Power Lunch - Countdown to the Fed Decision, Nat Gas Jumps & Travel Trouble 5/3/22

Episode Date: May 3, 2022

Markets get ready for the Fed Decision on interest rates. How are consumers dealing with inflation? One analyst says sell these staples. Natural gas jumps to a 14-year high, are even higher prices coming soon? Plus travel tumbles today, but CEOs are optimistic about the summer. Our trader weighs in Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi, everybody, and welcome to Power Lunch. I'm Tyler Matheson. Here's what's ahead on a busy Tuesday. We are one day away from that Fed decision on interest rates, 50 basis points, half a percentage point hike. That's what's expected. But it all comes down to how hawkish the Fed sounds about what it will do in the future, future hikes. That's what the markets are waiting to hear about. And as the Fed fights inflation, consumers are figuring out how to deal with it, what will they cut back on, where will they keep spending? We will talk to an analyst who says, sell the staples, Kelly. Not so stapling anymore, are they? All right, Tyler, thanks.

Hi, everybody. Let's check on the markets. The Dow's up 120 points. So we're well off the session highs, but still higher across the board. The S&Ps actually have three quarters of 1% today. The NASX of 0.6%. And as we know, it's been the last 90 minutes, last hour of trade, really, that's been setting the tone here lately.

So stay tuned. Energy, best performing sector on the S&P right now. Look at Nat Gas, soaring above $8 again today to touch briefly the highest level in nearly 14 years. We're just below that right now. Again, major problem heading into peak AC season in a lot of states. Devin, Diamondback, Cotera, those are the names benefiting from the move higher and energy prices today. All three reported strong results. All three raised their dividends. Here's the yield. Devin yielding 8% right now. On the other hand, you have the travel names getting crushed after expedient, disappointing quarter. They cited wage pressures. The

shares are down almost 14%. Booking Airbnb down about 5%. We'll have more on at a moment. and 24 hours from right now, we get the Fed's decision on interest rates. There is concern about the Fed making a mistake here, but what do we mean by a mistake? Too much, too little? Is there anything they can go back and fix now? Steve Leesman is looking at the confidence in Jay Powell, Steve. Hey, Kelly, yeah, during much of the pandemic Fed chair, Jay Powell got high marks for stewardship of the economy. But the latest CNBC Fed survey showing the outbreak of inflation and the new aggressive effort,

the Fed's going to embark upon to fight it, taking a toll on how Powell is viewed on Wall Street. Take a look during April 2020 and July 2020 in the middle of the pandemic. He got A minuses for his economic leadership. Slightly different question we asked this time. Overall leadership, well, that's fallen now to a B minus for this May 22 survey here. Now, transparency, he gets a B, but moving on now, communication, a B-minus economic forecasting, a D overall, and in monetary policy, he gets a C. Why? Well, the 100% chance of a 50-base point hike in May, 90% chance of a 50-base-point hike in June,

$2.7 trillion expected to come off the balance sheet over the next two years and five months, half a year earlier than the previous survey. And then the terminal rate, we end up at 3.08%. That's in August of 2023, four months earlier, and 72 basis points higher than that. March survey. Perhaps dragging on Powell's marks, the Fed not expected hit its 2% inflation target until 2024, and there's real worry about a recession. Take a look at these results right here. Asked that the Fed's efforts are bringing inflation down to 2% would result in a recession. 57% said yes, 33% saying no, 10% don't know. For the next year, the recession probability is at 35%. But several respondents said the strength of the consumer and the job market and businesses

makes a near-term contraction unlikely. Kelly? And, of course, as we talked about with Annetta Markowska last hour, Steve, we're listening for his language on the labor market, which is already, I think he called it, what was the term he used exactly? It was sort of overheating or something to that extent. That was before the Joltz report, which is probably too late to factor into their decision tomorrow,

but 11.5 million job openings, two for every person looking for work right now. This is unprecedented. Yeah, I think what Powell said was it was strong to an unhealthy extent or something along those lines. He just thinks it's way too tight. And these numbers are not going to give him any comfort. What the Fed needs to do is start to see job openings decline here. Six millions of normal run rate, we're now at 11.5 million. And as you say, rising, we had strong durable goods reports this morning. There is very little sense right now that the consumer has eased off at all with these high inflation numbers or with high.

higher interest rates, all of the concern, I think that's a key part of the report here, Kelly. All the concern about recession and contraction of the economy comes into next year after the full weight of all of these rate hikes ends up hitting the economy. You know that famous phrase, that monetary policy works with long and variable lads. Well, that lag now is seen as August or so of 2023 when a recession is. But near term, it looks like there's quite a bit of strength. All right. Steve, for now, thank you, Steve Leesman. Let's continue our conversation on the Fed with Crossmark Global Investment, CIO Bob Dahl. Bob, welcome back. It's great to see you again.

