of the animals >> vegas is great at reinventing itself it keeps doing that to stay ahead of market demand it gives the customers what they want. speaking of the market, let's look at where they are down about a percent for the dow and 3 quarterers of a percent for the s&p and nasdaq we'll have more. thanks for watching "power lu lunch". welcome to "closing bell." i'm mike santoli in for scott wapner, this make or break hour begins with stocks falling and bonds hiking we look at some hawkish fed speak. here's your score kord with 60 minutes left to go down just about 1% the s&p 500 has almost halved its maximum drop for the day it's down almost 0.75%

a little bit of traction in the nasdaq the 2-year treasury yield did hit a 16-year high, although the yield has moderated throughout the day. down to 5% that all brings us to our talk of the table and whether tomorrow's jobs reports will seal the fate for more fed rate headache this year let's ask tony pass carell low of goldman sachs it's coming with better economic numbers, and i guess the better story is the economy has held up better than expected a lot of pessimism has burned off as stocks went higher. where does that leave snus you nailed it. it think it introduces this question into the market, can stocks maintain almost this

immunity we've enjoyed the year from last year to higher interest rates i think it's mostly come from a good place strong data. we're contemplating might the fed sneak in 25 basis points here or there. very different including 75 basis points i think i have an interesting reveal nop probable tech stocks down 4% there's this question of what's long duration, what is not i think we would argue the very top of the index is not long duration making money today, making margins today. >> the very top mega cap growth stocks that have been relatively bullet-proof, it seems it's the rhie lim roughly underneath.

does it feel like it's a tenuous situation or it's a pullback and we had a good run? >> if we go back two months t yield is up 100 basis points since then that's the correlation shift if we look at u.s. bank tech companies, it's the story we know, the best balance sheets in the world. returning that flee cash flow and you introduce the retail in the form of ai so we're going to learn a lot. when the nasdaq freight trains are running full steam ahead, you don't want to step in front of them too early. >> no, exactly you never want to say this is an underappreciated part of the market or people don't get all what you laid out there. except a lot of these stocks aren't back to where they were a

year and a half ago. it's not as expensive as it was a year and a half ago on earnings i guess you have to look at it from both sides. i wonder how it feels, the investor's posture, because you were able to say for much of the year, the skeptic was underinvested. has that been normalized at this point? >> it has. so if we were having this conversation say two months ago, the trading community have had low levels of exposure i think people have more skin in the game today we can see that with our brokerage data, we can see it on the options market we can see that in sent meant measures the retail army is a little more engaged today versus where they were our basket of meme stocks is up 60% on the year. if i were to try to put goalposts on it, say a downten

to upten scale, at the peak of the market in 2021, that was a plus tag coming into dwleer after a long year last year, i would encourage plus five. >> so somewhere between halfway above neutral and way over our skis how do things look in terms of does this market crave more confirmation if the economy's strong as long as this inflation is still in place or are we going to be sensitive to every wiggle and yields? >> there's a level of turbulence again, you felt a pinch in the market you hadn't felt in a long time i still think in the end the biggest story of the year and part of the rehn that's why it starts and ends with the labor market.

that's been a bulwark for stocks all year i think in the end if you ask the market, would you prefer a stronger labor market or weaker labor market, it shows it's hand. >> does it feel to you in terms of the way clients are thinking about things that the soft landing scenario or, look, there's a recession somewhere out there, but we don't have to worry about it yet, that position has been fully em blaised. >> if we use the interest rate as a signal and push it out, we take it back we've taken all the applied cuts for the first half of next year. the fed market is not doing anything until the middle of next year. i think the equity markets mirror that as well. >> means that's where the

economic downturn risk sits. >> that's correct. >> and in terms of seasonal, only friendly for a couple of weeks. i'm wondering if we're at a point -- i wonder if we're going to have to work off a little bit of what we built up in the first half. >> it's been a year where have little has gone as expected. i don't know that many people expected it to be off to its best record. part of that has been thanks to the labor market and part of it to the top of the record if we look at the conversation for economic growth, valuation, and money flow, i think the market's taken a lot of credit for the good news we've had. could we have a period of consolidation, that would be the customary pattern, and i think that sits with the way we're looking at things. >> appreciate the time. let's head over to steve

