Closing Bell - Closing Bell Overtime: Fate of the Rally 05/31/22

Episode Date: May 31, 2022

How long can the rally keep going? Eric Johnston from Cantor Fitzgerald explains why the backdrop for equities is “very unfavorable.” Plus, Dan Ives from Wedbush Securities gives his instant reaction and analysis to Salesforce’s earnings results. And, Michael Santoli “can’t hardly wait” for his “Last Word.”

Welcome, everybody, to Overtime. I'm Scott Wapner. You just heard the bells. We are just getting started, and we have another busy hour ahead. Salesforce earnings, they are imminent. We'll have the numbers, the instant stock reaction the moment that report hits. No doubt a good read on where the much-maligned growth trade currently stands. We do begin, though, with our talk of the tape, the fate of this rally, which feels anything but a sure thing. How long can it keep going? Let's ask Eric Johnston of Cantor Fitzgerald. He is here with me at Post 9. It's good to see you again. Thanks for having me. Sat in that very chair. You made a big call on stocks. You said they're going to go up eight

to 10 percent all in the month of May. Not three days later. Sure. You got cold feet and you reversed it only for stocks to take off and go up about 7% to this point. Now we're coming obviously to the end of May. Now, why didn't you just stick to your conviction? So I was about two weeks too early, which in two weeks, this market can be problematic. And after two to three weeks, I realized that based on some of the information we were getting, including Target and other information that was out there, that the upside to a potential bounce was not as great as I previously thought. And if you don't have the reward there, especially with the backdrop of having a very negative overall view, I decided that, you know, the risk-reward was not attractive enough to be long.

And we have gotten the bounce. It came off of, you know, 3,800. And it's happening for all the reasons that we thought would happen, which was that institutional positioning was extremely stretched. Sentiment was very low. CTAs were short. And the inflation outlook is, in fact, getting better. And so all those things did lead to a bounce. But it came off of $3,800 as opposed to $ forty one hundred when I was here, you know, one month ago. You pulled a 180. I mean, in terms of sentiment to you, you know, you came on and reversed the call and it was like this market's messed up. So I am totally changing my view. And it sounds to me like you've gotten so much more negative in such a short period of time than you were when we last spoke. Sure. So the backdrop right now for for equities is very unfavorable. And I think that second quarter earnings season is going to be a big moment for this market. So earnings are going

to come in July, potential for negative pronouncements towards the end of June. But if you look at the backdrop for earnings, costs for companies are rising, inventories are rising, and sales real time are starting to slow. And so one of the things that's gone on is that with the supply chain getting better, that helps inflation, but that also actually increases inventory, makes goods more readily available, and it's hard to get margins, hard to increase pricing. When there's scarcity value, when you can't buy a car, you're willing to pay top dollar. And so the point is that for this earnings season, you have a number of dynamics. The consumer is slowing while expenses are still remaining high for companies. And then the other thing that's going on is that enterprise spending, I do expect to start to slow.

You've seen some job cut announcement, job freeze announcements from corporations. That's not happening in isolation, where they're just going to hold down costs around hiring. They're clearly going to be reducing spending in other areas of their business. And so it's going to have a cascading effect throughout the economy. And when earnings turn lower, that's when markets really get hit. We saw that in 2002 or 2001. We saw that in 2008, that once estimates turn lower, that's when stock prices can really accelerate to the downside.

You just think that estimates are going to turn lower faster than you thought. Yes, that is accurate. And by the way, Salesforce is imminent. As I told all of you, we're waiting on the numbers. As Eric is talking about enterprise spend, this company is going to give you a real-world view right here and now on what they're seeing from an enterprise spending standpoint. Let's just take the rally for what it is as we talk about it as still continuing,

even though we were obviously down today to end the month of May. I mean, even those who are the most bearish are saying, yeah, stocks can go up another 5%. Animal spirits can take over and lead the market higher. Does that seem reasonable to you, given even how negative you sound? Sure, it does. I mean, is it possible that we go to, you know, 4,300? So another, you know, call it 3, 4% from here, that's possible. But in order to own equities, you have to feel like the reward is attractive enough. And if you go to S&P 4,300 as an example, that's 19 times earnings, which where the 10-year yield is right now is way too expensive. One of the things that I hear people talk about is that the earnings multiple for the S&P

has contracted from 22 times to 17.5 times, which is true, but interest rates have gone, the 10-year has gone from 50 bps to 2.85%. The last time it was at 2.85% was 2018. The S&P multiple went as low as 14 times earnings, which would be, in this case, would be 3,200 on the S&P. So multiples really, from our perspective, have not come down. And that there is, as long as the 10-year is anywhere around these levels, there's certainly downside to multiples. And we think that will happen. Where are you going to go? Cash? I mean, what's the best play right

now? So cash, but also I think the long end of the curve. I do think the inflation outlook is getting better. And I do think that growth is falling fairly quickly. And so I think being long, the long end of the curve is actually attractive. I know the 10-year yield backed up today. Okay, because people are talking about the short end being like one of the most attractive places to be. Sure. So I think you're going to get, I would agree with that, but I think you're. Like the two-year.

