Power Lunch - A massive market turnaround 10/13/22

Episode Date: October 13, 2022

A remarkable turnaround took hold on Wall Street. After stocks fell to their 2020 lows, the Dow bounced 1400 points off its intraday low. What drove the rally? Is this the bottom and how do you invest in this environment? Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome everybody to Power Lunch on a wild day in the stock market. I'm Tyler Matheson, joined today by my friend Frank Holland, a massive, massive turnaround on Wall Street. We haven't seen this kind of action in months. They're very rare kind of day. Stocks falling hard on hotter than expected CPI numbers. That didn't last. A turnaround sharp, steep this hour. We're going to look at what's driving it as you see that massive turnaround taking hold.

How to invest in it? And we'll speak to a market veteran who's getting ready for an even more. powerful rally. First, though, to Frank for a check on the market. Hey, Frank. Well, hey there, Tyler. Stocks are bouncing back this afternoon after hitting levels, not seen since 2020. The Dow, it had a really wild ride. 13 points ring from the bottom to where we're at right about now, almost 1,800 points higher. You see the Dow now up more than 2.5%. The S&P, it was down almost 2 and a half percent. Now you can see it's up almost 2 and a half percent. This is the widest trading range for the S&P since March of 2020 hit the lowest levels we've seen since November of 2020. The NASDAQ is well

rebounding up more than 2%. Financials today leading the turnaround. J.P. Morgan, Bank of America and Wells Fargo, all of them rallying. You see right now, JPMorgan up almost 5.5% Bank of America up about the same levels. So are the regional banks. Names like PNC, Key Bank and 5th 3rd, all of them up even more than those big banks right now. Big Tech also reversing course. Apple and Microsoft leading the way along with meta, all of them reversing their earlier declines. Tesla, also bouncing back from a 4% decline now up more than 1.5% right now. Let's get more on this market turnaround and what's driving it. Our Mike Santoli is at the New York Stock Exchange. Mike, a bit of a surprise rally after that CPI number. Yeah, absolutely. I don't think anybody was, could have been perfectly

positioned for something like this, but you can piece together perhaps why we did see such a violent reversal to the upside, which is how far down the market had come in to short period of time and the levels that we reached. At this morning's lows, the S&P 500 was down 15% in a month, 27% from the highs, and it had fully unwound half of the entire rally from the post-COVID low to the January 22 high. That was a level. A lot of traders were stalking for quite a while. The 27% loss, that's basically the median bear market decline if you go through history. So this seemed as if it was an enough for now type calculation. Also, with the rally. At this moment, we're still trading below where the market opened one week ago. So that's just how

much room was, how much distance was traveled in a short period of time. Also, the CPI number certainly not welcome, certainly did not confirm any expectations of a rapid deceleration, but it also doesn't change the fact that it should be moving that direction. We're so steeped in Fed hawkishness for two weeks that this number itself really isn't out of line with what they've already told us that they're more or less expecting and didn't really change expectations for the next Fed move in a few weeks. All right, Michael, thank you very much. Michael Santoli. Our next guest says the market is setting itself up for yes, a powerful rally. If this isn't it, we'll explore that with Michael Darta, Chief Economist and Market Strategies at MKM Partners. Michael, is this the rally

you talk about or is it not? Well, it might be, thanks for having me on. You know, we've fallen very hard over a short period of time. So when that tends to happen, you get into over shooting and then it really doesn't take much to start rallying the market. I wouldn't be honest with you if I was coming on here saying I could tell you exactly what rallied the market because the inflation data this morning was not good. And the futures tanked on that. So, you know, something else must have happened here to start turning things around. And you can still see the equity market very, very connected to what's happening with interest rates. And they shot up and then started to level off and pull back a bit.

and, you know, that's helped to stoke this rally off the lows. So even though you can't, and I'm with you, I don't think, I've heard a lot of people talking on our air today trying to explain what's going on. I think it's impossible to do. I don't think it, it sort of defies explanation. I appreciate all the men and women who have gamely tried. But do you think that this, that if we're in a rallying phase, that it lasts, or do we have more downward, direction to go here. Yeah, that's really the critical question. I think we're setting up for a short-term rally. I'm not super confident that the rally is going to last. And the reason for that is it seems fairly probable at this point that we're probably heading for some kind of recession

as we move into 2023. In the last hundred years, it would literally be unprecedented for the market to bottom and start recovering even before the recession started. Typically, markets are bottoming sort of halfway or two-thirds of the way through a recession. And this one has yet to begin. So assuming that, you know, a soft landing is out of the question, then we might be looking at more of a temporary rally here. But we have come down very significantly. Valuations have compressed in a dramatic fashion over the last year. So as that unfolds, the bar really, you know, goes lower and lower in terms of what could catalyze at least a short-term bounce. Hey, Michael, this is Frank Holland here. So obviously a big surprise rally here. Nobody was really expecting what we saw today. But you believe we may have actually hit peak inflation. If we have hit peak inflation, where do you expect to see the numbers decline? It's hard as to believe it could be an energy. We're seeing a production cut from OPEC that's expected to raise oil prices when it comes to wages. The labor market's still tight. And then we also saw that move in rent. So we're expecting to see that softness and inflation that will give the market just that chance to take a breath and believe.

