triple digits at this point. get that loss of about 108 points ahead of the hope. we had some disappointing earnings that came in, including from some dow components, and that could be putting some of the pressure there. nasdaq down by about 109. s&p 500 futures off. we've been watching yields too. right now, the ten-year is at 4.862%. that does it for us today. join us tomorrow. right now, it's time for "squawk on the street." nooelts ♪ good wednesday morning, welcome to "squawk on the street," i'm carl quintanilla with sara eisen and mike santoli. futures under some pressure this morning with bonds yields still flirting with these cycle highs. oil near $90, the president in israel and the market very sensitive to headlines. our road map is going to begin with a big day. p&g beats.

morgan stanley topping estimates. netflix and tesla after the bell. plus, china's outlook, q3 economic growth coming in better than expected. jpmorgan, citi, and nomura all boosting their forecasts on the data. the nvidia headwinds. morgan stanley and citigroup lowering price targets on the stock after new u.s. restrictions on chip sales to china. shares down nearly 2% ahead of the open. let's get to the markets and this busy morning on the earnings front. we're graduating, sara, from the big banks, although we got morgan stanley today, into some of the regionals and more of the consumer names as well. >> kind of a mixed picture across the board. i think front and center is still this move in bond yields that we have been seeing, especially on the back of yesterday's move higher. the two-year yield got to 5.2%. >> above 5.20%, yeah. >> these are very high levels and it makes you wonder with everything going on in the world and with investors so focused on the geopolitics and figuring out, does iran enter the fray? there's more saber rattling overnight. we see that in the price of oil. are treasurys acting like a safe

haven? >> no. >> they're not. they were last week a little bit, but they really haven't been, and does that say something about treasurys and the relative safety because we are seeing things like gold and the swiss franc and the japanese yen all move up, or is it just investors are hoping this doesn't escalate any further and we have a more diplomatic solution? i'm not sure. >> there is one school of thought that says, well, you don't know how high yields would be without a safe haven bid. if you look also through history, when you do have these sort of shocks, geopolitical or otherwise, the bid in treasurys, historically, is not a particularly durable one so you get this reflex buying of bonds, yields go down. it's not usually a new trend. that said, whatever e's happeni, if there is a flow-through to market, it seems like it's on the oil supply front or generally inflationary reflationary around the world as opposed to the opposite. but i think the market is also

trying to do its best to look through what it can look through, so it's this really indecisive range, the s&p 500 for the last month has been trapped in. it's about a 5% range. four times in the last week or so, it's gotten up to the upper end of that range and stalled out exactly at the resistance level. everyone has been watching, but it's been volatile within that range because the earnings have been, on balance, okay. the economy is strong. one of the reasons for yields going up, seemingly, is we're taking recession risk out of the curve. it's a tough mix to try to figure out the way out of this race. >> we are taking recession -- i'm sure you saw -- you say to me, atlanta fed gdp goes up to 5.4% on the back of those strong retail sales with the control group also showing strength. >> yeah, it's been funny to watch the desks chase atlanta fed. i know jpmorgan, their estimate for q3 gdp back in july was 0.5, then 3.5. now it's 4.3. so, closing the gap with what

atlanta's long been saying. interesting take on the consumer today comes out of procter where they do reiterate the guidance. they see fiscal '24 earnings well above expectations. volume still down one >> the whole story is they're still able to get pricing. whether they're just offsetting commodities or squeezing a little more out of the consumer, the volume growth is not there, but procter has been outperforming the staples in this big swoon that we saw in the staples in the past three months, and it proved why. it's still seeing some strong growth. the ceo, john muller, was on "squawk box" this morning. here's what he said about the ability to keep on passing high prices to consumers. >> i don't think pricing is an endless well. we're pricing to not even fully recover commodity costs. >> so, not an endless well. what do you do with that when the dproet has been in pricing? the thinking with companies like p&g and others is if they pull back on those high prices, volumes will rise.

and also there's a school of thought on the analyst community that p&g's in much better shape this time than the 2008-2009 recession where everybody traded down into private label because they have made a lot of kmchang until the company. they have more options across different price tiers. they're more lean. they've gotten rid of a will the of lot of the brands since then. nick mody thinks they deserve this premium spot. >> "the times" has a piece about private label food and beverage, which is now 20.6%. before the pandemic, it was 18.7%, so there's some share shift going on in private label >> definitely. there's also been this pattern of p&g outperforming anything food-based staples. we know that story. people concerned not just about pricing in feed. >> the obesity drugs, not cutting into our toothpaste and toilet paper just yet. >> the valuation on p&g has

moderated. it use to be in the mid 20s. it's sort of in the zone of where people can find a little stability. >> the biggest negative in the report is that now they expect a bigger hit from foreign exchange because you have had this strong dollar, and that is larger expected and it's, you know, the market's not punishing them for that and they reiterated guidance, to your point, but an extra percentage hit on fx for p&g will lead to others having to call for the same thing. anybody that does the bulk of the business abroad is feeling it. >> morgan stanley is probably the other big name of the day. profit down 9, but 138 does beat 130. revenue ahead. miss on fic. ib down 27. they did buy back 1.5 million in the quarter and gorman did talk about the environment being mixed. take a listen. we'll get to that in a second. but they did point out as well, clients, big percentage of their assets in cash or cash

equivalents and that some of the m&a announcements will begin to pay off in the next quarter. >> there's no way to escape the lack of deals, so investment banking we knew was going to be weak. it was week on a year over year basis. i think the wealth management side missed a little bit. they beat on the final print. as of june 30th, the estimate was like 156 for morgan stanley. it comes in 138 beating, so that's been the dynamic where you have had this down scaling of expectations and then they manage to beat it. so it's a decent performance but the idea of clients staying in cash, morgan stanley not making much off t-bills when it's in the client accounts, and things like that, it's, you know, it's sort of a similar story. it's -- the fixed income trading side of things, i mentioned yesterday, when it came to goldman, it's often a little bit of a zero sum game across the street. you get jpmorgan, b of a, goldman-sachs, morgan stanley, reporting. you net it all out and usually get a couple better than

expected, a couple worse because it is a flow game quarter to quarter. the market doesn't may tremendous attention to it. it can't grow that much faster than markets -- >> better performance from goldman on the investing banking than morgan stanley. >> seems like it. it's a three-month window of deal closings and who got the scarcity of underwritings. when investment banking is really humming, you can't just name the four deals that happened in the quarter. there's so many of them, you can't keep track. that's why you know. >> we know golden had the arm ipo, the instacart ipo. that was half the ipos. >> there's not a lot to feed on. >> with the banks overall, they were beats, and they, you know, collectively, i think, spoke to an economy that's not in recession but is slowing. that's certainly the message i got from brian moynihan of bank of america yesterday. because of the fed actions and because of everything going on, like inflation, he's starting to see the consumer slow. when it comes to bank of

america, the underperformance, guys, has been on this held to maturity portfolio that they have where they just have a lot of the deposits they invested in long-term treasurys, and so i asked brian moynihan yesterday to address that and to tell us what he's telling investors that are concerned. >> no. at the end of the day, that comes from the trend of deposits we have and trillion dollars of loans. basically, two years ago, we made a decision to put some of that money to work and we split it into two pieces, a short-term piece and a long-term piece, so in the aggregate, 47% of our securities in cash we hold is really short-term overnight type of investments and 53% is long-term, and that's in the held to maturity portfolio because those marks, we knew would come, and then we don't have to take them through capital. these are government-guaranteed securities. our nii grew this quarter. we we upped our guidance and that's

because the securities yield of all that activity extracts value for our shareholders and continues to grow. >> he's clearly been sending this message to investors. i said, is there any risk they would have to mark these to market? and he said, no. does this calm those fears? bank of america is underperforming. >> it has absolutely underperformed. if there's an upside, the market knows it. it knows the effect on the balance sheet. it knows that b of a is just going to have to allow that to work its way through as the bonds mature. >> well, geopolitics is certainly front and center. president biden has arrived in israel where he is pledging support for that nation and its war against hamas. and weighing in on yesterday's deadly gaza hospital blast. nbc's jay gray live in tel aviv with the latest. jay? >> reporter: hey there. in the latest, the president is right now meeting with family members of some of the victims of the attack that started this war, some of the first

