced that consumers won't pay up >> right so procter, we love dividends, great cash flow. procter has been a straight line from 160 to 120. people feel procter will have to break price. that is a remarkable change. the raw costs are all coming down tail winds are coming. right now they are headwinds this is similar to pepsico people feel they are losing share. i cannot find a country they are

losing share the great american companies are delivering pepsico, great american company. j&j. they can sell j&j all they want. i think it is best in show >> so you would rather own some of the defensive staples, consumer products over, say, semis? >> i don't like the semis. look at pepsico. it is 163. it was a 4% grower now 12%. a lot of it is inflation it doesn't matter. they are questioning the incomes. j&j crushed the incomes. the semis -- biden took numbers down bid for the semis biden cut the numbers in half. china was the market >> it's true amd, deutsche cuts numbers again. they were 80

they go to 70. morgan stanley has high conviction down side ideas, logic tech and micron. >> they make a lot of the devices. yeah, i think they're going to miss these are commodity companies. procter and j&j are not commodity companies. they're not. >> there's the opening bell. once again, a fair amount of green. 40 points from 3,800 rubicon software company focused on waste management and recy recycling. all right. so taking stake of things at the open, how much is sustained only if yields start softening up

>> pretty much all of it i think this is a rally based on sentiment and momentary break in rates going higher j&j, people feel they are basically talking it down. right now you are walking into a buzz saw one of few stocks that are down in the s&p i think it's fine. the ones i'm focused on is salesforce it is radical. one of the great stocks of all time, taking a stake that is enterprise software. along with intel in semico semiconductors i'm looking at tech as being not great. i still believe in meta, which makes me the only person other than mark's mom.

the news that you broke is making people rethink how much they should sell software enterprise company i still think they're expensive. >> to your point, they had been punished typically amongst the best growers and best performers in the market of 20-21. then look at what happened it's just not been a pretty picture. today starboard comes out and says we think you can do better. they say your peers are doing better than you are at salesforce when it comes to delivering on a number of different important metrics. that is at least what their claim is

>> i think this is a catalyst i think people felt all these companies are run as they want and starboard comes in it is not going to be elliott, scorched earth it makes people think there is some value david, i think starboard in the end buy stocks they feel are valuable a lot of people feel there is no valuable to anything software or the software they bought public the last couple of years that's what i meant. starboard is uniquely very good at finding something that is cheaper than we think. first of all, it's a great scoop. i should have said that first. to see someone who understands value sees it in salesforce. people say, i don't know, sales. forget it. and this is nice >> that's a good point that's a good point, jim

an important point we are seeing it in not just the broader rally in the marketplace right now but in part because of the position that has been divulged here. we'll see what happens over time it is a very large position. yes, we have seen success. marvell comes to mind. the market caps are a small percentage of what they are dealing with here at salesforce. just kind of interesting that they have, you know, obviously expanded their aperture in terms of what they're willing to go after. >> any mention of the fact that something is not right >> no. >> good. obviously, he is involved with twitter. >> they point out, jim, that the company refreshed its management team has been increasingly

focused on the profitability they do point that out and say they are exciting about fiscal year 2026. quotes from bret taylor. yeah, they're excited about that >> all right that's great i think the buyback was a very good sign. benioff felt it had gotten 2too cheap. nobody is taking stakes in semis yet that i know of >> you're right. it can be a tough battle to wage you can be the greatest activist in the world if you make the wrong stock pick

it doesn't matter. it really all starts with making the right choice at the right time and then having those tools that you may use to sort of advance an agenda perhaps if required. the banking group is having another strong day >> my favorite group >> up 4.5% to be fair, down a lot less than the s&p. only 16% decline for goldman versus 21% for the s&p you would have been better off going with goldman >> i had egg all over my face today. now it is egg and ham. up three bucks i felt morgan stanley wasn't as bad as people said i keep coming back to the wonders of wells this is wells's time the stock was much, much higher

in 2018. and the dean of the group delivering that amazing number david, you're supposed to chide me on that >> i'm supposed to chime in here >> chide not chime >> i've got a lot going on >> a lot a lot. >> i didn't know you were jammed oh, wow. i'll come back to you. i'm jammed of here >> the best two-day gain for the nasdaq since march 15th and 16th >> this is important because that is the mike wilson theory i never used to talk about mike wilson but he predicted exactly what's happening. and i think that's rather remarkable >> well, today it's over at b of

a. >> yes. >> the positioning cash levels, sentiment screams market capitulation under weight is a three-standard deviation. it feeds their argument that you're going to see a bear rally in the first half of next year if you get rate cuts and the ten-year isn't above four. >> when we look at the earnings, we will realize next year, year-end earnings. i think this is one of those, david, cat's away, mice play >> yeah. >> but the play is huge. >> i am here at this 13d monitor conference i have another story for you this morning i want to do it as a faber report we're talking activism frankly, this is something i have been working on for a bit

of time. one of the more storied activists through many of the years. they're revealing a stake in colgate. >> oh, my. colgate? >> that is a billion dollar roughly let's call it stake. also working in collaboration with another hedge fund, investment capital management on the work they have done on colgate. now, the letter itself focuses on a couple of different areas one is hill's, which we talked about a number of times. the pet food business. primarily distributes through specialty and veterinary diets hill's prescription diet, hill's science diet as much as 20th% of colgate sales and profits for this year. they say, quote, there's a meaningful hidden value in the

