Power Lunch - 16-Year Highs, Bankman-Fried In Court 10/3/23

Episode Date: October 3, 2023

There’s no stopping the sharp rise in bond yields, hitting a new high today around 4.8% -- the highest level in 16 years.  And it’s having a big impact on stocks. We’ll tell you all you need to know.Plus, the trial of former FTX CEO Sam Bankman-Fried is underway. The man who became the face of crypto corruption is accused of defrauding customers and investors out of billions. We’ll get the latest details. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Well, the Dow is diving, folks, but Power Lunch must carry on. Welcome alongside Kelly Evans. I'm Tyler Matheson coming up. There is no stopping that sharp rise in bond yields. A new high today around 4.8. We haven't seen that level in 16 years, and it is having, as you will see momentarily, a big impact on stocks. Plus, the trial of Sam Bankman-Fried begins today. The man who became in the face and hair of crypto corruption is accused of defrauding FTX,

and investors out of $8 billion. We will get the latest, Kelly from the court. But first, let's get a check on these markets. As Tyler mentioned, diving lower. The Dow down 468 points, now 1.4%. Fresh session lows here we've hit just in the past half hour or so. The S&P's down 1.5% to 4223, and the NASDAQ is down 2%. The 10-year yield continues to climb today.

It was before the economic data. The joltz showed more job openings. It continued afterwards. It's continued in spite of some relatively Dovish comments from Bostick that we heard last hour, the 10-year yield just around that 16-year high at 4.789 percent. Meantime, a couple of stocks to tell you about McCormick, the Spice Company reported today. Earnings were lower than last year in line with estimates. Sales also fell missing estimates. That's why the stock is off today by 8 percent and 17 percent so far this

year. Airbnb also lower. Key Bank downgrading the stock, saying the tailwinds, which have been helping the company, including that post-pandemic travel demand, are starting to slow. Airbnb still up 50% year to date, Tyler, but down almost 6% today. All right. Thank you, Kelly. We begin with breaking news at the Capitol in the effort to oust Kevin McCarthy as Speaker of the House. It is coming to a vote, several votes likely here right now, and let's go to Emily Wilkins on the Hill. Emily. Hi, Tyler. Well, yes, Speaker Kevin McCarthy's speakership is in a very perilous position right now. We know that there are at least six Republicans who have said that they will back an effort to oust them. And we have a number of Democrats as well who

seem to be doing the same. I mean, just listen. We spoke with a number of Democrats this morning as they left a big caucus-wide meeting. This is what they had to tell us. We encourage our Republican colleagues who claim to be more traditional to break from the extremists in the chaos, in the dysfunction, in the extremism. So that was. Speaker Hakeem Jeffries and he has come out and said that Democratic leadership will be voting against McCarthy so not saving him potentially going to a spot where we're not even going to have a speaker of the House. Now right now the House is taking a bit of a preliminary vote. They're deciding on whether or not to move forward with that actual vote to oust McCarthy. If they do decide on moving

forward, that vote could occur as soon as this afternoon and then we could be in a spot like we were a little bit back in January where you're seeing roll call votes and Republicans try and figure out who the speaker is. Now, at this point, it's not clear who if anyone could really succeed. McCarthy, a number of Republicans have told me that they will continue to back McCarthy, even if he does get ousted. But at this point, Democrats, and we talked to a number of them, listen to what they had to say. They just say that there's really no trust left with McCarthy. This is someone who betrays his word on pretty much a daily basis. That's not someone we ought to trust to run one of the most important institutions in the country.

I'll be voting against him. He is not trustworthy, and I think you can see that within his own caucus, but you can certainly see it the way he's treated us and the American people. We are following our leader, and we are not saving Kevin McCarthy. As you can see, a lot of trouble for Kevin McCarthy. He's lost the trust of many in his own party. He's lost the trust of Democrats, and even though a number of Republicans still still support him. It just doesn't seem at this point that it will be enough. Of course, we'll be monitoring

the situation throughout the afternoon, but there is a very real chance that by the end of the day, this house could no longer have a speaker. And what happens, Emily, if that happens? Emily, did you hear my question? What happens if there is no speaker of the house? Hello? Looks like we don't have Emily's return there. So we'll let that question just linger there in the air, Kelly. And we should add, it's not helping market mood as we move towards that outcome. Stocks are falling sharply as yields also continue to jump, and yields are jumping in part because of fiscal problems in Washington. The ripple effects hitting not just those traditionally interest-sensitive groups, but really lots of different kinds of them. Bob Bassani has more

from the floor of the New York Stock Exchange. Bob. And Kelly, rising rates creating havoc in the stock market across the board. Now, there's obviously the traditional yield plays that are having the problem. Simply put, reits and utilities, the old yield plays, they really can't compete with 4.7% treasuries. But there's a secondary group here that's getting hit. There are plenty of capital-intensive industries out there that have borrowing costs that are going through the roof. Two simple examples, clean power and biotech. Look here, Next Era energies, Renewable Energy subsidiary, that's Next Era energy partners. They just recently announced that they were reducing their growth expectations downward because of higher borrowing costs. You see how that is cratered.

