Closing Bell - Closing Bell: Stocks Soar, Fintechs Flying High & Let's Make A Deal 8/3/22

Episode Date: August 3, 2022

Stocks snapping a two-day losing streak following stronger than expected economic data and earnings. But Canaccord's Tony Dwyer explains why he thinks the summer rally is about to cool off. Carlyle Group Co-Founder David Rubenstein says he doesn't see a recession in the near term and discusses the outlook for dealmaking in this environment. Mizuho's Dan Dolev weighs in on the big rally in Fintechs today and whether investors should be buying these stocks after big year-to-date declines. And KKR's Paula Campbell Roberts says she now expects a slowdown in spending by high-income spending, but she unveils which retail stocks she thinks will be able to buck that trend.

Stocks are surging as the Wall Street rally resumes. NASDAQ's up more than 2.6% right now. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look at where we stand in the market just at the highs of the day right now, with the Dow surging 1.4%, about 454 points higher.

S&P up 1.7%. Moderna's the outperformer in the S&P right now, off earnings. The NASDAQ up 2.6%. Communication Services is a real standout performer right now off earnings. The Nasdaq up 2.6 percent. Communication services is a real standout performer right now in the market. Strength in names like Meta. It is a big day for earnings. And take a look at some of the biggest earnings winners. Fintech names like PayPal, Robinhood, SoFi, all surging double digits. We'll talk to an analyst about some of those

moves. CDS is jumping, too, taking the drug stores higher. And there is Moderna up more than 17 percent, leading the S&P 500 right now. Ahead on today's show, Carlisle Group's David Rubenstein will join us with his thoughts on the market rally, the state of private equity and, of course, the Inflation Reduction Act. Let's get straight to this rally with stocks surging, even as a number of Fed officials come out with a more hawkish tone. Here's Jim Bullard, St. Louis Fed president, this morning on Squawk Box. We've still got some ways to go here to get to restrictive monetary policy. I've argued that now with the hotter inflation numbers in the spring, we should get to 3.75 to 4 percent this year. Also today, San Francisco Fed President Mary Daly told Reuters that if inflation keeps roaring, a seventy five basis point hike in September may be

appropriate, though 50 would be reasonable. She also said that this week that rate cuts in 2023 are not her modal outlook. Joining us now, Canaccord Genuity Chief Market Strategist Tony Dwyer. So does the market not believe these Fed officials that are coming out and trying to walk back, the dovish Powell? Well, Sarah, there's a little bit of momentum in the summer rally that we have, and I think people are more focused on that and maybe trying, maybe they became a little bit overly defensive around the June low. But now we're up about 14%, and I think they're ignoring some of the issues that are out there. It's interesting that Jim became a little bit overly defensive around the June low. But now we're up about 14 percent, and I think they're ignoring some of the issues that are out there. It's interesting that Jim Bullard said that we're not restricted. We're at 225. He wants to go to 3.75 to 4 percent. I can't see how that's a really great thing. Right. So there's that and there's the fact

that we're starting to get a mismatch between where the market is pricing the Fed and what the Fed is saying. Isn't that a risky thing for the markets? Yeah, Sarah, it's the whole thesis behind the summer rally that we had. Remember, you're in the middle of the of the initial the initial fear is that what is the Fed going to do and how is it going to impact the economy? That was the first move lower. Now we're in. OK, it wasn't as bad as we thought. The economy is OK because it works with a lag. I think, again, our call for the fall, fall. So, you know, once we look through the summer rally, which I think we're pretty close, you get the fall, fall when you actually get the fear of what's happening.

Remember that interest rates work with a lag. It's widely expected. This is a pretty funny range. It takes three months to 18 months. That's the spread of what economists think. Right. Thanks. Let's take the shortest one, three months. So that means we're just discounting the first 25 basis point hike. So in our opinion, it looks more like the economy has slowed down because of the fiscal cliff, the ending of extra unemployment benefits and other pandemic-related fiscal stimulus.

And now, unfortunately, as we go into the end of the year, I think we're going to have to have the impact of those higher rates. And again, the whole premise here, where I really screwed up in 2020 was after the initial surge. I think we did a really good job of identifying that, I think, similar to the summer rally here. Where I made a mistake was I didn't get really bullish right away. I thought the market would test the low, but then I ignored that the Fed had already started easing. And that is really what's different here. Not only has the Fed not started easing, they've not announced that they're buying corporate debt like they did in early April, the game-changing decision on April 9th, buying high-yield debt. They're actually telling

