Closing Bell - Closing Bell: Stocks Slump, Avoiding A Recession & Senator Manchin Speaks 8/2/22

Episode Date: August 2, 2022

Stocks under pressure on Wall Street amid rising tensions between the U.S. and China and commentary from Fed members on the pace of interest rate hikes to fight inflation. Senator Joe Manchin weighs in on how the new Inflation Reduction Act will help cool inflation and impact Wall Street by closing corporate tax loopholes. The National Bureau of Economic Research is the only organization that can officially declare a recession. CEO James Poterba discusses whether the strong jobs market will help the economy avoid recession. Axonic's Peter Cecchini discusses how rising tensions between the U.S. and China could impact Wall Street. And Wedbush's Dan Ives explains why he thinks Uber will continue to rally after reporting strong earnings and why tech stocks could see a surge into the end of the year.

Earnings, FedSpeak and Geopolitics sending stocks on another roller coaster ride today. Drifting lower right now as we head toward the close. The most important hour of trading starts now. Welcome everyone to Closing Bell. I'm Sarah Eisen. Take a look at where we stand right now in the market. We're off almost 1% on the Dow, which is underperforming everybody else, down 291. Low of the day was about down 375. S&P 500 has held up a little bit better thanks to strength right now in utilities, energy stocks, and communication services. Some of the media names strong showing today, names like Paramount and Warner Discovery carrying that group higher. NASDAQ is stronger at the

moment. It's up a tenth of 1%. Small caps are also doing quite well, up a third of 1%. Treasuries are weaker, yields are a little bit higher, and the dollar is stronger. Check out our chart of the day showing some big moves on earnings. Uber jumping 18.2%, turning cash flow positive for the first time. Pinterest is also soaring today, up almost 12%, while Caterpillar dragging on the Dow after a revenue miss. We'll talk about all of it. Coming up on today's show, a big interview you will not want to miss. We will talk to West Virginia Senator Joe Manchin about his surprise deal on a Democratic spending bill and why he says the legislation is all about fighting inflation. Let's get straight to the market. In another choppy session, as investors weigh the impact of earnings and the Fed's policy path, of course, those simmering tensions between the U.S. and China, as well in light of Speaker

Pelosi's visit today to Taiwan. Joining us is Dan Ives from Web Bush Securities. How put the earnings in context? And Dan, what was the read through from Uber? Look, Armageddon like expectations coming in. And I'd say it was probably the strongest quarter they've had since going public. EBITDA, profitability, rides look strong in terms of the recovery we're seeing. It looks like finally Dara and company has Uber on the right path.

And that's what you're seeing reflected in the stock. I continue to think this is really the first step into what's going to be a new Uber strategy going forward. And what about the price? Given you said Armageddon-like expectations, we're seeing a big jump today of 18 percent. Do you still think it's a good value? I think that I mean, our price target's 38 and you can start to justify a stock into the 40s as that EBITDA profile continues to increase. And also it's about rise. I mean, right now, I think they were sort of early in terms of from a strategy perspective, cutting costs, starting to rationalize.

And now you're going to start to see the benefits. And I still think this is an under-earned stock on the street. Obviously, it's been a disaster if you look back the last few years. I think it's a new chapter for Uber starting today. Peter Cicchini joins the conversation from Axonic to take it a little bit broader. And, Peter, how do you read some of these earnings reports, which do speak to solid demand, Uber's doubling of its revenue, thanks to strong ride sharing? We had some positive demand commentary from DuPont, from Marriott. How does that fit

into your, I would say, negative view of the overall equity market. Decency bias, because if we look at the earnings season overall, it's certainly been a mixed bag on the demand side. And in fact, you know, if you look at Kimberly-Clark and some of the industrial companies, they're actually saying that we're seeing unit volumes fall on the higher prices. So, you know, Uber, I think, perhaps somewhat idiosyncratic, but mixed bag at best. And a lot of companies have actually lowered their expectations coming into the earnings season. And I think the next catalyst for equities, lower that is, will come from guidance as the quarter progresses and higher prices and their impact on demand starts to bleed through to unit volumes. And that's going to force a lot of companies to guide considerably lower.

So you're not convinced on the earnings story. What about the new geopolitical risk? How should investors think about what's happening right now between the U.S. and China? Yeah, I mean, you know, the tensions between U.S. and China, especially with respect to security issues in the South car in the south china sea uh... are nothing new for a member of your new newt gingrich took a trip uh... during the clinton administration to taiwan and that up that upset them there are some big differences now however

uh... china is uh... you know preeminence in the world uh... has grown considerably others a lot more trade that goes through the south cheap seat china c and tai Sea. And Taiwan now accounts for about 50 percent of semiconductor production. So I think that's important. I think that's in the background and is a longer-term driver of potential tail risk. But, you know, sort of in the front view right now, the Fed, obviously, as well as, in my view, margin compression that's going to take place almost inevitably. And guidance is showing that. The companies have been guiding lower. Dan, you don't agree, do you? You're positive on a lot of what you're

