SOTS 2nd Hour: An Earnings Blitz, Big Tech Goes Nuclear and A Deep Dive On Activist Investing 10/22/24

Sara Eisen (0:08)

Good Tuesday morning, welcome to another hour of Squawk on the Street. I'm Sara Eisen with Carl Quintanilla, live from Post 9 of the New York Stock Exchange alongside David Faber, who is live from the Active Passive Conference here in New York City this hour. Taking a look at stocks, we're starting weaker, down four tenths of a percent on the S&P 500 Strengthen consumer staples, energy, communication services and real estate, though not offsetting some of the weakness. For instance, in industrials, down 1.3%, materials down a percent, so some sharper declines in these cyclical groups. Financials are weaker as well, so is technology. That's why the NASDAQ composite is down about a quarter of 1% right now. One thing that everybody's looking at are treasury yields, which have been backing up. Higher yields, bonds sell off. There's the 10-year now, almost at 4-2, so we're just below that level. The 2-year also a little bit higher, goes above 4%. We're 30 minutes here into the trading session here. Our three big movers we're watching. Three M shares under pressure, despite a top and bottom line beat, plus raised guidance thanks to strengthen the company's electronics segment. The stock though down almost 2%.

GE Aerospace also moving lower, despite a beat and a guidance raise as well. That said, shares have been a huge outperformer on the year, up around 80% since January. And then watch the defense names, fresh numbers out of Lockheed Martin and RTX this morning, sending shares in opposite directions. But guys, we've got to start with a big news from the IMF, some new forecasts for global growth. They still call global growth sluggish. They don't change the view on 2024 They still say it's going to be about 3.2%. But good news for the US. They upgraded the US growth forecast by 0.2%.

That's good. Now it looks like we're going to grow 2.8%. Why? Thank you to the US consumer. Better consumption fueled by rising wages and asset prices. This is the story right now in the markets. It gets a nod from the IMF, which has all the really good granular data out from different countries. It looks like we're going to do better. I also just want to mention a few other countries that got some changes. China, for instance, everybody's focused on that and what's happening with the economy there. They actually cut China's growth rate in 2024 to 4.8%. Below the official China 5% growth target that they have. That was interesting. They also 2025 say 4.5%.

However, they don't really factor in the stimulus impact that has been recently announced by China because as we all are, they're trying to figure out what the stimulus plans are, especially on the fiscal front. Best economy in the world in terms of growth?

Carl Quintanilla (2:45)

And pulling ahead.

Sara Eisen (2:46)

Do you know who it is?

Carl Quintanilla (2:48)

Oh, in terms of growth.

Sara Eisen (2:49)

The best, highest growth number. Yeah, US is good. We got an upgrade. But the best is India, 7% growth.

Carl Quintanilla (2:54)

Right.

Sara Eisen (2:54)

Really strong.

Carl Quintanilla (2:55)

I just can't get over. I don't know if you built the table of gross fixed capital formation among the G7, but we're crushing it. No one's even close.

Sara Eisen (3:05)

We're doing really well. And by the way, Jenny Allen, the Treasury Secretary is going to be speaking this hour to kick off the IMF World Bank meetings, which are happening now. And it's going to be a victory lap. And here's one of the excerpts that I pulled from what she's going to say. From day one, we rejected isolationism that made America and the world worse off. I thought that was sort of like a thinly veiled criticism at President Trump, because there are some warnings in this economic forecast, David, of protectionism, of tariffs. We know the IMF has been sounding the alarm on those type of growth hits. And there's, you know, they don't directly address the US elections. They try not to be very political, Carl, but but clearly that's in the backdrop. As they say, there's been good news on inflation and almost declare victory on what's happened with higher inflation rates.

Carl Quintanilla (3:52)

Meantime, JP Morgan does today looks at last week's retail sales. Atlanta Fed at three, four. That's up a full percent from August. JP Morgan today looks at the increased forecast for not just US GDP, but China, put them together and their forecast for global GDP growth is up seven tenths.

Sara Eisen (4:12)

Yeah, I mean, the China thing is a question mark. But if you do add it together and just the US alone, the forecast going higher has certainly been a big part of the story of what we've seen with Treasury yields backing up with basically since the last Fed meeting, we have seen Treasury sell off and yields up and it really got super charged by that really strong jobs report that we have and it's changed expectations for how many rate cuts we're going to get. And I keep saying, you know, the market's not, doesn't seem that upset about it because it's happening for the right reasons. Better growth, you don't need as many rate cuts, but there's a good chart going around this morning showing. So this is how many rate cuts are expected. See the big spike up before the jobs report. This is going to end of January. The market expected more than four rate cuts before the end of January. Now it's between two and three. Will we get a pause in November? Will we get a pause in December? Market still doesn't think so. We've still got more than 50% odds for both, but there's some questions.