Closing Bell - Closing Bell: Nasdaq powers another rally, ECB’s milestone hike, First crypto insider trading case 7/21/22

Episode Date: July 21, 2022

The Nasdaq drove another solid rally on Wall Street, with stocks closing near the best levels of the session. The pop came even as the European Central Bank raised rates for the first time in more than a decade. Former Fed governor Randy Kroszner joins to weigh in on what that move could signal about the Fed’s next policy decision, and how it impacts investors. Plus, MKM analyst Rohit Kulkarni discusses tech earnings and makes the bull case for Snapchat. And Akin Gump partner Ian McGinley breaks down the ramifications of the country’s first crypto insider trading case.

The Nasdaq once again driving the market action as the major averages build on a solid week of gains here. Though the Dow is lagging, just turning positive, up four points as we head into the close. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look at where we stand right now in the market. Nasdaq adding another percent. It's up 5% this week so far, heading into a Friday. S&P up half a percent right now. The losers, energy, because oil prices are down today. Communication services, AT&T has lost a big part of that story. Consumer staples and utilities.

Check out the top performing S&P 500 sectors right now. At the very top, you've got consumer discretionary. Thank you, Tesla, with a 10% gain off earnings today, driving that sector to the top of the market. But it is earnings-driven. In the healthcare sector, it's Danahire with a big earnings gain today. In the technology sector, a lot of the chip stocks, software stocks, and mega cap tech are all working today.

Coming up on the show, we will talk to CEO of $100 billion European software giant SAP, which is moving lower today on the back of earnings. And it's a great day to have him as the ECB hikes rates more than expected. And Europe faces an uncertain economic future and energy crisis. Plus, snap gearing up for earnings after the bell. The stock fell sharply after a profit warning. Remember, in May, we'll talk to an analyst who says this might be your time to buy.

We'll start, though, with that ECB rate hike. It's the first time it's hiked rates in 11 years, the central bank increasing by 50 basis points. What does it mean for the Fed's move next week? Joining us now is former Federal Reserve Governor Randy Kroszner. Always good to have you on the show, Randy. So how, as a Fed participant, would you look at what the ECB and the rest of the central banking world is doing as you debate next week's decision? They're catching up. The Fed started moving faster than certainly than the ECB. I mean, this is going to be their first rate increase in a very, very long time. Inflation has been very high in Europe for a while. It did get started a little bit higher in the U.S. a little bit earlier, but they've been very slow to act. And so I'm very glad that they moved by 50 basis points.

They had sort of telegraphed 25, but 50 basis points seem to make a lot of sense. And then the markets have taken it reasonably. So I think the Fed would interpret this as people are now realizing that this is not transitory. This is not short term. And other central banks around the world are going to act like they're acting. So the Fed was the first out of the gate when it comes to hiking and setting the tone in terms of size of hikes. Will they be the first to pivot on the other side as well? Well, hopefully what will happen is that we'll be able to get inflation under control relatively quickly, or at least the Fed is hoping that. I think we'll see inflation start to come down, certainly by the second half of the year.

It's going to continue to be above the Fed's 2 percent inflation goal. And I think the underlying strength of the U.S. economy is there much stronger than in Europe. Europe is being hit very directly by the war, very directly by cutoff of natural gas, by the uncertainty of the sanctions. And so they're in a much more difficult position. Hard landing in Europe, soft landing in the U.S.? Is that a plausible scenario? That's a plausible scenario. I'm hoping that it'll be at least soft-ish. Soft, I think,

is going a little bit too far. But I think we'll have the unemployment rate move up. I know no one thinks the unemployment rate possibly could move up, but I think it will. And so we'll see some softening in the labor market. But I think Europe is facing a much more difficult task. And also the ECB announced this transmission protection instrument, the TPI, so that they're going to be buying bonds at the same time they're trying to raise rates. So there's this tension there. Do you get this? So what it is, is they have a much more difficult problem than we have in the U.S. It'd be like in the U.S. if the Fed had to worry about buying California bonds and New York bonds, if people got really worried about California having very low credit rating. So the California of Europe is Italy.

Mario Draghi, the former central bank governor of the ECB, just resigned as the prime minister. The spreads between the German bond, that kind of the safe rate and the Italian bonds have been going up very significantly. And so what they have now created this new instrument to try to prevent the spreads from getting too wide. But that means they're going to be buying bonds. But at the same time, they're trying to raise degrees. They're using it as they're tightening. It's a little odd. I mean, what they would argue is that they're just going to be moving things around to try to bring some of those spreads down.

