Closing Bell - Closing Bell Overtime: Weighing the Win Streak’s Staying Power 7/7/22

Episode Date: July 7, 2022

The S&P 500 posting its longest winning streak since March – but does it have staying power? Virtus Investment Partners’ Joe Terranova gives his take. Plus, top technician Fundstrat’s Mark Newton is breaking down 3 “buyable” charts. And, Elon Musk’s Twitter bid is in peril. An all-star panel of experts dig in on what it means for the future of the company… and the stock.

Well, they got a big crowd here at the New York Stock Exchange today. Welcome to Overtime. I'm Scott Wapner. You just heard the bells. We are just getting started. In just a little bit, I'll speak to Cantor's Eric Johnson, who's been bearish on stocks. Too much so? I'll ask him.

We begin, though, with our talk of the tape. The longest winning streak for the S&P 500 since March, whether it has staying power or is sure to fizzle out as the Fed continues to tighten and those soon-to-be-released earnings reports disappoint. Let's ask Virtus Investment Partners chief investment strategist Joe Terranova. He is here with me at Post 9. You've got a good crowd here. You've got a four-day rally here, the longest since March.

What's it about? Is it markets coming to grips with the Fed? They're not going to have to do too much because inflation is easy what would your mind what is this about well first of all I pulled all your fans off of the street into the stock exchange to welcome you on your

return. But what it's good that you're back and it's a it's a great day to be back. I think certainly what the markets right now. Have been reacting to for the better part of the week. Is that we are pivoting from pricing risk assets based on further inflationary pressures towards now pricing

risk assets according to an economic contraction and potentially a recession. I don't think the recession conversation is a 2023 one. I think a recession conversation is 2022. Now, if you're telling me that we have to think about an economic contraction and a recession in 2022, guess what comes back into play strategically? Well, you didn't get that backwards, right? Because most people are talking about recession in 23, although some say now, hey, we might already be in one. Bullard was talking today from the Fed and said, soft landing can very much still happen. I don't suspect that the recession will be very deep and painful,

but I do suspect that we are either in a recession right now or that we are entering a technical recession. The commodity disinflation, you're beginning to see home prices decline in major cities like San Francisco. The ISMs, manufacturing and services, both contracting as well. So there's clearly an economic contraction and you have to have a strategic reaction to that. And that's what the market's doing this week. All right. So there's clearly an economic retraction. You just said that.

Which is why I wonder whether the market's kidding itself here. Right. You got this nice little rally going, but you've got the economy that's slowing. You've got more rate hikes that are coming. I mean, they keep saying that, right? The 10-year is above 3%. If rates continue to rise, how much staying power does this rally have? There are some trend lines that suggest that you can go to 4,000. That may be difficult, but tell me, you're the man.

50-day moving average is at 39.78. The 100-day moving average is at 41.90. The pivot is emphasizing that the market came into July offsides. Why? Because the market was thinking oil prices exceeding 130. The market was thinking further inflationary pressures. The market was thinking, to your point, recession 2023. So the market was somewhat short. The market was leaning towards value. The market was clearly underweight growth. Now you're introducing into this environment, wait a second, The economic contraction is actually happening faster. Demand is weakening faster. Wait. Growth is going to be scarce. OK, I have to go out. I have to raise my allocations towards growth. That's exactly what's happening this week. So growth

is obviously doing well. Apple was one of the names leading today. That leads me to start thinking ahead to earnings, which that's where the rubber is going to meet the road. I mean, you could say whatever you want about, oh, inflation has peaked. Oh, the Fed in the back half of the year or towards next year, they're not going to be as aggressive as people thought. John Stoltzfus of Oppenheimer today is still sticking to $230 on earnings with a near 21 multiple. He's got 20.9. He reduced his price target modestly on the S&P, but said, I'm keeping my earnings. And I'm like, how does that make sense? $230? I got people telling me 220 isn't even believable. Yeah, well, I would agree with that. And the multiple concerns me.

The multiple has already contracted nearly 25%, which is in line with the 12 historical recessions since world war two. So you've had the multiple contraction I'm not sure. I'm not sure how we get the multiple to expand out once again. I would disagree with that probably the earnings

premise is what everything comes down to right. You're you're about to have. Earnings season what what if earnings, the biggest question is how much do earnings need to come down? Expectations. The market, as you said, multiples have come down. Earnings expectations largely have not met the come down in multiples. So how much do they need to come down? Well, I think the problem is going to be the dollar, the U.S. dollar. How many more companies beyond Microsoft Biogen Costco Hewlett Packard

