Closing Bell - Closing Bell: Stocks Lose Steam, High Energy & Flexible Living 8/29/22

Episode Date: August 29, 2022

Stocks staging a big mid-day comeback after opening deep in the red, but the market lost steam into the close. Bespoke's Paul Hickey says it is too soon to call the end of the summer rally, but things could get tricky for investors in September. Canyon Partners Co-Founder Josh Friedman thinks the Fed could oversteer its attempt to fight inflation and that could lead to a long malaise, not a recession, and he reveals where he sees distressed opportunities in this market. Medley Global Advisors' Ben Emons says investors should remain defensive in this rising rate environment. Ariel's Charlie Bobrinskoy says energy stocks still look cheap despite today's rally in oil. He reveals his top energy pick. And Landing CEO Bill Smith discusses the outlook for the flexible living industry and competing with Adam Neumann's new concept called Flow.

Stocks staging an impressive rally here off the lows with the Dow and the S&P clawing back from a 1% drop, though still in the red. The Dow went positive briefly. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look at where we stand right now in the market. You've got three sectors green, and that's helping the S&P 500, which is only now down a little more than a tenth of 1%. Energy, utilities, staples, and industrials, actually, just adding to the green pile.

We've got on the bottom of the market technology, health care, financials and communication services. It's why the Nasdaq is underperforming. It's down half a percent, though. This all looked a lot worse earlier in the day. At the low of the session, the Dow was down 310 points. Nasdaq was down 160. So we've really come back here off the lows. Take a look at the Dow stocks that are leading the intraday comeback right now. It's a mix of energy. You've got Chevron up there, Walmart, Boeing, Verizon, IBM, Salesforce, 3M, and Microsoft are the biggest drags right now. Coming up on the show today, Canyon Partners co-founder Josh Friedman here to talk about the bond market as the yield on the two-year Treasury note hits the highest level since 2007.

He'll give us his playbook amid the renewed market volatility. We'll kick it off, though, with today's market dashboard. Senior markets commentator Mike Santoli here with a closer look at how much damage, Mike, has really been done by this most recent pullback. I go away for a week, and what happens to the market? Yep, it didn't take it well, Sarah. We're glad you're back. You know at today's lows of the S. and P. five hundred we were

about seven percent off of. The highs that we got to. Mid August so that's a couple of weeks and we did have a pretty stiff. Pullback now we didn't give up. As much as half of the whole rally CC here off that June low. We actually got up to.

About nineteen percent intraday low to intraday high so that is a a pretty significant rally. A lot of folks looking for something in this thirty nine hundred area. So even if we do break below four thousand that would still be you know somewhat in the range of something normal that kind of gets you down to where we were in late July. That's just a kind of mental marker of what still would be a routine pullback. But definitely the market put on notice on Friday. It's still sort of feeling the aftershocks of it. You mentioned it's kind of an energy plus defensive and value leadership today as opposed to the risky stuff. Take a look at the U.S. relative to stocks in the rest of the world. This has been a pretty consistent story, but it's become more dramatic. Here's a three-year chart of this dynamic.

And you see really rolled over. We're well below in the all-country world index, excluding the U.S. That's what ACWX is back to well below pre-pandemic levels. We got our growth stocks that do kind of give us a premium valuation, as well as, of course, the U.S. dollar. Very strong right now. Not to mention the fact that we do have those, you know, a little bit better growth profile and probably slightly less of an immediate recession concern, at least relative to Europe, Sarah. Oh, you know, I'm going to be hitting the dollar later in the show because you have seen some crazy moves overnight. But Mike, as we speak, the S&P 500 just turned positive. The Dow just turned positive. And you've now got a number of sectors in the green joining that defensive energy

leaders that you just mentioned. Consumer discretionary communication services and materials just went green. What is the current thinking? Because when we started the day we came in, it looked like it was just going to be another ugly day continuation of the selling from Friday off the Powell comments that the market has been off sides when it comes to the Fed pivot. Right. And I think that, you know, arguably a three point four percent drop in one day kind of brought stocks more into line with where the rest of the financial markets had already been. I'm not saying that's all the damage that has to be done, but there was a sense coming out of a couple of days of, I guess, review of Powell's comments

in the market reaction of how much actually has changed. The bond market is still saying rates on the short end will get up to three and three quarters or 4%, probably stay there a while, but that's not too remarkably different than what we were thinking before. We're still in the same scenario, waiting for the jobs number to see whether, in fact,

you do have any slackening of the labor picture. That might inform what happens with the Fed and then the inflation numbers the following week. So, you know, I don't think there's an all-clear been sounded, but, you know, we already did have a pretty high wall of worry, and maybe we've kind of scaled it since this morning. All right, S&P 500, unchanged. Mike, thank you. We'll see you later for the Market Zone.

