Closing Bell - Closing Bell Overtime: Dramatic Late-Day Reversal 10/11/22

Episode Date: October 11, 2022

Treasury Secretary Janet Yellen weighs in on the fed, economy and her future at the White House. But first, concerning headlines out of the UK regarding the bond market sent stocks lower to end today���s session. All-star panel of Victoria Greene of GSquared, Trivariate’s Adam Parker and Virtus’ Joe Terranova break down all moves. And, market expert Mike Santoli’s Last Word on the big stock moves of the day.

Welcome, everybody, to Overtime. I'm Scott Wapner. You just heard the bells. We're just getting started from here at Post 9 at the New York Stock Exchange. In just a few minutes, you'll hear exclusively, as Sarah said, from Treasury Secretary Janet Yellen on the state of the U.S. economy and markets as recession fears escalate around the world. We begin, though, with our talk of the tape, which today might as well be the tale of the tape, given that late-day move we saw and some pretty concerning headlines out of the U.K. regarding the bond market mess there. It only underscores the still-growing risks in this market, the kind Jamie Dimon cited in comments that are still reverberating around Wall Street. Let's ask three headliners today about these markets. Victoria Green, G-Squared Capital, Trivariates, Adam Parker, the chief market strategist of Virtus, Joe Terranova, all three are sitting with me, which I am very appreciative of. Victoria, I'll begin with you.

As I said, this just underscores these elevated risks and perhaps the headline risk, if nothing else, that we are susceptible to in the days and weeks ahead. Sure, you've got a big number tomorrow with CPI coming out. Where's that going to land for September? You have what's going on in Europe. We've always said this is going to be a bit of a recession situation. It seems like the U.K., they were trying so hard to get quantitative tightening going, and they can't. They can't even get that going.

And so you look at all of these risks out there, and we just don't think it's time to jump in yet. We think there's a little bit further to go in this bear market, and we think you really still need to be playing defense right now. AP, I was going to ask you, you know, some are saying that we are set up for a good move higher over the next couple of weeks. But then you get a wrench thrown into the situation like this BOE headline and you may get more in the days ahead. Right. You have a three day deadline apparently there for these pension funds to get their houses in order. And who knows what happens on the other side if they don't. How do we think about that? You know, get their houses in order. And who knows what happens on the other side if they don't. How do we think about that? You know, it's funny. This morning we were talking about the war in the Ukraine thing, and these headlines should have been worse. You know,

so it's like I can't, it could be like a negative and a slight positive and they're offsetting. For sure, everyone knows companies are over-earning. News is going to get worse. There's going to be some bad guidance. The Fed's going to be hawkish, the CPI's going to remain elevated. I think those are basic facts. And I think the question is just, can we get some counter-trend rally into the year-end, or is positioning and sentiment low enough to get people excited? I don't think so, to be honest with you. I think we're going to have a pretty bad earnings season and pretty bad guidance.

And the stuff we've been talking about the last month or so. But you think this wall is just simply growing too high to get over? And we're going to run into it again with CPI thinking it's going to show something that it ends up not? It's just the way that thing works is even if rents start to slow a little bit, you know, you just have so much upward momentum. It takes six, nine months for that thing to really slow. The Fed's going to stay hawkish.

They couldn't be clearer about that. And earnings are going to decline. And now we know there's tons of inventory that's built. Companies overproduce consumption. So I think the main thing is you're looking at 2023 earnings. The street's got 240 plus or minus, 241 last. The real number is probably 210, 215. And then I don't even know if that's the trough or not, if 24 is flat or whatever. So I think what my clients have been asking me recently, the ones who have to own stuff, long-only PMs, are saying, is there anything compared to 2019? Let's just pretend, roll it back, it's October 2019. What looks like with different oil and different rates like it's a buy? And there are some companies that you can say, you know what, maybe Amazon's got much more revenue and more cash flow, and maybe

if estimates are 10% too high, it's still okay. So people are trying to find your bullish sentiment, but I think they want to wait to get earnings and guidance out of the way and get a better feel for maybe where earnings could bottom in the next 12 months. Joe, the problem is we are once again, while not making direct comparisons to the dire situation of 08. We're using the words financial stability again, possible systemic risk. That's what David Einhorn was suggesting.

