Closing Bell - Closing Bell: All Eyes on Jobs, Electric Results & Pets and Profits 8/4/22

Episode Date: August 4, 2022

Stocks mostly lower on Wall Street as investors brace for Friday's all-important July jobs report. Ariel Investments Co-CEO John Rogers weighs in on the recent market rally and unveils his top picks in the media and consumer discretionary industries. Nikola CEO Mark Russell discusses the EV truck makers' bullish delivery outlook and why passage of the Inflation Reduction Act would be a tailwind for his industry. Zoetis CEO Kirstin Peck on the animal healthcare company's weaker than expected earnings and whether consumers are still spending on their pets in this economic environment. And Oppenheimer's Owen Lau explains why Coinbase's new partnership with Blackrock is a bullish catalyst for the stock.

Stocks are wavering between gains and losses as we await tomorrow's big jobs report. The NASDAQ and the S&P 500 still tracking for a positive week. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look at where we stand in the market. Unchanged on the S&P 500, you do have some pockets of strength. Utilities are the best-performing sector right now.

Consumer discretionary also higher. A lot of the homebuilders are moving up. The 30-year mortgage rate drops below 5%. Welcome news for borrowers. Industrials are doing well. 3M is leading the Dow right now. The Nasdaq is positive. It's up a third of 1%.

It is having a good week, bringing the week-to-date total to 2.6%. The worst performing sector in the market is energy, and check out why. It's our chart of the day. WTI crude falling below $90 per barrel, lowest level since before Russia's invasion of Ukraine. Gas prices down again to 51 days in a row now, though still higher than this time last year. Coming up on the show today, we will talk to the CEO of electric truck maker Nikola, which just reported earnings this morning that topped estimates, stock getting a boost on those results. Plus, we'll speak with the CEO of $80 billion animal

health company Zoetis, which is ticking lower today on the back of quarterly numbers, but has been a long-term winner. Let's begin with the latest signals on the economy. Jobless claims coming in as expected, but near the highest level since November. Then tomorrow, the July jobs report. It'll be a key indicator for the Fed. In today's market dashboard, Mike is looking at the labor market overall and what we can expect tomorrow. Yeah, just in time, Sarah, for the market idling ahead of that jobs number. Bank of America economists have two new gauges of the labor market introduced today. The first is a general blend of labor conditions. So the overall state of the labor market. And then there's a momentum labor market momentum indicator that kind of tells you the trend.

Here's where we have it. The momentum is obviously flattened out, actually gone slightly below zero. But look at the overall condition, the tightness of the labor market by various metrics, well above prior peak. So there's plenty of room on the downside. What I find interesting is where these two gauges sat in advance of prior recession. So here you have it in 2000 or so. You have momentum go negative well ahead of when, in fact, we did hit a recession, even as you did at labor market conditions higher. Similar story here, you know, back there before the great financial crisis. My point is you have some pre-recessionary type conditions falling into place, but it's really not there yet, especially with regard to the labor market tomorrow, Sarah. The big question is, what's the market looking for? What does it prefer, whether a hot or a cool number? There's a decent case to be made that

a really strong labor market number is going to have people listening up for the Fed saying, look, we still have to be vigilant on rates. Bad news is good news. It could be a little bit of that. I still think you want a six digit number. So in other words, not below 100000 new jobs because the forecast is 250. But I think if you got well above the forecast, that might get people moving their feet a little bit. The strength and the resilience of this market is so notable, especially because it does feel like we are in some sort of concerted effort by the Fed, at least some sort of communication campaign to talk the markets away from the idea that a recession is inevitable and that Fed easing follows in a recession like they've been trained to think. And that's what's in the market. So is the market getting this

wrong, this whole calculation? I don't think there's quite as much of a standoff as it would seem necessarily. Yes, there's no doubt Fed officials are out there wanting to reiterate the last committee-based framework for how they're thinking about rates and what they need to see from inflation before they even think about ceasing the tightening campaign. But the markets are saying, look, we can see around the bend a little bit. Market-based inflation indicators are down. Gasoline prices have crashed. Since the S&P was at this level two months ago, you've seen a 20 percent drop in crude oil. You've seen 10-year bond yields come down massively, more than half a percentage point. That's looser financial conditions. That's whether or not that's right or not, whether it's going to change based on what

the Fed does. I think that equities have more or less kind of kept in tune with the other macro indicators. I know. I just wonder about this growth inflation tradeoff and whether the market has it right, because it's not what the Fed is saying right now. No, but I think what the market is saying is, OK, at one point we were leaning pretty hard in the direction of recession inevitable. Now maybe we can add a little more to the other side of the scale, which is softish landing is conceivable. Mike, thank you. We'll see you in the market zone. For more on the market and this whole environment, let's bring in John Rogers, co-CEO of Ariel Investments. John, it's good to have you. Good to be here. What do you think about the market pivot now, where we've seen

