tv Closing Bell CNBC July 8, 2022 3:00pm-4:00pm EDT
is now up roughly 50% off its lows. >> wow. >> and then one more just for you, take a look at this one teladoc. 50% off its lows. >> it doesn't look like much from the highs but it is starting to be a lot for those who watch the charts and the ark. dom, thanks so much for everything have a great weekend thanks for watching "power lunch, " everybody. >> "closing bell" starts right now. if the s&p 500 does close higher today, it will be the longest win streak of the year the most important hour of trading starts now welcome, everyone, and happy friday to "closing bell. i'm sara eisen we stand higher, up a quarter of one percent although we've been lower. the dow is up 78 or so points. the nasdaq up a third of 1%. nothing like we've seen earlier in the week but up almost 5% this week, 4.75% about 2.25% for the s&p 500. we'll see whether the market can
continue to rally. we've got a big lineup of economic and market experts to help break down the action, including mark zmandy, ken rogoff, roger ferguson and pat grady. time for today's market dashboard, though, which is where we start mike, what are you watching in the wake of the jobs report? >> just what you say about the possible five-day win streak which also shows a little bit of a different character of the market if you look at the five-day, look here, you've had a morning dip or overnight dip so weakness early and then a rally to finish relatively strong every single day this week it also by the way goes back to last friday. so it tells me if nothing else that big investors came into the quarter somewhat lightly invested, somewhat defensively positioned after a very bad six-month stretch for the markets and needed to add exposure if the market wasn't going to buckle along the way.
that's encouraging suggestion of a firmer tone and the market character is changing look at the year-to-date chart we still have plenty to prove. this is about the eighth rally that you can sort of identify on the way down we're still very close to this point of figuring out whether it's going to get a little bit more escape velocity around 4000 on the s&p a lot of stuff comes together, including the 50-day average i'll just point out that we did have a break of the downtrending in that march rally. that was the first fed rate hike, so you basically had the effort to escape the gravity it didn't really work because to me this was inflation is out of control and this is we might have recession more imminent than we like so the jobs number today cooled off the imminent recession fears even if the debate still stands. >> that's why it's a little confusing to watch the reaction today. so it was a good report. better jobs growth, low unemployment rate, a little bit of wage growth we have been in this period
where good news is often taken as bad news by the market because it's a green light for the fed to keep on hiking and cool down the economy. so if that's the case, it's interesting to see the market rally. on the other hand, really good news also bodes well for the soft landing theory. which is it? >> small moves on a net basis so it's not really necessarily a resounding verdict on that question also yields up, but not again up toward their highs, so it's in a more comfortable zone. i think one interpretation is the fed has been telling you they're full speed ahead until they see really tangible evidence inflation is falling apart. so if that's going to be the case, if that's what we're waiting for, it's better that the economy is stronger along the way because they weren't going to ease off just because of a weak employment number today. >> we'll see cpi on wednesday that will be pretty definitive mike, thank you. let's get to the recession debate joining us is mark zandy and ken
rogoff mark, you have been saying it's not a recession with the employment picture so strong we got further of that today so where do you stand right now? negative growth and strong employment how does that add up >> well, recession risks are high, no doubt high inflation, higher interest rate world, recession risks are elevated but, you know, with some reasonably good policy-making by the fed and a little bitof luc on the pandemic and the fallout from the russian invasion of ukraine, i think we'll be able to navigate through without a recession. the key is in fact the job market, the american consumer. the firewall, so to speak, between a continuing, expanding economy and the recession is the american consumer. as long as we're creating jobs, unemployment is low, excess saving, debt service is low. despite this decline in the stock market, house prices are up, wealth is high i think that firewall should remain in place, consumers
