Closing Bell - Closing Bell Overtime: Stocks Drop Ahead of Fed 9/20/22

Episode Date: September 20, 2022

The Fed decision is less than 24 hours away … and the question is, is today’s sell-off a precursor to an even bigger move tomorrow or will the Fed chair soothe investors? Virtus Investment’s Joe Terranova weighs in. Plus, GSquared’s Victoria Greene says “the pivot is dead” ahead of tomorrow’s big meeting. She explains. And, market expert Mike Santoli’s final Last Word before the decision. What he’s watching.

Sarah, thank you very much, and welcome everybody to Overtime. I'm Scott Walkman. You just heard the bells. We're just getting started here from Post 9 at the New York Stock Exchange. In just a little bit, I'll speak to Ed Yardeni, who says the Fed is going to be more aggressive than you think in the meetings ahead, but that stocks can still stay away from the June lows. Is that really possible? Well, you know we're going to ask him, and we'll debate it.

We'll begin, though, with our talk of the tape. That Fed decision less than 24 hours away now. The market's not waiting around to find out what happens either. The question is, is today's sell-off a precursor to an even bigger move tomorrow? Or will the Fed chair soothe investors just when they need it the most? Let's ask Virtus Investment Partners Chief Market Strategist Joe Terranova joins me right here on set. It's good to see you. Good to see you. Less than 24 hours away. What are you expecting? What do you think the market's

going to do tomorrow? Well, I think investors want comfort. And I think the press conference is the venue that ultimately Chairman Powell can deliver the comfort. He could deliver the comfort by letting investors in a very subtle way know that hawkishness is transitory. If he does that, then I think the way that the market right now is currently positioned, both from the standpoint of sentiment and actual positioning in the market, I don't think the market's ready for that. I think at that point, markets could rally. If he stays away from that, if he doesn't indicate that the hawkishness is transitory,

then we know you've got to turn your attention to the treasury market. You've got to focus on short-term yields. And I think ultimately, Scott, what you're looking for is some parabolic move that will signal a peak in capitulation. Capitulation is going to come in the market. It's coming in the treasury market. I don't think it comes in the equity market. Let's stay away from the transitory word, could we? Because I mean, the market doesn't want to hear that word anymore from the Fed chair for obvious reasons. Because it hasn't worked. What you're alluding to, though, is a peak hawkishness, leaving the market with the belief that this is about as hawkish as they're going to get.

Give you 75 and then sort of let's take a look at the data, let's see where we are. We're not thinking 75 and then huge hikes to follow that going forward. Right. So the disposition of the last several months, the current disposition, unprecedented. The Federal Reserve will move away from that unprecedented hawkishness disposition. That's the right way, I think, to frame it. All right. So the bond market seems ready for a hawkish Fed chair. Right. We're just a-year, which everybody says the Fed follows the two-year. Right, and everyone wants to put their money into it. Right at 4%.

Right. Right? Is the stock market ready for a hawkish Fed share? You know what's interesting is just looking, first of all, and I've said this ad nauseum throughout the quarter, I believe that quants and the algos are in control of the market. I think the good thing that's happened here is that this is a U-shaped correction, the first one since the great financial crisis. Why is that good? Because that has given retail and wealth management the time to extract the concentration. So right now, Scott, portfolios, there's not that portfolio imbalance that needs to be rooted out. Portfolios are very diversified right now, Scott, portfolios, there's not that portfolio imbalance that needs to be rooted out.

Portfolios are very diversified right now, and cash balances are very high, historically high. You've got to really present something very bearish, introduce something new, geopolitical or something from the Federal Reserve. That's going to flush the market very quickly down because I just don't see sentiment and positioning aligned accordingly. OK, you say the word flush. Dr. Doom, is that Nouriel Roubini? They call him Dr. Doom. I remember him. I think they coined that for him. He sees a long, I quote, long and ugly recession in the U.S. He gave an interview to an outlet today in which he said,

even in a plain vanilla recession, the S&P can fall by 30 percent in a real hard landing, quote unquote, which he expects, by the way, it could fall 40 percent. Is this just another doomsayer trying to make a big downside call? I'm not suggesting that, you know, Scott Minard is necessarily a doomsayer, but he's looking for 20 percent. Gundlach wouldn't argue with that. Dalio said a move to four and a half percent in rates would cause a 20 percent decline. This is becoming in vogue now. Listen, I've learned a long time ago in the market, you respect everyone's opinion. You're not dismissive of anything. I think what's very important is that in the case of Scott Minor, he talked about 20% down and said, I will be a buyer at that level. And I think a lot of people have maintained that