stocks rally since the beginning of July, especially growth stocks, which you do not like on this idea that the Fed is going to pivot, is going to stop hiking at the end of this year and potentially start cutting. Well, you know, I'm I don't agree that the Fed's going to stop cutting. I do believe that inflationary that inflationary expectations have gotten too high. Everyone started to feel and finally got around the concept that inflation was here to stay, that it wasn't transitory. But now that's what everyone in the country knows how bad things are when it comes to commodity prices. Everyone knows how tough things are out there because of inflation. So therefore, I think, you know,

inflationary expectations will go down. But I still think interest rates are too low. And as you know, talking with my colleague, Charlie Bobrinskoy, you know, we continue to think rates will go higher. And in that environment, you continue to think that value will outperform growth because that has been the case most of the year, but not lately. Exactly. We still think there will be P.E. compression. We think value stocks are way, way too cheap and they're going to really benefit from the economic recovery. We think ultimately there's been so much fear in recessions about a recession, so much fear around the economy being too weak. A lot of value stocks, we think, have been overly penalized based upon the fact that they're typically more cyclical and more exposed to the overall economy.

I want to talk about some of your favorite stock picks. Paramount, you've joined us. You've been in the stock for a while and liked it. I mention it because it reported earnings today. It was a B, Top Gun obviously driving the film business. But Bob Backish did talk about some weakness in advertising. Is that a concern around this stock and others in the media space? I think those are short term concerns. You know, as the economy has gotten a little tougher lately, you know, we saw the GDP growth the last two

quarters and people do pull advertising when there's this uncertainty in the marketplace. But at the same time, as we know, Paramount is so diversified around the world with so many great products. There's CBS, Viacom, Showtime, the Pluto, everything that they've got there, Simon & Schuster. When you put all the sum of the parts together, we think the stock is still selling at a 50% discount or more of what the overarching business is really worth. And we think ultimately you never know. Maybe because of the streaming wars, there could be M&A out there. You know, there are way too many streamers. We think ultimately we'll get down to three or four. And if somehow Paramount Global doesn't become one of those three or four,

which is a good thing, it'll be consolidated. And that would also be a good thing. That's what I was going to ask you, John, if this company can really get to your target as a standalone company or if the thesis has to be that it's going to get acquired. And it's also notable that Warren Buffett is now in the stock as well. Well, we're thrilled to see Berkshire Hathaway as a shareholder. You know how much respect and admiration we have for Warren and his team. So we think that's a terrific, you know, tailwind for us. At the same time, we think that Bob Backish has done a great job of revolutionizing Paramount Global and giving them the right kind of incentives, the right kind of vision. So we do think it'll ultimately be one of

the long-term survivors because we think they have the best mix of products. When you think about the live news, the live sports, to go along with their historic content and library, all the new and exciting things that are happening there, we think ultimately this is going to be one of the best streaming services out there in the entire world. Well, a lot of people think the bull case is if Sherry Redstone actually agrees to sell. But John, wanted to move on in the portfolio. Mattel, that's also been an outperformer this year. You've liked it for a long time. Do you stick with it, especially given the relative outperformance against competitor Hasbro? We think, as you know, we think Enon has done a fabulous job with Mattel. You know, we often see him on CNBC. He's often very candid and open.

He's beat expectations quarter by quarter by quarter. He's been very, very consistent. He's gotten Mattel back on track. And as you know, they've become this worldwide brand. They are just doing terrific things, reestablishing Fisher-Price that have been struggling, American Girl that have been struggling. Barbie continues to be quite, quite strong. And when you think about it, all the new movies that are going to be coming out that are going to be based on Mattel products, they're using their intellectual property

exceedingly well. The stock is selling at well over 30% discount to what we think it's worth. It's selling only about 13 times next year's earnings. And we think that earnings are continuing to explode and be much, much better than people anticipated. Again, the leadership matters here. And Enon has really brought Mattel back to being where it should be. What's your highest conviction idea right now, John? I think that besides these two being two really great, great favorites, we love Ad Telum. You know, it's the for-profit education company that is really fixated on the nursing market and the healthcare market. Those are places where there are shortages of nurses throughout the United States, shortage of doctors and healthcare

professionals. Stephen Beard, the relatively new CEO, has got that company on track. And we think it's selling at a very low multiple, less than 11 times next year's earnings, significant discount to private market value. We think close to 30% discount, I believe. And so I just think there couldn't be a company more positioned for this economic recovery as we come back. And again, with what's happened in the pandemic,

we value our nurses and healthcare professionals more than ever. And Ad Telum does the best job around the globe of really educating health care professionals, doctors and nurses and veterinarians. John Rogers, thanks for coming on and sharing some of your ideas. Appreciate it. From Ariel. Always good to see you. Take a look at Nikola shares.

