Power Lunch - Down Day for Markets & Salesforce’s Slump 5/30/24

Episode Date: May 30, 2024

It's another down day for the markets. The Dow is now off nearly 2,000 points in the two weeks since closing above 40,000 for the first time. But today's losses are all about Salesforce. That stock is down $55/share, accounting for about 350 points on the Dow, and weighing a lot on software and cyber security names including CrowdStrike, MongoDB, and Adobe. But if you look more broadly, 9 of the 11 S&P 500 sectors are higher, led by Real Estate and Utilities. We’ll dive into all of today’s market action and more, ahead.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everyone, and welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson. Glad you could join us on this, what is it, Thursday. It's Thursday. And another down day for the markets. The Dow now down close to 2,000 points in the two weeks since closing above 40,000 for the first time. But today's losses are all about Salesforce. That stock down $55 a share, accounting for all the Dow's losses and then some, Cal. All right, and weighing a lot on software and cybersecurity names, including CrowdStrike Mongo, DB, and Adobe. There you can see some of the declines. CrowdStrike, for instance, down 8.5%. If you look more broadly, nine of the 11 S&P sectors are actually higher right now, led by real estate and utilities, typically those rate sensitive areas. Let's start with the three key stock stories of the day. Number one being Salesforce, worst day since 2004, weak earnings results, the culprit there. Dell reporting after the bell, betting big on an AI boost and footlockers turnaround showing signs of life. We've got team coverage on each. Steve Kovac on Salesforce. Christina Parts and Evelace on Dell and Gabriel Fon Rouge on Foot Locker, Steve.

You go first with Salesforce. Oh, boy. Excuse me, Tyler. Well, Salesforce shares are taking following a revenue miss and expectations on guidance for the second quarter. Not to mention no clear sales generating plans for artificial. intelligence. On the revenue side for the quarter, it was Salesforce's first missed since 2006. So what's going on here? Well, execs blamed a variety of factors like weak overall demand for services for the guidance and revenue misses. And then there's the lingering AI question. CEO

Mark Beniof has been talking a lot about the promise of AI, but not showing any direct sales there. On their earnings call, he even said all the AI models we talk about so much from companies like Open AI, Google Anthropic, they are already commodity. and really just don't matter that much. Instead, he said it's that corporate data that's much more important for those models to tap into. And guess what? Salesforce generates oodles of that kind of data.

Here's what Benioff said with Jim Kramer last night about that. With this new generative AI capability, we can take the 250 petabytes of information that's stored in Salesforce and action that to create another level of capability for our customers. And with FedEx, what that means is they're able to sell services, to their customers that before they had tremendous white space with. Now, Baniyoff and execs, they talked about its product called Data Cloud,

which is the main AI product at Salesforce right now. They said 25% of deals over a million bucks in the quarter included data cloud purchases, but no real details there beyond that. By the way, that was the same stat they gave a quarter ago. So Wall Street, though, the stock market doesn't seem impressed with Mr. Benehoff's explanation of how they can monetize some of the data they have? Yeah, that's exactly right. And that's what this data cloud thing is supposed to be about, but no one's really buying it yet. A lot of the analysts and the reactions today after yesterday's

earnings say don't expect to see any material sales there until next year, Tyler. So that's that's really pushing it out right now. They're dealing with a tough macro environment that they're blaming that guidance miss on. All right, Steve, thank you very much. Steve Kovac. And let's stay in tech for the moment. Talk about Dell, which has become a hot stock again. Dude, you got to get Dell. It's doubled this year, 255% higher in 12 months, like Nvidia, really. And it's based on the same thing, AI. So is Dell an AI player or, well, I don't know if we'd call them a poser? But Christina Partsenevolous is taking a look ahead of their results this afternoon. Christina. You can choose, you know, nicer words, faker or just, you know, maybe over-exaggering.

But you just mentioned the comparison between Nvidia and Dell, the Dell share price actually increased more than Nvidia's just in the past year. I'd like to preface, though, the stock is down today, but it's literally jumped 44% since May 1st of this month. And that's because of AI optimism and the potential to capture it through Dell's server business, which had a near doubling of backlog orders last quarter. But AI server shipments were only 3.5% of total revenues. That's key. You know, less than 5%.

So is Dell a much less levered story to AI, as Bernstein says? Or an AI faker? There's that word, Kelly, as one Mizzouho analyst called Dell. I want to start with just the recent stock drivers. So you can call it the Midas touch of NVIDIA. The stock jumped after NVIDIA's CEO lauded the strength in their server relationship on stage last week.

