Closing Bell - Closing Bell: Stocks sink & the CEOs of Under Armour & Adidas on consumer spending 5/6/22

Episode Date: May 6, 2022

Stocks selling off for a second straight day after the worst day for the major averages since 2020, although the market closed well off session lows. Ally’s Lindsey Bell explains why she's turning optimistic amid the recent sell off. Axonic’s Peter Cecchini, however, says he would be a seller into any near-term rallies. Evercore ISI’s Mark Mahaney on whether he sees value in the beaten down tech sector. JP Morgan Chief U.S. Economist Mike Feroli weighs in on the better than expected April jobs report. And Under Armour CEO Patrik Frisk and Adidas CEO Kasper Rorsted discuss how supply chain challenges and covid lockdowns in China are impacting their businesses.

Stocks are under pressure again, but off the worst levels in what has been another choppy session here on Wall Street. Welcome to Closing Bell, everyone. I'm Sarah Eisen. Here's where we stand right now in the market, down a little more than a percent on the S&P 500. Not every sector is negative, though most are. Energy and utilities just popping into the green. They're higher, but everyone else is down. Materials are the hardest hit today. Real estate at the bottom of the list as well. Some of the high growth software names getting hit again. The Nasdaq 100 down 1.7 percent. That's where the brunt of the pain has been this week. And after all these crazy swings, we're going out Friday with only a decline of about seven tenths of one percent for the S&P 500. Feels a lot bigger

after a day like yesterday and the selling continuing today. We'll guide you through this final hour. Check out the most actively traded names here at the New York Stock Exchange right now. We've got Ford continues to be on the list of most highly traded. It's been lower for the past few days, down 2.5% right now. Palantir, NIO, EVs getting a lot of attention. And Uber, an earnings loser on the week, down another 3% today. Coming up on today's show, the CEOs of two companies in the eye of the market storm today. We will talk to Under Armour chief Patrick Friss, his stock

getting absolutely hammered, losing a quarter of its value as we speak after missing earnings estimates and giving weak guidance. The macroeconomics, especially China, very much at play. Plus, the CEO of Adidas will join us as that stock pulls back as well on concerns about slowing sales in China. A lot of the apparel names are all down in sympathy. Nike, the CEO of Adidas will join us as that stock pulls back as well on concerns about slowing sales in China. A lot of the apparel names are all down in sympathy. Nike, the big competitor here, is the biggest drag right now on the Dow. Let's get straight to this market action as we cap off a wild week. The big question now, how do you navigate this crazy volatility in this market?

Joining us, Lindsay Bell from Ally Invest and Oxonix, Peter Cecchini. Lindsay, to you first, because you have a very good handle on the earnings. Overall, I wonder how much this is feeding into the selling. Yes, the Fed is front and center in higher interest rates, but there have been a lot of high-profile misses from stronger kind of growth companies, like in Adidas or yesterday, like some of those internet names. What do you make of it overall? Yeah, that's absolutely right. And that's what sticks in our minds, right? So it doesn't feel so good. And so it impacts market sentiment for sure. But when I look at the S&P 500 as a whole, I look at Q1 earnings season, it was a really good earnings season so far. I know we're winding down

here about 86% of the way through and 78% of companies have beat their earnings expectations. More than that, have beat their sales expectations and the outlook continues to move higher, actually. So, and when I look at the stock reaction, well, some of those, especially in the communication services sectors, the stock reactions did not feel good for some of those high profile misses. But overall, it was kind of a muted reaction when you look at the index overall. So honestly, I think what we need to do is look at where margins go from here. Is there going to be compression sales? Sales growth has been strong enough that it's been able to offset some of the cost pressures that companies have talked about inflationary concerns that they've

talked about over the course of the earnings season and we're expecting operating margins to continue to increase throughout the course of the year and so we'll see if that continues to be the case as we get through the next quarter or so so just to be clear lindsay you sound optimistic are you a buyer of some of these names that have been hit hard on better earnings and better outlooks to your point? And if so, where are those names? Yeah, I actually am optimistic because when I look at this marketplace, it's come down quite significantly, especially in certain pockets. And what I think is the narrative has changed for some reason to this story that sloth is going to grow or going to slow significantly. And we even heard that.

I think people were reading between the lines from the Fed statement yesterday that they're expecting this major slowdown in growth, whether it's economic, corporate growth or within the consumer spending appetite. And we just haven't seen it on the corporate side or the consumer side just yet. And I think technology is one area where you can pick and choose your spots. You got to look for high quality cash flows and companies that are returning capital to their shareholders. But there are significant opportunities in there. We started today, by the way, it was it was Amazon, it was Apple, it was Tesla that was holding the market up in the beginning of the day that did not last. But people I think I think think buyers are starting to get interested in nibbling into that space.

