Closing Bell - Closing Bell Overtime 08/15/22

Episode Date: August 15, 2022

A fast-paced look at the after-hours moves and late-breaking news live from the New York Stock Exchange. Closing Bell Overtime drills down into stocks and sectors, interviews some of the world’s most influential investors and gets you ready for the next day’s action.

Welcome to Overtime. I'm Mike Santoli and for Scott Wapner, you just heard the bells, but we're just getting started. And we begin with our talk of the tape. Can it really be this easy? All three major averages posting gains again today with the Dow up for four sessions in a row. That is its longest win streak since late May. The bulls making a strong case that the bottom is in, but is the market already getting ahead of itself? Let's ask Richard Bernstein, CEO of Richard Bernstein Advisors. Rich, good to see you. Mike, how are you?

All right, thanks. And, you know, I guess how are you evaluating what we've seen here, right? The S&P up, I don't know, 17, going on 18% in less than two months or just about exactly two months right now. Really tension releasing from the markets. Markets saying we're past peak inflation, past peak Fed hawkish, just maybe past peak recession fears. Would you quibble with that setup? I would a little bit. I think that the leadership, some of the leadership that we've seen over the past month or so has really argued that the speculative fervor is back in and that the investors are

suggesting that maybe the Fed goes to the sidelines. Let's go speculate again. It's 2018, 2019 all over again. Let's go have a good time. I think that's a mistake. I think if the Fed steps aside, it's going to be because the economy is an awful lot weaker than people think. Not that we're in some kind of Goldilocks environment. You know, there definitely has been a sort of echo boom in some of the more speculative areas of the market. But to me, it looks like a lot of stocks down 80 percent have doubled off the down 80 percent level. At the same time, you know, Apple has been one of the leadership stocks, certainly quality, even if it's expensive and And things like industrials working, too. So there's a cyclical message that at least is being attempted to be conveyed by the market.

Is that something you think is a bit of a trap, or is that okay? Well, Mike, I think that we're in some kind of a late-cycle environment here. This is not the beginning of anything. We're in a late-cycle environment. And I think that there's only two certainties as we look out towards the second half of this year into early next year. And certainty number one is the Fed's going to be tightening. Certainty number two, perhaps even more important, is that profits are going to be decelerating. So the question for investors is what works in that

environment, right? There's a million different issues that are hair on fire. I know I shouldn't be saying that given my hate, but there's a million issues issues that are here on fire i know i should be saying that given my by complete but but but there's a million issues but there's only two certainties and i think the questions what works in that environment the answer is actually defense of factors not growth not cyclicals but the one that people tend to ignore which is defense of sectors

and those uh... that you prefer right now would be just the traditional defensive sectors like health care, staples, things like that? Exactly. Mike, the most boring stuff you could think of, you know, foods, beverages, household products, health care, utility stocks. I mean, it's pretty boring stuff. You were ahead of the discourse, let's say, a couple of years ago in saying that inflation was going to become an issue. It clearly did. It clearly was not transitory in the way that Fed officials and many economists were saying it might be. Do you think now, though, that we're on the other side

of that and that at least there's some downside momentum in inflation or not? Well, thank you for pointing that out. I've had my share of faux pas, too, but I'll take this one. And I think, look, I think the Fed is historically behind inflation. If you look at the real Fed funds rate, meaning Fed funds minus inflation, no matter what measure of inflation you want to use, you're going to find that real Fed funds rate is still historically negative. That argues that inflation will be more stubborn. Is it peaking out?

Perhaps. But is it just going to fade away? The real Fed funds rate argues it's not, and that it's going to be a more persistent and stubborn issue than people think. So I think where people may have it wrong in thinking that this little mathematical recession that we've had in the first and second quarter this year is the recession. Personally, I think the recession is going to be next year. The real recession is going to be next year.

And that's because the Fed is likely to over-tighten at the same time profits are decelerating. Right. I mean, without a doubt, the most bullish scenario is, guess what, we just had the recession. That's certainly an arguable point right now. But having had one or just noticing one is usually a bullish spot for the market. So you can't say we're there yet. Now, if the Fed remains behind and you therefore expect the Fed, as officials have been saying, to remain pretty vigilant and just focused on getting rates higher and restraining demand and perhaps muting the strength of the labor market.

