Closing Bell - Closing Bell: Stocks fall to start the week, Tasty bargains in tech 9/26/22

Episode Date: September 26, 2022

Stocks were mostly lower in Monday trading following last week’s brutal selloff as investors continue to watch the Fed. Former PIMCO Chief Economist Paul McCulley reacts to new comments from Raphael Bostic of the Atlanta Fed and discusses if the central bank can engineer a soft landing. Currencies were in focus as the British pound fell to record lows, and the dollar index hit its highest level in decades. Ruchir Sharma from Rockefeller explains what those moves mean for global markets. And David Rolfe from Wedgewood Partners identifies some “tasty bargains” in tech, as that sector piles on more losses to a brutal month.

The Dow and the S&P 500 losing some steam after that failed early rally attempt. Though the Nasdaq is making a late-day comeback, the most important hour of trading starts now. Welcome to Closing Bell. I'm Carl Quintanilla in for Sarah Eisen. Here's where things stand in the market today. See the S&P tried to reclaim $3,700. The bull's plans, though, were foiled by some more hawkish Fed speak. As for sectors today, we've got some pronounced weakness in materials and energy and utilities as well. Coming up on today's show, we're going to talk to Rockefeller International Chairman Rushir Sharma about the wild moves we're seeing in currencies and what that means for the emerging markets trade.

And David Rohl from Wedgwood says there are some, quote, tasty bargains in the tech space. He's going to join us with his playbook for volatility. First, though, let's get straight to the market dashboard with our senior markets commentator, Mike Santoli. Interesting day here, Mike. Yeah, Carl, hopscotching around the old closing low in the S&P 500, 36.66. The intraday was 36.36. You have a combination of the overall index, as everybody can see and calculate, as being somewhat oversold on a short-term basis,

but just these radical moves going on in currencies, in yields, not really allowing for a lot of traction, at least not yet. It's getting stretched pretty thin. Here you go. That was the old closing low. It's a little over three months ago. The average stock, I would say the equal weighted S&P, has made a new low below the mid-June lows. You also have some important stocks like Microsoft and Alphabet, as well as overall semis, also at new lows. So it wouldn't be surprising if the overall index had to plumb a little bit lower, if nothing else, before you get the snapback rally that seemingly everybody believes we are due relatively soon. Take a look, though, at a sign of building capital market stress. This is the corporate bond index spread versus Treasuries. Now, this goes back four years. So obviously,

you have the COVID spike in spreads and the complete obliteration of anything risky. Here, though, you see it kind of climbing above those levels. It should be relatively close to where we were earlier in the summer. It's a little bit below, actually, a July high. The problem is treasury yields have continued to march higher. So the absolute yield level, once you put this spread on top of it, is getting to be a little bit tight for some companies. It's 5.65% or so in this particular index investment grade stuff. Obviously, high yield, having it tougher. This year was late 2018, early 2019, just for perspective. And if you take it back to early 2016, there was a wider spread. So it's not as if it's at historic levels, but it shows you, along with what's happening with the dollar and with other currencies, as well as global sovereign yields, that this is sort of tightening the screws a bit.

Yeah, a lot of discussion about corporates today, some mentioning, say, Apple five years, trading near five. I mean, at what point does this start to get a little silly given some corporates' balance sheet strength? Look, it's all about where the treasuries are trading. So if you looked at Apple and you say, well, that's basically a very narrow spread over treasuries, it's not as if people are worried about Apple's ability to pay it back. The issue is you bought those bonds when the yields were under 1%. On paper, you're taking a loss. So in aggregate, there's this tremendous, you know, unrealized loss in bonds that we've taken right here. And it reduces the ability to sort of buy stuff. That's your capacity for taking risk is somewhat dictated by your portfolio values and what you thought was safe. And that's one of the things

I think it's keeping the overall markets on their heels. Mike, stick with us. We want to have a discussion here about the British pound today. A hit earlier on, record lows against the dollar amid this push from London for tax cuts and investment incentives to boost growth. The dollar index trading at its highest level, as you know, since 2002. Rushir Sharma joins us today, chairman of Rockefeller International. Talk about what's happening, at least in the U.K., Rushir. How much of it is concentrated behind what some believe is a policy mistake? And why is it getting extrapolated around the world?

