see these enormous make you gasp declines over the past, 72% on docusign, 62% on netflix a heck of a lot of them are not just in bear market territory, but crush territory. >> you want to talk about gas, rates, inflation thanks for watching "power lunch. >> "closing bell" right now. see you next week. thank you, tyler and kelly stocks falling hard as inflation hits a four-decade high. the most important hour of trading starts now welcome, everyone, to "closing bell." i'm sara eisen take a look at where we stand in the market we are down more than 600 points in the dow at the lows we were down 853 we are off that point but it is a sea of red on wall street. what's working right now some of the consumer stap le names. goldman sachs and mauftdicrosoft

weighing the most. the nasdaq getting hit even harder on those rising rates we're seeing in the treasury market down almost 3% right now. we're looking at another week of declines the longest losing streak for the dow since back in the 1930s. take a look at the sectors weighing most right now on the s&p 500. you've got everything down except for staples that's the highest performing sector consumer discretionary is the worst and pretty much all the components there from travel names even which have held up relatively well to amazon.com and tesla. if you think it's ugly here, look at the action in europe they're also dealing with higher inflation and coming, rising interest rates that has spiked yields in places like italy and spain we saw the destruction in the market after today's u.s. cpi report germany, 3% declines we'll be all over the sell-off with great guests to help you navigate it, including former

federal reserve chairman roger ferguson, barry knapp, tony crecenzi and rebecca patterson eric fredeman joins us also. let's look under the surface of the cpi inflation report the headline is 8.6% in may. sharpest increase since 1981 some line items have truly seen staggering jumps in the last year across wide swaths of the economy. energy, for example, we all know that and feel that fuel oil prices more than doubling electricity prices up 12%. used speaks up more than 16% new vehicles rising more than 12 it's food too, as we know. prices were up 10% and 12% for that supermarket food at home. meats, poultry, fish and aeggs u 14%. and then there's shelter rising 5.5% and seeing an acceleration.

a lot of it has to do with where the demand is in this economy. just look at airline fares jumping 40% since this time last year and those dashed hopes of decelerating prices are having a big impact on market sentiment mike santoli looking at the dashboard today. so much for peak inflation. >> yes, sara s&p down 3.5% in the last 25 hours or so. so yesterday the market started to lean in the direction of maybe it was going to be an unfriendly cpi report. this is a retest of the lows three weeks ago. that was 3900 exactly. at a closing level intra day it was 3810 so that leaves you a couple of percent on the downside before you get to intraday lows. you had three days of really strong buying right in here. it never got up into the levels that would have said, fine, it might be more than a reflex relief rally within a downtrend.

also the other thing to keep in mind for as relentless as it has been, it's a controlled demolition it's not been panicky with massive bursts of selling. it's been tightening of financial conditions, revaluing of stocks, repricing for a tighter outlook and maybe more growth risk. take a look at the treasury yield curve. 2-year yield has got above 3%. it's gone up well more today than the 10-year has so this is the spread between 10 and 2s we did get here slight low negative or just about flat. it's about 10 basis points what it's telling you is the fed will have to go faster than we thought but it's either going to work to restrain inflation and/or growth is going to come down enough and maybe there's a recession risk in there that you're basically going to not have the long term yields or long term inflation risks in there. that's the story of bonds. >> i mentioned the streak that we're on

the dow will close down for the tenth week in the last 11. we have not seen a stretch like that since the great depression. the last time was 1932 i do wonder, it's been relentless selling how much of it is already priced in, the recession if that's where we're going, the higher interest rates if that seems to be the conclusion, even though we get these surprises on inflation? >> i don't think an all-out recession is likely priced in because you're still not seeing kind of the earnings effect necessarily being registered in stocks we are down to about 16.5 times forward earnings that's fair value probably generally speaking over the last 20, 30 years but do these sell-offs stop when it gets to fair value or do you overshoot to get cheap at least for a brief period of time that's a big question for me. >> we'll see you later let's bring in barry knapp and tony crecenzi.

