Closing Bell - Closing Bell: Stocks mixed in seesaw session, Why recycling is key for EVs 8/23/22

Episode Date: August 23, 2022

Stocks finished mixed in a choppy session on Wall Street, with small caps seeing gains while the Dow and S&P 500 pulled back. Dan Ives from Wedbush and Charlie Bobrinskoy from Ariel Investments debate the trade on tech, following Monday’s big pullback for the Nasdaq. Chart watcher Jeff DeGraaf breaks down the S&P 500 levels that should be on your radar. And the CEO of Lithium processor Li-Cycle explains why battery recycling is key for the growth of the electric vehicle market.

Stocks trading in a tighter range today following the worst day for the major averages since June. The most important hour of trading begins now. Welcome to Closing Bell. I'm Carl Cantania in for Sarah Eisen. Here's where things stand this afternoon. Dow's down 137. S&P down about three. NASDAQ with a slight gain here. The bulls latching on these robust tech earnings, but bears watching some weak macro in both Europe and the U.S. Both sides, of course, wary of what the Fed chair may say on Jackson Hole on Friday. The 10-year yield refusing to break below three today. Check out some of today's big earnings movers.

Palo Alto, a big boost. Macy's and Dick's higher as well. Zoom pulling back a bit after cutting its full-year forecast. Coming up on today's show, a bull and a bear go head-to-head on the tech trade as the Nasdaq comes off that big Monday decline. We'll debate if now is the time to jump in. Is recycling the key to an EV future? We'll talk to the CEO of a company working to combat supply shortages by salvaging lithium and other metals from batteries. Let's get right to the market dashboard, though, with our senior markets commentator,

Mike Santoli, who says the markets are in a bit of a hazy spot. They are kind of caught in between. You mentioned both bulls and bears wary of what they might hear from Jay Powell on Friday, Jackson Hole Conference. It's kind of two sided risk is evident in the market right here. The S&P 500, no downside follow through for most stocks today. I think that's kind of a thin read you might grab onto if you are bullish. In terms of gauging what would still be a relatively routine pullback after the ramp we got off the June lows, I guess you want to sort of say there's a kind of uptrend.

It comes in right where the 50-day average does. It would also be in the area just below 4,000 where you would have given up half that rebound rally. So just in terms of the mental accounting of it, we're still in that zone that says we're, you know, OK in a routine pullback. But the market was thwarted right at the 200 day moving averages people have talked about last week. Now, the other thing we did is bump up against the perceived valuation ceiling. Take a look here at the S&P stacks up. It got just to 18 times earnings.

That's essentially sort of the pre-COVID pandemic boom ceiling for this market cycle over the last decade plus. Nothing hard and fast about it, but that's been where these upside rallies, valuation expansions have stalled. However, it's mostly the biggest stocks because the equal weighted S&P right there is pretty much right in the normal range of where it has been both before and after the pandemic. So it's the top five stocks in there, really Amazon and Tesla, to a lesser degree, Apple, Alphabet, really inflating that market cap weighted P. And then small cap stocks, really quite cheap by historical standards. This goes back to 2016. You see pretty much as low as they've gotten. So it doesn't seem to me the average stock is held back by valuation. It's much more about the macro,

what's going to happen to yields and how much you want to pay for each dollar of uncertain earnings. Carl, I love your line this afternoon, Mike, about how a pullback into the high thirty nine hundreds would be pretty routine, but it might not feel that way. I think that's exactly right, because sentiment's pretty fragile right now. Even yesterday and today, you saw a little bit of flurry of buying of put options. People are bracing for the potential for a little bit of a relapse to the downside. And, you know, people are also big hedge funds, large speculative funds are very, very net short the S&P 500. So I understand it. Nothing's being taken for granted right now. But as I say, definitely both directions, you know, you could be open to both

directions risk on Friday. Right. That's definitely going to be the highlight of the week. Mike, thanks for talking a bit. Mike Santoli, as we said, the Nasdaq is outperforming today, but it's still it's still the big underperformer this year, down more than 20 percent. And the S&P tech sector has dipped into the red for the month following Monday's sell off. Joining us this afternoon for a bull bear debate on tech, Dan Ives of Webber Securities and Charlie Babinskoy from Aerial Investments. Good afternoon, guys. Good to see you both. Thanks for having us. Great to be here. Let's just set it up, Dan. You basically think you've been bullish on the tech sector, but your broader point is that the results that are coming in from Q2 sort of ratify your

view. Yeah, fundamentals. If you look at earnings season, I mean, from Microsoft and cloud to cybersecurity to stalwarts like Apple. And I think even you saw with Palo Alto last night, I mean, fundamentals holding up a lot better than feared. And that's really our thesis is that ultimately this plays out. There's going to be a bifurcation in tech. But I still believe that this is ultimately a second half. It's going to be tech stocks in the green, especially with a lot of the bearishness out there that we're seeing. We're going to talk more about Palo Alto in a second. But Charlie, broadly speaking, is the pushback the notion that the market got overexcited about the rate cycle slowing down and hence got too excited about tech?

