Closing Bell - Closing Bell Overtime: Red Hot Rally 8/10/22

Episode Date: August 10, 2022

Cooling inflation numbers sparked a big rally on Wall Street. So, is today’s CPI number further proof the fed is successfully engineering a soft landing – and is the pivot in play? Josh Brown of Ritholtz Wealth Management gives his take. Plus, Wells Fargo’s Mike Mayo sees more upside for the banks. He breaks down the reasons why. Plus – reaction to Disney, Bumble and more all reporting results in overtime.

Welcome to Overtime. I'm Mike Santoli in for Scott Wapner. You just heard the bells, but we're just getting started. In moments, we'll get breaking results from Disney. Earnings expected to cross at any second. We'll bring you the numbers, instant shareholder reaction as soon as they hit. But we begin with our talk of the tape. Cooling inflation sparking a red-hot rally on Wall Street. All three major averages finishing firmly in the green as consumer price increases pulled back from a four-decade high. So is today's CPI print further proof the Fed is successfully engineering a soft landing and that the pivot is now in play? Let's ask CNBC contributor Josh Brown, the CEO and co-founder of Ritholtz Wealth Management. Josh, I mean, let's just break it down. I markets essentially spoken one loud clear voice today

obviously stock market with a two percent gain breaking out technically credit spreads screaming tighter the fed gets a breathing room you know historically stocks do very well in periods when inflation is high but falling uh... i guess where's the lie what's not to like about this idea that a more benign economic outcome is now looking more likely look I think I think you want to consider the fact that this

is actually a pretty rare thing to have happen over the last year which is a CPI day that ends with an S&P that's green most of the shocks that we've had or most of the surprises or even the non-surprises have resulted in a negative market on the day of a CPI print going back to last summer. So to see that shift today, this is only the third of 12 where we've had an up day and this is the biggest up day of them all. So I think if you're somebody that like myself that says that price is important and that price is the expression of sentiment in real time and it gives you some sense of how off sides people are, I think you have to respect the tape, Mike, to agree with what you had to say. And even looking at the leadership, aside from tech, materials, discretionary, it's like a true blue risk on day. And yes, there are plenty of potential negatives, which I'll get to in a second.

But I would finish with what Gwendolyn Brooks said, as quoted by Kanye West on Dondo last year. Even if you are not ready for the day, it cannot always be night. So maybe we don't have a recession in the third quarter of this year, the fourth quarter. Maybe it's next year. In the interim, people want to be long stocks. And a lot of people were very underweight. Yeah, there's no

doubt about that in terms of people being caught a little bit flat footed by this move. We're up more than 15 percent from the lows. And I guess even if we're not going to make the recession, no recession call or when does it hit or any of that, the jobs number last Friday at least suggested that the economy was in some kind of condition to absorb whatever the Fed might have left to do. In the meantime, that today's inflation number, who knows, maybe gives the Fed some more breathing room on that front. Do you think the market is miscalculating along those lines at all? I think the market, probably on a day like today, is getting a little ahead of itself.

We've seen that happen a bunch of times this year. Anytime you've seen the VIX below 20, that this year has been a good time to take something off, not to start buying all new things. So that pattern doesn't have to hold forever. Of course, it can snap. But I'm just talking about the state of the market year to date or really going back to last November. That's really the type of market that we've had. So today we were back at a 19 handle on the VIX.

I don't know. Is today the day you want to get all bulled up? And one thing I would, you know, I'm not on the air to be like, hey, everyone made money today. It's bad. It's great. I'm happy. I own stocks, too. Believe me. But let's just understand there's a lag effect with all these rate hikes. And we have had some

monster historic rate hikes in this cycle. And many of them have taken effect so recently, we haven't even seen them affect the system yet. And I think the Fed wants to slow down here, maybe do a 50 instead of a 75. That's what the market seems to think. So I'll take my cue from there. But just remember what happens in September. September and October, all hell could start to break loose because the real story is the tightening of financial conditions from QT. So if you were a believer that quantitative easing has given us a great bull market and given us these V-shaped recoveries where the whole plot line gets resolved and everybody's smiling at the end of the half hour sitcom, then you can't believe that the opposite is also not true.

So as of September, Michael, as you know, but maybe some of the viewers don't, the Fed is going to double the cap and let up to $95 billion worth of mortgage bonds and treasury bonds roll off without replacing them. So what that leads to is less reserves, less capital in the banking system. And they're doing that at the same time that they've just done these monster rate hikes. And that is not what happened the last time they did quantitative tightening. There was a much bigger lag in between. This time, they're doing huge hikes. They're going to do huge quantitative tightening. The balance sheet is twice as big as it was in 2014, the last time it peaked. And they're doing these things concurrently into an uncertain environment. So I love today. I love the rally. Yay.

