s. to find your personal style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™. good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla along with sara eisen on the floor of the new york stock exchange. new jobs data shows signs of what might be a cooling labor market. the manager of a $388 billion fixed income portfolio is with us next on what could be coming. plus, fewer iphone upgrades resulting in an apple downgrade

today, a rare one. key bank is lowering estimates. >> and looking beyond the pullback, deutsche's chief u.s. equity strategist on what it would take for the market to return to rally mode. first up, topping tape for us. the move in the ten-year, as the market remains squarely focused on these moving bond yields, and they have been moving higher. we've got the s&p 500 losing some early gains, now down 0.2%. nasdaq is holding in there, up a third of 1%. part of it is the relief you're seeing in treasury yields, it's now 4.78%. is the market stuck until rates top out? let's bring in cnbc senior markets commentator, mike santoli. it sure seems so. >> it seems that's the obvious potential trigger out there. and you probably also need yields to back off, in a little bit more of a convincing way. this morning, soft adp number, you had a little bit of a back off in yields cub into the session. and they've kind of migranted higher once again, just a little

bit. below 4.6 on the ten-year is going to look like this mini uptrend is potentially broken, that we've gone in recently. maybe that's something to watch. that being said, the ingredients are now building up, as everybody has been talking about, within the stock market, of stuff just getting very washed out. every day you wake up. yesterday, there were a thousand new lows between the new york and the nasdaq, new 52-week lows. the percentage of stocks that are above a 20 or 50-day moving average. all of that stuff, the scene is set for some kind of relief rally to take hold. the question is, what's the character of it? is it really going to be based on much of anything, except for technical rebound, and just exactly what fundamental scenario is now being priced in is a bigger question. >> speaking of fundamentals, oil back to almost 85. we were at 93 a few days ago. would you be surprised if oil sustained this drawdown and yields did not follow? >> you know, i think over time, it would be surprising. if you really got some convincing downside in oil. now, gasoline has been struggling, so it's not as if it

would be that weird if oil backed up. but, yeah, i think it's questionable exactly. we don't know what the factors are. there are so many factors. everyone, we have been talking about for weeks that have been driving yields. one of the big things is, though, without a doubt, is the psychology, not just around higher for longer, but the psychology around supply, and the psychology around why isn't it stopping? so just momentum feeds on itself until it burns itself out. i hate to be simplistic about it, but that's the way it is. and the supply question is real and people are not sure what the right clearing yield is to get all of this -- all of these bonds bought. on the other hand, it's not as if auctions are going begging right now. it's not as if there has been an actual supply shot. what's anticipating is the anticipation of it is causing yields to go up. >> they're dpgobbling up the t-bills, but now t-bills are becoming a bigger part of the market and of ownership. and it raises questions about long-term. >> there's no doubt about it. the appetite for duration, we don't know what it is. on the other hand, the levels

we're at are nothing weird, right? nominal gdp growth has linked up with the ten-year treasury yield for a very long period of time. we were way suppressed on yields for a very long time. and now, we've gone there in a hurry, to somewhat approximate maybe what nominal gdp is starting to look like. the problem is, the speed it took us to get there, the losses that are on the books right now, because bonds have crashed, that's the challenge of the bank stocks and they show you that. >> thank you, mike. let's take a deeper dive now into this move in bonds. it's stark if you look at just the one-year change. you've got yields for the two-year, ten, and 30-year treasury seeing big moves higher. look at the ten-year, where we were a year ago, 3.6%. we're now at 4 and more than 3.5%. both up sharply over that span. m remember negative yields? not anymore. let's bring in john bellows, portfolio manager for western

asset, one of the biggest players in fixed income. nearly $400 billion in assets under management. john, you think this move goes farther from here? >> thanks for having me this morning. you know, i think the discussion in the long-term needs to start with inflation. inflation over time is the single most important in bond yields, that's where the focus should be. over the last one-year period you just showed, the inflation developments have actually been very constructive. all of the parts of the inflation that we had in 2022 that were so problematic have mostly worked themselves out. you know, the supply chain situation is better. a lot of the planses ha sbalanc addressed. and today, inflation is much lower. over the last three months, core inflation is running 2 to 2.5%. so over that one-year period, the inflation news is unequivocally better. i think that's also made it possible for the fed to get closer to pausing. you know, they could hike again

