Closing Bell - Closing Bell Overtime: Trust the Rally on Wall Street? 05/27/22

Episode Date: May 27, 2022

Dow and S&P 500 post their best week since November 2020. Adam Parker from Trivariate Research, Shannon Saccocia from SVB Private, and Dan Greenhaus from Solus Alternative Asset Managment discuss whether or not this rally can last. Plus, the Nasdaq is up 10% since its intraday low last Friday. Can the bounce be trusted? And, Michael Santoli’s “Last Word” is “half-full.”

All right, Mike, thanks so much. Welcome, everybody, to Overtime. I'm Scott Wadding. You just heard the bells. We right here are just getting started. We do have a big hour ahead in just a bit. I'll speak with Gene Munster on whether Apple shares are indeed back in business. Ed Yardeni coming up on the real state of stocks as well. We do begin, though, with the winning week for your money. Finally, finally, after a grueling stretch of selling, is the worst truly over now? Let's ask Trivari. It's Adam Parker. He's with me on set here post-9 at the New York Stock Exchange.

Our servicemen and women are here. It's so great to see as we honor them on this long holiday weekend. What are your thoughts here after we've had this big comeback? I'm just psyched to be here with you in person when the market's not down 5%. I told you I was going to put your picture on the door and not let you in because you had a knack for being here on some of the biggest down days lately. I think the worst four days of the year. So we're finally here, headed into weekend with a little bit of better news.

Look, it's always hard to say, is this the exact bottom or not? I don't know. But I do think we got that combination of valuation, sentiment, and fundamentals, making people think risk-award is getting a little bit better here. What do you say, though, to those who say, yeah, but that's fine and great. We've been here before a couple of weeks ago. We went up nicely. Maybe we go up a little bit more this time. But all of the issues that withheld us from feeling better are still in front of us. So how can we really say all is clear? I don't know if all is clear. I don't think you really can say

that. I think we can look around and say, all right, well, I think about the things I'm getting asked, right? There's a lot of cyclicals trading between two and four times earnings. So they're embedding earnings down 75%. So we go back and study the last 50 years and say, how many times have earnings and revenues gone down this much? Are we in a similar scenario or worse than average today? Are there anything where risk-reward looks good? I think there is. I think metals and mining look attractive. I still think energy makes a lot of sense. We think semiconductors actually make sense here, down 30 percent and probably still

have pretty good demand supply. You always have a bias towards semiconductors. That's the former semi-analyst in you, right? That's true. But if you look back at the last 10 years, that was a pretty good bias, right? I mean, they've been pretty good kind of GDP plus growers and margin expanders. And then I think on the growth side, people were saying, is innovation really dead? Or is there anything down? You know, NASDAQ's down 25, but maybe stocks underneath 50, 60, 70 down. Are there any opportunities? So I think that's most investors I'm talking to are trying to figure out, even if I know earnings are going to decline,

is there still stuff that's worth it in the face of that? Are they inclined, the ones you're talking to, to want to put fresh money in? We had the Bank of America fund manager survey, which, I mean, the flow show, excuse me, which was the highest amount of money going into equities in some 10 weeks. Now, I don't know if that's long conviction money or not, but at least it's some money coming back in. Listen, if we're looking at the last few years, if you take a traditional long, short hedge fund, I own 40 longs, I'm short 60 stocks, I'm running net long, and we look at what we think will absolutely be the worst thing for them over the next six months, that's

basically what will happen. So if I say that's what's going to happen, what is that? Energy and materials outperform, because most of them don't do that. We get a tech rally that they sold some down, they miss it, they chase it, and get filled positions over the next couple months, and then it collapses again in the fall. So could that happen? Yeah, maybe. Maybe it could. Because I think earnings probably are up this year versus last year, but maybe a little bit not so much up 23 versus 22.

So you can get a squeezy rally. Multiple is going to expand. I think it's a stock picker's market, though, and I'm pretty excited about the opportunities. So what do you say to somebody who's listening to this and who endured this week of upmarket and said, you know, I turned on the network, and I heard everybody a week and a half ago was gloom and doom, and now the market's been up a lot, so everybody's feeling all better.

But if you split the difference and you say, yeah, but the Fed is still doing what it's doing, and I'm not going to fight the Fed, doesn't that win out over everything else or not? I mean, look, quantitative tightening. You know what I mean, too, right? I do. Everybody's positive now. Yeah, look, I mean, it's amazing how two-day price momentum changes the view when these are multi-year economic and earning cycles. So we're all probably getting too high and too low amazing how two-day price momentum changes the view when these are, you know, multi-year economic and earning cycles.