It's great. But let's just get our bearings and remember where we are. Sure. Now, in terms of the quantitative tightening, I mean, first of all, we're seeing it coming. They say we've learned a little bit from last time. But also, I mean, it's not happening in a vacuum. Net treasury issuance is down massively.

So we'll see if, in fact, we've actually come, you know, come to a point where the supply demand for bonds is now at a critical level. But Josh, hang on just a second, because Disney earnings are out. We want to get to Julia Borsten with the numbers. Julia. Mike, Disney beating expectations on the top and bottom line with a better than expected 26 percent revenue growth to $21.5 billion versus the $20.96 billion expected and adjusted earnings of $1.09, topping estimates of $0.96 per share. That strength was really driven by the parks and resorts division with both higher volumes and increased guest spending. Now, the media and entertainment division did fall short of expectations with a

larger than expected billion dollar loss at the direct to consumer division. But the streaming numbers surpassed expectations. Disney Plus adding 14.4 million streaming subs in the quarter compared to the 10 million that analysts had anticipated to end the quarter with 152 million streaming subs. The family of streaming apps adding 3 million more subscribers than expected for a total of 221 million subs. Disney also, at the same time as this earnings release, announcing pricing for its upcoming ad supported service and price hikes for its ad-free version. It is raising the price of Disney Plus by $3 from $7.99 to $10.99. It's a nearly 38% increase. And the new ad-supported Disney Plus, which is launching on December 8th,

that will cost $7.99, says the same price as Disney Plus without ads is right now. Now, they are also raising prices for Hulu, but the premium ad free bundle, that price does not change at twenty dollars. That indicates they're really pushing subscribers to that bundle, which is a better value. And it's worth noting all these price changes speak to the results of the quarter. Better than expected subscriber demand and worse than expected losses. So keeping an eye on that. We will be sitting down tomorrow

with Disney CEO Bob Chapek. I'll be talking to him in an exclusive interview on Tech Check. And we're seeing now that the shares of Disney are trading up. Guys, back over to you. They are, Julia. Thank you. That's the most watched tomorrow. Yeah, the market likes this. Stock up about 5%. It seems like all those areas you would have had questions about in terms of consumer response and behavior to both the streaming service. They think they have pricing power, plus theme parks and resorts running pretty hot. Let's bring in CNBC contributors Greg Branch of Veritas Financial Group and Degas Wright of Decatur Capital Management. Talk about Disney and where it fits within the market picture. Degas, I'll go right to you.

On the Disney numbers, at first blush, you own the stock. What's your takeaway? Yeah, so this is exactly what we expected. Bob Chapek, the CEO, started with this vision in 2020 of going direct to consumer with the streaming. And this was a big bet. But he was building off the success of the great content. Disney has a library of 700 movies, over 12,000 TV episodes, and live sports

on ESPN+. So he was building off that success. And the moat around the castle are the theme parks, the resorts. And so it gets to the Disney experience and the Disney name recognition. And so this is a great strategy and it's coming to fruition. In the short term, it does look like that, Degas. Let me just, Josh, I mean, if you want to chime in on Disney, I mean, I guess when it was at $200 a share back in early 2021,

we could have said they were getting too much credit for the success they were having in streaming. That was before the big kind of shock to Netflix's subscriber losses. And now it's trading at a level the shares are back to. It first got here in 2015, I think. So in other words, there's not a lot built in. Is this the kind of stock you think is built right for the current environment or not? You know, it's so interesting because I remember different regimes with this stock, and I'm sure you do as well, where they would say,

oh, no, now it's pricing on only the streaming. Oh, no, now it's a travel play. That's why it's down. Now it's a box office play. That's why it's down. Now it's a streaming play, that's why it's down. Now it's a box office play, that's why it's down. Now it's a streaming play, that's why it's up. It's really, really tough to pick one of their, let's say, seven amazing businesses and try to come up with a story for the entirety of the stock performance, right?

But I think everyone knew the Parks number was going to be a great number because everybody is acutely familiar with how difficult it's been to travel all summer, how tightly packed the airlines are, hotel capacity, etc. So I don't think that was ever in question. The fact that they did outperform on the streaming and they have the tenacity to raise prices into a moment where people are talking about a streaming glut. I think that shows a lot of confidence. And I think that that is the single most important metric they've reported tonight. And fortunately for Disney longs, it's a good one. So now you've got a stock that is broken above its declining 50-day. The declining 200-day moving average is not until 131.

