Closing Bell - Closing Bell: Stocks suffer worst day since 2020 as hot inflation cools market 9/13/22

Episode Date: September 13, 2022

A surprisingly hot inflation print sent the major averages plummeting on Tuesday, with the Dow, S&P 500 and Nasdaq posting their worst session since the early days of the pandemic. David Zervos from Jefferies, Anastasia Amoroso from iCapital, and Richard Bernstein from Richard Bernstein Advisors discuss the implications for the Fed’s rate hike timeline. Dan Niles breaks down the trade in hard-hit tech, and explains why he thinks inflation will remain higher for longer than most people think. And the CEO of Wingstop talks about rising food costs, which jumped by the most since 1979.

Stocks are plummeting here as that hot inflation number sends a chill across Wall Street. The Dow is down almost 1,100 points right now. The most important hour of trading begins now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Let's show you where we stand in the market. A more than 1,000-point sell-off in the Dow is just about the worst level of the day. 30 out of 30 Dow stocks right now are weaker. Biggest drags, UnitedHealthcare, Goldman Sachs, and Home Depot. Those three together dragging about 300 points alone. But you've got everybody weaker. Verizon's holding up the best, along with Merck and Walgreens, but all still lower. S&P 500 down 3.6%. We are looking at our worst day in a while. For the Nasdaq, down 4.5%, worst day since June for

the Nasdaq. Tech is the hardest hit right now, as we've been seeing in this bear market when interest rates spike. The two-year yield is at the highest level since 2007. And those interest rate sensitive tech stocks are getting slammed. Apple, Microsoft, Amazon, Meta. I'll give you a live look at the worst performing S&P 500 sectors right now. And again, every sector is in the red. But at the very bottom of the list, as you can see, communication services, technology, discretionary, financials, and real estate. That yield curve inverting even further, where the two-year yield spikes over the 10-year yield, a signal of recession. We're all over this market sell-off for you. Throughout the show, we've got a great lineup of guests, including David Zervos from Jefferies, Anastasia Amoroso from iCapital, Dan Niles on the tech rec, and Carl Isles, head of global research with the

Glass Half Full view on inflation. We'll start, though, as always, with the market dashboard, our senior markets commentator, Mike Santoli. It is ugly. It's hard to five S&P 500 winners right now. That's it. Yes, this is a comprehensive washout. I mean, the market kind of bet it all on black. The wheels spun. It came up red. I mean, that's the way to view the last week. We had a 5% rally or so, 5% or 6% in the S&P 500 over five days. We've given back about two-thirds of that. That's worth keeping in mind that a lot of what we've lost today

was basically just added back onto the market. But it does create this question as to whether thirty nine hundred this level that people were very glad held a few days ago and in fact also represented those maylows, whether that has to be revisited, whether it's going to hold on a second visit and all the rest of it. So clearly we still have this little short term downtrend to go along with it, along with this right here. So we're pinched between a lot of different factors right here and very volatile. But this same range I would say. Sarah you mentioned the two year versus 10 year treasury yield curve. This is the three month versus 10 year yield

curve. This is the one that historically is a little bit more precise in terms of talking about recession probabilities. The New York Fed uses this in its recession model. Now, when this one goes inverted, as it happened here in 2000, in 2006, in 2019, it has led the onset of recession by between 6 and 18 months. Obviously, that's a lot of lead time there. We have not yet inverted right now. So zero is right about there. But the three-month yield shot higher, went from 3% to 3.14%. In fact, at the highs of the morning, it was 3.2%.

Think about that. This is a Treasury bill, three months maturity, and that's a big move based on just putting in another Fed 25 basis point rate hike on top of what we already thought we were getting as of the CPI numbers this morning. Is this the kind of report, Mike, that you think is a game changer for the markets? In other words, the view, it's not just black and red. The view was that inflation would come down quickly. That was pervasive across the bond market, swaps, expectations. And I think that core reading that saw a much higher number

double what was expected shows that this could be more entrenched. It absolutely represents a reason and a good reason to rethink whether, in fact, gravity is going to really exert itself on overall inflation measures. At minimum, it defers that. You know, look, I guarantee you in a month's time, you're going to be saying the leading indicators of inflation are still pointing lower. You're still talking about used car prices.

You're still talking about rents, by the way. Listed rents are showing weakness in the latest, you know, let's say a couple of months, whereas the data in the CPI for rents is holding up better. So all these factors, I think, are still there. So you're saying it's backward looking? I'm saying it's backward looking, but also that it's just taken longer. And so the market's going to be impatient. It's going to try to anticipate the turn. And it's been wrong in doing so, so far. It's going to be right at some point. We don't know when and at what level the market will be. Right. And how weak the economy will have to get. Right. Exactly. Good question. Mike Santoli, thank you. Stay close, of course, as we monitor this sell off for more on the CPI report and what it means for the Fed

and the market. Let's bring in David Zervos from Jeffries and iCapitals. Anastasia Amoroso, it's good to see both of you, David, how surprising of a number was this to you? I don't think anything surprises me with inflation data anymore, Sarah. It's hard to predict. I think the Fed hasn't got it right. The street really hasn't got it right. A few people were calling for big inflation last year and did get it right. But really, I think we're all flying a little bit blind. The one thing we do know, Sarah, and this is the important thing, is the Fed is really interested in kiboshing inflation. And they're going to keep going and they're not going to declare victory early. And I think the market keeps getting ahead of itself and thinking that

this Fed pivot is somehow just around the corner and they're telling you it's not there. But the market just wants to believe it and gets itself all excited. And then a little disappointment comes in and you get a day like today. Well, I think the market wants to believe that inflation has peaked and is coming down and the economy has not weakened so substantially that maybe there's some hope of a soft landing. Does that go out the window today, David? No, I think it's more than that, because I think the Fed is trying to tell you that even if we get some good data, they're not going to declare victory early. They're very concerned about getting it down and keeping it down. And they're very nervous that this is something that could infect the anchoring of long run inflation expectations.

And I just again, I think the market's getting too excited too early. That's that's been a theme for us. The upsides are very limited. The downsides are risky, but I'm still not in the kind of cataclysmic downside camp because I just think nominal GDP growth is going to keep stocks from really taking a big swing lower. But, you know, we're going to get these violent upswings and downswings as people, you know, shift their sentiment too quickly for a Fed that's not really shifting anytime soon. So, Anastasia, what's it going to mean for stocks? Because we were in this period where it was hard to be too bullish and it was hard to be too bearish because the inflation

indications looked like they were coming down. And even though the Fed was talking tough, now we get this new number hotter than expected. What do you do? Yes, Sarah, I think we have been stuck in this broad trading range and I think that's not likely to break anytime soon. My interpretation of this this report, the CPI report, it is a stunner and it's going to be quite problematic for the Fed. And the reason I say that is, first of all, they're going to look at the month over month figures and they're accelerating not only the headline, but also on the core. That is a huge problem for the Fed.

