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tv   Fast Money Halftime Report  CNBC  May 18, 2022 12:00pm-1:00pm EDT

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instability as turkey looks to stem this attempt by finland and sweden to enter nato geopolitics layered on consumer concerns, layered on inflation risk not helping matters at all today. certainly it was a good day to take a look at the megacap tech. an afternoon ensues. let's get to the judge >> carl, thanks so much. welcome to "the halftime report." i'm scott wapner the bear bouncing, just crushed the rally in its tracks. we'll discuss that, of course. with the investment committee and joining me for the hour, britain talking ton, steve weiss and joe terranova. i'll show you what the markets are doing, pretty much at session lows dow down 800 s&p 500 near 3%. nasdaq is worse than that. 3 1/3% that's a 400-point loss. russell under big pressure, bond yields on the rise, ten-year quote yield, 2.92.
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almost wiped out the gains from the thursday low and the obvious question, joe, becomes is the bear bounce over and your actions would suggest that you think it is and to refresh people's memory, yesterday you sold nvidia. yesterday you sold walmart you had sold chipotle on monday and then today i learn that you've sold lululemon. talk to us. >> i sat with you -- had the pleasure to sit with you yesterday at the stock exchange and you asked me about target and the potential impact for target i said they better not miss otherwise we have a problem. well, we have a problem now. i thought that we would be able to extend this bear market bounce a little bit further than we obviously are with the results from target are completely negating that bear market bounce and now i have to worry about margin compression now companies are no longer able to pass through the rising inflationary costs so i'm respond tock that in my portfolio.
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i have a very disciplined risk mansment strategy. i know it sounds like i keep saying i got stopped out of this and got stopped out of that but that's what i need to be doing in this environment right now. i purchased lululemon earlier in february at 313.50 sold out of that today that was on a technical basis but also fundamentally, scott. lululemon is going to feel the challenge if the consumers are only focused on buying food and gasoline and by the way in addition to that, right before coming on to the show. i got stopped out of marriott. i think i spoke with you yesterday on the stock exchange about my concerns with marriott. that's a name i entered earlier in march at 159. the stock gave me a 19% rally up to 195 on april 21st i'm not going to turn a winning trade, 19% winning trade into a losing trade i'm stopped out of that one as well i incorporate a risk management strategy i'm protecting myself right now and i think it's the right thing to do because we have to have
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this concern about margin compression and previously that didn't exist. >> this has now become a corporate story. even cornell, ceo of target and we'll get to the target story, trust me, on that. didn't talk about consumer slowdown it's just they got caught by the consumer shopping a little differently but it is a margin story as joe said, costs are up all over the place, weiss, you concerned about everything that is no different from the view that you've shared with us for many, many weeks now you're short the xlf as a hedge and maybe even more interesting than that is you sold more apple. you had told us the other day you had taken almost every position in your book down now you've sold more apple why? >> well, it just goes to the thesis, not many weeks, many months, first there was disbelief that corporations are going to be hit in their margins and seeing that come to fruition and then there's there was disbelief that the economy is so
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strong, consumerso strong they can tolerate anything. we tend to live in a bubble when you're investing in the market and you're a financial professional you're not living in the real world of the 60 to 70% of the country lives paycheck to paycheck so sometimes we forget that or gloss over it. that can't be the case anymore even the home depot numbers were disappointing in my view why? because they had fewer tr transactions that means fewer people are shopping there, but higher ticket items and that's because of inflation how long will that go on for so in terms of apple even though the phones are subsidized by the carriers, when you're facing a recession, i believe if you're a responsible corporate management employee, meaning a cfo or a ceo or any line manager that you've got to be storing cash so if you think buybacks will save you in the market, they're not. we saw target, reduce the size of the buybacks that we had and
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guess what, buybacks as we're seeing with apple can't forestall the current of selling, so that's why i'm more bearish and i would also -- if it's possibly more bearish, i'd also tell you that people well aware now of what covid did in terms of demand for a number of item, peloton being i guess the most visible you had that short-term pop that people thought would last forever. what i will tell you at this point is that you've got a short-term pop from people that have been locked up for two years that are flying, that are staying in hotels and that's going to dissipate fairly quickly. to think that could last forever and base your forecast on those continuing trends going on for an appreciable period of time. >> i hear you. >> that's lunacy so that's why i'm doing it. >> we've made this point and had this conversation many types on this program and elsewhere that if you are looking at the travel
