Power Lunch - Big Tech, Small Banks and our Power House Road Trip 7/29/22

Episode Date: July 29, 2022

The big tech stocks worth owning as the growth trade picks up momentum. Plus, why community banks could be the big beneficiaries of the Fed’s rate hike campaign. And, our Power House Road Trip goes to Boise where the hot pandemic housing market is quickly cooling. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch. I'm Dominic Chew in for Tyler Matheson this Friday afternoon, and here is what's ahead. Big Tech buys. Our market pro this hour is adding to some of her positions, but warns investors must be picky. She'll tell us why growth isn't necessarily trumping value just yet and where she's finding some opportunities. Plus, our powerhouse road trip heads to Boise, Idaho, where buyers are balking at high prices and walking away from certain deals will bring you the on-the-ground view. from the housing market when that comes up, Kelly, Boise, Idaho. We're going to go there. Looking forward. Dom, thank you. Hi, everybody. The major averages on pace for their best month of the year. It's been a pretty terrible year after all. The doubt today up seven-tenths of one percent. The NASDAQ, 1.2 percent, I'm sorry, one and a half percent. The S&P in the middle with a 1.2

percent gain. 4120 is your level right now for the S&P 500. Tech trade is helping the market today. Amazon shares soaring 11 percent, almost 12 now, putting it on track for the biggest monthly gain in 15 years. Apple adding nearly three and a half percent as well. Elsewhere, Roku losing a quarter of its value after missing estimates last night and warning of a slowdown in advertising that Aletzei has more to do with them than the macro, but the macro hasn't helped much either. Roku shares Dom down 24%. All right, Kelly, the rise in technology stocks is putting renewed attention on certain growth-oriented names. Those growth stocks easily outperforming value names this past month. But our next guest says investors need to be

picky, even as she asked to some of those big tech positions. Let's now bring in Ann Barry. She's founder of thread needle ventures. And I wonder, you have a lot of expertise in investing in technology. Why are you still a little wary about dipping your toes into certain parts of that technology market? The essence of that question is because I just don't have confidence in some of the management teams in the growth arena to be able to execute through an uncertain period that no one's really seen before. So I do have confidences with the alphabets of the world and with the Amazon's of the world who

have proven that they can juggle balancing capital allocation to invest in growth with making sure they've got the discipline to keep costs under control. They're the kind of proven executives who've done it. I don't think in a lot of the growth space we've got that kind of sitting expertise quite yet.

So if that's the case, it does suggest then that the companies with the most experience, the most seasoned ones out there, you mentioned the Amazon, You mentioned the alphabet parent company of Google. Does that kind of mean that the Microsofts, the apples, the even maybe meta platforms are the ones that you want to go into, despite the fact that we've seen certain of those stocks tank over the course of the last year?

Yeah, I think META is definitely one that I'm staying away from. And that's because despite the fact that you've got a CEO who's been in place for a long time, you know, we've got Cheryl Samburg exiting and she's the season's C-O there. The other thing is that META has started over the last 12 months to dip its toe into, new business lines that are completely uncertain as to how they'll develop through this next next phase of economic uncertainty we've got in the U.S. Then there are others when it comes to Microsoft. We still don't know what's going to happen with some of its big gaming plays. It's got a very strong balance sheet. But when I look at the relative values here, I'm looking at Amazon

and I'm looking at Alphabet as being sure of bets over this next Q3, Q4 period. Now, when it comes to this idea of kind of what to avoid, there are still certain places, outside of mega-cap technology. It's been the consensus trade, and I bring it up for such a long time that whenever there is a market downturn, you kind of just go back to the same thing that you know and love, which is those mega-cap technology names. But elsewhere, is there anything outside that area that still kind of catches your attention besides the fact that we can see Apple and Microsoft maybe catch a bit at some point because of this kind of return to safety trade? Yeah, absolutely. And to your point, those big tech names are returned to safety. What I'm doing at the

moment is doubling down on those at the same time is looking at where there may be more interesting opportunities that flourish over the longer term. One of those is Warner Music, one that I've discussed on this show in the past. Spotify's results, if you look at what they just disclosed to the market, we're extremely strong, so that's European stock, it's not a US stock, but saw 30% growth in revenue, extremely strong numbers of subscribers. Morgan Stanley issued a report saying they expect music streaming subscribers to double between now in 2031. And so I look at that macro tailwind, and I look at Warner Music that's now beginning to lapse some of itself-inflicted issues, and think that's one that's positioned to do pretty

