Closing Bell - Closing Bell: Market Meltdown 5/5/22

Episode Date: May 5, 2022

Stocks suffering their worst day since 2020 and erasing all of Wednesday's huge gains. Tech stocks sending the Nasdaq down nearly 5%. SVB Private's Shannon Saccocia & Truist's Keith Lerner weigh in on the sell off and whether they see buying opportunities amid the carnage. PIMCO's Tony Crescenzi discusses what the surge in the 10-year treasury yield means for the market. Firsthand Fund's Kevin Landis on the tech stocks he thinks will outperform if the economy enters a recession. And Nikola CEO Mark Russell discusses the electric vehicle maker's earnings and when he thinks supply chain challenges will ease.

Stocks are tanking, giving back their post-Powell gains, and then some. Nearly every name in the S&P 500 is in the red. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Here's where we stand in the market. Another sharp sell-off on Wall Street. We're down 1,148 points on the Dow Jones Industrial Average. Just took a turn lower.

Lows of the day was down about 1,240 points, but it is ugly out there. Every sector is sharply lower. Consumer discretionary the day was down about 1240 points, but it is ugly out there. Every sector is sharply lower. Consumer discretionary is getting hit the hardest, down 6 percent, thanks to double digit declines in names like Etsy, eBay, really poor earnings and just bad sentiment overall. Check out the most actively traded names here at the New York Stock Exchange at this moment, with the Nasdaq down 5.3 percent. NIO continues to be actively traded. It's down 15 percent. Twitter, a rare bright spot in the action after Elon Musk gets more funding, $7 billion

in capital for his takeover bid. Itao of a Brazilian bank, Uber and Ford, among the most actively traded names. We'll be all over this market, Salah, for you throughout the hour with some great guests, including Shannon Sikosha from SVB Private, Keith Lerner from Truist, Tony Crescenzi from Pimco on the bonds, Kevin Landis from First Hand Capital on tech, which is getting clobbered right now, and David Zervos from Jeffries on the Fed. Plus, we'll talk to the CEO of Nikola. It is a rare winner today on the back of earnings and its outlook for production, up 3%.

Let's get straight to the sell-off. Mike Santoli with a closer look at the damage that is being done right now. Mike, in the S&P 500, wow, down almost 4%. One of the most violent recoils I can remember that anybody has seen based on two-day action up 3%, now down more than 3%. Shockingly, it leaves us still above where we traded at the lows on Monday, and it essentially leaves the S&P flat for the week, but very much kind of a jarring situation. You know, the Fed perhaps indicated less tightening than feared yesterday, but the financial markets are doing the tightening today. Stocks down, dollar up, yields up, treasury yields and German bond yields crossing a couple of tripwires, 3% and 1%, respectively. And that really has people on the defense. So you see here,

4,100, I mean, vaguely defined, has still not really been breached to the downside. Now, where's the top? 4,300 last Thursday, three times tried to bounce there, didn't get above it. So there's a lot of kind of friction above us, even if you do get a decent bounce in here. I would also point out, it's a very indexy move. So some of the biggest, most crowded index names are leading the way lower. The Nasdaq down more than 5 percent. It seems like liquidation type activity, simultaneous liquidation in stocks and bonds. Who knows if that's forced, but it seems like it at least. I wanted to point out in 1994, this is the I guess the hopeful scenario people have been presenting, including Jay Powell,

the Fed, for what a stock market does when a soft landing is being executed through aggressive Fed hiking. So this was that year. What do you see here? Very early year peak, January, just like we had here, declined. That's, by the way, early May of that year. And then you just chopped and really made no progress. And in fact, from early spring down toward the end of the year, nothing. Don't want to make too much of it to say that we're going to kind of follow it exactly, Sarah. But the idea of high volatility capped on the upside by financial conditions, yet also supported by an underlying economy that seems OK, you know, you could do worse than look toward that example. So for those of you wondering what what is going on here, best day of the year

yesterday following the Fed and now the worst day since 2020. I spoke to the head of a trading desk earlier just to get some color on what was going on. Going into yesterday, yes, there was a fear that the Fed was going to be even more hawkish than it was. And then Powell ruled out the 75 basis point high. He wasn't as hawkish. And there was a relief rally on that. But I was told that yesterday's rally sort of looked unhealthy, a lot of short covering. Oh, sure.

And then going into today, concerns that the Fed is going to be even more behind the curve when it comes to the inflation fight. And by the way, we got some economic data today that was very stagflationary. Weak productivity, a big drop there, and very high input labor costs, which shows that no matter how the Fed is postured right now, it's going to be a big fight for them to get inflation under control. And maybe if they don't go bigger now, they're going to have to go bigger later. And that's going to be a problem. A general sense that there's kind of no free lunch, right? If you forego some of the front-loaded tightening, maybe you're going to have to deal with

at least the fear of inflation remaining persistent down the road. I agree with that. Now, on the character of yesterday's rally, it's always short covering at the beginning. The burst off the lows always kind of looks like that. And also, you did have people, I think, just running the same play as the last two Fed meetings, where you did bottom on Fed Day and then had decent rallies to the upside. So we'll see if today is just a more violent shakeout along the way. Here's the other potential why.

And I know corporate America is generally in a good place. But we got a lot of earnings out along the way. Here's the other potential why. And I know corporate America is generally in a good place, but we got a lot of earnings out over the last 24 hours and they're really weak. And they're in some of the Internet darlings, the hotspots. And if you look at that, those shares today, Etsy, eBay, Wayfair, Shopify, all down double digits on top of huge slides that they've already had. There seems to be a realization that the pandemic pull forward maybe was underestimated. It's even worse than people thought, that even some of these companies that do have plans for growth or hybrid or secular growth trends, it's just not happening. There's a lot of give back on those sort of ideas, and that is also pounding tech.

I agree with that. And there's a sense that there's a reckoning to happen in the form of private company layoffs. Amazon talking about they overinvested and overhired. So, yes, I think that that's definitely a psychological overhang that's contributing to the idea that these were expensive and crowded and overfed stocks based on people's expectations for the future in terms of digital transformation. Right. We have to see some sort of earnings clarity or at least stop missing estimates. Mike, thank you. Stay close on a day like today with the down now down more than twelve hundred points. Let's bring in Shannon Sikosha of SBB Private. Keith Lerner of Truist. Keith, I read your note yesterday after the Fed. You thought the market was ripe for a rebound,

given some of the negative sentiment. The opposite is happening today. What do you make of it? Yeah, I think Louis Rukos said, don don't put something in print, but you can be wrong in 24 hours. But, you know, today is surprising as far as how much we've come down. I mean, we did downgrade equities in April, and part of that was concerned around a Fed policy mistake. But as Mike discussed, I don't think it's appropriate to become more negative now as prices have moved down. I mean, at this point right now, there is concern about the economy slowing down. But with markets down about 15 percent, you're already pricing in about 50 percent chances of recession. We think that's too high.

