Closing Bell - Closing Bell Overtime: Countdown to the Fed 06/14/22

Episode Date: June 14, 2022

We’re less than 24 hours away from the Fed meeting and investors are anxiously waiting to see what Fed Chair Powell’s next move will be. Trivariate’s Adam Parker and Virtus’ Joe Terranova break down what they’re betting on ahead of the meeting. Plus, Eric Jackson of EMJ Capital digs in on the meltdown in high-growth stocks. And, Osterweis’ Larry Cordisco tells us where he is finding opportunity amid the downturn in big cap tech.

All right, Sarah, thanks so much. Welcome, everybody, to Overtime. I'm Scott Walker. You just heard the bells. We're just getting started right here at Post 9, New York Stock Exchange. In just a little bit, I'll speak to well-known investor Eric Jackson about the meltdown in high-growth stocks, some of the same ones he was recently buying. Lots to discuss there. We begin, though, with our talk of the tape, the thing everyone is thinking about, what will happen less than 24 hours from now at the Fed meeting, and most importantly, how will markets react to what J-PAL does and says. Let's ask Trivari.

It's Adam Parker and Joe Terranova of Virtus Investment Partners and the Halftime Investment Committee, of course. It's great to see both of you. Adam, you first. 75? Is that what's going to happen tomorrow? I don't know. Is that what you think, though?

I don't think so, but it just depends how much they want to react to last week's CPI print. I mean, it feels to me real time like inflation has peaked, right? Whether you're looking at used car pricing, whether you're looking at home pricing, whether you're looking at select property rentals, some of the big ticket markets have clearly peaked. So it's hard to know how much that lag. Clearly, the market thinks the Fed's going to do more than they did last Friday. So we'll see. Well, what do you think?

Yesterday, Joe, was an accident that the 75 basis point thing just fell from the sky? I mean, it felt like it was a deliberate effort by the Fed to get that into the market ahead of what's going to happen tomorrow. What happens if it doesn't happen tomorrow? What happens if it is 50? I think the market would be disappointed. Listen, I hate to disagree with Adam. I'm a fanboy.

I like when you disagree. I know you like when we disagree. I know when we disagree. You told me he wasn't going to disagree with me. But no, Adam, 75 basis points, I think is without question happening tomorrow. I think the headline inflation concern that we have right now is what you didn't cite, which seems to be the real problem, and I'm not sure how you fix that. How do you bring headline inflation down at this point?

I don't think it's by raising rates a ton. As we talked about for a long time, I don't think it's by raising rates a ton. I don't think, as we talked about for a long time, I don't think that solved some of the issues, right? It's not going to solve the fact that there aren't enough people working in certain issues in certain areas. So I just said, I don't know. It could be 75. I don't know. But it doesn't help with supply chain issues, but it does help with demand, which has made supply chain issues worse, right? More demand with less supply equals higher prices. So crush the economy and then have to cut rates again next year. Fantastic. That's really what you think is going to happen? 75 basis points

is going to crush the economy? Well, I think if they're on the path to doing 75 and then a couple 50s after that, and they're really saying, hey, we have, look, the market's telling you there's more risk of stagflation now than it was two or three weeks ago. I mean, look at the two-year, look at the 10-year. The earnings estimates have still not come down. I think what's interesting, you know I focus on corporate earnings. I'm not like a Fed watcher, but I'd say January 1st this year, the S&P estimates right now are higher than they were on January 1st for 2022. That doesn't make logical sense, right? Commodities are up, the dollar's stronger, the economy's slowing. So I think the question is, what's in the price now about how much

earnings will decline? Clearly, the estimates are for 9.5% year-over-year growth. That's not the right number. I don't know if it's 5% or 6% or 4%. And if people think it's 4% and declining next year, that's really the debate on corporate earnings. What the Fed does, I don't really know because I think sometimes they don't know. I mean, you know, I guess you know. No, but that's the problem. I think the market has a problem believing that the Fed is credible in their actions. I think the market has lost confidence in the institution. That has to be restored. However they need to do it, that has to be accomplished tomorrow. It'll never be restored for me if they cut rates in the second half of 23 because they

raised them so much this year. It'll be a never for me on credibility. So I thought, and we talked about it, that they would take a slower path as the economy slows and rolls over, not take a more aggressive one. That seems counterintuitive to me, but like Joe's saying, I guess that's in the price. The market needs to believe again that the Fed has credibility. The bond market has been screaming that they don't. The bond market has been screaming that they don't get it. The bond market has been screaming for them to do more. What happened yesterday, and I want to talk to you about this credibility point because I think it's important. Wondering whether the Fed loses credibility with this move because it feels like they panicked or they regain it back because they're listening. They get it.

