Closing Bell - Closing Bell: Choppy Session to Start Week, Reaction to Inflation Reduction Act 8/8/22

Episode Date: August 8, 2022

Stocks were mixed in Monday trading, with the Dow closing slightly higher, while the Nasdaq ticked lower, in part on an earnings warning from chipmaker Nvidia. But solar and EV stocks were outliers �� climbing after the Senate advanced the Inflation Reduction Act over the weekend. National Association of Manufacturers president Jay Timmons joins with his objections to the bill, while the CEO of solar firm Sunnova makes the case for why it’s a positive. Meantime former Fed governor Sarah Bloom Raskin discusses if the bill will indeed combat inflation. And the CEO of Chegg breaks down the current environment for tech stocks.

An upbeat start to the week has faded throughout the session. Major averages wavering here between gains and losses as we head toward the close. 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 markets. The Dow barely positive. It was up as much as 306 points earlier.

The low of the day was down 27. S&P 500 down a quarter of 1%. Technology is underperforming. Information technology, the worst performing sector. That's what's dragging the Nasdaq down about a quarter of 1%. The semis, NVIDIA's warning, we'll hit on that in just a moment. But that is certainly taking its toll. Small caps doing well, up three quarters of 1% today. And if you look at what's working, here's the S&P 500 sector heat map. Here's a clue as to why. You've got materials on top of the market right now.

Energy is also having a strong day. Real estate stocks, communication services higher today. Consumer discretionary also higher. Some of the names like Paramount, Netflix, Walt Disney, all lifting that communication services sector. Healthcare also positive. And technology is at the bottom thanks to the sell-off in semi-stocks. NVIDIA is down 8.3 percent. You've also got utilities, industrials, financials and staples under pressure. Coming up on the show today, three takes on the Inflation

Reduction Act, which did pass the Senate this weekend. In just a moment, we'll talk to the president of the National Association of Manufacturers, who says the bill will, quote, stifle manufacturing investment in America. Plus, former Fed Governor Sarah Bloom Raskin will be here to discuss whether the legislation will actually live up to its name and bring down inflation. And the CEO of Sanova will talk about the benefits to his industry as those stocks, those solar stocks, get another big boost off the passing of this. Let's get straight to NVIDIA, though, out with a warning on its second quarter earnings, setting the stock sharply lower. Mike Santoli here with a look at the name in today's dashboard and the ripple effect this is having.

Yes, a little bit of a test of what is and isn't a bellwether for the broader market today. The overall Nasdaq sort of absorbing this downside shock reasonably well. Part of the reason is, you know, NVIDIA already was on a big slide. One of the great wealth creators and index drivers the prior couple of years. This is a one year chart of NVIDIA relative to the overall semiconductor group and the S&P 500. You see semis have not been leaders in this last little rebound. They participated. You have lost them as a real engine of the market. But NVIDIA down 14 percent over this span. Now you obviously see up here, that was when it had over an $800 billion market cap.

It's down to just over $400 billion. But again, it was up so much, it's still a double since before the pandemic, that it's still maintaining a lot of the sector strength. In terms of economic and cyclical bellwethers, take a look at semis relative to transports in the overall market. This goes back to the middle of last year.

You have had a bit of a cyclical revival here. The S&P 500 outperforming both of those things. Some of the growth stocks helping there. But now you see transport slightly outperforming semis. So kind of the old cyclicals, the old kind of industrial bellwether doing a little bit better than semis right now. We'll see if this turns out, Sarah, to be the kind of thing where the market has to try to get it done without semis. Or, you know, we saw that Micron warning June 30th and the market did OK afterward. Maybe a lot of it has been discounted, even if not all of it. It felt like that bad news was already in those stocks and certainly in Micron. Earnings overall,

I noticed that David Koston, the chief equity strategist at Goldman Sachs, took down 2023 numbers. I don't know if you saw this. earnings numbers from six percent growth to three percent growth. So cut them in half. I wonder if that if that is happening, because that's below consensus now on Wall Street, as we try to grapple with this question of how far the market should be pricing in a recession. It's likely to roll through the 2023 estimates. I think during the reporting season, you saw the third and fourth quarter numbers come down. That's kind of expected at this point, given we've decelerated, given the Fed has tightened. If you're still growing, though, if in fact he's right and you have 3% earnings growth next year, that usually means the market can sort of find a way to hold together, as opposed to if you see an absolute peak in profitability, that's often when the market can't really find its way out of that.

