Power Lunch - A Salesforce To Be Reckoned With?, and Consumers’ Discretion 3/2/23

Episode Date: March 2, 2023

Salesforce just reported a huge quarter, as shares surge and are single-handedly boosting the Dow today. Will it help CEO Marc Benioff fend off growing activist pressure? We’ll explore.Plus, Macy’s is also on the rise after results – even though it’s echoing the cautious themes we’ve heard from other retailers this earnings season. Can retail stocks keep gaining amid a consumer slowdown? We’ll debate. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch. I'm Dominic Chu, joining Kelly Evans today, filling in for Tyler Matheson. Coming up with the show, a sales force to be reckoned with. The company reporting a huge quarter jumping today and single-handedly boosting the Dow and a big quarter for CEO Mark Beniof, helping him fend off that growing activist pressure help. And Macy's also a big gainer today after its results, even though they and Best Buy are echoing those cautious themes we've heard on the consumer throughout retail reporting season. Can these stocks continue to gain if a consumer slowdown is looming? Before that, let's check on the markets. As Dom mentioned, Salesforce keeping the Dow in the green today.

Wow, look at these session highs up 283 points. The S&P has turned up. It was just the last 20 minutes or so. Was it Bostic? So the S&Ps up half a percent, the NASDAQ up a third of a percent. The small cap is trying to get up there too. I mean, that's a big move. I mean, when we were at the top of the one, the high of the session was minus one points for the Dow.

Now we're up to 19 or 20. Let's talk about what's happening with moving the markets right now for that. We turn it over to Christina, Parts and Evelas over there checking out the market action. And I see Salesforce a big mover today, Christina. I know. That's why I have to start with it, because it's of 12%. And the reason for that is because its effect on the Dow. Q4 results in forward guidance crushed expectations, and that's obviously helping the stock go 12% higher.

The Dow is weighted, so it's part of the reason. And it's also one of the biggest gainers on the S&P 500 as well. I want to talk about Tesla, though, because that's a big story today. It's down after its investor day. There was lots of talk from Elon Musk and other management about the vision, but investors wanted more specifics about new Tesla products and services. And that's why you're seeing the share price down almost 6%. But Musk was specific about Tesla's intent to remove rare earths from its motors and future vehicles.

More specifically, to use 75% less silicon carbide in its next generation cars. That's why silicon carbide producers on semi-STM will be. Look at that. Wolf speed down over 8%. STM down 3.3%. And most of these are selling off. And the sell-off, though, I've read several notes. There's about five this morning that are saying maybe this is a little too premature, according to all of the notes.

Why? Because the Model 2 won't ramp up until maybe 2025, 2025, 26. So it could be an opportunity to get into these names. Another name that a derivative from Tesla is MP materials down over 11%. Why? Because it's a rare earth company and its shares are falling on that Tesla. And I'm just going to end on one tech name, cloud name, Box, because it's on pace for its worst day since March 2020 on disappointing outlooks. A lot, though, a lot of volatility today in the markets.

Guys? All right, Christina, thank you very much. Let's get right to retail now. As more earnings keep coming in, Best Buy down after guidance came in lighter than expected. Macy's, on the other hand, up 10% after topping expectations, and both adding to the chorus of retailers saying customers are cutting back on discretionary spending. Should retail investors be worried if the worst is still to come? Joining us on set, CNBC.com, retail and consumer reporter Melissa Repco. And David Marcott is senior vice president with Cantor Retail.

He is here as well. And David, let me just start with you because we also had the Kroger CEO today saying consumers are starting to act already like we're in recession. What do you think is going on here? I think basically the overall media message coming out is that there is going to be a tightening and spending. And on the consumer side, they keep running into that one item that sticks in their head that indicates inflation and also recession. Like right now, eggs for some reason, which I can't imagine, eggs is the big item. So that's what they're benchmarking against. This has an odd inflow.

I've always found food inflation has an odd influence on people buying non-food. So once I see food inflation on a daily basis, they start thinking that's seeing elsewhere, which is really not the case. Not at the moment. Right. Melissa, what would you add to that? I mean, what are some, are there inconsistencies or consistencies as we kind of work through these results? Really across the board, I'm hearing from just about every retailer. They're seeing people focus on needs versus once.

And so they're kind of dusting off a playbook they haven't had to use in a while, which is, how do you drum up sales during a period that's slower? You know, they got used to these huge gains. And so one of the tools they often pull is promotions. And so we saw a ton of that over the holiday season. And that's really something that investors are paying attention to. It's showing up in compressed margins for a lot of companies. And that's part of the reason why Macy's stock is up today

because it really defied the odds and had somewhat hit margins, but not as bad as the street expected. And it said, you know, we think we'll be in a better position going into next year. We're not going to be overly promotional. We're going to be very strategic and we're targeted in those promotions rather than just marking everything down across the board. Yeah. I mean, if you take a look at it, and maybe, David,

this is something that we talk about a little bit, more often with regard to the way that strategies differ. If you take a look at the situation with Best Buy, speaking of, Melissa talked about a playbook that hasn't been used in a while. Best Buy was the beneficiary in a big way during the virus pandemic when people went out and bought laptops and tablets and TVs and video game consoles in droves.