They are charging higher after the company said it was on track to deliver 300 to 500 battery electric trucks by the end of the year. Reaffirming guidance there. We'll talk to Nikola's CEO about those results and what makes him feel so confident given some of the production delays that this industry has been facing. Dow's down about 59 points. At the low of the day, we were down 159. We'll be right back. Welcome back. A trio of EV stories to tell you about today.

Tesla's annual shareholder meeting kicking off in just a few hours. Shareholders are voting their weather to approve more shares so it can follow through on the three for one stock split. It's up sharply over the last month. Meantime, Lucid Motors is under pressure after cutting its vehicle guidance for this year by 50 percent. And then there's Nikola, which is higher today, beating analyst estimates on both lines, delivering 48 trucks in the second quarter, also confirming it expects to deliver between 300 and 500 trucks by the end of the year. And joining me now to talk about all that is nicolas ceo mark russell mark welcome back good to have you good to be here so so on the on the production you delivered 48 i

think you expect to deliver 50 previously expected 50 to 60. what are you learning about this process as you get it going well that it takes uh 10 000 about 10 000 parts to build a truck, and the number you need to build a truck is all of them. If you don't have one, you can't build a truck. And you're having trouble getting them? Well, there were a lot of parts short as we ramped this up. Around the world, this is the biggest supply chain crisis I've ever lived through. And so getting all those parts in the right place at the right time was hard.

Is it getting any better? Yeah, actually, I think we're in such a better position now than we were a month or a quarter ago for sure. And we expect to be in an even stronger position going forward with control over our battery supply chain once the Romeo acquisition closes. Is that why you are sticking with the 300 to 500 delivery expectation for the full year, despite this supply chain crisis? Exactly. We're confident that we're going to overcome anything that comes up, and we're going to be able to hit in that range. What is your perception of consumer demand at this point for the trucks that you're producing, both the batteries

and your future plans around hydrogen fuel cell? Well, we're not direct to consumer. Of course, we're business to business. And the businesses that we sell to, they really want and need these trucks. Many of our launch customers have objectives to help decarbonize commercial transportation. And the only way you do that is if you can convert from diesel trucks to clean zero emission trucks, which we sell, and we provide the energy that powers them. What about the regulatory environment? Is that a headwind or tailwind at this point? Well, I'd say that it's potentially about to become a big tailwind if the current proposed legislation passes the so-called mansion deal. If that is signed into law, that's going to be a powerful incentive for us and everybody else in the space, additional purchase incentives and additional incentives on the

production of clean hydrogen. Why? So I was wondering about how it affects you directly, because a lot's been told about the consumer incentives to buy EV cars. How does it affect you and what you're trying to do? Well, if this legislation passes as is, as we understand it, it'll include an incentive of up to $40,000 for a commercial vehicle, a heavy truck like ours. That's in line with what's been there for passenger cars for a number of years. So that finally puts commercial vehicles on an equal footing with passenger cars. And then unique to heavy-duty transport, unique to Nikola's business model and just a few other people in the world is the hydrogen production tax credit, up to $3 a kilo per hydrogen kilo produced, which would be a powerful incentive

to get clean hydrogen into the economy and powering things like heavy trucks. So would it change the economics for you, the calculus, the forecast? It would make it better. Everything we do is based on pure economics with no incentives or anything like that. We want to make sure it works without incentives.

But if we do have incentives, we're thrilled to have those, and they make it even better. That would be the case here. It makes it even better. I ask because so the analyst consensus is that your revenues are five times higher than they are, five times higher in 23 than they are in 22. At this point, can the production run rate handle that? Can you meet those high expectations? Yeah, what we're projecting, we're confident we can meet. And we are going to be growing rapidly from here. And we start slowly here, and then we grow rapidly. That's the plan. And we feel confident we can do that.

And finally, Mark, how big of a challenge at this point is Trevor Milton, your founder? He is, of course, the largest shareholder and has a lot of voting control, about 20 percent. You overcame that to issue more stock recently. He's about to face trial in September. I know you don't want to comment on all of that, but just in terms of what it's allowing you to do here, that some of the headwinds you still deal with on the reputational side and obviously when you're fighting to change the rules like issue more shares. We're super focused on going forward. We're grateful to have additional shares authorized now to have got that approved. That gives us the flexibility to continue our growth rate going forward. And we're super excited about what's coming down the pike for us.