Can we not also interpret the market as saying that's fine, but the economy is now perhaps sturdy enough in the short term to absorb that? In other words, the soft landing scenario, it seemed pretty much a long shot a little while ago, maybe a little bit less of a long shot now. So that, you think, is wrongheaded as well? Yeah. So I think, Mike, I think what that misses is that's kind of the traditional soft landing. And what that misses is that we are in a historically tight labor market. And so, you know, some people said we can't be in a wage and price spiral because wages aren't rising as fast as prices. So prices go up, that chokes off demand. Well, what's happening with a very tight labor market is that workers can now argue for more raises,

try and regain their purchasing power. So instead of a wage and price spiral, maybe we're in a price and wage spiral. Maybe chicken and egg, right? But whatever, it argues that this persistent inflation backdrop is going to stay, that the soft landing works when you have a lot of excess labor, you have a lot of slack in the economy, and that slack exerts disinflationary forces on the economy. I just don't think we're there right now. If you boil it down to how you think the market is going to proceed from here,

it would seem as if either you don't think we've had the true low or that there's not interesting upside from here. Because if it's just the boring stuff that you'd prefer to own, that alone is probably not enough for the overall indexes to keep going higher. That's right, Mike. I think you've kind of hit the nail on the head with that last statement. We've suggested at our firm that people think of the market as a seesaw, right? higher. That's right, Mike. I think you've kind of hit the nail on the head with that last statement. We've suggested at our firm that people think of the market as a seesaw, right? On one side of the seesaw, you've got a lot of sexy stuff. You've got tech, innovation, disruption, consumer cyclicals, those type of things. And on the other side of the seesaw, you have a lot of other things around the world. And I think whether you're bullish or bearish may be a secondary consideration

relative to which side of that seesaw you're on for the next five to 10 months or six to 12 months. Obviously, from the way I'm talking, I argue the not speculative side of that seesaw is going to be much more rewarding, whether it's consumer staples, healthcare utilities, whether it's potentially China, whether it's potentially Japan. I think there's a lot of counter-cyclical investments out there that people should be looking at. And I think that's going to make or break people's year, not necessarily just the market. Got it. Let's bring in CNBC contributor Shannon Sekosha of SVB Private and Wealth Management Groups and Wealth Enhancement Groups, Nicole Webb. Excuse me.

Shannon and Nicole, welcome. And Shannon, how would you be viewing what the market has been attempting to convey here with this rally, with the idea that, really, it hasn't been letting you in in the last little while that the dips get bought? And at least on a technical basis, it keeps checking off some of the boxes

for what people would look for to say, hey, this rally might have some substance behind it. Yeah, I mean, it certainly is a bit more robust than I was anticipating. I thought that we would start to enter into this end phase of earnings season and really be looking ahead towards Jackson Hole and what the Fed is likely to say. I think the economic data, you know, we had the inflation prints last week, both CPI and PPI, and then the jobs print, I think is indicating that inflation's coming down, but perhaps the economy is not in a recession and certainly not in a deep and sustained recession, depending on what the NBER decides. I think that there are opportunities right now, however, in looking at some of those

higher quality companies, even in a couple of those sexy sectors that Richard just talked about, like technology, where you can certainly find opportunities if we're not entering into a deep and sustained recession, where you're going to have some economic tailwinds. And so I think for right now, I see a lot of people getting perhaps a bit frothed up ahead of the Fed. We don't know exactly what they're going to say, but I'm pretty sure that they're not going to pivot away from tightening. And so I just think if you're looking at trying to discount or value your portfolio, keep in mind 325 to 350 on the Fed funds rate. They're going to get there by the end of the year. Sure. That that seems like a pretty good bet. And, Nicole, really, the debate boils down to to some degree, is this the eye of the storm or is it more clear? It's

clear skies ahead because you always do, even even in a period when the market is trying to contend with the end of a cycle and the Fed trying to to tighten pretty aggressively. You do often have these periods of relief. Absolutely. But I think from our perspective and the sentiment seems unanimous, you know, we don't anticipate the Fed to pivot in the short term and for them to remain hawkish. So we expect continued softness in earnings growth. And we actually do think some of the sustained cost of inflation and what we expect in the week ahead here with retail earnings is some of this oversupply of inventory. You know, we're still going to have this trickle in effect. And we don't believe that that's been properly priced in.

