Power Lunch - A midday market selloff, ARKK’s big outflows and the energy crisis escalates. 9/2/22

Episode Date: September 2, 2022

The Dow erases a post-jobs 370-point gain as stocks head for their third straight weekly decline. Energy in focus after Russia’s Gazprom shuts its European gas pipeline indefinitely escalating the energy war with the West. We track the biggest movers of the hour as market sentiment takes a big shift. 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 to Power Lunch. I'm Contessa Brewer in for Kelly Evans today, and we are watching this big U-turn in the market. Slamming the break on the morning rally, wiping out the gains that followed that jobs report, and we're tracking the decline. We have a lineup of market pros to help us navigate this volatility. First, let's get to Tyler with more on this sell-off. Contessa, thank you very much. Welcome, everybody. The market's earlier gains are all gone. The Dow had been up as much as 370 points. Now down about 280. That's a 650 point. Turnaround, the S&P 500, also lower today by about 1%. And right now, the NASDAQ is down 1.38%. It is a bit of a perplexing day as we head into the weekend. There is news, but there is a lot of uncertainty around that news.

3M, Dow, Intel, the biggest laggards on the blue chip index. The Dow transports, they are down as well. That is not a good sign. The sector led lower by J.B. Hunt, Old Dominion, and CSX. Contessa. up. All right, let's get right to the market panel and this midday decline in stocks. Keith Fitzgerald, Fitzgerald Group Principal Bob Bassani joins us. Mike Sintoli. Let's begin with you on what may have sparked this big turnaround. Well, it seems the headlines about Russia and, you know,

essentially going to close down the natural gas pipe down to Europe, timed perfectly with, yes, it was this kind of mechanical rally from this morning, but the dollar surged right on that. It was very much the script was starting to run on the risk aversion. We don't know what's going to happen over the weekend. We're worried about Europe falling into recession as most expect right now. And it just seemed as if it was, you know, hitting a market that was already a little bit fragile, both on the upside and the downside with these kind of illiquid air pockets. And, you know, right now the S&P, just a little bit above yesterday's lows from which it bounced intraday. Bob Pisani, what are you hearing from traders?

Well, 60 to 70% of the people I normally talked to weren't in today. This is the last day before Labor Day. And half of the rest of them left right after the jobs report. So the jobs report was good. Unemployment ticking up a bit. The wages are a little bit softer than was expected. So it was an excellent report. I don't think anything that's happening here negates the fact that overall the inflation is peaking

story got a little better today. However, look what's going on here. Very thin volumes. People aren't in. Mike's point is very well taken here. You've got a three-day weekend where we've got China lockdowns going on. We've got a lot of problems over in Europe. We've got an offensive going on in Ukraine. We've got the pipeline being shut down. We don't really know. It would make a lot of sense to lighten up a little bit going into a three-day weekend. So I'm not terribly concerned about this. I think that there's just an ongoing problem with buyers trying to get enthusiastic when they've got so many unknowns going into the month of September. Keith, your reaction here, Bob says a lot of people want to lighten up. Can you help us lighten up? Well, I can certainly

lighten up the humor. We can't take ourselves too seriously on days like today. I mean, this is a classic rug pull for both points that Mike and Bob laid out. A lot of people literally walked off the floor to go to the beach, go to the holiday, whatever. But at the same time, you've got a market that has increasingly tried to get ahead of itself, which means that there is just all sorts of computerizations, hijinks, things going on today behind the scenes that have simply caused this reversal. I would caution people not to read into this. When in doubt, you want to zoom out. Stay focused on the big picture and the companies you know that are going to survive. Because history, shows very clearly beyond any shout of a doubt. Big down days like this on thin volume,

temporarily are good buying opportunities. You know, I have to say that your cautions are very memorable, very catchy. And the one that I have in front of me from you, Keith, is don't do stupid stuff. So today, in particular, what would you consider stupid? Well, you know, thank you for pointing out. We try to speak in very plain English most of the time. Don't do stupid stuff is a mantra that we share with our clients. Today, qualification on stupid stuff would be a knee-jerk reaction, or would be trying to run for shelter when you know, in fact, the better play is to wade into companies. Maybe you've missed or take a different perspective, change up your tactics. It's making rash decisions that get you into trouble, particularly when this stuff hits the fan,

because it's not evenly distributed. Mike Santoli, let's talk about what we have today's jobs report, which was a pretty sweet one. But it seems to me that in the past week, there has been a lot more focus on the possibility, maybe the probability of recession coming and that that's going to slow profits and it's going to slow them globally and it's going to hurt stocks and that we may go into an earnings recession before or contemporaneous to a real economic recession. Well, there's no doubt that that theme has been a lot more in focus. And I think the reason for it is what, just the reason for it, is what just...

