Closing Bell - Closing Bell Overtime: Big Test for Investors Ahead 7/11/22

Episode Date: July 11, 2022

Earnings and a key read on inflation on deck – and investors are weighing the big risks. Payne Capital’s Courtney Garcia breaks down what she is watching. Plus, Cowen reiterated its buy on Apple ��� adding that it could climb more than 40% over the next year. The analyst behind that call makes his case. And, Twitter just sent a letter to Elon Musk’s attorneys. Big Technology Founder Alex Kantrowitz gives his instant reaction.

Welcome, everybody, to Overtime. I'm Scott Wapner. You just heard the bells. We're just getting started right here at Post 9 in just a little bit. I'll speak live to Ed Yardeni. His new note suggests stocks might have hit their bare bottom. He's going to tell us why he thinks that. But we begin, though, with our talk of the tape. What's really riding on the next four days in the markets as earnings begin and arguably the most critical read on inflation in years drops in just days. Let's ask Courtney Garcia. She's Payne Capital Management Senior Wealth Advisor here with me live at Post. Nice to see you.

Welcome here to the Stock Exchange. Thanks for having me. It's good to be here in person. So we've had a nice bounce off the lows, right? About 6% or so on the S&P 500. What now is the question? We give a little bit back today. Is this just another one of your run-of-the-mill bear bounces?

Yeah, I mean, I'm still very optimistic on where the markets are going. But the big thing going to be this week is, you're right, that inflation rate, right? Everybody's worried, is the inflation going to be peaking here? Are we going to see the Fed continue to raise rates? And I think likely we're going to be in this continuing interest rate raising environment. So some of your longer duration assets are likely going to continue to underperform. So, yes, we're seeing this bounce in tech over the last week. I don't necessarily think that that's where you want to be chasing right now, that you

want to still look at some of your cyclophones. Okay. So we're going to get to that in a second. But this line that you just had, I'm still optimistic on the markets. Where does that optimism come from? I think ultimately the economy is in a better place. And I think a lot of people give it credit for. I mean, we're the really strong labor force. Ultimately, wage growth is still going up. That's why people are able to sustain this inflation. I think as long as you have that, it is still theoretically possible to have a soft landing. I think we could continue to see things get on good footing. We just have to get through this. We have to see peak inflation, see people get through this. But so far, they've been able to. OK, so your view is not at all recession in the U.S.? It's possible, right? I mean,

I can't discount the fact that it's a possibility, but I don't think it's a foregone conclusion. Yeah, but I mean, you can't have a very optimistic view of the stock market if you in turn think that we're going to have a recession. Correct. I'm not of the mindset that we're in an impending recession. I'm not discounting the fact it's a possibility, but no, I am not of that mindset. What about this idea that, so the economy is, you know, it's not that bad off. And the Fed's not going to be as aggressive as people think either. So everybody's gotten too negative on everything, whether it's the economy, whether it's earnings or the Fed. You buy that?

Well, it's possible, right? And I think that's what the markets are pricing in. It's all that bad news is priced in. I think it's going to take a much larger catalyst to bring the markets down a lot further. But there's really no good news getting priced in. You're starting to see things like commodity prices come down. Maybe we are starting to see peak inflation. And none of that good news is getting priced in.

So this idea that you mentioned, you know, technology, OK, you don't think it can last this little move that it's had because it has been a nice little run. And some of the mega cap technology names are the ones who have led it. Which isn't that surprising because they were also the things that dropped the furthest. Right. So I think you're seeing that kind of relief rally here as things are coming in. But ultimately, if we continue to be in a rising rate environment, I think you want to continue to focus on, I guess, not jumping into some of those large tech names. And even, I think, especially looking at profitable companies. I think that's really important right now. You're actually seeing this huge discrepancy where unprofitable companies are down by about 60% on average, whereas your profitable companies only

got about 18%. Speaking of, what do you make of the ARK names, for example, that are up like 25 percent off of their lows? Right. The first sort of to go down as hard as they did and maybe the first to recover in any sort of meaningful way. Is that a signal of anything? I think it's a short term relief more than anything. Again, it could still have some room to run here. I mean, those have come they have come down so far. The valuations are becoming very cheap right now. But I just think

ultimately it's not the place that I would continue to chase. So do you not think that earnings are going to be as bad as some people expect? And would you admit that expectations and the numbers at this point are simply too high? They've yet to really correct with the rest of the market. Well, I think it depends on what market we're looking at, right? Because even like when you look at layoffs, that's in things like your tech firms. I think seeing some of our revisions in some of our tech firms, you're saying, yes, those are bouncing. I think we can see them there. But then you're seeing these other industries that are still having trouble hiring. They are still booming. So I don't think it's going to be across the board. Yes, I think there's

