too far from home on equity. >> you like junk bonds phil, thank you very much for being on with us >> less junky. >> that does it for us today make sure you join us back here tomorrow i'll be here again right now it's time for "squawk on the street. good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber at post 9 on the stock exchange. equity pressures under morning all morning as the street continues to sour on mega cap tech, core pce comes in a touch light at 2.4 even at gdp with 4.9. meta shares under pressure as guidance overshadows this quarterly beat >> also ahead, the uaw and ford reach a tentative agreement

nearly six weeks after the union began a walkout. and morgan stanley says it has its new future leader. don't miss a first on cnbc interview with ted pick and current chief executive james gorman let's begin with the nasdaq which is set to fall deeper into correction territory the ndx coming off the worst day of the year. now down 11 from the july highs. >> it looks like the mega caps are catching up to the decline of everything else i think there's an overwhelming sense that they all went too far. that they all got overvalued i do not share that. we'll get to meta. these are not ultra expensive stocks, they're a couple turns in pe. they've become major sources of fund i think it's more correlated with the bond market than earnings yes, google did not tell a good story, it wasn't like they

missed big meta, otherthan a few lines that were about meaningful spending, meaningful hiring and also obviously difficult to advertise when you have a wash, it was quite good. now, the stock is down literally 20 points from where it was after they first reported. i'm just trying to present this is more of a function of revulsion of companies that got too big and bonds. today we have a bond market that's tame. people use these to sell they don't even bother to listen other than a snippet >> i'm hearing the same from any number of other market participants this morning. almost saying it's a market thing. it's not a meta thing. >> i'm so glad >> meta, to your point, jim, and i did speak to three people who own the stock and have for some time they're contention is that was a great quarter. everything was largely positive. you did scare some people because of the commentary around

the ad market. you gave a wide range, which perhaps also sort of, again, in terms of where things may end up for guidance i'm told, by the way, in the callbacks, after the call typically then they'll call around and sort of call back to some accounts and the like they said things are already turning a bit. not dissimilar to what we heard from snap, saying there was a dislocation a bit during the beginning of the war maybe things are coming whback a bit. operating margins amazing. the discipline or the belief they had the discipline in spending still in place, and if revenues were to sort of moderate, they would be disciplined again. >> that's their strategy >> a different day to your point. i think many people would say, granted they own the stock, that this stock would be higher, not lower. >> i don't think the cfo meant to panic anyone when she was stating what she saw

i remember when the war broke out in iraq, suddenly our sales plummeted. i said, why is this okay idiot, don't you see, people don't advertise when there's a war? >> right >> this is the cfo, susan lee talking last night about potential volatility >> coming into q4, we've been seeing continued strong advertising demand including in online commerce and gaming, having said that we're seeing more volatility at the start of the quarter. that's why we widened our range to capture that activity while we don't have material direct revenue exposure to israel and the middle east, we have observed softer ad spend in the beginning the fourth quarter correlating with the start of the conflict, which is captured in our q4 revenue outlook. >> jim, i think it was roth this morning that said investors were hoping to unlock an algorithm that could provide a pathway to $20 next year. some argue they didn't get the

incremental evidence that that would happen >> look, there's a moment in the conference call where you have to say am i dreaming or did mark zuckerberg, one of the hardest-nosed business people in the world is saying ai glasses, particularly ray-ban glasses could meaningfully be terrific they can deliver ai through smart glasses that may be a killer use case. if that's true, then i can unlock anything i want i think the skepticism comes from those of us who got burned by google and google glasses i went and i said what am i doing with these this mark zuckerberg, he knows things that we want, looks at reels. reels is so good, he doesn't even have to break it out. >> now net neutral to revenue. so i'm saying -- when you throw a lot of money away in reality labs, we're making a bet if you like the stock that zuckerberg

has not lost his touch >> listen, i got people who think 18 is going to it be a low number for eps next year and they could hit the $20 number. if you back into that number, we can all do simple math, we're talking about a 15 multiple. >> is this a steel mill? >> which could be compelling that said, market today is taking of and there are concerns about the ad market going into next year or into the fourth quarter. we'll see. by the way, we got amazon. maybe amazon will turn it. >> how about nvidia? >> if we get aws revenue growth above 11% -- meta did come in below the 100 billion operating expense number, many said if you come in below that, it's a good quarter. amazon, looking for 11% revenue growth aws, the hope is 12, 12.5. the ad market is important for

amazon, too. we may get yet sort of read on that >> it's funny -- can i analogize completely away from this so people don't think we're just talking about tech -- i'm close to mastercard, which is a great company. >> yeah. >> our executive producer was in my office when we were going over things. out of nowhere they report -- the number looks great i said the revenues look flat, flat with what people are looking for, not flat -- >> i was going to say, mastercard is up 21. >> i said throw that thing away. i found that david, we'll probably talk later about the parent company of our network. >> i think we'll have to talk now about the parent company of our network. >> why are you leaving? >> the stock is down a lot >> don't take it personally. it's not your fault. >> it isn't? it isn't my fault? we're talking about comcast. comments on the conference call are shellacking the stock. >> shellacking

>> the quarter itself showed a loss of 18,000 domestic broadband subs investors were looking for gains, small gains, so that worried people my expectation coming in was when we talked about it, i would mention the 18,000 loss. on the call, i've been beaten to it, jason armstrong, the cfo of comcast said the following, the broadband market remains highly competitive, particularly at the lower end as we continue to manage this balance we expect growth to remain strong and our primary driver or broadband revenue growth with somewhat higher subscriber losses suspected in the fourth quarter compared to the 18,000 loss we just reported. that's not helping things. comcast down 7%. looking at charter, i would assume that is also getting hit. >> what is going on with the lower end on broadband >> maybe we should think about verizon now.

>> yeah. fixed wireless has a capacity limit. they can only do so much then they're done. verizon added, t-mobile added. >> i also thought if peacock losses would somehow peak and you would have good numbers -- cavanaugh, the peacock numbers seemed like they weren't going to come in as bad as i thought >> revenue up 64 >> right >> i know where people think, great, why don't you talk about how much your house is worth when you talk about comcast. it is a big issue. it's personal, but verizon did seem to be better. >> we can stay on comcast, but, jim, brunswick boat sales down polares sales down

harley sales down. >> we would rather experience it rather than pay for it >> brunswick, there was a period where we thought brunswick was secular growth because people found the outdoors david, the outdoors, okay. >> really? just okay? >> bugs and stuff. it's outdoors, it's no good. if it's cooking at home, mccormack, that's the best performing food stock. maybe you could say it doesn't have that much taste other than spice, so it doesn't have weight, so it's not a function of the wegovy, and hershey -- there's got to be a moment this morning where people say sure hershey is great now -- they're already doing it >> hershey organic up 9.8. >> you don't sell hershey before -- before halloween >> they did say consumers are starting to buy candy closer to halloween. >> they're optimizing candy now? >> optimizing spend.

