Power Lunch - A “tremendous” buying opportunity, a fintech stock plummets and a major shift in the housing market. 5/10/22

Episode Date: May 10, 2022

Volatility gripped Wall Street ahead of tomorrow’s key inflation report. Tyler & Courtney asked the experts if they think the market selling is almost done and where the best opportunities are emerging. Plus, the CEO of Vivid Seats on the company’s strong quarter but falling stock price. And, the stocks that are holding up in this turbulent market. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome everybody to Power Lunch. I'm Tyler Matheson, and here's what's ahead on a busy hour. Stocks are whipsawing. Equity soar, then tumble, then climb back again. The volatility, just not stopping our market guests from putting her money to work, steak in the ground, says it's a time to buy. She'll tell us where and why she calls this a tremendous buying opportunity. Plus, havoc in the energy markets. That's been a telltale. The bull's now back in control, at least for today, Nat gas, after a dramatic, A two-day, roughly 20% pullback. We'll sort through the chaos and ask an expert if the commodity market is broken.

But first, over to Courtney Reagan, who's in for Kelly. Hi, Cort. Hi, Tyler. Thanks for having me. What a day to be here. Let's start with an intraday of the Dow, which was up 506 points at its high, and then down. 358 at the low, and now we are higher by about 151 points. The S&P now up 1% on track to avoid its fourth straight losing session.

if we can hold here somewhere thereabouts, the NASDAQ climbing 2% outperforming the other indexes. In addition to tech, communication services and health care are the best performing sectors. And the transportation sector is weighing down CSX, Union Pacific, Norfolk Southern. They're all down more than 1%. But off lows of the session, Bob Pisani is tracking the volatility from the floor of the New York Stock Exchange. Hi, Bob. That is the key word, Courtney. Incredible volatility and absolutely no trend.

I want to show you the S&P 500, because this is really extraordinary. We had an aggressive move down in Treasury yields below 3%. They sold right into it. We moved the high print was right after the open, about 40, 68. We moved 100 points to the bottom around 1230, and now we've turned around, and we're almost 100 points off of the low, not quite. You get the point here? That's an amazed moon.

That's not the Dow. The S&P moving 100 points, high, low, and then back up again here. Good news is tech's holding up well. We've had a little late afternoon rally in tech. Most of the big names are not far from their highs for the day. Apple, Microsoft, Micron, and VDi, an incredible volatility in that group. The amazing thing to me today is a lot of money is moving around, and I mean a lot. I watch these ETFs, which are proxies for the market. There is very big moves in industrial ETFs, consumer discretionary ETFs, financials, energy ETFs. I mean, hundreds of percent

more than normal. So some people are moving money around rather aggressively right now. Not clear if there's any trend in that. The overall trend is still down. Other than tech, we've got a lot of new lows out there. Banks, a lot of the big money center banks, and a lot of the larger regional financial banks like PNC financial at 52 week lows today. A lot of the big industrial names that did so well earlier in the year in January and February also hitting new lows. General Electric's an old story, but Dover, Textron, Ingersoll Rand, these are really big global industrials indicating the sort of general chaos we're seeing in the global economy, also at 52-week lows. So what is the problem? The problem is we are arguably on the cusp of a bare market. And in a bare market, you get some

real problems. You get what's called bull traps. These are false signals to buy, not value traps, signals where the bulls think it's okay to go in and they start buying. You see what happened here today, and they just sell right into it. There isn't sufficient buying power to move ahead here. So the technicals, oversold, for example, that word you hear often, not always terribly reliance. in these environments. Tyler, you're an old hand at this as well. You've lived through this for a long time. You know about what I'm talking about. We had this at the end of 2008. Remember, when the great financial crisis, we thought we had a rally going in December 2008, and then it went all the way down to the bottom, March 6th, another big leg down, and it was a heartbreaking thing to watch.

So I think you would agree. Be careful here. Exactly. Let's talk a little bit more about that, Bob, as the volatility picks up. Our next guest is saying it's time to put money to work. The Current landscape offers, she says, a tremendous buying opportunity. Let's bring in Courtney Garcia, senior wealth advisor at Payne Capital Management. Courtney, I assume you just listen to Bob, who has a positive view that is really diametrically opposed to yours. He was using the phrase bull trap for today. He was talking about the idea that we may be on the cusp of a bare market. You don't see it that way at all.

