Closing Bell - Closing Bell Overtime: Will the Rally Hold in August? 8/1/22

Episode Date: August 1, 2022

The first day of a new trading month holds many questions for investors – most importantly if July’s rally can roll on. iCapital’s Anastasia Amoroso gives her forecast. Plus, early Pinterest investor Rick Heitzman gives instant analysis after that company’s quarterly report. And, market expert Mike Santoli’s first “Last Word” of the month.

All right, Sarah, thank you very much, and welcome everybody to Overtime. I'm Scott Wapney. You just heard the bells. We're just getting started here at Post 9 at the New York Stock Exchange. In just a little bit, I'll get Ed Yardeni's August playbook as he makes the case why stocks will have a strong second half of the year. We'll find out why and what the risks are to that call. Some key earnings, they are imminent. Pinterest and Activision Blizzard hitting any moment now. Our reporters obviously standing by to break in with everything you need to know. We'll show you the stock moves, have all of the analysis you need. We begin, though, with our talk of the tape. What this new month holds for your money and whether this rally does,

in fact, have a lot more to go. Let's ask iCapitals Anastasia Amoroso. She's live with me here at Post 9. It's good to see you. Good to see you. All right. Bear bounce or more? I mean, I think we're getting exhausted on the bounce that we've had. I mean, if you think about it, 4,200 on the S&P is probably as high as we're headed. But I will say the talk of the tape to me is I think we want to trade a little bit better. There's just a more constructive tone to it. And I don't know if it's fundamental necessarily, but there's a lot of technicals that are at play. We talked about this, Scott, I think a couple of weeks ago. Once we crossed that 50-day moving average, the CTA community really could step in. And it seems like they've been doing that. We've got past the earnings season, and it was not as bad as feared. And now, by the way,

60% of the companies are out of their blackout buyback periods, and 80% of them will be by the end of the week. So it's just from a technical perspective, there is a lot more money that could potentially get engaged there. And by the way, the Fed pivot, a lot of people kind of dismissed that from last week. Oh, we're going to talk about that. But I think there's something constructive to it. Okay, so you really think it was a pivot? Your note says, despite another supersized 75 basis point rate hike, the Fed delivered something for markets and consumers to cheer about.

I mean, did they really? Because others are out suggesting that, no, the markets are getting this totally wrong. I know. And there's been some Fed communications that are trying to walk back sort of the dovishness of the statement. But to me, there's three things that Powell said that really kind of under, you know, under, underline the fact that they do actually want to pause here. The first thing I would say to that is we're at neutral and they know that

the economy is not great. So they do know policy acts with a lag. They want to kind of pause a little bit here. Then the second thing is, if you look at the financial conditions, they have tightened to the 20 year average levels. And Powell said explicitly that that tightening is still going to exert downward pressure on the economy. And then, Scott, you saw the GDP last week. You saw the ISM number this morning. You saw the job opening numbers. They're likely to trend down. The Fed knows that their policy is working.

The economy is slowing down. So why not just be a little bit cautious here and just see how this plays out? I'm not saying they're done with rate hikes. I'm just saying I think Powell really does want to achieve a soft landing. And if he does, the next move is to slow down. There are some who don't believe that neutral is what the Fed chair says neutral is right now, that it's still too accommodative to get inflation under control and to crush demand. And that really is the central question. If that is not neutral, how far beyond neutral will they need to, in fact, go? To me, the whole

thing rides on that question. If they need to go way past, then all the bulls about the Fed are wrong. I think we won't know this for about a year. And hear me out why I say this. I think near term, there is a great case that is being made for them to pause. So we get to two and a half, two point seven. Maybe we get to three and a quarter by the end of the year. And they want to pause and assess how all this tightening affects the economy. But the reality, Scott, is that they might crush the durable goods inflation. They might crush some of the housing market inflation per se.

But if you look at the shelter inflation still, if you look at the wage inflation, that's not likely going down to 2%. So I can see them pausing, slowing down, assessing the economy. And it may be that in 2023, they have to step it up again. But we just don't know that yet. Do you expect the Fed to cut rates next year? I don't. I don't. Because the market's trying to get there. It's already kind of there.

Yeah. I think the 10-year pricing in particular has gotten a little bit ahead of itself. I mean, if you look at the 10-year treasury, it's really pricing in a great deal of an economic slowdown. 260? Is that where it is as we're having this conversation? Yeah. 265. It was just at 350 just a little bit ago. So I think it's pricing in a whole lot of a slowdown in recession. So at 258, was that 259? I would be taking the other side of that. I think there's value to be had in the front end of the curve, but I would be taking the other side of the 10-year treasury.