For more on the markets and what you should do now with these mixed signals, Ben Emmons from Medley Global Advisors and Charlie Berbrinskoy from Aerial Investments. Charlie is going to start the conversation by asking you if if Fed Chair Jay Powell reignited the bear market. And now we're seeing this nice turnaround in the market today. But what do you think about those comments and the direction? Well, as we've discussed, he obviously was embarrassed. The whole Federal Reserve was embarrassed for having messed up the inflation situation, having denied that there was inflation and then said it was transitory and that it obviously wasn't transitory. So they're trying to catch up and they are worried that the market's not taking them seriously. And so he went out of

his way to say, don't look for a pivot. We still have raising rates to do. And as we've also discussed, higher interest rates have different effects on different parts of the market. Higher interest rates are much tougher on growth stocks whose earnings are way in the distant future than they are on value stocks whose cash flows are much closer in. And so we're seeing that disparate impact on the market with value doing much better than growth today. But but if we go into a recession, if we go if we stop worrying about inflation and go into a recession as a result of what the Fed is doing, then that's not good for value. No, you're absolutely right. And that is why I'm not so enthusiastic about what the Fed is doing. We are not having the inflation that we're having because of an overheated economy.

That's just wrong. The economy is bumping along here with no growth for the last two years. Whereas you and I have talked, we're having all this inflation because the interest, the money supply went up by 42 percent. We had massive deficit spending. The Federal Reserve monetized those deficits. And that's what caused this recession. And so the Fed has one hammer. Every problem looks like a nail to them. And so they're trying to increase interest rates. And unfortunately, that wasn't the cause of this, an overheated economy. Ben, how are you balancing all of these risk factors now? Inflation, higher rates, potential recession and a market that today is proving somewhat resilient after a big sell off last week. Yeah, I think I echo my the other

guests comments. You know, you could take the power speech and extrapolate Fed policy into next year, and you could come up with a pretty high Fed funds rate if you factor in QTs. If you actually know that, then you can also build out a bit of a portfolio that is quite balanced. You know, I found it striking that the equal-weighted S&P continues to outperform the S&P for the year, whereas anything that you try to do with downside or any type of high B that does not so clearly the market wants to be defensive as you get this tightening on the way and that's what's showing today too you know in the aftermath of Powell what performs well it's either materials or staples or anything in let's say technology

that that is actually not so sensitive to interest. I think this is the way to play this environment as a fat catheist to ramp up. And we still deal with high inflation that's now still quite sticky. So you're out of the reopening trades. I know for a long time you liked airlines, Ben, and some of these other areas of the economy that were benefiting despite what was happening with rates and inflation. Yeah, to an extent I am. But I've always stayed in the reopening trade in terms of the global reopening, because we have to keep in mind that eventually China will reopen, and that will be a major boost to that sector again. So I think it's a form of more of a defense-offense play that you and I have talked about for a while. But, you know, domestically, airfares are being cut and we're still dealing

with high energy prices so it's not a domestic play and if you think about the reopening itself it is completely matured and high inflation is now starting in fact the leisure activities too so i think you want to be defense in that sense we'll balance that way sounds boring but that's actually the environment we're in at the moment you have have to play the way. I'm curious, finally, Charlie, where energy fits into all of this. Crude oil is up more than 4% right now. Energy stocks are rocketing higher. They're at the top of the market, up 2.5%. Traditionally, I know you've liked some of these names as value plays. Now it's, I don't know if it's cyclical value or just what's happening in Europe and what's happening in the supply. How much exposure should you have to energy right now? And you've missed a lot of it what should you be

doing with that with that group so in my fund the aerial focus fund my number one largest name is apache trading at four times earnings the futures are saying that oil is going to be down in the low 80s next year even though we're at 95 or so today. I think the supply demand dynamics for oil and natural gas in particular are very good for several years going out. We've had very little money spent on exploration and development. And so I think the supply demand situation is going to be good. The market is negative on the outlook for oil, which is always a good place to be. And the stocks are just very cheap. Apache's trading right now for about four times forward earnings. So it's a value play with a very good supply demand dynamic. Yeah. Amazing to see a move like this,

even with some of the recessionary concerns, the China revisions for growth lower. Charlie, Ben, good to talk to you both. Thank you very much for kicking off the week. Up next, we will talk to Bill Smith. He's the man that TechCrunch dubbed the anti-Adam Newman. He just secured a major funding round for his rental concept that's looking to compete with the WeWork founder's latest venture. We'll tell you all about it. Dow's now down about 47 points. We did just go positive at the start of the hour. It was the second attempt of the day. As you can see, a big comeback. We were down more than 300 at the lows. You're watching Closing Bell on CNBC.

