Closing Bell - Closing Bell: Wild Market Swings, National Economic Council Director On Market Turmoil and Under Armour's CEO Shake-Up 5/19/22

Episode Date: May 19, 2022

It was another volatile trading session on Wall Street the day after the biggest one-day sell off since 2020. The Dow was down nearly 500 points, but cut those losses in half. National Economic Council Director Brian Deese discusses the recent market volatility and the impact inflation and recession fears are having on the economy. Cantor Fitzgerald's Eric Johnston explains why he just turned bearish on the market again after recently calling for a short term rally, but RBC Capital Markets’ Lori Calvasina says the market looks like it is trying to bottom. Shares of Under Armour plunging after unexpectedly announcing a CEO change. Founder & Executive Chairman Kevin Plank explains why the move was made and whether the consumer shift away from discretionary spending will hurt his business. And BMO Capital Markets’ Simeon Siegel on the retail stocks he thinks are buying opportunities right now.

Stocks are mixed here following their worst day since 2020. We are gaining some ground in the last hour. S&P has gone positive. Dow just behind it. And the Nasdaq is solidly green. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Take a look at where we stand in the market. There's the Nasdaq right in the middle. It is bouncing today, up 0.8% of 1%. S&P 500 up a third of 1%. And the Dow just about to cross the flat line. We've got we've had a few attempts at positive action today and lost the momentum. We were as low as down 450 on the Dow, but nothing like we saw as far as the sell off and the mood yesterday. And in fact,

some of the bright spots are some of the hardest hit parts of the market. I'm thinking about the ARK Innovation Fund, for instance, which is surging 6 percent. Materials, consumer discretionary and energy leading the pack. Here's a look at some of the most actively traded names right now here at the New York Stock Exchange. NIO continues to be on the list, and so does Ford. It's been among the most active for weeks now. And they're all buys today. AMC Entertainment, one of the meme stocks. Palantir was on there, just dropped off, but a few others, interesting ones to note. Coming up on today's show, Cantor's Eric Johnson has a big bearish new call on the market, forecasting even more downside after yesterday's dramatic plunge. He will join us to break down that prediction. Plus, take a look at shares of

Under Armour sinking down 11 percent after announcing CEO Patrick Frisk is stepping down. We will talk exclusively to the company's founder, Kevin Plank, and chairman of its board about the future of the business and the macro factors that are weighing on the entire retail sector this week. Staples at the bottom of the market again today. Let's start with the broader markets. Major averages off the worst levels after yesterday's big sell-off. Mike Santoli taking a closer look at the pace, Mike, of wild swings in this market for the dashboard, the magnitude of these moves. Yeah. And, you know, today, kind of an uncharacteristic outbreak of calm, at least right now, as we go into the final hour. Did see a downside test earlier. I think in the short term,

you could look at last week's lows a week ago today in the S&P 500. We revisited them this morning, basically. Really apprehensive. I don't think you can really properly call it some kind of a retest that was passed, but it does show you there was a lot of comprehensive selling yesterday. Almost everything was down and we have an options expiration tomorrow, arguably keeping things kind of anchored around the thirty nine hundred level. That seems to be a very kind of concentrated strike of exposures. This takes us back just just so we keep kind of benchmarking ourselves, to the very beginning of last year when we kind of got lift off in the first quarter. That was the very peak of all the speculative stuff. Today, you can squint and say, as Sarah said,

staples are still weak. Apple is struggling. So stuff that had been relative safety is starting to buckle. Some people will say that's exactly what happens as a correction kind of runs its course. We'll see if that actually is the case. A lot of downside targets, I will mention, in the 3500 area were not there yet. 38 to 3900 remains for now, this support zone. Take a look at the number of 1% daily moves over the last 12 months. This is a rolling tally of 1% moves against the S&P 500 itself. This is from incident going all the way back more than 50 years.

So obviously, deep bear markets, it shows this spike, 161% moves over the trailing 12 months back in the global financial crisis. The 2000 and 2002 bear market, the early 70s ones. This one so far over the last 12 months is very much comparable to the ones we saw like in 2015, 16. So obviously, if it continues this jumpy, you're usually in a kind of deeper bear market type terrain. But it shows you that people are just more reserved in how much risk they want to put out into the market when you have these wide daily swings. The latest has been earnings. I'm just looking at Cisco. It's at the bottom of the S&P 500 right now, down 13 percent. It was a revenue shortfall. They said it's not demand.

