Closing Bell - Closing Bell: Stocks Rebound, Recession Risks And Buy The Dip 8/15/22

Episode Date: August 15, 2022

The market staging a comeback from early session losses following weak economic data in China. Fundstrat Head of Research Tom Lee thinks stocks could be heading to all-time highs and investors who are skeptical of this rally are missing out. Laffer Tengler Investments’ CEO Nancy Tenger reveals which stocks she sees value in amid this 4-week market rally. National Bureau of Economic Research Chair John Lipsky discusses whether the China slowdown raises the risks of a recession in the U.S. and around the globe. JPMorgan Retail Analyst Matt Boss on what he expects from retail earnings ahead of tomorrow’s results from Walmart and Home Depot. And UTZ CEO Dylan Lissette discusses the outlook for food inflation and why consumers continue to buy his company’s chips and dips despite several price hikes.

The summer rally proving resilient here as stocks bounce back from a pre-market dip. We are sitting near session highs. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look at where we stand right now in the market, up almost half a percent on the S&P. We were down as much as about half a percent on the S&P 500, so 1% move there. The Dow up about half a percent, 172 points. Again, at the lows of the session, we were down almost 180. And the Nasdaq up 6 tenths.

Only two sectors are lower right now. That's energy and materials. Everybody else is higher. Staples are actually leading along with consumer discretionary. So it is kind of a mix of the defensive groups and the cyclical groups as well as technology. Nasdaq 100 up almost three quarters of 1%. Chart of the day, the oil complex. Look at oil prices

down three percent at least. Energy stocks are getting slammed. Concerns are mounting about China's recovery. Some weak economic data there we'll talk about later on. Coming up on the show, Fundstrat's Tom Lee will join us with his latest thoughts on the market and whether China's downbeat data poses a risk here to U.S. investors. Let's dig right, though, into the markets with the dashboard. Mike Santoli here with a look at the market comeback and the sentiment turn that we've seen along with this momentum, Mike. Yeah, Sarah, it's always kind of a life cycle of a rebound. And so at first, oh, the market's oversold. It's just a reflex bounce.

Then it's more short covering, a little bit of a chase higher. And everyone was worried about whether we were going perhaps to gain more than half of the total losses of the total bear market decline. We have done all those things in sequence. And clearly, a lot of big investors were somewhat underexposed to stocks. They're chasing it. They're clicking higher. And we're now sort of racing to the next test. S&P is sitting right around 4,300. If you had the the 200 day average in here, it would come right down there. It's not even 1% higher than this. Obviously, it also gets back to these sort of early May highs. So a lot of these hurdles that are right ahead of the market might be somewhat telling. But so far, the market is showing some technical, mechanical signs of genuine demand, giving some reassurance that the June lows are pretty substantive at this point

anyway. Another thing to keep in mind, right around that 200-day average, that's when you get back to the minus 10 percent threshold from the all-time highs. So a lot of things come together right there. Usually it's not a V. You have to chop around a little bit and give back some. We'll see if that happens. In terms of the risk appetites, a lot of what you'd want to see is a broad rally, a lot of participation among a lot of stocks. One want to see is a broad rally, a lot of participation among a lot of stocks. One way to look at that is the equal weighted Russell 1000. Here it is down less than 6 percent from its all time highs. This is high beta stocks now outperforming the S&P 500 on a year to date basis. That was certainly not the case a little while ago. Those are the

more volatile, more aggressive, lower quality stocks to some degree. And that's the rest of the world. That's the all country world index, except for the U.S. And it has not really done a whole lot. It's kind of flatline. And that's basically where the dollar peaked as well in mid-July. That shows you a little bit of that separation there. Also, as U.S. growth stocks started to take some lead, they are the thing that distinguishes our indexes from the rest of the world largely is those big mega cap growth stocks. So, I mean, there are some clues there, but how ultimately do we know whether we're in just a really impressive bear market rally or the start of a new bull market? It sounds simplistic, but if it continues this way is one way to know.

Credit markets are somewhat confirming what the equity market is telling us, but not entirely. It's not exactly like back to the best levels that we saw early this year. And clearly, technicals and market action precedes fundamental confirmation. So at some point, you need to see that the economy is going to hold up, maybe that the Fed is going to be less aggressive, all those things that are now built into the bull case. Well, our next guest does have an opinion on the matter. Mike, thank you. We'll see you later. Mike Santoli.

