proceeds would really benefit everybody. >> thank you for coming in. always good to have you. lovehaving you in person, too. >> thanks. we are just about wrapping things up here. it looks like the dow is still under pressure, down about 80 points that does it for us today. make sure you join us tomorrow. right now time for "squawk on the street." good monday morning. i'm carl quintanilla with david faber and sara eisen. cramer has the morning off. we kick off the month of october in q4 with a government shutdown averted for now. tons of fed speak this week, a lot of eco beta. our roadmap begins with the beginning of q4, all major indices coming off their first negative quarter of the year. >> we'll keep an eye on a lot of the ev makers, they have

delivery numbers that are of importance for us. >> we don't know how big. >> no. >> kellogg nova set to begin trading today at the nyse. we'll talk to the ceo later this hour. we talked about the pain we got through in q3. a bunch of new notes this morning of top pick lists out of the major strategists. so we're guaranteed some data. >> maybe the fed won't be flying blind into the next meeting. we'll get the big jobs report on friday. we'll get the jolts report before that to see if job openings have come down and the inflation report next week. those will be the determinants. november is looking like a coin flip on whether the federal reserve raises rates. the back drop here of rising

treasury yields. the market rates rising despite the fact that we're still only expecting one more or no more rate hikes for the fed. the higher for longer mentality has really seeped in to the bond market and to the stock market as well. i think that that's what you saw in the performance of september. that's going to be the big question of what happens in october. >> it was something we were discussing last week as we approached highs on the ten-year yield, though we backed off. what are the key reasons we continue to see this gravitation? >> what's interesting is it's coming in the face of softer economic data and falling stocks. that doesn't usually happen. usually treasuries insulate you from falling stocks. they protect you. they're safe havens and you see yields come down as the economy softens. then we wonder long-term is the market thinking about higher

inflation numbers? is the market thinking the fed will stay high for a very long time or are the fiscal concerns starting to creep in? i can't believe i'll talk about this, but the risk premium for long-term rates turned positive for the first time since 2021. it basically is how much investors are demanding a premium to get paid for taking on the risk of holding long-term debt. when it goes positive it shows -- first of all, we have not been positive for most of the last decade or so. so they want to be paid more for taking on the risk. that could speak to the fiscal credibility we have going on in this country. >> we talked about that a lot. we're running large deficits. we have a lot of debt to sell, and we talk about supply/demand

imbalances as well. >> that's the risk heading into 2024, look, we have to issue a lot of debt, and there are pressures internationally. japan holds a lot of our debt. china holds a lot of our debt. questions about whether they will continue to unload some of our debt and whether there's buyers. remember, the fed is also u unloading some of that debt. all these factors coming together where where is the deficit? $1.7 trillion? deficit to gdp approaching 7%, which is usually not what you see during a time of full employment and an economy above trend. >> all this, of course, has been the topic of discussion for a series of voices over the past few days. dalio with you last week. jane frazier at citi at the conference on friday. williams of the fed on friday as well. then ackman on "squawk" this morning. i think the sound bite talks about the impact of real rates

on the economy. take a listen. >> i think the fed is probably done. i think the economy is slow. the level is high enough to slow things down. high mortgage rates, high car rates, high credit card rates, they're having an impact on the economy. economy is still solid but weakening. seeing lots of evidence of weakening in the economy. >> helps that we have gotten a bit of a disinflation trend in germany, france, japan, spain, of course with pce here on friday. the three-month annualized going to 2.2. >> that's the one to cheer on. that's what lael brainard was saying, back to pre-levels. the core number is still in the high 3s. 3.9%. as far as the economy, will it do the work for the fed? jane frazier, this is what she sees in the spending data for the u.s. right now and the

overall economy. >> i do think the recession, if there is one here, it will be manageable. it's been elusive so far. i'm not sitting there worried about the health of our consumers, worried about the health of corporates. they are strong. their balance sheets have been resilient. a strong job market is also a good thing. >> talked about cracks starting to appear in credit. i think that that feeling about the benign environment and balance sheets that consumers and corporates have going into any possible recession is why maybe the market has not been more freaked out before about the prospect of an economic downturn and her comments are in stark contrast to what we've heard from jamie dimon who is more worried about it. >> he is. he sees potentially higher rates longer than consensus certainly. lead story in the "journal" today is the spending by the consumer. what a crazy piece.

they interview a bunch of consumers who say, well, can't really buy an apartment or house, we will splurge on the taylor swift tickets and go to italy on a vacation and just not worry about it. >> i think covid changed our psychology. you have to live, prioritize what's in the moment. you want to go on that vacation? stop saving for it, just do it. you hear thosesentiments, you see it in the spending data, if the savings rate is down to now lower than pre-pandemic levels, it can't go on forever. you can only splurge a few times before then you run out of steam. i think as the excess savings come down and student loan repayments start today, it's been on moratorium -- they had deferred payments and zero interest rates since the beginning of covid. we don't know what that will do to the consumer spending environment. every retail analyst and

economist is paying attention for sure. it's a key cohort of people. did you know there's more student loan debt than credit card debt outstanding? >> i think i've heard that a number of times. >> it's big. >> yeah. >> same with auto loans, in the -- >> it's an enormous liability. it's unclear how many will go back to paying. there are efforts under the biden administration to somehow reinstate some ability not to pay. >> right. still -- >> it's a burden. it's a headwind. >> i think about half of the debt on student loans is owned by 10% of borrowers who are in the upper quintile of income. it's not a lower income story. >> no, but it will hurt the lower and middle income consumer even worse. that's a headwind going forward. at the same time, you talk to these companies and it depends on what industry you're talking

to. arvin was on friday, he was talking about tech spending two percentage points above gdp and he expects that to track. >> we look at what the demand signals are. our demand signals are driven by our pipeline and forward-looking bookings. it looks quite healthy for next year. all that said, we need the next three months to figure that out before being precise about 2024. >> it was more positive than julie sweet. >> she didn't seem indicate that there was an economic slowdown. >> the numbers did. >> declining growth. >> it raises the question on whether tech is safe to get back in. goldman sachs saying sell energy and rotate back into tech, the hedge funds they have been

tracking saw a big trade in that direction last week. >> notional selling of energy last week. notional buying of tech, biggest in two months. then you have the goldman also today adding nvidia and okta and isn' cintas replacing those with crm and johnson controls. it's a muddy debate regarding q4 and the tech trend. >> the other debate is who is protected in this world of higher for longer interest rates? david kostin writing the key risk for s&p r.o.e. is the higher interest expenses and he picked out costco, cisco, paychex and visa. >> we've got a lot of the

strategists weighing in. morgan stanley's mike wilson, he's using the opportunity for not having a particularly good quarter for stocks to once again say valuations look more ex extended today. this gets back to the heart of our conversation, nominal and real interest rates have risen amid supply and demand. >> and tom lee, who is constructive as ever on the u.s. equity markets. no doubt it's been a rough few weeks for his bullish call, he says the bottoms-up s&p forecast for q3 are rising. expected to rise 6.7% x energy improving on the 3.6% seen over the last quarter. 7 out of 11 s&p sectors expect todd show positive growth in the third quarter. he's constructive and likes the negativity. >> yeah. september didn't go his way. i think he was looking for a couple percentage points to the

