Closing Bell - Closing Bell Overtime: GameStop Fires Its CEO; Wolfspeed CEO On Why His Company Is Positioned For The Silicon Carbide Boom 6/7/23

Episode Date: June 7, 2023

The S&P 500 and Nasdaq closed negative, near session lows. BofA Securities’ Jared Woodard and BD8 Capital’s Barbara Doran break down the market action as investors wait next week’s Fed decision. GameStop reported a Q1 loss and announced it was firing its CEO; Ryan Cohen was named executive chairman. Wolfspeed CEO Gregg Lowe discusses his company’s strong stock performance and why silicon carbide is key to its growth story. Affirm shares rallied on news of a partnership with Amazon Pay; MoffettNathanson analyst Eugene Simuni on why it doesn’t change the macro headwinds facing the industry. The WSJ reports Amazon is planning an ad tier for its Prime Video streaming service; the reporter behind the scoop Jessica Toonkel joins to discuss the broader implications for the streaming players. RBC Capital’s Helima Croft on the impact of the Saudi output cuts and where oil goes from here.

A mixed bag is a story on Wall Street, but we're here for what comes next. Winner stay late. Welcome to Closing Bell Overtime. I'm John Ford. Morgan Brennan is off today. Coming up this hour, we're going to talk to the CEO of Chipmaker, Wolfspeed, getting a healthy boost today, making up some ground after underperforming this year. Plus, we're going to break down the energy trade with RBC's Halima Croft as oil gets a lift, energy stocks outperform, and we are awaiting earnings results this hour from meme favorite GameStop and DevOps software company HashiCorp. We're going to bring you those as soon as they cross. Now let's begin with today's market action. Joining us now, Jared Woodard, B of A Securities Investment and ETF Strategist, and Robert Duran, BD8 Capital Partners CIO. Guys, welcome.

Jared, this has been sort of a hated rally that we've been experiencing all year, it seems to me. It's been uneven, benefiting the largest technology stocks. So what do you do at this point with the Fed probably pausing, but even if not, probably at about the end of its hike cycle? Yeah, John, I think it's true that this has been a hated rally this year. And our advice this year has been that investors should use rallies in tech and other kind of mega cap growth assets to take profits and to invest in other parts of the market where there's better valuation opportunities. I think that the top priority for investors this year has to be to capture yield where they can, to protect against deflation and the recession we

think is coming, and to keep hedges in place if the stagflationary risks from 2022 prove to be a continuing threat. Okay, so how? You say preferred stock ETFs? Yeah, we think for the yield part of it, I think preferred stocks are a great place to go. PFF, one of the ETFs we cover, these have yields approaching 7%. These are very secure dividends. These are preferred stocks that have given you reliable dividends even in a financial crisis. Even in 2008, only 3% of those preferred dividends ever faced a cut. And these are some of the highest yields in the market today. So if you're looking for income, I think these beaten down preferreds are a top place to look.

Now, Barbara, you say you're not buying here. You are trimming bloated positions. But trimming and then what? Are you rotating into something else? Or are you sitting on your hands for a minute to see which way things go? Yeah, I'm sitting tight for now. Not that it's going to be that long, because I fully expect there's going to be a bit of a sell-off, which we're starting to see today in some of the tech names, which ran up. And of course, now you're seeing momentum players get out. But I think there's a lot of money on the sideline, particularly retail, that want to be in these

names. And I think you have to be in them for long term but i'm just waiting i had added you know really beefed up my tech positions several months ago and i'm fully invested in waiting there but i'd also added names like starbucks or expedia which was super cheap particularly compared to booking and i'm just waiting on those so right now i'm not doing much i'm waiting for some further pullbacks and some things like sales force which has a position but i i wonder if there's some investors who have been waiting all year right mike santoli was showing us yesterday how the uh the there hasn't been this inflow into etfs and if you were waiting all year it was a mistake so i guess what we need to know from you the folks

at home probably need to know waiting for what how? How much of a pullback, right, before you get in? And what are you particularly looking to get into? Yeah, I mean, you're talking to me, right? Yeah. I think that's always a question. It's not only one of the toughest things is when do you sell, but when do you buy and how much of a pullback will there be? I mean, right now we're in a bit of a news vacuum. Just earnings are done.

The debt ceiling is resolved. And we're waiting for the Fed next week. And it's widely expected they will pause. But it's really going to be important what their guidance is and what the CPI number on Tuesday will be and the PPI to see if that little bit of promise we saw last week with wages coming down a tad, average hourly workweek coming down. Signs that inflation is still coming down, if gradually. So I just think we need to see a much deeper where there's, you see much more momentum coming out of the tech names in order to make them a buy again. I think it's too early for cyclicals.

