Closing Bell - Closing Bell Overtime: Stocks Slip in Late-Day Sell-Off 12/9/22

Episode Date: December 9, 2022

All three major averages finished at session lows after hovering near the flat line for most of the day. Now, investors are gearing up for a busy week ahead. Josh Brown from Ritholtz Wealth Management gives his forecast for what’s at stake. Plus, top technician Chris Verrone breaks down the three charts showing serious strength right now. And, Bank of America’s Francisco Blanch drills down on the big slide in oil.

Welcome to Overtime. I'm Mike Santoli in for Scott Wapner. You just heard the bells, but we're just getting started. In just a bit, we'll all speak with Bank of America's top commodity strategist about the recent sell-off in oil and where he sees prices headed from here. And later, a top technician is bringing us his three best-looking charts in the market right now. We begin, though, with our talk of the tape. The late-day drop into the close, stocks selling off in the final minutes of the trading session. Here you see the Dow down 300, all three major averages finishing just about at session lows. The move comes despite stocks hovering near the flat line for most of the day, following a hotter-than-expected inflation read that was in today's producer price index. The focus now turns to next week and one last

critical inflation report hitting just a day before the Fed's final rate decision of the year. Joining me now with your setup into next week, CNBC contributor Josh Brown, CEO of Ritholtz Wealth Management. Josh, good to have you here to wrap things a bit. I mean, I guess if we get the general state of play. This rally since October it's a nice one it went up to basically where it would have been expected to stop at the downtrend of the year

didn't really get escape velocity didn't win back the benefit of the doubt but we mostly held it. And now we face the positive seasonals and maybe the Fed confirming hopes among investors that we're going to have

the destination for rates in sight. So what's your take on all of it? At its best moment, this current rebound, let's call it, I would say it's November 30th. And there might be some month-end stuff involved here. But we saw 64% of the S&P 500's components back above a 200-day moving average. And granted, many of these moving averages are downward sloping, but still, you had about two-thirds of the S&P back in some semblance of a bull market. And that looked pretty good, and we've backed off of that a bit somewhat in the last 10 days. But if we can challenge that level in the internals,

while at the same time holding above that 4,000 level, psychologically important 4,000 level in the S&P, and the three biggies next week, retail sales Thursday, the day before that FOMC, and the day before that CPI. Like if we could just get through those and we get that kind of breadthrust in the internals, we could rip into the end of the year. And I'm going to tell you, Mike,

you and I, we could sit for an hour, back and forth, all of the negatives. They're very well known. The AAII survey has had 36 weeks in a row where more people responded bearishly than bullishly. That is a longer count by weeks than COVID, which was 34 weeks, and the great financial crisis, which was 15 weeks. 36 weeks of outright bearishness. We all get it. We all get it. But if we can clear through these three big bad announcements next week and the breadth is there, what are you going to say?

It's been really hard to say anything much other than, all right, I better buy some more stuff. And look, it's it's seasonally. That's on your side. It's not easy to do if you're worried about earnings and inflation, all these things. But that's what the market is telling me. Yeah. And you're saying if, and I realize you have to say if, because obviously there's no way to handicap it ahead of time. And these things can, you know, even if it's a 60-40 bet that it's going to be for the better, you can't necessarily be that confident about it. But to your point about expectations, I mean, whatever this market's issues, you know, excessive optimism is not one of them, right?

I mean, you see strategists projecting in aggregate consensus next year for no upside to the market. And virtually everybody says down first, then up if we go flat. I guess that's a help. And how about the other stuff we're worried about? Wage growth too high. It's a very tricky moment when we're talking about we're now worried about risks to growth. But on the other hand, the economy hasn't slowed down enough yet. You know what's funny? We really didn't fall apart after that strong employment report.

It wasn't like it wasn't showing any kind of abatement in inflation. It was just like showing resilience. And that didn't kill stocks. So I don't know that we're like outright rooting for a crash in the economy and that that sort of thing automatically puts a bid in for equities. I'm not so sure. But look, TD Ameritrade keeps this thing

called the Investor Movement Index. That is at its lowest sentiment since April 2020. Do you know what the nation's mood was in april 2020 the types of things we were contemplating millions of people about to die kids out of like like that is where sentiment is so it's not going to take much the put to call ratio this week hit a century high like So, yes, I get it. All the negatives and high wages. All right, I understand. Who doesn't know about these things?