Of course, the hedge fund manager today in an interview, systemic risks, he said, have built up in global bond markets. I mean, we are using this language again. Justifiably so or no. I think unfortunately we keep having a conversation about are we going to have a soft landing or a hard landing. The hard landing is here and it's in risk assets. Forget about the economy. The hard the hard landing is unfolding right now in front of us. Now I said yesterday with you on the halftime report, if you have a capital need in the next three to six months, then certainly you need to understand that there's vulnerability, as you stated, to the downside. Hey, Diamond said it yesterday, right? He used

the words. His exact words were, if you need cash, raise it. Okay. So if you have that capital need, what is unfolding right now is going back to Q4 of 2020. That's when the valuation recession began. The hyper growth index for the Russell 1000 reached its peak from a valuation perspective and has been in decline since. Now you have this rolling valuation recession. And the last place that it's touching, Microsoft, Amazon, Apple, that's unfolding now. So the next few weeks are going to be very difficult. You're going to need to get a 7.5, a 7.6 on CPI. That's probably wishful thinking for the market to bounce. It's going to be a tough guidance period. But on the other side of that,

I'm sorry, I'm optimistic. Because I think if you have a long-term vision, there's enough value that has been restored, both in fixed income and the equity market, you're going to be greeted with a great opportunity. I think it's timing. Go ahead. Sorry. No, I was going to say Bloomberg came out today saying they're positive, turning positive on bonds. Their rate strategist Ira came out and said, hey, probably be a positive total return on the bonds the next 12 months. And then you look, it's not all parts of the market. So the inventory buildup, bad for Nike. But if you look like a Costco who gets to buy that inventory and they're not beholden

to any one person, they're buying inventory cheap. So some people benefit. And Louis Vuitton came out today, 20% sales growth. So not everybody is hurting. Main Street, 100% hurting. It's going to be about inflation. It's got to be a U.S. dollar. We're probably hitting 115 again, right? We're probably going to climb back up. Earnings are going to be bad. S&P 500 is about 60% U.S., 40% international. So the Microsofts of the world, those multinationals, they're going to be very hurt. 52-week low today for Microsoft. So hold your thought, AP, for a second. Just to remind everybody, the Treasury Secretary coming up in a matter of moments, and she's reacting to

everything that we're talking about, obviously. And then there is this headline out of the BOE, out of the UK, which certainly spooked the market late this afternoon. Let's bring in on the phone now Nick Timros. He is the chief economics correspondent at The Wall Street Journal. It's good to have you on with us once again. As I said a few moments ago, Nick, I feel like, you know, we're using these words again. Financial stability, systemic risks, as David Einhorn was suggesting in an interview, you know, not too long ago today. Are policymakers here growing more concerned at those prospects or no? You know, it really depends on what happens from here. The Fed has laid out quite a high bar for

them to deviate from the path that they put forward in those projections three weeks ago, which was to get interest rates to above 4% by the end of this year, above 4.5% early next year. Obviously, they'll never say that they'd never react to anything. But, you know, look at 2007. That was a pretty dramatic credit event that you had unfolding that took quite a bit of dislocation in the credit markets for the Fed to begin responding. And we've heard an awful lot from Fed speakers last week. None of them have backed off of the rate projections from that meeting three weeks ago. So, you know, you could bet that they might change their mind, but I'm not sure what that would be based on at this point.

Oh, boy. I mean, Mester, even today, you know, at the Economic Club of New York, you know, using very hawkish words, you know, no and no evidence of inflation peaking. That's not exactly what she said, but that's the point that she made. So they are very much staying the course. I mean, they they certainly seem to be at this point undeterred by almost anything. Yeah, I mean, notwithstanding the remarks from the Bank of England governor this afternoon, you haven't seen any change in tone in the Fed. You had a governor, Chris Waller, last week saying he was, quote, unquote, confused by market speculation that the Fed might slow the pace of its rate increases. He said markets were functioning orderly. He even pointed to tools like the dollar swap lines, the standing repo facility that he said the Fed could use before it would change monetary policy. He said, you know,

the Fed should not be looking to monetary policy because they need to be focused right now on fighting inflation. Now, we did hear yesterday from the vice chair, Lael Brainard, who talked about the potential for a sharp decrease in risk sentiment or other developments that are hard to anticipate that could amplify a shock. She referred to fragile liquidity in core financial markets. So the message seems to be it's something that they're watching, but that's all that they're doing for right now. If they're worried about, you know, so-called fragile liquidity in these markets, how far are they willing to go to the edge without breaking something or at least feeling as though they're not going to to get to that that point? It certainly seems they're at minimum concerned about approaching a dangerous point? You know, I guess it depends on who you're talking to right now.

