Verizon is holding up the best along with merck and walgreens but all still lower. S p 500 down 3. 6 . We are looking at our worst day in a while the nasdaq down 4. 5 , worst day since june for the nasdaq. Tech is the hardest hit right now. As weve been seeing in this bear market when Interest Rates spike, the 2year yield is at the highest level since 2007 and those Interest Rate sensitive tech stocks are getting slammed. Ill give you a live look at the worst performing s p 500 sectors right now. Again, every sector is in the red. At the very bottom of the list as you can see communication services, technology, discretionary, financials and real estate. That yield curve inverting even further where the 2year yield spikes over the 10year yield, a signal of recession. Were all over this market recession. Weve got a great lineup of guests including david zerbos, anastasia ammaroso, dan niles and jason thomas well start with the market dashboard. Our senior markets commentator mike santoli it is ugly five s p 500 winners right now, thats it. This is a comprehensive washout. The market bet it all all black. The wheel spun and it came up red. Thats the way to view the last week we had a 5 rally or so in the s p 500 over five days weve given back about twothirds of that thats worth keeping in mind, that a lot of what weve lost was basically just added back onto the market but it does create a question that 3900, this level that people were very glad held a few days ago, whether that has to be revisited, whether its going to hold on a second visit and all the rest of it clearly we still have this little shortterm downtrend along with this right here so were pinched between a lot of different factors right here very volatile but within this same range, i would say. You mentioned the 2year, versus 10year treasury yield curve this is the one that historically is a little bit more precise in terms of talking about recession probabilities. The new york fed uses this in its recession model. Now, when this one goes inverted as it happened here in 2000, 2006 and 2019, it has led the onset of recession by six and 18 months thats a lot of lead time. We have not yet inverted right now. So zero is right about there but the threemonth yield shot higher went from 3 to 3. 14 the highs was 3. 2. This is a treasury bell, three months maturity and thats a big move putting in another 25 basis point hike on top of what we thought we were getting. Is this the kind of report, mike, that you think is a gamechanger for the markets in other words, the view its not just black and red the view is that inflation would come down quickly. That was persuasive across the bond markets, swaps, expectations and i think that core reading that saw a much higher number, double what was expected, shows that this could be more entrenched. It absolutely represents a reason, and a good reason to rethink whether in fact gravity is going to really exert itself on overall inflation measures. At minimum, it defers that look, i guarantee you in a months time youre going to be saying the leading indicators of inflation are still pointing lower. Youre still talking about used car prices rents, by the way, listed rents are showing weakness in the latest lets say couple of months, whereas the data in the cpi for rents is holding up better so all these factors i think are still there. So youre saying its backward looking im saying its backward looking but also that its just taking longer. So the market will be impatient, try to anticipate the turn and its been wrong so far we dont know when and at what level the market will be. And how weak the economy will get. Thats the question. Stay close of course as we monitor the selloff for more on the cpi report and what it means for the fed and the market, lets bring in david zervos and Anastasia Amoroso how surprising was this number, david . I dont think anything surprises me anymore with inflation data the fed hasnt got it right, the street hasnt got it right a few people were calling for big inflation last year and really did get it right. I think were all flying a little bit blind the fed is really interested in kab kaboshing inflation. Theyre going to keep going. I think the market gets ahead of itself in thinking that this fed pivot is just around the corner. Theyre telling you its not there, but the market wants to believe it and gets itself all excited and then a little disappointment comes in and you get a day like today. Well, i think the market wants to believe that inflation has peaked and is coming down and the economy has not weakened so substantially that maybe theres some hope of a soft landing. Does that go out the window today, david no, i think its more than that the fed is trying to tell you that even if we get some good data, theyre not going to declare victory early. Theyre very concerned about getting it down, keeping it down and very nervous that this is something that could affect the anchoring of longrun Inflation Expectations again, the market is getting too excited too early. Thats been a theme for us the upsides are very limited the downsides are risky but im not in the cataclysmic downside camp because i think nominal gdp growth will keep stocks from taking a big swing lower but were going to get these violent upswings and downswings as people shift their sentiment too quickly for a fed thats not really shifting any time soon. Appearnastasia, whats it goo mean for stocks . We were in a period where it was hard to be too bullish and hard to be too bearish. Even though the fed was talking tough, now we get this new number hotter than expected. What do you do yeah, sara, i think we have been stuck in this broad trading range and i think its not likely to break any time soon. My interpretation of this cpi report, it is a stunner and will be quite problematic for the fed. The reason i say that, first of all, theyll look at the monthovermonth figures and theyre accelerate not only the headline but also the core that is a huge problem for the fed. The second thing, if you annualize these monthly figures and look at the cpi basket, 70 of it is growing or increasing in price at 4 plus. So the fed will take a look at this and i think it is going to be a bit of a narrative shift, narrative change because today they