Closing Bell - Closing Bell Overtime: Soft Start to September 9/2/22

Episode Date: September 2, 2022

Stocks posting losses to start September, but Fundstrat’s Tom Lee says there could be an upside surprise in store. Plus, two top money managers share their predictions for the Federal Reserve’s next rate hike. And, market expert Mike Santoli unpacks what’s ahead in a busy month for equities.

All right, Carl, thanks very much. Welcome, everybody, to Overtime. I'm Scott Walkley. You just heard the bells were just getting started here from Post 9 at the New York Stock Exchange. In just a little bit, I will speak to Fundstrat's Tom Lee, who says inflation is going to drop like a rock in the months ahead. Stocks are going to surge. We'll press him on that view with several September risks just ahead of us, not to mention this Friday rollover for the major averages. We begin, though, with our talk of the tape, a soft landing surprise. Did that chance just increase today with a jobs report some are calling Goldilocks? Let's ask Solis Alternative Investment Management's Dan Greenhouse. He's with me here at Post 9. It's good to see you again. Welcome back. Thank you for having me. So your view kind of where we are, and I guess it could be a tale of two markets in a single day.

Things seemed pretty good after the jobs report. Then we got the headline out of Europe with Nord Stream, and the market rolled over and rolled over hard. What do you take from it? So with respect to the jobs report, I mean, listen, in the short term here, that was, from the Fed standpoint, pretty good. Obviously, wages came in a little bit. Job growth slowed a little bit. Although, admittedly, 300,000 jobs in any given month is still an extraordinary strong level of job growth. I took a look before I came on.

In the last 40 years or so, only 10% of months or 11% of months have had job growth stronger than this one. So it's still a relatively rare occurrence. But relative to what we've seen the last few months, it's come back. The Fed has to be happy about that. And I think the market probably reflected that in the short term. I mean, you need the economy to hold up pretty well. I know this sounds so perverse. Not well enough, right? You need it to hold up so that you have a cushion for what the Fed's doing. So it makes the soft landing idea more plausible. Yeah. So listen, there's plenty of people on the network talking about the only way out of this is a recession.

That's not true. There's people on the network saying the Fed needs to cause a recession. That's not true. There is a plausible way out of this. I don't think it's the likely outcome of we've been discussing for quite some time now. But there is a plausible way out of this where the economy glides, so to speak, down and inflation comes down thanks to supply chain pressures easing and the like. Again, I just don't think that's the likely outcome. But the point I would make about Goldilocks, which has been the

type of thing that we've discussed all day, or the network has discussed all day, one report does not a Goldilocks make. This is a process. And as I was speaking to your producers about, you have to think about the U.S. economy as a Titanic-level ship or a cruise line ship today, which is infinitely larger than the Titanic then. It doesn't turn on a dime. It doesn't stop on a dime. I was avoiding a slip, citing the Titanic. Sure. But it is a large ship.

We hope we're not going in that direction. No, we do not. Iceberg, dead ahead, no. It is very difficult to say you're going to turn only two degrees this way and not go three or four degrees, or some nautical analogy that I don't have. And so the idea that we have a Goldilocks jobs report, fine, but this is a process, not an event. And come talk to me in six months. See, one of the reasons why, you know, you get some calls for inflation to be higher for longer

and then rates higher for longer are the very reasons that we reacted, we the market today, to the Nord Stream headline. Geopolitics, this is a smack in the face that says we're still out there. Geopolitics remain a huge risk to the story globally, and it's inflationary. Sure, but there's two points there. One is inflation higher for longer. Make no mistake, inflation was on a year-over-year basis was always going to come down. That was never a question. The issue always was to what level.

Even before the huge spike up to 9%, the issue wasn't is it going to go up, is it going to come down. It's to what level are we going to fall. I believed and a lot of people believed that when you fell and came off those peaks, you would be at a higher level for a host of reasons that's too long to discuss now. That remains in place every bit today as it did a day, a week, a month ago. The Nord Stream headlines are of tangential relevancy, but more importantly, they are an issue for growth than inflation. Obviously, higher net gas prices throughout Europe, inflationary, but more directly,

let me say it another way. Europe's in big trouble. From an economic standpoint, Europe is in big trouble. People say a recession is inevitable. It's a matter of when. I don't think there's any way that you don't have a recession. The only question is how deep. Now, just getting back to the inflation side of things for a second, you're talking about above 10%, maybe 15% inflation in the UK, something a little less than that in Europe more generally. But again, you've shut off gas flows. And as Josh Brown noted appropriately in a halftime show,

you were only at 20% of flows as was. Right. But with flows at zero, the analysis is that they basically don't have enough gas to get through the winter, which is obviously a humanitarian story. I mean, there is a point of view. And, you know, it may be in the minority.

