Closing Bell - Closing Bell: Stocks Rally to End Ugly Week, Jim Grant on the Fed, Baby Formula Backlash 5/13/22

Episode Date: May 13, 2022

Stocks finished the day higher after a brutal week for the bulls. Doubleline’s Jeff Sherman and Crossmark’s Bob Doll break down the opportunities in the bond and equity markets. Fed watcher Jim Grant responds to chair Powell’s comments about raising rates, and whether the Fed can really engineer a soft landing. And as a nationwide baby formula shortage deepens, the CEO of newcomer ByHeart outlines what the White House can do to get more supply into the market.

Stocks are rallying as the market looks to close out an ugly week on a high note. With the Nasdaq up more than 3% right now, the most important hour of trading starts now. Welcome everyone to Closing Bell. I'm Sarah Eisen. Here's where we stand right now. There's the Nasdaq up 3.5%. Dow's up more than 300 points. The high of the session was up 545. It looked like we were going to lose the rally at some point, but we are climbing. S&P 500 up 2%.

Every sector is green right now. Consumer discretionary getting the most love. It's been among the hardest hit. Energy is also right up there, jumping 3.4%. Technology, communication services all stronger today. It is a rebound kind of feel with the Russell 2000 index of small caps up 3% as well. Tesla versus Twitter. Tesla shares tanking as Elon Musk puts his bid into question, and that is boosting shares of his company, Tesla. We'll talk more about those moves later on in the show. Also coming up, Fed watcher Jim Grant reacts to Chair Powell's comments that he cannot guarantee a soft landing as the Federal Reserve tries to bring down raging inflation. First up on the market, stocks bouncing back for the day, still down for the week. One notable change this week, bonds. They've actually done quite well. Take a look at the bond ETFs, the iShares Aggregate Bond ETF and the Vanguard Total Bond ETF, both on pace for their best week since April 2020. Joining us now, Double Line Capital's Jeff Sherman and Bob Dahl from

Crossmark Global Investments. Jeff, why the change in the bond sentiment this week? And does it continue? Yeah, this is not really just directed only at the U.S. market, but this is more of a global phenomenon we've seen this week. As we've seen, just more ugly pressures mount within the eurozone. You're getting more reports of high inflation there. We know producer price indices are going off the charts, screaming just elevated levels. And just the amount of gas

that's being- allocated from Russia into the eurozone is causing. A lot of problems and so what that means is it's more stagflation fears that are driving that area so. When you look at the bond rally you've seen this week. It was really

incited by global bond yields and not necessarily just the U. S. and so. You look at- for, the German 10-year has moved in about 13 basis points or so this week. It's somewhat commensurate with what we've also seen here in the U.S. And so I don't think it's something that it's the inflation reports or a change in sentiment. The Fed, this is simply kind of a global growth scare that led to a rally this week in rates. And you're seeing it kind of reverse today. So it sounds like you're not convinced that rates have stabilized here or that this is the start of a new trend. No, unfortunately not for bond investors. And I

think you've got to remain vigilant here because what we also saw during this was we really saw some cracks within some of the darling childs of the credit market thus far this week. And so things like floating rate loans, which had been immune to the credit market thus far this week. And so things like floating rate loans which have been immune to the pain- within the- the fixed income marketplace year to date- we saw some really soft- trading in those names. Really sloppy

trading but- but in somewhat orderly manner so it doesn't look like it's going to cause- any long term pain right now. But also when you look at the triple C's the lowest rate cohort within. I'll corporate you really start to see a lot of pain in the last couple of weeks by the way the high-owned corporate market has had a tough time with issuance as well for the last

couple of weeks so there's some signs out there that look like there may be some there may be yes exactly maybe some issues there but also remember too in hot inflation we got cpi we also got ppi which tends to lead CPI inflation as well. And both of those things still have very elevated readings. So I don't think that the worst in the bond route is still behind us. But I do think we were oversold. You can see some of these conditions here. So potentially we're a little range bound before we look for new direction. Bob, so I think you agree with Jeff on the bond move. What does it all mean for stocks? We're getting a nice bounce today. Every sector is higher. Is it technical

conditions? And you see this as a sort of tradable rally? Yes, yes and yes. Meaning I agree what Jeff just said. Bonds have led the way and stocks needed bonds to calm down, have a chance to rally. You add on top of that less bad covid news out of China, the sentiment numbers which are screaming for a buy. Some of the other technicals that you referenced. These are the kinds of things that have ganged up to cause this rally, which has been pretty so far. But I think, Bob, you you have liked in the past. I was looking at some of your previous appearances on CNBC, and you've liked mega cap tech, right? Names like Google and Alphabet, which have joined the sell-off pretty intensely this week. It hasn't been great,

at least as a short-term call. Do you still stick with that group? We haven't owned those stocks, and we've been underweight them and short them for some time. The only mega cap tech stock that we're overweight is Microsoft and cross on our fingers on that underweight the others. I'd rather in tech, Sarah, play old tech. Yes, we'd rather play old tech, the Intel, Cisco's, IBM's. They're cheaper. They're shorter duration stocks. I don't know that I marry them forever, but renting them now is okay. You still like the financials because they haven't had a good run. They seem to go up.