Cyclicals typically do well when you're cutting interest rates and that does not seem to be in the cards anytime soon for the Fed. If anything, they pause, maybe they go up 25 fifths. They're pretty much done, that is for sure. But it certainly doesn't seem likely they're going to cut. So cyclicals are not a place to go either. So I think you just have to, financials have been oversold and they've been rallying here.

So there's probably more to go there than some of the quality teams. Okay, Jared, is this a 60-40 portfolio environment? Guess yesterday was saying 50-50 even. And even within the equities portion of that, what portion in this type of environment should you allocate to your higher risk? Our view has been for a few years now that the 60-40 portfolio era has ended. I think 2022 was the best possible confirmation you could ever hope for that kind of a view. We think that the risk in the 40, the Treasury part from a structural point of view, has never been higher. We do think there's a chance for a good Treasury trade this year.

But to your question, I think in the 60 percent, the equities, however much you allocate to equities, it's important to recognize that an index like the S&P 500, these broad market benchmarks that so many investors use, have never been worse as a measure of a diversified basket of stocks. Everyone's speaking about narrow breadth, and that's true. But it's worth noting that the correlation among the individual components of the S&P 500 has never been higher. And I think that's why so many investors are asking us for alternatives, places to look, other sectors, other themes. We mentioned preferreds. I would add to that sectors that have long-term exposure to real assets like gold or energy,

materials, and industrials. Those are cyclical sectors. They're going to be volatile for sure. But our view is that many of the assets that are priced for infinite growth out into the future at incredibly low discount rates pose a lot more risk than investors may be pricing in, certainly in recent weeks. So Barbara, last word. I'm wondering about this for investors out there. If you're thinking of maybe diversifying into small caps at a moment like this you know the russell did pretty well today relative to everything else but if we get that pullback that you're talking about

won't small caps likely get hit hardest i think they will actually i mean they've been performing very well the last week or so i mean really outperforming the s&p and i think that's we're seeing a rotation people looking for the laggers looking for places that would that have not run yet but small cap is very vulnerable in a high interest rate environment particularly if the fed does even if it's only 25 um 25 bips more in July those are the ones these are the small small companies that are most dependent on borrowing to finance their business and that's tough for them so I see this as a trade and maybe you get a little bit more just because people are looking for undervalued things. But I think it's will be relatively short lived. All right, Barbara, Jared, thank you. Thank you. Also today, shares of

Netflix hitting a 52 week high thanks to price target increases from JP Morgan and Wells Fargo. JP Morgan says the company's effort to limit password sharing could fuel revenue growth. CNBC senior markets commentator Mike Santoli joins us now from the New York Stock Exchange to break down the company's valuation. Mike. Yeah, John, Netflix so at a 52 week high. But as this chart shows, it is certainly only about halfway back to its all time high after really crashing from close to 700 down to like 175 at the lowest. Now, over here, the market was saying there was no valuation too high to pay for the disruptive, dominant, secular winners long term. Then we had the massive liquidation in all of those really highly valued growth stocks.

Down here, I think you basically had the idea that we don't know if the streaming is really a good business, if they can sustainably be profitable. There's too much competition. It looked like profitless prosperity in the entire industry. And now it's about the earnings model is starting to kick in and work and earnings estimates are going up. Find it interesting, the 1000 day moving average. You don't look at it very much. It's a slow moving trend line. It's about 200 weeks. So it's multiple years. This kind of halfway back move from the lows got us right there. So we'll see if there's more juice to it. It's still relying on things like twenty twenty five earnings estimates.

Maybe you're at 20 ish times that number. So it seems like it's getting rich again based on earnings. We'll see if this can continue. Now, take a look at Netflix valuation on a forward basis on next year's earnings relative to Disney. And you see what's happened here. This is when it was a very young, fast growing growth stock and Disney was a traditional media stock. They converged right in here as everyone got overexcited about Disney Plus and thought that during the pandemic that was going to be the winner. They've crossed back over again. So Netflix reestablishes the premium. It probably makes sense based on the sort of predictable metrics and the fact that it's the cleaning cleanest story in streaming. So we'll see if if that can continue from here. But as I say, kind of

stretching the valuation based on the visible earnings. All right, Mike, we'll hear from you, of course, later in the show. Right now, breaking news on GameStop, a bit of Game of Thrones there. Steve Kovach, how's the details? Yeah, exactly right, John. So GameStop has fired its CEO, Matt Furlong. He's been the CEO since 2021, and the board has elected Ryan Cohen, who we all know. He is now executive chairman of GameStop. They do not have in this brief statement we got from GameStop any word on who the new CEO would be or anything related to his search there. But we're watching shares down about 5%. And I'll just note we're expecting any minute now

