Closing Bell - Closing Bell Overtime: Stocks Plummet, Can earnings save the market? 4/22/22

Episode Date: April 22, 2022

The market sell-off accelerates in the final minutes of the trading day. The Dow Jones Industrial Average fell more than 1000-points at session lows. Jim Cramer discusses whether or not earnings season can save the stock market. Plus, top investor Rick Heitzmann from FirstMark Capital looks at how the IPO market stacks up in the face of tech valuation pressures. And, Michael Santol’s “Last Word” is “resilience.”

Welcome to Overtime. I'm Scott Wapner here at Post 9. You just heard the bells. We, of course, are just getting started on this big day. Halftime's Josh Brown will be with me in just a few moments. We do begin with our talk of the tape. Obviously, this brutal market and how much worse it's likely to get if rates continue to rise and the Fed continues to talk as hawkish as it has. There's a look right there, just settling out just below a 1,000-point loss for the Dow. Let's talk to Mad Money's Jim Kramer. He joins us now in overtime. Jim, your thoughts as we go out pretty ugly. Let it go. You just got to let it go. When the Fed wants to get something done like it does right now and drags it out, instead of just telling Sarah, listen, it's going to be 50, let's just do 100 right now on the set, you're going to have to deal with this torture.

It will set up for a good buying opportunity, but everything's got to come down, Scott, because they basically mandated a decline by stringing things out and by making it very unclear when they're going to stop. And I think that Jay got this one wrong. The country, the industrialists, the CEOs, they want him to go fast. They want him to go hard because they're sick of paying up. And when you look at what went up today, you take a Kimberly-Clark, they're not supposed to, we don't want them raising stuff.

That's what we actually buy. So he's got to move. He's got to slow the economy. He's got to make it so that we even have layoffs at this point because it's just not working. He's not moving fast enough. You want him to go big from the very beginning because, as you heard, probably messed her with Sarah. At least she is saying 75 basis points is not in her plan.

She also says this is what she calls the great recalibration phase. So I'm wondering how much more stocks have to recalibrate themselves, Jim, for the environment that you described with what the Fed is going to do. I think that we have to understand that stocks are trading as a unit right now. And so therefore, we're going to just take a classic 1994 like, by the way, 1994 was we had 50, 50 and then 75 in order to cool the economy. You had the Fed funds rate double. And everybody got out, and it turned out to be the beginning of a great bull run up to 2000. So, I mean, look, I think that the market obviously is too high, given what they're doing. But there's just stocks that are just getting killed that are very interesting, Scott.

But you've got to let them continue to get killed until we at least get the process going. Look, I would have gone for 100. I would have gone for 100. I would have. He needed the shock treatment that he gave us when we actually had the pandemic start. We need a shock treatment. And he is, you know I love Jay. I think he's doing a great job. But right now, this is when we simply cannot afford to be slow. Let's just get there. Let's get the third year up to four. Let's get people. We've got the great balance sheets in this country, but we don't have enough homes.

We don't have enough cars. We don't have enough chemicals. We don't have enough steel. We don't have enough plastic. Come on, man. Slow it down. We're going to have a crash landing if he doesn't slow it down. Do you think the lows, the prior lows are in jeopardy now as a result of what's happening? Definitely, because they're taking too long. They're taking too long. It's too bad because he's got the right attitude. You know, you tweeted not that long ago, in days like today, you must force yourself to read the conference calls

and ignore the endless drumbeat of negativity. For a minute, I read that and suggested, well, maybe Jim thinks people are too negative. No, there are things that— It sounds to me now, though, like— There are things that— You think we need to be negative. I mean, you know, we have a person, Gina Francola. You read Francola's stuff.

And she did a piece today about every single health care stock that was down because of HCA. Just as great statistics for people at home. Oh, they've got crushed today. Double digit percentage points across the board, Jim. You know, come on. I mean, 10 percent of those companies need to be bought right now. 10 percent of them. If you sent down an oil company, I mean, the Schlumberger call was so great today. Any oil company comes down, you want to start buying them if they have a variable yield of 7 to 8 percent. But I'm just saying, listen, they're sending everything down because it's taking too long. He's just got to get it done, take it where it has to go. We all know it. I mean, every conference call is the same

thing. Nobody can find workers. We are not in jeopardy of throwing millions of people out of work. We have the great balance sheets. That American Express conference call today was so fabulous. That was when I forced myself to read because I know it was great. Just get it done. Just get it done. The problem, Jim, is and look, I hear very clearly the exasperation in your voice, right, that we don't hear all that often.