going to be some revisions. If anything, I would probably argue that's going to be in tech. What about the, as it relates to tech, FX, right? We're looking, I mean, as I see it now, we're waiting for this move to parity with the euro and We're looking, I mean, as I see it now, we're waiting for this move to parity with the euro and the dollar. And I mean, it's basically there. It's not exactly there. But for all intents and purposes, it's there. And that is going to be a drag on earnings, especially for tech, no? Well, especially at your companies who are going to have your profits abroad. And that's where some things like your small caps can actually look attractive where they're much more insulated in the U.S. But yes, that's definitely going to

have a drag on earnings. So I think we're going to have to watch that as they start to report starting this week. You're more optimistic on the consumer than most. And I'm wondering where that bit of optimism comes from in what is an environment that's tough, right? Inflation's tough. And even if it's peaked, it's not going down all that much, although we're getting a little bit of a reprieve at the gas pump. We even just saw just on the show before us, you saw that Costco was showing that they're still showing the consumer is stronger than we see. We saw actually I think seeing JP Morgan come out is going to be really interesting because the banks just in general have a really good handle on the consumer. So seeing what their read on it, I think is going to be very telling.

But they were the ones who came out with this warning that we're going into a hurricane. But on the same note, they did- Right, that was Jamie Dimon, remember? Yes. On the same note, they did say that the consumer still had like six to nine months worth of saving. There's so much cash on hand right now and people are still able to get a job,

generally, if they're looking for it, because there's twice as many jobs there are people. So I think that's really where you have to look at these things. I think there is more optimism than people are giving it credit for. You like the banks? You think they're going to have a relatively optimistic story to tell in what is, as I said, a challenging environment?

I'm hopeful. I think seeing the yield curve flattening is definitely going to be a little more challenging for them. But yeah, I'm definitely interested to see what they have to say this week. You still like energy, right, as one of, if not your top idea, because the narrative on that was super strong and it's only a matter of time before it cracks, and then it cracked. Why is it going to recover? I think any sort of pullback you're seeing right now is just an opportunity to buy. And I think ultimately when you look at your energy companies, oil prices have come down, but there's still such a supply and demand issue. So many rigs were shut down back in 2020, and just with ESG now becoming the focus, and there's so much demand that's not going away. And energy prices do not need to be as high as they are now because their break-evens are significantly lower. So I think that can

actually still lead to good momentum going forward. Sorry to step on your toes there. Some big names you like, Exxon, Chevron, and you're in the Buffett Oxy trade. Yeah, I mean, Buffett liked it. Yeah, you got it. Although it got downgraded today. I mean, it's, you know, it's gone up so much because in, you know, at least in some respects of the Buffett halo. Yeah. And I mean, it's gone up so much because, at least in some respects, of the Buffett halo. Yeah. And I mean, ultimately, though, I think you want to look at these companies that have really strong balance sheets. And back in 2020, when oil prices were so low, they had to get so much more efficient.

And I think that's just putting them in such a better position right now. OK. Let's expand the conversation right now. Bring in CNBC contributor and requisite capital management's Bryn Talkington, Capital Wealth Planning's Kevin Simpson. It's good to see the both of you back here as well. Bryn, you say you're buying on some weakness in the market. Are you suggesting that the worst is in fact over? No, I'm not. And I think in my note, you know, all year long for clients that have cash, we've been dollar cost averaging on these

really bad down days, which we saw quite a few last month. And so what we're doing is instead of spreading out our dollar cost averaging more systematically, like one time a month for six months, we're doing smaller increments more often to take advantage of this year. Because I think ultimately this year is going to be a year of accumulation. You know, we are big believers in you don't want to fight the Fed. At the same time, our portfolio positioning has been really defensive this year. And so we want to take advantage when the markets are down, because ultimately everyone says buy low, sell high. But in reality, a lot of investors end up buying high and selling low. So we're sticking to that discipline and just doing smaller, more frequent purchases across our strategies. What about Courtney's energy trade? You sold out of the XLE in large part before the down draft actually happened. Are you tempted to get back in or is that trade done?

The trade is not done. You know, if you remember what I was talking about, I was really concerned about, first of all, the trade looked like it had gone a bit parabolic and I thought mean reversion would settle in. I didn't know it happened that fast. But also, I didn't want to be really long in energy going into, you know, Biden going over to the Middle East. I feel really confident if you look at the data, you know, Saudi probably can't do much more than 11 million barrels per day. They're going to he's going to ask to do more. I don't think that's going to happen. But I think they will jawbone. And I just don't think he would go all the way over there, have a sit-down meeting with the Saudis and come back with maybe some rhetoric.

