Closing Bell - Closing Bell: More Volatility for Stocks? 8/6/24

Episode Date: August 6, 2024

Should investors brace for more volatility … or is the worst over? Trivariate’s Adam Parker, NB Private Wealth’s Shannon Saccocia and Invesco’s Brian Levitt break down their forecasts. Plus, venture capitalist Rashaun Williams weighs in on tech valuations following yesterday’s big sell off. And, we tell you what is at stake when Airbnb, Instacart and Reddit report in Overtime.  

Kelly, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live here post-9 at the New York Stock Exchange. This make-or-break hour begins with a big bounce back for stocks today. The extraordinary events of the last couple of days and whether the worst is really behind us. We'll ask our experts that question over this final stretch. In the meantime, let's show you the scorecard with 60 minutes to go in regulation today. There's lots of green on the board. You've got the NASDAQ bouncing back by 2%. S&P by about that same amount, 1.5% to the upside for the Dow. So getting a good chunk of yesterday's losses back.

Yields are rebounding as well following that volatile session on Monday. And maybe that's helping calm things down just a little bit. Twos, fives, and tens. You see the yields all moving higher. Standouts today in terms of equities. Well, Palantir, it's surging after its earnings. Take a look at Caterpillar as well. Also higher after its own results today.

We're watching those two stocks closely. Palantir about 12%. There's Caterpillar, an important stock, having a nice move as well. Takes us to our talk of the tape. Is more volatility ahead for stocks? Is the worst, in fact, over? Let's welcome in Adam Parker. He's the founder and CEO of Trivariate Research.

Also a CNBC contributor. It's good to have you here. Great to be here. Especially given what's taken place over the last 24 hours. Is the worst over? What was this? You know, I was just joking around before we got in the air that after things happen, you always hear something, oh, it was a Japanese carry trade. You never hear about it before it happens. You know, I know we talked a couple weeks ago, things that I could get at, the consumer was slowing, financial conditions were tightening a little bit, the probability of the bear case went up. We talked about it last week on the air. So I think some of those things were knowable. I think the earning season was a little bit worse

than people thought. So you could point to some fundamental things. And I think you get a risk management sort of unwind when people get nervous. Is the bottom in? Probably not. Usually when you get this kind of volatility, you get a few more bad days than just this. It happened fast. But I think it's a little bit premature to say I'm back in with two feet and I'm excited that the bottom's in. I don't believe that. Do you think that this unwinding of the carry trade, which got a lot of attention yesterday, I think has gotten most of the blame for the kind of volatility we saw yesterday.

By the way, you ever seen something like yesterday morning where you get the VIX spiking by more than 100%, just like that, up to 65? Yeah. There was a lot of fear in this market yesterday. To me, like I took a step back, we were talking about it at Trade Barrier earlier, saying, you know what?

I've seen a million growth scares, come on. Like I'm, it's not my first, I wasn't born yesterday. This is like the 20th growth scare we've seen in the last 20 years. I think the difference was it felt sharper on VIX, it felt sharper on financial conditions, which nose dived. And then you say, well, when did I last get on these metrics? Oh, wait, COVID. It's not great out there right now, but it's definitely not 2008. So I think there was a bit of kernels of truth that are exaggerated. The fundamentals are eroding, but I still think earnings are going to grow in 2025 versus 2024. And so I'm not like panicked. I'm trying to think about what do I like? What can I maybe get that's a little bit

cheaper now? And I'm trying to figure out how to get more offensive as opposed to just panic, hitting the panic button. Goldman CEO David Solomons on the tape here was giving an interview and said no recession. The correction in the stock market, quote, might be healthy. Sees no emergency cut from the Federal Reserve either. And there are many notes out today saying no imminent recession. That's HSBC, Barclays of the Jobs Report last Friday, which got everybody kind of worked up just one print what do you make of all that yeah i'm inclined to think that um while things are slowing they're not falling off the cliff i was a little surprised to see you know siegel come on jeremy siegel come on to say we need like 75 bips of emergency cuts and

maybe two of them that seemed a little um extreme to me based on what i'm seeing from the data. I've seen enough corporates that, look, you're talking about Uber, like there's enough things that are going okay for big dollar companies and I'm not seeing, you know, some implosion. I see some eroding in the consumer. We saw it across multiple big verticals, autos, housing, retail restaurants to get a little bit more concerned. The sell side estimates for 2025 earnings are too high. They have to come a notch, maybe two notches lower. But I don't think it's like hit the panic button and, you know, it's like, you know, let's turtle off. I mean, of those who are sort of calm, cool and collected, if you will, was Rick Reeder of BlackRock, who joined us yesterday in the midst of all of this from BlackRock, of course.

