The Fed & Your Money 6/23/22 - Transcripts

June 23, 2022

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Fed Chair Powell continues his testimony on Capitol hill today. Frank Holland and the Investment Committee break down his remarks and take some positions. Plus, the transports sector have some names reporting, how should you treat these stocks. And later, Pete Najarian’s latest options trades.


I'm sara Eisen from the open to the closed CNBC has you covered from what's driving the market moves to how investors are reacting will guide you through each trading session and bring you some of the biggest names and newsmakers in the business. Be sure to follow and listen to CNBC's Closing Bell podcast Today. You're listening to halftime report in progress. I'm scott Wapner and you're listening to CNBC's halftime report the podcast, the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in.

Yeah. And with that, I'll yield back. Thank you very much, Madam. Chair Gentleman yields back. The gentleman from Oklahoma, Mr Lucas is not recognized for five minutes. Thank you, madam Chair. And actually, I think my timing for my question is perfect. Chairman Powell, I'd like to discuss with you today. An issue that is of significant concern to me and many of my colleagues, the sec. S regulatory agenda has more than 50 significant proposals that are currently underway or approaching a final vote. These rules cut across every asset class. Under the sec, the Securities Exchange Commission jurisdiction.

The sheer complexity and volume of these overlapping rule makings could negatively impact markets and the public. That depends on them. Sec Commissioner Hester Pierce purse, I should say, warned that the speed and character of these rule makings could create dangerous conditions in our capital markets. Now, this is against the backdrop of the US economy facing significant challenges. We've discussed that all morning Inflation at more than a 40-year high with substantial increases in the cost of food housing and gas prices at record prices also supply chain backlogs and labor shortages continue to weigh on the economy with consumer and business confidence plummeting and of course, we're still studying the impact of the global pandemic and the consequences of the ongoing Russian invasion of Ukraine in Oklahoma. Small businesses, farmers ranchers are navigating through surging energy prices and volatile agricultural markets for inputs like grain and fertilizer, poor crop conditions and high commodity prices are expected to worsen the situation throughout the summer and into the rest of the year. In uncertain times like this. Market participants need to seek to protect their retirement savings to hedge risk and to safeguard their livelihoods. A top priority should be supporting liquid markets to protect the U. S. Economy from the face of these substantial headwinds. I know you don't comment on other entities within the federal government.

I know these regulations that are gonna have such a tremendous impact are not coming from your area. But unfortunately, I'm concerned that the magnitude and the significance of rulemaking proposals coming out of sec in such a short amount of time runs counter to the goal. We know that regulatory uncertainty creates adverse market environment for economic growth and market stability. So, Chairman Powell, I'll not ask you to comment on the sec, but could you speak to the importance of market liquidity during periods of economic uncertainty. Yes. So markets are there to one of the things they do is process information and consider the implications of it. And and it's critical that markets be liquid enough to do that. And if that happens, then financial conditions can adjust and equity prices of various kinds can adjust. And that's that's one of their big functions is to do, do that to absorb news. Sometimes very difficult news in a way that is that is that preserves stability. I think Congress and the public should have the opportunity to fully grasp the impact of the sec sweeping proposals. If we really want to tame inflation, if we re if we should, we should begin to by not making the current situation worse.

The sec? S approach will rattle markets during a time when strong capital markets are essential to our economic growth and our constituents back home? After all, you're working hard on the demand side of the equation. But we in Congress and the administration should help with the supply side of the equation and that is not making it more difficult to invest in and create more goods and services in this country. That said, Chairman Powell, as you've acknowledged the Fed's monetary policy tools can do very little to mitigate rising gas prices. However, the increased cost of gas has an oversized impact on consumer inflation expectations, folks see the price of the pump going up and experience the price per gallon at an all time high. Could you discuss how the Fed envisions its ability to rein in inflation expectations driven in large part by gas prices or put another way if gas prices remain at record levels is an aggressive response from the Fed all but guaranteed. Well if gas prices remain at the current levels they're at then inflation, you know, it's the problem is inflation means continuing to go up. So it isn't so much the level as the as the rate of change as you as you know. So, um I think we are mindful that even though these things are outside of our control, the gas prices and food prices for the most part, that just that adds a little bit of urgency in our wanting to get our our rates into a place where where we're addressing inflation directly because the public reacts to all kinds of inflation. Not just core inflation are tools to generally go to core inflation. So, um, but and we don't think we can use our tools to change energy prices, but we do think that they that they add, they add to our desire to get expeditiously to the appropriate levels.