should keep spending and we should be able to navigate through without a downturn. >> ken, what do you think? do you think we can be in a recession with 3.6% unemployment rate >> i think we're not in a recession now. of course the numbers are hard to read because there's certainly output numbers falling. the jobs report suggests inflation is not that bad but there are other numbers that suggest it is. i think the question to me is now determined is the fed to bring down inflation in the, say, next 18 months, how patient is it willing to be to stretch out longer we're also facing a lot of supply shocks in a way we have not seen in 50 years and that's just a lot harder take i mean, yes, if you have a lot of luck. but the luck can go the other way. it can easily be that the ukraine/russia gets worse, that
china, which is temporarily pulling out of its covid lockdown, goes back into it. that other things go wrong i think it's going to be very, very difficult to have a soft landing. so i think if the fed tries to bring inflation down as fast as they're talking about, the odds of a recession, a significant recession, are high. >> mark, how do they achieve a soft landing it doesn't sound like they're blinking any time soon they sounding very resolute. williams today, the new york fed president, speaking in puerto rico on inflation. they want to do whatever it takes here >> yeah, and they should, right? if i were at the federal reserve i'd be saying the same thing they have two objectives that are very achievable. the first is keep inflation expectations anchored to their target they have done a marvelous job by talking tough and the aggressive actions, the bond market measures expectations, the one that really matters for fed policy they have come all the way back
in they're very consistent with what the fed would like to see and that's critical to getting actual inflation down where the fed wants to see it. the second thing they want to do, and they can achieve it, today's job reports suggests it, is to slow the growth rate in the economy so you get job growth that's down to 100k, 150k per month consistent with labor force growth and maintain a stable unemployment rate right around the mid, high 3s consistent with full employment. so a lot of script to be written. ken is right, there's a lot of things that can go wrong here and anything that goes off the rails can push us under and recession risk is high recession is not inevitable. we have a fighting chance to get through this without one. >> it also kind of depends, ken, on your definition of recession. they will look at things like the labor market but a lot of people define it as two negative quarters of growth back-to-back and you could be looking at that if you believe the atlanta fed
what happens historically where the fed is aggressively tightening into negative growth? >> i mean it's a very odd mix of having the employment report good and the growth negative everything after the pandemic is very odd i think the question about will we have a recession is how easily will they get inflation down i'm worried that the fed, they're talking tough. i suspect they'll blink, but i'm worried that having made some big mistakes, the biden administration made big mistakes and the fed made big mistakes, and a lot of academic economists supported what they were doing and had it wrong they're in danger of making a big mistake in the other direction and overshooting and trying to bring it down too quickly. >> what do you think will ultimately make them blink, a more sizeable jump in unemployment rate? >> of course the recession opens up
yes, of course no, i mean as long as you're getting job numbers at 300,000, we probably only need 50,000, you know, with the employment figure as long as you're getting eye-popping numbers like that, of course they're not going to blink. but monetary policy has long and variable lags famously and when things go south, i think they're going to start pausing in a hurry i think what would be really embarrassing, but they'll do it if they have to, is to backtrack. i'm just worried they keep pushing too hard for too long. they have convinced themselves that inflation expectations is everything and it's not. they have a dual mandate. >> right but it is -- it is certainly a priority mark, the only other thing i wanted to bring up as relates to the job report is participation was surprisingly lower and people are still dropping out of the labor force, which only is to say that the shortage is going to get worse and it's going to be harder for the fed to put pressure on wages and on