And he said, look, this presents a pretty good opportunity. I want you to listen to what he said yesterday and most importantly, what he was doing and looking at. Part of what makes this an interesting market is there's some stuff to do. I mean, there's some things to trade because the markets are overshooting at a bunch of places. The front end of the yield curve, you look at the move, what was it, over 30 base points today.

I mean, there are opportunities across these markets where, you know, seeing some extreme moves and we're taking advantage of some. By the way, I would say the same thing on the equity market. I mean, some of the names that have reported good earnings and buying back their stock that are down mid to high single digits, there's some opportunities in some of those as well. That's Rick Reeder. Do you think we'll look back at this and say that was a great buying opportunity yesterday of a lot of different things? I'm inclined to directionally agree with him that the soft's going to present some opportunities.

It's just in the past when I see this kind of volatility, it usually has a few big up days like today and then a few more big down days before it's totally over. So I can't say it's the clearing event. I think if there's names you like, you go in, you say, you know what, this is 10, 15, 20% cheaper in some cases, like semis. I mean, the semis have gotten absolutely annihilated over the last kind of two, three weeks. And I don't think their fundamentals are that impaired. So if you're a growth PM, you're looking and you're saying, you know, I wanted to own these names. I mean, NVIDIA is down 35%. You know, things are down a lot from the peak and maybe

the risk reward is getting skewed to the positive on a three to six month view. So I think you can start looking to buy stuff, maybe covering some shorts if you're a hedge fund. I don't think it's panic button. So I agree with Mr. Reader's sentiment. What about, you know, you have a lot of institutional clients,

talk to a lot of well-known hedge fund managers. What's their psyche through all of this? Were they looking at opportunity or were they looking to de-risk? You know, look, I think it really depends. If you're already an incredibly successful hedge fund manager, you're looking for opportunity. You're cover shorts. You're looking for the names you love.

You're maybe not two feet diving back in, but you're opportunistically trying to find stuff or maybe add to some positions that got smaller that you like. I think a lot of the money is market neutral, and these guys are all de-grossed. And so they're trying to figure out when are they optimistic that some of the real volatility is behind them. If two-thirds, three-quarters of this kind of carry trade thing is over,

whatever the consensus view is, it feels like you have another couple weeks to really start getting more offensive. So I think it just depends on the kind of client. My own personal view is that I probably would be covering some shorts and looking to add to names that I want to get bigger in for a rally that probably happens later in the fall. In what areas do you think were most dislocated yesterday

that you thought might be a little overdone? Yeah, semis. That's where it stands out? Yeah, I mean, to me, if you look at... Like NVIDIA and things like that? Yeah, all of them. I mean, you look at Semicap were holding in a little bit better yesterday because they really were for sale. But if I look at what typically...

I looked at the last 10 downturns of 10% or more over the last 25 years. I looked at which stocks normally go how, which stocks normally go down, which industries normally go down, and I said, okay, what's happened this past cycle since July 16th? And I sorted by biggest differential, and the semis are down, the semi-cap equipment are down more than they usually would be relative to everything else.

Real estate's held in a little bit better, so maybe I sell some of that that's held in better. It's hard for me to believe that comp equipment's held in better. It's hard for me to believe that, you know, Comm Equipment's held in better. It's hard for me to believe their fundamentals are really going to be good relative to semis. I think when we look back at the end of this month in NVIDIA reports, we're not going to freak out about the trajectory of semiconductors and compute over the next couple of years. So I think semis are an area I probably would look to own my favorite name that sold off 20, 30 percent. All right. Let's bring in Shannon Sekosha now of NB Private Wealth, Brian Leavitt of Invesco. Shannon 30 percent. All right. Let's bring in Shannon Sikosha now

of NB Private Wealth, Brian Leavitt of Invesco. Shannon's a CNBC contributor. It's good to add you both to the conversation. Shannon, you just want to give us your thoughts on what's transpired over the last 24 hours, whether you see the kind of opportunity existing as Reader does, as Adam suggested is out there. Well, I think one of the main opportunities that we see is that clearly, whether it's, you know, sort of the panicked to 75 basis point cuts or whether it's something more manageable in September, November and December rate front end rates are going to come down. Right. Because the Fed's going to cut. And so one of the things that we've been continuing to talk to clients about all year is moving your money away from cash and into whether it's, you know, longer duration, fixed income, including some credit, which, you know, if spreads continue to widen, that's certainly an opportunity, but also across the equity market and really outside of mega cap tech stocks. And so I think if you're sitting in cash and you're looking at potentially batting down the hatches right now, this is probably an environment where, to Adam's point, we're not

going to be able to time the exact bottom of what we're seeing. But this volatility is something we've been telegraphing as an opportunity to redeploy cash. And so we're pushing our clients to think about that in that vein rather than looking to kind of move money out of the market at this juncture. I'm wondering, Brian, what we think of where this rotation trade, which was all the conversation a couple of weeks ago, goes from here. Now, the Russell today is the biggest beneficiary of the bounce back. It's up two and a third percent. It's another question I asked Reeder about whether that whole conversation is now done, because if we're going to sit here and be worried about the labor market unraveling