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economy as the sign of ultimate strength for the consumer you're looking in the wrong place because, of course, there's going to be a lot of spending there. there already is and then it's going to come out of other areas eventually and even maybe in that space the services and travel business, it's going to come down there too after you have the initial burst of activity throughout the summer now, it's easy to be negative. it's easy to suggest, okay, everybody on the panel today is a seller, i've gone through joe's sales over the last few days of marquee names and steve weiss told you what he's doing and then jenny tweets a little bit earlier, a lot of red equals a lot of opportunity and you are putting your money where your thumbs are, i suppose, if you're tweeting that. because you added to disney. you added to jetblue you added to xpo you added to gxo you added to aptiv can you take me through those
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briefly? >> sure. but just one thing, we had to fund those so first let's start with the sells so we sold walgreens where we thought there was limited upside and trimmed huge winners, northrop grumman and repositioned it into growth stocks we think are legitimately oversold so jetblue, aptiv all down 30 plus percent we expect they'll haver earnings growth in 2022/2023 in the 20 plus range jetblue all the noise from the spirit takeover is completely clouding the stock i think they'll get back to $1.18 of earnings. turning out like $10, $9, $10 a share right now. xpo and gxo. no doubt logistics are so necessary, so in demand they have huge earnings growth and stocks down 34 and 42% aptiv benefits from evs and should have earnings growth -- i'm sorry. i messed up on that, i think 14%
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and disney down 34% year to date our thesis still intact we get back to 9 to $10 of earnings and, scott, that goes into your like we can't -- we can't look at travel and leisure and extrapolate that to the whole consumer but know huge money is being spent there and they are a direct beneficiary so this was a portfolio repositioning and i think this is what you do in these markets, you make lemonade when you have some lemon, there's huge opportunity to do this and, you know, before these guy, all -- sorry. >> it's okay gxo has suddenly become this battleground name on this program which weiss has been, i think one of the first to speak about, stephanie link told me yesterday or the day before she sold gxo you just added to gxo and weiss, are you concerned about your own position in that stock in the here and now >> no, absolutely not. as a matter of fact, i love it
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you know, we've invested privately in private market in infrastructure and when i saw the rundown and what jenny did adding to it co-incidentally i was on the phone with gxo at the time the headwinds there or the tailwinds rather you're seeing degloballization so that's bringing the need back here for logistics just in time inventory, that's dead we're not going to see that again in our lifetime. that's coming back so you'll need more warehouse spacing and at an end of what's available in warehouse spacing because without china, by the way, which has been shut for two months, imagine when it re-opens, so gxo is the premier player, that's why apple chose them for their outsourcing. they save companies 200 to 300 basis points that's why intel contracted them for the new fab. all the tailwinds are at their back their quarter was phenomenal at 19% revenue growth and this is a
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momentary dislocation but logistics is ever more important now and the ability for companies to outsource that, not worry about labor, not worry about, you know, about intermittent or, you know, sort of like periodic booms in their inventory cycle. push that off on gxo they can handle it. >> brynn, you heard everybody's comments jenny, sorry i have to get brynn in i'll come back to you. brynn, you've heard anybody and heard about their moves too. so what is your perspective today on, look, the dow was down 800 points a moment ago. the fact that we're at session lows, now we've introduced this big issue over the past couple of days of corporate margins from walmart to target, and who knows who else at this particular time. dow is down just about 840 or so right now. >> yeah, i think that walmart and target, you know, tell everybody that once again even
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the most sophisticated companies are behind the eight ball and what did brian cornell say, have a billion in incremental costs from transportation and, you know, inflation costs and obviously their inventories are building in technology and so, you know, this is all -- this is the year of the fed. anyone trying to fight the fed, i just think it's futile the fed will win every time and that's what is going to be frustrating about the next few months, maybe next three or four months as the fed continues to talk, incredibly hawkish and profit margins to me are what the big sell-off are today analysts were bullish on earnings still bullish on profit margins but when you have 400 basis points of degradation from target from profit margins, that's a huge degradation there, so i think you'll continue to have different sectors have their knees cut off and, you know, outside of energy which has held on well so far, there's
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been no place to hide in terms of having a positive return this year but i would just, you know, investors need to be patient this year, not have a trigger finger because once again, the fed is adamant to slow the economy, that means they want the consumer to slow down, they want the companies to slow down. they want unemployment to go higher and the market is pricing all of this in day by day and that's why you'll continue to see multiples come down and it's going to be a choppy year which i think probably ends the year negative which i felt that's a high probability, a zero or negative easily at the end of the year. >> powell is trying to tell you that some people might not want to listen might not want to hear it. but powell is telling you and he did yesterday that he's ready for a fight and he's going to punch and punch and punch until he knocks inflation out whether some people want to believe it or not because his comments yesterday were about as hawkish as they've been to date in that interview that q&a he did with "the wall street journal." the issue obviously there it is,