And as Mike also discussed, we're above the lows from earlier this week. So we have the employment report tomorrow. We have the CPI report next week as well. So I think that will be really important. But, again, I want to become more bearish as prices have gone lower here. We are making new lows as you speak for the day. We were as low as twelve forty three on the Dow. We're now down below that, about twelve forty or so. So, Shannon, would you buy on a day like today or you just have to step aside? I think that when we think about the next probably three to four weeks, Sarah, we're really thinking about that chop that Mike just talked about.

And certainly if you're a long-term investor and you're looking at the next three, four, five years, there's absolutely no reason to not buy high quality companies in this type of environment. With that said, you know, if you're thinking about averaging in, if you have cash on the sideline, you know, there certainly are going to be a number of opportunities over the next couple of weeks. I think the most important thing that we're thinking about is just that consumer aspect of the data that you mentioned and thinking about what does a lower growth consumer spending environment look like in the back half of this year and into next year and really thinking about where you want to be exposed there. So, again, going back to the data, that's what the Fed is doing. And that's what we need to be doing as investors as well to make sure that we're

appropriately positioned and going into companies like in technology where you're focused on enterprise spending. That is not going to slow substantially over the next five to 10 years. And so for the long term, that's what you need to be thinking about so so you actually like some of the names and technology then is that what you're saying absolutely and Sarah technology is still the largest waiting in our portfolios and although we've trimmed those positions several times over the last year and a half if we look at you know what's going to drive growth in earnings what companies can continue to grow their earnings over the next several years in a lower growth economic environment. You know, I think there's several quality tech names that can do that.

And it's not just tech. It's health care, industrials. Looking for companies that do not need a strong secular economic tailwind to necessarily drive earnings growth is what you need to be focused on over the next couple of years. Like what? Because Apple, Microsoft, they're all getting thrown out today. Take your pick. So how do you choose quality within tech? And I just I want to press you on it, Jen, because we're seeing more than a 5 percent decline for the Nasdaq. Yeah. So, you know, our largest position, Sarah, are names like Microsoft. We like Salesforce. We like the digital transformation aspect of what's happening in the hybrid world. We have large positions in Amazon, certainly on the back of the AWS and advertising part of the business, which is obviously the higher margin, higher growth part of the business. Those are names

that are large holdings in our portfolio and are going to continue to be so. And in fact, although we're not adding today, there may be opportunities to add to some of those positions, particularly one like Amazon, over the course of the next couple of weeks for the long term. Down more than 8% right now. Keith, what do you think? Can IT spending hold up in a stagflationary and even recessionary environment? It hasn't in the past. Yeah, we were negative on tech. We downgraded tech a few months ago. And as you look at technology, they have been hit a lot this year. But we have to remember, they've been huge outperformance for the last decade. And even

with this pullback, the S&P technology sector is still training for more than a 20 percent premium to the overall market. So we've been increasing the quality of our portfolios maybe a different way. Over the last few months, we've been much more focused on the defensive areas of the markets like staples and health care. But also, we've been overweight energy over the last year, still a very strong area, as well as materials. So we like that part of the market better, up in quality. And we also have been bringing in our bets in because coming into this year, even before the invasion, even before the Fed became more aggressive, our point of view is that we were going to have deeper and more frequent corrections. And we're seeing that today. But even with today's move down, though, we still think we're in a big, choppy range.

And again, we're not becoming more bearish just because prices are moving lower, because we think we are discounting a decent amount of bad news, at least short term. But so you'd be buying, Keith, but in defensive areas like Staples, as you mentioned, because they hold up better in slowdowns. That's part of it. When we look back, when there was Fed uncertainty in late 2018, this is exactly kind of the playbook that we've seen that defensives outperform. And then also, along with that pairing that we still think, you know, the commodity side as far as the energy sector materials is a good offset to that also. And we've seen that even today holding up better than some of those more kind of early cyclical growth names which are

underperforming. You know, the energy stocks are in good shape, but thanks, of course, to unfortunate events in the world. It's only down 2 percent, the energy sector right now. That's the best performing group as we speak with consumer discretionary, the worst performing group. It is down six and a half percent. Shannon and Keith, we'll leave it there. Thank you both for some of your recommendations today. I want to tell you the top search tickers as we look at this market near session lows right now, done more than twelve hundred points on the Dow. Top search tickers, no surprise. It's almost all macro interest today. That is what is fueling all of this worries about the Fed and inflation, the 10-year yield getting the most interest. And we're continuing to see the yields rise firmly above that 3 percent level on the 10-year

yield, hit 3.1 earlier today. Selling in bonds, selling in stocks intense today, followed by the Nasdaq. Look at the Nasdaq down 5.6 percent. The Nasdaq 100, which tracks the biggies, down 5.7 percent, which means it is now about 24 percent off the highs and about 22 percent lower for the year. There's the Dow down 3.6 percent. The S&P 500 is up there as well. It's now down 4 percent. The selling is picking up in this final hour. And Amazon also gets some search interest today, as I mentioned, down 8 percent. But it's really all of the mega cap stocks which are not working today. Apple, Microsoft, Amazon, Tesla, Nvidia, Facebook. And what's different today is that the moves are much more sizable

than we've seen in previous sell offs. Let's zero in on the 10 year yield, though. It is moving back above 3 percent. It is hiding its highest level since 2018. And joining us now on that is Tony Crescenzi, PIMCO market strategist. So give us some color, Tony, about what's happening today. Hi, Sarah. Well, obviously, there's a lot of open-ended issues that the markets are having to deal with. And, of course, readjusting to the idea of higher inflation, higher interest rates, just huge uncertainty surrounding the outcomes of these things, not to mention geopolitical issues.

And so there's lots of turbulence. And so what does a pilot do? And we all are pilots to our own portfolios. We seek out smoother air. And how do you do that? Of course, for an investor, and we would say this at PIMCO, we take a long-term orientation. And for the bond market, that means getting back to bonds, because this, to you, bond investors, what you've been waiting for. Let's remember there were 18 trillion of negative yielding bonds last summer. And today there's hardly any. This is exactly what you've been waiting for. The aggregate aggregation of all bonds in the U.S., including treasuries, corporates, mortgages, etc. The yield on that's probably around 360, 370 today with the move we've

seen with a little alpha, etc. Looking at a yield to maturity potentially at levels that are pretty good for a diversifier. And so that's the way to think about it. Think long term as a diversifier with low volatility in the long run. These yields are quite attractive. Explain what's happening when it comes to, Tony, the Fed rethink. Because, you know, yesterday it made sense, right? He took the 75 basis points off the table. He sort of laid out his plan. The market seemed to like that. Bonds actually caught a bid.

