Closing Bell - Closing Bell Overtime: Rebound Ahead? 5/2/22

Episode Date: May 2, 2022

Stocks rebounded in a late-day rally and the Nasdaq Composite closed near session highs. Bearish strategist Eric Johnston from Cantor Fitzgerald explains why he just turned “tactically bullish” for the short-term. Plus, Tom Lee from Fundstrat Global Advisors says the FAANG trade is a “no-brainer.” And, Michael Santoli’s “Last Word” was “normal.”

Welcome to Overtime. I'm Scott Walkney. You just heard the bells. We, of course, right here, Post 9, just getting started. In just a little bit, I'll be joined right here at Post 9 by Fundstrat's Tom Lee. A new month beginning for your money. It's gotten off to a volatile start, an interesting turn into the close today. Does it mean more pain is ahead or are stocks closer to a bottom? We were going to ask Tom, and he's going to tell us. We begin, though, with our talk of the tape. A big call by someone who's gotten this market repeatedly right. Cantor Fitzgerald's Eric Johnston, who now says he is turning tactically bullish on stocks. He's come here to Post 9 to make his case.

It's good to see you. You were coming here to make the case before we had this nice move off of the bottom today. Why is today the day that you say it's time to get more bullish? So we have the Fed meeting on Wednesday, and we think that's going to be a clearing event for markets. If you look at the Fed since the last meeting, financial conditions have tightened sharply since then. The 10-year has gone from 2.15% to 3%. Equities are down 5%. The dollars rallied 5%.

So with financial conditionings tightening as they are, we think the Fed is going to be slightly more dovish than the market is expecting. And we're going to have the event behind. In addition to that, sentiment and positioning right now is at extreme low levels. You have hedge fund net exposures at a year and a half lows. CTAs are net short. And a lot of these sentiment readings are at 10 to 15 year lows. And the data that we've run suggests that over the next three to four weeks, we are going to see a fairly sharp rally off of that.

Okay. So the reason you pay attention to what he said, I mean, anybody can show up and make a call. Sure. It's one thing to have a track record to back it all up in which you do. June 2020 to August 21, high conviction bullish, you said S&P rallied 50% during that period. August 2021 to December 21, neutral view on equities declared the bull market to be over. Market traded plus or minus 5% during that period. So basically a wash. January 2022 to February of 2022, you had a bearish call looking for a 10% plus correction. Market got down 10% in six weeks. February 24th to March 7th, tactical bullish view. Calling for a trading bounce.

What did the S&P do? It rallied 5% in a week. March 7th, you got bearish. April was horrible. And then today, here you turn tactically bullish. Now, let's be clear. It's a short-term call. Yes.

Medium and longer term, you're still not so positive. That's exactly right. Like we think over the medium term, the Fed is going to be withdrawing a trillion dollars a year. We think ultimately the economy is going to slow. And we do think the retail investor is bigger picture overextended. But if you look at prior bear markets, things typically don't go down in a straight line unless you are in a debt crisis or a situation like the breakout of COVID. And actually, the backbone of this economy is actually very strong. Jobless claims are at 180,000. That is a historic low. Excess savings for the consumer

are at a historic high. And earnings have actually held up very well. They've actually risen this quarter. So things are not falling apart. Estimates and, or excuse me, multiples have come down by five multiple points in a matter of six months. And so when you combine that, earnings doing what they're doing, and where sentiment and positioning is, we think it sets up very well. The other thing that I would point out is typically in a market, the gap risk potential to the downside is much greater than what the gap risk could be to the upside. That's not the case right now. There is a potential for gap risk to the upside if zero COVID changes, if something goes on with the Ukraine-Russia war, if something going on with inflation expectations in terms of people thinking that it's a peak. So you could potentially get a sharp bear market rally, And that's what we think is going to happen. So can you quantify sharp for us with the S&P at 41.55 and again,

staging this nice reversal? And by the way, today, everything but the Dow hit a new intraday low for 22. So maybe that will look back and say, well, OK, that was the bottom. But what does sharp mean? So I think we get a 7 to 10 percent rally. Oh, that's sharp. And I think it can happen all in May. So I think it's all going to happen. I think it's going to happen this month. It's going to be very, very quick. And the place that you would look for it to be most acute, let's put it to you that way. Is it tech? Because that was the point of despair in the selling. So that's where the reward comes? I think it'll be tech, and I think it'll be cyclicals. So you actually saw today, even when the market was down, defensive sectors, staples, utilities, REITs, they were all down.