But in practice, there's a tension between the two. And I think they're in a really tough position. So you mentioned the U.S., softish landing. We got a pretty bad batch of data today and yesterday with existing home sales. Today it was jobless claims. We saw a little spike up to 251, highest rate of Americans filing for unemployment claims since last November. Randy, and we've seen it in leading economic indicators today. We saw it in the Philly Fed today.

I know the Fed has told us number one goal is fighting inflation and we're willing to tolerate the softness. How much softness, though, do you think they're really willing to tolerate? They're willing to tolerate a recession if that's what it takes. I mean, they're hoping that they can avoid that.

And how bad on the jobs picture? You said you expect the unemployment rate to rise. How much damage could we be looking at before the Fed blinks? The key will be, so what they're hoping to do is raise rates quickly enough, bring inflation down enough that they don't have to raise rates so much, they really have to put the economy through the ringer like we did in the late 1970s, early 1980s. And I think that's right. I don't think it's likely that we're going to have to get to something like that. But it's not, they really do want to bring inflation down. And one of the ways to bring that down, unfortunately, is through a very strong contraction of demand, which would be a high unemployment rate. They would prefer not

to see that. But if they need to, they're going to tolerate a reasonably high unemployment rate. How high do you think is the bar for 100 basis points? Or that's just not in consideration right now for a Fed hike? I don't think they feel they need to move that much. I think they'll move 75 basis points. I don't think, I think one of the concerns that they will have is that core inflation continues to be moving up. I think headline inflation is likely to come down because the most recent numbers we got, which were quite elevated, were just before we started to see gasoline prices coming down, started to see some declines in a whole variety of commodities and foodstuffs. So likely the headline is going to be coming down a bit. But core is more predictive of what's going to happen to inflation. And that's starting to move up a little bit. And I think

that's going to give them some concern. But one of the things that they're pleased about is that the long-term, intermediate to long-term inflation expectations, at least the market-based measures, have come down a bit. So they're not as worried about inflation expectations getting unanchored. How do we get, Randy, from 9.1 percent inflation to 2 percent inflation, which is the Fed's goal? How long does that take to unfold? And do you think we're going to be at a point where the Fed is debating whether they're willing to tolerate a higher level of inflation just because that's a big drop and there are some changes in the economy that might lead to higher prices more lasting. So I think the Fed doesn't believe that there is that fundamental change. I think they do think

that they can get back to their 2% goal. And I don't think maybe over time they will change their view, but I don't think they certainly are anywhere close to that now. I do think this is going to take time. I think by the end of the year, we could see inflation perhaps at roughly half the level that we're seeing now. So in the four to five percent range rather than the eight, nine percent range that we're in. But I think it's going to be a slow slog to get back to anything close to two, I think, unless the economy really goes off the rails. I don't anticipate that the economy will. I mean, there could be shocks that come in. I mean, we've got a war going on. We've got sanctions. We've got a lot of other geopolitical tensions. So it could be things that push us. But if there aren't any of those extreme shocks, we could have a significant slowdown, potentially recession,

but not necessarily something that would cause such a demand contraction that we'd get rid of inflation like that. Well, finally, Randy, should investors fear QT? This is the shrinking of the balance sheet, which really is, we haven't really seen yet, and kicks off a little bit later this fall. I don't know if investors think that the Fed is going to have to stop or not be able to go through with it or what, but what is that going to look like? So I think the Fed is pretty committed to keeping that going. And what they tried to do is sort of keep that in the background. So in some sense, the main quantitative easing response was to a market dysfunction. If you think back to March, April of 2020, the Treasury market wasn't working.

And man, if the Treasury market is not working, no other market is going to be working. So they really made sure that that kind of fundamental market was functioning. And unless they see some significant disruptions of markets, I think they're going to continue on that gradual decline of the balance sheet. And so I think the markets just have to realize there'll be a little bit less liquidity that's there. And unless there's a major glitch, I think they're pretty committed to slowly bring the balance sheet down. Randy, thank you very much. Not worried about it today or this week. NASDAQ is surging now, one and a quarter percent. Randy Kroszner, former Federal Reserve governor. Shares of SAP, take a look. One of Europe's largest companies falling today after second quarter earnings

