Closing Bell - Closing Bell: Ugly end to April, Chevron CEO on earnings, debating Apple’s next move 4/29/22

Episode Date: April 29, 2022

The major averages closed sharply lower to finish out a rough month for the bulls. Tony Dwyer from Canaccord and Charlie Bobrinskoy from Ariel break down the action, and whether or not they’d recommend buying the dips. Analysts Colin Gillis and Amit Daryanani debate the best way to play Apple’s pullback. Meantime Chevron CEO Mike Wirth discusses the outlook for the oil giant as shares move lower on the back of earnings. And Gary Dvorchak from Blueshirt Group talks about Chinese internet stocks -- one bright spot amid the carnage.

Stocks are struggling on this final trading day of April. Near the lows of the chef's session right now. It's an ugly end to an ugly month. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Here's where we stand right now in the markets today, down more than 600 on the Dow.

It's being weighed down by pretty much everything. It's broad. Every sector's lower in the S&P 500, 2.8%. Amazon, though, is hitting consumer discretionary particularly hard. That sector is down 5.6%. Look at the Nasdaq. It's down 3.3%. Worst month of trading for the Nasdaq since back in 2008, the depths of the financial crisis. Check out the most actively traded names right now, right here at the New York Stock Exchange. Didi, seeing strength, actually,

in the Chinese internet names. We'll cover that a little bit later. Ford, NIO, AT&T, and Alibaba. Coming up on today's show, Chevron CEO Mike Wirth joins us exclusively to talk about his quarterly results that are sending that stock a bit lower today, though it's still up more than 30% on the year. Let's get straight into this market sell-off. Joining us now, Tony Dwyer from Canaccord Genuity. Tony, if I've been reading your recent notes correctly, you are actually expecting a little bit of a reprieve in the market. It doesn't feel like that today. No, it doesn't, Sarah. We put that out Wednesday when the market was getting smoked then. And as you know, our policy since December is, I have this line, don't just do something, sit there. And usually it's the other way around.

Well, now I think that the sentiment measures, the historical sentiment measures by either investors, intelligence, newsletter writers, National Association of Active Independent Managers, but especially the American Association of Individual Investors, the readings go back to even in the bear market of 2008, when the bears were this high, you found some kind of footing. And obviously it's not working today. But again, it's just a small move. This is a really tumultuous and dicey environment. As you know, we've talked about a lot about it. That's going to continue to be that way. So what makes you think besides just really extremely negative sentiment,

we're going to get some sort of meaningful uptrend in the market. Because if you look at the reasons why we're selling off, Tony, it doesn't seem to be getting better. And that is higher inflation. We don't know whether it's peaked or not. Weakening growth. We don't really know how much we're slowing.

And then China slowed down, global growth slowed down, and we're starting to see some warnings and earnings like Amazon. Yep. Sarah, this is an awful environment. I don't want to make the case that we're going to have this major uptrend that starts Wednesday or today and goes on for the rest of the next two or three years. The problem that we have, as you depict, is you've got a Fed in a box. Their two main mandates aren't getting better, and they can't.

They're lagging indicators. So inflation is still excessively high, and the unemployment rate is still historically low. That's not going to change enough over the next couple of months to really change the dynamic of the Fed raising rates, but they're raising rates into a global, not just a global slowdown, but now a domestic slowdown where China is shutting down again. And they're a mess and it affects the supply chain stuff because of the COVID shutdowns. You've got Europe, if they're not in a recession, they're on the border of it because of the Russian Ukraine war. And now in the U.S., consumers are beginning to slow down because of the impact of higher inflation and higher interest rates. And while that sounds so negative,

even in the heart of the great financial crisis, like post Bear Stearns, post Lehman, you had some meaningful bounces. And I just think that we're on the cusp of one of those potential. And so where do you want to be when that happens? Do you want to be in big cap tech, which has been now hit the hardest with the Nasdaq and bear market? It's the economically sensitive in the big cap tech. Again, if you're making a fundamental case, here's the difference of what was happening in 2008 and now. It's more like 1994, I think, frankly. The Fed is tightening. They're not easing. So typically when the markets are in trouble and it looks like there's a potential recession, global economic slowdown, you get the global central banks begin

to ease. This is not the case in the U.S. So that's creating the issues we have. Well, and the bond market is sending some funky signals as well because yields just keep marching higher. The bond market seems to be much more focused on the inflation story. The break-evens are higher than two and a half to be much more focused on the inflation story. The break-evens are higher than 2.5 percent on 10 years. And the stock market seems to be stiffing out more the slowdown story with the defensives outperforming. So which is it? How do you hedge against that kind of stagflationary environment where we're getting mixed signals like that? So, Sarah, I'm glad you bring that up because our thinking is that this could be a lot

like 1994. Now, obviously, inflation was going down in the 90s, but Alan Greenspan wasn't playing it that way. There was a surprise Fed rate hike in February of 1994, another one in March, an unscheduled one in April, and then it started 50, 50 and 75. So whether there was inflation or not, there was a massive move by the Fed in that. Once you got into the June low, you got kind of a whoosh like we're getting now. That set the stage for the market to rally into the summertime because the market began to believe that there was signs of an economic slowdown and the market had already discounted what the Fed was going to do. So you were into this really oversold situation. And remember, March was the worst bond market for treasuries

since February of 1994, not since the great financial crisis or other recessions. So I think that is. But then the problem was and this is a really important point, Sarah, when the bond market acts like this in the currency market acts like this, typically something breaks. You know, you had the S&L crisis in 90. You had the Mexican debt crisis and Orange County declaring bankruptcy at the end of 94. Of course, the Asian economic crisis, the Thai bond, you know, a lot of it's a tumultuous environment. So we're we're just thinking that we get this oversold bounce on sentiment and some of the technical stuff. And so just play it out. So 94, there are similarities, as you say.

