Closing Bell - Closing Bell Overtime 7/22/22

Episode Date: July 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.

All right, Melissa, thank you very much. Welcome, everybody, to this Friday in Overtime. I'm Scott Watney. You just heard the bells. We're just getting started right here post-9 New York Stock Exchange. We get right to our talk of the tape as well. The countdown to a blockbuster week for your money. Earnings from Apple and Amazon, Microsoft and more. A critical Fed meeting followed by our interview with DoubleLine's Jeffrey Gundlach right here in Overtime. A good reminder for you there. I hope you'll join us then. So with all of that looming, will Tech's tear turn into Tech's troubles in the days ahead? Today's sell-off notwithstanding, it's been on a major run from the June low.

So just how good do those reports have to be to keep it all going? Let's ask BMO's Brian Belsky. He joins us live once again. Brian, it's good to see you. Welcome. Thanks so much for having us, Scott. Nice to see you. Man, there's good to see you. Welcome. Thanks so much for having us, Scott. Nice to see you. Man, there's a lot to look forward to next week.

And maybe this rally is, in fact, hanging in the balance for what happens next week. How good do those reports have to be? I think they have to be pretty good. I mean, so far, the earnings that we've seen have been actually pretty good, as I warned you, coming into the season. But next week is obviously 175 companies. And you nailed it in terms of the importance of these tech earnings. But also think about some of these big industrial companies, Scott, where we've feared in the marketplace with respect to foreign exchange

exposure. Companies like Boeing, which obviously had massive execution risk, and GE, which obviously has a lot of operations overseas. What's going to be really interesting is to see if we see that same sort of less negative tone, meaning numbers are not going to be as good as everybody thought, but are they going to be even worse than everybody thought? Meaning, is the market going to reverse tide and say, OK, they're not as bad as we thought, kind of like what we saw in some of the retail numbers this week, like the gap, or kind of like we saw in the banks, meaning they kind of swallowed that and said, OK, it's not as bad as we think.

So are they going to buy them after the earnings come out saying it's not as bad? So I think that's probably a theme that we're not talking enough about. But clearly, the big fangs coming out is going to really put either a damper on this rally or make it even stronger. Is this just a bear bounce? What is this rally at this point in your mind? You know, I don't think it's the bear market rally. I think this is a bottom.

You know, bottoms, you never know what a bottom is until you pass from one. I think to see and hear about this capitulation all the time is excessively consensus. We're looking for consensus. We're looking for capitulation for a long time. If we've learned anything in this business, Scott, and especially this year, this business is not easy. It's not easy. And this bottoming process is going to be difficult. And so that's why capitulation is too easy to make that call. And I think a couple, three weeks ago when they took energy out, and that was really the last of the generals to be taken out, I think that was the

bottom. And now we've had this massive outperformance of value. That's why growth has come back. Remember, if we're worried about a recession and worried about earnings going down, there's this notion of when growth is scarce, growth outperforms. That's why we've seen this kind of bounce back in tech. But we would say that be careful on the tech side. Stick with the high quality and stable growers. And I think we're going to get a great picture, especially in names like Microsoft and Amazon and the like next week. What if we don't? Well, I think the key thing is this. You look at Amazon's numbers and how they've changed year to date.

I mean, they've gone down. Their growth rate's gone down 69 percent, meaning we have a 69% negative change in their growth rate. So we could be playing a game again like some of these other retailers. What if it's down? What if the number actually beats? Remember, under-promise and over-deliver. I think the stable areas of the Microsofts and the Googles, I think, are the place to be. I think if you're looking for me to make a bear market bounce call, I think it's in the high multiple areas that don't have any cash flow and don't have any earnings. I think it's crypto. I think it's the SPACs.

I think that's the bear market bounce, not in the overall market. Yeah. I mean, aren't we going to be reminded, though, next week, you know, X those earnings, exactly what road the Fed is on? And it's a road that, you know, I don't know that stocks want to travel on the same one as the Fed. We're going to be reminded next week exactly what's going on, aren't we? Yeah, we really are. And I think, you know, the bond market, the stock market has been correlated here for the last couple of three weeks. And I think that's why we've seen strength in the market, number one. And number two, remember, we don't have a Fed meeting in August. We do have we do

have the Wyoming situation when they're going to be speaking. And so I think August is going to be very volatile. I think volume is going to be very sparse. I think a lot of people are going to be on vacation. And I think we could see these we could see some epic moves both in both directions in August and really get a true direction of the tape in September, especially off the heels of the comments that we're going to hear, hopefully from Powell on Wednesday. Yeah, but I mean, you're not addressing what I'm sort of alluding to, and that's the fact that the Fed's going to be raising rates a lot, right? I mean, and that's the reminder that's going to come this week. I hear you on no meeting in August, and we think we know that maybe it's going to be 75 in September, too. Who really knows? But if nothing else, he's going to remind everybody

that quantitative tightening is really just the beginning, really, and that a lot of tightening is going to be ahead and inflation is still way too high. I don't think we could ignore any of that. No, we can. And whether or not we're seeing an inflection point, maybe is that the best way to take a look at inflation with the average dollar or average gallon of gasoline now retracing two thirds of its ascension during during the Ukraine war. Commodity prices are right back to pre-war levels. You get lumber prices lower. You get bond yields falling, Scott. And I think that's not we're not paying enough attention to that.

