Closing Bell - Closing Bell Overtime: Bear Bounce or Real Bottom? 06/27/22

Episode Date: June 27, 2022

Stocks took a breather today after last week’s rally. So, is the market finally showing real signs of stabilizing? PIMCO’s Erin Browne gives her take. Plus, Nike reporting a beat across the board. CNBC’s Sara Eisen and Brian Nagel of Oppenheimer give instant color and analysis. And, Ed Yardeni says the relief rally is here to stay. He gives his expert take on the markets.

Thank you, John. And welcome to Overtime. I'm Mike Santoli in for Scott Wapner. You just heard the bells, but we're just getting started. In moments, we'll get earnings from Nike. We'll bring you the numbers as soon as they hit the tape, plus instant reaction from a top-ranked analyst. Plus, we're awaiting breaking news from the banks. The big financial firms expected to announce their capital allocation plans after breezing through last week's stress tests. Those breaking details are straight ahead. But we start with our talk of the tape. A bear bounce or a bottom? Stocks taking a breather today after last week's big rally. Despite today's minor losses, the S&P 500 is up more than 6% from its June 16th low. The Nasdaq even better with an 8% gain. So is the market finally showing real signs of stabilization, or is this just a run-of-the-mill bear market bounce? Let's ask PIMCO's Erin Brown. She joins me here at Post 9. Erin, great to see you. Welcome. Nice to see you as well. It's been the question we've thrown out there a few times here, and the pattern has been on the way down, you've got these 5% to 10%, 11% rallies. Anything different about this one, whether it be the macro situation, what we're actually looking at in terms of Fed headwinds,

or even just the rhythm of the market, or is this familiar to you? I think this is pretty familiar. I mean, you continue to see rates sell off today. So yields were higher, about six or seven basis points. You saw, I think, continued underperformance from some of those growth-oriented sectors. NASDAQ had a pretty big down day today, about down 1%. I think going forward,

until we start to see earnings really come down, I'm not going to be really confident investing in this market. And we still have to get through second quarter earnings. That's coming up in a couple of weeks. I think that's going to be key to watch. But we still have to see earnings estimates, which are still pegged for up 9, 10 percent this year, come down before you can really feel confident stepping in. That's definitely true. In the aggregate, the estimates have held up. People have pointed out outside of energy, outside of energy materials, you actually have had net downward revisions. Now,

modest, nothing that approximates what the stocks have actually done and therefore the message of the market. But you think that essentially it has to show up and be in front of investors and we have to actually see what the clear path is on profits through the end of the year? Yeah, because even listening to first quarter earnings season, a lot of corporates were still somewhat confident, still said that they hadn't seen the degradation in orders. Now, you have seen between first quarter earnings and now some companies coming out pre-announcing or guiding down sales lower. But there's still a lot of, I think, optimism based into or baked into numbers that I think needs to come out of the market even you know despite the fact in some segments you have seen some downgrades already and we haven't seen that and if you look

at earnings multiples they're still at you know sort of mid to late cycle valuations they're not at recession lows so until I see those numbers come down and until I see yields peak and start to come lower, I'm not stepping in front of this market. You mentioned today that Treasury yields were higher a bit. They actually picked up when we got the sort of durable goods number came in on the headline, better than forecast. Also, the pending home sales numbers seemed like it was an upside surprise.

Yields went up. Stocks backed off a little bit. So that's a dynamic that suggests the market wants to be able to see a point of when the Fed is going to be able to, say, mission accomplish and ease back. Is that wrong for the market to think that way? Is that moment not yet in sight for you? I think the moment is in sight, although it's going to take a couple of months. Right now, the Fed really has an inflation problem that they're trying to resolve. And I think, you know, they're going to see need to see more confidence that inflation is really starting to come down.

They've gotten the inflation call wrong. It's been a hard call for the last couple of months, even since the pandemic. And so I don't think that they feel fully confident right now that their forecasts are going to be materialized. And so they're going to see a lot, need to see a lot more data points. We feel they feel comfortable, you know, taking the foot off the acceleration in terms of rate hikes. We're not there yet. And so it's going to take several more months. The thing, key thing to watch this week is going to be the ISM print at the end of the week to see whether these regional Fed survey data translates to a weaker ISM number, which I think it will. We had pretty bad numbers from the regional Fed data.

