business report with bill griffeth and sue herera. h >>g on tight. the markets tank and thenck clis and it may be because stocks no longer react to earnings and forecasts the way they once did. >> sounding the alarm. bellwethers caterpillar and 3m warn of rising costs and issue weaker outlooks unnerve sharltd. pockets of strength, the areas of market making money even amid the volatile streak. the stories and more on october 23rd. and we do b you goo evening, everybody. and welcome. so wha a ride. again. investors nerves were frayed at the oning when the dow plunge the 500 points after some big

blue chip companies reported quarrly results. the most part the earnings were good. it's what the ceos oays had to about the future that the market didn't like. and some important levels wste during the day. the dow traded below 25,000 part of thethession. s&p 500 cracked 2,700 for a time. d that was for t first time since july. and the nasdaq flirted with correction territory with you then a rubbed. not sharp but slow and gradual and the dow cameithin a few points of breaking even. and when the "osing bell" rang ehe dow was down 125 points to 25191. nasdaq fell by 31. the s&p 500 slipped by 15. now this latest bout of selling and volatilityomes during the busiest week of earnings season. and as bob pisani reports, so far there a has been different response to the results this time around. >> earnings season is in full swing but right now the market has a problem. many stocks are no longer rising

on good enings or even good guidance. the market typically rewards coanies raising guidance and punish those that don't. but something different happening this quarter. companies raing the fourth quarter forecasts on analysts raising the forecasts are not being rewarded csx. vf corp. all posted earnings beats. fourth quarter estimates raised but all trading down since the reports. tat's going on? the market is tryifigure out if the positive outweigh the nchgts right now and some are worried the positive momentum from the tax cuts are wains a bit. rememb what the stock market has been rice on on higher revenues tax cuts and partially redu regulations. but new headwinds have emerged inhe last several months tariffs higher rates, higher commodity costs and now country specific issues c weighcerns over china slowing be italian policy andaudi arabia which is

important since saudi arabia is a major investor in technology funds. goldman sas noted that 56% of companies beating easterning expectations a of friday's closed underperformed the s&p. normally we would see outperformance ofr than 1%. not happening. so far companies that are missed on earnings underperformed the s&py 3%. that's worse than the historic averages. what do we make ofar thet when those that do well underperform the market and thos that don do well sell off even more? it's hard to decide. but maybeot much yet. but the fact that stocks are not rising on positive earnings is certainly worth watching. for nightly business report, bob pisani at the knock stock exchange. >> it started when caterpillar results.ported the industry companies were in focus given the international reach and exposure to china. the disappointing comments raised fears of slowing enomic growth. and that sent shares of both caterpillar and 3m lower. morgan brennan has the details.

>> reporter: 3m's disappointing results rippledinhrough the strial sector. reporting slowing sales across the board in health carend consumer segment for which sliding consumer products ses in china mentioned on the call. currency is a headwind so rising costs. the reason make he the coastings now expects the roughly $10 oh million dollar headwinds from tariffs. still 3m expects to offset the cost. >> our view is we have a, sr.il $100on headwind from tariffs and that our price will go more than offsetha and raw material prices increases into 2019. >> that's really the theme for industrials so far this season. higher costs, versus higher pricing. and what that means for mrj margin. take caterpillar which beat and reaffirmed the outlook. the stock still tumbled in trading. why it's more expense toef manufacture those earth moving machines. but management s did costs headwinds willome in t lower end of previous guidance and

higher prices from tariffs will rowe are already baked in >> we have been on managed distribution. still we don't expect a major impact process. quite frankly we were already hit with the earlier tariffs. we don't think a later change will have an gas chromatography are impact on us. it was baked in for us. >> cat like 3m plans to raise prices on the productst sells to make up for mier costs. analysts say economic growth is still solid but that investors are taking a trade relatedto ri further accounts. >> cat executed quite well. it's surprise to the upside as youft mentioned quarter quarter. that's not easy to do. cudos to them. i think tariffs are introducing uncertainty and they are managing through tha we understand the risk then we can sort of price that in better ank make the r comes down. >>ry similar sto for united technologist as the industrial conglomerate says it hikes prices across the portfolio as long as tariffs are in place. for niginly buss report, morgan brennan up in new york