InVIDIA chips need to plug into something like servers, and that's where Dell plays a role. And then secondly, Microsoft's AIPC announcement with Qualcomm last Monday helped fuel this PC refresh cycle that's going to be driven by AI PCs. But Dell's core business, about 60% remains heavily reliance on PCs and monitors, which means that AI boom,

may not be as beneficial as thought. And if we talk about Nvidia, yeah, they're getting their GPUs. NVIDIA's hitting 78% in gross margins. That means if NVIDIA's making that much money on their chips, it's going to cost Dell a lot and could be more dilutive to Dell's actual gross margins. So there's definitely caution going into earnings tonight, hence why, you're seeing the stock down, what, 4% today? But look specifically for AI server bookings.

I'm seeing a boogie number of about $4 billion. And then any commentary about the PC recovery. which some are saying is underway. Well, it would be a big boon if this whole, now that Microsoft's out with its AIPC, do we expect Dell to enter that space as well? Well, HP Inc. is a great example with their earnings report, right? So they're an original equipment manufacturer.

Their earnings report said that about 10% of their PC shipments in the second half of this year will be specifically AI PCs. Dell plays into this space as well, but that 10% number is still small with HP, Inc. saying that most of it's going to be in, you know, fiscal 20, 25, 2026. So that is maybe some thought for Dell that we're not going to see this immediate rise in PC sales and especially AIPC sales, despite the narrative that's trending. And just for our investors that are listing right now, the stock tends to move quite a bit. Options market is pricing in at least 9%. Last

quarter of the stock jumped about 32% post-earning. So this could be a mover, especially with the sell-off going into earnings tonight. Let me ask you one quickie. What is an AI PC going to let me do that a regular PC doesn't already? Excellent question. Excellent question. So AIPC, they have specifically an extra chip called the neural processing unit. And the key thing, Tyler, is that it can do all of your AI

needs, like write emails, search for or plan your itinerary, all on the actual laptop. It does not necessarily need to connect to the cloud or Wi-Fi. So that's what they're selling right now, that you know, you can do everything remotely. It's going to save battery life. It's going to, you know, work on the AI, eventually, let's say, for example, you're deaf and you want to sign to your computer,

you can write it out for you real time, not connected to the cloud. So this are just some of the examples. But is this going to be a major driver just yet? That's where the hesitation stems. All right, Christina. Thanks very much. Christina, parts in Avelace. All right, let's move on to another corner of the market, one that's got some soul. Foot Locker, rising nearly 20% today and won an on pace for its best day in nearly seven years. But investors can't get too excited. The stock is still lower for this year and down 44% over the past 10 years. Gabrielle Fon Rouge joins us now with the Foot Locker story. Gabriot. That's exactly right, Tyler. It's a big day for Foot Locker. A lot of what's driving

this stock move is some of the good numbers that we saw in the report today. So same store sales, they were down. They were down 1.8%, but that's better than the 3.1% drop-off that analysts had expected. And they also had guidance that was better than expected. You got to keep in mind that last year they slashed their guidance over and over again. Now they're actually reaffirming their guidance, which is a step in the right direction for Foot Locker. They're expecting sales to be down 1% to up 1% compared with the decline of down 6% that Annalas had forecast. So you've got to keep in mind, this is coming about two years into CEO Mary Dillon's turnaround plan. And a lot of that work has been focused on the stores. You got to, you know, Foot Locker

does 80%, more than 80% of its sales are still done in stores. It's a lot to, different than other retailers. So it's incredibly important for Foot Locker to have great new stores. What you're looking at right now is the new store of the future concept. So this kind of takes the tired old Foot Locker concept, the walls of shoes, and turns it on its head. It's becoming brand hubs. There's individual locations you've got on there, you've got Adidas, you've got Hoka, and that's incredibly important for the brand partners. Foot Locker doesn't have a reason to exist if brands are not willing to sell into Foot Locker. So that was another thing that CEO Mary Dillon had to say. Let's hear what she had to say about Nike. Nike is our largest

brand partner. We're thrilled about our relationship. I'd say it's reinvigorated in a lot of ways I was just in Paris at their innovation summit. I think they've got some exciting things today and coming in the future as we get into the Olympics and into next year. Yeah, so Nike is one of Foot Locker's biggest brand partners. They've had a little bit of a rocky relationship over the last couple of years, Nike is now starting to realize how important wholesalers are. So a lot more work to be done, Tyler. It looks like what Footlock is trying to do is turn their stores to have the kind of cool factor that an Apple store would have. Do we have any idea how much these makeovers cost them in the aggregate or store by store? So they spent about 250 million in capital expenditures

