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tv   The Exchange  CNBC  December 22, 2022 1:00pm-2:00pm EST

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>> dgx, quest diagnostics, expected to grow on the topline. >> steve steve? >> frankly, defensive in this market >> buy treasure is buy six-month and one-year i'm telling you to buy something. >> folks, thank you very much. we'll see you at halftime tomorrow "the exchange" begins right now. thank you very much, brian hi, everybody. i'm kelly evans. and here i am, welcome to "the exchange." coming up this hour, leaning short. david tepper was famously long the fed-driven market last decade, but now he says he's leaning short on stocks because of it, and the market is backing him today. look at these numbers. the dow down 675 we'll look at why and whether he's right plus, some new developments in the ftx case.
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plus, on shares of hard-hit coin ba base, one of my guests sees coin base quin up thing from here and from a perfect storm fromretail to an actual storm that could derail your travel plans, we'll talk to retail legend mickey drexler about all of that. but first, let's get to dom chuy look at the nasdaq, 3.4% from the chips. >> it's getting pretty bad here's what we're going to point out. it's been a tilted negative day, pretty much in the get-go, but we are just about at session lows right now for the dow, that means about 690 points, pushing minus 700 at this stage right now down over 2% 2.5% declines, over 100 points to the downside for the s&p 500, which by the way, currently stands at 3777 and the nasdaq composite, we'll call it the epicenter of today's market meltdown, so we're down about 3.5%, 365 points this is just about minus 369 was the session lows so far.
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even at the highs of the session, we were still down 110 points for the nasdaq composite. that tech-heavy trade in the nasdaq is what we'll focus on. a lot of the negativity has come from a specific part of the market technology and even within that, some of the worst performers in the market, within the nasdaq 100 and the s&p 500 are chip-related stocks. micron didn't help with their after the bell earnings report yesterday. disappointing results, disappointing outlook. and that has carried through into equipment makers like lam research, down 11% applied materials down 9%. even nvidia and advanced micro, some of the bigger names are down anywhere from 7 to 9% right now. so keep an eye on those chip stocks and then, of course, one of the big, big movers to the downside that's been highly publicized over the course of the past 12 months has been shares of electric vehicle giant tesla those shares are down 10% right now, over the last couple of years. i'm showing you a two-year chart. you'll have to go all the way back to september of 2020.
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>> it's down 10% right now >> it's a $1.25 trillion quarter at the highs, now about 75% of its value shed in that time. >> come on over, dom there's so much more to talk about. tesla shares, for those following along, and everybody is at this point, down more than 1 10%. $123 right now the flip side of fed liquidity coming out, maybe. and david tepper was saying these global rate hikes are making him pretty uneasy about stocks listen >> i would probably say i'm leaning short on the equity markets. right now. because i think they're -- you know, i think the upside, downside just doesn't make sense to me, when i have so many people telling me, so many central banks telling me what they're going to do, what they want to do, what they expect to do >> david tepper also saying that he would be short bonds, by the way, especially that two-year,
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let's get reaction to tepper from jason brady he's president and ceo of thornberg investment management. he joins us along with rick santelli watching those bond markets for us out in chicago and dom chu is here as well. rick, let me start with you. we all remember, david tepper famously set up the entire market landmark when he aid, g long the fed either way, you'll get bailed out and see stocks kind of rally. this now feels like he's saying the opposite >> it does and i can clearly understand why and everything he says makes sense. i just think that there may be a bit of a time,ing issue. yes, global central banks are all snug enough, removing stimulus, trying to correct mistakes of keeping rates much too low for much too long. and in the u.s.' case, not only that, but some of the policies enacted, some of the spending, some of the issues to address covid seem to have gotten out of spending control but our fed is way ahead of the curve in that regard
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other central banks may need to play catch up. i completely understand and agree with mr. tepper regarding the bullish bounces we've had in a bear equity market i think all of the central banking activity is going to make it very difficult for the stock market, globally i think a global recession is pretty much baked in the cake. where i come to disagree with him a bit is on the central bank and where he's looking at to accomplish in the treasury complex. i do think that we've seen -- yeah, go on! >> no, no, no. i was going to just jump in and say, why, you know, small question, why are we down so much today, right? every time we -- every ten minutes it feels like the dow is shedding another 40, 50 points we're down more than 700 >> i think a couple of reasons i think that the ecb has gotten much more hawkish. bund yields today closed very near levels that were the highs of the year. and those highs of the year represent 11-year high yields going back to 2011
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i also think that when you look at what's going on with regard to the electric vehicle market, tesla, it could be a variety of reasons. it certainly seems the minute he touched twitter, the minute he started talking about what he perceived as free speech, many investors that did buy his stock, not based on financial reasons as much, did turn away, but i think the entire complex is starting to suffer for good reasons. the head of toyota was in a "wall street journal" article not too long ago, saying many of these car companies are spending too much money if the globe goes into recession, do you think all of these start-up car makers and ev makers will be able to afford the burn rate. i think we're continuing to see a snugging up. but we've got to be careful with treasuries the less-inverted yield curve is important to note. two-year note yields on the week are up about six basis points.