liesman. >> it was a double take number for me we had a strong jobs, service sector data along with the street rethinking the outlook for rate hikes, pushing things down this is the private sector you see the estimate was 220 it came in more than double. who knows what the numb berry's going to be, but a strong jobs report looks to be on tap. jobless claims were higher, but not much increase so far in the continuing claims number, remaining under 1.8. that suggests those who lose work and apply for claims are pretty quickly finding work again. and the employment index showing growth as well is that the 240 number, could it be on the weak side and should

the market be thinking like the fed does about two more like this year? they're thinking more about it today. 89%. then in september that number is probably 10 points higher. they're thinking hard whether or not the fed comes in with a fed rate hike this year. lawyer are logan made hawkish rem remarks. we're going to have austan g goolsbee on torms and we'll put all the questions to him >> the market says, we can breathe easier they don't seem to be targeting some big jump in unemployment to

get the job done does this change with the run of hot numbers? we got the j.o.l.t.s. data you can read that in either direction. but what are the stakes in terms of causing a rethink for the whole path for the fed >> we had a discussion on the 230 cnbc news call about what the goldilocks number is let me lay out goldie longs. you have a check or two on the unemployment rate. the workweek might be lengthening out. that would be fine i think, mike, and you tell me if i'm wrong about this. the market is more or less okay with two more hikes. i think that's the upper end of tolerance. it's when you start talking about the possibility of a third hike or fourth hike, getting into the 6s. that's where the market might be concerned. the 5% yield on the 2-year is a

chac you can earn 5% with little risk that's been an increasing challenge to it. the other size is if we hit the 400 number, a big bust in wages. i like the question. strong jobs is not enough to concern the fed. it has no metric or measure. it wants inflation to come down. it believes a weaker or a less tight job market is a means to that end, but in itself it is not the end. watch for the impact on inflation, not at the level itself. >> yeah. i think that's the correct read. the market is probably okay at this point with two more strike

so maybe that's possible let's bring in our next guests to talk more about this. how would you feel about the way the market is hedged, on the one hand looking to pull back on the excuse of almost anything. on the other, the yields have gotten into the zone for the last couple of years. >> thanks for having me. we talked about this a couple of times. the yields are going higher. you know, expectations are for a continued slowdown

that combination doesn't typically push markets hire. we expect a little bit of a pullback especially as we move into earnings season. >> peter, that's certainly very true that that combination is not typically what would be a bullish market for stocks. i know you've been looking for the economy to weaken. i know china may be saying, okay, we might be heating up again. what's your read >> i think the june numbers were strong the adp print if it was not revised were obviously strong. i do think the trend, though, has been for weaker. pmi has been weakened. initial claims which bottomed out around $1850,000, hit about 265, they were a little bit stronger this morning.

they get carried away. at the end of the day, i think this long and variable lag that even jerome powell said will eventually manifest. we had an unprecedented stimulus coming into this the faults are rising, mike, especially in weaker middle market companies we can see all the telltale signs and never have we not had a recession with a yield koouv this involved and some water >> does that mean it's a huge

buy-up >> we might be seeing that the instance in which it would not be is if the fed, quote, unquote loses control. we don't think that's going to be the case, but, yes, over the next six months or so there will be a point in tomb when becoming bullish in the long end will make sense >> on a practical level, what areas of the market would you feel comfortable with in terms of fresh money, putting it in there? what to you looks like an attractive combination >> sure. we like the fixed income as well, but if you want to is stick to the equity markets, health care hasn't done as well this krien we think itoff offs. and the differential between

small cap valuations and wide cap valuations has widened into an area where small caps could be attractive going forward. they're much more sensitive. but we thinkover the long term things will come back to some sort of outperformance relative to large caps. >> peter, you mentioned defaults have been ticking higher in some of the more distressed areas, in the corporate borrowing area i guess you would look at the bench markets and sacred it firms have been firm is there an explanation for that is oar is it a matter of time has to work its way through? >> yeah, look. we've been a little bit, you know, off on the timing. this has taken kind of three to six months longer than i thought it would but there's always that lull where spreads widen and it stabilized

you talk about 800 to a thousand basis points that's pretty typical. i'm not saying that's atip cat it's many much longer period they're not spread in high yield, but they're not quite wide i would the capitulation come to around 40. that's -- again, that's not atypical it ice taken a little longer because of the unprecedented stimulus that has solidified both consumer and corporate balance sheets. >> if you're a little bit cautious about exactly what the markets are offers you right tee the here