Maybe they're late, but they get it. What do you think, Joe? I think in January of 2019, markets applauded the dramatic communication pivot from Jay Powell at the time. Let's remember, he basically said on the first business day of 2019, he basically said everything except go buy stocks. He reversed his entire policy. So the market wants that right now. And I think one of the reasons that he has to deliver on that is we're talking about the treasury market. You've had a move in the last three days for a two-year treasury where the yield has risen 60 basis points. Scott, that hasn't happened since 1987. What's the consequence of that?

The consequence of that is that spreads are widening and we're losing liquidity in the treasury market. That's a problem. We have to bring that liquidity back in. I think the consequence from the equity perspective is you probably have to pay a lower multiple than you did, right? Because all of a sudden I'm thinking, and we talked about this a couple of weeks ago, even at 2.7%, I'm thinking, all right, I probably should have in my portfolio some two-year yields. I can get 3.3, 3.4. I can hold that for two years. That looks better than some equities. So as that rises on the short term, it probably makes the equity multiple a little bit lower with this uncertainty. But the multiples already come in, right?

And now it matters what the earnings are, and that's why you don't know what the appropriate price is. That's why we say when we ask these questions to people like you guys, where's the market going? I understand that it's hard to give answers to that because nobody knows the numbers. I always tell you that short term nobody knows nothing, right? So the volatility of the multiple, the price-to-earnings ratio, is way higher than the volatility of the earnings. We can study the historical earnings collapses. We can decide, is 20% down? We can look at that and say, okay, let's say it's 225, not the 250 that's in the consensus for the S&P next year. We're at 3735. Let's divide it by the

225, not the 250. That's the multiple. But we all know that if yields back up a ton and stagflation risk rises, that P ratio is going to go lower. And that could go to, who knows, 14, 15. What about the here and now? Okay, where the market is right now, terribly upset lately, right? Stocks have gone down a lot after they rallied back a lot. Where are we going, do you think, Joe, from here? Are we going to an even lower bottom than where we are right now? We had a new low yesterday in the Dow, S&P, Nasdaq, Nasdaq 100. We're only adding to that in the Dow and the S&P today. Negative momentum, negative sentiment. That is what's

presented itself since Thursday afternoon when we had that technical breakdown. That needs to be reversed in some capacity. Whether Chairman Powell can do that or not, I don't think any of us know the answer to that. But that's what prevails in the market. And as long as that prevails in the market, I agree with Adam. Predicting the near term is very challenging, but you do have a pathway towards the pre-pandemic highs at 33.93 right now, based on that technical momentum, 33.93 from February of 2020. Technical momentum, technical sentiment, it's opened that pathway. I don't think it stays there very long, and I'm bullish long term, but in the near term, unless that gets reversed somehow tomorrow, that looks to be where we're headed. You disagree with that? No, the one thing I've seen at the stock level is companies that are still beating are going up a lot.

I mean, you've seen it with FedEx. You've seen companies come in. Oracle today. Oracle, FedEx. You've seen companies give comments that things are fairly robust, and those stocks are being rewarded. Not all of them, though, right? If you get margins and revenue. It can't be beat on revenue, miss on margins, right?

It's got to be both. But I'd say, you know, I don't know on the technicals in the short term, but I think the next catalyst would be in July. Do we see companies reaffirm that things are good enough for them and kind of say things are good and people believe it? Or do we get more of a hoggy stick than ever in the Q4 numbers and people say, oh, my God, they're going to come down even more? So I think the catalyst fundamentally is really July earnings once we get past the Fed stuff. So let me ask you this about the Fed stuff tomorrow. What happens if let's just for argument's sake say it's 75 and Powell's hawkish, right? He wasn't that hawkish last time, right?

He answered the leaseman question with the 75 not being really on the table, even though those weren't his exact words. But nonetheless, the point was made and the market rallied off of that. What happens if it's 75? And he makes it clear that everything's on the table moving forward. How does the stock market react tomorrow? What are we talking about at 4 o'clock, 4.09, and 10 seconds tomorrow, Joe? First of all, I don't think there's enough time from the press conference to 4.09

to make a determination on, okay, the market has found its bottom or the market's going to go to a different place. The thing that I want restored, I'll keep suggesting this, we need liquidity restored. That's the first step. Restore liquidity, restore confidence, stabilize, and build a base in which we can rally off of the earnings that Adam's talking about in July. I think it's lower. I mean, I'm trying to answer your question.

I think it's lower if people perceive them as incrementally hawkish. I think you've got to follow the Fed fund futures and look at what happens to the Fed fund futures, you know, six, 12, 24 months out after the comments, because if the futures rise some, in other words, people think there's going to be a higher front end disproportionately versus I think the market won't take that well. I think that's bad for the multiple.