You say the key unknown right now is whether central banks are going to be able to tighten sufficiently to slow down inflation without triggering a recession. I think as I read my notes of what you said is that you think they probably will be able to do that, that you think there are probably some signs that comparatively inflation will slow. and that the underlying economy, at least in the U.S., is strong enough to avoid a recession, even with the rate hikes as forecast. Avoid a recession, Tyler, for now. I'm with those who are saying second half of next year most likely.

Threading that needle, engineering the soft landing we know is very difficult. But those are calling for recession like tomorrow morning, I think are missing how strong the consumer is, how strong the job market is, how strong corporate balance sheets. income statements are, and the long lag, do you Steve's phrase and variable from monetary and fiscal policy. The ease from last year is still operating on the economy now. It'll take a while, in my view, for recession to show its ugly head. Am I right or am I wrong that Powell is not alone among central bankers in holding onto a very easy money policy, perhaps longer than he should. should have. Well said, there's a whole group to blame, I guess is the way to put it. Look, that word

transitory lasted way too long. In our view and many other views, there were signs that inflation, core inflation was getting perky, and they just didn't seem to want to pay attention. So you have a long lag, the policy mistake, I'll call it that, and the need to restore credibility, as your poll just showed is going to take a bunch of time, Tyler. Yeah, I'm sort of with you on that, Bob. I mean, there are a lot of central bankers who could be sort of plead guilty to the same thing that Powell is being accused of here. And, oh, by the way, there weren't a ton, I don't know whether you were among them or not, there weren't a ton of market analysts who were all that concerned about inflation a year 18 months ago. I want to go back to 2018, the fall there, because I think that's when

I believe it was 2018, it could have been 2019, when Powell started to raise interest rates. And he came under pretty sharp criticism for doing that, most notably by President Trump. And then by December, he had pivoted and he had gone back the other way and let rates come down. In retrospect, was he bullied into lowering rates at that point? And would he and we be better off if he had stuck to his guns back? three, four years ago. Yeah, how and why he did it, whether it was bullied, who knows, but the fact that he did, he went too far and it lasted too long.

Perhaps we shouldn't have gone to zero. Look hard to blame the pandemic and the reactions to it on anybody. We didn't have a playbook for that. I think the problem was waiting too long. As the economy began to normalize in the back part of 2020 and into 2021, that's when the Fed should have said, let's just get rates back. to normal. We don't have to be punitive. Let's just get back off this zero target. And of course, at 1% Fed funds, which will still be under after tomorrow's meeting, and 3% 10-year treasury,

we still have negative real yield. So this is still stimulative for activity. We're not even in restrictive territory yet. Yeah, we're going to have to go higher for longer on rates, it would seem, to tame what we didn't expect we would say, and that is very high historic inflation. Final thought here, what should I do with my money over the next six months? Are there opportunities, are there going to be opportunities in equities? Are there going to be opportunities in fixed income? Where? I think this is a year we're going to frustrate both the bulls and the bears.

So far, we frustrated the bulls. Maybe we'll frustrate the bears. I think the market is oversold to some degree. Look, we have a tug of war here. The earnings picture is still pretty good. I know we could throw cold water on pieces of that. The problem is multiples. They've come down from, call it, low 20s to mid-teens, may have further to go. The question is, can the earnings continue to be okay? My guess is you've got to pick your spots.

Old tech where PEs are single-digit. Some of the financials, like to see them perk up today, including insurance companies. And if you want some strength since the first of the year, some of those HMOs still make sense in the portfolio. That's where I would be shopping. Bob, it's been a while. It's great to see you, sir. All the best. You too. Kel? Well, we've been talking about high prices for consumer goods, but as you just heard, auto prices are near record highs. The street is starting to get worried that consumers have got to start trading down when it comes to essentials. Joining us now is Michael Lavery. He's senior research analyst at consumer staples with Piper Sandler. Michael, it's good to see you. Tell us, first of all, where you're starting to pick up this trade down effect. Well, we haven't seen a lot of it in the history yet. What we really wanted to understand was as consumers become more aware of the,

