Closing Bell - Closing Bell: Back Into Bear Market, Focus On The Fed & Crypto Crushed 6/13/22

Episode Date: June 13, 2022

Stocks selling off and pushing the S&P 500 back into bear market territory as investors brace for the Federal Reserve's decision on interest rates this week. Jefferies economist Thomas Simons explains why he thinks the Fed will raise rates by 75 basis points this week to help combat runaway inflation and whether these aggressive rate hikes could spark a recession. But Atlas Merchant Capital CEO Bob Diamond doesn't think that's aggressive enough and says the Fed should raise rates by 100 basis points. Citi U.S. Equity Strategist Scott Chronert says investors should be buying health care stocks as a defensive trade amid this market volatility. UBS Private Wealth management’s Alli McCartney reveals why she thinks the market could remain volatile for a long time. And Bitfury CEO Brian Brooks reacts to Bitcoin’s plunge and whether crypto lending company Celsius pausing customer withdrawals is a warning sign for investors.

Off the lows, but stocks are getting wrecked on this crucial Fed 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 this market. It's been brutal all session long, really since the open. The low of the day on the Dow is down about 900. We're down 750 right now.

S&P down 3.3%. The Nasdaq getting pummeled down more than 4%. All of mega cap technology stocks are lower. Apple, Microsoft, Amazon, Tesla, Nvidia,IA, Meta and Alphabet weighing the heaviest. Small caps also down more than 4%. Here's a live look right now at the S&P 500 heat map, which shows you just how broad the sharp sell-off has been today. You've got energy and consumer discretionary groups feeling the most pain right at the bottom of the market. Consumer discretionary down 4%. You've got names like Caesars Entertainment down 12%.

Norwegian Cruise Lines down 12%. And Carnival, they're at the bottom of the pack. But pretty much everything in there, the homebuilders, the retailers, is lower on the day. The best performing sector is consumer staples. It's down 1.7%. But it is a relative safe haven today. It's where you're seeing very few pockets of green as well. In the Dow, there's only two stocks higher, McDonald's and Cisco, everybody else down, Boeing the biggest drag. We're going to stay focused on the sell-off

for you throughout the show with analysis and ideas for your portfolio from all sorts of guests, including Citigroup equity strategist Scott Cronert, Jeffries economist Thomas Simmons, who now has a 75 basis point hike penciled in from the Fed this week. Bitfury's Brian Brooks on the crypto crash, which is definitely playing a role today. Former Barclays CEO Bob Diamond with some perspective on the banking system and Ali McCartney from UBS. Let's kick it off with the sell off. Stocks are plunging. The S&P is down more than 3 percent. And Mike Santoli is here with a look at the market action for his dashboard. Where do you begin, Mike?

Well, we begin with the depth of this, right? So 3%, very similar to Friday in a lot of respects, Sarah, which is a sharp sell-off at the open. You made the low for the day near a round number on the S&P right early, 3,900 on Friday, 3,750 today. You've been bumping along there. And even though it's broad and comprehensive, it's not very heavy selling. Believe it or not, volumes are not that high. We don't know if that's a good thing or a bad thing. But a pretty classic Friday-Monday sell-off pattern.

Now, this is a three-year chart of the S&P 500. I always say, when you go down in price, you go back in time. How far back are we going right now? Basically, to early January 2021, the first week of January of last year. That's the first time we got above 3,800 on the S&P. Now we're down more than 20 percent from the high. We can get that out of the way. Stop debating what this is. So we're down more than 20 percent.

Other levels people are watching if we have to have another wave lower, really rationalize the valuations and price in some of the Fed path. I think 3,500 is that late September of 2021 high and then $3,400 the pre-pandemic high. So still within sight, but would be painful from here. This is stocks versus bonds of various varieties. So New York composite, very broad index of stocks, as well as Vanguard total bond and then the high yield index. Year to date, it's the same trade. Worst start of the year of any year for bonds ever. The bad news is that,

and the fact that stocks are tracking lower as well as financial conditions tighten. But the good news on that, Sarah, is the best estimate of what bonds are going to return over the longer term is the initial yield. So it's starting to rebuild a little bit of return potential over the longer term for bonds, even if it's painful on the way and we don't know if it's over. 3.36 is the latest on the 10-year yield. To me, the two-year and three-and-a-quarter is the story. You know, we started below half a percent this year. You're at three-and-a-quarter.

That's where the Fed expectations get most quickly priced. I would also note the bad breath. Everyone's been talking about it. 1,200 stocks at 52-week lows right now. You've got 41 to 1 negative on the S&P 500. I don't even want to say it out loud, but isn't that the kind of stuff that bottoms are made out of? Yes, eventually they are. In fact, three days in a row, we had 90 percent downside volume. So if you wanted to see the kind of washout numbers, it's getting there. It doesn't put a pin in the

chart and say that's the low, but it definitely tells you that you're getting in that direction for sure. Mike, thank you. We will talk to you often throughout the hour. For more on the sell-off, let's bring in Citigroup's U.S. equity strategist, Scott Kroener, and Jeffries economist Thomas Simons. Welcome to both of you. Thomas, the idea that the Fed could go even more than originally expected this week, certainly playing a role this week or in the next few meetings. There's now one 75 basis point hike priced in over the next few meetings. You think it's going to come on Wednesday. Why? Yes. So I think one of the biggest reasons,

you know, point in favor for going 75 this meeting is because it's not expected. And that's because the Fed has found itself after Friday's data in a real pickle, in my opinion. The bedrock of their whole inflation targeting scheme, their whole policy framework is steady inflation expectations. And what we saw in the University of Michigan Consumer Sentiment Survey last Friday is that those are starting to become unhinged. And as much as, you know, 50 basis points is baked in the cake from prior guidance that they've given us, it doesn't seem like it's a good move to me to just go with what's safe and then have to defend a relatively soft move in the press conference afterwards.