And I think that's also another signal that things are changing. So we think it's going to be a very offensive rally, where high multiple tech's going to rally, and the cyclicals that have really gotten beaten down and really priced in, I think probably at this point, too high a chance of a near-term recession are what's going to lead the rally. The size of your wallet has nothing to do with the kind of call you make

as to whether it's going to be right or not. And I say that because you've got the hitters are out at Milken and they're talking today. Ken Griffin, right? We're in perhaps the highest period of uncertainty since the great financial crisis. That's what he said earlier today. The Apollo CEO with our very own David Faber out in L.A. We have a long way to go in talking about the valuation reset, especially to technology, when you have to revert to the mean, back to,

say, 2019. They wrong? So I don't think they're wrong. And I think if you look at prior sell-offs, they've taken years. And so we are right now, if you look at the S&P multiple at just over 17 times, that's actually, we've given up all the multiple expansion since the pandemic lows. We are now at December 2009 valuation levels. And so I ultimately do think that valuations will go lower. But we've taken a lot out really quickly. And it's all about the math around the percent probabilities of different outcomes. And right now, I think it's pricing in too high a percent probability of things really falling off the cliff. Well, I almost feel like it doesn't necessarily matter if the Fed can't land the plane softly.

Yours is a short-term call. You still have doubts. That's correct. It sounds to me, and so do others. Here's Ken Griffin again of J-PAL. He's in a very, very difficult position, he says. If inflation's transitory, if we're heading towards a 4% rate by the end of the year, he has a lot of room to maneuver rates in 23.

If inflation doesn't break soon here, he's going to have to hit the brakes pretty hard and that will put us into a recession. I think the consensus is it's going to be hard to engineer a soft landing because the Fed's never done it. So I would agree with that. I think that's absolutely the case. And what we're trying to unwind is like we've never seen before. But if you look in the next month, we're going to get a CPI print next week. I think that's the narrative around that CPI print is that it's going to be perceived as a peak print because one year ago is where inflation started to take off. So the year over year compares actually get easier for

the print next week. And I think that expectations have swung so far to one direction that in the short term, I think they're going to come back a little bit. And that's going to be sort of the narrative around the rally. And when you have positioning and dealer gamma set up the way it is right now, it can be explosive. Okay. Let's expand the conversation now and welcome in Solus Capital's Dan Greenhouse, requisites Bryn Talkington of the Halftime Investment Committee. It's great to see both of you here. Bryn, what do you think of this call? We could get a sharp rally, says Eric, as much as 8% to 10%.

Yeah, well, he's done a great job. And I think just to add some more data points to what Eric's saying, where I agree, is if you look at the NASDAQ first technically, on Friday, only 17% of stocks in the NASdaq 100 were above their 200-day moving average going back to 2009 that's only happened six times so to me that's like peak bearish peak technicals from a trading perspective so i wouldn't be surprised at all if what eric is saying is true and you saw today especially towards the close, the disruptive names, certain names in the queues just did great today, especially like a Coinbase, Microsoft,

et cetera. I'll say on the S&P though, technically, right now we really haven't hit that where less than 30% of stocks are below their 200-day moving average. Once we hit that also, that's also a really strong buy signal. So I agree with Eric and with our clients that we have dollar cost averaging. We actually pulled forward some of that and did it today because I do think this year is going to be a good year of accumulation because I do think we're going to have a tough time with the Fed and the market's going to stay in this funk. But as a trader, this definitely seems like a good technical entry point. Yeah. Dan, agree or disagree with this call? Because you talk about peak in your note as well, hawkishness from the Fed.

Yeah, I think there's a lot to like in the analysis. And you can layer on top of it, again, the Fed meeting. And obviously, we'll get some additional data on what they're thinking about the risk asset sell-off and the potential for 75 basis points. But along with the CPI print next week, you are, in that sense, hitting the highs. At least that's what we hope for worry. And going forward, the belief or the hope, if you will, is that some of the hawkishness starts to come out of the market. And that allows for a little bit of a rally from these levels. That's fair.

What about the call from Guggenheim? And that's not necessarily a call, but the commentary from Scott Minard says the Fed better stay the course, right? You were talking a little while ago about, well, maybe it'll have a more dovish tone than people think. His point today was they better stay the course or they're going to lose whatever credibility they have left. And most of it went out the door with the whole transitory debate. So I think they'll stay the course or they're going to lose whatever credibility they have left? And most of it went out the door with the whole transitory debate. So I think they'll stay the course in the terms of hiking 50 bps, reducing the balance sheet starting June 1st by 95 billion. But I think that there are some people who are thinking that they're going to raise by 75 bps next meeting. And my thought is they'll probably take, in not so many words, that off the table. Because

they want an orderly tightening of financial conditions. They want the S&P 500 to go lower as it has. They don't want it to gap lower to $3,800 or $3,700 or have a 10-year gap to 3.5%, 3.75%. So they're trying to sort of tie it a very fine line. And at this point, they don't want the conditions that the market is pricing in to get any tighter, I think, right now at this moment. Maybe they give one last. If I could just jump in for a second, Scott. Yeah, please do. I think there's a lot to like about what Eric's talking about. But I also think that what he's articulating is a view. And I don't know that this is like sort of a core belief of Eric's,