As much as guidance may have been revised last quarter, we do think that there is still choppiness out there. And again, I would agree with both Shannon and Richard that there actually is pockets of opportunity in both growth and some of these defensive stocks. It's just being specific to not just quality, but free cash flow. And where is the investment going for that return on earnings per share? So, Nicole, that implies, I guess, if you really think that the market has perhaps overshot to a degree in celebrating the fact that maybe inflation has peaked and maybe in the distant horizon, the Fed could become a little bit

less hostile. What areas therefore seem unattractive or seem like they're overdone or ripe to rotate out of? Yeah, I would make a strong argument for the likes of anyone where you're seeing any company where you're seeing them company where you're seeing them provide mission critical software, enterprise level solutions. I actually like on more of the value and dividend side, you know, kind of this pay to waste analogy. So names like Oracle stick out to me. You know, still a big believer that it's a buy today in Alphabet. Not only do you pick up Android

and Google, but again, as we continue to see this enterprise purchasing and the strength and value of a conversion to cloud, we expect strong earnings there as well. And with $65 billion in free cash flow over the trailing 12 months, again, just you know, with a good future prospect of where investment is going, regardless of the macro environment that we're in on a global scale. Shannon, you know, it would seem like these retailers coming out this week, they may have, you know, one take on the state of the consumer. It's more likely it's going to be a little more nuanced than that or a little more kind of winners versus losers.

Would the consumer area be someplace that you would feel as if this has been unduly punished on the way down or have the bounces been maybe a little bit too aggressive on the way up in the last few weeks? Yeah, I mean, I think there's still an open question here, Mike. If you look at, you know, consumer data, consumer confidence, consumer sentiment has only started to tick up most recently. So we're talking about quarterly earnings. So I think there's going to be, perhaps, I'm hoping, at least because we want to see some additional color and context for some of the more positive consumer data we've gotten over the last couple of weeks. I'm hoping we see a little bit of a different messaging around here was the quarter, but this is what we're seeing today just in

channel checks over the last couple of weeks. I am a little bit concerned just in, if you look at margin, I continue to think that for both Walmart and Target, neither of which we own, but we're going to continue to see some compression from a margin perspective because their high margin items are just not going to sell through in this environment. And so I think there could be some disappointment here, even with the warnings that we've already seen. I'm a little bit more interested to see the likes of Home Depot, for instance, to see how this kind of housing adjacent trade is turning out. So it will be telling this week, but I'm hoping we get a little bit more color and context again around some of the improving consumer data that we're hearing from the

sentiment surveys. Richard, it can't be a coincidence. I'm assuming that the stock market basically bottomed as global yields peaked out. You've seen that give a little bit of a refreshed strength to the big growth stocks and they power the S&P 500 to a large degree. So all that stuff has come together. Your idea that those are not necessarily the likely leadership from here, I assume, would that suggest you think yields have room to work higher? That's a big question. I see people look at the chart of the 10-year and say, that thing is topped.

Others are basically saying not so fast. I think, Mike, when you start going out on the curve, it's going to be very choppy. I don't think we should expect a straight line either up or down. Now, that's kind of a wishy-washy answer, so let me explain what I mean by that. And that is that I think people have, to a large extent, discounted that we're already in some kind of deep recession, that inflation is past tense and that sort of thing. I think we will see a period here sometime in the next several months where we where people have the feeling that inflation is never going away. Right. We've argued at our firm that there's three stages. There was the transitory stage, the temporary stage, which we've gone through.

There is the it's worse than we thought stage. And the final stage is it's never going to end. And I think we've yet to get to that point where people are saying inflation is never going to end, including the Fed, by the way, will probably say that. And they'll probably panic. I think we'll see a sell-off in the 10-year. And then you'll probably have your really big buying opportunity at the long end of the curve, because that will probably occur at a point in time where profits are really decelerating. You're heading into a profits recession, 1.523, and then you really have

something to talk about the long end of the curve. At what level of inflation do you think those phases are going to occur at? In other words, it's going to be sticky at what level that makes people feel like it's never going to go away? Yeah, I wish I could give you, you know, like a 6.2 percent answer or something with a decimal point. I'm not nearly that smart. But I think the way to think about this, there's going to come a point where economists will start lowering their inflation forecast and will still jump over those forecasts, whatever that comes out to be. And maybe it's two months in a row or three months in a row,

and then I think you get that feeling that it's just never going to end. And that's what I meant by it being inflation. I mean, being more persistent than people think. It's just it's going to be very stubborn. I mean, that sounds like, you know, essentially somewhat of a rerun of the 1970s experience. I mean, Nicole, would you be braced for something like that? Or do you think that's at the at the outer extreme of of the bad scenarios? Not really. I actually mirror a lot of Richard's sentiments in that he can't name the exact level of inflation. I, too, am not smart enough to guess