>> david, it's halloween >> i know. i've been eating all the halloween candy already. >> you'll need braces. oops, not. align. align was bad. people no longer care about whether their teeth are straight >> apparently people are still drinking some soda dr. pepper, not a bad quarter. really hot summer, maybe people drank more -- >> carrier global. we'll get to a lot of those names. have to get to autos, ford and the uaw do reach a tentative deal to end the labor strike after six weeks. phil lebeau has the latest >> let's give you the numbers behind the pay increases that the uaw members will be receiving if they finalize this contract that ratification vote likely going to happen next week, maybe a bit longer it basically comes down to this, 11% pay hike immediately, once

the contract is radtified, 25 p25% over 4 1/2 years base rate payer will be brought in at $28 an hour. here's something you don't see anymore. the picketing has stopped. this is video from what we've seen over the last 40 days outside of ford plants workers picketing. that has stopped the workers will be going back on the job soon. some actually are going in now, but the ramp up of production at the three plants shut down, that will be more gradual ford is working with the uaw in terms of getting everything up to speed there couple other things to keep in mind, if you look at shares of ford, this strike, the estimate is that it cost them $1.9 billion. we will get a more definitive number likely this afternoon

that's when ford reports its q3 results. there's going to be a strong profit for the third quarter, but i suspect most of the questions on the analyst's call will be with regard to the uaw contract what does this mean in the future for ford in terms of ev investments and how the company is positioned for future investments? look at shares of ford versus gm and stellantis yes, the strikes continue at gm and stellantis one interesting note today came out from rbc capital talking about the impact of this ford deal they said we expect a brief relief rally i think we may be seeing that already today with ford. by brief, you're looking at maybe a 5% pop >> all right phil, we talked about the market what about stellantis and gm how close? >> well, there's definitely progress being made there. any time you take out the two largest and most profitable plants for those guys with gm

it's down here in texas, the arlington plant where they build big suvs and for stellantis up in the detroit area where they build the ram 1500, that got their attention. i think we see gm next and then stellantis timeframe? your guess is as good as mine. there's no doubt those two strikes that were initiated this week has gotten the attention of ford, that's one reason why ford was quick to resolve this before they reported earnings today they didn't want to come out and say we're making x billion of dollars knowing what happened after gm's report earlier this week >> a positive, different tone versus the one just mentioned. i thought this would be scorched earth. i thought fame would go for 30 or 35. the next thing i want to know, will farley pivot, recognizing what toyota is saying, go all-in

hybrid and make us want to own this stock because then we won't lose so much in ev >> he already has gone very heavy into hybrids he made that announcement a couple quarters ago. you're seeing that at ford, they're pivoting that way. having said that, you won't seafood, gm and stellantis give up the ghost when it comes to electric vehicles. are they going to scale back they have already said they'll do that. i think that's what we'll see more of. >> phil, we'll talk to you in a bit with southwest's chief bob jordan those shares opening near a nine-year low. >> i just like ford. it could be a win-win. after the break, servicenow's bill mcdermott is with us breaking down the latest quarter. stock getting a lift from strong sales guidance we'll get to tractor supply, morgan stanley, ibm, honeywell,

royal caribbean, hertz in a minute

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sometimes it's good to have unmitigated positive numbers we have servicenow now who crushed it last night. just crushed it on every single element. and we have bill mcdermott in person, a delight. he's the chairman and ceo. most important line of the call,

ai it is not a hype cycle, it's a generational movement and giving you multiple $10 million contracts. why is that? >> jim, a couple things about servicenow that a lot of people don't know this is a company operating at the rule of 55 when you take the revenue growth and the free cash flow margin operating at the rule of 55, it's the first company of all-time in enterprise software to be on the doorstep of 10 billion in revenue at this point in our history fastest growing ever what's happened is digital transformation has turned into business transformation. how do companies deflect the pressure from their people using digital technology how do companies avoid having employees swivel chair between 13 applications on average a day burning up 33% of their productivity and now how do companies take generative ai to rethink the game in terms of their business

processes? that, they're doing all on one platform with servicenow with one user experience that is consumer grade so, jim, you'll love this. we went live on a pricing skew on generative ai for one day we had multiple deals of multiple million of dollars. >> that's because of vancouver and you fondly have offered the finest security proposal, therefore federal contracts love that >> exactly >> the air force being one i want you to talk about >> the united states air force is the third largest deal we've ever had at servicenow it was a phenomenal example of using one platform with one user experience to completely reinvent the way in which the u.s. air force goes about their business but, jim, you're a big fan of nvidia >> major profits, and you went

jen with the first name, like yoda >> he's a good friend of mine. we're building large language models from the gpu up through the nvidia stack to fine tune large language models on the servicenow platform at mass scale. nvidia is also a customer of servicenow's that adopted our platform as the new standard for this generation. we're proud of great companies like fedex, nvidia, the united states air force and so many more that understand that business transformation management is what every great ceo needs to be doing. they're doing it >> can you explain what you just said what that actually means? in terms of building the stack for generative ai. you're not thought of in terms of spending did-- you're not spending the money that meta or alphabet or microsoft are in terms of large language models >> or goggle

>> computing power what are you doing. >> right on. we're doing domain specific generative ai built into the servicenow platform. so, what's different about us is we require far less compute power than those large companies you just mentioned to execute for customers across our platform every single thing in our platform is now energized by generative ai. that includes how do you manage your assets, how do you run operations, how do you run risk, security, governance, compliance how do you give your employees a great experience fedex, 500,000 employees on one portal to give them a great experience customer experience. how do customers self-self why should they wait for a call agent? jim, i have another one for you. david, you'll love this >> we'll run out of time >> engineers

engineers now text app development, completely reinventing engineering complex. in new york, the banks you have here, they have thousands of engineers. we'll transform what they do every day. >> you moved the whole software market earlier in the year with your comments about macro and elongated sales cycles are you seeing any echo of that right now? >> what i said in the second quarter of 2022, which is what you're referring to when the ukrainian war broke out, i said there will be challenges at the global macro level and that was correct. i was the first one to claim that the market reacted that was on your show, jim the market we acted. then the truth teller, as it may be, reinvented the way we create value for our customers, truncated the sales cycles and made sure return on invested capital, taking costs out, improving productivity baseball

the calling card of servicenow that's why we've run with this market >> to carl's point, you have a read on spend overall. >> yes >> we've gotten some mixed reports lately from some of the big tech companies what are you seeing on the ground >> these ceos are very concerned about the macro. there's no question. you have a couple of wars, high inflation, high interest rates, and the hangover from covid. they need to digitally transform their companies, take costs out and improve productivity they need to buy into generative ai if they don't and their competitors do, their business models will be superseded by someone else >> they're all talking about optimizing spend except for your customers. how does that happen >> our customers wouldn't spend if they didn't get a great return on their investment they'll spend a dollar if they can get 10 in return with the service now super platform for digital transformation, you get an roi uncommonly good. >> i have to tell you, you're a

godsend on a day like today. maybe you can turn it. maybe you can turn it up >> you have to want it more. we want it more. >> what's the rule of 55 come on. >> that's revenue growth plus free cash flow margin. david, they say you're a great company if you're operating at the rule of 40 there's only one company in the software industry, servicenow. >> i know the name of that company. >> he beat salesforce to 10 billion. >> thank you >> generative ai says now. >> now >> they're giving me the hook. thank you for coming on. please come on personally every time >> i love being here with you guys you know that. thank you for having me. >> don't be a stranger opening bell coming up in about 4 1/2 minutes.

all right. let's get a mad dash in and then an opening bill. adobe. >> yeah. i want to keep this in the family of what we just heard from bill mcdermott of servicenow

people are saying generative ai, show me somebody who is making money. now we have three. servicenow clearly, microsoft without a doubt with co-pilot and this -- with adobe, this is still number one for the small business person and individual if you want to know how to incorporate generative ai so you literally become every big as any business because your name plate is so good adobe. these are three companies other than nvidia that are not part of the hype cycle someone might say that ibm also delivered. they had a good generative ai numbers, they keep their free cash flow up, which is excellent. i think adobe, servicenow, microsoft and nvidia i'm working on a magnificent seven, remember faang, that went completely -- >> you're working on a new generative ai? >> who is actually making money.