ock exchange. he investors did have a few things to cheer, notably mcdonald's quarter. in fact thed fast fhain stock was the best performing blue chip after the company topped expons and reported the 13th straight quarter of same store sales growth. and as kate rodgers tells us now the earnings beat comes as the company makes global business changes. >> earning are loving it overseas sales were better than expected i international market for mcdonald's. rowth bolstered restaurant renovations designed to modernize the golden arches. including self-order kiosks and talle service. hile business was strong overseas thanks to the modernization efforts it was weaker than wekt o expected in the u.s. as the competitive landscape in the fast foods remains stiff. mcdonald's is aggressively renovating u.s. locations updating 1,000 restaurants p quarter and investing about 6 billion to modernize units by 20 to. >> i think we see the benefits of the experience of the future d the companies other velocity

accelerators such as delivery and mobile order. not only in international markets but the u.s. process. there is disruption as it's rolled out. but if you look at the high level ner seeing bifurcates from that. helping toffset the promotional activity within the category. >> but the changes have come with pushback from u.s. franchisees hundreds of whom recently metdan flo claiming the changes coupled with menu innovations aren't payin off quickly enough. ceo steve east brook acknowledged on the conference call that franchisees are taking on a lot at once but reaffirmed the company's vision for change. >> our currently place by the end of 2019 expe c toplete over 12,000 restaurants with out future inie making it the largest construction projects in our history. we have hard work ahead but we are seeing encouraging response from customers in restaurants where many improvements are completed >> easter brook also said the company is looking to refocusn breakfast and rolling out more

deals to bring diners back to restaurants as the value wars continue. for nightly business report, i'm kate rodgers in new york city. pe> and fellow dow component verizon t the wall street profit expectations. the telecom giant added subscribeser quicker than expected as it presses ahead with the plan to offer a faster 5 g network. they reported a revenue decline in the we line business and said it's struggling to meet financial targets in the oath media and advertising unit. nonetheless, the shares were up 4% to close at a18-year high. well we have invited a couple of pretty smart market watchers to talk aut why stocks act the way they have during the volatile month. joining us tonightef is klein top, the cleave global investment strategist at schwab and a alyst with bleakly group. thank you for joining us tonight. >> thanks. >> ffrey, it seems as soon as we turn the calendar over to

october more than 3 weeks ago that the markets suddenly went into volatility mode. what's your version of what's going o right now? >> well, i think there is two things behind this, bill. one is we have known about the risks of slowing revenue growth for some time. that's not new news in acts. but rising costs are. we talke about it earlier rising costs whether caterpillar or even mcdonald's. but look at the mcdonald's. they were able to pass on some of that whereas the others wrote not. the combination of slower revenue growthcu but dion of new rising prices materials and laanr, that's new. potentially a weaker outlook for profits. the second thing is thebuyback story. every time we get to this point of the earnings season in october corporations do less. they limit the number of the corporate share buybacks this time however it's joinedly individual refers turning into net sellers in the secretary half of the year based on industry data. wither no b institutions not

buying and individual investors sellg w see the downdraft in the season. >> peter, you think higher rates, the tightening central banks makes the market vulnerable to othsss geopolitical out there. >> happens every time. the deeper you get into a tightening cycle accidents begin to happen. no the accidents started overseas with -- well, you have the short vicks trade blow up turkey, taargentina, and it's causing issues obviously in other parts of asia with china and the u.s. so when the liquidity spigot iturns off and rates go u impacts not only valuations but starts to impactcomic activity. house and autos the two sensitive interest areas of the economy are slowing down. now, the offset up to this pbent ha a strong earnings story right. >> but now that there are holes in tt in terms of the profit margins. you have a tightening the

monetary policy and rising interest rates with peak in profitargin that confluence of events is causing the volatility >> and that's why you think -- we saw this the beginning of earnings season when the banks reported blowout numbers and the stocks went down that's going on here. >> youing look at netflix. grea quarter, big upside in the subscriber numbers and a good day and gave it back. it's been earnings strength that hasse o the monetary drag. and now maybe we're losing some of that support. >> you know, geoff, talk to me about the recession indicators that you're looking at.my i mean the eco to people on main street and elsewhere seems to be really chewinglong quite nicely. why are you worried about a possible recession? >> you know, there is good and maybe too good. one of the things i like to watch is the difference betweene the unempl rate and the inflation rate. you know, historically those two

are usually pretty far apart. the unemployment rs high are than the inflation rate but when they come together as they have about a year before the last three u.s. recessions it tells you that the kissimmee ov heating and likely to experience a recession in about a year. we're not there yet. still about 1% apart in the u.s. and t japan uk, germany, other hayess but getting close. in the next six to eighteen months. that combined with increasing rates from the fed suggest we might be sighing a peak in the global economic cycle. sometime in 2019 andmi investor t be beginning to brace for that. >> so, what do you do? ? why geoff the market is as defensive as it has been. seeing the defensive secrets outperform the market lately. is that what's going on. >> i think it is. i think investors are positioning for the end of cycle. might be early still. but certainly looking out six ts eighteen monrocess it could be there.

