Closing Bell - Closing Bell Overtime: Countdown to CPI 9/12/22

Episode Date: September 12, 2022

It’s a moment of truth for the market as we await tomorrow’s CPI report. So, what should investors expect? NewEdge’s Cameron Dawson gives her take. Plus, Strategas’ Jason Trennert reveals the key market indicator that investors need to pay more attention to. And, SL Green and Chef Daniel Boulud are cooking up a new venture. All the details are explained in Overtime.

In moments, we'll get breaking results from Oracle. We'll bring you the numbers, plus instant stock reaction as soon as those earnings hit. But we begin with our talk of the tape. A moment of truth for the market as we await tomorrow's critical CPI report. Investors expecting to see inflation easing again last month. And our first guest says tomorrow's print could help decide which way stocks might break from the summer-long trading range. Let's bring in Cameron Dawson, chief investment officer at New Edge Wealth. Cameron, thanks for coming down.

It's a party here, apparently, tonight. We got a 1% gain in the S&P 500, but interesting setup ahead of the CPI. I just wonder, clearly the street has gotten into a posture saying that it could be benign. Is it going to be a clinching number that says the peak inflation story has legs? Well, we think we have to watch the core CPI on a month over month really closely, because if we look at the July CPI print, it was all about energy prices that brought us down on a month over month basis. But it really is a question of how does that spread out to other parts of inflation, other components.

We think we could see some softness in goods prices, but then it comes to services. And services are so important because they tend to be stickier, they tend to go high and stay high, and they tend to be more related to wages. Wages are still running up 6.7 percent. So that could keep services inflation high. And that really is a key thing for the Fed to watch as they determine if inflation really has moved lower significantly. For sure. And it's interesting that the markets have rallied here, let's say five percent in the last week. The S&P 500 has. Yields ticked back up toward their highs today. Now, the dollar has eased off, but you do see this little bit of a different message being absorbed by either market. Now, I don't know if one's right and one's wrong, but it's interesting compared to last month's CPI, because we also did rally in stocks into it.

It was good news. It didn't necessarily create a lasting rally. And watching that divergence between what the macro is telling us with yields and the dollar and what the market is saying with equity prices is really important because we don't think divergences can last forever. We saw that snapback after Jackson Hole where yields have been telling a story of a much tighter Fed.

Equities had ignored it for a few weeks and then we got that sharp, harsh reality where we saw big sell-off in equity markets. So the question is if yields continue to press higher, if the dollar resumes its uptrend, and the question is, if yields continue to press higher, if the dollar resumes its uptrend and the dollar is still in an uptrend. We had a big move lower over the past couple of days, but that uptrend is pretty strong. You know, I do wonder if there's a way of the relationships evolving in such a way as if the market sees the destination point where the

Fed is headed, if it's 4 percent, that sounds like a big, scary number. We were at zero not long ago. But if we go three quarters of a percent next week, the high end is at three and a quarter. So we're not that far from 4 percent. It's almost like the market is in almost their mode and feeling as if it can get some relief from watching the Fed try to catch up to inflation. Well, I think the Treasury market is in that almost their, because we can see that with two-year yields. The two-year yield is reflecting a lot of this path forward of where the Fed is expected to go. The question is, has the equity market or even the credit market fully reflected the degree of tightening that

the Fed is doing? And that probably speaks to the fact that Fed tightening affects the economy and affects certain parts of the market with a lag. So that's one of the reasons why the Fed is saying is we want to tighten and then see how things get digested. You know, we've got this very strong rally off the June lows. You've talked about that. Some of the breadth and momentum indicators were quite powerful and usually give the market the benefit of the doubt if you look at several months. This rally, you've seen a little bit of that, but I'm not sure how it stacks up. But we've kind of solidified this idea of a trading range we've been in most of the summer.

Yeah, and we have been getting more and more narrow in this trading range. It's now in that 4,200 to 3,900. And any time we get into this narrow period, you can tell that there's a lot of push and pull between the bulls and the bears. And so on the bullish side, you can see that we've had better momentum. You see that positioning is still very light. That could support that the pain trade is higher in the near term. But then on the bearish side, we look at valuations still being rather elevated given Fed tightening. We look at where earnings estimates are given that they're probably still too high for 2023. And that's likely why we're seeing this battleground in this convergence.

