Closing Bell - Closing Bell Overtime 12/22/22

Episode Date: December 22, 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.

Thank you, Carl. Welcome to Overtime. I'm Mike Santoli in for Scott Wapner. You just heard the bells, but we are just getting started. And we begin with our talk of the tape. It was a rough day on Wall Street. Stocks pulling back. All three major averages closing in the red, although well off their lows of the day. Tech taking it the hardest with the Nasdaq dropping more than 2% still by the close. The index on pace for its third straight week of losses, also threatening a new low for the year. Joining me now to break down today's drop is Dan Greenhouse, chief strategist that sold us alternative asset management. Dan, good to see you. Thank you, sir. Merry Christmas. Merry Christmas. And, you know, there's an instinct, I guess, we get to the end of the year to sort of think that there's going to be a different story when the calendar turns. Last year, it actually happened, right? I mean, we peak on January 3rd.

The leadership of the market going into it became the leadership to the downside afterward. And the Fed really did accelerate a shift. This year, does it make sense to think that the story is going to change? We're sort of kind of going back and forth between inflation is coming down, but how much the economy and earnings are slowing, but how much? Yeah, I mean, listen, there's a lot of hullabaloo, let's say, about the Federal Reserve. And there's nothing that's untrue about that hullabaloo on January 4th that wasn't true on December 29th, let's say. And so I think from an investment standpoint, the calendar turn is not unimportant because there are some

flow and positioning reasons why it matters. But from a narrative, from a broader market and economic perspective, nothing's different next year. The trend is still the trend and that remains in place. There's no doubt the trend is clear and it's sort of got to prove itself that it's turned. You can't just anticipate it. But the levels are different. The valuations are somewhat different. The embedded assumptions about what the economy can deliver, in theory, have changed to a fair degree just how much, I guess. Yeah. But I mean, next year, that unfolding story remains in place. And so, you know, again, to the turn of the calendar, we're still left with the same unknowns on January 1st that we have on December 31st. How far is the Fed going to

ultimately go? And while inflation is coming down, this is the easy part, so to speak. Are they able to get down to four to three to two? And that conversation obviously is a story for the new year. And you expect that it'll be sticky at some point on the way down? Yeah. Listen, we've been, I mean, listen, this is a very complicated and long conversation. I think there's a lot of people who talk about, well, inflation is coming down. Look at oil prices. Look at lumber prices. Look at the commodity indices more generally.

Those are the goods prices. I know I'm not telling you anything you don't know, but for the viewers, that's the goods prices portion of the conversation. We know that's going to come down, has been coming down, and should continue doing so. The second part of the conversation is that labor market part of the conversation. Once the goods prices stuff have come down and you've gotten rid of the, we'll call it the excess fat from the inflation part of the conversation, can you get down back to the 2% target? And the Fed believes, it doesn't matter what I think, it doesn't matter what you think as a viewer, the Fed thinks that they cannot, in a sustained and perpetual way, get back down to 2% without

curbing some of the excesses in the labor market. And like anything else, that's a story for 2023 and what ultimately that means for the economy and markets. Yeah, which gets right to, I mean, we've been talking all day about what David Tepper had to say about, you know, the Fed told you what it's going to do. Why don't you believe them? And of course, that, you know, in a don't overthink it kind of way makes the most sense. On the other hand, in August of 2021, right, at Jackson Hole, they were saying we're not even prepared to slow down the asset purchases in QE. We still think the risk is we're not going to get to our employment goals. And eight months later, they're initiating

the most rapid tightening cycle in decades. That's right. So at some point, you know, events and the cycle kind of overtakes their intentions. Sure, and listen, I'm going to make a very dramatic statement here. No one's going to agree with me. The Fed doesn't always get it right.

Yeah. And I think when you look at the pricing and markets, to Tepper's point, I watched the video, obviously, to Tepper's point about the markets don't believe the Fed, the Fed's trying to do two things, obviously. Bring inflation down and bring asset prices down. They're doing a lot of things. But the point of the story is what markets don't believe is that once you see the weaknesses, it's easy to talk. It's sort of a variation of the Mike Tyson comment, everyone's got a plan until you get

punched in the face. It's easy to say you don't care that inflation is your priority once people start losing their jobs, which presumably is going to start happening to some degree in the second or third quarter of next year. It's going to be a lot harder for the Fed to stick to their guns. And what the market is betting on is that the Fed is ultimately going to blink. Whether that's true or not remains to be seen. But I think that explains a lot of the mispricings, if you will.

