Closing Bell - Closing Bell: Stocks Seesaw, All Eyes On The Fed and Crypto Winter 6/14/22

Episode Date: June 14, 2022

It was a wild ride on Wall Street. Stocks rallying at the open before sinking sharply into the red and then staging a comeback late in the session as investors remain on edge ahead of tomorrow's Fed decision. Goldman Sachs Chief Economist Jan Hatzius on growing expectations the Federal Reserve will raise interest rates by 75 basis points tomorrow and the impact that will have on inflation and the economy. But Fmr. Kansas City Fed President Thomas Hoenig explains why he still thinks the Fed will only raise interest rates by 50 basis points and cautions 75 basis points would be a mistake. Mizuho's Dan Dolev reacts to Coinbase's CEO announcing layoffs and warning of a "crypto winter" ahead. And Jefferies Healthcare & Biotech Analyst Michael Yee on the FDA panel deciding whether to recommend Moderna's Covid vaccine for children ages 6 to 17.

Stocks trading in a narrower range after yesterday's sell-off, but we are near session lows. We've given up some early gains as we await tomorrow's big Fed decision. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look at where we stand in the market. Again, a few attempts to go positive today, which would break a five-day losing streak, but we've given up those gains.

The Dow is now down more than 200 points. S&P 500 down three quarters of one percent. There is one sector that's positive right now in the S&P, and that's technology. Thanks in part to Oracle. Better forecast, 30 percent cloud growth. That's helping some of those names right now. But you still have weakness pretty much across the board. The worst performing sector today is utilities and consumer staples and health care. So the defensives are getting hit a little bit harder. NASDAQ only down a quarter of one percent. Check out the chart of the day. That would be FedEx getting a huge boost on news of a dividend hike and new board members. We're going to talk much more about that

move, whether you should follow investors in there today, up 14 percent later in the show. Also ahead, former Kansas City Fed President Thomas Honig joins us with his expectations for tomorrow's all-important rate hike decision. He has been saying inflation is not transitory for a very long time. Let's get straight to our top story, though. The Fed's pivotal decision last week's hot inflation print rattled investors. It was quickly followed by expectations that the Fed would have to go even bigger this week. Yesterday's Wall Street Journal report helping affirm the notion that a 75 basis point hike is coming as soon as tomorrow. Let's bring in Jan Hatzias, chief economist at Goldman Sachs.

Jan, one of the economists that yesterday evening changed their forecast and now expects 75 basis point hike tomorrow. Why? Because it's difficult to explain otherwise. If there wasn't a pre-decision made to go 75 basis points, it's difficult to explain why we were reading this article. Because the guidance had been pretty clearly for 50s, and this was a significant change in tone. And I don't think that happens without a reason. So what do you think is going on inside the Fed? Do You think they're starting to panic about higher than expected inflation? Well, I think they were rattled by Friday's data, both the higher core CPI and headline CPI, with unfavorable composition because you've got rent and owner's equivalent rent coming in high. There was a significant increase in the University of Michigan five to ten year inflation expectations number. That's a very important measure for them. So I think that's the trigger. Now, my own view is that if you look at the entire context and other data releases that we've gotten recently,

the flat unemployment rate, the somewhat higher claims numbers, the weaker average hourly earnings number. You know, I think I would put that into perspective. So, to me, it doesn't seem that as much has changed as this, you know, apparent leaning towards 75 basis points suggests. So, do you think this is going to be a mistake if that's what they do? Well, it was a surprising decision. I mean, I think in the end, it probably, you know, what matters more is what the endpoint is, what they're signaling about the path, what gets priced into financial markets. So from that perspective, it doesn't matter a huge amount whether you do, you know, over

the next few meetings, you raise by 150 basis points in two meetings or in three meetings. I don't think that necessarily matters that much. But it was surprising, and it is going to make it a little bit harder to put significant weight on, you know, this kind of guidance given in FOMC press conferences in the future. I also think you're going to get questions about the communication strategy, because that is one reason it was really surprising at the last meeting powell said explicitly we're not thinking about 75 right now that's not under consideration and here they are the week of the fed meeting during a quiet period with some signals to the journal and others

you know our economics reporter also reported this last night, that their 75 basis points is on the table. It does make you question that whole forward guidance strategy where they have gone above and beyond to be very transparent about what's coming next. Yeah, I mean, they did give themselves an out and said, you know, it depends on the data and things could change. My own view, again, is that things haven't changed that dramatically if I look at the entire kind of body of recent data releases. So, and I asked you if the Fed was going to make a mistake. I do wonder if that's in the market now,