So I want to wait to see what happens later on this week. And then we're looking at potentially reentering the trade. But the fundamentals are so strong on energy. Right now, it's just the sentiment that caused us to move out of the trade. Kev, what's really riding on this week? I don't think we're overstating it by suggesting a lot, given the CPI and then earnings are kicking off and earnings are a real question mark. Yeah, for sure, Scott. I mean, earnings are going to come down and that's the problem. We've had such enthusiasm for so long that the reality of this inflation is going to affect corporate earnings. And I don't think it's over. You know, I look at the first half of the year and it was the worst first half we've seen since 1970. And history gives us reason to be hopeful on the

second half for some kind of rebound. But I'm not sure that we can depend on history to repeat itself this time. It just doesn't feel like it to me. And it's not the first time. I remember famously in 2008 or maybe infamously saying to my team, you know, thank goodness that's over just to watch the S&P 500 go down another 18 and a half percent in January and February. So I don't want to turn a blind eye to the economic realities. Consumer sentiment still at an all time low. And until that turns around, I think we're still bottoming. We can retest the lows and potentially go a little bit lower. So I have a little bit more of a cautious outlook, Scott, right now. Court, it's sort of at odds with your view, right? He's talking about the

consumer is, you know, a real question mark. It is right. I mean, I think that's ultimately what everybody's worried about is inflation is getting high. And if it continues at this rate, ultimately, it's going to get to the point that consumer can't withstand these prices. And businesses aren't going to be able to pass on that. They don't have the pricing power to pass on to their customers. And that ultimately will lead us into a bad place in the economy. I'm not necessarily that mindset. I think the consumer is stronger than we give it credit for.

But, yes, that is something we're going to have to watch. And I think some of the numbers coming out this week will show that. Hey, Kevin, if the worst is not over yet in the stock market how much lower do you think it has to go. Well I think we're gonna retest the lows and maybe see another ten percent down from there I'm not in the camp that we're gonna be

thirty forty fifty percent lower from here. You know the good news is I think we're closer to the bottom than the top. I love Bryn's approach of adding on on this weakness and adding to strength for sure. That's exactly what we're

doing. And it makes sense to do so. We can never pick the bottoms. We can never pick the tops. But these are opportunities for long term accumulation of positions. And that's what you want to do here, Scott. You want to build positions in great companies. But you're at least describing a scenario in your mind where you have a total decline from the highs in the S&P of, say, 30 percent, right? If you're down 20 now, roughly, and you say we could go down another 10, that's the ballpark we should be playing in? Yeah, I mean, I think so. You know, everything is not just completely doom and gloom. I think we're closer to the bottom than the top. So, you know, that's a good thing. But if you look at some of the statistics, again,

with the consumer sentiment that I mentioned, I mean, I think that's a leading indicator. If you're looking at it from a contrarian standpoint, I mean, it's a good thing that it's so low. A couple other, you know, contrarian indicators are retail and institutional sentiment. I mean, I think the bearish sentiment on the retail investor last week was like the sixth worst that it had been since they started doing it in 1987. And as much as we like to put onus and credibility into market timers, you know, history proves it's really hard to do. And one really good thing is for the month of May, and I'm going to be looking at this closely for June, for the first time since March of 2020, Scott, we saw more insider buys than insider sells in the month of May. And if that continues into

June, I'll look at that as a really strong indication that we are getting closer to the bottom. Keep an eye on buybacks and things like that, too. Kevin, real quick. I mean, you have some new positions that you have established. So, you know, you're doing something which you think is constructive in the market. General Mills, Lockheed, both are new positions. You added to a couple, which I'll get into in just a moment, but those two first. Yeah, I mean, there are opportunities and I'm not smart enough to call the bottoms of the tops, but General Mills came out last week. They beat on top and bottom. They're a stock that's actually making new highs. I think they traded a bit of a discount versus some of the other consumer staples. You're getting almost a

three percent dividend while you wait. And good news, last week, they increased that dividend by 6 percent. So from a multiple standpoint, an evaluation standpoint, stock could certainly go a little bit lower. But I like it here and I like it a lot for the dividend. I'm sorry. Go ahead. I'm sorry. Just real quick, Lockheed Martin, kind of the same theme. They had increased their dividend by 9 percent on average over the past five years. You get a 2.6 percent dividend. I like the idea of having a defense contractor considering everything happening geopolitically. So just two new positions. But again, real high quality companies. Yeah, it's funny. And I apologize. As you were speaking there, a new note literally dropped from J.P.

Morgan's Marko Kalanovic that I was trying to read and listen to you at the same time. And look, he's been, I would say, more optimistic than most. And he seems to remain that way. He says, and I'm quoting directly from his note, and this literally just crossed, while growth risks are elevated, our base case looks for an acceleration in global growth in the second half of the year, led by China and a moderation in inflationary forces that should allow central banks to pivot. You're hearing, Bryn, more and more people suggest that that may in fact be the case. Your thoughts on what Mr. Kalanovic is saying? So China's the wild card. So a few weeks ago, Xi Jinping came out and said they're comfortable to remain in a zero COVID policy until like 2027, which the date seems very arbitrary, but nonetheless, somewhere around

there. And then right now you have around 30 million people in lockdown. And so I think it's a wild card. So if for some reason you had a pivot, because don't forget China's having the big election sometime this fall, where Xi Jinping will be, you know, leader for life. And so if China actually pivots from that and reopens, I think you will for sure see GDP pick up globally. You'll also see supply chains ease, because to me, the biggest issue right now,

or one of the biggest issues with inflation and you know, all that's happening in the US is actually not being able to get products and the supply out of China. So I think he could be right if China opens. But if not, China is going to continue to weigh on the markets. Courtney, he says, and I'm quoting here again, we keep a large overweight in commodities and commodity sensitive assets and would advocate adding on the recent pullback.

