Closing Bell - Closing Bell Overtime: The All-Clear or Time to Hunker Down? 7/8/22

Episode Date: July 8, 2022

Is the worst over for investors or is more pain ahead? Solus Alternative Asset Management’s Dan Greenhaus gives his opinion. Plus, Professor Jeremy Siegel says today’s red-hot payrolls report is actually weaker than it looks. Why – and how it could impact your portfolio. And, market expert Mike Santoli’s “Last Word” with a look at what he’s expecting for stocks in the week ahead.

Welcome to Overtime, everybody. I'm Scott Wapner. You just heard the bells. We're just getting started right here in just a little bit. I'll be joined by Wharton professor Jeremy Siegel on where the markets go from here after that hot jobs report. We begin, though, with our talk of the tape, whether the worst is over for investors or still to come. Opinions on that, you know, they vary. So let's ask Dan Greenhouse, Solus Alternative Asset Management's chief strategist and economist. He is here with me on set. It's good to see you. Good to see you. So we had a decent move this week. We're up four or five days.

Where do we go from here? I mean, what do we make of it? Is this move off the lows different than the last? Well, I mean, it's different. It's different in the sense that I think some of the tech stocks, which were some of the first to sell off, appear to be bottoming out, both on a relative and an absolute basis. And I think you can take some encouragement from that since they were one of the first to obviously sell off. But at the end of the day, I mean, we're in front of earnings season.

And I think there's an enormous amount of uncertainty. Today's jobs report plays right into that. There's divergences in the data. There's divergences in corporate commentary. Costco gave us something of a positive report today. And so I think you really need to get into earnings season to hear what companies have to say before you can have truly any conviction one way or the other. Does the jobs report help the soft landing case or does it embolden the Fed because they say, see, the economy is strong enough. We can do this. And then does that increase the risk of a mistake that they go too far?

Sure. In some respects, both. And in some respects, neither. And like a true economist, I'll say on both hands. I mean, clearly, the jobs report was stronger than expected. I think the whisper, to the extent that that's a thing anymore, was certainly for a much weaker number than a stronger number. And in that sense, if you're the Fed, you're emboldened by the report that there hasn't been any meaningful slowdown, at least in the labor market. And if you needed any solidification of a 75 basis point hike at the next meeting, whatever Kevin O'Leary says aside, I think that jobs report gave it to me. You're alluding to the fact on halftime today, he said they were going to go 50, which he's on

an island by himself on that. But this does show that they need to slow the economy down. And that is the risk continued for stocks. Yeah. So but listen, the jobs market aside, you are seeing slowing down in numerous sectors of the economy. I so but listen, the jobs market aside, you are seeing slowing down in numerous sectors of the economy. I mean, obviously, consumer sentiment is plumbing deaths, depths heretofore unseen. The housing market is unquestionably in a slowdown. Some of the manufacturing indices are slowing down. So it's not as if the economy is robust and growing top to bottom. There are pockets of weakness. Just one of those pockets appears thus far not to be the labor market. CPI next Wednesday. Sure. How large does it now loom? I mean, all the inflation reports loom large right now because obviously the Fed is preoccupied with

inflation and everything else is a distant second. We know this from the Fed minutes. We know this from their public commentary that they are willing to slow down the economy to bring down the inflation rate. And you remember what happened last time, right? I mean, there was all this thought going into the CPI. Let's see that it's peaked. And it was exactly the opposite. And that was sort of a game changer for the market. And there is a risk, a probable risk, that this report will, from a headline standpoint,

show an even larger year-over-year increase. But as you and I have talked about, the year-over-year numbers we need to dismiss. And you need to focus a lot on those month-to-month numbers. They've been really, really strong lately. And so if you're the Fed, you need to start seeing more normalized rates of increase, something like one, two, three-tenths, rather than the five or six-tenths that we've been seeing. Does all of the uncertainty that we're speaking about now and all of the issues that are still in front of us make it impossible to say that the bottom was in? Yeah, I mean, but the most important thing for investors in both equity and credit,

or really across markets in general, is that you haven't really seen the full effects of what the Fed has done in the form of risk assets. And yes, the equity market is down 20 percent or so, down 23 percent at the low. Yes, credit spreads have blown out. But the way monetary policy works, as we all know, is with long and variable lags. And so to the extent that you're going to see the full effect of what the Fed has done and is likely to continue doing, it's not going to happen for another three, four, five, six, potentially even longer. And so can the equity market sell off and rally before the Fed even completes its tightening program? I'm not sure that that's the case. I'm looking at yields as we speak. 307, 10-year right now. How much of a risk are yields now moving higher back three and