later this year. the market is priced for some of that, i guess. but i'm not sure that changes the big picture. the big picture is, the fed is close to done, because inflation is falling. so as we step back and think about bond yields over the last one year, when you think about inflation, when you think about the fed, both of the developments there are consistent with stable-to-lower bond yields, certainly not consistent with the sharply higher bond yields that we have seen. >> but that's what we've seen. so are you guys buying hand over fist. is that what you're saying? betting on lower yields? >> then the question is why, you know, given inflation and fed developments, why have bond yields moved up. probably the biggest reason is a big change in the growth optimism. in the beginning of the year, we had a very negative consensus about growth. people worried about recession. that was really peaked in march and april, when they were also worried about regional banks. and six months later, that's flipped. and today we have a lot of optimism about growth. it's not uncommon to hear people say, we're not ever going to have a recession, and you know,

growth has upside risk. so there's been a big change in the growth optimism from a pessimism from the beginning of the year to now a lot of optimism. we should be careful here. we should skcrutinize what's going on in growth. and from our viewer at western asset, it would be wrong to extrapolate a few quarters of good growth later in the future. there's a lot of headwinds facing the u.s. economy. the consumer is under pressure, interest rates are higher, which is putting pressure on manufacturing and housing. you know, bank stocks were mentioned, lending conditions are pretty tight. so i think you need to be really careful here of taking that, you know, optimism about growth and extrapolating it forward. and i think a little bit of caution there is probably warranted. and yeah, if you put that next to the sharp rise in bond yields, even a little bit more cautious growth outlook, together with the positive inflation in fed outlooks, i think those could be the ingredients to move lower in yields from here. >> although, john, the reasons people give that are

non-growth-oriented, japan's policy, china recycling less, obviously, government dysfunction, which has been on display this week in particular, can you remove some of those from the list? >> you know, i think those are all important topics. i think investors need to be thinking about those. we need to, you know, try to qualify them where possible. i guess the thing i would like to contribute here is the price. and so in investing, you always have to think about the idea, but then take it to the market price, and see, ways the market discounting? and what we're struck by is just how much of that is already discounted or already reflected in yields. think about it this way. you know, currently, the long-term interest rates priced in the treasury curve are 150 to 200 basis points above the fed's estimates of neutral. now, the fed's estimates may be too low. they may need to come up over time. but 200 basis points is a big gap that's opened up. and i think for a lot of the reasons that you just suggested. in other words, in terms of real interest rates, prior to the pandemic, with real interest

rates around zero, today we have 30-year real interest rates at 250 basis points. so i think a lot of the things that you just suggested are already reflected in prices. so we should have discussions about each one of those, i'm happy to go into that. but the main focus here for investors is a view, as it relates to the price. and i think the price reflects a lot of this. and when you start from that observation, you know, i think the distribution from here is probably asymmetric. a lot of the news is already reflected there, and there are scenarios where we actually have much lower yields, you know, should any of those story lines play out, or if they were to change for any reason. >> the one that's hard to sort of reconcile, though, is, john, the debt problem in the u.s. and the deficits. and the fact that now the federal government has worked against the federal reserve. and when it comes to the inflation fight and you have now concerns that there are bond vigilantes going after u.s. bonds in order to impose some

sort of discipline around the deficit, which is reaching these crazy high levels for a period when our economy is doing well, we have full employment, do you just not see that as a factor? z >> you know, so in an earlier part of my career, i have firsthand knowledge on how to make work of that. we know it's a big focus for a lot of investors. it is a problem. there's a long-term fiscal sustainability issue that at some point will need to be dealt with. i think where i would -- and in western asset, we have a little bit of a different view, is whether that problem is right here, right now. and a comment was made earlier that i think is really important to emphasize, by one of your anchors, that you know, auctions are trading okay, the kind of immediate supply in front of us does appear to be manageable. you know, deficits are actually going to come down a little bit next year, as we work through kind of the one-offs of student

