Closing Bell - Closing Bell: 800 Point Swing, Goldilocks Jobs Report & Oil's Not Well 9/2/22

Episode Date: September 2, 2022

Stocks staging a big early session rally following the August jobs report, which came in slightly weaker than expected, easing fears the Fed could hike interest rates more aggressively. But the Dow, which had been up nearly 400 points, swung to a 400 point decline after Russia's Gazprom announced an indefinite shutdown of Europe's Nord Stream pipeline. OPIS Global Head of Energy Tom Kloza discusses what the pipeline problems mean for oil and gas prices. Truist's Keith Lerner explains why he thinks this market sell off would have happened regardless of the pipeline news. Satori Fund Founder Dan Niles discusses the recent rough ride for tech stocks and where he is finding opportunities in this market. Jefferies Michael Yee on why he is so bullish on biotech stocks despite a huge sell off this year. And IMAX CEO Rich Gelfond on the outlook for the box office and the first ever national cinema day on Saturday.

Stocks give up a big early rally and we're selling off into the close. Dow had been up nearly 400 before reversing lower. The most important hour of the trading day starts right now. Welcome to Closing Bell. I'm Carl Quintanilla in for Sarah Eisen. 1% losses are close to it as the focus shifts from that Goldilocks jobs number to European energy. We will get to all of that. S&P down almost a full percent, 39.32. Biggest decliners on the week, a lot of companies that warned in recent days, among them NVIDIA, PVH, and Seagate. Coming up on the show this afternoon, Satori Fund's Dan Niles is going to join us to break down the wild week for tech, including today's big downside reversal. We'll talk to energy expert Tom Kloza about this developing news about Nord Stream 1.

The pipeline will not reopen as scheduled tomorrow. But first, let's get straight to the market. Senior markets commentator Mike Santoli watching today's turnaround. Yeah, Carl, that reassuring jobs number seemed to lead people to set the dials for a nice gentle rally about halfway through the day. We were hovering right at the 50-day average, kind of reinforcing the idea that yesterday's upside reversal maybe had something to it. It does leave us here just a little bit above yesterday's lows. That 3,900 level was seen as very important going into yesterday. One reason is it basically is the uptrend line from the June lows right to now. So that would seem to stay intact, but it's precarious at the moment. Not too much breathing room there.

We obviously just had this real jolt higher in the dollar as well as energy prices on those Russia headlines about depriving gas from Europe. Take a look at the U.S. dollar index on an intraday basis. That's kind of all you had to know. The headlines hit right there. And that just is read as financial conditions tightening, people on alert for some kind of other macro shock that was not necessarily anticipated. So a bit of a limbo state in, of course, a relatively fragile tape ahead of a three-day weekend. Now, as to whether we've gotten in the clear at all, whether the June lows hold, Bank of America was out today with a bit of a reality check on what happens typically at market bottoms. B of A making the case most conditions are not in place.

This shows you the Fed funds rate and these vertical lines are previous market bottoms over prior decades. The point being that typically the Fed has been cutting rates or has just cut rates right before the market has bottomed. Now, there's exceptions to this rule right here, OK? In fact, I would say the 1987 example when they cut rates just once after the crash. It was really just a pause in a tightening cycle. But it does tell you that maybe we're not really in sync this cycle in terms of how it normally goes. Carl, I know you remember when we got into this year, everyone had those charts to say, you know what? The stock market typically does well in the first six months after the first rate hike.

Well, that hasn't happened this time. So who knows how much the playbook applies? Right. And then, of course, we have September to worry about. Our thanks to Ryan Detrick, who says that as bad as the month is, September 2 is actually one of the stronger days of the month. Exactly. People this morning saying, of course, we're up today. It's September 2nd. Look, who knows how it's going to play out. But I will say year end rallies are born in September weakness. Typically, that's not necessarily reassuring, but that's usually how the cadence goes. Yeah, a lot more months to go. Mike, we'll talk in a little while.

Let's turn to energy this afternoon. Russia's state-controlled company Gazprom says it can no longer give a timeline to restart the Nord Stream pipeline, which had been slated to resume flows tomorrow after finding a leak. Our Brian Sullivan joins us with the latest, maybe a bit, Brian, on what we can

believe and maybe might not believe. Yeah, I'm going to be interested to hear what Tom Closey, your next guest, has to say about this, because obviously Germany has said this is a lie, that there is no maintenance issue with this turbine or with the pipeline still. I think, Carl, I'll make a prediction. I'll editorialize just a bit. You're going to see the term energy war a lot, I think, this weekend in many papers, if you haven't already. That's what we've got now. There's this talk of this oil price cap, the G7, including the U.S. and Janet Yellen coming out, saying we are seriously exploring the idea of a price cap on Russian oil. Nothing instituted yet, not a mention of what price, not a mention of how, but they're talking about it. Russia has