to get their quarterly earnings come in. So I'll be back with more. Okay, we'll certainly be looking for those and any more details. They don't even mention Matt Furlong's name in this release. That is the former CEO. For more on GameStop and how now executive chairman, Ryan Cohen, got legions of retail investors

to follow his every move. Do not miss the CNBC documentary Making of the Meme King. That is Friday, 8 p.m. After the break, we're going to talk to the CEO of Wilfspeed, which makes semiconductors for the EV industry, among other things. We'll break down today's pop, the stock's lagging performance this year, manufacturing issues. Silicon carbide when we come right back. Investors are feeling the need for Wolfspeed today. Shares closing 4 percent higher. It's not the only silicon carbide maker jumping today. Microchip, Mobileye, NXP, all ending the day in the green. So far this year, Wolfspeed is lagging behind its peers, down about 25%. Joining us now, Wolfspeed CEO Greg Lowe. Greg, good to have you. So after last quarter and the manufacturing difficulties you talked

about with your Durham facility supplying your Mohawk Valley facility. You had some repricing going on. How is that process right now working out for you? Give us an update because that manufacturing facility that you have, Silicon Carbide, in New York is a big part of what investors need to know about. Thanks a lot for having me john and yeah we did have some challenges bringing on our durham crystal growth operation we had some supply chain issues that created a bit of a lag on that and that factory then feeds the mohawk valley factory in new york essentially those problems have now been resolved the factory is up and running. The crystal growth machines are operating as planned. And so we're now, that's kind of, you know, behind us now.

And, you know, we're basically ramping the world's largest and world's only 200 millimeter silicon carbide crystal manufacturing plant in New York. And, you know, obviously getting those problems, those challenges behind us has been really positive for us. We're really looking forward to ramping up facility kind of as we speak. How recession dependent is the demand for these power systems that are going to be reliant on silicon carbide? Well, basically, we have a very strong secular growth in silicon carbide. The world is moving from silicon, which has been the basis of semiconductor chips, to silicon carbide.

And I think that is something that is non-stoppable right now. And it's simply because silicon carbide is substantially more energy efficient. What that means is, if you use silicon carbide in an electric car, for instance, your car is going to go further with the same amount of battery, 5% to 15% further. Your car is going to charge faster. If you're using silicon carbide in a solar field, more of the sun's energy is actually going to get to the grid because we're wasting less of it.

So I think these trends are really unstoppable. And what we're looking at is a decade-long substantial growth opportunity for us with silicon carbide as a secular demand trend. There's a lot of time in a decade for competitors to get into the game. And we've seen some moves today with a China-based partnership and for investors to sort of miscalculate when the payoff is going to come. So what do you consider your strategic advantages to be, whether domestic manufacturing plays into that or not? And what are the trade offs with costs that arise because of it? Well, we are the world's largest silicon producer of silicon carbide materials. We produce about 60% of it today.

And so we have a huge commanding lead on that. That scale advantage allows us to drive manufacturing improvements, which drives costs down, which allows us then to get more business, which increases our scale. And we sort of created this circular effect, if you will, of improving our business. We're increasing that scale substantially as we bring on the Mohawk Valley facility, the world's largest silicon carbide manufacturing plant, and the only one at 200 millimeters. We've been in this business for 35 years. And what I can tell you, it's not an easy business. And, you know, what we're focusing on right now is continuing to drive scale, continuing to drive costs and, you know, try and really maintaining that leadership role.

So why is Tesla sitting this out? Right. Said it was going to use 75 percent fewer silicon carbide transistors in its powertra trains a few months ago. It's a really big player and probably even more important than that. It's sort of a standard bearer for what a lot of people think about when they think about power efficiency in the future of EVs. What's it going to take to convince Elon Musk of this trajectory? Well, what effectively Tesla said during that announcement was that they were going to use, they were going to install an inverter in an entry-level car using 75% less silicon carbide. Our viewpoint is that's actually incremental growth for us because we did not anticipate that silicon carbide would actually reach entry-level vehicles. They didn't make any mention about reduction of silicon carbide

for their more mid-size or mid-range and higher-end vehicles. So our viewpoint is that this is actually incrementally positive for the adoption of silicon carbide into more entry-level vehicles. I'm just visiting with a whole bunch of customers here today up in Detroit, and the commentary that I'm hearing back from customers is silicon carbide is being adopted across the vast majority of their platforms. All right. Great detail. Greg Lowe of Wolfspeed. Thank you. Thank you, John. Well, GameStop earnings we were waiting for are out. Steve Kovac, how do the numbers look? Yeah, John, and shares are down 17 percent now. We do not compare the results to any estimates

here because of the thin coverage. But let me give you the results. A loss per share of 17 cents and revenue coming in at one point two four billion dollars. And of course, as I just told you a few minutes ago, CEO Matt Furlong has been fired by the board. He's been CEO for about two years there. And Ryan Cohen, elected executive chairman. No word yet on what that means for a future CEO. And I would also note, no conference call today. So we're not going to get any more color than what I just gave you there, John. Wow.