Energy and utilities solidly higher now. Peter, you've been bearish for a long time. You finally got your big sell off. S&P is now about 15 percent off the highs. Where do we go from here? Thanks, Sarah. Yeah, no, I've, I've been bearish since late last year. And the thesis was that the Fed was going to have to pivot and react on exactly what we've gotten, which is persistent inflation. The earnings picture, I would say, is actually not quite as rosy as Lindsay may have painted it. I think if you look at company guides, you're actually seeing a couple of things. You're seeing for commodity producers in particular, even though that's the one area I actually happen to like here. You know, for Alcoa, for example, you're seeing unit volumes fall. You actually are seeing margin guides come down. And so while this earnings season wasn't

horrible on its face, you know, the beat percentage is really not a very good gauge of where things are about to go. When you pile that on top of the fact that you can get a 4 percent yield from investment grade corporate credit and the earnings yield on the S&P 500 is about 5 percent with the prospect of margin compression, which I do think will occur, continue to occur as the year as the year goes on. That's not a great picture and setup for equities. I think one of the other issues is, is with the 10-year at 3.1, 3.2 percent, perhaps, that doesn't give a lot of room for equities to rally either. And, in fact, I think what happens is the equity sell-off will reflexively lead to lower 10-year yields at some point, a reinversion of the yield curve as the year progresses. From here, tactically, I think the market is quite oversold. Positioning is extremely

bearish. And from here, I would actually expect something of a rally in the broad indices. That said, as I've been writing in the pieces. But you're a seller. Yeah, but I'm a seller of those rallies. Lindsay, he pushed back against your earnings optimism, and especially on the outlooks and the peak margins. Yeah, no, what I would say about the outlooks is what I've seen is you haven't seen as many companies raising their guidance as we've seen in the past several quarters where beat rates were significantly higher and the margin of the beat was significantly higher. And so while the guidance increases have been reduced, so have the declines, though. So people that are cutting guidance,

there are less people doing that, less companies doing that than have in the past several quarters. So to me, that helps fuel my optimism about where future earnings growth can go from here. And by the way, corporations, when I look at Corporate America and look at the S&P 500, they have more cash on their balance sheet now than they did after rebuilding after the great financial crisis. So from here, the corporate America, as well as the consumer, is in a much better position if we are to enter a bit of a slowdown in the near term. So I remain optimistic that we come outside of the other side of any sort of slowdown in a solid position, and we'll be able to weather that in a better way than

we have in the past. All right, two sides there of the story. We'll leave it there. Peter, Lindsay, thank you both very much. Have a great weekend. As we look at the S&P down 1.3 percent, the Dow slipping here down 375. Again, lows of the session earlier, 523. We also went positive at one point. So all over the map again. We'll see where we land. Up next, canaries in the consumer coal mine. Athletic retailers getting slammed today following red flags from Under Armour and from Adidas. We'll speak exclusively to the CEOs of both of those companies about what they are seeing from the global consumer right now as soon as we come right back. You're watching Closing Bell on CNBC. Take a look at shares of Under Armour getting absolutely crushed today, down 24 percent. This comes after the sports apparel company reported an unexpected loss for the quarter and cautioned investors about a tough year ahead as it weathers global supply

chain challenges and COVID lockdowns in China that are putting a dent in the profits. Joining us now on the CNBC News line is Under Armour CEO Patrick Frisk. Patrick, you know, the market having a brutal reaction here to your earnings, clearly caught off guard by some of these headwinds. What happened? Well, I think coming out of the earnings call that we had last time, we did caution, you know, our quarter that we were in, our stop quarter. And we were seeing more depression in China towards the end of the quarter, as well as some higher freight costs than we had expected. But we also said that coming into 2023, that we were going to see some headwinds early on in the year based on actions that we had taken to make sure that we were able to deliver the orders that we had as we came into the year. So talk about the supply chain impact, because that's clearly

a big hit to margins. Is it getting worse when it comes to shipping and all the costs building up there? Well, I think for us, we've been going through a two-faced situation here where we came into the quarter, the sub-quarter, already guiding late last year that we were going to be seeing some shortened demand in the quarter because we made some actions to make sure that we were going to be able to deliver on time. We did the same thing, and as we said on our call today, impacting the year of about three points and actually the first quarter of about ten points, making sure that whatever we were making was going to make it there on time, not wanting to build inventories in the quarter.