that. But what I think it will come more down to is to what degree do we impact the balance sheets of not just corporations, but the consumer? And when do we see not just the low income affected, but also the high income affected? And there was some argument when you started to see Amex trading a bit off where it had been that the wealthy consumer was also being a bit now thoughtful or pragmatic in their spending and how was that going to affect the future. And so when will this end? I think we'll actually see consumers change their behavior drastically and go into more of that profit recession as an indicator of this is never going to end. And maybe then some forceful action on behalf of the Fed. Shannon, I'll give you the last word here on maybe just discussing what might be slightly different about this setup versus compared to, I guess, previous recessions when it comes to the consumer. And, you know, at least right now, if you take a snapshot

of their financial obligations relative to incomes, it looks pretty benign. And companies, interest coverage, all those types of things. I just wonder if it's not going to go according to script based on, you know, prior downturns. Well, we can continue to see this exacerbation of the K-shaped recovery. And I think that is worth noting, especially from an investor seat. I think the thing that could be slightly different here is to your point about balance sheets. Where does that go a year, two years, three years from now? I think there's an anchoring, a re-anchoring, if you will, for the consumer. You're going to see it for mortgage rates. You're going to see it in day-to-day purchasing. You're going to see it in durable goods. You'll see it in large

purchases. They need to re-anchor to these higher prices. I don't disagree. We're certainly going to see higher prices. And we're not going to see any of the sort of deflationary type pressures that we saw prior to the pandemic. But there could be positives there. You know, some of this reshoring that we talk about, there could be outcomes whereby the consumer is accepting these higher prices, factoring that in. But that reset is likely to take a couple of years. And so I think that that K-shaped recovery, watching where consumers are spending their money and not necessarily banking on like this huge return to services spend, I think we need to be cautious on that because I think that might not have the legs that the market is factoring

in for the next couple of years. All right. Yeah, that would probably be a little bit of a surprise. Shannon, Rich, Nicole, thanks very much. Appreciate it. Thank you. All right. Up next, trouble in the charts. One top technician says fade this big retailer ahead of earnings this week. We'll bring you the name ahead. And later, more on that bombshell out of China. The Chinese central bank surprising the market by cutting rates or drilling down on the fallout. Don't go anywhere. We're live from the New York Stock Exchange. Overtime, we'll be right back. We are back in overtime. Growth stocks have been outperforming from the market's June lows. Chris Verone of Strategas Research says the charts are signaling some near-term hurdles ahead. Chris joins us now. Chris, great to catch up with you.

You know, certainly you've been following how you've been observing this market here. You've been sort of withholding your endorsement from this rally and thinking that it's the start of something big on the upside and maybe that, in fact, the lows are certainly. What are you sort of waiting for to see the market prove or how would you characterize the field position right now? Well, Mike, it's great to be here. And it's just been a little bit unusual that on one hand, the momentum certainly looks very early cycle, right? We have 90 plus percent of stocks above the 50 day. We've seen a surge in new one month high. So the momentum data certainly looks like what you would want to see.

What I'm perplexed by is that the leadership has largely remained pretty defensive here. I mean, utilities have held their own and discretionary has not done much. So it's this unique tension between strong momentum but pretty tepid leadership. And I think the growth value front is reflective of that as well here. I mean, this last week or two as the market has run away, I find it notable that growth versus value has not made new highs. And triple Qs versus S&P has not made new highs. And semis relative to S&P has not made new highs.

So you're seeing these little subtle leadership divergences start to emerge that I think add to this tension between the momentum, which looked early cycle, and some of the leadership, which I still think looks pretty late cycle. this tension between the momentum which looked early cycle and some of the leadership which i still think looks pretty late cycle so if you had to set out you know the the hurdles uh that you would want to see clear you want to basically see the big growth stocks assert themselves in a more obvious way well i think at a minimum here we've done a lot in a short period of time, right? We're up 15%, 16%, 17% off the lows.

We're into mid-August. We're at the 200. We're overbought. I think the big hurdle for the tape is, can we sustain the overbought conditions? When you get momentum of this magnitude, which is suggestive of what you see coming off lows, can you sustain that? What I think is notable about the growth value debate is, is this just a reflection of how sticky bond yields have been? Is the fact that growth has started to come in here and value reassert itself

reflective that two-year yields are still three and a quarter and 10-year yields are basically back to where they were pre-CPI? So sticky yields, I think, is contributing to this little stalling or pausing of the growth-first value trade. And I did note that just today you were pointing out, even after the bounce in 2011 into 2012, another growth scare, it still was kind of choppy and slippery along the way before it really became a new uptrend. I do want to get to a couple of the names you think are looking attractive here technically, a couple in the industrial area.