you they're almost going to double rate from here. So I'm having a hard time buying an up 14% pay. And QT. Yeah. Well, I'm not as worried about QT. This is your calling an end for the summer rally. You know, if I were that good, I'd be on my yacht, but I'm not. I think we're really close. Remember last time I was talking to you. Okay. So, Tony, we're 14 percent off the off the 14. Sorry, off the lows. We're about 14 and a half percent off the lows in the S&P. You think that that's sort of where we should be after the oversold conditions where we were going into June? Yeah, it was the environment was right. We had that oversold condition. We came up with the indicator on the rate of change for the 10 week rate of change in the S&P we talked about last time I was on the show. We hit the median plus a little bit

of what upside you should expect. So the short answer is yes. But again, the conditions that were there were not just the oversold condition. It was that the economy was already in recession. And I disagreed with that. It takes time for that to take place. With 7% nominal growth, copper still above 300, there's things that you could look at and say nominal growth, copper still above 300. You know, there's things that you could look at and say, wow, they're down from peak, but they're nowhere near recession levels. And I think that's where we're going to have to look out for in the end of the year is as you get that weaker data and those indicators coming close to a recession level, what it's going to mean to the idea that we're just going to have this soft landing. Why do you think at this point, Tony, the market has not priced in a recession or a

deeper economic slowdown? We know what happens usually in history when the Fed hikes like this. 100%. So it's down 24% for the S&P 500, down over 30% for the Russell and Nasdaq. Yeah, it was pricing in some semblance of a recession, but we're not there anymore. We're up 14% from that low. So again, we called for the summer rally

because of how far down it went and how much it discounted, even though it was too early to expect a recession. But now that's not the case anymore, Sarah. We're already up that 14%. So I can't come on TV and say to you and the viewers, wow, we're discounting a recession because we're 14% higher from when we were. We're not.

And again, I don't want to come across, I do think we're going to have a recession. I don't want to say we're going to go down another 30 or 40. I don't think so. But what I am pretty highly convicted in is that we're going to test that low in some way. It would be, in my data, historically unique not to, because the Fed hasn't started easing. That's the caveat between now and the difference between now and 2020. So I want to look to take advantage of weakness versus trying to chase this kind of strength. So where would you be? Would you go back to the defensive groups

that worked well when the market was more worried about recession, utilities, staples, those those type of places? Yep. Aggressive trades that people put on in anticipation of a summer rally or any kind of rally, whatever you want to call it. I would neutralize those. I don't think you want to get super bearish. I just think you want to neutralize and it's a do no harm situation. You know, it's one of those volatility. A month ago or a month and a half ago, it looked so wrong to expect a rally, just like right now it feels so wrong to expect a test. And it's all wrapped around the Fed. And the Fed is telling you that they're likely going to double rates from here. Well, I guess we'll see what happens with the with commodity prices and inflation. Just got a headline, Tony. Neil Kashkari, Minneapolis Fed president, says inflation may still end up being transitory. So I guess they still don't know.

Nobody knows, but ultimately parts of it are. We've talked about the Fed being in a box, Sarah. Statistically, it's going to be too hard to get to the level they want before the next meeting. So the owner's equivalent rent makes up such a high level of the CPI. And the thing that blows me away is for my entire career, the Fed has looked into the camera every time and said, we use core PCE. It's more representative of real inflation, not the CPI, because of the significant overweight of owner's equivalent rent. So somehow the Fed has let the narrative go to the CPI. With that said, again, you can't statistically drop it to where they've literally stated they

want to be by the next Fed meeting. And in our view, to really turn the tape here, Sarah, you need the Fed not to just say we're going to do 50 instead of 75. That generated no summer out. You need them to say, we're going to not raise rates anymore. And if the data gets worse, we're going to ease. That's what kickstarts the next real sustainable, in my opinion, real estate sustainable. Well, forget my opinion, the data, the sustainable bull market. Yeah. Or inflation really could be maybe Kashgar is right. WTI today is at the lowest level since February. Tony, we've got to leave it there. Thank you very much. Tony Dwyer. All right. Have a great day.

You too. We've got a news alert right now out of Washington on the Inflation Reduction Act. Elon Moy with the story. Elon. Sarah, the Congressional Budget Office now estimates the Democrats' new reconciliation package would reduce the deficit by $102 billion over the next decade. Now, that number does not count the impact of enhanced IRS tax enforcement. The $80 billion in that bill that would go toward collecting additional taxes, the CBO says that would actually generate another $204 billion in revenue over the decade. So you add those together and you get $305 billion in deficit reduction,

matching Democrats' estimates for the impact that this bill would have on the deficit. Really key point for Senator Joe Manchin, as you know, Sarah. And once again, the CBO is saying $102 billion for deficit reduction. Add in the tax enforcement piece and you get another $204 billion off of the deficit. And they're just looking at the deficit, right, Ilan? They don't have estimates on what it would do for inflation because that's the other thing. No, they don't. But certainly Democrats are saying that the deficit reduction is one of the key reasons why inflation would go down over the long term. Obviously, there are differing estimates on that.

