Closing Bell - Closing Bell: Stocks sink into the close, a warning for the market, and Energy Secretary Jennifer Granholm on Russia sanctions 4/5/22

Episode Date: April 5, 2022

Stocks selling off into the close amid new concerns the Fed’s rate hikes could slow the economy. Marathon Asset Management CEO Bruce Richards warning about a great disconnect in the market and why he is selling into any rally right now. Tech the biggest loser on Wall Street, but Wedbush’s Ygal Arounian lists the tech stocks that look like bargains. Mizuho’s Dan Dolev explains why he slashed Coinbase’s price target and the one fintech he is so bullish on. And Energy Secretary Jennifer Granholm on the outlook for oil and gas prices and energy sanctions against Russia.

Stocks are lower at this hour with the Nasdaq feeling the brunt of the pain down around 2%. The most important hour of trading starts now. Welcome everyone to Closing Bell. I'm Sarah Eisen. Plenty of red on the screen for the Nasdaq 100 this hour. Take a look at some of the biggest losers in the index. Moderna, Lam Research, Marvell Technology, KLA Corp, Datadog. It's a combination of a lot of different tech sectors.

Chips and software getting hit particularly hard. We're getting back all of yesterday's gains and then some. And we are near session lows as we speak. Here are my top takeaways on some big stories today. Coal, the next price spike from the war. U.S. coal prices topping $100 a ton for the first time in 13 years. Look at Peabody Energy stocks springing back to life. Coal is next on Europe's list for new Russia sanctions. Russia supplies 18% of the world's coal exports. It's a big problem for electricity costs. And it's a step closer to Europe banning Russian oil and gas. That could be the next move.

A big jump today in Treasury yields, hurting the homebuilders and the growth stocks. One of the catalysts, Fed Governor Lael Brainard, who's usually pretty dovish, talking very hawkishly about shrinking the balance sheet as soon as the May meeting and shrinking it rapidly. It shows there are no doves left at the Fed. This Fed is going to move aggressively, not just on interest rates, but on the balance sheet, too. And the market may be underpricing the tightening risk. And Carnival and the cruise stocks are all rising today despite weakness in other consumer names. Why? Well, last night, Carnival said it had the highest ever booking week in the company's history,

a double-digit increase from the prior week. Hard to get too depressed about a recession when hearing from these travel companies. Booking Holdings last week told us they haven't seen any consumer pushback to higher prices, and demand is off the charts. It's a big disconnect from what we're seeing in the market, which is pricing in an economic slowdown. Earnings commentary coming up will be key. Let's get to our top story, though.

This hour, while tech takes a big leg lower, Twitter is getting another pop today. The CEO announcing this morning that the company is adding Elon Musk to its board of directors after the Tesla CEO took a 9.2 percent stake in that company. Musk joins former Twitter CEO Jack Dorsey, Salesforce co-CEO Brett Taylor, and the CEO on the board. Joining us now, Jeffrey Sonnenfeld from Yale School of Management and CNBC tech correspondent Steve Kovach.

It's good to have you both here, Jeff. I think the question of the day is, as a board member, he's one of 12, he is the most vocal, he is the most active on Twitter. What kind of power does he have to make changes to the platform and to the company? You know, he adds a lot to the party here. Of course, there are three big concerns.

The governance one you raised, I think, is the biggest one. But, of course, many people inside the company are worried about what the content character is going to be. And, of course, there's an upside here on product quality. First one on governance. This is a to be. And of course, there's an upside here on product quality. First one on governance. This is a spectacular board. It's a board that knows how to work with entrepreneurs. It's a board where, you know, we might have hoped for more reinvention of this company and he'll bring that. But they've got the financial heavies there. The CEO, I think, is very promising. Parag is pretty new on the job. They've got the best chief financial officer, one of the best in the industry, for sure, you know, with Ned Siegel. So I think it's very encouraging. Just a lot of founders don't play nicely with others. So Freud said society has

changed by its discontents. And this is a guy who's never happy with the status quo. When Jack Dorsey had actually just tweeted that he's been trying to get him on the board for a long time. Steve, one thing he brings to the table that none of the other board members do not is 80 million Twitter followers. And he's already out there putting out polls like should Twitter have an edit button? Is he going to bring the results of the polls to the board meetings? How is this going to work? Yeah, that's right, Sarah. There's this running joke when you look at Twitter board members that they don't use Twitter.