said in the past, if there's a price cap, we will retaliate. And it looks like this Nord Stream may be the first sign of retaliation. This is with natural gas, not with oil. Zero flows now through the Nord Stream. Germany's storage level is OK, but the storage level depends also on continued flow from pipeline. Remember that they've never tried to just exist on storage levels alone, along with some U.S. and Norwegian imports of gas to try to make that up. Could be a long, cold winter in Germany. And, of course, with oil, we've got OPEC meeting on Monday, Labor Day holiday. And to Mike Santoli's point, Carl, why would you necessarily hold these long positions

when it appears we are on the edge of what could be an all-out oil or natural gas price war heading into a long weekend? OPEC meeting on Monday. And as I reported last week, speaking with the Saudi energy minister, just kind of reading the clues, it would not seem unlikely if OPEC either brought down their production gains or simply said we cannot make our production gains, which would affect be a de facto cut. JPMorgan Chase has said $380 oil in a worst case scenario if Russia pulls its barrels for the market. I'll leave it there. Yeah, we remember that call from earlier in the year, Brian.

Thanks for the setup, our Brian Sullivan. Let's bring in Tom Ploser to discuss, of course, global head of energy analysis at Opus. Tom, how much of the oil leak reasoning do we believe? Well, I would agree with Brian, but not use the term war. I think that it's reminded us that this is an energy crisis and it's going to be measured in years or certainly many calendar quarters. You know, the nuisance of Putin being able to press these buttons, you know, is a big, big thing to watch. I never thought I'd wake up every morning and look at what the price of natural gas was in Holland or the price of bean oil is in the United States. But that's the reality that we deal with now.

And I think, you know, people have to realize that if the stock market were trading with the swings we see in natural gas, we'd be looking at swings of two and three and four thousand dollars a day. So these are absolutely disrupted markets and they could go back above the equivalent of five hundred dollars a barrel very, very quickly. Most of the Nord Stream news came after the futures market for the title transfer facility. You know, that trading closed down. Right. The German economic minister spokesperson today said, we already know Russia is an unreliable vendor and our storage plans are much better prepared now than we were a few months ago. How much of a salve can that act as in this

situation? I don't think it's much of a salve because if you look at natural gas and you look at what happens in the United States, you can store only so much. And it's very much like the Bay of Fundy in Canada, where it has a morphology where it's shallow and you have tremendous high tides and tremendous low tides. And that's true for most places with natural gas. We're seeing these swings and we're seeing prices drop off. But if you get a cluster of degree days in Europe or a cluster of degree days in the Northeast, prices tend to go parabolic. And that's a possibility this winter that's probably multiplied by the levers that Putin can pull. So targets now? I mean, when we're talking about crude, you know, Goldman's been pretty stubborn

about 140 on either West Texas or Brent. Do we need to start thinking in those terms again? I think we have to look at crude oil and say that it can also go much, much higher. I think that had a near-death experience this week. And the OPEC meeting is pretty easy to call. I agree with Brian that they may opt not to do anything in particular, but they're underperforming so badly right now that they could basically agree to do nothing. And it still doesn't mean they're going to meet those quotas. So it is going to be a wild, wild finish to 2022 and in 2023 as well. Finally, you do think as gas prices have come down 80 straight days that that streak's probably going to end soon? I think it ends. It ends mostly because California has become a little bit unmoored and the Chicago markets have become unmoored based on some refinery murmurs there. I don't think that we're going to see prices trade nationally at below $3. I think there's a possibility we're going to go higher in the fourth quarter. But if you look at history throughout this century,

we've never seen September demand exceed August demand for gasoline, with the exception of the COVID year, where it was a meaningless 17,000 barrels a day. Tom, appreciate that. What a wild afternoon for the energy complex. Good to see you again. Tom, close it. It's going to be an interesting Monday. Thanks. Meantime, tech looks set for a comeback today, but it is falling hard along with the broader market. After the break, Satori Fund's Dan Niles will weigh in with his outlook. And if he'd recommend buying some of the dips in these hard hit names, you're watching Closing Bell on CNBC. Take a look at the Nasdaq. It was on track

for its first positive session in six days, but it did take a leg lower when the market turned. If we close lower today, six in a row we've not done since 2019. Let's bring in Satori Fund's Dan Niles to talk more about the market. Dan, it's great to see you. You get the Barron's treatment this weekend, a new piece. And the headline is, why a bearish money manager likes gambling stocks and is ready to dump Apple. It essentially puts into print what you've been telling us for several weeks, and that is that you were net bearish. Yeah. Yeah. I mean, it's pretty much the summary. I think, you know, our what I've said consistently when I've talked to you in the past is we have two

fundamental theses we're sticking with. Don't fight the Fed. Worked great on the way up for the last 13 years when the Fed had your back ever since the global financial crisis. And now you should respect it on the way lower, because the Fed, as they told you and reminded you again at Jackson Hole, is nowhere near done. And the thing that was most interesting is they said in that speech, Jerome

Powell talked about inflicting pain twice. And then the last piece of it, which you're starting to see now, is don't fight the fundamentals because earnings are starting to come down for the first time in two years. And you heard a lot of companies talk about it this week that are off or that have July quarter ends. And so those are the two things you want to stick with. And the final piece, obviously, is the risk you're taking on as measured by valuations, which are still incredibly high relative to where inflation is today. In this Barron's piece, Dan, you say back in the 2001-2002 downturn, you had about 5,000 Internet companies, public and private, go bankrupt.