We keep talking about inflation and apartment rents. But if bond yields keep falling, remember, mortgage rates are tied to the 10 year Treasury. So we could see a bit of relief in terms of these mortgage rates against something that nobody's talking about. So again, I think- Brian, they're falling. Why are rates falling? Why are rates falling? They're falling because of fears about the economy going into a recession. It's not a good signal of the reason why they're falling. Yet, it may provide a little bit of relief on the housing, excuse me, on the housing market. But let's not kid ourselves. Rates are going down because of concerns about where the economy is going. Rates are going down because because there are some measures of the

economy that have slowed. But unemployment still remains very, very strong in terms of the low numbers. We've seen rising claims and that and that's pretty likely, especially given the kind of path that we've seen that unemployment's got. But I think the key thing is that, yes, the economy is going to slow. Whether or not we're going to have a recession, that's already been baked into the market of this contraction. If you take a look at where Fed funds futures are showing, and you keep using, we hear a lot on the network, this term pivot, I don't think that we're going to see a necessarily clean pivot early on, but the Fed has to be kind of careful here not to be too aggressive on the upside,

especially if, and no one's talking about this, if actually we do see an elevator down in inflation. Inflation went up like an elevator. If we see an elevator down, which nobody's talking about, we start to see 7, 6, five handle in CPI, then the Fed has to really rethink what it's doing. I mean, people apparently aren't talking about a lot of the things that you're talking about. And I don't know if that's exactly the case, but I mean, there must have been like five different nobody's talking about that.

I'm going to tell you who else is going to be talking right now. And let's expand the conversation, bring in Victoria Green of G Squared, aalth. Steve Chivarone joining us, too, of Federated Hermes. So, Victoria, you've heard the case that Mr. Belsky has laid out. And now I want to have a debate because I know that you don't agree with much of what he said. Respect, really, I do disagree. I mean, next week is definitely make or break. It's either going to confirm this is a rally rally or it's going to crush it back into a bear market rally. And right now it's still in the classic throes of a bear market rally. We're not quite off 10 percent

from the lows on the S&P 500, but all eyes are on next week. I feel like this week was the warm up week. And the next week we get so much data with all the megatech reporting. Obviously, you have some concern on what social media may look like with the snap and the Twitter today, but generally all eyes on the Fed. And I think those two things, both the mega cap tech as well as the Fed and 175 S&P 500 companies reporting next week are going to either confirm this is a true rally or it's going to say, no, there's too many macro headwinds and you're going to see this flip right back around pretty hard. We are definitely concerned. I will freely admit earnings have not been quite the dumpster fire I thought they were going to be. You know, you've seen them a little bit stronger, but you're seeing so much muddled data.

On one hand, you have American Express saying, no, everybody's spending. It's going to be travel and everybody's spending so much more on travel and leisure. And we've got a good runway there. And then you have Verizon and AT&T saying, people aren't paying their phone bills. So you're getting these two different pieces of data, and you have all these macro headwinds. And we talked about them, right? Inflation, dollar, Fed, hawkishness.

How do we see these two factors and who wins out? I tend to think the macro factors are too much of a wall to climb, and I tend to think this is still a bear market rally. Steve, maybe maybe Brian's right. Maybe Jim Labenthal is right. Maybe those who have called the bottom are right. And that everybody just got too negative.

Still got PTSD from 08. Every crisis that comes up is the next 08. And we can't see the forest through the trees and that the economy is still pretty good to give the Fed some cushion to do what they need to do. And inflation has, in fact, peaked. Why is that not right? I'm going to cast my lot with Victoria here. I think if you take a step back for a second, you know, I keep hearing about sentiment being negative. Yet every month ahead of an inflation report, we fool ourselves into thinking it's peak inflation this month and then it's not. And we still haven't given up on the growth religion here.

As I look out, you've got every central bank in the world engaging in the most aggressive synchronized monetary tightening in a generation. You've got unemployment claims that are up roughly 70,000 from the bottom, which is the average increase prior to a recession. You've got credit card spend that's having the greatest 12-month increase on record, just as we're hearing some of the news from AT&T and Verizon. And I think what we're headed for here, you know, the market, I think, is too cute by half. It's playing out three steps on the chessboard, Scott. It's saying, okay, inflation today means the Fed's going to be more aggressive, which means the recession comes sooner, which means rate cuts come sooner, so let's buy now.

