Closing Bell - Closing Bell Overtime: Stocks Plunge Across the World As Growth Fears, Fed Spook Markets; Google Loses To DOJ 8/5/24

Episode Date: August 5, 2024

Everything you need to know about why stocks tumbled today from Japan to the US, including from former Fed Vice Chairman Roger Ferguson, Morgan Stanley Wealth Management CIO Lisa Shalett and Apollo Global Chief Economist Torsten Slok. Plus, the DoJ’s victory over Google and Lucid CEO Peter Rawlinson on the latest quarter. 

That's the end of regulation. AMTD Idea Group bringing the closing belt. The New York Stock Exchange, MF International doing the honors at the Nasdaq. Red across the screens as a massive broad sell-off rocks investors in the U.S. and around the world. That is a scorecard on Wall Street. The Dow just closing down more than 1,000 points. Let's get to the action, though. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Fort is off today. We will be all over this sell-off throughout the hour with top market strategists from J.P. Morgan, Wells Fargo, and Morgan Stanley walking us through what could come next. Plus, we will also talk to former Fed Vice Chair Roger Ferguson and Apollo Global Chief Economist Torsten Slocke about these recession fears and whether the Fed is behind the curve. Plus, a real-time look at the health of corporate America when we get earnings from Palantir, Lucid, Simon Property Group, CSX,

and more. But first, let's get to this market plunge with our panel, David Kelly of J.P. Morgan Asset Management, Scott Wren of Wells Fargo Investment Institute. Gentlemen, it's good to have you on a day like this where we have every Dow component finishing the day lower. As I mentioned, the Dow down 1,000 points, the S&P lower as well, every sector in the red there as well. David, I'm going to start with you because we are hearing about recession fears. We are hearing about the Fed behind the curve. We're also hearing about the possible unwind of the yen trade, the volatility trade. There's geopolitics and politics in the background. What's driving this right now?

Well, I think it starts with the fact that the market has been up a lot really since October of 2022. We had a 50 percent move up. And so it was very overbought. And we were sort of waiting for an excuse for correction. So I think that's the first thing. Second thing is that in the last 12 days, views in the economy have moderated. I think we are looking at a softer economy. I want to make it clear, we're looking at a slowdown scenario, not a recession scenario. We think there's just enough between the psychology of what's going on and the actual weakness in some of the data, maybe to get you down to a one percent gdp growth rate for the second half of this year but there's no reason why that should push you into recession uh there's there's not

enough wrong with the economy for that to happen and in particular i think consumer balance sheets consumer income growth is strong enough to tie this through this um but for investors you know the other thing to look at is, yes, I think the yen carry trade is a big issue. We were talking with our colleagues in Asia yesterday about it. It's not just that the gap in interest rates between the U.S. and Japan is falling. It's that all this exchange rate volatility is making it very hard to, from a risk perspective, to actually borrow in yen. I think that is really part of the problem here. So I think that's contributing to it. But, you know, it's just a reminder to us all about being balanced, about the dangers and concentration. But overall, I'm much less

worried about the economy here than I am about some markets, some investors that found themselves offside today. OK, we have the S&P 500 as we settle here. It looks like closing down basically three percent on the nose. It looks like maybe fifty one eighty six, Scott. And of course, as I mentioned, quite a bit of selling that extended even beyond just the equity market. And we did see a lot of bond buying treasury yields coming off pretty aggressively today, too. Do you see it the same way as David? Well, you know, I will say I think David hit the nail on the head when, you know, we're up we're up almost 40 percent from the October lows. I mean, that just cannot keep going up. And if you cough up 10 percent, which I think we we did on the S&P

500 right at the open, you know, that's three steps up and one step back. So, you know, you have to put it in perspective of what's been happening in the market, what the expectations have been, and then you have to have a good feel, or at least based on your analysis, you have to have a good feel on what's going to happen with the economy. And we don't see a recession out there either. Could you have a string, two, three, maybe even four quarters of one and a half to two percent GDP growth? Sure. But that's not the end of the world. Earnings estimates, you know, really have been holding in pretty well. So for us, when you have people that were leaning as hard

towards certain stocks for such a long time, you know, you're bound to have some pullback here. But Morgan, as you and I have talked about before, you know, we're looking for opportunities. We've been patient here. While the market's been going up, we've been trimming tech. We've been trimming communication services. We've been buying some other sectors that we think are undervalued. So we're trying to be patient here. Our clients have a good amount of cash on the sidelines. And so we're looking for places to step back in here because we don't think it's the dire circumstances that the market seems to suddenly have latched onto since last Friday's labor report. Okay. And of course, we've seen tech really leading the selling here in

