Closing Bell - Closing Bell Overtime: What’s Driving The Sell-Off? 5/9/22

Episode Date: May 9, 2022

Major averages post 3-day losing streaks Avery Sheffield from VantageRock and Rockefeller Capital Management, Anastasia Amoroso from iCapital, and Dan Suzuki from Richard Bernstein Advisors discuss how to navigate the current environment. Plus, Jason Tauber from Neuberger Berman says despite the market volatility, there are still big opportunities in growth. And, Michael Santoli takes a look at “wrinkles in the sell-off” in his “Last Word.”

Welcome to Overtime. I'm Carl Quintanilla in for Scott Wapner on this Monday afternoon. You just heard the bells, but we're just getting started. We're going to begin with our talk of the tape and another major sell-off on Wall Street. All three major averages plunging again today. New 52-week lows and tech taking the brunt of the pain, the Nasdaq down about four and a quarter percent, 10 percent over three days. Is there more selling ahead or is the worst over four-year money? Let's ask Avery Sheffield, co-founder and chief investment officer of Vantage Rocket, Rockefeller Capital Management, on an historic day, you might argue, looking at just some of the technical levels that

were violated here today. Absolutely, yes. I mean, certainly the market's in a much tougher place than I think we thought right after the Fed meeting last Wednesday. Where do you think that left us? This idea that Wednesday bounce, somehow there was room to be dovishness. Has that completely been evaporated? Well, I think what's happened in the past Fed meetings is when the Fed has spoken and said something that has felt like we could end up with a Goldilocks scenario, the markets really run. And what's been different, what's really different about this, the backdrop for this Fed meeting versus in January and March, is when they spoke then, there weren't earnings announcements coming out within a few hours of the Fed's meeting that really demonstrated that there's really, there's some underlying fundamental weakness to many companies that have very high valuations, that have been the type of

companies that have benefited a lot from a belief in a Goldilocks scenario. So you think the, unlike the last couple of meetings where we had equities rally in the ensuing couple of weeks, this time we had earnings almost as a reality check to the Fed speak we got once the blackout window reopened and just from the chair's presser, in other words. Exactly, exactly. I mean, we saw earnings reports. I mean, right before the Fed meeting, we had some, you know, in on-demand mobility. We had a lot of e-commerce names. We had names exposed to internet traffic. We had names in the semi-space. We've had software names, all with disappointments. And so it's really hard to maintain a belief that we can

just run on momentum and run on fundamentals and the Fed when companies are disappointing. So the question is, where do we go from here? We've already had a meaningful sell-off since Wednesday. I think that fundamentals are going to continue to reign and be what drives the market. And so I would continue to be focused on companies that don't just have potentially great fundamentals in 2040, but those that you expect to have good, strong, real free cash flow in the very near term. And those companies that don't, I think, are going to be really asking themselves, can they raise price or are they going to have to cut costs? And the valuations of those companies, many have not really re-rated to a point where you can make a difference on those fronts in the very near term.

Right. One name I know you like is T, right? Yes. Does that, and why does that fit all the boxes? Yes. So, and we own AT&T, I mean, full disclosure. So look, AT&T is, I mean, to start, let's start with valuation of fundamentals. That got reset. That got reset. Look, you have a very nice free cash flow yield. You have over 5% dividend yield, low on PE as well. But a cheap stock does not mean it's a good stock. What's really, I think, interesting about AT&T and the telcos as a whole is that you've seen the competitive backdrop really get much more benign than it has been historically. And in just in the

past couple of weeks, we've had both AT&T and Verizon publicly discuss price increases. Now, to move from an industry which has been potentially deflationary. Exactly deflationary over time and wireless service. It was a joke with the Fed a couple of years ago. Exactly. I mean, in 2000, I was paying $100 for my cell phone bill, right? And I had a cell phone, this little tiny flip phone, I had to pay for entirely myself. And now it's $50, right?

So there's a lot of room for pricing in this space. We rely on our phones more than we ever had before. The competitive backdrop is getting better for them. They're really starting to compete more with the cable operators, where we're less constructive, rather than amongst each other. So if you do, I mean, look, we don't know if any pricing groups would hold. If they do hold, though, there's a lot of free cash flow that just flows strictly to the bottom line because they have a pretty fixed cost business. The other thing is if the competitive environment really becomes more benign, they could potentially pull back on promotions and marketing, which are very serious expenditures for the space. So there's really the opportunity for an inflection in the business. And they're just

really overlooked, kind of very boring stocks that aren't cyclical very much as well. Right. And we'll talk more about it in a little bit. But the dividend, of course, we've talked about. The degree to which it was at risk a while ago, you clearly don't think so anymore. I don't think so anymore. And with a spinoff of WarnerMedia, their debt structure is much more manageable as well. Let's bring in a couple of our other buddies. Dan Suzuki, Richard Bernstein, Advisors, Deputy Chief Investment Officer, and Anastasia Amoroso, iCapital's Chief Investment Strategist. Thanks for joining, guys. It's good to see you. Anastasia, let me ask you, it does sound like both you and Dan think we got a lot more wood to chop in this downside action.