i think the big surprise on inflation is you did not see a moderation in the good side of things we knew everything was going to services with airlines but target starting to mark down apparel and tvs we know. we just got that warning why are we not seeing that in the data at this point >> well, they say about monetary policy they're long and variable legs you could say monetary policy is like walking a dog with a long leash, pretty difficult to control and difficult to say where it's going leaving one regime appnd the regime we're in, which we dislike, is the high inflation regime we'll probably continue to see news like this for a little while longer but by the fall and almost certainly by the winter, no one wants to call a peak and the idea of catching falling knives should be low. the news should be a lot better and investors at that time will probably be looking ahead to the

idea of peak inflation if it hasn't already occurred and the mood will be a lot better more than likely. >> investors have been saying -- i think, barry, you have been saying that we have seen peak inflation. a lot of people like you have been totally wrong >> i wouldn't admit to being totally wrong. goods inflation, core goods inflation was 12.4 in february it's 8.5 now last time we had chinese manufacturing ppi, that's fallen from over 10% down to 6. you've had cpi even on a quarter on quarter basis fall from 3% in -- or 8% in march down to 5.2. so the momentum is decidedly headed down. but tony had a great point which is monetary policy does work with long and variable legs. the two sectors outside of energy that most strongly contributed to the beats on the

headline and the marginal beat on the core were the two most sensitive parts of the economy, namely autos and housing yes, we've had 220 plus basis point shock to mortgage rates. my work on housing prices using things like a correlation matrix indicate that they are peaking right now and are likely to come off very strongly by the fall again, as tony indicated i think that that broad story is intact what isn't intact is the political fallout of this and the policy implications of it are still really acute that brings up the question of what does the fed do next week i'd love to see them accelerate the caps on winding down the balance sheet, even start considering outright sales of mortgages. that would push those longer term rates up and potentially accelerate that cooling of demand in autos and housing where demand is in excess of supply but more likely if they do anything, and they probably won't, but if they do anything

it would be a 75 instead of a 50 >> how likely do you think that is, tony, that they'll do a 75 basis point hike fed chair powell ruled it out last time but this is a pretty big surprise in terms of inflation. >> no groundwork has been laid by the fed for that possibility. >> we're in the quiet period now. >> yeah, but in looking at the markets and forward pricing, it seems like the markets only have a fraction of that 75 basis points priced in, meaning the extra quarter. the landscape would be different of course for the july meeting so if fed chair powell thinks he wants to lay the groundwork for the possibility of it, he could then but then you could argue, sara, why wait if you're going to hint at it, why not just do it there is a benefit to acting tough. i would often call it tough love the more vigilant the fed is toward inflation, the better the outlook. the fact that the fed is front

loading its interest rate hikes, compared to other cycles the front loading should limit how much it has to do later. >> so, barry, what's the bottom line for the equity market what would you tell investors to do given the fact that you are still seeing signs of a peak in inflation and do see it starting to come down as monetary policy really hits hard >> so a couple of weeks ago i was thinking about paul samuelson's famous quip about the stock market predicting nine of the last recessions even if we were to have a mild recession, the median decline associated with that in the stock market is 24%. so we're really a good entry point unless wer about to have a deep credit cycle recession that causes earnings to collapse as they did in 2000 and '08, and i

put a very low probability on that so to me this is a good entry point. i think the second half of the year the market will make up the losses of the first half of the year so as liquidity got withdrawn, markets will struggle so i think this is a good entry point for investors. i would buy the cyclical parts of the stock market. those are the ones that are really inexpensively priced. the banking sector, for example, the asset mix evident so far this year from cash and government securities to real loans is going to boost return on assets, boost return on equity and profitability is going to respond accordingly so i think this is a good spot to put money to work. >> in the cyclicals. financials down 3%, materials down 2.5% today i'm talking about, industrials down 2.2. tony and barry, we'll leave it there. thank you both for joining me on an important day.

after the break, roger ferguson breaks down how that hot cpi report could impact the federal reserve's rate decision next week. you're watching "closing bell" on cnbc. the dow is down 670, and the only sector that's positive is consumer staples we'll be right back.

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goldman sachs downgrading it from buy and cutting its price target to $41 from 55 citing economic headwinds and risk to margins from higher commodity costs and supply chain it is underperforming, down almost 7%. consumer discretionary down 3.5%. speaking of higher cost, the may inflation report seeing costs rising from food, gas, rent, transportation former federal reserve vice chair roger ferguson joins us now to discuss roger, it's great to have you, especially on a day like today welcome. >> thank you >> i think my key question is how is the fed likely to view this report? are this ey likely to say we'll stay on our current path or we need to do more? >> i think what they're likely to do is see this, as you indicated in the opening, as being inflation across the board, higher than expected. some might see signs of it peaking but i think it's too early to call that my expectation is that they'll

do 50 next week as signalled, but i think the tone around that is going to be leaning towards a bit more hawkish i suspect when we get to the press conference, the possibility of 75 will be on the table in the future will be talked about next week i think it's the 50 that's been broadcast. after that i think the risk, so to speak, is to maybe an extra 50 or two more than the market priced in and possibly a 75 if called for i think that will be the signaling the next time they have a chance to speak to us. >> in terms of expectations, one thing this report did is knocked out the idea that they would pause in september as was indicated by the atlanta fed president. now there's 50, 50, 50 priced in, june, july, september, roger. but is there merit to a pause? is there risk here that we could get into a stagflationary environment where growth does slow substantially and we still have higher inflation numbers?

