Power Lunch - Delta CEO on Airbus Warning & Summertime Surprises in the Market 6/25/24

Episode Date: June 25, 2024

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists.   Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon and welcome to Power Lunch, everybody. Alongside Kelly Evans, I'm Tyler Matheson. Glad you could join us. The Dow is lower, but tech stocks are bouncing back just a bit today thanks to, yeah, Nvidia. But auto dealerships are not. Many are still struggling with the effects of a crippling cyber attack. We'll hear from a dealership owner and a cyber security expert for the industry. And Delta is opening a fancy new lounge at JFK.

We'll talk to the company's CEO about efforts to attract higher-end customers. But first, let's get a check on the moment. market. It's flip side of what we saw yesterday. Today, it's the NASDAQ leading the way, as ever, up 1%. While the S&P is now up a quarter percent, the Dow's down 310 weighed by Boeing in some part, and also off its lows of down more than 400. Shares of Home Depot are also costing the down nearly 100 points. Some concerns that consumers, while they're getting a little more selective about their home improvement projects, volumes are still struggling. Elsewhere, Nvidia, of course, is contributing to the gains for the S&P and the NASDAQ, reversing a big three-day slide that cost the stock nearly 15,

percent from its peak last Thursday. Tyler, it's up almost 6 percent today. All right, and we've seen how Nvidia has the power to raise and sometimes sink the broader markets with a simple pullback. But looking beyond that, what other threats are there to the markets this summer? Let's bring in

Nick Colas, co-founder of Datatrek research. Nick, welcome. Good to have you with us. You know, there are lots of hotspots around the world. Today you can add Kenya to it, riots in Nairobi. You've got geopolitical risk, you've got U.S. political risk, you've got quite a stew to royal the markets between now

and certainly our election day and maybe beyond. Yeah, absolutely. It's true. We're hearing this from clients, both in the U.S. and in Europe. They're very happy with the year-to-date gains. They understand where the market is and why it's here. They appreciate it in video, obviously, but they're looking at the summer with a bit more concern because we have less liquidity, less trading, people on a vacation. And that's the backdrop we often see for a summertime surprise, a negative summertime surprise. And the U.S. political situation is probably the first on deck with the debates on Thursday. Yeah, absolutely. It could change things one way or the other. But you're not suggesting that there are problems intrinsic to individual companies as such.

In other words, the profit picture looks pretty good. The economy is growing reasonably well. spending seems to be okay? All true. I think that the issue with the market right now is the market is perhaps not complacent is the right word, but they're looking at the market as relatively stable. So we look at sector correlations to understand how confident investors are, and they're exceptionally low right now, which tells us that we're probably in for a bit of a waiting period for the next month or two, and any of these summertime surprises we're talking about could be what upsets the market in the short term. So on the energy trade, Nick, which is getting a little bit more interest, especially during

NVIDIA's big correction there, down 15 percent. Why do you think that might have legs or should be an area that people should consider having exposure to? Yeah, you're right. Energy was the big winner since the Nvidia highs last week and has been rallying back on higher commodity prices, but also I think an understanding of the geopolitical risks that we're talking about. Our standing advice to clients, and this goes back the whole seven years we've run data track is never be underweight energy. and perhaps having to have a small overweight because it's the only thing that works during a geopolitical crisis that increases the oil prices quickly. So if you go back to say 1990, August 1990, the biggest summertime surprise in the last 40 years, Iraq invades Kuwait, energy prices spike, the market declines.

Energy stocks are up 10% over 10 days. They were the only hedge in a geopolitical crisis that created an oil spike. So we're always cognizance of that risk and always tell clients stay focused on it. get the idea of using energy as a hedge against geopolitical issues, but how in periods where there were not those sort of proximate geopolitical events, how has energy fared? My sense is not all that well. A very interesting point, because if you go back and look at how energy is done, say, since the end of 2019, so the whole pandemic and post-pandemic period, energy on a total return basis is the second best performing group since the start of 2020. If you include and reinvest

dividends. I'm very surprised to hear that. Tech is number one. Tech is number one. Energy's number two. So the key, though, is you have to reinvest those dividends. Very important point. If you just take the dividends and invests in something else, you don't do as well. But if you're reinvesting your dividends in energy, it does quite well. So it holds its own. On that way, not sort of slice things here. I also wonder, is Nat gas kind of the new oil? Because in a lot of what we've seen in recent years with Russia, I mean, and that's obviously specific to Russia, but it had massive gyrations, whereas, you know, oil was kind of surprisingly stable. Nevertheless, more broadly, Nick, do we talk kind of growth versus value or is that a waste of