I don't really see a lot of resistance between here and there. I hope the stock can make that move and maybe consolidate a little bit. But I don't see any good reason why we should be looking at this thing sub-100, at least for a very long time, barring a new pandemic. I think that was way overdone, and I'm a little bit mad at myself I didn't buy the stock. Greg, I know in general you're a bit cautious on the latest market move here and maybe what is in store for the economy. A name like Disney, clearly a lot of it's very discretionary, but it's also a great franchise with a stock out of favor. How does that look to you at these levels?

Well, there's still some things we need to figure out, right? I don't disagree with my colleagues here, but all of that is backward looking. The two things that are going to drive the performance in the stock going forward are, one, the streaming business, which, as we said, they hit that out of the park, at least from a top line perspective anyway. You know, they're one of the few streaming businesses that can raise price and add subscribers. And so what they needed to deliver was about $9 million to hit their 2024 target and clearly outperform that. So that question is answered. The other question that will need to be answered is how are those theme parks going to perform in a recession? We don't know what the depth or duration of the recession will be, but that is the concern right now. And that's what investors are trying to figure out. As was noted, the parks are performing wonderfully

right now. The per capita spending is up 40% from 2019 levels. And if they can show some persistency and they can show that those levels won't markedly decrease as we've seen in the past in recessions, perhaps due to some continued pandemic-related pent-up demand, then yeah, you can make a strong valuation case for the stock. Hey, Greg. Josh, you wanted to jump in there? Yeah, I would just say, fortunately, we don't know the answer to how they'll perform in a recession, but the theme parks have been around since the 1960s, so we have a pretty good idea of what the worst we've ever seen is in a recession,

and truthfully, it's not terrible. And I think one of the main reasons for that is even in an economic recession, if you're a parent of two children and one of them's in fifth grade and the other one's in second grade, you're going. Like, that's the age where you bring your kids. And if it's not the best economic environment, so be it.

We have— I think that's a very high— Oh, wait. Josh, Josh, that is a very high socioeconomic bracket outlook on the world. Perhaps, but if what you've experienced is 9% inflation and $5 gas, perhaps you're not. And so I think you're only speaking for a portion of the country right now with your outlook, my friend. Well, it's true. And look, it's probably going to hold up better than you think. But the data is out.

No, no, but look, Josh, I remember in 08. I remember 08, people were very concerned about vacancy rates. They don't have as much pricing. They have to value price a little bit more. Look, I think that that's legitimate to argue about. No, no, no. Which are we worried about, inflation or recession? But hold on a second. Which are we worried about? Inflation or recession? But hold on a second. Which are we worried about, though? Greg. But they are compounded, right? They are occurring at the same time.

We're worried about consumer stress in general. Yeah. Greg, I was going to say, you're talking about recession as if it's essentially a lock or at least a high likelihood. Is that the way you view it? I know that you're a little bit,

you know, not buying into the way the markets have currently been interpreting things. Look, I'm on tape with this, Mike. In January, I said that we're going to have a recession this year. I was one of the few voices to say that. And that fair value on the S&P was thirty seven hundred. That's on tape. It's back as far as January. Nothing has changed in my outlook at this point. I do think that actually I'm a bit confused as to what today's optimism was about. Food was up 110 basis points. Shelter was up 50 basis points.

Yes, energy came down, but energy is subject to any number of shocks and certainly will remain volatile into the rest of the year, particularly with some of the structural and geopolitical elements that we're seeing. But I am glad that Josh brought up historical context, right? Because it's important when we are talking to investors that we have a broad historical context. So the Fed has raised interest rates 100 basis points or more 38 times since 1970. I don't know if we can call 75 basis points monster or historic. Maybe if we're talking about the last five minutes, that's true. But in the terms of the context of history, we haven't even seen anything aggressive yet. And on top of Josh's point, maybe that's what was required given the historic liquidity. And so I think the CPI report

today underscored two things. One, that the Fed was late, as many of us noted a year ago, that they should start at the back of 2021. But two, that they haven't been aggressive enough with the tools to date. Yeah. Degas, weigh in just a little bit on the broader picture here, because this rally in the S&P 500 has taken it, you know, right to that borderline of where you would say this is about the max a bear market rally ever, ever gets, really, if you get back just about half of the losses. But there are plenty out there to say, look, this is this is not one to chase to the upside. How would you approach? Yeah, so ultimately, what'll look at, and to

address Greg's point, is that I don't see a recession in 2022, because if you look at the three Ds that actually describe a recession, the depth, the dispersion, and duration. Dispersion, we have aspects of the economy that are doing are strongly still increasing, such as the labor market is very strong. The retail sales numbers are very strong. So we don't we're not seeing this recession. So it may occur in 2023. But also we have opportunity here to have a soft landing because of the strength of the labor market. And so what we're seeing here in this market is that this is a relief rally, but we don't see a hard recession occurring in the near term. That does seem to be the way the market, at least recently, is leaning. Guys, hold on one second. We do want to get back to Julia Borson for a bit more color on the Disney

