Closing Bell - Closing Bell Overtime: Rocky Start To August For Stocks; Intel Has Worst Day In Over 50 Years 8/2/24

Episode Date: August 2, 2024

The selling in tech spread to the rest of the market today as all three major averages slid. Tech was hit hard as Amazon fell almost 10%; Goldman’s Eric Sheridan breaks down what’s going on under the hood. Jon sits down with intel CEO Pat Gelsinger as the stock falls over 25% for its worst day in over 50 years after saying it will suspend its diviend. Unlimited Funds CEO Bob Elliott, Neuberger Berman’s Erick Knutzen and Mariner Wealth’s Jeff Krumpelman on what to do with your money. Plus, Wells Fargo analyst Mike Mayo on a rare downgrade for Morgan Stanley and the broad selling in bank stocks today. 

A major sell-off rocking investors today after soft jobs data dialed up fears about the health of the economy. Tech getting wrecked, dragged by huge pullbacks from Amazon and Intel on earnings. That is the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. Well, we will be all over the market downturn throughout the hour with a great lineup of guests to break down whether this is a buying opportunity or just the start of more selling. Plus, we'll have much more on Intel's free fall, including highlights hour with a great lineup of guests to break down whether this is a buying opportunity or just the start of more selling. Plus, we'll have much more on Intel's free fall, including highlights from my first on CNBC interview with Intel CEO Pat Gelsinger. But first, let's start with the markets

and the sharp sell-off sparked by soft earnings results and much weaker than expected jobs report. Let's bring in our panel. We've got unlimited CEO and CIO Bob Elliott, because it's Friday. Love Friday, Bob. And CNBC senior economics reporter Steve Leisman. Guys, welcome. Steve, OK, this started with the jobs data in a way. So I'm going to start with talking to you about that. All of a sudden, bad news, bad news. What is it in this data that you think might have changed the narrative so much? Well, can I just back up just a little bit? Because I think the context is important here. I think that we came into this this week. There's been some rethinking about the valuations in some

of your stocks, the ones that you screwed up, right, and went too high. I don't own them. I just talk to a lot. I know you talk to these. And it's like, wait a second, where's the profits coming from? I think point number two is that the earnings and the revenue have not overall in the S&P been that exciting. And it raised more questions about broader valuations. Now you come in, this is the third leg here. And we've had some gathering weakness in the economic data this week. The ISM manufacturing numbers were terrible. The jobless claims ticked up. And now this number. And the problem with this

number is there's nowhere to look to sort of hang your hat on if you're an optimist. It's pretty relentingly weak all throughout. The only good thing, two good things you could say. One is that there wasn't a lot of firing. There was just not a lot of hiring. What happens over time with that is you end up perhaps losing payrolls, losing gains. If you don't, there's a lot of churn in the job market. So what happens is, in fact, it's like looking at the surface of some lava and it looks flat, but underneath there's all this stuff going on. People are losing their jobs all the time in industries. People are gaining their jobs. What happens is it looks flat across the surface.

But right now, we're not getting a lot of hiring, but we're not also getting a lot of firing yet. But we'll talk about this in a minute, if you like, to how fast I think the Fed is going to change its opinion, depending upon what happens between now and the September meeting. Bob, we could say too far, but this was not a super dramatic pullback to those of us who've been watching the market for more than a decade or so, right? We've seen worse than this, and we ended off the very lows of the session. So is this necessarily a complete narrative shift? Well, I think if you just look at this market action, stocks are down 6 percent from peak. We're still above where we were to kick off June. And I think that connects well

with the point around the Fed. You know, the Fed's not looking at stocks down, you know, under 10 percent and super worried about what's going on with the financial markets. Even the data that came out today related to the job market, you know, was probably a bit overstated. There were some issues related to weather problems creating some temporary unemployment. The job market is clearly softening, and Chairman Powell acknowledged that in the meeting on Wednesday. But the question is, is it rapidly softening to the point where they're going to start doing the sorts of cuts that are currently priced into the short rate market? And that seems that would be that would be unusual given the what the actual macroeconomic data looks like. And so I think the markets are expecting a much more reactive Fed than likely the reality.