amazon, we don't know? man up >> i'm working on it >> let's get to the opening bell here at the big board, bit wise at the nasdaq, a korean bush daysed social media platform jim, i guess in the line of social media, we'll keep our eye on meta today. >> absolutely. meta -- i put my cards on the table -- it was a great quarter. yes, there is going to be -- there's going to be people who say it's not right to advertise when there's such bloodshed, but they also say when it runs its course, which wars do, we have to go back to advertise and we'll advertise with meta, with amazon web services. i'll call attention to a company that's small but doing a good job.

carrier. this is a company that is hvac doing a very good job. >> he pumps now in european. >> he made a big acquisition a lot of downgrades to sells they're doing well watch this one from the tenor of we had so many easy shorts it's been great to be a short seller watch carrier as a litmus test as whether the shorts are overly shorted and pressing their bets. >> bernstein with a great note we got about a third of the s&p earnings in. up about 11. if you take out the magnificent seven, down nine >> yeah. now we decided that magnificent seven should be valued the way the downers are. david said something yesterday, when you look at the companies we're talking about, meta, alphabet, billions and billions as opposed to hundreds of millions right? maybe you can help in this, we -- sometimes we can't grasp

the magnitude of a company making $30 billion a quarter >> the number -- i know our viewers may get tired of me saying it -- >> they never tire >> -- having started many years ago, the numbers are staggering. 40 billion in a year on capex at alphabet or microsoft, $30 billion a year at meta the revenue, the free cash flow, it's astounding. >> yes >> just the numbers themselves taken separately from the performance and whether or not it's meeting the performance obviously that is hoped for, the numbers themselves, the size of these companies is staggering. >> it's the size it's very hard to grasp. jeff marks put out a great note on meta. this company was not doing nearly as well last year as it's doing this year. that's rather amazing.

yet it's 17 times earnings that's kind of attractive. >> if they do the 18, not to mention some believe as much as 20 next year you can back into a multiple you can do the math. less than 15 times, 16 times, even if they come in at 18 >> yeah. >> yeah. that would be cheap. that said, there's always a concern that he's going to just -- >> spend too much. >> yeah. yeah >> meta generated more than -- quoting jeff marks, meta generated more than $13 billion of free cash flow in the quarter bringing the total through the first three quarters to 31.5 billion in free cash flow for all of 2022, they generated 18.4%. >> that's what you get when you have the margins they're putting up >> highest in a couple of years, right? >> yes then again, they had -- they are meaningfully employing, increasing their headcount, meaningfully spending on the part of the company that people don't understand does he have something that

we -- if we put the ray-bans on and we're -- i don't know, we're at a baseball game or the world series, would i be able to say when did we last have -- what did ted williams bat the year before he came back from the war? would it give me an answer would it have an ad for the red sox? we need to see it. he's seen it i was in his metaverse versus apple's metaverse, apple has their zip code >> either way, you don't think it's a revamp of google glasses. it won't be like that? >> i think he's too smart. i can't do that. i trust him. maybe we're so short on supply for trust right now that -- but if amazon says jassy has a great number and we have greatnumber from microsoft, maybe someone will say i'm willing to bet it might work apple -- i'm buying it -- that's my wife's berth day. don't want to mention what i

bought i'm on the phone with some virtual assistant last night, chris, who was dynamite. i'm looking at apple's numbers what do they have to do? they need the phone to show growth but the amount of money they make and they raise the price of their subscription no one will not take it. >> the service revenue is enormous it's recurring it gets a higher multiple, but that's all baked in already, isn't it >> it is baked in. that's why i told people to own it, don't trade it i'm not telling people, listen, you have to buy apple. i just like it it's the best american -- best company in the world i can't tell you -- carl, i would much rather you be in -- you know what? this is the time to be in bristol-myers. don't be in the best company in the world. >> we did not get to the revlimid guidance today. >> no. bristol-myers is very disappointing. i have to change -- the price

multiple for bristol-myers is shrinking rapidly. >> as it the stock price look at that in stark contrast to the eli lillies of the world or the eli lilly of the world >> i took a picture yesterday of twinkies, the hostess twinkie, i don't know, you buy a thing of doughnuts, you only want one doughnut >> you want to do ms pick? >> no. i'm going to deny your request i will do endeavor >> you are picking the picker. >> they'll talk to picker later. james gorman and the incoming ceo of morgan stanley, ted pick. let's talk about this, the stock is up 18%. endeavor, remember, of course, most recently in the news because of the merger of its usc with wwe creating tko of which

they control it. go back to the ipo, back in april of '21 i believe it was, you can see, it's not been a good performer that's including the move up today. that's frustrated ari emanuel who runs the company and maybe even silver lake, its largest stakeholder and the company that controls endeavor. late yesterday we got this given the continued dislocation between our public market value and the intrinsic value of our underlying assets, we believe an evaluation of strategic alternatives is prudent. what does that mean? we may sell the company. silver lake made it clear we're not selling to anybody but us. so they might buy in what they don't already own.

silver lake believes in endeavor's business and is not interested in selling its shares in endeavor to a third party nor in entertaining bids what silver lake is interested in doing is making a bid potentially to buy the company and take it private. what will that look like will it happen how do you make sure that's fair to minority shareholders you'll have a special committee. and again, they've done this before do they come with a number that endeavor and the committee can be happy with? will it have a three in front of it as many hope it would having spoken to people who are not ari and are not silver lake, you take the stake in tko, you look at what is being paid for

caa at 7 billion, they have a bigger agent business. on location they say is worth a billion. the studios business they have, worth as much as 10 bucks a share. they can go on and on and tell you why this thing is very much undervalued. they will also, however tell you -- i know you can't say too much -- that they have not communicated very well with the street at endeavor they sent mixed messages the last time is when the stock went down sharply after they signed that tv deal, the rights deal for part of the wwe, the "raw" deal still to come maybe the communication from the company has not been the greatest not going to be anything there for the pga. we'll watch this closely if there is a buyer, it will be silver lake. and the price, i'm told if it does happen, the deal could be reached before year-end. we'll see. now we can talk about ted pick >> you know, i did want to

mention, in terms of communication, there's an upgrade today of livenation, which communicates its story incredibly well. i was going to go out on this gdp analysis, i'll put it so people can understand. two words, taylor and swift. experiential, football is back, travis kelce how did it happen? that's a metaphor. when the nation is going nuts for entertainment, royal caribbean, whether it it's taylor swift, you can see it's not cooled down yet. hats off to our fed chief, jay powell, had he start cutting rates and gotten this gdp number would have been regarded as a fool >> there's a lot of discussion about it, if you just took the headline, fed has to do more, but that core pce number maybe

thinks they can't afford to stand pat. >> then we have these auctions coming up. in the '90s we used to follow the bond auctions, how did they do how did they do? we're back there was a five-year yesterday that wasn't so hot that's what people have to start watching things that you haven't cared about in years, lie how did that auction go rick santelli, we'll have to get these numbers. if the auctions go badly like what happened yesterday at 2:00, that's when you had the breakdown. >> we'll look for that today we mentioned southwest earlier today. stock trying to bounce off the shallows, that is going to be a nine-year low today. let's get to phil lebeau live in dallas with bob jordan hey, phil. >> hey, carl bob, good to be down here once again in the hangar where you do some work on your aircraft you basically meet expectations in terms of your third quarter both on top and bottom line. your guidance about capacity has spooked investors. your stock is now at a nine-year