The bond action is certainly one of them. But inflation is much higher now. And there is a feeling that the Fed is just going to have to stomp on it until it breaks something. And that's going to be very painful for the equity market. So what happens next? So there was a reprieve in the summer of 94. And then didn't it end on a down note for the year? Well, so what happened is you went down. Remember, our call for the year is a plus or minus year. I get a lot of questions about what's our target. It's a plus or minus year. So what happened from the August peak, you went back down

is Orange County declared bankruptcy and you had other Fed related issues to the lows. And then you close the year on change. Basically, you have that year end rally. So that were it's different because inflation is not going up like it was in 1994. A good comparison is to think that the market is just beginning to go down. You've got nearly 50 percent of the Nasdaq down 50 percent%. So this is not like, wow, it's just beginning to go. It's been going down. And at some point in 94, it was, I'll never forget, Ralph Ekinpour used to talk about the stealth bear market. And that's what was happening in 94. And it's what's happening now. The AD line is rolled over and so many stocks are going down. And that just again, it sets the stage for an oversold rally. Whether it's sustainable or not, Sarah, is going to depend on if the Fed is able to see the economic data slowing down enough to allow backing off from their aggressiveness and rates begin to come in on a market level.

And whether inflation also can come in. Well, it's not plus or minus right now. It's minus. The S&P is now down 13 percent for come in. Well, it's not plus or minus right now. It's minus. The S&P is now down 13 percent for the year. Tony, thank you. Tony Dwyer, as we're making new session lows, down 700 points on the Dow. We're going to have much more on the market sell off for you throughout the hour. Dow now on pace for its fifth losing week in a row, fourth week in a row for the S&P and the Nasdaq. Up next, our exclusive interview with the CEO of Chevron, Mike Wirth. The stock taking a dip today on earnings, but it's been a big winner so far in the year as oil prices

reach multi-year highs. We'll talk about the results, elevated gas prices, the politics, and much more. You're watching Closing Bell on CNBC. Taking another leg lower down, more than 700 points right now on the Dow. Every Dow stock pretty much lower. There are a few bright spots, but every sector is lower in the S&P. Not all red hours on the street. Want to point out today's stealth mover. It's Mohawk Industries, the best performer right now on the S&P.

The world's largest maker of carpet and wood flooring products, reporting much better than expected earnings thanks to record sales and multiple price increases. People still spending to renovate their homes. Meantime, energy giant Chevron quadrupling its first quarter profit from a year ago, its highest in 10 years. The stock is down more than 3%. The results follow a surge in oil prices, hitting a peak of $130 a barrel back in March. Joining us now for an exclusive interview is Chevron CEO Mike Wirth. Mike, welcome. Nice to see you.

It's good to be with you. So clearly the profits were a good story, but some gripes with the refining, international refining revenues. Wall Street a little bit underwhelmed. What do you make of the reaction? Well, Sarah, as you said, it was a very strong quarter, four times better than a year ago and really our best quarter in a decade. We're delivering on our commitment of higher returns and lower carbon. Our first quarter return on capital employed was about 15 percent. Midyear will close on a renewable fuels acquisition that we're very excited about. And in a market that is moving quickly and is volatile, there are certain timing effects and other things that are difficult for the market to anticipate. But it was a very,

very good quarter. What about on the cost side? How are you dealing with all the issues from wage inflation to everything else going up? Well, we're a long-term business, so we plan our work and we work our plan. There are inflationary pressures in the economy, but much of what we do, we've already contracted for, we've permitted, we've laid it out. And while we're seeing some pressures, it's all very manageable. It's all within our budgets, and we're not seeing anything that is something I don't think our company is very well prepared to manage as we go through this cycle. Well, certainly the higher prices help. You said, Mike, in the release today that you're doing your part to boost domestic supply. And I know you have increased it this year. But it does feel like you and some of the others have been a little reluctant to really turn it up at a time where we need U.S. energy supply very much right now.

And Europe needs it even more. Well, I would see it a little bit differently, Sarah. Our first quarter U.S. oil and gas production is up 10 percent from last year. Our capital spending is up 30 percent from last year on production. We raised our Permian guidance from 10 percent growth to 15 percent growth today. And first quarter was the highest production we've ever had in the Permian, nearly 700,000 barrels a day. So we are committing capital to this market. We are growing production and we are adding supply. But overall, isn't U.S. supply still below 2020 levels?

