Closing Bell - Closing Bell Overtime: Breaking Down the Big Rally 7/15/22

Episode Date: July 15, 2022

Stocks rallied to end the week. But what could lie ahead with a slew of big earnings slated for next week? Fundstrat’s Tom Lee gives his take. Plus, we’re breaking down all the key themes to watch ahead of those big tech results – including the likes of Netflix. And, market expert Mike Santoli’s Last Word on a volatile week for stocks.

All right, Sarah, thanks so much. Welcome, everybody, to Overtime. I'm Scott Wapney. You just heard the bells. We're just getting started right here at Post 9 at the New York Stock Exchange. Let's get right to our talk of the tape today. That is today's rally. Why stocks had such a strong session and what that might mean for where they could go from here. A ton of big earnings are coming next week. We'll set you up for that, too. Let's ask Fundstrat's Tom Lee. He's with me here at Post 9. It's good to see you on a big day for stocks. What was today about? Why did we rally?

Was it about a good retail number but not too good? Yeah, I think there's a couple things. One is the retail number because it shows that the economy is slowing but not broken. I also think this UMich survey was a big deal because it's corroborating that not only is gasoline down and the commodities down, but now consumer expectations of inflation have rolled over. Market expectations of inflations have been anchored. I think this pushes the Fed to be more measured.

And we heard some of that comment yesterday. And finally, I think it's good news that stocks aren't getting obliterated every time we have a bad CPI print. Make the argument for me, if you would, Tom, that this is not a sell the rip market, that I shouldn't, if I have some positions that I still want to get out of, that I shouldn't take advantage of a day like this and do just that. I think the majority of people want to sell this rip. The reason I would say it's different is unlike every pretext for the past few months where commodity

prices were soaring and consumer inflation expectations were soaring and market-based inflation and interest rates were rising and even Fed funds hikes were rising, a lot of these are stabilizing or rolling over, which means this is putting the Fed in a position to go from being expeditious, you know, chasing hikes to being more measured. That's a huge deal for markets because now it gives markets a path to sort of see where rates will be. And keep in mind, in 80, 82, the stock market bottomed more than three months before Volcker sort of abandoned his Volcker moment policy. So I think that's why stocks are in a different place now than they were a month ago. And I actually think that's why second half could be quite strong. But even your

own technician, Mark Newton, was suggesting just days ago, literally, that a new low was coming. And maybe the second half was going to be good, but not until you hit a new low in stocks. You sound like you're telling a little bit of a different story here. Yes. And, you know, one thing that Mark and Mark's been very consistent about expecting a lower low into the end of this month, end of July, is that that's going to be a touch that he thinks that we might momentarily peak below the prior lows. But he's buying that because it's not the start of a new downtrend. And I mean, to me, that's the message. I don't think we're talking about accelerating downside. I mean, we've had earnings misses and companies aren't falling. I think that the upside risk is much greater now than the downside risk.

But do you agree with him that we're going to put a new low in? You painted a picture at the beginning of our interview here that suggested otherwise. I'm not great short term. So if Mark, that's Mark's belief, I would defer to him. But do I think stocks have a lot of negative shock still in it? It would have to be the belief that the Fed suddenly feels urgency to go much faster. That doesn't seem to be priced into fixed income at all. So I'm in the camp that stocks have bottomed. What about this idea of 100 basis points, right? It was sort of Bostick kind of got everybody all worked up, even though he's not a voting member with his

everything is on the table commentary from a day or so ago. Waller came out and talked everybody off a cliff. However, Sockgen, RBC, Citi, Nomura, Piper Sandler, everybody's talking about 100 now. Yeah. I think what's interesting is there's talk about 100, but it's not raising the terminal rate. So people are just talking about putting more under 25 into July, but it's not raising where the Fed sort of peaks. And I think that's more important. If the terminal rate isn't rising, then 100 or 75 isn't really changing what it means for equity prices. But the CPI was bad. And the suggestion was from people like Steve Leisman, for example, that you need to reset the clock. Last CPI was bad. This CPI was bad at

a time where we had hoped for some moderation. If that does anything, it forces you to reset the clock about when the Fed may be a little easier than they are now. So what happens to your thesis about a strong second half if they have to go stronger in September because inflation is still red hot? Yeah, Steve makes a great point because the Fed needs to see consistent, a consistent and meaningful move down in inflation. But we also have to remember CPI is the last thing to capture that because commodities are already rolling, oil's back to pre-invasion levels. I mean, wheat and copper are lower. The markets-based inflation expectations are actually lower than they were any time at the