low. why are you pulling out -- or why are you slowing down your growth and capacity as much as you are? >> i'd start first with we had a great quarter the third quarter. we had record operating revenues, record passengers, record rapid rewards revenues, record new rapid rewards members, record ancillary revenues we're forecasting record revenues and record passengers again for the fourth quarter you know, the whole sector is under pressure, obviously. costs are rising a lot of that is labor costs a lot of times it takes a while to absorb that we plan to make some capacity changes here in 2024, just to recognize the fact that travel patterns are different business is strong, but it's still restoring. our leisure demand is strong but the patterns are different than pre-pandemic we will take capacity out of the first quarter and reducing capacity for 2024 to the 6% to 8% range, which is all capacity

that's carried over from 2023. >> did you get over your skis in terms of how much capacity you added here in '23? >> i'm really proud of our folks. it was a huge effort and accomplishment to get all of our aircraft flying and to get our network restored basically to pre-pandemic levels. that's a lot of capacity >> did you go too far? >> you never know. we plan for the business restoration to be higher than it is today the main thing is there's strong demand for southwest airlines. we're taking action going into 2024 to pull that capacity back prudently. first quarter,back after the year -- if you look at the back half of 2024, our nominal seats next year will be down compared to the same period in 2023 >> you mentioned in your release this morning seeing a return to historically normal travel patterns does that mean that these slower periods in the fall, this is what we'll start to see again? and that the travel patterns that we saw coming out of the

pandemic, that's pretty much -- it's played out. >> i do think leisure has returned to typical travel patterns business again, while it's -- we're continuing to gain market share and business is growing, it is still not fully recovered to 2019. that produces a different travel demand pattern and behavior. we need to adapt our own network to that. the shoulder period as an example falls off more than the stronger period. that's why we're taking capacity out of january and february. >> you mentioned something before this interview that struck me. you're noticing people who travel for business are booking fewer flights. as in the past, five flights a month was typical, now it may only be four tell me what you're seeing there. >> that makes sense. a lot of companies still don't have full return to work they're working three days a week it makes sense to me that if your customer is not there, you're not going to visit. business travelers, while they're flying and flying a lot,

they're flying a little bit less per person than they were pre-pandemic we're adapting to that look at our rapid rewards programs while a lot are leaning away from customers, we're leaning to our customers. we're making it easier to get tier status. a lot of it is about business customers who we know are flying less and we want them to obtain tier status. >> bob, jim has a question for you. >> how are you >> i'm good. good how are you doing? great to see you and phil down there. >> great >> i want to -- not challenge, but question something you said. you are talking about people going back to the normal travel patterns we had a gross domestic product number today that shows me that there is still in excess of travel patterns when there's something to go to your predecessor used to tell me when we have something to go to, we go. how about the vacation routes?

are those still robust >> they are. leisure demand is strong we had record revenues and record passengers in the quarter. we're predicting record passengers and revenues in the fourth quarter demand for travel, especially in leisure, it still demains strong our demand for the holiday periods, bookings are rubbing ahead of 2022. >> bob, real quick on the pilot contract, are you going to get it done this year? >> you know, i -- i hate to predict. we're working really hard. we're meeting every single week. there's a lot of progress. we want to get all of our contracts done we've actually closed eight of our contracts in the last year we just got a new tentative agreement with our flight attendants, tw 556 yesterday now there's work to be done. it has to go out to the flight attendants for a vote. i want nothing more than to reward our awesome employees

>> won jordan, ceo of southwest airlines glad to be down here jim, guess where he'll be friday night? world series against arizona >> i'm not sure about that >> i just thought i would throw that out there >> that was nice, phil i always thought we were friends. i didn't know. i didn't knows there tension there. >> i did not say i would be at the world series >> come on you can give jim a little bit of grief. >> i'm going down to dallas for the dallas/eagles game on sunday night on nbc i hope to see you then >> phil, as always, thanks >> thanks, guys. jim, we were talking about -- actually, we should do more airlines, because people talked about death crosses on delta. we talked about this low >> i actually like delta it's inexpensive and because we don't know how many things really did stay post-covid that gdp number tells me that there's an element of travel that is really kind of -- never

going to go back the only thing i'm finding that will never go back now that the -- i have to see the world before i die we know that is still with us. i think that you see it with delta. >> we don't have u.p.s. on this board, that's going to take you back today to mid 2020 as they do lighten up the guidance a bit. >> yeah. that's a tough story i'm hoping that one day -- when you had the teamster deal, i thought it would be like the ford deal. not yet. watch the ford suppliers xpi is the semiconductor company to the autos texas instruments, which was shelved yesterday. i have people who feel this strike is not open and you wake up, other than david who did say he felt a little birdie told him -- you just felt the strike was about to run its course. >> nice. good call. >> i did

>> you said it to me >> i did >> i'm just giving you credit. >> for what? >> he didn't know jack about the strike he was talking about lucky strike >> nlcs world series strikes >> no. i -- i talked to jim i felt if this didn't resolve soon, the broncos i saw coming off the line, they'll run out. not. not. got some gains on the dow, mild one up 15. check bonds today as well. got some data at 10:00 with pending homes. yields have backed off ten-year 4.91. as jim said, seven-year note auction, $38 billion worth back in a minute

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manhattan where ftx founder sam bankman-fried is expected to testify in his fraud trial as early as today we'll continue to monitor that and bring you any highlights nasdaq down almost a full percent the falling below the 200-day. we'll get stop trading with jim in a moment. how's the chicken? the prawns are delicious. oh, i have a shellfish allergy. one prawn. very good. did i say chicken wrong? tired of people not listening to what you want? it's truffle season! ah that's okay... never enough truffles. how much are they? it's a lot. oh okay - i'm good, that - it's like a priceless piece of art. enjoy. or when they sell you what they want? yeah. the more we understand you, the better we can help you. that's what u.s. bank is for. huge relief. yeah... ♪

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let's get to jim and top trading. >> my colleague david faber was on fire all morning. i'm going to put something upbeat in his bonnet hertz reports a number i thought was fine but one thing driving it down is tesla tesla price cuts are killing it. they have to drop the price of the cars to spur sales looks like you'll like this, it's costing a lot to fix them when -- the repair costs >> really? high for the - >> yes. >> i thought they weren't supposed to have a high level of maintenance. >> that's why. >> i passed it on to david montoya was -- >> you're going into musk now and -- >> montoya going in to "princess bride".

>> ask about these repairs. >> happy birthday to the star of that film. great snpicture. >> it is the best. >> how about tonight >> i have hertz. we'll be able to talk more about it i have steve. >> no kidding. >> always enjoyed him at goldman. straight shooter did talk about musk and repairs, not what you're supposed to talk about. bahram did not have a good quarter. life stooim fitness. planet fitness lost its ceo. my question is, glp-1, just in shape. you have to work out harder. i have to find out what's the matter here. >> you do that. >> great show, jim. >> servicenow. don't know what to do? >> servicenow. what are you talking about don't know what they do? you can't follow bill mcdermott come on. >> when we come back, speaking of ceos, morgan stanley naming ted pick succeeding goanrm both joining us next

don't go anywhere.

