Power Lunch - Dow Slides, Despite Nvidia’s Blowout 5/23/24

Episode Date: May 23, 2024

Stocks are falling, with the Dow losing more than 600 points, as a post-earnings rally in $NVDA failed to lift the broader market. Chipmaker and AI darling Nvidia surged more than 8%, sending the shares above $1,000, after posting stronger-than-expected Q1 results and announcing a 10-for-1 stock split. We’ll break down it all means markets and your money. 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 alongside Kelly Evans. I'm Dominic Chu. We've got a lot of coverage about NVIDIA's blowout earnings report, of course, Kelly. But there are some other stories we are watching for you today as well, including the issue uniting Taylor Swift fans in both political parties. The Department of Justice seeking a breakup Live Nation and Ticketmaster. The company says it will not reduce prices or fees. We're going to have more on that story, Kelly, coming up. Plus the $150,000 a year house cleaner in Palm Beach. Each. Good help must be hard to find because the demand for housekeepers and other domestic workers is driving salaries through the roof. We will give you all the gory details. Let's get a check on the markets first, though. Dow is turning sharply lowered this hour by almost 550 points. Now, Boeing is a big decliner today after some news from the company's CFO this morning. That's contributing to its outsized decline. But the S&P broadly is now down half a percent in Live Nation, one of the big decliners there along with Boeing. And the NASDAQ, despite Nvidia's 11 percent boosts. is still down about two-tenths of a percent today. Now, speaking of NVIDIA, that stock is hitting an all-time high and has doubled so far this year, and its market cap is now more than $2.5 trillion. But the question, Kelly, now, is can Vindivia keep this momentum up?

According to the analysts who cover the stock, the answer is an overwhelming yes. Christina Parts of Nevelas is looking at that story for us, Christina. Dom, yes, is almost an understatement, but Morgan sadly says there is no sign of slowing down and over 19 analysts that I counted race to increase their price targets today. FACCET showing 89% of analysts

betting Nvidia is still a buy. No sells, average price target of $1,142. Q2 consensus estimates coming from these analysts have already jumped by over a billion dollars in just one night for 26.6 to 27.7 billion. The analyst really liked hearing that Nvidia's demand is improving for its upcoming chip launch,

as well as broadening across sectors like Auto, which is why Cantor Fitzgerald wrote The midnight train of NVIDIA continues to execute to perfection. And Niedem says that NVIDIA is marching towards a $3 trillion market cap. So definitely more upside to go, given the current levels of 2.6 that you just mentioned. As for the surprise stock split, it won't change NVIDIA fundamentals, but Susquehanna says the split would reinvigorate the retail crowd. It's all about the psychological aspect of it.

While Nidem says that it will add short-term momentum post-June 7th because the stock will be more affordable for people to buy in. Deutsche Bank, though, one of the four banks right now keeping a hold rating on a video because they say the stock is already fair value, but they did increase their price target to $1,000. Regardless, the company has added over $250 billion in market cap today alone from yesterday's close. That's pretty much the equivalent of an entire AMD. Yes, AMD, competitor.

All right, Christina Parts and Nvelas, superfluous, kind of these. superfluous comparisons are abounding on a day for record highs in Nvidia. Thank you very much for that. We are going to continue this conversation with even more reaction from said analysts. Our next guest just raised his price target on Nvidia to $1,200 a share and is pretty positive. The momentum will continue way into the year 2025. Joining us now is Raymond James Senior Semiconductor analyst Srinni Pajuri. Srini, this is one of those situations where there is everybody. everybody, I guess, is on one side of the boat.

Is there any risk to everybody being so bullish on the prospects for NVIDIA? Yeah, thanks for having me. So that's an interesting question. Right now, the demand for AI accelerators, you know, the stuff, the GPUs that NVIDIA makes is so strong. On top of that, you know, they also have this new product called Blackwell that's going to ramp starting in a Q2, Q3 time frame. So, you know, based on what we are seeing right now, we don't think there is much risk in the short term. Obviously, you know, the demand has to continue. And if you look at their customers, the big cloud companies, they continue to spend very aggressively.

So as long as that spending continues, we don't see any risk in the short term, at least. What kind of a risk could there be? Let's say that these companies are spending because everybody pretty much has to spend. investors, customers are almost expecting these companies to spend on AI. What exactly then has to stop in terms of spending? What can actually derail this NVIDian narrative anytime in the medium term? Yeah, I guess at the end of the day when you're spending this level of capital expenses, you need some return to justify this this Cappex investment that we're seeing today. Right now, it's, you know, the competition among these customers.

is highly intense. Obviously, Microsoft and Google and Facebook, they want to maintain their lead in AI, so they're continuing to spend. But I guess if there's no return on investment, eventually, that could put, at least in a slow down the spending that we're seeing. The other potential risk is competition. Envidia has done a great job, maintaining their market share, maintaining their technology lead.