responders, and some of the families of those that are being held hostage right now. he did begin his day here in tel aviv with meeting with benjamin netanyahu and his war cabinet, but it's the meetings he won't take that may help to define what happens on this trip. he was expected to have a summit with arab allies and then make a quick trip to jordan before returning to washington. that is not going to happen after an explosion overnight at a hospital in gaza that killed hundreds there. hamas blaming israel, saying it was an air strike that led to that blast, israel saying it was a failed rocket launch by islamic jihad. that back-and-forth has changed the dynamic of this trip and the global view of what's happening in the region right now. part of the reason that the president had hoped to speak with those arab leaders is to damp down what are growing concerns and actually activity when it comes to this war

potentially expanding to another front, and we're seeing some of that along the border with lebanon right now. there have been casualties. israel is building up troops as well as equipment along that border, and so that's something that everyone's watching very closely and is very concerned about. one other quick point about the president's trip. he was here also, the white house said, to really try and get some of that humanitarian aid that's so desperately needed into gaza. two million or so caught in the cross fire in all of this, and haven't seen water, food, medicine or fuel deliveries for quite some time. and he was intending, the president, to speak about that at every stop along the way, but with things changing, it will interesting, guys, to see where that part of this equation ends up because it's certainly not the primary focus after what happened at that hospital overnight. >> it's interesting, jay, that we keep anticipating this potential ground invasion from the israelis into gaza, and it

hasn't happened yet. what do we know at this point? >> reporter: well, all that we've been told from the idf is the fact that they're going to do this when they believe it's the time is right and that they haven't been there yet. there was some speculation that weather may have thwarted it a bit earlier in the week and then you've got the visit of the president, and i think most agree that this would not happen while he was on the ground in israel, though both the idf and the white house said that the president's presence won't change their strategy or how they enact that strategy during this war. but you would think, you're absolutely right, with all the talk that this would be bound to happen in the next 24 to 48 hours, but we've thought that before, and there have been indications that that might be the case before, and it still hasn't happened. one other quick point on that. when pushed, idf commanders say that by no means does this delay mean that it's not going to happen. >> jay, appreciate that very much. talk soon, i hope. jay gray joining us from israel

this morning. when we come back, china is in focus as well. economic growth there did beat expectations. meantime, nvidia shares extending their declines in the wake of these tighter a.i. chip restrictions on chinese imports. take a look at the premarket here. we'll get to nvidia, uual, travelers and some others when ce ck. new projects means new project managers. you need to hire. i need indeed. indeed you do. when you sponsor a job, you immediately get your shortlist of quality candidates, whose resumes on indeed match your job criteria. visit indeed.com/hire and get started today.

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lot to talk about with china today. got some new data out of the country. the economy, it turns out, grew

faster than expected in the third quarter. eunice yoon with more. >> not only did the q3 gdp growth figure beat estimates coming in at 4.9%, but it also showed that the economy here has been growing quarter on quarter so there's a lot of hope that was lifted there from this set of numbers. also, analysts are quite fixated on a couple of data points, which they find encouraging. consumer loans, which is seen as a bit of a proxy for mortgages, came in at $44 billion. that was a bump. also, the retail sales figures came in better than expected, as did the industrial output figures. unemployment eased to a 5% from 5.2% in august. there are still signs, though, as you can imagine, of fragility in the economy, as well as potential headwinds. a private investment, this was a

figure that people keep watching because it is seen as a gauge for how pessimistic or optimistic the private sector is, and that showed a further slowdown from the summer, down 0.6% year on year. year to date. also, the fixed asset investment number, more broadly, missed, and then property investment is still looking very weak. so, even so, jpmorgan, as well as nomura, both raised their outlooks for china's gdp to slightly higher than the government's own target for the year. the overall property picture, though, is still a big question mark. the analysis has been that, okay, these stimulus measures that the government has put in place have been working more or less but there are still major unknowns out there. for example, country garden, which is is huge real estate developer here, looks as though it may be missing an offshore bond payment deadline. it's not known yet, not clear,

but of course, if it does default, then that's going to have a huge impact on the overall buyer sentiment here. guys? >> eunice, we'll talk in a bit about xi's comments about decoupling and belt and road and tim cook as well. nvidia, extending losses in the premarket after the white house did announce its tightening curbs on exports to china. the company says it may impact product development and cause it to relocate certain operations. both citi and morgan stanley cut their targets on the stock. some of the high end of these targets coming off the boil. >> moderating. you know, this is a $300 stock, like five months ago, so what it's doing right now is really sort of testing the super aggressive uptrend once people started to get on the bandwagon for this unending, seeming, supply of or demand for the a.i. gpus. so, it's interesting,

chart-wise, because everyone saying this is manageable or expected or they can get around it. and now, it's in the guidance probably. yet the stock is still kind o of iffy on the response to it. it seems like the stock could go down to $350. it's amazing how much air was under it. the valuation, everyone's going to say, doesn't look crazy. 30 times earnings for, you know, this company that's at the middle of the most exciting trend we have going. little bit of scrutiny on what's implied in the outyears of profit and revenue growth in the nvidia numbers. if you just sort of figure out, like, how big the market has to get in a hurry and just how much, you know, kind of capital spending by the world is going to be dedicated -- flowing through nvidia, unknown if that's, you know, something that we should be questioning at this point. but it is interesting that, you know, we've stalled out here for sure. >> but i think the common thread from the analysts, even though they're cutting numbers, and morgan stanley, as we just

showed the quote, says this. it's still the top pick. they still love the stock. they still think that it's manageable, even though, as morgan stanley says, this is a more draconian, that's the word they use, measure when it comes to restricting chips for a region, they say, that's driving 20 to 25% of demand for nvidia. but they're still our top pick in semis. >> it's a set of restrictions that's designed not just to be kind of a gesture. seemingly. but as to actually try and curtail the technological capacity of china to catch up. i mean, it's not a joke. >> it's not a joke, and overnight, you mentioned xi spoke at this belt and road celebration and initiative alongside his friend, putin, and he referenced it, that they're against unilateral sanctions and economic coercion and decoupling. those were the words. >> dear friend, i think, is the ac actual term, right? take a look at the market. we'll get to some of the impact these individuals names are

going to have. close to session highs here, still looking at a negative open in about eight minutes.

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♪ we mentioned amd. i'm sorry, nvidia, before the break, and you can see some of the laggards on the ndx this morning kind of resolve around the semiconductor space. asml did warn about flag growth next year. bookings down 42 in the recent quarter. that's going to open down almost 4%. l t e eng lln i about five minutes. from chrome to duckduckgo.

