Closing Bell - Closing Bell: Jobs Jolt, Fmr. Treasury Secretary Jack Lew On Inflation & Winging It 8/5/22

Episode Date: August 5, 2022

A volatile day on Wall Street as investors weighed whether the much stronger than expected July jobs report means the Federal Reserve could hike interest rates more aggressively at its next meeting. Mastercard Chief Economist for the U.S. Michelle Meyer says the Fed needs to do more to cool inflation in the wake of that hot report, but LinkedIn Chief Economist Karin Kimbrough says she sees some small cracks forming in the labor market. Former Treasury Secretary Jack Lew explains why he is endorsing the new Inflation Reduction Act and why he thinks it will effectively fight inflation. And Wingstop CEO Michael Skipworth says everybody may be talking about food inflation, but his company is actually benefitting from falling chicken wing prices.

A wild session here to end the trading week as investors try to make sense of that scorching hot jobs number. The most important hour of trading starts now. Welcome everyone to Closing Bell. I'm Sarah Eisen. Take a look at where we stand in the market. At one point today we were down as much as 1.1% on the S&P. We're down only half a percent right now. The Dow on the verge of going positive. We were positive for a moment earlier on.

Up 55 is the high of the day. Down 237 though is the low of going positive. We were positive for a moment earlier on. Up 55 is the high of the day. Down 237, though, is the low of the day. The tech stocks are getting hit the hardest on these rising rates. What's holding up the market today? Energy stocks on higher oil and financials on higher rates, which is a big part of the story. Materials just ticked positive. But consumer discretionary, communication services, technology, those are the losers. It's why the Nasdaq is down 1%. It's a reversal of what we've seen in July. And here's a look at some of today's biggest earnings movers. What's also playing in?

Lyft, a winner of 16%. Carvana, what a short squeeze there. We're going to talk about that later with Phil LeBeau. It's up 41% after being left for dead. AMC also surging to the upside, while Warner Brothers is selling off down about 17%. We've got a big show coming your way. We will talk to former Treasury Secretary Jack Lew about today's blowout jobs number,

plus why he is endorsing the Inflation Reduction Act and what he makes of Senator Sinema's changes to the bill. And a rarity this earnings season, Wingstop saying in its report that meaningful deflation should benefit its results. We're talking chicken wings. The CEO will join us to explain. Let's get right to the market dashboard today. Mike Santoli with a closer look at the market reaction to the jobs report, which more than doubled estimates.

What a shock. Mike, what are you watching? It really was, Sarah. And given the magnitude of the surprise, relatively muted response in aggregate from equities. But you hit on why, because it mostly has triggered a rotation rather than a stampede outer into all stocks. S&P 500 has pretty much held above 4,100 all day. Even earlier in the week on Tuesday, we got below that. So we didn't even wobble down to the week's lows so far. Now, it still remains right here at this upper

end of that trading range. You mentioned banks, energy strong, that kind of reflationary cyclical groups, whereas the kind of disinflation, lower yield beneficiaries in growth are giving some back. Now, what it shows me in part is that the rally since mid-June has not just been about hopes for a Fed pivot or yields coming down or gasoline prices. All that has helped. But it's also been about the plausibility of a relatively sturdy economy and a potential soft landing. Take a look, though, at the two-year note yield. This has been a more dramatic response. This obviously is a stand-in for what the market expects of the Fed over the next couple of years, pretty much going back to the highs. So 340 or so right here back in June was the high.

We're pretty much as high as we've been in about three weeks. So still saying that maybe the Fed's going to have to go 75 basis points in September, maybe a couple more after that. And who knows? We could again start to price in a final terminal rate of 4 percent. But we're not there yet, Sarah. So here's my question on the equity market. So the spare market rally that we got, 9% in July, continued through this week, basically up until today. Is it over if it was fueled on the idea that the Fed is going to take a pause on hiking interest rates? If that's all that was going on, if that was the sum total of

the buying impetus, yeah, I would say it's pretty much in deep question if that's the case. But clearly, it's not just that. I think you also had, you know, 80 percent of all earnings are through. Companies didn't say demand is falling apart. You still have some relatively, you know, sticky earnings estimates for the second half of the year. So I think, you know, the idea is the market can thread the needle for a little while longer. It's a long time till the next Fed meeting. So we have some data we're going to have to absorb. Two CPI reports. That's right. We're going to get one next Wednesday, which might be more important than even the jobs report. Oh, I think very likely that could be because today, again, massive surprise and the market

kind of pretty much took it in stride, at least the stock market did. Mike, thank you. Wall Street's been weighing in all day on that job surprise. Goldman Sachs chief economist Jan Hatzius expects a more hawkish Fed as a result of the report, like many. Here he is on Swak on the Street earlier. I think it does increase the possibility that the Fed is going to have to do more. Our expectation is a 50 basis point move at the next meeting, but I think this increases the risk of 75. Some other tidbits we gathered for you from the day.