the fact that this sets them up for a bigger policy. They're tightening in a triple hike in a bear market in an economy that's starting to weaken. How does that end? Well, I do think they've wanted to tighten financial conditions. So that's very clear. I think most of what's happened in 2022 so far, in terms of where financial conditions have gone, has been desired. What's less clear, I think, is whether we're now overshooting in terms of the tightening in financial conditions and the terminal funds rate that is priced in the bond market. I would say probably we're starting to. So at this point, my best judgment is that probably we'd have a better chance for, you know, a soft landing or at least the softish landing that Chair Powell has talked about with financial conditions a little bit easier and an

expectation of a terminal rate that's a little bit less than 4 percent. But it's not. It's gone the other way. It's gone the other way. So I think we're in the process of probably over. No, I mean, that's true. It's too early to tell, I think, because obviously financial conditions can shift. We don't know where the tightening cycle goes. There are a lot of other drivers. But I think we're more at risk of tightening financial conditions too much at this point. Do you think that a 100 basis point hike could be on the table? You know, the market always looks to what's next.

If we get 75 this time? You mean at the July meeting? Yeah. I think it's pretty unlikely. I wouldn't expect it. That said, we put in 75 for tomorrow and 75 for July as well. Because if you're doing 75 at this meeting, then you get to, you get to one and a half to one and three quarters. And then, yeah, I think if they want to go to what they view as neutral, they might want to do that at the

July meeting as opposed to going back to 50s. Then it really doesn't seem worth the trouble. So to me, it seems more logical, conditional on them doing 75, if that's actually right, that they do another 75 six weeks later. He said he's wanted to frontload it. That would be the case. Finally, what's happening with your recession odds? They have to be going up if we're getting this amount of tightening.

I think they're—no, I think they are clearly going up. And I think if we were to get significantly more tightening from here. You know, bad inflation news that drives more tightening of monetary policy and of financial conditions that would drive it up and, you know, could make it the base case. At this point, it's not the base case. And again, these things can obviously shift, you know, relatively quickly. We've seen some very large moves. They could be unwound. But I do think that the risks to what the markets are currently pricing is that the Fed delivers less tightening ultimately.

Not tomorrow, but cumulatively. Because the economy would be weakening. Because I think a 4% terminal funds rate seems to be something that is putting sort of undue pressure on financial conditions. And I do expect that, you know, inflation is going to come down in a slowing economy. I think there are some signs of improvement in areas like wage growth and also some of the supply chain measures. So, you know, we'll see. It'll stay volatile probably.

Jan Hatzias, thank you so much for coming by in person to share your views on the big day tomorrow. Chief Economist at Goldman Sachs, Coinbase becoming the latest crypto firm to announce big layoffs. And last month, Mizuho analyst Dan Dolev was asked his thoughts on the company's ramp up in hiring at that point. Remember what he said? It feels a little bit like the final scene from like Thelma and Louise, where they're heading towards the cliff with gas. Not such a bad call. After the break, Deleth weighs in on today's news and what the broader crypto meltdown means for the fintech space and the economy as we're talking about it. The Dow's down 279. You're watching Closing Bell on CNBC. Information technology, only sector green, but about to go negative.

We'll be right back. Session loads right now. We're down 313 on the Dow. So the losses continue to accelerate as we head into this final hour. A few attempts to go positive earlier in the day. Not going to happen. Fifth day in a row. Longest losing streak we're seeing for stocks now since back in January.

As far as the Dow concerned, it's actually the stalwarts, the consumer staples that are biggest drags today. P&G, Coca-Cola, Disney continues to weigh. UnitedHealthcare dragging 70 points off the Dow. You've got some bright spots, though, and that's in technology today. Microsoft, IBM, Visa, Apple, they are all positive. So is Boeing after some bullish comments from the CEO on airline demand. Check out today's stealth mover, IAC Interactive. Also a big winner today after Cowen named the company its best small and mid-cap idea for the year. The analysts there believe IAC's portfolio of internet businesses at the moment trade at a significant conglomerate

discount. That stock is up 2.2 percent Coinbase CEO Brian Armstrong, warning of a crypto winter, while announcing layoffs of 18% of the company's workforce, about 1,100 workers. Armstrong writing in a blog post, the economy appears to be headed for a recession that could last for an extended period. The stock has been up and down today, but has dropped about 80% so far this year. With us now is Dan Dolev, senior analyst at Mizuho, period. The stock has been up and down today, but has dropped about 80 percent so far this year. With us now is Dan Dolev, senior analyst at Mizuho, who, Dan, as we reminded everyone, was warning people about the hiring spree that Coinbase had been on.