start of this year. And now consumer confidence inflation expectations are rolling over. These consumers are already experiencing the rent and the things that are making CPI hot, yet their inflation expectations are coming down. So I would say if you see all this soft data pointing to a downturn, the Fed doesn't have to wait for CPI to get to two or three before they realize momentum has already shifted in inflation. So I would say I'm in the camp that the Fed has more room because the market's done so much work for them. Do you think we'll see enough of a material change in the things in inflation that matter the most to cause the Fed not to be as aggressive in September? It's a great question. If you look at sort of inflation, what's sticking to script,

things like travel, cars, gasoline, they are rolling over into the next few months. I could read you 10 different parts of inflation that have rolled over substantially. However, it's the rent aspect that hasn't. So if your cost of living on just living is high, you're feeling lousy. Sure. But my point on the rent is, if rent is causing inflation expectations, the UMich Consumer Confidence Sur confidence surveys would show it, meaning that people should then say inflation's accelerating because their rent is, but in fact, consumer confidence inflation expectations are rolling over even as rents are going up, meaning their expectations are pretty anchored. And I think that the CPI is just capturing home prices take time

to roll through and the base effects. I think it's a lagging indicator. And in fact, I'd say the sequentials are going to matter. And as you know, month over month, it's going to start being under 2% annualized from August all the way through February. The other elephant in the room that we need to address is earnings. And, you know, we made a big deal yesterday when Savita Subramanian of Bank of America, you know her. I mean, she's well respected. She finally capitulated a bid on her target for the S&P. You haven't really. She capit bit on her target for the S&P. You haven't really. She capitulated on her outlook for earnings. You haven't really. Why? Well, I think earnings this

quarter are really highlighting, too, how bad expectations have become because unlike prior quarters, misses aren't resulting in big sell-offs. So that's a huge change in the reaction function. The second is, you know, consumers and businesses are holding up spending better than expected. And I think that that means despite what looks like the economy hitting a wall in the first half, earnings are still growing. I'm just in the camp that we're a soft landing is still a stronger narrative, even if the market believes it's a soft landing is still a stronger narrative, even if the market believes it's a recession. I mean, you're not the only one to think that, right?

I mean, Bullard, Bullard was making comments today suggesting that, you know, he still thinks it's a possibility. Let's broaden the conversation now, bring in a few other voices. CIC Wealth's Malcolm Etheridge with us, along with Axonix's Peter Cicchini. It's good to see both of you. Peter, you, I hope, heard what Tom Lee had to say, that you shouldn't sell the RIPs, that maybe this time is different. You would suggest otherwise? Yeah, I would. You know, I've been in the seller rally camp for the majority of this year, and I don't think, unfortunately, I don't think that's done.

I think as we go through this earnings season, we could see a summer rally as companies post earnings. They're just good enough, given how negative sentiment had become to support higher prices. That said, I think where we start to see the weakness is in the guides into next quarter. So we've had multiple compression to start on higher interest rates. That was the story up until now. And I think the next part of the story is cash flows. It's lower earnings and lower guides. And that has not been built in to most people's forecasts. And I think that takes us into a 1970s kind of paradigm where we could see something significantly greater than a 20% pullback. Interesting. Malcolm, I'll get to you in just a second, but I want you to respond to that. Tom Lee. I mean, I wouldn't expect companies to have

a lot of visibility, so it's not a surprise. But are delivered numbers coming in better than expected? Yes. I mean, even today's retail sales is a positive surprise. I think that there is a very large gap between the level of gloom that's out there, market expectations, and there's room for companies to miss and guide down because how much expectations have fallen. I mean, Russell's a great example. The Russell 2000 earnings are up 70% since 2019. The Russell index is flat. So you have 72% more earnings behind a flat index. Malcolm, gloom and doom or no. Yeah I think my main concern

here is that the Fed starts to share the same sentiments as perma bulls like Tom. And he's is off of the gas pedal a little bit. As we start to look at the. July and then September rate numbers I really think we need to be talking about a

hundred basis points here. But I'm very concerned that one, they start to ease off because like Tom said, they start to feel like the market's done some of the work. And two, they start to not want to look like they're capitulating to the markets and not being reactive to the markets by going to the extreme 1 percent and instead go 75 basis points because it's a lot more palatable and really already expected by pretty much everybody on the street. I'll let you respond to that, too. I mean, that was a little bit of a zinger he threw in there. But I mean, that that is the criticism is that you you're you're ignoring some of the issues that Malcolm and Peter have addressed.