That's affecting the entire area, but borrowing costs going up for renewable energy deals at this point. Another one to look at is biotech stocks. You'd think what would they have to do with higher rates? But biotech is very capital intensive. They have to borrow a lot of money. That is affecting them. Also, many of these stocks, this is a new 52-week low for the biotech ETF. Many of them are small cap stocks. They're affected even more because banks are more reluctant to lend to smaller cap companies. This is creating a very unusually rich environment for yield hungry investors. Look at these traditional yield plays. For example, Altria, Verizon, AT&T, Simon Property Group. These are now yielding 7, 8, 9% yields. Is this a lot? Oh yeah, this is twice what these

yields were just a short time ago. Most of them were in the 3 and 4% for many, many years. Bank yields also going up rather dramatically. Key Corp, for example, some other ones like Truest, Comerica, they're also in the 7 to 8% area. Tyler, great environment if you want to go out and get yields, but a little bit risky because obviously prices moving down means you're not really getting as much of a return as you think you are. Tyler? All right, Bob, stick around. I'm going to lean on you for a little history here in just a moment. As bond yields continue to rise to levels we haven't seen in many years. The setup for the markets is reminding a lot of seasoned Wall Street professionals of what

happened in, yes, 1987. Let's bring in Art Hogan, chief market strategist with B. Riley wealth management. Art, welcome. I don't mean to overstrain that analogy because there are a lot of things that are different between now and then, most especially perhaps the presence at that time of something called portfolio insurance, which contributed to the, to the unwinding of stock prices. But the things that are similar are that there was a rising market during most of 1987,

as there had been up until the last month or month and a half or so here in 2023. And the other thing that was similar was a rapid rise in interest rates, which has certainly been the case here in this country over the past year and a half. So how far off is the idea that conditions are not totally unloading, like what was at hand in 1987. Tyler, I think it's a great question. I think it's worthy of looking into, but I certainly think it's important to remember where we were at 87.

So coming in October of 1987, the market's up 44%. It was up nearly 250% over a three-year basis. So flash forward to today and say, okay, we're flat. The market's flat over a two-year basis, and we're up, you know, call it single digits on a year-to-date basis. So clearly the market hasn't sort of, to follow that similar pattern. We didn't have that irrational exuberance that existed in the mid-80s, culminating in the month of September of 87. So I think that's one major difference. I think the

order of magnitude that Treasury yields run up is also a major difference. We went from 6.3 to 9.2% in treasury yields in about 40 days, right? So the markets, you know, when you talk about the markets largely ignoring that, the markets went up while that was happening. I would argue right now markets are in lockstep with yields. We're not ignoring what's going on in the Treasury curve were actually pinned it. So, you know, for the market in August and September, has looked at one thing and one thing only, what's going on to yield on the two year and the 10 year. And that is driven market activity. So to me, I think the difference is almost the polar opposite. We're paying hyper attention to what's going on the end curve and not ignoring

it very much like we did back in October 87. Bob, Art has just skillfully demolished my metaphor there. Would you like to pile on or add anything? The concern that we, if you want to go back 40 years, the concern for the markets in the late 70s and into the early 80s was stagflation. That is, we had a weak economy and we had high inflation. I don't see that right now. The Joltz report may give the impression we have a really strong jobs market, but at the very least, the economy is very stable right now. There might be concerns about where it's going to be six months, but it's stable. And inflation is coming down, notwithstanding the strong.

report that we saw today. So these arguments that somehow stagflation is going to be around and come back and haunt us for a long time, I don't see that right now. I just see us repricing interest rates to where they were back before into 20 years ago, which I don't think is necessarily a bad idea. I don't think it's a bad idea for savers to get a little bit above the real rate of inflation, which is where you're doing it right now. You're getting 5% you're getting roughly a 2% real return. I think that's probably the way it should be. And even though I know the stock market's having a hard time adjust to that,

I don't think that's necessarily a bad thing. That's a much more normal historically, if you want to talk about history, than what we had in the prior 10 years. Art, there's one kind of missing piece of this, which is why I find the Washington machinations so fascinating right now is that we haven't had 5% when we've had the deficit this large and the debt as large as it is.