but like this idea that somehow the Fed is totally capable of perfectly fine tuning financial conditions to a degree just enough to raise the unemployment X and lower inflation by Y. And again, I'm not saying that Eric is, but there is this view that, oh yeah, they can do this. But to your point earlier, history is replete with instances in which they have not been able to. And so from a trading standpoint, and this is not what we do it all but uh... to the extent that you want to be tactically bullish or whatever and and have uh... some sort of an allocation here for for assets about you do have to

remember that in the background these guys are going to torch uh... i think a lot of people to get a little cover here uh... what they're going to do is basically, they haven't done it in 30 years, and the idea that they're going to do it perfectly is one with which I would disagree. Of course. Right, and I was writing down, like, you know, as you jumped in, and I'm glad you did, this idea, as you articulated just now, that the Fed can control this perfectly, right?

The market can go down just as much as the Fed wants it to without over-gapping to the downside, and that remains to be seen. Maybe the market's already gotten ahead of itself. The bond market certainly has been screaming. Sure, yeah, I think it is very, I think it's challenging for them to do it. But ultimately, the Fed funds rate right now is 33 bps, right? So what they need to do, it's all about the markets,

what the markets are pricing in, in terms of the tighter financial conditions that the Fed is trying to engineer. And so whether they can ultimately control it or not, you know, it remains to be seen. But they are clearly monitoring it and they're actively looking at it. And that will, I think, impact the message they deliver on Wednesday. Bryn, the point of pain has been the Nasdaq for obvious reasons. Horrible month, the worst since 08, which is what we're coming off of. Now we see this big

bounce today. Is it something to believe in? And if you do believe that Eric is going to be right with this sharp near term rally, all of it happening, by the way, he says in the month of May, is that the place you want to deploy capital? Names like Amazon turned around today. There are others. Tesla had a nice day. And certainly some of those mega cap names, along with Amazon, seem to really pull the boat higher today. I think if you were going to trade this month, I don't I wouldn't play the Amazons. I think Amazon's quarter wasn't great. I would actually trade the more disruptive growthier names that are down 70, 80 percent. Because if we do have if we are having a repeat of the 2000 bubble, it's not the NASDAQ today. It's those small cap disruptive names that are already down 75% and 80%.

They're not going to go down 100%. And that's where you're going to see people trading those tactically. Because they could easily move 15% to 20%, yet they're still down 60%. Last comment to you. What are you going to be listening most closely for this week from the Fed? rally because as we get momentum, conviction is so low that people are going to follow. And especially with gamma levels where they are, that's what's really going to cause the exacerbated move to the upside. So I think it's really price action and then looking at how real yields react to the Fed on Wednesday. And I think that'll be a great telltale sign. You picked a good day to

make a call like this. Thank you. I got to tell you, it might have looked a lot different a little while ago. Eric, I appreciate your time. Absolutely. We'll talk to you again soon. Dan Greenhouse, of course, my thanks to you. Bryn Talkington as well. I'll see both of you soon. I know we do have a big interview coming up later this week. Speaking of the Fed to react, who better do you want to react? Jeffrey Gundlach, the Double Line CEO, is going to join us once again to give us his thoughts on what the Fed does. Most importantly, what the Fed says. 4 o'clock Eastern time right here in Overtime. Now to our Twitter question of the day.

We want to know which of these Dow stocks do you think will see the biggest rebound in May? Is it Disney, Boeing, Salesforce, or JP Morgan? You can head to at CNBC Overtime. Please cast your vote. We'll bring you those results at the end of the show. We still have earnings. Expedia is out, posting a smaller than expected loss of revenue beat. Seema Modi with the color on that for us. Hi, Seema.

Hey, Scott. And the key number to watch is gross bookings, which came in at $24.4 billion in the first quarter. That is a gain of 58 percent year over year. So the demand for travel remains strong. CEO of Expedia, Peter Kern, saying there was the early impact from Omicron leftover from late last year, which faded as the turnaround in demand reached new highs since the start of COVID. And while the war in Ukraine did slow some of the recovery in Europe, he says there too we see travel at new highs since the start of the pandemic. He references some of the challenges like inflation and ongoing geopolitical tensions. But he says we continue to see positive

indicators going into the summer, specifically around leisure travel, which we did see growth in Vrbo, its vacation rental business. Shares now up over 4% here in overtime. CEO Peter Kern will join me live from Las Vegas at the company's annual event on Thursday, first on CNBC Interview. Scott, the conference call begins in 15 minutes' time. Back to you. All right, I know you'll be on it.