upside at the beginning of the month. we came in down about four. take bank of america's top picks, boeing, kraft heinz, teva, you don't see a ton of tech in there. i will add some of the tactical ideas include microsoft. >> what's so interesting is that even though the economy is softening and you see signs of this everywhere, some of the safest sectors have been beaten up the hardest. sentiment is so negative on those. you have higher rates and that stands in the way, it's more attractive than equities that pay fat dividends. if you think we're going into recession, usually those sectors outperform. >> if you say so. >> we can ask the kellanova ceo about that. >> we have tesla delivery numbers out. we'll get to phil lebeau on that

after the break. >> some of these numbers coming in even after estimates have been shaved. we have upgrades to names including rivian. look at the premarket. some red arrows to start q4. eve: is it possible? with comcast business... it is. is it possible to help keep our online platform safe from cyberthreats? absolutely. can we provide health care virtually anywhere? we can help with that. is it possible to use predictive monitoring to address operations issues? we can help with that, too. with the advanced connectivity and intelligence of global secure networking from comcast business. it's not just possible. it's happening.

here's why you should switch fo to duckduckgo on all your devie duckduckgo comes with a built n engine like google, but it's pi and doesn't spy on your searchs and duckduckgo lets you browse like chrome, but it blocks cooi and creepy ads that follow youa from google and other companie. and there's no catch, it's fre. we make money from ads, but they don't follow you aroud join the millions of people taking back their privacy by downloading duckduckgo on all your devices today. tesla's delivery numbers seem to be a bit below expectations. let's go to phil lebeau for

those numbers and some other numbers as well. phil? >> they are below expectations. the street was expecting tesla to deliver 448,000 vehicles in the third quarter. deliveries coming in at 435,000. not well below, but definitely below expectations of 448,000. production for the third quarter coming in at just over 430,000. for the year they delivered basically 1.33 million vehicles. the guidance, by the way, remains unchanged at 1.8 million vehicles. the cyber truck is what people are looking at. as we look at shares of tesla. the original target was cybertruck deliveries to start in the third quarter. q3 has come and gone. we still don't have cybertruck deliveries. that is not a huge surprise. nobody in the auto world was saying this is a big deal if they miss q3.

they'll be coming at some point. but this is not a surprise that there is a slow first delivery and it will be a slow ramp up on cadence as well. let's quickly talk about rivian. those shares getting a pop after q3 deliveries were better than expected. deliveries at 15,564 vehicles. the estimate was 14,000. for a long time it was 15,000, just within the last couple of weeks, wall street brought it down to 14,000. they produced just over 16,300 vehicles in the quarter and affirming its full-year guidance once again of production of at least 52,000 vehicles. finally all things auto, let's look at the big three automakers. gm, ford, stellantis, we talked about this on friday. you now have 25,000 uaw workers who are -- they've walked off the job. they're picketing out in front of facilities, five assembly plants. you had the automakers,

executives voicing their frustration on friday. you had sean fain coming back and saying, no, we won't deal with the way these guys are -- how they're handling things. we're nowhere closer to a resolution on this. >> yeah. a lot of different things to get to. i'm curious on rivian. they raised all that money on the ipo a bit back. where are they in terms of potentially needing more cash or do they have enough to take them through this period? >> they have enough to get them to the r2 production. now the question becomes, that r2 production, they're in the process of building a facility down in georgia to the east of atlanta. it's going to probably come online. you're looking at late '24, early '25, production is not going to really kick in until '25, that's the r2 model, the smaller suv, smaller crossover

suv. that becomes the question, they have the money right now that will get them to where they need to be at least for the foreseeable future. then you get to r2 and the question becomes how is your funding? do you need more capital? >> now we've seen the strike expand in terms of the number of workers and number of furloughed. this is something that everybody is watching as it could have an impact on the broader economy and probably already has. any sense on where these negotiations go this week and how much longer we'll be dealing with this? >> i don't think it gets resolved soon. we've been saying that for some time. sean fain believes he has leverage and he has enough time on his side that he can push this further. a good example of that is on friday they said they got a last-minute offer from stellantis where stellantis has now said cost of living adjustments, we're willing to

throw those into the contract. for a long time it was, nope, we're not doing cost of living adjustments. now they're saying we will put those in the contract. that's the kind of progress sean fain is looking for. the fact that we have not seen it regularly is not a surprise. i think that sean fain and the uaw look at in as we can push this further. we're not to a point where public sentiment or people on the line are saying settle it. we need to get back to work. therefore they will continue pushing this. >> that's kind of backed up in some of the chart work in the last week or so showing either that the union wages should have a relatively muted impact on overall wage inflation or in some cases have not even kept pace with nonunion wage increases over the past couple of years. >> that's what drives the workers. whether you go to some of the plants whether in wayne,

michigan or toledo, they truly feel like they have been shafted over the last four years. yes, they were under contract and nobody is disputing that. but they look around at the rest of the manufacturing complex in this country and say, look at all these raises these people are getting. look at the record profitability of the big three. why am i getting 3% or 4%? seriously? that is the attitude that you hear from people on the line. that goes back to sean fain and his negotiating style. he believes that he has that support. it's not eroding any time soon, which is why he believes he can push the automakers further. >> hence why the lebeau meter is in negative territory. >> yeah. >> let me end where we started on tesla. as you said, still target around r. round 1.8 million vehicles for 2023. will report numbers on october 18th. any sense we'll get along the

way in terms of demand in china and how much that may impact the overall number? >> i don't think we get it until they report. i think it will be during the analyst call that we get some better color from elon musk and his team in terms of what they're seeing in china. remember, earlier this year when they -- tesla along with a number of other automakers in china, there was a hope that perhaps they had reached the detente, that they weren't going to continue to cut prices. that has not happened. i heard you talk about this, as a result it keeps getting pushed lower and lower in terms of the asking price in china. that is a huge driver of what we'll ultimately see for the q3 results for tesla. >> phil, thanks. we'll see who has the biggest tolerance for pain if the price cuts continue. phil lebeau talking some union stuff and the deliveries. let's look at the pre-market

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also defends the systems running america's infrastructure. for these services. for the 336 million of us living here. ♪ starting off the new quarter and month under pressure here with futures. here are the biggest losers pre-market. tesla on the list on 2.5% on deliveries missed forecast just out. carnival cruise on there as well with more selling after the quarter, which was a good quarter and good profitability and some forecasts from the ceo on demand. solaredge gets a target cut at

barclays. we'll hit all the movers for you and why including treasury yields which continue to drift gh wn e eng ll comes right back.

ip window has gotten more interesting. today birkenstock. we'll look at this as we take the temperature of the them. lvmh's chairman and his family have been an investor in the past, may also buy stock in the ipo. testing the waters is right. i talked on friday with adena friedman, the head of the nasdaq, she called the environment trepidatious. that was her word. she said ipos are kind of a question mark, they had strong

debuts but since then have faded. >> sequoia saying it has not made any money on its 2021 investment in instacart. again, the big one is still trading above the price. >> yeah. >> let's get to the opening bell and at the big board, it is kellanova celebrating the launch of its cereal business. steve cahillane will join us on set in a minute. at the nasdaq, hologic, marking breast cancer awareness month. the bulls may have been thinking we could enter october with a bit more heat. >> one thing on the plus side that we didn't talk about is the china data. it was a manufacturing number. it went above 50. back in expansion territory. that was a little helpful and also played into the narrative that the china data has turned for the better. the stimulus is starting to

work. it's not booming, but it is certainly important. >> that is the first above 50 since march. i noticed last week mizzuho tweaked higher. >> the world bank downgrading the asian economic forecast, both for this year and for next year. part of it is on the weakness in china. i want to pull up the exact number. growth for china they leave at 5.1% this year. for 2024 they lowered the target to 4.4% from 4.8. they cited long-term structural factors there, elevated debt levels, weakness in the property sector. east asia pacific economy only expected to grow 5%, which is also lower because of some of these problems. that's a focus because for investors it's been a lot of hammering over the u.s. and europe lately. you need asia to grow as well, especially china.