I'm just guessing on a, I'm trying to guess at the answer to your question. I don't think incrementally hawkish is good. You don't think that the market says, aha. I'm just guessing. I'm trying to guess at the answer to your question. I don't think April Metal Hawkers is good. You don't think that the market says, aha, this guy finally gets it. No. Right? We prepared ourselves now for 75. They laid the groundwork a couple days in advance. We need them to be more hawkish to prove that they get it about inflation.

They're going to get it under control. That's the Ackman tweets of this afternoon. I don't know if you guys saw these on your way in there. They're checking your IDs and everything. They saw you. They were skeptical because the market was down. They figured here he is again. Totally. Here's that Bill Ackman a little while ago. Federal Reserve has allowed inflation to get out of control. Equity and credit markets have therefore lost confidence in the Fed. Market confidence can be restored if the Fed takes aggressive action with 75 basis points tomorrow and in July and a commitment to continue to be aggressive moving forward. That sort of speaks to this issue, right? Yeah, I mean, I don't want to be in the business of disagreeing with way smarter and richer people than me, but I would just say the bet he's going to make there is that the P.E. ratio, the price-to-earnings ratio for the market will start to expand because they're going to control, you know, fear of stagflation.

I guess that's possible. But I think so far what we've seen, you can prove sort of a statistically significant relationship where as perception of rates rise, as Fed fund futures, as we get directionally hoggish, it hasn't been good for the P.E. ratio so far. Maybe this will restore confidence, but my thought is if you get more hoggish from here, people will worry that the recession will be deeper and more imminent, and there's still some people that believe it won't, it could be a shallow one, or that maybe they can soft land it, maybe. Hey, the guy who runs your old firm, Morgan Stanley, Jim Gorman, right? Yesterday, he said, 50-50 chance. I don't think it's going to be long or deep. I mean, but the reality is that all of those leaders of these organizations expect the Fed to continue to raise rates

and probably think that they should. Yeah. Again, I just think you're saying they do 75, they get more hawkish, they say everything on the table. Does that restore confidence or not? I mean, I don't know. I don't know if there is confidence, but it's a lower, it's a lower multiple. But you have to leave yourself, if you're the Federal Reserve, open to that possibility. The Federal Reserve doesn't know where the price of oil is going. Price of oil could easily surge significantly higher. Let's remember that after the July Federal Reserve meeting,

there'll be two inflation reports in early August and September before they hold another meeting. So what are we talking about? An emergency rate hike at some point in August at Jackson Hole? Doubtful, but they're going to have to respond to two inflation reports. Let me ask you this. Where do I want to be positioned? Where do I want to stay away from right now? Well, I mean, look, to me, you know, Where do I want to be positioned? Where do I want to stay away from right now? Well, I mean, look, to me, you know, every time I come on, I say I like energy is my first choice. Yeah, now it's down like 10% in like four days. Yeah, and I like metals. And I tell you that I want to buy the dips in energy and metals when they form.

And I'm still in that camp because I don't think the Fed can control the fact that there's going to be demand growth that exceeds supply growth for most of the next decade. So, yeah, you can create a recession, it'll all go lower, but ultimately we're shorting. So I can feel most confident in dip buying there. Outside of that, I think you want to look at businesses that can grow above GDP, that have lower volatility of growth. I like health care services generally. I think you're getting an aging population. They have pricing power. I know as a small business owner, UnitedHealth raises prices, I mean, 9% per year.

And I say, yes, sir, can I have more? I mean, there's no, you know, so there's certain businesses that have pricing power. Generally, metals, energy, and healthcare services are my top. And I think the ones to avoid, honestly, are probably machinery. I see their estimates are really high. Expectations are for the highest incremental margins ever. And they probably are going to have to deal with rising input costs. So it's probably more long energy and material short industrials for me.

And I like health care services a lot. What about tech here, Joe? I want to read you something that Kathy Wood said today because, I mean, ARC has been just crushed. She said, quote, inflationary pressures have begun to unravel. We're on the other side of the inflation problem. I've been, quote, surprised that more investors don't seem more reassured by this. Now, she's made similar comments before. And, you know, she said the biggest risk to some of the stocks she holds is that they get taken out at low prices.

