Power Lunch - Earnings Avenue, Retailers At Risk 4/23/24

Episode Date: April 23, 2024

A huge week for earnings reports rolls on, with tech, energy, autos, airlines and consumer staples all in the spotlight. We’ll break down the key results for you.Plus, a new report from UBS warns 45,000 retailers are at risk in the next few years. We’ll ask the analyst which names he sees on the chopping block, and which remain strong.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi, everybody, and welcome to Power Lunch alongside Simamoti. I am Tyler Matheson. Welcome. Glad you could be with us on a Tuesday. Ahead on the program. The huge week for earnings continues today with tech, energy, autos, airlines, consumer staples. We will break down all the key reports. Plus further, a new report from UBS warning 45,000 retailers are at risk over the next few years. We ask the analysts which names are on the chopping block and which will remain strong. But first, let's take a look at where markets are trading right now. We're actually at. the highs of the day with the S&P 500 up 1.3% building on the gains from yesterday. Biotech and technology stocks bouncing back with 10 of the 11 S&P sectors trading in positive territory. And let's draw your attention to Spotify up a whopping 16%. Highest levels since March of 2021 on the back of its earnings beat.

Also check out Jed Blue sinking after reporting worse than expected revenue. On the other hand, aviation engineer maker GE Aerospace, higher. after beating on its results by 6.7%. And over in autos, GM up beating on earnings. We'll take a technical look at that name further ahead. Another auto name also in focus. That would be Tesla reporting after the bell. But that name, along with some of the big tech stocks,

becoming the target of short sellers. And for that, we turn to Kate Rooney. Hi, Kate. Hi, Tyler. So last week marked a record windfall for the bears that are betting against big tech short sellers. And the magnificent seven saw a weekly profit of $10 billion. That was an all-time high. During that NASDAQ sell-off, it's according to data firm

or techs. Those tech giants mostly report this week, and they are the most shorted stocks in the U.S. markets. That's according to S3 partners. InVIDIA, it's number one, followed by Microsoft, Apple, Tesla, then you got meta, Amazon, and Alphabet. There's also been some negative sentiment around these companies, but the short interest, it might be more about downside protection and hedging. S3's Ior Dusenuski tells me, investors are, you. using mega-cap tech as a way to hedge, their overall portfolios. It's more efficient, he says, than going long materials and energy. For example, these stocks tend to be cheap to borrow and short because they're so liquid.

He described them as a hedge with, quote, serious afterburners, since they get the biggest kick in the teeth if the market goes the wrong way for them, aside from last week, shorting big tech, it's actually been a lot less profitable. And video shorts, for example, down 35% this year. Meta shorts down 27%. Amazon and Microsoft Alphabet Bears, they are all in the red of the Mag 7. It's only been profitable to short Apple and to short Tesla. Shorting Tesla, though, that's been risky.

Bears have lost a total $52.5 billion shorting Tesla since its IPO, only two years. You can see there have been profitable. For short sellers, this is on track to be one of them. The shorts are up $9 billion this year, guys. How do we know how much shorts as an aggregate have made or, lost across these names that you mentioned. I'm just wondering, how do you, how do you determine that? So thanks to S3 partners, who's great about sending us some of his data. This is mostly hedge funds, by the way. I should mention this really is not a lot of retail interest. So they measure this

based on how much is being borrowed, which they can see sort of the percentage of the float that's shorted. So they calculate that, it sounds like they have sort of a proprietary model, because I've asked myself, Tyler, but they're good at coming out with some of the data. You can also use FACSET, and there's a variety of different data points. But one way to look at it in terms of the short interest is the percentage of the float. So even though these tech names are the most widely shorted, you actually see certain stocks with a higher percentage of the float, meaning there's more short interest in those particular names. They tend to be more volatile. But because big tech is so ubiquitous, they are used as that firm said, as S3 said, as sort of a hedge for

broader portfolios. If you're going to, instead of, you know, shorting the cues, you can just short one of these big tech names. It's also a way to keep your portfolio a little bit tighter instead of, you know, going out and buying 50 stocks and shorting, you can just short those big ones and you're sort of evened out there. So it does reflect sort of this bigger portfolio strategy that we're seeing. Interesting data. Kate, thanks for bringing it to us. That's Kay Rooney. Let's dive it deeper into Tesla. That stock down 15 percent in just one month. Electric vehicle demand remains a worry, as does Musk's public behavior. Here to discuss is George Dianarchus, managing director and senior analyst with Kanekorgenuity.

