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tv   Squawk on the Street  CNBC  May 19, 2022 9:00am-11:00am EDT

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problem. >> we have to go, but i wonder, what's worse, inflation or recession? then we have the specter of both at the same time >> inflation, hands down hands down, inflation of course. inflation would take us into a recession. >> okay. liz, thank you markets back down but not out, i guess. >> join us tomorrow. bye-bye. good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer david faber is back on set a fresh round of recessionary worries are driven by kohl's and cisco. philly fed disappoints and the 10-year yield near lows for the month. speaking of cisco, we'll talk to ceo chuck robbins on set in a few moments. we begin with the markets after yesterday's sell-off, the major indices extending their losses from record highs including a
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more than 29% decline for nasdaq, jim. that mix of everything from consumer discretionary to staples. nowhere to hide. >> nowhere to hide i think yesterday's -- of course even oil was down, all i want to point out is that there was a moment in time when all we cared about was the 10-year, and that time has come and passed, which tells me that should not have been the focus the focus should have been the tipping point from when retail had the stock eating or eating inflation. a lot of the inflation had not been felt or seen in part because it was at a level where it was almost hidden from the consumer it turned out to be just hid frn the consumer because the companies hadn't reported. david, my take-away is that it's been simmering and simmering and simmering. it boiled over in march and really went nuts in april. because the companies didn't
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report until early may, we just really didn't know how bad inflation was. much worse >> what about the demand side? are consumers reallocating their spend organize are they slowing their spending >> well, i think that they're spending at a different place than where we thought they were. >> reallocating. >> they're buying luggage. one of the weird kind of existential moments in the target call where brian cornell says they're buying sunscreen. serious businessman. what he's basically saying is they're not to ding what we thought they were doing. they're just buying little things now and they're traveling. luggage. so what people are doing is doing something that we should have i think maybe presumed, which is that they're seeing the world, doing things with their lives because they've been
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locked down. they're not trying to spend even more time at home. they want to get on the road phil lebeau would certainly tell you that too anyone who's flown knows you can just add a zero to wherever you go with the airline tickets. >> you mean the fare >> i think there's still not demand destruction because people are so happy to get away and they use airbnb, so it's not like they're getting caught with a hotel, but i am just shocked at the number of people who were misjudged. people wanted to go away and where they go does not add up to retail they just aren't -- they're off -- they're not going in the aisles en masse. off contractor trying to finish the project that started during -- >> jim, when this week began, you and i were together on monday, i think it was >> i think i've seen you a couple times this month.
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>> we've all been together maybe once this month. good to be back, all fly of u on the set. when we were here on monday, you talked about the retail earnings being key without a doubt. >> yes. >> now we're through most of the big ones >> i didn't know it would be this bad >> how do you approach the market at this point, which will be down again after a very poor day for the s&p you can see from yesterday, and market sentiment, we can talk a lot about that, the fact that nobody's going to buy until they know. but what does this retail reporting period tell you in terms of -- >> it tells me that as much as i like jay powell, he is so off the mark here. >> what do you mean? you love jay powell. you've been singing his praises. >> of late i've been in the other camp oh, that's right you haven't been around. >> where the hell you been, dad? you're never around.
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>> cat's in the cradle >> i've been busy, my man. >> it was johnny o look, i think that it's very important to recognize i think george is talking, talking about 50 the lesson is holy cow, things are so much more out of control than we thought, so i have to -- i've been in the board i love jay powell. i think jay powell was doing a good job i think he was concerned as much as she that maybe omicron would be really horrible he misjudged that, but he's not a public health official we have a guy name board very sane. we need to shock the system and bring things down right now. the only commodity that i know that is here, chicken wings. >> meaningful deflation. you talked to wing last night, right? finally deflation in chicken wings. >> so bad, my wife and i came home, we ate them.
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everyone's cutting back. >> cutting back on what, chicken wings? >> i had chicken wings for dinner >> you're cut back not the breast, just the wings >> i'm saying the chicken wings were surprisingly good and i was shocked that they were half the price of what they were. and everything else is much more than what it was it's the only commodity i can find that's down versus say gasoline the state of washington is -- you don't have enough digits >> yeah. washington state's bracing for some big numbers by the way, in terms of things that are rolling over, mortgage originations, maybe hiring plans. esther george did talk about what it will take to get inflation under control this morning. >> i think we will succeed in bringing down inflation because we have the tools to do the heavy lifting on that as it relates to demand. and we do see financial conditions beginning to tighten. so i think that's something we'll have to watch carefully. it's hard to know how much will be needed to make that happen given all the moving parts that
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we see today in the economy. >> 1994. we've got to do 1994 >> what does that mean >> got to go after with 75s. can't be grade of 75 basis points >> meanwhile, we have the supply chain issues we'll talk to chuck robbins in a minute i don't know how that figures in as well. you can't even get enough goods that you want to satisfy the demand, which -- >> we need housing to definitively slow. things are rolling over a little bit. i do think that there is a lot of miscommunication of what the fed needs to do. but i think that what the stock market cannot do what the fed needs to do. we need to stop the cycle, which just says we can put through price increases, david that's what i said yesterday there isn't a company in the world that doesn't feel right now it can't put through a price
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increase what we need is companies to say, you know what, if we do that, maybe the customer won't buy it >> isn't that exactly what kohl's said? sales meaningfully declining in april. >> i read kohl's and -- they're terrible they're terrible i mean, sephora, that's great, genius cole's is existential. there's nothing really at kohl's on the sale, they got a good price. >> it's not that easy to sell yourself in this environment, one would expect i don't have any updates on that process. obviously, the board was unanimously reelected, if you recall >> you see their cheap merchandise. >> senior people, yeah >> look, i don't want to -- i mean, i'm sure that doug would be on here saying, jim, you sleight me and sleight kohl's. brian was very objective people didn't have the right thing.
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i say kohl's is different. i say kohl's doesn't have what it takes that's very different from not having the right fit target did not have the right merchand merchandise, okay. walmart has a lot of food, and food's gone up home depot had a great quarter and no one is talking about it and marvin ellison with the coldest april, with the do it yourself, coldest april in 20 years and rainiest, $50 million and he'll catch up there are companies that are doing well, all right. people are gardening people are doing things at their homes. they want to make their homes better there's marvin is he in russia? >> not that i'm aware. canada goose, another example. >> some guys have the right stuff. but when i talking about the fed, david, i'm saying we need some belief that autos don't -- wow, that autos -- we need autos to catch their breath. we need housing. look, it is incredible how short we still are in housing. >> come what may in the stock market, right?
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doesn't matter >> the wealth effect is kicking in people are -- but that was our -- we knew that was going to happen r.h. was the beginning >> bigger, quicker, sooner, get it over with >> get it over with. you want to keep doing this? you want to talk about this every day for the next year? >> no, i don't >> david, people aren't buying as much. can we just get it over with in '94, that was the greatness in '94 by the fall we got it over with. you were still in diapers. >> i was not i was at cnbc. >> remembering back to fort lee in '94 and what i was doing. >> you had hair then what you have is that you have a fed that's got a lot of leeway to raise rates and they're taking their time. they act as if oh, a little inflation. i mean, jay is not doing his job right now.