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ten-year basis points are up about 18 the curve 2s to 10s has moved into minus 57 from well over 80. the market is telling us something, that the fed unlike other central banks, i don't care what they say, they're most likely much further to the end of the chapter and curve trades are getting reverse reversed, and that's what's going on the last couple of days. >> that's very interesting jason, i see you shaking your head weigh in here. >> i think rick is exactly right in the context of thinking about where are we in this normalization process? so, the fed has moved well over 400 basis points a year ago, our expectation as a market was that they would move 100. so this has been enormous. a huge, hung change and, we're probably more at the end than the beginning. >> so why are we concerned now about the chips? why are we thinking now the auto
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sector has excess inventory? it seems like they're telling us these shoes are still yet to drop >> i think we're seeing a confluence of where is the -- where is the economic data, which is still pretty good, right? we saw consumer confidence, what, 24 hours ago, a little more that was great consumer confidence still looking good, banks still healthy. there seems to be a pretty good consumer balance sheet out there. meanwhile, some companies forecast for earnings are at more trouble micron being a great example of a more cyclical name i think it's that confluence where we say, hey, the fed is not necessarily going to cut soon, although i think sooner than they think they will. but the fed will not cut so soon, so we'll have this weight, this higher cost of money, which will be more challenging, especially for more tech-heavy names. >> so dom, we have micron. so do we blame them for the nasdaq being down? why is micron down 5%, but lam down 11%, right? what is that all telling us about this highly cyclical, usually leading part of the
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market it doesn't feel like it's a good sign >> or applied materials. they make the equipment that makes computer chips if you have a supply problem, an inventory problem, a possible glut happening, that possibly means you're not going to have to make as much going forward, before you clear out the inventory. that's an overhang for memory chip makers. there's been so much negativity about what it could be like for a recession. whether it's going to be shallowerer, soft landing or whatever it is i guess, maybe, one of the things that a lot of investors are trying to grapple with right now is whether or not the earnings picture, we've spoken a lot about multiples over the course of the last several months about how higher interest rates means that there's an alternative, opportunity costs are now more profound, and that could mean valuations come down. well, right now, the earnings story isn't all that dire, at least not for right now. >> even though a lower multiple could be a decent price. >> what you have is a multiple contraction, even on earnings, that may not be as bad as people
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fear and this could be an earnings season, by the way, coming up. where ceos are just going to take the opportunity to guide lower, because they can. because they can >> look at yesterday, rick we were talking about nike and fedex and how great, maybe earnings season won't be that bad, and today it's taking down the whole market rick, it strikes me about one leading indicator, let's call it the yield curve, looking better today, while other leading indicators like the chip sector, for instance, are looking a lot worse. can you -- why are they at odds? >> well, i think they're at odds, because when you look at the yield curve, it isn't neces necessarily, think about what the behavior is behind the scenes by investors. they're finally starting to challenge the two-year they're being more aggressive in selling longer-dated treasuries. those are normally considered to be spongy when you think we're going into recession
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i think the u.s. will fare better if the fed has more confidence in the treasury complex. their guidance isn't going ar. i think tehe equity markets have big problems so i don't look at it the same way as other investors to me, it's a bounce in a bear market and they need to be challenged we've been having central banks manipulate markets we have the bank of japan beyond the pale it's going to be painful trying to normalize we've barely skrcratched the surface. >> do you agree with that, jason? >> i think that on one hand, it's not necessarily at odds in the context of, when you actually see the curve resteepen, that's the beginnings of when the recession really occurs it means the market believes the fed is going to start to say, oh, my gosh, this is getting
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bad. with regard to the fed having a lot of problems, that reminds me of george costanza and the festivus they have almost said outright that they would like to see it go down. that's a significant headwind. i think that headwind over the next six months will go away and the real headwind will be actually what the evolution of the economy. >> well, this is not a very optimistic outlook dom chu? >> so here's what i would say. because there's been so much emphasis on the negativity, i'm generally a positive person, no doubt. but you can't ignore what's happening -- >> you're a realist. >> to the point of jason and risk wound but what i would say, in the context of what's happening right now, there is an opportunity being presented for a lot of investors out there we often talk about the difference between hedge funds and short-term traders, day traders and swing traders versus those people who are investing for the long-term. these are opportunities right now in fixed income and equities