And we'll have to watch to see which way it breaks. If you're an investor trying to figure out if there are moves to make, reallocations to think about in that environment, if you say to yourself, look, the June lows look relatively solid unless we get some big macro shock. Valuation doesn't look attractive, so maybe the market's not going to run away from me on the upside. What does it leave you to do except to maybe just adjust your return expectations? Well, I think that is actually the biggest first step, which is that after such strong markets over the last 10 years, given where we stand in valuations, given where we still are in equity allocations, one of the best forward predictors for long-term returns

is investor allocations to equities. They're down off their highs, but they're still well above where they were after bear markets like 08, 09 or 2000, 2001, which sets you up for very powerful bull long rallies because positioning was so light and sentiment was terrible and valuations were weak. Now that's not really the case. So lowering your expectations is really

helpful. And then the next step is focusing on quality because we think those are the areas where you can compound growth over the long run. Buy names that you don't have to sell in the next down cycle, essentially. And you do still think that oil and energy is an opportunity here? Why would that be? Well, we think that we could be getting into an interesting supply-demand balance as we move into October, because October marks the end of the Strategic Petroleum Reserve releases. We've released 180 million barrels of petroleum, and we're now down at 1984 levels in inventories. We also have the China Party Congress on October 16th. China demand has been incredibly weak because of COVID lockdowns.

If those are eased, we could see demand come back, put upward pressure on oil prices. And lastly is OPEC. They're meeting again. We could see them cut production again if they're unhappy with the level of where oil prices are. That would tell us to see upward bias in oil prices over the next month or so. Would quality, let's say outside of some energy names which would qualify, encompass things like the very large tech stocks that kind of drove the market to such a degree into the 2021 highs and now have led to the downside? We think they can,

but you have to be very disciplined about valuations. You can't just pay any price. And you also have to watch in quality and updating your thesis about each name, meaning that we've seen a lot of big tech names have to do big investment cycles, for example, where we've seen cash flows come in much weaker than expected over the past year,

or that you're seeing growth slow because of the pull forward in demand. And so having that discipline about where you see cash flow, where you're seeing investment spend, as well as on valuation, really is needed within the tech sector because a lot of the areas of tech are still rather expensive. For sure, they are. We're going to get to a different area of tech right now. Oracle earnings are out. Frank Holland has the numbers. Hi, Frank. Hey there, Mike. Shares of Oracle down just about a percent right now after revenues that were in line but a miss on EPS. EPS was a few cents below estimates. But if

you look at the report right now, which we're going through at this time, Oracle says that it was largely due to currency. During their fiscal quarter, the dollar rose almost 7 percent, more than 6.5 percent. And in this earnings release, CEO Safra Katz really spelled out the issue here, saying in part the strength of the U.S. dollar compared to foreign currencies had a significant impact on results in the quarter without the impact of the U.S. dollar strengthening compared to those foreign currencies. Earnings per share would have been eight cents higher, which would have actually been a beat. So, again, a miss on revenue. I'm sorry, revenues that were in line, but a miss on EPS, the company blaming foreign currency impacts right there. Other metrics generally in line.

Short term deferred revenues were right at estimates. So look at the report right now. But again, shares of Oracle actually reversing a bit, up a half a percent, despite revenues being in line and that miss on EPS due to currency impact. Back on. Back over to you. Yeah, Frank, thank you very much. Stock did firm up. Let's bring in CNBC contributor Stephanie Link of Hightower Advisors and Victoria Green of G Squared Private Wealth to talk more about the markets and earnings. And Steph, let me start with you with Oracle, at least as a representative example of some of what we might continue to hear in terms of big tech earnings. We knew FX is a headwind. The question is, does it matter much for the markets at this point if that's really just a translation effect? You know, I think this is going to be the theme for the third quarter when we see companies reporting earnings. And and I think you have to look through it. We all know that the that the dollar was so strong in the quarter and there's only so much hedging companies can do, right? So I'm just pretty much relieved, though, that the total revenue numbers came in line, recurring revenue also up double digits, very strong. This company has really turned themselves around in terms of the cloud

strategy, and they are delivering on that. So that's a positive. The stock is inexpensive, Mike, as you know, 14.6 times earnings. I just think if I'm comparing a couple of different of these legacy technology companies, I'm looking at something like IBM. I just think if I'm comparing a couple of different of these legacy technology companies, I'm looking at something like IBM. I prefer that one because of the red hat acquisition and the transformation that that company is undergoing. And I think it's just a little less under a little more under the radar versus something like an Oracle. So, I mean, I'm encouraged by the revenue number. It looks like enterprise demand is still very strong. And that is very much key for these legacy technology companies. For sure. And Victoria, just to broaden it out a little bit in terms of what companies have told us, what they continue to say in the conference

season that's been going on for over a week, we've not heard big downside guidance revisions. It seems like there's some resilience in corporate America. I don't know if that explains why the stock market has been managing to hold up in the face of all this Fed hawkishness. But how would you read those things? Well, the stock market's always the consummate optimist, right? The stock market is always going to see better days ahead. I think CEOs tried very hard in the beginning of this year to reset expectations, and now they have kind of more moderated EPS targets to hit. You know, Oracle is a great example of the fact that it wasn't really an impressive earnings, but maybe they're going to gain. And that was something we saw as a pattern here in Q2,