Yeah. And of course, we do know that markets tend to be trigger happy. Look at where we started the year pricing in six, seven cuts from the Fed at the beginning of the year. And then the market had to readjust to that reality as well as inflation didn't come down as quickly. So this major spike we saw toward a 50 basis point cut now being predicted by the market, what would it actually take to see that carried out? And ahead of that now, just how important is Jackson Hole and what Powell says there? Can I just show graphically all the things you just said? Because we have charts on these,

Morgan, unplanned. But first, folks, in the back there, let's look at the change in the probability of a 50 basis point rate cut just today. We went in with a 30 percent probability as of just a few moments ago. We're trading at a 73% probability of a 50 basis point rate cut. Now, look at that. How many cuts now, Morgan? We were at six earlier this year. Look at that. We're back to planning five by January 2025, eight through June of 2025. So this is a very, very aggressive move.

By the way, I think it's going to be interesting to think about companies being able to refinance their debts now in ways, depending on what happens to spreads here, but in ways that they weren't able to do. It is, I was just trying to calculate here, the amount of stimulus to the economy just delivered through this is something like 80 or 90 basis points in pretty much the blink of an eye. I think you have to have a very rapid and pronounced deterioration in the data to bring the Fed to where those charts are right now. And I don't think that's where we're at. The latest GDP estimates going in early days of the third quarter, obviously, were two and a half percent. That's above potential. So what I would say at this point is

watch the jobless claims. There are six jobless claims report between now and September half percent. That's above potential. So what I would say at this point is watch the jobless claims. There's six jobless claims report between now and September 18th. There's at least one other two more inflation reports coming and there's another jobs report. But the thing I would watch most carefully now is the consumer as to whether or not the consumer is giving it up. They he and she he or she he and they, they power the economy. And if that's going to retrench, that's the thing that would probably move the Fed towards where the market is right now.

And I think that's one of the things that's actually helped propel this market, because it wasn't just a softer jobs report. It was softer ISM. It was softer claims yesterday. But it's also growing commentary from companies on earnings calls about a cautious consumer and challenges around the macroeconomic environment where the consumer is concerned. So the fact that we had this very defensive day here, you saw utilities, staples, REITs outperform. We've had this ferocious move in the treasuries as well. We started the week with a 10-year treasury yield at 4.18. We're at 3.79 right now, to put that one in perspective. Spike in the VIX today. You got gold at record highs. You got crude under pressure, despite the fact that we have flaring tensions in the Middle East right now. Where do you invest? How do you think about this? Well, I think from a stock investor's

perspective, the fact that we're getting so much expectations of cuts is kind of the thing that's keeping up stocks relative to where they would be. Look, stocks have they have an expectations problem. They actually don't have really an earnings problem. We're seeing earnings growth year over year, 10 percent. That's pretty good. The problem is people are expecting 17, 18, 20 percent earnings growth from a lot of names. That's an expectations problem. Until those expectations reset, stocks are going to be under pressure from the top line expectations. The problem is, if the actual macro data for the Fed, the Fed decides based on the macro data, not based upon what the stock market thinks or what the bond market thinks, if the macro data is gradually softening, which is basically what it looks like in aggregate, the Fed may not move

anywhere close to as fast as what's being priced in. And stocks need those cuts to maintain current levels. Those cuts don't come and stocks are going to be under further pressure. OK. I have a slight disagreement with that. OK, quickly. That is true unless it's offset by better growth. And I think you'd agree with that, right? That you could either get the cuts, deep cuts, or the growth. And what we've learned in the last couple days is how sensitive these valuations are to the growth story and perhaps less to the Fed story. Fair enough, Bob?

Well, I think it comes down to what are the expectations. And are you going to get those 17 percent growth rates in earnings over the course of the next 12 to 18 months? That's true. And say nominal GDP growth is great and it comes in at five or six percent. There's a long way between five or six percent nominal growth and the types of expectations that are priced into those forward earnings. OK, gentlemen, thanks for joining us here on set. A power panel. Steve Wiesman, Bob Elliott. All right. Well, don't miss Steve's exclusive interview with Chicago Fed President Austin Goolsbee. That is Monday at 8.30 a.m. Eastern on Squawk Box. You're going to want to

tune in to that one, especially now. And from macro to micro, one of the major stock stories of today's sell-off is Intel having its worst day in more than 50 years. I took some time with CEO Pat Gulsinger, asked him why with hyperscalers signaling huge CapEx outlays, Intel isn't benefiting more from that spending. Overall, John, the story is the AI build out. So I'll say everybody is still pretty focused on their AI and accelerator investments, and the CPU portion is more modest. We do see some early breadcrumbs of enterprise cycles. We do expect some growth there.

