Good wednesday morning im Caro Quintanilla with jon fortt and Julia Boorstin with us dow down 800, worst drop since about june 11th, on covid worries in the europe and United States, lockdown worries in france and germany oil is down about 6 vix getting closer to 40 were monitoring the ceos of twitter, facebook as they testify on section 230 well begin with dominic chu on more on what is driving the downswing. A lot of narrative around the rising covid cases, not just in the United States but europe as well markets may be taking their cues from whats happening in europe. Theyre talking about wider spread lockdowns in germany and france and whats if it happens here in the United States. Thats playing out in the markets right now. For the s p 500 specifically, below the 3300 mark, that is below both the 50day average price and the 100day average price for those indices, so many traders looking for technical or chart pattern levels as they look at trades today the s p 500, this little rollover puts it at some levels where we are almost at the point where we are below some of those kind of september, october lows that we saw over the course of the past couple of months. Thats something to Pay Attention to as well checking a little bit more about the factors that are affecting the market from an investment standpoint, the etfs that track momentum, down about two and threequarters percent and similar tore the low volatility type stocks, down about 2. 5 and the high dividend players, taking even deeper cuts there, down by about 3 right now if you take a look at the overall picture for other parts of the market, we are noticing some certain signs developing within key areas here with Market Movers tied to earnings these are all covid affected in some way mastercard, down about 6. 5 . They cited lower spending patterns and lower travel. Meanwhile, youve got garmin, much more demand for gps and outdoor devices as people socially distance. Masco is behind behr paint and faucets, and the trend will continue into 2021 as well tupper wear, up 31 . A huge revenue beat because more people are cooking at home, storing their foods and leftovers in tupper ware containers carl, very interesting story lines developing, much of which centered around the covid19 outbreaks. Back over to you things that our viewers obviously can relate to, dom thank you for that joining us to talk about the selloff today, guys, good morning, good to see both of you. Thanks. Brian, if i know you, your take is that this is maybe an unreasonable reaction to what were seeing out of europe well, considering the threeheaded negative frenzy that seems to be controlling momentum on the market, no, its not surprising and i know a lot of people have been calling for a correction. Were investors and, yeah, you do know me if you take a look at europe as an asset, its been a declining asset for ten years. And you look at how europe from a fundamental respect relies on emerging markets, i think those two areas should continue to be avoided. If you believe that stocks are higher a year from now, if you believe were going to start to see more fundamental consistency over the next year, you should be a buyer on a nearterm basis clearly the threeheaded negative frenzy of first off, the election, second off, the lack of stimulus and now, third, the increase in covid cases, i think society and investors in general have to cut themselves some slack. I mean, where we are now relative to february, march in terms of the measures that weve all had to learn, much different. Yet the market and investors alike that we talk to all day long want to react like they did in february and march and we think that is a very, very big mistake. Jack, you got any problem with that . And i guess the broader question to brians point is whether we have learned anything, given some of the hospital trends, i will say trends in western and northern parts of the country. Yeah, i mean, obviously the trend, at least on the covid side, is not our friend. Were investors, too, and we did take 7. 5 out of our Growth Strategy at the end of september, not because of covid, not because of the election, really just because we need a 90 success rate in making money over the next seven years and based on where valuations were, we couldnt get to that number without taking some of our equity risk down and moving into what we call noncorrelated strategies, between cash or equity hedged strategies so from that perspective, the markets somewhat expensive still a little early to tiptoe back into some of these out of the way markets like small cap emerging markets should hold up pretty well. Its banking on a biden victory. If we do get more stimulus in the hands of consumers, the emerging market space should do pretty well. China, of course, actually holding up quite well today. Brian, do you agree with jack on emerging markets and what are the other areas that youre watching emerging markets have benefitted from a weaker currency and i dont buy assets because of currency but because of fundamentals. Weve had nearterm macro measures coming out, but, again, i focus more on earnings and sales with respect to the denominator of an valuation and were not quite seeing that. I think jack is spot on with respect to trying to be too early and smart into buying small cap or value we continue to think of the stock market as a market of stocks look at the sector you cover, communication services, the quintessential bar bell sector where you have defense on one side and growth on the other you would be balanced there and thats also a sector that offers Dividend Income that we think is going to be exceedingly important in a zero Interest Rate environment for several years to come. Jack, microsoft is down nearly 4 after earnings, apple is down nearly 4 ahead of earnings, and i guess in a way thats not a surprise, given what weve been talking about, the lack of stimulus, just uncertainty in general before election i understand traders watch every