And you say we haven't seen that yet. Are you looking for that to happen this time? Yeah, I'm expecting a wave of bankruptcies next year to start kicking in because the one thing, and we've got some charts on this on danmiles.com that go through this, is during the pandemic, consumers massively deleveraged because you were getting a lot of checks from the government that came out. And the corporations, though, meanwhile, raised a lot of debt because interest rates were so incredibly low.

So they actually levered up during this period of time, which is a huge problem because obviously with rates skyrocketing this year, they're going to go up more as this year goes forward. You're going to see companies that especially have floating rate debt going ahead and having a big issue as those reset quite a bit higher. So that's not a problem this year. But I think as you get into next year and you combine higher rates with slowing economic growth and inflation that's still uncomfortably high, you're going to have to deal with that. All right. So let's talk a bit about your playbook. I think, if I'm not mistaken, 25 percent cash. The piece mentions you being ready to sell some Apple. But I also notice

you're long some names like Amazon and Walmart. Walk us through some of the large plays. Sure. I mean, I think Walmart and Amazon and Walmart in particular are what I consider defensive long. So if you go back to 2008, the stock market S&P was down 38 percent that year. Walmart was up 18 percent that year in terms of its stock price, because as people get more economically sensitive and the economy gets tougher, people start to shift down and go shop at Walmart. And so that really helped them. Amazon today, obviously, multiple a lot lower than where it was in 08, 09. But I think you're going to see the same thing where people go, wow, I can't get it at other places. I can go price shopping on Amazon and get it for cheaper. And so I think you're going to see them pick up an increasing amount of share as you go through a downturn as well.

And the nice thing is I can match those like every long I have is matched against a short. And so I can match those against shorts in the enterprise software space or in the advertising space, internet advertising space, where I think estimates, particularly in enterprise software, have a lot further to come down because that's the last shoe to drop is in that and in cloud computing. Yeah, well, certainly this week would lend itself to that discussion, given what we've heard about cloud and enterprise spend. But why wouldn't Apple act like a general, even in a downturn? Well, because here's the thing. You know, if you look at their revenues, they've massively decelerated. But what you're counting on is, if you look at consensus estimates, you're talking about revenues accelerating as you go into the third and fourth quarter from where they ended in June. And I think what you're going to see is people upgraded their phones a lot to work from home, learn from home, et cetera, over the pandemic. And that's why you saw revenues decelerate from,

I think it was 54% year over year in March to plus 2% in the June quarter they reported. For me, I don't think it's going to improve from there. I think you might actually have a good shot of it going negative as you go into the back portion of the year. Because these new phones, there's no real big upgrade to them, right? It's just sort of an evolutionary improvement over what you had before. And so with the multiple, because don't forget, the key piece of all this is then you have to bring up where the multiple is. And the S&P is about 18 times. I think Apple's about 26 times or so right now. You're paying a hefty premium for that name.

And they were a major pandemic beneficiary as well. You know, I've got a lot of names I like a lot better where the multiples have come down a lot as the stock prices come down along with the revenue growth rate. And so, again, I can match those up much better. Right. Does that explain the play on on gambling and your view about the future of sports betting? Yeah, to some degree. But there it's a little bit more nuanced. I mean, again, that's a space where I'm shorting unprofitable companies against them because these sports betting companies, specifically DraftKings, are unprofitable. But what you have going on there is, you know, California is going to be on the ballot to legalize online sports betting. You're going to have the losses be a lot less. Because remember, last year, nobody cared if you made money, right? The more losses you ran, the better. And all you cared about was revenue growth.

Now, all of those ridiculous promotions that the sports betting companies were running, they've all gone away. You're getting to profitability faster. DraftKings revenues are going to be up 60 percent this year. The stock's down 75 percent. But the key difference is their profitability profile is improving dramatically. We like Penn because they are profitable. And we've matched that up against with some casinos that are primarily focused in the Las Vegas Strip, where during the last recession, Las Vegas revenues came down about 20 percent. But for Penn, which is more of a regional play outside of Las Vegas, revenues came down about 5 percent during the 08-09 drop. And so we can pair those up. And with the stocks down as much as they are and with more and more states legalizing online sports betting,

there's 30 today. We think eventually you'll get to all of them over a long period of time. You know, that's a big growth engine looking forward. Yeah, that's fascinating. If there is a downturn, it's not going to affect gambling in quite the same way as history has said. Dan, fascinating. We got to a lot. Look forward to next time. Have a good weekend.

