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tv   The Exchange  CNBC  August 17, 2021 1:00pm-2:00pm EDT

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pharma jim >> another health care stock, another cheap one as josh was mentioning with bristol-myers, abbvie, 4.4% dividend yield, nine times earnings. >> all right and the lingerster >> estee lauder. i think there are structural opportunities in china, digital e-commerce and skin care there's a self-help story there and $10 earnings power by 2023. >> thanks everybody. cramer's with us tomorrow. can't wait for that. "the exchange" is now. >> thank you very much, scott. hi, everybody. here's what's ahead this hour with the dow down 500 points another day of disappointing data as retail sales missed, home builder sentiment sinks what is the real state of the economy right now? are investors overestimating the strength and spending wil willingness of the u.s. consumer we will ask. there is one area of the market that's been holding its breath meantime for congress to act on a debt ceiling if the stalemate we're seeing continues one strategyist says we could be in for financial consequences there that last a generation plus not so wishful thinking
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a roadblock for roblox and honestly bad earnings. it's all coming up this hour but let's start with the markets. dom, right at session lows, here we are >> we watched it together, riept, kelly just as scott wapner was handing the baton over to kelly right here we hit the session lows just for context that was down 501 points or thereabouts and that happened just in the last moment or so here. at the highs of the session we were still down 125 points for the dow. a lot of that has to do with some of the earnings reports that are out and of course what kelly mentioned in terms of the retail sales. but the s&p is down 1 1/3% the nasdaq composite down 1 1/2% the real laggard here. a decidedly down day it's a tough way to break a five-day losing streak for some of these major indices with regard to where the outperformers have been as of late, over the last month the two best performing sectors in the s&p 500 have been financials which are taking a bit of a hit today and health care as well. that's holding up relatively well one of the best performing sectors in a very down tape today. consumer discretionary meanwhile
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the worst performing sector in the s&p in that one-month period a lot of that dynamic playing out right now and health care certainly a sector to watch. with regard to the earnings reports better than expected numbers from both walmart and home depot different directions, though walmart the focus has been on e-commerce a little bit of a slowdown there. still better than expected earnings profits as well. they raised their forecast home depot down about 4 1/2% a real drag on the dow right now. still better than expected numbers. however, the sales at stores open for at least a year tailing off a little below expectations, indicating perhaps that that do-it-yourself trade that we've seen during the pandemic, kelly, is maybe losing a little steam however, the people quho did shop at home depot spent more money each time they went. 'll i'll send things back over to you dom, just one thing to point out as we think this through here. whether it's the taper, whether it's the kind of renewed spread of delta here, you think stocks like home depot and lowe's the biggest problem with them today is they're having a reopening hangover we're in an environment where
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we're questioning the reopening. it's interesting they're not getting more of a bid here you're telling me even the stocks that should be benefitting from this environment aren't benefiting and maybe that's because we're not going into full shutdown at home mode but kind of a lose lose where it's not the full pandemic plays but it's not the reopening plays either >> so how much have we talked about over the last several months this confluence of higher infl inflation, raw materials costs, a little pullback in consumer spending because of the delta variant and uncertainty around there. all of those are playing out in that home depot trade. the curious part will be whether or not we see that same thing or same theme or maybe even different commentary come out of lowe's lowe's and home depot are two of the biggest losers right now in the consumer discretionary sector alongside tesla so if you look at lowe's and home depot, will it tell us anything about whether or not that consumer spending picture is starting to weaken? now that those government stimulus payments are not as much part of the picture as possible and by the way, that rising commodity cost even though they've cooled off a bit, have made people a little bit more cautious i know some of those home
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improvements that i've been thinking about have been put on hold until costs can come down >> and that's the stagflation that peter boockvar would be talking about where he says the inflation we're seeing is no longer helping even those areas where we've seen the most strength all right, dom, i'll let you go. we'll continue the discussion. dom chu, i appreciate it let's turn now to the past few days where we've seen these poor readings piling up it started with consumer sentiment on friday. then it was empire state manufacturing yesterday. this morning housing in terms of home builder sentiment and a big miss on retail sales you can now add that to that list showing a drop of more than 1% in july. that was much higher than expectations so is it time to taper the taper talk here's what jeffries chief market strategist dave zervos told us just yesterday >> i don't understand the rush i don't understand why there's a rush when we're still playing with this delta, we're hearing about lambda we're all kind of flying blind there's a lot of as richard curtain from michigan road, the chief economist there, wrote, there's a lot of emotional
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scarring in our consumer and maybe the fragileness of that is a little more there than people think it really is >> joining me now is diane swann. chief economist at grant thornton and diane, again, the sort of ironic timing of all this is it comes just as the fed was signaling its intention to start tapering next month. you know this institution very, very well. what do you think they're thinking right now >> well, i think what we're going to see from jay powell at the jackson hole keynote is him lay out a road map of what would tapering look like what would we have to get to to get to tapering, an announcement in september or later than that. i think one of the things the fed is struggling with right now is that the supply chain disruptions have been greater than the demand disruptions. we are starting to see some weakness in demand and this august sentiment data as you said was really horrific on the first two weeks of the month and i am concerned about that.
