Closing Bell - Closing Bell Overtime 9/1/22

Episode Date: September 1, 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, Sarah, thanks very much. We'll see you in just a bit. Welcome, everybody, to Overtime. I'm Scott Wapner. You just heard the bells. We're just getting started here at Post 9 at the New York Stock Exchange. And it is good to be back. Some big earnings reports are about to hit the tape. Broadcom and, as Sarah said, Lululemon will have those reports the moment they drop. And the most important things that you need to know as an investor. In the meantime, let's get right to our talk of the tape. The September trade for stocks, a historically hard month in the market. So will this time be different or is a bigger downturn coming? Let's ask the Wharton professor, Jeremy Siegel. He is with us now. Professor, it's good to have

you back in overtime. Welcome. Nice little comeback here today. Is it a sign of things to come this month? What is your outlook? Yeah, I think so. You know, I took a look at the, we've had a total of 27 inflation indicators over the last 30 days, producer prices, consumer prices, GDP, and even in today's ISM report.. Of those 27, 26 have been below expectations. Inflation below expectations. In fact, the price index in the ISM report this morning, the last two months was the biggest decline that we've seen in the price index, second biggest decline in 70 years. So only exceeded by the great financial crisis.

So the inflation news is really on the ground, really coming in really well. And that's why I'm, you know, I was shocked when, you know, Powell was sort of acting last Friday like things are just getting worse and worse and worse. It has to stay, you know, the course. You know, Scott, I look back at last September's meeting. So this is very important. Last September, half of the FOMC said there was no need to raise interest rates in 2022. Five said by only a quarter of a point. And the most hawkish members said we may have to raise by 50 basis points by the end of this year.

So do they really have the ability to see the future? Not really. Have their predictions been good? I mean, you know, Laura Mester says, you know, don't, you know, read my lips. We're not going to we're not going to lower rates. Well, you know, it was just a year ago when everyone said I'm not even thinking about thinking about raising rates. OK, I got you. But you know what? That underscores that underscores your overall point. And that is I don't believe the Fed.

And that's why Powell has to come out and continue to be hawkish. And others have to, too, because there are a lot of nonbelievers like you who don't think that they're going to do what they say they're going to do. Well, they certainly didn't do what they wanted to do last year because things got a lot worse. And now when the data on the ground is getting better, I mean, I thought Powell should have said, well, what are you looking at? If you're looking at year-over-year CPI government statistics, we know that housing prices come in with a big lag.

They're going to continue to push up those official statistics. But talk to the people on the ground in the real estate market. Look at the Kay Schiller report or the government report that just came out three days ago. Well below expectations. Actually, people on the ground tell me real estate prices are now falling. That won't be in the official statistics.

No, certainly not on the CPI for many, many months. But on the ground, things are looking so much better. So you think the Fed's going to make a mistake? That's what this boils down to. You think they're going to make a policy mistake? I think they're going to begin to say, hey, you know what? You know, maybe we don't have to go to 4, 4.5%. I mean, I think they should do another 100 basis points by the end of the year. You know, I mean, the market expects a bit more, but that does

fulfill a good tightening. I don't think they need to go higher than that. And, you know, scaring the market, saying we're going to stay high through 2023 when they have no idea what's going to be happening in 2023, I think it was really not a good image to project. The risk, of course, is what you're speaking to, is higher for longer. I mean, with all due respect, Professor, and I mean that sincerely, the Fed is saying what it is

because people like you, they may think you're in denial about what they are going to do. And a lot of people continue to hold this view of the pivot. And that's the picture you're painting here. Well, you know, Scott, you know, I was one of the very first to tell you we're going to have terrible inflation back in 2020, 2021. And your program, I said the Fed was so far. It was farther behind the curve than I've ever seen before They were way out, you know in left field. So now, you know, they they got religion. Oh my god

Yeah, we were really late now. We're just gonna show you how you know strong we're gonna be well You know, you don't when you're speeding 120 miles an hour You don't slam the brakes to go to zero in, you know, five seconds. I mean, you've got to be measured. I look at the money supply, which told you exactly what was going to happen to prices. We have had no growth to the money supply in four months. There are rarely times in history where that's happened. So they have slowed monetary growth.