Let's bring in Tom Lee from Fundstrat. And Tom, it's been a good call so far, your bullishness, especially when you were sort of out on a limb and everybody was so bearish. But now that a lot of investors have caught up with you and we've seen sentiment turn as momentum higher continues here. Are you still feeling as bullish? Yeah, in short, Sarah, yes. I think most of our clients think this is just a bear market rally that will fail and we're going to retest the lows. And in fact, there's quite a number who have been sitting out this rally waiting to short because they think we could move towards 3000. So I think there is a bias right now for investors to think this is a we're in the early cycle of a recession, markets making new low. I think the signaling coming from equities, especially sector leadership,

is arguing that this is proving to be maybe a growth scare. And as the inflation data weakens and economic data softens, that actually makes the Fed's job easier. And then I think in the second half, we're going to get quite a lot of PE expansion and better earnings. So that's why I think all-time highs is possible. But already we've added, what, three points to PE? We're around 18 right now. The price earnings multiple just in the last few weeks. Yes, that's right. I think what investors have to ask themselves is if their view is correct and we have an inflation problem, why is the 10-year at 2.75 percent? Because that's a 37 P.E.

or a 10-year bond with no upside and losing you money owning it and if that's if the 10-year is anchored correctly i think the s p p e is going to drift back towards 20 to 25 times and at 20 times you get towards s p 5000 so i i think that the burden is on the market to prove that the tenure has to move towards four or five percent before they can be bearish on equities. Well, there are bearish investors, Tom, who say that the bond market has become too dovish here and that it's ignoring what it's hearing from the Fed, which all the messages from even the most dovish Fed members are that we still have work to do on inflation. That's right. I mean, that's a great point. There's a divergence between what the Fed is saying and wants and what the bond market's doing.

But as Volcker says, if he could be reborn, he'd want to be born as the bond market because the bond market really tends to signal where the Fed should go. I think you've heard that from a lot of your fixed income and macro investors, that the bond market is telling us the Fed might be done sooner than they realize. And again, it's whether you're looking at the 10-year or the 2-year, it's telling us inflation's not as sticky as people perceive it to be. Another argument that I hear from some of the folks that you say are a majority of your clients that think we're going to retest the lows is that we've almost become complacent about the bad news. Look what happened this morning. We got a sharp drop in New York Empire manufacturing. The Chinese data was really weak and the market did not get any comfort from the rate cut that we got out of China, the increasing recession risk, just the idea that we've become complacent, the VIX going below 20, and that that is actually not a good thing. I mean, these are certainly signs of complacency,

but they're also signs that investors are positioned for far worse. I mean, as you know, this is bad data on an absolute basis, but this is maybe not surprising markets. I just think too many folks think we're heading for stagflation or years of inflation or depression. That's what we hear from even our most fundamentally focused clients. They just have a lot of fear and lack of visibility. I just think the market's reaction to all this bad data is really the signal.

So you think the bad news is good news, ultimately, for the economy, which I think you have to if you want to be bullish right now, because we are expecting more downside news on the economy. That's right. And as Tom DeMark likes to say, markets when markets bottom on bad news. So we're rallying in the face of bad news. I think investors have to respect that and realize that's usually what happens at a bottom. So what part of the market do you want to be in? Because if you look, I'm looking in the last three months, the best parts of the market are the most beaten down. Not just consumer discretionary technology, but some of the most speculative, some would call junky stuff, has rallied so far.

Is that bullish? And would you want to continue to buy into those areas? I mean, I just think the leadership in the second half is going to come from Fang because they're going to outgrow GDP and they're below market multiples now. And their ownership has almost collapsed from the institutional side. So I think that they're going to be the first liquid groups to really re-rate. But the meme stocks, I think, is actually a good sign. It just means retail investors are back. And I don't necessarily say I would be recommending stay-at-home names, but they're down 90 percent.

And as you know, they could still double, and then they'd be only down 80 percent. So I don't think it's a sign of where institutional money is going. It's just showing you a sign that when you fall in 90 or 95 percent, you can bounce for a long time, and it's still way off the highs. Final question, because we're expecting earnings this week from Home Depot and Walmart and Target. And obviously we're going to be wondering the state of the consumer after some of those profit warnings from some of that group. What if the recession can, what if it's worse than feared even on some of these, whether

it's these numbers, commentary, the economic data? At some point, doesn't bad news have to be bad news and get factored into earnings multiples? Sarah, I think that there is continued weakening coming. And so I expect, you know, some negative comments to come out of these companies. But I think investors have to take a step back. This is very similar to 1980. This was a recession dynamic created almost by a point made because monetary policy triggered and flipped, and there was a huge announcement. This is what the Fed wants to see. And of course, because that's the dynamic underway, the markets are, I would believe, are going to go vertical when the Fed actually pivots.