And I suspect that as we work through the first Q and second Q of negative GDP prints, we'll likely see better GDP in the second half of the year. And with that, I suspect that the 10-year should move higher as well. Okay, let me just remind everybody, we're seconds away literally from more earnings flooding the tape. Activision, Blizzard, expected any second. Within the next couple of minutes, Pinterest as well. And we're going to break in exactly when they cross,

and we'll show you the stock moves. Just give us a moment as we wait for all of that to happen and our reporters to go through it. We'll tell all of you about it. There are some who simply say earnings not as bad as everybody thought. You mentioned that earlier and that everybody just got too negative and the markets priced in way too much negativity. Marco Kalanovic, JP Morgan today. The S&P has seen its second sharpest PED rating of the past 30 years, exceeding the typical compression seen during prior recessions. The risk reward for equity is now looking more attractive as we move through the second half. Peak hawkishness is now

likely behind. Do you agree with that? So I'll take two sides of that. First of all, when we were talking about 15 and a half times price to earnings, I would have said that's exactly right. We've priced in too much already. We're now at 17 and a half times and 247. So I think that's why I think we might be approaching the top of the range. Hold your thought just one second. Steve Kovac, you have ATVI. Activision Blizzard is out. I do indeed, Scott. It's a slight beat on the top line at $1.64 billion versus $1.58 billion in adjusted revenue. EPS, we can't compare this one, but it's 48 cents. And then some user numbers here. We've got 361 million monthly active users. That's expected to go up later this fall. They're bragging about some big game releases like Call

of Duty coming later this fall, Scott. And keep in mind, 95 bucks a share. That's the number to watch. That's what Microsoft is trying to pay. We got another 10 or 11 months before that deal closes. But that's the target there, Scott. Do we know where the 361 MAUs, the monthly actives, compare to what the expectations were? We do not have that comp. No, we don't. Sorry, Scott. OK. All right. You jump back in with me, Steve Kovac. If in fact you have that, I mean, there are concerns about a gaming slowdown coming out of the pandemic, et cetera. But Pinterest is out as well. Julia Borsten, to you. Well, Scott, Pinterest missing on the top and bottom line. Earnings per share of 11 cents falling seven cents light of expectations. Revenues of $666 million. That's a million dollars short of expectations, while monthly active users did beat estimates, ending the quarter with $433

million. That is down 5% from the year earlier number. Now, looking at the stock up 11%, I'm trying to determine with those misses what's behind that. And it seems to be this new focus on shopping. The new CEO, Bill Reddy, saying we accelerated our investment in shopping and e-commerce this quarter. And I'm thrilled by the dedication of our leaders, employers and employees to continue to build a positive place on the Internet. Sort of talking about positioning themselves as an alternative to traditional social media. But they do say that the macroeconomic environment has created meaningful uncertainty for our advertiser partners.

So Scott, just want to point out here that on one hand, investors with a stock up 13% now seem to like this new focus on e-commerce, but miss on the top and bottom lines with this concern about lower than expected demand from U.S. big box retailers and mid-market advertisers who pulled back ad spend due to concerns about weakening consumer demand.

So a lot of different pieces here. But that stock is up 15 percent. Yeah. Maybe in part, too, Julia, on the revenue guidance, they see it, according to what I'm reading here, up mid-single digits on a year-over-year basis. I know coming in, there was the expectation of what was characterized as modest revenue growth. Whether you think mid-single digits is modest or not, or perhaps even a little bit better than that, is perhaps a reason why the stock is moving higher, as you mentioned as well. Well, one thing I would point out is that the revenue guidance is less than the analyst consensus. But one thing we've seen for all of these stocks, such as Meta, Snap and Twitter, there has been a lot of concern about things being really bad.

And it's possible that the guidance is less bad than analysts had hoped. So maybe less than the consensus, but not guiding towards negative growth numbers in Q3. So I think it might just be a little bit of an expectations game here, because based on my numbers, that low mid-single digits, that mid-single digits percentage growth for Q3 is not hitting the midpoint of analyst consensus. I got you. Okay, good. Good to get your key insight there to try and get to the bottom line of why a stock is now up more than 17 percent in overtime after reporting that number. And certainly after what Snap delivered and Twitter, maybe this is a better than feared part of the story, too, as Julia was talking about there.

Let's bring in expand the conversation, if we could, with Anastasia and bring in our contributor, Sarat Sethi. He is managing partner Douglas C. Lane, Capital Wealth Planning's Kevin Simpson. It's great to have both of you with us as well. You guys have seen what these earnings are, not that you're in the stocks directly. Surat, you're in Electronic Arts. So we get Activision, Blizzard out. Kevin Simpson, you're in Microsoft. So you have a little play there too. Surat, your read on this as it just hits the tape. I think what people are looking for is what is the engagement? And engagement looked pretty good.