What is happening there? How painful do you think that the situation is right now? Yeah, I think it's pretty, you know, it's a pretty big disaster, right? So I saw that, you know, we called it like the last, the final scene from Thelma and Louise. I think right now it's just like a kind of an episode of We Crashed, you know, so I think it's sort of imploding. And what you're seeing right now is that downward spiral, which is they've got really tough choices. If they don't lay off people, then they're going to be losing a lot of money and they're burning like a billion dollars a quarter in cash, right, or more. If they lay off people, they can't find new avenues to grow. So they're really in a dilemma. And it's a very, very difficult dilemma because competition is getting worse and worse and more fierce.

So do you see this as just the beginning? 100 percent. I think, you know, we took down our numbers today. We slashed our estimates. By the way, consensus is overshooting revenue by like 30 percent this year. And that's not even assuming the environment gets worse. That's just the run rate of where we are in June. I think that's just the beginning, because remember, like some of their competitors, like FTX, et cetera, they haven't even started a price war. And if you actually start a price war and the consumer is less inelastic as they were until now, because that tipping point, 21,000, where kind of half the people are above water, half are below. If the price war starts, they're going to have to take down pricing, which means things are

actually going to get worse from here. So I think this is, you know, this is not the end of the beginning. This is kind of the beginning of the end. And that has always been your thesis, right, Dan, on the stock and why you've been neutral rated. It sounds like you should be at a sell based on the way you're talking about this name. My question is, what if Bitcoin stabilizes? This stock has already been hit 80 percent for the year. Correct. But what we haven't seen up until now, and we've been very critical of the name. So what we haven't seen until now is really the pricing come under pressure.

So even if Bitcoin stabilizes, there might be a relief rally in the stock. And that's one of the reasons to probably be neutral on that name, because it's very hard to predict. So kind of to answer your question. But I think once you start getting into this price war and people you know, people starting to, like, lower pricing because it gets really tight on the competitive stance, I think that would be the next downward leg to the story. 80 percent from the highs, I should say. What about relative to the competitors? Because it's not – you shouldn't just pick on Coinbase. We've seen layoffs from a number of these firms over the last weeks, including Robinhood.

Yeah, correct. And I think we've talked before. I've always thought that Robinhood is better positioned in this environment than, you know, Coinbase. And the reason for that is because, remember, they already do not charge fees for trading and they're more diversified. They've got equities, they've got options, they've got this. So, you know, everyone, you know, when, you know, when, you know, when, when, when this, when, when this happens, everyone suffers. But I think that there's degrees of pain. And I think Robinhood is actually better positioned. They've already gone through their layoffs.

And you looked at some of the trends that they published, I think, yesterday. They actually looked okay, right? They were stabilized. The number of users stabilized, et cetera. So things aren't as bad as the perception. I think Coinbase is in, you know, real trouble right now. Dan Dole, thank you for joining us. The stock has turned lower now, as the broader market has made new lows as we're talking. From Mizuho, give you a check on the markets right now. We're down 356 on the Dow. Remember,

I said information technology was positive in the S&P. It has gone negative. It's now down two-tenths of a percent. So every sector is now lower. Utilities, staples and health care are still the biggest drags, but you've got every sector down and the Nasdaq is now losing steam, down six tenths of one percent. This is just what a bear market feels like. After the break, a top biotech analyst breaks down the big pullback in that sector over the past week and whether he's recommending buying the dip in any of the names. And later, former Kansas City Fed President Thomas Honig shares his expectations ahead of tomorrow's Fed decision. We're going to go inside this whole communication strategy and what a 75 basis point hike could actually look like. We'll be right back. It's a crucial day for Moderna.

FDA advisors are meeting as we speak to discuss and vote on whether to recommend its coronavirus vaccine for children ages 6 through 17 years old. Moderna may be up today, but so far this year, it's down about 50 percent, getting hit along with Pfizer and the entire healthcare and biotech sector. Joining us now, Michael Yee from Jefferies. Actually, I didn't quite remember that. So Pfizer is the only one that has approval for this age cohort. The other big decision is, of course, coming when Moderna and Pfizer are up for the younger kids and the infants, which still cannot be vaccinated.

And we are waiting desperately for that moment. Where's the street on expectations of boosters for kids in both of these groups? Well, it's great to be here with you and good to see you, Sarah. There are wide expectations that the FDA is going to move forward to finally approve a vaccine for this final age group and likely have this starting getting deployed over the next week or two. That's pretty expected. And obviously, there's a lot of other bigger debates going on in the vaccine space and with both of those stocks. But how how how bullish are you on the idea of boosters?

Clearly, COVID is not going away and we're all we're all supposed to be getting boosters. I'm not sure how many people actually are and whether you think it's a big enough market to move the stock and profits. Yeah, well, look, we just hosted the Moderna CEO, Stéphane Boncel, literally a couple of days ago. They are prepared to deploy the new Omicron booster starting August, September. They just made comments about that. And I think there's a wide debate and we agree about deploying them to countries, but whether or not people are actually going to jab. And I think those are two different things. The idea to sell in is one thing, and I think countries will want to have those available.

