Power Lunch - Is the Fed finished?, investing in the energy rally and oversold stocks ready to bounce 5/27/22

Episode Date: May 27, 2022

Has the Federal Reserve done enough to cool the economy? A report today showed inflation slowed a bit and that helped boost investor sentiment. Plus, is it too late to buy energy? No, says our guest who’s telling investors to be selective. He’ll show you the one thing to look for before getting in. And, oversold stocks that are ready to bounce. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome everybody to Power Lunch. I'm Tyler Matheson. Here's what's ahead this hour as we wrap up this week. Stocks powering higher, a report showing that inflation has slowed just a bit. That's helping to boost sentiment. So has the Fed already done enough to cool the economy? That's the new debate on Wall Street, and we will discuss it this hour. Plus, it's not too late to invest in the hottest sector of the year. So says one of our guests later this hour, the energy index up almost 60 percent. in 2022, but there's one thing investors need to pay attention to when buying into this rally. And Kelly, we'll tell you what it is. I'm looking forward to that because it's been a sure thing lately. The Dow on track to snap an eight-week losing streak, the Dow and S&P, also going positive

for the month of May. All of the major indexes are at more than 5% for the week, as you can see here, almost 6% for the NASDAQ, which is back over 12,000. This 6% weekly gain driven by a 7% increase in Apple and Microsoft. off this week and an 11% jump in Nvidia and implied materials. The banks, meanwhile, also closing out a nice rebound with J.P. Morgan up 11%. It really set the tone this week with Jamie Diamond's comments on the Investor Day on Monday, Wells Fargo, Bank of America, the financial spider broadly seeing some nice increases. Tyler? All right. Thank you very much. As the Dow rises,

as the Fed's favorite inflation measured, so-called core PCE, may be suggesting that inflation is slowing down at least a bit. an op-ed written by our next guest. He points out a few things that hint to why the Fed may be, yes, finished with its tightening. And if it is, says we could see a market launch a new leg up. Let's bring in Ron Insana. He's a CNBC senior analyst and commentator, also a senior advisor to Schroeder's North America. Ron, you are always going against the grain, but this one really does because not many people think the Fed is done. When you say done, do you mean that they are likely to skip the two half-point increases that they have widely hinted at at the next two meetings?

No, I think those might be the last two, Tyler. I think they'll finish and get the Fed funds rate to 2 percent. And given what you just described, not just the moderation and the personal consumption expenditure deflator, which is one of their preferred measures of inflation, we've also seen inflation break-evens, both five-and-ten-year break-evens fall rather precipitously, five-year falling the most, over a half percentage point. Interestricer sensitive sectors of the economy, like housing, we've seen some pretty bleak numbers there. Credit spreads have widened. Credit conditions are tighter than they've been. The speculative excesses and financial assets have been wrung out. And so I think you've got the backdrop for the Fed, as Raphael Bostic of the Atlanta Fed suggested

earlier this week, to at least take a pause in September and maybe not need to do too much more. You saw that consumer confidence number this morning, too, which suggested that, you know, that's a leading indicator of a future slowing in economic activity. What about the runoff of the balance sheet, which has barely started? Do you see them continuing to drain their balance sheet away? I think there's a bit of a conundrum there. You know, since housing's rolling over, Tyler, and we start to see some, you know, increase in sellers versus buyers. we're starting to see, you know, prices move out of reach.

It would be very, although, as you say, the Fed's about to start quantitative tightening on the 1st of June, for them to be rolling off mortgage-backed securities or even selling them outright into an environment where a 30-year mortgage has gone from 3% to now 5. and a quarter would complicate that even further. Now, there's no doubt they're going to start it. How long they engage in balance sheet reduction, I think, is becoming an open question, at least in my mind. It's not coming from anywhere else, but my own thought process.

and my own analysis of the situation. I haven't spoken to people about this, no particular information that would suggest this is official policy. But by the same token, I mean, does it really matter if the Fed launches quantitative tightening or leaves its balance sheet alone when effectively, as we said earlier,

they've already had a fairly pronounced impact on the economy in real time? All right, so let's talk about two things. One would be the economy here. If inflation is slowing, which the PCE measure suggests it is by three-tenths of a percent from March to April. That's a good trend. What are the odds that the Fed is able to pull off this balancing act without stalling the economy?