So I just think people have to be careful. This is not a business cycle where there's a lot of leverage that has to be fixed and we have to rescue banks. This is a slowdown engineered by monetary policy, almost by announcement. So we want to see this happening, but that doesn't mean we have to have a recession. Tom Lee, sticking those guns. Thank you very much for joining me today. Thank you. From Funstrat.

And speaking of Walmart, we've got some news on that company along with Paramount. Julia Boorstin with the story. Julia. Well, Walmart and Paramount have reportedly reached an agreement to bundle Paramount Plus together with Walmart's subscription service. This, according to a report in The Wall Street Journal. We've reached out to both companies for comment, have not heard back yet. But Sarah, just to put this in context,

I have talked to various sources who told me that Walmart is talking and had been talking both to Paramount as well as some other streamers with the idea that offering an additional streaming service as part of that Walmart Plus membership, which costs about $100 a year, would help bolster it, make it stickier, make it more appealing. And then for the streamers, of course, this would help expand their reach.

Paramount Plus does have a version with ads, and so this could help generate more ad revenue there as well. But it's all about the new bundle. It's all about locking people in to subscription services and minimizing churn. We'll get back to you when we hear more from those companies. But as of now, Paramount shares up about two and a half percent on that report. Back over to you, Julia. Thank you, Julia Boorstin. Up next, we will talk to the chair of the National Bureau of Economic Research, NBER. Remember the group charged with designating when

a recession actually begins. For his read on the current state of the U.S. economy, you're watching Closing Bell on CNBC at 142 on the Dow. New data out today showing China's economic activity slowed across the board in July, prompting an unexpected rate cut. Pretty different picture than what we've seen in the U.S., most recently with CPI and PPI heading in the right direction and the labor market holding very strong. Joining us now is John Lipsky, the chair of the National Bureau of Economic Research. He was also the former acting managing director of the IMF. It's good to see you again, John. Welcome back. Thanks, Sarah. Nice to be here. I wanted to start with China because even though we knew that China's been in lockdown mode and the economy's been

weakening, I think the news still came as a surprise and we were seeing the reaction in commodities markets. And investors who typically cheer rate cuts and stimulus from central banks actually sold off on that news because it was a sign of trouble. So what's happening with the Chinese economy? Well, that's going to be a very, very good and important question in the coming months. But it seems, in which there are estimates as high as 65 million units, housing units that are unoccupied, that are owned in the anticipation of capital gains as a form of investment. And these typically the builders that build these kind of investment properties are very highly leveraged. And we've seen problems in many developers as demand has softened and housing prices have weakened. And if this continues, this is going

to have some bad news for the Chinese economy more broadly, when the consensus view had been that in the coming quarter, it's going to be accelerating. Now the question is, is that really true? Is it a reset? Is there a recession in China? What does that even look like? Well, it's clear that the government has in its hands a lot of policy tools that they can start using. The rate cut is a sign, today's unexpected rate cut

is a sign that the authorities on the one hand are cognizant what's going on, are concerned, and want to show that they're willing to act. But the financial side, certainly the central bank will support Chinese banks if they run into trouble. However, if the trouble is broader in the property sector, for example, in non-bank financial institutions and in local governments whose finances depend on land development and the income they derive from that, this is going to be broader and more

difficult for the policymakers to counteract what is potentially at stake. I don't think a recession, I don't think a big downturn, but it is entirely possible to think that the next few years the Chinese economy is going to need to be delevering and is going to grow quite slowly for an extended period of time, which is not what most people expect. No, and certainly not what investors are used to. Kind of U.S. investors brushing it off, except for in the commodity market today. John, what about the U.S.? I know you can't give the official NBER answer today on the show, although we would welcome that if you have a call. But how likely is it that we are in or looking at a recession?