Neil Dutta, economist from Renaissance Macro, says the report is consistent with an inflationary boom, saying the Fed needs to get more aggressive in pushing up rates, making the hard landing scenario more likely. Bank of America now looking for the Fed to lift its target range to three and a half to three and three quarters percent by year end, which was an upgrade. And Unicredit says the Fed will, quote, likely over tighten policy, which sets the economy up for a pretty hard landing next year. Joining us, Karen Kimbrough, chief economist from LinkedIn, Michelle Meyer as well, chief economist at MasterCard Economics Institute. Ladies, welcome to both of you on this big jobs report. Michelle, do you agree that perversely the better news on the economy and the jobs sets us off for a harder landing, a worse recession potentially, because the Fed will have to do more tightening? Well, I think it shows that there's more fundamental strength in the economy. And if people are still seeing this type of job growth growth they're still getting that type of income in.

They're still out there spending. Which means in order to properly cool down that demand side economy and take out that inflationary pressure. It means the fed really might have to do more as a lot of those forecasts

would suggest- does it mean that there'll be a hard landing per se no I don't know if that's the fair conclusion I still think it's this. Balancing act that the fed has to do in Does it mean that there will be a hard landing per se? No, I don't know if that's the fair conclusion. I still think it's this balancing act that the Fed has to do in terms of cooling the economy just enough to reduce inflation without pushing it into that downturn. But clearly there are there's just a lot more momentum, a lot more growth, particularly

from the labor market than many people gave credit to. Karen, does it jive with your data at LinkedIn? And how do you square this kind of strength at this point in the cycle with negative GDP growth? Yeah, well, look, the way we're looking at it is it's not a recession when you add 500 and 1,000 jobs to the economy. Our data shows that hiring is holding in. It is still a solid labor market. Do we think there are mixed signals? I do. I will tell you. I think right now there's no question that employers are still hiring, but we're starting to see less breadth across the hiring and less momentum. So for me, what I would tell the Fed is I'm starting to see a little bit of rebalancing maybe between supply and demand and labor markets, starting to see job seekers

looking for jobs with more intensity. They're coming back to the platform. We're starting to see also employers, you know, think about do they really want to add that next job opening or do they want to hold back on that? And so we're seeing, you know, still elevated job postings and openings, but not as much as before. And at the same time, we're seeing more people more actively searching for jobs. Well, I'm curious about that last point, because we saw the labor force participation rate actually go down, which was if you had to find a negative in this report, Karen, I guess that was it. That was it. Absolutely. But I'll tell you what happens with our data is that it's real time. And so we're seeing this is like just the

latest, most up to date signs of like what I think are indications of a labor market rebalancing. But overall, I'm not expecting that we're going to see labor force participation rates or employment population ratios go back up to where they were pre-pandemic. But what we do still see is that hiring is around the pre-pandemic trend. Even if it's slowing, employers are still hiring. People are still looking. I think it's going to be a fairly solid labor market for a while. You're going to see some quiet rebalancing. And then eventually, you know, I do think we are going to see a little bit of a tougher time

towards the end of the year or early next year. Michelle, so much of this is predicated on what happens with the consumer, which I know you're tracking now very closely at MasterCard. And you have some really interesting data showing just how strong the consumer is, especially in July. What can you tell us? That's exactly right. The consumer is out there spending in July. We actually saw

an acceleration in the year-over-year growth rate of our data. So looking at our spending pulse data for retail sales, ex-autos. And it was across a variety of categories. Yes, the consumer's prioritizing more experience-based spending. We're seeing really outsized gains still in lodging, in restaurants, in travel that has not let up. The good side has been a bit softer, so I do think that shift is very much in play. We're also looking at nominal spending. So part of this is the inflation story,

which is certainly elevating these levels. So when you dig into the details for some categories, absolutely real spending is starting to contract. consumers having to make some choices here in terms of how they navigate this inflation tax. But the important thing and I think what we learned today is that the labor market is still ongoing. People still have their job and they still feel as though they can presumably get new jobs with this churn in the labor market. The longer that goes on, the more power it will have for the consumer. Well, and they're getting higher wages, which we learned in this report, more than 5% from last year, which certainly helps spending. Finally, Michelle, I was looking at some of the numbers

