Closing Bell - Closing Bell Overtime: Markets close to a bottom? 5/19/22

Episode Date: May 19, 2022

Are markets close to a bottom? Avery Sheffield from VantageRock weighs in. Plus, Eric Jackson from EMJ Capital says it’s time to buy some of the “Cathie Wood” growth stocks. And, Michael Santoli tracks Apple’s moves in his “Last Word.”

Welcome to Overtime, everybody. You just heard the bells. We're just getting started right here, as we always do at Post 9. In just a little bit, I'll speak with PIMCO's Erin Brown, get the very latest on her market playbook. We begin, though, with our talk of the tape. This hunt for a bottom, whether investors should be more or less confident that one is actually getting close. Did today's action provide any signals whatsoever? Let's ask Avery Sheffield, Vantage Rock co-founder, the CIO, senior portfolio manager back with us. It's nice to see you again. Things changing all the time, obviously. Do we answer any questions today? I mean, are we closer to a bottom in your mind? Every day that goes by, I think we are certainly closer to a bottom. Are we at a bottom? I think for the market as a whole, I'm not really, I'm not sure. But we are seeing some signs that we might be near a bottom for some stocks.

The problem seems to be what's priced in, what's not priced in. What was priced in last week felt like, or in the last couple of weeks, felt like it was tightening, was starting to get priced in, right? The market had come down a lot, come into grips with the fact that Fed's going to be really aggressive moving forward. Now it feels like we need to assess the issue of whether big slowdown and recession are accurately priced in. And it feels like the market's confused about what to figure out right now. Exactly. Yes. So, I mean, the approach that I take is, to your point, what is actually priced into the stock today? Is a recessionary scenario priced in?

Or does the valuation suggest that people expect earnings to fall significantly already? Or is the valuation such that people expect, you know, good times ahead? And so, you know, we're really, we're very cautious on names that aren't already pricing in some type of slowdown. You know, Scott Minard of Guggenheim, chief investment officer, was on with me yesterday and his view has grown more bearish. You know, he once suggested and not that long ago that you had a pretty good ramp for the market until the Fed and things really got serious heading towards a recession. He changed his view because in his mind, the Fed is more aggressive and the economy is slowing. I want you to listen to what he told me about what that means for stocks and the environment.

Let's listen to Minard. We can chat on the other side. Given the aggressive posture of the Federal Reserve, we're going to be meaningfully lower this year in stocks before we find a bottom because the Fed has made it clear that they do not have a put on the stock market. They've made it clear to us that we're going to be at 1.75% by July. I mean, I think a 50 basis point hike has been advertised for the next two meetings. And they believe that the neutral rate is somewhere higher. So I think at that point, the Fed will be an overkill. The weakness in the

economy will dominate. And we could be setting ourselves up for a season of pain here, especially going into September and October. Setting ourselves up for a season of pain. You agree? I think that there could be more downside ahead for the economy. I'm concerned about it, but I don't think it's universal. I don't think that every company and every sector is going to be hit. But, you know, certainly it's just it's indisputable that, you know, rising rates are slowing rate sensitive sectors. We are seeing major drivers of the economy, such as e-commerce growth, software growth, starting to slow. Demand for consumer discretionary, starting to slow. And the issue is that when you have those slowing effects and you do have market declines,

those can lead to a self-reinforcing cycle that makes the overall environment a little weaker. Look, you haven't been afraid to stick your toe in and recommend some retail stocks, right? Right. With me on this set. Yes. Now I'm wondering, and it feels like for many, Target and Walmart were a game changer for a variety of reasons. But that seems to be what has most unsettled many because of high inflation, the lack of pricing power,

margins coming down, earnings getting reset. How do you see it? Yes. So I think it's interesting because I had been watching both those companies very closely and been concerned about starting to see some more promotional intensity come in and what that might mean for the entire economy. And I think, look, those stocks have been hit and even Apollo through today because they're not trading at cheap valuations. I mean, their target's not expensive here. Walmart's, you know, for the quality of company it is, it's not expensive, but they're not cheap. And so I think people are really caught by surprise that they could have this economic sensitivity. So I think where we're dipping our toe in are retail stocks that are trading at like five times earnings,

are trading below pre-COVID levels, where a recession scenario is already priced in. And what we've seen is in the past couple of days even, we've seen some of these companies report and even guide down for 2Q or guide down for the year. And the stocks are ripping because, I think because the values are so low. Now, we do have a lot of stocks that are ripping independent of any news just because people are chasing the junk. But I think in these cases, like the fact these stocks are up on earnings that maybe even they were down in the pre-market, but they rallied because like, well, how bad are earnings really going to be?