these price increases and see them more broadly, how are they starting to react? How are they planning to react? Because it really feels like we could be close to a turning point here. And what they've said is that there's definitely trading down they plan on doing and cutting back as well. So it's what you're really picking up on is the intention, the idea, and we've seen this in the saving, right, which kind of captures that monthly income inflow versus expenditure. And that's moving back down towards zero. So it feels like other than the savings that they have in the bank, consumers are going to start to have to make tougher choices here? That's exactly right. And we want to be as forward-looking as we can and try to understand

how they may start making different decisions. And that's where within the group, we still have names we like. Hershey is one that we've very much, we've got a belief in their pricing power. And in this survey, it looks like as a category, candy's faring quite well in terms of where consumers don't plan to make cuts or trade down. But then if you look at things like me, half of the consumers that said they plan to cut back on a category cited that as their first primary place to go. And they've said it's a place where they plan to down trade as well.

We think that's where there's a good amount of risk. Sure. And that's why Tyson is one of the names that you're downgrading to underweight here. Kellogg and Post present an interesting pair trade if you want to call it, downgrading Kellogg, but saying that Post looks like it could be a winner. Why is that? It's a difference in the composition of their serial portfolios. Post has called out pressure on their portfolio in cereal over the last year and a half

because they have a much more value brand skew. And they've seen some pressure as consumers have traded up. And we think that that's more likely to reverse. And then Kellogg is also in a particularly tough spot because they had a strike and a fire at one of their plants in the second half of last year that's really disrupted their ability to supply product and to run promotional prices and events. And so they already have share pressure they're under and to try to restore that in an environment where consumers may have been away from your brands and are looking to trade

down, I think puts them in a particularly tough spot. Well, and a reminder that sector selection alone really may not save you right now. It got to get pretty stock-specific, pricing power-specific. Michael, thanks for joining us. We appreciate it. Thank you. Michael Lavery. All righty, coming up, the stocks are bouncing back.

today, but the damage has been done during this recent tech wreck. The NASDAQ is still down 11% in a month. Up next, we will look to the options markets for any signs of where tech and other sectors might go next. Plus, we'll talk to the CEO of General Electric, Larry Culp. GEELP got crushed last week, Culp, after reporting earnings. We'll find out whether those supply chain problems are showing any signs of easing. We'll be right back. Welcome back to Power Lunge, everybody. The steep drawdown and equities from Thursday's close, it's still not recovered, as all three major averages remain about 2% off those levels.

My next guest has seen a wave of activity and options and names that reported last month, including Pinterest, Snap, and Meta, and says options volume seemed to point to the thesis that dividend names are no longer as attractive to investors. Joining me now is Chris Murphy. He's co-head of derivative strategy at Susquehanna. Great to have you back, Chris. So overall, what's options activity telling you about the next move in this market? Well, you know, every option indicator under the sun, every volatility indicator, sentiment positioning, et cetera,

all screaming for a near-term bounce. You know, obviously the longer-term U.S. economic growth, recession or not, that's going to indicate, you know, the longer and medium-term stock market direction. But all those traditional capitulation indicators, VIX term structure, put-call ratios, AIA, bullbear, that have worked so consistently over the last 12 years are flashing right now. I would obviously point out that, you know, the last 12 years, we've had a mostly accommodative Fed, relatively low inflation. So you've got to keep that in mind.

But those traditional options, time for a rebound indicators are flashing right now. In other words, you look, you're saying we could see a little bit of a bounce here. It's funny. I know people feel bad being bullish right now because that's the kind of market that we're in. Well, yeah, and I'm talking about a near-term bounce. So one parallel that we've been looking at recently. So the last two Fridays, 97% of S&P components sold off. That's a broad, you know, all-hands-on-deck sale where investors are aggressively unloading risk into the weekend. That has not happened in over 10 years. The last time that happened was in 2011, September. So the good news, that was towards the end of that bare market. And we did see, a pretty sharp bounce right afterwards, about six or seven percent. You know, the bad news from the low on that second Friday, S&P still traded down another 6 percent.