There's, you know, for years everyone would look up and they'd have like two tweets on their profile or something. We know Elon is not like that. So that's for sure. And just, you know, the company is telling me today, Sarah, they're finally talking, by the way, and they're kind of tamping down these expectations that there's going to be like a systemic change within, you know, the free speech principles at Twitter and so on and so forth. They're really downplaying his role that the board is there for an advisory thing that includes Musk and that, again, the management under CEO Agual are really handling the day-to-day decisions at Twitter. At the same time, they're kind of towing the line here saying, hey, we still

value impartiality. We're still a neutral platform and we're going to keep up with those principles, despite all the criticism to the contrary that they've been getting, Sarah. Well, that relationship, Jeff, is going to be interesting between CEO and new board member Elon Musk, who has tweeted a meme of the CEO as Stalin before. What do we need to know about Elon Musk, Jeff? What are your thoughts of him as a CEO? I don't think he's been on a lot of boards besides Tesla.

I think he's on Endeavor board, right? He hasn't made a lot of noise there. No, not made a lot of noise there. And he has he is not. Yeah, he's not served on a lot of boards. Surprisingly, he is not for the boring company. And I guess he would make it a lot less boring where he were on that board. Surprising that he but he's so scattered across so many other interests,

he doesn't really have the time. And also, as Steve points out, he spends an awful lot of time tweeting. So he's got 3,000 tweets a year, and his following at 80 million is maybe perhaps half of that of Barack Obama. But he's only got, you know, Taylor Swift and Lady Gaga and a few others ahead of him. One of the top 10, certainly most followed people. Would you want, Jeff, would you want Elon Musk on your board if you were running a company? You're an entrepreneur. You would. And that's exactly why he put the founder of Oracle on his own board. They know how to defend creativity. If Parag is not the founder, it's perhaps more of a mixed blessing. I think I can see why Jack Dorsey would have wanted him. The upside is pretty,

I think, encouraging here. The flamboyance that he went through in his tweeting history tapered off a little bit after 2018, after some of the trouble he got into on various fronts. And he's not really been out there when he talks about free speech. He's not a QAnon supporter and things. He got into some controversy over, you know, downplaying the severity of the pandemic. But I think he went mute over that, too, two years ago. So I'm actually quite encouraged that he can bring a lot of energy, a lot of creativity. So, yeah, I I would welcome him in a guarded way on this board. Stock's up 30 percent quickly, Steve. Investors have high hopes for him as part of this company.

It had been lagging. Competitors like Snap. What needs to get done to turn around the stock story and the narrative for advertisers? They just haven't been able to grow users. There's a lot of things to unpack there, Sarah. This has been a criticism of Twitter for, geez, last 10 years or so. If you look at Twitter, open up your phone and look at Twitter today, it looks largely like it did about five to 10 years ago. So that being said, over the last year or so, they've really ramped up product development, things like Spaces, which is that kind of live audio format. They're adding a subscription

service. And this is all with the goal of doubling revenue within the next couple years. They've already stated that is their goal. This is before Jack Dorsey even left. So it's really going to have to ramp up this product release cycle even more than they already have to reach those goals. And then I guess lean on Elon's advice for how to do that. Advisory role. That's what they say about the board members.

They're taking it to a new level here, perhaps. Jeffrey Sonnenfeld, Steve Kovach, thank you both for joining me. Thanks. Appreciate it. Dow's down 200 points right now. Up next, Energy Secretary Jennifer Granholm joins us for a first on CNBC interview to talk about rising oil and gas prices and the administration's new effort to bring clean energy to schools just announced this week. You're watching Closing Bell on CNBC. We are at session lows, down 220 right now on the Dow. Let's take a look at today's stealth mover.

It's Carvana, the online used car retailer, falling after RBC downgraded the stock to sector perform from outperform, slashed its price target, citing slowing sales growth. RBC also mentioning rising interest rates and inflation as factors that typically work against the used car market. Carvana shares now down nearly 50 percent on the year. Speaking of vehicles, electric school buses could be coming to your neighborhood. It's part of a new federal action plan aimed to update school infrastructure. Using funds from the bipartisan infrastructure law and American Rescue Plan. The Department of Energy is launching a $500 million grant to improve school HVAC systems and help introduce electric buses. Joining me now first on CNBC, U.S. Energy Secretary Jennifer Granholm. Secretary Granholm,

