Closing Bell - Closing Bell Overtime: Nothing But Negativity? 9/6/22

Episode Date: September 6, 2022

Many investors painting an ugly picture of the markets … but are things really that bad? Could it be a contrarian signal for your money? Trivariate’s Adam Parker weighs in. Plus – the case for *and* against growth stocks. EMJ’s Eric Jackson sees a lot of value in the space but New Edge’s Cameron Dawson takes the other side of that argument. And, we’re counting down to Apple’s big product event. We break down top three things every investor needs to be watching.

All right, Sarah, thank you very much. Welcome, everybody, to Overtime. I'm Scott Watley. You just heard the bells. We're just getting started from right here at Post 9 at the New York Stock Exchange. In just a little bit, I'll speak to tech investor Eric Jackson and why it's time to buy that space, even with the Nasdaq on this long losing streak. And speaking of, we'll also get you set up for Apple's big event tomorrow out in California, what it means for that stock, which some say right now is the most important in the market. We begin, though, with our talk of the tape. Nothing but negativity. That is pretty much what you hear from almost every investor you talk to these days. Are things really that bad? Could it be a contrarian signal for your money? Let's ask Trivari. It's Adam Parker. He's with me here at Post 9.

Is it really that bad? I mean, everybody's like the sky is falling, including you. I'm not a sky. I do love the new. You're like the earnings are falling. The new purple glasses are amazing. You look great. Thank you.

I'm not. Listen, I'm here with you on set, and the SAP's done 40 bips. That feels like a relative outperform for us being together this year. I'm serious, though. I mean, is it really that bad? Is there another story to tell other than negative, negative, negative? Look, there always is. And we've talked about this for a lot the last several years.

You always sound dumber when you're bullish, right? Because when you're bearish, you can really sound intelligent. I just think the problem right now is if you think about corporate earnings, they're way too high. Everyone knows that, but they're too high. So can the market act well when they come down? Yes, maybe. As long as people think when they're coming down, they're going to plateau and moderate, right? So when things are falling, will you believe, all right, that's good news because now things are achievable in Q4 or Q1?

It's a debate. We'll see what happens in September, October. And then the other issue is the so-called P ratio, the multiple. And that's the part that I think is hard to get bullish on when you know quantitative tightening is there, you know the Fed's acting hawkish around post-Jackson Hole. So I think that's why the cocktail's gotten a little bit more negative in the last couple of weeks. So I will be the first to admit, because I find myself in this position on a twice-daily basis. You run a little negative, yeah. No, I'm not saying I'm negative. I think it's hard to push back against the negative, because there's a lot to be negative potentially about. Playing devil's advocate against the negative is not the easiest thing in the world because it's hard to find the catalyst to bring the buyers out.

What are they? Look, I think it would have to be something like, all right, corporate earnings are probably going to be about 209 this year. The street's at 243 next year. The rule number's 215. Maybe if it's 215 or 220, and that's really where it comes down, and we believe earnings are higher in 2023 than 2022, the market will rally. It will rally on that. It's going to be, you know, that's possible.

I think it's too early. We talked about this a few weeks ago. Analysts come back today, the day after Labor Day. They've been in the Hamptons and wherever. And they start sharpening the pencils. They're like, you know, I've got a real September in front of me, and I better figure out if my 2023 numbers are a joke or not. And you know what?

They're probably too high. So as they kind of, companies go out, they do a big conferences, you know, in the next couple of weeks, I think you'll see numbers start to come lower and we'll see if that sets up for a better risk rewarded to October earnings. But right now, I think the risk is skewed to the negative

just because the expectations embedded in the numbers are just egregiously optimistic. So that's a fair assessment. The question is, they're skewed to the negative. How negative? The risk is skewed. I mean, we're at 3,900 just north of that on the S&P. What does that mean?

Are we going back to the June 16 lows? Are we going below that? We're at 18.5 times the current numbers for 2023. Sorry, we're at 18.5 times the current numbers for 2023. Sorry, we're at 16.5 times the current numbers, 18.5 what I think the numbers are. The long-term average is 17. I'd feel probably better if we were 10% lower about the risk-reward. So it's just hard to say this is the time to get in. Now, underneath the surface, there are a lot of stocks that trade way below 15 times earnings. And so I think the whole game right now is relative estimate

cheap ability where the numbers more relatively achievable than others such that I can deploy capital and beat the market. So that's mostly what we're focused on. You're not universally negative that there are pockets within the market that you've identified that you think investors can put fresh money in? I do. We talked about it a little bit last week. Energy? I think healthcare. I really like healthcare. I know the last person in the last hour just talked about it. But when I think about portfolio strategy, you talk to me, what do you think is going to work, and I'll find you something in healthcare I like. If you want to play defense, I'll take pharma over staples. Same dividend, more achievable estimates. You want growth, you want offense. I think biotech looks better than software.