I just think it's unlikely because you have a Fed that has worked so diligently on its communication strategy and worked so hard to telegraph moves to the markets and be transparent. I think it would be a real shock. Maybe they need to do it to restore inflation credibility. But what would that do to its communication credibility when last meeting Fed Chair Powell said 75 basis points is not under consideration right now? Well, he said that 75 basis points was not under consideration for that meeting. And he's also said many times that the Fed needs to look at the incoming data and react to it.

So in my opinion, a 75 basis point move is completely consistent with that. Obviously, you point out that they have been much more clear in their communication in the last 10 or 15 years or so in terms of sort of telling us exactly what they're going to do ahead of time. And that has some value at certain times. Right now, I don't think that that's the case.

And I think that if the Fed were to just go along with their prior guidance, even if it doesn't necessarily match up with what the economy is telling them, that risks the credibility they've had building up against inflation for the last 40 years. And once that's gone, I don't know how long it would take to try to rebuild that. And I don't think that J-PAL wants to go down as one of the more irresponsible Fed chairman in history for doing so. A lot of notes today calling for a Volcker moment. Scott, how would the equity market react? And is that what today's broad and sharp and painful sell-off is telling you? Yeah, I mean, I think what we're looking at here is the market quickly pricing in something that's akin to a recession. We've been arguing for a while now that as the market's teetered of late that you're pricing in a recession risk but not to a 3650 level on the S&P, which is really a function

of seeing a more severe hit to earnings expectations for 2023, combined with some multiple contractions. So I guess the way we would think about it is that the closer you get to our 3650 level, the more we feel like the market's pricing in something akin to a mild recession, which is tricky because we're still many months away from that recession actually taking hold. If it does, the house view here is still 50-50 chance of a recession for next year. So nothing's for certain at this point. And so I think that kind of speaks to some of the issue here in terms of discounting and a situation that is still kind of murky in terms of how it might unfold. So what do you do? Because today there's not too many places to hide.

Bonds are not working as safe havens. Even staples are down now one and three quarters percent, maybe a few or higher. But it's been a while since I've looked at a day where on the S&P 500 and seen like a handful of stocks that are actually positive. One of the CME group, which benefits from volatility. Where do you hide, Scott? So it's a relative call to your point, Sarah. So, you know, we're out over the weekend suggesting health care is our preferred sector recommendation, highest conviction, which is going to have some defensive characteristics to it. In other work, we've been using quality as a means of navigating this market where you steer clear of more levered companies, either economic swings and or debt leverage.

And so I think those are ways to mitigate some of the risks. They don't completely eliminate it, obviously. So at this point, we're looking at sort of a relative positioning perspective that keeps us most for the most part, either defensive or even within more economic sensitive areas of the market, the more defensive component of that sector. So, Thomas, Scott says 50 50 percent chance of recession, which is not helpful. But to be fair, there's there's not a wide agreement on this right now and not too much evidence of it yet. Where are you? Unfortunately, I'm more or less in the same boat, to be honest.

You know, I think that the economy, despite having a lot of challenges from inflation, still has a number of good elements of its foundation to build on for good strength. You know, the consumer, despite, again, facing very high prices for a host of different things, still has a very sturdy balance sheet in terms of a lot of accumulated savings. We haven't seen really any sort of cracks in the labor market yet. You know, obviously, we have a couple of announcements from major firms about having to reduce headcount for various reasons. But you look at the weekly jobless claims data and you still see, you know, continued downward pressure and continuing claims and basically flat initial claims. So it still seems like more people are getting jobs than losing them.

It's not really the question as to what we're seeing now, though, right? It's a question about what happens when we see a 75 basis point hike, if we're going to see one over the coming meetings with a bunch of 50s in there as well. And by the way, quantitative tightening. You think that the economy can withstand a recession then, Thomas? Well, I don't think that a 75 basis point hike right now is going to put us into a recession before the end of this year, for instance. You know, what I was trying to say is that there's a lot of momentum there. And I do think that that's going to continue for some time, even with tighter policy. You know, as we get into 2023, obviously, if the Fed follows through on what we expect, which is going to be a policy rate that

tops out somewhere around 4 percent, then, yeah, after a period of time, the economy is going to be a policy rate that tops out somewhere around 4%, then, yeah, after a period of time, the economy is going to slow pretty significantly. But the Fed right now, their priority number one is getting inflation down, and that is going to require a slowdown in growth at some point. Great discussion, guys. Thank you both for joining me today. Thomas and Scott, appreciate it. From Citi and Jeffries. After the break, what is behind the Bitcoin breakdown today? We'll talk to the CEO of blockchain tech company Bitfury about what's pushing crypto prices sharply lower across the board and the spillover effect that could have. Bitcoin down 15.5%, more than $4,200 right now.