that we could see a pause or in a pivot that could lead to a rally. Yeah, it's been a dangerous exercise this year to be calling peak inflation or peak bond yields for that matter. But I do think we're very close if we're not there now. And the reason I say that is typically these slower moving measures of inflation, you mentioned rental inflation, but essentially everything that makes up the core index will follow business cycle momentum by about five quarters. In business cycle momentum was peaking exactly five quarters ago. We also have some measures of apartment tightness conditions in the rental market that were peaking exactly a year ago, and they tend to lead rental inflation by about a year.

So the numbers should be hot right now, but over the next, say, three to six to nine months, I think these numbers are going to cool. It doesn't mean that inflation falls like a stone, but as I mentioned before, it may not take much. We may just need to see evidence of a decisive peak and a move to. to the downside. And if that pulls bond yields down and that cools off these fed tightening expectations, then they could at least put a temporary floor under equity markets. So let me, let me, I heard many people earlier today. It seems to me that like this is the worst possible time to be selling heavily. It may not be the best possible time, best possible moment to buy. But I heard earlier, Jim Laventhal say that, you know, if you miss out on days like this where so much of a market,

of a bull market's gains occur. And I'm not saying this. is a bull market, believe me, I'm not. But if you miss out on these days where it's up 600, 800 points, you are really missing out. Do you agree that this is a holder's atmosphere or a buyer's, a nibbler's atmosphere, certainly not a sellers? Yeah, I think in the near term for sure. You know, if one had been short the market, I would be looking to cover here. If you've been long and you've gone down with the market, then I would say you can be a little bit patient in terms of unwinding those long positions, if that's the intent. What we don't want is a situation that happened in June

where some investors sort of realized, right, was we were down just over 20%, the market's way down and they sold, and then we ripped 17% from there. And obviously that was given back as the interest rate structure started to come up again. But that's really the key is trying not to get run over by these moves. And typically what happens with these markets,

whether they're going up or down is, you know, they encourage investors to do the wrong thing at the wrong time, overly optimistic at the highs and overly pessimistic at the lows. It's tempting to do the wrong thing at the wrong time. I'm a personal example of that. Michael Darda, thank you very much. We appreciate your time today. Thank you. Tully, you're doing the right thing right. I'm doing it with you, baby. That's good. All right. Our next guest is looking at the charts. Isn't just quite yet to trust this move higher that we're seeing today with us as Todd Sone, technical strategist at Stratigis. Todd, thanks for being here. Hey, Frank, nice to be here with you as well. So I know a week ago you

might have had a different answer. Today we tested some new lows at 3491 on the S&P. Do you have a new support level for the S&P? And what do the technicals tell us about the potential moves going forward? Yeah, it's a great question. Listen, 3491 is the tactical players style line in the sand. But ultimately, I think that the next level we're going to revisit here, assuming this bear market continues, is around the 3,300. And that's because that's where the pre-COVID crash, lines up with. And you've already seen a handful of stocks start to revisit those levels and even below in real estate, in communications, some tech names. So as evidence billed that more and more stocks are retesting their post-COVID highs, pre-COVID highs and even some of the

lows in the case, the market likely has to go there too structurally. I think in the near term, you've got a good fourth quarter seasonal of the tailwind. You can get the S&P to say $4,000, perhaps even a little bit higher. That's in line with typical bare market rallies. But I would not overstay your welcome here. To trends domestically and abroad are still very much negative and a headwind. All right. So you're seeing a lot of negativity potentially in the future when it comes to technicals. Let's also talk about bond yields.

They briefly tested 4% earlier today after that hot CPI report. What do you see as the resistance level for the yield on the 10 year? Again, we hit 4% earlier. Yeah, 4% seems to be a little bit of a magic number here the last couple of weeks. But the way we're looking at this is the structure, the regime, of yields has changed and yields have been much stickier than the consensus has expected this year. Yes, maybe they're a little term extended in the short term, but we continue to believe the trajectory is higher.

