What's on the horizon for financial markets? At PJIM, it's a question that over 1,400 investment professionals relentlessly research in pursuit of your long-term goals. Specialised across asset classes, but united in collaboration, our teams provide global and local expertise. Our investments shape tomorrow, today. Pursue your tomorrow with PJIM, a leading global asset manager. Market moving insight and analysis. Join Jim Kramer, David Faber and me, Carl Cantonea on the opening bell hour of CNBC Squawk on the street. It is being called the largest IT outage in history as this operating defect. Ed CrowdStrike does hobble, airlines, banks, mass transit and municipal services all around the world. Good Friday morning. Welcome to Squawk on the street. I'm Carl Cantonea with David Faber, Sarah Eisen here at Post 9 of the New York Stock Exchange. Coming up this morning, we are going to talk to crowd strikes. George Kurtz in just a few moments with our own Jim Kramer about the outage and the timeline for fixing it. First though, we get to Megan Costello this morning with some breaking news. Megan. Hey, Carl, good morning. The Biden campaign is now holding firm this morning and saying that President Biden is remaining in the race for his reelection. A long new campaign memo out this morning outlines that despite widespread concerns, the party has "no plan" for an alternative nominee. The campaign's battleground states director acknowledges the uphill battle ahead, saying they have their work cut out for them, but he shares some internal research finding that the voters that the campaign cares about the most are still planning to vote for Biden in November. I want to read you a full quote here from the memo. It says, "Joe Biden has made it more than clear. He's in this race and he's in it to win it. Moreover, he's the presumptive nominee. There is no plan for an alternative nominee. And in a few short weeks, Joe Biden will be the official nominee. Now, this sort of internal research and reassurance about a viable path to victory, this is what Democrats have been craving from the campaign, but it's definitely not clear at this point whether this will be enough to fully put to bed all of those calls from Democrats for President Biden to step aside. Just in the last hour, a 25th member of Congress, those representatives Sean Cassin of Illinois came out asking Biden to bow out. And as of last night, Democrats were saying there was just no path to Biden staying in the race, that we were at the end of the rope here. There was fresh excitement even among donors and strategists about starting to plot out a new path forward. Obviously, this memo now will quiet some of those calls and plans, but the question becomes by just how much and whether President Biden can continue to stay on. So we'll stay on this and see if you can make it through the next few hours, the next few days. Back to you guys. Meghan yesterday was Adam Schiff and Senator Tester going public with their efforts to try to get the president to bow out of the race. And there is some reporting this morning that suggests more Democrats may go public next week if the president weren't the changes mine. Absolutely. This is becoming almost a fist fight here. What we're hearing is as lawmakers come back into Washington next week, that more and more of them might start to come out publicly. They'll be speaking together again. We can assume there will be more caucus meetings and that sort of thing. But it's almost as if the Biden campaign is sort of daring them to come out publicly. Many, many Democrats here out of respect for the president really wanted a lot of this to stay behind the scenes. They wanted him to get to this decision on his own to step aside. They thought that would be the best path forward for him, for his legacy and for the party. They're not getting that, so now it just continues after three weeks. We're continuing to have to watch to see if this will get even louder, and if it'll ultimately get sort of pushed out of this nomination. Well, the turmoil itself certainly not helping the reelection efforts, one would imagine. Broadly speaking for the party. Megan, you know, there were reports about former Speaker Nancy Pelosi having a conversation with the president and his key adviser Mike Donilon sharing her own insights from polling that she was seeing, saying there was no virtually no path, and that down ballot would be a bloodbath as well. Those are my words, not hers. But, you know, what are they seeing? Do you have any sense in terms of what Biden's in her circle sees versus what, for example, the former Speaker sees? The biggest question here has been exactly what polls the Biden inner circle is looking at. This memo starts to sort of hint that they're seeing something that supports it. We'll also hear from campaign manager Geno Malley Dillon this morning, and, you know, a lot of Democrats are hoping that she'll have some of those numbers to share. But the concern has been that they're sort of burying their head in the sand, that they're not looking at the polls that everyone else is looking at. Former Speaker Nancy Pelosi has, for her whole career, been very savvy, very good at this, always understanding and impact the political impact of different events on her caucus. So, for her to be warning like this, she's really saying, she's telegraphing, that she's seeing something that she's worried the campaign, and especially Biden himself is not seeing. They're trying to argue that this isn't just about you and this White House anymore, this is about the entire party and all of the policy that they've been working for. I know Dillon's going to be on morning Joe in a couple of moments. We'll listen for that. Certainly, as Pelosi was quoted as saying, put Donald on the phone, meaning Mike Donald in the President's pollster as to whether or not these polls can be believed. Meghan, we'll come back to you later today. Thank you, Meghan Cassella. Let's get to this massive IT outage, impacting businesses all around the world. Our Steve Kovac has been all over this from the very early parts of the morning. Hey, Steve. Hey, Carl. Yeah, here's what we know so far. This was an issue with the cybersecurity firm CrowdStrike. The company pushed an update that caused the outage. That's what it says. Company putting out a statement earlier this morning saying, quote, CrowdStrike is actively working with customers impacted by