So why the sharp reversal today, in your view? Well, is it really a rethink or is it just simply ongoing uncertainty surrounding the numerous issues we're thinking about? I think the Fed's caught in what I'd call, and I'm thinking of the Seinfeld episodes I've been watching, the opposite episode, the George Costanza rate hike cycle. The Fed will be doing the opposite this year of what it did during the last big inflation battle of 1994 when the 10-year yield shot up to over 8%. Back then, Greenspan was known for so-called gradualism. Greenspan gradualism started off with small moves, 325 basis point moves, 250 basis point moves in May and August of that year. Then, wham, 75 basis point move. You'd think that would hurt the markets. Instead, it ignited a big rally and markets never looked back, never started thinking about those higher yields until recently. So here

you see the Fed acting aggressively. People yesterday said the Fed wasn't aggressive, but it has an aggressive plan and it's told us it will move expeditiously, etc. And it's it's highly attentive to inflation. So investors should trust in the Fed. What you should be doing is listening to the adage, don't fight the Fed. And today that means trusting in the institution to battle the inflation level down, which will ultimately be good for investors. Down 1300 points now on the Dow. It's just getting worse, Tony, down 6 percent on the Nasdaq. What do these rising rates do to the economy? If we continue to see yields go up, we continue to see the Fed have to move. I mean, we've already seen mortgage rates spike.

What is PIMCO's view on how much economic damage will be done as a result of what's happening with rates? Well, we're sanguine about the outlook for the next year. And we put odds similar to what the New York Fed has on its website regarding the yield curve, odds of lower than 10% for recession in the next year. Looking 18 to 24 months out, that figure rises, call it 30% or so, because we are, in fact, in the midst of a fast-moving cycle with the jobless rate falling and likely continue to fall. But the good news in terms of the slowing of the economy, if it occurs, it will correct the imbalances that are causing problems. Chair Powell mentioned yesterday the numbers of job openings, around 11.5 million.

The numbers of unemployed is half that. And so if there's a reduction in demand that reduces labor demand, that can be a good thing. Final note, real quick, the burden is there's more burden sharing in the markets. It was all about the bond market weakening from two to three percent in the 10 year. Now it's spreading around to other areas, which means the Fed can Fed's handiwork can work and it can be successful in getting to that so-called an elusive soft landing. So when does inflation peak in your view? Because that seems to be the key to all of this. A tightening of financial conditions almost certainly will have some impact on the economy and we think ultimately brings the economic growth closer to growth potential, which is around 2%

next year. And typically when that happens, the inflation rate starts to moderate. There are factors that could lift it over time. You've heard about reshoring and things of that sort, and even climate change and investments there. And of course, the geopolitical story. So that could keep it somewhat higher than we saw in the 2010s, which is probably the wrong analog for the 2020s in terms of thinking about inflation. But there's deflation in financial assets now. It almost certainly has some impact on demand later. And there is a long leg and the Fed is like walking a dog with a long leash when it conducts policy. But it looks like it's moving in the right direction, but it's going to take a bit of time. But the peak should be around now, call it by the summer, the worst case.

What does it all mean, Tony, for the dollar, which is now up 8 percent year to date? It's making another big move higher, which also tightens financial conditions, right, and hurts the economy through exports and through corporate earnings. Didn't help overnight to have the Bank of England come out and warn about the economy as they're raising interest rates. That currency is getting slammed. But overall, strong dollar. Where does that go and how do we feel it? Well, the big story, and it fits with this burden sharing idea I mentioned with the Fed's

transmission of monetary policy occurring through many channels, that includes the dollar now. It had not until even a few weeks ago. The dollar seems stronger looking at a dollar yen, dollar euro, but on a trade weighted basis, which is what matters in terms of affecting the economy, it had barely moved according to the Fed's index because of strength in the Canadian dollar, which is our biggest trading partner in terms of destination of exports. So now we see a few percent move in recent days and I should say the couple of weeks in the dollar that could begin to eat away at economic growth and then again handle some of the imbalance. And so that could be a good new story in this burden sharing, more straws on other camels' backs idea.

Finally, we get a jobs report tomorrow, Tony. What do you expect, especially coming off of a day like today? Well, jobless claims tend to be one of the best predictors of that. And there still is a recovery theme, which we are strong believers in, which is why we're investors in recovery themes, such as in the lodging and airlines industries. You know from your own personal experience, and we all do have these stories of seeing a change in conditions. I know here in the New York City subways, not as crowded as they used to be, but picking up a bit. Restaurants, concerts, airplanes, they were fuller last week when I was on them. And so

that should keep demand strong. But we should look for moderation as that recovery theme plays out over the summer months. Tony Crescenti. Tony, thank you very much from PINSO today. Thanks, as always. Just want to show you what's happening. We're down nearly 1,300 points on the Dow Jones Industrial Average right now. Every Dow stock is lower. Even the safe haven, more defensive stocks like a Coca-Cola is lower, but it's faring the best along with Verizon. The worst performers, the drags on the Dow, Home Depot taking 122 points off the Dow. It's being hit by a double whammy of concerns about consumer, concerns about housing, with mortgage rates spiking. UNH, Salesforce, Microsoft, those are the other big weights

on the Dow. Every sector lower in the S&P 500, consumer discretionary and technology the worst, and the Nasdaq is down more than 5.5%. Those tech stocks under heavy pressure today. Nasdaq sinking almost 6% now as we speak. Let's drill down on some of the names getting hardest hit. Steve Kovach with a look at the pain in Microsoft and Apple. And Frank Holland is covering the cloud stock. Steve, start it off for us. Yeah, Sarah, it's looking even worse for Apple right now. It's extending its losses. Last I looked, it was down 6.5% and just keeps falling. Now, remember, this is erasing the gains of about 4% they had yesterday on that rally. And also off of news of last week, they keep warning about this COVID shutdown saying it's going to cost them up to $8 billion as they deal with all these COVID shutdowns in China,

hurting their supply chain, potentially impacting the iPhone. And then over on Microsoft, it's extending its losses to down over 5%. And again, it's the same story there, erasing the losses from yesterday. But also what we learned about in the earnings report last last week was the stagnant cloud growth and this kind of pandemic story that we keep hearing from digital services and cloud companies that are also getting whacked today. Just really tough comps versus the peak pandemic times there. Absolutely. Thank you very much. Speaking of cloud, the WisdomTree Cloud ETF getting wrecked today, down nearly 9%. Frank Holland tracking the biggest movers there. Frank. Hey there, Sarah. You know, just

keep an eye on these stocks. And you look at stocks like Salesforce, Snowflake, Palantir, Datadog. Cloud-based app names often called the top of the stack, really getting hit the hardest. Remember, cloud is high beta, so it moves with the markets. Also extremely sensitive to interest rate pressure due to high valuations in many cases. You were highlighting the 10-year earlier. Let's take one more look. 10-year after that Fed announcement, it falls from that 3% yield. The WCLD cloud ETF, it rises immediately.