We see prices on the ground that are going up listen if i saw sensitive commodity prices real estate prices money still growing i would not say no they're time to pivot and it's not time to quote pivot yet and start lowering rates but you know to say that you know we're going to just keep on raising through 4%, 4.5%. I mean, people are going for 5% and more. I think it's denying what facts are on the ground. I mean, you know, when you have 26 out of 27 indicators come in below expectation, how rare that is on inflation in the last 30 days, I think that's telling you that you've got a hold of this problem belatedly.

You've got a hold of the problem. I beg your pardon. I beg your pardon. I have some breaking news. Just hold your thought, and I promise you I'll come back to you. Let me go to Andrew Ross Sorkin, who's joining us now on the phone with a story regarding Starbucks. Andrew, what can you tell us?

Hey, Scott. We have some breaking news right now. The new CEO of Starbucks has just been announced, Lotzman. Now, Lotzman, he, of course, is the former CEO just stepping down earlier today from Reckitt Benkiser. Of course, they're the conglomerate that makes Lysol disinfectants and direct condoms and other things. He stepped down today. Lots of speculation about where he was going to be going, saying that he was hoping to take a job in the United States. Well, we can now tell you

that job in the United States is to become the CEO of Starbucks. He will begin as the CEO in April of 2023. He's going to spend the next several months, we understand, under the tutelage and working with Howard Schultz, of course, who's now the interim CEO of the company, who had come back to the company just last year to try to turn it around. He's put a number of steps in place to begin that turnaround process, and now will be handing off the company next year to Loxman to take on that role. Our understanding is that Howard Schultz will remain an advisor to him and a board member at Starbucks as well. Just to give you a little bit of background, Scott, on Loxman's history,

spent a long time as a consultant at McKenzie & Company, where he was a senior partner working in all sorts of industries for many, many years. Then in 2012, he moved to PepsiCo, where he rose to the ranks and worked for operations in Latin America, Europe, also in Africa. He was their commercial officer before going to Reckitt, where he's been praised, if you really look at what's happened to Batstock over the years. Of course, as I said today, it went down. But that was in large part because he was stepping down.

And now we know where he is landing at perhaps the most iconic American coffee giant in the world. Let me ask you lastly, I mean, you mentioned Schultz is going to stay on as an advisor, I think was the word, Andrew, that you used. Is this officially the beginning of the end of Howard Schultz having anything of critical importance to do with Starbucks once this transition is complete? You know, I think that that is clearly the intent. Having said that, just for context, as you know so well, Scott, covering Starbucks over all these years, Howard Schultz has stepped down before to name a replacement only to return to the company. They have named now two different CEOs, and in both instances he did come back to take over. I don't believe his intent is to come back again.

I think they're hoping that this sticks and this works and that he is going to take on the challenges that this company now confronts, of course, the biggest probably being this issue of the labor movement, unionization effort that's taking place at Starbucks. That's probably going to be job one. They're also, of course, grappling, like everybody else is, with inflation and their biggest growth market, which is China, still suffering from that lockdown. I knew it was kind of a loaded question when I asked you,

but I appreciate your answer nonetheless, Andrew, and the reporting, of course, as well. We'll get much more, I'm sure, from you in the days ahead. That's Andrew Ross Sorkin joining us there with the breaking news of the new Starbucks CEO. Professor, let me just come back to you real quick before I expand the conversation. So let me put all that into a box of everything you said, and I shake it up and I pull out the market. What do stocks do, in your opinion, for the remainder of the year, if in fact your view comes to fruition, the Fed is not going to raise as many times as people think? What does that mean for the stock market?

Oh, obviously very favorable for the stock market. I mean, I think the stock market is worried about over-tightening, honestly. And that's one reason why you get the paradox when there's a strong economic news, suddenly, oh my goodness, the yields go up and the stocks go down. I think that that's really what they're worried about, because I think the stock market is pretty smart. And they're looking on the ground and they see moderation and they would love at least Powell to acknowledge that there is moderation on the ground prices and that they will be looking at those rather than saying, you know, we're going to stamp out until we see inflation move down. I would, you know, he has to tell us what indicators is he looking.

The indicators I'm looking at, inflation is moving down. It is, but certain parts of it and some important parts, as you well know, are incredibly sticky and may remain, as I said earlier, higher for longer. Not just talking about interest rates. Yeah. Yeah. And that's one of the most important metrics, of course. Let's do what I said I wanted to do and bring in our CNBC contributor, Bryn Talkington of Requisite Capital Management and A.J. Oden of BNY Mellon Investor Solutions.