single move, but for investors out there, has anything fundamentally happened, given how far up weve been over the past few months, that should give them pause . Well, yeah. I think investors were buying into microsoft and other big tech names because of the defensive nature, high Balance Sheet quality, insulated businesses and now one of those legs has kind of, you know, chipped away a little bit as they fell short in revenues. The fact is that microsoft sells two businesses and were seeing boeing and others laying off workers and pairing back somewhat, thats not great news for the b 2 b sector i do think quality is important. Microsoft didnt fall short in revenues. Their guide on revenues was a little light which might be conservative because of xbox, but given how poorly sap did and given the damage we saw in enterprise and government and intel. Microsoft actually held up well enough that one could argue that the hedge that investors were using it for actually held up. Well, i think they are diversified and they do have a decent footprint in the Consumer Sector that Companies Like oracle and sap really dont enjoy, but i think what we need to continue to watch is, you know, how high up will this deterioration get. Obviously, you know, entry level workers, we see that pretty easily, but now will some of this pare back go upstream as we race against time with this vaccine and treatments and, jack, as you look at some of the sectors that have really suffered as a result of covid and were seeing those stocks again down today in terms of movie theatre stocks, anything involving gathering large groups of people, theme parks, concerts, et cetera, what is your timeframe for seeing an opportunity in some of these selloffs or thinking that its going to be a lot longer than anyone anticipates before those industries can come back yeah, so good question, julia. I view those types of names not like equities, but more like bonds. Do they have the wherewithal to bunt through cash flow wise, raising capital or generating enough cash flow to sustain themselves to the other side because once we have a vaccine and we have adequate treatments, im not sure happy days are here again at disney world. I hope so, as a florida resident, it would be great. But i think americans will still be reticent to pack into theme parks and theatres. One last thing, does your appetite for value extend into energy or are even you thinking about longerterm trends, about consumption weakening that go well beyond pandemicrelated dynamics its a great question, carl and we would throw energy into the realm of other areas, quite frankly, that on a fundamental basis were suffering prior to covid, prior to the lockdown, and then even coming out of covid. Remember, energy in the s p hit below 3 for the First Time Ever the contrary in me wants to jump all over that, but from a fundamental perspective, given consumption, given supply, we make Canadian Energy a lot better because of how those companies are managed in terms of cash flow but u. S. Energy companies are more dependent on a higher oil price. And given where things are going with respect to that area, we just think that is not a value area we can get cyclical growth out of traditional value areas like morgan stanley, goldman sachs, bank of america, j. P. Morgan, a lot better than we can i think thats way, way, way too early. Wow, fascinating, guys. Its quite a day we really appreciate you helping us kick off the 11 00. Jack, brian, thanks. Thank you. We mentioned a a moment ago and lets take a look at microsoft a day after its earnings report. The stock is down nearly 4 , but thats not because the news was bad. Despite the enterprise and Government Spending that we saw reflected in reports, microsoftmicrosoft microsofts azure growth was solid and office 365 and gaming also strong. Its worth noting that pc strength also seems to translate into strength in microsofts Consumer Office offering the raw subscriber numbers there have been the best in five years over the past two quarters now, guidance was muted, revenue was light of consensus that can be conservatism because of the Enterprise Spending issue or it could be uncertainty over how the big xbox launch is going to go. Either way, investors digesting that this morning. Microsoft down slightly more, about a point more percentagewise than the broader market, about the same that apple is down ahead of its earnings, julia, tomorrow. Thats right, john. Its going to be a busy couple days now, with the Market Selling off, is there more that the Federal Reserve can be doing or is its limited ability to respond part of the reason for the selloff joining us now is steve liesman. What do you got . Julia, i think the answer to both questions is kind of yes. Yes, there is more the fed can do, but yes, its limited ability to do so is something that no longer really underpins the market the fed can do quantitative easing, its been basically buying treasuries out there and other fixed income instruments as a way to really smooth market functioning, not really to boost the economy. The fed has sort of in its tool kit, in its back pocket the ability to come in and increase quantitative easing, and the effect that would have, i think theres some questions about, in part because Interest Rates are already low. I guess they could bring them down some more the other sort of main thing in the feds tool kit are all the money thats been allocated from the c. A. R. E. S. Act over to the Federal Reserve and thats only getting out into the economy in a limited way. But thats going to probably take an act of congress, julia carl, theres been a reason the fed has been strongly advocating for fiscal stimulus. Two reasons. One, the market has not correctly priced in the risk of additional coronavirus spreading around the country, and the second reason is because it feels its limited in its ability to respond to this particular crisis. Steve, fascinating profile of jay powell in new York Magazine