And one of the biggest fears was so much engagement pulled forward because of the pandemic. And I think if Activision can show that people are still engaged, the future is still brighter,

that works well for Electronic Arts. Because I do think we do have a secular change here. The growth might not be as fast as we got in the last 18 months, but there's definitely a change, and I think that's a positive outlook for stocks in this space. Kevin, so I think the headline, I'm not breaking new ground by suggesting this

because others have obviously said it, and I think it's the prevailing thought. Earnings not as bad as feared. The question is, is that enough to declare that the worst is in fact behind us, that this is something more than a bear market bounce? No, I mean, I think for sure it remains a bear market bounce. And you look at the Pinterest earnings and they were less bad. So we'll trade up 17 percent. To me, that makes absolutely no sense. I think it was awesome the way the markets traded in July.

But I think we're not through any type of capitulation. The headwinds are just too rampant. And for once, I think the retail investor, at least some of them, are agreeing with me. I looked at a Bank of America fund survey, and retail investors had the lowest equity allocation since 2008, the highest cash allocation since 2001. They remain very bearish, cautious, and fearful of a recession. Normally, I would look at that as a contrarian indicator. But I just think maybe markets got a little bit of ahead of their skis right now. And we need to look at this as a time for caution, not a time for all clear. OK, so why don't you rebut that right here? Anastasia Amoroso, you guys know,

is is with me here, offers a 180 really on that view. What do you have to say? Yeah, what I would say about the earnings being not as bad as feared. First of all, a lot of stuff is already, a lot of negativity has been priced into earnings. And you don't see that, Scott, if you look at the top line number, it went from 250 to 247, not really much change. But that's because of some of the market cap heavy companies that are skewing that number. But if you look at the sheer numbers of downgrades versus upgrades versus the overall universe, that number today is negative 40 percent.

What's special about that, it's negative 40 is kind of the average where you see in a non-recessionary slowdowns. So maybe we have already pressed in the slowdown into the companies that needed to have that reflected. So if we're not actually going to recession, then I would say we might have priced in that slowdown. So this is why the economic data is slowing. But as you can tell, recently, the stocks are not overly surprised by it because that's already been baked in. Now, to kind of agree just with the other view a little bit, I don't think we're going to 4,700.

I think 4,200, 4,300, maybe that's how far we can push it. But if you look at technicals, pretty soon, we're going to be approaching overbought territory. So not that we have to retest 3,700, but again, we might be just treading water around these levels for a while. What about this idea, Kevin, that we've already derated way too far the Marko Kalanovic view over at J.P. Morgan? Well, I mean, it's nice to start seeing strategists getting bullish, and I do think we're closer to the bottom than the top. But it just seems to me with the CPI print as high as it was, we're going to look at that so closely next month, but it's still going to be really high. PCE last week was the highest we've seen since 1982. So even if we are peaking,

it's going to take a really long time to get us back to where we need to be. Earnings beating is nothing unusual. I mean, they always set the bar low enough so that they can beat, which is, you know, part of earnings season in and of itself. But my thinking isn't that we're in for some rollover for some massive downturn from here. But what I want to caution investors is we are not through the bear market. It's not over and we're not ready for smooth sailing. And I think I say that more to the retail traders who tend to look for momentum, sometimes jump into things at the wrong time. And I just feel like we'll get a little bit better opportunity to start building positions.

All right. Sirat, you agree or disagree with Kevin Simpson? I'm more into Kevin Camp. I do think we haven't seen the worst of it. I mean, I don't think we're going back down to retest, but I think we haven't gotten the all clear. I think the Fed is still going to be raising rates. They're not going to be stopping and they're going to be some headwinds here. We still have input headwinds.

They're coming down. We still have the consumer not as strong as they used to be before. And with housing also tightening and, you know, we're going to see some weakness in labor. So not the all clear, but I think you can pick stocks and you can still own stocks. Doesn't mean you have to get out of stocks, but I think you just have to be careful. Well, Sirat, I mean, do you think the market is getting it wrong from the Fed meeting and the Powell news conference? I do, actually. I do. I think the bond market right now is more correct than the equity market on this. You know, the 10-year being where it is, the inverted yield curve. I think we just have some cautious coming ahead.

What do you think about that, Anastasia? You know, I think near term we might have gotten ahead of ourselves, but I really do think that Powell is trying to softland this thing. And I think he's very attentive to the slowdown in the economy. So I think he'll be foolish for them to continue to press on with a supersized rate hikes when the rate hikes are already working and they're slowing down the economy. So structures are slowing. You've got inventories that are slowing down. You've got goods that are slowing down. So I think we're going to start to see some deflationary pressure that's going to show up in some of the CPI numbers, not saying broadly. So I do think that the market is still going to be looking for slower pace of rate increases. And that's constructive, by the way. Scott, when you have fast rate hiking cycles, equities do not perform. But when you transition to the slower environment of rate hikes,

