Closing Bell - Closing Bell Overtime: State of the Consumer 05/26/22

Episode Date: May 26, 2022

How much is inflation eating into retail profits? Stephanie Link from Hightower reacts to earnings reports from Ulta, Gap, and Costco. Plus, value investor Scott Black from Delphi Management says stocks might be “slightly overvalued.” And, Michael Santoli “Rates the Rally” in his “Last Word.”

All right, Mel, thanks so much. Welcome, everybody, to Overtime. I'm Scott Watney. You just heard the bells. We're just getting started right here. In fact, any minute now, we will get earnings from Costco, what is now a critical read on the state of the consumer and just how much inflation is eating into retail profits. We begin, though, with our talk of the tape. The tech bounces, the Nasdaq surges, and some say the signs of a near-term bottom might be in place. Let's ask Stephanie Link. She's been cutting back her exposure to growth lately. She is Hightower's chief investment strategist, a member, of course, of the Halftime Investment Committee as well.

Steph, I'm looking. It's nice to see you, as always. A better than 300-point jump in the NASDAQ. Are signs now, as we ask in place, that this bounce can continue, at least that we have a near-term bottom? Well, yeah. I mean, the sector is down 21 percent year to date, and some of the stocks, Scott, are down 30, 40, 50 percent. So could we see a bounce? Absolutely. Could it be kind of a lengthy one? Maybe. But I think you have to step back after the bounce and see what your view is on the macro. Do you think the

Fed is going to be aggressive? And do you think inflation is going to stay high? If that's the case, you don't want to own long duration assets. You don't want to own growth. But if you think the opposite is going to happen, that they're going to take their foot off the pedal and inflation is going to come down substantially, well, then, yeah, then you can. So I'm not in that camp that they're going to be looser, if if you will but that was the story today and that was what was going around but you know like even though I'm underweight tech Scott I mean I've been adding to Facebook I've been adding to Apple Accenture is a new name IBM has been it's one of my biggest positions and so I have exposure but I

just don't have 28% of my portfolio which which is what the S&P 500 weighting is. I know that you do not own NVIDIA, but I noted this earlier today. If you're looking for critical signs, perhaps, that you do have the ability to have a near-term bottom, I cite what Lee Cooperman, when he took us to school, when he was with us a couple of weeks ago on sort of the Cooperman School of Investing, when you're looking for signs of a bottom, NVIDIA seems to me to be like case in point. You report the street's not enamored with it. It's somewhat of a disappointment. The stock goes down, then it rips up.

And not only that, it closes up on the day. That's got to be a key. I mean, it was it opened at 160, Steph. It went down to 160.22, and it finishes north of 178. Yeah, no, I mean, it was a really impressive action. But I have to tell you, I listened to the call, and I don't own it, but I listened to the call. It was great. I mean, it was really good.

I mean, 83% data center growth, 31% gaming. We know auto is tough because of supply chains, but that was down less than expected. Margins grew 10% sequentially. So it was a good report. The guidance you can explain away. My only problem with owning NVIDIA is at 29 times earnings, it's rich for me. I have owned semiconductors. I got rid of all of them in that February-March time frame because I am worried about as the supply chain gets fixed, we're going to see double and triple ordering. I mean, my goodness, if Walmart and Target can double and triple order, so can the semiconductor space. I mean, it's just what the doctor ordered.

I'm looking at Apple, which you just mentioned, as another one of these stocks that you just have to keep a continuous eye on. Apple, again, low today, 137. Where does it close? North of 143. The importance of these mega caps, Steph, right? They led you up. You enjoyed the good times when they were all going up because of the heavy weighting that they had. And then you feel the misery when they go down because they drag the market down.

They have an outsized portion of all of that. So what is the true importance right now of stocks like Apple, like NVIDIA, the Facebook you talk about, Microsoft, Amazon and the others? Well, I mean, Apple is 7 percent of my of the weighting in my benchmark. So and I'm overweight that. So I have a lot of exposure to Apple. And I think they are very important. The big the big five, the big six are very important. And it's encouraging to see them rally. I have to tell you, Scott, you know I sold Alphabet, right, back in January. It's down 27 percent since then. I'm looking at that one maybe to buy again, maybe closer to the $2,000 level if it gets there,

because that stock has gotten awfully cheap and a lot of bad news is priced in. But I think these are all very important for the overall market, for sure. You mentioned that you are definitely more focused towards value, let's say, in cyclicals rather than some of the growth names, right, and some names in tech. And you cite the fact that you don't think the Fed is going to make a pivot to be any less aggressive than they have put their message forth. I want to ask you about that, though, and their message. Their message seems to be getting across, right?

The market seems to be doing a lot of the Fed's work for it. You look at some of the economic data that's come out pending home sales. This is the high season for home sales, right? It's the spring. They're ugly. What if demand is coming down at a faster pace than all of us thought? And what if that helps the Fed be less aggressive than we once thought? And we all know what's coming in June and July, barring any surprises, of course.

