Closing Bell - Closing Bell Overtime: More August Gains Ahead? 8/4/22

Episode Date: August 4, 2022

Hightower’s Stephanie Link says this rally could last the rest of the month – she makes her case. Plus, Wedbush’s Dan Ives gives instant reaction to Lyft’s quarterly report. Plus, market expert Mike Santoli’s “Last Word” as we head into the final trading day of the week.

Sarah, thank you very much. Welcome to Overtime, everybody. I'm Scott Wapner. You just heard the bells. We're just getting started here in just a little bit. I will speak to Schwab's Lizanne Saunders on why she says fading part of this rally makes some sense. She'll tell you exactly where we do have more earnings imminent. The former square now called block reporting any second now, along with Expedia and DoorDash and Lyft and many more. The OT reporting crew, as usual, standing by to break in with those results. We'll show you the stock moves that always follow. We begin, though, with our talk of the tape. Why this rally could last at least for the rest of this month? That, according to Hightower's Stephanie Link. Why does she think that? We take that question to her right now. She's sitting right in front of me here. Why do you think that? I mean, we've had a great run, right? S&P up 14 percent from the lows, Dow 10.5, the NAS 20. Why does it last for at least a few more weeks, do you think? Well, it's been an interesting week. We got really good, solid economic data on the one hand, and we also are getting really good

inflation data. It's coming down, right? We're still at elevated levels, but it's coming down. And I think that's why the market is rallying. Right. So the economic data jobs better. Jolt's challenger gray. Even initial claims. They're at historic, still close to historic lows. Right. We'll see what we see, what we get tomorrow. Factory orders really good. ISM new orders. That's a leading economic indicator near 60. At the same time, you have food prices coming down. You see what's happening with energy and the ISM prices paid both manufacturing and services down at one, two year lows. So I think all of this is kind of exciting for people, for people. I can see why growth is actually doing better than value. And it has. And I think that that can continue.

You're telling me that this is now a glass half full market rather than a glass half empty? Because it sounds like that's what you're telling me for now. Right. And earnings are hanging in. Guidance has been pretty good. But for now, what we don't know is all the moves that the Fed did and what they will do going forward. We don't know what that means for the economy a little bit longer term. Right. So shorter term, I think the momentum stays. And then we get September and we get a Fed meeting and then we get more rates. And we don't know if Bullard is going to be right. They're going to go to 375 to four. So we have a lot of unknowns. But it's not just Bullard, though, right? I mean, this week has been the thing with every single Fed speaker has been hawkish,

right? Like saying to the market, I don't know what your reaction has been since Powell came out. You guys are all wrong. I know. So I think I mean, I hope that they can engineer a soft landing. But again, I don't know if they can. They don't have a good track record. But for now, let's let the markets run, do their thing. And then in the fall, we'll have to see what happens. We also have to see what happens with energy prices in the fall as well as the SPR comes out. We make this move in tech. I said the Nasdaq's up 20% off the low. And by the way, earnings coming out any second now. I see that Expedia Group

has crossed the tape. We're going to show you that, too. Our reporters going through that. We'll get back to tech in a second. But I want you to react to this. You sold it not that long ago. So I know you don't have to. I know you haven't had a second to look at the number. But why did you sell it even before this report was going to come out? Well, I made a lot of money in it last year. Last year was the reopen theme. This year was not the reopen theme, right? People think that the pent up demand is going to go away. And we saw that with Airbnb when they reported just the other day. So I think room nights, we have to look at that. We have to look at room nights going forward. The guidance, we know bookings, holdings, they actually lowered their numbers, too. So did Airbnb tough and it's tough for the space to look into 2023 and see what the travel demand is going to

be. What they say now with their earnings is like, yeah, we know we get it. But trying to trying to look forward is going to be we do have it. OK, Seema, you have the the numbers here. Why the stock is shooting higher by six percent? Well, here's why, Scott. Better than expected numbers on the top and bottom line, 3.18 billion. That is much higher than what analysts were expecting. Earnings, a profit of $1.95 adjusted. And now you're seeing the stock up over 6 percent. The company says lodging bookings were the highest in the company's history,

while revenue and adjusted EBITDA were the highest for any second quarter. So once again, you have a travel company painting a very strong story around the recovery in travel. Those were the comments that CEO Peter Kern says here in the press release. And that's why you're seeing the stock up. But as you were just discussing with Stephanie Lingscott, it is all about the third quarter. The pace of growth that they're seeing going into the fall, especially as business travel picks up. This is a company in the last three months that has gone through a restructuring. They've added a number of tech executives to their team to allow them to go after that business traveler. Is it starting to work?