So a lot of these parallels, I wouldn't necessarily say bullish in the medium term, but a lot of these parallels do point out that, you know, we are due for one of these bounces and we'll see if we get it. Well, who knows? I mean, yesterday, Kelly, when you and I got off the air, we were down about 500 points, and then I go home, and I find that we've ended up by 85. points. So maybe that bounces in there after that Friday phenomenon that you just referred to. You point also to retail option trading that small lot call activity remains near pandemic lows and that

that has been on the rise suggesting that retail investors are chasing down trend. It's chasing, chasing, chasing. When they do that, is that a signal, a contrary indicator? Let me put it that way. Well, yeah, so here's what I would say. I mean, if we think back to 2011 meme stocks, a call volume, all those things, you know, is a strong market to the upside. We saw a lot of small lot call volume. Now, fast forward to right now, that small lot call volume is back down towards post-pandemic lows. Now, not necessarily seeing a surge in retail put volume, but it's definitely way more. evened out compared to, you know, the frothy 2011. And, Chris, 2021, yeah. What are you garnering here about dividend plays, that they're becoming less attractive? Well, you mean, just today, and we've been looking at this for a little bit, so I'm talking

about the consumer staples that pay the higher dividend. We've seen a ton of put buying, put spread volume in the XLP, already an all-time high in put volume for that product. we're also seeing similar, this is all in June, similar put spreads being bought in Coca-Cola and J&J. And it kind of goes back to that 95%, you know, all hands, everything gets sold at the same time, kind of sell off. The consumer staples have held in a lot better. But if we get, you know, a final flush of everything in the market, you're getting much lower, much cheaper volatility exposure in a lot of those names. So if everything gets hit the same or if the outperformers get hit more,

that's a good place for risk-reward downside plays as hedges. All right. Well, Chris, the market didn't like your bullishness. Dow's now gone negative by 22 points. It's a dangerous, like Tyler said, every time you turn around these days, it's a different market. Chris, thanks so much for joining us. It's good to see you again. All righty.

Further ahead on the program, the General Electric Slide. The stock, I'm going to do that dance. The stock off 18% this year coming off the cost. lines, a rough quarter. We're going to speak to the CEO, Larry Colt. Plus, travel stocks caught in some bad weather. Expedia down more than 10 percent following week results. Hilton down. Guidance disappointing. China weighing on the company we'll discuss in today's free stock lunch. Welcome back to Power Lunch, everybody. April's auto sales numbers aren't off to a great start. So what are the numbers telling us about the future direction of sales, prices, inflation? Let's get to

Phil Leboe. Hey, Phil. Hey, Tyler, these are not horrifically bad numbers, but remember, we're comparing with April of last year when there was more inventory, therefore sales were higher. And what we're getting here is a snapshot based on those automakers who report on a monthly basis. So the numbers we've gotten so far today, you've got Toyota, Hyundai, Kia, just a little snapshot of where the industry is at, down anywhere between 15 and 23%. The average transaction price, it remains close to a record high. Why? Because demand remains strong, and there's just not the supply of vehicles. I mean, you go into any showroom right now, you're unlikely to see much different than what we're showing you here right now. This is what it's like around the country.

Dealers have really, really thin supply on their lots, average transaction, by the way, just under $45,000. The chip supply, it continues to hinder production, but it is gradually improving. And that's why we need to take a look at the auto stocks over the last three months. We've talked about this. The overall production rate is gradually increasing. The inventory levels are gradually improving, but we're still way far away from where we should be in normal times, pre-pandemic levels. Usually you have three to four million vehicles in inventory. Right now, it's under 900,000. So that's a little bit of the snapshot of what the industry looks at right now. Guys, the bottom line is this. April sales, a little better than March, but still nowhere close

to where this industry usually is this time of year. I don't want to take you down a blind alley, and this sort of comes out of left field. What's going on with used car sales, and used car prices. I heard, I think it was Jim Kramer last night saying used car prices may be peaking and ready to roll over. That's the expectation that they are, if they haven't already started to roll over a little bit, that they have hit a peak. But let's be clear, they're not going to fall off a cliff. There's still so much demand that's out there, Tyler, and they're so limited inventory

that you will continue to see high prices on the use side as well. I can't, you can't stump Phil. You just can't stump them, man. Stump the Lebo. That's the new game, man. Phil, thank you. All right. Let's get to Christina Parts and Ivelis now for our CNBC News Update. Christina? Thank you, Kelly. Here's your CNBC News Update at this hour. So K. Ivey, the Republican governor of Alabama, telling reporters the leak of the Supreme Court's draft decision is outrageous and not acceptable, but that she is hoping and praying Roe versus Wade is overturned. Alabama's among 26 states likely to ban or impose extreme limits on abortion if the ruling is. overturn. Meanwhile, Democratic Senator Joe Manchin of West Virginia remains opposed to ending

the filibuster despite the possibility the Supreme Court could overturn Roe v. Wade, ending the filibuster is likely the only way Democrats would be able to pass legislation to protect abortion rights due to their slim majority over Republicans. An Oklahoma judge ruling a lawsuit seeking reparations for survivors and descendants of the 1921 Tulsa Race Massacre can proceed. Tulsa's Greenwood area, was once the nation's most prosperous black business district before being destroyed by a white mob. And take a look at this video of a person scaling the side of the 61 floor sales force building in San Francisco. Gosh, that's scary. The climber made it all the way to the top and has since been detained by authorities.