I think what they're missing is this can all take longer. I think rates are going to be higher for longer because if you want to crush this inflation that's entrenched, it's not just about energy. It's about getting wage inflation down, wage inflation down which means unemployment gonna go up and that's going to take some time to play out so we prefer to play defense right now we think this is still very much a bear market rally and we think that this this this landing this will hard landing softly I think it's a longer rocky landing something that's more like four to six quarters, not one to two. Be defensive now, get greedy next year is the way we're thinking about it. So Brian, right, kind of the point is

that earnings not quite as bad, labor markets still strong, are not equal on the scale next to what's happening from the Fed. The largest amount of tightening in, as Steve said, a generation. Those aren't equal. And what's going to happen from the Fed is likely to push all of the positives too far to the side to be able to keep this rally going. I think a four to six quarter forecast in terms of that type of slowdown and that type of bear market slash recession. If you go back and look at history, you don't really necessarily see that necessarily. I've been in the business 33 years. I've been through a lot of different recessions. This, to me, is starting to feel more and more like what happened in 1990.

And then we had a consumer recession that we snapped back really quickly from, and it was actually a very shallow recession, and the Fed didn't have to act that long. We saw a very big ramp-up the Fed didn't have to act that long. We saw a very big ramp up in unemployment claims the second half of 1990, only to the Fed to come back in and do what it did. And then we had a very, very shallow recession. With respect to the negativity, what was said just in the previous guess is, again, what everybody's saying. I like to take the opposite way, not just because I want to, but because I think that investors in general, the last 20 years have become way too macro-driven,

and they're not looking at bottoms-up fundamentals. And the one thing that I would tell you is that small mid-cap stocks and small mid-cap companies that are privately held companies in the U.S. remain very well positioned, are taking out baked loans, are trying to build their businesses. And that's the backbone of the U.S. economy. We talk about how strong the U.S. consumer is, but small companies are the backbone. And we're still seeing very strong flows in terms of loan growth there. Steve, are you not looking at bottoms up fundamentals? What part of the story are you missing? Do you want to retort what what mr belsky just had to say yeah and i'd say you know don't let the black hair and boyish good looks fool you i'm i'm 20 years in myself and i agree recessions usually are quite short and uh you know you do get

quick bounces but i think the difference here is that you usually have a fed that's already paused or cutting ahead of the recession you usually have unemployment that's higher and you have inflation that's much lower. So I think the Fed needs rates to stay higher for longer in order to get wage inflation down. And I think that's going to take some time. So I think that's what's different here. Now, in terms of individual opportunities on the small and mid-sized part of the market cap, I think that's right. Small cap growth underperformed 26 percent or underperformed 26 percent or underperformed 26 percent last year so there's some names that are beaten up and there's some individual stock opportunities but from an overall macro perspective i think we're not done here yet i think you're seeing a bear market rally and once the consumer cracks then i think you'll have seen

the bottom of the cycle we think that's late, early 23. Victoria, I'm surprised to see that you're still sticking to your 100 bips call. You think the Fed's really going to do that at this point? I mean, haven't haven't people come out since then and talked to those folks off the ledge? Why are you still sort of standing on it? I think they should do it. If anybody should be telling them, I mean, obviously they're going to listen to me, right? No, I'm just kidding. Look, they should go. Should and will are two different things, right? Should, what they should do. Yes. They already shouldn't have done what they did to get us to this point. But what they should do and what they will do and what it means to the rally are many different things.

I just think people need to be aware. I think it's still on the cards. Just look at the data that they've absorbed. And I kind of go back to what's changed. The market took 75 basis points just fine last month. The market's actually rallied a little bit. You've seen earnings OK, but then you've seen kind of weak housing data. Your unemployment's crept up a little bit, but that's still well below trend line. So they have the room to hike. And I really think they need to consider and they should consider going the full hundred. Canada did it. So come on, guys, we can do it.