I'm not suggesting this is a they-know-nothing moment revisiting itself, but it sure sounds like you are leaning in that direction. The problem is, I don't think the Fed is going to listen to you, Jim. Well, they didn't listen. I mean, here's the minutes of when they didn't listen to me when I said that they had to start cutting rates. And in there, they say, they mentioned me. And in it, because these are the actual notes, you know, not the minutes. These are the actual, you know, it says Fed laughs. Fed laughs.

Well, look, Jay, who I respect so much and I think he's the greatest, when you come up to me and say, listen, we're ready to go put 50 on the table, don't put 50 on the table, just do 50. Just get it done. I mean, people, every CEO I talk to wants it done. That seems like a formality at this point. But help me understand this before I have to let you go. No, you don't have to let me go.

You have to get ready for your own show. Next week, it's going to be the biggest week of earnings. We can get a reversal next week because the companies that report are good. But not Monday. Apple, Microsoft, Amazon. I mean, we're talking about the biggest names in the market, Jim. Well, look, everything is below the 200-day, 50-day, head and shoulders. But what matters is that we're going to get oversold quickly. And I think Jay's going to listen and he's going to move. I think he's going to surprise us.

You do. I think he's going to say, look. So you're not discounting 75. There's a guy, you know, bored. OK, I had I had issues with bored. I have issues with everybody except for you. And and bored at one point wanted to do something really aggressive. I thought he was wrong. Bored is probably the most thoughtful person they got. They should just do what Bored says. I mean, honestly, I'm all in Bored. Wow. That's interesting to hear you say that. All in board is the most he is doing the most rigorous work right now. And board is the guy who get us out of this jam.

We are in a real jam because we are not moving fast enough. If Jay would listen to the calls, there isn't a company out there that can find workers. It is not like the typical situation where we're going to start to create layoffs and people are going to have no jobs and be kicked out of their homes. It's the opposite. It's like we are in a position to take this right now. The company's reporting good numbers and their stocks go down. I really think it's time. It's just it's just time. Get it done. We are leading the world. Europe is falling behind China. I don't know, 1.2 billion on lockdown.

What do they want there? We throw away like a J&J, like a half billion of really good vaccines and they don't want them. Good. Every other every other continent is doing poorly. This is our time. This is our time, Scott. So so so you're not looking at because I was thinking, let's say, you know, a lamb research or a gap. We're not going to look back at those moments, Jim, and suggest that those were the canaries in the coal mine, that we should have paid more attention to what they're talking about in their own industries and what it means. Two bad lines. They said that there's consumer PC, and we all knew that. And then they said cell phone, and we didn't know cell phone,

but cell phones related to both to Eastern Europe, but it's really related to China. Now, Gap is an execution fiasco because they bought in a lot of stuff from China. They didn't. They used airfare. It was wrong. They had the wrong stuff. You know, Calvin McDonald's killing it because he knows how to execute from Lulu. But I'm just saying that the reason why we're having so much pain in the market is because when you have the Fed chief say to Sarah, you know, 50 is on the table. Jay, hey, put 100 on the table. I mean, come on. Jay's the best.

Why do 50? What's the 50? Even though you think that, you know, maybe we can stabilize at some point next week, not Monday, as you suggested, is what's more important, Apple or Microsoft, Jim? Because those are going to be really heavily focused on. Apple's incredibly important because we need to hear that there's a lifetime value of a customer who owns a phone is worth more. Stop worrying about what's happening in China. But, you know, we've got we're beginning to see some really bad numbers out of Europe because of what's happening in Ukraine. And we're seeing some really bad numbers out of China. I mean, really bad. So we can be the leader of the world, but not while we're dragging this out.

You're the best for sticking around. I know you've got things to do to prepare for a big show tonight. I love being on your show. Thank you. I love being on your show. We love having you. You know you're welcome anytime. Two-minute warning?

Can I ever get on a two-minute warning? You can. Right? Absolutely. Absolutely. Absolutely. Don't miss Jim tonight. Don't taunt me. 15 yards. I'm telling you, I'm going to ask you for the two-minute warning. Okay, because I think you're taunting me.

Make sure you have some timeouts so you can do what you need to do. Jay, I love you. Get it over with, please. There. All right, that's a great Jim Cramer. Don't forget, you can have Jim delivered right to your inbox as well. Sign up for the Investing Club newsletter at cnbc.com slash join the club or use the QR code you see on your screen. You obviously can catch Jim tonight and please don't miss that. Let's talk more about today's big sell off. Joining us now is Ridd Holtz, wealth management CEO and, of course, halftime investment committee member Josh Brown.