And you're in your own sort of world here about why you think that the stock market can do as well as you think it can? Yeah, that's a great question. I think the market has sort of a very central narrative that we have a hard landing coming and inflation is very sticky. The data in June has kind of proving the point that inflation is not that sticky, even in consumer expectations. It's not de-anchoring. It's actually coming down. And I would actually kind of push back a little bit and say I think the bubble is in hyperinflation fears. I mean, that's the bubble that's bursting, not uber bullish bubble. You know, the market's already down. So I think the belief that the Fed has to do this for years is actually sort of the bubble. Malcolm, why don't you respond to that? Yeah, I don't know. I don't know what numbers Tom is looking at to get so bullish here and to feel so positive because, Scott, I think you made a really good point initially, which was that housing

is the big concern here when we look at the CPI numbers, right? The only way we're going to get inflation anywhere near under control is to bring housing back into a realistic number and then also autos like right behind it. And the only way we're going to get housing under control is if the supply of homes available for folks to buy suddenly somehow increases by millions. Right. We're behind like five million houses. And that's the only thing that gets people to stop renting. That gets landlords stop gouging people on rent.

That's the only thing that's really going to drive that CPI number down in a meaningful way that says to the Fed, mission accomplished. We can ease off here and stop raising rates to the point that we have. And then, oh, by the way, mortgages are twice as expensive as they were six months ago because the Fed has had to raise these rates. So it's kind of just this vicious circle that I just don't see where the optimism comes from here. Yeah. Peter, it sounds to me like you don't either. I'm wondering what you think about the 100 bips question, whether, you know, the Fed is going to be more aggressive than some like Tom Fink for the very reasons that Malcolm just articulated. Yeah, what's you know, one of the things that's been a bit surprising is the

reactivity to headlines of late. You know, the CPI print at nine point one percent was basically at the whisper based on the folks I'd been talking to. So I was somewhat surprised that the Fed funds futures markets for July started pricing in ninety three basis points right away. Then it didn't take much. It took a little bit of a walk back by Waller to talk about a 75 basis points base case. And now here we are under 80 basis points for the July hike. I do think the big risk here is, in fact, that inflation has been rolling over slowly. No one talks about PPI, but PPI was one of the reasons why at Exxonic we were ahead of the inflation story and thought it was not transitory early on. PPI has actually started to moderate somewhat. Inflation in goods has

transferred over to services because of the way the value chain works. Commodities have started to roll over for two reasons, One, because of the Fed, and two, because inflation kills itself. When prices go up, people buy less. We've been seeing that in the data. So I think the biggest mistake would be for the Fed to go too hard based on the fact that a lot of the data is saying inflation is cooling. That said, the important counterpoint there is that OER always follows inflation with about a six-month lag. So rents are likely to be sticky for some time, as are various parts of the services market. And so the Fed also can't be asleep at the switch. It's a very, very tricky spot. I just want to make sure people know what we're talking about. Owner-equivalent rent,

just so these acronyms have a place to settle with our viewers. Let's do this. Malcolm, let's get a little more critical on where you think we should be. You like cloud stocks. I like the debate on tech, especially now after ServiceNow raised the issue of currency. And I think the direct quote or certainly close to it from the CEO, and it may have been on this very network with Kramer earlier in the week, was it's impossible to outrun what's happening in Europe with currency issues. So why shouldn't I be more concerned about that and like these stocks? Well, I mean, that is a fair criticism. And I think especially when you think of the multinationals, right, so the giant behemoths that do business on basically every continent, I certainly understand

the concern over currency risk but I definitely still think there's opportunities in cloud simply because companies are finally at least started to look like they're they're accepting the fact that. Employees are never going to come back to the office in a meaningful way physically the way that they did before and so instead of trying to. Own sure or keep on sure all of their data, they're migrating all of their data to the cloud now instead of just siloing it and deciding to keep some stuff in-house because certain employees need access to certain stuff. And so I think what that's going to do, that demand for cloud storage specifically, is going to increase

