Closing Bell - Closing Bell Overtime: Doubleline’s Jeffrey Gundlach reacts to Fed decision 5/4/22

Episode Date: May 4, 2022

Stocks surged to session highs after the Federal Reserve raised rates by 50 basis points and Federal Reserve Chair Jerome Powell ruled out a 75 basis point hike. Top investor Jeffrey Gundlach says, ��That was all clear for the stock market to start a pretty substantial short covering rally."

Welcome to Overtime. I'm Scott Wapner. You just heard the bells. We, of course, right here at Post 9 are just getting started. And we go right to our talk of the tape today, a historic Fed decision, what it means to your money and stocks, which jumped and jumped big time on a very specific comment from the Fed chair. So is a broader rally really ready to happen? The biggest question of all, though, can the Fed actually pull off its most delicate balancing act in decades? Let's ask Double Line Capital CEO Jeffrey Gundlach. He is with me live today in a CNBC exclusive interview. Welcome back, Jeffrey. It's good to see you again.

Hey, Judge. Good to be back on Fed Day again. Yeah, it sure is great to have you. We said it's a historic move today by the Fed. Your first reaction is what? Well, I want to put it in context to start with. We all know that the Fed was far, far too dovish last September and perhaps into December. And then last Fed meeting, there was a lot of talk about we're going to get rid of inflation. We're going to bring inflation down. We're going to bring inflation down. And so we basically have those as the goalposts. We had way too dovish,

and then we had a pretty strong commitment. And that was supported, of course, by short rates going up a lot from only about 15 basis points for much of last year up to basically close to 3% on the two-year. And as I've said in past appearances, the Fed always follows the two year. But the one thing the market was really worried about, and we thought at DoubleLine overly worried about, and I think it turned out to be the case, is everybody knows that the tools of the Fed are very blunt.

And if you want to put it a little bit derogatorily, it's almost like Mr. Magoo and his jalopy. And he's driving around, and he doesn't really know where he's going, it's almost like Mr. Magoo and his jalopy. And he's driving around and he doesn't really know where he's going, can't see that well, but he knows when he's going to hit something, after he's hit something, and the problem is there. And the markets were worried that Mr. Magoo was going to start accelerating in his jalopy in terms of perhaps talking about 75 basis points. And that's a speed that jalopy going along at might really legitimately cause concerns about a recession perhaps even this year. And I don't think that's going to happen. I've talked about that before. And so there's a relief rally for

sure. One thing that hasn't been talked about is that the yield curve, the Treasury yield curve, has been bumping up against some pretty massive yield resistance for a while now, which is the high on the 10-year was 3% back in 2019 or 2018. The two-year Treasury got up to about 3.25, and there's tremendous amounts of yield resistance there. So it's not surprising that we've got a steeper curve. The long end can't seem to make up its mind on what to think because there's certainly some economic slowdown that one has to think is baked into the cake here

with the roll-off of all the durable goods and non-durable goods, consumer consumption, which is still very, very elevated and needs to come down very substantially to get back to trend, which had been convincing pre-pandemic. So we expected a rally. I mean, I do think that we may be seeing the high in the dollar now that we're starting to get some relief from the short end of the yield curve. So I'll stop there, Judge, and let you follow up. No, it's interesting because you really do allude to what I'm going to call the moment of truth today. And I want you to listen

to this exchange from our very own Steve Leisman and the Fed chair, because it ignited this rally. Jeffrey, let's listen and we can react on the other side. You talked about using 50 basis point rate hikes or the possibility of them in coming meetings. Might there be something larger than 50? Is 75 or a percentage point possible? 75 basis point increase is not something the committee is actively considering. The moment of truth, wasn't it, Jeffrey? Absolutely. I thought Steve just nailed that question. I was hoping that someone was going to ask it, and he asked it in such a direct way. I think that's commendable. Also, I commend Jay Powell for giving a fairly specific answer. And that's exactly what I'm alluding to, where I'm saying Mr. Magoo was not going to step on the accelerator and go crashing into a dumpster somewhere.

So we're still in a Mr. Magoo situation because the tools are blunt, as Jay Powell himself admitted. But at least the 75 seems for real off the table, at least at the coming two meetings. And what the market loves always, Scott, you know this, everybody that's a frequent watcher of CNBC knows, they want certainty. They don't want overly hawkish talk. They don't want maybe a 75 showing up out of the blue. And he got a very crystal clear answer in that. That's when the two-year treasury just plummeted 15 basis points. And that was all clear for the stock market to start a pretty substantial short covering rally. Which, I mean, I think stocks were in a very similar position prior to this meeting as they were prior to the March meeting.