Appreciate it, Carl. Dan Niles. We do have a news alert on the IPO market. For that, we'll turn to Leslie Picker. Leslie. Hey, Carl. Yes, just the latest victim of the IPO drought that we've been experiencing so far this year. This time, it's Chobani, known mostly for their yogurt. They filed a request to withdraw their registration statement for their S-1 with the SEC, saying that they have decided not to pursue at this time the contemplated initial public offering. Initially, it was reported that they were looking to debut in the fall of 2021. That was then pushed to the early winter, early spring this year. Then it was reportedly delayed even further. There

were executives that had left the company as they grew impatient about this IPO that never was to be. Ultimately, it could pop up again, but at least at this point in time, given the contours of its registration S1, not in this current environment. They were reportedly seeking about a $10 billion valuation. And just given the recent market volatility, the lack of IPOs, the lack of interest in IPOs, it's just one of those companies that decided now is not the right time, Carl. Certainly reflective of the year the IPO market is having. Leslie, thanks for that. Leslie Picker on Shabani today. Check the markets this afternoon. Dow down 223 or so. S&P down 29. Full percent decline now on the Nasdaq. Movie theater chains are flipping the script this holiday weekend, offering $3 tickets in an effort to fill seats. After the break, the CEO of IMAX will join us to talk about the promotion and what he's forecasting from the box office after a very strong summer.

Got some more headlines crossing on the Nord Stream pipeline, according to Reuters Siemens, which makes the turbines, saying this is about the pipeline not reopening due to a leak. Quote, we can only state that such a finding does not constitute a technical reason for stopping operation. And in the past, this type of leak has not led to a shutdown of operations. Obviously, a huge story, not just for today's session, but going into the weekend and the coming weeks. Coming to a theater near you, $3 movie tickets, more than 3,000 theaters, including some premium offerings like IMAX, are participating in the first ever National Cinema Day tomorrow, offering discounted seats. It comes after a summer rebound, which took in more than double the total from last summer.

Joining us today, IMAX CEO Rich Gelfand, talk about strategy among the exhibitors. Rich, great to see you. Great to see you, Carl. It's been a while. It has been a while. Tell me about this initiative. Is this sort of an attempt to get those who haven't been back to a theater back in the pool? Yeah, I mean, I wouldn't make too much of this initiative. The movie industry had a fantastic summer, as you said. You know, Top Gun was obviously the star, but there are a lot of stars. People came back.

But the industry has been slow the last couple months and the reason's been a lot of the movies got delayed in post-production because of covid so here we go into labor day which is traditionally somewhat of a mixed time of year and i think people said you know what the hell it worked in england when there was kind of a national $3 day or pound day. So why not give it a shot? But this is kind of a rounding error, Carl. I think the real developments are in the fourth quarter when you have Black Adam, Black Panther, and Avatar coming back. But why not give it a shot and try and make a little additional revenue? Yeah, no, it makes sense, especially some have said, look, the Q3 slate is not going to be nearly as strong as the summer or hopefully the holiday.

I do wonder whether or not you think the Warner strategy shift, this idea that, look, we are going to give our exhibitors the ball and not put too much directly into streaming, is indicative of how the industry is trending right now. Yeah, I do think so, Carl. And pretty much everyone has abandoned the day and date strategy, either for free or on PVOD. And everyone recognizes the value of a theatrical window. As a matter of fact, just today in one of the trades, I read that Top Gun had the best digital sell-through week of any movie ever. And Top Gun had, you know, 60, 80-day window. Before that, Elvis had a 60-day window. And it did really well in the aftermarkets and on streaming. So I think the model where you have a theatrical window is one that you need. And David Zasloff and the Warner team have clearly said

we're all into that model. And, you know, I think Disney has said it as well and Universal and Sony and Paramount. So I think that's where we are. That argument is over now. And I think you've seen even in the case of Netflix, where they don't have a theatrical window, they just don't give that same boost to the streaming properties. So I think there is going to be a lot of momentum behind theatrical releases and especially IMAX because premium and IMAX have increased their market share and gotten a bigger, bigger piece of the box office. And I think that's driving the whole chain. Yeah, definitely one reason why the street at least talks about IMAX punching above its weight is one phrase that gets tossed around a lot.

I am curious on China. We've had John to talk about China quite a bit in the last few years. Some reporting last couple of weeks that the studios are not necessarily accounting for that revenue as much as they were in the past. And they're modeling because of the obvious tensions that are beginning to develop. Is that going to be material? You know, I read the same things you did, Carl, and I don't know much about the studio politics about this, but I do believe that blockbuster movies are going to return to China and there is going to be a normalcy. We're in a very kind of strange period in China right now because you have the party Congress in mid-October to presumably reelect Xi as head of China.