M&A activity among some of the larger companies like your IBMs and your Salesforce's who are number three and number four players behind Azure and Amazon Web Services. And those companies are going to come in and gobble up some of the smaller players at the bottom of the the bottom of the field that have lost 80 percent, 75 percent, 70 percent of their stock price through the course of 2020 2022 they've lost a significant portion of their stock price their value and they probably are going to be willing to play ball so just from an m&a perspective i think there's going to be tons of opportunity for folks looking to increase their market share as far as cloud competing computing services are

concerned let's talk tech tom, because you like it and you've been advocating mega cap tech as part of your overall strategy. I note Apple closes a touch above 150. Stock was below 130 for a moment. Yeah. Not that long ago. We're 10 or so days away from big tech earnings. we going to be disappointed is this a run-up that's going to be a sell when they actually come with the numbers uh you know i i think tech is still better to buy into earnings because number one it's a group that peaked early you know it peaked several months before the s p did it's really been one of the source of funds because it's the one thing that wasn't nailed down and easy to sell early. And it's also, I think, very consensus to kind of want to be in value

and inflation plays. But if we're at the cusp of disinflation and the Fed cooling, I think one of the biggest moves is going to be the Nasdaq. And everyone says after a crash, you don't buy the groups that led. But every single post-market bottom since 1986 has been led by tech. So I think tech is still the place to be. Peter, why don't you respond to that? Do you agree or disagree? And I just note, again, this move by Apple has been somewhat stealthy. It's been a nice little move here.

Does it have greater meaning? I would say you've got a great barbell here, Scott, because you've got tech on one side, then you have what I like most, which is a defensive sector. It's called real estate. And because, for example, rents continue to go up and are likely to continue to go up, exposure to multifamily housing is a great defensive area. It's not equities. It's structured products for us, for example. But I do not like tech here yet.

I think the assumption that we've had a bottom in the markets is wrong. Tech does tend to lead out of bottoms. But I think we're actually far from the longer-term bottom. Again, the analog is the 1970s. We've got further to go, notwithstanding, you know, some pretty aggressive rallies in the meantime, which I think we're on the cusp of having right now. All right. We'll make that the last word. I appreciate it, everybody. Have a great weekend. I know I'll see you on the other side sometime soon. Tom Lee right here with me, Malcolm and Peter as well. Let's get to our Twitter question of the day. We're halfway through the month, so we want to know which of these July Dow winners would you fade?

If any, Apple, Boeing, Home Depot or Visa? You can head to at CNBC Overtime. Please cast your vote. We'll give you the results as we always do later on in our show today. We're just getting started here in overtime. Up next, we're talking more tech. Earnings are kicking off next week. One top analyst says this specific part of the tech sector will hold up better than feared.

We'll find out how you are supposed to play that as well. And later, an inside look at Wall Street's hottest trade, where you can still find opportunity in a sector everybody seems to love right now. That's health care. We're back in overtime in just two minutes. Tech, the biggest focus for investors in the weeks ahead. Earnings season really kicks into high gear. Joining me now on set right here, Post 9, Dan Ives. He is Wedbush Securities Managing Director of Equity Research. It's good to have you back.

Great to be here. I say back because I want to address something with you first before we get to this whole conversation about tech. And that is this fine that you recently were charged with by the SEC for a violation that occurred in your one of your prior jobs. Synchronos Technologies, correct? You ran IR for a little more than a year. As far as I understand, it was an accounting infraction. Can you confirm, first and foremost, the fine, which was said to be in the $15,000 to $90,000 range? Look, and I understand why you need to ask, and I understand the question. Look, I mean, this was an old matter, you know, from years ago,

which has been settled. And because it's a settlement, I can't talk any more about it, but obviously glad to move forward. And, you know, now that now that it's settled, Wedbush has given us a statement when this matter came out a few weeks back and said that it would not impact your employment there. But but I'm wondering and because you you can't address the issue directly because of the settlement, whether at the very least it hurts your trust with the public, people who are watching you now who had one level of trust for you before and see news like this and wonder whether they should listen to what you have to say today. Look, I mean, for decades I've been covering tech with investors around the world

that have known me to navigate tech. And, you know, and obviously my reputation has been extremely strong. And that's sort of my view. I mean, obviously, this is a settled matter, you know, in terms of me moving forward. Do you think it's a stain on your reputation that you said was pretty pristine for a number of years? Look, I just think like I for decades, I've covered tech on Wall Street and, you know, and obviously navigated investors through ups and downs. And that's sort of been my DNA. And obviously this matter is settled. And for me, I'm just sort of glad to move forward.

And that's why in terms of tech, that's what investors that's why they go to me. And in other words, over the years, traveling all around the world, covering tech, I think I've established an extremely strong reputation. That's where I stand by. I appreciate you addressing it. No, and I appreciate the question. For not only us, but more importantly, and most of all, our viewers. Let's talk about tech. Your headline today is that you think enterprise spending is going to hold up better than feared, right? What makes you so sure? Well, I mean, for me, it's bifurcated. In other words, you can't paint tech with the same brush in terms of the consumer and some of the e-commerce themes and enterprise. If I look at our checks and I look at names like Microsoft, I look at cybersecurity names like we've talked about with your Palo Alto,

Fortinet, Checkpoint, among others, I believe BART's worse than the byte relative to numbers cuts. FX, as you were talking about with Tom and the team. That's a big issue. No doubt. But I think that is already – if you look what's baked into these names, I think it's already 200 to 300 bps of FX, but more importantly, fundamentally, from a demand perspective, I believe what we're seeing on enterprise, cloud will only 44% through on the cloud.