time? For right now, unfortunately, it's a bit of a waste of time because growth is just taken over the world because of tech and VVIDIA. And the only thing you can say about growth is look at large cap growth as SP500 growth. It's now 60% in the top 10 names. So there's a lot of concentration in popular growth approaches. So I say like the SB 500 has become a growth portfolio. So you don't really have to go over too far into the SEP growth index to get that growth. You get it in the S&P without that concentration risk. It may seem bad in the 500. It's even worse than S&P large-cap growth.

All right, Nick, good to see you again. Great to have you back. Nick Colis. We appreciate it. Thank you. Let's talk more about some possible threats to the market like economic data and how the Fed might react to it. Rick Santelli is standing by in Chicago along with Pimco's Jerome Schneider. Over to you.

Thank you, Kelly. Jerome Snyder, welcome to Chicago again at the great CBOE floor. What I noticed today was the 2's 10 spread is hovering just below minus 50 basis points. That is the most inverted spin all year. What is that telling us? Well, it's telling us ultimately that the economic data is beginning to turn a bit. You have retail sales, which remains strong, but at the same time, you're beginning to have the inflation numbers come off. So everybody's eyes firmly on what happens on Friday.

But in reality, there's a giant cacophony of conflicting data. point in time. When we're really seeing as indicated by today's two-year auction, is that investors are... I get it with a B-plus. It was solid. It's probably B-plus, A-minus, but what's ultimately happening is investors are beginning to see the value in the front-in-the-eel curve moving out of cash, understanding inflation is coming down, and ultimately that the Federal Reserve is going to modestly affect interest rates here later on this year. And that means that the attraction to the front-of-eil curve to earn a little bit more income, but at the same time, has some potential for price appreciation, means that they need to get out of business.

money market funds. It really is a split decision because as I watch different data points last week, for example, yes, we have weak retail sales. But S&P Global Service sector PMI was the strongest since April of 22. So there are conflicts. What do you think about the yield curve? If we're looking at tens potentially where it's at lower stretching out that inversion, it's probably because some of the anecdotal slowing in the economy, wouldn't you think? Well, bonds in general are quite attractive right now. Let's put it in the context of where can you possibly earn equity-like returns with a lower volatility. Fixed income is presenting that opportunity, and specifically the front end of the yield curve was what we're finding. Two years, five years, maybe just beyond that,

in a diversified portfolio. But when you look further out the curve, there's a little bit of clouds. The fiscal discussion definitely comes up. Oh, yeah, yeah, yeah. Now, let's stop right there just so they know what we're talking about. When we're talking about a fiscal discussion, we're talking about the T's, almost $2 trillion in budget deficit. You're supposed to. You're coming to the market and ultimately it gets digested and specifically further out the yield curve there's going to be a effect where there has to be more premium along the way so for investors focusing on where to find these equity like returns but in fixed income focus on diversification outside the cash markets outside of Treasury

bills but inside the long end of the yield curve and in that way we can find shelter until we understand where growth is going understand what the inflation metrics are and all in all let's all let's also recognize the fact that fixed income's offering inflation adjuster returns, positive inflation adjuster returns for the first time in a long time. Well, but you are making some assumptions that inflation's going to stay tame. I personally have my disbelief on that topic, but we only have a few seconds left. Yield curve, what you're describing to me seems to be that you buy the short end, you sell the long end, you look for a curve steepening. But ultimately, here's what I want to know.

Would you be surprised to see a 10-year yield touch 5% again this year? It's probably unlikely at this point in time just because of the way the inflation dynamics are going to evolve. But look ahead and don't be discouraged by any one data point. The economic data is going to be fast and furious, but at the same time, recognize that the Federal Reserve is going to react to a lot more than data. Remember, financial conditions are incredibly easy right now, and that's part of the calculus, too, not just a single point of inflation data. Yeah, and it is an election year. I know that nobody likes to talk about that when we're discussing the Fed, but it is what it is. And Jerome Snyder, thank you for joining