To go back to Chris Waller for a minute, I mean, last week he did, it was kind of late in the day, but he did a Q&A on this, and he pointed to the overnight reverse repo facility, which has $2.2 trillion worth of liquidity in it right now. And he said, I have a hard time believing that I need to step in and do something on liquidity concerns when there's $2.2 trillion that can be, you know, taken back and redistributed. So, you know, that's his point of view. But that's sort of where you hear the center of Fed officials right now is that it's something that they're watching, you know, but they don't see disorderly, dysfunctioning markets, even if liquidity isn't what it used to be. Nick, I appreciate it so very much. Thank you. That's Nick Timmeros,

The Wall Street Journal, the chief economics correspondent there, reacting to these headlines out of the UK and certainly what they may mean, if anything, to what unfolds AP here in the United States. You know, I was on with Santoli, Scott Miner, the other day when you were on the road, and I'm just struggling a little bit with this whole, there could be a long-term capital moment coming, but I want to buy risk assets. Like, I'm sorry, I want to wait. I get that long-term, and I agree with Joe, there's going to be some value in these good businesses, but I can't buy them if people are worried about things that are really kind of, you know, financial conditions really going from tight to really tight.

I don't see why I want to take a big risky bet right now. So I guess I hear that stuff, and I don't think time to get in. Well, nor do you. I mean, Victoria, you're thinking, what, $3,400, $3,200 on the S&P is a reasonable level to get to. I mean, let's not forget what's right in front of us. It's CPI, and then it's earnings. And that's going to be the real tell, not so much what just happened with earnings, but what they say about what they see happening in the months ahead.

Yeah, it's funny you say that because I feel like they have to slightly check a box, but it's going to be forgiving if they miss something. Everybody knows the dollar's high, but everybody's looking for guidance. And what are the banks going to say? How much capital are they raising? I think 34, 32. 32 to me is very compelling. And I look at this, and one of the big problems that the Fed overshoot, the hard landing that we discussed, and what we want to think about is it's about a 12-month lag. And so they've got to be starting to think, okay, we have to start slowing down. And I do think a minute there's a pivot, the minute there smells like a pivot or even like somebody says the P word in the Fed, it's going to be the support the market's looking for. And it's been said before,

it gets so bad, it's good. And I see that at 34, 32. Problem is, is as you heard Timoros, you know, the so-called Fed whisperer suggest that doesn't seem to be close. And you hear from almost every Fed speaker after another, and there are many, and you can debate whether that's a good or bad thing at this moment that you're hearing from so many so often. The talk is decidedly hawkish. Mester underscored that for you today. So, you know, here we are, October of 2022, and we're very close to basically washing away the entirety of this decade. If you think about where we started, the 20s, the roaring 20s ultimately never unfolded.

That was just a false premise. And I think the pause with 100 degrees, certainly it's going to happen. It'll happen. It's just going to happen, I think, at a price point in which the Federal Reserve is comfortable knowing that the market is going to rally significant on that pause. I don't know that the Federal Reserve is comfortable right now thinking to themselves, well, we've got a $3,600 for the S&P. If we pause, we're talking about, what, $4,000 for the S&P? I don't think they want the S&P at $4,000. A lot's in the market. Don't you think a lot is already in the market? I mean, look at where the two-year is, right? Adam?

I have two quick thoughts on this. One is, I guess they're going to stay hawkish until the E gets killed. So remember the math. Price to earnings times the earnings equals the price. They're going to stay hawkish until the earnings gets killed. And then you're going to be looking at a P that's expanding on lower earnings. And that's not obvious to me where that fleshes out. Secondly, all analysts know the, quote, whisper number. What are the revenues? What are the margins?

We know currency's strong. So they're trying to feel that. What no analysts know is the inventory. No analyst models an inventory. There's no inventory whisperer. Nobody's talking to the buy side. What do you think they're going to build? They have no idea. So when production exceeds consumption, you know what happens? Gross margins get killed. And you've seen it be very detrimental for these guys that reported late September and pre-neged. AMD, Micron, et cetera. So I think you've got to wait for some of that stuff to get out of the way before you get all excited. Even Nike, right? You've got a lot of inventory. You've got to cut prices. I hear you.