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what we need to see is inflation coming down in a clear and convincing way and we're going to keep pushing until we see that and said that among many other things but the gist of it, the flavor after he said all that then you get target's ceo brian cornell talking directly about what the fed chair is trying to fight, this crazy inflation and what brian cornell is trying to deal with, a billion dollars in freight, the forecast there, it's an astounding number which cornell says things have changed from even 13 weeks ago, sure, the product mix may not have been right. the consumer started to shop differently but then he owned it we didn't project properly we own that. i own that i mean it's about as contrite as you've ever heard a ceo be on television after their numbers are bad and the stock really dictate what is they'll have to do in terms of their messaging for more on that let's bring in hightower's stephanie link it's good to see you we had to talk to you because we had a conversation yesterday after walmart on overtime where i asked you directly if you were
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worried. you said you are or you were about what target was going to deliver now they delivered it. what do you say now? >> yeah, it's not a great day for me because i own it. the offset is i also own tjx so a small positive to that today but on target i thought cornell did a good job explaining what happened talking about the tale of two stories, the front end and the back end and you know me i'll start with the positive because of the front end was the bright spot, 33 comp, two-year stack comp of 26%, traffic at 4% may, still very strong they don't see a recession from the consumer and i know he has a credibility issue at this point but those are the facts are that the traffic and the demand is still there to your point, the demand is shifting and the back end was a disaster there's nothing good there when you miss by 410 basis points relative to consensus on
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gross margins that is huge and that was a huge shock. we knew they would see freight costs, supply chain issues didn't realize how much they were going to shift, the consumer was going to shift from discretionary to consumables and did get a look yesterday and they said the same thing but i thought target would have held up better. they had higher markdowns so, look, i think one of the things that's also putting into play here is that they had an analyst day on march the 1st and they actually reiterated all kinds of targets, short-term and long-term and then 2 1/2 months later they've got to revise ebit down 25% it should be down 25%. yes, they are in the penalty box but i am not going to sell down here, even with the earnings revisions it's still trading at 15 times they are still buying back stock and i think they've reset the bad numbers. >> well, i can't help but think of the word that you use, i think, more than any other,
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whether it's asking questions to guests of ours or the way that you analyze companies and that's margins. you always bring it up. >> yeah, absolutely. >> you always talk about it. >> we do. >> and mostly in a positive way because it's one of the things you look at when you decide you'll buy a stock or hold a stock, it's the margins. are margins going to hold up here they are telling you directly that not only didn't they hold up, that they may continue to be even worse moving forward if inflation continues to be as bad as it already is so i'm somewhat surprised you're still willing to stick with a stock when your key word is the most uncertain that it has been in years, if not decades >> but they've just revised the numbers down by 25%, scott they're doing things, they're putting things in place, they already revised numbers even the second quarter and told you the first half will stink and margins are going to be under pressure but in the back half they're going to put things into place and i do think they're
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going to have to put pricing into place they didn't say that today but i think they will have to but then what if supply chains actually do start to ease a little bit, right, they still have the people coming into the store if they didn't, then the story is absolutely dead on arrival. but i think they've already reset the bar lower and it's already in the stock price and, again, 15 times earnings, you know, is it going to go higher from here in the short-term, no, it's not but i'll hold on to it and stay patient and be a long-term investor and that's the way it is, but i absolutely am positively disappointed with the margins, you're spot on. >> you are a stand-up person coming on. stocks down 24% and knew what the conversation was going to be so i appreciate you being here steph, we'll talk to you, stephanie link joining us there. the reality is setting in, right? for even the bulls even the biggest bulls like brian belski moments after he cut his own price target which we have
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questioned him about on this program on numerous occasions. it was the highest on the street, it was 5300. we said how can it possibly stay at 5300 given the dislocation in the market he made his arguments until yesterday. when he cut it to 4800, reality check, he said, a 30% move to 53 is not going to happen here's what he told me >> in the reality, scott, quite frankly to attain a 34% move in markets from that 4,000 or so level was not going to happen in our view, and, again, we want to play a little bit, but we feel comfortable with our revised target of 4800 at year end which is still a new price high which gets us 20%. >> 20% brian belski thinks stocks can still go up 20% by the end of the year that raises the questions for all of you of what stocks in
