Closing Bell - Closing Bell Overtime: The Pause the Market Needed? 8/17/22

Episode Date: August 17, 2022

The Dow snapped a 5-day win streak … but is this just what the market needed? Josh Brown of Ritholtz Wealth Management gives his take. Plus, Morgan Stanley Wealth Management’s Lisa Shalett says investors should not chase new market momentum. And, reaction to Target’s earnings from an analyst who issued a bold call ahead of that report – he explains where he stands now.

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 moment, we'll get earnings from Cisco. The breaking numbers and instant reactions of the quarter are straight ahead. But we begin with our talk of the tape. The rally takes a breather. The Dow snapping a five-day win streak as all three major averages end the day in the red. So was this the pause the market needed? Let's ask CNBC contributor Josh Brown of Ritholtz Wealth Management. So Josh this the pause the market needed? Let's ask CNBC contributor Josh Brown of Ritholtz Wealth Management. So Josh, good to catch up with you here. Market's been actually pretty well behaved in some respects, as you would probably observe. I mean, we regained more than

half of all the losses, got a lot of these kind of bullish momentum signals triggered, people chasing and saying, OK, that tells us a low is in. And then we bump up maybe within an inch of the 200 day moving average and it backs off from there. And today Fed Minutes gives a little indigestion. What's your read? I think that's I think that's exactly right, Michael. If you were to ask me in advance, like what would be the natural place for the rally to halt or take a break or take a pause or even end. I'll let you know tomorrow. This would be it because whether or not people want to believe in technical analysis or not, the algorithms are written in large part based on price signals more

than anything else. So totally unsurprising. I would point out if Apple were flat or even down today, it would be a much, much different situation. We'd be talking about a significantly worse day because Apple continues to grow in importance and in market a great thing for the overall tape, not necessarily great for the overall narrative that inflation is about to miraculously disappear. I wouldn't get too excited about that. And what we heard from Walmart and Home Depot has been very heavily interpreted as being bullish, but most of it really to me was not bullish, especially when looked at in conjunction with what we're seeing on purchase applications, mortgage applications, home sales.

Those numbers are now starting to go from being lower to what we would refer to as plunging. And I know that the last two years were really good years, so weigh it against that. But the comps were hard, but these numbers are now awful. And I personally think there's a very big multiplier effect coming from the housing market that is now going away at the same time the Fed is tightening financial conditions. Right. Well, I would say whether people are interpreting the Walmart and Home Depot numbers as bullish or just maybe unsurprising.

And obviously housing, without a doubt, a big locomotive for the overall economy and something that we have to sort of reckon with what the impact is going to be. But all of that in the mix at the same time that the Fed minutes hit. Now, I mean, the Fed minutes, right, it's weeks old. It gets a little bit massaged maybe along the way and gets released. But clearly, the market didn't find anything newly concerning in there. And I wonder if it's because there was at least a nod in the direction of, well, we are aware of the risk of overtightening. We are aware of the fact that, you know, financial conditions are when they tighten, they operate with a lag, and some parts of the economy have slowed down.

And so, therefore, maybe the market hasn't been completely off base in looking at the horizon and saying, at some point, the Fed eases its foot off the brake a little bit. I think two things will happen at the same time, and the market will have to get comfortable with both of these. By the end of this year, the Fed will probably be done with tightening. And the reason why won't be because inflation is back to their 2% target. It will be because the economy is crying uncle and the stock market

probably along with it. So that doesn't mean we have to have a recession, but it will be apparent that the Fed has gone very far in their tightening cycle in a very short period of time. Remember, what we're accustomed to in the last 25 years is 25 basis point moves. We're doing 75s and now we're going to do 50s. And that is just not something that most people trading have seen. You have to go back to 94 to find the last 75 basis point move. That's 30 years ago, right? So this whole experiment in how quickly can we normalize policy in response to ugly inflation readings, we don't know how it ends. But while they are acknowledging that they might be doing more damage than necessary to the economy,

simultaneously, you're going to start to hear stuff from the Fed about how 2% is not really acknowledging that they might be doing more damage than necessary to the economy. Simultaneously, you're going to start to hear stuff from the Fed about how 2% is not really that important anyway. And maybe we should really be thinking about inflation on a continuum. And maybe the right number is 3% or 3.5% or between 3% and 5% in the context of the economic growth, blah, blah, blah. That's the next thing that's going to start to happen. And I think the market can handle it. But that's a sneak preview of what you're going to see between September and year end. And I think it's going to be a wilder ride than what we've experienced this summer. You know, aside from not having seen 75 basis point rate hikes since 1994, and that was on top of a larger base of rates, right? It wasn't coming from zero or near zero.