And revenue growth is a lot stronger. It's about those margins. That nominal growth continues to help, yes. Mike, we'll see you later. Thank you very much. Mike Santoli with the Dow up about 23 points. Financials just turned green. The Senate passing the Inflation Reduction Act over the weekend.

Sectors like EVs are getting a boost today. And clean energy names like First Solar are also green on the weekend. Sectors like EVs are getting a boost today and clean energy names like First Solar are also green on the news. But National Association of Manufacturers CEO Jay Timmons says the final bill will stifle manufacturing investment in this country. He joins us now in a first on CNBC interview. You guys have been the most among the most vocal. You in private equity. It looks like they got their way. You did not, Jay. Is it because of this 15 percent minimum tax on booked profits? Yeah. So, Sarah, that obviously is going to be a drag on the economy. I will say this, though. We were very successful in getting immediate expensing, if you will, accelerated depreciation protected from this minimum tax. Senator Kyrsten Sinema

from Arizona was incredibly important in that effort, and she helped us get that done. But the overall bill is going to cost the economy. It is very inaptly named. I know you're going to be talking to somebody else about that right after this. And unfortunately, it's just going to suck money out of the economy that could be used by manufacturers for investment, job creation, and most importantly right now, wage growth. So you mentioned you got that very key deduction preserved. So when you think about, when you say that it's going to hurt manufacturing and economic activity, can you be more specific? What do you actually expect here in terms of whose taxes will rise and what that will do to hiring and spending?

Sure. Well, if you rewind the clock to 2017, we were very successful in comprehensive tax reform that year. The following years, we saw record amounts of investment, job creation and manufacturing, and wage growth for two or three years in each of those categories. So we were very pleased that we were able to demonstrate that manufacturers would keep our promises that we made when that bill was enacted. Now you're taking money out of the economy, several hundred billions of dollars that can be used to,

for instance, to invest in new plants and equipment that would actually help reduce the carbon footprint of manufacturers. So to me, when you're proposing a bill that is supposed to be helping with the environment, which is, of course, a laudable goal, and we're happy to see that that is a focus, by stopping or by curtailing manufacturers' ability to make those investments. It seems counterintuitive to the purpose of the bill. Well, the administration might fight back. You just got 50, almost 53 billion dollars in money to build semiconductor manufacturing in this country. And I believe you're going to be at the White House tomorrow for the signing of that bill, the CHIPS Act. So as far as investment in manufacturing, it's happening. So there is certainly good steps

forward. There's no question about that. It seems to me, though, that you want to take two steps forward instead of one step forward and one step back. You know, we don't really like being in the status quo. We want to be moving ahead. And the CHIPS bill, as you just mentioned, is a great example of bipartisan efforts to solve a serious problem. And the problem, of course, is the production of semiconductor chips here in this country. And those chips are in every single thing that is manufactured, everything in our homes, in our cars, everything throughout society right now. So we were thrilled that that had bipartisan effort. We are really grateful for the president's leadership on the chips bill. But on this particular bill,

the Reconciliation Act, that was a purely partisan effort. And it did not accomplish completely what it needed to accomplish. Yes, there were some good things that on the spending side of the ledger, certainly. But when you tax manufacturers to try to accomplish those goals, you're just not you're not taking two steps forward. Is how many manufacturers are going to be affected? Isn't it to try to go after companies like Amazon, who Biden always says doesn't pay any tax? Well, look, I think that's a nice talking point. But the fact of the matter is many financial statements do not reflect the reality of taxable income. And, you know, I appreciate the political statements that the president and others make when

trying to bash America's job creators. I don't think it's particularly productive, to be honest. And many of those companies have made investments. I can't speak for Amazon. They're not part of our organization. But I have 14,000 manufacturers that are attempting to invest in plants and facilities here in the United States in order to manufacture more in the United States in order to manufacture more in the United States. And we did that again after 2017 and the tax reforms that supercharged the economy. We want to keep doing that. And I'm afraid this bill is going to set us back. Jay, how are the 14,000 manufacturers doing

right now? We're trying to figure out, are we in a recession? Are we still in a post-COVID boom, different sectors of the economy telling different stories. What are you hearing from your members as far as where we are in this cycle? I'm so happy I'm not an economist, Sarah, because I couldn't begin to describe what we're in right now. But what I can say is this. We have a significant supply chain crisis going on right now. Much of that is because we can't find people to fill the jobs that we have open. We have about 800,000 jobs open in the sector. And if people are ordering goods from us and we don't have the people to actually make those goods, it creates a continuing problem with that supply chain. And of course, inflation is a major factor there as well. We had so much money that was percolating in the economy after the pandemic relief bills,

and we still had some sort of quantitative easing from the Fed. So much money was flooding the economy that it's now trying to catch up. I don't see that as a long-term problem. Most of my members don't either. But it is clearly very much a short-term problem right now. The supply chain crisis itself is creating bottlenecks that we don't really know when those things are going to start easing, although we're starting to see a bit of that right now. So again, I don't know what to call it, Sarah, and I know most economists don't either. Let's just say it's not pretty out there right now, and we're hoping that things are going to get more stable in the months ahead.

