Closing Bell - Closing Bell: Stocks Close Well Off Lows, Crypto Crumbles, The Trade on Credit Cards 5/12/22

Episode Date: May 12, 2022

Stocks staged a late-day comeback, with the Nasdaq turning positive and reversing an earlier 2% loss. David Rolfe from Wedgewood Partners makes the case for some of the beat down big tech stocks, including Apple – which just lost its crown as the world’s most valuable company. Meantime Bitcoin prices touched their lowest level since 2020. The CEO of crypto fund Polychain Capital discusses when prices could stabilize. And Wolfe Research analyst Bill Carcache explains why he just downgraded American Express, which was one of the worst performing Dow stocks in the session.

Welcome, everyone. Major averages falling once again in another choppy day of trading. 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. Just about at session lows right now, with the Dow down more than 500 points. S&P 500 down one and three quarters percent. Every sector right now is lower. It's being led down, though, by technology. A lot of those chip names, especially the mega cap stocks like Apple falling hard today. The Nasdaq Composite down almost 2 percent, 1.8 percent, adding to losses for the week. The Nasdaq 100 down 2 percent. And for the week now, it is down a few percentage points, about seven and a half percent. That's what the Nasdaq 100 is down this week. I want to point out the action in the meme stocks today. This is interesting. GameStop and AMC actually both outperforming for a change. GameStop was halted multiple times during the

session, seemingly on no news, sort of reminiscent of the frenzy from last year. We'll talk more about these heavily shorted names later in the show. Perhaps some short covering is the explanation there. Also ahead, we'll discuss the carnage in cryptocurrencies with the founder of crypto fund Polychain Capital as Bitcoin sinks to its lowest level since 2020. Plus, take a look at shares of American Express falling hard after Wolf Research cut its rating on that stock, saying a likely recession would put pressure on these credit card names. We'll talk to the analysts behind the call. First up, though, we'll start with more pain for technology. The Nasdaq in the red again, now down about 8 percent this week,

nearly 30 percent for the year. Apple joining the rest of the Fdaq in the red again, now down about 8% this week, nearly 30% for the year. Apple joining the rest of the FANG stocks in bear market territory, giving up its crown as the world's most valuable company. It's now Saudi Aramco. Joining us now is David Rolfe, chief investment officer at Wedgwood Partners, also a big Apple shareholder, and our own senior markets commentator, Mike Santoli. Mike, just have to start with you because, you know, it was looking a little bit calmer today. And yet we have this another sort of late in the day spill, again, led by some of the mega caps like NVIDIA, Apple and PayPal and Microsoft. And really, that's this latest phase is actually the stuff that it held up relatively well.

People thought were havens that are giving way to some degree. That sometimes happens as a deep pullback is running its course. We'll have to see. It feels as if, though, the big picture is massive valuation adjustment, people feeling when stocks started going down, when the Nasdaq started to crack, that they were way too exposed to the same themes. A lot of mass exit from that from those names. And it's just fed on itself. Dip buyers would be dip buyers have been completely chopped up over the course of nearly six weeks of declines. Now, a lot of people are doing it. Look at some of the speculative parts of the market. This is the park innovation. But here's the thing. That's the stuff that's already been blasted, destroyed, left for dead. And so if you're reducing overall positions, you're selling your logs and maybe you're picking up your shorts and closing them out. This is the kind of activity you would see. So I don't see that as basically hot money rushing in because they're emboldened. It's much more about, well, maybe things have gone too far in both directions for the short term. David, I know you're more of a long term thinker and investor,

value investor. Have you switched up your strategy given all this volatility in this new world we're facing of higher rates and a slowdown? No, we haven't. Actually, we've been slowly nibbling at our favorite tech stocks. But I'd like to echo what Michael said. The psychology for the NASDAQ stocks, it couldn't be worse. And behind the scenes here, even if you look at some Morningstar data, it looks like maybe two thirds of large cap growth managers are underperforming their benchmarks. I think it's worse than that. It's not that, you know, NASDAQ's down about 30% year to date or

from its recent highs in November. But it's not like the average large cap manager is down 35, 40%. They're down much more than that. I think the redemptions are much, much more than maybe have been publicized. Psychology couldn't be worse. And there's a lot of opportunity in what was a very, very crowded trade is starting to unwind significantly. We think there's great opportunity here. We're holding our own barely, but we like what we see. What specifically do you like? Are you adding to Apple? I think that was your biggest portfolio holding, right? And now it's sort of cratered along with some of the other parts of technology. It took a while, but it went there. Yeah, it's getting close to an ad. It was one of our largest holdings uh if it would fall a little bit more it would make that short list but we've been adding to uh meta we've

added the paypal a couple of times we've added the taiwan semiconductor and so we're taking this opportunity like we've always done in the past 30 years when we have these when we have bear markets you know at the margin we're trying to improve the quality, the businesses, the weightings of our most favorite stocks. And in the full course of a bear market, you have plenty of time to do that. How's your performance held up amid all the volatility? Not well. As we sit here today, year to date, we are down about 27 percent. I was asking because I remember, you know, after you were a longtime Berkshire Hathaway fan, I saw your interview with my colleague Becky at the meeting recently in Omaha, but you sold out of Berkshire in 2019 and the stock since then is up like more than 45 percent.

