the markets opened moments ago with
investors on edge after stocks had their
worst day by far in two years the dao
nasdaq and smb all went into a free fall
yesterday it is the fourth time the dow
fell more than 900 points this year
alone
something that never happened last year
investors continued to worry about
inflation and the odds of an upcoming
recession especially after retail giants
like walmart target and lowe's all
posted extremely
disappointing earnings for the first
quarter joining us now co-anchor of
cnbc's squawk box andrew ross sorkin and
columnist for insider lynette lopez
lynette i can't wait to get to your
column but first what's going on with
these uh big companies um and the end
these earnings reports andrew
well what's really happening here is
costs are going up this is inflation
writ large we're feeling it
we're seeing it
oddly enough the consumer is still quite
healthy the consumers out there the
demand is strong this is what the
federal reserve to some degree is trying
to reduce in a way by making things more
expensive at least short term but what
you're seeing right now when it comes to
target when it comes to walmart when we
come to lowe's and by the way we saw
this a little bit early on with amazon
is just the costs the cost of doing
business are so much higher the cost of
shipping things is so much higher we're
seeing in the price of gasoline all of
that
is is contributing to a situation where
the companies have been eating some of
that cost so in a in a perverse way
prices actually haven't gone up as much
as perhaps they should have meaning
target walmart they were holding the
line on prices
and eating the cost that means that
their margins their profit margins have
gone down and that's what's hit the
stocks but what it also says is that it
is very possible we're going to start to
see much higher prices from those
companies in the future and then the
question is will that actually reduce
demand because the customer won't be
paying it anymore all of what andrew's
saying leads what lynette calls to
the summer from hell in her latest
column wall street is heading into a
summer from hell top investigative
investors say it's going to bring a near
biblical reckoning to the market lynette
writes this quote after years of
inflating it's becoming clear the
everything bubble has burst since the
start of 2022 the s p 500 has fallen by
more than 18 percent the tech heavy
nasdaq down nearly 30 percent a
punishing combination of still hot
inflation hiked interest rates war in
europe lockdowns in china unprofitable
companies facing reality and recession
fears is making it clear this isn't just
a short-term drawdown it's a pivotal
shift for markets she continues unless
you are a seasoned practitioner i
suggest you avoid looking at your 401k
until next year
no one really knows where the bottom is
and no one really knows what's going to
happen next so you lay it out pretty
starkly there what are you hearing from
people on wall street what are you
hearing from some of these companies
about where we're headed well you know
me i don't like to be dramatic but i am
hearing that this is going to continue
for months and months and months and you
have investors saying that the s p could
go down as much as 40 the nasdaq could
go down as much as 80 percent and that
actually is analogous to the 2001 uh
2002-ish tech bubble that burst um we
have and the tech sector is going to be
hit the hardest here too and we have a
lot of unprofitable companies in the
tech sector that we're just using debt
to fuel growth but when interest rates
go up you have to pay back that debt and
if you're not making any money well then
you're sunk and these are big companies
these aren't small companies this is
like uber that you know um they also did
things like wework did where they came
up with their own metrics to value how
much money they were making you know
wework have like community adjusted
ebitda whatever um uber makeup makes up
its own metrics to show that it's a
healthy company
there's so many of these things going on
in the tech sector and because the
market is now being more careful about
the money and where it goes
well they're all gonna
poof oh man is it is it just inevitable
lynette that a recession is going to
happen
i don't know if it's inevitable you know
the stock market is the economy in the
stock market it's not the economy you
know you have to remember that um
it's possible for certain sectors to
have a really bad time without the
overall economy going into recession but
we have so many factors grinding down on
our economy right now there's not just
the fed raising interest rates it's
commodities prices going up because of
what's going on in russia and ukraine we
have you know this uh issues in china
with covet meaning that the supply chain
is still very very messed up um and we
have you know
americans are scared they're getting
more nervous and when americans get more
nervous they start to be more careful
about the things that they're buying and
you know people might um have a hiring
freeze at their company or you know
decide that they don't want to purchase
certain goods and that will slow us all
down uh
we're hoping we're hoping that the fed
can stick the landing
that the economy will just slow not go
into recession and that you know prices
will lower and calm down as this
frankly
like calamity of different events
depending on the economy just kind of
fades hopefully but none of that's going
to happen this summer so for the summer
hold on to your hats the stock market is
going to just puke so andrew we've heard
publicly now from the leaders of some
financial firms that's likely not for
sure but likely that we're headed toward
recession uh what are you hearing from
the people you talk to every day
well i'm i'm not going to take the other
side of the net because i think she's
right that there will be a puke if you
will but i'm not sure it's going to
happen this summer in fact some of the
technical analysts are suggesting that
it's possible that actually things could
flatten out be very volatile this summer
but then i think the real question is
going to be what happens this fall and
and there i think you are going to start
to see a market shift and it could be
downward having said that the market is
always sort of a is trying to
prognosticate what the world looks like
12 months from now 18 months from now
rather than what it is today so it's
possible that a lot of this is sort of
being moved forward if you will if you
can sort of put your brain into a bit of
a time machine as to how to predict what
that world will look like and the truth
is that when you look at where prices
are today in terms of the stock market
things are pre-pandemic um
in some ways that makes sense in some
ways it doesn't pre-pandemic was still a
little bit of alice in wonderland if you
remember because things were actually
quite good and some people thought they
were too good so there may still be
some some movement on the downside but i
will also tell you there are some people
on wall street that are thinking to
themselves
if you are playing this if you will for
the long term 10 years out five years
out even that actually as these prices
get low and everybody freaks out that's
when you're supposed to be buying i'm
not suggesting that but i know a lot of
people look at these moments and they
think i should be selling that's usually
not the right answer either
okay cnbc's andrew ross sorkin thank you
and insiders lynette lopez thank you
both very much
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