SOTS 2nd Hour: Alphabet’s Big Beat, Super Micro Tanks, Exclusive: Ray Dalio 10/30/24

Carl Quintanilla (0:00)

Good Wednesday morning, welcome to another hour of Squawk on the Street. I'm Carl Quintanilla with David Faber, live at Post 9 of the New York Stock Exchange, alongside Sara Eisen in Saudi Arabia at the FII Institute's 8th Annual Summit, where in just a few moments, she's going to sit down with Ray Dalio for a CNBC exclusive. Meantime, busy day at corporate earnings, Dow's up 140 or so, S&P up about 5, 10-year 421 We're 30 minutes in. Lilly is tumbling this morning after the big drug giant missed estimates and cut its profit outlook. Alphabet rallying on the back of its results, but AMD is dropping on its outlook. Shares of Reddit soaring, the company reporting its first ever profit. And keep an eye on the Super Micro today. Shares tanking more than 30% after disclosing its auditor has resigned. More on that later in the hour.

David Faber (0:48)

All right, let's get pending home sales, though. They're out just moments ago. And Diane Olek has them for us.

Diane Olek (0:54)

Well, David, pending home sales in September jumped 7.4% compared with August, according to the Realtors. That's a huge beat. The street was looking for less than 1% gain, and it's the highest level since March. Sales up 2.6% year over year. Now, these pendings are based on signed contracts. So with people out shopping and making their decisions in September and take a look at mortgage rates, the 30 year fix was coming down all through August and touched its most recent low of 6.11% the second week of September. It stayed right around there for the rest of the month before shooting higher in October. We're now just over 7%. So this is likely a reaction to the drop in rates and also to much more inventory on the market for sale. Regionally, pending sales were higher everywhere month to month. Year over year, they were higher in the Northeast and West and flat in the Midwest and South. Interesting though that the biggest gains were seen in the West where home prices are actually the highest. So David, probably where lower rates have the biggest impact.

David Faber (1:53)

Diana, thank you. Diana Olek with those latest housing numbers. Let's get to one of the big movers this morning. And it is on the negative side. We're talking Eli Lilly. The earnings were a bit of a miss. A lot to try to understand here in terms of demand, of course, for its GLP-1s. Angelica Peebles has more on the decline and on what the company is saying as well. Angelica.

Angelica Peebles (2:18)

Yeah, David, you hit it on the head. GLP-1s, unsurprisingly, the story today. Manjaro and Zephound, both coming up short of estimates in the quarter. And the bigger fear is it's not totally clear why.

SPEAKER_5 (2:34)

This is not a function of supply, though. It's a function of these wholesalers and retailers having capacity and wanting to stock every dose, which they often don't. So, yeah, we're just balancing all these parts. And there is an excess supply, but we haven't been stimulating demand the way we had originally planned. So we're pausing that a bit. We did pause that, but we're restarting here.

Angelica Peebles (3:03)

And, you know, one of the answers that Lilly gave to this is that part of the dynamic they're seeing is that the wholesalers are selling what they have in stock and they're not ordering more something that they call inventory de-stocking. But Barclay is in a note today saying that probably only accounts for about 20 percent of today's results. And so I think that you're going to want to hear more from Rick's on what exactly is driving this move. Is it demand? Is it supply? And what exactly is Lilly going to do about it in the coming quarters? That call now just getting underway. So we'll have to tune in to hear more. But again, take a look at that stock. It's down about 12 percent today, guys.

David Faber (3:40)

Angelica, you know, a lot, as you say, investors trying to fully understand it. There's there's one case that says they're trying to protect price in the sense that they wanted to get those compounders out of the market because if there's no longer a shortage, then they can't be doing what they do at a lower price. If you push inventory into the channel, perhaps a lot more than was needed at that moment, but that suppresses current demand from those who are buying. Does that make sense?

Angelica Peebles (4:06)

Yeah, and we actually asked Dave about that this morning, about how much of this has to do with making sure that terzepatide is in supply so that they stay off the shortage list. And he said that's certainly a factor, but ultimately what the FDA decides to do is just a by-product of how much supply they have. But again, I just thought it was really interesting talking to him this morning about exactly where supply lands because last quarter, if you remember, they raised their full year sales guidance by $3 billion because in part, better visibility into supply for the rest of this year. And now they're saying that, they certainly have supply at Lilly, but at the same time, the wholesalers aren't buying more, but there's still plenty of demand. And so it just isn't totally clear to me exactly what is happening here and why we're not seeing sales continue to go up. And so I think you're going to hear a lot of questions about that today. And of course, the compounders being one big piece of that.