Salesforce are going to have to warn about the negative impact of currency and I don't think anyone that I've traded currencies can really understand where the ceiling is going to be for the US dollar I think that's the biggest challenge that corporations, in particular multinationals, are going to have. Now, to sprinkle in a little optimism, Samsung's report was pretty good this morning. That's why the chips, maybe that's not the only reason, but the chips were rallying pretty good off of that. But let me go back to this tech thing you're talking about with currency. These growth stocks in tech have been incredibly reactive to rates. Rates had been down. Tech stocks and growth had been going up. Maybe too much so because the very reason you just said. Technology is the group, first of all, it's the largest group

of the S&P, right? And it's the group that's most susceptible to the rise in the dollar because of the amount of earnings that they get from overseas. Why isn't the market focused on that? So it's interesting. We sat here a couple of weeks ago with Adam Parker, and Adam said something that really was brilliant. He basically said, so you have to raise rates enough to where you're going to have to cut them at some point. Oh, that makes a lot of sense. But in reality, what he's saying is is correct and i think we have to begin to think what if the federal reserve is actually doing what they are intending to do which is weaken demand if that clearly is going to be the case and we are going to have a very challenged economic

environment as you move forward for the remainder of the year, you're almost gonna have to seek shelter in a lot of those names, like Alphabet, like Microsoft, like Alphabet, like Apple, and you could expand that even further to an Adobe and some other names in technology. So speaking of other names in technology, I was very surprised. Why? Yesterday when I heard that you got back into NvidiaVIDIA. I did. You know, one of

these highest of high-flying growth stocks at one point got cut in half. I thought that was very interesting that you decided to get back in now. And that made me wonder whether it's a bigger picture story of stocks have come down enough. Valuations in some respects have reset enough that somebody like you says, you know what? This is a poster child for once high-flying and highly valued tech, and now that's come down enough. Maybe I need to look elsewhere for opportunities that are similar. So I sold NVIDIA on May 12th. My semi-exposure was through AMD, and NVIDIA, I reduced that on May 12th. Why? I had concerns after CPI that the Federal Reserve did not have a handle on the need to be aggressive enough. I believe the Federal Reserve has a handle on that now.

We are, Scott, in my view, in the midst of a valuation recession. That, to me, is clearly evident. On Monday, you had NVIDIA make a 52-week low. The valuation reset, I know Stephen Weiss, who I spoke about this on Monday afternoon. He said today on halftime he wouldn't buy it. In fact, if anything, he'd sell it. We said the same thing offline on Monday. Okay, but the valuation reset is from a 90 PE down to a 40 PE. I'm comfortable owning this company.

I'm comfortable owning NVID nvidia i'm not going to trade it i was happy getting out of the name i'm happy getting back in it and i'll tell you what you had a you had to me the appearance of the technical capitulation on monday made since the 52-week low goes out on the high and continues to move higher through the remainder of the week that's good all right hold your thought for a second because we're going to find out if investors are going to continue to be comfortable owning Levi Strauss, which looks pretty decent to me,

at least the stock move in overtime based on the earnings. Courtney Reagan, what do you see? Hi there, Scott. Yeah, so Levi Strauss for the second quarter reporting earnings beating expectations, 29 cents per share adjusted. The street was looking for 23 cents.

Revenues also, again, stronger than expected, 1.47 billion compared to $1.43 billion expected. The company is, again, reaffirming its guidance for the full year. They did reaffirm that guidance last quarter as well. And they have a note in there saying that this assumes no worsening of the economic environments around the world as it relates to inflationary pressures and the COVID-19 pandemic. Inventory, something we're really paying attention to in retail, up 29%. But Levi says that's actually according to our plan. We're trying to stock up to kind of get ahead of any other potential issues in the supply chain. As you can see here, the shares

are up about 4.5%. In response to this, again, the global are up about four and a half percent in response to this. Again, the global direct-to-consumer business is outpacing the wholesale business, but both seeing an increase year over year. Back to you, Scott. All right. Good stuff. Courtney Reagan, thank you very much for that. As you see shares of Levi on the move in overtime. Just give me a quick comment here in terms of, I know you don't own the stock, but reaffirming the guidance. Better than the alternative, because now the market's going to punish you big time if you have issues. But this is a good sign, at least for part of the consumer demand question. You've got to have the right stuff if you're a retailer. You have to have the right stuff.

Specific towards Levi, it's been in decline since May of last year when it was trading $30. It's bouncing off the bottom here, down 43% year-to-date. Let's keep in mind, consumer discretionary has been the worst sector year-to-date. A lot of challenges there. Really, the only place that I am is in Lululemon. And again, it goes back to speaking towards taking advantage of what's a valuation recession and looking for opportunity and growth at a reasonable price. That's why some say that the move most recently in discretionary stocks is not sustainable. Now, maybe this would have you think otherwise,

at least in part of that, but we'll get into more of that later. We have a guest coming up who's going to offer up his perspective on that. Let's expand the conversation right now, though, and bring in Truist, Keith Lerner and SVV private Shannon Sikosha. Shannon, of course, a CNBC contributor, member of the Halftime Investment Committee. It's good to see both of you. Shannon, to you first, this move, is it sustainable or not? Mike Santoli last hour said it's too early to declare the all clear that this is a move, a signal of a move higher from here. What do you say? I would agree. I mean, I think that I have been somewhat cautious about the strength of the rally over the last several days with the caveat that, as Joe said, if we are truly in a recession now, people should be optimistic about 2023. If you look at historically, we see stocks move well ahead of the recession. And so that would indicate that the declines we had in the first half of this year were coming into this slower growth, this contraction.

I'm concerned about the dollar. As Joe stated, if you go back to 2015, the DXY was up about 12 percent for the year. We're already up about that this year. And so you think about the effect on multinationals. And so for us, I think that some stabilization in commodity prices is actually a positive. We felt like they were a little bit too high. But we think that that could start to take some of this risk-off trade out of the market if we see some stabilization in commodities. But again, it's earnings season.