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so we'll talk about the uncertainty but as long as disruptions to supply are greater than the disruptions to demand you still have an inflation threat out there that the fed needs to get sort of ahead of a bit or at least address. and that means tapering by year end. but that is the challenge they face right now >> the inflation threat itself is such an interesting talking point because what's happening with delta now, what's happening with the shutdowns in china that we're seeing and china slowing by the way could be a big part of the global srtort of slowing this week, that's all going to potentially make the supply changz worse it's going to possibly make cost challenges worse that doesn't mean that the fed should be tightening monetary policy right? that's not the kind of environment where you're going to see we're going to tighten financial conditions no, if anything those high prices are deflationary. >> exactly well, and it's not deflationary but it is a situation that you don't want the fed hitting the brakes on if it causes more
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problems and spillover effects for those emerging markets and i think that's where this gets into, is how much-- remember, the tapering is in response to the fed's run-up in asset purchases that was to avoid a financial crisis layered on top of the covid-related recession. the fed stopped that from happening in march of 2020 do we still need these purchases to prevent another financial crisis that's global in scope from morphing into that? and that's a really tough question for the federal reserve to weigh as we go into this. i don't think the tapering alone would take enough money out of the system to suppress demand as well but i do think it's a really tough call i think the fed is going to have a hard time sort of wading through and writing the road map on how they do this tapering given the global situation and other china like you said it's the second largest economy out there. and let's face it, chances are the data is actually worse than what they're saying. >> he o', sure and you have to wonder if their zero tolerance approach is still the way to manage through the
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rest of covid. so so at first it looked like that policy got it right the u.s. was kind of muddling through. in the worst way possible. now you wonder if we're going to have to be living with this over and over again in months and years if zero tolerances can continue to work but as a side note, steve liesman yesterday mentioned the fact that even if the fed tapers they'll still be adding $660 billion potentially to their balance sheet, which is a huge amount so i understand people go this is insane that we're even debating whether we should taper these purchases to a still very high number. i totally understand that. but we've watched these markets over the last five to eight years. every time, you know, people think there's no way the market could still need da, da, da from the federal reserve, well, usually it pushes the fed to as we saw in 2013 delay the september taper till december. as we saw in 2019, reverse course and say you know, those 2018 rate hikes they were actually a mistake, now we're going to cut rates a few times you know, you just -- we're going to have to watch the markets from here. but this feels a little
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familiar >> well, and to underscore your point, kelly, and i agree with it, we've gotten used to a wall of liquidity provided by the fed that protects the financial markets. that's a good thing in march of 2020 is it a good thing today it's not clear and i think that's something that is a longer-term issue that the fed is going to have to struggle with in terms of what does this really mean longer term how does this store our economy longer term? and that's hard because you don't want to pull anything out in the near term if the economy is in fact faltering and i am worried about delta i'm already signed up for a booster, but that's because i've had cancer several times this year so i'm on the list all those people who are going to wait, it's going to take time and they're going to be a lot more careful i'm already cautious so for me it's, you know, sort of a non-issue >> no, understood. understood yeah, it's going to be -- whether it's just today's market declines or whether this is the beginning of a bigger move to kind of push back on the fed i think we'll just have to see diane, really appreciate you
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joining us today thank you for your time. diane swonk is the chief economist at grant thornton. all right. so let's bring this back to your investments. financials have been flat all summer energy and airlines are down as the value in reopening plays struggle what will it take to reignite foes trades? or should investors just be looking to other parts of the market joining me now jeff crumpleman is chief investment strategist and heave head of equities at mariner investments. and chris croissant senior portfolio manager at mai capital management jeff, i know you've been pretty constructive on the market having heard what diane and dave and others were saying and looking at stocks today, what would your advice be to investors? >> well, i think you want to stay the course, and i do think that the bull market remains intact when you look over the longer term, the next 12 months. i think the plepth thora of dat still tilts to the positive. we've gotten several positive employment trend data. the activity reports with regard