But there's always that risk that, you know, there's going to be some competition at some point. The one that, you know, we are watching closely is, you know, what we call custom silicon, the chips made by their customers themselves. If you look at Google, they're already using their own silicon for a few years now. And most others have also announced their own custom chips. So, you know, that could potentially become an issue as we look out to the next one to two years. I wonder, I'm glad you highlighted that because it's not the valuation that I think raises eyebrows. It's the company's sheer size at $2.5 trillion is $3 trillion, $4 trillion?

in next? I mean, it's hard to contemplate. Yeah, I mean, as you said, Kelly, the valuation is not that expensive. It's trading at about 30 times over next year's numbers. And for a company that's growing, you know, almost doubling this year. And even before the Gen AI really took off, you know, this was a company that was growing, you know, 20 to 25 percent. And our view is that, you know, the 25 to 30 percent growth probably sustains for the next two to three years. So the valuation itself is not that expensive. So as long as the members are going up, I do expect the stock to continue to outperform. All right, Sreeny, just hold on one second. I just want to call attention to viewers and listeners right now on Sirius XM 112. We are now down about 607 points in the Dow

industrials, which does represent the session lows. We'll keep an eye on that for you throughout the course of this hour. Sreeny, to come back to the invidia discussion really quickly, you mentioned the product transition, the next generation AI chip, which is Blackwell, the current one, which is Hopper. There was some concern among certain investors. out there, that because of this Blackwell being out there, that people were going to not spend on Hopper to go to Blackwell, it seems to me that the Hopper product is pretty darn good. And if you're not one of the first in line to get Blackwell, you would stick on that Hopper product, would you not? Is it not all just about the hyperscalers? But anybody who wants AI chips seems like they could

have access to Hopper versus Blackwell first. Yeah, that's actually a very good point that you made. If you look at the results for this quarter, the cloud customers grew. They grew about high single-digit sequentially, but the non-cloud portion of it was much stronger. That tells us that the AI adaption is broadening beyond just the big cloud companies. And Tesla was kind of called out as one of the strong customers and also many enterprises. On top of that, you know, the so-called sovereign cloud, I think, you know, the many nations are investing in AI. So there is still a lot of pent of demand out there. So obviously, you know, there was some concern going into the print,

but I think based on what we heard from the management, they're not seeing it. And also the Blackwell seems to be ramping a little sooner than we expected. So I think the demand for Hopper is strong and Blackwell is very strong. And the management also said, you know, they're going to be supply constrained on Blackwell for the next few quarters. So right now it's looking very, very strong. Very good. Sreeny, we will leave it there. And it's so ironic that NVIDIA beats does fine in terms of the share price and the market is still tanking, which was not what anyone I think had on their bingo cards. Thank you so much for joining us, Srini Pajuri to talk more about that.

And their announcement of a 10 for one stock split has people speculating that Nvidia could soon be added to the Dow itself. Yes, Bob Bassani joins us now to talk more about that, Bob. And who would they replace Intel? Well, yeah, that's sort of an obvious choice, but it's not a shoe in. So there is a lot of speculation. NVIDIA could replace Intel in the Dow. Now, decisions on additions and deletions to the Dow are made by a committee, the S&P Dow Jones Indices Index Committee. Surprise. There are no specific rules for inclusion or exclusion.

However, the committee has stated that a stock would only be added if the company has a, quote, excellent reputation and demonstrates sustained growth and is of interest to a large number of investors. Okay, check one for NVIDIA. They meet that criteria. Companies have been deleted for many reasons, though. Look at the other side of this.

including a merger or acquisition, or if the company experiences financial distress, for example. The committee also wants to maintain adequate sector representation, and it may come to believe that there are other companies that better represent that sector. Finally, this may be the most important thing. There is the stock price issue. Remember, unlike the S&P 500, the Dow's price weighted, a stock with a price way below all the other stocks in the index would make that company irrelevant in the index. that is undesirable. Now, right now, United Health is currently the highest price stock in the Dow.