So, to me, that's where the setup is. And I'm trying for the first time this year to be in the bull camp. I'm struggling, but it's getting getting easier nobody else seems to want to right well it is tough because i can think back to these relentless bull market years where you say to yourself what can it be that easy to just by every five percent death can it be that easy to just bid for every twenty day low in the s and p you know i mean you know how it was in other words, these trends can trend.

Right. So I guess the point is, in practical terms or in tactical terms, what specifically would you be looking to do just to sort of make sure that you don't have too little exposure to the market or look for stuff that the market has already punished or how to play it? Well, on a tactical level, some of our index bets triggered long at the end of November.

So those are on various timeframes and we don't look at daily. We don't look at weekly. We're looking at monthly moving averages and closes below, above. We're looking at slope. So we are longer now than we've been since April. And that might not last.

This is rules-based. It's technical. We'll see what happens. But those are straight-up index bets. It would really be a shame to get constructive or bullish on the market and then buy the wrong stock, like put a bet on a meta or something that goes against you in a rising tide. Even look at Tesla, which is a really big, important stock now, versus this recent market recovery. It's going in the wrong direction.

So I think if you want to start to get more constructive here ahead of these big, bad reports, maybe the right answer is to just not get too cute. Right. And I mean, one of the lines of thinking has been, you know, that you can be as far away from the hugest stocks in the index as you can be. And you might be insulated from some of the downside pressure because that's been the leadership to the downside, has been the biggest cap stocks. And, you know, otherwise, it's not been exactly carnage away from, you know, the top 50, let's say. Dude, where the Dow is down 7 percent this year. Yeah. It's like I I saw like I saw I got an ad in my Gmail inbox. One of these macro boiler rooms is like, we called the crash of 2022. I'm like, the Dow Jones is down like literally less than 8%. What are you carrying on about? So it could be way worse. heavily, heavily concentrated in Cathie Wood and Thang, they're not experiencing that. But most people aren't. So all things considered, all the things that have been thrown at us, 500 basis

points worth of rate hikes, like it could be way worse. Yeah, no, there's no doubt. And I know that the Goldman Sachs Retail Favorites Index has just been completely crunched, but that seems to be sort of wrung out of the day to day action, at least at this point. Let's widen out the conversation. We're bringing Peter Cicchini of Exxonic Capital and Kimberly Orth of Ameriprise Financial. Kim is ranked among Barron's top 100 financial advisors this year. And Kim, let's start with you here. I mean, you've heard the conversation. How does the risk reward appear to you after a year when you know we've had this big reset in valuations and monetary policy. Yeah we're we're cautious on equities for the next six to 12 months. We think investors need

to temper their their return expectations due to rising interest rates, inflation pressure, earnings growth, which may not be that great going forward. And so you don't feel as if what we've done this year builds in a lot of those risks just yet in terms of forward returns? Yeah, I think you still need to be careful. You need to be cautious. Manage your expectations. You won't be cautious. Manage your expectations. You won't be disappointed. Think single digits, maybe. Think single digits.

And any particular parts, either in equities or does fixed income start to look a little bit like more of a cushion here? Well, we're overweighted right now in health care, financials, utilities. We like them because of the stable earnings. We like them as they may be more defensive or more of a value play. We like heavy dividends generators. Yeah. Okay. Those have all certainly held up. And Pete, I know you were here in the conversation, too, and I think you believe that there's more shoes to drop here in terms of disappointments on growth. What the yield curve might be telling us. What does that mean into the new year for you? Yeah, you know, I agree with a lot of what Josh said. You know, seasonality makes markets into the end of the year pretty darn tricky.

But the way we look at it at Exxonic is, you know, where is the risk-adjusted asymmetry? And to me, seeing the spot VIX below 20 at a certain point last week was a compelling trade for us. Not easy to execute because VIX term structure is very steep but but my bet is over the next month to two months volatility will be higher not lower and of course we got a couple pretty big catalysts coming up next week on the 13th and CPI and 14th of the Fed I do think there's quite a bit of downside to be had in equity markets in particular and you know one of the things that we look at is three months to ten year urban versions- that curve tenors inverted by about. He to

seventy five basis points right now. In history might suggest that. Those at current particular needs to normalize for a bull market can resume. And I would suggest that we're quite away away from that at can resume. And I would suggest that we're quite away from that at the moment. Yeah, I mean, obviously, I think it's the inverted yield curves across the board