and the economy worsening and the Fed blowing it, whether you can still buy those kinds of stocks. I want you to listen to what he told me regarding the rotation. We'll react on the other side of that. I don't really understand. You know, the whole idea is there had to be a, you know, a Fed's easing so you go into small caps or into value. I'm not sure I understand it. The Fed's just moving from a very restrictive level. By the way, they haven't moved yet. They're moving from a very restrictive level, presumably to a still restrictive level. So this whole idea that I've got to buy into asset classes that are, if the economy slows, will be harder in terms of from a performance from earnings per second. That doesn't make a lot of sense to me. You want to weigh in on that? Yeah, the reality is things like small caps tend to need a catalyst.

And so that catalyst could just be things getting a little bit better rather than things being perfect. So this idea of looking ahead to Fed cuts, it's not just the fact that we haven't moved yet or there may be only a couple. The market's going to look ahead to multiple cuts. Now, when we look at this more tactically, our view is the economy is below trend globally and in the United States and slowing. So in that type of an environment, we've been saying it since early July, you want to be more defensive as the Federal Reserve normalizes the yield curve and economic activity picks up. It's a you know, that tends to be a catalyst that tends to broaden out market participation.

You just said below trend. I mean, Atlanta GDP, Atlanta Fed's at 2.9. So, I mean, growth by almost every measure that's out there is still pretty good. Yeah, growth is still pretty good. Now, what the market, so globally growth has been below trend. You've seen China weak, you've seen Europe weak, you've seen the UK weak. Well, we've been the outlier. And the U.S. is slowing. And so what really concerned the market, you know, if you look at what the unemployment rate did, so the unemployment rate was historically low, starts to move up. Yeah, that's some people moving back into the labor force and being counted. But the reality is that trend tends to go in one direction. So the market is looking at this and saying unemployment rate's picking up and leading indicators of the economy are starting to weaken.

Not to recession levels, but leading indicators of the economy are slowing down. It's interesting because, I mean, you can build a case based on CEO commentary and earnings depending on what case you want to make. If you want to say, well, the consumer is starting to really roll over, look at McDonald's. Look at what Starbucks and Walmart have had to say. But I can come back today and I say, you know what? I don't know. Look at Shake Shack last week. Look at Uber today.

Now, these are more premium brands. For a McDonald's, there's a Shake Shack. For a whatever, there's an Uber. You know what I'm saying? So, I mean, the economy still looks pretty healthy relative to what we're hearing. What you said in my speak is it should be a good environment for stock selection, right? Like some companies are share gainers and margin expanders. They're doing OK.

I think when you add up the dollars, though, when you add up like McDonald's revenue and you compare it to Shake Shack, like the overall dollars are slowing a little bit. But there's definitely individual securities and things to own. And I think it comes down to the research on where the margins are expanding. I don't think small caps work personally unless you're very bullish. They can work for a month. They can work on predicting the Fed and all that. But ultimately, you have to believe that their margins and earnings are going to be better

than the large caps. And I'm not willing to believe that. I think it's an inferior asset class. And you just have to be you can pick stocks better there, but it won't their earnings trajectory can't be better in a declining economy. So I agree with the reader on that. What happened, Shan, to just the simple notion that we've been hearing, don't fight the Fed. If we know that cuts are coming, what is the overall reason to be extremely negative? Now, that doesn't take into account an unsettling event like a change in policy in Japan, which causes a move in currency, which causes an unraveling of a carry trade. No one can ever predict when something like that is going to take place.

But that doesn't necessarily change the overall story. So I think you made a great point. I think the challenge here is that a lot of the trade has been don't fight the Fed. But now what you're seeing and what you particularly saw after the nonfarm payrolls report on Friday is that bad news is bad news because the Fed is going to act. And I think that everyone sees them on a rate cutting path. And so a lot of that has been priced in. Whether 125 basis points of cuts has been priced in. Now, whether 125 basis points of cuts has been priced in this year, I would say likely not, at least in the equity market. However, I think the challenge here is, is that if you are basing your decision on investing in any part of the market

on the fact that you will get a boost from Fed rate cuts, that's unlikely to happen because that is anticipated and expected. And so instead, you have to look at the fundamentals. So you look at something like REIT, Scott, you know, you would typically have seen REITs sell off pretty meaningfully over the last couple of days, and they didn't because they're already pricing in those rates cuts. So if you're basing your allocation on the fact that you're going to get a bounce from rate cuts, probably misguided. Instead, to Adam's point, we disagree on small cap. It's a very healthy disagreement on small cap. But I do absolutely agree that selection is critical, because this dispersion that we're

seeing and you pointed it out is going to continue and I think widen over the course of the next three, four months. But, I mean, as long as there remain questions about the strength of the economy and if the unemployment rate continues to tick higher and you have the potential of something getting dislocated somewhere, aren't small caps going to be a harder bet to make? I think it is a harder bet to make, but I think that there also is opportunity for earnings growth.