Josh, I hope you heard Jim's commentary. I want you to pick up right where he left off. What are you thinking on what was such a tough day in the market? Again, about a thousand point decline for the Dow. I would rather Jim be right than me be right, to be honest, but we disagree. I do not think earnings next week are going to be the thing that turns the market around. I think they could have a stabilizing effect, given that we're going to hear from some of the best run companies in the world. So I'm not looking at

next week as necessarily a negative catalyst. But so far in this earnings season, we don't have any evidence that the market cares whether or not a company has anything good to say because there are issues that are more pressing on the mind of investors. And a couple of those issues are worth pointing out. The first is that, to some extent, the die is already cast. We have earnings warnings and people lowering guidance ticking up historically. That has been one of the fastest moving and most high frequency ways to forecast the near term of the stock market. Of course, it's not perfect, doesn't always work. There are extenuating

circumstances. You have to throw out the data from from covid, et cetera, et cetera. But generally speaking, when you get the level and the breadth of companies ratcheting down expectations that we're already starting to see, it has not been good on a go forward basis. And you can plot earnings warnings of S&P 500 companies versus S&P 500 price. You can go back 20 years. I assure you it is never good. So that's one of the main things. So even though companies reporting good results, they are tamping down expectations for the future. Now, that could work in your favor because they're lowering the bar for themselves in future quarters. But the immediate impact of that is lower stock prices. So that's one. Two, and maybe this is the most

important thing I'm going to say. Technically speaking, we're now in a downtrend. We are below the 200-day in the S&P 500. We probably will finish April below the 200-day or below the 10-month moving average in the S&P 500. I understand there are people who look at that as random lines being painted on a canvas, but really, what that is, is a function of who's in control of the market, buyers or sellers. If we close April with the S&P 500 below its 10 month moving average, it will be for the first time going back to it will be for the first time going back to January. But really, you have to go back to June of 2020 for when we first broke above. And so you had this amazing 18-month bull market. It looks as though January was as good as it got.

February, you know the market fell apart. We tried to get back to those levels, get back to those highs, and we failed. And now you're going to finish the month below that 10-month. And what that does to psychology when combined with the earnings warnings that i'm talking about and then you combine the fact that there actually is an alternative you have a 10-year bond at roughly three percent um you have a two-year at a five-year two and three quarters a two-year that's right there so if you can earn something on your cash and there is some competition for stocks, it doesn't mean stocks are uninvestable. It just removes some of the

enthusiasm for some of the areas of the market that need buyers. And so, you know, I think those are the three things that are that are most weighing us down here. It also sounds to me as we look forward to what may happen next week, week that you think declines from a miss by either, let's say, a Microsoft or an Apple will be greater than a gain from a beat by either of those, just given where sentiment is in the market and we're such at what feels like a fragile state. Yeah, that's that's prospect theory. It's Kahneman and Tversky. We know that investors feel losses, feel the negativity from from losing money much more so than they feel positivity from making money. We know that empirically. So I want you to think about a scenario where where you're in Apple. It's like one of the only names in your portfolio that's hanging in there, right?

It's very close to its all-time high. It didn't fall with the ARK stocks. It didn't fall with all the growth names. You've got other tech giants like Salesforce and Meta that look like garbage. And Apple has been like a rock. It's actually better than Treasuries this year, right? Okay, great. Now what happens when they put up a great quarter and the stock goes down anyway?

Think about the impact that that has on professional investors who have been hiding there, on amateur investors who don't understand that there's not a linear relationship between good news and daily stock prices. That is what we're facing going into next Tuesday with Microsoft and next Thursday with Apple. And as I mentioned today on the half, I'm concerned about it. Yeah, I know. Stay with me. And we're so fortunate to have our next guest phoning in. BTIG's Jonathan Krinsky. Josh was just talking about the technicals. And this is Jonathan's line of work, and he does it certainly as well as anybody. Jonathan, you've been talking about the lack of a 90 percent down day for stocks. And I don't know what the final numbers are, but if we didn't get there today, we're darn close.

What do you make of the action today, and what does it tell us about what could happen next? Yeah, thanks, Scott. Well, we didn't quite get there. We finished about 87 percent downside volume on the NYSE. But the reason that's important is because in order to get that, even the defensive and the high momentum stocks, like your staples, utilities, mega cap tech, all the hideouts that really people were rotating into during the market volatility, those were ripe for a sell-off and ultimately in corrections, even though the generals or the leadership names finally succumb. And I think that's

what's happening right now. So the fact that we got close is interesting. You know, we would just say that even if you get a 90 percent downside day, it doesn't guarantee the low is in. But I think, you know, the action of late is certainly consistent with, you know, what we've been looking for. I mean, you've been talking about S&P. I'm looking at now you're what, at 42, 42.70 or so. You've been talking about the likelihood of getting back around the 4,000 range. Is that where you stand still today? Yeah, I think that's pretty fair.