And I think investors are looking at this and saying, unless they hear the Fed or some big buyer coming to the rescue of all this treasury supply, they're going to test just how high yields need to go. And it's both the level that they're at now with that fiscal backdrop and the speed at which the move has happened. I'm not sure we've really seen a full reset of this in the markets or in the economy yet. Yeah, that's a really good point, Kelly. And I think, you know, in order of magnitude, when we think about how much debt we've accumulated over the last few years, obviously the pandemic piled on a lot of that. And then massive fiscal spend after that in the natural occurrence. of not having the kind of capital gains taxes that we should have seen two years ago because the market was down both in equities in fixed income, likely plays a larger role than we talk about a lot.

I think the important thing to remember, though, is that when, to Bob's point, we have gone from being concerned about stagnation or a recession in the front half this year to be concerned about the fact that the economy is actually too strong, and that's what's driving, in a real sense, that's what's driving yields higher. So at some point in time, we'll get out of this county. intuitive, good economic data is bad for markets, and we'll probably stop watching the Treasury curve goal parabolic. The 95 basis points over the course of September and in October is a massive move in a short period of time, no matter how you slice it. I think when you look at any kind of chartering and a technical indicator, we've probably stretched it as, you know, likely

as far as it's going to go. There's no magic number to say that that's going to be the top. I certainly think we've outpaced that. We've outpaced it. We've probably stretched the move in the dollar. we certainly stretch the movement and oil. And I think all three of those are then drivers for the risk offset of it. We've seen over the course of the last. Art, very quick five-word answer, if possible. Last week in a poll, we asked investors like you what they think the best investment for the last quarter of this year will be. There were treasuries.

There were equities. There was oil. There was real estate. There were several others on there. If you had to say right now, best investment for the remaining three months of this year, it would be. It's going to be equities. I think equities are going to outperform the back up this year. all three of those things that are popping are going to compound the dollar oil and certainly

treasury yields and we're going to have a we're going to have a fourth quarter run I expected the post-cented in the positioning is washed out here but I think we're set up for it's one quarter rally all right the poll results indicated treasuries but with equities close behind art hogan bob bazazzani thank you okay and keep an eye on markets because the yield on the 10 years about to hit 480 and the dows down 500 points coming up we'll go live to the courthouse and lower where the trial of Sam Bankman-Fried is beginning with jury selection. And as we had to break, here's a look at treasuries right now. We have the 20-year, by the way, which is more ill-liquid. Over 5.1%. It's not even on that board, but the more important tenure you can see just a hair below 480,

the 30-year just under 495. And stocks are reacting quite poorly. We'll be back after this. Welcome back to Power Lunch with the Dowdown now more than 500 points. Jury selection beginning today in the trial of FTX founder Sam Bankman-Fried. Our Kate Rooney is live outside the courthouse in lower Manhattan. Kate? Hey there, Kelly. So the jury and potential jurors broke for lunch. They're now back inside the courtroom.

Jury selection is underway. Sam Bankman-Freed watched all of this today from the defense table. He had a new haircut. See the court sketch there. He is in the front of the courtroom there. The potential jurors, they're back. And we have heard a little bit about some conflicts of interest. They've already dismissed some potential.

jurors. One works at a venture capital firm that actually invested in FTX and Alameda inside partners. There's a lot of talk about some of the media coverage. One potential juror said he listened to a Joe Rogan podcast about it. So there's a lot of awareness about this story ahead of the trial. Judge Kaplan saying that these jurors are going to pretty much have to live in a bubble for six weeks. He said no Googling, no reading news, can't listen to the radio. So they're really going to try to have to not consume any media or news during the span of this trial. here, the list of questions he plans to ask. On that, you've got, do you have a negative opinion about cryptocurrency? Also, if a crypto company fails, you feel that only the owners are to blame.

And then questions around, do you have any negative opinions about amassing wealth to give it to charity? So effective altruism, as it's also known. Also talks about Sam Bergman-fried having ADHD. They plan to ask people to raise their hand if they've never had any personal or professional experience with ADHD. They say it's going to potentially affect Sam Bankman Fried's mannerisms and body language in the courtroom. Bankman Fried has pleaded not guilty to seven counts of fraud and conspiracy. This was over the collapse of what was once a $32 billion crypto exchange FTCX. He has been in custody since August. He's argued that he didn't know about some of the financial issues going on at FTCS despite being the CEO at the time. Prosecutors need to prove intent

here on the side of Bankman Fried. Four of his top lieutenants, though, have pleaded guilty. which legal experts say that it's going to make it especially hard and challenging for the defense here. At least three of these executives do plan to testify. We'll see if Bankman Fried actually testifies. The judge addressed Bankman Fried directly at the start of today, saying you have the right to testify, even if your legal team advises you not to. The judge said, raise your hand if you want to testify. He can essentially stand up at any point, but really directly was speaking to Bankman Fried there.