me today. Tyler, back to you. Jerome, Rick, thank you very much. We appreciate your time today. All righty, coming up, a massive cyber attack, shutting down computer systems at auto dealers nationwide. CDK, which supplies these systems, says it could take several days to get back up and running. More on this story, and it's a biggie when Power Lunch returns. Auto dealers across the country still dealing with the effects of a cyber attack, which in some cases has completely prevented them from doing business. And now we're getting new word about a possible timeline for resolving this. Amon Javers joins us now with more. Hi, Amon. Hey there, Tyler. CDK Global is acknowledging to

its customers in a message this afternoon that it will not be able to get all dealers live before June 30th. Now, according to a copy of the message obtained by CNBC this hour, the company is telling its customers, should you need to make alternate plans for your month-end financial close process, you should do so. Now, that will likely be frustrating for car dealers across the country who are reeling from the impact on their businesses from the cyber attack on CDK. As many as six publicly traded auto dealers have already filed notices with the SEC warning a potential impact to their businesses. CDK is not answering questions about the cyber attack, but put out a statement on Saturday saying in part, we have begun the restoration process.

Based on the information we have at this time, we anticipate that the process will take several days to complete. And in the interim, we are continuing to actively engage with our customers and provide them with alternate ways to conduct business. Now, all of this raises questions, Tyler, for the Canadian private equity firm, Brookfield Business Partners, which acquired CDK in an $8.3 billion transaction back in 2022. The fallout from the cyber attack and the way it's been handled could have implications for any exit plans that the private equity firm has for that CDK investment. In a statement to CNBC, Brookfeld said, in part, we believe that CDK is a great company with huge potential. Since the acquisition two years ago, we have and continue to make the largest technology

and product investments in the business's history. But a source familiar with the situation tells me CDK customers are increasingly voicing frustration with a lack of communication from CDK about what has happened here. And I should also say CNBC has learned just in the past few minutes that CDK has hired the cybersecurity firm Unit 42 at Palo Alto Networks to handle the response to this incident. So we're learning more as we go along here. Let's also bring in two industry players now who are in Sea Island, Georgia today for a large auto dealership conference there.

Brad Holton of Proton Dealership IT joins us, and John Heiser owns four dealerships in North Carolina. Gentlemen, thank you for joining us from Sea Island. John, let me start with you. You're at this conference in Sea Island. Can you give us a sense of what the mood there is? What are people saying about this hack and its impact on their business? Well, you know, I first thanks for having me.

I would say that the concern up to this point has been limited because, you know, a few days here, a few days there are not a big deal. But when you start talking about months close, especially for public traded companies, it's a big deal. So you're starting to see some people get more concerned as the time rolls by. Brad, what do you make of this notice that we just saw from CDK? They put out this statement to their customers saying, you know, June 30th is now in question. If you need to make alternate plans, go ahead and do that. What does that tell you as a cybersecurity advisor to auto dealers about how serious this is? Well, I mean, anytime you have a ransom or event, you're going to have to figure out the ways of recovering from that.

And that's a long process. You can't just say, okay, we're done. We turned it back on. Everybody get access to it. You've got to do a forensic analysis to figure out. how someone got in, make sure you've got everything cleaned up. In this case, you've got to do a lot of data, data integrity checking to make sure that the data that the dealers put in there before the incident is the same data that's there now. You've got to get third parties to audit all that.

So it's a long process, even if you're, you know, you've got everything stood back up in a lab environment and you kind of got passed out. There's still a long, long way to go before you're actually back to a production environment. John, I think the thing here is that, you know, people don't tend to blame companies for cyber attacks. You know, you're the victim of a crime. you got hit by a cyber attack. Everybody gets that. But I think people do get concerned about the way companies respond to cyber attacks. How do you think the dealership community feels about CDK now, their response to this attack so far?

And do you think dealers are going to look for ways out of their CDK contracts and look for other alternatives? You know, I don't think it's to that point yet. You know, certainly as we find out more information, you know, where they, did they make all the right decisions for protecting us? I don't know that and we'll know that. We'll know more about that as time goes by. But as of right now, I think everybody understands that this could happen to anybody. And, you know, it could happen to us. And, you know, when you look at what it did in the banking business and MGM

and some of the other companies out there, you know, it can happen to anybody. So we're not ready to put a dagger in them yet. I mean, I think we've got to give them a chance to do all the right things and recover as fast as they possibly can. And do we know whether, you call this a ransomware attack, and clearly it must be, do we know whether ransom has been paid? Do we know how much it was paid? And do we have any assurance? Does CDK have any assurance that even after paying the ransom, that they will be spared a second or maybe several more attacks from other ransom seekers? All we know is, you know, what's been disclosed by CDK, which is very little. They did

