Power Lunch - Apple under pressure, the S&P nears a bear market and trading the most shorted stocks. 5/12/22

Episode Date: May 12, 2022

The selling pressure intensified in afternoon trading. The S&P inching closer to a bear market, down nearly 20% from its 52-week high and Apple breaks below $140 a share. Plus, the analyst who says sell Ford and GM and questions their EV selling strategy. And, three of the most shorted stocks. Are they worth the risk? Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Kelly, thank you so much. We'll see in just a few seconds. Welcome, everybody. I am Tyler Matheson. The market sell-off intensifying this afternoon, and here is what we have in this hour ahead. Apple down more than 20% from its January peak, off more than 7% just this week. The sell-off spreading from speculative names to tech stalwart having implications for the broader market. Plus Wells Fargo sourings, and I mean souring on electric vehicles, questioning when Ford and GM will actually make money selling them. We'll talk to the analysts behind the bearish call and his decision to slap both stocks, Kelly, with sell ratings. Tyler, thank you very much. Hi, everybody. Stocks are right around session lows right now. The doubt was briefly down more than 500 points. It's down 1.4%. So is

the S&P to 381 right now, and the NASDAQ is down one and a half percent. Now, this all comes as rates are falling today. The yield on the 10-year edging down for a fourth straight, fourth straight session, to 84, and we've been even lower than that at times throughout the day. And this was after the producer price index this morning, 11% year on your gain for April. And despite high inflation and efforts to control it, legendary investor Bill Miller told me last hour, he says we're not near a recession. The Fed is going to be data dependent as they should be. And they're going to try, they're going to get inflation down, you know, one way or another. But I think they've also got to be alert to the fact that they're trying to avoid a recession. Now, we're not close to that now, but the market's certainly

worried about recession, as you can see in the way the economically sensitive stocks are behaving. Miller also told me he thinks the market is near an intermediate low. And GM, Tyler, one of the names you just mentioned, was a stock he cites favorably. All right, Kelly, thank you. For years, the so-called fang stocks, were the pillars, the bulwark of the stock market on many occasions contributing to most of the indexes gains. But this year is different. Every, every fang stock is now down 20% or more from 52-week highs. Netflix, Facebook, Amazon. They've seen the biggest declines, Alphabet, down about 25%.

And now, Mighty Apple has joined the others. And Apple is a stock that is particularly important to the broader market. Let's bring in Ari Wald, co-managing director and head of technical analysis with Oppenheimer and company. Ari, why is Apple a tell, William? Well, and unfortunately, that list of stocks down 20% from its peak go much broader than just those five names. It's really a market issue that we have going on here. I think there is a lot of attention paid on Apple for the simple reason of its market cap. It's 13% of the NASDAQ 100 composition, 7% of the S&B.

P500 so we can quantify how important it is to the overall market. And it has been the next to surrender lower. Looking at the chart of Apple, it has fallen below its 200-day average. The support level, I'm watching, $138. You got to go back to the stocks, late 2020 peak, very often former resistance becomes support. Even though we're touching it pretty close to it right here right now, again, given the damage in the trend, this stock needs to stabilize. Apple looks, you say, Airy, less bad than the NASDAQ generally and less bad than some of its compatriots. Does anything in Apple's activity suggests that we're near that capitulation point, if not in the market generally in the market for these big bulwark tech stocks?

Yeah, this is such a great point. Tyler, this isn't, again, we're arguing it's not an Apple issue. This is a market issue. Most of the stocks look like this, that they're breaking down lower. In fact, Apple has fallen less than the NASDA. It's actually outperforming this very difficult market tape. It's coming off a new relative high versus the NASDAQ. And so to look for, and again, that's our take that we're at the capitulation stage of this drawdown. that even the stocks, the prior leaders are now selling off as well. If you look at the chart we're showing on the screen is how far below Apple's been from its 200-day average. It's currently 12% below the 200-day average.