Safely, though. Wow. After all that, he gets detained. That's his reward. No, the video and the viral recognition is the reward. I guess that's right. We're talking about it, right? There you go. Spider-Man. All right. Spider-Man.

Thanks, Christina. All right. Ahead on Power Lunch. The brawl in the Buckeye State, a contentious race forming in Ohio with a ton of money pouring in from unlikely places, people, and organizations. We'll discuss that one. Plus natural gas soaring once again to its highest level since September 2008. This says the ongoing Russia-Ukraine war continues wreaking havoc on global energy. markets. We'll get the latest from Bank of America's Francisco Blanche after this.

Welcome back, everybody. 90 minutes left in the trading day. And we want to get you caught up on the market, stocks, bonds, commodities, and the massive rally in natural gas. We are losing some steam this afternoon. The Dow was up 280 points at the high of the day. Small cap Russell 2000 up more than 1%. But right now, you see the Dow is down by 31 points, kind of the flip of yesterday. when it spent most of the day down and then ended the day on a positive note. Energy, the best performing sector, Exxon, Chevron, both higher. More on energy coming up. Don't get too impatient, we promise.

Financials are doing very well ahead of an expected half-point hike from the Fed coming tomorrow. Citigroup, Bank of America, J.P. Morgan, they are all higher. Let's move now to the bond market where so much of the action is these days. And Rick Centelli, Rick. Thanks, Tyler. You know, yesterday, all maturities, two, three, five, sevens, tens, twenties and 30s, all made new cycle, high yield closes. Look at a two day of tens. We've traded above three percent intraday two days, but we haven't closed higher than three percent at or higher than three percent since the 29th of November of 2018. And that is important because many systems that are automated in this day of computerized trading have what is known as triggers. and many times it triggers based on closing prices.

Look at a 24-hour chart of boons. Big news overnight. They finally breached 1%. And if you put a stopwatch to your one-minute charts, you'd find less than 60 minutes of cumulative trade was at 1% or higher. And they didn't close there. As a matter of fact, they haven't closed above 1%

since September of 2014, even though there was intradate trades in 2015. And finally, December Fed Fund futures are on pace for a new continent. contract low. And the contract first traded December 31st, 2019. At 9723 plus is now implying 276 and a half basis points of total Fed tightening. Tyler, back to you. Rick, thank you, as always. Oil closing for the day down a little bit, but the big action today has been on the gnat gas market where prices hit their highest levels since 2008. Let's go to Pippa Stevens for

the closing numbers. Hi, Pippa. Hey, Tyler, Nat Gas with the eye-popping moves today. but let's first start with oil. China demand concerns back in focus, sending crude lower. WTI at 102, 58, Brent crude at 105, 13, each down about 2.5%. Energy stocks, though, going in the other direction, up more than 2%. And the top-performing S&P group today following strong earnings from Devin, Diamondback, and Cotera, all of which hiked their dividends. We also got some insight into how companies are looking at production,

with Diamondback saying it will keep output steady. CEO Travis Dice said, quote, we do not feel that today is the appropriate time to begin spending dollars that would not equate to barrels until multiple quarters from today. He pointed to ongoing uncertainty and volatility in the energy market. Meantime, Nat gases run higher continuing.

The contract surged as much as 9% hitting $8.17 per MMBTU. That's the highest since September 2008. Since moved off those levels, though, now up just around 6%. Tyler, back to you. All right, thanks very much, Pippa Stevens. So what's behind today's massive move in that gas? And what does it mean for consumers? Let's bring in Francisco Blanche, head of global commodities and derivatives research at B of A global research.

This is like our weekly date, Francisco, you know, we get together once a week, fail or not. Why today? Why the move? What can you tell us? Hey, Tyler. Thanks for having me. I think the market in natural gas is getting very nervous because, as you know, we have a global energy crisis going on. It's just that it hasn't impacted the U.S. yet.

