Closing Bell - Closing Bell: Stocks all over the map, Rare interview with Cliff Asness 6/22/22

Episode Date: June 22, 2022

The major averages closed just below the flat line after an up-and-down session, with commentary from Fed Chair Powell and a pullback in oil prices driving the action. Hightower’s Stephanie Link joins with her latest investment thoughts. Plus, Sara sits down for a rare and exclusive interview with AQR Capital Management’s Cliff Asness, who is vastly outperforming the market this year, for an inside look at the places where he’s finding value. And the CEO of snacking giant Mondelez discusses his company’s nearly $3B deal in the energy bar space.

Stocks rebounding from a steep pre-market loss as oil and the Fed take center stage. The most important hour of trading starts now. Welcome everyone to Closing Bell. I'm Sarah Eisen. Take a look at where we stand in the market. A lot better than where we started, up 0.5% on the Dow. We got as low as down 364, made a few attempts at going positive, and now looks like that's sticking. The S&P is up about 0.6. As Kelly and Tyler were mentioning, energy is under pressure today as crude oil declines. So are materials and industrials. Everything else is higher. Real estate is the leading sector right now on the market, along with health care. We've got a big show coming your way in just a few minutes.

A rare interview with AQR Capital's Cliff Asnest. His fund has been on a tear this year, despite significant macro headwinds. We'll get his latest thoughts and ideas. And then later, we'll speak exclusively with the CEO of Mondelez, fresh off of a deal to acquire Cliff Bar for nearly $3 billion. Time now, though, for Santoli's dashboard. Today, he is looking at the energy sector and how it's performed, Mike, specifically versus tech and consumer staples. Yeah, that seems to be the story here, Sarah. Headline indexes stabilizing, modest moves, but really it's the sectors and the factors below that seem like they're in a little bit of a short-term flux.

This dates back to the eve of the pandemic crash. So the market peak February 19th of 2020 before the COVID crash. And you'll see it's NASDAq 100 relative to the energy sector, mostly inverse. Obviously, tech opened up this huge lead right here, especially you saw it was going in different directions. And then, of course, more recently since November, huge movement. Now you see some switchbacks here. Obviously, big correction in energy. It's going against tech. There's some flavor in the market today of maybe we've seen some peak inflation, maybe inflation can soften up, and maybe, of course, we still have those growth concerns we're worried about. Take a look. I know you remember this, Sarah. A month ago,

I pointed out that the momentum factor, which Cliff Asness plays a lot, actually grabbed onto energy and staples, right? That's what momentum was in this market. So this is over the last year right here. Energy, of course, massive outperformer. But you see this whole time, the momentum ETF was going down until about a month ago, rebalanced and bought energy in staples. And here's what's happened in the last month. These things have mostly been moving together as opposed to opposed to one another. So it's interesting. Energy has faltered and it was kind of the last bit of pure momentum in this market. We'll see how it goes. Of course, I remember it's one of my favorite dashboards ever.

Momentum. President Biden. Thank you, Mike. We'll see you later. President Biden calling on Congress to impose a three month gas tax holiday as prices of the pump sit near record highs. Our Eamon Jabbers with the latest for us. Eamon. Sarah, that's right. The president may be calling on Congress to pass that gas tax holiday, but it's not at all clear that Congress is going to answer that call. What the president wants is a three-month gas tax holiday on both regular gas and diesel going into September. He also wants states to pass their similar versions of that gas tax holiday.

He wants industry not to pass along any benefits they get from that gas tax holiday or to pass along those benefits that they get from that gas tax holiday to their customers. The president also had a word specifically here for the oil companies. Here's what he said to the companies running gas stations and setting those prices at the pump. This is a time of war, global peril. Ukraine, these are not normal times. Bring down the price you are charging at the pump to reflect the cost you are paying for the product. Do it now. Do it today. Your customers, the American people, they need relief now. But up on Capitol Hill, prospects really unclear.

We just within the past few minutes got a statement from Speaker of the House Nancy Pelosi saying, in effect, you know, we'll see. We saw the House Democratic chairman of the Transportation Committee put out a statement saying that he doesn't like this idea at all. So it's not clear whether there's support among Democrats enough to pass this. Certainly no enthusiasm among Republicans to support Biden here. Not clear this idea is going anywhere anytime soon. But the White House clearly deciding, Sarah, they needed to be seen as doing something. And this was the action they decided to take today. Also getting a statement from the National Association of Manufacturers coming out against it.