They seem to go down when bonds rally and they go down when bonds sell off, too. Yeah, we do like the financials have gotten that wrong outside of the first month of the year. Look, if we don't have a recession, that's a big if I recognize. I think the financials will have a nice rally. They have decent balance sheets. Interest rates are up, could use a little steeper yield curve, of course. The stocks are cheap. So we still like that sector. And Bob, just on the consumer discretionary sector, because it really has been buffeted around, it's the biggest winner. We still have a reopening playing out in this economy, right? But people are spending a lot to travel. They're paying higher prices. The hotels and the airlines are having some of the best quarters of their lifetime.

Is that still a part of the market you like with some of these concerns that Jeff was laying out around stagflation and slower growth? At least for a trade, but maybe that's all. You're absolutely right. There are parts of the economy that are still opening up. It's among the reasons why we think we avoid a recession anytime real soon. Consumers have a lot of buying power and you're seeing that despite airline ticket prices being up nearly 20 percent this last month. We're still seeing planes full as consumers are taking their pajamas off, putting their clothes on and getting out and doing stuff. No kidding. Handbags and heels doing very well this week for the tapestry earnings.

Bahab and Jeff, thank you both for joining us on the Stock and Bond Stories. After the break, Fed critic Jim Grant weighing in on Chair Powell's latest commentary that he cannot guarantee a soft landing. And he'll also break down what it could mean for the market. He's got an interesting call in the energy space. You're watching Closing Bell on CNBC. Dow's up 400 points. Check out today's stealth mover. It's FIGS, shares of the company which makes scrubs and other health care apparel.

I would say fashion-forward scrubs. Plunging after reporting weaker-than-expected earnings and guidance because of severe supply chain issues, the stock is now down roughly 70 percent since going public nearly a year ago, one of those IPOs that everyone was excited about and basically has just collapsed over the last year. Meantime, Fed Chair Jay Powell telling radio program Marketplace that in hindsight, the central bank should have raised rates a little sooner, adding that executing a soft landing won't be easy,

but there are paths to get there. Joining us now, Jim Grant of Grant's Interest Rate Observer. Jim, always good to talk to you. And I know you've always been skeptical on the Fed, this Fed, Feds before this. I know you said that they were very late to this. What are the chances that they can execute a soft landing and fight inflation?

I think small. And I think it's notable that only we could go after them. In the press conference that followed the FOMC announcement, Chairman Powell said that the economy is not close to or vulnerable to a recession. And last night we hear on Marketplace Radio that, you know, it's kind of whatever it takes and it's going to be rough. And so I think that what drives the Fed is not only the analysis of the many hundreds of PHA economists on the premises, but also a keen sense of institutional pride.

And the Fed was, as you observed, Sarah, very late to the anti-inflation party. And when it recognized its error, it still waited three or four months to stop QE. It was doing new QE infusions in March when the CPI was pruning at eight. So I think a real risk this time is the Fed trying to hew to its newly expressed resolve. We'll keep going in the interest of institutional dignity. But even if it was late, Jim, sorry to cut you off, but even if they were late and now they admit that. And by the way, I think it was defensible that transitory inflation was driven by supply chain. But even if you disagree with that,

it doesn't mean that they're wrong and that they can't achieve it, right? Especially if they go aggressively right now. Well, I think the transitory was demonstrably wrong based on results. And, you know, anything is possible. I don't want to dogmatize about the future. Goodness knows I'm in no position to.

But this idea that they are going to thread a medium, they are, the fact is they are tightening into a downturn. They're tightening into a downturn. Very, very tricky business, right? I mean, for literally decades, people on Wall Street, people in our line of work in the buy, low, sell, high trades have been conditioned to expect the Fed will be there when downturns arrive and they will not be tightening and easing. This is totally different. It's a very, very hazardous and should we say newsworthy proposition. It's good for you, good for me, good for the people who write about it, but it's a rather different proposition for those who are implementing it. Well, it's tough for investors because I think there are serious questions now, Jim, about whether the Fed's going to make a mistake one way or another, either doing too much on the tightening front or maybe not doing enough to control inflation, which is the

bigger risk. I think that is entirely true. I don't think the trouble lies so much with the people at the Fed as with the mission that the Fed has in its unwanted technological conceit has gathered around for itself. And I advise the viewers of this fine program to go online and look for a two-minute clip by the physicist Richard Feynman. It's called P pseudoscience. And in it, the Nobel-winning prize physicist says of social sciences, they got no laws. He's got a great New York accent.