loans and the low capital gains and some of the inflation reduction act spending. so i think in the near-term, it's not obvious that we have an unmanageable supply situation. a different way to think about is if you look at deficits as a share of gdp, expected next year at around 6%, that's not as a share of gdp higher than it was in say, 2010 or 2011. and actually, way down from where it was in 2020. so i don't think we're out of line right now. i do think there's a long-term sustainability issue that's difficult to get traction on that investors need to think about, but i think that we shouldn't overstate that today. i think one other perspective that i would give on this is as deficits are higher due to interest rate costs and due to other things, it's going to crowd out, you know, spending in the stimulus that could go on in other places of the economy. so i don't see fiscal policy as all that loose. to the contrary, i think it's going to slow growth a little bit going forward. >> so you have just offered like

a point-by-point, very comprehensive case for buying bonds right now. you think these prices are out of whack. so explain how investors should take advantage? >> we think there's some value in the bond market. i think the opportunity to lock in yields, you know, close to 5% on 10s and 30s, you know, is a pretty attractive moment. you know, when you think about that relative to the alternatives, cash yields are still somewhat higher today, not a lot, but again, you're locking in those yields. and so if we get into an environment where interest rates fall in the future, cash will underperform dramatically in return for a strategy that lox those in. i think there's an opportunity to lock in some higher yields for a long time. i think at the same time, and the way that at western asset, we have our portfolios positioned, we also need to be able to perform in an environment where yields don't fall right away. and so the strategy at western asset is to maintain that value on the interest rate side and

compliment that with some value opportunities on spread products. and so places where you can earn additional yield in your portfolio. the good news is, today, you can do that in pretty high-quality sectors. that's been great in corporates, agencies, mortgages, aaa-structured products. you don't have to reach in terms of credit quality to generate some yield in your portfolio. we do think there's an opportunity in yields to lock in those higher yields for a long time. we think that's a preferable alternative to cash. and then at the same time, i think you need to have diversified portfolios to outperform wile you're waiting for yields to follow. so we're doing that on the spread product side in high-quality spread product. >> really interesting window into your strategy at a major bond fund manager. thank you very much, john. john bellows, western asset. the ceo of tilray joins us on the other side of this break. we'll discuss the company's latest earnings, get an update on its recent acquisition of those eight-year brand. plus, take a look at intel

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but they don't follow you around. join the millions of people taking back their privacy by downloading duckduckgo on mobile and desktop today. city's out with new credit card data this morning. they say the 16 subsectors that they track show that total spending in september down 10.8. that is the weakest month of the year. in september, they say, marks the fifth consecutive month of spending deceleration. our senior retail reporter courtney reagan watching that and a lot more today, a few days after city's james fraser say the cracks are beginning to appear in the consumer. >> consumers really are in a pressure cooker. just within the last week, we've seen the ten-year yield spike. that tied to variable rates on all sorts of loans. student loan payments restarted and the pandemic-era child credits, those expired. and all of that, as credit card delinquencies sit above 2019 levels.

macy's called out any higher credit card revenue it's getting is pretty much being washed out by the higher rate of charge-offs. further, consumer savings are at the lowest level since the great financial crisis, with pandemic-era savings pretty much depleted. and with speaker mccarthy's unprecedented ousting, labor strikes and more, negative sentiment is really just weighing on consumer psyche. nearly two-thirds of americans feel we're already in a recession, according to nume numerator. new, tuesday's sell-off hit travel-related stocks high. that sell-off suggesting that investors think the high level of spending in this area is coming to an end. and home-related stocks fell hard to do after all of our home investment during the pandemic, maybe consumers are done spending in that area for a while, too. >> court, we've been talking all morning long about the impact of higher rates on corporates. what about retailers and their cash and debt? >> yeah, exactly. so i kind of looked into a couple these last night just to give an idea of who's sitting where when you're looking here. so big lots, dollar general, and