well, one through a recession, and two longer term. Alphabet, Amazon, and Warner Music, it's an interesting mix of stocks that you're buying into now. I wonder if we could kind of go back to the macro side of things, Ann, is this maybe just a general question? Is this a market, as you see the price action over the last several days at this point now, is this a market that you feel is constructive again? Are you worried that there is a possible downside leg that we're not seeing? I still think there's a downside leg that could be looming. And that's because we still don't have enough information to understand how much of the uncertainty in consumer sentiment is going to persist through past the summer period. We still don't know whether what we're seeing in

terms of relative strength of the labor market's going to persist into Q3 and Q4. Until we get a handle than that. I don't think we know how far ad spending is going to continue to drop. We've already seen the impact of cuts there, hitting the metas, hitting the snaps, hitting the Rokos. And until we understand if we're hitting the bottom of things like ad spend on consumer loan delinquencies looking pretty good so far, but we don't know if that's going to drop off. We don't know where some of this consumer-driven decline in activity is going to hit the hardest right now. All right. What we know and what we don't know, always key. Ann Barry, thread needle, thank you very much. We appreciate it.

Thanks. And the murky economic backdrop isn't helping investors right now. The PCE price index, the Fed's preferred inflation gauge, jumped today to its highest 12-month read in more than 40 years. That was for June. Makes it one of the most complicated economic environments for the Fed to navigate as well. It's something our next guest wrote about in his new CNBC op-ed, understanding Fed speak. Ron Ansana is a CNBC senior analyst and commentator.

He's also a senior advisor to Schroeder's North America. up, Ron. Oh, my gosh. Where do we begin this week? Where do we begin? Well, you know, this whole thing's been a Rorschach test for everyone, right? I mean, you kind of see in the inkblot everything that you want to see in the Fed statement and Chair Powell's commentary thereafter. I think it was fairly straightforward. They acknowledge a slowdown in spending and production. They recognize that rates still have to go higher. They admitted they're closer to the end than the beginning of the cycle. And so I don't know, you know, what confusion there really is around this other than to say that the financial markets have responded appropriately. There's a little more room to take risk. Bond yields have fallen.

Stocks have rallied. Commodities have moved up a bit. And so I think to a certain extent, it's not as nearly as unclear, even with respect to forward guidance, which they're still going to give, as many people suggested Wednesday and Thursday. So if I had to boil this down in a nutshell, I'd say the Ronan Sana camp is the camp that thinks inflation is going to normalize very quickly. Sort of on its own or as a result of what we've just seen. Is that right? Because I would say that differs with what Diane Swank was warning about last hour. I don't know if you caught it, but basically saying she thinks that the Fed's not going to be able to cut rates next year.

Inflation is going to be persistently high in a report like we got this morning demonstrates that. Well, persistently high. I mean, again, I'm still sticking with the analog of a post-war environment. that it may take one to two, two and a half years for inflation to normalize when you've had supply disruptions and demand exceed that constrained supply over time. I do think the Fed's getting closer to stopping sometime next year. I don't think that a pivot is in the cards just yet. I mean, and I think that was another misinterpretation. All of a sudden, everyone jumped to the notion that next year the Fed's going to start cutting rates. It's absent a large recession or some real event

that causes systemic financial risk, there'd be no reason for them to lower rates. Just as within a matter of months, there's probably no further reason for them to raise. We do need supply chains to normalize, though, for inflation to come down. And look, Kelly, we know. Inflation is not going from 9% to 2% by this year. If we can get it down to 4 this year, 3 in change. Next year, we'll be on a path that looks very similar to post-World War I or post-World War II, which, again, I think there are the more appropriate analogs for this period than, let's say,

in the 70s and the 80s. Ron, I wonder, I mean, you mentioned this idea that there's a misinterpretation of this idea that there could be this, so to speak, Fed put, right? We've spoken about it numerous times in the past over the years, this idea that the markets are kind of dictating whether or not the Fed is going to step in with more accommodation or keep it and whatnot. I wonder if it's now this notion that there's a GDP put or a GDP put, you know, if you will. Does the economy now, the data, the backward-looking data now suggests that would be the catalyst for a potential easing of financial conditions? Saddam, it's funny you bring that up because one of the things I also point out with respect to the