He currently has a buy rating on Tesla with a $304 price target. And, George, as you mentioned in your note, visibility, that's what investors are craving. So what's the likelihood that CEO Elon Musk in today's earnings call is able to provide that to investors? How Tesla plans to overcome some of the bigger challenges when it comes to the timeline around robotaxies, the Model 2, the competition from China. Well, thanks for having me on. Look, you know, it's been pretty unsettling over the last month or so in Tesla in terms of the news. And it's for two reasons. First, the earnings visibility in the near term has been dark. I mean, we've had lower than expected deliveries. We had price

cuts very recently. That's clouded the outlook for 2024. More importantly, you know, some of the articles over the last few weeks have indicated to your point that this next generation vehicle would most likely be a robotaxie as opposed to a vehicle that's ready for the masses in the near term. And that's a really big determinant of earnings power 2026, 2027. So that's what's happened to investors. They've had their 2024 earnings estimate shot and potentially these 2026 earnings ramps shot to 2028 and 2029. So people are just looking for hope. either hope for the near term or hope for over the next couple years when we get on this earnings call tonight. But hope only lasts so long.

What would you say to investors who are trying to figure out whether they own this stock going into earnings, especially when there isn't that clarity around the timeline for the cheaper Tesla car, which not only investors, but consumers have been waiting for as well? We take a long-term approach, a 12-month approach to our price target. And all I have to say is, look, it's been dark for Tesla in the past. covered this stock for many years. I've been through several dark times. And ultimately, you make a bet on this company. And in our opinion, it's going to pay off over the long term. What Tesla is doing by having this full-stop driving software, which is incredibly important

to the future of the company, is that essentially they're making the vehicles on the road, every vehicle they sell, software upgradable. That can essentially double the gross margins of the firm, of the auto business, if you opt in to buy a license. It's really, really important, and ultimately, they can change the economics of their business and the auto business at large. It's similar to what other companies have done, whether it's Amazon and commerce, Netflix and media, Google and advertising. This is why investors have a hard time valuing these companies in the near term, because ultimately, they change the paradigm of the industry that they're going into. It's a very, very interesting point. I've said on this program many times,

I am an owner of a Tesla, and I'll talk to you about it forever, if you'll, if you'll, you'd like. But this is a very interesting approach. What they did was they offered existing owners a month free trial of full self-driving. Then they offered a sign you up for a subscription at $100 a month. That means that that company, which was going to get zero money out of me over the next 12 months, might now get $1,200 a month, $1,200 a year from me, and $1,200 from thousands of other drivers should they agree to sign up. I really think that's a small point, George, about the idea that this becomes a part subscription model. That's exactly right. And it's a really important part of the story for existing vehicles and

ultimately that robotaxie. And if you read the biography, excuse me, on Elon Musk, there's this massive debate inside Tesla. Do we go with something that's more conventional first, just with that has a wheel and pedals? Or do we remove those because we really believe that this full self-driving soft who will be ready for prime time in 2026. We'll see. It's very controversial. Ultimately, he's a businessman. If it's not ready by 2026, we're very confident that he'll opt to build the one with the wheel and pedals. And so we're obviously much more optimistic than most in terms of the next 12 and 24, 36 months. We think that there have been many dark times, like we said, and ultimately they pay off because this is the kind of entrepreneurs. He's generational. And ultimately,

We're big believers in autonomy, and vehicles over the next five years will just change the way they operate. All right. Stock down 41% this year, but actually higher by about 2% going into earnings. George, thanks for lending your expertise. George Rancis of Canacord. We've got now a news alert on IBM, and Steve Kovac has it. Steve. Hey, Tyler. Yeah, according to the Wall Street Journal, IBM is in talks to buy HashiCorp.

That is a cloud software company. You see shares are up about 7.5% there. they were halted. I think they're about to resume trading pretty soon here. HashiCorp, before this move, had about a $5 billion market cap, so at a hefty premium on top of that to get an idea of what the deal or cost. Looks like shares of IBM are down about 1% on this, Tyler. All right, Steve, thanks very much. Report on IBM and a possible acquisition. Let's pivot meantime to another name making headlines in the technology area today. That would be SoftBank, reportedly investing nearly a billion in a push to develop AI.