>> well, there's absolutely that risk, which is i think why the pause is not likely at this stage. it would be one thing to consider a pause if we had seen some sign of inflation peaking coming down and maybe the committee would have said let's wait and see if we've got cloor and convincing evidence, to quote chairman powell. but at this stage i think the idea will be they will continue to have to raise rates, maybe aggressively, 50, 50, 50, maybe a 75, until we really get inflation under control. and that means, frankly, risking the possibility of, as chairman powell said, some pain and so i think the trade-off has really got to be making sure that inflation is under control. that is job number one, number two and number three and if what that means is slowing and potentially dipping into a short, shallow recession, i think the fed is willing to do that, because this inflation is really unacceptable and far out

of the 2% range, obviously >> now there are questions about credibility, roger today the longer term inflation expectations are starting to break out, raising the question of whether inflation expectations are becoming unanchored can you explain why that's such a big deal to the central bankers and their credibility. >> the whole issue is incredibly important because then it becomes easier to build in one of these spirals you hear people talking about a wage, price spiral wages go up, prices go up. there's a wage, wage spiral. people leave one job to get more wages someplace else and then the former employer is forced to raise wages. so i think this question of inflation expectations is central to their thinking. we know that inflation is too high we see it starting to broaden across many categories, as you talk about we see it picking up and remaining high in the core

inflation, taking out food and energy the last thing they want is to start to see inflation expectations become unanchored because then households, businesses expect there to be an increase in prices consistently and that becomes something that's very, very difficult to deal with. so that's why i went back to three 50s, maybe a 75. and to your point they want to avoid stagflation but absolutely want to avoid inflation picking up if that means a short, shallow recession, that may be the kind of pain that we may be in for. >> why do you say short, shallow? how do we know we got a peak in the michigan consumer confidence numbers. clearly this inflationary shock is having an impact on consumers and now we're going to have a rate shock on top of that. >> well, you're right to call me on the question of short, shallow. that may be a bit more of a hope than a prediction. one can hope that that may be the outcome.

and so we'll wait and see what happens in that regard but as you point out, it's very hard and i point out in the past very hard to achieve a soft landing. now it looks as though inflation is continuing to mount and so i think they are going to have to tap the brakes harder than they expected and obviously the risks around that are pretty clear to everybody and that is playing into the point that you made, consumers may be starting to feel noticeably less optimistic o i did a survey of ceos a little while ago and 60% of them expected there to be some sort of recession, hopefully soft, short and shallow. and so that's a real possibility out there. and the fact that it may be a little harder at this stage i think is anyone's guess. >> obviously there are political ramifications of this as well, not just for the federal reserve and not just for investors but for president biden, who has said he's making it his number one priority why wouldn't the biden

administration -- why do you think they wouldn't want to take off the china tariffs? do you think that would have a material impact on inflation we'll talk about that later on a retail segment, but howard schultz broke it up yesterday, ceo of starbucks what economic impact would that have >> i think it is only marginal i think in many ways it's a bit more symbolic than real. i think you heard today from brian deese at the white house that the main thing the white house wants to do is give the fed room to take it's necessary actions. at this stage it's primarily monetary policy. anything that the administration can do might be marginally helpful, certainly would signal sb interest, but i wouldn't argue that's the main thrust in terms of getting inflation under control. that is primarily at this stage in the hands of the federal open market committee and the federal reserve more broadly. >> well, and president putin, unfortunately, given what's

going on with energy and food prices roger, thank you roger ferguson. >> thank you let's give you a check on the markets right now, down a little less than 700 points here on the dow again, we were down more than 850 at the low, but still a pretty ugly day. this is in reaction to that inflation report it was really a 1, 2 punch with weaker consumer confidence as well look at the nasdaq, it's down 3% microsoft, apple, amazon, nvidia, meta, adobe, all lower really the only thing doing well are the chinese internet names and some of the staples like pepsi and kraft heinz inside the nasdaq we'll talk more about it when we are joined by the barclay's economist who says he expects a 75-point basis hike next week. that would be a surprise check out some of today's top search tickers 10-year treasury taking the top spot no surprise yields are higher.

we're at 3.15, as high as 3.17 i think 3.20 is the high of the year but we're near that the s&p, broad markets and the disaster that is docusign after earnings, down 25% and the nasdaq down 3. we'll be right back. flexshares etfs are built with advanced modeling.