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to the service economy and manufactured goods remain at high levels albeit they've slowed and i do think that the economy, you know, has peaked and is likely to slow but to still healthy levels what advice would i give to folks? i would not be surprised to see a correction or ongoing rotational moves we've seen in these different sectors and from a growth and value standpoint like we've seen so far this year with the cyclicals really coming out of the gate hot and cooling and growth now having the p upper hand so i would remain balanced both from a sector standpoint and from a growth and value standpoint and low expectations when you look out over the next quarter as we deal with some of these issues you're talking about. >> a stock like boeing sort of probably the biggest example of a reopening play in your portfolio. it's only at 4% year to date but you also have names in health care and technology
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bristol-myers,antive, even gm in that list. not seeing a lot of financials here or energy plays otherwise chris, let me turn to you. same question. the value-growth debate is really just a way of trying to understand what the market is telling us about the economy and as i mentioned, the value trade has not been working for the last couple of months. >> that's true, kelly. and it's nice to be with you actually, my buddy jeff again. there you go but what i think is happening is the bond market is saying hey, who are you going to believe, me or your own eyes with our own eyes we're seeing all of of our portfolio companies either meeting or exceeding earnings we're seeing gdp growing this year the u.s. economy will grow faster than the chinese economy for the first time in a generation so that's incompatible with a 1.3% 10-year i understand we're working through some stuff right now we're working through the delta variant. we're working through the habit of investors to bet on low inflation and low growth but i think that's going to be more and more in the rearview mirror >> but chris -- >> whether we taper in six
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months or three months it's coming >> here's what i don't understand if people say don't believe the bond markets, they're distorted in part by the fed, which i would love to believe that narrative. i would love to believe that narrative. but we have a scenario in which the fed is saying it's going to start exiting the bond markets and bond yields have plunged by half a percent -- percentage point over the past few months that makes no sense. if they're distorted by the fed being in the picture, the fed's about to exit, then we should be starting to see that priced in at higher bond yields. it's going the other way >> well, i think a couple of things are happening, kelly. i think it's like the football with charlie brown this has happened so many times and it gets taken away i think we're finally at the place, we've paid $5 trillion for this recovery. i think we ought to enjoy it and i think it's going to be different. so when the fed leaves, when delta goes away, again, whether that's in two months or six months, we're going to be in a different place. and i'd want to be invested before we get there. but you are in google. you're in facebook you're in amazon i mean, those are plays that should do better i would think
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in a sort of pandemic light environment? >> it's true it's funny because i i this the economy's going to be roaring ahead but our portfolio would probably be relatively even better if we didn't. but i've got to tell you this internet advertising model is the best thing i've probably seen in my career. people who say it's a nice business model it's like saying katie katie ledecky is a decent swimmer. for example, you two will have more revenues next year than netflix from its advertising and youtube doesn't pay for content. it's a great business model and there's nothing stopping it. >> jefl, i'll give you the last word because you don't have big tech in terms of the top recommendation izz see right now. >> in terms of names we do like innovation and we think you can find it outside of big tech. within the consumer discretionary space aptive, an auto supplier, is highly levered to the move toward electrification, the buildout, the move from the internal combustion engine to electric vehicles and advanced riding systems and really make components for the electrical
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architecture and brain power of the vehicle. so growing at 1 1/2 times the industry we think that's a great play then within technology itself foalio is a great example of a company highly levered to legacy communication networks to cloud-based, very efficient customized communication networks we think there's plenty of opportunity outside of big tech. and again, remain balanced >> threading the needle a little bit because even as we're talking about today's declines we're still talking about -- jeff krumpelman, chris grissanti talking us through stocks. cathie wood firing back at michael burry. after the break we'll tell what you she's saying about burry, who profited big from the subprime mortgage collapse plus shares of the honest company are higher today but
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they're down 60% since going public in may. that includes friday's 30% drop after disappointing results. can the company's celebrity co-founder help turn things around and here's a look at the dow 30 heat map as we watch the index down more than 400 points. home depot, boeing, dow and caterpillar are your biggest laggards today united health and merck are helping keep it from steeper loss ppz we're back in a moment. >> announcer: this is "the exchange" on cnbc. sofi is a one-stop shop for your finances designed to work better together. save, spend, borrow, invest, and earn cash back rewards, all in one app. that's how you get your money right with sofi.