It's just discounting very little in the terms of safety and advocacy. You want services, you think it's a service economy. I like health care services over consumer services. So I can find a way across the portfolio to generate pretty good risk-reward data. So at some point, the market is going to try and sniff out when the Fed is done with its rate raising. Right. I mean, that's that's what this whole game has kind of turned into. I want yeah, I want you to react to what Bill Ackman told the network today. It's on it's on that very point. It is when the next buy signal is once people I'm quoting once people

realize that the Fed doesn't have to keep increasing rates and will soon be taking rates down, that's kind of a buy signal for markets, I think. The question is, how far in advance does the market predict that kind of outcome? I think if people see inflation come off 8.5%, you start to see a pretty powerful continuing trend. Then I think people will expect at some point the Fed to ease. So we have to figure out when that's going to be. Now, you see the CPI next week. If that cooperates, do we get a little more bullish or not? I mean, do we start doing what Ackman says people are going to do? Listen, I think people, the perception about interest rates is different than the reality,

right? We call that Fed fund futures, right? The Fed fund futures were moving in November of last year. The Fed didn't act till March. So you could certainly see four or five months anticipatory behavior. I think that's reasonable. So the question is, do you think they're four or five months away from, you know, the end of the cycle? Or do you think it's longer? I don't know.

But what I do know is owner's equivalent rent, the biggest piece of CPI is going to stay high. What if they're near the end of the cycle, but they keep rates high for a long time? Does that matter? So they stop cutting, but they leave rates elevated for a year. What if they do that? I think the game should be, I know what I would do, right? I would say, hey, we ran below 2% CPI for a long time. We told you that we were comfortable with that because we were taking the edge off deflation. It's the same thing in reverse this time, guys. We're going to run above 2%. We're just going to

take the edge off the real bad inflation and a multi-year view will get to 2%. I think the market would be bullish on that. I'd get more bullish on that if they could tell you that. Well, of course you would. If the J-PAL comes out and said two percent's not our target right now four percent but these guys would get bullish billions of dollars of mbs mortgage-backed securities when housing was on fire in every metropolitan area in america so do they have a history of being a little bit you know dilatory uh yeah they do and if cpi remains elevated on high rents which by the way i got 25 data points last week at a conference guys own seven million units i'm just telling you rents are which, by the way, I got 25 data points last week at a conference. Guys own 7 million units. I'm just telling you, rents are going up everywhere. So I don't think you're going to see a big drop off in CPI. And I think people got a little too optimistic.

Because gas prices have come down? Oil and gas is separate. I mean, like the core. I think owners' equipment rents are going to continue to be high. So I don't see a big drop off in CPI. But I agree with Bill Ackman that if you start getting a belief they're more dovish, that'll be good for the price-earnings ratio. I think that's right. Not to mention, if they come a little bit off their 2% in the near-term thing and say, oh, you know, we tolerate 4%, market goes boom. I don't think they'll say that. Do you?

Obviously, they're not going to say it. Well, you never know. I mean, when I buy a lottery ticket, I like to dream what I'm going to buy with it, but I don't think that's the base case. It's all what the market perceives they said. Right. We've learned that. That's the Fed Fund futures. They were way ahead of reality, and now they're not.

So I think the one thing that doesn't get talked about a lot is the inverted curve, too, right? We still have a two-year yield above the five-year yield, above the 10-year yield. Go do the work and show me, is that good for equity returns? It isn't. All right. It isn't. Let's broaden the conversation. Let's bring in CNBC contributor Greg Branch of Veritas Financial and Sean Cruz of TD Ameritrade.

It's great to have you both with us. Greg, I'm sort of channeling you. I'm thinking of you when I'm writing the top of the show today. I'm like negative. Everybody's negative. That's all you hear because I'm thinking of somebody like you because you've been negative on the market for as long as I since the beginning of the year. And it doesn't sound like you've changed one bit you know i am starting to change scott actually and you know what i call that i call that capitulation and sometimes what we need is a good old capitulation before we can move together to the next leg and i think you and adam have identified no you are you can't you can't fight the bet you can't fight the bear thesis so i you are. When you say it's hard to come up with an argument against the bear thesis, that's when we're all accepting a common reality. We can move forward from there.

But I think you and Adam did an important thing. You identified the two catalysts, the two very negative catalysts that I've been expecting that I actually think we're about to turn the corner on. Right? The first is analyst estimates. And as Adam said, and I agree with him, they're too high for probably Q4. They're too high for probably 2023. But a funny thing happened in the first two months of Q3. We got a 5.9% reduction in analyst estimates when the average for the first two months of the quarter is about 2.9%. So the analysts are starting to do the work.

