Power Lunch - Busy Week Ahead…and Almost Finished? 1/30/23

Episode Date: January 30, 2023

Stocks are mostly lower today, as the markets brace for the biggest week of earnings season on tap. We’ll look ahead to some of the biggest names with market-moving potential. Plus, the FOMC is meeting this week too. Will the Fed hike 25bps, or 50bps? And what will they say about the conditions for ending rate hikes? Former Atlanta Fed President Dennis Lockard will join us to discuss. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good day, everybody, and welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson, busy hour for you here today. Coming up, stocks mostly lower as the market prepare for a very important week. It is the biggest week of earnings, believe it or not, with 20% of the S&P 500 reporting. We will look ahead to some of the biggest names with market moving potential. Plus, we've got the Fed meeting on Wednesday. What will they do? 25, 50, no way. Will they cut? No, we're just kidding. But what will they say about the conditions for ending rate hikes in the near future? Former Atlanta Fed President Dennis Lockhart will tell us. But first, let's get a check on the markets, which are trading to the downside. A lot of what's worked in January is not working today.

The NASDAQ going from the biggest leader to the biggest lagger down one and a half percent, the Russell 2000s in the red as well. All right, let's check in with Bob Bazani at the New York Stock Exchange for a little bit more color and data on the markets. Bob. You know, there's three big things, Tyler, we're going to be watching this week. First, can we end January positive? You know the January barometer? As goes January, so goes the year.

We're up 5% so far. We end positive for the month. That's a big psychological boost for the markets. That's number one. Number two, big earnings week coming up. We're going to hear from the big industrials and the big technology names. First, you're going to hear Caterpillar and UPS. That's going to be Tuesday morning.

Honeywell is going to report Thursday evening. Then we're going to get AMD, big tech names on Tuesday, and then Apple, Alphabet, and Amazon on Thursday night. Finally, Starbucks was at a new high on Friday. We'll hear from them Thursday night. McDonald's will hear from Tuesday morning. Finally, big economic data and the big Fed meeting this week on top of that. So we'll get the Employment Cost Index, ECI on Tuesday. That's going to show us how employee compensation is growing or not growing. The Fed meeting, of course, on Wednesday, I can assure you they are not going to declare victory over inflation there. And finally, that jobs report. You know, Kelly, we're going to see probably the lowest print in a couple of years, supposedly. And talking to the traders here. If there's no gotcha in the ECI or the jobs number, Kelly, a lot of people think the tape can still keep going up irrespective of what's going on today. Kelly? Fair enough. Bob, thank you very much. Let's turn now to one of those big earnings report due out this week. Seema Modi is watching Caterpillar, especially with all these questions about China's reopening Sema.

That's exactly right, Kelly. Caterpillar's earnings will give investors a gut check on what's happening in China and whether the reopening is resulting in stronger demand for tractors and excavators. It's Warecat makes about 5 to 10% of its sales. Wall Street will also want an update on its mining business as the company continues to invest in autonomous trucks that go down into the earth to extract metals. Group president of Caterpillar Denise Johnson recently telling CBC that the rebound in commodities will strengthen demand for its equipment. Finally, do buyback slow down with the economy?

According to Jeffries, Caterpillar has repurchased about 23% of its outstanding stock for about $21 billion over the past 10 years. that's really more than any industrial. So we're wanting to see if that continues, Tyler. All right, thank you very much. Seema Modi reporting there. Busy week ahead for the markets. As Bob mentioned, some key earnings reports to watch.

In addition to Apple, Amazon, and Google, our next guest has a few others she's watching. Here with her look ahead is Stephanie Ling, chief investment strategist and portfolio manager. At Hightower Advisors, she's a CNBC contributor, among many other things. Let's get to the names. Seema, just talking about it.

Why don't we start there with Caterpillar? What are you looking for here in that company's shares? And it's good to see you, Tyler. Yeah, this is a huge week for earnings and economic data. But Caterpillar is one that I own, so I'm keeping an eye on it. But what we do know is that backlogs are high, inventories are low, equipment is actually worn out, and non-residential spending is down 13% from prior peak. So there's more room to go.

I think demand is there. They've got pricing power. We know that Kamatsu raised prices by 10% just last week, and that bodes well for margins for both companies. And that's really been the story with Caterpillar. It's their margin recovery because they've got the pricing power and they're waiting for supply chains to ease up. So the other thing is energy and transportation is about 35% of EBITDA.

Way back when it used to be 50%. So I think this is a hidden energy play on top of all these other things. Is there a China story here? with another stock you're following, Starbucks. Yes. Well, yes, there is a China story with regards to Caterpillar. It's about 10% of their total revenues, but definitely has a China personality for sure.