Yeah, Carl, I think that what policymakers around the world haven't fully internalized is that there's been a major regime shift, which is that the policies that they thought that they could get away with five or 10 years ago just don't work anymore. This unorthodox fiscal policy that you can just keep blowing out deficits, deficits don't matter, your level of real interest rates don't matter. That entire era is over. And I think that what is happening in UK is just a manifestation of that, that policymakers are making mistakes. They don't realize that the era that they were used to over

the last few years is over. There's a regime shift. And so therefore, the sterling and the markets by extension around the world are stuck in this doom loop, as I call it. Do you think that's going to stay centered in advanced economies, or do we start worrying about the pigs in emerging markets? No, I mean, as I argue that the fundamentals of many of those economies have improved because those countries went through their crisis. They've been able to clean up their balance sheet. But we are seeing spillover now.

In the last few days, even the markets that were holding up well around the world, such as India, Indonesia, Brazil, are showing some signs of weakness. So this doom loop is definitely extending everywhere, induced by this unusual dollar strength. And it's not as if people have great comfort in the dollar at present. It's just that that TINA factor, which used to be so common in stocks versus bonds,

has moved now to currencies, where people think that apart from the dollar, there's nowhere else to hide. So they're selling currencies quite irrationally around the world. And it's not just sterling, which is on its knees. Of course, that's the most extreme case. But we've seen currency weakness extend everywhere over the last few days. Mike, your thoughts on it? Yeah, I mean, the market clearly is kind of pressing the issue and forcing either policymakers or other markets to adjust to what's going on. And I don't know exactly how it seems like it's a something's got to give type moment.

You can't necessarily have the dollar doing what it's doing and the yields doing what they're doing and have the Fed feel as if it has as much runway as it was suggesting in terms of getting its short-term rates to the target. At the same time, you know, the policies in the U.K., clearly it should create some kind of a rethink in the Bank of England. So I don't know where the absolutely crisis point moment is where it has to break as opposed to just challenge this setup. But that's where we're headed. Rushir, I'm curious. You know, J.P JP Morgan has been relentlessly bullish on equities for a while and even again, they come out today,

the Kwan team, and they say, don't extrapolate the Fed hawkishness into the next six to nine months. The next six to nine months are likely to look much different and at some point, the probability of a dovish tilt increases and then you're going to be trying to play growth names.

Do you think we're, if that, is that even on the horizon for you right now? You know, if you look at the big picture, what we're seeing currently is the classic bear market. It's a roadmap that I'd laid out earlier this year, that the average bear market, you see declines of around 30% or so from peak to trough. So I think that there's been too much of this recency bias that all because markets are down, you know, we keep looking for a bottom. But in the bigger picture, we, you know, that is a big regime shift, which has happened, we have gone from a regime of very accommodative monetary policy to now where Powell is basically telling us that we just got to keep

at it. And I think that to see these prices adjust that way is not such a surprise. So I think that the big picture here is the fact that we are going through so far what is a garden variety bear market. The risk is that we get stuck in a doom loop, which is the fact that I think, as your earlier commentators were pointing out, that all because people want to cut risk, they end up selling and that leads to even more selling. So I think that's the doom loop I'm concerned about. And I have one policy suggestion here, if I can say that, which I think it's time for people, it's time for policymakers around the world to consider a coordinated central bank intervention move to stem the rot in the currency

markets. I think rail rates are too low. They still have to go higher. And that pain just has to be tolerated. But what policymakers around the world need to consider is a coordinated central bank intervention move to stem the rot in the currency markets because that is what can extend this doom loop and cause something to break quite severely. Now, that is not to condone what's happening in UK.

I think that's a policy mistake, period. But generally, when we see price action where currencies around the world are selling off without any fundamental basis and people are just parking their money in dollar cash, I think that's the kind of negative mindset which needs to be broken. Yeah. Well, Bostic did say today that we talk with our international counterparts a lot more than you might expect. We'll see what the coming weeks bring. Rushir, thank you. Great to see you. And our thanks to Mike Santoli as well.

Meantime, The Wall Street Journal is reporting that nearly 90 percent of companies that went public last year are now trading below the IPO price. Coming up next, the top venture capitalists will break down how this uncertain market is impacting the demand for new listings and which names he is focused on in the pipeline. You're watching Closing Bell on CNBC. A whopping 87% of companies that went public last year are trading below the IPO price. That tally according to a new report from the Wall Street Journal saying recently public companies are among the worst performers in this year's market drop. But there are some signs of life in the IPO market. As you know, we're expecting Porsche to begin trading this week and Instacart later this fall, we think. Joining us with more on that, MVP All-Star Fund

General Partner, Rashawn Williams. It's great to see you, Rashawn. Before we get to the individual names, I'd love to, you've got great color on the mindset of founders right now, how they're raising money, mostly in private markets, even if it means a down round, right? Yeah, Carl, look, it makes a lot of sense for founders to really think outside of the public markets right now for a variety of reasons. But let me give you the top three. Number one, the valuations you're going to get in the private market are likely going to be higher than you would get in a public market. And I know companies used to go public after three to four years.