Great to have both of you with us. Bryn, does your view match with Professor Siegel's? He is essentially, I don't believe the Fed. Well, I mean, I think I was just listening. This is why we all love Professor Siegel. I think he points out that, once again, the Fed doesn't have a crystal ball, and they don't have a good track record about looking around corners and predicting the future. To me, what I think about is that if Professor Siegel feels that inflation is going to moderate, which it easily could, right, to what level is the million dollar question?

I can't imagine Chairman Powell coming out anytime soon, no matter what data comes out and says inflation is moderating after the speech he just gave about pain and vulgar and about wanting to see months and multiple, multiple months of lowering of inflation. So I'm in the camp that this is just going to take time and that the market's going to continue to be in this tug of war of looking at every single data point and trying to read through if that is, if Chairman Powell is going to reduce his rhetoric around the hawkishness. But I just can't believe, as I said in the beginning, he's going to pivot off that message he just gave us. So I think the market's going to continue to trade in this volatile range.

But I don't necessarily see why we would need to go to those 3,600 levels. And when the market had a great technical rally today, we bounced right off that $3,900, which to me is a great sign. I'm going to give the professor a chance to respond to you. But first, I want to show shares of Lululemon. To me, look higher in overtime. The earnings are out. Looks like a beat on the top and the bottom line. As I said, the stock's moving higher.

Sarah Eisen is going to bring us some exclusive comments from the CEO, Calvin McDonald. That's coming up a little bit later on in overtime. But there are a number of issues that they will be discussing, certainly the strength of the consumer. It looks like their same-store sales were a strong beat. There are questions moving forward about gross margins, whether the pressure there will continue. And we will find all of that out in just a moment.

Professor, back to you. And, A.J., I'll come to you next. So what's your reaction to what Bryn said? Bryn's always been, don't fight the Fed. You want to you next. So what's your reaction to what Bryn said? Bryn's always been don't fight the Fed. You want to fight them. Well, what I'm saying is when the Fed starts looking at the data over the next two or three months, they're going to see a moderation. And just like they changed from what they had planned a year ago, they will change. And they will see what I think the market is seeing.

The market wants him to be able to see that rather than the pendulum swinging because he was way too easy to be way too tight. Of course, he cannot back off and now say, you know, we're ready to moderate right now. But I want the flexibility and looking on the ground because I see a lot of favorable factors out there on the inflation front, which, as you know, Scott, I was one of the biggest hawks on inflation in 2020, 2021. Yes, you certainly were. So, A.J., given what the professor just said, if he's right, you know, is it time to be defensive now? Or is it time to think that, OK, inflation is going to moderate enough. The Fed isn't going to have to do as much as we think. And the stocks can actually have a pretty good end of the year and into 23.

I mean, I'd have to agree with Brent here. I think I think it is a time to be defensive. Ultimately, one month doesn't denote a trend. And so we the Fed is going to be looking for inflation to actually trend down. Now, we've seen energy prices come down and that's been some of a lot of the sources of inflation. But we're going to have to see wages or at least the labor market cool off a little bit. I mean, we had the Joltz number that came out yesterday with eleven point two million, which we're looking at double the job openings as we have unemployment and so for us we're staying defensive in this market we're looking at consumer staples utilities health care. And materials right now but we're underweight equities ultimately because we're

not gonna fight the fact we're gonna listen to them and take them at their word that they're gonna continue tightening forward we also have to add in that quantitative tight he's gonna accelerate this month that forty five billion a month is going to $95 billion. And the Fed still has to unwind a $9 trillion balance sheet. So we're going to follow the Fed here. What about that, Professor? QT doubling? Earnings revisions, they're going to happen, aren't they?

Unless you just don't think that they will. Well, you know, 90% of the time year ahead earnings are revised down over time. It's not unusual. Now, clearly, if we have a recession, if if the Fed over tightens, they're going to be revised down a lot more than that. So, you know, I think that that that that goes without saying. But, you know, when I when I look ahead and see stock selling at 18 times earnings, 17 and a half times earnings, even if they drop 10 percent from current projections, 19 times earnings, 19 and a half times earnings. You know, in a world where interest rates are still barely inflation, I still think that stocks are definitely the asset of choice. And for long term investors, I think that this is certainly the time to accumulate.