Court. Just to put this into context, Mike, as we look at Disney shares up 5.5%, it is worth noting that Disney's subscriber base, the combination of subscribers from Disney+, ESPN+, and Hulu+, that number is now more than the number of subscribers that Netflix has. So Disney has 221 million subs, just a hair of Netflix's 220.7 million. But just to put this all in context, as we look at Netflix preparing to launch an ad-supported version, of course, we don't know how much that's going to cost. Looking at Disney having the pricing power to be able to announce those price hikes

as of the December 8th rollout of their ad-supported version, worth noting that they've just edged ahead of Netflix when it comes to total streaming subscribers. Disney's share is now up 6 percent. Mike? Interesting. And Julia, that 221 million total subs figure that you just mentioned, that's the one that's comparable to the company's overall goal for 2024, right, of 230 to 260? No, so the 230 to 260 is for Disney+. So they're coming off of a smaller number for Disney+. But Disney+, has surpassed expectations.

Now I believe it's at 152 million for Disney+. So they are ahead of expectations. Yeah, so they have 152 million subs for Disney+, right now. So ahead of expectations in terms of subscriber numbers, part of that is the ongoing international rollout and the fact that they have been investing in content. And we see a lot more content on Disney Plus than they had, say, a year or so ago. No, that's crucial because that shows you there is plenty more expected upside from the Disney Plus channel over the next couple of years

to get to those stated goals. Julia, thanks very much again. Josh, you know, obviously, you know, nobody really expected, I don't think, Disney to eclipse Netflix in total subs at this point. It's some maybe not apples for apples in terms of the types of subs and revenue and all those things. But is it back to the point where we can essentially say it's almost a two- horse race in streaming right now i think i i think uh everyone expected disney to eventually get here but but maybe you're right maybe it happened faster uh than most in the industry would have thought but disney's brands

are bigger than netflix's brands like there's no theme park ride for Jason Bateman and Ozark, right? There's no Narcos land, at least that I'm aware of. I would totally go, but I don't think it exists. So we knew that from a global standpoint, it was going to be easier for Disney to get to this point than it has been for Netflix. But, you know, to Greg's point, that's backward looking. The question becomes now, how much of that additional take that they're going to charge are they going to plow right back into making more content?

How much of that content will be successful at maintaining these subscriber growth rates? I do think that's a big question, Mark. But this was a big one. Yeah, the profitability of the model is absolutely still in question. But scale is something you need before you get there. Guys, the profitability of the model is absolutely still in question, but scale is something you need before you get there. Guys, thanks very much. Josh, Greg, Diggis, great to talk to you all. Thanks, guys. All right, let's get to our Twitter question of the day. We want to know what is the best streaming stock to own right now? Disney, Netflix, Roku, or Warner

Brothers Discovery? Head to at CNBC Overtime on Twitter, vote, and we'll bring you the results later in the show. Up next, betting on a big bank bounce. Top banking analyst Mike Mayo forecasting a jump in financials as we head into the second half of the year. He makes his case after the break. And later, we're counting down to Disney's call. It kicks off at 4.30 p.m. We'll have an analyst standing by with instant reaction to the quarter. Don't go anywhere. We are live from the New York Stock Exchange.

Overtime is back in tune. We are back in overtime. Bank stocks in rally mode. The KBE ETF gaining more than 2% today. It is now up more than 18% from the market's mid-June lows. But Wells Fargo's Mike Mayo sees even more upside ahead, and it's all thanks to a big tech tailwind. Mike joins us now to explain. Mike, so what's this maybe underappreciated factor that you're suggesting could help bank stocks going out into next year, let's say?