relative to where they were in 2019. Everybody likes to compare it to pre-pandemic because the pandemic has distorted. And they're so much higher. So jewelry as a category, 100% higher than 2019. How much of that is inflation? And how much is the fact that consumers are in just much better shape? So it's interesting you picked up on the jewelry one because that was one I was just looking at earlier today. And it showed this incredible acceleration right after the pandemic. That might have been somewhat retail therapy. You know, people had more cash on hand. They couldn't spend as much on experiences. So there's so many different fascinating things to look at when

you're trying to understand this consumer behavioral shift. But I do think the bottom line is that right now the consumer is still out there spending. Again, they're not pleased by some of these price increases. They're trying to balance some of these headwinds that they're seeing in terms of higher interest rates. And I do think, I agree with Karen, it's all about this rebalancing in the economy. That's going to take time and going to lead to this ultimate moderation.

But I think the important thing is that it's time. And so many market participants were looking for the economy to switch on the dime. And that's just not happening. Michelle, Karen, no, it's a good discussion. It doesn't sound recessionary based on talking to you guys. Thank you very much. I appreciate it. With the Dow going positive, shares of restaurant chain Wingstop have been on a tear. They're up more than 50% in the last month. And in its most recent earnings call, the company cited deflationary tailwinds. Don't hear a lot about that lately. We'll talk to the CEO about it and his read on the labor market and the consumer next. You're watching Closing Bell on CNBC. S&P down four-tenths of

1%. You've got three sectors positive, energy, financials, and materials. Check out the move in shares of Wingstop just in the last month, up nearly 60%. The company reporting Q2 numbers last week, easily beating earnings estimates. Part of the reason, chicken wing prices continue to fall. The company citing deflationary tailwinds in its report. Joining us for more is Michael Skipworth, Wingstop president and CEO. Michael, welcome. Everybody's talking about food inflation. Bone-in chicken wings are actually falling in price, down 19%. Why is that? Sarah, we're in such a unique spot in the restaurant industry. We saw record inflation last year in 2021. Our brand partners took the necessary pricing to manage our menu and manage their margins. Fast forward to today, we're seeing meaningful deflation. And so while the rest of the restaurant industry

is navigating inflation and likely going to have to take price against a backdrop where the consumer is navigating this record inflation themselves. We actually at Wingstop are in a unique spot where we don't necessarily have to take price and we can lean into value and present an opportunity where we can continue to grow our top line sales where 2021 marked our 18th consecutive year of positive same store sales for the brand. But the same store sales were a miss and so were the restaurant margins in this latest quarter, Michael. But you reaffirmed guidance, which Wall Street really liked. So why were the margins a miss if you're seeing the deflation and why are you confident

that things will pick up here? The deflation really hit towards the end of the second quarter and the table is set for the back half of this year. And top line-wise, as far as our sales, our business was hit with a bit of a perfect storm. In 2021, we had some really, really strong same-store sales growth when all the stimulus money was provided to the consumer. So we were lapping those numbers in Q2. In addition to that, we have the consumer navigating gas prices hitting north of $4 a gallon, as well as we had that unnecessary war in Ukraine. And all these dynamics at play with record inflation hitting the consumer, we had to pivot. And we have a proven playbook where we lean into value. So we saw our sales trends improve throughout the quarter as we launched a bundle to consumers at a very compelling price point of $15.99 for 20 boneless wings, four flavors, large fries, and two dips.

A really strong value to the consumer. And it allowed us to change the trend in our sales in the quarter, going against a very favorable commodity backdrop. And so this deflation that we're going to see in our business gets really, really strong and improves as we progress through the back half of this year. Finally, Michael, how do you read the consumer right now? Because in some of the restaurant earnings that we've had lately, McDonald's and Chipotle, there was discussion about low income consumers starting to pull back or trade down. Is that something you're seeing? We definitely saw that initially, as I mentioned in Q2.