And that is the VIX was very elevated. There was a lot of uncertainty and fear. And the VIX above 35, again, we talked about this in March, Judge. I said when the VIX is above 35, you're supposed to be getting less bearish, not more bearish. And indeed, that level turned out to be a good buy again. So it looks to me like the markets are probably going to be in a better position for the next couple of weeks than they were in the past month. I flagged that exchange that we had on March the 16th, where you specifically referenced the VIX at 35. I don't care how bad the tape looks. I don't care

how bad the geopolitics look, you said. You're supposed to get more bullish. VIX was at 35. I don't care how bad the tape looks. I don't care how bad the geopolitics look, you said. You're supposed to get more bullish. VIX was at 35 the other day, dropped down a lot from there. It's down a lot today, and it should be, because that's what happens when you get a thousand-point rally off of an uncertain period. So yeah, I mean, we talked about foreign stock markets. The European stock market continues to be a good performer. It's about the only area that's doing something positive. And interestingly, with the carnage that's in the bond market, in the corporate bond market, and in the emerging market, particularly the high yield corporate bond market,

it's amazing that the emerging market equities are doing as well as they're doing. It's a sign to me that, and I talked about this in March, still haven't bought emerging market equities, but we've taken a real hard look at it. Because if the dollar falls, the dollar index may reject this triple top, which was 2017, 2020, and now 2022. And if it drops back below 102, I think that's the signal to buy emerging markets. We're not very far away. So we've owned Europe, we've owned commodities, we've owned the long bond, which has been the poorest performer of our diversified asset mix year to date.

But I think all of these things, when you glom them together, this highly diversified portfolio approach that I've been recommending for two years now continues to work. And this year, it's been driven by commodities. The commodities have been the performer that's good. Stocks are a mixed bag. Some of them are up a little. Some of them are down. The NASDAQ's not very good. I haven't advocated the NASDAQ.

And then still, cash is there for tactical investing. Like you might have wanted to invest some cash late last week because of the extreme situation on the VIX. So I feel like we're almost in the same spot as we were last March. It's just it's been a little bit of a rocky road along the way. It leads us to this question I asked at the very top of our program before I welcomed you into the show today. It's the multi-trillion dollar question. It's can the Fed pull this off? Can they do what seems to be so incredibly difficult? To that, Jay Powell obviously was asked directly about that.

A good chance to have a soft or soft-ish landing is what he said. It's not going to be easy and may depend on events that are beyond our control. But he seemed to suggest that he's confident enough that they can pull this off. You've doubted that. Where are you today? Yeah, I don't think that was his finest moment in the press conference. I mean, he has to say that. I understand that.

But I thought by saying soft-ish, it sort of showed a little chink in the armor. I think he knows that the odds are not as good as 50-50 that he can pull off a non-recession in, say, the 18 months ahead. There's just too much normalization of the economy. is to compare durable personal consumption spending year over year, non-durable personal consumption spending, and service year over year personal consumption spending. And those three categories, which are all very different, went up in lockstep, almost exactly the same pattern and distance from point A to point B for the four years from 2016 into the pandemic. And then, of course, they all cratered.

And then thanks to the government stimulus, we had an explosion of durable goods spending. It's up 30% above trend right now. And that's a very convincing trend that was in place for years. Non-durable spending is still elevated at 20% above trend for those years, and service is back to trend. So these are going to be very substantial headwinds for the economy in concert with the fiscal drag. So when I put all of that together with the yield curve, which has inverted, not for long, and is now de-inverting, I like to tell investors, don't start throwing celebrations when the yield curve de-inverting. I like to tell investors, don't start throwing celebrations when the yield curve de-inverts. The yield curve always de-inverts

prior to recession. So it's not a sign that we're further from recession. The one thing you might take solace from with the yield curve is it stayed inverted for such a short period of time that you could say it might be a false signal. But I'm going to be watching the yield curve very, very closely. We're now at about 25 basis points, twos, tens. We were inverted. We've been about flat fives to thirties until the 75 basis point Steve Leisman moment that you referenced. And now that's a steepened out sum. So we're going to be watching that very, very closely. But I think the four terrible months for bonds in terms of returns, I think that string is going to be broken here hopefully in the month of May.

But this has been one of the worst four-month periods in the entire history of the Treasury and the investment-grade bond market. Worse than any four months. Forget about year-end start dates. I'm talking about any four months ever going back to 1978. And we all know how volatile interest rates were in the late 70s. So I think we deserve a break from all of these negative bond trends. And I think Jay Powell's, I don't believe his assurances that he can pull off a soft landing. But the fact that he says it does reassure investors, or at least let me put it this way. It scares short sellers. Is recession still your base case call?