Well, it's benefited. Tech has benefited from lots of tailwinds over the last two years. Broadly speaking, tech stocks did very well with COVID, the Pelotons, the Zooms of the world, and have really benefited from a historically unprecedented low interest rates. Low interest rates help tech help growth much more than value stocks. So now, you know, as Buffett says, when the tide goes out, we see who's been swimming naked. And we've got a lot of tech stocks that look kind of unsuited here. So they've had a lot of tailwinds. Now we're starting to see how they're going to do in a normal environment.

What about the notion that we're in some sort of structural innovative cycle where really the macro cyclicality is going to be meaningless in the grand scheme of what technology brings to our lives and earnings. So I'll take that one. People always say that about tech people. Whenever you're in the 70s or the 80s, it's the mainframe computer that's going to change the world. It's changes in transportation. That's why tech stocks always trade for massive multiples. And yet for the last hundred years, value stocks have beaten growth by an average of about three percent. Why? Because everybody always wants to own the glamorous growing company and they don't like to own that steady, stable cash flow company. Everybody has the dream of being the next Facebook or the next Apple. And often that dream doesn't come true,

which is why value has outperformed growth by so much. What do you say to that, Dan? I mean, people talk about the Fed and who knows what Powell will say on Friday. But bottom line, eight and a half CPI is a long way from two. And if we do have that long road ahead, isn't there the chance that tech stumbles in the midst of it? Look, I think there's going to be names like Zoom, DocuSign and some others that stumble and some of the work from homes. But when I look at cloud, we're still only 40 percent of the way through. I mean, I think it's a fourth industrial revolution that's playing out in cloud, on cybersecurity.

You look at rocket debrauters like Apple even going to iPhone 14 cycle where we, you know, our checks coming out of Asia continue to be robust despite the macro. So I think it just ultimately shows really what's going to be a bifurcation of tech. You got to own the right names. But I think right now, in terms of sentiment, it continues to be as negative as I've seen going back to 2009, 2010, even despite some of the rally that we've seen over the last month. That's interesting. You know, Charlie, some of the names that you mentioned, that there were COVID beneficiaries, right? Peloton, Amazon, Netflix, Zoom. I don't see a lot of enterprise names in there. And I wonder if if your thesis extends to the possibility that we do get a drawdown in business investment where enterprise really becomes the locus of any weakness.

Yeah, very possible. I mean, I should be careful and say there are some tech names i think are reasonable valuations and will do fine oracle has a big enterprise business and they have a a big hosting business that is reasonably priced at about fourteen times earnings but uh... but a lot of these things just started fundamentally you have to go back to valuation and i know that's boring and i know a lot of growth investors hate to talk about valuation, but it really does matter. And we have a lot of technology names that have valuations that are unhinged from the fundamentals. And the reason they've been able

to survive in this world is because we had negative real interest rates in a negative real interest rate world. A dollar of earnings 10 years from now is just as valuable as a dollar of earnings next year. That's going to change. Right. Would you describe, Charlie, would you still say valuations are unhinged even after the last eight, 10 months? A lot less unhinged. I mean, my beloved Netflix, Reed Hastings is a great man and a brilliant man. His stock is a lot more reasonable at 50 cents on the dollar. There's a lot of names like that. Believe me, if you look at the worst performing list, there's a lot of these big popular tech names that are down 50 percent. So, yes, the short answer, I should have said that up front. These names are not nearly as goofy as they were a year

ago. But that's, of course, because tech has performed so badly this year. As you said, the Nasdaq Composite is down over 20 percent when the Russell 1000 value index is only down about 8 percent. Dan, one of the areas that you argue will remain robust, even in the face of macro uncertainty, is cyber. And I wonder, your thoughts on Palo Alto? You called it a major positive data point for the cybersecurity sector, outperformed 620. Why? Look, that's really been on table pounder name because ultimately if you look at what's happening in Palo Alto, it's the shift to cloud. I mean, Zscaler, CrowdStrikes and others have had massive success. Palo Alto, I think it's only second, third inning of this all playing out. And they

have the free cash on margin story to go with it. And I think ultimately it's really golden age for cybersecurity. And that's going to be a firm area that holds up. And that's why Powell's in our top pick. And I think last night, a huge really prove me quarter for not just Powell, but I think the overall sector. And finally, Dan, to throw one more out at you, because you've been pretty good at calling the Twitter saga on a play-by-play basis. This whistleblower story, and in fact, Elon's tweet today, where he says, give a little whistle. To what degree do you think this becomes material come trial time? I think you're seeing play on Twitter stock. I mean, for Musk, this is essentially like Christmas morning, a little kid looking under the tree. Because going into Delaware,