Jay Powell said last Friday, which was essentially that this Fed is not going to be particularly data dependent on how it looks at what it's what it's bound to do on interest rates. So the point being, today's jobs number was reassuring. It was neither too hot nor too cold, but it also probably doesn't give any sort of excuse to a Federal Reserve that looks like it wants to get rates up to a certain level in a hurry and then see what happens and is not particularly worried about the wear and tear along the way to the economy. I think it's better to have an economy that we now see in this jobs report that's more resilient, that has a better labor market to withstand whatever the Fed's going to do. But you do have some bears out there and some people who will say, look,

the lagged effects of the tightening we've already seen by the Fed and the fact that the globe is slowing down and China is where it is can tell you that maybe the U.S. is just by definition going to follow down that path from slowdown. into recession. It's not a foregone conclusion, but clearly we have to worry about that as one of the probabilities. Bob, you mentioned the shutdown of this Nord Stream, this gas pipeline. The cited reason is that because it was an oil leak. Do we believe that at all? I mean, it would even, right, exactly. But I guess it doesn't matter. The pipeline is shut down, so who cares? But what we're seeing, and meantime, the G7 has said, has agreed on some kind of price cap for Russian oil to the extent

that that is enforceable. So what we're seeing here is the weaponization of energy, correct? That's right. And this is part of the problem that we're trying to figure out, just how much of this is a demand side problem where we're going into a slower global economy, therefore oil is going to be down. And in a sense, we want that because that's what the Fed wants. They want a slower economy. At the same time, there are supply issues that are impacted. this, this makes this head-spinningly difficult to figure out on a daily basis. And you can see how oil stocks had been on an up trend for several months already on the belief that eventually we were going to get our hands around the supply problem. And now it's moving to the downside

again on concerns that the demand side this week going down, that the demand side is going to be a real problem. So the whole global commodity thing is really difficult to figure out. And we want commodities down because that supports the inflation is peaking narrative that would help the Federal Reserve. But it doesn't cooperate with us all the time because we've got this additional overlay of Russia, Ukraine on the after effects of COVID. This is just really difficult to figure out. We're showing the charts right now that show energy, WTI crude up more than a percent. You had the RBO up more than 4 percent. We've seen energy under pressure this week. In the meantime,

you've got the NASDAQ down more than a percent, the Dow and the S&P, down almost a percent, as we mentioned before, really reversing those earlier gains that we saw after the jobs report came out. Let's talk a little bit, Keith, about where investors should park their money right now if we're heading into a season of volatility. Well, you know, that's a very interesting question, right? And it comes back to what we talked about earlier. Don't do stupid stuff. This is not the time to be a hero.

So if you're going to invest through this, and I would urge people to do that with the right perspective, this is where you go for the steady eddy reliable stocks. This is where you go to Costco because people are going to try to make every dollar go further. This is where you go to something like GIS because people are still going to eat and they've got multi-billion dollar brands on tap there. This is where you go to defense stocks because the world is a complicated place right now. These are all low beta, high dividend choices with long extended histories of taking care of their shareholders. So yeah, they're going to come under pressure, but I submit it's going to be. going to give you as far smoother ride and over time be far more profitable. On General Mills, does it factor at all into your thesis that people may be making decisions

about where they put their grocery money for the week and choosing other brands or even off-brand names rather than name brand General Mills? That's a sharp question. And yes, it does factor into the decision, which is why we take that Costco on the other side of the equation. Because, you know, you want to stick with those big names because those are always going to be their household staples. But in the event, people change how they buy. That's the Costco component of this. That's very much on our mind. I know that you have a strong opinion about the chip situation that we've seen this week. Invidia and AMD dropping, especially because of some of the moves that we've seen with regards to

China. Talk to me a little bit about how you're thinking about those two stocks. Sure. I mean, you know, the situation is this, right? We have created 90% or more of all the data in the history of humanity within the last few years. That genie is not going back in the bottle. So if you look at companies like Nvidia, AMD, even Intel to some extent, you know, it's logical that those are gonna get pushed back now

because those are highly leveraged stocks in terms of how the big traders hold them and use them. So a market pull down like this to me is something where I wanna look at it, say, do I really wanna nibble in? Do I wanna go? The answer is yes, but you gotta slow that down. You gotta take a very piece to perspective.