And so I think you're going to start to see that really sort of percolate through the ISM data at the end of the week. We're talking about ISM manufacturing data, which clearly is, you know, kind of shows a better or worse versus last month, shows you the trajectory pretty well linked with cyclicals versus defensive stock performance over time. Where would you migrate then if this is the situation you see ahead of you where there's still a little bit too much residual hope I'm getting from you, that there is going

to be a soft landing, that the economy can do OK? What does that mean, I guess, on a practical basis for positioning? I don't think you want to be too bearish in terms of your positioning, but I think you do want to be very defensively positioned. So high-quality companies, healthcare, I think, is a great place in this environment. I think some high-quality tech can continue to do well. And some of the names that are more linked to automation and more of these secular trends

of digitizing, you know, sort of industrialization, I think are good. Where I'd stay away from is the names like the shippers, like the truckers, anything that's really linked to durable goods consumption, which I think is going to continue to deteriorate. Those are the names that you want to stay away from. Even names that you think are going to have margin pressure, like some of the consumer staples names also, I think, are pockets of potential weakness. But there are names like the big box retailers that have gotten crushed that probably offer value here because they're going to start taking pricing away from some of their suppliers. So I do think that it's more of an RV environment, but overall I wouldn't be stepping in front of getting really long equity beta

or getting really bullish right now just because you saw a couple of good days in the market. By RV I know you mean relative value, not recreational vehicle, although maybe we'll see how those stocks look as well. You said the market needs to be a little bit clear about when rates are peaking. And if we're not there yet, does that mean do you still see potential weakness in bonds

from this point forward? Or is it just about what the Fed is going to end up at? So bonds, I think, are starting to look really attractive. If you think about like the 10-year right now, it's yielding 3.15 percent that typically is you know it's pretty indicative of what you're going to get over the next 10 years for bonds we haven't been at these levels and you know quite some time and I think that particularly if we're continuing to see a slowdown which we're expecting I think that bonds are starting to look attractive and you know particularly relative to where they've been in the past. So I right now would be more inclined to buy bonds here

and wait for equities to stabilize than going out and buying a lot of equities. Yeah, and just recently, they've started to give you a diversification benefit again, bonds outperforming on down stock market weeks so far. Let's broaden out the conversation a bit. We'll bring in New Edge Wealth CIO Cameron Dawson and CIC's Malcolm Etzrich. Welcome to you both here. Cameron, you've been hearing the conversation. Anything look different to you about the rally we're

seeing right now relative to the failed rallies before? We started from a lower level. The market was maybe more oversold and valuations lower. Is that enough or are you still skeptical? Yes, we think that this is just a relief rally and that bear market bounce. We did see markets move too far, too fast to the downside. We got oversold. We also saw very weak breadth. We also saw a lot of short positioning. There were reports of record short interest coming out of prime brokerage desks. So we were clearly primed for a bounce. But what's interesting and similar to the May and the March rallies is that we haven't seen a lot of urgency from buying in this rally, which would tell us that this is not the start of a brand new bull market. This is not the start of

a V-shaped recovery and that we likely fail when we hit resistance at that downward sloping 50-day or 100-day probably at best moving average. Yeah, 20-day is really just above where the S&P, I guess, started today. We sort of threatened it. And then 50 is what? About 4,000 on the S&P 500. So are you sitting there looking to maybe reload bearish bets, Cameron, or is it just about being patient and looking for better entries? We think this is a fantastic opportunity to rebalance portfolios.

If you still have exposure to high growth, high valuation kind of innovation types of names, these are the areas that are going to see the biggest percentage rallies because they were the most oversold. And so it's a great opportunity to take the money and run and raise some cash to be able to rebalance into more value, kind of reasonably priced sorts of names. Because the reality is that the liquidity environment simply does not support the high growth, high valuation multiples. And growth still trades at a 70 percent premium to value. Over the long run, that's been closer to 35 percent. So double the premium now, we think that that's still at risk as long as the Fed remains on this tightening path. Malcolm, you know, there's been a lot of talk and with some justification, I've mentioned it over the past week or so, that there seems as if there was going to be a big rebalancing back into stocks at the end of this quarter.

It's been underway, most likely. Obviously, bonds have outperformed quite a bit. As an investor, if you're not necessarily trying to time the perfect low in the market and be tactical about it, is this a good time to rebalance more generally into equities? Would you wait and see? Do you feel as if we just have more of this sort of downtrending market to get through before there's a real opportunity there? Yeah, I think you laid it out well. If you're a trader who's looking for an opportunity, maybe in the next couple of weeks while we're in a bit of a lull waiting to see what happens with July CPI numbers and whether we'll get another- C. P. I. number above eight and a

half percent which I expect would be pretty dismal for the markets once again. If you're a person who's looking for the short term opportunity great but if you're a person who's looking more long term I agree with what your. Panelists have

said so far just with the fact that- we know that there's more pain to come as soon as Q two earnings numbers start to show. And as soon as we start to hear about- inflation numbers again. And we also know that Fed policy tends to take a while before it works its way through the system.