But whether or not there's a winter surge and whether there's an urgency for people to actually get jabbed, Sarah, I think is a different thing. You spoke to it. I think people are feeling like although it's out there, the urgency and the seriousness of it is dying down. And so I think that this is going to be a debate over the next 12 months. Do you buy the stock? Moderna's down 76 percent from the highs. Clearly, it's come a long way, but is really acting like a growth stock in this higher interest rate correction. I think that's spot on. You know, we believe that high growth, high platform type of stocks,

not only Moderna, but others are going to have a tough time in this risk-off environment. It's not just rising interest rates. I think obviously bear market territory and all the growth selling off. That's going to be a tough place for much of biotech. So we're telling people to be defensive

in the Vertex, Amgen, Gilead, defensive, huge cash flow earnings stories. I think Moderna has a good story there, but it's going to take time for that to settle out. We really need some other revenue sources to get people back engaged in that story. Michael Yee, Michael, thank you. From Jeffries, we'll keep everybody posted on what we hear on that decision from the FDA. Up next, Kansas City Fed President Thomas Honig on the odds of a 75 basis point rate hike by the Fed tomorrow and whether that will be enough to begin slowing inflation. We'll be right back. Let's get a check on the markets as investors brace for the big Fed decision tomorrow. We've lost all the gains from earlier and have moved to session lows just throughout this final hour,

down eight-tenths of a percent on the S&P. The Nasdaq, which had been outperforming and still is, down a third of one percent. And the Dow down about 260 points. We hit down 300 just a few moments ago. Technology did pop back into the green as far as the S&P is concerned. Oracle is the leader there after a better forecast, a very strong cloud growth for that quarter. I would also just point out what's happening in the bond market because we're seeing another steep sell-off in treasuries with yields shooting

higher. The 10-year note yield at 350 right now. The two-year note yield shooting up to 343. These are huge moves. Just for context, we were at 2.8 on the 10-year last week joining us now is former kansas city fed president thomas honig and i have to give you credit tom because at the end of last year you were saying this is not transitory inflation there's more to this story and the fed should be more active so now they're making up for for some past mistakes what do you expect to happen tomorrow well i suspect um that they will stay with the 50 basis points. I don't think they want to drive people into more of a panic situation, but you never know. There are hawks on there who might argue for that. I think the thing that people are forgetting is the quantitative tightening that is

just beginning. And that really does pull a lot of liquidity out of the market. And I think that is affecting that yield curve pretty significantly. And so the combination of doing 50 basis points tomorrow and then continuing with quantitative tightening will be a major tightening policy and will cause rates along that yield curve to go up. And that's going to slow the economy pretty assuredly over the next two to three months. The real question for the Fed will be in September. And I think there it's a matter of if the unemployment numbers start to rise, whether they back off or not, or keep the pressure on to bring inflation down. So what's interesting is that after yesterday, when we got this report from the Journal and

all sorts of other financial news organizations, including CNBC, signaling that this 75 basis point hike is on the table and that the Fed is considering it for tomorrow, all the economists changed their forecast. We just talked to Jan Hatzis of Goldman Sachs. Wells Fargo today changed to 75. So is there a risk that the Fed goes too much if it does go 75 or 50, as you say, with the quantitative tightening? Then we get into potentially an uncomfortable spot where growth slows a lot and we still have very high levels of inflation or stagflation. What's the risk of that? There is a risk that you would create greater uncertainty because you're going 75. How sure is the Fed of itself and so forth? And I think that could be could work against the Fed. So I think they need to stay firm on their policy.

Everyone knows 50 basis points is certain. They know quantitative tightening. They know they need to stay tight. Unemployment is going to rise. And then they need to stay firm during that during the slowdown. And if if they go 75 and then things go wrong and they have to back firm during that during the slowdown. And if if they go 75 and then things go wrong and they have to back off of that, they're going to look like they're confused or panicked. And that would be unfortunate. So you think 75 tomorrow would be an all out mistake at this point, Tom, the market is almost fully pricing that in. I understand that. And it may in fact, the FOMC could do that. But I think it would be unwise. Not that I don't

think they should tighten, but they've set this plan out and they ought to stick to their plan rather than every time a new number comes out, they change their policy. That's unproductive. And I think that's an error on their part if they do that. So it's true. The communication strategy, I think, this really comes into play, because they've laid out the plan pretty clearly, and this would represent a big change, even though they did leave some room for change