That was one of the most interesting things from the notes that you gave to our producers, is focused more on the TJXs or Kohl's or container stores of the world, maybe more so than the Target and Walmarts from a price action standpoint, let's say. Yes, exactly. The major price action was sell-all consumer, even with Walmart, sell all staples. And a lot of staples are pretty expensive. But what was really interesting to me is seeing where were things selling off. And in full disclosure, we have a position in containers store, a position in Kohl's.

We don't own TJ Maxx, but I have enormous admiration for the company. And yet they bucked the trend, and they bucked the trend because they're not, in the case of TJ Maxx, certainly operating very well, but like they didn't guide up for the year. That would have been kind of potentially a weaker print, but people feel like, look, they're operating really well. They're in the apparel category, which apparel sales, by the way, are doing well across the board. We are hearing that, that dress apparel, formal apparel, branded apparel, very little price resistance, doing really strong. And the retailers that are doing well assorted well for those categories. Dillard's was very strong, right, in position in Dillard's.

And so even in this terrible macro backdrop, what you're seeing is that the more commodity categories in apparel are struggling. But people are willing to splurge and target even on their conference call today, like splurge for a little pillow, like for an extra pillow for the house, for, you know, a little dress for your child, something nice. And I think that in these times, even if they're weaker, you're going to see people really be more careful about where they spend. And companies that sell those things that are trading really cheap valuations might be where there's an opportunity and less downside. Well, that's why I wonder if maybe we're misreading or overreading Walmart and Target. They just didn't have the right stuff. Yes. And they paid a heavy price for not having the right stuff. If it was all of a sudden and they said exactly the opposite,

that the consumer was all of a sudden going into the tank, all of these other companies and stocks would be suffering the same magnitude that these guys were. Right. Right. And look, the lower income consumer is struggling. And even TJ Maxx commented on their conference call. He said there are stores in neighborhoods that are relatively lower income are not doing as well as the higher income stores. So that is, I think, maybe potentially across the board. But for the middle and higher income individuals, like households, we are seeing that they still have money to spend on, especially these less expensive discretionary items.

Let's take a look at one of these retail stocks, which if you'll bear with me for just a second, Avery, is moving right now. It's Ross Stores. Let's take a look at the stock action. You can see it down 16 percent on earnings. We need more color on it, obviously, to get inside of the report to find out exactly what the problem is here, whether it is a guidance issue, whether they're suffering some of the same problems that you heard out of Target and Walmart. But nonetheless, the stock is down nearly 17 percent. Is this just one of the names? I just want to you actually, you know what? I'm sorry. I have barely one second. I apologize. Let's go to Courtney Reagan, who has more on that court. Hi there, Scott. Yeah, that's right. So you're talking about raw stores here and you see shares are down 15%.

The report just came out. The company did put up lower than expected profit, also lower than expected revenue. Comparable store sales down 7%. And the comments here from the CEO are interesting. Give us some color into the quarter. Basically saying the quarter started out strong, but then all of these other external headwinds that we've been hearing about started to hit the company. So the government stimulus that was lapping took a hit when you're talking about the comparative sales number. There was a

significant customer pent up demand as COVID restrictions eased. That led up. So that made the comparisons tougher. The external environment proved extremely challenging as the Russia-Ukraine conflict exacerbated inflationary pressures not seen on the consumer in the first 40 years. Now the company is taking this all in and saying, look, the balance of the year is now just much more harder for us to predict. We're going to be conservative in our outlook, and they're taking that down. You can see our investors were surprised even after the commentary that we've heard from other investors and shares of Ross Store are are down 15 percent. And Scott, we know that the off price sector has been strong and TJX perhaps had one of the strongest earnings reports so far that

we've heard this week and so far out of the retailer. So this one's a bit of a surprise. Yeah. And we'll continue to follow it. I know you will as well. Courtney Reagan, thank you so much as we see that stock slide there, do you have a view on this one? You follow it? I do follow it. So we're not involved. So Ross is a very high quality operator. It's not an inexpensive stock. So so any downside surprise certainly can be reflected in valuation. The other aspects of it are that they tend to have somewhat of a lower demographic, and they tend to have less of these dressy, formal, branded apparel categories where you are seeing people spend more and you're seeing less price resistance. And they have, I don't know what they're doing this quarter,

but they have been much less likely to be raising price. TJ Maxx definitely commented they were benefiting from that. So they feel like they want to continue to give value to their consumer, and so they might be being hit by that as well. Let's bring in Stephanie Link from Hightower and Odyssey's Jason Snipe. Both are CNBC contributors. We expand the conversation, which is perfectly segued to you, Steph. You own TJX, and you added to it. Yeah, I did, and I added to it, and I will continue to add to it, especially if it's weak on the Ross Storrs news.