But Democrats are pointing to that reduction in the deficit as one of the reasons why inflation would come down, too. Yes, but it doesn't start until year five. So it doesn't really help inflation right now, as we've been talking about. Elon, thank you. Elon Mui. After the break, KKR out with a new warning on the consumer, saying a slowdown for high income spenders could be on the horizon. We'll talk to the author of that report about the market implications. And then later, we've got an exclusive interview with Carlisle Group's David Rubenstein. Stock surging, up 450 points on the Dow.

Every sector is positive in the S&P except for energy. You're watching Closing Bell on CNBC. While we are sensitive to the impact inflation and economic uncertainty are having on consumers, it's critically important that you all understand we are not currently seeing any measurable reduction in customer spending or any evidence of customers trading down.

That was Starbucks CEO Howard Schultz on last night's earnings call. But KKR is out with a new report raising a red flag on spending, writing, quote, we expect a material slowdown in personal consumption as the high-income consumer slows spending over the next 12 months. Joining us, the author of that report, Paula Campbell Roberts, KKR head of global consumer and real estate macro. Welcome, Paula. So what are you seeing that Howard Schultz is not seeing? We're seeing from a ton of different data sources that high-income consumer spending is sort of the last leg of the stool that's really supporting U.S. economic growth. What we're noticing and why we expect to slow down over the next 12 months is high-income consumer sentiment is actually below that of other consumer income cohorts. That's a really important flag that we've tracked. The other

thing that we're looking at is real personal disposable income is actually negative, down 4 percent year over year. And so if you put those two things together, what we expect is that over the next 12 months with equity market volatility, that on that consumer spending will slow. In response to Howard Schultz's comment, though, I think what's important is that what we'll expect is tradeoffs between consumer spending categories. So it's not that all sectors will fare the same. But given that we're seeing higher interest rates, lower real disposable income, it's really those real durable goods categories where we expect to see material slowdown in spending. And that's where we've seen it already. Well, that's why it's been

so confusing to track what is going on with the consumer. Even if you look at the profit warnings from a Walmart or a Target lately, it's not like they're talking about demand falling off a cliff. They're not talking about traffic declines. They're talking about shifts in prioritization and getting inventories wrong because of the sudden nature of the move. So it's really hard to tell what the underlying trend is. It's really hard to tell. I think this is a complicated environment for investors. Not only do you have high inflation and slowing growth, but you have the impacts of COVID, which have really shifted the way consumers behave. So I do believe, you know, stick to our call that over the next 12 months we'll see a change. But again, you'll have to look beneath the surface at some of the moves

between categories. What about service? Because where we have seen the biggest pockets of strength in earnings and right now in stocks is travel, hotels, casinos. Really no evidence of slowdown and we're not hearing it from those CEOs. That is where we'd expect to see continued strength. So the services rebound, especially on the back of COVID, is where pent up demand for travel and leisure is really coming through in high-income spending. So we expect that to persist through the fall, but then again to start to slow down thereafter with continued equity market volatility. So next year, this all catches up or what? We continue to slow down until the recession subsides. Services will hold up. It'll do better than goods. But by next year, I think we even start to see some slowdown in services. So what does that mean for investors when it comes to the retail stocks?

Because it's been winners and losers given the categories and the income groups that different companies have focused on. So as you know, we're long-term investors, so we're less focused on individual stocks today. But the big themes that we're invested behind are personal care, vehicle maintenance, nesting-related stocks or names. And those are goods that, names that will benefit from the COVID, sort of the COVID theme, where more individuals are staying home longer. And so, you know, furnishing their offices for remote work, or even food at home. We expect those themes to continue to persist. So obviously it's an economy that is driven by consumer spending. Not recession yet? What do you think?

We actually expect a recession over the next 12 months, right, but a mild recession at this point. What prevents us from thinking this is a GFC-type severe recession is there's actually a lot to be excited about in terms of balance sheets that are still very strong. The labor market is still very strong. So even though I'm talking about a material slowdown in spending, it's not that I expect a GFC-type contraction. Financial crisis, yeah. Well, we don't have those kind of leverage, those levels of leverage. We don't at all. Though we are seeing on debt to income ratios, they're now actually back to pre-COVID levels. And what that signals, from my view, is really just a widening of the credit box as consumers sort of settling into ramping up their spending

back to those levels. You're getting consumers then dipping into savings and also dipping into borrowing. Yeah, it's changing. Paula, thank you very much for joining us with those insights. Thank you so much, Sarah. Paula Campbell Roberts from KKR. Show you where we are in the market. Still holding on to some pretty nice gains. 1.6% higher on the S&P. We're now higher for the week.