it's great to have you back on the show. Welcome. Yeah, you bet. Thanks for having me on. So my biggest question on this is how those funds, the $500 million, will be used and allocated. There's obviously such great need here when it comes to updating public school classrooms, making them healthier and cleaner. How do you decide where it goes and how it gets dispersed? Yeah, that $500 million, as you mentioned, comes from the bipartisan infrastructure law. And the first step is to put out a request for information to get feedback from superintendents around the country about what they would do if they had, what they would prioritize if they had to upgrade their schools. We want to prioritize, of course, schools that haven't already been updated, but particularly because schools right now spend, the second biggest part of their expenditures

is on the utility bills after salaries. So we want to bring that down. And if just replacing the HVAC and lighting can save up to 30% in that utility bill, and of course that money ends up going into the classroom. So we're really interested in bringing down costs and having the biggest bang for your buck where it can have the biggest impact. And also, we'd like to see superintendents tell us whether they would be interested in renewable energy installations as well. So is there going to

be a private sector component here where you hire companies, for instance, to make electric vehicles, electric school buses, that sort of thing? The bus component is a different piece of it. That's actually a $5 billion component, which will be administered through the Department of Transportation. But clearly, because kids who travel, particularly rural areas, travel long distances on buses, those windows are open, they're breathing diesel fumes, et cetera. We want to be able to reduce the cost of transportation, which, of course, electric buses do over the life of the vehicle, and make the air safer and healthier.

The bottom line is the administration wants to actually leverage the private sector. So, for example, the energy savings performance contracts that can be part of a superintendent's plan with a district to bring down those energy costs is a very welcome thing that we would love to see. I have to ask you about the latest on oil and gas and the war. Obviously, we are seeing more images of the horrible atrocities coming out of Ukraine. What do you think, Secretary Granholm, it's going to take to get the Europeans to sanction Russian oil and gas? Are they waiting for a chemical attack? Well, it certainly looks like they're having all of these discussions that are heading in

that direction. I mean, you know, this attack in Bukha was, I want to say it really flipped a page about the horror of what Putin is up to. And I think that it is causing our European allies to really reconsider what they are doing and where they are getting their fuel from. Of course, we're in a privileged position in the United States because we are not importing now any Russian oil or gas. And so we understand that the first priority is to keep your people warm in the winter and make sure that they have fuel. But the conversations that we're having about diversifying and moving in new directions, about energy efficiency, heat pumps, et cetera, particularly for those countries that are very reliant like Germany on natural gas,

are very encouraging. But we have to on natural gas, are very encouraging. But we have to make sure that we are also doing what we can to help our allies. And that's why the United States has been a recent supplier, certainly, of liquefied natural gas. So all of those conversations are happening right now. Yeah, I wanted to ask about that. So we're going to supply them 15 BCM, but there are estimates that Russia supplies them with 160. That's obviously a huge gap. How does that get made up? Where does the extra supply come from? Yeah, I mean, so part of it is this notion of demand reduction through efficiency strategy. Part of it is there are other

suppliers, including Norway, for example, Qatar, for example. We are actually exporting every molecule of natural gas that can be liquefied where there's a terminal to liquefy it. So we are really amping up. We just granted two additional permits. There are two separate facilities that are coming online by the end of next year, which will increase our exports to 3 million BCF per day. So that's significant help. But those strategies are all happening in parallel. And the European Union is really front and center at making sure that particularly efforts with respect to demand reduction through efficiency is at the front of their strategy. What about you mentioned that these images that we've gotten out of Ukraine are

sort of a new level of terrible that we're witnessing. What about secondary sanctions? Is that something you're looking at, putting sanctions on Indian or Chinese companies that are still buying oil from Russia? Yeah, I mean, I think the administration is looking at all sorts of strategies, and I'm not going to speak for them about what the next level of sanctions are. But I do think, I mean, you heard the president speaking about Putin should be tried for war crimes, etc. I mean, there is just this sense that this is so beyond the pale, and especially if there are additional atrocities similar to what we've seen in Bucca that are about to be revealed. So we want to send, and this is why the European allies have been so united. We've all been so united in saying enough is enough. I mean, I just, for example, just as one example, I just chaired the International Energy Agency's ministerial,

and they will be going back for another collective action of releasing oil supplies because they just do not want to be in a position of using any Russian oil whatsoever, and we have to replace those Russian barrels that have been taken off the market. So we're also doing a big SPR release, which you guys announced last week, a million a day, you know, 180 million for the next six months, I believe. Oil prices came down on that news. They're back above 101. Was it enough of an impact that you were going for in terms of the price action? Let me just be clear what we're going for. We are going for stabilization.