So we're all probably getting too high and too low based on two-day price action. I think that's a spot-on comment. I think underneath that, your point is right. Quantitative tightening brings about a different set of investment opportunities than quantitative easing. I hadn't even started for QT yet. Right. But the market and the perception rate started last November and in earnest maybe in February. Right.

So there's certainly some anticipatory element the equity market has. And I think most people would say earnings are likely to not grow as rapidly in the future as they did in the last couple of years. I think that's in the price. And I think the question is now where are two negative assumptions in the price where I can find some opportunity? So in some ways, I think this could be a clearing out where stock pickers can actually make some money long short again for the first time maybe in a while. So let's talk about some of those areas. I'm looking down at my notes, and I see financials this week. Bank of America is up 9%. J.P. Morgan is up 11.5%.

The gains across the space have been rich this week. Something to believe in, to buy into, or no? I'm probably a little more neutral to negative on the financials. The old school guy in me would say when stuff's optically cheap in the banks, yeah, maybe it's because the curve will steepen and growth will be good, or maybe it's because there's things that are marked that aren't fully accounted for yet. And we've all been scarred enough in our careers to think maybe there's some private credit or something that's not totally marked.

And it keeps me a little bit worried. We're kind of recommending a neutral stance in the banks, preferring the big ones to the small ones, just thinking that the small ones are more pure rate play, where the big ones at least have some of the opportunities for growth, investment, banking, et cetera. But see, this feels like you're trying to thread the needle to me too tightly. You're not calling for a recession. I don't know. No, I don't think there could be.

What I say is the S&P 500 earnings will grow, and you could have a couple quarters of negative GDP, but I'm looking at 500 U.S. equities that are superior, man. I replace 30 every year that are poor with 30 good ones. That helps earnings. I think we still have enough companies with pricing power. I think energy materials grow rapidly. So we could have a, you know, I think the consumer is slowing. I think you've seen that in a number of areas.

But I still think earnings will be up this year versus last year. And so that keeps me relatively thinking there will be some decent opportunities in the market. You don't think that your favorite sector, energy, which has done great and has had an incredible week again, you don't, as I raised this issue with others on the prior show, money's going to come out and go into tech if there's any sniff that tech had bottomed? For sure, there'll be a, you know, arc rally, if you want to call it that, when people get optimistic. I don't even need to call it an arc rally. I mean, just look at the mega caps.

Mega caps this week. I mean, Apple's up better than 8% and Microsoft 7.5. NVIDIA 12.5. Yeah, I mean, the semiconductor index, I think we talked about it a week or two. I told you about that. The triple long index is up 20%. So I'm not surprised you'll get that kind of move. But I know or I feel with confidence that demand growth will exceed supply growth for oil, copper, and aluminum on a multi-year view.

And so that's the part of the market where I'm going to keep telling you, like I have for the last year, I'm going to buy dips when they form there because there's a shortage and demand growth exceeds supply growth. All right. Let's expand the conversation now. Bring in SVB, Private Chief Investment Officer Shannon Sikosha. Of course, a member of the Halftime Investment Committee. Dan Greenhouse with us, too, of Solus Alternative Asset Management. It's great to see you both. Shannon, to you first. What do you think about this move? Are you a believer in it or are you still skeptical that it can last? Well, my view is that we're going to still chop along here, at least through the month of June. I think what's going to happen over the next couple of weeks is I do think we're going to get some earning estimate revisions downward from the analysts. We're going to start seeing

continued conservatism from CEOs talking about inflation, pressuring margin in second half of the year. And you're starting to finally see a little bit of decline in consumer spending on the good side. Now, I think that's actually going to be a catalyst in the positive direction later this year. But I do think over the next couple of weeks, people are going to start to factor in slight loose lower demand, especially on the consumer side, higher costs.

And I think we could be in for some conservative estimates coming in for Q3. I'm being told this is the best week of the year for the S&P 500, Dan Greenhouse. Is that representative or is it a better sentiment rally or is it simply just a bounce? Yeah, listen, the stock market, the S&P 500 was down 20%, the Nasdaq was down 30%. At those levels, outside of a recession, which I'll agree with Adam, I don't think we're in either, you're pricing in a lot of the downward earnings revisions and the slower growth that Shannon's referring to. So in terms of the bounce, I think, first of all, you have obviously retail sentiment.

The earnings reports in the last couple of days were just not as bad as perhaps Walmart suggested. But then you also have the degree of sell-off that's already occurred. And you really, we talked about this last time I was on, this type of selling just needs to exhaust itself. And perhaps earnings from the dollar stores and TJX were enough to do just that. And maybe we got too negative too quick. I mean, there are a bunch of different sides I can take and try and foster a debate. You could say, well, Ron Insana, he has a piece on CNBC.com that I urge everybody to read that's provocative and says, maybe the Fed has done enough or will have done enough after June and July 50s that that's enough to cool inflation and get us to where we need to go.