Maybe there is a story to be told there. It's just too early to be able to really dictate a narrative. It's entirely possible, Scott. It's absolutely entirely possible. And also, I would argue, all of this retail inventory that we have been seeing from all of these companies, they're going to be very promotional. That's going to help on the inflation side as well. But then I look at food prices. I look at oil.

I look at copper. I mean, I think that these are really important metrics to look at when you include it in inflation. I don't buy that core CPI or PPI because everybody does eat and we have to fill up our gas tanks regularly. So those are really high. And I don't know if they're going to come down. And I certainly don't think the Fed raising rates is going to do it. So you're right. It would have to come from the demand side of the equation. I just don't see that happening either, though. Not materially. It's going to stay elevated. And by the way, we get the PCE deflator tomorrow at 830. That's a big, big number.

That's what the Fed looks at. Given the fact that you're approaching the end of earnings season, by the way, Costco is imminent and we're looking out for the Costco numbers and I'm going to get all of that for you. And we're going to go through the report and see what the stock move is. So you're towards the end of earnings. You don't really you know what the Fed's going to do, which Steph underscores the importance of every single inflation report that comes down the pike. I mean, that is going to be so closely watched. And I want you to look ahead for me, speaking of inflation to Costco, what might be a risk here after what Walmart and Target

had to say, particularly about the impacts of inflation. Clearly, it's a good read on the consumer because of the subscription business, the annuity business that they have as well. What are your expectations here on what is now a critically important report? Yeah, it is important, but they do release monthly sales. So I think the comp is going to be fine. Nine point two percent. That's versus fifteen point one percent year over year. You mentioned membership. That's seventy one percent of their total revenue. So it's recurring for sure. And they also have limited assortment, a limited assortment model, which makes them more flexible. Problem is, Scott, the stock is still darn expensive.

I'm looking at it. You know I've been talking about it. I want to buy it, but it's just too expensive here at these levels. Hey, but you bought more Target yesterday, though. I did. I did because it's a heck of a lot cheaper. It's trading at 13.8 times. The stock is down 30%.

It's yielding 2.2%. I mean, look, I know the quarter was terrible, but it was gross margin terrible, right? The demand side of the equation was actually very strong. Same store sales were up 3.3 percent. A two-year stack of 26 percent. By the way, Walmart's two-year stack was nine, so they're taking market share there. And traffic grew 4 percent. So, and these also, these guys are also catered to the higher end consumer income consumer. Right. So there it's a little bit different of an animal. But let's say I'm wrong. Maybe let's just say if the consumer rolls over and we get trade down, a third of their sales is private label. So you can play it that way, too. All right. We, again, are keeping our eyes out for those Costco numbers to cross.

We've got Gap reporting today, too. So we're all over both of those. Let's for now expand the conversation and bring in Dan Suzuki of Richard Bernstein Advisors. Keith Lerner from Truist. It's great to have everybody with us. You're right here sitting next to me. Dan, I go I go to you first. What do you make of what's happening in the market? Is it something to believe in, at least for the near term? You know, you can never count these sort of rallies out. I mean, we got so oversold. I mean, I'm not a technical analyst, but those technical analysts are telling you that we're setting up for a rally. The thing is, I would be a seller of the rally because at the end of the day, the fundamentals that move markets are still deteriorating.

Profit growth is still slowing and probably will be six months from now. Liqu growth is still slowing and probably will be six months from now. Liquidity is still tightening and probably will be six months from now. So given that backdrop, that's not an environment where you want to take more risk. I'd be a seller of that type of round. Okay, so Keith, I'm wondering what you think, you know, given what Keith just had to say. Well, hey, Scott, good to be with you. You know, our point of view is this. We have been upgrading the quality of our portfolios. We downgraded equities in April.

But last Friday, basically what we were telling our clients is we are not sellers at these levels because at least if you look at historical recessions, you were pricing in about a 65, 70 percent chance of recession. And while we certainly acknowledge the risk is growing, we think that's too much. And then as we talk about the oversold markets, we had only about 15 percent of stocks above their 50-day moving average last week. That's telling you that people were selling things indiscriminately. And I actually think this short-term rally has a bit more to go because there was such persistency in the negativity. And I think this may push a little bit higher. There's been a lot of false moves here the last month. We've had four or five 2% up days.

But I actually think there's a little bit more upside, especially as you think about the revaluation we've seen over the last 90 days, which has been one of the most significant revaluations we've seen over the last 15 years or so. Yes. So speaking of that, Dan, I mean, stocks have come down a lot. You want to call it a revaluation. Let's call it that. Why haven't stocks fully adjusted to what the perceived economic environment is going to be? Well, first of all, I'd say it's, you know, you say that the stocks have sold off a lot, but if you look at it, it's really been concentrated in the long duration growth areas

of the market. If you take the three sectors that are heavily geared toward tech, they're down like 25% this year. If you take the rest of the market, you know, it's down like 2 percent this year, really. So really, what's the story? Is it the market? Is it stocks are getting demolished or is it just parts of the market? And I think that's a reflection of the fact that we've been in a bubble. Liquidity is tightening. That bubble is deflating.

