you don't get it usually, though, that's after months and months. >> we've had a lot of pain maybe today you'll look back on and say that was it, target was the thing that needed to give you the flush. >> right that's mike santoli. see you tomorrow "fast" is now. live from the nasdaq marketsite, this is "fast money. i'm melissa lee. brian kelly, steve grasso, tim seymour, and jeff mill let's get to it. the dow down more than 1100 point, the worst loss since june 2020 the consumer sector seeing the most pang, target dropping nearly 25% losing a quarter of its value in a single day, marking its worst day since october 19th, 1987

remember that date that's black monday. apple dropping more than 5.5, amazon down more than 7% it's just a stone's throw away from leaving the trillion dollar club does today's sell-off just show how vulnerable the markets are, maybe how vulnerable the consumer is? since we're talking about the biggest drop since black monday, brian kelly, does this make sense about what we're being told about the economy, the balance sheet is in great shape, wage growth is there. >> but the market is telling you that that's going to change, right? everything you just mention are backward-looking indicators. the market is saying hey, wait a second look at what the earnings were blamed on. supply chain issues from china,

blamed on the war in ukraine i haven't seen a single company come out and say, you know what? the fed is raising rates that's actually hurting the consumer we haven't even had quantitative -- the market is pricing in that softish landing. the market is pricing in a hard landing. for target to be down 25% is extraordinary. this is unbelievable. >> so a couple things. i think the system is broke. i don't think that's an overstatement. you don't have things move the way they're moving now the system is broke. i don't know where the liquidity is, but that's gone. now, the balance sheet to b.k.'s point, no one is talking about that how can you have an end or bottom without that discussion >> the fed's balance sheet.

>> and mine, by the way. so how can you -- so china is unrevolved, ukraine unresolved, balance sheet not even discussed, can't talk about a bottom. >> and as brian kelly mentioned, the impact of consumer higher rates, we don't know if that's flown through there. you're standing by wall matt yet. i'm wondering if you think this is a bigger retail problem, given what we have seen today. >> well, we've heard this now from target and walmart, that they couldn't move prices up fast enough, that the gross margin is an issue the great irony, of course, is tjmaxx did the exact opposite today. we just don't know where the consumer is. we know a share of the wallet shifted. we heard that from brian cornell. we don't know where the consumer

will be in 150 to 200 basis points all the market has done is priced stocks in an environment where rates are lower and mechanically say, what are we willing to pay that was held with the consumer and businesses held constant today that's what's shocking walmart and target could be treated like zoom and docusign it is as if they earnings were more important than apple and microsoft. maybe there's some solace doesn't tell us where we're going to go in the market, but we came in today having rallied almost 6.5% in three days. this is an environment where we've had this kind of rallies and complete washout days. this washout day still has you, the s&p didn't go through the intraday low last thursday, and i think that's part of how do you have to drop it into a

perspective. again, we've had a massive rally coming into this. >> with the volatility has absolutely spiked in a single day, jeff, but to tim's point, this violent churning we are seeing in the market that also cannot have a good impact on a consumer, a consumer to filmed open the pages of the newspaper, and see "dow plunges over 100 points" and they won't feel as rich as yesterday. >> there's absolutely a psychological effect, no question about it, but i think there's a fundamental effect going on i mentioned this yesterday the stock market was up quite a bit, but once again you saw high-yield credits spread out. if credit continue to say deteriorate, that tells us something. we all have been looking at the shiny object over on the side of high tech, and it's very

important. but at the same time kind of over here, where nobody is looking, have been the rails you're starting to see moves in industrials. these names are breaking down, telling us there's something going on fundamentally with the economy. you're starting to see commentary in earnings call. you have for a couple weeks. b of a mentioned weak demand in earnings calls we have seen that the most since march of 2020. with the inflation we currently have, that means lower purchasing power i think we're starting to see that in credit markets consumers have binged on credit the past month or so that's not necessarily a good thing. this whole market has been a mull pal compression so that's the next shoe to drop. i think those growth areas where the mull pallets have rerated might be where you want to be right now versus some of the more cyclical areas where you

could dean impact on earnings. >> you said the good news? we've been pretty gloomy, but the good news is we're actually starting to price this in. strategists haven't reduced theireend targets, those types of things. these type of moves and earnings misses are the types of things where you have to adjust the good news is that's one part of a bottoming process to me the next part and for us to get a solid bomb, you need the housing market to crack. the ned talked about it this week once you see it, maybe it happens as soon as june, then you probably have something of a very tradeable bottom. >> demand destruction. you need -- what does that mean? that means, to me, a recession >> why does it have to be a recession? why can't it be grit in the wheels of the economy as opposed to a full stop in. >> because 80% of the time the