What we also haven't seen, though, is nominal GDP growing at, what, 8 percent? Pick a number of what it's been in the first half of this year and last year, double digits. So I think that, you know, a lot of people's calculus is is a little bit off in terms of how we think about the magnitude of these moves and what they mean for the economy that companies feed off of and how big it is and how fast it might be growing. And I don't know, maybe that's part of the explanation for why markets click to a 24 percent decline. That's a typical cyclical bear market. And I've tried to, you know, maybe get a little more neutral about how it plays from here, you know, without necessarily assuming that we either have a deep recession or assuming that a magical soft landing is a sure thing.

Michael, I'm glad you said the word nominal. This is the most important thing that I think is being missed right now. The economists seem to get it. The everyday investor, the traders, maybe not so much, or they don't understand it, or they do, and they don't think it's important. But I think it's really important. Nominal is the whole ballgame right now. If you're looking at retail sales being up 3% in any given month, but inflation being up 8%, then you have to say to yourself, how much of the quote unquote economic growth is just coming from the fact that everything costs more? That's really what it is. It's price pushing these nominal numbers higher.

It's not more demand. We know it's not more productivity. Productivity is actually down. It's just higher prices. That's a fun game to play if you're trying to paint a picture. Look how fast the economy is growing. But again, if you're a regular person eating, sleeping and breathing within that economy, it's not great. Look at what the guy from from Home Depot said. He said the housing market being up 40 percent over the last two years meant an additional eight to $9 trillion in net worth for the American consumer. Well, which direction is that now going? The guy from Walmart said they're actually seeing higher income customers stagger into the store, probably like, what is this place?

Because they're in search of cheaper food for their grocery shopping. This is like the Whole Foods customer migrating down. If you want to look at those stats and say, hey, Walmart and Home Depot said the consumer is strong, you can. But none of that, to me, is a net positive. Well, maybe not. Although, you know, that eight to nine trillion in net worth is a cushion, if nothing else, as are, you know, wage growth, you know, operating for typical wage earners. I guess, though, the way you're talking, Josh, and if you're saying that the economy is going to cry uncle and the market's going to have a tougher ride, you've got to be selling the S&P here at $42.73 more than you'd be buying it? Look, in the end, price is going to either validate or invalidate all of our feelings.

But I don't think, if you look at the last nine months to a year, I don't think the alpha move has been to get all bulled up at a VIX sub 20 because we've been very choppy. We've been very range bound. We just had a huge rally off the lows that hasn't even gotten us back into an uptrend, let alone a bull market, like has not even snapped the downtrend. And so when you're in that environment, I think it's less important to try to guess the next 10%

and more important just to have the situational awareness that this isn't a moment to get excited about momentum. So I'm glad prices have recovered. I like that Bitcoin and Ethereum have recovered. I'm very happy. It's great. But as I've been saying on the show repeatedly, this is not the time after the rally to get all bulled up. That has not rewarded you this year. And I still think we're in that range bound place right now. Well, that is true, although by definition, you know, the trend isn't going to turn up until you're at least 20 percent off the lows. So you kind of assume that's going

to be where you're at once you you get some reassurance there. By the way, we are going through Cisco's numbers. You see there the stock is responding positively, up almost 4 percent after hours. We'll get you the details in just a moment. Let's bring in Liz Young of SoFi and Malcolm Etheridge of CIC Wealth to talk more about the market setup. Welcome to you both, Liz. You've heard what Josh has been going through here. Would you be apprehensive about assuming that the market is making things safe for buyers at these levels or no? Well, first of all, I don't think Josh is saying that it's safe for buyers at all. And I would say not being safe. Yeah. Oh, with a forward P at 18.3 and the rally that we've seen over the

last month, month and a half, this is probably a fragile environment, and it's not something that I would expect to continue, certainly not at this clip. And I would expect the market to give pieces of this back. I think we got a little bit ahead of ourselves, and it's almost like a game of bumper bowling, where we're trying to sort of figure out which side of it we're supposed to be on. That said, I'm not as pessimistic as many are for the rest of the year, because I do think that the market is going to react more to inflation coming down and the relaxation in commodity prices than to some of this incoming softening economic data. And the economic data is going to get worse before it gets better.

