Closing Bell - Closing Bell Overtime: The Big July Jolt 7/29/22

Episode Date: July 29, 2022

Stocks handed in a monster month with the S&P having its biggest gain since November 2020. So, as we head into August what could be in the cards for the market. Greg Branch of Veritas Financial Group gives his expert take. Plus, the case for small caps. Jill Carey Hall of Bank of America says the rally in this space is just getting started – she explains why. And, Plexo Capital’s Lo Toney breaks down some top tech trades for your portfolio.

All right, welcome to Overtime. I am John Fort in for Scott Wapner. Just heard the bells, but we're just getting started. And we begin with our top of the tape. The big July jolt. Stocks handing in a monster month. The S&P 500 rallying more than 9%. That would be its biggest gain since November 2020. So as we head into August, is an even bigger breakout building, or was July just a bare bounce? Let's ask Greg Branch, founder of Veritas Financial Group and a CNBC contributor. Greg, you weren't so excited about what you expected the economy, the market to do. The Fed gave us 75 basis point hike. What do you think happens now? The Fed gave us 75 basis point hike. What do you think happens now? So you're exactly right.

I thought a number of things would combine this week to lead sentiment lower, to lead the markets lower, and that didn't happen. And for those counts, I was actually right. We saw deterioration in the home market with June sales down 8.6%. We saw second quarter GDP coming below that 1.6% growth expectation with 90 basis points of contraction. We saw PCE surge to continue at roughly a 40-year high by going from 4.7% to 4.8%. Where I was wrong is with the Fed. I thought that a disastrous CPI number would show that they had a lot more wood to chop in terms of their aggressive fighting of inflation, quote unquote.

And they decided not to do that. So I don't think that a 75 basis points rise at this point when it's well signaled and well anticipated is going to go very far in terms of aggressively fighting inflation. And the numbers are showing that out. So when you send the signal, as the Fed has done, to put risk back on, that's what the market's going to do. And I think that's the signal that was sent, and I think that will be the modus operandi of the market for a while. Yeah, but what's a while? I mean, that's important, right? I mean, July, we might as well say it's in the past, right? From a market perspective, it is.

So do you expect at least for August that to continue, maybe even for the rest of Q3 until we start getting Q4 numbers? There's got to be a lot riding on what the consumer is going to do there. Perhaps the reality check you're looking for sets in? I think a while is a few weeks, if you want me to be more specific. At the end of the day, what's going to happen is that we're going to get those July numbers in late August around Jackson Hole. And I think what the Fed will see is that maybe pushing the brakes on a program to fight inflation and going on an ad hoc basis or a one-off basis or being quote-unquote data-driven was probably not the right signal to send.

So I think that we'll have another round of eye-popping inflation numbers. And you've got to remember, these inflation numbers aren't off of easy compares or low compares. These are off of 4% and 5% that we were experiencing last year. And so I think that while the market is pricing in a Fed pivot, a more dovish pivot at this point, I think that we'll see the Fed change its tone in late August, which I think will change the market tone, particularly as we get evidence that the supply chains are still in quite a disrepaired shape. And as we get evidence that inflation is still a concern. So if the markets are operating, as you say, on some wishful thinking,

what is it that investors should be buying in early August while a while, you know, a few weeks is still operative before the reality that you expect sets in? So at the end of the day, whether you're buying companies now or you're buying companies four months from now, we're looking for the same thing. We're looking for companies that have sustainable demand that is tethered to a secular tail. And so one of my concerns, as you know, is that the consumer balance sheet is deteriorating. The consumer is levering up at a time that is historically expensive to do so. And so you want to look for companies that have a rock solid demand line that quite frankly might be insulated from any weakness in consumer demand going forward.

You want to look for companies that have protected margins, where the continued persistent inflation that we're expecting, and by the way, I expect this to end this year north of 6%, that that is not so meaningful as it is to other companies. And those two things combine to give you consistent earnings growth. And that is the secret sauce. That's what we're looking for going forward, whether I'm right or whether I'm wrong. That will drive performance without any multiple stages. What about the Walmart problem, right? Because you talk about consistent demand.