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when he made that comment, the 50s, why did he say that >> you will allow that the russian/ukraine conflict and the china lockdowns were curveballs out of nowhere >> they were curveballs, but at the same time, even before those, things were out of control. now, i mean, when you look at russia destroying the farm equipment -- >> the food thing. ukraine, cheat, russia, that was unexpected that's got a huge issue. you just mentioned it when it comes to -- you're starting to see that >> look, when you listen to all the calls, they all say the same thing, there's not enough housing. housing is the most inflationary part of the u.s. economy do you know how much housing is up over two years? >> 40% >> 40% that's too high. that's the american dream. >> a huge number >> of course have you tried to car shop >> no. >> someone tried to buy my car, 16 years old i'm driving my car why would i want to tell zelenskyy my car
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>> right don't. which one is that? >> the lexus it's not like homes. i want to buy a castle in ireland. i said enough. >> enough. >> enough. >> 13 is enough. >> wings for dinner. >> wings for dinner. i came home and said we're having wings before we ate at the bar, we are cutting back, what are you doing, sir >> i'm doing what i -- >> cut back. you have some sort of weird plaid tie on. >> you don't like my tie >> where is it from? t.j. maxx? >> there's nothing wrong with t.j. maxx. >> they had great quarter. >> they did. >> a good idea with t.j. maxx. >> you can pick up gadood bargas there. >> an unbelievable one in brooklyn, nothing but t-shirts >> awesome >> we'll talk to chuck robbins about these issues in the moment exclusive with the chairman and
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ceo of cisco futures again down across the board. europe's down across the board although we are getting that bid in treasuries with the 10-year 2.82 >> the 10-year >> back in a moment. ♪ ♪ wow, we're crunching tons of polygons here! what's going on? where's regina? hi, i'm ladonna. i invest in invesco qqq, a fund that gives me access to the nasdaq-100 innovations, like real time cgi. okay... yeah... oh. don't worry i got it! become an agent of innovation with invesco qqq
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revenue guidance ukraine, all this weight on the quarterly sales and in the future joining us now at post 9 is cisco chairman ceo chuck robbins. great to see you in person even if we have to talk about numbers we're not happy about. >> i can't tell you how good it is to be here in person. i brought my whole team to new york to do earnings here so i could come see you guys and talk about it it's important what's going on right now. >> talk about it first from the point of view of demand, because i think that was lost in a lot of notes that i read this morning and last night, was that demand is strong and you're not losing share i want to start there because after that, we have to talk about the miss >> yeah. well, you know, there was a lot of discussion about demand last night. if you think about the prior three-quarters we had product order growth in excess of 30%. we knew that wasn't normal, those were not normal run rates. >> right. >> so we got to a quarter where
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we grew 10% a year ago, product bookings 10% a year ago. two or three years ago if we'd been sitting here saying product qu orders were up 10%, we'd be celebrating. we grew 8%, but it would have been 10% notwithstanding russia orders that we took down because we ceased operations in russia >> right >> 10% growth on a 10% compare from a year ago, mathematically, of course it's slowing but from just an overrch aing, like, emotional perspective, i think we have to be careful not to over-rotate on that issue >> i do want to -- over-rotate i like that. russia, we know. you take it out. thank you. >> yep. >> that's what americans needed. there is, as i read this morning in a note, an epic disaster developing in china. and i say that because i think you actually may have had an upside surprise. we now have to realize china is
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shut down. shut down. now, you have a country, the largest country on earth, that's closed for business. what would have happened with the power supplies had you been able to be open? >> they would have been fine i think it's -- we can point to in excess of $300 million more of product that we couldn't ship in the month of april. so if you recall, i think you spoke on it earlier, most of our peer, they reported march end quarters, and the shanghai shutdown, which was much more detrimental than the shenzhen one, began on march 27th we experienced an entire month of april of those shutdowns and we have critical power supply components that come out of shanghai, and while they're building them, they gave them permission to be in the factories and the workers are literally sleeping there, but they have no transportation, no logistics, you can't get anything out so we have nothing from the largest power supply
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manufacturer that we use we have a dozen but this was the largest. >> i want to follow on that. you continue to be concerned about what the future is going to hold here, particularly as they open up getting stuff out of the ports there i know you talked about it during the conference call give people a sense as to your continued concerns when everybody is suddenly going to be racing for the exits with their product. >> i think that the good news is we believe if they begin to really open up over the next 90 days, then when we get into our q1 and q2, a combination of them being open and a lot of the work our teams have been doing for like nine months on some of these key issues we have, we think they'll start to show positive benefits. we'll lead that one. in the near term, we believe that as they begin to shift, you know, we're but one company with one product we're trying to get out of there there are other components we're trying to get out of there we do believe there will be a rush to get product out. we saw their industrial production numbers way down. and their export numbers way
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down and so when they open up ports, they open up airways, that there's going tock tons of competition for it so we believe there will probably be short-term pressure, and once they get it out onto the ocean, we could see another issue in l.a. and other ports where ships are backed up trying to get in. that was all built into to our guide because the concern customer with if they open it won't result in shipmentings as fast as we would like it to be that's a simple issue. that's it. no more complicated than that. >> do you think margin pressure among clients is going to force them to revisit i.t. spending plans or is that whole reinvention of the corporate i.t. world intact? >> i think that it will be less severe as it was five years ago. but clearly, there will come a point where companies, if they decide to stop spending, they'll stop spending. my point is covid, the pandemic,
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exposed the power of technology to cease wheat executives, political leaders, in ways they've never seen before. they knew it was strategic now they truly understand. it was up close and personal, so they understand -- i can see how this would change the customer experience for us. we can get closer to our customer base leveraging technology they also realized they had sweated their assets way too long and many of them had not modernized their technology infrastructure and it impacted their ability to deal with the pandemic in the early days, right? i joked we were putting duct tape and glue on a lot of this technology infrastructure. while it's inherently obvious if they decide to slow spending, they will, but i think technology will remain a higher priority today than a few years ago. >> with the two price increases in place this year, no sign of demand destruction at all? >> we have not other than the mathematical slowing. we had 100 of our top customers together two weeks ago and all they could talk about was how
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critical the technology was and the projects they're working on. we'll see. these things tend to turn quickly when they turn we'll see how things go the next 90 days. >> if that's the case, then why wouldn't you use your considerable cash to buy as many shares as you can at 42, 41? because you were buying higher off lot more money, $17 billion, available. it would seem to me if you're that confident we would know it if we start seeing buying by you. >> i think our teams have always had a core capital allocation strategy, and the opportunity to be opportunistic where we need to be, and clearly if we thought the stock was undervalued at different levels, it's certainly attractive now as well >> one of my concerns is order backlog. some of the analysts seem to think you're losing share. others seem to think your order backlog growth is slowing. now, i don't know how they got
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that maybe there's some merlin within the organization i didn't read that but that is the take-away of a major analyst. >> we've only given backlog two quarters, two quarters so it's very difficult to declare a long-term trend over two quarters but i'll tell you that our backlog was up $1.5 billion sequentially we have $15.6 billion in backlog today. we have rpo, which is remaining performance obligations, meaning revenue we will see in the future from software and services so you add those two together. we have $46 billion of revenue that we have taken orders and we're ready and we will recognize that over the next coming quarters. $16 billion of the rpo is short term if you assume the backlog shifts in less than 12 months and you have $16 billion of short-term rpo, next 12 months, that's $32 billion of revenue that is
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secured for the next four quarters so, you know, i think if you look at our backlog, it grew 136% year over year. if that's slowing, i'm okay with it >> to your point,things can change quickly we're in a somewhat unique period right here. >> we have been. >> yeah, we have been and it continues. we were talking about it the top of the show. the fed. we're starting to see some companies lay off employees. there seems to be a bit of a shift. how concerned are you about the meaningful change in demand and/or in behavior so to speak of those customers >> you know, if you think about what our customers are dealing with right now, they're rearchitecting applications, moving to hybrid cloud models. 5g is finally rolling out. 400 gig transitions. we have a new cybersecurity landscape in light of districted data, districted user, districted applications. we have hybrid work. so i think these multiyear
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transitions that we believe our customers are going to invest into and so could they potentially pause, slow down for a while of course. but i think longer term, we're quite comfortable. the reason in our q4 guide that we -- our eps guide was much lower than what the street expected, we believe these issues that we face are temporary right now. the china lockdown is temporary. they'll have to fix that because it's hurt ing their economy. so we didn't want to rip it out and destroy the company over something we think is a 90-day issue. by the way, the low end of our guide in light of wall street really liking companies that make things and make money -- >> yes >> -- the low end of our q4 guide results in our year being a record year in earnings per share. we've actually navigated this year in a very comply kaeltd world i think quite effectively. >> the conversation would have been started another way, which is we're in a tough quarter.