I don't know whether you're in the minority or the majority here. Explain your position. Yeah, and I think that's what you really have to take a look at right now is we're seeing some extreme selling pressure. We've had many days here where we have 80 to 90 percent downside days. So everything is selling off. I think what you want to look at right now is why are the market selling off and are some of these companies going to weather through this

or a majority going to weather through this. And if so, you just need to look at this as scooping up some more shares here while they're cheap. And I'm not going to call this a bottom. I don't think anybody who comes on here smart enough to say, oh, this is the bottom of the bottom of the, markets. But I think you want to make sure that as you have cash on the sidelines, starting to buy in here. And if there's further downside, just make sure you have that positioning to keep buying in. It's a wonderful opportunity that you only get these every one to two years or you see

large pullbacks like this. And so it's just a great time to start to get into the markets here. So really what you're saying is execute on a dollar cost averaging strategy at this point because if the market goes up, you're still going to lower your average cost per share. if the market goes down, you're going to lower your average cost per share. Yeah, you want to kind of hedge your bets that way, but I do think you just want to be strategic about where you're adding your investments right now, right? Because what you're seeing right now is tech has easily been the thing that's selling off the most this year, is interest rates are rising.

And I wouldn't be surprised here if you do see some sort of bounce in that just after the extreme selling pressure we've seen. But I think you do want to look longer term here. And as we're in this cycle of market, you do want to focus on some of those cyclical, those things that are going to do well in a rising interest rate environment. Before we get to a couple of your picks, which are a little out of the mainstream for these times, I want to go to your forecast for the economy in this quarter. You think it could bounce back to a 3 to 4 percent rate.

I think that's a little higher than most of your peers would say right now. What gives you that kind of confidence? I think what you want to take into account here is the fact that markets are pricing in all the extreme negative news right now, and there could be a lot of positive upsides here. There is a lot of thought that we can see inflation starting to peak. It could start to come down here later this year. We could see maybe the Fed is a little less or more devish than people are expecting. None of those positive surprises are in the markets right now.

And I think what you want to take into account is that can actually surprise the markets a lot more than some of the negative news. Getting more of the negative is already priced in, but anything positive, I think we can start to see things. But I'm asking about the economy. I'm not asking about the markets here. What tells you that the economy may be ready, I mean, are you in the camp that that first quarter print was an anomalous one because it was mixed up with export, import numbers, and so forth, and that our basic trend right now is back to 3 to 4%. Yeah, and I think a lot of that has to do with having a really strong consumer right now. And that has been a big argument, too, of is the strong consumer just in the past or are they going to continue to be strong in the future? And I am of that camp here where you are still seeing people are sitting on a lot of cash.

They are actually not spending that down as fast as people would expect. And there is still a lot of demand going forward. I don't know about you, but I have been traveling a lot recently. All of those planes are packed. The airports are packed. That's not people are just having to spend. People are wanting to get out and travel. They're wanting to get out and do things.

That's going to drive the economy. I'm going to turn to the other Courtney here today and ask her to pose a question about Nordstrom, which is one of your picks. Yeah, I find it very interesting that you have Nordstrom as one of your picks. And you note the dividend yield, which certainly it does have. It's not usually a reason that I see people pointing to Nordstrom. But why do you think that this is particularly a name that could see a recovery if the consumer remains as strong as it sounds like you believe the consumer is and will continue to be? Yeah.

And of your retailers, I do really like Nordstrom. They've been really strong. They were very loyal customer base. They were one of the first to get an online sales. But they also have a lot of your flagship in some of your major cities like New York City or San Francisco, which have not had the same kind of foot traffic that they have pre-pandemic. And that is starting to come back as people are starting to go back into the office. you're starting to get that tourism back in, and that can really add to a whole segment of their business that has not recovered yet. I think they have a lot of room still in their earnings and in

their sales to grow, and they're still trading it relatively cheap. It's still a lot of room to run here pre-pendemic levels. We have to move rather quickly. I'm interested. Merck, I kind of get. It's a big, partly a bet on Ketruda, which is a multi, multi-billion dollar cancer drug, very successful one. you like AT&T because they've gotten out of the entertainment business. You like them as a pure broadband and cellular play. And again, think about the fact that we're in a rising interest rate environment. You want to be in some of those companies that have pricing power. And AT&T is very much one of those.

They had a huge increase in subscribers last year. And they're spending a lot of money to get more into 5G and fiber optic networks and get more into that customer base. But again, they're at one of those companies where even as inflation is kicking in, They pay one of the highest dividends in the S&P 500, and they have that pricing power, which I think is really important in this environment right now. Courtney, thank you for your time today. We appreciate it. Courtney Garcia. For having me. You bet. Well, now to a key pillar of the economy, housing and a new report that points to a major shift, but is more homes for sale? A good sign or a bad sign? Diana Oleg joins us from Washington with the latest and the decision.