But they have the room to do it. And if the market can absorb it, all I'm looking at the Fed doing is they're trying to slow things down. So why wouldn't you hike? It's been done before. 100 basis points is not, you know, something that's never been done before. Historically, it has been done, and it's been done in times of great stress when we're behind the curve like this. So I'm looking at them that they could make this adjustment, get us more in front. They know they're late. Everybody knows they're late. We know they were wrong. OK, let that water under the bridge. But now you could reset a little bit. And then if you did 75 and

then 50 or 25, I know we're all looking this taper down and I get it. It's not priced in right now, but by golly, I think they should do it. And I'm going to stick to my call. I hear you. And we appreciate that. Brian, I want to talk to you about the Nasdaq before we go. Obviously it's been incredibly strong lately. Does that have the potential of making these earnings even more dangerous and that they better be good to justify this move which has been an outperformance. They better be good, Scott, for those areas that don't have cash flow and have very high multiples and don't have stable earnings. I don't think that includes the Microsofts, the Apples and the Googles of the world. I think the higher multiple names, you're seeing that. No, they don't have to be amazing. I think what you're

going to see still stress on and why you saw that is the snap in the Twitters, which, again, are much higher multiple names. And our names actually that are part of this tech rally that actually, with respect to the overall tech sector, were the biggest frothy names in 2021 and are still in their process overall of normalizing. So I'd much rather pay for high quality earnings in those big cap consumer staple type names in tech, which I think the earnings are going to probably be better than everybody thinks. I mean, Apple is up 20 percent from its low from its mid June low. The bar has been raised as a result of that. I mean, you know, we can characterize what it has to be, but it better be decent. I mean, it better be better than decent. I don't know how you can suggest, well, they can just come in and it'd be better than feared.

And that justifies a 20 percent move in the stock off the lows, Brian. Well, remember, these names were also very oversold as part of what was happening in the overall tech space and what was happening in overall growth in general. A big part of Apple is also in the value index. And you've seen a lot of tech stocks also in the value index. And you've seen a lot of tech stocks shifting into the value index as of July 1. And so I think you've got to be careful in terms of throwing in, creating all tech stocks the same. Technology and consumer discretionary, by the way, are the areas that we, according to our work in terms of valuation and earnings growth,

have shown the most dispersion. And so that's why you really have to be individual stock pickers and not buy the ETFs within those areas. And so we'll stick with our call in terms of staying with the most stable, low standard deviation earnings growth areas in tech. And those are those big consumer staple names. I wanna give Victoria the last word

and I wanna leave people with an idea, something to chew on over the weekend, pardon the pun, but I'm talking about Chipotle as one of your top picks. Why here and why now for that name? Yeah, so I think of all of the kind of discretionary and where people are spending their money, both Chipotle and McDonald's have managed to actually continue to increase foot traffic. Chipotle is a really unique store. They're continuing to expand. They have their Chipotle lanes now for the drive-through. They have some digital online-only stores, which are much cheaper and cost-effective for them to run because there's less staffing. And then they have their traditional dine-in model. And I know everybody's saying, oh, but there's price inflation. And they have raised prices, which is good for their earnings. They're able to keep their same-source sales and margins and protect those by passing on the cost. And I think they're protected because it costs money. It costs more to do anything these days. Doesn't matter if it's grocery store eating out. So the fast casual or the kind of the cheaper end of dining out,

I think is still going to be a safe place because people still need to eat. And so even if Chipotle costs more, you know, going to a steakhouse is going to cost even more. And your grocery store also costs more. So because the bar has been raised across the board with inflation, I still think it's a cost efficient option that many families are still going to use. And they've made themselves more accessible via technology. And I think it's a really unique way that they said this online ordering isn't going away. Let's lean into it. Let's make it better. Let's make it more convenient for our customers.

All right. Good stuff. You guys are great. I appreciate it. You keep pushing for that 100 basis point hike. Absolutely. I hope they're listening. Maybe they are. Brian, thank you as well. Steve, to you, too. Talk to all of you soon. Let's get to our Twitter question of the day. We want to know what is the best tech bet ahead of those earnings next week? Is it Apple? Big run into the number Microsoft, Alphabet or Meta? you can head to at CNBC overtime to vote will share the results as we always do a little bit later in our show still ahead here call it a growth comeback tech investor Eric Jackson says growth detect has in fact turned a corner

we're going to debate him on that and find out the names he is betting on now for some upside when we come back in overtime. We're, of course, back in overtime. Growth stocks making a big comeback in the last month, up 7 percent from their mid-June lows. Our next guest says the group could, in fact, be turning a corner. EMJ Capital president and founder Eric Jackson joins us now. It's good to see you as always. I mean, I don't know if you heard the interview I just did with Brian Belsky, but he

says these are the exact stocks you don't want to buy right now. Why is he wrong? Well, I think Brian's pretty optimistic. And so in general, I agree with his take on where we go from here in the second half of the year. I would just say that basically, if you look back, something like K-Web bottomed on March 15th. So that's the Chinese internet stocks. ARK bottomed on May the 12th. So growth tech. XBI, biotech, also bottomed on May the 12th. Some other growth stocks bottomed in June 16th, Scott. So Bitcoin and all the other crypto assets bottomed on June 18th up till now. I think the bottom is in for a lot of these growth stocks. A lot of these growth stocks in these sectors were the first into this downturn in the stock market 18 months ago.