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>> announcer: the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. we're going to wind up this year, even with everything that's happened with israel and with higher fuel prices spiking here in the fourth quarter, we're going to earn double what the consensus was at the start of the year, and we look at this and say, the world is developing almost exactly like we thought it would for aviation, both for

united and for the rest of the industry, and that development, frankly, the stress that's happening at the low end of the industry, is going to lead to changes in the industry and a restructuring that's going to leave us at a much better, sustainable, much more structurally profitable industry, and we're headed that way. >> that's united's scott kirby earlier on "squawk" today. shares were under some pressure as their guidance does ove overshadow this quarterly beat. people may be surprised in terms of reliance on their routes to israel. >> kirby characterizing it as temporary or transient. it's not going to be suspended forever. but there was the guidance given was sort of depending on how long the flights to tel aviv and the u.s. are suspended. and it is true that this year, the company's going to earn a lot more than folks thought at the beginning of last year. ten bucks a share is now where the full-year estimates are coming in but it's also down to

ten bucks a share for next year and the stock trades at four times that. as much as he and others in the industry talk about how this is a different airline industry, there is more discipline, not going to be that much capacity growth, we do have clear winners in terms of united, delta, seemingly. market doesn't believe it or at least for now is saying this is the same old industry. we do think this is a cyclical peak in earnings and you can't extrapolate. that's the opportunity if you think things have changed and there's going to be more durable demand and they can be smart about returning returns off it on a multiyear basis. >> there wasn't a big warning about demand, and investors and analysts took away from this strong business booking demand because the company was able to see that booking for business -- booking for trips in a short time frame, like in the next few months, did well, which is an indication that business travel is looking good. it's the fuel costs, right? they increased 20% since july, and that's clearly a headwind. >> yeah.

it's kind of weird. given where we've been on airlines, the airline index, the xal, is flirting with levels that you saw basically three months, four months after covid really took off. >> completely. it's miles from pre-covid levels. >> let's get the opening bell here. at the cnbc realtime exchange, the big board, it's car seller cars.com celebrating its 25th anniversary. and at the nasdaq, it's victory capital and victory shares in recognition of its two active fixed income etfs. plenty of names to toss around this morning, but tonight, of course, is going to be interesting between tesla and netflix. >> always highly anticipated. different ends of the spectrum in terms of share price performance into this probation report. netflix has been the underperformer in big cap tech. tesla is up more than 100% year to date. i feel like also with tesla, you know, we know the delivery numbers. they came in a bit short.

but that's because they're doing factory upgrades. >> yeah. >> but the question is, can they maintain the guidance and what does that do to delivery numbers in the fourth quarter? this ups the ante. and of course the margins have been pressured because of the price cuts, so i think analysts want to see any indication that may have bottomed out, what they'll say about margins and pricing. dan ives at wedbush says we're at the trough here when it comes to price cuts and the margins. >> still seeing not super demand at lower price points. that seems to be the bigger concern, lot of focus on globally what they're able to do market share-wise. netflix, for as much as it has been a very consensus, somewhat crowded call within the space, also some moderation of expectations after the cfo comments a few weeks ago, i guess it was, about slower start to the ad tier, and so it will be interesting to see. i think that stock is sort of come off the boil a little bit

going into the numbers and gotten their expectations that might come in with 6 million net ads or something like that might be okay. so, we will see on that front. what they have to say about free cash flow, i think, been saying this about, going through these strikes in the media industry. if they're rethinking exactly how much they need to produce long-term to feed the streaming platforms and so, some of the commentary there could be interesting, although i do say, netflix, i think, gets maybe too much credit getting lumped in with the huge guys. it's still $160 billion market cap. it's like, you know, 10 to 15% the size of the real f.a.n.g.s, but it's a bellwether for its own industry, if nothing else. >> some of the other names we're -- first of all, morgan stanley at the bottom of the s&p. that's now down 5.25%. that's actually the worst performance in terms of reaction from the big banks so far this

cycle. nasdaq's at the top. this is very -- this is an earnings-driven kind of move here in the markets. jb hunt, i notice, is also at the bottom, even though they had some constructive things to say about the freight cycle and bottoming out. it was a miss, and the stock is down 7.6%. >> for sure. morgan stanley has some valuation to give. i think that's been the little bit of the dynamic there. it was already this acclaimed, okay, wealth management solid, higher returns, and then within that context, it's, you know, not quite there. it's like a 12 times earnings versus 9.5 for goldman. there's a gap. >> they still don't have a ceo. they have this threeway succession battle. we have a sound byte from the president of jb hunt because a lot of people look at this one, obviously, as an industrial barometer for what's happening in that part of the economy. here's what the president says about the environment. >> to be clear on the overall environment, we are not at a point yet to say we're out of

freight recession but we do feel like we're coming out of it or said differently, directionally, we are seeing signs of things moving in a positive direction. >> so, it sounded positive, but the stock reaction is quite nif neg negative. this is an industry that's hard to figure out what's going on with market share because of the bankruptcy, for instance, changing the supply and demand for truckers. >> yeah. altering the employment picture as well along with the strikes. we mentioned the tesla. we haven't gotten to gm and what they're saying about "evolving ev demand." no longer opening this ev factory in michigan. this has long been the thesis of some analysts like adam jonas of morgan stanley, that the pressure of the strike and the realization that combustion engines stillchurn off a ton of cash, not to mention gas prices that haven't exactly gone to the moon, would force some of the d-3 to adjust their adoption

curve. >> it starts to -- the risk-reward of really committing in an extreme way to the transition comes into further relief. i think that's true. it's definitely been part of the bull case of tesla, that there's going to be this innovator's dilemma problem with the legacy guys, especially at the lower price points, but we'll see. i think ultimately, gm and ford and stellantis want to get to a place where they can be a little more agnostic as to what kind of power train the customers want. and they're not there yet, but i think that's -- that, ultimately, you have to be playing in all those areas, whether it's hybrid ev and internal combustion to make it work. they have bigger problems, i think, than the long-term ev demand. >> right. meanwhile, rivian, amazon says they now have 10,000 rivian evs in their commercial fleet. they had about half of that back in july. the plan, of course, is to eventually get to 100,000 by

2030. rivian stock in the reacting necessarily, but it seems like it's happening on the commercial side in addition to the consumer side. >> yeah. it's happening on the commercial side when you have an anchor purchaser with a bigger mission to try and make this happen. there's no doubt about that. that's the bull case for longer term, the industry transition. >> just want to point out two areas of strength in the market right now. consumer staples is a group that's winning, thank you to p&g for that. it's a big component of that index. it's having an effect on some of the competitors as well in the household product space, not on food and beverage, but kimberly clark, clorox, that's what's working today. this idea that household products, more resilient in the market than some of the other staples. may act as a safe haven. p&g is up 3%, which is a big move for the company, coming out, beating on earnings and sales, driven by pricing,

reiterating guidance, even though they're going to take a hit from foreign exchange. and guys, the other pocket of strength here is energy again. at the top of the market, up 0.6%. no surprise, because the oil prices are jumping on the back of the news out of the middle east. and if you're looking for a place where investors are expressing the sort of risks here, if in oil, especially when iran is in the headlines and increasingly iran is in the headlines, reacting to the hospital blast that happened in gaza, blaming israel, of course, more saber rattling. there's the impact. 1% move, but you know, it's interesting, mike, michael hartnett, the strategist at bank of america, put out the fund manager survey yesterday, said there was a huge swing in terms of fund management's exposure to energy, going from 1% to 8% overweight stance in october. so, that was the most bullish allocation since march. >> there's no doubt the story has worked its way through. it works on a bunch of levels. obviously, there's this kind of

risk premium piece of it but also just the cash flow story and production is up, and you know, it's kind of working, and it was no doubt underowned. also, i mean, probably not unrelated to oil, yields are perky again, so it was kind of the sign earlier that they might back off a bit. and part of the premise for the market finding its footing, let's say, in the last week or so, was we thought oil was going to raise to a hundred. it backed off. yields seemed like they were on the express to 5%. they calmed down. but they didn't stay under 4.6%. they had one close under 4.6%, which to me looks like the breakout level of the chart and that's where it gets uncomfortable above that. we do have one more long-term treasury auction today. >> 20-year. >> 20-year, which is a weird, orphaned maturity, but it gets out there. we've been sensitive to auction results, even though historically they don't move the trend, but that might be it for the month. >> we had the nasty one last week that wasn't too pretty.