They got no laws. Exactly. This DSGE modeling, all these pretentious effusions from the macroeconomics department. No, they are always wrong. Well, often wrong. And, you know, nothing wrong

with economic microeconomics. Market doesn't agree with that, Jim. I don't think that the market is telling you that the Fed has a credibility problem at this point. Well, the Fed, I think,

is, um... Anyway, we disagree. If the market is fearful of the Fed, that tells you, indeed, as the chairman said last week, that the market is fearful of the Fed, that tells you indeed, as the chairman said last week, that the Fed is — that they do believe the Fed is going to do something. The question before the House is whether it's going to do too much or too little. And or whether, having done perhaps too much, whether it will lack resolve and backtrack and then back in the inflationary suit.

That also is a risk. Right. and backtrack and they went back in the inflationary suit. That also is a risk. Right. No, I think some of the some of the bullishness that I hear on bounce days is, well, the Fed is going to have to reverse course. It's not going to be able to tighten very much because. Oh, we just lost your shot, Jim. We'll try. We'll try to get Jim shot back up.

Jim, can you still hear me? I think we still got your audio. Yes, the Fed did that, by the way. I know the Fed cut that, by the way. I know the Fed cut the shot off. The Fed shut it off. No, that doesn't happen in this country, Jim. No, but, okay, let's bring it all back to the market and for investors, because you

do write in your note that a lot of people on Wall Street pay attention to and follow that there are some interesting opportunities given what's happened in the market. So what looks good to you? For instance, there is the looming opportunity in transatlantic arbitrage of natural gas. This means simply that gas in this country, in North America, is trading for, what, $7 plus per thousand square feet. And in Europe, it's $30 or so per MCF. And there are facilities building now in this country and in Canada to facilitate the export of liquefied natural gas. And I'm not sure that much of this has filtered through to value these equities.

So we have been looking at energy for a long time in a bullish light. And I think there are opportunities all over the place in energy. One example. Opportunities, too, in some financials. Bank index is down a ton this year. Not every bank is deserving of that treatment. Not every business development company is deserving of the treatment. Meet it out to that group.

So, yeah, a lot of babies, a lot of bathwater. And now we think it's kind of the value restoration project is underway. It's good times for value-seeking people who are prepared to do some analysis. And just to be clear, so you like American gas companies, which which have done pretty well already, and U.S. financials, which have not. They've given up a lot of their their gains. I'm saying that's where we are looking for opportunities. We find some, especially in Canada with respect to gas. There are opportunities and financials in europe as well as in this country but you know the markets have been driven for so long sarah by this great gush of liquidity and

people i think have been rather uh getting a little bit sloppy about what is dry what's one of the business fundamentals we are looking at grants for business fundamentals. Jim Grant, always good to talk to you. Thanks for rolling with the punches there on the technical issues. Grant, interest rate observer. Let's check in on the markets right now. Rally's going strong. We're up 4.45 on the Dow.

S&P 500 zooming 2.4%. Every sector is higher. Consumer discretionary and Jim Grant's energy sector are the leading ones right now. The NASDAQ coming back. It's up almost 4% right now, still lower for the week, but making up for some of those losses. After the break, Mike Santoli taking a look at the four quality growth stocks that are trading at a discount to their long-term valuations after this month's market route. And as we head to break, check out some of today's top search tickers on CNBC.com. Ten-year yield right on top where it always has been. It's actually selling off today. Yields are a little bit higher, but we're not going back over that 3% on the 10-year. There's Twitter after Elon Musk puts the deal on hold, or at least tweets that, down 9.5%. Tesla, though,

rallying sharply off that news, 6% higher. Apple coming back after a tough week, 3.5%. And so is the S&P 500. Right now, 2.5%. We'll be right back. Welcome back to Closing Bell. Just want to show you the gain in the Nasdaq composite up about 4% right now, really cutting into the losses for the week. At one point yesterday, the Nasdaq was down about 8% for the week. Right now, it's only down 2.6% because this is a monster comeback we're seeing. And it's led by a lot of the biggest losers, EV names like Lucid up 15%, DocuSign up 14% and Zoom.