In 2025, our view is that earnings are going to grow and they're going to grow across the cap spectrum. So when I think about, so you talk about bad news being bad news. Now, that's actually a good thing. Bad news is good news when inflation is above 3 percent. So now that we're in this two and a half area, bad news being bad news, I'm comfortable with that given where we have been. Now, this idea of the Fed coming to the rescue, it really is all going to be about the economy. So if you look back in history,

if the Federal Reserve lowers rates and you don't have a recession, the market does very well. If the Federal Reserve lowers rates and you're already in a recession, the market does very well. If the Federal Reserve lowers rates and you go into a recession, that's the one situation where the market doesn't perform well. And so each of us are looking at this saying, yeah, things are slowing. Leading indicators are pointing in perhaps the wrong direction. But none of it is consistent with a recession. There's not a lot of leverage. There's not a lot of excess.

Yeah, corporate borrowing costs, spreads have gone up a bit but still remain below average. So it doesn't look and feel like a recession out there. So it's a market that may worry a bit about growth slowdown, but we start to ease and come out of it. It should be a nice backdrop for equities. We wrote about this in the second half outlook a month ago. Maybe we should fight the Fed. We talked about it on the air.

You said that the first rate cut could actually be a sell that is. Yeah, maybe we should fight the Fed. And then when I went and talked to lots of people about it, I realized maybe it wasn't that out of consensus. Like I wrote it thinking, wow, I'm the idiot who said for 15 years, don't fight the Fed. You know, I'm going to look like a moron when I write this. And then when I sort of socialized it, 30, 40 percent of people, yeah, I could see that because, you know, maybe we are in this point of the cycle where, you know, it's because things are really

bad and bad news is bad that it happens. But obviously, things aren't really bad. I think the market got way ahead of the Fed, right? For sure. You mentioned it with REITs. I agree in other areas. I think the other thing is really hard for me to analyze because I just focus on the relationship with equities.

Because in the past, when the Feds cut the front end, they also were doing a ton on the balance sheet. And there was also fiscal stimulus like crazy or incremental fiscal. So it's hard to isolate to just what the 25 or 50 pips does to stimulate actual economic growth. And I think more investors are kind of bearish that it's a really matter for growth. Do at the bare minimum, do we need to prepare ourselves for a higher level of volatility between now and November. Yes. And I think there have been many people, including myself, that have been telegraphing that. But it's what you do with that volatility, Scott. People have been asking, did I miss X, Y, Z trade? Do I not have an

opportunity to take advantage of this? This is what you do in volatile times, is that you look at where you want to be in 2025. This affords you that opportunity to get positioned the way you want to be positioned into a year where we probably still have positive economic growth. More volatility? Yeah, probably, but probably not for the reasons why a lot of people think. I mean, what I'm hearing from clients is concerns about the election, these types of things, concerns about geopolitical uncertainty. That's probably not why we get volatility. It's really now about what the growth picture is going to look like and how

quickly the Federal Reserve is going to move. So, you know, you look back at past election cycles, they don't become more volatile unless growth is deteriorating. So but the other point I want to make is, you know, these are garden variety corrections. We have them just about every year. And, you know, what what ends up happening? Market goes down 5, 10 percent. If you look historically, you recovered in three months. And so it's not supposed to happen in a single morning. Well, it happened in a couple of years. Yesterday wasn't really a variety. I mean, yesterday, you're right on the volatility index. But if you look at the S&P 500, it was the one hundred and third worst day since 1995. So in the last 30 years, it was the 103rd worst day since 1995.

So in the last 30 years, it was the 103rd worst day. And if you look at the median 12-month return on those other 112 days, you're up 18%. So, yeah, there were some things that were disconcerting yesterday. But an S&P 500 down 3%, given the run that we have, is not particularly out of the ordinary. Yeah, I mean, if you just looked at the end of yesterday, you didn't pay attention to anything. You're like, oh, what happened? What's everybody talking about? I think there's a difference between people who focus on the index level and the asset allocate and guys who run equity funds. I more talk to the latter, and their pain was far greater than a garden variety pain. People own names that are down 10%, 15%, 20%,

and they're losing money. And so they're always forced with the decision of what do I do right now? Do I buy some Coke? And do I sell some NVIDIA? Like how do, even if I believe in NVIDIA long-term, like they're managing, you know, trying to save 50 bps when this is happening. And that's a lot harder than asset allocation, you know, from 30,000 feet. Guys, I appreciate the conversation very much. Thanks to everybody for being here. We'll talk to everybody soon. Adam, Shannon, Brian, we'll see you soon. Let's send it to Kate Rooney now for a look at the biggest names moving into the close.