If you think back to the Amazon and the Google and Apple days, three to four years of being private and then doing IPO, now it's 10 to 15 years. And these guys are willing to extend that even more to get the right price. But the second reason is M&A is just a lot more attractive. You saw the recent deals out there. I'd much rather be acquired at my full valuation than to go public into a down valuation. And then last but not least, I know it's a bad word to say this publicly now, but even the SPAC option makes more sense in some cases than actually going public at this particular time. And the reason, you get a certainty of close. Most IPOs

won't even price in this environment that want to price. You get a favorable valuation with the SPACs and you're betting that the multiples expand by the time the transaction closes and the lockup period expires. For those three reasons, it actually makes more sense. And we're hearing a lot of private company founders talk about that in their board meetings and as they plan their next 12 to 18 months. Yeah. Yeah. It seems like there is respect for the tool as a tool, just as long as the projections are reasonable and responsible. Talk to me about Instacart. It sounds like you really think there's the possibility for some value there, depending on how it comes in. Yeah, this is one of my favorite names. We're investors in

Instacart. It's just a name that I've been talking about for the last two years. And it's just not enough good things I can say about them. But let me give you a couple. This is a name every public investor deserves to own. And the reason that I believe that is, number one, if this IPO comes anywhere below $20 billion, it will be the steal of the year. And you can look at the down round and where people are marking it, but a 50% discount to where the smartest investors in the world just valued this company a few months ago, that's the steal of the year, in my opinion. But let's take a step back from just the actual valuation. From a total addressable market standpoint, to get a piece of real estate in an industry where software hasn't completely eaten up the entire industry yet, the grocery

industry, right? 90% of all groceries are still bought in person. That's like buying Spotify, Airbnb, or DocuSign like at the IPO. So I think this is some of the best real estate in the private markets and in the tech market. And I think this is a name that public investors deserve to own. As for Porsche, it sounds like you think Volkswagen is being clever in doing this IPO, but is it going to have the same trajectory as, say, a Ferrari, a race? Well, it's funny because I'm sure the bankers have been pitching to Volkswagen for years that you need to spin off, you know, Porsche for a while.

Look at Ferrari is trading, right? In my view, Porsche is no Ferrari, right? It's a completely different market, and I know it's the luxury part of the market. But if you look at how many Cayennes are riding around in suburbia right now, it's just not Ferrari, in my opinion. But they're trying to arbitrage the market right now because they see where Ford and GM is trading on one hand, and then they see where Ferrari is trading. So to spin it off, and hopefully it trades at these really high multiples, investors won't recognize the difference. I'm personally not buying it. But the reason they're

doing it is actually as interesting as the arbitrage they're trying to take advantage of. Everyone can see from all of the headlines relating to them how it's been very well publicized about all of the scandals they've been involved with and their push to e-vehicles. So they want to do it now and give up their golden goose to take advantage of that multiple arbitrage and also to shore up some cash on the balance sheet. Yeah. Hey, at least we've got a couple names to talk about after what was a pretty arid period, Rashawn. Great to see you. Thanks for the help today. We'll talk soon, Rashawn Williams. We do have a news alert on BP. For that, we're going to turn to Pippa Stevens. Hi, Pippa.

Hey, Carl. Well, we're getting reports that BP is halting production and evacuating staff at two offshore oil platforms in the U.S. Gulf of Mexico as Hurricane Ian barrels down. We're watching the situation closely and we'll continue to keep you updated as we learn more. Pippa, thank you for that. We are watching that development very closely. As for the markets, Dow down 288 or so, S&P down about 30. Atlanta Fed President Bostic on the tape today with this message for investors. We'll tell you what it is and we'll discuss if the Fed can engineer a soft landing when we're joined by former PIMCO Chief Economist Paul McCulley. As we go to break, check out some of today's top search tickers on CNBC.com. Mostly macro today.