But the way consumers engage with Wingstop is different than other brands. Our average frequency is three times a quarter or once a month. So what we've seen, as I referenced during those 18 years of positive same-store sales growth, we've been able to grow through previous cycles. And where we see consumers pull back are more often on those heavy QSR visits four to five times a week. And they'll almost save up for that indulgent occasion with Wingstop. And so as long as we're presenting them with value, as I mentioned in that bundle before, we're able to retain those occasions, not to mention we're in a unique spot where we have a lot of growth levers to pull as a brand, whether it's expanding our delivery base to additional delivery providers. We're launching a chicken sandwich for the first time as a brand. It's not just one chicken sandwich. It's 12 with our 12 unique, bold flavors. And then we

have a meaningful increase in the amount of advertising we're able to spend in the back half this year. Our ad spend increasing over 35 percent. So we have a lot of firepower and it gives us the confidence in our ability to continue to grow sales and deliver on our guidance of low single digit same store sales for this year. Well, market's certainly excited about it. Michael, thank you for joining us with a snapshot of the business. Thanks for having me. Michael Skipworth. Still to come, former Treasury Secretary Jack Lew on his endorsement of the Inflation Reduction Act,

which is set to face its first vote in the Senate tomorrow. And then later, David Rosenberg from Rosenberg Research on what the jobs report means for the market and your money. He's been saying we are in recession. Wonder what he makes of this very strong read on the jobs market. We'll be right back with the Dow Down 7. Check out today's stealth mover, Monster Beverage. Scaring investors after missing profit estimates due to soaring costs for everything from ingredients to fuel to warehousing. It was a 20 cent earnings per share miss, even though the top line was better. It also comes after Pepsi this week took a stake in big competitor Celsius with a distribution deal. So they've got a tougher

competitive environment there. The stock is down almost 5 percent. And we've got a bonus stealth mover for you on a busy Friday. Check out shares of Goodyear Tire riding high after beating Wall Street's earnings estimates thanks to higher prices and sales volumes offsetting increases in raw material costs and supply chain disruptions. Pricing working in its favor of 4.5%. Up next, former Treasury Secretary Jack Lew on how the much stronger than expected July jobs report could impact the Fed's rate hike strategy and the market. We'll be right back with the two-year note yield soaring 3.25% and the Dow unchanged. The Dow is flirting with positive territory. It has been a volatile day for the market.

On the back of that very hot jobs report this morning, it's actually pretty amazing to see the resilience in stocks, given we are seeing bond yields and the dollar shoot higher. The two-year note yield, 3.226. On the back of expectations that the Fed will have to go bigger at its September meeting on rate hikes and maybe for longer even to fight off inflation. Joining us in a closing bell exclusive is former Treasury Secretary Jack Lew. It's good to have you, Secretary Lew. Welcome back. Good to see you, Sarah. So what do you think this jobs report does to the recession debate? Well, look, I think it's a good jobs number. I don't think there's any way to read it as a bad number. It means there's a strong economy, even with rates being increased pretty dramatically.

I don't think we should think it's a sustainable number. We don't have enough people to grow the labor force that much continually month after month. But it means that in the very difficult process of transitioning from the COVID economy to a more normal economy, so far the Fed has managed to raise rates pretty substantially without the underlying economy taking too much of a hit. I think we have to expect... Go ahead. No, sorry, I think we have to expect. Go ahead. No, sorry, I didn't mean to cut you off. But just this idea of transitioning to a more normal economy, it's something that the White House is saying. It's something we heard from Secretary Yellen and President Biden and his press secretary, in fact, today. And I and I wonder if the market is a little skeptical about transitioning into a more normal economy at a time where the economy is being pounded with interest rate hikes and about to undergo quantitative tightening.

How it can function as anything, soft landing or into a normal economy when that's happening. Look, I think the markets are getting a little bit ahead of themselves. The Fed has said over and over again that they're going to watch the data and move with determination on getting inflation down, but keeping an eye on the effect on employment. And I think what today's jobs numbers show is that they have some room to continue. We don't know what the inflation numbers will be next week. We don't know what the next jobs report will look like. Markets want to know today what we can't know for a month and two months. The Fed doesn't act again for a while.

You know, there's no question but that the economy is transitioning. I mean, supply chains are getting fixed. You're hearing from industry after industry that it's less of a problem than it was. You know, labor markets are healing. They're very strong, actually. And, you know, to say it's completely normal, we're not completely out of the woods. Absences are still high because of people getting COVID. How many people do we all know who've lost a week of work in the last few weeks? So I think it is a transition.