Well, it's below 2019 levels. And if you look at 2020, during the depths of the pandemic, production came down because demand was contracting and there was really no place to store the oil. In this market, Sarah, demand always moves faster than supply. On the downside, as we saw in 2020, and then again in 2021 and into this year, as the world economy opened back up, demand surged very strongly and supply doesn't typically respond as quickly, but it's coming. We see it in the U.S., we see it around the world. So, Mike, I also want to talk about the cash returns, because that was a big part of the story today as well. You're giving back $10 billion of stock, ExxonMobil with $30 billion.

What do you say to the politicians that might criticize that move and say, stop rewarding shareholders, it's the consumers that need relief at the pump? Well, Sarah, we just talked about what this market needs to help prices moderate is more supply. Our production in the U.S. is up 10 percent year on year. Look, we're in a position with a strong balance sheet to do it all. We've got four priorities. We've increased our dividend per share 6 percent in the first quarter. We're investing to grow both our traditional business and our new energy

business. Spending this year will be up almost 50 percent versus what last year was. We're maintaining a very strong balance sheet. And part of our value proposition to shareholders is to return excess cash through buybacks once we can satisfy those other needs. So we are investing in growth and new supply, and we can reward our shareholders at the same time. Speaking of politics, Mike, I'm sure you know the congressional Democrats are now talking about an investigation into the big oil companies for price gouging. What would they find? I think they'll find the same thing they found every time that this has come up over the 40 years I've been working. I think they'll find nothing.

In fact, I testified at a congressional hearing just a few weeks ago where we made it very clear that we don't control the price of oil, gas or refined products and we have no tolerance for price gouging. These investigations tend to have more of a political dimension to them than a practical one. And I think that the outcome will be the same as every other one that we've ever seen. Dropping 760 on the Dow. It's been volatile. Clearly, the war in Ukraine is a big part of the story. Mike, where do you think prices head from here? We got as high as 130.50 back in March. Think we'll see that level again? Well, it's a market, Sarah, that is, it's not in equilibrium right now. It's a very unstable and unpredictable market. We've got demand being somewhat constrained by lockdowns in China and air travel that really hasn't returned.

And yet on the supply side, we've got concerns about supply impacts of this conflict and sanctions and the other things that have emerged in response to it. It's a market that is pretty finely balanced right now. Inventories are at low levels, and there's a lot of upward tension in the market. I hope that the conflict in Ukraine is resolved sooner rather than later and through diplomacy. And I think that would take some of the pressure off of this market. If that's not the case and if we were to see further escalation and further actions, that could put pressure on it in the other direction. So it's just it's a volatile and unpredictable circumstance right now. Right. What would that look like? What happens

if Germany, if Europe gets cut off from Russian gas, either by Russia or by an oil embargo that it imposes? What does that look like in the market? Well, I think everyone is trying to find ways to reroute supply lines right now to meet the needs that exist in Europe and that could increase in Europe if we were to see some changes in policy or supply out of Russia. The fact of the matter is, normally, these markets are in a state of constant flow, and supply and demand are two very large numbers. They're very close to one another. So if you were to see a significant amount of supply come out of the market right now, it's very difficult in the short term for that to be, you know, to to to be met from other sources because those supplies are going to other markets today. And so that's why there is risk of of an upward move in oil or in gas if we were to see further disruptions or changes in the situation in Europe.

So how do you deal with the uncertainty? How do you plan a business without knowing whether this war in Ukraine is going to end or could go on for years and what the next chapter looks like? Do you look at it as a traditional boom-bust cycle in oil prices, or is this different? Well, you said a key word there, which is cycles. This is a long cycle industry. It's a commodity business. It's very capital intensive. And the current price of the commodities that we sell really doesn't impact our investment outlook or our strategies. We have to look through that to a long-term view of supply, demand, technology, and markets across cycles.

And that's what really drives our strategy. In the near term, the way you deal with it is you focus on the things you can control. We focus on safety. We focus on protecting people and the environment. We focus on cost control. We focus on execution. And then markets are what they are. And so you focus on the controllables and then you take what the markets offer. Two years ago, they didn't offer much. We had negative prices in this month just two years ago. Today, it's a very different world. We can't overreact to either one of those. We have to try to see through those to the long term. Mike Wirth, thank you for joining us from Chevron Off Earnings today. Appreciate the time. Stocks down about 3%, though it is the best performing Dow stock of the

year, up more than 33%. Take a look at what's happened now. We are lower sharply. So again, down 723 on the Dow. S&P 500 down 3% almost right now. Every sector is lower. Consumer discretionary hit the absolute hardest off Amazon, but you've got weakness across the board. Real estate, technology, financials all down at the bottom of the list. The Nasdaq down 3.4%, ending April on a sour note. Still ahead, we'll head out to Omaha where Mike Santoli is getting ready for the Berkshire annual meeting, but he's not off the hook for a dashboard. He'll take a closer look at Apple, which is one of one of Buffett's key holdings. Also a disappointing reaction there off earnings. That stock down almost 3%. We'll be right back.

