Closing Bell - Closing Bell Overtime: Facing Major Market Obstacles 06/03/22

Episode Date: June 3, 2022

It was another volatile day on Wall Street. Can stocks manage to overcome a Hawkish fed and tough talk around the state of the economy? Trivariate’s Adam Parker breaks down what he is watching as we wrap up the week. Plus, Snowflake scored an initiation at Raymond James despite a big downturn this year. The analyst behind that call makes his case. And Mike Santoli is reflecting on what we learned this week in his Last Word.

Mike, thanks so much. Welcome to Overtime, everybody. I'm Scott Wapner. You just heard the bells. We're just getting started. In just a few, I'll speak to Brenda Vangelo and Rob Seachin of the Halftime Investment Committee as we wrap up yet another turbulent trading week. We do begin, though, with our talk of the tape, whether stocks can overcome a hawkish Fed, a falling Apple, and tough talk about the state of the economy. Let's ask Trivariate's Adam Parker. He is back with us. It's good to see you. Welcome back. Hey, good to see you. You have like a one in five record of stocks being up to down when you're on. And here we are yet again. I want to ask you about kind of where we are, because we've come a long way from the lows of May 20th, right? The S&P is up nearly 8 percent. The Nasdaq is up nearly 9 percent. Did we learn anything this week to give us a clue as to where we're heading next? You know, I think there was some data you saw today from the jobs report. But generally, I think when I talk to investors, we did a bunch of meetings on the road

this week. People are more and more confident that earnings are going to grow. You and I have talked about that a lot over the last month or two. People are trying to figure out how much are earnings going to collapse. Cycle goals were really cheap. Growth stocks are down 50, 60, 70 percent. I actually think people are getting data points now that maybe corporate earnings can be up this year versus last year, getting a little bit more confident that maybe things were just oversold a couple weeks ago. So you didn't take anything negative from, let's say, Microsoft and their guy down on their EPS. Now, I know everybody tried to say, oh, it was just FX.

It's not fundamentals. But then there was a note today about the App Store slowdown for Apple, what that could mean for growth of their services business. You just dismiss all that? Not at all. No, I just think there's a bifurcation in the consumer. You know, obviously the low end is getting hurt more by rising oil. You're seeing some signs that housing is rolling over. Clearly the data, the economic data, have peaked and rolled over from the highs.

I think that's obvious. I think you're seeing a number of companies, even last week and the week before, Walmart talking about expenses and costs. So I think there will be a bifurcated consumer where the high end can handle higher prices more than the low end. And you're seeing that even on the tech front, too. Look, it's probably started, Scott, with Netflix, right? People don't need nine streaming services. So you're seeing some slowdown in some of the spend we saw during the depths of COVID and maybe over-optimism about those companies continuing to do that. But I honestly think Microsoft's a little different, so I'll take that one separately.

But generally, I'd say things are fine, just not as good as they were. Yeah. The Funstrat technician, Mark Newton, told me yesterday in overtime, he thought the lows of the year were in. Do you buy that? Do you believe that? I think it's possible. I mean, technical guys are always better than I am at two-week trading calls, so I'll defer to the experts. But I look out and I think corporate earnings probably grow 6% this year. I think there's a lot of stock buybacks. Maybe you get 2% net buyback.

You've got a dividend of 1.5%. I think that cocktail tells me 6% to 8% total return for equity markets on a 12-month forward view is a reasonable framework. The thing that I'm really excited about, though, when I look at this week and last week, is just underneath that, how many opportunities for stock picking are forming. One of the things that's been really hard in the last several years when you just get interest rates going down is really picking winners from losers, right? And now there's just so many relative opportunities. So I think if you're a stock picker, the second half of 2022

is going to be really a good time for you to long and short ideas and generate spread. I'll talk about some of your picks in a moment, but what about this move that we're making back towards 3% on the 10-year, as Mike Santoli was noting? I think we're 295 as we go into the weekend here. Can we handle going back above 3% again, and even if we approach the prior high? I think if the 10-year yield backs up because people think growth is going to be better, that's probably a net positive for equities and risk-taking. If people start worrying about accelerating inflation again, and that's what's correlating it, probably not.

But to me, while inflation will probably be higher in the second half this year and the first half of next year versus any kind of recent history. I think inflation has probably peaked. And I think that's probably the key. In order for the market to really go up, you probably need a directionally dovish Fed, as you and I have talked about. I think that's possible, but not likely in the near term. Yeah, well, OK, possible, but not likely. But what makes you think it's even possible? I mean, if you listen to CNBC over the last 48 hours, you would say that that is not the base case in any way, shape or form, whether it's from Brainerd yesterday with Sarah or whether it was Steve Leisman with Mester today, who said the following have to be intentional and consistent with rate hikes.

