Closing Bell - Closing Bell Overtime: Signaling a Bottom? 06/24/22

Episode Date: June 24, 2022

Stocks saw major gains to end the week with the Nasdaq jumping more than 3% -- so does this bounce signal a bottom is in for the market or is there more pain ahead? iCapital’s Anastasia Amoroso breaks down her strategy. Plus, Oakmark’s Bill Nygren reveals where he is finding value in this market. And, Mark Newton from Fundstrat says the recent sell-off in commodities could be coming to an end. He breaks down the charts to explain why.

All right. Thanks so much, Sarah. You just heard the bells here. Welcome to Overtime. I am Dominic Chiu in for Scott Wapner today. You just heard those bells, but we are just getting started here on the show and we begin our talk of the tape. That rip roaring rally as Sarah just mentioned to end Wall Street's first positive week of the month of June. Stocks finishing at session highs with monster gains, monster gains across the board. The Nasdaq gaining more than 3% on the session. The S&P, by the way, having its best day since early May and then adding more than 6% on the week. So did this week's rally signal a possible bottom for the markets overall?

Or is this just a bear market rally and is there more pain ahead? Let's bring in now Anastasia Amoroso. She's the iCapital chief investment strategist. I mean, we've been talking so much now for the last several days and maybe a couple of weeks now about a bottoming process. It is a process. We know it's not just one point in time. Do you feel, though, as though this is constructive at all? Do you feel more comfortable with the way the markets are reacting? You know, I do feel more constructive and more comfortable. And the reason for that is, Dom, we've done a ton of work in the first half of the year. And what I mean by that in terms of resetting expectations, we came to the year thinking

there's going to be three rate hikes and instead we're going to get to 3.4 percent by the end of the year. That's a massive adjustment that had to happen. It had to trickle in and be priced into a variety of valuations. You look at the valuation of the Nasdaq the S&P 500 we've seen meaningful resets in those. We've seen a bunch of fraud come out of a lot of different sectors. So because of that Dom I do feel more constructive that maybe as difficult as the first half has been the second half is not going to be quite as treacherous because probably there's not as much downside list left to go. You know, is this the absolute bottom? As I said, I can't quite make the call

at this point because there's one thing that I still think has to happen. We've reset the valuations, but we have not reset the earnings and the earnings in the event of a recession or even in the event of the slowdown, they probably still need to come down 6% in a slowdown, 13% in a recession. So we might still have a little bit more work today. Okay. So that's the one thing. A lot of folks out there talk about this idea that the recession and the earnings picture could be the biggest factor, I guess, in the market valuations going forward. You have to tame the inflation picture first, and the Fed talking, the pundits out there,

even the Fed policymakers themselves have said that you have to see signs of inflation markedly coming down before they're going to even think about slowing that pace of interest rate hikes. So it's not chicken or egg. We know it's interest rates and we know it's the inflation picture. Are there signs in your mind that that inflation picture is starting to calm down? I think there are signs, Dom, and I think something very interesting happened this week. So first of all, I would say if you look at the CPI number versus the core CPI, core inflation is actually starting to come down. I mean, it's not plummeting, but it's definitely edging down.

But it's the headline inflation that is so persistent, and that's why the Fed reacted so strongly to it, because the consumers don't care about the core. They care about gasoline prices. They care about food prices. And that's what drives inflation expectations. But you know, one way you can talk down inflation, you start talking up the probability of a recession. And that's exactly what Fed Chair Powell has been doing. So him openly acknowledging that we might be going for a recession in a way actually acts as a way to bring down some of the inflationary pressures. I think Jim Cramer said this earlier

this week, but you look at the price of wheat, you look at the price of oil, they have come down significantly. And guess what? That feeds into expectations. So here's the thing. Nine months ago, we knew that the inflationary picture was at play, but we didn't hear that R word, recession, nearly as much as we do right now. We've made the point before that the hard economic data, the stuff that you can count, things like GDP, CPI, PPI, are oftentimes backward-looking. Meanwhile, the forward-looking, soft economic data, CEO surveys, polls, all of those things say that everybody, we've got consumer sentiment at the lowest level in four decades. Are we going to talk ourselves into a recession? Yes, that is a question that I hear asked a lot. And I feel like we kind of are doing that right now. But in a way, maybe that's exactly what the Fed wants. Because one of my themes for the second

