Power Lunch - China Concerns, and Hard Landing Imminent? 3/6/23

Episode Date: March 6, 2023

China is predicting modest growth for 2023. But wasn’t the country supposed to come roaring out of Covid lockdowns? We’ll explore that plus the renewed push for a TikTok ban in the U.S., and government scrutiny of investments in China. Plus, we’ll talk to a market watcher who says the economy is headed for a hard landing, so the Fed should just keep raising rates anyway. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch. I'm Joe Kernan alongside Kelly Evans. I'm in for Tyler today, and it's an interesting, if you haven't been here, you wouldn't know, but we have no cameras. Welcome aboard. Do they bring cameras eventually? Well, we can only hope otherwise it's the podcast. Coming up, China predicting modest growth for 2023. Wasn't the country supposed to come roaring out of the COVID lockdowns? Plus, a renewed push for a TikTok ban and government scrutiny of investments in China. And we'll talk to a market watch. who says that the economy is headed for a hard landing. I haven't seen this gentleman in a while. I'm glad we'll be good to see you. You do the Pepsi CEO all the time.

We're going to be talking about all these things and much more, whether the Fed should keep raising to get it over with so the next bull market can begin. But first we'll get a check on the markets and see how they're holding up today. There we have the Dow up just 26 points. Nothing like the picture earlier when it was up almost 200. By the way, the Russell small caps are down 1.5%.

So a very different feel there. And the 10-year yield, which was looking much calmer this morning, is now heading back up towards 4%. Let's get to the NASDAQ for more of the big days. Movers with Christina Parts and have a list. Christina. Thank you, Kelly. Well, shares of Apple right now driving the Dow just barely into positive territory.

Apple is up. Look at that over 2% right now after Goldman Sachs initiated a buy rating with a price target of $199 on the stock. The stock is trading at 15460, so that's at least 30% more than Friday's close. And this comes even though Apple's sales fell 5% in December. That was the first quarterly decline since 2019. The Goldman Sachs analysts argue investors should focus on Apple's user base and its reoccurring revenue growth from services,

which they say is going to be the main driver for Apple's growth over the next five years. And I've got a tech theme today. So let's talk about Netflix. Also higher today after getting a vote of confidence from Morgan Stanley analysts. They say Netflix is a top pick ahead of an anticipated market bottom. So not necessarily good news, but shares are up 310% right now. And last but not least, shares of digital media company Snap are having their best days since November. They are up right now, up 10.5% after the U.S. House Foreign Affairs Committee voted to

advance legislation that would give President Biden authority to ban TikTok. Banning TikTok means firms like Snapchat can regain lost market share. And then you also have some other app-based streaming and social media companies like Pins, which operates Pinterest and meta, which owns Instagram. They're also trending higher on this news, but still coming off the highs of the day. Kelly, and Joe. Christina, thank you very much. China opening its annual National People's Congress Sunday with the premier laying out the country's economic roadmap,

announcing conservative targets for 2023 with a key focus on chips and defense. Let's get to Eunice, you, and she's in Beijing with the latest. Eunice? Hey, Kelly. Well, the GDP growth target was set at around 5%. So this is lower than expectations and last year's forecast. The Premier had indicated that most important is to boost domestic demand. And he also flagged some risks to achieving that, such as some of the problems in the real estate market,

which he described as unregulated expansion and a jobs problem. Now, the unemployment rate is targeted around 5.5%. So this is allowed to be slightly higher than last year. The fiscal deficit to GDP is forecast to reach 3%. So a bit of an expansion while the quota for some special local government bonds, which are used to fund infrastructure projects, is going to be scaled back. There is more money that's going to be earmarked for defense and technology, especially for chips. And this is all coming as the government through the Premier, calling for the whole nation to have a strategy and feel motivated for technology breakthroughs. Guys?

All right. Very good. For more, Eunice, Eunice, that's the second time I've seen her today. Well, it's the first, you know, for her, it's the middle of the night right now. It's like, it's a middle of night. Crazy. Unis, thank you. I didn't see you today, but I see you a lot again in the morning. On your other show. On my other show. Michelle's here, but let me introduce her.

For more on China's economic projections. And what it all means for the rest of the world here on set is Michelle Caruso Cabrera, a CNBC contributor, and Dennis Uncovich, partner at Meyer Uncovich and Scott. works with U.S. companies doing business in China. Did you, Michelle, I'm going to reference Dennis with you. Did you read Dennis's notes? I thought they were very interesting about this is the most powerful leader that China's ever had, even superseding Mao Cey Tung. And I'm trying to figure that out, Dennis. I guess in terms of length and in terms of just absolute power, you would say. So let's say that China is like a three-legged stool.