We will hear from CEO Peter Kern on the conference call at 4.30 p.m. Eastern, and he will then sit down with us first on CNBC tomorrow morning at 10 a.m. Guidance, Scott, once we get more clarity on that, I'll be sure to come back with that. Yeah, please do, because that's what matters most. No surprise that maybe on the early pop of the stock is on the current report. It's the look forward that matters most. So let's go back to our conversation. Seema, thank you. I'll see you again, I'm sure, shortly up better than seven and a third percent here in overtime. This move in tech has been dramatic. It's been critical to why the market is where it is. Do you see that continuing? And that's why you think the rally still has legs? Yeah, I think if you have lower growth, lower inflation, but steady growth and lower inflation, growth is going to outperform value.

And especially since it actually has been a massive underperformer year to date. So these stocks are still down double digits, Scott. I mean, you know, I've been adding to Broadcom, right? And by the way, I added to Fortinet today. So you're looking for places to be a buyer? Because they're down still a lot, and they're reporting earnings that aren't pretty decent, right? So, I mean, I think there are opportunities. I think the rally, though, will continue. And tech income services is 35 percent of the S&P 500. So if they do better, the market probably does better. All right. Let's expand the conversation now. Solus Alternative Asset Management's Dan Greenhouse joining us along with SoFi's Liz Young. It's

good to see the both of you. Liz Young, how about that? The rally will continue if tech continues to perform. Does that mesh with your view? So I agree with what Steph said about for now. I think this is good. However, this rally, in my opinion, has been predicated upon the idea that the Fed would either be scared by growth slowdowns or satisfied with the progress that they've seen. And I don't think they're either of those things. So I think we're still going to see tightening. And the market got a little bit ahead of itself, expecting more of a dovish pivot or some kind of pause in fall, which I don't think is going to happen. So I wouldn't be surprised if we give some of this rally back, especially in tech, because those names have seen just kind of pure multiple expansion in these last few weeks.

But I do still think that in August, if we see dips, those are buying opportunities. And you want to be present in the market for the second half of this year, because I think the third and fourth quarter could see some good upside. Now, not in a straight line, but I think it could see some good upside as the market gets satisfied with lower inflation and with the idea that we're not headed into a huge recession, at least this year. All right. I just want to call your attention to that at the bottom of your screen. DoorDash beats there, but they do report a loss and it looks like the loss is bigger than expected. We're going to take a look at that. Our reporter, Steve Kovac, is on the case. He's going to join me in just a moment. As a matter of fact, I can go to him right now. Steve, what do we see here?

Yeah, I'm right here. DoorDash, here we go. We've got a revenue beat, $1.61 billion versus $1.52 billion expected. Loss per share a little worse than expected, Scott. $0.72 loss versus $0.41 loss expected. Growth in orders, by the way, flat quarter over quarter, up 23% with 426 million orders. And growth year over year, though, Scott, is decelerating pretty rapidly here. We got orders were up 69 percent in the year ago quarter. So compare that. And then adjusted EBITDA, a nice little beat here, $103 million versus $57 million expected. And as far as Q3 guidance goes, we got gross order value roughly in line with consensus,

$13 billion to $13.5 billion expected. We were looking for $13.19 billion. And then adjusted EBITDA for Q3, they're saying $25 million to $75 million versus $51 million expected. Looks like shares are up about 11% here, Scott. Yeah, maybe better than feared. I mean, they have a tough pandemic comp obviously coming out of that. So you have Lyft as well. Speaking of bars that are high because of what Uber delivered. And by the way, you know, this is a stock as well that we've been watching. It's down 60 percent year to date. It's up 29 percent, though, from its low. Yeah, let's let's

break down these results here, Scott. Lyft effectively in line with revenue expectations at nine hundred ninety one million dollars. Adjusted EPS, a very solid beat here. 13 cents. The street was looking for a loss of 3 cents. Adjusted EBITDA, also a solid beat here. $79.1 million, blowing away expectations of $20.5 million. But those net losses growing significantly, up nearly 50% from the year ago quarter to $377.2 million. By the way, I chatted with Lyft president John Zimmer about all this,

and he was telling me that that net loss is largely due to a tightening around insurance payments and partnering with large insurance companies to hold that risk instead. And Zimmer telling me we're going to be getting some more detailed guidance than we have been throughout the pandemic on the call that begins at 430. So stand by for more, Scott. Yeah, we certainly will. They've been spending a lot of money, too. I got Dan Ives waiting in the wings in a little bit to come talk about that. Steve Kovac, thank you very much. Pop back on with whatever you have there. Dan Greenhouse, let me bring you into the conversation,

too. An interesting note today from JP Morgan, which talks about why we're rallying. Right. We mentioned what mega cap tech has been doing. The markets, what I think is an amazing ability to look past some of this really hawkish Fed speak this week and continue to go up. Is it short covering? Maybe some, they say. Better than expected earnings from mega cap tech. Yeah, they say that to retail. Maybe retail's return. There's a ton of money on the sidelines that may be coming in.