And I want to point out a stock that's moving big time right now. And, Steph, I'm going to come to you because it's in your wheelhouse, too. It's Ulta Beauty. That stock reporting's moving big time right now. And, Steph, I'm going to come to you because it's in your wheelhouse, too. It's Ulta Beauty. That stock reporting earnings, that company reporting earnings just now, I see a big jump on my screen. Let's throw it up in the OT, gang, and see what we got here. I mean, it was up 7% into the print. Looks to me the bid ask on this thing is north of 400. So there it is, near 6.5%, 7%.

Steph, you want to give me something on that? Yeah, I mean, like, they just raised their comp guidance, too. I didn't think they were going to raise their comp guidance. But we knew from Target, beauty was up double digits, right? So we knew that, not only that, but Nielsen data came out and SafeGraph data came out and talked about how traffic has actually improved in the month of April for the category, for beauty. And so clearly they're winning, they're gaining share. And this is also a reopened name, Scott, right? I mean, now that they're open, people want to go,

they want to test out the makeup and the hair and everything else. So really a great quarter, not very expensive, 18 times. So I really like this name a lot. Yeah, and it ran up a lot, as I said, in the regular session before we got to overtime. Courtney Reagan has more for us, Court. Yeah, Scott, let's take a look at those ALTA numbers. I mean, really, earnings per share just blowing away. Estimates at $6.30 adjusted. The street was only looking for $4.46, and revenues also much stronger than expected at 2.346 compared to 2.122. Ulta is also upping its full year earnings, its revenue outlook above estimates, and the comp sales up

18%. I mean, not a lot of commentary in the release other than the CEO just more or less proud of the results. So really interesting to see what drove the quarter here. But from what we've heard from other makeup companies, it does appear that beauty is on the up and up as we're all returning to life and we're dressing up more and going back to work like we've heard from some of the other retailers. You got to look your best from head to toe, Scott. Yeah, you do look good, feel good, feel good, play good. That's what they say. So you got to court. I appreciate it. We'll see in a few. That's Courtney Reagan there. Maybe the consumers hanging in there better than people want to give them credit for. You got to have the right stuff in your store.

You can't have too much of it, right? And the inventory is overflowing to the roof in the storeroom. But if you have the right stuff that people want and it's priced appropriately, you can do well. I think that's absolutely right. I mean, there's a big debate happening right now about the state of the U.S. consumer and their balance sheets. The reality is the low-end consumer.S. consumer and their balance sheets. The reality is the low end consumer, they draw down their excess savings. They've used up their credit card debt. They're probably at risk of their on their spending trends.

The high end is getting a little bit jittery about what's happening in the stock market, concerns about home prices. But the rest of the consumer, the middle, is still doing just fine, has a lot of spending power. I think if you're in the less discretionary items, they're going to continue to spend. There's still pricing power. Keith, I mean, the high end, though, seems to be hanging in. I mean, you look at Williams-Sonoma, Nordstrom. If you want to cite some of the luxury retailers that appear to be doing quite well, it's, you know, luxury retailer hanging in, mid hanging in. Maybe the lower end is suffering a little bit more for obvious reasons. Inflation is a horrible thing, especially on the lower end, trying to pay gas prices and everything else that we're all dealing with.

How do you see that issue, though? No, I agree. It's bifurcated. If you look at the low-end consumer, they have already used up the stimulus. They're getting hit by the triple whammy of gas prices, food prices, higher housing prices. But at the same time, if you look above that, we still have a lot of excess savings over $2 trillion. The stock market decline hurts the higher end somewhat. But overall, I think we're doing fine. And I think the way I think about the stock market, Scott, is last week we were pricing in 70%.

If we think the odds of recession are maybe increased, but maybe it's 30% or 35. That alone could have the market revalue some. And then you look at the consumer discretionary sector as a whole. What's interesting about this, on a one, three and six month basis, it has underperformed the S&P by the most we've seen over the last 30 years, more than after 9-11, more than during the global financial crisis. So I think some of that news is discounted. All we're seeing is that these valuations have become depressed, where a little bit of good news goes a long way. I will say after a rebound, we still think we're in this big, choppy range. But I think at least short term, I think we have a bit more to go in this rally. All right. Back to Courtney Reagan. The gap is out. What do we see?