Levi. I hear you. All of them. Let's do this. Let's leave it there. AP, I appreciate it. Good to see you. Victoria, you as well. Joe, you're going to stick around because we do have the Treasury Secretary on the other side. We are just getting started here in overtime.

It's an exclusive interview coming up. Janet Yellen on the record and exclusive. Her take on the economy, the Fed, her future at the White House. We'll take you live to D.C. next. And as we head to break, a look at today's Twitter question. We want to know, will we have a soft landing or not? It's a simple question. The answer is simple.

Yes or no. Vote. We'll bring you the results at the end of the show. All right, we're back in overtime. Fears of a recession escalating in recent days, especially in light of those dire comments from J.P. Morgan CEO Jamie Dimon, who suggested one is almost inevitable sometime in the not-too-distant future. Well, who better to ask about the state of the U.S. economy than Treasury Secretary Janet Yellen? My colleague Sarah Eisen, sitting down for an exclusive interview with her just a short time ago in Washington, joins me now with that very important conversation. Sarah.

Hi, Scott. Well, the IMF World Bank meetings of financial policymakers kicking off here in Washington, D.C., where Secretary Yellen has tons of meetings with her foreign counterparts. And the biggest topic, the growing warnings and worries about the global economy. So I started by asking the Treasury Secretary about her level of concern. Different countries face different stresses, but the IMF has downgraded their outlook for growth in many parts of the world. I think much of the strain we're seeing reflects the impact of Russia's brutal war against Ukraine, which has raised energy prices. Of course, he's weaponized natural gas, which is causing huge price spikes and energy strains

in Europe. We still see the impact of COVID in China and the slowdown in Chinese growth. And with high inflation and tightening monetary policy in many advanced countries, emerging markets from really all of these factors are suffering many stresses. So there's a lot to talk about. But from the perspective of the United States, I think the United States is doing very well. And we had an employment report just last Friday that shows we continue to have a very resilient economy, an economy, of course, that's slowing, which is something we expected

fully after a very strong recovery. We essentially erased the shortfall in output from its potential. The ARP accomplished that. We would expect slower growth, but we still had over 260,000 jobs last month and have a very strong job market, although we're beginning to see some signs that pressures in the labor market are easing. So I remain encouraged the U.S. economy is strong. And as I've said on other occasions, I think there's a path through. Obviously, inflation is too high. It's a priority to lower it. But I think there's a path to accomplish that while maintaining a healthy labor market. Is the U.S. really strong right now economically? The stock market has gotten crushed. So have U.S. bonds. CEO of the biggest bank, J.P. Morgan, Jamie Dimon,

told us this week that he expects a U.S. recession in the next six to nine months? Well, look, we're going to see. And I can't be sure, but I'm very encouraged by a continued strong labor market. People feel good about the labor market. They're, of course, concerned about inflation, and we need to bring that down. But household balance sheets remain strong. Firms, even with rising interest rates, have debt burdens that are, by and large, manageable. And while there's been a good deal of financial market volatility and some concerns about liquidity and the potential for liquidity strains in the Treasury market, we really haven't seen

signs of financial stability in the United States. In our financial markets, they continue to function well. And we're not seeing signs of deleveraging of the kind that sometimes occurs in an environment of tighter monetary policy. So I think the U.S. economy continues to do well. On the bond market point, you're not seeing any strains on liquidity because the market has been extremely volatile. Well, there have been a lot of underlying shocks, decisions, for example, OPEC's unfortunate, very unfortunate, and I think unwise decision to reduce oil production. So there have been shocks and

shocks relating to Russia, Russia's war against Ukraine, and other, you know, policy shocks. You know, obviously, I'm not going to talk about Fed policy, but it's clear the Fed is committed. They've set out a plan for how they're going to tackle inflation. And I think that's pretty well understood by the market. So while, you know, there is some concern about liquidity in the markets, I don't think we've seen anything that rises to the level of a serious concern. What about with the U.S. dollar, which has gotten super strong, and we've started to see emerging markets, central banks, and even the Bank of Japan have to intervene? What do you make of the dollar's strength right now?