Deirdre Bosa has the details in today's tech check. Hi, Dee. Hey, Tyler. So we have always known that Masa San and SoftBank, they were going to go big on GenAI. They've talked about it for a long time. But many have taken that to mean that SoftBank would invest in startups as a conglomerate. The NICA, though, reports that SoftBank is looking to develop its own large language model, a potentially far more expensive strategy.

Here's Anthropic CEO, which makes one of the most advanced existing. models of the moment, Claude, on what that takes. The models of today cost about $100 million, right, plus or minus factor two of, two or three. I think we're going to see models trained in the next year are going to be about a billion dollars. And then 2025, 2025, 2026, we're going to go to $5 or $10 billion. And I think there's a chance that may even go beyond that to $100 billion. That is just a huge amount of money. And SoftBank is reportedly planning to invest less than a billion.

dollars over two years. If a Modi is right in that the costs to build one will rise to five or 10 billion or dollars or dollars or more as soon as next year, a billion dollars is going to be far from enough. But there is another camp of experts that believe costs will come down thanks to improvements in hardware and algorithmic efficiency and more competitive pricing. Either way, though, Tyler Seema, it is not surprising that Masa San is very ambitious here. And going beyond just investing in AI startups, this could represent one of its biggest challenges yet, though. His approach over the last few decades has been in investing and acquiring companies, rather than building them from the ground up. You need a lot of money. You also need a lot of

talent to build these large language models. As you reported, D. Masa has had a lot of wins, but he's had a lot of the losses as well. What's the likelihood from your perspective on his ability to be successful in a market that NVIDIA dominates? He is such a controversial figure in terms of his investments, right? And what some of his big losses have include did WeWork as well as just a lot of the peak investments that he made during, you know, the boom times when valuations got out of hand during the 2021, he was the guy writing the biggest checks along with Tiger Global. But he's also had a recent really impressive win, and that is Arm, the chip company. He listed that soft bank. It's still the majority, I think, 90% owner of that company.

And there's a lot of questions over what he's going to do with those winnings. the money that he's made off of Arm since it got public, you could imagine that if he actually wants to develop his own large language model, he's going to have to tap that investment cash out, similar to how he's been tapping into his Alibaba investment from decades ago to fund a lot of Stop Bank's other initiatives. Makes sense. So just looking at Arm up about 93% in the past six months.

There you go. Dee, thank you. That's DeJor Bosa. Coming up here on Power Lunch, UBS warning that the impact of online penetration into retail may still not be done. we could see around 45,000 stores close in the next few years. We'll tell you which companies could be at risk. The CNBC Stock Draft is back.

Hoping to take this year's title is actor, comedian, and social media star Drusky. 7 million followers on Instagram, 6.3 million on X, and another million plus on YouTube. He's got an army of loyal followers behind him. The man has built a successful brand, but can he stand up against these business? and sports heavyweights? We'll find out, starting Thursday at 2 p.m. Eastern. Welcome back to Power Lunch, everybody. A new note from UBS predicts there could be a loss of 45,000 stores net in the

retail space over the next five years. Joining us to discuss which names are most at risk and which companies can benefit is Michael Lasser, a retail analyst at UBS and the author of that note. Michael, welcome. Good to have you with us. The headline number sounds big, 45,000 stores net lost, but it is over five years. So really, it's not that huge a number, is it? Well, Tyler, consider that there's about 960,000 retail stores in the United States, and we're projecting that that goes down to 915,000. So it's going to be a significant amount of capacity to come out of the retail sector. And basically what's happening is this sector is going through the process of natural selection, where the survival of the fittest is taking place that's going to benefit the large well-positioned

retailers like a Walmart, Target, a Costco, and it's going to adversity impact the small, less well-positioned players. In fact, in the U.S., about 70% of retail stores are operated by those companies that have fewer than 500 employees. Those are the retailers that stand to be adversely impacted in the situation. So the big get bigger, the small gets. smaller, I would think that one differentiator that might help some retailers would be to set aside a portion of their space for distribution and package pickup. True? True. Absolutely. Those retailers that are able to capitalize on e-commerce growth, which we're projecting goes from about 21% today to 26% over time.