along with beige book at 2:00. >> love the beigebook. the fed pays really close attention to the color from the different districts and they want to see more evidence that inflation is really coming down and going in one direction and not flaring up again. we'll watch that. that comes out at 2:00, gives you the snapshots. i think you're increasingly hearing this word, term premium, which we have been talking about on the show for a while when it comes to treasurys which is basically just the extra yield, the extra premium that investors need to take on the risk for trea treasurys beyond just the short-term interest rates set by the fed, and is it caused by the big deficits that we have, the concerns about supply that are coming due, or is it caused by long-term inflation expectations? we don't really know. >> or is it a return to the norm? which it was around these levels if you go back before the financial crisis or the year 2000, and i think logically, if you're owning longer term debt, you want to be compensated in some form for that, but it is funny. >> it's moving quickly. >> exactly. it's moving quickly. and it's a number that nobody

agrees on how to calculate it. >> there's no way. >> it's an abstraction. we're in this zone where we have the abstractions of the neutral interest rate, the term premium, potential growth for gdp, and what really is it? and to me, that tells us we're at the -- at or near the end of a fed tightening cycle because we're not really working with tangible cost of capital effects. and it also explains to me why your average investor wants to say, show me something about a.i. or ozempic. show me a tangible theme to play that is not about this macro, conceptual stuff. >> or even worse, geopolitics, which is very hard to price as well. >> by the way, we're getting more granularity on morgan stanley's results. for that, we're going to turn to leslie picker this morning, get some highlights from the call. good morning, lp. >> hey, cq. that call just ending. prospects for a rebound really in focus for morgan stanley investors today with that stock under pressure. investment banking revenue for the quarter was 27% lower than a

yearen ago due to fewer completed m&a transactions. the higher block offerings but those were partially offset by lower revenue from ipos as well as debt capital markets. you can see the declines of more than 5%. ceo james gorman said a resumption of activity really depends on the fed, saying he thinks there will be one more hike in november, perhaps, and then there will be a surge in activity. likely after he hands the c. >> suite to his ultimate successor. >> the minute you see the fed indicate they've stopped raising rates, the m&a and underwriting calendar will explode, because there is enormous pent-up activity. boards of directors are sitting there saying, until we understand the cost of financing, it is very difficult to pull the trigger on some of these capital transactions. so, i think you're heading into -- unfortunately, i'm not going to be around to enjoy it, but you're heading into a really good patch here.

>> in terms of timing, gorman said he doesn't know if it's "six months out or nine months out or three months out," but this thing is going to start turning. also, he said he doesn't think the fed will cut rates next year but eventually they will. when i spoke with the cfo earlier this morning, she did tell me that the firm is seeing increased engagement with clients in the financials industry, energy transition, technology, and a.i. so, hopefully, we can start to see some momentum and deal flow in those sectors, guys. >> leslie, how is morgan stanley doing in its two big businesses, investment banking and wealth management, relative to its competition? when the growth is lower, it's all about taking share. goldman had pretty good results on the investment bank yesterday relative to expectations. i know ubs has been pouring into wealth management, so where does morgan stanley stand? >> no, it's a good question. both goldman and morgan stanley saw inflows during the quarter

into their wealth management businesses so that's a positive for them, especially both of those businesses are looking to grow amid some of the volatility that we've seen in the capital markets division. now, the distinction here is morgan stanley did see a lot lower in terms of ipo revenue, largely just due to the fact that the three big deals that we saw in september, they didn't have leading roles in the same way that goldman and some of the other firms did. so, as a result, based on those three deals that came to market in september, part of it is timing. that division didn't help compensate for some of the muted activity in investment banking, which that gets paid when those deals close. so, across the street, most banks saw very little in terms of m&a revenue because very few deals happened no close in the quarter, but a lot of that was compensated by an uptick in ipo, but if you weren't a participant, if you weren't a major underwriter in the three deals that came in september,

then you're kind of looking at slightly lower fees during that quarter. >> well, a load this morning, leslie, of almost 75 is going to be a fresh 52-week low almost to the day of october 13th last year. we'll keep our eye on that. leslie, thank you. by contrast, mike, some of the smaller banks, faring much better. state street's a good example of that today. >> it's been a mixed picture on those trust banks. state street is up. bank of new york mellon did not have as good a reaction, and northern trust, also a little bit iffy. i think the takeaway is, no new bad surprises out of the banks. and so, you can kind of just check off that box. it doesn't really make it an exciting bull thesis for the group except to argue, perhaps, that they're due and that they've managed to weather the worst of the duration shock that we got from the spring. but otherwise, i think it's just about you tell me what the economy's going to do, i'll tell

you how most of the banks are going to do and when it comes to morgan stanley and goldman. >> that u.s. bank corps, i was watching this one because it kind of -- the earnings got a little bit overshadowed by this announcement that they won't need to be category two compliant by year-end 2024. it's a regulatory thing, but it's good news for them. on the economy, the comments from the ceo and the u.s. bank corps earnings call, i went through it, looking about the consumer, it was pretty optimistic. they said that the consumer's entering the cycle in strong shape from a balance standpoint. from the perspective of savings account that they have to spend activity, i think they're starting to normalize, but normalize to a prepandemic is what i would say as a normal level. everyone's talking about normalizing. they're not talking about recession. bank of america, brian moynihan talked about that as well. >> there's no doubt about it. that's where we are. and the whole debate is about, does it stop there at pre-pandemic normal levels? >> you have to normalize first. >> everything a bank ceo would be looking at, it's like, what's

the average fico score for our exposures, and everything else looks pretty good based on long-term trends. it is just really about where we go from here and are there any other rate shocks we're going to have to deal with? >> speaking of rates, travelers, obviously, the cad loss is getting overshadowed by the fact that a lot of these companies are now able to get a return. that's almost a three-month high on trv. >> insurance, by far, the strongest subgroup within financials for a while. it's absolutely a pricing story. it's also the fact that they can earn a good amount on, you know, their own investment portfolio. they tend to be able to be a beneficiary of higher yields in that area. and you know, even things like the auto price, auto insurance pricing cycle has been really positive. makes the activist push on all state kind of fascinating as well. feeling like there's an opportunity there that they're not capitalizing on, perhaps. >> industrials and materials are at the bottom of the market, which is notable because we had

strong china data overnight. all coming out better than expected. these are groups that you look to in terms of sensitivity to china, and we're not seeing much of a reaction there. >> no, in fact, i was going to say, you know, the past two days, the trend was, small caps over large, cyclical over defensive. you did have this sort of tenacious intraday action in the average stock that did recover, and we're getting some of that back today so it's an unwind. the russell is down more than 1%. >> wasn't the russell versus the nasdaq 100 best relative day since july? >> coming off the worst level in, like, 25 years. >> exactly. >> so, that's the issue. >> take another look at the markets here, dow down 88. as to sara and mike mentioned, it's going to be a busy day in fixed income, not to mention the 20-year auction. also, waller at 12:00 and williams at 12:30. you got the ten-year, of course, awfully close to that high from last week or last couple of weeks of 4.8%. back in a minute.

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tierk a look take a look at the transports months to date, it has not enjoyed this sort of tepid recovery in october and more losses today with jb hunt hurting the overall index. a lot of airlines taking it on the chin. dow is down 130, we'll take a short break and be back in a moment. that first time you take a step back. i made that. with your very own online store. i sold that. and you can manage it all in one place. i built this. and it was easy, with a partner that puts you first.