We still have a ways to go before I think the revisions are where they need to be. But we're in the midst of that. The other catalyst, and I'm going to clear up the mystery for you guys, the Fed told us when they're going to pivot. James Bullard said that the right policy rate is 4%. Now, whether they're wrong or right on that, I think that that their benchmark they want to get their funds right last i checked jay powell wasn't the fed chairman i mean uh that's true bullard wasn't bullard wasn't a fed chair and i do recall too i don't think that bullard's even a voting member so i mean that's fine if he likes

to drop tape bombs and he's like to say he says whatever he says and it does move the market by the way and no disrespect for him and i certainly certainly don't mean that in any negative way. But you get my point. It's like it's not the Fed share. Fair point. Fair point. But but I do see the runway coming to an end where they're going to raise probably twice more this year, I think. And I think that they're going to hold it there and see what impact that has on decreasing the level of inflation. Like Adam, I believe that that core is going to be consistent. And so the question we're going to have is, like you said, how does the market react when we are done cutting, but we're going to leave it there for a while so that it can have a meaningful, deleterious impact on the inflation?

Sean, do you find things to be more positive about today or no? No, I think one thing coming out of the weekend, we got some more negative headlines. And if nothing else, it let us know that we're not in the clear, I think, on due to the bigger items that are overhanging the global economic outlook. And one, that is just how bad the energy crisis is going to get out of Europe. We certainly got some more negative headlines of that going into the weekend. But then also what's going to be going on with China in terms of their zero COVID policy, because that's an important sourcing and end market for a lot of these big multinational companies that have heavy weightings. And a lot of these indices have a lot of growth priced in out of that region.

China is continuing with their zero COVID policy lockdowns, and that is going to have an impact to a lot of these companies across the board, either from sourcing or from selling, or in many cases, both. Think about those two issues that we haven't talked that much about of late. Are those still big risks? China, COVID? What do you think? You know, I think the COVID stuff really impacts estimate achievability because a lot of businesses pulled forward earnings. So it's kind of a joke, but it's a microcosm. But look at companies like Cook or Weber. Basically, they got on their conference call, said everybody bought a grill and we won't sell one for two years. Right. So they're just examples of people who, of companies where there's over earning. So I'm really concerned about consumer in particular, I'm very cautious on the estimate

achievability for that space. So I think there is a ripple effect, the whole work from home reopening cocktail. And I'd also say, you know, a lot of the reopening names are now embedding a big return to business travel that I think is probably a little, going to be a little bit, you know, dampened relative to reality. So I'm a little worried about some of the consumer stuff on the COVID front. China is always a fear, you know, but I think it's been hard to position a portfolio for what could go wrong proactively, you know. So, Greg Branch, I mean, how are you going to know when it's time to not be so negative? How are you going to know that it's time for the Bill Ackman buy signal?

What's going to be the message? It's not going to be so explicit that by then it's going to be too late. The market's already going to have moved. Anticipating the kind of thing that Ackman's going to be talking about today or talked about today. What's the signal going to be? We've got to be through the preponderance of the negative catalysts. We don't have to be through all of it because by the time we're through all of it, everyone will have the same information and we can place risk-free bets when we're through all of it. But we've got to be through these major

ones. We've got to have a couple of Fed meetings where they don't raise rates. We've got to see some meaningful, meaningful downward revision on the inflation numbers. We've got to see some meaningful, meaningful downward revision on the inflation numbers. We've got to see the analysts estimates come down. We've got to see some resolution so that we know we're not in an all out energy crisis in Europe, particularly when you have some countries, Portugal, Greece, Italy, with GDP debt to the GDP ratios above you know, above 150 percent with the borrowing costs increasing dramatically. So, you know, a sovereign debt crisis would certainly throw a wrench into the socket. So we've just got to be past some of these risks. We've got to have some certainty with the direction of Fed policy. And I think once you get comfortable with what the real estimate is, and I would agree

with Adam, right now the multiple is probably around 18, 19, because the estimates need to come down. Then you can start placing your bets on things that are tied to secular tailwinds, that have demand that is ineffective by whether or not we're in a contracting GDP environment, that inelasticity of demand you talked about in the last segment, and that can grow earnings throughout a variety of macro circumstances. Sean, so when we talk about what people are doing, you actually have a decent read because of what you see at TD Ameritrade from your clients. I thought it was quite interesting that from your notes today, your clients were selling Apple along with Qualcomm and Exxon and Netflix and Twitter

while they were buying Amazon and Shopify and NVIDIA, Lucid and AT&T. But this thing about selling Apple is interesting to me. What do you make of that? Well, one, I think the biggest piece is where we saw them accumulating Apple from. And that started generally around that $130 level. So Apple is always very popular. I mean, right. It's not typical for us to see them selling it in mass like they were. But Apple going from 130 and running all the way up to just over 170 in a fairly short window of time where we're alongside that. I think you are once in getting a lot of that uncertainty out of China, when they had those first rounds of lockdowns earlier on this year,