hill's pet nutrition business which we believe would command a premium multiple if separated from colgate's consumer assets now, that doesn't mean they're asking the company to do that. you know, i'm aware previously of some conversation that has taken place between shareholders and management and the board in terms of would you consider this i have heard the company is not interested in splitting itself, at least not at this point loeb, in partaking this position with the idea being, hey, if it were to be split, we theut it would have higher value. in fact, they talk about it having as much as a $20 billion value on calendar 23 numbers it's a stand-alone business, it could deliver faster growth, better margins and would command a premium multiple of 25 to 30 times earnings per share for an aggregate value, again, of

approaching 20 billion on those numbers. now, the letter of course, which will be going out as well to fund holders goes on to talk about other assets, namely oral care there's been some frustration that they have been losing market share in core toothpaste, that perhaps some initiatives they have made at colgate have not resulted as much as improved performance and that perhaps the allocation of capital is and oral care has not been as strong as would have been liked that is relying on conversations i've had over time with some investors in the company but when it comes to that, and the opportunity there i would point to the end of the letter here which basically says the following. where is that? let me get that. it says that large transactions, and we all know this although it is long tenured and not known for making bold moves, we are confident it will ask in

the best minuet. we talked about the spin-off from halion. >> disaster. >> there was interest in unilever, which they were not interested in. it doesn't appear they are making an approach that says we want this, and this and this, third point is at least putting out there the idea for why it has value in its eyes. namely, the hill's, pet food business coupled with the idea that were you ever to ever have colgate reach out and have a board that perhaps interested in making bold moves, there might be interested in consolidation amongst some of these other

players given its strong place in toothpaste. oh, i don't know, toothbrushes, mouthwash and other areas, perhaps it has not had success in gaining market share in a way they would want it to. i will point out, loeb said it has significant pricing power, inflationary conditions. by the way, thinks this is the correct time to potentially consider or take this kind of a position given that a number of supply chain disruptions are reversing inflationary measures are starting to reverse as well and stepped-up investments in innovation colgate shares could be moving up a bit on this we will keep an eye on it. the number of bankers of others who have suggested colgate should be a takeover target is endless. it has never resulted in anything >> colgate company can never get close to them.

hill's is doing very well. general mills turned out to be fantastic. schmucker is doing better in pet food loeb is right. hill's is doing the worst of those three. david, colgate has always done its own thing. it has been terrific at international. procter challenged them. unilever challenged them colgate is a black box >> yeah >> i've tried to crack it so many times and they're just not interested. they don't desire -- they don't want to tell a story they just don't. >> no. >> the window for the board is a ways away. this is something that should be on people's radar. to your point, a lot of people

have taken a shot at it or at least the idea that, hey, this company should participate in the consolidation in this area and it hasn't happened a number of, as i pointed out, maybe you would be better splitting the two companies. hills the higher grower. trying to create some value. they have not been interested in that as well it's just not a name we have mentioned that often we are talking about a pretty significant company. and, again, you know, i'm sure there have been conversations. at $62 billion market cap, we will keep up with it today along with the broader market which we have seen significant advances so far. >> general mills is operating at a higher level general mills, jeff harmon got a lot of heat. it's working good.

it's a great business. >> we have been perching petco and chewy the last couple weeks. dow currently on pace for the best month since last number >> great wo-day run here 10-1, advancing declining stocks similar strong open before what's important is the risk on stuff. i always put this up to see how the market is anticipating the day is going to go transportation stocks, semiconductor stocks, arc innovation, metals and mining stocks all doing a little bit better today and a lot of this, in addition to what's going on in the uk, a lot is because earnings are generally not getting slashed particularly for the fourth quarter, which is what everybody is carrying about. here is the big reporting today. all of them beat earnings expectations lochhead affirmed the full-year guidance johnson & johnson narrowed the full-year guidance just what they did is basically

good enough for the markets. this, by the way, is exactly three months ago in the middle of july. we were expecting an earnings apocalypse, and the earnings did not fall apart they were lowered. you saw that rally middle of july to middle of august, s&p rallied 500 points, about a 13% rally. the reason it rallied is the earnings apocalypse everyone was anticipating didn't happen we lowered the numbers but they didn't slash them dramatically who knows if we will ultimately play out here's where we are right now. very early in the season only 45 companies reporting. they were expecting it to be cut dramatically we are seeing a contraction but not a collapse in a typical earnings recession, they will decline 10% to 20% 2023 estimates still have

earnings up 7% so lower this is lower than it was a few months ago it is not any kind of dramatic slash. finally, i want to say something about mobileeye don't look very good 41 million shares floating at $18 to $20 in addition, the float is only 5% typical floats are 10% to 15%. used to be 20% so that's a very, very low flow. this puts the valuation at $16 billion. i saw valuations at $50 billion in december. in 2021, intel bought this for about $16 billion. it was 15 point something billion dollars. they essentially bought this for what it was -- what they bought it for for years ago remember, this is a carve out. we saw this earlier this year. bausch and lomb, core bridge

there's a lot of impetus to get them out there regardless of the cost because you have people who are in the company that need liquidity overall. obviously, a bit lower than people were anticipating for a number no surprise. they have to get the deal down carl, back to you >> very disappointing that's all they get for a division this they were excited about. >> a fifth of their overall market cap >> you would hope this would be so much you would buy intel off it that's not what is going to happen >> clearly not going to be 50 for sure >> no. >> take a look at the bond report not that moved by the beat in industrial production. 10-year sub four oil below 84 today watch out for bostic at 2:00 we'll be right back.

