Closing Bell - Closing Bell Overtime: Prepping for Powell 8/25/22

Episode Date: August 25, 2022

Fed Chair Powell’s speech on deck tomorrow and investors are anxiously awaiting his comments. Gabriela Santos of JP Morgan Asset Management gives her prediction for what stocks might do on the back of that speech. Plus, Bespoke’s Paul Hickey says current market signals are more positive than negative. He explains why. And, market expert Mike Santoli wraps up a wild day on Wall Street.

Carl, thank you very much. Welcome, everybody, to Overtime. I'm Scott Wadden. You just heard the bells. We are just getting started here at Post 9 at the New York Stock Exchange. Affirm and gap earnings, they are imminent, both, of course, giving us a good read into the strength of the consumer. We're going to bring you those numbers when they cross the stock moves that always follow. In just a few minutes, I'll speak live to top technician Jonathan Krinsky on the critical levels in the market he is watching. We do begin, though, with our talk of the day, prepping for Powell, what stocks are likely to do no matter what the Fed chair says tomorrow in his highly anticipated speech at Jackson Hole.

Let's ask Gabriela Santos. She is JPMorgan Asset Management's global market strategist. Welcome back. It's nice to see you. Nice to see you. So a nice move today ahead of Powell. Is this a sign that the markets and the Fed are in line with one another, at least the market thinks it is? I think we've had really low volume today and yesterday. Everyone just watching out for that big event risk tomorrow at 10 a.m. with Powell's speech.

But we are much better set up going into it than we were just eight days ago. We have real yields up 40 basis points, the two-year near the mid-June highs, and we have stocks off 4%. So much better position. I think we're likely to see a relief tomorrow unless we get a big shock from what Powell says. But one thing I would keep an eye out on if we look to next week and into the fall is that the move index or implied bond volatility is still very, very high for where it normally is in late August, suggesting that actually we're likely to continue seeing a lot of action in the yield curve, which could affect stock markets in the fall. Because it all depends really on where inflation goes and what the Fed is ultimately going to do. You mentioned Powell

tomorrow. A lot of Fed speakers today are Steve Leisman, who's going to join us in a little bit, interviewing many Fed heads today, if you want to call them that. Here's what Bullard said about inflation expectations, because I want your reaction to it on the other side. Here's Bullard. A baseline would be that probably inflation will be more persistent than what many on Wall Street expect. And that's going to be higher for longer. And I think that's a risk that's underpriced in markets today.

How about that notion, you know, that that is a risk and it's not priced in or very much underpriced in the market? Do you feel that, too? I very much agree with that sentiment. I don't think that we can have the confidence right now to be investing based on knowing exactly what the shape of inflation is going to look like ahead and what the shape of interest rates is going to look. I think there's still a big risk that we stay higher for longer, which is different than what the market is pricing in. In both inflation and rates. Exactly. In both inflation and rates. Exactly. In both of them. And that really we're at a turning point of a new regime where we have a slightly higher inflationary backdrop

and a higher interest rate backdrop. That's better for fixed income investors if you think out the next three years, five years, ten years. But it's a tricky spot for stock investors if you think about the 14% multiple expansion we've seen since mid-June. It suggests stocks are still a bit expensive here. You sent us a wish list of sorts for Jackson Hole, things you'd like to have answered coming out of that. One of the things you said was an estimate of long run inflation.

Sounds fleeting, especially given what Bullard just said. They don't know. I don't think any of us know. And I think we should all have tons of humility about inflation after so many upside surprises this year. But I do think that it's not just cyclical forces pushing up inflation. There have been some changes in structural forces, too. We've seen perhaps a peak in globalization. We've seen more power shift towards labor. We've also seen these big energy shocks. So there is an argument to be made of slightly higher inflation over the next decade than the previous decade and hence higher

rates for longer. You also have on your list a clearer view of what neutral is. And this is center to the debate, right? What the Fed chair said at the presser last time was we're basically there. Others would suggest no way and not even close. Now we have this whole debate on what neutral actually is. It would be great to have more of a discussion around what Fed members are thinking about in terms of the neutral rate, because I do think it would signal that there is very little visibility about it, that maybe we're not quite there yet. And hence that we will need higher interest rate this cycle just to be at neutral,

never mind to actually be restrictive. But we'll have to see what discussion we get tomorrow. There's so much on the wish list. I think Paul is likely to just stick to the script and stick on mentioning that the focus is on fighting inflation for now, and it'll depend on the data. Sometimes sticking to the script has left the market confused. We'll have to see what comes of that. 75 basis points. Is that in the market for September or not? So at the moment, 60 percent probability of 75 basis points is priced in. So it's more priced in than it was just eight days ago. So much better set setup going into the speech tomorrow. But I think the issue is we just have no idea