People are gonna change the way they buy, but they're not gonna give up their change. chips. They're not going to derail suddenly the digital process that in our lives. People are not giving up their iPhones, for example. Every single thing in our life increasingly has chips. And when that becomes a national strategic priority because of China and that stuff comes back to the United States, I submit that those things are going to come roaring out of the basement when people least expect it. Keith Fitzgerald, thank you very much for joining us. We appreciate it. Bob Pisani, Mike Santoli. Thank you guys.

Thank you. The big issue hanging over the market right now, of course, inflation and wage inflation in particular and what the Fed will do next and whether it can engineer a soft landing, i.e. avoid a recession with us, Dave Rosenberg, founder and president of Rosenberg research. Dave, welcome. Good to have you with us. Thanks very much. Can the Fed engineer a soft landing? No. All right. Thank you very much, Dave Rosenberg. It's been great being with you. Why do you say it's so tricky? Why do you say they can't? Well, I mean, Firstly, when you look at this strok of fat tightening cycles, we get soft landings 15% of the time and hard landings 85% of the time.

So if you're playing the probabilities, why would you make the soft landing your base case? And this Fed is tightening policy, you know, both through interest rates, by the way, and now they're doubling down on quantitative tightening, which is just starting. They're raising interest rates into an inverted yield curve. every cycle, and I said at the beginning of the year, I said, just watch when the yield curve inverts, the Fed and the consensus economics community, you're going to find a way to tell you ignore the yield curve. The last time the Fed tightened policy into back-to-back quarters of negative GDP and inverted yield curve was the Volker. And everybody seems to love the fact that last week, Jay Powell, compared himself to Paul Volker and used a lot of the same language that Paul Volker would have used. Well, Paul Volcker is revered in the financial community.

He killed inflation with back-to-back recessions in the early 1980s. So the proof of the pudding is in the eating. The first two quarters of this year, the debate, of course, GDI, GDP. The economy is really flat in its back. But the first two quarters of the year were dominated by Omicron and by the food and fuel shock, China lockdowns complicating further global supply chains, the Russian invasion in Ukraine. That was the first installment.

We haven't seen all the lags kick in from what the Fed has done. That's going to show up towards the end of this year in the next year. So the first two quarters of this year, and I think if you average out GDI, GDP, we'll just acknowledge the economy is flat in its back. Even if you don't think there's a recession, it's stagnant. But the Fed's actions haven't kicked in yet. And that's going to be the story for the next 12 months. And that's why the recession, if you don't believe it has already started,

is staring us in the face. Yeah, the Fed acts have not kicked in yet. The quantitative easing part of it is the sort of underreported part of it when they're pulling cash out of the system. I wonder why, though, if the economy is flat on its back, why is hiring as healthy as it is? Well, actually, hiring is not as strong as it seems. for a couple of reasons. 500,000 jobs the prior month and 300 and what thousand this month, I forget,

350. I get that, but when you look at the Joltz numbers, you'll see that hirings have actually been coming down. Really what's supporting the employment picture is that companies are not laying off anybody. Remember that employment month to month is a net number. The hiring rate is actually not that strong. What's happening is that companies are fearful

about letting people go, and that they won't be able to hire them back. I think the real kicker, and, you know, I think what happened is that, you know, bonds sold off and equities rallied in the first little while after today's non-farm number until some sophisticated people look beneath the veneer of the headline. Now, remember, it's an employment report.

It's not just one number. And, of course, what everybody does is they report the non-farm payroll number. But when nobody seemed to report today, but I think some people caught on was the kicker, was that the work week was down three-tenths of a percent. And the work week is a leading indicator for the economy. The work week has actually been flattered down each of the past six months. And so when you're down negative point three, you see, and you look at that holistically as to what that means for employment,

it actually means that the non-farm payroll number was actually negative, $150,000 when you counted the fact that people were working fewer hours. And when you're looking at the overall economy, it's total labor input that matters. And really the important thing out of the employment number today, that's why I totally disregard when people say to me, today's number was Goldilocks or it was a really good number. No, no, no, because you're not looking at the work week. And when you count that in, aggregate hours worked, which is total labor input into the economy was negative. It was down to 10. And I think that's what people looking beneath the hood underneath the hood. That's interesting.