Kate. Hey there, Scott. Yeah, let's start with Kenview. This is the best performer today in the S&P. Shares adding more than 14% after the company released better than expected results this morning. This is the J&J spinoff. It sells brands including Aveeno, Band-Aid, Benadryl, Listerine, Neutrogena, and Tylenol. Canview also reiterated full-year guidance.

And then Uber shares having their best day on record. The ride-hailing company's earnings and revenue did beat for the second quarter. Company's mobility unit saw a 23% jump when you look at gross bookings to $20.6 billion. And then for the third quarter, Uber is now expecting bookings of $40.25 billion to $41.75 billion. Scott, back over to you. All right, Kate, appreciate that. Kate Rooney, we're just getting started here. Coming up next, we are trading the tech turbulence.

The sector trying to pull back, bounce back after yesterday's sell-off with valuations front and center for investors. So what might be the next for that space and your money? We will discuss with venture capitalist Rashawn Williams. We'll do it after the break. All right. welcome back. Tech valuations pulling back over the past month as stocks came down. They're still well above their historical averages. So is this recent reset just the start of a further re-rating,

or will coming rate cuts lead to a rebound across public and private markets? Joining me now is Rashawn Williams of Value Investment Group. Welcome back. It's nice to see you. Hey, Scott. Good to see you. Yeah, I know you're thinking a lot about these stocks, given what's happened in the markets of late. Tell me what's top of mind. Yeah, it's a pretty complex situation. I mean, how much has the world changed since I was last here like a month ago?

But there are kind of two camps out there and I fall a little bit on one side of the camp. There are people who think this thing is all about an inevitable correction. Hey, the market has recently corrected. I was watching you earlier. There's a guy that says, hey, this is the run of the mill correction, right? So you have that camp. And then there's a whole different camp. I think this is a part of a long term shift in valuations. Look, to me, I really see this as like a wolf by the ears type situation where you have revenue growth and earnings in tech that create this enormous valuation creep. And then you have inflation and the economy and all the geopolitical tensions that can't sustain it. Ultimately, I think tech earnings growth will win, but it's a very complex situation. But when you look at the historical averages of PEs relative to where they are now, do you look at the space and say, even though I believe what you just said,

valuations just got ahead of themselves? Or does this all make sense to you relative to where AI is going? It makes sense relative to where AI is going, because you can't look at PE alone. You have to look at earnings growth. You have these big tech companies doing the type of earnings CAGR that you see in the private markets where we see those valuations and those PEs all the time. Right. So if you just isolate PEs in a normalized environment, you're correct. But when you look at stuff like NVIDIA and the big tech companies out there, they're growing like wildfire and it's all being fueled by this by this A.I. trade.

What about spending versus return on that investment? Yeah, so that's actually a good point. And I was thinking about this with Uber and Lyft, which I hope we get a chance to talk about as well. But you have to spend. This is a this is from the playbook of the private markets. We in the venture capital community care more about dominating the industry and being the number one or number two player in a growing industry, where then you can expand and increase margins and become profitable later, but you want to crush all your competitors. Right now, there's a gold rush for AI. You can sit and focus on quarterly profitability, or you can double down on your technology and be the leader of a massive

industry. And I think all of the big tech companies are definitely spending. But as a publicly traded company, quarter by quarter, it's a very delicate balance. Oh, but don't you have to get ROI? I mean, it can't be infinite that you can just spend until you, you know, until you feel like it. And at some point you need to be rewarded with a return on that investment. No. Yeah, I think we're already being rewarded with a return on the investment. A lot of people don't realize, but AI has already completely infiltrated our entire world, right? Siri is an AI component that we've been using for years. So those who don't have AI are going to be punished.

Those who do have it are just going to keep up. Those who lead it are going to dominate. Let's talk about Uber because it's a standout and we can show the stock today, which is reacting on the back of its earnings report. What stands out the most to you about this report and about the move? I mean, the stock is certainly off its best levels that that it had recently reached in large part because the prior earnings report was a surprising negative. Yeah. So I was an early investor in Lyft. So I've been a Lyft fan from the beginning, and I'm actually looking at Uber like, OK, now is our time. But I really hope the market gives Lyft enough patience to allow them to steal a little more market share from Uber,