Those retailers that can capitalize on that, especially the ones that can harness the power of their physical locations are going to be further advantaged in this environment. And we assume that about 20% of e-commerce sales are fulfilled by store. In fact, some retailers are doing much better job of that. Target, as an example, more than 90% of its e-commerce orders are fulfilled by one of its stores. And so that's going to be a really powerful mechanism during this period to separate those that survive versus those that don't. Yeah, I see that you like not just Target, But Walmart, Costco, Home Depot, again, to your point, that the bigger retailers have been able to manage their footprint

a lot better than some of the smaller names. But what about, and I'm going to steal one of Tyler's favorite words here, the bifurcation that we're seeing in the consumer, which is more people, higher income individuals, spending on luxury items, whereas lower income individuals here in America, becoming increasingly more cost-conscious. How does that play out when it comes to physical storefronts? So, Seema, I like this.

point because it's important one, and the way it's going to play out with how it has an impact on the number of physical retail locations in the United States is that more of the trips are going to be consolidated amongst fewer retailers. If a retailer, if a consumer has to drive from one retailer to another, that's going to cost them time, and it's going to cost them gas and other expenses, if they can consolidate their trips amongst a few large players like Walmart, like Costco, and like Target, they will stand to benefit from that trip consolidation where others stand to lose. So about 45,000 stores is what your estimate will be closing over the next five years. It's about 5% of the total installed base right now. Could that be a higher number

if the economy stumbles markedly? Absolutely. That number could be 50% higher if we go through a more turbulent economic period. Keep in mind that as part of our assumption, we project that retail sales in the United States grow 4% on average annually. That's in line with what it's grown over the last 20 years, a period where it grows below that, and that would accelerate or dramatically increase some of these store closings that we're projecting. What happens to shopping centers? I'm thinking of outdoor malls, not necessarily the enclosed malls, the big Westfield, ones or the Simon property ones, but strip malls, are they going to be hurt hard? They do get adversely impacted in this environment. Right now, there's about 8.6 regional and

super regional malls in the United States for every million households. In 2009, that was 10, excuse me, eight regional and super regional malls per household. So we've already seen that number come down. But back in 1980, when e-commerce did not exist, and you and I were running around the mall as a place to hang out, there were only eight super regional malls in the United States per million households. So there's still consolidation that needs to take place, and that means any retailer that's levered to those physical proximities are going to be at risk. Got to leave it there. Michael, thanks, as always, for your insight. Michael Lasser. I miss running around the mall. UBS. Yeah, I used to hang. Those are good old days.

Yeah. All right, coming up, buying in on paying later. Walmart's majority-owned fintech startup is venturing into the BNPL space for loans on big-ticket items. We're going to explain the key details on this story that is moving shares of a firm. Power lunch. We'll be right back. Welcome back. Walmart, beginning a major shake-up in the buy-now pay-later space. The retailer's majority-owned FinTech 1 will offer installment loan. putting it in direct competition with the likes of a firm. Joining us now are CNBC.com's Melissa Repco and Houston. Melissa, just is a great story.

Pretty significant, right, that the world's largest retailer is really leaning into Buy Now, Pay Later? Yes, Walmart is leaning into this space as it's really looking towards other types of businesses beyond retail. So it's looking towards things like advertising. It's seen what Amazon has done by making more money by getting into higher margin businesses.

And this FinTech is a number. is another example of how it can make money with more profit. Clearly having an impact on a name like a firm, Hugh, the fact that it still has a partnership with Walmart, but now that it's sort of building out its own technology to support buy now, pay later loans. That's concerning. So if you're a firm, I think you have to wonder,

how long is this relationship last? I think the fact pattern is sort of clear, that through one, through this Walmart-backed fintech, they're going to increasingly be competing with this constellation of partners they have. They have a firm, they have, you know, for buy, now, pay later. They have capital one for credit cards. They have Money Graham and something called RIA, which is a European company for money remittance.