what inflation indicators they're looking at to make that decision of 50, 75, nevermind what happens in November, December, 2023 and beyond. So my wishlist also includes some clearer signals. Is it headline? Is it core inflation? Is it lagging indicators or leading? Is it core inflation? Is it lagging indicators or

leading? Is it just gasoline? Or what about natural gas prices surging? So there's a lot of uncertainty about the path of inflation and the reaction function to it. You and everybody else want more clarity. And you know what? So does the Fed chair. And so do the members of the Fed. They want more clarity, too. The fact is, just nobody knows all that much because it's impossible to know. You say it's too late to sell and too early to add risk. So what does that leave us? That leaves us, ultimately, if we are still a bit underweight risk, which we would consider to be an appropriate position,

it's too early to start increasing exposure to equities, high yields, cyclical sectors, low quality companies. We're not there yet. We still need more visibility about the path of inflation rates. We need valuations to adapt to the new environment of higher for longer. And we also need earnings expectations to continue moving down a little bit further before we can really get excited here. All right. Let's broaden the conversation, if we could, and bring in CNBC contributor Stephanie Link of Hightower Advisors, our own Steve Leisman, our senior economics reporter. He, of course, in Jackson Hole for that big event today and tomorrow. And Steve,

obviously, I'll come to you first. I played the soundbite for Bullard on these, you know, the risk that inflation is higher for longer. But he also talked about what his target is for rates for this year. Let's listen and I'll get your reaction on the other side. Here's Bullard. 375 to 4 is my target for this year, for the end of this year. And I like the front loading. I like I like the idea that you get the rate increases in earlier rather than later. We've got inflation right now. We've got a strong labor market right now. It seems like a good time to get to the right neighborhood for the funds rate. All right, Steve. So that was Bullard. To you, did anything he say surprise you? It certainly didn't surprise the market. Dow finishing up more than 300. Yeah, it did a little bit the Fed funds futures market,

Scott. If you look at what happened, the peak or the terminal rate, which we've been monitoring now pegged in April of 2023, it went up about 10 basis points today. Now it's about 380. And so did that January 2024 contract we're following as to how much the Fed comes down after that. So if you look at that chart, you see that the market moved in a more hawkish direction. Paul McCulley, who listens to everything both I say and Fed officials say, sent me a fascinating note. And he said, this is really a debate in three dimensions. Let me give it to you. First is the terminal rate, where the Fed's going. The second is the pace that it gets there, how fast it gets there. And then the third dimension is how long it stays there. What I'm hearing from guys like Patrick Harker today is he wants to get

to a rate a little bit lower than where Bullard is and wants to stay there for longer. Bullard has long had this idea that I think is worth considering. The faster the Fed gets there, the more that it does to combat inflation now, the less it has to do on the back end of this. And I think that's one of the reasons he wants to go fast. And it has not been a bad bet to follow what Bullard is saying. He was the first guy to come forward with a need for 75. The Fed has now done that twice. So I like listening to Jim. I think he's very outspoken about what he thinks. Not so sure about next year, but he does like that 375 to 4% range and probably holding there for a while, which again is countering what the market is priced in right now, Scott. Yeah. I mentioned to you, everybody hold their thoughts for just a

moment. I did mention to you at the top of the program that we were waiting on a firm and gap earnings among a few others. A firm's getting hammered on these results, which we are currently going through. Our tech reporter, Steve Kovach, is going to come on in just a moment once he has a chance to go through the release, but at least take a look at what's happening with the stock, which is down nearly 15 percent, a stock that was already down 70 percent year to date. So we'll have that for you in just a second. So, Stephanie Link, I played the soundbite from Bullard earlier about this risk that inflation remains higher for longer in the market is underestimating or underappreciating, I think

was the word he used, underpricing those risks. You're a market participant. Are you underestimating and underpricing that risk? No. Scott, you know I've been talking about inflation, and it's everywhere, right? It's not only rents and wages. It's not natural gas at 14-year highs. Oil prices have stopped going down. Food prices are up 13 percent. Today, we got the GDP deflator, price deflator, and actually that was up accelerated from the prior print. It was at 8.9 percent so I I think they should front load number one they're behind the curve number two and number three I did think it was interesting that about Bullard's comments saying

they might stay higher for longer and that I thought kind of got in there that maybe people because people are starting to think okay they're gonna be aggressive and then they're gonna turn around they're gonna reverse and they're gonna pivot but he was saying maybe they have to stay higher for longer. And the reason is because it's going to take a long time to get inflation under control. And we get core PCE number tomorrow. That's going to be fascinating. Yeah. Gabriella, you're shaking your head in agreement with what you're hearing from Stephanie Lee. It's just such a hard pivot to say they'll finish hiking rates in December and start cutting in the first half of next year

when we have headline PCE tomorrow likely coming in three and a half times above the Fed's target of 2% and taking us the better part through 2024 to get back to 2%. So I think we're underappreciating this idea of getting to higher rates and staying there and the effect that can have on multiples on the cost of capital from here. Steve, it does the notion seem a bit absurd that the Fed is going to start cutting rates early in 23, given everything that we've heard and those who are going out of their way to make sure we hear it. Yeah. Hey, Scott, can I just do a nerdy correction on Gabriela, which is that the 2024 forecast, Gabriela, doesn't even show the Fed getting back to 2%.