The catch on all this is they say at some point, look for a flush day. With the VIX through 40 and the S&P down 4% to 5% as part of forming that bottom, suggesting that the bottom is not fully in. What do you think? Yeah, I mean, it sounds like they're attributing just about everything possible to the rally. And I guess that's fair. I mean, when you have this vicious a rally over this short period of time, it probably is a accumulation of issues. I think you've been harping on this the last couple of days,

the level of the hawkishness coming out of various Fed members who clearly wanted to come out in the wake of the dovish reaction to the press conference and walk that back. The Treasury market has not ignored that. some degree the equity market has. But just to tie this back to your main question, you know, I know right now it's it's it's fashionable to say that the bottom is in and we're all done and maybe so for now. But I think you still it would just be really unusual for the equity market and the credit market to have bottomed before the ISM even falls below 50 before you have meaningful earnings revisions and and the labor market just

hasn't turned down at all it would just be really unusual to have all this happen before those other things happen and so so I think that you still have a a good chance let's say of additional lows although not meaningfully lower but but further lows Liz well why is the market been able to look past all this talking this week this tough talk from Bullard and Mester and everybody in between? Well, I think part of it is that the Fed now has kind of introduced this veil of mystery and said that they were going to be data dependent. And the data is showing us that things are slowing down. And the whole point of this is to create enough slack in the economy so that we get

inflation back in balance. We get supply and demand back in balance. But to Dan's point, I think if you look at just what the yield curve is telling us, that if you look at yield curve inversions historically and when a recession or maybe a new market bottom would form, it takes a while. So that's why I think for the next few months, we might be OK. And maybe even through the end of the year, you get past midterms and you see a nice rally on that, too. You get through the end of the year and you could have some upside in markets. That does not, however, absolve us from having a deeper recession in 2023 if we don't solve the inflation problem. And solving the inflation problem means that it needs to come down quickly through the rest of this year, not just in little bits. Kind of.

And Scott, let me just add real quick. Go ahead. Real quick, to your question about why the market's ignoring this, let's also be clear that it hasn't been sort of the senior Fed leadership from the market standpoint that has come out and made this case. It hasn't been Jay Powell. It's been, you know, we'll call them second tier Fed members. And I think maybe if obviously the chairman were to come out.

But you know that, I mean, there's been some prominent people who have spoken this week. And it's like literally every single person who's come out. And by the way, you know, Bullard is a master of the tape bomb. I mean, this guy, you know, for the last few years, whatever he says, the market has gotten unsettled by it before. However, this time, because everybody's feeling good about the rally, and maybe rightfully so, we've been able to look past almost anything that's thrown our way. And maybe it's because of what Steph said at the very top of the show.

That's because some of the data that's come out has actually been friendly. Yeah, I think that's all fair. And I'll throw it back to Stephanie and say, whereas now we're saying, why is the market ignoring all this? Two poor jobs reports from now, we might be looking back and saying, how did we miss the warning signs? And I'd love Steph's take on that. Yeah, no, we might. I think that we will see some interesting job numbers. But I think the more important data points are going to be the inflation numbers. No, next week. Right. CPI, PPI, let's see, core PCE, which is still at 4.8 percent. But let's see if that comes down. Again,

look at food and energy, though, too, because that goes really right into the consumer pocket. And that's why one of the reasons I've been buying some of the consumer discretionary names, right, because the pressures are coming down. They still are in a world of pain on inflation. Don't get me wrong, but it is coming down. It's not accelerating from here. They still are in a world of pain on inflation. Don't get me wrong, but it is coming down. It's not accelerating from here. And wages are still going higher. So we'll have to see that number tomorrow, too. I mean, the fuel, you know, the gas prices coming down. Remember, gas prices being so high were one of the principal reasons why the Fed has been as hawkish as it has been all along. That part of the inflation curve, if you if you want to call it

that. I'm looking at something, you know, that just crossed a few moments ago on Twitter, a picture of a gas station with a three handle on the price of gasoline. So we're going to get a pretty good look next week on on where the inflation picture. I'm not going to say truly stands because the CPI, Liz, is so backward looking that it's hard to get a true gauge. And that's why the Fed doesn't even use it as its principal one. But nonetheless, it's going to either validate in some respects or throw water on this rally. Well, so first of all, the important number to watch in CPI is the month over month change, because that'll be where the trend is identified if it's coming down. But gas prices and things like mortgage rates coming down, that is really meaningful for consumer sentiment. And if you see consumer sentiment pop back up,

then we're in an okay place for consumer spending. And I'm absolutely with Steph on buying consumer discretionary names. I think that in an environment where the Fed continues to raise rates, the growth that can get us out of this is going to come from the consumer. It's not necessarily going to come from tech and communications. And consumer discretionary has been beaten down. So if we can keep consumer sentiment at sort of a floating level, then the consumer can continue spending, and that might keep us in an okay position. Are we going to do that, Dan? How heavy a lift is that? Yeah, I mean, listen, as long as the jobs market is strong and wages are growing, albeit real wages are negative, you can hold this off to some degree.