So the stay-at-homes, the Z-scalers of the world, some of the CrowdStrike holdings. So we've seen all of these areas of the market get pulled into the selling recently on higher rates, including those cybersecurity names. They are doing very well today at double digits. We've got a news alert now on Twitter. Deal news playing out. Where else on Twitter? Julia Boorstin with the details.

Julia. It's all playing out on Twitter, Sarah. Twitter CEO Parag Agarwal tweeting a series of tweets weighing in after yesterday pushing out two senior executives at the company and also after Elon Musk posted that tweet saying that the deal is temporarily on hold, pending details supporting the calculation of spake and family accounts. Agarwal tweeting out, well, I expect the deal to close. We need to be prepared for all scenarios and always do what's right for Twitter. I'm accountable for leading and operating Twitter and our job is to build a stronger Twitter every day. He also talks about

how he's going to try to bring more transparency to the work that they're doing and why he's working to manage costs and also why he made those management changes, saying that they're not just working to keep the lights on, but they want to make this the best company possible. We see Twitter shares, though, down more than 9 percent. Sarah? It's not, I mean, it kind of makes you feel bad for the guy. He just, he's following Musk, who appears to be doing this on Twitter. It is so untraditional. Usually if a deal were on hold, Julia, wouldn't you, wouldn't you see both parties agree to some sort of press release? Well, yeah, this is, this is certainly unconventional. I would say that's kind of what you would expect with Elon Musk.

And yeah, he's trying to figure out how to run the company. He's having to react to what Elon Musk is tweeting out. And then there's this question of what does the future hold in an industry where everyone's concerned about a potential advertising contraction in light of inflationary pressures and everything else. So a lot of pressure right now on CEO Parag Agarwal. And of course, we don't know what's going to happen to him after Musk takes over. Right. Well, it's not it's not helping the stock, as I mentioned, down nine and a half percent. Julia, thank you for the update. So the washout over the past few weeks means some growth names are now trading at a pretty big discount compared to their average price to earnings

ratios from the last 10 years. But one high profile name isn't quite there yet. Mike Santoli explains in today's dashboard maybe some opportunities here. Could be, Sarah. Yes, definitely not a trading call. But when you do have this very aggressive widespread selling that's been sweeping most of the indexes lower, you do have some value start to surface. This I would call quality growth, various quality buckets out there that I just sort of scanned and picked a handful of stocks from different sectors that are trading at the low end of their 10 year forward P.E. ranges. And Charles Schwab is an interesting one. It always trades at a premium, very high quality financial. And here you have it basically down at as low as it's tended to trade over the last decade. Now, AutoNation, very, very cheap looking, obviously some fundamental issues with canoe and used cars dealerships, but that might be discounted in there. And then Omnicom, the big advertising company, Best Buy. We can quibble with these. We can say the earnings are vulnerable. We can say that cyclically it's not a good time for these stocks. But considering

that we've been in all sorts of markets over the last decade, it just shows you that for a longer term holder, this is the kind of scan that might make sense. Now, one of the exceptions to this rule is maybe what's considered the highest quality company out there in terms of balance sheet, in terms of the steadiness of its performance. That's Apple. That has not yet come back down. So this is a decade. Remember how cheap it always was back in the kind of early iPhone era? Well, we've got up to almost 30 times earnings. You're back down below 25. And it's been this repository of capital for people finding safety. Buffett's in there. He's not selling. It's a buyback story. So maybe it doesn't have to revert to the mean. But this is not the area of the market that has so far looked as if it's different because they've gone through

it. To your point, so many evolutions as far as just where their revenues come from, the whole services component gets priced in and they get a higher market. I don't, nobody says it's got to go back down to 12 and 13 times earnings. But the question is, does this now rebuild the margin of safety in the stock? That's the question. Yeah. Mike, thank you. We'll see you soon in the Market Zone. America's baby formula shortage making national headlines and bringing to light the real pain caused by supply chain problems.

The co-founder of baby formula maker, BuyHeart and what the White House should be doing to fix the issue. We know they are trying. A lot of headlines on that today. We'll be right back. Dow's up about 500. You have seen the headlines. Parents across the country struggling to find formula right now to feed their babies. Abbott Labs shut down a factory in Michigan back in February after a potential bacteria outbreak and still hasn't reopened. That's just aggravated the shortages created by pandemic supply chain challenges. As of Sunday, 43 percent of baby formula nationwide is out of stock. President Biden met with retail and manufacturing executives yesterday about it, including Walmart and Reckitt, the maker of Enfamil. The FDA saying today will outline a plan next week to streamline imports of infant formula. We barely import any of it. And joining

us now is Mia Funt of ByHeart. It is the first new infant formula manufacturer in over 15 years to be registered with the FDA. Mia, welcome. Nice to have you here. Thank you so much, Sarah. Wonderful to be here. I can't even imagine what it's like to be entering this market in this country at a time like this. How fast can you scale your production? Is that the question? I can tell you, you know, we have launched in an unprecedented time in the industry, in the midst of a crisis, when parents are more stressed than ever.