that are staring investors in the face and saying, how can you ignore the implications of this, what it has meant as a leading indicator of recession in the past? On the other hand, there's some weird stuff happening with this cycle and you never want to explain an indicator away, Peter. But what about the fact that the market was already down 25 percent by the time we first got this inversion? Normally, the market usually holds up near the highs before we get to this point. Just trying to figure out the sequencing of how the market's trying to digest all this. Well, it depends which curve you look at. If you look at 2 to 10s, if you look 2-year to 10-year, that actually inverted in March, at the very end of March,

normalized and re-inverted in June. So when we're thinking about the timing of recession, for example, the 2-10 actually usually does invert before the 3-month 10-year. And actually, from that perspective, serves, I think, as a better indicator of recession. So the market wasn't down as much back in March. It was down like 15. Yeah, it was down like 10 or 15. It was down a bit less. But if you take the 1970s as an analog, which we've been in our work, as you know, we've been calling for a much deeper curve inversion of between 100 and 150 basis

points. This market feels a lot like the nineteen seventies in fact if you overlay the S. and P. starting at the beginning of last year or this year- with the market starting in nineteen seventy three it's eerily familiar there were some pretty big bear market rips in nineteen

seven. Well from the seventy three and seventy four. Yeah I mean I wouldn't deny that you can find some of the echoes although Josh- I feel as if the 2008 map was the one that we were worried about, you know, six, eight weeks ago. And the markets held up better. So maybe that doesn't apply so much. I am struggling to fit this cycle, how compressed it was, the fact that we completely, you know, just sort of nuked a recession almost before it started. And the fact that, you know, people came out of it with more

savings than they went in, how to figure out exactly what the right metaphors are for this environment. The only trouble with the yield curve, and I'm not saying this time it's different. I'm saying you have to choose sides. Do you believe that the yield curve is in fact what causes the recession because it stops banks from lending? In other words, why would they want to lose money on the inverse of borrowing short, lending long? So do you think it's causal or do you think it's just one of these things that is coincident with the environment that a recession happens in? If you think it's causal, which a lot of people do, here's the problem. Bank of America tells us there's still 1.2 trillion in excess savings sitting in people's bank accounts. And we really haven't had any

kind of uptick at all in past due credit card balances, delinquencies. Almost nobody is having trouble except for Carvana that I can see. That might change, but the thing is, if the yield curve is disinverted, but the lending is not an issue because everyone's got plenty of cash, it might not serve as the same type of causative thing as it has in the past. I don't know. That's the riddle. In lending standards, though, Mike, you do see it. Lending standards are super tight. And I'd actually suggest you don't need to pick sides.

It's both symptomatic or coincident as well as causal in a sort of circularly reflexive way. It's indicative of a slowdown to start and then actually along the way contributes to the slowdown. That would be my sort of. All it literally means in terms of really what's being priced is the Fed's nearly done and it's probably going to be loosening policy over the path of between two and 10 years, maybe significantly. and inflation is probably going away. The question is, why does the Fed get that much looser and why does inflation come down so much? And that's why it becomes the recession call, Pete. No, I think that's right, Mike. And it's hard to disagree with you because you got such a great smile. But at the end of the day, as deeply inverted as we

are, it's going to take a while for the curve to normalize. And I think that's a really important takeaway. Yeah, no. And, Kim, practically looking at, for example, the fixed income markets, however they're structured, whatever they're offering you, it's clear that allocators have decided to grab onto bonds here. I mean, the 10-year yield is from 4.2 down to 3.5 in a month. It seems like people feel as if that value got built up into fixed income. Do you feel that way for your clients? Yeah, bonds have been so beat up this year. It's been grim in the bond market,

as we're saying. We're staying real short on the duration. And in my practice, for the right investor, we've been using structured notes and structured solutions annuities as a bond alternative. Now, these are illiquid investments. So you have to have the stomach for the duration, but it can help, I think. What's the advantage there relative to lock me in for two years at four and a half percent plus in high quality corporates or governments or munis? So with a structured note, it usually is for a term. This is high level, OK, high level explanation. Let's say it's three years.

So you purchase it on December 9th, 2022. You care what the market does December 9th, 2025. Right. On the downside, maybe there's a buffer does December 9th, 2025. Right. On the downside, maybe there's a buffer, 10%, 15%. So if it's down that much, you don't lose that part. And on the upside, there's maybe unlimited potential for upside. And it's tracked maybe to the S&P or the Russell or the EFER or whatever. Got it.