Well, you have the top line, which should show the best Main Street banking growth in over four decades. And with the higher interest rates and extra loan growth, that's all gravy. That's great. But what's really underappreciated is the degree that technology is having a seismic impact on profit margins. So you're likely to see profit margins on these new revenues at twice the level of existing profit margins. And in the past periods of higher rates and inflation in the 1970s headcount increased by 51%. Now you're looking for the best Main Street banking growth in four decades. And guess how much headcount should increase? Probably zero, if not down. So you're about to see the best employee productivity growth in at least 90 years.

And the on-ramp to that started in the second quarter. You're likely to see more of that in the third quarter, fourth quarter, and especially next year when banks should have the best pre-tax margin growth, the third best out of 26 industries. So all this research that I and we've done over the last four or five years talking about artificial intelligence, big data, the cloud, digital banking, electronic payments, faster processing, and the governance around all this, now it's payday because instead of adding paperwork and management layers and all this bureaucracy like you did in the past, a lot of these efforts are automated. So when you have new loans and new deposits and servicing your customers, you don't need to add people.

So it's not just the top line for Main Street banking growth. It's the bottom line that's going to surprise people. So tech and banks, it's a beautiful marriage. I mean, this is certainly the case for earnings leverage now more embedded in these banks business model. But at the same time, doesn't it seem as if they've been, you know, they're kind of forced to carry more capital than they did in prior cycles. They're not necessarily making high enough returns on it to get their valuations up too much more. I just wonder if there's offsets to this idea that they're just much more efficient than they used to be. I mean, nothing's perfect, but our numbers have the lower deposit service costs, have the reduction in subprime loans from like 7% down to 2%, have the reduction

in the higher risk loans like construction and development, have the higher capital levels. We're talking about orders of magnitude. So the higher capital levels, yeah, that can hurt earnings equivalent by like a billion dollars at Bank of America. You know how much 100 basis points helps Bank of America's net interest margin? By $10 billion. A 10-time greater benefit versus the negative impact of the higher capital. A 10-times greater benefit than if credit losses go a little higher. So all this talk about credit losses and capital, that misses the forest for the trees. The big picture here is that you have the best net interest income growth. That's 60 percent of the industry revenues. And I'll say it again, the best growth in four

decades. I've said that before in the show, but now it's likely to be even higher than it was before. And the other point is that when you look at the guidance from the banks, are they looking to hire tons of people? No, they're looking to do more with less. And you've had a decade of investments in technology that finally bear fruit when? When the revenues come in and the revenues are finally coming in after four decades in a row of declining level of revenue growth. If it's Main Street banking that is the engine here and that's what you're most focused on, what are the best names in terms of capitalizing on the trend? Well, my three top recommendations right now are Bank of America, Bank of America, and Bank of America.

I cannot believe this stock is in the mid-30s. I mean, this is ridiculous. On your show, you were talking about retracing half of the loss from the highs. I mean, you're nowhere close to that. You're trading at almost half of the market multiples price-to-earnings ratio. You have visibility over the next two quarters of an uptick of one-fourth in the run rate earnings. And guess what? Credit quality remains exceptional. Bank of America, as much as any bank, has de-risked over the last 15 years since the global financial crisis. And as you know, I testified to the Congressional Committee on the causes of the global financial crisis. And in 2007, we were on your show saying sell, sell, sell. In some ways, this feels like the reverse of 2007 in terms of the degree of the pessimism,

the likelihood people are putting on a hard landing when from the micro level, things look very good for the bank. So we are certainly buyers here. I will acknowledge, though, that until we see the all clear that it's not a hard landing, that there's still some tentativeness among investors. So the consensus is buy the banks in October. I think that's getting too cute if you have a 12 to 18 month horizon. Yeah, I was going to say, if it's so hard for you to believe that Bank of America is trading where it is, what are you hearing as to why? Is it just strictly that macro shadow that's over the group?

People aren't convinced that the consumer is going to really struggle? Yeah, it's overly simplistic. I mean, the Fed's inflation is up. The Fed's raising rates. It's going to push the economy into a recession. Sell cyclicals. Banks are cyclical. Bank of America is cyclical. Just sell it. So the macro has been beating the micro. But you know what? We've been in this place for four or five months now, and the valuations of the banks are still low. And you saw it around earnings. Since earnings, banks have performed better because you saw the micro results. I mean, you see the top line accelerating. You see the profit margins getting better. You see credit quality still good. You see the de-risking benefits. And then the stocks rallied. And then you get the macro coming back and punching

you in the face and saying, oh, it's going to be a hard landing this, hard landing that. I'm telling you from a bottom-up standpoint, my fourth decade doing this bank analysis, I'm not seeing evidence from the ground floor here. It still can happen. But if you say hard landing stocks are down one-third in a normal scenario, stocks up, you know, 50 to 70 percent, then the weighted average returns look like they're in the, you know, the investor's favor here. Mike, thanks for coming on to make your case. Appreciate it. Thanks for having me. All right. Time for a CNBC News update now with Shepard Smith. Hi, Shep.