you know, it definitely was a weaker hand. This potentially changes the calculus there. For Twitter, this was not what they wanted to see. I think it puts gasoline in the fire, not just in the bot issue, but the security situation. That's going to get a much closer look within the Beltway. So I think this is really going to, you know, add to what I think is going to be a very interesting dynamic going into the courts in Delaware. Yeah. Hence the action today, Twitter, back to what I think is going to be a very interesting dynamic going into the courts in Delaware. Yeah. Hence the action today. Twitter back to almost forty dollars. Dan, Charlie, great chat. Good to see you guys. Thank you. Thanks, Kyle. Dan Ives and Charlie.

Elon Musk recently said the lithium business is, quote, licensed to print money. After the break, we'll talk with the CEO of Lysycle. The company is working to recycle lithium and solve supply chain shortages in the EV space. You are watching Closing Bell on CNBC. The worldwide lithium battery market expected to grow up to tenfold over the next decade, according to the Department of Energy. But there is a critical shortage of materials to make these batteries. Battery recycling company Li-Cycle says it can be a sustainable complement to mining. Stock's up today, but down 50 percent from the highs. And joining us today

is Lycycle CEO Ajay Kochhar. Ajay, it's great to have you. Thanks for the time today. Yeah, great to be on, Carl. Thank you. I was hoping you could start by giving our viewers a sense of where we are in aggregate right now on some of these recycling efforts versus where we need to be given the shortages we expect. Yeah, so maybe I'll start with the light cycle to give you a bit of a sense. So we today are a leading lithium ion battery recycler in North America. We recycle a multitude of batteries. We have about three sites operating today. We're building many more. Now, we're also growing rapidly into Europe. So just to help viewers maybe conceptualize the scale of that, we're probably about circa 20,000 to 30,000 EVs equivalent of material being recycled today. As you think about the future, I think towards 2025, 2030, that gets to the hundreds of thousands

EV equivalent of material to recycle. Now, most people may say, hey, isn't recycling 10 years away? Why is there so much material to recycle? The reality is that today, as batteries are being made, there's a level of rejects that comes off of making batteries. And that's the first wave of material that we're dealing with. We work with groups like LG and others that are investors in the company. And that's going to work into the second wave, which will really be that more predominant end of life material. Interesting. As far as the OEMs in the EV space, do they have a stance on this? Are they agnostic? Do they want to propel it forward or not? Yeah, I'd say it's been a very different time. So just taking a step back, we started this company in 2016. My co-founder and

I am a technical guy by background, come from the lithium industry. We're talking about lithium, Carl. And I'd say six years ago, there wasn't a ton of interest in this. I'd say people were really wondering, why are you doing this? Today, I'd say it years ago, there wasn't a ton of interest in this. I'd say people were really wondering, why are you doing this? Today, I'd say it's a total 180 for them. And the reasoning is, you know, multitude of factors. For example, the Inflation Reduction Act is a good, you know, pinpoint, I'd say, of what's happening in the market. There's a huge focus on domestic supply of critical materials. What folks may not appreciate is our Rochester facility that we're building will be the first new significant source of lithium, nickel and cobalt, whether from recycling or mining in the United States.

So there's an awakening realization, I think, to that. And we've seen a 180 in terms of interest from vehicle OEMs as well as some manufacturing companies which we work with. That's interesting. Well, it's been said that those who control the supply chain in the EV space will control the world. I do wonder, if you look at a chart of expected EV adoption over the next five, ten years, how do you think wide-scale recycling moves that? What's the delta in terms of how many EVs we could get on the road if, in fact, this goes broadly? Yeah, so I think, you know, let's start with maybe the equivalent of what we're doing at the Rochester facility I'm mentioning, Rochester near. So that will take in about over 200,000 EVs of

material in and produce the same amount of equipment on the way out. So you think about, you know, current levels of EV uptake in terms of, you know, hundreds of thousands of vehicles now getting to the corridors. So if we could help move that needle up a little bit in terms of recycling, even in the near term, that's great. But also the complement with it is that of mining, right? So some recycling companies will say, hey, we can recycle our way out of this. Recycling is very important to help give that near-term supply from domestic source. We've also chosen to partner with groups like LandCorp to provide a total solution and say, hey, we need primary material that's clean, you know, good prominence and recycling to come alongside. And that's a great validation for us

as a company, but also as a solution to vehicle OEMs and cell manufacturers. Right. Stock, as we mentioned, down over at least 12 months. Why doesn't it trade more in line with the EV space, at least in terms of manufacturers? What's it going to take to get that kind of validation on the street? Yeah, I mean, I flip side of that, Carl, I think if you look at many charts, it probably looks pretty similar in terms of trading pattern. But look, I'd say for us as a company and our focus is execution. So we have numerous facilities operating today. We have a two phase model where we pre-process batteries and then post-process. The post-processing step is what I'm talking about in Rochester, New York.