defect, found in a single content update for Windows hosts. Mac and Linux hosts not impacted. This is not a security incident or a cyber attack. The issue has been identified, isolated, and a fix has been deployed. End quote, really important there. They are saying this is not some sort of hack or cyber attack incident, but it is still unclear when things will fully recover. But earlier this morning, Microsoft's technical support page says some customers have been able to restart their systems. We're getting reports from some airlines and other impacted companies saying they're rolling back online as well. But here's how this worked. The outage caused Windows PCs managed by CrowdStrike security to reboot and show that so-called blue screen of death that took down operations that just a slew of companies across the world from TV networks like our own to airlines like Delta and United to banks, 911 call centers, hospitals we've been seeing. Microsoft is also involved in this and they're putting the blame on CrowdStrike saying the CrowdStrike update forced those Windows devices to get stuck in a reboot loop. In the meantime, shares a CrowdStrike rival central to one, and Palo Altra networks are popping here in the pre-market trading this morning. We're waiting for more updates though from both CrowdStrike and Microsoft about when everything is expected to be fully back online. And more importantly, after everything's working again, what went wrong? There's just some big questions here for Mr. Kurtz here in a couple minutes, guys. Yeah, thankfully we're going to be able to ask them. We'll see what kind of answers we get. Steve, we'll be back to you. I'm sure many times. Thank you. Let's turn now to Phil Laboe. We'll get a closer look, of course, and how this massive doubt of outage has impacted airline travel worldwide. Phil is in the UK and has the latest for us. And David, we saw it hit early in this morning. Here in Europe, there were cancellations, long lines. Look at what we've seen over in the United States. Long lines as people have shown up at airports like in Newark and they see, look, most of the flights are at a minimum delayed, if not canceled. Flight AWARE is reporting more than 1200 cancellations so far. That number is going to skyrocket from here. So here's where we are in terms of the three large airlines that had a ground stop early this morning. About 5.30, 5.45 this morning, American lifted its ground stop. About an hour later, we heard from both Delta and United saying that they have resumed some flights, though neither airline has told us exactly how many flights have been resumed. They both say that they expect disruptions to their schedule throughout the day. Bottom line is this guys, you are going to see this have a ripple effect throughout the day, both in terms of delays and also cancellations. It's going to take a couple of days for the people who are at some of these airports who can't even check in because of the software issues finally get on their flights over the next couple of days. Phil, thank you for that. We'll talk more about why you're there and GE Aerospace in a little bit but certainly important to have Phil give us a sense of what's happening with these ground stops. Speaking of all of this, let's get to our Jim Kramer this morning with a very special guest. Hey, Jim. Thank you, Carl. Yes, we have to speak right now to George Kurtz, the CEO of Crafts, right? A company that has a stellar reputation but we want to know what this is due to it. George, thank you so much for coming on Squawk in the street. Thank you, Jim. Thanks for having me. George, I know your company very well. Our viewers know it too. How does this happen? Well, first, Jim, let me start with, I want to personally apologize to every organization, every group and every person who's been impacted by this. And we understand the gravity of the situation. And let me explain a little bit more about what happened. This was not a code update. This was actually an update of content. And what that means is there's a single file that drives some additional logic on how we look for bad actors. And this logic was pushed out and caused an issue only in the Microsoft environment specific to this bug that we had. We identified this very quickly and rolled back this particular content file. Obviously, many organizations are impacted and many of them are beginning to recover. Many systems can be rebooted and we've fixed the issue so the systems are coming up and running. Some systems may not fully recover and we're working individually with each and every customer to make sure that we can get them up and running and operational. But to be clear, it was not a cyber attack. It wasn't anything related to that. It was a content bug or update that we sent out that we identified and we rolled back. Why do many different users find themselves with the blue circle of death and how do IT people get in touch with who is down? Because we'll just take are we talking hours? Are we talking days? Well, many of the systems are quickly coming online because they're able to be rebooted and the problem goes away and it's fixed. Some systems are going to take some more time. It could be hours, it could be a bit longer, but we're working with customers that if the system doesn't fully recover, we're working with them on the specific fix for that. Essentially, we are providing guidance through our tech support, through our blogs, everything that we know we want to be as transparent as we can and get that out to our customers. George, this is CrowdStrike we're talking about. Is this Falcon, which is your best program? And I need to know, why did you not phase this in? Why was this done all at once? That seems to be, to me, your response. Well, it traditionally goes out in a phased approach and it goes through. What we do is we've been doing this a long time testing throughout the life cycle of any of these updates. So it initially went out and we started to see some issues and then pulled it back. So not all of our customers are impacted. Windows and Linux are not impacted. And as soon as we saw this issue, which didn't manifest itself before we obviously sent it out, we rolled it back and now we're dealing with the impacted systems. I want to be sure about this. This dinner did not get to Azure, which is Microsoft's cloud, because if it did then, but maybe that would explain things, but maybe they're separate. Well, Azure