And clearly Congress and the administration, the majority has a responsibility to increase supplies of resources. Not discourage that you're back madam. Chair. Thank you. Mr Chairman Gentleman's time has expired. The gentlewoman from Ohio MS Beatty, who is also the chair Of the subcommittee and diversity inclusion is now recognized for five minutes. Thank you so much, Madam Chair and thank you chair paul for being here as you're navigating through all these federal issues during this difficult economic time. Uh Chair pal after our hearing concludes, this committee will be voting on a few pieces of legislation. So I'm gonna take advantage of having you here to shed some light on a few of the things that we will be considering. Uh I can't think of a better person to give us some insight on these issues. Uh First question is will be voting on an amendment that would delay the sec. Small business advocate uh advocate from conducting outreach to underserved business owners until after gas prices drop to the pre covid level chip allen in your opinion will delaying the sec s outreach to minority business owners affect gas prices in any way?

I'm with all respect. I reluctant to comment on on proposed legislation. Well, let me answer this. Let's say if it's not legislation, is there a correlation between what gas prices would be in relation to what they were with pre pre covid with inflation. You know, I'd be expressing an opinion on someone's amendment. And I just I if I start down that road, I don't know where it stops. I really these are matters for elected people. Well, would you say that the global markets and uh inflation is is across the country that we're seeing this everywhere. Yes, inflation, inflation is is happening everywhere now. I'm dealing with a lot of fair housing issues in in my district and you know, I have a long history of working with public housing and relocating people and as we look at issues with housing, do you think housing is anyway uh tied to inflation? I'm sorry, I didn't I didn't catch the question. I apologize.

Do you think what's happening in our housing market is tied to inflation in any way? Yes, it is, yes. So housing costs are about a third of the C. P. I. Housing we call them housing services and that's really rents. Plus uh the way the way it works is we in effect an owner of a house is is charging something called owners equivalent rent or paying something called owners equivalent rent. So yes, it's an important factor in inflation. Okay, so can you tell us in your opinion, in light of congressman vargas's question is is he was giving us an idea of as some of our colleagues are trying to tie things to the american rescue plan, they're trying to tie it to us, taking care of the least of us that that if it is tied to inflation, why in other areas or countries uh that and they don't have the american rescue plan. And how do you answer more about mr vargas question? I mean, I know he gave you a litany, I'm not trying to put you on the spot with quizzing you on what their inflation rate is in comparison to ours, But I think you got where he was going with this. Is there anything else you'd like to elaborate on in relationship to where he was going?

Sure. So I'll just say these things. Are there differences between even though we have a very similar inflation rate from with with a lot of the large european democracies now pretty close um There's there are differences between countries and the difference with with the U. S. Compared to the the european countries. Is that ours is more about demand. We we have areas of our in our in our economy where demand is substantially in excess of supply, it's not mainly a feature of the european economies where they're really feeling you know, very very high inflation because of energy prices and and also food prices. Now that's part of our story too, were also feeling energy, energy and food prices. But we have this other part that is that is more core inflation that is more susceptible to being managed by our tools and is really the object of our tools. My time is all right. But in in light of your response to my first question, I just need to say for the record, I can't conceive of a single connection between gas prices set by global markets and giving advice to small businesses and the same. I have a hard time coming up with a theory of how allowing discriminatory housing will help stem inflation and I think my time is up, I yield back, gentlewoman's time has expired.

The gentleman from texas mr. Session is now working nice for five minutes. Thank you very much. Chairman. Chairman pal thank you very much for taking time to be with us. This is important to the american people who hear our questions. This is important for us as we weigh and measure and gauge your input, which we believe is exceptional. I've stated that to you in the past that I believe that we need to have confidence in what you're doing today. I'd like to if I can without dissecting your thinking, use some of the words that you have provided for us today to see your thinking. You had stated that as it relates to the Fed quote, we don't give advice to agencies. Now, that's a quote from you today. We don't give advice to agencies.

Um Do you think that advice is different which I do than tools, which you have to do your job? But I consider part of what you do best. Perhaps the Fed is advice can you help me to understand? We don't give advice to agencies well, so I think particularly on fiscal matters, um people fiscal matters affect people's lives that affects industries and people and and you know, tax levels and spending that in our system is the province of elected people. And you know, for someone who's an appointed person who hasn't stood for election and has a very narrow mandate. I just think we, you know, that's that's not appropriate if we're gonna wander into into those kinds of things, then what would be the case for our independence? If we're going to be involved in every political issue that isn't directly connected to our work, then why would we be independent? We should just, we should just be another agency, but we have this independence and I think to preserve it, we need to stick to what we do and, you know, resist the temptation to work on every problem, even the ones that are not assigned to us. Well, let me say thank you or the answer you do know. However, as we were talking about student loans, it's a rather large amount, about a trillion to that is out there. You stated that you believe that would likely be dealt with in legislation. Now, that's what you said, likely to be dealt with in legislation, student debt.

