Power Lunch - 517,000 Jobs, and Market Euphoria? 2/3/23

Episode Date: February 3, 2023

We just got a blockbuster jobs report, and yet the markets are reacting with a whimper. Is that a good sign for investors? We’ll dig into what could lie ahead for stocks, the economy & the Fed. Plus, stocks are off to a very hot start this year, with speculative names seeing some huge gains. But is there anything real to support this, or could the rally quickly slide back into reverse? We’ll debate. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi, everybody, and welcome to Power Lunch. Alongside Morgan Brennan, I'm Tyler Matheson. Glad you could join us coming up a blockbuster jobs report this morning. And the markets react with a little whimper. But is that maybe a good sign? The market's no longer maybe fearing a more aggressive Fed. We'll dig into what could lie ahead for the economy, the Fed, and stock. Plus, stocks off to a very hot start to start the year. With speculative names, seeing some huge gains, Carvana, the poster child for this return to risk, the stock. Get this, it's tripled this year. But is there anything real to support this or could the stock quickly slide back into reverse? But first, a check on the markets. With the major averages lower this afternoon, though for the most part, on pace for gains for the week, the exception there being the Dow. The S&P is down 1% right now. Let's get over to Dominic Chu and Christina Parts-Nevilus for more on what's moving and why.

All right. So we're down about 150 points right now. At the lows of the day, we're down by 220, so it's been a pretty decent turnaround, only to lose some momentum. You've got shares of American Express and Caterpillar alongside Apple that are helping to the upside for the Dow. Meanwhile, you got Home Depot, Honeywell, and 3M that are among the biggest laggards. Let's also, by the way, get a quick check on what's happening with shares of Nordstrom right now, which are, you can see here, up pretty decently, up about 22%. And that's off the session highs. The high-end department store chain is now the target of activist investor and chew.

founder, Ryan Cohen, who is building a stake in the retailer and plans to push for changes at the board of directors level. That's according to a report from the Wall Street Journal, citing sources familiar. Now, at the highest today, Nordstrom stock did hit the highest level since August 16. So one of those corporate actions names, we want to keep a close eye on. So now let's turn over to Christina Parts of Nevelas with a look at what's happening with the NASDAQ and that big tech trade is obviously a big focus for investors. Exactly. So today's red marked by disappointing tech earnings. and a much stronger than expected employment report.

But as of yesterday's closed, the NASDAG is up 16.5%. That's the best start of the year since 1975, the year the Who split up. It's also on a five-week wind streak, so not all bad news. And we haven't seen that kind of action since November 2021. So let's talk about those big tech earnings that we had yesterday. Apple shares are about 3% higher right now and turnaround from earlier losses after missing estimates. Amazon's AWS growth slowed more than expected. So shares now are down 7.6%.

And then you've got Alphabet's Google revenue coming in light with YouTube, drag shares are about 2.4% lower at this moment. Morgan? Christina, thank you. Well, it could be or it should be the market's worst nightmare. The jobs report, not just coming in hot, scorching estimates, really across the board. Non-farm payrolls increasing 517,000. That was compared to Wall Street's 187,000 estimate.

This should be a sign that the Fed might not be cutting rates. any time soon, and yet markets don't seem to care too terribly much. Let's bring in Mike Santoli to discuss. Now, Mike, I say that noting that we are lower right now in the markets, but the fact that this report was so strong, unemployment rate actually ticked lower. The response here, why hasn't it been worse? Well, yes, definitely worth asking that question, just because we're conditioned to see such a dramatic show of unexpectedly good news to translate into a rougher for stocks. And we are still in the S&P 500 well above where we were before that Fed decision on Wednesday. So that's a good benchmark. Now, a few things we can point to. One is there's a little

bit of a perceived fluke factor in the size of the beat on payrolls, not to say that it's all seasonal adjustments or it's all a kind of one-off factors, whether it be illness or other things. It just seems as if it's a little bit high. And yes, it reinforces the idea the labor market is tight, but not necessarily something that we can plan on this being the pace going ahead from here. The other part of it is what Jay Powell did on Wednesday was in part to delink the unemployment rate from immediate Fed policy decisions. In other words, he didn't sort of say we're targeting a certain amount of unemployment before we think the job is going to be done against inflation. And the wage growth numbers within today's monthly report were pretty much as expected and

pretty much on trend from what we've been in the last few months. So that's moderately encouraging, I would say. The final piece of it, Morgan, I guess, is this stock. market has a little bit of traction right now. You've had this dip buying instinct get activated right now. And the bond market did not reprice what it expects from the Fed very dramatically. Two-year note yield, it bumped higher, but it's right at the level it was at a week and three weeks ago. The one-year note yield is a little bit higher. But again, not making new highs, not really saying that the story has changed about the expected Fed path. And yet, just to factor in the tech piece of the puzzle, these mega-cap names that we got reporting after the Bell