It's the macro factors, the supply chain, China, Russia, Ukraine. Market's not giving it the benefit of the doubt. Is there is there reason to be really worried about earnings? I think there's reason to be worried about investors orientation toward earnings, which they see more risk than potential reward there. In fact, there's even a line that says now that earnings season is just about petering out, you know, we've used it as a selling opportunity, almost everything. I think people are very nervous that these big bellwether companies like Walmart, Target, before that, you know, Netflix even, and Cisco and Amazon had these just massive air pocket type moves. So I do think it's probably good that we get out of it. Cisco is no longer an economic bellwether, but it shows you a lot of things we were sure of,

which was like enterprise spending, maybe you're not as as solid as we thought. Mike, thank you. We'll see you later on in the show. Joining us now to talk more about market volatility and the economy is National Economic Council Director Brian Deese from the White House. It's always good to have you, Director Deese. The market is increasingly worried about earnings and the consumer. That's been the theme of this week. How nervous are you at the White House about these factors and the underlying economy at this point? Well, we're constantly monitoring risks, but I would say the most striking feature of the current economy right now is its resilience. Having gone through all of the current economy right now is its resilience having gone through all of the supply chain challenges we have gone through to significant waves of the coronavirus and now the war in ukraine

we are seeing a resilient american consumer and business investment inventory accumulation that has held up and a very strong labor market as well so certainly there are risks but as we saw in retail sales, the retail sales data earlier this week, the American consumer continues to power forward in what is really, you know, resilience more than anything in terms of what we're seeing. Yes, but I think it came as a surprise to hear from Walmart and Target that the American consumer is now shifting away from discretionary spending into more staple spending. Clearly, inflation is going to have an impact. And so is the stock market. Brian, you've got the you've got the S&P almost 20 percent off the highs, the Nasdaq almost 30 percent

off the highs. Is that a concern about what it does to the market mood and consumer sentiment in a midterm year? Well, absolutely on prices. You heard the president last week. Inflation is his top economic priority. And here's why. We have an economy with these historic strengths, as I mentioned, historic labor market recovery. But we're also facing historic challenges. The global economic environment presents significant uncertainties. The war and the attendant pressure on supply chains is putting pressure on food and energy. And so we need to train our focus on getting prices to normalize and under control. First and foremost, that is about giving the Federal Reserve the independence

to operate, and it is moving. And we're seeing that flow through to the economy, but also on fiscal policy and what we as the administration can focus on lowering costs, making things more affordable for typical families, as well as lowering the federal deficit. Those two steps together can really help to increase the economic prospects and sustain the resilient strengths that we have seen. Well, and there's also in this in this effort to fight inflation, there's an increasing amount of blame being put on corporations by the Democratic Party. I'm sure you saw that the House passed this price gouging legislation to give the FTC power to go after energy companies if they are gouging consumers. Is there any evidence that that is what is contributing to inflation here? Well, certainly the president has made very clear and has put all of our regulators on watch that when you see this type of market volatility, particularly in the energy sector, it's critical

that we have the regulatory cops on the beat to make sure that nobody is taking advantage of consumers. I think the price increases that we've seen in energy markets, we know why that is happening. And it's because Putin invaded Ukraine. The war has taken Russian supply of product, but also Russian refinery capacity off of the market. And that has put upward pressure on price. That's why we have been very focused on doing everything we can to stabilize and increase supply. The historic release from the Strategic Petroleum Reserve, working to try to increase U.S. production in the very near term. Those are our priority focus areas. So it sounds like you agree with the market analysts who say it's not the energy companies are making billions in profits and buying back stock because of the market prices. They don't

have pricing power, do they? Well, we're seeing high oil prices. And the reason why we're seeing high oil prices is because we have seen Russian supply come off of the market. There are definitely questions about the pass-through between oil prices and retail gasoline prices. And in a moment of volatility right now, particularly where we're seeing with crack spreads blow out and refinery margins as well, it is an important time for regulators to keep a close eye on those market developments. But our focus is on how can we increase supply, how can we reduce price pressures in energy markets overall. President also seemed to float in a tweet the idea that raising taxes on the wealthy or

corporations would help fight inflation. It's something that Jeff Bezos criticized him for, called him out for, said that the non sequitur board, which doesn't exist, should look into it because it's hard to understand what the link is, Director Deese, between raising taxes on the wealthy and fighting inflation. Can you explain that? Oh, yeah. I think the economics of this are pretty straightforward. If we reduce the federal deficit, we will reduce price pressures in the economy. I think most economists agree on that. And we are in the middle of seeing historic deficit reduction. The CBO, the Congressional Budget Office, updated its estimates for the first seven months of this year. The deficit is down $1.5 trillion from last year. And importantly, that didn't

just happen on its own. More than half of that increase is increased receipts, increased revenue because of the strong growth that we've seen here in the American economy. If we can continue that deficit reduction, then we will continue from a fiscal policy perspective to reduce price pressures in the economy. And one of the most sensible ways to reduce the deficit right now is to enact corporate tax reform that would level the playing field, that would reduce the incentives for corporations to drive profits and production overseas, and would increase revenue to the federal government. So I think reducing the federal deficit is a smart and sensible thing to be focused on, as well as reducing costs for consumers. That's not a direct link, though. Well, it is a direct link. If you raise corporate taxes in a way that is sensible,