Starbucks, I think, is going to be great in the U.S. comps are, I expect about 10% in the U.S. There's some whisper numbers at 12%. Their guidance is 7 to 9, so I think people are getting carried away, but they've done a very good job in the U.S. In terms of pricing, in terms of better food attachment, and that sort of thing. It's the international comps that are going to be challenged, probably down about

three to five percent, all because of China, as you mentioned. Remember last quarter, they had a comp down 16 percent in China, but that was better than the 44 percent decline the prior quarter. So now that you have China reopening, you should see better and better numbers going forward. The only problem with Starbucks, Tyler, is it's expensive at 29 times forward, but I just think this is a compounder with a great brand. It's not the only way it's expensive. That's true. Steph, maybe let's talk about one with a little bit less China gearing, and that's meta. You know, it's been interesting to what, look, the stock is cheap and, you know, their social

platforms maybe still are going to do quite well, especially as we sort of, you know, pound the table on TikTok. But it's been fascinating to watch how different the responses to Microsoft's own $10 billion efforts, namely in the AI direction versus meta, which just kind of seems to be floundering. I don't know. Meta has been all over the place. So this stock, Cal, is up 68% from the November lows. And yet, it's still down 50% from a year ago.

So it has been a roller coaster. Unfortunately, I own it. I'm glad it's recovering. I do think the setup for 2023 is way better than last year. I think you're going to see very solid DAUs, daily active users, monthly active users as well, two to three billion to both. Reels is going to be the issue. Any kind of progress.

Last quarter, they did $3 billion in revenue run rate. I think they have to get to a $5 billion revenue run rate just to see normal and neutral monetization. So that's going to be a really, really important feature there. And then, of course, whatever they talk about in terms of monetizing WhatsApp, we always ask the question. They never really answer it. And then, of course, the cost-cutting story there that they're doing, 13% of the employee staff getting cut. It's 11,000 people. But keep in mind, for the last four quarters, they hired 19,000 people.

So there's still a lot of room on the cost side that they can do. Well, dance us through a couple of the key economic data that will come out this week. Obviously, we have the Fed on Wednesday. We have a jobs report on Friday. Yeah, it's a really busy week. So it's not only the Fed. It's the ECB. It's the BOJ.

I think Fed goes 25 and it's going to be a ho-hum. I think ECB does 50. I think BOJ keeps the pedal to the metal. And in terms of the Joltz number, I think, is going to get a lot of attention. A 10.3 million is what is expected. And then, of course, the unit labor costs. cost because that's a metric of inflation that the Fed does look at as well. And that is expected to come in at about 1.6 percent down from 2.4 percent last quarter, but still at an elevated

number. So that's really important. And of course, you mentioned the non-farm payroll numbers. I always look at the average hourly earnings number. That's the more important number. And expectations are for 4.7 percent year over year, still really high, unfortunately. More content for square second of delivery than anyone. Stephanie Link, thank you. Appreciate it. Speaking of squeezing things in, let's talk about semiconductors. The stocks have been on a leader of this early 2023 rally, despite some cautious remarks from obviously Intel. But what happens now as we turn our attention to NXP and the rest?

Christina, Partsenevelas has the latest. Christina? Well, like you mentioned, you have the socks that's up, what, 14% year-to-date, the SMH, up almost 15% outperforming the S&B 500. As Wall Street analysts agree, a correction is currently underway with a recovery in the second half of this year. So they're quite optimistic. and that's despite the brutal earnings quarter from Intel and the cautionary guides from Texas Instruments, lamb research, Wolfspeed, Seagate, and the list continues.

So why are we seeing such optimism right now? Investors, we could be thinking of snapping up names from the last EPS cuts or they believe that there won't be any more cuts. You also have strength in auto and industrials, which, Kelly, you know we talked about in the previous hour. NXP earnings are out today, so that could shed some light after the bell. And then you have the China recovery adding to demand. Microsoft increasing CAPX, surprisingly.

That could be good, especially with big cap tech coming out on Thursday. And last, chat GPT, just because everybody likes to talk about it, but it's bringing back the vigor for AI, and it's helping names like Nvidia, the largest component of the socks up, what, 33% right now, year-to-date. Might be a little too cheery, though, too soon. AMD is reporting tomorrow and is still expected to get hit by PC and server inventory concerns. Samsung also expected to cut production with CAPEX with its earnings out tomorrow. And on Thursday, like I mentioned, we talked about Big CAC tech.

