Power Lunch - Hiring slowdown, Europe’s energy crisis and a regional banking powerhouse. 7/21/22

Episode Date: July 21, 2022

A fresh batch of economic data points to a slowdown. CEOs are scaling back on hiring. Is it a smart management decision or an overreaction if the economy bounces back quickly? Plus, a report from Frankfurt on Germany’s power plan. And the CEO of Huntington Bancshares on loan growth and the impact of higher rates on his business. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome everybody to Power Lunch. I'm Tyler Matheson. We begin with this morning's big news out of the White House, President Biden's doctors, to hold a briefing on the president's condition after he tests positive for COVID. That briefing should start in about 15 minutes, and we will take you there. Meantime, though, let's go straight away to Shep Smith with what we know and what to expect. Hi, Shep. Hi, Tyler. The White House has told us to expect this briefing on the president's condition, his treatment, how this will impact. keep going, how this will impact his schedule and day-to-day operations inside the executive mansion. As I mentioned, it's going to keep going. They told us earlier today. The president is doing well, considering he has symptoms that they've described as very mild. They gave some specifics, runny nose, fatigue, a dry cough, that all started last night. And then according to the White House physician, Kevin O'Connor, Mr. Biden, didn't sleep well last night. And then he had a rapid test that was positive this morning, followed by a PCR test also positive. Now, the president's, of course, in a relatively high-risk group at 79 years old. So the doctors have

already put him on Paxlivet, as Meg Terrell would tell us, that's the antiviral therapy that's used to lessen the symptoms. The doctor says he expects the president to respond to it quite favorably because he's vaccinated and he's had not one but two boosters. So the president's quarantining, according to the White House, in the residence, and canceled a plan trip to Pennsylvania. But the spokesperson, Corrine Jean-Pierre says that the president will continue to carry out all of his duties. Now, frankly, nobody's shocked by this. The variants around now spread very easily, especially the BA5 variant of the Komen Omicron. The level of transmission described as extraordinary by Dr. Peter Hotez at the Texas Children's Hospital. So the White House says they've been

preparing for this. The rules there are quite strict. Everybody around the president's tested daily. Anyone who meets with him gets a test first, and those in close contact with the president at the White House are all masked. But, you know, You know, he's been out and about frequently lately. Worked a rope line just yesterday, so they figured this would happen at some point, and now it has. They've seen really transparent about it all day. As I mentioned, we expect to get a lot more information when the briefing begins around 2.15 Eastern, about 13 minutes from now or that's the plan. Kelly, back to you.

All right, Shep, for now, thank you very much. As we await the briefing, let's turn back to the markets and the economy, where we're seeing signs of a slowdown. Jobless claims touched their highest level since November 2021. It's the third straight weekly gain. Factory activity in the Philly region contracted in July for the second straight month, falling to its lowest level since May 2020. The conference board's leading economic index fell more than expected. Consumer pessimism about the outlook drove the index lower.

And there's more cautious commentary from CEOs. The CEO of Homebuilder D.R. Horton said he's seeing moderation and housing demand. The CEO of AT&T said the lower end consumer is stressed. Ford is reportedly adding its name to the list of companies slowing hiring, Microsoft, Google, Lyft, Apple, Coinbase, Meta, Netflix, all among the others. Smart management or an overreaction. Joining us now is Bill George, Harvard Business School professor and former Medtronic chairman and CEO. He's also a CNBC contributor. So, Bill, we know with inflation doing what it's doing that we need some slowing in the economy. Is this too much? Or is this appropriate? the appropriate reset that's needed?

I think it's very important to CEOs get ahead of it. It's obvious the recession is coming. What they're all asking is how long is it going to be and when's it going to start to get? Because demand in a lot of industries is very strong like you see in the airline industry, even with American cutting back on its capacity. But I think the prudent CEOs,

like you've seen Jim Barley at Ford or doing, are starting to trim up right now. I know Goldman's holding back on it. It's hiring. I think the smart thing to do is to get in front of this and to trim up employees who are poor performers, maybe some early retirements, really look hard at your supply chain with a lot of shortages, but still I think there are opportunities to take out infrastructure in your company. So I think that's what you should do. Farley said this morning, you know, you want to be lean and agile. And I agree with that 100%.

And sometimes, as he said, smaller is better. So I think this is a great time to get ahead of the recession. Maybe you have to put the price increases through because I think inflation is going to be with us a long time. I hate to say it. That was going to be my question, Bill. I mean, on the one side, you can moderate expense growth, labor or other things. On the other side, you've got inflation is now the time that smart executives go to the extent they have pricing power and push. through those price hikes because it may only get tougher if a recession gets going?

I think you're 100% correct, Tyler. I think now's the time to push through the price. I realize in saying that, that could simulate and encourage more inflation. So I'm hesitant to encourage too much, but I think they should get in front of it because this inflation is not going away because a lot of it's coming out of the Russia-Ukraine war challenges in China. and food, real food shortages and food inflation. So core inflation is going to be with us for a long time, even with higher interest rates. Bill, it's interesting to hear you describing that CEOs have to get ahead of inflation more so than they have to get ahead of recession. I mean, that's a pretty confusing environment.