a quarter or so? And that in and of itself is a problem for stocks. And by the way, some of the very stocks that you just cited had rallied off the lows, the ones that were the first to go into the tank were some of the tech stocks. By the way, ARK, for example, is up 20 percent this month. The ARK Innovation Fund, of course, of Cathie Wood. Yeah. Listen, I think from an equity standpoint, if the 10-year goes from 307 to 325, is that a problem? No, I don't think that's much of a problem. You don't think so? No, I don't think so. That's a de minimis. I think the bigger risk for equities would be if the 10-year went to 250 or or $225? Of course, but you've got to stop it at $325 first. If you start moving higher towards $325, then the conversation is going to be,

are we going towards $350? Well, of course. And then once you get closer to $350, the question is how long until you're at $400? I mean, this is how momentum trades work all across the street. Listen, again, I think the inflation numbers are likely peaking out. I think there is some level of surprise that they didn't peak out last month. They may indeed peak out the next month. You look, as everybody has noted, and Sarah just did on the show before us, cotton prices, wheat prices have come down. Gasoline prices at the pump, which I've cited on the network before as being a premier indicator, so to speak, are down 20 cents or so from the high. So you do have things working in your favor. The wage data in today's unemployment report or the employment report seems to be slowing down.

So all of that works in favor of the Fed and what the Fed is trying to do. But let's not pretend that they're not going to tighten to the degree that they are because they are. Right. What about what has been your favorite trade, which has been energy? Energy is more off of its 52 week high than technology. I didn't know that until Bespoke tweeted that yesterday. It's a fascinating stat. It just shows you what was a red hot trade has come way back down to earth. Is that the way it's going to be or do you still like it? Yeah. So I don't say it's my favorite trade, but I think our view is that there are structural underpinnings to the to the energy market that are every bit in place today as they were at the peak and two or three months ago.

And I also think, not to be overly dramatic, but I think the world is, I guess I have to be a little overly dramatic here. The world is playing with a bit of fire right here with what's going on in Russia and Ukraine. Ukraine, this price cap threat that's being discussed and the potential response on the part of Russia and Vladimir Putin puts an enormous amount of uncertainty that I don't think is being reflected in the price, despite the fact that oil is still at roughly call it 100, 105. There is a real risk that things go a bit haywire. I don't think that's your base case or even a low case, but there is a tail risk that things can go very, very wrong very quickly. If you're not willing to say that energy is still your favorite trade, then what is?

Well, I think there is a structural underpinning to the trade. These names are generating an enormous amount of cash. They're buying back a ton of stock. They could be potentially debt free, some of them, in just a few quarters or a few years. The idea that oil is going to fall to 40 is not anything with which we agree. There's just all these reasons. The refining capacity is running as tight as it is. Inventory is as low as they are.

There's just all these, I mean, every which way you look, structural underpinnings to the bullish thesis on energy and oil. In terms of what's our favorite trade, I mean, I don't want to say one way or the other, but I do feel that way about energy. All right, let's broaden the conversation now, bring in CNBC contributor Greg Branch of Veritas Financial. Jessica Inskips with us, too, the head of product at OptionsPlate. It's great to see you again. Are you, Greg, as negative as you have been? Yeah, I continue my posture. It hasn't changed much, although I'm starting to see the light at the end of the tunnel. Remember, Scott, what we need here is a capitulation, a shared recognition of our reality.

And so the earnings, the downward revision cycle that I've been talking about for months that we needed is well underway. And we see downgrades and estimate cuts day by day. Unfortunate that we didn't get those before 20% of the S&P forewarned that they weren't going to make their estimates, but better late than never. And so when we get on the other side of this revision cycle, when we get on the other side of what is likely, again, to be a 75 basis point raise and followed by a 50, when we get on the other side of the supply chain healing a bit, then in the fourth quarter, I'll probably start to get more positive. But from here to there, I do expect that there are a lot of headwinds and a lot of negative

surprises in store. And as you know, I'm at about 33, 3400 on the S&P 500. So you don't think that this bounce off the bottom or that low is sustainable at all? It's just yet another head fake, another bear bounce. Too many challenges right now, Scott. Like I said, we're going to go through this revision cycle. We're going to have a very chaotic second quarter earnings season with lots of surprises to the downside. We're going to get another 75 bips. And I think all of that will have, at the very least, a psychological effect. And so I don't want to be in front of that. Jessica, how about you? Yeah, from a technical perspective, I really agree. We've

got a lot ahead of us. Our current support is 36 to 3700. I'm still watching that 200 weekly moving average, which is at 3500. And we're looking for the upside and the textbook really bear market that we're in. We're really testing the upwards, really resistance levels as well. And just like everyone is saying, it's earning season that we're really looking into. There are so many headwinds. We're expecting another rate hike. So coming out of that, sure, there's some positives we can find and look for sector rotation and things of that nature. But it's still ultimately a bear market with bear market rallies with a lot of challenges that we're going into. Dan, how come no one's looking for surprises to the upside? I mean, there are some people who are actually constructive and

positive on the market. Why are they so wrong? What if the Fed doesn't have to be as aggressive as it once was thought to be? What if the Fed doesn't have to be as aggressive as it once was thought to be? What if the economy is strong enough to withstand what they're going to do, as Jay Powell has maintained? Yeah, listen, earnings season is going to go a long way to telling us something about that. I brought up the Costco report from earlier today. There are a number of other companies that are early reporters that have not suggested the sky is falling. But I think the uncertainty right now, both from a micro and a macro standpoint, is sufficiently large that even though we can dismiss what a lot of corporate