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for some of the biggest names out there that have placed on discount to the tune of 10, 15, 25, 50, 75% that could be some of the biggest bounces in the event that things actually do get better or are not as bad as people feared. if you're a long-term investor -- >> or even if they do get bad, look beyond that >> a year to two or three. this is not because i think i'm right or wronging on long or short, but if you believe that the economy for the united states and the world grows over time and will continue to mark the upward advance of mankind, this is a time for you to own some of these big blue chip names at a steep discount. >> rick, i can hear the young people in the crowd going, forget it. i'm not betting on that, forget it give us something here that you would hang your hat on, especially if we're about to enter a period where we actually see the recession come to pass we see more downside for stocks. but to dom's point, you have to look somewhere for
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opportunities. >> and i consider myself a realize. to answer the question, that's easy just because i think these bounces in stocks are bounces in a bear market doesn't mean we shouldn't put our toe in the water. i think as dom has pointed out, stocks can be viewed as on sale. the issue is, when these sales end. you know, i have younger kids, and i tell them that this is the time you're supposed to be grabbing stocks that in the past were too pricey, a little too overleveraged, you know, bought too much on margin all of that is coming home to roost. but there are good deals i agree with the professor that's always on cnbc with morton if you're a young person, you need to start investoring. just don't look for those returns that look very promising in the near-term in terms of interest rates, i'll tell you what, when mr. tepper today was talking about listening to central banks, maybe he ought to look at their track record >> well, i just think, speaking of track record, starbucks, i
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think you could have gotten for under $5 a share during the financial crisis it's not always obvious, for instance, is tesla a deal here, jason, or not? it's down 10% today, it's lost half of its value in the past couple of months, basically. where do you say there's obvious places that people need to pounce >> actually, i think it's places that look a little bit the opposite of tesla. so, is tesla a platform company? does tesla have a sustainable long-term business the answer is, yes, more than it did five years ago, because it really took advantage of very low rates to build an extremely impressive array of vehicles, et cetera but i don't think it's as much of a platform as other names, whether it's jpmorgan or citigroup or if you want to talk about tech,microsoft or apple. those are platform companies if you look at multiples, they've come down a lot. that's a really big deal but actually, high-multiple names are still at a significant premium relative to history. i can build a great
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international global portfolio of platform companies with an average p\e well under 16 or 15. more like 12 or 13 >> but if people go, you have ten cent, yum, china, walmart, mexico, people might say, i don't know, that makes me nervous. you have fx risk and all the rest of it >> you do, and we've seen something like -- we've seen the dollar be very, very strong and maybe if the fed is more towards the end and the ecb and boj are actually playing catch-up, that could reverse, but those are examples of steady business platform companies that are relatively cheap they're part of a broader portfolio, of course but that's much more interesting to me as an investor than trying to guess, well, tesla was way up here, now it's down whatever it's down. saying it's down 50 or 70% indicates that where it peaked actually had some value from an information perspective. >> totally, totally. >> i'm not sure that that's true >> rick, what would you say? >> i don't want people to take
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this the wrong way, but anything that has to do with energy, if you're investing it, when i say energy, i say fossil fuels versus batteries versus renewables that brings in the electric vehicle, the power grid, windmills, solar panels, be careful these investments have been pushed by governments with an agenda they got way too frothy and governments and states like california, like new york, like countries in europe, they make rules about what type of energy you're going to be able to use, what types of vehicles you'll be able to drive and look what's happened in europe they're now burning more coal than they have in years. and the reason i'm saying, this is not to point out how horrible energy policy has been, but if that is part of your assessment investment strategy, i would say to err on the side of caution, that there toyota -- ahead of toyota, read his article in the "wall street journal" about a week ago, i really do think that certain sectors are just overinvested >> we talked yesterday, dom, about coal and the performance of those stocks.