And you don't even have to necessarily say that the market is explicitly countering what the Fed is intending to do. What the market has to do. Although it is. Well, yes. I mean, certainly there's a contrast there. But what the market really is doing is trying to encompass a range of probabilities, which could include a really hard landing and something that forces the Fed's hand or something that looks really deflationary on the way to, you know, to where they want to

get. And I think that's right. And if you look at the Fed fund futures market, for instance, which isn't the most liquid of all you could do, the euro dollar market, but for the viewers, if you look at the Fed Fund futures market, they don't even have rates getting to 5%. And as everyone has observed a zillion times over, basically everybody in the FOMC thinks you're going north of 5%. So it's a microcosm of the mispricing or the disbelief in markets. Look no further than that. But again, it is a legitimate worry for various markets. When unemployment, presumably it does, starts weakening, and you're not creating 200,000, 300,000 jobs, but you're creating 50,000 or 75,000 jobs, and jobless claims are not

measured in the low 100,000s, but one or 200,000 more, is the Fed going to be as robustly hawkish on the inflation front as they are now? That, by the middle of the year, will become clear. But in terms of the mispricing in markets, I understand it. I mean, we're as uncertain now as we've been in 40 years. And again, like anything else, is why the bias in markets is probably the downside still. Where does that leave you in the sense of feeling how the risk-reward shakes out as we get through things here, credit-wise, equities, whatever? So I'm going to echo something that Tepper said, that we're an institutional, like we're a hedge fund.

So we're not an RIA, and I don't mean that in any way other than what we have to say, what people like David Tepper and I have to say is different. I mean, again, if you're an RIA, if you're a retail investor, you're supposed to just buy until retirement effectively. Ride it out. Stocks for the long run. That's right. But in a more short-term institutional tactical view, our view is pretty simple, that the bias is the downside. To Tepper's point, the Fed is telling you we want tighter financial conditions. The market may not believe it, but that can only persist for a while. And you look at something like the two-year, which I know David brought up. We talk about this every day, just the stunning disbelief in the two-year. It's going to over—I want

to be careful with that. I don't want my compliance department to kill me. But if the Fed is going to be right, the two-year is probably mispriced. Right. At least along the way. At least along the way. That's right. Not necessarily from here to two years from today. You never know where the rate's going to be. That's right. But if you believe the Fed's telling you we're going to five or five and a quarter, let's say, the two-year is nowhere near that.

And again, this is not the most profitable or actionable way to play this trade. But again, as a microcosm of some of the disbeliefs in the market, look no further than the two-year. I know I mentioned several of them, but that's another. Yeah, no, exactly. There's certainly some active arguments going on in the market price in Notre Dame, Nevada. Let's bring in CNBC contributors Stephanie Link of Hightower and Victoria Green of G Squared Private Wealth to talk more about all this. Welcome to you both. And Steph, just to maybe bring it to how the market has behaved here in the short term, do you think there's any significance to the way that the S&P has been a little bit sticky here in the last several weeks,

not really buckling below this 38, 37, 50 level? Yeah, I mean, I think it's very encouraging. Seasonally, we are supposed to rally if you look at history. And I think a lot of people are very defensively positioned. But look, it's been an ugly day today, but it's been an ugly year. We've had a one-two punch today alone, where you had a stronger than expected GDP number, which just reinforces the Fed being hawkish. You've got Tepper, you guys were just talking about it, leaning short. I actually didn't think he was that negative, to be honest. And as Dan mentioned,

he's a hedge fund versus a long-term investor. And he's watching the global central bankers. Well, we all are watching the global central bankers synchronizing higher rates and being behind the curve. But how many times are we going to discount the same bad news? And that's why I think today was kind of encouraging, right? Because we were able to rally above the 3800 level, which is a key support area. And so to me, I mean, I think you have to look for opportunities. We're already down 20% in the year. Stocks and sectors are, some anyway, are down twice, double that or triple that, right? So we have a lot of bad news baked in. And in the meantime, I actually think the

economy has more momentum that it's getting credit for. The dollar is weak. That's going to help for corporate earnings. Input costs are coming down. Listen to what Cleveland Cliffs said today about input costs coming down. That stock was up double digits today. And you also have a consumer that actually is OK. Wages are going higher and inflation is coming down. That's a good combination. And that's why you saw the University of Michigan sentiment numbers improve and consumer confidence actually improve yesterday. So maybe we can handle all of this bad news and all of these higher rates, even if we do slow down or even if we go into a recession, maybe it'll be mild and maybe we already are pricing in earnings coming down substantially.

Yeah, that is the question, though, it would seem to me in terms of at least name by name, there certainly could be the possibility that things are priced pretty rationally at this point. I mean, Victoria, you certainly have been leaning short or leaning sort of cautious, as Pepper would have said. Is there anything happening right here that makes you think that the market has already more or less realized where we're headed? No, and not to respectfully disagree with Stephanie, but I think nothing's really priced in. I think your earnings, if you do your market multiple math and you have anything below 220, you're not even fairly valued.