I'm a mother of three with a 10-month-old Simone. I'm in it. And the idea of any parent not having access to food for their babies, especially infant formula, sole source nutrition for their babies, is just unfathomable. We are so proud that at this time, ByHeart can show up for parents as only one of five infant formula manufacturers in this country to do everything we possibly can to support babies with highest quality infant formula. But actually, ByHeart started five years ago before a shortage with a real commitment to innovation and to quality and to use the latest nutrition science and cleanest ingredients to create a formula that got closer

to breast milk than anything before. Our formula was so highly, the launch of our formula was so highly anticipated because industry hasn't changed in decades. Well, right. And I think, Mia, not to cut you off, but I think that this shortage and this crisis is really shining a light on the industry, which is this sort of bizarre oligopoly of three companies. And we can show some of the stocks. Abbott, which makes Similac, which is what every mother gets in the hospital. I remember that. They dominate. Nestle, which makes Gerber. And of course, we were talking about Mead Johnson as well. How did the industry become like this? Is it powerful lobbying? Is that why we don't import for other brands from other countries and why they have this stronghold on the market? You're absolutely right that this is a category where 90 percent has been dominated by three big players and every

new entrant has gone to the single single contract manufacturer in the country which has given them quite limited control over their supply chain and and also meant that they could only make slight iterations to the recipe on the shelf. This is a very meaningful dynamic in the market. With our launch, we became the first new infant formula manufacturer in over 15 years. And that's because the path to truly innovating is incredibly rigorous. This is the highest, most regulated food in the world, rightfully so, because it's sole source nutrition. To innovate, it requires clinical trials. The barriers are incredibly high. So we took a path that no new entrant has because we knew that the only way that we could truly change the dynamic in the industry and innovate was to own

our end-to-end. So we acquired our manufacturer, directly sourced our ingredients, own our product development, ran the largest clinical trial by any new brand in the last 25 years. But that is really something that no other new entrant has been able to do in the last 15 years because the barriers are so incredibly high. It's amazing, actually, that you managed to do that, given the stronghold that these companies have. So, Mia, what would you advise? The White House is clearly thinking about this, talking about this. We saw Speaker Pelosi making some headlines. They're looking at their options. They're trying to increase, I think, imports from other countries.

What would you suggest? All I can tell you is that at ByHeart, you know, we understand that this is sole source nutrition for babies. And we take this very, very seriously. And I know that the whole industry, every player, every stakeholder is taking this very seriously and rightfully so, because this requires utmost attention. This is an incredibly urgent situation. We launched in the middle of a national crisis where so much of formula is out of stock, where parents are more stressed than ever. And that has led to unprecedented demand in our business. The number of by heart families is spiking more and more every day. The dynamic is changing hour to hour. Our launch has accelerated dramatically. I can tell you at this rate of the last few days, we have exceeded every case we mapped for the entire year in just three

months. We're already pacing targets we had initially for three years, for years. And you have the supply? You're able to get the supply, all the ingredients, given all the challenges around the world? I can tell you that our most fundamental responsibility is to support as many families as possible and to do everything we can to ensure that no matter what, a baby that starts drinking By Heart Formula can continue to drink By Heart with no disruption

and with peace of mind. And because we own our supply chain and our manufacturing and direct sourcing, we have more control than other new entrants. We have control over things that, you know, are incredibly important. And we're throwing everything at this problem. We're doing things like moving from a 24 hour, five days a week shift to 24-7. We're hiring relentlessly. We added a whole new shift. We're pursuing expedited expansion for our facilities. We already invested $20 million. We're investing another $30 million in our facilities. We're adding customer service because parents need support in this time. Nothing is off the table, but we can't do it alone. We're rallying every kind of stakeholder, industry, state and federal officials,

regulatory bodies. We're in a national crisis for the most fundamental food. We started this work before the crisis when we acquired and upgraded our own facility. And we've worked to build best in class manufacturing in Pennsylvania with the incredible support of lawmakers. But we intend to continue to work with them. And we are so grateful that there's now so much attention, so much needed attention on this category. Well, Mia, thank you for joining us to talk about some of those efforts and the new innovation. I could go on and on about this. I have lots of thoughts as someone who felt very pressured and the whole pressure around breastfeeding and lack of research around infant formula. I know why you're doing what you're doing.