Because that tells you that people are working less, and when you work less, you have less income coming in. So you're not going to spend as much. Contessa? Well, to that point, wage inflation may have something to do with the slight increase that we've seen in labor force participation. It went up. Here it is 62.4% in August up from July when the rate was 62.1%. Just this week, I had some conversations regarding wage inflation and the utter frustration that the Fed was not going to be able to do anything about how many workers we have versus how many job openings we have, especially if, and this has nothing to do with Fed, it has to do with our lawmakers, dealing with this issue of immigration.

How do you factor in how many workers we have, where the jobs are, and how do we fill them? Well, look, immigration is a wonderful thing. You know, in Canada, there's tremendous. immigration, and yet, you know, wages are really accelerating in Canada. So you can't just look at one particular element. I think what's happening, when you look at today's number, I think that what we're seeing, which is actually beneficial from an inflation standpoint or disinflation standpoint, is we're finally starting to see a thought in the labor market happen on its own without immigration. Like, for example, what did we see today? We saw that female participation rates, 25 to 34, let's call them working mothers.

The participation rate went up to the highest level on record. We've even broken above the pre-COVID peak. And that's a sign that the COVID fears, now COVID hasn't gone away, but the COVID fears have subsided. The female participation rate is going up. That wasn't happening three or six months ago. And if you remember, you know, we could talk about immigration. I mean, that's really glacial.

That'll have an impact over time. But what happened to the Great Resignation theme? What happened to that? Well, I'll tell you what took care of that. What took care of that? That's all people talked about last year was the great resignation theme. Well, the bear market inequities took care of that because all of a sudden, these people who are, say, over the age of 50,

they thought they could retire on their 401K nest egg now realize they can't. Oh, man, are you talking the truth? The bear market and equities has looked after. So you see, one of the things that happened in the number today was that was that male participation rate for people above 50, people like me. the participant shot up, and there's a diverse correlation between the participation rate for males and what the equity market is doing. So you see that there's some other things happening that are causing this law on the

market right now because gas costs more, groceries cost more, rent costs more. And so even the freedom for them to stay at home and take care of their children may not be there. The numbers have changed the behaviors in households and markets. David, thank you very much. We appreciate your time today. Have a very long weekend. Take care. Yeah, you too. Thanks for the fresh insight on that jobs report. Maybe not so Goldilocks after all. All right, our coverage of this market reversal continues. We're going to focus on the consumer-related names that are on the move this afternoon.

More power lunch is ahead. The Dow off 246 points. It was higher by well more than 300 at one point earlier today. Welcome back to the consumer discretionary sector down almost a percent this afternoon. led lower by the likes of Starbucks, Tesla, CarMax. That brings us to the final installment of our week-long series, Power Lunch Cookbook, where we look today at restaurant stocks. And to do that, we welcome Nick Settion and analyst at Wedbush. Nick, welcome. It's great to have you with us.

Consumers, I mean, investors are certainly chastened and a little bit concerned about the economic future. How about people who are going to eat out, restaurant patrons? Well, thanks for having me, Tyler. You're welcome. So look, we saw transaction trough in the first part of July since the first half of July. We've seen transactions accelerate. And so, you know, it seems like as, you know, as of now, people are going out and they're going out because gas prices are down. Because employment is still very healthy.

And the lowest income consumer is actually getting the kinds of wage increases that are exceeding expectation. So the business is healthy. Your picks are the ones you like best out of your coverage universe include Wendy's, Denny's, Dine Brands, and Wingstop. Why those? Well, there are different reasons for each. Essentially, I think those are relative to a growth rate, the most undervalued right now. You know, Wendy's, there's a big dislocation going on because of the E. coli worries that, you know, the news came out a couple of weeks ago. I think they were very quick to address it.

I think it will be contained. And, you know, there's probably about a 15, 20% dislocation within the share price within the last couple of weeks just because of the E. coli news. Wingstop is the best growth story within restaurants. You know, the 30 EB-Badam multiple seems very high, you know, in the current environment. But just for context, McDonald's, you know, commands a 20, 18 EV, but down multiple. Domino's commands a 20 EV, but down multiple. And Wingstop is two to three times the growth rates of those names. So, you know, especially within the smaller cap and mid-cap space, there are big dislocations

within restaurants right now. Nick, I'm curious. We've heard that some of the supply chain issues have begun easing. For restaurants in particular, what are the big headwinds going into fall? Well, we certainly have seen supply chain headwinds ease. We've seen essentially margins trough either in Q2 or Q3. They will trough here in Q3. The biggest headwind that is just a direction of the declines in terms of, you know, food costs

and then where labor inflation stabilizes. So, you know, the argument is sort of mid to high single digits in terms of labor inflation exiting Q4, and hopefully we start to see by the first half of next year, mid-single digits, in terms of labor inflation. And by Q2 of next year, hopefully you start to see this commodity costs, which have been up high teens, 20 percent year over year, this year, hopefully start to see those flattened out. And generally speaking, have restaurants been able to find the employees that they need? Is the labor crunch easing somewhat?