mention ransom in one of their updates. That was only in one update. You know, there's been speculation that, you know, you've got Black Suit involved. Black Suit is a well-known threat group that's been around for about a year now. They were previously part of Conti and Royal, some other groups. So typically when they're paid, they do decrypt. But once again, getting the decryptor is the first stage, and then you've got to get through decrypting and all the data integrity things. Would they be likely to be attacked again? Probably not by Black Suit, but anybody can attack anybody at any time. And I think every company in the automotive industry and really every company in almost all of our major industries are being attacked constantly. I mean, we're seeing thousands and thousands

of attacks every single day. So nothing says that this is going to be a one-time thing for any vendor out there. Brad, you've got pretty good visibility into this whole industry of auto dealers. I wonder if you could give us a sense of what this means for the private equity firm that bought CDK just two years ago. You know, we saw this statement from Brookfield Business Partners. they paid more than $8 billion for this company. Is this event having a material impact on the value of that investment? Or do you think they're going to be able to ride this out and ultimately flip CDK, merge it, have some kind of successful exit for that investment going forward, Brad?

I'm going to have to defer back to John's statement. I think that the dealers understand, you know, that things happen, and it could happen to anyone. It could have happened to any vendor. So I think we just have to wait and see, you know, kind of what the response is, what the long-term effect on the dealer. the relationship market is and how things are handled from here. And John, I'm fascinated by human ingenuity in a crisis.

I imagine that there are all kinds of very clever workarounds that people are doing to try to figure this out. I mean, there are probably not that many people on sales floors anymore who remember how to fill out forms in triplicate and use carbon paper and all that stuff. But what are some of the clever things you're seeing people do to figure out their way around this in the absence of this software now? you know what we've seen is kind of cool you know at first it was kind of you know what are we going to do and and pretty quickly our vendor partners like assurant and route one and and ally have come up with back doors to do e-contracting so you know it doesn't completely disrupt your business of course it slows it down but but we do have a way to to contract a customer so that they can buy the vehicle that they choose you know i think parks is going to be the the most frustrating part of it because

everything that you do today has to be re-entered into the system or recreated and making sure that that's all accurate. And, you know, you're going to have to do that just to be able to do a financial state. And yet alone, your inventories and all those things that are exposed by this. So, yeah, we've had to, you know, PDF forms and do other things. But it's kind of cool that everybody pulls together and finds a solution. And so far, we have been less harm than you would think. Yeah, so there's the silver lining. John and Brad will let you get back to the conference.

Sea Island is gorgeous this time of year. Enjoy the rest of it. Thanks for your insights, though. And Kelly, let me toss it back over to you. And thanks to you as well. Both of you and Aymann for bringing that to us, our Aman Jabbers. All right, coming up, the top states for business, Wisconsin poised to become a new tech hub, as Microsoft promises to invest $3 billion for a new AI data center.

But this isn't the first time the state has been promised a transformational project. More on that. Next. Welcome back to Power Lunch. Dow is weighted down by declines at Home Depot and some other names today. But the S&P is still up about a third of a percent. The NASDAQ is up more than 1 percent as NVIDIA rebounds with a 6 percent gain today. Meanwhile, we're just about two weeks away from our latest CNBC, America's Top States for Business Report, and a year where massive amounts of government money are changing the competitive landscape.

Our Scott Cohn is live out in Wisconsin where they know a thing or two about big promises and heartbreak, Scott. That's right, Kelly. We are in Mount Pleasant, Wisconsin. We're about 26 miles south of Milwaukee. At the site of what was supposed to be the eighth wonder of the world, in former President Trump's words, it was supposed to be a $10 billion electronics manufacturing plant from the Taiwanese contract manufacturer Foxcon with 13,000 jobs in exchange for about $3 billion in state and local subsidies. It did not happen that way. They did get some of it built, but most of the space that you see behind me, Foxcon has put up for rent. And here in Mount Pleasant, they are still trying to pick up the pieces. It became clear early on that this was all for show. Foxconn quickly scaling back the plans touted by then President Trump and Governor Scott Walker blaming labor costs. New Governor Tony Evers would renegotiate the incentive deal, but not before the state and local government spent hundreds of millions of dollars to buy land and build infrastructure. Local resident Kelly Galaher, now head of the Racine County Democratic Party, says people are still angry.