It's $516. Intel is currently the lowest price stock in the Dow. It's $30. The average price of the $302. Now, what you want to look at is that spread between United Health and Intel. It is unusually high. The committee has said that they do monitor whether the highest price stock in the index has a price more than 10 times that of the lowest price stock. Well, look at this. United Health price is 17 times more than Intel, the high versus the low. But also remember, there are other ones out there. Cisco and Verizon, for example, are also more than 10 times smaller than United Health. So here's the bottom line, Kelly. NVIDIA's 10 for one stock split, and Intel's low price definitely makes Invinia a Dow contender. But the committee has also had a clear

preference for stocks that are well-seasoned and not just suddenly superstars. So let's just say, NVIDIA is a strong contender, but not a shoe-in yet. And if only it were, Bob, perhaps the whole market would be doing a little better right now. What do you make of that? Well, think of what has happened this month. May is supposed to be a down month. Sell-a-may, go away, seasonally week, six-month. As of yesterday, we were up 6%.

It's been, everyone's been wrong on why May has been so strong. So today we have, look at the open, strong open with semiconductors, it's the XSD, the SMHD, the semiconductor ETFs, opens at new high, and they sold right into them. And Viti is still the only one that's up. So a little bit of exhaustion on the semiconductor play. And then we had a spike in the yields. I think the 10 years went up to 4.5 today right around the open. And the two year did as well.

That's almost, that's basically the high for the month for there. So you get a little exhaustion from the semiconductor rally. you get a little spike in yields and you just get a little momentum. And the whole market is basically down. Look, Goldman Microsoft Visa Proctor all down 0.8%. Coke Exxon, IBM Caterpillar, down one and a quarter. It's a broad little decline here after a rather remarkable month. Great point. Bob, thank you very much.

Bob Bassani. We appreciate it. Despite that invidia enthusiasm, as we mentioned, stocks are selling off with the Dow, especially down nearly 600 points. Let's talk to Stephen DeNiclo about that. He's a portfolio manager with Federated Hermes Kaufman funds. Steve, it's great to have you just to rewind the script a little bit. Yes, NVIDIA beat, but we also had this flash PMI data that came out surprisingly strong. Rates are backing up a little bit.

Do you think that's what's at fault here? Sure. I mean, look, as far as history goes, rates go up, stocks generally go down. NVIDIA is doing its best to keep everyone excited. Are we allowed to talk about stocks other than NVIDIAs at all? I'm not sure. You tell me. I mean, I'm equating right now, NVIDIA to like the Beatles at Shepard. stadium in 1965. The stadium's packed. People are freaking out, passing out in the stands. And

were the Beatles a good band? Did they deserve it? Yeah. So when you have a two and a half trillion dollar company growing 250% year every year at almost 80% gross margins, it's well deserved. The question is, is Nvidia taking up all of the air on this channel in the room everywhere we look? And if you, let's say, go through the Lincoln Tunnel over to Jersey, do you have somebody like Bruce Springsteen playing in an empty bar and Asbury Park, who's a pretty darn good musician as well? I would equate that Bruce Springsteen analogy to small caps right now. And I think there's a lot of opportunity in this market. You know, people might come up with a different analogy, depending on how much money they've

lost in small cash. Now, I mean, I know they've been doing better lately, but I mean, make the case that these aren't the stocks that should just be left behind. Look, there's a lot. The reality is, is it's been apathy, not fundamentals, that has taken small caps down. If you look since November 21st, November 2021, which was essentially the peak of small caps, that relative underperformance versus large-capped stocks has been 5x the norm. In addition, if you look at valuation versus large-caps, and I'm looking at 30 years of data right now, that relative valuation disconnect is 30% lower than historic norms. So you have a sector that nobody's looking at, okay? That has underperformed five times more than normal at a 30%

valuation disconnect. Now you take the fact of what happens when there's an interest rate regime change. So eventually, I don't know what's going to happen in the 10 year in the next month or what the Fed is going to do in the next month. But let's look out for the next year or two. I'm going to bet that the next 100 basis point move in the tenure is down, not up. In that environment, what happens? Valuation is the leading factor of performance. And so you have a sector that nobody's in, that nobody wants to hear about, where the fundamentals are actually doing well at a point where maybe we're going to get lower interest rates eventually. At Federated, we're in the camp that you're probably not going to get a cut until the fourth quarter of this year.

inflation is going to remain sticky. But look, I'd rather go where nobody is. I think Springsteen playing an empty stone pony makes a lot of sense right now outside of just, you know, trying to get into Shea Stadium with the Beatles. The Asbury Park folks are pretty much up in arms right now about whether it's Memorial Day. All right. So Steve, I remember back in the day when the Kaufman funds were probably the blue chip stock pickers out there for the small and midcap universe. Still are. And I know, I know they are. So I want to know what the stock pickers like you, at a Kaufman fund are trying to do with this kind of a market and what types of stocks specifically you're going to be putting on the buy list?

