Closing Bell - Closing Bell: Stocks higher for a second straight week, Tilray’s CEO on pot stocks popping, and Frontier Airlines’ CEO on record travel demand. 3/25/22

Episode Date: March 25, 2022

The S&P 500 closing higher for a second straight week even as treasury yields continue to climb. RBC Capital Markets Head of Global Commodity Strategy Helima Croft on how the attack on a Saudi Aramco facility is impacting oil prices. Tilray Brands CEO Irwin Simon on whether pot stocks will continue to rally as Congress considers a new bill to legalize marijuana. And Frontier Airlines CEO Barry Biffle explains why he’s never seen domestic demand this strong and whether he is considering fare hikes because of higher jet fuel prices.

The Dow is higher, NASDAQ down, and the S&P 500 pacing for its second winning week in a row. The most important hour of trading starts now. Happy Friday and welcome to Closing Bell. I'm Sarah Eisen. Here's where we stand right now in the market. The Dow higher by about 100 points. High of the day was about 234. Lost a little momentum as we continue to see Treasury yield spike. The 10-year going past 250. It's come off of those highs right now. S&P up a third of 1%. The underperforming sectors right now, information technology and consumer discretionary,

though those are big wins on the week. Energy is at the top of the market today. The Nasdaq underperforms, still a big winner, up almost 2% for the week. It's down about a quarter of a percent now. And Russell also up a tenth. It's the only one of the big four that's actually lower on the week. Here are my top takeaways on some big stories today. Another setback for the frozen IPO market. A big drop for another recent IPO. Shares of The Honest Company plunging on a weak quarter and bigger loss. And it's not just Honest. A basket of newly public companies down more than 25% so far this year.

Doesn't inspire confidence for other private companies waiting in the wings to go public. And it's happening in the private market, too. Instacart just cut its own valuation by 40 percent in a new fundraising round to $24 billion. Surprising with all the hype around pandemic grocery online delivery. Sure, it cites the market turbulence, but it also perhaps highlights how difficult the online grocery business is to do profitably. Normal grocery is notoriously low margin. Delivering temperature-controlled foods in a timely manner or the last mile adds significant cost. It only works by charging delivery fees, which consumers hate. Nobody, Walmart, Amazon, Kroger, has proven that online groceries are a profitable business.

And mixed signals from the bond market. Which curve do we look at and what does it tell us? Well, Fed economists prefer the three-month to 10-year curve, which is steepening. That's a good growth sign. Gives them a green light to raise interest rates. But the market's been watching the two-year, 10-year curve, which is nearing an inversion, which is a classic recession signal. So what to make of it?

Well, three-month yields reflect the Fed's main interest rate. Two-year yields reflect where that's going. They're all important. Watch them all. It's not a perfect science, but when we do see these unusual inversions across the curve, the odds of a recession do go up, according to History. Let's get to our top story. The United States and Europe striking a deal to supply Europe with more natural gas as Europe seeks to end its reliance on Russian energy. NatGas trading higher following the announcement of the deal. Oil also moving up today. Joining us now, Halima Kroff from RBC Capital Markets and Ian Bremmer, president of the Eurasia Group.

It's good to have both of you here. Halima, what are the market implications of this deal between the U.S. and Europe? I think it's important in terms of making a dent on trying to reduce Europe's dependence on Russian gas. It's 15 BCM. We still have a ways to go, though, if we're really going to cut Europe's dependence by two-thirds. The question is, where are the additional supplies going to come from? It looks like we're probably going to be rerouting additional supplies that might be going into Asia, into Europe. But already we have about 60 to 70 percent of U.S. LNG currently going into Europe.

So the question is, where are the additional volumes going to come from? The other question, Ian, is geopolitically how it changes the equation for Europe. As Halima said, it's still going to take a long time to wean Europe off of Russian gas. It is. And I mean, obviously, one of the great and tragic ironies of this war is the fact that the Europeans right now are funding it. And they'd like to get away from that as quickly as humanly possible. By the way, there's still real possibilities that the existing gas and oil gets severed, irrespective of the fact that the Europeans really need it, both because the Russians might decide to take those steps themselves and also at major cost, but also because if the Russians decided they were going to, for example, use chemical weapons, something that the Americans are increasingly and realistically concerned about, I can't see the Europeans maintaining their

energy consumption from Russia in that circumstance, irrespective of the cost it would have on their economies. Is that already in the price, Lima? The sanctions and an embargo from Europe on Russian oil? I could not agree more with Ian. I mean, if we had a chemical weapons attack, I mean, they've put a lot of pressure on Germany to basically say, we are going to seriously restrict Russian imports. It also could mean that the U.S. Congress passes secondary sanctions on energy exports. I think the big question, though, for the market is, I'm not sure they're actually pricing in that type of scenario yet.