Hi, Mike. From the news on CNBC, here's what's happening. Historic flooding has killed at least nine people after some of the heaviest rain in decades in the South Korean capital. Some of the victims include a family who got trapped in their partially underground home. Many buildings, roadways and subway stations in Seoul are underwater. And the forecast, an additional foot of rain through tomorrow night. More cops are headed to schools in Uvalde, Texas. The Texas governor, Greg Abbott, announcing the State Department of Public Safety will send more than 30 officers to Uvalde campuses to protect and comfort kids

as they return to school from summer recess. The move after the slaughter at Robb Elementary School there at the end of the last semester. And the vast teacher shortage in America's classrooms, detailed in a new report from the Bureau of Labor Statistics. It indicates there are more than 380,000 openings for teachers across the country. Tonight, our Perry Russom reports on how war veterans and college students are pitching in to help. On the news, right after Jim Cramer, 7 Eastern, CNBC. Mike, back to you.

All right, Shep, thank you very much. Disney's conference call just getting underway now. We're dialed in and ready to bring you any big headlines. Plus, more reaction to the quarter from a longtime Disney analyst. Stick around. Overtime will be right back. We are back in overtime. Disney's conference call about to kick off.

Shares rallying on the back of earnings. You see them up just about 6% after hours. Let's bring in Rosenblatt Securities Analyst Barton Crockett, who's betting on a bit more upside for the stock. Barton, quarter obviously, I think, checked off a lot of the boxes people were looking for in terms of Disney Plus subscriber growth, their expectations there, maybe some pricing moves. What's your first reaction? My first reaction is the theme parks were great, which is absolutely core to the story right now. And they're putting up very good sub growth. I think that there's

been some debate about who's the strongest grower and subscription video on demand. And the answer is clear right now, it's Disney. And those two things, I think, are big release for a stock that has frankly been on its heels for much of this year. It has. I mean, it's off 40 percent from its highs, even at today's close after a bounce today. I guess longer term, a question that's been hanging over the whole industry really is how good a business ultimately is streaming going to be. Clearly, every company has to embrace it, has to make it a priority and spend heavily to get scale there. But do you think it's going to be sufficiently profitable to replace a lot of the earnings you know, the earnings from cable and other things that Disney has had in the past that could rebuild the valuation? Well, I think that's, you know, it's obviously a great question. I think

nobody can say with 100 percent certainty that they know the answer. But I do think you see a couple of things with Disney relative to the pier set that's helpful. One, they have theme parks, they have them at scale. The peer set doesn't. So they'll have that going for them relative to others. The other thing is that they're first into streaming among the big media companies and they're the biggest scale player among the big media companies with, I'd argue, comparatively very distinct, powerful, resonant brand. So I think the argument is good that these guys can scale, that they can make money at it, and that it'll be a great complement for TV.

So I think that that gives you a setup for some earnings growth at Disney that's compelling. The theme parks, the most reliable part of of it and the streaming net of TV, I think, skewing positively from what is really kind of a trough level of earnings right now for the investment in streaming. Any reason to apply a little bit of, I guess, maybe a haircut to expectations for the advertising business or anything else that looks a little more cyclical at this point, given the economic slowdown story that's unfolding? Well, no doubt. I mean, advertising has been difficult across much of media, not everyone. But, you know, I think that for Disney, you're underexposed in advertising relative to the peer set because their TV networks are overexposed to affiliate fees

and they're underexposed to TV because they have more theme parks. So the mix is really on a relative basis on the ad story, you know, friendly for them. Now, you got to caveat this. I mean, if there's a major recession, the theme parks kind of get hit. And, you know, I think that the question right now is what is the macro? If we're kind of skirt around a little bit of a pullback in some of the GDP numbers, but employment is still full, people can still, you know, that are employed can still do things that are fun, like go to theme parks. That's a great setup for Disney. And I think sets them up to bounce nicely against the pullback that we've had here recently. I think you were looking for a $124 price target.

Stocks trading at around $119 right now. Is it something that represents a little bit of a valuation cap or is it you think can it carry higher from there? Well, look, you know, we'll have to review our model. I mean, the numbers came in, you know, at a good level, you know, but at this point, I think that the theme that this is a company that is is doing great in theme parks and has a great setup and streaming, is supportive. Valuation, I think, is certainly something you've got to be more sober about than historically. It's going to be an earnings-driven story.