I don't know. Does anyone support this idea? Well, the White House does. And they're saying they're saying this is the way to go. Right. But look, a lot of what Biden did today was put the blame squarely, you know, in the lap of Vladimir Putin. The president was really talking to the audience of the American people today saying, look, Republicans are blaming me, but this is really about Putin's invasion of Ukraine. That's why gas prices have gone up. And he praised the American people saying they do what they've always done. They've stood up and defended democracy here, and implying that this is a bit of the cost we're going to have to absorb as part of that war effort.

But, you know, there's some political finger-pointing going on, too, saying, hey, look, this is not my fault. It's Putin's fault. Well, he's got one thing going for him, and that is oil prices are down sharply today, 3.3 percent, back down to near 105 from $120 a barrel. Maybe it's already working. We'll see. Eamon, thank you. Eamon Javers. After the break, our exclusive interview with AQR Capital's management, Cliff Asness, whose funds are having a stellar year, even as the major averages tank. He'll name some surprising stocks where he is seeing big value next. You're watching Closing Bell on CNBC, up 140 on the Dow.

Today, I sat down with Cliff Asness from AQR Capital Management for his first CNBC interview in more than a decade. He said he got his butt kicked during the pandemic, but the situation has certainly changed this year. His global value strategy fund is up 48% this year. The S&P 500 down more than 20% over that time. I asked him about the thinking behind his strategy

and why many value funds have taken a leg down in June. June is actually one of the first, not horrible, one of the first bad months we've seen for value in a while. Thank God we spent a ton of time with our clients showing them post the tech bubble peak. And I don't want to overstate it. No period's exactly the same, but I think they kind of rhyme. Value made a ton of money over the next four years.

It was highly, as the geeks would say, nonlinear. It didn't make one divided by four years worth of money every day. It had big comebacks and then whatever forces on the other side disagreed. So you'll never, you shouldn't do this expecting to have a calm life. But the giveback is not that huge this month. And why are we sticking with it? That spread I love to talk about, the value spread, had dipped below the tech bubble maximum. But the July, excuse me, the June tradeoff has left us back at tied with the tech bubble. I kind of don't count COVID. It did occur. I don't mean you can remove that from the record, but I don't think that's something

you, like you said, want to plan on your pandemic risk all the time. So we're sticking with it because, A, we always like some value in the portfolio and we do like more when it looks very, very cheap. And it's basically tied. It's back. It's way off the ties, but the highs are so high, it's tied with the tech bubble. I still think relative prices are crazy out there. And, you know, this month, the size... Relative prices between value and growth? Yeah, between value and growth. Growth is still too expensive, even though some of these tech names have been shellacked. Some of them have. I actually just recently wrote a piece on our website

talking about how value is not all tech versus everything else in fact and this gets a little geeky but the way we do value and we wrote our first paper on this 27 years ago i'm starting to say a quarter century i think that sounds more elegant and mature. But we don't believe value or many other measures do a great job of betting on industries and sectors. We think they do a better job within industries and sectors because it's more apples to apples. It's a higher risk adjusted return. You can make a lot of money on sectors, but you can also lose a ton of money. So you're not talking about going long energy and short tech? No.

For us, we're looking for the cheap and the other things we believe in, profitability, low risk, momentum. Can you give us some examples, some names? OK, but first, I have to give you huge caveats. Everyone at AQR is terrified when I talk about specific names because it's not what we do. As quants in a global market neutral portfolio, it's not just value, but it's multi-factor. We might have 750 names long, 750 names short. Most of the time, I don't know the specific names. And that sounds bad. If I was a Graham and Dodd manager with 15

stocks, that would be terrible. But we're not betting on one name. We're betting on the average characteristics, cheap, profitable, good momentum stocks outperforming. But because I knew I was coming on TV. So I'm a little terrified that we'll do well, but whatever I mention here will do horrible. So you're not, we have to make an agreement. You're not allowed to come back a year later and say, you recommended this. You pounded the table on Meta. Is Meta value stock right now? Meta, I don't call it Meta. I call it Facebook because Meta is a stupid name.

But both Meta and Amazon are generally liked by our process now. They're cheap versus their peers. Again, we do industry comparisons. They're not always perfect. Meta is social media and whatnot. And Amazon is internet retail, I think is the official name, even though that doesn't capture web services. They're never perfect mappings.