it will reduce the deficit. And if you reduce the deficit, that will reduce price pressures in the economy. It's pretty straightforward. All right. What about the formula crisis? I know that the president has taken action there, the Defense Production Act. Clearly, it's an acute crisis in this country right now. I guess my question is how we got to this point where three major companies virtually control all of the supply of baby formula. We don't have any imports and they have total control concentration in this market. Well, the big picture, you're absolutely right. We have some serious. We need to put some serious focus on how we got to this level of market concentration. And it does go to, we do have

serious problems in this economy of lack of competition that go from excessive market concentration. And one of the outputs of that is we've seen is these brittle supply chains where we're too reliant on one individual company. In the very immediate term, though, that we are laser focused on trying to make sure that parents who need formula can get access to it. That's about increasing production. And as you mentioned, the president invoked the Defense Production Act to make sure that we are prioritizing throughout the economy to supplies that go into formula. It's about getting more formula here into the U.S. We've authorized the Defense Department to use commercial cargo to fly a baby formula in from foreign jurisdictions where that formula is safe. And it's also about allowing the retailers the flexibility to sell the inventory that they

have. The president has been on the phone with retailers, making sure that he understands where they are and what they need. And we're working every minute of every day. I was on the phone with big manufacturers last night. We are working this every hour here. And I would expect that we will have more action on that front over the course of today. All right, good. Brian Deese, thank you for joining us. National Economic Council Director from the White House. After the break, Eric Johnston from Cantor Fitzgerald is out with a big market call today

saying it no longer makes sense to own equities. He'll join us to break down his bear thesis next. You're watching Closing Bell on CNBC. Dow's down only 29 points, continues to recover with the S&P up two-tenths of a percent now. And most sectors going positive. Staples, utilities, and financials still lagging. We'll be right back. When the S&P 500 hit 4 4100 back in the start of May, our next guest called for a short short term rally.

Yesterday's sell off has driven him back to a much more bearish view. We're below 4000 right now. Thirty nine. Twenty five right now in the S&P. Eric Johnston from Cantor Fitzgerald joins us. And we should say, Eric, that you've had a lot of good calls. In fact, you're one of the few bearish going into the year. So no more short-term bounce? You took that off the table? Exactly. So, yeah, as you know, as you mentioned, we've been bearish since early January and then called for this tactical bounce about two and a half weeks ago. And the rationale behind the bounce, much of which still is in place, but it's being overwhelmed by a sort of deteriorating backdrop that I can walk through. But in terms of the short-term dynamics, positioning amongst the institutional community

does remain extraordinarily low. I do think that inflation expectations are getting better and that the direction for inflation over the coming months will certainly improve. And I also think the Fed meetings will be a non-event for the next two meetings, which is a positive for the market. But I no longer see as much potential upside on any bounce than I saw before. And also, the likelihood of it happening has been reduced. And the reason why is because the fundamental backdrop, which is what we've been concerned about and why we have this more medium term and have maintained the medium term bearish view, is deteriorating rapidly. So you look at something like Target and Walmart as an example that I know everyone's been talking about. But, you know, our view is, is that ultimately earnings estimates need to come down for the S&P 500.

And once that starts to happen, that the market will put a lower multiple on lower earnings. And based on what we're seeing, we think that's going to come sooner than we previously thought. In fact, this coming quarter, which is now. Yes, I mean, exactly. I mean, we, you know, you look at someone like Target, their margins were 8% post-pandemic and 6% pre-pandemic. And sure enough, yesterday dropped back to 6%. And you saw the same thing with Walmart. And the stocks, the earnings estimates get cut by 10% to 15%. The stocks go down 20%. And I think that's what we're going to see ultimately with the market. This total repricing. So Eric, I get what you're saying. It's like you're just too negative right now to call for a bounce.

But why even bother with these short term tactical trades then? Because even, you know, the most vicious of bear markets, you get tradable, pretty ferocious rallies in there. Yes, I think it's I think it's a great question. Why even call for the bounces? I think because to your point, you do get these big bounces in bear markets. And, you know, looking back to the 2000 bear market, the 2007 bear market, we had two to three month stretches where you did get rallies. And so if we do think we're going to get a meaningful enough rallies, then we think our clients want to know that. And for that matter, your viewers want to know that. But for that matter your viewers want to know that um but once that is not going to happen and we had this very fundamental backdrop uh that that's quite negative