where multiple stocks missed or barely beat, and they were still rewarded on the market. So I think the market had almost said, oh, it's not terrible. Congratulations. We're going to reward you for not being a dumpster fire. You know, Oracle is one of those that's a confusing stock right now because they have so much debt, but they are making transitions. They are working hard to get into the cloud. They were late to the cloud party and they know it. But with their acquisition to Cerner and some of the other steps that they're taking,

but they're now playing catch up and they're losing market share to the Microsofts, the Amazons and the Googles of the world. And this shift away from legacy infrastructure is something that's going to continue as more and more companies move to open source cloud. So I think you just have to be picky. You have to understand how resilient are these revenues and really dig under the hood on what the growth might come from and not look backward, but look forward. And if you say, Victoria, that the stock market is always the consummate optimist, I mean, we've been treated to a ton of indicators that say that investors have actually been pretty downbeat, record low

positioning in some areas and really not thinking, at least the majority, not thinking that the loads are in. Do you think right now at these levels of 4,100, the S&P 500 is kind of whistling past the graveyard? Yeah, I think it's going to retest. I think at this point, investors are smart not to buy this dip. We haven't had a capitulation. We haven't had a washout. I think EPS estimates are still a little too high at 228. I mean, even if you slap that multiple on 4100, you're at 17, 18 times. It's not like we're relatively cheap right now. So I think investors need to be cautious. You need to understand what you own. And again, one of the things we talk about is where is this country going and where is the global economy going?

And if you look at what's happening in Europe, what's happening in China, you just see this general slowdown. And I understand the strength of our labor market as kind of an outlier data point to the rest of the economic data points we're getting from PMI, from manufacturing, and what CEOs are saying and the layoffs that have started coming. You know, you had Goldman today announcing some layoffs. You know, a lot of investment bankers are getting a little bit uneasy as that section has slowed down. You've seen tech announce a bunch of layoffs. And so I think right now, looking forward, defense is still the right play here. And I do think we're going to retest the lows and not to be the chartist of the panel here, but look at the downtrend. It's

still intact. It looks like a really solid head and shoulders pattern still, which is very bearish. And we keep hitting lower highs and lower highs typically mean lower lows. That is true. I think you have some agreement about what the charts seem to reflect right now, although we did recently get that higher low. We'll see how that plays out. Steph, you know, this range we've been in in the market, I think you could interpret it as at the low end of the range, a soft landing seems like a remote possibility. At the upper end of the range, everyone says, hey, you know what, maybe that's not so crazy to think it could be soft. American Express today, I think at a conference, more or less said they

don't see any consumer slowdown. That stock was up two and a half percent today. So you can put a lot of these clues together and I guess read them any way you like. Yeah, that's true. And there were a few other companies at the conference that also reiterated guidance and also talked about the NERD. And they're not seeing any weakness yet so far. Here's the problem, though, Mike. I think we're in this trading range because we just don't know the outcome of the Fed. Sure, if they go to 4% Fed funds by the end of this year, that's expected at this point.

What if they stay at that level for a lot longer than people think, number one? And number two, it takes about nine months for any kind of tightening or loosening to get into the economy. And so we don't know 2023 what that looks like. And we also know that the economy is slowing. I am encouraged, though, and one of the reasons that we rallied in the last couple of weeks at the Atlanta Fed is now thinking one point using one point four percent in terms of GDP growth for the third quarter. That's a heck of a lot better than the negative numbers that we saw in the first and the second quarter. So I think there's a sigh of relief that it's not a disaster, but I think it's just too early to call soft landing. We just they don't have a great track record with the Fed. And there's so many unknowns. But I got to tell you, I mean, all eyes are on the CPI number.

I was actually very encouraged in terms of the New York Fed today lowering their one year inflation target to five seven from six one last month. That's year over year in terms of inflation expectations. It's still really, really high. So they have to continue to be tight. Yeah, Cameron, the lag effects are something that really do come to the fore right now. It seems as if there's a way you could frame 2022 as, OK, we took a lot of medicine. There were a lot of things that had to essentially be reconciled. We did. We had valuations come down a little bit. Rates came off zero pretty hard. You know, the real economy slowed. Didn't know if it did anything more than slow at this point. What about the idea, though, that the Fed is going to use any strength in markets and any resilience in the economy to overshoot in terms of the inflation fighting campaign?