Jay Timmons, thank you for joining us. National Association of Manufacturers, first reaction to the Inflation Reduction Act. The NASDAQ is the underperformer today. I'll just tell you, NVIDIA, Microsoft, and Amazon are weighing on that average. Shares of education technology company Chegg, they're up 20% in the past month, getting an extra boost on the back of earnings last week. So pulling back a bit today. Up next, we will talk to the company CEO about those results and the broader environment for tech stocks. You're watching Closing Bell on CNBC. Check out today's stealth mover. It's Tyson Foods getting grilled today after missing bottom line estimates for the third quarter.

It is the worst S&P 500 stock right now. The company is saying sales volumes decreased for pork and chicken due to a variety of factors, including labor and supply chain constraints and a fire at one of its chicken production facilities. Tyson also says chicken prices rose 20 percent from last year. But remember, on Friday, we spoke to the CEO of Wingstop, who said that they were seeing meaningful deflation in chicken wing prices. That stock is up 50 percent in the last month. Check out shares of Chegg. They're dipping today, along with the rest of technology, but they have been outperforming over the past month, jumping 16 percent. The stock took a leg higher last week after Chegg beat revenue estimates in its latest earnings report. And joining us now for a status check, first on CN last week after Chegg beat revenue estimates in its latest earnings report.

And joining us now for Status Check, first on CNBC, is Chegg CEO Dan Rosenzweig. Dan, good to have you back. Welcome. Thanks, Sarah. How are you? Doing all right. You know, I have focused on Chegg a lot lately because you're sort of an interesting read on the changes in consumer behavior post-COVID. You had this big boom during COVID as online education blossomed with some of your online higher ed homework help. And then a huge drop off on the reopening. So what are you seeing right now?

And what does it tell you about students and behaviors? Yeah, there's a lot we're seeing. And you're right. So it was interesting because we really, the help we got with COVID was more international, and in the U.S. was a lot of students needed help that they weren't able to get any other way. What happened though last October, November, was about a million and a half students just didn't go back to college, and that was sort of a shock, not something that we could have expected. So we've been digging out of a hole since then, but what we're seeing, seeing at least the summer school is we're seeing a stronger

summer school than we expected historically that's led to a better fall we did not want to put that in our projections yet because we've been burned before and we're seeing students tell us now that they're thinking about taking college 12 months a year rather than in semesters so they can take fewer classes during a semester so they can work. And they take it over the summer where they could take less courses and do more hours. So all of those trends are good for higher ed and good for us if they follow through. Right. I mean, this was a stock, Dan, that was, I don't have to tell you, more than $110 last year. It's now in the 20s. What are we going to see this fall? Because now we've had a whole year almost since kids weren't going back to college post-COVID.

Yeah, look, it's too early to predict, but the signs are stronger in that FAFSA applications are up nearly 5%. We're seeing 85% of the summer school students say they plan to or have already enrolled in the fall. And we're seeing significantly more students take summer school this year than last year because they're doing it online so they can both have a job and take classes. So that's all to Chegg's advantage if it continues to go that way. But as a company, at least as you know, Sarah, because you follow us for a long time in the education space, we're the only profitable company. We have great EBITDA margins that are improving. We produce 50 percent of our EBITDA or more goes to free cash flow and we're growing the top line again. So the business is in really is in shape to take advantage of any significant upside. Why don't you go broader with you, Dan, because you like to dish on other

tech companies happenings from your CEO Yahoo days. I just mentioned the news of the day, which is the SoftBank Vision Fund, one of its biggest losses ever. They're almost 22 billion dollars for the June quarter. And I'm just curious what you make of that. Obviously, they've had a lot of bad bets and technology has been hammered. But what kind of ripple effect that will have across Silicon Valley, VC, startups, because they were such a force? Yeah, look, I'm one of the few people that actually work for Masa. So one of Masa's first investments in the U.S. was Ziff Davis when I was there. And I spun out ZDNet, took it public under Masa and sold it to CNET. And then he, of course, invested in Yahoo, where I went to Yahoo.