And then the second thing, if you annualize these monthly figures and you look at the CPI basket, 70 percent of it is growing or increasing in price at 4 percent plus. So the Fed is going to take a look at this. And I think it is going to be a bit of a narrative shift, narrative change, because today they thought they were doing enough to fight off inflation and to crack down on it and still have this possibility of a soft landing. But I think what they're ultimately going to come out and say, looking at the CPI number, is that we probably can't have it both. We can't have it both ways. We can't have a soft landing and crack down on inflation. So they might need to go further in terms of rate increases and they might need to stomach not a soft landing, but something else. So that, of course, is problematic for the stocks.

And I guess my advice to investors is we're in this time period of uncertainty, unprecedented fight against inflation. The Fed is very keen to fight it off. And what do we do? We don't fight the Fed. So I wouldn't expect much from equities in terms of breaking out of this near-term range. And by the way, Sarah, cash, by the end of the year, we could be looking at 4% yields. So relatively speaking, investors are going to be making tradeoffs between cash and equities, and cash and bonds are increasingly going to look more attractive. Right. We're just not there yet, you don't think. By the way, down 4.6% on the Nasdaq, really plunging here in this final hour. Worst day since mid-June. David, today I had a chance to interview Bruce Flatt. He's the CEO of Brookfield Asset Management, huge conglomerate, 750 billion assets under man. They have assets in solar and wind and energy and retail and real estate. And here's what he said about that hotter inflation number that had just come out. This was at the SALT conference when I asked him about that

and whether the economy would be okay. They really know how to crush inflation if they want to do it. There's a balance between crushing inflation and not having a recession and causing problems in the labor markets. And that's really what the delicate balance is. The good news is everybody in the central banks in the world know exactly how to deal with this situation. Are you sure?

Yeah, yeah, yes, yes, for sure. So the positive spin is that they know how to deal with this. It's not like deflation or it's not like what he said, David, the pandemic, which was there was no playbook for this. This you just have to keep going and the market should be able to see that. Is there comfort in that? I think there is comfort in that. And I think we should be comforted that the central bankers at the Fed, at least, and now it's seemingly at the ECB, are really coming around and saying what they're supposed to say as central bankers at the Fed, at least, and now it's seemingly at the ECB, are really coming

around and saying what they're supposed to say as central bankers. There is one twist, and it is QT and how they manage the balance sheet, Sarah, and that'll be an additional confusion point for the market as we move through this more delicate period. But I think we'll get through it, and I think they know what to do. If solving an inflation problem, he's exactly right. This is not the rocket science that Ben Bernanke had to come up with in the end of 2008, beginning of 2009, and go into a laboratory and design the QE programs and the CPFF and the AMLF and the TAF and the TAF and the PDCF and every other FF under the sun. It was crazy what we had to do there. We don't have to design any funding facilities for this. We know exactly what to do. Sell assets, let them run off and raise rates.

It ain't that hard. So what is the playbook then, Anastasia, for investors? You said cash is interesting. You go back to defensive groups like staples and utilities and health care. If a recession looks increasingly likely and a harder one at that? I think you can, Sarah, but I also think you need to think outside of equities as well. I mean, there's definitely parts of fixed income that is creating is attractive, but I would actually point to multifamily residential real estate as one of the opportunities. And I might disagree just slightly in terms of, you know, the Fed knowing exactly what to do. I mean, sure, they can raise rates, but of course, it's problematic for the equity markets. But the point is, even if they raise rates, they can fix shortages. And the reason

why shelter inflation continues to run so hot is because we've underbuilt homes, we've underbuilt apartment units. And if you look at the vacancy rate in the multifamily residential real estate, it's something like three or four percent, depending on the market. So that is really rock bottom vacancy rates. So what do you think is going to happen? They might slow demand somewhat, but they can't fix the supply issue. So against that backdrop, Sarah, I would still expect to see market rent growth for some of the apartments. And even if we eventually do go into a recessionary scenario, guess what? Apartment rents are sticky. That's the last thing that individuals don't pay. So I think

the multifamily residential real estate could be both an offensive and a defensive play in this environment. Well, they can keep crushing demand so that there is no more supply issue, that there's not enough demand for it, I guess, is what they know how to do. Anastasia, I see you nodding, David. Yeah, we've seen that before. Thank you both very much. By the way, U.S. rental inflation increasing 0.7 percent in August. That was the biggest increase since 1991. Let's get a check now on technology as the Nasdaq sees the sharpest declines of the major averages. Here is a look at the Nasdaq 100 heat map right now. Tells you everything you need to know. There's not a single winner in that group. The biggest drags, Apple, Microsoft, Amazon, Meta, NVIDIA, Tesla, Alphabet,

sharp declines across the board. That is why the Nasdaq is down so much. Remember, the Nasdaq has been the most sensitive part of the stock market to those rising interest rates. And that's the story today. The two-year yield at 3.76, highest since 2007 on the idea the Fed is going to have to go even farther in this inflation fight as inflation proves to be longer lasting and more difficult to contain than expected. Our reporters are standing by with a closer look at some of the subgroups of the tech sector in particular. Steve Kovach is covering the mega caps, Julia Boorstin watching the social names, and Frank Holland tracking the cloud stock. Steve, start us off. Yeah, Sarah, just like you said, mega cap tech is having a rough day.

Apple is off over 5%, erasing yesterday's gains. And by the way, yesterday was up over 3% with analysts chattering this week about early iPhone 14 sales data showing more people choosing the expensive Pro models over the regular 14. Over to Microsoft, down 4.5%. Amazon, 6% down. Alphabet, around 5% down. And Julia's going to tell you about another mega cap here pretty soon that's faring even worse, Sarah. Yeah, we'll get right to that, Steve. Thank you. Julia Borson on the social stocks, not faring much better. Yeah. in fact the social media names most of them are falling even more than the nasdaq has suffered today meta shares they are off the most down nearly nine percent snap shares are down nearly seven percent pinterest faring a bit better uh

those shares down about four percent but there is one outlier in the social space here. It is Twitter. That stock is up about 1%. This after whistleblower Peter Zatko didn't say anything about bots, which of course are the crux of Elon Musk's argument that he shouldn't have to follow through on his deal to buy Twitter. And Twitter shareholders just two hours ago voted to approve that deal very much as expected. Back over to you. Julia, thank you. WisdomTree Cloud ETF on pace for its worst day here in three months. Frank Holland with a closer look at some of the movers in that space. Frank? Well, Sarah, Asana might really be the poster child of what we're seeing in cloud stocks today. Shares down 10% on rate worries, but up more than 30% month to date.