historically, equities did manage to eke out positive performance. Kevin, what if we're overreading the whole thing and suggesting that, you know, throw history out the window. Regardless of what has happened in the past, when the Fed gets on a rate hiking cycle, maybe this time, in fact, is different. And maybe you have a much stronger base of an economy than you had in prior cycles going into all these rate hikes so that maybe just maybe they can pull this off. I mean, even Jeffrey Gundlach last week with me was willing to accept the idea that it doesn't have to be a full crater, that they actually can pull off something close to a soft-ish landing? Yeah, he said soft-ish. I mean, a soft landing, I don't think there's a chance. I wish there was. I wish I was wrong. But when you're talking about inflation this rampant, I don't see it. You talk about things being different this time, and that's one of the

famous traps. We don't want to ever start thinking that it's going to be different this time. And, you know, that's one of the famous traps. We don't want to ever start thinking that it's going to be different this time, even though it was shut down and the entire economy was a result of a pandemic shutdown. And that's what caused a lot of this. I knew I opened myself up to you coming back to me when I said, is this time different? But for the sake of the conversation, I was willing to put myself out there and go anyway. So please proceed. But I knew I was going to get blowback for that. Just, you know, history tends to repeat itself. The catalyst might be different, but the outcomes are always the same. Anastasia had a had a counter. Is it a counterpoint? It is a counterpoint. Sorry, I am going to say this time is different relative to the financial crisis. And if you look at corporate fundamentals, if you look at bank fundamentals, if you look at consumer fundamentals,

what got us in trouble during the financial crisis amongst many, many things is the fact that a lot of people, for example, have taken on adjustable rate mortgages. We don't have that today. And if you look at the dirt severs for the consumers, it is half of what it was during the financial crisis. So the consumer is actually okay. If you look at corporates, $8 trillion of cash on the balance sheets and earnings are still hanging in. So I see a lot of resiliency.

If you look at high yield, for example, net debt to net leverage ratios, again, they're much better than during the financial crisis. And then you look at banks. Again, what got us in trouble is this amplification factor. People had to deleverage and the banking sector was at the epicenter of it. We look at core tier one capital ratios that are as strong as they've been, double where they were in the financial crisis. So I think it might have to be different this time. Slow down, yes. You know, maybe guard variety recession, yes, but not 2008 type scenario. Okay. Which we hope not. No, I don't, you know, I don't know of a lot of people who are calling for that anyway. Surat, last word to you. Hey, look, on the other side, I agree. I mean, you look at some of these

sectors like the financials and industrials, they're performing well. They're not acting as if we're going to super slow down. So I just think this is going to take some time to work out. I mean, we're coming from zero interest rates. It's going to take some time. We're going to have, you know, a little more pain. But I do think longer term things are going to get much better. All right, good stuff.

We'll make that the last word, guys. Thank you, Anastasia. My thanks to you as well here at Post 9. We'll see all of you again soon. Let's get to our Twitter question of the day. Now, we want to know which of these July laggards is worth betting on in August. Is it Snap, Newmont, AT&T or IBM? You can head to at CNBC Overtime on Twitter to vote. We'll have the results, as we always do, later on in the show, which we are just getting started on

here in overtime. Up next, more on that big move in Pinterest. The stock is shooting higher after reporting just moments ago. Early investor Rick Heitzman, the star venture capitalist, is standing by with instant reaction to that quarter. We're live from the New York Stock Exchange. OT, back in two. All right, we are back. Julia Boorstin has more regarding Pinterest. Julia. Well, we have some information about why Pinterest shares are shooting higher despite meeting on the top and bottom line. Pinterest shares now up 19 percent. This after Elliott Investment Management, Elliott, releasing a statement saying it's the biggest shareholder in Pinterest, saying they support the CEO, saying, quote, Pinterest is a highly strategic business with significant potential for growth.

And our conviction in the value creation opportunity at Pinterest today has led us to become the company's largest investor. Going on to say Pinterest occupies unique position in the advertising and shopping ecosystems and CEO Bill Reddy is the right leader to oversee Pinterest's next phase of growth. Of course, Scott, Pinterest's next phase of growth is expected to be really into moving into this e-commerce space and pursuing some new revenue opportunities there. Back over to you. All right. Good stuff. A nice update. Julia Borson, thank you. Let's bring in an early Pinterest investor, Rick Heitzman. He's the founder of FirstMark Capital. It's good to have you with us. Fortuitous to have you on a day. I'm good, thank you. So let me ask you this.

Let's just play off this Elliott news. Number one, you've got an activist now is the largest shareholder. So the stock's ripping higher. They say in a new statement, conviction in the value creation opportunity led us to become the company's largest investor. What is that?

What is the value creation opportunity that needs to happen when you've got monthly actives down 5 percent? You've got the lowest revenue growth in two years. So I think there's a couple of things. I think they thought the company was oversold. There's a lot of value to be picked up. You know, we're just getting the numbers now. But if you look at ARPU and the ability to monetize those users, it's up 20% to 80%, depending on which region of the world you're looking at. So Pinterest is still early, early in its monetization strategy. So they think it has a strategic ability to kind of control intent on the monetization strategy.