So I've known MASA for a long time. No, that's right. But MASA, yeah, MASA is only big bets. He does nothing that doesn't have giant risk. And when they win, they win big. I mean, I remember within one year when he became the richest person in the world next to Bill Gates. But when he loses, this is what happens. And I think, you know, I think people forget that there are ups and there are downs in the market. And so

if you look at what SoftBank did, if you look at what Tiger did, they actually tried to invent a new model, which is put as much money as you can and raise the valuations as much as you possibly can and then price out the second place person that couldn't get the money like Lyft versus Uber. This has been his pattern for a long time. And, you know, we work. It's very clear that it doesn't work and it's not sustainable. So if you follow it, you got to get in and you got to get out fast. I just is never a believer in putting that much money behind these companies that didn't necessarily need it or would spend it in a way that would never produce a profitable business.

So it disrupted the industry in a negative way. And I think this will bring the industry back to some normalcy. He said, I am quite embarrassed and remorseful at a news conference Monday, which is unusual, right, to hear from him. It's very unusual to hear from him and It's very unusual to hear from him. And it's very unusual for him to acknowledge it. But the reality is that anybody could have guessed. Look, you think about how much money he raised. It had to be put to use. There weren't that many places where you can put one hundred million dollars to work. He had to put billions of dollars to work. So they artificially raised the value of these companies, and it was really disruptive.

And you're experiencing now in the shakeout of the companies that went public with SPACs or went public before they were ready. This is some of the result of that kind of behavior. Yeah, big bets gone bad, I guess. Dan Rosenzweig, thank you for weighing in. Always good to talk to you. Thanks for having us. Bye, Sarah. CEO of Chegg. Wall Street is buzzing about a big shakeup at private equity giant Carlyle,

with the CEO unexpectedly stepping down months before the end of his contract. We'll bring you new details on the departure next. What is Wall Street buzzing about today? An abrupt management change at private equity giant Carlyle Group, as CEO Kewson Lee unexpectedly steps down. Our Leslie Picker has some new details. Leslie, what do we know? Hey, Sarah. So this is an ongoing situation. It's still not exactly clear why Lee is leaving. However, I just received an internal memo sent to Carlyle employees by co-founder Bill Conway.

He plans to take over as interim CEO and also held a virtual town hall earlier this morning. Based on that memo, some additional reporting, it appears that he intends to execute the strategic plan that Lee laid focused on private equity, credit and investment solutions. And their CEO search will prioritize candidates with a quote, demonstrated track record of leading high-performing global companies.

So perhaps someone outside the firm with C-suite experience, at least that's what they intend to prioritize here. Shares are 6% lower on the news today, sinking the stock deeper into underperformance relative to its private equity peers in 2022. The market clearly caught off guard, though, here, as the company reported 2Q earnings 10 days ago with no hint at a management shift. Instead, this was a Sunday night announcement with QSung Lee foregoing both his C-suite and his board seat immediately with no permanent successor named. Lee's five-year contract was set to expire at the end of this year. I'm told that some kind of turn in negotiations likely led to the shift here. But the private equity industry once again demonstrating that succession beyond the founders, not an easy thing to do, Sarah. Right. So this is a company, Leslie, that has three founders,

right, on the board, which could make it, I guess, tricky when it comes to negotiations. Adds in another layer, at least, when it comes to leadership. No, that's right. I'm told that there was unanimous support and that this was a mutually agreed upon decision. Unanimous support from the board of directors, as well as Lee himself, to part ways here. However, I was also told by another person familiar with the matter that some independent board members were a little bit more reticent about the decision, however, ultimately did agree for this move to take place. So yes, as these private equity firms are often structured, there is still a lot of founder involvement. We saw this with Apollo, kind of see it with Carlyle now today. So it's just an ongoing thing that these kind of next generation private equity firms have to grapple with. Seems like there's more digging to do there. Leslie, thank you for bringing up some of the

reporting that you've got. Leslie Picker, after the break, we'll talk to former Fed Governor Sarah Bloom Raskin. She's back about why she says the Fed should be paying attention to the Inflation Reduction Act and whether legislation will really live up to its name. Very focused on climate economics right now. Dow's up 32 points. Stay with us. The Inflation Reduction Act just passed the Senate on Sunday. It includes $369 billion for energy and climate initiatives, making it the largest climate package in U.S. history. Joining us now, the former Federal Reserve governor and CNBC contributor, Sarah Bloom Raskin.