Kelly, Tyler. So of the former FTX, executives who have pleaded guilty. Did I hear you say that all of them are expected to testify at this trial? And how damaging, I assume, would their testimony be to Bankman Free? So three out of, yeah, three out of four, Tyler, plan to testify from what we know. So you've got Caroline Ellison, who was the head of Alameda Research, that's the hedge fund that was involved here. Also, Bankman Fried's former girlfriend. So we're expecting a more personal account from Caroline Ellison. And there's a lot of interest around her testimony in particular. Gary,

Wang, Nishad Singh, who are other top executives and really part of Sam Beckman Fried's inner circle. He had a very close-knit group of executives living in the Bahamas with him. They have already pleaded guilty. They're working with prosecutors. And Caroline Ellison at least said that she knowingly committed fraud. It's an uphill battle for the defense team, and that's not seen as great news for Bankman Fried. And the fourth executive, Ryan Salem, did plead guilty, pleaded guilty, but we do not expect him to testify. All right. Thank you very much. Kate Rooney.

Coming up, social media's new revenue stream, Meta reportedly plans to charge users in Europe a fee for access to ad-free versions of Facebook or Instagram. Not unlike the streaming service model. Will users pay up or log out? Power Lunch? We'll explore that when we dig into the Metaverse. All right. Welcome back to Power Lunch, everybody. The Dow is down 504 points right now. Nasdaq off 2% as stocks get hit hard by a sudden. surge in interest rates. The Dow utilities average down more than 7% in a week, but not all utilities are equally impacted, and Pippa Stevens explains. Pippa. It's been a tough run for utilities earlier today. It fell to the lowest level since May of 2020. Yesterday, it dropped almost 5%, which is a move, you know, of which we don't usually see that big of a swing for the utility sector. And so as we've discussed, they're getting hit on both sides. So the first is that they have a lot of debt because

they are very capital intensive, so when rates go up, their costs go up. Then also, they're seen by investors as a bond proxy, and investors want their dividends, and those dividends look less attractive when rates rise. So the pace at which rates are going up has certainly accelerated, but we have been dealing with higher rates for a while now. So the question is, why have we suddenly seen this big sell-off? And John Barlett from Reeves' asset management told me it all started with last week with Next Era, and that now we have a crisis of confidence within the industry. So Next Era last week said that a drop down of one of their assets to Next Era Energy Partners, their subsidiary, they were not going to do it anymore because they got too expensive.

So then the market took the next step of saying, well, if they don't get money from that, are they going to have to raise more capital to fund their operations? And then Next Era Energy Partners also significantly cut its cash distribution outlook because they no longer have that asset, so they're not growing their rate. And so there's just a lot of headwinds for the industry right now, but he said you can still focus on companies that have good balance sheets. So that's names like DTE Energy, CMS Energy, and NYSSource. So the whole sector is kind of coming down with Next Era,

but there are a lot of different stories within the space. All right. Pippa, thank you very much. Pipa Stevens. Yeah, high-yielding parts of the market have not been a place to be lately. Ahead on power lunch spinning the wheels, why the UAW strikes put a dent in car sales, or could accelerate them for now, at least. We'll get the latest read on the auto market after the break.

Automakers today reporting their September sales numbers. Of course, the strike hanging over the entire industry right now. Let's bring in Phil LeBoe with some numbers. Hi, Phil. Hey, Tyler, you know, the strike was only the last two weeks of September. So impact on September, limited impact on Q3 sales. It's really not seen. Let's start first off with General Motors, seeing an increase of 21% compared to Q3 of last year.

More importantly, the inventory is at the highest level since the third quarter of 2020. That will be important, especially if this UAW strike stretches out and then we see an impact in inventory levels for GM. As far as the foreign automakers, all posting a healthy increase in Q3 sales. That's because the supply chain has improved dramatically compared to last year. As a result, sales are up across the board, really for everybody. And when you look at where we are for 2023 annual sales, most believe we're going to come in at about 15.2, 15.3 million. If that happens, it will be the highest annual sales since 2019. Guys, back to you.