So in large part, he agrees with you that his view is that there's a super cycle and it's also a good hedge for inflation and geopolitical risks. Yeah, and I guess I hope or I think we're going to see as some of the banks come out with their earnings this week, I think that's something we want to watch is what is their health of the consumer. Because really, I think that's what everything is going to be really looking at right now. So I really like to hear notes like this. I'm hoping we hear notes like this. I'm hoping we hear more of that because I think that ultimately would be a good thing for the market.

Kev, so these additions to your portfolio are positions you already held. Chevron, right? So, you know, adding again to commodities, as Kalanovic suggests, and Dow as well. And if you can also opine on this thought that, you know, you get through what many have described as a treacherous first half of the year, and then you could have a much different looking second half, assuming things fall into place, of course. Yeah, wouldn't that be awesome? I hope I'm wrong. I hope China opens. And I totally agree with Courtney on the trade from the energy standpoint. You know, we sold half the marathon petroleum before you went away on vacation. We trimmed Chevron. The energy sector came down about 20 percent. Brin sold XLE at the

high. And now we're looking at that as opportunities to redeploy capital. You're getting a 4% dividend on Chevron, pretty reasonable multiples, and they're going to make a ton of money. And it's the same thing. And that note made me really happy from the Dow standpoint, because they definitely, Dow got ahead of its skis from a commodity play. I mean, they sold off hard, but you're getting a 5.5% dividend.

I think the PE.E. is under six. So if we're looking for valuations opportunities, I definitely think that these are companies that will be continuing to add to on weakness. And again, like everything else, it's cash on cash, incredible dividends. We'll get compensated along the way. Bryn, I'll give you the last word that this battle between growth and value, what wins out from here as growth has had this resurgence, I think you could call it. Kalanovic says he favors cyclicals, which would imply value. What do you think? In the short term, it's going to be, I think, more defensive, still consumer staples and utilities. In the long term, though, I think the next year out,

it's going to be tech. It's going to be more technology. So the value trade actually hasn't worked outside of energy on this year. So you're going to stick with consumer staples and health care and utilities in the short term. You want to just give me a quick one on that, on that same question, growth versus value? Yeah, I'm definitely on the value camp here as well. I think you're likely going to, it's been outperforming this year. Yes, there's been a bump on growth, but I think that trend is going to continue. Great stuff, guys. I appreciate everybody reacting on the fly to this new note, which certainly is going to have people talking. We appreciate it.

Kevin, I'll see you soon. I know I will as you as well. Brynn, Courtney, thanks so much for coming here. Thanks for having me. All right, let's get to our Twitter question of the day now. We want to know, are stocks near a bottom, yes or no, or they've already bottomed? You can head to at CNBC Overtime on Twitter, cast your vote. We'll share the results coming up later on in our show. Up next,

our most valuable pick is back. One analyst making the case for a nearly 40 percent rally in one of tech's biggest names. All those details coming up after the break. A little bit later, Ed Yardeni is back with us. He's got a bold new call on the market. Why he thinks this could be an all clear for stocks. You have to hear him. We need to press him on that. We will do that later in OT. All right, we're back and it is time for today's most valuable pick. Cowan reiterating its buy call on Apple today, saying that stock can climb nearly 40 percent over the next 12 months. Joining us now is Cowen senior research analyst, Krish Sankar. Welcome. It's nice to see you in overtime. Thanks for having me, Scott. Yeah. Where is that 40 percent going to come from? That's the biggest question.

It's a million dollar question, right? So we actually have Apple earning almost close to like a little over six bucks in earnings next year. And a lot of it is actually driven by mostly actually, I would say, a slightly down iPhone units, but also modest growth in services and then some buyback actually helping, you know, earnings grow next year, despite sales being kind of like flat to maybe even slightly down. But I think and then on that you put like, you know, we put a 30 times earnings multiple, basically giving low 20s for the hardware business and a high 30s for the more recurring revenue like services business. You think the iPhone is doing better than some other people would suggest? I mean, you raised your own shipment numbers for this quarter.

That's right. That's right. So what you've seen is a weakening in the overall smartphone ecosystem. But most of the weakness has actually happened more on the Android side, not the iOS side. We're seeing weakness in China from Oppo, Vivo, Xiaomi, the OVX categories. We also see some weakness in Samsung, most of them from the cost-sensitive areas. And actually, iPhone, which is more a premium phone, has actually held up surprisingly well. We're reminded again this week, you know, we've been talking about the casino stocks today because of what's taking place in Macau. So we're reminded again about COVID and the threat that it is going to continue to have. Obviously, Apple relies heavily on China. How much of an issue is that? Are you taking that into account enough?