We're going to see that ease, though, as we go throughout the year, and things are going to get progressively better in the back half of the year. But we believe that in the first quarter, there's still going to be pressure on supply chains. It might get better on the back half of the year on the supply chain and on that cost front. But, Patrick, what about demand? Because now there are some serious concerns in the U.S. We've seen what the market's been doing about a slowdown. What are you seeing from the U.S. consumer? Any evidence of it? Well, currently, what we're not seeing, as I said, you know, we have been proactively

canceling orders. We have the demand for our brand and we continue to see demand for the brand. So there's a little bit of frustration, I must say, in our teams that we weren't able to meet the demand that's there as we were coming off such a great 21 and had made so much great progress around our strategy and our business transformation that we've been going through over the last couple of years. But we are, of course, seeing constrained demand definitely in China and also in certain parts of Eastern Europe due to what's going on there in Ukraine. You're starting to see the European slowdown, you mean, in terms of consumer spending? Well, in that area where, you know, that is close to

the war zone, for sure there is a lot of disruption going on. And we had you know we saw some adjustment I would say in the March month also early in April month from what's going on in North America right now as we are waning ourselves off the stimulus last year. So finally Patrick you know we're just looking at the stock price here down 24 percent brings it to levels that we haven't seen since back in September 2020. There was a lot of faith in this turnaround plan. And I know this was supposed to be a big quarter for you where you exited the restructuring and looking ahead to next year. What do you tell investors now with this new outlook and some of the numbers coming down? Yeah, for us, we were trying to make the point today that our fundamentals are still strong. the demand is there for the brand we

believe our strategy is working uh we believe that what we're trying to do is control the controllables to make sure we're not getting ourselves into any sort of an inventory position managing our inventory as well you know we came into the quarter and as we said a little lean with minus three percent so this is really about continuing to be disciplined about how we manage the brand and we are seeing demand for the brand so for us it truly is a moment in time you know 2023 is going to be a year um that that we move through and then towards the end of the year we continue to get better both in terms of inventories as well as sales accelerating um and we were trying to make that clear today. But there was disappointment there because we missed our guidance. Of course. Well, I think a lot depends on China, clearly,

and what happens with supply chain. Patrick, thank you for jumping on the news line and helping talk us through it. Patrick Frist, CEO of Under Armour. Adidas not helping the mood with some of these footwear companies, which is one of the worst subsectors right now on the S&P. The athletic wear company out this morning with earnings also getting hit on concerns over a slowdown in China, warned on profitability because of that region. I spoke with CEO Casper Rorstad and began by asking him about the nearly 35 percent slowdown in China sales that Adidas saw during the quarter. Listen. You're basically seeing a decoupling of the global economies. In the West, we are growing 13 percent.

That's the strongest growth we've had for the last five years. And in China, you're seeing an economy that's heavily impacted by the current lockdown, which is, of course, draining in on the profitability. And that is, in essence, what's happening. So very, very strong growth, you know, in the West. In America, 13 percent growth, outgrowing the market, you know, by quite a lot. And that's why we're so optimistic. But, of course, in the market where we can't control it, which is China, we're seeing that draining.

And I think that's something you're going to see for almost every global market company at this stage. You are seeing a very large country in closed-time mode that is slowing down the global economy, despite the fact that we are outgrowing the market in the West. I wanted to ask you about the U.S. because there's been a ton of volatility in our market, and there are increasing concerns about a slowdown, lack of fiscal stimulus, and tighter monetary policy. Are you seeing any evidence of that in consumer spending in the U.S.? Actually, we're not.

We grew 13 percent in the first quarter. We're seeing our growth rate in the month of April above what we had in the first quarter. We're seeing all our key partners in the U.S. growing very, very strongly. We're seeing a very strong order book. And as you've probably seen, we've also, you know, closed a strategic partnership with Foot Locker to further accelerate our growth into the basketball area. So we're very bullish about the U.S. We're not seeing that. We're not seeing a slowdown in the U.S. And it seems like, you know, the sporting goods industry, at least Adidas, is not so impacted by, you know, the fear of slowdown in the economy. So far, we've not seen any. What about Europe, Kasper? Any evidence of a slowdown there as a result of the ripple effects

from the war in Ukraine? We grew 9 percent in the first quarter, including the numbers from Russia and Ukraine. Again, we have a growing order book. So again, you know, April was better than first quarter. So we continue to see a very, you know, I would say, good trading in Europe. So so far we haven't seen it. And I was in our stores this week and we're very full. So we're seeing a higher growth rate than the first quarter. So right now, we're not seeing it. Obviously, costs are rising. How much more are you able to pass on to the consumer

in terms of higher pricing? We're not going to be able to pass on all the increases that we're getting. And the margin expansion is going to come from the top line. And that's why maintaining really the focus of getting the strong markets to grow. I spoke about North America with the 13 percent that we expect to increase this year. We need to make sure that we focus on the top line. That's where you're going to get the gearing into our model because we're not going to be able to offset the full impact of our shipping cost through price increases. So it's going to be top line leverage that's going to drive the bottom line.