It could get more extreme. It's gotten more extreme December 18, the example there. But again, these points, by the time Apple breaks down, you're usually closer to a bottom than a top. So that's what, and that's based on history, Ari, correct? In other words, when Apple goes down, say, 15% or more below its 200-day moving average, that can signal that sort of fulcrum point in the market. So you took that indicator. We lined it up with the NASDAQ and what you'll find, indeed, yes,

by the time when Apple gets this far below its 200-day average, 10, 15%, typically those signals occur closer to a market bottom than a market top. What is the S&P saying to you right now, Ari? We're getting close, but we're not there yet. We've been on the show discussing these indications of capitulation that we're going to be looking for. One of our favorite indicators, Tyler, is the percentage of NYSC stocks above their 200-day average. It fell as low as 22% as of yesterday's close. Looking at a decade, the past decade, the opportunities have arisen when that indicator falls,

below 20%, like to see a mid-teens reading. So we're getting close there. I marked 3815 on the chart as well. That's the common retracement of the prior bull market. If you look back through history, bear cycles typically retrace about that much of the prior bull if we assume the secular bull is still intact, which we are. So we're getting close to that capitulation. You still need the base. It still could be a tough summer. But we think for patient investors, investors with a time horizon, in at least 12 months, this does ultimately create the secular bull markets next big opportunity. Ari Wald, thank you. Always great. You're clear and concise, and we appreciate it. Ari Wald. Pleasure. Let's key off of what he just said. Despite the collapse in some of these

major big tech names, our next guest says one of them is a buy as active managers sort through the rubble and add companies that are actually beating earnings expectations. With us now is Mike Bailey, director of research with FBB Capital Partners. Mike, it's good to have you. It's not Apple here that you're singling out. It's actually Alphabet or Google. Why? Absolutely. So we are looking at, frankly, the fang survivors. You went through sort of a laundromous list of the names that have blown up. Most of them have already. But we are fundamental investors. And so we're looking at what are their earnings doing? And we're seeing, frankly, three survivors at the moment. So Apple earnings are up here to date. They keep trending up. Microsoft the same thing. Google basically

the same thing. So you've got three Fang stocks continuing to grow. Fundamentals look good. But wait, what about valuation? All three of them are starting to get cheaper. Google is just outrageously cheap. I mean, if you take a look at it, the last time Google's P evaluation was this cheap, we were talking about the taper tantrum. This is nine years ago. So I do think if you take a look at what the business is doing,

a little bit of a slowdown this year, but then you're back to mid-to-high-teen earnings growth. You're paying a 17 multiple for that. So for us, it's pretty compelling. We are sort of concentrating into some of our best ideas. And, again, these bank survivors look in pretty compelling. here. What are the other, because before I move away from tech to some of the picks here, what are the other fang survivors that you think are close to compelling here?

So if I had to start the top of the list, Google is seeing the best fundamentals and the deepest discount in terms of valuation. Next stop will be Microsoft. Again, fundamentals are looking good and it's sort of well below average. Apple is getting there. It's not quite dirt cheap yet. It's trading a little more like a hardware company. Oh, by the way, there's a massive software business that keeps growing. So I think Apple deserves to trade back at a premium. But again, of the three of those, the businesses are in good shape. Google, the valuation is just jumping out at us as a pretty good opportunity. All right.

And then some of the other places that are really jumping out to your elsewhere than big tech are talking about Dannaher and Clorox. Really? Why these two? So, no, diversification. That's sort of the name of the game. So for us, generally we do like growth. I think our theme is really businesses that can exceed expectations over a number of years. We're seeing that with some of the big tech stocks.

Danahir, again, kind of not exactly a household name, but they're really kind of the picks and shovels behind the COVID vaccines and some of the drugs out there just really crushing it in terms of growth. Again, similar to some of these bank survivors, the fundamentals are in good shape. We've not seen our earnings come down yet. Oh, by the way, the multiples way down. So you're getting a quality business, a company that can beat and raise, and you're getting it on sales. That's something that we like here. And that's the case with Danaher, which is just fractionally lower today, but it is down for the month. for the year in what's been a very tough tape. What about Clorox? So Clorax, again, going back to diversification, you know, we're not smart enough to call the, this is the bottom and all the gross stocks are going to rip here. We want to make sure we've got

some diversification. Chlorox, good business in Staples. They really kind of got crushed over the past, you know, six to nine months. Inflation really was a big problem for them. They're just starting to figure that out, push some price increases through, figure out their manufacturing. Really, we're starting to see fundamentals bottom out, and you're getting a very deep discount for a good business. If we're wrong and if markets continue to trade lower and if you do want to have some values of defensive stocks around, Clorax