Can they get ahead of both? I think, well, I think you get ahead of recession by not cutting off essential staff, but being lean and agile and getting and getting ahead of it by letting poor performers go and trimming your infrastructure. I would frankly never advise someone to cut their R&D to cut strategic investments at this stage, but you certainly can't hold back on some unnecessary investments, and you certainly can cut infrastructure. I think you've got to do that today and cut expenses. And if you do that, no matter what happens, you're going to be in good shape.

If you're going to either make more money, if the economy keeps going, or you won't have the deficits or the downturns that people are predicting. You know, the word of the year last year was transitory in the use with respect to inflation. It now sounds like the word of the year is persistent. That seems to be what you're saying here. How long do you think it's going to take before we get control over inflation? and is a recession really a predicate for that? I think it is going to take time.

And I think the higher interest rates, I'm concerned, Tyler, the Fed could overreact and really set us into a deeper recession. That's my fear right now. That's why I want to see the business community get ahead of it so we can be, if you will, a mild recession and not go too sharp. But I think the factors that are causing

are some ways out of the fed's control. Right. And so I think just interest rates, people still have to drive to work. They still have to eat, put food on the table, and it's going to cost more money to do it. And so I think you're right. It's going to be persistent.

And I saw this in the 70s. And of course, then you had a massive recession because the inflate interest rates were so high. Now, I don't predict that's going to happen, but I do think it's going to be with us. So get in front of it now. but keep your essential investments still going and essential people. Bill, it's great to see you.

It's been a while. Thanks so much for being with us. Thanks for having me, Tyler. Good to be back. Yeah, you bet. All right. In meantime, a volatile trading session. Has there been any other kind lately, the NASDAQ, today's big winner,

as the averages remain on pace for their biggest monthly gain of the year. It's been a good hot July so far. Our next year says earnings are the biggest catalyst right now, not recession risks or sky high inflation. And as long as earnings keep meeting street expectations, the path of lease resistance for stocks is up. Let's welcome David Wagner. He's portfolio manager at Aptus Capital Advisors.

So you're not too worried, it seems, about earnings falling off, are you? No, Tyler, I actually fully disagree with you with that. I do think that the market's path of lease resistance is up here in the near. year term until we get more clarity on the speculated, you know, earnings apocalypse. Yet I think that this earnings apocalypse, well, it's not new news to the market. And why would I say that? I would say, well, hey, look at really performance since May. The more recession-proof sectors, well, they've outperformed while energy, that's underperformed. So the market, I think, understands the potential for an earnings recession right now. I think the big question heading into next week as we get the larger names in the

the S&P 500 reporting is how much of this is already priced in. But I'd first like to say, you know, you know, Annos, they've been behind the curve right now on updating their estimates up until really this week. You've really seen them scramble to get ahead of Q2 earning season right now. We finally saw, I think, in the last five days, over 500 companies in the S&P 500 get some type of downgrade. Over a five-day period, you haven't seen that magnitude of downgrades since the financial crisis. But overall, you know, Tyler, ultimately, I do not know what. the EPS drawdown is going to be for the S&P 500. But what I do know is that over the last five recessions, the average pullback in earnings has been about 20%. So let's just say we have a mild

recession, you know, 15 to 17 percent EPS pullback. If you put that towards 2023 EPS targets, well, that gives you a valuation for next year on the index of about 19 times. So I'd probably leave it up to everyone else really to determine if this market is expensive heading into earnings next week. I'd probably side on that, yeah, we actually probably are a little bit expensive. A little bit expensive. If you're saying that if we have the kind of earnings pullback you described

there, 17% a little less than normal in a recession, at today's prices, you would still be trading it. What did you say? 19 times earnings? 19 times. And that's, and that is above every. Why has growth been out performing

value lately? What's that tell you? Yeah, that's definitely been, that's definitely been occurring really since May. What I think it is, it's a flight to safety. We know a lot of these growth companies have recurrent revenue right now. People want earning stability. And that's what historically released recently growth has been doing right now. But more importantly, I think that might be telling you that the market is starting to believe that we could get some type of Fed pivot right now, become a little bit more duffish. We're pricing in, you know, a few rate cuts next year. And I think that's really the market telling you that the market believes that we do

or we will obtain some type of rate cuts next year, obviously benefiting, you know, the longer duration assets. And you've seen R. 15 to 20 percent, just month to date. David, it's Kelly here because my little obsession is about the home builders. And I, if I'm not mistaken, you guys like Pulte here? Yeah, we very much like Pulte. I mean, obviously, D.R. Horton really came out with their earnings this morning. And honestly, when I looked at them on the computer, I sent a message to my team, wow, that was horrible, but that has somewhat played into our book right now that you have to start looking at valuation. I think a lot of the new investors really out in the market,

they didn't care about valuations for probably the last five years. But right now, you have to start looking at valuation. D.R. Horton was traded 80% of next year's book value, Pulte, which I think is a higher quality homebuilder. They're more diverse geographically. They're more diverse by not just owning the entry level homebuilders such as D.R. Horton, that they're more quality in my mind, still trading it less than book value. So yeah, we love those names right now. And you're kind of seeing that in the performance, the name that, hey, maybe that really bear sentiment is fully priced in. All right, David, thank you very much. We appreciate your perspective. And there are a couple of the securities that David favors. Thank you.