That's how this works. So we need to slow down demand. We need to slow down some of this growth. We're just sitting here hoping to find out that we don't slow down demand. We need to slow down some of this growth. We're just sitting here hoping to find out that we don't slow it down to a point that turns into a huge contraction. But I really think that that huge contraction risk is more of a 2023 story, not a 2022 story. So as an investor, you want to be present in this market. And I would use down days and minor pullbacks as entry points. Malcolm, it is without a doubt a

tricky environment, meaning it's not necessarily conforming to a lot of the playbooks that might be out there. And by that, I mean, if in fact a recession is not here and is not necessarily imminent in the next few months and it might be a 2023 event or risk, then the market peaked way too early, right? We normally don't have a one-year lead time between the stock market peak and a recession showing up. Now, those are a lot of assumptions baked in there, but how would you think about the interaction of what markets have been saying, how the Fed is maneuvering things, and what it's going to mean for the real economy. Yeah, I think to your point, the split data that we have everywhere on indicators such as strong job growth and, you know, retail spending, for example, versus rising interest rates and layoffs and

the housing market cooling makes it really tough to look at anything in history and say, historically, we know that when the market does this, then 12 months later, it means it's going to do that. Or we know historically that when bond market does this in twelve months later it means it's going to do that. Or we know historically that when- bond yields do this. Then it means that the stock market is going to do that and so it makes it really tough to point

in any direction and say this is. Absolutely what we're headed for because we've seen this play out before and so I think to the point that. Josh made and then- lives made to its it's not going to be- super terrible or super great in either direction in the shorter term.

And so it's more a function of making sure that what your expectations are are in line with reality, which is, you know, we're not off to the races here. We can't confidently say we've hit peak inflation and it's time to everybody crowd back into the space. But it's also not the time to necessarily get super pessimistic and say, I'm selling out of the S&P completely because I know for a fact it's going back down to 32, 35, and I'll pick it back up from there. So it's really a function of staying disciplined and staying invested, knowing that the market is going to eventually work itself out in 2023. We'll probably be a little more clear picture. But we just have to get through this this bump with the with the Fed

deciding how much more aggressive to to continue to be. Josh, just to look for more apparent paradoxes in this market or at least mixed signals, we have utilities having made a new high and relative high. So they're kind of leadership somehow within this market that is also seeing an echo bubble in some of the meme stocks and some of the lower quality, heavily shorted names flying. Is there a way to reconcile those things or just markets do funny stuff? I think markets do funny stuff is a great answer, and I rely on it all the time in conversation.

But the meme stocks are tiny. You're talking about non-S&P 500 stocks. There's really not a lot of institutional money in there. There's very aggressive trading going on, but there's not enough sponsorship where you could say something thematically is driving big money to be doing trades like that. I think we all understand what that story is. Utilities is different. Nobody's having fun trading utilities. That's meaningful money with gravitas behind the people pushing the buy and sell buttons. And so I would say that that signal is a little bit heavier. Let me give you a couple of more. Pfizer and Merck. These are two of the best trading setups in all of large cap U.S. stocks. These stocks are about to substantially break out

and they have been setting up. This has been setting up for a long time. Why would utilities be leading and would some of the best setups in large cap stocks be in large cap pharma I think we all know the answer I think the market is voting that way doesn't mean they'll be right but use that if you if you want a sentiment gauge use that don't use bed bath and beyond well and Liz you know we also have until a couple of days ago, transport's doing well and people looking at breakouts within industrial. So I think the market is speaking with several voices here. And clearly, it doesn't always have to be sending one clear, consistent, easy message.

But talk about the Fed minutes today and what it really revealed, if anything, to you. Did it really just confirm what the market has more or less been assuming about the stance for the next few months? I actually think that what the market assumed originally about the Fed meeting was not right. I think it assumed that there was a lot more dovish tone than there was, and what we got today was confirmation that they were still going to fight inflation. The other thing that I think people should take away from these minutes is another piece that they again confirmed. I think they would be on the side of going too far, then not far enough. Because if you get to a point

where they don't go far enough and they have to make up for it later, number one, they look like they're reversing course and now they're really behind the ball. And number two, it's probably too late by that point. So I think we can expect the Fed to go above what everybody might call a neutral rate or go beyond what it has to go to in order to get inflation back down and have a little bit of a pause. Now, Josh mentioned earlier in the show that maybe they're done hiking by the end of this year. I think that's possible, but I think it's also possible that they have a pause and they wait for it to bake through to see if they have to do any more smaller hikes or if they actually have to reverse course because they went too far. So I think any expectation that they're going to turn dovish or not keep going at this