yesterday largely disappointing or cautious reports, whether it was Alphabet, Amazon, or Apple, Mike. Last I checked, Apple was actually trading higher. And I realize Amazon's down something like 6% right now, and Alphabet is lower. But the fact that the reaction there hasn't been potentially stronger, given some of the commentary we've got from all three of those companies right now. How does it speak to the back and forth in terms of the rotations we've seen? Well, yeah, that's a huge part of it. I would say essentially, one, they're down a ton from their highs. The valuations are no longer as demanding. Each of these companies in its own way is really going out of its way to make gestures toward investors to say we're getting costs in line.

We're trying to get things figured out in terms of profitability from here on out. And the other part of it is the rotation you mentioned. So they were laggards. They actually have performed very well this year. Everything that was blasted out last year. Defensive stocks have been suffering. So I don't know that this is where you want to look to say this, these is the group that's going to gather the indexes up for a stampede higher. And also, you know, they're holding in okay, but they're not exactly getting bought aggressively. Amazon alphabet, interestingly, are pretty much down right in the range of what they gained yesterday. So not too dramatic on a week today. Yeah, I was thinking of that as I looked at those numbers earlier today, Mike, that yesterday

those stocks looked like the golden children of the market, and today less so. Mike Santoli, thank you. So what's better for stocks, a stronger economy and higher interest rates, or maybe a weaker economy and lower interest rates. Let's bring in Mona Mahajan, senior investment strategist with Edward Jones, Ron Insana, CNBC senior analysts and commentator and co-CEO of contrast capital partners. Mona, nice to have you in the house. Nice to be here. Yeah, good to have you back.

What do you make of those jobs numbers today? Are they too hot? Are they sustainable? What do they tell you about the state of the economy and what we should expect? Yeah, you know, I think it kind of reinforces this message. We've gotten all year in this last month of the year. that this soft landing is still on the table. You know, with an unemployment rate at 3.4%,

a recession is clearly not imminent. Now, the other part of the story, which I think is supportive as well, is that wage growth figure. So at 4.6% or so, you know, Jerome Powell told us on Wednesday, he's looking at three buckets of inflation. Goods inflation, that's come down.

Housing, rental inflation, that's showing signs of weakening. And then, of course, this wage growth component, that's been a little bit stickier, but we're starting to see signals that's coming down as well. So certainly better inflation numbers have been driving this market as well. Ron, walk me through the week as you review it and as you look forward. What did we learn this week about the Fed, about the economy, potentially about the future?

And I'd like to have a comment or two from you about the state of liquidity in the market right now. Well, liquidity seems okay, Tyler. I mean, we're not hearing as many complaints about bond market liquidity as we have in the past. certainly there's some cash on the sidelines that's been driving equities higher. With respect to the current state of affairs, you know, Jay Powell himself said that we're entering a disinflationary environment. And as Mona suggested, you know, the rate of wage inflation is beginning to slow. It was up 0.3% for the month, 4.4% year over year, which is down from 4.8%. And if you annualize a six-month rate of inflation, wages are growing faster than inflation. So there's no danger of a wage price spiral. And I think that's what we learned this week.

And I think the markets seem to be digesting that reasonably well. If anybody was in the bond market was losing their minds over inflation, you'd have a much higher yield on the 10-year note than 3.5%. Particularly with the Fed engaging in quantitative tightening, it's selling bonds. And bonds aren't really ripping to the upside in terms of yield as a consequence of these data. Mona, I mean, all of this, though, I didn't realize it's a downday for the markets, but for the most part, it's another up week for the major averages.

And since the start of the year, I mean, the NASDAX's up 15% since the start of the year. Have we moved too far too fast, given the fundamentals? Yeah, it's a valid question. Look, everything that underperform last year is ripping higher this year. And that's not only the NASDAQ, parts of the NASDAQ, like Com Services, consumer discretionary, up 20 percent. So back in bull market. And we've talked about the speculative parts of the market, some of those arc funds, some of the Bitcoin complex, all up 40 percent plus. So there is a valid question that investors are asking, are we moving too far too fast?

And as we know historically, one, markets don't go up. in a straight line forever. And in fact, when we move up this fast, it does tend to leave the market a little bit vulnerable to downside shocks. And so what are some of those shocks that could happen? Well, maybe it's earnings again. If you look at earnings expectations, in fact, for Q1 and Q2, back-to-back negative quarters expected. So maybe that also translates to GDP to some to some extent, but certainly we're getting sort of an earnings slowdown ahead of us. But maybe on the good side, when January is this strong, historically, the year does do well as well. So as goes January, so goes the year.