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it's time for jim and stop trading. >> so this morning wedbush does a very strong sale but they don't make it a sale downgrade car vana morgan stanley says auto delinquencies rose in september. you have a double-barrel attack on carvana. >> jonah has been all over the delinquency watch. >> the bapgs have all said, don't worry. but that's -- auto is a particular niche business now. not everybody's in that now. i continue to love the banks not backing a way one bit. >> netflix >> netflix earnings, yeah.

i look for -- periodically i look for companies where people say, jim, i want to make a little money i don't want to blow my head off. this has had 5% yield. it's been amazing since goldman brought it public a couple years ago. it's a reit. i like reits a lot of our individual viewers are saying, i i'll take a little risk 4.5. i do like some reits now and then >> that's one hour down. >> and a party tonight hi, everybody. he broke the salesforce and the colgate. that's just great reporting. >> we have more from him his exclusive with starboard, jeff smith we'll talk more about that as the dow is hanging onto 37 back in a moment - oh, the stock market is doing that fun thing again. news from the future: you're going to live through that

about 10 more times! (laughs) i just discovered yieldstreet. no stress. they vet investments that don't ride the stock market rollercoaster. - [narrator] yieldstreet: private market investing.

- oh, the stock market is doing that fun thing again. news from the future: you're going to live through that about 10 more times! (laughs) no stress. i just discovered yieldstreet. they vet investments that don't ride the stock market rollercoaster. - [narrator] yieldstreet: private market investing.

welcome to another hour of "squawk on the street. i'm carl quintanilla, david

faber is in new york city. a lot of news coming out of there. in the meantime, markets have the bulls tryingto string two very big days today. dow is up 530 off the initial highs. s&p got to almost 3775 or so housing data after production. we go to diana olick. >> home builder sentiment dropped to 38. that's not only solidly in negative territory, below 50, but now half of what it was just six months ago and the lowest reading since august of 2012 builders point directly to sharply higher interest rates, which are hitting affordability hard the average on the 30-year was 7.2% yesterday it started this year at 3% the chairman of the nhab said the situation is unhealthy and unsustainable. of the index's three components, current sales conditions fell,

sales expectations dropped 11 points to 35, and buyer traffic fell 6 points to 25. on a sentiment fell hardest in the west where home building is generally most active, also in the south. builders noted this will be the first year since 2011 in which housing starts will drop just to note, the reason it's dark, i'm in seattle i'll be sitting down later today with microsoft co-founder bill gates at his breakthrough energy climate summit big names in venture capital there. that's at 1:00 p.m. eastern time on "the exchange." morgan >> we'll be tuning in. diana, you wear many hats. thank you for bringing us those numbers this morning diana olick in seattle. 30 minutes into the trading session and it is rally mode again today on wall street three big movers we're watching specifically we'll start with johnson & johnson, beating on the top line, growth helped by pharmaceutical sales

warning some workforce cuts could be coming. it's actually under a little bit of pressure right now, down 0.50 jeffries upgrading target from buy to hold saying the retailer will benefit from easing of supply chain issues some upbeat comments on the tape from target ceo ryan cornel this morning, helping as well shares are 5.5%. watch hasbro, the toy maker had cut its sales forecast earlier this month and has noted this morning that q3 was further impacted by, quote, increasing price sensitivity for the average consumer nonetheless, shares slightly higher another big earnings mover today is goldman, of course, rallying after topping expectations 321 almost a four-week high. leslie picker has more on the numbers. hi, leslie >> hey, carl yeah, by and large it's been a solid earnings season for these banks. a beat for goldman but declines on the top andbottom line

largely due to dearth in deal-making. the analyst call started half an hour ago ceo david solomon opened by describing the impact of what he said was significant headwinds in the global economy. >> everywhere i go, macro themes dominate my conversations with ceos, they tell me they are rethinking business opportunities and would like to see more certainty before committing to longer term plans. we head into the fourth quarter, my sense is that the outlook will remain unsettled, though economic performance will vary by region. i expect volatility to persist as markets continue to digest these factors. >> this type of confidence is critical for deal-making revenue in investment banking slumped 57% on a year over year weakness on m&a, markdowns in acquisition financing. this segment represented 13% of

net revenue during the quarter however, challenges in investment banking were partially offset by strength in fix income currency commodities trading. we've seen that across the street so far among banks that have reported. goldman confirmed a reported reorg that mike mayo called the goldman galaxy the sun, a second division that brings together the earth and then a third digital bucket where the firm will host recent fintech acquisition green sky and consumer partnerships. mayo called this the outer edges of the goldman galaxy. goldman says it will report its full year 2022 earnings using these three segments so far have offered little in the way of financial details specifically as it pertaining to those three buckets and the reorg itself >> you know i like a good space reference, leslie. i'm not sure about that one, but --

>> i did that for you, morgan. >> okay. well, thank you, leslie picker of course, shares of goldman are contributing to the big gains we're seeing in the dow today and the financials are the top performing sector again today as well turning back to the broader markets, as i mentioned, a second day of gains here so far this week with the dow up 555 points the s&p up 1.9% to 3747. joining us, scott cronert, an s&p target of 4,000. given what we're seeing right now, does this rally have legs do you stick with that target? >> this is the narrative we were hoping for going into q4 we knew sentiment was stretched to the negative. you can see that in the options and futures positioning. what we were looking for as a catalyst was either some combination of more resilient q3 earnings, which early in the reporting season i think we're getting and/or some tone regarding interest rates that we're looking at peaking fed

hawkishness. i think the combination of those two sets this up we're keeping an eye on yields while also keeping an eye on the earnings picture. >> how does it take us into 2023 i ask that given the comments we got from goldman's solomon and other bank ceos in recent days with the exception of brian moynihan that there's increasing likelihood or risk of recession next year? >> the question is first half, second half, we've been in print since the mid-part of this year. there's probably a first half situation. so, what we have to expect off of that is that the bulk of the earnings pressure on expectations and earnings reality is probably more first half of next year. and that's just paying attention to natural lead lag effects between where the economic indicators are taking us and the read-through to actual earnings which tend to lag by several months. >> we had you on earlier in the month and we talked about upping your odds of a severe recession. has there been anyone in the last two or three weeks that's