everyone realized they're still committed to zero COVID policy. Apple was really concerned with how that would affect their ability to supply phones. Still, once again, an important selling market. So I think when you have this sort of run up that you had out of a company like Apple and there's still enough overhang out there, it makes sense that you're going to see some profit Apple and there's still enough overhang out there it makes sense that you're gonna see some profit taking and then rotating into some of those names that were just starting to break out Amazon was just breaking out above 125 I think it makes sense you'd see maybe some

profit taking out of Apple and putting those dollars to work in Amazon lastly Greg this last bit of note from you, where you suggest that our viewers, investors, should have historically low exposure for the remainder of the year for stocks. What does that mean? What kind of exposure should they have now? You know, I've been historically low since the beginning of the year, and we actually executed some successful strategies around buying long and intermediate-term puts that worked out really well, as it would when your view is that fair value is $3,800 and the S&P is at $4,700. Right now, I'm just avoiding risk, and I think investors should as well. I think there will come a time that we can pick among those companies I described

before that have inelastic demand, that can power and grow earnings through a variety of macro circumstances. But I think the multiples is yet to get cheaper. I think we will retest those June lows. I think it is clear that the Fed is still in the pocket. It should be a long time. Wrap it up real quick. One thing we're working on that we haven't talked about yet that a lot of clients at TriVarity are asking about is inventory levels. You saw Lulu, big number, market loved it. You read a couple paragraphs underneath,

81% inventory growth versus 2019. So in order for me to understand where the estimates are going to flesh out and whether I should get bullish, are we going to overproduce consumption or not? Because if we have an inventory burndown that's required, then I think you have to remain negative for longer than maybe this conversation is indicating. If we're producing the right amount and that kind of, you know,

it's got back to school, the Christmas stuff is okay, then I think we'll get our shot. That's why we need to continue to have these conversations. Thanks for being here. See you next week. That's Adam Parker. Greg and Sean, my thanks to you as well. We'll see you again in overtime. Let's get to our Twitter question of the day. We want to know with Apple holding its big iPhone event tomorrow, which level with the stock hit first from here?

Will it be back to 170 or could it sink to 140? Head to at CNBC overtime on Twitter. Cast your vote. We'll share the results coming up later on in the program. Up next, the bull case for the growth trade. EMJ's Eric Jackson joins me next with the top stocks he's betting on despite the market's downturn. We're live from the New York Stock Exchange. OT, right back. Make it seven straight down sessions on the Nasdaq. That's after today. That's the longest losing streak since November of 2016. The index is down 9 percent in the past month. Our next guest says growth and small caps will still work this year. Joining us now is EMJ Capital founder, president and portfolio manager Eric Jackson.

It's good to see you. I mean, you do realize that we're in the midst of this losing streak, right? It's like seven days and counting now. Well, we're sort of back to the mid-June pessimism in the market, Scott. Even though the Nasdaq is still about 4% higher than where it was back then, but people are ready to slit their wrists again. I do think, though, that there's a lot of, you have to be bullish when everyone's so bearish. And the reason why I'm optimistic going into this second half of this year is that you asked in the last session, Scott, what do you need to look for? I think the most important factor is inflation. We're going to get a print next week, obviously, with inflation.

We're going to get others in the remainder of the year. And I think that's what the market's going to key in on. If you go back to 1981, 82, which is sort of the height of the inflation, the big inflation scare with Paul Volcker, what happened is that the market dropped, you know, NASDAQ dropped something like 29 percent over 10 months from, you know, into the bottom in mid-82. But then what happened? Inflation fell out of bed. It dropped from like the nines and eights, passed kind of six, got into the fives. And suddenly the market took off. Basically, Nasdaq doubled over the next 10 months, which is sort of the equivalent of what it did off of the 2020 bottom through the end of 2020. And so growth stocks, if this market sniffs out that inflation

is rolling over and Jeremy Siegel is right, like he said on your show last week, that all these indicators are showing that that's what's happening. We could be in for a big shock. And the move we saw in growth stocks in June could be just the start. I know. But you said you've got to be bullish when everybody else is is bearish. I mean, you don't have to be anything if everybody who's bearish is right. And if inflation is sticky and rents, you know, don't come down and there's no indication really that they are. I'll give you what's happening at the pump

and I'm glad for that, obviously, like everybody else is. But it is way too early. And you even heard the Unilever CEO with Sarah in the prior hour suggest it is too early to declare inflation has peaked. And he even said that they continue to raise prices. It flies in the face of all clear is coming from the inflation front. Well, everyone's going to go off of past backwards looking indicators, Scott.