Yes, Scott. So we have the gap out here. This is a disappointing result for Gap Inc. And this is even after the company warned on revenues. You might remember a couple of weeks ago, it's a loss of 44 cents. It's unclear if that is comparable. Revenue is better than expected, slightly 3.477 billion compared to 3.457. The outlook, though, really dismal. Gap is guiding for an adjusted earnings of 30 cents to 60 cents for the full year. Consensus was for $1.34. Comparable sales fell 14%. The street was estimating a drop of more than 12%. Old Navy, remember that's the key drag in the warning on revenues and about half the company's profit, slightly worse than expected to for comps. Gap brand down much worse, 11% versus the estimates of down about 2%. Banana Republic comps, though, huge surprise to the upside, up 27%. The street had estimated

3.5% growth there on sort of that refresh. And I did speak briefly with Gap Inc. CEO Sonia Singhal, and she told me, look, the low- income consumer is starting to be really affected by inflation and the macro situation pressures. And certainly we have that consumer in Old Navy in particular. She went on to say that changing shopper preferences, quote, really shifted from last year where we won big with active and fleece kids and baby, which is our sweet spot for Old Navy. But this shift to use occasion, high occasion, weddings and back to work is really what was troublesome for the first quarter for them. It put real pressure on those categories. She said, quote, we are dealing with a really volatile consumer signals right now, Scott. So some more to work through here on this report. But initial reaction, not so hot for Gap Inc.

But as you said, I mean, I'm thinking of, right, dressing up versus casual. Dana Telsey with Melissa right before we started our show talking about how the teen hasn't done well. I'm thinking of Abercrombie, which was bad. I guess we need to find out where the inventories are, but this is going to be one to talk about for certain court. I'll talk to you again soon. I know there are more earnings coming up that you have as well. We'll see again in just a minute. I'll be right back. Yeah, I know you will. Before I let you guys go, and this is sort of a right turn, but I wanted to ask you about, and I don't know how closely you follow Bitcoin. I did notice today, and I thought it was quite peculiar that the market rips higher. We're in the midst of this rally and Bitcoin was lower. And I'm wondering if that has now decoupled itself from the Nasdaq at minimum and what that might say about the environment for risk sentiment and other things,

or if it's it seems to be a bad thing for maybe Bitcoin if it's decoupled itself that way. I don't know. What do you think? Yeah, I think, listen, I mean, one day it's not going to make a bad thing for maybe Bitcoin if it's decoupled itself that way. I don't know. What do you think? Yeah, I think, listen, I mean, one day it's not going to make a trend, right? So I wouldn't read too much into that. My expectation is that they're going to recouple. You'll see those trends continue. They're very tied to the same story. And it's one of the reasons I don't think you're seeing the capitulation that you need to get a true washout and a bottoming of the tech stocks and of the Bitcoin currencies, other cryptocurrencies, because the fact is all these areas of the market that have been in a bubble are still attracting capital.

I mean, you get huge funds created to invest in these things. The headline funds that are the poster childs for these investments are still attracting inflows. And until that changes, it's hard to see that you're going to get a true washout in the bottom here. We're going through the Costco report as we speak as well. And we'll have that for you in just a second. To me, on the surface, it looks like a top and bottom beat. But we'll have to get a look inside the report.

We'll see what the guidance is and the stock looks like it's trying to figure out, or investors are at least trying to figure out exactly what's going on. Headline looks pretty good, but there's often a lot more than that. Steph, give me a thought here as we wait to get this report here. As I said, at least to me at this point, it looks like a top and bottom beat for Costco, but there's a lot more to the story, I'm sure. There's a lot more to the story. But as I said, we kind of know the comp.

I haven't seen the comp number, but they release those numbers monthly. So that shouldn't be a surprise. You know, it was up today nicely. So maybe it's just giving back a little bit of that now. But this is a great, great story. And as I said before, I mean, it trades at 32 times earnings. If it were to pull back more, you absolutely should be buying this thing because this is just a definition of a compounder, right? And they have that

recurring revenue. It's just that it's expensive. So I'd like to get it at a 25 multiple if I can. All right. Court, what do you got? Yeah. So for Costco, I know you guys were just talking about it here. We've got earnings of $3.04. We are not clear if this is comparable to analysts' estimates. Revenues, though, did beat estimates $52.569 billion compared to $51.707. Comp sales, I know that Steph was talking about how we do get them monthly, so they're not much of a surprise. For the 12 weeks full company, 15% growth there. U.S. alone, even stronger, higher by almost 17%. The adjusted number, however, when you're adjusting for things like FX and gasoline, U.S. higher by almost 11%, total company higher by about 11% there. And they

don't really give us a whole lot more information in the release typically, Scott. So we're going to have to listen into the call for more details. But of course, we know we're in this inflationary environment and discounters, warehouse clubs do often get a little pickup from shoppers that are interested in buying in bulk, saving money. Of course, Costco sells gasoline. Gasoline is expensive. If you remember, it's less expensive. So that could have also driven some footsteps. I'm curious to know some of those details. Yeah. All right. And we'll we'll hear from you again, I'm sure. And there may be, as Courtney was alluding to at the top, whether the 304 versus the estimate of 303 is comparable or not. In fact, it may not be. And that also may be what the street is is trying to figure out as it decides which direction it wants to push this stock.