c coty are the names who talked about their interestballooning s move higher. but some are benefiting. dick's, costco, ross, and five moreau are seeing their interest income rising remarkedly on their cash reserve. you have to do your homework and see where the cash is sitting for these different retailers. >> all right, courtney, thank you! >> thanks. >> let's shift gears to the cannabis market and tilray. it's been a volatile 24 hours after reporting a larger than expected q1 loss. the company did say it expects to generate positive adjusted free cash flow this fiscal year. tilray also closing many on its acquisition of those eight beer and beverage brands from anheuser-busch earlier this week. joining us to discuss is tilray ceo, irwin simon. welcome back. good to see you. >> good to see you, too. >> first on the numbers, looks like you grew share, importantly, in the canadian market. how are you doing that and what's happening overall in that

market, in terms of adult use marijuana? >> so, listen, tilray got some exciting things. we grew market share in canada. we grew market share in europe. we completed the acquisition with avi. you know, it's interesting. we'll sell 80 million pre-roles in canada. we'll sell close to 300 million cans of beer, 12 million cases. we'll sell 5,000 kgs of medical cannabis throughout europe. we're in 50 states, we're in 10 provinces, we're in 21 countries, we have 12 brands in canada, 12 brands of beer in the u.s. at our breckenridge bourbon, and we have three brands in europe in our medical cannabis. we're doing a lot of things out there. our top line grew 15%. yes, you know, our loss was higher, but most of it is non-cash, which is amortization and dpleepreciation. tilray and the cannabis company

has only been legal in canada for five years. when i got here, we were a $50 million, we're at a run rate to be a $50 billion business. >> one of the analysts said it feels like your running in place when you look at the share price, even though you're talking about all of these exciting growth opportunities and market share gains. >> listen, it is frustrating when you look at your stock price, but on the other hand, when i come back and look what we've done, what we are today, what we have in brands, you know, and what we're doing to change the world, in regards to our medical cannabis for epilepsy for cancer patients, for pain, for sleep. what we're doing in regards to the craft beer. we're now the fifth largest craft brewer. we have a 13.4% share in the canadian cannabis market. you know, the only legal market in canada -- the only legal market in the world. we've really put together a great business. and listen, we're waiting for legalization to happen in the u.s. if it happens, it will be great and we're well positioned.

fit doesn't, with our beer and bourbon and nutritional food business, we're absolutely well positioned. . but listen, it's frustrating when you go back and look at your stock and where we are. but i've got to tell you, we've got great people, we've got a great strategy, we've got great brands, and ultimately, one day, investors will realize that there's a lot of great assets within the tilray brands business. >> we're smoeg some of the different brands. after this acquisition, where are you focused next. whatsoever categories or geographies? >> first of all, in canada, our focus is how we grow share there, and continuously evolve the legal market there. and that is a big part for us. canada, it's a $5 billion market. at retail today, it will go to a $10 billion market. i would like to get a 20% share. in regards to the beer category, i think there's so much excitement to be had within

craft beer. it's how to make it cooler again, how to bring more and more consumers into the beer business. how to get more and more distribution on a bourbon business. i like both of those businesses. my past, i love the food business. is there opportunities for us in the nutritional food business? and last but not least, europe. it's a big world out there in europe and medical cannabis is becoming more and more relevant throughout the rest of europe and the rest of the world. the dna is here. there's a lot of good assets. you know, profitability is important, but so is growth. when you're growing and when you're ripe, you're rotten. we're green. >> finally, just on u.s. policy, it's been frustrating for a lot of people in the sector watching the senate not quite get the ball over the hill regarding the safe act, but do you think we're getting close? is it imminent, do you think? >> listen, there's a lot of noise out there. and that's great. listen, if tomorrow a descheduling happens, it doesn't necessarily affects us, but gets a lot of the noise out of the

way of cannabis. there's a lot of confusion. we're scheduled for the same thing today as heroin, which is wrong for heroin. every corner you walk on, you smell cannabis in the city. come back and think about it. we're talking about this immigration tax. go out and tax cannabis the right way and use those dollars for all the immigrants coming into this country. and there's a lot of dollars. you know, we pay $150 million in the canadian market. so, you know, again, there's a lot of good. and you know, i wish washington would listen to a lot of things, but in regards to cannabis opportunities, you know, they should be listening a lot more. >> what about cucumber opportunities. are you really cultivating cucumbers in one of your facilities? is that a new business line? >> it's interesting. we have 5 million square feet of growth facilities. and this facility in quebec, over $200 to $250 million was spent there. and we don't need to grow cannabis there. there's two things we can do. build out ai technologies in there, which is a possibility, or, right now, there's such