missed the mark. We'll talk to CEO Christian Klein about the macro factors weighing on these results, including a pending energy crisis in Europe and a stronger dollar in the U.S. You're watching Closing Bell on CNBC. We are at session highs on the Dow now, up about 80 points. We'll be right back. Shares of SAP, the German cloud giant, falling today after the company reported Q2 results,

trimming its profit outlook for the year. I spoke with CEO Christian Klein earlier. I started by asking him if we should take the results as a sign of a broader tech spending slowdown. Listen. Absolutely not. I would actually consider Q2 as a good quarter. And despite the macroeconomic situation and the geopolitical tensions, and, you know,

let me share you three numbers which tell the story best. I mean, when you look at our cloud revenue, which is in the meantime our largest revenue stream, it's up 34%. Our current cloud backlog now surpassed 10 billion, and it's also up 34%. And as for HANA, our flagship ERP solution in the cloud has grown by 100% in the current cloud backlog.

So the transformation is ongoing. Top line exceeded expectations. On the bottom line, Sarah, fair, we had two one-time effects. One, we're actually exiting Russia. And second, what we are seeing is, as part of our transformation, that customers are moving faster to the cloud, less upfront investments, on-prem, faster move to the cloud. These are the two effects, one-time effects we had on the bottom line. So no sign of economic weakness in any parts of the globe besides Russia?

I mean, Sarah, I mean, for sure, the macroeconomic situation is challenging. But on the other hand, when we talk about tech and when we talk about SAP, when I talk to my peers, I mean, first, no one wants to stop the transformation of the enterprise now. They all want to move to more resilient business models. The second challenge where we can help with our tech is to build resilient supply chains. And third, the pressure is on to also run a more sustainable operations where we also have tech to solve these challenges of our customers. So net-net, we are seeing a super strong pipeline in the cloud and we are actually very confident for half year two and for the years to come. So even though cloud is resilient and it's growing faster than the economy,

ECB President Christine Lagarde just today said that the baseline scenario for the ECB is no recession this year or next in Europe. What's your expectation? I mean, for sure, when you see the inflation here in Germany, when you see it here in Europe, all over the globe, and when you see the energy crisis again here, especially in Germany, it's pretty severe. So I also don't see signs that the inflation, margin pressure, what many enterprises are facing, you know, tech can help to come to higher productivity, to automate business processes, to better, you know, have financing and to come to better cash flows. So also there, we see these challenges as a solution with our tech to help our customers to overcome these challenges. And you're enjoying the benefits of the weaker euro, unlike American companies, which are feeling the negative impact. Do you expect that to continue?

Yeah, I mean, Sarah, I mean, it's so hard to predict how the currency will develop. But indeed, look, in the last years, definitely we were not on the side where the currency helped us. Now we are seeing, of course, also a lot of tailwind. And these two pieces together, strong pipeline, strong cloud momentum, and also getting the tailwind now from the currency, of course, is also giving us the confidence that we even, you know, see better and stronger years ahead. What about the energy crisis, which you mentioned is very severe in Germany right now? How does that impact you?

And how do you plan for an environment where Europe will have to be rationing gas? Yeah, good question, Sarah. Look, first, with regard to SAP, our data centers here in Germany, here in Europe, are already sourced with 100% green energy. So we are not dependent on Russian gas. The second, you know, how is Germany impacted? Of course, this will all depend how the gas supply will develop over the next months, especially when we are going into fall and the winter season.

And of course, this is a scenario for Germany. It's an industry with a lot of manufacturing, car manufacturers. They're heavily dependent on energy supply and of course also not further increases on cost for energy. So this is definitely a scenario where Germany now has to double down

on the energy transformation to get more independent from washing gas and oil. Christian Klein, CEO of SAP. The stock, if you look at the ADR, which trades here in the US, it's underperformed rivals so far this year, like a Salesforce, Microsoft, or Oracle. I asked Klein if he was losing share to them.

He said quite the contrary. He's actually gaining share and has been especially strong on Commerce Cloud. Let's check in on the markets right now. About 40 minutes left of trading, and we are seeing the Dow push higher. It's been pretty much up and down today. It's been higher for the most of the afternoon. The Nasdaq is in the lead. That's the 1% gainer. The S&P 500 up six-tenths of a percent. Strong on consumer discretionary, strong on health care, technology, materials, weaker on energy and communication services. Still ahead, the U.S. just charged a former

Coinbase employee in the country's first cryptocurrency insider trading case. We'll ask a top lawyer if he thinks more cases will come in this space. As we head to break, check out some of today's top search tickers on CNBC.com. Tesla, no surprise, takes the top spot, again dethroning the 10-year. It's up 9% today on the back of earnings. 10 years not too far behind. And actually, there's buying of treasuries today. Lower bond yields. Got a batch of negative data on the economy earlier today.