That's going to produce, you know, over 8,000 tons approximately of lithium carbonate. To give you a bit of a sense, a lot of the new mines coming on stream do about 20,000 tons. And we're producing nickel and cobalt. So to be frank, I think that's pretty underappreciated in terms of our story. And we've permitted that facility well before, you know before a lot of the mines that are being talked about in North America will get permitted. So I think as we continue to execute along that path, there'll be an increasing appreciation of that. But that's, I think, a critical linchpoint as part of our overall execution. Yeah, it's a huge industry issue. Some argue a national

security issue as well. Ajay, appreciate your time. Good to talk to you. Thank you. Thanks, man. Ajay Kochar with Lifecycle. Checking on the markets on this Tuesday. Dow continues to ride a narrow range, down 92. S&P with a one-point gain at 41.39.

Still to come, chart expert Jeff DeGraffs with us. We'll talk some technicals looking at materials and technology. He'll tell us if you'd recommend buying those sectors. As we go to break, check out some of today's top search tickers on CNBC.com. Not surprisingly, once again, the 10-year yield getting the most interest, followed by AMC, Zoom, Tesla, and AMC's Ape. We're back in a moment. Let's check out today's stealth mover. It is Grocery Outlet, which is a discount grocer, more than 400 stores in the U.S. Stock's down more than 4% after Morgan Stanley downgraded it to underweight, but raised its price target to 33 from 29.

Analyst says he still likes the stock, but after rising 40% year-to-date, it has gotten ahead of the fundamentals. Now to some sad news surrounding a Wall Street legend, Tiger Management co-founder Julian Robertson, regarded by many as the father of hedge funds, died today from cardiac complications. Robertson co-founded his firm in 1980 and built it into a titan of the industry, cultivating a group of successful managers who would come to be known as Tiger Cubs. He was well known for his philanthropic efforts and was a frequent

guest on this network and this show over the years. Julian Robertson was 90 years old. Got a mixed session for the major averages today following Monday's big downturn. The Nasdaq's currently leading the way, Dow lagging down 110. Joining us today from Renaissance Macro Research is Jeff DeGraff, who's been doing quite a bit of good work about the momentum we've seen for the past month. Good to see you, Jeff. Thanks for the time. Thank you, Carl. You make the point that the momentum has been strong, but also that it's been relatively uncommon. Can you sort of characterize what we've been through this past few weeks? Yeah, you know, momentum has really built upon itself with breadth. And that's really the key to momentum, that when you have strong momentum, if you don't have breadth, if it's just

price without a high participation rate, it really doesn't mean much. But several of our indicators have triggered. 20-day highs have triggered. The percentage of issues above their own 20-day moving average has triggered. So the combination of those is pretty rare and pretty unique. And what we find historically is when that happens, it's usually the beginning of a bull market. You can have retests. It is unusual to have retests, but it has happened in the past. But the momentum signal is usually a very powerful signal out the next three to six months. And we had that, you know, really in earnest at the end of July and then confirmed in the early part of August.

Right. There were obviously a lot of eyes watching the 50 percent retrace. Then there were a lot of eyes watching the 200 day. And then there were eyes watching the sort of stall out at the 200 day. Did any of that be was any of that concerning in these last few days? No, not really. You know, I what I'm actually encouraged by and this is just, you know, 30 years of doing this in the business. I'm encouraged that it's really hard to find the bullish narrative. You know, when I know what the narrative is, that makes it too easy and everybody's invested. This is one of the more disdained rallies and momentum moves I've seen in my career. And usually that's a good sign, not a bad sign. So I can't give you the narrative. I'd love to sit here and tell you exactly what's happening,

Carl, and all the boxes that we're checking. But what I know is that price tends to lead the narrative. And we're seeing that, as I said, in earnest. And that to me is good news, not bad news. Yeah, that's interesting. So if you had to guess what the narrative was that that price was implying, is it as simple as peak inflation or do you think there's something else mixed in there that pertains to growth? Yeah, you have to do that to me, don't you? That's an unfair question. But I think you hit it. I think if there is anything that I would be looking at that says, hey, what is consistent with what we're seeing? I think it is the peak inflation fears is probably the

better way to put it. In other words, I don't know that inflation, in fact, I don't think inflation is going to be 2% by the end of this year. But I think the fears of inflation probably peak somewhere around the Humphrey Hawkins meeting, to be honest with you. And whatever happens from this point forward is probably considered good news by the market, not bad. Now, again, that might require a retest. That might be something that builds upon itself as we go. But I do think if there's something that squares here with history of the price momentum and that narrative, it would be something to do with peak inflation or at least peak inflation fears. Right. So for those who are on board with you and are riding this idea that it's a robust bear market rally at the very least with real bona fides, at what level do you think we need to start questioning it if we reverse? Is it