You know, I think it's a natural result of different paces of monetary tightening in the United States and other countries, differences in economic strength resulting from different shocks that countries are dealing with. And the United States is, in a way, doing about the best among the advanced countries. And also remember, the dollar is a safe haven. So when times are uncertain, we experience capital inflows into our safe markets. And all of those things are pushing up the dollar vis-a-vis a broad range of countries. You seem okay with it. And I'm wondering, because there are increasing calls for some sort of global-coordinated intervention, as you know, really hard for a central bank to go at

it alone against the multi-trillion-dollar foreign exchange market. Would you consider something like a Plaza Accord, where the U.S. helps some of its allies deal with this? Well, I've said on many occasions that I think a market-determined value for the dollar is in America's interest, and I continue to feel that way. And I do think that the pressures we're seeing largely reflect fundamentals and policies that are by and large appropriate. Of course, one of the things we always do in the IMF World Bank meetings is consult with other countries on what they're seeing and looking at their policies. We want to make sure globally all the policies that countries are taking add up to something

that works for the global economy as a whole. And that's a role we also look to the IMF to play. So we certainly will have that discussion. About currencies? We'll know about the set of policies and whether they're appropriate, understanding that there are spillovers, policy spillovers across countries. Does the whole complex of global policies add up to something that's good and appropriate. But I think the currency movements are a logical outcome of different policy stances. What about the U.K. policies right now? Have you been watching what's happening in the British bond market and the now third announced intervention from the Bank of England to calm things down? I have been watching U.K. developments quite closely.

I have met with Chancellor Korting, and I expect to meet with him again. I don't want to comment on U.K. policy, but I am going to try to understand what the impact of those policies and their rationale is. Because it is impacting our bond market, and there's a feeling that it's making some of the volatility globally a lot worse. Well, you know, as I said, interest rates are rising globally due to advanced country monetary policy tightening and responses. You know, my general view is that, and this is how I feel for the United States, that at a time when monetary policy is tightening, fiscal policy should have a stance that complements that, that central banks play the lead, but fiscal policy should be complementary. We've tried to do that in the United States. Yeah, not happening there, hence the credibility problems with the fiscal policy in the U.K. I know you don't want to get into Fed policy, and it's tough as someone who was

literally in that chair before, but you have to be concerned as Treasury Secretary about the Fed overdoing it, don't you? Well, you know, tightening, changing the stance of monetary policy to deal with inflation, it's extremely important. And I certainly espouse the goal, and I believe strongly in Fed independence. It's for the Fed to decide what's the right path, but it is an art, not a science exactly. And so it's always a matter of balancing risks. But I have confidence in the Fed to make a good set of decisions, and we're not going to interfere with their independent judgments.

You think inflation is coming down rapidly here? If you look in commodities, shipping rates, listen to companies, it feels like it's coming down. I look at those signals, and I think they're encouraging. I think we need to see it in, you know, the CPI and the PCE, the inflation indices that we watch. There's been some news that's positive, but I think we need to see a sustained decline, but I'm looking at those signals as well, shipping rates, delivery lags, commodity prices, other things that can be forecasters of future inflationary trends. And we're seeing some easing. The know, the job openings have come down.

That takes, without really seeing any layoffs or distress in the job market, that takes a little bit of heat out of the job market as well, which should be helpful in bringing inflation down, too. But we'll watch the numbers closely and monitor it carefully. You know, in the past few weeks, there's been a lot of chatter around your own tenure as Treasury secretary, a report that you are going to leave after the midterms, a report that you said is not true. So you do plan to stay?

I plan to stay. I have never said that I intend to leave. I've heard those rumors, but I fully intend to stay. For how long? I have no plan to leave. I've heard those rumors, but I fully intend to stay. For how long? I have no plan to leave. Some Republicans think that you should resign because you got the inflation story wrong. I think there were a series of shocks that virtually no one could have predicted, including Russia's invasion of Ukraine, that have pushed up prices and a series of supply challenges that most people did not anticipate, including me.