hard in September would be erroneous. Yeah, you know, Malcolm, I think we have to maybe define our terms and everyone has a different definition of what a Fed pivot is. Now, look, if you look at the forward pricing of the Fed funds rate, it suggests that they think that, you know, the Fed will be cutting maybe sometime next year. But a pivot could also be going from urgently chasing inflation higher and having to get more and more aggressive with larger hikes to something more manageable, 25 basis point hikes, and then maybe just plateauing and waiting and seeing. How do you, I guess, characterize what the Fed path looks like? Yeah, clearly, there's a lot riding on this September meeting, right? I think to Liz's point, the Fed is probably going to come out

in September and stay as aggressive as they have been to the tune of 75 basis points once again. I don't know where we actually end up in 2023, but I feel like it's unrealistic to think that they're going to start cutting next year after they went through all of the trouble of raising this year. I think, you know, to define what hawkishness means, to your point, I think we're chasing four percent, four and a half percent as the rate next year is what the Fed has kind of put out there is what they're targeting. And I don't think they're going to back off of that. But I will say, even though I agree with Liz, I actually think that's a danger, a headwind to the market that the Fed decides to stay that aggressive into next year because there isn't a lot that they're going to actually be able to do about

inflation at this point. We're talking about food prices being up 10 percent year over year. We're talking about, you know, fuel prices being up still, even though they've come in quite a bit. We're talking about owner equivalent rents and those kind of things. Not a lot is going to be taken off of those numbers that I just gave you simply by them making it more expensive for me to use my credit cards or refinance my mortgage at this point. Yeah. Well, there's no doubt that that they're still hoping to get lucky with that, with the numbers just sort of coming back to normal on inflation without them having to do too much. We'll see how it goes, guys. Appreciate the conversation, Josh, Liz, and Malcolm. Let's get more on Cisco's report. Frank Holland is here with that.

Hey, Frank. Hey there, Mike. Cisco shares up just about 3% after a beat on the top line and a beat on the bottom line. EPS was a penny above what the street was looking for. Forward guidance, that was actually a bit mixed. Revenue guidance for this current quarter and for the full year, that was above estimates. But the profit guidance for both the current quarter and the full year, that was a bit soft. You have to remember last quarter,

Cisco shares, they dropped double digits after the company reduced its forward guidance when it came to revenue, citing supply chain challenges in China, issue sourcing components, and also the war in Russia and Ukraine. This quarter, CEO Chuck Robbins, he basically addressed some of those concerns that analysts had about the company's backlog and also about potential for their customers to switch over to other competitors. He said, in part, full-year product orders and backlog are both at record highs and reflect strong demand, and we continue to see for our innovation and the overall value we bring to our customers. This quarter, however, Cisco did miss on estimates on gross margin, operating margin, and cash from operations. The earnings call starts in just a few minutes.

We'll be listening for more commentary on their supply chain and also the recovery in China from the COVID lockdowns and how they see that impacting the full year. Again, shares of Cisco up just about 3%. Mike, back over to you. Frank, thanks very much. Let's now get to our Twitter question of the day. We want to know which of these August Dow losers is due for a catch-up trade. Johnson & Johnson, Chevron, Intel, Caterpillar. Head to at CNBC Overtime on Twitter,

vote, and we'll bring you the results at the end of the show. Up next, Trivariates' Adam Parker breaking out his playbook as the bond market flashes some major recession signals. The key names he's betting on. We're live from the New York Stock Exchange. Overtime is back in two minutes. We're back in overtime. Take a look at the yield curve. Still flashing some, well, cautionary signals, let's say.

But our next guest says it's creating some big buying opportunities as well. Joining us now is Trivariates Adam Parker. Adam, I mean, multiple yield curves are inverted, you know, different maturities on the curve. For one thing, I guess I would just ask for your your basic interpretation of that. I mean, first of all, literally all it means is the market thinks that, you know, short, longer term rates are lower rates are lower than short-term rates. Therefore, short-term rates maybe are done going up, meaning Fed might be getting close to the end, have to come down. But what does it mean economically to you? I mean, I was told, or I thought it was not very good, right? That, you know, maybe today's price action makes a little bit more sense than we saw the last five or six weeks, because what it really means is people think there's risk to a recession. The 10-year yield being low, the yield is low

because it's a risk-off indicator. So I think what is going on is people are saying, well, wait a minute, the Fed's probably going to keep raising rates a ton and slow the economy down massively. And that's probably not very good. In the interim, if you're an investor, you probably can buy the two-year, pick up a decent yield, hold it for two years, and wait out for the earnings to decline. Arguably also means that over the 10-year span, inflation gets under control, which I guess is a silver lining. Yeah. On the other side of it, sure, you could get very bullish again. It doesn't mean that the same leadership will unfold this cycle. And I think a lot of investors I talk to are hoping it's the same leadership as last cycle.