Cheers. Coming up, a regional banking powerhouse, Huntington Bank shares up today. They're up 10% this month. We've got the CEO talking results, rates, loan growth, and his, view of the economy. Plus, Germany's power plan. We're live in Frankfurt with a report on what Europe's largest economy is doing to end its addiction to Russian gas. As we hit to break a look at the top performing stocks in today's top performing sector, which is consumer discretionary. And we've got Tesla, Las Vegas Sands, and Bath and Body Works leading the way. And of course, we are awaiting that news conference from the White House with the latest update on the president's health

and testing positive for COVID. We'll bring that to you as soon as it begins. Welcome back to Power Launch, everybody. Banks in focus with the Fed expected to raise interest rates at least another three quarters of a percentage point when it meets next week. The Regional Bank Index has been outperforming the KBW Bank Index this year as the rates rise. Huntington Bank shares benefiting from the jump in rates. High-based bank up nearly 10% over the past month rising today as second quarter earnings beat on strong loan growth. There you see it up nearly 9% for a month. here for a Paralyunch exclusive, the company's CEO, Stephen Steinerauer. Mr. Steiner, welcome.

Good to have you with us. The numbers looking back to the last quarter are very nice. 30, oh, what was it here? 36 cents per share versus an estimate of 34 cents. I'm wondering, though, as we got numbers earlier this week about a rapid decline in mortgage applications, how that affects your business and how do you compensate? If mortgage applications and mortgage loans are declining, how do you compensate? Well, mortgages have declined throughout the year as rates started to move,

and the refy bubble, if you will, ran out of steam. So it's all home purchase now, and that's already in the numbers. So we have already compensated for the changes in mortgage. We have a number of growth industries, our card business or Treasury management businesses, and our wealth business all generate fee income that supplants the loss of mortgage revenue. Okay. And so you are seeing more, and I guess on the other hand, higher mortgage rates, you know, you get a little bit more probably a net interest margin as those rates go up. Let's talk about the corporate loan market, which you cited as being particularly strong.

Do you see that continuing as we spent just the last few minutes talking with Bill George about the possibility of a recession coming. Right. For us, again, a Midwest regional bank with some national specialties. We're very large in equipment finance. Number seven nationally.

We're very large in inventory finance and a host of other national businesses. They're all doing well. And our lending activity across the board has been strong through the second quarter. And as we shared on the earnings call today, our pipelines are very strong going into the third quarter. Typically for us, because we're a large equipment

of finance lender, it's like a retailer. the fourth quarter is a big quarter. So our outlook for the year is bullish in terms of loan demand, and it's being driven by onshoreing, by inflation impact on inventory. So dollar adjusted, same volume. I just need more working capital. And then there's a continuing labor shortage.

It's still a significant issue for business, as it's been for the last several years, particularly here in the Midwest. And so there's a lot of capital investment going on. And we're extraordinarily large in that financing capability. I hope Jim Labenthal was listening to what you just said about onshoreing and that driving real demand and capital investment and everything that you just said. You've been on the Fed board, your regional Fed board before, but it sounds to me like a beige book that would paint a much healthier version of the economy than what we're worried about back here on Wall Street. So inventory finance, can you speak to that as well, Stephen? That's such a hot button issue these days.

What is it revealing to you about the supply chain health and the economy? Well, supply chains are getting better. They're not normalized by any stretch. You look at autos, for instance, our auto floor plan, if it were normalized, we have another $2 billion in outstanding loans. So we have an evolving situation that is a bit episodic right now. China shuts down delivery out of a port, and that has another round of disruption. And we've seen that so far this year.

It's certainly what's going on in the Ukraine and the after effects of that are disruptive as well. So historic supply chain efforts are improving and that supply chain management getting better, but there are a new set of issues that have to be contended with. Stephen, thank you very much for that update. We appreciate it. And glad to hear the Middle West is doing so nicely these days. There's a bullishness here. Sorry, there's a bullishness generally, obviously a concern about inflation and what that's going to mean to the

economies. There's a cautionary, more cautionary outlook. But businesses are doing well here. That's expanding. Great to hear. Stephen, thank you so much. Pleasure. Appreciate it. Ours. That's why we like getting that on the ground perspective. A major announcement today spanning both climate and real estate. Fifth Wall, a venture capital firm focused on real estate tech, just announced commitments of half a billion dollars to close its inaugural climate fund. Diana Ollick spoke with the fund manager. She's here with the details. Diana. Well, Kelly, Fifth Walls is now the largest. private fund formed specifically to decarbonize the real estate industry, according to the firm,

a space that is wildly underfunded. The real estate industry over the last 10 years has only invested $100 million into the tech to decarbonize it. And that's kind of surprising because the numbers that are required to decarbonize the industry are staggering. So it's estimated that in the U.S. alone to decarbonize the existing commercial building stock. So forget homes, forget most infrastructure, just commercial.

buildings will cost $18 trillion. The fund aims to invest in smart buildings, renewable energy, hardware, software, energy storage, and carbon sequestration technologies. Its backers include big public names in commercial real estate from rental reeds like Camden Property Trust, Equity Residential, Invitation Homes, and American Homes for Rent, to hospitality like Hilton, host hotels and resorts and MGM. They're investing because they want to get access to these technologies. They see the advantages from the real estate side of things as to why they want to be ahead of the curve.