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s&p 4350. let's get to bob pisani. >> we are 10% through earnings season, over 50 companies reporting and earnings are beating above expectations and yet the response to that is fairly poor, i have to say. particularly in transports. nice to see energy bouncing, oil around 87. a few new highs there. consumers staples stabilizing after a miserable september. semiconductors on the weak side. amsl weaker numbers, trading down 4%.

transport down, united down 6%, jb hunt down 4%. i see ch robinson at a new 52 hope hick -week low. american airlines at a new 52-week low. new highs, it's small, basically a smattering of energy companies with oil moving up a bit. some service companies like halliburton as well. , but that's about it. the problem with the market right now is that there are confusing narratives and a lot of people don't believe any of them. so there's extremes. people who believe growth is strong, we have a soft landing and people who think we're going into a recession. these do not reconcile each other. if you think growth is too strong or going to be great. you would be interesting in something like cyclical stocks but they're not outperforming at all this year, not monthly,

quarterly, anywhere. industrials and materials have been lagging throughout the year and aren't rallying much. if you think the economy is slowing down, there are people who think that. you think value stocks are doing better. they're a disaster all year. the s&p growth is 20%, value up 7%. nothing here. no conviction on any of the narratives right now. the only narrative with any conviction right now remains megacap tech i put up vanguard's megagrowth, this is the apples and amazons, the magnificent seven. this is up 32% on the year. interestingly, that's where the earnings growth is, i'll break this down for you show you why these things matter. because they're following the earnings growth. the average earning for the big, seven is 32% for the third quarter. if rest of the over 493 stocks the average numbers are down 4.6%.

that's why we're expected to be flat for earnings on the s&p 500. what's happening in the absence of any other conviction, investors are following earnings trends. stock prices tend to following earnings trend and that's what investors are doing, carl, back to you. >> mike thanks for the time see you soon. mike santoli. when we come back, more on what to expect from tesla and netflix when they report tonight. dow down 1, 30nasdaq lagging on some of the chip weakness. we're back in a minute.

they just want to play. [ giggling ] [ screaming ] i want you to meet the others. [ screaming ] good wednesday morning welcome to another hour of "squawk on the street" i'm sara eisen with carl quintanilla live for you as always from post nine of the stock exchange. david has the morning off. we are expecting comments from president biden in tel-aviv israel this hour. we'll bring it to you live. stocks under pressure, i'd say the dow is down more than 100 points, 115. s&p 500 off about half a percent. the strength there is in energy, oil prices up more than 1%. consumer staples are doing well

thanks in many part to p&g's earnings. industrials and materials taking it the hardest. it has to do with earnings like united and jb hunt. treasuries as well. a story here. continuing to rise on the longer end of the curve, the 10 year and 30 year yields. the two year yield backs off, it was above 5.2% yesterday. still elevated levels. 30 minutes into the trading session. three movers we're watching, proctor and gamble in the green, despite volume declines. more pressure on the chips today, nvidia seeing price target cuts on the new u.s./china chip restrictions. and asml reporting a miss on sales. jb hunt slumping after missed estimates on freight costs, freight rates. and the company warning we are not at a point yet to say we're

out of the freight recession, although things are looking better. stocks off the worst levels down more than 6%. carl, it comes to the debate about hard and soft landing, higher for longer, the fed. the big story yesterday on the moving rates was the odds increased for november and december of rate hikes. still not above 50%. market still thinks the fed is done. however you get a strong retail sales, you get strong inflation number. a little bit firmer, strong jobs numbers, that's been the theme and you have to wonder if inflation is going to remain sticky on the back of that strength in the economy. so potentially one reason we're seeing the yields remain consistently higher. the atlanta fed gdp number it was a wow when it first came out, a wow now, revised up to 5.4%. you mentioned the sell side, the economists on wall street were not there. remember when it first came out,

here's the chart, the orange above is the atlanta fed gdp. it's always been elevated. the blue line is where wall street firms have been and they're playing catch up. it first came out, everyone said atlanta fed always overe overestimates, they never get it right it's going to come down. it hasn't. why does it matter? it bodes well for earnings and i would argue for fourth quarter gdp and first hatch '24 gdp because we don't usually see massive dropoffs. we might not get 5% growth but it sets us up at a higher base. >> i would argue it was a laughingstock when the early estimates for q3 came in. goldman is looking for a drop off in q4 and reacceleration in q1 largely because of the one-offs from external shocks from student loans and strikes. jb hunt saying demand improved

throughout the quarter, across the eastern and transcontinental networks led by destocking trends. decent performance from rail providers. given retail sales six straight months longest streak in a couple years up as you said yesterday .7. there's some accelerating going on. >> it was a wow numbers, especially like online stores, convenience stores have been doing well. i talked to bank of america ceo brian moynihan yesterday about this. he played down the retail sales number said it's noisy. here's what he says about the consumer right now. >> you're seeing that deterioration of deposit in those median income households down a little bit that means they're spending money in excess of what they're bringing in. so the economy has slowed down.

this is real-time data as opposed to lagging data so we can see it every week. >> it means it's what's happening right now, basically. that is a slow down in the consumer because of the fed action and inflation. still doesn't see recession, thinks we can get away with a soft landing but back to prepandemic levels which he pointed out were also not bad for the economy. which is what's been happening overall. i think the question is, then, is the fed going to have to do more? is the fed going to go higher for longer? is the world going to look different as a result of the tensions? we are waiting for the president to speak in israel. we're watching oil prices rise, watching the relationship between china, russia, china, russia and iran. these are hard things for investors to wrap their arms around. it matters a lot. >> wti this morning got to 8988. iran is calling for sanctions

and embargoes on israel from other countries that is bringing hand ringing about global oil supply. but we saw agreements between the united states and venezuelan production and our rates are reaching record levels. gold one month high today on a lot of the similar concerns. >> gold has been the safe haven this time around, certainly than treasuries that are not acting that way. let's talk about the market implications with stocks under pressure and how to navigate all of these growing risks right now. let's get to the street's view. citi group scott cloner is here at post nine as we await the president. you have an s&p target of 4,600 does what's happening in israel right now change your view over all of the environment, the markets and the economy? how do you process this -- you

know what, scott. before we listen to you we'll go to the president in tel aviv. we'll be right back. >> you're not alone. you are not alone mp you are not alone. as long as the united states stands and we'll stand forever we'll not ever let you be alone. most importantly, the -- i know the recent terrorist assault on the people of this nation has left a deep, deep wound. more than 1,300 innocent israelis killed, including at least 31 american citizens by the terrorist group hamas. hundreds, hundreds of young people at a music festival, the festival was for peace. for peace. gunned down as they ran for their lives. scores of innocents from infants to grandparents, israelis and americans taken hostage. children slaughtered, babies slaughtered, rape, be heading,

bodies burn alive. hamas unleashed pure unadulterated evil on the world. there's no rationalizing it. no excusing it. period. the brutality we saw would have cut deep anywhere in the world but it cuts deeper here in israel. october 7th, which was sacred -- a sacred jewish holiday became the deadliiest day since the holocaust. it brought forward scars of semitism and genocide of jewish people. the world watched then. it knew. and the world did nothing. we will not stand by and do nothing again. not today, not tomorrow, not ever. to those who are living in limbo waiting desperately to learn the

fate of a loved one, especially to families of the hostages, you're not alone. we're working with partners throughout the region, pursuing every avenue to bring home those who are being held captive by hamas. i can't speak publically about all the details but let me assure you. for me, as the american president, there's no higher priority than a release and safe return of all these hostages. to those who are grieving, a child, parent, spouse, a sibling, a friend. i know that black hole in the middle of your chest you feel like you're being sucked into it. the survivor's remorse, the anger, questions of faith in had your soul, staring at that empty chair, first sabbath without them, they're the everyday things, small things you miss the most. the scent when you open the closet door. the morning coffee you shared together.

the bend of a smile. the perfect picture of a laugh. the giggle of a little boy. the baby. for those who have lost loved ones, this is what i know. they'll never be truly gone. there's something that's never fully lost, your love for them. and their love for you. and i promise you, you'll be walking along some day and say what would she or he want me to do? you smile when you pass a place that reminds you of them. that's when you know. when a smile comes to your lips before a tear to your eye that's when you know you'll make it. when terrorists believed they could bring down -- bring you down, bend your will, break your resolve, but they never did and they never will. instead, we saw incredible

stories of heroism courage. neighbors opening their homes to shelter survivors. retired soldiers running into danger once again. civilian medics flying rescue missions and off-duty medics at the music festival caring for the wounded before becoming a victim themselves. volunteers retrieving bodies of the deads so families can bury their loved ones in accordance with jewish tradition. reservists leaving behind their families, honey moons, studies abroad without hesitation and so much more. the state of israel was born to be a safe place for the jewish people of the world. that's why it was born. long said if israel didn't exist, we'd have to invent it. while it may not feel that way

today, israel must again be a safe place for the jewish people. i promise you, we're going to do everything in our power to make sure it will be. 75 years ago, just 11 minutes after its founding, president harry s. truman and the united states of america became the first nation to recognize israel. we stood by your side ever since. we're going to stand by your side now. my administration was in close touch with your leadership in the first moments of this attack. we're going to make sure we have -- you have what you need to protect your people, to defend your nation. for decades, we've ensured israel's qualitative military edge. and later this week, i'm going to ask the united states congress for unprecedented support package for israel's defense. we're going to keep iron dome fully supplied so we can continue standing centennial

over israeli skies saving israeli lives. we've moved u.s. military assets to the region, including the uss ford strike group in the mediterranean with the eisen hour on the way to deter further aggression and to prevent this conflict from spreading. the world will know that israel is stronger than ever. my message to any other state or hostile actor thinking about attacking israel remains the same as it was a week ago. don't. don't. don't. since this terrorist attack took place, we've seen it described as israel's 9/11. before for a nation the size of israel, it was like fifteen 9/11s. the scale may be different you but i'm sure the horrors have tapped into a primal feeling in israel like it did in the united states.