So you do have more upside potential. Josh, I know that you were, you know, exaggerating for effect and saying nobody's really gotten hurt except perhaps Carvana in this squeeze on liquidity and credit conditions. But you're seeing cracks, are we not, in terms of the outflows from the private REITs and the way that the public REITs have traded and maybe even the way the banks traded this week. The private REIT story is like, here's an asset that is being marked up with a 9% gain while the average REIT is down 20% and people need liquidity for year end. Why wouldn't they go to the thing that they can say is a victory, is a win by? But I don't think there's anything wrong with that vehicle. What might be wrong is the way it's been sold to people. And so if you were a wealth manager or a family officer and you presented that as being liquid,

shame on you. But I think Blackstone is doing the right thing. They should not start liquidating commercial real estate because there's demand for cash. That's not their responsibility. And that would hurt the other fund shareholders. But no, I really don't see a lot of cracks. I see tons of issues in Asia and I see tons of stress in Europe. I just don't. I know they'll come, but they're just, it's not evident. They really don't exist. Even the retailers are fine. I can't think of a retailer that's in pain right now. So it'll it'll happen. We're just not there yet. And again, a lot of that is a hangover from all of the artificial stimulus that came into the economy two years ago.

We're still working that off. Arguably, that's the biggest problem right now. I agree that you're not actually seeing the cracks. You see credit spreads, high yield maturities, they're almost none for a couple of years. So the wolf's not at the door, but you got to be aware of the market's diffics and things out. We'll see how it goes. Thanks, everybody, for the conversation. Josh, Peter and Kim, great to see you all. Thank you. All right. Let's now get to our Twitter question of the day. We want to know, what was the hottest story this week? Carvana's collapse, the FTC taking aim at the Microsoft Activision deal,

China lifting some COVID restrictions, or Sam Bankman-Fried agreeing to testify before Congress next week on the FTX bankruptcy. Head to at CNBC Overtime on Twitter to vote. We'll share the results later in the hour. We are just getting started here in overtime. Up next, we're going global. Schwab's Jeff Kleintop seeing even more signs of strength overseas in the new year

where he thinks investors should be putting their money to work abroad. Overtime live from the New York Stock Exchange is back in June. We are back in overtime. Global equities outperforming U.S. stocks since the mid-October lows. And our next guest sees even more gains overseas in the year ahead. You see that little outperformance there among non-U.S. stocks. Not bad. Let's bring in Jeffrey Kleintop, chief global investment strategist at Charles Schwab for International. Jeff, it's great to talk to you. I mean, we and others have talked about how you had the makings for global stock outperformance for a while. Valuation looked better overseas and all the rest. Do you think that there's traction perhaps in the international outperformance now? I think we've turned the

corner. And usually for an entire cycle, you get one or the other outperforming, international or the U.S. And we had that for the last cycle. I think the tide has turned. And I think we are likely to see international outperformance continue next year, they tend to possess more of the characteristics like high dividend yields and lower price to cash flow ratios that have contributed to outperformance within and across sectors and countries this year. Earnings growth, we know, is stronger outside the U.S. and expected to remain so next year. And you combine that with lower valuations and this turning, and it's maybe more behavioral than fundamental. As you end a cycle, whatever's outperformed tends to be stretched in terms lower valuations and this turning and it's maybe more behavioral than fundamental as you

end a cycle you know whatever's outperformed tends to be stretched in terms of valuations and expectations and as we go through this kind of a correction we reset the clock and we get out performance by what were the laggards which are now the international stocks i think if we can get a pause or a reversal in the sharp rise of the dollar that characterized much of this year it might even be more pronounced well we've certainly seen at least the makings of that reversal in the dollar, I suppose. Does it have to deepen in order for the international outperformance to really continue? I mean, we're well off the highs in the dollar, but still, of course, up year to date. Yeah, no, I don't think we need the dollar. I think it would be a help. I think the other

factors are more important. You know, this year in both down and up markets, we saw those high dividend payers and those low price to cash flow stocks outperforming across sectors. You even saw it in tech. The highest dividend payers in tech were the better performers, right? And that's generally true outside the U.S. They tend to have higher dividend yields. We know they tend to have lower valuations. These are quality factors, and I think those are going to continue to be embraced next year. I think we're in a market of higher volatility. Now, it's been more to the upside here lately, but over the last six months, we've seen markets move up or down 5% every month. And I think that volatility could continue in the first half of next year. So sticking with those themes that have worked here over the last six

months should pay off, and that points to international stocks. So what I'm hearing you lay out here, Jeff, is that the characteristics that should work in an environment we're facing are more prevalent in global markets, right? It's sort of the flip side of, you know, the U.S. markets outperforming because we have all the big growth in tech stocks. Yeah, that's exactly right. It's exactly the flip side of that. They have a lot more energy, a lot more financials, a lot more of these higher dividend payers and low price to free cash flow companies. It's an abundance. In fact, I would say, if you look at it, it's like 70% of the lower price to cash flow companies are located in the EFI index, only 30% of the global companies in the US. So yeah, it's a flip. It's an inverse of what worked for the last cycle.