But they both look good on a combination of, call it, I'll do a simplified version of our model, value, profitability, and low risk investing. The mix is a little different. Amazon is actually pretty good on all three. Meta is very profitable and not bad on value or low risk. So both of them are, at least, again, our long holdings are trivial. And for the record, again, if Meta and Amazon die, I am not to be held responsible. But they, to give you a flavor of the process, yes, they would be ones included. And those are traditional growth names.

You know, if you leave the growth world, the fang world, I can give you an example. My old stomping grounds, the only other place I ever had a full time job, Goldman Sachs, looks pretty good on our process compared to other financials. It's fairly cheap, which is rare for Goldman. It's more profitable and it's a lower beta and volatility and all the other things quants like like to look at. And let me give you one scary example of something we don't like. I've only told you things we like. I didn't know this till I was coming on TV, but we have a very tiny short of AMC. So we got a meme stock short. Now, again, you might laugh that I don't know this. I don't know

it because it's never mattered. We had it throughout the whole meme stock craze. We don't notice it at the size we take positions. But it's not that surprising when you want to short high-valued stocks. No, because it's terrible on everything we care about. It is more than any of the other examples I've given. It is super expensive, super unprofitable, and super high beta and volatility. To anyone running a quantitative process that's anything like ours, which I wish we were totally original, but we have some original stuff, but we're not totally original.

I think they'd all hate it. But I think it's like a 12 basis point position in the portfolio. So this is scary. I dare all the meme stock maniacs to try to hurt us on that. They're going to come after you. They don't like hedge funders. Let them come. It's 12 basis points.

They're crazy people, and I will not notice them, but they can have their fun. Any other examples of stocks that look completely overvalued right now? Virgin Galactic is another one. Don't ask me for too many more because I was cribbing for this, for this, because again, I don't usually do this, but that's pretty ugly on, on pretty much everything we care about. But next time I come on, I'm going to read 750 names long and 750 names short. I'll take it. I think a lot of people want to hear. We'll block out a 300 special. Playing at home. There you go. We'll have much more from that interview in just a few minutes,

including Cliff's thoughts on whether recession is coming and whether the Fed can do anything to stop it. Also, his take on bonds and whether they are looking overvalued or undervalued at the moment. After the break, we will talk about from cliff to cliff bars. We'll talk to the CEO of Mondelez about his company's nearly $3 billion deal. This week in the snack space, Dow stopped about 105 points. Low of the session was down 364 earlier this morning. We'll be right back.

Snacking giant Mondelez, which owns brands like Chips Ahoy, Ritz, Sour Patch Kids and Oreos, is adding cliff bars to its portfolio. Two point nine billion dollar acquisition expected to close in the third quarter was just announced this week. Mondelēz CEO Dirk Vandeput joins us now for an exclusive interview. Welcome back, Dirk. Good to see you. Good to see you, too, Sarah. So I've been having some conversation with investors and analysts about the deal. It surprised them a little bit just on the size. It's a bolt-on, but it's a bigger bolt-on than they're used to from you. And maybe how expensive it is. Can you talk about the growth right now for Cliff and Luna Bars?

Is it really a growth company? Well, certainly the space, the bar space has been growing very well if you look at the last five, seven years. During the pandemic, as the consumers were less mobile, obviously the growth slowed down, but we've already seen a very good recuperation last year. and then this year we see some very strong growth. So if you look at the longer term, Cliff has been always growing at high single digits. So certainly from that aspect, it's worth it. You have to also take into account that we're a relatively large-sized company in North

America and that we can have a lot of top line synergies, we can help them to grow more, and we also have a lot of cost synergies, as you can imagine. And add to that the fact that we can really give them a space in the international opportunity that exists where these bars are only just now starting to grow. And if you add all that up, the fact that it's an $800 million business, yes, that I think makes it worthwhile with the valuation that we have. So it's ninth deal I think you've made since 2019.

The timing though is interesting. Clearly you have flexibility in the balance sheet, but tough, tough time where people are worried about prospects for the consumer. Food inflation has certainly affected you and other companies. How do we read into why now and whether more deals like this are coming in this kind of environment? Well, I think what we see so far is despite the fact that there is high inflation and prices are increasing, the volumes are not yet affected. That is always possible.