. good thursday morning. well to another hour of "squawk

on the street. i'm sara eisen and carl quintanilla and david faber, live for you as always from the new york stock exchange. take a look at stocks on the busiest day of earnings. it's a mixed picture, at least in the s&p 500, which is down almost 0.75% real estate, materials and industrials are higher right now. what's weighing on the market, tech, communication services a big part of the story today. we're going to talk about meta and the movers there health care is weaker, tech, energy and consumer discretionary. 10-year treasury yields is backing off the 5% level we hit on mond after stronger gdp lower yields across the curve. 30 minutes into the trading session, three movers we're watching meta, to begin with, under pressure despite beating estimates, cautionary commentary around advertising meta and the entire tech just head down 2.2% on the nasdaq.

it's only tuesday. shares of comcast slumping -- sorry, thursday. after posting a surprise loss in broadband commerce more later this hour ford on the move after reaching a tentative to end a labor strike includes a 25% pay increase over the terms of the agreement poerds is going to report earnings after the bell. we have more data. >> pending home numbers crossing the tape up 1.1. we were looking for a decline of 1.5 and down 11 compared with september of last year of course that comes on the heels of decent new home sales data yesterday there's clearly some housing activity taking place with mortgage rates where they are. >> just another data point confounding of strength in this period of the cycle and this period of interest rates though i think we have to top it off with gdp coming in at 4.9% we expected a strong number, that was stronger than

consensus, not as strong as the hasn't fed, but they were way out of consensus, but driven by the consumer 4% growth in u.s. consumer spending might be surprising after more than 5% of basis points tightening. the inflation and all the other headwinds, so far so good for the third quarter and marked a pick-up from last quarter. jobless claims out to 10 higher than last week but nothing to worry about in terms of stress and layoffs. watch continuing claims because that does see an increase and those are the people basically still on unemployment benefits we're going to want to watch that to see about the health of the labor market what's interesting, guys, is that these strong data points, they don't necessarily match up from what we're hearing from big companies. for instance, ups, taking down their sales forecast and

cautious commentary on the health of the economy and the strength of demand if we can pull up the ups ceo, we expected to have conditions in the third quarter to be challenging and they were. the macro economic environment remains weak which is just interesting on a day where we get 4.9% growth ceos have a direct view of what's happening in the economy and a real-time view, and so the gdp data looks old. >> and it may well be old. i mean, there's any number of commentary off of these calls that indicate the belief that things are softening a bit we talked about it in the ad market as it related to snap today to meta. maybe a minor blip maybe not. they're related as well to geopolitical turmoil to a certain extent. >> people see that stuff and don't make big decisions to commit a lot of money.

i noted the hershey's commentary as well talking about the value consumer hershey has been a big loser, worries about the obesity drugs prp here is the commentary, many cutting back on discretionary purchases looking for deals, buying smaller sizes we have seen more category and brand switching with deflationary perimeter categories and more satiating foods out performing the perimeter of the store. >> downshifting in terms of growth even with this big gdp number now in our rearview mirror >> we're downshifting. not going to get a number like this in terms of household spending, gross private investment they worked well in the third quarter, and you have to pay attention to what ceos are saying though it is a little confusing because if you get a higher third quarter gdp number you would think that even with a step down, fourth quarter is going to be better and first

quarter of '24 will be better. not like we're falling off a cliff. some of the new data points have been pretty strong. >> yeah. >> even if you take out government, take out inventories, take out experts, final sales to private domestic purchasers still 3.3 a solid number on private, and that's doubling the prior quarter's r rate in their view too fast for the fed to take victory lapse laps. >> the ecb is on pause, inflation remains elevated not too early to talk ability cuts according to christine lagarde. a similar message we're going to get -- >> the pound three-week low the boe has done - >> they have higher inflation system so it was thought they would continue hiking. the ecb on hold, bank of canada on hold, the fed on hold -- >> turkey not on hold. turkey hiked 35%.

>> their inflation is like 100% or something crazy not a barometer for the global central banks. let's dig deeper into the tech results. we got a few ibm one of the top gainers on the dow after some strong numbers there. just wanted to highlight a few of them for you. the software numbers came in a lot stronger, 8% consulting numbers, slight miss but a strong 6%. healthy growth for the first time i thought this was interesting, they broke out ai as a revenue driver not necessarily in the esults, but said that our book of business in the third quarter specifically rated to the generative ai both in the low hundreds of millions of dollars. so if they're -- it comes in software and consulting, selling these generative ai services to other businesses like an ey was one of the examples on fixing their hr platform. if they do 200 to $300 million a

quarter on generative ai and it's material and notable a company like ibm which some say doesn't get credit for being a generative ai player, is starting to show how it's moving the needle for them. >> yes. >> yes. >> people remember watson. they remember the promise of watson and all the things that we thought were going to come and never did. they would disagree, but i would argue there was hype around it. >> yeah. >> jeopardy thing. >> yeah. >> more than that. health care really is where they saw it not jeopardy. >> i think that in terms of this current wave, what ibm is seeing is the digital transformation is now -- >> sound like bill mcdermott digital transformation. >> that's what it is it's why they say that tech spending is going to be 2 to 3% higher than gdp growth he continues to see happening into next year. >> meantime we'll talk about meta this morning despite

weakness of softness in the ad market, keeping outperform and 385, joining us at post nine is jason. thanks for coming in a big discussion this morning about whether or not there was enough evidence last night that you could get to $20 in '24. is that the crux of the debate >> i think it was making people more concerned that if the middle east turned into something bigger, that would have an impact on advertising. snap could put that out there, but i think investors didn't believe that because they have some of their own issues and to the extent you have a guidance range 13 to 24% growth, that's unusually wide, when pressed why that low end they did mention the middle east and that was something that investors were not really focused on before today. >> meanwhile, as for the revenue growth and operating margin, is that a reflection of the decisions they made a couple quarters thing >> reelz got to revenue neutral

in three years 70% improvement on engagement, 40% engagement from reelz and then a 6, 7% improvement on core instagram and facebook from ai the investments they're making are driving engagement you can see the revenue numbers. coming off of the apple product changes. >> why is the stock down 6%? is it on worries of the ad market >> all the other ad stocks today are down, maybe not the same magnitude, but everything connected to digital advertising is down today. again, snap said it, it wasn't a focus, meta. this is a little bit powell-esque it was a bit over talked i don't think they're seeing it right now, but they're giving themselves cushion in case things don't go in a favorable way. >> did you get a sense -- operating expenses below what many were worried they would hit, and, you know, put cost discipline is the year of efficiency going

to be years of efficiency. >> the bears were worried about expenses over $100 billion guiding 96 and change. that's where the street was. they're kind of hitting that historically they use expenses as a way to manage the earnings, and so presumably they'll chip away and come in below 96 next year. >> so you think they continue to be focused on efficiency you believe them >> they did talk about shifting people in the organization, backlog of hiring, but i clearly think mark -- the stock is trading at 14 times '25 earnings, right. that's a crazy multiple and so i think look, mark knows what he needs to do. >> i mentioned ai with ibm breakingist out. what did we learn about generative ai driven advertising and when that's going to be material >> yeah. right now it's more like the ai changes the font, it changes the background it's not creating the digital image yet, but at their meta connect day, they did show a product that isn't live yet that