seeing in technology. Well, and also, I think there's two individuals, Nadella and Cook, that disagree with that statement as well. I mean, because if you look last week, they could have easily ripped a Band-Aid off. Yet look what you're seeing in terms of clouds and the demand story that's holding up. Look what you're seeing from Cupertino in terms of strength, even coming out of China. And of course, FX is an issue. But if I look across the board, especially given some of the negative expectations, it's been much better than feared. And that's really across big tech. And I think that's why you're starting to see more and more of a risk on. And some of the haters, they'll continue to hate on tech. But I believe second half tech stocks move higher. Are you a hater on tech specifically, Peter? No, no. I mean, I know Dan is focused on tech, and I'm referring more broadly to equities.

And in fact, positioning and sentiment were so negative. You'll recall last time I was on the show, I said I thought we were in for a summer rally. We've sort of reversed that view, and now, you know, our tactical view is more aligned with our more negative strategic view. But look at IBM. You know, IBM felt FX, and their report was not as strong. So I think there's a little bit of cherry-picking going on. I mean, Apple is not the universe of companies in the United States.

It's certainly an important one, and it's one that you cannot ignore if you're using the S&P as a proxy to hedge your portfolio. But I think the broader picture is not nearly as rosy. Well, it's a good debate and one we'll continue to have as we get more results. Peter, Dan, thank you very much for now. With the Dow down about 276. After the break, we'll talk to the CEO of the National Bureau of Economic Research, the NBER, the group widely seen as the decision maker to officially designate a recession. The key indicators he's looking at next. You're watching Closing Bell on CNBC. The big recession debate, two quarters of consecutive negative GDP growth is one common way to define a recession.

That's what happened in Q1 and Q2 of this year. But only one group in the United States officially declares a recession, and that is the National Bureau of Economic Research, the NBER. Joining us now is the president and CEO of the NBER, Jim Paterba. Jim, under the radar NBER, did you ever think there'd be so many articles and so much demand for what you have to say? I will confess, Sarah, that I've been surprised by all the attention in the last couple of weeks. Absolutely. So tell us, how do you define a recession? So the NBER has a tradition of defining recessions, peaks in economic activity in the beginning of recessions,

which goes back nearly 100 years to the work of Wesley Clare Mitchell and Arthur Burns. Mitchell was the first director of research at the NBER in 1920. And it focuses on finding periods of time when a decline in economic activity is broadly dispersed across the economy and lasts for a period of at least several months. So its depth, duration, and diffusion are the three features of a downturn that the NBER would typically look at in trying to identify periods that would be categorized as recessions. So is that what we're looking at right now? I mean, that's the way the committee, the business cycle dating committee, will try to assess data as it emerges is for those attributes. The committee doesn't rely on the two quarters of declining GDP definition for a number of reasons.

First, it looks more broadly at measures of economic activity than just GDP. Second, it is focused on a monthly chronology for peaks and troughs in economic activity. And if you're looking for monthly, GDP is reported at a quarterly level, so other indicators will tend to be important. And the third is in some sense that something as mechanical as two quarters of negative GDP admits the possibility that if you had two quarters when there were very slight declines in GDP, you know, minus 0.1%, minus 0.1% again, that might not add up to a deep decline in economic activity. Think about something, you know, a weather-related disruption in economic activity, say, or some geopolitical shock, which occurs in the second half of a quarter. It reduces economic activity by just a bit during that quarter.

It bleeds over into the next quarter. It again leads to lower economic activity then, but it resolves and it is relatively narrow in terms of its impact within the economy, one could imagine a situation in which that generates two quarters of negative GDP, but it might not actually fit the rubric of depth, diffusion, and duration that would ordinarily be associated with a recession. Got it. Not that we're facing anything like that necessarily right now, just that's why you wouldn't look at only two quarters of negative GDP. So, Jim, what about- This is to conceptually explain, in some sense, why something as arbitrary as the two quarters might not be helpful. What about jobs? How much does that factor into the picture?

Some are wondering, how can we be in a recession when we're creating three to four hundred thousand jobs per month and have a 3.6 percent unemployment rate. How much does that factor in? You know, employment is certainly an indicator of economic activity. It's certainly one of the many measures that would need to be considered in thinking about whether the economy is expanding or contracting. I do think that it's important to know that historically, low unemployment does not by itself rule out the beginning of a downturn because the recession, the downturn is about the change in activity. It's not about the level. So if you go back and look in the history of some of these things, in July of 1953, the NBER dates a peak in activity, the beginning of a downturn following that.