thought process. I as well. If the market takes out the June lows, for all of you that one year ago said, hey, we don't want to be buyers of this market because the valuation is too rich, here's your opportunity. If you don't have a need for cash in the next two years, here's your chance. If you have a need for cash, OK, go to the Treasury market by short-term notes. Do you think the markets, do you think stocks are expensive or not right here, right now? Because Lee Cooper was on Squawk this morning and suggested stocks, even though they're down 20 percent year to date, S&P roughly, right? Not cheap. Stocks are not cheap. Now, there may be selective stocks within the universe that are cheap, and he would even tell you that, which he said the same thing. But broadly, 20% decline. Are stocks cheap or not? So generally, what happens in a recession

is there's three shapes of recovery, L, U, and V. I think that a valuation recession began in early 2021. If you look at the Russell 1000 hyper growth index, you'll see the PE peak in early 2021 up near 30. That's now fallen below 20. That's an indication to me, first of all, that's where the L-shaped recovery is ultimately going to unfold. But I think you've had this valuation recession and you've had capitulation that's kind of rolling throughout sectors and strategies within the market. So I don't know that the entirety of the market can be defined as being expensive. I'm not sure that I agree with that. And I do think you could find opportunities within the market where reasonable valuations present themselves. Some say you haven't had capitulation enough across the broader market yet. So that's an issue potentially, too.

Let's broaden the conversation out, bring in Cameron Dawson, chief investment officer of New Edge Wealth, who's joined us here at the table as well. What do you think right now about the market, where we are? Because you've been pretty negative of late for the last many times we've spoken right on this desk. Yeah, and we think that stocks still are expensive just looking at the index level. They're still trading just under 17 times. Given the degree of tightening that the Fed is promising and where real interest rates sit today at over 1%, that would argue for APE multiple that would be below average, and average is about 16. And we think that earnings estimates are still too high

because we're still looking at 8% growth for next year. Given, again, the degree of tightening and the leading indicators that we're seeing, those estimates need to come down quite materially. The biggest wild card, I suppose, is whether we're going to have a soft or hard landing to really determine how bad earnings revisions are ultimately going to be. Nick Timros, Wall Street Journal, says Powell scrapped his original Jackson Hole speech and decided to deliver unusually brief remarks with a simple message. The Fed would accept a recession as the price of fighting inflation.

Do we need to rethink as investors what the Fed is willing to accept that maybe we didn't think they were months ago? Definitely. This is a very different world that we live in compared to the recovery coming out of the great financial crisis. In that world, when inflation was benign, the Fed could step in at the moments of a wobble. But now they're unable to. And what they're telling us at Jackson Hole is that they're willing to see higher unemployment. They're willing to see lower growth. And that's likely what we see in the summary economic projections tomorrow, which is higher unemployment projections, lower growth projections, and maybe even higher inflation projections because of last week's CPI print. So if this, you know, Fed whisperer, as some call him, suggests that the Fed's willing to accept a recession,

and Nouriel Roubini suggests that even a plain vanilla recession, those are his words, S&P can fall by 30 percent, that makes sense to you, a call like that? Should we pay attention to calls like that? Well, first of all, we also have to realize where we are in this drawdown. We're already down over 20 percent percent and we're nearly 10 months into this bear market. So to say that we could see a 30 percent correction really just brings you back to just below those June lows. And so that actually is very run of the mill and ordinary. To see even more than that, I think you have to be betting on a big debt crisis, something that

looks like the great financial crisis that's deeper, more protracted. And given the fact that debt levels on the corporate side of things aren't too elevated, consumer debt looks okay, we think that that more dire scenario, 40 to 50 percent down, is too aggressive. Yeah, and you raise a good point, too, Av. I don't know the context of how he said this, whether it was a 30 or 40 percent in total or a 30 or 40 percent more additional. Let's hope in total. Let's hope he meant that. Joe, the idea that somehow Powell is going to soothe us tomorrow. You use that word on the halftime report today. You used it again here. Why would he do that? Why would he have any

desire to soothe anybody? He needs to make the point, I need the unemployment rate to go up. I'm not going to say it as explicitly as that, but he wants that to be the ultimate outcome. He needs unemployment to go up. As much as nobody wants to see anybody lose their job, that's what he needs to happen. What is going to be soothing? He gave an eight-minute speech at Jackson Hole, which was about as unsoothing as one could give. He mentioned Volcker. Why is he not going to do that again? I know him a long time. He's going to get upset with my answer. I agree with everything you just said. So my remark at the top of the show was, is he going to upset the market or is he going to comfort the market?