CEO of Adidas, Casper Rorstad, by the way, the footwear and apparel category getting hit pretty hard. Nike taking about 30 points off the Dow right now as we speak. Take a look at where we stand as we head into the close down about 339 points or so on the Dow. S&P 500 with a decline of 1.3 or so percent. Look at the Nasdaq. That's been the hardest hit this week. Again today, it's down 2 percent right now. For the week, it's down 2.2 percent. Remember, we've had all sorts of wild swings. Big up day after the Fed as well, adding into the mix. Small caps also getting flamed the most actually today, 2.4 percent. Up next, it isn't just the equity market that's been sending investors on a wild ride. There's plenty of action in bonds as well.

Mike Santoli here to break down the relationship between stocks and bonds and what that signals about the market's next move when we come right back. Treasury yields continuing their climb as traders digest the volatile swings we've seen in the market this week. Mike Santoli here to take a look at how bonds are impacting the stock market in the dashboard today. Mike. Yes. Both are getting sold off pretty hard lately. Very hard. You're losing on both sides. And in fact, the sensitivity of stocks to what's happening in treasuries has also increased today. For example, every time the 10-year treasury was above 3.1 percent, indexes were in retreat. When they traded below 3.1, you actually had them firmed up. We're about 3.13 right now.

So this is the so-called prudent portfolio, the 60-40 ETF, basically global 60% stocks, 40% bonds. You see here making new lows today for this move, 10% over one year. It's actually basically underperformed or just performed just about in line with stocks. So no help from bonds. Now, where does that leave valuations in terms of equities against fixed income? Take a look at the standard view of the equity risk premium. This is basically the earnings yield of the S&P minus the 10-year Treasury yield. Now, when it's lower, it means stocks are more expensive relative to bonds. It means there's

less of a valuation cushion between equities and bonds. And what you see here is we're basically at the lows of the post global financial crisis period. This is kind of the rough area where it's more of an equilibrium around 300 basis points. So that would mean, you know, 16 times earnings for stocks for about 17 and a half right now, Sarah. So there's nothing magic about any one number. There's no absolute fair value number. And in fact, in the 90s, we were down at these levels and the market went up 20 percent a year. But it's just a different regime right now. And so that's why we get the pressure from higher yields. I think it's why this has felt particularly painful for people, because bonds have not been a safe haven refuge for stocks falling, which they typically are. My other question about this, Mike, if the whole idea

is that Powell is going to have to sink us in into recession to fight inflation, a la Paul Volcker, the yield curve is steepening. Yes. Wouldn't it be flattening if that were the case? How do you explain that? The way I explain it is really it's not recession fears that in the last two days have been at the fore. We seem to be sort of swinging between, oh, no, he's got to put us in a recession by being really aggressive on rates to, oh, no, he's going to be more moderate on rates, which means maybe we have to worry about inflation, you know, getting escape velocity. So it seems like that's where we are. And I think it emphasizes the narrow path

to a soft landing that we're traveling right now. By the way, kind of humorous, Fed Barkin not ruling out support for a 75 basis point hike, just hitting the wires from Market News International. I guess that's still in the discussion. Barkin, I should say, is not a voting member. Right, not this time. Powell just ruled it out. What's interesting is, if you really want to parse what Powell said,

it's 75 basis points is not under active consideration now. Well, there's not a meeting for six weeks. It could be under active consideration now. We'll see. Maybe it becomes under consideration. For sure. We'll see in the market zone. Thank you. Up next, chart expert Katie Stockton weighs in on whether stocks are starting to look oversold after this big two-day sell-off. We'll get her technical take next. What a rollercoaster week for stocks. After a big rally on Wednesday, the market tanked yesterday

and stocks are lower again today. The selling continues. Joining us to dig into what the charts are telling us, Katie Stockton, founder of Fairlead Strategies, noted technical analyst, Katie, on the S&P 500. Is it ripe for a bounce or maybe something more than that or keep selling the rallies? Well, obviously, a huge pickup in volatility this week and really April was just such a terrible month in terms of returns. And typically, it would have been a very positive seasonal month. So we have very weak tape. Nobody would argue against that. And I know there's a good reason to look for a buying opportunity, but I don't feel like we're convinced that we have one at this time. The oversold conditions have not been eliciting the reaction that we would hope,

and that's more indicative of a downtrending tape. And then, of course, we have the S&P 500 testing some key support. It is below at present. It's roughly 4,200. So if we see a week close this week, so that means very soon, we would confirm the breakdown that we've been watching. And while it doesn't really have implications for the very near term, meaning next week, even the week after necessarily, it does have bearish intermediate or long term implications with the secondary support for the S&P 500, roughly 3815. You're saying that if we break below that level, 3815, which we're not quite at yet, that would be long-term problematic? So it's actually the 4200 level that's being confirmed potentially today because we always wait for breakdowns to be confirmed. Yeah, and so it