It has three legs. One is the economy. One is the military and one's the CCP, the Chinese Communist Party. Mao only had control of two of those. Xi Jinping as of yesterday, I guess it's yesterday on Sunday, became the president. And he now totally controls China. That's why I think he's more powerful today than Mao ever was in the best of his years. What is that exactly?

Is that good for us or bad for us? I can't imagine that that is good for us, especially with Michelle, some of the recent pivots that the country's made. I thought it was all about growth. Now it's about global hegemony. You know, and you walk into a fancy store and they say you broke it, you bought it. Xi Jinping owns the Chinese economy now. And let's see what he does with it. So far, he's been very anti-business.

He claims he's going to be pro-private sector, and yet everything that's been done recently appears to be anti-private sector. There's this hope amongst some that he's going to become pragmatic, and because he's going to need growth, he's going to start making decisions that are actually good for the economy. But I don't get that impression at all. There's a report from the Wall Street Journal that we're going to hear later this week. It's actually been leaked to several outlets that imagine if we took the Federal Reserve and the Treasury Department, took them away from the government and put them all together controlled by one person in a party. that's what's likely to happen under Xi Jinping. That's how much control Dennis is talking about, right?

It's extraordinary. How does it work out when you have so much government control over an economy? You think they're going to grow a lot? I don't think so. And Dennis, to that point, I mean, the government and the Chinese Communist Party are two separate entities,

even though we usually lumped them together, but people are saying that this is now really the takeover by the Chinese Communist Party of the entire government now. It is going to be the takeover, of the total government by the CCP, the Chinese Communist Party. There's a great proverb from China I love. It's the mountains are high and the emperor is far away.

That's from Yuan Dynasty 800 years ago. But the point was the people in the countryside or the other local governments sort of could do what they wanted because the emperor was far away. Xi Jinping is now up front, in charge, and he's saying, we, the Chinese Communist Party, are essentially going to control everything. And as Michelle just said a few minutes ago, we're going to have to sit back and wait to see what happens. But this is something that is a real challenge, I think, not just to the United States, but to all Western democracies. We had Speaker McCarthy.

I saw. Watch the whole thing. He is feeling really good, he says, about engendering some bipartisanship. Guess what it was about? It was about a China committee. And that's how important this. In fact, you know, because he was on, you know what I'm going to do? What are you going to do?

We'll run a sound bite. Okay, go for it. Here's the speaker from this morning. This isn't about defense. This is also about just not our security, but our technology and our supply chain. What China has done is done these five-year plans to go after certain parts in certain industries, and now we've become dependent upon them. And this is that we can come out with one voice, Republican and Democrat, an American position,

that we bring those jobs back to America, but we don't have. us dictating these business how to do it. But we don't be beholden to China in any industry. I asked if he was going to Taiwan. He deferred. Did you see the reporting on this? So he is going, not going to Thai. Speaker Kevin McCarthy will not meet with Taiwanese president in Taipei after all.

They persuaded him to move the meeting to California instead to avoid upsetting China. This was an FT scoop from just a couple of hours ago, probably after those comments. He wanted to visit in a show of boldness as Pelosi had done. but they shared intelligence with his office about the Chinese threat to get him to reconsider. So they said we're going to spend 7% more. And this is to Dennis or Michelle. Seven percent more. I said, that's a lot.

They haven't raised defense spending in decades, right? But it's up to 250, something like that. But we spend 800 every year. But they said it was for some special. But why are they ahead in hypersonics then? I mean, look what they have to show for the money that they're spending. Well, they're clearly very worried, right? They want to be able to control the navigation of the seas around them.

They want at some point to be able to take Taiwan in some form or fashion. The one data point I would point out to you is they spend even more on internal security and surveillance than they do on defense. Which is both scary, but also maybe an Achilles heel in the long run. If that continues to siphon money away, they don't have endless funds here. Oh, when you hear the reporting today about what the vice premier said, he said, we have got to deal with local government debt immediately. This country is so indebted. I want you to think of China like a vast swath of Puerto Rico's and Illinois.

Okay? And they are so in debt. There are some areas that are spending 75% of their revenue servicing their debt. Wow. Why can't they have higher growth? Because they cannot spend money. They're going to have to fix balance sheets. You know what it takes to fix a balance sheet?

I mean, that means you're going to have some kind of balance sheet recession where you can't build roads and bridges and hire people. You're just paying down debt. And you meant more than one Illinois. Because I've heard anchors on TV call it Illinois. Yes. But that's not. That was not what good.