thought they were doing enough to fight off inflation and to crack down on it and still have this possibility of a soft landing i think what theyre ultimately going to come out and say looking at the cpi number is we probably cant have it both. We cant have it both ways we cant have a soft landing and crack down on inflation. So they might need to go further in terms of rate increases and they might need to stomach not a soft landing but something else. So that, of course, is problematic for the stocks and i guess my advice to investors is were in this time period of uncertainty, unprecedented fight against inflation. The fed is very keen to fight it off. What do we do . We dont fight the fed so i wouldnt expect much from equities in terms of breaking out of this near term rate by the way, sara, cash by the end of the year, we could be looking at 4 yields so relatively speaking, investors are going to be making tradeoffs between cash and equities, and cash and bonds are increasingly going to look more attractive. Right were just not there yet pie the way, down 4. 6 on the nasdaq worst day since midjune david, today i had a chance to interview bruce flatt, the ceo of Brookfield Asset Management huge conglomerate, 750 billion. They have assets in solar, wind, energy, retail and real estate and heres what he said about that hotter inflation number that had just come out this was at the salt conference when i asked about that and whether the economy woman okay they really know how to crush inflation if they want to do it. Theres a balance between crushing inflation and not having a recession and causing problems in the labor markets. And thats really what the delicate balance is. The good news is, everybody in the Central Banks in the world know exactly how to deal with this situation are you sure . Yeah, yeah. Yes. Yes, for sure. So the positive spin is they know how to deal with this its not like deflation or what he said, david, the pandemic, which was theres no playbook for this this you just have to keep going. The market should be able to see that is there comfort in that i think there is comfort in that i think we should be comforted that the central bankers at the fed at least and now seemingly at the ecb are really coming around and saying what theyre supposed to say as central bankers. There is one twist and it is qt and how they manage the balance sheet, sara. That will be an additional confusion point for the market as we move through this more delicate period. But i think well get through it and i think they know what to do if solving an inflation problem, hes exactly right, this is not the Rocket Science that ben bernanke had to come up with in the end of 2008, beginning of 2009 and go into a laboratory and design the qe programs and every other ff under the sun it was crazy what we had to do there. We dont have to design anything, we know exactly what to do. Sell assets, let them run off and raise rates. It aint that hard. So what is the playbook then, anastasia, for investors you say cash is interesting. Do you go back to defensive groups like staples and utilities and health care if a recession looks increasingly likely and a harder one at that . I think you can but you need to think outside of equities as well theres definitely parts of fixed income that is attractive. But multi Family Residential real estate is one of the opportunities. I might disagree just slightly in terms of the fed knowing exactly what to do sure, they can raise rates, but of course its problematic for the equity markets but the point is even if they raise rates, they can fix shortages. The reason why shelter inflation continues to run so hot is because weve underbuilt homes and apartment units. If you look at the vacancy rate in the multi Family Residential real estate, its like 4 . So what do you think is going to happen they might slow demand somewhat but they cant fix the supply issue. So against that backdrop, i expect to see market rent growth for some of the apartments even if we eventually do go into a recession scenario, apartment rents are sticky thats the last thing that individuals dont pay. So i think the multi Family Residential real estate could be both an offensive and a defensive play in this environment. Well, they can keep crushing demand so there is no more supply issue if theres not enough demand for it anastasia, i see you nodding, david, weve seen that before. Thank you both very much by the way, u. S. Rental inflation increasing 0. 7 in august that was the biggest increase since 1991 lets get a check on technology as the nasdaq sees the sharpest declines of the major averages heres a look at the nasdaq 100 heat map right now tells you everything you need to know theres not a single winner in that group the biggest drags, apple, microsoft, tesla, alphabet, sharp declines across the board. That is why the nasdaq is down so much. Remember, the nasdaq has been the most sensitive part of the stock market due to rising Interest Rates and thats the story today. The 2year yield at 2. 76, highest since 2007 on the idea the fed will have to go even farther in this inflation fight as inflation proves to be longer lasting and more difficult to contain than expected. Our reporters are standing pie with a closer look at some of the subgroups. Steve kovach is covering mega caps, Julia Boorstin watching the social names mega cap tech is having a rough day. Apple is off over 5 , erasing yesterdays gains. Yesterday it was up over 3 with analysts chattering this week about early iphone 14 sales data showing more people choosing the expensive pro models over the regular 14 over to microsoft, down 4. 