Look, the hardest time, the hardest thing for any investor to do is to mark time. My father was an electrician. He built things for a living, right? As investors, you're owning companies that have some sort of long-term narrative. The hardest thing is to let that narrative play out and realize that in the short term, what makes a stock go up or down is there's more buyers or sellers. So let's look like a company like Aspen AeroGels. This is one of my favorite stocks right now that tickers ASPN.

This stock is down from a peak of 65 down to 27 today. All right. It was at 65 in late 2021, 27 today. I have not seen a management team. And they make insulation that encapsulates lithium batteries for EVs. As you're seeing with Boeing in the news today, managing the heat of lithium batteries is very, very important. And so all these OEMs that are bringing out new EV vehicles have to make sure that these batteries are safe for the consumer. You don't want a car going on fire, right?

I have seen their gross margins go from zero in the last two years to over 30 percent last quarter. Now, the stock is up off of its lows, but look where it was two years ago. You're still well off the highs. and the business momentum is not measured in quarters. It's measured in years. Okay? Let's take another company, Montrose Environmental. These are the stocks we're looking at at the Kauffman funds right now.

M-E-G is the ticker, okay? In April of this year, the EPA came out and said P-FOS is very bad. P-FOS is a forever chemical. It gets in your body through the ground or the water. Once it gets in your body, bad things happen, right? Tell me about it. My town is like at the foremost of this. We've got like all the filters you can imagine.

We had Montrose on to talk about this, believe it. I'm getting, you know, shades of go belly here with these stock pitches. But it's your point is well taken. I appreciate it. You managed to get in about five minutes on a non-invdivian name today, and that's quite a feat. I'll try. Have me on any time. Thank you, Steve.

Good to see you. All right, take care. Steve Nicola. All right, coming up on the show, we're all over the markets right now. The Dow, as you can see, is down about 500 and I'll call it just about 600 points. This is near session lows. We were down 607 at the lows of the sessions. We'll keep it on those.

markets for you, specifically the Dow. But coming up after the break, following the money trail, the AI power story keeps growing and power consumption grows even larger along with it. Alternative power sources are being sought out left, right and center, and solar, of course, is one of them. Pippa Stevens is following that money trail and has a story, Pippa. Hey, Dom, I'm here at a new 2,000 acre solar site that will soon be powering a new meta data center. We got an inside look at how the inflation reduction act. is helping things out. The details. Up next on Powerlunch. Welcome back to Dow. Maybe down 600 points today, but solar stocks have jumped this past week, led by First Solar on hopes it could be a

renewable provider for the massive energy demand that AI is going to need in the future. Meanwhile, a new 2,000-acre solar panel farm funded by the Inflation Reduction Act. It's being developed outside Phoenix, Arizona. It will have the capacity to power thousands of homes, but a majority of it will be used to power metas. Yes, meta's data center needs. Pippa Stevens is live from the solar field with more on that story. It's hot and sunny and that's good for the business. Yeah, that's right, Dom. So I'm at Renewable Energy Developer Orsted's new solar and a storage plant that's finishing up construction. All told, it can power 65,000 homes, but two-thirds of the power will be for a new metadata center being built close by. Gen A.I is a

power hungry with BCG forecasting that US demand from data centers will triple by the end of the decade, just as more things go electric. This is the most load growth we've seen in the past 30 years. A lot of that's driven by reshoring of American manufacturer. We're seeing that from semiconductors, from battery companies, but we're also seeing a lot more digitalization coming on board. Big tech, AI, all needing more energy. New renewable energy sites like this one, 11 miles, solar are moving to fill the gap. Orsted announced today a $680 million investment from J.P. Morgan for this and one other project. It's a tax equity deal, meaning J.P. Morgan provides financing in exchange for tax benefits. Now, this structure has existed for years, but what's new is that under the Inflation Reduction Act, J.P. Morgan now has the option to sell those credits

to another company, unlocking a big new funding pool for renewable energy. And Dom and Kelly, I got to tell you, here on the ground. It makes sense why there is the solar center here. It is very hot and there is nothing but sun. Okay, so let's talk about the future development plans for Ors to, I mean, what exactly does the future look like and what kind of capital do you need? Do you need inflation reduction acts in perpetuity to be able to keep funding projects like this, or at some point, is it going to be able to be self-sustained from a private standpoint? Well, renewable energy is already competitive on a levelized cost of energy basis with other forms. Also, other parts of energy ecosystem have also been subsidized simply because it is such a capital-intensive industry.