So thank you, Mia Funt. And we'll continue to talk about it because it is actually a crisis right now. Thank you from Byheart. Here's where we stand right now in the markets. Up 2.18 percent on the S&P 500. So it's a rally and it's holding, unlike some of the other rallies that we have seen this week. We're still down for the week, but we are cutting into those losses. Now 2.6% lower on the week. NASDAQ 100 really zooming higher, up 3.5%. A lot of the beaten down tech names, including some of the biggies like Apple, Nvidia, and Amazon Amazon and Tesla, all taking us higher. The market was all about inflation this week and

the impact of inflation on corporate profits could become more clear next week when several major retailers report earnings. That's next. Welcome back. We are unveiling a new Friday segment called Top of the Week, the biggest market event of the week and the biggest potential catalyst for next week. This week, it was all about inflation. April CPI showing prices jumped 8.3 percent, which was actually a moderation from the month before. But there were some troubling trends inside the report showing inflation is now spreading into parts of the economy like services. Market didn't take it well. The question now, will those price increases translate to tighter budgets? Next week's highlight will be big box retail earnings.

Tuesday, Walmart and Home Depot. Wednesday, we'll get Target and Lowe's. Walmart and Target have been safe this year, outperforming the market by a wide margin. Home Depot and Lowe's, not so much. They've underperformed on bets that the housing market is going to soften. The question is, is the sting of inflation starting to cut into consumer spending? University of Michigan consumer sentiment just out showed a 10-year low. Whether the U.S. consumer is healthy enough to withstand higher prices and higher interest rates is going to be the key investor question of the moment to see whether we can avoid

a recession. When we come back a firm a big winner today on the back of results earlier this week mizuho's dan dolev explained why he was so bullish on the stock heading into earnings despite the recent fallout in fintech remember this the amazon deal that they have is massively accretive and i think that's going to get to catch all these bears by surprise. I'm very bullish about it. Turns out he was right.

Up next in the Market Zone, Dan Doleth tells us how much more the stock can rally. We'll be right back. We are now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day.

Plus, Truist Yusuf Scully on the latest Elon Musk Twitter takeover drama. And Mizzou host Dan Dolev on Affirm's post-earnings rally. We'll start with the broad markets because we are seeing a nice rally to end this week. Every S&P 500 sector in the green. The Nasdaq is the outperformer. And Mike, you don't have to look far to see the comeback stories today. You wanted to highlight the chips, the semiconductors, because they've been an area of pain, basically, this year.

But outperforming this week, even in a down market, is that a bullish leading indicator? Making an attempt. I mean, I think everything is very contingent. Any inference, any judgment you make about the action today, you have to contextualize it and say everything's down a ton. The trends are lower. But you look for glimmers like this on a one week basis and semiconductors have taken their pain. Maybe they're trying to, you know, find some demand from some longer term holders as opposed to just being flipped right here.

We have to take a look. And that's as distinct from some of the really obliterated sectors of the hyper growth tech stocks, the heavily shorted names, which, of course, are going to be bouncing the hardest today. I think the bigger question or the bigger takeaway is we did see some indications of selling exhaustion. You saw this tape get stretched pretty far. The Nasdaq dropped a half of its entire rally from the March 2020 low. The S&P went down almost 20 percent, a very logical place to bounce. We have to see if it's more than just a bounce. So far, it's OK, but we can still go up 7 percent from here and it still just looks like a reflex bounce. So that's the zone we're in. Yeah. Good morning there, Mike.

Thanks. Check out shares of Twitter today. It is the worst performer in the S&P 500. Shares falling after Elon Musk tweeted this morning that this deal is temporarily on hold, pending more details on the number of fake accounts on the service. That news sending shares of Tesla sharply higher, on the other hand, perhaps easing some of the fears about Musk's plan to pledge Tesla stock as collateral for the deal. Musk then followed up on his tweet a few hours later, saying he's still committed to the acquisition. And then Twitter CEO Parag Agarwal tweeting this hour that he still expects the deal to close. Let's bring in Truist Managing Director Yusuf Scully.