inflation and ultimately fulfill its goal of fighting inflation without really hurting the economy. do you agree >> no. i mean i think labor force growth is actually quite good. labor force growth is equal to the participation rate times working age population you're right, last month the participation rate ticked down labor force growth is pretty good over the last few months it's been on a year-over-year basis close to 2% and that's really very, very good. so i think people are coming back according to the bls and today's numbers, there's still a fair number of people that are outside of the workforce that haven't come back in because of pandemic concerns. maybe it's long covid, maybe they're worried about their kids because they are not vaccinated or their elderly parents those folks are coming back in and i think that will support solid lanebor force growth and help the economy move forward. >> i guess the other thing is whether it's a lagging
indicator, employment in general, and how much. >> no. no unemployment is a lagging indicator. but employment, the number we looked at today, that is the single best contemporaneous measure of economic activity, much better than gdp my guess is when it's all said and done, they'll get revised many times over. these declines will get revised away there's a lot of technical issues that i'd love to talk about but i'm sure it would bore everybody if we went down that path. >> we've got to leave it there ken, mark, good discussion on jobs. still higher on the dow, 65 points up next sequoia capital's pat grady joins us to discuss the outlook for the venture capital market why he's so bullish still on crypto right now you're watching "closing bell" on c 234bz nbc
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like many investors, it's been a rough start to the year for venture capital. over the last six months tech startup sales and ipos are down 88% from the previous year in a recent presentation, sequoia capital says it's going to be a longer recovery. joining us now to share where he sees opportunity is pat grady. he led investments in snowflake, zoom, to name a view pat, great to have you on the show welcome. >> thanks for having me. >> so you guys at sequoia are sort of known for some of the
doomsday warnings and presentations that you've shared with your portfolio companies. i'm thinking back to 2008 and 2020 when you said the black swan of coronavirus. a few weeks ago you called it a crucible moment. what does that mean? what do you think we're in store for here >> the market is pretty tough right now. but the good news is tough times build strong companies and we go all the way back to 1987 when black monday happened, it was only eight weeks later we got into business with cisco systems which laid the train tracks for the entire sbrngt after lehman brothers fell over and the depth of the financial crisis, we got involved with airbnb fast forward to april of 2020, 80% of airbnb's bookings got canceled, nobody was traveling, they knew what to do they quickly observed what was happening, came up with a plan, executed and came out stronger than ever.
and so tough times build strong companies. it's a terrible time for founders to try to get rich time it's a terrific time to go build an enduring business >> so what does that mean? are you telling companies to slash costs, to slash hiring, to preserve cash? how are you changing the advice for this kind of environment >> so our advice is simple but not easy what i mean by that is, it is somewhat easy to understand and hard to execute. the advice is go ahead and invest in your business, but don't just spend money there's a critical difference between the two. when you invest in your business, you're building an asset that will yield a future benefit. if you're just spending money, that's money out the door. what does it mean to invest? well, let's look at snowflake. it wasn't in the first cloud platform but it's certainly the be best investing in your business means building a great product
engineers, designers, data scientists, researchers, these are the people that will create a competitive advantage over a longer period of time. this is where you want to invest there are ceos that are skeptical about these investments. we'll use amplitude to connect those dots and you'll see how it will lead to the financial outcomes you want. >> so what does that say about what you think valuations right now for some of these companies that you've been in early are now public, like a snowflake or okta or zoom video how do the valuations look right now? >> one of the things we've done the last couple of months is launch the sequoia capital funding. this is a change in our business and i'll get around to why this answers the question that you asked. this makes us structurally long-term oriented we have a single permanent capital vehicle that funds our entire operation in the u.s., europe and latin america what does that mean? it means that we get into business with people like the