I think even private advice, not within your tool structure, but this advice that we're trying to land on would be really important because it will be the way I see it the next large hit to inflation. And this is why republicans or at least this Republican says that I believe that this administration, the Democratic Party are making friends with inflation. They are using the tool box that they have of politics and money and spending policies to make friends with inflation. So my point would be to you, I sure hope that someone could send unnamed memo uh to someone saying that you have an opinion if you have an opinion on that next point, we have had some discussions about unemployment. How is unemployment calculated? So you have to be actively looking for work within the last month to be can and not have a job to be unemployed. If you're if you're not looking then you're out of the labor force and that that's uh so you're not participating in the labor force. So that's those are the factors. So what we want to do, some members of this committee have wanted to look back and to say, well perhaps under President Trump. It was 3.5% now were 3.6. So not a big difference. And yet the huge number of jobs that are available is really the factor when we're not jobs.

That is a problem. But to simply say, well Trump was 3.5 now we're 3.6, everything is fair, it's all done. I think the other advice I'd love to have you have from the Fed is to someone about getting people back to work because today the uh the government has given zero instructions for federal workers to return to work. And I think that it is causing a mindset among many. We don't need to go to work. Thus reflected in 3.6% unemployment and millions of jobs awaiting Mr. Chairman thank you for taking time to be here. It's my hope that you would find in your toolkit advice that becomes perhaps more important than I. Thank you sir. Thank you. Time has expired. The gentleman from Florida Mr Lawson is now recognized for five minutes madam. Can you hear me?

Yes, sir. We're loud and clear and we can see you okay? Thank you. Okay? I want to thank Mr Powell for and welcome back to the committee. No, it's a great deal that is going on. Mr Powell. I think earlier, there might have been something that came from one another, my colleagues and it was a rising interest rate. The complex combat inflation does come with her rising unemployment rate and possible contributing to economic recession. While white unemployment rates have dropped to its pre pandemic levels, pre pandemic levels of 3%. And and try On 2022, the national black unemployment rate remains still at 6.5%. And and and I know something you can't say, but uh but what suggestions can you offer to help prevent black and other minority communities from face and future economic inequities as the Federal Reserve considered continued to raise rates in the near future?

If I heard your question correctly, it was whether we're considering future additional future interest rate increases, sir. That's correct. Yes. So I think just last week my colleagues and I wrote down our forecast for this year and we anticipate ongoing rate increases over the course of this year. Yes. Additional rate increases. Do you believe that the Fed's current inflation projection of 2022 and 23 remains a good uh benchmark to consider even with these uh vulnerability potentials growing in the upcoming March. I think we these are the projections that the latest projections that individual FOMC participants submitted were submitted last Wednesday. So I think they're still fresh and um there's a range of a range of expectations of people in the committee. But I think there are a reasonable a reasonable set of projections. Yes. Okay.

Several of my colleagues on the other side of the aisle in debating about, you know, the biden policy and so forth, which I know you can comment on. Uh oh, but there is a concern um where we were kind of caught off guard with the war in Ukraine. And then at the same time, our vulnerability of all of the things that we depend on for other countries uh in your deliberation uh when you are working with the situation that has arrived that has been that came from Russian Ukraine war and other real estate and other stress in china spilling over into the United States. Uh The Feds give a recommendation back to the administration on how we should proceed in the future because everything, you know, we've done a lot of things with other countries and depending on a lot of countries for resources and so forth. And it looks like we're becoming very, very vulnerable. What does it look like? We're becoming very vulnerable to this dependability. Do you all make a recommendation back to the administration on how we should proceed in the future? No, no sir. We did not. Okay. And so early on you said that as prominent lead up that policy position is letter is should be considered by the Legislature of the administration.

Am I correct? I'm sorry I lost track of what you said there. I apologize. I think to some other colleague of mine you stated that those policies should be left up to the Congress uh to the administration. You all don't really deal with that aspect of it. Am I correct? I'm sorry. Which aspect of it about what recommendation could be made for all of these things that we have all showed that we depend on from other countries. And I might not be really clear. But for example, like the the gas situation with Russia, you know, and we and stopped with Ukraine and stuff of this nature. No, we're not. We're not in those discussions.

Those are those are really discussions that happen inside the administration, um the Treasury Department and the White House and the other agencies. Okay. But that madame Gentleman yields back the gentleman from Missouri Mr Lupin Primer is now recognized for five minutes. Thank you Madam Chair and welcome Jerome Powell Long morning for you and afternoon um question for you with regards to Quote that on March 17, the CPB put out in a blog on rising interest rates in which they said, and I quote, the C. F. P. B. Is the arm of the Federal Reserve system that is fully focused on consumers ensuring that markets are fair, transparent and competitive. End quote, Do you believe the CPB is an arm of the Federal Reserve? And do you have any control over their actions? They're an independent agency. We have no control whatsoever or their actions.

They are actually the legally a bureau that the law makes them a bureau and and an hour the profits that we make off of our balance sheet. We give we give all of them to the Treasury Department except the part that we give to to the to pay for the C. F. P. B. Practical purposes, they're they're fully independent in all of their they're not an arm of the Federal Reserve. I wouldn't consider that an arm there have a relationship but they're not an army there, A bureau, but they're not under you. So they're not we have no supervision. You know, we do we collaborate with them. We coordinate with them. We talk to them. Well this is this is overreach by the director.