Do you regret that? Maybe over the last couple of months, but the stocks that we bought, Sarah, from that very large position we had in Berkshire, they have significantly outperformed what Berkshire has done since then to the tune of almost three to one. So, you know, up until the last couple of months, you know, Berkshire's done wonderfully. But in the full course of that sale and subsequent reinvestment of those Berkshire proceeds, it's been one of the best trades in our 30 year history. Fair enough. What's your favorite? You said you see a lot of opportunities in a bear market. What's your favorite right now, now that you've got a lot of seemingly value picks

to choose from? The big mega cap fame. I know that sounds redundant. Everybody's loved those stocks for a long time, but it looks like a lot of people are, you know, heading for the hills because of redemptions. And I think if you can stay the course in those names, or if you've been underweight those names in the previous bull market, now's your time. Probably feels like you're stepping in front of a freight train. But I think we'll look back here in a year or two and realize that when you can buy these dominant companies, huge cash flows, buying back stock for mid-teens, forward PEs, maybe low 20s, you've got to start swinging at that stuff. David, Ralph, thank you for joining us. Thanks, Sarah.

For some of those calls. Appreciate it. After the break, Bitcoin plummeting to its lowest level since December of 2020 today, down nearly 20% this week, went down to 26,000. We'll talk to crypto fund manager Olaf Carlsen-Wie about the extreme volatility in the space when he thinks it could stabilize. You're watching Closing Bell on CNBC. Dow's down about 540 45 points right now we'll be right back check out today's stealth mover it's app lovin shares of the app monetization company soaring

today on an improved earnings outlook and announcing the possibility that it's putting its apps business up for sale bank of america also upgrading the stock citing valuation shares are still down about 60 or so this year take. Take a look at Bitcoin. Story of the day. Plunging below 26,000 earlier, giving up all of its gains from last year and touching its lowest level since 2020. This comes after the collapse of that stable coin, Terra USD, fueling fears in the crypto markets. Joining us now, Olaf Karlsson-, he's Polychain Capital founder, which is a Bitcoin fund or a crypto fund, and CEO. He was also the first employee of Coinbase. Olaf, it's good to have you here. Welcome. Yeah, thanks for having me back. A lot of people were looking at Bitcoin

as a potential safe haven, as an inflation hedge. It's not doing any of that right now. It's acting like an unprofitable tech company and is really starting to break down. How do you see what's happening and why? Yeah, crypto markets have always been volatile. I think they will be volatile for many years going into the future. We've always seen these sort of drawdowns. It happens basically every year or two across the crypto landscape. I think the main thing is that this is the moment of peak opportunity

for those that have conviction and are willing to make a long-term bet. We're really entering the place where this is going to be an amazing entry point over the next several years. In what? Because the stablecoins don't look that stable. And especially if we continue to see higher rates, it might be harder to maintain the peg. Tether, the largest stablecoin, breaking below a dollar, raising some concerns not the first time

doesn't inspire a lot of confidence. Yeah, so there's lots of different stablecoin architectures. Projects like Tether and USDC are backed by assets that are held offline in bank accounts. And so the risk for those types of assets are very different than the blow up we saw with UST, which is more of an algorithmic stablecoin. So it's not collateralized in the same way that those assets like Tether and USDC are. So what does that mean? Do you think that they are investable? Is it in your hedge fund? Do you have stable coins? So we're always invested fully in crypto assets. So we don't usually hold any stable coins

because we always like to just be betting on the market and new technologies that are being developed by, I think, some of the smartest software engineers in the world. So we don't hold stable coins because we always want to be invested in the market. How do you hedge yourself against a move like this in cryptos that we're seeing in the stocks and the currencies? So I've been in crypto for over 10 years and I don't hedge. I believe in a long only approach, which empirically has been the best way to generate returns over the long term in the crypto landscape. I do think that it comes with a lot of volatility and you just need to know that you're getting into that ahead of time. But I've been through many drawdowns of Bitcoin that were significantly worse than those we saw over the

course of the last few weeks. But any in a rising rate environment or recessionary environment, we really haven't had to deal with this in Bitcoin's lifetime. Yeah, I think that's accurate. So this is going to be a new environment for Bitcoin. I also think, though, that it's a new environment for many growth tech stocks who have also kind of tumbled over the last several months. You know, I think it's just an environment where we have high inflation, falling asset prices, you know, an unstable real estate market. It's very hard for investors to know where to park their capital. It's just in general. I do think, though, that once the dust settles, people will realize alternatives like Bitcoin are exactly what they're looking for.