Yeah, I think from a leadership perspective, if you're looking for the best group out there that's really demonstrated some legitimate leadership off the low, it's the industrials. Cummins is one name, CMI, that stands out here. I mean, this peaked all the way back in March of 2021. So you had an 18-month bear market here. It has through resistance it's gapped through the 200-day when you get momentum of that magnitude i'm inclined to endorse it so cummins has certainly turned i think general dynamics gd and the defense contractors is another example of a very good chart here it really never

broke trend i mean this is not a name that had a bear market this um basically hung in there the entire time. It's reasserted itself as leadership. So look to the industrials. That's probably the best leadership group in our work here. And you think that the bounce in Target is a selling opportunity. Why? Well, I think these as these retailers start to report, you know, they're burdened by downtrends. I mean, a lot of these retailers target especially still below a downward sloping 200-day moving average. It's not even back to where it broke down from. There's a ton of resistance in this, let's call it 175 to 190 range. I think on any post-earnings move, that's

where you want to be a seller of it. I think ultimately discretionary broadly has been one of the more underwhelming parts of this rally. Yeah, that's a pretty daunting gulf there in the chart back from where it gapped lower. We'll see how that goes after reports this week, Chris. Appreciate it. Thank you. All right. Thanks again. Let's get to our Twitter question of the day. We want to know which of these retailers reporting this week is your best bet. Target, Walmart, Home Depot

or TJX. Head to at CNBC Overtime on Twitter to vote. We'll share the results later in the hour. Up next, the China surprise. The Chinese central bank shocking the market today by cutting rates. So could trouble out of China put the rally at risk? We're digging in. And don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. Overtime, we'll be right back. Welcome back to Overtime. Time for a CNBC News update with Kayla Tausche. Hi, Kayla. Hi, Mike. Donald Trump says today the FBI also seized his passports when they conducted a court authorized search of his Mar-a-Lago, Florida property,

in addition to removing several sets of government documents marked as classified. No comment from the FBI. The State Department says it is despicable and disgusting for Iran to put any blame on Salman Rushdie for the attack on him on Friday. Tehran says it didn't have any involvement, but accused Rushdie of insulting Islam with his novel, The Satanic Verses. And Defense Secretary Lloyd Austin has again tested positive for COVID. Austin, who has received four doses of the COVID vaccine, is quarantining at home with mild symptoms. He first tested positive back in January. Tonight, I'm in for Shep on the news. We'll look at the big political tests facing Representative Liz Cheney tomorrow as Wyoming's Republican primary voters go to the

polls. For now, Mike, sending it back to you. Kayla, thank you very much. Big news out of China today. In a surprise move, that country's central bank cut interest rates. The move comes as China released a slew of data that painted a weak picture of the economy, retail sales and industrial output. They slowed and missed estimates. Youth unemployment hit a record high and home sales fell more than 28 percent year over year. Joining us now to break down the fallout is J.P. Morgan, chair of global research. Joyce Chang. Joyce, great to see you. To what degree has the degree of economic weakness been a surprise to you? Are we seeing the signals coming at this point? Great to be with you, Mike.

I think the Omicron is still a big problem for China. So the retail sales really disappointed. They were actually down a little bit from June to July. And that's a surprise. Now, we haven't changed the third quarter outlook, which is still that you could see a double-digit rebound after a very sharp contraction after the second quarter. But it remains to be seen how this will play out for the full course of the year. I mean, we've got China's full-year growth a little bit north of 3 percent, but we've continued to have to take that growth number down. And it's not just Votnicron. The property sector, the housing market is really a problem in China that's not going to go away anytime soon.

So it was a surprise easing. And the question is, are they going to have to do more later this month? And that's what the market's going to focus on. Right. I mean, and that surprise easing now was just maybe a gesture, right? It was one tenth of a percent cut in rates. And what's your read on that exactly? I mean, was it essentially just, you know, an acknowledgment of the weakness? And you say, will they have to do more? Would that be your basic baseline expectation now? Yeah, I think they may have to do more policy easing. But the real question is, in August, later in this month, are you going to see even more

fiscal measures announced, not just policy easing? I mean, the 10 basis points was, you know, maybe just a little move. But the fiscal measures are what the market will focus on and really how you get the growth numbers looking better before the plenum later this year. So I think that, you know, the housing market, though, is going to continue to be a drag on the economy. And even though they've announced some measures locally, I still think that you're going to see that being a big weight on the economic outlook going forward. What specifically rises to the level of being a risk that should alarm investors about the