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give you a check on retail, which is mostly lower, walmart is bucking the trending and is higher along with some of the consumer staples today's inflation report shows prices are surging for consumers across the board from food to apparel. joining us now, national retail federation president and ceo it's good to see you inflation and apparel, i just checked that, was high, more than 5%. i think a little deflation maybe in men's pants for some reason do you expect this number to come down given what we've heard from some of the retailers reporting earnings this period >> well, sara, i think a couple of things are going on

input costs are going up, transportation, logistics costs are going up we've seen some retailers talking about how quickly consumers are pivoting into new behaviors, and so i think there's still a lot of churn and change going on out there in terms of consumer buying habits that might take a quarter or two to settle out. but overall, i think many of them still see a healthy consumer it's just a question of getting the goods right. the inventory issue is actually better than a lot of people think. if we go back to 2019, the inventory-to-sales ratio was about 1.50 in inventory for every dollar of sales. as we sit here today in the face of this unprecedented demand, we've got about $1.15 in inventory for every dollar of sales. while we do have more inventory, we've got much greater sales and that accounts for what we're seeing in the supply chain we're seeing at ports, we're

seeing across the economy. >> the question, matt, is what happens to sales and that healthy consumer that you describe when you have food at home up almost 12% from last year and energy prices we know up more than 35% from last year. that is a double tax on the consumer >> it absolutely is, sara, and that's one of the reasons we have been for months talking with the administration and congressional elected leaders, encouraging them to be as good as their word and that is if we're going to take an across-the-board approach to trying to reduce inflation,we should really mean it and we should do everything we can. one of the easy things we can do that doesn't require congressional action, doesn't require sort of the longer tale of fed action, the administration could eliminate the tariffs on all imported goods from china that's $300 billion worth of goods. a number of estimates indicate

that's up to $1200 a year per family >> he said it was symbolic that it's not that meaningful. >> well, he said it won't show up tomorrow but it's a good signal for the market. evening it demonstrates to the market that the administration really means it when they say they're going to do everything and so this is -- >> but it also demonstrates -- sorry to cut you off but it also demonstrates that we are willing to, you know, be friendly toward china in a not-so-friendly trading environment. >> well, i think there are ways you can manage the china relationship that don't require you to inflict pain on american consum is a tax on consumers, plain and sicmple it always was. if there aren't meaningful results from the tariffs, which are punitive on american consumers, we ought to try other strategies let's work with nations across the country, let's have a really meaningful replacement for the

transpacific partnership, whatever that might be i think there are a lot of things happening out there if we're really committed to fighting inflation, we think that this ought to be at the top of the list in terms of eliminating the tariffs, and then do the ocean shipping reform act, which we support and the president spoke about earlier. that is very important we support that. keep working with supply chain stakeholders all of those matter and we should pursue all of them simultaneously. >> the white house hasn't really ruled it out i'm trying to read some of the communications we've got it sounds like they're they thinking about it and talking about it but no word if that's the direction we're going on the china tariffs. is that what you hear as well? >> i don't think they have confirmed one way or another it's clear there's a lot of talk inside the administration among many of the senior leadership, different agencies and departments. we've got other retail leaders coming to washington next week we're going to meet with secretary yellen, we're going to meet with our friend jason furman among others, some

congressional leaders. we'll be talking china policy with some members of the administration so they haven't given us a guarantee, they haven't given anyone a guarantee of anything one way or another, but they're signaling, i think, that they're giving it consideration and we ought to consider that a positive sign and we optimistic. >> matt, a lot of this has to do with the supply chain. one thing i think that we should point out in today's report is it did include potentially the impact of china being locked down and some of those ports being disrupted and some of the factories having to be shut down what are you getting on the supply chain china is reopening covid is still with us but it feels like the world is dealing with it a little bit better. we've got vaccines, we've got treatment. so is that crunch easing in any material way that would impact some of these prices that we're seeing at retailers? >> sara, i think there is reason to think positively about the future in that regard.

certainly retailers learned dramatically over the course of the last two years and the massive disruptions they experienced to their supply chain with their sourcing partners how to work more efficiently to move more quickly, to anticipate and plan more effectively we saw that. so i think all of that experience goes into thinking about the future we'll see that we also know american consumers are resilient. they shop around there's enormous amount of transparency in the marketplace. there are some excess goods in some categories we've heard some retailers talking about, maybe not food and energy. so there are opportunities for consumers, although not as many as we need at the moment so i think we should be optimistic about some of those things i was actually in seattle the last couple of days at the global department store summit with several hundred ceos of retail companies around the world. eric and pete nordstrom hosted it it was a fabulous meeting. there is optimism recognizing