Well, I think we just have not seen what the future is going to look like six months from now. And I think what you guys just discussed right now is it's likely going to be much slower. We're going to have rates that are higher. We're going to have the economy that is slower. You've seen that in earnings. You've seen that in some of the manufacturing numbers. And the slowdown is going to continue. And that's going to compound itself and express itself, manifest itself in earnings growth that's likely to slow down. And oh, by the way, the Fed is going to pressure multiples. So I think all in, there's still downside risk to this economy, even if we engineer a soft landing. And that's not to mention that if we do actually

go into a full scale recession, that is definitely not being reflected, even with the down graph that we have today. So it's really challenging right now for investors, because, yes, you want to look at some of the oversold technicals on certain stocks and certain indicators and say, well, we're probably due for some sort of a relief rally. But I think what ends up happening is instead of having a relief rally, we have relief moments, but then evaporate just like that because we fret over the next data point and the next event risk. So until we have clarity over where this economy is headed and at what point the Fed is going to stop, I think it's going to continue to be a struggle for investors. All right. Dan, I know we'll talk about your underweight in technology and growth and innovation, and you still think we need a lot to do on the sentiment side. But what happened to the argument that you would step ahead of or try to get in front of the CPI print on Wednesday. Yeah, I mean, again, I mean, I think Anastasia sort of alluded to this, but I don't think it makes sense to sort of, you know, move like move

and position portfolios based on sort of one data point. I mean, especially a data point that's lagging indicator as CPI is. I mean, it's officially a lagging indicator. So I think rather than focus on that, I think what Anastasia was mentioning, I mean, at RBA, we focus on profits, liquidity and sentiment. And despite all this uncertainty about what's happening this year, the conflict with Russia, Ukraine, we have a high degree of certainty. You know, over the next six months, you know, chances are profits are still going to be slowing. Liquidity is still going to be tightening. And unless this correction continues at the pace it has, you're probably going to see these big parts of the market that still have elevated valuations and sentiment. So I think all that together tells you, you do want to lighten up on risk, but keep in mind that it's

not a uniform market. There are opportunities in the market. I think it's just not in the stuff that people care about. Right. Do you worry right now about missing opportunity or is that, is, are we so unanimous in our groupthink right now that we think they can wait? Right. So, I mean, look, we have the advantage of having a hedge book. And we run pretty net neutral. We're just modestly net short. So we are taking small bets on things that seem really undervalued.

Or in the AKC phase, it's a bit larger of a bet because it seems very stable. But we're taking small bets of things that look like they're already potentially pricing in a recession, companies that have very substantial free cash flow yields and are trading at well below 2019 levels. But I mean, if you don't have that opportunity to hedge, it might still be a little early. We don't know. So yeah, I don't worry too much on missing out, but I am placing, you know, some positions that I think could really outperform in this environment and certainly hopefully at least act defensively. Right. And, Estesha, I'm curious, you know, this morning we had a conversation with Art Cashin about 90 percent down days and a VIX that, as of this morning, wasn't cracking above 34, 35. Cashin said, you put those two together, maybe he throws his hat in the ring.

We did get the VIX a little bit elevated going into the close. Do you think this needs to culminate in sort of a washout of sorts? Or has the selling been so consistent that you can do without that big barn burner of a sell day at the end? I will tell you that it doesn't feel to me like we have reached this point of capitulation yet. I mean, whether you look at this combination that you just talked about from our cash and whether you took at the relative strength indicators, we're not yet at oversold 30 levels on the broad indices. If you look at valuations, whether it's the Nasdaq or the S&P, they have corrected a lot, but they're not a rock bottom levels over the five year period, kind of going back to the pre-COVID, pre-fed easing

timeframe. So I just don't think we have seen this extreme oversold conditions yet. And I do agree we would need to see that. But one thing I really come back to during this time is the oversold technicals are just not enough to have a recipe for a more sustained market rally. Yes, we can bounce off some of those oversold levels, but for us to have a recipe for a more sustained market rally. Yes, we can bounce off some of those oversold levels. But for us to have conviction and say, yes, I want to be in these stocks for the next six months, you really have to have an inflation peak. Hopefully, we'll see some sign of that on Wednesday. You have to have the Fed that can ease up a little bit and pivot. And I just don't think that's imminent. So having said that, I think there's things to do.