Diana? I don't know if I have the decision court, but I got the numbers. So the supply of homes for sale could post its first year-over-year increase in three years, and it could happen in just the next few weeks, that according to new data from Realtor.com. Inventory was 12% lower in April, but that was the smallest year-over-year decline, actually, since the end of 2019. And another reading covering just the last week in April shows inventory down only 3% from a year ago. So Realtor.com's chief economist, Danielle Hale, said April data suggests a positive turn of a events is on the horizon for weary buyers. Of course, not for sellers. Weaker affordability is

translating into fewer potential buyers and a slowdown in bidding wars. The shift in supply is due to that drop in sales thanks to the recent spike in mortgage rates, which has made already expensive homes even pricier. The average rate on the 30-year fix has jumped more than two and a half percentage points since the start of this year, and home prices are up about 34% since the start of the pandemic. Now, the growth in supply is being led by mid-sized, family homes, as fewer are going under contract, despite this being the heart of the spring market, which is when that family demand usually happens most, Courtney. I am curious, Diana, why is the growth in supply being led by mid-sized family homes? Can you elaborate on that a bit?

I would say prices. It just has to do with affordability. When you see mortgage rates go that much higher and you're already looking at a pricey home, like a big one like this one, it's going to knock people out of that market. Perhaps they want the lower priced homes, but there are very few of those available. So you already had more of the higher priced homes there to begin with. Then they become even pricier. They sit longer. They don't go under contract, supply, just balloons. Got it. Diana, thank you very much. All right. Thank you, Dye. And coming up, folks, shares of vivid seats lower today, despite strong quarterly results in an upbeat outlook. The stock down about 30% this year. If spending is moving to experiences, as we hear so often, what will it take to turn

vivid around. We will ask the CEO, plus a one-time pandemic darling faltering fintech and a restaurant-related play. We will trade three of the day's big movers this hour. As we had to break, take a look at shares of Bio Haven Farma, surging 70% on an acquisition by Pfizer. And let's see, the beaten down said, there's the biotech ETF. There you see it up three and a half Welcome back to Power Lunch. I'm Dominic Chuby. We want to bring you a market flash right now on what's happening with National Vision Holdings, which is on pace for its worst day ever after missing estimates on revenues. The eye exam and glasses provider, ticker EYE, also slashing its outlook, signing a now familiar list of headwinds, including the Omicrom variant for COVID, staffing challenges, weaker consumer confidence and risks of a possible recession, as well as, of course, geopolitical instability. Now, those results are also weighing on Direct-to-consumer glasses provider, Warby Parker, which is down. You can see double digits so far today. And then, by the way, we want to also call your attention to what's happening right now with SOFI technologies.

It's just resumed trading after that inadvertent early earnings release slash leak. You can see those SO-Fi shares right now, down roughly 12% in trading off about 75 cents, $5.22. Courtney, the last trade there. I'll send it back over to you. Thank you very much, Tom. Well, shares of online ticket marketplace vivid seats sharply lower, despite reporting record. revenue in its first quarter and raising 2022 guidance. The stock also down about 30% this year. The company acknowledging there was an impact from higher than expected event cancellations.

And also point to some challenging macro headwinds, including high gas prices. Stan Chia is the CEO of Vivid Seats. Stan, thank you very much for being here. Why not raise your profitability forecast if you are expecting higher revenues? What kind of costs are weighing on the business that would prevent that part of the guidance from being increased? Yeah, hi, Courtney. Thank you for having me today. Yeah, look, when we look across the landscape and where we continue to perform, you know, I think as we talked about, we certainly had an unexpected cancellation impact in this first quarter, despite being our third record setting quarter across revenue in GOV and beating, you know, consensus across every line, including the EBITDA line. That, you know, $4 million impact to cancel, I think, was something that happened that really wasn't even COVID-oriented, right? We looked at just an anomaly in the industry driving a disproportionate cancellation impact. And so as we look at raising guidance through the rest of the year across all of the elements, you know, I think us keeping our EBITDA online really takes into account

the headwind that we encountered in the first quarter. Okay. And so are you expecting these cancellations, as you're mentioning, not necessarily COVID-related? Are you expecting potential one-off cancellations to continue throughout the rest of the year as a possibility? You know, I think that's really a hard thing to forecast. Again, I can go back and just say what we saw in the first quarter with, you know, really top acts in, you know, the Foo Finers with the really unfortunate death of their drummer, as well as Celine Dion and, you know, Major League Baseball's Lockout. All three of those things happening in one quarter, we feel, is an anomaly,

but certainly can't really predict the future in terms of whether that will be a regular occurrence. Okay. That makes sense. Let's talk about what events are popular. Vivid Seats obviously offers tickets to a wide variety of different entertainment type of performances or sports events. What is most popular? And what are ticket prices like? Are you seeing inflation in the prices of tickets just like we are in almost everything else?