AT&T having its worst day in years, down 8% off earnings. What else is in there? Amazon up 1.4%. It's turned around. It was lower earlier on the announcement of a deal of one medical. We'll talk about it later. And that is the company it is acquiring next to it, up 70%, paying a pretty hefty premium there on that stock.

We'll be right back. Check out today's stealth mover, Discover Financial. It's one of the bigger losers in the S&P 500 today, down more than 9%. The company did beat Wall Street's earnings estimates, but shares plunged after the company announced it is launching a probe into its student loan servicing business. And it is suspending its buyback during that investigation. So will Snap's results after the bell help the stock snap out of this year's plunge? A top analyst makes the bull case when closing bell returns. With the Dow up 50 and the S&P 500 up six-tenths of one percent, we're at more than three percent on the S&P now for the week.

Snap reporting its second quarter results after the bell today. The company, remember, back in May slashed its outlook, citing a weakening economy. Shares took a dive on that news. The stock is down 40 percent since May, though it is up 20 percent this week ahead of results. Joining us is Rohit Kulkarni of MKM Partners. Rohit, the chart is pretty ugly if you look since, I don't know, last fall, October or so. What do you do with it ahead of these results? We thought the setup heading into the print was conservative enough. By that, what I mean is Street has already cut estimates, cut numbers for both 2Q and 3Q. Some of the checks that we did

seems to indicate that ad market is slowing down but not falling off the cliff so if snap is facing specific issues they probably are going to be more conservative sweeter slash to test limits and i think they could do an inline and bracket print that should spark a relief rally so long as we don't see any evidence of engagement uh TikTok hitting Snap as such. That's the black box right now. But from a fundamental standpoint, it feels to me that we are at a point where stock price is much below where the fundamentals could be by tonight. So you're a buyer. So they do often set the tone for social earnings and ads.

And a lot of people were a little surprised at that warning that came in May. They were one of the first to warn of the weaker environment. What has happened based on the conversations you've had and the companies you cover since then with the ad environment? I think there has been a bifurcation in terms of what verticals do you tend to over-index and which verticals you tend to under-index, as well as geography. So if you have over index to Europe, you're probably seeing a bigger of a hit. If you're over index to e-commerce, online streaming, mobile gaming, crypto companies, VC funded startups, then probably you're seeing a

greater hit. I feel Snap is more over index in the second camp and that's why it is feeling more of a hit. There is no clear falling off the cliff, as I said. I feel there is slowdown, gradual slowdown. People are being cautious, but it's not coming to an end right now. STEPHANIE WONG, Who is better insulated on the ad side, given what's happening now? SUNDAR PICHAI, Google would be the one that we like.

Given what search is, it's a bottom of funnel. When we are in a slowdown, advertisers tend to be more ROI sensitive. They want to make sure the dollar goes further and search is what exactly that is. Search is doing, is still a reopening play through travel and many other things. And I feel what Google is doing with their more top of funnel,

middle of funnel advertising kind of products like Performance Max, I think Google is the one I feel should be less worse off in the next three to six months. It would have some downside. Numbers need to come down, but I feel all is equal. I think Google is the one that we like more. Better position. I'm just looking at Snap. Twelve months lost three quarters

of its value. Seventy five percent. The stock is down. It can't just be the macro environment that investors are worried about here. Is it is it engagement? Is it user numbers? What's the issue? I think it's a trifecta of issues it's the macro environment probably that's a third uh affecting everybody but then there is a tick tock user engagement um and what how that is affecting from time spent and taking time spent away from a company like snap that is that is the biggest unknown here and when that abates is something that we don't know and the third issue is around apple apple has been uh chasing and changing a lot of policies that affect facebook snap pinterest and many other companies in the mobile advertising ecosystem i

think snap has been on again off again with regards to how well they have mitigated some of the risks from apple so those are the three issues here. And plus, there's an issue of management credibility as well. If you see the whiplashes with how the stock has reacted to earnings, I think more than 20 percent moves more than five times. That is something that some of the investors feel very queasy about. Steady returns is what people want. And that's management credibility, something that we are personally focused on as well. Well, I know you are a buyer. You have a $26 price target, $10 upside from here. Rohit, thank you for joining us with What to Expect. Rohit Kulkarni.