I think they're basically saying Russian flows are being affected because of self-sanctioning by companies, but we don't have the major embargoes by countries that take significant quantities of Russian crude. So if we got secondary sanctions, that would be material in terms of how much additional oil would come off the market. It's sort of confusing, Ian, to figure out the picture right now, because we know that there are still buyers of Russian crude, right? India, China, how much evidence do we have of that? And how does it sort of reshape the world order around energy? Well, it absolutely reshapes the world order, because the point is that you can even imagine in a negotiated settlement and the Russians were to pull all of their troops out, and we're very, very far from that, you're still going to have a permanent decoupling of Europe from Russia

over the medium term. I mean, when you consider Putin to be a war criminal as not just the American president, but many global leaders from NATO presently believe, you're going to do everything you can to cut your economic ties. And the fact that that can't be done immediately doesn't mean it won't be done over two, three years' time. What that means for the future of Europe, as you just asked, it's the end of the peace dividend. It's vastly more money being spent on defense, much more focus on national security. And it's an ongoing level of confrontation, direct confrontation between NATO and Russia. Whether or not there's a frozen conflict in ukraine that confrontation with permanent uh nato bases and deployments in the baltic states for example with finland and

sweden wanting to join nato where the russians said there'd be military consequences for that with the germans spending two percent of gdp plus on defense and all of these countries sending massive amounts of weapons to the Ukrainians to defend themselves while Ukraine has a government that is as opposed to Russia as could humanly be and sitting right there on their border. And really quickly, Halima, while we have you, we have to, of course, ask about Saudi Arabia. I know you were just there and you talked to sources there all day long. Reports of another fire, missile strike on an Aramco facility. What do we know? And how big of a threat is this to production now?

I mean, we've seen a stepped-up series of Houthi attacks with missiles, drones on Aramco facilities, particularly in the south of the country. And officials are deeply concerned about the fact that in these Iranian nuclear negotiations, we're not seemingly pressing Iran on their support for these proxy groups. And the Saudis are essentially saying, you keep asking us for more oil, and yet our oil output is at risk because of these ongoing attacks. So, United States, you need to do more to help us secure our facilities. LYNN HIRSCHFELD ROBERTSON, CNN CORRESPONDENT, CNN CORRESPONDENT, CNN CORRESPONDENT, CNN CORRESPONDENT, Halima Croft, Ian Bremmer, it's good to have both of you here with me today. Thank you.

Coming up, pot stocks have been on fire just over the past two sessions on some new developments in Washington around possible legalization. We'll discuss the possible outcomes with Tilray CEO Erwin Simon next. You're watching Closing Bell on CNBC. Losing some of the gains, down to about 30 points. Pot stocks are soaring again today. Till rates up 17 percent, 50 percent since Monday after reports of the House voting on a marijuana legalization bill sometime next week. But some are throwing cold water on the rally. An analyst, for instance, at BTIG, warning that he expects the legislation to pass the House, but, quote, we view it primarily as a messaging bill as it has no viable path to passage through the Senate. Joining us now, Erwin Simon, chairman and CEO of Tilray.

Erwin, good to have you here. Clearly, there's a lot of excitement and a lot of shorts being squeezed in your stock right now. But that is a question. Why would this time be different? We have seen this before. The House has gone after it and there's no real path to getting passed in the Senate. Do you think this is going to be different? So good afternoon, Sarah, and good to be here. Listen, I think the interesting thing is over the last day or so, over a billion shares have traded between all the

cannabis stocks out there. The sentiment is, you know, investors want this to legalize. And I think the big thing is, is if you step back for a second, whether it's the Moore Act, the Safe Bank Act or full legalization, you know, lawmakers got to get the message. This is what constituents want. This is what consumers want and why it's good for the economy, why it's good out there. You know, the Canadian market, which is now legalized for three years, it's contributed over $18 billion of taxes, over 150,000 jobs, $6 billion in infrastructure. So with that, consumers, constituents want that. Lawmakers got to listen to their constituents. And I think whether one of these act passes,

that's what's important. And I think it says, these act passes, that's what's important. And I think it says, Congress, Senate, you got to get your act together here. Well, you mentioned the SAFE Act. Some people say that that's maybe more likely, this idea that banks will be allowed to do business with you and other marijuana companies, which is currently not legal. How far does that go, do you think, to opening things up? I think that gets passed. And think that you know gets passed and i i think hopefully that gets passed and then what it does it brings in institutional shareholders allows interstate commerce among banks and allows us you know to start trading among all the

different states in regards to you know the more act decriminalization and i think a big thing here is the whole social justice part of this listen the best thing sarah would be you know full legalization here that would be the best thing if you come back and look at it 91 percent of consumers want medical cannabis to be legal you know 62 percent want it you know from a standpoint of adult use so it's something everybody wants and if you come back and look at the size of the business out there, by 2030 expects to be a hundred billion dollar business. If it didn't legalize, it would be half that. So I'm not sure why. And with all the regulation in

place, why this shouldn't happen. It's basically being held up by, you know, Congress being held up by Senate. Are you lobbying? Do you have any friends in the Senate? Who should we be watching? Well, I think everybody is lobbying. Everybody's out there trying to get their messaging across here. And I think it's important. But I think the thing is, is this here, there's real good reasons why this should pass. There's real good reasons from an economic.