Yeah, you know, I think across the board we've seen great interest as I think folks really look to get, you know, towards live events as they are, you know, enjoying experiencing moments together with their friends and their family. When you look at sports, we've seen a great interest in the first quarter. We had the best Super Bowl we've ever had. We've seen the strongest NCAA, both in the regular season with Coach Kay's final game at home, as well as the tournament itself, bringing in some of the highest demand that we've seen. You look more recently, just this past weekend, F1 in the sports category, you know, triple what our 19 sales were over this past weekend again. And, you know, with ticket prices north of 3,500.

dollars. So I think as you look at the market and certainly us as a marketplace that doesn't set prices and as rare prices are really more of a reflection of the demand, I think demand continues to be really, really strong. And as you look at the concert side, a lot of great acts, you know, Elton John, Lady Gaga, they're all out there touring. And certainly, you know, I think as artists look to get back on the circuit, I think they're finding that consumers are just as excited to see them as they are to get out there and tour. So there's been a lot of discussion about the consumer in the United States. Most of us believe the consumer has been strong. There's debate about whether or not the consumer will remain strong in the face of all the pressures that we're facing. Is your view that

indeed consumer strength will continue to be present, especially when it comes to events like live sports or live performances that we've missed so much of in the last several years? Yeah, I think, again, I look back to what we've seen, you know, in our business where we've seen, you know, on average, average order size climbing at about 3 percent. We looked at the this last quarter that we just put out, again, record-setting quarter, an average order size when compared to 2019 still up 12 percent, right? So I think that would tell us that there's still so much demand going on there. And the other stat that we look at, which I think is a great bullish indicator, again, you know, how much are people willing to travel to events? And what we saw in our

data is that consumers are really willing to travel almost more than 20 miles more than what they've done, you know, in 19. So we see indicators, again, that live events remain. a key area that I think consumers remain really excited to go to. And interesting traveling, even as those prices go up, whether it's gasoline or airplane tickets or everything else associated with travel. Stan Chia, thank you very much for joining us here today, CEO of Vivid Seats. All righty, coming up, hunting for yield off the beaten path where investors are looking for dividends in this market, plus old reliable IBM actually holding up well compared with the rest of the

tech space. We'll discuss that in today's working long. And as we head to the break, during May, we celebrate Asian American and Pacific Islander heritage and featuring some of our CNBC teammates and contributors. Here's Richard Bernstein Advisors' Deputy CIO, Dan Suzuki. My advice to the community would be, don't be afraid to stick out. Proves to people that you're unique and that you're much more than your racial identity. And don't forget that it's a two-way street.

Just as you want to feel included in all society's circles, make sure that you're doing your part to include others into your circles. Because how can you expect them to see the beauty of your culture and your individual personality unless you allow them to get close enough to see it for themselves? It has been, I probably don't need to tell you, a rough week for stocks since Wednesday's post-Fed rally. The Dow has dropped 1,700 points in all since then. That's about 5%. And that is leading some people to get in all. on the hunt for yield. Sima Modi, join us now with some of the unusual places that they're finding it. Sima. Tyler, as we continue to hunt for yield, let's look at the high-yield corporate

bond ETF, ticker, HYG, which has about $19 billion in assets under management. Trading higher today, it did sell off last week as part of the market's reaction to the Fed, and it's now trading at its lowest level since April of 2020. We looked back to over the last three months. It's down less than the broader market off by around 6% compared to the 10% decline that we're seeing in the S&P 500. This does have an average yield, HYG, around 7%, much higher than the 10-year, and even energy and real estate stocks that generate the highest yield in the S&P 500. Now, junk bonds also tend to be more speculative and higher risk.

The bull case has been that if we do see a rapid decline in inflation and a subsequent slower rise in interest rates, this part of the bond market will thrive. Medley advisors recommends looking at U.S. energy bonds that are sitting on less debt and have a stronger need for investments in energy infrastructure. Courtney and Ty? Important stuff, FEMA. Actually, one of our earlier guests was sort of having some yield hunting stocks to some of her picks. Thank you. Let's get over to Frank Holland.