Fed being data dependent, the Fed has always been data dependent. You and I have always been data dependent. Anybody who has access to data is data dependent. So whether or not it's GDP, whether or not it's systemic financial risk. When we talked about a financial put over the last 20, 30, 40 years, it really had to do less with a technical recession or something that would be akin to a growth recession or a slowdown, then it had to do with systemic financial risk that could cause a very, very big shock in the economy. It looks like the fed's willing to tolerate slower growth. It looks like the fed's willing to tolerate a mild recession. What they might not be willing to tolerate is something very deep and prolonged, which they've never tolerated in the past. So

the puts always there, but as much as it hasn't been used sparingly in recent decades, we've had a lot of financial crises that threaten the system, which is why they've been in and out of the markets this way. But a GDP put, I don't think so unless you saw like, you know, a minus eight, minus 10 print like we did during the pandemic. Ron, you mentioned this earlier, but I think a lot of people would want to know when you say it's a little safer to buy stocks and maybe even bonds right now, but the market in general, do you think the back half is going to be a decent environment? And everything from the transports we just mentioned now performing, consumer discretionary is up nicely this month.

What is the message all that sending? Well, so, Kelly, you know, look, I don't think you can declare an all clear here because the Fed is still raising rates. And typically, you don't get a secular bull market until the Fed stops and or reverses. So while it's safer insofar as we're closer to the end of a tightening cycle and obviously high-quality companies that have been dramatically beaten down, and we've seen this already begin to play out all month long, are our opportunity sets. trying to suggest that we're going to launch a new bull market in the last three innings of the Fed's tightening cycle, I think is probably historically inaccurate. The Fed has to stop. And at some juncture, if you want a roaring bull market, the Fed would have to start cutting rates.

That's historically what we've seen. And again, as using the war shock test or the inkblot analogy, you know, people may want to see a bull market in this moment, a roaring bull market in this moment. I don't think we're there quite yet, but it's a little bit safer than it's been. over the last seven months. All right. I always just see butterflies. I see inflation. Why not? I just see butterflies. No matter what the ink says. Is it a rabbit or is it, what was it a duck or is it a woman or is it a vase? Ron and Sonna, thank you and have a great weekend. All right. Coming up at the show, our powerhouse road trip heads to Boise, Idaho, where the hot pandemic market is, yes, starting to cool off. And in some cases, showings have all but

disappeared. Plus, Solar Edge and First Solar seeing massive over the course of this week, they're now positive for the year. That's how dramatic it's been. But Sun Run and Sinova are not. Why the disconnect and which stocks, alternative energy, could see the biggest gains from here on out. And as we head out to break, a look at some of the names hitting 52-week highs in today's session, including genuine parts, W.W. Granger and N-phase Energy, speaking of alternative energy. We'll be back after this. Welcome back to Power Lunch, everybody. The move higher and mortgage rates hasn't only stalled out lately.

It's actually reversed course, perhaps settling into a new normal. Diana Oleg has the latest numbers. Diana? Yeah, Kelly, mortgage rates don't follow the Fed, although they are impacted by the Fed's outlook and monetary policy. Mortgage rates do loosely track the yield on the 10-year Treasury, and that tanked yesterday due to that second quarterly drop in GDP, potentially signaling a recession. As a result, the average on the 30-year fixed fell,

32 basis points to 5.22%. That according to Mortgage News Daily. And that's the lowest rate since late April of this year and well off that recent high of just over 6% in mid-June. And it was in mid-June that the red-hot housing market made that sharp U-turn. Several of the big public builder CEOs have confirmed that in earnings reports this week, they say that June jump in rates was a real inflection point in the housing market. Rates had been inching lower for the past few weeks, and that may be having a small impact on buyers already. Real estate brokerage Redfin just put out a report saying it saw a slight uptick in searches and home tours in the last four weeks or so. That reversed a 10-week trend of decreasing demand that began mid-April. The interest,

however, has not yet carried through to contract or sales, so we'll see, Kelly. We will. By the way, Diana, now we have to contend with, you know, a market where rates might actually be lower than homeowners realize? Yeah, they may be lower and they may be in for a surprise. The thing is, though, they are still considerably higher than where they were in January when they're back around 3%. So there are still some buyers who are just not going to qualify for the mortgage they wanted, but for those who do, it could be a welcome relief. True. Absolutely. Diana, thank you very much, Diane Oleg. All right, let's stay on housing, Kel, because we're on the next leg of our powerhouse road trip hitting six cities this summer for a look at just how the housing market is changing.