But I do agree that mortgage rates coming down and particularly gasoline prices coming down should be helpful for consumer sentiment. But listen, at the end of the day, the Fed doing what it's doing, surely job growth is going to slow. We see this in the jobless claims numbers that come out week after week telling us something is going on here. Obviously, they're not high historically, but they are moving in that direction. And that's what matters more so than the level. I imagine you're going to have a much slower level of job growth reported tomorrow. And I assume that trend will continue. And we'll see how the consumer is doing in the fall thereafter. To be clear, I'm not making the case for some sort of a calamity.

I just think everyone is very quick to dismiss the long and variable lags that tend to be associated with monetary policy when the market is moving higher. I hear you, but you heard Steph at the top of the program really paint a glass half full picture now for the time being. And she put a caveat in there for the time being, that's a market change from where we were, where it was like a bucket half empty, not a glass half empty. Have we really changed? Is the risk-reward scenario better for the people who are watching this right now? Yeah, well, to Stephanie's credit, I mean, if you're paying attention to earnings,

then there's no way you are not, for lack of a better word, more enthusiastic today than you were two or three weeks ago. Earnings reports on balance have been fairly good. I mean, obviously, there's a lot of uncertainty out there. All sorts of multinational companies are pulling out of Russia. You've got the extremely strong dollar. Inflation is an issue. And a number of companies have referenced us talking ourselves into a recession. But then at the same time, you have the casino companies telling us that Vegas is going gangbusters.

You have all the travel companies more or less saying everything is fine from the travel side of things. Google reported that with respect to search. So you could point to any number, any corners of the market, and say more or less that corporate guidance and corporate earnings were better than expected. And so, again, you would be more optimistic now than you were two or three weeks ago. But again, the point is, what happens as the effects of Fed policy begin to work their way through the entire economy and not just the housing market? But Dan, isn't that more of a 2023 issue? Before you answer that, before you answer that, forgive me, Steph, for jumping on your toes

there. I just want all of you to know that Block is out, Square, the former Square, is out. We're going through that right now. You can see the stock is down about 6%, but we'll have the reporter on the case. I mentioned it was up into the number and quite substantially, up 18% just this week. It's only Thursday. So that gives you an idea of what this stock has done. Kate Rooney has it for me now. Kate? It's like a beat here on the top and bottom line for Block, formerly Square EPS. This is the adjusted EPS number, a beat by a penny coming in at 18 cents. Revenue for the quarter, 4.4 billion. That was also better than expected.

Gross profit up 29% year over year. Also some cash app numbers here. That is still growing double digits, 29%. Square, which is sort of the seller side of the business, growing right in line, that same number, 29 percent year over year. And then Cash App reaching 47 million transacting actives. That was up 18 percent year over year. This has really been the higher growth area for Square. Also saw the highest quarterly inflows ever for Cash App. Appears as though the stock is down more than 6 percent after hours. Looking through here for any sort of guidance or anything accounting for that big drop in the stock here, Scott,

but we'll bring any highlights. Do you know what the expectation was on cash app? I heard you throughout the day on the network saying that that was the area that everybody was going to be focused on. So you report 29% growth. What was the market looking for? Do you know? Gross profits. I don't have the comp right in front of me here, but 18% in terms of monthly actives seems strong, but it may have been below what the street was looking for. I don't see anything obvious right in front of me here, and I don't have the comps. But 29% growth year over year, you would think it's pretty strong, but it seems to, after a rally in July, maybe price for perfection. So anything other than an absolute beat on all of

these line items could be accounting for that miss. But I will bring any highlights. I know you will. All right. I'll see you soon. That's Kate Rooney with the latest there. What do you think about fintech? Is it back? Is this just a blip? What is this? Because, you know, after PayPal, PayPal, I've said it all week. Yeah, that stock was maybe the poster of out of control, crazy valuation stocks brought down to earth. Maybe they just needed to get re-rated if you believe in the fundamentals of what they're trying to do. And also if they sort of get their eye back on the ball about what their core businesses are rather than these crypto plays that they've gotten burned by. Yeah, well, I mean, I think it was the CFO news that drove the stock higher. Elliott, two billion investment, then a buyback. So I think there

are special situations and the stock, to your point, down a lot. Square block, I'm looking at the expenses and they're much higher than expected. And they just had an analyst day. So they just gave guidance on expenses. And so that looks like it's a little disappointed. Plus, again, that stock has bounced off the lows. I'm not a fan of fintech. I'm not a fan of companies that don't make or that don't have earnings or real earnings or a lot of earnings that are spending like drunken sailors. Right. So to me, the valuations still are not that compelling. I'd much rather own something like a Bank of America, which I know is boring, totally a different story. But they are a miniature fintech, not even a miniature. They spent $30 billion in the last 10 years. Boring was passe, right? I mean, PayPal had a bigger market cap, I think, at one point than Bank of America during the height of

the craziness, but that's a story for another time. Guys, I've got to let you run. I've got some more to get to here. We have a busy hour ahead. Liz, I'll see you. Dan Greenhouse, I'll see you too. Steph, I'll see you in a little bit. All right, Stephanie Link will be back with us in just a little bit. Let's get to our Twitter question of the day now. We want to know, how does the S&P 500 finish this month of August? Higher than current levels, lower than where we are now, or right about current levels? Head to at CNBC Overtime. Please vote. We'll share the results as we always do later on in the show. And we are just getting started right here in overtime. Up next, we are digging in on those

Lyft results. The stock is on the move, as we showed you. There it is, the hand notwithstanding. There's lift up 2%. Dan Ives is back with his instant reaction right after this. We are back in overtime. Lift out with Q2 numbers just moments ago. We showed you what the stock is doing. We will show in overtime. Lyft out with Q2 numbers just moments ago. We showed you what the stock is doing. We will show you again.