And I believe they're going to be the first one to out. Right. They were deservedly so the first ones in. They're the most sensitive to rates, right? They're the most sensitive to the risks of recession. So, yes, deservedly so they went down. They went up the most and they go down the most. Volatility is the name of the game with these. But are people going to come back to these stocks? Yes, because they have the growth rates. Ultimately, in a period of recession, in a period of inflation, people will always want growth. And so I think this sector is going to rise again. It's what they don't have.

That's the issue. And that's profits in this kind of market. Why would all of a sudden unprofitable growth stocks, which got way overvalued before, suddenly become back in favor if only the valuation has come down, but the profitability hasn't gone up? Well, I think you've got to sift through these names. And there's a difference. The best performing tech stocks of all time, take your pick, Google, Amazon, all the fang names, Scott, they've always been huge cash flow producers. So you've got to get to cash flow positivity eventually. But Amazon didn't get to cash flow positive from 1996 until 2002. If ARK had been around in the dot-com era, everyone would say, oh, my God, Amazon, it's one of these profitless tech companies. What was Kathy Smoking getting into this name? So you really have to think a couple of years ahead and determine which of

these stocks that might be cash flow negative at the moment or have lost money recently are actually about to turn the corner. And those are usually the ones with the best re-rating opportunities and obviously the best upsides with that. But it's funny to me. I keep hearing this. It's Amazon was this. Amazon was that.

It's like Amazon has become the proxy for every single frothy part of the market that's been deflated. Anthony Scaramucci sat to my left, was it yesterday, and suggested that Bitcoin was like Amazon back in the day. A lot of nonbelievers, Jeff Bezos on the cover of magazines, Amazon.bomb. Now we're talking about it again today. Not everything's the next Amazon, Eric. Yeah, no, you can't cherry pick. You're right. And I would say there's a big difference between a real business producing real cash flows and some cryptocurrency that we don't know how to peg the valuation of it. You know, so that's a fair point. But I would say that, you know, you know, pre dot com, pre 20 years ago, there there were other periods of recession.

So Belsky in the last segment, he mentioned in 1990, 1990, I think, is is the right comparison to what we're going through now. Now, back then, there weren't many growth tech stocks. I mean, there was IBM, but there weren't a lot of others out there. And I don't even know if you'd call IBM a growth tech back in 1990. But Oracle existed. It dropped 80 percent in seven months from March to October 1990. And the lead up to the to the big recession fears back then, similar to a lot of the profitless tech stocks today. Adobe back then dropped 65 percent leading up to that. What's interesting is the entire market bottomed in October of 1990, three months ahead of when the Fed finally relented and started easing. Could we see three months from now we're going to be in October?

Is that the time when we start to get signals from the Fed that they're actually pulling back and easing and actually thinking about rate cuts in response to what might be going on in the real economy then? I think so. And then Adobe shot back up, regained all of its 65% losses over the next six months. So it got back to its all-time highs at the time. Oracle 10x'd over the next three years from its bottom in October 1990. So yes, you've got to find real businesses.

You've got to find ones that really can turn the corner. But the opportunities are going to be there, and they're going to come from the growth tech sector. It's not going to, you know, you're not going to get mega returns from, you know, consumer discretionary health care, et cetera. I've got to tell you, I mean, it's gutsy to make a bottom is in call, and this is more than a bear market bounce call ahead of next week. Why do you want to get ahead of that? And do you think that, you know, because those stocks have run up so much, the mega caps that the pressure is is on to a degree that they really need to live up to? Well, obviously, today, everyone's focused on Snap, right, and how they basically, you know,

had a terrible report last night in overtime. But, you know, think a couple of days ago. Think about Netflix. Think about Tesla. They weren't really stellar reports, I would argue. And yet the stocks rallied for both of them. You know, what's going to be the name of the game for the rest of the earnings season from here? You know, next week, are we going to get sort of so-so, throw the kitchen sink type earnings where, you know, companies announce, meh, kind of second half results, and yet the stocks still rally because they've corrected so much for the bigger FANG names like Microsoft, Amazon, Apple? I think so. I think we've corrected so much in this first half of this year, Scott, that, you know, everything in the growth tech sector especially, everything's priced in in terms of, you know,

kind of the worst outcomes over the next couple of years, no matter what happens from here. So I think that we're going to see more Netflix and Tesla-type responses in the weeks to come. Yeah, I mean, you look at, you know, Netflix was cut in half. The bar was pretty low, right? People were expecting another bad report. Tesla's was was it what, north of twelve hundred down to seven hundred. So that had already come down a lot. These mega cap techs in many respects, you know, haven't they haven't been cut in half.