You're above average PE at 17, 18 times. So no, not all the bad news is priced in. And anytime we have a bear market, you're always going to have a few signals of hope, right? And we see this as false hope because just like the summer, just like other bear market rallies, the resistance is held. The downtrend's held. There's no way this isn't coming back down and retesting because you have such strong downtrends still. And this reads more like a 2018 December. We had all our seasonality pulled forward in November. Yes, typically you have that great Santa Claus rally. Everybody's getting cold this year. I don't think anybody's getting anything nice. So yeah, we're defensively bearish. I think you want to stick with your winners. They're big, boring,

ugly. But right now, I think I want to stick with the stocks that are doing well and stick with my winners and my quality. And we think it's way too early to chase because if we do have this recession, if we have this slowdown and you have all these companies making cuts. So I'm listening to what the yield curve is telling you with this inversion. I'm listening to what the CEOs and companies are telling us other than a few bright spots like Nike. But if you look at Micron on CarMax and these slowdowns in these bubblish areas, I think you still have more pain to come. And so as much as it's boring to repeat again, stick old, ugly, stick your blue chip, stick your dividends, I think that's the right play for now until we retouch lower. But Victoria, it's true. The downturn has remained in place. Every rally has stalled lower than the one prior to it. But, you know, the intraday low in May was 38.15 on the S&P 500.

We basically closed there today. So, yeah, it's been smart not to get overexcited on the upside, but somehow we've remained traction. So do you think that's a little bit of sort of delusion in the market or something else going on? I mean, it was nice to see that rally back today. I think it does give you this interim that rally back today. I think it does give you this interim support. I just don't think it's quite as strong. So I would anticipate if you said what's more likely we break above our downturn on a resistance or do we break below the support? I'm going to say it's more likely we break lower. Yeah. And Steph, you know, we

certainly see this sort of stock byby-stock differentiation. That's something that, without a doubt, that's come to bear this year. It hasn't always been easy. But we see Micron today where it's sort of like the street and the market tries to chase the fundamentals lower and they can't quite catch up. And then you have Nike and FedEx where they beat down expectations enough. So what areas or what types of stocks seem to be in the category of, look, it seems like they got washed out already in terms of expectations? Well, I would argue that I think some of the semiconductor and semi-cap equipment names, especially after today, are already reflecting a lot of bad news. I mean, Micron was not a surprise at all. They have been slowly cutting a couple of times throughout the

quarter. And so it wasn't even down that much today, to be honest with you. The cap equipment guys got hit harder for obvious reasons. But I still think that those companies, those areas in tech are attractive. There's a lot of other parts of tech that are not attractive. Most of most of FANG are not attractive. Cloud software, not attractive because the valuations are still too expensive and they're still very crowded. So that's an area I think you would be very careful with. In terms of discretionary, I think there definitely are pockets in discretionary. We saw the Nike yesterday. I think Starbucks is an interesting idea. I like McDonald's as well. That's a little bit more defensive. You know, I recently bought

D.R. Horton. I still like that story very much for the long term. I mean, you've got the 30-year down 21 percent from the highs. And so and this stock trades by 1.2 times book. So I think there are pockets there. I still like energy. I still like industrials. And I think industrials have actually held up remarkably well. And I think that's because they have very strong pricing power that they implemented a year ago. And so if you have strong pricing power and then you actually have input costs coming down, which is exactly what Cleveland Cliffs said today, then those stocks have operating leverage into the new year. Victoria, I know that you also have liked energy and continue to. And I wonder if there's not a little bit of a contradiction

in thinking that the economy is going to have a big leg lower. The Fed is still going to be resolute in trying to tighten things up. And yet energy can work. I mean, historically, those two things haven't really gone together. I know. I know I'm about to say the four worst words in investing, but this time it's different, I swear, right? Usually, typically, yes, the recession is bad for demand, but you're having such a rebalancing on the market that we've never seen this happen at the same time. You have an SPR refill support to oil and gas prices, and you also have this big disruption in the markets between what's happening with Russia and everybody rebalancing and wanting to secure their energy. So we see that we think 70 is about a floor.

We're still very bullish on oil and gas prices because you have the China demand picking up. You know, they finally seem to be getting over COVID zero. I think there's going to be fits and starts. It's not going to be perfect. But obviously, China demand, they're the world's biggest importers. So that's a huge driver. And then you have massive SPR refills we need to do.