But what's really important here is that this tax credit transferability is so important because before only really big banks would be willing to take on that equity investment. And now you can sell those to another party that wants to reduce their tax bill while also helping out clean energy. And so it opens up this whole new funding pool. And I think the reality is that these projects are expensive. And so having that support at the federal level, it's helpful to get these projects off the ground. But longer term, renewable energy is deflationary, since once you have it all built, the sun is a free energy source. And so that's what companies like Orsted are banking on. They're building out, of course, their offshore portfolio

with wind, as well as their onshore solar and storage portfolio with just a ton of opportunity here, both from the domestic manufacturing and reshoring all of that, as well as great electrification. And then, of course, more recently, data centers and Gen. It's fascinating. The transferability angle, JPMorgan, or the bank's role, is really, you know, much to ponder in the midst of all of this change. Pippa, thank you very much. We appreciate it. As we had to break, let's get a check on the markets. Boeing is weighing on the Dow and contributing, yes, 90 points of the decline. So as Bob Bassani said earlier on, it's pretty broad base. That said, the blue chips are down 1.5%. It's half of that decline for the S&P, the NASDAQ down 4 tenths. Boeing is down 7%. And the 10-year yield are watching as well. creeping back up towards 4.5%. We're back after this. Welcome back to Power Lunch, everybody. We're keeping a close eye on the markets. Dow's down 1.5%, although the NASDAQ is still getting a boost, relatively speaking, from NVIDIA. Bond yields are also rising, especially after this morning's economic data.

Rick Santelli joins us from Chicago with more. Rick? Yes, Kelly. Wow, the data was important this morning. I know new home sales were weak and we had a negative revision. But if you looked at initial continuing claims, ultra-well-behaved. If you look at S&P Global PMI's, the service PMI is at a one-year high. The composites add a two-year high, and everything from the seven-year on has an outside session. Higher yield on the day, higher versus yesterday, lower than the lowest yield yesterday, and all maturities have traded above yesterday's high yields. That's a momentum builder. The low 430s, there's great support in tens. Now we're testing the upside. And we're going to test

Jim's brain here as well. Jim, welcome, and thank you for joining me today. You saw the data this morning. Some brief thoughts. PMI was hot again. Demand push economy is still here. The fiscal spending, the de-globalization labor is looking good. And I think that's the moral of the story here. It's less about monetary policy and liquidity. It's more about fiscal spending and demand push and people getting money. That's a very different story. Now, you know, I always like to talk about the macro. Why don't you tell me more of a micro story that comes from the mentality of a trader on the trading floor. Yeah, I think some of the things that people aren't really looking at is that June OPEX is coming up.

That's a big quarterly OPEX. LOPHRELAX. Option expiration. Exactly. And there's a lot of open interest there on the downside puts, which can create a tail. But in the sense, when it doesn't materialize, that means positive flows for the market. On top of that, you've got three holidays now in the next month. You not only have Memorial Day, which we've had forever, but now we have June 10th.

It falls on a Wednesday. It really kind of breaks up that whole week, really sucks out some of the volume. On top of that, Thursday, July 4th, OPEX after that, and that kind of kills the Friday. So all that time gets pulled out of the market, and that accelerates a lot of positive flows, a lot of Bonna and charm. These are the second order of Greeks, but things that flows that come back into the market. So that's supportive. Ball is very well supplied in the market, so compressing, you know, likely a lot of rain trading. It'll be choppy with less liquidity, but I think that's the biggest story.

You have a very slow summer with low liquidity, but really a range is probably likely. And when you said VAL is well supplied, you know what, I can even put an easier spin on that for some viewers. And that would be, if you looked at the volume, open interest, you looked at all of it, it's most affected by the first 15 minutes and the last 15 minutes of trade. A majority of that volume gets done in those periods. That really goes to your point, doesn't it? Absolutely. And there's a lot of compression coming in during those times, which are also really really. plays to pin the morning action, to pin the end of day action.

You know, that volume happens, and then there's nothing all day in the middle of day. So a real acceleration. Now, yesterday, real quickly, we were just about out of time. Did the minute surprise you yesterday how uncertain and out of GPS location the Fed seems to be quickly? No, the Fed's been without a rudder for some time. They have the wrong tools for the problem they're trying to deal with. They're using rhetoric to try and help, but that rhetoric is ultimately, making things go in every which direction. So the Fed's not the solution here.