And so it's unlikely that we're really going to see that last raise at 75 basis points from the Fed really make the difference that the Fed needs it to, to signal to the markets that they've started to get things under control here. So to your point, I don't think that now is necessarily the time to be trying to jump in, expecting that you're timing the bottom. I think, frankly, now if you're rebalancing, that's great. But now it's also a really great time to be looking at the exit and say, if I'm a person who knows that I need to access some of the money I have in the markets in the next, say, six to 12 months, Here's a pretty decent exit ramp where things are a little bit more calm. And I know exactly what I'm going to get by placing a trade today. Yeah. Well, yeah. So this is obviously

presented a pretty good psychological test for yourself to see how much maybe your pain tolerance is at this point. Aaron, you know, Malcolm mentioned the CPI number. We're going to get, you know, I guess the PCE number that the Fed looks at in terms of inflation. It should be a little more muted, I mean, just by construction and all that. Are we not in a mode where we can look at commodities having rolled over and maybe look at how some of the housing effects could start to blunt themselves in inflation and see the market kind of gear itself, talk itself into this situation where it looks like we might be closer to an all clear, or is that a trap?

I think it's a little bit of a trap, only that the Fed tries to look through some of the commodity-based inflation measures. And when you look at what the Fed is focused on, whether it's shelter inflation, whether it's some of the you know service oriented inflation. That is actually going to continue to be somewhat robust over the next couple of months. So it's

really looking at what's driving core PCE or core CPI that the fed's going to be much more honed in on. And that's what we have to see start to slow in terms of the month over a month increases. And so I do think that we see start to slow in terms of the month over month increases. And so I do think that we're starting to see that roll over. You know, on core CPI,

we already saw that start to roll over, but it's still at levels that are uncomfortable for the Fed. And so the pace at which it rolls over and continues is going to be really important. The other thing that they're watching is inflation expectations, and that has ratcheted up. So that's also something that's going to be key for them to get under control. Yeah, that's that, to be honest, is is almost comical. Right. Because Jay Powell cited the University of Michigan sentiment survey inflation expectations number from a couple of weeks ago when he was trying to explain why they decided to go three quarters of a percent. Right. And then last Friday, we get the two week revision of that number and it's slightly lower. It coincides

with the three percent up day in stocks. I mean, it seems like we're we're sort of slicing this pretty thin in terms of what the indicators are. But I mean, if you live if you live by the higher inflation expectations in the University of Michigan, you can't expect the market not to take the bait on a lower one. right? Yeah, I think that's right. I mean, the market right now is focused on inflation. Like, that is the singular most important thing that's driving stocks on a day-to-day basis. And, you know, and growth, of course, as well, and how that's interplaying with the, you know, higher inflation. But so I do think it's going to be, you know, very key to watch these macro indicators

as they come out over the next couple of weeks in sort of an absence of corporate data. And then we're going to roll right into the second quarter. And that's what's going to be key to watch is how are corporates dealing with this higher inflation. Cameron, in terms of maybe tacking toward things that are less cyclical, more quality, or at least not the overpriced, as you would say, growth stocks. Where does that land you in the way of groups of stocks? Because it's interesting how there is so much overlap between what's defined as quality and what also seems like it was the overpriced stuff from the last cycle. Yeah. And it's not just about being overpriced from the last cycle, because a lot of those very growth equality names also had the pull forward of the demand that we saw into 2020 and 2021 because of the pandemic dynamics.

But when we think about how we want to shift portfolios as we move later and later cycle, what was dominant was the cyclical kind of late cycle names, things like energy and materials. Now we're starting to see signs of life of defensive late cycle names like health care. And those are names that are less sensitive to the path of GDP. There's more kind of secular demand trends there. They're trading at fairly good valuation multiples and the relative performance has improved quite substantially. So that's where we're finding a lot of opportunities. They screen well in quality, screen well in valuation, better relative performance. Healthcare seems like a great place to be. Malcolm, I mean, Cameron brings up energy. I mean, you had both an incredibly strong

trend, got very overbought, then an amazingly sharp correction down here. We bounced today. What would be your view of exactly where it could go from here? Yeah, so energy is going to remain a very tough one to predict as long as there's a war in Ukraine with one of the world's largest exporters of of oil. Right. And so it's really tough to get too, too excited and not get too over far, too far over your skis with the excitement around energy being the trade in a time when it's very tough to find very many positives in the market. And so people will kind of glom on to that as the new tech, if you will, where we had 2020 and 2021. Those were the go-to trades. I think energy is easily becoming the go-to trade simply because fuel prices are what they are. And so we expect the party will keep on going. But I would caution people that it's kind of in Vladimir Putin's hands to an extent simply because this war that's