recent days. It was the same scenario here as well. I want to dig a little deeper on that. But first, David, OK, maybe maybe recession fears are overblown here. Maybe this is just an economy that is, in fact, slowing down. But it raises the question, does slower economic growth equal slower earnings growth? And I ask that knowing that the second half of the year for U.S. stocks, earnings projections are incredibly high, high by historical standards. Yeah, I think you will get some slowdown in earnings growth and for three reasons, really. First of all, we are seeing slower GDP growth. So that takes a little bit out. But also we're seeing lower inflation growth and lower inflation. That's a good thing, but it does limit the growth in revenues, which will make it just a little harder to hit those nominal earnings targets.

And the last thing is that if we do have softness in the economy towards the end of the year, there's a little bit of a sort of kitchen sink habit that companies have of throwing every piece of bad news into their earnings reports at the end of the year and blame it all on the economy. So there's a danger that that could also hurt earnings growth a little bit. So, yes, I think we should probably trim our estimates for the second half of this year a little bit in terms of earnings. But overall, you know, I think what the economy has shown is that American companies are extraordinarily good at generating strong profit growth in a mediocre growth climate overall. And I expect that to continue. So, you know, I think the outlook for earnings

in 2025 and beyond remains very good. OK, so, Scott, what would you be buying here? What would you consider quality? Well, I think I think you have to buy large caps. This supposed rotation into small caps prior to this last few days. We're not big believers in that. But if we look at the sectors, you know, financials, materials, industrials, health care, you know, energy, we don't think oil is going to trade much lower than it is right now. Kind of 70 is some support right there in our minds. So those sectors clearly for much of the last year have been trailing tech and communication services. So those are the ones that we think over the course of the last year have been trailing tech and communication services. So those are the ones that we think over the course of the next 12 to 18 months are going to do better. And as I said, you know, if you don't think the economy is going to see a recession,

you think the Fed's going to do a little bit of easing, and you think maybe these global economies might be a little bit better, let's say, by the second half of next year, that's going to help S&P earnings. So we've been below consensus there. Some people may have to bring their estimates down for the second half of this year. I think they're certainly going to have to bring them down for 2025. We're 260, which at one point that was 20 bucks below where the street was. So I think there's some earnings adjustments that are going on. But, you know, overall for us, I mean, we've been looking for a pullback. You need to have a plan. You need to have some levels where you're going to stick your toe back in the water and put some of that cash to work. So that's what we're looking out for, Morgan. Okay. Well, speaking of earnings,

we're starting to get earnings right now. And the first one we'll bring you is Palantir. Those results are out. It was a beat and a you is Palantir. Those results are out. It was a beat and a raise for Palantir, the AI software company, reporting earnings of $0.09 per share. That was a penny better than estimates, up 80% year on year. Revenue of $678 million, also better than estimates for $652 million. Q3 revenue guidance, that was coming in at $697 million to $701 million. That's also higher than the street.

Full-year guidance raised $2.74 to $2.75 billion with adjusted operating income from operations, U.S. commercial revenue, and adjusted free cash flow all also raised for the year. Now, for Q2 specifically, U.S. commercial revenue, that was up 55% year-on-year to $159 million, better.S. commercial revenue, that was up 55 percent year on year to 159 million, better than expectations. U.S. commercial customer count up 83 percent to 295 customers. A reacceleration in U.S. government revenue as well, 24 percent year on year, 8 percent sequentially to $278 million.

And Palantir closed in all 27 deals over $10 million in Q2. Now, CEO and co-founder Alex Karp telling me the results indicate to the market that, quote, yes, AI is valuable. Yes, you can stick by your the West is superior and then you can organize your business around that and you can make money and do very well, which is what no one believed. On geopolitics, Palantir is a software prime contractor. He calls the environment, quote, really crazy dangerous, saying, quote, moving this into a safer position is going to be forcing our adversaries to understand we're serious and we have methods and means that they don't have. Now, on commercial growth, Palantir's AIP boot camps continue, but Karp telling me, quote, our serious customers want to move so quickly into production, we can't do as many. On whether winners and losers in AI are already

emerging, this is certainly something the market is debating right now. Carp saying, quote, very few people have figured out how to do this in a way that is financially viable, meaning the people providing it make, providing it make, become profitable. I mean, the single most important number for our Palantir AI narrative is that we're profitable and the revenues are going up. Bottom line, as investors debate how and when all of this investment in AI will pay off, for Palantir, it already is with another very strong quarter across the board. And you can see shares bucking today's trend up more than 18 percent right now, shifting gears a little bit of pun intended. Lucid results are out. Phil LeBeau has those numbers.