Again, we've seen, you know, pretty significant selling onto the surface for a while now. And those areas of the market, you know, the semis, the banks, homebuilders, biotech, you know, those areas of the market continue to remain weak. Even if they've outperformed, even if they outperformed today, they still went down. And then those, you know, those really heavy hitters in the market is what's really going to probably get that final washout under 4000 in our view. So give me then. Yeah, go ahead, Josh, please. I'm sorry. Two things I want to ask about. RSI seems to be in kind of a no man's land. Today might have changed that to some extent, but 45 RSI on the S&P.

It's not washout-y enough. I feel like we need to see closer to 30, which is where we were in the first week of March before the big bounce. But maybe that's asking for more of a washout than we need short term. And then the VIX back at twenty seven, twenty eight, which is an area where I feel like you have to start making a buy list. That seems to be the top. Thirty seems to be the top of the new VIX range. What do you think about those two metrics and those two levels I'm referring to? Yeah, I mean, look, RSI is just one indicator. At the end of the day, everything's, you know, every indicator is a derivative of price. And so, you know, we'll certainly look at that if and when we get a little bit more oversold. But I think, you know, you have to

remember, we're at the same level in the S&P, essentially, that we were in late January. And so you could argue that we've kind of just gone sideways for a few months, worked off, you know, some of those oversold conditions. I think certain metrics are certainly getting a little elevated. The put-call ratios were up today. So we're starting to get a little bit of fear. And the reason that's happening, right, is because the hideouts in the market are finally getting hit. And so people felt okay when they could, you know, hide out in Microsoft and Google and, and Google and some of the defensive names. But once those start to get hit and there's nowhere to rotate into, that's when the fear

starts coming out. And I think that's why you're seeing the VIX elevate and put call ratios elevated. You've helped us understand these markets better today, Jonathan. I appreciate you coming to the phone so quickly on this Friday for us. I know we'll talk to you soon. That's BTIG's Jonathan Krinsky. So Josh Brown, it's interesting what you were just mentioning about at some point you get your buy list. What is starting to look attractive to somebody like you who looks in an awful lot of stocks in so many different sectors? What's getting to that point for you? What's going to be on the top of your list? I added two new ETFs earlier this year that I felt would be, were stronger than the overall market and had both a technical and a fundamental explanation for that relative strength versus

everything else that I thought could persist throughout the year. Doesn't mean I'll be right. I'm wrong about a lot of things, but so far so good. And I want to talk about those again today because I am not from the school of thought that says if you think the market is washed out, you go buy the biggest piece of junk you can find. That's not how I do things. I'm looking for stocks that were stronger than others through a dip or a

correction, because my feeling is that they may not have the biggest bounce, but their bounce will endure for the longest period of time. And I'm not a day trader, so that's what I need. So to that effect, I think U.S. Aerospace and Defense ETF, this is an iShares product, the ticker is ITA. If you're buying individual stocks, go look at the top 10. You know what's in there. These are some of the best stocks right now in the market. They're down. They're red like everything else, but not as red. And I think the fundamental story for why those have been outperforming all year is not going to change whether or not Jay Powell does 50 basis points,

75 basis. None of that's going to have anything to do with the earnings power coming these companies way. The other one is IEO. This is natural gas and oil producers, domestic stocks, also an iShares product. It's an index ETF. It owns all of the companies in Oklahoma and the Dakotas and Texas that are producing energy domestically. Again, a very obvious fundamental story for why those stocks have been great this year. And absolutely no reason why you should think that there's going to be much change there. I don't think the Fed can engineer enough demand destruction for gasoline, for example, that you would really see those stocks start trading down on negative headlines. You could see volatility in nat gas and crude prices that would affect these stocks. But I don't think you're going to be able to

materially change the supply situation, which is why those should continue to work. Record profits across the whole sector. How many other sectors can you really say that about in 2022? Not many. So ITA and IEO, I would be buying the weakness there, not looking for ARK stocks that are down 80%. To me, that is the wrong playbook. Yeah. I appreciate your time, my man, really. Thank you for being here and helping us through what was a difficult day in the stock market and certainly an ugly finish. You have a good weekend.

I'll see you on the other side. That's Josh Brown joining us there. Let's get to our Twitter question of the day now. We want to know which tech report next week matters most to you and the market. Is it Apple? Is it Amazon? Is it Microsoft? They all report next week.