If you're wrong, Olaf, and there is a wider sort of crash, and we've already seen a lot of carnage and people lose, investors losing billions of dollars here on the spill in Bitcoin and related assets. I think one question to figure out is how systemic that might be. How do you view that? I mean, beyond El Salvador now, whose bonds are getting smashed and there's a fear of default because they have it as legal tender. How broad do you think Bitcoin reaches into the financial system at this point? You know, I do think Bitcoin and just the larger crypto landscape is increasingly, you know, a core and critical component of our sort of, you know, global

financial reality. Over time, it's actually going to become an even more critical substrate, because I do think that the future of every global financial market is going to be built on a blockchain based substrate, which is just safer, more transparent and less subject to control and corruption, you know, than their existing systems we have today. So I do think the dependence on these systems will only grow. And I

think their resiliency will be shown through market events like those of today and, you know, market events of the last 10 years. Olaf, thank you for joining us. Appreciate it, especially on a day like today for Bitcoin. Yeah, of course. Thank you. Good to see you. Let's show you where we are in the broader market right now. The Dow

lowered by about 525 points. We've sort of been sitting at these levels in this final hour, though we took a leg lower just in the last hour or so. Most Dow stocks are currently trading weaker. UnitedHealthcare is the biggest drag, along with Microsoft, American Express, and Boeing. Amgen and Home Depot are the winners. S&P is down 1.5%. So is the Nasdaq, which has come back a little bit. Take a look at Disney dropping today, despite a beat on Disney Plus subscribers. We'll talk to a media industry expert about the read-through for the rest of the streaming landscape. And then as we head to break, check out some of today's top search tickers on CNBC.com.

No surprise, 10-year yield back on top. What's different, and we've seen this over the last few trading sessions, is there's actually buying of treasuries and yields are coming down. They've really stabilized and started to go lower. As you can see, we're below that 3% level where we were last week. Bitcoin up there, down 4%.

It's come back as well. Apple down 4.5% in bear market. Tesla also giving back 3.4%. And there's the Nasdaq composite. The eye of the storm lately, down 1.5%. Recovering a little bit, but another down day for the Nasdaq. We'll be right back. Stocks under heavy pressure again today, dragging the week-to-date returns losses further into the red. Mike Santoli is back to look at the damage done. Mike, and possible signs of support in today's dashboard? What levels are we looking at?

At least some intermediate target levels to keep in mind, Sarah. You know, coming into the week, I was talking about how a bunch of different approaches were gathering at these downside targets in the 3800 to 3900 area of the S&P 500. Down 5% to 8% from last week's closing level. Didn't necessarily think we'd get there in four days, but we're right in that range at the moment. In fact, closer to 3800 is somewhat of a key level in terms of how much of the rally off of the March 2020 low we would have been given back. It's about 38%. Let's not get into details. But also, it's around 16 times forward earnings on a fundamental basis. It also takes you back pretty far in time. Right now, we're back to basically March of last year. So that's about

a 14-month stretch. Back in 2018, we had a 20 percent drop in the S&P. It took us back 18 or 19 months. So that's what happens. You test these levels. Also, keep in mind here, talk about thirty five hundred ish as that September high in 2020. And then, of course, the pre covid peak before we got that crash was in the thirty four hundred thereabouts as the as the intraday high. Now, financial conditions tightening. Take a look at high yield corporate debt spreads. Right. This is what the Fed wants is financial conditions to tighten, but not too much so that it causes any kind of more capital market stress. So when this number is going up, it means the market's very stressed. Risk levels very high. People don't want to lend to risky companies.

So what you see is you've curled up. It's up there, you know, not even as high as we got to in 2018. And also 2016 was actually a huge credit shock, not to mention the pandemic. So inching in that direction. But so far, nothing that's going to turn the Fed away. I was going to say back in that that spike, the pandemic, that's when they entered the market to stop to stop it. That was whatever it takes. Absolutely. So. So, Mike, we're just seeing a recovery here. The Dow rallied about 200 points just the last few minutes.