can run, you know, customers run in Azure, right, and they can run our software there. So if there was a customer that was running in Azure that had our software, or it could have been impacted, but that's the extent to what I know is specific to Microsoft piece. You do not know whether this is impacted Azure or not. Well, when you say Azure, it has impacted customers that are running in Azure. That's what I know. All right. Now, let's talk about liability. You offered an apology to me. An apology means that therefore you are culpable and therefore you will be sued. Maybe perhaps sued by airlines, perhaps sued by networks, perhaps sued by banks. Let's talk about the liability to crowd-circuit what it could be. Well, we have to sort out what that all looks like, Jim. Obviously, from our perspective, and I wanted to jump on the air because it's all about our response and getting our customers back up and running. You know, we'll do the hot wash and how this happened and ensure it doesn't happen again. I think past that, you know, we'll deal with my goal right now. And my mission is to make sure that every customer is back up and running and providing the protection that they've come to rely on from CrowdStrike. Do I believe that if the ones that have not come online yet perhaps have to be hand-fixed, which would stretch every single IT department of everybody who is a client who you sent this update to? Yeah, well, we're working on the automation. Many times this can be automated to be fixed. It may take more automation than just simply rebooting the system. That's what the teams are working on right now with customers. But we've been in contact with, go ahead. We've been in contact with customers working through the fixes. And many of them, again, are coming back online. I'd like to turn this over to my colleagues, David and Carl. Maybe you want to ask George something? Yeah, Jim, thank you, and George, thanks for being here. Yeah, I mean, to Jim's point, I think right here I know on the ground here at the New York Stock Exchange, our CNBC computers are going to require somebody apparently to come and actually do some sort of an update manually. So, again, this could take some time, couldn't, for organizations that are going to require somebody to actually manually update code or whatever it may be to be able to successfully reboot. Yeah, there could be some manual steps involved and certainly we're looking at ways to be able to automate those manual steps. And depending on the system and the computer brand and the network and how it actually works, it's different in each organization. Many systems can be rebooted and the fix can be done automatically upon a reboot that's specific to the hardware manufacturer. So, we have to work through that, but there is a manual fix for it that can be employed. And again, we're looking at ways to automate those sort of fixes so that it isn't as manual as going. I just said, you know, you mentioned, obviously, it's an updated content. The issue with the Microsoft environment solely. But to what extent is Microsoft or in the past had they perhaps been able to identify something that might cause a problem? I'm just curious to understand if there's any culpability here in terms of Microsoft as a result of what's occurred. Yeah, we're trying to sort out on our end, you know, again, exactly the interactions. And as you might imagine, the operating system, and this is what we're talking about, Microsoft operating system, is robust and complex. And if you have a negative interaction based upon our content update that caused the issue, right, or can cause the issue. So, we've got to do a hot wash and figure out exactly what systems were affected. Was it a particular operating system version or a patch level on a particular system? We don't have all the details on that yet, but that's what we're going through right now. But, George, historically, if you've been on bad money multiple times, you have had less than complementary things to say about Microsoft to soccer security. Is that at all impacting your ability to be able to work with Microsoft this morning to get this result? Yeah, we know what the fix is, and we've already rolled that out. So, you know, specific to Microsoft, again, I think both us and Microsoft are focused on customers and customer health, and we want to make sure that customers get up and running. Let's talk about reputational risk, because, again, CNBC, I have to believe that CrowdStrike has a black eye. I'm not sure exactly what that extends to. Have you already had customers who just said they're fed up and don't understand why it does? I think many of the customers understand that it's a complex environment, and staying one step ahead of the bad guys requires these content updates, right? And I think what we've seen before, and what we see now, is that customers are understanding that we are doing everything that we can to get in front of it. This is why I'm on your show, Jim. Of course. You know, we want to be able to say what we're doing, we want to keep people updated, we want to be as transparent as we can, and be front and center with our customer standing shoulder to make sure they get them up and running. Some things are out of my control, what I can't control is our response. We would appreciate you coming on and being straightforward, but, again, we have to understand, I believe, the best practices when you roll things out is to do things region by region, so impact is limited. It sounds like you did this all at once, all across the globe. These are staged in terms of the actual roll-out. It doesn't just roll out all to every computer that we have under the globe. It rolls out in a cascading fashion. So when we saw the issue, that's when we were able to roll this back so that the entire customer base was not impacted. George, hi, it's Sarah. You know, what's so remarkable about this is the size and the scope. It's almost difficult from McDonald's stores in Japan to 911 emergency services being affected. Of course, we've been talking about the airlines. It feels like we're pretty vulnerable to this sort of thing. I mean, what can we learn about what made this happen, why it's so interconnected, and how vulnerable are we going forward? I know you're supposed to protect against the bad guys, and this isn't related to cyber, but now they know how easy it is. Well, it's an interconnected world. Our customers are