I said that yesterday on halftime. Here's the scenario where he can upset the market. Here's the scenario where he can comfort the market. The only way that I think he can comfort the market is by, really, to your point, Scott, making a mistake in the press conference. The chairman in previous press conferences sometimes suggests certain things that maybe has to be walked back in the weeks that will follow. Potentially, something like that could unfold tomorrow. That's the only way that ultimately I see that he could be comforting markets,

is by suggesting that the disposition, we won won't use the word the T word, but the disposition that the Federal Reserve has maintained over the last several months and currently maintains, they will move away from that unprecedented disposition. That's the only way they could comfort the market. OK, now, Cameron, this idea that some are putting forth that stocks aren't aren't even the best game in town anymore anyway. So, you know, it's time to look elsewhere in fixed income. I'm not just talking about treasuries either, okay? We mentioned this on the Halftime Report today of somebody sending one of our producers a muni bond, right? Paper 5% yield.

Now, the maturity was 35 years in the distance, but nonetheless. Would you reveal that individual's age? No, I'm not. I don't know. I don't know, frankly. I don't think it was a 25-year-old. But my point is, OK, some are. And then you had Scott Miner suggesting yesterday that there were once in a generation buys of certain bonds in companies that are just better and more attractive than stocks. So I've given you three examples now of areas of fixed income that are better than stocks.

Plus, the BAA corporate yield, investment grade yields, is now higher than the earnings yield on the S&P 500 for the first time since the great financial crisis. And that's meaningful because what that means is that's competition for assets. That's competition for money flows. And if we look back at the last cycle, the whole point of quantitative easing is to push people out the risk spectrum, make people take more risk. That's why risk assets do better in QE scenarios compared to risk-free assets. Now, if you're telling people that you can have less

risky assets and even risk-free assets in some cases have yields that compete with much riskier assets, I think as portfolio managers, we have to look at that. There might not be as much upside, but certainly from a yield perspective, they're getting much more attractive. It's not like there aren't any bones for the bulls to chew on, because you give a list of reasons that you could be more bullish of the market. Better performance out of cyclical contrarian sectors, you point out. Light short positioning, poor sentiment inequities for institutions, strong momentum out of the June low, parts of inflation data easing, including goods prices, seasonality, midterm election years, resilient consumer data. The question is, is any of that, or even in total,

enough to weigh heavily enough against the bearish case? I think it's a timing difference, because all of those bullish things are enough to get you a counter-trend rally. They're enough to get you a relief. They're not necessarily enough to get you a major turn in the trend of this market. We look at that downward sloping 200 day moving average. What can turn that? We think what turns that is the Fed. It is liquidity. And a pivot, a pivot. So what you're saying is I want you to know if you agree with this. So the only thing, only thing with enough power behind it is a Fed pivot. And that comes through the bulls. And that comes through the course of time. And I think that course of time is coming sooner than we think.

So you mentioned the 200-day moving average. The nature of that 200-day moving average statistically is going to begin to drop as we move forward in time. Ultimately, where current price is is going to meet that 200-day moving average statistically is going to begin to drop as we move forward in time. Ultimately, where current price is, is going to meet that 200 day moving average. So I think the resolution is coming soon. Why? Why do you think that? Why do you think that? Why do you think that? Because the economy is contracting. Yeah, I know. But we did our CNBC Fed survey, right? Leisman brought this. And this was higher for longer. This wasn't like higher than pivot. This was they go to 4.26. That's up nearly 40 basis points, okay? That's higher, all right?

And then they stay at the peak. They stay at the peak rate for 11 months before cutting. That's a long time. They haven't even gotten to their peak, so they have to get to the peak, and then they wait 11 months. We call it a year. They pull a Volcker, right? They get high, and they stay high.

Because we are finally seeing the signs, whether it's the intelligence of people that are coming on the network and talking about their businesses and what they're seeing, whether it's what FedEx is guiding to investors, the economy is cracking. And that is the exact vehicle that the Federal Reserve was targeting to combat inflation. And it's happening. Parts of. Parts of. Not the full economy is not cracking. That's the problem. I say it's a problem because the Fed wants it to crack. It's not cracking. No, I don't know that the Federal Reserve wants the entire economy to crack. I think the Federal Reserve wants the economy to crack, but not the entirety of it, because then you're talking about a deep recession, a hard landing. No, no, no, not necessarily.

But you need demand to get pulled out of the economy in almost every place. Without question. Because demand was overwhelming in almost every place. Houses, cars, travel. Correct. This, that, and the other thing. And the biggest industry in which, and you and I have talked about this, you didn't see it, was in real estate.

I think you're finally beginning to see that, Scott. You're at the initial stages of that. That's comforting. That's exactly what you want to see. What about this idea of this hire for longer? Is that, if you voted in this Fed survey, and I don't even know if you did, maybe you did, is that how you would have voted? Hire for longer?