Seema, thank you. No surprise there, a beat from a travel-related company in this environment. Up next, late-breaking news on Elon Musk. Fresh reports that he is in talks with some big names to finance that Twitter takeover. We'll have the implications, what it means for Tesla shares, which have been volatile since this news broke. And later, making the case for Fang Fundstrats, Tom Lee joins us with the bull case for big tech.

Overtime is back in just two minutes. Welcome back to Overtime. We are following a developing story on Elon Musk. Shares of Tesla rallying today after Reuters reported Mr. Musk is now in talks with several firms and high net worth individuals about taking more financing for his $44 billion deal to buy Twitter. Apollo Global and Jack Dorsey reportedly among those considering providing that financing. Star Wedbush analyst Dan Ives on the news line for his instant reaction. Dan, it's good to have you with us. What do you make of this story, first and foremost? It's significant.

I mean, this has been a big overhang on Tesla stock. I'd say it's about $100 per share overhang. It's been a big mystery if he was going to ultimately seek financing from the outside, PE or others. Seems like he's going to go down that route. This is a positive for Tesla stock, and it answers a lot of questions as it goes forward that investors have had around the deal. Yeah, I mean, you're assuming, of course, that all comes together.

He gets this financing, and there's less of an overhang. Let's just play devil's advocate and suggest the other side. If he's looking for more financing, that suggests he doesn't want to leverage as much of his Tesla position as he otherwise might have to. So how do you play the other side of it? Well, and I think that's already factored into the stock. And I think he's heard from shareholders loud and clear. They do not like him being so levered up in terms of using his Tesla stock for Twitter. Obviously, he's gotten the calls from the outside. This would be a positive all around. And it was

always viewed, and it was our scenario, that once he got the Twitter deal, then he would go to PE and other sources to ultimately help with the $44 billion. And I think that's really the game plan here in terms of playing chess. That's sort of the next step. $100 a share. And if the stock closed at the high of the day, by the way, better than $30. Street will still give some skepticism. This ultimately happens.

But that's really, I tell you, nonstop frustration from Tesla holders over the last week since the Twitter deal, because they don't want to be levered to the Twitter deal. That's not why they bought Tesla. Musk heard them. This is ultimately the last step that I think would be a positive, getting outside financing. It shows there's interest. It ultimately just was about sort of putting one foot behind the other.

All right. Good stuff. I appreciate you calling in. You're the man I wanted to hear from, so I appreciate that very much. That's Dan Ives of Webush joining us right there regarding Tesla. Elon Musk, you saw that stock performing today, especially after that report hit the tape. NXB hitting the tape. The chip master, chip master, chip maker is posting a beat on the top and the bottom line,

giving better than expected guidance as well. Christina Partsenevelos has the numbers for us. Christina. Yeah, this is a revenue that jumped 22 percent, so maybe you can call it a master right now compared to last year at this time. The company said demand is strong. They're benefiting from lower costs due to lean inventories. Right now, inventory, their inventory levels are about a month and a half. Keep in mind, pre-pandemic, the normal rate was 2.5 months. So they're doing a little bit better there, saving on some money. Guidance for Q2 revenue also fell above consensus. I'd like to point out, too, that about 80 percent of the NXP portfolio carries a 52-week lead time. So that

means literally from when a chip is ordered to when it's delivered. So there's still a lag there at least a year. And the assembly facility shutdown that happened in China was already baked into its outlook. They said, and this is before this earnings report, so I'd like to just reiterate that, it included a $50 million negative impact. Nonetheless, the shares, they were up. Now it's going back and forth between positive and negative.

Back over to you. Chips, the street's trying to figure it out, right? They're down 25% year-to-date. Chipmaster, Chipmaker. It's going back and forth between positive and negative. Back over to you. The street's trying to figure it out, right? They're down 25% year-to-date. Chipmaster, chipmaker, you call it whatever you want to. Christina, thank you. Thank you. I appreciate it.

That's Christina Parts of Nevelos. Let's get the Halftime Investment Committee member, Jim Labenthal, for more on NXP's quarter. Jimmy, what's your takeaway? The street's trying to figure it out. Have you come to a conclusion? Yeah, I think this is a very solid report. I mean, it's really hard to argue with a beat and raise. It's hard to argue with the commentary, you know, from the CEO, the written commentary that demand from end markets are very strong. Scott, I think if you're wondering, like, what's going on with the little wobbliness in the after hour, I could make a very, very light complaint that if they're raising their revenue for next quarter,

why aren't they raising their margins? Shouldn't we get some operating leverage? I think I'm going to look through that because this is just such a strong company putting up such strong results with good demand insight that I just think it should march nicely higher from here. It may not be like an NVIDIA when it beats, but still, this is a solid company. But what's been the problem for the 25% year-to-date decline, if it's so great? Just simply, that's what's going on with

