Closing Bell - Closing Bell: Ugly First Half Of The Year, Tech Technicals & CEOs Of Pepsi & HP On Recession Risks 6/30/22

Episode Date: June 30, 2022

Stocks slumping as the market closes out the worst first half of the year in more than 50 years. Allianz Chief Economic Advisor Mohamed El-Erian says the market has not fully priced in the Federal Reserve's aggressive interest rate hikes into a slowing economy. Wharton Finance Professor Jeremy Siegel explains why he thinks the economy is already in a recession, but does not think it will be a severe one. HP CEO Enrique Lores & Pepsi CEO Ramon Laguarta discuss how recession fears are impacting consumer spending and their businesses. Fairlead Strategies Founder Katie Stockton looks at whether the recent rally in mega cap tech stocks is more than an oversold bounce. And BD8 Capital CEO Barbara Doran says she sees opportunities to buy stocks in the consumer and tech sectors.

Stocks are falling as we head into the final moments of an ugly first half of the year. The most important hour of trading starts now. Welcome to Closing Val. I'm John Ford. And here's where things stand in the market. Well, you know, I've been clawing out of a hole, but now the major indices are heading back down. We'll see how far in this final hour. The Dow is off about 284 points. The S&P down a little shy of 1%.

The NASDAQ bearing, worst of all, down about 1.2%. And let's take a look at the top performing Dow stocks in the first half. Chevron and Merck way out ahead. The biggest decliners so far in 2022. Disney down 40%. And Nike, Salesforce, Home Depot, and Boeing all down sharply as well. We've got a great lineup of experts coming your way to help break down today's action. Explain what they're watching as we head into the second half of the year,

including Mohamed El-Aryan from Allianz, Wharton's Jeremy Siegel, Bob Dahl from Crossmark, Katie Stockton from Fairlead and Barbara Doran from BD8. And let's get straight to the market as we wrap up this first half. Just about 58 minutes and change left over. Mike Santoli is here to put this rough start to the year in context. Yeah, John, the first half is dying the way it lived. Caught between these twin concerns of stubborn inflation that's going to keep the Fed in a hostile mode toward financial assets. And then, of course, concerns about a stalling economy. The result here is a

pretty well-defined downturn we've had so far. This is a two-year chart. So this shows you we peaked right at the start of the year, especially since early April. It's been that pretty steep decline. These bounces have been relatively fleeting, unconvincing. The last one that started with the mid-June low, we were down just above 3,600 for an intraday low, 36.36. You got about 9% above that quickly, and it's given most of it, if not all of it, back right now. At some point, one of these will be the real one. We don't know when. One thing I'm kind of focused on here is where we're gone back to. So it's sort of a year and a half of gains that have been more or less unwound. This area right here is somewhat interesting, though, because early

November of 2020, when we got the Pfizer-BioNTech vaccine results and the market shot higher, that's kind of high 3500s, 3600. It was right about there. So who knows if that's going to be sort of a touchpoint out there. Now, the the two year treasury yield shows you what the market is now gearing for in the way of Fed expectations now this is also a two year you see it just kind of accelerated up it's declined from about almost three and a half down below three percent it's taken basically two quarter point Fed rate increases anticipated in the next two years out. There's other ways of looking at this as well. The market thinks the Fed's going to try to push rates higher into the end of the year or the next few months perhaps if it can.

And then it's probably going to be cutting next year presumably because the economy couldn't handle it. Now, Mike, we keep saying worst first half of the year since 1970. It's weird on this chart, though. It's like the drop happens right at the beginning of January. It's like, happy new year, not so happy. And also interesting, losing a full year's worth of gains in half a year. It's all very nice and neat. It seems very tidy. I agree with you. Now, it is a little bit of a fluke that we happen to peak January 3rd. There have been other six month periods that have been comparably weak. And also, if you talk about going back 18 months, you know, when we bottomed in late 2018, also in early 2016, had severe corrections, you were basically going back almost two years,

in other words, in terms of the levels that you bottomed at. So that's nothing too odd about that and sort of unwinding the gains that way. Well, heck of a New Year's hangover. We'll see if this market will be reborn on the 4th of July, Mike. Thanks for more on this market. Now let's bring in Mohamed El-Erian, Allianz chief economic advisor. Mohamed, here's my probably biggest question about the overall economy as we head into the second half. It looks like consumers are still spending, but they've been spending down their savings. Inflation remains stubbornly high. The essentials cost more and the cost of borrowing

certain to rise. So is there the risk of this consumer vice where consumers could slam the brakes more quickly than historically? Thanks, John, for having me. Yes, absolutely, there's the risk. We left out three additional things. The Fed is hiking aggressively into a slowing economy. The fiscal impetus is now negative and exports aren't doing too well. So you have these various components all coming together and slowing our economy much faster than we'd like it. Does the Fed have any choice, though? No, it doesn't. It was late and it fell into the worst trap, which is you have to play catch up.

