Squawk on the Street 9/29/23

SPEAKER_1 (0:00)

What do you see on the horizon for financial markets?

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David Faber (0:31)

Market insight and analysis. You're listening to the opening bell of CNBC's Squawk on the Street.

Carl Quintanilla (0:37)

Good Friday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with David Faber, Mike Santoli at Post 9 of the New York Stock Exchange. Cramer has the morning off. We are putting Q3 mercifully to bed with some green arrows.

As the disinflation trend continues around the world, Eurozone CPI runs cool. Core PCE finally a three-handle for the first time in two years. Our roadmap begins with the last trading day of the month and quarter. Stocks looking to rally at the open, looking to close out the worst month of the year on this high note.

Mike Santoli (1:04)

Plus, the latest read on inflation ahead of a potential government shutdown over the weekend and the likely expansion of the big three auto strikes. National Economic Council Director Lail Brainerd joins us this hour.

David Faber (1:15)

And sure, is Nike rallying this despite its first revenue miss in two years. The company is saying that it sees a resilient consumer, both here in the US and in China.

Carl Quintanilla (1:24)

S&P down, NASDAQ all on pace for the worst month of the year so far, as the street now braces for a potential government shutdown as soon as tomorrow night. Meantime, we knew PCE Mike was going to be the 10-pole data point of the week, and some relief that we got the 3-9.

Mike Santoli (1:40)

Yeah, people were leaning toward the idea. It would be a relatively softer number based on some of the clues going into it. So as expected, you know, we spoke around the close yesterday, Carl. I said, we're going to be allowed to mark our fear to reality here because it's been all about, wait, what's going on with this messy sell-off in the bond market? It seems unanchored. It seems like it's got a life of its own.

And now we did get yesterday GDP revisions, weekly claims today, the PCE inflation number. So we have the economy we more or less thought we had, bond yields calming down and getting a little bit of a bit in stocks. It's all happening, coming together almost a little too scripted, maybe, at the last day of the quarter. You have had both stocks and bonds down together in lockstep this quarter, almost by the same magnitude.

And so there's no real reshuffling that I would expect around that. But it does seem as if you maybe for now done enough on the downside in stocks, even if it feels a little too cute. By that, I mean, as I said, last day of the quarter, the sell-off, really the weakness started August 1st, the very beginning of all the seasonal weakness period.

And then the S&P goes down to, oh, I don't know, 20 points above its 200-day average and 4,200, whatever one was looking at. The VIX, everyone says, it's got to get to 20 It gets to 19.7 as a high. So, you know, the question is, can it work that tidily to have that be all we needed to do in terms of a correction in this mode?

David Faber (3:05)

Mike, seasonality.

Mike Santoli (3:08)

It's crazy, isn't it?

David Faber (3:09)

Yeah. I mean, sometimes I hear it and I'm like, what are we actually even talking about?

Mike Santoli (3:13)

Every single month, not even every year, I say, how can this not already be kind of either front run arbitraged out or just over time lose any ability to be predictive? Because, you know, the more years you have, you would think more randomness can filter into it.

And of course, it doesn't always work. I think that's one of the reasons I've been a little bit suspicious about how perfect it's sort of fit this year. And it could be partly coincidence. A lot of things did get piled on the market around that time.

But so far, it has mattered. You know, you see people slicing and dicing it even more finely, where it's not just, oh, things start to get better in the middle of August and you get usually a year-end rally, to the point where if the market was up through July at least 10% and then down both in August and September, it's been up the rest of the year every single time. Now, it's only a handful of times. We're not talking about statistical significance levels of, you know, really high tolerances to the data, but this is what we see. And I guess there's certain flow elements that matter here, the cadence of looking toward the next year's earnings and economic data, election cycles, all the rest.