And what's been going on is there's been a big rally in the global price of thermal coal, which is essentially the basis of electricity generation for all our countries. And we've seen appellation coal prices in the U.S. rallying. So natural gas has been getting closer and closer to that appellation coal price rally. And that's been the main train in the last few weeks. That's really been the main driver of gas, the rallying global power prices and global coal prices. So as Europe tries to wean itself off of Russian natural gas, which it appears it is going to try to do, the pressure point then becomes on our ability, the United States or others, to send from terminals here and elsewhere around the world,

liquefied natural gas to Europe, but we just don't have enough terminals, and they take years to build and get functioning. And then the question is, what is the return on investment of those terminals if in 25 years we're not looking at natural gas as the power source it is today? That's right. Tyler, you frame it perfectly there. Not sure I have a lot to add, But I'll tell you one thing that worries me is that if the U.S., for whatever reason, needs to gas domestically and needs to withhold those exports, we're going to have to see a very high domestic price in the U.S. natural gas market. Remember, globally, gas prices are $25, $30, $30, $40 per MMBTU, not $4, $5,6, or $7. Francisco, where do we go from here, both for oil and for net gas? Do you expect these to be near-term price peaks?

I don't. I think the global energy markets are still extremely tight. We have very low inventories of oil, gas, coal, inventories are low in North America and Europe and Asia. We have an energy crisis going on. And I think one of the big issues that is going to help provide some relief is if we have a major economic deceleration, also known as a recession. But of course, nobody wants that to happen. And the one saving grace so far has been the fact that China is in lockdown. And we have diesel prices scratching $200 a barrel with China in lockdown.

And what's going to happen when China reopens? So I'm pretty concerned about the state of the energy markets. Hopefully, we'll see some supply responses. Hopefully the producers in the U.S. and elsewhere will react to the high prices. But there is no imminent relief, I think, for construction. for the time being. Russia is just too big a producer to knock off the market. Do you do I correctly infer from what you're saying that really the only or the best way these natural gas prices come down or diesel prices come down as if we do have a global

economic recession? Well, what I'm telling you is we don't really have the quantities to grow GDP at the pace we want. So it's no longer an issue of price. It's an issue of having the available quantities. And, of course, Europe is trying, as you pointed out, to sanction Russian energy, oil and gas. And already, as you probably know, sanction Russian coal exports, which is what's triggering the rally at the bottom of the stack. Remember, Colts typically the cheapest generation soars around the world. So all those prices are trending higher.

So hopefully we avoid the recession, but it's going to be quite a close call. Francisco put it in your book for next week. We'll see you then. Francisco Blanche of Be AVEC. End up next uncertainty in the energy sector, along with supply chain struggles, are severely impacting GE. It's been hitting their revenue, and we're going to talk to CEO Larry Colp live to discuss. Before we go, the stock draft may be over, but you can play the CNBC fantasy stock draft.

To scan this code or go to CNBC.com slash stock draft challenge, you can play for free and we'll even give you $100,000 in virtual bucks to play the game. How do you stack up against the pros? We're back in a moment. Welcome back to Power Lunch. Shares of General Electric are trading higher today, but they're still down double digits just since their earnings last week. The company's under pressure as material costs rise and supply chain headwinds persist. Let's send it out to Brian Sullivan, who joins us from the Milken Institute's Global Conference live with Larry Culp,

the chairman and CEO of General Electric. Brian? Kelly and Tyler, thank you very much. That is right. Let's talk about energy because that's why we're here, the transition. GE is a huge part of that. Larry, thank you very much for joining us. Before we get a little more specific on the energy side,

obviously earnings were out last week. Most of what I read was pretty positive about your quarter. the market, which is down overall, by the way, didn't react as well. What is maybe Wall Street or are viewers missing about the GE story right now? Brian, always good to be with you. I think that the last week clearly has seen some pressure on the stock. It was really not in our view of reflection of performance in the first quarter, more a function of the outlook that we updated for the rest of the year

where we said we'd be at the low end of the range that we issued back in late January. We cited three things, inflation, policy and certainty in our renewables business and the situation in Ukraine. I think as we look forward, and it really is all about the outlook, we're heartened by the fact that the aviation recovery is underway. We power two-thirds of the departures the world over. That'll be a good sequential trend for us through this year going in the next year. We had a very strong order book in our health care business.

Orders were up 8 percent, but we had trouble because of these supply chain challenges getting product out the door. So it's not a demand issue for us right now. It really is an execution challenge, again, working through supply chain pressures, like so many other companies. We'll do that. I think as we work through the course of the year, we'll deliver better numbers. You mentioned the regulatory issue with renewables, and this is a little bit wonky, and I don't want to bore our viewers here at the conference.