demand in the canadian market for fruits and vegetables. and you know, it's not the highest margin business, but having it dormant or just trying to sell it is not the right way to go. so the plan is to grow cucumbers there, not a high cost for us to retrofit. and ultimately, one day, either we sell that business or ultimately, we see if there's opportunities there. >> i know investors are wondering about it. the produce line. thank you, irwin. everyone likes cucumbers. >> there's great demand for it out there and great demand for vegetables. and california is a long way to ship those products. >> makes sense. irwin simon, thank you very much for talking us through some of the numbers and the sector. >> thank you very much for having me on. >> we continue to watch the dollar's recent move higher. the dollar index just coming off of the morning highs, close to 107. we'll break down which companies might see the biggest impact, next. plus, we will also break down a rare downgrade of apple, after that stock closed out its worst quarter since 2015. dow's back in positive territory right now. it's up 7 afr llg tefain130

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let's turn to europe as the markets are coming to a close. the major indices mixed this morning. rate-sensitive sectors like utilities and real estate are the best performers while energy lags amid lower oil prices. eurozone retail sales come in much softer than expected on weaker spending and higher

inflation. august producer prices, moving up by 0.6%, month over month, in line with the consensus estimates. they've cratered, year over year, down 11%. and finally, pmi, manufacturing ticking up in september, but still below the 50 mark for the fourth month in a row. >> a good chance europe contracted in q3, while our number still to be determined, obviously. the dollar continues to be a major story for the markets, as well, as it hits its highest level since november. dom chu joins with us a list of companies that have the most overseas exposure and might take a hit from a stronger greenback. >> so, carl, sara, last hour, david and i told you about some of the sectors or industries that have the dollar exposure or lack thereof. remember, an estimated 40% of s&p 500 revenues come from abroad, outside the u.s. so some of the names that have the most exposure. according to data from s&p

capital iq, some of the more consumer-focused names out there, like estee lauder, it gets around 77% of its revenues from outside the u.s. coca-cola from a consumer staples standpoint, 64%, nearly two-thirds of his business revenue-wise outside of the u.s. and procter & gamble, a little over half of its business revenue-wise outside the u.s. and then within the tech consumer discretionary media side of things, check out names like booking holdings on the travel side, about 88% of its revenue is outside of the u.s. tesla gets about 52% of its revenues outside the u.s. and microsoft, as well, 50%. so as we talk about the driving force, many of those magnificent seven stocks get a good amount of their revenues outside the u.s. a good reason why, carl, sara, there is so much focus on the s&p 500 entering earnings season with that dollar level the way it is right now. carl, back over to you. >> stay close. we'll see you in a bit. let's get a news update with

silvana thenao. >> jim jordan is the first republican to announce a speaker bid just one day after mccarthy's historic ousting. jordan has been one of trump's most prominent allies and is now serving as one of the gop leaders in the impeachment inquiry into president biden. the households to plan a speaker election next wednesday. people who live in maui delivered a petition to hawaii's governor, asking him to display plans to allow visitors back into the county. some 14,000 people signed the petition saying the grieving community is not ready for tourism to restart, as they reach the two-month anniversary of the deadly wildfires. the governor responded by reopening the county is crucial to its recovery. and g-mail wants to help you clean up your inbox. starting in february, anyone who tries to send more than 5,000 messages to g-mail addresses in a single day will have to authenticate the email and set up an unsubscribe option.

google says this will close loopholes, usually used by spammers or hackers. s sara? some good news. >> yeah, i was going to say, that sounds helpful. >> utilities the worst-performing sector this year, now down about 20% from their highs. a look at what n'sext and how much lower these stocks could fall if rates continue to move up, "squawk on the street" will be right back.