And any changes with their capbacks could be a negative sign for chips. Absolutely. No, that's a great reminder. Christina, thank you. Let's talk more about how we should trade the chip stocks. Vijay Rakesh is managing director and senior semi-analyst at Mazujo. Vijay, I'm going to pick up on something we were talking about last hour with Christina, which is take NXP, for instance, with all of this auto's exposure. Do you want exposure to that segment of the market?

If Texas Instruments insists it's doing fine, but it feels like their signs were turning from shortages to gluts. Yeah, thanks, Kelly. I think specifically to an XPI, I think they have executed very well. But that said, what you're seeing is a little bit of a slowdown. I think China was kind of soft in the December quarter. And going into 2023 as well, in the first half, what you're seeing is autos are slowing down. I think sales are slowing down. Auto financing is at pretty high levels. Affordability is very tough. And so we think you're starting to see the auto side start to slow down. So we'll be more cautious. You're seeing in a big OEMs like Ford GM or start to cut pricing, right? So where we had a supply shortage last year, now you are going to a demand slowdown on the auto side.

So we'll be more cautious. The analog supply chain is starting to recover as well. So you're starting to see some things go the wrong way. So we'll be a little bit more cautious. The industrial side, by the way, is also a little bit softer. I think you saw something that's the PMI numbers come in, software. I think it takes the instruments, as you noted at soft guide as well. So I know you say, I mean, you point out several things about how semiconductors tend to outperform most years, the S&P 500 and the NASDAQ and so on and so forth.

But this year you say you see a more favorable investment entry point likely in the second half of the year. Explain a little bit your reasoning there. And how does that translate? In other words, do you expect that these names will decline a little bit more during the first half of the year? and then hit a bottom and then that's your moment? Yeah, I think what you see in the first half is basically a situation where things are softening, you know, revenues, the top line is coming down,

but inventories are going up. So we'll probably hit that peak somewhere in the first second quarter in terms of inventory peaking and revenues declining. And by the second half, we start to see a recovery. So that's how we look at see the semis broadly. But key names we like here on the play, on the long side would be Nvidia, names like AMD on the data center side, Broadcom, Credo, even the silicon carbide names like on semiconductor, Allegro, etc., on the long side.

But yes, definitely going to the back half, what we see is some of the data center names, some of the gaming names start to work better, whereas the auto side, I think, you'll still see the consumer in a pretty weak spot pretty stretched because if we have these higher rates continue through the end of the year, which is probably well, it's going to be a little bit of a headache for the auto supply chain. But I might worry, might and I, Vijay, that the Van Act, the SMH is up 17%. I may, if I follow your advice and I think, well, the second half is going to be better, I might think that the train is going to leave without me here. Well, I think near term, you definitely have had a pretty significant run in the socks.

So I think here you probably have, you know, it's kind of run a little bit too far too fast is what we would say. So we'll be a little bit more cautious stepping into the name. All right. Finally, Vijay, as we kind of discern what's happening with the cycle more broadly, you said when topics in VD, Amat, Broadcom, AMD, I mean, all of these are cyclical, right? Is there any way if you want to kind of sidestep things? Can you do that in the world of semis? Well, I think the reason we highlighted those names.

is they have gone through an inventory correction much faster. So somebody like Nvidia has cut supply into the gaming channel, almost 50% below what native demand looks like the last two quarters. So you have a little bit of a bottoming of inventory in some of those markets, especially when you look at Nvidia and some of the data center guys also. They've been cutting in an AMD cut PC like 50% in the September quarter. So you've seen some accelerated inventory cuts in those markets. So we should see those segments stabilize faster.

Whereas what you're seeing on the auto side is really, you know, inventories are actually starting to pick up more. Right. And demand is starting to slow down. So they are a little bit have lagged some of those inventory cuts that we saw on some of the other markets. No, but it's a good point that, you know, if we hear, for example, something worrying from NXP, you can say, well, some of these names have already moved through this more quickly and tried to get ahead of that cycle. We appreciate it. Jay, thanks so much. Thank you, BJ.

Appreciate it. Coming up, we are less than... two days away from the Fed decision on interest rates. What will they do this time? What will they say about future plans? We will ask someone who used to be in the room where it happens. Former Atlanta Fed President Dennis Lockhart will join us. Plus Johnson and Johnson, contributing to the Dow's losses today. We'll tell you what sense that normally, relatively stable stock, tumbling 3% midday. Look at the cliff. It fell off. Power Lunch. We'll be right back.