It is modestly higher. It's certainly off the best move of OT thus far. Let's bring in Wedbush analyst Dan Ives. He covers Lyft with an outperformed rating, a $32 price target. It's good to see you. What's your initial reaction here? I'd say better than feared, specifically on the spending. I mean, that was really the issue.

If you look at adjusted EBITDA, you know, I think better than expected. I think it just shows similar with Uber. I mean, they're not having to do as many promotions. And that's really been the overhang on the stock. Remember, the last quarter really showed like they were going to spend like 1980s rock stars. Looks like they curtailed some of that. I mean, you were even thinking that that was going to be the case going in. As I look at your notes here, what jumped out to me is in every single paragraph was about spending.

They're expected to ramp up their expense profile, spending on driver incentives. You talk about spending money, as you just said, like a rock star in the 80s. I mean, has that been the whole story? I think the problem is that they're almost a little brother to Uber. I mean, Uber, if you look what the hour and the team have done, they've curtailed some of that spending, less promotion, driver shortage has been an issue, and Lyft, it's been a bit of an uphill battle. I do believe they're starting to now get that on track, especially going to the second half of the year, it's a cheap stock. We talk about two times EV to revs for next year. And I think finally, now you start to have some confidence,

specifically on the spending side, that maybe they're going to curtail some of that. Unless it's just a moment in time. And the only reason they're curtailing is because they have no choice, because inflation is bad and the economy is slower. So, of course, they're going to slow their spending now. And the minute they have any kind of visibility on the other side of that, they're going to have to ramp it up because they don't want to be Uber's little brother, as you suggested. That's a great point. That's why I view as a fork in the road for Lyft. I mean, the next six to nine months, they either navigate through this judiciously from a cost perspective, but also ridership and demand continues to spike. But to your point, I mean, if they don't read the room right, especially in this type of environment, it would just be continued selling of Lyft

and buying of Uber for those that want to play the ride share in space. All right. And you, as I said, bullish on this one. Dan Ives, thank you. Got to bounce. Got a lot going on. That's Dan Ives of Wedbush joining us. By the way, don't miss Lyft president and co-founder John Zimmer tomorrow, Squawk Box. That's 8.15 a.m. Eastern time. Another stock is out.17 billion slightly higher than expectations. CEO Adam Aaron talking about a very optimistic outlook for the box office looking into next year, both for this fall and for next year. They're saying that the 20, he says that 2023 will be

much bigger by billions of dollars than 2022 in terms of the box office. The company also announced a special dividend of one AMC preferred equity unit per share, saying that this will be designed for current shareholders and will help provide AMC with a currency to be used in the future to strengthen their balance sheet, including debt repayments and provide capital for shareholders. Scott, back over to you. All right. That's Julia Borson. Thank you.

Just looking at the stock here. Yeah, one month up 38 percent. I mean, it's been a good box office. That's why. Up next, Schwab's Liz Ann Saunders is with us. She says fading part of this rally makes sense. We'll find out exactly how she thinks you should position. Overtime's back in two minutes.

Welcome back to Overtime. It's time for a CNBC News update now with Shepard Smith. Hey, Shep. Hi, Scott. From the news on CNBC, here's what's happening. The White House today condemning China for launching 11 ballistic missiles near Taiwan today. It calls military exercises a prelude of a bigger show of force to come. The national security spokesman, John Kirby, calling the Chinese moves irresponsible and at odds with the goal of peace and stability in the region. He says the aircraft carrier USS Ronald Reagan and the ships in its strike group will remain in the general area to monitor. Monkeypox is now a national public health emergency. The White House declaring it today as cases top more than 6,000 across health emergency. The White House declaring it today

as cases top more than 6,000 across the country. The declaration is set to free up emergency funds and make it easier for health agencies to collect data and speed up vaccine distribution. And Alex Jones' defense team denied a motion for a mistrial today in the Sandy Hook defamation case against him. That motion came after a bombshell

in court yesterday. The plaintiff's lawyer revealed that Jones' legal team accidentally turned over years of his cell phone text and email records. The jury now deliberating how much Jones must pay for his defamation. Tonight, the latest on Brittany Griner's prison sentence, new rules that could force airlines to pay you when your flight is delayed, and virtual dating in the metaverse. On the news, right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. Hi, Shep. Thank you very much.