But financial investors and institutional investors also get that this is one of the biggest opportunities. This is a generational investment opportunity. I spoke with the CEO of American Homes for Rent, Dave Singlin, who said in addition to greening his thousands of rooftops from a marketing standpoint, this, he says, is what his residents today value most. Back to you guys. Wow. Diana, thank you very much. Diana Oleg with that report. And we are awaiting a news conference from the White House with the latest update on the president's testing positive for COVID. We'll bring that to you in just a moment here. As it gets underway, you can see preparations there. Our Shepherd Smith is standing by with more details, Shep. Hi, Kelly. Well, we know that Corrine Jean-Pierre, the White House press secretary and Dr. Ashish Jha, the White House coordinator for COVID response, is going to speak. And in fact, we've just heard from the president, They tweeted a video of him. It's short. Here, look at it.

Hey, folks, guess you heard this morning night tested positive for COVID. But I've been double vaccinated, double boosted. Symptoms are mild. And I really appreciate your inquiry and your concerns. But I'm doing well. You get a lot of work done. I'm going to continue to get it done. And in the meantime, thanks for your concern.

And keep the faith. It's going to be okay. Going to be okay. Casual on the balcony. Just kind of letting people know he's all right. know he's all right. They tell us day-to-day work is going to continue, but of course, the president will have to quarantine in the residence. Kayla Taushy's with us, our senior White House correspondent, they've been really transparent

all morning. I mean, I'm guessing he told the kids and grandkids first, but we learn mighty fast. Yeah, they've been transparent all morning, Shep, but the protocol here at the White House has been pretty strict, even despite relaxed regulations on masking and distancing outside of the White House grounds. But here on campus, anyone who has been meeting with the president, directly has been masked and distanced for months now. One of the reasons why when there have been cases that have come out of the White House in the West Wing in the past, they were never considered to be a close contact of the presidents because of those protocol. Even just this week, I met with someone in person who regularly meets with the president, and the suggestion was

that meeting would have to be masked. So that is one of the ways that this administration is keeping the trains running, even as some of these cases continue popping up. The White House has has said for months that it would be a substantial possibility given such high community transmission that the president at some point would contract COVID-19. And, Shep, we now know that day is today. He's on Paxlivet, which makes sense. It sort of fits the CDC guidelines. He's, you know, 79 years old. It's a relatively high-risk category. And he's been vaccinated, twice boosted. And the White House doctors decided they'd go ahead and put him on Paxlivet, which is that antiviral that diminishes the symptoms. I do wonder about the schedule going forward.

He has to be quarantined according to the White House until he tests negative, whenever that is. And we know, Shep, that today is day zero for his quarantine. If it were a standard five-day quarantine, then that means that he would reemerge on Tuesday. So certainly some of those trips would be canceled. Here's Corrine John Pierre along with Dr. Shee's John Pia. Let's listen. We released it to you shortly thereafter in the interest of transparency. I have the letter here and I just want to read it through so we can get started before we get started.

This morning, as part of our routine screening program for the president, the SARS-CoV-2 virus was detected by antigen testing. This result was subsequently confirmed by a PCR test. Unquestioning, President Biden is currently experiencing mild symptoms, mostly a running nose and fatigue, with an occasional dry cough, which started yesterday evening. Given that he meets USA Food and Drug Administration, FDA, emergency use authority criteria for Plaxovid, I have recommended initiating such treatment. The president is fully vaccinated and twice boosted, so I anticipate that he will respond favorably, as most maximally protected patients do.

Early use of Paxlovit in this case provides additional protection against severe disease. He will isolate in accordance with CDC recommendations. I will keep your office updated with any changes in his condition or treatment plan. I also wanted to provide you with a brief readout of the president's activities today. The president has been working from the residents, like so many of us have during this pandemic, doing calls with senior staff, including the chief of staff, myself and Dr. Ja, who's here with us. As we read out, the president also called Senator Casey, Representative Cartwright, mayors of Scranton, mayor of Wilkesboro, and Representative Clyburn. The president also called a few of his cousins from Scranton who were set to attend today's event in Pennsylvania. And he spoke with Ambassador Gittinstein and Cornyn.

You all have seen the photo he posted on and the video that was just released to all of you out of transparency moments ago. The president will continue to work from the residents. Today, as you all know, as I just mentioned, and as we sent out earlier, Dr. Ashizza, our COVID-19 response corps, coordinator is joining us today in the briefing room. And as I tweeted out earlier, Dr. Ja and I spoke to the president this morning, and he said he's feeling fine. He has a little dry cough, as I just mentioned from the doctor's letter, a little runny nose. He's feeling tired, but he's working very hard on behalf of the American people.

And with that, Dr. Ja? Good afternoon, everybody. I'm pleased to be with you. So, as Corinne mentioned, I spoke to the president earlier. I also spoke at length with Dr. O'Connor, who is the president's personal physician. And I'm happy to share the readout of these conversations with you, and then I'm happy to take questions. In terms of my conversation with the president, he sounded great. I asked him, you know, Mr. President, how are you feeling?