I mean, and I understand the difficult task that he has. Not this year, but ultimately, even if it's a 23. I mean, Ken Griffin this week, Powell's in a very, very difficult position. He said, we're in perhaps the greatest period of uncertainty since the great financial crisis. That from Ken Griffin of Citadel this week. It speaks to the challenge that Jay Powell and company have in front of them. And I had almost the exact same message that I took away from Paul Tudor Jones, who said almost the same thing. So I think we got a hat trick.

I think Jeffrey Gundlach, Paul Tudor Jones, and Ken Griffin are in agreement that this is one of the toughest environments. I mean, here we are. It's better than it was, say, September to December of last year when the stock market was so overvalued and you knew that rate hikes had to come because the bond market was so far ahead of the curve, i.e. the Fed was so far behind the curve,

and we knew quantitative tightening was coming. That piece of the puzzle was pretty clearly articulated, and that's going to be the one thing that challenges the system as we move forward. We do have double-barreled tightening going on, and while 50 sounds good when you're worried about 75, I heard from that press conference that there's two 50s coming back to back. And the bond market pricing definitely corroborates that. The bond market thinks there's three 50s coming in the five meetings that remain by the year end. But do you make the argument, too, though, that the markets have gotten ahead of themselves, bond market included? I mean, if you look at what the markets have factored in, it wouldn't necessarily mesh with what Mr. Powell just said.

The bond market has been displaying the early signs of late cycle activity. The yield curve flattening is a big piece of it. Credit spreads have been widening, not in an alarming rate that's gotten a lot of attention, but even investment grade corporate bond yields spreads are out by about almost 50 basis points. They probably narrowed in today. We're in a strange environment, Judge, where when interest rates rise, spread sectors, credit sectors actually widen in yield. That's pretty unusual. It's because we're at such a low rate level and there's so much perceived risk. And now here in 2022, when you get a rally in treasury bonds against historical patterns, you get a

tightening in spreads. Basically, when the bond market rallies, you're getting more confidence in liquidity. And that's what's been happening. So I expect we're going to see fairly positive returns, even out of the credit sectors in the bond market. I'm not talking about for the rest of the year. I'm talking about in the weeks ahead. Well, it's interesting. I mean, you referenced Paul Tudor Jones. And to refresh people's memory on what he said also on this network, so much news has happened on this network this week. You don't want to be in bonds or stocks, said PTJ. Can't think of a worse macro environment than where we are now. So it sounds like you agree with the comment about the uncertain environment that we're in,

but don't necessarily agree on where you can make some money, at least in the near term. Is that fair? I think Paul Tudor Jones is a lot more aggressive than I am. And so I think that he's willing to take more extreme positioning. I still like, I'll reiterate, I still like the highly diversified portfolio with commodity exposure, which continues to work. I mean, it's incredible how the commodity markets, since we talked in March, are up about 7%. And that's with, for most of that time, a lot of risk assets not doing very well. So I still like a commodity position

as much as a third of a portfolio. I like non-U.S. stocks. We've been using Europe. That's been doing well. That's one of the better performing sectors. And I like long-term treasuries only because we still have a recessionary risk and a deflationary risk.

So the fact that you're losing money on the treasuries isn't really still have a recessionary risk and a deflationary risk. So the fact that you're losing money on the treasuries isn't really a reason not to own them. Because if you do this blend of cash, which now should probably only be about 15%, commodities, long-term treasuries, and a variety of stocks, this has been a formula that's worked quite well. It's had a return of about 8% over the past year. and the past year hasn't been very good for a lot of portfolio positioning. And it's actually almost flat year to date, a mix like that, which is what we need. Paul Tudor Jones talked about capital preservation. I agree with that. I think there's various ways of achieving capital preservation. I like this diversified mix. Paul Tudor Jones probably likes active trading more

than I do, but he's more aggressive than I am. So anyway, that's how I see it, Scott. Good. It is interesting, though. I mean, you have maintained what has been a 25-25, 25-25 allocation. For those who are playing at home and trying to figure out how to make their portfolios work the best for them, that being commodity stocks, non-U.S. bonds and cash, each getting a 25% weighting. But now you're upping commodities to 35 and dumping cash down to 15. Well, that's actually a move that I made a few months ago. But, yeah, the 25, 25,25-25 thing is a good starting point. We move around that because we're on top of it every day

and a lot of investors have another job to do other than just following their own 401k and the like. But yes, I like that diversified mix. The worst performer in that mix has been the long-term treasuries, but it served us well during certain periods of market turmoil, and I think it can again. So if we look at rates, since we're talking a bit about that as well, it's really amazing how far rates have gone or how much the environment at least seems to have changed since we last spoke on the last Fed day. Not that long ago, obviously, in March. The 10-year, and it's hard to remember that it was at this.