Your response to that is what? Well, you know, we've talked about this a lot, you and I, over the last couple of months, that there's still some chance they could thread the needle without ruining everything. I think the part that would really structurally affect me would be if they cause such a big decline in the economy that they end up cutting rates next year. Then I will lose all faith, right? So if that's not the case, then I think they will move a little bit more slowly. You could get some directionally dovish commentary in the next six months

and that could cause a bid and multiple expansion for mega cap tech and some of the other stuff that's happened. I mean, we did get the market multiple down at 17.5 times. It's not like it was crazy expensive anymore. Shan, what if? What if? What if the Fed can actually pull this off?

Well, I think you're seeing 200 more basis points of hikes priced into the bond market right now, Scott. So not only would we see, you know, potential inflection in tech, and I agree with Adam, but you could see a rally in bonds. I mean, this is a huge opportunity for the for the Fed to potentially nail this. I'm not sure that they'll be able to. I think they want to be incredibly aggressive. But I think if you look at 50 basis points, June and July, you're coming into September. That implies that we get another 100 basis points in the fourth quarter. That seems hard to believe with consumer spending slowing down. I think out of the corner of my eye, I saw Greenhouse with like the look that said that's crazy talk by the judge. I don't believe that they can play. I saw your face.

Well, yes, my face told that story. I was just going to say to Adam, like, I mean, the idea that they're not going to cut, which is which I agreed with what Adam and Shatner are getting at here, like, yeah, there's ample history of them not i think is misplaced and i think you still have to assume a bounce here notwithstanding that 200 225 basis points whatever they end up doing over the next couple months is going to be too much because it usually is right? History ain't on the Fed's side, AP. I don't, and that's factual, right? Three out of 12 times they've executed it. I just think what's a little bit different this time is, you know, we had the interest rates were low across the curve at the starting point. And we know, and you talked about this a lot in the last few months, that the supply issues were really the cause of the

inflation. So the classic destroying demand isn't going to help with wheat. It isn't going to make semiconductors catch up. There's some things that were inflationary that aren't going to be solved by that. So waiting will probably help a little bit more this time than other times in the past. So I think they'll slow down a little relative to, as Shannon said, the huge change in the Fed fund futures where people went 250 bps higher 12 months out versus where they were last November.

So, Shannon, let's talk about some of the areas of the market got a nice boost this week, financials being one which we had a conversation a few moments ago before you joined the party here. Adam does not like the financials. What about you? Because they had a really good week leading some to believe that this sector is back. Well, I mean, I think we're really talking about the banks, right? And those are the stocks that you cited, Scott. We're fairly neutral on financials.

And actually, we don't have a ton of bank exposure because we do feel like they're going to be trading on the curve right now. Now, there are opportunities in some of the larger banks to obviously generate revenue in other places. But I think a more diversified basket of financials is the right way to go, especially if you're looking to create a basket for the second half of the year. Names like Schwab, retail names, some of the exchanges, those are probably going to see a little less volatility. But that's that's our view on the banks in general. Greenhouse, I'll give you the last pitch up and in because I want you to tell me whether you think that that's a space that you would want to be in. If you think that the Fed is going to be as tight as they've suggested and that rates may go up

as a result of that, or if you think rates would be depressed because you still have those concerns about recession and weakening economy? Yeah, so for Solis, I mean, we don't really, the financials we look at are way, way worse than the J.P. Morgan and the Citigroups of the world. We're way further down on the ratings spectrum. But when you look across the space, there is a level of attractiveness given the depths of the sell-off and the quality of the management in some cases again this isn't what we do but some of these names are glaringly obvious being down 20 25 and yet uh being led by strong operators but again i keep coming back to for for the viewers i i the viewers, over the course of the next six months, we're going to undergo a monetary tightening the likes of which we haven't seen in 30 or 40 years.

And I think it's foolish for any of us, Adam, Shannon, myself, or my mom, to try to fully appropriately understand exactly how this is going to affect the investment landscape, because I really think, again, the only investment landscape you have as a barometer for what we're about to do and are doing is the 1970s. And obviously, over the totality of that period, it was not very good. Yeah. You want to make a quick last point? Yeah, see, because there's no perfect historical analog, the job is really to figure out where the same set of assumptions are differently discounted in securities and pick winners from losers. And that's mostly what I do for a living.

So I don't think we're too far apart, actually, on what he just said. All right. We're going to leave it there. Mr. Greenhouse, I appreciate your time. Shannon, I'll see you soon. AP's sticking around for the remainder of the hour today. Let's get our Twitter question of the day. We want to know, will stocks be higher or lower in six months' time?