you have to just you know back out we have the market sold off about three and a half percent um we no longer think it's going to happen and then you have to cut your losses and uh and move on and that's exactly what we are uh what we are I mean, the pushback I would give you is just that, you know, we have days like today where the major averages aren't doing a whole lot, but ARK Innovation ETF is up 6%. Names like Unity and Shopify are up 10, 11% on no news. So there's clearly still a bid for some of these beaten down names. There's also this idea, Eric, that a lot of these stocks are down. 50 to 70% of their highs so so a lot of that bad news that you

are worried about and have talked about in the earnings estimates is already in there. So you know today is a big short covering rally the most short stocks in the route in the market are having some of the biggest moves but I would

say that- as the growth outlook does continue to deteriorate some of the biggest moves. But I would say that as the growth outlook does continue to deteriorate, some of the secular growth names that, as you said, have been beaten down pretty hard, down 50 percent plus, could start to outperform. I'm not recommending that because ultimately, when you look at where stock prices are, looking at them from where they came from the top does not always work. Because when we look back at where prices were, that was the speculative money flows from the Fed that were causing a lot of these valuations to be at levels where they should have never been. And so a lot of these companies, you look at where the valuations are now, even though they're down 50 or 60 percent, you can make arguments that they should go down another, you know, 25 or 30 percent from here. But I think if you look at the makeup of what's going to drive

the market, you know, going forward, I think one of the sectors that I think is at risk is energy. You know, we've seen this is one of the more crowded, long sectors in the market. Everyone loves energy. Clearly, supply is probably unlikely to change anytime soon. But I think the demand picture is where you could really see a deterioration. And that's what our view is, that growth is going to be slowing down faster than maybe people once thought. I think the's and so demands are hit that's me a problem. I think it's risk to

your view. Eric is that is that we don't go into recession and that inflation starts to really come down here because the fed and the market basically doing the fed's job. Tightening financial conditions is going to hurt demand and is going to.

Bring prices down at the same time where maybe some of the supply issues. Will get better. So I think there's also a difference between earnings and the economy. And not to, again, use the Target and Walmart examples, but there were some issues with their sales, but essentially their sales were OK. It was just the makeup of the sales. And so I guess my point is, is that even if the economy only slows down and we don't ultimately go into recession, this mismatch in prices with inflation still staying high, even though it comes down, while growth is slowing, even though it may

not go negative, can have a sharp hit to earnings. And so you could have a scenario. And again, earnings are at levels. We had this pull forward effect not only for revenues, but also for margins. And so if you see margins start to revert to pre-pandemic levels or heading towards that, you could have a situation where you have a sort of an earnings type recession as opposed to a economic recession. And that's what I'm most concerned about and I actually think will happen. And the key point is that when earnings start to come down, the market will put a lower multiple on those earnings. So I think that's really a very key point. And the one thing I would say is- Stop talking. You're talking down the market here. Just kidding.

Final point, really quickly. Final point is that it's always very challenging for the initial move in the market to go down to 10 or 15 percent, right? People were calling for it for the last year plus. And that becomes very hard. But once you have the momentum to the downside and things start to roll over, there's all sorts of self-fulfilling prophecies where the sell-off in the market causes the economy to get hurt. And I think we're in the process of seeing that, which makes the downside come easier than the first 10 or 15 percent. I was trying to ask Brian Deese if he was worried about that sort of wealth effect.

Didn't bite. Eric Johnson, thank you for joining us from Cantor. Appreciate it. Thanks, Sarah. With the S&P turning negative right now, down about a third of 1%. The rally was tenuous pretty much all day. We've had a few attempts at going positive. The Dow's down about 172 points right now. So we have just dropped.

The NASDAQ remains positive, though just barely. Materials, consumer discretionary, energy, and healthcare are your positive sectors right now. Speaking of the consumer, Under Armour founder Kevin Plank will join us for an exclusive interview in just a moment as his stock sinks to the bottom of the S&P on news that CEO Patrick Frisk is stepping down. We'll be right back. Check out shares of Under Armour. It is the worst performer right now in the S&P 500 today after announcing CEO Patrick Frisk is stepping down from the role he has served in since January 2020. The move will take place June 1st.

Current COO Colin Brown will run the company on an interim basis until a permanent replacement is found. This comes at a time when retailers across the spectrum are struggling to deal with rising transportation costs and freight costs, not to mention a consumer facing high inflation and shifting spending towards services over goods. Joining us now is Under Armour founder and executive chairman, Kevin Plank. Kevin, thanks for being on with me today. Good to see you. Good afternoon, Sarah. Thank you for the time. I think we have to get the first thing out of the way, which is a lot of people are wondering, seeing you here, if you are coming in and pulling a Howard Schultz and going to be returning as founder, as CEO, which you were in that position before Patrick Frisk.