last year on store refreshes. They're planning to spend a lot more again this year. So that's something Foot Locker is going to have to work on throughout the year. You know, their cash position is not the best. They've got debt on the books. Their sales are consistently following. So Dylan has to balance. She's got a tightrope that she has to walk. She's got to spend the money to refresh the stores, but she also has to keep the business

afloat. Indeed, she does. Gabby, thanks. We'll see you soon. We appreciate it. Let's get to some news now on the merger talks between Paramount and Skydance. Julia Borson, what's the latest? Well, Skydance has sweetened its merger offer for Paramount.

This is according to sources. This was first reported by the Wall Street Journal. My sources tell me that Skydance understood that they had to satisfy Class B shareholders, so the group offered both additional cash and some sort of reallocation of the cash part of the buyout, so it is more equitable for the Class B shareholders. And we see the stock is now of about 2.5% on this news. My understanding, according to sources, close the situation, is that the Paramount Special Committee is currently reviewing this new offer.

If they make a recommendation to take this offer, then it will go, to Sherry Redstone to consider. We've reached out to Paramount for comment. We have not heard back yet. And Skydance told us no comment. Kelly, back over to you. Where is the other party in this merger dance right now, Julia? So the other party is Apollo and Sony.

Together they are right now doing their due diligence. That started a couple weeks ago. It is still ongoing. So now we are seeing sort of parallel paths being taken here. Skydance had an exclusive negotiating window. that exclusivity has has expired, which is why Apollo and Sony are now in their process of evaluating and having conversations about this. So it could go in either direction, but of course, the value for Sherry Redstone, who's very much interested in keeping her company together, is that

the Skydance deal would not break up the company, and the presumption is that an Apollo Sony deal would result in a breakup of the company that Sherry Redstone's father built over so many years. Great point. Julia, thank you very much. Paramount shares. up about 2.5%. As we head to break, let's get a quick power check on the retail sector. Today, some huge movers. On the negative side, coals down 24% nearly on a massive earnings miss. They cut full year guidance as well. But on the plus side, Burlington stores take a look. Along with Foot Locker and Best Buy, we're seeing some resilience in this space today. Burlington up 18% delivering a strong beat. Further ahead, we'll dive even deeper into some of the big moves and the changing

trends within the retail group. Power Lodge will be right back. Welcome back to Power Lunch, everybody. Stock's under pressure today and all week, a rough week on Wall Street continuing to roll on. S&P 500 and NASDAQ both on track to snap a five-week win streak in the Dow on pace for its second straight week in the red. Our next guest expects a 15 to 20 percent full pullback from these levels and also says he sees a rate hike, a hike before a cut this year. Let's bring in Greg Branch, CNBC contributor and founder and managing partner with Branch Global Capital Advisors. Greg, welcome.

Good to have you with us. Why so dower on the markets, Greg? So, Tyler, as you know, this has been my consistent view for some time now, even back to January, when the market was focused on seven rate cuts this year. And so now that the consensus is coming closer to my stated view at the beginning of the year, that will have zero rate cuts this year, I'm surprised that the market hasn't pulled back already more than it has. Remember that this rally, which kicked off in October, was driven by two things. It was driven by the euphoria that the battle with inflation was over and that we would be in a

much lower interest rate environment, 2004, and the general AI euphoria as well. Well, only one of those remained, Tyler. And recent data suggests, that we haven't seen disinflation in quite some time. In fact, what we saw is a spike in inflation over the first quarter. And what we saw is a spike in the things that lead to inflation over the first quarter, with wage growth going from 90 bibs in the fourth quarter to 120 bibs in the first quarter. And so overall, Tyler, we just don't have any evidence that we're seeing continued disinflation. 3.9% unemployment doesn't get us there.