chip, Scott. I mean, that is just, it is a chip maker, and that is what's going on with all the chip companies. So I think not only does this distinguish it as one of the better chip companies, but I think it very strongly puts wind in the sail that the chip sector is just fine. Thank you very much. Hey, did you hear that call at the top of our show today, Jim, from Eric Johnston? I couldn't get it. Matching your bullishness. He made a big short-term tactical call today, said you could get an 8% to 10% rally in the S&P 500 in May alone, given how bullish you have been. Now, he admittedly is more cautious in the middle to latter term. But nonetheless, as bullish as you've been, what do you make of that call? Well, you know, you and I

spoke earlier and you said, hey, it's a pretty complicated prognosis that I put out there. I really want to simplify it right now and tell you, for me, what I'm looking for is next week's CPI report. I think that could come in a lot easier than expectations and make the market think that maybe the Fed isn't going to be as aggressive as it currently thinks. That's what I'm looking for. And if that happens, Scott, it could be a darn good month. Yeah. Eric was looking at that, too. CPI. We'll see. Jim, thank you. Jim Labenthal, always joining us there on the hotline. All right. Up next, four reasons to get bullish on FANG. Fundstrat's Tom Lee makes the case for big tech,

where he sees the sector going from here. Obviously, we're going to ask him to opine on the big call that led our show off today of a violent rally in the market coming this month. We're back right after this. We're back in overtime. It's time for a CNBC News update with Shepard Smith. Hey, Shep. Hi, Scott. From the news on CNBC, here's what's happening. Hundreds of Ukrainian civilians have been trapped in a Mariupol steel plant for weeks now. Today, they're starting to evacuate the city under siege. This follows weeks of failed attempts to keep a humanitarian corridor open. A former NYPD cop guilty on all counts after he stormed the Capitol on January the 6th.

A jury today found Thomas Webster guilty on six charges of assault and civil disorder. Body cam video showed Webster attacking a D.C. police officer with a flagpole. He's the fourth January 6th defendant to face a jury trial. All four convicted on all counts. And murder charges levied today against a then Philadelphia police officer, Ed Saul Mendoza, charged with murdering a 12-year-old boy, shooting him in the back. The district attorney says the boy was unarmed and lying face down when then-officer Mendoza killed him. Tonight, a manhunt in Alabama for an escaped inmate and the corrections officer accused of helping him get away. That's on the news right after Jim Cramer, 7 Eastern, CNBC.

Scott, back to you. All right, we're there. Shep, thank you. That's Sh the news right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. All right, we're there, Shep. Thank you. That's Shepard Smith. Well, the NASDAQ got smoked in April, and earnings from big tech have done little to ease concerns that even more pain is ahead. Our next guest says the FANG trade can still work. He's Tom Lee. He's Fundstrat's head of research, joins me here at Post 9.

And we'll get to that in a second. It was a nice rebound, by the way, in the market led in part by that area. But what do you make of that call? Top of our show today, Eric Johnson says we're going to get a violent rally. It's all going to happen in May. It can go 8 to 10 percent higher in the S&P. And it's going to be led probably by tech. I mean, the market is oversold. And the timing makes sense because we've got a market nervous about FOMC and the meetings this week. And in a way, I know you guys have said that the band-aid gets ripped off. So could a relief rally happen, 10%? Yeah, I think it's very possible, and I do think it would be led by tech.

So, okay, you make a bullish call on FANG at a time when some say the FANG, the whole FANG acronym is dead. And then you had all these companies report earnings, and most of them reported slowing revenue growth. So how can I not be concerned about what the trajectory for the business looks like? There's slowing because we pulled forward demand from COVID, but we still have Web 3.0. And all these companies are really going to be centered to that. And then we have a labor shortage globally.

And the only way to cure shortages of labor is tech spend. And FANG are really the centerpiece of productivity. So I think that the top line will surprise people for the next few years. And again, above GDP. So in terms of all the air, let's just say, you know, I know you've been bullish. You admitted the other day that you were wrong. You were too early in that call. But if you do think that stocks are going up in the rank of where I want to be putting my money right now, where does FANG rank relative to some of the other areas, be it defensives? Eric was even positive on cyclicals. What do you think?

I put FANG at the top of the list because they've not— Number one. Top of the heap. Nearly number one, yes, because they've not... Number one. Top of the heap. Nearly number one, yes, because they've derated. We, in our note today, folks highlighted that faster-growing companies today traded a discount to slow-growing companies. It's a complete inversion of what's logical, and it only happened since November.