should confirm today. It's on a consecutive weekly closing basis. And the targeted support zone would be around 38.15. It's not as far below as it was a couple of weeks ago, of course, but it does suggest that risk would be increased over the intermediate term. And obviously, the long-term momentum has already shifted in a negative way. We've seen pretty terrible market breadth or participation, meaning more stocks are going down on down days. We also have seen downside leadership unfold from the mega caps. And that's been obviously problematic already year to date. And it's something that we probably will see more of, especially if names like Apple, which, of course, is such a heavyweight in the major indices. If it starts to exhibit

downside leadership in earnest, I think we're just going to see more of the same. Well, so today is interesting because Apple's higher, but Microsoft, Amazon, Facebook, Tesla, Nvidia, all the other tech mega caps are lower. NASDAQ 100 is under heavy selling pressure. What do you see for that hard hit part of the market, the NASDAQ 100? You know, the NASDAQ 100 is also below support and poised to confirm a breakdown today with negative intermediate to long termterm implications with its next support level of roughly 10,600. And you can see that the percentage downside to that level is far worse than the 3815 for the S&P 500. So the implications there are that we could see underperformance by the Nasdaq 100 continued underperformance at this

point. And that would likely mean that you're getting the underperformance from the likes of Apple and Microsoft and Google, which have a bigger footprint, not much bigger, but a bigger footprint in the Nasdaq 100. Which is down for the week pretty sharply, down 1.75 percent. Katie Stockton, Katie, thank you very much. I want to show you where we stand right now in the markets. The S&P 500 is down about a percent. So come back just a little bit as you've seen a few groups go positive, just energy and utilities, really. But the defensive plays are holding up better than, say, yesterday. Consumer staples are only down about a half a percent. Health care is doing OK. Even technology is not the hardest hit today. That would be

materials and real estate. Coming up, Evercore ISI's Mark Mahaney on tech's rough week, whether he's buying any of these beaten down tech names right now. And do not forget to sign up for the CNBC Fantasy Stock Draft Challenge. Scan this code right here or go to cnbc.com slash stock draft challenge to play for free. Dow's down 252. We'll be right back. Check out today's stealth mover. It's Cloudflare, the cybersecurity company, reporting better than expected top and bottom line results. But look at the reaction, down 16.5%. After forecasting, it could report a loss in Q2. And any excuse to sell with some of these earnings. Here's a check on some of today's top search tickers right now on CNBC.com. Macro and interest at macro rates dominating the

searching again. The 10-year yield right on top. Yields go higher again, 3.12% on the 10-year selling of bonds. The NASDAQ selling off again down 1.5%. The S&P 500 is there. It's actually recovered a little bit, down about six-tenths.6% from where we were a few moments ago. And the Dow also coming back. Look, it's only down 91 points. Again, the low of the day, down about 570 or so. Amazon gets up there. It's down again 1.3%.

It's Amazon, Microsoft, Facebook, Costco, and Tesla weighing on the triple Qs. The NASDAQ 100 right now. And Amazon has really been brutal lately, down more than 40 percent from the highs. Up next, J.P. Morgan, chief U.S. economist Mike Faroli reacting to the April jobs report, whether he sees a recession on the horizon and what is next from the Fed. That story plus energy outperforms again and another huge sell off for crypto stocks. We'll take you inside the Market Zone next. We are now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli is here to break down these crucial moments of the trading day as always. Pippa Stevens here as

well on the strength today in energy, very notable, best performing sector. And Evercore ISI's Mark Mahaney on tech's rough week and which stocks to buy now. Let's take a look at the broader market, though, because stocks are extending losses after yesterday's massive sell-off. But off the worst levels of the day, and we've seen a little comeback here. It's mini. Dow was down 523 at session lows. But look where we are right now, down 110. Mike, energy and utilities are doing all right. Looks like I was looking for a reason.

Yields are still a little bit higher, but everything kind of in moderation compared to yesterday. Yeah, I don't know that it was so much a specific reason as it was. We came into this day with what seemed near washout conditions yesterday and people very apprehensive about whether, you know, some investors are trapped or there's this ongoing big liquidation. And then the reaction to the jobs, jobs number was relatively mixed. I would say. Yields going up, people very fixated on labor force participation, which didn't go in the direction people were looking at. And so far, you haven't really found additional sellers near the lows for the week.