Late-day rally along with the rest of the market for cloud stocks. 10-year rises again, especially overnight. You see cloud stocks crash and now on pace for a seventh month of declines. And despite the need for cybersecurity, especially with the war in Ukraine expected to lead to a rise in cyber threats, cyber stocks, they're falling as well. We're talking about Zscaler, Tenable and SentinelOne, all of them down more than 10 percent. Palo Alto Network's also down more than 5 percent. Talking to analysts, they say it's clearly not about demand. It's not about financial.

Simply that rate pressure making these stocks less attractive. Sarah, back over to you. Brian, Colin, Frank, thank you. Let's bring back in Mike Santoli. You know, a lot of people looked at some of these, especially the Microsoft and Apple's, as defensive. If we are going into a slowdown and not as rate sensitive. But on days like today, they really get dragged in hard. Their businesses are more stable. They're more predictable. They should be defensive.

Fundamentally, they probably are. I think today what matters more is who owns them in size and what's happening to the indexes and the portfolios they're in. And that's when you just essentially get much more indiscriminate action. If you look at Apple, Microsoft, Alphabet, all down five or six percent, their intraday charts look the same. It's not a lot of differentiation. That's what happens, I think, on a lot of these sort of liquidation, high volatility days. So that's all happening. Rate pressure, no doubt about it. That's part of the story because that does create more valuation pressure on all equities. And the more expensive ones, the ones that are bigger in the index, have been hurt the most. It's been the story of the entire year. It's just happening in a big bite today, I would say. I'm also looking at the move in corporate bonds.

I know you are, too. The JNK, for instance, ETF, which you can follow along, big sell-off in corporate bonds. And then they're starting to come to levels that would indicate that there's some fear out there. There's some shakiness in that market, for sure. Now, you have to be careful in just looking at the price of the ETF, because they're going to move based on overall treasury yield action more than anything else. Now, if you look at the spreads, corporate bonds, high-risk bonds to treasuries, they've, you know, wavered a little bit here. And you're starting to see anecdotal signs of maybe individual companies having a hard time, you know, rolling their

debt and things like that. But it's not, to me, the center of the action. It's a little more reacting to equities than it is causing what's going on there. It doesn't mean you can't go lower in stocks, but it does suggest this is not at this point systemic unless you consider, you know, people who have balanced portfolios running for the exits at once and selling their treasuries and selling their stocks at the same time because you do have these strategies that are so deep underwater. What's the center of the action? The NASDAQ down 6 percent, 10-year yield above 3 percent?

Yeah, those two things. I mean, they're kind of operating different ends of the seesaw. They've moved in sync for a while right now. And, you know, really, it's just the recoil and the idea that, you know, we still kind of keep darting around the same territory we've been at for the last four days or so. Remarkable. Huge moves, but yet not making any net progress in either direction. And it just grinds people down. Which is hard to believe. We're only down four tenths of a percent for the week. We were up most of the day for the

week. Unbelievable. One bright spot in the market sell off right now is Nikola jumping after reporting earnings this morning and beating analyst estimates. The company bringing in one point nine million dollars in revenue, much higher than analysts were looking for of one hundred thousand dollars. Joining us now is Nikola CEO Mark Russell. Though, Mark, I guess it's not really about the numbers for you, is it? It's about the updates. So bring us up to speed. You've started production on the truck. How many have been delivered, and how many more do you expect for the year? Sarah, we started production last quarter, and this quarter we're shipping to customers. We've shipped 11 saleable trucks to the dealers for customers so far. And we're producing steadily now and we're ramping up production.

So I think that's the reason for the favorable reception is that we're in the phase of generating revenue and ramping up production. What's the reception from the 11 trucks? I know it's a small sample that you've delivered. And what type of customers? Well, we actually had a fleet of 40 pre-series trucks that were out with customers before. Starting in December, we started delivering those pre-series trucks to fleets for testing. And the reception so far has been awesome. We started our earnings call this morning with a video where they're interviewing customers, fleet executives and drivers, and they're thrilled with the truck.

The trucks run like champs. So what's happening on the production side of things? Are you able to ramp that up or is it tougher in this kind of environment with some of these supply chain issues of key battery inputs, for instance, that we see other EV makers struggling to get? Sarah, that's the key issue. Right now, this is the toughest supply chain environment I've ever seen in my career. It's really, really tough. So we're going to be supply chain limited, not production capacity limited. But we think we've lined up, thanks to the efforts of a world-class supply chain team, we've lined up enough parts to build up to 500 trucks this year. So we're really excited about that, and we think that's an incredible achievement in this supply chain situation that we're dealing with right now.

You know, we're down. It's a brutal day in the market, down 1,300 points on the Dow. I know you've got your story that you're focused on, ramping up production. But, Mark, do you worry about the economy here? Because that's certainly going to impact demand for trucks and companies upgrading their fleets. Well, the economy affects us all, of course. But we're focused on the long term here. We're trying to ramp up production of our battery truck. We're trying to be able to start production of the fuel cell truck next year.

And then make sure that we've got charging infrastructure for the battery trucks and hydrogen infrastructure for the fuel cell trucks that's our singular focus uh going forward what about does does the fact that we've seen diesel prices skyrocket does that help you because that's of course what powers most of the trucks out there right now it doesn't hurt uh it doesn't hurt our prospects. It hurts the economy overall, of course, because that raises costs for just about everything. It certainly does tend to accelerate the impetus for switching over, you know, the higher cost for the diesel fuel and the more mandates against it that are spreading, you know, the more likely people are to consider switching. And just one more on the stock market and just on your stock in particular, Mark, which has been pretty volatile. I think you're winning back some credibility on Wall Street after,

you know, a rough start and some concerns about whether it was even a real company. But the whole sell off and the concerns about higher interest rates has impacted any kind of speculative play on Wall Street where your pre-revenue company. Obviously, you're going to get dragged into the selling. How are those conversations with investors going? How do you view the stock price? Well, I think the exciting thing today is we are now a revenue company. It wasn't much, a couple million dollars, but we're now in the mode of shipping vehicles and generating revenue,

and we're looking forward to growing that quarter by quarter as we go forward from here. It's an exciting watershed for us to become a revenue company. revenue. And we're looking forward to growing that quarter by quarter as we go forward from here. It's an exciting watershed for us to become a revenue company. Up about 4% today on a tough day. Mark Russell, thank you very much, CEO of Nikola. Major averages are having their worst day right now since back in 2020, the height of the pandemic. Here's a live look right now at the S&P 500 sector heat map. It shows you that this is a broad-based sell-off. Every sector is lower right now. The worst hit at the bottom there, consumer discretionary, down almost 7%. And that's thanks in part to names like Etsy and eBay. Those two falling 18% and 12%. Disappointing earnings. Technology also getting hit particularly hard. Every stock in the