He said, I'm feeling fine. He said he was feeling fine. He had been working all morning. He hadn't even been able to finish his breakfast because he had just been busy. I encourage him to finish his breakfast. In terms of my conversation with Dr. O'Connor, we talked at length about what happened this morning. As Corinne mentioned, the president got his regular testing that he does on his regular cadence. After he tested positive, he reported the symptoms that have been described.

Dr. O'Connor examined him thoroughly. He found his exam to be normal, to be at his baseline. And then obviously he recommended that the president take Paxlevitt. The president accepted that recommendation and has started Paxhavid and has taken his first course already. I want to also just take a minute to sort of mark this moment. You know, because the president is fully vaccinated, double boosted, his risk of serious illness is dramatically. lower. He's also getting treated with a very powerful antiviral, and that further reduces his risk of serious illness. And it's a reminder of the reason that we all work so hard to make sure that

every American has the same level of protection that the president has, that every American has the same level of immunity, and why we have worked so hard to make sure that people have access to life-saving treatments like Paxilid. These are incredibly important things for the president to have. They're incredibly important things for every American to have. And we have worked very hard over the last 18 months to make sure we have plenty of vaccines, that we have plenty of therapies, that people can get tested on a regular basis as the president does, because testing allows you to identify.

infection early and get started with treatment early. And we all know from medicine that early treatment is always better. Let me also take a moment to talk about BA5. If you've listened to me at all in the last couple of weeks, have you heard me talk a lot about this sub-variate of omicron that is now 70, 80 percent of all infections in the United States. It's a reminder to everyone. If you are over 50 the way I am, the way many of you might be, if you are

over the age of 50, and if you've not gotten a vaccine shot in the year 2022, you need to go get one. We need to go get one now because it will dramatically improve your level of protection, reduce your risk of having serious illness. It's the best thing that people can be doing. Let me just finish by saying, obviously, we work hard to protect the president, make sure he's been vaccinated and boosted as access to treatments. We also have been working very, very hard to make sure every American. has access to the same things. Because every American deserves access to the best vaccines, the best treatments,

and they are widely available. And I want to use this moment to remind everybody of that and to remind everybody to avail themselves of that, get vaccinated. If you have a breakthrough infection, get treated. It's the best thing you can do to protect yourself. Let me stop and take questions. And I know you will as well. We'll both take questions.

But go ahead and answer. Thank you so much, Dr. John. Has the president been tested to determine which variant he has? Is it VA5? And if so, what does that say about his prognosis? It's a great question. The virus has been sent off for sequencing. It takes usually about a week for that sequencing to come back.

That's under normal circumstances. He's the president. The sequencing will get prioritized. So we should have an answer sooner than that. But you can't just tell from a regular test what kind of variant. So the sequencing results will be back at some point less than a week from that. And as the president had to pull it. had to halt any of his regular medications now that he's taking Pax-Livid?

And what are you doing to mitigate the risk from halting those medications? Yeah, so this is a, I had a conversation with about this with Dr. O'Connor. There are two medicines. He's on Elyquist and Crestor, cholesterol-lowering medicine, and a blood thinner for his atrial fibrillation, both of which need to be stopped when you take Pax-Livid. It's a very standard common thing that we do when we give people Pax-Livid. And you don't need to do anything in those circumstances. They both get stopped for the five days that he's on packs of it and then they get restarted and it's totally fine in pretty normal practice. Where exactly was the president infected?

Where was he infected? I don't think we know. I certainly don't know if you have any thoughts on that. Look, I don't think that matters, right? I think what matters is we prepared for this moment. I think what matters is what Dr. Jaad just laid out. If we look at where we were a year and a half ago, this is a president when he walked to, in. One of his first priorities was to make sure we had a comprehensive plan to get people vaccinated. And so now today, look to today, more and more people are getting closer to having a more normal life. Vaccines are available. And as Dr. Jaa said, if you have not gotten vaccinated, please do. If you have not, if you have not gotten boosted, please do. These are these are treatments that are going to keep you safe. And I think that's what matters here is making sure that we continue

to do the work and the good thing is that the president again has been uh vaccinated and double boosted we know that rebound covid cases have been a concern in some individuals who take packs a little bit are there any precautions you can take to try and prevent that and how concerned are you that could potentially uh hinder his return to the office it's a great question um so let me tell you what we know about rebound um so we've looked at the clinical data on this or because if you if you look at Twitter, it feels like everybody has rebound, but it turns out there's actually clinical data if you look at major health systems that have given out Paxilipa to tens of thousands of people, rebound rates are around 5%. Some studies that say it's maybe 7, 8%, some that say

is 2%, but it's in the single digits. So it happens, it's not that frequent. But here's the key point about rebound, which is when people have rebound, they don't end up in the hospital, they don't end up particularly sick. And the goal of Paxlevitt is to keep people from getting seriously ill. And so it continues to work. You know, his physician is in charge of taking care of him. Obviously, the president will continue to be monitored as he is. But the Pax-Livit is working really well at preventing serious illness rebound or no rebound. And that's why he was offered it, and that's why the president took it.

And you mentioned the symptoms that the president has had so far. So there you go. The update is the president's doing pretty well. He's double-vaxed. And he's vaxed and double-boasted. He's on Pax-Livid. It will be for five days. going to keep working, going to do so in the residence, stay away from everybody else.