The 10-year was at 217 when we spoke last. Now let's call it 3%. The 2-year has moved almost 100 basis points. It was at 193, and then it was at 280 until today, and we had the market move. That's a really good comment, Scott, because we feel it the same way in our investment meetings at DoubleLine. You look at where we were in January, and you almost have to be in disbelief that that's how we started the year. The two-year Treasury is up 200 basis points year-to-date. That's before the presser today, so it's probably up a little bit less now.

The five-year up 170. The 10-year up 150 year-to-date. The 30-year up 110 basis points year-to-date. The curve broadly has flattened. But yeah, that move up in the two-year was incredible. It was about 120 basis points over a five-week period of time. And that's what got the Fed to really get religion about saying, we have to stop pretending about this transitory inflation and just identify it for what it is and get moving. And the bond market was relentless in basically taunting the Fed into changing its policies.

And it looks like the Fed has now placated the bond market to a certain extent. So, again, your comment is excellent. It's hard to believe where rates were just a few months ago and how much they have moved. And like we said in March, I don't care. When the VIX is up a lot, when rates have already gone up a lot, that probably means that an awful lot of things have been factored into the situation. And so the bond market, I think, has found a local high in yields. And frankly, I mean, you're looking into a camera, so you can't see the picture we're showing now as you're speaking. We're showing the curve and we're showing where interest rates were.

And as I was going back and watching our prior interview to prepare for today, we had the same thing on the screen. And I just marveled at where rates were not that long ago and where they've gone. And let's go back to where we sort of let's bring this full circle for a moment, if we could. And that is this idea of whether Powell can pull this off. And this notion of what you told me the last time, that you thought we were near peak inflation. And then when you were with Pazani down in Miami just a few weeks ago as well, you said, quote, I think we are near peak inflation. So if you think we are there, and Powell clearly does too, and there are certain parts of inflation that definitely seem to have rolled over,

doesn't that mean that the Fed does at this point, even given the shot at their credibility, deserves the benefit of the doubt in some respects, that they're going to pull this off, that 50 and then 50 at minimum or 50 today and then at the next two meetings, maybe they don't have to do as much if they're right? Yeah, I mean, that's something to hope for, I guess. I mean, the problem is that inflation peaking, CPI is at eight and a half. When I say inflation's peaking, I'm saying that maybe inflation can end the year below six on the CPI. So maybe that puts you in the high fours on some other inflation measures. That's still a lot higher than today's interest rates. That's sort of what the issue is. So the fact that it's peaking is quite certain, I think, at this point. The next three months CPI, month over

month figures that are rolling off, so the ones from last year, 2021, the three months coming are pretty big numbers. I think they're 0.6, 0.7, and 0.9. And it seems quite unlikely that we're going to replace the CPI with those types of month-over-month figures in the three months ahead, which means that we probably will be looking at a six handle on the headline CPI come, say, Labor Day or something like this. And so that's good, but the real question is will it fall back down anywhere close to say 3%, which is what you kind of need, I think, to believe that they can pull off this soft landing. Our methodology of analysis does not suggest that that's going to happen. And so I still think we

have real problems with housing inflation, shelter inflation. I think wage inflation is still going to be a problem. But those other things, the base effects from 2021, they're assuredly rolling off and not going to be replaced with the same types of figures. So yes, inflation has peaked, but just peaking isn't good enough. It's got to come down somewhere into the context of where interest rates and sort of nominal GDP. I mean, one thing, Scott, I want to point out, because we've talked about this in many of my past webcasts and on the air with you, there's a couple signposts for the 10-year treasury yield, which have been really helpful over the years.

The first is the ratio of the price of copper in the futures market to the price of gold. And since the middle of 2020, it was screaming that interest rates on the 10-year treasury were far too low. It was basically saying the 10-year treasury should be at three. Well, lo and behold, the bond market made an honest man out of the copper-gold ratio, and we got up to the point where now the 10-year treasury interest rate is now higher than what's suggested by the copper-gold ratio because copper and gold have had certain movements, and the 10-year treasury has stayed close to 3%. Another metric that we like to use is it's kind of wonky.

It's the average of nominal GDP and The German 10-year yield and there's weird reasons why I use the German 10-year I won't go into it, but that too was suggesting that the 10-year Treasury needs to be a lot higher like at 3% Well, that's changed And now we see that that metric is now suggesting that the 10-year Treasury should be in more below 2.5%. So there's some of the things that were strongly suggestive of this yield explosion higher from September of last year into, say, earlier, just last week. A lot of those things are no longer sending the same sort of warning signals. So these are fundamental reasons

why I think that it's, after the worst four markets, four months in a row, cumulatively in the bond market, it's not time to turn bearish. It's time to look for signs that the market has done a lot of heavy lifting already. And Jay Powell, I will give him credit for having corroborated that point of view in his press conference today. Forgive me there. Very interesting perspective from you. And I should let everybody know, too, we've got a bunch of people coming up to talk about what Jeffrey is telling us here, also what the Fed chair had to say.