Today, we're making a trip to the gem state, Idaho, Boise in particular. According to Zillow's most recent report, the median home price there is $508,000. Sale count is up 39% year over year, a smaller climb compared to some other cities in this list, for powerhouses, but the number of homes sold above listing is also down, down, 11% year over year. For more, let's check back and welcome back. Dawn Templeton, owner and associate broker over the Templeton Real Estate. group. This is a market that maybe like others, Dawn, is starting to cool off, but just how dramatic or not dramatic is that cooling off right now? Well, thank you so much for having me back.

I really appreciate it. Our Boise market is cooling off a tad, but that is with sales being down. I think there was a point in time when buyers were just taking a pause when interest rates were a little higher. They have come back down and we are seeing an uptick in activity. So I think, you know, it was inevitable that we had a correction in the market because the price increases were just not sustainable. So that's how the Boise market's doing. So let's talk, I mean, for millions of Americans, the process of buying a home, I guess we'll call it, is probably one of the most personal things and biggest financial commitments they'll make in their life. For that reason, sentiment is always such a huge part of it. Do I feel good about it? Do I not feel good about it?

What exactly has the sentiment been like among buyers and sellers in this market, given the fact that we've seen interest rates behaving the way that they are and price action the way that possibly it's behaving right now as well? Well, buyer's sentiment is that now they're seeing more opportunity because we do have more inventory and some prices are being or decreases in prices are happening. So buyers are actually starting to see an opportunity. And like I said, now that interest rates have gone down a bit, we are seeing an uptick in activity. Seller sentiment is completely different.

They're wondering where all the multiple offers are that occurred last year. And actually, prices are still 12% higher. year over year. So our market is shifting, but it's not the doom and gloom that some people are painting it to be. Are there places that you are seeing, Dawn, this idea of maybe things getting discounted a bit? It's a, it's a foreign concept to people in the market over the last maybe couple of years during the pandemic. Are prices actually starting to come to a point where listing prices are getting notched lower to get deals done? Yes, absolutely. We're seeing that. Sellers are now having to make repairs. They're now having to make concessions for buyers. So that is definitely

happening. And I think that's why we're going to be in a more balanced market. And it might be better for buyers and sellers, not just great for sellers. So I actually think that's a good thing. Dawn, ironically, I went out to Boise to report on the housing crash, you know, in 0809. Back then you had kind of, you know, I guess you guys are always emblematic. Back then, there were lot of Excerb-type places where you had lots that were just sitting vacant, even gas stations that were built and not fully completed. I have to imagine things are a little different this time around, are they? Much different. I experienced that market. I lived it. I worked in it. So things are much, much different. I think we are just doing an adjustment to get things

back more to reality and pricing. And so that was definite doom and gloom. And there was a ton of inventory on that time. We actually looked back. There were 5,000 homes on the market during 2007. And now I think we're getting up to almost 2,000. So it's a completely different situation altogether. Yeah.

Going back to normal, I think, as the journal this time put it, as opposed to that which was, kind of a ghost town for quite some time. Dawn, thanks for your time. Yeah, go ahead. Final thought? Oh, no. I was just going to say, yes, we're getting back to a more balanced market where it's good for both buyers and sellers. Yeah, Don Templeton of Templeton Real Estate Group, joining us to explain how it's evolving on the ground in Boise. Up next, by the way, big Basque population. Is it? Yes, yes. It seems like the right kind of terrain. Yeah, that's exactly right. Sheep, yeah, great pumpkin muffins. Yeah, very.