I think they have 2.4 built in. And I know you're on or about right, but I just want to point out, I pointed that out to both of you guys. Look, we'll take 2.4 if we get close enough. That'll be a huge victory. But getting to your question, Scott, you're right. I mean, at the end of the day, the fed has much more work to do here um and and it also told us today we had a bunch of things like esther george talked about the idea yeah some stuff's come down cars uh hotels

but the broad inflation that's out there has not yet come down and so uh she wants to see we got the first one of the answers to gabriella's thing she wants more clarity on george told us she wants to see, we got the first, one of the answers to Gabriella's thing she wants more clarity on. George told us she wants three months in a row of better inflation to start to feel confident that it is indeed coming down. So that's at least one metric we have out there that maybe would make Gabriella just a touch less anxious. So the statement you just made, Steve, the Fed has much more work to do here. Is that going to be Powell's message? Would you game that out? Do you think that's going to be the crux of the message tomorrow,

that we do have much more work to be done here? Yeah, Scott, can I call up a full screen from Powell last year where he said, incoming data should provide more evidence that some of the supply, demand, and balances are improving and more evidence of a continued moderation of inflation. If you'll note and you remember, that was 5% CPI when he made that speech back in August. It's now, as you know, top nine and came back down to eight and a half. So I think he's going to be very careful not to show very much wiggle room between this idea of the Fed hiking rates and going further

and try to provide any ammunition to those out there. Look, it's a really interesting thing. I got a note from one market participant about this notion about the Fed cutting next year. And he said, this person said, the Fed doesn't know yet what it's going to have to do next year, and that is to cut rates. So that's the kind of, I don't know what you call it, prescience or chutzpah, one or the other. There's some in between those two things. Part of the point we made earlier, Stephanie, is that the Fed doesn't know what it's going to have to do next week, because how could it? You're going to get more inflation data and it's going

to shape in part policy, which could make much of what has been said over the last couple of days moot in some respects. How do you see that? Right. Well, look, I mean, I think we're in a trading range for that very reason. We rallied up 14 percent from the June lows because people thought that they pivoted. They didn't pivot. And then we got economic data that was actually not terrible. Right. People were talking about earnings were going to collapse in June and we were already in a recession. And the data that we've gotten since then actually has been pretty good, mainly jobs like that's the bright spot. But retail sales, industrial production, capacity utilization doesn't point to a recession right this very moment.

And so they are going to have to deal with this inflation picture. And they can because we do have higher inflation, but we also have strong jobs. And so, you know, I don't think they know what they're going to do. Is it three and a half, four percent on the Fed funds by the end of the year? It doesn't really matter, Scott, because rates are going higher. And in that environment, you don't want to own growth names and you don't want to own long duration assets. You could own a few of them for sure. I do. But I think you want to own pricing power stories. I'm loaded in energy materials. Industrials are caught in a bid as of late. And I've been recently adding to

some material names and some financial names, because I think those sectors into the end of the year are going to do better as the Fed has to deal with this impossible inflation. Speaking of one growth name you definitely don't want to own at this very moment is Affirm. After those earnings, which Steve Kovach joins us now, has some color onto why that stock is getting absolutely destroyed after hours. Yeah, that's right, Scott, down about 15 percent, it looks like. Let's talk some mixed results here. Revenue is a beat, though. Three hundred sixty four million dollars versus three hundred fifty four million dollars expected. Loss per share, a miss. Worse than expected. Sixty five cents per share

versus sixty three cents expected. And then it's the guide that seems to be really hurting the stock here. This is their fiscal year 23 guide. For the full year, they're guiding 1.62 billion. Analysts were looking for 1.9. And then for the key one guide, which we're in right now, up to 365 million. And analysts were looking to 386 million. And then on the consumer here, something really interesting, a quote from CEO Max Levinson saying growth of online commerce is falling back to pre-COVID levels. So a little insight in the consumer there, too, Scott.

Yeah, we appreciate that. Which gap is going to give us as well when it numbers its numbers cross, excuse me, which are imminent as well. Steve Kovac, thank you. Stephanie Link, how do you see this buy now, pay later space, which has become more crowded and is about to get even more so with Apple? It's more crowded. I think a firm is doing the right things and they've partnered up with the right partners. GMV, gross merchandise value, up 77 percent year over year is very respectable and actually ahead of Whisper. But if you don't have earnings, you can't and you don't. There's no way to value this thing. And you're right.