Jim, thank you for joining me today. Dom, back to you. All right, Rick Chim, thank you very much for the bond report there. The Dow is down 617 points. The low was 637. Let's send it over to Contessa Brewer for a CNBC news update. Dom, thank you. Louisiana lawmakers have passed a restrictive new law that designates abortion pills as dangerous controlled substances. The first in the nation measure requires doctors to have a specific license to prescribe the drugs. It also makes it a crime to possess the pills without a prescription, a crime that carries fines and potential jail time. That bill now goes to the governor's desk for signature. The Democratic political consultant accused of orchestrating

AI-generated robocalls mimicking President Biden was indicted in New Hampshire and fined $6 million by the FCC. Authorities say Stephen Kramer commissioned the message that told thousands of New Hampshire voters to stay home during the state's primary. Kramer insists he only did it to demonstrate the danger of AI deep fakes. And a new CDC study finds diagnoses of attention deficit hyperactivity disorder, ADHD, are on the rise. Approximately 7 million kids in the U.S. were diagnosed in 2022, a jump of about a million from 2016. The CDC says that increase could be the product of more ADHD awareness, or maybe it's a reflection of how kids were developing during the, COVID-19 pandemic.

Raises a lot of questions. All right. Contessa Brewer for the news update, thank you very much for that. As we head out to break, we want to get a quick power check on the S&P 500. On the positive side, maybe no doubt here.

NVIDIA is holding strong, despite the market downturn here. Meanwhile, on the negative side, you've got Live Nation falling by roughly 8% following a Department of Justice antitrust suit against the company. That is your power check.

Up NVIDIA. Down Live Nation. We'll be right back. Welcome back to Power Lunch. As you can see here, the Dow is down about 610 points. Stocks are sliding this afternoon. The Dow is down 630 some at the lows of the session. All 30 Dow components are now lower on the session. Boeing and Caterpillar and McDonald's are the biggest drags on the Blue Chip Index. Those three costing the Dow roughly 200 points on their own. The NASDAQ is now also turning lower this afternoon. That's despite blowout quarters from Nvidia, which is still holding onto its gains up 9.5%. Mike Santoli now joins us from the New York Stock Exchange with more on the market narrative, Mike.

Why isn't the Nvidia optimism lifting all boats? For weeks now, we've been talking about Nvidia being that kind of tea leaf or that indicator for the health of the broader market. So what gives? Well, I do think it's a definite indicator, Don, for the health of the broader AI investment cycle, which has been energizing a huge portion of the NASDAQ. But it doesn't seem as if, you know, this massive, urgent spending on CAPEX by these big tech companies that's really going to the bottom line

of Nvidia necessarily has much to say about the current field position of most companies. It is interesting, though, Dom, because for three days I've been saying the market's kind of just holding in place, waiting to see if Nvidia allowed the permission to have an upside try here to break further out of the range. We did get the upside try. We printed a new record at the open in the broad indexes, and it didn't hold. And why didn't it hold we have this ongoing sensitivity to any sets of data that go outside the zone of that soft landing channel? So, you know, Rick was talking about bond yields reacting as much as they did to stale Fed minutes.

And today the PMI indexes, the S&PMI. I mean, all that stuff suggests that we do have this raw nerve that says maybe, in fact, we can't be as comfortable as we thought about the benign disinflation story and still solid growth. I don't think this changes the overall story. We're a couple percent from all-time highs, even in the Dow. It shows you that we had a 7 percent four-week rally, maybe needed to back up a little bit off of that. But I don't think it's surprising or, frankly, worrisome that NVIDIA's numbers themselves don't have market-wide coattails. And, Mike, to be clear, there are also not the clear-cut signs elsewhere in the market that things are teetering on the edge at all either, right? There are still no signs of real credit stress.

there are some underperformance in certain parts of the market that may be more economically sensitive. But this is one of those situations where people are like, hey, you know what? The path of lease resistance is almost instantaneously shifted to the downside. Yeah, I mean, I don't know if I would declare that, but it's true that you have seen, even as the indexes were doing well, you've seen consumer cyclical stocks register that there's been some deceleration there. Obviously, the reactions to a lot of the retailer earnings fall into that category. transports haven't been good. Globally, cyclicals have been doing great.

The rest of the world seems like it's picking up. Financials till today have also been a bright spot. So I think you've had a broad enough lift off that pullback we had in April that you give the benefit of the doubt that the uptrend is still in place. But, you know, I do wonder if just that little brief 5% reset lower when you didn't really get a huge kind of cleanse of investor sentiment and all that stuff, you know, was enough to get you more than just the. rally we've gotten. So we'll see. I, you know, I was also listening to we have all this sort of calm ahead of us, not many known catalysts, usually boring markets or bullish markets, and we do actually have a lot of this sort of divergence in different parts of the market, right? You have obviously AI-related is working today, and the rest of the market is not. That tends to

suppress volatility in general. So we'll see if there's anything more to today's action than just a little bit of an excuse to books and profits after this run. Mike, as always, thank you so much. We appreciate it. Michael Santoli. And we'll be back with more on the markets on Power Lunch right after this. Welcome back to Power Lunch. Consumers are continuing to collide with companies over higher prices. Growing frustrations online and slumping sales, pushing some chains to offer more value options. But in California specifically, restaurants are actually further increasing menu prices on the back of the state's new $20 per hour minimum wage. Kate Rogers has that story for us. And Kate, is the impact as significant as some of the reports out there would indicate?