Pacific climate. Up next, small but mighty, rising interest rates providing a boost to the banks, especially some regionals, will explain why next, plus a solar surge. Demand is up, supply chain disruptions are easing, and Washington removes a key hurdle, names that could rise even further when Power Lunch returns. Welcome back to Power Lunch, everybody. Rising rates are typically good for the financials, although it's been a hard year, but some banks do benefit more than others. Leslie Picker is here to explain. Leslie? Hey, Kelly, as Wells Fargo analyst Mike Mayo put it in a note yesterday, quote, higher rates are like oxygen that aid bank net interest income.

The firm says that profitability metric, which stems largely from charging more interest for loanmaking, should grow by almost a third year over year for the second half of the year, thanks to those Fed rate hikes, but not all banks will benefit equally. I want to show you this chart, which I think kind of explains it all. You can see there the white line is for an ETF of regional banks. The orange one is for larger banks. So you can see that clear breakout and performance going back to about March of this year and really accelerating over the last month or so.

Regional banks are positive over the last 12 months, while bigger ones down about 13%. The SMP somewhere in the middle down about 7% during that time period. As Mayo describes it, regional banks have led the way given more NII tail wins and less Wall Street banking headwinds. The bigger diversified firms are much more heavily exposed to the recent slump in M&A, and AUM fees have declined with market volatility. Regional banks, on the other hand, are seen as more of a pure play on the traditional business of loanmaking and deposit taking a simplicity than investors really like, amid all the uncertainty that's out there right now, Kelly. I wonder, though, if they're concerned about the new trajectory, which seems to be more about possible Fed cuts next year.

Yeah, so that was a big aspect to this trade as well. well, this idea that, you know, for those who are really benefiting from NII in 2022, they don't really want to go back to that easing era that we've seen over the last few years or so because they have seen such a tailwind from this rising interest rate environment. A lot of them are looking out for the next six months or so where it's a bit clear kind of the picture based on the dot plots of, you know, the fact that the Fed's going to continue increasing rates purely based on that speculation. Twenty-23, though, a lot more uncertain. I think. and in talking to analysts and investors,

if it was more certain that the Fed would continue raising, you might see even better performance for some of these firms. Additionally, there's the uncertainty surrounding a recession, which regardless of where interest rates are, would be a problem for these businesses. Yeah, bingo. Leslie, thank you so much. We appreciate it. Leslie Picker.

All right, let's see that. Bertha Coombs has got our CNBC News Update this hour. Hi, Bertha. Hi, Dom. Here's what we've got. U.S. Secretary of State Anthony Blinken, speaking with Russia's, foreign minister by phone today, pushing for his proposed prisoner exchange to free two Americans

being held by Moscow, including a star player for the NBA. Earlier today, I spoke with Russian foreign minister Lavrov. We had a frank and direct conversation. I pressed the Kremlin to accept the substantial proposal that we put forth on the release of Paul Wheelan and Brittany Greiner. Families of 9-11 victims are voicing their outrage over a Saudi Arabian-funded golf tournament being held at the Trump National Golf Club in New Jersey today. They accused the players of getting what they call blood money from a government that allegedly supported the terrorist attacks. And prosecutors in Spain saying they will ask a court to sentence Colombian pop star Shakira to more than eight years in prison if she is convicted in her upcoming tax fraud trial. Shakira, who rejected a plea deal and denies she did anything wrong,

is charged with failing to pay $15 million in Spanish taxes between 2012 and 2014. Guys, it has to do with her prior relationship with a Spanish football player. It's very, very complicated. Can you imagine if she went to jail? I can't even... I don't have the mind for pop culture like that. I think there are too many moving parts. Wow.

Thank you, Bertha. Thanks, Bertha. All right, ahead on power launch. Bad Intel. Wall Street expected a miss for the stock, but not one that was this bad. We are going to break down those results coming up. Then on the more positive side, some other semiconductor names that could benefit now that we have those strong results from Apple. We'll trade them in today's three-stock lunch.

We're back in two. Welcome back to Power Lunch. 90 minutes left in the trading day and the week and maybe the month as we want to get you caught up on the markets. Stocks, bonds, commodities, and the solar surge we're seeing today and now really year-to-date. Let's start with Bob Bassani with stocks around session highs, Bob. We are. And in fact, ending on a great note of for the month here. I just want to point out the energy and metal stocks are moving again. I mean, Exxon just had incredible numbers.