Those are tough comparisons to go benchmark against this time around. So when Corey Berry, the CEO, talks about these macro headwinds, how much longer does it take to abate? Do we just have to wait a year for the comps to get easier, so to speak, so that by 2024, things look better? I think the most impressive thing I saw in the Best Buy results was the uptick in services. Now, services is far in a way more margin beneficial than just about anything else you sell,

and Best Buy as a case in point. Now, during the pandemic, they made a lot of money in terms of consumer electronics. They made more money as the pandemic was going out in the housing. was going up with appliances. Appliance was a huge part of their boost. Now they're kind of in between both of them and they're going to have to be cooling until they see the next search. I think basically what they're saying is saying that towards the end of this year really does have alignment. I still seeing a lot of strength in regards to home goods and across the Venice. So that is possible for them to come back on that a little sooner than they're expecting. David, do you think the strength in home goods is because of the bed bath effect that our

analysts yesterday spoke of that they're just redistributing that market share, or is it because there's going to be persistently higher demand from all the new homeowners? I think, well, I think there's more demand, A. I think B, I think the part most people miss here is the rental market is up. But more importantly, they're still building multi-resonance homes at a pretty good clip. So even though the new home market is down, the new multi-resident home construction is up. And that means appliances in each and every case, even though it might be appliances at a manufacturer or business to business level. It's still going to be appliances. It's still going to be that type of thing. The other side of this, and this is where the services

side, this is something that Best Buy has been trying to establish for years. I think they finally did cross the threshold of being able to offer complex support for services for products in the home, which there's clearly as a need for. And I think they're finally tapping it. And I mean, on tech, which is a dish network product is the same kind of thing, the geek squad, all that stuff. Absolutely. Totally. Now, now Melissa, To kind of put a point on this whole thing, we want to look ahead, Costco is on deck. Kelly and I and Charlie Munger. We bonded over Costco over the years because of the value proposition.

They cover both the consumer staples trade as well as the discretionary side of things. What exactly should we be looking for there? And just how much of a bellwether is Costco vis-a-vis, say, a Walmart or a target? So Costco, the biggest thing that would help them is a membership fee increase. And that's something that you may not like as a member. member, but it contributes a lot to their revenue. And so investors are going to be listening for that. They've kind of put it off a little bit because of inflation. They realize people are feeling that pain. But if they do announce that, that would be a big deal. Even if they give

that timing, that would be a big deal. Also, any patterns they talk about with discretionary spending would be interesting. On the big ticket side, they consistently put up a lot of sales when it comes to grocery. But the question is, are they still selling the higher margin stuff too? Because that's where we're seeing some of the pain. Interestingly, back to your point about Best Buy, I spoke to Corey Berry, the CEO of Best Buy, and she said she's hopeful. Later in this year, we might start seeing some upgrades

and more replacements for tech that might kind of circle the tough comps of last year, but that will rely on newer and trendier products. And she said, you know, vendors are really thinking about the next hot thing to motivate shoppers if they're watching their dollars. I always have to fight the urge to buy a new TV every time I walk by those.

That's why they put them first. You have to go through them to get a house. exactly absolutely the one thing the one thing i would add in costco and i would the thing i look for is not so much new membership but retention and the retention rate is outrageous i mean it's some 92 93 percent internationally it's closer than 95 percent um as long as they retain membership which means they're spending nothing to gain them um that is a stable business platform from them to grow off new membership absolutely in terms of investor interest i think that's very real but i think for Costco internally, that retention number is the number they all aim at.

I'm a 20-plus year member at this point right now. I've been paying membership fees for 20-some years. All right, Melissa, David, thank you both very much for the retail look. We appreciate it. Well, meantime, Salesforce is on pace for its best day in over two years after blowing away fourth quarter estimates. The software giants adjusted operating profit margin clocking at just over 29 percent. That's its best ever. Chairman and CEO Mark Benioff telling Jim Kramer its renewed focus on profitability is the reason for those results. We are really looking at not just the short-term restructuring, but long-term restructuring of a company. We're looking at profitability, but also productivity and performance.

We're looking at prioritization of our products. And we're also looking at improving all of our shareholder relations. This has been our strategy. That's how you see us delivering these amazing numbers. All right, Mazuho is among a handful of firms upgrading its target for CRM, the ticker there, after results, upping to $225 a share in saying it's, quote, well positioned for profitable growth. So for more on what these results mean for Salesforce and Mark Benioff in the future, joining us here on set as CNBC tech correspondent Steve Kovac.