is a good one to hold on to here. All right. As you say that, the Dow's down 512. So we'll let that speak for itself. Mike. Thank you very much. Mike Bailey. I want to point out that it is baseball season and that mothers and fathers who are doing laundry

are using a lot more chlorox. A lot. Listen, I would be... Every night. I or my wife is washing Max baseball uniform because he likes to play dirty and he comes in we almost got through a whole game we was clean and he dives in the third base

the whole thing is the rest of the crowd is cheering I don't know who makes shout but whoever you are I love you and Clorox we like you as well listen nothing would surprise me more than the company that seemed to be the biggest one-time pandemic beneficiary turning out to become one of the post-pandemic beneficiary because all is back to normal Mac is sliding again. Your kids are going to get there. You're going to say, we're going to go through a lot.

I love you shout. All right. Coming up, GM hitting a 52 week low in today's session after a rare double downgrade. Ford also hit with a double downgrade. We'll speak to the analyst behind the bearish call and why he questions, excuse me, there are RV strategy, EV strategies, not RV EVs. Could the U.S. and Europe create a new OPEC? What we know, what we don't, and why the global energy market dynamic could be on the verge of massive change. Power launch is back at two minutes. The Dow is down 515. Welcome back to Power Lunch.

I'm Dominic Chuh. As you just saw there, we are at session lows for the stock market right now, and it's been a tough slog all day for the auto stocks following a string of bearish comments from analysts over at Wells Fargo. Now, Wells lowered earnings estimates on Tesla for the next three years, citing higher battery cell costs in tighter raw material supplies as well. They estimate spot battery cell prices have risen 50% over last year. And they note that Tesla does have the pricing power to pass along some of those costs of the consumer,

but expect underlying inflation to eventually catch up with some of those margins. You can see Tesla shares are down about 3% in trading today. Along the same vein, a double downgrade for Ford and General Motors at play as well. Wells analysts lowering its rating on both those names from an overweight or buy to an underweight or sell, saying that 2022 could see profits peaking for the legacy automakers with a shift towards battery-powered EVs, placing two greatest strain on margins in the coming years ahead. Both those stocks you can see down by about four and a quarter to five and a half percent for General Motors. Kelly Tyler, I'll send things back over to you.

Dom, thank you. Our next guest is the man behind that bearish market call moving both Ford and GM today. Let's welcome in Colin Langen. He's senior equity analyst at Wells Fargo. And Colin, the reason you're downgrading them and the EV names is because you say the untold electric vehicle crisis is coming. What do you mean by that? Yeah, we did.

We actually done some extremely proprietary research. We actually tore down a Tesla Model Y performance vehicle, and we actually were able to get from the engineers that tore that down, very detailed cost information. It's exciting, too, is that we'll actually be doing more EVs over the next few weeks. So this is just a first in a series of reports. And the most shocking thing, I mean, Tesla is a pretty well-known car, but it's the raw material cost of actually spike.

much more than we were expecting. So if you go back to 2021, you're talking about a $112 per kilowatt hour battery that's now about 168, according to those experts, that really puts cost parity between a Bev and an ice, you know, at least another 10 years out. Well, at the same time, there's a lot of people who would be angry at you for tearing apart a perfectly good Tesla Model Y that they're waiting for and trying to get their hands on, like someone over here who will go in name. So I guess my point is, are buyers really that price sensitive in the case of Tesla, especially, although in fairness, I don't know if that was part of your downgrade today. So in other words, why do you think the higher costs for Tesla are bad news for GM Ford and the rest of the space?

So, I mean, the teardown is just the first step of the research report we put out today. So one, we found that those raw material costs were high. And so what we did is we dug into the raw material supply chain to really understand whether that is going to stay, sustainably high, right? I mean, this is just a temporary blip. And I thought it was very concerning. If you go out to 2030, you know, seven, six of the seven key raw materials, you know, copper, nickel, lithium, all will be very tight on supply at that point. And so it's really hard to see, you know, an opportunity for these to sustainably correct downward. And that really is a big challenge because the economics of the Bev, which are particularly that nickel-based chemistries that everyone is moving toward, really just doesn't work. I mean, we've talked about $100 per kilowatt hour target, sort of the point where people think that's parity.