>> china continuing to grapple with serious issues in its property sector overall. we talked about evergrande and the detention of executives there. there's a hope of it relisting and country garden and its issues in terms of potential defaults as you look at japan's nikkei. the china and how the government responds to it and what they choose to do or choose not to do given its importance overall in the chinese economy and for the chinese consumer, where so much of their savings is really related to their ownership of property. >> east asia, too, they have been beneficiaries of the tensions between the u.s. and china, what's interesting in this report that the world bank puts out is they're starting to hurt because of some of the measures like the inflation reduction act and the more protectionist measures from the

biden administration favoring u.s. manufacturing and canada and mexico over places like that where they are actually seeing electronics and machinery exports from china and southeast asian countries get hit as a result of this. just another global growth factor to watch. wanted to come back to tesla. you heard the delivery numbers. 435,100. phil had it at 448,000, others as high as 455,000. for tesla, it was a miss. dan ives, friend of the show, nothing to write home about in these numbers. the street will be left wanting more. he does note they are still committed to delivering 1.8 million overall vehicles for 2023. he does see momentum ahead. better days ahead as well is another way he put it for the

next year of 2024. >> some of the estimates prior to last week were the 515 range and it got cut. factory down time in shanghai. >> tesla said that in the rel release. they said planned overhauls of the factories, which is something we announced and remain unchanged in the delivery numbers. tesla is down a little bit, maybe that's why we're not seeing a bigger decline there. it is interesting we're seeing a bounce today in apple and nvidia and meta and google and microsoft. that wasn't the story for september. especially with apple. >> tech is the only thing working at the moment with infotech green. fdx gets an upgrade today. susquehanna goes to positive. they go to 315. long-time opportunity they say in cost rationalization and much

more favorable to fedex than they are to u.p.s. >> i mentioned apple. apple, i guess the news today is they'll issue a software update to address the iphone 15 overheating complaints. not sure if that's a factor and this report, i'm sure you're all over it as i am, from a trade magazine on f1 and the business of f1. a report that apple is looking at a global media rights deal for $2 billion. it's interesting because apple did the mls deal and it's benefiting from that from messi. f1 never had a global deal like that. we can contemplate it. >> is f1 stock up? that's been down lately in part because tko, the merger of wwe

a and -- the merger of wwe and ufc, that tko had been getting hit. you can see as a result of coming into a sports rights deal with our parent company, with nbc and peacock that was not at least what many investors had hoped. formula 1 had also been down. it's a liberty company. i know you've been following closely. >> yes. >> larger questions when you bring up apple and sports rights about their commitment to it and how deep they want to get into sports rights because in a way, given that it was live programming, you can argue about wwe and live sports programming and it not coming in with the number anticipated. a concern that i picked up over the week about how that will ultimately play. will the nba do as well as it expects to. the nfl is its own thing. you have to own it. that's kind of a question and one of the keys is how big will

the streamers be overall, particularly the ones that seemingly have no price cap, apple and amazon, but they have yet to be fully in. that would be an interesting deal if they were to go for 2 billion for global rights for f1. >> espn has the u.s. rights to formula 1. that's locked up until 2025. this is a longer-term story. >> you can see it as having a significant impact on those shares. they had been down in part because of worries about their ability to negotiate given tko. >> it's a big number. it's a bigger number than anything f1 has gotten but it speaks to the rise of popularity in the sport. we finally have a meeting between the actors and the amptp. the first time in months. not doing a lot for the legacy media names. we'll see, david, if they can recreate some momentum that the writers got in a hurry. >> yeah.

a bit of a bump last week in many of those names after the writers did reach that deal. no updates that i heard of in terms of getting a sense as to how far or close they are to an agreement with the actors. >> did you see that brutal downgrade of toast? we don't talk about toast that much. this is the restaurant tech company that went public in 2021. the name was downgraded $30 to 16 on the price target. you know why? the obesity drugs, the ozempics of the world, this is becoming a bigger theme. the concern is that americans and people around the world, because a lot of them are on these drugs will be eating less and dining out less. the threat to the restaurant industry because of these drugs is real in our view. i went back and looked at this. darden last week reported results, got a question on the conference call about this drug.

>> cramer last week, we were charting hershey versus lilly, we looked at medtronic. >> looked at mcdonald's as well. this has been a theme. whether it proves correct or not, a lot of hedge fund managers, i've been talking about it over the last few months, they've been wondering whether or not it was worth trying to short some of these names. >> food names. >> yeah. or even fast food. who knows. coca-cola as well. if jim were here, he would talk about alcohol. >> smaller portions. >> yeah. >> cocktails in the uk are smaller. >> cocktails. >> cocktails. yeah. >> that's unfortunate. >> they don't want to drink as much. >> in the uk? so they have 20 of them? have you ever been out for happy hour in london? >> yes. at the fancy uk cocktail bars, i think they're more trend setting than the pubs. >> i'm not talking about the

pubs. >> got it. kellanova, formerly known as kellogg company completing the separation of its north american cereal business today. the company will focus on snack, international cereal, noodles as well as north american frozen foods. steve cahillane joins us on set after ringing the opening bell to talk about the spinoff. it's finally here. >> finally here. very excited to ring the bell. it's 18 months in the making. kellanova is off to the races today. >> do you want to remind viewers about the motivation and the thinking behind this one? >> we felt the vcereal business could flourish and 80% of our portfolio is snacking, driven by five of the largest brands, pringles, rice krispie treats,

cheeze-its and we think the market will appreciate that brand more than historically. >> how do you compensate about the lack of scale? that's what it has always been about, shelf space, getting distribution. i guess now that you're leaner, you can be more nimble but the scale is a negative, isn't it? >> you're talking about a $13 billion business. 2.7 billion we're spinning off. in north america, where we're spinning it off, we're still very much a scale player and growing faster than most retail. we provide a tailwind of growth. pringles, rice krispie treats, pop tarts, great brands. >> great brands, but are they growing market share? >> you have to look at a two or three-year trend. over that time period, yes,