That's Shepard Smith. We'll see you tonight. Turning back to the market now, take a look at how far stocks have come since their June 16th low. The S&P up nearly 10%. Let's bring in Lizanne Saunders, Charles Schwab's chief investment strategist, joining us on the phone. Welcome back to Overtime. It's nice to have you. So what is this that we're now in? Is this still in your mind just a bear market bounce, or have we started something new and different?

Depends on what segment of the market. I think that some of the moves on the upside down the quality spectrum to put a kind of trader spin on it, I think you want to fade that, but maybe lean into some of where you're seeing strength in higher quality segments of the market. So I think it's a bit more bifurcated. The breadth data definitely looks better than it did the last couple of attempted rallies during the bear market. And it really bodes well if your time horizon is a year out. But what I do concern, what I'm concerned with mostly is less about the technical. It's more about sentiment.

I think sentiment has quickly gotten a little bit frothy again. It's amazing what a good rally will do for you. Do you feel confident enough? And it doesn't sound like maybe you do to feel confident enough to suggest that we're not going back to test the lows? Or is the jury still out on that based on what lies ahead with inflation and the Fed, etc.? I think the jury is still out, but I think it's not just about the Fed and inflation, but I think the forward outlook for earnings second quarter season so far has been decent, although ex-energy, you are in negative territory.

But that has the potential to be the next shooter drop, not to mention the likely weakness in the labor market with a tell maybe coming from unemployment claims, which are now at 50 percent from the low, JOLTS having rolled over, challenger layoff announcements up year over year for the second month in a row. So I think we may still have volatility associated with profits, profit margins and the labor market, while we also still have to deal with the Fed and inflation. Looking at tech and I want your view here, because, you know, when you talk about sort of a bifurcated view on what you should fade and what you shouldn't, is tech a part of that conversation that you shouldn't fade the moves in mega cap, but you

should fade the move in no or low earning type tech stocks that, you know, the ones that we saw ride up so high and then come crashing down to earth? Yeah, I think it's more about earnings or lack thereof. So I think you can't look at any sector, including tech, monolithically because the prospects and fundamentals, technical conditions, valuations vary quite dramatically within a sector like that. So as you know, Scott, we've talked about it. We have been taking a decidedly more factor-based approach than a sector-based approach. In fact, we're just sector-neutral right now. And the factors we've been emphasizing,

I think, can be applied from a screening perspective inside all of the sectors, including tech. So, strong ROEs, strong free cash flow, healthy balance sheet, positive earnings revisions, those quality-oriented factors, and avoid areas like no profitability or negative earnings revisions or ultra-high volatility. I think that's the best way to approach an environment like this, especially at this stage in the cycle.

What's your current view on energy? I'm just staring at WTI today, below 90 at $88. Yeah, well, if you look at 50-day moving average related breast statistics, energy is a decided laggard with a very small percentage of stocks that have moved up off of those lows. But that's not surprising because the peak in oil prices as well as gasoline prices predated the recent bottom, the mid-June bottom in the S&P by only a couple of days. So there's clearly that inverse relationship. That said, earnings have been so strong for energy that actually the multiples have come down quite a bit because of the power of that increasing denominator. I just think we also got to a stretched sentiment environment. It took a while for sentiment to

get kind of frothy on energy. But again, to your point, you know, amazing what a consistent period of outperformance. And right at the point where you had extreme optimism, inevitably, both you saw the move down in energy-related commodity prices and a bit more of a struggle. So I don't think valuation is a problem for now. The earnings trajectory is not a problem. I think sentiment swings are probably a bigger driver. So let's bring it back full circle to where we started as I wrap it up. The risk-reward on the overall market, does it get worse the longer this goes on? Stephanie Link, who's sitting here with me still and was at the top of the show, suggested it could last for the rest of this month.

Yeah, I think between the inflation data that is coming out and the expectations heading into the September FOMC meeting, it's hard to think of a scenario where you really start to price in a significant economic recovery. So I think probably a choppy market between now and the next FOMC meeting. Thanks so much for making time for us, Lizanne. We'll talk to you soon. All right. That's Lizanne Saunders again. Charles Schwab joining us there. Up next, drilling down on crude oil. It's slipping to its lowest levels now since earlier this year. How should you trade the energy stocks? We'll debate that in today's Halftime Overtime. We're back right after this. In today's Halftime Overtime, the crude reality for energy stocks, despite WTI dipping below $90 a barrel to its lowest level since February,

Jenny Harrington staying bullish on what's been the top performing sector this year. If you can make the argument that oil stays above 60, these guys will continue to mint cash. And to Joe's point, they're investing in their shares. They're investing in us as their shareholders. All right. That was Jenny Harrington. Joe's point, they're investing in their shares. They're investing in us as their shareholders. All right. That was Jenny Harrington. Now let's bring in Hightower Stephanie Link back with us here on set. I thought that was a little aggressive. I thought saying that as long as it's over 60, that these companies are going to mint money. The implication being that the stocks can do well, even if oil goes down a lot more from here. You agree with that? It's hard. They'll go down if oil goes down.