But your window for hiking rates in an orderly fashion has closed so rather than helping the economy soft land the Fed now risks actually contributing to a hard landing and that's that's of its own making because it is so late right so let's look at the delivering alpha stock survey. We asked 500 money managers about how the Fed has been doing. Fifty five percent said the Fed is rightly getting more aggressive in fighting inflation. You just said they don't really have any choice, but sure would have been nice if they had started fighting it earlier, what do you put as the odds that the Fed is going to end up with a hard landing because of the corner they sort of painted themselves into? Unfortunately, John, it's a very high probability. The Fed is a good year late. So when you are so late,

you're going to have no choice but to hike aggressively. And let's not forget that it also has to reestablish its damage credibility. So I'm afraid that it's a high probability. It's uncomfortably high and it's worrisomely high. Now, that's different from what a lot of people have been saying that I've been hearing. And I've been this week, saying, oh, well, a recession isn't the base case scenario. And here are all the ways a soft landing could happen. Various CEOs have been saying this. It seems like nobody wants to say what you're saying.

But does that mean that the scenario you're laying out is not priced in as far as what you say is likely to happen in the second half, where a lot of people are in denial. So as Mike said, we've started to price it in. The first driver of the sell-off was all about interest rate risk, about the fact that the Fed was behind, it was going to have to hike, and the market was pushing the Fed to hike. And the market got carried away in terms of pricing in quite a few hikes. That was phase one of the sell-off. In phase two, recession fears started creeping in. And that is what's driving the market right now. It is much less inflation fears. It is now the mix of a recession fear and also the realization that the probability of a Fed policy error is very high.

Okay, so how then should investors think about the second half of this year and the signposts they should look for to see whether that worst case scenario is panning out? In my mind, I've been imagining, hey, when consumers get back from these vacations that they're determined to take because darn it, we deserve it after COVID, the credit card bills come in and maybe they go, wait a minute, we got to tighten up.

Is that an important potential moment? And how does that show up in the data, if at all? It is a potential moment. And we're already picking up a declining saving rates. And we're already picking up declining cash, readily available cash to pay bills. A latest survey by the Wall Street Journal shows that that's now down to 50 percent of people who feel that they have readily available cash for big bills. So we are picking that up. Look, John, the hope is that somehow we will get something on the supply side that will help us.

I don't think we can rely on the demand side. We need some good news on the supply side. Now, there is some good news. You know, today alone, the commodity index is down 3%. We just have to stop inflation broadening and destabilizing inflation expectations. And we need more wealthy consumers to keep spending, I imagine, because we know that the working class, the poor, with all of these must-haves, like gasoline getting more expensive, have less to spend on durable goods, right? Yeah, and you touched on a really important point, which is why I've been so upset that the Fed hadn't moved earlier. The sort of outlook that

we're looking at right now is going to be another great unequalizer. It's going to hit the low-income segments of our populations particularly hard, and they already have used up a lot of resilience. So there's also a really important social aspect to it, John. Yeah, important downside scenario that we're looking very seriously at that investors and everybody else should consider. Mohamed, thank you. Thank you, John. Still ahead, we're going to talk much more about the market action and second half ideas when we welcome Wharton's Jeremy Siegel and Crossmark's Bob Dahl. And up next, the founders of two recently public companies whose stocks

are sharply lower from their launch price. Bumble's Whitney Wolf Hurd and Jessica Alba from The Honest Company discuss the volatility in their shares next. You're watching Closing Bell on CNBC. Let's check out today's stealth mover, Universal Health Services, which is one of the biggest losers in the S&P 500. The hospital management company is slashing its full year earnings guidance because a significant decline in COVID cases hurting patient volumes. Well, that's a positive reason, at least. Now let's head out to Colorado, where Sarah Eisen is at the Aspen Ideas Festival. Hi, Sarah.