Flexible work has become all the rage since the start of the pandemic. But what about flexible living? Rental firm Landing, which launched back in 2019, recently landed $125 million in a Series C round from investors including Graycroft and Foundry. To date, it has raised more than $237 million. The company offers fully furnished apartments with month-to-month leases. Apartments are available in 375 cities across the U.S. The new round, coming after Andreessen Horowitz, recently invested $350 million into former WeWork CEO Adam Newman's new

flexible living concept, Flow. Joining us now is Landing founder and CEO Bill Smith. Bill, it's good to have you here. So explain how this works and what people do. It's great to be with you Sarah, thanks for having me. So Landing is the first membership for flexible living. Our members can live anywhere across the U.S. in over 375 cities. We have tens of thousands of apartments for them to choose from. And with Landing, they never have to worry about being locked in a lease. They can live anywhere they want, anytime they want. So are people actually doing this? You launched this before the pandemic. I was thinking it was sort of a pandemic phenomenon, but apparently you saw this trend coming before. Yes. So I launched Landing shortly after I sold my prior company, Shipt, to Target. And I saw an opportunity then where I believe that consumers were going to fundamentally change the way that they live. If you look at many of the other areas of our lives, whether it be transportation, buying cars, many of the things that we do, it's all happening online today.

But for living, it's still a pretty old school offline process. And so we saw an opportunity to really recreate the way that people live in apartments. Do you own the buildings or do you buy the leases? How does it work economically for you yeah so we partner with existing owners and management companies that manage large class a apartment buildings across the us and our goal is to help them re help them to supply this this new market that's out there and so we do that through a number of ways. We work through leasing. We also have brand partnerships where we'll partner with an owner to bring landing to their building and they leverage all of our technology systems

and customer acquisition. So do you make money? What people pay higher higher rents basically than what you're paying the buildings because of your partnerships? Yeah, so we're first we we're built on a membership. So all of our members pay $199 annual membership to be part of our network. And then they'll pay a different rent associated with each unit. And we generate revenue on the rent either through just a little bit more rent over

what it would cost if you leased it for a year and you didn't furnish it, or through a revenue share with the property owner. How do you feel about competing with Adam Neumann, and you didn't furnish it or through a revenue share with the property owner. How do you feel about competing with Adam Neumann, whose flow has yet to launch, but it does sound like it's going to do something very similar. Yeah, I'm actually really excited about other companies coming into the space. I think what we're seeing now is investors are recognizing that flexible living is going to be a massive category. I think it's going to grow for the next couple of decades or more. And so it just validates that this is going to be a major space and we're really excited about having other entrants. I expect to see three, four, five other

players come into this industry in the next few years, similar to what you saw play out in maybe online food delivery and other categories like that. It does kind of remind me of WeWork in that it's you know the leases and and it's shared workspaces and you can be very flexible in the locations. Do you hate that comparison? Well you know the office space industry is very different from residential. And one of the primary differences, if you think about office, is every WeWork had to be custom built out. So there was a significant amount of custom tenant improvement dollars invested in those buildings. In the residential space, we go into existing apartments.

We don't invest any money in renovations or any changes to the building itself we go in and furnish it with landings custom line of furniture that we actually design in-house and partner with manufacturers to deliver into our apartments so it's a different very different concept and and you know zero long-term lease liabilities in our model well that that's a key i think that we learned from WeWork, that you don't want to have that be on the hook for the lease liabilities. Is that a question that you're getting from investors? I know you're raising a lot of money,

although Adam Neumann raised even more without even launching from Andreessen Horowitz. Yeah, you know, I'm not sure how their business model works yet. Nobody really knows. But from a landing perspective, that's one of the things when we started in 2019 we actually started after after we work kind of had their their challenges and so we were able to take some of the learnings from that but one of the keys was figuring out the unit economics of the business early and you know I did the same thing when I built ship we had positive unit economics early on in the business and

we've replicated that same model at Landing, and I think that's what's given our investors confidence investing in Landing for the long term. You sold Shipt for, I think, a little more than half a billion dollars to Target a few years ago. Is this something that could fit with an Airbnb? What are the long-term plans here? Yeah, so Shipt was my second company that I've built and exited. And for Landing, I really wanted to get into a category that I could see growing for the next few decades and build a massive, independent, enduring company. So, you know, really, I think you'll see Landing for the long term be an independent company.