Phil. Morgan, in the second quarter, this is a wider than expected loss from Lucid, a loss of 29 cents a share. The street was expecting a loss of 26 cents for share. The revenue did come in better than expected at $201 million. The street was expecting revenue of $192 million, but the EBITDA loss for the quarter was $648 million, wider than the expectation of $561 million being the EBITDA loss. That's on an adjusted basis. Lucid did affirm its 2024 production target of 9,000 vehicles and a couple other pieces of news that have come out from Lucid in addition to the Q2 results. A Saudi investment company, a subsidiary of the Saudi Public Investment Fund, it is committing $1.5 billion to Lucid.

Yes, this is another commitment from the Saudi Public Investment Fund, or an arm of it, to Lucid. That $1.5 billion will include this investment company buying $750 million worth of Lucid convertible shares. In terms of liquidity, Morgan, they end the quarter with $4.28 billion. And just one last stat to keep in mind, and I know you're going to be talking with Peter Rawlinson in a little bit. When you take that adjusted EBITDA loss of $648 million and you divide the number of vehicles sold, they lost more than $270,000 per vehicle sold or delivered in the second quarter. Morgan, back to you. Wow. That makes Ford's losses look like a very piddly when you put that in perspective. Okay. Phil, thank you. Shares of Lucid, though, are up 8 percent right now. And we are, in fact, going to hear more about Lucid's

results when CEO Peter Rawlinson joins us in just a few minutes before the call with the streets. Gentlemen, I'll go back to you on this market as we do see some big moves, but this time higher in the after hours trade. David, how much hinges on the Fed cutting, and cutting perhaps more aggressively than the Fed has at least up until now signaled that it would this year? Well, I think Fed cuts could help the market. I think the problem is that in the short run, Fed cuts don't help the economy. When the Fed cuts interest rates, it's cutting interest income for consumers. You've got

$6 trillion sitting in money market funds. It also scares people when the Fed cuts rates. People think, well, what does the Fed know that we don't know? But most importantly, it tells people they should wait and see before they borrow money, because if the Fed starts cutting rates, they're surely going to cut them some more. So there is a J curve effect to Fed ease. And so I'm not cheering on the Fed in terms of cutting rates i'd i'd rather they take it easy but i do think that it's at the moment if the data remains somewhat soft it's likely they'll try to get to neutral faster than they otherwise would have i don't think they think the economy's headed for recession either but it might make sense for them to get to

say a four percent federal funds rate faster so we may see you know maybe 100 to 150 basis points in cuts before the end of the year whereas before this we may see maybe 100 to 150 basis points in cuts before the end of the year, whereas before this, we might only be looking at 50 basis points. But it won't help the economy. The reason the Fed needed to normalize long ago, the reason the Fed should never have got up to 5.25 to 5.5 is because of this exact moment. It's because when you cut rates, you actually slow the economy initially. So you really don't want to get in a position where you're having to cut rates from too high a level quickly to try and help out a slowing economy.

Yeah, the long and variable lags that we have talked about for the better part of two years, I suspect. David Kelly and Scott Wren, thank you both for kicking off the hour with me with all the major averages lower on this Monday. Let's turn now to Google, falling hard along with the rest of tech today

and taking another dive late in the session on news that the government's antitrust case against the company. Deirdre Bosa joins us with the latest regarding that. Hi, Dee. Hey, the news, Morgan, is that Google lost. Here's a line from the court's ruling that sums up the judge's position. He says Google is a monopolist and it has acted as one to maintain its monopoly. This is a major victory for the Department of Justice and the Biden administration regulators at large that have brought a wave of antitrust cases against big tech. Google's by far not the only one. In this particular case, the DOJ uncovered a deal between Apple and Google worth tens of billions of dollars

and argued that that allows Google to illegally monopolize the market for online search and related advertising. Judge Emmett Mehta, during closing arguments, questioned how other market players could afford that kind of deal and displaced Google. Remedies or penalties not yet known, this initial finding only makes Google liable. Google goes to trial against the DOJ a second time in September, this time over ad tech. This was regarding search. Regulators here accusing the company for monopolizing the digital ads market, raising costs for advertisers to its own benefit. There's Apple, Amazon and Meta. They each face their own lawsuits from antitrust

enforcers. Today's ruling could influence those cases. We just got a statement from Google itself saying we plan to appeal as this process continues. We will remain focused on making products that people find helpful and easy to use. So we won't see any immediate impact on the consumer or advertisers. But as we talk about a lot in this regulatory action, could create more scrutiny, could make it tougher for deals to get done or simply distract from the AI race at large. For years, we've talked about the regulatory risk, and now you see it actually coming to fruition. Something else for investors to digest on this very busy market day. Deirdre Bosa, thanks for bringing that to us.