We're also joined my Mizujo's senior research analyst, Greg Moskowitz. Greg, Steve, thank you very both very much for being here. Steve, we'll turn to you first for the story here on what's going on with Salesforce. This is an embattled company. There's no doubt about it. All you have to do is look at a chart going back to November of 2021. Is this, though, enough, the results. They were good and the outlook good, but is it good enough to fend off those activist investors at the gate?

Well, we heard Benny off that just now saying, you know, there's more to come. So if you're an activist investor circling the company, the Elliot's of the world. Elliot, by the way, took a victory lap on this. kind of taking credit for all these cost-cutting moves. So you're going to, you like what you saw yesterday. You love what's happening to the stock right now is up as much as 16% at one point. And then on top of that, all these other changes are coming. So, for example, through those activist investors of Bone, disbanding the M&A committee,

you know, they've been criticized for overpaying on acquisitions like Slack and Tabloo and so on and so forth. And then hiring Bain, bringing Bain in to reassess everything. And Kramer asked him last night, you know, does this mean more layoffs? Now, he didn't really say necessarily yes or no. He'd said just about everything else but layoffs. But to me, that says, you know, that's on the table as well. More cost cuts are on the table. And look, it's all about margin growth, profit growth, not so much revenue growth. There hasn't been that many times, Kelly, where I've heard a CEO say on the record that they would rule out completely.

Right. Right. Right. Any kind of a job cut because it just takes away all of their flexibility. I mean, he's done that before and had to eat crow later when they did do layoffs. you don't want to do that because you only seen backtracking there. But Greg, maybe we'll toss this next one to you here. Was it enough to kind of make you feel positive about this? Is this a good story going forward? Is this enough to be a long-term catalyst of the upside? Yeah, thanks for having me. We think it is. And, you know, it's interesting because there were a lot of folks who started to perk up around the margin opportunity following the headcount reductions that were announced in January that you referred to. Real estate consolidation is another area of significant savings.

But nobody was expecting a 27% margin guide for fiscal 24. I mean, that was more than 400 basis points above where consensus was. In the note that we published this morning, we referred to that 400 basis points of upside as video game-esque akin to, you know, playing NBA 2K, which is a game my son happens to love. And a basketball player scores 100 points in a game. It's just simply something that does not happen in, you know, in the real world. But that's especially for a company as big a Salesforce, right? That is a $30 billion plus revenue company. So it's just something which is a remarkably rare event.

And I think what's also interesting is it doesn't stop here to your point a moment ago. So the company also said that in Q1 of fiscal 25, they're going to do about 30% operating margins. So it is a very clear signal that this is not just one and done in terms of fiscal 24, you get a reset. And then it's steady state or modest incremental improvements. They clearly have, you know, bigger targets in mind. So, Greg, I just want to pick up on that and underscore what you said about how much they increased profit margins. They did it in the quarter and all of a sudden they're way ahead of their annual targets for the next couple of years. How do they get there?

So if you look through it, yes, they did those thousands of layoffs already that we mentioned. Benioff also said the company is pairing real estate costs, increasing its scrutiny of spending. They are disbanding the M&A committee to reflect their new focus on efficiency. I mean, how much more does the acts have to fall here to hit these targets? And is it going to undermine the company's future growth? Yeah, it's, you know, it is an open question in terms of whether or not there will be other head count adjustments or or reduction specifically in terms of getting to that, you know, getting to that target. One thing that we do look at as well is, you know, incremental margins. So the year-over-year change in operating income as compared with the change in revenue.

over the past 12 months. Based on the fiscal 24 guide, we're looking at about 70% incremental margins. I mean, that is off the charts for, again, a company of Salesforce's size. To put that in perspective, you know, prior to the fiscal 23 year that just ended, the highest incremental margin that Salesforce ever did as a company in their history was high 20s. So again, you're talking about high 20s going up to 70%. Right. I mean, is that really possible?

Do you raise your eyebrows? I mean, I wonder a little bit here if it's too good to be true. Yeah, this is a company that knows that historically they have had credibility issues. And, you know, as I mentioned, no one, including us, was expecting that they were going to guide this high on the operating margin side. The flip side is when you put out a target like that and you put it out and project such confidence in hitting that target, and to your point earlier, you have activists that are also obviously involved in the name as well, you know, you very much and you better have a high degree of confidence and high degree of substance behind that number. So, you know, we feel very good about their ability to, you know,