We're going to have that all week right here, by the way, in the OT. You can head to at CNBC Overtime, cast your vote. We'll bring you the results as we always do at the end of our show. Speaking of, tech valuations are being scrutinized more closely than ever, especially as interest rates continue to rise. How much more pain is ahead? Let's ask our next guest, Rick Heitzman. He was an early investor in DraftKings, Pinterest, Airbnb, and he was just named to the Forbes

Midas list of the best venture investors in the world for the third straight year. He's founder of Firstmark Capital. He's with us live. It's good to see you. Congrats on being named to that prestigious list yet again. It's good to have you here. Hey, good to see you, Scott. Thanks for coming. Thanks for having me on. So I couldn't think of a better time to have somebody who makes their living investing in tech and not just, you know, early or late stage, but public markets, too. What do you make of the environment right now? It's really tough. It's really tough. It's tough in the public markets, in the private markets. It's getting even tougher. So usually there's a lag in the public markets as

people don't react to the pain right away. But we're starting to see the news that started to come out last November, continued to the first quarter, is now seeping into the private markets and people are getting very bearish, especially as the IPO market shut and people don't know when the liquidity is going to come. I'm betting that the private market valuation reset lags what happens in the public market. Now, you correct me if I'm wrong on that. But if I am right, how much more do valuations need to reset in general? So it does. The private markets lag the public markets by a quarter or two as it just the information has to get through the system. So that reset has to happen. Then there's going to

be another reset where people are trying to figure out what happens in the IPO market. This is the third biggest IPO drought of the last 20 years after the original tech downturn in the early aughts and then the great financial crisis. So without a healthy IPO market, you're seeing a discount based not only on the multiples, but liquidity factors, as no one knows when you're going to be able to get to a real public financing market and therefore liquidity for the private market investors. What's your sense on how much more valuations, let's say public valuations? I mentioned in the intro here that you were early in DraftKings and Pinterest and Airbnb. Unprofitable tech seems to be thrown out by the market. Investors don't

want that at all. How long does that continue? I think it's going to continue for a while. Even as we look at the IPO pipeline coming, we have a number of companies in the 22 IPO pipeline and getting feedback both from bankers as well as buy side firms. People are very focused on capital efficiency, very focused on unit economics, very focused on path to profitability. And without that path to profitability, people aren't getting public. So the discount's even greater for companies who are losing money. So if you think about delivery companies with bad unit economics or anyone else that hasn't been able to turn the corner on profitability, not only are they getting hurt badly in the public markets, but that pain is being felt even more so in the private markets.

So I think as you see the next round of IPOs coming, those are going to tend to be profitable companies who have great unit economics and have a path to profitability in the near term. Even so, I mean, the markets are likely to remain so rocky that I can't imagine a runway to go public that that's any shorter. If anything, it's just going to be elongated and elongated and continue to go further as long as the markets are as rocky as they are, as the Fed is doing what it does and rates go where they go. I think I think you're exactly right. Rates going up at all obviously provides another avenue for people to put their capital, the cost of capital and the risk-free rates going up. And all of last year's IPOs are currently on sale. So there's plenty of inventory out there. And very different from a year ago, when everybody was looking for access to IPOs,

people are now leaning out of it. So now we're coming into the time of year where you should be able to see an IPO calendar of things that are going to come in the rest of the second quarter before the summer holidays. And that calendar is very weak. So you might not see a return to a healthy private market at the earliest until post-Labor Day in the beginning of Q4. Oh, interesting. Before I let you run, what's the scuttlebutt in VC land on Twitter? What's going to happen? I mean, give me your insight. You've been around the block a lot in tech and the Valley. What's going to happen? I've talked to a lot of investors. It seems to me that Elon is talking to a lot of people on the convert side and the equity side and lining up some equity as well as convertible as well and

traditional senior debt financing. I'm actually surprised by the amount of people who are interested or at least kicking tires. So I would it feels like that if he really wants to get this done, he'll have enough partners and enough capital to get that done. The only concern would be, does he really want to go through the painful process of getting this done? But there is a lot of deep pocketed investors who are willing to line up behind them and write significant, significant checks on both the debt and equity sides. When you say you're surprised, is that because of the challenging fundamentals of the company? You're surprised there's that

much interest in a business that needs a lot of help theoretically? Exactly. So this would be a bit of a turnaround. And whether it's a cultural turnaround, a profitability turnaround, a growth turnaround, a product turnaround, and then you're getting a CEO, although being one of the best entrepreneurs of this century, also has two other jobs. So how do you kickstart that company without a management reset? And, you know, the pricing, it's being priced like it's not a reset. So, you know, at this pricing level, I'm not sure I would be an investor, but, you know, you can't fault Elon's track record. And it's definitely a premier asset where if you turn it around, there's significant upside. Rick, I appreciate the time very much. I'll see you soon.