they're all growing. they're growing share and growing nicely. >> steve, are some of these new drugs a concern at all in terms of people's willingness to eat a lot of pringles or pop tarts? >> you're not on them. >> but i like pop tarts. >> you're not on the obesity drug. >> i am not. in all seriousness, does it become a concern? >> we're not complacent about anything. we're being asked the questions, but it's way too early and very premature to talk about. we don't know the penetration that these drugs will get. we don't know longitudinally what happens with consumer behavior. we know what people say they're doing in terms of changing their diets. it's way too early to tell. we'll watch it and understand who will be on it and then understanding what if anything behaviorally changes over a

period of time. it's far too early to forecast this as a headwind in our opinion. >> when do you expect volume and price to cross paths again? >> we think it's starting now and into next year. if you think about the last 18 to 24 months, we've taken 30% pricing, that's like 10 years to 12 years of pricing in a short period of time. of course it will affect volume and the elasticities returning. as we get to 2024, our supply chain is back to pre-covid strengths and stronger so we can make our customers orders at a fill rate that's very high. we can bring innovation back to fold. pricing doesn't have to continue to go up. we're looking at a more behind cost inflation environment into next year. all those things work to help us think about volume in a more construction fashion. >> to the degree you're discounting now, is it getting

the reaction from consumers like you were expecting? >> it's starting to. we're not back to pre-pandemic levels but we're getting there. back-to-school was more pre-pandemic. as you get to the nfl and thinking about super bowl promotions, i think next year you'll see an exciting retail environment. >> so the other concern around packaged food right now besides the fact you don't have the same pricing power is that we're starting to see consumers trade down. that consumers are pinched, especially at the low-income and it's coming ahead even more headwinds like the student loan payment reduction. are you seeing any of that? >> there's no question that c consumers are feeling the strain. we work very hard to earn the right to be in that shopper's basket. we have to think about affordability. we have to think about package sizes. we have to think about where

consumers are in their journey from a monthly standpoint. at the beginning of the month, times are easy. at the end of the month, times are tough. the u.s. consumer and the international consumer have proven to be very, very resilient through what would be a challenging set of circumstances. >> you created this pure play now, but i wonder, do you expect to grow it simply organically or is it possible you still have a currency, there may be some brands out there that fit into the portfolio. how does m&a if at all fit in? >> our balance sheet is very strong. our leverage ratios are down. we can make acquisitions. we will measure that against the organic opportunities in front of us. we're only starting to expand cheeze-it out of the united states. if we see something inorganic that can add share value, we'll be a buyer. kellanova is kellogg and

nova meaning new, is that fair? >> we wanted to keep the iconic "k" and the beginning. when you see kellanova, we want people to think i recognize that, what is that? it starts the conversation around who we are and who we aim to be. >> i remember when we spoke and you first announced this split, the big concern was keeping the kellogg name. >> we're thrilled. one of the biggest things when we announced this is i'm so proud to say i work for kellogg. please don't take that away from me. so, the employee base was excited when we announced kellanova. they're excited about the future. you know, it starts today. >> you maintained the dividend. i know that was a key throughout, correct? >> we maintained the dividend whole between the two companies. the vast majority of that goes with kellanova. it's an important thing to our stock, it's important to the share owners. yes, it remains completely hole. >> congrats. >> thank you. great to be with you in person.

let's get some pmis out with rick santelli. >> these are much stronger than i expected. 49.8, 49.8, what it doesn't dismiss, even though it's better than expectations, it still represents 9 out of 10 megtive numbers in a row -- that's the sixth in a row under 50 in contraction mode. however, 49.8 after having said that is still the best since april when it was above 50. it was 50.2. this is also a very important day, if we're getting closer to 50, long-data treasury yields are all on track to make new cycle high yield closes. we want to pay close attention to that. vernaculars were gums hot in treasuries. "squawk on the street" will return after a short break.

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it's been a rough six weeks for clorox after disclosing that cyber aattack. lost about a fifth of its market since mid-august. upgrades to buy said all manufacturing sites are finally operating and when they quantify the impact shares could rally. a target of 152. we'll take a break here. dow down 119 to start the month of october.

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it is the first trading day of the fourth quarter. we've got the s&p 500 a little bit lower. tech is bucking the overall lower trend. nasdaq up a third of 1%. communication services and information technology the only sectors higher. bob pisani joins us at post nine looking at the early movers. good morning. >> september living up to its reputation as the worst month of the year. the hope is earnings kind of distract everybody from the rising interest rate situation. we'll see. nice tech is bouncing today. commun communication services. the economically -- sectors still under pressure.

the transport terrible performance, 13%, consumer discretionaries 10% off 55 week highs. the russell forget about it, 13, 14% off of their recent highs. nice to see the tech bounce. look at consumer discretionary. it's weak as tesla is weak. decent reports from lennar and auto zone. doing no real bounce here in the economically sensitive sector. we go into the earnings season. here's the good news, the numbers have been going up for the third quarter and the fourth quarter. 15 have beat. that's good news. the estimates are rising modestly here. here's the problem. we have to see what september reporters are doing because that's when the interest rates went up. pepsi starts the september quarter october 10th. not jpmorgan. it's pepsi that starts with these sent quarters. the problem we have is the estimates have been going up, but not enough to overwhelm the interest rate scenarios.

companies that have estimates raised by analysts, amazon, gm, horton, ford, meta, netflix, alphabet, communication services, tech, nvidia, apple, t intel. rising expectations for earnings in the biggest companies that are throughout. yet, it's not helping because it's overwhelmed by the macro situation being overwhelmed by this, the 10-year yield we've been seeing such a problem for everybody and for all of the situation right now. of course take a look at lennar. want to show you this. september 15th, lennar came out, excellent earnings, beat on the top and bottom line. look it's been down, yet they said business is good, taking business away from existing home sales. doesn't matter. rising interest rates, you sell consumer discretionary, sell autos, home builders. good earnings picture, overwhelmed by the macro situation and you've been talking about this, sara, that 10-year yield is the biggest problem we've got throughout and that's what we want to hear. how much is the -- that

impacting the consumer right now. you see what it did to lennar on a great earnings report, overwhelmed by that kind of situation. >> well, it also means utilities, real estate and staples are the worst performers which would do well during economic softness. with the rising rates -- >> watch the high yield. hyg. watch high yield etfs right now. because if, in fact, there is a problem there, those groups that have the most debt outstanding, they're going to be the ones that are more sensitive right now. i would watch hyg. >> thanks. okay. >> talk to you in a bit. still to come this morning, wharton's professor of finance jeremy siegel how to get ready for q4 .