And you also have the shutdowns, the Communist Party, a lot of its legitimacy and the people support the government is a strong economy. And I think a lot of the policies, including the COVID lockdown policy and some of the ones around the release of movies after the party Congress, are going to really start to return to normal in a fairly significant way. So before, when they opened and conditions were normal, their box office came back quite strongly. And I think after the party Congress, we're going to see that again. That's interesting. We're certainly looking forward to a great holiday.

And as you say, there are some major titles coming to market Rich have a great long weekend we'll talk soon so I gotta leave you with this one Carl we're re-releasing Jaws this weekend for the first time ever in IMAX people think it's in response

to the sharks on the beach that we wanted a bigger shark but it isn't that. It looks fantastic in IMAX. Look, I work for Universal, and I should have mentioned that at the top of the segment. Rich, we'll see you later. Rich Gelfand. Take care. Have a great week. From IMAX. It's being called a Goldilocks jobs number. Investors were treating it that way before this reversal intraday. Coming up next, we'll talk about how the August employment report might impact both the Fed and the market. After a break. Session lows here. Markets reversing course today on the news of that extended Nord Stream

pipeline shutdown. Stocks were higher earlier after an August jobs number saw 315,000 jobs added. That was close to expectations, And many called it a Goldilocks report. Not too hot, not too cold. Let's bring in Truist Co-CIO Keith Lerner today and LinkedIn's chief economist, Karen Kimbrough. Great to see you guys. Appreciate the time on a holiday Friday. Keith, do you think that Nord Stream is worth the offset to NFP that we saw intraday today? Yeah. Well, first, great to be with you, Carl. Listen, it's the last day before a long weekend. There's this geopolitical uncertainty out there. So why go into the weekend long if you're a trader with the uncertainty? And there's not a catalyst

that we can point to for like beginning of next week for this market to move higher. So listen, I think it makes some sense. It's just a little bit disappointing to see such a reversal. And that did happen around this news out of Nord Stream. So I think that had some impact on it. But I also think, you know, more like traders are closing up their books and going to start over next week. Yeah, that's certainly how it feels a little bit on the floor here, Karen. I do wonder, as for the jobs print itself, those who wanted to argue that it was net dovish for the Fed. Is there enough in there to think they're on track? I don't think there's enough in there to call it one way or another. The Fed likes to have a couple of data points under their belt before they make a big decision. So I think they're going to keep watching the data before

they're sure. But to be clear, this was a pretty solid report. We were happy to see it. It mirrored what we see at LinkedIn, which is hiring is up from last month. And this is the first time we saw nearly 7% hiring pace among our members since April. So definitely a positive sign that the labor market is in good shape. And if anything, it kind of opens that path for the possibility that the Fed can get through here without causing a recession. Right. Journal did a piece following the print today, Karen, basically arguing that the conversation is still very much about 50 or 75 basis points. We're awaiting CPI on the 13th. Does it change your view about the terminal rate? Because I think the market may be a little bit tired of arguing 50 or 75. You know, I don't think it does.

I think whether they do 50 or 75, they know they want to get as much done as possible and go early, early-ish, if we can call it that. Because ultimately, the longer they wait, the harder it's going to get. We heard Jay Powell say that. And from our perspective, you know, the labor market continues to be probably something that's actually kind of helpful. I know they're worried about the imbalance between labor supply and labor demand, but we're seeing employers continuing to hire, focusing on what skills they can get through skill-based hiring of employees. And we're seeing job seekers coming off the sidelines.

That's what you saw in the report. You saw unemployment rate go up. That's a sign that people are reentering the labor market, looking for jobs. So all in all, really, really healthy place for the Fed to be. And whether they do 75 or 50, it doesn't really change my view. I think they still have some ways to go. All right. And finally, Keith, just on the indexes, it doesn't sound like you're in the mode yet to say June lows are something to worry about again. But you are advising clients maybe to trim in the high of 4200s. Well, actually, coming into the month, Carl, we were very vocal that we thought the risk reward is very unfavorable at that 4200 to 4300 level. So we were we were saying that was a good area to trim. Now that we're down about 10% over the last two weeks, what we're saying is down here, we wouldn't be selling here,

Carl, because in our indicators right now, we're seeing the most oversold levels since the June lows. And again, you've had such a one-sided move, a marker stone move in a straight line. So we still would be more on the defensive side, on the sector side, as far as things like utilities, health care, staples. Still like energy because of the geopolitical risk. But again, I think we're looking for some at least short-term stabilization after really a straight line down here over the last two weeks. Keith, Karen, appreciate it, guys. Enjoy the long weekend and the discussion. We appreciate the discussion today.