Yeah, no more color, no more. We'll watch that one. That one's down quite a bit. Steve Kovach, thank you. Thanks. Speaking of down quite a bit, HashiCorp earnings are out. The company reporting a 7-cent loss per share, smaller than the 14-cent loss analysts had been expecting. Revenue's also topping estimates at $138 million versus expectations for $133 million. So why is it down?

Well, the company's outlook mostly coming in weaker than expected, though the company's full-year loss per share guidance above estimates. HashiCorp also announcing an 8 percent reduction to its workforce. CEO Dave McJanet is going to break down those results tomorrow right here on Overtime. And Affirm today in fintech getting an early boost after Amazon said it would integrate some of Affirm's features into Amazon Pay. We will break down that move and the broader bump for fintech stocks right after this break. Plus, we're going to talk much more about breaking news on GameStop with the CEO out. Ryan Cohen elevated now to executive chairman when overtime returns.

Affirm shares popping today, but closing near session lows. The company announcing customers will now be able to use its adaptive checkout feature with some merchants on Amazon Pay. It's been a strong month for fintech names more broadly. Affirm and SoFi both up more than 50 percent in that time, Square up 12 percent. Joining us now, Eugene Samuni, research analyst at SVB Moffitt Nathanson. Eugene, how much of this is just how much some of these names had sold off before this point? Or is there a reason why investors should feel more optimistic about maybe some of these less crypto exposed names? Yeah. Yeah. Well, hi, John. Good to be on the show. Absolutely. There's definitely we sold off a lot.

And now there's an opportunity for an upswing. That's definitely a big theme in fintech after a very tough period. But each one of these companies did have some specific factors that have helped it. You mentioned a couple of things about a firm. SoFi has also had specific factors that helped it. So you do have to look company by company. But taking a step back on FinTech overall, our perspective, cyclical headwinds

to FinTech unfortunately remains strong and we're not out of the woods yet. Overall, our perspective, cyclical headwinds to fintech, unfortunately, remain strong. And we're not out of the woods yet. But the secular story is probably, you know, as strong as well. And so what we are on the lookout for is long-term winners that really will survive this fintech winter. And it will emerge on the other side as big winners in this space. And how do you define those? How do you separate these things by category? Because some, you know, SoFi is a bank,

a firm is certainly not. Some other names in the category cater more to small and medium business or even enterprise. Yeah, absolutely. That's a billion dollar question here. Look, FinTech is a humongous space. So you really do have to be specific about what you're looking at. We do like, you know, SoFi

firm, these are digital lenders. So that's been a very successful category of fintech prior to, you know, 2022. It has been really hit hard during 2022, but we do think there is, you know, a secular future for this industry. And what we do look for with digital lenders, we do like companies that are diversified, so that offer multiple different products, become more of a financial services platform versus kind of a one-hit wonder. And secondly, access to low-cost, stable financing. That's critical. That's been shown to be critical during these tough times. And you mentioned SoFi

is a licensed bank now. That's one of the reasons, for example, like SoFi is a longer-term winner because it does have this access to low-cost, stable financing in the form of retail deposit, which, by the way, what a firm currently does not have. So does that mean more need to become banks? Well, there's certainly plus and minuses to being a bank. Access to retail deposit is a huge plus. Huge amount of regulatory oversight is a big minus. So each company has to weigh it. And I wouldn't say that being a bank is the only path to being a long-term winner in this space. But in our view, more of these players will need to consider that as they mature. How do you look at players like Credit Karma,

which is part of Intuit versus NerdWallet, which is smaller cap and independent, diversifying, as you mentioned, into areas like insurance? Yeah, look, so we like the, maybe a bigger concept here, the boom period for fintechs, for digital lenders, etc. has created a lot of smaller companies that do specific things. Some of them focus on lending, some of them focused on helping folks budget, etc. Credit Karma, NerdWallet are examples of those.

Our general view is it's hard for those companies to survive on their own because offering one product, very tough to attract customers and even harder to retain customers with one product. Easier to do in a diversified offering and so some of this consolidation that has happened, for example, Intuit acquiring some of these platforms is logical to us, makes a lot of sense. And we expect more of that. So you expect M&A. That doesn't necessarily make these smaller names a bad investment, right?