In addition to that, Pinterest sits in a unique place as about a half a billion monthly active users that come directly to Pinterest. So in a world where privacy really matters and first party cookies really matter, Pinterest is able to capture that intent. And in a world where ad units are moving more towards direct response going into a recession, they're able to capture that intent on a direct response basis. So they're kind of in a sweet spot among all these media players in terms of how they how they react with their customers and the ability to monetize them. I feel, though, ex-Elliott and ex-the pressure that comes with having Elliott be the largest individual shareholder in your stock, this earnings report, the stock wouldn't be up the way it is. Would you agree with that or no? I disagree. I think that what you're seeing is, I think the stock was depressed for a bit. And you haven't also seen the ability for the new CEO.

And Bill just joined as CEO during this quarter. This is his first earnings release. And I think he has the opportunity to be a real catalyst there in terms of product introduction and driving the company towards commerce. To remind everybody, he ran commerce for Google and is now bringing that same playbook to Pinterest. And he's an excellent CEO. And I think now we all get a chance to see what he could do. Let me read you a quote from an analyst report coming into the quarter. They need to scale beyond their traditional female user base, which is, in their words, tapped out. And they haven't been able to do that all that well to this point. How do they do that? So there's two pieces. Domestically, female is their biggest user group,

but actually internationally, it's the opposite. Internationally, most of the Pinterest users are men. The company's done a really good job of expanding the types of content to make it more male-focused. And although it might be domestically a little balanced towards females, especially in their demographic, high end demographic, which isn't being as hurt thus far in the recession as much as maybe the lower incomes, as we've seen in Walmart, their ability to tap into the upper and middle income female demographic controls so much of that ad spend and so much of that purchasing power. It's really a wonderful place to be. I want to ask you about this new Einhorn position in Twitter, which has a lot of people talking today, too.

But before we do that briefly, just what do you expect from Airbnb tomorrow when it reports? I think they're going to have a great quarter. And I think that looking backwards, they're going to have a great quarter. And I think guidance might not be as great. I think, you know, it just it's going to be reflective of the consumer. A lot of folks had the kind of the YOLO post-COVID trip over the summer of 2022 and might not be feeling as flush going forward. So I think the key thing to look at there is bookings, not necessarily second quarter results. OK. And in fact, we will do that tomorrow in overtime. Einhorn and Twitter. He's making a bet. Okay. And in fact, we will do that tomorrow in overtime. Einhorn in Twitter, he's making a bet, right? He's making a bet that Musk is not going to be able to just ride off into the sunset, however he wants to do it.

I think that's exactly what he's doing. It's kind of traditional merger arbitrage. What are the chances that Delaware is going to force him to close or drive them in a position where he has to close? You know, I know a lot of smart people that would agree with Einhorn and Greenlight on this. It seems like Delaware could force them to close. It seems like they could force them to close this year. And if you just do the probabilistic math, that's a good buy. So it seems to be a smart thing to do, maybe not based on the basis of the fundamental value of Twitter, but the effectiveness of the legal argument by the Twitter board of directors. And let me ask you quickly before I let you run. What's the scuttlebutt among you and you and your friends in the VC world who are in tech?

Is he going to what's going to happen here? I think the scuttlebutt is they're going to force him to close. I think that they've, the Twitter board's done a lot of good work, has set themselves up well legally. And, you know, there's a lot of precedent in Delaware law that they're going to force him to close. He'll try to get out of it, but it's going to, but the conventional wisdom is it's going to close. All right. Rick Heitzman, thank you very much.

We'll talk to you again soon. Thank you, Scott. Up next, Ed Yardeni's going to close. All right, Rick Heitzman, thank you very much. We'll talk to you again soon. Up next, Ed Yardeni's August playbook. He says the lows are in. Where he sees the biggest upside as we kick off a new month. Overtime's right back. We're back in overtime. It's time for a CNBC News Update with Shepard Smith. Hey, Shep.

Hi, Scott. From the news on CNBC, here's what's happening. The death toll from the widespread flooding in eastern Kentucky now at 35 people. That from the governor, Andy Beshear, this afternoon. He says rescue workers are still searching for hundreds of people listed as unaccounted for. A massive, fast-moving wildfire in northern California forcing thousands of people to evacuate. The McKinney Fire, as they call it, started Friday near the Oregon border. It now covers more than 55,000 acres.

Officials say it's killed at least two people, their bodies found inside a burned out car in their driveway. And Guy Reffitt tried to storm the Capitol on January the 6th, wearing armor and carrying a gun. A judge sentenced him today to more than seven years in prison. He's the first January 6th defendant to take the case to trial. Reffitt's son tipped off the FBI about him. A jury convicted him on five charges back in March. Tonight, we're live in Kentucky with the latest on the flood rescue efforts, plus a look at the primaries in five states tomorrow.