Unemployment was 2.6% in July of 1953. It began to increase in August. By October, it was up to 3.1%. So that's an example of where, despite the fact that the labor market was clearly tight at that point, when the turning point arrives, right, it's that you're seeing a decline in in the rise in the unemployment rate, a decline in the job market at that point. So, Jim, when when do you expect to make this point, but the work of this committee is very much driven by the nature of the data and the degree to which different measures of economic Business Cycle Dating Committee in the late 1970s, on average, it's been about seven months between the peak of economic activity and the month when the committee made an announcement or determination. For troughs, it's actually been even longer, closer to 15 months. And in fact, you know, the committee announced in July of 2021 that the trough and economic activity in the most recent downturn

had been reached in April of 2020. And I think a lot of people were scratching their heads and saying, you know, what's here? It's important to know that, you know, in trying to figure out these peaks and troughs, it can often be easier to tell that things are declining or rising than to be able to assign a particular turning point. And the committee's task is typically to get the precision of it's this month. And that can lead the committee to wait somewhat longer to be able to get more clarity from the data that emerges. So, I mean, we're in a midterm election year. No pressure to determine it before that. I know you're nonpartisan, clearly. So whether we're in a recession or not, is there any way to avoid potentially going into one,

even if we're not in one right now, with the Federal Reserve hiking so much, with inflation so high? It's just not what we have been accustomed to in the last few years. Yeah, I'll say two things. I mean, first, on the point about, you know, we are in an election year, the NBER has never taken political considerations into account in making these kinds of determinations. It's a very non-political process. So I think that the committee is looking at. These are all publicly available.

And all of the information on the state of the economy, in some sense, is available to everybody who is looking. And really, the committee, in some sense, is not trying to do the same thing that many business economists and many of your viewers are trying to do, which is to make a real-time call on what's happening right at the moment. The committee is really more motivated by creating a chronology, which viewed retrospectively as we try to have a conversation about what happens during expansions, what happens during recessions, which gets that chronology consistent across, you know, circumstances in very different places in different times. So part of the judgment that comes into this activity

is trying to align the, you know, the very different circumstances that could be facing an economy in, you know, April or May of 2020 with the circumstances in, you know, the first half of 2000 when we were coming off the bursting of the tech bubble and trying to figure out how do you put the dating together in what are obviously very different circumstances. Right. Well, Jim, we'll stay tuned. We're all ears.

Thank you for joining us to demystify the whole process and how it works. We appreciate it. Great to see you, Sarah. Take care. You too. Jim Paterba, the NBER CEO. Let's give you a check on where we stand right now in the markets. Down 1% or so on the Dow. It's lower than some of the other indexes right now. The S&P, for instance, down about a half a percent. You've got big weights like Caterpillar because of earnings. Boeing taking 33 points off the Dow. Visa, 35 points

off the Dow. Just a handful of winners today off the Dow. Visa 35 points off the Dow. Just a handful of winners today in the Dow. Salesforce, Walmart, and Travelers. The Nasdaq did turn negative. It had been positive at the top of the hour. Tesla is helping out, but Microsoft, Apple, Amazon, Intel, Netflix all weighing. The S&P down half a percent. Up next, we're going to take a closer look at the chip space as $150 billion company AMD gears up for results after the bell today.

That stock getting a lift today into earnings. Plus, we are just minutes away from our interview with Senator Joe Manchin on the Democratic spending deal, inflation, corporate taxes, and much more. We'll be right back on Closing Bell, down 350 on the Dow. Welcome back to Closing Bell. Time for today's market dashboard mike santoli here as always today taking a look mike at the semiconductors ahead of amd's report which comes after the bell it does a five-year look sarah at semiconductors relative to the s&p 500 you know if you're bullish on the market you want semiconductors to lead they're a pretty good bellwether group

both cyclical and growth on a five-year back, it seems like they're kind of holding above that real breakout level from 2020. That's net bullish. On the other hand, real loss of momentum here. That would probably, you'd want to see a rebuild, a little bit of leadership. We have not seen that happen. Still consolidating these massive games in over a five-year basis. Keep in mind, that's 70 percentage points of outperformance relative to the S&P. So maybe there's a little more digestion to happen there. Now, when it comes to AMD specifically, some attention on the fact that it had eclipsed Intel in terms of equity market cap. Here's what a 20-year look is like. Now, I can remember going back decades, there was always a

bull case for AMD that it was going to have a window to outmaneuver Intel in PCs and other areas. Well, obviously, a lot of that has come to fruition. Intel almost perfectly sideways for more than 15 years in terms of market cap. And here you have AMD higher. What's interesting is, though, AMD is well off of its absolute highs and is now somewhat more reasonably valued. It always was a little more of a faith play because it did have a very high valuation. Right now, it's a little over 20 times forward earnings, and estimates have been rising going into the report, Sarah. I was just looking at the NVIDIA market cap, still the leader by far. Yeah, NVIDIA is by far the largest one in the group in the U.S., yes. Mike, thank you. We'll see you in the Market Zone. Still ahead, Senator Joe Manchin on how his new inflation reduction

bill will really help cool inflation, if it does. But first, chart expert Katie Stockton on the one key S&P 500 level that should be on your radar right now. We'll be right back. Stocks are mixed. Another volatile session. The Dow's down triple digits. NASDAQ just hanging on to some gains. Joining us now is Fairlead Strategies founder, managing partner Katie Stockton to read some of the charts. Katie, I feel like lately you've been a sell the rally kind of mode. Are you impressed, though, by what we got in July? And do you think it's something sustainable?