How, Yusuf, do you cover this stock as an analyst right now, not knowing what's happening here? Well, you try not to react to these tweets at 2 a.m. every few days, but it is what it is. So, and Musk is no stranger to these kinds of controversies. So the way we look at it is, as you know, we've downgraded the stock right after the deal came through, telling investors that, you know, take the money and run. We think this is the best you're going to get. Since then, there is a chance that Musk may be getting, you know, kind of some second thoughts either by himself or by or hearing from investors that he's going to to try to raise the 44 billion dollars that he needs to to close this deal and there are really two issues one is about potentially and this is important the numbers of users being not correct i.e there is fraud here and if he's clearly if he's able to to prove that and we don't know exactly, and we haven't heard back from

Twitter on the topic, but if that's anywhere near true, then, you know, all bets are off. And the other, even if— Is that true? I mean, I know you're not a lawyer, you said, but I'm sure you've looked at the contract. Is it contingent on reliable public information that Twitter's put out? Well, so what's interesting is that in the contract, Twitter is giving itself cover. They're saying it's less than 5 percent, but these are internal measures that we're using. It could actually be a little higher. We don't really know. Right. So that's specific in the contract. The question is, can he go back and say that's not enough?

It's the actual number is 10 percent. It's not 5 percent. And therefore, the little bit off is not enough to give you cover. Right. To me, that's really important. And maybe even more important is at the end of the day, he really wants this deal to happen, but maybe at a different valuation. When he came and made the offer and offered $54.20, that translated to roughly seven times revs back then. Snap was traded at 10 times. And since then, the group, the Internet Digital Media Group, is now 24%. 24%. So maybe he's getting second thoughts. Maybe the investors that want to be part of this deal

just think that the valuation is too rich in this kind of environment. And he's trying to remedy that. Maybe. It's 40 now, well off of where he said he was going to buy it at 54.20. Yusuf, thank you. Yusuf Skully. Thank you. The Nasdaq sharply higher today. Affirm is near the top of the list. Our next guest said he was still bullish on Affirm earlier this week amid a sharp pullback in the fintechs. His call is looking like the right one, at least today. Shares are up more than 30 percent after the company beat estimates for the first quarter with a smaller than expected loss and a revenue beat. Amazon, a big part of the story. Mizzou senior fintech research analyst Dan Dolev joins us.

And, Dan, you know, we gave you some grief a few days ago for recommending some of these stocks that have been hit so hard. So now we'll give you a victory lap on the call for a firm, at least on the quarter. Do you expect this to reassure investors into some sort of longer turnaround? Yeah, and I'm collecting. Again, first, thank you so much. I appreciate it for that. But look, I actually think, and I'm not a strategist, but I actually think this is the bottom in fintech. And not for everyone, but I'd say for

all the high-quality stocks. And we call this FIFO, first in, first out. Fintech was the most to benefit from COVID early in 2020. And it's the first to come out of those tough COVID comps. And we're expecting a very nice rally into the second half. I think Affirm is the manifestation of that. I think you're going to see that helping Square, you're going to see it helping some of the other names, Robinhood. But I think Affirm today is just the beginning of a nice rally into the second half. And it's a great business, and now people realize that.

There was a lot of worries that people are forgetting. There were a lot of worries heading into the quarter. Somehow I think that Mike Santoli is going to take the other side of this. Well, all I'm going to say is that, you know, obviously the worst fears were not realized and things were better than many people were braced for in terms of the numbers right here. But it doesn't change the bigger picture that at least right now in this market moment, fintech is being treated as more fin than tech. And so it's really going to be about the credit cycle, the credit experience that these lenders have,

and what the user economics look like from here. So it very well could be that the worst is over, but forget about the highs. They're down 80% share price-wise. So I do think that they could bounce really hard from here and still kind of be in the penalty box from the market. It's true, Dan. I mean, so much of what's happening in the market now isn't necessarily being communicated or heard by companies right now, right? Visa is saying that it didn't see any consumer weakness. And yet we know that that's coming, right, with higher interest rates, squeezing everything from home loans to auto loans. So if we do see a real turn in the credit cycle and consumer credit quality, what happens to an Affirm? So to second what you're saying,

Toast yesterday was saying that they're not seeing any weakness. Remember, they're sitting on 62,000 restaurant point of sales in the small restaurant point of sales in the U.S. That's a very positive, optimistic data point. So if the credit side, I mean, let me say something specific about a firm, and this is very important. The highest quality borrowers, the percent of them kept going down every quarter up until this quarter, and it stopped, which means that they were able to basically sustain the amount of highest quality borrowers. Now, if things turn south in the economy, that's not a firm issue. That's a broader issue. That's a credit issue. But I think the way what I'm hearing, what they're talking about, you know,

the delinquencies coming down, those are all positive data points. I know there's a lot of fear, but I think that the economy is much stronger and this business model is much stronger than people are giving credit for. Dan Dolev thank you for joining us. Reiterating the bull call on a firm in broader fintech. Let's go back to the market right now. Dow's up about 400 points as we head into the close joining us now. Someone