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a quick last word, dom, before you go >> the last word, to echo with this whole idea, this is not a sense of panic right now you don't get the sense right now that investors are selling this because they have to. they're selling this because there's a revaluation taking place. to rick's point about solar energy, all of those other risky places in the market, this has also been a time for people to reassess what their profiles are. they can understand there's possible losses at play during certain periods and time frames. if you're not comfortable with those, then a financial adviser shouldn't have you in some of these investments to begin with. and if you are, this is an opportunity to build a portfolio. >> utilities i think back to what kevin monotold us. i don't know if that counts as energy, but assiit's a monopoly. still ahead, coin boun more than 4% as the fallout from ftx continues. but my next guest, speaking of stock picking, she says, stick with it. she sees the stock going up to $200 versus $33 right now.
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plus, apple's down more than 4%, but it's outperformed the other f.a.a.n.g. names this year and one of our guests says this is the stock you want to own in 2023 he'll tell us why. as we head to break, here's a look at the market picture the dow is down 722 points right now. that's 2.1%, 2.7% drop for the s&p, 37.73, the nasdaq is down 3.5% we're back after this. hello, world. or is it goodbye? you know, it seems like hope and trust are in short supply. [clap] now, as businesses we can blame and shame. or... [whistles] we can make a change. [clap] we can make work, work for our communities. create more equal opportunities. [clap] it's time for business to show its true worth. because it's not goodbye, world.
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welcome back to "the exchange." ftx founder sam bankman-fried is currently in lower manhattan for his initial court appearance this after two of his former lieutenants sarah ellison and gary wang both pled guilty to federal fraud charges. the ftx fallout has crushed the crypto sector, including shares of coin base they're down another 5.5% today to around $35 a share, but my next guest says the silver lining in this collapse is that it's flushed out bad actors in the space and a crypto winter is healthy in the long run. she has a $200 price target on coin joining me now is lisa ellis, senior managing director at moffett nathanson. thank you for joining me in person tell us why you still see such significant upside >> look, obviously, it's a very
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rough period right now in crypto land, but coin base, you have to remember is a publicly listed, fully audited, fully regulated western player and, you know, what doesn't kill you makes you stronger, as this plushes out a lot of the bad behavior, a lot of the un-regulated activity happening around the world, the remaining players will consolidate a lot of the strength in crypto on to them and i think coin base is one of those players. >> what happens, though? i have to imagine coin base effectively trades with the amount of trading revenue on the platform and if the interest in crypto has gone from -- has gone to a tenth of what it once was, isn't that a long-term problem >> i mean, it's a problem for now, for sure. but we've gone through those crypto winters before, and you have to keep in mind that while we go through these crazy peaks, like bitcoin, which is still currently sitting around $13,000, is still up 2x from where it was even three years ago, 4x from four years ago. it goes through these wild swings, but a company like coin
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base that's been around for more than a decade kind of snows how to run their business through those cycles so, yes, revenues will be down, but they've also brought down expenses, they've prioritized investments, and they're in it for the long run they're sitting on $5 billion in cash, and really not burning through right now a meaningful portion. they're negative, but maybe running 300 to 500 million negative, so they can outlast this, even if it lasts through 2023, even into 2024 >> and to state the obvious, they've emphasized that they separately -- they're separate custodians of customer funds, right? so the big question has been, do people panic and pull their money off coin base and say, forget it with these exchanges, but custody in your own crypto is very, very difficult. so do you think they'll be able to kind of take that message to the client, to the customer, and say, your money is safe here it's not going to be like these other platforms. >> yeah, they should they have obviously segregated accounts, as you would expect, from a western player. and the s.e.c., you know,over
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sees this. it's literally right there on their balance sheet and their filings, you can look at it. certainly, they're experiencing jitteriness from investors, particularly institutions that have to, you know, report back to their own lps, right, who, you know, who are pulling back from the space but they highlighted last quarter, we'll be curious to see what they say this quarter, that while a lot of their consumer investors are trading less, they're not pulling off the platform they're leaving the asset sort of sitting there for now, while they kind of wait this out >> and to that point, can coin base then, i don't know if it's exactly like a bank, but can they take those funds, earn their own interest on it, and try to kind of earn a profit that way >> absolutely. their revenue stream, which includes interest income, which is making money off of the assets that are sitting there on their platform has jumped from only single digit revenue back in 2021 to now is over 30% of revenue. part of that, of course, is because everything has shrunk down but the important part is that