loo looking at the portfolio.e trimming volat areas and even tech stocks if you are overweight there that's a volatile area to look at. secondly think about bonds here. the five-year treasury at 3% not a bad entry point for longer term investors to manage the votility in the portfolio. no one is comfortable with ourfectly comfortable with losses but if are losing sleep over the portfolio you may have a bit too much in >> quickly, peter, where with you put money to work iday. >>hink that the international markets that sold off so much start to nibl there. the u.s. market is still very expensive. and short-term bonds are attractive and iarcularly like gold and silver. >> all right. >> short and sweet p always smaple that we like to talk process zwref klein topc froms hwab. peter from blaekly advisory group. thank you for joining us. >> pleasure. >> it's time for a look at upgrades and downgrades. lowes upgraded to buy from neutral at citi. the analyst driets lowe he is

turn around plan the and the strepgt of mpgt team. the bryce target is $112. the stockose a fraction to 98.12. vf corp. upgraded to outperform from nurmt at wedbush, the analyst does not share street concern over growth and margin processes. the price target is $94p the stock a fraction to 77.71. viacom was upgraded to in line from underperform at imperial capital with the analyst citing factors ieluding arket rotation from growth to value in the media seekter price target now $29. that stock fell to 32.71 tay. and nxp semi conduct are was upgraded oh overweight at bark cli. it coo citing the recently pullback in the stock and see the earning higher. the price target is $95, the stock up more than 1.5% to 77.72. crude craters after a saudi official makes a pledge.

a federal reserve official favorses more int rate hikes. atlanta fed president rafael bostic offered an upbeat outlook on the economy. he says he believes the central bank should continue on its path of gradual increases citing the risk of economy overheating. he explained that there is little reason to keep the fed's fo on the gas pedal.

>> president trump is pushinge dea of a middle class tax cut. he floated the 8:45 again today duringhoto opportunity in the oval office. >> we're i putting a tax reduction of 10%, which i think will be a net neutral because we are doing other things whi don't have to explain now. but it will be a net neutral. but great for m thedle class. it's going to be a tax reduction of 10%dlor the m class. business will not enter into it. and this will be on top of the tax reduction that the middle gottenas already and we're putting in a resolution probably this week. i think you folks know about it. and kevin brady has been working on it hard couple of months. ee will put that in and start the work sometfter the mid-terms. >> congressman brady chairs the x writing house ways and means committee and he said the measure would be crafted in the coming weeks. president trump will meet with china's president!

jinping at the g20 next month aerktd to the white house economic adviser larryudlow the two will meet for a bit but kudlow did not provide details. the meeting comes at a time of escalating tensions over tra. the trump administration recently put tariffs on $200 billion worth of chinese imports. and beijing immediately retaliated. theri two cou remain far apart on some key trade related issues such as intellectual property rights and technology transfers. the european union today formally rejected italy's notet, an unusual but unexpected move that puts brussels andome on a collision course. the budget proposed by the italian governmentncrease the overall government debt and the dechz in the short run. both violations of eu rules. and officials said today the eu was given no alternative but to reje proposal which caused italian bond yields to rise. italyow has three weeks to

make changes. oil prices tumble today aftered saudi arabia pledged to increase output. saudi's energy minister said for a second day that the kingdom will keep the world adequately supplied with crude. add to thatecent for example forecasts that global demand for oil is slowing and you have a down day for domestic crude which fell 4%. recalls sanctio on iranian oil begin november 4th. and washington says it wants to st all of the tehran's fuel export. harley-davidson faces weakening demand in the largest market. that's where we begin tonight's market focus. the motorcycle maker reported theeciggestne in domestic sales in eight years as it struggles to attract youngerst ers. the company had better luck with the international markets, specifically inope where sales rose and helped overall results edged pas expectations. harley warned that tariff related costs caused shipments

for the year to come in at the loaned end of guidance shares 2%down to 37.87. pulte group sd more himes a at higher prices and help thebld builder beat expectations. revenue rose. in addition ty said they expect average selling prices to climb this quarter. shares rose by 7% today to 22.40. and jet blue reported rnings that edged past wall street's estimates. even as a rise in fuel costs hurt the aresults. thline said it has a plan in place to improve margins and s,fset higher co adding that fare increasing wills part of the strategy. shares up a fraction to $16.63. lockheed martin said a rise in revenue in all of its units helped oregons soar past the aerospace and defense contractor raised profit outlook for the year and forecast revenue above wall street targets. the company also said sales could rise as much as 6% in