Facebook, notwithstanding the obvious problems that it had in the decline that the stock suffered as a result of that. And now they've bounced back a lot. So I just wonder what that does to expectations for how good they really do have to be at a time where we're questioning a rally in a still fragile market. Well, what I would argue is, you know, the magnitude of this drawdown for most tech stocks and the length of time, you know, 18 months, you know, most of some of these names, 70, 80, 90 percent off. I mean, you know, you just don't see bigger drawdowns in the history of the stock market. And so, you know, you mentioned Netflix. Netflix's drawdown since November to its low, which I think was 162, was 75%. But it did have

a greater drawdown, Scott. You know, back when it launched the Quickster DVD by mail, they sort of separated that business out from the streaming business, it actually corrected in five months, not seven months, 77%. So these things happen for tech stocks in general. Volatility happens. Apple has had something like three 80% drawdowns in the last 40 years. But it doesn't get worse than that. And I think we got to the levels in the May lows and the June lows where I just think the rubber band stretched about as far as it could. And we are due to slingshot back. All right. We will see. I can't wait for the week ahead. I hope you'll be watching us here in overtime and I know we'll be welcoming you back sometime soon. I'm sure of that. Eric, thank you. It's Eric Jackson joining us today. Up next, does this recent rally really have legs? Wells Fargo's Chris Harvey, he thinks it might, but he warns there could be a big reversal coming later this summer. He's going to tell you exactly why. He joins us next. Welcome back to the Bulls on Wall

Street have some new momentum that could carry this rally off the June lows a lot further. It just might, according to our next guest. That does not mean, though, that something ominous isn't looming later on in the summer. Let's welcome in Chris Harvey. He's Wells Fargo Securities head of equity strategy. It's good to see you again. Have we turned a corner or are we on borrowed time? I think is the is the real question. Scott, I don't think we've turned a corner or are we on borrowed time, I think is the real question. Scott, I don't think we've turned a corner. So coming into the summer, we thought you'd have a lot of volatility.

What we told clients is you're going to have some face-ripping rallies, and then you're just going to have some soul-crushing sell-offs. Right now, we're having that rally. Once we get through earnings season, the macro takes over, and we start to get worried about things. At the end of the day, until we see the Fed toggle down or the market believes the Fed's going to toggle down, it's going to be very hard to sustain any rally. So it's good for now, but don't get comfortable.

Yeah, I hear you on that. I do feel like, though, this rally has pushed you a little bit further out on your soul crusher call, if you will, that maybe you thought it was going to come a little bit sooner. And now you're willing to say, well, maybe it's going to wait until the end of the summer. Yeah, I think that's right. So what's happened is you've had the curve invert. I think all roads lead back to CPI. You look at CPI on the 13th. What happened? The curve inverted. That's when the back end or when rates back to CPI. You look at CPI on the 13th, what happened? The curve inverted. That's when the back end or when rates started to go lower. That's when demand destroyed, when the market got really comfortable that we're going into recession, demand destruction is going to occur.

But importantly, Fed fund expectations peaked and came down. So that's helping things out in the short term. But at the end of the day, we still have to deal with a slowdown. We still have to deal with the macro. And things aren't set yet. We don't know what the Fed's going to say. There's a lot of volatility. And until we know that the Fed is going from 75 to 50 to 25 or it's going 75 and pausing, it's just tough to to get excited about the market longer term. But if I'm if I'm on borrow time, but in fact, I do have more time, where do I want to be to try and make some money in that period? Yep. So I was listening to

the prior guests. And we're also in the value camp, excuse me, in the growth camp, right? We went from cyclicals to value and value to more of a growth camp. But at the end of the day, growth has run. If you're looking for a short-term trade, a lot of those cyclicals are kind of bombed out. They look oversold. You might get a bounce in earnings in that cyclical space, but that's just a trade. Longer term, we want some of these growth companies or former secular growth companies that are trading at a reasonable price. Scott one thing that people don't realize. Is three quarters of the bank have

representation in the Russell one thousand value index. I many of these companies are trading at reasonable valuations we think longer term. You can make a portfolio you can make. Some really good core positions out of this. But

they have run and tactically this is not the spot to do. You think we're gonna get through next week okay. I mean it spot to do it you you think we're going to get through next week okay i mean you must if you don't think we're going to have some massive uh sell-off yeah yeah i i think i think we're going to get there uh okay the wild card is always is a fed does jay powell say something out of the blue or unexpected that really riles the market one of the things that surprised me and one of the things that's keeping me positive is we started we were believing that margins would begin