30 to 40 basis points growth in core every month doesn't get us there. And wage growth that we're seeing right now when still historical low job as claims simply doesn't get us there. But you still have companies performing pretty well. You still have an economy that seems to be based partly on wage growth and unemployment and GDP growth that seems to be doing pretty well. Can those two things overcome those negative factors that you just and correctly. site. Tyler, those are actually part of the problem. I like you and everyone else, root for great GDP growth, root for wage growth, route for earnings. But what a 6% earnings growth quarter shows us, and what three consecutive earnings growth quarters show us in a row is that the Fed simply had not

put in place an environment that was restrictive enough. The GDP environment shows us that, even though we had a revision down, most of that downward revision was driven, by a 4% contraction in durable goods. The services spending was up 4%. And as long as that remains the case, there's no attainable path towards 2% inflation. What the Fed has done simply is not restrictive enough. That is why I've maintained a likelihood, even to this day,

that I think that the next move is actually a hike. It's more likely we see a hike than a cut. I think some people are coming around to that view, although the market's probably not quite there yet. It's sort of one of those things. Meanwhile, and the markets, whether you think there's a cut or a hike, you seem to agree with many others about some of these areas of opportunity, cloud and AI being one of them. You're also looking to Oracle as a name there.

Cybersecurity, Greg, has been a huge area of strength. For the most part, a little bit more choppy, more headlines today, obviously, about big hacks. Are those stocks you'd stick with no matter what the Fed does? Right, Kelly. And so, as you astutely point out, I am only poo-pooing one of the area of euphoria that we've witnessed that drove the rally. The other, those that are tethered to secular and cyclical tailwinds, generational secular tailwinds like AI and cloud, as you really point out, I've always been an advocate for. I'm not ready to give up on cybersecurity yet. I think

Palo Alto hasn't reached, hasn't come nearly close to its highs that we saw back in February. And I think that the cybersecurity element of the AI ecosystem, of the cloud ecosystem still isn't appreciated as much as it should be. And so I still think that there's relative outperformance in these names, particularly when we start to see a more restrictive environment, take earnings growth for everything else down to low single digits. These names will still put up, 20% plus earnings growth. So I think that's still an opportunity area. Turning to the major beneficiaries of those secular tailwinds, AI and cloud, while the invidias and the Googles and the Microsoft's, the obvious benefits, beneficiaries have performed well. There's some laggards like Oracle, for example, that has a unique

and singular focus on the large enterprise, but is only up 12% in the last year. So I think we can start to spread our exposure, remaining focused on these themes outward to some other names, but I still, yes, I still like cybersecurity as well. All right, Greg, good to check in with you. Thanks for your time today. We appreciate it. Pleasure to be here. Greg Branch. Further ahead, are $1,000 a month loans on new vehicles becoming the new normal? some new data pointing to a shocking trend. We'll be right back on Power Lunch. Welcome back to Power Lunch.

We told you about Salesforce soft quarter. Its shares are dragging the market lower, but might it just be the wrong software business model for the coming age of AI? Deirdre Bosa is looking at potential trouble in the cloud for today's tech check. Deirdre? So, Kelly, Enterprise Software,

it is the pain trade of the year, and Salesforce just added more momentum to that. But there is one corner that could, be poised to recover and will benefit more from Gen. A.I. than the traditional SaaS model that the likes of Salesforce has, that would be consumption-based models. Business models like Snowflake, Datadog Confluence, MongoDB, which reports tonight will be another piece of this enterprise software picture. Here's the case for it. If Gen. Gen.A.I applications are compute heavy. They require more usage of cloud computing resources or

API calls, then consumption-based models naturally scale with the customer needs, versus a Salesforce, and others, which primarily sells on a subscription basis, often structured around a per seat model that is charging based on the number of users that have access to the software. That is great when workforces are growing, but not so great if generative AI is making workforces more efficient and smaller. So you essentially have less seats,

even though Gen AI workloads are increasing. I spoke exclusively to Boxio, Aaron Levy, on where we are in this cycle. Have a listen. If you look at cloud computing, let's say, we are in 2006, 2007 in terms of cloud computing adoption relative to where we are with AI. So we have to kind of put ourselves back in that kind of position of how early we are in this technology cycle and ultimately then how much upside and potential there is as it fully

rolls out. So that's where many companies are today. They all know that they need to have AI strategies and probably will eventually, but they're trying to figure out what exactly that looks like, how much they build internally versus how much they're spending on outside platforms. And Kelly, that's why investors are trying to figure out as well. Enterprise software has been such a rough place to be invested this year over the last year, really, but there's some divergence occurring in that consumption-based model is an interesting one in the age of Gen A.I. It's an interesting sort of lesson in, I guess, second level or derivative

thinking when you said, okay, so here comes a... and it's a threat to some of these SA SAAS companies, software as a service companies, where they're basically collecting money on a per capita basis. Well, there may be fewer capitals. Exactly. Exactly. Less seats, right? And you see that like an example like Klarna, right, which said that it was able to get rid of 700 employees,

but then it put those workloads of those 700 employees into generative AI. So if your company selling Karna, selling your software to KORNA by seats and subscription, there's a lot less seats to sell to, even though their usage of Gen AI, which requires compute power, goes up. You understood it perfectly, Tyler. Yeah, well, it's interesting. It's derivative thinking. It may or may not be the case, right? I mean, it...