fed has done this, there's been a recession. they just don't do the soft landing well it's just not possible at this point. and we're so far ahead of our skis that you need to really chop it. there's got to been a lot of grit in the gears. >> i want to take a poll do you think it is inevitable that we hit a hard landing >> i'm going to raise my hand. the way you worded that, your honor, or counselor -- >> for the sake of the show, i will do that >> jeff, please be a ray of sunshine and tell us a softer or so muchish, in the words of jerome powell, is possible >> there are some signs -- and i think this is starting to become

consensus, i don't know if that's good or bad, wage growth has come down a bit. if you look at the trucking indicators, they're coming down. if we see inflation move low enough fast enough, that the fed thinking it can maintain credibility, but to steve's point, interest rates are a blunt force tool they also operate with a lag, so the fed is not turning a dial with precision, they're sort of feeling around in the dark, and that's a very heartard thing to. i put together a chart actually from piper sandler, and everybody is wondering -- the fed does not react to multiple compression, but what we're going to need to see, is earnings come down the correlation between the fed

funds rate and year-over-year earnings rate is very tight. that's when we can maybe hope to see the fed step in, but until then, i think it will be difficult. >> i love this peak inflation consensus theory that's great, but if inflation stays high, that's still a drag on the consumer. it could mean a more permanent shift in the type of consumers doing which is a lower margin shift dyswhat pioneer said in their earnings call today about prices for several years they expect oil to remain at $100 a barrel for several years. if they are half of several, that's a long time for energy prices to remain elevated, which flowing through all sorts of -- walmart and target talked about the energy prices affecting their cost of doing business.

>> i think we'll see oil prices that much higher some of this is structural, some of this is the dynamics with geo308 tickets, some is current policy the problem is that we have dynamic within the industry, that will be demand destruction. i think the dynamic in this conversation is what's a hard landing, it's all relative to where the fed was and where the balance sheet was. i am one that says give us a deep and severe pull back at least in the economy to counterbalance this dynamic. what i don't feel comfortable about, powell pointing out that we'll go until we feel inflation is at a place that we're

comfortable and gotten to neutral dynamics this is the same fed that told you in november there wasn't an inflation. so these are the big issues. the thing that's the critical thing is you're starting to see the s&p actually underperform technology that's the place that on some level we wanted to get to. the s&p has underperform the smh or semiconductors about 5% did he we that was going to happen >> this peak inflation to me, but be careful what the wish for. we're starting to see that if inflation -- the supply side hand changed and so if you're getting peak inflation, it means the consumer is done for the time being i don't know why you would buy the stock market, when you know that that means there's no demand and earnings are going lower

>> i just think we're starting to see -- you called it yesterday, whether we're looking at retail sales or individual companies. retail sales could be the lading indicator, so a company that wants to be rosie, i think companies that are the kitchen sink are getting out i think you're seeing a bit of let's throw everything out, let's blame it on everything we're going through presently, because next quarter should be better >> i mean, that is something we have not -- why wouldn't you throw that out there why not? instead of saying in the past few weeks, the consumer has

relatively strong. >> i think bryant -- brian cornell did that on our network. i think at some level we're losing the trees through the forest we say this every night. we know there's small employment, wage growth, we know the balance sheet looks okay, but guess what this is not even close to where we're going to be at some point. yes, again -- i believe this i think the stacks were overly pu punish the stock really disappointed on the target by the way, look out for best buy coming out i do think we have a case where, look, i think it was an

overreaction again, this was a forest over the trees dynamic today. i think the trees are okay >> but to your point, where they were secular, as opposed to cyclical, they're being cut down as well.

>> we could have seen this coming, right? target, home depot, and then the demand destruction >> where might there be more earnings risk? that's in the cyclical side of things >> where some of these companies and more or less their earnings will be insulationed, at least to some degrees, you might have to endure some pain, but in figuring out who trees we want to climb, i still think it's the growth ashe of the multiple. all right. coming up, more trees.

no the dow dropping more than 1100 points, and we are homing in on the energy space as gas prices continue to serve. first, we have some after-hours movers the details are next don't go anywhere. "fast money" is back in two. (vo) for me, one of the best things about life is that we keep moving forward. we discover exciting new technologies. redefine who we are and how we want to lead our lives. basically, choose what we want our future to look like. so what's yours going to be?