But what about those kinds of stocks right now after they've gotten obliterated and then obliterated again? She obviously drives a Tesla because she hasn't gone to the gas station lately. And I mean, that's where the inflation resides itself. So I don't know how someone could say that the inflationary pressures are beginning to retreat in certain places that Adam cited. He's 100 percent correct. Parker said it. No, but he's citing places in which it is. But I think he would acknowledge the headline is still food, energy, hotel pricing. So I think you have to continue to be mindful of margins. I think you have to be mindful of debt levels. I think you have to be mindful. And Scott,

I know everyone comes on the network and says, buy quality, buy quality, buy quality. But I believe this is an environment where looking forward, you want to ensure that that's exactly what you're putting in your portfolio. Quality, non-profitability in terms of technology and consumer discretionary. I'm not comfortable going there right now because I don't know what the cost of capital is ultimately going to land on. If I said to you, let's assume that you're still the chief strategist at XYZ firm down on Wall Street, and I said to you, how concerned are you about the upset in crypto, spillover effects, leverage in the system? How are you thinking about that relative to the stock market? Yeah, we've shown that it's correlated to what we call our hyper-growth junk universe.

So low-quality securities that don't generate cash, that have volatile business models, that are supposed to grow really fast. So there's speculation proxies. So clearly you're seeing a global de-risking on speculative assets. On the Cathie Wood, did she say she didn't like it when her stocks get taken out of premiums? proxy. So clearly you're seeing a global de-risking on speculative assets. You know, on the Cathie Wood, did she say she didn't like it when her stocks get taken out of premiums? Because when I ran my fund, I liked it when I owned something that got taken out of premiums. That's the only thing she said I would want to follow up question on. I like it when my longs get acquired. I don't know about you guys. Do you really like when they get acquired at the

bargain basement prices, though? It's always like where you are. I think when you wake up today at stocks at 20, you get an offer for 25, you're happy. Okay? I mean, you've got a 4% position, a nice little 100 pips of the fund. I don't think you look a gift horse in the mouth or whatever. I think you're okay with that. I'm serious, though, about the crypto question. It's a risk-off proxy. But I know that, but you have an asset class

with the guy gotten beaten up by 50%. There's no broader implications of that for the stock market to think about funds that have issues. I think for the low-end consumer, it's bad. I think there's a lot of people who had a disproportionate amount of their wealth in that one asset class. There's tons of people who had $2 million in net worth and $1.95 in crypto. So, yeah, I think there's some implications. I don't know if it matters for the businesses that maybe have blockchain technologies that can actually do some things in the long term. But I think it's a speculative gauge and probably not great for low-quality junk tech stocks. Do you think... I've been thinking about leverage. Well, that's exactly...

Do you think that the extensive leverage in the crypto universe presents some form of systemic risk? It easily could. I mean, I think when we think about junk as a quantitative term in equities, we mean typically highly levered businesses with lots of, you know, volatile underlying,

you know, lots of turnover in their share base, you know, risk of default. So they're all kind of tied together. I guess the one comment like older school guys could say is, are the banks cheap or are the banks telling you something's not marked correctly? And so it's like a challenge. And if it is, is it in private credit? Is it in something, you know, blockchain?

Is it in, you know, and there's some risk. I think all of us who've been on the block a couple of times would say we've seen that movie and I wouldn't be totally shocked if we get, you know, some European bank with a big charge or something or whatever usually unfolds, you know? Yeah. I appreciate it so very much, guys. Thank you. Always good to see you. Yeah. Adam Parker, Joe Terranova. I'll see you a little bit later as well, Joe. Let's get to our Twitter question of the day. On Friday, we asked how many basis points the Fed should hike at this week's meeting. Well, the majority of you saying a full point.

Lots changed since then, I think we can say. Now it seems 75 basis points are expected. Let's ask it again. How many basis points should the Fed hike at tomorrow's meeting now? 50, 75, 100, or more than 100. Remember, it's what they should do, maybe not necessarily what they will do, but what do you think?

Head over to at CNBC Overtime on Twitter. Vote will bring you the results at the end of our show today. Up next, the high growth meltdown. High-flying tech stocks crashing back to earth yet again. Our next guest, though, sees big opportunities within that pullback. He's Eric Jackson. He joins us next. Overtime in two.

High growth tech continuing to get pummeled this week with ARK Invest flagship ETF down nearly 17 percent month to date. Let's get to someone with skin in that game. Eric Jackson of EMJ Capital joins us once again. EJ, it's good to see you. I mean, the pain continues, and you're telling me that these are still buying opportunities? Well, I'm going to make the case, Scott. I heard Joe in the last segment say, I heard him say, hey, you don't want to be in these profitless tech stocks. I'll step aside. I was emailing with Josh Brown earlier today, Scott and Josh. And we were talking about ARK and a lot of these tech

stocks. And Josh said, you know, there are going to be some investors that are going to stay away from these kinds of names for years. And I'm sure that's true. But I would argue that's exactly the time when you want to be looking selectively at these names. I mean, remember 20 years ago, there was a cover on Barron's that said Amazon.bomb. I mean, that was sort of the peak pessimism for Amazon, which was seen as a low quality, profitless growth tech company at the time, and of course, grew up to be a behemoth. So I would say that with ARK down 77%, I think, from its peak, I would point to the fact that NASDAQ dropped 74% in the dot-com era. I think the Nikkei was off 79% from its 1989 highs.