Keith, give me a comment on the consumer in terms of discretionary names. You like them or not? Yeah, well, I mean, we are we've been neutral, so maybe strongly neutral stuff. I think what you're even hearing today is there's just so much divergence. It's not like you're buying the whole sector. I would say, if we look a little bit longer, I mean, we prefer still the energy sector. We've been overweight since February of 2021. So energy prices are staying high. That will actually impact or negatively impact the consumer still.

We still like materials. And as we have this bounce that we expect, if that happens, we would actually continue to rotate in some of these more defensive areas like health care and staples. We think it's going to be a pretty choppy environment on a short term perspective. For someone who's more of a trader, I do think some of these areas in general are going to have a bounce. Think about this morning and we're not picking individual stocks, but Macy's was trading at around four or five times P.E. So a lot of these stocks have been marked down. I think they're ripe for a further move up. But again, I think as we look a little bit further, we would still be a little bit more defensively inclined for someone with like a six to 12 month outlook. All right. I hear you. I appreciate everybody's time today. Steph,

Dan, Keith, we'll see all of you again soon. Let's get to our Twitter question of the day. Now, we want to know, given the big bounce in Zoom and Teladoc today, which stay-at-home stock will rebound the most this year? Will it be Zoom, Teladoc, Peloton, or Roku? You can head to at CNBC Overtime on Twitter, cast your vote. We'll bring you those results at the end of our show. Coming up next, star value investor Scott Black will join us with some under-the-radar picks for your portfolio. We're back in just two minutes in the OT. Stock staging a comeback today and now on track to break their longest weekly losing streak in decades. And while growth stocks are

leading the comeback, our next guest is always on the hunt for value name, Scott Black, the founder and president of Delphi Management. It's always good to see you. Nice to have you back. Well, thank you for inviting me, Scott. So I want to ask you first and foremost about the environment before we get to some stock picks, because there is a suggestion that as if growth has bottomed, that you're going to start to have money come out of value sectors and go back into growth. And I'm wondering what you think about that. I don't try to make a determination what's going to do better. I mean, since I started Delphi in

1980, we've been trying to buy growth companies at value prices. And so we're really agnostic about whether growth versus value. Put it this way, though, the market, even with today's rally, still slightly expensive. It's about 18.1 times this year's expected S&P earnings. And then if you look at small cap, like the Russell 2000, that's almost 20 times earnings and the Nasdaq's about 22 multiple. While we've had major pullbacks, stocks are still slightly on the expensive side. What's an appropriate multiple then in your mind? Well, I'm not a big believer in the Federal Reserve. I know the market rallied on the Fed notes today. They were going to have a 50 basis point hike in June and July.

I think it's going to take much more than 100 basis points to bring out inflation. I was around in 1981 when Mr. Volcker took over and Ronald Reagan was president. Of course, interest rates lifted into double digits. So I don't think 100 basis points does the trick in taking inflation down from the 8 plus percent level to 2 or 2.5 percent. So, you know, a historic norm on the P.E. is around 16 times. And the fact that interest rates should still back up, I know the 10-year went out today at 2.75 percent, but I could foresee something in the 3.5 to 4 percent level on the 10-year went out today at 2.75%. But I could foresee something in the 3.5% to 4% level on the 10-year before the year is out. And that would mean that multiples would contract. So if the historic norm is somewhere around a 16 PE, we're slightly overvalued here.

And one day doesn't make a bull market. I would caution your viewers today not to chase the fastball up in the strike zone. Yeah, no, I hear you. You pay a steep price if you do that, because the next one comes up and in, and that's not fun. Equinor, that's one of your picks. E-Q-N-R. Frankly, I haven't heard about it. Tell me about it. Sure, but it's the old Stoutil. It's owned two-thirds by the government. It's the old North Kedro. And basically, you know, they have the whole North Sea, the shelf in Norway and the UK. They're big in the Gulf of Mexico. It's a $37 stock, 3.23 billion shares for about $120 billion market capital with about a 2.2% yield and we think this year because prices are

you know going through the roof for the brent and also for gas their gas prices are over 30 dollars per mcf whereas you know they're close to nine dollars in the united states i think they make the dollar about six dollars and 80 cents that's a 5.4 pe and another um metric people look at was called discretionary cash flow. And if you add back the depreciation and amortization, the discretionary cash flow should be around $9.50 a share this year. So that puts it at four times discretionary cash flow, which is really on the low end. If you look at other global energy players like a Chevron or an Exxon, they're much more expensive.