there are great challenges but they thinking about partnerships with new members, new partners, relationships working with consumers, applying everything that's been learned over the last two years to the uncertainty of the future and still finding ways to deliver value, serve customers, create jobs and be successful. >> that's good color matt, thank you very much for joining us. >> thanks, sara, nice to see you. >> president of the national retail federation. what is wall street buzzing about besides inflation? the biden administration finally lifting its covid testing requirements for international travel makes traveling abroad a lot easier the testing rule was initially put in place by the trump administration back in 2021 and tightened by biden's white house in december. it will expire on sunday travel executives have been pushing hard to scrap the mandate. this week the ceos of marriott, hilton and ihg explained why it matters so much. listen >> if we got rid of the testing requirement, i think you'd bring a lot more international travelers in those travelers not only come here, but they spend a lot of

money. they spend more than domestic travelers. >> for folks that maybe are not particularly experienced international travelers, it's one more thing that gives them pause. >> travel stocks not really getting a lift from the news today, actually underperforming in the sell-off. to tie it back to the inflation, airfare prices are up 20%. we'll see if demand pushes the fares even higher. it does eliminate the burden to think about that you could get stuck abroad when it comes to booking international travel. take a look at technology. steve is here to look at the mega caps which are dragging down tech. steve. >> bad day for big tech. let's start with apple down about 3% today they came off their wwdc developers conference on monday and bad news out of the uk today saying that their app store policies around cloud gaming services are anti-competitive so

that's something to watch too. meta down also 3%. some bad news coming out of there this week that they're putting some of their hardware plans on ice, these augmented reality glasses that they're planning to release in the next couple years, that got delayed and a smart watch delayed as well alphabet is down about 2%, faring the best of the group let's move over to microsoft, which had that big gaming announcement yesterday off 3%. and as always, amazon is the laggard of the group we've seen this all year and all last year even it's down a whopping 5%, sara. >> steve, thank you. how much damage, mike, has been done to some of these mega cap tech names already >> a lot of damage and they're responsible for most of the aggregate downside but you look at microsoft or apple, they're down mid-20s percent from their high. the overall nasdaq composite is down 30% from its high coming into today, the average nasdaq composite stock had been down 50% from a 52-week high

in other words, some of the big guys have held up better than the rest but the nasdaq continues to modestly perform. it still is up a couple of percent. interestingly on the s&p 500, the intraday low today, 3900.6 the closing low from may 20th, three weeks ago, basically 3900. so it's basically revisited the closing low. we're up three-quarters of a percent from there, just a little relieving of the pressure as the day has gone on bond markets have closed but the damage there has been done as well where you have treasury yields pushing their highs for this sell-off. the 10-year now at thr3 sp.16. also seeing oil, it's not really in the epicenter of what's happening today, but down almost 1% so some of the demand concerns and some of the growth worries are sort of evident along with

the inflation fears, sara. >> mike, thank you for running us through some of the charts. for more on today's sell-off let's bring in rebecca patterson from bridgewater associates. rebecca, you guys at bridgewater have been expecting inflation to remain stubbornly high i'm not sure if you expected it to increase from the levels that we were at what was your reaction today >> well, this is largely what we expected not necessarily each wiggle each month, but looking for inflation in the united states to be higher for longer significantly more than what the fed is forecasting and the market is discounting. that comes back to a few pieces of inflation the labor market is the big one. we see 60% of u.s. companies saying they can't find qualified workers. so if they want to get the workers they need, that puts upward pressure on wages as the service sector benefits from reopening, those higher wages are going to be even more in play, so that's sticky in our view

housing, we're seeing housing demand starting to cool a little bit with higher mortgage rates, but house prices and particularly rents are still biased higher because we just don't have the supply and they can get that and the consumer can still handle it because of balance sheets so that's sticky the last to watch is commodity prices you noted oil down a little bit today. when we take a broader look at supply and demand for a lot of commodities, we see a bias higher for prices there and not seeing that fix any time soon. so we're still in the camp that inflation is going to be a problem for the fed and that means you either need to have inflation-sensitive assets in your portfolio or position for more fed tightening, which is quickly getting priced in. >> yeah, so on oil let's take that one because gas prices hit a new record of just below $5 a barrel nationwide, highest ever. we're seeing the seventh week in a row of gains what happens to the consumer in

this environment and are you positioning for recession? >> one thing that's really different about the environment we're in today is the gap between nominal and real in the economy. you know, sara, you're younger than me but we both grew up where real and nominal were basically the same thing because inflation was so low today there's a huge gap between the real economy and nominal economy and that difference is inflation. so when we look ahead, nominal demand is still relatively strong we see that coming through equity earnings. but the real economy is starting to get hit from this inflation, the erosion of purchasing power, especially in those lower income households when we put that together, we think that even with the nominal strength, we'll see the real economy likely go into a contraction in 2023. the question is just going to be how deep we actually think in this environment the bigger risk is to financial assets more than the real economy >> so how deep and what to do with your stock portfolio in