And the U.S. government did that quite well, actually. They released it at 98 to 100 a barrel, and they're buying it back at 70. But they have a lot of, they're going to have to refill. We got to the lowest level since we started the SPR. So I see that floor in there. And the unwillingness of energy companies to do CapEx, if you look at the rig count, the rig count's been like 779 for over a month. And it's still well below where we were when everybody, when we were in the wildcatting days, is no longer wildcatting. It's all about the shareholder benefit with buybacks, with dividends, and the fixed and variable. I think it's a very attractive place to be. And for right now, I think that you, again, have the pricing power that Stephanie had

referenced, especially if you look at some of the service companies. This year was the year of the EMP. We think 2023 is going to be the year of the service companies. So we really like Somerset in that spot. Gotcha. Dan, just if you're expecting there to be a little more of a, you know, a reckoning that goes on in terms of, you know, the economy kind of catching down to what the Fed's doing and whatever, is the premise that it'll be a short and shallow downturn secure? I mean, do you believe it's going to be relatively contained? The only way to answer that question is to say I believe wholeheartedly that the only reason people are saying it's going to be a short... That's not true.

Most of the reason most people are saying it's going to be short and shallow is because of the enormous career risk one would take by calling for something much more dramatic. That said, there are reasons to think that the economy would be would be buoyed. You have the strong consumer balance sheets, the labor hoarding narrative that's that's been going around. So there's arguments you could make, but I think on balance most people that say it's short and shallow say it just because that's the safer thing to say. Well it certainly is safer, although I do think that the particulars of this cycle seem to move in that direction, it certainly is safer, although I do think that the particulars of this cycle seem to

move in that direction, whether it is, like you say, the structural labor mismatch or just the absolute level of activity we got to. And it's nominal growth. It sort of seems like a cushion. Yeah. I mean, listen, there are not the type of excesses that need to be worked off throughout the economy that traditionally are there or at least in certain pockets. You don't have. Well, I mean, other than inventories on the retail side of things, which clearly, as I think Dana Telsey was discussing in the segment before us, but there aren't these large imbalances that are going to necessitate huge declines, relatively large declines in GDP.

I think the jobs market, you know, people probably overhired, certainly in the tech space, and you're going to have some pain there. But on balance, I think it's a fair argument to make. My point is just simply to call for something deeper is just a difficult thing to do. And it's also always worth remembering that the unexpected is always an aspect of recessions and bear markets, and so you can't bank on it just being a nice and tidy one. Listen, it's a $20-plus, $20 economy, and we're not China, so who knows what's going to happen. Yeah, we can't control it or predict it.

All right, Dan, thank you very much, and thank you, Steph, and Victoria as well. Happy holidays to all. Let's get to our Twitter question of the day. We want to know, are you short heading into next year, as David Tepper says he is? Head to at CNBC Overtime on Twitter to vote. We'll share the results later in this hour. Now, we're just getting started here in Overtime on Twitter to vote. We'll share the results later in this hour. Now, we're just getting started here in Overtime. Up next, much more on today's pullback. Top technician Katie

Stockton is assessing the damage, where she sees the market headed from here, and where you can hide out if there's more selling ahead. Don't go anywhere. Overtime live from the New York Stock Exchange. We'll be right back. We are back in Overtime, another rough session for stocks with all three major averages finishing in the red, but also off their lows for the day. Our next guest says investors should probably brace for even more volatility ahead. Joining us now at Post 9 is Fairlead Strategies founder and managing partner Katie Stockton. Katie, good to see you. Good to see you, too. So you've been certainly suspicious of rallies and thinking that the market downturn remains in place. Are we anywhere close to culminating it or finding some relief?

Or do you think that this is just what we're in for through the end of the year? Well, I mean, I guess we found some relief already, right? And now I feel like it's been given back to some degree. And it's just a reminder of the downtrend that still very much has its hold. And we have lower highs, lower lows across the board for the major indices. And the newfound sort of concern for me is the mega cap downside leadership. So we have a breakdown in Apple stock, which the market just can't sustain that really. And its impact on market sentiment is quite bad too. So while I don't think we'll have a lot of downside between here and year end, although today was not a great day, I think we'll

see that kind of release to the downside in January. But that could be the step of something that gets us closer to the major low. So I have the hope that we'll see an inflection point sometime. So that implies you need to see some kind of a flush or something that's a little bit more, I guess, productive on the downside to create some kind of a better base. And we need often that kind of sort of capitulation. And I know it's a bit cliche, but in reality, no bear market cycle has ended without a VIX spike, the volatility index spike. And I think we'll at least see the volatility index hit maybe 48 plus before we have the end of this bear market cycle. And we don't know what