Yeah, I'm definitely impressed and certainly surprised by the magnitude of the move, especially in the last week or so of July with Apple's earnings showing a breakout there above its 200-day moving average. So what that tells us is that we have some minor breakouts, and those breakouts could contribute to a more extended relief rally. But I don't think it's going to be the stuff of what we saw in July. I think it'll be a bit more muted. For the S&P 500, it had some minor resistance around 4075, and it did manage to get through that. So it puts the next resistance of roughly 4270. From here, that's about 4% upside. I think it would be really difficult to capture on the long side. Some people that are more short term in their orientation

might be able to do that. But with these relief rallies in bear market cycles, they're super difficult to take advantage of. You really have to be there on the right day. So you still think we're in a bear market? And what about the low in June? Do you think that is the low or you expect to see lower lows? I think that is a low, an intermediate term low, but not a long term low. And I say that because we have improved intermediate term momentum, but just very much like past bear market cycles, that does tend to happen usually more than twice even during that bear market that you see these kinds of relief rallies that have a favorable impact on the intermediate-term momentum gauges, but it's temporary, lasting weeks, not months. We saw it in 2008. We saw it in 2000. And some of these relief valleys can be pretty

impressive, as we've already seen, but they often give way to lower lows. And we do think that this will be the case this time around as well. For the S&P 500 support is still around 3815. It's been a level we've been watching for some time, and we have about 5% room to that level. So here we have a risk reward that's about a one for one ratio, and about 5 percent room to that level. So here we have a risk reward that's about a one for one ratio. And that to us isn't that compelling. So as far as my final question is, as far as drivers, Katie, we've seen lately we've been driven on stocks by treasuries, by oil prices, by the dollar that the stock market seems to like weaker dollar at the moment, lower oil prices and lower treasury dollar. The stock market seems to like weaker dollar at the moment,

lower oil prices, and lower treasury yields. All three are going the other way today. Which do you think has the strongest pull right now? I think it's more about treasury yields right now than anything else. And they do look poised for an oversold bounce, in my opinion. And if anything, that would probably affect the high growth technology stocks the most that had seen a bit of an improvement in market sentiment as yields had pulled back. So perhaps they'll be under pressure, at least in relative terms here in the very near term. And we're talking a couple of weeks, not a couple of months. So that might have some impact.

But our bias in Treasury yields is actually neutral beyond the next couple of weeks in terms of an oversold bounce. So we think that influence will start to dissipate here pretty soon. Katie Stockton, thank you. Always good to check in with you on the charts from Fairlead. Up next, Senator Joe Manchin on how creating a corporate minimum tax and closing the carried interest loophole could impact Wall Street. And tomorrow, join us virtually for the CNBC Small Business Playbook, which offers insight and advice on how businesses can hedge against inflation and supply chain and labor challenges. A good lineup there. To register, you can use the QR code on your screen.

Dow's down about 300. We'll be right back. Legislation surrounding climate change, the tax code and health care costs may be coming soon. Last week, Senate Majority Leader Chuck Schumer and Senator Joe Manchin announced they had struck a deal on a reconciliation bill called the Inflation Reduction Act of 2022, which they said would invest $400 billion over a decade and reduce the deficit by $300 billion. And joining us now is Senator Joe Manchin of West Virginia. Senator Manchin, welcome to the show. Good to have you. Hey, good to be with you, Sarah.

Thank you for having me. So you told my colleague at MSNBC earlier that you had planned to speak with Senator Sinema this afternoon about the bill. Have you done that yet? Yes. And what can you tell us? We had a good conversation. Is she supportive? Senator, we had a good conversation, Sarah. I'm not going to say any more than that because, you know, she does her own homework and she

looks at the bill and looks at the content and she'll make her decision and give her reason for making her decision, I'm sure. But with that, you know, we talked about just an array of different things and we'll leave it at that. Did you talk about carried interest? Because I know you had said that she was on board in December about a lot of things, but this provision wasn't in that bill. We just had a good conversation. We're going to give her some information that we have and we'll share information back and forth, which is how we operate. And it works out well at the end.

All right. Let me ask it one more different way, which is if carried interest does prove to be a sticking point for her, would you be willing to negotiate on that point? And what would that look like? We've really had a good conversation, Sarah, and I'm not saying anything else. I know you're trying and you're doing a great job. Well, it's a key question. Yeah. Well, it's a very delicate question, too, and I'll have to talk about all that. But, you know, we're just looking and exchanging ideas and exchanging different information we have for why each other's position. That's all.