Yeah. We don't know. We will find out as we find out on... But there's a lot of unintended effects, right, of Gen A.I. Like, at the beginning, we thought that it was going to hurt blue... collar jobs. Turns out it's white collar job. So while enterprises, while their customers are trying to figure this out, so are investors and so are the workforce is. Deider, good to see you. Thank you. Deider Bosa. Let's get to Julia Borsden now for a CNBC News update. Julia.

Tyler, a third U.S. farm worker who deals with dairy cows has been infected with a bird flu. The CDC reported the update today. This is the second person this week in the state to be diagnosed with this illness. And this latest case is different because the CDC says the worker experienced a new symptom, a cough that accompanied eye symptoms. Federal health officials say the risk of bird flu to the general public remains low. IRS free tax filing is here to stay. The agency announced today will make its experimental direct file option for simplified returns permanent. The pilot program rolled out on a limited basis this year. The IRS says some 140,000 taxpayers took advantage of it, claiming more than $90 million in refunds. In basketball great Larry Burr,

Bird helped celebrate the grand opening today of a brand new museum cataloging his career. It opened in Terre Haute, Indiana, a couple of hours north from where Bird grew up. The Celtics legend and NBA Hall of Famer spoke ahead of the ribbon cutting, saying he hopes the museum will inspire the next generation of athletes. Back over to you. All right. Thanks very much, Julia Borsden. Well, rewriting Retail's Gene Code, why adjusting to changing fashion trends could be a make-a-break decision for several companies.

when we return. Welcome back to Power Lunch. We are right in the middle of retail earning season. We've heard from a lot of the big apparel names, with more still-to-come Gap, for instance, reporting after the bell today. Shares up 3% into that print. But if there's one big theme emerging so far, it is denim. According to Morgan Stanley, demand for denim is jumping.

Search levels are hitting peaks in a 20-year data set. Abercrombie has been hitting it big with the denim trends. The stock up 20% in a week, as it reported, and up 460%. Oh, yes, in just 12 months. Here's what CEO Fran Horowitz said about the changing style. She said denim silhouettes are shifting. What we're seeing today is that they are truly getting significantly baggier and wider. Aren't they ever?

For more on how important it is for retailers to catch these trends at spring and CMBC. com retail power duo, Melissa Repco, who covers department stores like Macy's and Coles and Gabbyle-Fle-Fone Rouge, who covers the apparel names like Gap, Abercrombard. and American Eagle. We're all wearing denim. We came on style. If they zoom out enough, can everyone see for a second these balloon, these ladies went to the store. I said, ladies, you know, I'm last on a trend here.

But even I know, the ladies at my town, they're not wearing the ath leisure anymore. They're wearing this, Tyler. Yeah. They're wearing. This is what people are wearing. This is my first foray into. You get a good gust of wind. You could be like to flying run, you know.

They're not quite long enough. You get in there. I wore my jeans today. too, by the way. And this is what, everyone's wearing. What's with this wide silhouette that everybody's so hot for? So it is the low-rise baggy. This is what all of the teens are going for.

I bought these today at Hollister. You know, like we just heard from Fran Horowitz, she said that these are the most popular jeans. This is what's in. And this is what's out. We're jagging the skinny gene. Oh, the skinny gene. And so we had a really interesting experience today at the American Dream Mall.

So Fran Horwood said that low-rise baggie is what's in. American Eagles president also told me the exact same thing. But when I went to American Eagle, they didn't have low-rise baggie. They only had it online. And they told me as well that Juggings were no longer resonating with their customer. They're getting rid of them from the stores, yet they had a whole wall of these. I have an entire closet of these. I used to be able to fit into these skinny jeans.

And this is out. The athal leisure feels like this is not where look at Lulu Lemon struggles amid all of this. It's very interesting. So my wife just bought from one of the aforementioned companies online, jeans ripped to hell and wide and wide like that. What is the attraction here? Because the wide look. This is the mom gene with the cut to it. Huh?