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your portfolio either are going to get us there or the ones that you're most worried about and, jenny, i turn to you first, of the names you have you have a number that are down fairly substantially. b & g foods down 25%, unilever down 16. input costs and all that we talked about >> so those are each 2% positions. b&g 2% unilever, 2% in the international strategy they're not -- when you ask the question coming up up on the show what are you worrying about, it was hard to find out what i was worrying about because most of the companies in my portfolio are actually really well positioned for an environment. they are cash flow oriented companies and if we're in an inflationary or stagflationary environment who do you want to own? the companies that put cash in your pocket so, yeah, those two could be doozies and also could be fine because as consumer -- sorry, as individuals are making more, as wages increase, they're
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going to be able to pass some costs on so i'm not terribly worried. that was me just trying to find two companies that i could give you that i worry about more than others for the most part i think you can actually be okay can i just say one thing on belski he might be right. maybe it's up 20%. that would put the market up 3% on the year. that's not that crazy but in any case you want to own companies with real growth, real multiples and pumping out cash flow. >> well, why isn't it crazy? why should our viewers think that from right here that stocks can go up 20 plus percent given the fact that we're down another 2 1/2 to 3% today. how are they going to do that? >> because the economy isn't that weak and the consumer isn't that weak and the consumer still has a ton of cash in their pockets and i think that the market can shift where you have the xpos and gxos and jetblue, they could lead theirway up. they shouldn't be down 40% so
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could easily rally i don't think you need the same leadership we've had in the past five years to drag the overall market up. i think energy will continue to lead so i think all of that could work, people can make money if they just shift out of what they had that have dragged them down and into new things that are down too much and can bring them up for the rest of the year so i think it's possible i don't think it's probable. i think it's possible. i'm clearly shifting from the negative perspective i had when i was arguing with belski last fall and i was negative and he was bullish, now i'm feeling more bullish valuations are getting more reasonable there are things to buy. sorry, one more thing on that. interestingly if we talk about the target and t.j. maxx t.j. maxx had totally solid margins, ross stores reporting tomorrow another in my portfolio. i'm not worrying about ross stores' margins but don't own walmart because we worry about there. you can't own retail broadly but certain retailers and have some nice returns. >> joe, this belski move, you
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know, i told him yesterday that i knew we would have it. it was just a matter of when and it's not a knock on brian, he just didn't want to be the one to sit there in the market falls out of bed so he cuts his price target right there and then. one of his pet peeves he didn't want to do but i think we all knew it was coming the other side of the call, though, he did not take down his earnings projections, even by a dollar, okay he kept those the same, even as he dumped his price target but then suggested that stocks could still rise by 20% or so by the end of the year. >> so i think we have a tsunami of bad news affecting investors and that's why we're wallowing at the bottom of this rank and probably why we'll extend the sell-off further in the coming weeks. i do think the potential is there for a positive exogenous shot to take margins higher and positioned for that, let me be clear. i am invested. either a resolution between
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russia and ukraine hopefully we get that or more realistically, scott, you have tariffs hanging out there and president biden's administration for the good of the country can temporarily suspend or relax those tariffs, that would have a positive effect on inflation, even if they didn't temporarily suspend the tariffs, what they could do is grant exclusion to companies that are importing chinese goods temporarily. >> well, of course >> the perception of that -- >> it's a political issue for them that's the problem. >> okay, well, but you know what, put the politics aside treasury secretary yellen is smart enough to recognize it and to support it for the good of the country, that's exactly what she should be doing. the timing is right. the tariffs from president trump expire in july the review of necessity is going
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on right now i'm not going to sit here and debate whether those tariffs were good or not for the market but you have an opportunity here to help the inflationary pressures, let's take advantage of that at least temporarily >> all right so let's just update you, we're about 24 minutes through the program and just give you a little bit of a reset on the market you can see we are at the lows of the session really across the board. the dow jones industrial average has given up 32k down 850 plus points that's 2 2/3% or theres about. s&p 500 has given up 4,000 a little better than 3%, 128 points nasdaq is down just about 4% a little less than that but it's still a loss of 450 so at the lows of the day so let's add another person, courtney garcia of payne capital management, a senior wealth adviser, of course what's your view here as we find