Well, because that's what the Fed is telling us that they need to do. They do not want to cut rates and risk reigniting inflation. But I think if we look at where we've seen the slowing, it's all in goods. And that actually was transitory. Goods inflation has gone from 20 percent to start this year to just 7.5 percent today. But that's not the story. The story is services inflation and services inflation is driven by wages. Wages are still growing plus six point seven percent because the labor market is still tight. The problem is the

labor market is a lagging indicator. So that means the Fed will continue tightening and will be looking at a lagging indicator to tell them when they've gone too far. All that said, hold on real quick, Joe. All that said, even though you're negative near term on stocks, you would be a buyer on a pullback. Excited buyer. Look, I think that we have to be very prudent about not being too scared as we see weakness going forward. Because if we look out two years, three years ahead, after seeing a 30% correction that's lasted nearly 10 months, around $3,600, that's been long-term support for this market, we may not get the ultimate low. We may not pick the absolute bottom. We may still have losses because of valuations, because of earnings. However,

the risk reward at that point for strategic investors looks far better. And we think that as advisors, as portfolio managers, we have to think in that longer term strategic perspective. OK, before I let you go, Twitter question. I want you to vote in it. What should the Fed do at tomorrow's meeting? Cameron, you first. What should they do? 75. OK. And reiterate the message from Jackson Hole. All right, Joey. 75 tomorrow, 50 in November, 25 in December. Stop no matter where inflation is. All right. I appreciate that. The rest of you, please vote. Thank you, guys. Great conversation. Cameron Dawson, Joe Turnover right here on the desk. We want to know what should the Fed do? You heard it, 25, 50, 75,

or 100. Head to at CNBC Overtime, cast your vote. We'll give you the results coming up later on in our hour in which we're just getting started. And a big reminder, don't miss our exclusive interview with Double Line's Jeffrey Gundlach here in overtime tomorrow, his instant reaction to the Fed. I can't believe it's another meeting already, and this has become a regular thing, and I'm so glad it has. Jeffrey, me, tomorrow in overtime. Looking forward. We are just getting started, as I said. Up next, the pivot is dead. That is what our next guest is saying ahead of tomorrow's crucial Fed decision. G Squared's Victoria Green is positioning. She'll tell you. There she is. She can throw a flame or two around. She may do that next. We're back in overtime. Red across the board today. Nike, Caterpillar, the biggest drags on the Dow.

Real estate materials were the worst sectors today out of the S&P. As we close in on tomorrow's Fed decision, our next guest says time to play defense. Joining us now, G Squared Private Wealth Chief Investment Officer Victoria Green. It's good to see you. I mean, everybody's on the defensive side of the field. When is it time to play offense? It's not yet. We got to wait a little bit longer. You know, everybody's expecting the Fed to continue to tighten. And until the Fed, like your other guests talked about, until they are ready to actually start slowing down in our dovish, I think this market is going to face some headwinds. And remember where we are in this global cycle. We haven't seen a bottom out yet.

We can debate whether or not we're in a recession. I know we had that discussion a few weeks back. But it looks like we still have a lot of clouds and a slowdown coming up. Look at what FedEx warned us about. And you have to look at the companies that started reporting Q3 and really listen to what the CEOs are saying. So you have a tightening Fed, you have quantitative tightening, you have sticky inflation, and you have a global slowdown. And I just don't think it's the time to be aggressive yet. Well, I mean, you were pushing for 100 basis points before. You've come off that now, right? Well, I still, the Twitter question of what should they do? They should do 100 because it would help them get in front of it. What will they do? They'll go 75. I think Powell did a really great job of ripping that pivot bandaid off after Jackson Hole,

you know, when there was all that commentary today about how he ripped up his speech and he had to come out more forceful. The biggest risk to the Fed is when there's a dislocation between expectations and what their paths are. So I feel like he's going out of his way to convince people that they're in it to win it. Their comparisons with Voeckler, you know, he's saying he doesn't want to start and stop. He wants to hike and stay there. I think all of these clues lead you that this is a committed Fed willing to sacrifice unemployment to make sure they get inflation under control. Is there really dislocation, though? I mean, the bond market would argue otherwise, right? That seems to be in lockstep with where it thinks the Fed is going to be tomorrow. Now, you can make an argument that the stock market isn't quite there yet or not.

It's not for me to to make the argument. But I don't know about the dislocation argument you make. Well, so I think parts of the bond market, yes, but you really haven't seen credit spreads blow out. You're seeing a little bit, but if you were to say this is a bond market under stress, it's not. It's not really showing the signals you'd usually see of a distressed bond market where you'd see credit spreads blow out. So yeah, you're seeing the two-year almost at four, the 10-year finally above three, five, you know, the highest we've seen in 12 to 15 years. And we'll see if this this three point five becomes the next support and it moves up higher. But I do feel like the bond market isn't necessarily reflecting what we see in the stock market, mostly because credit spreads are still fairly low compared to the distress you're seeing in the stock market. What about this call from