I think there are a lot of investors who might say, well, what happens in difficult economic times? People shop at Walmart. And that's true. Same store sales we learned earlier in the week actually higher. And yet inflation is pinching the margins and the stock took a dive. It bounced back. It bounced back big as the week wore on. But is it all about demand? Or do you also have to be careful about the impact of inflation, even if demand is strong? Of course. And let me just address that demand point for a second. The Walmart problem, the Target problem, the Kohl's problem was not so much in the volume consumers are spending. It's that they had inventoried the wrong stuff.

The consumer appetite for spend shifted over a course of months from things that they could put in their home and things they could touch, things that they were experiencing. Some of the retailers were ill-prepared for that. So those are not top lines that are insulated that have being somewhat shielded from the inflationary pressures that expect to persist, is one of the secret positives. That'll help you deliver that earnings growth. And there are some sectors that have that. Energy is a great example. They can pass on a lot of these inflationary pressures directly to the consumer. And with the elevated prices expected to persist. We saw what that means with Chevron

and Exxon. But I look at some of these natural gas players as well. The supply-demand characteristics might even be more acute there, particularly with the weaponization of Nord Stream. All right, Greg, let's make this a bigger conversation and bring in CNBC contributor Shannon Sikosha of SVB Private and CIC Wealth's Malcolm Etheridge. Welcome to both of you. Shannon, what a day to end a month that a lot of people didn't see coming. What's your game plan heading into August? More of the same, frankly. We have seen our portfolio tends to focus on quality companies with strong free cash

flow, relative competitive advantage, and most importantly, strong management teams. We cannot overstate the importance of management in this environment, whether it's through guidance, which has been so closely watched the first couple of quarters of this year, to dealing with, you know, the potential levers that they need to pull in a continued inflationary environment. And so we're looking at August as being potentially some more volatility. I mean, we've got two CPI prints ahead of the next Fed meeting. Jackson Hole will certainly be much more important, perhaps than ever, depending on what happens over the next

couple of weeks. So we're not necessarily thinking that the volatility that has been so apparent in the market, if you look at plus or minus 1% moves on a day throughout much of this year, is going to abate. But we do think that there are opportunities to continue to add to quality companies in your portfolio. And we are optimistic that we may have seen the worst of inflation behind us. Malcolm, how are we going to know if this is fading in August? Because, I mean, you don't want to wait until you lose everything from July if you are in and you're feeling really smart right now. You added to your Microsoft position after their earnings report. Why did you do that? And yet

you think that we're not in the clear market wise. Yeah. So two completely separate reasons. Right. So I added to my Microsoft position basically because they came out and said, similar to what Shannon just said, more of the same. Right. They said, we expect next quarter to be just as strong as this past quarter and reiterating the same guidance from three months ago. Or, you know, you had Apple who came out and said, we sold even more iPhones than we expected. And we see no evidence that iPhone sales were affected by what's going on in the broader economy. When you have the leaders of the biggest, most influential tech names coming out and making statements like that, it's easy to get excited

and even conflate those outliers with the broader economy. In fact, we're on pace, as you guys have been talking about, for the best month and probably a couple of years. I can't remember the exact time frame. And my concern now is that this week's rally might be a little bit of a trap. But separately from that, I see Microsoft as being, like I said, a bit of an outlier, where their cloud business now having something like a hundred million dollars of projected run over the next four quarters which is their fiscal year. That alone tells me that Microsoft is on pace to grow sort of underneath the surface regardless of what happens in the broader markets over the next couple of months

while we're waiting to see whether inflation will actually prove that it's cooled or if it stays pretty steady. So when investors are looking for places that are relatively protected, let's see, Greg, you like health care. Talk some more about what what about that particular area you like and what you look for as you're screening through the stocks to say, yeah, this is some place where demand is really going to hold up. And so I think this is a good one. Right. And so all of the areas I like right now share the same four characters. And I said two of them earlier. One is that consistent demand growth that is, in some cases, tethered to a secular tailwind,