I would not be terribly surprised if you start to see four and a half or even a five handle on yields as we head into 2023. The way that tech stocks have acted, the way that some of these growth stocks continue to act, they are not leaders. So that would suggest that the trajectory for yields is still higher. Conversely, you see energy continue to act well. The financials have shown some signs of life. The industrials are showing some signs of life.

And that's consistent with what we believe is going to be higher rates over the course as we head into the next year. Let's talk a little bit more about inflation. It's obviously a backward-looking number that we're pondering and stewing over here this afternoon. And the Fed really only started to tighten, let's say, six months ago in March thereabouts. And some of the tightening on the balance sheet has been sort of de minimis. far. Do you think that inflation is about to fall? Because it seems, at least on those backward-looking year-over-year numbers, and even month-to-month, it's not falling much. This is a great question. This is the question I think everyone wants to know. The most

important takeaway I can offer, right, is that wherever inflation settles, whether it's at 5%, 4%, right, even 6, you have to get the Fed funds rate above that number. But before we're done hiking. I think that's what Larry Summer says. That's the Summers. That's the summer's point, right? Yeah. Our chief economist, Don Ristmiller's pointed out. Jason Tremerd's pointed out. That is the biggest takeaway, I think, from the market that you need to get fed funds above the CPI before this is all said and done. And I think that this goes back to the 3,300 number and the S&P is why we're just more structurally bearish than the reversal today would exhibit. So, Tata, we're bringing on to talk technicals, but I want to talk to a little bit about currency, too.

how much does the move and currency play a part in your thesis, especially when it comes to the moves for the S&P. Obviously, a higher dollar weighs on a lot of these companies and their revenues when it comes to overseas markets. Right now we've seen the dollar soften a bit, but still up 17% year-a-date. Yeah, the dollar has been a Mack truck driving through risk assets this year. I think the consensus believe we're in for a weaker dollar earlier in this year. It's been the total opposite. I find that it's amazing that the Bank of Japan tried to intervene in the end market a few weeks ago. And we're already above those levels after a $20 billion intervention.

And so until you can get the boil off of the dollar, right, maybe back to at least 109 is the first test to support on the DXY. That keeps pressure on global markets. And so if you're going to see a real move, durable move higher in equities, you got to get the dollar lower. That's going to give a boost to risk assets abroad and some more risky corners of Europe and Asia. But again, 109 in the near term support. And that still doesn't change the overall trend for the dollar, but at least brings off the boy. here for perhaps a fourth quarter rally in the near term. Again, yen's still weakening, Juan's still weakening. The dollar is a persistent headache for risk assets abroad.

All right. DXY right now at 112, you're saying 109 is the key level. It is a little bit softer. Todd, we appreciate it. Not bringing a lot of sunshine today, but we appreciate the answer. Thanks for being. We like the light. Thanks, Frank. If not sunshine, we like the light. All right, we're going to continue to track today's rally, snapback rally, if ever there was one. Netflix detailing. It's an ad tier strategy, but with recession calls growing, is this the best time to rely on ad spending? Plus, a real-time read on inflation, consumer and business spending with the CEO of Forward Air, a trucking, logistics company. Clients include Home Depot, many others. They'll tell us which parts of the economy are working, which are not. But as we head to the break, let's take a look at shares of Kroger and Albertsons, which are moving on a report that the two grocers are in talks to merge.

There's action frank in aisle six. Keep it right here. And welcome back to Power Lunch. Netflix, off of its lows along with the rest of the market, the company detailing its ad to a strategy just about an hour ago. It will cost $6.99 a month. Commercials are going to be 15 to 30 seconds. We'll average 4 to 5 minutes per hour.

But with the stock down 63% this year, is it really enough to kickstart growth and win investors back? To answer this question, let's bring in Janice Min. CEO and editor-in-chief of the Anchler. Janice, thanks for being here. Thanks for having me. So first and foremost, what's your take on this? Seems like an odd time to add an ad tier.

We're expecting an economic downturns. So two questions. Is there enough ad money out there to support it? And are people willing to keep Netflix in a potentially recessionary environment, especially with ads? Well, I think you saw some announcements today that indicated the state of play here. That they are coming in. The ad tier is going to be a dollar less than Disney Plus and Hulu. supported and that's no coincidence. And what we're really seeing, the bigger pressure on the marketplace

ahead of their Q3 earnings is that the subscription growth might not be great. We saw in the second quarter that they had their biggest show ever, Stranger Things Season 4, and they still lost subscribers. So what was before this year a subscriber arms race is now really becoming, I would call it an Arpoo arms race, an average revenue per user arms race. where these companies are desperately trying to figure out how do we drive revenue into this company because we've hit the domestic ceiling, the North American ceiling, far faster than we were expecting. And Netflix, just to remind everyone, is the sole major that's just reliant on streaming. It's not Disney. It's not Warner Brothers. It doesn't have some flywheel of theme parks and consumer products that can feed the beast.