And so we know because of those millions of barrels that have been taken off the market, we need to ramp up supply to replace those. And so our oil and gas companies and the Energy Information Agency has actually projected that we will see an additional ramp up in oil and gas supply to the tune of a million barrels per day by the end of this year. So this this release of the Strategic Petroleum Reserve is that amount one million per day until they can get up to at least replacing that a million. Now, it may be more. There seems to be some real interest in or at least some activity that would suggest that it might even be more than a million, but we're not in a position to say that yet. We're doing what we can to be able to stabilize the markets. Our allies in Europe are also looking at how much they can release, again, to stabilize the market. We know that at any given day, you're going to see volatility in the price. It's going to go up or down based on external factors. What we want to

do is to make sure that supply and demand meet each other. Secretary Granholm, thank you so much for the information. We appreciate it. Thanks so much. Jennifer Granholm, Secretary of Energy. Let's give you a check on the markets because we are seeing session lows right now, down more than $2.250 on the Dow. The Nasdaq is the big loser on the day, down two and a quarter percent. So we've given back all of yesterday's gains and then some now negative on the week. Small caps down two percent. S&P 500 down 1.2. Up next, Mike Santoli looking at the support levels for tech stocks in his dashboard today as the Nasdaq does sit at session lows. Later, Bruce Richards from Marathon Asset Management says there's a great disconnect in the market. He will join us with his warning

for investors and what he's doing about it. And biotech having another rough session. Check out shares of Veer, one of the biggest movers to the downside in the last three hours. The FDA saying an antibody treatment developed by Veer and Glaxo no longer authorized to treat COVID-19, with data showing it's unlikely to be effective against this new BA.2 subvariant. The stock down 12 percent. The recession lows as we head into the close. Tech getting hit the hardest on 234 on the Dow.

Joining us now, Marathon Asset Management Chairman and CEO Bruce Richards. Marathon is a global credit manager, 24 billion in assets under management. Bruce, good to have you back on the show. You've been talking about recession for a few months now. The bond market looks like it's catching up with the inversion of the two-year, 10-year curve. Is that still where you think we're headed? And if so, are you a seller of the stock rallies that we've seen lately? So a few things to unpack right there.

Number one is the 210 curve. I look at it, I say it's a negative 70 basis points because your one year forward rates is a negative 70. we haven't seen that since the volcker years so take a look at those forward curves and then look at what happened to three year notes three year notes earlier a few months ago went from 28 base points to 270 where it is now, up nearly 250 base points. So I ask you, when the Fed actually embarks upon 50 base points after 50 base points after 50 base points of hikes, because they want to get the Fed funds right 3%, they want to do that in the next year. And when that happens, when they're selling down their balance sheet, remember, they took the balance sheet from $4 trillion to $9 trillion in just the last couple of years. When they start to reverse that, they're going to be selling treasuries.

They're going to be selling mortgage-backed securities. And the market won't be able to sustain that heavy selling. So right now, there's a big disconnect between what the bond market is starting to signal and where equity markets are priced. Because equity markets are only down 6% S&P on the year. Earlier in the year, they were down 13%. So you have a lot more to go, is your answer. Downside on the stock market. I think of you as more of a credit guy, but are you shorting stocks at these levels? We have some options on where we do, but we also think high yield is going to be under a lot of pressure. You know, high yield bond spreads are a measly,

I say measly because it's in the 90th percentile of spread tightness. They're a measly 325 off of treasuries. That's it. And so I think there'll be at some point when stocks are down 20%, they'll be out beyond 500 spread. And so there's going to be a very different scenario

for the markets when financial conditions really tighten is when the Fed really raises rates, when the markets start to appreciate how much they have to sell down their balance sheet and what that means for Treasuries hitting the marketplace and a flight to quality that happens as a result. So you think we'll see a recession when? You know, I'm calling for looking at the inversion curve now, going for about a year and a bit out. So summer of 23 is when we should mark our calendars. It really feels like that market hasn't priced in any kind of earnings slowdown. Expectations haven't haven't budged. And I have to say, Bruce, some of the commentary