All right, thank you very much, Phil. Phil LeBoe reporting from normal Illinois. And the UAW strike may not be putting a major dent in U.S. auto sales yet. But there are ripple effects emerging as Ford and GM just laid off another 500 factory workers combined. In total, more than 6,000 workers across the big three and their suppliers have been let go as a result of the walkouts. And current estimates, well, they show the strike has resulted in 325. million dollars in direct wages lost. Let's bring in a former auto insider now to discuss the impact as well as the tightening EV race, Mark Fields, the former president and CEO of Ford. He's also

a CNBC contributor. Mark, it's great to have you here. Would you have done anything differently so far? Well, from an automotica standpoint, I think they're doing exactly the right thing, which is, listen, they don't disagree that a raise is an order for their employees. The issue right now is the size of ask. And, you know, what they want to do is they want to make sure they have a fair agreement for both their employees, but also the company. So it doesn't really cripple them with uncompetitive labor costs, particularly as they face off with EVs, with folks like Tesla and some of the other new startups. So I think they're doing exactly the right thing. They're getting more aggressive with their communications because, you know, the UAW has been out there with a very unconventional

approach on talking about the status and the negotiations. And, you know, you usually do have a degree of rhetoric during negotiations, but this has been over the top. And I think the automakers now are starting to fight fire with fire and lay out their view of the status of the negotiations and how important it is to keep their business competitive, but also make sure their employees are rewarded with record contracts. I was somewhat surprised to see, Mark, in some of the requests, I'll call them that, the UAW, that the company's return to a traditional pension plan, a defined benefit plan. How unusual do you think that is? Does it have any chance of getting through? It feels so

well, 1970s-ish. Well, you're exactly right, Tyler. I mean, these are benefits that were done in a different time with actually a different number of competitors as well, as you've seen from the likes of Tesla and other EV competitors, which really is the future of the marketplace. But listen, going back to define benefit plans, that would actually add billions of dollars to the cost structures of these automakers. And they just can't afford that. They cannot be uncompetitive. And at the same time, you know, where's the win for the UAW if their employer becomes uncompetitive and gets marginalized over time? So I see that as one of the lower priorities in terms of the UAW, in terms of their non-w demands.

But if they stick with that, you know, this could be quite an extended strike because I think all the CEOs in the Detroit 3, they live through the Great Recession. They've seen what some of these excess benefits versus the competition could do their business. And they don't want to recreate the past. Mark, so to quote kind of analyst Dan Ives, we spoke with on this program. yesterday, he's quite concerned that if all the demands are met, that the big three won't be competitive in the EV race going forward. Do you think he's right? Well, I think if you take it face value all of the demands that the UAW is making, and keep in mind,

Kelly, I mean, this is about negotiations. So, of course, you put all of your demands out there, understanding that you won't get all of them. But, you know, hypothetically, if they were to get all they wanted in their demands, I mean, it would make the automakers extremely uncompetitive versus the likes of Tesla. I mean, right now you have about a $20 an hour difference in the labor costs between the Detroit 3 and Tesla. That's only going to get widened. And if you go, you know, the full Monty on all of these benefits,

then it becomes a very, very difficult future for the automakers. But I don't think it'll end up that way, but clearly they're going to have to find ways to offset that in other parts of their business. How do Chinese competitors figure into these negotiations? Well, you know, right now, Tyler, you know, as you think about it, there's no Chinese vehicles that are sold in the U.S. And obviously you're well aware of the geopolitics involved in this going forward. But I do think, you know, these, the Detroit three are global automakers and they have to compete around the world. And what the Chinese are doing, if you look at BYD for a.

example. I mean, they came out with their sales results. They're, you know, they're second to Tesla right now and gaining on them. They're profitable. The Chinese market is extremely competitive. Their domestic market. And when you're when you're competing at the coal face of these very, very competitive makers in China, they're going to take those cost advantages and take them to other parts of the world like they're starting to do in Europe where they've gained considerable share of the EV market. And now, of course, the Europeans are waking up to the fact that that could potentially damage their domestic automakers. So we'll see how that plays out. But nonetheless, you know, they are kind of setting the pace, if you will, for EV costs around

the globe. Yeah. It's a really interesting time in the business where you've made your career. Mark Fields, thank you very much. We appreciate it. You bet. Thank you. Well, a worsening sell-off on Wall Street right now. The Dow has been down more than 500 points, now down about 480, but what's 20 points among friends? Nasdaq down 2%, the 10-year yield hitting a 16-year high of 4.8%. So let's bring in Mike Santoli now for more on this sell-off. Mike, what do you make of what's happening today and why? Well, Tyler, it's still this sort of three-legged race where bonds sell off in a kind of indiscriminate way and it drag stocks along with it. So we have this very across-the-board repriced. of stocks in line with the losses in bonds, which of course means yields going up in bonds.

Today, you had that extra little push from the Joltz numbers, as we've been talking about, August Joltz, stronger than expected. Labor market maybe is tighter than we anticipated, which is an extra piece to, I think, the assemblage of things that are driving the weakness in treasuries, which has mostly been, I think, a focus on supply, the Fed's message, which has been consistent about higher for longer. And now we say, okay, the economy maybe is even stronger than we thought. responding to some fundamental inputs as well. All of it, to me, computes into finally the stock market, maybe getting closer to a more comprehensive washout

type condition. That's just a short-term tactical thing. That's not telling you whether the economy does well, the market's priced it correctly, but I do think we might be getting nearer to one of those points as we get around 4,200 of the S&P. Or I note this morning, I forget where it was, maybe BTIG, Mike. They were saying the NASDAQ hasn't had a 2.5% down move all year. And then you look at the action today and you think, well, maybe it's today. Maybe it'd be better if it were today because at some point that's the kind of trading activity people are looking for as a flush. Yeah, we do get to that stage, Kelly, where it's sort of like we need it so bad it's good type of environment. You know, nothing ever lines up everything all at once perfectly.