You know, the raw materials in that battery went from 62 to 119. So it's just impossible unless costs come down. And the problem is it doesn't look like they're going to. And then you layer on that, and that's really the driver of the downgrades for GM and Ford, the regulatory framework, which has been completely ignored by the market. You know, NTSA and EPA issued some very, very challenging standards. And so it basically forces the automakers to sell these vehicles. And at this point, because of the sudden change in economics, they're going to lose money. This is very reminiscent of old compliance rules where the automakers might actually be forced to sell money,

losing products to hit those standards. And that's really the driver of the downgrade. I think Tesla's in a little bit of a different position because they don't have to sell the ice and have to balance this transition. I do think, and as we wrote in our report, by the next six months after you ramp all of these volumes, you know, to compensate for this cost to increase, they're going to have to raise price, and that's going to shrink the addressable market for them. Well, that's what I want to ask you.

You say that because of the regulations, they're going to have to sell at money-losing prices. Why? Why can't they just raise the price so that they make a decent profit on the car? I get the idea that if you raise the price, you are reducing the addressable market by some level. But I got to think that a lot of the... the manufacturers do have pricing power. Ford talking about their F-150 electric vehicle, Tesla, which certainly seems to be selling plenty of cars. Well, so the cost parity right now is $10,000. If you go around the world, you know, cars around $40,000, you probably make a 5% mass market margin, $2,000. We're nowhere close to being profitable. So how do you get a customer if you're buying it,

you know, to pay that price difference when you're on the lot choosing between an ICE F-150 and the Ford Lightning? That's a big, big, big issue here. I mean, so you're competing against your other internal combustion vehicles. That actually is going to keep that EV price down. And I think, you know, there is a question of how much, you know, it's still a product. How much are people willing to pay for these products? How much what kind of Bev premium are people willing to pay? I just don't think it's going to be over $10,000.

You're probably right, but I have a big gas guzzling car whose brand shall remain nameless for now. and I'll tell you what drives you there to the more expensive car. I'm a lucky guy. I can afford the more expensive car, but it's having to pay $90 twice a week to fill the thing. That's what drives you there.

Let me ask you one thing. I've been thinking a bit about what Elon Musk should do with his money. And I thought what he should do with his money is invest in nickel. And invest in nickel mining and ways to get those

minerals that are critical out of the ground in an environmentally responsible way? Because if he controlled that, not Twitter, he'd be able to sell to everybody. Well, there's two points there. One, you did mention your gas prices, but just to be very clear, I mean, the biggest cost of the vehicle is depreciation. And so if you're paying a higher price, you're going to face higher depreciation. So the total cost of ownership math isn't really that, you know, clear. It obviously helps EVs when gas prices go up, but you don't notice the fact that your car might be depreciating more. that's something to really think about. In terms of whether he should buy nickel,

I mean, definitely is a good way to secure your supply chain. The problem I have in the report is that it takes about 10 years to put in most mining supply between finding the sites, getting all the permits, and actually getting the mine

and extracting it and refining it. That's possibly even a conservative estimate. So when I'm talking 2030, it's just too late. And so we just kind of haven't done our homework. Now we're forced to sell these EVs. You know, even if we start taking action today, it's just too late for 2030. So maybe 2035 that could be worked out.

But issue right now. Can you put that Model Y back together and sell it to me, Colin? It was an older model Y. It was an older model Y. Colin Langen, thank you. We appreciate it. As always, Wells Fargo Security, still ahead after months of anticipation, along with a big valuation cut, food delivery service Instacart.

filing for an IPO. This is delivery names have struggled over the past month. Plus, we got the three-stock lunch short list. We're highlighting names with huge short interest. We ask our trader whether they could make a turnaround. And Congress taking aim at OPEC and threatening to spark a price war with Saudi Arabia. During May, we celebrate Asian-American and Pacific Islander Heritage Month featuring some of our CNBC teammates and contributors. Here is J.P. Morgan managing director Joyce Chang. One important thing about the Asian American community is that it's not a model. There's real diversity of Asians that's often not recognized.