Josh Brown is going to join us. Some others we're getting on the line as well. But, Jeffrey, before I let you run, and I know I have to unfortunately do that, you are in Buffalo today. People might not know. The backdrop's a little bit different than it normally is, but that's your home. That's where you're from. And you've pledged tens of millions of dollars for an art museum, which I believe you're sitting in as we speak.

I'm sitting in the administrative building. The construction continues to be underway. We've finished the renovation of the 1905 building, which needed a lot of work because it was, you know, there's a lot of deferred maintenance, so they call it, that's just disrepair. And then we had to remodel the 1962 building, and we're building the 2023 building, and we're going to be finishing that. I'm actually excited. I'm going on a tour next week, a hardhat tour, and it's really a lot of exciting things going on in Buffalo, and even the Bills look like they have a legitimate shot at the Super Bowl, which is, this is going to be a great 12-month period in the city of Buffalo,

I think. All right, well, congrats to you on that great project, the great work you're doing up there. June 15th, You got any plans? Because I want to do this again with you. Your reaction after the Fed meets? I'll tentatively do. I have to check my calendar. I don't think, I think I'm going to be back in Los Angeles then. So a different backdrop. All right. Well, I look forward to catching up with you again. And I thank you for your time today. That's Jeffrey Gundlach with DoubleLine. Be right. Well, I look forward to catching up with you again. And I thank you for your time today. That's Jeffrey Gundlach with DoubleLine. Be well.

Thank you, Jeff. Let's get to our Twitter question of the day now. After the last Fed meeting in March, we asked, will the S&P 500 be higher or lower by today's decision? The majority of you voting higher. Well, you were right. The S&P is up nearly 1% since then. Doesn't hurt to have a massive rally today. Let's ask it again.

Do you think the S&P will be higher or lower by the next Fed decision on June the 15th? As we just said, the date is. You can head over to at CNBC Overtime, cast your vote. We're going to bring you the results at the end of our program today. Up next, we're all over the big earnings action in the OT. Booking Holdings, eBay, Etsy are all on the move right now. We're breaking down their quarters straight ahead. Plus, we do have much, much more on this massive rally, the Leisman rally. Can we call it that? I guess we just did. We're back right after this with Josh Brown. He is standing by to

break down the move. We're back in the OT right after this. All right, welcome back to Overtime. 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. A senior U.S. official tells NBC News the majority of the Russian military in Mariupol is leaving that city and heading to new position. But there are still reports of heavy fighting at the steel plant there where civilians are reportedly still trapped. The mayor says he's lost contact with Ukrainian soldiers still inside. The Russian military claims it'll open a humanitarian corridor from that plant tomorrow through Sunday.

A plea deal today in the federal civil rights charges case against Derek Chauvin, the former cop convicted of killing George Floyd. The sentence today, 20 to 25 years for violating George Floyd's civil rights. Derek Chauvin's already serving a 22 and a half year sentence for the murder conviction. And Secretary of State Anthony Blinken has COVID. The State Department says he had a positive PCR test this afternoon and is now experiencing mild symptoms. Secretary Blinken is not considered a close contact to the president. He's isolated

and working from home. Tonight, new polling after the leak of the Supreme Court draft opinion on Roe v. Wade and the efforts to get big companies to take a position. That's on the news right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. I will be there, Chef. I a position. That's on the news right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. All right, we'll be there, Shep. I appreciate that. That's Shepard Smith. Stocks surging into the close today after Fed Chair Powell signaled that a 75 basis point rate hike was not on the table. Let's welcome in Ritholtz Wealth Management CEO, halftime contributor, halftime committee member, Josh Brown. It's good to see you, Josh. You know, it really was the moment of truth. Gunlock knows a big market moment as well as anybody. And he he knew that that was the moment, too, when Leisman asked that question to the Fed

chair and the Fed chair said, no, 75 basis points not on the table. We're looking at 50, 50 for the next couple of meetings. Yeah, I think that's right, Scott. And, you know, you found out today what the market was most fearful of. And it turns out it was not inflation. It was the Fed going crazy in the short term and and racing to catch up with where the bond market is at a speed that really most market participants would say, OK, it seemed unnecessary when you continued to stimulate the housing market last year. Now it seems unnecessary that you want to crash it. So that was the moment of truth.

I think there were a lot of days, and I joked around with you the other day, where there's nothing going on. Maybe go tend to your garden. This was not one of those days. I think this was, you know, 900 point rally, of course, it's momentous, but I think it was momentous because of the way it came together. It really accelerated into the close and fed on itself after probably a half an hour or so of really the market saying, all right, we kind of expected this, blah, blah, blah.