half of the year is it's returned to rational activity and return to prudence. And if you think about what's been going on for the last two years, it's been disruptions all over the place. It's been revenge spending. It's been traveling as much as you can. It's been hiring as much as you can. That's not rational activity. That's not prudence. But I think what's likely to happen in the second half of the year, we're going to retrench. We're going to return to some sort of prudence. And if that's happening because we're now talking ourselves into a recession and want to be more conservative about it, that's actually a good thing from the inflation perspective. So is that your base case, that that kind of returned a more fundamental thought, that more kind of rational thinking with regard to investing? And if so, have enough of

these growth-oriented technology-type communications media stocks come down enough to become rational in your mind? Or is this still going to be one of those things where you say, hey, it's going to be those defensive, less economically sensitive consumer staples, utilities, you know, healthcare-type plays that really do the heavy lifting in the second half? Yeah, I think it pays to be a contrarian investor. And if you look at the valuation spectrum right now, all the defensive stocks are bid up quite a lot. They've rallied. Their valuations have extended. They're in the top 75th percentile over the last five years. But you look at the flip side of that, and if you look at something like growth software stocks, for example, you look at parts of healthcare, you look at biotech, they have beaten up significantly.

So I think that's the rotation opportunity. And I've been talking about this earlier in the year year that it's not the time to chase cyclicals because the Fed wants to slow down cyclical activity but when we come out on the other side of this the valuation on growth has reset so much and by the way growth is secular it's not going away so I do actually think that's where investors want to be stepping in. And case in point, this week, you know, the big outperformer of this year, energy has corrected a lot. But you know what investors have been nibbling on are those growth software stocks. It's interesting because to get to your point, that oil trade, now oil itself, the commodity, maybe not so much. But energy stocks, especially exploration and production companies, entered a bear market, and I say this tongue in cheek,

entered a bear market 20% plus off their highs in the span of two weeks. That's a very quick unwind of a very consensus momentum trade. If that's the case, how do you strategize around that? What's the kind of point of attack? How do you go about, is this a dollar cost average situation on some of those cyclicals that come out on the other side of this particular move in the second half? Yeah, I think you can. I mean, I'm not surprised to see a 20% drop in energy shares because they were up 60% or 70%. So that happened quickly.

And it should have happened because we're now concerned about a demand slowdown environment. I think at this point it might be interesting to nibble on some of those select energy shares because, you know, their cash flows are phenomenal. You know, at even a hundred dollar barrel of crude oil, they're making a lot of money. So I think you can think of this as a part of what I would say the income sleeve of your portfolio. You want to get paid while you wait out this volatility and energy stocks is actually one way to do it. But one idea that I mentioned on Overtime last time is financials. And I've not liked financials all year. But if we are, in fact, heading not for a full-blown negative GDP growth recession,

if we have a chance for the softish landing, which I still think we do, then financials might actually be a pretty okay place to be. So energy selectively, financials for the dividend play to get paid while you wait, and then maybe pockets here and there of some of that growth trade in tech and media that have been destroyed in some cases over the last several weeks. That's right. Financials, I would say, for the beta to the rising interest rates and the fact that not all loan growth is going to fall apart. In fact, it's likely to continue to move higher. And by the way, if the markets stabilize a little bit into the second half of the year, we can see some of the capital market activity come back.

So that would be a positive for financials. But yes, selective energy, broad financials, and I think tech is interesting. All right, tech is interesting. Let's expand this conversation now and bring in BNY Mellon's Alicia Levine, also Truist's Keith Lerner as well. Thank you guys very much for being with us here. Let's layer into the conversation and perhaps Keith, we'll start with you. You heard some of what Anastasia was saying with regard to where she's kind of finding some selective spots. Do you feel as though this is an environment where you want to

deploy capital or do you still want to wait and see if things do stabilize even further? Well, first, Dominic, great to be with you. We were on with Scott last Friday and our point of view was that the market was very oversold. I mean, we had only 2% of stocks above the 50-day moving average. Sentiment was very depressed. And our point of view then was that this market was ripe for some type of rally. We've seen that actually stronger than we would have anticipated over just the one week. But we still think this likely has further to go because you were so oversold. So we would stick with this kind of short term rally. We still think it's in a context of a broader trading range, but you could still see, you know, four or five percent

upside. And then for us positioning, we would use a balance actually to fade somewhat the financials because we think that the PMIs are going to continue to move down. And we do think it's an opportunity in energy. We've had this big correction in energy. We think the secular story there is actually intact, that the supply is still somewhat limited, but those trends are still intact. The earnings are still strong as well. And we also, as this market rebounds, we'd be rotating back in some of these defensives like health care, which just made a relative or fresh relative high yesterday. Again, on the short term, I think what's hit the most is going to bounce the most. But again, I think that's more of a short-term trade versus the intermediate trend, which is

somewhat more still choppy waters from our perspective. All right. I like it. I like it. Alicia, Alicia, OK, you're going to be like the tiebreaker here, right? Because we've got a converging and then a diverging set of views with regard to certain parts of the market, especially when it comes to some of those more defensive sectors out there. I guess maybe we'll start with this notion, Alicia, do you feel comfortable? Does the price action this week make you say, hey, maybe this is a bottoming process and that we are collectively feeling good enough to start nibbling and buying and putting money to work? So I think we are in the middle of the bottoming process here.