>> do you think the fed has goon too far with the rate hikes or do they have to keep cinching tighter while the inflation remains here >> i think they have to keep inching a little more. fighting inflation is the number one goal as wages continue to equate to the inflation picture, they're going to have to continue to raise rates. >> they seem on course to do that good to speak with you. let's get to our twister question of the day. we want to know what do investors want to see in tomorrow's payroll numbers do you want them the markets head back to cnbc.com to vote. we'll show the results later in the house.

>> up next why one of the worst perform forming will make the case and andy jassy on exclusively overfile the dow down 354 you're watching "closing bell" on cnbc. >> announcer: this cnbc program sponsored by truist wealth where meaningful relationships matter most ( ♪♪ ) ( ♪♪ ) ( sfx: people celebrating ) ( ♪♪ ) ( sfx: people celebrating ) ( sfx: stock exchange bell ringing )

let's get a check on some top stocks kristina partsinevelos has more. >> the stocks are plunging almost 4% from piper sandler it's about a little better about 12.5%. what the analysts are saying is the loans continue to grow and they're pressured by higher interest rates it's 11 bucks a share, which is lower than the trading price green goddess, that's my go-to sweetgreen salad shares are jumping right now, not because i like the salad, but they're the stock to buy, setting growing foot traffic the analyst says it could help with margins keep in mind it opens up its first location in illinois. meta shares meantime pulling

back slightly following the launch of its new twitter rival threads. it's already racked up over 37,000 here to explain what it means is alex not every day you get a big entrance in this area. what is meta after in terms of the size and the revenue this is not necessarily a make or break business opportunity, but what is it doing >> there's always hesitance to go after the twitter space because it seems so small. twitter's best year was 2021 meta made over $100 billion last year le with relatively little extra work, they could end up making a

good deal of money because the thing with twitter, it always struggled to monetize. meta's making about four times the user >> suppose if they can -- if there's nothing about the text-based sharing of news and views, which is what twitter is, which limits the potential is it the structure and format of a twitter-like product or twitter didn't do it right >> i think you take a little ding when you're in the news business i'd much rather be around shopping i think advertisers want to be

on a sight where they know it works. if they can take this system, you can see advertisers go there. >> do you think a billion users is actually insight as zuckerberg has floated >> i don't think that's going to happen one of the interesting thing i'm seeming with threat. what that means there's no flofr flofrs you just signal. they're transitioning the act go rijt they're making it work right the toughest thing with twitter was building the holograph

>> from a broader perspective, i wonder tick tock took a big audience. it takes attention so what you're sighing right now. >> what does it mean for advertisers or overall >> good point. right now metais locked in the bans for its life. that means the introduction of reels and putting it prominently in products like instagram you have twitter, notes from su

stac what was nice is if news was breaking and something was ha happening, it was there. there are five or six and all use you tigges >> you don't necessarily want to be serving in really team. thanks for breaking it down. up next, jonathan krinsky breaking up the big charts he's line in. it's knocked out 40% this year ayear he'll join us. "closing bell" straight ahead.

our next guest is seeing a turn in the charts saying real estate could be set to outperform joinings u now is jonathan krinsky. obviously we have yields going up the well-understood challenges down the road. what do you see technically that gives you a sense maybe there's a trend change here. >> as you mentioned, a worst performing sector in not just the last 12, but last 18 months. really poor. sentiment equally as poor in the space. i think it's important to remember, first of all, how much sentiment matters. when you go back, where was sentiment? i think sentiment's the first backdrop, but the second backdrop is, you know t slowly but surely turning of the trend. we're starting to break that 18-month downtrend in the reit index. the 200-day is starting to

flatten out. things are starting to improve a little bit some of the names are also extremely short interest, in some cases 20rks%, 30% of the float. it doesn't take much to turn those names when you get any little bit of positive news. you know, the last point is, you know, you mentioned the problems in commercial real estate are well known, but parts of the reit market, apartments, for instance, are actually doing well i think the new higher mortgage rates may be pushing people again. avalon bay is up 1% today. >> good point. obviously not a model-thick sector do you feel it pays to look for a chance to play laggards torsion kind of look for catch-up opportunities or is this an isolated opportunity? >> i think to some extent, our call has been looking for a bit of a meaner version.