Welcome back to another ugly session here on Wall Street. Here's where we stand right now in the markets down 715 points or so just off of the lows of the session. The S&P 500 down about 3 percent. The Nasdaq down more than 3 percent, capping off what has been a terrible month for April, especially for the tech-heavy Nasdaq, worse since back in 2008 in the fall. Take a look at today's top search tickers on CNBC.com. Amazon getting the most interest today. No surprise. The stock is plunging down 14 percent, having its worst day in years off of that weaker revenue forecast and some misses on operating income. Apple also giving

back 2.6 percent off of the disappointment in that guidance that we got on the costs that are rising related to supply chain. Tenure yield in the third spot, unusual. It's usually number one. Yields are higher again today, 2.89 on the 10-year. Tesla EVs are actually doing a little bit better today, up 1%, maybe on news that Elon Musk did tweet that he has done selling shares for now. And Meta, down 1%, a little bit more resilient after a double-digit rise yesterday off the back of what was viewed as positive earnings. As you see there, Apple shares weighing on the Dow despite beating earnings estimates up next. We will debate whether Apple's pullback is actually a buying opportunity.

Closing bell back in a moment. We're sinking here into the close. S&P is now down more than 3%, capping off a brutal month, now down more than 8% for April. Berkshire's annual mega gathering in Omaha is underway. Our Mike Santoli is there for the festivities. And for today's dashboard, Mike, you're taking a look at some of Warren Buffett's top holdings, including Apple, which we should hit because it's lower on the back of earnings. Yes, it is lower, Sarah. Obviously,

you know, down 3 percent, not a real tremendous move off of those results, but clearly, you know, not immune to the pressure. What's interesting is over time, since Warren Buffett and Berkshire Hathaway have bought their stake in Apple, how it's become revalued. Take a look at how it compares based on the forward price earnings multiple to Coca-Cola, which, of course, is a decades-long holding of Buffett's, a core holding, one he owns 8 or 9 percent of the company. You see they both are in parity right now, about 25 times forward earnings. Most of the past decade, when he was acquiring his shares. Apple was seen as a hardware company, was not given a generous valuation. It was hit driven and all the other reasons. And Buffett's insight or his

case that he made when he bought it was it's actually an everyday consumer product. Consumers rely on it. They're not going to switch away from it. It's a premium branded good. Margins can stay high. It was the same type of observation he made many years ago about Coca-Cola. So far been rewarded, Sarah. Yeah, always, always looked at it kind of like a consumer staple, too. So there you go. The valuation finally caught up. What about Berkshire Hathaway overall? It's been pretty resilient thanks to holdings like Coca-Cola and being in some of the right spots for the economy. What do you expect to get this weekend to hear? Well, I think it's almost a guarantee you're going to get reminders about those long term principles about don't bet against America over very long periods of time.

Stock market will be very rewarding. He always points out that Dow was under 100 when he first bought his first share of stock. Now, shorter term, nothing. You know, it's tough to say higher rates. This cocktail of higher rates, stubborn inflation. It's somewhat benefiting parts of his business. If you think about it, insurance has been a bright spot within financials. Obviously, energy infrastructure and utilities, a big part of it. Railroads generally have been also very strong. So the components of Berkshire Hathaway have been in favor at the moment. Also, extremely strong balance sheets, as his are. And his stock portfolio has a lot of the steady consumer staples type stocks that have been largely resistant to the recent bear turn in the markets.

Yeah, up for the year, but it sort of ran up into March and then has come right down in April on some of these slowdown concerns. Mike, looking forward to a lot more from you guys there. You and Becky tomorrow. Don't miss Berkshire Hathaway's annual shareholder meeting. It'll be streamed live exclusively on CNBC.com. So definitely check that out. Need to hear from Warren Buffett right now. For more on the Apple earnings, let's bring in Colin Gillis from Chatham Road Partners and Amit Daryanani from Evercore ISI. Trying to figure out here what to do with the stock. I mean, you say buy, correct? Why? Yeah, listen, the guide was somewhat disappointing, right? But it was really all about supply, not demand. I think that's an important point that needs to be made over and over again, which is Apple's miss was all about supply. It really wasn't about demand. If they didn't have

the supply issues, they didn't stop selling the phones to Russia or the FX issues, the growth would have been 9%, 10%, which is fairly robust. So far, inflation has not hurt Apple's demand. And I think the ecosystem, if you look at the platform narrative, services are growing double digits, wearables are growing double digits, and you have a whole slew of new products coming out. So I think it's a supply issue, which is temporary, not longer term. And historically, when Apple has had a supply issue, it's demand that gets deferred, not destroyed, which means the output should get better for Apple from a growth basis. Well, that was your question on the conference call, wasn't it, Amit, about the supply and the headwind and whether investors should look at it as just a deferral.

So what did you learn on that front? You know, I think Apple management is being extremely cautious and guarded about how they can in the next six, nine months play out, right, given everything that's happening in China from their manufacturing base. But I do think this sort of alludes to the fact that historically, it has been more about demand getting deferred rather than getting destroyed. And I think what Tim said was, listen, we have this internally. I'm not just going to share this to a public audience, right? But what I tell you, historical trends pulled up. This is getting pushed out because if I want an

iPhone and I can't get it, I'm just going to wait for the iPhone to come out. I'm not going to go buy a Samsung or Huawei in the interim. Colin, you're not as convinced on the stock move. Is it about what we've seen so far or is it about something you got from the fundamentals and earnings last night? I think, first off, there's a lot of great things about Apple, right? I'm sure we're going to touch on the services business and all the pieces that investors love. But the reality is, is that the company's growth is slowing and it's going to be slowing even more in the June quarter and likely even more in the September quarter. Right. Because this is still very much the iPhone company.