Rubini that's going to get a lot of talk over the next 24 hours of a big decline in stocks because of a deeper recession and a harder landing than most expect? We definitely expect a further downside. I don't think quite as far and as severe as he's predicting. We tend to never look in those extremes. We do think this is a more normal, typical recession between nine to 12 months. And we'll see in a bear market, sorry, between nine and 12 months, 25 to 30 percent on the downside. So you're looking maybe another eight to 10 percent. That puts us around the 3400. But I think you have to look at this market and understand we aren't exiting a recession. We're not exiting a bear market yet. We are entering the lows and we will see the market

bottom first. The market's a leading indicator. The rest of that's all lagging. So I do commend the Fed for being committed, but I do think they're recognizing that they are going to have to put stress on the market and that's going to be further downside on equities. But I'm not calling like an 08 blowout or 1929. I know that's what we're starting to harken back to. But those 45, 50 percent drops are very, very rare. And we just had one within the last 20 years. And if you look at the rhythm of the market between the early 2000s, the 2008 and then the 2020, you have seen stress on this market. So I see this as more typical bear market. We'll see earnings expectations come down. Everything's going to get terrible.

People are going to capitulate and sell. And then that's when the market will bottom. You're the chief investment officer, as we say, for G Squared. Are you recommending fixed income to your clients? Ultra short treasuries. If you look on that front end, the six zero to six months, you're starting to get paid pretty well and you limit your duration risk as you set this out. You know, cash does have a cost if you're sitting in just straight up cash in an inflationary environment. But I was buying a six month treasury today at like three point four. And it was just great. You know, you're still you're seeing some alternatives. Tina is dead. I would also say that there are alternatives. You have a one seven dividend yield on the S&P 500 and you're getting paid more than that to sit in the treasury and wait a little bit.

Be patient. And we always talk to our clients about a bad day, a bad week isn't a trend. Don't be upset if the market moves up and you're a little defensive. Be patient. Wait till you feel a signal. The same with if the market moves down. It's probably not the end of the world. You know, a bad week like we saw last week, just as a reaffirmation that the market is under stress and we expect the market to be under stress for the coming future. And you're just fighting. September is a horrible month. Like you're fighting some really, really bad headwinds right now in the last two weeks in September. Just not a great time to be an investor historically.

So defense, don't chase and then park somewhere where you can make some income. All right. Good stuff. Victoria, thanks so much. That's Victoria Green joining us once again in overtime. Up next, we're counting down to tomorrow's Fed decision with Ed Yardeni. He says the Fed is ready to go big. It might be bigger than you think in the meetings ahead, too, and why that might not be the end of the world for stocks. We'll test him on that. We'll do it next.

Getting a news alert here in overtime on Beyond Meat. Our Kate Rogers has that story. Kate. Hey, Scott. That's right. Beyond Meat announcing its COO, Doug Ramsey, has been suspended effective immediately with the following statement. Quote, Doug Ramsey, Beyond Meat's chief operating officer, has been suspended effective immediately. Operations activities will be overseen on an interim basis by Jonathan Nelson,

senior vice president of manufacturing operations. Doug Ramsey was arrested over the weekend for allegedly biting a man's nose after an altercation following a college football game in Arkansas. He was charged with terroristic threatening and third degree battery. The Washington County, Arkansas information page says he was booked on Saturday night and released Sunday. He joined Beyond Meat in December, coming from three decades at Tyson Foods overseeing poultry The Washington County, Arkansas information page says he was booked on Saturday night and released Sunday. He joined Beyond Meat in December, coming from three decades at Tyson Foods overseeing poultry and its McDonald's businesses. Really there to kind of jazz up the chicken rollout, all these partnerships with its QSRs. And now this, we've been waiting for several days to hear from Beyond Meat, and he's suspended effective immediately.

Back over to you. All right, Kate, I appreciate that update. That's Kate Rogers. It's time for a CNBC News Update now with Shepard Smith. Hey, Shep. Nose nibbling will get you every time. Scott, from the news on CNBC, here's what's happening. Hurricane Fiona, now a major Category 3 storm. It left flooding and power outages across Puerto Rico, mudslides in the Dominican Republic, and damage to the eastern islands of Turks and Caicos. The forecast? Strengthening, potentially to a cat four, before threatening Bermuda, potentially late Thursday.

It's expected to then head north towards Newfoundland and not hit the U.S. mainland. New York City is set to lift its strict COVID vaccine mandate for workers at private businesses starting November the 1st. But the mayor left the mandate in place for city workers. And a massive explosion this morning in Chicago, sending eight people to hospitals, happened on the city's west side. The force caused a nearby building to partially collapse. At least three people listed critical, five others stable. The cause under investigation. Tonight, we're live in Puerto Rico and beyond with the latest on the devastation

there. Plus, details on what the feds say is the biggest covid fraud case yet. A quarter billion dollars on the news right after Jim Cramer, 7 Eastern CNBC. Scott on the nose and back to you. Shep, thank you. Shepard Smith, we'll see you then. The Fed is front and center as we count down to tomorrow's rate decision. My next guest expecting 75 basis points, like many others, says the market might actually welcome even more aggressive tightening. Joining me now, Ed Yardeni. He is the president and chief investment strategist at Yardeni Research. Welcome back. It's nice to see you as always. Thank you. Thank you. What got my attention more than anything else is not the call for 75 tomorrow. It's the call for 75 at the next meeting and that the market can somehow handle that. Well, I think the markets fully appreciates the fact that the Fed has turned hawkish.