Short term, clearly. I think June was the bottom. We might test that bottom. I think it is. Long term investors, these are good prices for equities. Stocks, you say stocks are the asset class of choice. What if I say to you, OK, well, the yield on the two year, for example, is, I think, more than double now of the dividend yield of the S&P 500. So maybe there is an alternative to stocks and it is treasuries, Professor. Well, that's true. But don't forget, stocks are real assets, which means over time it's indisputable that they have over they've done better than inflation. When you get dollars from a treasury, it's never adjusted for inflation. So, you know, I think the fact that you hold real assets in an inflationary

environment with stocks and don't forget, we're forgetting about buybacks. If you add the buybacks, the dividend yield, you really get four or five percent, which is much more than the Treasury yield, which is not adjusted for inflation. I understand. Let me let everybody know as well. Broadcom's out and we are going through that. It looks like the stock is a little bit higher in overtime, which is notable because no space has been under more scrutiny these days than chips, as all of you know, especially with the NVIDIA news today and certainly what's going on in that space and calls that there's a lot more downside to go. So maybe this, you know, allays some of those fears. Again, we're going to have Christina Partsenevelos come on and tell us exactly what the case is

and why that stock is moving higher in overtime by a couple of percentage points. And we'll do that in a few moments. But Bryn, back to you. Even as you are a don't fight the Fed investor and you're more cautious than others, you are what I thought was interesting from your notes to producers today, saying you are dollar cost averaging into the market. Right. So investors have to remember this. The lower stock prices go, the less risk that is in the price today because the higher the future return. So when I say I'm defensive, it's like, what does that mean? As I've talked about all year,

we have a lot of covered calls in our portfolio taking advantage of that volatility. And so all year long for clients with cash, we have been taking advantage of these big down weeks, these big down days to add into the market. So we did that today. We'll probably do some tomorrow. And so we're doing smaller increments more frequently throughout the year because you want to be an investor and buy stocks in bear markets. Right. Because the lower they go, the less risk is there. It just doesn't feel that. And so I would say we're defensive in terms of how we're positioned. But I don't think sitting in cash waiting for some beldering is a strategy. You're going to miss it because stocks will turn higher. well, well ahead of the negative news being over with.

AJ, so that leads me right right to you. I mean, Bryn makes a great point. Not that you're trying to trying to time the market, which is all all but impossible. But maybe the scenario that the professor paints is going to come to fruition. Yeah, it's very possibly it could but i mean if the professor's saying at five percent and we're looking at potentially moving up a two year a two year at three and a half or even potentially going to four i'm not really getting compensated for the risk i'm taking at four percent that that the delta between the two so i i'd say that to be honest right now we're the reason why we're defensive is because we're asset allocators.

We're looking at long term. And right now, it's a lot of uncertainty of what the markets are going to look like and, you know, the rest of the year and even next year. And we haven't seen an earnings recession yet. And so for us, we're going to be underweight just because we're waiting to see how the next CPI print plays out if we seen that downward trend. And so it is possible that we could miss it just a little bit, but I'd rather protect my downside and let the right tail take care of itself. Yeah. Busy month ahead. Man, we have a lot on our plate. Let me get to Christina Partsenevelis now, as I said. She's had a chance to take a look at what's driving Broadcom shares higher by a couple of percentage points. Christina? Yeah, well, you had a relatively small beat on the revenue line, $8.46 billion when the street was anticipating $8.37.

Earnings per share came in a little bit higher as well. Guidance for Q4 also a beat. See, these are all strong numbers, especially in a time when the chip sector has been faced with macroeconomic headwinds, slowdown. And even the company said that they anticipate robust demand across their cloud service and solid demand to continue into Q4. So they're quite bullish for the next several quarters, or I guess I should say in the next several months overall.