It's a more competitive landscape. That's exactly the recipe of not owning a stock in a rising rate interest rate environment. They are having their growing pains for sure. And I just think that there are better places to be owning. If you want to pay like if you want to be involved in payments, for example, FinTech, for example, find the companies that are actually earning some something and growing those earnings. Yeah, Gap is out, which I've been waiting for. Bertha Coombs has that for us right now. Bertha, what do we see here for a stock that's had a multitude of problems over the last several months? Yeah, you would think this is going to be the kitchen sink

quarter as they try to transition to new leadership. Gap revenues coming in, though, ahead of expectations at $3.86 billion versus a street estimate of $3.82 billion on the top line. On the bottom line, the company reporting $0.08 adjusted profit. Now, the street was looking for a loss of $0.05 a share. If you include a $0.13 per share impairment

for inventory, then that would be in line. Marge is down eight and a half percentage points from a year ago, impacted by higher freight costs, higher discounting at Old Navy in particular. And of course, they bring in inflation. CFO Katrina O'Connell telling CNBC that the company faced some real execution challenges in the quarter. And like other retailers, they are trying to manage inventory. And considering uncertain macro trends, they're going to take some actions to reduce that inventory in the quarter ahead. Comp, same-store sales were down 10 percent year over year overall.

Especially disappointing when it came to Old Navy, down 15 percent. But a little bit of a glimmer here. Comp sales for Banana Republic were actually up eight percent. A flagship also was down at Gap. But a little bit of good news on Banana Republic. Back to you. Yeah. CEO transition underway. Just to add to everything that's taking place. Bertha, thank you so much. Let's get back to our conversation. Steve, Gabriella, I thought, made a good point earlier she suggested that uh what's happened in the market over the last week has actually helped powell out um leading into this speech tomorrow in jackson hole and had that not happened we may hear something a little different than we otherwise might now 100

the market has come towards the fed you know scott Scott, on the noon show and on this show, there's this debate who had it right, the Fed or the market. The market has come towards the Fed and their forecast for 380 or 3.8% funds rate. If I could just say a quick word about the consumer from the GDP report, picking up on what Stephanie talked about. She obviously follows that economic data very closely, does a great job of integrating into an investment thesis. The consumer is doing still pretty well. We've had two quarters in a row of positive real consumption or personal consumption expenditures. That's even accounting for the dismal inflation numbers that are out there. And by the way, that comes from services doing really well and goods being down two quarters in a row, which is what you feel when you talk to some of these other companies that are selling the goods products. They're getting hit.

The service companies are picking up the slack there. The other thing we found, Scott, is that from a nationwide perspective, all companies, public and private, their profits grew very strongly in the second quarter. And the margin, which is corporate profits represented GDP, near an all-time high. So companies also finding a way to do better. And I don't know how you integrate that, but certainly the Fed wants things slower. Things still are going pretty good, not on the top line of the GDP numbers, Scott, but when you look inside them. Yeah. And that is, Gabriella, one of the issues, right? I know the Fed wants to tighten financial conditions further. It wants to crush demand. So far, it's like the consumer giving the Fed, for the most part, the Heisman on that.

And they have been flush. Certain parts of the consumer spectrum, obviously, are less flush than others. But that's been a problem. Yeah, so I think the glass half full way to look at the consumer is that the consumer is still spending. On the second quarter GDP, we saw one and a half seasonally adjusted annual rate of consumption. But the glass half empty way of looking at that is that it was growing two and a half percent in the fourth quarter. So consumption is clearly slowing. In terms of consumption patterns, we're seeing huge shifts. Apparel getting absolutely hammered by spending. Goods in general seeing a big contraction.

And then services still seeing some very strong consumption and still operating below average. So you have these areas of consumer spending at very different speeds at the moment. Also, big, big focus on discounting, big focus on spending with credit. So for us, it's really all about not executing this consumer retail theme broadly, but much more focusing on pockets of strength. And I mentioned this as an important

thing because we have seen consumer discretionary sector up 20 percent just this month. And we've been seeing a lot of retail investor flows back into the space. We don't think it's good to be making very generalized bets on the consumer right now. Steph, give me a quick coda for this conversation as we look ahead to that all-important speech from Powell tomorrow. I think the economy is stronger than people think. Inflation is stronger than people think. The Fed has to do what they have to do. They're going to raise rates. But I think the economy for now can handle it. And in fact, earnings have been actually ahead of expectations. And that's very encouraging. That doesn't mean we're not going to start slowing down into 2023. We haven't even heard the effect. We haven't even felt the effects of what the Fed has already

done. It takes about six to nine months to get into the economy. So next year is a different ball of wax. But for now, I think as long as earnings hang in there, I think the market is a little choppy and you use this as opportunities to buy those sectors that I talked about earlier. I love the conversation, guys. Thank you so much for it. Gabriel Asentos here at Post 9. Steph and Steve. Steve, I look forward to seeing you tomorrow throughout the day as we look forward to that speech tomorrow. You have some big interviews coming up as well, and we look forward to all of it. We have full coverage live from Jackson Hole, as we say. It continues tomorrow right here on CNBC.