It's still loud, though, from the likes of Tom Lee, who's, by the way, coming up in just a little while. Jim Labenthal, Barry Bannister, Stiefel, late this afternoon. We see much lower back half 2022 inflation and no U.S. recession until the third quarter of 23, which we believe supports 4,400 for the S&P 500 at year end 2022, led by big tech. So leave the led by big tech out of it for a minute. But this notion that inflation is going to roll over hard, the Fed is not going to have to be as aggressive as they sound. And thus, that could be stimulative for stocks in the latter part of this year, four months left to go. Does that make sense?

Of course, that's the threaded needle idea that's been around for, and I don't mean that disrespectfully, but that's what everyone's been arguing for six or nine months. It's a perfectly plausible outcome. What are the probabilities of that? That's what it comes down to. We in markets deal in what we call expected value. And I think people like that put too low of an expected value on the negative outcomes, whereas I put a higher value on it. But listen, I think if you're someone like Barry Bannister,

and no disrespect to Barry Bannister, but as a former strategist on the sell side, you're not taking a look at what's going on in Europe and adjusting your price target as a result of it. The issues with Gazprom and Nord Stream and the energy prices throughout Europe are not the type of thing that you're probably going to take into account as a sell-side strategist unless you are in the European power and energy market or in the gas market. If you're a U.S. equity strategist, that's just not going to filter into your analysis.

That said, it's one of those black swans, so to speak, that's going to make all your analyses a moot point. Because if European gas prices go to 400, 500, 600 euro a megawatt hour, that's going to be the end of that. Back to the Fed. 75 basis points. Does today's jobs report take that off the table firmly? Or is it still hanging out there in the wind and it's a risk? Yeah, I don't think it takes it off the table by any means. I mean, my own opinion as a relative hawk is that they should do 50, but I don't think it takes it off the table at all. I mean, listen, you do have any number. You had Jeremy Siegel on yesterday, I watched, and he cogently articulated gasoline's down, commodities are down.

Yeah, like 21 of 23 metrics are down, he said. Of course. So you have the wind at your back, so to speak, in terms of bringing down the year-over-year rate in inflation. And I think there's something to be said for after two 75 basis point hikes, doing 50 and taking a minute to assess the situation. Because the risk that I have laid out and I believe in is that they're going to tighten more or less, for lack of a better phrase, too much and eventually slow the economy too much, which will end up being detrimental further to stock prices. Doing 50 takes some of that risk off the table.

So arguing for 50 somewhat is in contrast to my own personal views, which is more bearish. Understood. Let's bring in Victoria Green of G Squared Private Wealth and Steve Chivarone of Federated Hermes. Guys, thanks. It's great to have you a part of the conversation today. Victoria, 75 basis points is your call. Really? Hike, baby, hike. Yeah, you got to go. We already took our break in August. Everybody took a vacation in August. Look, the numbers support it. It's going to remain high. And they actually don't care about unemployment. All they needed is a checkmark that unemployment isn't rising too fast. All they care about is inflation. And I agree inflation came down in August with gasoline, fuel prices.

Home prices, I think, are a wild card. Home prices falling. Rents may be up. But why wouldn't you go 75? Why not put that cushion in there? Continue to build your war chest to fight inflation because it's working. And remember, Powell stated he only spoke for eight minutes and he talked about unusually large hikes. 50 basis points is not

unusual. So I think they need to go. Obviously, they're going to wait, but they've been doing their best to put this hawkish rhetoric back on the table. QT is happening. It's tightening. I actually think let's go with the Titanic metaphor because that's what it feels like a little bit right now as an investor Hmm Steve, you know your headline was interesting today, and I want you to square it up for me and our viewers You say you're bullish But at the same time as cautious as you've been since the global financial crisis. What does that mean? That means as a shop we have historically been one of the more bullish shops. We skew that way.

That's generally our bias. We're not right now. And that's a contrast. It's not to say that we're both bullish and bearish right now. No, we're cautious right now, which is in contrast to how we normally look at things. And it's because we have deep concerns about the consumer, where we think labor markets are headed and what it's going to take the Fed in order to get this inflation not down from nine to six but from six to two and we think that's going to be a difficult road ahead. Okay so you're always bullish but not bullish right now was I guess what I took from that. That suggests that you think stocks are going how much

lower? Well, we think there's meaningful. We think we're at least going to retest the lows from earlier this summer. We think we could break lower. The average recession pullback is 30 percent. That would be a 3350 level on the S&P 500. We think that's absolutely within reach here. Yes, it's plausible that the Fed's going to get inflation down without a recession. But frankly, we think that's not just unlikely, but highly unlikely.

We think the choices now are going too far and causing the recession in order to get the recession down, or they risk that inflation being entrenched, which is an even worse outcome. They started too late, and so now they're just left with bad choices. At least back to the lows, Victoria, is that what you think as well? Yeah, 36, 3400. Look, the chart does not look good, right? I'm not a huge technical person, but you can't deny right now we've got a head and shoulders pattern. You've got lower highs, and that usually means you've got lower lows.