Our products are getting stronger, but the story is still one where the data center and the cloud is driven by the AI investments as the primary ones. Obviously, for us, we need to get our AI accelerators, our GAUTI3, launched this coming this quarter, we believe allows us to start participating more effectively in that area. And we're seeing some good early signs of customers there. So we do see some of those benefits, but fundamentally we're not yet getting the full benefits

of that in our business, even as we aim to be much more strongly participating in 25 as those products are now ramping and fully in the marketplace. Really bad guide for Intel, Morgan. Really bad guide and just a lot underneath the hood. We talked about it in overtime yesterday in terms of data center weakness and some of the other aspects of this. The fact that we saw such a big move in Intel, which is considered such an American stalwart, tech stalwart. Of course, it's a Dow blue chip as well, suspending the dividend. It raises the question, what is it now going to take for this turnaround to really come into full effect?

Spending all this, you can't really change direction strategy-wise if you're Intel at this point. I mean, domestic chip manufacturing is important. We've got the CHIPS Act. We can see the AI demand boom. And then they still have the majority of the PC market, right? And data center, CPUs are still big. So you've got to keep making those. So, you know, exactly how they solve this problem, especially of the trust of Wall Street after this quarter.

That's a big question. Any sort of sense? I know we got to keep moving here, but any sort of sense on how much time Gelsinger actually has to continue to execute on this? You know what? What needs to happen in terms of that time turnaround? Has he put out a multi-year forecast, for example? We are three and a half years in about to what he said was going to be a five-year turnaround. So the board knows beyond that. All right. Investors do too. Well, Intel is just one of many tech names selling off today as the Nasdaq closes more than 10% off its recent all-time high, superficially in correction territory. Amazon diving almost 9% today after

weak third quarter revenue guidance in its earnings report yesterday. Joining us now is Goldman Sachs tech analyst Eric Sheridan. He has kept his buy rating on Amazon but lowered his price target to $230 a share from $250. I'm going to finish today, Eric, just below $168. Why do you feel confident that this is still a name to own right now? Well, number one, thanks for having me on a Friday late in the afternoon. It's great to talk to both of you. Second, AWS is re-accelerating this theme around cloud computing as an output of the AI investments and hyperscalers seeing both putting cloud optimization in the rearview mirror, workload migration picking up at the enterprise level, as well as AI workloads starting to pick

up and generate growth, we believe is still an underappreciated story. We don't think this is the end of the reacceleration growth story at AWS. And not only are you getting 19% growth, but you're also getting a mid-30ies gap operating income margin at the same time and we don't think a W. S. is valued as if it's a rule of fifty plus company inside Amazon- the- the number as as the first point. Second while

the consumer is becoming more volatile- and while there was a lot of noise around operating income this quarter- we would say the long term thesis around- a rising operating margin and Andy Jassy's commitment to delivering a mixture of a return to operating margins to pre-pandemic levels, as well as the advertising business contributing more margin than just that narrative is still

well intact. So we still see a pathway to gap earnings and operating income margins that look, believe it or not, relatively cheap on earnings as you look out over the next two to three years. We have a $6.50 gap earnings number for 2025, almost $8 in 2026 against less than $170 prices today. Yeah. I mean, it's interesting when you lay out the thesis for Amazon and you can argue that it's been similar for some of the other MAG7 names that have reported in the past call it week and a half is investors have been really nitpicking and really going through line by line and honing in on very specific metrics. And that has been triggering the selling, even when there's been top and bottom line growth and growth and things like in the case of Amazon, AWS, which is always typically the thing that drives the stock in one direction or the other. We were just having the

conversation with Bob Elliott about stocks having an expectations issue right now. And I wonder how you see it, especially on a day where you have Elliott putting out a client letter saying NVIDIA is in quote unquote bubble land and being skeptical of AI and calling it overhyped with many applications not ready for prime time? Yeah, I can't address the Elliott letter, but I think at the end of the day, what I would frame up for investors is, yes, there is a nervousness. There's certainly less patience for narratives to play out. I think there's elements of when can I get a return on some of the spend that's starting to work their way into my investor conversations. And we understand that narrative. Almost every technology and computing shift that I've been

through ends up with moments of product innovation, followed by build cycles, followed by a little bit of disillusionment. And those play out over multi-year themes. So patience is running thin. There is not a lot of willingness to underwrite less linear narratives. And when you get a little bit of noise in something like an operating margin in Amazon, it does lead to a sell-off on a one-quarter view. But we would tell investors to zoom out a little bit and see the bigger picture that's of compounded revenue growth and compounded earnings growth that could play out here, irrespective of the AI theme at Amazon over the next three to five years. Eric, I was about to say I was surprised in the investor reaction to Amazon relative to Microsoft, because I felt like Microsoft was way down on the numbers.