And I think what's most interesting in the last two weeks when we were down 12% in two weeks, many of the most hit names did not make new lows last week. And that tells me that for many of the names in software and enterprise and some of the consumer names. That there may have already been a low met. But I'll say this I think for the most part. I agree with what Keith is saying that this is a short term trading

range I think we rally into the PCE data. That inflation data on Thursday. Which is the metric that the Fed is really looking for and if we do that. And essentially we priced in, then essentially we've priced in better expectations for softer goods inflation. And once we've done that, we have to then face the fact that earnings have to come down and the multiples will remain too high if earnings have

to come down. We're at a 50 percent chance of recession by the end of the year headed into the first quarter. So we do think that the street is just way too high for earnings estimates. And we wouldn't get more bullish and at risk until the estimates come down. Having said that, we are defensively positioned for the short term. And I think the downturn in energy in the last 10 days or so is actually a time to add positions. We're still positive on WTI over 95. And it is a structural change in the market. So I would add positions here. Anastasia, JP Morgan's Marko Kalanovic

widely followed for some of the quant strategies and a lot of the things that people look at with regard to trading activity. Issued a note basically implying that there could be a move up in equities next week of around 7%. That's what you're seeing on the screen right now. Month, quarter, and rebalancing could push up the market 7% next week. Is this an environment where you feel as though that kind of volatility to the upside is enough to draw more people in? Well, I would love it, first of all, if the market did bounce back 7% next week. I think we all would. But I don't think it's enough to draw people back in because I think at this point, there is a bit of a bias strike. And most people understand that we are going through this growth

slowdown stage. Most people understand that the way the time to be adding to equity significantly is not when you have a slowdown in the PMI data, not when you have revisions that are trending to the downside. So I think most people understand that and for that reason, I don't think they're going to be chasing this potential rally. But I think we have to decouple what's going to happen next week versus what might happen over the next year. I'm not saying that we want to be buying tech or financials or even nibbling into energy for the next two weeks or even for the next month. What I'm saying is it pays to be a long-term investor and it pays to be buying stocks when it feels terrible to do so. You know, Dom,

I think you brought this up. If you look at consumer sentiment, it's at the worst time, the worst level it's been in 40 years. If you look at the percent of investors who are bearish out there, it's 58%. It's the worst, again, in something like 30 years. So it feels pretty terrible right now. And if you think about it, if you bought stocks from 16 times forward multiples versus 20, your forward-looking one-year returns were a lot more positive. So next week, 7% bounce or not, but I think still buying these stocks after this reset for the long term, that makes sense to me. Keith, the American economy has been, I guess,

evolved over the last several decades to be one that's very driven on consumer spending. We saw a lot of money dispersed by the government, taxpayer money over the course of the pandemic that really strengthened some of those individual and household balance sheets. We are seeing some signs, just anecdotally and few right now in the beginning, of stress in that consumer spending picture, that consumer balance sheet, the household net worth balance sheet. Does it worry you at all, the economy right now, given the fact that maybe consumers cannot come to the rescue this time around like they did with government assistance during the pandemic? Yeah, well, first, I do think the probability of a recession have moved up, but we've just

looked at some data. This is actually over the last day that was released from the Fed. The excess savings is still significant in the trillions. The part of the income spectrum that's really hurt is the lower end. And they are already tapped out and they're getting hit by this triple impact of higher gases, higher rents and higher foods. But in general, I will say if you look at like household debt ratios, they're still near 40 year lows. So the consumer may be slowing down, but in aggregate still somewhat strong. One other point, Dominic, I just want to share with you, you know, the earnings is a big question on Wall Street right now. We've been doing some more work on that as well. You know, the one thing with the economy slowing down, earnings should slow down. But the one thing