And the Nasdaq zooming because the three best performing groups in the S&P are consumer discretionary, information technology, and communication services. Nasdaq's up 2.6%. Still ahead, Citigroup's U.S. equity strategist Scott Cronert on today's rally and what to do with technology in particular after the NASDAQ's big rebound over the last month or so. The NASDAQ 100 now up over the last month 14.5 percent. We'll be right back. Just got a bit of a turn in the bond market treasury yields have turned lower they were higher we'll hit today's market dashboard with mike santoli focus on seasonality and the s&p

in parts are yeah exactly how the s&p 500 this year is tracking against sort of a composite of cycles that show the tendencies of what the market might have been expected to do in 2022 now this is called the ned davisosite. I showed at the beginning of the year as a very broad sense of what not only the seasonal factors, but the four year election cycle, as well as the 10 year kind of decade cycle to year ending in two. Does that matter? I don't know. History says this is what the year should look like. And here you see in blue, the year is tracking relatively well in the cadences of it. I want to emphasize the magnitudes are very different. Right. So we actually got down to more than a 20 percent decline. Obviously, the average

up and down is much more muted than that on all these cycle composite years. But it does show you that a June low would not be unusual in this in this scenario, as well as just weakness in general in the first half of the year. Now, a lot of the election year stuff says you've got to wait until after you add the election itself, and the fourth quarter tends to be strong. Obviously, you wouldn't trade just along this, but it does show you a general sort of tendency of what history says might be the way the winds are blowing for the market. Especially if you think we bottomed in June. Yeah, it sort of, it tracks along. And of course, that would mean a new high. I mean, there's a lot to assume here that I wouldn't want to make those leaps.

But this is what's out in front of us. Nice hedging. Mike, thank you. We'll see you in the market zone. Up next, Carlisle Group co-founder David Rubenstein weighing in on this big market rally and the outlook for dealmaking in this environment. Dow's up more than 460. We'll be right back.

Stocks in rally mode today. On track to snap a two two day losing streak. They're now higher for the week. But our next guest says markets may be bumpy for a while. Joining us in a closing bell exclusive is Carlisle Group co-founder David Rubenstein. Welcome to the show, David. Nice to see you. My pleasure to be here. So you get a good view across a number of industries and sectors in your portfolio. Do you think we're in a recession? I don't see it yet. I don't think there is likely to be a recession in the immediate future. I think the Fed has done a reasonably good job of catching up to the problem they had of not anticipating inflation being as high as it turned out to be. And I think the markets are now anticipating that the Fed has got it under control as much as you reasonably can. So I think the

markets today reflect the fact that the economy is not heading into a recession anytime soon. So the bears would say that means that there's still downside ahead because the market has to price in a recession at some point if we do get one. Do you agree with that? Well, the markets now are, I think, reflecting the fact that the Fed has increased interest rates by enough to make it make people feel that we're not likely to go into a recession because people are recognizing that the Fed's actions are working. Inflation is probably coming down and people are not going to, I think, take actions that reflect the recession is imminent. So what do you think is ahead for the Fed path? Because now there's this debate about whether we were closer to the end, which is what the market seems

to suggest. But all the Fed speakers are are out of the last 48 hours or so saying quite the opposite. I think I'm not an expert on the Fed, but my guess would be that the Fed will increase interest rates at its next FOMC meeting by 50 basis points and probably in the two subsequent meetings this year, 25 basis points apiece. And I think it's unlikely that you're going to see increases next year. The market is now basically telling us they don't expect to see increases early next year. I think the fed strategy seems to be working reasonably well though obviously they admit that they they missed the ball a bit on on inflation early on when it was not transitory it was more significant than they thought do you see inflation coming down relatively quickly here

based on on what you're seeing from your companies? Inflation doesn't any time come down very quickly. Inflation gets embedded into a system and it takes a while to get it down. Paul Volcker used to say when I worked in the government and he was the chairman of the Fed that when you get inflation into a system, it takes much longer to get it into the system, get it out of the system, to get it into the system. And I think right now it's going to take a while to get it down to a level that we'd like. But I do think that the Fed's actions are making some progress and the markets are reflecting that. So what kind of environment is it right now for your business, for dealmaking? Because it seems like fundraising hasn't slowed to a halt. That's still happening, right? But deals have slowed down.