And they have, you know, and so these are the relationships they have. And as you go on, what you could see is that one is going to increasingly take over those relationships. Is one going to be a credit card issue? That's a good question. It's too soon to tell. But Walmart has said that it's going to come out with a new credit card. It's just not said it if it'll be through one. But it's worth noting that Capital One explicitly said in its lawsuit against Walmart,

which ultimately Walmart prevailed in, that it anticipated that one would be its competition and it would be displaced by one. And it just shows that as the majority stake of one, Walmart has financial incentives to work with one and expand more financial services and use its scale of its stores and its website to make the most of that FinTech product. Keep the money in house. And keep the money in house most importantly, right? The house product, I think, is going to be preferred over the outside product over time,

as long as they perform, right? So one has to execute. You know, they have to, you know, if you're Walmart, you have two motivations. One, you want to have a good customer experience for your customers. You want to have a good user experience of good value. And number two, you want to retain more of the economics in-house. And I think that's going to be proven out over time. So what we know about, one, which products are eligible for this?

So one is ultimately trying to be the super app. So it's trying to roll up a bunch of different financial services into one, different, like one specific place. And we've seen this model followed by a lot of other fintech companies, kind of going there for everything from contactless payments to, you know, kind of having a savings account or whatever the case may be. And they want to be that one-stop shop. And of course, having that huge customer base for Walmart. And then also Walmart being the largest private employer in the country, that's another way that it can kind of grow its users over time for all of the services. Does Walmart have a history in financial services, Hugh?

Yeah, Tyler, it's funny you ask. So they wanted to get into banking since the 90s. Yes. And they've had three or four attempts, you know, through different avenues. You know, one is to be a Utah like industrial loan company way back in the day. And at each juncture, they were blocked by lawmakers and by bank lobbyists because, you know, the specter of a bank of Walmart was so scary. And you could always talk about how this could potentially, you know, squeeze out small

lenders and results in, you know, in a lot of pressure in that industry. And so they've always been blocked. And in this iteration, this latest attempt, is why they created a joint venture with Ribbit, Ribbon Capital, which is well known back in places like a firm in Robin Hood. So they're a well-known fintech VC firm. And they created this arm's length creation. But at the same time, if you look at the structure of one, the board is composed of the CEO and the CFO of Walmart. And if you listen to their conference calls, Walmart's very clear that they talk about one all the time as their expression of this is how we're going to digit. financial services. We view this as a huge growth, you know, one of many growth opportunities

outside of retail and, you know, and watch the space. Wow. Interesting. Very interesting. And getting so competitive, too. Everyone wants a piece of that. It's also worth noting to Hugh's point that Walmart has another reason to want to be in this space. We are seeing a time when consumers are being a little bit more careful if they're spending. And I spoke to CFO John David Rini in late February. And he said a lot of those big-ticket items like electronics have been slower to sell. So having them in big bold letters say you can use buy now pay later and having a buy now pay later that they're connected to and

part of could be a way to get people to break up those bigger expenses into smaller installments. Okay, Melissa and Hugh, thank you. Appreciate it. Let's get to Kate Rooney now for a CNBC News update. Kate. Hey there, Tyler. The U.S. is reportedly preparing a $1 billion aid package for Ukraine. it comes as the Senate begins debate on funding. The Pentagon aid package includes vehicles, air defense munitions, ammunition, and more, according to the Associated Press and Reuters reports. The Biden administration, meanwhile, announced changes today that will make about

4 million more Americans eligible for premium overtime pay. It raises the salary threshold to $58,600 annually from $35,500. The rule does not impact hourly workers. The Labor Department says, the change will ensure lower paid salary to workers will be paid for doing the same job as their hourly counterparts. And Paris's mayor says she is confident the River Sen will be ready for Olympians this summer. Climate nonprofit, the Surf Rider Foundation released a report claiming athletes would take a significant risk to their health if they competed in it because of the water quality. The Sen is slated to be used for marathon swimming and the swimming leg of the Olympic and Paralympic Triathlons.

Tyler, back over to you. All right, Kate, thank you very much. And coming up, the lowdown on the labor market. A new CNBC survey monkey poll found that most workers are satisfied with their jobs. Hugh is, Melissa, yeah, well, but one expert says she's seeing some troubling signs about job seekers. She'll join us to explain why when power lunch returns. No, Melissa likes it. The Senate has just passed a major hurdle in getting the TikTok legislation done.