So I was born in Peoria, Illinois. I grew up in rural Iowa in Knoxville, Iowa, which isn't that typical. But I think growing up Chinese, one major value is humility, but in the workforce, in order to keep moving on a new career, you need to be able to promote yourself and your achievements to others. And that's a bad. It's a balance of achieving these ideals and really staying authentic to both cultures. All right, welcome back to Power Lunch and speaking about lunch, Instacart, taking the first step towards going public, the grocery delivery company, filing with the SEC to pave the way for an IPO.

The company was a pandemic darling, seeing its valuation soared of $39 billion in 2021. But in March, the company cut its valuation by nearly 40% to $24 billion. It's been a rough road lately for recent IPOs, especially in the food delivery area. DoorDash jumping today, but down 73% from its 52-week high. And Just Eat Takeaway, the parent of Grubhub is 90% off its yearly high. Let's get to Christina Partsenevilus for a CNBC News Update. Christina. Thank you, Tyler.

Here is our CNBC News Update at this hour, North Korea, declaring a major national emergency as the first ever case of COVID is identified within the country, according to state media. Leader Kim Jong-un is ordering lockdown measures in all cities and directed the distribution of medical supplies. The Supreme Court's nine justices are gathering in private today for their first scheduled meetings since the leak of the draft opinion which would overturn the landmark Roe v. Wade case. Meanwhile, protests continue outside the Supreme Court and across the country.

Nearly 2,400 people needed medical treatment following the tragedy at Travis Scott's Astro World Festival, according to a new court filing. Over 700 of those victims sought extensive treatment for their injuries when the crowd of 50,000 attendees began pushing towards the stage last November. The Federal Aviation Administration is suspending the licenses of two Red Bull stunt pilots who tried to swap planes mid-flight. According to the FAA, the licenses were revoked for their careless and reckless conduct last month in Arizona. How do they even think to do that? Kelly, back over there. Wow, I wonder for how long or if it's permanent or but they had to do something. Yeah, they just...

But what a stunt to even think of that. I know. They're crazy. Anyway, Christina Banks. Ahead on Power Lunch, the new business, the new business battleground. When political debates hit the public forum, some companies speak out. some stick to the sidelines. We'll discuss the role of corporate America

and the pressure coming from employees when Power Lunch returns. Welcome back, everybody. 90 minutes left in the trading day, and we've seen more selling pressure this afternoon. We've got the S&P nearing a 20% decline from its old-time highs. Apple just dipped below 140.

Let's get right to Dom Chu for the very latest. Dom? Okay, so what we have right now is a market, and you've been watching it just like I have, Kelly, that's now drifting at or near session lows at this point. And it's a story that we've seen play out in the past as that selling pressure tends to accelerate heading towards the closing bell. If you look at the way that the S&P 500, NASDAQ and Dow have all traded out, there was a point today when the NASDAQ was actually

outperforming on the session. But now you're talking about similar percentage losses for those three major indices. The one thing I would say was the bright spot earlier on was a decent move higher in small cap stocks. However, that trade is now faded. We are now moving towards that. kind of marginal negative territory for the Russell 2000 index. From a sector perspective, it is very much about tech and financials today on the downside. Tech especially the worst performing sector in the S&P 500. Meanwhile, you have more defensively oriented sectors like health care, also real estate. They are amongst the outperformers, and at least for the time being, the only two sectors

in the green. Now, stockwise, you have to keep a close eye on what's happening with the mega cap names, as you mentioned, Kelly. Apple dipping below that mark now flowing around that $140 level. But with regard to what's happening with Apple, it is keen to put a perspective on what we are seeing. It was a 5% loss yesterday. It could be a 5% loss today. That's something we haven't seen in quite some time.

The notable outperformer, by the way, in that mega-cap tech trade is Amazon right now, which is just fractionally in the Greens. We'll keep an eye on that. And then, of course, on the heels of earnings earlier today, Tapestry, the parent company of Coach and Kate Spade, other brands as well, the real big gainer out there in the S&P 500. Earnings and revenues better than expected, Cal, the outlook, not so much, but still a decent size performer in the day, Kell Lsen. Yeah, Amazon just turning negative back-to-back, 5% declines for Apple.