There's real good reasons from a social standpoint. there's real good reasons just for different states. And if you come back and look what cannabis legalization has done for California, what it's done for Colorado, what it's done to create jobs, and that's what's important here. And again, don't step back for a second. I think the whole social justice part of this and come back in the education part of this is so important. And listen, there is a big medical opportunity here from a research development here in regards to opioids and cannibals, the cannibals out there. So there are just so many aspects of this that's good to get some bills passed here. We've heard we've heard the case and you've made the case many times. I just wonder, you know, there's still a lot of skepticism.

We don't want it to end up in the hands of our kids and our teenagers, and we need to do this right, and we need to have research and data. So, you know, you've heard that. There's nothing new there. My question, Erwin, actually relates to the stocks. And I know you can't talk about the fundamentals because you're in a quiet period, but, you know, up until this week, when we started to see some consolidation and some movement in Congress, the stocks have been performing very poorly along the lines of SPACs and high growth, unprofitable tech companies. Why do you think the sentiment has gotten so bad?

What do you think investors are missing? Because I think investors step back for a second and say the unknown out there. Investors don't like unknown. At least, you know, with a bill in place or bill potentially in place, there is, you know, light at the end of the tunnel. But, you know, from a Tilray standpoint, listen, the Canadian market has gone through its challenges with COVID and the market being closed. And I think that's going to change quite a bit. But, you know, Tilray's in a good position here. You know, we've diversified into spirits and beer. We've diversified, got a good sized business here in Europe. We're number one in Canada. So the opportunities in Canada.

So I think, you know, investors here have not been high on these stocks, literally, because not knowing what's going to happen here and if there ever is going to be legalization. And listen, I've been on your show and I thought legalization was around the corner and I was wrong. So hopefully something gets passed next week. But there is lots of work to do to get it through the Senate and to get the president, you know, ultimately to sign it. But there is so many good reasons here that make sense why this should why this should pass. Well, we'll see what happens next week. We'll keep in touch. Erwin Simon, thank you for taking the time. Thank you so much, Sarah. Thank you. Telray soaring today up 20% or so. After the break, Apple has also had a pretty good week,

up more than 6% since Monday's open. Mike Santoli will look at how Wall Street may be changing the way it values the tech giant in today's dashboard. Dow remains positive, but has lost a little steam here in this final hour. It's up 25 points. NASDAQ still the underperformer. We'll be right back. Apple has been on a hot streak this week, up more than 6% and significantly outperforming the NASDAQ 100. Mike Santoli here to take a closer look at Apple's valuation in the dashboard. And Mike, it's a consumer staple. It is trading that way, Sarah. It's actually gotten valued that way. Here's Apple against Coca-Cola. This is price to cash flow, but price to earnings would work similarly. And here you see, you know, Apple used

to be traded much cheaper because it was hardware. It was hit driven. People weren't really sure if they were going to get every cycle right. If you remember when Warren Buffett bought a big stake in Apple, his thesis was it's an indispensable consumer product with a premium brand pricing power. And right now, the analysts are kind of using an earnings model and a valuation model for Apple that's similar, which is relatively low top line growth. But you buy back a lot of stock, you have some earnings leverage, do some M&A, and it gets you to a good total return number. And that somewhat explains where we are here with Apple. Because the thinking around Apple is that it was increasingly deserving of a services valuation because that's a bigger chunk of its business.

Now there's word that it might even do subscription hardware. Wouldn't that be better for Apple than a staples valuation? If it was a pure software services valuation, probably a bit better. Of course, Microsoft has a higher valuation, for example. But I think it's almost two approaches to the same spot, because what investors really love about subscription services and consumer products is steadiness, is that it just does not really wax and wane. And so you have that recession proof. That's where they'll be willing to pay more for each dollar of cash. Well, it's been a little defensive market. So this explains the

strength. Thank you, Mike. Up next, the CEO of Frontier Airlines on how inflation is impacting travel demand and whether he sees more consolidation on the horizon. The price of jet fuel this month hitting highs not seen since 2008. It's the second largest expense for airlines outside of labor. Today's closer is Frontier Airlines CEO Barry Biffle. Frontier recently announced a deal to merge with Spirit, creating the country's fifth largest airline carrier. Welcome back to the show, Barry. It's nice to have you. Thanks for having us, sir. So just remind us, I don't think you hedge on jet fuel. So how costly is this going to be?