ARK's not an index, but there's a group of stocks out there that there's not much blood left to come out of that stone if you're pressing shorts against some of these names. And that's usually the time to buy. Unless you think that the valuations are still just too high. I'm looking at names that we've spoken about most recently, Twilio, Zoom, you know, the likes of which you suggested to me maybe a month ago at this point that you had been buying. And they've gotten beaten up a lot since then, which seems to be the market saying what Eric says isn't necessarily going to be the case, that these multiples were so outrageously high that they need to come down much more than people like he thinks.

Well, you're right on Twilio, for sure. Twilio's down in the last few weeks since we spoke about it. I still think its valuation relative to the universe of SaaS stocks out there is really low, historically low for itself. And this is a free cash flow positive story. I would differ on the Zoom front. Zoom's actually up 20% in the last month or so. It's up from its earnings. Everybody likes to say it's a pandemic stock, and certainly it's not a $580 stock anymore and probably will never be again, or at least not for a while. But it's up nicely from $85 where it got a few weeks ago. It's trading at five times next year's sales, which in my mind

is reasonable, and it produces a lot of cash. So I think in these names, there's two things that you should probably look for right now. The ones that are producing a lot of free cash at the moment, which someone like a Zoom is, but then there are names that aren't producing a lot of free cash yet, and I put Twilio into this category, but they could produce a lot of free cash down the road. And Amazon was in that boat 20 years ago. You have to think that if these growth rates continue with certain names and they're producing cash now, they could be mega free cash flow producers in the futures. I think those are the two kinds of names that you should be making your shopping list on these days and looking to take initial positions. You know, I could look at some of the numbers, whether it's performance, I could look at the

earnings, I can look at what their price to sales number is. But maybe the most important numbers to look at here, Eric, is rates. And to see what the 10 years doing and the two year and these rates shooting up, it is stunning to see. And maybe those are the most important numbers when it comes to these stocks. My question being, can these possibly work in an environment where rates go up even more from here? It's a good question. Historically, you know, there's not a perfect correlation between rates and how well some of the stocks do. And we spend a lot of time, you know, gnashing our teeth about it and concerned about it. And rightly so. But at some point, you know, the fundamental dynamics of a company, its revenue, its revenue growth is producing free cash flow. Those can win out if they're priced attractively enough.

So, you know, we'll all pay attention tomorrow. And I would say, you know, don't pay attention to the first 90 minutes after the Fed's decision, because last time that happened, we found that was a poor predictor of how stocks traded in the coming five or six days after that. But regardless of what rates do and what the economic environment continues to do for the rest of the year, I would say these growth stocks, a lot of them have been re-rated so significantly that you should be looking to buy them now. I appreciate the conversation, Eric, as always. I'll talk to you soon. We'll see what happens tomorrow. It's going to be interesting. That is for sure. That's Eric Jackson joining us today. We have breaking news on Moderna. Meg Terrell has that for us ages 6 to 17. They had discussed this all day and took two separate votes because they're two different dose levels, 100 micrograms for the teenagers and 50 for the younger kids. This would, if the FDA follows suit and authorizes this, put the second vaccine on

the market for this age group. Tomorrow, a lot of eyes will still be on the FDA, though, because that is when the advisors discuss both Pfizer and Moderna's applications for kids under the age of six or five, depending on which one you're talking about. That is the last group of kids down to age six months not yet eligible for a vaccine. You can see Moderna is up there. It's been up essentially all day throughout this, a positive vote from this committee. Scott. Yeah. Anticipating probably that this news was coming. Meg, I appreciate it very much. That's Meg Terrell with the news there on Moderna. Still ahead, the big battle over one of this year's hottest trades. Is it time to take profits in energy? We debate that in today's Halftime Overtime. That's next. It's time for a CNBC News Update with Shepard Smith.

Hi, Shep. Hi, Scott. From the news on CNBC, here's what's happening now. A bill to increase security around Supreme Court justices on its way to the president's desk after the House approved it just today. The bill passed unanimously in the Senate last month. It comes in the wake of threats made against justices ahead of their ruling on abortion rights. Tomorrow's January 6th hearing postponed until next week, the committee blaming the delay on technical issues and scheduling factors.