Here's where we stand right now in the markets. We're continuing to build here near the highs. NASDAQ's up 1.1 percent. S&P's up seven-tenths of a percent. And there's the Dow, which had been lower and underperforming. It's up two-tenths of a percent, about 60 points or so right now. You've still got consumer discretionary in the lead thanks to Tesla. And other earnings winners are helping. As far as the Dow, what's taking it lower? Verizon, Dow Chemical, IBM, Chevron.

So some of those groups, the telecom companies after the AT&T quarter, the energy stocks after WTI, that's what's weighing down the Dow. Wall Street is buzzing about what the Justice Department is calling the first ever crypto insider trading scheme. A top lawyer weighs in on whether this is the first of many cases to come. And you can always listen to Closing Bell on the go by following the Closing Bell podcast on your favorite podcast app. We'll be right back. Dow's up 50. What is Wall Street buzzing about? The first ever crypto insider trading scheme. The Department of Justice announcing earlier today charges against a former Coinbase product manager and two others. All three defendants are accused of using confidential Coinbase information about which crypto assets were scheduled to be listed on Coinbase's exchanges.

Joining us now is Ian McKinley. He's a partner at Akin Gump. Ian, you've been following crypto fraud for a long time. What is the significance of today's charges? Yeah, Sarah, this is really the beginning of a government crackdown on insider trading in the crypto space. You know, last month, the DOJ, Southern District of New York, brought the first insider trading case in this space, in the NFT space. They charged an OpenSea employee with insider trading. And now, just a month later,

DOJ has made an even bigger case, one to the tune of 1.5 million. And I think that that is really, the timing is no coincidence, right? I mean, the crypto market is under stress. There have been a lot of concerns that investors have. And this is the government saying, you know, we can act in this space and we will. All of it is happening at the same time that the SEC is in this tiff with Coinbase. They want them to register as a securities exchange. Coinbase is refusing. It filed a petition today. Where does Coinbase end up ultimately with the SEC? And how does today's news fit in? Yeah, you know, it's an interesting question. So the DOJ case, actually, it does not depend on whether Coinbase is selling securities.

It doesn't even depend on whether a piece of cryptocurrency is considered a security, which is a very complicated debate. You know, so in this case, the charge was wire fraud, which was essentially just a scheme to defraud that doesn't have to include security. So in this case, the DOJ was saying it doesn't really matter if this is a security or not. The other thing that's very interesting here is that Coinbase is actually the victim in this case. It was Coinbase's confidential business information that the indictment alleges that these defendants

stole from Coinbase and used to make handsome profits. Got it. Ian, thank you. I have a feeling we'll be talking to you again soon on CryptoFront. All right. Thanks for having me. Akin Gump. Shares of one medical skyrocketing after Amazon made a big bet on the primary health care provider. What it says about Amazon's medical ambition straight ahead. That story plus Ford's EV roadmap and investors hanging up on AT&T. The stock down sharply. We'll take you inside the market zone next. We are now in the closing bell market zone. Welcome. Julia Borson is here on AT&T. Bertha Coombs covering Amazon's big health care deal.

And the markets are rallying again. Take a look at the Dow. It's up 74 points right now. We built on these gains throughout the final hour of trade. A few temps to go positive, and now we're at the highs of the day. There's the S&P 500. It's up about three-quarters of 1%. The strength today, it's coming from earnings.

Consumer discretionary is your best-performing sector, up 2.1%. Tesla and Las Vegas Sands are the leaders there's coming from earnings. Consumer discretionary is your best performing sector, up 2.1%. Tesla and Las Vegas Sands are the leaders there, both reporting earnings. Hasbro is up there as well. After reporting earlier this week, healthcare is your number two sector. And Danaher is the leader there. Only two sectors lower, communication services and energy. And the reason communication services is lower, the telecom companies. AT&T at the bottom of the list, down 8 percent.