We've always done that. So we're not doing anything different we haven't done before. Okay. So let's talk about the bill and inflation, which we talk about. Yeah, now we're talking here on CNBC. So you bill it as an inflation reduction act, but some of the early studies coming out, Senator, are saying that it does nothing to fight inflation, especially in the near term. So isn't that a bit misleading of a title? Well, it's a bit misleading for those who come out and said that because there's been so many others who looked at it so favorably. Sarah, I think just the common sense.

I know I've been involved with 17 Nobel laureates telling me back in March, almost over a year ago, that inflation would be transitory. And the figures I saw and everything I was evaluating said it would not be. It would be very detrimental and harming to our economy and to the people of America and harmful to West Virginia. And guess what? That's what it turned out to be. So I know different people have different opinions.

Sir, what we're doing, we're basically paying down debt. We're fighting inflation by putting more production out in energy, produce more oil and gas, and making sure that our fossil industry can carry the load. We're making investments for more jobs, more energy, more jobs here in America with clean energy. So we're basically taking care of the needs of energy now and basically investing for the energy for the future. And we're doing all that while we're reducing the amount of inflation or the amount of prices for gas because I think all of us will agree the supply and demand, the more supply you

have, the better chance you have of driving down the price. And that's going to be for gasoline, that's going to be for your home, heating and air conditioning, everything else you're using. So we're doing that. We're also paying down, reducing all the drug prices. So when you think that millions of people across America will be paying lower drug prices because of Medicare being able to negotiate,

that's a tremendous factor. They're not factoring any of these things in. All they're taking is that companies who haven't paid for whatever reason they haven't paid will be paying 15% minimum. Sarah, the only thing I've said, the corporate rate was at 35% before, and that was way too high. There was a bipartisan group of us in 2017 thought it would be reduced to 25. It went clear to 21.

That was a 14% reduction. That was great, and people were tickled to death, but I guess it's not enough. And all we're saying is companies who aren't paying or paying very low, if any at all, and there's 55 of the largest corporations, this only affects companies that have a billion dollars of revenue or greater annually that are even going to be evaluated this way to pay a 15 percent minimum. And I just can't believe that these patriotic companies don't want to help this country defend itself and be able to do what we need to do to be the superpower of the world. Well, JCT found that 50% of those companies would be America's manufacturing companies.

At a time where, Senator Manchin, we're trying to reshore American manufacturing, aren't we? Right. Well, we're putting an awful lot of tax production tax. So doesn't that hurt their hiring and investing decisions? Well, if you thought it was going to hurt, don't you think the last two years you've seen record capital investments and you've seen the least amount of capital investments

with record profits? So the only thing we're saying is the thing they tell me most is reliability, making sure this government will let them do their job, permitting regulations. And that's what we're going to basically accelerate and streamline to where people can, you know, we can do things and build things much quicker than we ever have in the past. That's all part of this package. So it's going to be wonderful from that end of it. Well, the National Association of Manufacturers disagree. They say that the tax in 2023 alone will reduce GDP by $68.5 billion, cut labor income by

$17.1 billion. That's problematic. I've heard also that the CDC—you've heard about that, the Joint Tax—I'm sorry, the JCT, the Joint Committee on Taxation, you heard that they said it was going to cause the people paying taxes that made $200,000, which is absolutely, totally a lie. That's not the fact. What they're not telling you, Sarah, is that that only came out from one half, the Republican side. You know, the Joint Tax Committee, Committee on Taxes, basically has two sides. You have a Republican side, Democrat side, they work together. When they have a joint

statement, it's basically by both sides. This only came from one side. So a lot of this is being skewed right now. We are, for the first time, we're paying down our debt, $300 billion. Haven't done that in 25 years. Not in 25 years. We're paying down debt. Okay. We're increasing production of the energy. But that doesn't come for five years. Sorry to cut you off, Senator Manchin, but if that is the reason this is disinflationary, the deficit reduction doesn't happen for five years. No, no, I'm not saying that. I'm just saying.

When's the last time, sir, you saw the intent of us paying down anything? We're $30.5 trillion. No, we have to tackle our debt, for sure. I'm just going back to the inflation question. Okay. How about, let me ask you this then, how about as far as production? Don't you think you've got to produce your way out of this,, how about as far as production? Don't you think you've got to produce your way out of this, work your way out of inflation? You

can't just sit back and wait for it and let the feds basically raise the rate until you quit buying anything. I think, think differently. I think production is the way to go. And on top of that, we're accelerating permitting, which is what every one of my Republican friends have said we've got to do to get America back. And then the investments we're making on the renewable sides and all the new technology is going to be production tax credits and investment tax credits. So let me give you an example. We have a coal-fired plant in West Virginia that's going to be closing down in two years. It's a 1,300 megawatt. Okay, there's a couple hundred jobs that work there. We have a company now looking at buying it and turning it into a green energy, hydrogen.