It was set to focus on former President Trump's failed plan to replace his acting attorney general with a Justice Department lawyer who was more supportive of his fraud claims. And the basketball star Brittany Gr, will be kept in a Russian jail until at least the 2nd of July. That from Russian state media today. Brittany Griner detained at an airport in February after authorities say they found hash oil vape cartridges in her luggage. The State Department insisting Brittany Griner's being wrongfully detained and repeatedly calling for her release.

Tonight, Steve Leisman on tomorrow's big Fed decision, Kate Rooney on the crypto collapse, and Valerie Castro live in closed-down Yellowstone National Park. On the news, right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. All right, Shep, appreciate that. We'll see you at 7 o'clock Eastern time. Shepard Smith. In today's Halftime Overt overtime, the state of the energy trade.

Why halftime's Bryn Talkington is ringing the register on some of her exposure to one of this year's hottest trades. When you have a XLE year to date is up 50 plus percent, while the S&P is negative 20 and negative 30 for the Q's. And so we wanted to do some portfolio management and just take some profits on a security that's done wonderfully for us since we invested in it, get some powder dry, because I do think there's going to be some other tremendous opportunities in other asset classes. Back with us now, Joe Terranova knows a thing or two about the energy space. I thought it was an interesting move by Bryn right in her backyard, Houston. She was early in that trade. She loves that trade. And she saw that now was the time to take some profits. What does that say to you? Without question, up to this point, she should be applauded for the investments that she has done in energy. For me personally, I view energy as almost a hedge in your portfolio,

and I'm not necessarily sure that you could remove that hedge just yet. Now, let's understand, in the last five days, the S&P is down 10%. The XLE is down 8.5%. I think the outsized move in crypto, in treasuries, in the S&P, we're using energy as a source of funds. I think that's one of the reasoning why energy is selling off here in the last five days. There was some perspective in the last few weeks that it was only a matter of time, that it had become a very crowded trade favored by you, Bryn, and seemingly everybody onto the sun, including everybody who's still left in this building. Right. And that was a statement in and of itself that maybe it had sort of reached a top. And then at some point, the money was just going to come out and it was going to go somewhere else because the getting was too good to ignore, i.e. Bryn's

move. Well, that's where when it's a crowded trade, it becomes the source of funds. So I'm not sure, for me personally, I'm not ready to remove it from the portfolio. Because if you want commodity exposure, last five days, natural gas down 21%, lumber down, aluminum down, a lot of soft commodities are down. I have been advocating for agriculture. Agriculture is not working so well for me in the last three weeks. You sold one of your names there. I did. I sold Nutrien the other day. I still have exposure to ADM and John Deere and Bungie. But how do you capture commodity exposure? You have to really do it through energy, through oil specifically. I'm not ready to take that edge, as I'll call it, out of the portfolio. Sorry, let me ask you this last question before we bounce.

Barclays raised price targets on a number of stocks today. I'm going me ask you this last question before we bounce. Barclays raised price targets on a number of stocks today. I'm going to read you a list of names. You tell me your favorite name on the list. Pioneer, Devin, Cotera, Occidental, Apache, Diamondback, EOG, Marathon, ConocoPhillips. Own personally, Pioneer, like Marathon, like EOG, it's in JOT. Those are the ways I would play it. That's your ETF that you manage, for those who may not know that. Thank you. It's good to see you. Thanks for having me.

Double appearance from Joe Terranova today. We'll see you soon. Up next, we are tracking some big movers in the OT. Christina Partsinello is back and all over that. What's on deck? Well, we've got the bad. Several companies announcing layoffs and a roundup of regional banks that just hit fresh 52 week lows. And the good, a retailer surging today. I'll tell you why just after this short break.

We are tracking the biggest movers, as we always do in the OT. Christina Partsenevelos has that for us. Hello. Hello. The layoff and hiring freeze continues. A report just out from the information maybe just about a few minutes ago says Warner Brothers Discovery will cut as much as 30% of its global sales force. And almost half of that staff is actually located in the United States. CNBC has reached out for comment.

The layoffs are seen as a cost-cutting step taken after Discovery's acquisition of WarnerMedia in April. And right now the shares were unchanged, but they worked down just before I went live. And speaking of layoffs, shares of online real estate firms Redfin and Compass were both trading lower today after announcing workforce cuts. Redfin said it would reduce its headcount by about 6%, while Compass said it was going to let go of its staff, about 10% of its staff. Both stocks moved lower in this session. You can see Compass down over 10% today.