It's very, very faint praise, I would admit. But that's where we are right now. Still held hostage to some degree by where Treasury yields go, but kind of an indifferent performance, at least today, at the end of a grinding week. I would also note that the dollar is a bit weaker today. Euro is stronger. That relieves a little bit of pressure because that was also a sign of all the tightness going on in the economy and the markets. Despite the volatile swings and the pessimism in the stock market, as Mike mentioned, U.S. economy is still showing signs of strength. The U.S. adding 428,000 jobs in April. That was more than economists were expecting. The unemployment rate holding at 3.6 percent. Let's

bring in J.P. Morgan, chief U.S. economist, Michael Ferroli. Ferroli and Santoli. I'll start with you, Michael Ferroli, which is, you know, it's hard to imagine that we're having conversations about a recession when we're adding in a tight jobs market more than 400 000 jobs and an unemployment rate at 3.6 percent so how do you you square that so i think the recession as i at least as i understand that the recession narrative or discussion is really about perhaps next year not about next quarter i think most people recognize that the momentum in the economy right now is pretty favorable. As you mentioned, the jobs number looking very timely and looking very strong. But as we see these financial conditions tighten, many of what you just talked about, stocks down, rates up, dollar way up.

Over time, if this continues, then you set yourself up for a scenario where maybe, you know, a few quarters down the line, recession becomes more of a possibility. But again, as I understand it, I don't think it's a near-term concern, at least not for me, but rather something as you look out to next year becomes a little more of a real possibility. So what do you think this is all about? That big rally off the Fed and then the big sell-off off the Fed? Is it about concerns that the Fed's going to make a mistake or not get inflation under control or what? Yeah, the reaction seems a little bit sclerotic. I do think perhaps Powell maybe misspoke or was a little too firm in ruling out 75 basis points on Wednesday. And maybe some people read that as not being committed enough to the inflation fight. But I think that's a misreading.

I think they'll do what they have to do but uh there may have been you know some words i suppose he would have chosen differently but the reaction has been a bit odd but i would say on net the fact that rates are generally up and the dollar is up is probably the kind of reaction they want i mean eventually they're not just doing this for the for the sake you know for the fun of it. They actually want to tighten financial conditions and slow down the pace of spending growth in the economy. Mike Santoli, I would have thought that maybe the market would have had a better reaction, certainly bonds and stocks, to the wage numbers, which came in below expectation and continue to show a little bit weaker month-to-month changes.

How is the market interpreting a jobs number? Yeah, I guess arguably you could have seen that as a plausible response. Maybe just the fact they wanted to see a little bit more on labor force participation coming back. That seems to be the toggle. It's also I have to, you know, kind of emphasize it's a global move in yield. So, yes, obviously, the U.S. financial I mean, the U.S. employment data matter a lot. But I'm not sure that that's the sole driving factor in the way we're repricing the global bond market at the moment. What's up with labor force participation, Michael Ferroli? Because that makes it tougher for the Fed. Yeah, it's tougher for the economy.

I think it's really difficult to explain one month's move. I think that's kind of fruitless. But one thing I would say is that in general, over the past several months, participation has probably been doing a little better than we and most economists have expected. And so perhaps last month was just a little bit of give back on what had been a generally more favorable than expected outturn. But I think it's really difficult to say for exactly why April set that. Really quickly, what do you expect for CPI next week? CPI, I think, is going to be another firm one. We're still dotting the I's and crossing the T's on that one. But I think both the core and headlines should be pretty firm

next week. Yeah. Key consumer price data out next week. Michael Ferroli, thank you very much from JP Morgan. Let's hit tech because it's been an absolutely brutal week for some of these stocks. Yesterday, the Nasdaq saw its steepest drop since 2020. And big names like Amazon, Meta, Apple suffered amid the sell-off. E-commerce names like Shopify and eBay also feeling the pain after reporting disappointing earnings this week. Joining us is Mark Mahaney from Evercore ISI. Mark, I always ask you this, but how out of whack does it look to you now that we've seen, like, how out of whack are the valuations? Any dislocations now that we've seen continued carnage in your sector? Yeah, we've seen a heck of a lot of dislocation in the space. OK, we started off with some pretty

aggressive valuations. You know, we began the year not knowing just how aggressively interest rates would be rising, not knowing how high inflation expectations and real inflation would be rising and not knowing how close we could get to a potential recession, maybe in the back half of the year or next year. So economically, macro things have changed dramatically. The e-commerce companies, I look at what's happened to earnings estimates and revenue estimates. Those are the ones that have been checked the most. They've had that come down the most, both on the revenue side, there's been a softening there, but especially on the cost side. Amazon gave you that in droves when they talked about the shipping and the fuel costs, how that's really spiked up and brought down their

profits. The one place that's been safer, the companies that have reported this week, Airbnb, Booking, Uber, DoorDash, they all had positive estimates. All of their estimates went up, but only one of those stocks actually traded up on the print, and that was Booking, because it's what I call this Venn diagram stock, because it's got a reasonable valuation, very strong P&L and balance sheet, and it's trading close to a market multiple. There are very few places to hide in consumer tech right now. I think this is maybe one of the few places to do it. It's unfortunate, but that's the reality. Bookings, any others? DoorDash is only down one and a half percent now. But to your point, it was a good quarter. Yeah. So, you know, you're not getting paid for good