Clear it up for us. Thank you for the question. And, no, I will not be returning as CEO. We have the right structure in place, and we also have the right process in our succession plan with Colin Brown stepping in for Patrick after this time and we've got a search that'll be going on now. So no, there won't be any,

I will not be the CEO. So clearly the market was surprised by this and is unnerved by this decision, Kevin. Why did you make this? I know it was a bad quarter last quarter with Patrick, but he's only been serving for about two years and had really started to turn things around. Yeah, well, you know, we're heading into our third decade as a public company.

You know, we're in year 17 nearly now. And along all that time, it's given us a tremendous amount of opportunity to rework our vision of what we're doing and how we're operating and running the business. And so the last five years have really been transformation for us. And Patrick joined us in 17. He really started that transformation. He was the one that was, you know, really responsible for it. And frankly, he's the one that put us in the position to be able to make a decision like this. This pivot to growth that we're talking about is something we think is incredibly important.

And because of all the time that we've done down in the engine room, it allows us to do this and really put that focus on how are we going to grow and how are we going to continue to reach athletes and consumers everywhere. And so our opportunity is good, but we also want to be clear is we don't anticipate giving up any of the operational excellence, which is why it's so important to have a leader like Colin Brown that can step right in. And he's been doing this. Him and Patrick have worked together for the last five years, and they worked together before that at their previous brand as well. I guess what I'm wondering, Evan, is just why now? Because you're in this period where, yes, I know you put the restructuring behind you that ended last quarter and now want to focus on growth.

But it's a tricky time with all the supply chain issues and the China shutdowns, which I know is impacting your business. Yeah, well, let me just start with number one, you know, we have a serious board. And so making decisions like this are incredibly important. Let me also just say clearly, there's no there there. There's nothing else behind this. There's nothing else internal happening. There's not another shoe to drop.

But the timing we thought was right. I mean, we talk about, you know, pivoting to growth that, you know, the strategy that we're looking to build on, it's the strategy that's in place today. We're just simply talking about how we can amplify that strategy. We think that there's opportunity beyond. And so, you know, this was a mutual separation and one that we, you know, look forward to this next chapter and turning the page and really being able to grow the brand. Where are you in that growing the brand recovery stage, given some of the headwinds that I mentioned right now with the broader economy and things that you can't control?

Well, one of the great things we've been doing the last several years has been running a demand constraint model. So there is demand out there for the brand. You know, we saw, you know, tremendous gross margin improvement throughout 2021. And that's something that puts us in a great position as we, you know, contemplate the next chapter.

But what we want to do is we want to make sure that consumers are looking for our brand and finding us. And that's what we do inspiring things like they're watching the University of South Carolina women's team win a national championship. They're watching Stephen Curry do his thing last night in San Francisco. You're seeing obviously Jordan Spieth is going to be competing this weekend for the career grand slam in golf at the PGA championship. So we know that consumers are watching us, they're seeing us, and they believe that when they do see us, not unlike the great athletes we have who wear Under Armour, that we have the ability to show them that when they wear Under Armour, they can do anything. But are they in good shape?

Walmart and Target, I'm sure you know, came out this week with a one-two punch to the markets, warning about, in part, consumer spending and that the consumer is shifting away from discretionary spending toward more basics as they're dealing with inflation. Is that something you're seeing? Well, that's why it matters to be important. And so, you know, you can't just make stuff. The world doesn't need another capable apparel and footwear manufacturer. And so that dream, I think, that the business was founded on, has been built on, and, you know, frankly, that we've been strengthening over the last five years is that having us to have the ability to really think about being offensive. And I want to be clear,

we're not looking for growth at all costs. This is about good process, reasonable growth, that we think we can be aggressive. And we're in a great neighborhood being in sports, within our industry. And we think that we can not only catch up, but we should be leading there. We have the ability to end the dream to be number one someday. And so that ambition is something which is very unarmored, but we're also pragmatic about where we are right now and taking one step at a time. Stock has come back a little bit, but it's still down, Kevin, about 12 percent. It's down about 54 percent for the year. What are you telling investors today? What sort of tough conversations have you been having? Well, I think that's part of our message is that, you know, Under Armour deserves to be thought of, you know, we deserve that top tier of consideration as

consumers think about us, is that, you know, we're one of only a handful, maybe three or four global authentic athletic brands. And it's important that when you see us is that you think of Under Armour as somebody who can, you know, play at that highest level. And I know that we, you know, we have an amazing management team in place. You know, we have incredible support across the brand as well. But the ability for us to get out and really compete, that has a lot to do with, I think, the place that we are now and where we're thinking about the brand. And I've got to tell you is that we are supremely confident in the outlook for the brand, the product pipeline that we have, and we have the ability to compete with anybody. In fact, we think that we should be leading there. Look forward to catching up with Colm, the interim CEO, as we get