I want to see a consistent move down on inflation. Can't be more than it can't be more than one or two months. I haven't on inflation. It can't be more than one or two months. I haven't seen that. It has to be more than one or two months. I haven't seen that. Could easily be 50 basis points in September. I'm not in the camp that we stop in September. You have, and we've had this argument, or at least debate, as to whether the Fed was going to all of a sudden turn dovish and not be as hawkish and stop raising rates. They're giving you no indication of that. Yeah, I think the language is one thing, the actual, the other. I think the thing we watch on a market base like you are is the Fed fund futures. And that, to me, is the perception that investors have about rate changes going forward,

12, 24, 36, et cetera. They really have kind of leveled off a little bit in the last couple months. So people aren't thinking that the Fed's going to get incrementally hawkish. And I think that's probably important. At the end of the day, I just don't think they can raise rates six, eight more times this year, cause a recession, then not have to cut them next year. So if I'm thinking about life, I'm thinking, all right, well, there's what, arrogant theoreticians over here and there's humble practitioners over here. Man, if they have to end up cutting rates in 2023, the meter's going to be slammed on the floor on arrogant theoreticians. So I think they'll end up realizing they can't just go crazy raising rates every single meeting forever,

and they'll probably slow down a little. And at some point in the second half of this year, we'll get a bid for the growth of these stuff again because people will think they just can't get more hawkish. Maybe the most controversial part of your mid-year outlook, which you published today, at least according to what I think, is where you suggest that we think multiples should be elevated versus history, when a lot of other people are arguing that they should not. In fact, it should be totally the opposite. So why do you make that case?

Yeah, look, the way I look at it, forward earnings data have existed since 1978. The average since then has been 17 times forward, 15 times trailing, right? So just think about that. The forward earnings estimates for 2023 are around $250 for the S&P. I think they'll probably be less than that. Let's say they're $240. You've got to market at, what, $4,100. So you divide it through.

You're not really that much above the long-term average on forward earnings today. Now, do I think you deserve a long-term average? Yeah, I do. Why? The profit margins of the companies are so much higher. They're so much less capital intensive. I think 43% of all companies don't even have inventory as part of their business model, like something like Google Search, right?

So you don't really have the capital intensive manufacturing-based lower margin businesses that you had for much of history. So I reject CAPE and Schiller PE and sort of the Grantham. You have to mean revert back to long-term margins and pay below average multiples. I don't really think that's right because the constitution of the businesses are much better. Biotech and software are a bigger piece of the pie. They grow longer. The banks are in better condition balance sheet-wise.

So I think maybe average at a trough and then accelerate from here makes sense. I don't think we're going back to 12, 13, 14 times forward earnings just based on how good the companies are. I think the biggest pushback on my view is probably that we have extreme real yields, right? The 10-year yield minus the CPI is extreme. And usually when it's extreme, you're in some sort of risky macro situation that makes you worried and want to pay lower multiples. That's probably fair pushback, but I think that the companies are just so much better now than history

that you should pay a higher multiple for them today than most of the past. All right. Let's expand the conversation then. Let's bring in Rob Seach, a New Edge Wealth CEO, the co-founder as well. Brenda Vangelo, Sandridge Global Advisors, chief investment officer there. Both, of course, members of the Halftime Investment Committee. It's good to see everybody. Brenda, you first.

You've heard what Adam Parker has to say. Is he dead on or is he just playing crazy and being as optimistic as he sounds? I don't think he's crazy, but I will say I think we're in an extraordinary period where there is just a lot of conflicting data. Even the real economic data is conflicting with itself right now on many levels. But I think, you know, if we look to corporate earnings, to Adam's point, you know, corporate earnings are hanging in there and they appear as though they're still going to grow this year. And that's a really important element here. But I think, you know, that we still need to get through a lot, especially later this month when the Fed's balance sheet really does start rolling off, starting on June 15th.

And then I think as if the market really does start to recover, that's just going to loosen financial conditions. And that's not what the Fed wants. So I think the Fed needs to talk tough right now. The last thing they want to do is to have long-term inflation expectations move up significantly because that just creates even more of a problem for them to deal with. So I think things are fundamentally still okay. But I think we're in for a choppy period here. And I think if we do see CPI starting to come down, which I think it should, just based on a lot of the comments from goods related industries suggesting there's discounting

going on more recently, I think that will be a good reassurance for the market that perhaps the Fed doesn't need to be more aggressive. But I think we're just in for some uncertain times here and probably more choppiness until we get a little bit more clarity. Speaking about talking tough, Rob Steech and the Fed certainly doing that. Other people are talking downright gloomy in terms of Jamie Dimon and his hurricane scenario. Tom Lee comes on today on the halftime show, says we could still go to 5100 this year. Another thousand points on the on the S&P 500. Parker sounds pretty, pretty confident. I'm not saying he thinks we can get there as well, but he's not gloom and doom. What are you?