Don't miss any of it. It's so important that you catch these comments and certainly the commentary and what it all means to the market. Let's get to our Twitter question of the day. Speaking of, we want to know what tone does the Fed chair, Jerome Powell, strike tomorrow in that speech? More hawkish? More dovish? We will see. Head to at CNBC Overtime. Place your vote. We'll give you the results later on in that speech. More hawkish, more dovish. We will see. Head to at CNBC Overtime. Place your vote. We'll give you the results later on in our show. Coming up here next, where we are just getting started, we have the line in the sand for the Bulls. Top technician

Jonathan Krinsky is watching one key level. He's going to tell you exactly what it is because it could be a true test of the recent rally. We're live from the Stock Exchange. That's the New York Stock Exchange. OT is right back. All right, welcome back to Overtime. The S&P 500 is now at a key technical level after rallying nearly 15 percent from its June low. That is according to BTIG's chief market technician, Jonathan Krinsky, who joins us now. What was the key level that you were watching, which we actually closed above today with this nice little burst into the close? Shed some light for us. Hey, Scott. So, you know, today we're watching a shorter term level,

the 20-day moving average on the S&P 500. It was around 4,186. You know, and the 20-day is a good gauge of short-term trend. If you go back to July 7th, when we first closed above it, all the way up until this recent pullback we've had, you only had a couple of closes below it in July. And then we went back and failed to hold it on Monday. And then we kind of tested it from the underside today. So closing back above it, I think is, you know, encouraging news for the bulls. But I think, you know, if we take a step back and kind of talk a little bit more bigger picture, you know, we really talked a lot about that 50% retracement of the S&P closing above that a couple of weeks ago, did kind of conclude that the June lows are probably in. Again,

we work in probabilities, not certainties. So we do think that the June lows are probably in. Again, we work in probabilities, not certainties. So we do think that the June lows are probably in. But the caveat there is that it's not going to be smooth sailing. I think a lot of people just assume once the lows are in that we just are up and to the right. And that's really not typical of markets if you look back throughout history. There's always a caveat, of course. You are staying cautious. That is the bottom line, regardless of getting over and closing above a key technical level, right? Yeah, look, there's still a lot of cross currents, a lot of macro headwinds. We saw rates pull back today, but, you know, the move up in rates is a little concerning if that were to extend. Remember, the 10-year yield, excuse me, topped two days before the market bottomed in June. So

there is a pretty good correlation there. The dollar continues to be pretty strong, pushing up near 52-week highs. So there's just a lot of cross-currents. Again, I think there's reasons to be optimistic. There's areas of the market that certainly are acting much better. But I don't think it's the pound the table, all clear to the upside that some people might be looking for. What is it with tech right now? Leave us with that view. It's such an obvious large part of the S&P 500. A lot of people are in the most marquee of names within this market, which are in that sector. What do I do with it now? Yeah, I think even within tech, you're seeing bifurcation among, you know, on the stock level. You can see some of the earnings movers from the last couple of days.

There's clearly some winners and losers. I think if you go all the way to the, you know, to the top of the pile and look at Apple, though, you know, it's 7% of the S&P or so. I think over 13% of the NASDAQ, you know, and that's, you know, been a stock that outperformed the market throughout much of the correction the first half of the year and then actually outperformed again off the market bottom. And so that tells us there's a pretty crowded name when it can act both defensive and offense offensively. And we look we look at something like the spread of Apple relative to its 50 day moving average. It recently got about 16 percent above that 50 day, which excluding one brief period off the covid bottom, that's about as wide of a spread as we've seen over the last seven or eight years. So we think Apple is a bit vulnerable or at least, you know, needs further consolidation.

And by definition, that means tech broadly is probably, you know, needs some consolidation as well. What sector are you most worried about before I let you go? You know, I think the sector with the least risk reward is a sector you probably don't talk about much is utilities. Again, and this is some of the cross currents we're talking about. Utilities are typically that defensive safe haven sector, but they actually outperformed the market off the June lows. And you look at it across the board, it's stretched pretty much on every metric that we look at. So utilities, we think the risk reward is extremely poor here. All right. JK, appreciate it. That's Jonathan Krinsky, BTIG. We'll talk to you soon.

It's time for a CNBC News Update now with Shepard Smith. Hey, Shep. Hey, Scott. From the news on CNBC, here's what's happening. Parts of the affidavit that led to the FBI search of Mar-a-Lago will be released by noon Eastern time tomorrow. The judge overseeing the case ordering the release in just the past hour after the Department of Justice submitted a redacted version earlier today. The last two working power units at the Zaporizhia nuclear plant in Ukraine, the largest in all of Europe, disconnected from the power grid today. It's the first time that's happened in its 40-year history. Ukrainian officials are blaming fires that were sparked by shelling in the war as Russian troops continue to occupy that plant.