collison brothers in 2010 at the seed in stripe and continue to invest we can keep doing that once they hit the public markets and be their partner for literally decades to come. so to answer the question, in the context of a multi-decade time horizon, where we're trying to execute on the mission of helping companies go from ipo and beyond, a few quarters worth of turbulence is just noise. >> just noise. so you think these companies have gotten too cheap. is that what you're saying >> again, i think if you look at the earnings potential -- >> longer term. >> we have companies like let's go back to 2009 and 25 million of run rate revenue when we got into business and now they're ticking along with 7 billion plus the earnings potential of these businesses is immense. >> what's going on with your crypto portfolio you guys have gone very bullish here at least ten investments that i
can counting on the website and i know a few other of the stealth ones you haven't named have you had any hesitation as we've seen prices collapse and bankruptcies pile up in some of these brokers? people losing a lot of money. >> our point of view on crypto has actually been pretty consistent for most of the last decade that is we are long term incredibly bullish, near term realistic. a lot of times we use the analogy to the internet in the late '90s. if you look at the case study, the internet had a million users in 1987. amazon got going in 1994 the netscape moment was 1996 google got going in 1998 and yet in the year 2000, we had the internet bubble burst. if we apply that to crypto, what does it say? the bitcoin white paper came out in 2008. we're 14 years into that the reason it happened with the internet is the expectations associated with the technology got ahead of thety of the user experience. the same is true in crypto today. the lesson that we can take from this, you wouldn't have wanted
to invest in the internet index in the late '90s because most companies were going to zero similarly, you wouldn't want to invest in the crypto index today because most of those companies are going to zero. that being said in the late '90s internet you could have founding amazon or google. >> what is the amazon of the crypto burst >> sam bankman-fried with ftx is unbelievable the way he's the focal point of the eco system, supports the entire ecosystem including retail investors, nothing short of phenomenal. look what brian fpellegrino is doing, developers can benefit from innovation. look at magic eden, starkware, fire blocks, they are legendary companies in the making. again, long term incredibly bullish. near term very realistic. >> i know you're a big investor
in ftx as well so, pat, how has the performance of sequoia funds been? a lot has been covered around tiger global and some of the competitors. of course the soft bank vision fund which has gotten clobbered. how have you held up amid the volatility, particularly in tech >> the benefit is that we are structurally long-term oriented in a way nobody else in our industry is. the amount of money that we invest in any given year is a tiny fraction of the total value of stock that we hold in the public market or the total value of the shares that we hold in the public market and the private market what does that mean? it means that we can fund all of our ongoing operations with a tiny, tiny fraction of the current holdings and so whether those holdings are up or down, we're fine and we can be a long-term partner for our founders for many years to come. >> pat grady, thanks for giving us a taste of the thinking there at sequoia, appreciate it.
>> thanks for having me. let's give you a check on the markets. up 75 points on the dow. big tech is having another strong day tesla, apple, costco, that's what's leading the nasdaq right now. actually microsoft, amazon, meta are under a little pressure, though still higher for the week the nasdaq is up 4.5% for the week health care is leading the s&p right now for a change best performing sector along with energy, financials, staples. still ahead the former federal vice chair roger ferguson on whether he thinks the fed will raise interest points by 75 basis points following that stronger than expected june jobs report this morning. plus, find out why it's not all fun and games for investors tme park operator six flags today, when we come back (vo) get verizon business unlimited from the network businesses rely on. like manny. event planning with our best plan ever. (manny) yeah, that's what i do. (vo) with 5g ultra wideband in many more cities,
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mover. it's six flags citigroup downgrading the theme park operator to neutral from buy, slashing its price target on the stock to $26 from $41 the analyst there believing rising ticket prices may be to blame for a recent slide in attendance the stock down 7.5%. up next, former vice chair of the fed, roger ferguson, on whether last month's wage growth surge means inflation is unlikely to come down quickly. we'll be right back.