can create an image in five seconds and presumably that's the precursor to ai generated ads. >> we'll look out for amazon tonight. thank you. good to see you. >> thank you. comcast shares under pressure this morning. we came in or at least i came in this morning focussed in part in terms of the earnings because domestic broadband subs declined by 18,000. that got overtaken by the conference call and comments from jason armstrong that indicated that weakness essentially is expected to continue i think we have that for you take a listen. >> the broadband market remains highly competitive particularly at the lower end during the quarter we recalibrated pulling back on some of our promotional offers targeting this segment to remain consistent with our strategy of competing aggressively but in a financially disciplined way. this means striking what we believe to be the appropriate balance between broadband subscriber growth and our put growth

as we continue to manage this balance we expect growth to remain strong and our primary driver of broadp band revenue growth with higher subscriber losses expected in the fourth quarter compared to the 18,000 loss we reported in the third quarter. >> that is having an impact on the stock. it had been down 8%, but up over 6% shares of charter, one of its key competitors down 4%. again on concern about the lack of growth in broadband, as their competition from fixed wireless, over builders, at&t, you know, certainly could expect that is in part the case on other fronts, by the way, for our parent company, peacock continues to be a focus and continues to be a consuming a lot of cash. the cfo, mr. armstrong, said continue to improve in terms of financial performance, now expect full year '23 losses from peacock about or around $2.8 billion saying that's better than the previous outlook of losses of as much as $3 billion.

this is expected to be the peak year for losses at peacock on the ad market which we were talking about with jason, mike cavanaugh, company president, said in terms of advertising, he says the ad market has remained soft and hasn't necessarily gotten worse, despite a little bit of sequential decline, but it hasn't gotten better at the same time. general uncertainty. he cites about economic conditions, of course, out there as you explained earlier that can be reflected in decisions. >> advertising as a lead time on some of the other parts of the economy. you have to make those decisions early. >> yep. >> as we have a lot of earnings movers to get to road map for the rest of the hour ken view, owns tylenol and benadryl after reporting results. we're going to break down the numbers of their ceo with hour. >> a number of stocks falling to near covid lows. we'll break down the names that one analyst calls an opportunity. >> finally, morgan stanley

officially naming a new ceo a three decade veteran of the firm, ted pick, alongside james gorman, to talabt throk oue ad ahead when "squawk on the street" comes back

c'mon, we're right there. c'mon baby. it's the only we need. go, go, go, go! ah! touchdown baby! -touchdown! are your neighbors watching the same game? yeah, my 5g home internet delays the game a bit. but you get used to it. try these. they're noise cancelling earmuffs. i stole them from an airport. it's always something with you, man. great! solid! -greek salad? exactly! don't delay the game with verizon or t-mobile 5g home internet. catch it on the xfinity 10g network. welcome back big news in banking today. morgan stanley naming its new ceo. leslie picker joins us with special guests hi, leslie. >> hi, carl. i am here with ted pick, the newly named ceo effective january 1st and james gorman,

current ceo, soon to be executive chairman also effective january 1st. thank you so much for being here first on cnbc interview since the news announced james, why ultimately was ted selected for the role? >> beats me. >> was it -- >> i told you i would get you to laugh. >> five-month process. >> dennis, who ran the comp development management succession committee led the process. todd who led the board were involved we were doing this from three years ago. you know, we had three phenomenal candidates. ted, you know, on the business side, he had grown up in capital markets and ran equities and brought that to be the number one or two depending on the quarter and went into fixed income and turned that around in 2015 and 2016. he had taken a great business and made it better, business broken at the time and fixed it.

we gave him banking, made him co-president and gave him i.t. had all the business skills, but he had the strategic skills, the ability to knock through some complex problems we've faced he's been working side by side with me for decades. he's a great leader, has tremendous fellowship and passion, outstanding choice. >> ted, i know you said you don't expect any major strategy shift while in the role, but is there anything you want to put your stamp on? any vision you have that's different than what we've seen in the last 14 years >> first of all, thanks for having us. this is a special day for me and for the firm, and i'm so thankful to james for getting the ceo nod. it's the privilege of a lifetime the business strategy is sound there will be no change in strategy we know who we are after 15 years of transformation under james' extraordinary guidance, a

strategy where we have a world-class wealth and management business, world class investment bank and so many opportunities to grow both globally it's a strategy in place and we're going to keep with it. >> we'll get into the individual businesses in a moment, sticking with the succession theme here, james, this is a firm that's had some history in terms of succession battles, and my reporting and others reports, has indicated that has not been the case this time around. this is a concern that two people who were also contenders, dan and andy, who didn't get the job of ceo, there's concern they might leave. do you have any commitment from them, you know, that they have an expanded role, but a commitment they plan to stay >> firstly, they're phenomenal executives friends of both of us. i have a known andy 30 years, worked at three different companies. dan has been on my operating committee eight or ten years they both done incredible jobs

integrating e-trade. unfortunately we can only have one ceo. but they're both going to be co-presidents. work with ted running the firm and yeah, they're going to stay. they're committed to morgan stanley. i know people doubt that and actually saw an analyst report the other day downgrades us because they thought we would have a mess here and turned out we didn't. we have worked hard on our culture, values and on the team at the top to make sure this worked i couldn't be more proud of all three of them. >> ted, james is like a -- in part, all the articles being written today and when you announced the succession plan in may, a lot of it was shaped by the wealth management side of the business buying, building, wealth investment management, buying out smith barney, e-trade, and the growth of this more durable business has led to a multiple that's higher than a lot of peers. the street seems to like it. your experience in investment

banking and trading and how do you plan to tackle, you know, this curve here and continue the momentum after q3 saw a bit of a retrenchment in terms of momentum in this business. >> sure. the first piece of it is andy and dan. two exceptional partners, terrific friends, we have known each other forever and work with clients and do town halls together having those two exceptional leaders in their jobs getting expanded roles is a key part of why this is going to work. and the reality is, you're right. we got to where we are largely because we transformed the firm. we sought out the durable revenues james had bravery, he had vision, and we grew the business we grew the business organically and made these two gigantic acquisitions after we had integrated smith barney after the financial crisis in e-trade. three acquisitions, the firms integrated the reality is that firm having

both a winning wealth and asset management business alongside an integrated investment bank is a special combination and having those two work even more closely together is something that andy, dan and i will be working closely with james on. >> in terms of investment banking you said on the call last week when the fed indicates it will stop raising rates the m&a calendar will explode because there's pent up demand. >> sure. >> when we spoke in july you said that the business had bottomed out, indicated a turnaround was imminent there. do you believe that's the case how confident are you in the banking if we see some sort of recession next year? >> i was early and said we were seeing green chutes and somebody said, you forget to water them you know, listen, we're not that good, but we know in any weak period when it's happening. inflation was sticky coming down the fed had to move aggressively and they did i think they're likely within a

quarter basis point, quarter of 1% getting to where we need to go at that point you'll see -- i mean you saw the chevron deal. that's a huge deal the whole energy sector is transforming right now you've seen it in the banking sector and a number of transactions over the last couple years as there's more consolidation. it's coming. whether i happen to think -- i thought it would be in the fourth quarter, that's more like i think now fourth quarter because the announcements have picked up but it takes six months for the revenues to hit a little bit of a lag. it's coming. the least of my stresses in life. >> there's no doubt strategic m&a is coming. three years of the pandemic, war, second war, board rooms can wait so long now the large cap m&a cycle. >> what about strategically for morgan stanley investment banking revenue at this firm was down 27%

i know when there's muted activity things can get lumpy. but your peers saw stabilization in investment banking in the third quarter. anything you're doing when it comes to talent or strategic shift to kind of build that back up when those green chutes are watered and do start to actually blossom you're well positioned. >> we're working it hard bankers are working it hard and closely with folks in fixed income and equities to bring the integrated investment bank and in investment banking three to six month lag before deals close you want to look at the forward pipeline and the forward pipeline has gotten sequentially bigger with each passing month, mid cap offerings, large-scale m&a across industry groups that's the most interesting part given we have higher interest rates and the world has gotten smaller, m&a across the entire industry arena and for morgan stanley that's a strength because we have industry strength all over the world.