Well, remember, if you look at the Business Cycle Dating Committee of the National Bureau of Economic Research website, you can see in detail the definition of what constitutes a recession. I'm not a member of that committee. It's leading academics and scholars. But it seems clear that it needs to be broad and diffuse slowdown or downturn in the economy. The latest data, of course, as you pointed to already, jobs data and others, certainly suggests that the economy continues to expand. But we've been through an absolutely unprecedented period

of the lockdown from COVID, of unprecedented fiscal stimulus. So the economy is certainly difficult to call right now. Well, and I think the other big question, John, is we're dealing with pretty historically high levels of inflation. And while we've seen a turn in that, it's still kind of a question mark as to how fast it can come down, if that's the route we're headed what do you think oh yeah that's that that's certainly the question what is clear is that the run-up in prices so far has been led very narrowly by in fact if you look at the data about 33 percent about a third of the increase reflected energy prices more than 31 30 percent reflected increase

in motor vehicle prices and about a quarter represent increase in food prices. Those aren't likely to continue. They're going to fade away. So the question really is, is the aftershock of that inflation surge going to spread through the economy to a degree that is going to produce inflation persistence. And most important is in the labor sector. So far, increases in wages have lagged inflation. In other words, real incomes have actually been falling. And the latest data, if you look not just at the employment figures, but if you look at the initial unemployment, the weekly claims for unemployment insurance, you'll see signs that suggest that

the labor sector is beginning gradually to soften. Labor demand is softening, despite the last month's very strong employment. So the key question is whether wages are going to reflect the softening in economic growth. John Lipsky, good to get your perspective. Thank you for joining me. Sarah's always happy. It's nice to see you again. Nice to see you. Okay. Let's give you a check on where we stand right now in the markets. Going strong into the close near the highs of the day, up half a percent on the Dow, half a percent on the S&P, with most sectors positive. Staples, consumer staples, and consumer discretionary leading. Tesla's having a nearly 4% rally day. Only energy and materials lag. The Nasdaq's up three quarters

of one percent. Still ahead, Walmart and Home Depot kicking off a huge week of earnings when they report results tomorrow before the bell. We'll talk to top ranked analyst Matt Boss from JP Morgan about what he's looking for from the retailers. And as we head to break, check out some of today's top search tickers on CNBC.com. Ten-year yield right on top. Treasuries continue their rally with the ten-year yield lower today. It's at 2.79 percent. There's Tesla, I just mentioned, having a good day. Oil prices lower, along with a lot of commodity prices. Copper's down 2 percent off that weaker China data. Brent crude down. But WTI is giving back three percent right now, below $90 a barrel.

Apple and Walt Disney stay positive. Disney with a new activist investor, Dan Lo, back in the stock. We'll tell you what he wants later on in the show. We'll be right back. Check out today's stealth mover. It is Green Plains, which is solidly in the red today. Bank of America downgrading the ethanol fuel producer to neutral from buy, citing valuation. Shares are up more than 30 percent or so over the last month amid the big rally we have seen in clean energy stocks. Given some back today. There's been no dip in consumer spending for salty snack maker Utz. Up next, the company's CEO breaks down a very strong quarter and whether he sees any signs of pushback against higher prices.

When Closing Bell comes right back with the Dow up 160. Last week, we saw inflation cool down a bit in July, but food inflation remains high, especially at the grocery store. Food at home rising more than 13 percent from a year ago. Despite rising prices, demand for snacks is holding up well, at least for Utz. The company beating earnings last week, seeing an increase in sales for the second quarter and raising guidance.

Joining us now is Utz CEO, Dylan Lissette. Dylan, it's good to have you. So no recession for salty snacks, no recession for cheese balls, huh? No, it's been a fantastic category. It typically grows about 3% to 4% a year. This year, the category itself in the last 13 weeks grew about 15%. Our overall portfolio grew about 16%. Our power brands grew about 17%. really seeing a very strong consumer. Snacking traditionally has just been a fantastic category. I've been here for 25 years at Hudson. It's grown almost every year that I've been involved in the category itself. What about, you clearly have pricing power. What are you doing

with that? You've raised prices. Is more coming? Well, we did. We raised prices. You know, if you go back in time a little bit in 2020, when demand just sort of surged at the beginning of kind of the COVID lockdowns, the supply chain was really great. Things were working out very well. As we morphed into 2021, the supply chain got a little tighter. People problems, labor problems, supply problems. That sort of brought on some cost of goods inflation. We were a little bit slow last year in 2021 with raising prices. We had some technology that we implemented. We had some people and talent that we implemented. And really this year, we were able to increase pricing to offset inflation, ideally at the end of the day to, you know, to beat inflation, but also to allow us to reinvest ultimately in our business.