According to the U.N., the energy supply to the plant was restored later in the day. And another congressional visit to Taiwan, Another strongly worded statement from China. Senator Marsha Blackburn arriving there today. Reps for the Chinese embassy in Washington calling the trip proof that the United States is meddling in China's affairs. The Tennessee Republican says visits to Taipei are part of longstanding U.S. policy and that she won't be bullied by China. Tonight, regrets from the front lines of the great resignation, plus guilty pleas in the case of Ashley Biden's stolen diary. And could magic mushrooms hold the key to treating alcoholism? The new study on the news right after Jim Kramer, 7 Eastern CNBC. Scott, back to you. I appreciate it, Shep. Thank you. That's Shepard Smith. We'll see you tonight.

Up next, a big breakout for the Bulls. Why bespokes Paul Hickey is seeing serious upside opportunity right now. He's here at Post 9 to make his case right after this break when overtime returns. The S&P tried but failed to break through its 200-day moving average last week. However, our next guest says current market signals are more positive than negative now, and the next attempt should break through. Joining us now right here, Post 9's Bespoke Investment Group co-founder, Paul Hickey. It's good to see you.

Good to be here. Welcome back to the exchange. Thank you. Why is the second time going to be the charm? Well, you know, I think there's a lot of angst in the market right now among investors of coming. You know, we failed at the 200 day. And then we're coming into the Jackson Hole speech this Friday. And so everyone's, you know, talking about this is going to be a big bad event.

Looking at history, it says you shouldn't focus too much on this. And anyways, I like to, you know, the Fed, like economists and analysts, we're all in this experience right now where we have no idea what's going on and what's going to happen. And we're all going to make mistakes. It's like someone going off to college learning and you don't know what to do, but you want to rely on someone for info. So we're focusing on the Fed. We're focusing on Jay down the hall from D.C. or Esther upstairs from Kansas City or Jim from St. Louis. But the key is to listen to the market here. And I think what we saw in this rally off the lows

was we saw very strong breadth in the market. We saw 90% of stocks trade above their 50-day moving average, which is historically 16 times it's happened in the past. Since 1990, you say that three and 12 months later, the S&P was higher 15 of those times. 15 of those times. Furthermore, when less than 50% of the stocks were still below their 200-day moving average, the S&P 500 was higher 3, 6, and 12 months later all three times with, as you characterized it, massive returns.

Right. I mean, you look at the history, it was very strong. And if you even, that's three different periods of those 16. But if you widen it out to less than two- thirds of stocks above their 200-day moving average, it's still those same very consistent three, six, and 12 months later, higher every time. And sentiment has improved a little bit, but it's still very negative if you think about it. We still, the bull bear ratio in investor sentiment, more negative than positive. It's now, I think, close to the second longest streak of negative readings on record. And then you look at positioning in the commitment of

traders report. It's the most negative it's been since October 2011. And I mean, it's a long time ago, but remember October 2011, that was a very good time for the markets before in that period. And it's just because we're in this environment where sentiment is washed out. There's very little faith in the market going forward. Well, because there are too many wild cards, right? I mean, how can you expect there to be faith in anything where you have the wild cards of inflation in the Fed? And as you said at the very outset, no one has any idea where any of it's going, really. Right. So the key, no one has any idea where it's going. But you listen to the message of the market, the collective wisdom of the market with this strong breath.

And the wild cards is I don't think there's ever a time that I remember in the past where the coast was clear, where I thought, oh, hey, the coast is clear, everything's looking like roses, and the market did well afterwards. I think the last time everyone thought things were going to go well was last November, and look where we are now. So this headlines are negative right now. But the market was telling us that six months ago and we, you know, during that period. And I think looking forward, you're seeing this rebound in the market and you're seeing this somewhat easing of credit conditions still tight, but it's moving in the right direction. You, of course, assume that there's no great mismatch between the market and the Fed. Now, today's action, not one day

making a whole trend clear, but would seem to suggest that the market and the Fed are at least on the same page. It's a matter of not getting grossly mismatched. Right. I think that's a great point. You've got to keep things in balance. And I think there is a balance here. You know, we talk about, oh, there's the Fed's going to keep hiking, you know, 50 basis points, 50 basis points, 50 basis points for the rest of the year. But everybody, we all know that, you know, so it's priced into the market. And when you heard Harker today talking about and then maybe take a wait and see approach, the Fed doesn't always have to be hiking aggressively or cutting aggressively. You can you can just sit back and wait and see how things play out.