to get there. It's hard to imagine a whole lot more upside in fiscal 24 because, again, we're talking about 70% incremental margins. But yes, we think it's a multifaceted attempt at optimizing. And that's what you can sort of get when you move from a very suboptimal bar. company to where we're talking about now. Steve, last word to you very quickly. What's the one thing you remain skeptical about with regard to Salesforce? Matthew McConaughey is still on the payroll despite all those big cuts. Reportedly 10 million a year. And Kramer, he defended it and saying, you know, great marketing opportunity and so forth. But still a bad look when you're cutting costs and laying people off and you're paying a famous friend of yours 10 million a year to, you know,

promote the company. It's not the marketing. I think people took issue with the other ads weren't. It's a bad ads weren't. Great. It was more that he was involved in actual corporate director or some kind of, yeah, exactly. It's a little weird. Steve Kovac, Greg Moskowitz. Thank you very much for the conversation on Salesforce. Don't miss, by the way, Snowflake CEO Frank Slutman in a CNBC exclusive interview live today on closing bell overtime, 4 p.m. Eastern time. A must watch interview there in a CNBC Kelly exclusive. Coming up, Rihata Farma pulling back today after a huge jump yesterday, but still up 90% this week.

We'll talk to the CEO about the challenges of getting a rare disease drug developed, approved, and to the patients who need it. And we've got to talk 10-year treasury yield, jumping again, hitting almost 410. It's backed off that level this afternoon. Our bond investors reading the Fed correctly. Rick Santelli is talking to the traders in Chicago.

We will hear from him coming up on Power Lunch. We want to highlight a pharma stock that's having a huge week, to say the very least. This is shares of Riata pharmaceuticals. It's up nearly, yeah, 90% this week after its drug for treating a rare neurological disorder was approved by the Food and Drug Administration. Earlier this week, we took a closer look at the challenges in treating rare diseases. So take a listen to Dr. Olaf Bautamer of Boston Children's Hospital. This is still a long way to go.

I think in my own experience, it's a mixed experience. Some patients come to attention very early due to the significant. of the symptoms. Sometimes it takes still, in some cases, years until a diagnosis is finally made. Okay, so let's bring in now Warren Huff, the CEO of Riyadharmaceuticals. We've also got Meg Terrell on set with us, our pharma reporter joining us here, expert on all things, drugs and biotech. Warren, Meg, thank you both for being here. I guess maybe, Warren, if you take a look at the reasons why some of these types of companies, like yours, are getting so much attention, it is because of the binary nature, sometimes,

it seems, of the results of studies of drugs and the way that company stocks react. So how important is it for your business and your company to be able to put forth results like this? And is it a real stepping stone towards bigger things? Oh, it's absolutely everything. You know, the quality of your clinical data, how interpretable it is, You know, all of that is what leads to either the approval, you know, or a failure to get approved. And it drives everything. You know, we've worked on this platform for 15 years, and we worked specifically in Freed Weeks of Taxia for over nine years now. And it all comes down to a single day event on your approval.

And Warren, it's Meg Terrell. You know, your stock went down 30 percent the day before the approval. There was some nervousness around it. You've got the analyst notes coming out. Brian Scorni at Baird said, quote, we followed some pretty dramatic. stories in the past, but the Rihata Odyssey is in the Hall of Fame. 30% drop, almost 200% rise on the approval. The comparison I'm seeing most of all to you now starting to market this is to Surreptus Duchen Muscular Dystrophy drug. And there, I wonder if you agree that's a fair comparison, but they did face some pushback from payers over the high price of that drug, and yours will be

$370,000 a year before discounts. Are you expecting payer pushback? Actually, not really. We were very careful about the pricing here. We looked at every ultra- rare disease analog launched since 2016. We priced below the midpoint. The published estimates of where we would price were meaningfully higher than where we priced. And so we were very careful to be fair to the payers in setting the price. And we've also instituted a Riyadhara Reach program, which is designed to provide access to every eligible patient with either a nominal or no copay. If I could just kind of broaden this out a little bit, I mean, when it comes to the bigger picture here, and Meg, maybe this is a question for you, when it comes to like the rare

disease type thing, orphan drugs, the ones that are, that are, they cost a lot because they have to make back the research and development costs over a smaller base of patients, potentially speaking. This has always been a controversial topic, but is there any way to really get beyond economics that we see here? I mean, it costs a lot of money, right, to treat these diseases. Yeah, absolutely. And I'm sure Warren could speak to how long they've been working on this and how much money they had to invest in order to get to this point. And still, there's a road ahead toward, you know, profitability and the real payoff here. The interesting thing about the orphan drug market

is that, as Warren was saying, you often don't see as much pushback from the insurers because there are so few patients being covered. And so you do have those high drug price tags, but they do get coverage. But since there has been that comparison to Surrepti, I was curious to know your answer on that, Warren. I'm also curious to know, you know, we heard from that doctor in the intro talking about the importance of getting diagnosed early, and you have approval for 16 and up, but what is the pathway to getting approval for kids? Because treating earlier in life would presumably be very important here, right? Yes, absolutely. Well, to go to the first part of your question about the surreptus drug for Duches, of course, they're comparable because these are both, you know,