Dennis, I really thought that she's most important priority was to raise the standard of living for the average person living in China to getting close. I don't know, what's GDP now? average GDP, $8,000 or something? Is it gone up? Oh, you mean per person? Per person.

Yeah. And all of a sudden it seems like he's tacking to where, I mean, I guess Putin did it. Putin's not worried about the standard of living in Russia. Is it the same, does that analogy hold true for what China's doing right now? China's had a 30-year run where they had great growth in really until the last couple of years. I think he has enough, she has enough power to say to the average Chinese person, be patient, I'll get to this, but there are bigger issues out there. One of the things we haven't talked about yet is technology.

Clearly, Western technology has been dominating China for the last almost 30 or 40 years. C now recognizes that he has to have his own level of technology or to play nice with the United States. And it's clear to me he's not really wanting to play nice. And so that's something that I think, and I think Michelle has spoken about this on some of our other interviews, about where you have reverse Sipheus, where we in this country may say, you're simply not going to get our exports, and you may not be getting our money.

Am I right about that, Michelle? Yeah, yeah. So Sipheus is the Committee on Foreign Investment into the United States. This is a committee made of cabinet members who say, no, you, mostly Chinese companies, you cannot buy this company here in the United States.

What if we did in reverse, and now we have cabinet members saying, to American companies, you cannot put your money into China. Right now we have outbound export controls. Invidia, you can't send that chip. But now what if they say, Sequoia, you can't send that money? But that's another level of regulation.

Totally. And so people go, okay, well, maybe obviously really sensitive areas they would start to clamp down. But, you know, I mean, sometimes you think of the bellwet. We think we're talking about Starbucks. We're talking about McDonald's. So the question is, would they clamp down on or to investment firms? Would they start having to look at it piece by piece? Or would it begin with?

No, obviously those that are most sensitive and everything else. we kind of look the other way. Your question is, what is the scope of it? They've been arguing about that for two years. The original legislation, because they could either go through their White House with an executive order, or there could be legislation. The first round of legislation two years ago was so broad. The U.S. Chamber of Commerce said every single sector is going to be beholden. Now they're talking about artificial intelligence.

They're talking about anything related to the PLA. That's the People's Liberation Army, the military, and anything related to personal data. Hmm. You saw Mobius. I did see Mobius. Is that different or he says they're not saying you can't take your money. We want 20 years worth of records for him to get money out of it. And he was a big China bull.

Oh, yeah, yeah. He's changing his. So Mark Movius is a long-time Chinese investor and a longtime bull. And he has said recently that when trying to expatriate dollars, he hasn't been able to get them. Can you get him out. Suddenly there's all this new regulation. was that you leaving China could not leave with more than $50,000. And yet, Chinese people own vast swaths of Vancouver,

San Francisco, in 57th Street. So obviously, they can, you know, open the window or not. And now they're obviously clamping it down. We did ask Derek scissors about the same issue saying, is this new or not? And he just said, listen, if it happens, as Mobius reports, it just is evidence of a clampdown of whatever has been the official policy that would be more sensitivity going into this Congress, for instance, who know?

Dennis, I'm sorry. We have three hours in the morning, Dennis. It's different. I'm going to, we're going to call you. Okay, will you answer? Sure. All right, good. Michelle, you're already on all the time.

Dennis is great. You should have more often. He is. That's what I just, yeah. You're going to steal. Is that okay? You know, yes, actually. I've seen other people poach when they come on, on Squawk, box.

They do for a living. I do watch sometimes and they go, you know, we should get that person. They're really good. I totally do. Quid pro quo, Clarice. As we were just discussing, the White House is working on new curbs for U.S. investment. In China, let's bring in Kayla Talshi with some new details, actually, on what exactly Kayla this program could look like. Well, Kelly, the Biden administration is requesting at least $10 million in new funding.

That's on top of $20 million secured at the end of last year, all to monitor outbound private equity and venture capital money in adversarial countries. The agencies who briefed Congress last week didn't mention China by name, but the end of the end. goal here. It's to rein in China's military advancement. Last week, the Treasury and Commerce Department sent two extremely brief, nearly identical reports to Congress, according to copies I obtained, that say work is ongoing to ensure clear definitions and scoping as necessary to facilitate swift implementation and achieve the objective of preventing U.S. capital and expertise from being exploited in ways that threaten U.S. national security while not placing an undue burden on U.S. investors and businesses. But behind the scenes, officials are still

disagreeing on just how broad to make this program, there is consensus to screen and possibly prohibit funding for semiconductor and quantum computing investment, but expanding it to include artificial intelligence, which touches a wide swath of industries and could have ripple effects. That would be much harder to police. That's where there is not agreement right now. Sources say the administration is discussing a one-year pilot program to try to refine some of those issues, but there's no word on when it could all go live. Earlier today, Commerce Secretary Gina Romando said no decisions have been made. Kelly?