You know, profits are up essentially 100% for the full year. But I'm not sure you want to see metals and commodity stocks moving up when you want inflation to go down. These are proxies for inflation. Freeports have another good run, New Corps. These are all commodity names here. So keep an eye on that. I do love it when those boring old industrial stocks move up. Yes, I love Caterpillar.

I love all of those companies because they're global companies and they're on a little bit of a tear. Ingersoll ran, another great global company on a bit of a tear. I mean, Ingersoll ran has just been fantastic recently. Caterpillar was 170 a couple weeks ago. It's up 10% in a couple weeks, essentially. So some of these global industrials are really back. As far as the big movers on the S&P, well, you know, Amazon, when Amazon and Tesla have a big move up. The whole consumer discretionary sector just kind of gets dragged up.

So that's definitely happening. Apple's helping the tech sector here. Nice run there. Intel, look at that. That is a five-year low, not a 52-week low, a five-year low. You've got to go back to 2017 to see Intel at these levels. That's one of the big disappointments for the earnings season, particularly in technology. As far as the downside goes, there's not much interest in buying the defensive sectors. It hasn't been for a few days. People are trying to buy growth right now. So pharmaceuticals, which had a great run, Merck, not doing so great recently. Lily's holding up all right off of the highs. Clorox, Kimberly Clark. Remember these darlings earlier in the year, really not doing much at all. But this is a little bit understandable when you consider the

mindset for growth right now. Finally, just take a look at the S&P 500. 8% move for the month. That is quite a move. In fact, you've got to go back here. We're breaking out of a new, we're breaking into a new trading range. You've got to go back to mid-June. Remember that, Kelly, when we were, what, 41-60 or something, before we fell apart towards the end of June. So we're now breaking into a new trading range. Fairly broad. You can thank technology, consumer discretionary, and a few industrials for leading us higher this month. Guys, back to you. And that date significant, Bob, bracketed by the Fed meeting. That was the first time they hiked by 75 basis points. Now they've done it again. Bob, have a great weekend, or Bob Bassani. Let's quickly check on the bond

market now where, Rick, I don't know, the 10-year 265 with the PCE number we got this morning, maybe you can make sense of it here. Yeah, actually, and it's been down to even lower. It's currently trading a whisper under 263. Let's put that in some perspective. A month and a half ago, 614, we had a yield that was basically right on the threshold of 3.5%. We're down 87 basis points and a month and a half. And yes, I understand things are hot, and it's somewhat confusing. Hot in terms of deflators, hot in terms of everything except for confidence. Confidence was not hot.

But what's going on here? Well, these markets are giving us a very good clue as to slowing, and it's both a domestic and a global issue, as you'll see. Now, look at a chart of 10-year-note yields. On pace for the lowest yield close in about two, three-and-half months, actually, since early April. And if you look at boon yields, there are a three-month low close. They closed down 95 basis points from their high yield, which was 1.77 on the 21st. That means their yields cut in more than half in about six weeks. That's unbelievable. And if you look at guilt in the UK, they closed

at a two-month low, down nearly 80 basis points from their June 21st, 2.65. They closed it 186. See, the issue here is global slowing is having a huge influence on our markets, and the dollar is having a huge influence helping slow many of the markets outside of the U.S. There's a real problem going on in Europe, and I think all these issues are definitely affecting interest rates. Why are our rates up with inflation going there? Because the market doesn't think it's going to stay there. Will the market be right? It's certainly been a lot more accurate than many people that are guiding policy. Kelly, back to you.

All right, Rick, thank you. very much, Rick Santelli. Let's check out another key inflationary indicator. Oil, crude, hitting $100 a barrel again during the session, energy having a strong week, the earnings, records. Pippa Stevens has all the latest. Pippa. Hey, Kelly, lots going on in the energy sector today. So let's start with WTI, which is up about 2 and a quarter percent here at 9864. It is on pace for its first positive week in four. And this comes ahead of OPEC's highly anticipated meeting next week. And of course, higher oil is boosting the bottom line for energy companies. Chevron and Exxon this morning reporting record profits during the second quarter. They're refining divisions playing a key

role as prices for products like diesel and jet fuel jump. Now, both stocks are rising today, but we have seen some softness across the energy sector in recent weeks amid growing recession talks and the potential demand slowdown. But Exxon CEO Darren Woods saying today on Squackbox that he still sees growth ahead. There is some elasticity in demand, so we did see some impact and moderation and demand, but continue to believe and see growth overall in products as economies continue to recover. Meantime, huge moves across the clean energy space this week following that surprise deal between Senators Schumer and Mansion, as well as strong earnings.