Real estate and health care turned green in the S&P. Does it feel like this market wants to rally? Well, it's poised at any moment just because the band has been pulled back so tight. We are right around that minus 20 percent level intraday in terms of a peak to trough loss. It just seems like a logical, plausible place for somebody to say, let's not lean too hard on the market to the downside unless somebody's trapped and absolutely has to liquidate further, which today doesn't feel like it. If anything, the complaint has been that the selling has been too orderly so that we haven't gotten to extreme extremes that would sometimes indicate a climactic bout of selling. Consumer discretionary also just joining real estate and health care in the green

as we continue to recover. Mike, thank you. We'll see you in a minute. Up next, former NBCUniversal Entertainment co-chairman Ben Silverman on whether concerns about Disney streaming subscriber growth are being overblown. That stock a loser off earnings. We'll be right back. Welcome back. Here's a look at the Dow heat map gaining a little bit of lost ground just in the last few moments or so. Most stocks, though, are still red. UnitedHealth is the biggest drag, along with American Express. We'll talk to the analysts behind the downgrade today on that stock. Apple, Microsoft, UnitedHealth, those are some of the weights on the Dow right now. On the flip side, you've got Home Depot, 3M, Amgen, and Merck.

Disney is right in there. It's one of the bigger losers today, trading near $100 a share. That's a level we haven't seen since the depths of the pandemic and before that in 2018. This comes after the media giant reported earnings last night showing growth of nearly 8 million subscribers to the Disney Plus platform, though EPS and revenue both missed. Joining us now is Ben Silverman of Propagate. He was previously the co-chair of NBC Entertainment. Ben, always good to talk to you.

Welcome. Thank you, Sarah. So I guess it was a relief on the subs number after Netflix's loss. Who's winning the streaming wars right now? Where are we? Well, you know, it seems like everyone's losing. I'm kind of surprised, like you hit your numbers or exceed your numbers and, you know, the world doesn't reward you and or you miss your numbers and the world doesn't reward you and or you miss your numbers and the world doesn't reward you. But overall, the long-term trend of direct to consumer

and the relationship that these big companies can now have with their audience and consumer is an invaluable opportunity and how they unlock it will be really interesting over the coming years. Whether it's gonna be the introduction of advertisers who've really been left out of the streaming ecosystem other than Peacock, or whether it's going to be new ways to monetize the content off those streaming platforms down the road. But in general, I think what is clear is that library content still has massive value

in the pulling of that content onto their owned and operated services, whether it's NBCU and The Office or it's Warner Brothers and Friends. Which is yours. Yes, I got to mention it. And it's incredibly valuable. But also the big tent studio investments made in IP, whether it's Disney's investments in Star Wars, Pixar or Marvel, have real value and can be unlocked and can drive subscriber. But at what price, Ben? Is there a sense that what we saw in terms of the big bucks for content is just going to be scaled back massively with these stocks? Netflix's stock down, I don't know,

70 percent or so from its highs, 60%. And the discipline that the market is imposing on some of these streamers with the models changing, what that's going to mean for how much you and others get paid for content? Well, I think that they can't stop investing in content, right? That is the essential fuel for these platforms. But do they need 20,000 people to do it, right? I think what's one of the interesting things about the shift that technology was supposed to unlock was about the amount of infrastructure and people you needed for that content to be made and then distributed, and then the thought being that streaming would create a kind of technological advantage.

And it feels like they've only been hiring into the technology instead of actually using the technology to kind of save on the cost side outside of the physical content. But I really believe in the value of content increasing and growing. And I think it's also just multiple forms of content. The broadcast platforms knew early on they needed one price point for daytime, one price point for the morning, one price point for late night, one price point for prime time. And I think that the streamers just all went heavy into the big

prime time content and didn't spend the money across the slate in a wise enough way. Because a consumer doesn't differentiate between Dancing with the Stars and Game of Thrones about their pleasure experience or their viewership. But one is 10 percent of the cost of the other. I don't know. I'm much more Game of Thrones than Dancing with the Stars. But I see your point. Yeah, but in general.

And I think the big other thing about the Disney piece and just in general is sports, right? We're watching as Amazon has acquired sports. We're watching as Apple has acquired sports. We know NBCUniversal's platform is very sports dependent and the same with Disney. And I think that sports value just continues to increase. And the advertising halo that sports brings you when you're selling ads is big value. So I think there's a lot to be looked at across the different elements of the content, not just the content budget in and of itself. To that point, Ben, we're getting into

this new wave of ad-supported content. Disney is going to roll it out for Disney Plus later in the year. Netflix looking at doing ad-supported.. Disney's going to roll it out for Disney+, later in the year. Netflix, looking at doing ad-supported. I was fine watching ads when watching Yellowstone on Hulu. How do you think it impacts the viewer experience? Because it feels awfully similar to cable, ultimately. A hundred percent. We're back where we started, right?

And the fact is, the advertisers have been left out of the ecosystem, and the tech oligopoly treated them poorly. Right. Like the meta meta company and and others were not really great friends to those advertisers. They took their money and they didn't treat them well. And the broadcasters and the media giants have always treated their advertisers well because it's been a 50-year-long relationship. And I think there's a lot of revenue to be gained by reaching back out to those advertisers who are really left out of the culture conversation. Other than broadcast, television, and cable, they weren't connected to Stranger Things. They weren't connected to Game of Thrones.