through earnings. Kevin, thank you for coming on and explaining the move today to our audience and your investors. Kevin Plank, founder, board chair of Under Armour. By the way, Mohamed El-Erian, our guest yesterday, is a lead board member as well at Under Armour. Should have asked him about that. Still ahead, Sam Bankman-Frieds, FTX, making a big move into stock trading today. We'll tell you why Wall Street is buzzing about that news next. Check out today's stealth movers today, and they're the railroad stocks. CSX, Norfolk Southern, and Union Pacific all significantly underperforming the market today

after Citigroup downgraded all three to neutral and cut its 2023 earnings estimates for the entire group because of a decelerating freight and economic environment. Very economically sensitive stocks, the transports under a lot of pressure this week. Here's where we stand overall in the markets. We're down to 35 or so. We started the hour positive. We've lost all that momentum and now down about half a percent on the S&P 500. This comes off of the worst day for stocks, which was yesterday, since 2020. The Nasdaq has turned negative as well. So even though tech is outperforming today and there's a bid in some of the very high growth,

unprofitable tech names, the Nasdaq is losing steam. Materials and discretionary, the only groups that are still higher, so are small caps. Wall Street is buzzing about crypto exchange FTX, which just launched a zero commission stock trading

exchange and taking on Robinhood and other online brokerages in the process. We'll tell you about it next. And later, we'll talk more about this week's retail wreck with top analyst Simeon Siegel, whether he's recommending buying the dips in Target and Walmart specifically. Straight ahead. What's Wall Street buzzing about today? A new player in the stock trading business, Sam Bankman-Fried's crypto trading platform, FTX, says it will start rolling out commission-free stock trading to some of its U.S. customers today. The company specifically noting in a press release that it will not be receiving payment for order flow. That's that controversial practice that's being looked into by the SEC. So FTX doesn't make money off of this, unlike Robinhood.

It's the second move this month by Bankman Freed to extend his reach into stock trading because last week, the billionaire took a sizable stake in Robinhood with more than $640 million. Our Kate Rooney asked Robinhood CEO Vlad Tenev this week about that move and whether he was worried about a competitor buying his stock. Listen. I wouldn't say it makes me worried from a competitive standpoint. I mean, we have, we're a public company. We have lots of shareholders. We're a company that is all about democratizing access to public markets and cryptocurrencies. So happy to have shareholders involved in the company. Now, FTX might end up attracting some of Hood's own investors since they're not selling order flow,

but it isn't impacting Hood today. The stock is up more than 5%. And this afternoon, Bankman Freed revealed another stake in another competitor. Well, just one and a half shares in Coinbase, tweeting, testing out FTX's stocks and showing some support for our colleagues. He does approach the whole corporate rivalry thing a little bit different. Up next, RBC Capital Markets head of U.S. equity strategy, Lori Kalbassinan, whether she's starting to see signs of a market bottom.

That story, plus big rebounds in retail and fintech stocks when we take you inside the market zone. Dow's down 200. We'll be right back. We are now in the closing bell market zone. CNBC Senior Markets commentator Mike Santoli here as always to break down these crucial moments of the trading day. Plus BMO Capital Markets Simeon Siegel on today's retail rebound and RBC's Lori Calvacina on whether she thinks the market is getting close to a bottom. Stocks are volatile here into the close. The Dow and the S&P 500 have turned into the red in this final hour. S&P is down about a half a percent. NASDAQ trading right around the flat line.

If we could pull up the intraday chart on the S&P 500, Mike, talk us through the bounce attempts and what's happening out there. Honestly, Sarah, it's just been lolling around. You see the flat line there a couple of times above that, this 3,900 level. It seems like yesterday was just enough of a jolt to the downside. It got us close enough to last week's intraday low. We kind of went down and visited it, but really seems indecisive ahead of the options expiration tomorrow. And we continue to hover just above or have so far above that 20 percent decline level. So I think we're going to have to wait till maybe Monday to get a clearer view of direction. Well, one sector that is rebounding is consumer

discretionary. And you are seeing some bright spots in the retail space today. Take a look at Kohl's, BJ's, Canada Goose, all trading in the green after all three reported better than expected revenue. Kohl's is actually lower earlier in the session. It's now four percent. This, of course, comes after the big box retailers Walmart and Target both suffered their worst one-day drop since 1987 earlier this week after reporting weak quarterly results pressured by rising input costs. Joining us now, Simeon Siegel, senior retail analyst at BMO Capital Markets. I know you cover some of the brand names and the retailers versus the big boxes, Simeon, but it's been a messy week all around. Any buying opportunities here?

I'm trying to figure out which of the companies are micro versus macro and everything going on. I think like it's all mixed in the same thing, Sarah. And you and I were talking about this. You look at these press releases, I mean, look at Kohl's, look at the way it's trading to your point. Had you had the press release this morning,

you still may not have made money. So I think what we saw, TJX was a standout this week and TJX was a standout because week and TJX was a standout because it was up a lot on a red day. I think the reason was because they focused on margin. So you and I for the past however many years have been talking about this idea that retailers chase growth for growth's sake. That was the problem. COVID paused that and now all of a sudden everyone's going back and everyone chasing that revenue but giving up the margin is feeling pressure. TJX actually protected margin and was rewarded for it.