Dealmaking has slowed down a little bit, but there's still a lot of activity going on. And interest rates are, while they're a little bit higher, remember, in the buyout business, interest rates are important, but they're not as important as they were 20 years ago, because people were borrowing a lot less money. And 20 years ago or so, you might borrow 90% of the purchase price. Today, you might borrow maybe less than half of the purchase price. And maybe a lot of the private equity and product investment deals that are done are not using leverage at all, venture capital, growth capital, and so forth. So interest rates are always important, but not as important as it was to our industry. Therefore, I think the industry is finding itself not easy to get deals done because there's still a gap

between buyer and seller expectations. But I do think that you're seeing a fair number of deals getting done and financing is available when people want it. What parts of the economy would you look at? Would you feel like we'll see more activity? Well, I think financial services are ones that tend to be doing reasonably well when interest rates go up somewhat. And I think financial services will do quite well in the future. Health care is increasing a big part of our economy. When I worked in the White House 20, 30 years ago, it was about 7 percent of the GDP. Now it's over 20 percent. And you're going to see more and more money going into health care, in my view. David, I have to ask you about the Inflation Reduction Act, because a lot of politicians, as you know, have promised to get rid of carried

interest. It looks like it might just happen with this deal if the senator from Arizona is on board. What will be the impact for you and the industry? Well, I'd say that the name of the act is wonderful. I hope it actually works. If every act that was named sufficiently that way actually lived up to its promise, we would be a happier society for sure. I'd say that this is a debate Congress has had for 15 years. And obviously, it's unknown today what's going to happen. But I think the private equity industry is in pretty good shape. And the private equity industry and investors in the industry are likely to still get good returns no matter what happens.

So you're not fighting this? Well, I'm not in the day-to-day efforts on Capitol Hill. I've long past given up dealing with Capitol Hill and doing lobbying or anything like that. So I have not talked to any members about it, and I don't expect I will. No, I'm just surprised because we've heard the private equity industry as a whole argue that this is going to hurt jobs and it's going to hurt small business and it's going to hurt our economy if we get rid of carried interest. So I'm interested that you're sort of supportive of this. I didn't say I was supportive. I just said I'm not personally involved in lobbying members of Congress.

It's not something I do at this point in my career. But I do think that the industry's positions are well known by people on Capitolitol hill and i suspect uh they will be reflected in uh some of the members votes but i don't know for sure what will happen i don't think anybody knows for sure what will happen at this point but the private equity yeah private equity is in pretty good shape and investors are interested in the private equity industry because it gets good returns and whatever happens on capitol hill i think the industry is going to do reasonably well though obviously people in the industry would prefer a certain outcome over another outcome lower taxes sure so what do you think of the bill overall i i don't were you were you suggesting that it is that it is mislabeled inflation reduction act i asked

senator manchin about that yesterday he He thinks it will reduce inflation. Well, nobody really knows, of course. And every act has a wonderful name. And I wish all the acts, as I said, live up to the name. We don't really know. Everybody hopes it will reduce inflation. But who knows? Because even under this act, I think nobody's projecting inflation will come down because of this immediately. It will take many years. And so you don't really know what the act will live up to the name of the act. We just don't know. I thought it was notable that five Treasury secretaries today came out together, prior Treasury secretaries, saying that they are supportive, including Hank Paulson, who, as of course, everyone knows is Republican,

worked for President Bush. Quite a quite a strong statement there that they that they are supportive. David, did you think so? Well, I think that their view is that anything that can be done to reduce inflation is a good thing. And I think their view, obviously, is that this is better than nothing. Right now, if we have this, we don't have this legislation, but not every piece in it is perfect. I think their view would be that inflation will be higher than we would like. But no doubt that we have inflation in the system. It's going to take quite some time to get it reduced. I think some of the things that were done at the beginning of the administration probably turned out to be more inflationary than anybody thought, other than probably Larry Summers. Finally, David, we know you've got a new book coming out in September, How to Invest, which remember your previous book, How to Lead, where you interviewed

a lot of the great leaders of corporate America. And here you're interviewing a lot of the great investors. I'll ask a David Rubenstein question. Who impressed you the most? Well, I won't give you an answer other than to say that everybody I interviewed is really impressive. What I try to do is define what it is that makes people great investors. And from people like Stan Druckenmiller or Seth Klarman or Jim Simons or Michael Moritz, they all have characteristics that make them pretty talented at what they do. But all of them really are willing to defy conventional wisdom. And they really have a work ethic that's pretty impressive. They all come from relatively modest backgrounds and they all really have a pretty good facility for numbers. They really like to make the final decision. And I think

investors, I think if they get this book and they read it, I hope they will find that they learn a little bit more about the investment world than they might have known before. And I should say that all the profits go to children's hospitals. So I'm not looking to make a lot of money from this book. I'm giving all the profits away. Very nice. David, thank you for joining us. Always appreciate the time. David Rubenstein. And David will be one of the featured speakers at this year's Delivering Alpha conference, which returns in person September 28th. You can scan the QR code right there on the screen to register or visit deliveringalpha.com. Here's where we stand right now in the market, holding on to the gains. And they are pretty nice gains for the bulls, up 470 points on the Dow right now.