The company generates over $20 billion a year in free cash. It has a AA S&P credit rating. I mean, it's bulletproof. And it's a very good company. And you don't have much exposure. I looked up what the exposure was in Russia. It's about 1.5% of the energy. Now, the other thing is, because of the restrictions on gas prom,

this company now, which was number two in total gas delivery in Europe, now becomes number one. So they're in a really good position as we put restrictions on gas prom in Russia. Let me ask you finally, before I let you go, and I want to revisit a pick because I think it's a good time to do that. Three weeks ago or so, you picked KLA Tencor. I ask you about that one specifically because of the conversation that's being had around semiconductors right now. And I'm curious as to whether you still like the stock here and how you see that space right now. Sure. Because even with all the supply chain disruptions, people in the industry, LAM, KLA, and AMAT, they've all said we're going to see north of $90 billion worth of way to spend on the upfront portion. And it could go as high as $100 billion. So they're still in the driver's

seat. There's plenty of demand. It's coming from people like Samsung, Intel, Taiwan semis. They try to go to 0.03 and 0.04 nanometers. I mean, across the board, there's a big demand for semiconductor capital equipment. I think KLA is an excellent company. It's well run. High return on equity, bulletproof balance sheet. Scott Black, I appreciate your time as always. Don't swing it to high one.

Stay away from that high fastball. We'll talk to you again soon. That's what Ted Williams used to say, and he was pretty good hitter. He was pretty good. All right. Time for a CNBC News Update with Contessa Brewer. Hi, Contessa. Hi there, Scott.

And here's your news update right now. Police in Texas are explaining how an 18-year-old shooter got into an elementary school in Uvalde where he shot and killed 19 students and two teachers. They say the door was unlocked and he walked right in. It was reported that a school district police officer confronted the suspect that was making entry. Not accurate. He walked in unrestricted initially. So from the grandmother's house to the bar ditch to the school, into the school, he was not confronted by anybody.

Within the last hour, the White House confirmed the president and first lady will travel to Texas. The plan is for the Bidens to head to Uvalde Sunday to grieve with the community. Mitch McConnell is signaling he's open to new legislation resulting from mass shootings. He told CNN he has encouraged his fellow Republican Senator John Cornyn of Texas to talk to Democrats about what McConnell calls an outcome directly related to the problem. That's an indication he may still be opposed to greater restrictions on guns. At Oxford High School in Michigan, where four students were killed last November, a planned demonstration to support changes to gun laws and in solidarity

with the people of Uvalde. Tonight on the news, the battle to raise dollars for campaign contributions between the NRA and groups supporting gun control. That's right after Brian Sullivan's inflation special, 7 p.m. Eastern on CNBC. Scott, I'll send it back to you. All right. I appreciate it. Thank you. Contestant Brewer up next. We're trying to find big market opportunities. We'll talk to one market strategist, find out where he's putting his money to work amid all of the volatility. We'll do that just ahead in two minutes.

All right, we're back. Dell earnings are out. Stock looks like a big winner in the OT, too, Frank Holland. Absolutely. Right now, shares of Dell up 6 percent right now after reporting record first quarter revenue and a beat on revenue. An EPS of $1.84 per share, not comparable right now. The company's client services group, what it's best known for, we're talking about PCs, notebooks, monitors, et cetera, also having record first quarter revenue. The company's saying it was really driven by commercial PCs as part of that big hybrid work and back to the office movement. The COO making a reference that appears to be a veiled reference to some supply chain issues some other tech companies are having, saying we're positioned to pursue growth wherever it materializes in the I.T. market. Given the predictability, durability and flexibility of our business.

Again, shares of Dell up six percent. Beat on revenue. EPS of a dollar for a share. Not comparable. Back over to you. All right. Good stuff, Frank. Thank you, Frank. Colin stocks on track to break their longest weekly losing streak in two decades. So does that mean that the worst is over? At least for now? Let's ask Troy Gajewski. He is FF's investments chief market strategist. Welcome to Overtime. It's good to see you again. It's been a while. Yeah, it's been too long. Great to be back on. Yeah. Where do you come down on whether some kind of bottom is in, even if it's just for the near

term? Yeah, we think there's a good chance for some more strength here. This is sort of a classic bear market rally or bounce off the bottom. You know, as inflation expectations have rolled over recently and yields have been capped and have come lower, you know, one of the most amazing things about the declines we've had is how consistent they've been. And so we are poised for a counter trend rally here for quite some time. It could be as long as two to three weeks. After that, unfortunately, as you know, Scott, the Fed's balance sheet reduction is soon behind it. And then things are going to get far, far choppier and sloppier once again, unfortunately. If I mean, if stocks I mean, I expect things to be choppy. Obviously, I'm not expecting a straight line up on down days.

Would you be buyer a buyer then of dips? Well, I think you could be in very certain and select cases, things like semiconductor capital equipment or names like Caterpillar, areas like copper, copper mining. But you want to be very careful because you have to understand that we're due for more multiple compression. And if ultimately the Fed does drain the balance sheet as aggressively as they're stating, it's almost a certainty that economic growth will slow further and we'll flirt with a recession. So there's no reason to be completely panic driven here. But you have to realize any dip buying should be done very judiciously. And in general, buying dips in bear markets can turn out very poorly.