No. Well, yeah, that's a good point. Some of this will be absorbed. No doubt some of them will just die out as the sector evolves. But yes, some of these, you know, small names could be attractive M&A opportunities for bigger names and therefore could be attractive investments, I agree.

Yeah. All right, Eugene, thank you. Yeah, of course. Eugene Simoni. Now, speaking of fintech, earlier today, I spoke with Brex, co-CEO and co-founder Henrique Dubagras. Brex provides fintech services for startups. It hit a milestone with two of its latest products reaching $100 million in annualized recurring revenue.

Dubagras told me part of what's driven that is in the wake of the SVB collapse. Brex has become a flexible option for customers to diversify their bank accounts. I would say at that time, we didn't know if this was going to be net positive or net negative for us. It was still unclear. The market was developing and everything was happening very quickly. Turned out to be net positive. And the reason is now as customers want to have multiple bank accounts, it's easier for us to win one of three than one of one. And we're being chosen as kind of like one of three because the easiness of like dealing with us day to day. So we've become the kind of like day to day partner versus where you

park, you know, 90 percent of your money. Remember, we had him on overtime talking about trying to shore up startups access to capital as that SVB bank run was playing out. He also told me regional banks are looking for tech that helps them compete with the larger banks. Investors feeling a bit better about those prospects this week, it seems, with the KRE regional bank index up almost, well, a little more than 3 percent today. Time for a CNBC News update now with Seema Modi. Seema. Hey, John, here's what's happening at this hour. Former President Donald Trump told the New York Times

he has not been told he's getting indicted. The comment was in response to a report by one of his allies that claimed he was sent a target letter. A federal grand jury is meeting in Florida in special counsel Jack Smith's investigation into Trump's handling of classified documents. Trump has denied wrongdoing on many occasions. Supreme Court Justice Clarence Thomas postponing his annual financial disclosure, asking for more time to prepare the document.

He is facing scrutiny for accepting pricey vacations and gifts from Republican billionaire Harlan Crowe. Thomas will get 90 more days to submit the disclosure. Justice Samuel Alito also requesting an extension. Tupac Shakur now has a Hollywood star. It was accepted today by the rapper's sister. The late artist has sold over 75 million records worldwide. He's also the first solo hip-hop artist to be inducted into the Rock and Roll Hall of Fame during the first year he was eligible. John, back to you. Seema, thank you.

After the break, Wedbush analyst Michael Pachter joins us to talk about that breaking news this hour on GameStop. CEO Matt Furlong out. Ryan Cohen elevated to executive chairman from chairman. When Overtime comes right back. Welcome back. Shares of GameStop falling hard in the after-hour session, down more than 20%. Longs might want to throw their controllers at the screen. They reported results this hour. The big news, the CEO, Matt Furlong, out at the company.

Ryan Cohen has been elected executive chairman, effective immediately. The company is saying in a statement, Mr. Cohen's responsibilities include capital allocation and overseeing management. What's left of it? Let's bring in Wedbush analyst Michael Pachter to discuss. He has a sell rating. Price is $6.50. Closer to that, you were right on the sell. Is the dream over?

Oh, I think the dream never started. You know, you guys have a documentary out right now. I think it came out yesterday called The Meme King, Colin Cohen, A Meme King. He's the queen of hearts. You know, he was displeased and he said off with his head to Furlong. That's the CEO's name that they shall not name. I mean, it's like if he said his name in the head, defer long. That's the CEO's name that they shall not name. I mean, it's like if he said his name in the press release, he'd be cursed. They brought three Amazon executives in three years ago, and they managed to, one departed after seven months. I think she figured it out quickly. The other was fired after less than two years, and the third one was fired after just under

three years. So Cohen brings people in, doesn't actually tell them what to do and they don't fix anything and they're gone. I don't think he has the first clue how to turn this company around. And the truth is, I don't think they can turn it around. I think that they should be in harvest mode, trying to generate profits on a smaller footprint and they're just not doing that. I mean, are they going to figure out how to be Domino's Pizza and not Blockbuster here somehow?

Because so many trends in gaming are going against them. We just had Apple announce the Vision Pro. You can bet that's gonna operate on an app store. You're not gonna be going to GameStop to get games for your Vision Pro. And then you've got the cloud gaming and streaming happening, Microsoft pushing hard on that as well as others.