And whether it's looking beyond, you know, the broad based indices and finding those small pockets of opportunities where companies do generate cash flow and earnings and they're growing those earnings and they're a bit of a yield right now on a taxable basis, close to 4%, 3.7%. So that's becoming attractive for investors. So I think there's ways to position. And the biggest thing is you've got to get paid something, a yield, while we wait out this volatility. Right. Is high yield too risky for you, given that idea of being paid to wait? I mean, yes, there's obvious risks with high yield because spreads have not widened out all that materially yet. And if we are headed for a recession, yes, we're going to have wider spreads. But it's all relative, right? So do I want to de-risk my portfolio?

And if so, I may want to take a little bit off the equity sleeve and add it to high yield. I mean, to start the year, we're looking 5, 5.5% yield, yield to worse on high yield. That's now over 7%. And the average bond price has corrected quite a bit. So I do think that as a de-risking move, that makes sense in the portfolio. But it's a balance. You know, it's high yield. It's maybe some stocks.

It's cash. It's other things that can provide a yield, munis, like private credit and so forth. Dan, you've got an interesting point of view, and that is that you're underweight tech and growth. You think we need to get to a point where the former tech heroes, the analysts, the founders go from being heroes to villains, where you almost don't want to hear about it anymore. It kind of feels like we're getting there, but I wonder how close you think we are. Yeah, Carl, exactly. I mean, I think the best analog is if you go back to 2000, people went from, you know, heroes to villains. And we're starting to hear the grumblings. I mean, you're getting some angry investor commentary. But

really, I mean, these people are still viewed as, you know, experts and visionaries. They're just taking a bit of a break in terms of the stock's recognition of that. I think that's the issue, is that people are just thinking this is a short-term move. We've been of the view that this part of the market, which is a substantial part of the market now, has been in a bubble. That bubble is probably in the early stages of deflating. Now, it feels really bad, right? Something like, you know, 90 percent of stocks, tech stocks are down 20 percent. You know, 50 percent of tech stocks are down 50 percent. You know, the point is, if you go back to the tech bubble, you know, when you saw those stats, the first time you saw those stats was in May of 2000. So just two months after the

after the market peak. So the point is, you know, this can go a lot further if you're talking about correcting a bubble. Yeah, well, certainly historical numbers on bear markets, at least in terms of duration and decline, were nowhere near the median levels over the last, say, century and a half. Dan, you said you did have some ideas of what works right now, or at least in the medium term. You got a couple? Yeah, absolutely. So I think right now, you know, our portfolios are basically a barbell of inflation beneficiaries and defensive stocks, right? I think that's, you know, right now, those are the most attractive areas funded, you know, by that big underweight in the tech and growth stocks. But I think, you know, as the profit slowdown continues, you probably do want to shift that sort of emphasis away from the

inflation beneficiaries simply because they're cyclical. So if demand is falling, that's going to hit those stocks and increase that exposure to the defensives. But really, that barbell of inflation and defensive positioning, I think, makes a lot of sense here. I did want to ask you today about the selling in both equities and commodities. Is that just indiscriminate selling? Is it some element of force selling? Or is it pricing and recession in a way that is more than pricing and inflation, for example? Yes. Well, I think there absolutely is some recessionary concern in the sell-off in commodities. And look, commodities that are particularly exposed to China might actually have some real downside if China doesn't open up soon.

I would say a commodity like oil, it's harder because it's much more supply driven than it's been in the past. The supply constraints are quite significant. And it's not clear that a pullback in demand would be enough to offset the constraints in supply. And so that's one area where, you know, we're a little bit like cautiously like constructive, some names in the energy space, just because there's a lot of, there are still very high free cash flow yielding companies. There's a lot of concern about supply. And many of these companies are actually inexpensive at like $70 oil. Now, certainly they would sell off a lot if oil went to $70 in the meantime, but there's real value there. Right. Anastasia, I wonder if you agree,

given the break-evens well below where we are right now. I'm also curious what you make of the argument among some bulls, and that is that if things were to go right, they could go right very quickly. Bostick today saying there are signs that supply chains could be easing. What if China suddenly turned a 180 on their lockdown or at least their vaccination framework? I mean, what would happen in that case? I think you're right. We would have a very sharp snapback in the markets, but these are such big ifs. They're not givens. I mean, just back to the China point. I mean, we just heard again from President Xi that kind of the doubling down of this adherence to zero COVID.