I just want to make sure that everybody's on the same page. This is a bunch of nonsense. So it needs to be put in his place. Um, Chairman, you've got your hands full right now. And this is the Wall Street Journal from Tuesday. We had economists say recession is likely down here. We said stocks are not not bottoming very soon. So we've got some concerns. I know yesterday you were in the Senate and uh, you know, there was a long lengthy discussion on inflation which has been here this morning as well. And in my mind, there's four root causes of inflation. And we've had economists in your chair a few weeks ago and I had one in my small business committee a couple weeks before that and I asked the same question and I said, it looks to me like there's four cause of inflation, monetary, monetary supply rules and regulations, energy and supply chain slash job problems that we have with workers in, in economy today. And they both agreed that's basically your four problems that are underpinning inflation.

I asked him to to give me a percentage on each one of them. They said roughly 40% for money supply 202,020. So I guess my my concern is that if you look at those four causes, you're trying to help fight inflation. It's one of your mandates and you're really under money supply is the only thing you have any ability to do something with and even then it's probably only half of it because Congress has control over how many dollars are put into the system with additional bills like the trillion dollar stimulus package last year taxes and things like that. So it looks like you have a minimal amount of impact out of those four things. So it looks to me quite often times whenever you're trying to control the inflationary stuff with the interest rate, it's kind of over here trying to do a little, something went over here, there's all sorts of stuff going on and administration seems seems to be at a contradiction to some of the things you're trying to accomplish over. Do you ever feel like that? Do you believe that that maybe a position that that you're in right now, we're very focused on the part of the job that we can do and using our tools to do it. I understand that Mr Chairman, I would seem that I would think that you're um, all these other factors fall outside your purview here and for you to try and manipulate and everybody rely on you to to solve the inflation problem by tinkering with the interest rate over here. It looks like that's a little over over hyping the situation. But um, one of the things that is very concerning is the regulatory cost In my discussion with the, with the economists, he said, Look, and this is the administration's own figures last year, the administration costs uh costs of compliance with new regulations with $201 billion. That's astronomical.

That's a huge cost. That has to be built into all the small businesses and other businesses whenever they produce products and services for sale for customers, they've got to build an initial $200 billion dollars in costs every year. Would you agree that's a huge driver of inflation. It sounds like a big number. And as you know, we try at the, at the Fed to weigh costs and benefits and take that into consideration. Would you agree that those are the four things that I I said are underpinning infection. Would you agree that those probably are the four major problems? Yeah. So most overwhelmingly, most economists would would not would not think of it in terms of, of money supply, but would think of in terms of supply and demand. And although there may be a role for money supply, they would think in terms of supply and demand, being being out of balance. And that's how I think about it. You know, the definition inflation I've always had was too many dollars chasing too few goods and services.

If you throw more money in, You have more money just to supply to there's, there's 40 or 40 plus years of history. Uh actually, Milton Friedman at the end came back and said, you know, that's not really working. Working again though. More quick comment for you with regards to this, it looks to me like whenever you're modeling when you're trying to model and you use it for different things. I hope that your models are including these things in your modeling. I appreciate just 13 seconds. They'll be able to finish my question. Thank you, Madam. Chair, absolutely. Thank you. Gentlemen from California, Mr. Chairman who is also the chair of the subcommittee on investor protection, entrepreneurship and capital markets is now recognized for five minutes. Chairman Pel, I want to thank you for bringing to the attention of this committee over the last several years.

The systemic risk posed by Tough legacy lib or some $16 trillion dollars of instruments where we would not know the interest rate that the debtor is supposed to pay the creditor And $16 trillion dollars is a big problem. We passed the relevant bill back in March and for those who think Congress can't possibly deal with the problem until after the last minute we passed it a year and a half before the LIBOR hit the fan. That bill requires rulemaking by the Fed and the rulemaking is supposed to be done by mid september and that would put us in a that's the final step in

making sure that these

live or instruments are not a subject of uncertainty because even one basis point to thousands of a percentage point of, of risk or uncertainty turns out to be

significant when you're dealing with

$16 trillion. Uh, so Chairman Powell, can we count on the Fed in getting these regulations out by mid september. Yeah, So by the way, thank you for all of your efforts on this technical problem. Um which has really really helped move it along. Um And in terms of the rule, yes, we know the deadline. We know it's a tight deadline and I'm assured that that people are working very hard to meet that deadline. Thank you. Um you're shrinking your balance sheet

and welcome to the halftime report. I am frank collin in for scott Wapner. We're keeping a very close eye on Fed Chair jay Powell's testimony before the House Financial Services Committee. We're gonna bring you any major headlines that come out of his testimony obviously been keeping a close eye on it so far. But right now we want to turn your attention to the markets and your money, our investment committee today Brenda Van jello josh brown, Jim Lebenthal and Pete Najarian, co founder of market rebellion dot com. But first let's get a check on the markets right now. Looking at the dow right now in the red very slightly down about a third of a percent. The S. And P. Basically flat the NASDAQ up almost a percent off of its highs just a moment ago but getting some help from falling bond yields and now we want to get over to our land in D. C. With the top headlines from Fed Chair Powell's Q.