Hi, John. Good to see you again. I just moderated a panel today with two prominent female founders, Honest Companies, Jessica Alba and Bumble's Whitney Wolf Hurd. Both companies went public last year, February and May of last year, in much better market conditions. They both had big IPO first day pops. And then look at what's happened to the stock price since, tumbled. I asked them about how they think about the stock pricing during this current prolonged downturn that we're seeing in the market. It's COVID. It's every issue is is everything sort of like rising to the top. And there's a big it feels like there's a reckoning in every area.

And it's hard. Yeah. I think I, I don't know what you've been doing, but what I've been trying to do is I just really remember that that's not the right number to watch, right? That's not the right metric to pay attention to. How is the health of your business? How is the health of your team? Are they okay? Are they hanging in there? Are they feeling inspired and motivated? And how can we focus on just continuing to drive impact, right? Are people finding value from the products? And that's ultimately over the long run what makes a stock successful, right? And so it's life though. There's daily volatility in everything. It's the big picture. It's what you're trying to get up and achieve, you know, what you're doing in the morning, right? What goodness are you trying to put into the world?

And then how much you want to play the short game versus the long game. I mean, you know, thinking about sort of like, what is your mission? And are you driving that mission forward every single day? For us, it's our mission and it's also innovation and it's continuing to move the needle because if we don't do it no one else there's no there's no one else doing it right and no one's going to do it quite like us and so it's important that we continue to stay on course and not let the outside world kind of distract us from our mission. Alba said that the whole going public experience was,

she called it an out-of-body experience just because of how male-dominated it has been. She cited a stat that between 2013 and 2020, only 18 companies went public with a female CEO or founder. So clearly there was a lot of talk about how these two women were breaking barriers. And what Whitney said of Bumble, John, was that going public was actually a huge milestone because it showed that her business, which she created as a dating website for women to make the first move to empower women, was not just like a girl's thing. She said it became a serious business and she was able to prove that in the public markets. And she finally thinks investors get that now,

even though the stock has obviously been hit really hard since his IPO. Both of them high profile, inspiring founders. I'm going to be a little cheeky here. It seems lately to me that rich people and investors with cash on the sidelines are a lot better at seeing the big picture. I wonder to what degree these companies are going to get pushed to reprice equity awards for the rank and file who had not only big hopes, but big expectations that their compensation would be at a level that it's probably not going to be at based on the current levels. Well, we did not get into that topic. It's a good question, John, but clearly the environment is changing in terms of belt tightening

and if we are facing a consumer slowdown, how these growth companies are going to tackle it. It's really the first time they've been public and seen any kind of downturn. And my big takeaway, honestly, from this conversation is that these women are, they're thinking about the big picture and the long term and doing good and the whole idea of a mission driven company. It's not

just mumbo jumbo that we talk about and Aspen Ideas. You know, they are thinking about how to improve the lives of women, both companies. And in Bumble's case, you know, Whitney has been extremely vocal on the Roe v. Wade decision by the Supreme Court, called it devastating this morning on an interview on CNBC, doubled down today in our conversation. And how they're approaching these issues at the same time keeping their businesses growing and trying to prove that they can disrupt, in both cases, much bigger industries. Procter & Gamble and Kimberly-Clark in the Honest Companies case. And of course, with Bumble, it's IAC, Match Group, Tinder, where Whitney used to work. So they're focused on the long term. They're focused on doing more than just shareholder capitalism, I would say. But clearly, these models are going to be tested because we are in a difficult economic environment. Do we have a David and Goliath equivalent for female founders and CEOs?

You know, something that's not so male metaphor? I'll think about it. Think about it. It's a good question, but it is like that. Sarah, thanks. You're on the right track. Let's check the markets because as I mentioned at the beginning of the show, really on a downswing in this last hour, and that has accelerated the Dow now down 1.3 percent. That's more than 400 points. The S&P down one and a third. The Nasdaq down knocking on the door of two percent. Up next, oil and energy stocks pulling back on this final day of the first half. But it's a different story for solar stocks. We will tell you what's behind that divergence. And as we head to break, check out some of today's top search tickers on CNBC.com. The 10-year yield again, followed by the S&P, Bitcoin, Tesla, and the Nasdaq.