Sounds like so many of our household and so many of our people right here at CNBC. This virus comes, the virus goes, we've got to learn to live with it. And Tyler, I guess we're learning. Yeah, no, exactly, Shep. So many people these days are coming down with it. It's a very transmissible variant. If indeed this most recent B5 variant or whatever it's called is the one that he has come down with. I'm sure we'll have more on the news tonight with you.

Thank you, Chef. At the meantime, back to what we do best, which is follow the markets, and we'll do some of that after this short break. Welcome back, everybody. Let's take a glance at the markets with 90 minutes to go here into the bell. We want to get caught up across stocks, bonds, commodities, and the latest on Europe's energy crisis. Let's start down with Bob Bassani at the New York Stock Exchange, where stocks have erased. At least the Dow has erased a pretty sizable loss, Bob. That's right. In fact, the S&P has been positive really since about 11 o'clock eastern. time. Dow is now flat on the day. Here's what's important. They are continuing to pick at the

growth story. This has been just huge in the last week or so. All the growth sectors of the S&P's going up. Kathy Woods, ARC funds, for example. It's just been having a wonderful two or three weeks. Tech's been moving up, consumer discretionary. These are all the growthier sectors of the S&P 500. Energy's down today. Boy, they love it when energy is down because that's, of course, an inflationary indicator. That's moving to the downside. As far as what else is moving, travel stocks having a tough time of it. Of course, we had the airlines reporting, but they've had a very nice run the last couple of weeks. So that's not surprising perhaps they're down today on their earnings report. Travel, of course, we said carnival, a billion dollars in new stock

sales out there. And that was a little bit of a surprise to the market, I think. But again, both of the cruise lines have been doing really well recently. As far as what's going to going on with energy stocks. I just want to show you now three up days and now a big down day. And it's really important that these energy stocks move to the downside because the bears want that because that's the indication that we're going to have some kind of move in oil today. Oil's at $96 right now. And the key also, Kelly, of course, mega cap tech stocks holding up very well throughout the day. Back to you. Yeah, a big move lower in oil. We'll have more on that in a moment. Bob, thanks. But first, let's check in on the bond market where we saw yields drop

significantly and then kind of stabilize. Rick Santelli, what can you tell us? Well, they've stabilized double digits, though. We're down double digits from twos all the way out to tens, down 12 basis points in twos. Look at a two-day chart below yesterday's lows. Look at a two-day chart of tens, down almost 11 basis points below yesterday's lows, and, well, consider Philly Fed Index 26-month low, jobless claims at eight-month high, and we see that leading economic indicators have four consecutive negative months in a row. It hasn't happened since the end of 15 beginning of 2016. Now let's shift gears just a bit.

Let's look at a week to date of boons. They've settled their third session in a row lower in yield. And if you look at it intraday of the euro versus dollar, you know, Lagarde said in her press conference, one of the reasons they did 50 was because the euro was below parity on an intraday basis. It was to juice up the currency, but it didn't get juiced. It failed. It fell sharply as you look at the intraday chart from its intraday highs.

And, well, energy crisis on the verge of recession doing 50. It sounded good until you really stop and think about it. And in terms of the transmission protection instrument, that's that secret tool, that crisis tool, but it wasn't explained very well. And that was really the reason the traders I talked to didn't stay long the euro. and started buying boons. Kelly, back to you. Rick, thank you very much. Now, you've heard oil mentioned a couple times. Let's get all the details there as it's down to $96 a barrel.

And we're watching net gas closely as well. Pippa Stevens, what's the latest? Yeah, Kelly, well, oil is dipping and net gas is as well into the close, but still hovering around the $8 level. You can see on the chart that jump off the lows at 11 a.m. That was after the latest inventory report, which showed a smaller than expected build. during the prior week, and for the week, it is still up here, about 13% on track for third straight week of gains. Over in Europe, not gas prices have retreated and are down for the

week, but in the UK, surging another 16% today, and up 56% for the week. Now, energy stocks underperforming today as well, but there are some notable outperformers in the last week, including Kelly LNG plays like Tellurian, EQT, and Chenier. Absolutely. Look at those gains, It's 17% for Tullori and Pippa thanks. Let's pick it up with more about Europe's growing energy crisis. You know that Nat gas flows have restarted from Russia into Germany, but it doesn't solve Germany's longer-term problem, which is permanently getting itself off Russian gas.

Brian Sullivan does have more on that angle from Frankfurt today. Brian? Hey, Kelly, yeah, decades ago, former German Chancellor Helmut Cole said that Germany should do Russian gas, but not more than 30%. That advice seemed good at the time. Obviously, it was ignored. Russia ended up being more than half of Germany's natural gas just before Putin started the war. Cheap natural gas, too hard for Germany to ignore and German dependence on Russian gas would be higher if the Nord Stream 2 pipeline would have been allowed to come online.

That second part of the pipeline network is built, but it may never operate. We'll see, time will tell. So now Germany realizes, obviously way too late, that it has a big Russia problem. But Germany also needs the power that natural gas provides. It is the biggest consumer of Nat gas in Europe. About half of German homes are heated with Nat gas, which means about 25% of all homes in Germany are probably relying directly or indirectly on Russian gas for heat during the winter. Wow, it seems insane, given the history between the two countries.