We are seeing some cell programs kick in here. Back to nine hundred. Some familiar battlegrounds. Dow's down four fifty. Biotech stocks falling hard today, down more than 20 percent this year. Coming up, a top analyst will explain why he sees big upside for this beaten down group. And of course, you can always listen to the Closing Bell podcast wherever you choose your favorite podcast apps. We're back after a break. Let's check out today's stealth mover, Beyond Meat. The stock's under pressure after investment firm Bailey Gifford reported its stake in the plant-based food company had fallen to 6.6% as of the end of August. That's down from a previous stake of just over 13. Shares of Beyond Meat now down more than 60 percent year to date. We are now in the closing bell market zone. CNBC senior markets

commentator Mike Santoli breaking down some of these crucial moments of the trading day. Mike, we were talking with Keith Lerner a moment ago, sort of suggesting maybe the weakness is partly Nord Stream, but maybe it would have come anyway. Yeah, or at least the degree of the weakness we've seen in the last few hours probably exacerbated by the fact that we do have, obviously, illiquid tape and ahead of a three-day weekend. But I don't like to necessarily rely on that to explain the directional moves. I could argue yesterday we got a percent-and-a-half rally off the low to the closing high, and that was kind of, you know, I'm sure exacerbated, too,

by the fact that we do have slightly kind of, you know, I'm sure exacerbated, too, by the fact that we do have slightly whippy, illiquid markets. But the market was presented in that in that, you know, Russia gas prom news with one of the very well-known feeders right in front of it. And so I don't think it was new, but it was one of these acute things that folks were worried about. And another excuse for investors to pull back their risk budget and not spend much on stocks here. With stocks and bonds down all year and this month, it's been very difficult to have people feel as if they have the cushion to go out and buy dips. Now, that being said, 3,900, we keep pointing to it. We're about at yesterday's low,

which was just above 3,900 on the S&P 500. It is an area folks feel like it should probably hold. And I keep trying to contrast where we are now with where we were in terms of overall conditions at the June lows, which was just above 3,600. And on inflation, on growth, on credit spreads, on almost everything, you're in slightly better shape now. Where we're not is that the Fed seems to not care and they want to be full speed ahead. And we've been dealing with that for a week. Yeah. Or in the case of Kashkari, maybe actually smiling a little bit. Mike, there were some technicians yesterday who said the successful test of 3900 made them feel pretty good. That maybe buying dips in this environment remains smart.

Do you think that conversation continues after this? It absolutely continues. Who knows, if we close right here, it's going to be at the point of kind of maximum disagreement as to whether you can believe the support or not. To me, the character of the rally off the June low is still the single most bullish touchpoint that we have. Just all those breath momentum readings that we got. It's doing a lot of work for the bull case, for the dip buying case right now. If you don't believe those things, if you think that, you know, those stats are outdated or they're not going to hold this time, then there's not as much to go by.

But, you know, we've we've gotten down around these levels before late July, early June. We've kind of been knocking around here. And we're one more quarter in from June of earnings that didn't fall apart. You know, GDP now at the Atlanta Fed is above 2% for the third quarter. We had negatives the first two quarters of this year. So it seems as if, you know, either side can argue, you know, that they have the data in their camp. And I do think we still have a pretty good debate going. Yeah. This morning, Mike, the JP Morgan desk says we still await one of those flush days where you have the VIX spike to the 40 to 50 range, the market falls 4 percent,

and you begin getting calls from relatives about which assets to sell. That kind of got ridiculed a bit because there is this fascination about a flush and a rapid VIX spike. How valid is that waiting game? You know, I think it does follow a certain kind of playbook in terms of what you would want to see, ideally at that kind of a low.

I think it maybe reflects a little too much the idea of these sharp corrections and these mini panics that we've gotten that led to V bottoms over the course of the last decade or so, as opposed to the grinding months long bear market, you know, tightening financial conditions. It's more about, you know, the opposite of love isn't hate. It's it's neglect. I mean, I think at some point when people

stop caring after a while, that matters as much as whether we get some kind of a real purge at the lows. So, you know, I think you'd welcome it if one were to come, but I'm not sure it's a prerequisite and I'm not sure it's around the corner. Right. Finally, you know, we're going to be in a bit of a waiting game. First of all, two thoughts. One is pre-announcement season actually had some ballast this time around. If you look at the Seagates and the PVHs and the NVIDIAs and their performance the last few days, but we are going into a period of heavy conferences. And I wonder if you think that's going to be rich with landmines the next couple of weeks. You know, it certainly could be rich with landmines, but it could play the other direction as well. So a lot of people are focused on this idea of it's, you know, our management team's going to take the opportunity to either say, look, everything looks OK to us.

We're not really changing our plans. Clearly, you're hearing a lot of one off layoff announcements. That's not filtering into the overall aggregate jobs numbers, at least not yet. So I think it could play either way. But there's no doubt people are on alert. We've been waiting for the earnings picture to really fall apart in a bigger way. First half of this year or the second quarter, rather, outside of energy, you're down 2 percent. I think for the entire year, the S&P 500 X energy is supposed to be down 1 to 2 percent. That's not great. But, you know, the market's, whatever it is, 18% off its high or something. So I think you've accounted for some of it.