protected margins that are somewhat insulated or more insulated from inflation, things that can persist, that can have growth persist throughout this macro environment. And the thing about certain areas in health care is that it doesn't matter if the consumer is deteriorating or not. The demand characteristics will still be strong when you look at companies like pfizer and moderna for example both of whom were just awarded new contracts for different variants of their vaccines this is probably becoming a poor business very high margin business and quite frankly it doesn't matter what macro environment we're in their top line will still have a sustained growth. When you look at HCA, for example, the hospital stock, they reported that labor costs were a problem back in April, but they turned the tide on that

contract labor costs 22% below in June where they were in April with a sustained strong volume. And so whatever sector I'm looking at, I'm putting it through that frizz. Okay. Shannon, you feel similarly about healthcare, but it seems like from a slightly different angle. Striker, you like? Is that partly a kind of COVID recovery play in a way, elective procedures getting back into the swing? Yeah, so there's sort of two things we're playing in healthcare. To your point, we do think that procedure volumes are going to continue to increase. We actually think that Stryker's well-situated to also take some additional share in knees and hips. The other trend we're looking for in healthcare, and this is maybe a little bit outside or sort of opposite of that, is actually looking for innovation in healthcare.

And so one of the things that everybody has shied away from are these high valuation growth stocks, particularly in technology, certainly in software. And we have plenty of that in our portfolio. But we're looking outside of the technology sector, per se, for different areas of innovation and growth. We have learned that the healthcare industry is ripe for disruption. So we have names like Acubia, for instance, who helps ease the pain of clinical trials in terms of being able to aggregate data. So those are the types of themes that we're looking for, areas of growth in a market that potentially has some secular headwinds from a growth perspective. You've got to find growth at the company level.

Okay. Now let's talk some catalysts, I guess, for stock moves that we might see in August and beyond. Malcolm, you say to expect more cloud M&A. You say that, and then at the same time, we got headlines about the FTC, Lena Kahn khan taking on facebook trying to buy a little tiny uh company in vr and the ftc regulators pushing back against that who's gonna buy these companies cloud wise does it have to be private equity at this point or do these companies who did so well this earning season big as they are are they actually going to be able to spend that cash? Yeah, Facebook's a little bit of an outlier. They're on everybody's hit list, if you will. They're an easy target just by name. But I think, you know, in the cloud space, some of the more well-diversified companies like a Salesforce or an IBM, I mentioned Microsoft, I think anybody

who's not Amazon Web Services, basically, might start to acquire some smaller single product companies and then add them to their ecosystem as a means to growing their market share in the cloud more quickly. And I'm thinking about names like, you know, a Digital Ocean, a Databricks, Confluent, Cohesity. There's a ton of these smaller players out there which are all now well off their 2021 highs and might be willing to deal a little bit more because the recent uptick in demand for cloud solutions is because large companies are now migrating their entire tech stack to the cloud rather than just one-off applications here and there with the majority remaining on-premises. And so it's like they're finally coming to accept that their workforce is never going to return to the office in the numbers they had hoped. And so now there's

this overwhelming demand for cloud solutions, especially from companies looking to diversify providers and maybe go multi-cloud as a way to prevent blackouts and potential price gouging. And so Linacom might have the ability to step in with a name like a Facebook that already is public enemy number one. But a lot of these other companies, like the ones I just named, are ones that consumers don't really recognize by name anyway It's not going to get the political headlines that would make that worth, you know

The effort of going after blocking something like that again unless I should I should be calling it meta not Facebook The tickers meta now and it goes by meta I I knew it back in the day on the block when it when it just went by Facebook But Shannon, you agree? You were nodding your head through a lot of that. Yeah, I couldn't agree more. I think that cloud is here to stay. And frankly, I think that there are a number of companies not just providing cloud software, but a number of companies that are involved in upgrading all of these servers, the infrastructure that goes behind the cloud. I think that one of the things that is a misconception

is that enterprise spending is going to start to slow down as we're entering into a more difficult patch. However, it is clear that companies need to be spending to move more offsite onto the cloud so that they can support these hybrid working environments. We've hired a lot of workers across you know, across the United States. All of these large companies have done that. And so being able to use a chassis like Salesforce, being able to bolt those on.