Welcome back to Power Lunch, everybody. Investors counting down to the first Fed decision of the year. It comes Wednesday. The Fed widely expected to raise interest points, interest rates by a quarter point, following an aggressive pace of rate increases over the past year. Here to weigh in on the Fed's next move, Dennis Lockhart, former Atlanta Fed president. Mr. Lockhart, welcome. Good to have you with us, sir. Thank you, Tyler. Good to be with you. You know, we're always interested in what the Fed does. I think you sort of are in the camp that thinks they'll probably raise a quarter point, but that a half point is not completely off the table.

But what really interests me here are the kinds of calibration or recalibration words that the Fed might use on Wednesday in its statement or in its press conference. What will you be listening for as a telltale of what may come next? Well, I think you have to listen for the elements in the data picture that really are going to dictate where they stop. And that would be the first, the confidence they have that the inflation data are actually showing the kind of decline in inflation that they hope for and they need and that it is beginning to convince them that inflation is headed in the right direction. That's just one example. Demand data as well, I think are important to the overall picture. They have been trying to slow the economy.

So it would be some emphasis on the data that they're going to look at most carefully to make their decision when they finally determine a stopping point. Interesting. What they say about what inflation is doing and how enduring that change in inflation's direction may be and demand data. those are the kinds of things you'll be listening for most acutely as a signal to what they may do next. And do you think, whether they stop at four and a half to four and three quarters or whether they get into the four and three quarters, five, five and a quarter at the stopping point, do you believe that they'll stay at that stopping point for an extended period? I do. I think that what they're going to try to calibrate as they go through the next two or three meetings is a stopping point that they think will be durable, that will hold up for a hold period.

And all signals are that as of now, at least, they're thinking the whole period will last for most of the year, if not to year end. So they definitely, I think, want to set that rate where they're going to hold and then let it produce the lag effects that bring inflation much closer to target without necessarily going into a recession or doing much damage. You know, it's not an exacting thing, but I think that's what they're going to be trying to do. And as you probably know, and it's great to have you here, Mr. Locker, But as you probably know, the market is betting on a very different outcome. One where they might have to cut. There's a small chance that might have to make big cuts. For instance, if things really turn sour.

Do you think there needs to be a wider range of views at the Fed? This is something Steve Leesman keeps highlighting. But last year when they were wrong to the downside, thought they're only going to 1%. Basically everybody held the same view. This year, when they insist they're going up to 5% in holding or whatever the number is, basically everybody has the same view. Don't they need to have a wider range of dispersion here to indicate there's

more intellectual flexibility if things don't play out as they expect? Well, a wide range of views is desirable. It really is. I have to say from my own experience over 10 years, there is a bit of a tendency to group think as you get closer and closer to the meeting. At the same time, they want to present a united front in the sense that the committee is together, there's not a lot of, let's just say, real difference of opinion on the committee, that would be something that would undermine confidence. And I don't think they want to show that. So what goes on in the room and what the views that are expressed there may not be known much until the minutes come out in three weeks and they may show that there are a variety of views.

But coming out of Wednesday, I think they're going to show very much a single position, a single point of view. Without divulging some of the secrets of the temple, I'm curious. There's a jobs number that's going to come out on Friday with average hourly earnings and those kinds of numbers. Is the Fed privy to those numbers ahead of time? My experience, no. The chair, I believe, gets some numbers. It may be the jobs numbers the night before they are announced, but the chair does not share that information with at least the presidents

and may not share it with the governors. So the Fed, for the most part, is getting the data at exactly the same time as the markets are getting the data. That's very interesting. Yeah, that's, I mean, and obviously this would be two and a half, three days ahead of the release, because the release is Friday. So if the Fed chair gets it the night before, that's moot because these meetings are taking place a couple of days ahead of that. But that's an interesting little tidbit. Thank you for taking us inside the room, literally.

Absolutely. And you make a very good point, Tyler. The meetings take place, and often there are key data elements that come in two days later. And they simply don't have access to that information when they make the decision. Yeah. Can you imagine if they hiked rates and then we had a negative payrolls number? Well, you know, these kinds of things have happened where you've had some disappointing numbers or some surprising numbers, but they have to make the call. It's a system built to get to a decision by noon of Wednesday, and that's the way it works.

All right. Fantastic. Thank you very much. Dennis Lockhart. Appreciate it. Further ahead in the gig picture, the early days of the gig economy, every company had the same motto growth at all costs, and it doesn't cost the consumer a thing. But after the pandemic, the shutdown, higher interest rates and an economic slowdown, now it's a very different story. Time to separate the week from the strong, in fact.