Kayla, great stuff. Thank you very much. Kayla, Taushi with some fresh details. Coming up, markets are heading higher today or at least trying to. The Dow with a small gain for the year. But as people fear a hard landing, my next guest says, bring it on. He'll explain his thinking. And then later in tech check, SoftBank is going to the cash machine looking to raise money. It's not what they're doing, but especially where that makes this so interesting and important. We'll explain. Welcome back to Power Lunch. As stocks look to build on last week's gains, our nexus says, bring on the hard landing. He thinks it'll happen and that the market should go full speed ahead. Joining us with his strategy is Hugh Johnson, chairman and chief economist with

Hugh Johnson economics. Hugh, it's great to see you. And this is, I've seen a lot of takes about hard, soft, no landings and all that. This is the first time I've seen someone say, give me the hard landing, bring it on. Yeah, really simple, Kelly. You know, I've looked at all of the so-called cycles since 1890. In each case, you get, of course, a bear market that's accompanied by really followed by an economic recession. And in 23 of the 25 bare markets that are but accompanied by recession since 1890, the bear market has ended and the whole market has begun in or during the recession. Not before, not after, but during the recession.

And, of course, the reason for that is pretty simple. and pretty straightforward, and that is, when you get the hard landing, when you get economic numbers that are not very good, that's when you get a change in public policy. That's when the Federal Reserve will start to lean towards less restraint. We'll start to maybe not just pause, but maybe lower interest rates. And that's when prospects for the economy and earnings, importantly, start to get better, and that's when stocks turn. So bring on the hard landing. I don't think it's going to be a severe hard landing. Let's have it. Let's get it over with because it's during that hard landing that you're going to get a turn for the better

in both indicators that lead the economy as well as stock prices. Right. So I guess the other camp here would say, no, we want to, it's not that we want to delay the hard landing. We want to avoid it all together. And we think we can't avoid it. And it's going to be somehow, I don't know what the rationale is as to how that can happen. But do you think that there's hope that the hard landing can be avoided altogether?

Of course. There's always hope that we're going to be wrong. The forecasters are going to be wrong. They've been wrong many times in the past. We could avoid a hard landing. We could have a soft landing. But, Kelly, when you take a look at the numbers, look at the index of leading economic indicators declining for 10 successive months.

It's done that 10 times since 1960 and on eight occasions. We've had the recession. Take a look at the yield curve. I know a lot of people want to criticize the yield curve. It has a really good record of forecasting. recession. So yes, you're right. We could avoid it. We might not have it. I don't think that's going to be the case. The numbers right now tell me we're headed towards a hard landing, although it's not likely to be very severe based on a lot of factors. I mean, what's the playbook,

as people that are weighing, and of course, listen, at some point, let's just fast forward and I guess get it over with. But what's the playbook for an outlook that says we are going to have a, we're are going to have a recession. We are going to have a, you know, a worsening bear market. How should people be positioned until and until that happens, right? Because if we all, if everybody wants the recovery, but you have to wait for the bare market to get the recovery, then what do you do in the meantime? Yeah. You take your, you take your clue, quite frankly, Kelly, where you should always take your clue. And that's from the financial markets themselves. We're getting some fairly interesting numbers coming out of the financial markets. You know,

between the beginning of 2022 and basically October 13th, you saw the markets performance, bare markets performed. But since then, you've had some fairly positive, interesting performance. You've seen bull market sectors like materials, industrials, and technology, host good relative performance. You've seen small capitalization stocks, outperform large capitalization stocks. No, the market's performances have changed. And the reason it's changed is because investors collectively, And those sectors are at the top now. Those sectors are the basically investors are really anticipating the outcome that I'm talking about. They're anticipating the typical hard landing and during the hard landing will get a change in policy.

The Fed will pause, even if we're not at 2% inflation, I think. And the Fed will turn policy. And when they turn policy, things like the index of leading economic indicators will turn for the positive. And that's when stocks will turn. So, you know, financial markets recently, very recently, and again, I say since October 13, and they're performing better in anticipation of an outcome of the sort I'm telling you about. So they're getting, it might get worse before it gets better, but they're kind of looking past it either way. Hugh, it's good to see you this afternoon. Thanks for your time.