The Fed has told us that they want to see tighter financial conditions. And in order to see financial conditions tighten, you need to see tighter financial conditions. And in order to see financial conditions tighten, you need to see a stronger dollar, but you also need to see wider credit spreads and lower equity valuations. So if we continue to see rallies in risk assets as we've had, it can embolden the Fed to continue to deliver all of that medicine, meaning that the market really isn't giving them any reason to tap the brakes. And I think the other question is that will they meaning that the market really isn't giving them any reason to tap the brakes. And I think the other question is that will they, if the market does give them that reason, are they even in a position to do so if inflation remains elevated? Well, that's the thing, right? Because if inflation were to race down to their target of 2 percent,

I mean, nobody thinks it's happening tomorrow. But if we get there, they're not going to say that's nice, but we need financial conditions to be tighter. I mean, if inflation works in their favor, they can do whatever else on the other side and say markets can do what they're going to do. Wouldn't they love a return to Goldilocks where we could have that tight labor market like we had in 2018? They could raise rates and we have no inflation, a very benign inflation. But that's just not the case where we are today. So every time the Fed pivoted the last cycle, inflation was benign. And so now the Fed is talking about this fear that if they cut rates, inflation will come back with a vengeance. And so that's why it's likely, as Stephanie said, that they'll keep rates high and keep them there just so that they make sure that

inflation is fully contained. Yeah. And just as we wrap up, Victoria, if you think that the market retests, if that's what we have in for us, what would you do in the moment right now in terms of either looking for stuff that can hold up or playing the downside directly? Yeah, so we're playing defense. We're not a hedge fund,

so we don't really look to short something like this. I'm going to mention the six-month T-bill at 3.2% is not a bad parking spot. That front end is going to keep coming up, but you're not seeing that wiggle too much. Own some quality defenses, dividends, strong cash flows, too early to chase anything high beta. You know, stick away from, you know, maybe shut down Reddit a little bit and stay away from the meme stocks. Look for things with earnings. Watch out for your zombies. So I think you just want to still bunker.

I think generally, regardless of what the Fed does they're going to tighten it's going to get harder on growth stocks- and it's just a traditionally and historically a harder environment for growth stocks and small caps to outperform when we're seeing these tighter

conditions because their lending markets drop dry out. All right shut down read it and watch the charts- we got thanks a lot to all Cameron Stephanie and Victoria appreciate it. Let's it. Thanks a lot to all Cameron, Stephanie and Victoria. Appreciate it. Let's get now to our Twitter question of the day. We want to know what will tomorrow's CPI report show? Inflation is cooling,

inflation is heating up or inflation remained unchanged. Head to at CNBC overtime on Twitter to vote. We'll share the results later in the hour. We are just getting started in overtime. Up next, the key market indicator to watch. Our next guest says that while stocks have rallied, there's one part of the market investors need to be paying closer attention to. Strategist CEO Jason Trennert explains after the break. We are live from the New York Stock Exchange. Overtime, we'll be right back. We are back at overtime. Today's rally building on last week's strong performance. The major average is now up about 3% in September. But our next guest says it is the sharp move higher in yields that investors need to be paying more attention to.

Joining us now is Jason Trenert, CEO of Strategas Research Partners, a Baird company. Good to see you, Jason. Great to be here, Mike. You know, the yield interplay with stocks has kind of changed along the way. It seemed at one point that the stock market couldn't really get anything going with the 10-year above 3%. I mean, we could talk about where these lines in the sand have moved to. But what's the larger idea behind the idea? Look, yields have been marching higher. Equities might have to deal with a new type of environment. I think that's, you know, it's my view not only because obviously bonds are more attractive,

but also I think you've had negative real yields on the, for a good part of the treasury curve for a long period of time. And it seems to me, if you look at the academic switching models between bonds and stocks, generally that happens around 5%. We're a long way away from that, but 20-year yields today I think are 375. And you're still, at the 10-year level, you're still about 500 basis points in the red as far as meeting inflationary expectations, at least inflation. The trailing inflation. The trailing inflation.

So I'm worried, I have to say, I think it's something worth worrying about. And I also think if you look at quantitative tightening, which will really kick off in a meaningful way this week, that's something else that I think the market has yet to really deal with. You know, it's true that we haven't seen exactly how it plays through QT. On the other hand, you have such a polarized views. And by the way, this is the SL Green. They rang the closing bell. We're going to be talking to the CEO there in just a minute. They're pretty excited about a new building they've just put up. But you've had those folks in and around the Fed who say, look, this is kind of just noise

in the background. You know, QT bonds rolling off, they're maturing. Equity, treasury issuance is down. It's not like the market can't absorb it. And then the other side, you know, people basically say this is unwinding the whole basis of why markets are where they are at the moment. Yeah. I mean, listen, Mike, as you know, the Fed's balance sheet has gone from $4 trillion to $9 trillion in about two years. It's hard to think that hasn't had a big impact on risk assets. And I think while the Fed has a lot of experience in terms of raising interest rates, the Fed funds rate and now the interest rate on excess reserves,

it doesn't have a lot of experience as far as balance sheet runoff is concerned. And we really don't know where that money is going to come from. If it comes from a reverse refou-po facility, that's probably not so bad. If it actually comes from the banking system, in my opinion, that could have a meaningful impact on the growth of the economy, as well as the propensity for people to buy risky assets. So I think this is a big unknown. And I think people should take it seriously, mainly because people don't know.