5 . Amazon 6 down alphabet around 5 down. Julia will tell you about another mega cap pretty soon thats faring even worse, sara. Well get right to that, steve. Thank you. Julia boorstin on the social stocks not faring much better. Yeah. In fact social media names, most of them are falling even more than the nasdaq has suffered today. Meta shares, they are off the most, down nearly 9 snap shares are down nearly 7 pinterest faring a bit better. Those shares down about 4 but there is one outlier in the social space here. It is twitter. That stockes up about 1 this after the whistleblower didnt say anything about bots, which are the crux of elon musks argument that he shouldnt have to follow through on his deal to buy twitter of the and twitter shareholders just two hours ago voted to approve that deal, very much as expected back over to you. Julia, thank you. Wisdom tree cloud etf on pace for its worst day here in three months Frank Holland with a closer look at some of the movers in that space. Frank. It might be the poster child of what were seeing in cloud stocks shares down 10 on rate worries. Strong earnings earlier this month the catalyst the hotter than expected inflation, what it can mean for rates putting pressure on many high growth names. Data dog down 7 it was getting lower than it was earlier. You see stocks like cloud flare do down 10 many investors were believing we were seeing the bottom when it came to cloud stocks wedbush says this could be a buy the dip moment. Frank holland, thank you. Well, the overall inflation number may have eased a bit but grocery inflation is getting worse. Just wanted to zero in on food prices in august, u. S. Food prices at home, which is grocery, were up 13. 5 and that is an acceleration from null which is 13. 1 its the 15th consecutive monthly increase fruits and vegetables up 9. 4 . Poultry up almost 6 Dairy Products really strong on the pricing. Ice cream and milk up 16 . Cereal prices brutal rose 17. 4 fats and oils up 21. 5 it shouldnt be too shocking for investors because weve heard from all the major food manufacturers during earnings and interviews here that they are still raising prices but they havent been as aggressive about the price hikes as they were talking about a few months ago and perhaps thats why some of these price increases are moderating a bit dont get me wrong, theyre still expensive but we are seeing some of the jumps in prices coming down in spots like soup, baby formula, fruit and meat and the overall monthly increase in food at home from july to august was 0. 7 , which was actually not as big of a jump as we saw in july so perhaps some glimmers of hope that we may be at or near the peak on grocery stwhags. Wholesale food inflation is out tomorrow that will be a clue because thats earlier in the whole production process but so far its still painful. I dont have to tell you that if youve been to the Grocery Store lately for more on the impact of food inflation, lets bring in wingstop ceo, michael skipworth. We thought of you because last quarter you were talking about deflation in chicken wings is it just bonein chicken wings where this is happening . Sara, it is we are seeing meaningful deflation in our business. Bonein chicken wings represents 65 of our cost of goods sold. And were seeing a benefit in our p l year over year of over 1,000 basis points so truly a unique position for wingstop. What about some of your other costs, what are you seeing obviously its more than 60 , chicken wings are the greatest, but there are other ingredients. We are seeing inflation across parts of our other commodity basket in addition to that were in a really unique spot because we have a really strong outlook from the back half of the year from a sales perspective were pulling a lot of growth levers one of those is the recent launch of a chicken sandwich which sold out in less than one week in six days we sold over a million chicken sandwiches. Because of the inflationary environment and the strain that the consumer is under, michael, weve been hearing increasing evidence that the consumer is staying at home and cooking at home more. I heard that from rodney mcmullen, the kroger ceo, just a few days ago have you seen that in your restaurants . We havent seen it show up in our business wingstop is an skindulge in occasion its a once a month frequency with our guests. If theyre pull back from restaurant visits, they save up and want to treat themselves on that wingstop occasion so weve been able to retain those visits and our top line momentum but adding things like expanding our delivery channel to add uber eats as a provider as well as that chicken sandwich are allowing us to continue to bring new guests into our business and ten to strengthen the unit economics. Well, the restaurant s p stocks are down 2 today, michael, on concerns about the economy and that spending with these inflationary numbers we appreciate the color from your business at wingstop. Michael skipworth. Lets get a check on where we are right now as were in the final hour 40 minutes left of trading the dow is still down more than 1100 points. The s p 500 is down almost 4 . This is one of the worst days weve seen of the year every sector lower right now look at the nasdaq, down 4. Almost 7 . Joining us is Richard Bernstein whos been bearish this year, richard. I dont know if you had changed your tune at all on signs that inflation was easing, but today was a real wakeup call for that moment how do you think the market and the fed is going to process this number so, sara, you know, for more than a year now weve been arguing that there were going to be three phases of inflation the first was going to be that people would think it was temporary, and we heard that from the fed they used the word transitory. The second phase is people would say its worse than we ever thought. And the third phase would be its never going away. And i think today is the first time were starting to hear people talk about phase three. Not using those words, but thats kind of whats in the backdrop here is, gee, this is lasting longer than we ever thought. Its not going away. The fed is going to be tightening for longer than we ever thought thats kind of been our story is that the cycle was not going to be shortlived, that you dont fight inflation in a matter of months. That Economics Team tries to go with consensus first. Theyre talking about a 100 basis point hike next week but odds in the market have moved up to 20 or so that that happens do you think that the fed should do that . Would do that . Sara, weve argued for a long time the fed should be more aggressive than they have been i think thats still the story heres the way to think about it if you look at the real fed funds rate, fed funds minus the inflation rate, it is still for all practical purposes historically negative. The fed has never been this far behind inflation that argues that were mor