Strong earnings earlier this month at Catalyst. Also, those thoughts that we may have seen the bottom when it came to cloud stocks getting a little bit shaken today. The hotter than expected inflation, what it can mean for rates, putting pressure on many high growth names. Datadog down 7% now off of its, it was actually even getting lower than it was earlier. MongoDB down 9%. You're seeing stocks like Cloudflare down almost 10%. What we're seeing today is also breaking the trend of cloud and rates rising at the same time that had many investors believing we were seeing the bottom when it came to cloud stocks. Wedbush says this could be a buy-the-dip moment.

Frank Holland, Frank, thank you. Well, the overall inflation number may have eased a bit, but like last month, grocery inflation is getting worse. Just wanted to zero in here on food prices. In August, U.S. food prices at home, which is grocery, were up 13.5% from last year. And that is an acceleration from July, which was 13.1. It's also the 15th consecutive monthly acceleration. Some of the increases are staggering here.

Fruits and vegetables up 9.4%. Poultry up almost 6 percent. Dairy products really strong on the pricing. Ice cream and milk up 16 percent. Cereal prices, brutal, rose 17.4 percent from last year. And fats and oils were up 21.5 percent. It shouldn't be too shocking for investors because we've heard from all the major food manufacturers, the companies during earnings and interviews here on this show, that they are still raising prices. But they haven't been as aggressive about the price hikes as they were talking about a few months ago. And perhaps that's why some of these price increases are moderating a bit.

Don't get me wrong, they're still expensive, but we are seeing some of the jumps in prices coming down in spots like soup, baby formula, fruit, and meat. And the overall monthly increase in food at home from July to August was 0.7%, which was actually not as big of a jump as we saw in July. So perhaps some glimmers of hope that we may be at or near the peak on grocery inflation. Wholesale food inflation is out tomorrow. That'll be a clue because that's earlier in the whole production process. But so far, it's still painful. I don't have to tell you that if you've been in the grocery store lately. For more on the impact of food inflation, let's bring in Wingstop CEO Michael Skipworth. Michael, we thought of you when it came to food

inflation because last quarter you were on talking about deflation in chicken wings. Is it just bone-in chicken wings where this is happening? Sarah, it is. We are seeing meaningful deflation in our business. Bone-in chicken wings represent 65% of our cost of goods sold. And we're seeing a benefit in our P&L year over year of over 1,000 basis points.

So truly a unique position for Wingstop. What about some of your other costs? What are you seeing? Obviously more than 60% chicken wings are the greatest, but there are other ingredients. We are seeing inflation across other parts of our commodity basket, but those are being muted by the meaningful deflation we're seeing in wings.

In addition to that, we're in a really unique spot because we have a really strong outlook for the back half of the year from a sales growth perspective. We're pulling a lot of growth levers, one of those being a recent launch of a chicken sandwich, which, Sarah, sold out in less than one week. In six days, we sold over a million chicken sandwiches. Well, because of the inflationary environment and with the strain that the consumer is under, Michael, we've been hearing increasing evidence that the consumer is staying at home and cooking at home more. I heard that from Rodney McMullin, the Kroger CEO, just a few days ago. Is that something you're seeing in

your restaurants? We haven't seen it show up in our business. Again, I think there's two elements here. One is Wingstop's an indulgent occasion. It's a once a month, three times a quarter frequency with our guests. And so if they're pulling back from restaurant visits, it's more in those high frequency, fast food, four to five times a week occasions. But then they save up and want to indulge and treat themselves on that Wingstop occasion. And so we've been able to retain those visits and retain our top line momentum. But then, as I mentioned before, adding things like expanding our delivery channel to add Uber Eats as a provider, as well as that chicken sandwich are allowing us to continue to bring new guests into our business

and continue to strengthen the unit economics. Well, the restaurant S&P stocks are down 2% today, Michael, on concerns about the economy and that spending with these inflationary numbers. We appreciate the color from your business at Wingstop. Michael Skipworth, let's get a check on where we are right now amid this sell-off. As we're in the final hour, 40 minutes left of trading. The Dow is still down more than 1,100 points. The S&P 500 is down almost 4 percent. This is one of the worst days we've seen of the year. Every sector lower right now. Look at the Nasdaq. It's down 4 point, almost 7 percent. Worst day since mid-June. Joining us

now is Richard Bernstein, CEO and CIO of Richard Bernstein Advisors, who's been bearish this year. Richard, I don't know if you had changed your tune at all on signs that inflation was easing, but today was a real wake up call for that moment. How do you think the market and the Fed is going to process this number? So, Sarah, you know, for more than a year now, we've been arguing that there were going to be three phases of inflation. The first was going to be that people would think it was temporary. And we heard that from the Fed. They used the word transitory. Then the second phase is going to be that people would say it's worse than we ever thought. And the third phase would be it's never going away. And I think today is the first time we're starting to hear people talk about phase three.

Not using those words, but that's kind of what's in the backdrop here is, gee, this is lasting longer than we ever thought. It's not going away. The Fed's going to be tining for longer than we ever thought. That's kind of been our story, is that the cycle was not going to be short-lived, that you don't fight inflation in a matter of months. So Nomura, that economics team tries to go out of consensus first. They're already talking about 100 basis point hike for next week. But odds in the market have moved up to 20 percent or so that that happens. You think the Fed should do that? Would do that?

So, Sarah, we've argued for a long time the Fed should be more aggressive than they've been. I think that's still the story. But here's the way to think about it. If you look at the real Fed funds rate, Fed funds minus the inflation rate, it is still, for all practical purposes, historically negative. The Fed has never been this far behind inflation. That argues that we're more at the beginning of the tightening cycle than the end of the tightening cycle. And so whether they go 50 or 75 or 100 or 125, I think that's a little bit of forest and trees here. The story, I think, is going to be the Fed's going to be tightening for the foreseeable future. And let's just accept that, that inflation doesn't end very quickly.