being fought in Europe has such a very direct correlation with where oil prices will be, you know, in the next month, three months, six months, what have you. For sure. Even if crude is below the peaks right after the invasion, we'll see how it goes from here. Malcolm, Cameron, Aaron, thank you very much. Appreciate that. We do want to get to Nike earnings. They are out. Company beating on both the top and the bottom line. Nike earned 90 cents a share in its final fiscal quarter. That compares to 81 cents as a forecast. Top line, $12.23 billion in revenue. That's relative to $12.06 billion at the estimate.

You see the stock up about 2.2% at the initial reaction. Obviously, the stock had been down close to 40 percent from its highs. Let's get more on Nike's quarter. Sarah Eisen has been digging through the report and has more. Hey, Sarah. Hi, Mike. So you just mentioned the positives and potentially the relief is on that. I'll mention a few negatives here that will come as disappointments of what was wrong in the quarter.

China revenues were down about 19 percent. So clearly that was a drag. And that, of course, comes as most of China, a lot of China's cities were shut down due to covid at one point. Sixty percent of Nike's business was in shutdown mode. A lot of that is coming out on the other side right now. And there will be questions on the call about what they're seeing in terms of brand momentum in China and whether that recovers. But clearly that comes as a negative. North America revenues were down 5%. So what that tells me is that they're still dealing with supply chain issues, shortages of product and getting that product to the stores and everything like that.

Now, the bright spot here continues to be Nike direct revenues. They were up. They were $4.8 billion, up 7% compared to a year ago, 11% on a currency neutral basis. And now you heard that gap about currency neutral. So that's a big theme here in the quarter for Nike because it is being hit by the stronger dollar. Overall, revenues definitely were hit and would have been a few points higher if not for the stronger dollar, which cuts into revenues. As far as the different areas of the growth, really strong, it looks like in Europe, 25% growth in EMEA, 43% growth in APLA, and 5% growth there in North America.

The digital revenues, which is also a growth point for Nike, 15%, 18% on a currency neutral basis. So you get a theme here, and that is they're still seeing really strong growth on direct. They're still seeing growth on digital, but the strong dollar is cutting into sales. China is a weak spot for sure. And then the only other thing I just wanted to point out as I'm looking, gross margin, a decrease there of 80 basis points to 45%. And they explain why, primarily due to higher inventory, obsolescence reserves in greater China and elevated freight and logistics costs. So that's also going to be something to ask on the call, because usually what we see is that Nike's got good pricing power. They're able to keep margins rising as they're able to keep prices high with demand for the product. It looks

like they were probably here trying to clear their inventory or mark down their inventory in China to get ready for the new season as a result of all the shutdowns and that weight on margins. Overall, though, the stock is up, Mike, because it could have been worse. As you said, the estimates have been coming down, and so has the stock. Yeah, at least some modest relief there, Sarah. Appreciate all that color. Let's bring in Brian Nagel, Oppenheimer Senior Equity Research Analyst, for more on Nike. Brian, what are your main takeaways? I mean, Sarah detailed a lot of the headwinds from, you know, tough comparisons to obviously what's been going on in China.

Good afternoon. So, look, I agree with a lot of what Sarah said. I think she did a nice job kind of breaking down the results. I mean, as I'm looking through the Nike results here quickly, I think, you know, it's a bit messy, right? It's a bit messy, again, for a lot of reasons Sarah mentioned. The key here, as we get the conference call at 5 o'clock, will be this management team and how much of what we see here in this press release is just kind of transitional type pressures, especially

on that gross margin side. The way it's written in the press release suggests to me that it's probably one time in nature. And from that standpoint, it could actually be a positive because it almost seems like Nike's probably clearing itself out of these headwinds and preparing for smoother results ahead. So I think the underlying trends here are good, but the report itself is quite messy. Yeah, it's a tough spot. I mean, obviously, you would think that some of their products fall into the kind of goods categories that people bought enough of for a while. And now things that transitioning to services, the North American business, at least another piece of it, Brian, a company authorizing an 18 billion dollar share buyback over four years. That's, you know, that's reasonably a good size on a market cap of $170 billion.