And do you think airline seats are too small? The FAA wants to hear from you on the news right after Jim Cramer, 7 Eastern CNBC. Scott, back to you. We'll be there, Shep. Thank you, Shepard Smith. The S&P has been on a tear since its June 16th low, up nearly 9% since then. My next guest has been saying for a while now the bottom is in fact in. He sees even more upside as we dive deeper into the bottom is in fact in. He sees even

more upside as we dive deeper into the second half of the year. Joining me now is that man, Ed Yardeni. He's the president of Yardeni Research, the chief investment strategist as well. So it's good to have you back. So far, so good is how you call your own call on the June 16th bottom. What makes you so sure that it's going to hold? You must believe soft landing is in the cards and that the Fed is, in fact, going to make the pivot that seems to have everybody all excited. Well, Scott, I wouldn't say that I'm so sure. I always look for where the risks are and there's still plenty of risks. But I think a lot of them were discounted in the first half of the year. And I think what started to happen around mid-June is

people perceived that commodity prices were starting to come down, that bond yields were starting to come down, even the two-year, which is a good indication of where the market thinks the Fed funds rate is going, has come down. And meanwhile, I think there's a growing recognition that maybe Powell isn't wrong about 2.5% being neutral, because you have to factor in that a strong dollar is akin to raising interest rates. And on top of that, quantitative tightening is, again, an equivalent number for raising rates. So I think those two are equivalent to at least 100 basis points. So I kind of agree with Powell that they're at neutral. They're probably going to go a little bit into restrictive at the

September meeting, and that will be enough to keep the economy growing slowly or soft landing, if you will. And that will be enough to bring inflation down. And today we saw some good numbers on inflation in the purchasing manager survey. So you don't think that bond yields coming down to the degree which they have are, you know, screaming recession? I don't think, I don't hear them screaming recession. You know, many years ago, I talked about the bond vigilantes and it looked like they were back on the saddle again in the first half of the year. And now they seem to have gone into a siesta. They don't seem to be particularly concerned about inflation, as you would think. I think you have to look at our bonds in a global perspective. In a global perspective,

we probably are going to have a recession in Europe. We've got probably something that's about as recessionary as you're going to get in China, particularly in the property markets. And so on a global basis, there are actually very powerful forces that are starting to bring commodity prices down, starting to bring inflation down. And I think when you factor that in, the United States kind of looks like a safe haven. So I've coined this idea of TNIC. There is no alternative country. When you look at the global mess we're in, I think global investors are attracted to our markets. The dollar has been strong and that's brought a lot of them into our bond market. But I mean, you know, a boat with a small hole, the U.S., is better than a boat that's capsizing like what may be happening over in Europe.

But the one is still taking on water. That's us. Well, I don't know about that. I think you mentioned before, I think some of your panelists mentioned that, actually, you said it, that the U.S. economy may be just a better economy than we've ever seen. And certainly the consumers' balance sheets are very good. The business sector's balance sheets are good. They refinanced a tremendous amount of debt at record low interest rates. And on top of that, the banking system is solid. So I just don't see the kind of credit crunch situation that caused previous recessions.

So I think this boat can float. Yeah, I mean, there are some who think it's wishful thinking. Larry Summers, the former Treasury Secretary, among them, which I know you've looked at his comments. He says that Powell's engaging in, quote unquote, wishful thinking. He accused him of saying things that, quote, to be blunt, were analytically indefensible. There's no conceivable way that a two and a half interest rate in an economy inflating like this is anywhere near neutral. Sounds to me like you take complete issue with those thoughts. I take complete issue with those thoughts. I think what the Fed's critics are

missing is exactly what I just said. And that is the circumstances around the Fed's tightening is that through forward guidance, they managed to push the mortgage rates up to like six percent and really clobber the housing market. We've seen a very strong dollar, which is probably at least the 50 basis point increase in the Fed funds rate in equivalent terms. And then they're completely ignoring quantitative tightening, which we're just starting here. And that's got some tightening impact. So I think the critics aren't being fair here. They're not seeing the whole picture. What about earnings, Ed? Granted, you know, the whole thing didn't collapse during earnings season, but that's not to say that earnings were fabulous and expectations really haven't come down that much. Not nearly enough, as some say they still need to. How do

you counter that? Well, the way I counter it is it obviously depends on the alternative economic forecasts. I'm looking for a growth recession that is not much in the way of growth, close to zero growth, which is what we have in the first half of the year, that continue in the second half of the year. I think in that kind of environment, revenues can continue to grow around 10 percent or so, especially in light of the fact that prices are part of that story. But the big story, I think, is certainly earnings. And I think analysts are finally shaving their earnings, not slashing their earnings. And I think that's a healthy development. And wouldn't you know it, just as they're starting to do it,

investors are now looking beyond that, looking into next year, I think, and concluding that we're going to make it through this morass, this slow growth environment, soft landing environment. They'll probably see better earnings next year. The market looks ahead. We're going to see, and that's going to give us many more opportunities

to have these kinds of conversations. Ed, I appreciate your time, as always. That's Ed Yardeni. He's the president of Yardeni Research. Up next, rating the rebalance. Halftime committee member Joe Terranova, major shakeup of his ETF that he manages, the JOTI. We're going to break down the big moves and debate them straight ahead. And don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. Overtime, we'll be right back. We are back in today's halftime overtime rating the rebalance. Joe Terranova's quality momentum index and ETF shaking up its positioning as part of its quarterly rebalance, adding a number of energy holdings and selling out of some big cap tech names.