Ron, let me come back to liquidity for just a moment. I guess one observation might well be that one of the reasons we had such high inflation is that we had really high liquidity in the market. We had the Federal Reserve injecting cash into the market. We had the fiscal stimulus coming into the market. We had all of the, that's many, that seems to have abated a bit. But let me ask you this. There were a lot of people who said, we can't get inflation under control until real rates are positive. Are we there yet?

Yeah, and how. Yeah, they are. And how sustainable is that positivity? Well, I think it's going to stick for a while. What's going to drive inflation in the second half of the year? You know, almost immediately after Jay Powell said disinflation on Wednesday, you had a, you know, cohort of economists come out and say, you know, the second half of the year we're going to see rising inflation. The question is, where does it come from? China reopening? Maybe, maybe not. Energy,

clearly not. It's falling even amid worries of another offensive in Ukraine by Russia. And yet all energy components are down sharply this week with Europe having stocked up on natural gas. They could carry it through all the way through next winter. You know, it just doesn't seem to me that many people are thinking about this in a nonlinear fashion. It seems like some very linear thinking going on and just extrapolating old trends into this year. I don't see any further increases in inflation. I don't see any inputs for those. And so I think to answer the first question that you guys raised was, you know, I think slightly higher rates in a stronger economy is better than the alternative, which would be a collapsing economy and plunging interest rates. That would not,

it might be good briefly for the markets. Certainly wouldn't be good for the economy or for the average American. So quickly, Mona, where would you be putting money to work right now? Yeah, great question. Look, I think if we do get any sort of pullback period of consolidation, that is really the opportunity, especially if you missed maybe this last month of Rally, to put money to work. And what we'd say is take a balanced approach, quality growth, cyclical parts of the market, those are recovery plays, small caps over large caps. But longer term, that value trade with rates this high and probably not going back to the zero bound, important to have that diversification element in there, too. So use those pullbacks as opportunities. We do think there's a period of

more sustainable recovery coming ahead. All right. Mona Mahajan and Ron and Sana. Thank you for joining us to kick off the hour. For more on today's blowout jobs number and what it says about the overall health of the labor market. Let's bring in Tom Gimbel, founder and CEO of LaSalle Network, a national staffing and recruiting firm.

Great to have you on. Want to get your thoughts on more than half a million jobs added this past month. In a month, I might note that it tends to be seasonally weak, in part because of the weather, are you given what you're seeing at your firm, surprised to see it coming so much stronger than expected? Where are the streamers, the balloons, and the champagne? I mean, we had a order over Montana right now. Let me tell you, it doesn't get any better than this.

So anybody that's saying anything other than Yahoo, let's go, is crazy. We're seeing that small and medium-sized companies are hiring as much as they ever have, and the numbers indicate that. Well, people got scared off from big tech who thought the pandemic behavior would last for forever. And they overhired. And now we're seeing small and medium-sized businesses that have always been the fuel of this economy are going to drive this thing for the next year. Yeah, the weekly claims data has not shown any signs of the churn we've seen in the tech sector and some of the layoffs we've seen from some of those big companies. Does it speak to the fact that people that are getting laid off from the alphabets and Microsofts of the world are finding jobs, elsewhere very quickly right now? Yeah, absolutely. What small and medium-sized companies couldn't afford

to keep up with the way salaries for mid and senior level white collar talent was going. And so when big companies lay off those people, they're able to snatch them up. At the same time, big companies aren't putting a hiring freeze on. They downsize people. They still have attrition. They're still hiring people. And they're hiring people back at more reasonable salaries is what our research is showing us, is that what we've now seen is even though we've had over 4% wage growth over the past year, is that it's no longer an employee-driven market when it comes to compensation. And things are becoming a lot more traditional of this is what the job is, this is what it pays, and employers aren't going to be held hijacked by candidates who are with such a short supply.

We're really starting to see the labor market even out in that way. What you're saying is so crucial to what the market has been focused on, and certainly what economists and the Fed have been focused on, the wage piece of the puzzle. I mean, we saw high quit rates. And obviously, we just got that jolt's number yesterday, too, with, you know, 11 million job openings. But there had been this sense, at least until recently, that people could quit one job and go to another job and see a significantly higher salary attached to that. Are those days over?