when they said that they were going to be data dependent and make sure that inflation rates start to come down. I guess there's a question of the communication and then the question of credibility there of of are they credible in terms of their mandate on fighting inflation? Right. They go 50 basis point and continue with the quantitative tightening. They are committed to fighting inflation. credibility on the inflation front will come later when things really start to slow, whether they stick to the policy, keeping rates high enough that it does slow the economy. Unemployment will rise. You are going to risk a recession late this year or next year. And you have to be able to maintain your policy through that uncertainty and those bad pieces of news so that you do, in fact, bring

inflation down. But going to 75 now and then backing off of that later would be, I think, counterproductive. And so stick to the plan, but don't back off when you start to see the economy slow. And it is slowing, as we can tell just by watching the numbers today. Well, so how far down do you expect inflation to get, let's say, by the end of the year and into next year? Because a lot of this inflation is due to factors that they can't control, like what's happening in Ukraine. Well, certainly the supply disruptions are real, but those are changes in relative prices. You will have supply and demand interact and you will ration that off

and that would be temporary inflation. But the real long run factor in the inflation front is what the Fed has done in the past and the fact that the Congress spent nearly six trillion dollars over the last two years. Those things have to work their way through and the Fed has to reduce the amount of money it's bringing into the economy if they're going to actually bring inflation down over a sustained period of time. So it's going to come down, but slowly. And they may push it down more quickly if they create a very quick recession, a very strong recession by going very quickly up. But those are risks they have to weigh. But I think you really need to say this is the plan, 50 basis points, we're quantitative tightening. Yes, the rates are going to go up. Yes, the economy is going to slow.

And we're going to, we are going to wade through this until we get inflation down below 4%. Thomas Onig, thank you for weighing in. Former Kansas City Fed President. Appreciate it. Take a look at where we stand right now. We have recovered, actually, a little bit on the Dow. We're only down 170. S&P 500 only down half a percent. And the Nasdaq is about to go positive again. Another up and down session here on Wall Street. We'll see if the Nasdaq can actually go positive. We just saw the Nasdaq 100 tip into the green right now. Again, strengthen some of these cloud names off of the Oracle quarter. But also the Chinese internet names are doing really well today. The Pinduoduo is up 12 percent. Baidu, JD.com, some of those names. And there's actually a list

today, unlike yesterday, where it was just all red across the board. Up next, the big picture on how the soaring dollar is becoming a big downer for Wall Street and corporate America. Next. Today's big picture, the U.S. dollar. It's the new bad weather. In other words, it's corporate America's excuse du jour for missing earnings. Not that it's not legitimate.

The dollar has gained 10% this year and has wiped out two decades of declines at the moment. That eats right into any sales that U.S. companies have overseas. They're just worthless. Wall Street is finally starting to take note. Benchmark downgrading Netflix to sell today, citing dollar strength against the yen and euro, not being fully priced into Netflix's 2022 guidance or analyst consensus. Remember, Microsoft was the first major tech company

to warn of the impact, cutting its revenue and profit outlook for the current quarter, citing the impact of foreign exchange rates. Salesforce cut its sales outlook for the same reason. But it's not just tech feeling the pain. Last week, Stifel cut its price target on Nike to $150 per share, due in part to a strengthening dollar.

The impact is far and wide. Morgan Stanley strategists actually recently screened for the stocks most negatively correlated with a strong dollar in the market. Top 10 names include Activision Blizzard, Quest Diagnostics, PayPal, Clorox, Kimberly-Clark, a lot of these consumer staple names. One problem, the dollar is still strengthening. Pretty big moves here following U.S. interest rates higher, meaning that headwind for earnings could be just the beginning. Until we see a lasting stabilization or weakening for the dollar, it could continue to be a big problem for stocks. And as we speak, dollars up about a little less than half a percent.

It's particularly strong against the yen. Watch that into the Fed meeting tomorrow. Crypto getting crushed again as one CEO announces layoffs and warns of another looming crypto winter. That story, plus the board shakeup at FedEx and whether it is time to close the reopening trade. When we take you inside the Market Zone next. We are now in the closing bell Market Zone. Glenn Meads, Jason Pride is here to break down these crucial moments of the trading day. Plus, Barclays, Brandon Oglenski on FedEx's board shakeup and Kate Rooney on crypto getting clobbered again. Kick it off with the broader market. Stocks are recovering here after hitting session lows just

this hour. Dow only down about 122 points. S&P 500 only down a third. You've got a few sectors that have gone positive just in the last few moments. It's technology, which is up three-quarters of a percent now. Gains accelerating. And energy just popping into the green. Utilities and staples are still the weakest links. The 10-year Treasury note yield continues to shoot higher.