Overall, stocks just keep getting hammered, down 3.5%, with the Nasdaq down 4.3% and the Dow down 814 points. You're watching Closing Bell on CNBC. Bitcoin tumbling below $23,000 earlier, hitting its lowest level since back in December 2020. Several headlines out today hurting investor sentiment. Crypto lending company Celsius pausing withdrawals for its customers. And then there's BlockFi announcing it is laying off 20% of its workers. And the world's largest cryptocurrency exchange, Binance, pausing withdrawals due to a, quote, stuck transaction causing a backlog. Joining us

now is Brian Brooks, Bitfairy CEO, which is a Bitcoin miner. Brian, do you have any more color on what is actually happening in some of these issues like a Celsius or Binance? Yeah, absolutely. And listen, thanks for addressing this at this moment. It's kind of a crisis for the crypto industry. What I tell you is you have a perfect storm of multiple things all happening at the same time. So first, you have Celsius blowing up. It's the second big centralized crypto project in three weeks to blow up. That causes people to think the whole sector is infected at some level, which it isn't, but that's a natural human reaction. The second thing you have is, you know, Bitcoin had its enormous rise during a period of very, very high inflation

building up in the economy. And now you've got Federal Reserve action and central bank action around the world taking aggressive steps to rein in inflation, which is a bad thing for Bitcoin over time as an inflation hedge. And then finally, every stock in the S&P 500, literally all 500 stocks are down by a significant margin today, specifically including financials. So it's a perfect storm. Everything that could be going wrong is. I get you keep calling it an inflation hedge, but it's not acting as an inflation hedge, Brian. It's really acting as if it's just one of the speculative parts of the market that got overvalued during the massive liquidity and stimulus that the Fed and the fiscal government pumped in in the last few years, sort of like SPACs, what's happened there.

Yeah, so I would tell you, I don't think that's quite right. So what's been going on over the last two years during the big Bitcoin bull market, right, when Bitcoin went from 4,000 to 69,000, is all of those inflationary pressures were building. And especially in 2020, that's when the massive run up in crypto, in Bitcoin in particular, first happened. That's when we were baking inflation in the economy. What's happening now is a series of major rate increases by central banks. So inflation is super high today, but the inflation activity by central bankers is now putting pressure on anything that runs contrary to inflation. So last two years of inflationary cycle, great for Bitcoin, tightening, bad for Bitcoin. 2020 was when we got the massive injection of stimulus from central banks around the world, including from the Fed. Nobody was anticipating inflation. And yes,

you're right. We could have been sowing the seeds for inflation. But even now with the central bank actions, there are questions about whether the Fed and other central banks are really going to get a hold of inflation because it keeps going higher. So I'm not sure I see that Bitcoin is an effective hedge. Yeah, I mean, you can debate the effectiveness and you can debate how widely traded it is. But I think those of us who have long memories remember that plenty of us, myself included, were warning against inflation in 2020. Right. That was at a point where basically the monetary policy had shot all of its arrows by that point. We'd had zero short term discount rate for a long time and all that was available was fiscal stimulus. So I would take the other side of that,

to be honest. But different minds can differ, I suppose. So what about some of the issues, the Celsius you mentioned, and the loss of confidence that that's sparking? How do we know what else is lurking there? What other sort of skeletons are in the closet, given all that's happened in Bitcoin in the last few years? It's a great question. I mean, my mental model for all of this is 2000 and 2001 and the dotcom bubble bursting. I mean, what we all knew in those days was there was a really important thing going on called the Internet. But a lot of those companies were going to go to zero. Right. The companies that were either scams or that didn't have a core thesis for why a network platform was better than a regular platform.

All the pets dot coms of the world, they all went bankrupt. And I've been saying for two or three years now that in crypto, a lot of the projects you see going on here are going to go to zero. But there are Amazon dot coms in there somewhere. Right. Things, you know, the major protocol layers, the significant network technologies, those are going to make it out here stronger than ever two years from now. But things are going to get shaken out now. The scams, the charlatans, the easy money guys, those people are going to get shaken out in the next six months. And you're starting to see that now. I guess we're going to start to see where all sorts of places that could pop up those

structured products around around Bitcoin. What about your business? How has it been affected? Can you mine profitably in this environment? Yeah, well, so the good thing for companies like mine is if you have the right chips and the right electricity prices, you can mine profitably down a fair bit from where we are today. But, you know, at Bitfury,

the great thing about our business model is we're a highly diversified portfolio of different kinds of companies. And so companies in blockchain analytics are going to be even more valuable now that people are trying to figure out where the cash flows are going. Bitcoin mining, less profitable than it was yesterday, for sure. Brian Brooks, thanks for joining us to shed some light on to what's happening right now in Bitcoin. Price is getting slammed right now. Along with stocks, check out where we are in the markets right now. We've still got a pretty sharp and broad sell-off today, with the Dow down about 800 points, the S&P down 3.5%. Every sector in the S&P is lower. Again, consumer discretionary feeling

at the worst, down 4.5%. Though energy is not far behind for all of its gains this year. And yes, it's still up 51%. That sector right now down about 4.4 percent. It was down more than 6 percent earlier this morning. Real estate, utilities, communication services, the Nasdaq down 4.2 percent as technology gets absolutely slammed. Cisco is one of the few bright spots in the Nasdaq right now. Still ahead, former Barclays CEO Bob Diamond with his read on the market pain and how long we could be in for. Plus, as we had a break, check out some of today's top search tickers on CNBC.com. And it's all macro focused today. Tenure yield getting the most interest. Not surprising. Yields shoot up. Look at the tenure at 341 right now. We're looking at

the highest yields we've seen in years as expectations ramp up that the Fed will have to go even bigger to fight inflation. Bitcoin is on there, down 15.5%. The S&P, Nasdaq and Dow round out the list. We'll be right back. Stocks sharply lower across the board as we head toward the close. The Nasdaq is down 4.5%, near the worst levels of the session. Here's a live look at the Nasdaq 100 heat map, which just shows you how broad the selling is reaching every single corner of this market. There's the NASDAQ, as I mentioned, 100 heat map. At the bottom of the list, you've got names like Splunk, Datadog, Pinduoduo, the Chinese internet name. They're all down 10 percent. DocuSign, Okta. So it's really a mix.