Every sector strong in the S&P except for energy. Consumer discretionary is leading the charge, really having a great day. Some of these retailers with a rally. Amazon's in there, Tesla as well, helping that group. Technology stocks are also playing a big role. The Nasdaq 100 is up 2.8 percent right now. Up next, we will reveal a stock that is skyrocketing after blowing the lid off its earnings report. There's your clue. And then later, we'll talk about the huge moves for fintech stocks today with an analyst who is bullish on PayPal, Robinhood and SoFi. We'll be right back.

Check out today's stealth mover. It's Tupperware. Investors unable to contain their excitement for this stock today, up 34%. The company's sealing in a profit that nearly doubled analyst estimates, blowing the lid off of top-line forecasts because pricing actions were able to offset lower gross margins. Despite the gains, though, the stock is still down nearly 40% this year. It's been hammered after they had to withdraw financial guidance in May. Saw a lot of insider buying since then, but having a pretty strong day today, up 34 percent. Up next, a top analyst weighs in on today's fintech rally. That story, plus why Under Armour is higher despite slashing its outlook when we take you inside the market zone

with the Dow up 460 points. We'll be right back. We are now in the closing bell market zone. CNBC senior markets commentator Mike Santoli here to break down these crucial moments of the trading We'll be right back. new session highs. I did note just a few moments ago that Treasury yields turned lower. They were higher on the day. It might be confusing to some with what we've heard from the Fed today and yesterday, which is that they're not really in the mood to pivot here and they're still worried about high inflation and they still say that they've got a lot of work to do. So what accounts for this rally? Well, whether there is a pivot or not a pivot is months away. Right. So that's something that eventually will become very relevant. If the Fed feels like loosening financial conditions is not what they want. They feel as if the job against inflation is not finished.

However, I think for the market to really remain under a lot of pressure, you probably needed a little more ammo for the recession bear case in the immediate term. So you got the ISM services number. That's good enough. I think it's morphed into a little bit of a chase for the upside. It shows you that professional money was very much skeptical of the initial rally and now feels maybe compelled to add more risk. That's what probably tactically is going on right now. At the same time, you know, we've not gotten a lot from companies that suggest that some kind of a precipitous downturn in the economy is underway. So all those things together, we've migrated back to where we traded on the S&P two months ago, right at the beginning of June. And, you know, Treasury yields are lower since then. Oil prices a lot lower since then.

So that's not that confusing, even if the Fed wants to lean against this move. Yeah, no, you mentioned the ISM services number, which I think is worth highlighting. It was a gain. It was supposed to be a decline. And within that, new orders were up four points. And we also saw prices index there down for the third month to the lowest since biggest monthly decline since May 17th and lowest since February. So that's partially probably what got people in a good mood. I do want to hit the fintech stocks because, boy, they are on fire. A trio, PayPal jumping after beating expectations for its most recent earnings, also announcing a $15 billion buyback program and saying it has joined forces with Elliott Management to help create value. Then there's Robinhood beating the streets estimates and announcing more layoffs. That stock up more than 12 percent. And look at SoFi, up 30 percent

after topping estimates and giving upbeat full year guidance. Joining us is Mizzou host, senior analyst Dan Dolev. He's got a buy rating on all three. Feeling vindicated today, Dan. We've given you a lot of grief over the last few months for for continuing to pound the table on these names when they have been pretty big losers in the bear market but today we saw the fundamentals shine through which one did you like the best and thank you for remembering all the grief they're like my kids i i love them all the same all three i i think that there are different stories here right i think what you've seen with PayPal is really the culmination of the work that we've done, basically showing that their margins are too low.

They're not buying back shares, et cetera. And Elliot is giving them real tough love, right, to put it nicely. So I think that one is going well above 100. I think SoFi just showed everyone, showed the world that it's a much better business than everyone was fearing that it is. And I think that one is, you know, basically prone for success. And I think that, you know, the cost basis for Robinhood was always too high. So and you're looking at their margins getting better and their losses getting less bad. And I think that's a wonderful sign. So I think all three, if we talk a month from now,