this environment i will note that staples are outperforming today, up a third of 1%. utilities just popped into the green as well so there's clearly some slowdown pricing in here. >> so a lot of it will come down to the fed and if they decide to continue lagging economic conditions or they decide to get more aggressive. it's really a difficult decision for them if you're more aggressive, the greater the risk you trigger a recession. if you lag conditions, inflation stays higher than you like and you risk your inflation-fighting credibility so they can't win. our view is that they're more likely to lag economic conditions and so inflation will stay somewhat higher and stickier and that would suggest a recession that isn't particularly deep. that said, it doesn't mean equities are unscathed we estimate 40% of the u.s. equity market is highly sensitive to liquidity conditions as the fed does tighten and we start to see that balance sheet roll-off, we think stocks will continue to be at risk if the equity -- pardon me, the

economy, excuse me, continues to moderate, then the next leg lower forric ric wilts would bee ever earnings and cash flow expectations that would be the next leg to watch. >> so is there any part of the stock market that you guys like now? >> well, we're actually seeing better opportunities in equities overseas than in the united states we are modestly short u.s. equities we're roughly neutral equities overall. we have been looking at economies where valuations are less demanding, where policy makers have more room to help if needed, where inflation isn't as aggressive for policy makers, and so places like japan and i'm going to say it, china to us look more attractive from an equity point of view relative to the united states right now. >> i will also note gold is up 4%, rebecca. how much of your portfolio

should you have in gold right now? does that make sense >> we have a modest gold position we want a diversified basket to help our portfolio in this world where inflation is a bigger driver of markets relative to growth and gold, i think, is a good piece of that gold tends to lag cyclical commodities when you have rising real interest rates append we've seep seen that play out this year if the fed lags conditions and inflation is higher, if the dollar starts to come under threat, i think gold could perform much more strongly so it is something we want in the portfolio as part of a diversified commodity basket. >> definitely credibility questions and higher inflation expectations, though you are seeing a stronger dollar today i'll say gold up 4%, that's the gold stocks, gold the commodity up 1 spo.5%.

we're going into the market zone mike santoli here to break down the crucial moments of the trading day. frank holland with us on docusign's big plunge and barclay's jonathan miller on why he is expecting a 75 basis point hike from the fed. kr cpi data showed hotter than expected inflation and the markets have clearly adjusted to this on top of what has already been a pretty difficult period how long do you expect this move to last us is this the new regime we're in for coming weeks and months? >> it's very tough to say, sara, because i don't think -- first of all, this is may data we knew more or less how this was going to look, we just didn't get lucky with it i think it's three months out of 24 that economists have been high enough in their estimate of cpi inflation so clearly the market is trying to catch up to what the prices have already

done obviously the fed is in a similar spot right now and have we now finally gotten to a point where the fed path is reasonably priced it's tough to have confidence in that because you're not going to know for multiple months before you have a downtrend that all being the case, i do say investors have remained fairly defensive there's not been a lot of folks saying this is absolutely a bottom right here or three weeks ago. that's a very small net positive or at least not a negative, but it's tough to actually hang your hat on just the fact that people are worried, they're scared and they recognize the challenges. >> we are seeing some pockets of strength to your point the market is lower but docusign is hit harder after weaker than expected earnings and outlooks pretty much in line with expectations they are showing disappointing billings growth guidance that was a topic the ceo

discussed this morning on tech check. listen >> we had that incredible acceleration that occurred from the pandemic where we doubled our rate of growth and we really doubled the size of the company in about 18, 20 months and so now as we see that there was so much demand that our customers -- they're saying we still love docusign, they're not leaving us they're just saying i've got a lot of docusign, we have to manage through that adjustment >> frank holland joins us. frank. the pull forward from the pandemic, companies like this are just struggling to adjust to what is the new normal were they just way too optimistic >> that is the only thing that you can say. on the call last night dan springer said assume and another was unreasonable expectations. he admitted the company thought its pre-pandemic growth would

continue after the pandemic. initially last quarter they got it for about 14% billings growth for the full year. now they dropped that down to 6% and springer on the call and in tech check, he said they didn't account for that pull forward effect of sales that so many companies are adjusting to, including target this week they're trying to figure out how to deal with that pull forward effect springer said their customers flat-out told docusign we're not growing at the pace we were during the pandemic so we're not going to spend at the pace we were during the pandemic we're going to spend less with you. another is macro factors he hit on them generally the company said they don't see a material impact coming to a stronger dollar but definitely seeing a material impact when it comes to rising rates. if you look at the impact of the 10-year yield on all cloud stocks, you see the relationship there. then you have to look at what analysts are saying about this stock. dan ives from wedbush called it