Well, Bill, certainly interesting. We'll follow it. Thank you for joining me to discuss. Bill Smith of Landing. Thank you. It's great to be with you. You too. We've got the Dow down about 45 or so points right now. The S&P 500 down about a tenth of a percent. As I mentioned, you've seen a lot of groups go green just in this final hour in the last few minutes, like consumer discretionary and industrials, joining energy, utilities, and staples, all powering this market. On the plus side, on the downside, it's tech,

health care, and financials. The NASDAQ is down about four-tenths of 1%, well off the lows. Still to come, we're going to talk to Canyon Partners co-founder Josh Friedman about opportunities in the bond market as the two-year treasury yield hits its highest level since before the financial crisis.

But first, it's Taylor Swift's world and we're just living in it. We'll tell you about the big money buzz surrounding the pop icon next. 39 minutes left of trading. Dow's down 50 points. What is Wall Street buzzing about? What everybody's buzzing about today, Taylor Swift.

She nabbed music video of the war at the MTV VMA Awards last night for All Too Well, the short film from her Red re-recording project. Of course, my favorite all-time Taylor Swift song. Maybe bigger news than that, she teased a new album, Midnights, to be released October 21. It's her 10th album and the first of new songs in almost two years. Remember, she's had more than 30 songs on the Billboard 100 in the last two years for old albums that have been re-recorded. She's been putting out

these new albums recently of re-recordings of previous albums, Fearless and Red. Those were the two. Which she did in defiance of a sale of her music by her previous label to music agent Scooter Braun back in 2019. Well, now the charts, awards, and social buds prove that Swift is successfully ripping up the musical playbook again, taking control both commercially and creatively of the music. The new version of Red sold 1.5 million equivalent albums in its first six months compared to the original album, which sold 350,000 over the same period, potentially devaluing the original albums. And under her new deal with Universal Music, she owns it all.

They license and distribute it, proving Taylor reinvents the model again, like she did by getting Apple Music to pay royalties and boycotting Spotify for a few years because she felt it didn't compensate artists. Though it's unclear, like that time, whether any other artist can pull off this rerecording success like Taylor. When we come back, Canyon Partners co-founder Josh Friedman on where he's finding opportunities in this market amid the renewed volatility. You've got the Dow down about 49 points or so. Again, off the lows, which were down 300. S&P 500 down less than two-tenths of one percent.

Today's big picture, the U.S. dollar's move getting super strong again, soaring to a 20-year high today against a basket of currencies, overnight briefly above 109 for the dollar index. We haven't seen that in decades. Some other moves today within that, euro at 99, good for all those American vacationers right now in Italy and France this summer. The pound is at 117. And China's yuan getting a lot of attention today because it plunged to a two year low, even with China trying to steer or fix it to a stronger level. So why is this happening? Fed Chair Jay Powell talking higher interest rates for longer to fight inflation. That boosts U.S. Treasury yields, makes the dollar more appealing. So what?

Well, it's a big headache for the U.S. stock market, for one, because it cuts into sales and profits at any American company that does business overseas. We've seen that wreak havoc on earnings from pharma to tech to consumer staples. And there are also bigger concerns now about emerging markets who have debt payments coming due. The stronger dollar makes it costlier and more difficult, raising the risk of default. It also means other central banks like Europe and the UK may now have to raise their own interest rates even more than expected or more than comfortable to keep their currencies from free-falling, which also raises recession risk even more. It's a domino effect. Powell's words carry a lot of power for the global economy. Keep an eye on that stronger dollar.

For more on that and global markets, let's bring in Josh Friedman, co-founder and co-CEO of Canyon Partners. In a Closing Bell exclusive interview, Josh, definitely want to get to credit, but just on this strong dollar issue and the amount of attention and weight that Powell carries off a speech like this, are you concerned systemically or globally about some of the fallout? I think we've all been worried about a slowdown in the economy. But frankly, I'm not particularly surprised at what's happened in the last few days. I was pretty out of consensus when I was last on this show because Powell had made some very dovish kinds of comments. And I think that those were overinterpreted. The cost to the Fed