Mavitt Nathens sent out with a new note laying out who they think is best positioned for this new gig space. We'll be right back. Welcome back to Power Lunch, everybody. We have the Dowdown 180 points, pretty much session lows while the NASDAQ is leading the way to the downside with a 1.6% drop. Chips in China are among the drags, as we discussed earlier. A lot of these semi-names have had big gains this year. seeing some profit taking today, Nvidia, down nearly 5%. The Chinese stocks, which are up sharply from the fall lows, also getting hit hard.

Alibaba down 5.5% and reporting it's moving its headquarters to Singapore. They've denied they will leave China. But so you can also see JD.com Pinduo duo down sharply, reflecting the broader China sentiment there as well. Let's turn our attention to the bond market now ahead of the Fed meeting, Rick Santelli in Chicago. Rick? Yeah, see, you pointed out how the equity markets are now trading below their previous stays low as the Dow Jones in particular, and that is pushing yields down a bit. If you look at the intraday of tens, it's mostly been a light volume up in yield session. As you look at a one

week chart, something should jump out at you. Now, that's an intraday chart, obviously, and it has a rough time getting anywhere near 360 or below that 340 level. We do know on the 18th, we settled below 340 and it's bounced right back. There's definitely a consolidation going on. You can see it. If you open up the charts of the last unemployment report, which was on the 6th, you could clearly see that we've come back down and we're moving towards that three and a half and we're spending a lot of time there. Even the spreads, if you look at twos versus tens, they've come into a consolidation mode hovering right around minus 70 basis points. This new temporary normal means that these Fed meetings are very important and we want to pay close

attention to any of the moving parts, especially break up below 340 or above 355 on a closing basis. Kelly, back to you. Wow. Thank you, Rick. Now to share us to Johnson and Johnson taking a sharp turn lower today after an unfavorable court ruling. Meg Terrell here to explain. Meg.

Hey, Kelly, well, this is all about what we actually talked about in the earnings preview last week, J&J's potential talc liabilities. A court of appeals has essentially dismissed J&J's attempt to spin out those talc liabilities. and file them for bankruptcy. It dismissed the bankruptcy claim, is the decision that happened today. Now, essentially, this J&J is saying, as a result, it is going to appeal or challenge the Third Circuit's ruling. It says, quote, resolving this matter as quickly and efficiently as possible is in the best interest of claimants and all stakeholders, we continue to stand behind the safety of Johnson's baby powder, which it says is safe, does not contain asbestos, and does not cause cancer.

As a reminder, Kelly, there are more than 38,000 legal actions against the company. surrounding talc. This was its way of trying to sort of head off the piling up of suits related to that, but it looks like now this legal battle is going to continue. How, Meg, how, if this had been sustained, how would it have affected Johnson and Johnson? Would it have reduced the amount that the company ultimately was going to have to pay to these claimants? I assume that's why they did what is called. Is it called a Texas two-step? That is the legal name for. essentially the way they carved out the liabilities, put them into their own company and then filed that company for bankruptcy. The idea they said, you know, was to create this pool that would take care of all of this together in sort of a neat and tidy way,

rather than individually litigating these thousands and thousands of claims. They'd put $2 billion into that. We don't know exactly what the liabilities could mount up to, you know, if they have to go through them individually. but, you know, they have seen an award in the past of $2 billion for that one award alone. And so these could really mount and get quite large, but we'll have to see how the legal proceedings play out from here. Let me be impolite here because I don't want you to be impolite. Johnson & Johnson cedes this spun-off company with $2 billion and then says it's out of business, it's gone bankrupt to limit the amount of money that both the parent and,

and the seated or spun-off company would have to pay. Frankly, that seems like a little too cute to me. Well, you just summarized the Third Circuit Court of Appeals' decision, perhaps a little bit more pithel. Colloquially. The court itself put it. Yes, exactly. No, that was the argument.

They say essentially, you know, you have to be in financial distress to get the protections of bankruptcy court, and this company was not in financial distress. So this actually has implications. for other companies potentially trying to use this, quote-unquote, Texas two-step for- Yeah, they're not the only ones who have used or, yeah, they're not the only ones who have used this, I'm sure, or would contemplate using this kind of maneuver to avoid a large litigation risk.