Our milestones in the next couple of quarters and next year are just super exciting. We can't wait. Mark Russell, thanks for giving us a status report. We appreciate it. Thanks for having me on. CEO of Nikola. Show you where we are in the markets,

down 30 points or so on the Dow. The S&P 500, little change. It's moved up a little bit. Still holding on to gains for the week. Utilities, consumer discretionary, and industrials are leading. Real estate and communication services just turned positive. Technology is outperforming again today. That's why the NASDAQ is up about half a percent.

It's energy staples and financials at the bottom of the pack. Lower rates. Continue to see that. Buying bonds. Treasury yields lower. Coming up, fintech's epic week. Getting even more interesting today as Coinbase, look at this, surges on a new deal with BlackRock. It's off its high, still up more than 10%. We'll talk to a Coinbase analyst about the news and what he recommends

doing with the stock next. And then speaking of Coinbase, it is the second top search ticker on CNBC.com today. The 10-year yield still in the top spot. And then the bond rally yields at 2.67. Tesla is up there at half a percent into its shareholder meeting. Alibaba up two and a quarter percent off earnings. And then there's crude oil dropping below $90. We'll be right back. We also see a lot of value in biotech where, you know, they have very robust research pipelines.

And, you know, at the end of the day, a ton of cash that they're sitting on, granted, they're burning it to do that research. But we think that there's going to be a lot of M&A in that space going forward. And it represents a real opportunity for active management. Healthcare biotech investors have been waiting for a while. That was Goldman Sachs' Ashish Shah predicting a wave of M&A in the biotech industry. It was earlier this week. He said that on closing bell. And that's exactly what we're starting to see. Today's stealth mover is Chemo Centrix Amgen buying the biotech company for nearly four

billion dollars in cash. Look at that move. Chemo Centrix makes a recently approved drug for a rare immune system disorder and also has treatments for cancer and other diseases in its pipeline. The IBB biotech index is higher today. It's up about two and a half percent. It's made a move lately. It's still down sharply this year, but there is some excitement around M&A. Finally, a lot of investors have been waiting. That's finally coming to the sector. The Merck close to getting a deal with Seagen. That's in there as well. We'll keep an eye on it. A lot of investors have been waiting. That's finally coming to the sector. The Merck close to getting a deal with Seagen. That's in there as well. We'll keep an eye on it. A lot of people have been bullish and waiting for a while. Up next, the CEO of Animal Healthcare Company Zoetis discusses how generic drug competition and currency fluctuations are impacting that business. Doubt down about 64 points. We'll be right back.

Breaking news out of Washington on the Inflation Reduction Act. Ilan Moy with the story. Ilan. Sarah, the Senate will now vote on the Inflation Reduction Act starting on Saturday afternoon. That's according to a statement from Majority Leader Chuck Schumer. That sets up a timeline that would put final passage of this bill sometime likely on Sunday or Monday. But it remains unclear if the Senate and Democrats have enough votes to actually pass it. I saw Senator Kyrsten Sinema, the wild card in these negotiations, speaking with Republicans on the floor earlier today. She had said that she wants to wait until the bill's text is fully scrubbed before she announces how she

will vote. But clearly, Senate Democrats not willing to wait any longer. They're saying that the voting process will begin on Saturday afternoon. Sarah. It'll be interesting whether how hard she fights for that carried interest provision to remain. Elon, thank you. Elon Moy, the Nikola CEO just telling us that if this bill becomes law, it'll be a big tailwind for their industry and for his company. Take a look at Zoetis, another big earnings mover today. It's dragging despite reporting higher second quarter sales in their report. But the company is feeling the impact, of course, of foreign exchange, causing them to lower full year guidance. Joining us here first on CNBC is OUETA CEO Kristen Peck.

She's also a member of the CNBC CEO Council. Nice to see you. Great to be back on set, Sarah, especially in a quarter where we had really strong results, as you said. So you're not happy with the reaction? No, I got to say, it's hard to be happy with that one. We had 8% top-line growth operationally and 9% on the bottom line led by Companion Animal.

So we felt it was a really strong quarter. The 14% growth in companion animal, I thought people were returning their pets. No, no, no. I think the trends you're really seeing in pet care are really driven by more millennials and Gen Z adopting pets. You're also seeing more high income people adopting pets and everyone's spending more time with those pets. So I think those are really trends that are going to really continue. And what you're seeing is it's driving for us, especially given our innovation, tremendous growth across both parasiticides, dermatology, and our monoclonal antibodies.