You know, here's the challenge, Scott. The stronger the economic data and the markets are, the more it emboldens the Fed to tighten policy. And, you know, we had been expecting a relief rally. We got it. In our view, it looks like it's over today. And we expect markets to be stuck in this choppy, volatile kind of framework because it lacks Fed support. And ultimately, we think earnings estimates have to come in. In addition, the probabilities of a recession have gone up, we think, quite a bit. And yet markets are still priced at 18 times earnings. So as we see the consumer fraying and the Fed needing to see things get worse before they can get dovish and make them better,

we're just going to use relief rallies to rebalance portfolios, sell out of low-quality, expensive, low-conviction stocks, and rotate into high-quality positioning. I think when you hear guys like Jamie Dimon or even Elon Musk today talk about what are challenges to their businesses, I think investors need to think the same way within their portfolios, reducing beta, upgrading quality on rallies. And that's just intelligent. That's running the ball in a very difficult environment to play offense. So those are the things we're doing. Adam Parker, I mean, rally over,

earnings need to come down, Fed tough. Were you shaking your head no way as Rob was saying all that? No, I think Rob is right that high quality stocks beat junk or low quality stocks by about 2% per annum. They outperform by more in risk off tape. So I of course don't want to own low quality expensive stocks. I think that part makes a lot of sense. And there's a number of sectors and industries where things have gotten kind of stretched and expensive. I think that's right. I don't know if I totally agree on the earnings part, meaning, yeah, I think earnings estimates have to come down, but I don't really think that matters. I think what matters is, do I believe earnings will be

higher next year than this year? So over the last year, since 1978, as I mentioned, when forward earnings data started, on average, the analysts think earnings growth will be 14% at the beginning of each year, and the actual growth's been seven. So the downward revisions haven't mattered. What's mattered is my belief that earnings can still grow. So I get there's uncertainty. But as long as people think that the numbers are going to be higher, then the whole system earns more money, then I'm not sure you have to get too negative on equities if you think earnings will grow.

But you say it doesn't matter if earnings come down. You can only say that because you believe that that stocks deserve a higher multiple. If if earnings come down and the multiple isn't justified to where you think it is, then of course the stock market goes down. Right. But I'm saying if everyone if the last 40 years people start off thinking it's 14, the actual seven and you're talking about downward revisions coming at the same time, the market's massive in the last 40 years. And obviously the market appreciates more often than not as earnings revisions come down. You just have to believe that it's going to grow when they grow the year after that. So it's about a continued belief in

earnings growth, not so much whether numbers come down from the 9% expectations this year to 5 or 6. All right. So, Brenda, I mean, they're sticking your toe in the market. They're putting your whole foot in the water. Tesla, you bought for the first time ever this week. Why this week that stock? We did. Well, Tesla's down significantly from its high. It's a top five position in the S&P 500, and that is what our individual stock portfolio is benchmarked against. So we actually are still underweight the position relative to our benchmark, but we did decide to close some of that negative bet we were making, particularly just given the company's strength within the EV market, the financial condition of the company, which has improved markedly over the last few years. So, yes, valuation is still hard to get our arms around,

but we do feel that this is a stock and a company that's likely to continue to grow just based on overall trends within their industry. And so we decided to close that bet a little bit this week by adding a position. Interesting. So, I mean, it's like two ends of the spectrum, Rob. You've got the Teslas of the world and, you know, whether you want to put that with higher valuation and higher growth stocks, controversial stocks. And then you've got the other side of the equation with energy, which everybody seems to love, which suddenly feels like it's the most crowded trade since everybody went into the FANG stocks a couple years ago for the first time or a few years ago as a group. The point being, how can that remain that way for that long, for much longer?

Is it poised to roll over at some point because Adam loves energy, everybody loves energy, Seachat loves energy. I don't think it's going to roll over, Scott, because we haven't solved the kind of infrastructure problem for energy in this country. And we have a war raging on in the Ukraine. And when you have that type of environment, I think energy prices are going to remain well supported. I would also say to the point that I think Tom Lee made and to the point that Adam's making is there's value being created in other parts of the market, though, too. I think you want to own energy at one end. You want to own some financials as well. We like health care, but we're starting to see some value in technology. And I use Salesforce as an example of some of the value we're seeing. Price went from 12 times sales all the way down to five times sales.

There are stocks that become incredibly interesting, even stocks that should be really exposed to higher interest rates because you're discounting that future growth at a higher interest rate. And so it depends on the price. It doesn't just depend on the absolute growth. It's what you're paying for that growth. And when you look at some of these SaaS companies, I think there's opportunity there. There's opportunity in some of the chip companies as well. And so this is a stock picker's market. I don't think you want to make sector bets too much. I think you want to buy what looks incredibly attractive and pay the right price for it and make sure that you have those secular tailwinds of their business models that are pushing those stocks forward so they can achieve that growth that Adam was talking about. Now, you guys sound like you're in agreement on at least that perspective. And by the way, I love when people are watching the show and then they tweet

responses to some of the things that you guys say, like Mark Newton from Fundstrat, who says markets certainly have not given any indication that this rally is over, quote unquote. Prices have traded range bound literally all week. And if my recollection is correct, the last six nonfarm payroll reports have produced a market declines afterwards. No surprise and no change. See, you want to respond to that? Somebody somebody might want to tell Mark Newton that I'm a paying client of Fundstrat not to challenge me on on Twitter. No, I like that he did that. What's your response to that?