I think people are missing is that we should be looking more at nominal GDP inflation, you know, with inflation, because during the 70s, earnings actually held up better than people expected because inflation is passed along in many instances to companies. So that's one thing that I could I think could be a surprise to the market later this year, that earnings hold up better than people expect. Alicia, you mentioned that earnings picture before as well. In an environment where you do maybe, and I just say maybe because I don't have a crystal ball, maybe have a recessionary environment, let's say for Anastasia,

that it could be a soft-ish landing from the Fed in an ideal scenario. If the valuation picture has already come down to the point where, by the way, today you're paying about as much in terms of the dollar for stock price for next year's anticipated earnings as you did in the emergence from the pandemic lows back in March of April of 2020, have the valuations been reset in your mind enough to accommodate some of those revisions possibly to earnings coming forward. And at the same

time factoring in a higher interest rate picture for everybody who's trying to value some of these stocks out there on a forward basis. So look I don't think we're there yet on valuations if there is a slow down let's call it you know a

mild recession. I still think the valuations are too high, but we would be looking to add risk if the market goes much below $3,500 because then we think the risk-reward going forward is actually quite good. It's simply that the margins are at historical highs, operating margins of the S&P at about 13.5 percent. That margin increase was also a result of fiscal stimulus. So as that fiscal stimulus is fading as an impulse throughout the economy, that extra margin that companies got in the S&P over the last 18 months will fade as well.

So it's not just declining revenue. It's also declining margins. Once that gets baked in, then I think it is actually time to buy. If there's no recession, valuations right now are historically where an investor should buy. We're about six months into the bear market. We're down about 21 to 22 percent. Historically, if there's no recession, that is exactly the average. And that's where investors should be buying. All right. Ten seconds. Keith, your favorite sector out there? My favorite sector is still the energy sector for the next six to 12 months. All right. Alicia, what's your favorite sector?

Health care, energy. Okay, and then Anastasia? I'm sticking with software. I think rates will top out and software can move higher. All right, there's the picks right there. Anastasia, Alicia, Keith, thank you all very much for being here and through your thoughts. Have a nice weekend, guys. Thanks, Tom.

So let's now get to our Twitter question of the day. We want to know this. Did this week's rally signal the bottom is in for the market? Just head over to at CNBC Overtime to cast your vote. We'll bring you the results later on in the show. Very simple question. Do you feel good about it? Is this the bottom?

Do you step in and buy? Still ahead on the show, much more on today's big move in the markets to the upside. The NASDAQ jumping nearly 3% at this stage. You can see there. Oakmark's Bill Nygren is with us. We'll share where he's finding some value right now. And then later on, it's the commodity crunch. It went from a rally to a crunch. One top technician says the recent sell-off in commodities could be coming to an end soon.

He'll tell us what he's seeing in the charts. Overtime's going to be right back after this. Welcome back. We're back in overtime. Check out the moves in the big banks today. They soared in today's broader market rally. So let's now bring in Bill Nygren, Oakmark Fund partner and portfolio manager. Now, the financials carry the biggest weighting in the Oakmark Fund. So, Bill, do you feel good about the banks? Yeah, and at Oakmark, we don't feel good because they went up today.

We feel good because they're selling at PE discounts to the market that they have rarely sold at before. And we think especially the big banks are much better businesses today than they were a decade ago, two decades ago, three decades ago. I think there's kind of a knee-jerk reaction among investors that when the talk turns to recession, they think what industries were hurt in the past two recessions and not really thinking that the past two recessions were more generational. The pandemic and the great housing recession in 08 were much larger than recessions that have been typical throughout my career. In most of those recessions, the banking industry, the health of the industry was not brought into question. And by the time you knew you were in a recession, you were actually on your way out of it. We wouldn't be surprised if that's the situation that we're in right now.

And we think investors are way overestimating the trouble that will cause for the banking industry. So if that's the case, I mean, the Fed stress tests, they basically just reaffirmed what you already know, right? That the banks in America are probably the most capitalized and strongest they've been in decades at this point. Does that then mean that it's an all clear signal for banks to become those kind of income proxies that they've been in the past? The dividend payers, the ones that kind of have that cyclical exposure yet still pay you to kind of wait around as well? Well, I don't know that the market ever gives an all clear signal on anything. But I do think it's interesting that if you look at the leading retail bank, Bank America, that sells at about eight times expected earnings,

they have got a capital ratio at the bottom of the Fed's severe stress test that's better than they had in the boom times before the great housing recession. So this industry is much stronger than it used to be. And what we've been through the past decade, where the banks are always part of the risk on, risk off trade, that's been unusual in the history of banks. As you said, they used to be viewed as more stable businesses, more dependable income generators. And I think the managements in these companies today are more oriented in that direction

of getting dividend payouts that can be reliable. And when times are good, using excess capital to buy back stock rather than pushing on loan standards to try and grow their top line revenues when that top line growth really isn't present. So we like the way they're being run. The leaders we think are as competitively advantaged as they've ever been and the market is certainly pricing them very cheap. At the low end of multiples, a name we own like Ally Financial sells at about four times expected earnings. And the highest quality names like Bank America are up at about eight times. To have the high end of this industry be half a market multiple seems kind of silly.