But it's starting to build. I was noting kind of on Friday and yesterday that last week's conditions came just toward those levels everybody was watching. we got, everyone says, oh, we need a 20 plus VIX. We got to 19.7. We need to get down to test the 200-day average. We came within a percent of it. And we didn't, you know, so people over-anticipate the tactical relief rally. Obviously, if bonds show no quit in terms of the selling and the rise in yields, it's going to be difficult to really to get something going with stocks. But I do find it interesting that it's now combined with, hey, maybe the economy can handle it for now, but that means things have to get restricted. enough in the long-term bond yields are trying to find a spot that gets restrictive enough to where the economy won't be okay. So that's to me what the market's struggling with. You know, this conversation just reminds me once again, Michael, something I've always got to have to think about. And that is that rising bond yields does not mean that bonds are doing well. It means that bonds are selling off. Absolutely. And so what you have here is bonds selling off and stocks selling off at the

same time. Bonds have done worse than stocks this year if you own the S&P 500 in terms of your total return. And it really is a return to the pre-2000, year 2000 days when they more or less did run in lockstep as opposed to being offsetting factors in a portfolio. We'll see if that continues. But you're right. So this idea that, oh, stocks are going to have trouble with high yields because everyone's just going to flock into bonds. And what happens every day? There are more sellers than buyers and bonds. It's not people flocking to bonds. Yes, people. you know, throwing them out of the portfolio. Oh, those flockers.

All right. Thanks, Mike. Appreciate it. All right. Let's get back to Emily Wilkins for the latest out of Washington. Emily, what can you tell us? Hey, Kelly, well, as we speak, the House is taking a critical vote. Now, this isn't the vote that will oust McCarthy. But basically what has happened is Matt Gates has come forward. He has tried to make that motion to get McCarthy out of his speakership.

An ally of McCarthy's has moved to block that. and the House is now basically voting on whether or not to proceed. So it wouldn't be until this afternoon at the earliest that we actually get to that critical vote that McCarthy's future hangs on. But at this point, things aren't looking good for the Speaker. This vote is a bit of a test vote, testing the waters. And so far, and nothing is finalized yet, but we are seeing 10 Republicans who have voted basically against keeping McCarthy in his speakership. And they so far have been joined by the entire Democrats. Any Democrat who has voted at this point is voting against McCarthy.

was the sense we got when we spoke with Democrats this morning. A lot of us said, look, we can't trust McCarthy anymore. He's gone back on numerous promises. They're unhappy with some of the things that he said over the weekend, trying to blame Democrats for a potential shutdown. There's just a lot of frustration at this point. Congressman Dan Kildee from Michigan basically said, look, you know, Republicans are in a chaos state right now, and it's not our job to come in and to save McCarthy. So at this point, McCarthy is still speaker. He's still going to be speaker after this vote, but he is really in a perilous spot right now, and that could absolutely change by the end of the day. So if this vote does not carry and the people on the sidelines

line up against it, that means that there will be a vote to kick out Kevin McCarthy, right? That's absolutely correct, Tyler, and this is something that the House really has not seen in at least a century, and not in the way that it was brought up. I mean, this is very unprecedented to see the moves that we have today. And of course, if McCarthy is ousted from his speakership, then we basically revert to what we saw way back in January, where you have a bunch of members sitting around roll call votes, trying to figure out who the next speaker of the House is going to be.

And at this point, it's just not clear. A number of Republicans have told me that they're still going to try to back McCarthy. But at this point, you're hearing other names being brought up. There's certainly a lack of confidence, a lack of trust, a lot of frustration and a lot of confusion about what the rest. rest of this week and potentially even what the rest of this month is going to look like here. All right. Thanks very much, Emily. We'll count on you to bring us the news as it happens. We appreciate it. Well, meantime, CNBC is launching a new initiative to recognize women blazing new trails in business.

Coming up will reveal the details for our first ever change makers list. And as we had to break, CNBC also celebrating Hispanic heritage, sharing stories of influential business leaders. And here is Frank Del Rio, president of Oceana Cruisans. As a first generation Cuban American, both of my parents were born in Cuba, migrated here to the U.S. for political reasons. Growing up in Miami, the cultural melting pot that it is, was always a comforting feeling because I always felt like I was surrounded by folks that understood my heritage and understood the dynamics of my culture.