I look at names like Microsoft, Salesforce, and even cloud derivative names across cybersecurity like Zscaler. But why does like, you know, when ServiceNow came out with Kramer, Bill McDermott, and said you can't outrun these currency issues. I mean, that stock didn't go up. That would suggest that there's more potential downside if the news gets worse, which it in fact might. Yeah. And look, given what we see on the economic storm clouds, you're clearly going to see a softening as we look down to the next six, 12 months. But then it comes down to you campaign them all with the same brush. Now, service now, you know, in terms of what McDermott said, I'm not necessarily going to say that you're going

to see the same things in Microsoft, at Salesforce, at Adobe and others. That's why I think you got to look at pockets of spending to get through this storm. And I believe cloud and cybersecurity, the reason they've been resilient the last few weeks, is I think you're starting to see going into 2Q earnings, I believe a lot of this bad news baked in. I think about 8% to 10% numbers cuts already sort of reflected in a lot of these names. Why is your favorite tech name right now Apple? And I did reference this run that the stock has had from a touch below 130. already sort of reflected in a lot of these names. Why is your favorite tech name right now Apple? And I did reference this run that the stock has had from, you know, a touch below 130,

not that long ago, to now back 150. Yeah, because I look at it, if I look at the iPhone 14 cycle, if you look at Asia checks, demand in terms of what they're forecasting, you've really seen no major tick downs. I look at, yeah, you got 225 million iPhones that still have not been upgraded in the last three and a half years. You got services business that's held in extremely strong and could be on pace to over, you know, 80 billion in terms of this year. So I believe Apple, the reason Apple's held up like rock or Gibraltar, it's because fundamentally you have FX, you have supply chain issues and zero covid. But I think a lot of that, as we look in September and December, I think that's baked in. A couple of things before I let you go related to Musk. OK, number one, Tesla, doesn't it report next week? Yeah. So I want your outlook there. But also this whole saga with Twitter is going to play out now

in a courtroom. What's the potential stain on him on the other side of that? And is there any residual on Tesla as a result of it? Sure. It's been a black eye for Musk. I mean, let's just call it like it is. It's been a fiasco in terms of the way this has all been handled since April. I think part of the problem in terms of Tesla, you know, obviously the zero COVID issues, that was a disaster in terms of April and May. Big focus is going to be what ultimately demand and production looks like second half of the year. And I think that's one in terms of EVs. They've been able to navigate better than really many others in the industry. In terms of the Twitter situation, we've talked about Twitter clearly has upper hand going to court. Legally speaking,

I think Star to get baked into that stock is either monetary damages settlement or potentially, you know, ultimately must still have an own Twitter. And I think that's why that stock continues to move higher. We'll talk to you again soon. Appreciate you being here. Thanks for being here. All right. That's Wedbush's Dan Ives joining us here at Post 9 today. Up next, searching for opportunity where one market strategist putting his money to work right now in this volatile environment. Get his top picks after the break. We're back in the OT after this. It's time now for a CNBC News update with Kelly Evans. Hey, Kel.

Hi, Scott. Hi, everybody. And here's what's happening at this hour. Within the last hour, President Biden told reporters he made progress on security and energy issues when he met today with Saudi Arabia's Prince Mohammed bin Salman and other officials. But Biden stressed that he also brought up the 2018 murder of journalist Jamal Khashoggi in the country's embassy in Turkey. I made my view crystal clear. I said very straightforwardly,

for an American president to be silent on an issue of human rights, is this inconsistent with who we are and who I am? I'll always stand up for our values. Also today, Biden moved to at least delay a threatened strike Monday by freight railway workers by naming a board of arbitrators to deal with the dispute. And 30 women who allege sexual misconduct by NFL player Deshaun Watson have settled their claims against the Houston Texans for enabling Watson's actions. Watson, who plays for the Cleveland Browns now, has denied any wrongdoing and vowed to clear his name. Tonight on the news, I'm in for Shepard Smith. We'll tell you why a national suicide hotline is getting a new number and is a little understaffed. 7 p.m. Eastern, Scott, back to you.