will get it there. But I think that the complacency is sort of real. It's interesting. It's starting to see and, you know, you have to be a little bit wary of these arguments, but starting to see explanations for why the volatility index is maybe not reflecting a lot of the concern, a lot of these daily expiring options, maybe taking some market share. Nonetheless, your point, certainly well taken. In terms of the mega cap leadership to the downside, that's really been the case all year, though, hasn't it? So is it now gathering momentum that you feel like it's going to be more decisive? I think it's really Apple. Yeah. So I think it's more about Apple, which had sustained

its relative strength to a degree that we hadn't, of course, seen from Amazon or Tesla, Google and Microsoft, or Alphabet and Microsoft as well. But now Apple's kind of joined the party on the downside, exhibiting downside leadership. And it felt like it was the last man standing in a way, in terms of the mega cap. So now that we've seen that sort of concede and now break down below some

minor support, I feel like the market with its heavy footprint will react to that. Now, you were here to ring the closing bell on behalf of your ETF, TAC, sort of tactical asset allocation approach. Where does that now sit in terms of your exposures and positioning? Well, we're very highly risk-off at this time. So we have positions in short-term treasuries, long-term treasuries, gold, and also a small position in energy, which is the only sector in our work that has maintained long-term upside momentum and relative strength. We hope to see TAC move into a more aggressive or offensive position sometime towards the middle of next year. So it would be our anticipation of that. I do see some traders and technical folks getting interested in gold at these levels. Not really the levels, but just seeing the trend.

Is it just the inverse of the dollar? I mean, what's happening with it that sort of seems like it has traction? Yeah, there's been some influence, of course, from the dollar. But the reversal in gold does seem real to me. It's a reaction to the long-term oversold condition that had characterized it. It was range-bound, so that long-term oversold is more meaningful in a range than it would be in a downtrend. So we're seeing a reaction to some real technical indications.

The dollar, of course, has lost some upside momentum, and that could be a tailwind for gold. But we are encouraged by the action in gold by the nature of it clearing multiple resistance levels at this point. And I say encouraged, not necessarily for the equity market, but for gold. Sure, exactly. And then just to get a little more specific, would you feel like maybe we have to have another thrust lower, volatility spike, some kind of capitulation? Presumably that would require the actual indexes

to make new lows. Yeah, we obviously don't know in advance, but I would think so. Yeah, I think that's what it's going to take. So thirty five hundred is support and it's an area for the S&P 500. Below that, we're looking at thirty two hundred. And that's been our targeted level really for months. And it still stands in our work in terms of previous breakdowns targeting that objective and also just based on where we feel the indicators will look better without having that crystal ball. Right. Exactly. It is kind of where a lot of the lines come together. It takes you well back from before the pandemic. Katie, great to have you. Thank you.

Thank you, Mike. Appreciate it. Katie Stockton. Still ahead, the year of the bears. That is what our next guest is calling 2022. Bespoke's Paul Hickey tells us what he means and what he sees for the market in the new year. Overtime, we'll be right back. Time for a CNBC News update with Bertha Coombs. Hi, Bertha. Hi, Mike. Here's what's happening at this hour. The House is on track to vote as soon as tonight to approve the one point seven billion dollar government funding

bill. The Senate overwhelmingly approved that package 68 to 29. It concludes forty five billion dollars in aid for Ukraine and election reform to prevent a repeat of the January 6th challenge to the electoral count. A key witness for the January 6th panel's investigation says she was pressured to change her testimony by Trump allies. Cassidy Hutchinson made the statements in testimony released for the first time today. Winter storm Elliott continues to blast the central U.S. with brutally cold temperatures, wind chills as low as 40 below zero in some areas. More than 100 million people are under winter weather alerts, including 11 million under blizzard warnings.

The conditions are creating massive problems for holiday travelers. Tracking site FlightAware says nearly 2,200 flights were canceled today, and another 1,600 of tomorrow's flights have already been scratched. Really rough for people trying to get together with their relatives, Mike. It is brutal, Bertha. Yes, stay home, I guess, if you can. Meanwhile, we have new developments in the Sam Bankman Freed fraud case. Mackenzie Segalos has the latest details. Hi, Mackenzie. Hey, Mike.

So Sam Bankman Freed has been released on a staggering $250 million bond while he awaits trial. He's had his passport confiscated and will be confined to the Northern District of California, where he's going to be living with his parents in their Palo Alto home. His parents co-signed the bond and put up equity in their house as collateral, which is due January 12th. The house is valued at $4 million on Zillow, a fraction of that $250 million bond. A former federal prosecutor described it as an unsecured bond, essentially an empty promise secured by his parents' interest in their home, which is all they stand to lose if he flees. There was no arraignment because the presiding judge was out, so Bankman-Fried has not yet entered a plea for those eight criminal

charges. That should happen at the next court hearing on January 3rd. Mike? All right, Mackenzie, I know you'll be tracking it. Thank you very much. Let's turn back to the markets. Stocks pulling back today, and with just five trading days left in the year, our next guest is calling 2022 the year of the bear. Joining us now is Paul Hickey, Bespoke Investment Group co-founder. Hi, Paul. I mean, just objectively speaking, of course, it was a pretty bearish year. We did get to certainly bear market levels in the first part of it. But but also it's been the mood that's also been dominated by the bears.