My pleasure. Hugh Johnson. All right. Further ahead on the show, today's Clean Star. We're going to take a look at one company that removes carbon dioxide. from the air and then turns it into diamond. We're back in two. Welcome back to Power Lunch. It's about 90 minutes of trading left now in the trade.

Wait a minute. The markets are trading? Unch. We almost have an unch on the Dow right now. We never have that happen. Yes. You don't have to do the math between the implied open. We do.

We have the pre-market trading, but not an actual session. Let's get you caught up on stocks, bonds, and the economy. Wow, how much time is this we've given this guy? starting with a gain for the market to the start of the week. Did you hear what you got to cover, Bob? No pressure. No, he's doing the stocks part. Oh, you're just doing the stocks part?

Okay, that's easy. That's easy. Do the Russell 2000 for us, all 2000 of it, Bob. It's having a tough time of it today. Let me just show you what's going on here because you live by bond yields. You die by bond yields. We had a great start. We had yields lower.

And in the middle of the morning, yields started creeping up again. And the markets lost a lot of the steam. Remember, lower bond yields, lower interest rates, the growth people love it. So tech's been roaring since Thursday. Communication services. Caddy Woods Arc Fund has been doing great. You see now flat to slightly down, all of these were a lot higher. Energy's now up.

It had a terrible start here. And you know what's been going on with energy, Nat gas collapsing. A lot of these big Nat gas stocks were down 4 or 5%. They have recovered a little bit. EQ2 range resources. Devin, Cotera. Some of these stocks have amazing yields. Devin's got a 9% yield right now.

Cotera's, that's got a 9% yield right now. But remember, the prices are down there. Metals and mining, some of these are China stories today, but the coal stocks have been terrible. So Peabody, Consul, Suncoke, some of the other metal names like Century Aluminum. Some of the steel stocks also are weak. Overall, you've got to admit, Joe, 120 points in the S&P since the middle of the day on Thursday. That's a 3% move in the S&P 500. So we've come off of that here today a bit on the yields moving higher, but it's been quite, quite a run in the last couple of days.

Kelly, back to you. Bob, thank you very much, Bob Pisani. Over in the bond market, this is what Bob was referring to. Yields went down this morning. Now they're back on the rise, and we've got the yield curves inverted to worry about. Rick, what's the latest? Rick Santelli. Well, you know, we saw data today, and if you stripped out transportation in both factory orders and durable goods,

the numbers that remained were actually pretty good. And I think that's partially the reason we saw rates reverse from lower to higher. And as you look at a two-year versus 10-year spread, you'll see that right now we're hovering very close to the minus-90 basis points. We closed that on Friday. And it's very key because if we start to get just a smidge more inverted, of course, we'll be looking at a fresh four-decade inversion on that spread. And we continue to monitor that because, of course, it seems to course. very highly with recessions. But something is gone awry and what really is the three month to 10 year, the actual recession spread. And what has gone wrong is let's look at three months to two

years. We see that the coupon curve has made up a lot of ground with T bills. We are now looking at two years higher than three month bill rates. You can see how much it's changed year to date. And that has made the three months to tens a little bit more steep or less inverted at minus 89 basis points. So we're going to continually watch twos versus tens to be the harbinger of potential recession news because three months to tens most likely is going to end up a little bit less inverted due to the dynamics of bills and the coupon treasury curve starting to get closer together. Back to you. It was good. It was good. Rick, thank you very much. The final key here is oil prices, which are back in the green today after trading lower even this morning. Those growth projections from

China, a key driver, but the big energy story today, Nat gas falling. Let's see, latest check was about 13%. 14%, there you have it. Got to get PIPA back. It's coming off a huge week, though, when Nat gas did go up 20%, still 258, so it's way down since Jan 1. And on closing bell overtime, CEO of Baker Hughes will join the crew 4 p.m. Eastern Time with more on this unique situation. Let's get to Bertha Coombs now for the CNBC News Update. Bertha? Hey, Kelly. Here's what's happening at this hour. Norfolk Southern. pledging to pay several million dollars to Pennsylvania to cover the cost of the response after last month's derailment there. Pennsylvania's governor Shapiro met with Norfolk Southern

CEO and secured an initial commitment for financial aid as the cleanup from the February 3rd derailment continues. Norfolk Southern already made a similar pledge to the state of Ohio to cover the costs of cleanup from the Palestine derailment that toppled 38 rail cars. Two planes set to leave Boston's Logan Airport this morning made contact. That according to transportation officials. The incident took place as a United Plain leaving for New Jersey made contact with another United Plain that was set to fly to Denver. No one was injured, but this comes less than a week after two planes had a close call at the same airport.