He has a CNBC news update for us. Hi, Frank. Hey, good afternoon, Courtney. I'm Frank Holland. Here's your CNBC news update at this hour. In Ukraine, as the war enters its 11th week, Russian forces firing new hypersonic missiles at the vital. Port City of Odessa overnight. That attack killed at least one person and destroyed a shopping center and a warehouse. The corrections officer who helped an Alabama inmate escape triggering a

massive manhunt is now dead. Authorities say that Vicki White died of a self-inflicted gunshot wound after a high-speed car chase with U.S. Marshals. That escaped inmate, Casey White, is now in custody. And parents are struggling to keep up with the nationwide shortage of baby formula made worse by Abbott Nutrition's massive recall. That recall was triggered after 40, babies were hospitalized and two of them died after consuming avid products. CVS and Walgreens. Now rationing formula limiting customers to three items per purchase. And a California district attorney will not be filing criminal charges against former heavyweight boxing champ Mike Tyson. This comes after he was recorded punching a first class passenger aboard a flight last month.

Both the passenger who has not been identified and Tyson, they both requested that no charges be filed. If you go online, you can see some of that video. Fun fact, Mike Tyson was heading to the this conference I was at when it happened, Tyler. Oh, my goodness. Yeah, I remember the altercation there. That's alarming, isn't at court, about the baby formula thing? I was just thinking that's so terrifying as a parent that, you know, one time had a child

who was on formula. Oh my gosh, like not being able to get it. Oh, it's scary stuff. All right ahead on Power Lunch, folks. Energy havoc, national gas prices. That would be natural gas prices. Hitting record highs, diesel prices, soaring, we'll break it down. In our weekly meeting with Bank of America's

Francisco Blanche. Plus, Pella done, the stock tanking after posting a huge loss and we've guided. Should investors avoid it at all cost? Power lunch. We'll be back in a moment. We've got 90 minutes left in the trading day. We want to get you caught up on this wild market day. If you like volatility, you like the VIX.

It's a Vixen right now. Bond, stocks, commodities, all in focus. Let's bring back Bob Pisani from the New York Stock Exchange. Bob. Wild volatility and no trend particularly. Look at the SEP 500. A hundred point move from the top to the bottom. around 1230 and then almost 100 point move back. That's no trend and an awful lot of volatility.

20% of the S&P 500's at new lows today. That's over 100 stocks, kind of big name Dow stocks. We've got Boeing, Nike, Disney, Home Depot, JP Morgan, banks of new lows, a lot of them, Goldman Sachs, 7, 8, 9, 10 stocks over on the Dow at new lows. How many new highs are there in the S&P? How about just two? You got it. Kroger and, of course, General Mills. And they're down. They were higher earlier in the day. Mega Cap tech's holding up well, and that's one. one of the reasons the markets rally back a little bit in the middle of the day. So Apple's up 2.5% at the highs, Microsoft, Micron, and VDio, all bouncing. We've seen some new lows in the retail sector today as well. The XRT is at a new low, Amazon new low, and some of the big discounters,

TjX and Ross Stores, new lows as well. Tyler, back to you. All right. Thank you very much, Bob, now to the bond market. Money moving into bonds. Prices going up on this day, and yields are going the other way, as they always do. The 10-year-backed. below 3% today, 2.977 right now. After hitting 3.17 yesterday, that's the highest level since November of 2018. Let's go now to the energy markets, which are experiencing almost as much volatility lately as stocks. Oil back down below $100 a barrel, and Pippa Stevens has the details. Pipa. Hey, Tyler, closing under that key $100 level and adding to the 6% declines we saw yesterday. PVM attributing the slide to the stalled EU sanctions on Russian energy, which is

shifting the focus back to economic considerations and what slowing global growth means for oil demand. Let's check on prices. WTI is at $99.69. Brand crude at 102, 38, both down about 3 and a third percent. Natural gas, though, back in the green up nearly 5 percent at $7 and 36 per MNBTU. earlier in the session it traded as low as $6.43. Now, also wanted to note that gasoline prices are surging yet again. The national average four gallon hit a record $4.37 today, according to AAA. Retail diesel also hitting a record of $5.55. This is the 12th straight day.

It's hit a record. And part of this is because of the surge in oil, but lack of refining capacity, starting to play an even bigger role, which is sending diesel, jet fuel and other refined products surging. Tyler, back to you. All right, Pippa, thank you very much. Our next guest has been pretty concerned about the energy market and expects the turmoil to remain well into the summer. Let's bring in Francisco Blanche, head of commodities, global commodities and derivatives research at B of A global research. We're going to call this Tuesdays with Francisco. Welcome back, my friend. It's nice to see you.