Clearly, Ross Storrs is having a harder time with freight and with wage costs. TJ highlighted those areas as weaknesses for them, too, but they have an entirely new pricing initiative strategy that is helping them not only deliver on margins, but actually increasing their margins. It was an extremely impressive quarter with comps, Marmac comps up 3%. And HomeGoods was down, and HomeSense, their home businesses, fell 7%. But that's basically because they had a 40 comp last year.

So net-net, you're at 33% in terms of the two-year stack. So very, very impressive. The execution is tremendous. As I mentioned, they actually raised their margin guidance. And so this is the kind of story that absolutely you want to own. You want to own pricing power stories. I'll give you a couple of others not in the retail landscape. You want to own something like a Schlumberger because they got pricing power.

Their margins are going to expand 200 basis points this year. You also have Emerson Electric. You have Dow Chemical. Dow is actually increasing prices by 20 percent. So there's a lot of stories that you can find in this place, I think, in the market. And I think we just got to look at the Walmarts and the Targets and now the raw stores as almost like one offs. Because it's very difficult, Jason, to make a blanket statement like you can't own the consumer now because of what you got from Walmart and Target. You just have to own the right ones and you have to own the ones that are executing better than the others. Now, unfortunately, a lot of times you don't know that until the tide goes out and you find out who executed better and who didn't.

But just to say a blanket, don't own discretionary, don't own the consumer, may be too severe. One hundred percent, Scott. I mean, obviously the narrative, there's conflicting narratives just on the state of the consumer. And I understand, obviously, Walmart and Target are major bellwether stocks. You know, Steph has talked about in the past on double ordering and inventory. I mean, that was a problem here with Target. And obviously they had some operating margins losses here. And that's also experienced different, a little bit of a different experience with Walmart with wage pressures. I think you're right, Scott.

I think you really have to be discriminated in terms of what names you're looking at here. Because as Steph mentioned, pricing power and margin expansion is the story to really make sure that you're looking very closely in an environment where inflation is still a major, major theme and will be with us for some time. So I think it's very important to make sure that we're looking at margins very closely. The consumer is still relatively healthy, not as strong as they once were, but they still are relatively healthy and are still spending. I mean, all you have to do is listen. It would be different if Brian Cornell, CEO of Target, came out and said, we're starting to see trends change and the consumer looks a little bit weaker. Didn't say anything like that. In fact, it was absolutely the opposite. Yeah, he was he was certainly optimistic.

And, you know, I think he just he's seen a movement of the categories that people are buying from. And they had over inventory, over assorted in some of the categories that had been very strong. They knew there would be weakness and there was more than they anticipated. We've got another stock that's on the move in big time because of earnings. It's Palo Alto. Frank Holland has that, Frank. Shares of Palo Alto now up more than 10% after earnings where they reported a beat on the top line and a beat on the bottom line. EPS 11 cents above estimates. Also some very strong guidance for Q4. Both the revenue and the EPS estimates above what the street was looking for. CEO Nikesh Arora saying that this performance was a testament to the team's consistent execution

and capitalizing on broader cybersecurity trends. Again, company raising guidance for Q4, its final quarter of the year, after a beat on the top line and a beat on EPS, 11 cents above estimates. The call starts in just a few minutes. We'll look for any commentary on possible impact or increased demand due to geopolitical issues like the war in Ukraine. And also CEO Nikesh Arora will appear on Mad Money later today with Jim Cramer coming up at 6 p.m. Eastern. Scott, back over to you. Yep. Look forward to that. Frank Holland, appreciate that. The update there, stocks up nicely, 11 percent. Steph, you talk about being in the right space as the CEO tonight

with Jim we'll talk about. Cyber, I mean as the CEO tonight with Jim will talk about. Cyber, I mean, I'm not surprised by this at one bit. No, no, not at all. I'm surprised the stock is down 21% before this report year to date. But the whole tech sector has been kind of thrown out, baby, with the bathwater. Fortinet, which is the name I own, had a very good quarter. And they did talk about bookings being better than billings just because of supply constraint issues. So I want to hear

about what Palo Alto has to say about bookings versus billings. It's probably both very, very good. 24% on the billing side is your bogey, but really good results. Total addressable market for cybersecurity is going to be a trillion dollars by the end of this decade. So these are the kinds of names on weakness you absolutely want to be adding to. You know I've been adding to Fortinet and I will continue to do so on the bad days. Jason Snipe, Steph just said something that caught my attention, right? The whole tech sector has been thrown out, right? The good and the bad. Is now the time to really take a hard look at some of the stocks that have been unfairly beaten up or is it just too dicey? is it too soon because the market environment itself just feels so unsettled

yeah scott i mean obviously tech has gotten beat up tremendously and i and obviously there's been multiple the multiples have come in some you know palo alto you know a name that i own and really happy to see uh the print here mean, they've beaten 19 out of the last 20 quarters on revenue. They've beaten 20 out of the last 20 on EPS. You know, so it's really nice to see them move here. But I think, you know, obviously it's hard to call a bottom in tech in all the sectors. You know, I think there's obviously some, you know, there's probably some volatility still here in technology. But these multiples obviously are far more attractive than they were a month ago and even where they were two weeks ago.