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it shows that they are div diversifying those revenue streams. and in a rising rate environment, they can benefit like any other bank can, where they can make money off the funds that are sitting there >> maybe we can show it on the screen, but what is it trading at in terms of the multiple today, and how do we get to $200 in terms of earnings that you see and what the multiple is at that point >> we're looking at a one-year price target, where at that point, you'll be looking at 2024 press conference and even expecting a very modest recovery in crypto, meaning, assuming, this is as bad as it's going to get right now, as we're dealing with the ftx collapse and fallout, and it stabilizes and maybe follows a similar pattern as to what we saw in the last year, which is 2017, 2018, on 2024 numbers, our numbers, which is, again, a very modest recovery, it's literally only two times ebitda it's that -- it's sold off that much >> because didn't you used to have a $650 price target i feel like i remember talking
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about this what is the big change from $650 to $200 -- or $600 >> so when we initiated $600, that was in the peak a lot of this is about anticipating exactly how the cycle is going to look and the timing of that, at the time we were, you know, pegging off of an expectation that this cycle would sustain for a little bit longer it didn't, it's come back. that's fine. we reset earlier in this year, back in the spring of this year, one it was clear we were in the winter and now, like i said, we're just sort of watching and monitoring to see but really, you know, you should be looking out at 2024 and if you believe that crypto, as a technology will persist and will recovery, coin base is really the only, you know, publicly listed asset that you could buy in the space so i wouldn't necessarily recommend a major position in coin base, but if you have a long-term time horizon like that, this is an unbelievably attractive entry point >> quick final word, but does it all come back to the fed is this all just a reflection of
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those liquidity conditions, both for interest in crypto and for the performance of a company like coin base >> certainly, because it's a high growth, kind of long-dated asset, like every other asset like that, it suffers in a rising rate environment. and so some stability in the rate environment, out in 2023, will also help in addition, we're looking for some regulatory clarity in the u.s. hoping that maybe in 2023, at a minimum, we see stable coin regulation and things like that. that will allow institutional investors to start dipping their toe back in. >> sounds reasonable i don't know >> it requires a strong stomach, that's for sure. >> lisa, thank you so much good to see you. lisa ellis coming up, the markets giveth and the markets taketh away stocks are erasing yesterday's gains and then some with the nasdaq down 3.5% but one portfolio manager says now is the time to buy look at apple down 3.6%, sitting right at 130 bucks he'll tell us why now is the time as we head to break, the dow is
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down 131 points and there's not a single stock in the green right now. you can see the outperformance, if you call it that, procter & gamble, nike still up there as well, worst performer today is intel on those chip oversupply concerns we're back after this. ugh, this rental car is so boring to drive. let's be honest. the rent-a-car industry is the definition of boring. and the reason can be found in the name itself. rent - a - car? you don't want a friend. you want the friend. you don't want a job. you want the job. the is always over a. that's why we don't offer a car. we offer the car. ( ♪♪ ) sixt. rent the car. ♪
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welcome back to "the exchange." we are putting in session lows right now with the dow down 763 points the s&p down 110 or almost 2.9% and the nasdaq down more than 3.6% pretty ugly afternoon here a lot of concerns about the chip cycle spark things off let's get to tyler mathisen for a cnbc news update >> ukrainian president zelenskyy
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met with poland's leader the two leaders discussed u.s. support for ukraine and bilateral relations going into the new year nasa astronauts are installing a new solar power array on the international space station. the work was delayed by a day because of maneuvers to delay space. and that's the news at this hour back to you. >> tyler, stay with us we have one more headline today, a very, very sad one longtime friend and frequent guest here on cnbc, scott minerd of guggenheim partners passed away unexpectedly yesterday. he died from a heart attack during his regular workout guggenheim's ceo mark walter released a statement saying, i have known scott for over 30 years and we were partners much of that time scott was a key innovator and thought leader who was instrumental in building guggenheim investments into the global business that it is today. he will be greatly missed by all. my deepest condolences are with his husband, family, and loved
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ones tyler, obviously, we had scott on so many times he was a lovely, wonderful person this is just such tragic news. >> he was so generation with his time to cnbc and to all of us. and i know we all feel like we had a personal relationship with him. he was clear spoken, he was unafraid to say what he thought. and above all, i will remember him as being a very generous soul who would carve out time for you to explain things to you. and you can probably see from these photos, he was a workout freak, i guess is what i would say. he was a massive man and to shake his hand was to know you were shaking hands with a rock >> that's true >> he was one big dude >> we will really miss him our condolences to his family, to his friends, to the firm. he will be very, very dearly missed >> yes, indeed >> we'll be back after this. >> thanks, kelly