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welcome to another hour of "squawk on the street." i'm sara eisen with carl quintanilla and david faber, live for you from post nine of the new york stock exchange. we begin the new month and quarter, a little bit soft, although coming back a bit. the s&p 500 unchanged. why? because there's strength in information technology and

communication services and that's offsetting the weaker parts of the market. today it's utilities, energy, materials, health care, consumer staples, financials, and real estate. though the nasdaq composite has been higher. it's up about a half a percent led by apple, nvidia, meta and microsoft. a bit of a reversal in the trend we have seen inseptember where energy was the outperformer and technology hit hard. the dow weighed down by goldman sachs, mcdonald's and 3m, although cautiously still watching yields which have been the big headwind for the market rally and economy. and the 10-year yield up 4.63%. we're pushing near the highest levels in 16 years. we're 30 minutes into the trading session. three movers we're watching. tesla is in the red after delivering numbers come in light. more on that. norfolk southern is one of the biggest losers as bank of america downgrades the name to neutral cuts the price target

on, quote, continued services challenges. watching nvidia and okta today. goldman sachs adding the names to the conviction buy list heading into q4. >> getting some ism and construction spend for that we go back to rick santelli. >> thank you, carl. construction spending is out. it's up 0.5%. if you have to go back in history to find if that's good or bad, well, the last two numbers, of course, have been better. you have to go all the way back to april to find a smaller number. construction spending has been positive for the entire year, best month in january, up 2.2%. ism 49.0, means 11 sub-50 reads in a row. 11 sub-50 reads in a row. and that number actually is equalled to november of last year. to find a higher number you have to go back to october. if we look at prices paid at 43.8. that's the best number outside of last month. you had one, two, two months that it was less than that and

may it was a little bit better, so our comp there at least for the weakness was in may. new orders very important, 49.2. that means 13 consecutive months sub-50. 13. and finally on the employment front, the jobs report coming out, 51.2. guess what? we break the string of three consecutive sub-50s. 51.2 the best level since may. when it was 51.4. look at yield kurn curve moves as long maturities continues to be guns hot. back to you. >> no change after the data. thank you. rick santelli. that just kicks off a week of heavy economic data now that government has managed to stay open and that's surprise deal on saturday night, we are going to get data and rick mentioned the jobs report on friday, we're also going to get jolts which the fed pays attention to. the openings come down but there are plenty of them. speaking to the tight labor

market, the adp private sector report, jobless claims, and then punctuated by jobs. fed speak from jay powell speak at 11:00 today alongside harker. not sure if he will give clues because it's a roundtable discussion on workers. we pay attention to all of it, of course. the question is, what happens to tre treasury yields from here? it's about higher for longer and the fed reiterating that message for a while but feels like the market has glommed on to it in a bigger way in the last few weeks. we started september in the 420s on the 10-year and ended in the high 4.6s. >> prices paid just now looking for 49. 43.8. might be one reason the s&p has gone green. >> it's good news because it suggests that inflation is continuing to come down and will it be good enough for the fed to stop raising rates?

maybe. cutting rates sooner? that's the question. we have come down substantially and the last part could be the hardest parts with stickier services pricing and oil prices on the rise and whether that will seep into core inflation and whether they can ignore the headline inflation for core. the chart of the day as it relates to treasuries. it is the economic surprises so basically is the economy getting better or worse than expected versus treasury yields. and what you are seeing is that treasury yields are the orange line that continue to go up, up, up. the blue line are the economic surprises and they are coming down because we're seeing a lot of missed economic reports, ie, softening economy, softer than expected. this is not what you typically see. the two usually track each other and this just proves the point that we've been trying to make which is the rise in yields isn't completely tied to a

stronger or firmer economy and that's why it's catching a lot of people's attention and we have to figure out what it is and whether it will continue. >> which takes us to something we've talked about a lot and will continue to. the underlying fundamentals don't necessarily call for higher rates and is it maybe we're starting to see impact of supply-demand, the need for fund these deficits and unwillingness perhaps some of people to step out at ten years, for example, and give the u.s. government its money what would be or should be a rate reflective of current economic conditions. >> you have totalk about the fiscal credibility, fitch downgrade, government shutdown averted, but it's kicked the can to november 17 where the they have to figure out big issues like paying for the war in ukraine. there's major divides not necessarily that that's why the treasury move is like this, but speaks to the overall dysfunctionen and lack of credibility when it comes to dealing with the debt problem and with the higher debt. it's coming at a time where

capital gains track not contributing as much to the federal government at a time where debt interest payments are higher. >> right. >> all of this is converging and, i don't know, people are getting flashbacks. we talked to ed last week who coined the bond vigilante term. anything like the '90s. no. crazy move in 1992, but we watch it. will it be enough to impact politicians? not at this point. let's keep watching it. >> and the deficits are fwhakds. i suppose if you were to cut them over time it might have an impact. we know funding in terms of deficits for this year and next year, right? >> we know, yeah. but i'm saying in terms of forcing action, that the government could take, when it comes to austerity or reducing the deficit doesn't feel like we're on the brink of anything like that. >> not until mid november at the earliest. meantime our next guest does not believe the fed will move rates on november 1st as higher oil

prices continue to pressure the market. jeremy siegel joins us this morning to discuss. professor, great to see you. want to get to the q4 playbook but i'm curious about your views with what we've been discussing the separation between the movement in yields versus inflation products, break even, do you think that's largely technical and how much can it get reversed? >> well, i think the economy is still very strong. take a look at this ism report. you know, certainly is -- was above expectations. system of third quarter gdp are north of 3.5%. i mean, some like the gdp now are north of 4. i think this economy is cooking. the economic surprises, some of them, have been negative, but on the whole, we have a strong economy. and, of course, the rising oil prices which is really a supply

shock because opec i think is at a record restriction from their capacity. don't forget bond holders look at overall inflation. they don't just look at core inflation. core inflation might be doing good. overall inflation could be affected by the oil prices. you know, i think that the higher yields, that's what's been pressuring the equity markets. i think the recognition that hey, what happened last year, bonds not being the hedge that they had been for 20 years against stock declines, has sort of dented, do you want bonds in your portfolio when inflationary episodes are likely to be more frequently in our future. >> you can't say that bond yields are rising because the economy is strong because it's not strengthening and a big part of the move happened in the last few weeks, professor siegel, where the economy, while coming from a good, strong base, is

weakening, not strengthening, right? so there's something else going on. >> i'm not -- you know, as i say, the third -- we just started the fourth quarter. third quarter is going to be north of 3.5%. we're going to get positive payrolls again. what's happening is a rebound in product fichts remember 2022 was the worst productivity i think that we had in 75 years, and what we see is a rebound in productivity and, of course, the expectation that ai may perpetuate that rebound in productivity into 2024, so we don't need blowout payroll growth like 250, 300,000. we can have 150,000 and still have gdp growth above what we've had for the last two, three years. you know, i think that the economy is strong enough.

i think that core inflation is going to be stubborn, but let's face it, the fed, you know, has to look at what's happened to the yields and that has affected home building, no question. housing starts were down. home building sentiment in the index has fallen quite a bit in the last two months. as you guys have mentioned, we're getting 30-year fixed mortgages beginning to move towards 8%. that has to have some depressing effect. other than that, look at jobless claims, 200,000, wow. i mean, that -- that's one of the first indicators to really show weakness on the real side. i don't see it yet. >> professor, i want to divert for a minute, you mentioned ai, and i'm curious about your students. you're teaching the future hedge fund managers, private equity,

investment bankers, and business people of the world, how are your students viewing ai at this point and what it means for their ability to get a job, keep a job, and build a career? >> i think a lot of them are worried. what they did very best now can be done by ai. so they're trying to get ahead of that. what could i add that ai isn't? don't forget ai scrapes the web and there's a lot of false information on the web as we know, so ai is far from perfect. people have to be able to detect it. clearly it's something that's going to add productivity and except for those people that can interpret really big events that i don't think ai yet can do, it summarizes all the details extremely well, but to foresee the future or give you a context of the future and that's what we try to teach here at wharton, i don't think ai is there yet.