That bill, of course, could lead to a ban on the app in the United. States. 60 senators had to vote to clear this current threshold to actually get to the final vote on the bill. And as you can see, they now have more than enough senators to reach that. The amount of support here also speaks well for getting an agreement on time that could lead for final passage later this afternoon. If not, the procedure vote that was just cleared is going to set up at least 30 hours of debate on the bill. So the latest that this TikTok measure could be going through will be Wednesday evening. And this bill has a lot of bipartisan support. Of course, it doesn't just include TikTok. It also has that $95 billion in foreign aid

for Ukraine, Israel, as well as the Indo-Pacific region, plus a number of other national security measures. We'll be following this closely to see exactly when final passages, and if senators can get an agreement by the end of today. Guys? Emily, big news there. Thank you. Now, sticking with the broader economy and certainty in the jobs market, there is a new survey that shows overall workers are actually happier than you may think. Sharon Epperson joining us now with the details. Hi, Sharon. Hi, SEMA.

Americans in our latest workforce surveys say they are satisfied with their current job. The online poll was done April 3rd to 5th among nearly 6,000 workers. And a solid majority, 73% say they are well paid and that morale at their company is excellent or good. Still, half of those say that they would be happier running their own business. That compares to 44% who would prefer a regular day job. Now, pursuing their passion is the main reason for starting their own businesses, followed by being their own boss, making more money, and deciding their own schedule.

But the timing may not be the best. One in three Americans think it's a worse time to start their own business right now compared to a year ago, and that's nearly double the percentage of those who say now is a better time. Not surprisingly, workers who have thought about quitting their job in the last three months are more likely to say they'd be happier running their own business compared to those who aren't thinking about leaving. Millennials and Gen Z were more likely to say they think they would be happier running their own business as well compared to Gen X and Baby Boomers. Tyler? All right, Sharon, Sharon Epperson reporting. Thank you very much. Well, now, despite this

survey showing overall happiness, there are still some troubling signs in the labor market, namely growing anxiety among younger workers over issues like wages and work-life balance, even political issues. For more on this, let's bring Julie Bakke in. She's chief career happiness officer at the Balki Group. Julie, welcome. Good to have you with us. Hi, thanks.

How are Jen Z? Here's the big question. How are Gen Z and millennials different from you and me? They have, they want their work to serve their lives, not their lives to serve their lives. work. They are very motivated to have a flexible life, to have the freedom and flexibility to do what they want to do. And they're also very cynical about corporate America. They've either had some experience and said, now, this isn't for me, or they feel like they're stuck in a machine. And that's something that frankly, Gen X and Boomers put up with. I don't know that has changed

that much. But the younger generations, they're just not as willing to work inside of that structure. So back to what Sharon said, yes, absolutely. Genzi and Maloney's. millennials, much more likely to and interested in starting their own thing. Let's talk a little bit about how good the labor market or not good the labor market is right now. I suspect it's pretty good. I mean, we see job growth month after month after month after month. Are there any, and incomes are going up a little bit, not maybe as much as folks would anybody would like. But how do you characterize the labor market right now? You know, it's pretty good. So our unemployment rate has stayed very steady at a respectable

37 to 3-9 for the last eight months. And worker confidence is high. They believe, yeah, I've got plenty of options. If it doesn't work out where I am, I can go elsewhere. And college grad hiring is up. And so that's really good, too, over the past several years. There's a lot of these good indicators. What we see, though, when you look ahead, especially over the next 10 years, when you look at where are jobs, what are the highest demand jobs going to be? health care and something under the tech umbrella that makes up about 90% of the top 20 jobs that are going to grow. And so when you compare that to what the market's going to need, to what people are studying and what their actual skills are, there's a skills gap. And I think it's just going to

continue to grow. And that, I think, is going to really cause employers. It's going to put a lot more pressure on employers to do things to attract and keep the people who do have those skills, there's going to be people left out. Yeah, and training, you got to wonder if companies take bad upon themselves to keep those workers. But I wanted to get your thoughts, Julie, on the S&P global data today that showed a reduction in jobs in the services sector. So hospitality, restaurants, two areas where it really led the rebound in the jobs market post-pandemic. What do you make of that? When you see retail, you see that's an area where things like there are a lot of ways that AI can really help, a lot of ways that non-human contact types of jobs can be blended in. And also,