This has been a big focal point, obviously, into the Fed meeting where there are growing expectations and this market is pricing in a 70, almost a 75 basis point hike at the meeting tomorrow, Jason. So what is this market telling you about the Fed? Is it going to be a buy the news opportunity if they go there? Is it going to be a bigger shock if they do 50 basis points? How do you how do you strategize? That's actually a tough question to answer because you're trying to judge, and reaction to a Fed survey or a Fed response, right? So 75 basis points is what they're pricing. And I'll probably take it a little bit different direction. What should they be doing?

We've been arguing for quite some time they should be erring on the side of tougher than markets expectations. So if markets are expecting 70 basis points, deliver that 75. It's a little bit over the expectation and you'll have the marginal person a little bit caught off sides on that. Yeah, that 71 basis points is what's expected. To be precise, I just wanted to share a tweet that went out by Bill Ackman, noted investor. The Fed has allowed inflation to get out of control. Equity and credit markets have therefore lost confidence in the Fed. Market confidence can be restored if the Fed takes aggressive action with 75 basis points tomorrow and in July and a commitment to continued aggressive Fed funds increases and QT until it is clear that inflation has been tamed.

And then we get to the Volcker comparison, which a lot of people are making right now. He says hopefully five to six percent on a terminal rate gets it done to bring inflation down. Is that is that something you agree with? Five to six percent is actually really high. But I think that that that logic that's coming out will make some sense. If you think about, you know, I think there's a lot still a lot of credibility behind the Fed. If you think about what they tried to do last year, they had to keep it. They had to keep it loose to get us out of the pandemic. They kept it loose a little bit too long. They got inflation higher than where they wanted to be.

They entered this year and it was a year that they just had to clamp down and they've had to clamp down throughout this year. And that's why I think this market and economy is now kind of in shock to some degree, trying to figure out, wait a second, how do we go from a mid-cycle economic expansion to roughly what feels very late cycle and may actually even be on the precipice of a recession with at least recessionary odds increasing? Because the Fed may now be in a corner where they have to take rates high enough that they cause a little bit of economic weakness to get the inflation weakness that they want. And they've got to establish that credibility in order to round trip this questioning of their credibility. They've got to end it now. So we were just showing an intraday of the 10-year no yield, and we're off the highs of the day. The high of the yield coincide with the lows of the market today. So clearly, stocks are really tracking these higher rate moves that we're

seeing in the market. There you can see we're just off the highs, 348, hit 350 just a few moments ago. The Dow was down more than 300. A boosted dividend and an agreement with an activist investor, sending shares of FedEx sharply higher today. The company announcing a hike of its dividend of 53 percent to $1.15 while saying it has added two board members with a third on the way after negotiations with hedge fund D.E. Shaw. Shares are up more than 13 percent. Let's bring in Brandon Oglenski, Barclays Freight and Transportation Analyst. How surprised were you by all this, Brandon? Yeah, thank you for having us on. Look, you know, this has been a long time coming, if you ask us, because we've been looking at FedEx with roughly half the operating profitability of their very close peer UPS. And this has been going on now for decades

because they really have a lot of duplicative assets. And look, you know, we're not trying to be disparaging of Mr. Fred Smith, you know, the founder and CEO of this company, or was a CEO for, you know, upwards of 51 years. But he ran it very much like an entrepreneur, always risking capital, focusing on growth. And what we find FedEx at today is like one of the largest transportation companies in the world, but with half the profitability of, again, their peer UPS, or if we even look to Germany, the DHL Deutsche Post network. So we think with a more focused board looking at financial returns,

focused on cash flow, getting CapEx down, you could see significant upside in the shares of FedEx. So you're a buyer on this news. You think they can widen that gap, half of the profitability, operating profitability relative to peers? Yeah, that's right. And look, we understand investors are very fearful to put multiples on things right now. Like, you know, people are worried, are we hiking rates 50 basis points, 75, 100 basis points at the next meeting? But what you need to keep in mind here, you know, FedEx has some structural cost issues. A lot of people don't realize it, but when you look out in the street, sorry, you know, there's going to be an express truck and a ground truck going to a lot of the same addresses. So they have a lot of overlapping network costs that we think, you know, with a more

focused board and a new CEO, they can actually start to address some of these cost disparities. S&P 500 almost on the flatline. FedEx up almost 15 percent. Brandon Oglenski, thank you for joining us with a buy on FedEx. The crypto carnage, though, showing no signs of slowing down. Bitcoin falling below 23K. It's now down more than 25% over the last week. Meanwhile, Coinbase trying to stage a comeback today after announcing it will be laying off 18% of its full-time workforce. In an email to employees, CEO Brian Armstrong warning a potential recession could lead to a crypto winter. Let's bring in Kate Rooney. Kate, you've heard a lot probably about the crypto winter lately.