I mean, you can pay. You want to pay. Do you think the rally's over? Do you think the rally's over, Adam Parker? I don't. I don't. But I as I said, I'm not a technical guy. My clients mostly invest for medium to long-term investment. But we're happy to engage. Trivary Research is happy to sell you our content. So we'll talk about that offline. I would say on the energy point that you asked about, though, Scott, I don't really agree with you that it's crowded. Maybe people are coming on TV and mentioning it. But at 4% and change of the S&P 500, the whole entire sector. It's gone from 1 to 5.

It's gone from 1 to 5. What do you mean it's not crowded? Everybody's in energy, and everybody loves it. Everybody's in it. It's cheaper than the market. It has upward visions, positive momentum, and there's a lot of doubters. As you know, over a year, talking about it as our top sector, the resistance level was really high at the beginning. I think there's still a lot of people who think the terminal value of oil is zero and they're not involved.

A lot of hedge funds don't even have energy analysts. A lot of long-wave firms have exited because of ESG reasons. So maybe people are saying that's the case, but I don't see gross and net exposures super high from clients that I talk to. So I think there's a disconnect between the words and the reality. Okay. We'll leave it there for now. Brenda, you're going to be back a little bit later. We'll look forward to seeing you again. Rob Seachin, thanks to you, Adam Parker, AP. Good weekend to you guys. We'll see you again. Have a good weekend, guys. All right. Everybody do the same, please. Let's get to our Twitter question of the day. We want to know which Fang name is most attractive right now. Is it Meta, Amazon, Netflix, or Google? You can

head to at CNBC overtime on Twitter, place your vote and we will bring you those results at the end of the show. Up next, trading the cloud space. One Wall Street firm getting bullish on a key cloud name, but that positivity does not seem to be helping the sector. We're going to drill down on that call in our most valuable pick. It is back in two minutes on overtime. All right, we're back at O.T. Raymond James initiating that stock right there. Snowflake outperformed today. It comes after the cloud stock has seen some big time losses this year. Mike Santoli is here with more. I mean, it was one of those poster stocks, right? When it went public. Oh, my gosh, it's like 100 plus times sales. What are we doing here? It's pulled back a lot. Now what? Well, actually,

when it came public, Scott, right in mid-September 2020, it seemed to just catch this huge wave of excitement for cloud and probably really fueled it. Remember, on day one, it priced above the range of the IPO, then doubled on the first day. This chart starts the next day. So essentially, it's if you bought it at the close after the IPO, this is your experience. So you see it's down 48 percent, of course, went up a little bit from there to its peak. Now, what I find interesting is it's more or less tracked the cadence of the overall cloud sector. That's what that ETF is. But also FinTechech and and bets, which is the sports betting ETF. So you can bundle all these things together and do an arc invest chart.

And that's basically what it looks like to my point being the excitement for cloud was very similar to that for this other sort of total addressable market. Boom time, open ended growth type sectors. And now arguably, you, we've rung a lot of the excess out of it. They've all hooked a little bit higher, but that's happened before, as you can see. So we've had some head fakes. Interesting to see if they can find some kind of a base soon. All right, well, our next guest thinks they can.

Mike, I'll see you back for your last word coming up in a little bit. The analyst who made that call is joining us right now, Simon Leopold, Raymond James, data infrastructure analyst. It's good to have you on the show for ourold, Raymond James, data infrastructure analyst. It's good to have you on the show for our MVP, which we're bringing back again. 184 is the price target. How's it going to get there? Yeah, so I'm not necessarily calling the bottom today,

but certainly feel like we're a lot closer to a bottom for a stock like this. And so when growth stocks come back into favor, which they inevitably will, we're arguing that you want to find quality names that are share gainers with good, solid, improving fundamentals. And so I wanted to pick something that had the opportunity to be such a play. And I think it's snowflake. I mean, there is going to be more scrutiny around growth stocks in general, even when they do come back into favor, especially around valuations. Are you you're making the case that this will differentiate itself? So even if there is more scrutiny around the names, the cream rises to the top and this happens to be in that boat?