Yeah, sure. So I think that's accurate. Meaning I think that Fed hike expectations are at the peak. And this whole idea that they'll go 50-50 and then pause, I think, is certainly very reasonable or slow them down to 25 bps. But I think we are at peak sort of hawkishness and the market's view around where rates are going to go. So I think owning bonds at the long end, I think, is more attractive, but certainly the short end is also going to become an attractive play. What happens if inflation pulls a rabbit out of its hat?

And what happens if it cooperates, if you want to use that word, more than the Fed thought and maybe more than all of us projected that it might? How does that impact the equation of how you think about it? So I think the issue is that the balance sheet runoff is going to continue. So might they pause hikes or move to 25 bps towards the end of the year? Because inflation is getting better, that's absolutely possible, and I would call it probably likely. But the $1 trillion of balance sheet shrinkage that's going to go on, that is going to continue because the balance sheet is simply too large for the current economy and too large relative to where we've,

even if inflation comes in, relative to where inflation is. I'm just looking at my computer. I'm not ignoring you. I'm listening to everything that you say. But I'm looking at Salesforce, which to me looks like a top and bottom beat. Our Frank Holland is on the case. He's going to pop on. Don't go anywhere because Frank's going to be here any moment to give you the exact details.

You can see the stock is higher right now in the OT by about 3%. But it's the particulars that matter the most. Where's revenue? Where's revenue growth? They did $7 billion in revenue for the first time ever last quarter. Did they match that? Did they exceed it? Or is growth from a sales perspective starting to slow? You heard Eric talk about, and really the story is enterprise spending. Where does this portend? Enterprise spending is going to be Holland's ready. Frank, what do you got?

Thanks, guys. You said shares of Salesforce, they're up right now after a beat on the top line and a beat on the bottom line. EPS, $0.04 above estimates. Guidance, however, for Q2 and the full year, generally mixed. The Q2 guidance is a bit light when it comes to revenue. The full year guidance, slightly light when it comes to revenue, pretty much in line and slightly above when it comes to EPS. Another thing that we've been watching is current remaining performance obligation. That's work that Salesforce has done, expects to get paid for in the next 12 months. That came in line with street account estimates. Again, shares of Salesforce up after a beat on the top line and a beat on the bottom line,

but mixed guidance going forward for Q2 and for the full year. Back over to you. All right. All right. That's Frank Holland. I'm going to bring in our panel in just a second, but to you first. Now, you don't have to opine on these numbers specifically because that's not what you do. But nonetheless, the fact that he said guidance was mixed, and we have to get inside the quarter and understand it a lot more than we

do it at this moment. But it's not like the stock's falling out of bed. It's not like the guidance was horrific. And that, you know, maybe is something that's a positive to take thus far. Sure. So one thing I would say about CRM is that it's been a massive underperformer relative to software overall and relative to the market. It's trading at six times sales, which has been a floor for the stock over the last six or seven years. So I would focus in terms of the takeaways. I'd probably focus less on the stock price reaction and more on what they're actually saying for for guidance, just because the stock price has been discounting a fair amount of negativity.

No doubt about that. You handled that well, by the way. You actually looked at this. You looked at the particulars on this before you showed up today. You knew it was coming. All right, let's expand it now. Eugene Profit, he's the chairman, CEO, and CIO of Profit Investments. Erin Brown's here, too.

She has the current playbook from PIMCO for the market. So, Eugene, I'll go to you first. Just a reaction to Salesforce, because I know you're keeping your eye on it. Yeah, I mean, good news that they'd be on the top and bottom lines. I really wanted to dig into that guidance to see it. Maybe foreign exchange, the dollar firming up, that could impact their revenue somewhat. I think that it says IT spending is basically stable. I don't think you're going to get a big jump in the stock here now. I mean, you're at about 35, 36 times forward earnings with it growing at about 16%, so a peg of two. I'd like to see that peg get down to 1.75.