What's the path to life here? What do they have to do? So Cohen's solution is blockchain gaming. And of course, you know, if you own a console, an Xbox or a PlayStation, you think of GameStop first if you're going to play a blockchain game. You would never think to actually go to your pc um the guy has no clue not the first clue they are blockbuster and absolutely physical retail is going away it's not going away tomorrow it's going away when the playstation 5 and the xbox series x are done with their life cycles it's got another five years maybe six or seven but they should be harvesting that cash and trying to figure out what they can do with it uh instead, he's not paying his bills. Take a look at their accounts payable. 50% of revenue in the quarter is accounts payable. They literally have six weeks

outstanding of payables. If they keep that up, no one's going to advance them any more product. So they're going to accelerate their demise. I think it's really crazy. Yeah, I guess not paying your bills is tougher when you need to be advanced product. So they're going to accelerate their demise. I think it's really crazy. Yeah, I guess not paying your bills is tougher when you need to be advanced product. Elon Musk doesn't have that problem at Twitter. So this is tough to short, though, I imagine, because there's a lot of excitement. This used to be a meme stock, so it could go any way on you, couldn't it? It could. And it still is a meme stock. And I think in the documentary, I'm not sure they used this piece, but I called him the Pied Piper. And the retail investors are the rats following him off the cliff, and they don't see it coming. They're happy, they're listening to his hyped

tune, and they think he's a genius. I mean, I'm sure he is a genius in other areas, not in games. So what is the anti-GameStop, though? We know how you feel about that, but in this space, what are you extra long? Activision, because the Microsoft deal is going to happen. Microsoft I don't cover, but Microsoft's going to absolutely dominate with Game Pass. I like the tools guy, Unity. I think they're really, really interesting here. For other reasons, I like Netflix as well.

But Activision's the easy money, $80 to $95, probably going to happen in the next month or so. Do you have a sense of what studio is best positioned in mixed reality? Well, you know, it's all going to be IP based. But I mean, you tell me, we talked this past week about the price point, you know, how many Vision Pros is Apple going to sell? That's not going to be a giant install base for another three or four years. So Disney was smart to get in early. But game wise, I'd say the sports simulation games probably have the best chance of EA. Yeah, but whoever comes out with the halo of mixed reality might get a valuation pop, I imagine.

We'll see. Michael Pachter, thank you. Thank you, John. After the break, stronger than the average bear. Mike Santoli is going to look at how the current market cycle compares to historical periods and why this time might be different. When Overtime's right back. Well, how bad is the smoke in the mid-Atlantic? Major League Basketball, baseball, sorry, just announcing it is postponing tonight's scheduled games between the Philadelphia Phillies and the

Detroit Tigers and the game between the New York Yankees and the Chicago White Sox, and that is because of hazardous air quality conditions in both New York and Philadelphia due to Canadian wildfires. Those wildfires have also had a big impact on air traffic in the Northeast. Let's bring in Phil LeBeau with the latest details. Phil? You know, John, briefly earlier today, there was a complete pause on new aircraft coming in to LaGuardia. Now they are allowing aircraft once again. So here's an update on where things stand. All of the New York City airports, the FAA says that they have slowed down the level of traffic coming into those airports, obviously because of reduced visibility. They are also slowing down airports, obviously because of reduced visibility.

They are also slowing down traffic into Philadelphia because of the reduced visibility. Whether or not we see this clear out to a point where they can increase the flow of traffic a little bit later on, that remains to be seen, John. It literally is changing hour by hour because there was one point where they were like, look, we're down to a half mile of visibility in Newark. Now as you take a look at Newark, it might be a little bit better than that. So it completely depends on how quickly the smoke dissipates and the visibility improves. But as of now, New York and Philly have reduced traffic coming into their airports. At the point where we should be watching cancellations, are there hubs that are being particularly affected here?

Sure, there are hubs. Yeah, New York is a hub. Newark is the hub for United. New York is also a hub for American and for Delta and JetBlue. So there is an impact here. But when we've reached out to the airlines, John, all of them have said the same thing. Because it is so fluid, they're being cautious about preemptive cancellations. There is some of that going on, but not widespread because at this point, it may clear up within a couple of hours and they can start to have flights come in again. So that's the hope among the airlines at this point. Oh, wow. Phil LeBeau, thank you. Now let's get back to Mike Santoli at the New York Stock Exchange. Mike, what about the bears? Well, I like to compare this current market cycle with some of the bigger bear markets in history.

And this was a comparison that became very popular in the latter part of last year. When you see here, this 2022 means that was the market path after the 2022 all-time market peak. And these other ones are some of the more devastating bear markets, actually the worst bear markets in the last 80 years or so, which began in 2007, 73 and 2000. And you can see right around here, that's in the latter part of last year, people were some people were saying, don't take too much comfort in the fact that the market has had this nice lift, this rally off the October low, because you've had that in the past in prior bear markets and you've gone on to make new lows. Now what you see is real separation from the other trajectories that are on this chart. It doesn't mean that we've gotten escape velocity because there's also some valid criticism that you have not seen the kind of really aggressive momentum and the broad participation you often see at the beginning of a true early bull market move.