That's like a $15 drop in just two days. Dom, thanks for highlighting it all for us. Let's get to the bond market now. Can't really argue yields have driven this one, Rick, unless we're saying they're driving them to the downside. Yeah, I don't know. I think this is stackflation part two. You know, the first part is you have high interest rates.

and you have dropping equity prices. Now we have maybe a slowing economy, maybe due to the consumer. So rates are going down. They're buying treasuries and selling stocks. I think that's really a stagflation trade, and why? Maybe the clue was Friday.

I continue to point out consumer credit leaped to 52 billion month-over-month-month Friday. We certainly hope that consumers aren't using plastic to take the sting out of inflation to hold lifestyles, because that is not. not a good thing. We had an auction of 30-year bonds today. It went very well, the best of breed,

completing 103 billion in supply. There's an intro of 30s. You can see around 1 o'clock Eastern rates dropped. Here's a two year going back to the fourth, where they had a 285-inch high. Look at how we dropped to 252. Tens on the ninth had a 320 intraday high. They're now hovering just barely above 280.

Boone yields today plummeted 15 basis points from a closed yesterday at 9. basis points to today's close at 84 basis points. And if you look at September of 2020, onshore and offshore one, making 20-month lows against the greenback. And finally, it looks like a 20-year fresh low on the euro currency versus the dollar. Big moves, Kelly, back to you. A buck-0-3 for Europe right now.

Rick, thanks for highlighting all of those moves. Over in the commodities market, we're seeing a lot of moves to the downside today. In metals, for instance, where gold continues to fall. down almost 2%. Silver is down more than 4% to its lowest level since July 2020. Dr. Copper, the metal with the Ph.D. Down 3% today. It's well off its year-to-date highs and palladium down about 5%. All being hit on concerns about a China slowdown in particular. But on the other hand, let's check in on oil. This one's been uncomfortably higher. It's still hanging on to a two-thirds percent gain, 106 a barrel. And we are seeing more creative efforts by politicians to deal with

that reality. So on that note, forget OPEC. Could the new crude cartel be old back? Reports are surfacing the talks between countries like the U.S. and Italy are creating what they call an OPEC for buyers. Brian Sullivan is here to explain. Brian? Well, that's kind of what I call it, Kelly. We'll see. And by the way, we've got this new bill going around the Senate. I want to talk to you about too. So I'll blast through this and then hit me on that. All right. In real estate, you got buyers agents and sellers agents, right? Well, could oil be soon going the same way? Italy's prime minister and former ECB head Mario Draghi, well-known name, telling reporters actually a couple days ago that he and President Biden

recently talked about creating a sort of anti-OPEC, basically a group of nations that would band together to represent oil buyers. Now remember, OPEC, which stands for organization of petroleum exporting countries, is made up primarily of oil sellers. Now, whether this is something that is really being discussed or just being kind of used as a form of political hammer or scare tactic. I don't know. It's not clear. It's also not clear if this move forward, what nations would actually be in it or if it would even work to lower prices. The problem right now is more about global supplies. Mike Bradley, the new firm Veritin put it, quote, creating a buying cartel in order to encourage a production response is useless if the commodity just is not there. And that's really

the issue. There just is not a lot of spare capacity globally out there right now, especially with Russian oil offline in many places. Oh, by the way, more Russian oil coming offline this Sunday, because Sunday is when EU restrictions kick in for the trading houses. So many European trading firms that have, probably right now, are still buying Russian oil will stop on Sunday. The IEA thinks that's going to take another two million barrels of Russian oil offline. And all this comes at a time when the so-called NOPEC bill is floating around Congress, Kelly, and now this price scadging bill that I was just emailing you about. So there is a heck of a lot going on in the world of oil and gas right now. It actually ripped my tie right off. I was so frustrated.

Brian, we will get to more of the details later. We appreciate it for now, Brian Sullivan. All right, after the break, the growing debate in corporate America, should companies get involved in state and broader political issues? Disney, the most recent to find itself front and center of heated political debates, we will discuss next. Welcome back, a key news alert. Jerome Powell has been confirmed by the Senate for a second term. Here's the vote, 80 to 19 to give Powell a second year run at the central bank's helm in the midst of a historic fight against inflation. Ty? All right, thanks, Kelly. Welcome back to Power Lunch, everybody. Disney shares are trading lower this afternoon following its earnings report late yesterday.