The software names, the big cap tech like a Microsoft and Amazon and Apple all weighing hard. The only two positive names are Cgen and Cisco Systems. Everybody else is lower. Technology is one of the worst performing groups in the market, though consumer discretionary and energy doing even worse right now. Check out today's stealth mover. It's Duke Realty, which is also one of the very few S&P 500 stocks in the green today after the warehouse owner agreed to be acquired by rival Prologis. It was an all-stock deal worth roughly $26 billion. Duke had rejected a $24 billion deal from Prologis last month. Looks like that has been accepted. Prologis down 7%,

and Duke is up almost two. Up next, Atlas Merchant Capital CEO Bob Diamond on this market sell-off, where he sees potential opportunities amid the volatility. We'll be right back. Look at the bank stocks getting hit again today, even as Treasury yields rise. Leslie Picker has a look at what is pressuring this group. Leslie. Hey, Sarah. Yeah, after last week, where financials were the worst performing sector, actually today they're one of the top performers, but still down significantly, down about 3%, only bested by consumer staples, though, among the S&P sectors. Banks, asset managers, brokerages, all getting whipsawed by the prospect that inflation or the Fed's response to

it pushes the economy into a recession. But some may argue that higher rates can be good for certain businesses, making lending more profitable, for example, and trading more robust. However, a recession can diminish credit quality, freeze M&A, shrink fee generating assets under management, and create markdowns in both liquid and illiquid assets. Morgan Stanley CEO James Gorman sought to assuage some concerns today at a conference raising his odds of a recession to 50 percent from 30, but saying he's not expecting a deep or long recession if there is one, adding, quote, I am totally relaxed about it. Sarah? What's happening fundamentally, Leslie? Are we starting to see a turn in the cycle from the banks? Because we have heard a lot of really

positive commentary from the banks, Bank of America, for instance, citing how good the consumer is lately. Comerica, someone forwarded me, had some good news when it came to an intra-quarter update on loan growth and less of deposit runoff and stronger net interest margins. Thank you, Doug Cass, investor, who sent me that. So what's happening under the surface here? No, you're right, Sarah. Fundamentally, the picture hasn't really shifted yet, at least as far as we know. J.P. Morgan gave guidance saying that they were expecting a big boon in trading during the quarter.

Investment banking still expected to be weak. It was weak in the first quarter, expected to continue on into the second quarter as we navigate this situation. But interestingly, there is an accounting rule that does fundamentally impact banks. It's called CISL. And basically what it does is that there are various models that the C-suite will input. And basically that determines how much they need to set aside for loan losses. And those models do incorporate a lot of the macro factors. So what we saw, for example, in the first quarter is J.P. Morgan was forecasting a more dire, broader macroeconomic situation,

had to set aside more in those loan loss reserves, which do have an impact on their earnings directly. So it's not necessarily mark to market. It's actually it does affect them fundamentally, at least in the earnings they report. Got it. Leslie, thank you. For more on the banks and the broader market environment, the Fed, which is very much front and center, Bob Diamond joins us, founding partner and CEO of Atlas Merchant Capital. Bob, there's a new Wall Street Journal report making the round saying bad inflation report raises the odds of surprise 0.75 percentage point rate rise this week, which clearly is something economists, we've been talking to a lot of them on the show, are talking about and speculating. You think there's a chance that that happens? I think there's a chance. I

still think since Chairman Powell announced that they do a second 50 at this meeting, the second 50 at the end of July, that's probably the most likely. But if you ask me a different question, which is if I were if I were going to, you know, have a vote in this, which I clearly don't. But if I were going to have a vote in this, you know clearly don't. But if I were going to have a vote in this, I really think 75 or 100 is right. I think back to Paul Volcker in a situation similar to this, rather than say 50 now, 50 in June, 50 in July, more likely to say, let's get back to 2%. Let's get back to neutral and then see how the markets react. And since Chairman Powell and the Fed have pretty much said it's going to be 50 now and 50 in July, I think it would be really a good idea to do the full 100 now, get us back close to 2%

and see how the markets do then. So I think the odds are it's going to be 50. I do think there's a chance of 75 or 100. Because Chair Powell also said is that we need to see evidence that inflation pressures are abating and coming down. And if we don't see that, we'll have to consider moving more aggressively. So maybe a surprise this week. Maybe he'll signal that they're up for it. Maybe next meeting. Bob, though, you think the Fed can get inflation levels back down is a question, given that a lot of what's pushing prices up, certainly on energy and food, are way out of the Fed's control. Sarah, one thing's clear. Inflation is not going to fix itself. We have to take action.