But then after Amy Hood put them into context and what was coming, it went back up again. But I just checked and they're both down to about February, early February levels. They've lost six months worth of gains almost exactly. Any significance to that? Well, I think I think that speaks to the broader point. And it's a good point, John, is that you're basically retracing back to levels where people feel a little bit more comfortable with what they're underwriting in terms of compounded growth and where there might be more visibility. But to contrast it with another name even just this week, look how positively Meta responded to no caveats, no hiccups with respect to the advertising business. And you can trust that what a quarter ago, Meta sold off a quarter ago when there was a little more noise in the advertising business and there was a little less patience with the AI investment. Fast forward 90 days, it reacts very positively this week to very stable advertising revenue, no misses against expectations, and just as elevated an investment narrative from Mark. And I think it's all about

elements of expectations, how our core business is operating, and then layering in the investment theme on top of it. That's what's driving a lot of these reactions. Okay. Eric Sheridan, thank you. Thank you. And of course, for the NASDAQ 100, here's a stat from our data team here. Almost three quarters of the NASDAQ 100 is trading 10 percent or lower from the 52 week highs. More than 40 percent down, more than 20 percent. Bank stocks getting slammed in today's sell off with outsized losses for the major firms, including Citigroup, Goldman Sachs and Morgan Stanley. And Morgan Stanley getting a rare downgrade today. The analyst behind that call, Wells Fargo's Mike Mayo, joins us now on the news line.

Mike, it's good to have you. Let's start with your downgrade of Morgan Stanley. I believe you're the only one on the street now who is underweight. Why? Well, actually, it's been 12 years since the last time I had an underweight or sell rating on Morgan Stanley. Then it was coming off of the global financial crisis and the stock went down to $13. And I was wondering about their viability. And then you had James Gorman come along and he had a good team, including the current CEO, Ted Pick, and turned things around. Now, 12 years later, I'm putting a sell rating on the stock because I think at this valuation, close to $100 a share, they're pricing in returns that I don't think they're going to achieve.

And half the company is really their crown jewel, and that would be wealth management and investment management. And that half of the company is valued probably 50% more than the other half when you look at your typical valuation metrics. But if you look at their wealth management business, great place to be a client, but they're not growing their new wealth assets as quickly as before. In fact, they're only growing at half the pace that they grew them three years ago, in fact, at the pace before they purchased E-Trade. So that valuable part's not growing as quickly as before. Their investment management business, also usually a higher-valued segment, has seen

outflows of assets over the last three years. And then a newer factor is they have, as part of their wealth business, they have a bank. And banks have spread revenues, and those spread revenues are likely going lower. So you add it all together, you're not growing as quickly as much. You're seeing some outflows in investment management. You're seeing some pressure on kind of traditional banking revenues. And that's on the half of the company that drove their stock re-rating for the last 15 years. So at a minimum, that's plateaued. And if not,

maybe it's come down. It'll come down and get closer to peer valuation levels. This is the most expensive stock that I cover, and things aren't going quite as well as I think they'd like them to go. Okay. And of course, shares of Morgan Stanley finishing the day down about 6%. But we did see across the financials, and particularly the banks, we saw quite a bit of broad-based selling today and some very large moves. And despite the fact that Intel and Amazon were such big percentage moves lower for the Dow, it was actually Goldman Sachs, sort of speaking to this point, that contributed the most from a point perspective to the Dow falling more than 600 points. What is fueling this broader sell-off right now? Is it recession fears and the macro concerns of economic slowdown, or is it something else? At the start of the year, we had three scenarios. One was a base case,

soft landing, 50 percent chance. One bull case where things are better than expected, 25%. And then a recession scenario of 25%. And truthfully, until the last few days, until this morning almost with the unemployment data ticking up, people weren't talking so much about recession. And now the talk of recession is back on the table. Is that going to be short-lived or not? Ways to be seen. But whatever percentage you had for a recession before, it's probably gone back up. So I had 25% chance at the start of the year and maybe we're getting closer back to where I was at the start of the year for a chance of recession. So you price in a greater, not probability, but chance of a recession. You also

have interest rates declining quite a bit. In fact, I'd highlight the five-year treasury yield just this quarter has declined from 4.3% down to 3.6%. So there are some indications that things are slowing down more than expected. I want to ask you about the smaller banks. The regionals are really taking it on the chin. I know you've got some buys on some smaller banks. Is there opportunity there? You know, we would favor some – the plain vanilla traditional banks could have some issues. For that reason I just said, you have these treasury yields declining. And so as their maturing loans and securities mature,