They are reliant on one revenue stream. Yeah, Netflix also has one other thing. also just relying on content. You see a lot of these other streamers. They have sports like the NFL. If you look at Paramount Plus, Peacock has NFL, Prime has NFL. And also it seems like, and correct me if I'm wrong, Netflix is very event-driven. You mentioned stranger things. I know a lot of the women in my life were watching Bridgetton, but when those shows end, it seems like people just stop subscribing to Netflix. Is there something they can do to hold people longer? Well, this is what I think you're saying with, for example, the HBO Max Discovery

strategy they're trying to do, which is, you know, bring people in who love Discovery, who keep it on his background TV for the tent pole programming that they're used to on HBO. Netflix needs to get out of, in some ways, the only event programming that they currently are in. And so, yes, you're absolutely right. Right. You see sports and live coming into all the other streamers. And this is what I say about Netflix all the time. they are the never say never company. They said never theatrical, never advertising, and they've said never news and sports. And I'm going to guess that never eventually becomes a possibly. You raised something and Janice, it's nice to see you. It's Tyler Hill. Janice, by the way,

is one of the legendary magazine editors of our generation. Congratulations on your many accomplishments. It's really true. I mean it. No, I mean it. No, I really mean it. No. You raised something that was interesting there, and that was that here is this streamer that has one stream, and that is streaming. They do not have theme parks. They do not have cable subscription revenues. They do not have merch and so forth. So I follow that thought, and I go, does that mean they either need to buy that to have multiple diversified revenue streams, Or do they need to sell so that they're inside of a company that has diversified revenue streams?

Well, I think one of the things people should start thinking about is who's on the board of directors of Netflix and who and what kind of defensive mechanisms do they have to hold off an acquisition. The price is so low now that it has become possible that someone could acquire them. And I think, you know, word around town here in L.A. is that, boy, what would have happened if Reed Hastings back in the time, of 2019 had thought to buy a library, had thought to do what Amazon did when they acquired MGM, maybe buy a Lionsgate, a Sony, someone with the intellectual property, so they don't have to sit there and every year spin up some franchise that cost $200 million like Greyman that people didn't really love. And I think when you look at a movie that they've launched recently, like Blonde, which is more than two hours, it had a lot of buzz, NC17 about Marilyn Monroe.

it had like, I think, like a 36% on rotten tomatoes and a very, very low audience score. So, you know, you can come for these tent polls, but if nothing's making you stick around, the cancellation problem in streaming is it's one button cancellation. And that's really tough to compete with. Janice, I am so hooked on Ozark. I'm in season three. Don't tell me what happens. I don't want to know.

But it is a really good one. It's as good as the Americans was. Wait, hold on. As good as the Americans? It's right there. It is so tense. Janice, great to see you. Great to see you. Thanks for having me. All right, we want to bring your attention to some comments from J.P. Morgan's. Jamie Diamond, people listen to him when he talks.

He says inflation will curb consumer spending in nine months. He doesn't think there's going to be a soft landing. Uh-uh. He says the Fed rate will be higher than four to four and a half percent. That's the Fed Funds rate. And also says central bankers are doing the right thing. We're going to continue to monitor what he's saying from the IIF conference. That's Jamie Diamond.

Inflation will curb consumer spending in nine months. Up next, core inflation may still be climbing, but new data show record rents are finally easing. This comes as mortgage rates tick higher. We're going to discuss housing and more. Plus, a look at the state of the global freight industry. How is demand holding up? The CEO of Forward Air weighs in with his business. weighs in. With his view of the economy, that's all on Power Lunch when we come right back.

All right, folks, welcome back to Power Lunch. Stocks seeing a huge rebound. There you see it. Up 750 points, 2.5% on the Dow Industrials, way up from today's lows. And right now, the S&P real estate sector is up more than 1.5%. Looking at the housing component of this morning's inflation report, rents are still rising, but this report was for September. A lot can change in two weeks. weeks and Diana Oleg is looking at the even fresher data. Hi, Dai. Hey, Ty. Yeah, the CPI numbers still show rent growth accelerating, but those numbers are actually lagging by several months due to the way that the BLS calculates. More recent reports show rent growth easing significantly. Rent in September cooled to the slowest annual pace in 16 months, that according to Realtor.com,