>> finally, professor, the fed, if you don't think they will move in november but talked about the resilience of the economy, why would they not to move again to show they mean business? >> because again, take a look at the price report is. outside of the stubborn super core, we keep on redefining it into a smaller amount and that takes so long to go down. you know, risk with a tightening of yields 50 to 100 basis points that will feed through in the fourth quarter to perhaps slow things down, not recession, but slow things down, i think -- november 14th is another data potential. we have the auto strike still there, the effect of the student loan repayments. you know, my feeling is at this particular point, he will opt to hold, but don't forget, we have four weeks more of data to see

what's going to happen. >> yeah. luckily we'll be getting the data thanks to the averted shutdown. professor, thanks. talk soon. jeremy siegel this morning. as we kick off a new month and quarter "squawk on the street" has a jam-packed week of interviews including what investors need to know as we close out the year and wall street's top pick across tech, energy and more. something that's going to sustain us in the coming days. >> all right. shares of tesla actually not doing atoo badly. let's go to phil lebeau for what may going on. >> david, we had the retooling of factories in shanghai as well as in texas. there was an expectation these numbers were going to come in light compared to q2. they're lighter than the system that were out there. when you take a look for the third quarter they delivered 435,000 vehicles, just over that a. the street was expecting 448,000 vehicles. the production rate was just

over 430,000 vehicles. lackluster would be one way to put those numbers into some context here. again, people were expecting this as tesla forecasted we're going to be bringing on texas as well as shanghai for a bit during the third quarter. in terms of the annual guidance that remains at 1.8 million vehicles. that's what tesla expects to deliver. it's 1.32 million when you add in the third quarter. that's what they have to make up in the fourth quarter. the expectation is they will get there. by the way, the cyber truck a lot of people were saying, wasn't it supposed to come out in the third quarter? that's not happened. we'll see if that happens in the fourth quarter with production by some system likely to start late october, early november. those are guesses at this point. take a look at shares of rivian. take a look at the stock and the day when the company reported its initially there was a pop after these numbers came out.

reporting q2 or q3 deliveries of 15,564. the street was expecting 14,000. better than expected with production coming in at 16,304. the full year guidance remains at 52,000 vehicles. that's where they are right now. tomorrow we will be at the rivian plant in normal, illinois. you do not want to miss our exclusive with rj scaringe and how it's looking '24 into '25. as you pointed out and david pointed out, sara, the question becomes, will liquidity, the capital that they have on hand, will they need to raise more capital? they believe they're in good shape at least leading up to the beginning of r 2 production in '25. >> as you're reporting the ev delivery numbers, phil, i'm wondering if the ford and gms of the world because of the strike, if their plans which are pretty ambitious and start to ramp up

get delayed? >> i don't think so. not at this point. i don't think that the strike is so catastrophic where they have to dial back their plans. jim farley says there is a limit to how far they can go. say you have a super extended strike, that may change the calculus in detroit for the automakers in terms of their ev investments at least near term. we're nowhere close to that at this point. >> detroit three manufacturing losses $1.2 billion from anderson economics tracking this thing. thank you. as we lead to break our road map for the rest of the hour. birkenstock sticks off its road show ahead of a potential debut this week. what investors need to know. >> insurers are hitting fresh highs, some warning of big risks ahead for that sector. the q4 playbook for two beaten down sectors, financials and energy. and some of the key names to watch there. big show still ahead. don't go anywhere.

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months but only up 3% year to date. joining us to discuss the outlook for energy and oil prices is the energy aspects founder and director of research. interesting to see it flip lower today. a reason to expect the reversal of the trend in q4 that we've beening me. >> >> i mean, look, we've been saying and i think in the near term last week and this week as well, some consolidation is likely given we are, you know, we've moved higher substantially. some risks are for sure around kind of options positioning but that's very much a near term phenomena fundamentally. this is a market that should move higher. we never move higher in a straight line. they make great headlines but overall hasn't really changed in terms of whether the direction of prices are you. >> you think prices can continue to rise from here? you don't think the administration might step in or some type of other supply side

issue? >> no. look, for me, opec plus continue to remain cautious. they continue to remain very much of the opinion that the macro is weak and they need to remain vigilant rather than bringing back production quickly and early. even russia, who's enforced some oil product export ban, isn't jumping up and down to export more crude. they came out and said that because both saudi arabia and russia and opec as a whole are realizing significantly more higher revenues and as a result of that, i think they are fine in terms of letting prices go up a little bit simply because even at these price levels because gasoline has been coming off you're not seeing a negative impact on consumers and, you know, we do believe oil prices need to go up substantially from here if gasoline prices continue to come off before it makes a negative.

in terms of the administration, we think an sbr release -- i shouldn't say it's likely but definitely something they could use. maybe they use it for thanksgiving. that's something they've done in the past. 13 million barrels is what happened in november 2021. i wouldn't rule out a repeat of that given it's an election year and they will probably do everything they can to lower prices. it's going to be a temporary impact because the market is tight enough to absorb that. >> when would you argue that inventories in the spr are dangerous? a threat to security? >> it's a great question. it depends. look, right now with what u.s. demand is and u.s. production is, we think you could draw down another 120 to 140 million barrels and still have some cover, but, of course, in the event of an actual outage, you would want more than that. that would be the bear minimum. if they were to draw it down another 120 to 140, that's

absolutely the bear minimum you would fwhants an sb, r. there are potential issues with stability and can you actually draw that much down without collapsing. those -- i don't think anybody knows the answers to those questions, but there's definitely, you know, when you talk to some of the technical folks they will highlight what to watch out for. >> you're a buyer of energy today? >> sorry. could you repeat that? >> so your upshot you're a buyer of the dips in energy stocks? >> yes. yes. i mean, look, absolutely yes. like i said, i don't think it's going to go up immediately, but i do think even if we consolidate a little bit and we correct lower, i think ultimately this is headed higher given how law of entries are. we're fighting for crude everywhere in the atlantic basin. we should continue to edge higher. >> thank you for joining us to kick off our playbook series. >> thank you. >> after the break, shoe company