to crack we're not seeing that just yet yes price is not keeping up with cost but companies are able to squeeze out productivity they're reducing uh certain costs whether it's advertising or otherwise which isn't a great long-term strategy but it's holding on tight the other thing is as we pointed out before the cost of capital has come down so the floor is a little bit higher so we're okay right now jay powell's a wild card we think you have a little bit more upside maybe 41 42 4300 you get there and we'd be a lot more cautious. And what we're saying right here right now, you're probably going to bounce out of cyclicals because they're oversold. But if you do,

take the money and run, start repositioning and growth and start getting looking for better balance sheets. You have, in fact, had some companies have margin pressures for certain. Now, maybe they haven't been as bad as you were anticipating, but Micron, Nike, IBM, Tesla. Right. I mean, we've heard from some companies that are, in fact, having those problems. Yeah. And maybe I just phrased that incorrectly. We thought it would be worse. It's actually holding up a lot better than we would have thought. And at this part in the cycle, we thought that margins would really start to come under a lot of strain. But companies are doing a very good job at holding them, in many cases, on average. You're right. Not all companies can do it. And some of the companies that aren't doing it are getting hurt. Others, you're seeing a little bit of forgiveness,

especially on the growth side. And we think that's kind of interesting. But we are still worried about it. And we would have thought it would be worse. And it's interesting that it's holding in. OK. Were you surprised by the banks? Did you expect much worse than we got? I mean, they weren't gangbusters, but they were far from the train wrecks that some were predicting. Yeah. Here's what I would say to that, Scott. We it's almost like clockwork at this point in time. Banks underperform coming into numbers, then they outperform post numbers. numbers and that's been pretty traditional and that's what we've seen happen that's what we expected to happen what surprised me is the move in city that was a heck of a move i i would not have expected that i did expect to see a bounce in banks but that move in

city was really impressive got you have a great. It's good to catch up with you. We'll talk to you again. That's Chris Harvey joining us again from Wells Fargo Securities. Up next, bracing for big tech. One halftime committee member is taking protection out as we gear up for a monster week of those earnings. We're going to break down the specific strategy you'll want to know about in our halftime overtime segment. Don't forget, you can always catch us on the go anytime by following the Closing Bell podcast. Overtime's right back. In today's halftime overtime,

bracing for big tech. You've heard about that a little bit this show. Cautious commentary coming out on one of the most widely owned stocks in the market. Halftime Steve Weiss is urging investors to put on this specific Apple trade ahead of earnings. You own the stock. I would sell some covered calls out of the money. If you don't, I'd buy the put. You can buy them pretty cheap. Those options are priced rationally for a change.

So expire next week. You get it in before the earnings. All right. That's Steve Weiss from Halftime. Now requis Requisite Capital Management's Bryn Talkington joins us now on Apple. She owns it. And when I think of covered calls, who do we all think of? We think of Bryn Talkington. What do you think of that strategy going in? Yeah, I mean, I think it's a sound strategy. But here's what you have to look at when you're selling calls. You want to sell a call on a stock that has higher implied volatility. So I was just looking at Apple. So for next week, the market has an implied volatility of around 5%. So that's telling you as an investor, the market is expecting a plus five or minus 5%

move. And so I don't see enough premium in there to sell the call to get the yield. We're sellers. You could say, yeah, I'm going to buy the put to get the yield. We're sellers. You could say, yeah, I'm going to buy the put, but the market is telling you Apple's probably not going to move around that much. So it's a sound trade. I wouldn't do it. I would do it on Facebook, though, because there is a lot of premium there. Tell me why. Which, by the way, you own too. I mean, you're all over next week, by the way. You've got Apple, Meta, Microsoft, the Qs. Yeah. Yeah. Yeah. Fun times. Fun times. And so with Meta, you can sell the 190. This is October. OK, so you got three months out. You can sell the 190 calls. It gives you around 12 percent upside. You're going to collect $10.20, which is around 6%

yield for three months. Okay, so that's a really nice, that is a really nice yield. So you have a big premium. Why are you getting that type of big premium on Facebook, but on Apple, you don't, it's because the implied volatility around Facebook is 12%. So the market's expecting plus 12 or minus 12. So that's a really good way to protect your position going into next week and still get, once again, that 6% yield for just three months. See, I love that you're taking us to trade school as well. Give us a last thought on what your expectations are

for next week. What are you most worried about? Well, the market's telling me today I need to be most worried about Facebook, but I'm not so sure if Snap and Twitter are a true through read through Facebook, but I'll just say the market doesn't like the stock. So I'm definitely most concerned about that. I think the market, what I'm more interested in, less concerned is on Apple and tech in general, Scott, 45% of tech revenues are overseas. And so with China, you need to see, with Apple, you need to see how they're going to

navigate China and not just the dollar, but like China, the consumer, because, you know, China's having a housing issue. They're having COVID lockdowns. They're having, you know, a real slowdown there. So I'm more interested to hear about how they're navigating it. But definitely, I would say that Meta or Facebook next week is going to be, I think, caused me the most agita going into the week. I got you. I should also say, of course, when we talk about covered calls, we think of Kevin Simpson as well. I knew he was going to text me, which in fact he just did. So I just wanted to get that out there, make everybody feel special for the moment. We will see you soon, Bryn. Have a good weekend.