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welcome back ark invest's cathio wood is firing back at michael burry after the big short investor wet against her flagship ark innovation etf christina parts nev los is here. >> wood is the star fund manager running ark investments while burry is known for his hole shorting housing bonds prior to the financial crisis in 2008 he's also played by christian bale in "the big short." in a filing release monday burry disclosed a $31 million position against wood's benchmark fund ark. ark has $23 billion in investments. its biggest holding is tesla followed by teledoc and roku and on top of going after ark directly, burry also revealed that he was betting against
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tesla to the tune of $731 million. wood took to twitter to defend her fund's investment strategy saying, "i do not believe that he understands the fundamentals that are creating explosive growth and investment opportunities in the innovation space. but burry isn't the only one betting the price of ark will fall bears are circling the volume of put options traded on the etf, which means the right to sell or sell short ark at a certain price is rising short interest on that etf is at a record high 13% of the float right now. there's even a short ark etf that is awaiting approval from the s.e.c. but wood is sticking to her fund, stating that the tech innovations she's targeting should transform the world in the next 10 years, kelly >> a short ark etf the burry case is interesting because arkk is the type of etf i would imagine has a pretty strong following amongst a lot of retail investors. the tesla types, reddit crowd whatever you want to say
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but burry himself also has that kind of following, especially with a lot of his views about inflation and hyperinflation and collapse so you kind of have two polar opposite viewpoints here that both generally enjoy a lot of retail support it's interesting seeing them going head to head. >> and there are those that argue that burry hasn't been as accurate in a lot of his calls as of late but it's still maybe too early in his defense to say he's wrong. but this is a game that's often played on wall street, who's going to be riept, who's going to call it let's throw some numbers out but he's putting his money where his mouth is and she's sticking with hers. >> and it's so high-profile. we're going to find out one way or the other one of them is going to be right in a dramatic fashion. christina, thank you christina parse neff los the relatively less exciting muni market. but one investor has his own dire warning if congress fails to extend the debt ceiling we'll tell you about that. the home builders are also down today after sentiment in the home building community sunk to its lowest level in a year the etf tracking the group the
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xhb it's on pace for its worst day in over a month with d.r. horton, toll and lennar all down nearly 5% right now. we'll tell you what's bringing down the builders when we come right back
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welcome back, everybody. we're just off session lows. top of the hour dow is down 501 points down 475 pretty even declines across the major averages today of about 1.3% right now the nasdaq is underperforming, though, with about a 1.4% drop let's get down to times square where josh lipton is checking on the biggest movers there josh >> so kelly, let's start with some of those big tech names like amazon which is in the red here it's down now about 15% from its
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52-week high and now negative, by the way, for 2021 alphabet, check out that name. also in the red in today's trade. but keep in mind of course with that name what a run, up about 55% so far in 2021 check out the chips too. so nvidia, applied materials, nxp are all lower. nvidia, remember, reporting results tomorrow after the close and we can end here on some of those chinese tech names like and baidu, also trading lower. kelly, back to you >> josh, thank you very much josh lipton. let's get over to rahel solomon now for a cnbc news update rahel? >> hi, kelly here's what's happening at this hour united nations is responding guardedly to taliban pledges to protect women's rights and not seek revenge on people who opposed it a u.n. spokesman saying the taliban must follow up with acts on the ground to show that it is keeping its promises meantime, in wisconsin the fort mccoy army base preparing to receive refugees from afghanistan. the defense department predicts up to 22,000 people could come to the u.s. in the next few weeks. fort bliss in texas also being
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considered as a temporary site to receive refugees. grace is moving toward mexico after dropping as much as ten inxhz of rain on haiti many people in haiti still looking for medical help and shelter after this weekend's mag tieu 7.2 earthquake. and tonight getting aid to haiti and helping thousands who lost their homesback get back on their feet thavg airs tonight on "the news" at 7:00 p.m. eastern take a look at this video in the nation's capital a perfect view as lightning strikes the washington monument. take a look. you can see the camera shake there and there it goes. it happened over the weekend the monument is closed, kelly, for electrical repairs but it almost looks unreal >> yeah, that is omething. maybe we can show it one more time here we go wow. oh, my gosh. >> something out of a movie. >> yeah. rahel, thank you well, recent ipos are causing woes we'll have more of those stories in today's rapid-fire. wish, roblox, that reopening you can also find out what david you can also find out what david tepper's doing in his latest