are going to be at a higher place than they are right now. But Robinhood, OK, let's just zero in on that one. Clearly, the market likes, you know, has this perverse thing where it likes layoffs because it cut it cut costs and gets the margins better intact. But doesn't it just speak to the fact that this this company is really suffering under the weight of higher interest rates and a bull market that has faded away? Yeah, and look, this is I call this the post covid hangover. Right. Robin Hood was the epitome of covid. Right. People sitting at home and trading. So obviously lapping that first half of 2021 is like the most insurmountable thing. And I'm actually glad that we're beyond this period. So, you know, I think it's just a factor of, you know, this post-COVID kind of, you know, kind of exuberance that we're seeing. And that we've seen they overhire, they have too many people, the revenue is not justifying

this big of a cost basis. Over time, I think it's going to regulate itself. It's a great app. People love it. You know, the younger people that use it love it. It's an amazing product. I think it's going to regulate itself. It's a great app. People love it. You know, the younger people that use it love it. It's an amazing product. I think, you know, the very bare bottom of this stock is like twelve dollars. It's probably, you know, not even touching that right now. You've got a fourteen dollar price target. So, Mike, this is quite a re-rating we're seeing for this group and some of these individual names. Where does it take valuation? Well, first of all, they're both they're all down at least two thirds from their high still. So I think a lot of the action is still consistent with, OK, maybe we got too negative in the short term.

There is a bit of a short covering rally. They do have some movement on margins they can do on the cost side. I would put Robinhood almost to the side because it's not clear to me that franchise is particularly durable right now. PayPal is the obvious clear to me that franchise is particularly durable. Right now PayPal is the obvious exception to me just in terms of the size. Of the franchise the fact that it really is integral it's got a very

reasonable valuation actually it's pretty much below market multiple and probably should have decent growth longer term so to me that's the one that's very interesting as opposed to you know the so fine and Robin a lot has to go right in terms of customer acquisition over the long term for So to me, that's the one that's very interesting, as opposed to, you know, the SoFi and Robin, a lot has to go right in terms of customer acquisition over the long term for

them to carve out a place. Is that Dan? Do you think PayPal has the most upside of the three? I think probably PayPal is the safest bet out there is because it's in good hands right now with Elliott Management, you know, steering the company in the right direction. Remember, there's a lot of optionality potentially on Elliott Management's, you know, other big holding, which is Pinterest. Remember, Bill Reddy was the CEO of PayPal. So I think there's a lot of things going on that we might not be aware of right now. And I think that there's a lot of upside from here. Dan Dolev, thank you for joining us. Three buys. Under Armour shares are higher today. The company did match estimates for the quarter, but cut its full-year profit guidance because it says it expects a more promotional environment and, of course, foreign exchange.

The dollar is crazy strong, the head of Under Armour IR told me this morning. I spoke with him and the interim CEO, Colin Brown, who was COO under Patrick Frisk, who surprisingly stepped down from his CEO position in June. Brown was somewhat upbeat on the U.S. consumer, saying, we are seeing some retail slowdown, but I think the consumer is still relatively healthy. Employment is strong. We expect a strong back to school. When it comes to the more promotional outlook that the company has given, he cited economic conditions changing, higher inventories across retail, and now easing of supply chain issues, which opens up more merchandise. The bottom line for Under Armour, the quarter was better than feared, just like a lot of earnings we've gotten this season. And a lot of the bad news has been

in the stock, but Under Armour still has a lot to prove on the growth side. And now it has to do that in a more challenging macroeconomic environment. And there are still leadership questions here. Kevin Plank, the founder and chair of the company, opened the earnings call today saying they're focused on the search for a new CEO. A decision will come by year end. Colin Brown told me that he is a candidate. Mike, the question is,

what's the read-through for a Lululemon and a Nike? Because they're all dealing with these problems. Weakness in China because of the lockdowns, foreign exchange. And Under Armour has some more brand issues to work out. I was just going to say, you know, much smaller. We're talking about a $4 billion company right now. The stock trading not far above the lows from the COVID crash in 2020 at this point.

So obviously arguably washed out, but doesn't necessarily have as many levers to pull or enough maybe brand equity to lean back on. So it may be more kind of, you know, has to go along with the macro wins and inventory work downs and things like that. So it's tough to find the next catalyst unless it is going to be a management change. Right, which we are expecting. By the way, Adidas reports tomorrow morning. We'll hear from the CEO in this show. We are near session highs and technology is soaring in particular today. With us now is city U.S. equity strategist Scott Croner. So if you thought that July was a bear market rally, it looks like it's extending now into August, Scott. Do you continue to buy, especially in the tech space? Well, I think we to be you know aware of what the setup has been right so if you think about the s p and the nasdaq peak earlier in the year to those mid-june