3,900, lower than that, 3,650? Where do numbers get interesting? Yeah, the one thing that we do is when we're still in a bear trend, which we are, we're still in a bear trend, momentum precedes a bull trend. I know that gets confusing, but the sequencing is sentiment. You have very bare sentiment. You develop momentum. That momentum then develops into trend. Between the momentum phase and the trend phase, if you undercut, when we have the momentum signal, which we've had, when you undercut a 20-day low, which at this point is 39.10, that starts to raise questions about what the legitimacy of that momentum historically has been. We did that in 74. We undercut the 20-day low and retested. We did that in 62 and retested.

So it has happened in the past. Again, it's the oddity, not the base case, but that's the way that you protect yourself. You always have to have an out in this business to be able to control risk in those parameters. And for us, when we're still in a downtrend after a momentum thrust, we'll look at the 20 day low as our signal to pull the ripcord and say, hey, something isn't quite right about this momentum signal. Right. Right. You say leadership's murky, but where would you look for leadership to develop? Well, I think it's reestablishing itself in energy. So that's one thing. It is not doing so in materials. So I think that's an important distinction that, you know, you could look at energy and say, boy, this is back to that reflation trade.

I think it's different than that. The materials still look actually very, very weak. We are starting to see it in some of the cap goods, which is a portion of or a sub-industry of the industrials. We're seeing it in things like air freight and logistics. We're seeing it in construction and engineering. We're also seeing it, which doesn't help clarify the picture, I understand, but we're also seeing it in utilities. So utilities is actually the second best performer off the lows. So, you know, a little unique there in terms of the leadership.

And what we've been advising clients is, you know, look, you have to be on the balls to your feet. You have to be in an athletic position, be willing to move laterally, be willing to move forward, backwards. I don't know exactly how this is going to end up playing itself out, but let's be in an athletic position so that we can not be caught flat-footed here. Right. Hey, finally, Bitcoin, would you have expected it to have more power against resistance these last few days? Not really. I mean, I think I think that's part of the concept capital, which we've been

really warning clients against now for for over a year. And, you know, to me, that's that's at the tip of the spear of concept capital. It rallied. It's got a big top overhead. It fell into resistance. It really didn't have any momentum, unlike equities, which I think is interesting. And if you know, I'm not willing to be short the market here, but I'd certainly be willing to be short Bitcoin and and some of the cryptos here. Jeff, great stuff. A lot of really smart charts. Appreciate it, as always. Good to see you, Carl. Jeff, joining us. A lot of really smart charts. Appreciate it, as always. Good to see you. Thanks, Carl. Jeff DeGraff joining us from Renaissance. Here's where we stand on the markets on this Tuesday. Dow again down about 122. S&P riding 4135.

After the break, the street is buzzing about Coinbase today after Brian Armstrong defended the company on CNBC. And then short seller Jim Chanos laid out the bear case on the halftime. We're going to break down both sides in a moment. And, of course, you can listen to The Closing Bell on the go by following The Closing Bell podcast on your favorite podcast app. What's the street buzzing about today? Well, it's Coinbase. Stock's now down 70% year to date. And Brian Armstrong was on Tech Check today, talked about his strategy long term.

I do think there's going to be margin compression eventually. It has to happen at some point because everything that we're building, you know, others eventually are going to build it and it'll become a little bit more commoditized. So, you know, what do we do with that environment? This is why we're investing today in so much in subscription and services revenue. And we're realizing that trading fees is not going to be that thing that, you know, it's going to be that it's still going to be a major part of our business in 10 years from now, even 20 years from now. But I'd like to get to a place where more than 50 percent of our revenue is subscription and services. A short seller, Jim Chanos, revealed a short position in Coinbase back in March when shares were about $100 higher.

He responded to Armstrong today on the half. Services and subscriptions was $147 million in the second quarter. That's been flat for four quarters. It's not growing. And so it's a wonderful thing to sort of have you look elsewhere into the core business, which is, of course, declining.

But services and subscriptions is not growing. It's been $147 million plus or minus for the last four quarters. So, you know, that's the problem here is that almost all the drivers are under pressure. And yet, and yet, the stock trades at a stratospheric valuation relative to other broker-dealers. Let's bring in Kate Rooney and Mike Santoli to talk about Kate's interview from last night. Kate, a couple of thoughts. One was, as we talked about on Tech Check, he appeared to be softening a bit the industry's stance against regulators, less antagonism. But the other thought I had was he seemed a little more reticent, I guess, less willing to declare an end to the crypto winter than, say, Sam Bankman-Fried.