this week. Part of the argument theyve made is that hes been so effective because hes established such great relationships on the hill. And i guess the question that follows is why that didnt or hasnt yet paid off in Convincing Congress to do something on fiscal. You know, all powells sources and men couldnt make congress adopt additional stimulus i couldnt come up with a rhyme on the fly here. Theres only so many powell can do i think he convinced a lot of folks getting past the political roadblocks there, one important aspect of it, i think powell did agree, and a lot of the members of this fed, that pelosi and the democrats were very strong on, which was the need for state and municipal and local aid that the republicans did not want to have the fed knows well now in the last downturn, carl, the cutbacks at the local and state level made the recession go on longer and made the job market worse than it otherwise could have been without that kind of aid. So thats one thing. I also think that the fed is limited, certainly publicly, in its ability to pressure or Lobby Congress when it comes to these issues steve, thanks as we see an interday look here at the dow as we go to break by the way, great statistic today, s p down about 2. 8 if it stays there between now and noon, just the third day this year that it was down 2. 5 plus at noon the only other times back in rbarc wee ck in a minute rests or whats trending. Get realtime insights in your customized view of the market. Its smarter Trading Technology for smarter trading decisions. Fidelity. You can go your own way go your own way your wireless. Your rules. Only Xfinity Mobile lets you choose shared data, unlimited or a mix of each. And switch anytime so you only pay for the data you need. Switch and save up to 400 a year on your wireless bill. With the carrier rated 1 in customer satisfaction. Call, click, or visit your local xfinity store today. Twitter all testifying in front of the senate this morning with all of the stocks trading down significantly. Facebook, twitter shares now down nearly 4 , alphabet down 4. 5 shares of snap, which doesnt face the scrutiny, that company is in the green. Whats going on on capitol hill right now . Reporter well, julia, the executives are all defending the political knew ralt neutrality and theyre also warning lawmakers about the potential consequences ofchanging sectio 230. Let me be clear, we approach our work without political bias. To do otherwise would be contrary to both our business interests and our mission, which come pels us to make information accessible to every type of person, no matter where they live or what they believe. Reporter now, republicans did try to bring up specific examples that they said directly convicted those assertions they said president trumps tweets have been flagged, but posts from other adversarial foreign governments have not, including the Chinese Communist party and the ayatollah of iran. We believe its important for everyone to hear from Global Leaders and we have policies around World Leaders we want to make sure that we are respecting their right to speak and to publish what they need, but if theres a violation of our terms of service, we want to label it reporter now, just a few minutes ago democrats began questioning google ceo pichai, democratic senator Amy Klobuchar saying he has been defiant to the law and the response to the dojs lawsuit has been unsat factory. Its interesting to me to listen to the different approaches and dorsey very much on the defense about this double standard, trying to explain that they dont have a rule against misinformation and zuckerberg saying that they want to work together, he wants to work with the government in creating new laws have you gotten any sense of some changes that might come out of this . It seems like a lot of the questions have been about whether or not these decisions around censorship have been partisan has there been anything solutionoriented, in terms of the questions or the answers reporter well, we are very close to an election, julia. Right now everything is going to be highly politically charged. However, one of the sort of ideas that zuckerberg has been talking about is that they need help from the government in defining what types of harmful content might be so what exactly counts as misinformation, what exactly counts as hate speech. And its going to be up to the regulators to define that. There is a bipartisan bill out there that would create a sort of standards body that would help define some of those terms that includes both Industry Leaders as well as the government, as well as regulatory agencies. So there are there is some discussion on capitol hill about bipartisan ways to proceed but in the moment that were in now, none of those discussions are going very far were just seeing the political theatre thats being laid out today. Lets listen in on whats going on in that testimony right now. President trump and the republicans have a plan which involves disinformation and misinformation the russians have a plan i want to know whether you have a plan, facebook, twitter, google, a plan if the president uses your platforms to say on the day of the election that there is rigging or fraud without any basis in evidence, or attempts to say that the election is over and the counting of votes must stop, either on november 4th or some day subsequent and i would like, as to this question about whether you have a plan, a yes or no. Senator, i can start. We do. We have policies related to all of the areas that you just mentioned. Candidates or campaigns trying to delegitimize methods of voting or the election, candidates trying to prematurely declare victory, and candidates trying to spread Voter Suppression material that is misleading about how, when or where to vote. So weve taken a number of steps on that front. Perhaps we can take mr. Pichai next and then mr. Dorsey senator, yes, we definitely are robustly weve been planning for awhile and we re