So I think you could start to leg into some of them. You know, but again, I think it's looking at pricing power, looking at margin expansion are the important themes to make sure that you're making the right choice here. Well, you you got to watch this interview we have coming up. Eric Jackson is coming up and you talk about hard to call a bottom in tech. Wait till you see the area of tech which he is about to say might have bottomed. I mean, maybe you're going to be surprised, and don't go anywhere, because that interview is coming up too. But what do you think, Avery?

Technology right here. Too tough? Good plays? What do you think? I think you still want to be very selective. And, I mean, just in general, you want to focus on the fundamentals and focus on valuation. Because, I mean, there are some tech stocks that, you know, we're actually, we don't, I don't think we own any tech stocks right now. But some are, or maybe one, are coming down to valuations that seem really reasonable.

Others, they are just, there's still vulnerability if something misses. So but again, we're not as focused on the sector at the moment. But yeah, it's still remaining more cautious on technology overall. I'm sure that there are, you know, we've found one opportunity and there are probably others starting to emerge. Always great having you here, especially here in person on set. That's Avery Sheffield. Jason Snipe, Stephanie Lee, I'll see you soon. Thanks for your time as well. Let's get to our Twitter question of the day in overtime. We're asking which beaten down, speaking of tech, NASDAQ stock will be up the most by the end of the year.

Is it Apple, Nvidia or Tesla? You can head to at CNBC overtime. Cast your vote. We'll bring you the results as we always do. At the end of the show, more earnings are coming out. Applied Materials, Christina Partsenevelos has it. Well, Scott, I think Wall Street was quite bullish on this company, and yet we had an earnings report that failed to beat on the top and bottom line. You had guidance for Q3 that came in light for both revenues and earnings.

What stood out to me is the cash flow for the company, cash flow from operations company. Cash flow from operations, free cash flow came in much lighter than anticipated. And this has a lot to do not with demand, but supply issues. The CEO himself saying, quote, demand for applied materials, products and services never has been stronger or it's never been as strong, yet we remain constrained by ongoing supply issues. So this is going to be a big concern. What was the impact of shutdown in China? Is this going to continue?

It appears that it's already affecting this company, hence the decrease in free cash flow. And you're seeing the stock price down over, oh, it was negative 5%. Now it's coming up a little bit, but still selling off on the news. All right, we'll follow it. Let us know if there's any other big move in that name. Christina Partsenevelis, thank you. Up next, it's been a tough year for tech. You know that by now. XLK is down more than 20 percent. That's the ETF that tracks tech. Our next guest, though, sees big opportunity in this beaten down part of the market.

You might be surprised exactly where. We'll talk about the big names he is betting on now. Overtime is back right after this. We're back in overtime. This whole stock sell-off started with those higher valuation names and technology, many of which have gotten clobbered. Our next guest suggests now is the time to get more bullish on that space, even with the market still so unsettled. Eric Jackson, the founder and president of EMJ Capital. He's with us live. I got to say, when I saw this note today, I said, what? Eric Jackson likes many of the Cathie Wood names right here. I was sitting at my desk last Thursday morning, Scott, and things just got stupidly priced. I don't know if you recall. I was looking at prices.

Oh, I recall. I was looking at prices. I remember. If you asked me six months ago, probably my biggest fear was, are some of these names actually going to trade down to the March 2020 pandemic lows? And we've gone way past that with several of these names. We are now in a zone which is, for some of these companies that have been public for maybe six, seven years, they've never been as cheap as a public company as they are now. So yeah, for those names, and it's a few, it's not across the board by tech, but for some of these growthier, smaller cap names, I think you have to start buying now.

Wow. And let's go through some of these names because they are names that most people know and many who are listening to you right now may own. Let's talk Twilio. Why Twilio? Well, Twilio IPO in 2016 was sort of an IPO darling at the time. The CEO, Jeff Lawson, was on the cover of Forbes. Stocks went up like 5x in four months. And then they lost Uber as a client. And Uber and WhatsApp were their two biggest clients at the time. And the stock got murdered. It got sent back down to below its IPO price and basically was in the doghouse for a year and a half.

It was still a good company. It turned out that Uber made a silly decision in getting rid of them. But even when they were in the dog house, they were at 5X trailing price to sales, which is for a SaaS company, super cheap. They got even lower than that on last Thursday. So that's a name that I bought then.