So the pace of veterinary visits, you expect to keep up at these high levels? You know, we expected veterinary visits to come in about where they are. There's a lot of focus on that. A few things I'd say, they're up from 2019 levels. I think you saw in 2021 some phenomenal vet visits with a lot of new puppies have to come in every few weeks, as you know. And so we really are seeing a trajectory up, but we expected it to flatten. I think the focus for us is really on spend per visit, which is still trending, you know, 7%, 8% in Q1 and Q2 above where it was a year ago. So spend per visit's really been driven by innovation, you know, and, you know, customers willing to spend, as we said, and that's why we believe Zoetis is really a recession resistant industry. Pet care owners are still willing to spend. 86% of them would spend whatever

it takes to care for their pets. So the guidance cut. I know foreign exchange is a problem. You're very international. Is that it? So we didn't really cut guidance. What we did was we narrowed the revenue range and kept the midpoint where it was. And that really had to do with the confidence in the strength of underlying demand in the second half of the year. And then if you look at adjusted net income, we, you know, an operational range of, you know, moved it up 1%. So actually increased the midpoint of the range there. And that again is confidence in the demand of our business and in the growth in the second half of the year. What about inflation? How does it affect you both from the input side and what you're doing on prices? Yeah, I mean, inflation is affecting everybody.

We took in the U.S. companion animal business about a 5 percent price increase this year. And we're seeing overall, as you look at 2019 to today in vet clinics and their revenue is up 20 percent. So I think it's, again, a space where, you know, vet clinics as well as, you know, companies like Zoetis have been able to take price. It's clearly harder for us in our livestock business. So on the quarters, you probably saw we only took about 3% overall on price. But we really, again, back to the trends we're talking about, you know, the strength of the pet care industry, the innovation that we're bringing to it has helped us really weather these trends. So you mentioned livestock. It's been a weaker spot in the portfolio, though I think the numbers did come out better than expected in

that group today. When do you see that turning, if at all? Yeah, I mean, we have to finish lapping the generic entry competition we got on our big product, Draxen, and we'll be able to do that in 2023. We really see livestock going back to its traditional growth rate around three or four percent. And we're really investing in innovation to get above the market growth, looking at new therapies, vector vaccines, vaccines in swine and aquaculture, as well as immunotherapies and precision livestock farming. How do you view the economy through that lens? Because I know we were talking about during COVID and people weren't eating out as much and therefore livestock was a little bit weak. What are you seeing right now? I mean, it's still under pressure for a few reasons. One, input costs of producers are still really high. If you're any consumer going to the

supermarket right now, the price of your chicken or your beef is really high. So I think it's still, you know, got some headwinds as we look into it. But I think as you look at some of the big drivers for us, China, we really believe is going to return to growth as pork prices in China are returning. COVID really hurt them in the first half of the year, as you know. So we really do believe the macro drivers, you're still seeing population growth, growing middle class, and more urbanization, which will overall drive that livestock business in the medium term. You said the word recession resistant.

That's what you've seen in the past with animal health care? Yeah. So if you go back to 2008, 2009, the industry as a whole grew at 3%, as did Zoetis back then. And I think what's even better now is back then we were 65% livestock, which does get hit harder. Now we're 65% companion animal, which is the much more resistant area. So we really think Zoetis in particular is well positioned in a recession. See, I read all these headlines about people bringing back their pets to shelters.

They're still buying. You're saying that it's generational shift. It is a generational shift. Look, people are bringing pets back, but at lower rates than they did actually before COVID. So that's good. Yeah, it's a good underlying trend for us at Zoetis. Yes, it is. Kristen Peck, thank you very much. It's good to see you. Great. Great to see you too. Thanks, Sarah. CEO of Zoetis. Yes, it is. Kristen Peck, thank you very much. It's good to see you. Great. Great to see you too. Thanks, Sarah. CEO of Zoetis. Up next, you will hear from Adidas CEO Casper Rorsted on the state of the consumer and the current promotional environment. Under Armour

warned about that yesterday. Find out what he had to say about what's coming next. Dow's down about 67 points. We'll be right back. In today's big picture, a pulse check on the consumer. Today, I spoke with Adidas CEO Casper Rorsted, who gave us some clues. Adidas' earnings were weighed down by headwinds in both China being locked down because of COVID and Russia, which it's exiting. But the bright spot, growth in the West, North America particularly. The brand continues to see strong demand, 21 percent growth in the U.S. I also asked Rorsted about their relationship with Kanye West, which can be controversial at times, including now, and about whether he sees a more promotional environment coming after Under Armour warned about that this week. Take a listen. I think that right now you are seeing that in

China. And I think you might start to see some in the US and Europe later on in the year when you start getting your shipments coming in at a higher rate. Right now, we actually had an okay environment right now. So we don't have, we've not seen it overly promotional. It might increase in the second part of the year because you're going to have a, you know, higher supply into the market. And there is no doubt that some consumers will be impacted through the inflation at higher prices. And you're also starting to see in certain countries the first layoff. But besides that, we're very, very bullish for Europe and, as I said, for the U.S.