And we know a couple of things. We know that the Fed played an absolute blinder early in COVID, early in 2020, with their fiscal and monetary stimulus. We also know now with hindsight they went too far. Did we really need that last one and a half trillion to have five trillion in fiscal stimulus? Compare and contrast that to 2008, when the entire period following the financial crisis, there was 700 billion in fiscal stimulus. This time we had 5 trillion. So we did probably too much. And then what's absolutely clear, and we've talked about this before, they waited too long. You know, six or nine months ago, you saw the tightness in labor. We saw the signs of inflation. Everyone was talking about it. We left interest rates at zero

and we continued buying 120 billion in U.S. Treasury and mortgage securities each month. So we're easing into an economy that already recovered. It wasn't recovering. It had already recovered. We have to pay that price now. We need to get rates up. And I think we should not be surprised at the situation that we're facing now because we kind of overstimulated the economy. And now we have to and we probably waited too long. And now we have to calm it down. Inflation is not going to cure itself. What does it mean for the banking sector, Bob, which is down sharply today and now about almost 25 percent off the highs?

Well, listen, there's a lot of factors. A little bit of it is just risk off. So all equities are being impacted when you go from kind of a risk on trade to a risk off trade. I mean, basically everything was going up. Stocks were going up. House prices were going up. Bitcoin was going up. It was across the board. But I think in terms of the fundamentals specific to banks, I do think higher interest rates, steeper curves, more volatility are very positive in and of themselves. But as you mentioned on the previous program, we're going to see credit losses start coming true. One of the things that we did three years

ago on Atlas Merchant Capital is we hired Ty Wallach to begin building an opportunistic credit business, recognizing even before COVID, with 12 years of zero interest rates, lower and lower covenants, there's going to come a time when too much credit, too much debt is going to impact the corporate sector. That was really delayed during COVID and all the stimulus that came, but we're seeing the signs of it now. And I don't mean across the board. There are really, really a lot of liquidity there and very sound balance sheets, but there is a sector of the corporate sector that will have borrowed too much or borrowed unwisely, and we're going to see real opportunities in credit. That would be a negative

in some ways for the big banks because of the provisioning requirements and what they have to set aside. Bob, I've got to ask you, you, I think, had plans to take Circle public via SPAC. Both of those are the wrong, SPACs are not doing too hot and neither are cryptocurrencies. Is that still going forward? Well, in this case, we've already announced the merger and we're awaiting approval. So, you know, that SPAC has a partner going through the process, of course. In terms of Circle, we're very excited. I think, again, there's a risk on, a risk off. But you remember what I said when I was on with you before. Circle. We want to be the most conservative, the most regulated. We only operate within the perimeter of the U.S. regulatory

system. We're applying to become an OCC bank. And since the kind of the crypto winter, as they call it, has begun, the outstandings of Circle have increased. And people can take confidence that a dollar is a dollar is a dollar. And the stablecoin is we have only U.S. Treasury short term, three months and less U.S. Treasuries and cash standing behind every USDC. So as a payments platform, we're still pretty positive on this. And you've seen the private round of funding that's happened just more recently. All right, Bob, conversation for another day, just how stable those stable corns are after some questions earlier this year. But we'll leave it there for now. Got to get to the sell-off,

which just took another leg lower. We're down 900 on the Dow. Bob Diamond, thank you. And let's get a closer look at some of today's biggest losers. Pippa Stevens is here to break down the energy sector. And Deirdre Bosa looking at the gig economy stocks. Pippa, we'll start with you. Hey, Sarah. Energy stocks down 4% today despite oil ending the day modestly higher. The services companies are leading the declines with the OIH down 7%. The XOP, which tracks upstream players, falling 6.5%. The refiners, though, are holding up a slightly better. Looking at individual names, EOG, Halliburton, APA and Devon are the biggest losers. Giants Exxon and Chevron are down four percent. Both stocks did hit all time highs last Wednesday. Now, Joseph Sikora from Aptos Capital Advisors said this is thanks to indiscriminate selling

across the market. Energy is still the top sector this year by a wide margin. And he said that since mid-April, it's up 30 percent against the broader index. So profit taking is to be expected. Now, turning to renewable energy stocks, the iShares Global Clean Energy Fund down more than 6 percent. Sunova, Sunrun and Plug Power all dropping double digits. These companies are very sensitive to higher interest rates and higher borrowing costs, so no surprise here that they are selling off. Now over to Deirdre Bosa, who has a look at the gig economy stocks.

Pippa, thank you. They are getting hit hard as well in today's session. They just took another leg lower along with the broader markets. Uber, Lyft, Airbnb, Grab, take a look. They're all off between 10 and 12 percent. DoorDash off around 6 percent. Didi is starting its plans to delist. It has been a very rough ride for the Chinese ride hailing company. For years, when money was flush in private markets, gig names, they could focus on growing revenue while burning through billions and billions of dollars. But now that has put them in a very tough spot amid the current market conditions. Investors, they want real profit, net income, not adjusted EBITDA.