Do you see that happening or not? Well, hard to tell. I mean, right now, you know, as we've seen from all the retail reports, it's very much a mixed bag. There are certain sectors that are doing well, certain areas where the consumer is retrenching. obviously travel looks great. Consumers also shifting their buying habits. So I think it's too early to say whether or not, you know, we get that soft touchdown. If the Fed were to persist in this process and continue to raise rates through the remainder of the year,

my bet is still that would raise the possibility or probability of a recession to 50%. But I think if they really kind of curtail their efforts around September, they might just do what they did in 94 and 95. You know, we're here. We have to fill 14 hours of the day with Convert. You know what it's all about. And so for most of the month of May, we have been looking at, A, a very volatile market, and one that was more down than up. But here we are on the next to last trading day of the month, and the Dow and the S&P are basically at break-even for the month. What are the odds that we have passed the worst in the market decline? Well, in my mind, this is still a bear market rally until proven otherwise. I tweeted

out on Sunday night that we should be looking for some sort of meaningful trading bounce here that would be, you'd be able to leg into and make some money. But I think we need further confirmation. We need a break on China. We need a break in Ukraine. We need, you know, the flow of energy and food to start to pick up in order to really extend the lifespan of this rally. And you need somebody at the Fed to say we're getting closer to being done than being in the process, in which case, then I think it's a new leg up. Short of that, for now, you just have to say it's a bear market rally with some small positive signs that we might be moving into a situation where a soft landing is possible.

All right, Ron, thanks for the insight today and have a great weekend. You also. Thanks, Tom. Ron and Sana. Our next guest is taking advantage of the market's valuation reset. The S&P is down from 21 times earnings at the end of last year to 17. times forward earnings today. She's finding opportunity in companies with strong balance sheets, good dividends, and pricing power. Let's welcome Courtney Garcia, a senior wealth advisor at Payne Capital Management. Courtney, it's good to have you. And to the larger macro point, I guess some say

the S&P needs to go down maybe to 16 or 15 times. But I guess either way you look at it, much of the reset has already taken place. Yeah, I think that's the question, right? Because the price or earnings are now at 17, still actually well below the five-year average. It's not quite to some of the longer-term averages, to your point, some people want to see it more like 15 or 16. But either way, it's so much more reasonable right now. And ultimately, what's going to drive the markets is earnings and profits, which are actually still relatively strong. And I think that's exactly what you're seeing here is when valuations are coming down this low, you're seeing people coming to buy back in and take advantage of those valuations. And it's ultimately really kind of keeping some of that downturn at a

minimum. So while some are looking at the market and saying, okay, I want to stick with energy because of my view on the tightness of that market, you're kind of looking at, you know, style, almost we could call it, you know, balance sheet. What are the names that jump out to you here as good investments for right now and why? Yeah, I do still like energy. I just want to kind of throw that out because I do think what's happening right now is we're saying maybe inflation is peaked and that's really one of the reasons the markets are having a positive week this week, which is great. But inflation peaking is not the same as there being no inflation. So I do think you want to look at some of those hedges, energy being one of those, but also things like materials can be a really good opportunity.

So like BHP group is a really good example where it's a really well-diversified company in things like copper, iron, coal, et cetera. And if inflation does kick in, that's going to be your hedge against that. But also, you're looking at places like China are actually about half of the demand for things like iron and copper. Their economy is still not even open yet. And so I think a lot of that can lead to more demand. This can really start to improve here. that kind of regardless of where the economy is going, I think you want to make sure you have some of those positions there that will do well either way.

You also like Deer, you like Mark. And one of the other sort of things about this week that has been interesting is wondering whether we get into a situation where reopening names, travel names, consumer discretionary names, get back to the leadership, and something like health care goes back to its traditional backseat. Yeah, I mean, you do need to make sure you have a well-diversified portfolio here. I do think seeing some of your consumer

discretionary if the consumer is still in a good place. And I actually am under the impression they are. You do want to make sure you have those positions in there. But something like healthcare, I do think is going to continue to perform. Like I like that Merck, for example, they have some really solid revenue drivers like Ytruda and Garda cell. But I also really like about them is they're getting really into the animal health industry. And that's something that people are going to spend their money on regardless what's happening in the economy. And I think that that's actually really promising as well. So I think just to get some of these companies here, which regardless where we're going. I think they're a good place that you can put some more money right now.