ratified that scenario >> it's still out there. we're at 20% odds of a recession. that's around economic activity rolling and the fed tightening into this in the quest to get inflation down what you get is risk of unintended consequences. it's still out there hasn't been alleviated hasn't gotten materially worse, though >> this housing sentiment number of 38 is a classic example of people pointing to a metric the fed doesn't look at because they're more interested in data that some say lags. >> yes we have to be aware clearly going in, this combination of inflation effects and rising rates. the consumer is the first place you'll feel this, right, much more so than the production side of the economy i think what's happening in the housing market is just -- it's sort of probably a really important starting point for measuring how the fed is going to begin to assess the effects of their policies thus far before they continue down an ongoing tightening path that so many are expecting right now. >> i want to go back to this

idea of unintended consequences and what we've seen in terms of fed tightening cycle that's been this aggressive. has there been a time the fed has been this aggressive and it hasn't tipped us into a recession? and then when you add in quantitative tightening, what does that do here? >> i think the quantitative tightening, we're presuming it adds maybe a quarter of a point to what we would expect the fed funds rate to actually get to. now, in terms of where this pops up in my many years of doing this, this is the first -- the first time we're actually looking at the fed way ahead of recession possibilities, right so, usually it's in reaction this is in anticipation of so, i think what we really just have to pay attention to is kind of aligned with what we're seeing in the housing market you get this rapid and aggressive of a fed rate-hiking cycle. where are we going to begin to see issues that emerge and like i say, we have an example out of the uk so far,

but not much more than that. housing is going to be a first place to keep an eye on. >> so, just quickly, then, where does an investor put their money to work right now? sounds like maybe not housing. >> we've gone down this growth path we think from this point going forward, the growth side of the market lends itself to two opportunities. first is more resilient earnings which you get in economic downturns. the second is the possibility for valuation relief should we get to a market sentiment that begins to price in peaking fed hawkishness. >> great to have you on set with us. >> thank you very much >> david >> i'm david faber at 13d monitor conference coming up, an interview with jeff smith, starboard. it's been a busy morning with salesforce and splunk. salesforce shares up 7%. yeah, it's going to be interesting. looking forward to it.

after this david, we'll go to break with a road map. take a look at what's coming up in the rest of the hour. dow is up. we'll have the interview with jeff smith. lockheed martin out with results, rallying on an earnings beat we'll dig through those numbers. later, we'll get art cashin, his takes on the market right now. the nasdaq aiming for its best two-day rally since march. we have a lot more "squawk on the street" straight ahead - oh, the stock market is doing that fun thing again. m the future: you're going to live through that about 10 more times! (laughs) no stress. i just discovered yieldstreet. they vet investments that don't ride the stock market rollercoaster. - [narrator] yieldstreet: private market investing.

- oh, the stock market is doing that fun thing again. news from the future: you're going to live through that about 10 more times! (laughs) no stress. i just discovered yieldstreet. they vet investments that don't ride the stock market rollercoaster. - [narrator] yieldstreet: private market investing.

welcome back to "squawk on the street." i'm david faber at the conference joined by starboard ceo jeff smith. you've been busy this morning. >> it's been fun it's nice to be busy again. >> when you and i do this every year, thankfully, always happy to have you, the sound picks up, but with we can get through it you were on the stage, you presented three ideas. i'd really like to focus on two of them, starting off with salesforce, which is 150 plus billion dollar market cap company, adding a lot today as a result of your presentation. you say salesforce has not generated meaningful operating leverage relative to peers in recent years how should the investing public take that kind of a statement from you >> david, great to be with you

again. happy we do this once a year look, first, salesforce is a great company. really a terrific company. a company that i've admired, starboard have admired for years. what they've done is incredible. what marc benioff is incredible. when i'm inside companies, when i'm working with companies as a board member or talking with companies, inevitably, they have salesforce, they're using salesforce, they're becoming a salesforce partner so, salesforce is ingrained in the fabric of so many companies and has become so important in the way they operate and conduct business to be able to invest in salesforce, for us, is terrific. it's a great opportunity we never expected to have that opportunity. but given what's happened with market conditions, given what's happened with valuations in particular with salesforce, it's given us an opportunity to make this investment. we're thrilled to be an investor in salesforce.

>> okay. >> that said, what we're really talking about is a migration for them we've had a great conversation, great conversations with them. it's a migration for them. as companies are growing really fast, especially in the recent past, they've been rewarded for all of that growth and as they mature and as they get larger, they need to produce more and more cash flow for shareholders a great way to look at that for technology companies in particular, but really any company, is to look at the sum of those two the growth rate and the margin >> right >> see where you compare to your peers. >> you talk about a subpar mix of growth and profitability as a reason why there's been a valuation discount >> yeah. >> so, what do you want from them in terms of how they should go about addressing that discount >> yeah. so, in the past they were growing a little faster, but as you get bigger and bigger, you can't keep growing as fast and you have to drop more to the bottom line. when you add those two things

together, you get to a number. and as it turns out, with their peers, the median number is around 50%, adding growth rate and profit margins they as a great company, they really should be at that number or higher. and they're not. >> why not >> they're not dropping as much to the bottom line they haven't been as focused on operating margins as we think maybe they should be this isn't overly critical i think they would say the same thing. they're moving in that direction. they're looking to grow their profit margins as well it's an opportunity for them i mean, what we would say, what i have said to them, is you're great at all that you do inside your business. you're number one or number two in all the areas in which you compete. you're highly competitive internally you want to win. we as shareholders, we want you to bring that same energy, that same focus on being number one or number two, ideally number