Great seeing you. See you soon, Scott. All right. That's Rick Heitzman, First Mark Capital. He's the founder and partner there. Up next, finding opportunity. One big bear says it's a great time to double down on a few subsectors of this market. We'll find out where he's seeing upside next. We're back in overtime. It's time for a CNBC News update with Bertha Coombs. Hi, Bertha. Hi, Scott. Here's what's happening. The Pentagon expects at least 20 countries will attend talks focusing on Ukraine's long-term defense needs. The U.S. is hosting the event next week in Germany. A number of non-NATO nations have been invited. Russia claims it has hit dozens of targets in eastern Ukraine. Ukraine says the attacks include this one that killed

one and wounded seven others. Officials also say Russia shelled the main market in Kharkiv, a residential building and a wedding hall. Russia continues to deny that it is targeting civilians. Tonight on the news with Shepard Smith, see how one Ukrainian family escaped the violence. We follow their trip through Mexico to the U.S. That's right after Jim Cramer at 7 Eastern. And in Atlanta, Republican Representative Marjorie Taylor Greene testified that she didn't call House Speaker Nancy Pelosi a traitor. Then after being questioned further by the judge, she admitted she had. Greene's lawyer argues the statement was not meant to be taken seriously.

Greene is defending herself against a lawsuit that claims she should not be allowed to run for reelection, the suit, arguing she supported the January 6th insurrection in a way that violates a constitutional amendment barring candidates who supported a rebellion or insurrection. That would be the 14th Amendment, Scott. Back to you. All right, Bertha, thank you. That's Bertha Coombs. Tough week for stocks, as you know, finishing ugly as well. On pace now for their worst April in nearly a decade. No surprise to our next guest, because he's been bearish, Greg Branch with Veritas Financial Group. There's a look at your sector heat map, and it was red across the board. Every Dow stock down, every S&P sector in the red, and with sizable declines really across the board too, Greg, which I said is not really surprising to you. You think there's more pain ahead too. That's right, Scott. You know, last time we spoke,

you had another guest on who forecast S&P 500 above 5,000. And I think you'll recall I said that it is far more likely that we see a dip below 4,000 than we see 5,000. All of the macro concerns, I think, are well worn at this point. But at the end of the day, when I look for what I'm seeing for S&P growth at this juncture, I'm at mid-single digits, put 5% on what we saw last year, that gets us to 215. If you put in 18 times on 215, that gets us at 3875. So, yeah, I am expecting more downside from here as those macro concerns intensify and as we start to see some of the earnings growth slow and some of the concerns that I haven't even anticipated that are coming out in some of these earnings reports. Wow. So when Mester tells Sarah, you know,

that the Fed at least is in recalibration mode as it relates to interest rates, you still feel like the stock market has a long way to go before it meets the place where the Fed is, 38.75. That's fair value on the S&P to you? I think so. If we see 5% earnings growth and we're using an 18 times multiple, which I think is appropriate, if, as I think, we're going to see the beginnings of a recession end of this year. I think it's going to come sooner than most think. I think all of the conditions are right for it, quite frankly. And whenever we see energy prices double with a tightening Fed and the inflation where it is, it's always led to a recession.

And so I don't see any reason why this time will be different at this juncture. Well, if that's the case, why do you want me to buy financials? I mean, it's not like you're running for the hills in every sector. You like financials, cybersecurity. I can see the obvious reasons for that parcel delivery. But why the financials in the kind of environment that you just described? Right. So there's a couple of unique things with the card processors, right? The thing that we're seeing being restored is those cross-border transactions. We're just getting to the point where we're reaching pre-pandemic levels on those cross-border transactions, which are uniquely profitable for both Visa and MasterCard.

But at the end of the day, Scott, it's not that I want to sell and run from everything. What I want to look for is the opportunity. And the opportunities to me are in companies that exhibit three things. They exhibit sustainable, strong top-line growth, buttressed by secular tailwinds. They exhibit pricing power. And I think that this quarter is really a referendum on that. And lastly, they exhibit the management acumen and skill to manage the cost side of the business. What that leads to is strong margin integrity, if not gross and operating margin leverage, which gets us those double-digit earnings growth. And in an environment where we're not- Even during a recession?

Even during a recession. I'm sorry to interrupt you. Even during a recession? Yeah. Even during the beginning of a recession as it comes on, we'll go through some multiple contractions, Scott. But at the end of the day, if you're getting 20% earnings growth, if you take a couple of point hits on the multiple and still get performance if you get 20% earnings growth. And there are some companies that are going to admit that. Okay, I hear you.

I mentioned cybersecurity, which frankly seems like I don't need to go into a big explanation because it seems, you know, for obvious reasons that you would like those stocks. Parcel delivery sounds a little more interesting to me because, again, it sounds contrarian for the kind of environment that you just articulated you expect. And those stocks have already been under pressure. The transports have been weak. Why would I want parcel delivery stocks now? Again, a few unique reasons.

Number one, the industry is severely undercapacitated. And so we can enter a recessionary environment and the demand will come in line to where the supply is. You know, right now, long term demand is growing at about 10 percent. Supply is growing at 8 percent. That's why you're seeing both in the duopoly commit multi-billions this year to expanding their capacity. And so the industry is still severely undercapacitated, and they have such strong pricing power that at a certain point when they learn to use it, and obviously UPS is much better at this than FedEx is, you know, I don't believe that these companies should be trading, particularly in a duopoly, at 10 times and 15 times respectively if they're going to give us mid-teens earnings growth.