And especially commentary there to point out data centers, broadband and wireless, all areas of strength. So this is a good news for the company, especially when so many other chip companies are getting hit in those segments. And that's part of the reason why you're seeing some of the stock go up higher today. All right. Good stuff. Thank you for that. That's Christina Partinovalos to the panel as well. I enjoyed the conversation. I hope our viewers did as well. Bryn, thank you. AJ, of course, Professor Siegel, I'll see you soon. Always enjoy speaking with you about the markets. Let's get to our Twitter question of the day. Now we want to know which of these sectors has the most September upside. Is it financials, health care, tech or energy? You can head to at CNBC Overtime on Twitter. Please vote. We're

going to share those results later on in the hour. And we are just getting started right here in overtime. Up next, six hundred and ten billion dollars worth of investment advice. Schwab asset management CEO Omar Aguilar. He joins us exclusively what he is expecting as we kick off a new trading month. We're live from Post 9 at the New York Stock Exchange. Overtime, we'll be right back. Welcome back to Overtime. The S&P 500 touching its lowest level in more than a month to kick off September. And Schwab says the pain is not over yet.

Joining us now, Omar Aguilar. He is the CEO and chief investment officer of Schwab Asset Management. It's good to see you again. Welcome back. It feels like everybody now is on the same side of the boat. More downside, more volatility. But you heard the professor, I hope. He's not as negative as everybody else because he

doesn't think the Fed's going to do nearly what it says. Well, yeah. Thank you, Scott. Thanks for having me. And it's good to see everyone. Well, you know, the volatility is probably the biggest driver of what we're going to see for the next few months. I think the market continues to try to gauge, you know, the straight up between inflation and economic growth. And, you know, these trade-offs between inflation and economic growth. And, you know, when it comes down to, you know, what is going to be faster, whether inflation is going to come down faster or the economy is going to just go down into recession, that particular trade-off, everybody's thinking for the Fed that will make the call. The reality is that a lot of the data points that the investors are focusing on now, they

tend to be lagging indicators. And I think what we're going to hear for tomorrow in terms of labor market, you know, still, you know, it's a lagging indicator of what may happen with the economy. And the reality is that, you know, the Fed will continue the quantitative tightening. We have been on the book of basically saying that the Fed will do anything they can to try to get that inflation and that demand destruction to try to keep in that stability they're looking to do. That obviously has ramifications. And the first one is higher volatility. We should expect higher volatility as people are starting to transition to that last phase of the economic cycle.

So you believe the Fed, you take Powell, the chairman, to be respectful, Chairman Powell at face value and all of the other Fed speakers who have come out and certainly sounded hawkish over the last many days. You believe that they're going to follow through on what they say? We believe that they will do whatever they take until they see that the inflation numbers stay in a course that they can control. I think the possibility, and if you think about the odds of a 75 basis points hike in September, it's roughly around 70 percent. And what that tells you is that, you know, the market is clearly believing that the Fed has more net less downside in trying to be aggressive and hawkish right now than it is trying to just, you know, give the market what they want, especially when you have still a fairly

strong labor market, a fairly strong consumer. And then granted that that's a big part of that is reducing. I think the the stage of the consumer is probably an area that we'll be looking into the next month or so to figure out how that evolves, because until now, that has been a very strong part of our economy. I feel like you're painting a no win scenario for stocks, at least in the near term. I could be wrong, but it certainly sounds like that's sort of the point you're making. But even given that, is there opportunity to be had in the stock market? And if so, where is it? Well, you know, I would probably just just to be clear, we always encourage people to think about the long run.

And I think this part of the of the volatility allows people to rebalance their strategy. So, you know, equities, you know, always have a space in the portfolio. And while they may be painful during short periods of time, it is very clear that in the long run, and I think, you know, the professor was saying this earlier, you know, they provide protection for inflation, they provide price appreciation, and they also provide income. So, you know, we always encourage clients to try to look at the whole picture and the long term as being part of their investment strategy. Now, yes, over the course of short periods of time, there will be volatility and clearly risky assets tend to be more volatile than the non-risky assets. The same thing happens when you see a yield so attractive as we have now in government bonds.

You know, obviously, there is a space for that that you can actually put when you put them together. So stay the course of your long term strategy. Try to look for those opportunities. And yes, be prepared to be sealing this volatility. And that's what long term plans help you with. What about outside the U.S.? We don't talk about it as as much. Maybe we should. Should we? Absolutely. And if you actually think about, you know, what the dynamics are right now, you basically have a situation where the dollar is being very strong in combination or a China slowdown and a significant, you know, chances of a big recessionary components out of Europe. When you actually put all these pieces together, number one, you know, allows you to seek opportunities of rebalance again with an international component,