What do you what are you looking at here? Yeah, so, I mean, just as far as sentiment, I mean, you look at just the AAI weekly survey. You have bearish sentiment or bullish sentiment below the historical average every week this year. That's never happened in the history of the survey. You've never had a year where it's been below its historical average every year. So we have a real sense of malaise on the part of investors. There's a malaise in the economy and there's just a malaise everywhere we look. I'm looking for my cardigan sweater today just because I kept thinking about malaise so much.

But we're in the process of looking ahead to 2023, and there's really not a lot of positives. And you know it's bad when the best thing you can look at is you look back at prior years like this year, and you see that the last two times we were down 20% year-to-date, and then down in December, were 2002 and 1974. The year that followed both of those periods was positive, and that's the thing. When you're near market low and there's nothing positive to point to and say, this is why we need to rally, people are negative in all aspects. That doesn't mean we will rally from here, but it's just when you can't think of anything positive to find, that's usually

the case when you're closer to a low than a high. The economy, go ahead. No, no, I was just going to say, I mean, I would repeat that there are lots of concerns about this market and the outlook, but one of them is not that people's expectations are too high, it would seem, just in general, in terms of Wall Street strategists and, you know, and as you say, retail investors saying that they're quite bearish. And by the way, for anybody who's younger than us, the malaise cardigan reference was to Jimmy Carter several decades ago, and it was a good one. But how to read the sentiment flow in general? Because you could look at prior times this year when we

were similarly kind of skewed to the pessimistic side and it only gave temporary relief to the markets. Yeah, no, I mean, I think I mean, sentiment is just one aspect of things. I mean, the main driver is the Fed. That's no surprise to anybody here. And the Fed is talking more hawkish than they've ever talked at this point. There's a little bit of a difference, though, between what we've seen this year throughout the year. For the first three quarters of this year, the market was constantly playing catch up to the Fed. Pricing of Fed expectations was constantly, for the terminal rate, was constantly rising. Since October, we've seen that pricing flatten out to even decline slightly. So that's the market thinking that they've caught up to the Fed and we're not being, you know, trying to completely play catch up. The Fed seems to think that the economy is

a lot stronger than it is. I mean, all we have to do is look to your last segment. You have former billionaires now living at home with their parents. So that's how bad things have gotten at this point. But on the inflation front, you know, all signs seem to be pointing towards weaker inflation at this point. Obviously, yes, services seems to be stickier. But I think at this respect, we're going to there's a very real likelihood that you're going to have CPI with a three handle come early next year and you're going to have a Fed funds rate close to 5 percent. And that is pretty restrictive territory. And so as long as the Fed doesn't go much, doesn't ratchet

things up a little more here, I think we can stay in at least this range bound area that you've been discussing so much. You know, the market really hasn't done anything in over six months. That's right. And I do think it is still interesting that if you really do separate out either just all of tech or just the very largest growth stocks from the index, it's been a much less dramatic story on the downside. Whether that continues or not is difficult to say. But that group hasn't really gotten much cheaper, if at all, relative to the overall market, you know, in the last year of trying, so to speak.

Right. So, yeah, like you said, the average stock is up 4% since the last time the S&P was at this level in June. So underneath the surface, we've seen a little bit better performance. But the tech in general, it's gotten a little cheaper relative to the market, but it's still trading at a premium, an above average premium to the market versus history, whereas other sectors like materials, health care, and financials, which are much more reasonably valued relative to their history. So I think in that respect, you can see there's certain you have to take it sector by sector and even stock by stock, especially in the tech sector. So, you know, there's always a little bit of a discussion about whether to really reach for some some laggards or some discarded stocks at the turn of the year.