That moment, I think, crystallized this idea. And Jeff and I are singing from the same hymn book. You can't stay as bearish as you were at VIX20 when you're above VIX30. And I've been saying this all year. And Jeff and I see this the same way. VIX above 30. We were at 35, I think, at the worst point on Monday morning. You have to be buying something.

No matter what you think about Russia and this and that, you have to be adding to something. So I've been doing that. I bought a little bit more Amazon. I bought a little bit more A.O. Smith, AOS, for the people who are unfamiliar. Looking at areas where you just say, OK, this is too much. This makes no sense. And I think that's going to continue to be the playbook. We're not out of the woods. And I think for most investors, what they should be doing in

a range bound market, which is what we're in, you have to ask yourself as bad as it felt on Friday, the Dow down a thousand points into the close. And as great as it feels today, you have to find a middle ground. Your sentiment can't sway to the degree that the Dow Jones is going to sway. You've got to find a middle ground emotionally to stick it out through this because it's real tough. Let me ask you this. So Gundlach says all clear. That was his quote.

All clear for a short covering rally. And my question to you is, does this have legs? Is this a one day thing? Do we reassess tomorrow or does this have some staying power to propel the market higher, like some have suggested can actually happen and sharply so in this month? Well, the answer is going to come from big tech and technology was the number two performing sector today after energy, communication services, which is also big tech, right on its heels. And that's where the answer is going to be. This is something that we have been consistently saying on Halftime. The fact that Apple was able to hold that critical support

level and then today bounce off of that, very, very key. So if you're asking about the S&P 500 and you're not talking about Microsoft, Apple, Alphabet, Nvidia, if you're not talking about those names, then I don't know what you're talking about because that is where the rubber meets the road. The good news is those stocks participated today. So it's nice to have retail up. And yes, it's great to see the REITs bouncing. And of course, we're not mad that health care was up. OK, great. But you absolutely have to have the trillion dollar market cap stocks be at the vanguard of a bounce if you if you want to try to trust it. So now the S&P is five percent higher than where it was at the worst VIX level, 35 on Monday. That's a pretty good start.

Let's see if there's follow through. You don't need 900 points tomorrow. You just can't have a two o'clock rollover. So let's stick around. Let's see what happens before we form a judgment. But remember, if it's a range bound market, as we drift back lower to that 20 VIX level, start thinking about the stuff that's gone up a lot

that you're not crazy about in your portfolio, because that's the stuff you're going to want to peel off. Unfortunately, that's the environment that we're in. But I think we have to be honest with ourselves about that. Looking at Apple as we speak, right, finishes up 4 percent, 166. You could pull up Microsoft, as you said, up 3 percent, almost, you know, back at 290. I remember we were talking about Microsoft hopefully holding 275. Right. And Apple hopefully holding 150, 155. And it did. And that was critical. And now we find ourselves with it with a move and we'll have to see if we can back it up. Yeah, and I want to say one other thing about what Jeff's comments on the bond market. I also agree with the bond market deserves.

I know deserves got nothing to do with it in real life, but the bond market statistically deserves a respite. I really don't think that we've had the yield curve inversion already. I don't think the Fed is racing to get back to that place. And I do think three percent is way too attractive of a yield, given the ocean of money that's still out there, the ocean of liquidity. Right. Despite the fact that we're going to have the Fed shrink its balance sheet, et cetera, et cetera. There is still too much money out there looking for a risk-free return of 3%. And they can get it now. And I do think that that's going to serve as somewhat of a governor in the fixed income market. So it has been absolutely horrific four months for diversified portfolios. Unlike anything

we've ever seen, the worst start to the stock market ever, the worst start to the bond market ever in a calendar year, both coinciding. But there's one thing that everyone should keep in mind. And this is where I break with PTJ. The money has to go somewhere. It has to go somewhere. And it's going to go to one of those two places. Insurance companies are not going to 30 percent come out of the exposure. I'm sorry. They're just not. I don't care what the inflation stats are. So at a certain point, you cannot have both bonds and stocks

with that velocity continue to fall together. It's just, it's unprecedented and it's not gonna happen twice. So if you're in this market as a 60-40 portfolio investor, which is what most of America is doing with its 401k, take heart because what Jeff said is right. You may not get a lot of relief in the stock market for long. We may roll back over. But in the bond market, enough is enough. Unless you think we're going to keep printing 8% CPI and 6.5% core PCE. If that's your expectation, we can't have a conversation,