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welcome back to "fast money. shares plummeting after cisco had a miss on revenues frank holland has the details. >> cisco with a 1 to 5% decline, well below the 7% increase the they were forecasting. they said dough individual has changed everything more than 100 products, and those issues cost the also cost

the company about $$200 million by region. cisco guess about 60% of revenue they expect to last through the next quarter, and tomorrow the ceo will appear on "squawk on the street" to discuss the report and what it means melissa, back over to you. >> thank you. >> not what you want to hear in this market environment. >> no, i feel like as a similar holder, this is what i'm saying often. what's interesting here, is, again, miss on the time line,

and yet the stock getting punish the. eps i think they cut by about 3%, they're probably even more conservative than that if you look at where people are positioned, and chuck robbins is standing in the pocket, saying that's not the issue the reasons for the drop in forward are things you can't necessarily forecast you just adopt know what the end is there would be up side do it, but there also could be down side. >> absolutely. i've been of the few that they

can't lock people done too far, but phone makers are cutting protection 20% because of lockdown creating problems when it comes to cisco, tim pointed it out, this wasn't a margin issue this was a revenue issue, so this is very different this is something that's not something you can fix with financial engineering. i think you can probably extrapolate this to other tech companies. that's where i was going to go with this, jeff mills. we're getting a better sort of more realtime view, if you will, of where things stand. >> yeah, there's no question about it

you know, maybe we there i think this is indicative of the fact with the valuation you know, i think that any sort of reductions in expectation, this is the market is what you demand wasn't all bad as that business mcstarts to shift away from hardware a bit, maybe that's good news the stock has shown some reasonable support so let's see how the stock reacts tomorrow.

before we took the nose dive, would you art that the world is in a worse place for cisco now >> yeah. >> that's no longer support, so where support is, you're going to have to navigate that you're going to have to look and say, what does that future look like, and how much worse was it then >> tim, it looks like you're disagreeing with grasso. >> i'm trying to think of trees and forests, and i won't come up with anything good for the benefit of the audience. i think cisco is a better company in the last few years. this is a company that's somewhat in transition, and when i think about the enterprise upgrade and what i hear from

corporate america, everything we sold off today was the consumer. we're not necessarily selling off the core business. it's a cheaper company today, trades at 14 times next year that's my push back. it's not that i don't think we have a discussion about are companies better than they were pre-covid, or we look at the charts i think this is a bottom-up story that i think is actually in a better position than they were two years ago. coming up, oil taking a hit, even as gas prices continue to rise our next guest says there could be relief on the way we are checking in on the options pits to see how traders are playing this move. this is "fast money. back right after this. wealth is breaking ground on your biggest project yet. worth is giving the people who build it a solid foundation. wealth is shutting down the office for mike's retirement party.

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welcome back u.s. refine rs increase production, and prices are driving even higher in california, the first state to ever record an average gasoline price of $6 a gallon how long can these pressures last ed morris, do you think there's some relief in sight before the summer ends? >> i do, absolutely. i would note that while we have pump prices going up, we have the screen price going down today. i think we'll see more momentum.

>> how much relief are we talking about? is part of the dynamic that $6 a gloa gallon in california, there's d demand going on? >> there's demand destruction going on really it's the crude price, if we look at supply-and-demand balancing, with crude selling offer today, we see $99, $10 below where they are, and we think the price drops will be consider by the end of june. when we get into the july/august mark, even though it's a higher market for summer driving, we think it will be the lower 90s by the end of summer, and then

to under 80 by the year end. you get a drop in prices of crude by 20%, that should translate to a 20% drop in the price at the pump with a big of the lag. >> i'm curious where the disconnect is with your forecast and some of the producers like pioneer. they're the ones pumping it out and are on the front lines what are you seeing that they're not? >> i hate to pick on a company, whether it's pioneer or some other company. if you look at the spread of forecasts across companies, like the majors, they're a lot lower than the one independent company you were saying. nobody knows the future, but the forward curve is a pretty good indication, and the forward curve is going down. that would indicate that something is lifting the front

price that's temporary, and not a good indicator where the prices are going ahead. >> i see mountain pre-interview notes you think the macro economy is getting more gloomy every week, so i wonder what the outlook is for some of the metals obviously there's a supply side elements and demand side element. >> the supply side is going to respond in kind. we have a bit of noise in the metals mark, with so many tied to the exports from russia, but if you look at china, the world's largest consumer of metals, and you look at the most robust forecasts of china, picking up from where they are now, we're looking at an inventory build, certainly halfway through the year, and then who knows in fact, we have q2 prices now

at a level that is lower than we thought they were going to be. we thought that was going to continue on into the fourth quarter. maybe we'll get a boost in aluminum from $2800 a ton to $3200 a ton. we think copper with stand still. definitely on the nickel side, we think the incredible artificial run-up, now trading at 26,000, will go back to the 22,000 we think by the end of the year we'll see that further erode, so nickel log pricing back down zinc, which has been especially tight, with some of thing in europe that had shut down, but we think it will be short term,

not going very far at the end of the year a bit lower than currently, and then next year at this time about 10% lower than currently. >> ed, thanks for sharing your forecast with us, we appreciate it jeff, where do you want to go with this trading? >> let's look at energy for a second with a name like chevron, for example, still trading 26% above the average. i'm not a commodity expert, but i was under the impression heading into the year, spare capacity was really low. my guess is prices are 95, 110, these are levels where these companies are quite profitable

so, you know, there's value in these names, technically overbought, but buy the weakness, because i feel like there's room there. >> i agree partially with what jeff is saying, but i think you have to sell them at this level. ed's talking about less than $80 a barrel. >> you're mr. recession. >> i am. and i think oil will be at $68 having said that, you haven't been rewarded -- look at the xle, up 47% year to date you haven't been rewarded by buying individual names. it's not worth the risk. if you think energy is going higher, stick with the xle if you think like ed dand i do, it's about selling these. >> what would tim do >> tim will be buying energy.