The good news is I don't think the stock is going to go down much, but I don't think it's going to run much higher either because in this environment, it's just a bus to growth stock. I like it. The valuation is good compared to last year, but I think that we need a little bit more macroeconomic stability for it to really take off again. Aaron Brown, you know, all things considered, earnings haven't really been that bad at all. I mean, you've had your cases where, you know, companies have been impacted by different things that are going on, but even the ones from, let's say, a comparable tech space,

if you want to call NVIDIA and Cisco just because they're technology companies, yes, they talk about Ukraine, and yes, they talk about the China lockdowns hurting, but X that, stories were pretty good. Yeah, earnings across the board were fairly hurting, but X that, stories were pretty good. Yeah, earnings across the board were fairly good as reported, but what was key was that guidance pretty much across every industry sector was pretty mixed on the outlook, and we saw pretty significant downgrades to certain sectors in respect to the sort of mixed outlook.

I think what's important, as Eric mentioned earlier, is that when you look at guidance, it's continued to be revised up year to date for the S&P 500 stocks. And so the market hasn't really digested the fact that harder and tougher margins are ahead. And that's going to, I think, start to bite as we move into the second and third quarters. What's important is you're starting to see a slowdown, as mentioned by management companies, into the latter part of the first quarter, and that continued early into the second quarter. And so I think that's what's going to be the key to watch,

is how margins get affected and how trends are going into the latter part of this year, which I don't think earnings estimates are discounting yet, albeit certain sectors of the market, from a a stock price perspective certainly have taken a hit. I mean, NASDAQ's down 25% year-to-date. Some of those stocks are already pricing in a recession, even though a slowdown is probably likely not exactly a recession. So from here, I think it's very much a renter's market, not a buyer's market. I'll throw it to Eric.

I mean, was tech declared dead too soon? I mean, the stocks got pummeled, and now they've had a nice comeback, and maybe all is not so bad after all. I think different answer for different parts of tech. I think for unprofitable tech, I think it's going to be a rough road ahead. We've seen that as soon as you have a move lower, credit markets can freeze up very quickly. And you have stocks out there like Carvana, which has been losing negative cash flow of a billion dollars a year, and they've been bailed out and able to raise equity and raise debt. Well, now times have changed, and there's a lot of companies out there that have been,

essentially have survived based on quantitative easing and excess liquidity in the market and essentially just free money everywhere. And now that that can turn very quickly, once those spigots turn off, that becomes a self-fulfilling prophecy, right, where things can really come unglued. And so, you know, for a company, again, to go down 80 percent, it doesn't mean it can't go down another 50% or 60% or further as these credit markets become sort of unglued and tend to freeze up. Hey, Erin, Eric mentioned earlier how the consumer is weakening, and you had some interesting recent trades, if you want to call them that, that we need to talk about. You closed your retail shorts, but you like big box retailers. Can you explain that to me?

Sure. So last time I was on here, I was talking about being short the retailers, you know, a lot, particularly the apparel retailers, which I held through earnings season. Those names got hit really hard. And so I took profits on those names. I now, though, given we've seen some, you know, pretty, pretty strong hits to some of the stock prices from the big box retailers and starting to rotate into some of the big box retailers, which I think, you know, already got out of the way, bad margins, you know, sort of expectations and guidance for the latter part of this year. And I think now with some of those stocks down 25 to 30%, they're starting to look

attractive again. On the other side of that, however, I think you're going to start to see real challenges from some of the consumer packaged goods companies, particularly the food companies, that aren't going to be able to continue to pass on higher prices. And the market is still expecting them to have really good earnings growth this year, 8% to 9%. And I think as you start to see consumers trade down into more private-label goods, the branded products are going to have a real challenge continuing to pass on pricing. So the trade is to be long the big box retailers, which are going to start to squeeze the consumer packaged goods companies

and be short the consumer packaged goods names on the other side of it. Okay. Eugene, technology and healthcare, are those your two favorite sectors right now? They are, but they're basically because I like conservative large cap growth like Microsoft, Apple, but I'm an Intel fan because I'm waiting two to three years for their infrastructure spent to take place and earnings to come back. In healthcare, I'm like Moderna. I'm a very kind of growth at a reasonable price type investor. So while I understand that the market has been selling off Moderna, selling off Intel and trying to time when growth is going to come back in a favor. To me, it's a very effective way to play a descending market to not fight the Fed while it's doing quantitative tightening, just like we didn't fight the Fed when it was doing

quantitative easing. And over a two to three year time period, it's sort of a way to make a portfolio a lot more conservative while understanding that the Fed might overshoot and increase interest rates a little bit too much, tighten a little bit too much. And I'm not concerned about the next two quarters. The needs of companies with stable earnings, lots of cash on the balance sheet,

and we'll be here in the next two to three years. All right. We're going to leave it there. Everybody, thank you so much. Eugene, Aaron, we'll talk to you again soon. Eric, thank you very much. Thank you. Coming and having this chat on the set with me today.

Let's get to our Twitter question of the day now. We want to know, now that summer has officially kicked off and travel is expected to be red hot, which reopening play will have the best return over the next six months? Is it airlines, cruises, entertainment, or other? You can head to at CNBC Overtime on Twitter. Cast your vote. We'll bring you the results as we always do.