And I think as that normalizes, that means the FANG could have the biggest moves. Interesting. And how much do rates have to do with where they go from here? That also is why this is a big week. It's not just what the Fed does. In fact, we pretty much know what they're going to do. It's what they say that matters most and where rates go. We were at 3% on the 10-year today. That's right. When I look at rates, and I'm not a fixed income expert, 450 basis point hikes are already priced into the 10-year and even in the

two-year and the five-year. So unless there's a hawkish surprise fundamentally that drives rates higher, the bond market is sort of fairly priced. And then the stock market then has to figure out what the right multiple is. And look, at a 3% 10-year, that's a 30 PE for a bond. I don't think 16 PE for the S&P or 11 times for Facebook is demanding. So I think stock multiples can actually expand. We've said that Milken's going on out in L.A. and Ken Griffin was speaking today. And I mentioned some of his notes from earlier today,

talking about how Powell's in such a very, very, very, very difficult position is what he suggested, that we're also at a time that he didn't use the word perilous, and I'm sifting through my notes to find the exact word he used, but nonetheless made the point that you got to go back to the financial crisis to find another period where it was so uncertain in terms of everything that's going on, not only here in the United States, but around the world. We're in perhaps the highest period of uncertainty, is what he said, since the great financial crisis. What do you make of that?

Agree with it? Disagree? I might say March 2020 was more uncertain because people forget the Fed stepped in. But before March 2020, the market went into a huge panic. We had a 37 percent decline and many people expected the end of the world. I think if there's any lesson in 2022 is that the market is prone to panic and panic quickly. I think people are assuming the Fed is going to break the economy or the markets. But if inflation— Well, history suggests that they are.

Yes, or inflation can cool because financial, you know, in a way, rates have moved in a way that have tightened financial conditions. So the markets are doing a lot of the work for the Fed right now. And that way we don't have to break the economy or the markets. But again, I agree, it's very uncertain. But March 2020 was scarier. And yet people are more bearish today than they were in March. Well, because in March of 20, you had to figure that the cavalry was going to come to the rescue, so to speak, in which it did. Here you have, you know, you're pulling everything back.

It goes back to the old argument of, you know, I love people putting themselves into a pretzel trying to tell me all the reasons why it's okay to fight the Fed on the way down, but no, nobody wants to step in the Fed on the way down. But no, nobody wants to step in the way on the way up. That's just everything's great going straight up. I yeah. And I think there's a bit of some revisionist history because in March 2020, nobody said nobody even believed the Fed could turn around a market in a free fall. And I think today the argument is, well, the Fed's not going to stop until the market breaks. I think there's the same kind of panic, but a different view of how the Fed would react.

And again, I think if financial conditions tighten, the Fed doesn't have to be as aggressive. Then it's a dovish development. More importantly, I think if, you know, these tech stocks are trading 10, 11 times earnings, I think you're going to have an M&A boom. I mean, cost of capital has gone up, yet there's cash-rich tech companies. I just don't see how these aren't good investments for the next 12 months. So is this the moment then? I want to, because we've been discussing this for a couple of weeks now with you and others, do I want to finally now move away from defensive stocks, which have gotten expensive, and then go back to cyclicals,

which are obviously more heavily impacted by fears of a slowing economy, or this tech trade, which has been terrible? Well, I mean, I already have like 10 omelets worth of egg on my face. But I would say I can't see how anyone doesn't see great risk reward in owning FANG right now. And large cap tech, I think, is almost a no brainer here. Almost a no brainer. Well, all right. Well, we'll see. Right. That's the best part is you come back often. We can have these conversations often. We can see what happened or not. And you either have omelet, more omelet on your suit or not. Yeah, I like eggs. It's Tom Lee of Funstrat joining us

right here at Post 9. Up next, we're breaking down the biggest movers in overtime. We're back after this. MGM earnings are out. The company reporting a revenue beat and posting a slight profit as well. Contessa Brewer has the numbers, some color for us. Contessa? Well, Scott, that profit was unexpected given the big drain that Macau is right now. MGM managed to maintain its expanded profit margins despite the impact of Omicron early in the quarter. It's EBITDA. That's a key earnings metric in gaming, up 47% on the Vegas trip over the first quarter 2019. Before the pandemic in regional casinos, it grew EBITDA 48% over 2019 numbers. I mean, that's pre-pandemic. Unbelievable. It's focusing on its business development now

and announced today the acquisition of a European mobile gaming company called Leo Vegas. It's out of Sweden. It's reiterating its pursuit of gaming licenses in New York and Japan. And as you can see, the stock up almost 2% on those earnings. Scott? All right. Contessa, surprise profit. The market was expecting a loss. You see the stock is trying to figure out which way it wants to go. Contessa Brewer, appreciate that very much. Let's get a check on the other big movers in the OT. Christina Partsenevelos has that for us. Christina? Oh, I definitely have a lot of movers. American education tech company Chegg down almost 20 or over 20 percent. The company posted very weak Q2 and full year revenue

guidance in the earnings release. The company says that weak Q2 and full year revenue guidance. In the earnings release, the company says that with higher wages and increased costs of living, more people are shifting their priorities towards earning over learning. And that meant a lower course load and delayed enrollment in school at this time. So you can see stock down even more, 28% lower. And let's move on to shares of Clorox plunging right now in the OT. Despite a beat on the top and bottom line, the shares are down over 2%. The company has one quarter left in the year and maintains full-year revenue guidance, but is cutting its gross margin.