You know that doing nothing is sometimes a good approach to take. Yeah. And they've already been aggressive, as they would tell you for certain. Thank you. Good to be here. That's Paul Hickey again with Bespoke joining us here post nine in overtime. Still ahead, fueling up on the energy trade. One halftime committee members making a big bet on an 18 billion dollar natural gas company. We debate that in today's halftime committee members making a big bet on an $18 billion natural gas company. We debate that 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 back right after this.

In today's Halftime Overtime, gearing up for more gains in the energy trade. Steve Weiss making a new buy in his portfolio this morning, adding the natural gas company EQT. Listen. I continue to believe that nat gas prices are going to accelerate. This one's not that well known, not that small market cap at 18 billion, but I think it's got a lot of upside here. And so that's why I bought it. I think it'll be an intermediate term trade. As you know, I don't think energy is investable over the long term. I think history has proved that out. But I think over the next six months or so, this stock could do very well. All right, that was Steve Weiss.

This is Hightower's Stephanie Link, who is back with us. What do you make of this move? I mean, even if you don't own this particular name, just this idea of believing that certain parts in particular of energy are going to continue to go up. Yeah, I mean, there have been structural changes within the industry. Right. And we've talked about it all year long. Companies in general are producing less and they're returning more cash to shareholders. These companies are minting money. In addition, you have the SPR in October going away, right? And then also, OPEC Plus is thinking about cutting production. So add it all up, and the supply side of the equation is actually getting tighter and tighter, and will get even tighter, right? And the companies are

doing the right things in terms of buybacks and dividends and special dividends and all that. So EQT, I mean, it's not as well known, but the stock is up 126% year to date. That said, it's trading at 13 times earnings. And I mentioned cash, and they're expected to grow cash $22 billion between 2022 and 2027. That's larger than their market cap at $16 billion. So they have ample flexibility to lower debt and that sort of thing. I don't own it. I own, you know, I own a lot of other names. Chevron. You do. You do. Ones that including ones that are up a lot. Right. Oxy's up one fifty six percent year to date.

But of the ones you own, right, Chevron, Diamondback, Occidental, Slumber's. Why don't you own a more pure play nat gas company? Why are you playing the crude part of commodities more so than that? Yeah. Yeah. I mean, look, I mean, Chevron is diversified. You definitely get gas exposure there. Right. And I just feel like the natural gas names are up a lot more than the crude names. Right. So and look, I mean, you mentioned oxys a lot, but it also trades at five times earnings, right? So, I mean, I think that there's

better value elsewhere. I'm not saying that natural gas and being exposed there is a bad thing. I just, I feel like I missed it and I'm getting it through other ways. Oh, I got you. Okay, fair enough. Steph, we'll talk to you soon.

Thanks for hanging around. That's Stephanie Link back with us again from Hightower. Up next, we're tracking some big stock moves in overtime. Steve Kovac is standing by with all of that action. What do you have on deck for us? Yeah, Scott, got a lot coming up for you. We got one technology name that failed to marvel investors after hours. And dude, you're getting a PC maker falling after earnings. And look, I'm not making this up. Things are looking beautiful to one popular name tonight.

All that when Closing Bell Overtime returns after this. We're back in overtime. Another check on shares there of Affirm. The stock is getting crushed in overtime after that larger than expected loss last quarter. You see the stock's down about 14% now. Not the only big mover, in fact, in overtime. Steve Kovac tracking that action for us, Steve. Yeah, that's right, Scott. We've got three big movers here in overtime for you. Let's kick things

off with the stock shooting higher. Cloud Vendor Workday up better than 12 percent, the company with a small beat on both lines while reaffirming four-year guidance. However, the guide is not comparable to estimates because of subscription revenues. Shares are up a whopping 26 percent in the past month. Meanwhile, Dell shares dropping right now in overtime, the computer maker with a slight beat on earnings, but revenue coming in short of analysts' estimates. The company's COO saying they observe more cautious customer behavior as the quarter progressed, down about 21% so far this year. And let's end with a consumer name, Ulta, with a move higher, the beauty store chain beating estimates handily, posting a $5.70 EPS number on revenue of $2.3 billion. That compares to

estimates of $5 EPS and $2.21 billion revenue expected. CEO Dave Kimball pointing to the, quote, strong emotional connection guests have to the brand for how it plans to remain strong against some softening in the consumer. Those are your overtime movers, Scott. I'll send it back to you. All right, Steve Kobach, appreciate it very much. Thank you. Up next, a double dose of semi-picks, one money manager getting bullish on that sector. We'll tell you the top names they are betting on in our two minute drill next.

It's time now for our two minute drill. Let's bring in Dory Wiley, CEO of Commerce Street Capital. It's good to see you. Welcome back. Your first pick is right in the conversation I was just having with Stephanie Link. Looking at what natural gas prices are doing right there. I think 933 the last I checked. PXD, that's your pure play. Why? Sure. PXD may be the best buy in the whole stock market. We all know the energy play here, but the pioneer being in the Permian, their strong position, you got a stock that could double in the next two years, trades really cheap, and they pay you a 14 percent dividend while you wait.