Meg, thank you for indulging me. I appreciate it. Meg Terrell. Thank you. Let's get to Contessa Brewer for a CNBC News update. Tyler, here's what's happening right now. Charges and the Rust movie set shooting will be filed tomorrow. New Mexico prosecutors say they will file involuntary manslaughter charges.

against actor Alex Baldwin and weapons specialist Hannah Gutierrez-Reed in the fatal shooting of cinematographer Helena Hutchins. I see winter storms in the south and the Midwest are expected to make travel treacherous over the next few days. Heavy sleet is already coming down in Oklahoma and Arkansas. Freezing rain forecast for tomorrow from Texas to Tennessee. Across the country, about 50 million people are under some form of winter weather alert. It looks nasty.

hockey Hall of Famer, Bobby Hull has died. He was known as the Golden Jet because of his blonde hair and blinding speed. He helped lead the Chicago Blackhawks to the Stanley Cup in 1961. And to this day, he remains the Blackhawks top scorer with 604 career goals. Bobby Hull was 84. Tyler. One of the best players I ever saw right up there with Bobby O'Or Esposito of that generation. Contessa, thank you.

Sure. A head on Power Launch is Wall Street ignoring too many warning signs? Big tech layoffs, conference call warnings, yet investors, well, they're still jumping in on that tech rally we've been talking about. And now getting distracted by the street's shiny new toy AI. We'll be right back. Welcome back, everybody. The first month of trading for 2023 nearing its end on the surface, things had look too promising. You've got some weak economic signals, some major consumer companies issuing warnings,

multiple firms issuing layoffs, Intel. Yet despite this, NASDAQ is closing the month up 9%. So is Wall Street ignoring some glaring red flags. Let's bring in Herb Greenberg, CNBC contributor and editor at Empire Financial Research. Herb, what do you say? Is the market smoking a little too much, as our friend Brian Sullivan would say, hopium? Yeah, absolutely.

Look, it's, I always just, it's sort of simple. It's common sense. Too far, too fast is no good. And that's the way I can see it from this market's perspective. Everybody's got their charts. Everybody's got their wheels. Everybody's got their opinions. And you can look at either side and they all make compelling sense. We know that right now there are people saying, you know, we're off to a start, a great start. Interest rates aren't going to go much higher. But then we also know the earnings are coming out this week. And this is a market with zero conviction. The Fed is going to come out. And they may fool everybody. and this market just has a mind of its own right now.

And I think it needed this big breather, right? This big upside breather. But we've seen this before. And I think right now I come back to zero conviction. And, you know, as goes January, so goes the year. We'll see. Yeah. But there is, you say there's zero conviction, but there is a kind of conviction, is there not,

that maybe the worst of the inflation, moment is behind us. Whether that turns out to be correct or not, I'm just saying there seems to be a general consensus that that's the case and that we are in the later innings of a rate tightening cycle. And there seems to be at least, I would call it, if not conviction, consensus

that that's the case. Yeah, look, Tom Lee has this great chart. He says this is 1982. It's a compelling chart. And Tom may be right. I wouldn't bet against him. But I just know that from here to there, there are a lot of fits and starts. And we're not off to the races, Tyler.

I can't believe we're off to the races. But I think we're into a period where you need, you know, you have digestion. You need a little more digestion. And I think people still need to understand there's risk involved in this market. So many different stocks we could talk about, Herb. You know, you like Sherwin Williams here, you like NVR. There's a weird, there should be like a fan club of people who like NVR because it's such. NVR is such a...

Look, I write two newsletters, and these newsletters are totally the most boring companies. One is big stocks, one is little stocks. They're made for me, right? And I love the fact that they are the countermean companies. These are companies that were left for dead. No one cared about. They're not exciting. But you get a company like NVR, which is a housing company, probably the single best run housing company out there that no one talks about, for the most part, because the company itself doesn't talk about it.

Right. Sherwin Williams. It's like watching paint drive because it's a great company. It's an extraordinarily well-run business. That doesn't get people excited. I have little companies. This company called Hub Group. You ever heard of Hub Group? You've never heard of Hub Group. Hub Group is the second fiddle to J.B. Hunt. It's a trucking company with an intermodal component. It trades at a fraction of what J.B. Hunt trades for. Those are the companies that are out there. There are thousands of, no, there are thousands of companies. There are many companies that are great companies that people discover. Every holdings. Every holdings is like a fintech play on the casino industry. The company spends an enormous amount of time paying attention to itself. That's great cash flow. It's reinvesting in itself.

It has a games component. No one talks about it. One of the most speculative stocks I like is a company called Triumph Financial. I'm just, yeah, go ahead. So I'm not going to ask you to divulge the formula of your Coca-Cola, but how do you? you bubble up companies like that? What are the one or two metrics that cause you to find a Sherwin Williams, a hub group? What are you looking for on your screens or in your research that leads you to those? I have a screening process I use to screen out companies, and that's the

first thing I do. And what I'm looking for, especially for the smaller names, I'm looking for it makes, I mean, we're looking for free cash flow yield. We're looking for companies with strong pre-cash flow with strong balance sheets that rank high in the quintiles of the database we're using. So they rank higher than others. And that way, at least we can get a head start on finding companies that we think will do better over the next year. And in theory, our portfolio is two to five years. So, you know, over a longer period of time. The important thing you just said to me is it's as much about eliminating the bad ones as it is about finding the good ones. You eliminate.