Absolutely. And I think the key point I'd emphasize, right, is you can't pro forma cash. You can't fake cash. You can pro forma earnings. You can exclude things from what you count. But cash is real and substantive. And Snowflake started generating cash last year. We have them generating roughly 750 million in the next fiscal year, this fiscal year, well over 300 million and approaching probably two billion in free cash flow in their long term model. Basically, that's fiscal 29. But just looking at the near term, they are generating cash right now. Yeah, I can't even look ahead to fiscal 29. You're looking calendar year 25 that they can do a billion dollars in free cash flow and that they can do a sales growth of 50% of 50% CAGR over the next three years?

Yes. And we're coming off of 100% growth last year. So this is in the phase of maturing from triple digit growth to double digit growth. But there's absolutely nothing to be embarrassed about growing 50, 60%. This is a company that's playing in a massive market that is public cloud and their market share relative to the giants is two percent. So there is a ton of runway. What about recession, enterprise spend, slowdown, things like that, which are obvious risks to the story? Yes, absolutely obvious risks. Now, one question that's totally fair to ask here, but this company has never been tested through a recession. They began as an entity in 2012.

They came out of stealth mode in 2014. So we don't have the 2008, 2009 period to reflect on. What I would say is management has acknowledged the risk because their business model is consumption-based. So if their customers, enterprises, have slowing businesses, they may consume less. So that's a risk. Let me give you an alternative scenario for duration. Companies like Snowflake in the public cloud are helping their customers be more efficient to exploit data, data, the lifeblood of being a more efficient enterprise, selling more, understanding your customers, understanding your supply chain better. So to a degree, a tough market, a tough environment

may actually encourage customers to use Snowflake more. So I could see either scenario playing out. I certainly think we need to be attuned to the potential that a recession could challenge their business. But the long run narrative is intact. Yeah, well, Slootman, the CEO, I mean, he's capped into a bunch of ships through turbulent waters before. So we'll see. Certainly has the experience that you would look for. I appreciate your time, Simon. Thanks so much. That's Simon Leopold joining us there from Raymond James. Still ahead, next stop, Splitsville, Amazon stock split going into effect on Monday. Is now the right time to get in on that name? We will crunch the numbers and break down what company could be next. We'll do that in two minutes on Overtime.

We're back in Overtime. It's time for a CNBC News Update with Shepard Smith. Hey, Shep. Hi, Scott. From the news on CNBC, here's what's happening. Former President Trump's trade advisor, Peter Navarro, in a D.C. courtroom this afternoon. He was indicted by a federal grand jury. Authorities took Navarro into custody this morning. He's charged with contempt of Congress for defying the subpoena issued by the committee investigating the January 6th insurrection. Tropical storm warnings across South Florida right now. A live look at the coast of Hollywood, just south of Fort Lauderdale. The rain's coming. 30 to 40 mile an hour wind gusts,

along with heavy sustained rain. That's the forecast through tomorrow. The National Hurricane Center reports it'll likely become Tropical Storm Alex as it makes landfall. And New York State now in the process of banning anyone under the age of 21 from buying or owning a semi-automatic rifle. That ban part of a series of gun control bills that the governor Kathy Hochul introduced earlier this week. They passed the state legislature just yesterday. Now they're headed back to the governor's desk for her signature. Tonight, Mike Santoli on this week's jobs numbers, Meg Terrell on the next generation of cancer drugs, and the Elvis chapels in Vegas have a problem. On the news, right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you.

All right, good stuff, Shep. Thank you. That's Shepard Smith. Amazon's 20 for 1 stock split goes into effect on Monday. Many now wondering who might be next to do the same. Our Seema Modi is as well and has taken a look. Hi, Seema. Hey, Scott.

When Amazon first announced its stock split in March, it said it would give employees more flexibility and make the share price more accessible. Its 20 for one stock split will take its share price from around $2,447 to roughly $122 a share on Monday, leaving Alphabet as the only FANG stock trading above $1,000. But not for long, its own 20 for one stock split is set for this Julyuly next in line tesla and gamestop it follows apple's four to one split about two years ago the highest price stocks on the s&p 500 right now booking holdings at 22 230 a share autozone chipotle lamb research among others while stock splits have been unpopular over the past few years, research from B of A shows companies that split on average outperformed the S&P 500 by 16 percent one year later. Scott.

Seema Modi, thank you very much for that. Now to the playbook on Amazon split, along with a look at where stocks could be heading next. We welcome back Kevin Simpson. He's Capital Wealth Planning founder and managing partner. It's a portfolio manager. Good to see you. Welcome back. Thanks for having me, Scott. So this I get the fact that it's you know, you're probably going to say, well, it doesn't increase shareholder value by doing a split, but you do open it up to a different class or a larger class of investors, do you not?