Usually doesn't work in the next cycle. We're, I think, about to start that next cycle. Where does the China element play into it, either as a macro driver or just the fact that, you know, this is a market that really had been sidelined for much of the move in U.S. stocks up into this year. It's up off the lows, but still seems like it's a deep underperformer on a multi-year basis. Yeah, it's a big risk to 2023, upside and downside. Certainly, China's return to the global economic picture as they shut down their zero COVID protocols

means better growth for the globe. But at the same time, it could restoke inflation. And we know one of the things that has been driving the market higher is the idea that central banks may be done early next year. And if China's reopening brings about a resurgence in demand for goods and commodities that pushes up prices again, well, central banks may not be done. And that could weigh on cyclicals. And that's one of the Achilles heels of international stocks. They do tend to have more cyclicals than U.S. equities. And so if we renew that downward pressure and those renewed concerns about a deeper recession, international could bear the brunt of

that. Yeah. OK. So China, again, at least the economy, there may be a swing factor to a degree into next year. Jeff, thanks very much. Appreciate your perspective. Thanks, Mike. Good to be on. All right. Up next, top technician Chris Ferron pinpoints three charts that are showing some serious strength right now and the one investors should avoid. Overtime is back right after this. Welcome back.

Time for a CNBC News Update with Kate Rooney. Hi, Kate. Hi there, Mike. Let's start the news update. The former Minneapolis police officer who kneeled on George Floyd's back has been sentenced to three and a half years for aiding manslaughter. J. Alexander King pleaded guilty in exchange for prosecutors dropping a charge of aiding and abetting murder. King is already serving a sentence for violating Floyd's civil

rights and will serve time for both crimes concurrently. A federal judge is hearing arguments on whether lawyers for former President Trump should be held in contempt of court. The Justice Department says they have failed to comply with a subpoena demanding the return of classified documents. Details about the hearing are being withheld because they involve a grand jury and grand jury proceedings. But NBC News is part of a media coalition seeking access to those proceedings. And a West Virginia couple has been arrested for allegedly kidnapping a man,

beating him and locking him in a dog cage. The victim says his tormentors struck him with their fists, a fan, and even a propane tank. The couple is charged with multiple felonies, including kidnapping and assault. Back to you. Kate, thank you very much. Stocks closing out another losing week with the Dow posting its worst week since late September. Our next guest still charting opportunities for upside within this market, though. Chris Verona, Strategas, a Baird company, joins me now. Chris, great to speak with you.

We've been promising your three best looking charts for the moment. So talk about the themes that are standing out to you and maybe still look like they're worth playing. Well, I think we're at the point of the year where we need to start thinking about thematically what's going to matter most next year. And, you know, Mike, it just stands out to me that over the last six, seven, eight weeks, growth investors and growth stocks have gotten everything they've craved all year. Lower dollar, lower rates, softer inflation, softer economic growth, and yet they still can't work. I mean, over that last six, seven, eight week period, growth has still underperformed.

And what's been better is actually commodity, basic resources. So I would encourage people to really take a hard look at the basic materials here. The steel stocks in particular are coming out of a massive base. This is steel dynamics and Nucor. Relative to the S&P 500 in particular, they have really just turned up from about a four- or five-year base.

So I think important thematic idea going into 2023. And I know you've highlighted some of the sort of global resource type stocks, too, that seem to be playing along. So it seems like there's something something bubbling up across the globe on that rock over paper. Explain that a little bit as a pair trade. Yeah, important theme for us as well, this idea that hard assets beat financial assets in a world dominated by quantitative tightening, not quantitative easing. It's a reverse from what we've seen over the last decade. We like gold here, but I also like copper. And I think one pair in particular that really captures this is being

long Freeport, short Amazon. It's the idea of commodities over consumer in the next cycle. Freeport basically underperformed for much of the last 15 years. That has turned in a very, very meaningful way. So the idea of being long, rock, short paper is hard assets over financial assets. I think Freeport over Amazon really captures that thematically. So does gold versus banks. I mean, that's another relationship that we look to for risk appetite. And gold outperforming banks here. I think it's an important message. Yeah. In both senses. I mean, there are echoes of kind of the early 2000s.