We're going to get back to the macro picture now. Stocks suffering their worst daily drop since 2022. Morton's Jeremy Siegel making the case for dramatic action from the Fed this morning on Squawk Box. This may surprise me. I'm calling for a 75 basis point emergency cut in the Fed funds rate with another 75 basis point cut indicated for next month at the September meeting. And that's minimum. But a short time later, Chicago Fed President Austin Goolsbee pushing back against that idea in an interview with Steve Leisman. I've known Jeremy for some time. I'm a great admirer of his work. He does have a kind of a market-centric view that the Fed should react to that.

And spiritually something. Inside, I'm totally the opposite. My thing is the law doesn't say anything about the stock market. It's about the employment and it's about price stability. And let's maintain financial stability as that's going. All right. Well, joining us now is Roger Ferguson. He is the former vice chairman at the Fed, as well as former TIAA CEO and a CNBC contributor. And it's so good to have you on on a day like today, Roger. So thanks for being here. Thanks for having me.

I want to get your thoughts on the commentary we just heard from Siegel and Goolsbee and how you see it right now. So I think I'm more aligned with what Goolsbee had to say. The Fed should focus on its mandate. And also, look, let's put this in context. Markets are down 2 or 3 percent. Markets are not down 20 to 25 percent. Markets seem to be functioning smoothly. And so I think we need to put all of this in perspective.

The final point is the Fed was very clear through Chair Powell at the last meeting that they do see risks from both sides of their mandate. So I think they're quite attuned to the possibility of the economy slowing more than they'd like. And I think they'll be prepared to take the kinds of actions that are called for as inflation itself starts to ease. Okay. So Tim Dewey over at SGH was talking about the Fed's reaction function in his note today. And one of the things he was noting that if inflation continues to fall here, if the unemployment rate continues to move higher and that it's already pretty close to the Fed's own forecast right now, that that in of itself may mean that you need to see more cuts,

not necessarily because you're going into a recession, but because that's basically where you need to go to normalize rates in this market environment. Is that the right way to think about this, to be tracking the Fed's reaction function? I think roughly it is. So first, they do not want to see conditions become more restrictive as inflation starts to reduce. So that's one element that says, yes, it's certainly time to put cuts on the table. And by the way, Chairman Powell indicated at the press conference that the possibility of cutting even at the last meeting was mentioned by some participants. And then, yes, you should add to it the fact that, indeed, as the economy slows, they're not looking to see the economy

slow dramatically, particularly if inflation is already coming into control. So their job is not to throw the economy into a reverse. Their job is to get inflation under control, moving it consistently towards 2 percent. And as they do that, that does give them the freedom to reduce rates. So I think he's got the reaction functioning roughly right. The question, of course, is judgment, 25 basis points, when, how, et cetera. But I think the statement of the reaction function is accurate. I realize we've seen some soft data in the last couple of weeks,

and everybody's pointing to the jobs report last Friday and ISM and claims ticking up. But today we had a pretty strong, stronger than expected services ISM read that also included better than expected labor component too. So it raises the question, if we're actually heading for a slowdown and still on track for a soft landing and a recession is not necessarily here or the fears are warranted yet, what would you be watching to think that maybe that narrative actually changes? Well, look, I think I'd like to repeat what Chair Powell had to say, which is that they are data dependent in the aggregate. They're not a data point dependent group. And so I think the overall focus should be on inflation under control. The answer seems to be,

yes, moving in the right direction. Want to make sure that things do not get to be too soft. But as you point out, the data are really pretty mixed. You know, a few weeks ago, we were talking about a GDP print that was much firmer than people had thought. Now we're talking about a labor market print that's a little weaker. So I think the issue is, what is inflation doing? And how are we seeing the early signs of how consumers are doing? And is the labor market just getting back into balance, or is it starting to really become concerningly weak? And right now, I think it's roughly a good story. Recession fears, I think, overstated. And indeed, I would say soft landing if they start to cut rates, as they've indicated they intend to do at the September meeting. After that, it's meeting by meeting and looking at the totality of the data as it comes in.