Thank you, Tyler. Why don't we talk about a couple of a little more obscure parts? Why has diesel been going as high as it has? I saw it over the weekend well above $6 a gallon at a station out on Long Island. Well, so very simply, Tyler, Russia is one of the largest exporters of petroleum prolux. The largest one being the U.S. of A, but Russia comes right as number two. It has roughly over 6 million barrels a day of refining capacity. And we've seen a meaningful curtailment of Russian distillate. diesel exports as we've seen a lot of companies going for self-sanctions. And then, of course,

the U.S. has also sanctioned Russian energy exports, as has the U.K. So that's tightened a global refining system. That's number one. Number two is we've also seen the Chinese reducing their petroleum product exports. That's also tightened the global market. And as a result, we've seen higher gas, higher diesel prices in New York Harbor, which is why you have this high prices in New Jersey. So it kind of comes together. It's a global market and Russian, China, have reduced their export volumes quite a bit. That's the bottom line. And even though just really rock bottom low. Oil down today, natural gas higher today. After a couple of days of very steep sort of counter trend losses there, what's going on in that gas? Well, natural gas is a global

market as well in some ways, but in the case of the U.S. is still a local market. One thing that we talked about, I think, last week, the week prior is that the global coal prices are ripping. Now, you think oil is expensive at $100 a barrel, but just think about this, global coal prices are also close to $100 a barrel of oil equivalent. And typically, coal trades at the fifth of the price of oil wants to adjust for the caloric value that it contains. So coal is supposed to be $20 a barrel and straight at $100 a barrel. And that's right. up the price of coal in the U.S. as well, appellation coal, lifting up the room for gas to move towards the upper end of that ban. Because remember, utilities will use either coal or gas to generate

electricity. So when the price of coal goes up, the price of a pollution coal goes up, that also lifts the price for natural gas if you have a tight market. Remember, we had a coal and the winter. So the demand was pretty strong into the winter end. And also, remember, in the case of the U.S. I gas market, we had free soaps in the first quarter and also in April. So we lost supply. We had pretty good demand. And we ended up with a deficit.

And then this coal market is ripped. So I think that's the story on gas. It's kind of connecting to that global energy crisis, so to speak. And if we look at WTI crude or Brent crude, at what point does economic slowdowns, the United States globally, begin to impact demand for fuel and then ultimately hit the price. What's the average equilibrium price for WTI and Brent crude, in your opinion, as you factor in what may or may not be going on with economic slowdowns? Well, Courtney, thanks for questions. It's hard to tell because remember this is all happening

simultaneously. And I think the pullback in equity markets and fixed income markets could signal already an economic slowdown, and that'll eventually get priced into weaker demand growth. But I think what we've seen so far is that in the case of U.S. gasoline, we've hit record levels yesterday on the wholesale markets, which will feed into higher prices of the pump. And I still think going to July 4th, we're going to see a pretty strong gasoline market. Now, past the summer, things could be a little different. But of course, we don't know what China is going to do in terms of exporting more petroleum products, what Russia is going to do. And remember, as I mentioned also to you guys, a couple of sessions

ago, we still have mostly China in lockdown. And it seems like Beijing is moving towards the same levels of restrictions as Shanghai. So, you know, we still have a lot of demand offline, so to speak. And I think that could eventually support the oil complex throughout the next few months. So I'm a little concerned about the macro for sure. But I do think that, that recovery of the post, that we'll see post lockdowns in China will be very supportive to prices. Got it. Francisco Blanche, thank you very much for joining us here today.

Thank you. IBM hosting its think conference that stocked down, but less than other names than tech group, is the old tech name, a safer bet than new growth. John Ford brings us his interview with the CEO. Well, if you wait long enough, you will find that the Dow had turned negative again, and now the Dow has turned positive again.

It was down 300, and then it was positive. And then it was negative. Then it was positive. And now it's positive again by 53 points. They told me, as we were in the break, they said, we're going to do a market update because the Dow turned negative again. And as I'm going to come over here, we can say hello to John Ford. There's a little brain line.

My goodness. Now to our working lunch, John. That looks like Christmas. That's why you are here. Until this year, a great stock market was one that went way up. Now a lot of investors would be happy with one that isn't going just way down. They'd be happy with that, wouldn't they? Let's all agree with that.