Right. But I'm just wondering if you're planning more, because we've heard that message from a lot of the food companies. And that's why, you know, for those that were following some of these packaged food companies, not so surprising to see the cost of food at home actually rise in July. But I do wonder if that's peaked out as well or if you think that'll continue to rise. Yeah, we had we had two series of increases in 2022. We started in February with some. We quickly came behind in May as we saw more inflation. What we basically organized around for the second half of 2022 is to really do selective and strategic pricing, not a large wave of pricing across our entire portfolio. We think we've got the changes in place today that, you know, as they sort of make their way into the marketplace,

will not need for us to do another large scale increase, you know, in the second half of 2022. And, you know, we're going to work really hard on the productivity aspects of our business that can, you know, save some money as well that we can reinvest. Well, that's good news for shoppers, at least. So, Dylan, what changes have you seen, if any, from the consumer? Because we got some warnings ahead of Walmart's quarter and Target's quarter this week that consumers are shifting their priority. They're having to spend more on groceries and less on discretionary. What have you seen within your power brands over the course of

the last few months and coming months? Yeah, what we've seen is across the club channel, mass channel, food channel, convenience. Every one of these channels for us, for the category and for us, has been double-digit strong. So, I mean, I think if the consumer is making a choice as to where they're spending their money, I think you heard and you referred to Target and Walmart and general merchandise issues. And I know that they'll be reporting this week,

and we'll find out a little bit more about where they are but ultimately at the end of the day a lot of that consumer buying power has moved into the staples food beverage and we're really seeing a continued spike in our in our sales and and demand as well for it in both dollars but also in you know strong units and volumes. Yeah, you've been one of the more successful SPACs out there as well. Dylan, thank you for joining me with a take on where business stands. Appreciate it.

Thanks, Sarah, for having me. Appreciate it. All right, Dylan Lissette, the CEO of Utz. Here's where we stand overall in the markets. Up 0.5% on the S&P, holding those gains into the close, up almost 0.75% on the NASDAQ. Small caps are joining the party, too, up about a quarter of a percent. So lagging a bit, but quite a turnaround from what we saw earlier this morning, where stocks were under pressure following that Chinese data. After the break, we back. WeWork founder Adam Neumann is making a comeback with a new company and a big new financial backer. And Wall Street is buzzing about that. We'll tell you

the story next. And a reminder, you can listen to The Closing Bell on the go by following The Closing Bell podcast on your favorite podcast app. Up about 164 on the Dow. We'll be right back. What is Wall Street buzzing about today? All the money flowing into Adam Neumann's new company, Flow. The former WeWork CEO and co-founder receiving a $350 million check from venture capital firm Andreessen Horowitz. It's the largest check the firm has ever written in a funding round, according to the New York Times. That brings Flow to a billion-dollar valuation pre-launch. The business aiming to disrupt the residential real estate market by creating a product consistent with service and community features, although exact details are not known. Andreessen Horowitz was an early investor in names like Facebook and Airbnb.

And co-founder Mark Andreessen writing in a blog post today, quote, we think it is natural that for his first venture since WeWork, Adam returns to the theme of connecting people through transforming their physical spaces and building communities where people spend the most time, their homes. Our Deirdre Bosa, who's covered WeWork for years, joins us for more. And Deirdre, my question is, did Marc Andreessen not watch WeCrashed? He must have. Maybe he got a little jealous. He didn't have a part in it, Sarah. It is a lot of people, you know, it's not just Wall Street buzzing about this. A lot of people in the Bay Area, too, are kind of scratching their heads and thinking, OK, Adam Neumann may be still this kind of incredible founder and entrepreneur, a lot of charm, really good pitch man. But if you think that he's been humbled from the experience with WeWork, why throw another $350 million at him for a company to value it at a billion dollars

pre-launch? It feels sort of like deja vu all over again in terms of what the actual business is, Flo. We don't know a lot of the details, but it does sort of feel like similar to what he was doing with WeWork. That was for offices. But with Flo, he's trying to bring that same concept to residential living, which is what he was trying to do with WeLive. Remember, Sarah, there was the education part, the living part. That never got off the ground because things fell apart. So now he's doing it under a different name with different investors. And he's been buying up land to do this, right?