OK, Roger Ferguson, thank you for joining me. Thank you. Well, still ahead, YMorgan Stanley's Lisa Shallott says the market action is, quote, healthy and the surprising places where she is buying the dips. Plus, we will take a closer look at the carnage in crypto today and the downside support level that one expert says is imperative to watch. And the CEO of Lucid joins us with his read on big ticket spending. As that stock jumps on results, you can see they're up about 9.5% right now.

Overtime, we'll be right back. Welcome back. We have more earnings to bring you. This time it's CSX. Those results are out and it is a beat on the bottom line with earnings coming in at 49 cents per share. That was a penny better than estimates. It looks like revenues were basically in line, 3.7 billion, which is what the street had been anticipating. Volumes up 2 percent. Prices down 2 percent. Volume had been expected to go up about 1.6 percent. So it was a little better than expectations.

Operating ratio, this is a key metric for railroads, 60.9%. That was better than street expectations for a full year 24 guidance. Low to mid single digit total volume and revenue growth in the second half of 2024. Also, continued opportunities in merchandise, intermodal export coal. They call out here and favorable setup for strong incrementals and meaningful year-on-year margin expansion in the second half of 2024. You can see those shares are popping right now in these results as well, up about 5.5%. Don't miss my exclusive interview with the CEO of CSX, Joe Henricks. That will be tomorrow, kicking off at 10 a.m. Eastern on Squawk on the Street. In the meantime, let's get another check on Lucid.

Those shares are higher in overtime after posting a revenue beat in the second quarter results. Joining us now is Lucid CEO Peter Rawlinson. Peter, it's great to have you on. Walk me through the quarter here because there was quite a bit to work with and quite a bit of news. But let's start with the adjusted loss. Let's start with the fact that revenue came in better than expected and you did reaffirm your production guidance. Walk me through the quarter. Indeed, we're on the back of a second successive quarter of record deliveries. We delivered nearly 2400 cars and this outsold significantly our core competitors, namely the storied German brands. And we're seeing strong orders continuing

throughout this quarter. Okay. So pricing, is that something you've been able to continue to hold steady and toe the line on? And I ask that knowing that more broadly across the EV space, we've seen softer demand in recent months. Well, we've been able to introduce progressively more affordable versions of our cars.

Our car starts now at $69,900 with the Air Pure, which is the most energy efficient car in the world ever. And so I think this is finding a whole new range of purchases. And also we're debunking the myth that our cars are unaffordable. As Philip Bo was reporting when he broke down the earnings just a short while ago, he said if you take the adjusted loss and you calculate that against deliveries. It comes out to about 270,000 per vehicle that's being lost. I wonder what it's going to take to bring that down and turn to profitability. In a word, it's going to take scale. This is all about scale. We're growing our order book for

Lucid Air. We're about to launch our SUV, the Lucid Gravity, which is going to have a massively more significant TAM. And we're already well on the way in our engineering of our midsize platform. We're also building out a factory in Saudi Arabia. And we're really very close to have completed a major program expansion in our factory in Arizona where we've vertically integrated our powertrain into the same roof we've vertically integrated our logistics center and we brought even stampings in-house so make no mistake a lot of this expenditure is going in long- investments for the future. This is a

long term play. The PIF subsidiary investment, one point five billion dollar commitment. Why now? What does it enable? Well, isn't it nice on days like this with uncertainty on the markets that it shows the value of having a long-term strategic partner in the PIF. And that's what truly differentiates Lucid as a company. We've got long-term strategic partnership, which transcends a mere financial investment. We're a cornerstone of helping Saudi Arabia achieve its audacious Vision 2030. And you combine that with the world's best technology, the most advanced EVs on the planet. And that technology, make no mistake,

is an enabler for costs down in the future. It's not the case that our tech costs more and that's why we're losing money on the cars. That technology will enable us to make more cost-effective cars in the future, and that's key. Okay. We'll be watching for it. Peter Rawlinson of Lucent, thanks for joining us. Thank you.