And Notre Dame Cathedral is set to reopen to visitors at the end of 2024. The reconstruction itself started last year after the cathedral's iconic spire collapsed in a fiery braise in 2019. More than two years of work went into making the monument stable and secure enough for artisans to start rebuilding. And Kelly, one of the things that they are really working on is to make sure they can recapture the sound, the acoustics. That's going to be a big challenge. Wow, and probably make all the difference for the experience that people have. Bertha, thank you very much. Bertha Coombs.

Right. That's great. At least it's saved, right? Amazing. That's really pretty quick, honestly. I guess. When you think about how. Took them a couple hundred years.

Right, exactly. It's a small amount of time. But end of 2024. A head on Power Lunch. The soft bank-owned chipmaker arm holdings, reportedly raising at least $8 billion in the U.S. for an IPO will dive deeper into today's tech check. Power Lunch.

We'll be right back. Welcome back. It's time for today's tech check. Deirdre Bosa and San Francisco, Deirdre, with some, look, IPOs are not dead, although maybe they are if you're in London. I don't know. No, I mean, the window's still shut, but we're getting signs here. We've talked about it. And the first major IPO in about a year could be a big one in terms of both money raised and market valuation. That would be soft bank owned chipmaker arm. It's reportedly looking to raise at least $8 billion in a U.S. listing at a valuation of $30 to $70 billion. That is a huge range. And it kind of tells us where we are right now in the IPO and semiconductor landscape. Chip stocks, of course, have been extremely volatile over the last 12 months, weak in terms of consumer. enterprise demand, but exciting in terms of the secular trends of digital transformation. Of course, the chat GPT AI hype. The IPO windows we have discussed has been frozen shut. So you might expect that banks are vying to get into this deal. And that may also account for that wide range. Here is RMCO, Renee Haas, on Tech Tech just a few weeks ago talking about the IPO.

We're being very careful, as you said, as we're preparing for an IPO. We are fully committed to making that happen this year and 2023 and plans are well underway. So we need to balance that with hiring and making sure that we're able to capture the long-term opportunity, which we're most excited about. Arm itself occupies a very unique strategic position in the chip space, one that soft bank CEO Masayoshi-san hope will lead to what he hopes, quote, the biggest debut in the history of the semi-industry. Now, the UK-based chip company designs core chip components across the tech ecosystem. So when we talk about Apple's M1 and M2 chips, changing the game for processing power and putting Intel on the back foot, we're talking about Arm. It's at the center. Arm's designs. They're also powering Amazon's latest cloud computing technology, helping it to become more vertically integrated. And more broadly, guys, it's allowing more and more tech companies to bring more chip design in-house. So for SoftBank and Mossistan, the stakes here are very high. And Arm IPO would be a major windfall and helping really to make up for continued losses in the Vision Fund portfolio and, and that sell down in Alibaba. And we know, Kelly and Joe, that Masa San has taken a step away from the big soft bank overall. He's not doing the earnings calls anymore because he is focusing on this

IPO. But by the way, so total combined market cap of listed companies, number one, New York Stock Exchange, number two, NASDAQ, Shanghai, Euro Nex, Tokyo, Shenzhen, Hong Kong, Mumbai, London. That's how far down London is. I mean, is this, is there a Brexit, you know, angle here, I wonder. I'm still, I want to check the math on that range. I mean, did you check that math? Seriously? But then I thought, you know what? Look at a tech stock when it's trading. That's not crazy. We've seen value at market caps move that much in a year easily. Yeah. You're referring, though, Kelly, right, to the idea that Arm is sort of this big symbol of UK tech. And it's supposed to be this giant that many were hoping would actually list in the UK,

but it is going to list in the U.S. And that has come as a disappointment to many. But I think the range, too, is going to be fascinating. I mean, 30 to 70 billion. Invidia member wanted to acquire it for $40 billion. Here's an interesting stat as well in terms of the soft bank picture. ARM accounts for a bigger percentage of the company's net asset value more than Alibaba. Isn't that kind of amazing?

I mean, we associate Alibaba with SoftBank for so long. But MassaSan has been selling down that stake, which really tells you why it is so important. he must get as much out of arm as he possibly can. 40 trillion combined market cap of the Nicene Nasdaq, $3 trillion for the London Stock Exchange. I mean, listen, these things matter. It's a heartbreak for them. It doesn't even sound like it was close.