terrible neuromuscular diseases, you know, with devastating outcomes for the patients. And at the time of their launch, you know, they had no approved therapy. So I think we fall in that category of basically the first, you know, approved drug for a devastating disease. And we're thrilled about what it means for the patients. And so I think that's the, you know, that's, I think the most important takeaway here. And I also completely agree that the issue with rare disease. pricing is simply you have so few patients to share the cost. But it doesn't impose a big burden on the

system, again, because there are so few patients. Right. And, you know, now the path forward is manufacturing the drug, selling the drug, getting it to the patients. You did disclose on your conference call. There was a bit of a manufacturing hiccup. How much of a problem do you anticipate that causing going forward? And at any point, you know, are you talking to potential acquirers or partners in bigger companies that may come in here and see that they want a partner or even, you know, by you to help you sell this drug and to reap the rewards. Yeah. So, yes, to address the manufacturing issue, yes, we had a actually a pretty standard hiccup

when you're doing your final commercial batches. We had a impurity that had been observed, process related in prior batches, but it ticked above the reportable limit. And so that requires that we amend our specification for it. It adds 30 days, basically, to the launch. And so we feel it will have drug available in late May or at the latest, you know, early June. All right. That's Warren Huff, CEO of Rihata Pharmaceuticals. Thank you very much. Please come back and update us on your business developments. We'd really appreciate it. And of course,

our own Meg Terrell as well. Thanks for joining us in studio today. Good to see you guys. All right. Thanks. Thanks for having me. Thanks, Warren. Thanks, Meg. By the way, what you're seeing right now, join CNBC's Healthy Returns. It's Virtual on March 29. We're going to convene CEOs, scientists, investors, innovators, and health care to reflect on the progress made today. to reinvent the future of medicine and pharma, including the newest drug breakthroughs and, of course, device innovations as well. Just scan that QR code on your screen or visit cnbc events.com. Healthy returns virtually March 29th. And still to come, an ESGOP fight. At least half a dozen conservative groups are targeting Wall Street firms like BlackRock and Vanguard over their ESG platforms,

and it's fueling the GOP's fight. We'll discuss when Power Lunch returns. Welcome back to Power Lunch. Let's get caught up on the markets as stocks have searched to session highs this afternoon. This after the Fed's Bostick said he is still very much of a slow and steady mindset. Bob Bassani joins us now. Bob? I'm calling around, just checking on this. And it does appear to have moved on Bostick. Now, Bostick also said he's firmly in the quarter point hike camp here.

He also said there's good reasons to expect things will slow down in the economy. Policy should start biting in the early spring, he said. and then he also said going at a measured pace would avoid hard outcome. So Bostick is basically saying don't bet on any 50 basis points. There's also reports that he told reporters that he believes once the central bank pauses raising rates, it should hold them there and not have policy bouncing around and that he expects the Fed would be in a position by the middle of summer to late summer to pause. So that's enough for a little bit of a midday rally.

We moved about 20 points on that, as you can see there, in the middle of the day. Elsewhere, everybody's asking me, why is the fix down? Everything seems like in turmoil because of the inflation reports, and we're below 20 at this point. The S&P has been slowly moving down, but not erratically. It's been very organized. So I don't think there's a lot of panic buying of puts at this point. And that's the main thing that would motivate the CBOE volatility index. So yes, downward trend in the broader markets, but not in a panicky sense.

Finally, in terms of the movers here today, I know, of course, Salesforce did a great job with their guidance, but this stock is under a little bit of pressure. It's 193 at the open, and now down to 187. AMD got a big boost. Dan Loeb is taking a positive stake. Mosaic has been on a tear this week. We've seen some nice moves in commodity stocks. It was so, what, 48, 56 now, just a few days ago. And all of the regional banks, Kelly, all had getting hit again today. They've been on a down-term. trend, but Zion's region financial, all those big regional banks having a tough time today. Back to you guys. Bob, you think it's owing to the Silvergate issues or is that a unique situation?