So that's going to be painful for the economy and the stock market, isn't it, Rich? What are you doing? Are you in cash? Well, I mean, we do have the highest cash allocation we've had in quite some time. But I think the place to look here is what works during economic slowdowns and during profit slowdowns. And the answer is boring stuff, things we have to have. Consumer staples, healthcare, utilities, sexy, you know, like to have type things

don't work in this kind of environment. I think that's what people are coming to grips with is that boring becomes very, very attractive in these types of environment. So we're overweight, you know, staples, healthcare, utilities, very, very boring stuff. And valuation doesn't matter. Utilities are up 6% already this year. They're near the highs. A lot of people think they're expensive.

Yeah, well, I think, Sarah, defensives always look expensive at this point in the cycle. Then they get really expensive and people really love them. They become the core of a portfolio right as the cycle begins to turn. And that's when the valuation starts to bite. Is when the cycle turns, when earnings growth starts to pick up and a boring, you know, 8 percent earnings growth doesn't work anymore because cyclical earnings are starting to grow at 40, 50, 60 percent, things like that. But I think I think the notion here is that it's what you have to have. It's not what you'd like to have. it's what you have to have. It's not what you'd like to have.

It's what you have to have. Why are you so convinced that inflation is more persistent? I know the number today proves your point. But why are you, some people will look at it and say, actually, the monthly change was better than expected. And if the Fed can get a hold of rental prices, a few core categories by slowing the economy, actually, you're seeing some moderation in those price increases. Yeah, I don't disagree with the notion that inflation is going to slow to some extent. Of course it will. I mean, we're not going to stay at 8% or 9% inflation forever. But will it get low enough so that the fed will stop tightening the fed will feel comfortable

stop tightening i don't think that's going to happen until we see a recession now why is that so important because the labor market is still historically tight you know nobody pointed out that in last week's employer report the data actually showed the labor market got marginally tighter on top of everything so what the Fed's going to have to do is kill the demand for labor. Clearly, that's not happening yet. So I think you've got a number of issues in the backdrop here that are just feeding on each other. Look, another way to think about this, Sarah, is that the supply chain disruptions, which we all know and love and everybody's saying is easing. What nobody's pointed out is that the supply chain disruptions lasted longer than 73, 74 and 79 oil embargoes combined.

This was a major event in U.S. economic history that everybody wanted to brush off as just we could solve supply chains. Nothing would ever happen. But yet they're forgetting about the feed on effects of the overall economy. And that's what we're dealing with now. No, it broadened out completely. Richard Bernstein, thank you for joining us on this important day. Appreciate it. With the Dow down 1,100 points, the Nasdaq is leading the slide today. It's down more than 4 percent right now. Just brutal. And actually, the sell-off is picking up steam throughout this hour of trade. Joining us now is Satori Fund Manager Dan Niles. And your advice, Dan, this year has been don't fight the Fed, which on a day like today rings true. But you would

have missed a pretty nice midsummer's rally and some nice rally opportunities as well on the idea that inflation is coming down. How do you read what's happening today? Well, I mean, as you brought up, Sarah, don't fight the Fed and don't fight the fundamentals, which is the second part of that. And you're right. You've had some great rallies. If you had invested during the Great Depression, you would have made eight different rallies that averaged 24 percent on the way to losing 80% of your money. So if you're nimble enough to trade around those rallies, then yes, you can make great returns. This year alone, we've had five rallies in the S&P 500 that have averaged, I believe, about 9% each. So if you caught all of those perfectly, you'd be up 45%,

but you're unfortunately down 16%. So I think for the retail investor that can't daily trade their portfolio, you're better off losing, as we've said consistently this entire year, 5% to 7% to inflation than potentially 30% to 50 percent to a market decline, which I think will continue into next year. So that's how I think about it. And if you look at my Twitter feed, obviously we've talked before about when we think rallies will begin, which is easier to predict based on technical analysis. Tops are a lot harder to pick out. But, you know, the simple thing to think about is until the Fed is done raising rates, until we are at inside a honest to God recession where you've got unemployment spiking, all you're trying to do is catch bear market rallies and then you're going to lose even more money on your way down. So what should you do? You're what, 25 percent in cash right now, Dan? What's the rest? Yeah, well, we have a lot of shorts, as we've said all year.

You know, for us, it's typically been ramp up the shorts when you've got a nice little rally, if you think the fundamentals are still getting worse. And then, you know, as you think the market's hitting bottom and you've gotten to an oversold condition, then take those shorts off and then put them back on again. And so that's kind of what we're doing. So our longs are in defensive areas such as Walmart. You look at Walmart in 08 with the S&P down 38 percent. Walmart was up, I think, about 18 percent or so. We think Amazon also might be able to be somewhat of a defensive long in the sense that we think as people get more price sensitive, they're likely to look for bargains on places like Amazon. So that's another place. Although Amazon's never really,

really acted defensively as a stock, has it? Well, exactly, because the multiple has been so astronomically high. Yeah, exactly. So but you got to remember, no long in our portfolio is by itself. So we've got tons of shorts in retail matched up against Amazon. And in fact, for Amazon in particular, we've got ad names in the internet where we think advertising, if you look at 08, 09, advertising revenues went down over 20%. The internet, though, was only about 12% of total advertising dollars in 08-09. Now it's 66% or two-thirds of the market. So big ad-supported internet companies are not going to be able to avoid a recession. They're going to see their businesses get hit pretty hard. And so we've got that matched up against an Amazon where we think shoppers are going to look for bargains, just like

they're going to look at Walmart. We like Walmart better, obviously, because in 08, the stock was up a fair bit. So that's a good area. We have some stocks in healthcare where things have come down, another defensive area. And we own a lot of commodities. So oil, copper, coal, solar, those are areas that we're in. But just to be clear, those are matched up against shorts. We think all of those names, though, should be able to outperform as the market goes down another 20, 25 percent to get to its ultimate lows sometime mid next year. As we speak, we're looking at new lows for the day. The S&P is down 4 percent right now. The Nasdaq comp down 4.86 percent. And the Dow Jones industrial average is down a stunning 1180 points as we speak. Again, it's very broad. It's hard to spot any winners. You've got, I think, five gainers in the S&P. One is Twitter and the rest are

fertilizer stocks. So, Dan, when you talk about some of these these tech names, how do you know when they've gotten too cheap and when there are real signs that perhaps inflation is turning? Well, remember, there's two parts to a stock price. There's earnings and there's the multiple to those earnings. So if you look at the S&P 500, what are we talking about today? We're talking about inflation, which I have said all year is going to remain higher than what people think, even though it's likely to have peaked and come down, which is what you've seen, right? Headline inflation has come down. Yay.