Right. Fifty two percent of revenue comes from the iPhone. And that growth was only five percent. And that includes that you had 19% growth in the Americas. So if that slows down over the summer, which is very likely, given some of the consumer pressures and inflation, this is going to put pressure on Apple. So, Amit, take the other side of that. And if Apple's not immune to it, what does that do to the rest of the companies you cover?

Yeah, I think Apple's issue is, again, on supply, not demand, right? Demand seems to be holding it well. But if Apple has supply issues, then you worry about everyone else, absolutely, right? Especially the ones that have a more heavy China manufacturing base. Now, interestingly enough, through the the Trump era a lot of companies You know PC companies example move the capacity from China to Mexico to offset tariffs Apple never had the tariffs they never moved out and so now you see a bit of pain from there, right? But to the point of the group

Concerns right the compares get amazingly easy for Apple from 54 percent growth in March last year But 9 percent growth in December of last year. So I actually would argue that as you go forward, you're facing easier compares, you have a product cycle, and now demand deferrals are going to be a tailwind. So as long as inflation doesn't build up. So you disagree on the growth slowing point? Yeah, I think growth actually will accelerate for them once you get past the supply chain. Really quick, final word, Colin. All right.

So listen, Tim Cook has said that there is demand issues already showing up in China. If you're looking forward, likely that demand is going to decelerate or is it likely demand is going to be increasing in the next few months? It's more likely to decelerate. There you go. Two views on Apple, which is down 3%. I mean, Colin, thank you both very much. We've got to get to the broader market here because the Dow is down more than 700 points. It's another one of these final hours. We just collapsed into the close. Joining us on the CNBC

Newsline is Ben Emmons from Medley Global Advisors. I don't know, was it the Amazon and Apple spark that sent markets tumbling or just this is how it is lately? The path of least resistance appears to be lower. Hi, Sarah. Yeah, I think today it's really the specific stock story that's weighing. And as you noted, Amazon being down almost like 13, 14 percent, really hitting consumer discretionary sector with almost 5 percent down. So it tells you what the impact still is of those stocks, even though their weight in the index is declining. The overall broader market takes a big hit on this.

We're going into a big week once again. Interest rates are reacting to the core PCE data earlier today, and particularly the employment cost index. That's, I think, what really otherwise is weighing here, that we're going to have a Federal Reserve that's going to signal a series of rate hikes of 50 basis points, and the market once again is readying for that with the downside. So what do you do in this environment? Because the defensives had been working really well, and then there are some concerns now

about valuations. Yeah, for sure. And I think that, you know, if you think about since the ukraine war broke out sectors like staples and materials had a huge outperformance but that has changed now too that's because of the china story coming into the fray here with the supply chain disruption so you've become even a bit more conservative where you know you would have to resort to somewhat to a cash level in your portfolio to offset this volatility but nevertheless though so i do think that you're coming out a really bad month don't

know what the next month exactly will be but one thing we could say is that we're getting in some of these let's say technology and much cheaper valuations right so there will i think be another opportunity to be also on the offensive side. So I think we pay attention here as we get into the February. Ben Ammons, thank you for jumping on the news line. Increase those cash positions. Medley Global Advisors. Let's get back to Mike Santoli, who is in Omaha, but of course, watching every tick here, Mike, as we see another pretty brutal session, the Nasdaq 100 for the month overall now down 13 percent, not getting better. How does it set us up for May? No. Yeah, I mean, we're actually now challenging the lows for this correction.

We're trading on the S&P 500 here below the closing low, which was from back in mid-March, around 41.70. We had an intraday low on late February, back when we first got the invasion of Ukraine by Russia. That was in the low 41.00s. The bottom line, though, is we're kind of pressuring what has been the low end of this trading range for months. And what's interesting, again, about it, and maybe a little bit fatiguing about it, is that it's not really that headline driven. It's kind of this kind of slow, sagging action, draining away people, just reducing equity exposure. You have bond yields up again today. Some treasury yields are higher. People are losing money on their bonds. People a lot of talk about how the balance 60-40 portfolio is having an awful

run, you know, historically right now. And that just makes people more defensive. Now, can we just sort of make a stand here? Who knows? The market has refused a bunch of plausible reasons to try and find its footing. Not just that April typically used to be historically a strong month, but even the final days of a month like April where you've been very weak, often you did get a lift. We've been talking for days about very depressed investor sentiment. That still remains true. You're still seeing it in all the indicators. But the overall market's not terribly oversold, and sentiment is not a catalyst. It's just kind of a background factor that should allow the market to bounce down the road. But it's not something that really necessarily operates on a short-term basis, Sarah. Mike, stay close. Thank you for all of that talk about the levels. Let's bring

in Charlie Berbrinskoy of Aerial Investments. And Charlie, you predicted that NASDAQ had run too far, too fast, and that these FANG names are going to collapse and the growth names and values going to outperform. And it finally happened. You waited several years for that to happen, but now everything is in a downtrend. So what do you expect to happen next? Well, we had two things that were at bubble levels. We had growth in tech stocks and we had bonds, both trading at irrational levels. We had interest rates that made no sense, negative real interest rates. We still have negative real interest rates. So those two things combined with the power of inflation, which you and I've been

talking about for at least 18 months, which it continues to be underestimated. So you had those three factors, bubbles and bonds and tech stocks and unforeseen by the market inflation. That's all coming together to produce some areas of return. I mean, I am feeling everybody's pain, but the fund that I run was flat on feeling everybody's pain, but, you know, the fund that I run was flat on the year as of this morning, mostly through commodities. Oil and fertilizer stocks and gold stocks have held up very, very well here. So, look, I still— Is that still the play? Say it again?