The labor crunch is easing, but it's, still very much there. And so, you know, if any, you know, we have been hearing a lot, you know, about layoffs, et cetera, but it tends to be within the tech, you know, biotech sectors, lending, real estate, et cetera. But those are, you know, median incomes are higher, right? So within the unskilled labor population, there's still a very, very big need for labor as the services, you know, the service industries come back from COVID. All right. Nick, thank you very much. We appreciate your time. today. Thank you for having me. All right. Further ahead on the program, investors jumping arc.

Kathy Woods Fund seeing its largest monthly outflow since September. It's top holdings having a rough month. We will trade them in today's three-stop lunch. Ark, Ark, Ark. There you go. Power lunch. We'll be right back. All right, time now for our weekly ETF tracker. Very interesting this week. We focus on metals ETFs, which say $700 million of outflows were had this. week. The strong dollar and rising interest rates having a macro impact there in the latest COVID lockdown in China, raising demand concerns. Now look at the performance of a few specific funds. Big gains today for some, but look at the red numbers for the week. Still down, spider metals and mining, I-Share's global metal and mining, down 7%. Vanek gold miners down just

3%, 4% really for the week. All of them higher by varying degrees today. The data come from our partners at Track Insight. For more information you can find it available on the F.T. Wilshire ETF Hub. Let's get to Simomodi now. She's got our news update this hour. Tyler, good afternoon. President Biden is celebrating this morning's jobs numbers. The unemployment rate rising two-tenths of a percentage point to 3.7% in August,

but 315,000 new jobs were created. Bottom line is jobs are up, wages are up. people are back to work, and we're seeing some signs that inflation may be, maybe, I'm not overpromising, maybe beginning to ease. America has some really good news going on a Labor Day weekend. John Podesta is being named to oversee the $370 billion in clean energy spending provided by the Democrats' new climate law. He was in charge of climate policy in the Obama administration and was chairman of Hillary Clinton's

2016 presidential campaign. In central Ohio, here's an enormous corn maze that pays tribute to the 100th anniversary of the stadium where Ohio State's football team plays its home games. The shoe short for horseshoe, estimated time to complete the maze 15 to 20 minutes. Contessa, you'd be even faster than that. You're so smart. Yeah, thank you for that. I appreciate. She's a lottery gets you everywhere. Seaman knows me so well. Seema, thank you. Ahead on Power Lunch, the markets with a big intraday turnaround.

The S&P 500 had been up 52 points at the high. Now take a look at this. Down, you've got the Dow down, 206 points, off. 0.65 of a percent. And I want to take you, you know I love the casino names. Here they are. MGM bucking the trend up a whole percent. You've got win up a percent and a third.

And Penn, National Gaming, up 1.7 percent. Other comparable names, you've got draft kings down like 4 percent on the day. So not everybody bucking this downward trend, but certainly these three names are. We'll be right back. 90 minutes now left in the trading day, and we have seen a huge reversal here from what was a big rally following the jobs report this morning. Now the Dow Jones off 237 points. Let's get right to Bob Pisani at the New York Stock Exchange. And Bob, talk to me a little bit about what sparked the sell off.

Well, there wasn't any big macro news. The only news was out of Europe, and that, of course, was gas prompts saying that the North Stream pipe. line would be shut down. They had an excuse for it, but the fact is it's not, it's fairly clear, at least people I talk to believe that this is part of an ongoing effort to keep disruption alive over in Europe and to keep people guessing on what's going on with the natural gas situation there. So natural gas did rise a little bit, as you can see on this. Remember, we're just off of 14-year highs on that gas. It's been moderating in the last couple of weeks, but a little blip up in the middle of the day. Just want to show you the S&P 500 because Contestas got a good point. We were at