prints. So you want to stay as defensive as possible in the consumer Internet space that I look at. It's not a defensive sector, but the names that will hold up the best are the highest quality assets. I still think that's Google. I still think that's Amazon. And I throw out I throw out a booking as as as an idea to now. This is going to change at some point. We're not going to stay in this environment. And when it does, I think there's some wonderful reopening plays. I think you want to be long. You want to be long door dash for when we start moving back to growth equities. I don't know when that is, but when when we do these companies are showing improved fundamentals this

year you want to be long those names when that turn in the market comes are you having any conversations mark with with different sorts of investors value investors for instance and names like a google or an amazon or a meta as these stocks have been shellacked? Are we at that point yet? I think we have actually. I think we are close to that point. I have had those kind of calls. They first started coming in on Facebook earlier this year. I mean, this thing's trading at a discount to the market, a PE multiple. It's a discount to the market. So if you don't think they can solve the Apple privacy issues, if you don't think that they can address the TikTok issues and better monetize their Reels asset, I think they could do all of don't think that they can address the TikTok issues and better monetize their Reels asset, I think they could do all of that. And if they can manage their

cost structure, there's more evidence that they're willing to bring down their cost structure as the top line gets softer. I think value investors find that more attractive. So, yes, we're starting to see value investors come in on that. On Google, too, I think that's been the case for a while. And I think we could just start seeing that with Amazon, too. Look, these are three assets with an enormous amount of cash. They're buying back a lot of their shares. They're bulletproof business models. I mean, not in a recession. Nothing in this group is bulletproof in a recession. But barring that scenario, they're bulletproof business models.

Mark Mahaney, Mark, thank you. As the market continues a recovery here, the S&P is now only down a third of one percent. We've got three positive sectors now, not just energy and utilities, but staples have gone green. The Dow actually briefly went positive just a moment ago. It is only down 61 points right now. So back lower. Nasdaq 100 also recovering, still down a percent as it's been the big loser. As Mike, as Mark has been saying, a lot of negativity around tech. Let's zero in on energy because it is the big winner today and for the year. Oil prices hovering around $110 per barrel. Pippa Stevens joins us.

Pippa, energy has been a big outperformer this week. Can this type of divergence between the sector and the rest of the market continue? Yeah. Hey, Sarah. Well, whether it be today, this week, this year, or even over the last year, energy stocks have really outperformed. And Wall Street seems to continue to like this trade. J.P. Morgan has called the sector its highest conviction overweight. And, you know, Wall Street really likes this new age of energy

company, which is one that's focused on capital discipline and returning money to shareholders through buybacks and dividends. And Rysad Energy now expects the upstream sector to report more than $800 billion in free cash flow this year. That's up 70 percent compared to 2021. And the firm said that the health of these upstream companies is now at the highest on record. But I do think one area to watch going forward is the refiners. They haven't shown the same type of outperformance that the upstream players or even the midstream players have. And that's because when oil prices rise, their input costs rise as well. But now, you know, everyone's talking about diesel, which is surging.

And the crack spread is now above 70 bucks. That's the highest on record. So we'll see if some of the higher prices for diesel and other refined products will translate to the bottom line for refiners. So certainly an area to watch going forward. It's just amazing that we're continuing to see the spike in oil prices. Obviously, the geopolitical tensions have a lot to do with it and are so powerful that even with China shut down, and we saw how that's starting to impact companies today with Adidas and Under Armour. I just wonder where oil would be if China was not in that period and if global growth wasn't weakening here.

Yeah, that's right. I mean, China is the world's largest crude importer. And we did see some weakness a few weeks ago when we first got wind of the lockdowns over in China. But the market is really now looking beyond that. And as you said, we're not for the softer demand out of China. Prices could be even higher. And, you know, this week we didn't get that same type of rally that some were expecting, given that the EU is now, you know, proposing that ban on Russian oil. And so the question is, if they're not turning to Russia for oil, who's going to make up the difference? So there's certainly a lot of geopolitical factors to watch going forward.

And that's why investors continue to like these stocks. And even if prices were a lot lower, even at $80 on WTI, energy companies would be printing a lot of money. So basically, people say there is upside ahead for this group, despite the recent outperformance. Yeah, that's at $80. It's at $110 now. Pippa, thank you. ConocoPhillips, Mike, highest level since 2002 when it started trading. Occidental, back to 2019 levels. The sector's up another 10% this week. Who would have thought that energy would be the port in a storm when it comes to Fed concerns and economy concerns?