You know, markets have no patience for the fact that it has to take a little bit of while, and they want to know today what they can't know with certainty for some time. But I think so far in today's job report underscores it, the underlying economy is remaining strong. You have endorsed the Inflation Reduction Act, which faces its first vote in the Senate this weekend, Secretary Lew. Since you came out with four other previous secretaries of the Treasury to do that this week, Secretary Lews. Since you came out with four other previous secretaries of the Treasury to do that this week, there have been some changes, as reported, that they got rid of the carried interest break provision. They got rid of,

they altered the 15 percent minimum corporate tax and they added an excise tax on share buybacks. Are you still supportive? Yeah, absolutely. Look, they've made some changes in the legislative process. You do what you need to do to get the 50 votes that you need. And I think it's important that they have 50 votes because it's important to pass this legislation. You know, the core of the legislation is investing in things that will help reduce the burden on households of high prices.

It'll bring health care costs under more control for people in the Affordable Care Act with subsidies. It will reduce pharmaceutical costs for people on Medicare. It will give both individuals and businesses the ability to invest in energy efficiency and alternative energy improvements so that they won't be as dependent on fossil fuels. It'll help them in climate efforts, but it'll also reduce costs over time. On top of that, it reduces the deficit by $300 billion plus over 10 years. That's an important thing to do. We do need to chip away at the deficit. So I think all in all, it's a strong package and it should be passed. That's an important thing to do. We do need to chip away at the deficit. So I think all in all, it's a strong package and it should be passed.

On the inflation front, though, even the CBO says that in 2023, it doesn't really reduce or accelerate inflation. And it's being billed as an inflation reduction act. But most of the studies are showing that there's no real impact on lowering inflation. Look, I think the impact on inflation will be as much in terms of what is the coming on the spending side in terms of the Affordable Care Act credits, in terms of the prescription drug price controls, in terms of the energy price impact being absorbed. On the margin, I think we'll move in the right direction on the macro as well. And certainly over time, $300 billion of deficit reduction is movement in the right direction to reduce the inflationary pressures. But that doesn't really happen until the later part. I mean, even according to the CBO scores, 2027, 28, that's when we start to see real deficit reduction in the bill.

I think if you were to reverse this and say Congress was spending 300 billion dollars over the next 10 years, people would worry about inflation. So you have to give some credit for moving in the right direction. You know, in my time over 25 years working on deficit reduction bills, $300 billion is a lot of money. And it does show determination and a different way of doing business that will have an impact on both how business is done, but also expectations. So I think that, you know, the scoring over 10 years is that it is going to lessen inflation. You know, I wouldn't overstate the impact tomorrow in the macro economy, but I do think that when you're reducing the burdens of inflation on households, that's an anti-inflation effort as well. Are you surprised that that carried interest

loophole lives to fight another day? Every president, so many different politicians have vowed to fight this and get rid of it. And yet, you know, another lawmaker stands up for hedge fund and private equity managers' compensation. Did that surprise you? In government and out, I have supported changing the policy here. But every time I try to accomplish it, I face resistance as well. So I can't say it's surprising. The fact that it was won the last vote maybe means that the day is coming. Yeah, one holdout.

Kyrsten Sinema there getting rid of that carried interest loophole. They were trying to narrow it, at least. Secretary Lew, thank you very much for joining us and weighing in. Thank you, Sarah. Thanks. Here's where we stand right now in the markets. We've climbed a little bit. The Dow's up 20. Small caps are also having a strong showing today, up six-tenths of 1%, which speaks to where the strength is in this market, energy and financials.

A lot of those in the small cap index. Not in technology today. The Nasdaq's underperforming. It's down about three quarters of a percent. They're well off the lows of the day. And check out shares of Carvana. They are cruising higher. Coming up, find out why the stock is one of today's big winners, up 40%.

And do not miss tonight's CNBC special, Inside Jobs, focusing on how the very strong employment report will impact Wall Street, the Fed, and your money. That's tonight, 6 p.m. Eastern on CNBC. We are now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here as always to break down these crucial moments of the trading day. Plus, David Rosenberg is here on the market and the economy and Steve Kovac as well on

gig stocks and a big deal for Amazon. We'll kick it off with the broader market. Mike, Dow is kind of building on some gains here in the final hour of trade. It's a higher. The S&P 500 has four positive sectors now. It had two when we started the hour. It's energy, financials, materials and industrials. Surprised to see the strength given we are seeing a spike in yields and the U.S. dollar and Fed expectations of a bigger rate hike and maybe not a faster pause? A moderate surprise, I would say, Sarah. I mean, one one thing about the move in yields and the dollar is, yes, they're rebuilding back toward their highs, but they're not at high. So maybe there's a little bit of play in there in terms of the way equities react to that. Also, on some level, for most companies, good news that a continued sturdy demand picture that's reflected in a strong jobs market is not

a terrible thing. So I think the idea that there is a little more breathing room in terms of, you know, what the economy can handle in terms of potential Fed rate hikes is probably at work here, too. Again, we're sort of just treading water this week in the big picture way. It's resilient, but it's not necessarily something that seems as if it's an excuse for the market to burst higher. Most of the pressure, of course, is coming from the big growth stocks that have been pretty strong in this resurgence in the last six weeks. Right. Some of the biggest losers today, Tesla, Amazon, Meta, Microsoft, Nvidia, Apple and Alphabet. Let's dig deeper right now. David Rosenberg joins us from Rosenberg Research. David, you've been in the recession camp firmly and early.