Shares up about 15% right now in overtime. It's time now to get to a CNBC News update with Bertha Coombs. Bertha. Morgan, Donald Trump's sentencing for his conviction and related gag order in his New York hush money case will move forward before the election. The U.S. Supreme Court rejecting a long shot challenge from Missouri's Republican attorney general to stop the upcoming sentencing until after the election in November. Meanwhile, Supreme Court Justice Clarence Thomas failed to publicly disclose more travel on GOP mega-donor Harlan Crowe's private jet. Senator Ron Wyden asked Crowe's lawyers in a letter for more information on the 2010 round-trip flight between Hawaii and New Zealand. The New York Times first reported the news. The letter is part of an inquiry by the Senate Finance Committee opened after Thomas failed to report multiple trips provided by Crow,

prompting calls for ethics reform at the court. And social media platform X will close its flagship office in San Francisco, according to an email seen by The New York Times. Ex-CEO Linda Yaccarino told workers they would move to existing offices in San Jose. It comes, as Musk said last month, that he would move the company's headquarters to Texas. Morgan, back over to you. Perhaps it was inevitable then. We'll see. Bertha Coombs, thank you. Up next, Morgan Stanley Wealth Management CIO Lisa Shallott on her take on the big market sell-off and the specific areas of this market where she is buying the dips. Plus, Apollo Global's Torsten Slocke told us last month that the economy was doing well and there was no reason for the Fed to cut rates at the July meeting. We will ask if he is sticking by that

thesis today. Overtime. We'll be right back. Welcome back. Stocks tumbling today as part of a global market sell-off centered around economic slowdown fears. Should investors buy the dip or expect more pain ahead? Joining us now, Lisa Shalit, Chief Investment Officer of Morgan Stanley Wealth Management. Lisa, it's good to have you on. And let's start right there. More pain or garden variety correction here just perhaps happening very quickly, given the fact that you are in the middle of summer with not a lot of volume and a whole lot of algorithmic trading to back it up? Yeah, look, I think that there are a set of factors that catalyzed the sell-off beginning, you know, in the middle of last week. But this is a garden variety correction that really started from a place of extraordinary valuations. And so, you know, we're not surprised given the relative concentration of this market, given the hype around the generative AI theme

that, you know, we have long suggested is questionable in terms of the timing of it coming to fruition. We're looking now forward at third quarter earnings when analysts expect an acceleration in earnings expectations from here. So we're not surprised at what we're seeing in this market at all. It was more a question of when it would happen as opposed to if it would happen. So what would you be buying right now? And what are you telling clients that call you up on a day like today where the VIX touched 65 at one point? Yeah, well, look, I think this morning there was an element of, wait a minute, let's wait and watch. But the most constructive thing that happened today was really the stability in the United States Treasury market. That really gave us

some comfort and confidence. The other thing we were looking at was the credit markets. Credit spreads continue to be extraordinarily well behaved. And so, you know, our perspective is that the call for a soft landing is still completely on track. The United States economy is not rapidly sliding into recession at all. And so we're looking to buy some of those high quality, large cap cyclicals that we've been focused on, things like financials, industrials, energy, materials, and barbelling that with some quality stable growth like healthcare, like some residential REITs, like utilities. These are quality defensives.

And there's really a lot to buy. The things we're avoiding really are consumer discretionary and some of those high-flying, very expensive tech names. I mean, you talk about those sectors, especially the cyclical piece of this puzzle. Doesn't sound like you think a recession's in the cards, at least not right now. I would argue the bond market today and treasury yields falling to 2023 levels would suggest otherwise. Is that trade overdone? Do you expect yields to inch up from here? We do. Look, this is a bond market, a Treasury market that has moved extraordinarily far very fast on literally a few data points. I think you mentioned earlier in the program

that today's macroeconomic data points actually were quite good, you know, focused on the ISM services component, where not only was the level of activity better than we thought, but so was pricing, so was employment, and so were orders. So we don't think the U.S. economy is falling out of bed, and we would not be shocked to see yields back back up, particularly on the long end, where they've moved very far, very fast. OK, do you have a similar sentiment when you look around the globe, especially something like Japan, where we we've had some technical positioning that that came out of the the Japanese market because the Bank of Japan has been so accommod know as this yen carry trade. With the Bank of Japan finally moving, that trade has kind of violently unwound. Our view is that Japan remains an extraordinarily interesting market to invest in over the next two, three, five years. We are aggressively buying that market today at these discounts that we've gotten over the last two days. Our expectation is that we are going to see a stabilization in currency markets.

The yen will continue on the margin to strengthen. But, you know, the worst of the repricing is behind us. And our view is that, you know, the focus on shareholder value creation, the focus on improving return on equities, the government sponsorship of pro-equity programs with, you know, their sponsorship of tax-deferred retirement accounts, these are all things that are very supportive of the Japanese equity market over the next couple of years. OK, Lisa Shallott, thanks for joining me. Absolutely. After the break, Apollo's Torsten Slocke breaks down why he says the economic data does not justify the big sell off in equities and credit.