On its earnings call, the company discussed streaming and the theme parks rebound. But there was no mention of the online. ongoing conflict with Florida over what critics have called the states don't say gay bill. Now, as the future of Roe v. Wade hangs in the balance in the Supreme Court, pressure is on for companies to take a stand and that pressure is likely to grow. For instance, Levi's, Apple, Microsoft City, and Amazon say they will cover the costs associated with traveling to a state that allows abortion, should the law be overturned, and workers in the states where abortion is outlawed need to travel for that medical process. Disney has not made a statement on the issue, nor has

Walmart, the largest private employer in the country. So what is the role of corporate America when it comes to social issues? Let's bring in Kate Kelly, New York Times reporter and America's Reed, Wharton School of Business Professor. They are both CNBC contributors. Kate, let me start with you. You talk to CEOs. You talk to CEOs. You talk. to board members. We have gone, going back to Charlottesville in 2017, and then the North Carolina so-called bathroom bill, a couple of years later, and then George Floyd, and other issues, including the Disney so-called don't-say gay bill. And now along comes the possibility that Roe v. Wade will be overturned. What is the discussion like in boardrooms and in executive suites about how

companies should take a stand, whether they should take a stand, or whether they should stay silent. Well, Tyler, thanks for asking. These are all such important questions right now. I mean, I think abortion is probably an issue that most corporate CEOs would love to not have to address in a perfect world. But with the changing legal framework in the United States that we're likely to see based on the leak of the Alito opinion, they feel that they're having to act, at least in some cases. It's interesting that city, I think, was the first large entity to say they would cover these services for a woman or an employee, I should say, to travel out of the state to obtain an abortion if they needed to. This is the first bank ever to be run, major bank by a woman,

which is interesting. But we've seen, as you mentioned, other companies considering it, and I think there could be still more. This is a time, it seems to me, having covered Wall Street for many years and now covering sort of money and politics in Washington, where employees are expecting more from their companies. They're expecting mission. They're expecting values. They're expecting actions that they can stand behind. And it's a very difficult calculus, as you're alluding to for CEOs,

because employees are not a monolithic group, especially at large companies. They live in all sorts of different places. They have all sorts of different value sets. But the millennial generation leans left. And I think they've been at the vanguard, maybe starting in Silicon Valley, of pushing their bosses to do more to take stance in many of these. issues, including the ones you mentioned in your intro. It is going to be, it is obviously the abortion debate is as divisive an issue socially

as there is. But look at companies like Walmart, operates nationwide, worldwide, based in Arkansas, where if Roe v. Wade is overturned, there is likely to be America's a strict restriction on access to abortions, if not an outright ban on them. I think Kate makes, America's a very important point. The people who are driving these issues are really no longer customers or shareholders. It's coming from employees, from the inside out, from the bottom up. They want to feel like their company, like they are working for a company that shares their values. And here is an issue where the split is quite sharp.

This is 100% correct, Tyler. I think it's fascinating to me because as you've mentioned, as Kate has already mentioned as well, Kelly, excuse me, has already mentioned as well, that this is something that's incredibly emotionally intense. It's deeply rooted because we're talking about morality, religion, and human life and all of these kinds of things. And so it is going to be the case that companies and the folks that are making decisions, we're post-pandemic. And so people have already thinking about what's important in their lives, number one, and companies, back to work in a sort of normative way that we've seen things getting back to normal. So they're questioning everything. And a lot of consumers, as Kelly is saying, are basically saying to themselves, where do I want

to be? Where do I want to work? Where do I want to thrive? And answering that question in the context of joining a firm with an organizational culture that fits the values that you share that align with what you believe are important with respect to who you are is incredible. And it creates a kind of loyalty to the company that you just can't dismiss. And so 60% of this country are pro-abortion in terms of the latest data that I've seen from

Pew Research and some recent polls. And so this is a decision that companies have to make. Am I going to come out there and alienate essentially 40% of this country by taking a stance on the issue? And am I willing to do that? And as you're mentioning, there's a calculus behind this that involves understanding. the employees and other issues associated with protecting the brand. All right. We have a busy market day. We're going to switch back to there.