So I just don't know how we snap back right away. So I think we wish we would see this quick turnaround, but I don't think that's the reality. I do want to comment just a little bit on the energy trade. That's the trade that we've liked all year. But I think speaking of monitoring signs of a consumer slowdown, if you look at energy demand in the U.S., it's actually now tracking below the 2015-2019 average and below even where it was at this point last year. So I think there is actual cracks that are starting to show up in demand because there's some demand destruction that's happening right now given these commodity prices. So, you know, perhaps we are getting closer to some sort of capitulation point because even the winners of this year are being sold so hard. But again, that's for a reason that is fundamental, and that is the slowdown that's

underway. Yeah. One big reason we watched energy today, and Apple to some degree, too, how some of these last men standing are faring on a day like this. Avery, Anastasia, Dan, thank you guys for helping us start the hour. Let's get to our Twitter question of the day. We want to know, what is driving the sell-off? Is it the Fed? Is it earnings, China lockdowns, or something else? Go to CNBC Overtime on Twitter, cast your vote, and we'll get you the answer at the end of the show. Coming up next, a lot more on today's tech wreck. A trillion dollars in market cap wiped out from the mega cap players in just three sessions.

And just ahead, you'll hear from one portfolio manager who's all in on some of those names and how he's navigating this volatility. Later on, the crypto carnage, Bitcoin and Ethereum plunging in today's pullback. Is there opportunity in that sell-off? We'll chat that when Overtime comes back. We're back in Overtime with an earnings alert. Shares have upstart plunging right now despite a beat to the top on the bottom line. A weak Q2 and full-year guidance driving the sell-off in the OT.

The earnings call kicks off at the bottom of the hour, and we will watch that with shares down 42% in the aftermarket. Big tech got crushed today. The Nasdaq down 4.3 at mega cap names, losing over a trillion dollars in market cap over the last three sessions alone. Moments ago, we heard from star analyst Brent Phil. Listen to what he said about the current environment. We have no buyers on our desk. There's max pain and it's darker than I've seen in the last decade and covering many of these names. Our next guest says there are still opportunities in growth. Joining us today, Jason Talber, a portfolio manager of the Neuberger Berman Large Cap Discipline Growth Portfolio. Jason, appreciate your time. Thanks for being with us. I hate to throw this at you, but would you, is the sentiment,

as Brent explained, sort of fit with what you're hearing right now? Yeah, I think it's pretty bad out there. You know, there's obviously been a pretty dramatic change from risk on to risk off in the space of a little over a year. If we think about a year ago, we were talking about there is no alternative growth at any price. It's all about revenue growth because these companies are being valued on revenue multiples and we'll figure out profit later.

And now we're looking at a two-year treasury that's trading at 2.6%, right? So that's competition for risk assets for sure. I would say, in our strategy, we've been focused on free cash flow from the beginning, and we've also been focused on strategic positions. So we wanna own disruptive and innovative companies that have significant moats around them, right?

And there are plenty of those that are out there, and I think the valuations are starting to look more attractive. Is that a straight line then toward back to mega cap tech? No, not necessarily. You know, I would say in our disruptors ETF, one company that I think is particularly interesting is is uber which has obviously been been thrown out with the bathwater if you think about the kind of free cash flow this company is going to

be able to generate in 2024 we're talking about four billion dollars in free cash flow against a 50 billion dollar market cap today. So that's an 8 percent free cash flow yield. Meanwhile, you know, investors are scrambling to buy Procter & Gamble, which, you know, not to pick on them, but we're seeing a lot of heavy buying in consumer staples where we're talking about a 4 percent free cash flow yield on 2024. And that's competing against a 10-year treasury at 3%, right? So at some point, valuation is going to matter again. And within some of these disruptive companies, there actually is pretty interesting valuation support. Uber is interesting for sure, in light of the reported employee memo from Dara and talking about the

seismic shift in investor sentiment. I mean, not to pick on Uber, but if that is true and investors are going to demand more robust business models, don't we have to break the dependence on certain metrics like adjusted EPS or adjusted EBITDA? Oh, 100 percent. And as I said, you know, in our disruptor strategy, we've been focused on free cash flow from the beginning. And also, I think, look, there was somewhat of a bubble in these speculative innovation funds where, you know, investors just wanted exposure to blockchain and crypto and 3D printing. And it wasn't about, are these companies good fundamental businesses?