There is a Department of Commerce investigation into alleged dumping, tell me if I get anything wrong, of solar panels in the United States from China. It sort of came out of the blue Next Era Energy, by the way, cited this on their earnings call. It's an issue with solar. What can you tell us about this? Is it going to be short-lived? Where does this roll out to?

We're supposed to promote renewables, I thought, not hurt them. Well, Brian, I would defer to Jim Robo, a good customer of ours at next era, relative to the solar side of things. We really don't play there in a meaningful way. When we talk about renewables for us, is principally wind, onshore and offshore. The policy uncertainty I was referring to is the fact that the PTC, the production tax credit,

was not renewed last year. And at this point, it's uncertain as to when it will be. And as a result, we've seen deployments over the last two years plunge by 50% in terms of new installed capacity here in the U.S. That's not helpful relative to the wind business, let alone the energy transition. Well, okay, so there's multiple things going on renewables. in a time when we're supposed to be promoting renewables. That's what I'm told. That's what we hear around climate change.

I'm sure you've got a crack team in D.C. This PDC, this tax credit. Where do we stand with it? What are you hearing about it? Is it going to go away? Is that going to pop your business back again? Well, Brian, we have a crack team in D.C. No doubt I was down on the hill last week myself.

I think there's a bipartisan consensus, which I was pleased to see, that we need to do something, not only with respect to win in the production tax credit, but frankly, a range of other incentives, including 45 Pew, the carbon capture incentive. We need to do something from a permitting perspective, and we just need to have that policy certainty. And policy in a way that recognizes the role of natural gas, and frankly, the role that nuclear is going to have to play, particularly small modular reactors. I don't think it's about policy at this point.

I think it's about politics. We'll see how things play out. I'm optimistic that something will happen, and we'll see those incentives, those policy mechanisms, those policy mechanisms in place. Today, I think it's really more a matter of timing. And we took a more conservative position last Tuesday with respect to when that will be resolved. I know my colleague Tyler Matheson has a question. A long time.

By the way, former GE guy back in the day, Tyler. We all. I'm very grateful for my GE pension. I've just got the report on it. I'm very happy with that. Thank you, Mr. Colt, and everyone. I think I'm right that your previous guidance was for 280 to 350 a share in free cash flow, oh, excuse me, EPS. But your first quarter came in at 24 cents. That's a long gap from 24

cents to a low of 280 a share in EPS. How are you going to get there? I mean, that's a factor of what, more than 10x? Tyler, thank you for your service. We really appreciate everything you've done over time. I'd say what we said back in January, we knew it was going to be a slow start to the year for a number of the reasons we just hit on. But the sequential improvement that we see in the second quarter and in the second half is something that we have conviction in. Again, largely a function of demand. The demand is there and then some with respect to aviation. Orders have been robust. Not only in terms of our aftermarket, our shop visits, but also in terms of new units to both our major airframer customers. Healthcare, again, orders up 8%. There's plenty of demand.

we just have to work through these inflationary and supply chain issues to deliver on that product. And I think as we work through the course of the year, you'll see that step up, not unlike, frankly, what we did in 2021. I know we've got to go quickly, $8 natural gas. We hit it today. You have a gas turbine business. You also have renewables. Is $8 gas good for you? Well, I think the overall environment right now is good for the 7,000 gas turbines we have around the world generating clean energy today. cleaner energy today. That's a good thing. Clearly, as the input prices tick up,

sometimes we see pressure on utilization, but our utilization thus far, Brian, has been quite strong. So we're encouraged by that, and at a moment where we need all the energy if we can generate, we think that fleet is going to play an important role. And we're going to go do a panel

about just that here in the next 30 minutes. Larry Kopp, Chairman and CEO of General Electric, really appreciate your time, an important conversation. Guys, thank you. And Kelly and Tyler, I mean, think about it. Everybody wants to live in a 4,000 square foot house with air conditioning and a warm climate, drive an electric car and charge their phone every night.

We're going to need a lot more power. It's got to come from everywhere. And that's really the focus of the conversation here. All right. Brian Sullivan, thanks very much. Great to see you. Mr. Culp, thank you as well. J.P. Morgan says MGM could climb 26% as its convention business recovers.

The call not helping the stock, though, as the travel sector takes a big hit today. We'll trade that along with Expedia and Hilton in our. Our three-stock lunch will be back in two. It's time for today's three-stock lunch, and we're looking at travel. Expedia, after saying COVID-Ukraine and wages are hurting demand. Hilton lowered today as well. Similar story missed on revenue, but optimistic things will get better. MGM beat on results.