up 7.8% from September of last year. It also posted its second month-over-month decline in eight months, further from the July peak. Now that said, rent is still rising at twice the pace it was in March of 2020 when the pandemic started. Redfin is also showing a similar slowdown and notes the record high number of apartments currently under construction. All that new supply could cool rents further. This comes after a report last week showing apartment demand has evaporated in much of the country due to a freeze in household formation. Inflation may be keeping new renters from being able to afford to move out on their own. The third quarter is historically a seasonally strong leasing period, but demand actually fell this year, according to Real Page. That's the first time

it's seen a third quarter drop in the 30 years it has been tracking apartments. And finally, single family rents are also coming down off their record highs from last April. They're still rising more than apartment rents because there's so much demand for single family rentals and not as much supply. Quick questions, Di, number one, this is a point that Jeremy Siegel made with Scott about an hour ago, that the Fed's numbers on rents are so backward looking. They're not as fresh as the numbers you just gave us. Why doesn't the Fed look at these newer numbers? You know, ask the Fed. I can't answer that question. But look, we do have the latest data. Well, that's why we're here. But we do have to take some of these government numbers into account

when we're looking at the bigger picture because we are getting newer data from other sources. Let's talk about mortgage rates. Where are they now? Where are they headed? We are over 7% Tyler. Now, the good news is that the expectation when we saw bond yields go up so high this morning, we thought they were going to be much higher today. They did not rise as much as we thought, but they're still well over 7%. And it doesn't look like we're coming back down. We'd seen mortgage rates come down in August a little bit.

It doesn't seem like they're headed that way now. All right. Look for housing maybe to slow. Diana, thank you. Diana Olin. All right. Still ahead here on Power Lunch. Getting into the swing of things, the Dow, bouncing back to Nick significantly today,

despite a worse and expected inflation report is the worst priced in, and could we actually be hitting a bottom? We'll break down this dramatic market volatility. Plus, as inflation climbs, we'll dig into some names that continue to grow margins despite rising cost. Power Lunch, back right after the break. Welcome back to Power Lunch. I'm Aiman Javers in Washington, and here's the latest from the ongoing January 6th committee hearing today. Representative Kinsinger presented a newly obtained Secret Service email saying former President Trump was, quote, pissed that the Supreme Court had denied his lawsuit challenging President Biden's win.

An aide to Trump, Chief of Staff Mark Meadows, described Trump's reaction. He had said something to the effect of, I don't want people to know we lost, Mark, this is embarrassing. Figure it out, we need to figure it out. I don't want people to know that we lost. The panel also showed documentary footage of Roger Stone before Election Day urging violence if Trump didn't win re-election. I suspect it'll be, I really suspect it would still be up in the air.

in the air. When that happens, the key thing to do is to claim victory. Possession is nine-tenths of law. No, we won. F-you. Sorry, over. We won't. You're wrong. You're wrong. Fuck you. Representative Luria added new evidence of Trump personally trying to overturn his election losses in multiple swing states. She said Trump knew he was telling lies and ignored evidence that his voting claims were wrong. Tyler, back over to you. All right. Thank you very much, Amon Javvers. We got less than 90 minutes left in the

trading day. And as we've seen today, A lot can change in 90 minutes. So let's look at where stocks, bonds, commodities, and all the rest are trading right now, and what should we make of today's inflation number and the market reaction. Let's begin with Christina Parts in Evelace at NASDAQ where tech stocks are having a huge turnaround from this morning's low. Christina. Yeah, that's right, because the NASDAQ right now is on pace to break six straight days of declines and a race. That 3.2% drop from earlier this morning.

It's a guessing game for the catalyst, but sentiment repositioning is pretty much a go-to excuse right now. But let's talk about the mixed group of winners right now on the NASDAQ 100. You've got Walgreens in there up over 5% biogen and charter communications. All of those stocks up above 5%. But it's the semiconductor firms really leading this turnaround. You've got Skyworks, Lamb, applied materials, micron, intel, all part of the biggest mover to the upside 3% or higher. However, when you take a step back and look at the entire semiconductor index on the NASDAQ, all constituents are still negative on the year.