We'll be right back. Here's a real bright spot in today's trading, solar stocks. CNBC.com's Pippa Stevens explains why these names are hot today. Pippa. That is right, John. Solar stocks are getting some love with the Invesco Solar Fund, up 2.6 percent, and it's holding on to a slight gain for the month in what's been a bleak time for the broader market. Looking at today's winners, those include names like Scholz Technologies,

Maxion Solar, and Jinko, all up more than 7 percent. Sunrun is also on the move. Bank of America reiterated its buy rating on the stock today, saying the street is underappreciating the company's pricing power. B of A did take its target down from 45 bucks to 40 dollars, but that's still about 70 percent above where the stock is trading right now. But despite this recent strength, many of these names are still sharply below prior highs. The group's been hit by numerous headwinds, including rising rates, policy uncertainty, and supply chain issues that have forced companies to hike prices for consumers. So, John, some sunshine today,

but a cloudy outlook here over the past few months and year to date. And of course, we're all watching the forecast for the second half. Pip, thanks. Up next, highlights from Sarah Eisen's conversation with the CEOs of HP and Pepsi from the Aspen Ideas Festival. Find out how rising recession fears are impacting their businesses when closing bell returns. Let's get a quick check on the markets. The Dow is down 300 points. Convac Summit was down about 400 points. The S&P off by 1%, the NASDAQ off by about 1.4. And now let's head back out to Aspen, where Sarah Eisen spoke earlier with the CEOs of HP Inc. and PepsiCo. Sarah, what'd you learn? Well, it turns out, John, they went to the same business school in Spain, not at the exact same time. We had a wide-ranging conversation

with Enrique Lores from HP and Ramon LaGuarta from PepsiCo, talking leadership, sustainability, diversity, and more. Of course, I also asked both of them whether they think the U.S. is heading into a recession. Listen. I don't think anybody in the world is able to say whether we are going to have a mild recession, big recession, or if the economy is going to recover because something that nobody is expecting today will happen. What we need to do as leaders of our companies

is being able to be ready to manage the company in whatever happens, and this is really where our focus is now. But are you seeing a change in the environment? Are you seeing it show up in the business? Well, what we see is the same things you see. We have seen, as we said in our last calls, consumer demand is weakening,

inflation continues to grow what where that this brings us super hard to predict i know you're a little limited you're in quiet period but is there anything you you want to say about the consumer environment i think uh obviously this huge inflation is going to hurt consumer and it's going gonna force consumers to adopt some you know different strategies to make their budget work now to your point on recession i think europe will have probably more impact than other parts of the world i think europe is is is hard right now if you think about the energy cost you think some of the food cost in europe is going to be impacting the consumer and the business. I think the U.S. has much

more healthy unemployment levels and economy at this point. So, to tell you the truth, we have labor challenges in the U.S. We cannot fulfill our demands sometimes in our factories. So, I think the U.S. probably has more chances of

navigating through this with maybe minor demand impact. But we have to slow down inflation for sure. That is something that is not healthy for us long term. Emerging markets, to my surprise, they're doing very well in terms of demand, especially Latin America is a part of the world that I think is getting a lot of money from the U.S. So there's a lot of money that is going down to Mexico and other, you know, Central America from people that are working in the U.S. High levels of employment here, higher salaries. So that's helping their macroeconomics. Legarto was very bullish on Latin America. Overall, the conversation really centered on how to create and shift an organization to become purpose-driven,

even during times where we're seeing an economic slowdown like this. We talked about the environmental priorities, and both men actually welcomed regulation on this front to try to create more of a standard. Both of them also exemplify this purpose-driven leadership, and that's why they get credit from places like Just Capital, which does the rankings on ESG metrics that we follow closely and partner with on CNBC. And just for a sense of it, Pepsi's number 12 overall out of 100 on the list, number one in its category in those prominent rankings. HP is 27 and third in its industry. They track everything, John, from how they're doing on the environment to how they're doing with their workforce and policies for employees. Definitely things we talked about, but also things that investors are now wondering,

how do we hold these companies accountable? And should we value them in the same way if we're in an economic period where cash flows and profits are really the priority? Yeah, important question. Also, very interesting observation from Pepsi on remittances. Sarah, thanks. Sarah, honestly. Here's where we stand in the markets, trying to make up some ground in the last half hour of the first half of the year. The Dow now down just 230 points, the S&P off by three quarters of percent the Nasdaq off by just over 1% and up next Jeremy Siegel and Bob doll discuss whether a comeback could be in the cards for the market during the second half of the year and