it's been a choppy session here on wall street as investors digest the june jobs report, which did come in stronger than expected, countering some of the recent recession concerns. joining us now in an exclusive interview is former federal reserve vice chair, roger ferguson it's great to have you back on the show, roger, welcome >> thanks. nice to be here. >> do you think this jobs report seals the deal for 75 basis points in july >> i absolutely do i absolutely think so. as you said, it's a little stronger than expected we've heard a couple of policy makers today, one distinctly signaling 75 then you add to it the average hourly earnings, which continue to be strong, for some of the more subsectors so all three of
those factors suggest to me that the 75 is a done deal for the meeting later this month >> but a lot of the other data, roger, has been coming in a little bit weaker. some of the inflationary signals have also been coming in a little bit weaker. mortgage rates, for instance, had a big drop this week from their highs. commodity prices have fallen sharply, including the price of oil. so if you put that with some of the weaker economic data, doesn't that argue for going a little bit less strong on the rate hike than last time >> there is an argument that you just ade i think the argument on the other side is if they start to take their foot away from the brake, so to speak, they're going to be sending mixed signals to the market. one of the things they're very worried about is inflation expectations and i think it's not good enough just to have tough talk. you have to follow up with action so i think this report gives them the cover to raise by 75 basis points what happens later in the year
might change, but with a fed that's very data dependent, this kind of data i think is consistent with a 75-basis point move at the upcoming meeting. >> what's it going to take, roger, for the fed to pause, to blink? >> well, i think it's going to take a much more consistent showing of slowing, particularly in the wage area, because what they're very concerned about is wage price spiral, as it's called and i think we're nowhere near that yet now, we also have seen some recent data, including the atlanta fed, that suggests perhaps with their so-called gdp now that growth may be in the negative territory some of that is due to technical matters. so i think what the fed is mainly focused on is labor market and wage. i think they really want to see that growth being very definitively slower. i think they have used words like clear and convincing evidence. >> so what do you think happens to the economy from here
what do two consecutive three quarters of a -- three-quarters of a percentage point hike in interest rates do to the economy? >> well, we've seen a little flavor of what it does to the economy. to the point you made earlier, some of the spending oriented data show that the economy is slowing. obviously we'll see housing slowing as well. remember, all of these things generally starting from a very, very strong beginning. so the momentum is still positive but what the fed wants to see is demand coming down to better match supply and so what we have to see there is things like spending slowing, housing slowing, and then over time they want to see the unemployment rate rise somewhat, not dramatically, but rise to be above the current 3.6 level, somewhere over 4 perhaps, so i think that's what they're looking for. at that point then i think they'll think about stopping, taking a pause and seeing how
things are going but not before then. >> do you know they're sounding too confident about this idea of a soft landing more fed officials this week say it's looking possible, probable. what do you make of that >> i think some of them may be a little too confident about that. look, they obviously wanting to project confidence you're not going to see a fed official projecting too much pessimism. that's just not part of the playbook but i think chair powell handled it really well he talked about plausible paths. he has talked about pain he's talked about how difficult it's going to be so i think they would be wise to recognize that the outcomes are not fully in their control and one of the outcomes that many people are projecting is some form of a recession. i emphasize some form of recession because it may be very short, it may be very mild, hard to say but i think it's wise for them to be circumspect in recognizing
there are a range of outcomes, not all of which are in their control. >> i guess just trying to figure out this balance of how much the economy takes pain before inflation can come back down to levels that they are okay with, whatever that looks like where do you think the unemployment rate, if you had to guess, and i know it's just a guessing came at this point, roger, is at the end of the hiking cycle >> oh, i think it's somewhere around 4, maybe 4.25, something like that. certainly above the current numbers. i don't think it's going to be dramatic they're not trying to drive that kind of increase in unemployment but it's really a guess because the most important number is are we getting to inflation that looks like it's going to hit that 2% target over a reasonable time frame and that's what they're looking for, i believe >> one more if i can just ask on qt, quantitative tightening. they're going to start to shrink the balance sheet really in force here that to me is not talked about
as much as the interest rate hikes. what effect do you think that's going to have on the economy, on the market because at this -- at this size and speed, it's a little bit unprecedented. >> it is certainly unprecedented. i think the effect on the market is, frankly, and it's going to roil the market somewhat because they have been the buyer of last resort and now there have to be other buyers one would expect interest rates as set by the market to rise, not just because of expectations around future fed policy, but in order to bring in those buyers from the private sector. i think with respect to the economy overall, the fed itself has estimated that the so-called qt is the equivalent of a 25 basis point hike i'm not sure exactly if that's right. but i'd say the effect on the economy is milder than the monetary policy itself but the effect of markets i think could be to increase