How are other companies in the space preparing? Is it as bad as Coinbase? Yeah, well, Coinbase certainly is not alone here. We had BlockFi yesterday laying off about a fifth of its staff. It's another big crypto company, Crypto.com as well, about 5%. And then Robinhood was about a month ago with 10% layoffs. The surprise here for Wall Street was, you know, why didn't Coinbase do this sooner? Cash burn has really been a focus for analysts, and it was a pretty drawn-out process. Coinbase started with a hiring pause and then a hiring freeze and extended that and then rescinded some job offers. I spoke to Emily Choi. She's the COO over at Coinbase. She told me, you know, they wish they could have done this sooner, but it was a tough decision, and the intention now is that this is a big enough reduction that it's going to be a one time thing.

She called it painful, but necessary and also pointed to some of the macro backdrop here and what's happened in the past month or so. Jamie Dimon's warning inflation numbers and called this the prudent thing to do right now. But interesting that crypto is still so closely tied to what's going on in the broader economy, not decoupling or really trading as a sort of a safe haven in times like this. There are others, Sarah, who are keeping their foot on the gas. If you look at FTX, for example, another private crypto exchange, that company says it's going to keep hiring. And then Fidelity has got a pretty robust crypto unit. They are looking to add headcount in this time. So it is actually a good time to pick up talent if companies can afford it. Kate Rooney. Kate, thank you. Jason, how do you see the crypto crash affecting the broader stock market? Is one leading the other?

And do you think we're going to see more carnage there? Look, I think there's some flavor of one leading the other. We've been through this before. We saw this in 99, 2000 to 2001. This has some flavors of that where you had the crypto boom, you had the technology growth boom, you had the excess valuations in that space is one of the spots you could find the excesses in the economy. And now as it unwinds, like you see lower valuations for for Coinbase, for crypto assets, for technology assets, as those lower valuations for Coinbase, for crypto assets, for technology assets. As those lower valuations come in, M&A slows down. Technology-related spending slows down. Their capital spending slows down.

Their hiring slows down. We're seeing announcements like Coinbase cutting workforce. We've seen slowdown in hirings by companies like Tesla. That's probably something that will ripple through the economy, whether it's the same size and scale as before. I don't think this is a perfect mirror image of that. It's similar, but still has its own like only its own flavors are a little bit different. I'd probably say it's come. It seems like it's a combination of that. Oh, one cycle, something that's similar to like the 60s when inflation first started and something that also has some flavors of that 93, 94, where the Fed's ramping up really quickly, going up to a point where they

may be too far in timing. Well, 75 basis point, if they go for it tomorrow, will be the biggest hike since 1994. It almost feels Greenspan-like. Well, yeah, a lot of people say Volcker, but Greenspan in 94. Technology is working today for a change, and Oracle is one of the biggest winners in the sector. After beating Wall Street's earnings estimates, thanks to strong demand in its cloud business, Frank Holland joins us. Frank, Oracle's stock rallying after much stronger than expected cloud numbers. What could it mean for some of the other cloud names which have been under some serious pressure this year?

Yeah, absolutely serious pressure, Sarah. You know, investors have taken the 36 percent growth of Oracle's infrastructure cloud business as a sign that much better days could be ahead despite the growing interest rate pressure. You mentioned the rising dollar 10 percent over the last year. Oracle's cloud infrastructure biz competes with those hyperscalers. We're talking Amazon, Microsoft and Google. Those three, the big three, they have roughly three quarters of the market. Oracle, more known for its legacy business where workloads are on site or on premise. Analysts say a boost to their business is a sign of expansion and continued transition to the cloud, not a sign of delay or contraction when it comes to that trend.

And of course, if you're moving to the cloud, one thing that you definitely need these days especially is cybersecurity. We were watching those stocks today, many of those stocks, including a Sentinel-1 and a CrowdStrike, up both more than 2 percent right now. And as we mentioned, the dollar, the strengthening dollar, up 10 percent this year. Oracle also citing a currency impact of 3 to 4 percent. The fact that they were able to grow their business when they have so much of that business overseas, a very positive sign about those trends, not only here in the United States, but globally. Frank Holland, Frank, thank you. So is this, Jason, a sign that maybe it's been overdone, what's happening with some of these cloud names?

Look, you know, I'm not certain about the cloud names themselves, but kind of broadly speaking, this sell-off, we have brought a lot of the excess valuations on the growth side, the technology side, even the crypto asset side back down to more normal valuations on the on the growth side the technology side. Even the crypto asset side back down to more normal valuations. Historically speaking we do we do have a tendency to pass through. What is probably fear and go to something that

undershoots to some degree on the downside. I wouldn't be surprised if we see something similar to that. As we have in the past basically as people look over the shoulders and see what returns they've gotten from some of these assets.