So making basically green ammonia to be shipped anywhere in the country or the world. There's some other opportunities if we just keep our minds open and work together. This is an American bill. It's not a Republican bill. It's not a Democrat bill. It's not a green bill. It's a red, white, and blue bill. And for God's sake, can't we come together and do something that's great for our country and the solutions? Well, it is a Democrat bill. It's only voted on by

Democrats, right? You're doing this through reconciliation, presumably. Sarah, the things we have in this bill are things that my Republican colleagues have talked to me for the last year. They were tickled to death for the $3.5 trillion spending bill, a bill back better I was totally opposed to. Totally opposed. Never could get on. I was the only one who couldn't get on board. Okay?

And then all this goes on, and I started talking again. I'm trying to look and see if there's a pathway forward. I'm sick and tired of us running around the world asking people to do what we haven't done for ourselves, produce more energy. And they produce it in a much more climate harming way so there's so much we can do. Decarbonization works a couple of ways. If the United States of America produces more and we drill more and we produce more and

we do it cleaner and we replace the dirtier product around the world then we're decarbonizing. But then if you look at the geopolitical unrest that we have and what Russia is doing to Europe right now by screwing down the lid so tight, they're going to basically have to make some decisions. They go back to Russia for their cheap, dirty energy? Sure. Or can we help to offset that? That's what we've got to do. What about this sort of side deal bill for the $6.6 billion pipeline, natural gas pipeline, that would run through West Virginia. Are you confident that you can get the votes for that to become law?

It's the only piece of legislation that we have basically that puts energy in production within six months, two billion cubic feet a day. Do you know what that does? It's unbelievable. And it goes down through Virginia to North Carolina. It gets in the system it goes down through Virginia to North Carolina. It gets an assistant, goes to the Southwest. It basically gives us a chance to reduce the natural gas prices in America because we're putting production into the market. We're not waiting five or 10 years. 94% of that

has already been built. It's been built, put in the ground, covered up, reseeded, gone. And all we're saying is finish that. Like the National Production, okay, we need a Defense Production Act. We need energy right now to get ourselves out of this mess. And the only way you can get energy is by build and production. Is there a path toward this happening? Because you would need 10 Democrats to vote, assuming all Republicans vote yes on it. Oh, absolutely.

This is a path. This is basically a product that we're putting together all as one. That one has to be voted on separately because it doesn't fit in to the reconciliation. And we have agreements from the president, we have agreements from Chuck Schumer, we have agreements from Nancy Pelosi. That's all been worked together in that understanding and they need it basically for renewables. You can't build transmission lines taking them to where the wind projects may be or solar projects, these large projects, unless we can get basically fast permitting and regulations

so we can get this stuff done. You can't bring it to market unless you can finish it. So you've got guarantees on that. Just back to the Inflation Reduction Act, you mentioned, Senator Manchin, the drug pricing. And so for a long time, the pharmaceutical industry has been fighting this. But it looks like included in this bill, Medicare, the federal government, will be able to negotiate prices. And sure, we all want to pay less for prescription drugs, but we also want key innovations and new blockbusters in fighting cancer and

heart disease and all these issues, which the industry says it will prevent because it totally changes the economics for them. Well, let's use some comparisons here. The largest provider of healthcare in America is the VA. Okay? The largest provider is the VA. So with them being the largest provider, they have been negotiating for the lowest drug prices

for many, many years, way before Medicare Part D came into play, and that George W. Bush allowed PBMs and all them to come into play. So that has not stymied at all any innovation or creation. Medicaid has been negotiating for prices. Why shouldn't Medicare? Why is not, for some reason, Medicare not allowed to enjoy the same low prices? Why can't we put caps on insulin, life-saving insulin? Why can't we

do some of the things that we've been allowing other agencies to do? That's all we've asked for and that's something we've all agreed on. I think 80 percent of Americans agree that should be done. And we're — that's in this bill. I think they would argue, though, it makes the economics less predictable and makes it even riskier to go into high-risk areas of research and development around the health care side. Those drugs were never touched. Those drugs they're talking about, which are on the board right now, just came into being and still don't — and they still have the protection of exclusivity. Those drugs aren't being touched at all, Sarah.

It's only the 10 most drugs that have gone. And it's just unbelievable how they have distorted this. Well, they think it'll expand to — I mean, ten and then i think there's room for expansion into twenty but but i don't understand unless we have legislation what why why are you putting this in this bill that drug drug prices i went back and looked at the cpi report in june two-and-a-half percent higher than they were last year this is not what is hurting

americans at least eighty percent of the the primary driver of higher prices right now. 80% of Americans, Democrat and Re- We're here representing our constituents. I can tell you, my constituents in West Virginia want to be able to get lower drug prices through Medicare and the life-saving insulin they need. Okay? They want caps on that. It's ridiculous.