4010 on the S&P and we dropped essentially, you know, 60 points or so on that. As you can see, here, actually 70 points. So we're up 40 now down 30. Oil's trying to get some of its mojo back. It really didn't move on these headlines at all. Oil was in a bit of a downtrend. It's up a little bit today, $87. And energy stocks are holding up pretty well overall. So this is the best day all week for these energy stocks. They've been on a downtrend because there's been perceptions that global demand will be lower. But today, they've been bouncing back and really haven't moved down that much, despite this news in the middle of the day. One of the bright spots earlier on were bank stocks. Now, banks have had a terrible month or so. They're down almost 10%. Yields were

down this morning, which is interesting, and the stocks were all to the upside. They're still to the upside, but well off of the highs that they saw earlier in the day. So despite this midday move to the downside, it doesn't negate the central point of the jobs report. And that is that it was a step in the right direction. I heard this a lot from people I talked to this morning. We've got slower job growth. We've got wage growth adding to the peak inflation story. This whole idea is still gaining traction overall.

And the CPI on September 13th will be the next important data point along Contessa with the conference season that starts next week. Well, we'll get an update on where dozens of companies are in the last two months. July to September, things have changed a lot. They're going to give us an update on how their business is doing, starting the day after Labor Day. Okay, and we're pointing out here. We're off the lows, but still the Dow off 200 points. Bob, thank you for that. Let's go to the bond market.

We've also seen a reversal. Yield had a big jump this week, but we're treating today. Rick Santelli, tell me what's going on in the bond market. Yes, contessa, the week is the way to look at it. To that end, let's look at a week to date chart of two year no yields. You can clearly see on the far right today's activity yields move down. But what's notable here is not that we're down 10 basis points on the day at 340, which we are. But the fact is that we are unchanged on the week, that's a big deal, especially when you go to the long end.

Look at a week to date of tens. Yes, on the far right, we had the same amount of volatility at 830 Eastern. It was basically a mixed job report, but in the end, labor force participation going up, bringing people back in, does raise the unemployment rate, but it's a good thing. Truly it is. But as you see at 320 on a yield of tens, we're down five on the day, but we're still up 16 basis points on the week. The Tuesday tens is the least inverted since the end of July. Now, that news at 1218-ish Eastern about gas prom, that changed everything. Okay, look at the foreign exchange market. The intra of euro versus the dollar, the euro was actually doing pretty well.

Pull the rug right out from underneath it. What's the other European currency? Oh, the U.K., the pound. We think they're already in a recession. Common denominator? Energy. Look at the intraday of the pound versus the dollar. Down, down, down.

This is something to pay attention to. When we see foreign exchange markets get that excited, without a doubt, the energy or lack thereof or Putin and the lack thereof of any semblance of class on his part as Europe faces the shortage of gas is going to be the biggest story of the year, especially when it gets cold. Contessa back to you, and I hope you have a nice week. You too, Rick Santelli. Thank you for that. And as Rick mentioned, Gazprom Pipeline News having a huge impact on the energy markets,

on the markets more broadly. senior national correspondent Brian Sullivan has his finger on the pulse of there. What's going on with gas prom? Well, I think Rick nailed it. I mean, when you're on the verge of an all-out energy price war, which is where we are, and that is not TV hyperbole, this is what you're going to get, markets on edge. I mean, the breaking news, a short time ago, gas prom would shut down the Nord Stream pipeline for three days for, quote, maintenance, now saying that that pipeline is going to be shut down indefinitely. There are few other smaller pipes are also cut back on as well. Germany is ahead of schedule for the storage for the winter. But remember, their storage levels drain even with continued pipeline flows. They're getting some USLNG, liquefied natural gas, Norway's helping out. But this is a big blow. By the way, Russia likely responding to news happening a couple of hours ago at the G7, including the United States, has said that they are exploring a price cap on Russian oil. Janet Yellen, the Treasury Secretary coming out and

effectively saying energy prices are too high. This will be the tool in the toolbox to help fight energy price spikes given the war. Others disagree. I want to remind our audience that back in July, JPM Morgan Chase came out with an analyst note and suggested that if there is a price cap and Russia responds by taking a couple million barrels off to market, that they had the number $380 a barrel is not out of the question

if we get an all-out oil price war. OPEC meeting on Monday, Labor Day are here. Markets are closed. See what OPEC does. They may actually cut production. We'll see what happens the next 24 to 72 hours. hours are going to be pretty intense in the world for the price of energy, guys. All right, Brian, thank you for that.