Right, exactly. I mean, the commodity, as you said, the bull case is China's obviously partially shut down, and yet the chart still looks pretty good. I guess you could also say, though, offsetting China is people are restocking for sure. There's some geopolitical premium still in there. There has been some chatter that Monday is victory day in Russia. Maybe that means it's going to be some occasion for further escalation. I have no idea if there's credence to any of that,

but it seems that people lean in the direction of just-in-case type buying. When it comes to the stocks, there's been nothing but reiteration of capital discipline by all the companies reporting. So it seems like investors do love that. They're winning both ways with the windfall and the higher prices and then getting the capital return. Let's hit block. It's trading in the green today. The company missing earnings estimates, but said it is not seeing a slowdown in consumer spending. Meantime, other crypto related stocks once, significantly underperforming the broader market.

Kate Rooney joins us. Even though Bitcoin actually, I don't know, is it a leader, Kate, to the broader market? Are we seeing that correctly? Because it seemed to go green early today before stocks went positive briefly. The way I've heard it described, which I think just really explains

what's going on with Bitcoin and cryptocurrencies, is that it's trading like an exaggerated version of the Nasdaq. So we see what is happening with high growth tech stocks. If you look at Bitcoin, it's usually a percentage, a couple percentage points deeper in terms of losses or the same thing on the upside. So it is really mimicking what's going on with high growth tech. And it's one of the effects of crypto in general becoming a little bit more mainstream. And some of the institutional investors getting into the markets, they tend to look to crypto if they're trying to take a little bit of risk

off the table. So that is one of the key and first places that they look to sell. What about some of these stocks, Kate, after this week? How do they look? And including Block and what it was like last night. Right. Well, it's funny. Block is really trading as one of these Bitcoin proxies. The results last night, they only get about 3 percent of gross profits from crypto trading. So despite Jack Dorsey talking a lot about this as sort of the long term vision for Block, which they renamed Block as sort of a nod to blockchain and the future of the business, it really right now does not make up a huge percentage of the profits. It really in the quarter was all about cash app. And that's why you saw

the stock bounce yesterday. It was up 10 percent during the earnings call when the executives talked about some of the April numbers. Cash app grew 15 percent in April. The stock popped right after CFO Amrita Hoosier talked about that. And there'd been a lot of concerns heading into this that Wall Street was maybe still too optimistic on gross profit. And some of the estimates for Cash App, it outperformed. Wall Street seems pretty happy about that. But that is really still a core side of the business, this banking and payments app. And then, of course, the seller side.

But both, even though they missed in terms of estimates for the first quarter, some of the guidance and April numbers were pretty good. Kate Rooney, Kate, thank you. Mike, on a related note, just looking at some of the credit card stocks, under some pretty heavy pressure lately and today, we did get this hour a huge number on March consumer credit at $52.4 billion. That was like double the expectation and very historically high. I know it's old data, but what does it signal about the state of the consumer and some of these stocks that have been

hammered? Well, consumers were really swinging toward using debit cards and their built up savings during the pandemic. It seems like they burst higher toward rebuilding credit balances. A lot of that was credit cards, not just other types of borrowing. So I told you on some level, some confidence in terms of spending on the consumer. I don't think we're talking about people feeling strapped or, you know, putting kind of everyday expenses on credit. But obviously, you have to see that is March data, as you said. We've got less than two minutes to go in the trading day. What do you see in the internals as we've seen a bit of recovery in this final hour? Yeah, it's still skewed to the downside side.

We opened up again with 90% downside volume. That is obviously improved. It's more like 2 to 1 declining to advancing volume right here after yesterday's pretty heavy flush lower with 95% of downside volume. You mentioned earlier the yield curve, 10-year minus 2-year yield curve. It has been steepening. It's been all the action's been at the long end. It's been a little more about inflation worries versus immediate slowdown fears. I guess you could say that's net positive in terms of an economic outlook. And the volatility index hovering

around 30, we're six points off the highs for this little down leg that we've had in the markets. Pretty noncommittal, but definitely not able to get any further lift with this relatively range bound day today, Sarah. Unbelievably for the week on the S&P 500, we are down less than two tenths of one percent. I mean, it's been an almost 400 point S&P swing this week and we're barely moved net net net. Unbelievable. A stomach churning week. Mike, thank you. As we go into the close, take a look at the S&P. It's down about a half a percent right now and it is tracking for its sixth down week in a row. So the context is key, and it's felt very painful for investors.

As far as what's working right now, it's energy, top of the list for the week, for the year, for the day. Utilities also going strong right now. Staples holding up better. It's defensive groups like Health Care 2. Materials are the hardest hit right now. The Nasdaq 100 going out with a decline of 1.2 percent. So that really has been where the pain has been felt. It's down about one and a quarter percent for the week, which shows you the underperformance of technology. NASDAQ composite down 1.4 percent. Have a good weekend.

That's it for me. I'm closing now.