So are you still raising prices or are you going the other way? What exactly is happening on pricing? No, we raised price. We raised price for the second half, and our expectation is that we'll raise prices also next year because we are seeing the input cost continue to go up because of material shortages, labor rates are going up. And right now, we're not seeing any changes in shipment rates. And that's why we'll continue to push pricing.

We've done it for the second half, and we expect to do pricing also for the first half next year. What is your relationship these days with Kanye West? Oh, Kanye is our most important partner worldwide. We have a very, very good relationship with him. We communicate with him on a very ongoing basis. And, you know, we're very proud of that relationship. So continue to be super happy with that relationship and the products he built and, you know, and the respect he has in the market.

So it's very, very good. Because he claimed, according to Complex in an Instagram direct message, that you planned Yeezy Day without him, that Adidas is ripping off some of the styles like his slides, that there have been issues with capacity. Is any of this true? I wouldn't say, I wouldn't go into detail to discuss those elements of it. But of course, from a supply standpoint, there has been issues as we have globally. But overall, we have an extremely good relationship with Kanye and speak to him very, very regularly. And we very much respect what he does. So I would say we have a very good relationship with him. Didn't bite on that one. Kasper Rohr said, obviously, the Yeezy brand is key, still growing double digits. And just last week, Adidas did cut their outlook,

saying they now expect mid to high single digit top line growth, which Adidas says reflects slower than expected growth in China. The stock, though, has underperformed Nike, the market and Lululemon so far this year. Up next, we will discuss why Coinbase is rallying and on pace for its best week ever. That story plus indigestion from some restaurant stocks and a countdown to blocks earnings when we take you straight inside the market zone. We'll be right back. We are now in the closing bell market zone. CNBC Senior Markets commentator Mike Santoli here as always to break down these crucial moments of the trading day. Plus, we've got Kate Rogers on the restaurant stocks and Oppenheimer's Owen Lau on Coinbase rocketing higher today. Mike, though, I'll start with you on the broader market, which is sort of mixed.

The Nasdaq's a little bit higher. The S&P 500 is pretty much unchanged and the Dow is lower. Path of least resistance still feels higher after 9% gain in July and sort of starting off this week with the third week in a row of gains. I don't feel like enough people mentioned the Bank of England today, which hiked rates 50 basis points, the highest they've done in like 25 years or something, and much more explicit than our central bank and others about expecting a recession to start before the end of the year. And it's the gloomy forecast weighing on the pound. Does that does that resonate as we're trying to figure out what the Fed is going to do and what our economy is going to do? what our economy is going

to do? It doesn't really. I mean, I'm not saying it shouldn't, but it seems as if really that would get filtered in to some degree through, you know, how the dollar trades off of it, as we're seeing right there, as opposed to really anything it tells us about our macro situation. Now, I guess we may look back in retrospect and say, hey, hey you know stocks are whistling past the graveyard. The Treasury yield curves deeply inverted. Fed officials keep telling you that they see no easing off the tightening campaign anytime soon. On the other hand when the market does what it seems not positioned to do in other words when the market goes goes up or stay strong in the face of potential negative catalysts you have to pay attention to that. And I do think you see some decent rotation under the surface. Some of the big growth stocks have been providing support, even as things like banks have not traded well. So we'll see if any of that kind of comes home to roost or if it's really just a matter of this market having gotten so oversold, people be left behind by this little bit of a rally. And maybe the macro data has been good enough to keep the bull case alive for now. I just want to be clear about what's happening. So bonds are

rallying and the yield curve is inverting further. Is the bond market pricing in a recession as the stock market prices out of recession? I don't know that that's really the case. I think that the stock market arguably going down 24 percent peak to trough went some distance toward pricing in higher recession risk. I think, you know, what the bond market is saying is perhaps either we do truly get a recession and it means that, you know, the Fed doesn't have much more to go and we'll probably have to reverse, or we don't get a recession and, you know, the Fed does its job on inflation. The longer term rates are responding to things like that. So, you know, we haven't escaped the risk that, in fact, we'll have much more of an all out recession as opposed to just this bumpy period.