one, on these metrics also on this metric in particular, they're not even average so, they need to get above average. what does that mean? it means dropping more to the bottom line. i'll go into incremental margins, if you want, but that's where it - >> what's the nature of the conversation this is not typical for you. i know you focusing on a smaller market cap not small but $10, $15 billion this is ten times that why? why this company of this size now? >> again, it's a great company it's a great company we're big fans of the company. we're big fans of what marc has built. >> shouldn't be focused on the size of the company at all as being different for starboard? >> not really. we've invested in many companies that were larger i would say more than half the companies in which we invest now are lower than 5% positions. >> right but should we sti still take it as a potential activist play for

you over time? people know you, jeff, as certainly being aggressive when warranted and perhaps more so than others, willing to go to a proxy fight if you feel like it's something you have to do. how should it be viewed? or am i hearing a softer, gentler approach >> we don't know which it is we don't know which it is in every company we invest. can we run a proxy contest yes. can we put people on boards? yes, when it's warranted you know me, many other people know me. i'm friendly and work well with others, so we can also do that it depends what's needed in this situation, i don't know what's needed. i mean, my expectation is that management understands this. we've had good dialogue with them i have a healthy respect for them i hope they have a healthy respect for us as shareholders if what we're looking for is what the majority of shareholders want, it's going to create value, hopefully we're growing in the same direction. insiders want the value -- >> of course but it comes down to incremental

margins would result in significant outperformance, even versus their investor day targets, again, how do you -- how do you as a management team get to increasing those incremental margins? are they spending money that's not generating a return? >> yeah. they're not dropping as much to the bottom line on the incremental margin again, that makes it easier. we looked at how they've done over the last couple years on their incremental margin basis as their revenue's grown, how much has dropped to the bottom line they're lowest in their peers dropping that to the bottom line which doesn't make sense for the quality of their business and the scale of their business. so, their targets, and the first time they put out their margin targets at their investor day, their targets are good they're better than where they are. but their targets are 25% margins. if you add that to the 17% expected growth rate, that's 42%. we think they should be at 50. their incremental margins are nowhere near their peers

their incremental margins of peers are 50%. if they were able to just do 50% incremental margins like their peers over the next two years, they would be able to get up to 32% margins. it just so happens that 32% margins plus 17% growth rate would get us to 50% combined number shareholders would make a lot of money. this is attractive because they produce or will produce tremendous amount of free cash flow on a free cash flow basis, we estimate they're trading at around ten times free cash flow for 2025, which is less than half of where the peers trade. for the quality of the business, for their growth opportunity of the business, the margin opportunity of this business, i mean, as you can tell, i get excited about it. >> you're passionate about it. i appreciate that. they probably do as well can i imagine you and i will be sitting here a year from now and starboard will still own this stock? how do you view a position of this size and scope? >> well, you tell me -

>> if the stock doubles. >> tell me where the stock goes. from our standpoint, what we do is look at everything on a risk/reward basis. look, we want to be long-term owners of salesforce it's a great company it's embedded in the fabric of most companies we want to be an owner we want value to be created. as you can tell, we're pretty excited about it. >> we have a few minutes left. we have another name it got covered yesterday because another publication sort of knew you might present about it today. splunk i think of it as a more traditional starboard name in terms of the size of the company, the size of the position but you say similar things because you typically talk about this we believe the new management team has the opportunity to drive operational improvement. tell me what you mean by that. >> yeah, david, just about everything we do is operational. as you know, we're looking to improve operations at companies. sometimes they may be companies that can be sold splunk - >> or involve redoing the menu

at darden. >> it could be who knows. splunk could be a candidate to be taken over. it's been rumored it's highly strategic. it's rumored there's interest. >> right is that a part of your thesis, that potentially it's a takeover target or is it really focused more on just execution and improvement? >> everything we do is execution first. but it's not not a part of our future so, knowing it's a possibility is always a good thing knows it's a strategic asset is fantastic. knowing the companies would want to buy splunk is terrific. but splunk similar to salesforce is amazing i mean, it's - >> i'm looking at a chart here in your presentation where its margins are terrible >> terrible. >> versus everybody else. >> yeah, it's the same idea. this is a company that is also embedded in the fabric of corporations 95 of the fortune 100 companies use splunk splunk is mission critical it has all this growth it's a similar story

the growth rate was doing this it slowed a little bit and the margins aren't nearly good enough. when you add those two things together, so revenue growth plus profit margins, they're way below their peers. there's an opportunity for them to improve their operational execution. the good news at splunk is they know that. they know that they made a change of ceo, brought in gary steele from proofpoint he understands he understands and he needs to improve the execution on the bottom line. but there's a lot that can be done there's a lot of improvement available and a lot of value to be had either operationally or potentially through other alternatives. >> even though it's a new ceo, a lot of times they're not interested in selling the company. >> we've had examples where it's true and not true. what i will say is, i don't know i'm sure he didn't come in to sell the company that being said, he was willing to sell his last company, so it could happen you never know that's not always up to him. somebody comes in and puts an offer on the table, the board

sometimes -- >> or if an activist comes in and says, we really want you to do that. a lot of -- you can be the best activist in the world, and we've had this discussion, but if you don't buy the right company at the right time, it's not going to matter. why do you think salesforce and splunk, right company, right time for you >> you're right, david it's all about value and timing and this market environment this year has been crazy and difficult, but it's given us these amazing opportunities. for us, getting unbelievably sticky business where the revenue is stable and growing is amazing, with opportunities to improve the margins, and where you can get them at ten times free cash flow, while peers are trading at twice that and they have the opportunity to grow faster, less risky because they can't be ripped out so easily and opportunities to improve their margins, i've been dreaming about buying companies