So speaking of those multiples and the compression that we've seen, the valuation arguments here, Netflix is a stock that you're familiar with. It's been one of those stocks that you've held for a while now that you've talked about in the past. And Netflix has been absolutely hammered over the course of the last several months here. Can we talk about whether or not you feel good enough about valuation at this point to put more money into a trade like a Netflix or others that may have been crushed over the course of the last few weeks here? Well, I can't disclose what we've been doing in this past quarter. Our holdings will be out

middle of next month, and you'll be able to see then what we've done with Netflix. But the way we value businesses at Oakmark, it's not based on one or two quarters. It's based on where we think the company will be five years out. And as we look out five years, we're highly confident that Netflix will be able to resume significant revenue growth, subscriber growth, operating margin growth. And the stock is priced today at a discount on next year's expected earnings to the average electric utility stock. Again, that doesn't make sense to us. You can debate how rapidly Netflix will grow, whether Disney will catch up with them or not. But to say Netflix isn't as good a business as the average electric utility, that's nonsense.

And if you look at some of the top holdings within the top 10 of the Oak Mark Fund in general, there is one standout communications services company that's a pretty big weighting, and that's Alphabet. It's a stock that has had its own pullback. Do you believe that that Alphabet story is still compelling enough to have it as highly rated in your kind of portfolio and weighted in the overall Oak Mark fund as you have it right now? Sure, there are two reasons Alphabet is as highly weighted as it is. One is we think the stock is very significantly undervalued. Like Netflix on a cash-adjusted PE basis it sells for less than the electric utility index, it sells for less than the S&P 500.

We think you can have a lot of debates about what Alphabet's growth rate will be, but we think it will be significantly better than the S&P 500 growth. And additionally, we have it weighted so heavily because we believe it's significantly lower risk. Alphabet has a large net cash balance on their balance sheet. Contrast that with the typical company that is somewhat levered. So changes in business value at Alphabet don't get magnified at the equity line like they do in most of the S&P 500.

All right. Bill Nygren, Oakmark, thank you very much. Have a nice weekend, sir. Thank you. You, too. Still ahead on the show, fresh reactions to the Supreme Court's big decision to overturn Roe versus Wade. Our own Shepard Smith is standing by with the latest developments there. We are back after this break. welcome back to overtime fresh reaction coming into the supreme court's decision to overturn roe versus wade let's get right out to cnbc's shepherd smith with all the latest there good afternoon ship good afternoon dom here's what's happening now the constitution does not confer a right to abortion roe and casey are overruled and the authority to regulate abortion is returned to the people and their elected representatives. With those words, the Supreme

Court overturned a half century of precedent this morning, ending a constitutional right to abortion. A live look now outside the Supreme Court in Washington, where protesters on both sides of the aisle gathered today. Largely now, though, mostly people who disagree with the ruling, according to our reporters on scene. The country divided clearly, but a high court united in its conservative majority. CBC's senior Washington correspondent Eamon Javers. Now, Eamon, how did the decision come down among those justices? Shep, the breakdown was a narrow one on the Roe v. Wade decision itself. That vote was 5-4 among the justices to overturn Roe v. Wade. On the individual Mississippi law at issue before the Supreme Court, though, the vote was 6-3,

which reflects the conservative majority right now on the Supreme Court. The difference here is Chief Justice John Roberts, who was willing to live with the Mississippi law and uphold that law, but he was not willing to go as far as pushing away the Roe versus Wade precedent. He said that would be a jolt to the political system. He couldn't go that far. So Roberts trying to sort of carve a middle ground out here on abortion. In the end, though, it didn't make a difference in terms of the vote tally. 5-4 was enough to overturn Roe versus Wade, Shep. You know, this ruling could have some really big implications politically,

and both sides of the aisle appeared keenly aware of that in their remarks today. Yeah, we saw that from everybody today up on Capitol Hill and across the country, and I think there are a couple of political elements to look forward to in the months to come. The first one, of course, is going to be now a big fight over whether or not Congress should pass a law legalizing abortion nationwide. That would be a bitter political fight up on Capitol Hill. Not clear whether there are the votes to do that, certainly, in Congress, but some members of Congress talking about that today.