So if you look at your downtrend off of the highs earlier this year, the downtrend is very intact. You've invalidated a couple of supports. You don't have a lot. So I think 36, 3400 is certainly within reach. And then you have your black swan event. Sometimes when I'm talking about the markets, I feel like I'm in a bad infomercial. I'm like, but wait, there's more. We have a gas crisis in Europe, a potential recession, the housing market. You know, one in five, I read today, one in five homes have reduced their price to sell. You have that kind of getting bubblicious. And then you put in the tensions with China and what happened with NVIDIA this week. And you look around at all of this. And obviously, you need to look at fundamentals as well.

But you cannot deny that the wall of Worli has gone from from like four-foot bench to basically the big wall in Game of Thrones. Like the green monster up in Boston. So they both suggest we're going back to the lows, if not lower. Is that what you think? Yeah, I mean, our view has been for a while that there's probably some additional lows. Again, thinking through what the next six, nine months are going to look like, everybody speaks optimistically about inflation coming down, i.e. threading the needle. I think the point that we've made, it's a little more nuanced than we have time for,

but the point that we've made is commensurate with the inflation rate coming down, you're going to see deterioration, presumably, you're going to see deterioration in other economic data points beyond what you predominantly see in housing. You have the ISM continuing to fall. The job growth probably is going to continue to decline into the lower triple digits, God forbid into the double digits. And commensurate with that, the real conversation about a recession is going to start to accelerate because the nonsense that's been going on in the network for the last two or three months,

are we in a recession because of two quarters of negative GDP? Come talk to me in six or nine months when the ISM is at 47 and you're creating 60,000 jobs in a month. You're going to have a much more realistic and objective conversation about whether we're in or going into a recession. Unless, Steve, you think earnings are going to hold up and what makes the soft landing idea so implausible if, by evidence, even today, the economy is in a relatively decent place with the Fed doing what it's doing. So thus, there is that buffer. There's a cushion that they have to work with. And by the

way, maybe they get what they want with words more so at this point, at least, than actions. Yeah. So you've never had high inflation come down without the federal funds rate moving above the core inflation rate. That suggests you at least got to get to four. There are some cracks forming, Scott. You know, you look at the increase in unemployment claims are up about 51 percent off the bottom. The average increase prior to a recession is only 28 percent. You've got savings rate that's sitting two percent below the long term average. Credit card spend or credit card balances is up $140 billion in the last 12 months.

That's 50% greater than the second biggest jump in a 12-month period. You've had 16 consecutive months of negative income growth, which is a record. And then on the housing, there's four indicators. New home sales, existing home sales, housing starts, and home inventories have all deteriorated from their peaks at a rate greater than the housing crisis. So, again, I mean, is it possible that they can do that? Are we in a recession right now?

Yeah. Do you think we're in a recession right now? I think what we saw in the first half of the year was a decline in business spending, inventories and government spending. I think the consumer recession to come is a late 22, early 23 event. Victoria, what about that notion of soft landing? Why can't you get your arms around it at all? Look, the history is not in the Fed's favor. You've got a lot of things they don't control. They don't control commodity prices. They don't control the weather, which is affecting crops. And you're seeing agriculture prices continue to rise.

They don't control a lot of the factors that really cause the inflation to come up. Yes, you've seen metals and oil and gas come back down, but oil is still elevated. You took the Russian premium off the table, sure, but you have oil elevated. You have natural gas at unsustainable levels in Europe. And then if you look around, we just think that there's too much the Fed can't fit. So they're trying. They're pulling every lever they can. But they're not omnipotent. They're not God. They can't just wave a wand and make everything go away. So they have to overuse the levers they have. They have to overcompensate for what they cannot control. That means that I think they're going to have to tip it over. But they can get cooperation from part of what they can't control, right?

That's sort of the whole idea here is that inflation is going to start rolling over and rolling over pretty hard as you get month by month by month towards the end of the year and into next. Well, some of it, but it's also a little bit, if you look year over year, obviously as we progress forward, it's gonna look better anyway, because you keep having a higher starting point. So I think it's gonna be tough. I think obviously, like my colleague was saying,

nine to six, yeah, we can get there, but how do we get from six to two? And so they are, they're doing everything they can. I just think it's gonna be something, they're very willing to sacrifice jobs. They've made that very clear. And I think that it's extremely difficult to do what they're trying to do. And I feel like there's too many cracks.