But so far, the consumer has been quite resilient in light of what is going on. We do know that biscuits, chocolate, and this bar space tend to do quite well in recessions. And we have momentum on this brand and several of our other brands. So we don't know what's going to come exactly, but I think we're well prepared. And so far, things are going quite well. I'm not saying that we're going to immediately make other deals. That depends on the opportunity and what is available. But I don't think we can

just sit here and wait and see what's going to happen. We try to grow for the long-term future. And if these opportunities present themselves, we are planning to make them happen. It's so interesting that you say that volumes haven't really been affected, Dirk. Just in the last hour, President Biden is calling on Congress for a gas tax holiday. You have a good window into spending at gas stations for some of these snacks. Do you think that something like that will make a difference in consumer spending? Yes, I think it will. We can clearly see when consumers go and get some gas,

and they're a little bit surprised by what they see, that that then affects their purchase of what else they buy at the gas station or where they go after the gas station. It's clearly that there is an effect there. But most of our products at this stage are home consumption, and during the pandemic, home consumption has significantly gone up. You also have to take into account that in a recession, consumers tend to spend more time at home and having a chocolate or having a biscuit really helps. And we believe that, for instance, with a bar like Cliff, which is an outdoor type of activity, as the millennials and Generation Z become a bigger part of the consumers, that that also will start to play a role in how we see consumption. So we believe that looking at where the consumer is going, that this makes a lot of sense.

So, yeah, protein wellness over cereal and granola bars. I feel like that's certainly been the trend. Finally, Dirk, big news in your space. One of your competitors, Kellogg, is splitting up into three, something that you're very familiar with, getting a global snacking company, as that was part of your origin story. And I'm just curious whether you think

this is the start of a trend we're going to see more and more divestitures and breakups and potential M&A as these independent companies spin out. I think so. We've been saying it for a long time and we are the leader in this space. Snacking within the food space is the most interesting area. It's not slowing down. It's accelerating. There's a big difference between being in this space and some of the other areas. And so it's understandable what they're trying to do.

We did the same thing when we split off from Kraft. So I think that will lead to more of these things happening, but also I think that could lead to more M&A and bigger snacking companies being formed. No doubt about it, in my opinion. Derek Vandeput, thank you for weighing in on that and your deal as well. Appreciate it.

Thank you. CEO of Mondelez. Still ahead, we've got much more from our rare and exclusive interview with AQR Capital's Cliff Asness, including whether he thinks bonds present good value and what he says the Fed's biggest fear he thinks is right now. Closing bell. We'll be right back. Earlier in the hour, you heard part one of my interview with AQR Capital's Cliff Asness, who is vastly outperforming the market this year. He named

some stocks that look good right now in his quant process, including Meta, Amazon and Goldman Sachs and names that don't look so good. Good shorts, maybe AMC and Virgin Galactic. We also talked about the broader macro landscape. And I began that part of the conversation by asking his view right now on bonds. Bonds, we don't again, we don't do a a lot of market timing. Though in some of our oldest hedge funds that were really kind of the ancestor was stuff we did at Goldman Sachs were completely unconstrained. A tiny part of it will take a directional position. Where we do that, we do not like bonds. We don't dislike them quite as much as six months ago if you think about things we like the value is not great but it's not nearly as bad when rates scream up value even with inflation high

we don't just compare to current inflation value is not quite as bad but momentum is worse and there's a series of other things so if you absolutely force me um i'd say we're negative on bonds also in the trend world, that doesn't really look at value. In the managed futures world, we're certainly short bonds. That's not a shock. That's the trend. It's a trend, but also they've sold off pretty hard. So you might look at it and say there's value there. Yeah. Where we consider both value and momentum and quality factors, there is, I would phrase it kind of depressingly, there is less terrible value in bonds. Unlike some of those tech stocks we came up with, I don't think I can say bonds are a value play at this point. This doesn't mean if we enter a recession that there won't be a big bond rally. But in terms of the things we compare yields to, bonds are considerably less disastrous, but that is damning with faint praise.

You mentioned recession, and that is the talk right now on Wall Street. I know it's not what you do is have necessarily a view on that, but won't value be affected if we do go into recession? Well, I promise you everything will be affected. We just don't know which direction. Our strategies are not very macro sensitive. They have more good than bad periods or else we wouldn't be doing them. But they have bad periods. They just don't seem to be systematically related.