Ten-year yields on top, followed by the two, the S&P, the Dow, and the pound. Be right back. Take a look at today's stealth mover. It's Leslie's making a big splash. Investors diving into this stock after it was announced the swimming pool supplies retailer will join the S&P 600 this week. Leslie's will replace GCP Applied Technologies, which is being acquired in a deal. The stock had been sinking before today's jump, and it's still down around 40% on the year. Coming up, the NASDAQ 100 is now down more than 30% on the year.

But our next guest says the bear market has created some great deals. We'll get to the tech volatility playbook after this short break. More weakness in the tech sector today, although the Nasdaq is flirting with positive territory, still off nearly 8 percent in September alone, the worst of the major averages. Our next guest says the bear market has already begun to serve up some tasty bargains. Joining us today, David Rolfe is Wedgwood Partners CIO. David, great to have you back. You know, you've got, I mean, you come right out and say it, that the Fed share has at least already broken the stock market, in your view. Yeah, I think they've broken the stock market.

I think they've broken the bond market. Look what's going on in currency markets. You know, Jim Grant has a great line, and I've used it in a couple of client letters. I mean, the Fed, in the past couple of monetary cycles, particularly this last one, as he says, the Fed has been both the arsonist and the fireman. And we're seeing the ramifications right now. Hopefully they don't break the economy and they don't break corporate earnings growth. But that's yet to be seen. But they've done enough damage in the

stock market right now, that's for sure. It doesn't sound like you have a lot of faith that they won't push us into an earnings recession. Yeah, I think that's the next shoe to drop. The numbers aren't that bad right now. You look at global PMIs from where they were just a quarter ago, and about half of are and other leading indicators are pointing to some some uh some trouble ahead it's always interesting when we uh when school's over with and we get back into the markets uh after september uh this next earnings historically the third quarter earnings reports are our first look at the new year as as well as an opportunity for corporate America to kitchen sink the rest of the year. If the weight of the evidence is a little bit more negative than what folks assume today,

I think that the next round is going to be earnings cuts and another leg down in the stock market. Right. So with that in mind, why are you adding to names like meta like paypal you're obviously still very much a fan of fang and uh and you say if you got good ideas you should overweight them yeah i mean that that's our playbook that we've been doing now for over for over 30 years and we only own 20 stocks and our top 10 car, typically represent about 60%, 65% of our portfolio. I mean, it's very focused. In past bear market, when the bottom would ultimately put in, typically our top 10 names would represent 70%, maybe 75% of our portfolio. At bear market bottoms, diversification has already failed.

Everything's cheap. That's where you really have to swing a fat bet. And when you look at the returns of PayPal, Meta, the others that we like in the tech sector, we've been adding to Taiwan Semi. I mean, PayPal's down 69% over the past 12 months. Meta's down 59%. TSM's down 35%. Even Alphabet is down 30. But in the context of where we're at just right now, Carl, in our 20 stock portfolio, we've built a portfolio

where our forward PE is the same as the S&P 500. However, we're getting about 50 percent more profitability in terms of return on equity and almost 60% more earnings growth versus the S&P 500. So when this thing turns, you know, we hopefully have some some sprinters as well as some marathoners in the portfolio. And that's been and that's been our long history. I mean, we have to grin and bear it right now, no pun intended, but we're braced for more downside. Right. Do you think that return to a growth mentality, are you going to be getting people joining your club in 23? Or are you patient enough to wait even beyond next year? I hope it's 23. And the growth trade has been pretty darn crowded. It's thinned out a lot.

I was looking at some market stats. In the last two weeks, almost every in the past 10 trading days, we kept on seeing more and more new lows. Then over the NASDAQ as well as the New York Stock Exchange. Friday alone, on those two combined areas, 2,300 new lows. That tells me that the selling isn't drying up. And I think this fear factor is really becoming in the forefront of everybody's minds. In terms of that growth idea, if the Fed breaks the economy, if the Fed breaks corporate earnings growth for those companies that can grow in that environment, they're probably going to maintain their multiple. And I think a lot of them where the multiple is

now, they're actually discounting a really bad 2023. So that's the way we're leaning. And we'll see how it plays out. Finally, you say you were busier earlier this year adding to bloodied names. You say we'll bide our time and let the market give us offers we can't refuse. Of the tickers we just mentioned, is there one that is really an offer you can't refuse right now? Yeah, we added quite a bit to PayPal, and we've been slowly adding to Meta. And we did that through the June low, and then we've been slowly adding to meta. And we did that through the June low. And then we've been pretty quiet since then. But when I look at some of the damage in our portfolio, more and more names are popping up.