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you at the lows of the day now and we're wondering if we're going to have that bear market bounce which we did, maybe it's over >> yeah, i don't think we're necessarily at the end of the selling here that is what we were talking about last week, there's probably still more pain in the market, still a lot of nervousness. i don't think the volatility is quite where we need to see it when the markets are bottoming i think longer term speaking here and you guys have touched on this in the show and completely agree i don't think the economy is necessarily impending a recession. i think the economy is in a lot better shape than the markets would suggest they are right this second. i think the consumer after we are seeing what happened to walmart and target, a lot of negative sentiment but what may be happen something a shift in their behavior as opposed to them not being able to spend as much and i don't think we're seeing the end of consumer spending yet and they can lead to continuing improvements in the economy and positive catalysts are definitely not being priced in here which could definitely lead to a better second half of this year so are we the end of this
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i'd love to say so i don't think so i think we're getting closer to a bottom. >> how does the rest of the year look to you considering we're literally just coming off a conversation where we had someone suggest that you could go up 20%? >> i'm definitely on the optimistic side here i'm not -- i don't know how 20% is going to go from here but we could easily see a positive year this year, 2020 as a good example, down 30% in a matter of couple weeks markets can turn on a dime and i think that's something investors don't want to forget but the leaders might change here. like today is a good example always our tech funds selling off the most because even if inflation cops down it will be the headline this year so i think looking at some of your cyclicals not being overweight on megatech caps, still will be important as the consumer to make sure you have inflation -- >> is that the place you want to be right now, technology, given how significant the sell-off in those stocks has been?
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>> no, no, the opposite. right? so i'm looking at -- we have energy, commodities, things are going to offset inflation. i have your tech i'm not selling out of it by any means but not overweighting that category right now i think that very well could continue to underperform in the short term we could see a bounce it did such a sell-off that will continue to get -- not be rewarded. >> what's your top sector right now? >> i'm definitely still looking at whether it's energy, commodities and definitely looking at value over growth right now. i really think your cyclicals will continue to outperform. >> bryn, i think maybe that matches up with you, right you're not ready in any way to give up on energy, commodity-related trades at this particular time, right >> yeah, no, especially energy i mean i think today when you see energy, you know, selling off with the rest of the market, if you get more of this, it will be another opportunity for investors to come back in. but not all commodities are
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traded equal copper sold off quite a bit. gold has been doing terrible and so i mean i think energy is a special commodity over the next few years, just because we have such tight supply, and i mean what's incredible is that, you know, china is still closeds or shanghai and beijing and oil is still extraordinarily high what happens when china -- when shanghai and beijing open, you want to stay long on energy trade, i would agree with tech it's probably too early to add to those positions but i do think investors also need to remember how quickly things change and, you know, i don't think, though, that the fed is going to be able to get fed funds much above 2% and so we're also in a midterm so i'm open to the idea i have no idea how it happens at the end of the year looks very different than what we're experiencing right now. >> yeah. well, one can hope courtney, what about the defensive trades that have worked so well, the staples, utilities and things like that
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is that done >> not necessarily, i really think as we're seeing the markets shift you're seeing the same things over and over. markets selling off. your tech firms selling off the most, having some of them in there will be important. i think we're again not at the end of this, though, i think the cycles we're seeing, the overall macro review hasn't changed generally speaking so still want to make sure you have the same sectors and position yourself that as the markets are recovering it's going to be those cyclicals defensive will have a place still. >> thanks for coming on the program. it's good to have you. joe, how does all that sound to you? >> it sounds excellent i like the way she's thinking about the market she's obviously prioritizing risk and diversification and i think those are the two strategies that you need to have right now. avoid concentration and, please, do not try and catch those falling chainsaws because we know how that is going to punish
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you. >> i'm looking at a ubs call today, steve they upgraded tech, believe it or not to overweight and it was from underweight and it's led by software i'm wondering what you think of this call because it's somewhat controversial, obviously, inth environment that we're in. >> yeah. >> well, i think people try to pick the bottom. that's always the out. you know, belski's 4800 target, he'll be right i just think it's going to be next year or the year after, not this year and in terms of tech and software there are values there, i'm not going to dispute that but you're losing the valuation umbrella so the market is going to come down to meet that and as i said it's going to overshoot on the downside. coming into today or going into yesterday we've got 17 times on a p/e basis, i think we'll get to 14 times by the way with