All right, Kel, look forward to it. See you in the chair later. That's Kelly Evans. A major rally on Wall Street today, but the major average is still lower on the week. Our next guest finding opportunity in the pullback, Troy Gajewski. He is FS Investments Chief Market Strategist joins us now. It's nice to see you again here in overtime. So is this rally different than some of the others off the bottom or no? Not really, Scott. I mean, you know, our thoughts on the broader macro environment. I mean, one of the things that's been challenging for people to de-risk in this bear market is that we haven't had sustained, you know, bear market rallies, which are typically a hallmark of one. We think ultimately we have

more multiple compression into lower earnings than are expected. You know, that being said, there are great opportunities and alternatives, whether it's senior secured commercial real estate or multi-strategy solutions where you can put money to work with confidence. But you still want to be fairly cautious on broader equity markets, because at the end of the day, regardless of what stock you're long, you know, beta or systematic risk is the most important determinant to outcomes. And that continues to point lower. I mean, yeah, well, that's why I listened to you. And I'm like, why would I want to put any money fresh to work now if Troy just told me I got multiple compression more coming and we've already had some. Now it's going to be matched with earnings compression and the market's going

to go lower, maybe even hit new lows. Is that your belief? Yeah. So, look, the debate's still out on how much lower earnings will be versus current estimates. They're certainly going to be lower. Just the question whether they flip negative or not. And that would be driven, of course, by a recession. And that probability has gone up to about one in three right now, Scott. And I think the key in this environment, again, is you have to focus on strategies that are economically resilient in the event of a recession and can also benefit from the Fed hiking in resilient floating rate exposures. Or you have to go to market neutral strategies that can take advantage of niche exposures like dividend futures or shorting the mortgage basis versus treasuries. Those are 2022 trades and 2023 trades. It doesn't mean you take all your equity

exposure and liquidate it. You'd be very cautious and very careful where you're adding risk. We certainly don't buy into bear market rallies at inopportune times. Understood. I mean, but some of the trades you just told our viewers about are a little tricky. They're not your sort of run of the mill trades that a lot of people make. What people do do is they look for names to buy here. You do have a few names that I'd like to get to. Northrop Grumman, number one, why now? Yeah, sure. So why now? Again, very resilient, very defensive. Obviously, he's going to be a big beneficiary from secularly higher defense spending in Europe. And then behind that, of course, you have the prospect of the U.S.

gearing up for, you know, unfortunately, a second Cold War with both Russia and China. And so that's very durable demand. That's something that you can count on, should have modest multiple compression versus other sectors of the market. And again, like Scott, there's a non-zero probability that we've bottomed. Keyword non-zero, but not very high. And if that's the case, you have a little bit of lift from broader beta in the event that we have started a new bull market. Highly unlikely, though. Pick number two, Nexstar. Yeah. So Nexstar is going to be a big beneficiary from increased political spending. They have a lot of pricing power, very reasonable multiple. Everything we look for in our Chiron complex, led by Ryan Caldwell, is resilient cash flows. When you have pricing power in an inflationary environment with big political spends coming for the midterm election,

that's not a bad place to be either. Lastly, Vertex Pharma? Yeah, so Vertex, interesting, right? It's a market leader in a variety of areas, including cystic fibrosis, you know, has a lot of good developing news in phase two and phase three trials on, you know, renal disease treatments. Again, very stable cash flow, very attractive multiple, very economically resilient, and should have much less downside than the broader market if we take another big leg down here. All right. Be well. Troy, I'll see you soon. That's Troy Gajewski joining us, FS Investments. Up next, all in on health care. Seems like everybody is, right? The bullishness abounds on Wall Street, where you can still find some opportunity in that

sector. That's coming up next. And don't miss a moment of overtime. Follow the Closing Bell podcast on your favorite podcast app. We're back right after this. In today's Halftime Overtime, the street's new focus on health care. That sector outperforming over the past month as numerous Wall Street firms start recommending it. We're going to talk more about that because UnitedHealth led the Dow today after very strong earnings results. And you may know from watching this show and others, it seems to be certainly a favorite place to be. And again, a very big day on Wall Street today.

That stock led the Dow. Carrie Firestone joins us right now. She used to run the health care fund at Fidelity. Carrie, it's good to see you. You made a lot of people a lot of money for a long time. So you're the perfect guest to have on this topic right now. What about this? It does seem like everybody loves it. Well, it's the perfect defensive play if we're worried about a recession. And in almost all situations that there's fear in the market, you can see health care move higher relative to other sectors. It's the third best performing besides utilities and consumers staples. What, however, we know is that there's a bifurcation between what's working and what isn't working in health care.