She's currently a professor of law at Duke University. Great to see you again, Sarah. Welcome back. Nice to see you, Sarah Eisen. And Sarah Bloom Raskin, you are now focused on climate and economics, I know, as well, and sort of how that relates to the economy and our central bank. What do you make of this legislation? Does it go far enough for you? Well, I'll tell you, this legislation, this Inflation Reduction Act, Sarah,

is really an important catalyst in being able to transition to an economy that is going to be, that should be really more resilient and really how fiscal action can play a role in creating a more resilient economy. And that's actually critical. And what do we mean by resilience? We essentially mean, you know, an economy that can snap back from supply chain problems, an economy that can deal with productivity losses that are keeping prices high and rising. So it's a very important piece of legislation. So you actually think, what, that it's a stimulative for our economy to be spending in these parts? Because a lot of, you know, the Republicans and we just talked to the National Association of Manufacturing that

said it's a tax and it's going to hurt economic growth. I think it's probably going to do the opposite. It's not actually something that I would view as a stimulative on the demand side, but something that is going to really help on the supply side. As you know, our economy has been buffeted by supply shocks, right, stemming from different sources. We've dealt with a pandemic. We have dealt with the effects of climate. We have dealt with geopolitical uncertainty that have created these supply shocks that are really quite sticky and that are, in essence, driving some of our high inflation. What I think that this fiscal package has the potential to do is to actually deal with that kind of chronic damage to the supply side that we have been experiencing in the

U.S. economy. And the package of tax credits, of different mechanisms that can deal with the erosion from climate, I think is particularly significant here. But it doesn't help us with the immediate inflation problem, Sarah, does it? Well, it depends on how you understand inflation, right? Inflation has both a supply-side dimension and a demand-side dimension. And the demand-side dimension is the side that the Fed is focused on. And the Fed has tools that deal with the demand-side channel of inflation. But when it comes to the supply-side drivers of inflation, that is really the role of Congress.

And so what you see in this package, in this Inflation Reduction Act, through the provisions that are addressing climate in particular, is you see this attempt to actually deal with some of the supply side drivers to inflation. How should the Fed look at this? Should it factor in at all? They've got a real predicament with a weakening demand picture and inflation, which we think might be starting to cool down. We'll get a CPI report on Wednesday. But clearly, they're sort of caught between the growth and inflation sides of the mandate or jobs and inflation. Exactly. And the Fed is going to pay attention, as it does to every major piece of legislation. And the Fed is going to pay attention, as it does, to every major piece of legislation. And this one is, in fact, has the potential to be a major piece of

legislation, assuming it's enacted. And it has, you know, at its core, these incentives that, when taken up, are going to have the promise the promise anyway of being able to deal with some of the supply side stickiness. And that, of course, the Fed realizes is also a component of what is driving inflation right now. And inflation, as you know, Sarah, is where within the Fed's mandate. So while the Fed itself can't do anything directly on climate, it certainly has to be paying attention. Where are you right now on the Fed and Fed policy? Do you worry more about the Fed being too aggressive on tightening and choking off any recovery and hurting employment or the opposite and not doing enough on inflation? Right. So the Fed has, as you know, and as we've talked about numerous times, you know,

in a very important dual mandate, both on the price stability side, which goes to inflation, and of course, to the employment side. And we saw in the recent job numbers that job growth is continuing at a very, very good pace. But we've got inflation that is really, really much too high. And the Fed has been taking on these price hikes in a quite aggressive way, trying to get ahead of the curve before any kind of inflationary expectations get baked in. So you're seeing the Fed really attempt to move ahead on the inflation part of its mandate. And it has room to do that because, of course, it hasn't done anything that yet triggers something that is going to look like a significant set of numbers on job losses. I'm not sure we've ever I don't know. Maybe I'm wrong. You tell me. Have we ever heard any member of the Fed or the Fed chair acknowledge anything about climate and

the impact that you're talking about, how it's a clear impact on supply side inflation. I'm not sure that they go there or that we necessarily want them to go there. Do we, Sarah? Well, what we don't want them to do is we don't want them to do anything that would, you know, that would be would somehow compromise their independence. Certainly they are not going to engage in climate policy. That is way outside the realm of Fed policy. But what the Fed does need to do in its focus on the dual mandate, it has to look at the drivers of what are driving employment and driving inflation, right?