I know you've kind of hit on that, though. That was a big title shift in that direction. Somewhat differently in pharmaceuticals. I mean, obviously very defensive and they've outperformed kind of quietly. You know, Mike, I really love the paradox of COVID moving officially finally out the window, gone, as pharmaceutical stocks finally start to break out. I mean, pharma has been a dead industry for the better part of the last five or six years. But we've seen leadership really coming from the likes of Merck and Bristol-Myers. Bristol- Bristol Myers in particular, really breaking out of a four or five year base. That's actually back to the 1999-2000 high. So really 22 years unchanged, finally starting to come out of that. So I still think health care here as a leader into 23 is a theme worth playing.

And then more broadly, Chris, I mean, if we're just looking at the S&P 500, it's been, you know, this kind of indecisive period here over a number of weeks, not a lot of net movement. But I know you've been kind of scrutinizing underneath the surface and whether it's telling us that there's any hope for a trend change. Well, listen, I think this market certainly has the characteristics of some range-bound environment. I think when you're in those range-like markets, you have to look for clues as to what's the next major move. And I'll tell you one thing I don't like. I don't like the fact that the banks seem to be worried about something. The banks look sick, particularly

the regional banks. Banks versus S&P making about two year relative lows. But look at Fifth Third, look at look at Synovus, look at PNC. I mean, these are stocks that are breaking down from really eight, eight, nine, ten month topping patterns. So I think the weakness out of the banks is certainly new information. Perhaps it reflects the curve. But I think it's something that the market would suggest something feels off here. And then really just picking up on your Amazon idea as a short, I mean, I know that, you know, for you, trends mean you have to respect them, but it's down by 50% off a high as are, you know, Salesforce, as is Tesla. When do you look for indications that that's exhausted in terms of the selling? I mean, I assume it's not yet

is the answer, but. Well, I think the punchline is there's a difference between a stock going up and a stock going up as leadership. And when we go back to that time frame you mentioned, Mike, about 2000, 2001, 2002, Remember, there were two phases to that bear market. The first phase was the big techs and the big growths going down more than the market. The second phase was in the next bull market, those stocks went up less, right? So you could convince me that we're in the ballpark of some type of tech or growth flow, but I don't think we're going to go back to them as our leadership. And so many of us are playing the relative game. I don't think going back to Amazon or Microsoft or Apple is going to pay as a leadership story in the years to come.

Yeah, no, it's a good distinction and not a lot of opportunity cost, in other words, in underweighting those perhaps in the time to come. Chris, great to talk to you. Thanks very much. Have a great weekend. Thank you. You too. All right. We have a news alert on Coinbase. Kate Rooney is back with that. Hi, Kate. Hey there, Mike. So the Supreme Court is agreeing to hear Coinbase's bid to halt two class action lawsuits. These cases have to do with customers that accuse the crypto exchange of, in one case, failing to protect customer funds around a hack. And then there was another one about marketing around Dogecoin. Coinbase had argued that those belong in private arbitration

based on Coinbase's user agreement. The justices took up Coinbase's appeal of those two lower court rulings, and these judges had rejected originally the request to have the class action lawsuits put on hold. We did get a statement here from Coinbase. They say, we are gratified that the Supreme Court agreed to hear our appeal. We look forward to this resolution on this matter. And it does appear to be the first Supreme Court case, if not the first high profile Supreme Court case involving a crypto company. Mike, back to you. Interesting, Kate. Yeah, it could have implications maybe for other companies

that try to enforce these arbitration agreements as well. Thank you very much, Kate Rooney. Up next, we are drilling down on the oil slide, energy getting slammed recently. We'll discuss where prices could go from here with Bank of America's Francisco Blanche. Overtime, we'll be right back. We are back in overtime. The oil sell-off showing no real signs of letting up. Crude pulling back again today with WTI now down more than 10% just this week. So let's talk about where prices might be headed from here. Joining me now is Bank of America Securities Global Head of Commodity Research, Francisco Blanche. Francisco, it's great to have you.

First, we'd love your read on what exactly has been pressuring crude here. Obviously, a very bullish story for months. And, you know, the reopening in China seems to have gotten people's attention or the potential reopening. And yet we still have, you know, a market that's acting like there's plenty of supply there. Hey, Mike, thanks for having me. Yeah, I think there are probably four things that have taken oil markets down. First, obviously, is that Russia sanctions haven't really bitten into supply. And part of it is the price cap was set at $60 a barrel, which essentially has meant that we have yet to see meaningful disruptions of Russian barrels following the implementation of the EU sanctions on Russian oil and also EU sanctions on Russian oil services such as freight and insurance.