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welcome back, everybody. the dow testing an almost 800-point decline today. the nasdaq, the day's biggest
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laggard. the nasdaq is only 3% from its 52-week lows how much longer will the pain last and how do you position here let's ask delano sapporo why are we down so much today? >> happy holidays, kelly it was surprising yesterday when we kind of had a big jump, but there are clearer reasons in my mind why we're down today. even though we had consumer confidence numbers yesterday, inflation is still outpacing wages. we have an eight straight months and so yesterday's rally was kind of a surprise to me if you look at the macro economic numbers, especially on the consumer side, it shows that we're kind of weakening in that area inflation adjusted, retail sales are negative and it's pointing to a consumer that's getting weaker think of some of the things happening in the auto market we're seeing repositions
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happening at a much higher rate. so i think that the consumer may be weakening a little bit. >> do you think part of it is the bullwhip effect to now potentially being on the flip side of that from that vantage, you can see where the inflationer pressures come from. >> 100%. that would be playing to further with deteriorating so if you're having less shortages, you're having inventories higher, you're not having an inventory glut, and weakening demand, that definitely plays a point to it and then we saw something that could be, you know,off setting this with the numbers that we saw with the initial jobless claims coming in so a lot of that coming into play here. but, you know, this is an outsized move. and investors putting pressure on stocks right now. >> and we'll talk in one second. you have some particular ideas, but does it give you pause when
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someone like david tepper says, maybe i would be leading short in this environment. don't bet against the fed, and now they're going the other way. >> it does for myself, i've been saying, still positive for the next two or three months, at least to taking large positions that are bullish. people can still nibble at stocks and buy areas that have weakened and we'll talk about those names. but betting right now, at the end of 2022 in the first quarter of 2023, that we'll have a bull run, i don't think there'll be that christmas rally in my estimation >> and i want to mention, we're about to get some news you like united health care, match, apple, you wouldn't be a fan of dr horton here. apple in particular is the one to own >> yeah, i think all three of them are the ones to own the fang names that have performed kind of the best, obviously relatively speaking, is still underperforming year-to-date and lower year-to-date but if you look at the numbers they put in there last quarter,
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they've actually overcome some of the detractions when it came to supply issues and demand deterioration. they've overcome that, put up some record-setting numbers last quarter. they're building in services and subscription really, really well here, even if they fell out of the bid for informal sunday ticket, they're still strong points to apple here and holding that is a defensive play, but also a growth play i think will build well in the later half >> that is a strange-looking one-year stock chart it kind of tells you the kind of choppy market environment that we've been in. we'll leave it there appreciate it. we are getting breaking news out of sam bankman-fried's initial court appearance here in the u.s. >> so that hearing just wrapped up in the southern district of new york we know that the judge released bankman-fried on a $250 million reconnaissance bond. to secure that, his parents had to cosign with him and put up equity in the parent's home in palo alto in terms of next
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steps, bankman-fried will have to live with his parents in that house on the west coast. by tomorrow, he's going to have of an electronic monitor added to his ankle, so he's got to either do that in the southern district of new york or take care of it in northern california other details here, he has to surrender his passport he can't leave the country his travel is also restricted to the northern district of california he's not allowed to open any new lines of credit here and he has to submit to a mental health counselor. other things that i'm hearing, his parents were in attendance they seemed supportive, also quite nervous about next steps bankman-fried seen in a blue suit and tie, probably that same blue suit we've seen him in all week he didn't interact with his attorney, but we did hear from his american defense attorney, mark cohen, who said they agreed to all of these bail conditions, so that's where we are right now. still waiting to firm up whether -- what his plea was to those eight criminal charges >> wow, mckenzie, thank you for
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all of those details the latest chapter in the sam bankman-fried saga still ahead, it is looking like a blue christmas for this sector, falling nearly 13% in december and one expert says they'll be facing a perfect storm r e fothforeseeable future that's next here on "the exchange." dow is down 742.