It just shouldn't be that low. I don't care what the interest rates are. I don't care that, you know, the sky is falling. When you see prices like that, you have to be opportunistic. That's the key thing you just said in all of that. That's certainly one of the key lines was I bought it then last week. You own these names that we're going to talk about. I want to be very clear to our viewers about that. This is not Eric Jackson coming on and just suggesting, hey, I like this name. It's come down a lot. You bought all these. You own them, including, man, I mean, one that got absolutely

destroyed is Upstart. Yeah. Yeah. Upstart from 400 to I think the low last week was $25. So the IPO price for Upstart when nobody was paying attention to it in December of 2020 was $25. So the IPO price for Upstart, when nobody was paying attention to it in December of 2020, was $20. But obviously it's a billion-dollar company now. It's a much bigger company than it was when it IPO'd. And it was a much cheaper company last week when it was at $25. I don't care. They missed the quarter. They made a bunch of self-inflicted wounds.

They kept some loans on their balance sheet. They're still smart people. They're still all the reasons why this stock was a buy on the way up are still valid, smart Google people. I've known the founder CEO for six plus years. He's a solid guy. They are going to figure this out and it just shouldn't be trading where it is. You know, it was it was time to step in and buy that. I think the most controversial name on your list and what has become one of the most in the market itself is Carvana. Why Carvana now? Everyone loves to hate Carvana. This stock is amazing. It went down 75 percent from last summer

till the end of 2021. And then it's gone down another 20 or 75 percent this year. Everyone hates it. They think they can't make money. A lot of people are as bearish on it as they were bearish on Tesla, saying it's going to go bankrupt. The fact is, though, similar to Amazon back in the day, they've invested in a huge infrastructure

for their used cars. Through that platform, they're going to sell more used cars in the future when they figure this out. They're going to sell new cars. They're going to sell fleet used cars in the future when they figure this out. They're going to sell new cars. They're going to sell fleet management. They will be around. And, you know, I want to make a point that's very important. Everyone loves to compare all these names to the dot-com era, Scott. But it's important to remember that some of the names

in the dot-com era that people back then would say, these are the junkiest. This is the Carvana. This is the Pets.com. This is the upstart of that time. They bottomed a year or two years before the NASDAQ or the S&P bottomed. NASDAQ and S&P didn't bottom. It was basically going down for three years straight. Didn't bottom to late 2002. But many names did a nine-month in the doghouse and bottomed late 2020. Amazon basically bottomed just after 9-11, a full year before the Nasdaq did. So you have to get into these names now, even if, you know, everyone's screaming that the recession is coming and the market might not bottom for another year, year and a half.

Eric, I appreciate your time so very much. We'll talk to you again soon. That's Eric Jackson joining us. Up next, a new twist in the Twitter takeover saga. What Twitter executives reportedly told employees today that flies directly in the face of what Elon Musk has been saying. But first, PIMCO's playbook. Aaron Brown here next to break down where she sees opportunity. We're back after this. It's time for a CNBC News Update with Shepard Smith. Hi, Shep. Hi, Scott. Thanks. From the news on CNBC, here's what's happening. The suspect in the shooting rampage that killed 10 people in Buffalo on Saturday entered a court this morning to shouts of coward from a courtroom spectator. The prosecutor announced a grand jury had returned an indictment but said he wouldn't release charging details until the grand jury

probe is complete. The suspect ordered held without bail. He's due back in court three weeks from today. More than 1,700 Ukrainian soldiers from a bombed out steel plant in Mariupol now in Russian custody. Several hundred soldiers surrendered today, the Red Cross registering each of them as a prisoner of war, trying to ensure that they'll be treated humanely under the Geneva Conventions. And just in the last hour, the CDC authorized boosters of Pfizer's vaccine for kids aged 5 to 11, roughly 28 million children in that age group. But according to the CDC, only about one-third of them have two shots of that vaccine. Tonight, the anxiety over baby formula.

Why so many sailors in the Navy are deserting. And the head of NASA joins us for a big night in space on the news. Right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. All right, sounds great. Look forward to that, Shep. Thank you. That's Shepard Smith. Many are wondering whether those earnings reports we mentioned

already from Walmart and Target signal something ominous is on the way for the economy. Our next guest says the answer is yes and is updating her playbook as a result of that. Erin Brown, PIMCO's multi-asset strategies portfolio manager with us now. It's good to see you again. Welcome back. I mean, these reports to you in some respect was a game changer no it was i mean we're really starting to see a retrenchment of all the durable good purchases that consumers bought during the pandemic post pandemic period so while people were at home they were you know buying more retail goods they were buying more appliances more tvs And now what we've actually heard over the last couple of days from Walmart, Target,