They're not over, but it's the way, in my opinion, it's the way it should be, is that if you're the best of the best, that you're always going to have an opportunity to make more money. But what was happening during 2021 and 2022 was we were seeing the rank and file folks that were saying, hey, I can do this too and companies were paying. And now it's settling back and saying, hey, wait a second. Not only can we get people back in the office, which is happening more and more and more every day, every week, but we're also seeing him say, we're going to pay you a fair wage. And if you deserve an increase of 3% or 5% or 7%, that maybe we pay that. but we're not going to be handing out 20, 25, 35 percent increases in base salary to people. I think those days are gone for a while.

And to the earlier conversations about the interest rates, I mean, what were the interest rates like in 2004, 2005, 3 and a half, 4 percent? And that wasn't considered unbelievably high. I think what we're setting into is really a more normal world. And the previous seven or eight years was the abnormal. And we're showing that our country and our government and our economy can function when interest rates, at a normal level. Let me ask you about one of the headline findings in one of your surveys here. 85% of employed respondents considering quitting in six months. That doesn't mean that they plan to quit. It's a sort of fuzzier metric than that, that they would consider quitting. Am I understanding

that correctly? Because I simply do not believe that eight and a half out of ten workers are actively planning to quit their jobs in six months. Don't believe it. Correct, Tyler. 85% responded that they would consider leaving their job. So would I, if somebody came along and said, here's $3 million. I mean, you know. Well, I think there's got to be some level of perspective. And, Tyler, I'd keep my options open on that $3.5 million. Okay.

Yeah, make me an offer, brother. I'll be right there. All right. Thanks a lot. I think the number is high, Tyler. There's no doubt about it. But what it means is the lack of engagement that exists, especially with people being in remote work situation isn't as high as it once once.

Yeah. And that people would consider leaving, whether it's a bad manager, a bad company, a bad industry. And a lot of times when you have people working together towards a common goal in the same office, that number goes down quite a bit. There's a lot more continuity in the workplace. Yeah. And I think also it does reflect, you have to say it reflects some confidence that's not

that people feel that they could move on to another job reasonably quickly if they were to leave the one they're in. Tom Gimbel, thanks very much. Always good to be with you. Thanks for having it. Likewise. Coming up, a couple of heavyweights, each taking their shot in upending the pharmaceutical industry. The latest on separate efforts by Amazon and Mark Cuban to cut out the middleman. Plus, we'll get the traitor reaction to today's Big Jobs Report live from the Bond Pits in Chicago. Power Month. We'll be right back. All right, welcome back, everybody. Some financial titans are looking to shake up the market for generic drugs.

The Wall Street Journal highlighting how Amazon and Mark Cuban of Shark Tank fame, joining a list of disruptors aiming to cut out pharmacy benefit managers, a fancy term for industry middlemen, by offering lower cost options at much smaller markups. Joining us now as the author behind that piece today. Let's welcome in David Wainer. He's health care columnist for the Wall Street Journal. David, welcome.

Good to have you with us. I have to tell you that you have delved into one of the most opaque areas in all of healthcare to me. I don't understand how it works, and I have to believe that some of the big word here, opacity is intentional. Am I wrong? Absolutely.

You're absolutely right. I mean, if you think about this industry, right, you've got drug companies that make the drugs, and then you've got us, the consumers who use these drugs. And you've got people in the middle and the pharmacy benefit managers that you mentioned, they're in that middle. And they're supposed to negotiate

the drugs with the drug makers, get a discount, and then sell it to us at the cheapest possible cost. But instead, what's happening is a lot of these pharmacy benefit managers are keeping those margins. They're discounting those drugs, and then they're holding on to those rebates. And that's how, and that's why we're often seeing those high costs. So if, if a lot of their income stream derives from rebates paid to them by pharmaceutical companies, paid to the PBMs by pharmaceutical companies, aren't those PBMs then incentivized to buy and pay for higher-priced drugs because, therefore, the rebates they would get would be bigger than they otherwise would be? That's exactly what's happening.

And sometimes that's why we're seeing the risk prices on drugs being driven up so that then there can be a bigger discount that the PBMs can then pocket and not pass on to the consumers. And keep in mind, this doesn't happen on every drug. So oftentimes that's why you'll see, you know, a lot of drugs do come at affordable prices. But every once in a while, there are drugs that are very expensive. And I think, you know, just to bring up Mark Cuban's website, I think what they're doing there is they're being transparent and showing that every drug, what's the price, what's the markup? And you can compare that to other retail prices and see these huge gaps.

David, this has been going on forever. And in the meantime, we've seen a lot of these PVMs gobbled up by insurers as well and all the vertical integration that's happening. there's been attempts to disrupt this. There's been attempts to maybe try and regulate this, whether it's Mark Cuban startup or whether it's Amazon, can this actually, can either of these companies actually have a meaningful impact, whereas no one else has up until this point?