At the end of the show, up next, star analyst Dan Ives is here with me at Post 9. We have his instant reaction to Salesforce's results. We're going to talk tech. Tesla, man, that stock's been on a run. We'll kick that around, too. We're back to talk tech. Tesla, man, that stock's been on a run. We'll kick that around, too. We're back in two minutes. We continue to watch shares of Salesforce in the overtime just out with its latest numbers look like a top and a bottom beat for that company. Stocks up about 6%.

We're still waiting on more color on the guidance, which our Frank Holland described to all of you as mixed. Dan Ives is here, the Wedbush Securities Managing Director, the star analyst there. Do you have any more color yourself on what Salesforce delivered? The market seems to like it thus far. It's a barometer for cloud spending. I mean, much better than feared. If anyone's going to see the first cracks, it's going to be Salesforce. Combine this with what we're seeing from cybersecurity names, Zscaler, Palo Alto.

The picture now is starting to become a little clearer. I think better than feared, and even on that guidance mix, Street was fearing a disaster, and this is going to be a big barometer for Microsoft and other cloud news. Is it better than feared for this name or a barometer of what? Because I could say, well, Cisco is having some issues with the macro, right? Ukraine and China lockdowns. It all depends, frankly, too, when your quarter ended, right?

If your quarter ended in March, you didn't see some of the same issues that a Cisco or an NVIDIA or a Salesforce are having to deal with, at least on those fronts, because their quarters ended in the end of April. Yeah, and that's why Salesforce being off-quarter, this was the big one everyone was waiting for, because you also want to see cloud spending. Cisco, especially big CapEx-type items, they've also had company-specific issues. But you combine this with what we're seeing on the cybersecurity names, you're starting to now emerge what I'd say is a much stronger tech picture than the street was anticipating. Fundamentals holding up in the storm. That's why Salesforce, this is the one I could tell you, Scott, everyone was waiting to

see this one. And I think this is going to be a big boost to the bulls, especially across tech. I'm looking at revenues for Salesforce at $7.41 billion. I said a few moments ago, when we were having a conversation, they did $7 billion for the first time last quarter. That looks to be a pretty good number. But you sound, I don't know, you sound incredibly bullish, though, for where the reality of the situation is, if you will. Are you too bullish? Look, and I think it's relative to where the stocks are. Salesforce at 200, then this is a disappointment stock trading off. It's relative, as we've talked about, where we are relative to tech stocks.

You know, I think what's baked in here in a lot of these names across tech, from Apple to across the supply chain, is that numbers come down 5%, 10%. So now this is an important one that we've talked about because you look at Salesforce, you look at Palo, you look at Zscaler, you're starting out, look in the video, you're starting to emerge. I'm not saying there's not some bruises and batter, you know, across the board in terms of cracks in the armor, but overall demand holding up, this is an important one. So you feel, you feel especially good about where tech is today?

I mean, because there obviously are a lot of investors out there who are saying, this is a bear market bounce. It's a fool's rally. It feels great while it's going on. And it's going to roll right over. And tech's going to lead the charge, or at least be one of the sectors that leads the charge down again. Why is that not going to happen? And the tech haters will continue to hate. And we understand the fear there. Why are they haters? Why do you call them haters? Why can't they just be like realists? I think to me, it just comes down to if fundamentals are really

starting to crack and we're really starting to see that downturn, that leg down, then they're right. I mean, our thesis and what we see even from our checks over the weekend is Apple, we look at demand, look at supply chain, holding up better than expected. Microsoft over the last week, cloud, holding up better. The call on Salesforce, better than feared. Cybersecurity, pockets of strength.

Not seeing Snap snap other areas, ad spending, some of the e-commerce players, they're going to continue to be the work from HomePost or Charles that continues to sell off. But you're starting to see a have and a have nots emerge in tech. This is an important one because the enterprise story, which is really key as we go into June and we go into the summer months in terms of earnings season. Okay. I'm punching up one of your faves right now, even though you cut the price target recently. Tesla. Okay.

Tesla closed down today, but nonetheless, the stock is up 23% since last Wednesday. What am I supposed to do with that? Well, I mean, Tesla is an example of we cut numbers. Streets cut numbers for deliveries. That's already baked in. Now you're starting to ultimately see Shanghai open up in terms of what we see in Giga. The buildup into the month of June, into second half. Streets basically are going to throw away 2Q numbers.