It's the big defensive drug companies that have been very strong and the service providers and insurers. Those have been the best. What has been the worst, we know, has been biotech. It's really been abysmal. And you saw that the defensive names such as Merck, Bristol-Myers, Lilly underperformed through COVID. And now they've been outperforming because this is stability. Drug pricing has held up. We've started to see a return to traditional medical care and medical needs. And the insurance companies like UNH had a great quarter today. I mean, they reported $7 billion of cash flow, $4 billion returning to shareholders, much better ratios than expected. And that's what's really propelled these stocks to move higher which we understand we own UNH it's one of our biggest positions

and we own Thermo Fisher we own one of the insurers meaning health equity but that does not mean that these same companies are going to be the ones that drive forward in the next move which ones will be then? Yeah, well, the ones we like, of course, we like them. But if we talk about big pharma, that's where you want to be if we move into a recession. And the market today, for example, is feeling more positive about skirting a severe recession that we'll be able to get by without, you know, having much higher interest rates, the 100 basis point hike maybe off the table. If you believe that we're going to avoid a recession, then you might want to buy some of the biotech names. We just heard the guest talk about Vertex. Some of those names

have been so decimated. All small cap bio dropped about 65% from its peak. They've had a little bit of a rally, but they're still down 50% from where they were a year, year and a half ago. We own a medical device company, Medtronic, Edward-like science. We think that Integer, it's a small cap, that's a cardiovascular play. If you listen to what UnitedHealthcare said, it was that they're starting to see a return to typical types of procedures in hospitals. And rather than having to have hospitals full with COVID patients, if you return to what we saw previously, there's pent-up demand.

I think those device companies can do very well. All right. We'll leave it there. Carrie, appreciate it. Carrie Firestone, joining us in overtime. I'll see you soon. Thank you so much. Some staggering stats from this big week on Wall Street. Christina Partsanovalo standing by for us today for our rapid recap.

Christina. Well, we had a rally into the close, but indices couldn't cross the green finish line. I'll break down the biggest winners and losers on the week, plus a potential takeover of a food distributor, and shares are jumping. The details next. Stock snapping a five-day losing streak to close out this week. Christina Partsinovalos with our rapid recap now. Christina.

Well, call it what you will, relief rally or not, but stocks rallied into the close with the Dow jumping more than 650 points. But all indices still lower for the week. Consumer staples was the only positive sector for the week, up one-tenth of a percentage point. The biggest movers on the Dow were Boeing, Visa, and Walmart, with Boeing the biggest winner, up 6%. Earlier this week, the aerospace company reported its deliveries reaching their highest monthly level since March 2019. On the flip side, though, travelers dropped 7.5% on the week, followed by Salesforce and Microsoft,

but both were down about 4%. And then we've got crude settling higher, but down 7 percent in the week. That's the fourth negative week out of the last five. Concerns of a global economic slowdown, of course, and growing covid cases in China are reducing traders appetite for risk right now. And then you got gold. Gold had a rough week as markets repriced rate hike expectations and the strong U.S. dollar stole the safe haven spotlight away from gold. The precious metal has been down for five weeks. And even though it's Friday, I do have one overtime mover for you. I squared is said to weigh a takeover of fruit and

vegetable producer Fresh Del Monte, according to Bloomberg. Del Monte shares, you can see, are up over 6% in the OT. Scott, have a great weekend. All right, you too, Christina. Thank you, Christina Partsenevel. It's up next, our two-minute drill. We'll find out where one money manager is finding big opportunity in the software space. That name is just ahead when we come back. It is time now for our two-minute drill.

With us now, Ayako Yoshioka, Senior Portfolio Manager of Wealth Enhancement Group. It's good to see you. Let's talk about some of these picks, Ayako, if we could. Amazon, number one. I read one positive note about this one today. Why is this the right time for it? Sure, Scott. Thanks again for having me.