Everybody felt like they were, that they were lied to, and that is such a hard thing to come back from. They dug a hole with those golden shovels, and then they fell into it. Last month, President Biden came here to troll Trump announcing a $3 billion Microsoft data center on part of the Foxcon site. The chairman of the Racine County Board says with all the new infrastructure and Microsoft, all's well that ends well. It's kind of like to feel the dreams. If you build it, they will come. Thank you, Wisconsin. Thank you. God bless you, Wisconsin. Trump didn't bring up Foxcon when he returned to Racine last week, but his supporters don't seem to be holding it against him. I don't think Foxcon is dead and I think it got delayed.

For the record, Foxcon at least as it was originally planned, is definitely dead. The company has confirmed as much. And Microsoft is not exactly a replacement. For one thing, the infrastructure here that the taxpayers paid for is wildly overbuilt. Microsoft is going to collect its own big tax break from the state for building its data center here. It will pay $50 million dollars from. for the land that the taxpayers bought for Foxcon, but because Foxcon had first refusal on that land,

that $50 million will go not to the taxpayers, but to Foxcon. Guys? And how many people will this Microsoft plant supposedly employ compared with the tens of thousands, or more than 10,000, as I believe you said, that were to have been employed at the Foxcon installation? Yeah, there were supposed to be 13,000 jobs at Foxcon. Microsoft will, they say, employ about 2,000.

Foxcon at this point does have a little, about 700 and some employees here in Wisconsin. So they are not anywhere close to where they thought they were going to be. How did Foxcon get the land and therefore get the proceeds from the 50 million that Microsoft is going to pay allegedly to the county, but it goes to Foxcon? How did they get that land? Did they buy it? That was part of the deal.

Part of the subsidy that the county, the town, and the state agreed to to lure Foxcon here was that they would acquire land. They acquired about 100 homes, displaced a whole bunch of families, bought this whole site that Foxcon ultimately was going to build this giant tech mecca on. But they didn't take all of the land. So Foxcon had the right of first refusal. according to the deal when Microsoft came in and acquired it, Foxcon got the money. Interesting. Scott Cohn, we look forward to Best States for Business in a couple of weeks' time.

Thanks very much. Yep, you back. Well, let's go over to Julia Borson now for a CNBC News update. Julia. That's right, Tyler. I'm Julie Borsen. Here's your CNBC News update at this hour. A judge partially lifted a gag order imposed on former President Donald Trump

in his New York hush money case. Trump may now make public statements about witnesses or jurors from the trial, but is still barred from speaking about some staff at the Manhattan DA's office in the court. Trump is said to be sentenced on July 11th after being found guilty on all 34 counts. Eli Lilly is teaming up with OpenAI to develop treatments for drug-resistant bacteria. Public health authorities have raised concern about the lack of new treatments to combat the so-called superbugs that occur about three million times a year in the U.S. The collaboration comes after Lilly committed $100 million.

in 2020 to fight the pathogens. And a federal judge rejected a $30 billion visa and MasterCard credit card fee settlement that was intended to resolve litigation from 2005 over swipe fees that merchants must pay to accept the credit cards. The companies will now face a trial unless they are able to reach a new deal that the judge approves. Visa and MasterCard have yet to respond to this ruling. Back over to you. All right, Julia, thank you very much. Delta, aiming for the Flyers, they want the luxury ones opening a new top-tier lounge at JFK. There have been some concerns around airline costs and demand, but Delta is up more than 20% on the year. We'll hear from the CEO next.

Welcome back to Power Lunch, everybody. Airlines fighting over the top-tier customers. Today, Delta opening a new lounge at New York's JFK Airport, designed to be nicer, a little more exclusive than its current Delta clubs, which had gotten to some views crowded. Phil LeBoe is at the new. Delta One Lounge with Delta CEO Ed Bastion. Phil, gentlemen. Tyler, thank you very much. Ed. Hey, Phil. Tyler, set it up perfectly saying it's a little nicer, a little more exclusive, plenty of elbow room here. Why the Delta One lounge? Because this is not just another sky club. Yeah, this is not another sky club. And by the way, our sky clubs are great. Yes, they're overcrowded,