housing sector and what's going on there? I mean, we hear a lot of these reports about, you know, kind of housing speculation going in reverse and, you know, mortgage strikes. I mean, a lot of news out of there. Wondering what you think we should infer from it all? Well, I think the question is, I mean, the housing problems are structural and it's a big part of the economy. So, you know, every half a percent decline in the property sector, the real estate sector takes, you know, about as much, even slightly more off of China's GDP growth. And it's about 20 percent of investment. If you take a look at household wealth, housing is as much as 60 percent of household wealth in the urban areas. So you have the mortgage suspensions, but you also have that we've taken up the default rate on China high-yield property as well, after having a very high default rate last

year. And we continue to see that this is one where the local governments are taking more of a role. The central government's been very clear that, you know that housing is for living, not speculation. So they've left this with the local governments. And we've seen the revenue from sales is down actually 35 percent. And what the local governments have been able to announce, they announced one local emergency fund. We think that will only cover about 12 percent of some of the losses that are being suffered right now. So they really have to

balance this with respect to the overall sentiment for the upper middle class, just given how much of the household wealth is held in housing prices and property. This happens at a time when China is to some degree out of step with the rest of the world in terms of where they are in their cycle. They haven't had a real full reopening. Their central bank now cutting rates. The rest of the world is in hiking mode. Also, inflation is not really kind of the central issue with that economy. Are all those things helpful to the rest of the world economy in the sense that they're offsets, or is it a real concern that they're not going to be contributing much to world growth? I think that there's still a lot of market participants who think, well, China

can come in and save the day and do a big stimulus package. But I don't really see anything like that being on the cards. I think China is at a different point in the cycle, and they can provide more fiscal support, a little bit more policy easing. But we're looking at China going into a lower growth trajectory in large part because of their demographics over the medium to longer term. And the problems that they are facing are structural. It's not just the housing sector. It's also the youth unemployment rate, which is in the high teens right now for those who are under 25 years old. And you've got,

you know, very low birth rate in China as well. So I think that, you know, the concerns about China are not going to go away. And the boosts it's going to be able to provide to the rest of the world is a lot less than what we've seen when they've done stimulus packages in the past. Yeah, does seem to be something of a different playbook right now. Joyce, appreciate you walking through it with us. Thank you. Thank you so much. Great to be with you. All right. And we have a news alert on Berkshire Hathaway. Leslie Picker has the details. Hey, Mike. Yes. In anticipated form, Berkshire Hathaway has filed its second quarter 13F. A couple of movers to tell you about here in the after hours trading. Paramount Global,

the firm boosting its stake there by about 14% to hold nearly $2 billion worth at quarter end. Those shares trading higher on the news. Also, Berkshire Hathaway bumping its stake in Ally Financial to hold more than $1 billion, sending that stock higher as well in after hours trading. Those weren't the only holdings that the firm increased during the quarter. Selenese increased that stake by about 16%, acquired about 3.9 million more shares of Apple, but that's up about 0.4% because they hold such a massive stake in Apple. Chevron boosted that also kind of marginally up by about 1.4% there. Also took some money off the table in certain names. GM, that stake was pared back by about 15%. Kroger

down 10% to hold $2.5 billion at quarter end. Also trimming a bit of US Bancorp. So kind of spanning the gamut in terms of sectors, in terms of size of companies as well. No major, major new stakes or selling out of old stakes. It's just a little bit of portfolio adjustment, as you can see. Mike. Yeah. Paramount selling these ally in terms of the substantial new buys or increasing stakes. I mean, that seems traditional value stuff. They're all kind of out of favor and they screen out looking pretty cheap. So maybe that's one message we could pull out of it, Les. Thanks very much. Up next, we're drilling down on today's oil slide, energy stocks pulling back. But one fund manager sees real upside in the drop. The name is the

names that he is betting on. And later, a shining opportunity in the metals market. We'll tell you all about it in our two minute drill. Overtime, we'll be right back. Oil selling off in today's session with crude hitting its lowest level since February 3rd. The drop having a big impact on energy stocks with the XLE ETF falling 2 percent. But our next guest sees big opportunity in the pullback. Let's bring in Rob Thummel, Tortoise Ecofin Portfolio Manager. Rob, good to see you. You know, the real change of script here, it seems,