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welcome back, everybody. it's time for "rapid fire. here to break down some pretty
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broken-down names, leslie picker, bob pisani, and gina sanchez are with us. gina's chief market strategist at lito advisers and a cnbc contributor. welcome to all of you. again on a day when the markets had a pretty spoiled tone. let's start with what's going on in wish. you might know him from the lakers jersey patch. at least for me that was how i knew him the online marketplace company is down 20% just the past two days after a drop in sales, a wider than expected loss, and the ceo penning a shareholder letter that was anything but optimistic writing that "daily user activity and active buyers on our platform declined more than we had anticipated, particularly in the u.s. france and italy, three of our largest markets." again, that was the ceo. he wasn't very bullish on their turnaround plans either saying "we don't expect these new initiatives to contribute meaningfully to positive year over year results before the second half of 2022. the stock making a slight recovery today but it's nowhere near its $31 high set in february it's under about $7 now. bob, what does this one tell you? >> you're going to hear same refrain for all of these
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companies. it's not necessarily the companies are bad. it's that the prices were too high initially we've had a runaway ipo and spac marketplace in the first half of the year and now we're starting to question that the highest prices for most of these companies were right at the open here specifically you've got an online marketplace there is a ton of competitors out there. this is what you call a no moat company. there's nothing around it that's going to protect it. so the users are very unsticky they can go away very, very quickly. and that's what you're seeing here but the real problem remains the high prices. look at that price for that company there. >> gene, i'm curious after a stock like this, bob said if it was mispriced at the highs at what point does the price become more attractive at the lows or does it go back to some of the discussions we've had about value stocks which we were talking about this with tyler last week it's not so much they're overlooked it's that people looked at them and say i'm not going near that? >> i think this one is one that benefited from the hype and the second look is basically the stories that you're hearing is
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that there's poor quality control, there's longer than expected delivery times. when there's no moat, like bob just said, he really hit the nail on the head, then you've got a company that can't get if they can't deliver, and that's basically what's happening >> and they also, leslie, talked about how their advertising costs are up as a result because again, it's hard to kind of keep the consumer mind share especially when you're up against the likes of amazon and in the post-pandemic world when they just quite didn't have people locked in their houses as much not to draw too much from one to the other but the story that you've been reporting on today about bill ackman's spac problems as well and the sec going after that, another area where retail investors were super interested in the story for a while until that one has just completely fallen apart >> oh, that's right. this is a story that they went public back in december. it's the perfect case study for past performance is not indicative of future results a lot of companies that went public last year showed some really, really strong results
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from the pandemic era where people were staying at home, they were shopping online. but management itself in this quarter cited consumer mobility as one of the big reasons that they really missed on all metrics. >> yeah. so it will be up to them now to prove if they have a more sustainable way to get those eyeballs let's move along, though, and talk next about what's going on with shareholders of roblox. in the red after second quarter results. this is the online gaming platform they missed on bookings. that's a key measure for sales they had a wider than expected loss of 25 cents a share daily active users did jump to more than 46 million in july that was up about 4 million or so from the first quarter. and with the new lockdown in new zealand and the extension of japan's just today well, maybe that could give stocks like r roblox another boost gina quharks do you say? >> this is a company that definitely benefited from the pandemic so of course as we see any kind of stay at home measures or people being cooped -- no longer being cooped up in their houses going out starting to shop,
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starting to go to restaurants, this world of entertainment is going to be more challenging and you're seeing that happen. i agree with you that in fact maybe potential lockdowns might be a benefit, but we're not going to be locked down forever. so you have -- this company has to find what its actual comparables are and right now they're just comparing against strong numbers >> bob, this is something i was talking to dom about at the top of the hour but you have companies like roblox, home depot, lowe's who benefited from the stay-at-home moment for the consumer we're talking about delta kind of throwing a wrench into the works here why aren't these stocks getting some kind of second wind on that >> well, the answer is they are getting a little bit home depot has held up tremendously all throughout the year it's up 26% on the year, something like that. maybe a little less this year. it's outperformed the s&p 500 on the year and it's outperformed it over the last couple years. it has held up very well but all of this is still subject to the peak everything story and in the case of wish -- in