Yes. You know, I think you're seeing like there are two parts of the equation, right? One is obviously COVID costs, supply chain restrictions or issues. The other one is obviously the Shanghai-related China lockdown. I would say that they kind of gave a range of $4 to $8 billion. What I would say is that actually until yesterday, we actually had June quarter down 1% year over year. Modesty races to up 1% year over year now

because slightly better iPhone dynamics so far in the quarter. To your point, the COVID resurgence is always something to worry about, something to keep your eyes and ears open to. As long as we didn't have like a drastic lockdown that we saw in Shanghai in early part of the Q2, I think things should be fine. But at the same point, something we monitored. But so far, I would say nothing to really worry about yet. Your fellow analyst over at Morgan Stanley, Katie Huberty, really seemed to reset expectations for the services business for this quarter and maybe subsequent ones, too. When she put out that note, and at this point, it's three, four weeks ago.

Do you share some of the same concerns that maybe a slowdown in the App Store is going to have a more dramatic impact in the services business, at least in terms of where growth had been expected to be? So, you know, first and foremost, I would say, like, you know, the Apple service business is not a single revenue line item. That's how they actually, like, you know, give you the numbers. But it's actually multiple businesses or multiple verticals within services. You know, like you said, you have the App Store, you have the Apple Pay, Apple Care, Music, the Google Tag, the traffic action costs they get. So there is multiple different line items. What I would probably say is that what I do worry about is if we do run into a recession scenario

and actually the hardware sales slows down, that definitely has a knock-on effect on services. Obviously, fewer iPhones means fewer related services, whether it's AppleCare and things like that. So I do worry about that. But I would say as of now, the service system holds up pretty well. I think typically June quarter, from an overall revenue standpoint, is a low watermark for Apple, because that's usually when they also flush the iPhone for a new product launch in September or so. And September sequentially grows, so we do expect a similar dynamic. I think services is fine. I do worry about it if and when we do go into recession where, like you said earlier on, we are seeing slowdown in the more cost-sensitive part of the market, but the more premium phones are still holding up. I do worry that if that

starts slowing down, that might have a knock on effect on services. Let me ask you quickly before we go. What is a recession price on Apple look like if it's if it's 144 today and you're as optimistic as you are? What's the what's the downside case in terms of price? Yeah, I mean, I would probably say that, you know, based on analysis, if you try to do like, you know, like a down 10 percent scenario, you're probably looking around one hundred and twenty dollars. If you're like super bearish, you know, some investors who are more of a much more bearish camp on those numbers anywhere from 80 to 100 dollars. But in our case, it's probably more 120. But depending on how severe the recession is, maybe one hundred one twenty. But the most bearish number I heard, it's actually more like 80 to 100 bucks. Yeah, that that's the most bearish ones that I've heard too uh and yours is uh well above that I appreciate your time so much I'll

see you soon that's Chris Sankar joining us today again with Cowan up next debating a bottom have we seen the worst for stocks or is there still much more downside ahead Ed Yardeni joins us with his take his new note comes after this break plus Plus, GameStop. Check out that in OT. That stock's getting a little pop. The company launches now an NFT. It's a modest boost, one and a third're back in overtime. It's time for a CNBC News Update with Shepard Smith. Hey, Shep. Hi, Scott.

From the news on CNBC, here's what's happening. President Steve Bannon will go on trial for contempt of Congress next week. A D.C. judge denied his request for a delay. Bannon indicted last year for refusing to answer a subpoena from the January 6th committee. Over the weekend, he did a 180 and said he does want to testify. His lawyer says that's because President Trump sent a letter that waives executive privilege. But of course, the power to waive privilege comes only from the current president. The DOJ calls it all a stunt. The Conservative Party in the UK is setting a timetable now to replace the outgoing Prime Minister Boris Johnson.

Lawmakers set to narrow the selection to two top candidates by next week. Then a new leader and Prime Minister announced on September the 5th. And the race to save the ancient sequoia trees from wildfire in Yosemite National Park. Firefighters in California deploying portable sprinklers to protect the hundreds of giant trees. Officials say they're using those sprinklers and pre-planned burns to create a sort of donut hole of protection around the trees. Tonight, what to expect from tomorrow's January 6th hearing. We'll talk Twitter with Kara Swisher and get a new glimpse of the universe from NASA on the news right after Jim Cramer.

7 Eastern CNBC. Scott, back to you. All right. Good stuff. Thank you. Look for you then, Shepard Smith. The stock market may have hit its bear market bottom. That is the headline of Ed Yardeni's newest note today. He joins us now to discuss that big call. It's good to see you again. Welcome back to Overtime. Why do you think that? Well, you know, we made a bottom on June 16th. And ever since then, we've seen commodity prices easing off. We've seen the bond yield coming down. I think there's been some concerns about a recession, but some of them have been abated by the strength of the labor market on Friday, as we saw. I think all in all, the market, I think, is starting to deal with the possibility that we're simply going to have something like a

growth recession or a very mild recession, something that will force analysts to lower their earnings, but not dramatically. It could be something kind of like what we've had in previous what was called mid-cycle recessions. They brought a lot of the growth rates on a year-over-year basis down to zero, but they didn't turn negative. And after a while, they turned positive. What are we pricing in now, do you think? A mild recession? Is that what the market reflects to you or something worse? I think the market has been pricing a recession since the beginning of the year. We got down to 23.4 percent on a percentage basis from its January 3rd all-time high. And I think what has been pricing is a recession. I think it's but there was a lot of uncertainties about how bad it might be.