>> i'm curious, it's interesting because i was looking back to james' first interview for cnbc in 2010, talking about dodd/frank and now we're also look at significant regulation at the basil 3 end game in the higher capital requirements that will be falling under your purview. how do you plan to prepare for that new regime? is it a matter of shifting around capital allocation plans or are you looking at potentially buying any businesses that are well capitalized to help prepare for that >> i'll just kick in here because i've been -- >> you're the forefront. >> i've been living it for a long time. the fed has asked for proposals of all kind to comment on this proposal here. this is going to take a long time you can't change your business model anticipating something might happen you need to know what will happen

we've carried excess capital for 10 years we have the highest capital ratio of any of the largest banks in the world right now we have buffers. it won't change our strategy whatsoever that's different from do the banks need more capital? i have a strong view they don't. the large banks are well capitalized. proven year in and year out. but if the rules actually come through in any form close to where they're proposed, we've already got it no, won't change the strategy one bit. >> that was a strategic decision for the last ten years, james focused us on having many firms have 50, 100 basis points and now that gives us options. >> james gorman, current ceo, soon to be executive chairman, ted pick, incoming ceo, appreciate you both sitting down with us for your first broadcasting interview. >> thank you. >> david, i'll send it back to

you. >> i will take it. thank you as well for bringing that to us coming up right here, former crypto king and ftx founder sam bankman-fried set to take the stand in his own defense that could happen, yeah, today and we'll be live from the courthouse nt. ayitusex when you're looking for answers, it's good to have help. because the right information, at the right time, may make all the difference. at humana, we know that's especially true when you're looking for a medicare supplement insurance plan. that's why we're offering "seven things every medicare supplement should have". it's yours free, just for calling the number on your screen. and when you call, a knowledgeable, licensed agent-producer can answer any questions you have and help you choose the plan that's right for you. the

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. schools and businesses are closed this morning and people who live in and around lewiston, maine are told to shelter in place as authorities continue a search for a mass shooter. officials have not confirmed the death toll at a bar and bowling alley in lewiston, but sources tell nbc news 18 people are dead and 60 others are injured, four critically authorities shared photos of a man with a rifle and named robert card as a person of interest in connection with the

shootings. israel says it conducted a rare targeted raid overnight into northern gaza using tanks military officials called the raid part of the preparations for the next stages of combat. the mission came hours after prime minister benjamin netanyahu said israel is still preparing for a ground invasion. and a colorado judge tossed donald trump's latest attempt to dismiss a lawsuit seeking to remove him from the state's presidential ball lost in 2024 because of his role in the january 6th capital attack a trial on his eligibility is due to begin in just a few days. carl, back to you. >> thanks. got new development in the ftx fraud trial today. sam bankman-fried is expected to begin test fig in his own defense today. kate rooney joins us with the latest hi, kate. >> we are getting updates from inside the courtroom behind me the prosecution has rested its case the defense is kicking off what they plan to call two witnesses,

20 minutes each and then sam bankman-fried the defendant here plans to tell the jury his side of the story today we could hear that in the next couple hours this is a risky strategy if he is found guilty the move could add years to his sentence. his defense team saying in a letter to the judge yesterday that they plan to show he was operating in good faith. they're going to talk ability sbf's intention to comply with authorities in the bahamas, discuss his understanding of industry practices and expected to face intense cross-examination by the government if found guilty legal experts tell me any judge would sentence more harshly if they suspect the defendant lies in sworn testimony. the judge has discretion as one expert told me in that sentencing there are guidelines but judges don't have to follow those precisely and there's already been history of tension between bankman-fried and the judge here judge kaplan over the summer he revoked sam bankman-fried's bail accused him of witness tampering, warngds

him about pushing the limits and scolded the defense team multiple times in the courtroom in the past couple weeks the upside is persuading one juror that bankman-fried did not have criminal intent one person siding with the defendant would mean a hung jury the jury has sat through heartfelt testimony and heard from three insiders including his former girlfriend and they all say they knowingly committed fraud at the direction of sam bankman-fried. he has pleaded not guilty to seven counts of fraud and conspiracy. >> amazing he's been a risk taker in life before here's a big one kate rooney. bitcoin reporter turned court reporter. the nasdaq into official correction what's at stake with the markets. >> consumer company kenvue shares dropping after cutting ldnd ftlook citing the weaker co alu season. the ceo joins us next. don't go mae where

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welcome back to "squawk on the street." i'm dominic chu. the s&p 500 right now trying to bounce off the worst levels of the session so far in early action as you can see behind me, real estate is the best performing sector so far today. among some of those leaders you got ventis and avalon bay communities, crown castle, sba communications and kimco realty. the best performing stock in the sector so far is american tower after the real estate investment trust that specializes in wireless communications and data center infrastructure reported better than expected quarterly results and raised its full-year forecast for property revenue and how much cash flow gets generated. american tower said ceo tom bartlet will retire in february of next year and replaced by steve up androp who runs the tower and data center

operations i'll send things back downtown to you folks at the new york stock exchange. latest gdp data helping cut early losses but the nasdaq is sliding deeper into correction territory. talk about where the market may go from here, research founder and ceo adam barker is here with us at post nine. what great day to have you in. >> thanks for having me. >> first off, it's just -- are they shooting the generals on mega cap tech? how important is that? >> well, you know, at roughly 30% of the mega cap for the big seven it's hard to see a scenario where the market rallies a lot and they don't participate. you need them to participate the earnings season i would say was mixed for the collective lot. i could see mark to market doing worse than i did maybe two weeks ago. if i look forward i don't think they have anything that's impairing their outlook in any one, three, five-year view, or i feel good about the fundamentals i think you want to own those names and you want to own the

market for any longer term perspective. >> are you seeing value in things like the russell? >> i don't and that's a very popular topic among investors i talk to that look at the chart of the valuation of large versus small cap and they think it looks elevated and want to make a case for small caps you see that work today. you're thinking that's interesting because usually in a risk off trade small caps lag. i don't care that's the right move in a six-month view i believe the small caps have more margin expansion. when i look at wages and i look at costs like commodities and pricing power, i don't think the snaps have more and we did a note where we broke down the market when you do that, value looks cheap among mega cap and small and growth looks expensive for both when you sort of sectoror and normalize it, i don't think the snaps look that cheap. >> what are you so -- i'm curious, we have you on a lot. what's top of mind for you when

it comes to the market >> you know, honestly, i'm really thinking about underneath the surface, like which industries and sectors are getting dislocated things happen like staples and utilities selling off because of rates in ozempic and buy a high quality name like coke when i had to pay 30 in the past. used to be offensive to buy these defenses because they're so expensive i don't know health care services people hate that sector in an election year but they're getting cheap and have pricing power. i'm finding things i want to own under the surface and that's more of a topic than trying to make a market call where you have to get rates right and understand, you know, so i think there's -- i'm kind of excited about wanting to long or short things under the surface. >> just to harp on the nasdaq correction for a moment. it's not like we're going into another rate hiking cycle. the last time we saw the nasdaq in a big correction. what is actually going on here