But it's still higher than what people think. And if you look at over 70 years of history, when the CPI is above 5 percent, the trailing S&P multiple is 12 times. Today, it's 19 times. When it's if you want to be super optimistic and say, we're going to get it down to 3%, then the trailing PE multiple is 15 times. And again, we're at 19 times today. The second piece of this is earnings. And the S&P 500 earnings for 2023 is around 250 is where it peaked out. You've seen the first reduction in those numbers in two years. And I think you're going to see that get worse. You've already seen companies like Intel soft pre-announce after

giving guidance six weeks ago. You've seen Corning soft pre-announce. So you've already got numbers getting revised lower. And now those revisions are moving to the higher multiple sectors of the market, where a lot of the enterprise software names, such as a ServiceNow or a Salesforce, you're starting to see that weakness in fundamentals spread from consumer earlier in the year to now enterprise is starting to feel that slowdown as well. And that's where a lot of high multiple stocks sit in the software space. So that's one area where we've got a lot of shorts, a lot of the cloud-oriented software names in particular. That's where we're kind of focused

on. But a lot of these names, particularly the lower quality names, have already been beaten up so hard. And there's a lot of bad news in these stocks. I'm just looking. Roku's down still 80 percent from the highs. Robinhood down 80 percent from the highs. So there's a lot of this priced in there, is there not? Or you just think that it hasn't been? That's just a multiple correction. And now we have to factor in a recession. Well, think about it this way, right? A stock's down 80 percent from its highs. How much more downside is there? It's 100 percent. It's not 20. Right. And remember, in 08-09, you had 5,000 internet companies, public and private, go to zero. So, you know, you're not even in a recession yet.

That's going to happen next year because the thing that people keep forgetting is monetary policy works with the lab. So the Fed is going to crank rates by at least 75 basis points in a week. They're going to crank it by at least another 75 basis points over the course of the next three to four months beyond that. And so that's going to take some time to work through the economy, to work through earnings, to work through housing prices. And ultimately, the thing that people aren't focused on is to work through wages, because you've got about 1.9 times as many job openings as you have people unemployed. The prior record is about 1.25 over the last 20 years of data, and you're at 50 years of lows in unemployment.

So it's going to take some time to drive up unemployment enough to get wages under control, and services is 70 percent of the economy. And so I find it pretty funny when you have people talking about gasoline prices, et cetera, or supply chains. Those each are about 10% of corporate costs. Wages are 66%. That's what people need to be focused on. And rents are 40% of CPI, 30 to 40% of CPI or core CPI, depending on how you look at it, who cares about used car prices? That's like 3% because most people spend a ton of money on their rents. Well, people saw it as a leading indicator because it was the first.

Well, people saw it as a leading indicator and a symbol of what happened during COVID because that was one of the first areas where we saw big inflation in used car prices. But I get it. Look, shelter is the third of the CPI component. So the gas prices help, and they might help politically, and they might help people's moods. But agree, when you're seeing this kind of widespread rising costs, it's difficult to figure out where the bottom is. Is that the point? Yeah, the other thing is, remember, there's a lag. So home prices typically lead rents by about 15 months. Home prices peaked, I want to say, in March at up 21

percent year over year. You go back to 08, for example, home prices peaked and rents peaked about two years after the fact. So you've got a lag here that people, I mean, everybody's gotten used to the last 13 years that every time the market goes down because inflation is low, the Fed is able to say, oh, we're just kidding about raising rates. We're going to put more money into the markets. The governments can stimulate across the globe because there's no inflation. That's not the case today. Today, you're in an environment where you have high inflation. So if growth slows, you've got to go ahead and crank up rates to slow the economy even further. And you've got 15 months from the peak in home prices to the peak in rents. That's 30 to 40 percent of different inflation

measures. All of that combined with wages, that's what you need to be focused on and not gasoline prices week to week or whatever you want. That's what the Fed is focused on. By the way, the worst part of the market, household appliances, home furnishings. So we know that the Fed is targeting, obviously, the housing market. Dan Niles, thank you for joining us today. By the way, we are at a new session lows. The Dow is down more than 1,200 points. The Nasdaq composite is that look,

almost thirteen hundred points. It just keeps getting worse. Nasdaq comp. It's just it's a puke, Mike. We're down five and a quarter percent. Mike Santoli here with more on the sell off. Bitcoin down 10 percent. The dollar is surging one point four percent. Yes. Well, I guess the dollar is a safe spot. Not many other places right now. Absolutely. And the last couple of hours, too, as we've kind of made some downside momentum, it's, I would say, uncomfortably orderly in the sense that it's going at this consistent angle down and to the right.

And so that's what we have to see where we are as we close. But this push-pull between yields and stocks, particularly big growth stocks, again in focus, big growth to the downside leadership today as 10-year Treasury yield threatens the previous highs from the prior part of the year. Now, yes, there's an inverse relationship, right, when you had NASDAQ going down and yields going up at the beginning of the year and so on. However, it's just not as simple as every tick in yields makes an equivalent difference for growth stocks. So here we go.

Here's where yields are. This is the last time we were there. Where was the NASDAq 100 at that point? Well, it was a lot lower. So we got some, you know, upside in stocks relative to when yields were last right here. What does it mean? It doesn't mean there's no relationship. It means it's just not as simple. So is that a selling opportunity for the Nasdaq, considering that it's now higher than when yields were? It's not clear to me. I think the bigger question is once the Nasdaq 100 is down 30 percent high to low, it's now higher than when yields were, it's not clear to me. I think the bigger question is, once the NASDAQ 100 is down 30% high to low, it's still down 25% from a high,

each tick in yields is not really the story. It's much more about, is nominal growth gonna be high? These growth companies are not gonna necessarily be keeping pace in terms of nominal GDP growth. It's just a different type of economy, not one that flatters them and their premium valuation. So the valuation pressure hits them the hardest. Now, Dan was just talking about the interplay between the home, the single family home market and rents, house prices and rents.