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lower earnings so you have that double whammy. i'm not ready to buy them yet. at some point i will i've looked at some names i've sole and ten types earnings for companies growing 20% so it's compelling just the overall market backdrop keeping me on the sidelines because i think i'll get better bargains in better companies if i'm patient. >> looking at as the nasdaq is selling off pretty hard, i think what did we say it was, 450 the last time that we checked or in that ballpark. boy, apple is down near 5%, bryn, right now. it's $142 and change that's a near 5% decline you just don't see declines like that among the megacaps since we're talking about upgrading tech to overweight are you comfortable being in names like apple and some of the other megacaps right now >> well, we haven't seen these declines in a long time, but clearly these declines have happened before, and, you know, i'm never amazed at how low stocks can actually go when you
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get into this environment. so am i comfortable owning apple, yes am i comfortable owning the qs, i've sized it right but it's down, right. but ultimate when i look at the constituents of the qs, you know, there's great company, google and facebook, you know, continue to get cheaper, have really good margins but this is just if you're going to invest in tech and stay invested i think expect these stocks to go lower. volatility is high and i think that walmart and target, amazon doesn't look good here and i think that's why amazon is down, what, 5% today that stock does give me some concern because if you look at walmart and amazon, walmart and target on the logistics, amazon definitely has -- they are the e epicenter of logistics and we'll see how well they play that. but amazon being down 5% also, to me, definitely has me nervous. >> we had this previously planned, big tech day, if you will, here at cnbc before the nasdaq fell out of bed again
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today, and, deidre happened to look at amazon with a closer look on what's happening, dee. >> it's the perfect intro. biggest loser. you were talking about this. it has been vulnerable there's overcapacity at factory, inflation pressures, labor issues, its weighting as an influence has decreased at its peak and it's fallen the furthest percentagewise among the megacaps we are featuring it is by far the most expensive in terms of that p./e. ratio. what does wall street think? wall street is positive on all of the megacap, hardly a sell rating to shall found so looked beyond the fast for you and piece target from analysts, that may be a more relevant signal. for amazon, the trajectory is down as you can see from that line, that dip at the end there. for other names like alphabet,
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microsoft and apple, that line is flat. it's a lot more study so, scott, perhaps that signals less confidence in that upside for amazon >> yeah, well, i'd love to find out what others think on the desk, dee. thank you for teeing it up like that joe, amazon was named a top pick at jpmorgan. love that wall street continues to have for this name, right 4,000 bucks, they prefer it among all of the megacaps. you look at that p/e that dee talked about, 71 times forward >> so the problem that i have with a lot of the mega"company"s in particular a name like amazon right now is as the market continues to deteriorate, understand a lot of these names are the names that are being put in place as securities for debt financing, funding a lot of the investments and we all know softbank is one of the names that does that as markets move lower, these
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have to become a source of funds because you're placing those securities in a position of holding against the debt so that's the trouble and that's where you kind of lose the fundamental perspective and it just really becomes unabated selling. look at just tesla today tesla is down 6 1/2% okay, the correlation to that is what, where is twitter $37, is that deal possibly happen if the market continues to deteriorate in the capacity it does? i don't think so at all. so i think you have to be careful with a lot of tech names where you see a dislocation of fundamentals because it's really about raising liquidity and selling these names to offset a lot of the financing that's been done against them. >> i keep hearing, jenny, if you're going to buy technology, you want to stay with the quality. right? you don't want to -- i mean at least people say who have come on this program you don't want to go into the still high
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valuation name, even ones that may look cheap down 75% plus or so you want to stay with quality names. like the megacaps, they suggest. the apples of the world and the microsofts and the others like an amazon. how do you see that is because you don't own all of these stocks >> right, i define quality differently. i define quality as cisco systems where there's a lot of positive momentum of network demand or amat down 21% for the quarter but has 18% eps growth or frankly ibm that's finally getting the wind under its wings and trades at a cheap multiple, 4.7% yield so i define quality quite differently. you know, i'm listening to the amazon/apple conversation thinking how wonderful that i don't need to worry about these, the only time i need to think or worry about them when i'm going to be on tv. otherwise, they're not my problem. you know, i have this portfolio that is at the margins or other places then what's a good place to be right now. so you can own tech, but i don't