Absolutely. So let's confess that there's no additional value to shareholders. It just doesn't change the market cap, but it does introduce it to retail investors. And I'm a sucker for a good old-fashioned stock split. I mean, I love it. When I was a kid, Scott, I was fascinated by setting goals and savings. And my grandmother would take me to the bank with our little passbook savings and put in every deposit and interest, which was great because it was free money, but you'd set a goal, $20, $30, $40. Then when I went to college, I tried to do that with direct investing, having a dividend reinvestment plan, send in 15, 20, $30 for the goal of trying to access a round lot of something. And I think the same thing holds true when you see a 20 for one stock split with Amazon or Alphabet, it makes it accessible to shareholders for sure, but it also introduces people to the

value of savings and investing as opposed to trading. Not only that, I mean, for somebody like you who makes options a considerable part of your strategy, it kind of changes the game, too, in terms of accessibility for those kinds of trades. Institutionally wise, there's no question. I mean, for an option contract, we generally need 100 share round lot. So at a quarter of a million dollars for 100 shares of Amazon, it cut a lot of people out of the option market, whether it was to write a covered call or to introduce a protective put. So the beauty of this 20 for one stock split says that now 100 share position is going to be a $12,000 allocation. That's a heck of a lot more accessible than a quarter of a million dollars on one hundred thousand. Excuse me, on one hundred share round lot. Yeah. Let's talk markets before I got to let you go.

And you have some new new new moves I want to get to, too. But first off, the rally. I mean, I've had somebody today on this program suggest that it probably ended today. Others who say no way it can keep going. What about you? Well, I'm kind of halfway between Rob and Adam. I don't know that it ended and I hope Adam's right about stock picking. But you know, it's a bottoming process. The market last week just felt like it wanted to go higher. But it's really, really hard to do that when you have Fed governors coming out who are as hawkish as they can be. And they should be. They have to be. That's their job at this point in the game. But until we start seeing numbers, the jobs number was great today, but it doesn't have quite the same impact as the inflation numbers.

So we're going to be in a range bound choppy market into the fall. And it all is all predicated on inflation. You know, are we peaking? Peaking is great. How do we get two to three percent? That's a really long, long runway. So we're going to see a volatile market. If we're in a bottoming process, we're closer to the bottom than the top. And that's a good thing. You flagged a couple of things to me right before we came on today. New moves of yours, I suppose, within the last few hours. Chevron and Apple, what did you do there? So we had covered calls on both positions, Scott, that would have expired today. Apple would have expired worthless at 147. But with the sell-off, we rode it up to a 150 call. So we bought it back for a few pennies,

brought in $2, extended that trade. We didn't want to lose the position. It wasn't going to get called away. Chevron, we had a 175 call. That would have been called. We didn't generally want to lose the entire position. We've been trimming it, but we still want to own it. So we rolled that call up to a 182.5. It's pretty much an even roll. But now we can participate in both of those stocks for another two weeks, kind of see how they trade here. I think energy is getting a little frothy, not ready to give up on the position. But I don't mind writing at and near the money covered calls at this point. I know our viewers love to get the sort of the inside plays on these or how you actually do these trades. You added to JP Morgan within the last week, too,

and you wrote covered calls against McDonald's. Yeah, we sold half the Marathon Petroleum, which was kind of the same theme of taking some profits in Chevron. It's really hard to buy low and sell high and sell when others are buying. But we took that money and we went into JP Morgan. JP Morgan has been sold off horribly. You had a great Twitter poll a couple of weeks ago saying, can you get to 150 by the end of the year? The stock made a big run

over the past two weeks. I mean, it's a very, very solid dividend, strong dividend growth. We really like the name, but it's active management. It's not passive indexing. We're going to sell things that are up. We're going to rotate into things that are down. And we're going to ride through this in a very, very sound and intelligent way. McDonald's is a stock that's getting a little bit pricey. It moved like 10 percent in two weeks. We love the name. We've owned it forever. But multiples on McDonald's are getting a little bit higher, higher than they are in Apple. So we sold a covered call there. If we rotate out of the position, it's OK. We love the stock. We don't love the price. Nimble trader, loyal viewer.

We like that, too. We'll see you soon. Have a good weekend. Thanks, Scott. All right. That's Kevin Simpson joining us. Coming up, betting on a beaten down retailer. Why one particular stock could be a big, bright spot for that sector. It's in our two minute drill. First, though, we are wrapping up a very busy week on Wall Street. Who else? There she is.

Christina Partsenevalos is standing by with a rapid recap. What's on tap for us today? Well, we've got the Biden administration who wants to cut costs for one type of energy project, and it's helping boost some big names. And the chip sector taking another hit this week. I'll explain why right after this short break. All right, stocks finishing out the week on a down note. You see the Dow is down 1%.

NASDAQ got crushed today by 2.5%, so it was a rough day for tech. Christina Partsinevolo is here with our rapid recap. Christina. Well, unfortunately, I can't repeat what we saw last Friday, but health care this week is the worst-performing S&P sector, down about 3% or over 3%. Illumina, Regeneron, Moderna, all of those stocks at least 7% lower on the week. There's no major catalyst, but this is just part of the prolonged weakness we've been seeing in biotech.