The telecom giant did beat Wall Street's earnings estimates earlier this morning, but it lowered its full year cash flow guidance. This morning on Squawk Box, CEO John Stanky discussed some potential weak spots for the consumer. Listen. There's clearly some dynamics going on in the economy where we have customers that are stretching out their payments a bit. We expect that they're going to continue to pay their bills, but they're taking longer to do it. Julia Borsten, Julia, I get that. That is what the street is worried about here. That is exactly what it comes down to. I mean, as the company lowered its free cash flow forecast for the year, they did talk about things like heavy investment, investment and growth. But Sarah, it really came down to this fact that people are not paying their bills on time. Stanky was very careful to phrase it in

such a way. So it's clear that people are paying their bills, but just taking longer to do so. So that's a key thing here, because it also speaks to an overall pullback in consumer spending, which could certainly impact the other players in this space. I think that's why we saw Verizon and others trade lower as well today. Another key thing to note here is that AT&T hiked rates on some of its older plans in June. That's another factor that is weighing on its forecast. And they talked a lot about the economic climate in the latter half of the year being weaker. So a lot of concern there. And I think for a company that beat on the top and

bottom line, the fact that the stock is down nearly 8 percent, it's all about the outlook. Reversal along with Julia here. Dan, there's still the dividend, which people like, and obviously goes up when the stock goes down like this. Would you be a buyer? No. And you know, Sarah, you knew the answer to that already.

But here's the thing. When you see a service like a cell phone, right, which is a staple right now for almost every American, and they're pushing out, paying that bill, you've got to extrapolate that out

to just a whole host of other consumer things and what it means for the broader economy, our economy, that is what, 73 percent led by consumer spending. So I just don't think that if you put this together with some of the things that we've heard from some of the autos, right, about just, you know, like, you know, with rates where they are, with mortgage rates where they're going, where car loan rates where they were, this is not good. You don't have a whole heck of a lot of pricing power if you're an AT&T and you're seeing people push out the payments of your staple product or service. To me, I just think that there's not enough attention being paid to that and other consumer-oriented service companies right now. And it's funny, Julia, I think of the telecom companies as somewhat defensive.

Don't they usually hold up a little better? People need to pay. They need their cell phones even during economic hard times. Cell phones and broadband. I mean, that's the thing, Sarah, is that there's nothing that feels like more of a utility right now, an essential utility than your cell phone. And to a certain extent, especially as people work more from home, also broadband. But I think there's this question of as they roll out those price increases, you know, are they going to see people pay but just pay later?

So we'll be watching for other signs of how that consumer pullback shows up in other earnings reports. Certainly, I'm watching in other earnings reports. Certainly, I'm watching in the advertising sector. I mean, AT&T, Verizon, T-Mobile, these are some of the largest advertisers in the country. So you can imagine that they're going to be looking for ways to cut spending, which will have ripple effects as well. T-Mobile and Verizon down, as you mentioned, 3 percent, less than half of what basically AT&T is down, 8% today. Julia, thank you. Julia Boorstin. Look at Amazon taking another step into healthcare, announcing it is acquiring OneMedical. It's an all-cash deal, roughly $3.9 billion or $18 per share. The deal gives Amazon access to OneMedical's network of boutique primary care offices and

telehealth services. Bertha Coombs joins us. Bertha, is the acquisition a game changer for Amazon's health care strategy? We've seen a few moves in this space before. It is. And in essence, it helps them really leapfrog what they've been trying to do. They announced back in February that they wanted to build out brick and mortar primary care facilities to go with their Amazon care virtual service, which also hasn't gotten huge traction among employers. This gives them a footprint. And as Elizabeth Anderson over at Evercore notes, it also sort of gives them the infrastructure because One Medical has relationships with health systems like Mount Sinai here in New York, Mass General in Boston, and they also have relationships with insurers. So that's one of the things that helps Amazon now build this out faster. And it gives One Medical a lot of backing to be able to expand faster than they would on their own.

A few things stand out here. One, Bertha, the premium that Amazon is paying, 80 percent to the closing price yesterday, not too shabby. And then just the overall broader, who's going to be scared of this move, right? Whenever Amazon reaches further into another industry, there's always that fear factor, whether it's justified or not. Who would you be watching? Well, you know, we've seen that before. And I think the market, because of Amazon's initial moves not paying out as much of a sort of category killer. People are now taking a wait and see. That's what Lisa Gill over at J.P. Morgan says. You've got to wait and see

how they build this out. Nonetheless, it is healthier for the market because a lot of these companies like One Medical or Oak Street Health, which is also in the primary care building, they're rallying today because their stocks have been beaten down so much over the last couple of years. People wonder about what kind of deal they're able to get. You've got CVS is in the hunt for more doctors practices. You've got Walgreens expanding. Even UnitedHealth, although it has an army of 70,000 doctors, they all want to get into this value based care, primary care business. For investors, it's also good news.