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want to own what's in the limelight. >> concerned at all about cisco? it does report he earnings after the bell today. >> they do and actually, yeah, no, not at all that's another one where we think margins will come in positively so thinking through what you own and where the pressures are, i don't want to own walmart. yes, i do want to own cisco. i don't have a margin concern coming up there. >> weiss, how do you see this conversation it is and we constantly hear quality, quality, quality, no matter what kind of stock you're buying but particularly in this environment it's all about quality. at least that's what the people who are running money suggest to us it is but how do i view the megacap stocks which today, i mean names like amazon, for example, which are one of the worst performers and a stock that has come down a lot and still has a pretty lofty valuation attached to it >> yeah, you know, when i came into the year, i said that the faang stocks could be placed too high
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clearly that was wrong i sold my amazon as you know a few weeks ago and glad i did the valuation is too high. period at some point a company gets so big that it can't grow like it used to and amazon can't even make acquisitions that will grow their business, nor can the other faangs because the biden administration said, no, we're against that so i think amazon has some issues going forward i believe that, you know, in terms of their aws offering that we're seeing the end of the uber growth there it'll still grow nicely, but you've got others coming into the space and price is a consideration. what's the better value proposition? it's only going to be based on price so that's the major reason i sold it and the consumer i don't think the consumer is that strong. i think it is right now but it's a bubble and going forward, do the math you'll have that the consumer and the luxury segment will
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still do fine but everybody else, the numbers just don't add up and i don't know why people don't see that >> see, i disagree. >> so they'll spend less apparently. >> i disagree on that, though. >> go. >> okay, i disagree that it's like only the luxury segment will do well i bought american eagle for the dividend strategy two weeks ago. so on that one trading at six times earnings there you have a company that's expecting the consumer, sorry, stock price that's expecting the consumer to be so weak that it's kind of expecting earnings to be cut in half. they have $2 a share of earnings right now, 72-cent dividend trading at six times i don't think the consumer will stop spending at american eagle by 50%, maybe a little but there's this disconnect out there between the share prices and what's really going on i think that's why it's dangerous to try to call exactly the bottom don't look for the bottom. look for individual stocks that have likely bottomed now, i didn't nab the bottom of aeo but did buy it down 40% so i
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don't think it's just consumer luxury that will do well look at t.j. maxx. what ross stores is probably going to happen. you have to sift through, be really, really picky but look at the mix between what earnings are logically going to be reasonably going to be and what this share price is expecting and try to find secret where the share price is expecting the worst case and actually the worst case probably isn't going to play out. >> let's do this let's take a -- >> i want to congratulate jenny, she's able to predict earnings but walmart, home depot, target, they can't -- >> give me a break, weiss. >> kudos to jenny. >> what, that i'm saying they're not going to drop by 50% that's not such a prediction >> i don't think a 35% payout for their dividend is the right thing to do when you're facing a recession. >> right now it's like 100 -- sorry. it's over 100% coverage right now. >> thank you that's my case
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>> all right we are going to take a quick break. i think everybody needs a break. we'll be right back. much more ahead. dow down by 815 points
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bullish calls in the payment space, visa and mastercard initiated by goldman sachs our call of the day, bryn, you own visa you prefer it over mastercard? >> they're both great. i own visa ail he stick with visa profit margins with target, the margins of these companies are in the 40s s the consumer gets weaker which i think the consumer will get weaker because we're a 70%
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consumer led economy and jay powell wants the consumer to get weaker to lower growth i think that swipes will continue i like visa more only because they have more u.s. exposure on the margin and i think that globally the u.s. will be more insulated than a europe or what have you, so i think it's a good call i like visa here if it continues to get cheaper i probably will sell out of some other napes that haven't done well and buy some more. >> joe, visa, mastercard, fintech? what floats your boat? >> quite candidly i've missed both visa and mastercard i should be in both of these names. they offer the type of defensive positioning i think right now in this environment where growth is challenged and inflation is rampantly out of control these are the type of names you want to have transactional in their nature not taking any credit risk so both of these names are names that i've written down here and i may have to take a position in them soon enough >> we'll see if they -- year to
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date down 5%, 5 1/2 for mastercard seems like a win when it goes to the overall environment. down slightly is like the new up, jenny. >> so both visa and mastercard being down still are too rich for us they would be candidatesfor ou discipline growth strategy but that needs a 5% or better free cash flow yield. in that we own western union with a 5 and percent and pfi serv. the stock steve weiss just 'lte y wel llou what it is when we come back on "the half.