really honestly, so many people have left that sector voluntarily. When you look post-COVID, that's a sector where people got out of it, because obviously every place closed down. And when they got the opportunity to go back, they said, no, thanks. So it's really been the same. by fewer people who are willing to take those jobs on. And so, yeah, the service sector is going to continue to struggle because any service worker will tell you people are mean or meaner than they have been since before COVID. So it's less attractive. And now there's so many other great options that some of those previous service workers

have pursued those options and made a career change. So the two go hand in hand. How do you address that skills mismatch that you talk about? You've got 90% of the job growth coming from technology. and or health care, but we may be producing a lot of philosophy majors. Yeah, so we've seen some movement in that area, and the movement has to come from several places. We've seen some universities close down some of those programs that didn't lead directly to a job, and we've seen, so we've seen a little bit of movement in colleges

in terms of trying to better connect the majors and the skill sets and, and, as a little bit of, and what they're teaching with what employers are actually coming on campus to find. So it moves slowly. So what we're also seeing is employers. A lot of big employers who said, okay, we'll grow our own. And so they're doing a lot of internal training and development programs to help to bring people in, maybe even without a college degree and train them to do the work that needs to be done. And so we see a lot of movement toward that, which creates great opportunity.

Julie, I have to ask, you're the chief career happiness officer or strategy. Chief career happiness. Are you happy? I'm so happy. I skip to the shower every morning because I just can't wait to get to work. I love hearing that. Julie Boki, thank you very much. We appreciate your time today.

Glad you're happy. Stay that way. Andy on a positive note there. And remember, you can always hear us on our podcast, all our happy thoughts. Be sure to follow and listen to Power Lunch on your favorite streaming service. We will be right back. The Dow up 280, but Treasury's a bit lower today. Let's get to Rick Santelli for the bond report.

Hi, Rick. Hi, and indeed, it's been a wild day in treasuries, and it started early this morning. 945, to be exact, let's show a chart of two-year note yields. At 945, when S&P Global PMI's hit the wires, not only was the manufacturing headline under 50, but the services in the composite were both weaker than expected, and yields dropped. like a rock. Then fast forward, we come to auction time at 1 o'clock Eastern, 69 billion two years, record size and investors flock. So you see the second low on that chart, the low of the session that was made right after the results hit at one Eastern. Now, if you look at a two-year

note over the last couple of weeks, we've had violations intraday at 5% a handful of times. But if you go to the year today chart, we have yet to close above 5%. That's a little bit negative if you're a technician and add in that 10-year note yields hit right to the exact spot on a closing basis, the 4.67% high yield close on the 16th. Both are technically significant, and yields have moved lower. Tomorrow, record size 5-year at 70 billion. We'll have to see if investors get as excited about that record-sized auction as they did today for the two-year. Tyler, back to you. We will see. We're just not borrowing enough, are we, Rick? We're just not borrowing A little scary, isn't it, Tyler?

It's mind-blowing. Rick Santelli, thanks. Okay, coming up, we will check the charts on three stocks with different degrees of momentum. It is time for technical support. Next, momentum issue. Welcome back to Power Lunch. Time now for some technical support. We have three stocks making some big moves, and we want to draw your attention to them.

And to join us and give us his expertise is Jay Woods, Freedom Capital Markets, Chief Global Strategist. Jay, it's great to see. Great to see you. First up is meta, reporting earnings on Wednesday. What does the chart tell you? Yeah, the chart tells me a lot. I mean, the story of meta is unbelievable. We go back just looking at this on a five-year time frame. This stock in 2022 was down dramatically. What do we do in 2023? We made it back and then we broke out. So I want to focus on this gap and I want to delete that so we can focus on that gap. That gap was from the last earnings. In fact, the last three earnings, we've had a series of gaps up on positive news, and the stock continues in that trend.

Now we're seeing the stock tire a little bit. The stock just broke its 50-day moving average, that to cope line is Tyler likes to call it, it's tope, and it's starting to pull back. What we're seeing now in this earning cycle, stocks that beat, they're going up, but not as much as they generally do. So if this stock beats, I want to see it clear this 525, 530 level, make new highs to guarantee us that it's going to take that the next leg higher. If not, it may do something we saw on Netflix.