And the one factor he says is the source of the global pullback. And tonight, don't miss a CNBC special report on this market sell-off. That's at 7 p.m. Eastern. Welcome back. If you're just joining us, it was a brutal day for the bulls on Wall Street. The Dow closing lower by more than a thousand points. The S&P 500 falling three percent and the Nasdaq and Russell 2000 both plunging nearly three and a half percent. Joining us now is Torsten Slock, chief economist at Apollo Global Management.

Torsten, thanks for being with me today. Part of what is, I guess, being propelled with this narrative around Wall Street is this idea that or fear that the Fed is behind the curve and cutting, given the fact that we have seen softening economic data. How do you see it? I think that's premature to come to that conclusion. I mean, think about it. Literally just before Friday, the narrative was this is a soft landing. It's supported by inflation coming down. If you look at the data, as Jay Powell says, in the totality of what's been coming in, you've seen GDP growth in the second quarter was 2.8. You saw retail sales in June that was strong. If you look at the daily data for how many people travel on airplanes, it's still strong. The daily data for

how many people in open table eat at restaurants is still strong. The weekly data for retail sales, for hotel bookings, Broadway show attendance across the board. You're just not seeing this economy slow down in the significant way that markets are implying. So that's why looking at, again, as Jay Powell said, the totality of the data, we think that it's misguided to price in all these cuts. Bespoke today said based on the level of the two year Treasury yield, markets are now pricing in 175 basis points of rate cuts from the Fed. It's a huge amount. Is that possible without a recession? I would say no, and I don't think we'll have a recession. I still think it will be a soft landing. Of course, if the market, meaning the stock market, continues to go down over the coming weeks and months ahead of us,

of course, then you will have a self-reinforcing dynamic where it will ultimately be at least raising the risk of a recession. But where we sit today, the data is simply not justifying the significant amount of cuts. The market is making the same mistake that it did at the beginning of the year when we were pricing in six or seven cuts, because the data where we sit right now, just look at ISM today, it was up. ISM prices paid was up here for services and employment was also up. So yes, we have a light data week. Next week we get retail sales. We also get inflation. But at this point, it's just simply premature to come to the conclusion that the economy is sliding into a recession. We keep talking about things like the yen carry trade and the technicals and some of the dynamics that are at play, not just in in the U.S. equity market, but in other markets across

the globe right now. And it highlights a key point, which is that there is a big divergence afoot currently between the biggest central banks of the biggest economies in the world, Japan obviously being case in point today. But how much is this affecting the trading we are seeing on a daily basis? So that's right, Morgan. I think this is really, really important. And exactly as you're highlighting, it is very unusual. We literally had within a few days that one major central bank, namely the BOJ, was raising interest rates and another central bank, namely the BOJ, was raising interest rates and another central bank, namely the Fed, was talking about rate cuts. The implication of this over the last three weeks has been that dollar-yen has moved from 161 to currently 144. That is a major move for anyone

who's borrowing in yen and investing in the U.S. And it used to be the case that the carry trade was simply someone borrowing in Japanese fixed income and investing in US fixed income, most notably in treasuries, but also in investment grade credit. But that trade began to run out of steam when people started widening out and saying, hey, maybe from an implied vol perspective, I should also be taking some of my borrowed money from Japan and invested in the Magnificent Seven. So that's why we've seen the carry trade widen out to not only be in fixed income, to also be in equities. And that's a very important reason why that dynamic is now beginning to reverse the trades that are exactly one of the key reasons why the Magnificent Seven has been underperforming so much,

simply because the carry trade is unwinding as a result of dollar-yen moving so significantly in such a short period of time. Some good context there. I do want to ask about credit spreads because it's something you've done a lot of work on. We've talked about it in the past. We did see a pop there as well. How closely are you watching that now? Absolutely. If you look at IG spreads and high-yield spreads, they are now basically back to where they were in the beginning of the year.

So that's a different way of saying that in credit, you had a significant drawdown in the last few days as a result of spread widening. What's, of course, very important in that context is that if we do get a hard landing, well, certainly then equities should be lower and credit spreads should be wider but given that the incoming data again continues to justify a soft landing we will have to wait and see for the next several weeks whether the data is still as steady as it's been for literally the last really 12 months but if we do get a sharper slowdown then certainly spread widening and credit can be justified and lower equities can be justified but at this point there really is very little data other than the small increase in the unemployment rate and the slightly lower nonfarm payrolls number we got on Friday that talks about where we are going to get a hard landing. It really still continues to look very much like a soft landing. All right. Investors are going to have to sit on their hands this week.