and then Lyft can do what Uber did, which is increase their prices, increase their take rate, and just completely flip that switch on profitability, just like Uber did. So Uber executed the playbook masterfully. They had enough market share, brand recognition, your dominant player, they increased their take rate, they increased their prices. If you open your Uber and Lyft app right now, you're probably 30% higher for the same trip to use Uber. No one cares because now Uber is the is the word. It is the dominant player. Right. So they can do whatever they want to do. And I'm hoping Lyft can gain a little market share now that they're a little cheaper. Well, let's talk about that, because, you know, obvious obviously the difference between the two is the alternative revenue stream that Uber has to what Lyft does not, right? Uber Eats. And then you have the

other side of the coin, which is Lyft was doing great in a zero interest rate environment. Well, that's obviously changed. And maybe the company doesn't have the ability to recover because of the lack of profitability where Uber can say they are? No, I don't think so. I think this is a case where there's room for more than one winner. When Uber and Lyft started, there were 17 Ubers and Lyfts, right? So the ones that were the most well-funded, that grew the fastest, that did the most marketing, that were able to grab as many drivers and users were the ones that survived. But now that they're both public and they're both dominant players all around the world, I think there's room for more than one winner. But look,

it's no question that Uber has won the race by diversifying the revenue stream, growing vertically and horizontally, where Lyft was wanting to focus on being a more of a pure play. So look, again, I'm hoping that Lyft can start to use some of the playbook that Uber has used to crank through that profitability threshold and also grow revenue at the same time. Yeah. There seems to be more optimism about the capital markets returning to some semblance of normality. What do you see? You mentioned your venture, your venture background. So you're an early investor in a number of companies. You've participated in a number of IPOs, direct listings and otherwise. So what do you see from your front line? I don't think we're going to return to some normalized

world because the world has changed. There is an entire shift in the U.S. economy and with technology. And again, I don't want to be the same guy pumping the same horn that we hear all the time. But listen, things just won't be the same. I will tell you this. With the market, with the sell-off, there's always a technical concern that the high beta names sell off more than the low beta names. So I do think there is an opportunity for companies to still go public and to still perform well. Let's put Uber aside for a second. If they're a non-high beta name and if they're profitable, they'll still be able to access the capital markets. But if they are a tech company right now with this sell-off in this short period of time, we were already teetering.

I think it's going to further delay all of those liquidity events that VCs like myself were waiting for, for companies like Toro, et cetera, until multiples expand again, until that market opens up to some of these high-growth tech companies again. I appreciate your time. We'll see you soon. Thank you, Scott. All right. Sean Williams joining us once again here on Closing Bell. Up next, bracing for more volatility. Stocks rebounding from yesterday's big sell-off. But should investors expect more pain in the months ahead?

314's Warren Pies, he's raising the red flag on some stocks. He's going to break down his forecast and how you should position. We'll do it next. We're rallying into the close today, rebounding and trying to recover a good portion of losses from the previous trading days. My next guest says we haven't seen the bottom yet, but he's still finding opportunity for investors amid this volatility. Let's bring in Warren Pies of 314 Research. Good to have you back. Why don't you think we've hit the bottom? That's just what history says. You know, when you yesterday at the close, we had an eight and a half percent correction. So we went back and studied every 10 percent move historically going back to the 1970s. And in general, you get a 10% move, more than half of

those, you end up going down, like, say, another 5% on average. Those results get better when the Fed cuts within the next three months and definitely better if you don't have a recession. So that kind of leads me to believe that historically, we expect maybe we get down to something like that forty nine hundred level that we saw in the April lows. But, you know, if you're a long term investor, even an intermediate term investor, the upside, I think, outweighs the downside, say three to one in going out to the end of the year. Are you inferring that most of what you think is the cause of all of this is the U.S. and not what's taking place in Japan? Yeah, I mean, I do think Japan contributed somewhat. I mean, it was like kind of the spark,

but the real nervousness, the jitters that I think that have really surrounded this market over the last since, say, mid-July when we were at the at the highs have been a phase shift from concerns over inflation. And good news is inflation is kind of dead as a concern to concerns about growth. And so now I think everybody's nervous about a recession. And we have seen serious deterioration in the labor statistics and certain things that if you want to be a recessionista, you can point to and call for a recession. And so I think that's where the nervousness is coming from. And then you get kind of the spark that lights the fuse out in Japan. And so, yeah, it's a combination of both. But really, it's this phase shift, I think, that's behind everything to growth concerns.