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you're the number one place to work congratulations. >> thank you >> tremendous honor to be the number one thank you, chuck robbins, chairman and ceo of is coe >> great to be with you. >> so good to have you here in person, chuck. thank you. >> so good thank you guys looking at futures as we kick off this thursday morning "squawk on the street" continues tea orbrk. i'm dan o'dowd and i approved this message. tesla's full self- driving technology. the washington post reported on "owners of teslas fighting for control..." "i'm trying..." watch this tesla "slam into a bike lane bollard..." "oh [bleeped f***]" this one "fails to stop for a pedestrian in a crosswalk." "experts see deep flaws."
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let's squeeze in a "mad dash" before we get to trading less than a minute from now. the reels. >> an excellent note out of. the analyst has been dead right, christian weatherby. downgrading the rails, they've been outperform. the thought is csx, union pacific, they've been unbelievable, although they were higher [ applause ] selective and cautious about the transports the reason why i like this call,
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david, because this group has basically been in the sweet spot of the strength of the economy union pacific did say 50 points here, but that said, these, their business is -- [ bell ] that ohio renaissance. >> the guardians >> but also the previous >> the opening bell. obviously weak record on the big board. nuscale power celebrating its new listing. and mental health action day mtv. flo did an event yesterday about
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that as for the utilities and the grid, some cautionary comments yesterday about summer blackouts, jim i mean, i wonder, we talked about staples not being a safe haven, but the utilities remain. >> i've been saying the summer blackouts seem very real to me sempra, which is a fabulous company and a great, great, fabulous -- that could happen. i do like sempra they're doing many things right including natural gas export but let's just say it's an added concern among the many concerns, the supermarket, the gas station, the retailers, the housing. the list grows and grows and grows. and if the economy would just be able to catch its breath, things could be a little better otherwise i think the people are going to say -- and there are notes out today -- there's a lot of -- a bunch of notes saying
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the individual is fleeing, fleeing. >> you have some of these target, deutsch cuts their year-end target, hbc, goldman says a recession would take you to 3,360 >> the recession piece is beautifully written. >> bofa, worst case stagflation 3,200, which would also be your recessionary decline peak to trough >> you go home and read the research and keep saying do you try to find some bright things to say because it's your nature, oversold, price targets coming down, or do you just go global we just had a man, chuck ro robbins, come up here. he is a serious business person. if china indeed has shut down, how do you, david, own anything that gets product out of china >> well, it's a good question. i mean, he did say they are going to have to open up they are in the process it would seem of at least moving towards
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opening rather than getting more shut, although who knows, the course of covid is unknown and so the response from that country will be as well. but it's a good point, jim shanghai was much more important than shenzhen. >> that was amazing. >> the general group think is that when they loosen restrictions it's dovish but his point is everyone rushes to the bar and wants a drink now and that's going to create more short-term pressure. >> and that forecast is of course -- actually beat the number >> right. >> but the forecast was so negative as to make me feel that, okay, we have to analyze every company that is coming out of china but at the same time, the silver lining, we were really oversold and there are a lot of companies that have nothing do with china. if esther george is right, it may be a situation they get to still make more money. but this is the home depot issue. home depot had great numbers,
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and some they were able to put through big price increases. that's not what we want if you're a consumer, but if we can get good price increases your stock will go higher >> yeah. i'll give you another maybe positive the hedge fund world, they've taken their gross exposures down to levels rarely if ever seen. >> good point. >> a lot of the selling i think may be done. they've sold so much and i don't want to -- you know, but i'm hearing lowest exposure ever these are large hedge funds that are active traders that very well may be at the lowest exposure to the market they've ever had, meaning they've sold a lot of stuff and so you want to say that's a positive, certainly low exposures across the board is not a negative then we have melvin. you know, maybe the poster child for hedge funds and hedge fund
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access in some ways. dave plot kin, obviously all those great years of performance until he ran into the gamestop fiasco. from there, terrible this year down well into the 20s, maybe even more than that at melvin. he's done. he writes a letter, he says the past 17 months have been incredibly trying times for the firm and i've given everything i could but more recently, that's not been enough to deliver the returns you should expect. i now recognize i need to step away from management >> did he mention that as a reason >> tiff letter here. i don't think he did move the miami, buying sports teams. i don't know, maybe that's not the best idea. these hedge funds moving to miami -- >> six months and a day. give me a break. pay your taxes it's america >> just stay here in the rain, you know, the garbage. it's much better you focus on garbage
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all over the streets >> here's something. again, i don't want to be searching, but for a month, maybe two, we were all gripped by one thing, the 10-year, 10-year, 10-year now who cares? who cares? the 10-year is at 2.79 >> good point. i do want to make one final point on melvin. i think it's an important one. there are people probably looking at the 13 from the firm, melvin saying he's got to the sell everything because he's closing down he's done. he has liquidated and has been remember my story from a few weeks back he was trying to change his high water mark, make it go away, reinstate it on new capital. that didn't work he's been in more or less liquidation mode, my understanding, for some time an opportunity to shoot at his positions, unlikely. much in the public equity portfolio this that firm has already been liquidated as he returns external capital >> back to what you said about the exposure cut
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>> apple >> iphone. they use constantly when i'm talking to you >> yes yes. >> the stock is actually -- it's up >> right >> nvidia. i posted this morning, just to remember -- nvidia is up i would say it's a long day and probably early in the session. but i do believe you could bounce and people should be positioned and get out of things that have a lot of china because you heard chuck robbins. they're going to miss. everybody who needs product, i don't think chuck robbins is the only one who's not going to get that out of smanghanghai. if we went to shanghai right now, my wife's been to shanghai, just, you know, the most bustling city on earth i don't know, it's shut. that's just a major seismic