I think I was in good company in failing to see that inflation would increase and remain as persistent as it has. The Fed clearly understands the problem it faces, and we're supportive of the actions that they're taking to bring it down. It is President Biden's top economic priority. Treasury Secretary Janet Yellen there speaking with me about a lot of what the market is concerned about right now and sounding pretty optimistic about a lot of it. Says she thinks that the U.S. economy is in strong shape and will prove resilient, even though it is slowing. On the liquidity issues that we've all been talking about and watching in the market, saying she doesn't see necessarily at this point any cause for real concern. On the strong dollar, which I was really eager to ask her about because we really haven't heard from her on this issue, with the world sort of wreaking havoc on a lot of the global economies, it's sort of this global wrecking ball. She said that she thinks it's in the U.S.'s best interest to have a market value exchange rate. So, Scott, I come away with it thinking that the alarm bells are not yet going off in the Treasury and with Treasury Secretary

Yellen, despite some of what we're hearing and seeing in the markets. And then the final point, Scott, just because it is the news of the day on the U.K., I asked her about it. She doesn't want to comment on U.K. policy, but did say she's watching it very closely, the bond market, that is. She has spoken with British policymakers, and she is trying to understand the motivations behind their policy. And I thought, Scott, that when she said that it's important that fiscal and monetary policy should be aligned and complementary, that was a dig. Because that's what caused this whole problem in the U.K., that they announced a fiscal stimulus in the middle of the time they're trying to fight inflation. Sarah, great stuff. Thank you very much.

That's Sarah Eisen, just having spoken with Treasury Secretary of the United States. Joe Terranova, I mentioned, would be back here for his reaction. No serious concern about liquidity issues. That's one of the big takeaways. But also not a willingness to go there and say that we've got inflation totally under control. She made it clear that they need to see sustained declines in the core and those stickier parts of inflation that have been so pesky? So the Treasury Secretary laid out the soft landing more than I think I've heard any administration official or anyone from the Federal Reserve really lay out. She cited Russia and Ukraine as, you know, the reasoning behind a lot of the

inflation. There is certainly truth in that, but it goes a little bit beyond that as well. She also talked about there not being deleveraging. There's deleveraging. There is clearly deleveraging. So I think you listen to that and you come away with that where you have to set an expectation for yourself. And the expectation has to be this. In the prior administration, you knew that there was a focus on how is Wall Street doing. In this administration, the priority is how is Main Street doing. And you could agree or disagree with either policy, but set the expectation. That's clear what this is. And she is focused on Main Street. That's clear. She wants to ensure that there's job growth and that Main

Street's doing well. And I think she's less concerned about what you and I see on a daily basis, which is equities declining. Your point's well taken, but let's also not forget that while this is Janet Yellen speaking, it is Janet Yellen, the politico speaking at this point, a member of an administration that has been flailing to try and get that message under control of why inflation is here and how they're going to deal with it. You've got a midterm election that is right, you know, right in front of us. This is not Janet Yellen, the former Fed chair speaking. It is at the current politico trying to sell an administration's message on how they're dealing with this current crisis. And that's what it is, a 40 year high in inflation and now an unprecedented level of policy that the Fed has embarked on.

Without question. I completely agree with that. And this is also a Treasury secretary in which in the weeks that follow the midterm election, if the Democrats maintain the majority in the House, maintain the majority in the Senate or extend those majorities, you're going to hear a conversation about increasing the corporate tax rate or increasing individual tax rates. That's the expectation. You just have to understand it and set it for yourself as an investor. All right. Good stuff. Thank you for sticking around. That's Joe Terranova. Up next, treacherous trading territory. Those words from New Edge Wealth's Cameron Dawson. She's here. Find out how she's navigating the market, she says, is pretty nasty. Next.

We're back in overtime. Stocks finishing the day well off their highs with the S&P notching a five-day losing streak. My next guest says the market is entering treacherous territory for both the bulls and the bears. Joining me now, Post 9, Cameron Dawson, New Edgewell. It's good to see you again. Well, that's a headline. Tell me more. Yeah, we think it's dangerous for both bulls and bears right now, because if you are a bull today, the bearish story is pretty clear. We know that we have these headwinds from tighter liquidity,

potential financial instability risks, headwinds from valuations, from earnings. Those are clear. But to be overly bearish today, we also have to consider that markets are oversold. Markets have very light positioning. We had the most record put buying, which means downside protection buying last week. So you could see a powerful rally to the upside that doesn't reflect the fundamentals, doesn't reflect the risks, but just because of positioning and sentiment. But I mentioned earlier, right, as we started the show, financial stability. We're talking about spillover possibilities. True or not, they're in the conversation at this point, right? We don't know if some of the issues in the U.K. and the bond market there, you can see certain things

show up in our treasury market, our bond markets here, but we just don't really know what the ultimate outcome is going to be. Does that add to some degree of why you think it could be a treacherous territory ahead? Well, I think very much so, because one of the things that we heard from Yellen today is that financial stability is not a priority. It's not bad enough yet to be a priority for the Fed, for the Treasury. We also saw that with the Bank of England today, saying that they would stop the bond-bu buying program at the end of this week.