I think the one that has really become attractive right in here is, and it's one of our larger holdings, so we may not be able to do too much with it is Alphabet. And another one that we think is just an extraordinary company, one that a lot of growth managers don't own, it's in hardly any of the indices or none to speak of, is Taiwan Semi. And the chip world doesn't exist without Taiwan Semi. And again, over the past year, that's down 35%. I'd like to see that at a much higher weighting in our portfolio. And I think the market will give us that opportunity. David, great to see you, as always. A lot to think about.

Appreciate it. We'll see you soon. Bye-bye. Let's take a look at where we stand on the markets on this Monday afternoon. Dow, pretty tight range, at least the last hour or so, down 285. S&P down about 28. The Fed chair, as you know, warning last week that getting inflation under control will not be painless. But just how much pain is the bank willing to tolerate?

We're going to talk about that next with former PIMCO chief economist Paul McCulley. And don't miss your chance to be in the room with some of the biggest names on Wall Street during our delivering alpha, which returns in person on Wednesday. Scan the QR code on the screen right now to register. We're back in a moment. Investors still digesting the Fed's latest rate hike, and we're getting some fresh commentary on the tape today. This is Atlanta Fed President Rafael Bostic reiterating the Fed's focus on battling inflation. But now we're in a place where we know inflation has gone up rapidly and it has been enduring. And we've got to take that on board. And I think what you've seen is us doing just that. And I think there's still some more work to do on that front.

But no one should doubt our resolve to get inflation under control. Joining us this afternoon, former PIMCO chief economist Paul McCauley. Paul, great to see you. Thanks for the time today. I love your line about the Fed chair, at least, coming out of Jackson Hole, and that it really was rebuking the market for what you call the summer romance with the pivot idea. Yeah, I think when we look at what's been going on in the market last month, we can literally date it back to a month ago today, the 26th of August, when essentially Chair Powell said, you guys got too quick to the dance floor for the soft landing, the pivot, and time to get back into

the risk pool. And essentially ever since, the marketplace has been repenting and taking down valuations on the equity side, taking up the terminal rate for the policy rate, keeping it there longer, dollar current. Everything that's been going on for the last month was triggered by essentially the whole notion that Chair Powell put into the arena a month ago today, which was higher for longer and that we will pivot in the fullness of time. But it ain't anywhere close to being full yet. And we want to hear the economy cry uncle, particularly the job market. And I think the markets have been rational for the last month. We got a telegram from the Fed chair and we read it. Right. Well, speaking of crying

uncle, I'm sure you've heard about some of the people, especially on our air, who are now chastising the Fed for doing damage to stocks, doing damage to housing, doing damage to commodities. Does the Fed, does that faze them at all? Or is this a classic hiking cycle, what we're in right now, that kind of rhetoric? I suddenly referred to Jeremy's comments on Friday, which were, you know, fist on table. You know, God bless Jeremy. We've all known him for a very long period of time. And I think his vitriol may have been a little bit over the top. But the fundamental analysis that he was making was not wrong. The Fed started this year way behind the curve, if you will, that mythical curve. It caught it this summer. And we as a market said, that's great. You've caught the curve. Now we're going

to move into a period of major tightening that's really data dependent. And since this summer, that's not been the case. And a lot of leading indicators, and Jeremy listed them, are signaling that by our traditional models, the Fed would say we need to slow this thing down. We need to moderate our hawkishness. And the Fed hasn't done that. And I think, you know, there are a number of reasons. And probably first and foremost is to demonstrate their resolve. I think it's a little bit intense, but I respect Mr. Powell for saying we're going to do it. It has a Volcker-esque type of quality to it, the rhetoric and so forth.

So I think that's the dominant thing they've been doing is to burnish their credibility. But there can be too much of a good thing. And I think we're getting close to that. That's interesting. Do you think the quality of their of the metrics on which they rely, and that could be job openings for unemployed maybe it's core cpi three month annualized or whatever are those valid tools or do you think they're in a sense reading without instruments in a way no i i think they're valid tools the fed's always got to have a combination of our traditional economic data and then forward-looking market data.