with those valuations for the last however many years. now is the time we get to do that could the market make them cheaper in a few months? it could i don't know where the market's going to go. to get an opportunity to buy these companies at these valuations, we're very excited about that >> and, jeff, i always appreciate you taking time you probably should do this more than once a year but thank you. >> thank you, david. appreciate it. >> you're very welcome jeff smith from starboard. morgan, back to you. >> great stuff, david. talking about value and tech there. as we head to break, shares of ally financial are underperforming as the company's cfo steps down jpmorgan trims its price target to $34 a share from $39. we'll hear more from the company itself when it reports earnings tomorrow morning as you can see, though, down 4.5% right now 4.5% right now we're back in two. no stress. i just discovered yieldstreet. they vet investments that don't ride the stock market rollercoaster. - [narrator] yieldstreet: private market investing.

- oh, the stock market is doing that fun thing again. news from the future: you're going to live through that about 10 more times! (laughs) no stress. i just discovered yieldstreet. they vet investments that don't ride the stock market rollercoaster. - [narrator] yieldstreet: private market investing. welcome back to "squawk on the street". major averages still higher but off the highs of the morning right now. meantime, we'll check in on aerospace and defense. the etf ticker is climbing, up 2%

sector earnings kick off with lockheed martin. the top weapons maker beating on profit with revenue falling slightly short the company announcing a share buyback increase of $14 billion. that's got those lmt shares up right now, about 3%. still, lockheed's ceo revenue growth expected to return in 2024 why? a, quote, choppy supply chain, covid impacts are now poised to carry over into 2023 as the contractor promises to ramp production like raytheon javelins used in ukraine, he tells me he sees, quote, excess i have $10 billion in incremental opportunity. expecting to start in 2024 tactical, helicopters. we'll have more on that outlook and the geopolitical landscape when lockheed's cfo joins me on

"power lunch" later today. meantime, other aerospace and defense names are also in the green today. >> awful lot of green, although off the session highs. we opened up around 3762 or so we're off that when we come back, we'll get art cashin's take on this rally and whether or not it will hold. ♪ ♪ wow, we're crunching tons of polygons here! what's going on? where's regina? hi, i'm ladonna. i invest in invesco qqq, a fund that gives me access to the nasdaq-100 innovations, like real time cgi. okay... yeah... oh. don't worry i got it! become an agent of innovation with invesco qqq

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welcome back to "squawk on the street." i'm bertha coombs with your cnbc update the skies over kyiv filled with smoke as russian missile and drone attacks continue one of today's targets was a thermal power station. ukrainian president zelenskyy says nearly a third of the country's power stations have been hit in the last week,

causing massive blackouts. growing concern for the safety of an iranian female athlete who competed without her country's mandatory hijab. medal winning rock climber took fourth in this competition the post on her instagram account says her lack of hijab was unintentional. nbc news has been unable to confirm she wrote the post she has flown back to iran as protests there over hijabs and morality laws enter their fifth week. parts of the midwest are getting pounded by an early and heavy winter snowstorm more than a foot of snow has fallen in parts ofmichigan and wisconsin. lake superior, waves up to 28 feet high are being forecast a deep freeze across much of the country east of the rockies has already brought record low temperatures as far south as arkansas you know, there's just something wrong when you get snow before halloween, carl. i don't know, doesn't work for

me >> it happens, bertha. happens quite a bit, at least where i'm from, colorado thanks we are in rally mode dow up 420, adding to yesterday's gains. let's bring in art cashin, ubs floor operations on the cnbc news line. love to get your assessment of what the bulls have put together the past 48 hours. >> well, it's been a couple of things, carl you've got to go back a little bit further than that. i think a key was last thursday when we got a kind of flush out reverse rally. in the morning we went into near freefall, and when the heavy selling began to shrink a little bit, suddenly the short covering came in. that kind of setup can be pretty good and i think it's -- even though we've had whipsaw trading since then, it opens up some possibilities. now, you recall two weeks ago we

had a strong monday/tuesday, not unlike what we've seen yesterday and today. it's important that we hold on we shouldn't let this rally fade in the next two days so, i think if we can last for a couple of more days, we may be seeing not the turning point but an important turning point i was thinking the market was going to tighten more towards the end of october to get a bit of a reversal, but we may have started early. not unlike bertha's snowstorms we'll see if we can hold on. i think the key is, i think this is a bounce in a bear market, but it could last a couple of weeks. that's what we've got to watch for. >> short, rates are still higher ten-year still knocking on the door of 4. how much of that needs to change if this is going to last >> well, i think it's going to be helpful

i think there's some short resistance, cocktail napkin that i am, in the ten-year up above 4% i think the markets, interestingly, are beginning to watch the two-year a little more critically than the ten-year that is because they're taking that as a signal of interpretation of what the fed may do so, that has been somewhat beneficial i think one of the key things we've seen over the last week was this reversal in london of the tax policy and while the bank of england said we're not going to come in and buy bonds and rescue anymore, but they have admitted to, at least by their action, that they're not selling any bonds. so, they seem to be postponing their quantitative tightening. we've had a couple of potential black swans out there, bonds in

japan are trading by appointment. i mean, their ten-year didn't trade for three days last week and the story is that the bank of japan may own as much as 70% of their ten-year bonds. so, we've got some black swans still out there. keep your eye on the dollar. it's weakening a little bit. strength in the dollar is often a sign of concern that something's going to fall apart around the world, that we're going to get a black swan. people try to pick up with it. so, keep your eye on yields, particularly, but also keep your eye on the dollar, and maybe if we cross our fingers, this could have a couple more days going for it >> your point is incredible when you take a look around the world, some activities that are afoot in financial markets art, the fact you think this is a bear market rally, what would it take for you to believe that a bottom is in here?