And our take on Disney is that there's a lot to propel the earnings from here. So, you know, going into this earnings call tonight, we still believe that at this moment. Yeah, and obviously raising prices on the streaming business is a gesture of confidence. We'll see how that goes in terms of the subtrends. Barton, thank you very much. Appreciate it. Thank you. All right. Up next, a friendly Fed. What today's CPI print means for future rate hikes and your money. Plus, a bumble fumble, the dating stock falling in the OT. We have the details coming up.

Don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. Overtime. We'll be right back. We are back in overtime. Stocks rallying and yields falling as inflation cooled off in July. So does today's CPI print clinch a friendlier Fed? Joining us now, Charles Schwab, Chief Fixed Income Strategist, Kathy Jones.

To weigh in on that, Kathy, good to have you with us. Clearly, the market's definitely relieved, definitely seemed to suggest that the CPI number today gave the Fed some more breathing room. Yet we've heard from Fed officials that they need to see multiple months of evidence that inflation is on the decline toward their target. So where does that leave you in terms of the Fed call at this point? Yeah, Mike, I think that you could call this, you know, one one in a row, one good one good report does not make a trend yet that's going

to satisfy the Fed. And they're going to talk tough, even though they said they're not going to provide guidance, forward guidance. They're providing forward guidance all the time with these sorts of estimates. But it's going to really depend on the numbers. I think that the Fed continues to raise rates in September, probably more like 50 basis points than 75, because they've already reached that 2.5 percent level, which they consider neutral, and maybe another 25 or so later in the year, maybe two more 25. But I don't know about, you know, we're hearing 3.5 to 4 percent, 4 percent

plus by the end of the year. I think that's a really aggressive call on the part of some of the Fed governors. So my guess is that they will slow down before they hit 4%. Okay. And yeah, if you're suggesting maybe one full percentage point of further hikes over the next few months, that seems to be where the market is comfortable with at this point, right? I mean, trying to handicap that we peak out right there and the debate then becomes, are they going to be cutting then? What does the economy do in response to what's already been done right now? Do you think that a recession of some description is certainly in the cards or not? I think there's still a pretty high risk. You know, what we've seen is unwinding of some of the pent-up demand from the pandemic. Now we get into the effect of the rate hikes that we've seen to date. So we've only really

just started to feel that slowdown in hiring, the rise in inventories relative to sales. We're seeing consumer spending start to ebb a little bit. The global economy is soft. So I think that there is a risk of recession, whether you call it a technical recession or a real recession, if the Fed continues to be aggressive. And I think that's what you're seeing in the market. The yield curve is steeply inverted and it's telling you that the more aggressive the Fed is, the less likely we are to have a soft landing and more like a hard landing down the road. There is that line of thinking that given that stocks are up 15 percent from their lows,

credit spreads have come in, just the absolute yield level is lower than it was not too long ago. Financial conditions are looser and that essentially replenishes the Fed's budget, if you will, for how much tightening they can do or they might be willing to do. Does that make sense to you? Or are we just going to basically have everything dictated by the inflation data as it comes in? Well, I think the financial condition situation is really important to the Fed. And as you pointed out, they've loosened from having been pretty tight. But also keep in mind there's quantitative tightening taking place and that will pick up steam in September. So it isn't just the rate hikes, but it's also going to be QT that contributes

to this sort of shrinking in liquidity in the financial system. So I think that that can act as if it's a rate hike. Obviously, the inflation data is super important, and that's what we're all going to be continuing to focus on. But financial conditions is how the Fed transmits its policy to the economy. So if it loosens too much, it may force them to do more. But I think the QT portion of it will serve them in addition to the rate hikes they have planned. And then just quickly as we go, I mean, do you think that yields have probably peaked and therefore, you know, bonds look like they're decent value at this point?

Yeah, we were suggesting extending duration when 10-year yields got above 3 percent and up to that 3.5 percent level. I think that could be a cyclical high, given that we already have a lot of tightening in the system. We have very low- break even rates you know this inflation expectations coming down we have a pretty soft global economy so. I think bonds are decent here. There are much

more attractive seventy five basis points ago. But we like the investment grade corporate bonds where you. You know get four percent without taking a lot of duration rest of the things pretty attractive. Kathy thanks very much. investment-grade corporate bonds where you get 4% without taking a lot of duration risk, I think it's pretty attractive.