They weren't connected to these high-profile culture creation vehicles. And I think there's going to be a ton of value unlocked. And I think they'll pay premiums to be in these walled environments. And as a consumer, one choice is $20. The other choice is $4. I'll sit through the ads. Take the four. Yeah, no kidding.

And also boost the average revenue per user for these streamers. Get them more profitable. Ben, thank you. Really interesting conversation. We've got to leave it there ben silverman here's where we stand right now in the markets heading into the close down 345 again on the dow so we've come back just a little bit in this final hour the s p is down eight tenths of one percent still got most sectors lower technology and financials interestingly at the bottom of the list today the banks are acting a little bit heavy utilities and materials right, at the bottom of the list today. The banks are acting a little bit heavy. Utilities and materials right there at the bottom as well.

Tapestry is one of the biggest winners on Wall Street today after better than expected earnings. What those numbers mean for the big picture on consumer spending? Straight ahead. Time for today's big picture. It's the American consumer who's going out and spending despite the doom and gloom on Wall Street. In the big picture, we take a look at broad takeaways from stock stories. Today, it's tapestry. That's the retailer behind Coach, Kate Spade, and Stuart Weitzman up 15% right now at the very top of the S&P 500.

Why? Net sales at Kate Spade rose 19% and 11% for each of the other brands. Kate and Stuart Weitzman were both turnaround stories that hadn't been growers in the past. On the conference call, executives cited standout performance in North America and expressed confidence that it continues. The CEO also said we've seen no consumer pushback on price increases and that reopening and back to work is driving purchases of handbags and shoes. Tapestry actually lowered its guidance because of China, but the market is shrugging it off because the U.S. results were so strong. Bottom line, if the slowdown is coming in our economy, many of these companies with strong brands just aren't feeling it or aren't seeing it

yet. And that underlying strength and reopening momentum may eventually help insulate us from a hard landing or recession as interest rates rise. Certainly provides a good cushion. Our next guest, however, has a much more bearish outlook on consumer spending. Says investors should sell credit card stocks. As a result, they are all lower today, partly on that call. He explains why straight ahead. That story, plus a slew of analyst calls on autos and the technical take on Apple when we take you straight inside the Market Zone. We are now in the closing bell market zone.

CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, chart expert Jeff DeGrasse to break down Apple's breakdown. And Wolf Research's Bill Caracocci on his downgrade of credit card stocks, which is not helping those names today. Let's start with the broader market, though. Stocks are well off the lows as we head toward the close. We continue to make up some ground here. The Dow down only 289 points. I say that because it was down sharply. We started the

hour down more than 500, 531 at the lows. Mike, I wanted to highlight the ARK Innovation Fund because, you know, we've been talking about how brutal it's been for that ETF, which it is down 70 percent from the highs, but it is up almost 5 percent today. And you've got names like Roblox, Unity, Roku, Shopify up double digits, some of the hardest, most considered most risky parts of the market bouncing. Do we read anything into that? I read mostly it's people short covering and leaning in the other direction after such a huge move. All the stuff that's bouncing five or 10 percent is stuff that if you look at the long term chart, you could barely see a five or 10 percent bounce because it's such a small piece of the previous losses. So I think that's one piece of the story

going on today. But it fits into a general sense of, look, even in bad years, even when the market's having a rough time, it doesn't go straight down. You know, we're down almost for a sixth week in a row. We talked earlier about how there's this very mechanical sense out there that once we get right above the down 20 percent area in the S&P, it's just this, you know, trigger that says let's not get incrementally negative here because the market in history has bounced a few times from there. I don't think it dictates much from here except to say a lot of the work that has needed to be done in terms of valuation, mean reversion and all that stuff has gotten done. And whether it's enough is certainly the big question. Today's losses on the index, though, really Apple, Microsoft, NVIDIA, the vast majority of it. The average stock is doing a lot better. That's a

different story today. I also wanted to quickly ask you about Bitcoin and the implications for the broader market, because some some people might be surprised that it even held above 30,000 until today. And then we cracked below 26,000. The bottom really started to come out. We've rebounded a little bit from that. I do wonder if you sort of needed to see Bitcoin crack as the other speculative part of the market, you know, along with the unprofitable tech stocks and everything else to really get more of this washout feeling? You know, perhaps. I mean, it's down enough, I would argue. It's really been more of a coincident indicator along with FANG and NASDAQ 100 and things like that, as opposed to, you know, being kind of a secret leading or lagging tell, as far as I can tell. It's part of the same story. You know, people who just felt as if they'd either huge gains. By the way, the NASDAq 100 is up 60 percent over the past three years. It's still a lot big. And so people say, who's selling down here? Well, those were the winners for multiple years and they're giving