So it means that for central banks to step in and stabilize markets, things have to get a lot worse. Well, let's spin it, too, and say that it's a good thing that they haven't gotten to the point where Secretary Yellen, who was just with Sarah, suggested we're concerned about it. Not that she would necessarily say that during a television interview anyway. But the point being, it's not as bad as it certainly could or might get. So let's just, like, take a little pause on the dire stuff, Jamie Dimon's comments notwithstanding, with all due respect to what he said. First it takes time, but I think the second thing to remember is that policymakers are like generals.

They fight the last war. So they might have the things in place in order to keep the things that broke in the last cycle from breaking again. But what we don't know is where we could see pockets of weakness start to show up as they continue to deliver on what's the most rapid tightening policy since the early 80s. What about this 20 percent possible decline that Diamond's talking about? I mean, you're clearly negative on the market. Does that sound like too much? Reasonable? What? So it's reasonable if we look at past bear market recessions, down 40% would be the peak to trough. Now, we think that from a valuation perspective, that would be a very, very low valuation on this market. If you assume that we get $200 of earnings to share next year,

that would be about 10% down in line with the median EPS decline during recession. That would put you at just about 14 times earnings. That's essentially a trough multiple on trough earnings. And so if we got to that level, it would be a screaming buy opportunity. Okay. But that also would take time. I think that's really important to remember. A bear market to that degree, 40 percent peak to trough, usually takes a couple of years. And we can see big rallies along the way. And I think it's never a straight line down. Yeah, there's price, there's time, right, as we always talk about with these

bear markets. And we will follow it. Thank you. That's Cameron Dawson joining us from New Edge once again. We're tracking some big moves in overtime, as we always do. Christina Parts of Novelos is standing by with that for us. Hi, Christina. Well, hi, Scott. There's a growing trend right now, pretty much among automakers, to invest in sourcing raw materials for EV batteries. And one of the big six just made a big investment in nickel. I'll tell you which ones, along with some other OT movers, just after this short break. Welcome back. We're tracking the biggest movers in the OT as usual. Christina Partsenevalos, as usual, is here with that. Hi, Christina. Yeah, I'm back. Well, shares of General Motors are now moving slightly, slightly three-tenths of a percent higher on news that

it has invested $69 million in an Australian mineral firm called Queensland Pacific Metals. The investment will help GM secure nickel and cobalt for its battery cells. The agreement is pretty much part of a growing trend of automakers making investments into the supply chain to get the supplies of raw materials needed to fulfill their EV ambitions. Let's talk about shares of Roblox. About 10 minutes ago, they were moving. Yay! They're still up in the OT right now, up 1.7%. Despite no news catalyst, the video game developer actually sold off today after a Barclays analyst said it would struggle to expand its user base and convert more users to paying customers. And the $20 target that they have, which by the way, the stock is trading at $35.15 right now, means pretty much almost a 40% downside.

The uptick, though, in the OT could be some dip buying. And lastly, check out shares of these tech stocks hitting notable lows today. You've got Block and Zillow, the lowest since March 2020, and Roku and Shopify, lowest since 2019. Scott? All right, Christina, thank you very much. Christina Parts and Novelist up next. Home Depot falling more than 30 percent this year. But what halftime committee members making the bull case for that stock, even with serious questions about the housing market? We debate it in today's Halftime Overtime next. All right, in today's Halftime

Overtime, building the case for Home Depot. Despite volatile housing data and HD shares losing more than a third of their value this year, Hightower's Stephanie Link thinks now could be an attractive entry point for investors. I haven't recommended a housing stock in a very long time. It's down 29 percent, trades at 17 times earnings, 2.6 percent yield. I think they can have sustainable mid-single-digit comps going forward. So I like that one. Well, SVB Privates, Shannon Sikosha owns Home Depot. She joins us now. I mean, there are serious questions about housing.