So it's somewhere in between. I'm not that caught up in labeling what we're in right now, but it's also pretty much the case that you can't say any of these patterns was deterministic. One final point. This shows you that the current cycle rushed down to a 20 percent decline much more quickly than the other ones did. It seems like we got some stuff out of the way. It's a pretty compressed cycle. Wouldn't surprise me to go broadly sideways for quite a while from here, John. Yeah, Mike, I'm looking at the green one. Is that 2000 that you got? Yeah, absolutely. Yeah. So that one had a period where it kind of went sideways and maybe up a little as well. Are there lessons to learn from that? Well, exactly. So that right there, let me eyeball it here. I believe

that's 9-11. So that was the sell-off that really exacerbated. You were already in a bear market for like a year and a half by that point, and it seemed as if a lot of it was wrung out. And you ran into, yes, a recession, year-end earnings decline, but also just the reckoning of all that market cap in tech and telecom that was continuing to weigh on the indexes. You had Enron, WorldCom, a lot of exacerbating factors that really piled on and had it took, you know, another year before you really got to something that looked like

a reliable low. Yeah. That churning sideways, boy, that can be mind numbing. Absolutely. Yep. Thank you. Amazon reportedly planning to launch an ad supported tier for Prime Video. The reporter behind that story is going to join us when Overtime returns. Amazon is reportedly set to become the next streaming service to offer an ad-supported tier, following similar moves by Netflix and Disney, and our parent Comcast with Peacock was there all along. The Wall Street Journal also reporting Amazon might include the ad-based services of Warner Brothers Discovery and Paramount into its Prime video channels.

Let's bring in the reporter who broke that story, Jessica Tunkel from The Wall Street Journal. Jessica, the reasons for doing this, I guess, are pretty clear, but putting ads into things in a service that you didn't originally plan can be harder than it seems, right? You have to rework deals. They do have to rework deals. You know, they've licensed content from everyone from Warner to Paramount to Disney, and they're going to have to rework all those deals. Now, some of those deals, they already have the rights to put ads in. They have a separate service called Freebie, which is a free ad-supported service that is separate from Prime Video, but you can get a lot of the content in Prime Video. So they do have some of those rights already, but they are going to have to rework some of those arrangements.

So what's really going on here? Because adding ads to services that didn't have them before has become, it seems, a way to raise prices or at least raise the value that you're getting from the content without raising prices as quickly. At the same time, some of these streamers are pulling content that people expected to be there forever because there's a cost associated with it. Yeah, I mean, look, streaming is expensive business to be in, right? They're all trying to figure out how to make their businesses profitable. So getting into advertising raises the revenue you get per user because you're getting advertising revenue on top of the subscriber revenue.

So it's just another way to kind of get more money out of it. I mean, for Amazon specifically, Amazon's ad business outside of just streaming video for a minute has been a constantly growing business the past few years. And so they want to continue to grow that business. If they're looking to control costs, we've got strikes happening right now. Writers, the actors have authorized one. We'll see what happens. Is that a real danger for this nascent streaming industry because of the content they're trying to create?

Or is it a boon for the one with libraries because people are going to turn to them when they want to watch something? I mean, that's a great question. I think it depends on how long the strike lasts, right? I mean, I think if we go into the fall and the strike is continuing, even those companies with more vast libraries, I mean, viewers are going to want to see their new shows where, you know, I'm waiting for the next, you know, series of severance. So I think that's going to be an issue the longer it goes. But for right now, I do think to your point, a lot of studios are using it as a reason to cut costs. Does it strengthen the hand of live sports where, I mean, it's live, you don't have to

worry about the scripted part, and they do command quite a bit of advertising revenue, as well as attention're as we're seeing in the NBA finals, the one that they everybody thought we didn't want. Absolutely. I mean, look, I don't think live sports needs more of a hand. They have they have a lot of leverage here. The NBA rights is something that everyone's going to be talking about for the next several months, as like everyone, including Amazon, as we reported, is discussing bidding for those rights. So, yes, they have a lot of leverage. The tech giants, are they playing more or less of a role in the market,

the economy that we're in right now when it comes to bidding for those rights? A hundred percent more. There's no question that you're going to see Amazon and Apple and potentially others bid for those rights. I mean, I don't think, you know, I think it'll be a handful, and this has been reported, a handful of players that will win those rights, but you'll definitely see a streaming player in there. All right. Jessica, thank you. Thanks so much. From the Wall Street Journal. Energy, the best performing sector so far this month as oil prices rebound. Up next, RBC Capital Markets Global Head of Commodity Strategy, Halima Croft, on whether this energy rally is for real. Take another look, if you dare, at shares of GameStop plunging after hours down about 20%.