And then the other couple of things that have happened is obviously the I think there's been some nervousness about the China reopening story, which looked great a couple of weeks ago. But now people are realizing it's going to be a little harder to reopen China than maybe some of the Western economies. And maybe on top of that, OPEC didn't really cut production on Sunday, and they're not going to meet for a couple of months. So I think those three factors, coupled with the fact that, frankly, the macro picture is deteriorating. We've seen a big sell-off in the, or rather, we've seen the two stands in the yield curve in the U.S. pointing to maybe a steeper recession. I think those factors have probably all taken oil prices lower this week. It's been a pretty bad week for the energy markets. For sure. Now, do you think that all of those forces are going to prevail as we get into next week?

I mean, there's still a lot of folks say, look, the energy stocks have held up OK. Natural gas hasn't completely fallen apart, et cetera. Well, look, I mean, I think I think it's very important to understand most of the sell off has been front loaded. It's been the first, second, third, future month contracts. Long dated oil, oil five years out has held up a lot better. And I think it's just a sign the market believes once we get through this air pocket, this patch of weakness, we are going to find a much firmer outlook into the second half of 2023. Remember, once the Fed pivots, once the Chinese truly reopen their economy, we're going to need a lot of oil. And frankly, investment is just not there, as you know, and shale supply has been underperforming in the U.S. So all those factors, I think, will likely take us higher. But we need to see economic growth pick up again. That's the bottom line.

We were just talking about the life that's being shown in some of the basic resource stocks, specifically metals. Is that something that you think is justified based on what you think the metals markets or the other industrial commodities might be able to do? Well, Mike, this is a great point. I mean, we've been arguing that this was going to be a year where you wanted to be long metals versus energy, as opposed to last year, where you wanted to be long energy versus metals. There's a bit of a reversal there. And frankly, we are seeing it already, which to me is a pretty good omen for energy itself. Because I think the metals markets are very well supported by the energy transition, by the fact that whether China reopens or not, they're going to have to make big investments in their grid. So we really like copper.

We have a target for copper of $12,000 per ton. And also, frankly, I think once the Fed pivots, I kind of like gold here, too. I think gold is going to do pretty well. We're looking for $2,000 per ton. And also, frankly, I think once the Fed pivots, I kind of like gold here, too. I think gold is going to do pretty well. We're looking for $2,000 an ounce next year. So those will be probably our favorite metals. And then, of course, we think the high energy price environment will support aluminum as well. All right. Yeah, copper, that would be at least a 30 plus percent gain from here if we got there. Francisco, thanks so much. I appreciate the time today. Thank you. Francisco Blanche from Bank of America. Coming up, we're wrapping up a big week on Wall Street.

Christina Partsenevelos is standing by with a rapid recap. Hi, Christina. Hi, Mike. Well, we had a rough week for energy and Lululemon, but some bright spots from Chinese technology firms. I'll break down the week that was after this very short break. We are wrapping up a big week on Wall Street. Let's get back to Christina Partsenevelos with a rapid recap. Mike, uncertainty persists as investors weigh growth versus inflation risk. I know you talked about this earlier today, but questioning whether multiples have compressed

enough in future earnings, expectations lowered enough for the start of 2023, or is there more pain to go? The S&P 500 gave much of the gains back over the past few weeks, breaking a two-week win streak. The Dow and the Nasdaq also posting weekly losses. What's not working? You spoke about it with your guest before, energy. The sector down over 8% this week, and that's why names like NRG Energy down 21%, Halliburton down 15%, where they're some of the worst performers on the week. Communication services was the only sector higher today, but still the second worst group of the week. The top S&P winners, names like Newell Brands, that's the parent of Tupperware and Sunbeam, as well as Campbell Soup, almost 3% higher. On the Nasdaq, Chinese tech names like Pinduoduo and Baidu, some of the best performers

after China eased COVID restrictions. And then you got Lululemon, on the other hand, suffering, what, a whopping 15% lower after issuing a weaker than expected outlook. We look forward to Tuesday's inflation report and Wednesday's Fed meeting. I look forward to the weekend. Mike. Yes. And have a good one, Christina. Thanks so much. Thank you. All right. Up next, the buy now, pay later battle. One major retailer gearing up to take on the likes of a firm. We'll break down what the move means for the sector. Over time, we'll be right back. Last call to vote on our Twitter question of the day. We're asking, what was the hottest story this week? The Carvana collapse?