And at the end of the day, Uber is a dominant franchise, and it is an excellent business. The reality is that the business has tripled in terms of revenue over the last few years as it's recovered from COVID. So I get the frustration that there's not a lot of free cash flow immediately, but this will be a positive free cash flow year. And free cash flow is going to ramp very quickly. And I think Dara really wants to upside surprise Wall Street to get momentum back. And so I think the valuation is actually pretty compelling. And frankly, there are other companies that have been thrown out with the bathwater them back and so i think the the valuation is actually pretty compelling and and frankly there

are other companies that have been thrown out with the bath water in this um you know disruptive innovation space i would point out etsy i mean etsy uh obviously is seeing some give back in terms of the tremendous revenue growth that they saw during the pandemic uh you know after you triple your business it's not surprising to see revenue down, you know, mid to high single digits. You're kind of absorbing the change in consumer behavior. But if I look out to 2024, this is also a company that looks like it's trading

at a high single digit free cashflow yield. And then I would also add just one more point. If we do go into this stagflationary environment, there is going to be a refocus on real growth, like companies that can really grow. And so I think investors should keep some exposure to disruptive innovation. Right. Hey, finally, remind me, is Disney a holding? And if so, what are your expectations for earnings later in the week? We do not hold Disney currently. No, no Disney. That's still going to be a main event on Wednesday as we work our way through some of these media names. Jason, appreciate it. As always, Jason Tauber joining us from Newburgh. Coming up, Coinbase handing in its worst day ever, the company on

deck with earnings tomorrow after the bell. And one of the biggest bulls on the street joins us with the setup into those results. Later on, scaling back, the big move from Goldman in the SPAC space. That could be a major warning sign for investors. The details when Overtime. It's time for a CNBC News Update with Shepard Smith. Hi, Shep. Hi, Carl. From the news on CNBC, here's what's happening. President Biden just signed into law yet another bill to help get military aid to Ukraine. It updates a 1941 law known as Lend-Lease, which was used to help allies during World War II. It also gives the president the authority to expedite agreements for aid with Ukraine and other Eastern European nations. Baby formula is still in short supply across the country. The latest retail tracking data shows 40 percent of America's supply is out of stock.

The shutdown is a key production facility last month, plus supply chain issues and product recalls making the shortage even worse. And more than 100 graduates of Wiley College in East Texas debt free now after graduation on Saturday, the historically black college in Marshall, Texas, announcing that an anonymous donor paid off more than $300,000 in student debt. Tonight, the mysterious deaths of three Americans at a Sandals resort in the Bahamas. The latest on the investigation right after Jim Cramer. 7 Eastern, CNBC. Carl, back to you. We will see you tonight, Shep. Thanks so much, Shepard Smith.

Crypto getting slammed today amid the broader sell-off. Our Kate Rooney has some details. Hi, back to you. We will see you tonight, Shep. Thanks so much, Shepard Smith. Crypto getting slammed today amid the broader sell-off. Our Kate Rooney has some details. Hi, Kate. Hey, Carl. Bitcoin at its lowest level since July. It's down more than 50 percent from that all-time high in November. And as for what's driving it, analysts are pointing to the move away from risk. Bitcoin really hasn't been able to decouple from tech lately, namely the QQQ, which tracks the Nasdaq. One hundred thirty thousand dollars is the next key level to watch here for Bitcoin. It is getting close to that trading below thirty one thousand dollars today. Also hit by low investor sentiment, capital outflows and some overall de-risking in crypto markets and digital asset markets.

And there's been a general lack of new demand lately. According to Glassnode, in the past month, another 15 percent of Bitcoin investors fell into an unrealized loss. And in total, about 40 percent of Bitcoin investors are now underwater. Carl, back to you. All right, Kate, thank you. That sell-off in crypto hitting Coinbase today, the stock handing in its worst day ever. The company does report Q1 earnings tomorrow after the bell. And our next guest is expecting a big turnaround when those numbers hit. Let's bring in Mark Palmer, BTIG managing director, has a buy on coin with a $500 target. Talk to me about why, especially given the brutal action of just the last couple of weeks, Mark. Yes, thanks very much for having me on. We think Coinbase is simply misunderstood. Yes, you're going to see the stock move with crypto volumes in general,

around crypto. Longer term, this is one of the most attractive platform plays you're going to see out there it's not just about trading crypto it's about building an entire franchise that includes not just crypto but nft staking which is a big potential driver of revenue that many folks in the market aren't aware of but could be very big very quickly with the Ethereum merge later this year. You put all of that together along with a Fortress balance sheet, Coinbase going anywhere with the declines in crypto prices. It's going to be around for the long term. We could shake out here, but Coinbase is going to be one of the winners. Right. So for a long time, the defense

has been wait until the revenue stream diversifies. Is that still a valid argument on the bull side? It is. And I think it really takes a couple of different angles. One is that you're going to see the crypto prime brokerage that Coinbase has been building really come to the fore. To this point, Coinbase has really been more about retail investors. Over time, we see institutional adoption of crypto picking up significantly. Coinbase is positioned to be one of the greatest beneficiaries of that. Why is that? Well, number one, functionality. It's got the broadest range of functionality as it pertains to custody, over-the-counter trading. It's going to be adding other aspects such as derivatives and staking, which, again, is something that we made reference to.