This is the mom gene. And people used to make fun of this style, but this is a style that is in. No, they're wider pants. They're wider, flared out more. More flair. Because they're not, let's just say, they're. They don't do a ton for the silhouette. Well, here's the thing that's important, Tyler, is that it's not just about the bottom.

It's about the whole outfit. And so I spoke to Macy's CEO about this. And Tony Spring was saying, you know, people are dressing not only in head-to-toe denim, but when people are dressing in a different kind of pant, it affects their whole outfit. So they're picking out different tops. They're picking out different shoes. And so it's an opportunity, like, for a department store or a brand to try to get people to buy outfits, which we know is under pressure right now

as people are a little more careful with discretion of spending. I thought denim was going to be dead. What does this mean, this ability to surf a trend? What does it mean for the stocks of these companies? Well, it's incredibly important to be able to be on trend and to be able to get your supply chain in a place where you can respond rapidly. With social media, trends change in an instant

and you have fast fashion players. Like I talk a lot on your show, Sheehan, they can get an idea from design. They're spotting these things online, getting them online within a week. Under Armour said two weeks ago that it takes them 18 months to get something from idea to a showroom floor. And as you can see, Under Armour's down, and they had a bad earnings that day. Lulu Lemon as well.

And Coles as well. Poles is another example. Today it's down. It was down as much as 25% earlier. And one of the problems is that it's struggling to keep up with trends. And I spoke to its CEO, Tom Kingsbury. And he said one of the things they're trying to do is shorten the amount of time it takes, especially for the junior's department, which caters to a lot of teen girls.

They're the fastest to these trends. if you don't respond quickly, you miss the moment. And we're seeing the response to that today with very weak sales. He said they're trying to kind of get ready for the next couple quarters of year and get their denim section ready as well. So the ones that get these right, whether it's American Eagle or Gap or Abercrombie or you name it, their stocks are likely to respond very possibly. Yeah, those stocks are going to do well because it means they're executing well. Right now the consumer is like spending.

I'm going to come over here looking what you got on the rack here. Just keep going. I mean, I just don't mind me. I'm just going to browse a little bit. They need to, retailers need to make sure that they have the highest trends on the shelf. Where's the jumpsuit? There it is. Oh, that one would be good.

This is a little jumper. I think this one for Joe. Perfect for the summertime. Yeah, that's kind of cute, right? We're seeing denim in all parts. It's not just jeans anymore. You got gene bags, jeans shoes. Exactly.

And it's important to remember. It's about having the right stuff at the right moment. We are seeing consumers pull back in some areas, but then you look in an Abercrombie that is seeing a lot of strength in sales. So it's not that consumers are pulling back everywhere. They want to buy certain items. And with those items, they are willing to pay full price or closer to it. No, the trends are shifting. We even heard from the Brooks Brothers CEO, because I was asking him the same thing, saying, is this trend back towards work where he said, it's not that leisure is over, but people want those technical fabrics in these more sophisticated silhouettes. And I do

wonder where, so Lulu Lemon's chief product officer just left. I went in the store three, four months ago looking to buy something and left empty-handed because I was confused. I'm like, I don't think people are wearing tights anymore and I don't like any of these silhouettes they have to offer. I mean, this is the end of the trade of the 2010s and now the 2020s are bringing us something very different, very different. And it's denim. Cole's CEO is telling me, polished casual is what they are trying to focus on. So some more casual dresses, but they're active wear, the leggings you referred to, are

actually not selling well. They were on clearance this past quarter and that weighed on their performance. He said that was a weakness for them that people just don't want that in the same way anymore. Yeah, and we heard from Lulu last quarter, they have a lot. reported yet. But part of the reason why sales were so bad in North America is because they didn't have enough colors. Consumers came in looking for different types of colors and they didn't

have, so just like you, you came in with money ready to spend and you walked out empty handed. And that's because of poor execution. Yeah, still doing maybe well on the men's side. Men, Tyler, I think it would be a few more years to fully jump on the denim bandwagon. Well, you will not be seeing me in the wide flared stuff, but I'm not doing that.

I want you and be... Not a low-rise baggie for you? No, no, low-rise baggies. I mean, they would you give dad. Let's wait till 2025. All right, Melissa and Gabrielle, thank you very much. My wife wanted me to wear my denim shirt. You should have, maybe tomorrow. All right, do I hear 800, 900?