We've been waiting for it. We've been waiting for the information, the outlook from CEOs. And we're going to start to get it. And I think we're going to see additional volatility as we get those reports. Yeah, earnings season is going to be bananas right here in overtime in the next few weeks, really, with these reports coming out. Keith, to you, you've been defensive. Are you still? Well, first, Scott, great to be with you. We are still defensive overall. But I will say we've been thinking that at least short term we'd have a rally.

We do think this has somewhat likely further to go, but I think context is needed. You know, at the lows in June, the market was down about 24 percent. Historically, the median decline around a recession is 24 percent. So it makes sense to us that you've seen somewhat of a rally. We think you can go somewhat higher, but we do think we're going to be constrained on the upside because, you know, we think earnings may be somewhat better than these really depressed expectations. But even if you say that instead of being, you know, 250 for earnings for next year, maybe it's 240. You put a 17 multiple on that, that's maybe 4,100. So I think the upside somewhat capped as well.

On a shorter term basis, maybe you'll see some more reversion in some of the technology names. You talked about Levi. Retail is down a lot. But I will say, going back to your question about discretionary, Scott, those are early cyclical stocks. And with all the global tightening that we're seeing right now that works with the lag, we don't think we're close to being early cycle. So, yes, we'll likely see a bounce in some of these names, but we don't think that's leadership in the market. CPI next week, Joe, right? I mean, you know, this is how it. CPI next week, Joe, right? I mean,

you know, this is how it's going to be from here forward, right? We know what the Fed is pretty much going to do, at least in this meeting coming up in a couple of weeks in July. It's going to be 75 more than likely. But you've got to have something good on that CPI, don't you? I think that Wednesday's report is probably the most monumental economic release that I could remember going back to the great financial crisis. And the reasoning for that is think of now what the work that the market has done over the last several days. You need confirmation in that CPI report that there are disinflationary pressures actually beginning to present themselves. If, in fact, you get that, the market will continue to move higher to the upside. The downside risk, though, is there.

Well, because you remember what happened last time, right? And now you've unwound a lot of the pessimism, a lot of the short positioning in the market. So it'd be very easy to crater and back roll back over. So I think Wednesday and Thursday are going to be very, very active days. Big move either way based on what we get in that report. Who knows about tomorrow, Shannon, right? You got a jobs report. I said the 10 year back at three. If you get a move higher in the 10 year tomorrow, that's going to be something the market's going to have to grapple with, too. Yeah, I mean, I think the volatility in the 10-year is something we're not talking nearly enough about.

We saw that at the end of last week. And if you think about what could potentially be happening with jobs, you know, we're seeing, you know, slightly lower openings, slightly higher claims today. If you're looking at a nonfarm payrolls, I mean, we're going to see moderation in that number. That's to be expected. But perhaps what you need to see is that you need to see indications that those wage pressures are starting to subside somewhat. Because, again, it's not just about energy prices. It's not just about gasoline prices in the consumer basket.

It's about the margin pressure that we're starting to price in. We're all talking about earnings estimates. You have to think about how do those affect margins in the second half of the year. And so these input costs are very important. Wages are super sticky. And we need to start to see some of that wage growth subside. It hasn't been real, but it's been nominal. And I think that's going to be what we need to look at in tomorrow's release. Keith, to you and then Joe, and then we're going to wrap it up. The idea that at this point, S&P is down 20%.

And historically, people like you and Shannon and Joe have told people 20% from the highs is a good time to get into stocks if you're a long-term investor. Is this time different or is it the same, despite all of the issues

that are in front of us? Well, we looked at that and we think it's the same, especially you have to define timeframes. On a three year basis, after you drop 20 percent, the market has been up eight or nine times again from when you've dropped 20 percent from a record high. So from a long term perspective, I think that's the case. On a short term perspective, when we looked at the work, it really depends whether you go on recession or not, whether the market's up, say, six to 12 months later. again i think time frame matters we're still more neutral shorter term but i do agree that if you're

looking at three years four years buying at today's prices is a good risk reward until joe you actually have to hit that enter button on that trade you wanted to make although you did it on nvidia no i i actually think this is an opportunity i think the first six months of 2023 are going to be a very strong one we had to pay a. We had to pay a price for all the liquidity, speculative excesses, the leverage. We're seeing the price being paid right now. You can't ignore the inversions in the yield curve. Even the three months of the 10-year, that's collapsed 150 basis points. In the crypto world, you're hearing stories like Three Arrows and Voyager. These are all the things that needed to happen, Scott. We're paying the price that we needed to pay. And I think the Fed is

committed to doing what they need to do. Let's remember that. Well, the question is, are we closer to the end than the beginning of that great reset of valuation in stocks, of everything from SPACs and stocks to now crypto and the crypto winter. And if that's coming to its close in the market and all of these markets can start to rebuild. I appreciate your time. It's good to see you in person. That's Joe Terranova. Guys, Keith, Shannon, I'll see you again soon. I appreciate you being with me in overtime. Let's get to our Twitter question of the day. Now, we want to know which of these beaten down stocks look most attractive right now. Is it Netflix, PayPal, Joe's, Nvidia or Ford? You can head to at CNBC Overtime on