Staking is basically another way of generating yield by simply locking up little cryptocurrency. With the Ethereum merge, we think a lot more institutions are going to find this very attractive. On the NFT side, have you been unnerved at all at some of the reporting about year-on-year declines in either average auction price or auction volume? I mean, the charts on NFTs, I don't know, I guess, can you spin a constructive story out of it? Well, we've seen NFT pricing all over the board over the last few years. You know, the one thing that is a certainty with regard to cryptocurrency is you're going to see volatility. NFTs is just an extension of that. What we believe is that NFTs are going to expand beyond some of the use cases we typically hear about,

in particular art and things of that nature. We're beginning to see a vibrant NFT music market. We're beginning to see real estate, particularly fractionalized real estate, really come to the fore. And if you listen closely to what Brian Armstrong talks about at Coinbase, he makes it clear he does not view the NFT marketplace as simply being about art. He thinks there's going to be a great deal of functionality. We agree with him. And we think that's part of the reason why that NFT marketplace has the potential to be as big as the other portion of the franchise, which, of course, is the trading operation around crypto. Right. Yeah, certainly conceptually, the use cases make sense. I guess we're still sort of hunting for what the right price is to put on those. But we're going to see

it. We're going to learn a lot more tomorrow. That's for sure. Mark, thank you very much. Mark Palmer turning us to talk some coin. Still ahead, cutting back, one of the nation's biggest banks is shaking up its SPAC strategy during the sell-off. We'll explain. First, though, Courtney Reagan tracking the biggest movers in overtime court. What is on deck? Hey, Carl, we've got a vaccine maker, an AI-led consumer lending company, and a movie theater chain. They're all on the move. I have the overtime action coming up. Welcome back. We are tracking some big stock moves in the OT. Our Courtney Regan's here with the action. Hey, Court. Hey, Carl. So Novavax shares, they're down after hours after missing on earnings and revenues by a pretty wide margin. The company did reaffirm its full year revenue

guidance, but also noted that there was a sharp drop in its first quarter COVID-19 research funding and ultimately shipped less than 25% of total planned COVID deliveries for 2022. This year's down 10%. Upstart also down sharply. This consumer lending company, it's driven by AI Insights. It did beat on the top and the bottom line, but its revenue forecast for the current quarter and full year falling below expectations. Conversion rates from requests, those falling at least a little from the year prior. And the CEO says that, quote, while this year is shaping up to be a challenging one for the economy, we know the drill and we are confident that we can navigate whatever 2022

and beyond might hold. Still shares down 35% for upstart. And AMC putting up a stronger than expected quarter. Attendance also about half of pre-pandemic levels, despite AMC CEO Adam Aaron saying these first quarter results represent AMC's, quote, strongest first year, first quarter and two full years. But we all know our habits have changed a little, Carl. They haven't started back yet. And AMC Entertainment shares higher by 3.5%. Yep, still working on that shift, Courtney. Thank you, Courtney Reagan. Still ahead this afternoon, finding opportunity in the sell-off where one money manager is putting his money to work during this downturn. And as we go to break, a message from Closing Bell Overtime producer Crystal Lau as CNBC celebrates Asian American and Pacific Islander heritage. My best advice for the Asian-American community is to speak up.

Growing up, my parents taught me and my sisters not to be the squeaky wheel. But what we've learned over the years is how important it is to find our voice and to be the voice for others, speaking out against injustices in our community and advocating for yourself at work, whether it's during a contract negotiation

or making sure your opinions are heard. To the future generation, speak up. We're back in overtime. Some big news out of goldman today the bank shaking up its SPAC strategy in this sell-off leslie pickers here with that story hi leslie hey carl underwriting uh SPACs has been a lucrative albeit short-lived strategy for goldman capitalizing on fees amid the recent boom in SPACs. Goldman Sachs was second in last year's league tables, capturing 9% of market share. Only Citi underwrote a higher volume of SPACs in 2021, according to SPAC Insider. Amid the recent SPAC bust, Goldman is now scaling back this business. Citi, too, has put it on ice. While the market may be an easy culprit to blame here, companies that have already gone public via SPAC are down a whopping 44% this year amid the risk