as we had to break check out Bitcoin down sharply again today falling below $19,000 now down nearly sixty percent for the year so far first about twenty four minutes away from closing out the first half of the year it has not been pretty joining us now is jeremy siegel professor of finance at new pens wharton school of business also with us bob doll crossmark global Crossmark Global Investments Chief Investment Officer. Welcome to both of you. Professor Siegel, I really want to know whether it's guidance, earnings revisions, direction of gas prices. What's that most important signal that you're going to be watching for in the second half of the year to determine whether we're heading into a serious recession or not?

Well, John, I think we're in a recession. I mean, the data this morning was very bad. I mean, not on the inflation front, but on real spending. And the indicators that I look at, the forecasters now say second quarter will also print a negative GDP growth number. As you know, minus 1.6 percent in the first quarter. Now, it is a technical definition. It isn't followed by the National Bureau exactly. Two consecutive quarters of declining real GDP generally signal a recession. We don't know whether they're going to go to sleep. That professor is why I said a serious recession. What are you watching to see if it's like a really painful one or a longer lasting one versus just a technical one?

Well, I mean, it's a it's a real one, whether it's going to be shallow or deep. We'll get to B.C. I mean, listen, we have to look at commodity prices. I'm not surprised the 10 year drop below three. I mean, that's telling you really big slowdown because with inflation in the 10 year below three commodity prices falling everywhere. I don't think it's going to be a severe recession, John. But I think that we are in one of the most unique, unusual recessions with unemployment 3.6 percent and a strong labor market. Yet demand and inflation is eating away at the purchasing power of the consumer. Right. Yeah. Working to to move backwards more slowly, perhaps for a lot of the population. Bob Dahl, what about it? Is this market pricing in what you think is realistically likely to happen in the second half? Or is there

still this idea out there priced in that earnings are going to be higher? Earnings are the key to answer that question. And I think most of us are now of the view that earnings aren't going to be continue to go higher as they did the first six months this year. The question is, how much lower do those estimates go? I'm with the professor. I think it's shallow. We don't have a playbook for this. I don't think the NBER will say we had a recession based on the technical first and second quarter. I think it's going to be more about bumbling along as the market's likely to do with a lot of choppiness and volatility. Inflation probably is coming off commodity prices as we just talked about. So we're getting a little less inflation, a little less earnings. Maybe that

means the focus in the second half is more on earnings and less on P.E. That doesn't mean we go straight up, but I think it can be bouncier and frustrating both the bulls and the bears. That would be nice, Bob. But how vulnerable is this market to an external shock like an extended, you know, China covid lockdown that we got in the first half of the year that took a bunch of people for a loop? I mean, are we kind of like on tenuous ground that this is shallow and that we navigate well through it? Yeah, tenuous is a good word. I mean, how long does the war last? One of the ramifications of it, COVID, you're absolutely right. Look, as the interviews that Sarah did at the bottom of the hour, Europe's facing a lot worse than we are here in the U.S. We'll manage our way through somehow.

Don't forget, consumers still have $2 trillion of excess savings on their balance sheets. That will cushion the inflation problem a bit. And, of course, we still have a pretty strong labor market, even though it's weakening somewhat. So I think we'll make our way through here a bit longer. I'm not saying no recession ever, but I think we can push it off a bit here. Professor Siegel, President Biden said, I believe earlier today, that the U.S. is going to back Ukraine as long as necessary, whatever the implications for gas prices and inflation, et cetera. Is that priced into the market?