back the premium. So I don't know if Bitcoin is a tell or if it's just kind of getting swept along the same wave as everything else. Well, look at the auto stocks making big moves today. Following several analysts calls, Wells Fargo double downgrading both Ford and GM to underweight from overweight on concerns the automakers could reach peak profits this year. Wells also cutting its price target on Ford in half to $12, slashing GM's price target to 33 from 74. Meantime, Wells trimming its price target on Tesla to 900 from 960. Not quite a slash there. On expectations, inflation will eventually catch up with the EV maker's margins. And Morgan Stanley reiterating its buy rating on Rivian,

following its smaller than expected quarterly loss. Phil LeBeau joins us. Phil, do analysts think Ford and GM will hit their EV targets? What happened to all that excitement? Well, the excitement is still there if you believe that they can hit that. But let's be clear, and this has been out there for some time, Sarah, many people are skeptical that Ford and GM will be able to, A, hit their volume targets for 23 and 24. And second of all, even if they do hit those, it's going to be much costlier for both companies. It's going to be costlier for all automakers because raw material prices for EV batteries, battery cells, all of that is going up. The supply is not increasing. And that's what Colin Langan, the analyst at Wells Fargo, was talking about. Look, he basically said it's going to be more headwinds for the

automakers when it comes to EVs in the future. Question on the automakers, GM and Ford, right now. Forget the EV future for a moment, any signs of a cyclical slowdown? Because they typically get pretty hard hit by rising interest rates, right? Auto loans go up. But we've had this supply shortage and this backlog. Everybody's on a wait list for these cars. So is it going to be different this time as far as the cycle? It's not a typical cycle where when it turns over, it turns over hard. What we are seeing is because there's so much demand that is out there, the automakers are able to maintain pricing at least for now, and the consumers are willing to pay it at least for now. And there's no indication that that is changing. Right. Like a lot of, like some of the apparel makers, I cited Tapestry. Phil,

thank you. Phil LeBeau. Tech has had a very rough ride of late, as you know, and Alphabet hasn't been spared. It's down about 12 percent just in the past month. Our Deirdre Bosa spoke exclusively with Alphabet CEO in a pretty rare interview. Deirdre joins us with some highlights. Well, Sarah, we covered a lot of ground from privacy to free speech to cloud, but we did start on that macro backdrop in the market volatility that, as you said, has affected big tech. It has eroded a fifth of Alphabet's value this year. Pichai said that while he expects to face uncertainty for some time still, his investment strategy, which includes 12,000 new jobs this year, billions on infrastructure and security, he says that does remain on track.

Have a listen. The good thing is we've been around as a company for a while, have worked through past moments like this, be it 2008 or the early days of the pandemic. And we take a long-term view. Obviously when you're serving across the economy, a lot of the macroeconomic factors like GDP growth end up affecting advertisers' spend as well. But a lot of what you saw today at Google I.O. 2 is when we are investing in AI, one of the largest investors of R&D in the world,

and we take a long-term view and we work hard to make our products better. So Pichai really emphasizing consistency here and responsible investment. This comes, as you said, Sarah, at the top here, Alphabet, other big tech names that have held up relatively well amid the sell off. They continue to come under pressure this week, even as we look at Alphabet today, continues to underperform the broader markets, not taking part in that tech rebound that we are seeing in some of the more speculative areas. Back to you.

Yeah, I mean, he sort of made it clear that, you know, their priorities and their investments are still fully intact. After spending some time with him, Deirdre, what do you think those are? You know, diversifying away from ads. Where is he most focused in terms of taking Google strategically? Well, that diversity is a very important word there. He talked about how their diversification so far has allowed them to keep these investment strategies in place. But of course, advertising revenue still makes up the majority. So he did talk about things like subscription revenue devices, which they announced at IO Cloud, of course, which is still unprofitable, but they have been narrowing losses in this area. So that's where they're headed. He is committed to it. And it is kind of interesting

in terms of very specific investments, $10 billion they announced on infrastructure for hybrid work. You compare that with like a $10 billion for Meta that's investing in the metaverse. So you're starting to see real differences in the tech giants, where they're putting money and that's what their longer term bets are. Yeah, really interesting. Deirdre, thank you. Deirdre Bosa. Sticking with tech, shares of Apple continuing to fall after tumbling about 5% in yesterday's session, also down more than 4% today, losing its crown. Oh, now 3.5%. It's come back a little. But the company did lose its crown to Saudi Aramco as the world's most valuable company. Let's bring in Jeff DeGraff