they might not be able to reinvest those in assets with yields as high as they thought before. So that's not really where we're focused as much. I think if you think we're going to have a recession, a place to hide would be like some of the trust banks like a State Street or BNY or a higher quality regional bank like a PNC or U.S. Bancorp. On the other hand, we had sell ratings on Comerica, ticker CMA, and our new sell rating on Morgan Stanley after 12 years of not having an underweight rating. Okay. Mike Mayo, thanks for joining us. Thank you. After the break,

the market risk you might not be paying attention to. One expert makes the case for why the turmoil in the Middle East should be on your radar. Plus, is this market sell-off a buying opportunity? We will talk about the names that might be worth a look at discounted prices. We'll be right back. Welcome back. Rollercoaster week on Wall Street ending with all three major averages down sharply in the Russell 2000, falling more than six and a half percent since Monday's open.

Joining us with potential opportunities in the sell off is Neuberger Berman, multi-asset CIO Eric Knutson and Mariner Wealth Advisors chief investment strategist Jeff Crumpleman. Guys, happy Friday. Eric, multi-asset, which is great. I mean, we've had some big price swings both in fixed income and in equities. Where's the bigger opportunity now? On the margin, we would say we want to be leaning into short intermediate duration fixed income. I think there's an opportunity for some further curve steepening in here. And while we're generally at target in equities, we don't want to add to equity overall exposure at this juncture. We think that there could be more downside volatility,

in part because a lot of, in our view, a lot of the pricing of Fed cuts and any relief that could come from the first series of Fed cuts may already be incorporated into the market. We also expect a fair amount of volatility around geopolitical and election events over the coming months. And the next couple of months are pretty tough from a technical standpoint. So we want to hold tight here and look for opportunities after further volatility, probably a couple of months out. And Jeff, you're not convinced that there's a big further move down from here.

No, that's right. You know, there's a little deja vu, I think. John, about this time last year, you and I did a segment and, you know, we had a year where we were up 26 percent for the year after a rocket ship ride in the first seven months. And then we had a little moment in the third quarter where we pulled back about 11 percent, peaked the trough, and yet the fundamental valuation and technical backdrop stayed still constructive. And the fabric of that's a little different this year, but I think this is maybe a similar moment to what we had last year. We didn't take our targets down. We kept our positive targets, you know, for the year. And, you know, this year we're looking for

6,000 by, you know, mid next year. But it could be a little choppy in here. Part of our back to normal thesis this year of normal earnings growth, normal rates of inflation, normal interest rates levels is normal corrective activity. So I wouldn't be surprised when you get hints of maybe a slowdown, people overreact. And I'd say relax. And there's no reason to be premature and think that we're headed for a recession based upon the mosaic that we see. So. Okay. Cover your normal allocations is what I'd say. Okay.

So, Eric, the other thing that's sort of hanging in the backdrop here for the markets, especially as we do go into a weekend, is geopolitics. You have tensions in the Middle East continuing to ratchet higher. You know, you've got the headlines that Washington is now preparing for Iran to attack Israel potentially in the coming days. How much is that factoring in, especially when I realize crude was lower today because of the growth fears. But in general, you're starting to see some asset classes perk up here and respond to this. Yeah. So in general, we want to have our risk dials in our portfolio to kind of medium to low, hanging around targets, but not taking a lot of risk on the margin. One way to help hedge against

some of the real concerns out there is having some exposure to assets that will do well if we do get further political or geopolitical shocks in the Middle East. So we do have on the margin exposure to WTI energy futures in order to benefit in that environment, and also gold as a hedge against potential further conflict, which we could see over the weekend or at any time. The last element is really around the upcoming election, where both candidates would likely continue to engage in deficit spending. That may not be fully priced in terms of its impact on longer-term bonds. But also, if you do get a Trump administration, we don't think the potential inflationary aspects of his proposed policies have been recognized in markets. And there, again, having exposure to

commodities and other inflation sensitive assets could be a good portfolio hedge. Okay. We're gonna have to leave the conversation there. Eric Knutson and Jeff Crumpleman, thank you for joining us. It's time now for a CNBC News update with Kate Rogers. Kate. Hi, Morgan. Hunter Biden will be sentenced in November, a week after Election Day, for his conviction on federal gun charges. That is according to court filings today. The president's son was convicted in June when a Delaware jury found him guilty on three counts for lying about his illegal drug use when he purchased a handgun in 2018. The local police in Pennsylvania shouldn't be held responsible for the failures that led to the assassination