They're looking for free cash flow. Now, some are getting there quicker than others. Airbnb had about a billion dollars in free cash flow last quarter. Dash has been positive on that metric for the last two years. Uber just had its in free cash flow last quarter. Dash has been positive on that metric for the last two years. Uber just had its first free cash flow positive quarter. But still, guys, there is a lot of ground to make up here. Lyft hit a new 52-week low today. While Uber is not far from its, although is just a few cents off, I believe,

both those names are also well below their IPO prices from just a few years ago. Lyft went public at 72 bucks a share. It's now around 14. Uber went public at $45 a share. Sarah, it's now around 21 and change. Back to you. Wow. Deirdre, thank you. Deirdre Bosa. We're going to go straight here into the closing bell market zone now. CNBC senior markets commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, Kate Rooney on crypto's crash and some of the stocks going down with it. And Steve Kovach on big tech's rough day. Let's kick it off at the broader markets. We are in sell-off mode all day long. In just the last few minutes, though, took a leg lower. There's the Dow down 961 points. We're

now at the lows of the session. Took a little spill, Mike, around that time when the Wall Street Journal article did come out saying increasing odds for 75 basis point hike this week, even though Powell last meeting did say that it's not under consideration right now. You've got one Dow stock higher. That's McDonald's. How much credence do you put in that story? I put plenty of credence in the story that it's now under heavy consideration. I mean, obviously, the journal writer, very plugged in, very well sourced. The Fed itself is in a blackout period. The more important thing to me is whether it's going to happen or how the story came about almost doesn't matter based on how the market reacted, which is the two-year note yield already in massive sell-off mold just was liquidated further. And you went from like 328 on the yield up above 340.

So the market feels compelled to widen out the probabilities here and say that that's a possibility. Even if it doesn't happen on Wednesday, that most likely the Fed wants to put investors on notice that now that's the scale of what's being considered. That might be really useful for the Fed to both, you know, not necessarily seem like they're panicking and go 75 Wednesday, but also saying, look, we have to catch up here. I don't think it changes the overall story. The S&P is down about 10 percent in three trading days. I think that's very significant. You have massive, massive downside volume skew.

So that's somehow getting to a point where people are giving up on the near term. And, you know, that doesn't mean it's hit the low, but that's what you get before, in fact, you find your footing. Also, we've got a more than 1% move on the dollar index, DXY. You don't see that too often. That's on top of already a big gain. We're up almost 10% on the year for the dollar index. Pretty extreme, Mike. You know what else is near 340 is the 10-year yield, which means we're on the brink of inverting again. We are. It's very close. Now, obviously, we're at 340, 325 or so on the 10-year, which is considered to be really the pain threshold for equities. It's where they got to in late 2018 when the market couldn't really handle it. To me, it's all happening on the shorter end, though, because the market's implicitly saying the Fed's going to have to rush to get restrictive or near restrictive or neutral, whatever you want to call it.

And that's going to either create a slowdown or, you know, tip us into recession or it's going to work. In which case, in all those scenarios, you're not going to necessarily get the longer term yields up quite as much. And honestly, it's to me the volatility in bonds that the three month T-bill is up almost a quarter percent today. OK, that usually doesn't happen. So that kind of instability in your kind of bedrock ballast of the of your portfolio is just not going to be overlooked when it comes to riskier assets. We've got a four percent decline right now on the S&P 500. It is a sea of red with the Dow down 980 points or so. Cryptocurrencies are also getting crushed today, with Bitcoin falling to its lowest level

since December 2020. Meantime, crypto lender Celsius, which had been offering a 17 percent yield, freezing its customer withdrawals, raising fears about solvency. Kate Rooney joins us. Kate, how is Celsius offering 17 percent yields? And who else is exposed here? Yes, there's a lot of this on the back end was through lending. So step back a second. Hedge funds who are now deeply into crypto in some cases often don't want to hold that cryptocurrency on their balance sheet. They don't want the risk. They'd rather borrow it. And they'll pay a pretty high yield to do that. So Celsius was taking customer funds. They said, hey, we've got all this crypto from our customers. Why not lend it out?

And then they would split that and what they get paged by the hedge fund with the customer. So that's one way they were able to add some of the yield. And then you might be surprised how many other ways there are to get really high yield on crypto. So some of these early stage projects, international projects in a lot of cases, use high yields to attract customers to sort of get that customer base. And it's seen as sort of an incentive to buy in. There's a lot of questions on where they're getting the money to provide those yields. But Celsius, I'm told, was dipping into some of those projects as well.

And then you asked about the exposure side. The borrowers that I just mentioned, the hedge funds at this point, may be exposed here. And then you've got a lot of retail investors. So Celsius had, as of mid-May, about 2 million customers, they say, who right now cannot access their funds, buy or sell or transfer to anybody. So that is another customer base who's really going to be exposed here. Anyone who holds their money at Celsius right now cannot move it. Disaster. Kate, thank you. Kate Rooney. Look at big tech underperforming the broader market. The Nasdaq composite down 4.7 percent right now. Steve Kovac joins us. Steve, Amazon getting hit especially hard. Why is it faring worse than others? Any theories? Yeah, Sarah. So we heard from Amazon during earnings this past quarter about how they're having trouble, just like we heard with other retailers, managing their inventory and warehouse space.

And so that's a big thing investors are watching for to kind of fix before things start to turn around. We already heard a report last week that they're going to start subletting about 10 million square feet of their unused warehouse space. And so looking forward through the rest of the year, we have Prime Day coming up. How are they going to manage that? And then I was looking at all the other big mega cap tech stocks and like what needs to change before we even can consider seeing a turnaround. In Apple's case, it's the COVID lockdowns in China. How bad is that going to impact their quarter?

Tim Cook warned it could be up to $8 billion negative impact to sales. We'll see what happens when they report late next month. And then Microsoft, cloud growth, another big concern. Can they stop that flattening cloud growth and get it into that hyper growth that we saw in the middle of the pandemic? And then on the meta and alphabet front with digital ad sales, there's just a lot of concern about the changing in consumer habits. What are people, as we talk about the shift from goods to services and what that looks like in the digital ad market. So just a lot of factors playing in between all these big tech companies.