Performing poorly- there's going to be a marginal investor that doesn't like that and actually ends up selling out of it after the fact on the downside. I think now we need to be asking how far does the market decline go further and does this cause an economic event? And I think that is very much still up in the air and investors are probably well-deserved to find just at least a modest amount of protection in portfolios as we go through this difficult period and figure out how far the Fed is actually going to take this. The reopening trade officially dead. That is according to a new note from Wells Fargo. The firm is bearish on the overall economy, saying investors should rid their portfolios of cyclicality and prepare for the coming recession. Wells Fargo says that the sell-off in equities will play a larger role

in bringing about a recession than in the past, as experts are not fully appreciating the U.S. consumers' exposure to the stock market. In this environment, Wells Fargo is suggesting stocks with low volatility to hedge against a slowdown. Some of those names include Verizon, Lowe's, McDonald's, Coca-Cola and IBM. And this notion, Jason, that the opening, the reopening trade is over with cyclicals like airlines and hotels, which have held up actually a little bit better because the fundamentals right now are so strong. What do you think? So, look, I probably would argue that's a little bit of a late way to start being talking about this. I mean, we we went through the reopening. We got majority of the

economy backed up and running. It wasn't exactly the way it was before. There were still some things left to do and there still are some things left to do. But at this point in time for the overall economic cycle, we think we're in the late cycle. The late cycle is one where there's you're at least close enough to economic potential there's room to fall. You have valuations are above average you have a Fed that is stepping in and raising rates to to set off. And try to

contain inflation and when you're late cycle one of two things can happen. Is you can actually pass all the way to a recession. Which I think is going to be qualified by the Fed actually overstepping how far it takes rate hikes. Or you have a situation where they do just enough and it turns out to be qualified by the Fed actually overstepping how far it takes rate hikes,

or you have a situation where they do just enough, and it turns out to be the perfect scenario, where they bring rates up enough, that it slows inflation down enough, that you actually tread backwards into mid-cycle and kind of restart a little bit of the later part of this economic cycle. We're probably erring on the side that the recessionary risks are going up at this point. The higher inflationary prints are forcing the Fed's hand. The Fed is having to come in hard. And I think that sets the tone, at least for the near term, for the markets. We'll see if Wells Fargo ends up being right on this, being an outright recession. I think that's up for debate. In terms of the reopening trade versus not, I think it's more just about being late cycle and being nearer to a recession at some point in time in the future.

So what dislocations do you see? Which sector? I know you can't talk necessarily individual stocks. Do you think has been hit too hard given that you're not even in the recession camp yet? Look, technology may be getting interesting at some point in time. We're not quite there yet yet we're probably a little bit more in line with the idea of investing with the real assets that happen to be part of the cause of the problem so uh so maybe a little bit of the uh the materials and energy and portfolios probably more importantly the thing that we think is the most interesting longer-term investment through this cycle is real estate real estate by far is less connected with the economic cycle. It happens to be attached to inflation and does well in this environment.

And with money that you pull out of the equity market to get more defensive, we think there's a sweet spot in two to five year investment grade fixed income earning basically what you can get on the longer part of the curve. Well, we are seeing real estate sell off with some of the staple sectors today. Utilities, consumer staples and health care, along with real estate, are your worst performers right now. Jason, just very quickly, just short term, any signs that were washed out here on sentiment? I don't know if we see all out panic. The VIX has started to move. But are these are these is this a ripe opportunity to buy at least in the near term?

So we're getting close to it, but it's not quite there. Our sentiment index is showing kind of a medium buy. It's not its strongest signal. One of the new pieces is that only about 16% of stocks are above their 200-day moving average at this point in time, which is pretty low reading for that measure and is what's tripping that sentiment index up. But the problem is valuations are still sitting a little bit above fair value across the market. And cinema

gauges tend to be less useful in determining and Paul and calling an actual mark market bottom- when you're above middle valuations above fair value it. Until we get a little bit lower those. The seven index is just gonna be weaker signals.

All right, Jason, thank you for joining us for the market zone. Jason pride of Glenmede. As we head into the close here, we have recovered a lot from the session lows, which came in the final hour of trade. The Dow was down more than 300.

We're only down 150. So cutting those losses in half. You've still got Boeing, Microsoft, Visa and Apple as your leaders. And you've got PNG, Coca-Cola and United Health Care as your laggards.'ve got P&G, Coca-Cola, and UnitedHealthcare as your laggards. NASDAQ goes positive just in the final moments. It's up two-tenths of a percent. Technology had been a standout performer all day long. And it looks like

we got a positive close. NASDAQ at 100 and NASDAQ up two-tenths of 1%. That's it for me. I'm closing down.