Yeah, that's a good smart take and one we'll be talking about as we wrap up summer and work our way into fall. Talking a bit, Mike. In the meantime, biotech stocks, one of the worst performers in today's sell-off, the IBB down around 2%. Those names adding to an already steep decline down more than 30 from the highs that were set just over a year ago. Let's bring in Michael Yee, biotech analyst over at Jefferies, who might offer a couple ideas in what's obviously a tough broad tape. Michael, talk to me about where you think directionally the sector is headed. Yeah. Hey, great to be here with you guys. You know, it's been tough for the last two years,

you know, as you were referring to, it's been a tough year this year. You know, it's been tough for the last two years, you know, as you were referring to, it's been a tough year this year. You know, what I really like is the recent rally off the bottom. If you pull up the chart on the XBI, up 25% off the bottoms. And I think it's a really important data point that we've had a bunch of positive clinical data sets, a bunch of financing, a bunch of good news. And I do think we're headed higher into the end of the year and into 23. Is that, are we leaning on M&A ideas or not? Look, I think there's two points you bring up. One is the fact that you have had a bunch of deals in the past two months, Pfizer being particularly aggressive in this space, deploying a lot of their COVID money across the space has got everybody excited. You've got Merck

looking at Seattle, although now it's a little bit of in limbo. And I do think you're going to see M&A as a tail end, particularly into January. I know there's a JP Morgan conference coming up and other conference seasons and people start to get excited into January. But look, we've had a nice rally. I think M&A, positive data points. I think we're moving higher. Is it your view that the names might have been entering a period or window of political risk, but we're sort of exiting that now? Yeah. Well, look, I think one of the most interesting data points, and we had a lot of conversations with investors about this over the last month, was, wait a second, you have the Inflation Reduction Act, you have all of this

Medicare negotiation, drug pricing concern, that's always been a problem for this sector. You have all of this Medicare negotiation, drug pricing concern that's always been a problem for this sector. You had all of this past, yet the group moved higher over the last two months. We think people are digesting that. We think people are comfortable with that. You look at where stocks are and valuations are, basically five and six year lows on valuation. People are willing to forego that, particularly in this macro recessionary environment. Not a lot of concern about that. So with M&A, drug pricing behind us, I think you can start to dip your toes back into here.

I like the pullback here, by the way. 10% pullback. It's healthy. And I think we move back higher off this correction. Yeah, I imagine some investors are keeping an open mind about some upside playbooks. Michael, appreciate that very much. Good to talk to you. Good long weekend.

Good stuff. Thank you, guys. Meantime, back to the broader market. Joining us on the news line, Bleakley Financial Group CIO Peter Bookvar, a good voice to check in with on this Friday. Peter, I wonder how much of this action to you feels material versus typical holiday Friday, end of summer kind of trading environment? Well, I think because the market is closed on Monday, it's going to prevent U.S. investors to react to the Nord Stream news. So Europe can wake up Monday morning and Dutch TTF natural gas prices can be up sharply,

but we're not going to be able to respond to it here until Tuesday. So I think that is helping to exaggerate the response to it. Now, Sunday, the Russians can change their mind and gas prices would not rise. But again, I think the lack of being able to trade on Monday is a factor in this late day sell-off. Right. How are you feeling overall with these tests, you know, the 50 percent retracement up and the 50 percent retracement down? Some of the charts look extremely clean and some people wonder, you know, can it be that simple? I think we saw a bear market rally. I mean, I think the challenges for the market is, yes, we have to deal with the economic implications of a sharp rise in interest rates

and what that's going to mean for earnings in the back half of the year. But I also think that investors are trying to figure out, well, what's the right multiple to pay on this market? And we've had a multiple D rating that started really last year. But even at 17, 18 times earnings, is that the bottom? And I don't think it is. I think in this rising rate environment, now we have QT underway, rates rising around the world. I think multiples still need to decompress. And I think that's what the markets are trying to manage here. But it's still going to be a very challenging macro environment because we're in a rate backdrop, a QT backdrop that's not conducive

to sustainable rallies outside of the bounces like we just saw. That's interesting. You know, yesterday, prior to the recovery intraday, people were pointing to welcome to September, welcome to full QT. You've been a great watchdog on Fed balance sheet. Do you think that's really a top of mind? I don't think it was up in full now that it's here. I think for the last couple of months, the main catalyst for that rally was, OK, maybe the Fed will be our friend again and back off. Obviously, Fed members, including Powell, disabused to the markets of that notion. But taking out $95 billion off their balance sheet per month is notable. And just as QE helped to grease the financial conditions wheel, QT

could do the opposite. So we're back to sort of this double-barreled tightening that the market had to contend with in the fourth quarter quarter 2018. At the same time, the global economy is more fragile and other central banks are tightening as well. Yeah, that's exactly right. With rate trajectory, balance sheet trajectory, seasonals, there's some stuff for the bears to work with right now. Peter, appreciate it. We'll talk soon. Peter Bufaro. On that note, energy is moving higher on the back of the Nord Stream news. And joining us on the phone, John Kilduff, again, Capital founding partner. John, we've been talking about this for most of the afternoon.