CEOs and CFOs have to say, since they are ultimately cheerleaders for their sectors and for their companies, the insight into how they are bearing the level of inflation that they are having to bear is going to be incredibly helpful. Because again, I could paint a story that the S&P belongs to 3,000 just as easily I could paint it that it belongs closer back to 5,000. It's just it's as unusual an environment as I've certainly seen in my career. I've been, you know, certainly as loud as anybody, Greg, in suggesting that earnings estimates were too high and it was ridiculous that they hadn't come down yet. But what if we're wrong? What if things aren't as

bad as people say? And what if earnings, even if they do come down, aren't going to come down nearly as much as some people suggest that they will? Well, I think this harkens back to something you and Dan were talking about earlier in the segment, which is there is a lag effect to everything that the Fed is doing right now. The tightening, the underwriting standards going up, all of that takes Fed is doing right now. The tightening, the underwriting standards going up, all of that takes some time to play out. And what I'm more concerned with, Scott, and what I think probably puts some gas on the fire to the opposite of what you're saying here is that I'm concerned about the consumer. We're at $ 848 billion of credit card debt. You know, we paid down 83 billion during the pandemic, but we opened 229 million accounts in the first quarter, added 50 billion in February, 40 billion.

And so I'm worried about the consumer leveraging up just as it's almost becoming historically expensive to do so. And so those things that we thought would support the economy, the strong consumer, great labor market, those things also have counterfactors in that wage inflation isn't keeping pace with normal inflation in the basket of goods that consumers have to buy. And so we can get a recession with a strong labor market. Because at the end of the day, the reason that that recessions are coincident with with a weak labor market is the lost earnings, the lost purchasing power. But we're seeing that anyway, because wages aren't keeping pace with inflation, because the market's down, because underwriting standards going up, because it's historically expensive to carry that credit card. I mean, one week doesn't a story make, of course, Jessica. But you do wonder the market went up on the Fed Minutes Day. And you do wonder a little bit whether the market is finally coming to grips or is content or whatever word you want to pick that

works with that story, is content with what the Fed is going to do. And it's also, it feels good enough about where the economy is that it thinks that the Fed can maybe pull it off. Yeah, consumer confidence is really, really important. And consumer confidence as far as the credibility of the Fed and the way that they feel that everything's happening. I hear everyone mentioning Volcker a lot. We did a big study on that as well and how it relates to the run up inflation and such. But it's certainly a different environment with the credibility that the Fed is. So there was an issue with that.

We wanted a higher rate because of the data that came in. Remember, that was CPI came out. Then they immediately adjusted. And that's actually a good thing. That's important when they react to data and the transparency that's there. And I think that's what's helping with the market reaction. So it's telling us what's happening, giving us more data, releasing those Fed minutes, giving us an insight so we can digest because it absolutely is a lagging indicator. But we don't have those jolts so

ferociously so much anymore during this bear market because we're getting insight and can react to it and digest to it accordingly. And I think that's really important with that lagging indicator is that digestion period and the transparency that the Fed is trying to give. That's super important. And what we learned from last time this happened is essential to consumer confidence. Greg, you make anything of this move that we got this this week in mega cap tech? I'm looking at Apple 147. It's up, you know, well off of its up 10 percent or so off of its June low. Some of these other mega cap names, too, this week up five, nine, 10 percent. You don't take anything from that. Not a thing, Scott.

And don't get me wrong. These are great companies. I love buying companies that are going to put up 20 percent top line, give me double digit earnings growth in this environment. But I just can't buy that ahead of a 75 basis points increase. And not to mention, we got a little bit of a surprise that probably wasn't in any of our numbers when Microsoft warned about the strong dollar and how it affects some of these mega caps who are dealing in local currency. And so anything like that, although temporary in nature, any little surprise like that with a market that's nervous as it is and anticipating interest rate hikes, even though they might not have a significant impact on the types of