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event. >> there were some headlines this morning that chinese officials telling the wires that port capacity is back to 90% but, i mean, that's not certainly what he's saying >> right >> your point about bouncing, children's place, down 13 premarket, now positive. >> really? that was a really bad quarter. >> you have expedia up, live nation up, hilton up, delta up to your opponent, jim, about people trading in goods for travel >> right i can't believe children's place is up. >> i know. >> i read that i'm not picking on it. >> they missed on the top of the bottom line and they did guide below for the year >> the tale of the tape will be if lowe's can come back if you believe marvin ellison that if the weather is good, he'll get back to sales. i just think he did such a great job this quarter he didn't cut numbers. there are a bunch of companies -- look, i hesitate to say anything positive because i think we all feel like when you
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do that, you're trying to sugar coat the damage that people have suffered i do think at this point, carl, when i meet someone, the first thing they say is 401(k) they look at me and i'm, like, 401(k) >> they don't say when is is it going to end that's what i get. when is it going to end? june 7th >> june 7th. >> at 10:36. >> let me mark that down >> can i take a selfie which is it going to end >> june 7th. i'll post it >> i don't know when it's going to end >> june 7th. you took a nice picture. thank you. >> june 7th. what time? >> 10:37 right that down. >> no one else has been able to predict this accurately. jay still involved >> he will still be involved,
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yes. >> i'm not calling him jay anymore. he's mr. powell. i want to get the distance >> raise interest rates 300 basis points >> i want a shock to the system. i want people to say i better not put through that price increase because the customer may not take it. that's what i want now, oil unfortunately, the customer has to take it. if you're in the state of washington, it's not like they have the most -- >> demand destruction. >> i'm saying it right now we cannot have people -- we can't have a paint company say, you know what, the whitener went up 30% so i'm taking mine up 40%. we can't have that anymore it has to stop, david. >> okay. but that is going to slow the economy dramatically and that was the worry yesterday, at least, that we're going to have a recession. >> we have to stop inflation we have to --
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>> you're saying only a recession will do it >> yes >> equities are pricing in more of a recession than the macro indicators. >> costa saying -- the peak to trough is so hard because the november peak was such a phony peak i'm not -- by the way, i'm not -- >> do you remember the buttons in the '70s? i think i have one >> i have one. i bought it on ebay. >> gerald ford >> we have, i just saw a flsh, we have kevin plank. >> yeah. >> and chris walked the plant, the ceo. >> under a armour down about 6, morgan stanley cuts. >> apparel is just a disaster. >> isn't that what you're looking for, though? >> yes >> yeah. >> there will be a glut of app apparel and that will make it so -- you have to check the boxes. it is autos and semis.
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semis are starting to come in. if you ask chuck, he would tell you it's loosening if car prices come to doesn't and i think home prices, david, have to stop going out of play car prices, carl, have to stop going up the stuff that goes into a home has to stop going up and then if that means that it's recession, so be it. but that has to happen we cannot have this -- the american worker cannot afford to make 5% more and have to pay 9% more that's what i'm talking about. >> you're telling us all these things tell me what the appropriate multiple should be base on that expectation. if we have a recession, we should have it everybody asks me on the street, when does this end >> when those things -- june 7th at 10:37 >> because things get cheap maybe, you know, historically they get cheap but some are historically cheap >> the ability to be able to get
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a job is still good. >> best labor market in 15 years. >> amazon, looks like -- >> software engineers are not to going the make as much money next year as they did this year. that's starting to come to doesn't a bit. >> that's a positive i had ultra x yesterday, unique, fewer people to be able to calculate things these are things that will be put through. fewer people -- all these things i know meaning that there's going to be low unemployment because of what you said, the job market is still strong enough, i think that we won't get a recession, but i do think that jay powell is not doing his job. this 50-50 thing >> i missed the transition on jay. i did miss a couple of days. i've been on the road a lot finishing a shooting for a documentary on exxonmobil. >> i thought you were at the vineyard >> i was not at the vineyard
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last i remember, you liked tim. >> we had a serious oes of numb that made me -- april was a bad month in this country. we had big inflation and slower sales, and we need to have the inflation come down. >> his retort would be financial conditions have been doing their work for six months, and now we're watching the effects >> right but we still have -- some of these things are out of powell's control. but i do think it would change the psychology the psychology of asking for a price increase has become ingrained in america and that hz to stop. this thing should be 900 >> you're almost as hard to follow as elon musk is sometimes. >> no. elon musk is off the rails >> we have to talk about tesla a bit. he got very upset about being removed from this index by s&p,
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called esg an outrageous scam. s&p, dow jones, recently removed tesla from its esg index man, he's going off on a lot of directions not to mention twitter >> i was going to ask you about the specific performance >> we can talk about specific performance another time, what his contention may be, how much of twitter's maus are -- >> he spent three days there and he was fine. >> but the esg stuff, there is a lot of marketing that goes in here i do believe it's become as much a marketing ploy as -- >> spent a lot of time there >> i have. >> do you like the way exxon is rated? >> i think that may be a fair rating, but it's unclear if you want to understand exxon and its future, watch our documentary on june 23rd let me begin the pronotion right now. right now. >> to june 17th.
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>> we are going to have an incredible look inside sun mobile that we've spent the last six months working on that will answer that question >> june 23rd >> yes 8:00 >> 8:00, june 23rd >> write that down as for mr. musk and specific performance and the twitter board, i don't know what to tell you. >> a lot of bots are out there if he's right that it is a multiple of 5%, carl, that conceivably could be fraud >> the epic disaster call you referenced >> we have to go, but i will say, look, i'm not calling for recession. i'm just saying speed up speed up that's all i want. speed them up. >> we did shave some opening losses and then lost it again. dow is down almost 400 are we getting to bob pisani this morning yes, we are. hey, bob >> good morning. yeah the minute we opened the futures rocketed up.