Look at second half. Look at 23. That's why I believe Tesla here, massive risk-reward positive because of what was already factored in in the bad news, as well as also the Twitter situation, which is still ongoing. That's not resolved. No doubt. But once he changed, once must change the financing optics in terms of the leverage piece, you started to basically now create no more what we'll call death spiral relative to the Twitter Tesla Siamese twin situation. So you combine some of the changes he made on the financing,

and we still say 50-50 in terms of the Twitter deal happening. But overall, relative to what we're seeing in the supply chain, relative to demand, when we look at Tesla, I think it's a buy here. What about, you cover Amazon too, don't you? Yeah, so Amazon. What about Amazon? Do the split this week. Of course, that's why the stock's up today. But that's one.

Amazon, I think they cleared the deck on numbers. Streets look at numbers, feel like they cleared the deck. And on the cloud story, on the re-rating, in terms of that cloud piece, that's why I believe that. You look at Google in terms of GCP. You look at Microsoft. Those are relative strengths in this market. And I think that's what I think a lot of investors that we talk to, that's what they're starting to focus on. How do I get the enterprise exposure in terms of what's holding up in a market that clearly has Category 5 storms? I mean, Amazon year-to-date is down, let's call it 28%.

You make the case harder for Amazon or Microsoft. Let's just pick that. I know you love Apple and you criticize everybody who doesn't, and there aren't that many people who don't. But Microsoft or Amazon today? Microsoft's a pure play. It's a pure play cloud, and I believe that's the stock that ultimately could be $325, $350 because of the cloud story and because right now everyone's fearing the growth stories in the rearview mirror

and the Dell is going to have to cut numbers. Now you get to see what Benioff is saying, what Palo Alto is saying. The picture is becoming clear in terms of tech, and I think ultimately it's very bullish from Microsoft. All right, good stuff. As always, I appreciate you being here. Thank you. All right, that's Dan Ives from Wedbush. Back to Frank Holland because HP is out as well.

Frank. Yeah, shares of HP kind of straddling between positive and negative territory after a solid beat on the top line and a beat on the bottom line as well. EPS three cents above estimates. The company also raised its full year and next quarter guidance. But as you can see, the stock kind of moving between positive and negative. I actually spoke to CEO Enrique Louris just a short time ago. He says the quarter was really driven by companies spending more on hybrid work, buying more PCs, notebooks, et cetera. Record sales for Q2 in that area. He did say there were some supply chain issues that he expects to continue throughout the rest of the year,

but the company thinks they can handle it, and that's why they raised guidance against shares of HP, straddling between positive and negative after a beat on the top line and the bottom line. Back over to you. Yeah, Street's trying to figure out what to do with it in OT. Frank, thank you. That's Frank Holland. On a programming note, don't miss the CEOs of Salesforce and HP on Mad Money Tonight with Jim. Don't miss that. Up next, weighing recession risks. Our next guest is breaking out her market playbook,

breaking down her forecast for the market as we head into the second half of the year. That is next. Overtime's right back. We're back in overtime. It's time for a CNBC News update with Shepard Smith. Hi, Shep. Hi, Scott. From the news on CNBC, here's what's happening. The House Judiciary Committee is planning for an emergency session on Thursday to mark up a collection of gun violence prevention bills. It's called the Protecting Our Kids Act.

A committee aides tells NBC News it will include raising the age to buy assault rifles from 18 to 21 and make it a federal crime to buy high-capacity magazines. At this point, it has little chance of passing in the Senate. Iran now has enough uranium to make a nuclear bomb. That from the International Atomic Energy Agency, the U.N. watchdog. The report shows Iran needs to make just one more step to enrich its uranium to 90 percent, a step it says Iranian scientists are capable of making. And former President Trump's advisor, Peter Navarro, tells us that a federal grand jury has subpoenaed him to testify about the January 6th insurrection. Navarro openly admits that he did indeed work on a strategy nicknamed Green Bay Sweep to overturn the election results.

But he says he's suing to block that subpoena because Navarro accuses prosecutors of ignoring claims of executive privilege and testimonial immunity. Tonight, we're live in Uvalde, Texas, as families vary the victims and a community searches for answers on the news right after Jim Cramer, 7 Eastern CNBC. Scott, back to you. All right, Shep, thank you. We'll see you then. Shepard Smith. Well, the darkest period of the China lockdowns and the impact on its economy might be behind us. That is the headline today from our next guest. Joyce Chang is the chair of global research at J.P. Morgan, and she joins us now.