particularly on the developed markets. But at the same time, that strong dollar is actually pretty good in terms of reducing the effects of inflation when you actually think, you know, what may come down the pike. So overall, you know, looking at international, it's always healthy for looking for diversification opportunities, but at the same time for looking of, you know, how you position your portfolio for the next phase of the cycle. Gotcha. Appreciate the time, as always, Omar. Thank you. Be well. We'll see you soon. It's time for a news update now with Tyler Matheson. Hey, Ty. Hey, Scott. Thank you very much. From the news on CNBC, here's what's happening at this hour. More details on the way about materials seized at former President Trump's home in Mar-a-Lago. The Florida judge says she will unseal a more expansive list. She also says she will not immediately rule on Trump's request for an independent review of the documents.

The White House calling on China to immediately cease, quote, atrocities against Uyghurs and other Muslim ethnic groups. The comments follow the release of a U.N. report that widespread detentions in Xinjiang may constitute crimes against humanity. China denies any abuses in the region and dismisses the report as driven by U.S. and Western interests. In his primetime speech tonight, President Biden is expected to say extremism fueled by former President Trump and his supporters is a threat to America's democracy. It's part of efforts to reframe the November election and build on recent primary wins for the Democrats. House Minority Leader Kevin McCarthy says Biden is trying to deflect attention from high inflation and crime. He will make comments ahead of the president's speech. On the news tonight, what Biden hopes

to accomplish with his primetime speech and how Republicans are pushing back. Plus, pilots hitting the picket line just before Labor Day weekend. Join me tonight right after Jim Cramer at 7 Eastern, Scott, here on CNBC. See you then. We'll do just that. We'll see you, Tyler Matheson, this evening at 7 Eastern. Up next, Ed Yardeni says there are buying opportunities in this tough tape. Where he is finding upside as we kick off a new month.

Overtime's right back. Stocks finishing the day well off their lows, all three major averages, though, still on pace for a third straight week of losses. Despite that tough tape, our next guest still sees some buying opportunities in September. He's Ed Yardeni. He's the president of Yardeni Research. Welcome back. Interesting note from you. You say, quote, we've seen both the highs and the lows for the rest of this year.

So where does that leave us as investors? Probably just as exactly as I suggested in a trading range. Question is, are we going to be closer to the lows or the highs by the end of the year? I think we'll be closer to 4305 than we're going to be to 3666. We have an economy that's growing very slowly. There is a sort of a rolling recession that's hitting different sectors at different times. Right now, the housing industry is obviously suffering quite a bit. Some goods producers are saying that there's been a shift by consumers away from goods to services. So I think that's kind of the nature of this beast. I don't think we're going to have a traditional recession that's caused by an economy-wide credit crunch.

You know, I've been describing this market as rather binary. It's either you don't fight the Fed or you don't believe the Fed. And it finds me here suggesting that you don't believe that they're going to hike as much as the market might fear and that you're still banking on a pivot, much like the professor at the top of our program was talking about. I'm not really banking on a pivot. I'm banking on the Fed being data dependent.

And I think the data is going to show, especially on September 13th, I'm counting on a really good number on the CPI. We know that gasoline prices came down tremendously in August, following a big drop in July. We know that used car prices are coming down. I think we're going to, we just had the purchasing manager survey today. We saw that its prices paid index has come down a great deal. So I think the fundamentals are going to start improving.

Some of the inflation was supply chain disruption related. And I think there's more and more evidence that that's what that's behind us. So the question is demand. And I think demand is slowing. It's certainly pivoting away from goods to services. And that should also help to kind of cool things off. So, I mean, I hope the Fed goes for 100 basis points at their next meeting at the end of September. Just get it over with. We're two and a half now in the top end of the range.

Let's get to three and a half. Markets are already there. That's where the two-year is at. The bond deal is basically anticipating that kind of move. So the credit markets have already tightened, done most of the work for the Fed. Well, the credit markets have forced, certainly the bond market has forced the stock market to catch up to it on numerous occasions. So that's what we sort of just went through. The question is, are we going to have another episode of that? Now, given all of this, if you question is, are we going to have another episode of that? Now, given all of this, if you if you think we're going to be in this trading range,

we teased this out, suggesting that you still think there is opportunity to be had. The question I want from you for our viewers is where is it? Well, I think technology, as we saw during the rally from June 16th through August 16th, a lot of the sectors that were beat up prior to that had a tremendous rebound. And I think you kind of want to stay with those kind of stocks because they are going to do well if the economy doesn't head into a terrible recession, as is widely feared, or the Fed winds up normalizing interest rates. By the way, normal interest rates would be very welcome as far as I'm concerned.