Some of that comes out of some mundane stuff. Like I mentioned, we don't take a very big industry bet. This is not what we do, so I don't even follow it super closely. But I can imagine a more traditional value index that takes some huge industry bets can have a lot more recession exposure than we have. When you're long and short based on both value and quality and risk and momentum across every industry in a balanced way. You're really betting on specific names. So it will affect us because recessions are big events.

And if you tell me crazy stuff's going to happen, we're going to make more or less money than usual, probably, because the world's volatile. But I don't think we have a very direct bet on recession versus non-recession. Do you have a view? I do, but it's a purely personal one we don't trade on. I want to be careful. Any AQR clients out there, we do not listen to me about these things.

I think the Fed probably fears recession more than they fear inflation. They fear both. That's not what they're saying. I. That's not what they're saying. I know that's not what they're saying. But historically, this is scary because the next time it won't work. But most macroeconomists think if we really have to,

we know how to kill inflation. It usually will bring on a worse recession and you only do that as a last resort. Volcker is the ultimate example. But I would bet, and again, not what I do, but that the Fed feels like if inflation really gets out of hand, we have a playbook. If we enter a really bad recession, rates are still pretty low. We can cut them again. I think they're probably more nervous about that. So they'll be raising rates for a while. This doesn't change the general direction. But if I were to bet which side they'd err on,

no matter what they might say, you know, they always have to sound as a whole. I have spent my career avoiding being a Fed parser. I can't think of anything more ridiculous than hanging on every word. I think Powell's speaking right now or soon and trying to parse it. And they're always trying to tell you something, but mislead you a little bit. All else equal, I think they're probably a little bit more worried about a serious recession. Therefore, they won't go. They'll go, but maybe a drop less than some who were right down the middle would have gone. So anything can happen. We live in a volatile time.

You could see inflation with growth resume. You could see recession right now. Or the one everyone fears is certainly a possibility of stagflation. Not a certainty, but a higher possibility than we've seen in a long time. It feels like that we're in it, even. We're entering it. We really haven't entered recession um but if we see a slowdown in the economy inflation won't stop on a dime once it's going you know inflation we like

50 years ago macroeconomists thought they'd figured out inflation uh and it's quite clear that they haven't um and so and inflation has a little magic to it once it starts going it tends to keep going so again not a prediction it's not what Once it starts going, it tends to keep going. So, again, not a prediction. It's not what we do. I'm too cowardly to do that. But I will say the probability, the chance of stagflation, we're a lot closer to it than we've been for a long time. Because there is a school of thought that once inflation peaks, if it starts to peak and the economy weakens as the Fed raises interest rates,

that'll be a good time to buy into some of these growth stocks that have been beaten up, especially unprofitable tech companies that are 80 percent off their highs. You clearly disagree with that. No, no, I don't. Remember, we're pretty industry neutral. And some of those names you asked me was a great question. We do own some of those those names. But unprofitable companies? We we love profitable, cheap companies. And it's a weighted average of everything we believe in. You know, non-quants are a weighted average, too. They just don't add it up. They're looking at a whole bunch of things and saying, what's the

totality? So being extremely profitable is a very large part of what we believe in. It didn't help from 18 through 20. It did help a ton during values troubles from 2009 through 2017. Value suffered, but we actually did quite well because things like fundamental momentum, profitability, low-risk investing, all did really well. I think of that as kind of a loss for value, but one that was deserving. I think of 18 through 20 as a bubble loss for value. So we do believe in profitability. We do believe in growth companies. We weigh that against value. In a bubble, nothing else matters. If you care about price, you die. But in a rational market where some of those names were restored to, you know, halfway back because they're very profitable, I think we could be fine in that market. So are you net overweight or underweight stocks right now?

Almost everywhere we're flat. Most of what we do is either a market neutral long and short or run. We run a lot of money that's traditional. People call us a hedge fund. More of our money is beat the benchmark, long only, low fee, kind of boring. And there we don't take a beta bet. Where we do in the few places, we are on the short side. The value is still, it's not nearly as bad as it was. Stock valuations have gotten better. Not as much better as you might think

because bond yields have gone up, but still have gotten better. But they're still not great and the momentum is pretty lousy and trend is a directional version of momentum. So again, nobody do this at home. We're not the place to come to for a market call. But where we make little tiny ones, yes, we're net short stocks.