Sure. There's no doubt there. I know I don't know. But to me, the transition from QE to QT is a very, very meaningful transition. It's probably as big a transition as you've seen since Holker really started targeting reserves as opposed to interest rates in the late 70s. Last week, more than $50 billion in new corporate debt priced. Very active issuance week for big companies. So could you not look at that and say, look, the capital markets have lots of capacity here

to absorb whatever happens if they have to buy more T-bills or whatever it is. I think that's fair. By the same token, I do think when you look at global economies and you look at global policymaking, especially what's happening in Europe, it strikes me that we're buying into a period in which you're going to have significantly more debt issuance, really just to pay for what I believe are, I would say, wayward environmental policies or policies that are going to cost a lot of money. And so I'm not quite sure. Or just subsidizing consumption of energy.

Right, which I'm not quite sure does the trick in terms of getting the price of energy down. So there's a lot of, I'm trying to be politically correct here in saying that, but I do think it's a, I would say it's a conceit to think that deficit spending is a thing of the past. I think we're looking at significantly more government spending as we move forward. How does that knit back into what we should expect out of equities? I mean, is it just a valuation headwind? Is it kind of a, hey, there could be an accident waiting for us out there? Well, listen, it's a little bit of both. I think clearly whether we think inflation is, I tend to think inflation has peaked, but I also don't think it's going back down to the Fed's

target anytime soon. So to me, that puts pressure on multiples. At the same token, I do think generally when the Fed stops, it's when there's a financial accident. And we don't know what that is. There are clearly a lot of potential candidates out there, but generally that's the way it works. And it seems to me the Fed is going to get its wish. Unfortunately, there'll probably be a body that floats to the surface

before it's over. You know, the one hallowed soft landing example that everyone would like to point to, 94-95, the Fed tightens aggressively, gets ahead of it, it's no recession, etc. There were financial accidents, right? Orange County went bankrupt. You had massive derivative losses. The street, in aggregate, lost money that year on bonds. On the other hand, stocks kind of just sailed through. The only difference, Mike, though, is that- There's many differences. I don't want to say it's the same. One of the big differences is that inflation wasn't nine. It never ticked to nine. The Fed did a lot of prophylactic work to make sure that it never took off in the first place. It's much harder when you're behind the inflation eight ball and because expectations are going to be picking up now too. They're going into next year, there are going to be quite a few labor negotiations, UPFs with the Teamsters,

you're going to have the UAW with the big three. There's obviously a railway negotiations right now. So that's why time is an important element in fighting inflation. There's obviously a rail, railway negotiations right now. So that's why time is an important element in fighting inflation. The longer it sticks around, the harder it is to fight. And that's why I think what the Fed is doing

is appropriate. It's just that it's going to be a headwind, in my opinion, for equities. Let's keep in their message. Yeah, I think so. We'll see if we get it. Jason, thanks.

Thanks a lot, Mike. Appreciate it. Appreciate it. All right, up next, stocks rallying ahead of tomorrow's all-important CPI number. But what other crucial catalysts could investors be watching as we kick off the trading week? We'll discuss with Evercore's Julian Emanuel.

Plus, the bell ringers, SL Green Realty, as you mentioned, the CEO and chef Daniel Ballou, joins us to discuss their new venture over time. We'll be right back. Time for a CNBC News update with Shepard Smith. Hello, Shep. Hi, Mike. From the news on CNBC, here's what's happening. President Biden being introduced by Ambassador Caroline Kennedy right now at the John F. Kennedy Library and Museum in Boston. 60 years to the day since President Kennedy gave his moonshot speech

about landing Americans on the lunar service. President Biden is talking next steps in his own moonshot goal of cutting the death rate from cancer by half over the next 25 years. Among the initiatives he plans to announce today, appointing the first director of a new government agency that will focus on cutting-edge biomedical research. A three-day nurses' strike is now underway in Minnesota. According to the Nurses' Union, it's the largest strike of its kind ever in history. 15,000 nurses on the picket line over salaries and understaffing that they say was made worse by the COVID pandemic. And multiple sources now telling NBC News, the January 6th committee is likely to hold its next public hearing on September 28th.