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they were weak prior to that take look at the sectors consumer staples still weak, the retailers like kohl's still not having very good news. energy is down, second day in a row. that's kind of interesting industrials. tech is holding up pretty well, though apple, microsoft, nvidia, they're on the upside. retailers, kohl's down again today, considerably weakened in april as their sales considerably weakened. that's what the alarm bell is for a lot tf industry now. kohl's, target, best buy still trading down right now elsewhere, if you take a look at the internet-related names here, cisco and the competition out there, juniper and broadcom, hope you were watching chuck robbins on the air, but they're all down as well the question now is what's priced into the market and what's not we were all on sebsessed with interest rate risk, reasonably priced into the market
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we're seeing growth and earnings risk there is a concern about a recession that has gotten a little louder in the last couple days i think the most important thing is the earnings risk, which is not priced in. let me show you the earnings estimates for this year. this is absolutely remarkable. i've been talking about it for several weeks. they're not down at all. we're expecting earnings gains of 9% this year for the s&p 500 and 10% for 2023 that's a rather remarkable number 9% and 10% for 2022 and 2023 what's the right estimate? i don't know, but it's clearly wrong, 9% earnings gain ps the market doesn't believe that. if we assume the market is going to be flat, that we'll get, say, 208 this year instead of 228, it would be reason to believe assume the market would come down another 9% because there's assumption based in. i don't know hard to call the bottom right now. all i know is the commodities are the realtime indicators for inflation. they haven't been particularly moving in the right direction. i do want to point out oil,
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though, has been down the last couple of days oil is the realtime indicator of inflation. we were 114 yesterday. and we are sitting now here enough lower than that in the last couple days i don't know if that's a long-term trend or not, but the last two days it's clearly down. that's a little bit of good news on the inflation front what's the take-aways for the last couple days one, stock analysts are way behind the curve they are not useful with these inflection points. they're too slow and the market doesn't believe the earnings estimates. two, the consumer strong story is wearing thin at this point. by the fall it will be over. by september, october, all this pent-up travel demand will be gone netflix was peak streaming when you saw target saying luggage sales up 50%, jim referenced that this morning, he's right that's peak travel right there i think that all changes in the next few months. finally, are we in a bear market or not a lot of people have been telling me, guy, stop saying we're in a bear market, only down 18%, not 20%.
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that's an old convention if you look at the s&p, half of the s&p 500 is more than 25% below its 52-week high that is good enough for most people to consider us to be in a bear market. carl, you and i, you know, go back a long way, 30 years, when we were trying to officiate and determine what is an when we were trying to determine a official or unofficial bear market i think we shouldn't get too hung up on whether it's 18% or 19%, it's where most of the market is. >> great point thank you, bob. jim mentions or recent fascination with the ten-year, now below the 279. the dow is down 440, s&p, we are some 30-on the points above the low for the year
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let's get to jim and start
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trading. facebook just don't need all these engineers, but if they're finishing projects, and i think it's going to half, why do they keep hiring? there's a lot of seasoned engineers. >> i mentioned this earlier. or coming next year.
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they're still going to have a job somewhere. it's an enormous fight for talent >> why should he keep hiring people he doesn't need those who think that company is in trouble, you're just dead wrong. >> how about tonight >> okay. i'm bringing on constellation. they're bringing back nuclear power, and then palo alto, you know, safety never takes a vacation, never takes a vacation >> it's going to be busy today. >> really? i'll just stay up all night.
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>> i have had to watch, when he tweets, right? he tweets around the clock, musk, hour 2, 3, 4, 5. i want to give him a sedative. >> you're going to be a pharmacist in your next career >> i just think we ought to throw klocoklonopin in. >> you love that llffer ia mere on the extended se-o he,n mont ♪ ♪ connecting to opportunity is just part of the hustle. ♪ ♪ opportunity is using data to create a competitive advantage. ♪ ♪ it's raising capital that helps companies change the world.
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good thursday morning. welcome to another hour on "squawk on the street. i'm here with leslie picker and david faber. morgan brennan is off. bounced off 3876, but as they say, the day is young. >> the day is young. here are some of the big numbers we are watching today.
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starting with cisco systems, the company says covid lockdowns china as well as the war in ukraine continue to hurt sales plus, spirit airlines rejecting jetblue's offers that's up about 1.3% a rough week for retail continues. kohl's is citing a tough sales environment as well as higher costs. we'll have more on that sector in just a moment inflation, margins, pressure, what a week. let's get to rick santelli >> yes, carl another miss on leading indicators we're down 0.3%. it's the second negative number in a row, and i think that speaks volumes with respect to
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what is happening -- excuse me -- not second in a row, second of the year one in january and now this year when you look at minus 0.3, you said to go back to last year to find ute negative number we know how important housing is and how interest rates move. for that number, we head east to diana olick. existing home sales if el to a seasonally adjusted of 5.61 million units, right along expectations the slowest sales pace since june of 2020 that was actually an artificially slow pace, because it was right at the start of the pandemic it's all about supply. the supply down 10.4% year over year
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at the current sales price, that's a 2.2 month supply. it continues to push prices higher despite rising mortgage rates, median price there, 391$391,200 of course, that's skewed partially by what's selling, mostly on the higher end, where there is more supply the average rate on the 30-year fixed mortgage stated february at 3.66%, ended march at 4.78% it is now hovering around 5.45%. the chief economist for the realtors said, while he expect sales to continue slowing, he doesn't expect much easing up on prices, leslie. >> interesting these are focused on closings, and a lot of people are working
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on buys home as rates were rising, they could have much higher expenses in the months to come when do you see that inflection point really shaping up in these sales? what are analysts telling you? >> well, we're already seeing it now. my favorite thick -- thing is the lockbox indicators, and they said the lox box indicators are showing a big slowdown in buyer traffic. we also saw when the home builders reported their sentiment numbers earlier this week, a big drop in buyer traffic. i think we're already at that inflection point, leslie. >> diana, thank you for that important number today let's turn to the broader markets. they're following their worst day since june of 2020 bill mier is here. good morning good to see you again. >> good morning, carl.
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thanks for having me is the market coming to as a value vettor when you see that annual rate, is that doing the kind of work -- >> yes, the market is coming to us we think there's a lot the cheap stocks, but unfortunately investors tend not to get excited about add to go their portfolios when the market is down, so we were being flooded with new money we always encourage investors to consider rebalancing portfolios. if you haven't touch your portfolio since last fall, cash is a much bigger percentage than it was then, and we think it could be a good opportunity for people to put more capital to work >> when you talk about it being a lot of cheap names you long watched financials, energy, autos and trucks, first
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of all, what names are you talking about? and are you worried about earnings estimates coming down even after price valuations have come down? >> i would say, in those sectors, we like most of the names. our largest financial holding is allied financial the stock sells for just under $40 a share. they're supposed to make about $8 a share this year they pay a dividend higher than the 30-year bond yield they'ref also repurchasing about 17% of their share base. earnings per share would be growing close to 20% in the energy area, most of the stocks are single-digit multiples. those companies are also returning capital to shareholders, especially under pressure from esg investors to not fully reinvest that capital.
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a company like gm sells at about six times earnings, and you can find similarly attractive names like borg-warner, it seems like if it has a motor and it moves, the stock price is a sing of-signature p.e thee they're also putting in excess capital to good use today. >> i heard a lot of -- we've talked obviouslythrough bull and bear markets i've heard a number of those names in your portfolio for some time anything new that has fallen to a level that is now suddenly an opportunity for you to be buys >> well, there are a couple new names in the past quarter. pulte homes is one of those
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names. pinterest is a name we purchased just going into covid after the stock price had fallen dramatically we sold it in hindsight way early, but it retraced almost all of those gains, as well as the business performing well and we think pinterest is one of the cheapest social media names. you're right, david. we've been there oakmark started in 1991, this is the sixth bear market that oak market has been through. we are not market timer, but the s&p is up over 20-fold we've been able to do limb twice what the s&p has we don't think this is at all a time for panic.