Yeah, I think that's a great point. And if you think about some of the big names that have sort of made splashy announcements like, remember J.P. Morgan, Bezos, and Warren Buffett, we're going to change the healthcare system, right? So you're absolutely right. And I think Mark Cuban and Amazon, which we haven't mentioned yet, they're both kind of doing mainly the cash consumers.

They're not working with insurance. And remember, as you just mentioned, there's been this vertical integration in the system and insurers own the PBMs. And so they can very easily keep Mark Cuban and these others outside of the system that they control. I think the difference here is that, you know, employers are taking notice and employers are no ones who pay for a lot of these healthcare costs. and they can push the insurers and the PBMs to either work with Mark Cuban, or as we are seeing happen in some cases, to be more transparent about their costs. So United Helps OptumRX.

They recently announced the tool to allow people to consume, you know, insure drugs with drugs that are just cheaper at retail price. So there's pressure in the system. Who wins at the end is what we're not really clear on. David, thank you very much for being with us today and for taking on a very important and very complicated topic. We appreciate it. David Wainer. Thanks for having you. Be care. Well, still ahead. We are looking into one startup that's looking to attract a cadre of investors. How? By letting individuals buy shares of privately owned commercial real estate. That's today's working lunch. Stay with us. Welcome back to Power Lunch. We are just 90 minutes from the ending of the trading day and the trading week. And as you can see, major averages are

firmly in the red right now with the S&P down more than 1%. 41.34 is level there. And of course, we're seeing pressure on stocks as we see yields to hire in treasuries. Let's get you caught up specifically on those stock moves. Also bonds and commodities first to stocks where what seems like a lack of reaction to the jobs report is actually a big reaction. So let's get to Bob Pasani for more. Hi, Bob. Yeah, we're at the lows for the day. I still think it's pretty modest, given the disappointment in some of the tech names and the startlingly strong jobs report. They're still betting. It looks like on a soft landing. I just want to show you the Dow leaders

for the week and the laggards because it's very obvious that technology generally is still holding up very well. Who would have thought Apple up 20% for the year would now still be up on the day, even when they had some disappointment on their earnings report. That's rather remarkable. Nobody would have bet on that. But bank stocks are having a good week. J.P. Morgan's up. Amex is up. Even Intel, which had had a disastrous last few months, is up about 7% this week. So tech is strong. At the same time, the laggers for the week continue to be the consumer names. We had some disappointments in some of the pharmaceutical reports this week. But Johnson & Johnson, Coke, generally have been selling off. They're down 2 or 3%. Honeywell, a little bit of a disappointment. So the S&P is up about 1.5% on the week and a really strong start. Now that we had had the Fed meeting done,

and we're now working through the heart of earning season. The VIX has dropped rather dramatically. It is very rare to see the VIX recently below 20, but we have been there now for the last several days, and that's rather interesting. That shows a lot of complacency in the market, a little bit of a warning sign. Finally, S&P 500 up about 9% this year,

and believe it or not, that is the fifth best start to the year through February that has been since 1926, guys, almost 100 years. Fifth's best start to the year. All right, Bob. Thank you very much. Bob Pazani. We're seeing a bigger reaction to the jobs number in the bond market, so let's get to Rick Santelli at the C-Bull.

Rick. Yes, you know, big pop on rates when we saw the jobs report, but look at this one-week chart. We're up a dozen basis points on the day. We closed under 340 yesterday in 10th, but we closed at 3.5% last week. We're only up one on this session. And if you look at the last big move in tens, it was in October when it made its four and a quarter high yield close.

It's dropped, and you look at the VIX. Bob just alluded to it. Not only is under 20, it's under 19. Look at the VIX. It peaked, and it looks a lot like tens. And finally, June Fed Fund futures hovering around 95 even, which means they're pricing roughly 5%. They're low, 94, 86 and a half. That was pricing in around 513 and a half.

So you can see the difference there. Let's pick a trader. Hey, Paul, you have one second? Sure. Okay. Paul, we want to talk to our audience regarding big jobs report. What did you see with regard to preparing for yesterday? What are you seeing today?

Rick, this has been a really interesting week with the uncertainty coming back into the market. First time all year, really. The jobs report this morning kind of runs counter to what we were observing earlier in the week after the press conference. Yesterday, record volumes. Like record all-time record? Sebo record volumes. driven by the single stocks. And what did that mean to?

How were they preparing? Where would all that volume go yesterday? The retail volume was a call buying in the big techs, and that drove volatility in our product up, drove the price action and the market up. And then the jobs report came out. Maybe the rethinking, your thoughts? Well, yeah, you can see today's actually much slower.