The Invesco Solar Fund up about 19 percent this week with hydrogen. and windstocks rising as well. Now, in terms of individual movers, end phase, Sunrun, First Solar and Sinova, Kelly, all up more than 30 percent this week. Incredible. Pippa, thank you for highlighting that. We're going to pick up on it, in fact, because our next guest says one of the leaders in the solar space could be first solar.

It's moving big on his upgrade today. Colin Rush's senior analyst at Oppenheimer. He gives it an outperform, citing its earnings power, and the stock is up 15%. Colin, it's weird to see you and not be talking, Tesla. Welcome. Thank you so much for having me. I'm happy to talk about solar. I've been covering this name for 15 years and happy to be more constructive on it after a long time. Why are you more constructive now? And I'll cite an often thrown about stat that half of solar companies have gone bankrupt. And this is not a great. Oh, it's much higher than that. Much higher. The solar has been, you know, a tremendous market. And we've seen about 100x growth in my career in this space. And there's still, you know, we think three to five X growth in terms of those.

the solar market from an installation perspective. And we're just reaching an important inflection point. Solar is really the cheapest form of new energy for the power markets. We're seeing a couple of important trends. One, energy security is a huge issue that I think this bill addresses in a meaningful way. Secondly, we're seeing the electrification, not only of the transportation market, but also of the heating market. And so the demand on the power grid is going to be substantially higher. And as we move towards wanting clean power here around climate issues, the solar

demand is going to be substantial. But when you think for, go ahead. Let me just clarify. So the inflection point you're talking about is that solar, correct me where I'm getting this wrong, is now the cheapest form of new energy. But is this, are we talking utility scale, you know, i.e. the industrial sector, because for households, obviously, that I'm not, that wouldn't be the case.

You're not all the way there. But so on the industrial, on the utility side, absolutely, without question, you know, as you move into, you know, the edge of the grid, it depends on which market you're But certainly we think solar plus storage for over 30% of the country now is economic in the U.S. And as we look across Europe, it's a much higher percentage of that. First solar is really focused on the utility scale market. And right now, with natural gas at $8, when we look at peak power comps or even baseload power comps, solar has at least a 20 to 30% cost advantage.

I wonder, though, if the stock price behavior this week doesn't reveal to us the extent to which they're still relying on government subsist, because every time, you know, these deals were fading, the stocks would dump. Now they're up 30% on this mansion bill and this deal. Does that really speak to a fundamentally strong earnings model? So for, you know, for first solar, one of the things that we're upgrading on is the production tax credit here. So they'll get a manufacturing tax credit if this bill passes, which we think is likely. That adds another, you know, between $4 and $10 of earnings power, or $4 for solar, depending on

how it checks out in the ultimate levels. But when we think about this from an energy security perspective and the fact that for solar really is the only legitimate manufacturer of solar panels in the U.S., that's an important component of this bill that we think stays in there. And it's critical for the U.S. to really secure its own sources of energy. And we've seen that both on the traditional energy side, but we need to see that sort of investment happen for the clean energy sector. And we're seeing this bill as a really meaningful moment for that. Colin, it's Dom, on that point, do you feel as though the U.S. can be in a leadership position to really exert some kind of influence and kind of be the tip of the spear with regard to the solar trade? It's us versus China on so many fronts, but it's got to be us versus China with the solar side as well.

That ship already sailed and we're behind as a country. All the manufacturing that was in this country except for solar has left or gone out of business to the point about bankruptcy earlier. And so really this is about a hedge in my view. You know, as we look at transforming the grid and moving towards clean energy sources, we need to have some manufacturing. And this gives the country some leverage from a strategic perspective, even if it's a little bit more expensive than some of the other sources of panels. All right. Colin Rush with a big trade on solar and alternative energy.

Thank you very much, sir. Have a nice weekend. Thank you. Coming up next on the show, a sinking chip. Yeah, chip. Intel reporting its biggest revenue drop in more than a decade. But can it do anything to come back and run? the chip. We'll be back after this.