Is that kind of altered the story at all? Look, it's a positive. I mean, I tend to look at buybacks like that as very much a vote of confidence from within the company. So I think it's a positive. I think it's probably also somewhat suggestive that Nike's moving past kind of the really heavy investment phase. Remember, this company over the past several years has been investing aggressively to build out its technology background. I think it's done that very successfully. I think this buyback announcement today is probably some signal that, again, they're always going to be investing, but they're

probably the meat of its gun. And then finally, just in terms of how the stock is situated, Brian, in terms of valuation, you know, roughly 30 times forward earnings. It had a much higher premium. It was 40-ish not that long ago. So some of it's bled away, but it's obviously, you know, not cheap, even if Nike always tends to trade at some kind of a premium. Well, look, I view the valuation as attractive here.

That's one of the key reasons we keep on recommending the stock. You know, clearly, you know, this is obviously a theme throughout the market. What the market's saying right now is there's a potential recession on the horizon, and that potential recession would be bad for Nike in very simple terms. I'm not totally sold on that idea, but I think even if we did get some type of pullback from the consumer, I think on the other side of that, Nike is extraordinarily well positioned. So, look, what we tell our clients is, you know, buy Nike for the intermediate to longer term,

and this valuation now having come down significantly from where it was is a detractor point. All right. Conference call begins pretty soon, 5 o'clock Eastern. We'll see what comes out of that. Brian, appreciate the reaction. Thank you, Brian Nagel. Let's get to our Twitter question of the day.

On the back of Nike's results, we want to know, what is the best athleisure stock to own long-term? Is it Nike, Lululemon, or Under Armour? Head to atCNBCOvertime to cast your vote. We'll share the results later in the show. Up next, Robinhood seeing a big bounce on reports that FTX is exploring a potential deal. We'll dig in on that move and what's at stake with an analyst just ahead. Overtime is back in two minutes. We're following a developing story on Robinhood. Shares rallying 14 percent into the close on

reports FTX is exploring a deal. Joining us now is Devin Ryan, analyst at JMP Securities. Devin, I mean, I guess just maybe in broad outlines as to whether it in fact makes sense for an FTX to try and bundle in Robinhood, what, 16 million customer accounts or something like that as a way, I suppose, of getting greater entree into retail equity and option trading. So is this something that you think is attractive if you're a Robinhood shareholder, I guess? Yeah, thanks, Mike. Well, first off, we're not surprised there's interest. Robinhood has a leading scale platform in the retail brokerage space. So if you want to break into that space, there's not many ways to do it in a scale way.

And so Robinhood would check that box. You know, they have $6 billion in cash on their balance sheet. It's a $7 billion market cap today. So, you know, the stock is quite cheap relative to the balance sheet value. And then strategically, yeah, I can see where FTX as a potential suitor would make sense. And, you know, there's obviously been other press that are looking at some other platforms in the space. The one last point here, though, is that the Robinhood management team, they own about 15 percent of the stock, but they have class B shares that give them a 10 to 1 voting right. So I don't see this as a fire sale. They own a majority, you know, 60 percent of the vote.

So really, they'd have to get the management team on board here, which, in our opinion, would have to be at a much higher price than where the stock is. And, you know, I would love to drill into a little bit the $6 billion in cash on the balance sheet. It's been mentioned quite a bit. I just want to make sure, is that genuinely unencumbered cash that's not required to be set aside for capital, you know, levels or anything like that? Because I've covered broken terms a long time. Nobody ever talks about cash on the balance sheet when you talk about financial companies. But is that, in fact, just a slug of cash that is not otherwise

spoken for? Well, the way we would explain it is that if you were to liquidate the firm, that's the cash that is available. So it is the firm's cash. Now, they do have an operation where they have to put up cash for clearing parties and to run the business. And so that's not all excess cash. But the point is that if you think about investment banks or brokers and where's book value, liquidation value, that's kind of the way we would frame this, that you have $6 billion of liquidation of cash that's sitting right there. Yeah. And you did mention that, obviously, with management having a lot of say as to whether

this company gets sold, the stock is still down 90 percent from its highs. Presumably, they don't feel as if there's any hurry, certainly from a financial basis, to find a partner. So do you place the odds of a potential acquisition relatively low because of all those factors, or at least at anything like the current price? Yeah, anything close to the current price, very low. We don't think the company's been seeking out partners. That's our opinion.

But to the extent it really makes sense for someone and someone wants to pay up, that's where the probability starts to increase. So our base case here is that the probability is still relatively low unless we get a lot more details and it becomes clear that the price would be dramatically higher where we think the management team might get on board. Because again, they have their class B shares or they have gives them kind of the majority vote in that alone, which I'm not sure everybody realizes. So I don't see a fire sale happening here if the current price suggests that. There's been the argument for a long time that especially even when Robinhood came public barriers to entry are not very high.