It's nice to see you. Welcome. Great to be with you, Scott. I'm going to get to China with you in just a second. But can you ever remember a second half of the year that looks as uncertain as this one does here? And I'm wondering how you're thinking about all of that. Well, we have a whole confluence of global factors here. You know, we have an energy crisis, geopolitical risk, a war, a slowdown, quantitative tightening alongside Fed hikes. So I think this volatility is going to be with us, even if the darkest period for China might be over. I think this volatility is going to be with us, even if the darkest period for China might be

over. I think this volatility is going to be with us. And the liquidity has also really gone down in the last few weeks as well. And that's complicating and amplifying a lot of the price action that we've been seeing. Let's deal with the China question before we turn our eyes here. Do you really believe this is a turning point? Well, we have China's growth down to 3.7 percent. This is only the second year out of the last 30 years where they're going to miss the official growth target, which is five and a half percent by quite a lot. But you might be at the darkest point. There's a couple of things that we're looking at. First of all, the manufacturing numbers that came out for May were a lot better than April. But also, the state council has come out with a number of fiscal measures that we think are meaningful and further than what they had done earlier when the slowdown

began. And most importantly, we really are seeing a peaking of the COVID cases. I mean, we're down to 1,000 cases, including the asymptomatic cases daily. We were at 30,000 in the middle of April. So you can see that the worst has passed, but we're still looking at a pretty sharp slowdown in China. And that has reverberations for the global economy. Well, tell me about that, because I was going to ask you what the ripple effects would then be on the global economy. And by the way, even though you've revised down your GDP forecast for the U.S., you're not looking for a recession here.

We think it's premature to call for a recession, but we are looking at subpar growth. We're looking at growth that's only around 1.5% globally for the first half of the year. And in China, we've taken down the first half growth by two and a half percentage points. So that is going to impact the rest of the world. Now, is that about a half a percent? That's kind of what history would tell us. So these effects are still playing out right now from China's slowdown. And I think that, you know, this is the dilemma, you know, when you go faster, I mean, there's

just a bigger risk of accidents. And that's sort of, you know, the dilemma the Fed is facing right now. It's sort of stuck between a rock and a hard place. And we do think they're going to continue to have to move 50 basis points at the next two meetings, given what the demand driven pressures have been. So the China story is part of it, but there's a much bigger backdrop against this. Seems to be in the market. I think we could agree at this point, right? We generally accept the fact that the Fed is going to go 50 in June and they're going to go 50 in July. And then we'll have to see after that. Relative to what you said about China and the

ripple effects around the globe, what does all this mean, let's say, in the here and now for the U.S. stock market? Well, I think the problem is that everybody is actually looking past what is already priced in in June and July. And the real question is how much this higher inflation is going to lead to a growth slowdown six to 12 months down the road. So it's not a recession right now. That's premature. But is that what we're facing into 2023? So I do see that there are opportunities now, given the magnitude of the sell-off. And there are also some technical factors that are more supportive as we look at month-end rebalancing, as we look at just how sharp the sell-off has been in certain sectors. But I think this liquidity

issue is going to stay with us and the volatility is going to stay with us. And still the questions on the growth slowdown and where inflation is going to settle are not going to be solved overnight. Do you have a favorite market ex-U.S. before I let you go? Well, I mean, look, you know, in the in the U.S. market, we continue to still like, you know, a lot of the commodity plays. And I think I would still focus on this. I mean, we're still at a point where we see the risk of gas prices at the pump going to $6, commodity prices still that could go higher across a broad base of commodities. So in some of the emerging markets that are commodity exporters, there are better opportunities right now.

And I think there is room also to look at certain sectors that really have become cheapened up here. Like if you look at small caps there, where they were at during the global, during the global financial crisis. So we are seeing that there are some opportunities that have emerged, but we expect this volatility to stay with us. And the fundamental questions, I don't think are going to go away. I appreciate your time very much. That means we'll continue to have things to talk about. Joyce Chang, thanks so much. Thank you so much. All right. Take care. We do have a quick news alert. Meta platforms, formerly known as Facebook, will officially begin trading under the ticker symbol Meta before market open on June the 9th. The company previously announced it would be changing its ticker symbol. Now we have the official date to go along with that. Coming up, betting on Disney,

why one money manager is banking on a big comeback for the media company. It's in our two minute drill. But first, we're tracking the biggest movers in the OT and Christina Parts and Nevelos. Who else has a look at that? She's on deck. Hi. Hi. So we got a bunch of new company earnings. The theme seems to be across the board, weaker guidance for the next quarter. I'll have those names along with one retailer surging right now in the OT on higher earnings. That's after this short, short break. We're tracking the biggest movers in overtime. Christina Partsanovalos is here with that. Hi, Christina. Hi. Let's start with silicon chipmaker Ambarella posting Q1 earnings after the bell today.