of underestimating the impact of inflation, backing off and then having to go back on to hit the brakes again would be enormous, both in credibility and in effectiveness. And I think part of the Fed chair's job is to jawbone down people's expectations. So they start reducing their own consumption. So the job openings start to reduce a bit. And so there's a bit of a slowdown that takes place not just because of interest rates actually going up, but because of the anticipation of the effects of that. So I'm not terribly surprised that this is the trajectory of the market at this point. So you were right that the relief, I guess, was misplaced. So do you see a

lot more pain for the equity and bond market now that it's starting to reverse? Sometimes I think the markets tend to overreact in both directions. I think the Fed oversteered a lot when they were easing up and it produced the opposite effect, where it accelerated inflation. And I think at this point, it's more likely that the Fed oversteers by maybe increasing a little bit too long and a little too hard and maybe selling down its balance sheet a little too hard just to show how serious it is in the fight against inflation. But I think we have to be a little bit humble and recognize that the Fed is really only part of the equation. The Treasury has a role in this as well. And federal spending and the state of the deficit, these are also ingredients in inflation.

And if you spend well beyond your means, you also stimulate inflation. So we tend to give a lot of effect to the word, to the Fed share, but we recognize that that's really only one ingredient. But to your latter point that they're going to overdo it potentially on tightening and trying to control inflation, what sort of stress in the system do you see or fall out for the economy do you see as a result? I see it as more of a sustained malaise as opposed to a really deep spiky recession. And I guess the reason for that is we're coming from a position of great strength in the sense that the bank's balance sheets are incredibly strong right now. The consumer has nice amount of savings relative to income flow. And we're starting with a lot of open job positions.

And we're starting with a relatively strong stock job positions and we're starting with a relatively strong stock market. So the economy is in a position to be able to take it in a way that it would not if it were in a more fragile state. So I think that at some point this gets reversed. It could last a little longer. It could be a little more painful. We'll certainly see the effects on it. Many, many companies have borrowed heavily and have relied on low interest rates and have not fixed their rates. The effects of significant increases of rates will be lower earnings, and that will have a feedback effect on the stock market as well. It also affects the government's ability to spend money when its own cost of money is quite a bit higher and its debt balances are higher. So it won't be able to spend as much money quite as easily. So this will reverberate. But I tend to see it more as getting to a certain point and

persisting as opposed to getting very spiky and really throwing the economy into a into a terrible position. Yeah, I mean, you're not you're you you have drawn the distinction before that you don't see any kind of financial crisis or any kind of risk like that. You know, I think of we really haven't seen any opportunities in distress. I think sometimes of your firm and others with distressed debt, we haven't seen it since the financial crisis. And I'm wondering if this time is going to be different. And we're going to start to see that creep back in as the bear market could get deeper. We've actually started to see a bit more, certainly than when we last spoke. There are a number of names that have started to trade at distress levels. The number of bonds

trading below 70 cents on the dollar has exploded. It's up something like a factor of six to seven this year. The number of bonds trading below 90 is at a record level. There are many, many, many bonds of credit worthy solid entities where the bonds are relatively high in the capital structure, but where mutual fund selling has produced 15, 20 point declines in price. This is not pervasive. It's not like you can run into the market every day and buy all you want. These were readily available a few weeks ago. Then it backed off as the market responded to Powell's relatively dovish comments. And now we're seeing more of those show up again. So I think we will see distressed opportunities. Some will be distressed pricing and some will actually be distressed issuers. We are starting to see a little bit of

that creep into the market. So there are a number of bonds that are trading down of companies that are facing pretty interesting financial challenges. Yeah, which I know is an opportunity for you. Would you tell people to stay away from high yield at the moment? No, I wouldn't. I think it's actually run of the mill high yield, if you will. We had sort of been avoiding anything that was in the index because the index was trading tight, the spreads, the underlying treasuries were trading tight, and you didn't get paid for incremental risk. That has all changed, certainly since June and in part since March. So I think cautious, periodic buying. We have a long shopping list today,

longer than we've had really in years. And I think there are a lot of opportunities in secondary high yield. There are other opportunities as well. A lot of banks in their desire to be very competitive with the shadow banking system, with private lenders, got very aggressive. And while they're supposed to be in the moving business, in other words, structure alone, and then sell it to people, they found themselves in the storage business, where they promised someone a certain rate, found that the market moved, and they're stuck with it. So I think those are opportunities to help those banks relieve themselves of that inventory. I think the high yield market is an opportunity, albeit one where one has to be