I highlighted Carnival at the top of the hour out of companies, they're not seeing it. They don't see a slowdown yet. There's still a ton of pent up demand, especially for travel. Labor market is super strong. Wages are going up. It doesn't feel like we are on the brink of a recession. Well, you'll see goods start to really soften. You'll see services, particularly travel related services, because people have been locked up for so long, start to accelerate. And so you'll see a rebalancing within. But what I'm talking about is overall S&P earnings, which would be growing mid-teens, expected to come into this year growing around 8 percent,

will close the year with growth rates of only about 4 percent. And what you'll see are the CEOs, while they exceed last quarter's earnings, you'll start to see forecasts start to forecast lower earnings going forward. And so what that means is cost pressures, because inflation is running 8 percent, cost pressures will really start to hit earnings. And we're seeing that already in the margins of companies as 40% margins become 30% margins when you look out over the next 12 months. And we're seeing the guidance there, and we're seeing that in the early numbers that we're seeing from, you know,

you can look at companies that, like Carvana's been in the news today, all right, it's been in the news. They crashed because, you know, people are going down in brand because food costs are going up so high. So they're going to in-store brands as opposed to brand label. So we're seeing that across the board. But mostly it's the consumer weakening because wages are getting eaten up by inflation and discretionary spending is starting to decline. And so it's going to be led by consumer consumption and a buyer's trade for prices from this point going forward

for anything that's discretionary. It's quite a warning, Bruce. I want to have you back on soon. We've got to leave it there. But we've got to talk about China as well. I know, I think you're still bullish there. Bruce Richards, a marathon, a warning of a recession. Pretty dire circumstance there for the market.

Here's where we stand, by the way. We are at session lows, and we've taken another leg lower here, down 276 or so on the Dow, down 2.3% on the Nasdaq. Bruce Richards not helping sentiment there. We are seeing pretty much a lot of the sectors under pressure at this moment. What's holding up? Utilities, real estate, and consumer staples, all the defensive ones. A big downgrade of UPS dragging down transportation stocks today.

Find out what's behind that call and whether it could mean more trouble for the broader group later on Closing Bell. The sell-off been picking up steam all hour long. We just hit down 300 on the Dow, down 290 right now. Salesforce is the biggest weight, followed by Boeing, Disney and Intel. UnitedHealth, J&J and McDonald's, Staples holding up best. We're going to continue to follow this sell off, hit some of the big moving names, especially the Nasdaq, which is down got 19 minutes left in the trading day we are now in the closing bell market zone cnbc senior markets commentator mike santoli here to break down the crucial moments of the trading day plus christina parts and eva is here with a big drop in chip stocks. Mizuho's Dan Dolob on the fallout in fintech and much more.

Stocks are selling off for the final hour of trade. The Nasdaq leading the declines, down more than 2% on track for its worst day in more than four weeks. And Mike, now down half a percent on the week. So this big spurt that we saw in the past few weeks, a lot of people say it was technical in nature. It was about positioning. We're now down 12.5% of the highs on the NASDAQ. Does this mean that stocks are still vulnerable to rising rates and all the other fears out there fundamentally? We're absolutely still vulnerable to real fast moves in rates like we did see over the course of the day today. Still vulnerable to the psychology, which is there for a good reason, that we are seeing signs of being late in the cycle and therefore not a lot of runway for rates to go up

or for the Fed to act very aggressively without bringing up at least the possibility for a big slowdown. So I think we're still in that dynamic, probably will be for a while. But we were up about 10 percent from the lows. If we closed here, this would be the third one percent daily decline for the S&P along the way on that 10 percent rally. But they've only just been these one day isolated sort of gut checks. We'll see if that continues on from here. But clearly, we got up to a level and we've been saying this for days. That's right on the borderline between it's either the maximum bear market rally or it's a resumption of the uptrend. And so, you know, we'll see after today

what it looks like. What did you think about what Bruce Richards just said, a marathon asset management, that he is seller of the rally, he's doing it with options, shorting stocks, and that there's a big disconnect between the stock market and the bond market on recession, and the stock market is way behind? I would say that when there's an apparent disagreement between what the Treasury market might be saying in terms of the yield curve and what equities seem to be saying, I look to the credit markets because that's what mediates those two markets, equities and Treasuries. And the credit markets are not really in any kind of recessionary panic right now. They're not at the strongest levels.