Carlyle, for example, is able to get out of its investment in One Medical with this deal. But those that have been investing in these startup companies, those investments had slowed in the first half. Now they might see more of an exit plan through M&A and you might see that start up again. Bertha Coombs, Bertha, thank you. Dan, I also think it's an interesting question what happens to M&A in this cycle with the economy deteriorating. It's not dead. You're still seeing pockets of strength and with some nice premiums here. How do you find the winners?

Yeah, no, I think it's an interesting question, Sarah, because, you know, when you think about this, you just mentioned it's a good exit for a private equity firm, right? Well, look what we saw last week. We saw Elliott take this state stake in Pinterest. Pinterest was down 80 percent. It's a profitable company. About a third of their market cap was in cash, nearly 80 percent gross margins. And Elliott taking a stake, the CEO had just left, so they weren't pushing him out. It probably is to basically maybe push them to sell to private equity or lever the thing up a little bit. So we might see a lot of M&A in some washed out stuff. We might see a lot of M&A strategic like this deal that you just mentioned. We're not going to be talking about one medical three and a half

billion dollar acquisition probably for a long time again with Amazon until they roll it out with something broader. And it's really some sort of deal that might move the needle here. But I think it is important to understand, especially with a name like Amazon, where, you know, Andy Jazzy, the CEO, took over for Bezos a year ago. He's going to put his own imprint on this company. And it might look like a different company than it was under Bezos a few years ago, especially when you consider that he was the one at the helm who built AWS over the last, what, 10 plus years that really allowed Amazon to go in a lot of these different directions because of the great margin and the great growth in that business. So Andy Jazzy's probably got a few more tricks up

his sleeve, is my guess. For better or worse, because the stock has definitely underperformed partly in the environment under his tenure, but also Amazon has been a disappointment for the bills. I think for better. I think that at the lows just a month or two ago, the stock was down 45% from its all-time highs made last summer. This is a company that built a vaccinated supply chain during the pandemic. They obviously overbuilt their other kind of bringing back some of that spend as it relates to the logistics and the and the, you know, the warehouses and the employees. They're going to get their expense ratio back in, I think, in line here. And then there'll probably be some good strategic pushes

that take the company in a different direction that make long term believers in the story and you have to be a long term believer because of the valuation that this stock has always traded at a premium to the market. And it's peers so to me I think down 33% now from its highs looks kind of interesting it's

up 20% in just the last few weeks alone into that print next week I love that that's not a great setup I'd love to see this thing back towards you know 100 and then start taking a longer term view of how that thing gets back to its highs over the next few years. Well, it is helping lead the market today and tech in particular, along with Apple and Tesla is now the number one performer on the S&P 500.

By the way, look at the Dow. It's at session highs, 115 higher right now. There's Tesla. It's up 10 percent. It did report better than expected Q2 profit last night. This has Ford updates Wall Street about its EV strategy. Phil LeBeau joins us. Phil, what is the big question for investors to keep in mind when it comes to EVs right now? Battery production, Sarah, and by extension, the ability to ramp up final assembly. If you listened to the Tesla call yesterday, a good chunk of the time for Elon Musk was spent on how they can increase their battery

production, because that is ultimately the key to getting their production or sales of vehicles well over 1.5 million or close to 1.5 million. That's what the street is expecting for the full year. And they're only at about 559,000 right now. Today, Ford came out and said, look, we plan to have a run rate, a production rate by the end of next year of 600,000 EVs. And we have the battery supply needed to make that commitment. And then you have Rivian today showing the first Amazon electric delivery van. Those are going to be deployed by Amazon. Remember, there's an order for 100,000 of those. Rivian will start increasing production. So again, it's all about the battery production and then by extension, the ability to ramp final assembly.

Rivian popping 4% today. Tesla up 10, Dan. So you did not like it. We were on Fast Money last night. You were not that impressed. And yet the stock surges today, even though it was a margin miss. They kept their 50 percent growth target for the year. Are you surprised to see this kind of strength? I'm very surprised. I mean, the stock was up initially five percent on the results there and we were kind of picking through

it. And I think the margin thing is a big issue. I just thought that the visibility that they have into the back half of the year to continue to guide to those delivery numbers just didn't make a whole heck of a lot of sense to me. So I'm kind of shocked the stock is up 10% here. And again, I think there's a lot of reasons why Elon needs this stock to stay well bid. And there was, I guess if you're a bull,

there was enough to look through it and be optimistic that they're going to be able to manage some of these supply chain issues better than some of these OEMs that are moving into it that have less experience building EVs. But one of the things that we've talked about, and this has been a pillar of the bear case, is competition.