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as we look at going forward, we are having more serious conversations with companies as they're thinking to tap the public markets but they're still trepidacious on the fact that there is market volatility. we've gone 85% of the ipos and four of the top five. as we go into the second half or the fourth quarter really, we could see interesting companies come out, but we also would expect pore companies to be planning for the first half of next year. >> that was adina friedman giving her outlook on what's a volatile outlook market. sounds optimistic. her comments come as birkenstock becomes the latest company to test the waters filing an amended f-1 kicking off its road show. birkenstock planning to raise as much as $1.6 billion selling 32 million shares between 44 and 49 apiece at these levels, birkenstock's valuation would be as high as $9.2 billion in an

ipo on a non-diluted basis. i think it was valued about $4 billion a few years ago when bernard arno invested in it. his son goes on the board. they're back in style again. this is a company that goes back to the late 1700s and used to be just for hippies -- >> late when? >> 1700s. >> like 200 years old. >> 1774. >> things you learn on this show. >> who was wearing -- john adams was wearing birkenstock? founding father. >> he was a young guy. >> hard to farm in birkenstocks. >> they were hippie-ish and now back. they got a bump from barbie. they were featured prominently in "barbie." >> huge exposure to 4 x pressure in this case. >> because it's an international market. obviously, it's subject to the trends and the consumer and the manufacturing. david is going through the risk factors. it's a long -- >> lot of risk factors always important to read them in the

s1. the performance of ipos has been okay. you talked to rene haas from arm last week. that's hanging in there about above the $51 bid. >> instacart. >> not. >> and then the -- >> klaviyo has done the best, like 15% above. >> i always get the name wrong. >> that one interestingly is doing well. >> klaviyo is. >> software as a service model recurring revenues, enterprise is the tart, not as much consumer, so that's been an interesting barometer for some of the private software companies that want to go. different directions. >> yeah. birkenstock, wow. >> see how it goes. in the meantime still ahead, you can take any news cycle and throw it out the window. the market is following the yield. that was ubs's art cashin the first week of september. we're going to get his take on what's ahead now when we're back in a couple minutes. icy hot. ice works fast. ♪♪

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welcome back. i'm silvana henao with your cnbc news update. donald trump stopped to speak to reporters at a new york court this morning as a $250 million fraud trial against the former president began. prosecutors accused trump, his company, and two of his adult sons of over valuing and under valuing his assets to benefit his business empire. trump once again denied wrongdoing on his way into court and called the trial a witch hunt. meanwhile, a massive search effort is under way for the 9-year-old girl believed to be in imminent danger after she vanished from an upstate new york camp ground. authorities fear charlotte sena was abducted while on a bike ride saturday evening. they have deployed dogs, drones, boats and dozens of law enforcement personnel to look for charlotte. and two scientists whose crucial work paved the way for covid-19 mrna vaccines won the

nobel prize in medicine. the panel says the previous work on the messenger rna set the stage for the unprecedented quick development of covid-19 vaccines which the package said saved lives and paved a path out of the pandemic. guys? back to you. >> thank you. just about an hour into trading and it's kind of up and down kind of day on the s&p 500 at least. which is lower by 0.1%. the nasdaq up 0.4%. did get manufacturing numbers better than expected but not expanding. new orders better, not expanding. more disinflation momentum. dominic chu with more on what's moving. >> most sectors as you point out in the s&p are trading lower today but it's the heavy weight sectors like tech and com services are keeping things near the glass line. on the other hand, on the other end of the spectrum, utilities down about 3.5% right now. far and away the biggest under performing sector extending its

recent declines. the sector is down around 10% just this past week alone. names like aes, constellation energy, pg&e, among the biggest laggards in the sector today. along with nextstar energy which has fallen 20%. analyst says under performance is over done and next era should be able to manage above average growth. they note higher costs of capital and renewables and things like that in the high interest rate environments will persist as challenges. keep an eye on the challenges, nextera, back down to you at the stock exchange. >> thank you very much. for more on what's ahead for stocks let's bring in ubs director art cashin. it's great to take your temperature again, especially regarding the market's fascination with yields. you brought this to our attention weeks ago, but what do you think breaks the spell? >> i think what you saw, carl,

was a recently the yield on the 10-year spiked suddenly up to 4.70. and then it recoiled and came back. a lot of us old timers say that looks very much like a parabolic exhaustion rally that they peaked out and eased. from that we've got this multiday autumnal rally in equities that popped up. i wrote in my morning comments today that you have to be careful. the yield on the 10-year was creeping back up toward that 4.70. now if it goes back up to or through 4.70 that violates that whole idea it was a top. that would make everybody nervous. so what i said coming in preopening, was that if the yield today gets up above 4.60, up into the 4.63, 64 area, it

will put pressure on equities and sure enough, what we're seeing they got up to 4.65 briefly and that cut the rug out from under the dow jones, so i think viewers at home, your yardstick or rule of thumb will be once that yield on the 10 yea year, as it begins to inch up, it will put more pressure on equities. if it eases back that may give them a sigh of relief, 4.60 or what not. and then just to diverge a little bit, carl. >> yep. >> october is the month of bottoms. okay. people you talk about weak months and strong months. october is a month of bottoms. usually they come after some

kind of climatic sell-off. i don't know if we can call september climatic, but ordinarily you see in october a bottom is reached. we've seen it in, heaven forbid, 1987 and the crash of '87 and crash of '29. '6 we had the same thing happen. on and on for 60 years we've been watching this thing. somewhere in october we're going to get a bottom. and where could that come from? well, earlier you guys were talking about student debt repayments are going to start today. guess what? in the middle of the month, on the 15th, there are billions of dollars in tax payments that have been deferred on the west coast because of the absolutely dreadful weather a year ago. october 15th, billions of

dollars in back tax payments are going to come due. it's going to be a squeeze on the banking system. it's going to be a squeeze on liquidity. that may be a factor on bonds and stocks. get ready for an adventure this month, ladies and gentlemen. >> great. art, what do you think is driving this yield move? do you think it's the fed talking higher for longer? do you think it's something about longer term inflation? or fiscal concerns starting to be a problem? what do you think it is and where do you think it goes? >> it's a little bit of the combination. once again, quite accurate to be on top of it. the fiscal side is beginning to pile up. it's not there yet. we're starting to see deposits leaving the banking system. people are using them for x, y and z. we had surplus money because

they poured an awful lot of money into the pandemic and post-pandemic relief problems, trillions of dollars. some of that is drying up and that money is starting to come out of the banking system. that's one of the factors on yields and the others are, as i say, you're going to get deferred tax payments, student loans. all these things are coming together in the month of october as we begin the fourth quarter. we're looking at a crab claw here and they're afraid of getting pinched. >> appreciate that. you have another pothole to monitor and truly appreciate the granular look at what the 10-year means for equities, at least at the moment. look forward to talking soon. art cashin, thanks. >> my pleasure. >> froinancials are on pace,

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welcome back to "squawk on the street." the fed's capital requirements for all large banks went into effect yesterday. financials posted losses for the third quarter, but still outperformed the broader markets amid soaring yields. rbc capital markets us to discuss the outlook for financials. it's not a pretty picture other than jpmorgan stock i don't have any of the big guys up at all for the year. what do you tell investors to get them excited, if anything, as we finish out the year? >> thank you for having me on the presume. i would suggest it's going to come down to when the fed reaches its terminal rates for fed funds.