Is now really the time to buy Home Depot? Well, there are definitely questions about housing, I think, in the short term, Scott, as we wait for the reset to these higher mortgage rates. But if you look at the retail space out there right now, I mean, there's very few retailers that I would be looking to own, but Home Depot is definitely one of them. I think despite the fact that we have this pressure from existing home sales coming down, Homeowners are anchored to their homes, to these low mortgage rates. And this rehab and renovation trend is only going to accelerate over the next couple of years as they look to enhance and improve their existing properties versus going out and finding a new one. Housing can get a lot worse, though. I mean,

we might just be at the precipice of a real rollover. How do you deal with that? Well, if you look at month supply, Scott, we're still well off. We have 20 percent less supply in the market for housing than we did in 2000. Go back to 2006, 2007, the last time we had a true housing crisis, and the market was absolutely flooded with homes. So although we have seen a decline in home sales in this last couple of months, and we're going to see some significant pressure on home sales as we move into the spring market, the back half of next year, homebuyers are going to re-anchor themselves to these mortgage rates. And frankly, I just don't see the bust based on supply and based on some of the demographic trends that we see with millennial household formation. All right. The other one, Bank of America, they're bearish on Netflix, right? They reiterate their underperformed 196 is the price target. You own that, too. Do you

want to take on this call? Well, the call, if you read it, had a lot of ifs, ands and buts in it. And I think their big question is, you know, the pace. There's a lot of caveats. Are you questioning whether I read it? No, absolutely not. I would never do such a thing. You know, I think this is really a question on how much they can monetize, you know, at this lower level. I mean, they're questioning whether there's really enough spread between the basic plan and, you know, this new ad plan that Netflix is going to be putting in. But, you know, I think they're going to figure out the right pricing for this. And I think they're going to have plenty of content that's going to be available on the

ad supported platform. Maybe the basic price has to go up a couple of bucks. But, you know, I think this is the right timing ahead of what could potentially be a softer economic environment next year. That's a nasty slide. Almost 7% in shares. There was a negative call on Disney, too. So it's not just a Netflix issue. Shan, thank you. We'll talk to you soon. That's Shannon Sikosha. Still ahead, Mike Santoli. He's in the wings for his last word. We'll get his take on these market moves today. Overtime's right back. Let's get the results now of our Twitter question. We asked you, will we have a hard landing or not? About 75 percent.

Seventy five percent of you saying yes, we will. Up next is Santoli's last word. Big show tomorrow with a big guest. Mark Lazzari, the Avenue Capital chairman and CEO, will be with us in overtime from here at the New York Stock Exchange. To say there's a lot to talk about with him is an obvious understatement. So we look very much forward to that. There's a lot to talk about with Mike Santoli here for our last word. What is it? I mean, you got so you got Treasury secretary within this hour, UK stuff. Everyone's on alert for something. We see things moving in the direction that make you uneasy in terms of,

you know, the intermarket relationships, the yields watching the dollar, the dollar watching central banks. So it's all understandable. There's a watched pot effect here. I mean, I'm just looking at credit spreads. They're not as wide as they were back in July. They're not great, but there's nothing that seems like there's it's imminent. Now, I think it's a good thing if we're worried about it ahead of time. On the other hand, the stock market kind of grabs a new low intraday today. It's very hard to be inspired. What we know big picture, though, is high and declining inflation is like one of your better starting points to start buying stocks. We just have to see it start declining. We know that when the market's already down 25 percent, if you're looking out further than six, 12 months, usually it's a decent time to actually own these things.

And we know that the market's kind of flirting with getting sold out. So I think that's why you have this very difficult relationship, because it was just if it was just easy to stay negative, then you just stay on cruise control in that way. Problem is, is there's you know, there's different inflation, right? I mean, it's the headline inflation, food and energy. I mean, headline inflation has come down. And there are good stories to tell around that. Yes. But that's not the inflation that influences the Fed more than anything,

as Yellen herself, the Treasury Secretary, told Sarah and others in days past, have said there's no evidence at all that inflation has peaked. There isn't. And they demand the evidence. They're going to have to see it now. Are we going to be ticky tack about whether it's got to get to two percent or not? I doubt it because, you know, Fed chair has managed to grab for some kind of not so robust indicators to justify a hawkish stance. Right. Larry Summers today, big Twitter thread saying it's ridiculous. We're using owner's equivalent rent, which feeds into CPI in a huge way as a directive of policy because it's a lagging indicator and not really necessarily responsive to what's happening. Look, there's services inflation, which is an issue, too, which Neil Kashkari is concerned about very much so.

And a lot of that is not great. It's just not. Not a lot is great. I think the question is, what have we already sorted out and put into the market? Good stuff, Mike Santelli. We'll see you tomorrow, as I will as well.