volatility a bit and certainly reinforce the need to have rates somewhat higher to bring private sector buyers in to replace the fed. >> roger ferguson, always valuable to have your insight. thank you for joining us on jobs day. former vice chair of the fed. >> thank you >> saying 75 basis points in for july. we just turned negative on the s&p and the dow. it's been a tentative rally when we've seen a rally all day today. still much higher for the week, more than 2% for the s&p, more than 4% for the nasdaq but the gains are slipping for today on this final hour of trade. you've got materials at the bottom of the market staples just turned red. still some strength in financials, energy and health care, but technology also just turned red as it relates to the s&p. the nasdaq 100 still higher by just a few points. two analysts, two very different takes on the outlook for microsoft, which is one of the bigger drags on the dow today. details on that coming up. and do not miss tonight's cnbc special, "taking stock." frank holland and josh brown breaking down the second half investing playbook
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huge down day for upstart. down 18.5% after a revenue warning. that is resulting in a lot of analysts' criticism. we'll share the details straight ahead. plus health care rallying and investors loving levi's. i told you i've been buying jean shorts ental hit that and more reil wh we take you inside the market zone, next.
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we are now in the "closing bell" market zone. mike santoli here as always to break down these crucial moments. trading day. plus steve kovach with us and dana telsi on levi's and what it means for retail mike, we'll kick it off with you on the broader market which is wavering between positive and negative the 10-year treasury note yield is above 3%. the dollar just continues its march upward where are we getting direction from in the equity market? >> well, it seems that the numbers we got today with the jobs report but also all week didn't give incremental new, fresh cause for people to get more worried about what they have already been worried about is the way i would view it, which is to say, yes, the economy might be losing steam. the fed might be willing to risk
recession if it has to but we're not really hereand now with that fear jobs numbers showed that and then the yield moved now from 2 all the way out to 10 years is a little over 3% so you have a flat yield curve. but credit is not blowing out in the last two days. so it seems as if the macro worry has cooled enough to allow the market to gather itself up we're 7% off the lows in the s&p 500. we've had these rallies before but this one seems a little more consistent for now although the entire week's move in the s&p was within the high and low of last week so even though it seems like progress, it's still very familiar groundi we're walking on. >> and morgan stanley, mike wilson, who's been bearish the whole time and right basically put out a note that said the bear market will not be over until recession arrives or the risk of one is extinguished. and we don't really have clarity on either of those things. >> we don't. and that is pretty much how the historical textbook tells you to think about these things you know, there is a potential
for some kind of soft landing, as you were talking about, but it's still a ways before we have confidence that that could possibly take hold months and months. so i don't think anybody is particularly comfortable on either side of the trade, but we are hovering up off the lows a lot of valuation work has been done to try and sort of reduce the expectations that are embedded in equity prices so far. >> let's hit health care because it is the top performing sector right now in the market. biotech names are work, novavax, moderna. moderna aiming for its seventh straight up day. then the insurance stocks like united health, hugh mania, centene and cigna. health care suppliers, take a look at some of these, mckesson, cardinal health, amerisourcebergen all moving higher there's growth within biotech. is that why it's in the sweet
spot as the market tries to figure out which way it wants to go >> yeah, there definitely is a blending here. it's defensive but not without top line growth, without secular tailwinds. so i think that's one of the reasons. it definitely is an end of cycle playbook to start to overweight health care. pharma has been the best performing one that is really value and definitely defensive biotech just got beaten up so much and now it is reviving a little bit it's almost like doing what you might expect broader tech to do from a very low starting point but the big profitable biotechs have valuation support they're working so i think it makes a lot of sense only down less than 9%, i think, year to date the question is whether it really is just a place to park while you get confidence about other things in terms of the cycle or if this is a longer term move. >> and there's deal speculation always heating up. it's been quiet lately
potentially some deals to be had. interesting split in technology. apple and tesla are leading on the nasdaq, microsoft and amazon are lagging. piper sandler cutting its full-year estimates for microsoft, reducing its price target to 312 from 352 the concern, the stronger dollar and the outlook for i.t. spending during a potential recession. analysts at deutsche bank, though, say microsoft screens as the top name in the software space in terms of quality and price to quality steve kovach joins us. how is microsoft able to combat the currency headwinds and negative outlook for i.t. spending is it a safe bet or not? >> it depends on who you ask if you ask satya nadella, he says it's a safe bet he just does not see cybersecurity and i.t. spending going away he didn't say it's not going to slow down, it might, but he sees