companies we're talking, the psychology of owning mega cap tech ahead of interest rate increases is something that I don't want to fight against. All right, Jessica, I mean, Greg's a hard man to impress. I mean, and for good reason. There are concerns about FX and earnings and rates moving higher and how knee-jerky the reactions can be, especially in technology, to that. But you do like some tech. You just are more specialized and you like it more tied to automation, like the kinds of names that you have on your list are Corvo and Qualcomm and Cisco. Yeah, it's such a great point. It's not tech overall. And tech, you know, looking at that narrow-based, it is showing early signs of capitulation, but it's not necessarily true because it's narrow and it's not broad. But if you think about what's contributing to inflation, which is the hot labor market and something that's also important for that soft landing, if you look at things that focus

on really automation, like you were saying, that help with automation of processes, really since the industrial revolution, if you can, where it helps with those operational processes. And for lack of a better words, it takes people's jobs. And that is going to help overall. And if you're looking for innovation and growth, that's a great way to look at it. In addition to healthy profit margins, that's extremely important as well. So if you layer that with some good technicals, I'm okay buying that going into a 75-point base rate hike, to be honest, just because that theory is really well. And if everything matches up, like I said, healthy margins and great technicals with those macro headwinds, it's absolutely fine. Because when this does happen, or say we're wrong, I'd want to buy in the summer anyways. So it's really more of a long play,

nonetheless. Gotcha. We got to be quick, but you had a point you want to make on that? Yeah, I just want to say, Greg made a great point, which is really saying something, because I think nobody makes good points but me. But Greg made a great point about the translation issue that's going to come up in earnings season. And normally you dismiss this. I don't think we're strong enough to dismiss what is otherwise seen as a non-core hit to earnings, which will be the translation from the incredibly strong dollar that we're dealing with. Yeah, a few weeks from now, certainly when all those big tech companies report. Guys, thank you.

Greg, my thanks to you. Good weekend to you. Jessica as well. Dan, it's good to see you here. My pleasure. All right, that's Dan Greenhouse. Let's get to our Twitter question of the day now. We want to know which of this week's winners has more thanks to you. Good weekend to you. Jessica as well. Dan, it's good to see you here. My pleasure. That's Dan Greenhouse. Let's get to our Twitter question of the day. Now, we want to know which of this week's winners has more room to run.

Is it Micron or Tesla, Alphabet or Nike? Head to at CNBC Overtime on Twitter. Cast your vote. We'll bring you the results at the end of our show. Coming up next, believe the bounce, the turnaround in growth stocks stunning the market this week. But is that rally for real? Michael Santoli breaks down the charts coming up next, plus Neuberger Berman's Jason Tauber is digging in on what he says is the one sector best poised to benefit from that. Later, Jeremy Siegel, the Wharton professor, his first take on today's hot jobs report. We're back in overtime in two minutes. We are back in overtime. Growth stocks having a serious rally this week. but is the turnaround for real?

Mike Santoli taking a look at that. Michael? Yeah, it's got a lot of talk about the reawakening of the growth trade. Well, here's what it looks like on a five-year basis. This is the Russell 1000 growth index relative to the 1000 value index. So you see here the outperformance is just this little hook higher. Is it going to break the downtrend we've been in since, you know, the latter part of last year? Well, maybe it's right about there.

We also did kind of break the earlier downtrend there. It didn't really necessarily last. What I find interesting about it is this floor level goes right back literally to the very moment that the pandemic was declared. Effectively, it's from mid-March. It's when the NBA canceled the season. And so that whole premium that was built up in growth, it got bled away to some degree, but still on a longer term basis,

you're still going to have people say value is the one that's underappreciated. We'll see how it goes from here. All right, and we'll see you a little bit later for your last word. That's Mike Santoli. So is there staying power to the growth trade? Let's ask Jason Tauber.

He runs Neuberger Berman's large cap disciplined growth and disruptors portfolio. It's good to see you. I mean, you saw Michael's report. You saw the performance of the stocks this week. Is it sustainable or not? I think it is sustainable. I think that what's clearly going on here is that the economy is slowing. I think that, you know, there's talk about the jobs report. Is that a coincident indicator? Is it a lagging indicator? I think the you know, there's talk about the jobs report. Is that a coincident indicator? Is it a lagging indicator? I think it's more of a lagging indicator. There's just too many stresses on the economy right now. Housing is weakening. We're seeing in our credit card data that gas prices, you know, gas spending is crowding out other spending. You're seeing the high yield spreads blow out. I mean, this is sort of classic, you know, slowing of an economy. And the 10-year is weakening. And the correlation between growth and value and the 10-year yields has been extremely strong, especially of late. And when you think about what you want to own going forward into a weakening economy, it's these companies with skinny balance sheets, with pricing power, companies that don't have a lot of operating leverage. And thus far, what we're hearing from