You can head to at CNBC Overtime on Twitter. Cast your vote. We'll bring you those results at the end of our show. We're just getting started here on Overtime. Up next, we're talking tech. The Nasdaq has seen some serious gains this week, but can the rally really continue? We debate that. And later, is inflation peaking?

One top market strategist thinks so. He'll make his case just ahead. We're back in two. The Nasdaq has rallied 10 percent since last Friday's intraday low, led by mega cap names like Apple. For more on whether the bounce can be trusted, let's bring in Mark Lehman. He is JPM security CEO and Gene Munster, Loop Ventures managing director. Gene, I'll start with you because I know you follow Apple almost closer than anybody else. Up about 8% this week.

So what from here? I think we're going to see a nice bear market rally. There's a lot to love about these rallies, and they can be pretty significant. I think Apple is going to participate in that, Scott. And if you look at the frequency of these rallies, they've happened 16 times since 2000. And the magnitude has been surprisingly impressive. They're up 22%. So just to kind of frame in that, you mentioned the NASDAQ up 10% over the past week. That would suggest that this bear market rally is going to, we're about halfway through it. There's still another, call it 12% upside to this. And so I would say this, enjoy this, but be brave as tech investors, because we are not through the bottom

of this. And if I may just continue with a thought quickly, is that a bear market rally will end, all good bear market rallies end until there is visibility that fundamentals are improving. And if we fast forward a month from now and start thinking about how investors are going to be positioning themselves for the June quarter results, I suspect that we're going to see some cautious anxiety amongst investors because the March quarter, we looked at 20 tech companies. 11 of the 20 largest tech companies had negative commentary regarding June. We think that that is going to stir concern from investors. And so put it simply, Scott, just enjoy this ride, the next 10%, and then batten the hatches down because it's going to get bad. I mean, I think, Mark, a lot of people would take that 10%.

That sounds optimistic. I don't know whether you believe it or not. Do you? Well, you're right. I think most people would take another 10 percent. I was on the show a week ago and it's up 10 percent from then. And that Friday, a week ago, everybody was chiding anybody who talked tech and positively. So that's how fast things can move. I do agree with Gene. I think we're going to start to look at the June quarter pretty soon. But we've seen some numbers in the last few days. You looked at Workday's numbers when they reported and others. Expectations and analyst guides are going down. And at the same time, some of these stocks are performing just fine. So that gives me a little bit of confidence. We've also seen some things that are obviously backdrops that are terrific.

We saw some M&A this week in a large takeover, which is the kind of indications you want where people are using some of the balance sheet. Because these balance sheets for these tech companies are in durable shape. And what they do with it, it's going to be fun to watch over the next two, three quarters. And I'm looking at that.

And again, this week showed some evidence of those signs. Adam Parker was waving his hands like he wanted to get in. Look, there's 40 years of history where the annual assessments can come down and the market can rally. So what I don't want people to be confused about is you can have earnings grow year over year and still have the earnings expectations come down. Right now they're for 9% earnings growth in 2022 versus 2021. That's what the bottom-up annual assessments are for.

If we get revisions down to 6% growth, that could still be perfectly fine for equity markets. So you can have downward revisions in an upward equity market, and we've had that a lot in the last 45 years. So, Gene, I mean, Apple really specifically, the talk about iPhone production numbers coming down, should we believe any of that? Well, it's true. The production numbers have come down and you can believe it, but you have to put it in a context. It's standard operating procedure for Apple to initially tell its suppliers to produce a large number of iPhones and then it's operating procedure to tell them to cut production because they always do that.

And so I think that's where you get some of the noise around these data points with the market backdrop. I think it can get people concerned. And I want to be clear here. Apple is, if we go into a recession, Apple, their business will be negatively impacted, just like everyone's business. I think we're going into a recession. And so to answer your question is that we should be, there is concern related to some of these data points, but ultimately I think in Apple's case,

I think it will outperform many of these other companies because essentially we can't live without it. They fall into that category of can't live without it. And also they have other products coming, and we're going to probably hear more about that on June 6th at their developers conference. And so there is room for optimism when you think about the growth piece of Apple in the next few years. But I mean, if Apple goes, if we do have a recession, as you say, you think we will. And Apple, you know, may may go down. It probably will go down. It may not go down as as much as the others for the reasons that you just suggested.

I mean, what would your price target be if you had your old hat on? Old hat's at 250. It seems optimistic in this view. And that's a two year price target. It used to be a one and a half year price target. I've pushed it out given what's happened with the market. It's my view of where this goes. And ultimately, what I think is that 2023 is going to set up to be a great year. We're going to have an ugly middle part of this year. There's going to be ringing of hands. And I think as soon as things are flushed out, I think people are going to look at better growth. And I think Apple is going to participate in that. And so I'm still optimistic that there's measurable upside to Apple over the next two years.