There's too much geopolitical risk and uncertainty going around. And all it would take would be the straw that breaks the camel's back. And then suddenly it's uncontrollable recession. And I also argue strongly if we're arguing about if we are or aren't in a recession or what the technical definition is, is we are probably in a recession we're just like trying to look at this in the details i don't know we can't really be in a recession with a labor market as strong as we are i know people like try and make that claim but it seems i i don't know and i don't mean this in any way it seems kind of absurd what is the definition of recession yeah what is it? Let's go to

never, right? No, it's not two quarters in a row of GDP. At any rate. The only way it gets defined is after it started. That's not fair because then you get to kind of never gets to go around and pick what they want to choose. So if it's a feeling, then yeah, we're in a recession. So Steve, for somebody who is at a bullish shop, who's now cautious, what are you doing? Are you raising cash? Are you looking for opportunities somewhere in the far reaches and nooks and crannies of this market or what? Yeah, so we have raised cash. We're at about 10% cash in our standard asset allocation model.

That's as high as it's been. It's about as high as we go. We think cash is a better play than longer duration treasuries for now as the market's pricing in, I think, a higher terminal rate. At some point, we will probably start adding the longer duration treasuries, but not yet. We think the bond sell-off still has some legs. And we really like dividend-paying defensive equities. We don't want to be loaded up in growth, which is going to be sensitive to higher rates. We don't want to be loaded up in growth, which is going to be sensitive to higher rates. We don't want to be loaded up in the cyclicals, which will be sensitive to lower growth. We want those stable cash flows, that dividend income, cash for today, maybe treasuries soon.

And then we do think that once you get through that recession, you can load up on risk assets again. We just think we're not there yet and won't be there for a little while. Still, Dan, greenhouse-like energy? Yeah. You like that trade? Sure. Because you liked it when it was great. You still liked it when it rolled a little bit, and now you're being consistent. And I believe Victoria shares my views. You have tremendous capital discipline. You have shareholder returns, there's a lot to like in the space. It remains as attractive as a sector as it did six months ago.

Victoria, you get the last quick word. Look, I think everybody should be cautious. Look at that zero to six month T-bill. You can get three, two sitting on the sidelines a little bit and have sustainable cash flows. Make sure you have resiliency in your stocks and quality so you can have companies that can survive a little bit of a slowdown. Guys, enjoy the long weekend. I hope you do. I'll see you soon. Happy Labor Day. Dan Greenhouse. Yep. Steve, thank you. Victoria as well. We'll see you again in overtime. Let's

get to our Twitter question of the day. We're asking, should the Fed hike 50 or 75 basis points at the next meeting? Head to at CNBC Overtime on Twitter. Cast your vote. We'll share the results coming up later on in the hour. We're just getting started right here in OT. Up next, it's Fundstrat's Tom Lee. He's sticking by his 4,800 year end target for stocks. The clock, as you know, is ticking. The calendar just turned. So how are we going to get there? He'll tell us next. We're live at the New York Stock Exchange today. Overtime. We'll be right back. We're back in overtime stocks sinking to start September, but there could be a positive surprise in store. So says CNBC contributor Tom Lee of Fundstrat Global Advisors with me here at Post 9. You're always trying to find the positive within the negative.

Some say it's getting harder to do that. Yeah, I mean, the last few weeks it's been hard to find anyone that is positive, right? I think they've all been gone into hibernation early winter. There are a few people, you know, here and there. Yeah. But what allows you to remain as such? Well, I think that it still comes down to our belief that a lot of the pessimism about inflation is anchoring negative sentiment. We know that this is also sort of part of the Fed's default view. And we're coming into September, which is a seasonally tough month.

But in the past week, we've gotten some data that I think really shows inflation could be falling far faster than expected. You know, one, gasoline. Now, as we close that month, it might subtract six-tenths. The ISM prices collapsed for the month of August, and that really points to potentially PPI going to almost 0% in a few months. And then I think the third thing that's pretty encouraging is if you look at sort of the composition of CPI, you know, 42% of the basket is actually now in outright deflation. So I would say I think there's still positive surprise coming. And it's the fact that inflation could cool a lot faster. And history shows once it starts breaking, it falls very quickly.

What if the surprise is that the Fed is more resolute than people want to believe? That, you know, there's a bit of denial going on as to the Fed doing what Jay Powell suggests they will. And sticking with it. And keeping rates higher for longer. And keeping rates higher for a lot longer and a lot higher than people think. I mean, I'd say that that's the consensus view, and I think it's appropriate. The bond market still is not completely convinced, as you know, because the bond market is pricing Fed funds peaking next year and then some cuts coming. And if you look at the inflation swaps

market, for the next two months, the inflation swaps market is forecasting deflation. So outright prices falling. So I think that it's possible in the next couple of months, the idea that inflation is sticky and the Fed has to therefore stay tough is going to be modified by the idea that inflation could be coming down very quickly. So what do I do with the other risks? Because September seems fraught with them. We get a great reminder today, an awful reminder, but a big reminder of that with the pipeline. I've got the potential for earnings revisions. I have the Fed meeting. I've got the dollar, which remains especially strong. I've got oil still hanging around 100 with the propensity perhaps of going higher. None of that matters? No, they all matter. But I think markets need some perspective. You know, in June, people talked about gasoline going to $6 or $7 because

people forecast oil going to $180. Now we're in September and oil's at $86. The concerns about Europe, I mean, they're still there. But as you know, just a few months ago, people were forecasting much greater shortages, and it looks like Europe's made some progress filling up. And I would say just from a market history, I know seasonality's tough, but we already know investor positioning is actually really light and sentiment's negative. So I think as technicals improve, the dollar doesn't have to keep going up. And if interest rates break, I think a lot of these could add up to stocks rallying pretty hard. What multiple is justified, do you think, for the market?