What about the home builders? And I'm throwing that curveball at you because they are trading at just incredibly low valuations. And Stephen Kim last hour just made his case once again for why he thinks these stocks are going to perform much better than the market's currently expecting. I actually, I'm going to go out a lot, but I do actually like the home builders here. I think they're probably got a lot more negative sentiment than is justified. So you are seeing so much demand here. There's still an entire generation that wants to get out. and buy their first homes and get into the home market, but there's still so much more demand than there is supply.

And even with mortgage rates coming up, that demand is really not coming down. So I actually do think your home builders, it's a longer term play, but I'm actually pretty interested in that as well. All right. Courtney Garcia, a vote of confidence for the builders and some other names. Thanks for your time today. Thanks for having me. All right.

Coming up, Alibaba, jd.com, 10 cent, all reporting their slowest revenue growth on record. All down more than 20 percent. today. There you see the graph. It's been a tough run for Chinese tech names, but is sentiment about to turn? Plus, oversold stocks that could be ready to bounce. They are risky, but if you got the guts, they could offer a big reward. Our trader tells us which ones are worth owning and which should be shunned in today's three-stop lunch. Time now for our weekly look at ETFs making big moves. This week we look at Chinese internet ETFs, $205 million of outflows in the latest week.

The continued lockdowns to fight the spread of COVID-19, that is hurting factory output. That in turn is likely to slow economic growth. So that is what's driving the action there. So you've got slowing output and a lower GDP outlook as well there. Despite those concerns, Crane shares K-Web ETF, the largest tracking this group is up 3% this week. Let's come on over here. We'll look at it year to date, down 24%. But this week, a good one. The data come from our partners at Track Insight, more information available on the F.T. Wilshire ETF hub. So what is next for these Chinese stocks, especially for the large internet names like

Alibaba, Tencent and J.D. All just posted their slowest revenue growth on record. Let's bring in the man who runs the ETF in focus this week. Brendan Ahern of Chris. share. So Brendan, do you make the case that now is a good time to buy into the ETF that you represent or into these shares? And how do you overcome the argument that fundamentally China right now is uninvestable? Yeah, it's a great point, Talley, you made just on the outperformance of KWeb. It's not just this week, but actually over the last month, KWeb is up not quite 2%. Whereas broad emerging markets is down slightly. The Q's NASDAQ, NASDAQ, NASDAQ, is down 5.5% and the S&P 500 is down almost 3%. So I think a lot of the risks, a lot of the negatives are very much baked into these

companies. And we've had some really strong earnings this week. I know that the year over year quarter comparisons don't look great. But I think it's important investors recognize that Alibaba beat, Badu beat, Quashu beat, Nettis beat. We've had a lot of the big players in this space actually beat expectations despite a little bit of a challenging macro environment. What has to happen? I mean, as you look backward at the last quarter, the second quarter may be a different story, or do you see it that way? Do you think they can continue to do well in light of what is in China a relatively complete shutdown of big parts of the economy? Well, Shanghai is a very important city, not only from a population perspective, but you

got to realize it's the city of, you call it not quite 30 million out of a population of 1.4 million. You know, China has over 100 cities with more than a million people. So I'm not, I'm not diminishing the importance of Shanghai and more importantly, not only its financial emphasis, as well as its port, but it's a very big country. And a lot of the vast, vast majority of China, is at work, able to travel. And yes, we're going to see some households have been quite conservative. Advertisers have been a little bit conservative. But hopefully we see some marked improvement. And just that, just all this negativity baked into these companies, we think that's why we're seeing some of this recent outperformance over the last month. How do you decide

which companies are in your ETF? And when new ones get admitted? and when existing ones get put out? How often do you rebalance or reshape the portfolio? I'm curious. Yeah, Tyler, we do a semi-annual index rebalance, where we go in and trade K-Web on behalf of our shareholders in June and December. So we're getting close to a new kind of refreshment of K-Web. The one thing that's been a little bit different is due to the risks associated with the holding foreign companies accountable act,

we've migrated the majority of K-Web's exposure out of the U.S. ADRs into the Hong Kong share class, and we'll continue that trajectory due to the risks associated to delisting, which is one of the really important non-fundamental factors that have weighed on the securities. All right. Very interesting. Brendan Ahern, thank you very much. Brendan is with crane shares. We appreciate it. Coming up, a vacation may be all you ever wanted, but inflation. is not gas prices at a record. Airfares are climbing to pre-pandemic levels. Will consumers hit a breaking point? I don't know. Airline stocks are up today. We'll find out after this.