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>> though oftentimes you don't gain assets during a period like this are you losing them at all people say i've just got to get out? >> no, we're fortunate in this decline it's not hitting us quite as hard as the growthier portfolios pretty much since the pandemic hit, we've been performing a bit better than the s&p, so thankfully we're not losing assets right now >> bill, i'm curious on your thoughts on the recent crypto sell-off i'm curious if you've seen any kind of indications there's systemic spillovers into other pockets of the market, just given the risk-off sentiment >> i'm the worst interview you could possibly have on crypto. i don't understand it. i don't understand why people think it's as valuable as it is, and to me it just doesn't make sense at all, compared to
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growing businesses that sell at single-digit p.e. multiples. >> let me ask you another way. where do you think are the remaining vulnerabilities in the market, given what we have seen with scriptsos, with spacs, profitless companies are there other places we should be looking at? >> we've been talking for several years about how price has become disconnected from value in rapid growth companies. there's a lot of investors that their decisionmaking process for what process they wanted to own was not at all dependent on price. in general, we don't think they have come down to values where
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it's as the more traditional businesses we ngo own. i would say another area is what i would call fixed-income substitutes. very slow growth but stable businesses electric utilities, those companies are selling at much higher multiples than meta and alphabet it just doesn't make sense those are a couple areas we think are still overvalued. >> i'm thinking of a name like a c kroger or some of the names that got punished yesterday >> it's a fact that those companies were able to pay 3% dividend yields when bonds were yielding much less than that we're kind of indifferent to whether companies grow their top
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line or give us capital back we just don't see those businesses as being nearly as attractive as an ally or gm or names we have talked about. >> interesting to see pinterest on that list, too, bill. a great interview. good to see you again. >> thank you. coming up after the break, retails are up weak. today kohl's, and we'll check in with art cashin on where the bulls and bears stand on this week of extreme lalivotity don't go anywhere.
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it's been a rough two days, among the biggest laggards on the s&p. courtney reagan has more what's going on? >> not all retailers are putting up poor results, but the etf xrt was underperforming the s&p 500 nonetheless. kohl's shares are lower as it joins walmart and target, but better than expected revenues. its comparable sales fell and missed consensus kohl's says the q&a started well, and lacking the stimulus and poor weather in april, it sharply cut its guidance, and chief marketing officers
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the department store did say fully financed bids will be submitted in the comes week. the conference call just wrapped up the costco and sam's club competitor is holding its guidance bath & body works also put up a strong quarter with positive store traffic and positive transactions shares of bath and bodyworks you lower by 8%. shares of children's place rallying even with a miss on earnings but the retailer did reiterate for a full year, shares higher by 6%. under armour shares are
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following -- targets shares are falling further today, after shedding a quarter of its value on wednesday shares down by 3.5%, so now down more than 30% or so for the week, i believe, david yeah, it has been quite a week not a good one if you're short, very different story. corti reagan, thank you. >> a lot of it due to supply here, chuck robbins joined us right here on set. >> we got to a quarter
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we've been saying -- we would all be celebrating, but since we had done 30 three times in a row, people seemed to think we had it would broadband ten, notwithstanding orders we put down because we ceased operations in russia so a so% growth on a 10% from a year ago, mathematically, of course it's slowing but from an over-arching emotional perspective, you think we had to be careful not to over-rotate on that issue >> but the real concern and perhaps one that should be shared by other investors, what is coming out of china the implication. and then this prospect he raised
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of when things get back to normal, so to speak what that could mean in terms of snags for shipping. without looking through the details and what this means for the shutdown, and how much that is one-off, versus the overall sentiment. >> remember when it looked lumpy, and the market was able to get a picture of how things looked >> butted forward p.e. under 13 the quell will be there's so
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much in the hybrid work environment, hybrid security, that's going to support demand in the long term the motorcycle maker suspension for two years the company siting what we were just talking about, a parts issue at a supply. you can see shares down more than 7.5%. there's resqmo "uawk on the street" ahead. stay with us s to design hr solutions to provide flexible pay options and greater workforce visibility today, so you can have more success tomorrow. ♪ one thing leads to another, yeah, yeah ♪
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this is the planning effect. tesla has been booted from the esg index as part of the annual update to the list. it said the lack of a low-carbon strategy and business code of conduct -- according to data exclusively provided by cnbc, tesla now ranks 608 out of the
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russell 1,000 companies they cover, which factors in sustainability, climate changes and more tesla currently does not have a public climate commitment. apple, amazon, and even exxon mobil remain on the list, which was really, david, what stuck in musk's craw. >> they do have a goal to be carbon neutral by 2050 but it does seem odd that the largest maker of evs in the world would not rank higher. >> and that they wouldn't have the stated goal, and that would be part of the ethos all of these stocks were getting appreciation because of the whole esg trend really coming
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into focus, so to see all of this come out, i was surprised. >> there is, i think like -- many things musk tweets may be overdone, but there's probably some truth to what he's talking about in terms of esg being used as a marketing tool by some of necessary asset managers and gatherers these days, and when you get down and actually question the metrics, you don't necessarily find they're reflective of what you might expect the fact you lump the e, s and gs together, it's you're okay on e, but may not s and g, and then you get confused as to why they're in the same index. the whole issue becoming so convoluted given the explosion in the space. >> they did get to 694, which san tolder said it was the price
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it was at when tiffs first added to the s&p of course, musk has lost more money on paper since the twitter offer than the twitter offer value itself. >> though he did sell a lot of tesla shares to help pay for twitter over at $900, so that was a good sale for him. in fact, what he saved by selling then probably equates to well beyond his reverse brake fee. we won't get into all of that. >> not today the nasdaq is still down dom chu has more on the sector. >> that 30% pullback from the fall has a lot of people wonder if there's a bottoming process in place we'll look at the market through some of those etfs it's trying for a positive day,
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up about 0.25% as you point out, we're still trying to figure out whether the 30% drawdown is where some investors feel comfortable if you break it down into some of the industry components, technology, media, that have seen some of the worst performances in the near term, these are some of the key parts of that financial and technology and media market that have really led to the down side here we'll take a look first of all what's happening with some of the financial technology stocks. also with some of the more cyber-focused ones out there and then, of course, what's hatching with cloud computing as well cybersecurity stocks, as measured by this etf, down 24%, financial technology down 21%, and 21% losses for cloud as well but the two places that have seeked to at least relatively outperform on a marginal
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basis -- again semiconductors, and software -- those two parts of the market, then, of course, if you look at the megacap technology names that drive so much of the trading action right now, we're seeing a bit of a mixed picture, which is a win for the bulls out there. apple is down about 0.75%, flattish gains for alphabet and amazon tesla and amazon, the run-ups we have seen and the falls, remember they're both around 40% below the record highs we have seen for them. they're two of the ones who have contributed to the down side back over to you. >> thank you, dom.