So how do you make sense of what we saw today? Very strong job growth, lower unemployment rate, higher wages. Well, look, the lower unemployment rate that comes from the household survey and is a product of the fact that the participation rate went down to the lowest point of the year. And I have trouble, you know, rectifying the comment that we have a really vibrant labor market when the participation rate is only moving down. Now, you're quite right, the payroll survey, you know, was a shocker. But, you know, from my perspective, and looking at it, say, through the lens of an equity market investor, and not really talking about, you know,

what's happening today, but bigger picture, I mean, let's think about it. When you're taking a look at today's employment numbers, Sarah, and you look at the hours worked and the employees, the labour input to the economy is running at a one and a half percent annual rate into the third quarter, at a time when we know that all the components of GDP, which is demand in the economy, output and spending, is flat, which is telling you that for the third quarter in a row, productivity is at risk of being negative sequentially. So if you're looking at this through the lens that this is actually a great report, you know, you'd rather have the labour market accelerating alongside an acceleration in demand and an output. And that's not happening, right? We got the isms this week. We know what output is

doing. It's lagging well behind. But the only two other times historically where productivity declined three quarters in a row. And what else is, I mean, we're talking about the impact it's having on the Fed, but productivity is so important for profit margins. And you've only had three quarters in a row of sequential negative productivity prints twice in 1974 and in 1979. So I sort of look at this wonky number that, you know, it's out of whack with what's happening on the on the spending and output side of the economy. And that's a bit of a problem. Yeah. No, I expected you to put a negative spin on it, David. My question is what ultimately it's going to mean for the market, which had gotten really excited lately about the Federal Reserve's no more hikes after this year and cuts starting next year. It feels like there's a whole rethink of that if labor demand is still very strong, even with weak GDP and inflation numbers also

stay pretty hot? Well, I mean, well, firstly, you know, what you call spin, I call analysis. But, you know, we have the Fed is chasing this particular Fed is making its policy chasing lagging and contemporaneous indicators. So you just want to talk about non-farm payrolls okay non-farm payrolls is one of the constituents of the conference board's coincident economic indicator it is it is basically looking at the trees when you want to look at the forest past the trees and this will jobs of jobless claims sarah which we haven't talked about so far, that's in the index of leading economic indicators. And I think the recession call is pretty well baked in the cake. The initial

jobless claims is in the leading economic indicator, not non-farm payrolls. That is a coincident indicator of something that happened today. Jobless claims, the four-week moving average is up 84,000 from the low in April. 84,000, up 84,000, going back to when the data started in 1967. Up 84,000 in initial jobs' claims has been a recession call 100% of the time. So you think I'm going to abandon my recession call because of today's nonfarm payroll report? It's not the first time nonfarm payrolls rose into the early part of recession. So what I'm doing is I'm forecasting the future. I get it. So what does

it mean for stocks, though? Is recession a positive for stocks because it means the Fed will slow down? Well, you know, if the Fed were to pause or even cut rates, of course, you get an initial rally. It'd be a trainableable rally but the one thing we know about two fundamental bottoms in the stock market is they happen when the yield curve is positively sloped there's never been a bottom with the yield curve inverted and usually the bottom in the stock market is when the market is looking in the whites of the eyes of the recovery we're now looking at the whites of the eyes of the recession. So this is the bottom is going to be next year's story. And look, you go back to 2000, 2002, you go back to the 2007 to 2009 bear market. There were eight peaks and valleys along the way. There were like eight very significant bear market rallies and you can trade them. But the fundamental lows happen

late in the recession. When you look at the recovery, they happen after the Fed significantly cut interest rates and steepen the yield curve. No, I'm sorry. You don't get fundamental bottoms in stocks. You can get tradable rallies in stocks. Indeed, you don't get fundamental bottoms in stocks when the yield curve is inverted. Unless you're going to say that, you know, this is the first time something is going to happen, you know, in our professional lives. So that's that's the problem right now. It is still a bear market rally, a very significant one. We had a few powerful ones, the great financial crisis. So, yeah, you can trade them and they can last a few months, too, by the way. But no, it's not a fundamental low. I think that'll be next year's