and some of the other retailers that have announced is that they now have excess inventory in many of these products. And so they're having to expand warehouse capabilities in order to really absorb some of this excess inventory that's now not selling through. We've seen inventory to sales ratios go up, particularly for apparel and for TVs and appliances. And I think there's really more pressure to come, not just for the retailers, but also for the entire supply

chain, for the truckers, for the shippers, for everyone down that supply chain that's linked to the, you know, those post-pandemic boom. Are you telling me I need to stay away from all the truckers, the rails, all the retailers, or can you be a little selective? I think you can be selective. I mean, I think particularly amongst the rails, some of them are still very much linked to the commodity trade. And so you don't want to be underweight or shorting the rails that are linked to commodities. But those that are geared towards the more towards goods, I would say right from them, you know, sort of wholesale right now,

where I do think that there's opportunity is you are really starting to see this shift from goods to services accelerate. So I think that there's real opportunity in some of the reopening trades. But amongst the durable good names, I really think the retailers right now are going to continue to remain under pressure. We haven't seen earnings come down yet. And what actually we're seeing is that guidance is still quite robust for the rest of the year, expecting double digit earnings growth. That's not likely, particularly if we continue to see inventory levels remain high. But these names that you want me to look for in travel and leisure, they've run already so much. I mean, you have to believe that, you know, there's going to be,

say, peak travel at some point, right? Consumers have taken the money they might otherwise have spent elsewhere. They put everything towards the summer vacation they've wanted to take for the last two years. They're going to take it, come heck or high water, and then they may cut back elsewhere. Isn't all that in the stocks already? I don't think it is. I mean, pricing has been exceptionally strong. Capacity is still slightly below, particularly in urban areas, slightly below what they were running at pre-pandemic. And you are seeing people being able to absorb higher prices and higher price points for their travel spend. And so I think that that pricing power exists. The other thing that's, I think, really important to keep in mind is you're

starting to see labor wages start to roll over. And yes, there are very high levels, but on the margin, you're starting to see more labor capacity come back into the market. And this has been a significant drag on margins for these service-oriented names over the last year. And so as you start to see that abate a little bit, I think that that also is going to add margin strength to these underlying names. And I don't think that that right now is being priced in to the market. Interesting perspective. What about the market at large? Where are you on whether we're near a bottom, whether we put one in? How do you feel about it now? So the market's down, I think, something like 19 percent from peak to trough. And historically, during recessionsions the market troughs at about down 24% on average and so we've ready, you know

I've largely moved to pricing in a recession You know that that would say we're about 80% through pricing in a recession and even if you look at the multiple compression It would also suggest that we're you know, somewhat in the range of about 40 to 50 percent pricing in a recession right now. So if you think that there is a recession coming in the next one year, then the market probably can fall another 10 percent. If you don't think that there's a recession coming in the next year, then there's a lot of room for further rally from here. Our base case at PIMCO is that we don't think over the next 12 months we're likely to see a recession. So overall, I think that the market is, I would be cautiously

optimistic, and I think that there's opportunities to buy, but I think that there is pretty wide band between, you know, the losers and winners in terms of the sectors you want to really target. Yeah, and please forgive me for stepping on your toes there. I thought you were finishing your thought. I mean, it feels like in the last couple of days, the the runway, if you will, into a recession has been moved up by by many people out of just sheer fear about where where we're going and what some of these earnings reports may portend. Aaron, I appreciate your time so very much. That's Aaron Brown joining us today from PIMCO. Up next, your earnings rundown. A slew of retailers just hitting the tape as well. We're busy. We'll break down all those moves in the OT when we come back. I want to give you another check on a stock that's been moving in OT on earnings. There it is. It's down even more now.

This is Ross Stores plunging after the company said it was adopting a, quote, more conservative outlook for the remainder of the year. It's an interesting move. You saw right after it reported Ross stores plunging after the company said it was adopting a, quote, more conservative outlook for the remainder of the year. It's an interesting move. You saw right after it reported it was down about 14, 15 percent. Now it's down approaching 20 percent. You just get punished if you report something that the street doesn't like. I think we're all learning that, Courtney Reagan, right? Yeah, absolutely. This has been a really tough and very interesting quarter for the retailers because you have to pay attention. They're really not all the same. They're managing things very differently, Scott. So let's get you up to date with VF Corp popping on results,

even though it actually had a slight miss on the top and bottom lines compared to consensus and put up an earnings guidance range below consensus. But expectations had really fallen for VF Corp going into this print. Shares were down 25% in the last three months. Vans, the largest brand by sales, that was flat. The second largest brand, the North Face, those revenues grew 24%. And then we've got a huge beat by Decker, sending shares sharply higher here after hours. This is the parent of UGG. Remember, of course, that's still very popular in many parts of the world and with many cohorts. It beat largely on profit expectations and put up stronger revenues. Decker's guidance

is stronger for revenues, but for weaker earnings going forward. UGG revenues grew 25% year over year. Hookah, which is the second biggest brand, grew by 60 percent. And, Scott, it wasn't that Decker's didn't get hit by higher supply chain costs and all these other external factors. It just appeared to respond more deftly than others. It actually turned it in operating margin at 18 percent. That's the top end of its original forecast. Decker's higher by 12.5 percent. You've got to have the right stuff as we're learning, and you've got to operate well around it, right, Court? That's right. Absolutely. It is not easy to operate in this environment. But if you do it well, you're going to get rewarded. Yeah, as we're seeing today in the overtime.