a debacle that speaks to darker growth days ahead. b of a said macro issues only add to execution issues. evercore saying a high turnover in the sales team is also an issue that will lead to more problems with willing. so a lot of issues with docusign and a lot of questions about the growth of what is supposed to be a growth stock. >> going back to levels that were basically where they were at the beginning of the pandemic frank, thank you down 80% from the highs of docusign it's not just a multiple correction on this one, it's is the growth story over. fundamental rethink of whether they can go. >> we're looking at low double digits sales and earnings growth for the next fessiscal year one of my rules for any software tool or application is the upside case can ultimately become something boring and invisible and it's just a utility and it's just there and grows gdp plus something that's where we are.

that's fine. docusign is still 35 times their earnings estimates that are out there for low double digit grower so that's why it's tough to make the numbers work it doesn't mean that it has to collapse from here, but it suggests that there's a reality check that's gone on repeatedly across software. >> docusign, mike, not the only former pandemic winner getting hit today. we're watching netflix, ebay, roblox, they're all plunging after being downgraded to sell from goldman sachs it is increased focus on profitability and much lower investor tolerance of longer term investments given the uncertain macro environment. goldman saying amazon is its top pick, although that stock is down 5.5% today. i feel like it's a little late for this sort of strategy advice that's what's been working all year maybe with this renewed focus on higher inflation and even higher interest rates, that's still the move go to profitable, cash flow

positive companies that aren't investing big in the long term >> yeah, it seems like it's kind of marking the analysts call to market in a sense. you've seen the valuation compression. if you want to say macro pressures are going to have a bigger effect on consumers' willingness to pay up for the premium subscriptions on netflix, maybe so. i don't know how hard it is to model that out netflix is interesting the street kind of hates it now because it's really badly disappointed a couple of quarters in a row right now. and it looks like a routinely kind of market valuation basically. it's fairly valued along with the market as opposed to having that premium it just seems like it has no real catalyst out there to change the story right there there are a number of winners today. cardinal health, hershey and kellogg, cme group is higher.

if we go into stagflationary or inflationary, what might work for people >> i see it as a fairly textbook buy the predictable, reliable and defensive. that's not something that tells me that's going to be the rule from here on out but it is what happens when you have the combination of yields going up and people all of a sudden starting to worry about whether the fed will have to choke off growth more than they would otherwise. parts of health care have actually been sort of stealthil starting to take the lead. >> molina health care higher, cvs is higher in today's trade some of the energy plays still doing really well. hess is higher again, continues its march up big call from barclay's today on the fed given those hot inflation numbers. now expecting a 75 basis point hike at next week's fed meeting. joining us is the economist

behind that call, jonathan miller i guess it surprised everyone and will surprise the fed to get such a hot number, but as roger ferguson told us earlier, market expectations, they don't necessarily want a shock that's not where the market is and not what they have been laying the groundwork for. >> right i think this is one of those circumstances that actually may require the fed to surprise the markets. what we saw in the data today was just a very broad-based increase in cpi. wasn't pmuch in the way of silve linings. there's not much sign that we hit a peak in terms of inflation. perhaps more concerning today, the michigan survey data showing an increase in longer term inflation expectations which has to have the fed worry about their own credibility. so it does seem to us that they're going to prioritize having to get in front of this and to try and reinforce their credibility with an aggressive move up here. >> so you've laid out the case of why they should do that but do you actually think they will do that, knowing this fed

and knowing how careful that fed powell is to telegraph the moves and prepare the market, doesn't it seem likely they will hike 50 and lay the groundwork for 75 or perhaps leave that open? >> we think that 75 is likely either in this meeting or in the july meeting, but we think that the argument for doing it now is stronger it has the biggest bang for the buck in terms of the effect on the yield curve and also sends the strongest message that the fed is very serious about reinforcing inflationary pressures. but you're right, the fed is always reluck anxiety in a hiking cycle to surprise the market this is one of those circumstances that calls for an aggressive action that does surprise the market. >> either way, we'll have the hawkish rhetoric come back up. expect bullard and others to say we have to do more than even

examined wh expected. what's the impact on the economy? >> it seems that the economy is holding up fairly well this is something the fed may have to live with. they're going to create a much bigger problem for themselves if they're not aggressive, because if inflation expectations start slipping, their job is much, much harder and they'll find themselves falling farther and farther behind the curve it does seem to us that they want to position themselves to address inflationary pressures if they prove to be more prolonged. the best way to do that is to get out in front of things and move policy -- the policy stance further towards neutral. then they can react from that, depending on how inflation developments go. >> mike, what would all this mean for the stock market if we get a 75 basis point hike next week or talk of it at the next meeting? >> i think it leaves the stock market in the place it just about is already it's interesting the market seems impatient about all this and investors are impatient and they feel like