S&P tech sector is lower. Communication services right down there with it. It's why the NASDAQ is down so much with the NASDAQ 100 down 6% as we speak. But even the safer haven plays like utilities, which are holding up better, down almost 2%. Consumer staples down 2.5%. Bob Pisani here to break down the carnage at the NYSE. Christina Partsenevelos looking at the big NASdaq losers. And there are a lot of them. Bob, let's start with you. What are you watching?

Well, the important thing is I know it doesn't look like there's any place to hide, but I just want to put those sectors backed up. There is a differentiation. And what matters here is the cyclical sectors like consumer discretionary. And I know she mentioned some of the issues with Etsy and eBay, but Tesla's down big as well. They're text down. And if you look at the more defensive sectors, consumer staples, for example, health care, they're only down about two percent. So, yes, everything is down. But there's a difference between down two and down almost seven percent. Just want to show you the Nasdaq, the closing low there. Of course, we're going to violate that. And Christina will give you a little bit more on that information.

But the important thing right now is if you want to look at the inflation story, and that's what's motivating things today, the new high list, there's only one sector on the new high list. It's all oil stocks and energy stocks. So you've got some of the refiners like Phillips 66. They're Exxon, Devon, Marathon Oil, all at new highs. These are off of their highs. They were at earlier in the day, but they were 52-week highs. The market is starting to price in a somewhat slower economy. So all of a sudden, recently, we've seen cyclicals that are big global cyclicals like Nucor and Honeywell notably weaker. And then we've seen consumer cyclicals like Anar and Pulte also down.

Finally, defensive groups holding up a little bit better, but as you can see, even the consumer staples names fairly flat right now. Carol, back to you. Kellogg doing well off a good quarter, but a lot of pain there, too, today. Crude oil, interestingly, higher on the day, up 108, given all the geopolitical issues. The Nasdaq composite now down 6%. Christina Partsenevelos is at the Nasdaq. Which names are you watching, Christina? Oh, I have a whole list, but sorry, I actually just wanted to pinpoint something you said at

the start of the show. You were talking about yesterday's upswing, which you could say maybe it's short covering, and then how quickly it was followed by a massive 5% drop, which we're seeing right now. It's rare that the Nasdaq jumps and then falls 4% at least on consecutive days. Since 1980, it's actually happened only 12 times. And we're heading for lucky 13 today. And to go up and down like that in the span of one week. And you did talk about that, Sarah. You highlighted how rare that is. The last time that happened was during the peak of COVID in March 2020

and November 2008, the heart of the financial crisis. And to answer your question, the company is responsible for this massive swing downward 2008, the heart of the financial crisis. Now to answer your question, the companies responsible for this massive swing downward because of their weight on the Nasdaq is the usual, big tech. Apple, Microsoft, Tesla, Alphabet, Meta, you can see on your screen a sea of red. The biggest laggards in general though, Cognizant Technology, Chinese e-commerce platform Pinduoduo that's down over 12%, eBay down 12%, a weaker guidance. And then let's talk about semiconductors trending lower.

NVIDIA, one of the bigger laggards, followed by AMD, Marvell Technology, on semi. The list continues. And with all of this talk about inflation and the pinched consumer, of course, online retail taking a huge hit. Etsy, you mentioned it, 18% lower today. Yesterday, the CFO mentioned how the consumer has less disposable income and more places to spend it. So that stock taking a major hit. PayPal down over 8%. And JD.com, 6%, Sarah. No shortage of losers today, Christina. Thank you. We'll stick with tech. With the Nasdaq now down 25% from the highs. Joining us is Kevin Landis from First Hand Funds.

Kevin, selling getting extreme to you in some of these tech names or more to come? This feels like full-fledged forced selling. You can probably name a handful of days in your whole career where the market's down more than 5% like this. And you've got stocks in your portfolio that are down 10% or 12% in a day. That's pretty extreme. What does it indicate? What should you be doing about it?

Well, it depends on whether you fancy yourself a trader or just a long-term investor. I think if you're a long-term investor, you just sort of have to sit here and get punched in the face. If you're a trader, you might even be able to make it even worse by thinking that you can get out of the way now and being wrong on your timing. So I guess you're mad when you're having to sell something this cheap and you're terrified when you have to buy something amidst the falling market. So pick your poison. But what about opportunities for long-term investors?

Amazon is now, it's 8% and now about 40% off the highs. Is that an opportunity to get Amazon at a good price? Or is that just a total rethink given this inflationary high rates environment? It's probably a decent opportunity and you may this may not be the perfect day to get back into it i mean i've taken a look at all of what we call the pandemic socks right it's a little over two years but uh ago but i mean you could take a look at a two-year chart and say okay companies like docusign and zoom you know they're they're almost complete round trips. And yet they're clearly better companies and different companies in a better place now than they were. On the other

hand, you could take a look at Peloton and, you know, this is probably not the time to get back into Peloton. But, you know, for your favorite great quality companies, this is probably a great time. More importantly, though, we're going into a recession. And the stocks I think that you want to own as you go through a recession are the ones that can grow through the recession. Well, those are the high growth names that are just getting just pummeled even more so today. Like what? What do you like in a recession? Well, you know, I've talked before about Wolfspeed.

Wolfspeed makes silicon carbide power electronics. Why does that? Why does that matter? Well, that goes into EVs and the EV trend is really just now taking off. Wolfspeed is going to do great. It doesn't really matter what the Fed does and it doesn't really matter what Putin does. Wolfspeed is going to do great. And you can get it. I think it's down something like 10% today. 15. Yeah, okay. About 10, 15, right? Exactly.

So you can also take a look at, believe it or not, Roku, right? I mean, some days it feels like Kathy and I are the only ones who own that stock. Kathy would. Yeah, but I'll tell you, it's streaming's not turning around. It's not going away. And Roku wants to be everybody's partner here. And they're uniquely positioned. It's a great play on a trend. Roku is going to grow through any recession. So is this. Well, I want to come back to Roku. I have a question on it. But you mentioned, Kathy, what the ARK Innovation ETF is down 10 percent right now.