And a gallon.

Well frank this hearing is really more of an event session for lawmakers to air the pain their constituents are feeling from rising prices at the pump at the grocery store when they try to buy or perhaps even rent a home republicans repeatedly ding chair Powell over his support for more fiscal stimulus Back in late 2020 Powell said that that is over, he is done with trying to comment on fiscal policy. The Fed should stick to its knitting but of course, uh, that did not stop lawmakers from debating the root causes of inflation with democrats warning Powell as well that if the Fed goes too far too fast then they could risk high unemployment and sending millions of people out of work now separately frank. I also want to mention that we got some breaking news during the hearing of a new warning from Intel saying that its plans to expand in Ohio which $20 billion expansion could be delayed or scaled back if Congress does not act to pass the chips bill which would send About $52 billion dollars of support to the semiconductor industry. In a statement that I received from Intel, the company said that the scope and pace of that expansion in Ohio will depend heavily on funding from the chips act. And unfortunately that funding has moved more slowly than we expected and they still don't know when it will get done. It is time for Congress to act so that intel can move forward at the speed and scale that they have long envisioned for. Ohio. So there were hearing some companies warned publicly about the dangers of Congress dragging its feet on this bill Just yesterday. House Speaker Nancy Pelosi and Senate majority leader chuck schumer had said that they want to see this legislation and the broader package passed by the end of july, we'll see if that actually happens frank a lot of moving parts here on capitol hill

down in D. C. Chip sector. Actually under some pressure today. M D down 2% and video down 1.5% jim Lebenthal gonna come over to you. I know you have some stake in and tell what's your take on that news. Yeah. And just to be clear, I don't have a stake in intel but I am overweight semiconductors in general. Uh, to answer your question frank, I don't like reading this announcement. Um, you know, 11 wonders, is this just kind of politics at play here? Or is this a cover story that intel is trying to back down on what is the largest investment thus far in the US and the semiconductor space. So it is troubling.

However, um, if there's anything that congress can do that is worthwhile and and good it would be to pass the chips act. Um, I can't handicap whether that will happen or not because there's a lot of other things that Congress wants to pass that would not be as ubiquitously positive and you can't tell if this is going to get caught up in that maelstrom, but the right thing to do would be for Congress to pass the chips act for this plant and others to be built and to help, uh, supremacy return to the US in terms of manufacturing maelstrom. Don't hear that very often on CNBC. Thanks for that one. Jim josh want to toss it over to you. We're all listening to what the Fed chair pals testimony there at the House Financial Services Committee inflation continue to be the theme. What was your take from what you heard? I thought, uh, I thought the stuff about how this is a global phenomenon, uh, is, was somewhat important, Not that the majority of americans are watching or paying attention to this stuff, but, uh, I think it's, it's, there's a little bit of a misunderstanding in terms of like disentangling how much of the inflation is coming from biden's, uh, stimulus bill versus how much is just endemic, uh, and, and just going to be part of the world that we live in, uh, going forward. So outside of that, you know, I don't think there's much there. I just think when we think about, um, what we're seeing in the market right now, the two most important things that have taken place over the last week or two. Number one oil prices backing off gasoline prices backing off. I think we've had eight straight days of falling gasoline prices nationally, uh, that should help us stabilize a little bit some of those consumer sentiment numbers, which seems to be spiraling out of control at this point, um, and the number two take a look at the 10 year yield.

So this is the kind of thing that I think maybe most people aren't aware of because just as quickly as rates went up, they seem to be backing off, I don't know how much lower they'll fall, but 44 basis points has come off of the 10 year yield since june 13th, so that's almost half a point. We were at 3.5% now we're back closer to 3%. Um, A lot of that is related to, you know, new found widespread concerns about recession, but the bottom line, it doesn't matter why. What does matter is that all of this volatility has come from one source which is battling inflation. So if you get rates calming down, which we have now and you get oil backing off of its recent highs, which we have now, that's maybe enough of a foundation to say that we may have temporarily found a bottom. I don't know if it's the bottom, but stocks seem to want to stabilize here and getting follow through in the form of even flat stock prices, uh, is better than a one day wonder rallies with no follow through where we're making new lows right afterwards. So that's what seems to be taking place this week. I just want to be clear. Do you do you think we're reaching peak inflation or we're near peak inflation? Is that what you're saying? I don't think that inflation is monolithic enough to be able to say that all of it will peak out at the same time. I think it's very likely we have seen the peak in employment related inflation.