off sell-off. This though is actually more about regulatory concerns. The SEC is clamping down on SPACs proposing new rules in March. In part, these rules increased the risk that a bank could get sued. That's because they could hold an underwriter liable for the financial projections included in the de-SPAC registration document. A recent analysis by the Journal found that nearly half of all startups with less than $10 million in revenue that went public by SPAC last year have failed to meet their 2021 targets they provided to investors. So that's just too much risk for a bulge bracket to take on, Carl. Leslie, stick with us here. Let's bring in Mike Santoli into the conversation

here at Post 9. Interesting headline that crossed today. Would it be happening, if not for the SEC, putting up some railings around the space? I doubt it would be happening as a matter of policy. I think maybe everybody felt as if the SPAC boom went too far. But this idea, as Leslie said, to hold an underwriter responsible for the financial projections, a SPAC is nothing really but a pool of money and an aggressive pitch deck that said, over the five years from here, things are going to be great. And they were overwhelmingly loaded toward the fifth year.

That was when a deal is consummated. Once the SPAC finds a company to buy, that was the aggressive projections. And that was almost the loophole that SPACs were based on, that you could make aggressive projections. You can't do that with an IPO. So I do think it makes sense. It's also very much in character for Goldman to be early in cutting losses and getting away from something risky when things start to turn. Right. Leslie, I'll ask you the same question. The role of regulation in this decision and then how many follow suit? Yeah, it's almost exclusively regulatory. There will be some

smaller firms. EF Hutton has been extremely active in this space, despite the SEC rules have come out. Other smaller firms have taken a greater share as the bulge brackets have stepped back. But to Mike's point, it's this idea that these safe harbor agreements and this idea that financial projections and SPACs have kind of been this loophole where companies that were either pre-revenue, definitely pre-profit, maybe a small amount of revenue, were making these projections in the future where they don't have much of a history to kind of base those projections on. And so if you're a bulge bracket, you open yourself up to quite a bit of liability if you just go with what the management says in terms of those financial projections. And then ultimately they turn out to be wrong, which, as the journal noted, took place in about 50 percent of SPACs that went public last year.

Right. From a practically speaking, what happens to the companies that are still searching for their target? Well, they can still have to find one. Somebody will probably advise on the deal. I mean, I think that's kind of what Goldman is doing is to just say we're not going to be the default participant and advisor in this. Although I guess there was a little bit of a of a subtlety where if there's if there was a SPAC that's far along in the process and is about to close a deal, they'll stick with it. Right. Leslie, will we wind up with some money that ends up hitting a dead end, not finding a place to go?

I think so. There's something like 600 SPACs currently seeking a target right now. With the markets the way they are, that's just increasingly more difficult. Additionally, if you're a SPAC, what you do as you're searching for a target is you put your capital in trust, usually treasury-like securities. Well, those have sold off, of course, as we know recently. So that money is just shrinking as they wait for a potential target. And then with fewer advisors out there, it's becoming increasingly more difficult to actually find that target than it was previously, where there was so much supply seeking so few companies to actually find that target than it was previously, where there was so much supply seeking so few companies to actually acquire and take public through this method. So,

yeah, a ton of headwinds for this market. Right. We'll be talking a lot more about ramifications from this story in the weeks and months to come. Leslie, thank you. And Mike as well. Coming up next, another ugly day on the street today. We're going to find some opportunity in that sell off in our two minute drill. And coming up on Fast Money, our market technicals pointing to more downside ahead, what the charts are saying about the next move for stocks. Overtime is back in overtime. Stocks plunging again today. But our next guest is finding some pockets of opportunity in this drop.

Joining us today, Mark Giombrone is Senior Managing Director and Equity Portfolio Manager at Barrel Handling. Mark, it's good to have you. Was there anything we learned today or something that we suspected was true about the overall market that got either confirmed or not confirmed? Well, I think there's no mantra in the market called don't fight the Fed. And it's true when the Fed is accommodated to the market, as it's been really for the vast majority of the last 12 years. And it's true now when it's removing that accommodation. So, you know, the market is going to struggle as we move forward here, as it's learning sort of to deal with a less friendly threat, a less friendly threat. It didn't seem like today the peak inflation argument did much for the bulls.