But at the end of the day, it's really boiling down to just shaking off the rest of the pandemic and COVID, Sarah. Yeah, and just a valuation reset off these higher interest rates and potentially slow or slow down. Steve interest rates and potentially slower slowdown. Steve, thanks. Steve Kovach, look at the homebuilders. They also continue to significantly underperform the broader market.

Both interest and mortgage rates are spiking. Diana Olick joins us. Diana, how are these higher rates impacting sales? Every time a new rate flashes on the screen with a headline, it's a wow number. Yeah, and it's a wow number today because we crossed 6% for the first time on the 30-year fix since the end of 2008. And remember, we started this year at 3%. So mortgage rates basically doubling. What's happened is to the housing market is it has done the sharpest U-turn that I think I've ever seen. Even in the Great Recession, it took several months for sales to slow down. We saw this in a matter of about four weeks. So what does that mean going forward? Well, it definitely means a much slower summer

than anyone expected. Realtor.com put out a revised forecast. Home sales, they say, will still end 2022 with the second highest level since the recession in 15 years. And that's with last year being the strongest home sales year. But here's the interesting point. They're saying that inventory will be up 15 percent this year compared with last year. And originally they expected it to be up 0.3 percent. Now, some of that will be more existing homes, but also it could be more new build. That is new construction from the builders that may not be selling or that may be sitting longer. They still do expect housing starts to continue to move ahead. I think what you really got to watch here, though, is the lenders, you know, the names like Loan Depot

and Rocket, which are really going to get hammered by this slowdown in mortgage demand. But again, the home builders and especially like you look at the ETF ITB, that one is down really significantly. And that includes not just the home builders, but the home remodelers, your home depots, your lows, et cetera. Sarah. Diana, thank you. We're going to hit all the carnage in the markets, every corner. Travel stocks are tumbling today. Booking holdings, Expedia, Airbnb and the cruise lines are all getting hit hard. In fact, the cruise lines are at the bottom of the consumer discretionary sector, which is at the bottom of the market right now. That sector down 4.4 percent. Actually, we've got real estate and technology moving even lower as we speak. Airlines, one of the market right now. That sector down 4.4 percent. Actually, we've got real estate and technology moving even lower as we speak. Airlines, one of the worst performing industries on Wall

Street today with the major carriers under a lot of pressure. Phil LeBeau joins us. Phil, what is the biggest concern now facing these investors in the airline stocks? Well, do we have a potential recession in the fall, Sarah? And if there is, if we slide into a recession, what does that mean for demand for bookings come the fourth quarter? We know that the airlines are very bullish, not just on the summer, but they say it's going to extend through the remainder of this year. We haven't seen all of the booking data come in. So that's the big question. You combine that with jet fuel prices surging to all time highs, that is not a good recipe for the airline stocks, and that's why they're getting hammered today.

I just saw a headline, Phil. I don't know where it came from, but Boeing CEO Dave Calhoun, quote, he's bullish on the industry, airplane demand, quote, as robust as I have ever seen, which it's just strange to get these headlines out of this industry with what's going on, the juxtaposition in the market. Well, he's said that for some time. So that's not new news in terms of his position on the demand for aircraft that are out there. So I'm not surprised to hear that headline. The question is,

will that match with reality, let's say, over the next six months or a year? Will there be as many orders as he expects them to be right now? Now, they even put a number out there, but he's very bullish on the market, has been for some time. Does that change if we see a recession come in? Right. It's just it's so strong right now and the stocks are so, so rough. Phil, thank you. We're down a thousand points right now on the Dow. First time we've seen that today as the sell off has accelerated just in this final hour or so. S&P 500 trading now more than 20 percent from its all-time high, which is a technical definition of a bear market, though it's felt like that to everybody for a long time now. The Nasdaq composite down about 5 percent in these final minutes of trade. It is off about 34

percent from its highs. Joining us now is UBS Private Wealth Management's Allie McCartney and Phil Camparelli from J.P. Morgan Asset Management. Allie, what are you telling your clients right now? I know you've been a fan of energy, but energy today not faring too well, down 5.6 percent. Look, Sarah, on a day like this, nothing fares well. We have had two really tough days. Ultimately, I think the subtle change in what we saw Friday and today comes from the fact that we have had a lot of mixed data. It depends on who you're talking to, at what point in time, and to how you can interpret it. The data that we got last week, everything from the lowest consumer index level ever at University of Michigan to something from the CPI that confirmed that the narrative that we hit the peak in March

is not, in fact, the narrative. So everything that has been priced in based on interest rates, based on the expectation of inflation, is now undergoing, you know, what is the new normal and where are we going to be? So this is just a risk off day. And I'm telling clients to try to just hurry up and wait and understand that this is going to be a long process that took 14 minutes of a lot of money and a lot of free money in the system. And we all just have to practice humility and discretion and discipline when it comes to investing at this point in time.