So it looks, and its economists look very carefully at what could actually be keeping supply side shocks from being able to move, you know, to move to move us quickly. So in other words, we need to see, you know, we need to see and we need to understand whether or not these inflation shocks are going to be sticky or whether they're going to be transitory. And the Fed is very well focused on that, as they must, as they do their projections and figure out how to use their tools. No more transitory talk. That's a bad word. That's the Fed these days. Sarah Bloom Raskin, thank you. It's good to talk to you again. Hope to see you back soon. Yeah, bye-bye.

We're going to talk much more about the Inflation Reduction Act in the markets. And when we are joined by the CEO of residential solar firm, Sinova, that stock has been on a tear lately, along with other names in the solar space. The Dow is up 36 points. The S&P 500 off its lows. We've got some groups going positive here in the S&P just in the last few moments. Financials joining into in the rally. Materials at the top of the market, along with energy and real estate. We'll be right back. Welcome back. S&P 500, little change. Check out the top search tickers right now on CNBC.com. Ten-year note yield is in the top spot. Buying Treasuries today, putting a little pressure on yields there. 276 is the 10-year. NVIDIA is up there after the profit warning, sending shares down 6%. But that

is off the lows of the day. Palantir also with a rough quarter, quarterly reaction. That is down 14%. Tesla is up a little bit, a little more than half a percent. And look at Bed Bath & Beyond, up 34%. AMC Entertainment up almost 7%. Definitely a meme trade kind of day. Meme retail back in the buying mode. GameStop up 8.25%. So really all of those meme names that are

heavily shorted having a surge today. Up next, Morgan Stanley's Jim LeCamp explains why the summer strength is all the hallmarks of a bear market rally, according to him. That story plus much more on NVIDIA and Palantir when we take you inside the Market Zone next.

We are now in the closing bell Market Zone. Jim LeCamp from Morgan Stanley Wealth Management is here to break down these crucial moments of the trading day. Plus, we've got Christina Parton-Eviles on NVIDIA's warning and Sinova CEO John Berger back to talk about the Senate passing the Inflation Reduction Act. We'll kick it off with the market, though. NASDAQ is under a little bit of pressure here, and that's because of NVIDIA, which we'll hit in just a moment. Some of the semi-stocks are lower today, which is the communication services stocks are going the other way. Interesting, because sometimes those two move in the same direction. Real estate energy materials at the top of the market. Jim, you say it looks like a bear market rally.

So are you telling your clients to fade the strength? Sarah, this has all the ingredients of a bear market rally. We had near record pessimism, whether it's positioning by hedge funds, whether it's positioning by commodity trading advisors, whether it's these polls from the American Association of Individual Investors. You took all of those. You had the highest level of bearishness ever. So that sets the stage. All you need is a little positive spike and you can have a positive piece of news and you'll get a spike in the markets. And those spikes are stronger because they include short covering. What was the spike? Well, we had an interpretation of Jerome Powell's comments that seemed to insinuate that he might not get to 3.5% on the Fed funds rate. That eased some of the fears. Then you had earnings. Earnings came in better than expected,

70% beat rate, 70% revenue beat rate. And all of a sudden, the market's trading up. It breaks above the 50-day moving average, which was a key technical level. And now you have fear of missing out. That's a classic look of a bear market rally. Now, it doesn't mean the market's always going to do what it does historically. It doesn't mean that this can't be the onset of a new bull market, but it sure looks like a bear market rally, and we're sitting in front of August, which has been our worst month over the last, well, really since the mid-80s, and you have September, which has been our worst month over the last, well, really since the mid-80s. And you have September, which is historically the worst month. We have all that in front of us. We have a market that's made a big move. All I'm suggesting is I think a retest is likely,

and investors need to be careful about buying in here. You should use a rally like this to sell some stuff that you're trying to get rid of. You don't want the cheese anymore. You want out of the trap. And use an ensuing sell-off, if you get one, to nibble at things that you've been wanting to own. I think investors have to be careful here. And the semiconductor index is starting to roll over as well. Yeah, so fade it. Let's talk about semis, because the media shares, that's what's causing it today, falling sharply. The company saying its Q2 revenue will come in below Wall Street expectations. It's the gaming segment dragging down the numbers the most.