Dom, it totally depends on what type of restaurant we're talking about here. I'll walk you through it. So analysts have been tracking these price hikes as a result of this minimum wage increase, finding that different trends kind of depend on the brand and restaurant format because we know companies are not created equal in this environment. Research from Gordon Haskett found that Chipotle and ShakeShack increased prices around 7% through May 15th. The firm projects these two names will actually see the biggest same store sales tail win from price hikes in the state. Sweet Green, which is another name that isn't seeing consumer pullback right now, also implemented a 5% price hike in California.

But the hamburger players have been more cautious. Wendy's, Jack in the Box and McDonald's have all raised prices under 3% through May 15th. This makes sense because lower income consumers have tightened spending in some cases at fast food establishments in recent months. Jack in the Box noting in recent weeks that higher prices did offsets. some traffic drops, which will likely be the case for the fast food names. However, the highest price increases were at Chick-fil-A at more than 10 percent, according to this research note, and Starbucks at over 8 percent. Starbucks is currently battling to bring back occasional customers, remember, given the challenges the company's seen in the last two quarters. The company is holding off most of the casual dining names, with one exception here, Chili's. Brinker disclosed

some higher pricing in California, which Gordon Haskell projects is just over 4%. Back over to you guys. It's all about the details here. Can we talk a little bit really about Kate, just the differences and where we are seeing some of the pushback on prices specifically for things like value menu items at those burger chains? Yeah, so we reported earlier in this week about McDonald's and some of its franchisee advocates kind of pushing for an investment from McDonald's to keep that upcoming $5 value meal on the menu past its month-long promotion.

So a reminder for viewers here, the promotion begins in the end of June. It does have marketing support from Coke. So this is something that's getting at how to keep it on the menu past that time frame. I obtained a copy of a memo to members of the National Owners Association. That's an independent advocate for McDonald's franchisees. And essentially, in it, the NOA board writes that for offerings to be affordable for consumers, they have to be affordable for the owner operators and to sustain that four item for $5 price tag beyond just the month long, promotion period, an investment from McDonald's will be needed.

Now McDonald's declined to comment on that. So we'll see how it all shakes out. But really, that company trying to figure out how to keep a national value platform moving ahead. All right. Kate Rogers with the latest there on California's minimum wage, thank you very much for that. Thank you. Speaking of high costs, elsewhere in the economy, higher wages are being fueled by good old-fashioned demand. And wealthy Palm Beach, housekeepers are earning as much as $150,000 a year.

Robert Frank is here with those details. Robert? It is kind of unbelievable, Kelly. Thousands of wealthy New Yorkers moved to Florida after the pandemic. They bought big homes in Palm Beach in Miami that needed cleaning. The problem was there weren't enough experienced cleaners. So now Florida's wealth boom has touched off a housekeeper shortage. Salaries for experienced housekeepers in Palm Beach have more than doubled in the past few years.

The typical salary, get this, is now $110 to $150,000, including overtime, 401K's health insurance. Now, most housekeepers are asking at least $50 an hour or more. Staffing agencies say some executive housekeepers, That's where they clean and they help manage the staff are topping $200,000. Bidding wars have become common and employers are getting frustrated. They're coming to us and they're saying, you know, we want a professional housekeeper. We tell them what the salary is. They really don't believe us, but there's no getting around it if you're looking for a quality experienced housekeeper.

They're going to have to pay. Hotels and resorts, they also have assurors, but that's a different labor pool since Housekeepers for the wealthy have very specific skills. There's also a higher demand for chefs, nannies, and butlers. But that's not nearly as high as it is for housekeepers. Now, you can read more about the housekeeper shortage and where the wealthy are investing in Inside Wealth. That's my new newsletter. Head to CNBC.com slash Inside Wealth.

And this is kind of the perfect storm of inflation in the wage sector. We've seen it in services. It's the wealth migration to Florida. And it's employers, very wealthy employers, who don't really have a ceiling of, on what they're willing to pay for a really good housekeepers. Those three things coming together created, you know, doubling in salaries. Salaries in Palm Beach are now much higher than they are in New York. Dom, you and I think you'd make.