There's sort of some softness in pockets of it. But it's not something that says to me that, you know, equities have their head in the sand and they haven't figured out that we're headed, you know, right into a downturn. Down about two. We've recovered a little. Down 250 or so on the Dow. Tech is the worst performing sector today. Chip makers and semiconductor equipment makers, hardest hit right

now in the industry, with the group on pace for its worst day in nearly a month. Christina Partsenevelos joins us. Christina, we've seen some bullish outlooks from chip companies recently. So is that not resonating? No, it's not, because a lot of investors right now are worried about the immediate pain points and whether this growth trajectory can sustain itself. For example, you've got COVID lockdowns happening in China, weighing on a lot of the supply chain. You have, of course, the cyclical environment that's hitting all of tech, so rising interest rates and semiconductors falls into that category. And then you also have, of course, a trend weakness in handsets, weakness in PCs. AMD has great exposure to PCs. And so those are just three main points that

a lot of investors are weighing right now. Ford, for example, announcing today that the chip shortage is still hurting them. And yet you have a lot of companies, ADI, for example, they had an investor day today and they were extremely bullish. They actually raised their long-term revenue forecast from a mid-single digit to 7% to 10% range. So you have this divide that's going on between the investors and the bearishness tone and then the management that's relatively bullish. And I'll end with just this one quote that stood out to me from Piper Sandler. They said, quote, we've not seen such bearishness since the trade war with China in 2018 and 2019.

And analog is one example. The stock is down over 2% right now. The index, though, also down over 4%. What are we expecting to hear from the companies? We got a little bit of a tell with Micron. I thought that was pretty bullish, Christina, as far as the fundamentals still being very much intact and cycles like 5G still in big growth phases. Right. But are those cycles that something would happen within the immediate term, within this year, or in the beginning of 2023? That's the big question.

So a lot of these companies, Micron, AMD, they talk about the push to data centers. We're going to be needing a lot more storage. They're going to be focusing on NAND or other products are going to be in the data center. But that's something that is still going to take a little bit of time to transition. Right. And so that's something that could be weighing on the sector in the immediate term. Christina Partsenevelos, Christina, thank you.

We've got a news alert here on Spirit Airlines. Phil LeBeau has it for us. Phil. Sarah, this is an interesting move. JetBlue, according to The New York Times, has made a bid to buy Spirit Airways for a deal that would be the purchase price would be three point six billion dollars. Now, you might be saying to yourself, wait a second, isn't Spirit already in a merger? You bet. Spirit and Frontier have already agreed to merger and or merge. So that is an agreement that would have to be unwound if Spirit were to say, yes, we would like to be acquired by JetBlue. So unclear exactly how this would transpire or what this means, but there is already an agreement between Frontier and Spirit to merge.

Would Spirit unwind that agreement in order to talk with JetBlue, accept JetBlue's offer? Remains to be seen. We have calls out to all the principals involved in this, but certainly an interesting move by JetBlue, according to the New York Times, making a bid for Spirit for $3.6 billion. Sarah? The stock is spiking up more than 20%. So just to be clear, Phil, I don't know if there's any way to tell this.

Is it a better deal? Is it a better match? Is it a better strategic fit for Spirit to go with JetBlue or for Spirit to go with Frontier? Yeah, remember, Frontier, which is in the merger with Spirit, there's a pretty nice fit between those two airlines in terms of low-cost carriers. There's not a ton of overlap regarding their route structure. There's not a huge amount of overlap between JetBlue and Spirit, though they both have big presence in Florida. So that certainly would be an obstacle that might have to be overcome. Unclear exactly how this matches up dollar for dollar versus the merger with Frontier. But again, remember, both the boards of Spirit and Frontier have already approved that merger.

So they would have to, Spirit's board would have to undo that agreement in order to start entertaining this offer from JetBlue. Spirit shares are halted up at those high levels. Frontier's a little higher. JetBlue down almost 7% on this news. Phil, thank you very much. Let us know if you've gotten anything more here. Let's get more on the tech sell-off, though. In the meantime, Yigal Arunian, Managing Director at Wedbush Securities, joins us now. He covers names like Alphabet, Twitter,

Facebook, which are all getting hit again after they've, a lot of them have already been hit pretty hard on this prospect of rising rates. Yigal, Are you a buyer on some of the valuations right now, or do you sell because the macro noise is still there and it's still proving to be pretty vulnerable for this group? Sure. Look, I would expect to continue to see some vulnerability as we kind of move throughout the next couple couple months. I am a buyer of strength and high quality names with with a lot of the valuations we're seeing a lot of names are trading at trough valuations and I think you know the macro certainly off the highs that we've seen over the past couple of years but it's also holding up still relatively well. That can certainly move in the direction

with if rates keep going higher and the macro weakens, especially around the consumer. But so far we're seeing still pretty solid health in a lot of pockets and a lot of valuations that I think you can consider pretty attractive right now. Like what? Which one do you like the best? So if I think about that combination of highest quality with most attractive valuations,