And then, of course, the midterm elections. Democrats, in particular, pushing their voters to this idea that abortion is on the ballot in November, and if you want to do something about this ruling today, turn out and vote Democratic in the fall. We'll see if that works. It was expected to be a very tough political year for Democrats in the fall. We'll see if this changes the momentum of what could be a tough year for them. Amy Javers, live in our Washington newsroom. Thanks. Tonight, full analysis of today's ruling, including how and where state abortion laws are already changing on the news,

right after Jim Cramer, 7 Eastern, CNBC. Don, back to you. All right, Shep, we'll be tuned in for that one for sure. Thank you very much for that. Up next on the show, it's back to the markets overall as we close out a very big week for investors. To the upside, your rapid recap when overtime returns after this. Only two losers in the Dow all day today. We are back in overtime following a very big rally on Wall Street. Let's get out to Christina Partsenevelis with your rapid recap.

Christina. Thank you, Dom. So we had quite the reversal today with markets posting some big weekly gains after suffering, unfortunately, the largest pullback since the depths of the pandemic in March 2020. No major catalyst right now behind this bounce aside from oversold conditions. It's the first positive week, though, in June for all three indices. So there's some positive stuff. S&P 500 had its best day since May 2020, with only the energy sector in the red on the week. Despite the green, though, EPAM, M-Phase, SolarEdge and Citrix all closed in the

red. You can see across your screen today. And I want to talk about the Nasdaq because that's where I am finally snapping its three week losing streak, but still almost 30% off its high and on pace for its third straight monthly decline. Much of the day and week's strength, though, came from software players like Okta, DocuSign, Datadog. Okta, the biggest winner today, up over 8%. And then you got Airbnb also topping the list today on the Nasdaq, closing 8% higher, driven by the notion that pent-up demand is benefiting travel companies. And we can throw Marriott on the screen as well because that's another example. But if you take a look at the weekly performance, it's a different picture. Marriott and Chinese tech firm JD.com are the only two stocks in the red on the Nasdaq 100 this week.

And then you've got Lucid Motors, the only company to close 0.5% lower despite today's rally on the Nasdaq 100 this week. And then you've got Lucid Motors, the only company to close half a percent lower despite today's rally on the Nasdaq 100. And then lastly, we don't talk about this enough, but copper prices had a tough go. And that's on fears that a global slowdown would reduce demand for metals. It's on pace for its worst month since 2011, which is why on your screen, you've got a 10-year time frame. You can see prices dropping. Big moves for Dr. Copper there. Christina Partsenevelis, thank you very much for the rapid recap there. Coming up on the show, commodities getting crushed recently, as Christina just pointed out, but is there a bottom on the horizon and upside ahead?

Fundstrat's Mark Newton is breaking down all the charts for those commodities. And don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast apps, Closing Bell OT in audio format. Overtime, we'll be right back after this. Welcome back to Overtime. The weakness in commodities continuing into the month end with everything from oil and natural gas to wheat and copper, all negative in June. Fundstrat's head of technical strategy, Mark Newton, joins us now with the key levels to watch in the commodity complex overall. Mark, it wasn't that long ago, maybe in the last few years, that people still referred to copper as Dr. Copper, the Ph.D. in economics. Does the slowdown in this kind of trade for commodities give you some pause about the inflationary picture overall, not just here, but in the world? Well, I think we've definitely seen that in recent weeks. You look at the underperformers in the month of June.

It's been materials. it's been energy. A lot of that recession fears are creeping up as people have concerns about growth and really demand and how these rate hikes are going to affect things. So you've seen a lot of commodities, iron ore, steel, zinc, a lot of things have been down 8% to 10%. And as you mentioned, copper, a huge pullback to multi-month lows. A lot of times that means it's still a little bit early to consider moving in and buying dips. And so, you know, these inflation fears have now given worry to, are we going to see a slowdown and is that going to affect demand? So if that's the case, if this is signaling some broader issues that are developing in the macroeconomic story, that narrative.