Is that still the playbook? Absolutely. Against inflation through commodities? Absolutely. These names, these operating companies, I wouldn't own the raw materials. I'd own the companies, Mosaic and Apache. Apache's trading at five times earnings, maybe four times earnings. Mosaic, there's going to be a lot of demand for fertilizer. We've got food shortages in lots of the world. Corn is at $8 a bushel. There's going to be a lot of demand. So that is the way to play this. And then the other way to play it is to keep your

bond portfolio short. We still should have the 10-year Treasury way above 288. That's a level that's too low for this inflationary environment. That number is going to go to 4 percent, in my opinion, certainly this year. So the flip side of your whole view, Charlie, is if growth really starts to slow down. We got a negative print on GDP. A lot of people think we are going to slow, given all of these headwinds, including the Fed getting aggressive on rising rates. If that were the case, wouldn't you want to be buying bonds? And an out of that trade? Because we've seen some they're pretty extended right now,

that sell-off. Yeah, not at an 8% inflation number. I think we're going to have inflation actually up over the next couple of months. We're not going to see inflation peaking until the summer. And then next year, we're going to see inflation way ahead of the people talking about 2% or 3% next year. So at those levels, you should not be buying bonds. Corporate spreads are still too tight. Those are going to widen out. Keep your duration short. The other things to be doing are, frankly, real assets. Don't be afraid to own a home here. Warren Buffett talks about the value of owning a home, and there are still good value there. Real assets look real

good right now. Charlie Berbinskoy, thank you very much for joining us from Aerial Investments. Flat on the year. Learn that too. We're going straight into the Closing Bell Market Zone here. CNBC Senior Markets Commentator Mike Santelli here as always to break down these crucial moments of the trading day. Plus, Deirdre Bosa on Amazon's big sell-off. Pipers, Chris Donut on his downgrade of Visa and MasterCard. We'll kick it off with the broad market because we are near session lows again in this final hour of trade. And it caps off a rough month for the major averages for the month of April. Worst month for the Nasdaq since going back to October of 2008.

Looking at declines pretty much across the board. There's the S&P 500 down 3%. And Mike now down about more than 8% overall across the board. There's the S&P 500 down 3 percent and Mike now down about more than 8 percent overall for the month. We thought April was seasonally strong and that we were going to get a rebound here. What do you what do you make of the earnings? Do you think they are being taken as poorly? Do you think they are as poor as they are being taken by the market? No, I wouldn't say across the board they're as poor. They're obviously spotty. And also the areas that are where you're seeing the beats, they're getting rewarded

modestly. I think the big question is, you know, the market just couldn't withstand huge mega cap disappointments like we've seen. That's obviously a quite obvious statement. But Amazon, it basically got half and half, right? Apple, Microsoft did fine. Alphabet, very mixed, but skewed to the negative. And then, of course, Amazon, Netflix, to the downside. So all those things are a little bit too much weight. Now, where do we sit? Almost 14 percent from our highs in the S&P 500. You've been chopping around this minus 10, minus 12, 13 percent for a while. The forward P.E., because the overall earnings have held up, is just above 18 right now. For what it's worth, when we've bounced

in the market over the course of this year, it has been in the vicinity of 18 times forward earnings. We'll see if that matters going from here. So you're calling for a bounce, is that it? I'm saying that the ingredients are there, but they were also there a few days ago. True. Amazon, let's hit it. You mentioned it getting wrecked after reporting much weaker than expected earnings due to the slowest sales growth in nearly two decades and a huge loss from its stake in electric vehicle maker Rivian. The company also forecasting second quarter revenues that will come in lower than analyst estimates. Deirdre Bosa joins us now. Deirdre, how much pricing power does Amazon really have and what is going on with demand?

Well, so there's the stuff that Amazon controls, like the price of its prime memberships, as well as that high margin AWS cloud service costs. But then remember on its core e-commerce platform, nearly 60% of sales are made up by third-party merchants. So if you think that Amazon is having a hard time dealing with inflationary pressures and supply chain, what about those small and medium-sized businesses that are selling on the platform and using things like FBA fulfillment by Amazon to fulfill those orders for inventory, logistics, etc. We know that Amazon, Sarah, spent a ton of money over the pandemic to double its network. But what they said on the call last night is that that has actually led to extra capacity. So this

year was supposed to be a harvest year. Investors enjoy all of that investment, but that Amazon made over the last years. But now it's looking like Amazon has still more work to do while it contends with some of the slowest growth that we have seen out of the company. So all of that is a perfect storm. And that is why you are seeing the stock just plummet today. This is a traditionally beloved stock by research analysts on the sell side. What are they saying today? I'm sure the targets are being lowered, but are they sticking with the stock as a buy? Yeah, I mean, I think that the fundamentals haven't really changed. And if any company is able to solve these problems, it is likely Amazon, B of A, in their note this morning,