Guess what? Inflation. Earnings per share guidance did come in line with what analysts were expecting. Thirdly, we've got Avis Budget Group. Shares are soaring right now, over 10%. The car rental company had a massive beat. When I talk massive, we're saying earnings per share came in at $9.99 versus the estimate of $3.45. Q1 revenue also came in higher. What Omicron? You know what happened? Pent-up demand. We're all looking to travel, so we rented cars, even at higher prices.

And then lastly, shares of Devon Energy, climbing higher in the OT. This time you can see about up a half a percentage point. The company announced it raised its dividend to $1.28 and increased its share repurchase program to $2 billion. Scott, a lot of movers right now. That's for sure. I think that Devon is a Cooperman name. Lee Cooperman, of course, that is.

A Jim Cramer name as well. Christina Parts Nevelis is her name. And she joins us there. Thank you. All right. Let's get more on Devin's quarter now. Bryn Talkington is back with us from down in Houston, I presume. The hotbed of energy. What do you think of this report? You know, it's so consistent with what you're hearing from all of the energy companies this quarter. You know, they increased their dividend by 27 percent. They can continue their share repurchases. I don't own Devon, but I own a bunch of other ones, including Viper Energy. They came out today. They're a mineral rights company.

They really had a very similar headline as well. Increased distribution and share repurchases. I think what's so interesting is people think this trade is going to fade. And I know there's so many skeptics out there, but it's still just 4% of the S&P. And Shanghai and Beijing are closed, Scott. And I think the population is like the equivalent of California. And that will open. The draining of the SPR is finite. That will stop. And U.S. oil production still is a million barrels per day lower than it was in 2019. So I still think this trade has legs for the for the foreseeable future. And I think these are just like consistent high quality earnings that people should own in their portfolios. Does the price of oil, which I'm looking at right now in front of

me at 105, does it matter? Because that's the obvious question. And a lot of times the answer is not necessarily. What's your answer? It always matters, right? If oil all of a sudden is going to go to $30, of course it matters. But I think that most people feel like 75 and above, these companies are so profitable. And so I don't think we're going to see that anytime soon. I know people are, we hope that the Russia-Ukraine war ends. But listen, Russia is going to be in the doghouse, I think, for years. And making up that supply coming out of Russia, I think, is going to have a long-term impact. So it matters.

But I think what matters more, though, Scott, is that supply-demand imbalance, which will ultimately affect prices. And that supply is going to remain really, really tight for the foreseeable future. All right. Bryn Talkington, appreciate it, as always. We'll see you again soon on Halftime or in Overtime. Still ahead, normal market swings. That's what Mike Santoli is debating in his last word today. He'll see you again soon on halftime or in overtime. Still ahead, normal market swings.

That's what Mike Santoli is debating in his last word today. He'll explain, of course. Plus, an under-the-radar oil play. The name and why it might be worth your money in our two-minute drill. Overtime's back after this. Boy, that 84 points at the finish doesn't tell the story, does it? 500-point decline for the Dow and a nice rebound. And don't forget to weigh in on our Twitter question, which we want to know.

Speaking of the Dow, which stocks out of the Dow will see the biggest rebound in May? Is it Disney, Boeing, Salesforce, or J.P. Morgan? So far, Disney is in the lead. You can head to at CNBC Overtime, cast your vote. We're running out of time, but we will give you the results at the end of our show today, as we do every day. Up next is Santoli's last word. And today he is weighing in on whether the S&P's recent volatility is actually business as usual.

He'll explain all that. And coming up on Fast Money, Dan Suzuki of Richard Bernstein Advisors joins the Fast crew to break down today's market action, plus the big warning he has for the tech trade. Overtime is back right after this. Time now for Santoli's last word. Today it is? Well, normal. At least questioning whether this has been normal. I mean, what we see here is a 15% decline in the S&P 500, high to low.

It's not exactly a 100-year flood, right? The average inter-year decline since 1980 has been 14 percent. What we're really doing is kind of taking some of the valuation froth off the market exactly when you're supposed to do that as profit growth slows and the Fed starts to tighten. That being said, the angle of descent has been fairly extreme. The fact that you're already vastly underperforming the average midterm election year, which itself is usually pretty weak, shows you that maybe the direction of mean reversion for the short term is a little bit higher. And the fact that you're also taking losses on the bond side

makes it really disorderly and sloppy for an individual investor. So I think those things are kind of bringing you on the cusp of something worse. There you see the S&P 500 from mid-2018 through mid-2019. That is kind of your immediate downside scenario, which is, oh, we chopped around the down 10, 15 percent level for a while. And then the trap door opened up when people felt like the Fed was staying too tight. You're basically asking the question of your normal is whether this is a garden variety correction or not. That's exactly right. And, you know, I think, again, in magnitude, it is.