Is there an end in sight for this commodity drawdown? Or are we reflecting kind of this idea that we are going to be heading into a deeper economic slowdown, globally speaking? Yeah, my feeling is it is short term in nature. You know, we've seen crude oil pull back pretty substantially in the last few weeks. It's down 12 to 15 percent. And, you know, we've seen crude oil pull back pretty substantially in the last few weeks. It's down 12 to 15 percent. And, you know, we could have a temporary bottom there. The broader commodity space likely is going to sell off into the month of July. I do think there'll be more sustainable signs of intermediate term support. Many of the commodity gauges are still within uptrends.

And so this is merely just short term weakness. I do think there'll be buying opportunities for these, but that's also have to be a concern for the Fed, knowing the commodities are still very much trending up and that we might start to turn higher in the third quarter after this little pullback has run its course. So, Mark, if you don't mind me interrupting, what we're showing viewers right now and listeners on Sirius XM, what we're seeing is a chart longer term over the course of the last two years of the S&P GSEI Equal Weighted Commodity Sector Index. And what it's showing is that it's approaching this level on a gold line where there could be support. So take us through the levels,

not just there, but for crude oil and some of the other base metal prices that you're looking at as well. Well, it's still a little bit early. So that pullback has not reached that line yet. And anything this past week, we just saw a breakdown to new really multi-month lows to the lowest level we've seen in almost the last few months. So I do think that continues in the short run. I think to end the quarter, we probably do see a pickup in the dollar and or yields in the end of month. And so that could cause further weakness. I think crude oil, you know, near term 101 is a very key level. It can rally probably to 112, you know, maybe 110.

And then we're likely going to see some further weakness into July. So that drawdown in energy could be comforting for the Fed and inflation, you know, as we near the second 75 basis point rate hike. But for the commodity, we really just want to keep an eye on that equal weighted gauge for commodities. And if that starts to break down more severely, then I think we could see more material weakness in the commodity space. For now, it's been the grains. It's been really base metals and now more recently energy. I think precious metals are going to be next, unfortunately. With real rates pushing up, that's going to put some real strong overhead supply on gold and silver, I think, heading into July. And we could see a little bit further drawdown in these. Mark, as you look at the charts, you look at the patterns developing right now,

is there one or two specific trades within that commodity complex, hard or soft commodity, that seems to be the more compelling opportunity for traders going forward here? I really don't like being long a lot of commodities in the short run. I would mention if you're a very short-term trader, I do think you can be long energy and be long crude here for a bounce. And as I mentioned, we could get to maybe 110 to 112. I think most people would be right to stay away. If you're comfortable being short, I think shorting silver and gold makes a lot of sense. I think we'll probably revisit last summer's lows. So those are really two trades, one long, one short that I like here.

All right. Mark Newton at Fundstrat. Thank you very much. Have a nice weekend, sir. Thanks, Dom. You too, sir. Take care. All right. Coming up next on the show, our two-minute drill, the top picks for your portfolio. We will break down those trades and those names coming up ahead. And coming up at the top of the hour, the most important charts in the market right now. We were just talking about some of the commodities. The Fast Money crew, those traders, they are laying out which ones, those trades that you should watch. Fast Money, 5 p.m. Eastern Time.

Overtime is back after this. All right, you saw the sector leaders and laggards right now. So it's all this positive activity make you feel good because there's our last call here to weigh in on our Twitter question of the day. We want to know, simply put, did this week's rally signal that the bottom is in for the market overall? Just head over to at CNBC overtime on Twitter to cast your vote. We will bring you the results at the end of the show. But right now, it's interesting. There's a big debate right now about whether this is a bottom.

Up next on the show, we are setting the table for the big trading week ahead. We are breaking down the key things that need to be on your radar in the week ahead. And speaking of next week, check out this power-packed CNBC lineup from the Aspen Ideas Festival. Among them, Jessica Alba, Ken Chennault, Eric Schmidt, the CEOs of Intel, IBM, PepsiCo, Wells Fargo, Bumble, and a lot more. NBCUniversal News Group is the media partner for the festival, so make sure you tune in. We've got all kinds of access to all these big decision-makers and thought leaders. Tune in. Overtime is back after this. All right, welcome back to Overtime.

Let's get the results of our Twitter question of the day. We asked, did this week's rally signal a bottom is in for the markets overall? Just 28% of you said yes. That's not very optimistic. 72% of you said no. So it doesn't look like folks out there really believe that this is a rally that you can buy into, maybe just the bear market variety. So Twitter, thank you very much for weighing in on that particular move there.