Kathy, thanks very much. Kathy Jones from Charles Schwab. Up next, we're tracking the biggest stock movers in overtime. Steve Kovach all over that action. Steve, what's on deck? Hey there, Mike. Got a few names here making big moves in the OT. Streaming music is feeling the pressure from inflation and the strong dollar.

Love can't conquer all when a recession's on the horizon. And investors aren't loving a proposed video game M&A deal. We'll tell you all about it when Closing Bell Overtime comes back right after this. We are tracking the biggest movers in overtime. Steve Kovach has all that. Hey, Steve. Hey, yeah. Bumble shares sliding about 13 percent after earnings, despite beating estimate on revenue in its second quarter. Company cutting revenue guidance for the full year, blaming inflation, the war in Ukraine

and foreign exchange headwinds for that. Sonos also following. It's down after Q2 earnings. It's down about 19 percent here after naming a new CFO and slashing its four-year guidance, blaming what else? Inflation and foreign exchange. The company also missing on the top and bottom lines with $372 million in revenue versus the $423 million expected. EPS was a big flat zero versus seven cents estimated. And finally, shares of Applovin down about 10 percent, the company reporting a loss of $0.06 a share for its second quarter. It also lowered its full-year guidance, and this is coming a day after it made an unsolicited bid to buy video game software maker Unity in an all-stock deal. Unity is already in the middle of another acquisition for a similar company called Iron

Source, but the CEO is saying it will look at Applevin's proposal. Mike, back to you. All right. A few tough moves there in OT. Thank you, Steve. Still ahead, one money manager making the case for a beaten down housing play. That's in our two-minute drill. And coming up at the top of the hour, the fast money traders are breaking down today's big rally and the latest at a Disney's conference call. Don't go anywhere. Overtime is back after this. Welcome back to Overtime. Let's get the results of our Twitter question. We asked you, what's the best streaming stock to own right now? Well, the big winner is Disney with 56 percent of the vote. That's the stock that's now bouncing following its results

for the quarter. It's about four and a5% right now. Up next, an under-the-radar way to play the auto space. That's in our two-minute drill. Over time, we'll be right back. Time now for our two-minute drill. Let's bring in Mike Vogelzang, CapTrust CIO. Mike, just quickly on the overall markets, you know, you're buying this take by the markets that, in fact, inflation has peaked, and it's quickly on the overall markets, you know, you're buying this take by the markets that in fact inflation has peaked and it's up and away from here or is this a bear market rally? It's giving you a chance to sell it. It certainly feels like Goldilocks is winning today, right? I mean, it's it's yeah, I'd be I'm a little suspicious, a little cautious here. I think it seems to be that investors are forgetting that the Fed is still tightening. Money supply is being shrunk.

This is not good for financial assets. Yeah, the margin, you know, inflation cooled off, unlike the weather. But, you know, at the moment, at least the market's chasing optimism. And I'd fade this rally. I think we're being a little more cautious. We think we'll see some, maybe not new lows, but we may plumb those old ones. All right, still some to proveumb those old ones. All right. Still some to prove there for the market. Let's get to some of your picks here, though.

AutoZone, interesting spot, great long-term performer, but also a stock that's not too far from its highs. What do you like? It's been outperforming for about four or five years. I mean, it's just, look, the fact we love about this business, we call it the slow roll LBO. Over the last 20 years, they've taken out 85% of their market cap and their float out of the market through buybacks. There's 15% left. So think about that, right? So they're basically taking this company private very, very slowly. We love that. It's a great use of their capital. It's an anti-recession business. As recession sets in, more people do do-it-yourself stuff with cars and autos. So we think it's a really interesting place here. And it's a little expensive at 19

times earnings, about the market multiple, but not too bad. Speaking of do-it-yourself, Lowe's, the home improvement retailer, is another pick. What's the rationale? You know, an interesting factoid is that the average mortgage in the housing stock around the country is now about 2.5% less than the existing mortgage rates. One of the first times that's happened probably in our lifetimes. And what we think is that that creates people staying in their homes longer because nobody wants to sell their house and lose a cheap mortgage and go get a 5% mortgage or wherever they are today. So that's this sort of compression of keeping people in their homes. And we just think that's going to auger well for additional home improvement, which, of course, is how it works there. The other thing is the valuations are at

lows. And it's no pun intended, of course. And it's also at a big discount to Home Depot. So lots of stuff going on there. But we think it's an interesting place. Mike, you made the case. Appreciate it. That does it for us on O, but we think it's an interesting place. Mike, you made the case. Appreciate it. Thanks, Mike. That does it for us on Overtime. Fast Money begins right now.