All in all discount brokers are zero percent commission right now. Obviously, they have a brand. They have a user interface. They have the identification among a certain generation with this is how you trade for free. But is that brand of a lot of value, do you think, still at this point? Well, I do think it is because, you know, they still own that kind of younger millennial segment, you know, the 30-year-old contingent. And there's been a pretty tough backdrop over the last six, nine months for trading, no doubt. And we all also realized that what we saw in the first half of

last year wasn't normal. But one thing that's actually been pretty encouraging has not gotten a lot of press is that they're growing their net deposits, meaning customers putting money on their platform at a 30% annualized rate just over the past couple quarters. So what that means is that their customers are still putting a lot of money at a very high growth rate onto their platform to transact and to interact with Robinhood. Unfortunately, the other side of it has been that trading volumes are down because we're in a really difficult trading market, which is affecting institutional accounts as well. So I do think there's a brand,

and I think you see it in that deposit level, that net deposits, which are growing at 30% annual. All right, Devin, appreciate you jumping on the phone and fleshing out the story with us. Thank you very much. Thanks, Mike. All right, time for a CNBC News Update with Shepard Smith. Hello, Shep. Hi, Mike. From the news on CNBC, here's what's happening. The January 6th committee scheduling a surprise public hearing for tomorrow afternoon at one o'clock Eastern. We don't know much, frankly. The committee would only say it'll present new evidence and hear witness testimony, but it didn't identify any witnesses as it has before in earlier hearings. Negotiations on the Iran nuclear deal set to resume this week. A State Department official is saying indirect talks with Iran will happen in Doha, Qatar. A key sticking point,

Iran wants its Revolutionary Guard removed from the U.S. terror blacklist. The Biden administration says that is outside of the scope of this deal. And an Amtrak train derailing just a couple of hours ago in Missouri. Amtrak says a train from Los Angeles to Chicago hit a dump truck at a public crossing in Menden, which is about two hours north and east of Kansas City. The Missouri Highway Patrol reporting at least eight cars have derailed. We know there are casualties. We don't know how many or how bad. This is the second Amtrak crash in two days. Three people were killed on Sunday in California crash. Well, tonight, updates on that situation in Missouri with the train,

plus the nationwide fallout from the Roe v. Wade reversal, and more missile systems headed to Ukraine. On the news, right after Jim Cramer, 7 Eastern, CNBC. Mike, back to you. Jeff, thank you very much. Up next, inside the relief rally, Ed Yardeni is breaking down the five key themes that he's watching in the market. He joins us just ahead.

Plus, we're still awaiting breaking news from the banks. Big lenders gearing up to announce their capital return plans. We'll bring you all the headlines and instant analysis. Overtime, we'll be right back. Stocks taking a breather today from last week's big rebound, but my next guest believes the relief rally is here to stay. Let's bring in Ed Yardani, president of Yardani Research. Ed, good to see you. Thank you very much.

So, you know, selling every 5% bounce this year has been almost as easy and reliable as buying every 5% dip was in 2021. Why do you think that might change here? Well, I think the focus clearly has been recently on commodities as reflecting the very short-term outlook for inflation. And so I continue to watch commodity prices. They've been relatively weak over the past couple of weeks. And I think that's been one of the drivers of the relief rally that we've seen. I think that's been one of the drivers of the relief rally that we've seen. I think that we're going to continue to see that commodity prices will be

volatile. We'll continue to look somewhat as though they're peaking. And if that's the case, I think that should help a lot. Another very important factor for this relief rally has been sentiment. Sentiment has been absolutely awful. As a matter of fact, when the market bottomed a week ago on Thursday, it bottomed at 3,666, which, by the way, was 3,000 points above its 666 intraday low in the previous bear market. But what's fascinating is that sentiment, according to the bull-bear ratio put together by investors' intelligence, is now as bearish as it was back in March of 2009, which was the very bottom of the bear market when the market was down by over 50%. And now the market, as of Thursday a week ago, got down 23%. And sentiment is as bearish as it was back then. So I think there's a contrarian

perspective. Things aren't that bad. And I think the fundamentals of the economy are going to continue to show the economy is growing, albeit at a slow pace. Yeah, there's no doubt that we're seeing some pretty rare extremes in terms of negative sentiment and have for a while. But you know what people will come back with and say, yeah, but we hit those types of levels in terms of investor psychology, in terms of positioning in 08, you know, months and months before you got the ultimate low. And then naturally, somebody says, yeah, commodities are rolling over. Doesn't that mean we're in for a bit of a downside growth scare? So it seems like you're never going to escape the on the other hand with these calls. Yeah, look, I think the relief rally is I think the word is still relief. I think there's some more upside here. But I think we might have very well made a bottom at three thousand six hundred