I do think that acquisitions are going to be a little bit more difficult, particularly for the big heavies. But I do think that M&A is going to be much more important over the next 12 months. It's going to be a lot less. There's going to be a lot more scrutiny, I think, from the PE universe in terms of deals. And so I think M&A is going to have to pick up some of that slack. OK, Malcolm, last word. But what about a month ago when almost everything was cheaper? There were so many people saying, hey, if it doesn't have profits, I don't want to touch it. It's all about free cash flow.

A lot of these growth names, all these cloud names that are potential M&A targets, they're the very stuff that a lot of people are saying don't touch it. A month ago when it was cheap, now it's gone up and it could go up further. So what's the rule book you go by in deciding what quality means now. Well, as I said, a lot of those companies we're talking about, their share prices are 70, 80, maybe 90 percent off their November 21 highs. And so they're more willing to deal than they would have been back then if they had been approached by somebody like a Salesforce. At the same time, to your point, I don't think that necessarily means that the product that they offer, their single focus product, is any less quality than it was before. It's just that promising us growth five years from now isn't going to cut it in the same way that it did back in November 2021 and the months prior to it. And so I think it's more

a focus of let's get something out of this name while we can. Let's find a happy home while we can, more so than it is the product itself is not of quality or the product itself is of lesser quality than it was before. It's just not as expensive. It's not as frothy as the better word to use. Okay. Certainly not. We've got a little bit of excitement happening in the market, certainly in July and the way we close today. Greg, Shannon, Malcolm, thank you. My pleasure. Now let's get to our Twitter question of the day. We want to know which of these July winners you would fade. Apple,

Boeing, Chevron, or Goldman Sachs? Head to at CNBC Overtime on Twitter. You can cast your vote. We will bring you the results at the end of the show. Up next, your August market playbook. Jill Carey Hall of Bank of America Securities breaks down where she's seeing the biggest opportunity as we head into a new trading month. She joins us next. We're live from the New York Stock Exchange. Overtime is back in two. We are back in overtime. The Russell 2000 rallying in July for its best month since late 2020. Our next guest says the rally in small caps just getting started. Joining me now is Jill Carey Hall, Bank of America Securities Head of U.S. Small and Mid-Cap Strategy.

Jill, you're excited about small caps here, but during recessions, and you can argue about whether we're in one already or not, small caps typically underperform. So why? Why be excited here? Thanks for having me. That's right. Small caps do usually underperform during downturns and during recessions. And we've seen that happen now. So, I mean, there's a lot of debate around whether we're going into a recession, whether we're in one. Our economists do expect that we'll be in a mild recession starting right around now, second half of this year, similar to the recession that we saw in the early 90s. So one of the mild we usually see around recessions. When we look at small cap valuation multiples of the forward price to earnings ratio of the market, you know, large cap stocks are still trading more in line with their historical averages.

Small caps are trading extremely cheap, recessionary lows. So we think a lot of the bad news at this point around recession has been reflected already in small cap valuations, different than it might have been historically heading into recessions. And we see the size segment as better positioned in this macro backdrop. Here's my concern, though, as I look at the way things played out in tech this week, you can look at, say, Alphabet versus Snap. Snap saw this dramatic ad slowdown demand there. Alphabet was a lot stronger because, in part, it's bigger, it's more diversified. Similarly, look at Microsoft versus smaller cloud software players,

even enterprise software players. Its size helped it out. Are you saying that all of that, kind of the disadvantage of smallness, is already priced into the small caps? I think a lot of the risk around recession is priced in. I think there's a couple of things that are going on. One of the reasons we've been more favorable on small caps over large caps, and granted, if we do see, you know, a more severe recession, there could certainly be more downside risk to small caps at this point. But we do think large caps actually have more downside risk in that scenario. And, you know, one of the reasons we've been positive on small caps over large is, you know, based on the backdrop, we're seeing services spending this earnings season and in the recent quarter or two has held up a lot better than goods-related

spending. Small caps overall are more exposed to services spending. We're also seeing, you know, even though corporate guidance has been weak, guidance from small cap companies has so far been holding up better. And when you look at CapEx guidance and companies spending on CapEx, that's actually held up very well. And we've found that small caps are more correlated with CapEx cycles in the U.S. than large caps are. So I think there's some fundamental reasons as well and the fact that they've been more discounting the risks already. OK, so for the investors who follow along with you on this thesis, what are the risks? What are the potholes, whether it has to do with inflation, specifically with consumer spending? Where are small caps perhaps less protected? Should we see some surprises in the data over the next month or so?