They can go back to the same playbook that worked. But I don't think that's likely. I have been surprised we do a lot of investor meetings. We just don't hear about the inverted curve a lot. Now, I do equity meetings. I focus on U.S. equities the most. So it's not like I'm in there talking about various parts of the bond curve and duration and what to own and whatnot. But I think the signal isn't a positive one. So when I see the market go up a lot and I get a little bit more chatter, hey, maybe there

is a soft landing. Maybe earnings weren't as bad as I thought. Maybe CPI is peaking. I mean, you're starting to hear some of that. I get a little bit more worried. So I'm definitely more negative than I was six, seven weeks ago because the market's up a lot and I know things are going to slow. So if you think there is that disconnect between, you know, how the market's up a lot and I know things are going to slow. So if you think there is that disconnect between, you know, how the market is pricing things and how you think it's going to play out, what does it lead you to in terms of reorienting a portfolio, in terms of the kinds of stocks that will or won't work? Yeah, it's a great question. I think it's dramatically different because I'm sitting here looking at the consumer, right? Everyone says the consumer is two-thirds of the economy. You need it to be good, right? Consumer businesses for the last 20,

25 years pretty consistently grow between 6% and 8% per annum, if you go down the list. The last 12 months trailing, somewhere between 20% and 25% has been the actual reported growth in the public U.S. equities. So don't be confused that there's a soft landing. We made it through. The numbers are coming way lower, way lower. And I think that's an important point. Why is it confusing? Because we look and we say, OK, well, GDP is a little bit negative. I don't know how many people focus what percentage of the audience thinks about nominal versus real. We're just talking about it. But eight minus nine, it gets you an answer of minus one. Two minus three gets you an answer of minus one. There's a big difference, though, when companies produce widgets and sell

them. And so you can get a period where earnings still look OK because the nominal GDP is high. That's going to slow and roll over. And I think another thing we keep forgetting about is when did the Fed lift off in March? Yes. So companies reported their Q2 results April through June. Well, maybe it didn't take effect as rapidly as we all thought it might, but it will over the next couple quarters. So I think numbers will come down, particularly in discretionary and staples and some consumer sensitive areas. What will work and where estimates are going to be more achievable? Likely across the healthcare complex, healthcare services, pharmaceuticals. If I had to take some growth-driven risk, I probably

would go for biotech because probably something will be safer effective. And so I think healthcare could be a leader. I think another disconnect that's really formed in the market, Mike, in the last few weeks is, hey, it's a recession and a risk-off trade for oil and commodities and metals, but it isn't for kind of the growthier tech stuff and consumer stuff that's ripped off the bottom, that seems inconsistent to me. If you're worried about a demand shortfall, won't it affect other stuff? So I actually think the leadership could be back to where energy and metals again, where I know confidently in the medium to long term, demand growth will exceed supply growth.

Obviously, if we have a recession, demand is going to be off. So the market seems to be discounting more pain on the demand side for kind of metals and oil than it is for, you know, tech and consumer. Those types of stocks, that's wrong. The material stocks. I mean, energy obviously became somewhat in fashion, but I feel like those are only, they're not fun. You don't tell great stories about material stocks and metals and things like that. It's much more about just pure, it's a pure kind of leverage to the cycle type of trade, as opposed to you can believe that various types of tech stocks or even consumer stocks have a story independent of the cycle. We do stocks, right? So I buy my little dream today.

I sell it to a sucker with a bigger dream later. That's what we want to do. And that dream's always more awesome and something that seems disruptive and innovative. Whereas you want to buy copper, really? Well, it's about demand growth, exceeding supply growth. And one thing, we talk about ESG all the time, but that doesn't really prevent demand, right?

If you finally have enough wealth in the southern part of the U.S. or southern Europe or India or Africa or whatever, I don't think you're going to say, yeah, you know, I don't need an air conditioner because of ESG reasons. So people are underestimating global, you know, GDP will be above global. You know, GDP will drive things globally for things like metals for a long time. So I think we look back 10 years from now, S&P maybe up 5, 6 percent per year, metals, oil up 20 percent per year. Sure, they're going to be cyclical, but I think you want, if you're an investor, you want to be focused on these areas as major areas for leadership.