It seems like everyone's trying to digest this number. Luckily, we don't have too much longer to wait, because Powell's speaking on Tuesday. That's going to really be an interview that everyone's going to be trying to. Turning point potentially. Maybe the markets and the Fed get on the same page. We'll see. Morgan, back to you.

Rick Santelli and the pits, love that. Thank you. Oil trading about to close for the day. It's down more than 2% today. Let's bring in Pippa Stevens now for more. Another losing week for commodities. It seems that traders are betting some more aggressive action from the Federal Reserve could lead to a curtailment in crude demand than all.

Also, just a bit ago, we did get the official announcement that EU leaders have agreed to a price cap on Russian petroleum products. It's $100 on diesel. That goes into effect on Sunday, and of course is meant to limit Russia's revenue without creating enormous disruption in global energy markets. Now, turning to Nat gas, more weakness there, seven straight week of losses. It's also at its lowest level since December 2020. But just looking at Henry Hub doesn't quite tell the whole story because in California, prices are at $15 per MMBTU. so more than five times the average we're seeing on Henry Hub. And that's because of a confluence of factors,

including actually colder temperatures than expected in California, as well as pipeline issues, the El Paso pipeline that carries gas from the Permian Basin to Southern California still offline. So the TLDR on that is a higher prices for Californians. Quick question on China. How is the oil market factoring in the reopening of China, or is it? I think the issue with that is that it was such a big catalyst. and all oil bullets could talk about was China, China, China.

And we have yet to see that confirmation that there is going to be that big rebound. And it feels like the targets keep getting pushed out. So initially everyone was pointing to 2023. You know, Q1 will see that demand rebound. We didn't see that. So now people are talking about the second half of 2023. But there is a lot riding on Chinese demand. So all the oil bulls are saying it's coming, but we have yet to see it.

We'll see when. All right, Pippa. Thanks very much. Pipa Stevens. Let's get to Bertha Combs now for a CNBC News Update. Perth up. Hi, Tyler. Here's what's happening at this hour. The Pentagon says a Chinese surveillance balloon has drifted east and is now over the central U.S. The Pentagon is also rejecting China's claim that the balloon is a weather research mission or on a weather research mission and that it

has blown off course. Officials say it is expected to stay in U.S. airspace for several days. Two suspects have been arrested in the shooting desks of six people in Central California last month. Police say both are gang members, but the motive for the shooting remains unclear. The victims included a teen mother and her baby. One of the suspects was in a shootout with federal agents before being taken into custody. And designer Paco Raban has died. He was known as a rebel who started out using unusual materials, including metal and plastic. Coco Chanel reportedly called him the metallurgist of fashion.

He also had a line of well-known perfumes, fragrances, Hagarabon, dead at the age of 88. Tyler. All right, Bertha, thank you very much. And ahead on Power Lunch, Carvana Nirvana, the online use car dealer struggling in 2022, ending the year down a meager 97%. But that's nothing compared to the stocks.

200% climb so far this year. So what's causing the comeback, that is next. Welcome back to Power Lunch. Rise. Risk is back in vogue on Wall Street in 2023. The NASDAQ is up nearly 15%. That's nothing compared to the rebound we've seen in beaten down names like Carvana. Okay, stocks under a little bit of pressure this morning, but it's up 200% to start the year.

Keep in mind, though, still down 90% over the past 12 months. Is there anything fundamental about the company that is leading to this massive rebound? or will this end in tiers for some investors? Let's bring in Brian Nago, senior analyst at Oppenheimer. Brian, too far too fast? Well, good afternoon. Look, it's hard to say. I think your opening was perfect because I'm getting a lot of questions on it from our clients. And yes, I mean, the stock has essentially quadrupled, you know, off of its recent lows. But we also have to keep in perspective. You know, this is a stock that was trading $370, you know, back in later 2021. So it's still well off those highs. But look, as I think about fundamentalists, I'm thinking about Carbana as a fundamental

analyst, you know, I don't see much improving for the business right now. Now, one of the bigger questions and the reason, one of the reasons I'm not recommending our clients in it right now is that, you know, in my mind or per my math, you know, there's still what I call a significant funding gap here. I mean, this is a company that will need to raise additional capital in order to sustain its business model. You know, I think to a certain extent, now, obviously the Carvana stock crisis rallied with other similar type names, but I think maybe the market's getting less concerned on that front, you know, that the capital markets will open, you know, will allow Carvana to, you know, garner the cash and needs to run its business. But it's a very, very difficult