i think we can continue to expect the downside version. i think it's been well doumited that the nasdaq has not had a down july since 2007. i don't think you want to go dumpster diechbing, but sentiments are washed out, positions are washed out and they have a bit of a characteristic at times. they also can act as a defensive sector, so we kind of like that here. >> sure. more specifically on today's action with pretty comprehensive downside flush in the morning, it's kind of got some traction along the way. what's your read on how the

markets behave today and how it fits into the general feel position >> last time i checks, we were 90%. definitely a day to take note where we bounced them off the morning lows obviously interest rates are a factor the psychological levels you mentioned, the 2-year by 57 10-year by 4%. they feel a little bit different, but to break that mentality, it would take a little more than the one-day shot >> for sure. certainly a few percent down from here. i know you've been working on this thought that this year is

stacking up as being almost the inverse to 2022 in terms of market cadence, some of the seasonal stuff i guess even investor expectations where does that place us right now? i know it's not a blue print, but where does it place us for the beginning of july? >> it's been uncanny you go back to the beginning of the year and it was a con sen sense for the first half of the year the first half was kind of the opposite if you look, it has been almost an inverse of last year. it was weak until june then you had that water fall move it culminated last june. you rallied a bit. and then you took off in jushlg after the fourth of july this year what have we had we had almost the opposite a nice rally into june you had an acceleration into

fomc you kind of topped out we're seeing a little bit of weakness on the fourth of july we don't expect this to continue to track so closely, but it speaks to where sentiment was and what the consensus was for the market on january 1st of this year and where it is right now. i think expectations, positioning have all come a long way in the last six months it goes back to the to national seasonal strength that a lot of people think will happen this year. >> a good reminder that a lot of what's going on is taking back some of the deep losses in the parts of the market in 2022. jonathan, great to catch up with you. thanks so much. >> up next, we're tracking the biggest closers. kristina partsinevelos is standing by with those hi, kristina. >> hi. today's themes are partnerships. jetblue ending one and jets

extending one. details on the moves next. ♪

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less than 19 minutes till the "closing bell. the s&p off by one eighth of 1%.

kristina partsinevelos is back. >> jetblue wants to protect spirit airlines even if it means it ends its partnership with american airlines. jetblue said it informed american of its termination of the three-year alliance so there would be no objection, but american plans to appeal the ruling you see jetblue down 7%, american, down 2% and spirit up 1%. genius sports will continue to have a exclusive partnership with the nfl and statistics. a last chance to weigh in on the twitter question we ask what do investors want to see in tomorrow's payroll number do we want it to beat expectations, downside surprise, or in-line with expectations

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let's get the results of our twitter question the answer at least for more than any other is inlied with expectations is what the market would crave. that would mean a jobs trend about 240,000 for june, give or take here's where we stand as we head into the final trade the dow down about 360 points. the s&p off 0.8%, about half of its losses. up next, we're told how he's navigating today's data and the

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we are now in the closing bell market zone we're here to break down the crucial moments of the trading day. plus, kate rooney has the read on the retail investor playbook as the second half gets underway morgan stanley's key price hiked his price for microsoft. welcome to you all warren, i'd love to hear what

you think the market setup is going into the markets tomorrow. things have gotten more or less the bull's direction on those fronts where are we now >> thanks for having me. everybody came in expecting a recession and that was unwound everything in the stock market rally has been multiple expansion. all p, no e. we enter the second half from an earnings perspective on the stock market, that should be inverse of the pe ratio expressed as a yield i think at this point we really need to see fundamentals come

through. >> what would you say the earnings collapse hasn't happened you've had year over year declines a fed is doing it in smaller increments and more slowly and the market has seemed to be able to digest that >> that's correct. that's i think a good read on what we've seen so far this year reare entering the 2023 estimates begin to get marked down last year our theory at 314 is to get to the midway part of the year. forget this year we're on to next year. at this point the market is going to look at 2024 estimates. analysts will start looking at the reporting seasons and looking to either take their estimates up or bringing them down like they did last year the growth that's implied is not very much. it lands you at an 18 1/2 pe