Douglas C. Lane, Surat Sethi is back with us here at Post 9. I want to sort of debate these here. You tell me, what do you make of these moves? First increase to tech, OK, after five consecutive reductions. Now, he is still underweight relative to the S&P, but not by much. Again, the first increase there after five consecutive reductions. Let's bring it to our viewers. Should they be increasing their exposure to tech in the here and now?

I don't think so. I think we're too early. I think we have to wait some more. Some of the large-cap tech has done very well. I like the semis in this space, but I think it's too early to chase because I think you had a lot of short covering there. And I don't really believe the valuation still fit some of the large. These reduced financials for the second straight quarter. You take the other side of that, too, don't you? I completely take the other side. I knew you were

going to do that. Absolutely. Look, you've got this perfect inverted yield curve. And right now, what that's telling you is a slowdown. But if you look at the way the banks are doing it, and we had talked about it in the previous in the show, the banks have great balance sheets. They're making a ton of money, just a net interest margin. M&A activity is as low as possible. So it can't stay at these levels. And you're just assuming capital markets are going to stay shut. Nine to 10 times earnings with 3%, 4% dividends on companies that are just going to grow. I think it's too early to get out of those. Adding more energy, less industrials. So I agree on the energy part because I do think this energy is going to be sustainable for a while. I don't think you're going to be a demand destruction there. And the supply, as we know, is just limited. And even if we get more supply

from the Saudis and we get more from overseas at 60, 70 dollars, they're going to make a ton of money. So I agree with that. Industrials, that'd be very key. That's where stock picking comes in. Overall, I agree they're overvalued, but there's some picks there. All right, so he sold Amazon. You own it. He sold Cisco, which you own as well. Take that one on for me.

And for us, Cisco is this dependable kind of Oracle-type cash flow play. I think for his momentum, he's looking for something that can go. I'm surprised he sold Amazon because Amazon has the momentum behind it. It does? Well, the stock hasn't. Well, the stock just came off. It could have gone the other way, Scott. And what did it do? It had a 10 percent rebound and basically said AWS is doing just fine. And if they get the other sides of the business working, you get a momentum stock there. I mean, large investors want to hold these large caps. And I think that has investors want to hold these large caps, and I think that has more upside to it than some of the others.

You bought MasterCard, which you own, too. I think MasterCard, Visa. I know you got some overhang today with all the lawsuits. But, look, great inflation play, consumer globally spending, strong dollar, and a motor on the business. I like Amex. I like Visa. And I like MasterCard.

All right. Good stuff. Good to see you again. Thank you. Sarat Sethi here at Post 9. We'll see you soon. Up next, we are all over the biggest stock movers in overtime. Christina Parts of Nevelos tracking those for us as always. What's on deck?

We've got resilience in cloud computing that continues as companies spend to build out their data centers. And I'll tell you which stock is soaring off that trend. And a big beat from Avis Budget Group. The details next. We are tracking the biggest movers in overtime as always. Christina Parts and Nevelos on top of that. What you have? Let's start with Zoom info because shares are soaring in the OT up almost over 15 percent. This is a subscription based company that sells intelligence data for sales and marketing teams. and you can see actually up 12%. Let me correct myself.

The company beat on all fronts earnings Q3 as well as full-year guidance. And further resilience in the cloud space. Shares of Arista Networks are trending higher as well on an earnings beat and a strong Q3 revenue guidance. We'll show you that stock in just a second. This is a company that is a key provider of networking gear to the cloud giants, demonstrating they continue to build out data centers and spend that money. Shares are up over 5%. And then lastly, Avis Budget Group. On the other hand, we saw their shares also jumping about 5% on a hefty adjusted earnings beat of $15.94 when the street was actually expecting $11.48.

So quite a difference there. Revenue soared 37% quarter over quarter. That's the best quarter in Avis history. Oddly, though, in going through the financial statement, revenue per day in the Americas was only up 2%. So with all this inflation talk, you think it would be a little bit higher. Cut. All right, Christina, thank you.