It is underperforming even the market and now 64 percent from its highs. My question on Roku, Kevin, and I think it gets at a lot of these names that you've been mentioning is it does feel like besides the higher rates, which is a problem for valuations, there has been some surprise at just how much give back there have been. And I mentioned this with Mike earlier. There has been from the pandemic that even some of these companies where you thought there was a secular tailwind for growth, like a Roku, maybe like a Netflix, perhaps it's just being turned on its head because Netflix is now losing subscribers. And the pandemic behaviors are changing so much that these companies are missing earnings, which also takes a key bullish reason to buy them out of the market. Last year, it was all fine because they were going up and up and up,

but they were beating expectations. This year, it's the opposite. Right. Well, and the other thing that goes on here is that when you're under stress and when you're sensing greater risk around you, you try to go to what feels like the safer names. And those are the names you know well, right? Amazon, Apple, Google, they just feel better. And that's why in a situation like this, a high growth story, but it's a small cap and it's not quite so expensive and people haven't quite figured out what the heck it is they do for a living. Those are harder to step up and make yourself buy them. And that's why they don't get the support it is they do for a living, those are harder to step up and make yourself buy them. And that's why they don't get the support that the others do.

Kevin Landis, thank you for joining us. As we look at the Dow down 1,279 points, we're going to go straight into the closing bell market zone here. CNBC Senior Markets Commentator Mike Santoli, of course, here to break down these crucial moments of the trading day. Plus, Needham's Bernie McTernan on tech stocks, Kate Rooney on the ugly day for crypto-related stocks, also taking a tumble. But we'll kick it off with the broader market because stocks are getting slammed here into the close. Major averages having their worst day since back in 2020. Just want to give you a market check because Kevin's right, we don't often see days like today where the Nasdaq is down almost 6%.

We're just off the session low. There's the Dow down 1,287 points, Mike. Intense selling really from the outset. And we're continuing to make new lows as treasury yields rise, the dollar strengthens. Add it all up. What is driving the intense selling today? You know, all of it. It's kind of like, you know, what are you rebelling against? Well, what do you got? That's an old movie line. I think that's what's happening today. Three percent Treasury yields has been a little bit of a psychological line. One percent of the German 10 year boon as well happened. Dollar racing higher and really just keeping the market off balance after a day when they thought they got.

Investors kind of read the Fed as as maybe giving an incremental dovish surprise. It's the largest stocks that are having the greatest weight. So the biggest NASDAQ stocks are really causing the most damage today. You actually look at, you know, all 1,000 stocks in the Russell 1,000 are down less than the S&P is. That's because of the apples, the Microsofts. I mentioned earlier, it seems a very index-concentrated selling storm happening right now. Now, one thing people are watching and have been waiting for for some time is to just see a very comprehensive flush lower in terms of breath

volumes being all to the downside. You have some of that. You could check off the box that says more than 90 percent of the New York Stock Exchange volume is now in declining stocks. That in itself is not sufficient to say that some kind of traction is being found right here. Also, we've talked about depressed investor sentiment. You can still make that argument that it remains supportive or it's one of the supportive elements of this market because people are pretty negative at the moment. But again, not sufficient as a catalyst right now. So to me, it's all the macro stress coming from multiple directions. We mentioned credit markets.

They're still not misbehaving that badly. But in general, the number of failed rallies that we've had at the similar levels, I think just has traders less willing to make a bet right here. With it all, putting all that in the middle of the table, you can still say, for better or worse, it's remained this range-bound trade with a definite risk of a delicate floor that we're now testing out. How do you protect yourself in an environment like this? Because the traditional 60-40 definitely not working when both bonds and stocks are sharply

lower and vulnerable. Should you have more exposure to commodities as we see new highs here with natural gas and some of these other commodity plays? The case can be made absolutely that commodities are going to be non-correlated or at least they're going to be net beneficiaries. I guess the question you would have to ask is if your portfolio was not built to handle of down 15 percent in equities, then, you know, you probably had too much risk in the first place. But at the very moment that everyone decides diversification is broken, the model doesn't work anymore, you have to find some kind of separate solution, I just wonder if that's a lagging sentiment. In other words, if the market's already gotten you to this place where you found,

I mean, 60-40 has almost never had this bad a start to a year ever. So is it going to get worse from here? Or do you think the direction of mean reversion is to the high side? Just how high do you think yields are going to go from here, I guess, is the question if we're simultaneously worried about some growth scares. So I guess my question also, Mike, is what are the catalysts from here to know whether we, this is the washout that we're expecting? Because we just got a lot of clarity from the Fed chair, and that doesn't seem to be helping out much today. We're going to get a jobs report tomorrow. We're still in earnings season where it's kind of mixed.

What do you say? Are we just going to need to see more downgrades and more lowered forecasts from companies? I mean, that would help probably, at least in terms of saying that the pendulum has swung far enough. I think bigger picture, what needs to happen probably is the idea of peak inflation probably needs to have some credence and be supported by the evidence in the next weeks and months. That, to me, is the

big call at this point. So either the Fed is trapped or the Fed is not trapped. And it can be somewhat measured and does not have to really get the economy into a bad place before we can say that inflation is moving to the right spot. Which is hard to know, get the economy into a bad place before we can say that inflation is moving to the right spot. Which is hard to know there with the war still raging in Ukraine. Oil prices still rising. As I mentioned, NatGas up 21 percent this week. Want to hit the e-commerce names because they are getting crushed along with the broader market. Amazon sinking to its lowest level since back in 2020. There's Wayfair, eBay, Etsy, Shopify. They're all down double digits. eBay and Etsy among the worst performers on the S&P after both companies gave weaker than

expected guidance. Again, you know, these stocks have been weak all year long and they're taking such Shopify is now down 70 percent, Mike, just taking away a lot of the pandemic gains. I guess the question from here is what settles these stocks if the fundamentals are turning weaker than expected? Well, I think in every case, the question is, and it's going to be different. I mean, what was built into Shopify's valuation near the highs about the kind of perpetual, very fast growth that was going to be there? At these levels, I again say, who owns them?

Who needs to get liquidity? You know, when are they basically going to be so low that they're kind of ignored? That's almost what we're waiting for right now. I think the other question, as I mentioned earlier, is what's going to happen in the real tech economy or what is happening there in terms of, you know, people choked on a ton of hot money that went into these businesses, private and public. You built your business for continued, very fast growth. Now you find yourself in a rough place. Amazon, the biggest example of that.

And what does that retrenchment tend to look like? So I'm certainly not smart enough, have no reporting on where we're going with that. But that is the overhang on this group of stocks right here. Before you can say, oh, they're all sold out. Well, I mentioned the ARK Innovation ETF. Worth hitting again. It's down 10.25% just today, which brings its declines to about 65% off the highs. It's down 50% for the year.