Appreciate it. Now to Starbucks, which is naming a new CEO to replace Howard Schultz, who took over for Kevin Johnson in March. Lots of changes here, lots of issues for this new boss. Kate Rogers joins us now. I mean, you cover Starbucks. You know what a big character, Howard Schultz is here. What are people telling you about the prospects for a new CEO to come in and take over for

someone who has had such vision for this company? Yeah, it's so true, Contessa. Well, Loxman, Narasemann will be joining his incoming CEO on October 1st. He was most recently the CEO of Reked Ben Kaiser. That's a consumer hygiene, health and nutrition company. They make Durex, Airwick, and many other brands. He was also the global CCO at PepsiCo and a senior partner at McKinsey. Now, Schultz will be staying on his interim CEO until April 1st of 2023. He'll also serve as an advisor to Narasemond through the end of the calendar year while remaining on the Starbucks board of director. so he's not fully stepping away. The company, as you mentioned, still dealing with impacts from the pandemic in major markets like China, the changing consumer in the U.S., and a union fight with workers at more than 200 of its 9,000 cafes across the country.

An external candidate with experience in international markets was key for this hire. Analysts have been weighing in Andrew Charles at Cowan said, while we're surprised Starbucks chose a successor outside the discretionary sector, we are optimistic that Mr. Naraschaman's global perspectives as CEO of a public, multinational corporation and background in beverages at PepsiCo will serve Starbucks well into the next chapter. I spoke to Andy Beres of Jeffries telling me that basically it's his understanding of Naraschaman's leadership style is that he understands the importance of investing in people behind the scenes. Those would be the partners at Starbucks and that should align well with what Howard Schultz has been focusing on,

which is the reinvention of the brand, this big reimagining for the future. Part of that being store safety and, of course, the partner experience as the company continues to stare down that union fight. Back over to you. All right, Kate, thank you very much. Up next, more on this dramatic market turn. We'll take you through the names, making the biggest moves, especially names in the industrial space. We will be right back on a very volatile day in the markets.

3M, the worst performer on the Dow today, but it is not just today. The stock also down 14% in a month. Only Salesforce down more over that time among the Dow stocks. Simomodi now with more on 3M. So, Tyler, as the dollar strengthens, as we've seen the broader industrial sector come under pressure. Airlines are down on the week as well as oil prices remain a bit of volatile. So you can see here, United Air Delta, American down about 3 to 5%.

But as you mentioned, one of the key laggers in the industrial space is 3M, hinting at future job losses in a memo to employees earlier this week. And also dealing with a setback in its earplug litigation with a bankruptcy court declining Chapter 11 protections to 3M, those two factors are weighing on the stock. And just to put this into perspective, it's now on pace for its longest weekly losing streak since June and also hitting its lowest level since March 2020 in today's trade, trading at 122 a share, guys. Back to you.

All right, Seema, thank you for bringing that to us. Appreciate it. But meanwhile, you have all the major indices still off now. The Dow Jones off by more than half a percent. You've got the S&P down three quarters of a percent and NASDAQ off a percent. Still to come, Kathy Woods top holdings down big over the past month, a lot of investors seem to be ditching the growth investors fund. Could you do the same? We'll trade them in today's three stock lunch.

Kathy Woods flagship fund, the ARC innovation ETF, seeing more than $800 million in outflows in August. That's the highest September, excuse me, of 2021. That ETF is down 55% this year as its top holdings plunge from their year highs. Tesla, the fund's top holding, down 30% from its high. Roku, the second largest, down more than 85% from its all-time high. And Zoom coming off one of its worst months ever. Are any of these names worth a look? Let's bring in Matt Maley of Miller-Tabak, chief market strategist to trade these names. Let's start, why don't we, with Tesla?

Philibault was on a program last night, and he said, you know, nobody wants sedans anymore, but they're selling a lot of Tesla sedans. You know, they are, Tyler, and the thing is, their production capability, I mean, it was just a few years ago where we were saying, hey, geez, you're only making like 15,000 cars. You know, they're going to produce two million next year. And so that's definitely a positive. So it's more of a hole for me than a sell. If you own the stock, I'm not saying to sell it. But I do worry about what's going on with Elon Musk and this whole Twitter thing.

It's, you know, he definitely is a self-inflicted wound. he didn't have to deal, I'm sorry, but he does have to deal with it. And that's creating some problems. The other thing, though, is I do think, you know, he had David Rosenberg earlier. I think we're headed for a recession, if not already in one. That's tough for car sales, and they do have expensive cars. And so that's going to be a little bit tougher there. So, you know, the stock is still expensive.