Well, it's because a peak is different than a sustainably too high a level. And that's really what we're talking about now is it may be peaking. There's a lot of reasons to believe that's true. But it's still at a very high level that's destructive overall to the economy and to the consumer and to demand. And so it still needs to come down quite a bit for us to be in a comfortable range for inflation moving forward, you know, whether it's peaking at the moment or not. Right. You do have some ideas. VICI is one, gaming entertainment REIT. A lot of the attributes that are all current right now, predictable cash flow.

Although I wonder if gaming and entertainment, for example, Party City's results, if the consumer is still a vulnerability here. Well, I think what we found is, especially for the gaming REITs like Vici, they went through their most difficult environment maybe they'll ever face during an actual shutdown during the COVID period. And yet their customers or their tenants never missed a rent payment. And at this moment, if you look at MGM or some of the casino names that they are the landlord for, their balance sheets are in gray shape, their cash flows are very strong. Vegas particularly is booming relative to even

2019. And so while, sure, there could be a slowdown, I think at the end of the day, the margin of safety here is dramatic. Their rent has inflation kickers in it. And so even if we see inflation, that won't have an impact for them specifically. They've got lots of cash flow, good balance sheets, and they pay nice high yields with stable and recurring revenues. It's something we like a lot. That's interesting. You know, a lot of the financial earnings are going back a couple of weeks now. It's hard to remember, but you do like M&T, which has traded pretty well during the course of the year. What's our thought right now about regional banks and financials in general?

Sure. Well, so let me start with M&T Bank for a second, because there's lots of ways to win specifically with M&T Bank. It's true that in general for the lenders, as rates rise, right, that's a positive for them as the interest margins expand. And generally, therefore, they're making more money as long as you're conscientious of where credit's going to be. I think that's where the market is concerned now, right, is where will credit be? And that could be more destructive to earnings than interest margins helping. What we like about M&T Bank specifically is there's lots of ways to win. So M&T Bank is a very high-quality underwriter. They're purchasing and just went through an acquisition of People's Bank Corp., another very high-quality underwriter. So you're seeing a company that's clearly going to expand

in interest margins, but also has a history of excellent underwriting. You have merger synergies, and you have significant excess liquidity in the business so they can redeploy that to repurchase shares and grow the dividend in the future. So we think there's lots of ways to win with M&T Bank, not just because rates are rising, but they're clearly a beneficiary of that. Right. A couple of good ideas there in a trading day that had few. Mark, appreciate that very much. Mark Jamboran. Thank you. When we come back, Santoli's last word when overtime comes right back. Welcome back to Overtime. Let's get the results of our Twitter question today. What

is driving the sell-off? 56% of you say the Fed, 31% say other, writing in valuations and inflation as reasons for the sell-off. Interesting read of sentiment right now when don't fight it, the Fed, that is. Let's get to Mike Santoli for his last word. Always an easy villain. You know, looking at the action today, Carl, trying to parse through it, a few things a little bit different. I think one was the somewhat more indiscriminate nature of the selling. Energy stocks down big. Obviously, it's a global growth scare.

Chinese currency not acting well. Also, Treasury yields lower. So that implies that it was a little bit more of a sell whatever you have type market. Now, what was up? Hormel, Campbell Soup, Clorox. So the pure recession plays were the only kind of grab in town. And so if you're looking for that disorderly phase of this decline, maybe it's an overshoot. You can never handicap a crash, which is inherently

fluky. And it happens from oversold levels. But I think you're in that zone where even if you got further sudden follow through to the downside, it probably doesn't last that long. In other words, it might burn itself out pretty quickly. So I think some of this stuff is starting to come into place for people to say the risk reward is improving here if you can deal with another day like today, tomorrow. Sure. Well, you point out that the risks per se aren't original, right? They don't keep handing us new ones every day. That's right. We just continue to price in ones we're familiar with. You keep pricing them in. You have two sides of the risk. I think that's what's confusing about it. It's either like, well, we were in overheat inflation, Fed getting too tight mode, and now we're also in maybe growth isn't going to be their status. So that's been the complicating factor. But I do agree with that.

Look, it's the flip side of what we had on the way up, which was things didn't get better every day. You didn't get good headlines that justified the extra half percent up in the market every day. You just had more of the same and made people feel more confident about it. Really, it's very similar to 2020 in reverse. Back then, economy was on its back. The market ripped. Here, market struggling. Economy, so far, seems OK. Right. Well, and the bulls would argue, thank goodness for that cushion of excess savings. Without a doubt, yeah. Because without it, where would we be? And how much faster does it burn, given some of the inflationary pressures we're looking at right now?

Fascinating market day. And, of course, four more to come this week. That does it for overtime. Let's get to fast money.