That's a great point, Carl. He did seem to say, you know, I'm not a fortune teller. I can't predict when this is going to get better. And their business is really tied to crypto prices, things like trading volume. And one of the questions is that cash burn. If this goes on for multiple years, for example, are they in a position to weather the crypto winter, as people are calling it? But that's been one of the issues that Wall Street is really focused on, that cash burn in general. They've done things like layoffs, for example, to try to pare that back.

But they've got also the competitive pressure coming in from companies that are not publicly traded, are not seeing that daily repricing that Coinbase is getting and are also operating overseas. Meanwhile, they have tried to say, OK, we are the regulated version of all these companies. We're based in the U.S. We're trying to work more with the SEC and CFTC in some examples. But interesting, like you mentioned, you know, not going after the SEC, saying we're trying to work with the SEC and CFTC in some examples. But interesting, like you mentioned, not going after the SEC, saying we're trying to work with the regulators and stay within the guardrails at this point.

Right. I'm thinking back to a lot of the sell-side calls on the run-up, Mike, and that was about revenue diversification. We can only surmise that the short is paying off for Chanos, though. It almost has to be. And I think the interesting thought experiment

is if you grant that Coinbase is going to be one of the winners, it's going to be one of the kind of middlemen in this business. You have to have assumptions about price and volume for for Coinbase. But if I look at something like, you know, State Street or Bank of New York, these massive custodians each have 40 something trillion dollars in custody in financial assets, razor thin margins, massive technological investment over time. And they've traded 10 times earnings. You know, so it's obviously a long way from here to there. But you wonder what success long term means for this kind of business, if it's going to be kind of a broker dealer model. Or you can look at the E-Trade model as well. After 99, it was a viable business. It did pretty well. It got bought out by Morgan Stanley, but it would never approach the heights of that initial rush of excitement in 99. Right. Kate, as far as big surprises to you, was there an answer that took you back? Great question, Carl. We heard from earnings a couple of weeks ago, some of the similar themes

about margins, about cash burn. One of the things we hadn't really heard from Brian Armstrong since he made this announcement a year ago was on corporate culture. They had really stood out from the Silicon Valley crowd and said, hey, guys, we're doing, they called it mission first, but a lot of people took that as leave your politics at the door, you come to work, you focus on work, and that's sort of it. And at the time, Silicon Valley really had been getting into some of these corporate issues and taking a stance politically. work and that's sort of it. And at the time, Silicon Valley really had been getting into some

of these corporate issues and taking a stance politically. He was a standout and got a lot of criticism for that. And he said in this interview, essentially, he had heard from other tech CEOs and other Fortune 500 CEOs who said, hey, we would have loved to do this, the same thing, but the political pressure was too high. And, you know, behind the scenes of those conversations, he gave a little bit of color on that. And I think in hindsight, he was saying it's probably a good thing. You've seen some of the corporate pressure with Disney, for example, and the charges of woke capitalism, some are calling it. But I think they've avoided some of that on the other side. So it's interesting to see that evolve in the past year or so. Yeah, that is fascinating.

And you really ran the bases with Armstrong. Great interview, as we said, Kitsar K. Rooney and Mike Santoli. Coming up after the break, the latest on Twitter's whistleblower complaint, plus a check on the chips, a preview of Nordstrom this afternoon when we take you inside the Market Zone. We are now in the closing bell market zone. CNBC Markets commentator Mike Santoli is here to break down these crucial moments of the trading day. Julia Borsten on Twitter's whistleblower and Courtney Reagan on a very big day for retail. Mike, in terms of interesting levels today, I would guess you'd have to say 10-year holding three. And Brent back to 100. Exactly. The 10-year three in particular, it seems to be where the bids in stocks kind of go away. We've

been sort of hovering above it pretty much all day. Not a lot of lift, but it shows you the sensitivity to those levels. This morning, we got that really weak ISM services number or the S&P Global services PMI, as they call it. And immediately we got a bond rally, yields go below three, stocks pop a little bit. So I think there's a little bit of that kind of, you know, computer spy versus spy going on with these numbers. And then crude really rebuilding. And it's, you know, essentially breaking that little downturn that's been in place since July. Still some room to the highs, but I think it's explaining why we're kind of just hovering here as opposed to having much direction and bouncing back from yesterday.

Yeah, spy versus spy. That's a good deep track, Mike Santoli. Twitter shares pulling back today as the social network's former head of security files this whistleblower complaint over the company's policy surrounding privacy, security and content moderation. The whistleblower, Peter Zatko, said more than half of Twitter servers were running out of date software and many employee computers have disabled software updates, adding that nearly all employees have access to systems or data they should not. The complaint also discusses misrepresentation by Twitter to Elon Musk, a Twitter spokesperson telling CNBC in part Mr. Zatko was fired from

his senior executive role at Twitter in January 2022 for ineffective leadership and poor performance. What we've seen so far is a false narrative about Twitter and our privacy and data security practices that is riddled with inconsistencies and inaccuracies and lacks important context. Julia Boorstin has been covering this all day today and has been talking a lot about what it may mean, Julia, for Musk's case. Well, it certainly seems like it could help Musk's case, at least the fact that Twitter shares continue to drop and move away from that price that Musk said he was going to be buying the company at fifty four twenty. Now, Twitter is down seven percent today to forty dollars.