Committee members said to hold meetings tomorrow on the path forward. Tonight, former U.S. ambassador to Russia, Michael McFaul, on the Ukrainian advance, plus live coverage from London on the Queen's remembrances and the first space launch accident for Jeff Bezos' Blue Origin on the news. Right after Jim Cramer, 7 Eastern CNBC. Mike, back to you. Shep, thank you very much. See you then. The dollar pulling back again today following a huge run-up this year, and our next guest says an even bigger drop in the greenback could usher in the return of the bull. Joining me here at Post 9 is Julian Emanuel, senior managing director at Evercore ISI. Julian, good to see you. Great to be here, Mike. The dollar obviously had been

a big source of pressure on, I guess, on risk assets, holding the market in check a little bit. We've eased back, I think today, the U.S. dollar index maybe even below the July highs. Is that a decisive move? How does that play into the rest of financial assets? Well, it's a change in psychology. If you look at how the markets recovered off the June low, basically you saw the break in gasoline prices. Then you saw credit spreads start to moderate.

And obviously we've had a lot of concern about China, about Europe, clearly, and still appropriately so. But now the move in the dollar is saying perhaps that's easing slightly. But more importantly, because the Fed, we can have line of sight to the Fed eventually going on pause, likely by year end. Big plus for assets. So that, in a sense, depicts peak Fed hawkishness. That's the hope. Right. What are the investment implications right now in terms of, you know, U.S. stocks, rest of

the world and I guess economic growth? So, again, economic growth is something that's likely to be challenged for months to come, perhaps quarters to come. We still don't see a recession here over the next year or so, but slower growth abroad, obviously. However, when you think about it, given the fact that the dollar, having been a source of stress as it's been, is likely going to help international stocks, particularly emerging markets, which have been sort of everyone's favorite underweight. And we sort of think of it the way we thought about energy six, nine months ago, then everyone's favorite underweight. Things change. It's an interesting idea because the underperformance has been very pronounced

in emerging markets. On the other hand, so much of it is China. It's hard to know exactly what the overall kind of regional play has been. Do you think we could escape a Fed tightening cycle without things kind of somehow mishaps in emerging markets or anything like that? Well, look, there is likely to be some sort of mishap. But when you think about valuations of the rest of the world and you think about the strength of the financial system in the U.S., I think you could argue, and I think your last guest talked about this, in years like 1994, we had similar mishaps, but we were able to get

through it. We think that's highly possible this time. And then in terms of, you know, the U.S. market and how it's positioned, I mean, if you don't think there's a recession right, you know, ahead of us here, and we have line of sight perhaps toward the Fed being done for a while. What does that mean? Is the June low something that's going to stick? Do we even have to go back to it? Again, it does depend on the evolution of the economic data. And I think part of the thing that we've seen this year is that even though we didn't have a recession, there were times when it felt like there was a recession in financial assets. So we don't want to say that the June low was T-H-E low.

We suspect it was, but we do need to see how things move along. And does the Fed fully understand that inflation and expectations are coming down enough to take the foot off the gas pedal? Yeah. And just, I guess, finally, in terms of, you know, equity market valuation, I mean, that's the other side you see. It's like, fine, June low, maybe it's got a chance of being a real consequential one. But, you know, we're at 17 times earnings. Our earnings have to come down a little bit. You know, the noisy backdrop from there.

Right. It is not cheap at all, certainly not by historical standards of the last 50 years, which I think when you look at geopolitics, tells us that we need to reconsider what the valuation regime is, particularly since when you look at the bond market, and to us, yields do look higher in the months and years ahead. All right. But we do have cheaper values overseas, as you mentioned. We'll see if that ends up working. Thanks a lot years ahead. All right. But we do have cheaper values overseas, as you mentioned. We'll see if that ends up working. Thanks a lot, Julian. Thank you. All right. Breaking news now on Peloton. Bertha Coombs has the story. Hi, Bertha. Hi, Mike. Peloton CEO Barry McCarthy announcing this afternoon that the company's co-founders

have resigned. Executive Chair John Foley stepping down effective immediately six months after the Peloton co-founder was ousted as CEO. Independent Board Director Karen Boone succeeds him as chair. She was the former CFO of RH. In a statement, Foley expressed pride in what the 10-year-old firm has been built within the world of fitness. As for his next chapter, he says, quote, I have a passion for building companies and creating great teams, and I'm excited to do that again in a new space. Also out, co-founder and chief legal officer Hissou Koushi, effective October 3, when he'll be replaced by Tammy Al-Bahran, the former Uber deputy general counsel.