I think the best way to still judge the P.E. is to look at the 10-year. And the 10-year, if it's at 3.2, it's still a roughly 35 PE market. I don't know why we would say the S&P has to go to 15 times. Again, I think if the 10-year drifts back down to 2.7, you're talking a 40 PE for the 10-year. I'm not sure why the S&P PE has to go to 15 times. Okay, so let's assume it stays at 17, and that makes sense to you. Some would say there's no reason that earnings could stay anywhere close to 250 and that they need to come way down. And even if the multiple stays higher than 15, earnings coming way down drag the market down.

I mean, that's not like a far reach. That's right. Earnings next year is unknown. I think if we have a recession, then earnings could fall. But if it's a soft landing or even a growth recession, that doesn't mean S&P earnings actually have to falter because, one, companies are producing more output with, you know, not a huge increase in employment. And there's been a lot of cost discipline that came out of the pandemic, and I don't think they lost that cost discipline. So we've been seeing it in the results. Earnings have been surprising. So I don't know, maybe earnings could still be 240 next year.

I mean, you're starting to get some preannouncements from not insignificant companies. I just don't know why we should believe that that's not going to continue as you get closer to the season. I mean, a lot can happen in the next 12 months. And I think that if the Fed does hold rates at 4 and doesn't continue to tighten, I'm not sure that that's a scenario that causes earnings to have to dramatically weaken. They could slow. But again, I think that there's a lot of consensus belief that earnings have to fall 20 or 30 percent. You still like tech here because what are we, six straight down days for the Nasdaq as of today? I think that's the longest streak since 2019. That's right. I mean, I would say tech's been under a as of today. I think that's the longest streak since 2019. That's right. I mean, I would

say tech's been under a lot of pressure. It is one of the more liquid groups. It's very easy to sell. I mean, for instance, Apple trades more in a day than all of Europe. So when people are de-risking, they are going to sell large cap tech. But I think it works in the other direction, that if investors start to believe inflationary pressures are easing and we can have a rally in place and no recession, one of the big groups everyone will start buying is tech. We'll see. I mean, your guy Newton says Apple's the key to the market, at least right now. We'll talk to you soon. That's Tom Lee of Fundstrat joining us here in overtime. Have a good long weekend. Still ahead, the bull case for tech, the Nasdaq on its longest losing streak,

as we just mentioned, since 2019. Our next guest, though, is finding pockets of opportunity within that weakness. JMP Security CEO Mark Lehman joins us when Overtime returns. Welcome back. It's time for a CNBC News Update with Seema Modi. Hi, Seema. Hey, Scott. Here's what's happening at this hour. A manslaughter indictment has been thrown out against the dive boat captain whose boat caught fire, killing 34 people. The judge says the indictment failed to claim the captain acted with gross negligence, which must be proven to get a manslaughter verdict. The accident happened exactly three years ago today near an island off the coast of Santa Barbara.

It remains one of the deadliest maritime disasters in recent U.S. history. Two top lawyers in the Trump White House appearing before a grand jury investigating the January 6th attack on Capitol Hill. Deputy White House Counsel Patrick Philbin spent about two hours at a federal courthouse this afternoon. His boss, Pat Cipollone, was at the courthouse this morning. In Argentina's capital, thousands rallying in support of Vice President Cristina Fernandez after she survived an assassination attempt. An attacker tried to fire his gun inches from her face, but the weapon apparently jammed. Law enforcement is investigating whether the gunman acted alone or was working with others.