That's Bryn Talkington joining us there. Up next, your rapid recap. Christina Partsenevola standing by with some of the big stats from this week. Christina? No, we did break a three-day winning streak, but not all is lost. Plus, Coinbase just had its best week ever. I'll tell you why after this break. All right, we're back in overtime on this Friday, closing out a big week for your money. Let's get to Christina Partsanova with your rapid recap. Christina.

The good news, we got off the lows of the day, but still broke that three-day winning streak for stocks. On the week, all indices closed over 2% higher, with the Nasdaq even up over 3%, driven by growth stocks. Communication services, utilities, healthcare were the only three sectors in the red for the S&P 500. But I want to jump over to the Dow right now, because we have some winners this week. Goldman Sachs, Salesforce, Disney, and American Express leading the pack. Amex having the most positive impact. Whereas names like IBM down 8% on the week. Verizon fell almost 13% after cutting its full year forecast. It added 12,000 net phone subscribers when the street was expecting 144,000.

Big difference there. Bitcoin ended the week up over 8%, while Ether is 22% higher in the week. That's the best week since August 2021. And that helped Coinbase have its best week on record, which really is just since April 2021 when it IPO'd. Next week, though, is a big week for tech ratings. It should give investors some clarity on the overall demand environment as the sector is already heading or already slowing hiring across the board. There you have it. Rapid recap. Scott, back over to you. We appreciate it. Have a great weekend. We'll see you on the other side of that.

That's Christina Partsenevelis. Up next, our two-minute drill. One money manager making the case for a beaten down semi-stock today, and it got downgraded to a sell today, too. Why is he a buyer? We'll find out next. All right, welcome back. Let's get the results of our Twitter question of the day. Now, we asked you, what is the best tech bet ahead of earnings next week? 26% of you said Apple, which has been up 20% from the low. But the winner was Microsoft, with 34 percent of you saying that is the stock that you want to bet on ahead of next week. Interesting. Thank you for

voting. All right. Up next, it's our two minute drill. Hey, be sure to catch a CNBC special tonight. Politics and profit. The Council of Economic Advisors Chair Cecilia Rouse and business leaders in solar, EVs, oil, and semis discuss all of the issues in Washington that could impact your portfolio. That is tonight, 6 p.m. Eastern. I hope you'll be there. It's time for our two-minute drill. Joining us now is Dori Wiley, Commerce Street Holdings president and CEO. It's good to see you. We're about to have a really big week.

What are your expectations? Are you nervous going in? Not really. You know, two thirds of the companies have been beating expectations. So surprisingly, but consistently, earnings have remained pretty strong. OK. All right. Fair enough. Let's talk about some companies you like. I want to start with Micron. I teased it earlier. You like it. And it just got downgraded to sell today by Morgan Stanley. Why should I put my money there now?

Well, I'm being contrarian. First of all, it's an industry issue, right? Softening demand, inventory issues, supply chain issues. But this stock has an incredible margin of 34 percent. They've gotten ahead of the curve on the cost cuts, moving that margin up to 40 percent. They lead the industry in a couple of their products i think everything's factored in so you got a forward p of single digits and a ebitda earnings value to ebitda less than four that's incredible even more so next week you know we've got this package of 52 billion dollars that should go through the senate and nancy pelosi likes it when it goes back to the

House to be very supportive to help a long-term issue. You get some good news in this sector, I think you'll see them all. Okay. Texas Capital Bank shares, number two. Why? You know, that's pretty interesting. They went through a drastic management change that's bringing in a drastic balance sheet change. So here you have a company that in the past traded at a premium, not for what it was, but for where it is. Now the company trades kind of for what it was instead of where it is and what it's going to be. It's very, very cheap. They've trumped the balance sheet.

They've got a very high capital position. They're diversifying their non-interest income stream and becoming what they should be, which is more of a commercial-based bank built from the deposits on top. I think it's a good buy. All right. I'm going to have to leave it there. Sounds like I'm having a little bit of an issue with your microphone, and we're running out of time anyway.

You have yourself a good weekend, Dory. We'll see you back. That's Dory Wiley, Commerce Street Holdings, the CEO and the president. Pioneer Natural Resources was his last pick, by the way. It does it for us. I hope all of you have a great weekend. I'll see you back right at this desk on Monday. Fast Money is now.