Phil, it does raise the question as to how long this type of bear market we're in for. What does this look like to you? Is there any historical comparisons that you can give between maybe the hiking cycle, where we are in the economic cycle, and what we've seen for stocks? Yeah, Sarah, we need to stop meeting like this,

which is interesting. The historical comparison that people are drawn to is either the late 70s with the Volcker moment or 1994. But listen, over the past couple of trading days, this sell-off has entered a new phase. The conventional wisdom as we came into this month was that the Fed would hurry up and get to neutral. So they would still go 50 basis points over the next couple of meetings, stop at about 3% and look around. And hopefully at that point, they would see that meaningful

reduction in inflation. That's out the window now, Sarah. I mean, we've seen an additional 70 basis points of tightening over the last two trading sessions priced into 2022 alone. And as Ali was saying, there's absolutely nowhere to hide, which is so jittering to investors. Sarah, do you realize that the worst year bonds has ever had, as identified by the Bloomberg aggregate, was down negative 2.9 percent? We're down 11 percent in the aggregate year to date. Like nobody's really seen anything like this. And what we're telling clients is, listen, if your time horizon is a long time horizon, you're going to be fine, right? But over the next couple of quarters, this is not the time to be a hero. We do not see a bottom in the equity market. There's nothing that tells us that the equity market has bottomed.

So from our perspective, you know, it's a meaningful underweight to stocks of about 10 percent in a 60-40 portfolio. And we're trying to figure out what to do with our corporate credit, which is acting a little bit more like stocks than we want it to right now. But buying puts on the S&P 500, which we've had in the portfolio for a couple of months as a hedge, is the only thing that's working right now. Ali, I guess the question for investors, maybe in the short and medium term, continues to be whether the Fed can pull this off, whether they can bring down inflation without a hard landing or a painful recession. Is that still the case? Do you believe that? Yeah, It's exactly still the case. And the question is not whether I believe it or whether UBS believes it. It's whether the markets believe it. And clearly the bond market has told us in the last two days that it does not believe it. And look, everybody knows that we had hoped we were going to have transient inflation as a result of COVID and the necessary shutdowns that

happened. What is once transient has become mid to long term. And inflation is a really hard thing to combat. And we're seeing inflation in so many areas that continues to be exacerbated by continued shutdowns, by geopolitical struggles. So there are many, many areas that it's stemming from. And I just feel like everybody, whether it's a stock trader, a bond trader, an individual, or an institution right now, is quite overwhelmed by the set of options that are in front of us. And you can see that by, again, what Phil was talking about by this move in credit. I think this is going to be a very meaningful week in terms of what can the Fed say Wednesday? What can they telegraph? Do they stick to their 50

basis points? Do they go to 75? But we need to make sure that we have a path that the markets believe is credible. And until we can get there and until the data proves it, which is a number of CPI and Fed meetings away, we're going to continue to be in this super tumultuous environment. And it just doesn't feel good to anybody right now. No, it doesn't. Absolutely. Mike, credible is one of the words that you hear a lot about with the Fed when it comes to inflation fighting, when it comes to long-term inflation expectations. You do wonder with this kind of setup going into a Fed meeting on Wednesday, whether if the Fed did surprise Mike 75 basis points, if the market would like that, would the market rally off of that? Because then it would show that it was serious on inflation even more so. I mean, the setup is there

for that, right? I mean, the way the bonds have been bucking all over the place. And by the way, just in the last few minutes, that two-year yield is down like over 10 basis points. It's just basically become unhinged. So yes, if you had some kind of sense out there that there was gaining traction in the fight against inflation, sure. But I think everyone's operating now on the basis of the Fed has a single mandate, which is inflation. And if it has a soft landing, it'll be accidental because they don't really, they're not really paying attention to the growth side until they have confidence. Inflation comes back under control. So sure, 75 now, front loaded, maybe so.

I don't think it's easy to really predict the market's reaction function to the Fed's emerging reaction function. But I don't think it would automatically be some kind of huge incremental bearish blow to go an extra 25 basis points in two days, given what the market's already done, down almost 10% in three days on the S&P. That's what we do, Mike. We analyze reaction functions. Ali McCartney, Phil Camporelli, thank you both for joining me. We've got two minutes to go in the trading session. Mike, we hit down 1,000 on the Dow a moment ago. We're now down about 800. What do you see in the internals? Yeah, stocks had this minor bounce just as yields came off. It's all one trade right now.

Overwhelming negative breath. I mean, you almost rarely see 98% downside volume. So it's basically comprehensive. Also, a buyer's strike. Because as I said earlier, volume's heavy, but not really stupendous. So that's absolutely one thing to keep in mind. Now, take a look at crude against energy stocks. Energy stocks down some 5% today, XLE. That's got a little bit of a disconnect there. Crude's now outperforming on a year-to-date basis. We'll see if it maybe has

a catchdown, because that's been relatively solid. Volatility index finally responding. We're up into the mid-30s. So we were here not that long ago. A lot of complaints. It hasn't gotten to 40. It's top end of the range right here. We'll see if this is the start of something or, in fact, another stall at the top of the range. You have two days until the Fed meeting. Well, it looks like we are going to close in a technical bear market that is more than 20 percent off the highs for the S&P 500. We're down 4 percent right now as we head into the close. Energy is among the hardest hit sectors today. It's down about 5%. It's actually just at the bottom there, along with real estate,

utilities, consumer discretionary, technology. Everybody's red. Consumer staples holding up the best, but that group is down 2.3%. The Nasdaq has been pummeled all day. You've got names like Apple, Microsoft, Amazon, Nvidia all weighing on the triple Qs. The Nasdaq is tracking for a huge loss on the day, 4.7%, it looks like. You've got the Russell 2000 index of small caps down almost 5% as well. And there is the Dow, down 856 points. We were down just a little over 1,000 one moment ago. Looks like we're going to close just off of those lows. Overall, just an ugly day.