Well, I think one of the divergences that we've seen is that services versus goods spending, where you've seen downward revisions to the sales of more of the goods and big ticket item exposed areas, upward revisions to sales for some of the more services exposed areas. A risk is if we see just a broader deterioration in consumption that puts that services spending at risk. I think what's also a risk is that small caps are certainly lower quality. You have fewer stocks that make a profit. Quality has been rewarded in this environment. But if you're a passive investor, if you look at the two small cap benchmarks, the Russell 2000 versus the S&P 600, the S&P 600 is a lot higher quality of a benchmark. It doesn't have as many stocks that aren't profitable. And that index has actually been outperforming the large cap indices year to date and holding up a lot better. So

for investors within small caps, we would definitely focus on quality. We do think it's a market where stock pickers can be rewarded in these late cycle and downturn backdrops, lots of alpha opportunities. So focus on quality, focus on small caps that offer healthy free cash flow. That tends to be a rewarded attribute in this backdrop. And focus on stocks that can fare well if inflation stays high. Okay. Got to pick your small caps like you pick your produce carefully. Jill Carey-Hall, thank you. Thank you. Up next, we're talking tech. The NASDAQ rallying more than 4% this week. We are breaking down some top technology trades after the break. And don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. Overtime, we'll be right back.

Welcome back to Overtime. Time for a CNBC News update with Frank Holland. Frank? Hey there, John. Here's what's happening at this hour. The House expected a vote later today on an assault weapons ban amid mass shootings across the country. This legislation would criminalize the knowing sale, manufacturing, transfer, possession, or importation of many types of semi-automatic weapons and large capacity ammunition feeding devices. It is, however, very unlikely that the ban will get through the Senate. Lunar Focus Company masked in space Systems filing for Chapter 11 bankruptcy protection. The space company's debts have ballooned since it won a NASA contract two years ago. It made that bid before the pandemic and COVID made everything much more expensive,

leaving Mastin over budget and unable to pay its employees. And the Mega Billions grand prize drawing now growing to an estimated $1.28 billion cash, excuse me, with a cash value of almost $750 million. It's hard to believe those numbers. It will be the second largest prize in the game's 20-year history, the drawing tonight at 11 p.m. Eastern. And tonight on the news at 7 p.m. Eastern, see why families that lost loved ones on 9-11 are angry about a golf tournament in New Jersey. That's the very latest. John, back over to you. Frank, thank you. Now, tech was on a tear in July, the Nasdaq locking in gains of more than 12 percent. That's its best month since April 2020.

July's top performers in the Nasdaq 100, Tesla Netflix, and Amazon. Joining us now for more on the tech trade is Plexo Capital founding managing partner, Lo Tony, also a CNBC contributor. Lo, good to have you. And I mean, what a month. Amazon is up about 24% in the month. Apple is up about 17%. What's the most important sort of earnings report that you saw this week? Most surprising that changes, if at all, the way that you look at this environment? The results from big tech companies that focus on the cloud. The reason being is we wanted two indications. The first indication we were looking for is we wanted to see how resilient these businesses are going to be able to hold up in what could be a changing and much more challenging environment. So that was the first thing that we were just also looking for a barometer of sorts based on the composition that customers of these cloud businesses and what those customers are experiencing. So, for example, when we looked at the results of Amazon and Microsoft, we were very pleased with their ability to not show a very significant decrease sequentially from the growth last quarter. Google, on the other hand, gave us an indication based on what we suspect is a higher concentration of retail and e-commerce,

advertising heavy businesses. Their growth slowed a little more. So that could be a canary of sorts in the coal mine looking ahead. OK, so that's the cloud software side. What about Apple? And I'd throw Amazon in here a little bit too, because the big questions about the impact of China shutdowns, the impact on supply chains, and, you know, Apple was only down 1% in China. Amazon was chugging right along, said it didn't see the sort of demand concerns that we heard about from Walmart at the beginning of the week and showing, I guess, a different demographic for your mainstream Amazon shopper. So when you're mixing in the hardware aspect and the concerns about the

consumer, what did we learn there? Anything good? Yeah, John, I think your points were precise with how we've been thinking about this, especially with regard to Apple and the impact that the shutdowns based on COVID could have had on the business. In particular, we were very focused in on what was going to happen with the MacBook sales. You know, given that Apple is making a renewed push by having their own chip, the performance works great. I'm on one right now. And it was slightly disappointing in the sense that we didn't see the numbers that we wanted to. But when we drilled down into the comments by Tim Cook and the CFO, what we did hear was promising in that it was much more inventory and supply chain constraint related.