you had this storyline out there of very tight oil supplies. It wasn't going to abate anytime soon. You had that near-term shortage of scarcity that was showing you that near term prices were higher than the whole story held together but now we have a pretty steep. A little downtrend from the highs in crude. In gasoline as well what does that tell you about the supply demand picture. Yeah Mike you you mentioned

scarcity right so yeah we were worried the world was worried we didn't have enough oil- at least. For now And now we're in a situation where you've got China demand slowing, and it might not even have any demand growth out of China this year for oil on the demand side. Supply, there's rumors that maybe Iran will be able to pump more oil and export more oil, so that will be more more supply so those two dynamics working together mean um you're going to have a lot more oil added back to the supply which has then been uh the result is just lower prices ultimately and and you can see what happened today as a result of that sure and you know i guess you should fall back on the idea that uh the current level of prices

are still relatively healthy for for most parts of the industry. So it's not as if this is creating any new stress. But I wonder what you think it does mean for, you know, on the equity side, investing in various parts of the energy space. Yeah, no, that's a very good point. So we still are very low in oil inventories, you know, 10 or 15 percent below the historical average globally for oil inventories. And if you put that in context, you know, the world would have to produce more oil than it consumes by about 800,000 barrels a day for the next year just to get inventories back to normal. So there's no doubt there's still that scarcity value in oil prices, which is actually an opportunity for the energy sector. The energy sector broadly, even with oil prices where they

are today, and they could even drop a little bit, still generates a lot of free cash flow. And a lot of that free cash flow is being returned to the shareholders in the form of high dividends, stock buybacks, and in some cases, debt paydowns. And that's an attractive combination and compelling for investors that are looking for good. Good returns and in market. In a market like this is pretty choppy for in other sectors. For sure- I guess you you focus to some degree on energy infrastructure so a lot of those cash flow plays the ones that essentially volumes maybe matter. A good deal more

than price there any particular sub segments that you think stand out to you. Yeah yeah no yeah you're right Mike that toward us that's what our focus is, energy infrastructure. And we look at the energy sector broadly. So if you look at things we like, for instance, Chenier Energy, it's the largest exporter of LNG in the U.S., and the U.S. is the largest exporter of LNG in the world. If you think about two mega themes that are going to really play out over the next several decades, it's global decarbonization and energy security. And you look at companies like Chenier Energy, it can do both. And that's a bit of a rarity. There are companies like Plains All-American. That's another example.

Now, it transports oil out of the West Texas, out of the Permian Basin. A lot of your viewers are familiar with that. The thing I like about Plains is it's almost an 8 percent dividend yield. Look across the stock market. You can't find a lot of 8 percent dividend yields, but you can find it in a lot of energy infrastructure names and planes is an example of that as well. Broadly speaking, would you be viewing the energy sector, at least in this country, as being a little bit more of a kind of long term steady decline type story or has anything changed with this recent episode after the russia ukraine invasion that you think there might actually be a new round of growth investment here contrary to what a lot of people thought a couple years ago well i think what the world's telling us right now is that the world needs more oil and gas uh the global demand for for oil and gas is is back to pre-pandemic levels but the global supply supply is not. The world's also telling us we

need reliable sources of oil and natural gas. And so where does that come from? That sits square in the United States and Canada, where the U.S. and Canada can provide, and not only domestically, but globally, more oil and gas to the rest of the world, which enhances global energy security. And then a lot of the oil and gas companies here in the U.S. and a lot of energy companies collectively are really working on decarbonizing their footprint. And so big picture, we think that the setup long term is pretty strong for all the energy companies in the U.S. and they will be able to adapt as changes happen like they do in all industries. Yeah. All right. So maybe there'll be a next act. We'll see. Rob, thanks very much. Thanks, Mike. We are tracking the biggest stock moves in overtime. Christina Partsenevelis is standing by with that. Christina. Well, we've got some dim outlooks for the economy.

One company warning buyers are continuing to be priced out of the market and another firm warning that hiring is slowing. I'll have those names and the details after this short break. We're tracking the biggest movers in overtime. Christina Partsenevelis is here with all of those. Hey, Christina. Well, let's start with shares of online employment marketplace ZipRecruiter falling over 5% in the OT, even though the company swung to a Q2 profit amid a tight labor market. According to the firm, during their past quarter, there was one unemployed person for every two jobs out there.