Take a look at two sectors of the market that track these. So XHB, home builders and related stocks like that. Downside leaders done 30% a year to date. Now, this is mostly residential real estate investment trust, a good play on apartment rents and things like that. Now, down for sure, they're leveraged. They're obviously financials like everything else, but a big performance gap right there. So it shows you that the market has kind of internalized this idea that homebuilders are the most sensitive to what's going on in rates and the risk of a downturn on the consumer side, whereas rents are stickier. The question here is just how sticky and whether they're about to roll, because if you look at

some of the near-term apartment listing rentals and things like that, you have seen some downside momentum. Now, with mortgage rates 6 plus percent for 30-year fixed, it's hard to see that homebuilders are all of a sudden going to get off the map. But it does show you that the market is not clueless, Sarah, to the fact that you do have this bifurcation in the residential market. The biggest drag right now on the Dow, Home Depot, shedding 123 points off the Dow. Mike Santoli, thank you very much. We're down 1266 right now. For more on the sell-off, let's bring in the Carlyle Group's head of global research, Jason Thomas. Jason,

in your notes, you say inflation is not all that bad. Explain. It feels pretty bad right now. Well, thanks for having me, Sarah. Really, what we're saying is that there's a flip side to inflation, and that's, of course, business revenue growth. So you mentioned earlier the rebound in stocks that we saw in the middle of the year. That was Q2 earnings season. Why was there a pop in stocks? Because earnings rose 13.5% from year-ago levels. Why was there such strong earnings growth?

It was because of pricing power. So really, we want to see disinflation. Everyone is hoping for that. Today, obviously, was a very big disappointment this morning. But there's a flip side to that disinflation. Everyone is hoping for that. Today, obviously, was a very big disappointment this morning. But there's a flip side to that disinflation coin. And that means a diminution in pricing power for businesses and a slowdown in revenue growth. So I think people just need to understand that and understand what it means for financials going forward. This is now our worst day. I just want to bring our viewers up to speed. We're down 1249 on the

Dow, more than 5% on the Nasdaq. We're looking at our worst day for stocks since June 11th, 2020. So that was sort of height of the pandemic when markets were still very volatile and we didn't quite know what was coming next. There's the Nasdaq composite down 5.1%. Tech stocks getting hit the hardest. Jason, the problem now is not only are we worried about higher interest rates from the Fed, but the effect that's going to have on the economy and a potentially deeper recession. So that's not good news for corporate earnings. No, it isn't. But I would say that when you look at valuations today and you group them into quintiles, you see that virtually all the risk of downward pressure on valuations is concentrated in the top third of the distribution. So the top 20 percent of stocks today carry P.E. ratio on average of about 53 times.

That's 40 percent higher than the long-term average. If you look at the median stock right at the 50th percentile, it's actually only about 18 times, only about 8 percent above its long-term average. The bottom 40 percent of stocks are actually cheaper than they have been historically. So that this valuation problem from higher interest rates that the fed is forced into raising because of the higher inflation. Is something that again is very much concentrated the top of the distribution and that's why I think. Investors should should have their portfolios prepared for the adjustment there rather than assuming that this is going to be something that flows through, you know, on a peri-passu basis across the market. So let's talk about, Jason, what's attractive to you right now, what sectors, what types of companies, what investors should be looking at and how you're navigating this at Carlyle.

Well, obviously, there's an enormous amount of near-term risk we see in the U.S. with higher interest rates, the effects of disinflation, slowing growth. You have an energy crisis in Europe. China is not coming to the rescue this time, of course, because it has its own problems with zero COVID policy, having to deal with the housing market excesses. But, you know, the good news on a three to five year basis is that we do seem to be at the end of the post GFC era. And what I mean by that is where we seem to be entering a period of deferred maintenance where people realize with supply chains were stretched too thin. Companies that try to go factoryless become

more virtual businesses ended up taking on really exotic risks and really had fragile production networks. There's enormous amounts of investment that's coming in right now to have more resilient, more robust production networks. You have investment in manufacturing plant in the United States already up 22 percent. Secondly, with the energy crisis in Europe, it's creating enormous opportunity for LNG. Yes, there's going to be a huge investment in energy transition that is going to accelerate as a result of this. But there is going to be potentially trillions of dollars in investment in infrastructure to create an integrated single market for natural gas, just as it exists today for crude oil.

So those are some areas. Finally, you mentioned the stocks that are going to hit the home home builders. Well, this is an area where the Fed is actually counterproductive. Higher rates are leading to a sudden stop in housing construction. And it's precisely the housing construction that we need to deal with the housing shortage. There's, you know, between 1.7, three and a half million shortfall in terms of housing units. And actually, this is, again, an area where tighter policy is proving counterproductive. And I think that that is going to lead actually to the Fed to be a bit more cautious than you might expect, given the news of the report this morning. An interesting idea, yeah, trying to balance the supply-demand situation. Jason, thank you for joining us. Jason Thomas from the Carlyle Group, head of global policy. We're going to take you

straight commercial-free into the closing bell market zone right now because we have a pretty deep sell off on our hands and it has gotten worse in this final hour. Risk reversals advisors Dan Nathan is here to break down these crucial moments of the trading day. Plus, Christina Partsenevelos on the chip stocks among the hardest hit in the market and Diana Olick on the home builders, which are also at the very bottom of the list. I'll start off with you, Dan. And just what we've seen in this final hour, it was a down day all day. We came in down 1,000, now down 1,300 points. The sell-off has gotten so bad that we're now looking at our worst day for stocks.

In more than two years, June 2020, you remember what was happening then. If the Nasdaq loses more than 5.25%, we're going back to March 2020, that day where the NasdaQ lost 12.3 percent. This is a liquidation, Dan. How much of a rethink for you, given what we got on the inflation rate? Well, I think it's a really important way to phrase it, Sarah, is a rethink. I think over the last month or so, I think a lot of investors maybe came to this conclusion that because of a lot of the inflationary inputs that people track, whether it be gasoline, whether it be lumber, whether it be freight rates, all that sort of stuff, that the Fed was going to get maybe some you it's probably the start of something, a start of the retest of the lows that we saw in stocks back in June.

And so when you think about all of the different reasons why people have to readjust the idea that maybe we're going to have this year end rally because the Fed did their job, they got really aggressive last November. They said they're going to battle inflation and maybe some of the data was going to start to reflect that. Well, it's not doing that. And the last point I'll just make about this is, like, we can talk about all these inflationary inputs. The one thing that hasn't budged yet is wages, is employment.