Speaking of negative, Chinese ecommerce names like JD.com, pinduo-duo Z-scaler still, well, Z-scaler is a softer one, but still negative. Those names have sold off over the past few days because of Biden's new export restrictions to China, and there's fears that further restrictions will continue to weigh on this group. And then you've got software names. Now I can say that Z-scaler and date a dog, negative despite today's rebound. And lastly, Match Group, the worst performer right now in the NASDAQ 100, down over, what, 4.5 percent, trading at all-time lows, dating back. to its IPO back in 2015. It did get a downgrade this morning from Evercore. Maybe people aren't using dating apps as much. No, I'm just guessing right now. But the stocks down. Hi. Christina, thank you very much. And now to the bond market where the 10-year yield once again

popping over 4% today. But can it, will it? Stay there. Rick Centelli, tracking the action. Hi, Rick. Hi, Tyler, indeed. Whether it's the 10-year, the 30-year, or that CPI number, there's been a lot of action today. CPI, 6.6 with the year-over-year core. That was the highest since 1982, a fresh high, I should say. And remember, we can go all the way up to 9.3 percent, Tyler, because in 1982, that's where it peaked. So we still will probably continue to comp to this.

But everybody's like, wow, what a reversal. And there was a reversal in stocks. Everybody can see that. But in treasuries as well, look at a two-day of two-year note yields. First of all, look at the complexion of the chart, how flat everything is, and how close to the highs which were a yield of 452, we still are in two-year notes, on pace for a fresh close, high-yield close going back to August of 2007. Now, let's look at a two-day of tens.

Their high was 407. And as Tyler pointed out, we've been above 4 percent, exactly three times. The 28th of September, the 11th of this month, just this week, and today. Three times. If you're a technician, three times is always something to pay attention to. If we don't close above 4% on a third intraday try, that will mean momentum to the downside and yield upside in price. Vice versa, if we get momentum and close above 4%. The dollar index did not like these numbers.

Initially, they did, and then look what happened. The big reversal, down almost a cent. And we've given up all the gains for the week. The moral of the story here is it's about what the markets have priced in, not necessarily what the Fed can. keeps telling us is around the next corner. Tyler, back to you. All right, Rick Santelli, thank you. Wisdom there. Let's talk about oil now, closing for the day. And along with stocks, it is heading higher by about 2% Pippa Stevens at the commodity desk. Pippa. Hey, Tyler, oil is catching a bid today after three days of selling. The latest inventory report

from the EIA is stoking optimism after distillate stockpiles fell to their lowest level since May, and that is offsetting a build in both oil and gasoline stocks. Meantime, the United States and Saudi Arabia trading barbs following the two million barrel per day oil cut from OPEC and its allies, which does include Russia. Saudi Arabia said it was purely economic. The White House dismissed this, calling it spin. National Security Council's John Kirby added the kingdom new and output cut would increase Russian revenues and blunt the effectiveness of sanctions.

and the IEA today said that in its closely watched monthly oil report that the cut is exacerbating market volatility and heightening energy security concerns. The agency added that it could be the tipping point for a global economy already on the brink of recession. Tyler. All right. Thank you very much. Pippa Stevens. Let's get back to the remarkable turnaround in equities

and whether it can hold. Margie Patel is portfolio manager for the multi-assets solutions team at all spring global investments. Welcome. Good to have you with us. Thank you. It's good to be here. Yeah, fantastic. What do you make of today's numbers first and today's turnaround in the market? Well, I think it shows you short-term trading can be very, very hazardous to your health, and it's a strategy to be able. And secondly, I think it shows the market is sinking, well, the rates were up for inflation, but maybe that means we're at the peak and therefore they'll come down.

And I think that reflects the feeling that everything is riding on what the Fed thinks and does. And if the Fed looks at these and says, oh, well, we don't need to raise 75 basis points in November, the market will feel very good about that. And I think that's really what the volatility in the market is from, not so much fundamentalists, but trying to make it better on what the Fed is doing or thinking about the outlook for the economy and inflation. Hey, Margie, Frank Holland here. So I think you took the words out of my mouth. So much volatility in the markets in Q4.

I know only about two weeks in, but really a lot of big ups and downs, testing new lows on the S&P today. How much more attractive are bonds right now? I'm looking at the two-year yield at 4.4 percent. Are you moving more of your client's portfolios towards bonds? Well, I still feel a little lukewarm on bonds because, frankly, the Fed has been pretty clear that they still want to raise interest rates. And by the things that they're looking at, they will continue on this path. So it seems to me, although bonds look attractive compared to where they've been for some years, we still could have more upside in bond yields for treasuries.

The 10-year treasury has a negative performance this year almost 20 percent, so it hasn't really been a good place to be. And even high yield, the yields are pretty attractive, seven and three quarters, but no reason in the world, if the economy slows down and the Fed continues to raise rates, that we couldn't see some erosion. So we would rather look at the equity side figuring one day earnings will come through, the Fed will be done, and there'll be better returns on the equity side. Yeah, Marjor, I think everybody's looking at the equity side.