Okay, a moment of peace and agreement. John Ford brings us up close with the CEO who took the driver's seat of a storied company at the beginning of the pandemic and says now turning a corner. Yeah, Tyler, Arvin Krishna, CEO of IBM, a company that's trading about where it did five years ago. To be fair, so is Netflix. But IBM is paying out about a 5% dividend yield. The question is, though, can IBM meaningfully grow? from here. Arvin's an engineer by training and he's been reconfiguring the company. He's integrating software company Red Hat and just spun out IT infrastructure company,

Kindrel. Whether it's companies or technologies, Arvin Krishna has had a long history of studying how things work. I think when I was two years old, I still have memories of this. I was given a tricycle. Most people like to ride the tricycle. I found my father's spanners and I took the tricycle apart. We had guests that used to come, and this was probably a bit older than that, and I have been known to take apart pots on their cars that I could find. Luckily, my father was handy so you could put them back together. Right, and I'm guessing as a two-year-old, you did not put the tricycle back together. I don't believe I did. I believe I

tried, but didn't quite succeed. Now, investors need to decide whether he's put IBM together correctly for this challenging moment. IBM has a huge workforce, about 250,000 employees at a time when labor costs arising. But Arvin says customers also need skilled tech workers, which he has. Another big question is whether IBM can succeed in a cloud-driven enterprise environment, even if it doesn't have the infrastructure business of Amazon, Microsoft, or Google. Arvin argues IBM technology is going to help customers operate when they have to use multiple clouds. I really want to have a common pool of skills that straddles all of these clouds. May not be for every single application, but let's call it for maybe half the critical applications.

If you want a common pool of skills, that means they're not going to learn each native cloud all the way down to the depth. So that layer that provides abstraction comes from the red hat technologies, both Red Hat Linux and Red Hat OpenShift. That gives you that commonality that goes across both public clouds and a private cloud. And so I think you'll agree when there's a shortage. of skill labor, then that's attractive to a certain fraction of the enterprises and to what they would view as critical that they want the resilience of being able to go across multiple clouds. That's where the advantage comes in, and those things can then run across that environment, and that's how we would then get the software established.

I actually worry less about margin. I worry more about client delight and people consuming it to get business benefit. If they get that, margin is an outcome. Now, IBM has had a lot of false starts in recent years, but I think the next 18 months are going to show whether Arvin Krishna has meaningfully focused the company. Two key questions. Can his expensive workforce solve customer problems crisply enough to justify price hikes? And can his software become the clouds' lingua franca? If so, this IBM tricycle might be faster than it looks, guys.

So what? He said stuff there that you understand. Yes. But I don't. Here's a big part of it when it comes to cloud. So there's AWS, Microsoft's got Azure, there's Google Cloud platform. Lately in Enterprise, people don't want to be locked into just one. They want to have options for all of them.

So he's saying, well, with Red Hat, we have the software tools that allow customers to just write to that and use it across multiple cloud. So they can be flexible. Yeah, for some things, they might want to be specifically on AWS and get real experts in that. But especially in a tight labor environment, customers want to be flexible. and we allow them to be flexible. So is IBM then really a subsidiary of Red Hat or the opposite? Was this Red Hat driving the bus here? Well, the technology, the software is important, but remember, IBM's also got mainframe technology,

which is actually growing very high margin. They're in a new Z cycle. They've also got this big consulting business, which is people that help customers actually know how to use the technology, which he's arguing in a labor-constrained environment. The customers can't afford to hire their own people. IBM's got the people. We've got them here. Can IBM keep the people and can they deliver the results that are going to allow IBM to raise prices and say it's worth it? You don't always look at IBM as a name that might be the sexiest tech investment, but is it more recession-proof than some of these other names like Amazon or Microsoft if you're looking to play cloud?

Well, when you're excited about stocks that keep going up and up and up and revenue growth that's in part driven by risk, then IBM's not so exciting. But when you're worried about preserving capital, a five, 5% dividend yield and a stock that's not going down is interesting. But eventually they got to grow, right? And they've had some good quarters of revenue growth. The question is whether Arvin's strategy is going to accelerate that. All right, John. Thank you very much. John Ford. Oh, AI lending platform upstart sinking, to put it lightly, after the company cut its full your revenue forecast. The stock is way off its highs in nearly $400 per share. That and more in today's three stock lunch. Today's three stock lunch is focused on three of today's biggest movers, fintech company Upstart losing 60% of its value after the company cut its full

your revenue forecast. Peloton shares are dropping after the company said it is burning through cash and food distributor, Cisco, is higher on solid results and growing demand from restaurants. Let's trade him with Cliff Hodge. He is chief investment officer at Cornerstone Wealth. Okay, let's get started with Upstart. Good afternoon. Upstart is a disaster. Down 60% today, as you mentioned, $4 billion of market cap has been wiped out, and it's still trading at about six times next year sales estimates, which are likely going to continue to get marked down. The stock is a poster child for what can happen during regime change, like what we're experiencing now, promising technology,

blistering growth and the potential for massive profits far off into the future. We're great in a negative real interest rate environment, and where that growth trajectory keeps moving higher. That playbook is over. We're in a new world. world, rates are rising, the feds pulling liquidity. Investors should be looking for cash flows, earnings, and cash flows today. That's the name of the game. Let's go on to another one where you could say there's a regime change. There actually is in the executive Sweden, and that would be Peloton. What do you think of Peloton? And is my favorite instructor, Cody Rigsby safe? My wife loves Cody Rigsby as well. But again, it's another example of the kind of stock that worked well.