Twitter, cast your vote. And while you're there, give us a follow as well. We'll share the results at the end of our show. Coming up next, there is no backstop for this market. That is the big warning from Cantor's Eric Johnston, why he is doubling down on his bear case for stocks. We're going to test him on it coming up. And later, three viable charts. The top technician lays them out for us. We'll be right back in overtime. We are back in overtime. Is this four-day rally something to build on? My next guest remains cautious on the markets, Eric Johnson, the head of equity derivatives and cross-asset at Canna Fitzgerald joins me. It's good to see you again. Good to see you. Good to see you, Scott. Yeah. You don't think it is something to build on. Why? I don't. I think this is sort of a typical

bear market rally short squeeze that we're seeing. Our conviction on the downside has actually has actually grown. I would say the first thing, and you were talking about this in your earlier conversation, is when you have a sell-off where you're down 20%, 25% of the market, the risks of a further sell-off are actually much higher. We looked at this data. If you go back to the 1970s, it's been five times when the market has sold off more than 23%. We were down 24% in our recent lows. And of those seven times, three times out of the seven, the market has sold off an additional 25% to 30%. And then another time, we were down about 15% at one point following that. So versus a typical time, a 25% sell-off is very unusual.

Once you have this type of sell-off, it actually becomes a much higher chance of happening. The second thing is around the Fed, is that you have to believe what the Fed is telling you. You have to go with what the Fed is telling you. They're ultimately right now, whether you believe them or whether they're ultimately in charge right now. And so we took what they said on the way up when they were pumping money into the economy. And we are now taking them at face value that they are going to squash inflation. They pivoted in November and the market has been in a downward trend since then. And we don't see they have told you there may be pain.

They've also told you around the around unemployment that for the long term employment picture, you want to squash inflation, i.e. they're okay with employment going up and growth going down. Right, but what if inflation is going to come down faster than people expect? I'm not suggesting that it is or it isn't, but what if it does? So let's paint that picture. Let's say that in the next three to four months, you've got a CPI that comes down a lot. Let's say it comes down to four to five percent. Are they going to stop at that point? Because at that point, when you have a four or five percent CPI, if they were to pause, then all of a sudden you get stocks rallying, commodities rallying, and then your inflation is back as a problem.

I think Fed Governor Waller said today that they're not going to do this stop and start. They learned in the 1970s that that does not work. And so because that's the issue, as soon as they take their foot off the brake or give any sort of nod to stopping, all of a sudden all the risk-taking comes back. And so I don't expect that to happen in 2022, which means you're going to have at least another six to eight months of a tightening Fed. Well, let me ask you this. I mean, you said this is nothing more than a typical bear market rally. At some point, these

rallies are not going to be your typical bear market rally, and it is going to be a real rally and it is going to mark the bottom and it's going to be a new uptrend in stocks. I want to know, how am I going to know when that is happening? When are you going to come on and say this is not your typical bear market rally, you or anybody else? I'm not picking on you. You just you get my point. Sure, I get your point. I think let's look at earnings. Earnings are at their peak. We haven't even seen the first cut, not to mention the second or third cut where someone could say, oh, it's almost done. We haven't seen the first cut yet. And if you look at where earnings estimates are today versus where they were four months ago, they're essentially

unchanged. In that four months, we've had ISM, new orders to inventories, is the same level as it was in October of 2008. You have consumer confidence at the lows. You have financial conditions tightening. You have the dollar ripping, yet estimates are unchanged. Is the corporate outlook the same today as it was four months ago? No. So we think earnings are going to come under pressure, and this will not be the last cut. This will be the last cut. This will be the first cut. And once, just like we see in stocks,

once a company cuts, there's usually a second or third cut to come. We saw that already with Target. We saw that with Restoration Hardware. And I think that we're going to see that with the broader market. Now, in terms of timing, we don't get the bulk of the earnings that are going to matter for this market are going to start the week of July 25th, because financial earnings are important for financials, but may not really give us an indication. So there's a little bit of time. And so could something, could we have a little bit of more of a squeezy market? It's possible. But I think ultimately, buying the S&P right now at 3,900, when you have peak earnings, a tightening Fed is just not a good risk reward to be to be long. And there's all sorts of tail risks that are out there that could suggest a much lower market.

And credit markets are showing that not only in the U.S., but also in Europe. They're suggesting credit markets, suggesting that the risk right now is extremely high. Although you've had a little bit of narrowing of spreads. I mean, I get your point, but everybody sounds the alarm bells all the time lately, it seems. Yes. So spreads have tightened. But if you look at what's going on in Europe, those spreads have blown out far more than here in the U.S. And most of it's because of the risks around energy and their supply from Russia. But if something goes wrong there, we know that's going to have a global spillover impact. So, you know a i think that's an important

you know fact and something to uh and something to watch um we will i would also say that if you look at copper you know copper has sold off 25 percent in the last month and a half and copper is a metal that actually has big secular tailwinds and yet it's sold off 25 percent. And that is the market, the commodities market, telling you that the economic slowdown is real and it's going to last for a significant period of time. And when you look at the chart of copper. But I mean, I hear you. I know it's always been an interesting economic indicator, if you will. But when you had commodities at such high levels and we're like, oh, my God, commodity prices are way too high. And then they come down. And now we're saying, oh, but that's now a predictive factor of economic growth.