still protected from the adversaries, and this is, again, what we do for customers day in and day out for, you know, well beyond the last decade. But again, I think it shows the complexity of the technology environment and how interconnected the digital world is. I have to admit, George, I am still confused. Some customers have between us, 10,000, 50,000 windows machines. I have to believe it's hard to get there, and I want to know how much this need to be done manually reset versus something you can do at your headquarters. Well, it depends, Jim, on each customer and how their systems are configured. Some customers, it's simple as a reboot. Other customers, they can automate the reboot process and delete the file that was the offending content file. Others, it may be more manual, so it really depends on each individual system. It depends on the hardware manufacturer, it depends on how they have it configured. Each customer has a spoke in how they have their own operating system at IT configured, and we're working through the various ways to be able to bring them back online. Okay, now obviously we're more concerned about first responders in 9/11. How many of them are back going and how many do we have right now? I'd say in the dark about what's happening. Well, we're communicating to our customers through various channels, our blog and our tech support portal, and obviously we're going through the number of impacted customers. I don't have the exact details for you as we go through them, but as you might imagine, we're working through each customer through our customer support, and we're being proactive in letting them know what's going on and the potential fixes that are available to them. George is David again, just to follow on Sarah. I mean, this morning when I woke up and my app that tracks the subway trains that lets me know what time they're coming in didn't work, and then I went to a city bike and I tried to retrieve a bike to get down here, and that didn't work. I think a lot of people say, "My God, if this can happen just from a simple update of content, what in the world could our real adversaries such as the Chinese do to us?" How do you answer that? Well, this is the challenge with cybersecurity. You know, when you look at infrastructure and you look at keeping the bad guys out, I mean, there's incredible capabilities that the Chinese government has, and this is one of the areas, again, why we focus on being able to protect against these sort of attacks. Obviously, it was an issue that we're dealing with, but the sophistication of the adversary shows how vulnerable we are, and it's a function of the interconnected world. You like using your app, you like the speed and ability to get on the subway or call a car service or what have you. Everything is interconnected, everything is connected in the cloud, and this is why these systems need to be protected. All right, George, I want to be able to try to give you your due here. I want to be saying that this could happen today. This was a glitch, this was not something that says if files right, it should not be calculated when it comes to cybersecurity. That's right, Jim. Again, we've, I think, built a stellar reputation on protecting customers. I've been at this for a long time. I'm personally involved in making sure that we get every customer up and running. And from my perspective, it's how we respond to this and how we get customers up and running. There are many companies that have issues and bugs and different things that may impact the system. This is just part of software and part of the interconnected world. I want to be here, and I want to talk to you directly in the audience, let our customers know that they're protected. We're working through this issue, we've identified it very quickly, we've rolled it back, and now we're bringing our customers back to health. And that is my promise. I propose what David and Cher ask me. I'm struggling with this automation part. If the machine is frozen, George, it will not respond to anything. The automation requires the machine to be alive. Well, depending on the system, again, Jim, some systems can be simply rebooted because they're power-cycled. Other systems can be rebooted from the network. Other systems are virtual, and once the virtual machines are all updated or rebooted, they come back online. So there is a high level of automation that can be done just by simply rebooting the system. Now, there are some systems that may not come back, which may require more manual intervention, which we're working through. You're watching the show right now, and you're saying to yourself, I can't get on my computer. What should these people do? Just give us the quick of what you can do. Let's say you're an airline terminal in Delta, and you're someone trying to put something through. Can that person do something, or is that person just down? That person, it's really going to be up to the IT department of the company that has the impact. So that's not something that a consumer can actually fix on their end. And we're working through this issue with the IT department to get things rebooted and deal with the offending content update that was pushed out. Understood. George Kurtz, proud straight CEO. We greatly appreciate you coming into us and telling it straight about what is happening with this mess about. Thank you, George. Thank you, Jim. All right, back to Carl and Dave. I don't know if you have to run, Jim, but I am curious about your thoughts after what happened with AT&T the other day. The car dealers, which that impact is still ongoing. I wonder if you think this will force some would be customers to slow down their automation plans in general. I mean, we've seen car dealers go back to patent paper. It's a great question, Carl. I don't have to go anywhere. What concerns me is that we have become so digitized, and all we do is get digitized and digitized, that maybe we have lost some control to the machines. I listen to George and what concerns me. Remember, the question really can power out faster. What concerns me is that the lack of knowledge about what you can do in digital versus if it were by hand. If it were by hand, we would just walk away through it. But, Carl, it's so out of reach of everybody who has the screen that I begin to wonder, don't we lament that we have no backup by hand? It's almost as if we have turned over ourselves as humans to a machine. Something