our growth companies is business is holding up pretty well. Enterprise IT spending remains strong, maybe a little bit of deal slippage. Healthcare has obviously been resilient. Consumer internet, there's going to be ad weakness, obviously. There's a post, you know, post pandemic reversion of some of the spend there. But valuations have contracted so dramatically. So I think the outlook for growth really is improving. Yeah. I mean, there's a lot in your answer there specifically about rates. When you said rates have been coming down, they were. And now they look like they may have some steam again to the upside if that's the case. As you said, they've been so closely tied with the performance

of technology stocks. Isn't that a problem? I think it would be a problem, but I just think it's very unlikely to be the case. I mean, you're already starting to get somewhat of an inverted yield curve. I think that's likely to play out over time. And then people are just going to sort of shift into the safety of growth. And as we get into these earnings reports, I think they're going to be a lot more challenging for value companies than they are going to be for growth companies. What if they're just challenging for everybody, right? I mean, as you just heard the conversation we had, you know, there are a multitude of issues you need to worry about, whether it's demand, enterprise spend. And then now we have the, you know, the strongest dollar that we've seen in an

awfully long time versus some currencies. And that's a major issue, particularly for the companies you're talking about. Yeah, I think that's a good segue into where we're finding interesting opportunities. So obviously, health care has been a massive leader. You know, it's basically been energy staples, utilities and a massive leader. It's basically been energy staples, utilities, and healthcare, but it's really been the big uglies of healthcare, right? It's been big pharma. It's been insurance companies. If you think about the small and mid-cap growth space within healthcare, they've been decimated just like every other growth company, yet their business backdrop is pretty, it's resilient, right? It's health care. And so

we think there's a lot of interesting stocks down here which could outperform in a variety of different environments, but particularly one where the economy slows and rates start to drift lower. Let's go through a few names in the time that we have left. Arrowhead Pharma is one ARWR. It's down greater than 50% from its high. Yeah, exactly. So the XBI has had a, the biotech index has had a historic move down over 50%. Arrowhead's a little bit better than that, but not much. Fantastic business. They're basically the opposite of what Moderna does. They do RNA interference. They can knock down all sorts of bad proteins. They have an enormous pipeline, a pipeline that rivals Alnylam, which is about four times their size. We think they're getting pretty close to having a drug on the market, and then that will result

in a pretty big re-rating of the company. And Dexcom's another, also down greater than 50% from its high. Sure. I mean, Dexcom is a high quality growth name. Their total addressable market is about to, you know, potentially 10x. Historically, you know, they do continuous glucose monitoring for diabetics. They've changed the lives for diabetics. But a recent journal article in the New England Journal of Medicine basically showed that for non-insulin intensive patients, just having awareness of your glucose levels results in improvement in your A1C levels and better outcome. So there's 3 million type 1 and type 2 insulin intensive patients in the U.S. There's 27 million type 2 diabetics that don't take insulin and could benefit from having this therapy.

Lastly, tell me about Exonix, because as I look at it, it's certainly performed far better than many other stocks in the market. It is a positive year to date by, you know, 13 percent, which is no slouch and anything positive seems like a huge win now. Yeah, I mean, Exonix is obviously the exception here, despite, you know, really negative, you know, experience of small and mid-cap growth space. But, you know, it's a really transformative technology. It's for women to address retention and continence issues. It's sacral neuromodulation. Historically, this has required a surgery every three to five years. Their technology enables you to have one every 15 years for a while you need to recharge it you no longer have to do it they just launched a direct

to consumer campaign that we think is um accelerating their business we can see this in google google trends data we can see it in their web traffic um so we're pretty encouraged there all right it's good to talk to you jason i'll talk to you soon that's jason tauber neuberger berman joining us here in overtime up next the real read on jobs from Wharton professor Jeremy Siegel. He says today's red hot payrolls report is actually weaker than it looks. We'll find out what he is seeing, how it could impact your portfolio. Overtime's back after this. We're back in overtime. It's time for a CNBC News update with Frank Holland. Hey, Frank. Hey there, Scott. Here's a look at what's happening at this hour.

President Biden visiting the Japanese embassy in Washington, D.C. to sign a condolence book for assassinated former Prime Minister Shinzo Abe. Earlier today, Biden ordered that flags be flown at half-staff until Sunday as a sign of respect for Abe. Meanwhile, a new report finds the Border Patrol agents on horseback who confronted Haitian migrants crossing the U.S. border with Mexico last September did not strike them with their reins. That is contrary to what many critics had speculated. But that report did find those agents did act inappropriately. Widely circulated images of the incident showed U.S. agents swinging their

reins and screaming obscenities while briefly trying to block families, bringing food to a camp where thousands of migrants arrived requesting entry to the U.S. And the Biden administration is set to send its 15th security assistance package to Ukraine. The additional $400 million brings the total U.S. military and humanitarian aid given to Ukraine to more than $7 billion since Russia invaded in February. And tonight on the news, the funerals begin for the three Highland Park victims. Much more on the tragedy and the investigation at 7 p.m. Eastern. That is the very latest. Scott, back over to you.