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there's a look at the ten-year. a couple hours into trading. let's get post-to-post with bob pisani pisani. >> the s&p is up 10, but this rally is very, very tentative. what we want to look at is some kind of bounce in the most beaten-up sectors. utilities, consumer staples, not really getting it.

that's what concerns me a little. nexterra, we've been talking about for almost every day, the poster child for utilities. significant clean energy play for its subsidiaries, higher borrowing costs. this was $66 a few weeks ago. you think there would be some kind of bounce here. it bounces here. $54 right at the open. and they sold right into it. it's been straight down for most of the day. not a great sign. we want to see a little better than that. consumer staple stocks, campbell's here, four-year low yesterday. four-year low yesterday. you would think you could get a modest bounce today. but, all right, that's not particularly enthusiastic, but other ones, general mills that's out there, no bounce at all today. sold right into the kimberly clark, hershey's, bounce at the open, higher, sold right into it, of course. that's what i mean. very, very tentative, still, here. good news is a modest bounce in technology stocks, but these have been stable more recently. so salesforce was, oh, 225, 226,

three weeks or so. it went all the way down to 197 yesterday, here it is, 202. there's at least a little bit of a bounce. i'm looking at something like 1%, given how much these things have dropped. semis have been more stable. taiwan semiconductor here, this is the big one that trades right down here. it was 140 -- no, it's been more stable than that recently and 5 86.25, it's been in that range for a while for the last couple of weeks. that's certainly good news, but you would think with the kind of declines that we've seen recently, you get a little more buying enthusiasm. i look at the volumes here and i still don't see it. let's just say, nice that it's a little more stable today. i want to see some signs of individual investors trying to pick up bargains. i don't see it yet. guys, back to you. z >> bob, thanks. bob pisani. utilities aren't following through on the small gains they had yesterday, despite this

slight move lower in yields today. not all stocks in the sector are created equal, and if yields continue their march higher, some might be ahead more than others. joining us this morning with his outlook on the space, julianne smith. it's great to have you. worst-performing sector of the year. is it too early to start looking for value? >> look, i'm not going to step in here. again, you've seen a little bit of a crisis of confidence with nexterra here in the recent days. my point to you would be, look, this is the figurative canary in the coal mine for the space. they're just the first of a slew of different companies that will be out there talking about their guidance updates here. third quarter, fourth quarter will be a challenging time. i'm frankly not all that surprised given the set-up here that you're not seeing that much of a bid for the sector, heading into a slew of further roifrs in just the weeks ahead, right? nexterra is the starting point here. and really, again, as you guys said a minute ago, look, this is not the space that retail is

looking for. it's been 15 years since we've seen the set-up, look, i think there's a better place. >> what happened with an ex tearra? >> look, i think the nexterra set-up is really about -- it's a story of interest rates, right? this is a story of confidence. this is the first time in a decade that this company has seen this kind of question, right? it had been at a super premium versus a sector. they had been fairly limited questions about its ability to deliver consistent earnings growth, and really, the interest rate question has caused some gyrations. for as much as nexterra has some offsets and some other considerations, the real question is, what happens next across the space? >> and they took down earnings forecasts, right? they warned on long-term growth. >> well, actually, that's what's really interesting about this. if you've seen the gyrations, and they were trading at a pretty super premium to the rest of the group. they didn't even touch their guidance. and i'm not even calling for them to bring down their long-term guidance. that's actually somewhat in

tact. we were thinking earlier that we were going to exceed their guidance rangeses. we've had a history of delivering on that front. this is about bringing it back in line with their historical ranges and bringing it back in line with historical earnings growth across the rest of the group. that's all we've seen so far. as you see other questions, which don't have the benefit of interest rate swaps, which have more material equity rates to come, again, that's why i'm using this phrase. is this the canary? >> you go to 53, which i think is a street low, do you want to talk about how you got to that number? zpr >> yeah, look, we're the street low. i'll be open about that and this sector has been trading up, which certainly contributes to that. in this environment, you've seen a lot of their peers trade off. what are folks willing to pay for renewable energy companies in this environment certainly has been under a lot of duress across the space. let me be very clear about this. the entire space has actually somewhat outperformed a