in the past couple of years that are going to have a much tougher flaw going forward. Peloton has a great product. We have one at our house, and I should probably use it a little bit often. But again, we want current earnings, current cash flows, neither of which Peloton have. And its sales are actually projected to fall over the next 12 months. Now, the stock has already dropped 90%. They have a great franchise, a great brand. It's relatively cheap.

But this is going to be a longer-term turnaround story. Could get taken out. But you need have patience, and we think they're better places to deploy capital today. Pelt on shares down about 7.5% right now. Okay, Cliff, the final name is Cisco, not the tech company, but the food company. The food company. Yeah, this one, this name fits a little bit better with the kinds of factors that we're interested in currently. This morning's results sales up over 40%.

earnings per share up 250% was a nice beat and raised to boot. Love management commentary, aligning with some of the other comments we heard for banks and credit card companies earlier in the reporting season with consumers favoring experiences over stuff. We like that theme. Also nice to hear about management giving a nod to improving supply chain. So that's going to likely take a little bit longer to normalize. not cheap. I wouldn't rush out to buy it on a 7% update, but it could be an ambiquee on the watch list if the broader markets continue to struggle. All right. Well, Cliff Hodge, thank you very much for running us through our three stocks

and a three stock lunch. All righty. Up next, a look at the stocks that have been working in this turbulent market. Yes, we've found some. Well, the hunt is on for stable stocks in this very volatile market. Dom Chu has a list of names that have been holding up, sir. Holding up over the last week or so. So we kind of saw what happened after the Fed decided to raise rates, but maybe not by as much as people thought and whatnot. And we saw the rally and then the subsequent crash. But over the last week, if you take a look at the S&P 500 overall, the move that we've seen now, that tiny little pounds that you're seeing on the right-hand side, still those, though, represent about a 15-17 percent decline from the record highs that we've seen. Over the last week,

though, believe it or not, there have been actually green spots in the market overall. And there's two specific industry groups I want to kind of call out to show you what I'm talking about. Maybe no surprise right now that if you look at the consumer staples trade, right, the ones that are less economically sensitive, people are always going to buy processed foods, things like that, diapers, shampoo, and whatnot. It is names like Kellogg, Clorox, and Kimberly Clark and Campbell Soup. Names like that over the course of the last week that have actually seen gains despite the fact that the market's fallen off. So now it's not even that they fall in less than in the market. They're actually winning in an environment where everything else is kind of falling

by the wayside. So that's the consumer staples trade. Not a surprise there. What was interesting was to kind of dig a little bit further and take a look at some of the other stocks that have been doing well over the last week. Financials, but not the banks. It's the insurance companies. Take a look at these performances over the course of the last week. Cigna Corp, health insurance, up about five and a half to six percent. Cincinnati Financial up about two and a half percent, big insurance company in the S&P, and then Travelers, a Dow component, up about a half a percent as well. So in an environment, when you've got tech stocks falling 6, 7, 8, 9, 10 percent in a week, actually having green performance for consumer staple stocks and insurance companies

may be one of those places where if the market does hypothetically take another leg lower, there's a near-term precedent for maybe some of that outperformance to play out in the coming weeks if it were to happen again. Why insurers, is it because they somehow seem to make money? no matter what? Well, it could be, it could also be the interest rate environment, right? Because as things kind of go higher, insurance companies in terms of rates, do you have some exposure with regard to being able to fund future liabilities at a certain rate. There's a certain amount of money they can make in their portfolio if they're able to reinvest in certain rates, assuming they're at higher rates,

and whatnot. So that could be one of the things out there. Or it could just be that there aren't as many natural disasters for those property casualty companies to have to kind of finance and going forward. So, but I would also point this out. I mean, none of the, none of these, these companies is going to compare with the performance of big tech, right? We've made a lot of hay with this notion that the biggest tech companies in America and the S&P have lost over a trillion dollars in market value over the course of the last, you know, just three days. So it's certainly something to keep perspective on. And to think a few years ago, there was not one company that had a trillion dollar in. And now there's only four right now, right? So, Tom, good to see you.

You got it, guys. Nice to be with you, Cork. Nice to be here, Tyler. Fantastic. Thank you all for watching. Power Lunch.