A stock rose last night, but now getting dragged down with the overall sector. Let's bring in Boris Schlossberg, BK Asset Management's Managing Director and a CNBC contributor. Boris, welcome. Let's start with MGM. JPM Morgan thinks the stock could still. rally 25% from here. What do you think? Yeah, I think it's a reasonable chance to go to 50 at this point. I mean, Vegas at this point has got to be one of the most desired destinations along with Orlando. I'll be there next week and I'm sure many Americans are going to go there for

conventions and just fun. So MGM is really benefiting from this resurgence of Vegas. The only thing with it is it's trading at 40 PE, so it has to execute perfectly in order for the stock to perform well. I still think it has a reasonable chance to make 50 over the next 12 months, absolutely. You're going next week. Maybe I'll go just because you're going to be there. All right, let's talk about Hilton. Good numbers, but lower than expected full year outlook. What say you? Hilton is the one that I'm the most cautious about because I think there seems to be a lot of idiosyncratic risk over there. In addition to that, the company is, you know, increases dividend, is doing purchase buybacks.

These are all financial engineering things, not necessarily things that you want to impress the shareholder of the operational excellence. So I am concerned about Hilton. That is one I would kind of stay away from until they show a better improvement on the operation side. All right. What about Expedia? Can't believe how much this one's dropping today. Yeah, I think that's actually an incredible opportunity at this point. I mean, it's getting clobbered really based upon the Hilton guidance, which is sort of throwing

the baby out of with bathwater. I think Expedia actually looks very good going forward. You have to remember that the dollar is at 20-year highs. that makes Europe unbelievably cheap this summer. Demand, I think overall is going to be very, very strong. I think we're all tired of having Zoom wine parties. Everybody wants to go out and have a real experience. Expedia should really benefit from that.

My favorite way to play that is to sell the 150 puts in June. That's about $11. It gives you about a 7% real yield in three months, which is about 30% annualized. The worst comes to worse, you buy the stock at 139. So, for me, that's a better way to play it. I love it. Worse comes to worse.

You buy the stock. Do the simple thing. Boris, thanks so much. We appreciate it today. Boris Schlossberg. All right. The three glasses are empty. Still to come, raising the capital.

Millions pouring in to Ohio's Senate race, including tech billionaires, crypto investors, team owners. We've got that story next. A key vote taking place in Ohio today, as voters decide on the candidates, who will face off for the Senate seat in November. You want to know how important this is?

We'll just look at it. all the money that is pouring in. Elon Moy is live for us in Beachwood, Ohio. Well, that's right, Tyler. We are here at a high school in Beachwood, Ohio, where voters have been casting their ballots all day long. The toss-up race here is Ohio's open Senate seat. This has become the most expensive Senate primary in the country with nearly $70 million spent on advertising so far, and that's just on the Republican side. Now, a lot of this money is coming from outside of the state. Peter Thiel has invested more than $10 million to support the top GOP candidate, J.D. Vance. Meanwhile, Matt Dolan, whose family owns the Cleveland Guardians, has put in $10 million of his own money in order to fund his race.

The latest polls show him running neck and neck with Ohio State Treasurer Josh Mendel for second place. Now, Mandel was here casting his ballot earlier today. He has been endorsed by the Bitcoin Pack, and he likes to say that he is pro-God, pro-gun, and pro-Bitcoin. It's going to be a great story and illustration of how grassroots is more powerful than money, about how having an army of Christian warriors fueling your campaign instead of billionaires from Wall Street and Washington and Silicon Valley and Hollywood can actually win a race. Now, Republicans need to hold on to the seat if they want to have any hope of flipping control of the chamber in November.

But guys, even more than that, this race has become a fight for the future of the Republican Party, establishment versus conservatives, and that's why this race has become such a magnet for money. Back over to you. On the Republican side or on the Democratic side for that matter, is this a winner-take-all situation? In other words, there is not a runoff between the top two. Yeah, there will not be a runoff. It's whoever gets sort of the most votes in either the Republican or the Democratic side. But I got to say, Tyler, one thing that the candidates do seem united on on both sides of the aisle is their hatred and their rage for corporate America.

All of the candidates have been calling out major companies from Twitter to Amazon to Apple and saying that corporate America simply has too much power. We're hearing that from both Republicans and Democrats. They used to call the GOP the party of business. Not so much maybe anymore. Elon Moy, thank you very much. And thank you everybody for watching Power Lunch. Dow's back in positive territory of 134.

Keep your eye on it. You never know what it'll do.