All those viewers out there who weighed in on that Twitter poll, thank you. So Wall Street is closing out its first positive week in four as investors turn their attention to the big week ahead. There's lots on the docket, including earnings from Nike, Micron, plus you've got GDP and more Fed speak throughout the course of the week. So joining me now with your setup for the week ahead is Wall Street Journal reporter and also CNBC contributor Gunjan Banerjee. Gunjan, I think this is one of those times where the folks like you and I who cover markets, who report on markets, think to ourselves, something is going on. We just don't know what exactly it is. What have you been hearing about? What's the explanation for this

big, massive rally in stocks the first in the month of June? That's right, Dom. You know, it's funny regarding your poll that lines up with what I've been hearing from investors I've been speaking with, where no one is saying, you know, know the bottom is in a lot of investors are expecting more volatility ahead and what's striking to me is that there's a lot of parallels between the period of time that we just saw over the past week and the end of the first quarter where stocks were off to the worst three-month stretch in around two years. Yet at the end of the quarter, we saw this rally in meme stocks, in growth stocks, and tech stocks. And it proved to be a pretty short live. And I think that lines up a lot with what we've been seeing recently, where some of the biggest losers are staging this kind of bounce. For example, the Russell 1000 growth index has been underperforming the value index by the biggest margin since around the dot com boom.

Yet it's outperformed this week. So what we're seeing is some of the biggest rallies kind of staging this comeback right now. And I think one word of caution to investors is, as we saw at the end of the first quarter, that wasn't very long lived. Yeah. So there's catalysts. I mean, we kind of listed some of the micro economic company specific ones, the macroeconomic Fed speak and everything else that's happening. We've got economic data. So what do you feel in your mind is going to be the thing that you focus the most on in this coming week for maybe some directional clue as to the market's next leg? That's right. I think what today's action showed us is that the market is just clinging to

every morsel of inflation news that we can get. And I do think that, you know, the downtick in inflation expectations that we saw in the data this morning did help propel the rally today and even tempered some investors' views on the path of interest rate hikes, with many people now expecting cuts next year. So I think inflation, Fed speak, those will be the key drivers ahead because inflation remains the biggest risk to many investors out there. And I think today highlighted that. Of course, and you've got break-even yields, the markets and the credit markets and the bond markets signaling that inflation expectations are already starting to come down. Gunjan Benerjee at The Wall Street Journal, thank you very much. Have a nice weekend. Thank you. All right, let's round out the hour with our two-minute drill.

Let's now bring in Westwood Quality Value Fund co-portfolio manager Lauren Hill. Lauren, two minutes are on the clock. Let's take us through the picks. What do you think? What do you like? So my first pick is Bath & Body Works, BBWI. It's a reopening play. It's now trading at just six times earnings, even though they traditionally have operating margins in excess of 20 percent, so twice the industry level. Customers have missed buying their scented products in store. And as more consumers shopping, or excuse me, their social occasion calendars fill up, they are getting back out there and buying more gifts. So including Bath and Body Works products with price points under $7 per unit. They have really strong pricing power and can raise prices. It doesn't break the bank for consumers, even in an inflationary environment. And they have 85 percent of their supply chain in the U.S.

And with the Victoria's Secret brand, net broken brand now gone, I think it's a wonderful buy. And I think it's an easy double the next three years. All right. So what else you got on your list? I think it's a Bright Horizons. Let's talk about that one. Sure. They provide child care, backup care and tutoring services for families and also Fortune 500 companies that are so desperate right now to just get their employees to return to work. So free or subsidized child care is one of those ways. They pay more than the rest of the industry. So I think it's a matter of when, not if. They fully restaff and see that rebound in sales and margins.

And from there, the stocks really beat up down over 35 percent year to date. And I see over 50 percent upside in the stock. All right. You got 30 seconds here. What about tech and retail? Tech and retail. So Revolve is a wonderful business. They sell to clothing and apparel and accessories to millennials better than anyone else. They scan millions of Instagram influencer posts, determine what's trending, test shallow just 100 items and whatever sells out, they quickly reorder it and offer it to their clients. As there's more travel and events and social occasions and weddings, their sales are going up. It's a wonderful business. They've made money 17

out of the last 19 years. They're growing at over 20% CAGR. And I think longer term, they're going to expand from California towards the East Coast and also take market share from the department stores. The stocks really beat up, almost cut in half this year. And I also think that one's a double over the next three years. A double over the next three years. All right. Lauren Hill, Westwood Quality Value Fund, thank you very much.

It's Bath & Body Works, Revolve, and Bright Horizons. Thank you very much for joining us here on the show. Big week to close things out. Massive moves in the market higher. We'll see if those things stick. Fast Money picks up the coverage coming up next.