well, i think a couple of things, morgan you know, the -- if you look at history, and doing this a little over 61 years, i'm steeped in history if nothing else. so, if you look at history, the markets don't necessarily bottom before you see certain actions the fed slowing down on what's going on if you begin to see the economy move in a strong way, but as i say, i have hopes that this thing could last for a couple of weeks. throws out my schedule somewhat. i was looking for a bottom around the last weekend in october, but i'll take it. if they're going to have intermediate bottom and bounce back, let's stick with it so we have the rest of this week to prove it >> we're going to watch it closely. all the tells you just mentioned as well, art appreciate the guidance.

talk soon. art cashin >> my pleasure. >> always great to have art on on a day like today. we'll take a quick break here with the s&p right now up 1.1% here are some top gainers in that index right now it's led by the cruise lines carnival up 8.5% norwegian as well up 5%. salesforce with starboard stake, also target and another cruise name, royal caribbean rounding out the top five out the top five back in three.d your doubt. ♪ heat makes it last. so you'll never sit this one out. icy hot pro with 2 max-strength pain relievers. - oh, th rket is doing that fun thing again. so you'll never sit this one out. news from the future: you're going to live through that about 10 more times! (laughs) no stress. i just discovered yieldstreet. they vet investments that don't ride the stock market rollercoaster. - [narrator] yieldstreet: private market investing. you'll always remember buying your first car.

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welcome back to "squawk on the street." we're joined by our own bob pisani, out with a new book "shut up and keep talking. bob, you were on with jim last night. our congrats again to you. it's an amazing mix of color about cnbc and investing lessons. as you were saying a moment ago, what a year for that >> you know, i always say to people, they ask us, what's it like to work on the floor?

you and i have been down here more than 25 years you've been down here a while, too, morgan. i say, what would it be like to meet your famous hero? any rock star, queen, king, politician, you and i, we've done this. 10,000 bell ringings since i got here 10,000 you don't say hello to everybody, but there he is, the ceo of chevron standing there to say hello to even if you're not doing a formal interview what do you learn talking to him for five minutes an awful lot there's motley crue, aretha franklin, what do you want to say to them? it's been a wonderful experience, a wonderful privilege to be with cnbc, very privileged to be on the floor of the new york stock exchange. >> it's incredible we talk about the idea of software eating the world or automation and workforce changes. this has been ground zero for it how much has this floor changed since you came down here >> this is a textbook example of

technological disruption when i got down here in the summer of 1947 there were 4,000 people on the floor. they did 80% of the volume 4,000 people on the floor screaming at each other, mostly open outcry. there was some electronic trading but over the years, we went to electronic trading computers buy and sell orders, faster, quicker, prices went down and a lot of people -- this business became much less profitable as a result of that there's an example of technological disruption i love hanging out with the guys instead of 4,000 people doing 80% of the volume. nys is still important, i still love it, but you can't be nostalgic about that kind of things you have to support new ways of doing things we have new ideas in crypto, for example, you have to support all of it. you can't be caught in the past too much. >> you talk about people you've learned from we just talked to art cashin,

you mentioned jack bogle you go into lessons you've had to learn yourself. >> one of the things i decided to do very early on is reveal what i own and reveal my whole investing guy. i'm a jack bogle guy, vanguard guy. no surprise. i own index funds. we're restricted in what we own. we can't own individual stocks and bonds. i own index funds, s&p 500, not terribly interesting you don't have something special? like leveraged malaysian bonds i say, no, i don't own that. i'm sorry if i'm boring you. you want to stay long term stay in low cost index funds for most people. you don't want to time the markets. market timing doesn't work you have to be right going in and right going out. the academic evidence is people don't do it very well. it goes to what i call the unknowability of the future. why is everybody so bad at predicting the future? not just amateur stock pickers, professional stock pickers

economists are terrible. the federal reserve is terrible at predicting the gdp one year from now how is it everyone is so bad at this it goes to two ideas one is people have biases that infect their opinions a lot. you have confirmation bias you only look for ideas that support your own point of view biases, there's dozens of them that behavioral economists have studied that we know infect their ability to make accurate predictions. the second is there's an unknowability of predicting the futures. try to be an analyst predicting the earnings of a big company. it's impossible. you could have macro events like the economy, companies could have individual events, the ceo could fall ill, you could get bought out it's difficult to predict that you have to be comfortable with a certain degree of unknowability. i've gotten a lot more humble. i made a lot of mistakes i bought general electric stock, our company early on i showed overconfidence in ge and our ceo, jack welch, who i

admired, very much the ceo of the 1990s. i believed in him. i'm going to reveal this, 50% of my ipo was in ge stock there was a mistake. i knew that. i knew you don't put 50% of your 401(k) in your own company's stock. and i knew it and i held onto it too long as well and i show people why i made that mistake you don't get more cocky as you get older. you get more humble, if you have any brains in this business at all. what a wonderful experience it has been to be on this floor with you for all of these many, many years, my friend. >> yeah. we're so proud of you. we can't wait for the book party next week. >> there's a whole chapter about him in there as well and what it's like to be standing next to him. >> bob, congratulations again. we can't wait. by the way, tomorrow, special edition of cnbc pro talks with bob and our own dominic chu. talking about all of this and more tomorrow, 12:30 p.m. eastern time when we come back, later on