Lastly, and real quick, if you could, big tech next week, Apple, Microsoft. What do you think going in? Microsoft will be fine. I'm more interested in the names tied to the digital ad spend. I think we're going to see some weakness, Scott. And I think that YouTube will show some weakness. I think Facebook will show some weakness. And then it will be time to sharpen our pencils and decide, is this temporary?

Is the long-term story still intact? And if we believe that, we may have an opportunity. All right. I'm going to have you back on the backside of that. We'll see what they deliver, and we'll see what you say then. Greg Branch, I appreciate your time. Have a good weekend. All right. I'm going to have you back on the backside of that. We'll see what they deliver and we'll see what you say then. Greg Branch, I appreciate your time. Have a good weekend. I'll see you soon. You too, Scott. Up next, an ugly day on Wall Street to finish out the week, but there were some green arrows in the sell off. We're going to tell you what worked today. Believe me, there were some things, maybe not many, but some. And later, Mike Santoli joins

us with his last word. the key question for investors now following today's big drop. The OT is right back. Back in the OT, stocks finishing out the week with a big sell-off. Let's get to Seema Modi, who's tracking some of the big movers in our rapid recap. Hi, Seema. Hey, Scott. Stocks on the S&P 500 finishing out the worst week since mid-March, but there were some bright spots in today's sell-off, starting with Bed Bath & Beyond shares spiking in late trade. On news that the company is considering offers to sell its Bye Bye Baby business that, according to the Wall Street Journal, now the home goods retailer did agree to a strategic review

of its baby business as part of its deal with activist investor Ryan Cohen, who is a major shareholder. WeWork bucking the downward trend, closing up 3% after analysts at Mizuho initiated coverage with a buy rating, calling it an undervalued play on changing work preferences for employees. They say the stock can double in two years. And then there was this pivot to safety, right? We saw the defensive equipment player Lockheed Martin reporting better than expected earnings earlier this week. Saw its shares close up today by 1.4 percent and now higher by around 25 percent this year. Scott? All right, Seema, thanks. That's Seema Modi joining us there. Up next, playing defense. Investors getting increasingly cautious, but is one popular

sector now becoming too overbought? We'll debate that in today's Halftime Overtime in two minutes. In today's Halftime Overtime, defensive stocks have had a great run, as you know, as investors have grown more cautious. And while some now suggest areas like consumer staples are becoming too expensive to buy, Shannon Sikosha argues otherwise. If we are going into a slower economic environment, if people are feeling like there needs to be a flight to safety, as much as Steve said, Tina is gone. I still think there's going to be sectors where people are looking to hide out. And I think this is the place. Rob Seachin, co-founder of New Edge Wealth, a member of the Halftime Investment Committee, is with us live. Seachin, it's good to see you. Is this still a place that you can hide out

in Staples, for example, as part of the defensive trade, or have they just run too much? I think broadly they've run too much, Scott. But there's, you know, it's tough for me to get overly optimistic on any one sector. I think this is an environment where you definitely want to be stock-specific in your approach. And, you know, there is value within health care. We recently added UnitedHealthcare. As you know, I talked about it on the half. We've been an owner of Pfizer.

Regeneron was one of our top picks coming into the year. And so there's opportunities within the sectors. But if you were to twist my arm in terms of where we would be a bigger buyer, I think it's definitely in the cyclical areas of the market and those that are more service oriented because of the pent up demand for that. See, now this gets a little more controversial, right? I mean, just given, you know, the way we ended today, some of the concerns that are in the market about a slowdown in the economy initiated by the Fed, right? That's what this is all about anyway, right? It's an aggressive Fed

slowing down demand. You're overweight discretionary. Talk me through that. Why do I want to be overweight, a sector like that, if the Fed's doing what it's going to do? Again, it's really stock specific, right? So the the name the types of names we own our names like auto zone which is a specialty automotive parts retailer and supplier that has a tailwinds from an aging auto industry so i i you know and we own we own amazon obviously we own home depot those have been core names for a long time. But you've got this interesting tug of war between some really good things happening currently and some possible bad things on the horizon. And any time you have a market price in, the move that it's priced in from the Fed,

where you have a Fed chairman come on and say it's essential to restore price stability economies don't work without price stability a 50 basis point hike is on the table and then money markets uh price in a 200 basis point move by by september i mean markets are going to move on that. Markets are going to have a tough time digesting that. And then you have fears on the dashboard that surround the supply chains, both in China with lockdown policies and in the Ukraine with the war continuing to rage on. And I think that's an environment where the uncertainty is enough that you have to be defensive. But that doesn't mean you run for the hills. You certainly got to buy things that you like. And I would say you don't have to like everything