Kate Kelly, thank you. America's Reid. Thank you as well. As Tyler mentioned, the Dow's down 567 points as we hover around fresh session lows. And the declines are pretty even across all the major averages. The Dow, the NASDAQ, and the S&P all down about 1.8%. The NASDAQ, by the way, now down about 8% just since Monday. Coming up, a new short squeeze. The highly shorted meme stock AMC has been surging again today. We'll discuss the name and others in today's three stock lunch next. All right. Welcome back to Power Lunch, everybody. We want to show you the S&P. It is now nearly 20% off, 19.9% off. It's 52-week high, which would mean that would cross into bare market

territory. The NASDAQ already down 31% from its 52-week high. And right now, the Dow is off 600 or nearly 2%. One area of the market that has the potential to see pops on the back of any rally are the names with big short interest. CNBC Pro ran a screen searching for names with a market cap of more than a billion dollars, which are 50% off their highs and had the highest short interest as a percentage of float. Here are some of the names, AMC, Gap, Inc, and Sun Run. Let's trade them in today's three-stock lunch. Jeff Mills is Chief Investment Officer at Brynmart Trust and a CNBC contributor.

Jeff, welcome. And we're actually going to start with a stock, not on that list, but with how. high short interest and one that was popping certainly earlier today, and that is AMC. What do you make of it? Yeah, look, AMC, I mean, these stocks are trading down 10% one day, up 10% the next day. So not necessarily indicative of companies that are trading on any sort of fundamentals. So it's very hard to be long. It's also very hard to be short. They're dangerous, quite frankly. But I would not touch a name like that with a 10-foot pole, quite honestly, especially from a fundamental perspective. it's still trading at 10 times its pre-COVID price to sales ratio. What has changed? The answer is

nothing. It's still unprofitable, not for this market. Well, let's go to the gap. It is nearly 70% off its highs, 15% short interest. This has been sort of a crippled stock for quite a long time. Yeah, so of your more traditional name there and certainly cheap. So if you have a very long time horizon, maybe this is the time. I just think that for the next, say, 12 months, this is not a particularly good stock. It's a company that tends to rely on promotions. It didn't during COVID. It's starting to do that again. And now it's dealing with higher costs. So margins are getting squeezed just at a time when real incomes are also getting squeezed. So demand is tightening up a little bit. In this kind of market, I would rather a Lulu, which has a little bit of pricing power,

and the stock has re-rated quite a bit. Maybe even more interesting would be a dollar general or Walmart. I don't know if we have the chart, but I did send in a chart with Walmart, charted up against the ISM manufacturing PMI. And you can see as economic growth starts to slow, Walmart usually outperforms. I think that's a good place to be over the next, say, six to 12 months. Walmart against the PMI. I love that. All right. So let's switch gears to talk about Sun Run then. Solar panel maker, more than 70% off the highs, 14% short interest. What do you think? Yeah, I guess this is three strikes you're out for me. You know, it's sort of a similar stock, right? That's not for this market. It's negative EPS. Even in the out years, this is not.

not a market for story stocks, and there's still a lot of unknowns. 40% of their customers are actually concentrated in California. There's a lot going on right now relative to regulation there that could end up hurting their customers. Maybe you could play for a trade here, sub-20. It looks like there might be some technical support, but I would definitely be selling it into strength. Selling it into strength. So let's go back to Walmart, which you think is kind of better for the macro environment that we're in, Jeff. Are there a couple of other names that you would add to that list? Yeah, Dollar General would be one too. You know, I've been talking about these like Walmart, Dollar General, sort of away from the staples, you know, the Clorox, the Procter

and Gamble's, the traditional names that would do well in an economic slowdown or a recession, but that are trading at particularly high multiples right now. And, you know, I think you want to play for an economic slowdown, not a full-blown recession. So I think those middle-of-the-road names, like a Walmart, like a Dollar General, even like a Dollar Tree, those are places to go right now. All right, Jeff, we will leave it there. Thank you so much for all your thoughts today. Jeff Mills. For more on the stocks that could pop on a market rebound, be sure to visit cnbc.com slash pro.

And up next, tech companies getting crushed in this sell-off. We will tell you how that slowdown impacts Silicon Valley. We've got the details next.