But it is true. So what is Germany doing in the short term and the longer term to try to get off this Russian gas addiction? Well, a couple things. Okay, number one, cut consumption. It's going to import U.S. LNG. You just talked about Tullurian. It's making gas deals with Azerbaijan and Algeria. And all that is on the gas side. What about the other types of ways to try to make electricity? Well, renewables, of course, are a big and growing part. Wind and solar make up, depending on the day, 40 to 45 of the power generation mix, with the goal of getting to 80% in just eight years. Some of that will be hydrogen or maybe rooftop solar. Some will be. be utility scale solar. But you know what? That can't come online quickly enough. So in the short term, Germany is doing something it doesn't want to, but it has to do. And that is bringing coal back online. It's converting some gas plants to oil. And there is even now talk of not shutting down the final three nuclear power plants that are scheduled to go offline at the end of the year.

One sad but true fact, much of the wind power in the north part of Germany, and they're having trouble getting power lines built to run the power from the north to the south. Because get this, wealthier people who tend to be in the south don't want ugly power lines to be built. Nimbism, not in my backyard, apparently not just an American issue. And that doesn't shock me, but it's a reminder of the challenges they face. Brian, thank you very much, Brian Sullivan. Let's talk about Nat gas prices. Where do they go from here? Because our next guest sees huge opportunity in European energy markets and says now is the best time to be a nat gas trader. Bill Perkins is here. He's founder of Skylar Capital Management. Bill, this thing

whipsaws, though. Are you suggesting it's only going higher from here? No, I'm not suggesting that. Natural gas is a very dangerous game and you have to get a handle on many fundamentals to get the direction right, both on the short term and the long term. What I would say is that the upside risk, particularly in Europe, is much greater than a downside risk. This energy transition to renewables or whatever they plan on doing the wind themselves off rushing gas is going to take some time. They're not renewing long-term contracts. So that puts a heavier burden on LNG imports. Things break.

Things go down. There's a lot of volatility. So it's a dangerous game, but a profitable game. And you have certainly shown that with gains of, what was it, 182% last year on one of your funds, and I think more than 100% – excuse me, you're to date so far this year and 100% last year. If I am an individual investor who is of the mind that the price of natural gas is going to rise over the next nine months because of the various complex of influences that are at work, how is the smartest way? for me to play it if I don't have the skills of a Bill Perkins or the capital of Skylar. Well, I think you can look at if you're interested in the gas unhedge producers that are out there, Occidental Petroleum, people that have run an efficient operation or simply an ETF on gas.

There are gas ETFs that are out there that you can purchase, limit your, you know, put the small amount of capital at work that you want to put into the volatile commodity that natural gas is and feel safe at night that, you know, clearinghouses aren't going to call you and wait you up and bust you out of your position. Because you bought futures or whatever, right? Because you bought futures and you were way levered and things went horribly wrong. And things tend to go horribly wrong in natural gas. We had a Schneer LNG expert facility breakdown, blow up when things were extremely bullish. And then things look bearish for a minute.

And then we had pretty much record heat for the past two weeks, basically erasing all the gas that was brought back into the United States of America, or not exported, rather, from the Schneider going down. So things do happen. Things do go wrong. And it's not for the faint of heart. But it is a wonderful product to trade. Where, Bill, is it going next?

Wow. You know, if you talk to me before the Freeport, sorry, Freeport LNG plant had blown up, I would have said it's going straight up. That relief to the American consumer by bringing two BCF a day back in the USA kind of threw a wet blanket on the bull trade, although the weather has gotten me slightly bullish again in the short term. And the long term, though, never bet against the American producer. They will be growing supply steadily throughout the year, through the winter, and into next year. And so I would say that the tail end of domestic prices seems to be going lower. On the flip side, in Europe, I would have a bullish tent for quite some time. Wow. And that's saying something given that our prices have doubled, but theirs are up,

you know, four or five X and could keep going. Bill, for now, Thank you. It's good to check in with you. We appreciate it. Thank you. Bill Perkins with Skylar Capital. Up next, three stock lunch. Three big movers today that have been big losers recently. And no more virtual drinking buddies. Jeff Kilberg live in studio next on Power Lunch. There he is. Come on down. All right, welcome back, everybody. Time for today's three stock lunch. We are going to focus on three movers that are also double-digit losers so far this year.

Carnival, sinking after saying it would sell a billion dollars worth of new stock. DocuSign lower after a downgrade to underweight at Piper Sandler and Amazon higher, after announcing it will buy the primary health care provider one medical for nearly $4 billion. Jeff Kilberg, CIO of Sanctuary Wealth, CNBC contributor here live in studio, Jeff. It is great to have you here. Let's start with carnival, shall we? whenever a company has to raise capital, particularly one that raised a lot, sold a lot of debt not that long ago, you start to wonder. Very expensive, Ty, no doubt about it, but wonderful to be here with you and Kelly in person in Inglewood Cliffs.

But you think about Carnival, and if you like, the last five years, it's down 85 percent, Ty. So I don't want to use the same. You don't want to be buying a sinking ship here, but I am not touching this. But in the event, you do see an overreaction today because this is a very expensive capital raise, but they have some 20, 23 debt maturities. that they have to meet. So that's a tough chart. It's a tough chart, tie. So this is a, if you own it, what do you do? If you don't own it, stay away from it. If you own it, I think you stay buoyed here. But otherwise, you sell and don't touch this until you get a little more certainty. All right. Let's see if you're more positive on DocuSign. What about that one?