I mean, it was a little softer jobs report in a still reasonably strong labor market, wasn't it? Yeah, to me, I don't see it. I don't see a recession. I think that the fears are overblown. I mean, that's kind of the big takeaway for us is that, you know, if the Fed is on an easing path, which they are, and everybody agrees on that now, and you don't see a recession in our framework, our recession framework looks at the housing market, construction jobs. Remember, job losses define a recession. The average recession construction job losses make up 30 percent of total jobs lost in the U.S., even though those industries only make 5 percent of total jobs. And so you need to get these cyclical parts of the

economy rolling over to get a true recession. And that's what we focus on. We don't see any kind of signs right now of serious layoffs in the residential construction payroll segment or anything in the construction segment. So in my view, no recession. Yeah, I get there's some nervousness. You're seeing breadth deteriorate in the industry growth. But ultimately, I'm fading those recession fears. I still am in the soft landing camp, I guess. So if that's the case, then what's become most attractive relative to the dislocation we saw over the past few days because of fears about the economy going into a recession? Yeah, I mean, I think there was a big and we talked about this, I think you and I earlier is like this, this this drumbeat for buying small caps. And it really

confused me. This is a late cycle environment still i mean what we're debating is whether or not we go into recession this is not in a situation where we're emerging from a recession or a serious bear market and so you don't want to be in low quality you don't want to be in small caps you don't want to be in cyclicals and so that leads you into by process of elimination into high quality stocks i think you also want to shade away from the mag 7 so you have this kind of high quality non-mag 7 area that's what we've been focusing on in the quality group what you can really do our research is focused heavily on quality at this point in cycle and what you can do is you buy dips so for instance our fund was buying housing related stocks going into july and because there July because those are high-quality stocks with a pullback. And we've rotated a lot of those gains

into some of these tech-type stocks and semi-stocks and semi-adjacent stocks going into August. And so high-quality, long-term uptrend, short-term pullback, that's the mix that I want to play. Stay high-quality, stay large cap. Okay, so you're willing to buy some growth, but just not at the highest levels of the market cap spectrum. Yeah, I mean, but I'm not even really nervous about, you know, some of these stocks look like good deals to me. We bought

Microsoft this month. And so to me, that's those are that fits the profile of everything I just laid out. And so it's just a matter of the indices are so top heavy at this point in time. We're running an equal weight strategy. And I think that's really important is just to diversify out. The S&P is so beholden to those five or six stocks at the very top of the cap structure. And so I'm not necessarily against them i'm just saying we need to look for areas outside of just that that mega cap tech warren we'll see you soon thank you warren pie is joining us once again closing bill yep up next tracking the biggest movers into the clothes today kate rooney is standing by once again with that for us hey scott yeah so next up we got a major

equipment manufacturing company getting a boost from a better cost environment and a fiber company on a tear today it's having its best day ever we're going to explain why when closing bell comes right back We're 15 for the bell. Let's get back to Kate Rooney now for the stock she's watching. Tell us what you see, Kate. Hey there, Scott. So shares of Caterpillar rising 3% today after beating Wall Street estimates on the top and the bottom lines for the second quarter. Higher prices and easing manufacturing costs ended up being a counterweight to some of the moderating demand

Cat's seen for that heavy equipment across major markets. And then Lumen Technologies having its best day ever. Shares of the fiber company soared as much as 95% today after that company said late Monday that it secured $5 billion in new business driven by none other than AI demand, of course, for connectivity. The stock also got an upgrade from Citi to neutral from sell. Shares are up more than 160% year to date. Don't miss Lumen's CEO as well, Kate Johnson. She's going to be joining Closing Bell Overtime tomorrow.

Scott, back to you. All right, good stuff, Kate. Thank you. Kate Rooney still ahead. Reddit reporting its second ever quarterly earnings in overtime the stock having a rough run over the last month so what's at stake in this report we will discuss coming up.

Coming right back on the belt. All right, coming up next, your earnings setup, Airbnb, Instacart, and Reddit among the big names. We're going to be watching NOT today.T. today we'll run you through the key things to watch for just after this break and a quick programming note do not miss boy what timing for this Jamie Dimon JPMorgan Chase CEO it's an

exclusive it is tomorrow and it's at one p.m. market zones next. We're now the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, we'll get you set up for three big earnings reports in overtime tonight. Pierre DiBosa looking ahead to Airbnb and Instacart. Julia Borson with the key numbers to watch in Reddit's report. Michael, I'll turn to you first.

You said on the halftime report today as we chatted it was a pretty encouraging day yeah you still feel that way now largely um at least in terms of the main things that needed to be proven which is that this sort of concentrated panic uh and that unspooling of a lot of that concentrated positioning was done and so you didn't have trapped hedge funds paying a high ransom to get out of these positions. What you do see, though, is whenever you have one of these intense down days or a volatility storm, the first rebound rally is kind of suspect. You know, it's sort of like it's guilty until proven innocent, because there is a lot of times just

sort of a technical we were oversold in the short term. And you see here today, and we were up 2.3 percent in the S&P at the highs. You've lost about 1% point of that. So that's just the way it goes. We're back to the end of the first quarter levels in the S&P. A lot of stuff really did wipe away months worth of upside. I usually view that as being, you know, valuations and positioning are less demanding now. Doesn't mean we're cheap. It doesn't mean the semis have kind of rebuilt their ability to be leadership. That's a broken looking chart. They're only a couple percent today. So a lot to be proven. But at least it's not this kind of self-reinforcing spiral of urgent selling. It's mostly just a wait and see. And we'll see what the fundamentals can support.