No, what about 1,000? That's just about how much your new car loan may cost you every single month. Phil LeBoe will tell how prices have climbed this high when Power Lunch returns. All right, welcome back to Power Lunch. Yesterday, Phil Daddien's LaBoe told us, about car leasing making a comeback. And maybe today we have a reason why. Buying a car is more and more expensive if you hadn't noticed. According to new data, 16% of new car buyers who finance are paying $1,000 or more per month. Phil joins us now with more on the story. Hey, Phil.

Dad jeans? We'll discuss this sometime. We will discuss this. Let me throw some numbers at you, Tyler. These won't surprise you, Tyler, because I know you're above $1,000 a month for your car payment. The average right now, in terms of somebody taking out a new car auto loan, and this is according to Experian, in the first quarter, your average monthly payment was $735. The average amount borrowed just over $40,000. The term, how long it would take you to pay it off? 67 months. That's the average right now. Okay, so there's a couple of things to keep in mind.

Is there any indication that auto loan payments are coming down? Yes, but don't get excited. They only drop $3 per month in terms of the average. And as you take a look at auto sales, the demand is there. They're going to be the highest since 2019. And that's why this statistic takes on greater relevance. 16% as you mentioned, Tyler, of the people who took out an auto loan in the first quarter are paying more than $1,000 a month. that's before insurance. So add that in. You can only imagine what people are paying. And here's the

breakdown in terms of what people are paying between 400 or under 400 all the way up to 1,000. The bulk of these are between $400 and $800. That's where you see most of the auto loan payments falling right now. Bottom line is this. We continue to see people who say I am willing to pay more than $800, more than $1,000 a month when it comes to financing a new vehicle purchase. Tyler, back to you. The Dad Gene's reference was to a previous segment, which you may not have seen, but it just felt. Oh, I watched. Oh, you did?

Okay. I watched. Good. All right, man. You want me to comment on the full shot of you in the studio? We'll do that some other time. All right. Save it for next time.

No? This is why, one of the reasons why leasing, as you pointed out yesterday, has made a big comeback. Exactly. Leasing is generally about $140 less per month in terms of a payment. So if you went out and looked at the exact same vehicle and you wanted the finance to buy it versus lease it over three years, generally speaking, you're paying about 140 less per month to lease. Phil was kind not to comment on my balloon jeans, by the way. He knows better than to go there.

Let's move along, Phil to Boeing. We did get some news from the FAA. What is that news? Well, leadership of Boeing, including CEO Dave Calhoun, met with the FAA in Washington for three hours this morning, laid out their game plan after 90 days in terms of what they are going to do to ensure quality control, safety, all of the things that need to be done to assure the FAA that 737 maxes are built to specifications. At the end of it, the head of the FAA came out and said, this is great, but this is just a blueprint. see if they can meet the metrics on a regular basis, outline the fact that they're going to have

weekly meetings, quarterly meetings between the head of the FAA and the head of Boeing, and now it's up to Boeing to show that it can meet these metrics. One last point, Boeing still cannot raise production beyond 38 per month when it comes to the 737 max. Mike Whitaker, head of the FAA, said it's probably going to stay, that cap is probably going to stay in place for several months. All right. There's Boeing shares up fractionally, while the doubt was still lower for the day. Phil, thank you very much. See you soon. You bet. Phil Lebo.

The Dow is in fact down nearly 2,000 points in the past two weeks. So which names should you buy? Which should you avoid? Our three-stock lunch trader will give us his sell-off playbook next. And as we had to break, we're celebrating Asian-American Native Hawaiian and Pacific Islander Heritage Month. Here is Zoom, founder and CEO, Retune, Ryan. As an Asian, I have a firm route in family and traditions and cultures. that has been developed over thousands of years.

My values are in education, hard work, and being a change maker and bring the change in this world. When that's combined with the freedom, independence, innovation, and fairness of what's available in America, it creates a very unique conditions for somebody like me to be a change maker. Welcome back. It's time for today's three-stock lunch. Jerry Castellini has our trades today. He's president and chief investment officer with Castle Arc Management. Jerry, welcome. Dow is down nearly 2,000 points in the last couple of weeks. So we've asked him to give us two names he'd buy and one to avoid at this juncture.