Mike? MIKE HASSAN, The Washington Post, Interesting. Bertha, thank you. Peloton shares up about two percent here in overtime. Thank you very much. Before we go to break, we have to give a shout out to one very vocal viewer on Twitter today. Hello, Scott Wapner. Thank you so much for tuning in. It's a pleasure to be in your seat for you here. Still ahead, order up. Renowned chef Danielle Boulud ringing the closing bell just moments ago with SL Green Realty CEO Mark Holliday. The two cooking up something big in the commercial real estate market. They'll tell us all about it next. And it is not too

late to sign up for CNBC's Delivering Alpha conference that is live in person on September 28th. Register now at deliveringalpha.com. Overtime, we'll be right back. Shares of commercial real estate firm SL Green rallying today, outperforming the broader market. The company's CEO, Mark Holliday, ringing the closing bell just moments ago alongside culinary partner, Danielle Ballou, who is opening a new restaurant in one of SL Green's properties. Both Mark and Danielle join me now here on Post 9. Good to see you both. Good to see you, Mike. Mark, first talk about this new property we're talking about here and what it represents in terms of, I guess, a bet on Midtown Manhattan, commuters, everything. Right. So we've got we've

got several new properties to talk about. I'm going to talk about the one we announced today was One Vanderbilt and the incredible reception that this city has made to this building. It's been incredible. It's about 99% leased. It's transformed East Midtown in a way that has been so good for business, so good for the public realm, and so good for showing that New York City is still here and back? Well, it's certainly here. It's back in some description. Your leasing

looks good in this building. But in general, are we not concerned? I mean, this is right across from Grand Central Terminal. There was some issues with our commuters going to be coming back and all the rest of it. How's the overall outlook here for Office Rail State in Manhattan? You know, we've had a tremendous year. We've leased over a million square feet year to date. For the better buildings in New York that are fully repositioned and amenitized, we see high demand for those buildings. Work from home and remote work is something that is here

and is something that every company is taking their own particular position with. But I think you saw Goldman and J.P. Morgan and others leading the way. And I'm sure other firms are going to follow. There's no substitute for being in the office and in a purpose-built environment. And we were over 50 percent last week, and we see that number increasing. So we're big believers in the workplace and new yorkers return to work yeah companies are trying you know they're getting some uh some progress i think along the front and chef uh talk about the new restaurant you have obviously more than one new one but in this building in particular and and where this fits uh into i guess the whole uh

new york comeback this moment well a year and a half ago, we opened Le Pavillon, which was a commitment to Marc to create one of the finest restaurants around Grand Central, but also to really bring something for the tenant there at One Vanderbilt. And a year and a half later, it has been an amazing success. And we can see the business back, really, in Midtown in a pretty steady way. So in terms of not just, obviously, sort of a fine dining, business lunch and business dinner type crowd you're saying is back? Yes. Business lunch seemed to be a little bit more social than only business, but still, it's good. It's strong. And of course,

this week, we are opening a new restaurant which continues to show the commitment of Mark in New York City and at Van de Bilt. It's a Japanese restaurant called Joji. And Joji, of course, is a little smaller than the

pavilion. It's 10 seats only, plus a private room for eight or two, four. So it's a very exclusive and beautiful experience in omakase and Japanese sushi restaurant. Mark, how does it all fit together i mean you know we still see this idea like in the stock market the commercial real estate stocks have struggled people are worried about leverage people are worried about the fact that leases roll off over a matter of years it's not just about what's happening today you don't see that as a big overhang look i've been doing this business now for over 30 years and i've been through these times where people have written off new york City and written off commercial real estate many times before,

only for New York to come back bigger, better, stronger. And I truly believe it will again this time. There is such a good vibe in the city. There's no denying what you see out there in terms of the packed restaurants, people flooding back on commutation, and everybody enjoying great events like the U.S. Open yesterday. New York is so compelling and alluring for young people, for tourists that are coming back in. They're predicting 56 million tourists this year. That's really something that's evidence of a city that's got a great, great way to go and a great track record. I'm confident. And almost no apartment vacancies, basically. The residential market is tight.

In terms of consumers and their willingness to, I mean, obviously inflation has been everywhere and in all sorts of food at home and restaurants, their willingness to spend on a higher end experience? Oh, yes. We see people want to indulge. People want to take care of each other, meaning business wants to make sure they entertain their clients well. We see the booking already for corporate business within the event that is very strong and coming stronger and stronger. And the social as well.

It's very good. And I think there is so much more coming to New York. And as Mark was mentioning, youth believe in New York. And we see the young people wanting to come to New York and take part of the experience of learning, growing, and becoming maybe a better businessman or a better chef in New York City by working in the top restaurants. You mentioned the tourism. How much of that is your business across your restaurants in terms of people coming from out of town? We do have a balance of tourism and New Yorkers always. But tourism can be from Oklahoma or Georgia or Chicago, and they come regularly to New York, and they regularly come to see us.