but it's probably not. So I think today was momentous for a lot of reasons. And one of those reasons is that the bond market rallied. Speaking of conversations, I'm glad we had this one. Josh Brown, thanks for your time. I'll see you back on the half or here in the O.T. or both. You as well. That's Josh Brown joining us there. Halftime committee member Jim Labenthal has been one of our biggest bulls. He'll tell us what he is doing now after today's big rally and coming up. Plus, we are breaking down some big earnings movers in the OT. Christina Partsenevel is tracking that action for us. Hi, Christina. Scott, I've got a theme today and it's about breaking away from the computer screens and getting

outside. E-commerce platforms are noticing the shift in consumer spending habits from online to in-person sales, while a travel company predicts pent-up demand will continue to propel this travel season forward. I'll have the stock movers right after this break. Welcome back to Overtime. We're tracking some big stock moves in the OT. Christina Parts Neville is doing that for us. Hi. Hello. Well, let's start with shares of eBay plunging on lower forward guidance for the year. The e-commerce platform had a slight beat on the top and bottom line, but it's the second quarter and full year revenue guidance that fell below expectations.

You can see the stock falling about 6%. There are concerns of declining consumer spending, along, of course, with intense competition from rivals like Amazon. Switching gears, Twilio, which is a customer engagement software company, their shares are up right now above 4% after posting first quarter results that beat expectations. Earnings per share literally came in break-even when the street was expecting a loss. But like eBay, Twilio warned growth would slow in the second quarter. I smell a theme there. Bookings posted earnings as well.

Revenues came in at $2.7 billion, higher than the estimates of $2.54 billion. The company says that it expects to benefit from a busy summer travel season. And lastly, Etsy. Shares are plunging right now, over 12%. Q2 revenue guidance came in lighter than anticipated. That's part of the reason. The other major reason is the CFO said consumers have less disposable income and many more places to spend it. So the CFO continued on and went to say that these are short term headwinds, but that they're very confident in the long term growth potential.

So there's quite a few themes in there today. Scott, there you have it. Some big movers in the OT. All right. Appreciate it. Christina Partsenevelis, thank you. Still ahead, more on today's huge rally. Stocks surging as the Fed rules out a 75 basis point hike. What should investors do now? Is this move, that one right on your screen, that one right there, 9.32 on the Dow, is that sustainable? That's next. We are back in overtime markets, finishing the day higher after the Fed rules out a 75 basis point rate hike.

So after today's nearly 3 percent rally, what are investors to do? Let's ask two of them. Hightower's Stephanie Link, Serity Partners, Jim Labenthal. It's good to have you both with us, Jim. Look, the market's up 900 some odd points. I said, give me Jim Labenthal. The guy's been the loudest person on the network saying, no, you bears don't know what you're talking about. The economy's strong. The Fed can handle this. Now what's your take? Is this sustainable? The answer to that question is going to take a few days. And, you know, Scott, I love the tweet. I got a kick out of it that you put on a little while ago. It made me go reach for these, but I can't put them on just yet. We need a couple of things. We need to see the labor force participation rate pick up on Friday, and we need to see CPI next Wednesday come in below expectations. It's been a long time since that happened. Now, listen,

CPI expectations for next week are 8.2 percent%. And if that comes in at that level or higher, I think you can expect Jim Bullard to go back on his nationwide tour, despite what Jay Powell said, this is a Fed that can and will pivot. So really to confirm this rally, you need to see that inflation has peaked, which I believe it has for a lot of reasons that may be esoteric economic reasons, inventory to sales, prices paid, those sorts of things in the regional Fed surveys. But they matter. And I think I think inflation has peaked. But I got to wait to Wednesday to really confirm it and put these little gems on. Yeah. OK. You're not ready to go full top gun, Tom Cruise, just yet for those who

are not on Twitter and not everybody's on Twitter. But Stephanie Link. OK, we know what the Fed is likely to do in the meetings ahead. Is that enough cover to actually put something together in the market or do we have to come to grips with the fact that the Fed is going to tighten and they're going to do as much as they have to do? And Powell was explicit about that. We'll do more if we have to do it. Yeah, actually, that was, I think, one of the most important comments that he made, that they're going to be data dependent after they get to neutral policy of two and a quarter, two and a half by September. That's what the Fed funds futures are pricing in anyway. But he said nimble. He said flexible. So I don't think that this is the all clear. I think we're going to stay choppy. And I agree with Jeff Gundlach about inflation.

And I actually also agree with Jim on inflation, maybe at the peaking stage. There's no question about it. You have just by easier comparisons going ahead. However, I do think inflation is going to stay elevated. We still have the war and we still have a Fed that's not proven to be able to engineer a soft landing. So I just still think we are going to be kind of in this choppy range. I'm encouraged by the economic data. I'm going to be watching the wage number on Friday for the nonfarm payroll numbers. That's a big one, too.