shock, pain, rage. an all consuming rage. i understand, and many americans understand, you can't look at what has happened here to your mothers, your fathers, your grandparents, sons, daughters, children, even babies, and not scream out for justice. justice must be done. but i caution this while you feel that rage. don't be consumed by it. after 9/11, we were enraged in the united states. while we sought justice and got justice we ought made mistakes. i'm the first u.s. president to visit israel in the time of war. i made war-time decisions. i know choices are never clear or easy for the leadership. there's always cost. it requires being deliberate. it requires asking very hard questions. it requires clarity about the

objectives and an honest assessment about whether the path you're on will achief ve those objectives. the vast majority of palestinians are not hamas. hamas does not represent the palestinian people. hamas uses innocence -- innocent families in gaza as human shields. putting their command centers, their weapons, their communications tunnels in residential areas. palestinian people are suffering greatly as well. we mourn the loss of innocent palestinian lives like the entire world i was outraged and saddened by the enormous loss of life yesterday in the hospital in gaza. based on the information we've seen to date it seems the result of an errant rocket fired by a terrorist group in gaza. the united states unequivocally stands for the protection of civilian life in conflict. and i truly grief for the families who were killed or wounded by this tragedy.

the people of gaza need food, water, medicine, shelter. today i ask the israel cabinet who i met with for some time to agree to the delivery of life saving humanitarian assistance of civilians in gaza based on the understanding there will be sf sp speks inspections and the a aids -- aid goes to civilians and not hamas. if hamas diverts or steals the assistance, they will have demonstrated once again they have no concern for the welfare of the palestinian people and it will end. as a practical matter, it will stop the international community from being able to provide this aid. working in close cooperation with the government of egypt, the united nations and agencies like the world program and other parts of the region to get trucks moving across the border as soon as possible.

separately, i ask israel that the global community demand that the international red cross be able to visit hostages. i just demanded that the united states full -- just demanded the united states fully supports. today i'm also announcing $100 million in new u.s. funding for humanitarian assistance in gaza and the west bank. this money will support more than 1 million displaced and conflict affected palestinians including emergency needs in gaza. you are a jewish state. you are a jewish state but you're also a democracy. and like the united states you don't live by the rules of terrorists. you live by the rule of law. when conflicts flare you live by the law of wars. what sets us apart from the terrorists is we believe in if the fundamental dignity of every human life, israeli, palestinian, arab, jew, muslim,

christian, everyone. you can't give up what makes you who you are. if you give that up, then the terrorists win and we can never let them win. you know, israel is a miracle. a triumph of faith, resolve, resilience over impossible pain and loss. think about october 7th, a jewish holiday. we read about the death of moses, tragic story of a profound loss to an entire nation. a death that could have left a hopelessness in the hearts of an entire nation. but though moses died, his memory, his message, his lessons have lived on for generations of the jewish people as well as many others. just as the memories of your loved ones will live on as well. those who observe the holiday began reading the tora from the

beginning. the story of creation. reminds of us two things first when we get knocked down, we get back up again and we begin anew. and second, when we're faced with tragedy and loss we must go back to the beginning and remember who we are. we are all human beings created in the image of god with dignity, humanity and purpose. in the darkness to be the light to the world is what we're about. you inspire hope and light for so many around the world. that's what the terrorists seek to destroy. that's what they seek to destroy. because they liv in darkness. but not you. not israel. nations of conscious like the united states and israel are not measured solely by the example of their power. we're measured by the power of our example. that's why, as hard as it is, you must keep pursuing peace. must keep pursuing a path so

israel and the palestinian people can both live safely in security and in dignity and peace. for me that means a two-state solution. let's keep working for israel's greater integration with its neighbors. these attacks only strengthen my commitment and determination and will to get that done. i'm here to tell you that terrorists will not win. freedom will win. so let me end where i began, israel you're not alone. united states stands with you. i told the story before and i'll tell it again of my first meeting with an israeli prime minister 50 years ago. i was a young senator, sitting across from her at a desk in her office and she had a guy who later became prime minister sitting next to me just before the 1973 i donyom kippur war.

she flipped the maps down saying how bad things were. and then all of a sudden she looked at me, would you like a photograph? she got up from her desk, walked out into that hallway. i think it's marble flooring. walked out in the hallway and there's a bunch of photographers in front of us. we're standing shoulder to shoulder and without looking at me she said to me knowing i'd hear her, why do you look so worried, senator biden? i said worried? like of course i'm worried. she didn't look at me and said, don't worry, senator, we israelis have a secret weapon. we have nowhere else to go. well, today i say to all of israel, united states isn't going anywhere either. we're going to stand with you. we'll walk beside you on those dark days. we'll walk beside you on the good days to come, and they will

come. as you say in hebrew which i'm not going to attempt to do because i'm a terrible linguist i'll say it in english, the people of israel live. the people of israel live. israel will be safe, secure, jewish and democratic state today, tomorrow, forever. may god protect all those who work for peace. god save those who are still in harm's way. thank you very much. >> mr. president, what's your line of u.s. military involvement in this war? >> president biden in tel aviv giving a full throated defense for our ally, israel. confirming he's the first u.s. president to go to israel during a war, saying i promise we'll do anything in our power to make sure israel is safe, make sure you ever what you need. he confirmed that later this week he's going to ask congress for an unprecedented package of

support to israel. he also announced a new $100 million investmentment by the u.s. government for humanitarian assistance for gaza and the west bank he called israel a miracle. carl, from those that i speak to in israel, the presence of president biden during this very volatile time offering his support and compassion and understanding of history means a huge deal clearly to the israelis and to the israeli government and we should mention the german chancellor has been there as well in a show of support from europe that we haven't typically gotten. the question i think is, what does it mean for the rest of the world, right? how does the arab world react to this. let's go to the ground we have reporters all over tel aviv, josh letterman is live for us this hour. what can you tell us?