And now that I'm able to raise my own kids here in Miami, it's really nice because we're we're able to really keep a lot of our own cultural heritage alive. CNBC is launching a new initiative to recognize women making waves in the business world. Senior media and tech reporter Julia Boorston is here with the news. Hi, Julia. Hi, Tyler. Well, I'm very excited to announce that we are launching CNBC changemakers, women transforming business. This is a new franchise and annual list of trailblazing female leaders.

This list of 40 women will be unranked. It will focus on accomplishments in the past year, and it will feature, women from companies across all sectors of the economy, including philanthropic organizations. And we're going to be publishing this list in January. We have put together a stellar advisory board, which will be joining me and the CNBC editorial team to determine the weight of the qualitative and quantitative metrics we're going to be considering to put together this list. The advisory board includes Cheryl Sandberg, Lorraine Powell Jobs, Ken Fraser, Chris Jenner, and Harvard Business School Dean Sri Khan-Dat-Tar.

Now, applications for our list are open as of today. For female leaders, the criteria is to be at a private company or organization, including philanthropic ones, with at least $25 million in revenue and at least one of the past three years or an enterprise value of at least $100 million. For those at public companies, the market cap should be at least $250 million. For more about our inaugural lists and the process by which we'll be putting it together, you can find the nomination form at CNBC. or you can scan right here to apply. I'm really excited to have this opportunity to service the stories of new icons of innovation and leadership. Tyler.

Very, very interesting. We want to ask you about reports that meta also and TikTok are both considering charging users for an ad-free experience. Streamers have done it. Could it also work for these companies? Well, Tyler, the social media players are, of course, looking for new revenue streams,

But for META, it's also looking to comply with EU law, the Digital Markets Act, which goes into full effect in March. Now, that act says that META and others should not show personalized ads based on online activity without user consent. So offering a subscription service or the choice of a free service with targeted ads could be a solution to that. Now, Meta shares did decline today on this report down about 1.5%. And the company did not comment specifically on the report, but a source. tells us that the Wall Street Journal report is accurate and that the company is considering charging $14 a month for ad-free access to Instagram on mobile devices or $17 for Instagram and Facebook on the desktop. Now, that pricing would be roughly in line with YouTube premium.

Meta did share a statement with us saying, quote, meta believes in the value of free services, which are supported by personalized ads. However, we continue to explore options to ensure we comply with evolving regulatory requirements. Meanwhile, another social media player, TikTok, is reportedly testing an ad-free version of its app with a $5 fee. They're testing this in just one market. TikTok did confirm to us that they are testing this, but it is unclear if they'll launch. They've said they test a lot of different things. Kelly? All right. Thank you very much, Julia. We'll look forward to the initiative with the women executives. Appreciate it. And coming up, we will get some technical support we need it.

In this market, with a read on some stocks showing attractive entry points on the charts, we'll tell you which ones when Power Lunch comes right back. Welcome back. Let's get back out to Emily Wilkins in Washington as the first vote on the speaker's fate is over. Emily, what's the result? Well, Kelly, it has failed, which basically puts Kevin McCarthy's speakership in very big peril at this point. Now, that vote was kind of a prelude, basically saying should we go ahead and actually vote to oust Kevin McCarthy? And basically what happened is that 11 Republicans and all Democrats said, yes, we're going to move forward with this. It's so important to note here that McCarthy does have the strong support of the vast number of Republicans.

But because margins are so narrow, that doesn't matter. The fact that there are 11 Republicans is more than enough than what is needed to oust McCarthy. And at this point, it is clear that unless something major happens in the next hour, Democrats are not coming to help him. What we're going to see now is a debate on the floor that's going to go on for about an hour. we could see that vote that would remove Kevin McCarthy from his speakership. Now, of course, there are numerous procedural tricks and processes that could be put in place. It might take a little more than an hour or more to get to that vote, but it does seem increasingly likely that by the end of today, the House and Congress is not going to have

a speaker. And that's going to really delay a lot of work that Congress is trying to do, funding the government, passing really critical legislation is all going to come to a halt, while Republicans have to figure out their internal politics. Kelly? All right. For now, Emily, thank you very much. As an afternoon, we'll get only more interesting. Dows off the lows, we should add, down only 427 time. All right, Kelly, time for some technical support to take a look at some names and see if they offer any opportunity. Here to chart those names is Jay Woods, Freedom Capital Markets, Chief Global Strategist.

First up, J.XLU, utility sector, recent losses, down 10% in a month. What does the chart tell you here? This chart is ugly. We want to look for opportunities. I will give you some opportunities, and I apologize for all these moving averages. There's one I just want to follow. That's the 200-week moving average. This is a weekly chart.