No, I think that's fairly unique. We've been seeing things move to the downside for, no, I think it's just Silvergate. I think it's a unique situation. All right, Bob. Thank you very much, Bob Bassani. All right. Now, turning to energy, oil is up slightly on the day, but our PIPA Stevens is focused on some big stock movers. PIPA, these are, you know, the ones that don't necessarily always track

the price of oil. Yeah, that's right. So on the renewable side, starting here with Plug Power, those shares are taking a hit. The hydrogen fuel cell maker posted a larger than expected loss during Q4. Revenue also came up short even after the company lowered guidance about a month ago. Plug Power pointed to an unreliable supply chain and slower than expected new product rollouts. Still, the company reiterated its 2023. guidance. Moving over to shares of Rare Earth's company MP Materials tanking today after Tesla said it plans to remove rare earths from its permanent magnets. But as Cowan's David Decobaum told me, this is not near term and there also weren't many specifics offered around how Tesla will

replace the rare earths. For its part, MP Materials told CNBC that it expects motor diversity in electric vehicles of the future. And so Tesla's announcement isn't surprising. And importantly, They're also not a Tesla supplier. And despite today's decline, shares are still up, guys, nearly 30% on the year. All right, Pippa Stevens for the update that on energy. Thank you very much. Let's now get to Bertha Coombs for a CNBC news update. Good afternoon, Bertha.

Hey, good afternoon, Dom. Here's what's happening. Former President Trump can be sued by police and lawmakers who contend he is responsible for the January 6th Capitol insurrection. That is the Justice Department's position in a new court filing that urges judge to reject Trump's claim of absolute immunity. The DOJ is not saying whether it thinks Trump is actually liable or not for what happened. President Biden arrived at the Capitol today for a closed-door lunch with Senate Democrats. At the lunch, he said he will not veto GOP resolutions that would

block the District of Columbia's city council from enacting progressive changes to its criminal justice laws. That's what four sources were. with direct knowledge are telling NBC news. And Ford says it will restart production of its electric F-150 lightning pickup a week from Monday. It was halted early last month after a battery fire in a vehicle waiting for its pre-delivery check. And Dom, you know, the most amazing thing, if your house loses power, that Ford F-150 can power your home for up to three days. I have seen that. It's part of their commercial campaign as well for that F-150 lightning. So hopefully you'll never have to use it in that way, Bertha.

Thank you very much. Appreciate that. Now, still ahead on Power Lunch, the 10-year Treasury note yield, hitting its highest level since November. We'll go over to Rick Santelli in Chicago in the pits for the latest moves coming up after this break. Welcome back to Power Lunch. Bond yields rose almost to 4.1% today. By the way, the mortgage rate went to 7.1.

We've since backed off those levels a little bit. Rick Santelli joining us from Chicago. Was it Boston? Was it Bostick, Rick? You know, Bostick is part of it, but there's many parts because the market is guns hot, meaning interest rates are going up and all comments are taking in that context. And if you remember that two-year note yields have been comping to 07 off and on since June of last year, while three-year notes, as you see on this chart starting in October, well, they're close to taking out their fall high-yield cycle closed. And that's important because twos are the only one that does it so far. And if you look at five, tens, and thirties, you see what I mean.

The further down the curve you go, the further away from the fall high yields. And that's significant, especially considering what happened today. Today you had under $200,000 on initial. Continuing claims only closed above $1.7 million, only printed above $1.7 million twice since February of last year. Jim, do you have a minute? Yeah, absolutely. What's up, right? Jim, yesterday, of course, we saw volatility kick up a bit.

We saw claims on the low side today. correlation there? Yeah, look, claims are, we're at unemployment that's the lowest that it's been in almost 50 years, right? Populism has been a big driver amidst all this. We really think this is going to be sticky for some time. That's what you're seeing. Bostick, the Fed in general, has been very active trying to talk up, you know, the rates and the yields of the long end of the curve, and we believe that's going to probably continue. Bostick put a little bit of a damper on that today, though. He did put a little damper, slow and steady, and Kelly was asking. about it, but it seems though everything's about yields going higher.

Now, for tomorrow, we have ISMs for the service sector. It's all about the service sector. I see the VIX's down. Your thoughts about tomorrow. Yeah, there's a lot of structure elements going on right now. Flows going into a March OPEX are really supportive. Ball has been incredibly dampened going into this, so I think that's a big player. Obviously, ISM itself, which has been hot.

You know, the economy has been pretty steady as it goes. The Fed is the important part here. They're ball dampening. What about European inflation? inflation. We noticed that, like us, it's historically sticky, but it's still lower than it's been, except for the core that was released today for the Eurozone. It was the highest since record-keeping, and that may have an effect here. Your final thoughts. Yeah, I think this inflationary pressure is going to continue in Europe and here locally as well. The Fed needs to keep fighting this inflation.

That's a problem for the markets. But at the end of the day, the Fed doesn't want a liquidation. The Fed wants ball dampening. They want to sell calls to the market. That's what they're doing. That's why the balls down. I'd expect more of that to come. Thanks, Jim. Always a pleasure to talk to you. Dominic Chu, back to you. All right, Rick Santelli. Thank you very much from the CBO floor over there. Next off, anti-ESG, multiple conservative groups, along with the GOP itself, targeting ESG funds and platforms run by some of the world's largest investment firms. That story coming up next. Welcome back to Power Lunch. President Biden is vowing to use his veto power for the first time as president and the target is a bill in the Senate that would no longer allow a labor department

rule that does allow retirement fund managers to consider ESG factors when making investments on behalf of pensioners. Got that? It's part of a growing backlash against ESG and what some are calling woke capitalism. And this is what the president might veto. CNBC.com's Brian Schwartz has been writing about the funding behind this movement and he joins us now to talk about it. And Brian, welcome, first of all.