I think the market's coming around to the view that maybe it's not going to be much more than a mild recession and one that might not even make the official history books because it might not be severe enough. I mean, there are others who are who are suggesting a far different picture. Earnings are going to be reset dramatically. The Fed is going to be more aggressive. They're not going to make a pivot at the point that some some do think they will. Why are they wrong? Well, you know, you've got a lot of opinions all over the place. You know, you just read one strategist that's quite optimistic about the second half of the year. I think there's still I think the pessimists are right. There's lots to still worry about. I guess on my worry list right now, right at this time, is Europe. I'm very concerned about the energy crisis in Europe and how that might affect

the rest of the world. I'm not as optimistic about China as some people are. So I do think on a global basis, we've got enough weakness to keep commodity prices down, which means, in my opinion, that the Fed's going to find that inflation is going to be peaking pretty shortly, or maybe after we get the June CPI, the July CPI should really start to show some moderation. And that means that the Fed funds rate might peak more like 3% than 3.5% or much higher than that. So I agree that the Fed's going to do 75 basis points in July, but we all know that. And I think that in September, another 50 to 75 basis points is in the markets. But that might be pretty close to it. But even if they do do that

in September, you think the stock market can still have a decent second half of the year? I mean, what I keep hearing is you do 75 in July. You have no meeting in August. And then the great hope is that this scenario plays out in large part like you think it will from from an economic and inflationary standpoint that they only do 25 in September. You really think if the Fed does another 75 in September that the stock market is going to be in a good position? Well, you know, there's there's calling a bottom and then there's calling what it does after the bottom. And I agree there's a lot of risks here to what trying to pick bottoms here, as we've seen all year. We've all been kind of looking for a bottom and it keeps finding a new one. So I'm not telling you with 100 percent certainty or a great deal of certainty

that we definitely bottomed it on June 16th. It just seems to me that if these conditions continue, moderating commodities and stabilizing interest rates, that that'll help make a bottom in the stock market. That doesn't mean we go straight up from here. There's still plenty of challenges over the second half of the year. So it may be a range bound market. It doesn't have to go straight up or straight down. When could we hit new highs, do you think? Next year. But I think it'll be late next year.

But you do think it'll happen? Oh, yeah. I mean, in the relatively near future. Yeah, I do think so. Ed, always provocative. It's always good to talk to you. Thank you very much. We'll see you soon.

All right, that's Ed Yardeni joining us today in overtime. Well, he thinks we hit the bottom, but what do you think? Vote in our Twitter poll at CNBC Overtime. We will share those results at the end of the show. It's a simple question. Are stocks near a bottom? It's yes or no. You can also suggest that they already have bottomed.

And maybe you're in Campyard Denny as well. Up next, we're tracking the biggest movers in the OT. Christina Parts and Nevelos is all over that as usual. What's on deck? Well, we've got GameStop that's making some headlines in the OT and it involves NFTs. And good news for travelers, the euro just hit a new 20-year low. I'll have those stories and more after this break. We do have some breaking news in overtime. Check out shares of Gap right now. We are just getting word that the CEO, Sonia Singhal, is stepping down, leaving that role, also leaving the board. She has been CEO since March of 2020, so not all that long in the top job for shares of

GPS. We're digging into that. We'll have much more. Been a tough go, to say the least, for shares of Gap over the last, let's say, even three months, down 35 percent, six months, down 51 percent. And over the last 12 months, that stock is down. We'll call it 73 percent in a very challenging industry, to say the least. Let's get as I said, we'll have more on that coming up. Let's get more now on the other big movers in overtime. Christina Partsenevelos is here with that. Well, GameStop just announced it's launching an NFT marketplace for gamers and collectors to trade non fungible tokens. The interesting line that I found in the press release was, quote, over time, the marketplace will expand functionality to encompass additional categories.

And you can see shares are moving up to the upside, almost 1% higher in the OT. But for more details on that, head to CNBC.com for all of that. And then let's switch gears. Let's talk about the euro. It's fallen to a new 20-year low against the U.S. dollar. We've got a string of large Federal Reserve interest rate hikes that have supercharged the U.S. day here, while the euro has dropped nearly about 15 percent just in the past year on fears of a recession in Europe driven by higher inflation and energy supply and certainty caused by Russia's invasion in Ukraine. The EU used to get roughly

about 40 percent of its gas through Russian pipelines, but of course has been reducing its dependency on the country, hence the reason why we're getting closer and closer to parity. Scott. All right, Christina, I appreciate it. Thank you, Christina Partsinovalos. Up next, it's a rare sell call on Meta. That stock tumbling on the back of a big downgrade today. Is it time to get out of that name or buy that drop right there of just about five percent? We debate it with a shareholder next. And just a reminder, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. Overtime's back right after this. In today's halftime overtime, a rare sell call on Meta. Needham downgrading the beaten down

social media stock and warning about deteriorating fundamentals and valuation risk. Requisite Capital's Bryn Talkington back with us because she owns Meta. All right, Bryn, this is pretty straightforward. With ad-driven stocks down sharply, they say, the most common question we get is, what shares would we sell in order to fund stock ideas we prefer? At current price levels, we recommend investors use Meta as a source of funds. Why is Laura Martin wrong? I actually thought Laura did a great report.