from Renaissance Macro Research with some chart analysis, Jeff, on Apple, because for so long, this was the port in the storm. And until very recently, what was acting like a safe haven has started to break down. What next? Well, I think it's endemic of a bear market, right? I mean, in bear markets, there's nowhere to run, there's nowhere to hide. And when you start taking out leaders like this, it's usually a sign that, you know, they're starting to get to everybody. Importantly, Apple broke down through that 150 support level, and that was an important support level because it really represented the potential for the completion of a double top. And so between 180 and 150 now is this relatively large distribution zone

over the last six months, and that counts downward of about 120 on the chart. So certainly we can get a reprieve in the near term, rally it back up to that resistance level, which is now 150. But I do think that the trend is turning in Apple, and we probably have some more downside to go. Again, 120 is the crosshairs that we're looking at here. Yeah, another 20 bucks lower than right now. Jeff, you said it's a pattern in the bear market when they start coming for everybody, right? First it was speculative tech, and then it goes into Apple, which has better balance sheet dynamics. So does that typically happen toward the end of a bear market, in the middle?

Does it signify anything about where the broader market is going? Well, it certainly happens closer to the end than the beginning, but I wouldn't say it's the end, the end. You know, unfortunately, Apple is in tech and tech is in the crosshairs of part of that cyclical trade that, you know, tends to have some of the most volatile downside to it. So I think that's endemic that they're hitting a leadership within a weak group. So that's something to keep in mind. It's when they start taking out utilities, when they start taking out some of the staple names and some of the things that you would expect to be really safe havens in even a bear market,

that you start to really triangulate that towards the ninth inning of the bear. So I don't think that's where we are here, unfortunately. But certainly I think for tech, when they start taking out the leadership in tech, that's a better sign that, unfortunately. But certainly, I think for tech, when they start taking out the leadership in tech, that's a better sign that they're starting to take everything. All right. Well, what about the Nasdaq overall? Let's broaden it out. 30% off the highs right now. It's been another awful week, about 8% lower for the week. And what's

interesting, Jeff, is it's coming as there's buying of bonds with yields lower, which was sort of the opposite dynamic. It just kept getting hit hard by higher yields. So what do the charts show for the Nasdaq? Well, they're still under this liquidation phase. I don't think we're done yet. In our view, we probably have to retrace at least 50 percent of the gains that we saw from the extraordinary liquidity environment that we had post-COVID, both fiscal and monetarily. So I still think that there's downside there on the NASDAQ. What we're seeing today, just as an example, is volatility is working, short interest is working, really sort of a reprieve from what hasn't been working the last couple of weeks,

but certainly looks to be more bouncish than anything else. When you get these big moves, these one-day single stock moves that are so large, call it plus double digits on a percentage basis, that also is very endemic of what you'd expect to see in a bear market. They have these nasty, vicious rebounds that keep the shorts honest, but that's usually the sign that you're in the teeth of it. So I still think we have more to go on the downside, unfortunately. All right. Coming back a little bit today, we're down only two-tenths of a percent. Maybe we'll go flat into the close. Jeff, thank you.

Jeff DeGraff, I just want to bring you some headlines as we continue to monitor Fed speak. It is front and center for the markets right now. Getting some headlines from San Francisco Fed President Mary Daly on the Bloomberg Wire saying, no reason to alter course for 50 basis points at the next two meetings. She still wants to reach a neutral rate of two and a half percent by the end of the year. And Daley also says the debate between 50 basis points and 75 basis points is not a primary consideration. So really reiterating what Chair Powell said, but it is notable in light of what was another hot inflationary print that we got on Wednesday with CPI moving up core and services? So we mentioned the weird moves in the meme stocks earlier.

CNBC Pro actually ran a screen of stocks with the highest short interest, focusing on names with market cap over a billion dollars and included in the S&P 1500. And several of those meme names did show up on the list. Christina Partsenevelos with the details. Maybe those shorts getting covered today, Christina. Maybe that could be the case. And in general, stocks with massive short interest means investors will have to scramble to buy back the borrowed stock. And so top of that list that you mentioned of potential rallies, video gaming company Corsair, 27 percent of its float is shorted at the moment. Stock is pretty flat at $13.98.

Obviously, you've got some memes in the top 10. GameStop has fallen the furthest from its 52-week high, plunging over 70%. And today, some may say, is history repeating itself, with GameStop trading halted multiple times because it surged 20%. You can see the share price up over 10% right now. And then other meme ones, Restoration Hardware, known as RH, Gap, American Eagle, also in the list. Morgan Stanley Research found that all pandemic trading gains by retail investors were wiped out as of Friday, May 6th last week. So maybe don't holler these for too long.

And then I've got two health care names in there, Arcus Biosciences, Verisilcorp. SunPower is another one in there where the 22% of its float is shorted. And if you didn't get all these names, you could head to CNBC Pro for the entire list. And I'll end on this name, one name making moves today, Carvana. Shares of the online used car retailer surged 30% today, and then were also halted several times. Nearly 29% of Carvana shares are available or sold short, according to FactSet. So happy hunting all. And the stock has been obliterated, right, this year? Oh, definitely. Definitely. We've seen that with the earnings.