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welcome back dow is down 740 points let's get some show and tell, where we show you a chart and tell you the story it's the holidays, but december has not been a merry one for retailers. the retail xrt falling 13% just this month and the former ceo of j. crew and gap told "squawk box" that one of the biggest retail head winds is too much inventory and he doesn't see that problem going away anytime soon. listen >> most of the goods were place nine months ago.
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business was good then there were supply chain issues then, which there are no longer. and i think all of us got a little too bouuoyant about the future and a perfect storm happened in october business slowed, and therefore, inventories climbed. so i'm not very optimistic >> well, neither are the markets right now, as we are just off session lows, we've turned lower for the week with this 2.2% drop for the dow. the nasdaq is down 3.4% we're talking about the worst loss since early october more on this sell-off, straight ahead. completely on its head. bringing legendary design... and state-of-the-art technology... to a fully-electric suv. the all-new, all-electric eqb from mercedes-benz.
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welcome back stocks are lower for the first time in three days and in a big way. the dow is down 729 points disappointing chip earnings weighing on stocks big-time. is the santa claus rally in jeopardy let's bring in bob pisani from the new york stock exchange and steve liesman to discuss what's next with the economy. gentlemen, welcome bob, what gives today? >> well, look, the problem is very simple. just look at the s&p 500 it's down 2.5% but big chip names, including micron and nvidia, they're down 6, 7, 8, 9%. this tells you that there's a
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major problem with micron. so with micron, they're a big bellwether in the tech area. these dram chips are in everything, in cell phones, pcs, data centers we are expecting them to say inventory's under control and we've got everything covered in 2023 instead, inventory is not under control. you can blame samsung if you want they keep producing. but what's happening now is the street is realizing there's way too much inventory still and they're reducing -- they're going to be reducing their earnings estimates for the chips and a lot of other pieces of the tech sector in 2023. >> steve, what would you say, the larger questions, we're seeing it in chips, starting to hear talk a lot about it in autos. is it going to spread? >> it's supposed to be getting better everything i've read about the supply chain is that things are improving. but i would point -- i'm not taking away from what bob is
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saying is animating this market, but i would point to the gdp numbers this morning, kelly, where out of the box, we got an upward revision to third quarter growth the only way it feels it's going get inflation under control is to run the economy below potential. i think the market market saw gd news, read it as bad news and decided to turn tail and go the other way before the holidays set in. >> bob, what would you add to that >> yes, we did take a little tick down on the gdp numbers we took a little down on the lei numbers too, which is a little bit harder to explain. they were a little bit worse than expected. so the problem is what side of the recession debate are you on? if you're on the soft landing side, earnings for most of the street are flat for the s&p 500, but this is substantial harder decline crowd that's out there, and most of these strategists have estimates down about 5, 6, 7, 8%, and i fear with this
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micron thing they're going to go down to 10%. 10 to 20% in earnings down from prior to year. that's an earnings recession. >> i see, so that's got people more concerned speaking of leading indicators, rick also mentioned the yield ku curve a little while ago it's improved by 30 basis points recently people are kind of hinting maybe that points to this idea that with all this momentum slowing so much, will the fed be pretty close to the end here? >> i mean, that's sort of the thing that tepper was leaning heavily against this morning he's a little bit confused why the market has decided to ride the fed train on the way up, but it got off at the top of the mountain and decided to walk its own way down and find its own route is probably the best way to think about it. you know, tepper came on squawk this morning and said basically what are you people thinking the fed told you where it's going. why is it you're so smart and think the fed's going to go
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elsewhere? not only that but he points out what i've been trying to say, i think i said it on your show yesterday, the guard went max hawkish. she's going to do 50s for the next three meetings or so. so you got a german ten-year bund trading at 250, and lagarde's going to 3%. go figure, the same thing in the united states, two years trading at 425, and it's hard to understand why it's not 480 and what's kind of interesting about -- i was just going to say, what's kind of interesting about this is the stock market seems to really believe the fed. >> yes >> and it's the bond market that thinks it knows better. >> is it that they're getting to 425 from us going up to 5 and then cutting 75. is it getting -- and is the stock market telling us it's going to be so bad that the fed is going to go all the way to 5 or whatever their end goal is and then have to abruptly reverse course because the data's going to deteriorate so quickly. >> now you're in a hall of mirrors trying to figure this