stock at this point. It's difficult, and there's been a lot of concerns around the possibility of bankruptcy, as it has been pinched for cash, to your point. It raises questions, not only about, excuse me, about Carvana, about sort of this, quote, unquote, dash to trash, and some of the other names that have been beaten down, some of which I know you cover, that have been seeing huge rises since the start of the year as well. Talk to me about Peloton. Look, it's a very similar dynamic. Now, Peloton, we are recommending. I've got a $20 price target. And, you know, the way I look at these names, you know, and again, this is a longer term type approach I take is, you know, I think of Peloton. And look, there's a lot of concerns

there are near term. I also think that company's going to have to raise money. You know, they're fighting now a, you know, what I would have to be a, you know, what I'm a, I think, what I'm what I think is a rather significant wave of gymgoers going back to physical gyps. I'm going to say Lifetime Fitness. LTH is one of my favorite names here. You know, they're benefiting there. But with Peloton, look, I think, you know, my message to our clients is I do see a spot within the broader fitness sector, longer term for well-run, much more cost-conscious Peloton. Near term, it's harder to call because, again, there's a lot of these near-term risks right now.

I mean, Peloton's future may indeed be in the monetization of its app more than in the selling of its gear, if I had to make a guess on that. Back to Carvana, why in the world would it be up four times from its low? What is the mechanism by which that happens other than irrational exuberance? Well, Tyler, look, I mean, I think it's hard to explain succinctly. Okay. I think to a certain extent, it's simply a function of how far this stock fell. You know, as you got a graph, you know, you put the 2020 chart. I mean, the stock ended 22 with a forehand line.

I mean, you know, the stock had moved significantly lower. And a lot of that, you know, was in a very, very tough market against very negative market sentiment. But really, I think the primary concern is, is this company going to survive? Okay. So as we look at the market now. You know, again, this is obviously a much bigger question with rates and capital markets. markets and such, you know, the chances of Carvana going out of business are probably now somewhat less, somewhat less. And that's why I think you've seen the stock and have this rather significant

bounce off its lows. But again, I want to emphasize, it's still well off the highs. Well, yeah, we're looking at a chart over the past couple of years. It looks like the Matterhorn. I mean, you know, up it goes and then down it comes. And even though it's tripled off the lows, you can barely detect the move against that Matterhornish. kind of chart. Brian Nagel, thank you. Appreciate it. You're having it. Appreciate it. Still to come, John Fort will bring us his interview with the CEO of the real estate investment

startup cadre in today's pre-stock lunch. Thanks are making it harder for many commercial real estate investors to make projects pencil out. At the same time, there's opportunity, and today, John Fort brings us up close with a founder whose company is using technology to make

real estate investing more accessible and efficient, John. Yeah, that's the idea, Tyler. Ryan, Williams is founder and executive chairman of Cadre, an online marketplace for commercial real estate. Companies raised more than $130 million and has done more than $5 billion in transactions since 2015. Williams cut his teeth at Goldman Sachs in Blackstone before striking out on his own, and Williams grew up working class in Louisiana. He became an entrepreneur early, starting a sportswear business on a shoestring when he was 13.

His development accelerated when he got into Harvard, and he launched a program there to teach undergrads about financial services. The housing crisis had just hit, and he saw deals in real estate. Pitched classmates on buying four closed homes in Atlanta that I thought were mispriced and distressed, renting them back out people in the community, giving them an option to buy back, and selling for two to three X type multiples unlevered. And long story short, as that business ended up becoming a nice way for me to have passive income on the side while my day job was doing banking at Goldman. ended up buying nearly 1,000 residential units throughout Atlanta from 2008 to 2011.

Will's mission at Condre is to democratize real estate investing and cut accredited retail investors in on data and deals. I asked him about icebergs he's watching out for in this volatile economy. Here's what he said he's making sure not to do. If we want to scale our secondary marketplace, because we're the first platform ever to build an exchange and to let people trade stakes of real estate buildings, but we don't think about, you know, redemptions and thresholds on redemptions and guidelines around that. And so to me, it's loosening of standards and, you know, in exchange to try to grow. That's like the biggest iceberg and the biggest risk that I foresee. But it's also when we're all over. And one where as long as I'm in charge

will not be the iceberg that takes us out. I was texting with Ryan this morning, and he told me the main thing Cadre has done since we talked about a couple months ago is capped all of its floating rate debt to protect cash flow. He says the portfolio is doing well because it's tilted toward multifamily, not office, and he's looking to play offense soon in areas like hospitality as uncertainty creates opportunities, guys. Really fascinating. And I think the point you just made at the end there is probably the most crucial, especially for anybody who's looking to invest in commercial real estate right now, which is that floating debt, which is a big question mark for broader commercial real estate in general right now.