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steve weiss has another move we need to discuss delta air lines, which i thought was going to be a little more longer term for you and we had this conversation, but a couple of days ago. why did you get out now? >> yeah, i thought it would be longer term too but it was up 10% in less than a week so in this kind of market you got to book the profits where you can airlines you only rent do you rent them for a week, six months or a year, such capital intensive companies and so
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cyclical so that's why i told it a rare gain in this market. >> sorry to interrupt. feels like when i heard this news i'm like united airlines changed the trajectory of this trade for you in some respect, right? they raised their outlook. >> without a doubt. >> and it made perfect sense to me why you wouldn't be willing to stick around if your overall view is what the was >> and i bought it when everybody had turned negative on it look, business travellers are getting back on the road also. they haven't seen their accounts, their customers with, whatever, suppliers for two years. then they're going to go back to zoom who wants to be on a plane more than they have to? take advantage of it when the world turps positive in
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this market uniformallyly kwb, n that's a good time and su summer travel was booked months ago so, that's why ib got out. >> we told you earlier and sure you know by now he's cut his target from 5300 to 4800 he joins us on the phone right now because he tid not bring his earnings projections down we went through why you cut your overtime in overtime yesterday i wonder what's going to cause you to take a look at that as well >> a great question and thank you so much for having us back on one of the other moves we did
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make yesterday obviously too is we talked a little bit about bringing the consumer discretionary waiting around with, given the fact of what we've seen in the high valuation part of the market remember too that tesla and amazon are technically consumer discretionary stocks there's no doubt that target'sb numbers were as walmart says previously to that walmart may have more execution issues than target does. but you have to take into account the great management and so far, what's happened with t.j. max, another name ewe own and home depot again, the fears with respect to the consumer pricing and the margin effect. and the margin eeffect has to dowith the overall earnings invoirmt woevl been clore that sales growth has been strong and like we said yesterday when you're looking at a company holistically, they're lacking at
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all parts of the financial statement and ib think stability and strength of u.s. companies and the wherewithall that can't be debated we actually think again that earnings could be a better poised for the second half of the year i know ib was listening earlier and joe was talking about an upside to prize. i think market's not anticipating not positioned for an upside surprise in the second half of the year number one, with our earnings target but number two, as history also being a guide that we to indeed have seen markets in the past have these types of recoveries cyclical bear markets, like the market is acting like or this correction phase we can't have this 20% bond. >> i'm thinking of a line you just said. sales growth has been good
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but you're suing fewer customer transactions these days. as home depot sited in their earnings report. products have become more expensive because of inflation at some point, that's going to run its course the consumer is not going to be willing or able to continue to pay up for the high prices, which the targets of the world literally just told you they can't raise anymore. so, that would seem to mess with your projection a little bit i think. >> yes and no. the consumer still -- obviously, you never bet against the u.s. consumer, number one number two, i think what's interesting is the way that the market is trading, the way that the market is acting around these companies, they're creating all companies equal,
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which we know is not the case. there's a good chance target is going to do a better jaub relative to walmart or costco do a better job relative to -- >> but why brian cornell told you that he did -- these are my words. he did a a bad job of forecasting. he owned it. heate it, right? they projected poorly. what gives you confidence they're going to be able to do that any better moving forward in what is a quickly changing environment? >> here's my confidence. my confidence is that it's still, like a stock picker's market, companies are going to be able to do things better as well and i think the consumer is going to spend $100. just maybe more concentrated where they spend that money. the money is still there it's troubling that they've been
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bottling up and not passing along these costs. but there's a good chance that some of the pressures, with respect to supply chain,b could fall off dramatically in the second half of the year. and yeah, there is going to be costs passed along but the consumer remains resilient and that's why we're so bullish on that >> we appreciate you coming to the phonin mens tie aomt'noce well take a quick break. [sfx: street ambience] ♪ ["fly me to the moon"] ♪ ♪ ♪
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i hope you join me in overtime tonight, just over thooe hours from now adam parker will be ewith me halftime investment committee will be with me. wells chris harvey we'll kick everything around as well and i'll see you in o.t give me a final trade, please. >> i spent the last two days at midstream energy conference. a very safe place to hide in this invoirmt. >> bhp when the australian commodities juggernaut china will reopen. there's an election year in china. there's a 9% yield it crosses across commodities and it's at 54 >> i would sell docs they reported bad a number
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still way too expensive. i still like cash. >> and i own pugreszive corp, nice share holder return. buying back stock. returning a a dividend >> and green on the screen yea. not everything is red. i will see you later in "overtime. "the exchange" begins now. thank you, scott hi, everybody. i'm kelly evans. welcome to "the exchange." target logging i, should say,b the biggest earnings miss since 1996 a day after walmart had its worst trading session since 1987 and we have an exclusive interview who warns the market has a lot further to drop. let's first get to dom chuw wit the latest color on the markets.


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