I'm interested in your thoughts on Disney, because not only has it been a huge underperformer, it's sitting at levels. This stock that it first reached in like 2014. It's over eight years ago. Yeah, I mean, Disney has just been a disaster this year for anyone holding it. And it's been extremely weak. It's back to its COVID lows. I mean, there are some major headwinds that Disney is facing. The content and cable issues is one thing. You have economic concerns, which would weigh on the stock if we do go into a recession. And you have some self-inflicted wounds by the company's prior management getting involved in areas where they probably could have just sat on the sidelines. So I think

with Iger back at the helm, I think some of these self-inflicted wounds may not be as prevalent. But you have this sector underperforming. There's only been two other times in the last 50 years where the stock has underperformed the market by as wide a margin as it is now. You have to go back to the early 80s one time and just after the 2000 crash the other time. So in that respect, I mean, I don't know if Disney is a good play for the next three months here, but if you're willing to hold on to this stock, it's a blue chip American company, and I think it will reward you holding on to it. Just they tend to do things right. Yeah. No, it's an interesting contrarian call right now,

given given all the noise in that group and with the stock. Paul, great to talk to you. Thanks very much. You too, Mike. Merry Christmas. All right. Take care of you, too. Up next, recession resilient retail plays. One analyst says bet on these stocks if you think the economy is headed for a big slowdown. We will bring you the names. And don't forget, you can catch us on the go by following the Closing Belt podcast on your favorite podcast app. Overtime will be right back. We are back in overtime. The retail sector getting hit in today's drop as recession fears grow on Wall Street. But my next guest has a few places to hide out in retail if the economy slows.

Let's bring in Peter Keith, senior research analyst at Piper Sandler. Peter, good to have you with us. I mean, I guess let's start off with the premise. So is it you think it's a pretty far gone conclusion that the consumer is going to struggle into next year that we will actually have the recession fears realized? Yeah, I think there's a lot of cross currents with the consumer. There's certainly some positives and negatives. I'm going to lead a lot of our hyper macro team. They think we're going to have this slow grind into a recession in the back half of 2023. And I kind of see consumer spending following that path. You probably see employment tick down,

savings is continuing to draw down. So we just see consumer spending overall not falling off, but just kind of slowly grinding down. And so we want to play names that we think could be a little more resilient to that type of backdrop. Yeah, what are the attributes of the kinds of companies that you think can withstand that pressure? Yeah. So a good example would just be companies that might benefit from some type of trade

down, right? If consumers are feeling a little more strained, they want more value shopping, where might they go as a place to save money? We think the dollar stores are a great place for that, like a dollar general. Now, interestingly, trade down hasn't occurred much in 2022 because there's just markdowns everywhere. There's been so much inventory across retail, there are promotions all over the place. The inventories are starting to get cleaned up. We think that is largely normalized for 2023. And so trade down probably accelerates

in our view, again, as the jobless claims likely tick up. So Dollar General is one that we really like a lot. It's a high-quality name to stay paid in that trade down environment. All right. Interested also in Planet Fitness as a thought that it's, I guess, some kind of a value play. Exactly, yeah. So, yeah, Plants, the value play in the gym space, it's their $10 a month membership. So, look, there could be some trade down there. People maybe pay $50 a month and they want to save some money. But what's great about Plants is that they are still not back

to their pre-COVID members per gym level. And we're going to January. It's really kind of peak season for new member signups. A year ago, their signup season got disrupted by Omicron. So now as we move into January, just in another week or two, we think they're going to be seeing a lot of new member signups. They're going to start off the year with a great start. And at the end of the day, it's a great value offering for the consumer at $10 a month.

So we don't think there's going to be any economic impact. And they comp very strongly in the last recession. And then love your quick thought on Boot Barn and why that's a recession proof category. Yeah. So Boot Barn's also kind of our favorite valuation play. You know, it's been really beat up this year. It's at about 10 times earnings. And in my space, stocks that have a lot of store growth opportunity just get really nice valuations. So, Booth Barn is growing store-based by over 10% per year.

Companies that I follow that do that generally trade at 20 times earnings. So, Booth, you're getting like a 50% discount at 10 times earnings. The reality is Booth Barn also just sells a lot of functional product. It's what people wear to the job. It's about 70% of the sales are functional use. And here again, on our macro team, we're seeing this big shift to onshore

and more U.S. production. So we think Booth Barn's very well positioned with kind of where the economy's going. And we think it's a cheap stock and certainly warrants a look interesting all right yeah it has been cut in half already in terms of share price so uh certainly low expectations greeting next year peter uh great to catch up with you thanks very much thanks so much bye all right coming up we're tracking some big stock moves in overtime pippippa Stevens is standing by with those. Hi, Pippa.