The company announcing earlier this hour it had fired its CEO and Ryan Cohen has been elected not just chairman but executive chairman of the board. Ryan Cohen tweeting about 20 minutes ago, not for long. Now, the outgoing CEO's name is Matt Furlong. I'm a bit of a pun artist myself, so that's where my mind immediately went. And he's known for his tweets not to be that serious. But what is serious for investors is figuring out what's next for GameStop. Meanwhile, let's turn to energy. The top sector today and so far this month, led by a rally in names like Halliburton and Baker Hughes, and West Texas crude is up 1% as the Saudi output cut from the weekend hangs over the oil market.

Joining us now is Halima Croft, RBC Capital Markets Global Head of Commodity Strategy and a CNBC contributor. Halima, is a bottom in for oil? Is that what this is about? Or is that kind of wishful thinking given this weak Chinese export data? I mean, I think what the Saudis wanted to signal to the market with their million barrel a day unilateral cut that they announced over the weekend is they are willing to put in a floor. They did a surprise cut in April. And yes, you've not seen this massive rally on the back of these cuts.

But I think the message the Saudis want to say is, if you want to get short on oil, think twice. We're standing here with our barrel balance sheet to really defend the floor. And I think they look at the back half of the year and say it's going to be better from a demand perspective. I mean, you focus on the Chinese data in terms of exports. But if you look at, for example, Indian oil import data, that is very strong. And so I think they believe that the market will turn and these cuts are designed to ensure that they get a better outlook in the back half of the year. Well, yeah, I know that's what the Saudis want us to think. But is this a concrete floor or is

this I mean, what are the chances of falling through it here? I mean, if we get more heavy data, if we get a bit more of a recession, people are expecting a recession, at least in the U.S., in the back half of the year. What are the risks to that floor? I mean, I think there is a dislocation right now between the financial and physical markets. I mean, I think oil's biggest headwind are these macro sentiments, these wall of worries about Chinese, you know, manufacturing data, potential recession. But if you look at the physical markets, we do have demand for oil is rising. We're not in a contractionary situation. And we do have now significant supply coming off. I mean, one of the points that I've made about this OPEC cut is

the fact that the Saudis announced it unilaterally. If the Saudis say they're going to cut, the Saudis will cut. If you have a sort of collective OPEC cut, then you start wondering, well, really, will the Russians do it? Will these other countries do it? But I think the Saudis mean business. So come July, we will have an additional million barrels off the market. Also, John, the U.S. SPR sale winds down in June. So that, again, is something that should make the physical markets tighter. But again, you do have these macro concerns, and oil can certainly trade lower based on broader macro concerns. But from the physical market perspective, it should be a better back half of the year. So based on all of that, why do you like some of the names that you like?

Because of their exposure or lack of exposure where? I mentioned Halliburton and Baker Hughes. Well, I'm not an equity analyst, John. So I can tell you when we think about, you know, from a commodity perspective, you ask, like, why do you still think there's a path to, for example, you know, Brent returning to the 90s? You know, we continue to have the view that, again, the physical market should be more constructive in the back half of the year.

And now that we have this Saudi cut, you put that into your balances when you think about inventory draws that we should be seeing coming in the back half of the year. So I should have said, OK, why does one like the names that one likes? That's a possible reason why those names are moving higher in this market. Yes. And again, one of the things I think we should all be watching for, because what the Saudis announced over the weekend in OPEC was a one month million barrel a day cut. Everybody's going back to Vienna in July for the OPEC seminar. And the key thing to watch will be, does the Saudis make the decision to extend this additional cut on a multi-month basis?

So does summer travel matter at all to this market right now, or is it all about supply? I mean, it certainly matters on demand, certainly in terms of seasonality. And so we will be looking to what type of summer driving season do we get in the United States. We will be looking at our people, you know, traveling for the summer. I mean, that is a big catalyst when we think about seasonality in terms of oil. But certainly, you know, supply matters. I mean, one of the bearish overhangs in this market has been the fact that Russian production has held up despite the sanctions. There had been this expectation.

Think about where oil was a year ago, $50 higher, because there had been this view that the price caps would cause Russian oil to come off the market. All right, we're going to have to leave it there. I'm out of show. Halima Kraf, thank you. That's going to do it for Overtime.

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