But operationally, they'll still be very strong. right? Their break-evens are $40 to $50, right? So they can still, yes, generate cash. Mint money, but what does that mean then for the stock? They're not going to mint as much. I mean, at $100 today, at these prices, they're minting money, right? So yeah, maybe you see a little bit more pressure, and I think oil is coming down. A lot of it is, well, ECB today, right? The strong dollar. And yeah, demand destruction. So I get why it's coming down. However, these companies have changed their strategy. They're not overproducing given the higher oil prices. They're plowing it back into shareholder returns. And to that extent, Chevron increased their buyback from 5 to 10 billion to 13. That's one of your largest positions, right? It is. Diamondback, a new $2 billion on top of their $2 billion buyback.

Another position of yours. Yes. Schlumberger, last quarter, not this past one, two quarters ago, 40% increase in their dividend, right? And then Occidental, finally, they're not doing much, but they finally have their debt levels under control. They don't need to do much when you've got Warren Buffett buying all your stock every day.

I know, but their goal was to get net debt down to $20 billion. It's to $20 billion. So now they just generated $4 billion in the quarter, and now they can start to buy back. But these are just four examples. I think you can go across the spectrum. And so, yeah, maybe in the near term they pause, they go down. But I think you have to look at these as opportunities, quite frankly.

I mean, these stocks are down anywhere from like the ones I just mentioned, 17% to like 30 percent from their highs. What if money has come out of energy? And going into tech? Yeah. Well, not going into, has gone into. And I don't know that that money is necessarily going to come back. And if it goes out of tech, maybe it finds another home.

It doesn't go back to energy. Well, that's very possible. But I mean, again, I think structurally this industry has changed and they are very strong. And the earnings numbers, you just heard Lizanne. Earnings numbers are going up so much. These stocks, the multiples are coming down so much. This is like the cheapest sector in the entire market. And for those people that are looking for value and quality on sale, I think that truly is the definition of this sector right now.

All right. I appreciate you sticking around. Thanks. All right. That's Stephanie Link of Hightower joining us. Of course, a member of the Halftime Investment Committee, too. Warner Brothers earnings are out. Highly anticipated. Julia Borson has been waiting for these all day. Warner Brothers announcing a revenue announcing revenue of nine point eight three billion and a loss of a dollar and 50 cents per share.

These numbers are not comparable to expectations. Remember, this is the first full quarter that we've gotten results from the combined company. The direct-to-consumer subscriber number increased by 1.7 in the quarter. But right now, the call is going on. I see the losses have accelerated. The stock now down 7.5% after hours. But right now, CEO David Zaslav is talking about some of the unexpected challenges that they, quote, have and will continue to require our focus and attention. He talks about challenges to the macroeconomic environment, both in the U.S. and overseas, inflation and the threat of recession. So he's talking about those challenges now and the importance of content. But we see that stock is down. Back over to you. All right. Julia

Borson, thank you. We'll keep our eye on that stock. Up next, we're all over the biggest movers in overtime. Christina Partsenevalos standing by with that. Christina. Well, we've got Zillow warning about a contraction in the housing market and another company cutting staff. The announcement just came out. I'll have all those details right after this break. We're tracking the biggest movers in overtime. Christina Partsenevalos is here now. With that, Christina. Let's start with shares of Carvana, which is an e-commerce platform for buying and selling used cars online. And they are soaring up over, what, 10% right now, even though the company missed on revenue, missed on used vehicle unit sales, missed on gross profit. And yet here we are.

The company did point out that higher used car prices, higher interest rates are causing them to focus on lowering expenses. And I just checked on FactSet. Almost 30% of the stock has floated, which could explain the move upward. Zillow shares plunging on its Q3 outlook. The company expects the dollar volume of transactions to, quote, meaningfully contract in the second half of this year from a year earlier. And you can see shares down almost 10% as well. And then you've got Beyond Meat announcing they are laying off roughly about 4 percent of their staff. They expect that 4 percent to equate to a savings of $8 million

a year. The company, though, missed on revenues and posted a bigger than expected loss. Full year guidance also lower. Management saying, quote, we recognize progress is taking longer than we expected. And commented also that the recent, quote, we recognize progress is taking longer than we expected and commented also that the recent, quote, dramatic decline in consumer buying power is having an impact. Shares down over 2 percent. Good stuff. All right, Christina, thank you, Christina. Parts and Nebulas. Up next, it's our two minute drill. Why one money manager sees big upside for one mega cap tech stock. We're back in overtime after this. All right, we're back. Let's send it back to Kate Rooney just off the phone with the Square CFO.