So no, we do not hedge, but we have a structural hedge in that we're America's greenest airline. And so we spend 10 gallons of fuel to move us to 1,000 miles, whereas most of the industry uses about 15 gallons. So we save a considerable amount of fuel just structurally. So while we're not immune, it's a lot easier for us to cover the cost in this environment. How are you dealing with it as far as passing it along to the consumer? Because demand right now is very strong, I would imagine. So are you able to pass it on in terms of higher prices? Absolutely. We've actually said recently, we have seen the highest sales that we've seen through the pandemic, both in total dollars,

as well as what customers are paying per fare plus their non-ticket. And it's actually exceeding 2019 levels. And so we believe at this current rate, even with the high fuel prices, we believe we can be profitable this summer. So I think what everybody forgets, Sarah, is that, you know, yes, inflation is going up, but incomes are coming up significantly as well. And so we see an arbitrage potential where you've got this really strong, robust demand that's roaring back. People have more money than they've ever had. And so while we have, you know, we'll have to gently raise our fares, you know, the relative cost advantage versus our peers has never been this good since I've been in the business. So

we think customers are still going to get a good value, but shareholders will as well, because we can cover the incremental cost. So are you saying then demand is so good and you've seen wages, for instance, rise so much that you're not seeing any resistance or pushback from the consumer on higher fare prices? Is that in all parts, all routes? No, we're seeing uniformly across the board, we're seeing significant demand that we've never seen before. And in fact, it's like I said a while ago, we're actually starting to exceed sales levels that we saw in 2019. Internationals still held back, but I'm optimistic, just like the masks. I expect those to go away shortly. And if the international testing goes away, I think you'll see the

international recover as well. What will, I know you guys have been in favor of getting rid of the mask mandate. What will that mean for airlines? Do you think we'll see even stronger demand? Do you think we'll see fewer incidences of bad behavior? How are you looking at it? Well, the majority of the bad behavior is completely related to the masks and kind of enforcing that. You know, I was just talking to a bunch of politicians yesterday and they want this gone so bad. And so I think there's the science has changed, right? The virus has changed. The severity is not there. And so there's still some vulnerable people and they can wear you can even get it in 95 today. So if you want to wear a mask, just like if you want to get vaccinated, it's

there. But the enforcing this and getting in fights on board, that needs to go away. The science just doesn't support it. I don't think the political science supports it anymore. So it's time to remove the mask mandate. How close are you to full utilization of airlines, which has also been a really important theme? Yeah, so we're probably 90 percent of our full potential, if you will. And we're going to probably keep it there until we can get the equilibrium of supply and demand over the next few months. But we've said, you know, that we'd like to return to full utilization by the end of the year so that for 2023, we're at full utilization.

And finally, you know, we talked to Spirit Airlines CEO last week, and he doesn't expect any headwinds when it comes to regulatory challenges to the deal, the merger between Spirit and Frontier. Even the American Airlines CEO told us that he doesn't see it as a problem. What will happen to fares if you are allowed to merge? Will they go lower or in this kind of inflationary environment, is that impossible? Well, on a relative basis, yes. I mean, we're going to have to cover fuel. That's a reality. But on the things that we can manage, you should see fares lower to more places for more customers because of the savings that we're able to do. And the combined entity, as we've said, everybody wins. The consumer is going to win with lower fares and even more reliable service. So it's really good. It's good for shareholders. It's great for our employees. So everybody wins with this.

So we're really excited to work through the process with the government on it. And as all the airlines are hiring again, have you seen any problems when it comes to attrition for pilots or anything like that? Because, you know, ramping up this capacity at a high speed with such strong demand is a big deal. Yes, there's shortages in just about every part of the economy, right? I mean, yes, there's been pilot shortage, there's been mechanic shortages, there's been ticket agent ramp handlers, but we're slowly working through those. And I think the industry will get past this. But yes, you've probably got another six months to 18 months of challenges across the industry. But the answer is, in many cases,

you know, you just need people to come back to work. And we're starting to see that. Has demand ever been this strong, Barry, do you think? I've never seen, I mean, total demand would actually have been stronger, you know, once you get the international. But in terms of domestic and in terms of recovery, we've never seen anything like this. I mean, literally in the last 60 days, we went from the depths of a really rough January, February to the sales for all future periods have just never been stronger. Barry Biffle, thanks for joining us on all the key issues facing airlines. CEO of Frontier. Here's where we stand in the markets.