A hundo, a hundred bucks from here. 150 is where that's at now. Mark, real quick before I let you go, your picks right now would be Airbnb, which has gotten crushed, right? And LegalZoom. Give me the Airbnb story, though. Why should I put money there right now? Well, you're right.

It has gotten crushed. It's down over 20% since April. And we just feel like leisure is going to continue to be a winner. And the balance sheets of some of the people who use Airbnb continue to be fine. And again, if we go into a recession, all bets are off. But I think we're going to see, and we've seen some evidence of that, that some of those balance sheets for some of the halves of the last couple of years are just fine. So they're growing substantially.

It's going to be low 20s times EBITDA for next year. And they're growing as fast as they are and gaining much share. We'd like it. LegalZoom's similar. Comp's eased in the second half. They have some new products. It's trading very reasonably at three times revenue. It's just a name that's going to continue to gain share. And I think you're going to wake up when people come back to a name like this. And they're going to be very happy they own it at three times revenue with a very good balance sheet doesn't need to raise more capital. And those are the kind of names I think are durable in this economy. All right, Mark Lehman, Gene Munster, I appreciate it very much. I'll see you guys soon. Up next. Thank you. Stocks are rising today on fresh inflation data. Our next

guest betting that inflation may in fact be peaking or has peaked. Ed Yardeni makes his case after the break. Welcome back to Overtime. It's time for a CNBC News Update with Kayla Tausche. Hi, Kayla. Hi, Scott. Good afternoon. Nearly 20 police officers waited in the hallway of Robb Elementary School

for more than 45 minutes after the gunman who killed 21 teachers and children barricaded himself inside a classroom. During that time, students in the room repeatedly called 911, pleading for help from police, saying some of their classmates were still alive. But a top Texas state official says the school district's police chief on the scene mistakenly thought no children were at risk. In Houston, the National Rifle Association's annual meeting is underway this afternoon with former President Trump scheduled to speak inside a half hour from now and protesters outside. And a jury in Virginia now has the case that captivated the internet. After six weeks of

widely followed testimony, seven jurors will decide if Amber Heard defamed Johnny Depp when she wrote she is a victim of domestic abuse. I'm sitting in for Shepard Smith tonight on the news. We'll have a CNBC investigation into thefts of land in the metaverse. That's right after crypto night in America, 7 Eastern, CNBC. I'll see you there, Scott. All right, Kayla, appreciate that. Thank you. Key inflation number came in below 5% today and lower for the third straight month. Our next guest says that inflation might in fact be peaking. Ed Yardeni, the president of Yardeni Research. He joins us now live. Ed, welcome. It's good to see you. Thank you, Scott. This comes just what,

a day or so after you cut your earnings estimates and S&P range for this year, correct? So what do you think of where we are now, given this read and this rally? I think this is going to continue to be a very volatile year. I think it's next year that I'm anticipating we'll see better times ahead. But for now, I think the lower inflation is going to help for a while. We still have some uncertainties with regards to energy, for example, up ahead here. But what's really come down quite a bit is durable goods inflation. And a lot of that's been used car prices, of all things. And there's still plenty of room for other durable goods inflation rates to come down. On the other hand, rent inflation is going to be a problem. So there's still going to be a lot of volatility in the market as these

numbers continue to buffet around. About this bounce, let's talk about that specifically before we get into some other issues. How far do you really think we can go here? Well, Scott, I don't think anybody knows. I mean, I think I'm kind of using $4,300, $4,400 as kind of the upside in this particular move here. I mean, I don't even know that it's proper to call it a bear market rally because we had a bear market that was an intraday bear market. But the reality is it's been a correction based on just a technical reading of the drop since January 3rd.

And here we are down 13%. So we're still, this is just turning out, I think, to be a very long correction. I don't know that it's actually going to turn out to be a bear market. And I think the upside is going to be somewhat limited by the reality that the Fed still has a couple of great acts to go. And I think what we've all forgotten about is there's QT2 up ahead here. Quantitative tightening act two is still ahead and the Fed is going to be cutting back its balance sheet by something like $95 billion a month after an initial cutback of about half that. I've got Adam Parker sitting next to me still, who I think wants to take a little issue with your characterization of this as simply a correction

rather than a fair market. Is that right? I mean, I guess it's a semantical thing, right? He's probably saying there's some definition of, you know, that's mathematical. I think you're running money in the real world. It's a bear market. It's been bad. Yeah. You know, you've got names that are down 40, 50. You've got a lot of funds that are down 20. So, you know, whether it trips some academic definition of down 15 or 20 or whatever, I don't think anybody cares. Right., right, that's kind of the point, right? I mean, who cares if we went down 19.9% of the S&P? You've had just huge percentages of stocks that have been well into bear market territory for a while now.