Um Now you're starting to see layoffs there about 100 companies in tech and media that are downsizing The Wall Street Journal had a big feature about uh companies pulling offers and kind of like um uh shadow employment stats that haven't hit the headline numbers, but that's already starting to turn, I suspect business owners are going to get a little bit of relief. Uh if if, if and when they want to keep hiring, we'll see what happens. Um Oil is really not related to that though. So you could have a situation where labor costs slow down, but energy prices keep rising through the fall. So it's important that we think about the sources of inflation and understand that they have different drivers, even though concurrently inflation is up across the board, it's not going to stay that way in all categories. So Brenda over to you to other headlines, Fed chair jay palace in the labor market is unsustainably hot? Also saying it's unsustainable for debt to grow faster than the economy. Any other headlines that caught your ear. Yeah. You know, I think there were just a lot of comments about what does this mean for the job market? We're likely to see slowing and that's gonna be a positive thing. Certainly not for every individual though, but for the economy overall we need to see some slowing same thing in the housing market.

Lots of questions about housing and what does this mean. And as chair Powell said, you know, housing represents about a third of C. P. I. So with prices normalizing and potentially starting to come down that should ultimately have a positive impact on C. P. I. But as josh was mentioning, you know, when you look at something like headline inflation, there are several components of that. The Fed really can't impact, there are other drivers, they're impacting food and energy costs that may the Fed may not really be able to to impact by rising by raising interest rates. So I think it's a complicated time. But I think also if you look at some parts of the market, particularly areas like small cap equity or evaluation is as low as it has ever been. Uh there is certainly a lot of draconian assumptions here about how this is all gonna play out.

And I think we need to be a little more pragmatic and as as we go in understanding the overall backdrop, which still seems to be fairly positive, um certainly not ruling out the potential for recession in future periods. But I think if we look at the remainder of this year, there is a possibility that we will have a soft landing where things slow down enough that the Fed can potentially pause and that would be certainly a positive for the stock market. So pete over to you. How do you see the outlook for the second half of the year? Are you also seeing the potential for that quote unquote soft landing? Yeah, the potential for it frank. I mean the reality is when we look at this and we look at all the different categories, whether it be nat gas or crude oil or take your pick. I mean they have come down Coppers come down. Copper was just trading at 4.5 and now it's at 3 80 then you look over at something like nat gas. It was over nine and now here it's trading closer to the six is 6 30. So that gives you a little bit of a little bit of relief. I'm not saying that's giving us everything we not need.

But you also look at crude at 1 17. Now it's 104105. So we have seen some Pullbacks we've also seen and josh was talking about the 10 year, I would both highlight the tenure and the two year the tenure was up near near 35. Now we're just above three. You take over, look over at the two year, that was up very close to 35 now, it's under three. So I think those are some interesting parts of what we are seeing right now in terms of catalysts for the market, but there's a lot of different elements that go into each and every decision that everybody's making right now. Obviously inflation is something that everybody is completely locked in on. But it's it's also something where we're seeing volatility kind of moving around, but we're also seeing the velocity of these moves when you look at what's been going on in some of these commodities. Some of this has happened in just one week or in some cases maybe it's two weeks, but this is a very, very rapid movement. I think the markets are just trying to kind of navigate their way through and I think that's why a lot of folks right now are very, very confused. Are we at that peak inflation or are we just at a point in time where we're consolidating and there's a next level higher. I tend to be leaning towards that second side of it right now, but we'll see frank, It's pretty interesting.

I wanna come back over to you Jpmorgan out with a note today forecasting that the S and p could end the year at 4800 about Almost 20% higher than it closed yesterday. And basically saying that they see inflation moderating in the second half of the year, leading to that so called soft landing. What do you, what else do you think needs to happen? This is the note right here, we're showing it to you right now. What else do you think it needs to happen to kind of create this so called soft landing and to avoid a recession and make stocks increasingly attractive in the second half? Well, I think we need to see that the economy hangs in there and the consumers need to keep spending right in order to to facilitate ongoing economic growth because the consumer is such an important piece of that. And I think as long as the job market remains relatively healthy, even if some of the froth comes out of it and inflation does come down and that alleviates some of the pressure that the consumer is feeling and causing them to have to dig into the savings that they saved up over the last couple of years in that dynamic. I think that we could have more of that soft landing scenario. But the consumer is such an important piece of our economy. And I think looking at where sentiment is today, it's incredibly low, no one's happy about paying higher prices, no one's happy about seeing the correction. We've all experienced the financial markets. So I think though that um as long as the consumer can remain healthy in spending um, and that we don't see a real significant fall off in some of these areas like the job market that, that, that would facilitate more of that soft landing that JPMorgan is, is, is forecasting alright fed chair jay Powell still on capitol hill right now markets actually falling a bit the NASDAQ still in the green but down about a half percent from where it was the top of the hour, the S and P also moving into the red over the last few minutes up next trades on some of the big analysts dot calls the day halftime back in two minutes.