But NVIDIA is also saying its data center division has been hurt by supply chain issues. The CFO saying she believes the long term gross margins should remain intact. Christina Parcellet-Navalos joins us. Christina, why shouldn't this announcement come as a surprise to investors? Well, that's because GPU units have been dropping in price for quite some time. There's been a lot of warnings around weakness in gaming, around weakness in PCs. And so, yes, the street was expecting some type of reset. It's the magnitude of this reset that we're seeing with NVIDIA that's concerning. The fact that gaming fell 44% quarter over quarter. You mentioned data center revenue. So yes, that climbed 1%. It's pretty strong, but it was a little bit weaker than anticipated. Luckily, though, the problem was had to do with supply and not demand. There's two key points going forward with this. One,

what we're seeing across a lot of chip makers is they're shifting your attention away from their units that are exposed to weakness like PC handsets, gaming falls into that mix, so GPUs as well, and shifting your focus towards data-centric segments that are expected to grow. That would be AI, auto, and data centers fall into that mix as well. And so we're seeing that shift quite a bit. The second major point too with a lot of these companies is, has the stock dropped enough now where the fundamentals are in play? It's reset and it's a good entry point because that's what a lot of investors were looking for. To answer that question really quickly, Micron, Western Digital, Qualcomm, though, all lowering their outlooks and expectations for the next few months. So might need a little bit more time

for that reset, Sarah. So bottom line, though, Christina, it is cyclical, right? This is historically a very cyclically sensitive sector. 100%, even though many of the CEOs and executives will likely argue with me and say that's not the case. Got it. Well, the transports have been outperforming them, as Mike Santoli noted earlier. Christina Partsenevelis, thank you. Another name deep in the red today is Palantir. We've got to talk about that one. The company reporting Q2 numbers this morning.

Revenue beat estimates, but earnings were slightly below Wall Street forecasts. Guidance was also weak. The CFO blaming that on, quote, lumpiness of government work. Frank Holland here with more. Frank, what's the reason the stock is getting hit so hard down, what, 14%, 15%? Well, Sarah, it's really not that complicated. It's really that soft guidance and that lumpiness comment. It was kind of just confirming the fears of many investors, according to analysts. There's a lot of concerns about the lumpiness or inconsistency of government work and the fact

that it's kind of sometimes hard to forecast. I haven't kind of sometimes. It can always be hard to forecast. And then a lot of people may have forgotten about this but people on wall street haven't i remember that 10 billion dollar jedi contract that amazon and microsoft uh battled over and then eventually it was broken into smaller pieces and divided amongst other companies well that's kind of a something that hangs over this stock the idea that government work can change or shift whether it's due to an election or something else that happens in D.C. So a lot of concern about that. And you have to remember that Palantir gets about 80 percent of its revenue from government contracts. Got it. Frank Holland. Frank, thank you very much. Want to hit the solar stocks as well?

Catching a bid today after the Inflation Reduction Act passed this weekend. The bill includes tax credits for clean energy producers. One of those producers joins us now, Sanova CEO John Berger, who I know, John, you were excited when we got word of this deal, and I'm sure you're very happy that it passed the Senate. What do you hear about prospects in the House? Well, we're hearing that prospects are very good, that I think the expectations are that it would pass the House by Friday and then it would be sent to the president's desk fairly quickly.

So we're very optimistic. I think at this point in time, it's a 90 plus percent probability that this does indeed pass. I know there was some skepticism of that last time I was on the show. But as we said, we felt pretty confident that it would pass. There's a lot of reasons to do this. It does reduce inflation, adds more energy supplies, the lower power bills for really a broader set of folks, really addresses some of the disadvantaged communities in the country. And then also for the first time gives investors certainty. In my entire career, the solar industry has never had certainty of policy. We're now going to get that with 10 years plus of certainty. So this is something to

be really celebrated as it hopefully passes the House here in the next couple of days. So you, when we talked last, we talked about how it helps you from a government regulation perspective, because there is a part of this bill, John, explain it to us, that actually speeds up permits for investing in climate technologies like yours, right? How does that work? Well, there's a lot of moving pieces and not all of this bill address solar specifically, but essentially there are varying levels of investment tax credits. So it starts right now, the investment tax credits are basically how much now the investment tax credits basically how much you can take off the cost of a solar system that would include uh possibly batteries uh load management

ev charging those kind of technologies it takes about 26 off that cost this is now going to go to 30 percent however if you're in a disadvantaged community there's another portion of this that could be 50 off and then with some additional domestic content. So manufacturing is a big, big piece of this. So it's a huge win to bring that manufacturing, this national security, important industry that is solar and batteries home to the United States. There's going to be another 10% for the domestic content there. And then there's another 10% for some other communities that are hydrocarbon based and such. So there's a lot in here that's really addressing some of the key long term problems that we've had. Certainty of policy, not just on the tax side of things, but also on the trade side of things, the national security side of things. Bringing that industry home is going to really