Let's just call it what it is rather than get hung up on some textbook definition of a bear market. Maybe I hang out with investment managers that tend to focus on the S&P 500. And the reality is that index has yet to actually enter a bear market. But you're right, it's semantics. The reality is so far this year, if you didn't own energy, it's definitely been a bear market. But the reality, it's been, to a large extent, a correction in the mega cap H stocks. As we've seen, their valuation multiples really taken a dive.

That's where we've seen a lot of the correction going on. And here we are with this rally back at 17.5 on the forward PE multiple up from 16 only a few days ago. So everybody thought with the benefit of hindsight, yes, the market was way overvalued at 19 to 20. We got down to 16, and finally that's fair value. And then, bam, we're right back at 17.5. So it's not as cheap as it was only a few days ago. No, I know, but if you weren't in energy, it's you know, it's been a bear market. I mean, energy is only five percent of the S&P 500. That tells me that 95 percent of the S&P was a deep

bear market. Yeah, I mean, look, I'm not going to get into a semantic argument with you. You're right. I mean, that's the way it's been feeling for most investment managers and most individual investors. It's been feeling like a bear market for sure. Do you believe, as I suggested, and I brought up Ron Insana's name because he put forth a provocative idea that maybe the Fed's done enough. And he doesn't mean done enough to right now. He means done enough after June, July 50s. What do you think about that? I think there's something to be said for that. Fed officials have made the case that for all the talk about how far behind the inflation

curve they are, the fact of the matter is they also use forward guidance. They've talked a lot and they've certainly tightened credit conditions in that way. Look, we've got recessionary conditions in the housing market developing with a mortgage rate going from 3% to 5%. But of course, home prices are also up 50% on a two-year basis. So things are slowing down. One of the reasons that I've become more costless short term is I started to see these regional business surveys for May, and they're really quite weak. They do suggest that the National Association of Purchasing Managers' index could be pretty close to 50.

They actually suggest it could be slightly under 50. So we're going to know that on June 1st. And that could kind of make the market realize that things are actually pretty slow and that while analysts' expectations for earnings have been high, some of them are going to be coming down. I wonder if the sell the rippers are going to come back shortly. They feel left out this week. It was the buy the dippers who won out this week, and then the sell the rippers are going to show

up again. It could be. I'm curious about his view on inflation peaking, though, because if that's really right and that becomes more the consensus narrative over the next couple of months, I think people will start to believe more and more the perception will be that the Fed will have to get more dovish, and then you could get more multiple expansion views for growth, and those rippers will be worried. Yeah. Ed? Yeah. Well, look, again, I think that a lot of this bear market has, in fact, been a PE meltdown after a PE meltup as a result of the pandemic. And so this is, in many ways, a correction of the overvaluation that we had in the mega cap A stocks. The biggest, the largest stocks have had a tremendous PE rally in 2020, 2021, and a lot of them have given all of that back or quite a bit of it back.

So from that point of view, the correction's been, I guess, healthy. It hasn't felt very good for anybody's health. But to the extent that this kind of corrects the excesses and sets us up for the market doing better, maybe not this year, but next year, I think that's a good thing. More immediately in front of us, you know, I'm thinking about kind of catalysts up or down that are here. Earnings season, you know, all but over. You know, NVIDIA sort of closed the door on that this week, at least ones that, you know, I think maybe could have a more outsized impact on market direction.

You've got pretty much the market understanding what the Fed's going to do in not only in June, but but in July feels to me like then everything comes down to the CPI in June. I guess it's in a couple of weeks time. I don't remember the exact day. It might be June 12th or thereabouts. But that means we're going to be paying such close attention to that and hinging everything perhaps on it. Well, I think we are, but I don't think it's going to be decisive as just the way the data today hasn't been decisive. We still see lots of inflation indicators that haven't peaked yet. Again, I watch these regional business surveys very closely and the prices paid and prices received indexes remain in a range near their record highs. So we're not seeing relief there yet. And so I don't think that the June CPI is going to be the number that tells us, yes, we don't have to worry about inflation anymore. And the Fed only needs to do 100 basis points. So that's the problem with this year. Nothing's going to really kind of resolve this one way or the other.