How can we have that both ways? I mean, these commodities needed to come down from extraordinarily high levels. Yeah, so in fairness, I would say that if you look at wheat or you look at oil, that has been much more of a supply issue that's causing the concern. Copper has never been a supply issue. Copper was trading at the highs because people had a bullish view on the economy as opposed to on the global economy, as opposed to oil, which is much more of a supply issue. So, you know, you know, it's certainly, you know, oil where it is right now is, you know, is certainly a positive. And some of the inflation metrics coming down is certainly a positive. But I would just argue that the reason why that's happening is because of this, you know, deteriorating outlook in growth.

And, you know, equities, if the CPI comes down to, you know, five, four, three percent and the Fed ultimately in six months stops, but we're in a major growth downturn, you know, that's not a favorable equity environment. And when you see the price of copper do what it's doing, that's an indication that that's a big risk. I got to leave it there. I'll talk to you soon, Eric. Thank you. That's Eric Johnston joining us. Yep. You as well. We do have a market flash on GameStop. Steve Kovac is joining us with that. Looks like we have an executive departure. Mr. Kovac. Yeah, that's right, Scott. Axios reporting that the CFO of GameStop is out of the company and there are layoffs across the company, too. The report says there are significant layoffs, but we don't know the extent to which and we don't know if there's a replacement for the CFO.

Shares down about 8 percent here in the OT. And I've reached out to the company and I'll get back to you once I hear from. I know you will. So I may see you in the next 30 minutes. I appreciate that. Steve Kovac joining us there. It's time for a CNBC News Update now with Shepard Smith. Hey, Shep. Hi, Scott. From the news on CNBC, here's what's happening. The Russian President Vladimir Putin lashing out at Ukraine and its Western allies today. In a speech to leaders of the Russian Parliament, Putin accused Western allies of fueling hostilities. He warned Ukraine to accept Russia's control of Crimea and regions of eastern Ukraine or prepare for the worst, as he put it.

Putin claims Russia has barely begun its war in Ukraine. The former Minneapolis cop Derek Chauvin just sentenced to 20 years plus five months in prison. He's the former Minneapolis cop already convicted in state court of killing George Floyd. This sentence after a federal plea to civil rights charges. It'll run consecutively, said the judge with the previous sentence. And Rafael Nadal withdraws from Wimbledon. He's blaming a torn abdominal muscle. Rafa was set to play in the semis tomorrow, vying for his third Wimbledon title and his 23rd Grand Slam championship.

Tonight, we're live in London on the fallout from Boris Johnson's resignation. The father of the Highland Park shooting suspect speaks out. And what happens next after Brittany Griner's guilty plea in a Russian court on the news right after Jim Cramer. 7 Eastern, CNBC. Scott, back to you. All right, good stuff, Shep. Thank you. We'll see you then.

That's Shepard Smith. Up next, sell the bounce. That's what one top technician says you should be doing with your money right now. He'll tell us why and when it might be all clear to get back in. And later, the big debate over the banks. Should you buy the group heading into earnings? We lay out both sides when overtime returns. Back here in overtime, the S&P 500 on its four-day win streak.

Now our next guest, though, not buying that bounce. He says he sees new lows ahead, but says there are three parts of the market that do have upside opportunity. Joining us now, Mark Newton, Global Head of technical strategy at Fundstrat Global Advisors. It's good to see you again. Why shouldn't we buy this bounce? Why should we sell it? A few key important reasons, Scott. One is that, you know, we haven't really seen any real breadth acceleration on this little bounce over the last week. You know, this is very similar to what we've seen several times this year. I know it's a four day rally and it really marks the longest rally we've seen really this year. But yet, you know, we look at what's rallied, and largely, that's been consumer discretionary, really communication services. We have seen some tech

also rallying. Those are good things. However, these sectors all remain within downtrends. We really want to see a lot of volume and a lot of advances versus declines on any sort of move off the lows, a real breadth expansion where there's a broad-based rally. So downtrends remain intact, and we really have not seen that just yet. Okay, so the same things you look for in the down draft to try and declare a bottom, you're looking for the inverse on the way up, like a 90% up volume day versus down. It sounds to me like you're describing a similar scenario just in reverse. 100%. I think that's right. Look, there are some reasons to be constructive over the next few months. I think we've clearly started to see the market change in

character as we've gone from inflation worries into now worries about recession and or growth stalling. And so that's been interesting. We've seen commodities decline about 20 percent, you know, in inflation gauges. I've all started to pull back in recent weeks. So those are good. We see break evens down, yields down. However, you know, there's really more to be done, I think, to think that this market has clearly run its course. So when I look at things like wave structure, you know, you just don't see the capitulation just yet. I think it's a little bit more that needs to happen between now and the July Fed meeting. You're looking at I mean, you look, you're a technician, so you watch the numbers as closely as anybody does. Thirty nine forty six. That's the number, the line you're looking at in the S&P 500. Can you tell me why?

Yeah, structurally, you know, that would mean that, you know, the rally had gone much further than would be anticipated from a bearish perspective. And really, a lot of that also lines up with the ongoing downtrend just from late March highs and just connecting the last few peaks. So a lot of that comes between 3946 and also right near 4000. I don't think 4000 has exceeded in the month of July. I think we're going to stall potentially as early as tomorrow and turn down towards the lows. And I think that's going to give us some opportunity to buy, I think, in the weeks to come. The tomorrow specifics because of the jobs report? Well, look, you've seen some evidence of treasuries really starting to sell off again. And that's interesting. A lot of people had not thought that the treasury yields had made their peaks for the year.