David talks about a great deal and surrendered our autonomy. Because if someone is a quantist and someone is a delta, it's down. That person really doesn't have to clue. And we can all say that they should just do X and just do Y. But the fact is, humans seem to be left out of the loop. I'm not sure if you guys agree, so that's all the way I did. We're glad we had you on the desk for at least for a little bit today, Jim. And we'll talk more next week about Sentinel-1 and the fallout. But greatly appreciate that George pulled in. There's reputation, risk, and competitors power out. And I'm going to go to the park and get some Darcy Keys. Let's see, Jim. Have a good weekend, Jim Craig. We're bringing us Kurds today. A lot more on tap this morning, including market reaction to names like Netflix and Amex and Travelers. Got news on Lily. We'll talk more about this fed speak today as the blackout window begins this weekend. Stay with us. Support for this program is provided by Chevron. Demand for energy is projected to continue rising in the future. To help keep up, Chevron is increasing their U.S. oil and gas production. And they're innovating to help do it responsibly across their operations, including their Gulf of Mexico facilities, which are some of the world's lowest carbon intensity operations. Helping supply energy that's affordable, reliable, and ever cleaner. That's energy and progress. Learn more at chevron.com/meetingdemand. Earning your degree online doesn't mean you have to go about it alone. At Capelli University, we're here to support you when you're ready. From enrollment counselors who get to know you and your goals, to academic coaches who can help you form a plan to stay on track. We care about your success and are dedicated to helping you pursue your goals. Going back to school is a big step. But having support at every step of your academic journey can make a big difference. Imagine your future differently at Capella.edu. Let's take a look at the opening bell here. And to see if you see the time it changed to the big board, it's Pearl Diver Credit Company celebrating its recent IPO, an epic match back. NYC desert shop delays celebrating National Ice Cream Day. We see markets react to the IT outage, although the picture not as dire as it was earlier today. Still some moderate losses Sarah in Europe today yields up just a touch. Some of the airlines got hit on the disruptions. Not clear what the specific market implications will be of this as we just heard from George Kurtz, the CEO of CrowdStrike. The fix is on and he said should be immediate in some places and could take hours or more in other places. So when you're thinking about economic impact, hopefully potentially it's not as severe as what could be, but obviously exposes a big vulnerability, David, which we were trying to figure out is pretty widespread. Yeah, I mean, it is just a reminder, I think, and we certainly indicated that of what our adversaries conceivably could do. Of course, it's interesting listening to Mr. Kurtz. His company is used widely to prevent those same adversaries from causing such outages, but it does remind you how interconnected we are as he indicated as well. And just going about your daily life, how many things you do rely on that you may not even realize are connected in somehow to Microsoft and some fashion, for example. Well, I mean, one stock that is being big-time affected is CrowdStrike, which is opening down about 14 and a half percent. Dan Ives published already on the name. Web bushy likes CrowdStrike, but obviously, and Jim used this phrase a lot, "reputational risk is real here," and that is CrowdStrike becomes a household name across America and the world today and not for the right reasons. That could open up a competitive advantage, and it is a competitive marketplace for these services. For instance, Palo Alto was up pre-market. That's a big competitor on the cybersecurity space, and we're looking at some of the others as well, higher on the day. We took note this morning of the Redburn Atlantic analyst who cut CrowdStrike yesterday to sell for reasons completely unrelated, largely about valuation, but it's helping out names like Sentinel-1. That's up almost 9% here, as we'll start to talk about potential shifts in market share or senior markets commentator Mike Santoli's here to talk about either this or the fact that Dow is on track for the best week since May. It is definitely getting tested, I think, in general on the dip buying reflex all week. The market has been dealing with this forced rebalancing for about a week, meaning we all knew this was a lopsided market. We all knew it was very concentrated. Everyone was begging for a broadening in the market, and now it's like, well, maybe not this way, where it was essentially massive short squeeze, massive wrong way positioning creates these huge churning moves under the surface. Now, it nets out to not very much, the S&P down 2% off its high. I do think earnings are going to be an interesting kind of input to all this, just because stocks have been, you know, the majority of stocks have been ramping into this period, whereas the big bellwether stocks have been coming off the boil. 5% pulled back in the NASDAQ 100 a month ago, people would have said, give me one of those, I want to buy it. Now the question is, do we give credit to the market for this massive breath-momentum surge, because that sometimes buys you some time and it has some good forward implications, but usually you'd want to see that happening at the end of a cycle. Or, you know, if we keep saying this, it's not really in step with what you would normally want to expect. One final thing I'll note is that I think maybe it's giving some people comfort today is Goldman Sachs data on just how much hedge funds have de-risked in this period by basically a record pace. Everything happens fast in this market. We overshoot in the short term, and it seems as if there's a kind of squeeze and the sort of sharp drop in some of the most crowded positions at the top of the NASDAQ have cleaned up positioning a little bit, which was getting, I think, a little excessive coming into this week. Which means maybe there's a lower vulnerability out there in terms of further foresell. It's really starting. Like 3% moved lower this week for the NASDAQ. It rustles up 2.3%. It was up even more than that before that kind of fell apart yesterday. And we're still asking