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the case of roblox, this is not home depot, this is a company where again -- the stickiness is a real problem the same thing with wish these users can move around very easily with these game platforms and it's not going to matter that much. if you look at the actual numbers on the company the earnings estimates have been declining on this for a while now. and they're significantly lower than they were earlier in the year if you look out in the further years they're lower actually again, i get back to the question of valuation, which is not easy to figure out with a company like this that's relatively new and obviously has a few dedicated users. but i think stickiness is a great problem. >> that's a great point about the earnings declining usually we see the opposite but not in this case all right. let's move on it another banana peel it's been a rough ride for the honest company shares of jessica alba's beauty and baby care biz seeing a small bump today but after plummeting 28% on friday after they whiffed on second quarter results, bank of america analysts blamed the weak numbers in part on amazon, which cut $6 million of inventory for prime day and people not buying as many
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cleaning products compared with 2020 so the shares popped on the first day of trading if you remember when they debuted back in may but they are down more than 50% since, leslie >> yeah. they've got some inventory reduction issues here. consumers spending less on sanitation as you mentioned. then kind of a similar situation with wish. people are going back and they're buying things brick and mortar people are buying makeup they're buying beauty things in store again in a way that they really weren't doing back in 2020 so if we're going to be honest here and we're going to level set, it changes the risk profile of a company like honest company. >> yeah. >> gina -- go ahead, bob go ahead >> well, again, not only did the company have to reset expectations, and i hate to keep beating on this, but the pricing is a problem it priced at $16 when was it? early part of may, right the highest price for this stock was the open it was $23.88. and it's been essentially down from there so in behavioral economics you know this, kelly, there's this thing called anchoring where
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where you i this the stock should be is kind of where you saw it initially so everybody has this $23 price and it seems like a huge disappointment but obviously the stock was overvalued investors got too enthusiastic it was never worth that. this is probably closer to what the honest evaluation of the company is i'm not blaming the company. they're doing fine they seem like a very decent company. it's investors this isright part of the problem. they're really going to push back in the second half of the year against the pricing because everyone made money on the first day of these ipos and then lost money every day after that practically. that's a problem >> and i want to get to this beach body story but first, gina, what i was going to ask you is if all of these stocks are not necessarily names, and this reminds me a little of what's happening in china where these stocks are doing horrifically where does value present itself? if it's not going to be in those names and it's not going to be in this name, i mean, where is it then? >> people are looking for things that people have to keep buying. you see defensive names.
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we've actually seen there was a little bit of this sort of desire to own growthier names for about two months and it just rottened out as the delta variant came out and what you found was the stuff that was performing was the stuff that people need, the more defensive stuff. companies that have a moat and those are absolutely the right kind of elements that stock pickers right now are looking for. they're looking for companies that can defend their company, something that one single move by amazon isn't going to wipe out your entire revenue stream >> yeah. >> those are the things that matter >> all right that's a great point now, we always go through these 13f filings when we get them every quarter, okay, they bought this -- well, what is beach body david tepper has made a big bet on that, disclosing a large stake in appaloosa's latest 13-f filing beach body reported a wider than expected lost last week, blamed the setback in part on a dre' in its spac deal which deferred investors and postponed its exercise bike launch the ceo sue collins says they're now well positioned to execute
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strategies, he this upped guidance the shares are climbing today but they are down 35% since going public on that three-way merger with a spac backed by shaquille o'neal somehow this story feels emblematic to me of like everything we've just been discussing but david tepper's in on it so i go maybe this is legit i don't know >> i totally agree although i will say that this company i think it was five days before the end of the quarter, he bought 2 million shares $21 million at the end of the quarter. it's unclear if he held on to it in the six weeks since then. if so that stake would be down to about $15.5 million thanks to a slump. but a really interesting point here this idea that a delay in getting that merger done impacted their marketing spend and therefore impacted their earnings will they correct that over time remains to be seen but i think that is a good lesson for a lot of these companies that are looking to tie up with a spac as a way to get public it can have demonstrable impact on your bottom line.
