SOTS 2nd Hour: Earnings Season Rolls on, and A Deep-Dive With Morgan Stanley’s CEO 10/16/24

Carl Quintanilla (0:08)

Good Wednesday morning, welcome to another hour of Squawk on the Street. I'm Carl Quintanilla with David Faber here at Post 9 of the New York Stock Exchange. Sara Eisen is live from 30 Rock this hour. Markets appreciating some of the earnings we're getting as we continue to chip away at Q3 results of Morgan Stanley and United Airlines among the highlights today, although the S&P's down a touch, once again, approaching 5,800. Treasury's a little bit of relief as the tenure works its way back to 4%. Not much data or Fed speak today, although we did get export and import prices, Sara.

Sara Eisen (0:39)

Yes, 30 minutes here into the trading session. Here are some movers we're watching. More results out of the financials. Regionals like Citizens Financial, US. Bancorp, First Horizon, all on the move. Plus, checkout shares of Morgan Stanley, the last of the big banks to report. It's having a good day, especially good day, up 7.5%. We're going to break down the numbers with CEO Ted Pick in just a moment. Transportation stocks also on the move. United Airlines and JB. Hunt both calling out strengthening demand in their markets, with United raising forecasts, and the airlines are having a good day today as well. Look at United at more than 9%. Retail also in focus. Luxury name LVMH, missing estimates, calling the outlook uncertain, while Adidas just raised its profit target for the third time in a row. That's, guys, where I would love to start, which is the state of the consumer. We do get the big retail sales number out tomorrow. We'll also get jobless claims, expect them to be skewed because of the hurricane. But retail sales, really important because more than 70% of our economy is driven by consumption. If we want to know where the economy's going, look at the consumer. So let's go to the anecdotal evidence first, what we got from earnings. Adidas is having a really strong run, which, of course, stands in stark contrast to Nike right now. They now see sales growing 10% this year. They raised their forecast as well. Obviously a good sign, but also a good sign that they're connecting well with the consumer. On LVMH, even though the overall numbers were disappointing and what they said about luxury, particularly in China, here's what the CFO did say about the US. Demand from Western clientels show a sequential improvement, this being very gradual, given that inflation and interest rates remain high. JB Hunt, I mentioned the transports. We have seen a return to more normal seasonal demand patterns. Then the United comment that we picked out here, demand continues to be strong.

Of course, this comes after we talked to Brian Moynihan at this time yesterday, the CEO of Bank of America, second biggest bank in the country. And here's what he said about the consumer, which follows some of this rosy commentary.

Brian Moynihan (2:43)

The good news is that consumers keep spending, albeit different stuff at every quarter, it's a little different, but overall, the amount of money they're moving in from our customer base, 60 million plus American consumers, moving well over a trillion dollars in the economy every quarter. It grew up 4.5% last quarter, third quarter over last year's third quarter, and it's still growing at that rate. That means the consumer is still in the game in spending, which fuels an economy that's stable, but we have to be careful that we don't choke it off.

Sara Eisen (3:11)

And David and Carl, this is why we're having the conversation now about soft landing or no landing instead of soft landing or recession, because things are looking up for the consumer. It's not all great. I know we do anecdotal sometimes talking about value and talking about the stress of the consumer, but some of the more recent commentary has sounded really strong.

Carl Quintanilla (3:34)

Yeah, NRF has its holiday forecast out, Sara, up 2.5 to 3.5, approaching a trillion dollars in holiday spend. They point out the consumer or the economy has been in a good place. The consumer economy will certainly continue to benefit from that strength.

Sara Eisen (3:50)

Right, and even though that's less spending than last year, I do think it bodes well for the consumer, and it jibes with some of the other forecasts we've gotten from Adobe, for instance, PCW has also done it. Look, if you're wondering why on the consumer, there's a few reasons, a few charts you can point to today. So what I did today was just showed you why the consumer is feeling better. Look at gas prices, for instance. Gas prices, the average gas price in this country right now is what, $3.20? A year ago, it was $3.60. It has come down. This is relief at the pump. We know that it feeds into consumer psychology, sentiment and just basic spending decisions. There's one. How about rates? I mean, what we've seen, even though mortgage, yes, I know you guys talked about mortgage rates going back up to six and a half percent highest since August, there's still been relief on that front. As the Fed has lowered rates and the markets rates have come down, you've seen relief in places like rates for credit cards. So that's another input. How about the unemployment rate? It's at 4.1 percent.