And I think we're going to hear more hawkish talk from Fed Chair Powell at the press conference tomorrow. So I don't think it's going to be any surprise that they're going to do 75. I tell you the truth, I wish they would just do more of it faster, just get it over with. The two-year Treasury is at 4%. So the financial markets are already anticipating certainly this 75 basis points up ahead here, but they could easily stomach more given that they've already discounted it. The faster we get to that so-called terminal rate, the better off we'll be in terms of the market. I don't think the economy is going to be completely stressed out into a deep recession.

I think we're going through what I call a rolling recession. And I think that continues through the second half of the year. But you really believe that if they 75 tomorrow is in. Right. I mean, everybody expects that at this point. Right. You really think that 75, though, at the next meeting and the stock market, if it hasn't already gone back to that level, won't go back to the June lows? Oh, no, no. I think the June lows made the lows. And I think we're in a range between the June lows and the August 16th high. So the June low was 3,666 and the August 16th high was 4,305. I think that makes the range for the rest of the year. I think that's where we're going to be. I

expect that earnings are just going to be flat and that the PE multiple is just going to create the volatility that we've seen all along in this marketplace. So it may very well be that the Fed does 75 tomorrow. I will not be surprised if the market rallies on that closer to the top end of the range because we're near the bottom of the range. And then I think you're right. The market's going to focus on, OK, now what's next? And if, in fact, 75 is what's next, the market's going to have to be torn about whether that's a good thing or a bad thing. Again, I think we want to get this over with. I think the faster they do it and declare that they've got restrictive enough so they can pause, I think the market would welcome that.

And maybe it depends what market you're talking about. I mean, maybe it depends most of all what the bond market does tomorrow, right? I mean, you're the guy. You coined the term bond vigilantes back in the 80s. So you watch it and read it closer than most. What are you reading from it today? Well, yeah, I think it's very, very important to look at all the markets, how they're interacting. And what I see is that the spread between the 10-year and the two-year has gone negative. Everybody has seen that. But I think we have to understand that

what that is, in fact, implying is that the Fed has gotten into restrictive territory in terms of short-term interest rates. I mean, as we've seen the two-year rate go up, we haven't seen the 10-year go up as fast. So now we're, last I looked, we're about 40 basis points into negative territory. That's the kind of action in the past that's suggested that bonds are actually attractive. Some say the 10-year is calling you-know-what on the two-year. They don't think that the Fed's going to be able to push it to where some think they'll get. We'll see. Ed, I appreciate your insight, as always. We'll talk to you again soon. That's Ed Yardeni, again, from Yardeni Research, joining us.

Up next, it's halftime overtime, the big news in the SPAC world today and what it means for the future of that once red hot space. And throughout Hispanic Heritage Month, we are celebrating our CNBC teammates and contributors. Here's our friend, CNBC producer Silvana Henao. When I first came to this country, I only spoke Spanish. Once I learned English, I only wanted to speak English. And my mom really, really made sure that we only spoke Spanish at home to make sure that we held on to our heritage, that we held on to our roots.

And I'm so proud of that. I'm really proud that, you know, in a crowd of people, I know that I speak two languages that if someone needs help, I can help them. I can translate for them. And I think throughout life, it's opened a lot of doors for me, especially in my career, given that I'm bilingual. I feel like it really just gives me double the power. All right, in today's Halftime Overtime, so-called SPAC king Chamath Palihapitiya winding down two of his SPACs

after failing to find a deal. Raises questions now about the future of this alternative way to go public. Halftime's Josh Brown still critical of that space. Believes the recent boom is over. They have never been a good investment for individuals. They're great for sponsors. They're great for somebody as successful and charismatic as Chamath. We've seen SPACs every time that there's been a gold rush. This time was no

different. That moment is now past. And I don't doubt that three years from now, five years from now, we'll all forget. There'll be another crop of SPACs. All right. Well, Joe Terranova is back with us. The question is, do you believe what Chamath told me himself almost a year ago, exactly, at Delivering Alpha 2021, that this was going to be a meaningful revolution that was going to last for a long time? Or was it a moment in time? of excesses in the market. I think Josh is 100 percent correct in his analysis. I think the SEC will enact a lot of regulatory oversight on SPACs as we move forward. You've had 21 that have shut down year to date, Scott. There's 550 more, 550 more that have to find a home to be buyers. $150 billion in capital. Understand that moment of excessiveness was in February of 21. So Q1 of 2023 is going to be very interesting. You're going to hear a lot of stories about SPACs winding down. And over 25% of the SPACs that were introduced in 2021, they're now trading below two dollars. So what if I say, OK, there's still going to be SPACs, right? Chamath is right. It's a revolution