And so and everyone has to say that the Fed has to say that right now. But the market moves so quickly and the market's not going to sniff out backwards looking data. It's going to sniff out what's happening in the moment. So it's sniffed something, you know, over the summer in the big rally that we saw from mid-June into the beginnings of August. And we're going to see next week, you know, whether we've got a start of a trend here in terms of a decel in inflation. And if that happens, these growth stocks, many of which have been in a bear market for over 18 months now, just are so cheap historically, you know, from a multiple perspective that you'll miss out, I think, if you don't have some exposure to them. So the stocks you like and the first one I want to talk about is one that has had really a renewed sense of optimism around it, and that's Uber.

Right. I mean, it feels like that story has started to turn significantly, not only from a business standpoint, but from a stock performance standpoint. Well, Dara at Uber was really rewarded over the last few years for showing growth. And now we're in this new regime where everyone wants to see profits. Everyone wants to see cash flow. And fortunately, Uber was on the verge of being cash flow positive. And starting over the summer on their last earnings sprint, they showed a massive pre-cash flow beat. So they are now going to key in on that metric. And the recovery that's going to happen just with people coming back to work is in their favor.

They're the leader in North America by far. And so they've got a lot of tailwinds behind them. And if you just go back to pre-COVID kind of multiples and say, where might this thing, you know, be at from a reasonable, you know, revenue perspective a year from now, two years from now, to me, they still look severely undervalued and they could continue to have a strong run over the next couple of years. Now, the other one I'm looking at, I have a harder time figuring out other than it was down a ton, but I need more than that from you. And that's Twilio, right? It's down 75 percent year to date. There has to be more to the story rather than just, well, it's down a lot. What is it. Well people have lost faith in the management. I think and Jeff Lawson they've they've kind of you know this was a stock rewarded for growth. But it hasn't unlike Uber it hasn't shown strong gross margins strong profitability and I think people have gotten fed up, especially just waiting around

for them to show that. But it's very, very cheap. And I just added to it recently because it's trading at less than two times enterprise value to sales. And no SaaS company ever sees those kinds of valuations unless people are just sick of it and are selling it hand over fist. Salesforce has never traded at this low a multiple ever in its lifetime as a public company. So to me, there's just too much negativity around it. It's gotten too cheap. You have to step in opportunistically, I think, when things just get stupid cheap. And this is for Twilio. They're still growing their top line. They have to show the market that they can can improve from a gross margin perspective. I think they can.

But, you know, it doesn't it's not necessarily going to go back to 443 where it was in February 21. Doesn't have to for this stock to be a major upside winner from here, though. I got you, Eric. It's good to talk to you as always. We'll see you soon. It's Eric Jackson, EMJ, joining us today in overtime. Up next, the other side of the coin. Our next guest is not sold on the growth trade. New Edge's Cameron Dawson makes her case after this quick break. We will be right back. Welcome back to Overtime. It's time for a CNBC News Update with Eamon Javers. Hi, Eamon. Hey there, Scott. Here's what's happening. A new potential lead on the remaining suspect in that

stabbing rampage in Saskatchewan that killed 10 people. Canadian police surrounding a home on the Indigenous Reserve where some of the stabbings occurred, although it's not clear if that suspect is in the house at this point. Roadblocks have been set up in the area and residents are being told to shelter in place. Federal cybersecurity experts are warning schools about new ransomware threats. The alert comes as the Los Angeles public schools dealt with a ransomware attack over the weekend. School officials saying today they blocked the attack and no personal data appears to have been taken. Across Texas and beyond, wearing maroon to show support for students in Uvalde who started their school year today.

It's been about 15 weeks since a gunman stormed the school and killed 19 students and two teachers. Maroon and white are the team colors of the Uvalde School District. Join me tonight on the news. We'll look at how survivors and parents are recovering from the tragic attack and what's being done to stop future shootings. That's right after Jim Cramer at 7 p.m. Eastern here on CNBC. Scott, I'll send it back over to you. All right, Eamon, I appreciate that very much. We'll see you then. A few minutes ago, Eric Jackson told us he's betting on growth stocks right now. However, our next guest says

not so fast. She's Cameron Dawson of New Edge joins me right here at Post 9. You heard Eric, I hope, make the case as to, look, you might not time it perfectly, but a lot of these things have come down too much. First in, first out. Why not now? Well, they have come down a fair amount, but we think valuation is still a risk for growth stocks. They're still trading at 24 times forward earnings. Now, that's down from the 27 times that they peaked at back earlier in August. But 24 times is still expensive, mostly in the context of this liquidity environment.

Given the fact that 10-year real yields are now at 75 basis points, that's more consistent with growth stocks trading near 2021 times, which implies more valuation depression that needs to happen. Implies also that you think rates are going to continue to go up. I mean, you've been maintaining the Fed is going to be more hawkish and have more resolve, I think, than people have some people have thought. Yeah. And the Fed is telling us that it's not just about getting to the point of restrictive policy.