So that's probably where I would disagree with Jeremy most, is he was saying, you know, market data, market data, market data. And I think the Fed needs to do that, but they need to have their traditional metrics as well, because they're operating not just for Wall Street but for Main Street. And essentially, Mr. Powell wants a softening in the labor market. That's really what he's looking for, to essentially signal that it will be time for a pivot. And our most recent job report was described by most of us in the arena as very close to Goldilocks. So I think where the pain needs to happen to get the Fed to

say enough is enough is in the job market. And it is lagging a bit, but not nearly as much as the inflation data. And I think one of the clear things that's going to happen in the future is that Sheriff Powell will let the market know that the job data is going to be the bell ringer for the pivot, not the inflation data, because the market-based inflation data has already cried uncle. It's just a matter of the lagging data, particularly the core CPI, as Jeremy quite correctly was pointing out, is staggered twice on the lag front. That's going to be an interesting period where CPI clearly is on the backside of that hill, but we're waiting for Jobs Fridays to ratify it.

Paul, as always, our thanks. Good to see you. Thank you. My pleasure. Paul McCauley. Don't miss a CNBC special report, The Fed Factor, hosted by Brian Sullivan. That's coming up tonight. Speaking of all of this at 6 p.m. Eastern time. After the break, we're going to talk about how the ultra strong dollar is

impacting big tech companies and what that might mean for earnings season. That story, plus why casino stocks are jumping and Micron is falling when we take you inside the market zone. We are now in the closing bell market zone. Lindsey Bell from Ally Invest is here to break down these crucial moments of the trading day. Plus, Steve Kovac on big tech and the strong dollar. And Contessa Brewer talking some casinos today. Pretty interesting session. S&P 500 lower but off the worst levels of the day. Still on track for a fifth session in the red and this five day route taking about six percent off the benchmark index.

Lindsay, I know you don't think this year has been easy, but it doesn't sound like you're necessarily worried, given the defensive positioning, strong consumer, good job market, pretty good corporate balance sheet action. Yeah, no, you gave a great summary there. I think, you know, it doesn't mean that we're out of the woods yet. Obviously, there's a lot of uncertainties on the table right now, and especially after last week hearing from the Fed. The Fed remains in the driver's seat. And because of that, the market's going to continue to be very reactionary

to any data point that's going to impact the direction that they might move in. So anything around jobs, inflation, we're going to get PCE later this week. Those are all going to be really important data points for market participants to watch because the market's going to move quickly on that. I think the action that we saw on Friday and the action that we're seeing today really shows that investors in the market in general are struggling to find their footing here. They have mixed signals, some good, some bad. So it's yet to be determined, but I'm looking forward to the end of the fourth quarter. Once we get past midterm elections, seasonally, it's typically a strong period of year. And I think we're going to have more certainty at that point in time about direction.

Yeah, certainly moving out of the back half of September, where seasonality is perilous, that might help some attitudes. We'll find out more later. The dollar index marching higher once again today, hitting levels not seen in two decades. And that strength could present a big headwind for big tech. Steve Kovac has been following that today. Steve? Yeah, Carl. So these big tech companies, they have so much revenue exposure throughout the world, and we've already seen them starting earlier this year to react to these foreign exchange headwinds, and it's only getting worse. So let's talk about what these companies are doing on the Apple front. They've been raising prices. The iPhone 14 is 100 euro more expensive than the iPhone 13 was in those countries, although it wasn't raised here. And apps, the App Store is getting a price increase across the EU, UK, and some Asian countries,

raising prices there as much as 20% for the base-level app price. Then over on Meta, also raising prices. They raised about $100 on the VR headsets, the Oculus VR headsets. And the CFO warning last earnings that they could see 6% revenue hit to the Reality Labs division. That's where all the metaverse stuff is. Due to foreign exchange, that could take a 6% hit in revenue this quarter. Microsoft, same thing here. Strong dollars shaved 6 cents off of EPS during that last earnings report. And CFO Amy Hood warning, look, more pain ahead throughout the rest of this

calendar year, but it should ease off a little bit once we get into the first half of 2023. And we're going to really listen to those earnings coming up in a couple of weeks to see if Microsoft can hold on to its pricing power as it faces those headwinds. Meanwhile, Amazon and Alphabet, a little less dire sounding over the last couple of months, especially during earnings and not giving as many specifics. But Amazon did say during last earnings that operating income is protected while revenue is expected to take a hit. And look, Carl, we're just weeks away from all these mega cap tech companies reporting their earnings. And we're going to get a lot more color and commentary from those execs about how they're dealing with these FX headwinds. Yeah, it's a great estimation of some of the things they're doing in response. Lindsay,