attempt on Donald Trump last month. Acting Secret Service Chief Ronald Rowe told reporters earlier this afternoon that the agency, quote, should have had eyes on the roof where the gunman fired shots at Trump and that the Secret Service was at fault for the security failures. And Florida residents are preparing for days of heavy rain and flooding as a tropical storm warning and a state of emergency was issued in anticipation of Tropical Storm Debbie the storm hasn't yet formed but the National Hurricane Center designated the system as potential Tropical Cyclone 4 which is forecast to strengthen into a tropical storm by tomorrow night back over to you Morgan all right I'll take it Kate thanks after the break more from my interview with Intel CEO Pat Gelsinger as his stock craters,

including what he told me about layoffs, costs, costs, and why he says he's committed to finishing the job of turning that storied company around. We'll be right back. Welcome back to Overtime. At today's lows, Intel touching levels not seen in 11 years, since 2013. The company also announced the suspension of the dividend starting in Q4 and a layoff of more than 15% of the workforce. I spoke with CEO Pat Gelsinger in his only broadcast interview right after the analyst call last night, starting with the layoff of more than 15% of the workforce. I spoke with CEO Pat Gelsinger in his only broadcast interview right after the analyst call last night, starting with the layoff. You know, it's hard. This is the Intel family. So I feel this very deeply. At the same time, making the steps to have an

efficient Intel for the future that has both process and product leadership, but also a financial sustainability in the model. We're committed to this journey. This is the most substantial restructuring of Intel since the, I'll say, the memory microprocessor transition four decades ago. We have laid out an audacious journey of rebuilding this company, and we're going to get that done. And today's announcement is accelerating the financial piece of that, even as we build on the product and process capabilities that we've put in place. I asked Gelsinger about the reasoning behind these cuts, aside from the immediate need to preserve cash. We're making these cuts to build a more efficient Intel.

And what happened at the beginning of the year was we disclosed this new financial model, the new operating model of Intel, a world class fabless company and a world class foundry company. We began a clean sheet analysis of the two pieces of the business, and we said, what does world-class look like for each of those businesses? Because we were operating in the old model for five decades. And that clean sheet exercise led us to say, these are the changes that we need to be an efficient, nimble company for the future. That's what's driving the restructuring that you've heard

us announce today. The financial performance accelerated that a bit, but the work was already launched and underway from the start of the year. And now we want to get them done quickly so that we have this new operational model in place and fully supported by a more efficient organization. So we expect the majority of these will be finished this year so that we're able to have more efficient, effective Intel foundry, Intel products and an overall Intel delivering product and process leadership with financial performance as well. I also asked Gelsinger why an investor seeing the stock plummet today and seeing the dividend suspension would put money in now? Well, we believe that those foundational investments are realizing beginning now, right? These new products, we're seeing them come to life. You know, and for instance, the AIPC is a great example of that. We have the leadership product today

with CoreUltra. We're about to announce the next generation of that at the IFA show coming up next month. Lunar Lake, our second generation Core Ultra, unquestioned leadership and performance and AI capabilities, dramatic improvements in power. Our next generation server products are shipping this quarter. So I'll say all of this hard work that we've done starts to materialize now. But I think we've reset the financial expectations now, and we've taken the steps that the markets should look at and say, wow, they are really getting their house in order for a efficient Intel building on the leadership Intel work of the last three years. Now is the opportunity to start benefiting from those.

And we believe that the guidance that we've given is now well placed in the market. The steps we're taking are well respected. And with the products and the technology, we're now well positioned to begin a very solid cycle for the Intel of the future. This has been heavy lifting, and we're now confident that building on that, we can go forward effectively in the Intel of the future. This has been heavy lifting, and we're now confident that building on that, we can go forward effectively in the market for the future. There's a tough quarter a few back, and the hope was that there was a trajectory after that point that would be more predictable. We're here now, and it sounds like you're saying that again. At what point do

we know that those kinds of surprises and the needs for realignment are out of the way? Or is this just such a rocky period for Intel and the changes that are needed in the industry that you can't say? Clearly, this has been a challenging rebuild. This has been an audacious rebuilding of Intel. One, that I'm proud of the work that we've done. You know, rebuilding a company like this is heavy work. We always said it was going to be a five-plus-year journey. Here we are three years in. We've accomplished the most significant process technology cycle. People didn't think it was possible. Now,

the end is clearly in sight as we've released the PDK, the products have come to life. These are significant milestones, ones that people thought were impossible three years ago. They're now done, John. And building on that, these new products that we're bringing, these are competitive products. We're no longer in a position that we're losing market share because we have inadequate products. And our AI products, AIPC, our Gaudi 3 that we're beginning to ship this quarter, all of these things are now coming together. So yes, I understand some of those concerns, but I'd also say, look at what we've gotten done. This is incredible what we've gotten done. And we're now combining that with the steps to build a more efficient Intel.