Less than a half an hour left to go in trading. The Dow has actually gone negative, so we lost some early gains. At the highs of the day, we were up about 234, still tracking for a positive week. We're keeping an eye on rates, though, with yields continuing to move higher. The 10-year yield just below that 250 level. NASDAQ getting hurt today. It's down about eight-tenths of 1%. Still, resilience has been the theme all of this week for stocks. Nike reuniting with Kobe Bryant's estate, and Wall Street is buzzing about the impact that could have on the brand. That story straight ahead. And a reminder, you can listen to Closing Bell on

the go by following the Closing Bell podcast on your favorite podcast app. We'll be right back. What's Wall Street buzzing about? Kobe Bryant's estate is back with Nike. It's been about a year since Bryant's initial endorsement deal with Nike expired. And now Bryant's estate is back with Nike. It's been about a year since Bryant's initial endorsement deal with Nike expired and now the Bryant family is back reaching a new long-term contract to continue producing both footwear and apparel. In addition to re-releases of the 11 signature Kobe models worn by Bryant during his career, Nike will also be launching some new Gigi Bryant shoe series with proceeds going to charity. For Nike, this is no doubt a sales mover. Last season, two Kobe models were the most popular sneakers for NBA players on the court.

71 players actually wore them, according to Baller Shoes DB, which tracks this stuff. But it was hard for fans to buy them. Kobe is also an international brand and especially huge in China. He visited there regularly for two decades, even after retirement, and helped put an NBA on the map for Chinese consumers and fans, arguably one of Nike's most important growth markets today. And resale is always a good measure of demand. Well, eBay just told us 24,000 Kobe sneakers were sold on its platform last year. In comparison, 34,000 sold for LeBron. The first release of this new deal could happen as soon as May 1st, which would have been Gigi Bryant's 16th birthday. Straight ahead on the show, the EU versus big tech. We'll talk to Evercore's Mark Mahaney about the stocks to watch and the new regulations

that could reshape the industry. That story and more when we take you inside the market zone. And as we head to break, check out the Chinese internet names having another rough session. Didi down more than 10 percent. We'll be right back. 20 minutes left of trading. Welcome to the Closing Bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, Evercore ISI's Mark Mahaney on how new EU regulations will impact tech names. BMO's capital markets, Simeon Siegel, on whether slumping consumer sentiment is a red flag for retail stocks. But first off, let's talk about the broader market because stocks are losing steam right now into the close. The Dow and the S&P 500 briefly turning negative just in the last few minutes.

The Dow was up 235 at the session highs. Mike, still a really strong week for stocks. Is the market having a little trouble digesting higher yields today, the 10-year going past 250? I think that's one of the reasons for the hesitation, yes, Sarah. But I would also agree that it's really not that much of a panicked response to these really eye-catching moves in the bond market. To me, the bull's job this week coming into it was to preserve most of last week's rally. And really what's happened is they built upon it. So it's certainly a net positive. It takes the indexes up into a little more of a tough zone in terms of immediately making further headway, I think you would argue, especially with yields doing what they're doing.

But net-net, it's a positive way to digest what was a very strong six-day rally coming into the middle part of this week. The two-week chart really illustrates the bounce back that we have seen in stock. It has been fierce. It's been surprising. You know, and if you frame it in the context that everyone was so negative, there were so many reasons to hate the market and to be scared and the Fed hiking rates and becoming even more hawkish. And even the doves coming out as hawkish and the inflation story and the Russia war. And yet and yet here we go. This big this big rebound. What has that done to sentiment overall? It's certainly it's improved it. But, you know, to me, those things are not,

you know, confusing. It's not so much. Wow, I can't believe we got a rally when people were so negative. We got a rally because people were so negative and we had priced in a lot of the negatives. We point out the Nasdaq composite. This week, it's been the story. It's been mega caps. And because all of a sudden, after the rest of the market rallied so much, those things look like they had more catch up to do. They were further from their highs. That to me is the is the way you kind of walk upstairs in some of these rallies and things start to look better on a relative basis. In terms of where sentiment sits right now, it's a little bit more comfortable, but certainly not overly bullish. I still think we were in a pretty deep hole in terms of how people were positioned and

how they were thinking. And we burned up some of that, but maybe not all of it. I'm just looking at the sector performance here, Mike. Today, it's energy. It's either an energy or tech day at the top of the market. So tech is underperforming today. Energy, utilities, real estate, financials were higher. It looks like most sectors are higher across the board for the week, except for health care and real estate. How defensive has this rally been? And what sort of cyclical indications are you getting as the market continues to grapple with this idea that the economy is slowing and the yield curve might be signaling recession? It's interesting, Sarah. You have to almost go to the subsector level to some degree because consumer cyclicals have been a little softer. I mean, obviously, homebuilder is really tough. You've never seen this much of a magnitude move in mortgage rates in about 40 years to the upside.