story. David Rosenberg, thank you very much. Good to have you from Rosenberg. Have a great weekend. You too. A pair of gig economy stocks are moving on earnings today. Lyft reporting an unexpected quarterly profit thanks to ridership jumping to pre-pandemic levels. And then DoorDash beating Wall Street's sales forecast due to an increase in monthly active users and also higher restaurant menu prices. It was initially higher, but has since come down. Steve Kovach joins us. Steve, what are we learning about the consumer and demand from Lyft and DoorDash? I was surprised to see such strong numbers from DoorDash as everyone's going out again. Yeah, that's right, Sarah. That's both these companies actually paint a picture of a reopening economy with Lyft and earlier in the week, Uber saying, look, we expect demand just to continue to surge and especially surge once

September hits and we get into the back to school season. So there is no sign of these letting down. And on the travel side, too, we heard from Airbnb earlier this year or earlier this week, rather, that they are also seeing demand just not letting up at all despite these COVID spikes. And we're going to in fact, they're so confident about that, that they were able to issue a two billion dollar share buyback on the DoorDash side, it's a little different. So actually, Sarah, growth kind of moderated a bit, and it's more normal growth than the super growth that we saw during the pandemic, about 23% growth in DoorDash orders versus a year ago when we saw 60-something percent growth. So it is flattening a bit. People

are going to restaurants instead of having the restaurants come to them a bit more. Yeah, but still growing on top of some tough cons. Yeah, very nicely. And part of that's because of international expansion, too, Sarah. They closed this acquisition of a company called Volt, which is like the doordash of Europe, and they're going to really start expanding globally, too, from there. So there's plenty of room for them to grow. What about the stock, Mike? How does it look?

It's been clobbered along with so many of the other pandemic winners and unprofitable stocks, right? Exactly, yeah. I mean, there has been, you know, pretty much waves of selling. You see there since the first quarter of 2021, they've moved largely in tune with one another. You know, this kind of big hyper growth premium came out. You can say a couple of different things that seem like they're contradictory. I mean, these companies have absolutely established themselves in the consumer habits. They're not necessarily going away in terms of people's usage of them, but they still do have these business models that are unproven. And that's the case even if you go to Uber and Lyft, even though the numbers are getting better, they're not necessarily showing that they're

going to really be reaping consistent and growing cash flow. So that's why I think the market is sort of having this little minor echo boom in the stocks, having some recoveries there. And by the way, a lot of the beaten up hyper growth stocks are having a little bit of a muted revival. So it's still, I think, show me and approve it to me situation. Right. So, Steve, while you're here, we've got to ask you about the Amazon deal to buy iRobot, which makes Roomba vacuums, $1.7 billion in cash. iRobot stock surging on that news, sort of a pandemic darling, but facing a lot of headwinds. What does Amazon want with it? Yeah, it's all about the smart home here, Sarah. So Amazon, as you know, has been really building out this network of Alexa devices and ecosystem Alexa devices, all tied to those smart speakers,

those Alexa smart speakers that you have. If you look here, the market share, Amazon is far and away the leader there. And this all ties into this idea that we're going to have everything on our home be smart. You keep in mind, Amazon has also bought other smart home companies like Eero, the Wi-Fi router maker, and then Ring, the maker of those video doorbells and security cameras. I mean, Ring even has a drone that will fly around your house and monitor security that way. So some really crazy pie in the sky ideas. But also robotics, this is not a new area for Amazon. A decade ago, Sarah, they bought a robotics company called Kiva to work in their warehouses

and move product around the floor. You've probably seen videos of that. It's really neat to watch how robots and humans kind of work together there. But on the consumer side, last year they released a $1,500 robot called Astro, which is supposed to be like a home companion. It scoots around your house.