And let me tell you, on the high end, the Germans and the Japanese, they got a lot of really good alternative to the model as in the model life and then on the low end the three and the axe look at what's coming out of Detroit and you just mentioned what Ford said

they're going to be able to produce next year have you seen this F one fifty have you seen this Mach E. have you seen the blazer this is this car is hot so I just think that there's gonna be a lot of competition there for the first time. It's

all out there people have been saying this forever and and Tesla maintains the leadership this. This car is hot. So I just think that there's gonna be a lot of competition there for the first time. All out there people have been saying this forever and Tesla maintains the leadership position and there's been no showing of demand weakness as a result. You know what Sarah this is a company that has like

low single digits at best global market share competing with. Companies that you know have been doing this I just think that this is gonna be a story that changes very quickly that's my opinion I've been losing money on it recently and I'm wrong,

obviously. But today's 10 percent reality makes no sense. I was short via puts into this. Got it. Yeah, the shorts are getting crushed today. Phil, we also got to ask you about the trio of airline stocks because United missed on both the top and bottom lines. We heard we heard with you and the CEO yesterday, American matched profit estimates but beat sales. And then Alaska under pressure despite better than expected results. What is the takeaway from the airlines? Higher cost and capacity cuts. And the capacity cuts that were put in place at the end of the second quarter

when they had all these cancellations and delays and they simply couldn't fly the schedule they had set, a lot of those are going to be either kept in place or gradually increased the rest of this year. They're certainly, compared to 2019, down anywhere between 8% and 15%. That's the expectation for the second half of this year. And, Sarah, it's that limiting of capacity that feeds into the higher cost per available seat mile, excluding fuel. So that's why investors are looking at this and saying, not a lot to get excited about, at least for the near term, when it comes to the airlines.

Pretty sharp declines there. Look at United down 10 percent. Phil LeBeau, Phil, thank you. Dan, as we head into the close, we're looking at another rally. It's been like this all week, where we see this little surge on already, a sound rally in the final hour of trade. The S&P is now up a percent. The Nasdaq is zooming one point three percent, adding to gains for the week. It's now up five and a quarter percent on the week.

Just remind me of your positioning. You you I think you think this is a bear market rally and you're not a buyer, but you've been in some of these tech stocks, right? Yeah, so for about a month and a half, I started picking out QQQ. I bought things like PayPal and Snap that were down 80% at their lows, at their recent lows. I also bought a little Meta. So to me, I actually find some of those names very interesting. I think it was almost like a generational reset

in some of those names. And so I want to take a one, two, three-year time horizon in some of them. And I do expect there to be some of them to have some nasty gaps, maybe one more bad guy down. Maybe we see it next week with some of these major tech names. But again, I think that the most of the damage is done in some of those sorts of names. And what you're seeing over the last couple of days, Sarah, is a little bit of a catch up in some of those. It's kind of a beta trade. People thinking that maybe we get the S&P back or the Nasdaq back to those breakdown levels that we had in June prior to the Fed meeting.

We do have a Fed meeting next week. We do have the five largest tech names other than Tesla reporting. So I expect maybe investors to kind of hit the buzz button if we get the S&P towards 40, 50, 40, 100. And I do expect new lows in the S&P, possibly in September. I expect unemployment to start ticking up. And I think that's going to be the thing that people really start to price in. What does stagflation look for the broader market right now? The S&P down 16 percent, in my opinion, on the year does not encompass all of these headwinds and frost currents that we see in the economy. You just don't think the recession's been priced. And we're toward 10 percent almost now off the lows. And you think we're going to make new lows. Dan Nathan, thank you very much for joining me in the market zone of risk reversal.

As we head into the close, take a look at the major averages. Dow's up nicely now, up 150. Did not look like that was going to happen earlier in the day. We got as low as more than 300. That was shortly after news that President Biden tested positive for COVID-19. We dipped down to the lows at that point. Quick reversal and recovery later. Obviously, learning that the symptoms are mild and the president is doing great and fine, as we have learned throughout the day. But also, just better earnings have helped carry us here. You see that in consumer discretionary. It's up 2.2 percent.

Thank you, Tesla, Las Vegas Sands, a number of the other discretionary names. The only two sectors lower at the close, energy and communication services. The Nasdaq soaring 1.3 percent. The S&P up a full percent. And even the small caps join the party at the end of the day at 4 tenths. That's it for me on Closing Bell.