I'm sure Jim is as well. I'm encouraged about earnings. So I have to be a little bit more balanced at this point because I really don't know. And there's just none of us know if the Fed can do this. Peak doesn't mean go away, Jim. Peak just means stop going up. And let's not confuse the two. It doesn't mean if inflation has indeed peaked that the Fed's job all of a sudden becomes much easier. It's still going to be hard to break inflation on where it is now and keep the economy intact in the process yeah i think that's a fabulous point scott um the good news is for bulls like me is that expectations for inflation are really really high so you know i threw out that 8.2 percent number for next week that's a really big number what if it comes in with a seven handle?

I mean, I think the market's gonna rejoice on that. And what people are looking for is by no means a return to two or 3%. But if we, by the end of the year, got this thing down to four or 5%, as far as the starting number, that would be something that would indicate that the Fed does have it under control.

So if you get a trajectory towards those numbers, that's all the market needs to see. I really do want to say that this is it. Today was it. I just feel like we need a little more data. But the only mistake that I could be making here is being early. And I'm willing to make that mistake. All right. I won't call you a maverick just yet. I won't do it. We'll just wait. We'll see what happens. It's farmer Jim Labenthal, Stephanie Link. I appreciate it as well. We'll see both of you again soon. Up next, it's Santoli's last word, what he thinks about a potential soft landing ahead. And coming up on Fast Money, is the dollar a detriment to U.S. stocks? Technician Carter Wirth is laying out

his take. Gundlach waited on the dollar, too. Overtime, back after this. We're back in overtime. Let's get the results of our Twitter question of the day today. Do you think the S&P 500 will be higher or lower by the next Fed decision on June 15th? And we have positivity. I guess it's hard not to be after a 930 point move on the Dow. Sixty five percent say higher by June 15th. Thirty five, of course, lower. Up next, Santoli's last word. We're back right after this. You talked about using 50 basis point rate or the possibility of them in coming meetings. Might there be something larger than 50 is 75 or a percentage point? 75 basis point increase is not something the committee is actively considering.

That was the moment of truth. The moment at today's press conference, Fed Chair Jay Powell asked by our own Steve Leisman that led to this. Take a look at the markets, how we finished up. Because it was a huge rally on the back of that. Bond yields fell. The Dow rose by 932. Just a remarkable moment in that exchange

and what it led to. Mike Santoli's here with the Santoli's last word. That was a moment of truth. I mean, if anything, relieved some of the fear that was in the market that they're going to do too much

and destroy this whole thing. What it did is it said to investors, you can take this one thing out of your basket of worries and set it aside. And so it lightens the load enough. But what's interesting is these meetings and these press conferences are always in the ear of the beholder. There was a way, absent that statement, you could have said,

he's actually still going on the hard line here. He said maybe we're trying to get a soft-ish landing. He did not assert that much confidence that a true soft landing was likely. He emphasized when he talked about Ukraine, when he talked about China, the supply chain disruptions and inflation. He did not characterize them as risk to growth. He claims they can kind of reduce demand for labor just by hitting job openings and not raising unemployment. I mean, there's a lot of skepticism you could apply. But the market, the context of this meeting was the market was so leaning in the direction of more, more, more in terms of tightening and financial conditions going the wrong way for

stocks that we just get this very huge burst of relief. I mean, look, it helped, too, that he said and he was explicit. Yes. And maybe he didn't have to be 50 at the next two meetings. That's right. So he gave you the roadmap of some sense of certainty. He's been doing that where he kind of wants to shine the headlights that far ahead of the of you on the road and say that there is a plan in that context. And that's because all they want to do is get to this point of neutral. They're not saying, oh, we're data dependent on every. No, the data don't matter for the next, I guess, 100 basis points at minimum. But after that, they will. So, yes, I think in the, you know, relative to all the things that we've chosen to fear leading into this moment, look, it doesn't mean that there's not going to be a little bit of a slowdown. It doesn't mean that, you know, the market can't get colicky for some other reason.

I mean, 3% move one day doesn't erase the world's problems. Right. But what I do like is that almost everybody, bulls and bears alike, are saying, got to wait and see. These rallies have failed before. Very strong rallies in bull markets. We still have resistance overhead. So that's good.

I think there's still a wall of worry. Got less than 30 seconds left, but Josh Brown points to the place to look to see if it really does have legs. The mega caps, the Microsoft's, the Apple's, which had a nice run into the into the close. Yep. They've been underperforming. Obviously, they they hold the most juice when it comes to what the index as a whole is going to do. Also, you probably want to see cyclicals do better again. You don't want to necessarily see the defensive sectors lead the way from what we are going to see. Thank you for your last word, Mike Santoli. That does it for us in overtime.