eliminate a lot of these tariff fights and such that have really hung over the industry for at least the last couple of years, if not over the last decade. That's been an issue for you. Are you part of the National Association of Manufacturers? Because we talked to Jay Timmons at the top of the hour, and they are against this bill and say that it'll raise costs for manufacturers, clearly the big ones that are going to face higher tax bills as a result. But if it boosts manufacturing in your industry in this country, I would think that might offset it. It sure does. We are a member of the Solar Manufacturing Alliance, even though we do not manufacture, we never will manufacture. But we just view this as a national security important

industry, just like the semiconductor industry and that chip spill that was passed a week ago. This is just as important. Again, the semiconductor industry is our cousin industry, if you will. And bringing those jobs here will absolutely be important to the country and absolutely reduce the amount of risk. And it's something, again, we need to do as a country to address really the global energy crisis and make sure that the manufacturing and those jobs, that the technologies that go with these tech with solar batteries and fuel cells and other technologies are actually improved and invented here in the United States versus elsewhere. So, John, what's the timeline here? When, when, because obviously your stock has been bid up a lot on news of this, of this happening. When can we expect, when can you

expect to see actually this to drive revenue and to drive a surge in business with the market, which is what the market and you are expecting? Well, over the weekend, we actually started to swing into action here. Now, we've got to see the final bill. Again, that's got to pass the House and then, of course, receive the president's signature. But we again, we're very confident that it will pass the House and very confident the president will sign it. And so we've already begun to make some changes versus some of the changes and laws that are passed within this bill to accommodate and really open up the spigot, if you will, as far as growth here. I really feel like that this bill cements the fact

that this company and the industry is gonna be something that's recession-proof, that we are going to grow through this quite strongly, whatever the recession, however deep it is or isn't. But we're going to be able to grow through this in a very strong fashion. So we expect to see some additional revenue pick up as soon as later on this year. And certainly into 2023, we'll see significant growth from what we had previously expected. John, thank you for joining us with that reaction. John Berger, how this new bill affects the solar industry from Sanova. Jim LeCamp, would you make any moves, any portfolio

moves based on this legislation? Well, I really think this is an interesting time frame because of the structure of this bill. You're starting to see a lot of these stocks break out. And where we've seen energy stocks do really, really well, way above the market over the last year and a half, fossil fuel energy stocks. Now it looks like these stocks are saying this is a serious bill. These stocks can make a serious run. And just look at the benefits that Tesla got from government help and tax credit. So I think this is a new dynamic here. But I also think it helps fossil fuels because you need fossil fuels to create, to mine the lithium for the machinery, to mine the copper. So I don't

think the fossil fuel story is over as far as stocks are concerned. But now these stocks will have a new leg higher. So your overall take, Jim, is that you would fade the rally. You think it's classic bear market and investors should take their profits now. Is there a sector or type of stock, though, that you might recommend given this? I want to say recession, but we don't know if we're in a recession. Just this kind of environment that we're in with the Fed hiking interest rates, the inflationary problem, and the softness in demand. Sarah, I think the real story moving forward is going to be a different one than what we've seen over the last three decades, and that is that commodities are going to be a really big part of our investment themes moving forward. Look at what's

happening in Russia and Ukraine and Denmark and all of these areas where governments are getting involved with commodity distribution. I think that's going to be our play. In the short run, I think you've got to look at taking some technology profits off the table. They've had a very, very big run, and we're going to run right into the 200-day moving average. Doesn't mean you have to do it today. Look for signs of it, though, and be very, very careful with those names. Got it. Thank you very much, Jim LeCamp. It's good to have you here from Morgan Stanley Wealth Management. As we head into the close, you're seeing oil tick up 1.8 percent. That is leading to a rally in energy stocks. They're up about half a percent. There is the Dow. It's up a tenth of one percent. We lost most of the rally that we had earlier. We were up 300 points earlier

in the session on the passing of this legislation and general start to the week positive coming off of last week. If you look at what is helping the Dow, it's Disney, Home Depot and Honeywell. Disney for a change, adding 16 points to the Dow, Still down about 30% year-to-date. S&P 500, a little bit unchanged. It's down a tenth of 1%. Technology is the drag. Financials, industrials, and staples are all lower. Real estate, materials, energy, communication services higher on the day.

NASDAQ 100 down a third of 1%. It's NVIDIA. It's Microsoft. It's Amazon, Apple, AMD, Qualcomm. Those are the losers dragging on the NASDAQ. That's going to do it for me on Closing Bell. See you tomorrow. I'm going to send it into overtime now with Michael Santoli.

Mike.