So I do think you have to be careful in that respect. Autos look good, but that's because Tesla was ripping. So to me, it's not necessarily that the market is saying that the economy is going to just power through here, but that we have enough momentum that on the job side, things should be utilities very strong in the face of rising yields to a little bit confusing. But there's sometimes a little bit of an energy price kicker in some of those stocks. Pulte Group, Lowe's, Lenar all down 10 percent or so this week. D.R. Horton, this is the bottom of the S&P for the week, to your point.

The U.S. is now saying it will work to supply 15 billion cubic meters of liquefied natural gas or LNG to the European Union this year in an effort to help Europe wean off of Russian energy supplies the EU hoping to cut its dependent on that Russian gas by two-thirds this year and end all fossil fuel imports from Russia by 2027. let's bring in CNBC's Pippa Stevens and Pippa these stocks are jumping clearly the market likes what it hurts especially the the gas stocks yeah I'm hearing from the companies yeah, these stocks are moving sharply higher today. But we don't actually have that much information on what this deal means in actual practice on the ground. The U.S. is already sending record amounts of LNG to Europe, partially because of pricing dynamics. If you're going to get a higher price in Europe than in Asia, you're going to redirect those cargos. And these take a long time to

come online. New terminals cost billions of dollars, require extensive permits and a lot of money in capital. And so it can't just be increased on a dime. And as one industry source told me, this is less of a promise and more of an aspirational statement. But as you said, these stocks are all up a lot today. Upstream players like EQT, Coterra, Range Resources, those are the nat gas plays. Those are rallying. The pipeline companies, Enbridge, Williams, also up. And then finally, the LNG names themselves, like Chenier, Tellurian, Sempra. We're really seeing strength here across the board. How do we get, Pippa, more energy production in the U.S.? We're already, you know, huge. But for oil and gas, which is clearly in high demand right now, is it a matter of more government or less government regulation from the

Biden administration? Or does it have to come from shareholders who have been so tough on these companies, especially institutional investors like BlackRock, who have been pressuring companies to get away from fossil fuels and to do more on ESG and to cut their budgets? Well, that is certainly, Sarah, the question of the moment. And there are a lot of different opinions on this. Energy policy is, of course, incredibly complex. But to your point, these companies emerged from the pandemic lows when they were just beaten down. I mean, when WTI went negative. And they're totally different companies now. They're focusing on reining in capital spending, paying back through dividends and buybacks and not growing their production above around zero to five percent.

And part of that is once you start paying out dividends and buying back stock, you can't then turn around to those same investors who were burned over, you know, many years of underperformance and say, oh, just kidding. We want that money back. We're going to start drilling. And then also on the policy front, there's been a lot of conflicting signals from President Biden. I mean, today he's saying we need to increase our production, send more LNG to Europe. But that, of course, is in conflict with the longer term goals to move to green energy. So I think the industry would say there's a lack of clarity on the policy front and that kind of cuts back on spending because investors don't want to put up the money now. It's kind of both of them. Pippa, thank you. Pippa Stevens. And speaking of energy,

Devon Energy, it's up nearly 20 percent since Jim Cramer picked it on March 15th. You can get more picks like that by signing up for the CNBC Investing Club by going to CNBC.com slash join the club or point your phone right there at the QR code on the screen. Mike, is the market differentiating between gas, oil, services, refineries, or just rising tide lifts all boats? Or should you distinguish when it comes to the picks? I'm looking at some of the winners this week. It's across the board. It is pretty much across the board. And I think that's because the commodity moves themselves are strong enough to float most of it. I mean, the market's very cognizant, I do think, of who has, you know,

leveraged most direct leverage to the price increases, where you might actually be able to see increased production and things like that. But really, right now, it is a stampede into this sector. Big question, I do think, you know, maybe from this point on, is just how much higher energy will go, needs to go, can go as a percentage of the overall S&P. You've almost doubled off the lows. The bottom, you know, rock bottom was two, two and a half percent or something like that of the overall S&P. We're above four percent now. So we'll see where it goes from here. Obviously, right now, it's much more than that in terms of mindshare. Yeah, less than five percent of the S&P. Wow. Well, there's a new law out of the EU, and it takes aim at big tech. The Digital Markets Act, DMA, designed to increase competition partly by curbing the practices of tech companies, keeping customers in their ecosystem.