that as such an important thing for literally every business out there to be spending money on even in a recession. so he's if not in the short term optimistic, he's very long term optimistic and microsoft is in good company with these price target cuts earlier we saw cuts for apple, netflix, alphabet and by the way, those names are having great weeks. microsoft is the laggard of the big tech that we've been talking about all week >> well, it feels like the analysts are just late to the party. these stocks have been selling off for weeks and months now on concerns about the recession, steve. the big question, i think, for tech earnings is whether i.t. spending will really slow, because in previous recessions, it always does. >> yeah, it slows, but it's also becoming more important than ever to keep spending to stay aware and alert for what's going on in cyber right now. the last recession we didn't have these strings of ransomware attacks, for example we didn't have russia doing cyberattacks all over the place,
which is something microsoft is very involved in monitoring. at the same time, you've got to look at the pricing power microsoft has for some of its products, especially office 365, which it already started raising prices on last month and it can do that again if it needs to we've seen for these foreign exchange headwinds, we've seen companies like apple tweak pricing in international markets. they rose the iphone price in japan. so it will be interesting to see if microsoft does that in their office business. they can't necessarily do it in cloud as much because they have so much competition with google and oracle and amazon of course for those clients they're trying to get but for the most part they have pricing power in a lot of their other software. >> good point. steve, thank you in fact some of the best performers in the week in the s&p are related to tech. alphabet is up 10%, qualcomm micron after that disappointing earnings results last week up more than 10% this week. what else is selling off today upstart. remember that company, the lending company that does ai
it's down about 18.8%, warning q2 revenue will come in much lower than expected. that's leading to a slew of harsh commentary from the analysts citigroup writing it had overestimated its assumptions for upstart's loan assumptions and it lost the forest through the trees. piper is saying the company faces a perfect storm of headwinds. stephens saying upstart originating loans on its balance sheet that it can't pass on to its funding partners breaks the thesis that it had for that company. and the stock is now down about 80% in 2022. mike, this is one of the poster children for the high-flying technology-focused stocks that had stories during the post-covid period of ample liquidity. >> and the story in this case was that they had sort of hacked the credit underwriting process. so they had an ai-powered solution that was going to give them an advantage in selecting
more credit worthy borrowers that was not going to be locked into the standard credit rating type of framework. and that's obviously fallen by the wayside. it happens almost every cycle. there are direct consumer lenders that can grow really fast in a good economy when you do have rates friendly and you have the wholesale bond market willing to buy up your paper so you can keep growing and that sort of always hits a hitch when we get tougher times, rates go up, risk appetites go down then you realize that there's really no reinvention of making personal loans, making auto loans that's material enough tol overcome those powers. they might be better than others, but it's not showing through in the near term results. >> such a momentum name that totally unwound. take a look at levi strauss after reporting strong numbers yesterday, beating the street on top and bottom lines while
hiking its dividend and reaffirming their year outlook let's go to dana telsey. >> i would stick with levi's i think as we go into retail earnings season, being able to maintain your guidance will be few and far between. levi's said there's an incremental sense of expense pressure and they're still able to maintain their guidance so that tending to casualization with hybrid office and new innovation is driving the business don't forget the 20% hike in the dividend which is important also. >> levi is on trend right now. people are buying jeans still. anecdotally it feels that way. >> you're buying the shorts. >> yes and the western -- the whole western trend i think is still very much a thing. i was in aspen last week, it's hot. >> right >> so my question is, does it say anything broadly about the consumer because it's in a good spot in terms of the trendi, but i'm no sure if it means anything for the rest of the retailers about
to report? >> i think you're right, sara. i think levi will be differentiated from the others others have more excessive inventory. earnings estimates will need to come down. i think levi's will look like a strong retailer and a strong brand in this marketplace because i think that the headwinds of rising inventory, rising promotions, a lower income consumer that's pressured is going to be the theme of earnings season for the second quarter. >> who else has got it right now? who else is like that on trend i'm looking at some of these consumer discretionary -- nike is at the bottom of the consumer discretionary basket this year, down 35% isn't nike still on trend? >> i think they areon trend, but i think you are having slowing in sneakers right now. i think fashion footwear is stronger look at steve madden and some of things they're doing look at eritsia who is on trend.