So it appears that the demand is still there. And I think this also plays into your point about, you know, this is really a higher end consumer that we see with Apple, as well as with Amazon. You know, I think what we saw with Amazon was a surprise to me. Amazon has a much more complex business, given the components that they have that generate revenue. Now, we know that their cloud business did really well. We were anticipating that. We were pleasantly surprised just to see how well the other aspects of Amazon's business also held up.

So all in all, I'm really bullish about what this portends. What we also saw was a little bit of a drag along effect for some of the smaller, more growth oriented players across different sectors, primarily enterprise software and cloud as well. So names like Snowflake, names like MongoDB, those also have been performing fairly well. On the not so good news front, Intel closed down 8.5% today. I spoke with Intel CEO Pat Gelsinger earlier, really kind of concerned about Q4 and their expectation that things get better from here. Do we have that sound? Part of what gives us confidence in the second half and into next year

is our consumption rate is now below that of the end user. So we're clearly drawing down a supply. There's going to be a natural bounce back as we go into the second half of a stronger year. Also, the changes were primarily driven on the consumer side, John, and the strength of enterprise where we have higher market share, higher ASPs. We continue to see that. Overall, we're very confident. And as we said on the call yesterday, this is the bottom. We're rebuilding from here.

Interesting thing in what he was saying made me think back to Logitech's earnings earlier this week, where they saw a drop-off in gaming accessories and in webcams, but continued strength in the stuff you use for work, right? The office video setups, keyboards, and mice. What does that say, perhaps, about the rest of this year, either what continues to be strong, similar to cloud, you know, businesses continuing to buy, and what is either weak and could strengthen, or weak and could get weaker with the consumer. Yeah, well, John, look, we are lapping some very challenging comps across the board. And I think the reflection of some of these devices, hardware that was necessary to establish a worker so that

they could do a remote work for their job, you know, we're just lapping that. And these were, you know, kind of one-time purchases, right? Like we've seen this play out in other areas. Peloton thought their market was bigger than it actually was until the economy opened up. Zoom thought their market was bigger than it was, but it actually was just pulling revenue forward. But that's where I go back to the cloud businesses, because these were already growing at an astronomical rate based on the demands of digital transformation, as well as the genie being out of the bottle now for remote and distributed workforces. So I expect to see strength and growth in those businesses. But in some of these other elements

that were driven by a consumer and many one-time purchases, those are tough comps to lap. Yeah, Shopify recalibrating to a similar thing. The curve went right back to where it was before. Still increasing, but not off of that higher level from COVID, off of the lower level. Lo, thank you. Thanks for having me. Good to see you and wrap up July. Look into August. Now, up next, we're wrapping up a big month for the market. Seema Modi is standing by with our rapid recap. Seema, what do you got on deck? You know what, John? A negative GDP print and an interest rate hike,

not enough to stop Wall Street from rebounding. A solid performance for the major indices. We will uncover biggest names, what you need to know as we enter a new week. That's after this very short break. We are wrapping up a big month for your money. Let's get to see Mamodi with our rapid recap. John, it was a strong rebound on Wall Street this week and month. The Dow, S&P and Nasdaq up roughly 3% this week, led by energy, rallying more than 10%, helped in part by Chevron, which reported record second quarter profits,