But it's also the summit at One Vanderbilt. Mark, can you explain the summit? Mike, are you familiar with summit? Have you been? I have not been. Okay, if you haven't been, you've got to go. Because it's hard to explain. I can only tell you we have about 8,000 people a day coming to the top of one Vanderbilt, to summit one Vanderbilt, both domestic and foreign tourism, locals, people coming back three, four, five times.

This is no ordinary destination. People getting married. People getting married almost on a daily basis, proposals, weddings. If anybody has any question about the health and vibrancy of New York City, go to Summit on any beautiful day and what you will see will be very exciting. A new sort of top of the skyline view in Manhattan. Oh, absolutely. It's a view. It's more than a view.

It's a journey. It's very personal. It's very thrilling and emotional. And it's resonated with people on social media. It's resonated with people who are media. It's resonated with people who are visiting and taking their friends and their family. And again, I think it's just one more evidence of what New York City offers that other cities don't. All right, guys, thanks a lot for stopping by. Appreciate it, Mark. Thank you. Thanks. Up next, we're tracking all the biggest

movers in overtime. Christina Partinello standing by with all that. Hi, Christina. Well, unfortunately, we've got more layoffs that are coming. And this time, it's an online retailer. And the app-loving acquisition of Unity software has fallen through, but that means Unity is still on the market. I'll explain why after this break. We are tracking the biggest movers in the OT. Christina Partsenevel is here with all of it.

Hi, Christina. Well, hi. Chenier Energy, actually, the ticker LNG right now, just announced it'll increase its share repurchasing program by $4 billion while increasing its dividend to $1.58. So that's actually a 20% increase from last quarter. The producer of liquefied natural gas also raising its full-year guidance

because several deals that were previously scheduled for 2023 are now moving into 2022. And that's why the shares are up over 2 percent. Let's talk about Rent the Runway because those shares are plunging on its latest earnings report and restructuring plan. It's important to note that this company actually has a really small market cap and it leases, we know this, the women's clothes. But it posted a higher than expected subscription rental revenue and gross margins, but its active subscribers fell short of expectations. And it also plans to lay off almost a quarter of its corporate roles in order to cut costs. And that's why the shares are down 22%. And then lastly, shares of app Loving trading higher.

Well, let's see it, up 2% higher after it announced it was pulling its takeover bid for Unity Software. You can see over here it doesn't plan to submit another proposal either. Unity's board previously opposed AppLoving's offer, which was made just last month. And that means Unity Software can now pursue a deal with Israeli software firm IronSource. And you can see Unity shares down almost 3% right now. Mike, back over to you. Christina, thank you. I love how you correct the pronunciation of app loving.

I'm with you on that. We don't do the N apostrophe thing here. Still ahead, a top payment play. One money manager making the case for this fintech stock. We'll reveal that name in our two-minute drill. Let's get the results of our Twitter question. We asked, what will tomorrow's CPI report show? 68% of you saying it'll show that inflation is cooling. We will see if that comes through. Up next, our two-minute drill. Over time, we'll be right back. It is time for the two minute drill. Joining us now is Jeremy Bryan, portfolio manager with Gradient Investments. Jeremy, good to see you here. Talk a little bit

just about the broad market. Do you believe in this rally? Is it right to be pricing in peak inflation this way? Yeah, I really do. I think the things that are that brought us into inflation are really starting to roll over. And so the only one that's really holding up is wage growth. And if wage growth is what's driving inflation, honestly, that's not that bad in a 70 percent consumer economy. So we do think peak inflation is probably in and we think we have some upside potential going forward here. All right. We do want to get to your picks, including Intercontinental Exchange, ICE, the financial exchange company. Why is that an opportunity now? Yeah, just in general, I mean, for all three picks, the main theme is that I like these durable growth stories here is the ones that you get long term growth in that mid to high

single digits, even double digit EPS that aren't trading 18 to 13 times earnings. And so ICE really fits that category. People are a little worried about the M&A transaction with regard to Black Knight that's going on right now, but eventually that gets resolved. And this is a very high-margin business that is just very durable growth. So you can get it for a discount to the market right now, and I think it'll grow longer term, higher than the market will in general. So good opportunity right here to be picking up. And just to be clear, Intercontinental Exchange, L3 Harris, defense contractor, as well as global payments, global payments and ICE, I guess would go into the category of financial networks that now used to trade at very premium valuations, but are much more reasonable, as you say. Is that basically the

case in 10 seconds? Very much so. Yeah. High incremental margin businesses. Payments are still going. People still have jobs, so they're going to use them. I think they're going to grow very well. All right. Jeremy, appreciate it. Thank you very much. Thank you. And that does it for overtime. Fast Money begins right now.