There's no reason why we shouldn't be able to live with interest rates around 3%. We've done it before. We'll do it again. So technology, I think semiconductors. I think cloud computing is going to be a very big use of cloud technology. Artificial intelligence is another area that's very important. Energy, any opportunity to buy some of these high-yielding, dividend-yielding stocks in the energy area, that makes a lot of sense. Financials, I think we're going to see a wave of M&A activity

in an environment where an economy is growing slowly. It's a competitive environment, and so there's a tremendous pressure for M&A. Forgive me for interrupting, but I want to push back, if I may, on this semis idea, because that seems to be an area that is a true battleground right now with a lot more negative than positive around it.

It is arguably the most cyclically sensitive part of the market right now. And some people think it's going down. That sector is by a lot more. Why isn't it? Well, I think the consumer side of semiconductors certainly is challenged. There's no doubt about that. Everybody's got a cell phone. I don't know how many people want to upgrade to cell phones that cost a thousand dollars. But I think the consumer is going to be an area of weakness. But enterprise companies, I think, are going to have to continue to spend a tremendous amount

on technology in order to increase the productivity of a very scarce labor force. And I think companies have come around to realizing that these labor shortages are chronic, and you're not going to be able to get more workers simply by paying them more. You really have to increase the productivity of the workers that you have. I got it. All right. He's Ed Yardeni, the president of Yardeni Research. We'll talk to you again soon. Thank you for being with us today. Lulu shares, they are popping in overtime. We do have exclusive comments from the CEO right after this break.

You're going to hear from a shareholder as well when we come back. And don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. Overtime is right back. All right, welcome back to Overtime. Shares of Lulu rallying on earnings. Sarah Eisen just spoke with the company's CEO. Sarah, I'm gathering he's pretty happy because they raised their guidance, too, and the market likes that. Oh, yeah, Scott, is a strong quarter and a strong outlook from Lululemon beating the bottom line by more than 30 cents over what analysts expected. Sales growing 29 percent and yes, raising guidance. I did just speak with Calvin McDonald, the CEO. I asked if he's seeing any weakness or any signs of change from the consumer.

We are monitoring our guests' behavior very closely and looking for any signs that would indicate a change in behavior. And as to date, we have not. We grew our men's business 27 percent. We grew our women's business 27 percent. We grew our women's business 24 percent in the quarter. Our traffic increased 30 percent in stores, over 40 percent online. New guest acquisition was up 24 percent. Transactions with existing guests up 17 percent. Positive comp growth in stores at 18 percent., online 32 percent and across the region.

So we're not seeing that. And it's driven by full price innovation. And that is another factor that makes Lulu an outlier here. It does get full price for its merchandise. I asked McDonald how with the category at leisure and retail in general, increasing promotions right now, he's able to do that. Promotions are back. Others in the category took price action. As we've stated, we took very modest price activity this year, less than 10 percent of our SKUs. We've implemented most of those. We haven't seen a reaction from our guests. And we continue to drive our business through innovation. But we were cautious on changing prices. And as the industry were more

aggressive, they're now course correcting a lot of that activity through promotional. And I just think we took a different approach. Our brand positioning is different. And we drive through innovation. So we'll keep monitoring it. But we've operated through a promotional activity in the past. And although it might have been less through the last few years, we have had heavy promotional periods that we've operated through. And the brand, the resilience of the innovation and the product positioning continues to be a unique offering in the category and will continue to operate that way. As far as inventories and supply chain, McDonald told me it's getting better. The shift to air freight, though, is still pressuring margins a bit, but inventories,

he said, are improving and he expects them to get back to pre-pandemic levels in the back half of this year and into next. The innovation certainly helped, Scott, including the belt bag, which is a key accessory seller during the quarter. Yep. No doubt, which you have mentioned. I'll keep my eyes on that. Thank you, Sarah Eisen. All right. Let's bring in Virtus. Virtus is Joe Terranova. He owns Lulu, joins for reaction. You were looking for more than the belt bag. You were looking for more than the belt bag beat. That's what you said in your note. I guess you got it. Yes, I did. I mean, this is really a tremendous amount of confidence on the part of management, both in earnings and revenue beat. Let's remember, this is a company that's identified by 2026 to double its sales.