Stay with us. Yeah, there's nothing quite like owning something rare, something valuable but keeping it safe can be stressful. Now Ebay is launching a new way to protect what you collect from the original collectibles marketplace comes the Ebay vault, a state of the art facility in digital marketplace with millions of dollars of cards already secured the vault, empowers how you'll collect in the future. The Ebay vault buy sell secure, go to Ebay dot com slash vault to learn more. I'm scott Wapner. When the closing bell rings, we're just getting started closing bell over time is your destination for late breaking news and after hours action we're tackling each trading day with actionable advice from some of the biggest names on the street. Follow and listen to CNBC's closing bell podcast today. Mhm mhm mhm And welcome back to the halftime report. Tesla's price target cut to 1200 from 1300 by morgan Stanley the firm is trimming Q two estimates on lower volume Elon musk actually just recently complaining about some supply chain issues. It is one of our calls of the day Brenda. You recently bought it. We did recently buy it for the first time.

But I would say, you know, this is not immune from something from the supply chain issues that are really impacting companies inside and outside of the auto sector. But we, I think that this company continues to be really well positioned. We're expecting that they're gonna be able to ramp production with Austin and Berlin facilities ramping up. Um, and this company has pricing power and that's important in this environment. I think to stick with companies that have a great niche, a great moat and that have pricing power and we think Tesla has all of those. Um, in this note, the price target reduction was simply because of an adjustment to the risk free rate. Um, and I think we'll be seeing a lot of that. Um, as rental rates have risen. So I don't want to read anything into that. Still think the company is really well positioned here. Pete over to you. You have a few Tesla calls right?

Yeah, I did and I no longer have those. But yes, we even had some buying just again the other day with the stock trading right around that 6 80 level and then it took off to the upside well over 700. But you know, I think that's what we're seeing in Tesla right now, you see these just surges suddenly and then a pullback and a lot of it could either be the commentary from Elon musk himself or some of the news that gets out there. So I think that they will have some issues, obviously a little bit of a slowdown on some of the volumes of delivery, but they're going to be able to make that up I think in the second half of the year. So I think this is definitely a solid, I understand why why she's holding on to it. I like this name a lot. But when you get quick moves like we've had recently, I think you've got to take those off because these markets right now are definitely trading markets, they make it very, very difficult for long term holds jim we're also going to Disney reiterated as a by bank, by Bank of America target though, cut to 1 22 from 1 40. What do you think? Well, it's a tough time to be a Disney shareholder and I am one, the reason it's tough is because with all of this, talk about recession, what you think about is they're very important profits at the theme parks dwindling away if people stop going um and, and inflation certainly has been seen to really be prevalent at the theme parks, But here's the thing, what if we don't have a recession or you know what if jobs stay plentiful. We did have initial weekly jobless claims ticked down slightly this week and the continuing claims are hovering at 50 year lows. So maybe the worst is in here in Disney in terms of predicting a recession that has yet to arrive. So I'm comfortable holding it, but I understand what the risks are facing me and the other shareholders.

So josh, I want to come over to you with netflix, two different takes on it today. Bank of America reiterating underperformed cowan reiterating outperform given it a 3 25 price target. Where do you see it at? Especially this inflationary environment? I think it can outperform. I actually think this is one of the few businesses in the market that uh the the inflation uh let's say the inflation scare uh might actually be overplayed. I think netflix similar. I've said this about Starbucks too. There are things in this world that are just affordable luxuries and people don't give up on them as quickly as you think they might, even though they might not be necessary. So, a cup of coffee is is one and I think a video subscription is to Um this is a stock that was $700. It's 176 in January of 21, it was selling at 47 times forward earnings today, it's 16 and as a matter of fact it's actually cheaper than Disney which sells at a forward earnings multiple of 22 saying a lot of the risk has come out of this name. I don't think everyone in America or everyone all over the world is about to cancel their netflix subscription to pay for gas.

I think that's very unrealistic. And this is the type of stock where you've already had so much pain. It's hard for me to imagine another year worth of news. Uh, you know, that, that people weren't expecting, nobody is expecting much from netflix over the next, you know, 6 to 12 months. So I, I like it here. I think it's gone through enough. Yeah, netflix shares down 70% year to date. All right, coming up Fedex shares pulling back today, but up 10% over the last month earnings after the bell today, josh owns it. That trades coming up next. Don't have time. I'm sara Eisen from the open to the closed CNBC has you covered from what's driving the market moves to how investors are reacting will guide you through each trading session and bring you some of the biggest names and newsmakers in the business. Be sure to follow and listen to CNBC's closing Bell podcast today.

All right, welcome back to half. Fedex trading near session lows right now. It's set to report earnings after the Bell shares have outperformed its rival ups since new Ceo raj. Subramaniam took his new role on june 1st and josh you recently bought it? I did, I bought it for a trade and if it keeps going my way maybe it turns into an investment. But I think what's going on here is they came out in March, they affirmed full year guidance. Let's hope that doesn't have to change. They raised their dividend by 53%. The stock had its best single day performance Since the 1980s on the heels of them having done that. So I I stay I'm staying with it since that happened. Um And now we're going to basically get the first quarter under the new Ceo. And for for those that are relatively new to the story fred smith was in his late seventies there was an activist D.