The FTC taking aim at Microsoft's Activision deal? China easing some COVID restrictions? Or Sam Bankman-Fried agreeing to testify before Congress next week? Head to at CNBC Overtime to vote. We will bring you the results next. Welcome back to Overtime. Let's get the results of our Twitter question. We asked what was the hottest story this week? China easing some COVID restrictions. The big winner there, nearly half of all respondents to the four choices deciding the big picture changes to that economy was the hot story of the week. Meantime, Walmart looking to get into the buy now, pay later game.

The retailer says it plans to launch the service through its fintech venture called One as early as next year. So what does it mean for the other players in the buy now, pay later space? Let's ask D.A. Davidson's Chris Brendler. He covers Affirm and Afterpay. Chris, it's good to check in with you on this. I mean, on the one hand, huge retail player can throw its weight around and maybe make things tough for the existing players. What do you think it says about the product offering as a category and for the likes of Affirm? Hey, great question, Mike, and thanks for having me. You know, I don't think it's necessarily bad news. I actually think it's actually more, you know, increased adoption of

this new tech-driven financial product. I think it's a better product than credit cards, and I think it's just a further endorsement by Walmart. What's important to remember here is that Walmart has been one of Affirm's major clients for years and continues to be. And just like a credit card, most retailers accept major credit cards from all different issuers. There should be multiple binomial providers. I don't think this essentially means that a firm is on its way out. I think it's more increased adoption of this new lending product. Yeah, I mean, I guess just to your point, I can remember going back 20 years and the stories were always, well, Walmart is, you know, buying some little Utah industrial bank and it's going to issue its own credit card.

It's going to be a threat, you know, to the industry. It was always seen as a potential kind of player that could stomp the competition. But on the other hand, I do wonder if it says anything about whether this is really just kind of a commodity offering or just kind of table stakes, buy now pay later for all the players and in other words what's the excitement around it if it's just another thing to to click as you buy something yeah no i think there's definitely um and that's a good point is there's definitely got a lot of folks interested in this you have visa and mastercard with their buy now pay later offerings you have other technology companies trying to get in the games credit card issuers private label card issuers so there's a lot of lot of folks looking to ramp up on BNPL. I think the fact of the matter is that there is a significant first mover advantage here. Affirm, Klarna, Afterpay, now owned by Block,

they're clear leaders and they will continue to be. There's some network effects. The more scale you have with consumers and merchants, the more likely you are to continue to grow in binomitators. So, I think a lot of those folks relate to the game. What's different about Walmart is this is going to be probably a captive offering. You're not going to use the Walmart, be brought to anywhere else but Walmart. It's also being offered through their new fintech joint venture, sort of this rivet-funded new tech platform they're funding. So I think that's kind of like some early days. We don't know how big it's going to be. We don't know if it's going to sit on Walmart's balance sheet. So there's still, I think that's kind of like, you know, some early days. We don't know how big it's going to be. We don't know if it's going to sell on Walmart's balance sheet. So it's there's still, I think, some ways to go before this hits the market.

But it's really, I think, at the very least, an endorsement of BNPL. And then just setting Walmart aside, when it comes to a firm, I mean, some of the things that have been weighing on the company and the stock are just sort of whether the market was willing to buy, you know, the receivables thativables that it puts out there and whether it can continue to finance itself. Where does that all stand right now? Yeah, that's a tougher question. It's really a much different environment for funding loans, consumer loans, especially ones that have lower credit risk or lower credit quality in this environment. But I think our view is that a firm is the clear leader. They have the best underwriting and that kind of paper will always have a buyer as long as it's underwritten correctly. As long as you're able to predict losses effectively, I think you'll still have the ability to sell those loans into the wholesale market and otherwise.

But surely you're paying more. The spreads are higher. The interest rates are higher. So that's, I think, one of the things they highlighted on the last quarter's call is that interest cards are going up. But the bigger question and the bigger concern is credit losses. And so far, Affirm has really outshined the competitors there. All right. We will monitor that. Of course, that stock is down 90 percent from its highs. Chris Brendler, we appreciate your time today. Thanks, Mike. Appreciate it, too. All right. And just to wrap up the week, S&P 500 ended up at about a 3.4 percent loss,

still kind of in this trading range. It's been in for about a month as we look ahead to next week. Big Fed meeting. CPI report as well to get through. Have a good weekend. That does it for overtime. Fast money starts right now.