2019. and long as key programs continue to receive funding from the government. lockheed shares were off more than 1.5% to 321.35. biogen said improved sales for the multiple sclerosis treatment led to a earnings beat. separate will i the drug maker said the lupis drugd fai to meet goals in the study trial. but shares ined up a tick to 316.15. and the known short seller andrew left says he now has a long position on tesla's stock. after shorting it for more than two the reason for his change of heart, left says tesla is destroying the competition and pulling customers away from a mber of car makers including mercedes and honda. shares of teslaor poppedthan 12% to 294.14. and the aluminum products maker arconic is reportedly coidering a $1 billion acquisition offer from the global management.

are the routers says that values arconic at 23 and $24 a share. the company hoax hopes to make a decision on whether to sell olitself before it the investor day next month. shares fell more than 3% to 20.65. coming up, we are looking for pockets oftrength in this otherwise head spinning market day. it is no secret that october

has been volatile. but even with the broer marke down more than 5%, there are sectors that are higher since october 1st namelyli utities and consumer staples. let's talk more about the pockets of strength wh mike bailey director of research at fbb capital partners. z nice to see you welcome back. >> thanks for having me back. we are getting to specific picks in a minute but i guess i shouldn't be surprised at the strength in the utities sector and consumer staples, right. >> absolutely, o, yes if you are in a risk off moment it seems that's where we are. maybe you look for the most attractive areas or the safest ilays if you. . ies are at the top there. what we see is investors are really worried about tariffs, what are those doing? rising interest rates,tronger dollar. if you sort of think about the of s of the market are sort immune to the utilities is definitely at the top of the list. th mostly defect, no tariffs impact.

not a lot of currency impact. there is a little bit of risk around interest rates. but i think investors are not wofford about that at this point. >> i was going to ask you about that because so many viewers invest for dividends. and utities are a typical case to invest for divides. how thunderstorm perform as rates rice. well. ually don't do >> that's right. we are seeing kind of a counterargument if you will to that. i think part of it may be just looking at what are investors really worriedabout. i think the flavor of the moment is probably tariffs. and perhaps currenciesnd any company doing business outside the u.s. if there is some global slowdown.t' if t the fear then maybe utilities are the perfect setup there. bu are right in general if with he see interest rates creep up that's going to make other investments such as safer bonds maybe more t attractivn a safer utility stock. >> let's get to names. you gave u three namesn the time we have remaining. cme group is one that you favor

at this point. why isohat? >> cme in some ways is sort of taking advantage of the drama. we're seeing really this month. so the company an exchange as vestors trade. they basically take a small fee exchangean they are sort of a toll taker. and the drama we have seen this month is more tding and volatility. they participate in that. they really benefit the. when we dhink between now and heading into next ear you say oncern base when is the recession coming with when does the equity market owdown. that translates into trading. cme really participates there. they are doing an acquisition and there is upside there. it does pay a farrell attractive dividend. >> was as we go we saw the y graphi like honeywell and next era energy. things for joining us tonight mike with fbb capital partner/8. >> thanks. and finally tonight the country is obsessed with megamillions. and so are some of us at acast.

the jkpot as you know is $1.6 billion. and people spent t day dreaming about all of that green. >> i would b a 747 jet, okay. . a retired one have it gutted edaren't innovnd converted to the a home. >> buy a couple of houses, travel the world. probably just enjoy irlife. >> of all, i'd help my family. and my >> if i got buy the new orleans saints i'm a big fan of the saints. i would buy thafranchise. >> a mansion and i'd get my own room and my sister get horse own room. and a ps 4 and big screen tv. >> but allow me to be the voice reason in the end the game comes down to simple math and very long odds. according a statisticen from columbia verse to convert the odds of 302 million to one toth sog tangible it's like laying820 miles of pennies

edge to edge in a line that would extend west from new york city to los angeles and the another thousand miles into the pacific ocean. or to ve verse that east to -- from new york city you'd have to go paris france. obviously the odds of winning are equivalent of picking out the jackpot penny from that line. good luck. what's wrong with that. >> before we go a look at the numbers on wall street. the dow down 125 points. it was down more th 500 points midday. the nasdaq fell 31 and the s&p 500 slipped 15. that does it for us tonight. good luck i'm sue herera. >> i'm bill griffeth. see you tomorrow.

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