We know that, especially in the southern part of the U.S. Yeah, some 3,000 apartments reportedly. And you have to wonder, in the same sense that we asked, was WeWork ever a technology company? Certainly, it got that valuation with backers like Masayoshi Sun and SoftBank, but that came down in remarkable fashion to now valued around $4 billion. At its peak, it was $47 billion. Similar question here. Okay, Adam Neumann is rethinking the residential experience again. That's interesting, but should it command a tech valuation? And at a billion dollars pre-launch, it certainly seems

headed that way. But is this just, you know, multifamily REITs by another name? That was always the questions plaguing WeWork. I will say, though, Sarah, having covered it and going to a number of WeWork events at its peak and even interviewing Adam Newman. He is this really grand thinker. He does have the ability to create a community in a way that few entrepreneurs can. I guess the main question, though, is, is he humbled enough? Can he do it this time around? Or is this more money being thrown at him that will lead to the same corporate governance problems? The thing is, we just don't know. We don't know what lessons have been learned. But clearly, Marc Andreessen thinks enough. Yeah. Well, that's, I guess, a boost here for the credibility. Thank you, Deirdre. That's a

to-be-continued. Deirdre Bosa. Up next, one of the top retail analysts on Wall Street will be here to unveil his best stock picks ahead of earnings season for retailers. Tomorrow, we'll hear from Walmart and Home Depot. That story, plus Dan Loeb's new stake in Disney and a big drop in homebuilder sentiment when we take you inside the Market Zone. We are now in the closing bell Market Zone. Lafleur Tengler, investment CEO. Nancy Tengler here to break down these crucial moments of the trading day. Welcome. We've got Leslie Picker as well on Disney and JP Morgan's Matt Boss on some retail picks. We'll kick it off with the broader market right now. And what a turnaround we saw down 180 at the Dow with the

lows of the day. Market was in a bad mood earlier on the weaker than expected news out of China, off of its economic data. And then we got a weak read on New York area manufacturing. We turned around and continued the rally that we have seen over the last few weeks with the S&P up half a percent. Nancy, have you been buying into it? If it is a bear market rally, it is resilient, impressive and broad. Yeah, sure. Sarah, thanks for having me. We've been adding risk back into our portfolio in June, which turned out to be a good near term decision.

At this point, I'm not really willing to chase the rally. We're adding small amounts to some specific names, but I think you're going to get another chance. I don't think we're going to retest the lows, but I do think you're going to get another chance to step in and pick off some of the names that maybe you didn't finish buying in the summer. What's been your biggest purchase over the last few weeks? We've been adding to cloud

names and we've done that in June and then we continue to kind of top them off. And then we've also been adding to consumer discretionary. So a name like Chipotle that has pricing power has demonstrated they can maintain their margins and stands to improve their margins through improved efficiencies. We like that name a lot. It's in our 12 Best Ideas portfolio, as well as Amazon. I think that's a name that demonstrated, and might be good news for Walmart and Target, but they demonstrated that they could execute in this environment with a weakening consumer or at least a consumer who's shifting from goods to services. And their cloud business, of course, has been really driving the story.

And then lastly, we added to Disney. Disney. All right. Well, let's talk about that right now, because it is one of the biggest gainers in the Dow today. Investor Dan Loeb taking a new stake in the company. And in a letter to CEO Bob Chapek, urges Disney to spin off its ESPN business and integrate Hulu directly into its Disney Plus streaming platform. Disney issuing a statement that it welcomes the views of all investors. Leslie Picker joins us. Leslie Lowe previously held a stake in Disney, sold it. Why is he getting back in now? The timing is interesting, just as Disney was sort of on the upswing again. Yes, I was doing some comparisons here, Sarah, because the Disney

stake actually dropped off their 13Fs just in the first quarter of 2022. We should get their second quarter 13F filings to see if it's in there this time around as of the deadline tonight. But interestingly enough, you know, they traded it pretty well. If you kind of ballpark when they may have entered versus sold out some of it, up roughly, say, 17 percent. Missed some of the flattening of the stock over the course of the most recent quarter. Again, depending on when they may have gotten back in. And he may have also held beneficial exposure in the form of derivatives and things like that that don't have to be disclosed.

But in terms of a strategic emphasis here, the first iteration of his stake in Walt Disney, a low stake in Walt Disney, had to do with a couple of things that are pretty similar. Very, very focused on direct to consumer via streaming. He initially initiated that long back in Q2 2020, which is when the whole world was basically falling apart from COVID. And the shares traded down on fears that the closure of theme parks and movie theaters due to COVID would cripple the company. He believed that the company should really double down on direct-to-consumer streaming, emphasized that in a letter in October, while also saying that the company should permanently suspend its $3 billion annual dividend. Now, a lot of those themes are present

in this most recent letter that was out today. He reiterated that the dividend suspension should remain. He reiterated this focus on direct-to-consumer, but had more of a strategic focus to it. This idea that Disney should be more strategic with that minority stake in Hulu and potentially spend ESPN, as you mentioned. Nancy, it's an interesting set of ideas, given what's all the changes happening in the streaming world and people constantly wondering about ESPN ever since it started to post losses a few years ago. What do you make of Loeb's proposal as a shareholder yourself? Well, I love that it served as a catalyst, Sarah. This was a stock that we were arguing about internally when it was threatening to break below 100. Great company, but there was nothing really going right in the market in terms of looking at the businesses. So when the streaming