and sixty six. And I think we could be in a trading range for a while. I think we can go a little higher here, maybe forty one,100 or so. But you're right. The problem we have is the market went down almost entirely on valuation, actually entirely on valuation. And here it's bounced from a low of around 15 forward PE a week ago to now around 16, 16 and a half. It's hard to imagine that it's going to go back up to 18 or 19 after all the agita that we've seen in the markets about valuation. So I think the optimistic side of me suggests that we may just kind of consolidate here for a while, that we may have very well have seen the low for this bear market. Ask me again if we go below 3,666 but again i think the inflation story is going to show more signs of peaking i think the economic indicators like today's economic indicators on orders and

pending home sales will continue to show that there's still plenty of life in this economy yeah i mean there's no doubt we've had recession scares that seemed as saturating as this one has been with everybody more or less anticipating it and not really been that close to a recession before. I wonder how the inflation picture fits into all this in the form of and been trying to point to this higher nominal GDP growth than we're used to in the past cycle when it came to, you know, maybe we're not going to grow much in real terms. And meaning that is that a cushion for companies? This the fact that the overall nominal GDP is still relatively healthy. Well, that's been the kind of the wild divergence in the market. You've had investors who are very bearish and they brought down the valuation multiple dramatically. At the same time, the analysts have continued to raise their earnings estimates, and that's

partly because of the very point you're making, and that is pricing. Obviously, as prices go up, S&P 500 revenues are going to go up. That happens automatically. But the remarkable thing that seems to be happening, or at least that the analysts believe is happening, is that companies are holding on to their profit margins. They're able to pass through their costs into prices. And as a result, earnings are going up at about the same pace as revenues, which means that they're also reflecting inflation. So for now, stocks actually look like a pretty good inflation hedge. Obviously, if this all turns into a recession, that's not going to be the story at all. Right. Yeah, absolutely. And just, I guess, on a hypothetical, if, let's say, June, that low was ultimately as low as we get thereabouts,

would you expect the leadership of the market to be different this phase versus what it was going into the peak in January? Well, again, from a contrarian perspective, everybody wants to be in value now and nobody wants to touch growth. And yet we've seen the biggest discounts, discounting in terms of pricing. The biggest sales have been on these growth stocks, especially the ones with earnings. I have no interest in technology names, for example, that don't have any earnings. But there are plenty of technology names that have earnings, that have great prospects for the future. Capital spending, I think, is going to remain remarkably resilient, primarily because there's a labor shortage and companies are going to have to spend on technology and capital generally in order to increase their productivity. And that's that's an ongoing process that's going to continue for for quite some time.

Yeah, which in itself over time is, in theory, disinflationary, too. We'll see if that all plays out according to plan. Thank you very much. Good to talk to you. Thank you. And you're Danny. We've got a news alert on Robin Hood. Steve Kovac has that story. Hi, Steve. Yeah, Mike. So we got a statement in from Sam Bakeman-Fried,

not exactly denying the report that they're discussing internally about buying Robinhood, but he is denying that they're talking directly with Robinhood. So let me just read the statement off to you. We are excited about Robinhood's business prospects and potential ways we could partner with them. And I have always been impressed by the business that Vlad, that's the CEO, and his team have built. That being said, there are no active M&A conversations with Robinhood. So very clear there that they're not talking directly to Robinhood about buying the company, but not exactly denying that they're speaking internally about it. Mike?

We're trying to find a way, perhaps, as a shareholder, of course, as we know, of Robinhood. And as we discussed in the last interview there with Devin Ryan, management has some voting control here. You can't just sort of make an offer and expect it to go. Steve, thanks a lot. Appreciate the update. You got it. All right. Up next, we're watching the biggest movers in overtime. Christina Partsenevel is standing by with that. Christina, what's on deck? Well, we've got Ford's first ever electric vehicle recall and one airline offering pilots triple pay to help with the labor crunch and those dreaded flight cancellations. I'll have those details coming right up.

We have breaking news on the banks. Let's get to Leslie Picker with the details. Hey, Leslie. Hey, Mike. Yes, we've got a couple filings here. JPMorgan Crossing just moments ago saying that they plan to maintain their dividend, their quarterly stock dividend, at $1 per share for the third quarter of 2022 in light of their higher future capital requirements set by the Fed. That stands in contrast to some of its peers that have also announced their plans for capital distribution.