And metals, maybe they're not, you know, dreaming, sexy kind of stories, but they're going to work over the medium to long term with high conviction. Are those estimates either poised to go up or already holding up better, or do you feel like they've been adjusted slowly? You know, look, the S&P numbers for 2023 are around $243 in earnings down from 250. I think the real number is probably 215. So the numbers are definitely too high for next year. I think a lot of people know that. But whether it's in the price, who knows? What's interesting, though, is energy and metals numbers are way lower for 23 than 22. And the stocks are way cheaper. So I'm willing to believe it's more in the price

for those businesses than I am per se discretionary, where I think the consensus numbers are for 25% earnings growth for 2023. That's crazy. The numbers are going to come way lower. So in terms of what's in the price and estimate achievability, I feel good about it. And then if you look at certain businesses, they're generating enough cash in this environment, a lot of the E&Ps you guys talk about on the show, that the balance sheet improvement cycle is pretty strong. So unless we're going to turn it to drunken cowboys on the CapEx again any minute now, I think these businesses probably merit a higher multiple this cycle than they did in the past. Yeah, but every indication is that they're not going there.

I think it's changed a little bit, yeah. They are better on the credit side. Adam, thanks a lot. Great to be with you. All right, see you again soon. Time now for a CNBC News Update with Kelly Evans. Hi, Kel. Hi, Mike. Hi, everybody. Here's what's happening at this hour. Former Vice President Mike Pence says he would consider any formal invitation to testify before the House January 6th committee if asked. Pence, though,

did express constitutional concerns about testifying before the committee, noting that it would be, quote, unprecedented in history for a vice president to be called to testify before Congress. A federal judge has ruled that Walmart, CVS and Walgreens must pay a combined $650 million to two Ohio counties to address the damage done by the opioid epidemic. It's the first time pharmacy chains have been ordered to pay money in an opioid lawsuit. Walmart says it intends to appeal the ruling. And LeBron James and the Los Angeles Lakers have agreed to a two-year deal worth more than $97 million. According to James' agent, the agreement includes a player option for the 2024-25 season,

and the deal makes James the highest-earning player in NBA history history with contracts totaling more than five hundred and thirty million dollars. He passes the Brooklyn Nets, Kevin Durant, actually. And tonight on the news, Rudy Giuliani testifying before a grand jury behind closed doors. We will have the latest at 7 p.m. Eastern. I'll see you all then. Mike, back to you. Yes, absolutely. Kelsey, then thank you. Up next, big money and the rally. Why Morgan Stanley Wealth Management's Lisa Shallott thinks investors should not chase market momentum. She joins us with her take after this break. Over time, we'll be right back. We have a news alert on Bed Bath & Beyond. Leslie Picker has the details. Hey, Leslie. Hey, Mike. Yeah, Bed Bath & Beyond shares slumping in the after hours today based on an SEC form called a Form 144, which shows an intent to sell. And of course, as you recall, over the last few days, some recent filings related to RC Ventures. That's Ryan Cohen's, basically his family office that has been, you know,

holding these shares recently has helped kind of propel the stock upward. Well, now there's this form 144, which is showing the intent to sell the potential sale of about 7.8 million common shares and the following call options, about 11,257 calls that expire January 20th, 2023 at $60, goes on to have 5,000 calls that also expire January 20th, 2023 at $80, as well as 444 calls that expire that same date at $75. So massively out of the money call options, even with the recent search that we've seen, listed in this document is the broker by which he is apparently transacting with, which is JP Morgan. So proposed sale of securities, I've reached out to Representative Ford Cohen, who declined to comment on this recent filing. But obviously, any move he makes in this stock has the potential to swing the stock price.

You can see shares down about more than 7 percent right now. Also worth noting that the date of notice for this is 8-16-2022, which was yesterday, although this form was recently filed. Mike? Yeah, I mean, you're sort of conveying some ambiguity here because we don't necessarily know if sales have been made, if they might be made, if they absolutely will be made, right? And this is something like 7.8 million shares amounts to just about 10% of the outstanding total for Bed Bath & Beyond.

Which is about how much he owns. Yeah. Shy of about, I want to say, 1.8% of the company, because I think he had about 11.8% based on yesterday's filing, if I recall those numbers correctly. So it would amount to the entirety. We don't know if he has sold. Again, the language in the filing says potential sale of all of these different entities.