correlationversus rates. the latest stepdown in the whole space is really just a correlation to get back in alignment with the move higher in rates that you guys were just talking about. >> pretty fascinating picture, obviously, you can sort of understand the broad backdrop, but the valuation, obviously, streets are still wrestling with. julian, thanks. we've got an update on the sam bankman-fried trial this morning. kate rooney's got that for us. hi, kate. >> so the jury has been selected in sam bankman-fried's criminal trial, predominantly women. there's 12 people in, about 9 out of 12 are women. it ranges from retired corrections officers, you've got a nurse, also a post office worker. they're taking a short break right now. we do expect opening statements to start right after that. we're looking from about 20 minutes from the government side, to the prosecution, defense is a little bit longer. about 30 to 40 minutes from what i they say. we saw sam bankman-fried's parents arrive outside the courtroom. they are headed in. and sam bankman-fried himself is

there, sitting right next to his lawyers. he's been on his computer for the most part, despite not having internet access, he appears to be tiyping notes, hi hair is a lot shorter, he looks a little bit more clean cut after being in the government correctional facility awaiting trial. he is in the courtroom. we'll head back in for opening statements and bring you any updates. >> yeah, almost unrecognizable from those court drawings. thank you, kate. kate rooney. when we come back, beyond the recent pullback, is a rally on the hiz?oron deutsche bank's chief u.s. equity strategist joins us to help navigate these tricky markets. we're back in a moment.

welcome back. when it. comes to the pullback we've seen in recent weeks, our next guest is remaining constructive, making the case that we've already seen a mild recovery and we're perhaps in the midst of a robust recovery.

welcome back, bankim chad hah. >> i think then, a lot of people have raised their numbers. we called for 45, 4,600 by the middle of the year. we then looked for a pullback, but there's plenty of people higher now. >> but the core of your thesis remains pretty constructive, despite what we've seen here. >> it does, it does. >> so, you know, the way i would put it is, if you look at the macro economic consensus, i would say, since late last year, it has been firmly of the view that growth is going to fall off a cliff. so the forward trajectory looks like this "v" that has kept rolling forward. that roll forward has basically delivered positive growth surprises and the market is up basically because of those positive growth surprises. and of course, you know, if you

look at this quarter, macro consensus in the middle of may was at minus 1. it's at plus 3 today. our economists who tend to be on the bearish side are at 4%. we have gdp trackers close to 5%. and so i would argue, the room, basically, for positive data surprises to continue remains. i mean, we're talking about somewhere between 4 to 5% gdp growth in this quarter. and you know, you ask yourself, what's the consensus for the next quarter? half a percent. what's the consensus for the second quarter? 0. so half a percent is actually a bit of an improvement relative to the pattern. it's always been zero for the last five quarters. >> but you have to be, considering the higher yield now, which has come as a surprise, both in how fast they move in and how far they move in higher, and what that's going to do to the growth outlook. >> absolutely. but what i would say is, you know, so far, last year and a

half -- this is not my take, it's just a fact, basically, which is that yields go up. we get volatility basically in rates. you look at the move index, to which all asset classes are completely glued. and then, you know, the move has to come off, because to sustain it at current levels, you need the ten-year to move 10 to 15 basis points every day. that's not very easy to deliver. so comes in and the equity market rallies. a simple way of thinking about it is, if yields find a range, whatever the level, equities will rally. just look year-to-date, january 1 to july 31st, you know, yields are -- >> but we haven't found a range, yet. >> we've just entered basically, i would say, a new range. so it's been stopgap. so it's been more of a story like the rates go higher, the markets go higher, and then they do sell off, but i would say

it's absorb and move on. >> but that's not a story that can continue forever, is it? re-rate and re-rate and equities eventually snoeignore it all m. >> i would say, it depends on your longer-term view of rates. i tend the view that the aberration was really the post financial crisis period where rates were very low, so, you know, sure. the move is sudden. it's creating volatility, but we're talking about a bond premium going from negative to positive. that's really terrible? really? >> we're talking about mortgage rates going to 8% from 3% -- >> exactly. >> -- that crushes at least one part of the economy. >> exactly. you have to ask yourself what's one of the differences this time around, the housing sector and gdp is 2.8% of gdp, and it's also absorbed basically the rates. we were flying very high, and rates brought it back to where