that's not going away, but the crap SPAC is going away that everybody and their brother had a SPAC. So everybody. Yeah, I wouldn't call it a revolution. I mean a SPAC. Everybody. Yeah, I wouldn't call it a revolution. I mean, SPACs have been here for decades, and there have been successful SPACs. They're in the minority, but there have been successful SPACs, and there will be successful SPACs as you move forward. I think Chamath still has two that are healthcare-related. I wish him nothing but success there.

But I think the overwhelming majority of these SPACs are going to end up in disappointment. And for the individual investor, to Josh's point, these are not good investments. Well, what if they are scrutinized more heavily moving forward so there aren't as many of the dumpster SPACs? And there are legitimate SPACs. I mean, you can't argue against these alternative ways of going public, whether it's a direct, we haven't even talked about direct listing. That's not going anywhere right now. I mean, the IPO market's been closed. But I have a hard time believing that once this cycle is over of this malaise in the market and then you rekindle the next wave of boom or whatever it is, that you're going to still see

these. They're just going to be more heavily scrutinized. Show me that legislation. I think it's warranted. I think it's needed. If it could improve the vehicle that SPACs are right now for investors at that time, I would be open and willing to look at investing at them. But until that point, they need the oversight. And by the way, you know, I know we highlight Chamath because he was the or is the so-called. I actually applaud him. I think he did the right thing.

I mean, he's not the only one who sort of abandoned ship at this particular time. I mean, it's hard to find a target. Right. Ackman did the same thing. Sam Zell, I think, did as well. Twenty one have already liquidated this year because of the environment that we're in. Let me ask you a question. When do you think the environment for IPOs in general is going to get better? Can we ask Chairman Powell that tomorrow in the press conference? It all depends on that. All depends on the chair. Right now, where rates, where they are, where the trajectory for the Fed, the market remains closed as long as you have a highly unsettled and volatile stock market. I think Stanley Drucker-Miller said maximum uncertainty.

That's where we are right now. All right. Good stuff, Joey. Thanks. Thank you. Joe Terranova sticking around for us on that. It's not too late, by the way, to sign up for this year's Delivering Alpha conference. You won't want to miss my interview with Citadel's Ken Griffin. I can't wait for that. It's next week.

Again, in person. We can't wait. Register now. Deliveringalpha.com. Up next, we're all over the biggest movers in overtime, in person. We can't wait. Register now. DeliveringAlpha.com. Up next, we're all over the biggest movers in overtime, as always. Christina Parts and Novelos is standing by with that. Hi, Christina. Hi, Scott. We've got another retailer blaming lower consumer spending for their weak earnings. And United Airlines is pulling dozens of Boeing planes. I'll tell you why after this short break.

All right, we're back and we're tracking the biggest movers in overtime. Christina Parts and Novelos is back with that. Christina, I'm going to start with United Airlines. The company is removing 25 Boeing 777 planes from its service after realizing it didn't do the required FAA inspection on the wing panels. Shares of both companies right now are trading a little higher, but just by pennies. And we got shares of online personal styling firm Stitch Fix plunging right now in the OT

down over 2.5% on earnings that just failed to impress. Revenue came in light. Next quarter's guidance also came in much lower than the street expected. Although this company does have a very small market cap,

it's a good insight into the consumer and management says macroeconomic environment as well as its impact on retail spending, has been a challenge to navigate. And I've got one more story for you. CVS and Walmart have agreed to pay $147.5 million to settle claims over their roles in West Virginia's opioid crisis. The state accused these retail chains of being just too lax when it comes to selling those opioid pills in their stores. Walgreens was also named, but has not settled, and a trial has been rescheduled for June 2023. And you can see just none of them are moving in the OT right now, but it is news. $147.5 million settlement. It's news. We'll take it.

Christina, thank you. It's Christina Parts and Novelos for us. Up next, trading the chips. Our next guest betting on a beaten down semi stock. There are many. We'll tell you which one in our two minute drill. O.T. is right back. It's time for the two minute drill. Let's bring in Michael Binger. He is president of Gradient Investments. Welcome back. It's good to see you. When you were last here, which was August, you liked Salesforce and PayPal. Salesforce is down 21% since. PayPal's down 11% since. I don't bring that up to embarrass you by any stretch.