I think that, you know, we are going to make new highs in yield. And what happened when treasury yields fell? Well, we saw technology rally. Well, now if we see the opposite, yields start to back up. I think we'll see that growth trade recede. And if anything, you know, treasuries and equities should be moving in the right direction, which in the near term, both should be lower. I got you. So new highs, new highs in yields, new lows in stocks. That's correct. At least 3,500 to 3,600. I'm not a big bear. I think we have a bit more to go on the downside. You know, you have seen far fewer

stocks hitting new 52 week lows on things like the Nasdaq. Those are all constructive. But everybody's concentrating on the here and in the now. And I think, you know, this move in yields just yesterday with what we saw with the ISM data and the jolts, I think it's very interesting. And yields should start to push back towards new monthly highs by the end of the month. So it's one of the, charts you had, the other around commodities. But thirdly, and let's focus on that before I let you go and be brief, if you could, biotech, you suggest it looks good here. Is that what the charts are telling you? Both IBB and XBI have broken intermediate term trend lines. That's a very good sign for a sector

like this. It's been under substantial pressure. Look, the growth trade has started to resume a bit. I think health care in general is one of the growth trade has started to resume a bit. I think healthcare in general is one of the best sector bets for the month of July. Historically, XLV has been up about 3.25% over the last 10 years. I like pharma as a defensive play, but I like biotech to gradually start to bottom out. And I think we're starting to see that.

All right, it's good to see you. Tom Lee's gonna be on with me tomorrow on the half. I don't know. We'll have to find out if he matches up with your cautiousness. We will find out, Mark. I'll see you then. Take care. Bye bye. All right. That's Mark Newton. We'll talk to him again soon. Up next, we're tracking the biggest movers in the OT. Seema Modi is standing by with that. Pardon me, Seema. Hey, Scott, all good. Coming up, we've got the latest pulse on retail with those Costco same-store sales numbers, plus a big mover in the automotive space. That's coming up after this short break.

We're tracking the biggest movers in overtime. Seema Modi is here with that. Hi, Seema. Hey, Scott, let's start with WD-40, a consumer name cutting its yearly sales outlook, citing macroeconomic concerns in its earnings release. The company says, although we remain committed to managing our business to restore gross margins to that 55% target, we continue to experience short-term margin pressure due to inflation.

Of course, a company heavily tied to the price of oil and petroleum, and the stock is down nearly 10% in overtime right now. Let's switch, though, to retail. Costco, June, same-store sales up 18.1%. The company says one additional shopping day in the U.S. versus last year benefited sales by about 2%. We're looking at Costco slightly higher here in OT. And we're watching shares of GM. Federal vehicle safety regulators will investigate a crash last month in which a vehicle struck a self-driving car from Cruise, which is backed by General Motors. The incident resulted in minor injuries. We're looking at the stock down just slightly here, about about half a percent in the OT. Scott, I'll send it back to you. All right, Seema, I appreciate that. Seema

Modi. Up next, is it time to buy the banks? The XLF is down nearly 20 percent this year. Earnings kicking off next week. We have your setup ahead of that. We'll do it next. In today's Halftime Overtime, the big debate over the big banks. They've been underperforming the market over the past month. And Short Hills Capital founder Stephen Weiss says it could be a tough trade as the banks kick off earnings next week. I just think this is going to be a tough time. Look, there have been no capital markets transactions in the public market to speak of. And that's high margin business. You've also got lower volumes, lower volumes today, as a matter of fact, down, I think, about 6% from yesterday. So that's how they make money.

So I think it could be a little rocky going forward, as well as the yield curve just hasn't given them the sustained opportunity to make money on that. All right, that's Weiss. I've got Terranova back with me here. Joe, of course, Bank of America, JPM, Morgan Stanley, those are the ones you own. What do you make of what he said ahead of the earnings? I wouldn't take it to the extreme that Stephen did. We had this conversation yesterday at halftime, and I said, listen, I'm disappointed in the performance of banks.

Now, where we sit right now, would I'm disappointed in the performance of banks. Now, where we sit right now, would I step out and aggressively buy the banks? No, but I am going to maintain the exposure that I have. Stephen's talking about falling investment banking activities. Correct on that. That probably impacts Morgan Stanley, which I own. What he's failing to realize, though, is that capital market activity did pick up in the quarter. So you'll see a potential upside surprise for a bank like Bank of America. But I think this really falls into the ability of banks like JP Morgan, like Citibank, like Bank of America to rebuild reserves. And that's what the focus on for these banks are going to be in the coming months. Why? Number one, recessionary

concerns. Right. And then also regulatory requirements. The reserves have actually fallen by October 1st. These banks have to get their reserves back. I mean, the reserves have fallen and it's helped the earnings picture. It's sort of raised questions about the, quote unquote, quality of the earnings. Correct. And then it also brings forth lower buybacks, which has always been one of the reasons why you wanted to own financials. So I think in the near term, there are going to be some headwinds. I'm comfortable owning financials because ultimately at the end of the day, and I'll cite and compliment Doug Cass for writing a great article on this. He made me think about it. You think about the balance sheets of banks. Banks are in good positions. Why? They learned the lesson from

2008, just like technology learned their lesson from 2000, 2001. Good balance sheets don't make great stocks. Good balance sheets over the course of time does, though. OK, we'll see. I mean, depending on a number of factors. I got some developing news. I want you to sit with me on this, too. Steve Kovac joins us now relating to Twitter and Elon Musk. Kovac, Kovac, I mean, what are you going to do? Too many Steves in this newsroom, Scott. Yeah, so Washington Post reporting that the deal by Twitter is, quote, in jeopardy. Apparently, Elon Musk has looked over the fire hose of data he got from Twitter about those spam accounts and doesn't actually believe that what Twitter has reported about the number of spam accounts is true.