I would put Alphabet up there, right up near the top. Definitely one of the highest quality names we cover. I think still the fundamentals there are in pretty good shape. You can kind of go further down the curve with names that might be a little bit riskier, but the valuation there is even more attractive. Staying within that digital ad space, Pinterest is kind of right up there. We cover Shopify. That valuation has come in quite materially. Consider them a best-in-class e-commerce operator. So there are a lot of high quality companies with valuations that if the fundamentals improve

a little bit, think about where we are right now. We should start to see re-accelerating growth as we lap the toughest comp here in 1Q for most of these companies. Some re-accelerating growth, the macro holds up a little bit better. Estimates can move up again. That's the kind of recipe you need for valuations to re-rate and expand. And I think there's a lot of those within this tech pocket.

But not Twitter. You still don't like it. You're still neutral, even with Elon Musk now as the biggest shareholder and a board member. Yeah, again, go back to the fundamentals. And so, you know, Elon Musk coming on, being on the board, I think net net, that's a positive. But where his focus has been, you know, around the free speech and, you know, what what should be acceptable and what shouldn't be acceptable on Twitter. You know, that that's fine.'s fine, kind of good conversation, but kind of think about what's going to drive Twitter forward here. What should drive the valuation and the stock? And that's user growth and it's better monetization. Is Elon Musk coming onto the board

of Twitter going to drive better user growth? Is debate around free speech going to drive better user growth over the next couple of years for Twitter? I think that that's debatable. And there's a lot, a lot that we need to see to get more comfortable with that. It's so interesting. Brent Thale yesterday, also an analyst not impressed by Elon Musk. Thank you, Egal. Good to talk to you, Egal Arunian. Coinbase is getting clobbered right now. Mizuho lowering its price target to $1.90. The firm says Coinbase's decision to launch its NFT marketplace is questionable, especially as NFT hype is waning. Overall, the stocks in the fintech space are sinking today across the board.

PayPal, Block, Affirm, all significantly lower. Joining us now, Dan Doleff, the Mizuho America senior analyst who made the call on Coinbase in particular. I'm curious about it, Dan, because Bitcoin has actually held up a little bit better lately than some of the high growth tech stocks. Yeah, thanks for having me again on the show. Why did you make that call? Well, the call is basically not on Bitcoin. The call today is actually on them going all in on NFT and spending hundreds of millions of dollars on NFTss right when nfts was at the peak and if you look at nfts today versus say you know three months ago the hype around nfp has come down this was like maybe like a one-trick pony that was very very strong in january february that's when they made the investment

they're spending four to five billion dollars on technology and gna this year big part of it is going to be on on employee they're hiring 6 000 employees and they're going all into nfts and i think this is you know just kind of a me too action um they don't have like a huge competitive advantage in nfts and and the hype around nfts is going away so i think it's a it's a mistake and remember if they go towards the low end of their MTUs or their monthly actives this year, they're not going to be profitable. They're going to be losing $500 million on an adjusted EBITDA basis. So it's the wrong time to make this bet, in my view. But what about their core business and the scale and sort of first mover advantage that

they built there? What's that worth? I agree. So they have an enormous first mover advantage and they're actually gaining share in Bitcoin. If you look at sort of their share of Bitcoin, while it's very small, it's about 2% on a global basis, they're gaining share. But if you think about kind of the moat of this business, if you look at institutional take rates, institutional yields, what institutions pay to trade Bitcoin, that's about two to three basis points, right? It's very, very small. Consumers pay over 100. So I think what you'll see at the end of, you know, at the end of days is that consumer yields are going to, the spreads are going to shrink and they're going to be in

line with the institutional yield. So I expect a convergence and pressure on their revenues over time. So I don't like their business model. I don't think it's sustainable over a long period of time. All the fintechs are under pressure today. You have that block cash app investigation, a former employee downloading customer information. But clearly the group has been hit hard. There are concerns about a consumer slowdown. Which valuation do you think has gotten the cheapest in the group? I still like Square the most. I mean, especially on a day like today where they've had, you know, that security breach, which I don't think is going to be remembered, you know, in a week or two weeks.

The fundamental work that we've done here shows you that the cash app could be 20% above where consensus estimates are today. People completely don't understand what they're going to do with Afterpay and Cash App and the seller business, the point of sale, combining the trio and creating their own ecosystem. So I think Square is light years above and beyond everyone else in the ecosystem. That's the one I'm most bullish on, and that's the one I see actually working,

especially as we near the analyst day on May 18th. So I view this as a huge catalyst. I would buy more Square today or Block. Square, which is actually Block, which is down 6% and down about 15% for the year. Dan, thank you. Dan Tolev. Let's turn now to the transport stocks having another rough day, have been hit hard lately. Shares of UPS falling after Wolf Research downgraded that stock to peer perform from outperform.