It's about keeping it there. The Fed is afraid that if they do an about face and start adding liquidity to this market, that they will reignite inflation. They talked about that at Jackson Hole. They do not want to repeat the stop-go policy of the 70s that saw that flip-flop and saw inflation cemented. What if they can stop, though, if inflation starts or at least continue? I think you can say continues to trend in the right direction. Maybe they don't have to go as far, nor would they potentially have to cut because they haven't gone so far as to put the economy into the nosedive. Yeah, I think that's a really good point, which

is what Powell was trying to say back in July. He was saying we want to get to the point of restrictive, but we don't want to go so far that things get out of control because we know that monetary policy acts with a lag. So then how does the market respond in that environment, I think is the important point, which is that it's likely then that you would see the focus turn to earnings, meaning that valuations are driven by liquidity. They're driven by Fed policy. If the Fed's not easing policy, valuations can't sustainably rebound. Then we focus on the earnings story in order to get a sense of where markets can go. OK, so how inflated, we want to use that word, are earnings projections now? I mean, how much do they need to come down? Because estimates are kind of all over the place, depending on who you talk to.

What's your best guess on how too high they are? Well, so if we think about where they stand today for 2023, $244 a share. I think your prior guest, Adam Parker, has them at $215 per share. If we take that $244 as what the market is expecting and compare it to other tightening cycles. That's implying 8% growth next year. If we look at past tightening cycles, 2015, we had down 2%. 2019, we had up 1%. 8% is too high in a tightening cycle.

Of course, there are a lot of idiosyncratic things that happened in those years, but the reality is that it's likely that we need to get closer to the low single digits, which is much more realistic and consistent with a tightening cycle. OK, so assuming that happens, you must be if you're expecting that to happen, you must be anticipating the market going fair amount lower from here. The question is how much lower? Well, we thought that we it's likely that now, given the fact that we have rolled over so hard at the 200-day moving average, that a retest of the June lows is in play. Now, we did see good momentum and breadth coming out of those June lows. And so we try to stay very balanced to say, look, the likelihood of us plumbing down to 3,200, 3,400 is less likely today.

And so as we move through this process of recalibrating earnings, it doesn't necessarily mean a collapse in the S&P 500, but it certainly means that we likely will retest back to those 3,600 levels. And at that point, you'll have set a low bar. Valuations likely look more attractive. And I think that we can probably talk more about being opportunistic buyers.

Are you watching the 3,900 level closely on the S&P? Because I know a lot of other people are. And if you hold that, that's a, it's hard to say, bullish sign in this sort of environment, but certainly better than what the alternative is. It is the battleground. It was resistance and support. And anytime you have these places where you have a lot of consolidation of resistance and support, we're going to see a lot of fighting to see where we push either above or below it. If we hold thirty nine hundred, that is a bullish signal. So that means that the market is sniffing out some change in liquidity, willing to put

a higher multiple thing on things on a sustainable basis. So even if the earnings start coming down, then the market will start saying, hey, we think that we're actually going to see that Fed pivot. What are we doing? I'm sorry. Finish your thought. But if we don't, then I think that 3600 is in play in short order. OK, so forgive me for stepping on your toes there. Looking at the dollar versus euro, 99 cents, right? Pound 115. That's one issue.

And then you look at what's happening with energy over in Europe, too. Are we worried about the spillover here or not? We should be aware of this. 16% of U.S. exports come from Europe. 11% of S&P 500 revenues come from Europe. So just from an actual demand standpoint, it's important. But the dollar is really what is so critical. Because the dollar being as strong as it is is actually consistent with revenues

falling not rising 12 percent like they did last quarter so the dollar is a key headwind for this market it's a key headwind for earnings and it raises the question about how central bankers will respond because a strong dollar tight

and liquidity financial conditions around the world. How able is the Fed able to step in and provide liquidity like they did in 2010, 2011 during the Euro debt crisis? That really remains to be seen. We will be watching it as a result. Cameron, thank you. That's Cameron Dawson joining us from New Edge. Up next, a big bounce or a breakdown.

One halftime committee member making a bold call on meta, what the future could hold for that stock. We'll debate it with a shareholder in today's Halftime Overtime. And don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. Overtime is right back. In today's Halftime Overtime, the next move for Met for Meta shares have already lost more than half of their value this year and are coming off their longest weekly losing streak since June. Halftime's Josh Brown, though, says the charts are pointing to yet another big move ahead. The direction is the question. It is on the precipice of either the mother of all bounces or a really nasty breakdown. And I have no idea which.