All right, Frank. Thank you, Frank Holland. We'll see you tonight, by the way, on a CNBC special, Taking Stock, second half playbook. That's along with halftime committee member Josh Brown. Do not miss that, six o'clock Eastern tonight. Look forward to seeing you guys then. All right. The Nasdaq notching its longest win streak of the year after this morning's jobs report. But our next guest says it was weaker than it looked. Joining us now, Jeremy Siegel, professor of finance at the Wharton School. It's

always good to see you. Good to see you, Scott. Why was it weaker than it looked? Well, two reasons. First, first of all, if you look at the household survey, which actually covers a lot more people, it's not considered as accurate. We're actually down in the number of jobs over the last three months, not up like the payroll survey. But just as importantly, and I listen to a lot of newscasts, and I think a lot of people are ignoring a tremendous drop in the number of hours worked per week. Now, you might not think 0.1 drop, and they revised the previous month down one tenth, is a lot. But if you do the math, one tenth drop in the work week is like a $450, fifty thousand dollar four hundred fifty thousand person loss in payrolls.

And in fact, we've seen one of the biggest downdrafts in hours work over the last 15 years since going back to the financial crisis back in 2008. OK, so even though the headline number looked, you know, decent and, you know, beat the estimate, what I saw underneath there, I think showed a lot of weakness. So so this this to me sounds like you think it only bolsters your case. The argument you've been making is that we're already in a recession, that we just don't know. I think we're in. I think we're in a recession. I mean, even some of the way the data and inventories may be down 2% in the last quarter. We already got minus 1.6 in the first quarter. So that technical definition has been reached of a recession.

I think the Fed will go 75. I mean, listen, one has to remember, everyone's talking about the Wednesday number and inflation is important, but it is very backward looking. I mean, that's when gas prices, it's going to be for the middle of June when gas prices were at the all time high. Now, we've already known they've gone down 20, 25, 30 cents. Actually, the wholesale price has gone down 60 to 70 cents. A lot of forward looking data that we've been getting just over the last two or three weeks has been very much on the downside. This June number that we're going to be getting on Wednesday is not what I call, you know, really on the ball current inflation. It'll be a bad number. I mean, it probably will be very close to nine percent on a year over year basis.

And everyone can rattle their drums and say yeah fed's got to go at least 75 etc and so on but you got to be looking at the tea leaves and looking forward uh that's not as comforting as uh you know to keep on hiking rigorously so for some but but again and to remind people you're somebody who was uh arguing and advocating for 100 basis points. I wanted them to go to 100, 200 basis points at the very beginning of the year and get there. We all know they should have started in 2021. Everyone knows that. It was a terrible policy mistake. I don't want them to make the policy mistake on the way

going down. I don't think 75 to make the policy mistake on the way going down. I don't think 75 will. But I think if you're just wedded to these historical numbers, listen, we've talked about, Scott, how much the housing market, which we know is softening on current prices because of the way they collect data, is going to show housing inflation over the next 6, 12, maybe 18 months into the official CPI. So, you know, don't get fixated on CPI as being the current, you know, be it all and end all of where inflation is going. I hope the Fed recognizes that, realizes that we take a look at freight rates. We look at commodity prices. We look at home prices. We're really seeing some declines here. And again, as I've talked about starting a month ago, I think with you, the money supply has barely grown this year. And that is also a concern

in terms of are you going to slow too fast? OK, so my viewers are fixated, I know, on the stock market and where they think it's going to go. They want to know where it's going to go from here. So what does all that mean? I put everything that you said into a box. I shake it up. And what comes out? Well, I mean, you know, actually, the recent debt, recent action.

Look, I mean, we saw that long bond really jump. Really, the market was flat today. That somewhat surprised me. That's somewhat of a sign that it's sold off. I mean, I think values are near the low. I think they're discounting a continued mild recession. Listen, we haven't gotten too many warnings. And we're within a few days of second quarter earnings reports. Yeah, the forward guidance is going to be a little bit nervous, et cetera, and so on. I think we're not going to see any storage. People are talking about

20% declines, 15% declines. I don't think that's going to happen for 2022 earnings. We've already had two quarters of negative GDP growth, And actually, earnings are slightly ahead of where they were in the first quarter, first two quarters of 2021. So we, you know, it's not going to be a collapse in earnings. I think mostly they're going to be met. Valuations are still great. I just want the Fed when I'll tell you when this market is really going to turn around. When Powell says, I think we've done most of our work, you know, in in in actually corralling inflation, then I think you see the terror. If they see if they still look scared and say we've got to go 75, 75, 75, you're going to see that really pressure on the market. I mean, I had Tom Lee with me on the halftime report today. I want you to listen to what he

told me about what he thinks is going to happen in the second half of the year, which he thinks is going to be good. I think second half is still shaping up to be very strong. And I think there's a lot of catalysts in place. I think you guys discussed it for why stocks could reverse. Today's jobs report is a great example that as much as the headline looked like a really strong jobs number, I think the underlying details really support the idea that disinflation and the right parts of the economy are weakening. And that really means the Fed may not have to be as hawkish as the market's expecting. Are you on team Tom Lee?