june troughs heck the s p was down let's call it 24 the nasdaq was down somewhere closer to 33 percent and within that you had sub-industry groups such as software down closer to 40 so you know the combination of rising rate headwind combined with the expected concern regarding earnings related to recession fears was on display front and center for the NASDAQ. So no surprise as we've gone through the Q2 reporting period, we've seen earnings, let's call it more resilient is the phrase that we've been using as a way of describing the reporting period, you're necessarily getting sort of a reflex motion higher, particularly as rates have now shown a little bit more accommodative path. So what I would say here in terms of where we go to

from here, we've recognized the underpositioning and the deleveraging that's taken hold within the broader market over the past couple of months. We also are approaching our S&P year-end target of 4,200. So from here, I think we want to be a little bit more attentive to stock selection and expected dispersion around that, but would also argue that in a soft landing scenario, the S&P and the broader market can still work higher from here. Is that the key to this market, whether we can pull off a soft landing? And if so, maybe we've seen the lows. I think I mean, we think in terms of a mild recession scenario, we've been using thirty six fifty as our line in the sand on that. We nearly touched that in mid-June when the market bottom somewhere around thirty six seventy. So if that's pricing in recession, anything less than recession is a positive. And that's

where you come back to the Q2 earnings picture and the rate background. Now, as we look forward, we still think there are lag effects between economic indicators and ultimately earnings read-throughs. So we're still of the view that the first half of 23 is going to be more challenging from an earnings perspective. So hard to say we're out of the woods, but definitely are much more comfortable that what we're getting from the earnings reporting period is a heightened degree of resilience and confidence that we can weather even a mild recession more bullishly than perhaps many had feared going into this. But just to take it back to technology, because that is what has been in the driver's seat for this whole rebound. Obviously, it was hit harder during the downturn.

Does this past earnings season and the fact that we're still below 3% on the 10-year again, does it change your view on growth stocks? Well, I think it has to. We've been taking steps down this path. We had favored value going into the year. Two months ago in early May, we had kind of gone style agnostic, beginning to set up for a bit more of a growth rotation. Obviously, we're a little bit behind the curve on this now. We'd upgraded software from an underweight to a market weight to reflect this a month or so ago. And I still think that that's an important toggle. Keep in mind the tech sector, the growth component of the market in general, the D rating that it suffered as rates were rising in the first half of the year was somewhere around six multiple turns. Let's call it a 30 percent D rating. So you were pricing in a lot.

And the snapback opportunity, I think, is still pretty significant. Again, I just want to be a little bit wary that we're not completely out of the woods in terms of your longer-term economic read-throughs. But I think what we're seeing is a better-than-expected earnings response to the inputs that we're dealing with thus far regarding inflation and interest rates. Scott Cronert, thanks for sharing your view from Citigroup. We appreciate it. We've got just about two minutes to go here in the trading session. Mike, I want to ask you about the internals and just some of these moves. The earnings winners today are being handsomely rewarded.

I know PayPal looked cheap perhaps to some going in. It's up big. Moderna up 17 percent. Huge moves. Absolutely. Obviously, there is a tailwind, a bit of an upside chase, as I did mention, you know, a day when Apple is up 3.7 percent, right, and it's back above 7 percent of the S&P 500. A lot of drafting behind moves like that. The breadth is good. It's about two to one

advancing to declining, better on the Nasdaq. Wanted to take a look on a two-year basis of the IPO ETF because so many stocks look like this. many of the hyper growth stocks we talked about the fintechs they basically look like a huge decline off the highs and then just this little mini uptrend trying to put in higher lows it can go up another 30% from here and still just be bumping up against this downtrend of the 200 day average so that's I think a lot of the thinking right now is these upside air pockets, if in fact risk on is back. And we see the volatility index really coming in hard, down two points, around 21, bottom end of the range. Makes all kinds of sense. As I said, the market's where it was two months ago, and a lot of the macro variables have become a little bit less stressful since then, Sarah. As we head into the close, Mike, the Dow is up 417 points, so just off the highs, which we saw moments ago of 500 points on the Dow. Biggest contributors to the Dow gains right now, Microsoft, Apple, Salesforce, Home Depot. Most Dow stocks are higher. You've got a few exceptions. Energy is weaker today. Fruit oil prices are down. Chevron, Walmart and Caterpillar

are the drags on the Dow. S&P 500 also going strong. It's up 1.6 percent, which takes it higher for the week. If we can hold the gains into Thursday, Friday, that means we'll be a third week in a row of gains. Every sector, as I mentioned, higher in technology, discretionary for consumer names and communication services are leading us. And the Nasdaq, the biggest winner of all, up 2.6%. Big Tech Tech having a healthy rally. Moderna's in there as well. So is PayPal. So some big earnings winners. Meta having a nice close as well at 5.4%.

That's it for me. I'm closing bell. See you tomorrow into overtime with Scott.