in every sector. Good stuff, Rob. Thank you. That's Rob Seach in New Edge Wealth joining us today in overtime on this Friday. Up next is Santoli's last word and the big question right now for investors. And coming up on Fast Money, the traders are breaking down today's ugly market action. And of course, they're looking ahead to next week's big tech earnings as well. We'll be right back. It's time for Mike Santoli's last word of the week. So it's ultra important now. It's going to sum it all up. Resilient. And I say that with a question mark. The sellers. With a question mark. And it's in the eye of the beholder, and it's how you define it. Treasury Secretary Yellen defined the U.S. economy right now as having been resilient relative to all the headwinds, all the known threats.

And I do think you can ask the question as to whether the stock market, just given everything that's been thrown at it, is showing resilience or is it showing some denial of really what is what is to come in terms of a reckoning? And I say this because where we close today on the S&P. That was a vote for denial, by the way. Apparently so. They don't ring a bell at the bottom, right? But where we close today in the S&P is slightly above where we traded down to January 27th, which was before the two year yield went from 115 to 270, before you added more Fed expected rate hikes, before Russia invaded Ukraine, before Facebook blew up twice and Netflix. So the point being that we've kind of priced in a fair bit.

Still, the question is, do you see any daylight to people saying, I'm going to start taking more risk right here. Given how we closed and looking ahead to next week, can we overstate how important those earnings reports now really are? Apple, Microsoft, Amazon, Alphabet and many, many others. Busiest week. Undoubtedly very important. And I do think mostly, though, as a barometer of what the market's willing to grasp onto. You know, you can go with the cliches such as markets don't bottom on a Friday, which is true often enough that it stays a cliche. It's not, strictly speaking, true. I do think a lot of people are looking at this point because these rallies have been such feeble attempts to the upside. You're looking for a little bit of a washout and a little bit of don't go down on bad news.

We'll see if we have that next week. It's not a great sign to close as ugly as we did on a Friday. It's not great. It doesn't dictate much. I think a lot of people would say, hey, let's see if we get a sloppy opening on Monday and see how you react to it. All right, good stuff. Good weekend to you.

Yes, you do. All right, that's Mike Santoli with his last word. Up next is our two-minute drill and a big bet on one tech titan reporting results next week. We'll bring you the name and the outlook when Overtime returns. Welcome back to Overtime. The results now of our Twitter question of the day. We asked which tech report matters most to the market next week. No big surprise.

It's Apple, 65%. Two-thirds of you think it matters most to the market. And after we close the way we did this week, you're probably right. Time for our two minute drill. Joining us now is Victoria Fernandez, chief market strategist, Crossmark Global Investments. It's good to see you. Two minute drill. Apple, you picked it last time. You're picking it this time. And boy, is a lot riding on it next week. Yeah, it sure is, Scott. But I mean, look, this is a name that you need to have in your portfolio. I know we have earnings coming next week, and there is some concern about the consumers in China. They're concerned over streaming after the Netflix earnings that we saw.

But this is a name, I mean, it's down 10% for the year. You can start building a position or adding to the position you have. You look last quarter, there was record demand for Mac products, for iPad products, and two-thirds of new consumers or sales were new consumers to Apple. So you talk about that ecosystem and bringing those people in where you upsell them on services. Service revenue was up 24 percent last quarter. So I think they're going to be pretty well situated, even though there's some obstacles in their way. You've added to your position as well. We have. Yeah. I mean, it's a core position for us, but we like it on these down days to go in and add a little bit. We added this week to Apple and we think that's the best way to approach it.

Small bites on down days to build your position. OK. Union Pacific, controversial stock right now. Why do you like it here? Yeah, we do like this stock. Obviously, they had earnings yesterday. They did well, beat on both the top and the bottom line. You're looking at revenue growth of over 17% year over year, and it was broad-based, right? There was volume growth. There was price gains. They were able to pass along some of the fuel cost with higher fuel surcharges and you look at the revenue per car load that was up 12 percent and coal was huge there was a 49 increase in the revenue in regards to the coal car loads and if we continue to have issues with energy i think you're going to see more of that but as supply chains continue to be better this

company should continue to benefit from that. And operating ratios are solid. So I think when you have a 2% dividend yield, this is a good name for your portfolio. I'll leave it there, Victoria. Thank you so much. You have a good weekend. We'll see you next week. We'll see what Apple delivers.

By the way, that near 1,000-point decline today leads us into next week, the busiest of earnings season, with Apple, with Amazon, Microsoft, Google. I will see you then in OT. Have a great weekend.