But I promise you, it's a small part of what we do. And we can have days where we make or lose a lot of money in any market direction. You can watch the full interview on CNBC dot com slash pro and you'll get more, including his thoughts on private equity, which he says may be pretty overvalued right now. Buybacks, which he has coined the term buyback derangement syndrome and also has gone after President Biden, who again today repeated that oil companies should not be buying back their stock and instead investing in in oil and gas production. Asna said, the president is wrong on that. A lot more, CNBC.com slash pro. Still ahead,

Kohl's taking a dive in the last hour following a CNBC scoop surrounding its buyout offer from Franchise Group. Remember that? We'll talk to the reporter who broke the story, what she's learned next. And coming up on Mad Money, don't miss Jim Cramer's interview with Meta CEO Mark Zuckerberg in the Metaverse. That should be cool. It kicks off tonight, 6 p.m. Eastern, right here on CNBC. After the break, Hightower's Stephanie Link with her latest thinking on the market, plus David Faber gives us a look inside his ExxonMobil documentary. Those stories and much more when we take you inside the market zone. Dow has just dipped negative,

so we've lost all the gains just in the last few moments. We'll be all over in the market zone next. We are now in the closing bell market zone. Hightower chief investment strategist, Stephanie Link, is here to break down these crucial moments of the trading day. Welcome, Stephanie. Plus, Christina Karts Parts and Evalus here with a look at the chips and David Faber on Exxon and his new documentary. Let's kick it off with the broader market.

Stocks are losing steam this hour, well off the best levels of the day. The S&P 500 had been up nearly 1% at the highs. We just took a tumble in the last few moments, Steph. And the Dow and the S&P 500 had been up nearly 1% at the highs. We just took a tumble in the last few moments, Steph, and the Dow and the S&P are pretty much unchanged, which does look better than where we were at the open today. You know, I got to speak with Cliff Asness of AQR. Don't often hear from him. He has his first time on CNBC in a decade. And he came out today to talk. And my biggest takeaway was he put on his value cape where he comes out and says we are still in value, believe in value. It's only worked in the last year or so and has outperformed

growth and really not till June, really, when it went negative. But it's still done better than growth and saying that he still sees that spread at the highest it's been since the dotcom bubble and it should work for the next few years. What do you make of that? Well, it's great to be back, by the way, Sarah. Thanks for having me. I kind of agree with him. You know I'm a large-cap core investor, and that means I can be value and growth. And for the past year, year and a half, I've been more leaning towards value. This year I got a little bit more balanced, a little, but I have such a big bet in energy and materials and financials at this point in time that I now lean a little bit back

to value. And I agree. I think if you believe that the economy is not hanging out into a recession, but that inflation actually will be high and interest rates are going higher, long duration assets will suffer for sure. And even though I heard you ask the question, technology stocks have plummeted, but they are still pretty expensive, much more so than the market. So here's the dilemma we have. And this is why we're chopping around. And I was really going to I was I was about to start

this discussion by saying I was really excited because we saw dip buyers today and we haven't seen dip buyers all year long. Now, obviously, the markets are kind of doing their thing and they're kind of flatted down slightly. But we're not out of the woods because we have two big questions to get answered. How long is the Fed going to tighten and how secure are earnings? So the Fed just told us again today they're going to be data dependent. So now we're going to be laser focused on inflation all over the place. We get core PCE deflator data next week, and then we get the CPI on the 13th of July. We've got to mark our calendars for all this stuff. The good news is oil and commodity

prices have come down a little bit. So on the second point, earnings, I think you're probably going to have to ratchet earnings down from 10 percent, but I still think you can see 5 percent or so. And so I think basically the market is, you know, it is cheap, but the pockets of value are cheaper than the pockets of growth. Yeah. Interesting. He put Meta and Amazon in that category. I know you were happy to hear that as a Meta shareholder. We'll turn now to the semis, though, because the SMH ETF that follows the sector down slightly on the day, underperforming broader tech and new today, major automakers and chip suppliers urging Congress to move quickly to pass that legislation with $52 billion worth of subsidies for U.S. semiconductor production.