On the news tonight, climate and clean energy jobs, and plenty of them. They're in all types of work work from installing solar panels to accounting. We will talk to recruiters and others about the opportunities. That's tonight, 7 p.m. Eastern. Scott. All right. Appreciate it, Seema. Thank you. That's Seema Modi. Tech stocks getting whacked again today. The Nasdaq now posting its sixth straight decline day. That's the longest streak since 2019. Hasn't had a gain since Jay Powell's Jackson Hole speech last week. Our next guest, though, says there are still pockets of tech that are good places to invest. Joining me at Post 9 is Mark Lehman. He's CEO of JMP Securities. Welcome. It's good to have you back here at the Stock Exchange. This is an area of

big concern these days. You're not concerned? Well, I'm concerned, but there's also opportunity. And I think we've seen times certainly this year and in past years where we forget that tech is the driving force of a lot of the growth of our economy. And there's opportunities to buy great growth stocks at discount prices. I think we're getting close to one. What if they get more discounted? Well, they probably will. I mean, Fridays at the end of the summer are tough times to make big, big bellwether comments. But it was a worrisome kind of a, as you know, kind of an almost thousand point reversal today. And that's not a great time to go into Labor Day and start thinking about a big upside. But I do think we had a whiff of that earlier in the early part of August and after our June lows. And I

think we're going to get to see more of that as we get a better sense of inflation. You want to give me your view on the importance and holding a big event next week in your backyard out in San Francisco, Apple, of course. It's at 155, just below 156. Some suggest it's the key to the whole market right now, given how fragile things were. Do you have an opinion on that? I think that's right. I mean, it is the bellwether for our economy, frankly. It's bellwether for our market. These events generally are not the kind of crescendo moment where you say, oh, my God, there's a new product because they're too big to say that. But as they get deeper and deeper into different parts of our economy and the iPhone itself rules most everything that's in our life, whether it's entertainment or work or more over health care over time. Apple is that bellwether.

And I think watch what they're doing. Right. They're taking some of their production out of China, moving it to India and Vietnam and other economies. They're way ahead of some of the other tech companies. I think it'll be a great event. But I do not expect this to be kind of a bellwether product cycle for them right now. There are some who suggest that a lot of these mega caps right now are too expensive relative to the market. And they highlight Apple's at 23 times relative to the 18 times that the S&P says, which some, as you know, suggest is overpriced in its own right. Do you agree with that idea or not?

It's a relevant concern, but I think the durability of the earnings of Apple are second to none. I think when you look at an Apple and you look at all of tech, frankly, is you get these pockets of opportunity when we have the volatility that we've seen over the last nine or 12 months. And I think you're going to get another example of that probably. I don't know when that's going to be. Apple's a company you want to own. And if you've got a chance to buy it on a down day, when we have these down 3% days, down 4% days, they're likely ahead. I think you absolutely want to add that to your portfolio.

You have found many down days in meta. Obviously, as I lead you there, it's a stock that you like because it's cheaper than it was. Or do you like the fundamentals to match? What's the story? You know, our analyst, Andrew Boone at J&P, does a great job on this name. It's completely washed out. You talked about Apple at kind of mid-20s earnings. This is 14 times earnings.

I think all the bad news is really easy to see. You look at some of the competitors. Snap had an awful last few weeks and that stock now single digits. TikTok actually had layoffs, which, you know, their hyper growth, what we have seen in the last few quarters has slowed down a little bit. It's completely washed out. And the specter of Mark Zuckerberg getting in front of Congress anytime soon is not going to happen. And I think that's a good backdrop for that. Enterprise software. Snowflake is an interesting name to pick right now. You know, speaking of a stock that's gotten slashed,

to say the least. To say the least. It's wildly expensive by any metric. That being said, I think it's the most well-run big software company, kind of the sub, you know, Microsoft level. It's a $60 billion company. Stock was in the $300s. It traded to $110. Had a stellar quarter last week when they reported. Again, their management team is second down. They're harnessing a $250 billion market. When stocks get weak, and Snowflake will get weak with a whole market, you want to pick up Snowflake. It reminds me of Workday. Workday, at some point, was the most overpriced tech stock in the market a decade ago. You wanted to own it. That had been proven out.

Snowflake will be the same stock. Okay. Marati Therapeutics is the last stock on our list. MRTX. Price target's 110. Your firm rates it a buy. Why do you like it? The XBI, the biotech index, is way ahead of the NASDAQ.

It got whacked way earlier, including last year. It was down about 70%.. It roared back 50 percent. They have news coming up in one of their key development pipelines with Keytruda. We think there's going to be good news there. There's been a slew of M&A and biotech, and I think they're going to be a beneficiary. Think there'll be more? I think there's going to be a lot more. You got a lot of dollars that Pfizer and others are going to use, and biotech is definitely undervalued right here. Appreciate you taking the time to come out and see us in person. That's Mark Lehman joining us today right here at Post 9, JMP Security CEO.

Up next is today's jobs report and the renewed optimism of a soft landing changed Steve Weiss' outlook for stocks. He's been pretty negative, to say the least. He's going to tell us next in Halftime Overtime. And don't miss a moment of the show by following the Closing Bell podcast on your favorite podcast app. Overtime is right back. In today's Halftime Overtime, the market's midday reversal. Stocks giving up their earlier gains after the August jobs report to post their longest weekly losing streak since June.