Talk to me a bit about what surprises you, given that the whole world has been waiting for a moment like this to come out of Gazprom? Well, I guess, Carl, it was a sudden change in course, because I will tell you that the news wires moments before that news hit about Nord Stream being turned off and going on to this alleged maintenance because of this leak, was saying that they were going to resume full output, full flows to the line. So it was really a whipsaw moment. I think we've all been waiting for this. I will tell you that our own U.S. natural gas prices bounced off a significant low on the news as well. But the numbers you're seeing right now for crude oil, for WTI, around $87 a barrel. We were much higher earlier in the day, pushing on $90 a barrel, in fact. And we came off throughout the course of the day because of a couple of things,

including that factory orders number that was weak, and some, again, mixed messaging around the Iran nuclear deal situation. So, you know, and the lockdown in China is another negative factor for crude oil. So, you know, we're still starting it. We're still trying to sort this out. I have to say again, too, this is a problem for Europe as far as natural gas goes. Not so much us. We continue to build our inventory sufficiently. There's only so much LNG that we can export, given the capacity limitations of our infrastructure. So, you know, U.S. consumers

should be okay. But the problem is for Europe. And the other thing we have to watch out for, though, is this price cap deal that's being kicked around by the G7, which they appear to back away from a bit today. Because if that were to go into effect, I fear that it will backfire on their plans to lower oil prices because Russia won't sell to the West at that price cap number, Carl. So we will, in fact, finally lose meaningful amounts of Russian crude oil, potentially, and then it's a different ballgame here. Yeah, it was remarkable how quickly the Russian response came to news that the cap was getting

some headway. If all that's true, why do the likes of Yellen continue to sell it so aggressively? They have it in their minds, Carl, that it's going to work, that the Russians will play ball with it. I tell you, those of us in the market just don't. It takes two to tango, right? I mean, if you're only willing to pay, you know, $10,000 for one of these new Ford electric pickups and Ford wants $60,000, well, a deal's not getting done, right? So it's the same sort of thing here as far as the way we see it in the market, the way

the market's taking it. So I really don't understand this one from the policymakers who are otherwise very sophisticated and have great respect for, but you can't dictate a price to a seller in this regard. It has been a head-screr for a lot of people who are watching such an important space. Appreciate the guidance today, especially given the news flow, John. Appreciate it very much. Good to talk to you. John Kilduff. Just a couple minutes and a half left to go in this trading day. Mike's got some more on at least today's internals. Yeah, Carl, as you would expect, they've eroded

quite a bit over the course of the last few hours. Right before noon, New York Stock Exchange had about 80 percent upside volume, looked like it was going to be a pretty broad rally day. Obviously, that's unwound. That being said, this is not exactly a washout. You know, 1.8 billion to 1.3 billion declining to advancing volume. That's pretty middling at this point. You also have the equal weighted S&P slightly outperforming the market cap weighted version. It just sort of shows you that not every stock is being aggressively pounded today. Take a look at a couple of sectors, utilities relative to real estate over the last several months. They used over the last year, they used to kind of go together, right? They're basically both yield oriented, essentially defensive sectors. And real estate is given way in a big way, no leverage to natural gas prices and pricing and obviously the asset values in commercial real

estate causing them to suffer quite a bit there. Volatility index kind of interesting. This was actually imploding earlier. It was down more than two points. It looked like it was going to give a little bit of a wink to risk takers because it was declining so much over the highs of a couple of days ago. But still, even with this one percent drop in the S&P 500, this is almost a non-reaction here on the volatility index side. You have three days of no trading. It means the index isn't going to move for three days. It means you don't want to necessarily pay up for volatility protection today. Twenty five is, I would say, kind of in the middle. It's showing a little bit of residual unease, but we're clear of the jobs number. We don't really have a macro catalyst next week.

And so we're just kind of sitting there and cruising into the weekend call. Yeah, pretty interesting, Mike. Not a lot of strategy calls on a Friday before a long weekend. But Stiefel at least said we do see much lower back half 2022 inflation and no U.S. recession until Q3 of 23, which we believe supports 4,400 for the S&P at year end, led by big tech coming from Barry Bannister over at Stiefel. Overall, as Mike said, you can see the weakness here. NASDAQ looks like it will, in fact, turn in six straight losses, something we have not done since the summer of 2019, down about 8% in six days. That does it for Closing Bell.