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>> gina and bob shaking their heads. i think the message there is caveat investor. >> high print again at the open first day. >> wow all right. bob pisani, gina sanchez, leslie picker, thank you all very, very much for this edition "rapid fire." coming up, treasury secretary yellen warned the failure to extend the debt ceiling would cause irreparable harm to the economy and to livelihoods of all nernz. and with near-record inflows into the muni market this year one investor basically agrees and says the xwrim pact could last a generation or more. we'll tell you about it next we now find that 85% of individual investors are interested in sustainable investing. among millennials, the interest is even stronger. ♪♪ one of the big trends in sustainable investing is data, and the ability to understand
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welcome back nearly $57 billion has flowed into muni bonds in the first six months of the year that's the most for any first half in nearly 30 years according to lipper. but a congressional failure to extend the debt ceiling limit this fall could have a big impact on that money my next guest says if the ceiling isn't raised it could cause a ripple effect that could roll through the world financial system and make the financial
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crisis of 2008 look like a three-minute g-rated movie trailer and it could be disastrous for the muni market if u.s. credit worthiness is questioned so with that trailer, tom koslik is joining me to discuss heat head of municipal research -- i think the point you're trying to make is if we defaulted on our debt that would come to pass but every time we go through this exercise we never really get to that point. is this time different >> let's hope it's not let's hope the base case if anything is something that is a 11th hour agreement. but even an 11th hour agreement we saw some pretty significant marketwide and municipal market implications back in the summer of 2011. >> such as >> so one of the things from the municipal market we saw is after the ratings downgrade from s&p there was a ripple effect where credit was concerned and so that's one of the things that i could see happening if there is some kind of recognition by rating agencies
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or a rating agency, number one number two, one of the other things i'm concerned about from a municipal market perspective is just the level of uncertainty where something like this is concerned. you were just talking about the demand that we've seen for municipals over the last couple of months. i would be very concerned if there would be a -- that there could be a supply and demand imbalance. something similar to what we saw last year when issuers really accelerated the sales of their issues before the election >> so draw the line for me between the treasury sort of not paying the -- and it affecting the muni bond market explain the relationship there >> so one of the first things and one of the reasons, one of the key reasons that i started paying as close attention to this over the last couple of weeks is just because first of all i think that because of how much kind of political theater there's been going on in washington, one of the things i wanted to communicate to investors is this is not just political theater.
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and just to answer your question, with all of the things that are happening with regard to the not just potential fourth wave, this is a fourth wave, i'm concerned that the political in and out and/or the political and market volatility that could result from this and the uncertainty coupled with what we could be seeing with revenue bonds and stress on revenue bonds over the next couple of months could really pose a problem for municipal investors. >> i'm also thinking about the timeline on this i think it was lou wrightson, whoever the analyst is who follows this, the cash very closely, has moved up his timeline for debt ceiling from late october to early october. so we're talking about maybe six weeks' time to figure this out >> right so the cbo studies identified that it could be as early as october 1st, going to november on the other hand, there could be some uncertainty there. it could end up being even sooner than october. so the fact that we just don't
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have a specific drop dead date yet is an issue of concern but then again, whatever ends up happening combined with the other political issues that are going on in washington right now is something that i'm concerned about. >> do you think people should buy any backup in muni yields that's created as a result of this >> whether or not it's related to the debt ceiling or even the situation where we see, you know, i'm already reading news about some schools closing in texas and georgia, for example this fourth wave could end up being a credit issue going into the fall where g.o.s are concerned i'm not as troubled. it's really in the revenue sectors that i think whether it be health care or higher ed or mass transit or other transportation, i think that is where there could be some credit stress i think that being said i think one of the things that investors
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learned over the last couple months, not going back to last year, is that municipal bond credit is pretty resilient >> well, because it might actually be backed up by the federal government >> i wouldn't necessarily say that i'd say just because a combination of -- well, first of all, the relief from the federal government, especially the $650 billion of relief we saw in the rescue plan definitely helps support munis for sure but i think that also especially where g.o.s are concerned the security pledges have shown that they're pretty strong and pretty resilient. >> all right tom, thank you very, very much examining a lot of the different sides of this issue. we appreciate it tom koslik with hilltop securities still ahead home builder sentiment falling to its lowest level in a year. despite the drop in lumber prices what's behind it, next and as we head to break, let's check back on the markets. dow is down 501 at the top of the hour we're nearing those declines again. about six points away from that level. nasdaq's down 1 1/2% we're back in a moment digging into discretionary, under armour, dph she said