The more Twitter falls, the less confident investors are that he's going to be buying the company at that fifty four dollar mark. So I think it does raise more questions and it does feel like all of this is going to be hashed out in that trial, which starts on October 17th. But this could give more ammunition to to Musk's legal team. I'll put it that way. His his army of legal experts. Mike, as we inch toward October and that important trial date, every incremental step will be watched to see how it might affect it. And in fact, we were waiting to see if Elon would tweet about it, and eventually he did. No, he absolutely did, clearly embracing it as at least a complication for Twitter's case in Delaware. I think it seems as if the market's assessment is the more that trial starts to seem very noisy

and a storm of all these different issues, it just raises the uncertainty factor. And Twitter's implied legal advantage in holding him to the signed contract, even though this whistleblower assertions, they don't really get it at Musk's core point that the number of, you know, monetizable daily active users includes more spam accounts than the company has said. In fact, he sort of argues the opposite. But it doesn't seem to matter because uncertainty about the trial means the stock is going to take a hit. Right. Obviously, we'll be on watch to see how the judge continues to process this, if at all. Julia, thanks.

Chip stocks gaining back some ground today after this sharp pullback in yesterday's sell-off. The focus now shifts to data center, which will be a big part of earnings this week from NVIDIA and Marvell. Gaming, too. Christina Partsenevelos joins us today on why data center is so important. Hey, Christina. Hi. Well, I guess the quick answer is consumer electronics across the board weakening, smartphones weakening, and some even argue about saturation. Whereas data center sales and big organizations can not only bring in the hardware stream of revenue, but also the software side as well. And soon enough, you think in the very near future, a lot of these servers will need to be even stronger to handle artificial intelligence. There's still lots of potential, hence the emphasis on data centers. For Intel, though, the highly profitable data center business actually underperformed quite a lot, actually, in the last quarter. The stock,

though, just yesterday hit a five-year low. Today, yes, it's trading a little bit higher at $33.91, but we might learn a little bit more about its hold on its market share later on this week. And that's because NVIDIA is out with earnings tomorrow. The company we know already preannounced weaker revenue, stating, like you mentioned, Carl, the gaming chips face a crypto hangover and challenging market conditions. Actually, they're expecting it to continue into Q3. But that also means there's going to be much more emphasis placed on data center sales. And investors will want to see long-term projections and if they will hold. Out of all of the SMH constituents, that's the semiconductor ETF, NVIDIA has actually fallen the most from its 52-week high.

And then lastly, you have Marvell Technology. That's considered more of a pure play data center company, and it's got a lot of strength in 5G. So it could be also an opportunity for market share to be stolen. Earnings are out on Thursday. But both of these companies, Marvell and NVIDIA, can give insight to how lucrative the data center business is and how it's holding up and if these companies are stealing market share successfully from Intel. That's pretty interesting. Mike, you know, Bernstein earlier in the week talked about NVIDIA and gaming, and they said, we're getting the feeling the buy side would actually like

to see a further de-risked fiscal Q3 outlook because they have had flushes out in gaming and then recovered pretty quickly. Yeah. And with the stock down this much and with numbers already coming down, there is a sense out there people want sort of a washout in the numbers and make them achievable and beatable next year. So it does tell you the psychology of investors, though, around the whole group, which is you're contending with slowdowns in a lot of the end markets at the same time as all the news flow is about a massive capital investment cycle. We need to ramp up, you know, the manufacturing capabilities, all these different players. And in general, it has computed to semiconductors losing their status as a leadership group.

It looks like, you know, even this last little rally off the lows has given a lot of it back and it seems a little bit toppy. So I do think as soon as the numbers are achievable, the valuations have rationalized a lot in most of the of the semi companies. So it's not any longer like, wow, everyone loves semis and they're too expensive. It's it's sort of like they seem reasonable, but only if the earnings are achievable next year. Yeah. A lot of good takes today on Intel Brookfield as well on that partnership. Christina, thanks. Macy's shares getting a nice pop today. The company beats on both lines, but they do cut their full year sales and profit forecast, says it will need to offer more discounts to get rid of excess inventory, especially in casual and athleisure apparel. Despite that, shares higher and we're getting more results in