And 80% of Americans across this great nation, Democrats and Republicans alike, overwhelmingly, please reduce the prices of drugs. This is a start. And if they think this is going to basically disassemble the whole pharmaceutical and big pharma, I'm sorry. That's not going to happen. That's not the intent. No, I think they just think it's harder. It's not the primary driver of inflation.

You've been critical, Senator Manchin, of the Federal Reserve in the past for being late and slow when it comes to the inflation fight. Do you think they're doing a good job now? Well, they're coming on now. They're doing their job now. It took them a little while to get kicked in, but they're doing their job. Let's just see what happens. But we can do an awful lot more, basically, by producing, taking the chains off of production for energy. Let our oil companies do what they do. Let our natural gas companies. Let's build some pipelines. Let's get some things done here, and I guarantee you we'll drive down prices.

You know, they're just trying to basically stop everything or basically tap things down by putting higher interest rates so it takes the desire from people wanting to buy. I want people to consume. I want them to be in the marketplace. I want them to have good opportunities, but I want them also to have an affordable energy price. Inflation is killing us. It will not let up. It's harming West Virginians, and it's harming everybody in America, I can assure you.

Who owns that? Who should get the blame for that? Fed? The Biden administration? Congress? You guys passed $2 trillion of spending at a time where America was reopening. Sarah, that's not my job here to blame people. You want to blame people, you never get anything accomplished. I'm here to get things done. My Republican friends are upset right now for whatever reason I don't know.

These are still my friends. They'll always be my friends. And we work very well together. We did three things they told me to do. They've always said, can we produce more? Absolutely. Can we pay down debt? Absolutely. Can we streamline the permitting process? We worked very well together. We did three things they told me to do. They've always said, can we produce more? Absolutely.

Can we pay down debt? Absolutely. Can we streamline the permitting process? Absolutely. In a normal time that wasn't this toxic because people hate each other so bad. I love them all. These are my Democrats and Republicans. This is not their bill.

This is an American bill. Let the American people have a win. One time, let them have a win. What about China? In the news today, clearly, with House Speaker Nancy Pelosi in Taiwan, China's threatened serious consequences. Is it a mistake that she went? Not at all. No, I think Nancy Pelosi did the right thing. You support it? Basically, we've all been there. I support it a thousand percent. We've all been there. You can't let someone say, well, you can't come to this country. They've been a major trading

partner of ours. We've had great relationships. They embrace democracy and the freedoms of democracy. My goodness. And we're afraid to stop and say, how are you doing? Are we doing okay? Can we work better together? Is there anything else we can do? And we rely on them a good bit, as you know, on our chips. Now we're going to be able to have a robust chip industry and I was basically very leery about electric vehicles because we were changing our transportation mode Sarah and basically being totally foreign supply chain depending on China for the batteries and I said that's wrong so if you want discounts on cars and made in America that battery better be made in America, too.

And that takes away from China also the dependency we have. So we have to be self-reliant also. I respect China for who they are and what they've done. I don't agree with them, but they've been very aggressive. We're going to get aggressive now. And we're aggressive in chips. We'll be aggressive in batteries. We're aggressive in producing our own energy here in America.

Senator Joe Manchin, thank you so much for the time today, sir. Thank you, sir. Appreciate it. Always. All right. You too. From West Virginia. We've got just about eight minutes of trading here, and we are going to go straight into

the closing bell market zone with the Dow down about 360 points or so. We've basically been drifting lower in this final hour of trade. Joining us, CNBC Senior Markets Commentator Mike Santoli, here to break down these crucial moments of the trading day. Mike, we have had a lot of Fed speak today, which seems to have turned us lower. The two-year yield had a bit of a spike earlier, and it is now above the 10-year yield. And I wonder if all this Fed speak around, hey, we're not cutting, we're not at the end of our hiking cycle, starting to make a dent. It's starting to complicate the bull case for sure, or at least kind of interrupt a little bit of that upside momentum that we had over the course of the past few weeks, based at

least in part on the market's assessment that we might get the Fed easing back off the hawkish path. Now, I think you have to take a lot of the Fed speak today with a grain of salt because this is the party line they absolutely have to hammer away at to say that the job is not done on inflation. They need to see it in the data. But the bond market swings, I think, are relevant. In the morning, it seemed like the extreme flattening of the Treasury yield curve was the pressure point, this idea that maybe the three-month yield was getting close to where the 10-year was. And then we had this huge jump up

in longer-term rates as well. Over the course of the day, you can see it there. And whether or not that's a good or bad thing in terms of what it says about the economic outlook and the odds of recession, that kind of volatility in treasuries tends not to be the most comfortable thing for stocks. So all that being said, still pretty much hovering in this range. Equity is unable to get a lot of traction as the

S&P 500 threatened the June highs, early June highs, which is really also the upper end of a three-month range. So I see it a little bit as digestion and apprehension after a big move we got last month in July, Sarah. What do you think about Senator Manchin? Clearly, it matters for certain sectors. We've seen the solar stocks, for instance, run higher on prospect of more spending. Pharmaceutical stocks, I thought he pushed back really hard against lowering drug prices. What is the market expectation on whether this passes? He wouldn't give me anything on Senator Sinema, even though he said they had a good conversation. Yeah, the way it bumps up most directly against the markets, aside from the isolated kind of renewable energy plays, is the minimum corporate tax that's proposed in the bill.