The Senate and the House have passed separate versions of the bill that need to be reconciled. But while the push to start building chip hubs in the U.S. is fierce, is the timing of the sector off? Because we could be heading into a slowdown. Christina Partsenevelos has more. How do we square these two factors? Well, first, Sarah, you know it's been over a year that Congress has been working on this $52 billion funding and they can't get it into law,

even with companies penning letters to Congress asking them to pass it. So to your question, demand is still strong in lagging chips. That's used by the auto sector. But we are seeing a slowdown, definitely hitting the end consumer. We even can show you numbers for the drop in global smartphone shipments, just the latest three quarters. For the last quarter, it was down 9%. And then some are actually even calling this now a peak cycle for certain semiconductor companies. I've got two names to focus on. Morgan Stanley says the server market could or is strong enough to offset the slowdown in PCs and consoles for AMD and that AMD's valuation is relatively reasonable.

Stock is trending about 27% lower just in the past few months. And Bernstein, the other name, is focusing on Broadcom. They said that Broadcom has record backlog orders and strong cash flow and attractive valuations. But overall, big picture, multiples are plunging. Stephanie has talked about this before, double ordering. There are concerns about that. There's concerns about, obviously, consumer weakness, inflation. And like much of tech, the big question is, are we going to get any cuts to earnings in the next little while? And that would further drop multiples. And then lastly, you talked about socks. Just have to say it's having its

worst calendar year since two calendar month, I should say, since 2008, Sarah. Wow. No, June's been rough, down 8 percent for the S&P, even worse for semis. Thank you, Christina. Last hour, President Biden called on Congress to enact a three month suspension of the gas tax amid these soaring oil prices. It's the perfect time to take a look inside one of the oil giants. CNBC's David Faber got exclusive access inside ExxonMobil for his documentary ExxonMobil at the Crossroads, premiering tonight at 8 p.m. Joining us now is David Faber. You know it's a big day when David makes his debut in the market zone. Welcome. I mean, it is literally today's news, what you went into, which is Exxon trying to find right.

The balance between new energy, old energy and how to position itself. What can we expect? Without a doubt, Sarah, you're absolutely right. I mean, the news has played to our strength here in terms of presenting this documentary tonight. But it is that pressure that they're always under and that Darren Woods, the company's CEO, is under in terms of pleasing shareholders who very well may not want you to put that much more money back into the ground, so to speak, to continue to increase production over a long period of time. I mean, not that they aren't because they are. That's video you're looking at right there of us climbing a huge tower in Corpus Christi. That's the chemicals business, which, by the way, is a huge moneymaker for the company.

Think, of course, of ethylene, polyethylene, all the building blocks for plastics. But when it comes to oil and gas, Exxon is still increasing its production. Nonetheless, as you pointed out, its shareholders, you know, how do they feel about it, Sarah, is a key question. And not just that, but also the efforts of the companies being made to reduce its carbon footprint. That's something we also took a very hard look at here and obviously asked executives a great deal about. How serious are they? What kind of capital commitment are they making? What opportunities do they see that are available at scale today to reduce carbon the way that they have said they will? Of course,

they're spending 15 billion over the next six years, but they do have an ambition to be carbon neutral, so to speak, by 2050. By the way, that doesn't include, of course, the burning of whatever they are taking out of the ground. That actually only includes, Sarah, their own operations. David, President Biden has also ramped up, I think, his attacks on the oil sector and urged them to invest more in exploration and production and refining. Even in today's speech, went after them for using money for share buyback, something that Cliff Asness said.

The president is wrong on that, by the way. And he's telling them to invest in something that they clearly don't see as a long-term profitable bet. But this kind of tension is playing out with the letter from Chevron this week. You know, it's interesting and I don't want to make too much of our documentary, but I hope some people in the administration watch it. I mean, this is a company that is just not known that well, as relevant as it has been to not just the lives of Americans, but people all over the globe for as long as you can imagine, over one hundred and twenty five years since John D. Rockefeller founded this company.

You know, Sarah, a lot of people don't know much about it because it's been closed. And so that is why it was extraordinary that we were given the access we were. I bring that up because it would seem that Exxon is still viewed and Big Oil is still viewed sort of in some way as not a partner, but an enemy. And, you know, you'd imagine, and this came from Mike Wirth at Chevron and Darren Woods last week in their letter as well, responding to the president, that how about a dialogue? How about some conversation around the pressures that we face and what you face?

And perhaps they can make real progress. You know, one would hope that would be the case, but I will say that perhaps, you know, the lack of transparency into their business to a certain extent has hurt them. All the more reason to watch tonight. David, thank you. We look forward to it.