estay lauder and ulta is on trend. >> and who are the losers this earnings season that you predict? >> i think overall we're still seeing weakness in some of the lower lower end retailers. look at the gap, it is pressured with old navy and not going away in the near term i don't think that's a story that will come back for a couple of years right now. >> mike santoli, where are expectations for this group? >> they're pretty low. if you look across the apparel retail or the apparel makers, valuations have taken a hit. some people point to the fact that it's a small and a short-term effect but cotton prices are down huge, like 35% in the last few months they're about flat year over year so what people thought was going to be an additional headwind, i know there's margin pressure out there but that's slightly easing up on some level but again, tough consumer environment to sort of make a
bold play to say that they're going to come back strong. >> really quickly, 30 seconds, dana, have we moved from inflation to deflation in apparel and some of those retail categories >> not yet you're still seeing inflationary pressures out there and i think the stocks have anticipated the weakness in earnings, but i'd be cautious on the group right now. >> got it. dana telsey, thank you very much always good to hear from you. two minutes to go in the trading day. mike, what are you seeing in the market internals, struggling for direction overall. >> yeah, and that's borne out in the internals as well. it's kind of indifferent, definitely not the broad rally we saw yesterday it's more declining volume than advancing volume there is outperformance by the nasdaq 100 which kind of tells you sometimes the mega caps doing more of the work on a week-to-day basis, a lot has been made about the aggressive, riskier stocks outperforming. take a look at the high beta stocks within the s&p 500. those that are more volatile and move faster. big outperformance this week relative to low volatility ones.
obviously on a longer term basis, beta has been a bad underperformer now you have one of those bounces that goes countertrend volatility is really compressed. you see the volatility index down below 25. i'd call it the bottom end of the range that's been in place since april. so not exactly relaxing, but also finding no reason to get overexcited going into a summer weekend. >> something about cotton prices down 35% from the highs. talk about inflation coming down as we go into the close, take a look at the dow jones industrial average. it's united health care that is the biggest contributor to the dow today in terms of positive, the dow has just gone negative it's had a few attempts at positive today we've also got strength in amgen, visa, american express, goldman sachs is the biggest drag the s&p 500, which is unchanged, the strong groups are health aa care, technology and energy. merms were the worst performers
down 1%. on the week, very strong overall. communication services the winner of the week along with consumer discretionary and technology and the nasdaq is just positive on the day it is the biggest winner on the week, up more than 4.5% to close out the week that's going to do it for "closing bell of." see you next week. i'll send it to "overtime" with scott wapner all right, sara, thanks so much well come to "overtime. i'm scott wapner i'll be joined by jeremy siegel on where the markets go from here after that hot jobs report. we begin, though, with our talk of the tape. whether the worst is over for investors or still to come opinions on that you know they vary so let's ask dan greenhaus he is here with me on set. it's good to see you. >> good to see you. >> so we had a decent move this week we're up four of five days erdo