Courtney, thank you. That's Courtney Reagan. Up next, Twitter executives reportedly telling employees its $44 billion deal to sell the company to Elon Musk is moving forward as planned. They're not renegotiating the price, they say. We'll break down the latest deal drama when the OT returns. More drama today in the Twitter versus Elon Musk saga. Company executives reportedly saying they will not renegotiate the deal at a lower price. Let's bring in our resident experts on this story. Big technology

founder Alex Kantrowicz. Casey Newton is also with us. He's the editor of the Platformer newsletter. Both, of course, are CNBC contributors. First thing I thought of when I saw these headlines, get the band back together again. And here you guys are. Twitter executives say no such thing as deal being on hold. They won't renegotiate the deal price. Casey, what does your reporting tell you? Well, inside Twitter, this has been the best thing for morale since the acquisition was announced. Employees were basically cheering as they were hearing from their executives as the executives said, hey, look, a signed contract is a signed contract and we're not going to sell this at lower than the price that Elon signed for. So there are a lot of smiles at Twitter headquarters today.

So it's interesting, though. I thought the view was that employees didn't want the company to be sold to Musk. But now they're happy because the stock price has come down so much they want the deal to protect the original price. I think that's part of it. And I think that part of it is just finally, it seems like somebody is going to try to hold Musk accountable to what he already did, which was sign on the dotted line. So, you know, in the months leading up to this, the Twitter executives have really just kind of rolled over and let Musk run the show. I think employees are excited that finally they're standing up for the company. Well, and Parag, the CEO of Twitter, Alex, has been doing that on Twitter, right? I mean, he's been directly engaging with Elon Musk on this back and forth as this drama

continues to play out. For sure. But it's been very weak. What Parag has been doing is making these vague statements. Of course, he's pushed back on the bot situation, but I don't think he's shown any vision for what he wants to do with the company. Of course, he's pushed out a few executives, but he didn't say what the different direction is that he wants to take the company in. And I think that he's allowed employee morale to get so poor to the point that when the guy who says he wants to lay you off now will have to sign the deal, they cheer. So I'm not going to sit and applaud the job that he's done, I think it's been pretty dismal to this point. But Casey suggests, Alex, that employee morale may be counterintuitive to what people originally thought at this point. It's all relative. So if you've been living in a world of hurt for a long time, which is what Twitter employees have done the past month, which has felt like years to them,

you're going to take any sign of optimism, any sign of progress, any sign of leadership, and you're going to cheer it. But again, this is Elon Musk. The guy says that he wants to lay people off inside the company. And so the fact that they're cheering now, the fact that he's going to maybe be pushed to sign this deal just shows you, I believe, how bad it's gotten inside that company. And for me, this looks like a Pyrrhic victory, if a victory at all. Casey, Alex says that Parag's being weak. I think that was the exact word that he used. Maybe it's simply he's holding all the cards. He has a signed deal at a set price higher than where the stock is trading now. So why would he do anything other

than what he's doing now? Worst case scenario, he ends up in court. And then I guess they see what happens. That's right. You know, they say if you're hunted by a dinosaur, you shouldn't move because they sense motion. Like, that's how I see Parag acting in this situation. He's trying to be calm and cool and just hoping if he doesn't make any sudden moves, you know, maybe he's not going to get eaten by the velociraptor. So we'll see how that works out for him. So last word goes to you,

Alex. Is that is that where we are heading? Do you think ultimately to a courtroom to figure this whole thing out? You know, I think we likely end up with a settlement where Elon does try to hold back from making the purchase and gets Twitter to come down on the price. Everybody knows this was an overpay. And of course, Twitter does have a deal in his hand. It's a great point. However, I think what the discussion fails to address most of the time when we talk about the fact that Elon is bound by this agreement is what happens when he goes to court. And if you think about it from every stakeholder, you think about advertisers, are they going to want to spend money with Twitter while it's in the middle of this battle? I don't think they're going to spend as