It doesn't help that they own Shopify and a lot of these other names. Coinbase will hit those. Roblox. It's been sort of a barometer, Mike, for some of the speculative tech stocks that worked so well during the pandemic, during super low rates and when everything was pulled forward, just absolutely collapsing. How do you view the levels here on this ETF? I mean, look, it is all along the way up and down tracked an index, the Goldman Sachs index of non-profitable tech companies. So whether that

was the intent or not, and certainly it wasn't the reason that ARK bought those companies, but it was what it was about. It was kind of the hopes and dreams side. Now, in this case, too, Tesla has not been helping. For a lot of the way, Tesla was kind of covering up for a lot of weakness elsewhere. And it's 10 percent of the of the flagship portfolio. And that, of course, is well off its highs for its own reasons and for the fact that market psychology has changed so much. So I guess all I could tell you is after the tech bubble burst, the Nasdaq went down about 75 percent and it happened over the course of two and a half years. So a lot of that time I was asking, people were

asking, is it enough? And you just didn't know if it was enough until finally, you know, the ball stopped rolling downhill. Not many advancing stocks today, many declining ones, heavy volumes, I would say, as well as technology bears the brunt of the selling. Those crypto related names also getting crushed today, significantly underperforming the broader market. Kate Rooney joining us. Kate, why are crypto related stocks down even more than Bitcoin today, which is also sharply lower? Yeah, it's interesting. A lot of these names trade in sympathy with Bitcoin. But then you've sort of got this double whammy. Mike mentioned the unprofitable tech names. Take Coinbase, for example. They are getting hit by lower Bitcoin prices. And then they've got the idea that they're not profitable. This company reports earnings next week, but they've seen a

slowdown in retail crypto trading in general, a lot less volume in crypto markets and less volatility there. So the expectation is that they won't see as much trading activity. There's things like competition. Coinbase is down more than 13 percent today. So you've got some of these tech names that are getting hit also just by the idea of investors moving away from growth. And then you've got the Bitcoin mining stocks. So Hut 8, Marathon Digital, Riot Blockchain, these same phenomenon. They're getting hit by lower Bitcoin prices, but then capital expenses are high for these companies, energy expenses, and the cost of borrowing is going up

as well. So they're getting really hit harder than Bitcoin, almost double what Bitcoin is seeing right now in terms of losses. And again, not all of them are profitable. It's sort of a different business model than obviously the tech names. But there's a lot more crypto proxies out there. Even a company like Block, which reports earnings today, only gets about 4 percent of its gross profit from Bitcoin, but has been trading on the same sort of sentiment driven ideas as crypto. Jack Dorsey has been very vocal about his vision for the future with Bitcoin and Block has become sort of a crypto play, even though it's not getting a ton of profits from that particular business yet, at least. Wow. 12% down right now ahead of earnings. Kate, it sort of raises the question, what happens to activity levels of trading in crypto?

Today, Bitcoin's down about 9.5%, 10%. As we see these big drops on some of these more macro concerns, what happens to trading at these firms? Well, it's interesting. At the trading firms, at least if you look at Robinhood, they've seen a slowdown. So the expectation is that people just are not trading as much. And then when it comes to Bitcoin, there's a lot of investors that at this point are underwater. So there has been sort of a shakeout in crypto markets where some of the newer investors have just gotten out. They don't have as much conviction as the long term holders. And the majority of

Bitcoin investors right now are sort of a buy and hold types that got in in previous years, see it as a decade long investment. And there's a little bit less of the retail trading. And one of the things that investors and analysts have said is sort of holding Bitcoin and crypto prices back is the lack of new excitement and investors. There may be some who got in and got burned and have decided that they're sitting on the sidelines for now. Down 9.4 percent on Bitcoin. Kate, thank you. We'll stick with the tech trade with the Nasdaq down more than five and a half percent with minutes to go here into the bell. Joining us is Bernie McTernan. He's an analyst from Needham, covers names like Uber, Lyft, Airbnb, and DoorDash, which reports earnings. Bernie, how do you view this? What are the conversations

you're having with some some of investors in these names right now which are getting clobbered yeah so two things that really investors are focused on one is what companies are trading at reasonable valuations we can't be looking at revenue multiples anymore we have to be looking at EBITDA multiples free cash flow uber's on the conviction list for needham one of our buy raid stocks and the reason one of the reasons is because it's you're getting growth at an increasing reasonable valuation and profitability. Stocks trading less than 20 times EBITDA now on our 23 estimates and less than 20 times free cash flow on our 24 estimates. The other area is

that where there's upside to estimates and where we actually feel good about the end markets, travel, basically no matter which way you cut it, seems to be on fire right now and for the summer months. Airbnb is one of the few companies that we cover that still trades in a double-digit revenue multiple. We actually prefer to play the travel theme through Vacasa, which is a local property manager, much more less lofty valuation, let's say, and we see significant more upside to estimates. Let's talk about Uber and Lyft, because that's been a real painful spot of the market this week, especially Lyft coming out of earnings. It doesn't seem to be a demand problem, Bernie,

but it feels like the market is really waking up to these issues about driver shortages and the whole model around drivers and what that's going to cost some of these companies that aren't doing autonomous driving anymore because, you know, they had to let that go as they were trying to become profitable for Wall Street. So where does that go? Because it feels like the market's pretty negative on that idea right now. Yeah, no, it's a good point. It's not only that the market's waking up to it, I think the company's waking up to how much they have to invest, and especially with Lyft coming out of Omicron. It was interesting they kind of dismissed the gas prices as a reason why they had to invest in driver supply now. And it's really coming out of Omicron where supply takes a break and it just takes a lot longer for the supply to

come back on. I think it is important to point out from Lyft's point of view, I know the stock was down 33% yesterday, but the company made massive strides during the pandemic to increase their profitability. If you look at 2019 to 2021, that's almost like a billion-dollar increase net in EBITDA that the company went through. So right now, the stock's trading less than 10 times EBITDA. The only question is, do you believe that EBITDA estimate? And again, with the uncertain end markets, with these companies dealing with inflation, too. I mean, we're talking about inflation throughout the economy, but really ride sharing was the was the leader in inflation when there was this supply and demand imbalance. We do a ride sharing tracker that shows that, you know, ride prices continue to be elevated relative to preabor Day levels. So I think there's some uncertainty, A, if consumers are going to continue

to really absorb this ride-sharing inflation, and then, B, how much do these companies, in particular Lyft, who took a break from investment, unlike Uber, who's investing for the past four quarters, if Lyft, you know, how much more they have to invest other than just what they called out in 2Q. I know you like DoorDash. You have a buy ahead of earnings as well today. Bernie McTernan, thank you for joining us. Thanks for having me. Let's go back to broader markets. Let's bring in David Zervos, chief market strategist at Jefferies. And David, I'll give you a little credit because you were skeptical of the rally. You were here at this time yesterday into the close, skeptical of the rally that we were seeing off the Powell news conference. So what do you make of the reaction today,

which is so much steeper and more severe even than the rally we saw yesterday? Yes, Sarah, we were, I mean, it was just about this time when we were talking. And, you know, I think it's, this is a liquidation. This is a liquidation of a lot of trades that have worked for a very long time.