>> reporter: the early part of president biden's trip was meeting with benjamin netanyahu. but as president biden wraps up his trip here to a war zone we heard him in these remarks speaking directly to the palestinian people. he tried to draw a distinction between hamas, the group that israel is fighting and the palestinian people as a whole. arguing that hamas does not represent the palestinian people. we also heard the president suggest that that very delicate deal that secretary blinken floated a couple nights ago to try to get humanitarian aid into the gaza strip might not be completely off the table at this point. that it could still potentially be viable. but the president adding an important caveat saying the u.s. still wants to see the deal

succeed for other governments as well as non-governmental organizations to bring aid in but sending a clear warning to hamas, if any of that aid is diverted to hamas, which has been the allegation in years past, that would be a bridge too far and the u.s. would have to cut off support for moving humanitarian aid into the gaza strip. we also heard the president make a new demand, he wants to see the international red cross have access to the hostages who are now currently in the gaza strip and that really adds some information to what we understand about the current situation because we knew there had been delicate behind-the-scene negotiations about trying to get the hostages out. hamas made a number of comments about potential willingness to release civilian hostages under various circumstances. but the real question had been is any of that discussion still happening or has the events of

the last day and this strike on this hospital in the gaza strip up ended that and caused each side to go to their respect ive corners and stop talking about the hostages. the president in the final hours of his time on the ground is trying to put a new focus on the hostage effort and get those talks going once again. clearly a big priority for the united states given a number of those hostages in the gaza strip are believed to be american citizens. >> on the hospital attack he did say he believes it was caused by an errant rocket and not israel. i know nbc has some reporting that suggests that might be more definitive based on some third party analysis? >> reporter: that's right. the president had said just a little while ago that he was basing his comments here, that he believes that it was the other team, meaning palestinian militant groups not israel, on information he had seen from the defense department. and now senior u.s. officials

tell our pentagon correspondent from nbc news, that the u.s. has an independent analysis that suggests this was likely an errant palestinian islamic jihad rocket that fell short and struck that hospital. we are waiting to see whether the u.s. government might try to declassify some intelligence at some point today to try to put some meat on the bone and back up that assessment. clearly there's still intelligence analysis at this hour to see how the u.s. can get to the bottom of what happened there. all the comments we've heard from the u.s. so far, both from president biden and now via these officials who have spoken to nbc's courtney kube suggest the u.s. is largely buying the israeli set of events here that it was not an israeli air strike even as the other nations in the area are not believing israeli. turkey, egypt, jordan are all

blaming israel for the air strike as protests have been erupting throughout the region. i want to bring in scott crohner here at post nine who's been very patient with all of us. happy to have you here so we can get an investor take on what to do with all this information. >> i think we're still looking at a period of what we'll call geopolitical uncertainty that's going to overhang valuations for the s&p. we know that investors tend to sell uncertainty we're still in the uncertain mode. the way i'm thinking about it is contained versus escalate. as long as this remains contained our view towards u.s. equities is in good shape. the 46 target is premisesed on peaking interest rates, that's coming down perhaps on safe haven play here. but we think the fundamentals for the u.s. stock market are in good shape.

>> so contain versus escalate. what's escalate? >> that's beyond my pay grade. i don't think any of us know. we'll watch oil prices as a lead indicator on what the market is trying to signal on that, it's something we have to monitor. it's hard to presume a base case and what we'll presume, if you will, it remains somewhat contained. i think we heard from the president that's where the focus is going to be. >> that said, short term i wonder if you're heartened by the improviing breath the last couple of days, does it reinforce 4300 as support? >> we've been saying 42, 4300 is the place to buy. no reason to change. i think what you were saying before the speech is at the same time we're seeing some of your economic activity indicators coming through more constructively. which yes, it gives the fed some issue but fundamentally it's a

reminder that the broadening we think is a big opportunity for u.s. investors continues to be in place. that broadening is beyond megacap growth and tech. think back to our focus on the industrial economy is a place you want to look as well. >> so 5.4% growth in the third quarter is what atlanta fed says what does that do for earnings expectations for not just this quarter but the coming quarters? >> we're out aggressively with our estimate for next year so i welcome that. >> backs it up. >> exactly. >> so jean-claugenerally speaki think fundamentals are in good shape. >> there's an argument that goes the strength of the economy might make the fed keep hiking rates. >> catch 22. >> then an increased chance of a hard landing again. >> we did analysis and you go back the past 70 years and i can point to half the time the s&p dealt with a 4 to 6% nominal

yield it traded north 20 times. so we have to think about the influence on u.s. equities and that's counter to what we've gotten used to in the past decade. so what we're positioning for is a in new paradigm, if you will, in terms of how interest rates play through in u.s. equity markets. we'll take the glass half full side and view it constructively from a fundamental perspective. >> let's bring in david harold this morning to talk about international equities. david, it's great to see you again. i wonder how you are processing all of what's happening on the other side of the planet into your model of what to do internationally. >> what we've continued to see is the geopolitical events do have a shock impact on share prices. and our view is, long-term investors at harris oak mark is to not value on next week, next

month, next quarter but the next three, five, ten years, the fundamentals of company valuation. when you have the extreme price reactions which we've soon incidentally in the last three or four months, particularly in europe, it actually becomes an opportunity to buy quality at low price, which is the essence of value investing. trying to buy good businesses at low prices. and normally you don't get this opportunity unless you have a shot. so we view this as an opportunistic subset that we can take advantage of given our investment timeline ofthree to five years. >> it makes value stocks more valuable in your view, i guess. what do you think of international exposures. we look at shoring, does it make you i rethink allocations in

places like china and increased exposure to places that are friendlier like europe. >> this is happening, friend shoring, that's a good term but it's called diversifying your supply chain, not putting all of your eggs in one basket. this is a slow and will be a contin continual process. there was too much emphasis on using china as a supply chain, base of manufacturering, a manufacturing, and i think people got caught with this, and they're doing the rational thing of diversifying the supply chain. but we look at company and company fundamentals and the ability to earn cash flow streams and one of the things that's a misnomer is a company based somewhere, germany or europe say, should be punished because of its zip code or where it's based and not where it actually conducts business. so we focus on where the company

conducts business. if we can get good, quality business at a low price, that price is being severely impacted by zip code, i think this is a great investment opportunity and we've seen over the last ten years, international has been out of favor, value has been out of favor. international value, this is our fishing ground, has been out of favor. this is actually a very bullish time period for us. >> reminds me of your call was it last week we downgraded uk. we got some cpi numbers out of uk today. still sticky at half a point. >> right. right. does look like we're near the ends of inflation rate hikes over there, though, so. i would just kind of come back and say in response i think that makes sense. . we've been talking about global supply chain diversification for some time now. there are many moving parts that continues quite bullish on the u.s. industrial economy. i think, again, we talk about

broadening within the u.s. equity markets away from the megacap growth influence and that's where we put our focus. >> on industrials. go ahead, david. >> what's interesting, the u.s. is the biggest economy in the world, almost 25% of global gdp. these companies located outside the u.s. are huge beneficiaries of u.s. growth. and what we have seen is, when u.s. reports a strong growth number, the dollar strengthens and the foreign stocks weaken. what should actually happen is the dollar as it strengthens should strengthen the local market share prices because of the most multinationals benefit from this. as a result of this reaction, you see, for instance, germany trades ten times earnings. the u.s. trades at 19 times earnings. to me there's a huge opportunity here. especially when you look at earnings yields compared to bond yields where the german ten year is below three and the u.s. ten

year is pushing five. so you have a german p. e. ratio of 10 and bond rate at 3 versus s&p at 19 and a bond rate that's almost the same. >> david good for talking to you. and thanks for sticking around stock. ten year crossing 4.9. more "squawk on the street" after this. what do you see on the horizon? uncertainty? or opportunity. whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today.

united airlines one of the laggards today, warning the war will weigh on profits. joining us the jeffries analyst covering airlines. on the united story, kerirby discussed it this morning. >> they're betting it lasts until the end of october, cutting a point and a half of capacity. what's weighing on shares is costs. we have a flat cost assumption for 2024. and every one point of cost is a dollar of eps on $10 of eps for 2024. it's not pretty. >> are these new labor contracts coming into play? >> exactly. plus aircraft delays, seeing max delays, kirby cut his max

outlook for '23 but united has 800 new aircraft coming in over the next decade. it's going to weigh on their free cash flow -- >> and fuel. >> yes. >> with oil prices rising. i wanted to ask you about the defense companies because with all of this we've seen their share prices elevated. they had a run last week. does this change the trajectory of earnings for them what's happening in the middle east, israel? >> i think it will. we've seen massive splupplements to ukraine, 152 billion so we could continue to see that. the defense budget looks up 3 to 4% for fiscal '24 but this funds that short cycle not only as a short cycle bump up but this is an eight to ten year restocking cycle when we went to the army show last week. beneficiaries would be the short cycle army exposed names.