numbers came out, I think that was an opportune time for him to say, hey, here we are, we're back again. I'm not really crazy about the spinning out ESPN idea, though. I get it. I understand why he thinks that would be important. But as a shareholder, I'd like to see it stay intact. I would also like to see them reinstate the dividend, which Chapek has promised to do. But I think what Loeb has done is lit a fire. This was a management team that seemed to me, I know others disagree with me, but seemed to me to be adrift and got distracted with all the issues in Florida. And I want to see them focused on growing business. We know consumers are returning to services over goods. And this is a great way to play a resilient consumer that's going out and spending money. Well,

it certainly represents a new test for Mr. Chapek after the Florida debacle and COVID. Now he's got an activist investor to contend with. Leslie, thank you very much. Leslie Picker, homebuilder sentiment falling into negative territory. First time we've seen that since the start of the COVID pandemic. The National Association of Homebuilders chief economist saying the Federal Reserve's tighter monetary policy and higher construction costs as well have brought on a housing recession. Diana Olick joins us. Diana, could this lead to more meaningful price reductions now for homes, which has sort of been the last piece of this that the Fed and others have waited to see?

Yeah, actually, Sarah, that's what we've all been waiting to see. And in the builder's release this morning, they said that builders have been lowering prices not only to get more buyers in the door, but to slow down cancellations. We've seen cancellation rates for the builders double just since April. And that's according to John Burns Real Estate Consulting. So by lowering by 5 percent, that's what they said they were doing on average. Is that enough? You know, when you look at prices for newly built homes, they're up close to 40 percent since the start of the pandemic.

And the same thing for existing homes. So lowering them by 5 percent might help a little bit. But I don't think we're going to we're talking about these really meaningful price drops or it's just really a shrink in the gains year over year rather than actually dropping. So I think you will see home prices in the next couple of months just kind of flatline for a while, but stay at these very high levels. They may fall back a little bit, but it's going to need a lot more. You're going to need to see home sales and demand fall back a lot more to see prices come down really meaningfully. Still, is that so is that what we're calling it now? A housing recession? It's like the NBER declaring a U.S. recession, which we have, which it has not done. Yeah, that was Rob. That was Rob Dietz,

the chief economist for the NHB. He declared a housing recession. Yeah, that was Rob Dietz, the chief economist for the NAHB. He declared a housing recession. Look, sales are down, no question. And the builders are not building as much. It was barely six months ago that they said they were slowing sales because they couldn't keep up with the demand. They couldn't build houses fast enough. Now it seems that the demand is no longer there. It's been wiped out. And so I believe we are in a housing recession. Does that necessarily mean that we'll see this big drop in home prices? No, not necessarily. I just don't think we're going to see any kind of the crazy gains that we've seen over the last couple of years.

Those gains were unsustainable anyway, though. Now, a lot of them, a lot of people called it bubblicious. Diana, thank you. Diana Olick, huge week for retail on a related note because we're going to get Home Depot earnings tomorrow. Walmart, Target, Lowe's, Kohl's. The S&P retail ETF has underperformed the broader market so far this year, although more than tripling the S&P 500 so far in the month of August. Pretty sharp comeback. Joining us now is J.P. Morgan's head of department and specialty softline retail.

Good title, Matt Boss, which means that you cover all of retail. What do you expect first, Matt, from the department stores, especially Walmart and Target, where expectations have been lowered all year long? Target's down 25% this year off a few warnings. So thanks for having me on, Sarah. Look, I think what you're seeing is the consumer picture as a whole, I think, is stable. You're seeing pockets, though, of cross-currents. So I think the lower-income consumer seeing pockets though of cross currents. So I think the lower income consumer, more so on the discretionary front, that's where you're seeing

the primary pressure. And that's really what you've had intra quarter with some of the discounters. Now, it's not all of the discounters. The dollar stores, Dollar General, Dollar Tree have seen much more robust results. And that's because they're selling need based food at roughly 80% of the mix, which you saw throughout the quarter at Walmart and Target is a little bit different where it's much more of the discretionary, the larger ticket consumer electronics home. And I think that's what we're seeing in our work is pandemic benefit categories, soft home furniture, as well as consumer electronics, as well as stay-at-home apparel. Those are the softer areas, but things, as you cited before,