This is the most significant rebuilding of Intel in four-plus decades. I'm proud of the work we've gotten done, and we're committed to finish the job, and we are well on our way to do exactly that. A lot riding on Gaudi 3 as that launches and ramps in AIPC. We'll see where Intel goes from here. We certainly will be watching it. Up next, Piper Sandler's chief investment strategist on whether this week's sell-off is a buying opportunity. Plus, find out the sector he thinks is the best way to play lower interest rates.

Plus, oil's not well, ha-ha, in the energy sector, which is one of the worst performers this week. Find out what's dragging down oil prices and energy stocks coming up on Overtime. Welcome back. Stocks wrapped up a brutal week of losses, accelerating after this morning's weak jobs report. The 10-year yield falling firmly below 4% or further below 4%. Joining us now is Michael Kantrowitz. He is chief investment strategist at Piper Sandler.

Thanks for being with us. And really, the place I want to start right now is, is this just a garden variety correction that maybe perhaps is even overdue after such a strong first half of the year? Or is it the start of something steeper in terms of the selling? We'll see. I would say, though, the catalyst has been weaker data and specifically worsening employment data. And when you look back through history, there's really two catalysts that create corrections in bear markets. It's when interest rates spike, like we saw in 2022, or when the unemployment rate starts to accelerate, which potentially we're beginning to see now. So if that continues, yeah, I think the markets are going to remain under a lot of pressure. You talk about in your

notes the fact that you expect we're now going to see a positive correlation between interest rates and stocks going forward. Why and what does that mean for the types of sectors that are going to benefit? Yeah, we had been bullish this entire year on this theme of what I called softy locks, which is moderating growth and moderating inflation, bringing interest rates down, which we viewed investors seeing that as being a bullish catalyst for equities, because beginning of the year, investors were still worried about the potential for a Fed rate hike, for higher rates and higher inflation. Now that has been pretty much exhausted. People are not really worried about inflation. The Fed's very likely to be cutting the next meeting. And so when we get bad data, there's no more inflation relief. There's no more the Fed's not going to

tighten relief. It's now in rising recession fears. So I think that's why we're seeing that flip. So I don't think lower rates are good for equities anymore. For the sectors, utilities has been one of my favorite sectors for several months now. I've kind of labeled it the Ironman sector because it has so many traits and potential catalysts to outperform, whether it's AI exposure, which led to a pretty big rally in the month of May, or today and the last several weeks, it's got a lot of bond exposure and it's very counter-cyclical. So it played offense in May

and it's playing defense now. Michael, you also say the rotation into small caps is over. Why? Yeah, I think it is. Well, I think, you know, if you look at small caps, it was that trade was four days. It was July 11th through July 16th. That was the peak in the Russell 2000. And it was entirely multiple expansion. It was entirely built on the idea that rates are going to come down and they're going to continue to come down and that's going to be good for equities. And the catalyst, of course, was the good inflation report. Now we've seen rates continue to come down on, as you guys were talking about earlier, a bad ISM report, a bad employment report. We've seen weaker housing data. So I think it's over because the fundamental backdrop for small caps continues to deteriorate. They're the most economically sensitive. And if the unemployment

rates going up and credit spreads are starting to widen, I think small caps are the last place you want to be. Well, given what Amazon did today, what Microsoft has been doing lately, I wonder what are the chances you think that everything goes down? Well, that's where we're beginning to see this systemic broadening. And I think, again, part of that goes to that we've seen credit spreads start to pick up despite interest rates coming down. And again, that's been on employment rising and other macro data being pretty soft on a broad basis. So from a stock picking perspective, what we've been recommending is looking for stocks that have above average stability in their earnings, visibility in their outlook and strength in their fundamental statements. All right. Michael Kantrowitz,

a lot of good stuff in there to think about. Thank you. Thanks. Oil up next. Why crude prices are getting crushed again and why pirates are happy about it. No, whether there's any sign of a comeback. We'll be right back. Well, if you think today's stock sell-off was bad, check out oil. WTI crude getting crushed, along with the entire energy sector, which is underperforming the broader market. Well, Pippa Stevens explains what's behind the weakness. I know we had some technicals this week, but we've also got geopolitics. Yeah. Economics. What's going on?