much. Employees, you know, they'll probably be out the door. The company lost its head of product management and data science this week. I think that's pretty big. And of course, shareholders, you know, I don't think shareholders are going to want to be in for this ride where it goes up and down and up and down. And so I think Elon, you know, Parag holds some cards, but I don't think Elon has lost his leverage. I think he still has the leverage. This deal is going to be more than Twitter will ever get. And so he's able, I believe, to play the negotiation game. Twitter, of course, is never going to say that it's willing to negotiate. It would lose all its leverage. So I do believe Elon's not out of the account right now. I think he still ends up with the

company, but at a discount. Who knows what a discovery process would reveal anyway about bots, spam, and gosh knows what else at this point. Guys, thanks. We'll talk to you again soon. I'm fairly certain of that. That's Alex Kantrowitz, Casey Newton joining us there. Up next, one money manager making the case for Cisco following today's plunge. We'll break it all down in our two-minute drill.

And coming up at the top of the hour on Fast Money are the pillars of the market now cracking. The fast traders digging into the continued weakness in the mega cap names. Overtime's back right after this. It is time now for our two-minute drill. And joining us now is Cope Corrales, Director of Investments, Shana Sissel,

right here at Post 9. It's good to see you. Thanks for being here. No problem. Thanks for having me. First, before we get some picks, let's talk about the markets. What's your view right here and now, given all that we've endured? So we're now kind of in bear market territory, which is actually a good sign because from here, once you hit 20%, forward returns are typically better than average. So this to me, I don't know when the bottom is, but this is a good sign. And just remember, like in the history of the stock market,

it's always recovered its losses. May have taken some time, but these are opportunities to be buying right now. Let's talk about what opportunities you see best. Your top idea is Leidos, L-D-O-S. Yes. Tell me why. Leidos, government contractor, very diversified business, not in defense per se. So this isn't missiles and stuff like that. They're doing cybersecurity, system networking and engineering. They also have a growing and high demand health business, which was the key driver of their earnings this past quarter. They bought back $526 million in stock in the first quarter. They're expecting to have a billion in free cash flow between now and the end of their fiscal year. So really good stock trading at 16 times,

1.38% dividend yield. Solid idea. Relatively recession-proof. Governments spend money in recessions. Okay. Oxy. Now, is this, okay, energy because energy's been doing great plus Buffett equals excellent? Yes. Yeah. I mean, the sector is where you want to be. So what are the names that make sense? Oxy is a great deleveraging story. They paid off 10 billion dollars worth of debt in the last two years after their Anadarko acquisition. So you have improving financials. You have margin expansion, increasing demand. All of these things play out well for the stock. Well, you get the good housekeeping seal of approval or whatever it's worth with Buffett, too, right? I mean,

it has to play a role in some respects. Cisco is the last pick. The elephant in the room, which was down big time today. So this is a stock that on the fundamentals, you have to look at what their earnings reported today and say it was out of their control. A lot of the zero COVID impacted their ability to meet demand. They have very strong demand. In the first half of their fiscal year, 30% increase in demand. They have a software business that is helping transition them from their hardware business. And it's trading at 12 times.

It has a 3.8% dividend yield. It makes sense from a fundamental standpoint. And given that it just sold off, I would be a buyer here. Yeah. Russia in issue, too, as Chuck Robbins, I thought, so eloquently said right here on this set earlier this morning. Fanta Sissel, it's good to see you. Thank you. Thank you.

All right. We'll see you again soon. Up next, Santoli's last word. Overtime's back right after this. To the results of our Twitter question of the day, we asked which beaten down Nasdaq stock will be up the most by the end of the year. Almost a three-way tie. Wow, that's pretty interesting. Apple, 37 percent.

Tesla, 32. NVIDIA, 31. Three names have gotten beaten around big time. It's time for Santoli's last word. Do you have a quick reaction to that, by the way? Well, I actually have something related to Apple, which is one of my long-held contentions that very few people agree with, is that Apple is not really a bellwether for the stock market in the sense that it doesn't really reflect or lead the overall index direction and trend. A lot of times it's outperforming vastly. Sometimes it goes on these streaks. It's done nothing when the market was up.

So what we've seen recently is kind of fascinating. It really outperformed the overall market, especially the equal weighted S&P for a while. Just in the last few days and weeks, it has buckled. And so now it's down almost 25 percent from its high. And if you actually look at it compared to the equal weighted S&P, it shows you that it's sort of lagging on the way down. Sometimes people will interpret this as finally they're going into the havens and it's a latter stage of a downturn, just as the most speculative stuff, at least tentatively, has started to perhaps find some kind of footing. It's hard not to look at this as such an important stock, though, given the amount of ownership. It's not saying it's not important. It's not saying that it

doesn't have a huge influence on the indexes. It's just that its behavior doesn't necessarily tell you anything about what happens next for the overall market. We're going to see what happens next. It's been in the red. That's Mike Santoli with his last word. I'll see you right back here tomorrow.