But that's not hurting the stocks right now. Amazon, Apple, Facebook, Alphabet, all outpacing the broader Nasdaq today. And for the week, Mark Mahaney with us, Evercore ISI head of Internet research. What do we need to know, Mark, about these two new tech rules from Europe? Once they're implemented, is it a revenue headwind for these companies? I hope not, and I don't think it will be. But there's a series of things these companies are going to have to watch out for, and particularly Facebook, Google, and Apple. These regulations seem squarely focused on them in terms of forcing the app stores to allow alternate payments and allow what's called sideloading or allowing other apps

to be sold in their app stores in terms of no longer allowing the companies to do self-preferencing, making sure that all the users are required to give their consent for different activities on their platform. So it looks like a lot of things that it depends on how it's interpreted by the courts or by the actual executive branches. I guess the European Union, in this case, I could see how it's going to make names like Facebook, Google, Apple, and maybe even Amazon very careful about their business practices. I don't think it leads to a dramatic change, but we'll see. My guess is that it's not going to materially impact these companies' P&Ls. Is there anything in here that you think could be a template for U.S. regulators,

which are way behind when it comes to any sort of regulations from privacy, which Europe already did, to this kind of gatekeeper, what they call gatekeeper protections for people? Yeah. So, Sarah, the one thing that jumped out to me was the self-preferencing element of it. So I think Senators Klobuchar and Grassley have legislation that would also stop self-preferencing. In other words, the example would be Amazon creating its private label products and preferencing those in the Amazon marketplace versus third-party sellers. I'm not actually sure that that happens, but that would be the kind of activity that the Klobuchar-Grassley bill is attempting to stop. And then that also

is pretty broadly written, at least as I've currently seen it, how that's implemented by the FTC, how it's implemented by a regulatory agency in Europe. I mean, in the hands of certain regulators, you could trip up a lot of activities. In the hands of others, you wouldn't. So I want to have your new note today on Amazon, because you continue to love this stock as you continue to think the market underappreciates it. It's at $32, $3,200. You're at $4,300 price target. Oh, I think we just lost Mark Mahaney. Well, he still likes Amazon, and he says that the market is not appreciating it. It says $4,300. And part of the opportunity there is grocery. Let's move on. Activist investor Starboard losing its effort to get on the board of chemical company

Huntsman. Starboard has an almost 9% stake in the company and was seeking four board seats. However, based on preliminary voting results, shareholders have chosen to elect Huntsman's 10-member slate of nominees instead. Shares of Huntsman are plunging today on the news down double digits. Let's bring in Leslie Picker. And Leslie, now that Starboard has lost two proxy fights in a row, Box was first, what does it mean for their ability to do activism in the future? Because you might look at this stock and say investors were with them and they were in the stock in part because they were agitating. Yeah, well, it's unclear who exactly is selling today. It could be Starboard that's one of the sellers in the market today on these results. But you bring up a great point, Sarah. This is

certainly not something that's going to be great for Starboard's brand. It's their second proxy fight defeat in six months before Box, before September 2021, when they lost their proxy fight defeat in six months before Box, before September 2021, when they lost their proxy fight at Box. Starboard hadn't lost a proxy fight in nearly a decade. The last time that happened for them was AOL. So it's pretty remarkable that it's taking place twice in six months time. The problem with losing a proxy fight, and especially losing two in a row, is that it begs the question whether management will kind of have that fear in them the next time starboard disposes a stake and that fear

is what oftentimes leads to cushy or settlements they tend to be a little bit more cost effective than going the proxy fight route to really get what you want. But to your earlier point starboard L.P.'s what they care about is not necessarily

board seats although it looks good from a reputational standpoint. They care about what the stock price has done. And Huntsman, up until today, was up 50 percent since they disclosed their 13D. So that's done really well. So has Box, by the way, since even though they lost that one, too, sort of won the war on that, too, because it totally changed the company. And now the stock's been an outperformer, Leslie. My question is how—Huntsman is a chemicals company, for those that don't follow it carefully, and this has been sort of a long fight.

I wonder, though, how the fact that it is in this business right now that's kind of been in the eye of the storm on inflation and other macro factors has influenced what happened here. Yeah. In the activism world, sometimes it's better to be lucky than good. Obviously, activists these days in a volatile world are going to pick companies like Huntsman that not only do they believe they can drive shareholder value by shaking up the boardroom, but they also believe that the company has an intrinsic value that's worth more than

where the shares are currently trading when they first buy in. Because it provides them some sort of downside protection. So Huntsman's certainly a beneficiary of the market and macro events that have been taking place around it. And then, of course, that's gone into the pockets of Starboard and its LPs as well. Leslie, thank you. Leslie Picker.

And do not miss an exclusive interview with Starboard CEO Jeff Smith right here, Monday, 3 p.m. on Closing Bell. Cannot miss interview. Doesn't talk that much. Consumer sentiment out today remains at a decade low, according to new data we got from the University of Michigan this morning. Overall, it's been a pretty rough week for brick-and-mortar retailers. Stocks like Dick's, Gap, Williams-Sonoma, all down significantly this week.