I am more positive on DocuSign, Kelly. I was just over in Short Hills, New Jersey, with my lovely folks at SkyPath Wealth and what we actually talk about in every wealth management, or even banking or lending, everything is secure and transacted on DocuSign. So I know this is a tough chart year-to-date, down 56%, down 77% on a one-year perspective. If you look at the value here, and I know it's just hard to save value, but with a 39-times forward PE ratio, it makes a ton of sense. And I continue to see DocuSign being utilized in every possible way, no matter what this sector is. It's part of our fabric in wealth management.

Still 37 times, still kind of high, but yeah. Very expensive. Let's move on to one that is in a lot of people's portfolios. Amazon announcing a deal today to buy a major medical provider. It's a multi-billion dollar deal as they try and nibble into the medical care market. Well, Todd, they're the disruptor, right? And you talk about some of their big takedown. So I want to be a buyer here of Amazon, own Amazon.

We think it's an essential name. But at the end of the day, this is really fascinating. Is it going to have the same effect on some of the other companies like when it bought whole foods? No. But when you talk about one medical, the bricks and mortars component, really going to try and reconfigure or reimagine the way we consume health care. So I really like this. I will take a drink of this third stock here without a doubt. So here we go, Amazon. It's going to be interesting to see how they continue to move forward. And to your point earlier, Ty, you're absolutely right.

A lot of people on this, but a lot more people own this after the stock split. Yeah, that's right. So have a shot of Amazon, huh? Yes, indeed. Kick them back. Jeff, Killer, Kilbert. Thanks. Great to see you. Great to see you. Well, is it time to panic or time to party? The price of Ether? may be under pressure today, but that's not stopping crypto developers from throwing a very lively gig in Paris, joining us live from the Paris Ethereum Community Conference is CNBC.com's Mackenzie Segalos. Mackenzie, I got to start. How hot is it in Paris? It's wonderful. I've had so many macarones since I'm arriving. Good. Take it away. Tell us about this conference and what's going on.

So the vibe here is overwhelmingly positive. People are thrilled that the grifters have been washed out and the developers who are left behind are building real utility. There's also a lot of optimism around the fact that this years in the making upgrade to Ethereum is actually happening in September. So today, Battalic Buterin, who is the creator of Ethereum, gave a keynote on the main stage pointing to all the benefits of the merge, as it's called, including the fact that it will make Ethereum so much faster, scalable, more energy efficient, and lower the price of gas fees. So we've got a situation where I'm sensing that people are more encouraged than not. Are there some there who are worried there are more shoes to drop in the industry?

Lubitons? No. No, so much of the conversation is not about the market. It's about the underlying fundamentals. So the conversation I've had with virtually every single person at this event, is that, you know, the crypto-contagent effect has actually been contained within a very specific corner of the ecosystem. So we're talking about the distinction between centralized finance and decentralized finance, Celsius and Voyager Digital, those big names that have fallen. These are C-5 players. Their yields weren't real. So 20% APY oftentimes with no collateral involved.

And then you have your defy platforms like Ave and compound that are over-collateralized. And this is where you're seeing real yield in the market. So, you know, people here are. aren't worried about the recent erosion of confidence among investors because even though there's less liquidity flowing, the bankruptcies are cleaning out the system and exposing vulnerabilities. What's the general mood there, McKenzie, on a topic where we see each day bringing new information about insider trading and lawsuits and bankruptcies and all the rest of it? What's the atmosphere like? I mean, it just hasn't phased people.

They're just so confident in the fact that those people that were looking to me, make an easy buck have been washed out. So what you're leaving are developers and cryptographers who have a lot of work to do to create actual utility. Meanwhile, the party scene has been a blast. Like nobody has been sleeping this week in Paris. They're bouncing from ECC to all of these ancillary events. There are dozens of blockchain parties happening across the city. Folks snuck into the catacombs, which is 65 feet underground. It holds the skeletal remains of around 6 million Parisians. Tonight, the hot ticket to have is Rave's. blowout party where I'm told all the defy DGens get loose. So if I get a ticket to that,

I will report back on how that goes. Well, we want to get a report on that, but I find a certain irony amidst all the all the turmoil in cryptocurrency that they would have a party in the catacombs where the bones reside. That feels a little ironic to me. Right. No, but that's the thing. It's like the investors and the trading side and the price charts and the markets are so completely separate to the group of people that ECC attracts. We're talking about the top developers and cryptographers on the planet. Like every single session has been devoted to what is the latest in tech? Like what is being

developed that people aren't talking about yet? So there are no panels, there's no opining. It's about really getting into the weeds of the code. Well, next time, McKenzie, take us along, will you? We would love that. Kelly and I will join you. There is... What can I bring back? What do you guys want? There is a quazon. A quazon. There is never a bad time to visit Paris. Mackenzie Seagallis, thank you very much. And you can read all of her stories from Paris on CNBC.com. I'm still chuckling. I hope she gets into the party with the D-Fi D-Gens. Yeah, that would be good. Thanks for watching, Power Lunch, everybody.