Turnaround on Wall Street. We're still following here on CNBC. Thank you so much for being here. All right. Up next here on Power Lunch, state of freight. The Dow transports higher this month by just about 5%. But they're still down about 22% for the year. Up next, we'll take a look at one stock that's outperforming the broader space. Stay with us. Much more Power Lunch after the break. Let's give you a quick market check. Welcome back to Power Lunch. The Dow 30. All 30 stocks are higher. That is what you call a wall of green. Some people got a sea of green. Sea of green. It's a wall right there.

Led higher by wall greens, up more than 6%. As you see there in the upper left hand corner. McDonald's Goldman Sachs and United Healthcare account for about 200 points of the Dow's now 830 point gain. Yeah, Wall of Green, but I think on Wall Street, a sea of optimism. Sea of a big turnaround. For a day. Turning our attention to the Dow transports. They're hired today as well, though down sharply for the year.

It's about 30% off its highs. FedEx. warning of weakening global demand in mid-September. That stock tumbling since then. But trucking company, Forward Air, recently released a strong mid-quarter outlook. And its stock has really outperformed some of its rivals, shares up almost 10% this quarter. Joining us now is Tom Schmidt, chairman and CEO of Forward Air. Tom, thank you for being here. Good to be here. So Tom, we just mentioned FedEx CEO issued what I have to call a dire warning about the global freight environment, scared a lot of people on the market. But you released

your update recently. You showed revenue growth up 16%. Shipments per day. up 6%. Some of your customers include Home Depot and even some other shipping and transportation companies like expeditors. What's your take on the global freight environment and the U.S. freight market? Well, we clearly see the same thing everyone else is seeing. There is a softening in consumer demand all over the world and certainly here in North America and the U.S. So we do see the same things. Having said that, Frank, we are focusing on what we can control. And I learned a long time ago from one of my mentors. Luck is when preparedness meets opportunity.

We are prepared, whether we didn't know it would be COVID or possibly a recession or certainly softening demand. But we have a very strong growth forward program where we focus on high value freight in a clean operating environment, compensated and paid for the right way. So we're executing what we control. All right. Higher value freight. That's something we've heard FedEx and UPS talk about as well.

Let's dig into your business. About 60% of your business is industrial business to business. 30% is consumer spending related. You mentioned that softening. Talk to us about the business spending environment when it comes to your business. Are we seeing businesses continue to send things out and continue to spend money in those areas? As a company, we have become more resilient and more robust with that high value freight focus. Three or four years ago, we possibly couldn't spell medical equipment correctly.

We certainly can now. So we are focusing with our customers to go after those high value freight shipments. And those tend to be more resilient, more essential, a little bit less peaky. So we at the same time as a company have become more robust, more strong, and more predictable. So you mentioned more business-to-business shipping, also medical. Also, defense shipping has been up. In general, do you see that sustainable going all the way through the fourth quarter? Your business not is relied on holiday peak and things like that.

But what's your outlook going into Q1 of next year? Do you expect the business spending environment to remain the same, at least in relation to your business? I do believe there's going to be consistency. And again, if you cannot win a size of pie game because the pie may not become bigger, then you win a slice of pie game. That's what we're doing. That's the playbook we're executing. And we said on the earnings call that you may have preferred to before the mid-quarter update, that we believe this year obviously will be a record year, top line and bottom line.

And we also, based on our models today, believe despite the headwinds, that with more high-value freight, more events coming back, precision execution, high-value freight, that next year will be another record here for us, top line and bottom line. Do you have the people you need to do the job? How hard is it for you to find truckers and how much more are you having to pay them to find them, attract them, and keep them? So great question, Tyler. So we are winning. the War for Talent. Two decades ago, we probably talked about people like the three of us here when we talked about the War for Talent. Now we're talking about that too, but we're talking about truck drivers. There's a shortage today, perhaps 100,000 across the U.S. That shortage will be twice as much five years from now. But we are winning that War for Talent. We have a super creative talent attraction and retention to your point crew. We're doing creative programs

like Doc to Driver programs. We also have a driver board where we listen to their concerns every quarter. I sit there with tribal drivers and defeat owner representatives, and then you blast out what we're doing to make sure predictable home times are in place. That also there are wait times when they call dispatch is going down. So we are making this a hugely desirable professional home for all of our drivers. So this is a war for talent across the board and we're winning that war for talent with better retention rates and better attraction rates than the industry. It's interesting. We have to wrap it there, but it's interesting. It's not just money and it's not just pay that counts here. It's how you listen to your drivers and

employees and what you do in response to their concerns. It's got to be the best professional home and you absolutely correct. Compensation is necessary but not sufficient. Tom Schmidt, thanks. Forward Air. We appreciate it. Up next, we're going to take a look at the cloud stocks. One of the few groups not keeping up with today's rebound. And speaking of checkout shares of Etsy, still the worst performer in the S&P 500. You don't want to be that, Frank. You don't want to be the worst performer. No, I don't think you do. We'll be right back. All right. Welcome back. Cloud Enterprise stocks. They haven't rallied along with the rest of the market. Bit of a turnaround in some of these names. The CLO and the SKYY now turning in the green just while we're doing the show right now.