All right. We will stay on top of it. I know you will, too. Leslie, thank you. All right. We will stay on top of it. I know you will, too. Leslie, thank you. All right. The recent rotation from value back into growth stocks has seen the Russell 1000 growth index rebound more than 20 percent since mid-June. But our next guest is cautioning investors to not chase this new momentum. Joining us now is Lisa Schell, a chief investment officer with Morgan Stanley Wealth Management. Lisa, it's good to see you here. Obviously, some relatively sharp market moves in a short period of time creates opportunities,

I guess, to figure out what makes sense and what doesn't. So what are you looking at the growth sector as telling us? And why would you say it's not something to bet on from here? Sure. So, look, I think we had reached by the time we got to June, we had kind of played out the very traditional, you know, policy tightening framework playbook, if you will. As interest rates go up, price earnings ratios go down. And, you know, we saw the market, you know, really move into a very traditional bear from January to the middle of June. By the time we got to the middle of June, we started to see technical conditions that suggested, you know, that some of the price action was perhaps overdone. Things were oversold. And we had in certain pockets some interesting valuations. I think fast forward to today, you know, we've gotten, you know, this very traditional bear market rally back with folks focused very much on this narrative of peak inflation, which some folks are suggesting

means peak Fed. And therefore, you know, they think that, you know, rushing back into some of the growth stocks and, you know, we're back to where we started. Let's, you know, let's play the old symphony again that worked so well for the prior 13 years because the feds done our view is that is just you know profoundly premature if you look at uh you know history typically bear markets play out in at least you know two or three acts and so you're waiting for this next act to begin which do you think it means uh that we haven't likely seen the lows in the overall market? Or do you feel as if we're just going to maybe get tested along the way? I think we will retest the lows and potentially go through them.

I think, Adam Parker, your last guest made a lot of fantastic points really about the vulnerability of earnings estimates as we get into not only the end of this year, but in particular into 2023. You know, one of the things that is somewhat incongruous, and I think Adam alluded to it, is, you know, investors seem to be cheering that this idea that inflation is conquered. But if inflation is conquered, so is pricing power. And so is, you know, the speed at which the economy is growing. And without pricing power and without powerful economic growth, there are an awful lot of these company earnings numbers that are going to, you know, come under pressure. What parts of the market in that environment would you say offer relative value then? Yeah. So if we're looking at at the market right now, I think we come to some of the same

conclusions as as as Parker did in your last segment. You know, we're seeing a lot of value in energy right now where the market has discounted recessionary levels of earnings, materials and mining very interesting, financials are interesting to us, and on the more growthy side of things, healthcare. I think we come to a lot of the same conclusions that this idea of rushing back into old leadership in consumer discretionary and tech really just may prove

more frustrating this time around as some of the operating leverage that those companies benefited from in the last cycle really starts to become challenged in this environment where you've got a higher cost of capital and, you know, more aggressive Fed policy. Seems like a different game they're playing for sure. Lisa, thanks very much. Appreciate the time. Absolutely. All right. Up next, betting on the bullseye. Last week, we brought you the bull case for Target ahead of its earnings report.

Now that those numbers are out, where does the analyst behind that call stand? He joins us after the break. Welcome back to Overtime. Target shocking the street today with earnings that came in 46 percent below expectations. This coming after two prior warnings from the company. However, our next guest remains bullish on the stock and was on the show last week calling it a top pick. Joining us now, UBS analyst Michael Lasser. He has a $205 price target on the stock and was on the show last week, calling it a top pick. Joining us now, UBS analyst Michael Lasser. He has a $205 price target on the stock. Michael, good to catch up with you again here.

Now, the stock had run up into the report today since we spoke to you last week and only gave back less than 3% on a pretty sloppy bottom line number. What's the main interpretation of the quarterly results and what they're telling us to expect from here? I mean, did they clean up most of the inventory issues? I think you got it right, Mike. Three quick points from the second quarter results. One, the traffic was up 2.7%. There is no better indication or validation of the strength of a retailer that if someone gets off their couch and goes to a store or opens up a phone and buys from a company's website and they are certainly

doing that at Target. Number two, they are making progress with their inventory. It was up 43% at the end of the first quarter. It was up 36% as of the end of the second quarter. That was inflated by factors like all the cost inflation that's rolling through retail and some early receipts of holiday inventory. And they guided for improvement in the back half of the year. All this does is set Target up for a much better 2023. And that is that the heart of this call and the stock is along here in our view. What are the next signposts, I guess? I mean, clearly people did have confidence in target management before these warnings. They

performed very well in the prior couple of years. Have they won back the benefit of the doubt? Are we going to be looking at, you know, back to school and holiday with a little bit of skepticism? So you're right in that the milestones from here will be, A, back to school. And they said that back to school and those categories associated with back to school are off to a good start. And then from here, once we get into the holidays, how do they manage through it? It's going to be an intensely promotional holiday season. We've already seen indications of that. We think Target's well positioned to do well in both good times and not so good times, in promotional and less promotional times. And so we think that Target's going to be able to