Shares, though, are trending down, oh, over 6.5% right now. There was a slight revenue beat with earnings. Also, at 44 cents a share. Q2 revenue, though, came in light for its guidance with the company's CEO warning, quote, our near-term outlook is under pressure with the flare-up of the pandemic in China and resulting lockdown, which is disrupting our orders and our customers' production, as well as logistics throughout the greater asia

supply chain we also have eb charging infrastructure company charge point posting a gap loss of 27 cents a share on revenue of about 81.6 million which is a beat but it's cute too revenue guidance also came in light shares are trending over four percent lower right, and the company is still 67% off its 52-week high. And that retailer I teased you about before the break, shares of loungewear brand Victoria's Secret climbing higher in the OT after posting Q1 revenue directly in line with the street, but had an earnings beat. The retailer's Q2 earnings per share guidance, though, came in a little light. The company did, in a separate statement, announce that they're adding a new board member. That would be the co-founder of online marketplace Minted, Miriam Nafese. We'll be joining. And the stock is up over 7 percent. Scott.

All right. Christina Partsenevelos, thanks so much. Still to come, the Peltz Factor. Billionaire Nelson Peltz officially joining Unilever's board. Investors, well, look at that stock price right there. They cheered that news today up nearly 10%. We'll talk about his plans for the company, what it might mean for the stock next. Don't forget to weigh in on our Twitter question of the day. We want to know, now that summer has officially kicked off and travel is expected to be red hot, which reopening play will have the best return over the next six months?

Will it be the airlines, the cruises, other entertainment or just other? You can go to at CNBC overtime on Twitter. Cast your vote. We'll bring you the results at the end of our show today. Unilever has a new board member, Triance Nelson-Peltz. That stock up about 10 percent today on that news. Let's bring in our Mike Santoli for more. For obvious reasons, the stock is jumping because you're talking about a guy who's got a lot of street cred, among other things, with companies like this. Yes, packaged food and consumer staples companies in general. Also a ripe target because of the steep valuation discount that Unilever trades at, which showed you some investor skepticism about their strategy.

Unilever, under 18 times earnings. You look at P&G, Kogay, Pomali, even the European companies like Nestle, even L'Oreal. So basically, you can close that gap in theory if it's better run. Those all trade in the mid-s type of of P.E. Now, also, Unilever was kind of in the penalty box for having made this failed bid for GlaxoSmithKline's health care consumer products business. Now, that was going to be a bet of almost half the value of Unilever on that company. Investors didn't like it. They walked away from it. But the big fear has been, are they still going to do something like that? Are they looking for transformational M&A?

Not anymore. With Pelts there, most likely not, if nothing else. Yeah. The P&G playbook, right? That's how people are talking about it. They're looking at that. I mean, I think I saw some crazy stats. And since he joined the board, which he recently left, the stock was up like 90 percent. Had a huge run. Obviously, P&G, always a high quality company, would never say it was broken. But in terms of sharpening focus on individual product category, profit margins, how are we pricing things? Maybe I think that the playbook also was essentially just sort of put accountability out into the business units and things like that. You know, there's also

different ways to structure Unilever if you really wanted to. Nothing says the old best foods business that they acquired has to remain a part of it forever. They've already sort of been thinking about how to reduce costs long before Mr. Peltz arrived. But it's going to be interesting to watch Procter & Gamble, Mondelez, Heinz, just to name a few of the packaged food business boards that he has been on. Let me get you on Salesforce real quick, because that was one that we were looking out for.

Kind of a proxy for right now on the growth trade. Yes. It seems to be pretty good. It's definitely a relief. Obviously, the stocks had a really terrible run. And what's going on with those big companies is they're getting revalued based on their cash flow, right? So if you look at sales sources, chronically expensive, always traded this towering valuation. Well, guess where it is now?

Four times free cash flow yield. Same as Adobe. Same as Microsoft. So if they can come through with those numbers on the cash flow line, they can sustain this valuation. I think that's the the lesson of this reaction. We'll see. We'll see how it plays out. We'll see you for the last word. All right. All right. Mike will be back in just a few after the break. How one money manager is putting cash to work and how she's positioning her clients portfolios. That's in our two minute drill and coming up top of the hour.

More on the late day sell off in crude oil prices touching their highest levels in months. Today, the Fast Money crew breaks all of that down after overtime. We will be right back. It's time for our two minute drill now. Joining me now is Shana Sissel. She is Cope Corrales, director of investments. It's good to see you again. Let me ask you first about the market at large and then we'll talk about the picks, because I don't know very many people who have any conviction whatsoever about this market. It's like you cover your hands, cover your eyes with both hands and barely look through and see it every day. Do you have conviction? Do you think this can last? Well, it's not uncommon to see double digit bear market rallies. They typically last about 30 days, 30 to 35. We're