multiple i don't think mere stable ilizao at this point in time. if you are not betting on that, then you're betting on some kind of epic bubble so to me this is a zone where you can expect weakness that doesn't have to be top line that's 100% of earnings margin all margin pressure. analysts baking in 12.9 margins for 2024 that's 140 basis points over the precovid peak. there's room for margins to come down it equals $20 off of eps operating leverage gets marked up in this environment. >> the risk/reward is skewed to the down side. does the story change?

that valuation a lot of people will say has really been amplified by the very large stocks yeah i mean, i think that the ai -- you have to set ai it's interesting when we came into may there were out of 11 sectors only three were positive for year that's coming to june. coming to june, three sectors positive very weird and skewed market obviously there's an ai story. those are the strongest balance sheets and company it's a high quality play in my view going into the second half of the year, we've upped our equity allocation coming into june. we're not exactly buying into this the bull thesis though, i think you want to crowd into the quality stocks you can get the seven, eight tech stocks that power the market >> still plenty to prove for this market. warren, good to speak with you

thanks very much >> thanks for having me. >> kate rooney with a snapshot for what retail investors are feeling like. >> there's been a lot of momentum behind the red hot artificial intelligence stocks into electric vehicle names. it shows a surge in in flows for the most popular ev maker, tesla. that's the most bought stock among individual investors ahead of apple and a recent beat in tesla deliveries is the latest catalyst that's about 30 million of in flows. some of the shine is coming off of ai. c3 ai was the topic in march the inflows have stalled.

>> feeling better. contrarians take note. see if it's gotten overdone. kate, thanks so much keith, lay out your case for microsoft. you raise your price target. you're seeing 20% more further up side. the stock has performed very well trading now about 30 forward pe. >> thank you for having me generally i agree with the earlier guest, warren. we think microsoft has real catalyst to moving numbers

higher it comes from their positioning in generative ai we reported framework for understanding what types of revenues can come behind generative ai. they have the picks and shovels in terms of stuff like azure, open ai services where companies are building out the next generative applications but then they have the applications themselves the gold miners, themselves. co-pilot forget hub and microsoft 365 with these catalysts on the horizon driving new revenues up side in revenues to people's expectations, that's what's going to take microsoft on the next leg we've moved our estimates higher. >> how much of a mover of the needle are they?

how do you quantify? >> there's different frameworks for quantifying different parts of the equation. the first mover is likely the picks and shovels. azure open ai services that's going to come through an acceleration of the applications people are building on top of the platform you're seeing really good indications of an affinity to azure ai services. 27% of cios said they are looking to build on azure open ai services in the next 12 months that should be the near turn opportunity. the framework for looking at applications is an install base argument we're talking about office commercial, there's close to 500 million office commercial users. we think these aren't going to be high value, high price purposes we expect the penetration over

the next two years we have a base case of close to a $20 billion ad in terms of application revenues that's microsoft fiscally. >> all of that you're saying justifies the stock getting up to 415 a share would be above the $3 trillion market cap level if we got there. keith, thanks a lot. appreciate your laying that out for us. >> just about a minute left in trading. dow down 360 points still. s&p 500 off 3/4 of 1%. that takes the s&p back to where we traded essentially last friday we closed a little bit below here on june 29th. financials have been a moot point taking another hit to bond portfolios concerns what that's going to mean for the banking sector and creating competition for deposits volatility up 15 certainly braced for the potential for more bumpiness as

we get through the jobs numbers tomorrow we're going to finish with not quite 90% down side volume on the new york stock exchange. in the broad indexes heading into the payrolls number in the morning. that's going to do it for "closing bell. sending it into "overtime" with morgan brennan and jon fortt sea of red for the major averages this is treasury yield spike on hotter than expected data. that's the scorecard but the action is just getting started welcome to a special edition of closing bell overtime. jon fort is in seattle he's going to join us in a second for a can't-miss exclusive interview with the ceo of amazon, andy jassy covering consumer, the cloud, ai and so much more. let's get straight to today's market aio