Well, you know, we actually see those gasoline prices falling on the wholesale level and the retail level, natural gas falling. You know, John, you know, it might surprise us four weeks from now we have the Fed. Everyone's saying 75 is a is a slam dunk. If we continue to get the weakness that I see, it might be 50, maybe 25. You know, then I think we're near the bottom of a bear market. Once investors can can see, hey, I can see that peak of the Fed in terms of hiking. I can see that road down away. It may be a recession, but, you know, it's been mostly rates that have sent down stock prices more than profits. Really, profits have held up fairly well. It's been the rates. If they can see

if we can see a peak in rates I think that would actually stabilize the stock market yeah okay maybe things have gotten bad enough and so it's like a sunny recession scenario I like it Professor Siegel Bob Dahl thank you thank you up next chart expert Katie Stockton looks at whether the recent rally in mega cap tech stocks is more than just an oversold bounce. That story plus missed messages. Can I say mixed messages about the state of the consumer and a countdown to Micron's earnings when we take you in the closing bell market zone. VDA Capital CEO Barbara Duran is here to break down these crucial moments of the trading day. Plus, Katie Stockton on mega cap tech stocks and Christina Parts and Neveless looking ahead to Micron's earnings. Stocks pairing some of the pain from earlier in the day, but year to date, the major average is still well in the red.

The worst performers on the Dow in that amount of time, Disney, Nike, Salesforce. The Nasdaq is set to finish the first half down nearly 30 percent with Netflix, Align Technology, PayPal and DocuSign among the worst performers. Barbara, what has distinguished itself positively or negatively today and heading into the second half? Well, certainly the market action has not been on the positive side. And I think the restoration hardware news this morning was very unsettling because investors are very concerned about earnings. It seems the market has discounted the Fed rates. We've seen PEs come in from 21.5 to 16, 16.5 for the S&P 500. But now the big concern is, OK, we've seen signs of growth slowing everywhere, whether it's housing, retail, the commodity prices. The question is, how deep is it going to be?

Are we heading into recession? Probabilities have gone up to over 50 percent in consensus numbers there. So it's now a concern with the restoration hardware coming out this morning and disappointing, cutting their numbers. People are saying, oh, my gosh, this is a sign of things to come over this next few weeks as we see many more company earnings reporting. So, you know, that is, I think, the downside. The good side this morning was the PCE number. We are seeing signs, small as they are, that inflation is beginning to moderate. And that will probably take some time. We don't know. I don't think most people expect to see a big drop, but I think that is

a positive. And I think there's a lot to talk about today in terms of this market action. Yeah, Barbara, you mentioned RH. I've been calling it devastation hardware. Shares of the retailer are down after the company slashed its outlook for revenue, now expecting negative annual sales growth versus prior flat to up 2%. CEO Gary Friedman blaming slowing luxury home sales and the Fed's rate hikes. Not all doom and gloom for retail, though. In a new note today, Stiefel said its latest survey shows the U.S. consumer remains resilient, but warning spending intentions for the lowest-end consumers and high gas prices hurting sentiment.

Stiefel saying Costco, Monster Beverage, Celsius Holdings are favorite retail names. Barbara, we were just talking about this earlier in the show. It seems like two different economies, even more than usual, for the poor, the lower middle class versus those that normally have a bit more money to spend. And yet, is there the risk of even those higher end consumers, at least, you know, financially reflected in these restoration hardware numbers starting to feel a pinch? Well, I think you're definitely right in the lower income. We know that most of the income on lower income, say under $75,000, goes toward food, housing, gas, and they're

definitely going to feel the pinch with higher prices. Now, on the luxury, I think that Restoration RH comment was about thinking that because you're seeing luxury housing down, the demand down 18% right now, that that will spill over into them. It's going to be interesting to see. I mean, for them, you don't know how much was pulled forward because we know there's been so much demand that was in the hard goods, which has now switched to services. So I think it's a little bit murkier with RH. But certainly, we're not seeing, I don't think, as much hurt in the luxury end, although every stock holdings and bonds are down tremendously this year.

So that's got to make people feel poor, even at the high end. Yeah, how wealthy do people feel? Often pretty important here, Barbara. Let's move on. Walgreens, one of the biggest drags on the Dow today, despite beating Wall Street's earnings estimates. But the company did report a larger than expected drop in operating income, partially because of fallen demand for covid vaccines. Bertha Coombs joins us with that. Bertha, what are the other headwinds besides those vaccines?