It doesn't feel like it. Of course, that average of 14% includes— Like, does it ever when you're in the throes of it? It includes some that you barely scraped 10% and includes some that went down 25% or more. So, again, I think it's a matter of setting the context correctly. The 2018 scenario is one that some people have been playing for a while. I have not been the one who's thought that we were in that. Mike Wilson is one who's been using that as an example.

One thing that's interesting about it is the 20% drop, if you look at that chart, it's a perfect V. It was clearly a downside overshoot, and it was short, sharp, scary and brief. The hardest question to answer, and it's for all equities, not just one sector versus the next, is what's the appropriate price to pay for the assets and how much they were overinflated or pulled forward during an unprecedented period or certainly one that we hadn't seen in 100 years. And there is that question, whether it's out at Milken or elsewhere, whether there still is valuation reset that needs to occur,

even with the pain that we've endured already. I mean, you absolutely never know. And the market spends almost no time at any real estimate of fair value. It always kind of swings above or below. 18 times earnings, forward earnings is where the S&P has bounced each time it's bounced from a low this year, just about. That's kind of where we are at this point.

But that doesn't mean on an absolute level that somehow that's a magic buy signal, getting to 18. That's high by historical standards if rates are where they are. And if you're having to raise your probability of recession risk, it's not priced in.

You have a good time out in Omaha? It was very good to get in there and tap into some of that energy. All right, good stuff. Your first trip out there of hopefully many more. That's Mike Santoli with his last word. Up next, a key semi-stock for your portfolio. Our next guest is betting on one name despite supply chain concerns. Those details in our two-minute drill when we come back.

All right, take a look at the Nasdaq, really after the worst month since 2008. That is really where the rebound happened today or certainly sparked things. You could see the Nasdaq finishing the session by better than 200 points. Tesla, we gave you that news a little bit earlier. Good day there. Amazon, Apple got down to just above 153. Closed near 158. Gives you an idea of how those mega caps, certainly towards the end of the day, started to have some money go in there. And that helped the overall market. And speaking of technology, we have a big interview on deck to remind you about tomorrow. Don't miss Altimeter

Capital's Brad Gerstner. He's going to be with me on the halftime report. That's tomorrow noon Eastern. Can't wait for that because he was right when he said the Nasdaq and valuations needed to severely correct in which they did. Now he'll give us his view on what happens next. Let's get the results now of our Twitter question of the day. We asked which Dow stock do you think will have the best returns in May? 33 percent of you saying Disney CRM. Salesforce was in second, followed by JP Morgan and third Boeing there with some issues in fourth place. Let's do our two minute drill now. Joining us now is Donna Sissel. She is director of investments at Cope Corrales. It's good to have you back.

Nice to see you. Thank you. Great to be here again. So let's talk chips, because one of your picks is right from that space. Chips have obviously had some trouble year to date. Marvell, MRVL, of all the names you could pick, why is this one you chose to highlight today? I think it has a very strong pipeline of growth opportunities. It just completed an acquisition last year of Enfee, which allowed it to broaden its scope and be able to offer a full solution and networking and cloud. So this is a name that's had short-term headwinds due to the supply chain, but it's got strong management, a strong growth pipeline, looking at having a 20 percent growth rate going into next

year. And it is on track to hit three dollars in earnings power by 2024. So I think this is a stock that is being hurt just because the overall macro environment is is not positive, but it's a stock that has good fundamentals going forward. Yeah, although you look, you know, you listen to NXPI, for example, tonight and, you know, they listen to NXPI, for example, tonight and, you know, they're still talking about supply and demand and not being able to work that off, maybe for a year. So it's an interesting space to certainly watch moving forward. National oil well, NOV. So this is a typical cyclical, looks really bad fundamental wise, as all cyclicals do when they're sort of at trough earnings. But we are in a situation where

there is massive demand for oil and we are losing a key supplier as we have Russia is losing a lot of Russian oil. So we need to look at alternatives. Deepwater drilling, offshore drilling is starting to pick up in demand because it's one of the only places that can quickly pick up in supply. So NOV sort of has a monopoly here. and it's an opportunity, I think, to take advantage of this need to pick up supply of oil as we are kind of moving around the different ways in which we can get increased oil supply in the near term. Can you give me 10 seconds on GXO?

Yes, so recent spinoff, stock has been hurt by insider selling and just bad and not a lot of good comps, but it is a supply chain logistics last mile. I think this is a great stock going forward, strong management, great execution, and I think it's going to benefit going forward. Shana Sissel, thanks so much. I'll see you tomorrow.