E. Shaw involved. They kinda nudged him out and the C. 00. Took over and the reason that's important uh this business is so heavily reliant on snags in the supply chain, getting cleaned up quickly and the difficulty of hiring people. So having an operating person as the new C. Ceo I think is an important signal. The other thing that's going on is compensation at the executive level will be more tied to shareholder performance. So these are all good things. We'll see what they have to say tonight. Hopefully I can hang on to the stock. I do have a stop loss in place.

Uh And I may have to re evaluate if for whatever reason they don't stick to their guidance or throw a curveball at us. So Brenda you on their rival ups. Any thoughts about what you're expecting after the bill? Yeah, I would just say, you know, obviously having a new Ceo in place can be pretty transformative. We've seen that at ups over the last several years and that's why we prefer ups, it's just this focus on better, not bigger and improving automating, improving efficiency by implementing more automation. Being able to eliminate some jobs of the process. Um and really just becoming more efficient overall I think is is going to help not only ups but potentially Fedex as well in this type of environment that we're in. You own ups as well. Any thoughts about Fedex bumping up its dividend still below ups dividend to be clear. I believe Fedex bumped up to about 1.5 ups at about 3%. Right. Yeah.

And and it was a great move. I think that was a great move by the Ceo to make that decision. Obviously the board members as well. I think they've they've done a lot of the right things, but there's a reason why ups if you just look at a one year chart why it's consistently been outperforming against Fedex and I think a lot of that has to do with the ground versus international and a lot of the different, you know what goes into that whole pricing model but I'll tell you what, I love what the company has done. I think it's been a great decision to do that and by raising the dividend, that makes them that much more attractive. That being said ups still nearly double the dividend yield. So because of that, I'm gonna stick with ups but I do think Fedex is going in the right direction right now under the new ceo. Yeah, I misspoke Fedex said 2% dividend yield ups now almost at 3.5% up next. Pete's latest trades and unusual activity and final trades halftime, we'll be right back all right time now for unusual activity, Pete, what are you seeing in the options market? Alright, I'm gonna start off with Snowflake now. This is one that's pretty interesting yesterday they were buying frank, it was interesting because they were in the money calls august 1 20 calls, stock was trading 1 25. Those took off to the upside, they came back again today and now they're going really short term, they're buying 8300 of tomorrow's expiring.

1 40 calls. So obviously with the stock trading just about 1 40 right now. Pretty interesting to see if this thing is able to continue to move to the upside and break through that 1 40 again. It was over there earlier. We also have Freeport Mack Moran, they bought twice today in FCX now, not looking so great because the stocks actually making a move to the downside stock was trading right around 30. They bought the july 33 calls and then 3500 of the august 30 calls. So aggressively buying and positioning into Freeport mack, they're buying a little bit of time too. So it's not so much about today move, but actually a little bit further out into time E W. C. This is an E. T. F.

For Canada. I don't talk about this one ever. As a matter of fact, I hardly remember ever seeing this. But 56% of this is financial side of things, financial services along with energy. So you know exactly what you're getting when you're in this CTF. They bought 7000 Of the September 31 puts that's with this stock or the CTF moving very close to its 52 week low so it might be on its heels, but they're actually even pounding it even more looking for even more downside there. Those were going for about 85 cents. Yes, snowflake with an upgrade from Jpmorgan today as well. All right time now for our final trades Brenda, you're up first. So to the animal company, essentially a pharmaceutical company. But without all of the problems that come with traditional pharmaceutical companies that with generic competition dealing with Medicare or insurance. None of that just plain old cash fire.

So we like we like it here. Charge point increasingly looks like it bottomed in early May stock is very resilient. I like it. All right. Jim Thermo Fisher, great healthcare company and it's, it's what I'm recommending because I think we're stuck right now while we wait for more information on inflation and earnings. So it feels like a safe place to be. All right, pete, you're getting the last word on this one. All right, well, I'll tell you what, you know that I'm a bull in the energy space, but we've obviously had a significant pullback and a little bit of trimming here and there and I don't have quite as much exposure. But the Excel Lee does make me start to scratch my head a little bit because they're out there buying 68,000 of the October 52 puts. So looking for this to make some sort of a pullback, we'll see what happens. But definitely seeing those huge put buyers right now. All right.

That does it for half time. The exchange, it begins right now. You've been listening to CNBC's halftime report the podcast. You can always catch us live weekdays at 12 eastern only on CNBC. I'm scott Wapner. When the closing bell rings, we're just getting started closing bell over time is your destination for late breaking news and after hours action we're tackling each trading day with actionable advice from some of the biggest names on the street. Follow and listen to CNBC's closing Bell podcast today