Yeah, I'm on team Tom Lee. I think, you know, he and I are saying basically the same thing. We're really in a very slowing economy. Inflation forward looking is on control. One thing I've got to warn, and I've said this before, you know, wages do need to catch up. So, you know, don't get I think of the if Powell says, oh, my goodness, we got a five tenth and a six tenth on wages. Wages have really been lagging behind inflation. They they need to catch up just to stay even. I would not just concentrate on the wage front. I know that's the biggest cost for a lot of the firms, but that's the last that's going to be responded.

That's not a forward-looking indicator. I think the forward-looking indicators look very encouraging on that point. Gotcha. We'll leave it there. Good weekend to you, Professor. I know I'll see you soon. Absolutely, Scott. Thank you. Yep. You bet. That's Professor Jeremy Siegel. Up next, we're breaking down some big stats from the week on Wall Street. Seema Modi standing by with our rapid recap. Seema. And Scott, a nice reversal from what we've seen as of late. Growth stocks outperforming, value sectors left behind. Can this trend last?

We've got the biggest movers of the week coming up right here on Overtime. We're wrapping up a big week on Wall Street. Seema Modi is here with our rapid recap. Seema. Scott, it was a week in which we saw a significant rebound in growth stock tech among the best performing sectors, helped by shares of Apple chip stocks like Micron, Intel, Qualcomm. But it was Moderna that stole the show with a 17 percent gain this week as a new variant makes its way around the U.S., plus news that its modified COVID vaccine induces a

stronger immune response against Omicron than the original shot. On the Dow, one of the biggest laggards was Chevron, closing down by 2.5 percent this week as WTI crude slipped below $100 a barrel before rebounding slightly. On the S&P 500, Virtue Financial trading at lows not seen since November of 2020. Scott, back to you. All right. Appreciate it. Seema Modi, thank you. Up next, your second half playbook, where you can find the biggest upside for your money for the rest of the year.

We will be right back. All right. Tonight, 6 p.m. Eastern, catch our CNBC special, Taking Stock, second half playbook. You can join Frank Holland and Josh Brown as they tackle your investing questions for the rest of the year. Josh is here, of course, with a sneak preview of what's to come tonight. Give us an idea of the kind of subjects you want to tackle. I have to be very candid. It's like my favorite. I love answering your questions, but I love answering CNBC viewer questions. And we got a lot of good ones. So we're going to talk about dividend investing. We're going to talk about the state of the 60 40 classic portfolio uh we'll talk about housing we

have amazing guests jeremy schwartz jenny harrington from the halftime report logan modashami and some surprises along the way how are you feeling right now about what the second half could bring we're right on the cusp of earnings. And we've got the Fed and everything else right in front of us. This is going to be a battle between how much has already been baked, how much has already been baked in versus whether or not earnings actually even end up reflecting what stock prices have done in the first half. So if we believe, and most of us do, that stocks are anticipatory, let's see. The proof will be in the pudding. I do think just purely on, forget about fundamentals,

just purely on market psychology and price is a possibility we may have overdone the depth, you know, in terms of how bad the economy might get. We could skirt a recession, but a lot is going to come out in the commentary starting next week from Fortune 500 companies and guidance will be way more important than whatever they had to say about the second quarter. What do you make of what, you know, Tom Lee said on the halftime report today and what I just had the conversation with Jeremy Siegel

about? And they're in agreement that after a treacherous first half, that the second half could actually be pretty decent, that maybe the Fed is not going to have to be as aggressive as we once thought. Now, whether that is true or not remains to be seen, but that is their perspective, that stocks could actually do well at some point in the second half of the year. You know, one thing that is just so incredible about markets and the way they function and how price feeds into psychology,

which then feeds back into price, is that we almost always do overdo it like almost all the time. Both ways, by the way, both ways. And even better, if you're if you're an optimist right now, just look at how quick that pivot was from one interest rate hike in 2022 to nine interest rate hikes. It happened, I would say, in the span of 60 or 90 days. That's how quickly things can turn for our benefit if the Fed looks at what's going on and says, you know what, we're still too easy, but we may not have to take this thing as far as we may have thought we had to as recently as May, because it's always fluid. It's always developing. Unless they're emboldened by the jobs report today. And Powell says, you see, I told you the economy is extraordinarily strong. It can withstand what we want to do so far. Look, you're adding jobs at a three month average. You're