But management warns they are seeing signs of a, quote, cooling hiring environment, and that's why they're lowering their 2022 revenue outlook. Compass shares are plunging right now down over almost 13 percent. The real estate broker believes that the difficult real estate environment will continue into the foreseeable future as higher mortgage rates and high home prices are pushing prospective new homebuyers to the sideline. Compass plans to cut costs big time to about $320 million in target savings, which they hope will make them cash flow positive in 2023. And then lastly, biotech firm Ginkgo Go, I should say, moving higher on an earnings beat and raised guidance. The company almost doubled its foundry revenue

year over year. Keep in mind, it also has recently announced deals with Zymergen as well as Bayer, and they believe those deals should help drive demand in the coming quarters. The stock is up a whopping 15%. Mike? Christina, thank you. Thanks. Up next, a golden opportunity. One man, one money manager making

the case for a mining stock that is down nearly 40 percent this year. We'll bring you the name in our two minute drill. We have a news alert on David Tepper's Appaloosa management. Let's get back to Leslie Picker with the details. Hey, Mike. Yeah, it seems like based on this 13F in the second quarter, Appaloosa was really paring back some of its larger holdings, you know, 10, 15 percent, and then dipping its toes, little small seven-figure stakes in new companies. No major big bets, though, which is kind of the trend that we've been seeing with these 13Fs. For example, Appaloosa paired back Alphabet, Microsoft, Uber, and Micron.

They did up their stake in Meta by about 12%, but then put money to work, not a lot of money to work, for them at least, into Caesars, Disney, and Netflix. Those were smaller seven-figure stakes, as I mentioned. Also, on the energy side of things, Appaloosa boosted its stake in energy transfer, but sold some of EQT and Occidental Petroleum. So, interesting trades nonetheless. These, of course, are as of the end of June. They may have changed in the six weeks since then. But this is what we are learning from their 13F filing, Mike. Yeah. Stepping in on some beat up stocks, Meta, Netflix, Disney.

Sounds like it was a bit contrarian, Les. Thanks very much. Up next, our two minute drill. We'll be right back. Welcome back to Overtime. Let's get the results of our Twitter question. We asked which of these retailers' reporting results this week is your best bet. Home Depot, the winner, 34% of the vote over Walmart, which is reporting tomorrow. Sticking with retail, we have a big interview coming your way tomorrow. Walmart CEO Doug McMillan sitting down exclusively with CNBC following earnings. We'll also ask him about that streaming deal with Paramount Plus. Be sure to catch it tomorrow,

10 a.m. Eastern on Squawk on the Street. It's time now for our two minute drill. Joining us now is NFJ Investment Group Chief Investment Officer John Mowry. John, good to see you. Good to see you, Mike. Seems like you feel the market's giving you a bit of a shot at some cyclical names, perhaps in this little recession scare. Talk a bit about TransUnion in that in that mold. Absolutely. Yeah, we're seeing some real opportunities in some of the more cyclical industrials like a TransUnion, which is the credit rating company. Their company is trading at the steepest discount to their history since March of 20 or the fourth quarter of 18. What gets us excited about TransUnion is that they've got a pristine balance sheet. They've got 24% operating margins. And the CEO just stepped in and bought 25,000 shares. So he's putting his foot in the water saying he's committed. So we think

that that provides an opportunity. And the slowdown in the mortgage business and the originations is what's creating the dislocation and the real opportunity in this name. And why is that not a longer-term concern for you? Well, the reason it's not a longer-term concern is because we look for companies where we see a dislocation in the valuation, but not a dislocation in the fundamentals. They actually recently did an accretive deal for about $500 million. That will be accretive before the end of this year. So their business is humming on all cylinders and the consumers are in a lot better shape than they were in 2006 and 2007. You also like Truist, the big regional bank, but I want to get your take on Kinross Gold,

whether that's a play on the gold price going higher or just this mining operation. Absolutely. So it's definitely an area that people love to hate. You know, gold stocks have not provided an inflation hedge. A couple of things I would say, Ken Ross is a Canadian miner. So he's got exposure in North America, South America, as well as Africa. But specifically, Ken Ross and many other gold stocks are really a play on the dollar. And this is cascading into the emerging markets. The last time we saw the dollar this strong was in 2002. And if you picked up and bought gold stocks or the emerging markets in October of 2002, they handedly outperformed. Emerging markets actually

were up 440% since October of 2002 over the next five years. So that's really interesting. And Ken Ross was up 300 percent over that same time period. So the dollar is extremely crowded. We think this provides a real opportunity for people that are willing to step into areas like the emerging markets. Right. All right. So a gold stock has a leverage short on the dollar, John. Thanks very much. Appreciate the time today. Thanks, Mike. All right, that does it for overtime. Fast Money begins right now.