Today, Twitter actually came out and briefed reporters saying they actually found it's less than 5 percent that figure that they've been reporting. But it sounds like the Elon Musk camp is quibbling over it. This report also saying that talks between Elon Musk and his investors have, quote, cooled off a little bit. Our Julia Borson is reaching out to Twitter now and she'll have more for us soon. Yeah, I mean, I'm looking at the the Post article, Steve, as we speak, and they suggest that Musk and his team are, quote, expected to take potentially drastic action. Right. I guess that would be or suggest perhaps uh formally

pulling out of the deal or trying to we have always suggested at the well that's the key word obviously uh the key words because we've always sort of assumed that if he tried to do just that that we'd end up in delaware anyway exactly and maybe that's where this thing is heading in court or just to get a discount scott i mean at least make it annoying enough that they'll be forced to, you know, agree to a lower price for this thing. You can totally see that happening as well. But this is what everyone's been reading into the whole situation for the last month or so, that he's trying to find an excuse to either lower the price or get out of the deal altogether. Stay with me. I'm going to bring in Casey Newton. He's on the phone. He's been with us every step of the way in this developing story, of course, of Platformer, also a CNBC contributor. Casey,

your reaction to this developing news here? Well, look, this was always going to be the next step. We've known for weeks, if not months, that Elon wants to renegotiate this deal. And we knew how he was going to do it. He was going to say, oh, no, there are too many bots, even though he said he was buying Twitter to get rid of the bots. So I think the most important thing to note in this story is that for all of these anonymous complaints that Twitter isn't cooperating, no one is saying what cooperation would even mean. They just keep moving the goalposts.

Yeah. Santoli. Mike Santoli is here, too. You want to give us your reaction to this? I can't see how anybody could be surprised by this one bit. The skeptics have always said this has nothing to do with the bots. This has everything to do with the dollars. Well, the market is not entirely surprised that there is lots of doubt surrounding whether this deal is going to close at the price, whether Musk even wants it to close at the price, Because if there weren't doubt, there wouldn't be 50 percent upside to where the stock closed today

to the cash offer price that he's legally obligated to pay based on the contract. So clearly there was a lot of doubt in here. This creates even more of it. We don't really know. I think you'd have to make some educated guesses to where Twitter would trade as a standalone going forward company. It's lower. Let's just say that. And that's why the after hours action at minus five percent. Sure, this might be a tactic to pay less, but he still has a contract. And so that still can be adjudicated. That as well. And Steve, back to you, just for context,

for those if there actually are anybody, you know, people out there who haven't followed this every step of the way um twitter has come out on numerous occasions the management has the ceo uh parag agrawal and suggested we're not budging on price one bit right we have a signed deal with elon musk and we expect him to follow through on it yeah and in fact a couple weeks ago you know they they were signaling to their own employees that he's going to be the new owner. He held that all hands meeting with employees that leaked out immediately. So we knew everything he said. But yeah, that's exactly right, Scott. It's it's they're operating under the assumption that he's going to be the owner and buy this company at the end by the end of the summer. And now, again, we you can just read what Elon is doing here in between the lines. It's clear he either wants

out completely after the stock price has fallen, or he just wants a cheaper price on this thing. No more $54.20. He'll have to find another $4.20 number. And maybe, Casey, he's willing to pay the billion-dollar breakup fee just to clean his hands of this whole mess and walk away. Surely, the world's richest person can afford a billion-dollar breakup fee. He can, although I still think it's more likely than not that he wants Twitter. He just wants it at that lower price. I think it would be hard for him to get away for that billion-dollar breakup fee unless he provides reasonable grounds for breaking up the deal.

This bot and spam issue that he's brought up is sort of among the weaker excuses that you can imagine him trying to use. But I guess we'll just have to see how it works. Yeah. Joe, your take? If Elon Musk is on the phone or in the room for the conversations to raise the capital, then you know he's serious about buying Twitter. If he stopped doing that, if he's not present for those conversations, then he's going to walk away. But, Casey, the chances of him actually getting the opportunity to buy Twitter at a lower price, let's just for argument's sake and for the sake of this conversation go there. Scale of 1 to 10, what are the chances that you would give it that somehow that's where this would end up?