Morgan Stanley, for example, announcing that they plan to increase their quarterly dividend to 0.775 cents per share from 0.770 cents per share. In other words, about an 11% increase there. The board had authorized a new multi-year common equity share repurchase program also beginning in Q3. And Bank of America increased its quarterly common stock dividend as well to 22 cents per share. That's an increase of about 5% and renewed their buyback program in October 2021. So no major updates there. They said that they did still have about $17 billion remaining in that program as of March 31st. But you can

see their Bank of America shares up slightly, JP Morgan down slightly, and Morgan Stanley was the big mover on these results so far. That stock is up about 1.8 percent right now, Mike. I just did a quick bit of math. Morgan Stanley's new dividend level gets it exactly to a 4 percent dividend yield on the closing stock price. So who knows? Maybe a coincidence or not, but that now outyields JP Morgan at about 3.4 percent. All right, Leslie, thanks for keeping track of it all. Appreciate that. Up next, our two-minute drill. Top stock picks for your portfolio. Over time, we'll be right back. We're tracking the biggest movers in the OT.

Christina Partsenevel is here with all that. Hey, Christina. Hi. Well, we'll start with Ford Motors because shares are slightly lower after announcing a car recall. The company is recalling 2,900 F-150 Lightning trucks because of a software issue that may not actually notify drivers that the tire pressure is low. So it would be the first recall for the Ford electric pickup truck. Fortunately, no accidents have been reported thus far. And we just actually just heard from our own Leslie Picker about Morgan Stanley's dividend increase, but in separate news from the bank, Reuters is reporting that Morgan Stanley is the latest financial firm to expand their

health care policies to cover travel costs for those seeking an abortion. Morgan Stanley would join Bank of America, JP Morgan, and Citigroup who have all agreed to cover travel costs. And a new story to hit the wires from our web team. American Airlines regional carrier Envoy Air will offer pilots triple pay to pick up trips this July. This after the American Airlines regional subsidiaries already agreed to a 50% pay bump earlier this month. The pilot pay bump comes after airlines canceled over 700 flights today alone amid a labor shortage. Mike?

Wow. I feel bad for a lot of people right now. Yeah. Yeah, no kidding. Maybe they're soon. We'll see. Christina, thank you very much. Another check on Nike.

That's stuck up just slightly now, about 1% after reporting earnings have been on the top and bottom line. We're waiting for that conference call. And it's a last call now to vote in our Twitter poll. We want to know what is the best athleisure stock to own long term. Nike, Lululemon or Under Armour. Head to at CNBC Overtime on Twitter. Vote and we'll bring you the results straight ahead. We'll be right back. Coming up, a top tech pick for your portfolio. One money manager sees some serious upside for one key name. He'll reveal his pick after the break.

Let's get the results of our Twitter question. We asked, what is the best athlete or stock to own long term? 47% of you said Nike. 41% said Lululemon, just edging it out. 47% of you said Nike. 41% said Lululemon. Just edging it out at 12% said Under Armour. I guess Nike has been the legacy and the continued favorite. Time for our two-minute drill. Joining us now is Max Wasserman. He's Miramar Capital founder and senior portfolio manager.

Max, we previewed that you had a marquee tech name that you warmed up to here. Talk to us about why you like Microsoft. It's nice to talk to you. What we like about Microsoft is really going to be the Activision. Activision right now has about 400 million subscribers that pay $15 a month. And that's going to add roughly about $6 billion a year to their Game Pass, which has 25 million subscribers at 15. So we're looking for the gaming to be about a $10 billion a year revenue source, which making the third largest gaming after Tencent and Sony. So that's one area. Second area is the fact that you have security, which is about a $10 billion

a year growing about 35%. Take into account that Microsoft is off about 25% for the year high, trading at roughly 28 times earnings. We think the risk-reward for this company looks very favorable for the long-term investor. All right, we'll see if that Activision deal closes. The market has a couple of doubts, but talk about UPS. Is this a call on the economy overall or just the company? It's a combination of both. We've locked UPS for a long time.

Stock right now is down roughly from about 233, a train around 188, has about a 3.4% dividend train at 14 times, which is under its average earnings of trading multiple of 16. We think it's tremendously profitable. The new management has been taking the last mile and really bringing out everything they can out of it. Also, they have pricing capabilities. They recently increased their pricing by 10 percent. And the fact is extremely profitable. Now, we think that in the e-commerce business, this is the one to play. All right. Seems well positioned there. 14 times earnings. Max, appreciate your thoughts this afternoon. Thank you very much. That's going to do it for overtime this afternoon. Fast money begins right now.