And I think it's going to continue to be just a volatile year where we all have to get neck braces for the kind of what's also that we're seeing in the marketplace. Yeah. And I appreciate it, as always. Enjoy the long weekend. I'll see you again soon. And last quick word to you. If nothing else, it's not going to be definitive on, on where we're going, but it will, if nothing else, uh, perhaps confirm the trend of at least peak and then declining, albeit slightly isn't is intact. Yeah. It's all second derivative,

right? Rate of change. So people think the CPI is coming lower throughout the rate of the year. I think that's probably directionally bullish from where heads are now. All right. Thanks for hanging out with me. Yeah, man. Have a great weekend. 38 minutes. All right. I hope you enjoyed it. We'll see you soon. I loved it. All right. That's Adam Parker back on what is a positive day for a change in the stock market. Up next, some top investment picks for your portfolio. We'll do our two minute drill. First, we are wrapping up another very busy week on Wall Street. Christina Partsenevelos gearing up for our rapid recap.

What's on tap? Well, dippers, rippers, call it what you want, a rally or a bounce, but we finally broke this losing streak. I'll break down the biggest movers this week and which medical company is having its worst day in a year. That's coming up right after this break. We're back in the OT. Let's send it now to Christina Partsanovalos for our rapid recap. Hi, Christina. Hi, Scott. Peak inflation, peak Fed narratives, Shanghai reopening, buybacks, the lower bar for retail stocks. Whatever your reason, U.S. equities staged quite a turnaround this week, the S&P 500 seeing its

best week this year. And even though all 11 sectors are higher on the S&P, it appears many traders may have taken off a little bit early for this holiday weekend. Both the SPDR ETF that tracks the S&P 500 and the QQQ ETF are well below their 30-day averages for volume. On a sector basis, we're seeing strength from consumer discretionary, energy, and tech. Several names, especially in energy, hitting 52-week highs like Devon Energy, Eli Lilly, Chevron, Marathon Oil, Medtronic. That's what I teased. Medtronic, on the other hand, hitting a fresh 52-week low after missing guidance with, of course, blame on the supply chain. Here at the Nasdaq, Apple having the most positive impact on the Nasdaq with Workday, the most negative after an earnings miss.

And admittedly, as cheesy as it is, I did wear green on purpose today, Scott. Have a great weekend. You as well. Christina Parts and Novelos, thank you. Up next, retail's big run. The XRT gaining 10% this week. One halftime committee member is getting in on a previously beaten down stock. We will explain and we'll

debate it next. In today's halftime overtime, the big run for retail stocks, a number of names in that space surging this week after some key earnings reports. And today, halftime's John Najarian jumped into the space and bought shares of the gap. It had a circuit breaker this morning that took shares down to about 950. That's when we jumped in, bought it, had unusual activity in the options that expire next week. So I don't know if this is a long-term hold, Scott, but it's probably a hold into next week, next Friday, when these options expire. All right, that's Dr. J. Now let's bring in Shannon Sekosha back with us. What do you think of Doc's trade here in Gap?

Well, it wouldn't be my first choice in terms of consumer discretionary or retail here. I think from an apparel perspective, there's a lot of cyclicality in those businesses. I would prefer to be more on the higher end. We're seeing a clear divergence, Scott. This K-shaped recovery is back in play. And I think that's why you saw the different comments coming out of Target and Walmart versus, you know, examples like Nordstrom, right? We're seeing this widening of the rift between those that are paying a lot in food and gas as a percentage of their income and those higher income buyers that continue to be out there shopping. You own Best Buy, Costco, and Home Depot.

You own no apparel retailers at all. And that's obviously a conscious decision that you've made? It is. I mean, I would say that there are likely to be some opportunities. I mean, I think you saw some good comments out of Macy's, for instance, which has been, you know, a really tough business over the last few years. But you're seeing pick up in trends in makeup spending, for instance. We know Estee Lauder, we're seeing that as well. So I think what I would prefer to do is look at some of these big box retailers,

think about where you're going to see consistent demand and great execution on the business side, and stay a little bit further away from some of the trend businesses. And see, the big boxes, though, you know, would you have said the same thing? I'm just thinking, like, after Walmart and Target, I wonder if that made people reassess the big box retailers. Not you at all? Well, I think we're a little bit more concerned about Best Buy, to be honest with you. I think that's the one in our portfolio that we're a bit cautious on. I think from a we love housing adjacent businesses. So Home Depot is a great example of that. And Costco with their subscription model, I just think it's a lot different than, you know,

a traditional retailer in that they derive their revenue from a number of different avenues. All right, Shannon, I appreciate you sticking around. Have a good weekend. I'll see you on the other side. Thanks, Scott. Up next, we're trading the bounce. Some top picks for your portfolio to round out this rally week. It's in our two-minute drill after the Dow rose 575 points. Welcome back. Dow and S&P breaking long losing streaks this week. And our next guest has some top names for your portfolio in the current environment. Let's bring in Options Play Director

Jessica Inskip. It's nice to see you. Macro first. One of your picks is SPX. So you think that this rally has some legs? I do. So from a technical perspective, the S&P 500 had a forward momentum indicator for the first time since March 15th. Last time that happened, we saw an 11% rally before we pulled back. So it's short-term rally. If we surpass those old levels, then hopefully we'll go into a longer-term rally. So at least for the short term, I'm hoping for another rally, just like we saw last time this happened back in early March. We gave away the secret of one of your other stock picks was. We put it up on the screen a little bit early, so it's Starbucks. Man, that stock's had a lot of pain.