says that these problems are all ones that can be fixed. So still largely positive. I did speak to a hedge fund manager, though, Sarah. You know, they're more in and out of this name. And this fund manager told me that he was actually short Amazon because he prefers some of the reopening names like United. He said, though, that he was going to get out of that short and take some profits. So that may be a bullish sign. It's a profitable day for him, whatever that means. Mike, Amazon down 15 percent. It's now down about 35 percent from the highs, just like another fang name after Netflix and and Meta that has collapsed. And I do wonder what the

ripple effect is that of that on 401ks, on index funds. These are so widely owned stocks that have been working for so many years. Right. The pressure on the overall benchmarks and your average portfolio has been outsized. In fact, just the way they rewarded you more than they, you know, than the overall market did last year. I do think there's a secondary piece of it, which is you've had you've had to basically consider the potential for downside from these mega cap stocks to be greater than you thought a year ago. When you can lose a couple of hundred billion in market cap in a blink, as you've done with a lot of these names, I do think it just lends itself to being more defensive. The good news is, by all accounts, all the brokerage firms, say hedge funds, especially in tech, are already rather defensively

positioned. They already have kind of lightened up. And so now it's just about, you know, kind of a bleed lower in a lot of these these names. And the average stock, for better or worse, is outperforming the largest ones this year. Take a look, guys, at the Dow. We are making new lows right now, down more than 800 points, 830. Lows of the session, only Dow stocks higher. Honeywell and Merck, everybody else is falling. United Health, Goldman Sachs, Microsoft and Home Depot are the biggest drags right now on the Dow. It just goes from bad to worse here as we cap out an ugly month for stocks. One bright spot, Chinese tech stocks. Who would have thought on this down day? The K-Web ETF up 7 percent after reports that the Chinese government said it may ease off on its

crackdown of big tech firms and implement policies to support growth. Let's bring in Gary Dvorak, managing director at Blue Shirt Group, advises companies ongoing public like China. Gary, so what do you make of all these tea leaves? A report in the journal reported in Bloomberg that they really are going to change their tune when it comes to regulating big tech in China. Well, hey, Sarah, thanks for having me on. You know, obviously, on the margin, it's great to see that. And the way I'm looking at it is these companies, you know, look at our giant Internet companies and how they're struggling right now in a relatively good economy. Now look at China. You're taking the same gigantic companies that their economy is so dependent on, and

literally millions and millions of people work for these companies. And then you're putting on top of that the lockdowns in Shanghai, a much weaker economy in China than the U.S. And so even on the margin with the good news that we're getting today, I don't think we're out of the trouble zone yet. Down 921 points, another leg lower here on the Dow Jones Industrial Average. Mike, these stocks are so sensitive to any whiff of good news on the regulatory front, on the China stimulus front, because they've been battered so hard. So you've got a Pinduoduo, which is sitting at the top of the Nasdaq 100 right now. It's one of the few stocks higher still seventy percent from the highs.

Yeah I mean obviously they they led us down into into this kind of tech bear market obviously very headline sensitive. You know I feel like they've largely been abandoned by by many of the U.S. investors that thought they were great vehicles because they had kind of two things going for them both China growth and just general Fang attributes. That's kind of gone. So I think they're effectively just trading stocks at the moment, unless you really have some kind of high conviction that, in fact, longer term, policy is going to change and those markets are going to be allowed to flourish. So, Gary, what do we need to see to see that? Because you sounded a little tentative too in terms of how much how much room there is for these companies to do better in this kind of environment where China still is dealing with the lockdown and some uncertainty on the regulatory

front. Yeah, well, I think the central government is going to support them from the standpoint of reducing the regulatory burden and, you know, a lot of the cybersecurity investigations and things like that, the biggest overhang is still going to be the uncertainty around the audit issue because that is not resolved. And frankly, the biggest risk right now to those stocks is what the SEC does because there's a good possibility they'll accelerate the deadline for the PCAOB compliance. And if they move it to this year instead of 2023, that means that basically means two audits that are noncompliant and you're delisted. That means this year's audit has to be compliant. So all these companies have to really scramble to solve their audit situation if that gets accelerated, if the governments don't

resolve the issue. Gary Dvorak, we'll leave it there. Thank you very much. Despite the strength in those Chinese internet names, the Nasdaq is getting pummeled today. It's down 4 percent right now at the session low, with the Dow down more than 900 points. Intel not helping, sinking after issuing weaker than expected earnings and revenue guidance in its quarterly report yesterday after the bell. The chipmaker did report a beat on the top and bottom lines for the first quarter, but Mike, not being received very warmly in this kind of market, especially when you have guidance that disappoints. After TI, Texas Instruments this week, what have we learned about the cyclical group of the chips, which is sharply lower right now? Yeah. Well, PC exposure is something that you kind of can't escape for an Intel,