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after the break, art cashin will join us. first, during may, we are features some of our teammates and contributors >> southeast asian, indian culture is rich in tradition, ceremony, festivals, everything from an indian wedding ceremony and the different festivities that go along with that, to even some of the holidays i look at my own kids, i want them to take away from all of this rich culture is the values behind it, you know, the importance of supporting family and communities, making sure that you not only work hard and remain dedicated in life, but you're humble and give back. this thing, it's making me get an ice bath again. what do you mean? these straps are mind-blowing!
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here's your cnbc news update at this hour within the last hour, president biden welcomed the leaders of sweden and finland to the white house. they will be talking about the two countries' applications to join nato. almost all of the countries in the alliance favor their addition, but may need to make some concessions for turkey. the court appearance for the 18-year-old white man who killed people in a buffalo supermarket. and on nbc this morning, the nation's surgeon general described what is being done to alleviate the nationwide shortage of baby formula >> we are working on the import formula from abroad to get many manufacturers, to get the plant
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that was shut down back online quickly and redistribute product. there's an abundant in some areas and scarcity in others >> time is of the essence. david, back to you. we are about an hour into trading. let's get you a quick check of where we are we've been morph around. nasdaq notably outperforming our steve liesman joins us, fresh off the exclusive interview with esther george steve? >> yeah, david, thank you, esther george, the kansas city fed president, she acknowledged the impact, but she did not sound like a fed official ready to reverse course based on the sell-off so far. >> this is a time of uncertainty. it's been a rough week in the equity markets i think the combination of the uncertainty going on in the
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world, the fact the fed is beginning a rate hike regime causes investors to try to figure out where do theysettle on how valuations might come out? i think in respects, not surprising you see this volatility. on the other hand, not to be dismissed, to watch and see what signals it's offering, which we've been seeing for a while. >> so she added that fed policy isn't -- just part of the way fed policy works by tightening financial conditions, and reducing the wealth effect george did say she's committed to 50 basis-point hikes, and she held out some hope that there could be a limit to how far the fed has to go, base odd what she's seeing in the economic. >> where the shift might come in consumption, people don't buy as many goods, they begin to move
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out into more normal patterns of consumption, maybe we don't need to go so far to achieve cake libli i equilibrium. those will be keyed components over the course of this wyear >> she added she has seen some limits on how far retailers can raise prices, and that's a hopeful sign, but she also said there's a long way to go art cashin, ubs director, art, good morning, it's great to have you back. >> good morning, good to be here. >> you does write that 3860 would be important today and it's roughly where we got our initial bounce this morning.
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how important is it? >> well, it is important along with the orders, the dow actually took out last thursday 'intraday low, but it failed to backe 31,000, viewers have to understand the market is weighing each of these little individual items, so clearly the s&p holding was good nasdaq strangely held and then went into plus territory the main contribution i think to that was a dip in the ten-year yield. that's deceptive to a degree the dip in the yield is a part of flight to safety. so markets are feeding on each other. i think the most important thing is the s&p holding above its intraday low, and the dow holding above 31,000. all right. we talked a bit about the ten-year this morning, at 282 now. when you couple that with inflation expectations, mortgage
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ori or originations, is that the kind of cooling that you think the market wants >> well, you know, it's something that they're watching toward, but i think in its own way, yields and rates are somewhat deceptive what you've got to keep an eye on is what the fed governor alluded to in steve's interview, and that is when they start reducing the balance sheet that has not been fully discounted in the stock market yet. that's going to be really critical for now, the market is taking its own temperature, own pulse to see how it feels. so far today we're all right if we break below 31,000, the question will be, do we then get
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a trap-door sell-off, or do we circle the wagons. we're testing support here, carl so far, so good. >> art, another thing that steve spoke with esther george about is the idea if consumption changes, the fed may not need to go so far. do you see that starting to take place. does that give you any optimism that rate rises could not be as high as people were indicating in the market so far >> i have some of that hope. it's partly because of the things we saw in target and walmart. two of the greatest retailers in the world. these people know their game really well. part of what they want that was very important and not picked up by enough people is things like diesel costs, you know, just a
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simple delivery of inventory is going to raise inflation, so we have a lot of these subsets going on as far as the fed, i think they're stuck, as it were, in the next weeks and maybe months, two months maybe they can't of they can't really begin to back off. it won't just be the stock market they'll be looking for the economic data, but not to beat a dead horse, it's going to be all about the balance sheet. once they start to move on that, and then we see, you know, major changes in mortgages, already shaky housing sector, what happens there, they will be becoming in the next couple months very important in what happens. >> are you thinking of binary outcomes that need to be resolved i wonder if you think the china lockdowns expire before we get a
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resolution with russia and ukraine, and how does the market process that how much of a bounce do we get from it, if any? >> well, the trouble is, carl, it's not an isolated matter. if they were going to pull back, you might be hopeful -- you had a report this morning that some of the ports are picking up, but largely unnoticed to some degree there's an outbreak going on in north korea. that place is totally unvaccinated it's next door to china. and secondarily, the president is going to be visiting to korea and japan and a major influence move with china. you have the covid on one side, the geopolitical on another, it's two weeks of darefully watching what's going on in china. i don't think it would be totally binary, but it certainly will be something to watch.
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>> art, i want to ask about the long term. there was a column in the journal yesterday that talked about the potential for a long decade in stocks is that something you are concerned about, or do you think it will reach a level, where people will start coming in and buying the dip, like we've been used to over the last decade >> we've been spoiled the last decade i think a lot will depend on this tightropew walk that the fd will be doing. it's going to be all about the fed. are they going to move another 50 basis points? i don't think it's the rate moves that matter. it's what happening with the quaint at a timive tightening and what impact that has to give you a longwinded answer,
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i think the act of the stock market over the next 6 to months can be important. i don't know about decades, but important for years and reposition people's attitude about how do i want to play the stock market earlier today there was some stock about young people coming into the market and is the place a casino those early experiences tend to shape your mind. taking a lossis a very painful thing. people don't forget it easily. >> art cashin, thanks so much. we'll talk soon. good to see you. >> my great pleasure the president is set to deliver remarks >> reporter: top officials have called it a watershed moment,
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certainly the most significant geopolitical shift in decades they are very proximate to russia by land and by sea, and they are making this application in the wake of vladimir putin's invasion of neighboring ukraine. turkey has said it will vote know, alleging that finland and sweden harbor terrorist organizations, but the white house has suggested that diplomacy can assuage those concerns today president biden must make the case to the american people why the u.s. would then need to defend vast amounts of territory in europe if russia continues the brinksmanship.