the best performing stock on the Dow this week, and a really strong performance from Caterpillar, which reports results next Tuesday. We did get those better than expected reads from its industrial peers, General Electric and Honeywell. On the flip side, Intel really struggling following disappointing earnings and guidance. Consumers and businesses don't seem to be buying as many PCs as they were before. The stock, just putting into perspective, now trading at levels not seen since September of 2017. We will hear from another semiconductor company, that's AMD, next week, as well as some travel names, Marriott, Expedia, Airbnb. Finally, a big rebound in cryptocurrencies in the month of July. Get this, Ether gaining 70%, Bitcoin rebounding 26%. It's best month since October

of last year. And John, of course, we'll see if it can hold. We will see. Indeed. Seema, thank you. Coming up, top trades heading into another busy week of earnings. We're going to break it down when Overtime returns. Don't forget to weigh in on today's Twitter question, kind of like a game of would you rather not. We want to know which of these July winners would you fade?

Apple, Boeing, Chevron, or Goldman Sachs? Head to at CNBC Overtime on Twitter, cast your vote, and we'll bring you the results coming up. And check out shares of Roku plunging after missing earnings yesterday in overtime. The stock handing in its worst day ever. Roku is the third biggest holding in Cathie Wood's ARK Innovation ETF. That fund seeing some serious losses so far this year. We're going to hear from Cathie Wood tonight in CNBC's special The Tech Trade, hosted by Deirdre Bosa. Dee is with us now.

Dee, I mean, big show. Excited to see it. Some rough hits. I'm going to miss you, John, first of all. What am I going to do without you? I won't have on the other hand. But I will see you, of course, Monday or the week after, actually. It is a big show.

You know what? It's a Friday afternoon. But this was also one of the biggest weeks in tech that I can remember. There was so much kind of dread at the beginning of the week with the mega caps not deliver, under deliver. Could that tank the rest of the market? And what we got, as you well know, is relief and actually some optimism, some good old optimism with Amazon and Apple showing us that things may not be as bad as we thought. However, where is Cathie Wood and the ARK Fund invested? Some of the hardest hit names, you mentioned Roku. There were also Coinbase headlines this week, Teladoc.

Some of her top holdings are hurting so bad on the year, even though we did see some recovery in the broader ETF over the month of July. But is she sticking with her convictions? That's what I want to know, John. Is there anything that would sort of make her think twice about this tech growth trade so far? It just feels like nothing can shake that. Is that kind of blind optimism or is there something that she's seeing that others are not? I mean, after the July she had, she hasn't thought twice up to this point.

Why would she be thinking twice now? But I do wonder about, I mean, she is selling some stuff. So why? What's the strategy there? I mean, it's so rare that you find somebody who is like all in, just to the extreme. Just all in, I know. Double down. Yes. Well, that's the interesting thing. Exactly. Usually when we hear about what she's buying,

it's often double downing on something that she's already holding because the price has gone down. But in the case of Coin, right, she actually sold that to pick up some shares of Shopify. I'm very curious to hear more about that call. But John, we also, on the other hand, see, I always, I'm always thinking about you. We also have Dan Niles, right? And he's really been a bear throughout this rally. He's going to tell us that this is a bear market rally. I'm certain of it. So that will be a good contrast. If you're looking for what to do next, I mean, you want to hear from both of these two asset managers that have very different views, but important to hear both of them, as I know you know. Shopify. Yeah, it's a Canadian company. So, you know, Buy Canada, I guess is what she's saying. There you go. And Tim Hortons.

Yes. I mean, the drink and the donut There you go. And Tim Hortons. Yes. I mean the drink and the donuts. DeBosa, also Canadian. For those who couldn't tell from the accent, DeBosa, also Canadian. And very nice. Up next, our two-minute drill. Some top picks for your portfolio as we round out the week. And coming at the top of the hour, another packed week of earnings is on deck.