I think two of your favorite turnaround stories during COVID are both under a lot of pressure today. Under Armour, we know why. You just heard from Kevin Plank. And Bath & Body Works, both at the bottom of the S&P 500. Are you still a believer? Yeah, so I think that if we look at a year, those two stocks will be phenomenal opportunities. I think right now, there's no bid for consumer discretionary. I think we need to get past this macro news.

And I think catching falling knives, there's just no interest. But as we look forward, the question, both of those two businesses have gross margins higher than they were pre-pandemic. Both of those two businesses are healthier than when they started. That's different from some other companies you and I talk about that were COVID winners. And I think that's the distinction. We need to find companies that won during COVID as opposed to companies that won because of COVID. Because that revenue will be given back, that margin will be given back. The question is who actually changed their business and who's healthier? I think those two are prime examples. All right. So you're sticking with them. Simeon Siegel, thank you. Got to move on because the fintech stocks are also big winners today after being significant underperformers during the broad market sell off.

We've been seeing Kate Rooney joining us. Kate Block outperforming after its investor day yesterday. Anything specific that gave Wall Street more confidence or is it just Bitcoin is up and so a lot of these stocks keep going up? Yeah, well, Block in particular has been trading like Bitcoin proxies, so that's likely helping. But yesterday was Square's first investor day. In five years, the CFO really tried to make the point that Square block in this case is profitable. She focused a lot on unit economics. I talked to her briefly. She pointed out that they're outgrowing, they're outperforming other fintechs. So that really was the focus. We also got some updated profit margin numbers. So they didn't give targets for 2022, which was a little bit of a disappointment for Wall Street. It's good to see what happened last year, but

analysts really want to know what to expect in 2022. Mizuho backed into some of the numbers. They're estimating cash apps long-term profit margins could be close to 40 percent. And we did get last year's, which were closer to 12 percent. So did give sort of a new picture here of how profitable the company is when there's a lot more focus on some of the bottom line numbers versus growth at this point. And then Bitcoin is still the big story. That is really what Jack Dorsey talked about. And like we mentioned at the top, Sarah, probably one of the reasons Block is outperforming today. Some Wall Street analysts don't love the Bitcoin story. They'd rather have Block focus on the more profitable

payments company. But as far as Jack Dorsey is concerned, that really is the long term vision here for the company. Kate Rooney, Kate, thank you. We're getting some breaking news right now out of the CDC. Meg Terrell has it. Meg. Hey, Sarah. Well, CDC's group of outside vaccine advisors just voted in favor of a Pfizer booster for kids ages 5 to 11. The vote was 11 yeses, 1 no, and 1 abstention. This is for a booster at least five months after the primary series, just for the Pfizer vaccine. At this point, the Moderna vaccine is under review by the FDA for all kids under 18.

You can see BioNTech already up there more than 6% on this news. Sarah, this was expected. The CDC director now has to sign off. And once she does so, you know, the vaccinations among kids in this age group could begin within the next few days. We should note, though, only about 30% of kids 5 to 11 in the U.S. have been vaccinated with the first two doses. Sarah? Right. So kids are now getting their boosters or at least the approval for the boosters. And adults over 50 are supposed to get four shots. Is there a discussion of a

fifth shot into the fall as the administration is looking at models that show we're going to get millions of cases again? Yeah, absolutely. There is a lot of discussion about updating the vaccines potentially to include protection specifically against the Omicron variant, whether that's a combination of Omicron and the original strain or some other form that they'll need one in the fall. But the kids, you know, boosters, if they're updated, could take longer than the adult boosters. So it's just a little bit complicated. But they did get the quite strong vote for a third dose for kids five to 11 now. All right. Pfizer up, BioNTech up sharply today. Meg, thank you. Stocks are extending losses here after yesterday's big sell off. The S&P nearing that bear market territory line. It's currently 19% below its all-time high. The technical definition is 20%, though it still feels like a bear market. Let's

bring in Lori Calvacina, head of U.S. equity strategy for RBC Capital Markets. And you've been telling your clients, Lori, of some levels and some things to look out for to sense a bottom. What are they and how close are we? Sure. So, look, let's just put the performance in context with the 20 percent drawdown. If we get to, say, the 3850 mark, we're basically going to be right back where we were at the end of 2018 when we saw that big drop around the China trade war and QT from the Fed. We've seen other similar growth scares in the past, which have ranged from 14 to 20 percent. So I think if the market, you know, kind of moves past this 20 percent threshold, it's essentially going to be pricing in a recession.