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welcome back shares of home builder etf are falling today after the nahb market index dropped five points kb homes and pulte are down about 5% diane oleic is here with more behind the decline diana? >> the issue is rising costs for materials which then means higher cost for the homes an sticker shock for home buyers. so builder sentiment drops to the lowest reading in over a year but it is telling. current sales conditions fell five points to 81. buyer traffic fell five points to 60. only sales expectations in the next six months was unchanged at 81 because builders know that demand is still high and hope that costs will level off. but the price of lumber has come down from the peak in may. but the price and availability
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of other building materials remains a challenge, including flooring, drywall and appliances and windows and new home prices are way up just about 56% of new and existing homes sold in the second quarter were affordable for the u.s. median income that is down from the first quarter when over 63% of homes were affordable. it is the lowest affordability level since the revised series in the 2012. mont mortgage app lickations were falling off. >> and even speaking with people in my town who were involved in real estate, they say they think that prices have gotten too high so what happens next >> well we see what the home builder supply starts to look like if they could ramp up production, they had slowed production because of the higher cost for materials and if they are coming down for lumber, then
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perhaps they could ramp up production, the more supply then you have demand leveling off a little bit with supply and prices can pull back a little bit. we're not saying prices will go down but the gains will shrink and that will help home buyers get back into the market. >> diana olick with the very latest and peter book bar said it could d jnsd. flag for the fe anheoi me next municipal bonds don't usually get the media coverage the stock market does. in fact, most people don't find them all that exciting.
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full prescription-strength? reduces inflammation? thank the gods. don't thank them too soon. kick pain in the aspercreme. welcome back to "the exchange." we were down 501 about an hour ago and what is driving today's declines weak data or delta worries or are they tied up together. joining me now is peter. stag flation is a term you're flowing around. >> all of the factors that you just mentioned are weighing on
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markets with the back drop over the past month but i think stag flation is an over rising worry in addition to the tapers that we keep hearing about. if you look at every major correction in the equity market since 2010 outside of covid and the chinese currency evaluation of august of 2019 it was around fed tapers and raising interest rates. 2010, qe ended and we sold off about 20%. and the. this year we sold off about 20%. q3 we had a 10% correction and the fed rizzed rates in december of 2015 and we sold off the first few months of 2016 and the q4 of 2018 when powell kept raising interest rates so that exposes weakness elsewhere and i think stag flation is what people are trying to get around on. >> and your point being, it is kind the way that you go, yes there is inflation and yes there
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is a slowing economy and those two things uncomfortably coexist with delta going on. but let's talk about the fed reaction are you basically saying, look, if people point to the marks as a reason for the fed to delay the taper, they're getting the sequence wrong, that any time the fed backs away, we're going to expect a market correction but it is something you work through? >> well, yeah, and that is going to get us to a very interesting moment in time so let's just say that the fed begins this taper in september or november, december meeting and you do get an equity market sell-off but you still have elevated inflation what is the fed going to respond to are they going to react and stop tapering because the equity market is down or are they going to continue to follow through because they need to contain inflation and i do believe that we are headed towards one of those moments where they're going to have to pick a choice and where they're going on that road >> right so there is i couple of other
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factors going on we talked to dave yesterday and he said don't overlook the fact that powell is up for reappointment in a couple of months and in the months ahead and it is not that popular to go, i know inflation is hurting people at home but we're yo going to have take a slow approach how do you think it will effect it. >> after everything this we've heard from a variety of different measures it is tough to avoid not beginning something in september or november at the latest but to david's point, i'm sure politics are an influence here since february 2022, someone is the new chair or the existing chair. but i don't think we'll wait until february for that decision to be made i think it is possible it happens before thanksgiving and that is just when the tapers just beginning so i don't think one should necessarily influence the other as much as maybe some people would think. >> but i can't imagine it would
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play well with congress for the fed to start tapering and then scrap it. >> that is not going to look good but that the problem that the fed has. is that this inflation story is not just a discussion, this is now a main street issue. this is to the point where you now have congress people that are writing letters to jay powell like manchin did saying we have a potential inflation problem here and this is an experience that the current federal reserve, the modern day central banking has not had to deal with. >> yeah. >> and are they going to focus on stag or the flation >> we'll leave everybody with that image thank you. it is good to see you. that does it for the exchange. but "power lunch" starts right now. >> welcome to "power lunch" and here is what ahead on this busy hour a market sell-off like we haven't seen in quite sometime a spending slowdown but the decline in retail sales may not be as bad as i


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