Real estate, financials also underperforming this week. Energy, the only sector in the green. This was XLE's third straight positive week, of course, as crude prices continue to soar. Got to talk about chip makers, though. They're tumbling this week over concerns that consumer demand is softening for electronics and in turn for chips. Plus, supply chain woes are starting to ease as China ramps back up. So the SMH semiconductors ETF closed 1.6 percent lower on the week. And I want to stick with tech for a second. While other software companies trim their outlook, Okta increased its guidance and the company had its best week since October 2019, but still 56% lower

this year. Okta helped pull up the internet ETF FDN, which is on pace for its second straight week of gains despite losses today. And lastly, solar ETF 10 had a pretty good week as well, closing over 3% higher. The Biden administration announcing this week they plan to cut costs for wind and solar energy products, giving those stocks a boost. Scott, have a great weekend. You do the same, Christina Parts and Novelos. As always. Next, Apple falling today on some growth concerns. So what is at stake for that stock? And could next week's Worldwide Developers Conference turn things around? We debate it in today's halftime overtime when we come back.

We've been watching shares of Apple after one of the street's top analysts, Morgan Stanley's Katie Huberty, published a note on Apple today warning about slowing growth in the App Store. Here's what Halftime Committee member Jenny Harrington had to say about the company's valuation. I'll tell you where we would start to look at Apple. We would start to look at Apple for our growth portfolio if it was trading at about $100 a share, because at about $100 a share, it's in its historical multiple range of 10 to 15 times. And that range accounts for the fact that growth isn't going to be what people like to pretend it will be. Growth, to Ben's point earlier, is around 7 percent. Might be a little plus or minus, but we need to adjust all of our expectations for a more reasonable, rational, multiple range and what they really are, which is mature, growing at not double digit, not

stratospheric levels. All right. That's Jenny Harrington. Back with us now is Brenda Vangelo from Sandhill Global Advisors. A hundred bucks a share. I guess Jenny's not going to be buying it, right? I don't think Apple is going to get down to a hundred dollars a share unless we really see something horrible happen with the economy that just brings multiples down across the board. I will say it's not surprising to hear Jenny say

that she's as disciplined as she is. She's a much more of a value-oriented investor. But I will say, you know, when I think about Apple and ask myself, does it deserve a premium to the market multiple? I think it still does. If we look at a lot of different factors, A, you know, the company has a $90 billion stock buyback in place. The company has an incredibly loyal customer base that continues to buy products and refreshed products throughout the years. And the company has an ironclad balance sheet. And so I think for all of those reasons, the stock does deserve a higher than market multiple. Now, when I ask, could the multiple come down from current levels? Absolutely. And it would

still be trading at a premium to the market. But I just think that it's likely not to get back down to 15 times unless we really see some significant changes with the overall economy and the stock market in general. But I'll also add that when we think about tech stocks in general, you know, Apple falls into this category of companies that are real beneficiaries of the pandemic environment that we're in. So, yes, it's likely that multiple years of business were pulled forward into the period of about two years. So I think across the board, we're going to have to be asking ourselves how we're thinking about valuing a lot of these companies when growth slows here for the next year or two. It doesn't mean the growth story is over, just that it's slowing for a period of time.

Do you think that big tech is vulnerable here? And what do you specifically take from the Huberty note who suggests today, I mean, she's one of the most closely followed analysts on this name, that the services business, which everybody has their hopes pinned on, because that's the beacon of high growth for the company, is going to be hit because of this app store slowdown. Yeah, well, I think, again, we have to go back to this notion of the fact that this, Apple included, was a huge beneficiary of the pandemic environment where usage was up.

You know, people were purchasing more items from Apple, using more of their services, using the App Store more often. And perhaps that's going to be curtailed a little bit as people move on to other things and other activities that they haven't been able to participate in over the last couple of years. So I don't think that this means it's a slowdown forever. But I think it means that we could get a year over year slowdown, not only for Apple, but for a lot of companies that were beneficiaries of the pandemic, whether it's in technology or, you know, goods related sectors. I think they are all vulnerable in that sense. But I don't think it means that that Apple still can't command a premium to the overall market, just given the quality of the company, the loyalty of the customer base and its balance sheet. We'll leave it there. Brenda Vangelo, thank you so much. Have a good weekend. I'll see you soon. Thank you. Up next, our two minute drill. The top market themes one money manager is

watching right now as we head into a fresh trading week. We're right back in overtime. All right, it's time now for our two minute drill. Joining us now, Joanne Feeney, partner and portfolio manager at Advisors Capital Management. It's good to see you. Let's send some people into the weekend with some good stock ideas. Up first, TJX. Why do you like it? Like TJX here, Scott, because this is almost prime time for TJX.