you know, there's this feeling on the street that, oh, you know, the market is interested in FX neutral metrics. It's treated as a one-off, kind of looks past currency effects. But if that were the case, why are these companies obviously trying to work on pricing to fight the headwind? Yeah, I mean, there's definitely an impact that the dollar can have on margins. And as you know, the tech sector has one of the highest margins in the whole S&P 500 industry or index. And so that's around 30 percent. So they certainly have room to handle a little bit of more pressure from from a currency headwind here but I will also say the tech as I look at the third quarter and out for the for the rest

of the year is expected to still have double digit revenue growth largely due to some of those pricing actions that were just outlined there so you know companies love to point out FX when it's hurting them as an excuse they don't talk about it too much when it's hurting them as an excuse. They don't talk about it too much when it's benefiting them. But this is a period of time where I think we're going to hear a lot more about it. I don't know that it's necessarily going to impact the stocks because they've been beaten down quite a bit because of higher interest rates, the Fed's actions, and also the dollar. It's not a new phenomenon that it's rising. It's hitting new records and things like that versus other currencies. But companies have been dealing with this for more than a year now, the rising dollar.

Yeah, certainly treasurers are used to that. Steve, appreciate that very much. Great idea. And we'll see how it affects the coming quarter narrative. Meantime, we mentioned casino stocks, and they are on a roll today. A rare bright spot for the S&P is China looks ready now to ease some of these travel restrictions and gambling destination Macau. Contessa Brewer has been watching that. And Contessa, we wonder if this is the beginning of a new rebound for Vegas. Well, you know that the casinos are hoping so, but it remains to be seen whether these restrictions keep easing down to allow, say, international visitors. And but for now, they're enjoying the lift.

MGM up just fractionally. That's because it gets less of its revenue as a percentage than the other competitors there in Macau. But look at Las Vegas Sands, up almost 12 percent. Wynn Resorts up 12 percent. Melco, this is based in Hong Kong, up 26 percent. The lift sparked by the news the Macau government will resume issuing visas electronically for individuals from four provinces and from Shanghai. But it makes it easier for those neighboring visitors to travel to Macau.

And the government is clearing the way for the gradual resumption of group tours. That's a critical component of business in Macau, 25 percent pre-pandemic. The top government tourism official predicts as many as 40,000 daily visitors next month, still well off pre-pandemic levels of 113,000 visitors per day, according to official tallies. But this is a real improvement on tourism this year, which has been down 86 percent from 2019. Jefferies has just upgraded Wynn and Las Vegas Sands to a buy and increased the price target. But, Carl, of course, there's still a lot of headwinds here. Concessions due for renewal and they have a

surprise competitor. And then you have also these questions about whether COVID restrictions will still follow that zero infection policy. Contests appreciate that. Lindsay, I wonder what you make of this theme. I mean, thematically, it makes a lot of sense. But trying to read China industrial policy or certainly health policy has been confounding this year. Yeah, but you know what? This is a positive news story for these companies, especially like a win in a Las Vegas Sands. It gives some clarity to what is a very complex story. The news does benefit these companies. And I do think what investors need to think about is that this is a longer-term trajectory. Sure, it'll be EBITDA positive,

free cash flow positive for these companies, a win in Las Vegas Sands with over 70% of their revenue coming from the region. So I think it's a positive story, but I don't think we're going to get to pre-pandemic levels before 2024. So I think it's still a long road ahead, to your point. Contestant, appreciate that. It was obviously a big story in action today. Chip stocks are falling again today, down for a fifth session

in a row. One notable underperformer has been Micron, which has been cut in half since hitting a record back in January. Micron is set to report earnings on Thursday. Our next guest is still betting on a rebound, but growing a bit more cautious in terms of how big a comeback it could be. Matt Bryson from Wedbush just cut his target on the stock to 65 from 85. Matt, it's great to see you. There had been some discussion last week as well about what's happened with DRAM pricing and how much they may actually cut in their spending is that sort of behind your thesis as well yeah so certainly both the uranium and that pricing have come down considerably uh throughout the quarter but particularly in the september time frame um that certainly is what caused me to lower my estimates um when you're looking forward why why is this the bottom

uh typically we tend to see bottoms for micron when it gets close to book value. Also, when we start to see the memory companies cutting their capex, so cutting their future production, so we see supply and demand start to match again. And that's what we're starting to see right now. How do you explain to viewers the timeline of when some of these channels may begin to clear out? Yeah, it's hard until you start to see it. So some of the dynamics, like lower pricing, causing systems vendors to increase content, so putting 8 gigs of DRAM in a phone instead of six