If we're headed to recession, we're probably going to test the June lows, and I think we will. Some of these big cap names, I think I'm afraid are going to take it on the chin once again. And you'll get a better opportunity to buy it six to nine months from that. All right. So, Mark, Matt, share your perspective here on Roku, which was, what, a pandemic darling, really? Yeah, I mean, the one thing with, again, we're worried about a recession here. And one of the things that people seem to be complaining about, and rightfully so. I know we do it, is we're loaded to gills with all these streaming services.

I mean, do we really need another one, especially where we're going to add some hardware? So that's, I think, going to be tough for Roku to really pick up the market share that they regain market share going forward. Another thing, though, is also advertising during recessions. If we are going to have that, average tends to go down. Now, again, like it is with Tesla, another stuff, like Tyler said, down 85%. I think you'll be able to buy a little bit cheaper. I'm not saying, oh, my gosh, this thing's going to zero. They're going out of business or anything like that.

because I do think what they're doing with Walmart, Kroger, some of these combinations, and what they're doing with their new innovation into the advertising area, will allow them when we come out of the recession to really build on what they had built during the lockdowns. And it'll be a much better company at that point. But again, I think it's something where three, six months from now, you're going to get a better opportunity. And finally, speaking of pandemic, darling, is there no name more associated with that than Zoom. but here is a company that A actually makes money and is trading at what one might say is a reasonable variable of 22 times forward earnings.

Exactly, Tyler. I mean, a lot of these, I'm afraid, a lot of these stocks in the ARC fund don't make money. I mean, Tesla does, but most of them, most of them don't. So this is a good valuation. Again, you know, it's 22 times earnings. It was trading at 170 times earnings less than a year ago. So it's really come down and become attractive. I also think that this, I mean, one of those things that, you know, they have these, some of the things that the businesses they've already developed, like Zoom phone.

I mean, I can't tell you how many times, you know, been on a conference call. I mean, you know, Tyler, we were on conference calls for 30 years. They never got any better, you know, until the last year or so with this Zoom call. This is really a much higher quality thing. And so even though people are going to be coming back to work, there's still going to be plenty of people who stay at home on certain days. And so I think this is going to be one that people are going to be surprised and really come back, you know, the second half of this year and in the years ahead. So it's a buy for you. Yes.

All right. Matt, thank you. Matt Mayley. Have a great weekend. After the break, meta making a big deal today furthering its metaverse ambitions. But the stock fell 3%. So far. We'll have more on that when Power Lunch continues. Welcome back to Power Lunch, everybody. Stock's lower today and well off the highs of this morning after the jobs are. Communication services, the worst performing sector this day, and we bring in Julia Borsden now for more. Hi, Julia. Well, Tyler, mid the tech sell off today, meta shares are underperforming. They're down about 3%. This, of course, comes as today, Meta and Qualcomm announced they're tuning up to develop custom chips for Meta's VR products. But the deal is not exclusive, and this does show Meta's dependence on Qualcomm, and its inability to develop its own chips. You see Meta shares down.

over 3%. Qualcomm, it was up earlier. Now, those shares down about 1%. Now, Meta is not the only social stock selling off. We see that Snap shares are down nearly 3.5%. Giving up some gains over the past two days. Pinterest down nearly 3%. Twitter, down the least them less than half a percent. Now, looking over the media space, Comcast shares underperforming the broader market. Those shares off nearly 3%. Also underperforming, we see Paramounting. We see Paramount. Mount Global down nearly 2%. Warner Brothers Discovery fairing the best of the group pretty much flat and Disney

down about 1%. Now switching gears and looking over at the streaming space, we see that Endeavor is in the green. The streamers are mixed. Roku shares are down about 4%. Netflix is down

the least of the group, down about 1.5%. Tyler? All right, Julie, a lot of business, a lot of action there in that sector today. Have a great weekend. and Julia Borson, as we head to the closing bell, let's run you through where the markets are right now as we head into what could be a very busy final hour. The Dow is off 282 points.

There's the NASDAQ down 147, and the S&P 500, off about 1% or 37 points. So you're looking at roughly sort of median decline here in the 1% neighborhood. Yeah, we are seeing some bright spots, though, in the market, especially in the energy names, Hess, Halliburton, CF Industries. On the flip side, you've got DISH, Zebra and Generac, those are all down about 4% on the day.

So some big winners and bigger losers. The biggest moment of the hour from me, Brian Sullivan, saying this weekend could be very interesting for energy prices. Watch that. And thank you for watching Power Lunch. And now closing bell.