and that's something that nobody on the street wants right now. Really just kind of sagging also on a long-term basis. I mean, this is basically looking a bit like a value trap, as it's looked a few times over the last few years, because it really does appear quite cheap. There you see on a five-year basis at the very bottom end of this range, and it's spent a tremendous amount of the last five years in the 40s and 50s. It hasn't really fully participated in the upside as they continue, of course, to have huge capex. Clearly, investors at some point could decide that it's moving in the right direction, that Pat Gelsinger is making the right decisions, moving the company in a strategy that's going to bear fruit. But patience is wearing thin and estimates are going down. It's just really hard to own tech stocks when the when the

forecasts are falling. And it's really hard to own it when there are questions about inflation and the economy and Fed rate hikes, which is all weight on the sector. Information technology is the second worst performer right now. Actually, third. Real estate down there and consumer discretionary as well. Mike, we're going into a Fed meeting next week. Are we feeling any kind of capitulation and washout ahead of what is likely to be a major catalyst? Or is it already baked into the market? We expect a 50 basis point hike. Pretty much Powell told us that last week. Yeah, I think it's fair to say it's clearly baked into the bond market. In the stock market, you've had, you know, I would say four pretty good washout days.

You'll have to see how the stats stack up at the end of today to see if you finally start registering some real dramatic capitulatory numbers. It actually hasn't been the case. The market has not gotten super oversold just yet. Even the breadth numbers, people want to see this sort of like a nowhere to run, nowhere to hide type of dynamic. That hasn't quite been the case. Again, after today, that might change. A lot of folks saying who are kind of been riding this downtrend and say, you know, S&P probably should crack below 4,000 to really cleanse things. And that's only a few percent down from here. No, Bank of America, as Michael Hartnett put out a note today, saying 4,000 would be a big exit point for the market and a few percentage points away. The list of new 52-week lows is long today. Disney, lowest since July 2020. A lot of the banks are on it. Citigroup, Goldman Sachs,

JP Morgan, Morgan Stanley, PNC, Truist, T. Rowe, U.S. Bancorp, all making new 52-week lows at least, going back to lows since 2020. Take a look at the credit card companies Visa and MasterCard. They're under pressure as well, along with the broader market. Piper Sandler downgrading both names, saying growing recession risk in Europe in particular will hurt revenue. Joining us, the analyst behind the call, Chris Donat from Piper Sandler. Chris, I thought the big news this week from Visa is that they're not seeing any evidence of a consumer slowdown. Right. Yeah, I thought the quarters for Visa and MasterCard were excellent. The trends are all very good up through April 21st. What we're looking at, and thanks to our macro team, we're leveraging their research.

But if you look at some of the leading indicators for what should happen later in 2022 and into 2023, that there should be some negative trends for Europe that put pressure on Europe. So we're concerned about that because MasterCard gets nearly a third of its payment volume out of Europe. Visa's a bit less, but these are big markets for these companies. So if there's recession in Europe, there's going to be a little bit of slower growth, slower earnings coming from MasterCard and Visa. What about American Express? What about PayPal? What about some of these other names? Yeah, so PayPal is another stock with significant exposure to Europe, about 30 percent of PayPal's revenue. That's a stock where with it being down 50 percent year to date,

I think it reflects a lot of the European pain and some other phenomena like e-commerce concerns. American Express expressed less exposure to europe it's two-thirds of the business is u.s it's only you know around 15 is europe so not as important for europe for amex uh and we think american expects is a company that benefits from the strength of high-end consumers uh particularly us yeah uh so strength of those high-end consumers, particularly U.S. states. Travel, too. Yeah. So, frankly, those high-end consumers. And with, you know, some of the trends we're seeing for Visa and MasterCard is debit spending is getting to be kind of flat year on year. Tough comps, again, some of the benefits from the stimulus package in the United States,

but tougher on lower-income households. Chris Donat, thank you for joining us. Changing to underweight ratings on MasterCard and Visa today. As we speak, the Dow is down just about 1,000 points, Mike, with two minutes to go in the trading day. Yuck. What do you see in the internals? Yes. Well, it's relatively ugly, Sarah, but again, maybe not as skewed to the downside internally as you would expect to see or maybe would like to see. As you see right there, it's less than six to one negative to positive volume on the New York Stock

Exchange. You want to see maybe eight or nine to one to really say people have sprinted out of this market. I mentioned the mega cap stocks have continued to be the main pain point. Look at the equal weighted S&P against the standard market cap way to one on a month to date basis now both down significantly but you have about three percentage points of advantage from the equal weighted one which of course is something you can own uh through an etf the volatility index spike back up it's tried to kind of crack below 30 a few times this uh this week and make another spike on the chart not quite there we're going to go out into the weekend at the highs typically not a bullish thing i would going to go out into the weekend at the highs. Typically not a bullish thing. I would want to point out, though, Sarah,

remember last Fed rate hike meeting in March? Market was awful going into it. It actually had a buy on the news response once we got the hike. See what Powell says this time next week on Wednesday. Down 995 points here with less than a minute to go into the close. UnitedHealthcare, Goldman Sachs, Microsoft are the biggest drags. It looks like we are ending the month of April, which was a brutal one for long investors, on a very strong down note right now. Down 3.7% on the S&P 500. NASDAQ 100 down 4.5%. That will cap off the worst month for the Nasdaq since October 2008. The depths of the financial crisis. Nasdaq composite down 4.3%. And the Dow going out with a loss of 980 points or so. That is going to do it for me here on Closing Bell. Have a good weekend, everyone.