They're doing that by offering products to men like myself. I love Lululemon's products and also expanding the footprint. So back in July, they opened their first store in Spain. But also the balance sheet looks really nice here as well, Scott. Let's understand that the operating margin, it was a 270 basis point beat. And then in terms of direct to consumer, that came in remarkably strong as well. So this is a great read into the affluent consumer. And so far, the macro environment is not impacting the affluent consumer. And Lululemon is a best in breed company to deliver products to that consumer. Yeah. As long as it

holds in. Right. And you've got to be happy. You bought it to 260 bucks on May 25th. You see it's over 300 now. But that does remain the big question, Joe. Does the affluent consumer get hit at some point? There has been remarkable resiliency to date. the answer to that question so far based on the evidence is is that the affluent consumer will be able to weather what's coming in terms of the economic contraction but that's why today scott it wasn't a quiet thursday before labor day because we're hostage to the fundamentals and the economic data releases. And we're going to get that tomorrow morning and we'll get more clarity. It's really going to be an interesting fall here. Gotcha. All right, Joe, thank you for joining us. That's Joe Ternova.

We're all over some big stock moves in overtime. Christina Partsenevelos is tracking the action for us as always. Hi, Christina. Well, we've got the slowdown in spending that have hit technology firms, but a relatively new software firm, seeing its shares soar on a stronger earnings report. Of all those details, when Overtime returns. We're back tracking the biggest movers in Overtime. As always, Christina Parts de Nevelos is back with us. What do we see? Well, let's actually kick it off with another check on shares of Starbucks.

The stock higher news we brought you just earlier in this show on the new CEO, Laxman Narasimhan, who stepped down as CEO of Wreck-It Ben Kaiser this morning, or this morning, and will take the helm of Starbucks. Starbucks interim CEO Howard Schultz will remain in the role through April, and you can see shares are moving a little bit higher in the OT right now. Let's move on to PagerDuty. Shares moving higher on a stronger earnings report. This is a software company that pretty much helps other companies troubleshoot their IT infrastructure. So although it's unprofitable, the company posted a smaller than expected loss on revenues of $90 million. Q3 revenue guidance was roughly in line

and the company's confident losses will continue to be even smaller than anticipated so it's definitely a more positive outlook for the software space and that is why you're seeing shares up almost seven percent higher and i want to call your attention to shares of nike they're moving right now oh they were two seconds ago but flat at the moment but this is likely in sympathy to lululemon's strong results. We did see a little bit of an uptick. You can see just right after the close here at 4 p.m. Because you all were watching OT. Scott? The charts don't lie.

Christina, thank you. Christina Parts of Nevelos. Still ahead, can you trust today's turnaround? Mike Santoli will tell us next in his last words. Let's get the results now of our Twitter question of the day. We asked which of these sectors has the most upside in September. 36 percent of you saying technology, energy, a close second with 30 percent of that vote. Santoli's last word is next. Mike Santoli is with us now just too oversold. It went down 9 percent in two weeks in an almost straight line. Some of the same types of extremes you saw generated at the June lows, just technically, they were present already. So the snapback ahead of a jobs number

makes sense. But in terms of today versus the June lows, the macro conditions, inflation is tracking lower. Break-evens are lower. Gas prices down 20%, high-yield spreads even come in. The only difference, GDP tracking better, too, the only real difference is what the market thinks the Fed is going to do in response to all that. Well, we'll see what happens tomorrow with the jobs report, right? Again, we're back to the old conversations we've had forever. Is good news bad news? Because a strong jobs report is going to have everybody once again saying, OK, well, 75 is on the table. That's going to be the reflex. By the way, 75 is now priced in like 70 percent.

Right. Seventy something. It might solidify the view. Yeah. Yeah. Thirty nine hundred. We held it. It did so far. Decent traction. As I say, trust it, but verify your old take. But there are technicians who say if you keep that, you know, that's important support and you could have upside from here as a result of holding that. It could serve as a quasi near retest of that low. That's what they're saying. All right. Well, we'll see what happens tomorrow. And of course, we'll have your last word then. All right. That's Mike Santoli joining us once again. I will see you all back on the desk tomorrow. Fast money begins right now.