We've just started to see that unemployment rate tick up from 40-year pre-pandemic lows, and I think that's what comes next. Across the wires, we're already seeing this. We're seeing banks start to consider some cuts. We're going to see major big tech companies start to do cuts or accelerate the cuts, that sort of thing. I think that's a Q4 story. Let's hit the chip stocks because they are getting absolutely crushed, faring worse than the rest of the tech sector. Christina Partsenevelos with the details. Christina. Yeah, it's chip stocks actually

like Micron, Nvidia, AMD. They're among the worst performers right now on the NASDAQ 100. All of them right now hovering just below 8% lower. The SMH, I want to focus on that for a second because the SMH is a good barometer for the chip sector. That is trending lower, down over 5% today with every constituent off by roughly 5% in the past month. So what you're seeing on your screen right now is actually a three-month chart. The stock's faring a little bit better over the three-month range, and that's because of Wolfspeed. Evercore analysts think it's one of the greatest ways to invest in electric vehicle transition. And if we're going to stick with this time frame, look at Intel on your screen, down 22% just over the last three months, and sadly on a roll to hit a fresh new low today.

Micron, though. Micron is down, and we talked about it, one of the biggest laggers on the NASDAQ 100, down over 7% lower down on the quarter. If it finishes Q3, it would be the longest quarterly losing streak. That's three quarters in a row since 2016. So not only does this entire sector, chips and all, have to deal with slowing demand, ballooning inventory levels, but also the threat

of potential export restrictions to Chinese customers, which still remains a major, an overhang, especially for companies like AMD, NVIDIA, as well as equipment makers and tools. Christina Partanavos, Christina, thank you. It's a group that's already 41 percent off its highs, Dan. So how much more bad news is there to come? Christina laid out a few of the reasons why investors have been down lately on the chip stocks. Well, I mean, if the producers can pull up a chart of NVIDIA over the last three years, I think the question can be answered by how far can it go down? Well, how far did it go up in late 2021?

I mean, it massively overshot all realistic expectations about orders, about all of the enthusiasm around emerging technologies that they were selling their graphic chips into. This is a great company, great management. They have great products. They've taken lots of market share. But just as it overshot late last year, it's probably going to do that to the downside. Also, this stock has a $330 billion market cap down about 65% from its all-time highs. So the question is, how exposed were they to data center, to crypto, to some of these things that might be slowing down a bit? We know crypto has. If we start seeing weak enterprise demand, there is more to go for a name like NVIDIA. On the other ones that you mentioned,

Micron, I mean, think about it. As long as I've been in the business, this stock has always traded at a massive discount to the market and its peers because it is a massively commoditized product here. And so, again, we don't have any visibility about what the next three, six, one year looks like here. So a commoditized product like this that's having maybe some reshoring issues

about all the costs it's gonna take to make fabs here or other places outside of China, you know, again, it's just a lack of visibility here. So I think that early cycle plays like chips are going to get hurt harder, which they have, like you said, down 40%, which is outpacing the NASDAQ and obviously the S&P. So to me, there's no reason to buy any of these stocks on a day like today. I think we're going to retest those lows. I'm going to say this again and again during the market sale that we had in June over the next couple months. So we're still 8% away, just for those keeping score, 8% higher than those lows that we saw in June. And the big debate is whether we retest them.

Clearly, there's more in favor of the bears camp today with that sticky inflation number showing that it's just going to be harder for the Fed to battle. They're going to have to do more more and that could hurt the economy more. The homebuilder stocks, no surprise, significantly underperforming the broader market today. Diana Olick here with the details and that rental inflation number everyone's talking about, Diana. Yeah, and much of that is because of the reaction by mortgage rates to the CPI number. The average rate on the 30-year fix today matched that 14-year high we hit on one day in June, 6.28% on the 30-year fix. And when rates go high, homebuilder stocks, they go low. Pretty clear in this chart of the homebuilder ETF versus the ITB versus the 30-year fix.

Stocks have some of the biggest names now down anywhere from 5% to 7%. Toll Brothers in there, which is a luxury builder and not usually quite as dependent on mortgage rates. Both housing starts and new home sales have fallen sharply over the last few months on those higher rates. Sarah. So, Diana, have you been surprised to see how demand has held up given the spike in mortgage rates? Because that's the thing, like the Fed has to figure out how much is too much when it comes to trying to crush demand to get these home prices and rental prices down. And it feels like they've done a bunch, but it's not really working. Well, I think demand has fallen off significantly. You're talking about the homebuilders seeing

very few people in their showrooms. The latest homebuilder sentiment number we got had low buyer traffic, low current sales and future sales predictions were off as well it was the lowest number we'd seen in over a decade so I do think demand is coming out of the market and we are starting to see prices for homes start to slip month to month which we don't usually see in the summer months because they usually rise during those months so the heat is definitely coming out of the housing market but again you go back to that fundamental supply and demand issue. If you can't build more homes and there's still a shortage,

you're going to have this floor under prices. Right. When in the meantime, all they can do is crush demand. Diana, thank you very much. Diana Olick on the home builders. Just want to bring you some new 52 week lows. As you can imagine, there's no shortage of them in today's session, but just shows you the scope of the damage being done right now in the markets. You've got Meta

trading at lows that we haven't seen since April 2020. They're the homebuilder stocks. They're getting crushed, as we mentioned. Whirlpool trading at the lows of July 2020. So a lot of these stocks, Comcast, our parent company, the lows of April 2020. Look at the travel and leisure stocks. They're also getting hit especially hard. Seema Modi with the details. Is that the end of the reopening surge on travel demand? It could be. Now we worry about recession? Well, Sarah, as we learn in this inflation report, one area of relief for Americans is airfares.

They fell 4.6 percent in August after falling nearly 8 percent in July. But this is not expected to last. Once the holidays hit, average airfare for Thanksgiving expected to be 43% more expensive than a year ago, according to Hopper. So it's a forecast for future prices that you could say is part of the story with travel names trading down really across the board. Airbnb, United, Marriott booking down 3% to 4.5%. Take note of the cruise lines down sharply with higher rates expected. That's going to pressure companies that will need to refinance the debt that they're sitting on that they took out during the pandemic. And for perspective, Carnival sitting on around $35 billion in debt with a market cap of $13 billion. We crunched some of the other numbers with help from Truist.

Royal Caribbean at $25 billion. So these are the type of numbers, Sarah, investors start to look at when you have to forecast higher rates. Seema Modi. Seema, thank you very much. We've got airlines about 31 percent now off their highs. Dan, it's weird because you go to airports and planes and they're packed and hotels are packed. And you talk to some of these executives and they've never seen demand like this before. And now and now the market is concerned and is seeing is trying to see past that, which might which might be a signal that the Fed just has even more work to do because you are seeing such strong demand in parts of travel. What's your take on some of these stocks? Yeah.