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finland spends about 2% every its gdp on military and defense. sweden is just 1.3%, but pledging to hit that 2% key threshold by 2028. we'll see what the leaders say today, but the white house has been vociferously in favor of this move and public opinion also broadly supports it guys >> changing world order in 2022. thank you, kayla. check out the biggest laggards legacy big tech really under pressure here. under armour creeping up at well we'll be right back. stay with us another crazy day? of course—you're a cio in 2022. but you're ready. because you've got the next generation in global secure networking from comcast business, with fully integrated security solutions all in one place. so you're covered. on-premise and in the cloud. you can run things the way you want—your team,
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♪ ♪ we all need a rock we can rely on. to be strong. to overcome anything. ♪ ♪ to be... unstoppable.
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that's why the world's largest companies and over 30 million people rely on prudential's retirement and workplace benefits. who's your rock? supply of existing homes are down more than 10% year over year our next guest is bearish on the
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home builders. it's been the right call, of course, so far this year the group has fallen about 30% in 2022. with us is ken zenner. first, give us a reaction to the numbers we got this morning? >> not a surprise. two days ago we had a report showing existing sales down 4%, inventory down sales are falling down 13% they're not good >> you have made the point, obviously, in terms of your research that these stocks don't perform particularly well during past fed tightening cycles that's been the case this year how much further do they conceivably have to go
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>> 30% down side -- several problems with the bullish narrative that's slowly fading first, we really disagree with the idea that supply is tight on the existing side. why? you see inventory, visible inventory, and units down. people have to forget the efficiencies offset it down inventory is offset by efficiency of days the demographic. there's young people everybody who wants to buy a house is living in one, they're expensive. with the fed funds rate at 75, the two-year approximately should be at 260 there's a long way to go, david.
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>> is that true that everyone who wants to buy a house is living in one right now? i think i saw a surveyor yesterday that said 50% of millennial are homeowners, and then two thirds that aren't would like to be soon, just waiting for the market to normalize. do you think that things have normalized at this point that people have, if they want to live in a house, that they're in o one. >> good question i want a yacht, you know, but i don't have one the reality is the incremental buyers are increasingly pressured, and it's really importance to look at -- you need to realize the majority of new home buyers, new homes that are constructed, are existing homeowners as we saw in '05,
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'06, as we saw in every cycle. if you can't sell your house, it's hard to buy a new one constructed. with their inventory units up 30% year over year, you know, demand could be an issue i think we have a price ceiling, healing. and, in fact, that's why we're negative on the builders despite historically attractive valuations on price-to-book, which some are below, some are right above. the reality is with price set they have to give up that land value to meet those incremental buyers to turn their inventory to get cash flow that's issues we have to come to grips with in the coming quarters. >> you're not just negative on the builders you have concerns about the product names. explain to our viewers what your concern is and what you're talking about when you say the product napmes. >> talking about everything from asphalt shingles, and roofing is
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a big category, the core issue is this. of the 11 categories that we covered, looking at fy-22, eight of the 11, their revenue growth is 100% price. that is initially. woe saw the issues with retailers, people trading down the risk is to the down side volume is flat now, good we have price recovery if volumes go negative, their factory is going to have less operating leverage that's the issue with stagflation. it encompasses the time period from 1969 to show how important credit, monetary and fiscal policies are they did well, the prior guest highlighted the fed's balance sheet shrinking but we have issues on top of that that we're not looking at systematically in my opinion. >> appreciate your time. ken, thank you. >> thank you
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in the midst of the market volatility, melvin capital will wind down and return cash to investors, what's left will be that of its founder, who writes to those investors that he's failed to recoupe the billions lost, including, of course, in the meme stock craze that was just the beginning of it, saying it's been an incredibly trying 17 months. and couldn't deliver the returns you should expect so we're returning capital. you can blame any number of things i kidded earlier, move to miami, not a good sign. buy a sports team, not a good sign but others argue he got away from his core competency, which involved shorting stocks he was successful as someone able to identify opportunities but you get too big, who knows the performance started with gamestop but didn't end there in terms of being well off what the market was doing. >> i think last year you could
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have said it was the by-product of being in the wrong position at the wrong time. gamestop years before that you could have had a lucrative trade on gamestop and you could have operated under the radar, but it wasn't just gamestop, it was last year's returns were ab abysmal, this year down 23% since april. >> probably a lot worse the last couple weeks. >> probably a lot worse the last couple weeks given the market gyrations. you have citadel that's fully redeemed, as i'm told. they were looking to restructure and salvage this thing, and investors just weren't up for it. >> a few weeks ago, that's right our story -- maybe a month ago, i don't remember, where he was trying to end and start over again and eliminate the high water mark his investor base said no way. i did make the point, people will go out look he has to sell
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everything much if not all of the liquidation has already taken place, is my understanding >> yes >> the investors may not have made out particularly well but he's still going to be a wealthy man. >> he'll be okay. >> yes, we don't have to worry about him. i know you might have been. >> i wasn't thinking about it too much but i'm glad you brought it to our attention. does matter for investors in terms of overall marketing position we are back to 3893 as we're flirting once again with fresh intraday lows, not quite there, the nasdaq is up just a touch. don't go anywhere. thinkorswim® by td ameritrade is more than a trading platform. it's an entire trading experience.
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the nasdaq working hard to rebound in today's trade but the dow still on pace for the worst week in four months. we have more on today's somewhat volatile market action bob? >> very interesting, leslie, 3 to 2 declining to advancing
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stocks, but about even on the nasdaq so right about tech stocks, apple is weak but the consumer names are getting hit again. let me show you, clorox, altria kimberly clark it's 127 today, a big drop these are low volatility stocks. i said yesterday watch big pharma because that's where a lot of people have been hiding out. the consumer staples falling apart, a little bit of weakness, merck was at a high two days ago. big story today is the citi downgrade of the railroads i think they had the right call on this. we've talked about the fact that interest rate risk is kind of priced in but the earnings risk is not and the growth risk is not. i think right now what the market is starting to do with target and walmart, it's starting to address the real
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earnings risk out there not prized in -- fully -- not priced in fully is the growth risk out there. i want to show you the s&p 500 earnings quickly the estimates are 9% growth for 2022, that's an amazing number hasn't gone down at all, 2023, 10% growth. the market doesn't believe it's going to happen. they believe it's going to go lower. if it goes to zero, it implies the market should be 0 for the next few months. some of the inflation people want to say watch oil because that's an indicator, oil's gone from 119 to 106, 107, that's not long term trend, nobody is going to claim inflation is on a down trend. the s&p 500, carl mentioned this earlier, 3858, the intraday low last thursday and everyone is obsessed with technicals these
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days, if we close here, this would be, david, a 52 week low, obviously. but it's the earnings story that's the big thing they are behind the curve, david, way behind the curve and the markets kind of sussed that out already. >> i'm not obsessed with technicals, just to put that out there. bob, thank you that's going to do it for "squawk on the street. tech check starts next. >> welcome to tech check today stocks continuing lower this week with almost half of the nasdaq now sitting at 50% or more below their 52 week highs what's the outlook from here we will discuss. plus some new friends for facebook a breakdown of the bold case for meta as shared sit 50% off of their highs. and cisco putting pressure on the software space, but low valuations

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