else who recently had a good call on the show Katie Stockton from Fairlead strategies. On the technical analysts analysis Katie and we've seen we had you on during a bounce attempt and you just were not convinced. We're having another real bounce today. Are during a bounce attempt and you just were not

convinced. We're having another real bounce today. Are you a buyer? Is it time for an oversold rally or are you still not convinced? I mean, I think it is an oversold rally and we certainly welcome that. I do think it's more significant than the last one that we saw, meaning that it should last a couple of weeks by our measures. Our indicators are flashing some short-term oversold buy signals finally. That's based in part on the Demarc indicators for those that know them. And we're expecting a little upside here. It should see some high beta hour performance just with that shift in sentiment, which as you know, is extremely bearish at this point. And yet we're not calling this an intermediate term low. And that's because we just don't have any improvement or those kind of oversold buy signals on the weekly charts and certainly not on the monthly charts, meaning that the intermediate and long

term posture of the market is still very tenuous. We'd rather than buy into this bounce today. We'd rather just recommend folks wait to reduce exposure and keep to that kind of tight stop loss discipline to manage risk. Also want to hit Bitcoin with you, see what the charts are showing, because we really did see one day where it looked like it was crashing. We got to below 26,000 on Bitcoin. And there were all sorts of concerns about what that might mean for the system now that it has grown so much into so many different product areas of the financial system. Katie, what happens next? Well, people are definitely treating it like a risk asset.

And that day did feel like a bit of a selling climax. We had the same DeMarc signals that we have for the major equity indices, interestingly, for Bitcoin. So essentially a short term oversold buy signal. And that came as support of roughly twenty seven thousand two hundred in our work was tested and tested successfully. So for Bitcoin also we're looking for a short term oversold bounce. But within the context of that weaker intermediate and long term momentum posture. And as you recall it follows a. And these breakdowns are across risk assets. And the breakdowns to me suggest that we're still in for more volatility over the summer. Even we know already that we're in this higher volatility cycle. And to us, while volatility may contract for a couple of weeks, that's just sort of part and parcel with what we've seen already. And we're just expecting sort of a macro shift as that happens. But that should be temporary.

Mike, I'm curious what you think about Bitcoin, because there are some skeptics who say and these are typically the haters who say that this is a classic sign of froth in the market. And until we see a bigger breakdown in Bitcoin and we see where those structured products are buried and where they're causing a lot of pain across Wall Street, that this big sell off is not going to be over. Yeah, there's a big what-if question around it. I think there's a larger observation you can make, which is so much of the excitement was truly about price momentum and greater participation in mostly the trading aspect of crypto as opposed to all of the promises of what it was going to become. And so maybe you're creating some kind of a test of exactly what's there underneath. And I just don't know at what price that gets revealed. Katie Stockton, Katie, thank you for your calls on Bitcoin and the S&P.

Two minutes to go on the trading day. Mike, what do you see in the internals? Very strong pretty much all day, Sarah. And in fact, a lot of people are going to scrutinize the breadth numbers today during this rally to see if, in fact, we get a 90 percent of all volume to the upside. So far, that's what we're seeing. Many people are going to check off that as a box that says, OK, maybe this rally has some legitimacy. You get a breath thrust. It doesn't mean the low is in, but it does give some credence to people who feel like the risk reward is better in the short term. Move on to some of the consumer names. Staples has been outperforming consumer discretionary very dramatically all year. You see that quick pop-up in consumer discretionary,

just very oversold relative to the rest of consumers. See if that has any further lift to it there. The volatility index has been conspicuous, not spiking above 35 this week. It's now giving way. And clearly, maybe it has some room down into the low 20s if the market stabilizes into expiration next week, Sarah. Well, I don't know if we can pull up the ARK Innovation ETF, ARK, up 12 percent right now, almost 11.6 percent. Speaking of companies and areas of the market that are rallying hard today that have been hardest hit. This ETF is still down about 54 percent year to date. But look at the rally today. Robinhood's a key part of it. And some of the other names which are bouncing, I don't know, 18, 20 percent,

some of the biotech names in there. Overall, it is a solid day in the market. The S&P 500 up 2.3 percent. It's still down for the week about two and a half percent. But again, we were down double that heading into today. And it is the sixth down week for stocks in a row, seventh in a down for the week about 2.5%, but again, we were down double that heading into today and it is the sixth down week. Four stocks in a row, seventh in a row for the Dow. Dow Jones Industrial Average is up about 453 points here into the close. Most of the Dow stocks are higher right now. The biggest contributor to the Dow gains is Nike, Salesforce, and American Express. The Nasdaq closing out with a gain of 3.8 percent. Strong comeback rally after

another tough week for investors. That does it for me on Closing Bell. Have a great weekend.