Yeah, well, because it's been a sell the rip kind of atmosphere and plenty of people are suggesting it's going to remain that way. Talking about the stock picks and some of the sectors that you just mentioned, we just spoke with Scott Black, who likes KLA Tencor. You would prefer it through AMAT. Yeah, either AMAT or ASML. I mean, they're both dominant franchises. We're all about solid free cash flow, reasonably free cash flow generation potential. And if you think of the backlog for semiconductor capital equipment, it's really enormous demand. So whether we have an inflationary outcome, whether we have, you know, the Fed can actually thread the needle here, or whether the

economy rolls over, semiconductor capital equipment demand is not in question and then on top of that you have very reasonable multiples right now i mean applied materials basically trades at a value multiple for a stock with tremendous growth potential those are much easier to find now than they were say six to 12 weeks ago and again you have to understand that there more than likely will be a bit more multiple compression over the next six to nine months but that's something that has very compelling free cash flow and earnings growth in an environment where, you know, a lot of the squishier tech stuff, you know, it's consumer facing, it's been taken to the woodshed, and you can have a lot more confidence in the sustainability

of the demand for semiconductor capital equipment than you can for a lot of other areas of tech. Let me just ask you about one more, because I don't know, I feel like it flies in the face of what you're thinking is going to happen to the economy later in the year, and that's Caterpillar. Why would I want to buy Caterpillar now if you think that the Fed is going to be aggressive? You're going to have the balance sheet roll off. You're going to have a further hit to the economy. Why this one then? Yeah, well, so Caterpillar right now is pricing in a lot of pain. You know, you're only at 15 times forward earnings. You have tremendous growth in their core franchises. You have the extra kicker from an increased mining capex, increased agricultural capex. And they're also moving to automation of a lot of their

tractor platforms, which is the big growth area. So, again, if you're thinking of areas that you can buy cyclicals cheaply, in the event that we clearly avoid recession and stay in a more inflationary environment, Caterpillar could be a clear winner. So in any portfolio, you should be looking at multiple economic and market scenarios, Caterpillar in particular will do much better in a thread the needle or a sustained inflationary environment than clearly any stock will do in a recessionary environment. All right, we'll talk to you soon. Troy, thank you. That's Troy Gajewski joining us there here in Overtime.

Up next, we're tracking all of the top movers in Overtime. Christina Partsinello is doing that for us today. Christina. Well, we've got how an increase in cybersecurity threats is helping one company's bottom line, another retailer citing inflation concerns, and a semiconductor firm that beat estimates thanks to data centers. I'll have all of those stock movers after this short break. We've been tracking the biggest movers in the OT. A quick look at some of the names we already brought you this hour. Christina Partsenevelos has three more as well. Christina.

Yeah, let's start with semiconductor firm Marvell Technology. They beat on revenue and earnings. Shares are up almost 2% right now in the after hours. CEO Matt Murphy stating, quote, we are guiding for growth to a continuing Q2, projecting revenue at the midpoint to grow about 5% and 41% year over year. So what you need to know is that's higher than what the street was expecting. Keep in mind, 88% of Marvell's revenue comes from data infrastructure,

which they believe will help with cyclical trends. So the stock is up over 2%. Software as a service platform, Sumo Logic, saw revenue grow 25% year over year, which is a beat along with a smaller than expected loss. Shares are up over 4%. The company says escalating security threats are driving a healthy demand environment. Uh-oh. And then American Eagle shares plunging right now in the OT, down 9%.

Another retailer hit by higher inflation. Quarterly profit miss. And the company lowered its full-year outlook to reflect higher discounts, to clear through some of that spring inventory, higher freight costs and the impact, of course, supply chain problems. Of course, Christina, thank you. Christina Partsenevelos up next. It's the stay at home trade. One halftime committee member says this beaten down stock is here to stay, despite falling over 60 percent this year.

We'll debate the move next. In today's halftime overtime, the state of the stay at home trade. Halftime's John Najarian buying more shares in one of the group's most well-known names, Teladoc. Listen. I think this is here to stay. So getting this one back down at the IPO price that you and I talked about about, you know, three weeks to a month ago was a gift. This was also a gift. So I love buying bargains. And this is one I intend to hold for quite a while. All right. That's John Najarian. Now let's bring in Serity Partners. Jim Labenthal. He joins us on the phone.

I mean, I'm curious what you think about this. But if you look at all of these names, Jim, Teladoc, 81% from its high, Zoom, 74, Docu74, Peloton, 89, Roku, 82, Dash, 71. Of all those that I just named, which one has the highest hopes, do you think? Oh boy, I, you know, Scott, I'm sorry, I really wasn't ready for that question because I honestly don't like any of them. And it's not, you know, I don't mean to be snarky about it, but I look at the current environment and I say, why is that the list I have to choose from when there's so many money-earning stocks that could easily go up 50%, even 100% the way those stocks might on a particular bounce? Because that's the game we're playing. That's the game we're playing, Pharma Jim. And by the way, weren't you a one-time Roku guy? I mean, didn't you own Roku? That was a long time ago. Okay, you know I always play the

game that you make me play. So Roku is the name that I would take there. But boy, I'm holding my nose, Scott. I mean, I'm really holding my nose. And I love John. But what I don't understand is if you're looking for a big pop, there are so many high, high quality names out there, whether they're value or growth at a reasonable price. It could be a Qualcomm. It could be if you want to take a flyer, take a flyer on Citigroup at 60% of book value. That thing could go up 75% and have the same valuation as Wells Fargo.