Well, those vaccines, definitely a big one. But just the pharmacy itself. that they talked about is that they are trying to staff up again at their pharmacies so that they can reopen for more normal hours rather than truncated hours that a lot of these pharmacies have been operating under since the pandemic. And that is one of the things that they are focused on. But to do that, John, you've got to pay up. You know, Walmart just said it was going to pay its pharmacist $20 an hour. So that's one of the headwinds that they have in terms of being able to staff up and have more volumes in the pharmacy, but also pay more. Bertha, thanks. Barbara, it's a good thing that we don't necessarily have to fight the pandemic in the same way that we did a couple of years ago. But

this also speaks, doesn't it, to normalizing patterns and it's not always being able to anticipate the economic effects when those normalize. John, that is an excellent point, because I think one of the things investors are so pessimistic and it's hard not to be when you see day after day, we have brief fair market rallies and then we're back to this. But I think people are forgetting the overall picture. We've just had a massive imbalance, you know, caused by the shutdown in March, oh, two, at least in this country. We've certainly seen it worldwide, where when we suddenly started to open up, we had flooded the system with liquidity, both monetarily and fiscally. This demand exploded. The supply chain was already disrupted

for various reasons in different countries with their lockdowns. And then you had demand overwhelming supply. So we're just last year. Things are price perfection. This year, things are more in balance, but it's still going to be choppy as we sort of get back to normal times. And I think we will. I mean, if you look at what's happening in the labor market, yes, you know, there's fewer job postings, but it's still two to one. We're not seeing the layoffs we're hearing about are in the smaller, say, profitless companies that really need to pull in their horns. But you still got wage growth up, even though that's moderating, thank goodness, from the inflation end. And the consumer balance sheet, as are banks and corporations, the balance sheet is in great shape. And one of your guests earlier mentioned that two trillion dollar savings number that is out there, you know, waiting to be spent. So, you know, the consumer demand,

it's moderating. People are worried. You've seen consumer confidence numbers, but we are in good shape. And that's what the Fed is banking on. And I think they do have a little bit more room for error than you might normally. Well, that would be nice. You talk about getting back to normal. I wonder when that is. Is that pre-COVID or is that pre-QE? I guess we'll see. Barbara, now, as we close out the first half of the year, we're looking at some key technical levels as well to watch in the mega cap tech stocks. Fairly lead strategies. Katie Stockton here to break that down. Hey, Katie. Hey, how you doing? I'm doing well. So how do the technicals look? Well, you can imagine not great. We do have negative momentum behind the market, the major indices, the mega caps on both their weekly and monthly charts, meaning intermediate term, long term momentum is to the downside.

And that leaves us with these short term, very fleeting relief rallies. We've seen yet another one just in the past week or two, and yet they seem to last no more than maybe three, four days. And it leaves us in a position where we really don't feel like we get proper selling opportunities. So very frustrating, I think, especially for the mega caps like Apple. I mean, obviously, Apple is a huge component of these major indices and also really impacts investor sentiment in a way, because at one time it felt like it was almost, you know, it was invincible, like it would only trend higher.

And now, of course, we've seen not only a corrective phase unfold, but also a phase of underperformance. And when you have these mega cap stocks exhibit downside leadership, that's obviously problematic for the major indices. And I suspect that on the back of this bounce that we've seen, we'll see more of the same. Yeah, on major indices, I'll mention taking another dip into the close. We'll see what happens in the next six minutes or so. But Katie, I mean, you mentioned we were talking about technicals. Should I make anything of the fact that so much of the

market's action has been timed to the calendar from the January 3rd peak to the fact that at the end of both Q1 and Q2, we had these rallies that people thought, oh, well, maybe, maybe, and then they faded? You know, I wouldn't look too far into it. I mean, these influences, once we figure them out, they pretty much go away. So I'm not spending too much time on those kind of money flows. In fact, I felt like everybody this week thought that the market would go higher into the end of the quarter, and it really hasn't done that. In fact, we have downturns in a lot of our short-term indicators that suggest that we might consider getting hedged yet again here just to be respectful of the next possible breakdown. The level that we continue to watch for the S&P 500 is in jeopardy. It's 3815. And as soon as we see consecutive

weekly closes below that level, that's just another major breakdown for the S&P. Yeah, well, that puts a lot of pressure on Friday this week for sure. Katie Stockton, thank you. Thank you from Fairlead Strategies. Meanwhile, chip stocks have been hit very hard this month. Investors are hoping Micron's results after the bell can help end that semi-slide. Christina Partsenevelis joins us. Christina, what are investors watching in Micron's report? Well, the first thing is DRAM, sorry, we were talking about dynamic memory chips, and the prices have been declining for the last little while.