The firm expects to see slowing volume trends, which could lead to slower pricing later this year. The whole sector under pressure, trading lower right now. And let's bring in Frank Holland. And Frank, leading indicator for recession, or at least for the economy. Typically, that's how we view the transports. There's also talk of a freight recession. What can you tell us about that? Well, yeah. Number one, Sarah, it cannot be overstated that freight rates have declined. They've fallen very hard, about 80 percent decline in their growth from the start of February to the start of April. That was a real catalyst for the UPS downgrade today. Wolf Research basically saying they're losing a lot of their pricing power.

But that's not completely a surprise. All of our lives have shifted pretty dramatically. For example, back in January, we saw a high of the container ships at the Port of LA and Long Beach, 109 ships. It's down 60 percent from that level right now. Again, a dramatic shift, but all of our lives have shifted. We're not wearing masks. We're going out and eating at restaurants more, and we're shopping in stores more. We're not ordering online just as much as we have before. It was kind of expected that freight rates would normalize, but this is kind of the new normal. They've normalized back to 2021 levels. But if you look at the comparison of pre-pandemic, they're about 50 percent higher than they were

pre-pandemic. Now, some of this decline in rates is also declining volume, partly caused by the shutdown of the Shenzhen port in China. We talked about that a few weeks ago. Third largest port in the world shut down due to covid. That reduced a lot of the traffic coming out of there, and it came right on the heels of Lunar New Year. That's a time in Asia when production slows down, period. You put those two together, you're just going to have a lot less volume coming out of Asia, which really fuels the U.S. freight economy. Coming up in a few days, we're going to get a lot of answers about what's really going on. You might hear a lot of analysts and other people talk about record low inventory in U.S. retail stores. Well, that's true on paper, at least. That number that

people get from the St. Louis Fed, that's lagging by two months. So the number that we got last month was actually for January. Coming up next week, we're going to get the Cass Freight Report, which will give us a better indication of where the freight market is. Then on April 14th, we're going to get the St. Louis Fed's report for February that will give us a better indication of where the freight market is. Then on April 14th, we're going to get the St. Louis Fed's report for February that will give us a sense of the inventory levels in February. So if we see those inventory levels tick up, well, there might be warranted concern about a freight recession or freight rates falling or continuing to fall.

If we see them stay at what could be historically low levels, well, maybe it's overblown. Got it. Frank Holland, we'll look for it. Thank you very much. We've got two minutes to go here in the trading day. Mike, what are you seeing in the market internals down 306, down 314 now on the Dow? It's pretty much been a deterioration all hour. Yeah, been a steady slide and actually relatively weak on the internally as well. Small caps underperforming. That often means breadth is negative. And you see right there more than three to one declining to advancing volume. That's been a real erosion since just a couple of hours ago. I want to take a look at the U.S. dollar index.

We had that Lael Brainard, Fed governor, points about reducing the Fed balance sheet as well as aggressive rate hikes. That's sort of a tightening noise. And you see the dollar index right back up near that 100 mark. It's a two-year chart. So right back near April of 2020 levels at that point. The volatility index now has bounced relatively hard above 21 again. It's still in this sort of short-term uptrend if you look at those lows from late last year. So still not any kind of all clear signal, but much more relaxed than we

had been just a few weeks ago, Sarah. As we head into the close, what's working today? Utilities, health care, consumer staples and real estate. Those are the sectors that are positive in the S&P 500. Not enough to lift the overall index, which is down 1.3 percent when you've got big, heavy groups like consumer discretionary technology and communication services all lower in industrials, energy, materials and financials. Also not having a great day. Higher yields today has been a big theme. That's pressuring technology stocks. Apple, Tesla, Nvidia, Amazon, Microsoft, Alphabet, all under pressure. It's why you're seeing a 2.3 percent slide in the Nasdaq right now.

Small caps also giving up about 2 percent or so. The Dow Jones Industrial Average down about 300 points here into the close. Biggest weight on the Dow sales force as the growth trade gets hit today on the back of rising rates. It's a reversal of what we've seen yesterday and what we've seen in the coming weeks, but pretty much what we saw in the first quarter of this year, earlier, that is. That does it for me in closing, Val. Have a good evening.

We'll send it into overtime with Scott Wapner.