They do well when other retailers are finding it difficult to sell their stuff. This feeds into TJ Maxx's and Marshall's inventory. They're able to get these goods at a cut rate price and turn them around to sell them. And there's another reason. If consumers are suffering tighter budgets, which they likely are because of the gas and food prices and other sources of inflation, they're going to try to save some money. And so they're going to step down and try to shop at a place like Marshall's instead. So they suffered from a lack of inventories during the shortages of the pandemic and from the China lockdowns. Now that's starting to ease and they're getting more supply in the stores.

Yeah, stocks down a little more than 18 percent year to date. I mean, it's still not totally immune from recession fears and slowdown fears, right? No, that's correct. And I think, again, you're going to see them do relatively well compared to the other retailers. In fact, they reported very good numbers and they had higher margins, whereas other retailers are really suffering from consumers shifting more towards necessities. So we're starting to see the turn in favor of TJ Maxx. Sienna, C-I-E-N, another name, and it's gotten beaten up pretty good. It's down 37% year to date. Why would you buy it here? Well, you know, Scott, I like to talk about bargains.

And Sienna is one of those bargains. They're a cloud computer component supplier. They have a deep moat around their technology. They're gaining share. And in fact, when they reported recently this week, they remarked that their orders are running 50% above their sales, their new orders. And their backlog has doubled in the last five quarters. Their problem is getting their own supply to build the stuff that they turn around and sell to the cloud

providers and telco providers. So demand is very strong. The problems they're facing are going to ease over time. We're seeing more chips being produced as new factories open up here in the second half of the year. China lockdowns are easing. So some of those constraints that have really held back their revenue and profits look like they're going to ease. And in the meantime, they have just very strong demand in a sector that looks like it's going to grow for multiple years and would likely grow even in the face of a generalized recession. Yeah. Stock that's done well in a sector that is popular, as you may have heard earlier in our program today, health care. And you like AbbVie, which is a popular name within that space too. You know, Scott, a lot of our clients are in it for the long term. Some of them are growth investors, but we have other clients who like more income. And AbbVie provides a nice combination

of a company that has two things going for it. One is it sells these aesthetics like Botox. And with the reopening, people are going back and getting their Botox treatments. On the other hand, they also sell conventional pharmaceuticals, and they have leadership positions in immunology and oncology. Their pipeline is a very extensive one, and that pipeline is growing very strongly. The stock has taken a hit over the years because of one of their franchises, Humira, which is facing new competition from a biosimilar. That is now built into the stock, the reduction in the sales of Humira.

And in the meantime, the rest of the pipeline is growing at 25 to 50 percent and should over time overwhelm the losses that they're going to see in Humira. And moreover, our clients, some of which like income to help them ride out the volatility in stock prices, would find this one particularly attractive because it pays a 3.8 percent dividend yield. OK, good stuff. Have a great weekend. We'll see you soon. That's Joe Anfini joining us in our two-minute drill. Up next, you know who, Santoli with his last word. Let's get the results

of our Twitter question. We asked, which FANG stock is most attractive right now? 18% of you said Meta, 22.8, we'll call it 23, said Amazon, 4.6 said Netflix.

And the winner is Google at nearly 55%. Let's get to Mike Santoli now for his last word. What is it today? Well, I guess, Scott, I'm going to call it survival. I mean, we kind of survived this week. I don't know that the market thrived necessarily, but just to dial it back a little bit, yeah, down 1.2% in the S&P 500. The prior week were up six and a half percent, came into the week nine percent up off

the lows. And it didn't seem like the market wanted to give back last Friday's rally. So, you know, very short term tactically, that's fine. The other thing is, I think the data this week made it seem a little bit silly. There was a mini recession panic a few weeks ago. But of course, that brings up the obvious other counter fear, which is, OK, the Fed sees clearance to do more. We are where we were. I think markets are inherently impatient. And it seems like it's going to be months before we have, you know, any kind of ultimate resolution. And I think that's why the chop. It's interesting. Kramer tweeted just a moment or two ago. I may be the only person besides Jay Powell who believes we are not going to have a recession. It sort of goes to your point, right? It felt like we were all of a sudden we were like going to knock on the door of a recession.

And now maybe we can take a couple steps back and clear our heads for a second. Just look at what's in front of us here. But but interestingly, I mean, yes, absolutely. If you're looking at the data, it's very, very hard to make the case for current or imminent recession. But what does that mean? It means the Fed says we're operating from a position of strength. Well, it shows that they are. What does that mean? It means, you know, 150 basis points in the next three months and see if the markets and the economy can handle that from the Fed.

Well, I mean, it's kind of told us, right? It's done a very good job telegraphing. We'll have to see if the environment remains as such where they don't have to do more than they've told us they might. So we will see how it all unfolds. We'll see you on Shep tonight. Mike, have a good weekend. That's Mike Santoli joining us with his last word. Does it for me? Have a great weekend. Fast money begins right now.