That's Christina Partsinello. What's up next, the top health care pick for your portfolio. One money manager makes the case for a stock that's been seeing substantial gains over the last year. We'll give you that name straight ahead. Time now for our two minute drill joining us now is jessica inskip head of education and product at options play it's good to see you let's talk about the market before we get some picks from you best month since november of 2020 what does it mean if anything for where you think we might go here in aug? Yeah, I think I'm cautiously optimistic. And that's exactly what the market is pricing in. It looks like we're thinking about

the Fed possibly pivoting to be a little bit dovish. But I think the most important thing to note that I actually haven't heard all day is we are testing the 20-period weekly moving average, which is around 4,100. And I want to be cognizant of not being caught in a bear trap. And we haven't been at that level or above that level, excuse me, since mid-January. So that's something to be cognizant of and watch. So perhaps this is the end of that really great July that we've seen. But we've got a lot of data we need to watch. Yeah, we certainly do. OK, let's go stock picking here. OnSemi is your number one name. Interesting day to do that. And maybe it is because in part of a 5% decline that I'm looking at right now. Yeah, it's on sale. OnSemi is great.

I'm looking for something that has exposure to EV and the automotive industry. They have wonderful profit margins and they consistently beat earnings. So for that reason, I am choosing on semi. I love the EV exposure. That's a great sector to be in right now. Do you think Apple passed a big test last week? Is that why it's on your list? It is. And also their recent activity today. So I actually looked at the things altogether and I didn't like any of them less Apple, but their filing for new bonds gives an indication that they're perhaps are going to buy back a lot of their shares, which is a good indication and hope for upwards momentum within their security. But it checks all the checkboxes, their sales and their earnings report pointed to

positive iPhone sales, which makes up the vast majority of their revenue structure. I was actually surprised by the forward-looking guidance being raised. They only do that a quarter of the time. So I'm very bullish on Apple now. Okay. And finally, this is the way we teased it, that we were going to give a new healthcare name for our viewers. Molina is the one you like. Why? Yeah. So I've been bullish healthcare. It's my favorite sector so far. I think it's going to be certainly a leading sector. This is one where I'm looking for something within healthcare that has a focus on better profit margins. Theirs is really minimal. So something

that I don't really like. However, since their revenue is primarily comprised of government sponsored programs like Medicaid, that's literally 75% of it. That's not too much of an issue with a hit to cash flow. So I think it's a great sector. The earnings report shifts that focus to profit margins, which I think is extremely important for these macro headwinds. So therefore, this fit the criteria that I was looking for in healthcare. All right. You beat the clock. We'll talk to you soon. Jessica, thank you. Thank you. All right. That's Jessica Insk joining us up next. Mike Santoli joins us with his last word when we come back. All right. Welcome back to overtime to the results of our Twitter question. We asked which of these July laggards would you be betting on in August?

The winner, IBM, 35 percent of that vote snapped not far behind with 27. Thanks for voting as always. Mike Santoli is here for his last word. What is it today? Well, you know, we were saying a couple weeks ago, if the S&P 500 managed to kind of break above this little downtrend, get around 4,100, it would at least give bears something to think about. Reconsider their kind of entrenched position that this is nothing but a rally to fate i don't think that you know they have to move off that case just yet there's still plenty to do but if you think about the things that everyone was

most fixated on and worried about today we're worried about the exact opposite oh inflation came down hard in the ism report gasoline under 94 under $94 a barrel. I mean, oil under $94 a barrel. All those things you were saying were the ingredients to when this market gets support. They're in place, but now it's about inverted yield curve. And it's sort of the backlash on the backlash, essentially, is what we're dealing with right now. So I think the market has earned a little bit of the benefit of the doubt yet, even if, of course, it's a pretty good, I think, even debate, Bo Bear, right now. Probably get through earnings season OK, right?

Not as bad as some thought we were going to do. And then there's really not a lot around in front of us. You've got CPI. You've got some obvious economic reads. And then you've got Jackson Hole, which I guess looms large later this month. Plenty of people making the case that it'd be hard to add a ton more risk ahead of the CPI report. It's August 10th, I guess, which leaves you, again, a week and a half to kind of noodle around and digest the gains that we've had right now. Markets enjoying this idea that you can kind of set what the Fed just told us and then not necessarily have to revise it very soon, even though the Fed keeps pushing back. Good debate also on whether, if in fact the market starts to believe the Fed did its job on inflation, and all of a sudden market-based inflation expectations start to tick up again,

because, hey, guess what, maybe they're going to pivot, then that's going to create the next wave of Fed hawkishness. Obviously, every road you look down, you can see some light, but you can also see a train. The importance of big tech getting through the storm, if you will, reasonably well. Significantly well. On the index level, I think it's significant. Now, Apple, as Chris Verona's strategist is saying, back up to the highest levels of weight in the S&P. So it's still kind of, I don't think it's going to be the leadership area, but it's insulated the market from a lot of the messier earnings we've had in other sectors. Maybe it's the most important confirmation sign of something. I think you can't

declare that the good times are ahead without that sector. That's basically right. Yes. All right. Good to have you back. We missed you. Mike Santoli here for his last word. We'll see you tomorrow, as will I. Fast Money's now.