And the Fast Money Crew is going to tell you how to trade the names ahead of the results. Overtime is back after this. Time for our two minute drill. Joining us now is Ellen Lee, Co-Portfolio Manager of Causeway Global Value Fund. Ellen, let's talk about three stocks, see if we get to all three. First, Philips. Why? Philips is a well-known industrial conglomerate that has pivoted to becoming a healthcare tech company, focusing on imaging and diagnostics, moving to businesses, pivoting to a business, which is higher growth and higher margins. But the opportunity came up because they're in the midst of a product recall for their sleep apnea machine. That operation itself only represents less than 10% of the company, yet the stock now is trading at around 10 times earnings, despite the fact that their core franchise value should at least be

much, much, much higher than 10 times. And we believe and we have conviction that in the medium term, the company will be or the management will be able to resolve this product recall issue. And worth noting that they have a fantastic balance sheet to whether this. OK. And you want to take a flyer on a European bank with with inflation raging? Unicredit. Why? Unicredit. Yeah, that's actually a great segue. You know, Unicredit trades at less than five times great value company. You know, just recently it had its earnings. It had fantastic operating profits. You know, it has a capital ratio of over 15 percent and it has committed to capital returns

that is boasting of a 20 percent payout yield. That's pretty impressive. But why is it so cheap? It's because, you know, with recent Draghi's resignation, there is a lot of concerns about what's going to happen in Italy. But we know that if Italy wants to get access to the EU recovery fund, they need to have a disciplined fiscal policy. So though the market's really worried about election risk, we believe that there is that carrot out there for Italy to form a government with a more fiscal responsible policy. All right. We'll just do two in a two minute drill. Maybe it's a little bit more than two minutes, but who's counting? Ellen, thank you. Have a good weekend. You too. Thanks. Up next, a moment of truth for the market. How you can get set up for the big data and

the big earnings coming our way next week. Overtime, we'll be right back. Welcome back to Overtime. It's that time. Let's get the results of our Twitter question. We asked, which of these July winners would you fade? The answer, the big winner or loser, Boeing with 47% of the vote. Wow. Nobody wants to sell Apple, I guess. I mean, even though it was up the most of the four. Well, Wall Street

closing out the best month for stocks since November 2020 on the back of better than expected earnings results and another rate hike by the Fed. There's still more market moving events ahead as investors look to a new month of trading. Joining me now with a setup Wall Street Journal reporter and CNBC contributor, Gunjan Banerjee. Gunjan, welcome. And then tell me what happened? What were we seeing in July? I remember you were tracking just how much risk retail investors had been taking on. It seemed like they got kind of skittish and went safe in July, maybe too soon. That's right. Well, I think individual investors were kind of holding on, right, as they have for a lot of the year.

And institutional investors were so, so pessimistic heading into the past few weeks. And obviously that has eased up just a little bit. I think the biggest thing has happened is that the yield on the 10-year Treasury note has dropped dramatically. It just logged its biggest one-month drop since March 2020, which is so remarkable when you think about how risk-off everything was. But these falling bond yields have triggered yet another rotation in the stock market and really helped this rebound. It's helped heal this rebound in tech. And I think that's one key thing people need to be keeping an eye on next week, especially with the jobs numbers coming out and for the coming months. And what we've seen in the bond market is essentially,

right, a bet that the Fed is going to be cutting rates next year already. What does that, in fact, translate into? Are you betting kind of on a soft landing, or are you betting on a more extreme recessionary scenario? I don't understand what that means. You know, I think that's one of the biggest questions out there, where all week what we saw was people on Main Street, people on Wall Street trying to figure out, are we already in a recession? Is the recession over? Is the recession coming? It's been all about a recession. So I think what that's telling you is people are really, really worried about growth, right? And they're betting on slower growth ahead,

whatever shape that looks like, whatever, whether that's a recession or slower growth overall. It tells you people are saying, I think the Fed's going to have to decrease rates because of a slowdown in the market. And we'll get more on that next week with the jobs numbers, right? People are really worried about a recession right now, but we've never really had one without a fall in the jobs market. But it almost seems like people are betting on a soft landing and yet betting that the Fed is doing too much right now. So they're going to have to end up cutting rates, but it's all going to be OK because stocks are I don't know. It's it certainly is complicated. Gunjan, thank you. One last thing. Is there anything in particular quickly that you're going to be watching for next week, perhaps a signal in the earnings numbers?

You know, I think the number one thing is the jobs numbers. And I thought this past week was busy, but next week might be even busier with the earnings results. I'm going to pay close attention to more tech earnings, advanced micro devices, PayPal. I think those are really key to watch. Definitely key. AMD and the jobs number, of course. Gunjan Banerjee, thank you. That's going to do it for overtime.

Fast Money begins now.