I know he's a plod analyst for saying sell if you think you should sell it versus hold or neutral. So I thought it was a fair report. She talked about, you know, self-inflicted margin pressure and competition and regulatory, but I'm not sure about her assumption because when you look at Facebook, they have 3 billion monthly active users and 1.9 billion daily active users. So, you know, I hear Kevin O'Leary talk all the time about his small businesses that he invests in. They all use, whether it's Facebook or Instagram. And so I think if you're a company and you're going to pull back on marketing, I'm not sure if you're going to pull back from a platform that has 1.9 billion daily active users. And I think what's interesting is, you know, they were

obviously late trying to compete with TikTok because, you know, TikTok is so pervasive, but Reels already account for about 20 percent of the viewership on Instagram. And so I think this this like why I agree with what she was saying, her assumption, I'm not sure. That being said, there are so many stocks down 50 to 60 percent. You have your your pick of the litter in terms of where you want to go. I think the market hates this stock. Yeah. Yeah. No, I was gonna say, but this one seems a little bit different in that it does have some fundamental challenges, right? She points, Laura Martin does, to revenue growth that is slowing and then a spend that is only accelerating into this view that they're

going to become this dominant player in the metaverse, which may or may not pay off. And if it does, who knows exactly when? So I think the metaverse, which once again, they changed the name of the company, which I still think was a huge mistake. I would call it the Oculusverse because really this is all around Oculus. And they do have a moat because they have been investing a lot of money in Oculus and in the ecosystem inside of there. And so ultimately, there are going gonna be so many ways that they are able to monetize that Oculus system. And I think that is what they're looking to do

because you need a device to go into the Oculus, which they own that. And so I think that if you go and do an analog to like, let's say Microsoft, Microsoft really didn't get AWS, I mean, Azure right until starting in 2011 when Satya Nadella became over that group. But they started investing in the cloud in 2006 and 2007.

And so it's like I feel this is very similar to a Microsoft, that maybe it's dead money for a while. But I just think it's hard to doubt Mark Zuckerberg's innovation. I think he's going to get new peopleberg's innovation. I think he's going to get new people in there. So I think at under 13 times multiple, I think it's still a really interesting name. And I just think that from an advertising perspective, I find it really hard to believe that you're going to leave a platform with 1.9 billion daily active users. And Scott, also, Facebook is really bullish on themselves. Last quarter,

they bought $9.4 billion of their own stock, which was up 141% year over year. And they have authorized $29 billion of buybacks. So I think while everyone else is dismissing it, I do think that Mark stepping in there, that was a pretty big purchase versus them historically. And so I agree with a lot of what she said, but I do think it's a little bit soon just to call the company out as, you know, dead for the next five years. I don't agree with that assumption. All right. We'll leave it there.

Bryn, thank you. Our Daily Double, Bryn Talkington joining us once again today. Still ahead, a special edition of our two-minute drill, the big warning to Twitter shareholders from one top tech mind following Elon Musk's deal drama. Alex Kantrowitz, he joins us next. We're also watching shares of Gap in overtime. The stock's lower on news. The company's CEO is out.

More details on that breaking story just ahead. Well, the drama continuing now. Just in, according to a new filing just released, Twitter's board has sent a new letter to Elon Musk's attorneys reiterating that it is confident and intends to close that deal at $54.20 a share. Joining us now, big technology founder Alex Kantrowitz. You've been with us every step of the way. So this letter, this new letter, which the filing just hit,

Mr. Musk's and other Musk parties purported termination invalid and wrongful. That's according to Twitter's attorneys at Skadden Arps. The agreement is not terminated, is what they say. You suggest that this is all a leverage game and Musk has the leverage. What makes you so sure? Well, the company right now is dealing with an issue that Musk can wait them out. He has far more resources and he can make this case go a year, two, maybe longer, depending on how willing the Delaware courts are to hear his arguments. He can play with this game and manipulate the way he wants. Whereas Twitter, you know, the company is in limbo. How do you run a

company like this? One to three years? You know, you don't the company is in limbo. How do you run a company like this? One to three years? You know, you don't even know exactly what's going on with your future. You can't roadmap. You can't do anything. Your employees are leaving. And so I think the longer that Musk waits, the more leverage he's going to have to get Twitter eventually go to his side and settle. I'm just wondering why you think he's going to be able to do all that and effectively skirt the court of law in in Delaware. Because I well, look, I think that if Twitter takes it all the way down the line, there's a chance that the court might rule in their favor. I accept that. But there's also a chance they might not. And then what happens if the Twitter board takes this all the way down the line, throws the company into chaos for three years, and then ultimately loses? You know,

I think right now they're the only ones that want this deal to close. Musk doesn't want it to close. The employees don't want it to close. The board is the only one that wants it to close, maybe some shareholders, right? And if they are to fail in this by taking it all the way down the line where they could potentially get a settlement beforehand, they're just as exposed to lawsuits as they would be by taking that settlement. So I think eventually they're going to crack. They're going to give in to Elon Musk. But again, look, anyone that's tried to predict this thing up until now has been wrong. They've also been right. The deal's not going to close. The deal's going to close. Right. So at this point, it's sort of a fool's errand to try to say exactly what's going to happen. If 44 billion isn't the right price, what is?