That's right. So there was rising tensions in the Middle East that boosted oil prices just a few days ago, now taking a backseat to economic concerns and demand slowdown fears, including in the U.S. and China. Both Brent and WTI posting a fourth straight week of declines, with Brent touching its lowest level since January. Meanwhile, NatGas is under $2, posting its seventh negative week in the last eight. Now, Wall Street was already not very excited about energy stocks, and the downturn in commodity

prices certainly not helping that narrative. Upstream drillers with direct exposure to commodity prices like APA, EQT and Devon Energy are leading the declines. But we did hear from majors Exxon and Chevron this morning with results diverging. A top and bottom line beat for Exxon, fueled by strength in the U.S. upstream, while Chevron missed on the bottom line thanks to weakness in downstream and international upstream. Now, Exxon shares opened in the green, but couldn't hold those gains, while Chevron shed nearly 3% today. And of course, kind of the bigger announcement there is that they're moving their headquarters from California to Texas. Oh, that's new. 140-year-old

California company making the move. To me, that was in some ways the biggest news around Chevron. Just to go back to oil for a moment, I mean, we saw it perk up on geopolitical headlines and some and these rising tensions we're seeing in the Middle East. Obviously, the economic data is outweighing that, at least in trading today. If we were to see, for example, Iran conduct some sort of strike against Israel, just how meaningful is that to the oil complex? I think it depends on the type of strike that they conduct. So if it's well telegraphed like it was back in April, which kind of does play into the narrative that neither side wants this to escalate into a full-scale conflict, then we might not see that much of a response. Back in April, we saw a little bit of an uptick, and then that geopolitical risk premium shortly faded thereafter,

simply because no energy infrastructure has actually been damaged. And this all goes back two years ago to when Russia invaded Ukraine. And initially, oil shot up above $130. And then those barrels were still on the market. And so everyone who was on the bullish side saying prices are going to soar ended up getting burned. And so this time around, traders are being much more cautious in terms of not kind of having too much of a knee-jerk reaction until we actually see disruptions on oil supply, which is why WTI and Brent have essentially been trading sideways

since that October 7th attack on Israel. Aside from those quickly surprises, possibly at the margin, is this a consumer demand story? Well, we've seen a slowdown in gasoline demand. That's been a surprising one this summer. Some of that's been offset by strength in jet fuel demand. But I think that, you know, people aren't driving quite as much. They're not taking as many road trips. If they're feeling stretched, that is one area that you can cut back on. And also think about inflation all along the way. I mean, I've stayed in some hotels this summer and those prices have gone way up as have food. And so maybe you're not going to take that same type of thing. But when it comes to a possible recession, the data today, that certainly would be a demand slowdown story for oil. Well, I'm about to do a lot of driving. We'll see what that does.

Pippa, thank you. Well, up next, all the key names on next week's earnings calendar that you need to know about and whether those results could help turn around this week's sell-off. And tonight, don't miss a CNBC special on the market sell-off, hosted by Kelly Evans, as it's 6 p.m. Eastern. Welcome back to Overtime. The earnings parade shows no signs of slowing down next week. Monday brings results from Tyson Foods, Yum China, CSX, Palantir, and Vornado. Amgen, Yum Brands, Caterpillar, Uber, and Airbnb are the big names on Tuesday.

Disney, Hilton, Robin Hood, Warner Brothers, Discovery, and CVS are the highlights on Wednesday. And Thursday brings Lily, Gilead, Expedia, Take-Two, Interactive, and Paramount Global. And a partridge in a pear tree. On the economic front, Monday we'll get the latest Purchasing Managers Index and the ISM Services Report. International trade data will be released on Tuesday. Wednesday features consumer credit and weekly mortgage applications. And the latest jobless claims data that Steve Leisman highlighted is out on Thursday.

Morgan, what a week it has been, though. And I'm particularly interested, even beyond next week, in these NVIDIA earnings. After we got Qualcomm earlier this week, it did quite well, but the stock went down. And then Intel, that did not do well, and the stock went down. There's questions about what the big one might do. AMD outperformed this week, though. We saw earnings there, too. But in general, the stock's really selling off today. For ISM services, prices paid. That's going to be key on Monday on what was just a rough day and a rough week for the major averages here.

And what's moving some of these stocks? I mean, AWS did well for Amazon, but Amazon, the stock, didn't do so well. Yeah. Fed speak. It's going to be the other thing to watch, starting with Goolsbee on Squawk Box on Monday. That does it for us here at Overtime. Fast Money starts now.