Rate pressure with the 10-year yield crossing 4%. Really continues to weigh on these names. High growth and high valuation names. They continue to get punished. Sentinel 1, for example, down 4%. One of the biggest drags on the W-C-LD-E-T-F, snowflake with a forward P.E of more than 600 times in Cloudflare. forward PE over 1,000. That stock down about 2.5%. Also trading lower today. The 4% yield, it really continues to be a catalyst for these stocks to sell off. However, these names are getting some relief from the dollar softening at least a bit. Up only a quarter of a percent this month. The greenback, however, up 17% year-to-date. A big headwind flagged by Salesforce, Box, and many other names. All right. Still to come here on Power Lunch. Pricing power will trade some names holding strong even amid this high inflation. Power Lunch. We'll be right back.

910 points. That is how high the Dow is right now, shrugging off more hot inflation data. CNBC Pro highlighting some inflation busting stocks that have held up in this fractious economy. Criterion includes increasing gross margins, anticipated earnings growth 10% or more, and bucking the broader downtrend posting gains as a stock for the year. Here to help us trade us several of those choices, Nancy Tangler, CEO of Laffer Tangler Investments. Nancy, always great to see you. And for more inflation-busting stocks, we can we'll refer to that a little bit later. What is our first stock here? I think our first stock is supposed to be Cotera Energy. Yeah, Tyler.

So we still think that energy, it's good to see you. And thanks for having me on on a day when the market is back. We're always glad to have you on. So we still like the energy trade. At the margin, we've been shifting our focus away from the upstream names. We still own some, but we're really interested in the downstream and midstream. So this is a company that is a diversified energy company, trading it eight times, yield of 8.7 and a five-year dividend growth of 70 percent because they're obviously paying special dividends.

What I really like about it is they get 100 percent of their revenues in the U.S. So your screen's identified some great names, and this is one that I would be buying. All righty. Shall we move on to the next talk, which would be ExxonMobil? There's a theme going here, Nancy. Same, same reason. 3.6% yield, much slower dividend growth, but 78 or 76% of the revenues are in the downstream part of the oil market.

And we think that's probably where you want to spend the next year or two in this trade, because it is a cyclical trade. So, Nancy, I want to skip ahead to one of your fourth pick, I guess, on this, list Cal Maine Foods. They're a big time egg producer. So my question for you is, have we hit peak egg prices? I know a lot of times people are going to the supermarket. Eggs have doubled in price over the last year. So how is this stock inflation proof? Because it's hard to believe people will pay even more for eggs. Well, you're right, Frank. But I do think it has been inflation proof. And so my response on this stock is it's up almost 60% year to date. It does have a robust dividend

policy. And that's very important to us. I've been running dividend growth strategy since the mid-1980s, this is exactly the time when you want to own these kinds of stocks, but this one's pricey, and it's kind of at peak earnings. So that could be equate to peak egg prices. So I think if you own it, you hang on for a little bit longer, but if you don't own it, I wouldn't chase it here. You might have egg on your, you know, face if you did. Let's talk about the market more broadly here.

What are your impressions of this rally? Is there a reason for it, or is it algorithmic trading, which is what, I suspect? I think so, Tyler. I mean, I was sitting at my desk at my home office this morning with my head and my hands when the futures were down yet another 500 points. This feels like just a knee-jerk bounce. It is probably Algo-driven. But I will say that I think earnings are surprising many investors, though I don't think the market's trading on earnings.

Until we get clarity on inflation and a Fed that at least seems like they're going to listen. to financial markets and or listen to the financial conditions tightening, I think we're going to continue to see this kind of volatility. So Nancy, one other question. These stocks are on your list, but when we look at grocery stocks and names like Walmart, Amazon, you know, certainly not recession-proof, but are these stocks that you would write out during the recession because they sell a lot of essentials? Absolutely.

Walmart's in our 12 Best Ideas portfolio. We also own a big chunk of target in our equity income strategy. These are the two best retailers, I think, in the world, and they're going to be drawing down the inventories and back in shape by Christmas. Nancy, thanks very much, Nancy Tengler. We appreciate it. Frank, great to be with you. Always great to be with you.

That'll do it. Thanks for watching Power Lunch.