we were before. >> what about other rates, auto loans and credit card loans? this will affect the consumer, won't it, at some point? >> it definitely will. we are coming off very, very low levels. we are normalizing. we can go higher than normal. it would not be unusual for this date in the cycle. to me, nothing stands out as we are going to go over the cliff tomorrow, and that's been the dynamic. that's why the market is where it's at today. >> what would be a reasonable overshoot on the ten year? >> i think something around five is actually pretty reasonable if you do it the old school way, gdp growth plus inflation target. you're already talking about 4.5, 5, and i just talked about gdp growth numbers on the high side. >> does your sector playbook change at all? what are your favorites now? >> i would argue that you wan to be long basically the two parts where there's the most priced in

for falling imminently off a cliff, and that, i would argue, are the banks and the consumer cyclicals. and i understand that sounds pretty tough place to be, but made the same point in december last year about technology, and it played out just fine. >> we're going to learn a lot more in less than two weeks on the first part. thanks for coming in. >> it's a pleasure. >> refreshing optimism there. by the way, everything has turned higher. the s&p is moving up. up half a percent on the s&p. the nasdaq up almost half a percent as the yields calm down a little bit. a rare down grade of apple. key bank taking the stock down to sector weight. we'll break down the call when we come back. and we're keeping an eye on shares of cal-maine fos.od it did impact the quarter, the share is down almost 7%.

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apple's coming off its worst quarter in more than a year, and there might be more pain ahead according to key, down grading to sector weight today. steve kovach watching details on this from long-term bull on the name, steve. >> apple shares are up about a third of a percent despite that downgrade, laying out an alternative view from what most analysts have been saying going into apple's most important quarter of the year. here is what's behind key bank's case. apple shares trading near all-time high multipless despit

when shares hit all-time highs saying softness in u.s. sales, especially with the carrier deals that over steep discounts or free iphones when you sign up for a two-year contract or switch over from another provider and not seeing strong demand for smart phones. tim cook told me about the falling demand. he said u.s. smartphone demand was, quote, the smartphone industry is tough in the u.s. right now. now ubs analysts backing up that this morning as well nighting iphone 15 pro wait times are shorter than last year and there's renewed competition in china with huawei selling phones again. now outside the u.s. keybanc says others have been too opti optimistic. apple sells growth in markets like india, but it's not enough to offset weakness in lucrative markets. as for the rest of apple's

fiscal 2024 that started a few days ago, keybanc estimates revenue growth to be 3.5% after a full year of declining sales making comps easier, guys. >> steve, thank you. steve kovach watching the name on apple. whether it's the carriers or valuation or just what they say is softness in iphones, we'll see at the higher end. >> on top of the rising rates, hasn't been a good environment. we had some interesting conver conversations this hour. one of the biggest bond fund managers out there, sounding like a buyer of bonds and laying out a case of why he thinks they are disconnected from reality with inflation that is coming down and their belief is it's going to continue to come down and a fed that is done raising interest rates, and he's not concerned about these high deficit levels as well as they relate to the move in bonds. and then deutsche bank says he's constructive on the stock market and is a buyer here as well

because he thinks rates will stabilize and the markets need stabilization in order to continue to climb this wall of worry around growth. >> we're south of 4.75 now. there is chatter about the potential for a shutdown in november. obviously the house only has a speaker pro tem at the moment. oil the biggest drop since june. the biggest single day drop and gasoline futures might not be hitting retail right now unleaded wholesale gasoline at its lowest for the year which might be a relief for some consumers. >> whether it's a trend or not, we'll take it and the s&p 500 is rallying to the highs of the day. utilities and banks rallying after a brutal day yesterday. >> meantime, still data to get

through the week. ism today and new orders. it will come down to jobs. friday, estimates are still around the 150 range. >> it's been hard to get a clear signal at only 89,000 added and j.o.l.t.s. at 9.6 million job openings. a lot rests on this data. >> let's get to the judge. carl, thank you very much. welcome to "the halftime report." i'm scott wapner. high rates, high anxiety as stocks remain unsettled today. the investment committee here with me at post 9 to navigate this choppy market. joining me bryn talkington, joe terranova, jason snipe, jenny harrington. check the markets. there's the dow. the s&p is good. the nasdaq, the highs of the day, the nasdaq is up about 1%.