Hey, Michael. Lower avocado prices hitting one major producer. Plus, this EV name is on track for its worst month ever. Your overtime movers are coming up next. We are tracking the biggest stock movers in overtime. Pippa Stevens has them for us. Hey, Pippa. Hey, Michael. Avocado company Mission Produce taking a hit after fourth quarter revenue came

in below expectations. The company pointing to persistent cost inflation and said average avocado selling prices decreased by 10 percent. Part of that, though, offset by higher volumes sold. And Tesla shares extending today's slide, which saw the stock drop nearly 9% in its worst day since June. The company doubling discounts on some models, prompting concerns around consumer demand. The stock now down 16% this week, on track for its worst week since March 2020 and its worst month on record. And ChargePoint's chief technology officer is leaving the company. In the filing with the SEC, the EV charging company said the executive will depart on January 31st. Shares of ChargePoint slightly lower on that announcement. Mike?

Pippa, thank you. Appreciate it. Up next, you're set up into tomorrow, how you should position yourself following today's drop. We are back right after this. We have some sad news to report on a familiar face to many of our viewers. Guggenheim partners CIO Scott Minard passed away unexpectedly yesterday. He died from a heart attack while working out. Guggenheim founder and CEO Mark Walter releasing this statement today saying, quote, Scott was a key innovator and thought leader who was instrumental in building Guggenheim investments into the global business it is today. He'll be greatly missed by all. My deepest condolences are with his husband,

family and loved ones. Scott Minard was 63. To the results of today's Twitter question, we asked, are you short heading into 2023? The majority of you saying no, though close to 40 percent saying yes. That sounds pretty high in terms of a percentage of investors out there who might actually be outright short this market, down 20 percent so far this year. Let's get another look at how we closed out the day. The major averages all falling with tech leading the losses. We did see about a 1 percent rally back in the S&P from the lows. So what's the setup for tomorrow? CNBC contributor Victoria

Green of G Square Private Wealth is back with us. And thank you for coming back, Victoria. So just I mean, I guess the basic level, we saw another test of kind of the low end of this range. We are going to get some data in the morning, right? November, PC inflation, as well as University of Michigan sentiment. What would you be keying off of? Yeah, I think that the income and personal income and spending numbers we're getting out could move the markets a little bit like today. You know, if they come in hot, more spending, more income, that's a little more inflation. And also we're seeing consumers start to spend more on debt. So very interested where those numbers come in, what sentiment looks like, durable goods.

I think that data dump is going to move the markets. Looking at if we hold this 38 kind of support that held today. You know, we're looking at the three weeks in a row of downturns. Doesn't look like we're getting a Santa Claus rally, but sometimes it comes a little late. So I think we're going to have to see what the data comes in in the morning. And it probably is pretty light trading day tomorrow, though, because most people do take take some time off for the holidays. But I think we'll see what what Santa brings. It wouldn't be too surprised if it was a bit gappy out there in terms of liquidity conditions. And I always like to remind you, if we're going to go by the strict definitions,

the Santa Claus rally does get underway tomorrow. The Santa Claus rally, period. It's the last five trading days of the year, first two of the next. And what's interesting to me, too, is it's not so much that it's so strong, you know, on average. I think it's like a one one point two percent gain on average. But when it doesn't rally over that period, it is usually meant not so good things for the for the coming year. It's like an extra pin in the voodoo doll. Correct. Correct. And it is. It's a strange phenomenon. If Santa doesn't come the last week of the year, January looks pretty ugly. So we'll see. Twenty eighteen did see the Santa Claus rally kick in to kind of help help that disastrous end of the year there. We're not quite as off as bad as 18, but we'll have to see what's in the cards and if the support holds or if we see it give way with strong data, putting a putting more fuel on the fire of inflation. Yeah, exactly. And you know, what's interesting today, there was really not a lot of action in

the bond market in reaction to, you know, the GDP revisions or anything like that. It didn't seem to be the driver. I mean, do we think that the bond market more or less has the Fed priced or has the growth outlook priced and it doesn't have to do a lot? Or what's your read on that? Well, I think until it gets more kind of important data points, not to say tomorrow's data isn't important, but I think the bond market is going to move again when we get some more CPI numbers and some of the bigger data points. I think you're going to see further flattening and inversion. And I think the two year could continue to potentially move up if the Fed is right. So there's this huge disconnect right now in the bond market of what the Fed is saying and what's priced in with futures. And I think that is going to come to a head at some point. Either the Fed breaks like the bond

market thinks it's going to, or the bond market is going to have to very hastily and painfully readjust to a very hawkish, tightening Fed. And we'll have to see how long QT keep doing. There's a high correlation between QT and running off the balance sheet and what's happened especially to growth in tech stocks. If you look at that chart, that's a very, very highly correlated chart. So if you look at the bond market, I think you really have to think it right now. Do you believe the Fed or do you believe futures? Yeah, no, that is that is going to be the debate as we carry through the next year. Absolutely. Victoria, appreciate the time today. Thanks so much. Absolutely, Mike. All right. You as well. And that is going to do it today for overtime. Fast money starts right now.