Why is now the time to buy it? It has a lot of pain. It's interesting from the macro environment. So we're really concerned with a tight labor market. But Starbucks has been in front in a leading really business in making sure that they position wages accordingly. So from that perspective, it's a positive buy. But also, technically speaking, it did the same thing that the S&P 500 did. Gave that forward looking indicator, positioning itself for positive momentum. So technically and fundamentally, I think it's well positioned. Disney, another interesting pick right now. Why now?

Yeah. So for the reopening of COVID, they've had a 40% increase in attendance domestically. And then from the summer, I probably expect a huge surge from cruise lines and that impasse of summer travel. So that, from a fundamental perspective, will definitely help with earnings and growing Disney. And of course, the Star Wars release that's happening relatively soon. And then the indicators also point to an upward trend reversal to the upside. So for the short term, I'm hoping for around 115 actually for Disney. Speaking of reversals to the upside, I think the most important earnings report of the week was NVIDIA. And more so than the earnings report, the actual price action in the stock for what it might have confirmed.

What do you think? It's one of your picks. It is. So I think it was very interesting, especially as tech has really been leading S&P in the larger decline and that reverse that we saw. But what's interesting digging into the earnings with NVIDIA is the way that the management has repositioned the company. So their data centers make up about 50% of their sales,

and that was up 83% year over year. And they're going to shift their focus towards that, which indicates positive momentum and positive staff valuation. And that's primarily why I'm bullish on NVIDIA. And additionally, I love the technicals. The same thing that's happened with all of my picks and the S&P 500 is that forward-looking indicator that I always look for to understand if there is a trend reversal fired off for NVIDIA as well, indicating strong upwards potential. Also in some of the other mega cap names, or are you so specific to NVIDIA? No, it's actually seen it happen quite across the board. And it's very interesting

the way that the market has been reacting lately. And I've heard a lot of talk about comparing it to different recessionary periods or declines. But you have to remember, it's a different market. We saw an influx of a different type of investors. And there is a lot more technology involved with the markets themselves, in addition to the sectors that we're tracking. So I think technically, it's important to look at that. But the way that we look at capitulation is a little different now. All right, Jessica, appreciate it. Jessica Inskip joining us. Have a good weekend. See you on the other side. Santoli's last word is next. Our results of the Twitter question of the day, we asked, will stocks be higher or lower in six months? And 60 percent of you say higher. Optimism abounds on this Friday in a big rally week.

Mike Santoli is here with his last word. They think as much as you do, because I'm peeking at the notes here, they think things are half full also. Yes. And so obviously that is the perception that things are half full. But I think it's important to think about that because it's the same glass. Right. It's just you see it as half full or perceiving it. And why did it happen? Yeah, the market looked like it got sold out. We definitely saw a burst of real, you know, real buying in there. People thinking it had some reason to do so, if only because we're telling ourselves a story about the Fed, how it does seem like there's some daylight there and inflation, the peak inflation story is still intact. But you have to remember at a higher price, if this rally continues at $4,300

on the S&P or something, the same glass might all of a sudden look like, you know, less of a risk reward bargain. So I think we have to just keep those things in mind. We're not yet escaping the fundamental reality that we're on a narrow, bumpy path to a possible soft landing. That hasn't changed. The shadow of the 2000-2002 NASDAQ meltdown is not completely behind us. I don't think we're rerunning it, but it's there. It nags at you.

I mentioned to you earlier, and you said a little bit when I said, well, the technicals, we repaired some technical damage. So Mark Newton of Fundstrat works with Tom Lee. Just before we came on the air, put a new note out. The bounce above 41.14

gives reason for optimism that the lows might be in place. Bottom line, a long bias up to 43.15 looks proper. Right. 39.82 being critical support. 43.15 is, you know, it's like another day and a half like today, right? So that's what I'm talking about. The story can change with relatively small changes in the price level. Well, I mean, it's been it's just been brutal. It's absolutely welcome. Yeah, of course. Have

a good weekend. That's Mike Santoli with his last word. Again, we broke that eight week losing streak for the Dow, the seven week losing streak for S&P and NAS. Have a good weekend.