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the street." we continue to bring you news from the 13d monitor conference. in fact some of it egg. >> guy: -- esg a topic active and general. a few weeks ago republicans take treasurers invested about a billion from blackrock over esg policies with us now, co-founder and management partner of impactive capital. if you didn't know, a fairly large hedge fund kudos to you since 2019. >> thank you very much. >> getting to a significant asset value over what? $2.5 billion or so you introduced an idea at the robinhood conference last week about aluminum cans, and today wax. give viewers a sense of the approach, how esg is a part or not as much as we make out

>> yes esg a part of our approach to the extent it can drive returns. esg without returns is simply not stainustainable we have ideas around capital allocation and also environmental, social or governance ideas that solve a business problem and drive a return. so in some of the companies you named we have unique ideas again, that link esg to returns as you opened, seeing a lot of pushback into the blanket statement of esg environmental social governance considerations have always been included in valuations of a business' risks and our belief is that it can be drivers of the business' returns. >> right was the conversation like? you go into one of these companies identify something perhaps they can do better in terms of esg, pushing levers, pulling levers, push buttons, i guess, that would actually address perhaps a societal

concern, at the same time actually do this >> a lot of these ideas coming to the table with are not necessarily addressing societal concern. we ask companies to look inward and trying to address business' concern or business challenges we have found over the past three years it's actually the esg ideas that are most easy to approach right? companies and boards really want to understand what matters to me you have passive guys, blackrock, mvanguard, only 20% o companies in our small marketplace. 20 things to do, check the box on esg our view is, forget about the noise. focus internally what matters to your business, will address a problem and how can we link it to long-term profit profitability. that works with boards and can work behind the scenes collaboratively. >> i mentioned state treasurers when i introduced you. a guy from south carolina a

couple weeks ago wasn't as much on the environmental part more social gove governance blackrock woke woke agenda, divest from that. is that a throat those pushing an esg approach? >> anytime the pendulum swings one way too far you get pushback night surprised by that. imagine a state treasurer going to, as a fiduciary going to investment adviser saying completely ignore environmental or social considerations like go invest in pg & e and don't consider risk of gas explosions or fires causing them to go bankrupt lost your pensioners' money entirely similarly, social side of things really gets to how you're able to attract and retain the stickiest employees and stickiest customers. these are business considerations for a treasurer or attorney

general sayegh nor it entirely is far too extreme and frankly cause far too much risk to beneficiaries. >> and used to a certain extent, large asset managers as a marketing tool. >> it has. >> getting out of that it matters, where it doesn't >> we look at it, again, only focus on returns you have seen a lot of esg products perhaps even in the passive realm they simply underperform i've always said, esg without returns is not sustainable i think weeg see 'll see a lot f underperforming fail and fall by the wayside and the next five years companies will continue to grow and appreciate. >> end on wex. why does this fall into that area you're discussing. >> yes so wex is misunderstood, mispriced. a complicated business with three different segments

the market perceives in their main segment, fleet segment drives 60% of ebitda, more electric vehicles enter the fleet. a hybrid fleet market's perception 20-plus percent lower revenue per vehicle. we've done diligence, ran a survey representing tens of thousands of vehicles in the commercial fleet and contend the opposite we think they have an opportunity to the grow revenue per vehicle by 70% and because they have network effect sit in poll position between 17 million in commercial fleet. 95% of fueling stations access to data and analytics all fleet managers want. reporting, telematics. thrive with electric vehicles, ow view, despite markets contending they might not. >> stock up about 2% lauren, thanks for taking tile appreciate it. lauer be taylor wolfe.

over to you, morgan. >> fascinating thank you, david. back to broader market approaching top of next hour goldman and salesforce moving the dow higher for more on today's take bring in c cnbc's mike santoli talk about the rally g. to see you. >> talking about keep watching yields see if this move higher in equities can continue over the next couple days, get something more sustainable in the next weeks? >> formula kind of know what's required, which is bond volatility calms down a little. maybe 4% short-term ceiling on the ten-year treasury yield. earnings seem like a clearable hurdle seen that in early going sort of say probably not going to be thing that knocks things off course seasonal factors on iran's mind. not something you is bank on strength didn't work in 2018 or 2008 although '08 a presidential election year. not something you bank on bus

cons but conscious of a rally out there. s&p up 70% off early thursday morning low on the cpi report. shows you a jumpy, twitchy market that's in this kind of hot house of kind of crosscurrents and trying to figure if that was a decent low. >> jumpy, twitchy market to say the least macro is moving markets. getting interesting commentary so far from this earnings season, where consumer's concerned. consumer is healthy. this morning target. ceo basically saying there's healthy guest shopping then hasbro saying seeing demand destruction in this inflationary environment as well for toys. >> i think it's healthy maybe not happy, the way consumers is. healthy meaning, ability as bofa said for consumers to absorb price increase and releverage. access to more credit, have the balance sheet for it the goods comp assumption was

running so far above trend i feel that's an undertow we're going to have to deal with because it's going to be coming in and hasbro might be seeing part of that. >> mike, thank you for rounding out the hour with all major averages higher. that's does it for us on "squawk on the street. "techcheck" starts now. good tuesday morning welcome to "techcheck" i'm carl quintanilla with jon fortt and deirdre bosa and a deal and exclusive, jon in l.a. for that. later a bull/bear debate ahead of netflix tonight big stocks used toing untouchable including amazon showing a couple cracks. de >> carl, another rally up 10% in just two days. salesforce meanwhile, take a look popping on news activist