a few moments when Nordstrom reports after the bell. Courtney Reagan joins us today. Courtney, does Macy's tell us anything about how we're winning down some of those inventories? Yeah, I do think it is interesting what they had to say about the inventories. They were up about 7% year over year, which really is not that bad when you think about the inventory levels that many other retailers put up. And CEO Jeff Gannett told me this morning about Macy's that actually the inventory levels were in line overall, though he said certain categories, yes, were out of whack. Those were his words. To your point, Carl, some of those pandemic categories that we were buying so much of, which we're buying less of now,

of course, they're a little over-inventoried in. And then some of the other areas that consumers are more interested in buying, Macy's would like to have a little bit more inventory, but does plan to have 55 percent of what's available for holiday being new, which is very key for a fashion retailer, of course. And that's what Macy's considers itself. Now, when it comes to what it may portend for Nordstrom, if you look just within the Bloomingdale's unit of Macy's, it was much stronger than Macy's overall. So overall, Macy's comparable sales were down 1.6 percent, but Bloomingdale's comps were up almost 6 percent. And Gannett on the conference call specifically talked about luxury and saying that it continues to stand out. They also saw some strength with Blue Mercury, which is, of course, their beauty brand, but it does skew a bit more high end when you're talking about price points.

We'll find out a lot more in a few moments, Court, with you, of course. Mike, we spoke to Matt Boss from J.P. Morgan this morning, who was rightly cautious going into the prints this past round. He thought, you know, back to school is pretty strong on a nominal basis. And as this inventory gets worked off, he did think that maybe holiday could be somewhat clean. Yeah, I mean, I do think they've mopped up a lot of the a lot of the issues. It's so hard to look at a Macy's and tease out the underlying macro consumer trend from the fact that obviously, you know, they're in a managed retreat in a way in terms of department store market share. And you look at something like Dick's Sporting Goods, pretty good response to their numbers today.

And that's a kind of a better performing chain retailer that the market pays 10 times earnings for. It seems like that's your upside case. And so it just shows you how difficult it is at this moment to be a retailer and be persuasive to investors that you've got things figured out and you have an actual growth path. I think, you know, doing better than feared and maybe being positioned OK to capture a little bit of a good nominal growth story in the latter half of the year for Macy's is as best you can hope for. Yeah. Court, I heard you and Tyler talking about cleats and sporting goods at the end of the exchange. But it's clear that, you know, Dick's, hardly any retailer this quarter had a full beaten race. Yeah, they really did, actually. And when I spoke to the executive chairman, Ed Stack, he said, look, if you know anything about our history, you know, we're pretty conservative. So for us to take up our guidance

through the end of the year, you know that we feel pretty confident. We're not one of those businesses that follows the highs and lows of the economy. If your kid needs new cleats because they grew out of them from last season, you're going to buy it for me. You're not going to say, honey, just curl up your toes and get on out there. Right. You got to win. You got to win. Court, thanks. Courtney Reagan, we'll see in a few minutes, I'm sure. A couple of minutes to go here in the trading day. Mike has a lot more on the internals that we saw today, Mike. Yeah, Carl, they're kind of mixed, actually, better than you might have expected. If you look at the breadth numbers underneath the market,

just slightly more advancing volume than declining volume for most of the day. Actually, closer to 2 to 1 on the New York Stock Exchange, a little weaker on the NASDAQ. It shows you that for the majority of stocks, there really wasn't a lot of downside follow through to yesterday's decline which was you know pretty bruising one at the index level. Talk about

energy. Look at the XOP. This is the exploration and production ETF. It's kind of broken above not the all time highs but that prior springtime high from April you can see there on the chart. So anybody who is looking for looks like it's going to be a topping pattern. It looks like maybe there's some kind of head and shoulders thing. That's a new uptrend that seems to be developing here

on the right end of that chart. That's probably going to be encouraging to energy bulls, even when you have, obviously, natural gas prices backing off a little bit today. And then in terms of the volatility index, it has held yesterday's gain. And the one-year chart, it does show a series of higher highs. Obviously, we're in a pretty confusing and high volatility macro regime. And the market's showing that. 24 is not a worrisome level, but it shows you ahead of the Jackson Hole conference and then heading into September, you might understand people bracing for a little more bumpiness, Carl. Well said, Mike.

The VIX, of course, recently hitting those three-week highs, and we'll see how that affects trading in the weeks to come. Mike mentioned energy, by the way, as we wrap up trading here today. A lot of things that got lost in the recent commentary were these comments by the Saudis about potentially cutting production if in fact the market appeared over bloated to them and as we said earlier Brent did get to 100 first time since August 12th and crude settled up about three percent as for the industrials down 147 again all roads sort of lead to Friday and to Jackson Hole we actually fell a bit this morning on those weaker than expected PMIs, lower since 2020, rebounded a little bit. Goldman did come out later and say we do expect Powell to reiterate the case for slowing the pace of tightening, and we'll see how that develops in the next couple of days.