From May to June, they dropped about 1.5 percent. Year over year, they're dropping 13 percent. You had Citi analysts that called the pricing in this market essentially collapsing at this point. So there's concerns that prices are dropping. There's concerns about inventory buildup. Maybe customers snapped up too many chips during the supply chain frenzy, and now they have a lot. They have a lot. Why are they going to buy some more? And then the offset, because the previous earnings for Micron, the CEO did say that

data center sales were really strong and outpaced mobile sales for the first time ever. So will that trend continue? Will that trend offset the weakness that we've seen in PC and handset sales? And then also we got to throw in freight costs that have been climbing higher. That should eat into margins. Overall, though, like you said, SMH, SOX, semiconductors as a whole, this has been the worst month for semis in those ETFs since 2008. Yeah, Christina, thanks. Barbara, Christina was just telling us the other day about, you know, slowdown in demand for graphics chips. Now DRAM as well. We know that the overall PC market not so hot as far as demand goes.

What should we take from that as we head into the second half? Well, I think, Cintra, obviously the semis as a group are down over 30 percent and Micron itself is down 40 percent. So I think you are seeing signs of demand slowing in consumer. As she said, the key thing we want to watch here is what's happening on their business side and their industrial, in their autos, you know, in the enterprise space. But that stock, I have to mention, is at five and a half P.E. on next year's earnings. And typically it trades eight to 12. They've got some six billion in cash book value, which typically a semiconductor name does not trade on book value. But I thought it was interesting to note the stock is around 55 book values, 42 increasing two bucks. Every quarter

will be at 50 bucks. Valuation is dirt cheap. And when you look at all the price targets, a lot of earnings estimates cut this last week, Price targets coming in, but you are still seeing significant upside from here and very little downside. I think the stock is pricing in a lot of bad news. And this slowdown that we're all talking about that's happening in general. It does feel to me, though, Barbara, like there's a lot of weight resting on the hyperscalers. And by that, I mean the largest cloud providers, Amazon, Microsoft, Google, the fact that they're going to, the idea that they're going to keep their capital budgets high when it comes to buying chips for their data centers. That's going to be something

that I'm going to be watching for out of Micron's earnings. Is that something investors should have an eye on, you think? Yeah, I know. I agree. Because the question is how much demand will slow down on those areas? Probably not that much. I mean. Because the question is how much demand will slow down on those areas? Probably not that much. I mean, this is this penetration in the cloud, for instance, AI, all this is still very low. These are the transformative technologies. So there is still demand. The question is how much inventory, you know, how much is delay? So I think you're absolutely right, John. Those are things we want to keep an eye on. And this report is going to be quite interesting and very telling. Yeah. I've got to hope that Amazon didn't buy chips like they hired people, right? They hired

too many. And now they're trying to burn that off. If they did that with chips, then that won't be good for Micron and many others. Barbara, thank you. Two minutes to go in the trading day. Barb, any final thoughts on this market action in general, since we've gone through some specifics when it comes to retail, when it comes to semis? Yeah, you know, I think people are worried. Where's the bottom? Where's the bottom? When do we buy? Is there a recession or not a recession? But I think you have to really look at where we've been and all there's so many sectors like the consumer discretionary area that have gotten plobbered. And there are great names like Nike down 40 percent, Starbucks down 30 percent, you know, Target, Walmart's down 15 percent, Costco 15 percent. These are fabulous names. And what we're doing, like Target and Walmart, when they reported, they were really one-time things that happened.

They misjudged the inventory. They had too much in hard goods. The consumer quickly switched. I think consumer discretionary has a ton of opportunities. And as I've said, you know, all along, there's tons in the technology. I mean, Facebook or Meta, excuse me, now is a nine or 10 PE. And Amazon, all these things have come down dramatically. And so maybe the bottom, we have another five to 10% to go. But when this turns, I think the risk is to the upside further on in the second half, which we are just about to begin.

So I'd be looking there, and I'd be looking at names like GM and Ford. GM at a 5 peak. So lots of opportunity. Yeah, lots of opportunity would be nice, hopefully, for those who are long, at least. Things perk up. It's a happier second half anyway. As far as the major indices go, still a bit weak into the close. Hopefully, for those who are long at least, things perk up. It's a happier second half anyway. As far as the major indices go, still a bit weakened to the close. The Dow is down about 250 points.

The S&P is down about 0.9%. The Nasdaq off about one and a third.