Important, I think, to note also, it is Black History Month. And access to real estate has been an issue in redlining and other things. And he's flipping the script. How does he pick what markets he's going to concentrate on? Well, they've got a very data-focused approach to that where there are gaps and where he sees opportunities. They actually put out a list of the high potential areas. They just sold some office in Colorado, right?

They're tilted toward multifamily. They just sold some office there at a pretty good price appreciation-wise for them. So that's part of what makes this unique. There are lots of sort of online marketplaces for real estate. But they try to be data-focused in how they find opportunities. All right, John, thank you very much. Appreciate it. Well, up next, Ford to Tears, Deutsche Bank downgrading the carmaker to sell,

citing considerable operational shortfalls. The stock is down more than 7%. We're going to trade that and more. and today's three-stock plug. Welcome back. It's now time for three-stock lunch. We're sipping on some of today's biggest movers to the downside. Ford lower on a downgrade to sell at Deutsche Bank following its Q4 miss and operational shortfalls. Quote unquote, Starbucks lower after weak international demand heard its latest earnings.

And Match Group is lower after announcing it is laying off 8% of its workforce. Here to help us trade all three is Victoria Green. She's CIO of G-squared private wealth and a CNBC contributor. Victoria, great to have you on. Let's start with Ford. Yeah, I'm selling Ford. I don't want to touch it right now. I think it's reversing back down to the 11.

They're stuck in this operational hell. The CEO even admitted they left $2 billion on the table. They're looking everywhere for cost cuts. But here's the problem. They're going to have more costs with the EVs. They're having to take price cuts to keep up with Tesla. And I just don't think they're going to get it done in Q1. So this is a sell for me.

Their charts ugly. They bounce right off of a Fibonacci level coming back down to 11. So I'm selling it. Sell on Ford. Let's move on. What are you seeing in Starbucks these days? Starbucks was all about a China story. They had a 29% decline in Chinese sales, but 30% of their stores in China were closed during that period. So I think we'll see China reopening. We're going to see that pick back up. I think the stock has good legs. It could leg back up to the highs around 126. I think they have strong leadership right now. They've got ways of growing revenue. The average spend in the U.S. is pretty strong. They're working on keeping a cap on labor costs, but I think right now this is a big play on China reopening.

And for me, I think it's going to get it done. And you're going to see those revenues normalized. And we'll see that 15% growth that they want to see. Yeah, and of course, meantime here, people will pay more for their Starbucks. Final name, Match Group. Absolutely. Now, apparently people don't want to pay more for Tinder. I think Match Group for me right now is a sell.

Their chart is super ugly. Their players, they don't call them users. Their players have actually declined a little bit. And I think they're going to see intercanibalization between Tinder and Hinge. Tinder is still the number one revenue source for them. And they're about to launch this big marketing campaign, never done it before. Could be a huge spend of money with not a lot of pickup. So for me, I think match is just mired.

Their margins aren't as good as Bumble. They've got a high debt load. And their chart, just for me, they're pretty stuck right now. So for me, I just can't buy it. All right. Victoria Green. Thank you. Maybe she had a few more of the cocktails.

She'd had changed her mind on Match Group there. I don't know. Whatever. All right, Victoria, thank you very much. Well, it's time now for our weekly ETF tracker, and this week we focus on technology. According to Track Insight, NetNet flows, were close to flat on the week, but the ETF soared as earnings took center stage. And a general risk on mentality gripped the market. Looking at some of the specific funds, the QQQQ of 3%. Communication services sector, Spider, up 5%.

And the Wisdom Tree Cloud Computing ETF is up 6%. And for a great week, it was a great week for Kathy Wood, her flagship ARC innovation ETF up 6% as well. Big gains for her internet and fintech funds. Also, for more information, it's available on the F.T. Willshire ETF hub. And finally, the Arena Group becoming the latest media company to enlist AI. That's all the rage these days. The company that publishes Sports Illustrated and other magazines, seeing its stock pop today.

but keep in mind the market cap is just about $200 million. That is tiny. Wall Street Journal reporting that Arena will use AI to help produce pieces for its properties, including Men's Journal. One example would be pulling information from its own library for a list of workout tips, I guess generated by AI. Arena Group saying it is not looking to replace human journalists. Neither we, an actual human producer, did, in fact, Morgan, write this script.

Which hasn't always been the case. As not, no, we've had some. Yeah. Well, most of the producers here are human. No, I'm just saying you guys did an experiment not so long ago, right? We did do that. We did do that. Very, very interesting.

Well, we end the week with the Dowdow down 200 points. It was lower earlier and higher earlier as well. So, what do you know? We'll watch for the next hour, the most important hour of trading coming up on CNBC. Thanks for watching for lunch. Everybody, glad you could be with us. Closing bell starts right after this quick break. Thank you.