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out. the fed has said higher for longer, steve's right. why shouldn't we believe them? they stop at 5%, and they're still at 5% at this time next year, which is what nobody wants to believe, i think. that's part of the cognitive dissonance everybody's got about this i tell you how i know that the street's clueless. i see ridiculously wide dispersion of opinions on where stocks are going i know people who have year end targets. you can drive a truck through that i know people who have $60 oil and i know people who have $120 oil. that is meaningless dispersion of opinions. usually it's much, much tighter. that tells me the street doesn't have a clue exactly what's going on right now that's why i get humble about making prognostications. >> what do you think about my reversal theory, they're going up there, but they're going to have to quickly climb back. >> that's what the market has
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priced in. if you put up that fed rate outlook, you see that the market has to deal with possibilities that the fed may not have to, but you put it in there, and you see, what, they get up to 498. the market doesn't even price the fed getting above 5%, and then they cut 60 basis points on the back side of that. what's weird about that is powell has told you specifically that's not what's going to happen mary daily has said that's not going to happen. >> she's been wrong, steve remember when he first started and i think it was rate hikes he had to turn around, it was during the trump era he's been wrong before >> oh, no doubt. no doubt, but the thing is is that he also told you he was going to raise aggressively, and he did four 75 basis point rate hikes. they may be wrong about it, but i just don't think you can be cavalier about it. and at least the fed could have the inflation story all wrong.
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i'm just saying this is where the fed has told you where it's going to go. this is where the ecb has told you where it's going to dgo, i think and you make a bet against it with some sense of the risk involved there >> sure. >> i don't know what it's going tad. i certainly think if you're betting on 60 basis points of rate cuts next year, it's a tough bet to make. you have to have an awfully secure version of how inflation is going to come down and feel good about betting on it if the market was so sure about this, kelly, i think the market would be rallying based on rate cuts i think they're selling on two things rates that are too high -- growth that's too high or higher than the fed wants it, the belief the fed is going to come in and do what it says it's going to do, and then, three, the idea that that may be a mistake and cause a recession. i think that's the one, two, three of what's happening in markets these days. >> that's how you get the dow down 730 points. steve liesman, bob pisani, a
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huge thank you as always. still ahead, dangerous winter weather impacting millions of americans all the way from the midwest up to maine already impacting thousands of flights as well. we'll have the latest next on "the exchange.
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welcome back one more thing before we go, airline stocks part of the big selloff as winter weather rips across the country, already causing chaos at some airports let's get out to nbc correspondent shaq brewster on the front lines in illinois. shaq. >> reporter: hi there, we've been watching this storm make its way through illinois, through chicago right now. i wanted you to take a look at the conditions on the road right now. things are okay, but officials are warning that this is going to change dramatically as we go through the afternoon hours into the evening. at issue is, yes, the snow that you see. you see the roads are pretty clear right now. we've seen a lot of snowplow trucks and salt trucks on the
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roads, but the temperatures are going to drop dramatically we've noticed that, temperatures dropping about 15 degrees since i started reporting this morning, and then there is the wind, and the concern is that the wind with the snow will cause those whiteout conditions and lead to treacherous conditions on the roads. you're seeing delays and cancellations by the thousands in the airlines and that's the concern that they're seeing as this winter storm continues to make its way through >> shaq, thank you, we expect to hear more in the next 24 to 48 hours as the fallout, 18 degrees the high here on saturday. that does it for "the exchange." "power lunch" picks up coverage of today's market selloff and it starts right now it's cold, it's wet. the market is down there's your forecast, folks welcome to "power lunch," along with kelly evans, i'm tyler mathisen, we are in the midst of a big selloff on wall street david tepper is bearish right now, and he's right at least for today, and micron's result w


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