and we're working on that too. One of the ways we're working on it is upscaling the next set of lounges. And so this is a Delta one lounge. Only for customers that are flying Delta 1, 360s will have access. But people that want to have that next level premium experience will have a great time here. I do believe it's the nicest lounge, certainly in North America. One of the nicest lounges is candidly in the world. And as people see it as we open it tonight, I think that's what the review will come by. Almost 40,000 square feet. 40,000 square feet. And the other benefit we get is as we open this lounge, it takes a lot of that pressure off of our pre-existing club at JFK, which is a nice lounge, but when it's crowded,

it's not so nice. So we'll actually get two lounges for one as we open this. Have you heard from your frequent flyers saying, look, there's too many people in the lounges, not just here at JFK, but at other lounges around the country and that the experience, frankly, it's lost its allure. We have heard that, but candidly, that's an old tape that was more of the last two years as everyone started to come back to flying quickly. We've implemented some pretty significant access issues in terms of increasing the qualification levels, both for our own people as well as for our customers. And it's already the overall density of the clubs and the crowded conditions are coming down pretty meaningfully. We're adding new clubs. Not only do we have this to JFK, we're adding a new

Delta One lounge exclusive in L.A. as well as Boston by the end of the year. We're opening up a new one also in Seattle probably started next year. So we're adding more, more. more real estate and higher end clubs. So you stay with us over the course of the next year or two. This is just going to continue to get better and better. Ed, I know Kelly's got a question very. Kelly. Thank you. And I think I'd rather talk about the lounge. But I just have a quick question for you about what's going on with Boeing and Airbus. And you guys are more of an airbus shop, if I'm not mistaken. They are now talking about some delays in plane deliveries this year. Do you have any frustration overall with the kind of the availability of reliable aircraft?

Well, I think everyone in the industry is frustrated. That said, I'm glad we're with Airbus, and they've been delivering us airplanes fairly regularly over the last several years this year. We'll take approximately 50 new Airbus planes in, and they're coming a little bit delayed, but not in a meaningful sense. And we're in a pretty good shape there. But I think it's far beyond just Boeing and Airbus. I think it gets into the engines, the overall supply chain constraints that are still out there. It's keeping a lid on capacity, no question. How long does that last those supply chain issues that are in really the entire aviation industry?

I think, I think, first of all, we'll never get back to where we could have been at one point, because this has been going on for years already at this stage. I think you're looking at another three to five years because this is about labor, this is about parts, this is about ensuring that you have the right quality specs, you know, with the FAA getting a whole lot more energized around the certification process. So I think this is going to continue to be some of the challenges that we see in our industry in terms of the constraint. We almost had 3 million people flying in the United States for the first time on Sunday. The FAA and the TSA both believe we're going to see that the 4th of July week at some point.

Are you comfortable with where the industry is as we continue to see these record levels in terms of the infrastructure, handling the increased capacity, the increased number of flights? I am. We've been seeing it all along. Royal Day weekend was a very significant high water mark for us. I think the 4th of July, as you said, will be another higher water mark yet. We're not adding necessarily new planes. We're filling them up even higher. So we're flying loads consistently in the 90% range, maybe 95% range on certain days. So it's not as if we can get more seats in the sky, but we're putting more people in them.

And a lot of those people flying Delta over through the Olympics. Absolutely. I'll be there too. We will. Ed Bastion, CEO of Delta, Kelly, we'll send it back to you. It was really fascinating to hear just kind of at how much of a challenge you think the industry faces with some of these supply chain issues. It looks beautiful. Thank you both. We really appreciate it. We'll come check it out in person sometime. As we had to break, let's get a quick power check on the plus side of the S&P.

It's Carnival today, best in the index, raising their annual profit forecast on steady cruise demand. On the downside, Pool Corp, revising full-year earnings guidance, short of street consensus. And we'll get the trade on pool coming up. three-stock lunch. It's time for today's three-stock lunch with our trades is Scott Nation's president of nations indexes. Scott, it's great to have you here today. And we got to start with the stock everyone is talking about. Invidia went from down 15% from the highs to snapping back almost 6% today. What would you do with the stock here? Invidia is a buy. And the scale of the rally over the last couple of years makes it easy to think it's in a bubble. But the forward PE is only

42 and a half. That's not a bubble. I mean, if you want a bubble in March of 2000, the P.E. for Cisco was 196. Wow. So talk to me when Invidia gets near there. So we get to buy because the rush to AI is not going to ease. We get to buy Nvidia, which is the premier name in the space on a pullback. And the company has earned this P.E. The last quarter, year over year, increased revenue 255% and operating income increased by six times. So it's performing. It's a great company, making what everybody wants, and add actually a reasonable valuation. Let's move on next to Walmart under pressure today after the company's CFO made some comments, admitting the current quarter has been challenging. Your thoughts about Walmart in the short term?