And some good news. This is a small-cap firm, but National Vision Holdings saw its share price surge today. Following news, the optical retailer will enter the S&P small cap 600 index this week. National Vision will replace Renewable Energy Group, which was acquired by Chevron. And you can see the stock price was up over five and a half percent. And looks like regional financials are taking a hit on the S&P 500. State Street, Bank of New York Mellon, Fifth Third, Prudential hit new 52-week lows today. So we had the good, we had the bad, no ugly, right? All right, that's good. Thank you, Christina Parts and Avalos. All right, up next, finding opportunities in mega cap tech. Some of the

biggest names in that sector are down big over the last week alone. Where investors can put their money to work? We'll answer that question just ahead. First, though, a message from CNBC Senior Director of Diversity, Equity and Inclusion, Ryan Ruggiero, as CNBC celebrates Pride. The most important thing that I want people to know about the LGBTQ community is that we are everywhere. We are CEOs, CFOs, actors, doctors, lawyers, football players, and we are journalists. We are also so appreciative of the many LGBTQ trailblazers and allies that continue to help create change in our community. We are not going anywhere, and we will continue to stand united in the face of injustice until we are all treated equally under the law. MegaCap Tech continues to be near the epicenter of the market's recent move lower,

with Apple, Microsoft, Amazon, and Alphabet all down 10 percent or more in the past week alone. Our next guest, though, still sees long term opportunity within the tech rec. He's Larry Cordisco, portfolio manager with Osterweiss Growth and Income Fund. It's nice to see you again. Welcome back. Thanks, Scott. Great to see you, man. Just when you think that kind of the worst is over with these names, then they go down again. Yeah, I mean, certainly you think about their weights in the indices. There's a gravitational pull in the market and they are going down with everything else. And to your point, a bit more these days.

That's true. When does it stop? You know, I think the way we think about it, and it's very difficult to predict the future on this. It's hard to say, obviously. But the way we think about it is we split it into sort of two different camps. You have companies that have more cyclical challenges, right? And that's an Amazon is sort of front and center in terms of what's happened with their e-commerce group. And then you have companies that have more business model challenges.

And that's sort of a Facebook or a Netflix, right? We're far more inclined to be favorable towards these companies that have cyclical challenges that are really well recognized. And that's why we still favor a Google slash Alphabet, Amazon, and Microsoft is also in that group. But we are less inclined to like the companies that have more business model challenges where we really don't know where Facebook's advertising business is going because of the Apple privacy changes. And Netflix, we really don't know what their pricing model is going to be in the future. So that's how we would segment. It's not monolithic is my point. Have your concerns gone up at all about what earnings season is going to bring, particularly after, you know, Microsoft guided down because of FX?

Absolutely. You know, I'd actually broaden the lens a little bit on the question. We got very concerned about earnings season after the retail companies reported about a month ago. Because what we saw was a combination of demand destruction, consumer preferences changing very rapidly, and margin compression. If you see that same sort of formula play out for the broader earning season coming up in a month, I think the stock market's going to have a challenge. Now, that's not a prediction, but I really think investors need to be very aware that if you start hearing that kind of story early in the earning season, that you're going

to have a problem as the whole season progresses. Specific to Microsoft, I do think it's worrisome that a small foreign exchange, small strengthening of the dollar is now something they can't overcome elsewhere in their business. And I think a lot of investors are keyed in on that. Do you own Apple or not? We do not own Apple in our funds. Some legacy client accounts have it, but we do not. And I'm also concerned about Apple. This is the largest iPhone cycle they've had since 2014. I definitely think demand was pulled forward during COVID. And I think that Morgan Stanley made a very good point in the last week or two that with the reopening of the economy,

the services business could be a little bit pressured, too, because it's one of the more expensive mega caps tech stocks. That's an area where we're pretty cautious. But you feel like Google. I mean, I think it is, if not the cheapest of the group, it's certainly maybe number two if it's not number one. That's right. You know, when you look at valuation support for a Google and they're certainly vulnerable to an economic slowdown. But I think if you look at the history, certainly, you know, it's a lower beta sort of economic model, revenue model for them. And you get Google Cloud for free. It still hasn't turned profitable.

So if you look at the valuation multiple, the pain that's already happened with that stock, in the long-term opportunity with the Google Cloud, we still, that's our largest position, we're still very enthusiastic about Google. How about AMD, which I know you like? Another stock that's gotten hurt, right? I mean, chips are a legit question here moving forward. I think chips are definitely a legitimate question. You know, I'm going to be full disclosure,

we have not been adding to any of our positions here because we're cautious. But AMD is a name I would absolutely highlight for people when they're looking to come back into the market. They just did an investor day. You can get to $7 to $8 of earnings around 2025 based on their long-term model. They'll be taking share from Intel for the next three to four years. I think that is an absolute name to circle if there's further weakness in the market. And it's only trading about 17 to 18 times current earnings. So you've got a name that's cyclically exposed, which is, I think you could say that generically about any name in the economy we're talking about now. But you've got a lot of long term positive drivers to that company.