careful. And the structured products market has gotten a bit chaotic, especially in the origination side. So there are many more opportunities today than there have been really in years within the very broad category of non-investment grade debt. The car loans, I imagine. What's the rate right now on a used car loan? Well, the car loan business is interesting because there are a number of entities that securitize car loans and the payment records on many of them are actually quite good. But the different tranches of the securitizations of car loans for those businesses that do that are really pretty robust, even if you assume car loans drop not only back to more normal levels versus where they've been the last year, which has been crazy high. But even if you assume they drop back to levels that look like 2008,

there are certain car loan securitizations that, in my view, are extremely attractive. I think the same is true with consumer loans. I think the same is true with non-qualifying mortgage. The same is true of home improvement loans. And we're talking 10 to 50 point drops in the prices of certain layers of securitizations because people are just stuck with these and they're not really in the business of holding them. Now, whether that persists, we'll see. But for the moment, there's actually quite a lot of disruption in the structured products business. Josh Friedman, thanks for joining us, giving us a taste of what's interesting to you right now in this volatile market from Canyon Partners. If you're looking for more market insight and advice from some of the world's most influential investors,

you have to be in the room at CNBC's Delivering Alpha Summit. It returns in person September 28th. Scan the QR code right there on the screen to register now. Take a look at where we stand right now in the markets. Dow's down about 48 points or so. We've been hovering at this level for the last half hour or so. S&P is down two-tenths of one percent. Energy is a big outperformer today.

The energy sector up two and a quarter percent. NASDAQ's down half a percent. Uranium stocks have been one of the hottest investments in this market over the last two months. Coming up, we will discuss whether those gains are sustainable. We'll be right back. Check out today's stealth mover. It is Catalan. It is the worst performer right now in the S&P 500. It's a contract pharmaceutical development and manufacturing company. Came out with earnings, missed Wall Street's revenue estimates, issued week-full year earnings and sales guidance. Catalan says it currently has 1,400 products in development,

has assisted in nearly 50% of the FDA approvals in the last decade. Stock down almost 7% today. Up next, bespoke Paul Hickey on whether today's market comeback is a head fake for investors. That story, plus a potential red flag for airline stocks and uranium stocks, remaining red hot when we take you inside the Market Zone next. We are now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Fantoli here to break down these crucial moments of the trading day. Plus, we've got Philip Oh here on the airlines and Deirdre Bosa on Chinese internet stocks. We'll kick it off broad though because stocks are rebounding off the worst levels of the day

when the S&P and the Dow were both down more than 1%. Energy and utilities are leading the way, Mike. It is quite an impressive rebound. The dollar, which was also super strong overnight, is now unchanged on the day. Treasury yields are off the highs of the day. What is causing this sort of intraday rethink? End of day, I guess I should say. Yeah, I would say that the simplest explanation is all those things started to occur after the European markets closed.

It seemed like there was an extra measure of pressure on U.S. stocks early after the ECB had some hawkish comments. You sort of see some pressure on the euro. And that all did just slightly ease back after the late morning in the U.S. So that's the part of it that I think you can point to intraday as well as the S&P 500 more or less bouncing off the 50 day moving average on first attempt after obviously having a little bit of a mini washout day on Friday. So tactically, all those things are there. And I think bigger picture investors are asking, despite the very determined and hawkish message that was delivered by Fed Chair Powell on Friday, how much is different versus what we've already been contending with for months right now? Yeah, well, I think if you're expecting a pivot, a pause, or rate cuts,

it was a little bit different. But I guess in terms of the bond pricing, maybe not so much. But he hasn't been saying it. So in other words, in terms of the message I've delivered, they clearly are not happy with the idea that the stock market was trying to look around the corner to a potential pivot. But it doesn't seem to me that they have to target financial conditions if inflation is coming down. Financial conditions, as I've said, are the tools. They're not the job

itself. All right. Well, not a good day for tech either. Either way, with the yields higher, Apple, Microsoft, Nvidia, Tesla all lower. Look at airline stocks. They're also under pressure today. Bank of America raising a red flag about softening bookings, which were down nearly 24% for the week ending August 21st. There are analysts there warning there could be an underlying demand problem if that softness is not reversed in the next one to two weeks. This all comes as the airline industry gets set for the busy Labor Day holiday weekend. Our Phil LeBeau joins us.