Deirdre, thank you so much. Good to see you. Deirdre Bosa with Tech Check. Could diamonds be a planet's best friend? Up next, we'll take a look at one startup that turns harmful carbon emissions into high-quality diamonds. And as we had to break,

throughout the month of March, we're celebrating women's heritage. Sharing the stories of women leaders and business and those of our CNBC teammates and contributors. Here's Andrea DeMarco, Regent Cruise Lines president. My advice to women is to follow what you love, find that true passion in life, and work in that industry. What I've found to be really successful throughout my career is I've always looked for ways to challenge myself, really push myself outside of my comfort zone, think out of the box, and learn new things. And of course, as a mother of two young kids, I'm always juggling, whether it's a work or at home, finding that work-life balance is always going to be a struggle, but having a really strong support

system in place will do wonders. And at the end of the day, you own your journey. So make sure you go after what you want. The future is yours. Removing carbon emissions from the air is one of the fastest growing remedies for global warming, but what do you do with all of that captured carbon? Diana Ollick explains in her continuing series on climate startups. Diana?

Well, Kelly, we've seen a lot of creative uses for captured carbon from making bubbles in soda to distilling vodka. And now, shall we say, another brilliant idea. Lab-grown diamonds are becoming big business forecast to reach $50 billion globally by 2030. Names like WD, Clean Origin, Vibranium, and a startup called Ether, which takes Diamond's sustainability to a new, level. Every ether diamond that has been grown until now has been from carbon that was captured through a direct-to-air capture process in the Swiss Alps. Shearman says this makes them even greener than the competition. It also makes them pricier than other lab-grown diamonds, but less so than mine stones. He describes ether's proprietary process as follows.

Captured carbon is converted to what they call atmospheric methane. That is then injected into a chemical vapor reactor, and over the course of about four weeks, the diamond green. The diamond grows atom by atom. So at the end, we're left with something that is unparalleled in its environmental footprint and meets the strictest requirements for cut clarity, color, and carrot weight for even the world's top luxury brands. Ether's diamonds are certified by the International Gemological Institute. The company is currently using carbon purchased from Climworks, a carbon capture firm that operates

this plant in Switzerland, but says they are now pursuing carbon sources. in large cities like Paris and New York, a strategy particularly enticing to investors. Imagine you're proposed to in Milan and in the future, the ability to actually take the air out of the millionies air that day and then putting that on your ring finger. In addition to Helena, Ether is backed by Trirek, Soundwaves, Kozla Ventures, and Social Impact Capital. Total funding, $18 million. Ether's CEO says the company is now expanding beyond diamonds to produce industrial materials like carbon black, graphite, and graphene from atmospheric carbon. They've also shifted

their diamond business from direct to consumer to B to B. Kelly. Does it, Diana, take a lot of energy in order to convert the carbon dioxide gas into the diamond? Less so than other lab grown diamonds. In fact, that's why they say they're greener than other lab types. And while they do have to use some, obviously, to create the diamond, it is much less than you would emit by mining or, as we at other lab ground types. Would, you know, would people have any issue? Trying to figure out. Diana, they're using coal to fire up the grid to use the energy to make the diamonds?

You're sure? That's not how it works. Okay. It might work that way in India and China because that's, you got to power the grid somehow, right? Right. But they're saying that they're using less energy to produce these diamonds and it's offset by the fact that they're using carbon emissions taken from the air. Yeah, I wonder net net.

Net net. How much is a diamond car? Is it similar to the cost of a regular? I don't want to. No, it's in the middle. It's in the middle. So it's more expensive than a lab grown diamond because it takes more to do that carbon capture that they're having to buy from companies like time. It is slightly cheaper than a regular diamond because it's more expensive to mine a diamond.

Diana, you know, my 25th anniversary is next week. And if you make too many of these damn things, seriously. I'm just giving you the perfect idea. I'm going to be really upset if you flood the market with these diamonds. I'm going to be really, that's all I'm telling you. I mean, diamonds are scarce, aren't they? We're going to start making them? Please don't.

Well, what if you're saving the planet by doing it, Joe? I'm not that. Isn't that a little worth it? I think the planet will be okay, Diana. But you know, you know how I feel about that. Maybe humans, but not humans. I know. We'll all be dead.