Technically speaking, though, if this thing gets into the low 150s, you really can't be in it. Well, Requisite Capital's Bryn Talkington is in it, and she joins us now. So what do we think about that from downtown Josh Brown? This thing's going to move big time one way or the other. I know which way you want it to go. Which way do you think it will go? So I don't see in the charts a big move up. I don't see a catalyst that would call for that.

I think the way you want to think about technical analysis is it's going to show you the path of least resistance. So without any new information, it's a really good guide. And so I think Josh is spot on. The stock has been trading around 152 as a base and around 178 at a peak. So if it breaks below this and it goes into the breaks below that 152 range, the next stop, Scott, is going to be the March lows when it hit around 140. And so I think you would need to see a catalyst to have that happen or the market in general, you know, break down. So I think he's right, definitely spot on about that 152s. If it breaks that, you really have no man's land until 140. But I don't see that it's going to necessarily just on its own have a big move one way or another just because of just because of what the charts

are saying. No, but it certainly sounds like you're concerned that it could be to the downside. And I'm curious, if that in fact does happen, what do you do? I kind of feel like I'm a tourist in this stock. You know, I bought the stock about 30 points higher. So it was relatively new in the name. But I still question, you know,

even though they're estimating to do 26 to 28 billion next quarter, they have 12 billion in cash. If I believe the 2023 earnings, it's trading at 15 times. So it's like, this is a great cashflow company. But what I still struggle with is at the end of the day, Scott, they're trying to monetize Oculus and my kids have a pair at home. And every time I put them on, I get vertigo. They're very aware of that as a lot of demographic has that. And I still feel like it's too early in the game. And so I know they're going to be monetizing WhatsApp, which is really good for their business in India.

So I'm a wait and see right now. I'm definitely not going to add to the position. I think Josh is right about looking at the technicals and see what happens here. And we'll see if I'm a tourist or I'm going to be on this ride for for a longer time. But the jury's still out right now. I don't know. I feel like you're making the case to sell it. I'm surprised, too. And I appreciate the honesty from somebody who actually holds the stock. And you really sound like you are moving towards the exit. Well, you know what I struggle with is there's so many other stocks that are down, right? It's like I own NVIDIA. And so obviously we have some issues with, you know,

what the government's going to let them do in and out of China, which is a real issue. But I would rather put, is what I'm thinking through, well, I think NVIDIA longer term has a spectacular runway. I think they'll get through this. So do I want to wait in Facebook or take those funds and add to like an Nvidia or add to an Apple? I'm not sure yet, but that's just sharing what I'm thinking through as I'm in this trade.

So I'm being honest that I'm definitely a tourist and I'm not sure if I'll be here long term because I do think it's a fundamental issue that investors, how many investors are going to wait and see if they can monetize Oculus? Because the metaverse doesn't exist. OK, that's Roblox, which I already own that. The metaverse is an idea that's five or 10 years out easily. OK, thank you, Bryn Talkington. We'll talk to you soon. Appreciate it very much. Up next, we're tracking the biggest movers in OT. Christina Partsenevela standing by as always with that action. What do we see today?

Well, we see one software firm that just posted a record quarter and shares are surging right now. And another retailer warning inflation is hurting consumer spending. I'll have those names and obviously much more after this break. We are tracking the biggest movers in overtime right now. Christina Partsenevelos joins us with that. Christina? Let's start with shares of Coupa Software surging right now in the OT on a surprise record earnings report.

You can see stock is up over almost 13, or I should say almost 14% at this point. The software is used to analyze expense reports for areas of inefficiencies, and Coupa reported a narrow loss, better than expected revenue, higher than anticipated Q3 guidance, and $100 million for share repurchases. And that's why you can see the stock surging. Newell Brands is the parent company of Yankee Candles, Rubbermaid, and Sunbeam products. That stock is falling almost 5% in the OT after giving an update to its outlook and it wasn't a good one. Q3 guidance was revised down to the CEO saying, quote, we've experienced a significantly greater than expected

pullback in retailer orders and continued inflationary pressures on the consumer. The company also warned of further cost cuts. And then you've got, lastly, software development firm GitLab. Shares right now are dropping about almost 4% lower today, despite the earnings being raised guidance on strong subscription revenue. It's been a tough environment to impress lately. Could be some concerns about free cash flow. GitLab's beat, though, comes after recent weak reports from Okta as well as MongoDB. Scott, back to you.

All right. Christina, thank you. Christina Partsanova is up next. We're counting down to Apple's big event. The three things every investor needs to be watching is just ahead. And tonight, don't miss a CNBC special report, Energy Emergency. It's hosted by Brian Sullivan at 6 p.m. Eastern. We'll see you in two minutes. We are back in overtime. Apple's big product event is on deck tomorrow.