I mean, look, I think if Elon ends up settling with Twitter and giving them a billion or $2 billion, there's no telling how far this stock is going to drop. You'd imagine there would have to be like maybe a $3 billion settlement just so the board can save face and go to shareholders and say, we got the best that we did. But I think that it's a it's a ugly situation and I think holding Twitter stock right now is an investing. It's gambling you have no idea

what's going to happen. You know there's no predictability no earnings. And the market can just take this stock if it ends up going all the you know the entire distance. So it's hard to say exactly what the price is but it's low. And you don't

think that there's a chance of anybody else coming in? No. I mean, if there was before, and there certainly isn't a chance that someone's going to come in now. You look at this company, employee morale is down. Can they ship any features? I mean, the biggest thing they've shipped recently is a co-tweet, which is the most confusing social media feature I've ever seen. So you have all that. And then what are you going to do? You can try to pick this company off the ground at the lowest state it's ever been. Maybe you get a discount. But in the moment we're in with the market tanking the way it is, it just doesn't seem to me to be a good buy. You could go to private equity, but it's just not exactly an appealing target for anyone at this moment.

We're going to see how it all plays out. And I know we'll speak to you again, Alex. I appreciate it. Alex Kantrowicz joining us once again. Up next is Santoli's last word. Plus, we have more on that breaking news out of the gap. Its CEO is out. We're back right after this. As promised, we have more details on Gap's CEO stepping down. Our Courtney Reagan has that for us. Hey, Court. Hi there, Scott. Yeah, so the Gap just filing an 8K with the SEC here, noting that CEO Sonia Singhal is out as CEO, more or less here effective immediately. She's been in this position since 2020, so she's led this company through several very turbulent years, more in the global macroeconomic environment, as well as for Gap itself and the way that it's been doing business. In the meantime, while a permanent successor is named Bob Martin, who is the current board chair, will step in and fill that role. He's had prior experience at Dillard's and at Walmart. The company also noting that they're naming a new

old Navy head. This position has been open since April. And this is Horatio Barbetto. He was most recently the Walmart Canada CEO. So he'll be heading this very important division. And last but not least, they are reiterating their net sales guidance more or less for the quarter to be reported August 25th. But it does look like they're taking down their adjusted operating margin just a bit. Shares down 4 percent in response. Scott. Okay. Court, appreciate it. Thank you. That's Courtney Reagan with more on the gap. CEO stepping down. Let's get the results of our Twitter question now. We asked, are stocks near a bottom? 35% said yes. 53% said no. Only 12% think we've actually hit the bottom. Mike Santoli now with his last word. Do you want to play off

that at all? Actually, I mean, that's a net positive. I was saying earlier today, almost nobody has conviction that, in fact, the June lows were the low. Doesn't in itself meet its magic. And all of a sudden we can bank on that being the case. But I think what's what's interesting about the environment here is, is the kind of conflicting timelines the market is on versus the Fed. The market's always impatient to look ahead and price in what's happening in six months and and kind of anticipate the inflection. The Fed has told you they're not going to be anticipatory. They have to see convincing evidence in the data. They're going to wait.

This is a two-year note yield against the S&P 500. You see S&P bouncing a little bit just as the two-year note yield comes down. That shows you that the little bit of a Fed wavering implied in the Treasury market. Now, this is almost the flip side of what we had in 2021. When the Fed told you they were going to be late responding to inflation on the upside, and every sell-off in the market was like, guess what? The Fed's still your friend, so don't fight it. What do you make of the NASDAQ, this 2-plus percent pullback today?

Rates were lower. Is it about euro dollar? Simply a trade that has worked real well lately? I think it's mostly that. It's an amplified version of the overall market. They were up more than 10 percent. The Nasdaq 100 was. Apple also leading to the downside.

Just a little bit of the China headlines filtering into it for now. Because yields were down. You couldn't really point your finger at that today. The 10-year hovering just below that 3 percent mark. So to me, it's much more about it's the beta in terms of the large caps that came off. As if it wasn't already a big enough week with earnings kicking off CPI on Wednesday. That's the biggie. CPI is the one. And it seems like that's what the market's kind of just sort of holding it in reserve for that number. Good stuff. See you back here. All right. Mike will have his last word again tomorrow. I'll be back as well. Fast Money begins now.