gigs of DRAM. Those shifts, they tend to happen with new models. And so you'll see it early next year or middle of next year. They tend to catch people by surprise. There's a shift going on from DDR4 to DDR5. DDR5, you simply get less bits per wafer. So that takes some capacity offline. But it's not always easy to tell exactly how these dynamics play out. And then the other piece is when pricing goes down, it makes less and less sense for Micron's customers to take more inventory. So when times are bad, it's even worse for the memory companies because their customers are lowering inventory levels because you can always buy a chip cheaper a month, two months, three months out. So when pricing does start to bottom, you see that reverse, and that always seems to catch everyone by surprise. And so that's something I'm looking for is when pricing starts to bottom.

The memory makers tend to get a little bit of benefit because customers start to normalize inventories. Right. Meanwhile, as we snake our way through some of these cycles, are there huge swings in share happening between players? There aren't huge swings, but there are swings. So Micron historically was always viewed as having the worst or among the worst technology. That's really changed over the last few years. So arguably, Micron has the lowest cost of DRAM production right now. They're doing a good job in transitioning to DDR5.

They've put out a great NAND bit. That's another place where historically they've struggled. They may not have the cheapest bit, but if they don't, they're very close. So Micron today is not where it was five years ago, 10 years ago, when it was ostensibly the worst place competitor in the field. Now it's, if anything, it's a leader technologically. So that's one of the reasons that I still like it here. Lindsay, great insight from Matt here. I wonder how you generally are thinking about semis right here in this space? Yeah, I think when you think about semis, the sentiment is significantly dour right now, right?

And everyone knows the worries. It's consumer demand, whether it's for smartphones or PCs, other electronics. It's pricing, like we just talked about here. And it's the inventory issue. And so it's hard for anybody to find positive glimmers of light, I guess, at this point in time. And the concern really is that the slowdown is going to expand into other sectors like auto or industrial. And so people are having a hard time nibbling, even at these very low levels. The SMH, for example, the VanEck semiconductor ETF hit a 52-week low. It's down 38 on Friday. It's down 38% on a year-to-date basis. So these are

very beaten up stocks. But but the question is, is where do we go from here? What does the future look like? When do inventories start clearing? When does pricing get better? And like your guest just said, I think it's all going to really come to fruition when we see it in the numbers. Unfortunately, it's hard to predict ahead of time. Yeah, it's a confusing space. On the one hand, you hear about weak demand in PCs and yet continued shortages in cars. It's hard to predict ahead of time. Yeah, it's a confusing space. On the one hand, you hear about weak demand in PCs and yet continued shortages in cars. It's a difficult, I don't know how you do it, Matt. Good to see you.

Thanks so much. Appreciate it very much. Thanks for having me. Lindsay, a couple minutes left in the trading session. Just your thoughts about how we're rebounding this week or not in light of the last four losses last week. Yeah, I mean, it's only Monday, so we have a handful of days to go through, and we have some key data points,

like I mentioned earlier, to look forward to. I think the market really is looking for direction on what the Fed is going to do. We've seen the stock market react very sharply. We've seen the bond market react very sharply. I think, though, at the end of the day while these are really very very serious risks when it comes to inflation interest rates even geopolitical risks I think at the end of the day the the consumer is still on solid footing corporations

also have very very solid balance sheets going into earnings season here and we do have seasonality that could work out in our favor and that could align very well with a reduction in inflation into the end of the year. So I don't think the story is over yet. I think we're going to see a lot of mixed data coming out over the weeks ahead. And I think earnings season, as much as I'd love to hang my hat on it as something that could save the day, I think that's going to be ignored until we get the macro picture figured out. Yeah, we're going to definitely ignored until we get the macro picture figured out. Yeah, we're going to definitely be working on thematics for Q3 earnings. But to your point about consumer strength relative to the rest of the economy, it's no surprise that consumer discretionary is pretty much going to be our only sector that's green on the close. And a lot of the

names that we mentioned a moment ago, aside from casinos, are names like Costco and Amazon and Walmart. So we're going to watch to see to what degree the consumer can continue to prop up what is otherwise weakness in the broad economy. Lindsay, thank you. Appreciate it very much. As we do see the Dow closing down about a percent, down 326. Don't forget, we're keeping an eye on Hurricane Ian and the ancillary effects on the energy complex.