Welcome back to Power Lunch. Intel is the worst performing stock in the entire S&P 500 today. After the company reported disappointing quarterly results and cut its full year guidance, feeling the pain from continued supply chain constraints and a slow down in PC demand. Our Christina Parts of Nevelis is at the NASDAQ with what's next for that stock and maybe the sector overall. Christina. The bottom is in. That's what Intel CEO wants the market. to think, but given today's stock plunge, investors definitely remain skeptic. The numbers were pretty bad. EPS was the worst miss in a decade. Revenue plunged on a 25% drop in client computing, as well as a

major drop in data centers. Guidance fell short. So what went wrong? Intel is America's largest chip maker, but brings in over 50% of its revenue from selling chips to desktops as well as laptop makers. The slowdown hits them particularly hard. As well, you've got customer inventory levels that are high, which means they don't need to buy as much. China's COVID lockdowns that lasted longer. And lastly, one, you don't hear too often, a CEO taking the blame. We missed yesterday. We own that. And, you know, a lot of that was the economic, but a lot of that was us and our execution. You know, we're being put firmly accountable for that to our shareholders. Yes, I need to do better. We need to do better. And we will do better.

The issues persist, though. The company has put. pushing back the launch of its new CPU until 2023, and problems with the PC supply chain could take quarters to unfold, paving the way for competitor, AMD, which was supply constrained in previous quarters and didn't overship PCs to the extent of an Intel. Rosenblatt analysts believes AMD could quadruple its share of the data center market in the next few years. With CEO Pat Gelsinger 18 months on the job, and the stock down over 40 percent since when he took over, Intel's turnaround has yet to do.

materialize. All right, all right, Christina. So what's interesting is because we've gotten some fundamental headlines out of Washington, D.C. that could be a way to write the chips, so to speak, right? This is the Chips Act we're talking about. This is billions of dollars worth of future legislation coming to these computer chip companies. Is that going to be enough to get things figured out, right, for these, fundamentally speaking? Well, fundamentally speaking, when you think $52 billion is going to be spread over five years

amongst all of these companies, the impact is not going to be made. and it's not going to happen overnight. So I know the stocks reacted SMH when the news came out, but you have to think long term this is going to be a positive impact, but a small one. Micron the latest today saying that, yes, they do plan to create leading edge manufacturing here in the United States. But let's see when that actually happens. China, though, the Chinese minister did put out a statement today.

They're not happy. They said, quote, the chipsack will distort the global semi-supply chain and disrupt international trade. Can't please everyone. Wow, maybe a sign we're doing something right. Christina, thank you very much, Christina Parts and of a list. Still to come, opportunities stemming from Apple. We'll trade the Apple ecosystem in today's three-stock lunch. We're not done with the chips yet.

Stay with us. All right, welcome back to the show. One of the things that Kelly and I, I mean, we have a, we like each other a lot, as you can tell. We are good friends, but we differ very much when it comes to our views on the lottery. Now, I will be the guy that goes home and stops at the convenience store and buys a couple of these mega millions tickets on the way home. But you're shaking your head at me. No, where do you think this billion dollars came from, everybody? Comes from us.

We just had a pandemic stimulus where we incinerated trillions of dollars. Let's go incinerate a billion more. Oh, come on. Don't be so cynical. Let's talk about where this $1.3 almost billion dollar jackpot is for Mega Million tonight ranks. The third biggest, by the way, the Powerball jackpot back in 2016 is nearly $1.6 billion. And then $1.5.4 billion for the mega millions back in 2018. But remember, 1.6 is kind of still that mark that we're looking at.

And by the way, just to give you an idea of what $1.2-ish billion could buy you in market cap? Wow. How about lazy boy? That's in that $1.1.1.2 billion range. Brinker International. I want some babyback ribs right from Chili's. And then SkyWest Airlines, if you feel like owning an airline, that's one that you could buy. That's my point.

We could do something a lot more productive with this money. I wonder what happened to that winner in 2016 or winners. I have $2 in a dream, though. How many tickets have you bought? I bought quite... I don't want to... I plead a fifth. Thanks for watching, Power Lunch, everybody.