whether the small cap rally is the place, small caps are the place to be given low rates, market very confident in a September rate cut and more following that. Given soft landing, the data's coming in a little bit weaker, but still pretty okay. Given the Trump odds have gone up and small caps are more insulated from tariffs, trade war, they benefit from lower rates, they benefit from lower corporate taxes. And these are all the reasons we've been talking about all week. These are all the reasons, and I think they all could hit at once. And I think that explains in part the dramatic angle of this move in small caps. I worry, as I said earlier this week, about getting to a point of a little too much certainty about all those great things you mentioned, Sarah, and what it actually translates into in terms of what types of stocks ought to work. You know, we'll have to see if earnings substantiate this. I still think that because of the extreme underperformance of the small cap indexes relative to everything else, the extreme underperformance of value versus growth, you have to sort of give room for it to just be kind of a mechanical reversion to the mean. Nobody expected this stuff to work. We weren't positioned for it, and you got forced into it. And so I do think it makes sense when you look at the historical tendencies of this type of a move in the Russell versus everything else, yep, has good things to say about what we get in six months, let's say, from the Russell. But the part of it that I can't calculate, the IWM, the Russell 2000 ETF, it took like two days for it to basically become a meme stock, to become like top three on Reddit in terms of what people were buying. There's just not that much market cap there. You know, you can't just rotate out of the MAG 7 and find a home for it in small caps. And, you know, it's like, is this the moment to bet on low quality companies, even if they are having a little bit of an earnings rebound, at least on paper, in the next couple of quarters. Yeah, I mean, Jim has made that point in terms of low quality that you made as well. Like, I mean, when you look through, actually see what you're owning, so to speak. It's not the greatest stuff. It's not the greatest. It's the kind of thing where you say, well, this economy's been in trouble. It's getting rescued. The Fed's cutting. We have a cyclical rebound accelerating out of here, and these companies can ride it. That's usually what that means. Now, I don't think that same thing applies to the eco-weighted S&P, where it's essentially big, better companies, but financials are getting relief. That makes a lot of sense on a bunch of fronts. And then a little more of the cyclical geared companies within the S&P that got a little boost. And to Sarah's point about the election and sort of economic policy and isolationism, whatever you want to call it, you would want to stick with names that are domestically focused, right? You wouldn't want to. That's the playbook. People are going to execute it. I still think how many things do you have to get right in sequence for that to play out the way you think, right? You have to bet that the probabilities not only are correct today about the election, but that they're not going to waver along the way and not that trade-off balance. You have to bet that the election happens that way. The policy prescription happens as expected all the way through. Sure, sure, it works. By the way, you got one of these in late 2016 after Trump was elected the first time. It didn't set the tone for four years. It was like three months. And you've had another one of these small cap outperformance rallies in 2020, and then we gave way quickly to Fang and Manx heaven. So I just think it's tough to extrapolate how these things go. Speaking of Fang and/or at least one of the winners on the S&P this morning, we're going to a fairly muted response Netflix. We haven't discussed it yet. 37 minutes into the show after the company reported earnings. Of course, after the bell yesterday, we finally will get to Netflix. Stock up a little less than 3%. Typically, we do see bigger reactions in Netflix, whether up or down. The numbers were pretty good. Eight million subscribers overall. That was certainly above many of the estimates. Ad supported. You see right there up 34%. Technically, there is a belief that there's still a lot to come yet when it comes to the ad supported tier in terms of the growth. They did talk as well about the introduction of a new in-house ad tech platform. They're going to test in Canada this year and launch more broadly in 2025. Global average revenue per month for the subscribers, $11.65. Obviously far higher here in the US than Canada, lower in other regions. You get to about $11.65. Some interesting charts as there always are in the earnings release. Including time spent and percent overall of engagement and screen time, 40.3% is streaming now versus 27.2% for cable subscribers and 20.5% for just over the air broadcast. But YouTube is still the biggest pointer. In fact, it's 20% more in terms of engagement or usage than is Netflix. And it's growing faster. Which again, gets back to this idea given the response in the marketplace. Strong quarter with expectations of significant growth. Although more muted when it comes to subscriber editions. By the way, we're going to, at some point, not get those subscriber numbers anymore from Netflix. >> Next year. >> Yeah, next year. So, you know, here we are with the, perhaps the next growth leg. Especially as they laugh the additions that came from the password crackdown. Being what will the ad support tier look like? >> It's trading and in all respects looks like a pretty mature company at this point. Now, definitely a faster growing one in terms of earnings. Because they do have pretty good operating leverage at this point. It is interesting in terms of the ad traction and maybe they're kind of saying they're taking it slow and trying to get the, you know, the ad serving algorithms right. But David, I wonder about the hours watched by a ad supported subscriber relative to premium subscribers. It's hard to get the data on it. Netflix in the upfront said that 70% of ad supportive members watch at least ten hours a week. That sounds light relative to the typical Netflix subscribers. So I just wonder if there's not a ton of inventory and not a lot of inventory concentrated in any one place in time. Like TV tends to