It puts more onus on the claims data we do get Thursday morning as well. In the meantime, Torsten Slock, great to have you. Thanks. Thanks, Morgan. Up next, a rundown of the biggest overtime movers after today's massive global sell-off. Plus, we will get you set up for tomorrow's trade when a top technician lays out the key market levels to watch ahead of the open. Welcome back. Stocks tanking in the regular session, and we have some big earnings movers here in overtime. Well, Palantir surging after beating on earnings and revenue with strong full-year guidance as well,

raising the guidance up 15%. CSX also getting a boost, topping earnings estimates, matching on revenues. Those shares are higher. And Avis Budget is falling after missing earnings and revenue. Those shares are down about four and a half percent right now. Plus, HIMS and HERS earnings are out. And that stock, it's plunging. Brandon Gomez has those numbers. Brandon. Yeah, Morgan, we're covering a little bit from the double digits that it was down just moments ago. But still a good quarter for the company, a beat on the top and bottom line. Expectations for Q3 in the fiscal year coming in ahead of expectations.

So why is the stock down? Well, this might be a spillover from last week when Eli Lilly, CEO, announced that the FDA would be removing some of those drugs that were in short supply from the FDA's short supply list. I did just get off the phone with the CFO. You know, he told me he remains confident in the ability for the personalization aspect of our platform to continue to be able to offer those drugs, although that was a stipulation that allowed the drugs to be offered in the first place, the compounding of those drugs. We'll continue to follow it and be tuning into the earnings call in just a little bit. Morgan. All right, Brandon Gomez, thank you. After the break, a key market level that you need to watch ahead of tomorrow's open, plus a closer look at the damage done to Bitcoin's chart and the

major support level to keep in mind there on a today where liquidity was in focus. Stay with us. Welcome back. The major averages suffering their biggest one-day drops since 2022. Joining us now with the levels to watch ahead of tomorrow's open is Oppenheimer Head of Technical Analysis, Ari Wald. Ari, it's good to have you on. I mean, NASDAQ's firmly in correction territory. S&P 500, not so much. We finished the day at about 51.86 here. What's the level you're watching? I think all eyes are on that 200-day average. It comes in at the 5,000 mark. And I think that's what's notable. You take a step back, S&P down about 9%, 10% from its all-time high, correcting into that 200-day average. We see that as a correction and an uptrend and a near-term opportunity to buy what

is still an intact bull market cycle. I think there are some kind of changes underneath the surface that would suggest that we're later in this bull market cycle than what we previously thought. Okay. The relationship between the S&P and the VIX. What are you seeing there? The VIX is the amazing count. It got up to 65 today. I think what's notable is that reading was only exceeded looking back since 1990 during the depths of the great financial crisis and the COVID lows as well. So it's typically a contrarian signal. We see that as an indication that a market low should develop over the next week or two, if not the coming days. And I think that indicates so at the very least, too late to sell. And for long term investors should be looking to buy some core positions right here on this volatility.

OK, and how about Bitcoin? We know it tends to be linked to liquidity in the market. It dipped below 50,000 at one point in trading today. It's back up a little above 54,000 right now. What does the chart tell you? Well, the uptrend is broken. I think it's too early to say it's a downtrend. I just see directionless range bound trading between around 48,000. That was the prior breakout level. Very often prior resistance becomes support. And the 61,000 on the upside is the 200 day average. So it has fallen below that key trend line, that demarcation line between bull and bear. And that could cap upside for the time being. OK, Barry Wald, thanks for joining me. Some key charts for us with the

technicals, certainly a big part of the story here on this Monday sell-off. We had every major average finish the day lower, the S&P down 3%, the Dow Industrials down more than 1,000 points, 2.6%. Every component in the Dow in the red, every sector in the S&P finishing lower in the red as well the Nasdaq composite down about 3.4 percent in the Russell 2000 also taking it on the chin down about 3.3 percent crude was lower copper was lower gold was lower crypto lower Treasury yields lower hitting their lowest levels uh depending on which note you're looking at since 2023 um and we'll continue to watch this carnage tomorrow for the Dow, the S&P, the Nasdaq. The worst day for all three averages since 2022.

We're going to talk more about Bitcoin tomorrow with MicroStrategy's Michael Saylor, but that's going to do it for us here on Overtime. Fast Money begins right now.