But that's life anyway. think you should get a CO2 diamond for, yeah, for 25th anniversary. I think you should. I think ether. I think ether should hook you up. That's what I think. I actually gave it the gift a while ago, but it was diamonds. Up next, we're going to trade some key movers in today's three stock lunch. I'm just being exposed to this. Oh, no, actually I've seen it every day. It's on, right? But, oh, okay, then I know what we're talking about. All right. Time for today's three stock lunch. Welcome back, everybody. And on today's tasting menu, we've got Amat trying for a six straight day of gains. Tesla lower after announcing more price cuts for the SNX models in the U.S.

and EQT, the worst S&P performer today as NatGas prices drop 14%. Here to trade all three is Ari Wal. Ari, I'm sorry. He's managing director and head of technical analysis at Oppenheimer. It's like the more you get to know someone, the more you make the mistake. You know what I mean? Anyway, thank you for joining us. And let's start with Applied Materials, Ari. What do you do with the stock? Kelly, just don't call me late for dinner. So the key message coming from our work here is that measurements of credit, participation, and internal breadth are all pointing offense over defense. So for all these reasons, we still expect high beta cyclicals to lead the market higher over the coming months. And one of our favorite industry to gain exposure to cyclicality is our semiconductor,

just given the broadness of the strength that we're seeing in the industry. I was on the show in January. We spoke on NVIDIA, and I think Applied Materials is the tactical setup here. It's a stock that is just getting above its breakout point from last August peak. The levels to watch, that breakout point is now support at $11, and we see runway up to $140 resistance over the coming months. Wow. Amack? That's a big vote of confidence. All right.

I'm just, I like those drink things. Are those martinis? Or, you know better than me. Margaritas? A little bit of everything back there today, I think. But we digress. Is it, Ari, my agency's name is Ari. Is it, but this is Ari.

I will go with the flow. Ari, next up, Tesla. Sure, well, Joe, half my friends call me Ari. If you were to ask my mom, she would say Ari. So we'll go with that. Here's my take on Tesla. We still do like large cap growth as a theme. It's not going to be the same one-way bet that it was for much of the last decade.

And if you were to break it up by sectors, tech growth, we like tech growth, but more so than communication services growth, consumer discretionary growth, and even health care growth. And Tesla would fall into that consumer discretionary growth where we're seeing more relative weakness, which is just to say the stock isn't as far along in the reversal process. In fact, Tesla has bounced and showing signs of moderating. below the bearish slope of its 200-day average, which we do see as a tactical opportunity to reduce position size in the name. Conversely, if you were to see a move above $220, that is that 200-day average. That would be an incremental positive for the trend of Tesla.

All right. So it kind of depends on this. By the way, Judeon, don't call your Ari Ari, because I don't think he would take well to it. No. You can't let this confuse you. This could be career suicide here. Right, right. And on entourage, it was Ari. It was, yes, exactly. And that's based on. Exactly. Exactly.

All right. Final name, EQT, a really tough day today, but is the stock one you would own for the longer run? We would not. We would, this is a relatively weak stock in a sector that has moderated as well. We downgraded energy about a month ago based on signs of moderation in the sector's relative strength. I do still think select, exposure is warranted. But here, too, is an example where it's not going to be the same broad, one-way energy bet that it was for much of the last two years between 2020 and 2022. So specifically,

we would be selling and avoiding the EMP stocks like EQT that have fallen below the 200-day, rotating into refining stocks like Marathon Petroleum and Valero. All right. Airy, thank you. A pleasure. Thanks for rolling with that. Managing director at Oppenheimer. There, and you're really good on TV. You roll with the punches. Are you available in the mornings, too? Anytime, Joe. Give me a call. Harry! That's two I got. That's two I got. That's two I got. Still to come some important drug data out today.

Results of phase two trials for Merck's cholesterol pill. That's next. Welcome back to Power Lunch, shares of Merck rising this afternoon as the company releases data on its cholesterol drug. Another cholesterol drug, Meg Terrell. Selmy, joins us now with more. Well, Joe, this is really interesting. It would be the first pill addressing the PCSK9 target, which, of course, already has two drugs out there that are injectable versions of this. So Merck in a phase 2B trial saying that this pill reduced LDL or so-called bad cholesterol by as much as 61% on the high dose. And they plan to start a phase three in the second half of 2023. So it'll still be a while until this potentially gets to the market.

But J.P. Morgan says it could be a more than $4 billion drug for the company. Merck also released data on a drug called so tatercept, which is for a rare heart condition known as pulmonary arterial hypertension, showing that the drug could reduce the risk of clinical worsening or death from that disease by 84%. An analyst telling me this is also driving the stock higher. We talked with Merck's chief medical officer earlier about his reaction to these results. Here's what he said. Now with this new drug, it's really thrilling to come back to my roots and see that, you know, yet again, we have something that's really going to move the needle, not only for patients with atherosclerotic cardiovascular disease, but also with pulmonary arterial

hypertension. So as a cardiologist, I am super thrilled. And there you have it. So potentially, you know, big moves for Merck. Meg, thank you very much, Meg Terrell with the very latest there. We're out of time. Yes, we are. Thanks for watching, Power Lunch.