I could do this all day long. Now, you're making me play a different game, so I will pick Roku. But boy, I don't want any of those stocks, to tell you the truth. I just don't need them. We're going to leave it there. I'll make that the last word for you. All right, Jim Labenthal, thank you very much. Coming up, our next guest is betting big on one FANG stock, and it's all thanks to rising inflation. He'll explain that in our two minute drill next. Our next guest says inflation is poised to slow, and that means it's time to buy the dip. It's time for our two minute drill with Jeremy Bryan, Gradient Investments Portfolio Manager.

It's good to see you. So you think inflation is poised to cool. That's interesting. So are you suggesting that this move that we've had in the market is legit and can last longer than people think? Sure. Yeah. The short answer on that is what if we've seen the worst of it? What if eights goes to sevens goes to sixes? A lot of these companies have seen significant damage. I mean, the company that we're going to talk about is down 40 percent. That is a massive movement. And this is not a fly by night, you know, a pandemic oriented company. This is a stabilized long term growth name that that I'd want to be a part of. And so, yeah, if we start to see decelerating inflation,

a lot of these names could have a sustainable rally as a result of that. Let's reveal the secret. I mean, at this point, we're talking about Amazon. Yeah, it's Amazon. Yeah. I mean, you know, if Amazon, if we've seen the worst of that, you know, of if eights do goes to seven goes to sixes, then they're going to have more spending power. There's going to be more purchasing power. And guess what? Amazon's gaining market share. You know, so Amazon is going to be a beneficiary of that if we've seen the worst. If eights goes to nines goes to 10, we might still be in some trouble here. But our best thinking is that it's actually going to decelerate. And so we'd want to

be buyers of Amazon at that level. Second part of that business is AWS. If we start to see a slowing economy within there, that's an efficiency-based business that could do very well as well. Another stock down 40 plus percent from its highs, Adobe. Yeah, one of the best durable growth models, right? If you think about their earnings profile, you know, the estimates have come down three, four percent, right? And the stock is down 40. So it's 27 times earnings right now. So our contrarian thesis, if you will, in buying the stuff that's out of favor doesn't mean we're buying the cheap stuff. It doesn't always mean that. What it does mean is we want to buy this stuff that's out of favor that has a chance for a rebound. And again, a durable growth software franchise like Adobe just seems like an

opportune time. We're back to valuations that we haven't seen since 2012. If we think that it can grow 15%, 17%, even 20% earnings over the next three years, this seems like to be the time to be buying. All right. We'll leave it there. Jeremy, I appreciate your time. That's Jeremy Bryan joining us there. Up next, it's Santoli's last word. We're right back. let's get the results of our twitter question we asked which stay-at-home stock will rebound the most on that list 45 of you said zoom roku in second place with 28 peloton and teledoc pulling up the rear there it's time for mike santoli's last word. Is it good night? You've had a long day. But we'll put off the good nights for a little while. I was going to just say, let's rate the rally here. You know, obviously nothing is settled. You can't tell just by looking at one or two days to say whether this was the one. And obviously, we're not even above

on the S&P 500 last week's high. So you have to take this in steps. But I do think you can see how broad the rally was. The fact that we rallied off of imperfect news, arguably, is probably a net benefit to those who think that this can last. You also probably could say it's from the lowest valuation starting point of any of the rallies we've had this year. So a lot of that work has been done. I would also just say it's been such a tough year for dip buyers. They have been demoralized and completely humbled. You wonder if at least once the sellers of the rips need to be challenged to have a rally that carries a little bit beyond, you know, just the standard five, seven percent bounce. The dip buyers

have been dunked on big time. You know, I'm looking at a couple of stocks in front of me. Apple's one of them, right? I mean, it kind of was in the danger zone. Yeah. 143. Maybe it needs to get back to like 150 to make people feel really good. And then the other one is Nvidia, which we've been mentioning all day. And this reversal and the importance of it in your mind, given how closely you follow this kind of stuff. It's pretty important as that kind of risk appetite teller. We're going to have money flowing into the perceived winners. It bounced off the one-year break-even mark and actually has been tracking with Tesla shares over the last year so perfectly it's wild. So they did bounce.

At least they kind of stayed out of the soup, I would say, at this point. Everything's very contingent. Tomorrow we've got the PCE inflation number coming. So you've got to see if that either confirms or refutes the idea of maybe peak inflation, see how the market absorbs that. Keep your eye on volatility. VIX 27. Easing back. Bitcoin lower, even though the market ripped. That's an interesting dynamic. All right. We'll talk to you soon. That's Mike Santoli. Fastest now.