I'd still probably give it an eight. Remember, technically somebody could come in right now and offer more for Twitter if they really wanted it when it was openly on the market. It didn't have any buyers. This is a company that's been on the market multiple times and has had a heck of a time getting anyone to purchase it. So that's the reason that Elon still has the upper hand here. And even if he does,

and it's why a lot of us think that he probably will wind up getting away with it for a lower price, simply because there are no other credible buyers on the market right now. Steve, so what's your take on what Casey just said? I'm actually a little surprised. I was suggesting, or I was thinking that he was going to suggest a much lower probability. And eight sounds like Casey thinks it's going to happen and he's going to get exactly what he wants. And that's a cheaper price. That's certainly what it feels like. Just the annoyingness of having to go through an expensive and horrible public relations battle in public with Elon Musk over this bot issue. That it's clear if anyone looking at the data, you know, it's you can tell what's

going on there. And as far as another like white knight coming in, we've been talking about this since the news first came out that Elon Musk was interested in. Is there going to be a white knight who comes in and either outbids him or comes up with a more attractive offer? But look at the tech landscape right now. I know we talk about this so much, but Google is not going to do it. All these antitrust concerns around them. Same with Meta slash Facebook. They're not going to be able to buy this company. So who buys it? Comcast or our company?

I don't know. There's no one willing to put the money forward. And like Casey said, we went through this again back in 2016, 2015, when the company was being considered for sale again from everyone from Disney to Salesforce. And nobody wants this thing except Elon. Yeah. Mike, is this is this really a horrible PR episode for Twitter to fight of this hard on this? I would almost suggest that it would be the opposite. They have a deal. They said you stick to the deal and that's it. I don't know that it's about the PR specifically. It's about the the the inherent uncertainty and prolonged nature of a legal fight.

And to remain in limbo, to keep your business in limbo, to fight it out and hold into a contract, yes, you have the sort of legal advantage, but that's still a long process. And so it's more about whether the board feels as if the lesser of two evils is to take a little bit more, which is still a premium to the current price, and essentially buckle to it. Now, the funny part is, I mean, everyone is saying the bot issue is just this complete kind of red herring. I mean, there's an entire industry based on allowing advertisers to figure out the return on their investment and what the audience really is, whether it's worth paying for. It has existed within Twitter, outside of Twitter, and the idea that somehow five percent of

magic threshold to one of the box i mean that's it's always been kind of silly it's much more about does the board feel as if it's just an easier path to take a slightly lower value given what else has happened in the rest of the market to peer company value a casey let's take this a step of beyond twitter itself and and talk about musking and where where he may go from here, at least his reputation. Is there any reputational damage whatsoever that is actually meaningful? As I suggested, he's the world's richest man based on fluctuations in the market and whatever, if he is today or what have you.

Nonetheless, he does have relationships with bankers at reputable investment banks. There are going to be deals that he wants to get done in the future. Does this have anything? Could this have any negative carryover for any of that in the future? Yeah, I mean, look, I think it's hard to argue that 2022 has been good for Elon Musk's reputation, right? Whether you want to talk about Tesla's stock price or, you know, an ever-increasing number of personal issues, and then you throw into that all of the fact that he is trying to now back out on a deal that he signed. So, you know, I don't know what specific problems that's going to cause for him down the road, but I would argue that if you're a shareholder in one of his companies and you're just sort of watching him stretch himself ever thinner and act ever more erratically,

you've got plenty of reasons for concern. Or not, Joe, right? I mean, you know, if you're a shareholder, there are those who have made the argument that this is a different kind of shareholder base around him to begin with. I would agree with that. I also think there has to be a degree of surprise on the part of the board that there is no one else that's a suitor for this company. And I think that's probably affecting a lot of the decision-making that's going on right now. I think they're still waiting, waiting for someone to step in and come in as competition to Elon Musk. And it doesn't look like that's going to happen.

Well, I mean, that was just the bad luck of the timing of it. I mean, right. I mean, the whole Nasdaq basically imploded right around the same time. And everyone else is playing defense right now, not offense, even if other companies. And meanwhile, Microsoft is buying Activision. It's got its own fight. It can't even come in there if we're even permitted to. Steve Kovac, I just got an email from somebody. I don't want to reveal who it is who says expensive litigation with Musk is cheaper than a billion dollar price cut. So maybe there are willing to go to the mat and drive down the New Jersey turnpike from us here and have a fight.

There's also, well, I want to add on to that. Let's game this out, Scott, and say there is this court fight going on. Talk about the clients and the advertisers on Twitter, like we were just talking about. What does the sales force of Twitter tell those advertising clients about the company? What are they telling them now? They were just at Cannes last week trying to convince all these advertisers to keep giving them money, that don't worry about the Elon Musk distraction. Everything's operating as normal until or unless he takes over the company, but if they go through this long protracted battle, how long can they keep telling advertisers that story until they get bored with it and go somewhere

else to Snapchat or whatever? If it's about a billion dollars though, I mean that's barely a price cut at all. It's like three percent of the stated current market cap. So I don't know. It doesn't seem like enough. Which is why you have to wonder, as Casey Newton said, and I'll give you the last word here, Casey, and do it briefly because we're running out of time that you still think he really wants Twitter. And we have less than 20 seconds.

Yeah. Look at everything he said. This man wants to own Twitter. He just wants to own it at a much lower price. And he's willing to go to some pretty extreme lengths to get there, including what we've seen today. Yeah. All right, guys. Good stuff. I appreciate everybody coming in the ring and playing on this. We'll see where it leads to. I'll see you back here tomorrow in overtime. Fast Money begins now.