You do see, though, some selling into the strength that we've had, to your point. I think not that, you know, no one thinks that the Dow is the greatest read of overall activity. But nonetheless, we're up about 700 points. You are. About an hour ago. Yeah. And here we are. You know, we have that. And it becomes increasingly easy to look at the Dow chart and say, well, I guess 40,000 matters here.

It's been this friction point. You've kind of popped above it a couple of times. It hasn't really managed to build upon that. And the S&P basically went up to Friday's low and backed away. So again, everyone's a technician in a sell-off because you don't have a lot of immediate fundamental catalyst to feed off of right now. We're waiting for, obviously, weekly claims. We're waiting for NVIDIA earnings. You're waiting for these things that are not right in front of us. Yeah, these earnings become more important. And that leads me to you, dear Jabosa, because you're going to get Airbnb and Instacart, and we're going to be watching those closely too.

We are indeed. And it's a bit of a difficult or maybe challenging backdrop heading into Airbnb earnings. There's been concerns around travel and leisure spending. Those have been building. You've got booking holdings guide, one data point, also some weakness and some other hotel and park names. But Airbnb does occupy slightly different space alternative accommodations. That's home sharing where trends are holding up better. So investors are going to be looking for that to show up in earnings and of course, color on the summer travel season and the olympics instacart will also give us signals on the consumer its partnership with uber that launched nationwide in june giving it restaurant delivery uber in its release said that initial trends were encouraging

in addition to grocery and now restaurant delivery do keep in mind that cart has a higher margin advertising business where year-over-year growth is expected to just stay in the double digits. Back to you. All right, Dee Bosa, thank you for that. Julia Borsten to you on Reddit. Well, the key number to watch in Reddit's second quarterly report as a public company is its revenue. After last quarter, when the company reported better than expected 48% revenue growth to $243 million, this quarter, analysts are looking for $254 million in revenue. Now, this will indicate how well Reddit's partnership with OpenAI is paying off, the impact of its deals with the NBA, NFL, and other leagues to show more sports content and highlights, and how its efforts to expand advertising to its conversation pages are going. Now, with the stock up 60%

since going public on March 21st, but down 25% in the past month, 47% of analysts have a buy, 47% have a hold, and 7% have a sell. Now, ahead of the report, analysts are also looking out to August 9th. That's when the lockup period expires, which could potentially drive some selling. I'll be talking about all this and more with Reddit CEO Steve Huffman in an exclusive interview that's coming up in overtime in the next hour. Scott? All right. We'll look forward to that, Julia. Thank you, Julia Boorstin. All right. We'll be taking our cues from Japan for a little while. I mean, it's stunning to see what happened yesterday and then the bounce back of some 10 percent. Without a doubt. And that shows you a rally of 10 percent in a day shows

you a highly stressed market. It was sort of spring loaded like you got a little bit of a of a rally in the dollar against the yen today. That sort of, again, shows you that the pressure is being dialed down on all this intense, you know, trades that were sort of going from super crowded consensus trades to something that was less so. I don't know that it's going to be the lead thing. To me, it's sort of a coincident symptom of everything else that was going on, not just, oh, somebody got it upside down with the yen carry trade and it actually spilled into everything else. It was always multiple things happening, whether it's the NVIDIA pushing off the launch of its new

product series, whether it's Berkshire selling Apple.VIDIA pushing off the, you know, the launch of its new product series, whether it's Berkshire selling Apple, like all this stuff tends to get piled on. Where we are right now, I think, is still typical waiting for soft landing evidence on both sides. Soft landing, it's not a moment. It's not a declaration of victory. It's a process of feeling like, oh, no, we're actually spilling into recession or nope, we're fine for a little while right now. You know, real GDP now from the Atlanta Fed is 2.9. It's early. We know that. We know it's going to get revised away to some degree. But it's still running above trend at this point.

Goldman's at 2.6 or something like that. It's not like the Atlanta Fed has run away from everybody else in some crazy level of optimism. Not at all. Again, we're not even halfway through the quarter, so you have to kind of take it with a grain of salt. The point being, we overshot, I think, in terms of the chatter and the psychology in reaction to the Fed and the jobs report on Friday. And now it's about where are we really? Look, we're only just under 20 times earnings for the S&P. It's not like the market got cheap all of a sudden, but you have taken some of the edge off in terms of aggressive positioning and valuation.

Dare I say anything, green today is going to have a good feeling relative to what happened yesterday. We will go off the best levels of the day, but nonetheless, we're 300-plus on the Dow. S&P is putting in about a 1% gain. I'll see you tomorrow. End of OC.