what we've seen in past tightening periods is when the fed reaches that terminal rate, the bank stocks, that's the catalyst for stocks to do better. what happens is six months after the terminal rate the deposit rates stop going higher but the yields on assets when they reinvest the cash flows from the bond portfolios, loan portfolios, they're reinvested in much higher yields and margins start to expand again. i think that's the real catalyst. if you believe the fed is finished by the end of this year, margins should bottom out some time in the second quarter of next year if not sooner and that would be a positive event for the banks. >> obviously, we debate that endlessly here on cnbc. when do you buy the stocks typically in advance of your expectation for rates topping snout. >> that's a really good question. if you look at '94 and '95 you might remember, greenspan raised rates from 3% in february of '49

to 6% in '95. stocks bottomed out in the late fall of '94. same thing '04 to '06. stocks bottomed at the end of '05. now would be the time if you believe that fed is finished or about to be, right now is the time to buy based upon the past history of how these stocks have behaved. >> what about citigroup? i wonder if there's a catalyst here with the reorg? it under performed in the past quarter, under performed for a long time, the past few years. i spoke with jane fraser, the ceo, on friday, about what she's trying to do. listen to this. >> we're focused on simplifying the bank. it's much more about eliminating the complexity, flattening the organization, taking out layers, getting easier for people to work together and deliver to clients. we will give a number in the fourth quarter earnings once we've begun the work all the way through the organization

cascading it down, so we expect to be in a place that all of that change will have finished by the end of the first quarter. >> news on the timeframe and that a she's going to lay out numbers on potentially job cuts and cost savings fourth quarter earnings, do you buy it? >> it's going to be interesting saishgs, because citi as you know over the years has a number of reorganizations and has struggled. jane frasier is turning around a battleship and what we really need to see is the outcomes of these changes. as the outcomes become apparent or materialize, that's when the stock starts work to. the effort is, obviously, very good. what she's doing needs to be done, but i think investors, because they've been scarred with this stock for so many years, they'll tiake a wait and see attitude. we expect the stock to react favorably to the moves. >> what about broader

fundamentals in the economy? loan growth doesn't appear to be strong right now. i'm curious to get your take in terms of how that will impact even if we expect rate have topped out? >> it's interesting, david, because loan growth has slowed down. it typically slows down with the slowing economy. if you go back over 50 plus years, loan growth in the u.s. banking industry mimics the nominal rate of growth of gdp. the next question investors have to ask themselves is what's going to happen to credit quality because if we go into a soft landing like we did in '95 the stocks are going to have a marvelous year in 2024. if we have a real credit problem, not as bad as '08 or '09, but a credit problem will weigh on the stocks in 2024. credit is the picture everybody has to focus on. credit continues to be strong with the exception, as you know, you twice have talked about it, downtown office real estate in

major urban markets is a problem. >> finally, gerard, you have a number of buys on your coverage list. any that stands out above all the others? >> yes, david. the two i would point to, pnc, that management team has done a very good job in integrating the transaction and acquisition they did, cost-savings program coming up, they also own the class b visa shares. you might recall visa announced they're going to start allowing banks to sell that starting as soon as the fourth irst quarter. pnc would be a top pick. the second one would be going into the quarter, we would throw in keycorp, key. they disappointed heavily this year, but we think that's behind them and their balance sheet is positioned to benefit over the next 18 months from a number of securities that wilma tour and they will have nice positive revenue growth in 2024 while the industry is going to be struggling with revenue growth. >> all right. couple of names, good snapshot.

thank you. >> you're welcome. thank you. still ahead, some on the street warning of headwinds ahead for the insurers as names like all state and travelers sit in the red today. find out why after the break. we're back in just a moment with e dow getting worse down 150 now. the break. we're back in just a moment with the dow getting a little worse. down 150 now. - so, the question is... - cyber attack! as cyber criminals expand their toolkit, we must expand as well. we need to rethink... next level moments, need the next level network. [speaker continues in the background] the network with 24/7 built-in security. chip? at&t business.

take a look at some of the heavy rain, we had on friday into saturday last week. an unpredictable year for weather events and starting to impact insurers. contessa brewer is here with that part of the story. they must see that and see potential losses. >> they do. much of that flooding may not actually be covered by insurance because flood insurance is a specialty line. a lot of people who are not in a flood zone would not buy that. if they do, much would be issued through the national flood insurance program. but comprehensive car insurance does cover flooding. allstate, progressive, berkshire hathaway's geico, travelers, they might expect to see a flood of claims. it illustrates the unpredictable weather catastrophes. in the first half of this year,

guys, thunderstorms across the united states accounted for $35 billion in insured damage. that was 70% of the total across the globe. thunderstorms. it's a big reason why property insurance premiums are rising. plus, of course, insurance companies are trying to manage their own risk. they buy reinsurance for, say, billion dollar plus catastrophes and the cost of that reinsurance has been skyrocketing. over the last 12 months, the demand and the increased rates in reinsurance have sent those stocks soaring. look at arch capital group, up 75%. renaissance up more than 40%. everstreet, same thin. the ceo told me that the general expectation is for a 10% increase in demand for reinsurance heading into 2024. >> inflation has had a lot to do with this. there's a lot of demand for reinsurance products because we live in a heightened risk

environment, so insurance values have gone up. there's social inflation in the u.s., which has basically increased litigation. there's also geopolitical risks out there. all these things have led to more demand for reinsurance and insurance products. >> estimates reinsurance will fetch a return on equity of 14% this year and next. what we're seeing is a lot of capital coming in because of the returns that are available here. and andrade told me, we've had a switch for protection from earnings, the insurers taking out reinsurance to protect their earnings, to now protection of capital. that's a reversion to what we saw before rates were rising. it's a big deal. >> what would you say the poster child is for insurers who just withdrawal from the market? is it florida? is it california? >> it's california because the core problems are still not being addressed in california. you have to charge enough to justify the rate, but california's trying. they just recently changed the

rules a little bit, trying to encourage insurers to come in. you can charge more but you have to agree you'll issue coverage in wildfire prone places. in florida we saw a law change, no one-way attorney fees or assigned benefits. that was driving the cost of insurance up an incredible amount where 80% of lawsuits filed over property insurance came from florida, which only accounted for 8% of the total property claims nationwide. >> wow. >> has climate change overall changed the entire thesis for this group? >> yeah. i think climate change is a big deal. look, it's not just climate change. it's climate risk. but if you look, as i said, at things like hail, which previously may not have been a massive billion dollar plus event, you wouldn't have seen it going to insurers, but when you look now at these massive -- i mean, hurricane ian was a big one because it covered half of the united states.

that was a huge -- an existential change in insurance that made them say, we've got to charge more premiums because now it doesn't justice affect florida. it's going to affect the whole eastern half of the united states. >> yeah. and our homeowner premiums keep going up. >> everybody's. >> that thunderstorm statistic was surprising. amazing how many. but, you know, of course, a lot of trees come down and that just causes all sorts of damage. contessa, thank you. "squawk on the street" is back rightft ts. aerhi when you're looking for answers, it's good to have help. because the right information, at the right time, may make all the difference. at humana, we know that's especially true when you're looking for a medicare supplement insurance plan. that's why we're offering "seven

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good monday morning. i'm sara eisen with carl quintanilla live on the floor of the new york stock exchange. has there been enough pain to generate gain? tiffany wilding weighs in on how this market and how to get ready for the fourth quarter. a clean start. da davidson says enough damage has been done to clorox recently and the stock is ready for a breakout. he'll join us for that call. is the hulu drama getting closer to an end? look at what comes next for comcast and disney this hour. kicking off q4 and the month of october, dow down 140. s&p down almost 8. nasdaq up half a percent