>> financial conditions, right when financials get tighter, you could argue that should be the case worry about this six month ago hard to know what causes -- the 10-years is back up in the last three months and finally people paying attention to september. i look at those and think, rates are probably closer to peaking and their growth rate will be better than the broader market over the next year i think the big seven are probably going to be fine. whether you have a hiccup or two on google or meta, i don't think it changes tratshe trajectory of their earnings i don't think you want to be negative on innovation or growth in the united states of america. >> we still got some mega caps to go. we'll see what we get. >> we do obviously, you know, i don't want to, you know, i hate the whole take this one stock and make it a microcosm for the global economy if nvidia misses the stock market will get killed i think that's one where people

would be surprised if the trend reversed that quickly. some of these other things we talk about every day have a lot of businesses and it will take some time. i think right now, you know, the risk-reward for the market looks good in a six or 12-month view, and i'm saying what can i buy here i love energy. i love some of the staples and utilities. i think i can buy health care services i think retailers are giant shorts and so i think target's stock will go half in the next two or three -- >> whoa! >> in half >> i don't believe this is like the beginning of the end and the market will get killed. >> spicy towards the end. >> the one takeaway from the interview, if nvidia misses the stock market gets killed. >> i think people would be surprised. >> yes. >> we have a ways to go before they report. >> thanks. >> good to be with you guys. >> up next the ceo of kenvue, shares moving lower on the back of its latest guidance we're back in a minute

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shares of kenvue a mover down more than 4%. the company cutting its annual profit forecast on softer demand for cold and flu medicines. stock is down 30%. it spun off from johnson & johnson in early may the ceo joins us now first on cnbc it's great to have you back on they may not know kenvue but they know your brands like tylenol and sudafed and benadryl and neutrogena why cautious guidance? >> good morning. good to see you again. to be clear, we have fair expectations year to date and we have maintained the base of our guidance for the full year and we factor the range to reflect the softer start of the cold and flu season and when we reflect on the

quarter, we had a healthy quarter as kenvue. $3.9 billion in revenue, 3.6% organic growth on top of 4.7% growth last year we are now on the s&p 500 index. you see the power of the kenvue business model you mentioned the brands of power, the iconic brands that are in everybody's homes that's what we saw this quarter again. we're pleased with our results to date and confident in our future. >> growth came from pricing, right? we've seen with other household product makers, still pricing driving, volumes down 3.5% have you reached the tipping point where you can't pass on more price increase? >> we see activity continuing to hold our volumes were a bit down this quarter, but two-thirds of that was linked to some discontinuation of product last

year and softness as we see in the china market so if you accept these two distinct elements our volumes are holding pretty well in a high earnings inflationary environment. >> what about skin and beauty i think was a little bit disappointing and a big, important category what are you seeing there? >> yeah. we see the skin health and beauty segment impacted by the two elements i talked about, last year the softness of the market in china, but we -- these two elements mask some good underlying strength of our brands, our skin, health, and beauty business is doing well in europe and america in the u.s. we continue to innovate we had a strong season and winter is coming we are launching moisturizers. we are just launching a new neutrogena hydro boost gel cream, nine times more hydration, so important in the

wint are time. excited as the innovation we are bringing to market has been extremely well received by customers. >> nine times more hydration. >> all right. >> thibaut, i can't imagine when you drew up the plans to split this off or when j&j did, that you expected the stock to be down or lose almost a third of its value in a time since its become a public company. what do you tell those holders at this point in terms of why this has not performed as well as i believe many believed it would when it was split off? >> yeah. we are transitioning to a new shareholder base what we are focused on at kenvue is the fundamentals of the business, building a strong foundation for the future of the company and we feel very good about the strength of our business model, the power of our portfolio. that allows us to have sustained profitable growth.

we saw it again this quarter with the top line, healthy margins, strong cash flow generation and a dividend of 20 cents in november on top of the dividend we paid last quarter. so that's the kenvue business model. we are confidentfuture. >> but was it mispriced when you split it off that may be your model, and i understand what you're telling your shareholders, but it's been seven months and the stock's down 30% >> yes, we see the stock reacting to the splits, to the exchange, there are a number of elements impacting the stock price. but what we remain focused on is the fundamental of the business, making sure we are close to consumers, close to customers, innovation and bring consumers what we have been doing for 135 years as a product and solutions they need, when they need them, to take care of their own health, the health of their loved ones, and that's what we focused on as we speak

>> speaking of some of those products, i wanted to ask you, since the fda decision that the main ingredient in sudafed for colds, cvs is pulling the products from their shelves. does that affect any of your other products and does that have a material effect >> they review around the world ingredients on a routine basis the fda is reviewing one, as you rightly mentioned. they have not made a determination yet. we will work with the agency and customers to make sure consumers will have access to the products they need when they need them. >> are they trading down are consumers going to more generic value oriented products instead of brand name products >> no, we don't see that we see private label penetration to be stable

actually down in the u.s. recently that, i think, has to do with the unique nature the consumer space where our consumers, when it's about their health and the health of their loved ones, reach out to the brands they trust that are backed by science, health care professionals that have been in their medicine cabinet for decades, sometimes generations that's what our brands are all about. we see a stronger affinity, a loyalty to our brands. >> i see the big bottle of listerine behind you thank you. coming up at 11:00 a.m. on "squawk on the street," the ceo of royal caribbean shares gaining on raised guidance, stronger results we'll get a read on the consumer in the travel space next hour. more on hertz, speaking of travel, as those shares hit new lows on the year we're back in two minutes.

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first he said about travel demand, we're seeing really good sustained demand for product in leisure and u.s. and europe through october. i think we'll see a strong winter in the context of u.s. domestic travel. why are shares tanking right now? the bottom line miss was driven by higher expenses that was all tied to its fleet of electric vehicles remember, they've been big buyers of teslas evs are now 10% to 11% of the entire fleet what's happening is depreciation on that fleet has gone up. damage cost also remains elevated for those evs he said over the year elon musk took the price, we know by some of his vehicle, down by a third. we own 35,000 teslas the residual price comes down. we model that resale much lower. depreciation goes down and that expense grows. it also costs double what a combustion engine car would cost. >> that's the part i'm interested in.

why more damage? do you know? just in general? >> i think it's newer and the parts -- like the supply chain isn't fully there to get those fixes. maybe that's why it's more costly now he said it's something that will normalize as evs become bigger part of overall fleet. yes, more damage. >> we'll see if shares of restricted stock unit is not looking so good now. remember that big comp number, he may get it. he'll be a guest on "mad money" later today. right after this hour, though, is another hour of "ua osqwkn the street." you won't want to miss that. don't go anywhere. ♪ ♪ every day, businesses everywhere are asking: is it possible? with comcast business... it is. is it possible to help keep our online platform

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good thursday morning. i'm sara eisen with carl quintanilla. after a golden era of private he can quequity old dominion with an earnings beat. the company says they're beginning to see a slowdown in demand. speaking of earnings, a first on cnbc interview, royal caribbean ceo jason liberty is ahead. they raised guidance up 100%. markets continue to see some pressure nasdaq has fallen below the