Come back to this gap area around 455 and test it. If it pranks, if it fails this 455 level, it could drop significantly because we look at that gap here. Sometimes those gaps fills. It could have a 15% downside if we see something negative at a meta. But on the upside, watch 525. That's the level. Let's pivot the discussion to Dominion Energy.

I'm curious what your take is on this. Yeah, we're going to utility. very exciting, one-letter stock. Dividend player, though. Yeah, dividend payer, 5.35%. So this is something, if you're a little nervous about current market conditions, you may want to look at it. And let's look at it over long term. This is just two years on a daily basis. That 200-day moving average, that purple line is also kind of a nice downtrend line. The stock has not gone above it until, whoa, let's look. Recently, we have what we call the Golden Cross. So when the 50-day goes above the 200-day, it's a lagging indicator. My friends at the CMT Association are going to mock me for

using it. But in utility, stocks that move slowly over time, they actually tell you a better story. So we see that Golden Cross and we have what we like from a risk reward setup, a very good play. The stock right now has made a series of higher lows. It's trying to get above this 50 level. If it can break above 50, it has room to run. Will it run quickly? No, it won't. And then energy, there's an AI story there. They're based in Richmond, Virginia. Northern Virginia is a data center area, they power those data centers, which power what? A lot of those AI plays. So when people talk energy, AI, this could be a play, but it's not going to move very quickly, but 5.5% dividend, 5.35, not bad either. Okay. What about GM and reported earnings today,

a big B, but what do the technicals tell you? Well, I'll tell you what. I love what we saw in General Motors. Now, this goes back five years, but let's focus on the last two. It basically traded between 30 and 40 and had nice construct. action. It broke down. It came right back into that zone. That's what we call a bear trap. It gapped back up into a little neutral zone and is traded higher consistently. On the fundamental side, it's crushed it. Five in the last six quarters, they've beaten on sales, EPS and guided higher. And now with this breakout today, I think we have a run to 5560 easily. And our fundamental analyst, Mike Ward at Freedom, also has its blessing. So when the fundamentals and the technical

come together. We like that, right? It makes it better, and the risk reward setup is there. If for some reason it pulls back below that 50-day moving average, back into this little zone here, then you get out. But I think the upside versus the downside if you enter today is not a bad thing. Jay Woods, bullish on GM. Thanks for joining us today. Ty. All right, folks. We're going to be right back with more. Federal Trade Commission has just voted on non-compete clauses, and Amon Javers has the important details. Tyler, that's right. The vote happened just moments ago and the measure passed by a margin of three to two.

Now, this is what they call a proposed final rule that would in effect ban most businesses from using non-compete clauses in hiring. This is a measure that's been under discussion at the FTC for a while. The FTC has now just passed this. It will potentially make significant changes in the way American business relates to American workers, Tyler. Measure won't go into effect immediately. There is a period of time of about 180 days where this has to be worked through the process. But this was the approval now by the FTC for this massive regulatory change in American life. They're saying that under the new rule, new non-compete clauses will be banned for lower-level employees.

And for higher-level employees, what they're calling senior executives, existing non-compete clauses will still be allowed. for the rest of us who are not senior executives, non-compete clauses, that are in effect now will be unenforceable once this measure finally does go through. Tyler, back over you. So in the future, if I'm one of those highly compensated, highly status executives, can my employer write a non-compete clause into a new contract or not? In the future, under this rule, non-compete clauses will be allowed for senior executives but below that level, and they're saying 99% of Americans will not be allowed to have non-compete

clauses. That is, businesses cannot impose non-compete clauses in contracts with new hires. And for those people who have non-compete clauses right now in their contracts, and it's probably a lot of people who are watching this on television, those non-compete clauses that exist now will be unenforceable once this measure finally does take place. So this is a significant change, Tyler. It's been sweeping that the argument for it is that about one in five Americans have a non-compete clause. That's a huge number. Maybe 30 million Americans are impacted.

The FTC argues that that hurts new business formation. It hurts innovation. And it hurts the workers. 30 million people. It could really be important in the technology world, I would think, among other places. Financial services as well. Amen, thanks so much. Thanks for watching, Power Lunch, everybody.

Closing bell begins right now. now.