regain its credibility. It's important to keep in mind, Mike, this inventory challenge was not unique to Target. Target acted very aggressively to work through it. And the fact that this was more systemic rather than idiosyncratic should help rebuild the company's credibility. That's true. Not unique there. Michael, thanks very much for the update. Appreciate it. All right. Up next, we're all over the biggest movers in overtime. Seema Modi standing by with all that action. Hi, Seema. Mike, coming up, we have a chipmaker soaring in overtime, plus shares in another bad stock falling in the after-hours trade. We'll share all the details right after this short break.

Take a look at shares of Cisco, up about 4% here after hours, making it the biggest S&P gainer in overtime. Let's get to Sima Modi with more movers in the OT. Hey, Sima. Hey, Mike. Kicking things off with Bath & Body Works, the company cutting jobs following disappointing earnings, 130 rolls. The retailer says majority of the positions cut were in leadership. Stock is down roughly 3.4%. The company was part of the L Brand spinoff alongside Victoria's Secret and shares are down about 40% since the separation last August. Let's turn to tech. Semiconductor

player Wolfspeed, a $10 billion market cap name, painting an optimistic picture with a solid beat on earnings and revenue. Guidance for the first quarter also ahead of Wall Street consensus. The stock is up about 18% here in overtime. And let's finish things off with silicon chip design company Synopsys delivering a strong beat on sales and earnings. CEO says while our customers navigate through the ebbs and flows of the market, they are simultaneously investing heavily in more complex chips. The company expects to cross the $5 billion mark in revenue in fiscal year 2022. And you'll see the stock is up about 2.3 percent. Those are the overtime movers, Mike. All right, Seema, thank you very much. Up next, a top cybersecurity pick

for your portfolio. That is in our two-minute drill. We'll be right back. Let's get the results of our Twitter question. We asked which of this month's Dow losers is due for a catch-up trade. The big winner here, Chevron, with 39% of the vote. People want to buy the dip in oil. Johnson & Johnson following closely behind with 35%. Up next, our two-minute drill. Over time, we'll be right back. Time now for our two minute drill. Let's bring in Mike Singer, Gradient Investments president. Mike, good to have you on here. I mean, a lot of back and forth in this market

over the last few months. It must have surfaced a bunch of opportunities here. Stuff looking oversold or too high. We talked about a cybersecurity play. What's your favorite one here? Well, in the cybersecurity area, I mean, before we start there, I want to concentrate on opportunities in tech. I want to talk about companies that are profitable and they're category vertical leaders. In the security area, which I think is, you know, top of the list for corporations, I think Palo Alto Networks is a company you want to own. They're profitable. They can grow their earnings and sales for 20 percent plus going forward. And I think they can hold their margins even in a recessionary environment. And you don't think that that one has been, I guess, sort of well

recognized for its advantages? It has held up better than most. Yeah, it has. And that's kind of my point here a little bit is I want to own companies that are mature, been around. They have best of breed products because I think those are the ones I mean, I don't want to play the, you know, the price to sales game. I want to play the price to earnings or price to free cash flow game a little bit. And when I look at security, which I think is a great vertical, I think Palo Alto is the leader there. And that's the one I want to own. I want to own leaders because I think they are going to be the ones that outperform going forward. Salesforce is a leader, obviously, in its area. Why do you think this one has recovery potential?

Well, Salesforce has come down. I mean, they kind of sacrifice earnings the earnings growth this year but I believe that that earnings growth is going to pick up big time. There's no argument that they're a leader in the US you know software as a service area. And I feel they're cheap enough to own where you get a twenty twenty five percent earnings grow or at a low thirties multiple. Good bye. All right and quickly pay, PayPal, this is

another sort of comeback candidate. This is a little bit different. I mean, I still think fintech is important. PayPal finally beat a quarter and they maintain their guidance, which proves to me that consumers are still spending. I mean, Elliott Management threw $2 billion in an investment there. And I think starting next year, their EPS will start to grow 20% plus at a 20 price to earnings multiple. Seems like a good buy to me on a recovery story. Yeah, one time a very expensive stock. But as you mentioned, it's really come back down toward, I guess, a broad market multiple. So not paying so much of a premium. Mike, great to catch up to you. Thanks very much.

Thanks a lot. All right. And that does it for overtime. Fast money begins right now.