And I suspect business travel hasn't come back anywhere near pre-pandemic levels. You might see consumers, you know, individuals, you know, flying for leisure at much lower rates. So that could be a big part of it. I think it's interesting what Seema just mentioned about the debt that all of these travel companies had taken on. And what have we been talking about here for months now? Just the rate in which rates have been rising. It's that much harder, I think. You know, cost of capital is that much more difficult. And I'll just make, when you extrapolate this to the homebuilders, I mean, the Fed has been very clear that they thought the housing market was overheating, and they wanted to cool that down.

Well, that's starting to happen. And I think, as my friend Guy Dami likes to say, especially as it relates to the Fed, careful what you wish for here, because when you think about now the negative wealth effect that has occurred in the stock market after the huge run-up that we had in 2020 into 2021, and now you have a housing market that's far more illiquid, okay, that has had huge gains in the lead up to this year, right? You say to yourself, that's not good for the U.S. consumer at a time where rates have gone up. You've seen what the 30-year mortgage rate has gone. It's gone from under three to about six. And just do the math on that for household incomes at a time where savings rates are going down and consumer

credit has really skyrocketed here. It doesn't paint a great picture for a U.S. consumer right here. No, and they're going to have to do more. Yields are marching higher now. Should see that reflected in interest rates as well. Let's hit some of the consumer stocks not being spared. Courtney Reagan looking at the retail movers. Every consumer discretionary name is lower right now, and some of these retailers are getting pummeled. What are you watching? Absolutely, Sarah.

I mean, fear really just reverberating through the retail stocks. After we got inflation data this morning and only getting worse throughout the day, the XRT is down precipitously. But then also look at the Amplify Online Retail ETF, the iBuy. That's off even more by almost 7 percent. So within that iBuy space, the e-commerce names Wayfair off more than 11 percent. Chewy down 6 percent. Warby Parker down 9 percent. Even the more staple names in the discounters are significantly lower. And these are some names that we think are often beneficiaries in times of high inflation. Big Lots names down 11 percent. Walmart and Target,

they're lower, too, but not at least much worse than the broader market. The specialty apparel players, those are off huge. We know we saw actually an increase in inflation numbers for apparel. Children's Place is down 13 percent. Urban Outfitters down 8 percent. Abercrombie down more than six. And Hanes Brands up or down rather almost 7 percent. Now, the high end has outperformed even in the face of high inflation, but it's not getting spared today. Shares of Nordstrom down 7 percent. Ralph Lauren and Capri Holdings down more than 5 percent. Canada Goose, RH, all of those names falling, even more so than the broader market, as we worry about consumers' ability and willingness to spend when everything that we have to buy continues to go higher.

Back over to you. I was surprised, Courtney, I don't know about you, that the inflation, that inflation in apparel this morning actually went up after a decline last month. And in some of these categories, we've heard from retailers, as you've been reporting for weeks now, Target and Walmart, the poster children, they're going to have to start marking down these products because they got the inventories wrong and they're sitting on all this excess product. It hasn't really shown up in the inflation data. That should be disinflationary. I know. It is really interesting to see that number sort of reverse course from the previous month, what you're talking about

there with the inflation data in apparel. And I think that we had heard so much about the inventories and about sort of the dislocation of product. And so we assumed, oh, they have to have big discounts. And yes, to your point, Walmart and Target and, you know, even names like the Gap had talked about, yes, we do have to discount to sell some of those goods. But I think also we forget that those inventory numbers are so inflated because you're looking at a year over year comparison when they were so short last year with the product that they wanted because it had gotten tied up in the supply chain. So I think it's just a really complicated picture, particularly the timing of when the discounts will come in and on what types of goods.

You also have apparel players and other high-end retailers. They're saying, look, we're actually not struggling. We're able to pass along those price increases. Lululemon, of course, is not the highest of high-end. It's certainly not low-end, but I'd call it premium. They, too, have been increasing prices, and they've been successful in doing so. So it's very hard to paint retail and even categories with the sort of a wide-ranging brush, which is why we need people like Dan Nathan to help us be discerning in individual stock names. Absolutely. Thank you very much, Courtney Reagan. Just as we head into the close, and we know you are very discerning, Dan, I want to show everybody what's happening. Basically, a bad day for stocks went from bad to worse in this final hour of trade,

down 1,226 points on the Dow, just off the lows there. We hit a few moments ago down 1,300 points. Looking at our worst day for the Dow, the S&P and the Nasdaq since June 2020. Pandemic times. Worst day of the year, worst day in almost more than two years. The S&P 500 is down more than 4%. Every sector is down sharply today. Even energy, which is holding up the best of all, is down 2.3%. Utilities, second place, down 2.5%. Nothing compared to the losses we're seeing in

communication services, down 5.5%. Or technology, down 5%. So, Dan, people at home, see these numbers. This is a lot scarier than what we have seen in other sell-offs. It hasn't been this way in a while. What should you do? You see these inflation numbers. You hear people worried about the Fed having to do more, a deeper chance of a deeper recession. What do you do? Yeah.

Yeah, I think you take a step back on a day like today, especially when you have the magnitude of the one-day decline after we had this kind of run up over the last few days is taking it all out in one fell swoop. I think it's really important for like a retail investor who's at home. There are major macro moves going on. If you think about it in currencies, in commodities, in fixed income right now, and they're all playing in with equities here. And when you think about it, equities is the one way that a lot of our viewers have a way to kind of reflect their views about the economy and the things that they want to invest in. So on a day like today, I think you have to go back and think, how was your mindset back in June when the S&P 500 was down close to 25% from its highs and on the year? And if you were calm then, you should be calm now, understanding the things that you own and the prospects and the time horizons you have for them. But that being said, if you bought back in June and you bought things

that are up a lot more than the market was, then you might want to think about taking some profits and leaving some cash around for a time if we were to break those lows that we made in June again. Dan Nathan, thank you very much for being here for this final hour. As we head into the close, we are not too far from the lows of the day and just what has been an ugly session all around. The Dow is down almost 1,300 points, or 4%. The S&P 500 is down 4.2%. Again, we haven't seen these kind of big drops in more than two years. The Nasdaq comp, the hardest hit, down more than 5%.

Small caps, obviously, down sharply as well. No sector spared. Every Dow stock lower. That's it for me. I'll see you tomorrow, everyone.