Rates obviously matter a lot. So before I let you go, and if I could ask you to be brief with your answer, tomorrow, what happens, $75 or $50? The trillion-dollar question, Scott. And whether it's $50 or $75, I don't know which one's good or bad. We're not yet in the bad news is good news part of the market cycle. So tomorrow's going to be extremely unpredictable. So I'm going to be like you. I'm waiting with bated breath to see what happens. Yeah, I can't you know, this is a very tomorrow's extremely unpredictable. So I'm going to be like you. I'm with I'm waiting with bated breath to see what happens.

Yeah, I can't wait. I'll tell you that. I appreciate it as always, Larry. You be well. We'll see you soon. It's like a disco joining us today in overtime. Up next, we've got your setup into tomorrow's big Fed meeting, how you should position yourself ahead of that. And don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. Overtime's back after this. Last call to weigh in on our Twitter question of the day. How many basis points should the Fed hike at tomorrow's meeting? 50, 75, 100, or more than 100? You can head to at CNBC Overtime on Twitter.

Vote. We'll bring you the results in just a few minutes before we get out of here. We'll be right back. Here's a tip for your money, your future. A silver lining when stocks slide is the potential to trim your tax bill by tax loss harvesting. Here's how it works. Sell an investment that's in the red in a taxable account and replace it with a similar investment. Then use that investment loss to offset earnings on winners.

That can help reduce or erase your capital gains taxes for the year. If losses are greater than gains, use that amount to offset up to $3,000 of ordinary income from federal income tax. And if there's money left over, carry those losses forward to future tax years to offset capital gains, taxes, or taxes on ordinary income. For CNBC, I'm Sharon Epperson. Let's get the results now of our Twitter question. We asked how many basis points the Fed should hike at tomorrow's meeting. Seventy five winning out by a margin of 36 percent. The second place was one hundred fifty.

Seems like that's over. Right. Especially after what happened yesterday on those reports coming out regarding what the Fed is likely to do. And we will see what happens. I should let all of you know as well that we have Jeffrey Gundlach tomorrow to react in real time once the Fed makes its decision, once Jay Powell speaks to the press and all of you as well. Then we will speak to Jeffrey Gundlach, who will give us his read, what it all means and where we're likely going from here. I hope you'll all join me for that. As we do await the Fed,

our next guest has two sectors she's watching to make her next move in. Joining us now, Jessica Inskip, Director of Products at Options Place. Nice to see you. Welcome back. What are these two sectors you're watching? Thanks, Scott. Nice to be back. Thank you for having me. I'm really looking at the tail end of energy. I want to see what's going to happen with that. It looks like there's still some slight room to the upside. But as we're shifting into a higher interest rate environment, I'm actually looking at financials and health care, especially as we entered into a bear market last week. So I want to find something that's going to help with that sector rotation and something with that type of exposure that's historically performed well in those type of macro environments.

I had a conversation earlier today with a couple of folks on the program here about energy and whether it's topping out, whether there's still room to go. You think that there's still room? I think there is slightly some room. So normally when it is overly crowded, it is topped out. However, high energy costs is something that's a high contributor to our inflationary problems right now. So due to some of the constraints and really macro environment and fundamentals around the energy sector, it's got a little bit of room for the upside. I do really want to see it pull back really for the macro environment, but it is getting overly crowded.

I think it's very, very minimal and we should see it topping out relatively soon. OK. Tomorrow, what do you expect? 50? 75? What do you think? I'm thinking it's 75. And I actually pulled three different probability models to see where the market is pricing things in. And one was a futures-based, and that one was 95%. So all of them, by the end of the day, shifted to 90%. And for that reason, I'm going to say a 75% basis point hike. Now, how the market reacts to that is a completely different story, but that's what it seems like based on the probability models.

Yeah, well, it certainly seems like yesterday wasn't an accident, that the Fed wanted to get this out and get the markets conditioned to the fact no one knows for certain. And we will find out, as I said, tomorrow. You mentioned we don't know what the market reaction is going to be. I've got less than a minute left in the program. So I'll ask you to be brief. What do you think? If it is 75, how does the market react? Yeah, I actually think it's going to react well. I actually tried to pull some data as quickly as I could today just to see how the market reacted with base hikes over 50 basis points.

And it actually was relatively well. So I tried to pull data to validate that sense. But since the market had a pullback, it priced it in, it digested it. It would be good for the inflationary concerns long term to have a higher rate height. So, yeah, the digestion process takes some time after these Fed decisions, as we've learned. Jessica, thank you so much for your time. I appreciate it very much. That's Jessica Inskip joining us there. I'll see you right back here tomorrow. That big Fed reaction with Jeffrey Gundlach. Fast monies now.