Halftime Steve Weiss has been positioning his portfolio for more downside. He joins us now. Weiss, it's good to see you. You don't look exactly like you're dressed like the Grim Reaper like you were yesterday. So maybe that's a plus, but you're probably still as negative as you've been, right? Yeah, I am as negative. Look, today you got a little good news, something that was very modest, which that inflation wasn't going to be as hot as it could have been in a jobs report that would have been much stronger. However, that's just not enough. And then we saw the gains collapse when the news on the Russian pipeline came out and said, that's going to drive inflation even higher.

So with the last guest, and Mark's a very smart investor, but everybody references where stocks were. It's down 50% from the high. It's down 40% from the high. But here's the reality. The reality is those were sugar highs that were born of free money for the last decade and historically low interest rates for an historically low period of time historically wider around the world than we've ever seen so the reason i'm so negative is now we're going to reverse that not just here

but globally and when you throw in what's happening with the economy in China, that I just don't see reasons for optimism at all. And I think the market resets. It never shot, overshot to the downside. So we're still, forgetting about the last 10 years where we were still above the market valuation on a PE basis, on a longer term basis, the market should trade 14 to 15 times. And we're still two or three multiple points above that. So that's why I'm negative.

The Fed has one goal in mind. And today's number, regardless of how good the bulls would like to paint it, is just not enough to deter Jay Powell from his spoken word, which is that we're going to crush it and it's going to be painful. And there's been no pain yet. It doesn't necessarily have to deter. I don't think that's necessarily the point, but it perhaps takes a more hawkish view than has already been exhibited off the table,

at least in the near term, right, or no? I don't think so, because some of the governors have come out, fed governors have come out and said, look so we need to see three months of data um and what we've seen is just one day's data we may see some more softness going forward i mean there's really nothing going on the evening next week so we could bounce off this level i think that's probably the likely scenario but it's got to be consistent because Jay Powell and he wasn't alone. The rest of the FOMC made a major mistake by saying we're going to be patient because we think inflation is transitoric. They don't want to make that same

mistake again. So everybody's product of their experiences and their near term experience was a disaster. They're not going to make it again, particularly when it's so important to so many people in the country to have a decent cost of living, which they're very far from now. I mean, you are putting your money where your mouth is. Most recently, you bought the short S&P 500 and the short Q's, and you're also short, you bought the short Q's ETF, and you're also short the Q's outright. So this losing streak that technology has been on, you think just continues?

I do. I mean, there'll be pops here and there. But you know what's interesting about today, Scott? What was interesting about today and kind of surprises that we had a major reversal in the 10-year yield. And the market has traditionally, I say traditionally over the last few months,

been pretty good at tracking what happens in the yield. But if you take a look at NASDAQ, which is down 1.3% today, and you have a 70-bit reversal on the yield in the 10-year. So that says to me the market's more nervous than we're giving it credit for. So I would have expected a down stay regardless of the of the north news.

OK, we'll talk to you soon. Thanks, Weiss. Have a good weekend. We'll see you soon. That's Steve Weiss joining us in overtime. Thank you. We're wrapping up another busy week on Wall Street. Christina Partsinello standing by with your rapid recap. Christina. Well, if you're not already on vacation, you surely felt the major stock reversal into the close. Although it was a tough way to end the week, there is one major retail winner. Of course, I'm not going to tell you the details. You have to tune in right after this short break. We're wrapping up another big week on Wall Street.

Let's get to Christina Partsinovalos with our rapid recap. Hi, Christina. Hi, Kristina. Scott, we had a lot of highs and lows today, but the positive momentum from the Friday's jobs report didn't last long once Russia's Gazprom said it would suspend reopening its pipeline to Europe, causing stocks to slump into the close. So the bulls must have already went on vacation. The Dow, S&P 500, the Nasdaq hitting three weeks of losses. And when you usually de-risk, investors tend to drop big tech, driving the Nasdaq 100 4% lower on the week. Energy is the only positive S&P 500 sector today. But if you look at it on a week-to-date basis,

down more than 3% and its first negative week in the last four. Chinese e-commerce company Pinduoduo, that was the one I teased right before the commercial break, that's the biggest Nasdaq winner, up 25% this week. The company just launched its own U.S. online shopping site, Tamu, hopefully I pronounced that correctly, to rival Amazon. Let's hope those deals come too. Whereas software makers like Okta, as well as chip names like NVIDIA and AMD were the biggest losers, all down double digits this week. And since I want to stick with chips, the SOX ETF had its longest daily losing streak since October 2020. Cue the Debbie Downer music.

Scott, have a nice weekend. All right, you as well, Christina. Thank you. That's Christina Partsanovalis. Up next, betting on Band-Aids. One money manager making the bull case for this health care stock. We'll break it down in our two minute drill and coming up at six o'clock Eastern time. Do not miss a CNBC special back to business. Overtime will be right back. We're back in overtime. It's time for a two minute drill now.