be. And so, you know, you have to be smart about how you're actually, you know, how much you want to load up with ads and to whom. And, you know, obviously they can afford to take it slow. >> They can't. And when it comes to being able to introduce new technology that is going to optimize, you would have to believe Netflix is probably going to be fairly successful in executing as they do roll out that new ad tech platform. Of course, Amazon does come to mind now in terms of what they've been able to do, obviously, on the website itself, but also with Prime rolling out significant ads. I mean, $49 billion worth of ads at this point. In fact, I mean, it's unbelievable. And then I mentioned YouTube as well. It's just good to keep in mind the overall landscape given how important YouTube is in terms of overall at Alphabet and the usage and the viewership there is incredible. >> I've also been following some of the updates they gave on the live front, which is also sort of a new growth area. I mean, the, the roast of Tom Brady garnered 22.6 million views and showed the power that they can do this sort of event style programming, which is sort of new for Ray for them. They've got some WWE programming starting in 2025. They, you know, in May, the NFL deal, you're going to have the Christmas game and exclusives, the option to pick up another one there. So I think that that's also a thread that investors are following. Look, Mike, the lack of the big move in the stock that we typically get for Netflix, it was a winner in the run up, right? >> Huge, yeah. >> 30% or so. >> Oh, yeah. >> I mean, I think from the low on October, it's up like 80%. >> Right. >> So, you know, you're almost back to the old 2021 highs, which was around $700. It's a mid-30s forward PE. You know, it's obviously kind of fully valued in that NASDAQ 100 stock type mode, you know, in general. So yeah, there's no doubt that it's already priced in some good stuff. >> Yeah. >> Yesterday, the chatter on the desks was about the freak out. I think it was B of A called it. When we heard they were going to stop suddenly. >> Yeah, of course. >> And Street got over it. >> Yeah. >> And they were like, well, that we were, it's ugly had, maybe if revenue misses, which it did a little bit. >> Right. >> But they're still reporting them, though. >> Yeah. >> You have to keep the mind. >> Right. >> But that's what you trade. And it was hilarious yesterday in the previews to the numbers where some of the desks were saying we're hearing buy side estimates as much as 9 million net sub ads, and they said, but those survey responses are coming from the bears. Because people who want to bet against the stock want to bet their expectations are too high, and it's going to have one of those sell the news responses. It didn't have that. Of course, a very strong sub number. >> 8 million, which was the highest mystery. >> Right, whatever. >> And they raised the revenue margin guidance and expect the sub growth to continue into Q4, even though they won't be. >> Although I do think you have to always keep in mind, when the base of subs is that much higher, you know, it's nice growth, but it's a smaller percentage growth. >> Also, some of the pushback was that the sub growth came from the Asia Pacific region. Particularly India, which is considered lower quality growth. >> Yes. >> That's something that bears are talking about. >> Right, because it comes to a much lower price. >> Lower part. >> Yeah, of course. But Netflix looks like it's going to eek out a win. Another one I was going to mention as an earnings member this morning is American Express, which had another good quarter and also raised its guidance, because they continue to see good spending. Steve Scary, the CEO, said we continue to attract large numbers of high quality premium customers with our superior products as seen in the consistently strong new account acquisitions and 24 consecutive quarters of double digit growth in card fee revenue we've delivered. I mean, clearly, MX customers are ones of the higher credit quality. My higher income level and are continuing their spending. They say they talked about a little bit of softness and T&E, which is business travel and expenses. >> It feels like the weakness is about the marketing spend. They do guide to an increase as much as 15% this year on the call. They said the increase in marketing spend is not related to worries that the consumer would be spending less. But I don't know. I mean, that's part of the general pushback. >> Yeah, I mean, I think they have a certain sense of urgency they've expressed before about making sure the franchise lives in a vibrant way among younger consumers. That seems to be working, but maybe they have to kind of keep up the pressure on that. Another stock, though, that, I mean, it's been a big out performer relative to the other consumer lenders. It lets over the last two years. It's at 18 times earnings. That's kind of high for American Express over the lowest, of course, of its history. It's also an interesting one always. It's a $180 billion market cap, but, you know, Buffett owns 21% of it. So there's less stock out there for everybody. So it's not as much of a core bellwether name as you might expect it to be, given it's in the Dow, and it's this longstanding kind of blue chip of finance. >> So the profits would be the revenue is a slight mess. >> They do put in perspective saying, you know, in terms of year-end revenues, 2021 revenues have grown by nearly 50% since the end of 2021, and as well sharing this on the call. Card members spending is up by almost 40% since the end of 2021. >> That's amazing. >> That's a big number. >> Yeah. >> So you think about beneficiaries of experiences and travel and everything that that priority has. >> An inflation. >> An inflation. >> And high rates. >> Exactly. >> I mean, ultimately, on the net interest income, which also affects a company like American Express. Nasdaq's up, barely. >> Yeah. >> A little bit. Nasdaq 100, at least. >> Mike, thanks. Talked talking a little bit, Mike, since only. As we go to break, Dow's down 180 here. Check out Treasuries. Got two voters on deck today. Mike at one, Williams at 1040. Of course, the blackout window does begin on Saturday for the Fed's Pixel. We'll be without it for next week, right now. 10-year eyes of the session, year 4-2-4. Stay with us. >> Imagine earning a degree that prepares you with real skills for the real