Walmart is a short-term sell. The stock raised from about $60 in mid-May, to nearly $70, up 30% over the past 12 months, and has a forward P.E. of 27, which is really tough for me to stomach for any retailer that isn't named Costco, particularly in a situation where Walmart's customers are really going to be battling inflation, probably more so than most other retailers' customers. The stock got to overbought, and it's pulling back from that condition, I think it probably has another 10% to go to the downside to get back into equilibrium and get out of that overbought situation. Interesting. Rarely hear bears on Walmart. I mean, you might be one of a kind right now, so we'll

watch and see if that bears out. Speaking of kind of moving to the downside, pool is down on lowered guidance. They see persistently weak demand, sluggish consumer spending. Dead about 7% today. How much more room could they have to fall, or do you think it's finally an entry point? No, pool is a cell. Pool Corp makes, guess what? They make pools, pool hardware, pool maintenance equipment, worst performer in the S&P all day. As you pointed out, they cut 2024 guidance ahead of earnings,

which come out on July 25th. A year-to-date revenue is 6.5% behind where it was last year. The EPS guidance was 18% lower. As you pointed out, the company blamed what they call discretionary. pool spending. That sounds a little bit like an oxymoron to me. But what they mean is that if you have a pool, people are paying to maintain it, but they're not selling many new pools. I guess everybody who wanted one or bought one in the pandemic, or at least they bought one if you couldn't afford an RV or couldn't get a hold of an RV. So the company is a sell. The chart is horrible. Nobody wants a brand

new pool and earnings are collapsing. Ouch, out, out. I'm going to go soak in a pool somewhere. We almost put one in there, but I pulled a plug on that one. Scott, thanks very much. Appreciate it. Thanks, Tyler. Maybe they're still pent up demand then.

Maybe. No time like the president. No. All right, more power lunche ahead. First, we had to break. CNBC celebrates Pride Month throughout June. And here is Sarika Tajagi, Amazon Senior Product Managed. In today's diverse workforce, the LGBTQ-plus community brings in a unique blend of creativity and resilience.

By embracing visibility, companies can unlock this potential. At the same time, the LGBTQ-plus employees can thrive by creating community within the organization, advocating for inclusive policies, and focusing on self-development. It's a win-win. Shares of Solar Edge are down sharply today after a key customer has filed for bankruptcy. Pippa, Steve, it's always bad news, Pippa. Yeah, more clouds, as they say. That stock now down more than 20% after Solar Edge disclosed a number of things last night,

all of which point to a market still facing significant challenges. Solar Edge announced a 300 million convertible note offering, which took the street by surprise and could ultimately prove delusive. The company also said one customer has filed. for bankruptcy and that Solar Edge may fail to collect what's owed or if it can only after a significant delay. Solar Edge did reaffirm its Q2 revenue and margin guidance, but Senate now expects negative free cash flow of $150 million for the current quarter, citing extensions of credit for some customers and a slower pace of payments on accounts receivable, among other

things. Truist Jordan Levy saying the negative guide represents yet another proof point of continued market challenges and inventory overhangs. Those shares down 23% at the lowest level in seven years. They're down 72% year today. What a trouble. Yeah, because we thought it was getting a little bit better. That's what the market was guiding towards. And then this just shows, no, it's not.

And actually, maybe it's getting even worse. Wow. Well, Pippa, thank you very much. Still to come. A company stepping up to employ Olympians as they train for the games. But first, remember, you can always hear us on our podcast. Be sure to follow and listen to Power Lunch wherever you go. We'll be right back.

We are about a month away from the Summer Olympics in Paris. Of course, there's excitement for fans and those who are qualifying, but for many of the athletes without a sponsor, it also comes with a significant cost. And one company is trying to change that by employing Olympic athletes part-time while still allowing them to compete. Let's bring in Tim Goki, CEO of Broadridge, a financial source, services firm that offers elite athletes a program for Olympians. And Michelle Sexer is a U.S.