You got to screen out the bad ones. You eliminate the 80% or the 90% or whatever percent it is that don't make it. And then you can drill down and concentrate on the 5, 10, 15% that do. Herb Greenberg, always good, insightful to hear from you. Thank you. Great seeing you, Tyler. We will argue about this. I think he's right about everything, but not chat GPT.

He's a little bit of a... He's casting some down on it. We got to, we'll talk about that one. But ahead on Power Lunch, the gig is up. gig economy stocks are rallying across the board to start the new year. So the gig is actually up for once. SVB Motha Nathanson says the bumpiest part of the ride is now in the rearview mirror. They will be here to make their case next.

Welcome back. SVB Motha Nathanson, bullish on the gig economy, initiating both Doordash and Uber at outperform, saying the bumpiest parts of the ride are in the rear view mirror. For more in this call, let's bring in Michael Morton, SvB Mawthon, the Nathanson analyst. I can't get it out of my mouth, Michael. But welcome, and it is great to see you. And I don't know, I don't if Tyler shares my skepticism about the long-term business models of DoorDash and Uber, but as a consumer, these companies have changed a lot and they're expensive and make the investment case. I guess maybe that is the investment case now, is that they're more profitable.

Yes, absolutely. We talk about, I don't know. They are expensive stocks, also from a consumer perspective, but from a multiple perspective. But the case we see in the gig economy stocks are the largest addressable markets we can really find. We estimate $4 trillion in addressable spend when you think about mobility or ride share and then delivery encompassing like food delivery from your favorite New York restaurant or grocery delivery. And due to the size of the market, it attracted a lot of venture capital dollars over the last decade. We estimate $125 billion in a slew of gig economy companies that led to some rather irrational behavior and growth at all costs, right, from pre-cony-com. COVID to this year, food delivery companies added $60 billion of gross bookings.

And we're coming into a new error, we think, for these businesses, where the focus is really going to be on profitability. And we see the profitability of these core businesses expanding over the next several years. And I think it will cause investors to reconsider the views that they've held around the gig economy stocks for several years, which have been a correct level of skepticism up until now. Is there the level of demand to compensate for what I perceive as a customer of these, the rising prices that you're being asked to pay for the service? Yeah, so our demand outstrip the pricing. Yeah, so there's different levels of demand.

And we looked historically about how these industries behaved. But there is no example, right? like Uber didn't exist in prior recessions, neither did DoorDash. So we looked at how consumers behaved with taxi cab spending in prior recessions. And it was rather resilient with low single digit declines in recessionary period. And restaurant spend is mind-blowingly strong when it comes to Puff macro environments in the 2000-2001 era. Restaurant spend grew through the recession. In the financial crisis, there was only three quarters of year-over-year to close.

clients, and it was, again, low single digits. And then if you go back over a multi-generational trend, consumers spend more on having food prepared for them every year. And again, there will be ebbs and flows ordering from DoorDash costs more money than if you go and just pick it up yourself. But we look at those long-term trends in the behavior of the consumer and it gives us comfort around the long-run demand you're asking about. Yeah, well, I mean, that's interesting. Consumers, I confess, I'm lazy. I like it when they call. You are not. And you're not the only one. who's balking at some of these prices. Yeah, I mean, the other night, by the way, Michael,

I have a favorite restaurant in town. There's actually one in your town as well, but I got so tired of waiting for them to deliver it. I went down and got it myself. I just, damn what I'm going to my man. He's had enough. He's either here and there. That's too much information.

Michael Norton, we thank you. See you again soon. All right, still ahead. Ammonia. It's for more than cleaning up your bathroom. It could also be a game changer for clean. energy. That's next when power lunch continues. Welcome back, everybody. In the race to find cleaner fuels, the heavy-duty transportation sector is way behind. That's because batteries don't have enough juice

to power trucks and ships. So researchers are turning to ammonia for a potential solution. Diana Oleg joins us with the details on her continuing series on clean startups. Hi, Dai. Hey, Ty. Yeah, heavy-duty trucking alone accounts for almost a quarter of of all greenhouse gas emissions from transportation. Now, batteries can't replace diesel, but new technologies with ammonia are emerging, and big money is pouring into the startups at the helm. From tractors to trucking to shipping,