Amazon, I know your guest yesterday also talked about Amazon. And, you know, today's retail sales numbers just told you, once again, it's tough to bet against the U.S. consumer. With Amazon, not only do you get the retail or e-commerce side, but you get the cloud as well. And AWS, Amazon Web Services, continues to grow and take market share. And we think that if you can assign a high teens enterprise value to EBITDA multiple to that side of the business, you're getting the retail or e-commerce business for a significant discount, especially relative to some peers like Walmart or Target. So we continue to like it here. How about Oracle? Okay, How about Oracle number two? Yeah. Oracle's a value tech name. It's trading around 13 times with a 1.8% dividend yield. We like the stable earnings that Oracle provides. It's also in the cloud space as well. And their recent acquisition of Cerner

gives them a healthcare vertical, which we think will continue to grow in a steady, stable pace, regardless of the macroeconomic environment. Speaking of health care, CVS Health, that's your last pick. I mentioned earlier how it seems everybody these days loves that space. Sure. Again, today we had earnings from UnitedHealthcare, and managed care seems to continue to do well. CVS has an integrated model, and you get retail, pharmacy services, and the managed care business all in one. And this allows CVS to really focus on a broad set of capabilities addressing consumer, employers, and government channels. And we think this is a great business to be in. So it's a value stock. It trades around 10.5 times. It's got a 2.5% dividend yield.

And it's a strong double-digit earnings growth company for the foreseeable future. So we continue to like CVS here. We will leave it there. I'll see you soon. Thank you, Aya. Thank you so much. All right. Up next, who else? It's Santoli's last word to round out this busy week. We'll be right back. We're back as we get ready to close out the week. To our results now of the Twitter question of the day, we asked which of these July Dow winners would you fade here? Apple, Boeing, Home Depot, or Visa? Nearly 40% said Boeing. Apple, not far behind with 31%.

Only 15% of you would fade Home Depot and Visa. Mike Santoli here for his last word. I'm surprised that Apple was number two, that they'd fade, of all things. I mean, it's hard to find people negative on Apple anytime. It's very true, although I have to say it shows you that Boeing has completely just lost the faith. I mean, you consider how it was four years ago. It was almost a cult stock and everyone thought it was nothing but up. So maybe that's net bullish for Boeing.

But I agree with you on Apple. There isn't always, you know, compared to the other huge Nasdaq stocks, there's a little more of an overlay of skepticism on Apple than there are, say, even on Alphabet or Amazon. Well, I mean, I also did reference the run that the stock has had in a reasonably short period of time, 130 to 150. And now we have earnings looming and that's going to be the real telltale. It also, as I say, it goes in streaks and it also popped above the round number of 150 in the last couple of minutes of trading today. It sometimes does on expiration. So your takeaway from the week is what?

Well, first of all, the market's still maybe a little too sensitive to every slight new nuance in the macro and the Fed picture than you would prefer. Right. The idea that the low for the week came the moment everyone thought we were going to be 100 basis points in two weeks. And then maybe it was a little bit of cold water on that, and it was 75, and then we rally, you know, a few percent off of that low yesterday morning, that shows you there's still a little bit twitchy and still maybe focused on the things that you can sort of over-pursue. However, we're going to have a little break from the big macro. Fed speak's going to quiet down.

And we got through the CPI number. Nothing much next week, really, until ISM on Friday that's going to quiet down. And we got through the CPI number. Nothing much next week, really, until ISM on Friday. That's going to change the picture. So that's set. And then you have the fact that the market hasn't made a new low in a month. Now, that's not saying an awful lot, but it's saying something. There were excuses to go lower. I think the gasoline price is bound up in so many things, including the Fed's preoccupations with what it has to do with inflation expectations and obviously pressure on the consumer, that the fact that it's come off so much is a little bit of a cushion. But if we're not distracted, if you want to use that word,

by Fed speak and economic data, we get to fixate on earnings and it gets hot and heavy. That has the possibility of us focusing more on the negative. It does have that possibility. We simply don't know to what degree, sector by sector, name by name, it's been priced at. And you don't even get any help by looking at this week because you had this ripping rally in the bank stocks today. Yesterday, they were all lower after J.P. Morgan and Morgan Stanley reported. Really not that different a story today versus yesterday in terms of what the CEOs told you, in terms of what the results were. It was

about the macro fear that was somewhat relieved today by the economic numbers. So, yes, we are going to have that. I think big tech stocks, once we get them, they'll probably have to miss by a lot for that to lead us to a new leg low. Earnings haven't been, you know, all that bad. I mean, Pazani this morning to start the day and since we're ending it, yes, you have fewer companies percentage wise beating. And you have fewer companies beating by as much as they once did. But it's not like a falling completely apart story thus far. It's not yet. We've got to probably get through another couple of weeks and see what third and fourth quarter forecast looked like then.

Because that's really what it's about right now. Investors should be looking into, you know, the next two or three quarters for direction as opposed to just, you know, last three months. So so far, you've kind of dodged a bullet. Have a great weekend. You as well. That's Mike Centoli. Thank you. With his last word, he'll be back next week, as will I. That does it for us. Have a great weekend. Fast money begins now.