I don't know if I can afford it. No, we're going to be the staff. Oh, I can do it. If they have a 401K, I, health insurance. Get a 529 plan. The health insurance is going to be key. I can do that in retirement, maybe in Florida. Me too.

Robert thanks. All right, as we head out to break, today is Red Nose Day. The networks of NBC are a big part. of the effort to raise money to fight childhood poverty in the U.S. and around the world. This year marks 10 years since the event began, and the organization has raised, get this, $370 million to date for food, shelter, health care, and education, touching the lives of roughly 35 million kids. To donate to the cause, go to rednoseday.org, helping things out. We'll be right back.

All right, time for today's three-stock lunch. We're looking at three names that have been making some headlines. We're going to start off with our trader, Courtney Garcia, Senior Wealth Advisor at Payne Capital Management. She's also a CNBC contributor. First up is Dell Technologies. That company continues to expand its AI partnerships and shares have been on a tear over the past year, surging by more than 230 percent in that span. Dell is also getting kind of an analyst upgraded Evercourt today. What's the trade, Courtney? Yeah, I would be a buyer here. Dell is something we've actually talked a lot about this year, something that we're optimistic on. as one of the beneficiaries of artificial intelligence.

I think the only concern here with Dell is the fact that it has done so well over the last year. When you look at its valuations, it's trading almost 20 times next year's earnings, which is about double the levels of it was at earlier this year, as you're clearly starting to see some of that optimism getting priced in. But if Nvidia earnings were any indication, I think we're really just kind of hitting the tip of the iceberg there with the demand you have going forward. And when you're going to see that demand toward AI servers, that's where Dell is going to benefit. But the other side of their business is PC demand. And this is something that you saw everybody bought a new PC during COVID.

There tends to be about a three-year cycle with that. So we're about due. Second half of this year, it's expected PC demand to pick up again. But you have to add artificial intelligence on top of that as well. We are likely going to need AI-enabled devices. And again, that is the other side of their business that's going to benefit from artificial intelligence. So is it getting a little expensive? Yes.

I still don't think it's too late to get in here. And it's absolutely something you want to hold for the long run. Many people talking about Delegant. and look at that year-to-date performance rivaling in Vida. Let's move on to another one, DuPont. They just announced they'll split into three publicly traded companies. Joining a number of U.S. conglomerates trying to do that, that stocks up 13% over the past three months.

Courtney, is this a buy for you here? This is, and I don't think this is going to be as, you know, sexy and exciting as a Dell or something with artificial intelligence, but the fact that they're splitting out into three companies, I think is going to unleash some value for shareholders just in the way that GE did with their companies. So maybe not as exciting, but absolutely, something that has some upside here as well. All right. And finally, Courtney, the name Ralph Lauren,

just reported better than expected earnings and raised its quarterly dividend as well. What's the trade on the luxury end? Yeah, I would be a holder here. Actually, they really beat expectations, which was fantastic to see. And I really like what they were saying about the consumer, where they actually use the word resilient and where there's a lot of questions about the consumer right now. If they have a consumer who is standing strong, that is absolutely what you want to see. So this is a company that if I own, I would hold on to it. Retail space is tough, though, right now, especially just as people are having to choose where their dollars are going.

So I wouldn't be adding new money here, but I would hold on to it if you own it. All right. Courtney Garcia with a three-stock launch at Payne Capital Management, Senior We'll see you soon. Thanks for having me. Quick check on markets as we head to break. Just around session lows down 637 NASDAQ, even with NVIDIA's gain down two-thirds of 1%. We'll be right back. All right, welcome back, everyone. The Dow's down 627 points. Boeing is part of the reason for that, but the still off DOM is really broad-based. It's broader based. I mean, just about every sector in the S&P is lower on the session. As you can see there, the real underperformer on the day, besides the Dow, is the Russell 2000 Small Cap Index.

Now, typically we've talked about this notion that we've seen some of these small-cap stocks underperform when interest rates rise. We are seeing interest rates rise right now, but not a huge, dramatic spike. higher. The macro data this morning, jobless claims stronger than expected. The flash PMI, remember not the official one, just the flash one. That was also better than expected. Ten years inching back up towards four and a half percent. But watch the two year. We're at four 90, about 30 basis points below the highs from October when the 10 year was at five. If that's telling us that we're going to see the long end go up again because of Fed moves, then you could see a market. That short ends also the proxy for Fed rate policy, right? So a lot of people look at it like

that. Exactly. All right. Well, that's it for power lunch. The Dow's down 625 points. And we'll hand it over to closing bell, which starts right now.