Good to see you. Thanks for having. It is interesting how big an issue this has become. I mean, Vivek Ramaswami is basically running for president. with a campaign that largely started in attacking ESG. Very outspoken. Yeah, you're right. Look, I'd ever thought we'd be sitting here talking about how certain politicians, particularly

Republicans, are taking on Wall Street. I didn't have that on the bingo card until this new Congress. But listen, it's clearly become a trend. It's been brought up in this 2024 election fight. You mentioned Viveki, somebody that's brought that up. But again, there's real questions, and this is what the story we focused on the CBC.com, of the origins of this, right? Where is this coming from from from the Republican side of things?

And it's coming from, at least in part, from a group of conservative leading organizations. We kind of map out who's funded them, where they're tied to. Some groups are tied to allies of former President Donald Trump. One of those people is Leonard Leo. He's running a nonprofit and funding part of this effort to push back against BlackRock and their ESG investment platforms through a multimillion dollar investment. That's the nonprofit run by Leonard Leo. And these are the things that are going on behind the scenes.

As Republicans, both at the state and federal level, are trying to make this part of their kind of political goals in there. And by the way, this is from Axios this week as well. But venture capital and private equity funds are deemphasizing ESG considerations. There's been an 11-point drop in those saying ESG is a determining factor to just 56%. A key challenge is how to back up claims with clear evidence and reporting to avoid accusations of greenwashing and now, of course, the politicization of the issue. It's not even just that. I mean, in a market where things are drifting lower or have no real upside catalyst, in a bold market, it's very easy to talk about ESG.

Right. When it's a down market, you're just trying to make money or not lose it. So how exactly does the environment factor into some of the nature of these, you know, these campaigns, either anti or for ESG? Well, you're 100% right. But that's actually part of the debate, right? That's where we're looking at. That's where Republicans are kind of discussing on the hill, this kind of environment that we're seeing here. You know, some of the Republican officials, particularly at the state level, are trying to suggest that Black Rock, for instance. We, you know, we mentioned them a lot on air. This is the big targets by Republicans. officials across the country is somehow using their ESG investment model as a core focus and pulling back on investments from the fossil fuel industry, when that is not entirely true, right?

The BlackRock still invested into a number of fossil fuel type companies while they are still trying to run this kind of ESG investment suggestions to their various clients and whatnot. So this is kind of the situation we're seeing here. It's this debate, right? What is BlackRock actually doing? This is Republicans are bringing up. And how much of a focus they're really still putting toward the, fossil fuel industry while having these ESJ investment platforms.

It is the ESJ investment platforms too much. It's overtaking their business. And BlackRock has become the face of the ESG movement. And the other, Vanguard and State Street, others are happy to sit back and go, yeah, you take the hit here. I mean, Vanguard has pulled out of a climate agreement that a bunch of companies were involved in over concerns about kind of being associated with this group thing. And Larry Fink has been on our air saying that his solution to this is basically to use

blockchain in the future to link your vote, you as the index investor, for instance, or ESG investor to your political goals, which raises its own concerns long term about these intermediaries and the influence that they have. Or just tracking them in general. Right. There's tracking in order to make sure that they are not making the selection for you. And then there's tracking that makes you concerned that maybe they know too much about the political goals of your organization.

So it's a really difficult issue. But to your larger point, the campaign looks in its early stages of what could be a rather successful move here to kind of push back against what was the prevailing trend just two or three years ago? You're 100% right. Really, there are two sides of this coin, right? Progressives are saying you look at Black Rock, oh, they're not doing enough to fight back against big oil and the fossil fuel industry. And then there's this other side, more of the Republican, conservative leaning side, oh, they're too much into this ESG stuff. And frankly, the Republican side, the pro conservatives are winning right now. Look what the bill that passed yesterday.

Republicans going after Wall Street, just like Brian said. That was not a bingo car. What is this world coming to? What's happening? Brian, thank you. Brian Schwartz. All right, well, after the break, we're going to trade some names hitting new 52-week lows. Speaking of down markets in today's three-stock lunch,

stick around. We're up after this break. All right, welcome back time for today's three-stock lunch. We're taking a look at stocks hitting new 52-week or worse lows. Johnson & Johnson trading at new lows not seen since December of 2020, and already down 14 percent so far year-to-date. CVS Health, trading at levels not seen since August of 2021, down 12% year to date.