Why wouldn't why wouldn't anyone have that in their portfolio unless they have ESG issues? OK, I'll give you that. I'll give you that. But I look at your next picks and I'm like, OK, Micron and Lam Research. You know, cyclical tech is certainly a question here with questions about where the economy is going from here. Why do you like both of those names? That's exactly why I like it. It's a little right now, right? Everyone's a little soft on semiconductors. Those are two really, really strong companies. Micron trading really cheap. Lamb with their position in the marketplace. Now you got the new bill comes out by Congress really supporting them. And the market hadn't bounced back yet. The market doesn't believe it yet. Those two strong companies are very strong and here to stay in a good position.

It's a good time to buy them. SBNY next and last, Signature Bank. Talk to us. Signature Bank. Watch the banks. Banks do really well, especially commercial banks, as rates rise or margins start to expand. Commercial bank has a niche in the marketplace and grabbing deposits through being the first bank in the country to have blockchain in their system. I'm not talking crypto. I'm talking blockchain for payments. And they do really good and they do it business to business by using a company called Tacit. They're the first company to do it. It's oversold down on the bottom side. It's a good time to buy. All right.

I love the conviction. Dory, we'll see you soon. Thanks so much. That's Dory Wiley joining us there in overtime in our two-minute drill. Up next, Santoli is back with his last word. Mike Santoli is back in overtime. Oh, you know what? We have to do the results of our Twitter. I got so excited about that.

All right. The Twitter question. The results. What tone does Fed share Jerome Powell's strike in tomorrow's speech from Jackson Hole? 75% of you saying more hawkish, 25% saying more dovish. Now Santoli is here to play off this. Anyway, we might just make it through this unscathed. Eye of the beholder stuff.

More hawkish than what is the real question. I suppose people feel more hawkish than we've heard recently or more hawkish perhaps than Powell himself was at the prior press conference. Very much unclear. I think they want to lay out this somewhat longer term framework that says, sure, whenever we get done with the rate hikes, it's in sight. Then we're just going to be steady for a while, plateau on hold. I think the market has kind of predigested a lot of that idea, which probably explains why there was kind of a benign market reaction today. Yeah. Gabriela Santos, who you may have heard earlier, suggested, and I think rightly so,

and Leisman sort of backed this up, the markets obviously helped Powell out. This pullback that we got since the runaway rally, it's a gift to him. It has. It squelched the idea that financial conditions had basically gotten too overexcited and too loose in the interim since the last Fed meeting so that he would feel compelled to sort of try to unwind that. Look, I think financial conditions are tools. They're not the goal themselves. I keep saying that they're not the target.

But it is better that the two-year note is at 3.4 percent again. It's pretty much where it was at the highs. That tells you it recognizes the Fed has more to do. We don't get away from the needle threading, though, that still exists for Powell and company. I mean, it is what it is, and it's going to be that way for a long time. It is. And frankly, he's not probably going to say that the soft landing that is the magical hope for result is in the bag. Right. He's from the beginning said soft-ish landing, maybe. And, you know, Steve has asked everybody so far,

does it matter if we're in a recession or about to enter one? Does that matter to your policy path? And they keep saying not so much because inflation is the sole effective mandate at the moment. Speaking of things that either matter or they don't, does 50 or 75 matter for September? I don't think so. I don't think it matters very much. At this point, I think there might be a reflex negative reaction if it's 75 out of the blue when the market's priced more for 50.

But I don't because I don't think it necessarily changes the total number of quarter point moves that we're looking at before things stop for a while. What about technically speaking? We had a couple on today, you know, whether it was Krinsky. Yeah. You know, we got above a key level. We closed above, you know, that level there. Paul Hickey suggesting next time we bang up against the 200 day, we're actually likely to go through, which we banged our head and fell down last time. Exactly. I don't think anybody would have expected the market to go from that kind of a low straight and slice up through a 200-day average that's declining and all the rest of it.

So I believe both of those points. Krinsky's saying, look, V bottoms are not the norm. And so you shouldn't necessarily expect a race back to the highs. I happen to agree with Paul, and I've been making this case, that there is still skepticism. And that is somewhat comforting at this stage. There is some belief, just to end on a stock that everybody likes to talk about, Apple, as Krinsky said, is maybe set up for some weakness here. I have a hard time believing that that happens and the market is just fine. Its outperformance has become extreme. I think the ideal possibility is it cools off a

little bit. It doesn't necessarily reverse sharply and see if the market can handle that. All right. So we had a whole bunch of Fed speakers today. It obviously culminates tomorrow morning with Powell and then the rubber is going to hit the road. We're going to see how everything happens. We'll see what's really all right. Mike Santoli, last word. Fast money's now.