Is that right? That's right, Scott. CFO Amrita Ahuja of Block, formerly Square. She says they are not seeing a slowdown in any discretionary spending in July. We didn't get any guidance number, but they do tend to give sort of real-time updates on a monthly basis. We have some numbers for July. Emerita, who's just saying the gross payment volume is expected to be up 18% year-over-year. For Cash App, she says growth on a year-over-year basis and a three-year basis is essentially flat. They're not seeing a slowdown, and they do expect that to be consistent. Also gave an update on discretionary spending. She said that is also strong. They have not seen any sort of slowdown in July and discretionary and non-discretionary spending remains relatively consistent. Also said they're

seeing pretty strong repayment trends when it comes to buy now, pay later, consistent with what they've seen in prior quarters. That has been one of the fears around buy now, pay later. As far as a recession risk, she says essentially they're looking at the real-time data. Spending seems to be strong. And then, Scott, you asked about the miss there. I talked to a couple analysts. It was the gross payment volume and cash-out numbers. They were looking for $7.27 was the expectation, $7.05 for cash-out profit. So that appears to be why the stock is dropping after hours. I got you. The key is exactly what you told us to look for. Proved to be the key. Thank you, Kate Rooney. Thanks so much for the update there.

Conversation with the CFO. It's time for our two minute drill now. With us now is Ayoko Yoshioka. She is a senior portfolio manager of Wealth Enhancement Group. It's good to see you again. Welcome back to Overtime. Let's talk about some stock picks. Number one from an area we spent a lot of time talking about today. Mega Cap Tech, Alphabet. Why? Sure. Thanks for having me again, Scott. You know, during these uncertain times, we like to focus on companies that have stable earnings and resilient business models. And we think Alphabet is one of those companies. They've got great properties with Google Search that everybody knows, YouTube and Android.

And they put up double digit revenue growth in both services as well as the cloud and generating 65 billion of free cash flow over the last 12 months. We think it's a strong company to own throughout the cycle. Yeah. No worries about ad spending, the stock that's, you know, come a good amount in a short period of time along with other mega caps? Sure. We all know that the ad spending revenue is likely to slow perhaps in the upcoming quarters. It's not completely immune to economic conditions. However, we think for the long run, it's something that you can safely own as an investor. OK, number two, Nike. I hear you here. Nike shares are down 31 percent year to date. I think China business important. I think China lockdown is always a threat.

Absolutely. Again, another company that we think is not immune to any sort of near-term pressures. However, you know, Nike's brand momentum is very strong, and we expect them to continue to take market share in the coming years. Their focus on innovation has been great. They've expanded into women's and continue to expand that side. And their strategy execution on e-commerce has been fantastic with over 40 percent of sales, you know, being direct to consumer. Aya, we'll see you soon. Thank you.

Thank you so much. All right. Ayako Yoshioka joining us once again. Up next is Santoli's last word. Overtime is right back. To the results of our Twitter question of the day, we asked you, how will the S&P 500 finish the month of our twitter question of the day we asked you how will the s&p 500 finish the month of august a majority of you said higher than current levels 51 voting that way 34 said will end the month lower and we shall see let's get to mike santoli for his last word it speaks to where sentiment has come to mike yeah without a doubt i look, we're up a lot in six weeks, 14 percent, 13 percent in the S&P 500. And a lot of the premise of this rally was the fact that people were overly bearish. The extremes were oversold. So the question being, how much left is there for the market to feed on? I still think some.

I think you look at a lot of the positioning data, the big investors still positioned short in index futures. But it's a little closer call than it was. What's interesting to me, Scott, in the last few days is a lot of people want to point at the market and say, you're getting something wrong. You clearly aren't hearing what the Fed speakers are having to say. You're clearly not paying attention to the fact that we may have more downside in earnings revision. I'm a little more inclined to figure out why the market might be kind of justified in doing what it's doing. And what I see is breakeven inflation rates are down hard since mid-June. Gasoline prices have crashed. The Fed told you gasoline was going to be the main driver of its hawkishness. And obviously, the services data were pretty good this week. So it takes a little steam out of the imminent recession camp.

We'll see what the jobs market has to say about it tomorrow, the jobs report. Maybe we're getting it right for where we are now, and maybe that's the key thing, right? And we'll see where we are later on this year, depending on what happens with inflation, depending on what the Fed is going to do, and depending on where the economy is. But maybe the market's priced right for what the scenario is right now. And it's priced in a lot

of stuff. Right. It's always just about the weight of the evidence and the market right now. Again, we're just back to where we were two months ago. What has changed in two months? Well, oil's down a lot. Has recession seemed like it's that much more right here now? It's not clear to me that that's the case, but that's an arguable point. And as I say, if it's a really weak jobs number tomorrow, you will have the recession eased out there. You say that's why the Treasury yield curve is so inverted. If it's a really strong number, maybe then we perk up and say, hey, the Fed's telling us they're not going to get friendly for a long period of time. But for right now, what we know, I agree with you. Yeah.

And we'll keep our eye on MegaCap, obviously, Apple and those other stocks. Mike, I'll see you tomorrow. That's Mike Santoli with his last word. Fast Money's now.