Joining me now, Emily Rowland, chief or co-chief investment strategist, John Hancock. Welcome. It's good to see you here on this Friday in overtime. It's time for our two minute drill now. Joining me now, Emily Rowland, chief or co-chief investment strategist, John Hancock. Welcome. It's good to see you here on this Friday in overtime. So we thought today was going to be pretty good. Then we had a rollover midday on those headlines out of Europe. How does it make things set up now for next week, do you think? Yeah, big reversal today. I think this morning there was a lot of optimism that the jobs report really checked all the boxes for the Fed. Job growth remaining robust, but wage growth coming off the boil, the participation rate ticking higher. Goldilocks was the word of the day this morning. And then, of course, we get these concerns around European energy with the delay of the major pipeline over there causing global growth concerns. And then we saw,

you know, this big backup in the 10-year treasury yield that we've been seeing really over the past month reverse course. And we think that that's about right. When you see inflationary pressure starting to recede, and we've seen a lot of evidence of that over the course of the week, you know, that should bring bond yields lower. And ultimately, those inflation fears, Scott, will turn into growth fears as global growth clearly is decelerating, likely heading into a recession at the end of this year and into next year. So we think embracing bonds right now actually does make a lot of sense. That said, you do have some stock picks and one of them, I mean, at least one of them is a little curious to me in the environment in which you just paint. And that's Google. If you think we're going to go into recession and a broad economic slowdown, wouldn't this suffer?

Yeah, in a recessionary environment, you really want to notch up on quality. So we're talking about companies with great balance sheets, ability to maintain their margins, grow organically, lots of cash on their balance sheets, and we want to own them at a reasonable price. We don't want to own unprofitable tech companies, growth at any price type companies that need to tap the capital markets in order to grow. So right now, Google has all those things. Great balance sheets, good free cash flow, trading at about 19 times forward earnings versus a five-year average of around 25 times forward earnings. So really sort of checking all the boxes for us on the quality front. Yeah, healthcare is very popular right now. You like J&J off that list.

Yeah, when we think about this late cycle environment where economic growth is cooling, the Fed's raising rates and earnings growth is starting to see downward revisions here, we really want to own companies that have not only that quality element, which J&J has, but also some defensiveness to it. So we're seeing a big change in consumer behavior just starting to play out here as consumers are transitioning away from the things that they want, those discretionary items and the things that they need, given that the marginal dollar is now going towards higher commodity and food prices and gas prices. So we think more defensive companies like J&J will benefit from that change in consumer behavior. People are still going to need to buy those Band-Aids, as you mentioned in the previous segment, as well as, you know, engaging in those

in those pharma, the pharma part of the company as well. Yeah. Yeah. Get nicked up by this market. Going to need many band-aids. Emily, thanks. We'll see you soon. Enjoy the weekend. You too. Up next is Santoli's last word. We're back in overtime. Let's get the results now of our Twitter question. We asked, should the Fed hike 50 or 75 basis points at its next meeting? 64%. Wow, two-thirds. Say 75. That's interesting. Let's get to Mike Santoli for his last word. Do you think that's interesting? I do. I think people want to front load this.

I think the market actually wants to look beyond that point. I'm not sure 50 or 75 in September makes a tremendous amount of difference if we're talking about the sum total being the same by the start of next year. What I do find interesting is the two year note yield today was down and is actually at about the same level it was before Jay Powell's speech last Friday when he was mega hawkish and told you to expect pain. Now, that may just be a safety bid today, but it tells you that not that much about the Fed trajectory changed. I think one of the tough things about this market, it keeps getting tested. I mean,

it doesn't get free of these lows at 3,900 on the S&P. Obviously, everyone looking at question going into next week is, will it respond to these oversold conditions? Because they are, again, proliferating at this point. The other part of it, September, everyone knows it's bad. It's undisprovable that that's bad. Recession is coming as a bear case that you also can't disprove in advance. People are basically able to say, yeah, pretty good jobs numbered there. But ISM new orders don't look great. The strong dollars attacks on global growth. So I do think we're in this point where it's tough to have fundamental conviction, even if the stock market itself has has priced in a fair bet. Do you think the Nord Stream news today is insignificant in terms of how we should think about the near term direction of this stock market? Because you didn't mention it. Yeah, I don't think it's insignificant. I think it's one

of those like rational looming risks. But it's so widely watched. It's such a thing that we kind of anticipated. I don't know that, you know, Europe kind of descending into recession, which is seeming like a sure thing, is a make or break for the U.S. But it's, you know, it's another brick in the wall to worry, which is pretty tall. We do have a lot this month. And, you know, some things that aren't spoken about very much in terms of what's going to bring the buyers in. You know, the buyback window closes. Powell earnings revision. You might have to get some reassurance from companies, you know, during the conference season or something like that. Or just the market has to get stretched enough to the downside. You have yourself a good long weekend. All of you as well.

I'll see you on the other side of that. Fast money's now.