Phil, Bank of America notes it is hard to extrapolate long-term bookings from one week. So how are the airlines looking into September and October? Well, they expect it to be a slower period of travel. There's going to be fewer people traveling after Labor Day, Sarah. But they're not at the point yet where they're saying, whoa, people are pulling back on booking. Two or three weeks from now, we might get a better sense of that. Keep in mind with that Bank of America note, they're comparing the bookings for one week with the same week in 2019. There was some choppiness

that week back in 2019 because of a hurricane approaching the East Coast of the United States. So you put it all together. Yes, it will be slower after Labor Day, but it's a little too soon to say that people have decided they are not going to travel as much. What's happening on pricing? Is it still coming down? I know in the CPI report we saw airfares a little bit down. A little lower, but that's traditionally what we see at this time of year, that we see them come down a little bit into September, early October, and then they start to ramp back up as we head into the holiday season.

Got it. Phil, thank you. Shares of Chinese e-commerce company Pinduoduo soaring today after beating Wall Street's earnings estimates thanks to a recovering consumer. At least sentiment is looking better in China. That continues a strong run by the Chinese internet stocks. The K-Web ETF up roughly 8% over the last week. Our Deirdre Bosa joins us. Deirdre, Chinese tech stocks as a whole have been called uninvestable in recent months. People have been burned before. Is the worst behind them?

Oh, well, it doesn't mean they're not going to be burned again. But yes, there is this notion that at least some of the worst stuff is behind. I mean, you've got the reopening, that indication from Pinduoduo about consumer sentiment. That's really good for other stocks like Alibaba, JD.com, Baidu, which reports tomorrow. And remember, too, that they're coming off a pretty bad quarter for Alibaba and Tencent. Some of these numbers we've never even seen before in terms of how low the growth is historically. So there's the opening up. There's also the U.S.-China audit deal. That is a positive catalyst for it. And that's a reason why you did see the K-Web up this week. But there is that one thing, Sarah, regulatory overhang.

We've seen it with Ant Financial, with Alibaba, with Didi especially. No one actually ever knows if that has gone away. Yeah, Deirdre, thank you. Mike, is it a play on China and the reopening? Is it a play on just sentiment changing or valuations? How do you look at these stocks? that index. So they're not really just swept up in or driving the general tech move. They've become dealing because of mostly, you know, the regulatory and and sort of geopolitical concerns that seem to drive them day to day. I think they're obviously somewhere between uninvestable and bellwethers because, you know, the Chinese government has said that they don't really want like these kind of global champions coming out of of their market. So the the old bull case on the Alibabas of the world seems like it's hard to regain, given all that.

When they snap back, boy, do they snap back hard, though, because of valuations. Another big move today. Pendojo up 16.4 percent. Look at the uranium stocks. Speaking of hot, they keep heating up. The Global X uranium ETF, it's now up almost 20 percent in the last week and on pays for its second straight positive month Pippa Stevens joins us Pippa we know that Russia's

war in Ukraine has clearly reignited interest in nuclear power how much higher could these stocks run yes Sarah well the urnm up another 10 percent today on the heels of several positive Catalysts and if we look at a one week chart you can really see the moment when this latest leg higher began. And that was last Wednesday, when Japan said it was considering restarting its nuclear operations. And that marks a big pivot for the country. Of course, the Fukushima disaster back in 2011 all but shut down the nation's nuclear capacity.

But now there is this global energy crunch with more and more countries reconsidering nuclear. And then here in the U.S., Guggenheim pointing to the Inflation Reduction Act, which does include credits for nuclear producers, which then provides longer term clarity for the industry. And if we take a step back, you know, these stocks are up a lot in the last few weeks, but they're still well below last fall's high. And that is despite what a lot of people say is a growing fundamental case for the industry. The URA and the URNM both are composed of companies in different stages of production. There's Cameco and Kazatomprim, and then there's U.S.-focused names like Uranium Energy and Energy Fuels. But ultimately, Arthur

Hyde from Sacred Capital basically said that the fundamental case here is very strong with producers keeping production under restraint while demand continues to grow in the coming years, Sarah. Clearly, there's a geopolitical reason here for the resurgence, Pippa. How does that square with the ESG interest and the fact that we are trying to reduce carbon emissions? Well, nuclear has long divided ESG people. There are, of course, those who say this is the only green form of baseload power. There are others that say we should absolutely not be using nuclear because of the radioactive waste, as well as safety concerns. But at this point, it seems like

the ESG concerns have maybe kind of moved a little bit to the sideline with more and more politicians and government officials focused on the question of energy security. We've seen prices in Europe skyrocket. And by the way, nuclear in France hasn't held up nearly as strong as some thought it would because of the lower water levels amid that record drought. So there's really a confluence of factors here at the moment. But I think in the short term, everyone is just trying to think about keeping the heat, keeping the lights on this coming winter. Pippa Stevens, Pippa, thank you. Let's get brought to the broader market right now. We're sliding a bit as we head into the close, down a little more than 100 points on the Dow. Paul Hickey from Bespoke Investment Group joins us by phone. Paul, heading into a seasonally tricky period, is this the end of the summer rally,