I continue to go back to the fact, though, nominal growth remains relatively strong. And companies are telling you there's still enough business out there that they don't have to radically downscale their expectations. Well, let's hit the restaurant movers, find out what they're signaling about consumer spending, because a trio of restaurant stocks making some big moves here after hours after earnings, most of them lower restaurant brands, which owns Burger King and Popeye's beating Wall Street's estimates, thanks to much better than expected same store sales and then Shake Shack sliding on weaker than expected revenue, partially due to fewer purchases by lower income customers. That was mentioned. And then Papa John's also under pressure after missing on both the top

and bottom lines. Our Kate Rogers joins us. Kate, what is the thread here that we're learning about consumer spending, particularly in the restaurant sector and how well it's holding up? So, Sarah, it's been so dependent on the company, it seems. I think the lower income consumer thread does kind of trickle through all of the names you mentioned. But one exception was Starbucks earlier this week saying they're not seeing a trade down. But then we heard from Papa John's CEO today telling us that they're poised to benefit from a trade down because they think they have the best value proposition in the pizza business for a recessionary environment. You heard from Jose Sill at Restaurant Brands International talking about not making too much of ups and downs in the near term and adding that they are seeing some trade

down as well and could also benefit from that into fast food from QSR, which tends to be a little bit more expensive. So I think broadly what we're going to continue to see is a lot of strategic price hikes, restaurants kind of testing what they can do there and value marketing in this environment moving ahead. Kate Rogers. Kate, thank you. Confusing picture. We're going to get more on the outlook for restaurant stocks tomorrow. We will speak exclusively with the CEO of Wingstop on the back of their numbers. Check out the travel names, Booking Holdings, one of the weaker stocks right now in the S&P 500, the travel company beating Wall Street's profit estimates, but missing sales forecasts and issuing a cautious outlook partially caused by inflation, something CEO Glenn Fogel discussed earlier on Squawk Box. Listen.

The booking window, how far in advance people are booking, it's shorter than it was in 2019. And so we have less visibility. We're not sure what's going to happen. And the points you just made, fuel up a lot of people spending more money on filling up their cars. People concerned about inflation in general. These factors certainly could impact. But the long run, people are going to keep on traveling and are going to travel more and more over the long run. Seema Modi joins us. Seema, so now we have booking and Airbnb. What do those tell us about what we could get from Expedia when it reports after the bell today? Well, Sarah, the big question is, is this peak travel demand?

Is that what we are hearing from the major travel operators? Expect Expedia CEO Peter Kern to reiterate what Glenn Fogle just said about the travel recovery. It's very strong, but there are macroeconomic factors that have to be accounted for. What we want clarity on from Expedia is the performance of bookings in May and June. That's where Airbnb said it's experiencing softness. Booking holdings did not see that. Where does Expedia stand? And as you know, it's been growing its Vrbo home rental business. Last time Peter Kern joined us, he told us that the demand story remains very robust for vacation rentals. Is that changing as travelers return to hotels? Remember, we got very good numbers from Hilton

and Marriott over the course of the last week. And both those stocks there, the hotels, they're faring much better than the online travel platform so far this year. That tells you something, right? Yeah, absolutely. Seema, thank you. Seema Modi. Mike, Seema raises the question, peak travel demand, is that what the market is telling us? Yeah, for the most part, it is. If you look at the airline stocks, they really haven't even gotten much of a lift with the decline in fuel prices. Even hotels, which have been really strong within the group, have faltered a little bit here. So if you wanted to make the case, if somebody had a sense out there that, in fact, travel demand was going to be more persistent, was going to continue on through the fall, if there's any indicators that show that, it would seem the market would actually, there would be an opportunity there. But

right now, the message is, you know, nobody's willing to go out on a limb and say that the consumer is going to continue at this pace we've been on this summer. We've got to hit Coinbase. Shares up sharply today. They're off the highs, but still up about double digits. The crypto exchange announcing a new partnership with BlackRock. That's up 9% now. That will allow its institutional clients to buy Bitcoin. BlackRock, of course, is the world's largest asset manager, worth more than $8 trillion under management. And for more, is Oppenheimer senior analyst Owen Lau likes the stock? Owen, clearly this is a positive and I guess add some legitimacy to Coinbase

after what has been such a volatile ride with all the regulatory headwinds. What do you do with this stock now? Exactly. So first of all, thank you for having me, Sarah. So what are we going to do with the stock? I think there are a lot more to run for the stock. Remember, for the first half of this year, Coinbase stock down, I think in our view, was mainly driven by the Fed taking away massive liquidity from the market. So now we see Coinbase start to diversify their offerings.

They partner with BlackRock. They are also trying to launch their NFT and try to expand NFT. They're also trying to launch the derivative spaces. So longer term, we believe that Coinbase can further diversify away just from retail trading. That's why we still like to start longer term. So the partnership obviously is great news to that end, Owen, but what if crypto does not stabilize? Isn't that the whole thing here of what determines the direction of this stock?