the shift towards travel and leisure and some of the service elements, as well as some of the key destination brands, those are holding up very well in our opinion. I guess what I'm trying to figure out is what to do with those stocks, because all those issues that you mentioned is why we've seen some trouble in Walmart and Target. Do you expect more bad news this week, or do you think that it's been factored in? I think the key to this week across the retail spectrum is going to be inventory control. So we cited in a note this morning that the wild card in our view for the retail earnings season here, I think the can has been kicked where retailers had said some of the excess inventory that entered into the second quarter, they believed would be

cleared by July. I do not believe that the inventory position across the apparel side of retail on the discretionary front i don't believe that we've seen that cleared so i think you're going to hear retailers talk about the actions needed to clear inventory as you move into the third quarter so we're expecting a highly promotional back to school season as well as third quarter cuts now i think one of the things that you cited in terms of performance for the group, I think the E that the buy side is using and that investors are using is much lower than consensus. Across the board, we're almost 20% below for earnings in the third

quarter. So we've taken that cut. I think second quarter rough and third quarter cuts are in these stocks. But I think if retailers have a game plan to come into holiday with their inventories clean and they speak to a robust consumer, I think the group can work from here. What about athletic, Matt? You've been doing a ton of work lately on Nike and Lulu, which I know are two of your favorite stocks, but on what we can expect on inventories and profits and how that might not be lining up with what the street is expecting? What have you learned? I'm glad you asked. So look, I think they're kind of a tale of two worlds right now. Lulu, I think the business is stable and if anything has a tremendous amount

of momentum. They fit squarely into the lifestyle hybrid wardrobe being more casual. All the tailwinds I think are right now in favor of Lulu. We're expecting a strong quarter and continued momentum. Nike has two issues. You have number one, the issue in China, and they have concentration in that region. That's obviously something that I think is at the forefront for investors with Nike. Secondarily, 65% of Nike's inventory right now is in transit. Now, the clarification that we had from management was, they remain in a pull market, meaning inventories are clean today for Nike

in both North America and Europe. But what you're seeing on the promotional front is as this inventory arrives, if the seasonally non-relevant products, so if shorts arrive right now, they open up a container, that inventory will immediately be marked down. So it's disrupting the athletic backdrop right now, but it's all planned and it is all in Nike's guide for the year. It's just a matter of the first and the second quarter

where our models are anticipating a bit more pressure to clear that excess inventory. But we are in a pull market in North America and in EMEA, which I think sets up very well for the athletic companies as well come the back half of their year. So you like it, but you see more earnings risk than what is priced in. Matt Boss for Nike, that is. Thank you very much for joining me. From JP Morgan, we've got two minutes to go in the trading day. Nancy, your final thoughts as investors try to figure out whether they should get back into this market. Yeah, I think, Sarah, I think people need to be disciplined and patient. But if you just can't stand it and you have to buy something, focus on companies that have reliable earnings growth, that have dividend growth, if possible,

and really strong free cash flow. And stay with the industry leaders, because I think we are going to get, we have to get some sort of a pullback. We know that markets don't go straight up. So if you can remain disciplined or just work money in over time, I think we're going to have very strong equity markets in the coming years. And I think you want to be positioned that way. Long-term perspective there. Nancy Tangler, always good to have you. Thank you for summing in for Mike Santoli. As we head into the close here, we've got a 143-point rally on the Dow. Most Dow stocks are higher.

Visa, Disney, Coca-Cola, Procter & Gamble leading the way today in the Dow. Chevron, Dow, 3M not playing a role. Those are the biggest drags on the Dow. The S&P 500 is up a third of 1%. So we've lost a little bit of steam into the close, but we are still looking to end higher. And that is a reversal from where we started the Dow. The S&P 500 is up a third of 1%. So we've lost a little bit of steam into the close, but we are still looking to end higher. And that is a reversal from where we started the day. Consumer staples are your best performing group at 1% gain there. Monster Beverage, Hershey, Lamb Weston, those are some of the winners. Consumer discretionary up six tenths. That's the number two performing sector. And you can thank Tesla for that, along with some other

names like Nancy's favorite Chipotle, which is almost flat on the year. It's been quite a comeback story. Technology is also doing quite well. It's why the NASDAQ is going to end with a gain of more than half a percent. Small caps also up about a quarter of one percent. The only sector to close lower today, materials and energy, with oil prices sliding more than three percent. That's it for me on Closing Bell. I'll see you tomorrow.