they would love it if you could just get it over with. wherever we're going to go, let's just get there i'm not sure the fed thinks about it that way. they also i think relish their ability to use forward guidance to get what they want into the market look over the last six months, the 2-year yield it seems like they would like to march us through this. mortgage rates at 5.85 for 30-year fixed. so maybe 75 somewhere in the next couple makes sense. i just don't know if they want to do it next week when they could do it six weeks later. >> got it. jonathan, thank you for joining us with that call today. a lot of people on wall street talking about it from barclay's. stocks are in sell-off mode. the dow is down 777 points right now, s&p and nasdaq also on track for their worst performance now since january and just continuing a very long losing streak.

joining us is eric freedman. eric, what are you guys doing with stocks right now? >> sara, we've been in more cautious defensive mode. we think the areas you want to be in are utilities, infrastructure and energy. generally boring parts of the market but boring is pretty good right now. our viewpoint has been to emphasize infrastructure real assets also we've been warming up to short duration fixed income. it's more of a safe haven as opposed to a place to make a lot of capital so we think the buys for the fed will be tightening and better returns in the equity market is still a couple of months out so we're in defensive mode rather than aggressive mode at current levels. >> couple of months out. talk to me about that, eric. how will you know when you want to start buying again for your clients? >> yeah, i think a couple things number one, this does boil down to the fed and their forward guidance everyone is talking about it but again, your prior guest

mentioned it the fed goes to 75 basis points, there's a repricing that has to happen as a result of interest rates. when interest rates go up, they have to reprice. the second repricing is if we start to see consumers weakening. that's the swing part that we think will be really important we did see evidence that there has been a decline in savings, so it does appear that consumers may be getting a little stretched. if the fed realizes that some of their tightening techniques were providing a greater headwind than they want, that could be the time that we get aggressive. we think for the next couple of meetings this will be a trial balloon from the fed and investors don't have to be in a rush to add risk to their portfolio. watch consumer data and reactions from the fed we think that's a multi-week story. >> down 2.7% on the s&p. you say you like real assets are you talking about stocks of energy and infrastructure plays? >> yeah. i think for equity investors and

certainly that's a big part of your viewership, utilities, infrastructure, as well as energy, even though energy feels stretched, we just think that gap between drillers, there's just not a lot of people looking for oil for lots of different reasons. we think that equity relative we'd still be involved in those sectors in particular. we do think, and again this sounds a bit boring but even things like short duration municipal bonds, those have gotten crushed those start to look more attractive so we would encourage people while stocks are very familiar, this is a time to be more in touch with a global macro environment. there are things beyond stocks that you can own so those are a couple of things we're focussed on right now. >> eric freedman, thank you for joining us we've got less that two minutes to go. down more than 800 mike, what do you see in the internals? >> it's pretty lopsided to thethe downside, about 85% is in declining stocks not quite to 90 but that's a

pretty good washout. take a look at the banks relative to the transports they're basically tracking one another showing you that the slowdown story, the pinch of energy prices and maybe some erosion of credit and risk to the economic outlook, they're getting priced in. not saying it's all the way there but both of those groups are underperforming the broader tape the volatility index has perked up it's under 28. arguably it's been underreacting, but we are in summer and this has been a relatively slow bleed in the market so it's not necessarily causing that quick short-term panic and we're going to be in july, the 30-day window that the vix covers. >> we're down 830 points on the dow. pretty fierce reaction to that inflation surprise this morning coming in even hotter than expected the nasdaq is down 3.4%. down 5.5% for the week for the dow, s&p and nasdaq, we are tracking for our worst week since back in january and just adding to the string of declines we've seen nine out of the last

ten for the s&p and the nasdaq we do have some pockets of strength in some of the more defensive staple type names like walmart, for instance, but overall it is a sea of red with the s&p going out today with a decline of about 3%. that's going to do it for me on "closing bell. have a great weekend, everyone now into "overtime" with scott wapner welcome to "overtime," everybody, on this nasty friday afternoon. i'm scott wapner you just heard the bells we are just getting started. in just a little bit, i will speak to bitcoin big shot anthony pompliano on whether claims that the cryptocurrency are some of the best inflation hedges are just plain wrong. we begin with our talk of the tape, whether the great bear bounce-back is dead and stocks are heading back to the lows our first guest has consistently made the case that inflation had