It can monitor with a video camera, and it can even bring you a beer from the fridge, Sarah. That's convenient. Just more data for Amazon to have inside your personal space. Lovely. Thank you very much, Steve Kovach. A pair of auto names heading in different directions today. Tesla is under pressure following its shareholder meeting. Meantime, shares of Carvana going the other way, skyrocketing. The online news car dealer announcing it is aggressively cutting costs

over economic slowdown concerns. Phil Abode joins us. Phil, Tesla stock has been losing steam all day. Why do you think that is? Well, I think part of this is because it has come so far so quickly over the last couple of months take a look at tesla shares over the last three months and look at where it was back in may i think it was somewhere in that 620 range and it went all the way up over 900 that's a 47 percent gain so it's only natural that you're going to see some profit taking coming in here this is not it is not tied into the comments from Elon Musk at the annual meeting. Overall, if you listen to that meeting, if you watched what he had to say, he was fairly upbeat about Tesla's future. So this is not a case where

there's actual news driving the stock lower. I think this is more a case, Sarah, where people said, look how far it's come. Let's take some money here. You've also got, Mike, Twitter up four percent. So there could be a sort of inverse trade there happening as it maybe looks likely that he'll have to buy it. It does seem as it does seem as if that might be the case. Elon Musk's legal camp did file its response to some of the Twitter documents as well. And it didn't seem to impress a lot of the legal authorities I've seen. So there has been a relationship there where some pressure on Tesla when it seems like the Twitter acquisition might be more likely Elon Musk might be forced to buy it. The other thing I'd mention is, you know, the stock ramps into the stock split announcements. He got the rubber stamp on the

split at the annual meeting. And even though that's kind of non-fundamental effect, it might be just unwinding slightly. Yeah, well, like Phil said, it's had such a strong run. And Phil, while we have you, how about that huge pop in Carvana shares? I mean, this stock was like left for dead. What happened? Well, they've announced that they're going to be cutting costs dramatically and they need to cut costs dramatically. And if you look at all of the analyst commentary about the Q2 results that they reported yesterday and the moves that they are planning to make so that they can get back to profitability,

almost everybody says the same thing. Amen. This is what they need to do. And I think that what you're looking at here is a stock that was so beaten down. I mean, we're looking at one week here. Go back and look at the stock this year. It's down something like 70, 80 percent, even more. It was due for a pop on any type of news

where the company said we will make the cuts necessary so that we can cut the losses. Got it, Phil. Thank you. A bit of a short squeeze there, too. Likely. Phil LeBeau. Mike, the only other sort of market tidbit I would add in, which is fairly bullish this week, is it was a big week for the credit market and for supply. You had Apple kicking it off, Intel doing a deal, Meta doing a debut deal. And those are all on the sort of higher end investment credit. But you also had high quality. You had investment grade inflows this week for the first time after 18 straight weeks of outflows. So if you're looking for a signal for the credit market, it's not too recessionary looking.

No, not at all. Absolutely true. And, you know, a lot of that capital raised by the big tech companies in the credit markets is going to go to share buybacks. It in general reliquifies the system. Corporate credit spreads have been pretty well behaved. So, yes, that's absolutely another way of explaining the resilience in stocks. Two minutes to go. What do you see in the internals? They've been actually a little bit better than you might expect, at least certainly better than they were this morning. The New York Stock Exchange split is decidedly positive now, almost 2 to 1. It was around 50-50 to start. The average stock's doing OK. It's really those mega caps that are weighing on the S&P. And even that, not very much. We're going to finish well above 4,100 on the S&P. Take a look at J.P. Morgan relative to Microsoft. Shows you this rotation over the course of the week with that jobs number today. You had J.P. Morgan and the other banks popping immediately to go meet that strength in Microsoft that we saw all week as Microsoft and the big growth stalwarts kind of flatlined after that.

21 has been one of the lower levels of the volatility index for a while. We're actually breaching that. Again, you see that steady decline, kind of summer, relatively range bound trading. It's bullish until it gets to a real negative extreme, let's say well below 20. And then you're going to have to people start talking about complacency. I don't think we're there yet, Sarah. All right. Let's look at the movers here as we head into the close with the Dow Jones Industrial Average well off its lows of the day. We got as low as down 237 on the Dow. We're now positive 62 points. We're actually at session highs in this final minute of trading.

JP Morgan, Chevron, Verizon and Visa are driving the Dow higher right now. Boeing, McDonald's and Salesforce are the losers on the day. S&P 500 well off the lows as well. It was down more than 1% earlier. It's down less than two tenths. Energy, financials, materials, industrials and real estate lead. NASDAQ is the loser on the day. It's down about half a percent, but again, climbing well off the lows of the session and higher by about 2% on the week. Despite the fact that we had a much stronger than expected job support, maybe we're applauding that. Earlier in the day, it was considered more Fed action, more hiking. We'll see where it settles out next week. That's it for me on Closing Bell. Have a great weekend, everyone. Into overtime now with Scott Wapner.