I think, though, you can see the market kind of resisting that urge, you know, kind of bottoming out in intraday pricing both this Thursday and last Thursday right above that 3850 mark. Look, if you look at high net worth retail, the AAII poll is telling you that sentiment has been pretty washed out for quite some time. If you look more on the institutional side, the CFTC data is telling you things like small caps and the Dow are washed out with positioning at or below financial crisis lows on a notional dollar value basis. It's got a little bit more room to travel on the S&P side, but I do think this market is trying to bottom and really would like to, but it's still wrestling with the fundamentals. Well, and the fundamentals moving to earnings this week, really, that was where a lot of the wake-up calls came from. Eric Johnson was on with us from Cantor, and he was saying that really the earnings expectations haven't been marked down that much, and that's going to start to happen, especially when you see margins get hit at a Walmart and a Target. Is that your

expectation? Look, I do think there is some vulnerability in certain sectors, but if you look at the rate of upward revisions in the S&P 500, there have been certain sectors, things like REITs, things like financials, energy, more of the value inflationary side of the equation. Utilities is another where you've seen actually more upward than downward revisions. And so that's giving some support to overall earnings expectations. Many other sectors, though, things like consumer, industrials, materials that are more sensitive to the problems we're all wrestling with today on inflation, you actually have seen some downward revisions there. So, yes, I do think certain sectors are at risk, but I do think it's important to take note of the fact that this is a

pretty broad market. The S&P is pretty diversified. And some of the things that are actually benefiting from this inflationary environment have been, you know, kind of buoying the numbers overall. Consumer discretionary versus consumer staples. They both got they both tanked yesterday on the target news. They're moving in opposite directions today and really have been for most of the year with staples as the safe trade. Which do you like better, if any? So, yeah, so look, we're neutral both of those. But I would tell you that in terms of overall valuations, consumer discretionary has been starting to look quite cheap on a relative P.E. against the broader market, while consumer staples has actually been up around peak levels on a relative P.E. against the broader market. So I think the price action is really interesting today after yesterday's big drawdown in both of those sectors.

What I'm seeing today is that the market is trying to go after the one that looks cheaper, that has a valuation case, and is avoiding the one that's been quite overvalued and done really well. I think that's actually a healthy trend underneath the surface. So you're neutral, though, still on it. What sector do you like the most if you do think this is a market that wants to bounce? So we see puts and takes. I would say if there's more risk in one, I actually think it's consumer staples from a valuation perspective. We've said if you look across all the different defensive sectors, that is probably the one we like the least if you're sort of comparing things like health care, utilities and staples. And the

earnings expectations have been starting to get worked down, but I don't think they've bottomed yet if you look at the rate of upward revision. So I'd say there's probably more risk that needs to get priced in on that side. Got it. S&P down about half a percent. Lori Calvacina, Lori, thank you very much. We've got just about two minutes to go here in the trading day. We've deteriorated throughout this final hour. Mike, what are you seeing in the internals right now? It's kind of mixed. Little bit, although still hanging right around that round number, 3,900 level in the S&P. A little better than even on the upside versus downside value of all days.

The average stock's outperforming. It's a little bit of pickup underneath the surface of the index. Of course, Apple very weak at the top of the S&P 500. Take a look at month-to-date Apple against the semiconductor stocks. Apple had held up so well. It was a haven.

It has now backed off a little bit more, and certainly the semis, which led us, helped lead us down in terms of the overall index. So it seems as if the hardest hit stuff you were talking about, the archetype stocks earlier, have trying to base here a little bit relative to the stuff that's held up better, like Staples and Apple. And then the volatility index is soft today. It's under 30 again. A lot of head scratching about why it's been so tame. Part of it is the steadiness and the orderliness of the decline. Part of it is

people are pretty hedged up already. So I do think all those factors involved, it's pretty much noncommittal here, though, I would say around 29. Also, some of the big mega cap tech stocks are still under pressure today, even though they were as well yesterday. I'm thinking Apple, which is lower. Google, Microsoft, all under pressure today. So the Nasdaq is a little more fairly balanced. You've got strengthened names like a Lucid or a Datadog, which have been hit hard. Take a look at the Dow as we head into the close, down 230 points. It's not quite the low of the session, but it is a lot lower than where we started the hour. Cisco is the biggest weight on the Dow off earnings. And UnitedHealthcare is the biggest contributor on the plus side. Remember, it was the biggest drag in yesterday's session.

Boeing, Home Depot, Goldman Sachs also adding to the Dow. Looking at the S&P 500, it's down a little over half a percent. We're down about 3% on the week now going into a Friday. NASDAQ down about 3.5% on the week. Materials are your best performing sector. Staples are the worst, down 2%. And small caps ending out in positive territory, the only one of the big four. That's it for me. I'm closing now. Have a good evening.