And people need to kind of respect the fact that we're seeing both stocks and bonds go down at the same time. Things like risk parity, things like 60-40, people are giving up on them. And I think rightfully so, this is not the year for those trades. So we need to kind of manage our downsides. And I think Mike kind of hit the nail on the head earlier in your discussion when you guys were talking about places to hide. There's just not a lot of places to hide here. And if your portfolio can't take a pretty decent double-digit hit, you probably lower allocation to risk overall, waiting for a dip or selling out some calls or something that was going to give you some advantage

when things got messy. And this is what's happening right now. So would you increase exposure in that environment to things like utilities, which are faring better today, only down 1 percent, which is a very small decline compared to consumer discretionary, which is down now six and a quarter percent. I think this is a powder dry environment, Sarah. It's one of those things where nobody knows where the bottom is. Nobody knows how much they're going to have to fight this inflation. We might have a couple more quarters where inflation stays much more elevated than we like. And in fact, the Q3 inflation data is going to be really tricky. And that doesn't come out, of course, until after the summer when the Fed doesn't have a lot of guidance.

And we saw a big drop off in inflation last year during Q3. That was when the word transitory started to look more correct. And then, of course, Q4, we exploded higher and then Q1 this year as well. So the comps are not going to be great going into the end of the year. We're going to get two more 50s. Then the Fed's going to look at the numbers and go, well, wait a minute, maybe it's not coming down as fast as we want it to, and it could be kind of dicey into the second half of the year.

So the idea that you bulk up here didn't make a lot of sense to me 24 hours ago, and it certainly doesn't make a lot of sense to me right now. What about the idea, David, so coming out there was some relief that Powell wasn't even more hawkish. He did rule out the 75 basis point hike. But now this idea that, especially in light of the productivity data, which was pretty bad today, if you're worried about stagflation, lower productivity, higher input labor costs, that they're just going to have to be. And if they're not going to do it now, they're going to have to do it later, which sets them up more for a policy mistake.

I think that there is some sober lining here, and I don't want to be so negative in a really big way. I mean, this is not inflation expectations rising. It's real rates rising. That's good. Fed inflation credibility is, I think, and I know this is not consensus, is actually very robust. You know, whether we look at five year, five year break evens or whether we look at the long term surveys from the New York Fed or the University of Michigan, they're all

pretty good. So the Fed has not lost it. They got to keep it and they got to keep it probably for longer than they had hoped. And that's going to hurt. And they're raising real rates. And that's just not a risk-free real rates going up just does not help you when it comes to, you know, owning risky assets. It makes the alternative, which is owning the risk-free asset look a lot better. And that's where we sit today. And it's just going to, it's going to weigh on the market. It's going to be tricky, but I don't get to, I'm not that bared up on the growth side. I'm not that bared up on the employment side. We've got so many job openings relative to seekers. You know, the data is incredible. The housing market is still doing very well, even with higher rates. And I expect that to be a secular phenomenon. I don't think it's going to get hit too hard.

So I don't want to get too negative. I just think the Fed has to do some very heavy lifting in the next few quarters to fight this inflation, to act aggressively and to kind of take back that medicine that they gave us a lot of and felt really good, but we don't need anymore. And coming off the medicine always creates the shakes like this. We had it with taper tantrums. We had it in 15 and 16. And we had it again. It doesn't feel good. No. It doesn't feel good when they take the meds away. No.

Well, there was a lot of stimulus, meds, whatever you want to call it. We just showed the 10-year yield. It's pierced above that 3% level and really is higher now, and convincingly so. Where does the 10-year end the year, David? Clearly, this is bearish for stocks at the moment. So I think what the market has to figure out, Sarah, we talked about this a few times this year, is how much are they going to do balance sheet? How much are they going to do short rates?

We're not going to know that until the second half of the year. They're going to watch this thing. They're going to do a couple of 50s. They're going to indicate that they're going probably beyond that, significantly beyond 175, up toward two and a half to three. And then depending on where the long end settles, they're going to either add to the balance sheet contraction or they're going to keep it the same. So I think one thing's for sure is that I don't think yields at the long end are going to come crashing down. If they do come down, they're going to give us more balance sheet contraction and drive them back up. So really, to me, the long end doesn't have a ton of value to it

in terms of purchasing at this stage. And we're seeing a steepening, a bear steepening, which is always an interesting thing. Bear steepenings are not the norm. Usually we get bear flattening. So that's telling you, and that's a real steepening, not an inflation steepening, expectations of inflation. So the market is expecting higher long-term real rates. That's a real steepening, not an inflation steepening for expectations of inflation. So the market is expecting higher long-term real rates. That's a fundamental change in Fed policy. David Zervos, thank you for joining us on this critical day where we're seeing the market plummet. Two minutes to go in the trading day. Mike, what are you seeing in the internals?

Can't be good. No, as you mentioned earlier, very, very lopsided to the downside. What you want to see, look at that. It's like more than, well more than 10 to 1 declining to advancing volume. So you finally got this 90% downside day. You know, we can argue about whether that means there's been a little bit of a decent flush and a shakeout here. Did want to look over the last couple of years, the equal weighted S&P against the NASDAQ 100 and the S&P has held up better. So in other words, the NASDAQ 100 has caught down to the S&P against the NASDAQ 100 and the S&P has held up better. So in other words, the NASDAQ

100 has caught down to the S&P. It doesn't mean you've escaped any pain, but it shows you it's mostly the biggest stocks that are hurting. Volatility index is at 31, well below the highs of a few days ago. People seem still very hedged up, Sarah. So it's not reacting as much to this move. By the way, S&P is where it was just before noon yesterday. As we head into the close, take a look at the market. We are off the lows of the session, but we are still down more than 1,000 points on the Dow, about 1,100 points. We were down 1,300 just a few moments ago. S&P 500 declining 3.6%. Every sector is feeling the pain today. They're all lower. Consumer discretionary hardest hit. Utilities faring the best, only down 1%.

Into the close, it's the NASDAQ that has been hit the hardest today, down less than 5%. Again, it was down 6% in the final hour. Looking a little better into the close, still ugly. That's it for me.