Far from it. But you must love them a lot more than you did then if they're down net like that now. I still do. Salesforce, I still think, is the leader in the SaaS software group. You know, the company is seeing some slight macro headwinds. They adjusted their earnings. You know, the market's down since August, too. But, you know, once we get through this, and I think that's going to be in the fourth quarter in 23, this company should continue to grow their EPS and REVs. It's kind of a midterms clip, so I still like Salesforce. You'll do well long term. And PayPal, you know, it's down about the same as the market. The thesis hasn't changed.

I mean, Elliott Management is there. Earnings, you know, guidance has been maintained for the year. You know, starting in 2023, these earnings and REVs are going to start to grow again. I like PayPal a lot here. Yeah, I mean, it's down a lot more than the market, right, from its highs. Yeah, of course, from its highs. Yeah, that stock's gotten clobbered. Blackstone is a name that you like.

Tell me why you like that today. Yeah, you know, Blackstone in the private equity asset market, they're arguably the biggest and the best out there. They have over $500 million in AUM to deploy and earn a return on. I think they see the best deals out of anyone. I think they can grow their earnings and revenues at about a 10% rate going forward. It's just one of those names that has historically outperformed the market. This year, it's been a lagger, so I would step in right here. I think it's a great buy. Make the case for AMD, right, because it's such a controversial place to be

right now at chips, of course. And speaking of stocks that have gotten hit pretty hard. Yeah, I mean, that's the opportunity. The stock's gotten hit. You know, AMD in the semi space, they're still the leader of the pack there They're growing their sales and earnings still. Trades at about a PE of 15 times. Investors are worried about the gaming, not the gaming and data center, but they're worried about the PC, the slowdown there in the PC market. I think that's reflected in price. Gaming and data center is still strong. I think if you buy AMD right now, you're going to continue.

That company will maintain their lead over Intel, and you're going to make money going forward. I appreciate it, Mike, very much. It's binger, too. My apologies. I mispronounced your name at the outset. My apologies for that. We'll see you again soon. I'll get it right. Up next is Santoli's last word. Overtime is right back. To the results now of our Twitter question of the day, we asked you what should. That's the important word. What should the Fed do at tomorrow's meeting? Forty-eight percent of you said 75 basis points, and that seems to be where we were heading. Mike Santoli is here for his last word.

No big surprise. That's kind of where we're at. No, but probably a heavier contingent saying 100 basis points than is now implied by the likelihood in the bond market, which I think is saying like maybe a 15 to 20 percent chance. To me, the key word tomorrow might be restrictive. OK, the degree to which Chair Powell characterizes policy as restrictive after this move. Now, 24 hours from now, Fed funds rates going to be about three percent from zero seven months ago. He said that policy would need to be restrictive for some prolonged period of time in order to presumably, you know, create some slack in the labor market, slow the economy down, reduce demand. These are the things that the Fed is hoping really take hold so they can be confident that inflation is headed back to their target. I don't think there's going to be, you know, it's not going to be an all clear signal. It's going to be more reading the coded messages of do we think we're close? Do we think we can

downshift the aggressiveness in the next couple of meetings? That's the other key thing. Is it is it going to be safe to get up and walk about the cabin again? Yeah. I just wondering if we're or some are not some are setting themselves up for disappointment, expecting something that he's just not going to be able to deliver. Yeah. Given the most recent read on inflation. So I think there's always a risk of that. But I would argue that the setup this time doesn't imply that people are very aggressively betting on relief, not the way we were going into Jackson Hole. Because the bond market has really moved itself in alignment more than ever, perhaps. That's right.

So in broad terms, in their terms, financial conditions have certainly resumed tightening again. You know, today, one of the little sub themes was that bankers are trying to price the the high yield debt to finance the Citrix LBO. And they're having to make massive concessions. They keep having to create more discounts. The reports are it's going to price at around a 10 percent yield. They have to get that done. That's just emblematic of the kind of environment we're in now. You would expect that you should have to struggle to sell LBO debt in a tape like this when, you know, you have a lot of relatively safe paper yielding five, six, seven percent. What do you make of people like Edgar Denny who says just go big and get it over with?

And that means 75 tomorrow is fine, but 75 next time, too, which I don't know that many people are on that page. I don't think they're there yet. I don't think you necessarily want to be there. I think you want to get away from the idea that the Fed is operating under a sense of urgency where they have to chase inflation, really getting close to the level and then just reassuring the market, hey, it's going to stay up there for a while. Four percent plus. I'm thinking it's four, four, four. Fed funds at four. Unemployment maybe get above four. And then, you know, maybe the 10 year yield gets to there as well. We're going to see tomorrow. I can't wait to have this conversation after the fact

tomorrow. Mike Santoli with his last word. Double lines. Jeffrey Gundlach gives his first word after the Fed decision on tomorrow's program. Hope to see you all there. Fast Money begins now.