in your view? I think it's too early to call an end to the summer rally, Sarah, and welcome back. Thank God you're back. But I think, you know, we ran into, we had a sharp rally, hit the 200-day moving average, ran into resistance there. And then today we pulled back, we tested the 50-day moving average right now. So we're in the middle of this range at this point. And I think just as disappointing as it was that we missed the 200-day week and a half ago, it's encouraging that we've seen a bounce here. I think what you have going forward is an environment where sentiment is very negative still. You have positioning in the futures markets is extremely at negative levels, net short. And then in this environment right now, you know, we're constantly focused on

what does the Fed think is going to happen? The Fed's guess is as good as anybody's at this point. Everybody's been wrong coming out of COVID about what's going to happen. So rather than listen to any one individual or one individual group, what we're doing is continuing to just listen to what the market is telling us. And the breadth coming off of this rally in the August from the June lows has been exceptionally strong. And historically, those kind of breadth moves, as you've discussed several times over the past week, and we've highlighted, has been positive for the markets going forward. So I think at this point,

it's still too early to call an end to the rally. But it is September, so things could get tricky at this point. But you just have to respect the trend lines and the moving averages at this point. You know, I feel like when it comes to the posture toward the Fed with the market, the market still sort of grapples with the resolve of Jay Powell to fight inflation. And what I mean by that is keep those rates higher for longer and get the QT going.

He says it, and he continued to say it at Jay Powell. But I feel like, Paul, the real resolve is going to be tested when we start to see unemployment go up, when we start to see people losing their jobs, when we start to see some real economic pain. And it doesn't feel like we've seen that yet. So how can you determine the path? Well, I mean, I think it's very hard to determine the path. Like you said, you know, we're going to start we're said, we've already started to see some weakness in the numbers, and we're going to see probably more weakness going ahead. But if we start to see a continuation in the inflation trend pressures easing,

that'll be a positive. And the Fed will jawbone the market until they're confident that these trends have really eased. But, I mean, what Jay Powell said on Friday wasn't that, you know, it was hawkish, but the market expectations haven't changed a whole lot since that speech. And so I think, you know, they can say whatever they want, but when you see the data come in, investors will be focused on that. The regional Fed, the Dallas Fed manufacturing report, prices paid was down month over month this month. All five declined this month, all five regional feds. And that's the second month in a row that all five have showed slower momentum. And, you know, I don't even want to say when the last time that was because it was in mid-2008 that we saw that.

But there's definitely slowing in the momentum of price pressures. And if we see a few more months of this, I think the Fed will become more willing to take that wait-and-see approach. So it's just a matter of you have to get the data in. Got it. Paul Hickey, thank you for joining us. Bespoke Investment, we've got two minutes left to go here on the trading day, down half a percent or so on the S&P 500. Mike, what do you see in the internals? Yeah, it's a little soft, Sarah, but pretty mixed relative to Friday. You see there are 1.1 billion shares advancing on the New York Stock Exchange against 1.8 declining. It was a 90 percent downside day on Friday. So I would say a little bit more balanced, but certainly skewed lower. Take a look at the two-year note yield. This is

where a lot of the Fed expectations get built in, just below the highs of the morning, which was also likewise just around where we peaked in June. So that shows you that, you know, we're getting toward 4% on the Fed funds, maybe then with a cut within that two-year window. That's how you get to a 3.43%. And the volatility index has perked up still in the mid-20s. We've got a higher low, but it's certainly not in panic mode yet. We were already well above 30 back at the June low, Sarah. As we head into the close, we've seen a bit of a deterioration. Markets headed south, although we are off the lows of the session.

We were down 310 points at the low of the day on the Dow. Take a look at where we are right now. We're down about a half a percent or 157 points. The biggest drag on the Dow today is Salesforce, with American Express, 3M and Microsoft. You've got names like UNH, United Health, Chevron and Walmart outperforming. That pretty much sums up the action in the S&P where energy and utilities are the best performing sectors. Very noisy here on the floor of the New York Stock Exchange. Looks like we are going to go out with declines. The NASDAQ, the biggest of the bunch. NASDAQ losing one percent.

That's it for me, I'm closing now. See you tomorrow.