And finally, Dominion Energy, the stock hitting a new 10-year low. Shears are down 11% for the year. Let's bring in now Victoria Green. She's the chief investment officer of G-square private wealth, also a CNBC contributor. So first up, let's go Johnson & Johnson. What do we think here? Yeah, I think you're overdone on the reaction to the TELC lawsuit, not being able to be class action, so it's going to drag on longer.

But look, we estimate that's about $8 to $10 billion in drag. And for every $5 billion, you're talking about a 1% mark. market cap hit. I feel like they've been punished enough. Look, these guys are projected to make $97, $98 billion in revenues. They're a massive company. They're trading out a reasonable PE. They have certainly been punished. You certainly have a little bit of legal headwinds and legal overhang that may drag there and you may have headline risk. But this is a profitable company, 3% dividend, like 15 times PE. I like it here. I think you are, you know, when you're talking about stocks trading at 52 or 500 week lows, you are trying to catch a falling chain saw. So I'm not saying

it's necessarily going to rebound tomorrow. Such a quality name, though, I'm a buyer. All right. Somewhere Tyler and Michael Farr are listening. We'll talk about CVS next, though, Victoria. What about this stock? This is all about the Oak Street health acquisition, and nobody on the street liked it, but I think it's a great deal.

I know we talk about synergies during acquisitions, and they always talk up how many billions of dollars of synergies, but this is a great way for them to push into health. And Oak Street is a very unique name. They focus on the Medicare market, and they focus more on their technology platform, Canopy, no, not the pop platform, an actual tech platform, and how they interact with patients. And it's a different interface. We like this. We think this is going to drive substantial growth for

CVS over the years. And I know the acquirer typically falls, but come on, guys, 21% in the last two months. It's a good quality stock, reasonably valued. And this acquisition allows them to push into health care, which is where they needed to go. I've got to tell you, I've been to more CVS minute clinics in the last five years and I have my own doctor's office. So that's one. Anyway, final name here, Victoria's Dominion Energy, buy or bail? It's a selling. I can't touch the stock. There's too many uncertainties.

They're doing this top to bottom revaluation of the company. They have legislative uncertainty. And Virginia is trying to reduce their customers' utility bills. You just can't buy a stock that is telling you actively, we are reevaluating our business. How do you know what the revenues are? What do you think is a reasonable multiple? How much profit is going to get capped by the Virginia legislature? too many unknowns here. I know it's trading cheapest it's been in 10 years, but this is one of those

stocks. Sometimes there's a reason it's trading this low. And just because it's down this low does not mean it can't push further until we get clarity on legislation, until we get clarity on their whole corporate restructuring plan, what divestitures they may be doing. I just can't buy the stock right now, not even at this level. All right. The stock picker, Victoria Green. Thank you very much for the three stock lunch edition today. We appreciate it. Thanks, guys. And coming up, a herstery lesson. We'll share the journey of one company and woman who's thriving to become the Netflix of healthcare training. That's next. All right, welcome back to Power Lunch.

Healthcare jobs have now topped where they were before the pandemic. And the demand is there for just even more in the coming years, especially when it comes to home health care. Bertha Coombs joining us now with the story of one company training people for these types of careers. The demographic secular tailwinds are there. Oh, it's huge. You know, you've got all these baby boomers starting to get. into their 80s in the latter part of this decade, nearly 85% of home care health workers are women.

And like Helen Adyerson, who worked her way through college as a health aide. It's a hands-on job with personal interaction. But after graduating from business school, Adiesin thought that there's a lot of training and continuing education that could happen on your phone or computer, not just in a classroom. Nine years ago, she launched Care Academy.

We think about ourselves really very similar to a Netflix, of health care. We have 600 plus classes. We have specialized certifications as well. So that includes learning about the needs of clients throughout their dementia care. In a field with high burnout, one Boston area home health agency saw turnover drop below 25% with Care Academy. Its AIDS on night shifts. For them, the platform has really been a game changer. We'll see that they've completed a Care Academy education course at 3 a.m. because they're awake and while their client is sleeping overnight. The program is offered through home care agencies and nursing homes,

but Adyason is also working with those groups and some large employers to try to offer that training as well for family caregivers because of any of us who've had to do that. There's a lot you kind of need to learn. It's very difficult. My dad and my uncle had to do it for my grandfather for a couple of years. It was really, really hard. I mean, the construct is there.

I wonder about the platform, though. It could just go beyond health care in my mind, right? Well, of course, it could. Right now she really wants to focus on that, and right now she's focused on these home health care workers. And one of the interesting thing is that she's partnered with Southern New Hampshire University so that they can actually get college credit for that certification training toward another health care degree.

That could be a game change. It's great. Great story, Bertha. Thank you so much for bringing it to us. Bertha Coombs. All right. Well, thank you very much for watching.