Like all of your outfit changes as well. Exxon Mobil at the Crossroads premieres tonight, 8 p.m. Eastern on CNBC. It is much to watch. Meantime, take a look at shares of Kohl's. They're plunging this afternoon following a report that Franchise Group is considering a lower bid for the retailer, closer to $50 a share than the previous $60. That report coming from CNBC.com's Lauren Thomas. She joins us now on the phone. So, Lauren, tell us about what you have learned, what has unfolded in the last few weeks since we first heard that this deal was on

the table? Yeah, thanks, Sarah. And I know this is a situation that you've been following pretty close as well, new developments kind of spilling out week by week. And the latest, I was told, reported this afternoon, according to a source, that Franchise Group is now actively weighing a lower bid, essentially, closer to $50 a share, like you said, down from that $60 mark that it had put in. Now, the two companies have been in this exclusive sale talks window that's run about three weeks, and that's set to expire this weekend. So come this weekend, we would expect one of three things to happen. Either we would see an extension of those sale talks, we would see a termination of those talks, essentially franchise group walking away, or we would see a done deal. It's still unlikely, you know,

which of three at this point is going to happen. Again, you know, from what I'm told, you know, it's very unclear if Kohl's would be willing to accept the lower price at this point. But Franchise Group, from their perspective, you know, they've watched really what's transpired in the retail environment of late, right? And Target is really the biggest example that I'm constantly pointed to. You know, recently, they announced this massive kind of plan to overhaul their inventories, to mark down products, to move goods, you know, off of shelves and out of warehouses, which is going to weigh on profits in the near term. You know, if that's something that Target's doing, you can only imagine what the rest of the retail industry is facing and what they'll have to do. It is far from a done deal. Lauren Thomas,

thank you very much. And great scoop here on the latest with the new franchise group, Lower Bid. Staff, final thoughts here on the market as we go into the close. It looks like the S&P 500 is up just a tenth of one percent. We're coming off of a pretty strong two days here. But it's interesting to see energy lower and treasury yields lower because both on the flip side have played a role in the stock market sell off. Yeah, that's telling you demand destruction, recession fears. Everybody's talking about it now. I'm not in the recession camp, as you know, not this year, but I did increase my odds after the Fed meeting last week for next year. And we'll have to just wait and see. But here's the thing. You do not have to chase strength in this kind of market. Stay patient. Focus on quality companies. I know everyone's talking about quality companies, but then you just did this great interview with Mondelez. And look what they're doing. They're trying to find growth. They're basically saying the macro environment is challenging, but we're going to find growth and we're going to be proactive. Kellogg's yesterday. Look at Diamondback Energy, two dividend increases in a month and a half's

time. Chesapeake just raised their dividend and increased their buyback. Johnson & Johnson is splitting up. So look for companies that are doing proactive things, shareholder value, friendly things. That's the kind of market that we're in. But definitely do not buy into strength here. Steph, thank you very much. It was great to have you here in the market zone. Appreciate it. Stephanie Ling. We have got the S&P 500 unchanged right now. You have to really break down and look at the sectors to see what's going on. Real estate is doing the best along with health care and utilities. There's some strength in communication services and staples today as well. Energy is the biggest loser for a change in the market, down about 4%

as crude oil prices take a dip today. The Dow Jones Industrial Average, just about unchanged. We were down more than 300. We were up more than 240 at the session highs of the day. Looks like we're going to go unchanged. We're weighing this recessionary fear today. Earlier, there was a news article, an op-ed published by Bill Dudley, the former New York Fed chairman, talking about how we are looking at a hard landing and a recession. He's been sort of a truth teller lately since he stepped off the Fed, and that caused a lot of concern about the economy. Heard from Fed Chair Powell today, he testified, no major news, and interestingly, did not signal the size of a potential next rate hike, just to expect that rate hikes would keep coming and that they were going to stay vigilant on inflation.

Said that recession is clearly a possibility, but still thinks there's a chance of a soft landing. That was the basic takeaway from Powell. You're seeing a buying of bonds today. The 10-year yield back down to 315. As for the Nasdaq, it's actually done a little bit better, but just dipped into the red. The Nasdaq 100, it's down less than a tenth of one percent. You're at the close. You've got the S&P 500 little change.

You've got names like Moderna throwing to the top of the market, along with Netflix today and DocuSign. So some dip buying on some of the hardest hit gross names. But overall, we're going to go out pretty much unchanged. That does it for me here on Closing Bell.