Steve Kovach live from San Francisco now with a rundown of what we need to be watching for. Steve, good to see you. Hey, good to see you too, Scott. Yeah, we've got three things we're going to be watching out for tomorrow. First of all, new iPhones, of course. Four new models expected. Two standard models plus two pro models. And those pro models are going to get the biggest change.

We'll have a smaller cutout at the top of the screen so the camera and facial recognition sensors don't take up as much screen space. Also, early rumors, actually, Scott, of a price increase for the iPhone lineup this year. That will boost the average selling price and help iPhone revenues. Still more than half of Apple sales come from the iPhone. Remember that. And the event is happening a week earlier than usual, so this is going to show up in Apple's Q4 results a little bit more than it typically does. Next up, we've got accessories. The second generation AirPods Pro, that's the model with the noise-canceling earbuds,

and also a new Apple Watch, including a version that people are calling the Apple Watch Pro. It's said to be more durable and catered to more serious athletes and of course it's probably gonna be more expensive. And finally what everyone is really looking at is how they're gonna work out this iPhone hardware subscription service. The idea behind this is you pay one fee and get a new iPhone each year bundled with all those digital services like music, Apple TV+, iCloud storage, and so on. And this is an important one because it creates a recurring revenue cycle for iPhone hardware. For the first time, Scott, typically people will hang on to their iPhones now about three years. This could shorten that time window.

I wanted to get your insight, too, as we look ahead to tomorrow. It doesn't seem to me like Apple's dialed back their offerings, their expectations one bit, even with the uncertainty around the global economy. Is it just me or is that in fact the case? Yeah. And this is something we heard from Cook and executives in the last couple of weeks, especially on earnings calls. Demand is really strong for the iPhone, despite everything we're hearing about a looming reception and inflation. They're able they have been able to manage these covid lockdowns in China. A lot of the lockdowns are working in what's called a closed loop, meaning the workers like live at the factory so they can make the

iPhones and not get exposed to covid. And they've shifted production around and opening production up earlier in countries like India so they can get the supply out faster, Scott. All right. We'll talk to you, I assume, tomorrow as well. Look forward to that, Steve. Thank you. Enjoy the event. That's Steve Kovac ahead of it out in San Francisco for us. To the results now of our Twitter question of the day with an Apple focus, we said with the event tomorrow, which level will the stock hit first from here? Will it be 140 or 170? 60 percent said 140. That's interesting. Thanks for voting. Up next, it's Santoli's last word. Overtime will be back in two minutes.

OK, it's Santoli with his last word here at Post 9. What do you make of today? You know, market clearly having trouble absorbing this move in yields, right? So we know this. It's happened globally. It seems pretty direct in terms of why. Yeah, better than expected U.S. economic numbers. Global yields are flying.

You've got the U.K. talking about massive deficit spending and all the rest of it. ECB going to raise rates. There was another supposed issue today, which was massive announced corporate bond issuance here in the U.S. That does usually have the effect of causing some hedging and selling of treasuries. That's actually a net good news thing. In other words, yeah, the corporate market remains wide open. Corporate spreads were OK. That means that in general, corporate America remains refreshed. And also the fact that, you know, it's not really telling us anything about inflation expectations or any of those things. And the Nasdaq, by the way, is a good deal higher than it was the last time the 10-year yield was around these levels in mid-June.

So maybe some of that sensitivity has worn off or, you know, stocks are the last to know. Well, that's where I wanted to go with you. Maybe that's it. Again, the bond market is ahead of the stock market, and now the stock market has to catch up. It could very well be. I think that the tell would be if we actually do make new highs in 10-year yields. We haven't quite made new highs, so it still seems as if it's in the range. So there's no way you can say that stocks have discounted what's to come.

I think we're going to be in a weird information vacuum. We're going to get the CPI number while the Fed is in a speaker blackout before their meeting in September. But you do get Powell. Don't you get Powell on Thursday? Absolutely. So maybe the bond market is trying to anticipate what Powell's going to say on Thursday, which you have to believe is going to be nothing but hawkish.

Well, right, because we got a good jobs number and we got a good ISM services number today, which kind of fueled the moving yields and the backing away of stocks. Nothing that's happening in stocks right now is inconsistent with a messy, uncomfortable, eventual bottoming process. But you just obviously never know along the way because the downtrend prevails and the market ran into a brick wall exactly where you would have expected it to at the 200-day average. We'll be watching Apple tomorrow for obvious reasons because it's in a significant event with new iPhones expected. But sub-155, it's like right on that line and it's critical to some where it goes next. If it's a source of funds, there's a lot of outperformance in that stock right now that could come out of it. And there has been a tendency for the stock to be a bit soft on these iPhone announcement days. Our poll was interesting,

right? 60 percent say it's going to 140 before 170. We'll see. We'll see you tomorrow as well. All right. That's Mike Santoli with his last word. Fast Money's now.