And what we want to focus on are two moves we've seen. This move back in 2022 is between July and October. What happened in July and October? Well, the 10-year yield went from 2.7% to 4.2% quickly. It's speed that matters in these yields. And what are we seeing now? We're seeing a major breakdown over a quick period of time where we went from 22% drawdown this first time,

and now we're about 17%. Now, let me clear this up, because it's a little ugly when all these lines are on the chart. And what we're in the middle of is we're in just a middle of, we're puking it out, all right? The RSI is oversold. There are 30 stocks in this index.

And of those 30 stocks, 100% are four-week lows. Only two, two Utes are above their 200-day moving average. I love when you use that technical language like that. But so now what happens next, though? I mean, when you come down, when you puke, sometimes you feel better. Well, we got to look. You see, something you feel better after you do.

And then, so what might happen here? Might it go back up? Well, that's what we're looking at. For a trading opportunity, you want to probably scale into this trade because where I think it's going to come back is to this $60 level. It's trading around $55 right now. So for a near-term trader, you may want to leg into it and put lower bids at various levels under this because historically we do have a consolidation area.

you going back years. This is not a trade I would want to be in for the long term with yields as high as they are. The average dividend right now is about 3.7% in the XLU. But for a trade, you may want to leg into it because it's getting overdone. It's getting overdone quickly. And there may be a snapback rally. But long term, you want to stay away. Let's move on to United Healthcare down 4% since January 1st. Let's go to United Healthcare. What do you see here? Yeah, United Healthcare is the opportunity here. This is a five-year daily chart. Now, the CMT community is going to mock me because I'm going to point out something that is a lagging indicator. Right here back in 2019, we had what's called the Golden Cross.

The 50-day moving average went above the 200-day moving average. It was able to sustain the COVID sell-off, and it held and it trended higher for years. We finally broke down. We had our death cross. We sold off. And now what are we seeing? Let's make it a little neater. We're seeing a golden cross. We're seeing opportunity. This is the biggest weighted stock in the day. We're Dow Jones Industrial Average, because, as you know, Tyler, it's price-weighted, $500 stock. It's also coming into a little bit of resistance around this 515 area. But the trend recently, boy, this is a little wonky, this iPad, is a series of higher lows. And then here's the kicker.

Over the fourth quarter, the last four years, we had a 40% rally. We had a 28% rally. We had a 20% rally. Last year, we only gained 4%. For this to rally back to the 550 level is about 7% from current levels. It's not a bad return. Given the environment we're in, you want safety. I think UNH is a way to go.

Golden Cross. Reminds you the Golden Bachelor, right? Yeah. Oh, I don't get me started on the Golden Bachelor. You got to love the Golden Bachelor. Talk about train racks. That's fantastic. All right.

Cybersecurity stock Palo Alto Network. Is the stock trading near an all-time high, Jay? Let's look at that one. Like I said, I want to be an optimist, and we're looking for opportunities. And right now, this is on sale. And in all that is that the New York Stock Exchange is, you know, it's the only market in the world when things go on sale, people rush for the exits. Well, I think we have an opportunity in Palo Alto Networks where you want to possibly buy. So what we have here over three years, we have a nice support level.

We had a rounded bottom, a nice breakout, and what is it doing? Let me just make it a little clearer. It's flagging. So this is an opportunity to buy on a pullback. It's trading around 230 right now. If we can get back to this 225 level, I think it's a good entry point. If not, you still have more support. down here at a rising 200-day moving average.

So I like it. It's best in class in a sector that hasn't really been beaten down. And there are other good names within the sector, like CrowdStrike and CyberC-YBR, Z-Scaler, are looking okay. But I want best in class. The stock isn't a nice up trend, and it's flagging perfectly. I think it will lead. And then another fun stat about Paloato, it's beaten earnings and traded higher 10 of the last 10 quarters.

They report in November. So I think this is set up for a nice little rally, at least two old time, all-time highs and maybe new highs. Great tactical advice and great technical analysis. Jay, thanks. Appreciate it. Good to have you with this, man. Good to be here. Kelly. Good stuff. A final check on the markets as the Dow's off session lows will be right back on Power Lunch. Welcome back. Here's the look across the markets as the Dow's down 443 points. And the session low, right around the turn of the hour, Tyler, we were down more than 500.

Now, 500 points. And what is particularly interesting here is NASDAQ reversing a four-day wind streak and with a basically 2% decline here. Nasdaq has been a stalwart. And the bottom of your screen there, 4.802. Now the 10-year yield just keeps marching higher. That's the first time we've been above that level since 2007. Thanks for watching Power Lunch. Closing bell starts right now.