like 10 days in and we're up 9 percent. On average, they're 30 to 35 days up 15. So just because we've seen a rally does not mean that we won't retest the lows. And I'm thinking of it more of tactically going in and buying when good opportunities arise. But I don't think that we're completely out of the woods yet. Okay. Now let's talk about what you are buying. Selenese, number one, why? All right. So this is blessed by Buffett, if you will. A recent purchase of Warren Buffett. This is a large producer of chemicals, specifically engineered polymers, And it's the largest producer of acetyl products in the world. Recently in February, announced an acquisition of DuPont's mobility and materials division for $11 billion in cash. It's the largest acquisition they've ever done, but it helps them broaden their end

markets. Had a really good quarter and actually raised guidance, which is not something we've been seeing a lot lately. So trading at eight times next year's earning, which is a significant discount to its chemical peers. And so I think that there's a lot of opportunity here, again, because I do think that they're in great end markets. Specifically, they're in solar panels, autos and water treatment facilities. So these are things that they've had some supply chain disruptions, but they've been able to push 100 percent of that increased costs to their customers. And so they've been able to do well, even in this

inflationary environment. Why is the tide going to turn for Disney, which is the next pick that you have? Because obviously the stock has not done well. Well, today it did well. One day does not a trend make. We know that. True. Well, you know, I think that there's overly negative sentiment with Disney right now. Parks are actually the largest driver of their earnings and their revenue. And I still think that the parks are going to continue to benefit from the pent up demand of two years of people putting off travel plans. I, for one, am planning a trip to Disney with my son in September. And I think there are a lot of people that wanted to wait until they were fully open and the children to have the full experience, the character experience. And so I continue to believe that the parks will continue to do well.

They did better than expected in the last quarter. And I think that trend will continue. People are still traveling. And while I do think they're going to surprise there. Like they just announced today, they had very strong viewership of their new Obi-Wan Kenobi series. And I think that that will continue to drive new subscribers to Disney Plus. All right, Shannon, thank you so much. I'll talk to you again soon. Up next, the answers to our Twitter question of the day. And now that summer has officially kicked off and travel, you know, is going to be red hot. Which reopening play will have the best return over the next six months? That is after the break. And so is Mr. Santoli. He is back for his last word. To the results of our Twitter question of overtime, we asked which reopening play will have the best return over the next six months. We have a good split here. Thirty two percent say the airlines.

Forty one percent of you say entertainment. Fifteen say other and twelve say cruises. You don't have to answer that, but you do have to tell me what your last word is. Not enough entertainment plays. So 41 percent are going to be squeezing into a couple of movie theater concert companies. But that's beside the point. All right. Last word is, you know, can't hardly wait because the market is in this mode right here where we price things. It seems like we made our peace with the visible Fed outlook. We were oversold. We rallied off that. We're kind of in this middle zone here in terms of valuation. And what are we waiting for? We're waiting for a lot of substantiating evidence one way or the other on inflation. We're not going to get anything for 10 days or so in terms of CPI. Jobs number Friday, unclear if that's really a mover. And then, of course, Fed meeting in a couple of weeks. So

there's stuff out there. But the question is, how does the market kind of absorb what's to come in advance of having the real key items in front of it? usually the market doesn't just sit and wait, right? It's going to test these levels. It's going to see if there's any real buying interest above here as we get into a new month. I don't know if you have any Fed speakers coming up. You know, we still have to digest what's happening over in China. Yes.

The journal story about oil and OPEC, that is interesting to watch too. It's an identifiable thing day to day that matters a lot based on what it's doing. It's really now the new main pressure point besides bond yields. And maybe bond yields race up again, too. But right now it is oil has not really given an inch in terms of that trend. And it is the thing that really does feed it. Remember, the Fed, as much as they focus on core, the real target is headline PCE inflation. And so they need energy to moderate a little bit or stop going up every day.

But this is kind of a game, I feel like, of crossing off the negatives. You go down the list, right? And if you can take China, cross it off the list of worries because the economy is going to reopen in big cities, Beijing, Shanghai, et cetera, that helps the story somewhat. It does. Even incrementally. I think another thing that's in that category is the credit market, because that was threatening to kind of fall out of bed and be an overhang on the market, the way spreads were gapping out in terms of high-yield debt.

That's come back in just the last three days. So that supports the idea that there was genuine buying interest for risk assets at the lows we got to last week, both stocks and bonds. And you keep moving past these important late season earnings reports, right? NVIDIA, right, was a referendum at that moment. Now we said Salesforce tonight was a proxy on what's the state of growth and enterprise spending and cloud spending. And arguably, in aggregate, the market took earnings season as an excuse to sell, not to buy. Right. So it was sort of looking at the possibility for downside guidance. The retailers

kind of ultimately righted themselves. But that was pretty rocky along the way. Yeah. An important report. We'll see how the stock maintains. It's up by nearly seven percent. Thank you. I'll see you again tomorrow. That's Mike Santoli with his last word. I will see you right back here on this desk tomorrow. Fast Money's now.