Joining us now, Simeon Siegel, BMO Capital Market Senior Retail Analyst, which is notable, Simeon, because the overall. Did well this week the S. and B. were good for at least gains of one percent and retail. Did not follow suit are you concerned about the consumer. A good see Sarah so listen I think that the interesting thing here is all

about the nuance I walk into meetings and certain people compare me to last year two years ago three years ago like trying to figure out when do we have a post COVID environment versus when are we a nineteen. Has been a question. You just named a group of stocks that didn't do well. There's some others

that are doing really well. So I think 2020 and 2021 were these periods of rising tides, lifts all boats, receding tides, takes them all back. 2022, I think, is going to be a year of divergence. I think the nuance matters. And you and I have talked about it. I think there are going to be certain companies that actually structurally improve their business. They're going to win. Others are going to watch all of that COVID benefit fade back. Like Under Armour, is that still one of your top picks? It is. It is, which is a lot of fun. If you rewind back to all the conversations you and I have had, I think this is a company, I think Under Armour is a company that took a ubiquitous brand and took a bloated OPEX and used this COVID cover as an opportunity to refashion that.

And I think they're doing a nice job. And I know you've done a lot of work with them. You've spoken to them. We can see this conversation where they want to be healthier, not louder. And I think they are one of the ones that emerge on the other side better off. They're down 18 percent this year, though, 23 percent over the last year. You know what? Macro factors will do that. So I think at the end, and by the way, we're talking about where you start from. So we upgraded the stock a little bit ago.

I think that right now, anyone who asks me to call a bottom, any investor that I talked to asked me to call a bottom, I'm not that smart. I think the question is, we're making a conversation saying 1H21 was the perfect time to retail. You had stimulus, you had pent-up demand. I mean, forget about Omicron, forget about Ukraine for a second. We knew these six months were going to be difficult. We also know that as we segue to the back half of this year, we're done lapping that supply chain, container costs, different things become built in already. The question is going to be, which are the companies that you want to own on the other side? I can't tell you that in the next week, we don't have global pressures that hit even the winners. And if anything, what we're seeing is not babies being thrown out with the bathwater. We're seeing them thrown out

before the bathwater because the crowded winners, the companies you actually want to be a part of, were the ones that I think have gotten hit the most. So absolutely, right now, this is looking out further on and saying, if we can look beyond the next three months and look further out, which companies are healthier, those, I think, will, the loss that they may have in the short term will vastly offset the gains we get. Go forward. Any hint of a turnaround at Peloton or do you still hate this stock? You had a very good call. You were one of the first to be negative and then it collapsed.

New CEO, new strategy. What's your take? Hate is a harsh word, but I think that the reality is we have yet to see what's changed, right? You and I need to see what's changed. And it sounds like we're getting different versions of price changed and it sounds like we're getting different versions of price elasticity it sounds like we're getting different versions of promotions and i think the question is peloton is a great product with a phenomenal community that probably is a lot smaller than it should be we watched the last management team overextend themselves and the new management team acknowledging that but what we're seeing is still a chase of growth and i think under armor is a great segue to peloton because under armor went through this and the new management team acknowledging that. But what we're seeing is still a chase of growth. And I think Under Armour is a great segue to Peloton

because Under Armour went through this. There is a time needed between a restructuring and a recovery. It doesn't happen right away. It still feels like we need to go through the restructuring before we can start getting excited about the recovery. Simeon Siegel with a new hairstyle, a very nice haircut. Thank you for joining us, PMO, with a new look. Two minutes to go here in the trading day.

Mike, what are you seeing in the market internals? We've gone back into positive territory at least here into the close. Yeah, it leans positive, Sarah. It's very much mixed under the surface, but if you look at the volume split, the advancing volume has taken a little bit more of a lead over declining volume. Still not dramatic in either direction. It's been kind of a little bit of a give-or-take digestion type day in general. We mentioned earlier that this week it was the big mega cap stocks, the growth stocks,

the NASDAQ leaders that really did do a lot of the work. Take a look at the extra large XLG Russell top 50 stocks. That's the 50 biggest stocks in the market relative to the small cap Russell 2000 over the course of the week. And you see that's a pretty good spread, almost two and a half percentage points of outperformance by the very largest stocks. The volatility index, again, continuing to play along now under 21. We have a big old spike on the chart. That means we're on firmer footing 20. Sometimes that barrier between somewhat more normal, stable trading and something else. We hadn't spent much time below that really since COVID.

So we'll see if that's in the future, Sarah, next week. Going into the close, Mike, it looks like as far as the Dow is concerned, we're going to get a positive close. Travelers, Honeywell and Chevron are the biggest contributors to the Dow games right now. S&P 500 about 21 points higher, half a percent. It's up almost 2 percent for the week. If you look at what's working today, energy is at the top of the list. Some of those gas names are really soaring. Gas, steel, anything commodity related had a very strong week. Technology did well this week as well.

NASDAQ 100 about to go positive here. On the week, up 2.3%. So a second week in a row of resilience for the overall market. Despite some weakness in the small caps, NASDAQ going out with a gain of about 1.8%. Again, second in a row. That's going to do it for me on Closing Bell. Have a great weekend.