>> what weapons does israel need? because president biden said he's going to make an unprecedented request from congress later this week, and who makes them? >> michssiles and munitions. lhx just closed the deal of aerojet on the 28th. that's a direct exposure to that. so you're getting 15% exposure to that, already have 15% army exposure, their second largest. so we see a restocking cycle not just because of ukraine and israel but the u.s. stock piles are low. and obviously there will be fighter jets like the f-35, helicopters, but those are big plays but what we really need is equipment on the ground at the moment. >> i noted rtx was one of the most shorted industrial names. a lot of this covering shorts of putting on fresh longs? had. >> i think the problem is the pratt division, the engine is

accounting for 25% of revenues but they're having an aircraft grounding, gtf they see 40% of the fleet grounded in the next 12 months. so that's one of the problems with that stock at the moment until we see them get through their engines we're not going to see that stock see relief. >> you mentioned the u.s. stock pile is low. terrible time to not have a speaker of the house. how low is it? what needs to be done? do you expect that congress will pass the funding to do everything you just mentioned? >> we met with the d.o.d. controller mike mccord last week and several u.s. army officials. i think the stats are hard to come by in terms of what the actual stockpiles are. that's very proprietary, the government is notproviding that but we know it's low and the cycle is not a one year bump. >> finally, spirit up 20%.

is there a feeling they put a lid on the production, the defect issues? >> they changed the ceo two weeks ago, we put out a positive note saying -- >> wrong charlottesvit. we're looking for spr. >> we think spirit could see strategic action and boeing has replaced the ceo with pat shanahan. and they've come in and changed spirit's contract so that's giving spirit immediate pricing relief although they'll probably have issues the next six months, this is giving the stock a boost. >> that's a lot. thanks for coming in. checking in on the markets. an hour into trading and seeing weakness on 166 on the dow. s&p 500 taking a little bit of a leg lower. the only thing working today energy and consumer staples. good earnings from p&g and oil prices on the rise.

bob pisani is here with the movers. >> 10% through earnings we've had almost all earnings beat but not quite today, jb hunt, travelers was on the light side. look at the sectors, energy is doing well, some new breakouts in energy as oil is holding up around $87, the s&p 500. but staples are rebounding, semiconductors are weak, asml had a decent report but trading down. the transports are a problem as we're seeing not just jb hunt but the big names in the sector, airlines down today. megacaps holding in there, microsoft, alphabet, apple -- apple just went negative. sort of a mixed performance there but overall holding up well. new lows, a lot of transports. robinson, american airlines. there's morgan stanley down big

on a new low there and some of the other investing companies as well. the transports, ual, jb hunt, american, alaska, this is a broad group of logistics and airlines having a tough time of it today here. speaking of, these are in the industrial group. looking for bounces here somewhere in the cyclicals because the economy is strong, it's not really happening. even again today, these are big global industrial names, proxies for global growth, caterpillar, ingersoll, eaton, parker, not a good sign. the earnings we have about 10% through the s&p 500, 53 companies are reporting. these numbers are higher than normal. the average beat is 8%. eps growth 8%. revenue growth is 7. all of these are much higher than expected, and yet we had a couple of disappointments today and still the pressure from high

interest rates weighing on the markets. back to you. >> netflix and tesla after the bell. bob pisani thank you. down 150 or so on the dow, treasuriry yield is higher, 'lpecially the 10 year. wel monitor all that when we come back. "squawk on the street" back in a moment. from chrome to duckduckgo.

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the president speaking in the last hour pledging to keep israel supplied with military weapons and arms and to ask congress for this unprecedented aid package for the country. let's get to steve liesman with results on the issues. >> we were in the field with these questions last week, the american public in the wake of the hamas terrorist attack support the israelis over palestinians. but a significant share want both sides treated the same. 74% say military for israel is an important priority for the u.s. government compared with

72% for security of the u.s./mexico border same amount for humanitarian aid and less so when it comes to aid for ukraine and economic and military aid for taiwan. we can show you why, republicans and independents put one two, the border with mexico and aid for israel. 39% say the u.s. should favor overall israelis over palestinians in the conflict that's up from 34% in the 2014 gaza strip war when the question was last act. 6% say the u.s. should favor palestinians first but 36% say the government should treat both the same down from 53% in the 2014 survey. and it is important here, 19% are unsure. a sign that the situation remains fluid in the mind of the public. looking by party you can see that democrats and independents are both in the area of saying maybe the government should --

they want the government to favor israelis over palestinians but 57% of republicans say they should favor israelis over palestinians. this is a fluid situation, guys. i think that undecided is a pretty significant number, when it comes to who the government should favor. so, and there's also a significant number there, looking for both sides to be treated the same here. so president biden obviously going with the public on that 74% number there, and support for israeli funding. but also, some support out there for treating both sides the same. >> steve, do you know the average age of those you surveyed? because i've been seeing increasing numbers about younger americans, sort of less enthusiastic for the support. we've seen what's been happening on college campuses, and i'm just curious about the breakdown. >> i don't know the average age, sara, but you ask a really good

question, for which luckily i have an answer. and the answer is this. when we compare the results from 2014, what we see is that older americans, 35 and older, but especially those 65 and older, have increased their support for israel, but when it comes to those 18 to 34, they have decreased it. and they're much more likely to say, either treat them the same or actually side with the palestinians over the israelis. you're absolutely right on that question. >> steve, thanks. interesting to get a mirror on this country's reaction to what's happening over there. our steve liesman. we'll get some more on the results sending morgan stanley shares slumping in a moment. don't go anywhere.

morgan stanley continues to be one of the outstanding laggards of the day, one of the worst performers on the s&p on the back of its latest results. let's get back to leslie picker, talk about some of the headlines today. hi, leslie. >> hey, carl, quite a pronounced negative move for morgan stanley here, despite beating on the top and bottom lines, shares under pressure amid a clear and continued slump in investment banking, a decline in net interest income and wealth management, and a turnaround in part depends on the macro, something ceo james gorman offered a generous amount of commentary on. he talked about the surge in rates, saying, what's remarkable is that we haven't had a recession, and i personally don't think we're going to. he talked about mop their policy, as it relates to the deposit mix within the firm's wealth franchise as well as what it means for deal activity. >> i suspect the fed will do one more rate increase, you know, by the end of the year, i guess, november. but that's likely to be it. and i do not expect the fed to

cut rates in 2024, but i do expect going forward, after that, so given that. we're talking about 12 months. the cash has largely moved. it's moved, you know, on the margin, you're going to have a little bit of niaa impact over the next few months, but that's not really the real game. the real game is go forward after that. >> that's when he predicts a huge uptick in transactions, as we highlighted last hour. as for succession, gorman says they're well into the process of naming and choosing the new ceo, and quote, we're getting close, he says. but they're not there yet. he said he doesn't want to give an exact time, because that's a spoiler. guys? >> leslie, is that weighing on the stock? is that an overhang? >> the succession issues? i don't think it is today. i think it really comes down to what you're seeing in wealth management with regard to the lack of true tail winds for net

interest income. there are also significantly lower net new assets during the quarter, nearly half of what they were last year for this year. and a lot of that has to do with what he was talking about with regards to cash sorting, that clients can basically go into cash and not pay any fees on that. >> i guess i was mentioning overall, in the last three months, morgan stanley's down almost 20%, worst than some of the other big banks, perhaps in anticipation of all of this. leslie, thank. > an>>metime, "squawk on the street" continues after this. don't go away. i'm going to sell my life

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good wednesday morning. i'm sara eisen with carl quintanilla live from the floor of the new york stock exchange. a second speaker vote as the house remains divided on its future leader. presidential candidate and former new jersey governor chris christie is here. then, a pulse check on the health of regional banks. first horizon's chief bryan jordan will join us on the heels of their results. later, two big earnings reports coming after the bell. what the street likes and does not about each, tesla and netflix. meantime, markets close to session lows here. we've got 1% declines on the nasdaq and the ten-year crossing about 491, vix bac