Olympic Rower who's part of the program at Broadridge. Welcome to both of you. Tim, let me start with you. How many people are in the program? Are they all rowers? And what do regular employees think about some of the scheduling forbearance that you extend to these special cases? Yeah, Tyler, thank you. Thank you very much. We have, we started in 19, in 2022 with four athletes. Today we have 10 and it's really expanded because of the very positive word of mouth, both amongst the athletes and amongst leaders at Broadridge who see what great associates these are. So it is really, I think with the advent of remote work, it is much, much easier to incorporate elite athletes into the workplace than it has been in the past.

people can do their training, come back, pop into a team. We're a global company with 15,000 associates in 23 countries. So, you know, we already have that sort of virtual element going, and it's worked very, very well to integrate them into our teams. Are all of the, back to the one of the questions, are all of the participants rowers? I know you were a rower at Oxford in the past. Yes. they are at this time all rowers. We got started with U.S. rowing in 2022. They brought it to us as a marketing

opportunity, and I really saw it as a talent opportunity. I do think there's a lot of great alignment. Rowing is a pretty academic sport, actually. We have our 10 athletes, we have two from Stanford, two from Princeton. We have Dartmouth, Columbia, Penn, many other great universities. And these women perform really well there. And it's a sport that really, really, really, it requires intense teamwork. You're only as strong as your weakest link in the boat. You have to put the boat first. Grit and resilience, hard work are all real elements of rowing. And that's a great fit with the business world. Michelle, thanks for joining us today. And congrats on all of your success. So did you have a financial background before, Broadridge? And it's interesting

to hear the work description. It basically 20 hours of work of week, nine months of the year, the other three months you're traveling and competing. And so on a typical week, you kind of, you have to do all of your workouts and all of your work. Yes, I did. So prior to Broadridge, I did receive my MBA at the University of Tulsa before beginning my Olympic pursuit of a gold medal. And I was in the nonprofit sector before starting at Broadridge, but Broadridge is so different. There are so many opportunities for upward mobility, for rotations through different business units. And I'm so grateful that now, you know, something like having that MBA can really be put to use while I'm also chasing this Olympic dream.

So as you mentioned, it is a lot to manage both pieces of my life for the Olympic preparations. We're doing about 18 practices a week. It's somewhere between 25 and 30 hours of practice. But as long as I can just really keep those transitions tight, we'll be on the lake in the morning for two to three hours. I'll do a quick transition sometimes feeling like Clark Kent moving into my broadridge work for about four to five hours. hours a day before we go back out for a second row and in the evening some weights or yoga or PT sessions. But while the training environments, the working environments for both jobs are very different being on the lake versus being in my Broadridge office, you know, the work itself is so similar. It's an unrelenting pursuit of excellence. It's wanting to do a great job for my team,

whether that's in the boat or on the client success team at Broadridge every day and being fiercely focused in both areas is it's really enjoyable. Tim, is there some kind of tit for tat here, like the Army, where if people, you know, they, that you get years of service for what you've offered in terms of the near-term flexibility or anything like that? Well, I think that we have had real demand for, for these athletes amongst our teams. And so I think it's just, it's, it's, you see people, you see how they perform. You know, we're not a company that is based on years or something.

service, which is a based, a company that's based on what can you do and what can you add. And as people have wanted to rotate or move into hopefully, you know, my hope is we'll be able to recruit athletes like Michelle to our company full-time after Paris. And if not, and as they sort out what they're thinking about for Los Angeles, we'll support them that way too. But I think it's just real demand for this. I just want to find out from Michelle, what are your events? and when will the qualifying be?

Are you a singles, doubles, quads? Yes. So I compete in what is called the lightweight women's double skulls. It's a two-person boat where we each hold two oars. Our first day of racing in Paris Olympics will be July 28th. That's where we start our heats. And the final will be on August 2nd. And so you've already qualified for the team.

You're already on. You're good. We've qualified. We're going to do a Fourth of July American send-off. And then the USA Olympic team heads over to Europe on July. I bet. Congratulations to you, Michelle. And Tim, thank you for being with us today. And good luck with the employment program as it moves forward. Quick programming note, the opening ceremony for the Olympics of Friday, July 26, on our parent network, NBC. But before that, the Olympic team trials continue Thursday at 8 p.m. Eastern on NBC and peak up track and field, men's gymnastics. I was watching some of the track and field last night. Really exciting stuff. I miss last night. We love it. Yeah. Good stuff. Yeah. Good lunch, everybody. Closing bell starts right now.