So first of all, theoretically speaking, I disagree with that. But if you look at the trading pattern, they were highly correlated. But if you look at historical pattern, during some kind of crisis or some kind of problematic situation, everything's correlated, everything's moved together. Remember, Coinbase charge fees even though Bitcoin goes up or Bitcoin goes down. So I would say in the near term, there will still be a pretty high correlation. But longer term, when Bitcoin or other tokens stabilize, Coinbase does not rely too much on trading revenue. I think the stock would not correlate that much with Bitcoin as of like last year we have seen so far. But do you feel a little uncomfortable recommending a stock that is, OK, I'll just read you some stats. Quarter to date up 90%. For the week, one week up 42%.

But year to date is still down 65%. It's all over the place. Right. But to be fair, when you look at many stocks in the market, many growth stock in the market, they were all over the place. So if you look at not just on the crypto space, because right now I do feel like the market thing, the crypto names are high growth, the most speculative companies. So that's why you see that volatility. But remember, Bitcoin and also Coinbase is only like, what, 10 years old or 12 years old or so. When this industry matures, I do believe the volatility will decrease. And also, again, like going back to the diversification point I just made, when Coinbase starts to diversify, I think the correlation and the volatility won't be that high long term.

Owen Lau, Owen, thank you. $90 price target on Coinbase. Mike, I do wonder also if you've seen a short squeeze with this name as you get some positive catalysts. Oh, no doubt about it. The stock went from $3.50 to $5.00 in about seven months. Clearly, it was a pile on short because it was sort of a leveraged play on what was happening in crypto, things falling apart. So up big off a very low base. It has those dynamics. In the meantime, since the early part of this year, 2022 earnings estimates have gone from $7 in earnings a share by consensus down to a $7 loss per share. Now, there's a lot of noise in the accounting and

everything, but that just sort of shows you it's mostly trading on sentiment, the partnerships, and the fact that crypto itself prices are off the lows. I was just, so it's still in the ARK Innovation Fund. Cathie Wood was selling a little bit, but yeah, it's helping that fund today, which is having a good day, up about a third of 1%. We'll stick with fintech. Block is one of the big names set to report after the bell. Kate Rooney joins us.

Kate, what is the key number we should be watching after what has been a banner week for fintech stocks? Hey, Sarah. Yeah, the big focus is cash app. That's Square Block's Venmo competitor. It's really been a crown jewel. Its growth rate tends to be what analysts focus on during earnings. It's a big line item. Then you've got the Square Seller business. So there's been a bit of a reversal there in recent quarters. This side of the business was actually growing faster than Cash App last quarter. So we'll see if that continues. Then you've got Afterpay.

That's the buy now, pay later business. There has been a little bit of fear around buy now, pay later and credit exposure. Finally, Bitcoin. So CEO Jack Dorsey has really been focused on that area. Block's crypto affiliation has been a bit of a negative for the share price this year. And they may face an accounting charge, which is known as an impairment from the crypto that's held on blocks. Balance sheet analysts are expecting a slowdown in the Bitcoin trading side of the business as well. Back to you. Hey, Rooney. Hey, thank you very much. We've got two minutes to go here in the trading day. Mike,

what are you seeing in the market internals? We've moved south just a little bit in the last few minutes. Yeah, definitely very mixed. There's a lot of divergence below the surface today. Take a look at New York Stock Exchange volumes, but it's now a slightly more declining volume than advancing. That's been sort of less 50-50 all day. The average stock is just below the flat line. Take a look at new 52-week highs and lows on the NASDAQ.

The NASDAQ has been the outperformer. That's not a big number of new highs, but the fact that we have more highs than lows is a switch. You haven't seen that often lately. Multiple days of that would start to give some credence that this rally has maybe a little bit of durability to it. The volatility index sagging further. Very, very flat day at the index level,

under 22 right here. And I wonder, after we get that jobs number tomorrow and you get the opening market reaction, if there's some air pockets below the VIX here, maybe we get down toward that 20 level as we kind of settle into range-bound summer trading, Sarah. Mike, thank you. As we head into the close, take a look at the Dow. It has been as low as 160 earlier in the session.

We're down about 100 points. What's giving the most boost? 3M. Industrials are having a pretty decent day. Walmart and Chevron are the biggest drags. And that tells you what's not working today. The two worst performing sectors in the S&P are energy and consumer staples. The best performing sectors, consumer discretionary, technology, industrials, communication services, all doing well. And I mentioned this at the top of the show. It's a

good day for the homebuilders. Those stocks at the top of the market, Pulte, D.R. Horton. Why? Lower interest rates. 30-year mortgage rate goes below 5%. We've also seen some strength in internet retail. The gold stocks are perking up today as bonds rally and the dollar sells off. Nantec is the only one of the big four that is going to go out with a gain of four-tenths of 1%. We're still holding the gains for the week, though, into a jobs Friday. That does it for Closing Bell. See you tomorrow.