world. Capella University's programs teach skills relevant to your career, so you can apply what you learn right away. Learn how Capella can make a difference in your life at Capella.edu. >> Shares of CrowdStrike are definitely getting hurt, but trying to come off of these session lows, at least. Goldman's already out with a note saying they expect to see, quote, "minimal" share shifts as a result of this incident. Although we do expect to see noise in its competitors go to market processes. We're going to talk to the Transportation Secretary next hour, Pete Buttigieg, about the outages impacted the airlines, at least. Although it goes well beyond that today. Stay with us. >> Let's turn back to this global outage of a lot of different technology platforms, and talk about the impact on the banking sector. Leslie Picker is monitoring it as the latest for us. Leslie, what do we know? >> Yeah, David, so the banking sector facing some sporadic disruptions from the global technological outage. Based on many, many conversations I've had this morning, it sounds like the glitches are largely limited to login issues with a few notable exceptions. I'm told some employees at JPMorgan have been experiencing login issues this morning, particularly with computer desktops. But the login issues are not ubiquitous, and they haven't wiped out capabilities for entire groups. So say if a certain trader once or couldn't log in, he or she could seek out help from other employees who can. The firm did not lose operational capabilities from the outage. And I've heard that other banks have had similar login issues. I'm waiting for additional confirmation before sharing those specific names. However, a person close to Goldman told me they haven't experienced any major impact from the outage. Now the focus turns to branches and ATMs specifically. My understanding is there are manual workarounds for tellers inside branches usually, but there may be some ATMs that aren't working. So keep an eye out on that. Stay close to your bank for potential diversions to other ATMs that are working. There are some indications I've seen on Twitter that smaller banks and credit unions in the US are having difficulties with their mobile banking, but we are chasing that down to to confirm. I've also reached out to the slew of banking regulators. I'm still waiting to hear back from the FDIC and the OCC, but a Fed spokesperson says its critical systems are operating normally, guys. You know, Leslie, we made this point earlier, of course. This can occur from a content update, so to speak. One has to wonder what our adversaries really could do if they were focused on actually interrupting our networks. You know, the banks, I mean, just put it in perspective, for example, JP Morgan, I know, what they spend simply on defending their own networks and what they spend on making sure, you know, their customers are safe. The numbers are enormous. I mean, oh, the banking system spends billions of dollars on cyber security. I believe that Jamie Dimon has said repeatedly how that is something that truly, you know, keeps him at night, often just the potential risk for a cyber security attack. So this is something that is very top of mind for bank CEOs. And I have to admit, David, when I first saw the headlines earlier this morning, my first thought was, oh, no, because of the critical infrastructure and because of the importance of the banking system that I'm happy to hear that this was not a cyber attack. However, it does show you just the ultimate kind of interconnectivity that the banking system has with technology and just that this glitch and this bug can ultimately, you know, have such a large impact. It also reminds me of that comment. Remember when I was talking at FedShare J Powell just a few weeks ago and I asked him at the end, what was his biggest headache? What keeps him up at night the most as far as a risk potentially for the economy and the unknown, and he said cyber. Yeah, that was a really interesting moment when you asked him that. He just answered it first of all. He just answered it, yeah. And unexpected. Yeah. And then he said also finding the right balance between unemployment and inflation. Yeah, yeah, but the cyber is what got everybody's attention. And I think it comes from talking to CEOs and CEOs of banks, Leslie, who maybe not as much on air, but on a lot of our conversations off the record and on background, they do talk about what a major priority this is and what a major, maybe not vulnerability. I feel like the banks are in the best shape because they get attacked a lot and have had to spend so much money beefing up their defenses. Exactly. No, this is not something that's kind of newer in the past few years, a new focus for them. This is something that's been a focus for a long time. I think it also explains, I've talked to some people who kind of run technology divisions within the banks to talk about their AI rollout plans. And it explains kind of why we're seeing this slower rollout of AI use cases that a lot of banks, it's because they have to number one, make sure that that AI rollout is secure before they can make it kind of more of a thing throughout the entire organization. And so it's ever critical for this industry. Leslie will monitor it today as the world tries to get back on track. Leslie Picker, such an important story. You've been listening to the opening bell on CNBC's Squawk on the Street. All opinions expressed by the Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC, NBC Universal, or their parent company, or affiliates, and may have been previously disseminated by them on television, radio, internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information squawk on the street participants consider reliable, but neither CNBC nor its affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Squawk on the Street disclaimer, please visit cnbc.com/squawkonthestreet disclaimer. Earning your degree online doesn't mean you have to go about it alone. At Capelli University, we're here to support you when you're ready. From enrollment counselors who get to know you and your goals, to academic coaches who can help you form a plan to stay on track, we care about your success and are dedicated to helping you pursue your goals. Going back to school is a big step, but having support at every step of your academic journey can make a big difference. Imagine your future differently at Capelli.edu.