>> tim has been investing in energy for much of his career. i think that energy is now an investment, not a trade. i think you don't need $120 energy in fact, you probably don't want it, if you're one of the producers. they're break even at 45 we talk about the precash flow dynamics, i think the entire commodity space, we could not blanket it i think steel prices are coming down i think aluminum companies and alcoa probably has a bit here. we have forgotten about uranium. and we couldn't stop talking about uranium for months i'm still interested in it just because the market is not. i think you have dynamics here, and reasons to own some of these things you should not treat the asset class the same way quickly, b.k., who do you

believe? >> you know, with all due respect to ed, he's a great analyst, i'm going with pioneer. i think there's a structure issue going on. retail getting wrecked, but it wasn't the only name to take a hit. we are checking in on the options pits more on that next, but trouble in the transports, groups handing in its worse day in two years. we have the details when "fast money" comes right back.

welcome back to "fast money. target wasn't the only retailer feeling the pain today costco dropping to more than 12%, the worst day since 2003. one options trader is betting this is just the beginning tony >> that's right, melissa, target dragging some of the retailers lower, costco trading some of the five times the trading volume one trader is betting this carnage is not over 800 contracts of the june 370, 350 put vertical paying an average of $1.90

just to put that into context, this trader is risking about $150,000 worth of premium, besting that costco could decline by another $1500 if he is correct, it will pay out about a $1.5 million >> jeff, how do you feel about costco >> well, listen, we're trying to feel our way through the exposure to the consumer, right? even after some of the carnage we have seen, eespecially after the carnage, if you haven't own costco, maybe now is to take a look i would rather be there than in pure retail. look at the way they tend to behave against the ism manufacturing. they move in opposite directions if you're looking at retail, i would rather a costco than

something like a macy's or something pure retail. >> the customer base seems to be stickier in an inflationary environment, if you're buying a pallet of paper towels, you'll get a discount. >> you would hope so, right? here's the thing, though, right? some people have to be long. if you don't have to be long, wait these things are going to get bombed out i'm certainly not short this down, 12%, but i think you have to way and see how bad the damage is and how much demand destruction is before these things become touchable. tony, by the way, thank you. be sure to tune into the full show friday at 5:30 eastern time transports with its worst day in nearly two years. what the weakness means, we'll discuss next and looking at the key levels to

> refa meyhere we head next. >>mo "ston" right after this

news alert on melvin capital. leslie picker joins us with the story. >> i received from a source a letter from melvin capital to investors, announcing that that fund is winding down it plans to return capital to all of its investors they say in the letter founder and chief investment officer saying that the past 17 months has been an incredibly trying time for the firm and for their investors, they given everything they could, but more recently that's not been announced to deliver the returns they could expect he's referring to the past 17 months, which is the last january, we saw that fund with significant declines relative to a short position, and short exposure to gamestop of course they got caught up in that whole frenzy about 17 months ago, as he put it, as

well as never really able to recoup the losses. declines last year, as well as declines this year i'm told since inception it had about a 12%, but performance year to date is down 23% through the end of april so news today, melvin capital is winding down, returning capital to investors they have included a schedule by which to do that including restructuring and starting over and then they saw some investors rebuke that idea. so this appears to be their decision after talking with investors. in they have decided to wind it down >> leslie, thank you. trouble with transports

here all components ending the day in the red. led by old dominion and avis, both down more than 12%. expediters international and more seeing big declines is this bad news for the broader economy, b.k.? >> i think it is we have seen the index roll over a bit. the yond lying index you saw it start to drop. so it's not necessarily surprising, but i think it says something about the economy, where you have this massive inventory build, because everybody was concerned about supply chains and now the inventory is there so, yeah, i think it does have bigger read-through for the rest of the economy. >> the market tells you that the market is slowing down, but when

you look at avis, a rental car company, the biggest metrics they're priced on is the used car fleet. so when you start to see that rolling over, you know that people aren't chasing their tail on the economy any longer, and i think it's a sign of worse things to come. coming up, nasdaq dropping nearly 5%. is there more painhe rter worth will join us with more

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