adding jobs. You're adding three hundred seventy two thousand jobs a month. If you smooth it out over the last three months, if you look at the 12 months of 2021, we were adding jobs at a rate of 570,000 a month. Obviously, that doesn't make sense in a normal economy, not sustainable. 300 something thousand is nice, too. Even if we were to settle out with a two handle, I still think that's a pretty decent economy, certainly not falling off the cliff. And the Fed would be happy. What do you make of this monster move we've seen in ARK? It's been big, the ARK Innovation Fund. Is that something to keep an eye on, or is it like one of those things, okay, great, it's going to reverse? Well, you look at the technicals, and it's still in a very defined

downtrend, even despite, what is it, 19%, 20% off the low? Yeah, 20%. That tells you how far it's fallen. It's very, very unlikely that any strategy can get into an 80% drawdown and come all the way back. So if you're along this thing or if you recently purchased it, you're probably very happy. I don't know how much more you could expect out of a bounce like this, but I own Zoom and that's her biggest holding.

So I'm not rooting against ARK at all. I'm not rooting against any of these stocks. If they continue to move, I guess I'll be somewhat happy, but I wouldn't bet my life on it. Have some fun tonight. Break a leg. Thank you. All right. That's Josh Brown again. You can catch Josh, Frank Holland as well. Six o'clock Eastern. Email your investing questions to CNBC at cnbc.com. You can tweet us at the hashtag cnbcadvisor as well. We hope to see everybody at six o'clock tonight. Coming up, it's Santoli's last word. We'll find out what he is watching as we head into a fresh trading week. So much on the plate, the CPI and earnings kickoff. We're back in OT after this. It is last call time to weigh in on our Twitter question of the day.

We want to know which of this week's winners has more room to run. Is it Micron or Tesla, Alphabet or Nike? You can head to at CNBC Overtime on Twitter to cast your vote. We'll bring you the results in just a few minutes. Plus, Santoli's last word when overtime comes back. To the results now of our Twitter question, we asked which of this week's winners has more room to run. Alphabet was the big winner, over 50 percent of the vote today. Nike bringing up the rear. Let's get to Mike Santoli for his last word. What are you watching

as we head into a new week after, you know, a pretty decent week for stocks? Yeah, Scott, mainly what I'm trying to figure out is if there's anything different about this rally relative to the seven or eight prior that we had that were five percent or more off the lows on the way down this year, anything in the character of it or the backdrop that makes it more believable or have a better shot at maybe lasting longer. And obviously that's to be determined. But a few things to keep in mind. This one, this bounce, it started at the lowest valuation of all of them, probably with sentiment more despairing than than any of the other ones. You have bond yields calmer. Even when we were rallying before, yields were mostly going up. And I think you could at least argue that the

investors are trying to get some comfort that they see the shape of the Fed's policy path a little more clearly and maybe are are wishfully looking to the end of it. So all those things in the mix, I still think the market has to prove that those things matter. And obviously, we're going to be tested by the CPI and by earnings coming up after that. But there's a decent shot that, you know, you got beaten down enough. The powers of just the pendulum swinging back after two 10 percent down quarters, which is extremely rare, might be a little bit, you know, making a distinction between this bounce in the prior. You take anything, as some have suggested, this move off of tech. You know, one of the areas that was, you know, first to get hit really hard, ARK.

I'm talking about some of those things, you know, the once high flying tech stocks like ARK, which are up 20 percent off the lows. Does that mean anything to you at all? Not in itself, but I do think there's a case to be made that just as we had rolling corrections into rolling bear markets, not everything's going to bottom at the same time. And probably there's a first-in, first-out effect. One thing about about the arc trend, I know a lot of folks have been pointing out there have been many double digit rallies on its way down. But this particular one did start at a slightly higher low. I don't want to get all into the charts that deeply, but it's a slight difference where at least you can squint and say maybe the thing is creating a base and going sideways. So wouldn't pin too much on that. But there's definitely a chance that some parts of the market are washed out enough that they don't have to be part of

the downside pressure. You know, the percentage of stocks that are trading with their valuations below their cash on the balance sheets is way, way up. You've only seen it a couple of times before in prior to kind of near the end of their markets. As you said, though, none of the moves right now seem to mean anything as long as you have a CPI looming and earnings beginning next week. If this week was up, you know, 5 percent, we'd still say it's very much in question because of those two events. Right. It's a show me. And there needs to be persuasive evidence that those trends are going in the right direction. And it's going to take time. So I don't think the market's going to be comfortable

to kind of anticipate that with a lot of conviction before we get those numbers actually filtering in. All right, good stuff. Thanks for the last word. Good weekend. We'll see you next week. That does it for us here at Overtime.