ammonia may be the answer to a clean energy future. Companies like man-energy solutions, Wartzilla and Brooklyn-based Amogy founded in 2020 are working on it. Our proprietary technology enables very efficient and effective conversion of ammonia to hydrogen, so you can use that process on board in the vehicle to produce hydrogen, and then use that produced hydrogen to run the vehicle using the fear cell. Amagi just tested its technology on a semi-truck

and has already made it work on a John Deere tractor as well as a drone. The next step is clean shipping and a tugboat. We are partnering a love with the industry stakeholders in shipping and heavy manufacturing and heavy industries. So certainly the collaboration is the key to skill, the new technology like ours. Amagi's investor, Saudi Aramco, is one of the largest petroleum producers in the world, but sees ammonia as part of its future. It's going to be a growing market in a carbon-constrained world. Such products are going to be more valuable, and the market for

that and demand is going to go rise. So we see this as a very positive from our shareholders' perspective. In addition to Saudi Aramco, Amagi is backed by Amazon's climate pledge fund, AP Ventures, SK Innovation and DCVC. Total funding, $70 million. As of now, the process is more expensive than just using diesel, but the saving to the environment is really what's at play here. Of course, the hope is that when this scales sufficiently, the costs will come down. Back to you guys. Oh, wow. Diana, thank you very much, Diana Olik. Still ahead, FinTech financials and EVs. We're trading SOFI, Goldman, and Lucid in today's three-stock lunch. Look at SOFi's move today, up almost 13%. and a very special fun in the sun edition of Fast Money tonight at 5.

Melissa Lee is live in Miami Beach with a preview, Melissa. Wow. Lots of fun, maybe too much sun. We've got a big show coming to you tonight from the I Connections Global Alts conference. Our headliner tonight, legendary short seller James Chanos, Jim Chanos, will get his take on the prospects for conflict with China in 2025. And, of course, an update on his Tesla short. Dan Nathan, Guy Dami, and I will join you tonight here 5 p.m. Eastern Time on

Fast money. Meantime, much more perilance coming up. All right, folks. Time for three-stock launch. So-Fi hire after reporting a narrow than expected loss for quarter number four. Upbeat outlook as well. Lucid group lower amid speculation it could be acquired. And Goldman Sachs up nearly 2% on the day. Let's trade them all with Erie Wald. He's managing director and head of technical analysis at Oppenheimer. Let's start Ari with So-Fi. Like it? Loat it. You could trade it higher. But not tactical right here. I think what's notable is it moved above its 200-day average.

For the first time, since falling below it, December of 1, I think that indicates both internal breath is broadening in getting this rotation into laggards. So usually if you're in it, you stick with it next resistance at $8. If you're not, you're looking to buy closer to $6 support. All right, there we go. Now we're already showing SOFI there, area, 13% nearly today. What do you make of that? What would you do with the stock?

The SOFI is the one we'd, really, that's the one I was just mentioning there. I think what's notable is it just moved above its 200 days. So for now you're sticking with it. I think, again, market breadth is broadening out. $8 is next resistance on the downside $6 support. I apologize, but you very well restated your case. What about Lucid Group? Are they going to do price cuts next?

Yeah, let's go the other way on Lucid, Kel. Yeah, this one reversed lower and it's two. 200-day average on Friday, that's notable. That's, I think, upside fatigue here. We see that as a near-term opportunity to sell long-term strength, generally just cautious below that 200-day average, marking resistance at 1450. Erie, your clock is 10 minutes behind. I just want to point that out to you. But never mind that. Let's go to the final question, and that is Goldman Sachs. Yeah, I like this one, Ty. We're bullish capital markets, and the reason why I think you want

exposure to what is going to be more market upside here. And I think this pocket of financials is really a great way to get that exposure. It's a broadly strong group. Here's a stock that had a great run in that October, November period. It's since softened, I think it's building a base above its 200 day, around $340 support. And I think really just stands to benefit from this next round of bull market rotation. You're going to go from the laggers that we've seen more recently to what were those leaders that have lagged work. Quick thought on the markets, down 202 on the Dow after what has been so far a very good month. Are we just seeing run of the mill profit taking or is this something having to do with the Fed? Yeah, I think this is consolidation after a big

run. It's, it's the trend improvement has been there. It's been with a broadening amount of stocks and the right amount of stocks too. So for all those reasons, I think it is strength that should continue over the coming months. All right. Harry Wald, thank you very much. It's actually really almost three o'clock it's not 10 of three as aries clock says unless he's on some kind of delayers maybe he's on a serious delay thanks for watching power line