And this idea that you have some low tax rate companies that would probably have to pay more. I think we saw JP Morgan say it might subtract a dollar on net from S&P 500 earnings if it were in place at the start of 2023. That's not really that big a deal. But obviously, sector by sector, there would be significant moves. Certainly, pharmaceuticals probably at least just on a sentiment basis, would not love the idea of the drug prices. But look, I don't think anyone thinks this is the thing that's either going to stoke or suppress inflation, despite what the bill is called. Right, exactly. Something I was trying to get at. Let's hit PayPal because we have earnings just minutes away. Kate Rooney here with the key number to watch for in this stock, which has

been battered from its highs, Kate. Yeah, Sarah. Well, the number one thing to watch for PayPal is the executive search. CFO John Rainey left earlier this year for Walmart. So there's concerns that CEO Dan Schulman right now doesn't have an heir apparent. There's a bit of a void on the management side. Second thing is that Elliott investment. PayPal has not acknowledged that publicly, but it sparked a little more speculation about a possible Pinterest combination. And then finally, the business performance analyst I'm talking to think the guidance may still have to come down based on the international business and currency headwinds, as well as a slowdown in China. The bar has been lowered in prior quarters. The question for this quarter, is it low enough heading into earnings this time? We'll see in a few minutes. Back to you.

All right, Kate Rooney. Kate, thank you. AMD is the other big name set to report in just moments from now. Christina Partinella is here with a preview of that name. Christina. Well, Sarah, AMD updated their annual guidance at its analyst day just in mid-June, so making expectations just a little bit more accurate and possibly easier to beat. But there are three points I want to focus on. We got to talk about weakness in PC sales that has plagued several chip makers, Intel being the latest. The second point would be data center strength, especially after Intel reported a 16% year-over-year unexpected drop. So the big question is, will AMD kind of have the same trajectory or show market share increase because it's stealing it away from Intel? We know Wells Fargo's analysts expect AMD's server CPU business to double in the second

quarter. That's a big move. Lastly, that third point, graphic chips. The prices have been dropping. NVIDIA saw its high-end GPUs dropping very recently. So the big question is, what will that mean for AMD and gross margins? AMD's stock, though, still underperforming the S&P 500. But if you look at AMD versus Intel just over the last three months, look at the difference between you got AMD higher, 10 percent higher just in the past three months versus Intel, negative 19 percent. We'll have AMD's earnings in what, less than 15 minutes. Thanks. And we will look to you then, Christina. Thank you very much. Mike, I do wonder if there's more focus. I was watching this group all day today to see if there would be any kind of reaction with Taiwan, with Nancy Pelosi there,

obviously, because the chip sector has so much on the line when it comes to these tensions, which appear to be escalating between the U.S. and China. Yeah, not specifically. It didn't seem like that's the main thing on people's minds. It was much more potentially about any kind of China response and more of a macro geopolitical sort of risk appetite play. But even that seemed to have fizzled over the course of the day. What do you see in the internals? Very mixed. New York Stock Exchange slightly positive breadth. The Nasdaq's been negative. Now, you've mentioned that on the Dow, Caterpillar's decline has had an outsized influence. You see they're just about even here, 50-50 advancing versus declining declining volume. Wanted to take a look at Amazon as a check in on a two year basis. Huge move higher

over the last few weeks was one of the engines of the S&P's lift in July. But look at that. All it really did is bring it to the underside of that prior long term range. Didn't get even up to the March lows. So I think it's definitely at least a wait and see right now. The volatility index is still below pretty or pretty much near the bottom end of its own range that we've been in for a little while. But it's inching up. The bond market volatility is not helping here. Equities can't really stay asleep when you do have the bonds whipping around as they have been, Sarah. Super volatile with a two-year yield back above 3 percent. As we head into the close, we're pretty much, we are at the lows.

We're making new lows, down 400 almost on the Dow Jones Industrial Average. Obviously, the big impact there on Caterpillar, which is dragging down the Dow off the earnings miss. They're 72 points off the Dow by itself. But Boeing is also shaving a good chunk off the Dow, and so is Visa. Salesforce, Travelers, and Walmart stay positive. S&P 500 is also at the lows, down about 7 tenths of 1%. And now every sector has gone negative. The worst performing groups today, real estate, financials, industrials, and materials, all those sectors are down at least one percent. The Nasdaq had been positive when we started the final hour of trade. It has gone lower.

Tesla is holding it up a little bit, but Microsoft, Apple, Amazon, Intel, all a big weight on the tech-heavy index. Small caps go negative at the close. That's it for me on Closing Bell.