So let's start with the big name of the day, which is Salesforce. Down more than 20% after missing revenue expectations and that weak outlook. Jerry, is this one you think investors should pick up? Is it for sale or the beginning of a bigger downtrend? You know, we don't know, and for that reason, we should avoid it. This one is being caught up in a big shift in cap spending in broad-based software and hardware at the enterprise level. And to see the beginning of a trend like this and to think this would be the turning point

after just one quarter, I think that would be premature. Is this a great company? Absolutely. Truly one of the generational businesses that you've seen. But the company was built to grow. And for them to have to go through an experience now where their growth will slow or they might not have growth for some period of time. I just don't want to be around. I'll let this one play out and let others buy it. So there's your avoid. Up next, though, we've got

applied materials. The name you say to buy today, the stock slightly down today, but up about 10% over the past month. Why do you like applied materials amat? Yeah, so the opposite really of Salesforce is the visibility a company like applied has. We clearly now are seeing. We clearly now are seeing, a backlog of their swell with the rush to build and to meet the demand not just in the next couple of years but over the next four to five to build out the foundries to create this explosion in demand for compute power and it includes not only that but even at the at the data center level the need for more memory is there and when you combine those things with a business is traditionally kind of

constrained by the amount of machines they can build, this is going to give them a tailwind for profitability and visibility. And the key to this market right now is to having that. Again, the opposite of Salesforce is you can see even more clearly every day applied this opportunity set. And it just keeps swelling now as people are more and more interested in this long-term view. All right. Let's move on to intuitive surgical, which is another name you say to buy, Jerry. The shares are up 20 percent this year. Why does this one jump out to you? Yeah, this one hits their trifecta. There's 12, I think 12,000 men pass through the age of 65 every day.

65 is that magical number that you have to start paying attention to the risk of prostate cancer. Prostate cancer solution is run through the Da Vinci machine that Intuitive Surgical has invented and has really closed out the market on. What's interesting about them right now is this is the first major upgrade in that product cycle and it brings with it a whole turnover of all the hardware that's in the hospitals today and the hospitals and docs just love this and this is a very very important upgrade for everyone that now has this risk factor and you can expect to see their 30% margin

is probably going well into the 40% level. Again, a long tail to this up cycle and this kind of market where we're not sure about the economy, we're not sure about some of the disruption from the AI side, best to find names like this where you know, or you hope you're going to have a good visibility pattern. All right, Jerry, thank you very much. Interesting. And that last one, very, very interesting indeed. We appreciate it. Still ahead. Orange juice prices are going bananas. Don't look now, but supply constraints and climate woes have got makers considering alternative options for OJ. We'll explain next.

And don't forget, you can always hear us on our podcast, listen and follow on any platform. Just look for Power Lunge. Be right back. Off the lows, but still down. That's the story of the Dow. 440 at the low, now about 300 points lower as the Dow continues to stumble after hitting $40,000 a couple of weeks ago. We've only got a couple of minutes left in the program, but we've got several more

stories we'd love to tell you about. Number one, General Motors just announced its new electric Cadillac O. Optique, that's with a queue. It will start at $54,000, making it the brand's cheapest EV option. GM says it hopes a model will help the company reach its goal of selling 2 million electric vehicles worldwide between now and 2026 while taking on the likes of Tesla, BMW, and others. So bucking a little bit against the trend, which seems to be moving a little bit more softly in the direction of hybrids, not EB. Exactly. Let's get to new data from Vanguard showing hiring for workers and lower-paying jobs has remained resilient,

even as demand for higher-income workers drops. Firms says that's partly a reflection of lower-paying service industry still trying to recover from COVID, but Burlington stores and its earnings said the same thing their low-end customer is doing quite well. Still. Well, good news there. Orange juice prices have climbed to fresh all-time highs

amid persistent supply constraints, pushing the industry into crisis mode, forcing some makers to consider alternative fruits. The benchmark frozen-concentrated orange juice futures closed at $4.77 a pound yesterday. That's nearly double the price from a year ago. Orange juice has gotten really, really costly. I mean, I always love that really pure, fresh squeeze one. You get at some fancy coffee shops, but it's really expensive, even more so now. And if you get this stuff in a bottle check, because they're going to blend it with other juices to try to, you know,

keep margins. Yeah. Sony is in talks to buy Queens music catalog and a potential billion dollar deal, according to reports. From a Citigroup note this morning, could have big implications for Universal Music Group. which represents the band's catalog globally outside North America, and produces and distributes its audiovisual releases. Sony Group shares are up about 3%. That would be a big deal there, buying Queen. Think they're worth it? I do.

Well, I have no way of knowing, but I mean, they're one of the timeless groups. You hear their songs still. Yeah. practically every day. Thanks for watching Power Lunch, everybody. Closing bell starts right now.