Yeah. Yeah. Used card prices ground to a halt. Christina, thank you. Christina Partsenevelos. Shares of American Express under pressure today. One of four credit card names getting a downgrade from Wolf Research. Wolf writing, it now sees an 80 percent probability of recession by 2024, which would hit the group. Joining us is the analyst behind the call, Bill Karakachi, consumer finance and mid-cap bank analyst at Wolf Research. And interestingly, Bill, these names have actually held up. Visa and Amex, better than the rest of the market for the year. So I don't think it's such a crazy call to say recession before 2024. But what we've gotten from the companies has been pure strength. That is, I think, a fair characterization to date.

You know, I think when we downgraded the credit card stocks back in March, it was really on the view that credit card issuers with outsized exposure to the low end consumer would face pressure amid rising inflation. And we were still more constructive and positive on American Express and Discover and effectively issuers with greater exposure to prime and super prime credits. And at that time, we were not contemplating a recession. With today's downgrade, we are now contemplating a recession. As you said, we now expect an 80 percent probability of recession. And against that backdrop, it's very difficult for credit card stocks to work. And so we moved everything down one notch. We essentially went to pure perform for American Express, pure perform for Discover, and underperform for Capital One and Synchrony. And as we look ahead,

the Fed has never effectively gone through a rate hiking cycle in an effort to temper inflation and done so successfully with the exception of a few soft landings. In those soft landings, Fed funds was well above CPI. That's not where we are today. And when you layer in the ratio of job openings to unemployed workers at 1.9 and you chart that out and that metric is up and to the right, the Fed, that's not going to cool down on its own. The Fed is going to have to essentially stimulate a recession. That's what they want to do.

Bill, just a quick question. Sorry to cut you off, but we can debate the recession, but doesn't it matter what kind of recession it is when we're talking about the hit to consumer spending for these stocks? For instance, I mean, I don't know, do you look to the financial crisis? It was very different then where there were tons of job losses and the consumer wasn't in that great shape. They were very leveraged going into this. How do you think about exactly what type of hit consumer spending is coming

as it relates to the credit cards? So we model a 15% decline in year over year growth in build business,, percentage point decline. That is relatively mild compared to the 30%, 40-plus percent declines that we saw during the global COVID crisis or during the global financial crisis. So we think we're effectively modeling a relatively mild recession where unemployment goes from, say, 3 half percent to five and a half percent credit card charge off rates go from to roughly 30 percent above 2019 levels so we don't think we're modeling a draconian recession at all and the problem is that in that scenario returns get cut in half so returns get cut to around 12 percent and so returns are coming down and the cost of equity for this group is rising the cost of equity for this group is rising.

The cost of equity hovered around 10 to 12 percent pre-COVID for the group, spiked above 25 percent during COVID, fell to 5 percent. Today, it's been gradually rising. Now it stands at 16 percent. That's not coming down amid rising rates and growing recession risk. And so 16 percent cost of equity, 12 percent returns. These stocks can trade. They're not earning their cost of capital. They can trade the most tangible book value and they's still 25 to 60 percent downside to tangible book. There you go, Bill. Thank you for joining us with the case. Bill Karakachi in the call of the day. Another payments news. Just want to hit shares of a firm. They're surging as the company gets ready to report results. Kate Rooney looking at what investors

should expect. Kate. Hey, Sarah, that's right. A firm getting a little bit of relief ahead of earnings. Wall Street's really watching any details around credit quality and the effects of inflation. Then that Amazon deal that's added to merchant growth and payment volume. But will it boost revenue in the quarter or help the outlook at this point? Then you've got the take rate or that's pretty much the yield that fell last quarter due to lower Peloton volumes, payment volume and merchant growth. Still key metrics for a firm. And then guidance is really the big one. Affirm, again, up ahead of earnings, but not close to erasing those year-to-date gains, still down more than 80 percent this year, one of the worst fintech performers. Back to you. OK, Rooney, Kate, thank you. We'll look for that after the

close. We've got 30 minutes left until the bell. 30 seconds, I should say. S&P continues its comeback. It's now down less than two-tenths of a percent. You've got a number of sectors turning green just in the last few moments. Energy, industrials, communication services, real estate, consumer discretionary, and healthcare all going to go out with actually a gain. ARK Innovation ETF bouncing 4% today. NASDAQ 100 also climbing from the depths of the sell-offs just earlier in the hour. It is only down about two-tenths of 1%. NASDAQ goes positive into the close. Quite a comeback about two tenths of one percent. Now that goes positive into the close. Quite a comeback there in that

final hour of trade. That does it for me on closing bell. See you tomorrow everyone.