Welcome back to Power Lunch. It's one of the biggest travel weekends of the year. And though prices are soaring for just about everything, it doesn't seem to be keeping people stuck at home, but will the sticker shock eventually set in and slow things down? Let's bring in Phil a beau. He's got the very latest for us. Phil? Kelly, that's stick. Shack is not expected to stop people from traveling at least through the summertime. Now, in the fall, it might cool off a little bit, but that's typically when we see leisure travel pull back. Take a look at what we're seeing with airfares right now. And when you look at this, you might say, wow, we're higher than last year. Yeah, we're way higher than last year, and it's

going to continue rising. By the way, domestic airfares, this is according to Hopper, up 72% since January, up 34% compared to the spring of 2019. it's up compared to pre-pandemic. Gulf Coast jet fuel is the wild card for the airlines because they're looking at these record number of people who want to fly, who are paying these prices, but they've got higher costs than ever before. Again, this is close to a record high in terms of jet fuel prices. Nonetheless, the airline stocks, you mentioned this earlier, Kelly, they're having a great day

today. But keep in mind, what we've seen with the airline stocks over the last month, month and a half has been days like this where they will have a nice pop higher. then they will sell off. They generally speaking are trading in this mid-range here. They're not close to the 52-week lows, but they are nowhere close to their 52-week highs. That's the story with the airlines. In terms of Memorial Day weekend traffic and travel, the bulk of the people in this country who are going somewhere will be driving. About 35 million people will be taking a trip somewhere, and they are looking at record high prices at the pump. Right now, the average, the national

average, $4.60 a gallon. That is up a buck 56 compared to the same time last year. And yet, we still see strong demand out there. We do not see people slowing down their habits in terms of driving. Also, we always get this question. I get it a lot from people. They say, well, doesn't this drive more people to buy EVs or won't it? Theoretically, they're going to be going to hybrids before they go to EVs because they're much more affordable. And that's why we're showing you, Toyota, and Ford, they lead in the gas electric hybrid arena, but it's a tight market in terms of supply, guys. So they have them, not a lot of them, and which ones they do have, they are selling and selling at a nice profit right now.

Guys, back to you. We went so many years where, you know, the Prius was very popular some years ago when there was high prices. It then sort of plateaued, and now it is very popular, as are other hybrids. Let me go back to that airline point. The stocks are up today. we keep hearing about really blockbuster demand for travel. And yet the stocks of airlines, based on the chart we just showed, Phil, are all down by double debt.

There you see it, one year, Southwest, down 26, Delta, I was going to call Dallas, Delta, 12%. UAL, down 18, American, down 25. Why, in the face of that demand, why are the stocks down as much as they are year over year, though they're up today. Two things. One, they all lost money, almost all of them lost money in the first quarter. They're swinging to a profit in the second quarter and are expecting to be profitable for the remainder of the year, Tyler. But to what degree will they be profitable? The wildcard is jet fuel prices. So far, the airfares have allowed them to offset the increase in cost when it comes to jet fuel.

But they're not racking up monster profits like you might expect, given the surge in airfares and the demand that's out there. Also, remember, they have less capacity than they did back in 2019. Why? Because so many pilots took early retirement or they took buyouts. And that is at the heart of why they do not have as much capacity flying today. And the international routes are nowhere close to where they were back then. Yeah. And you hear an awful lot about people just suddenly anomalously having their flights canceled,

just out of nowhere. I guess it's because there's a shortage of capacity. Phil LeBoe, thank you. It's a tight schedule. Thank you, sir. Frank Holland has a CNBC news update for us, Frank. All right, thanks a lot, Tyler. Good afternoon. Here's your CNBC update for this hour. The jury and the Johnny Depp Amber Heard defamation trial is expected to get to that case later today. After six weeks of testimony, that's attracted a lot of interest and sparked debate on social media platforms,

both sides are finishing their closing arguments. The jurors will have to decide if heard defamed Depp by writing in the Washington Post that she was a domestic abuse survivor. And near Pittsburgh, a massive cleanup operation is underway after 17 freight cars and two engines derailed when a Norfolk Southern train carrying petroleum disillates had a dump truck filled with stone. Officials are expecting disruption for travelers and voters over the Memorial Day weekend. And in Spain, a whale that was freed about a week ago from an illegal net was found stranded and injured on a beach 190 miles away. Specialists who examined the animals said it would not survive a return to the sea and it died shortly later. That's the very latest. Tyler and Kelly, back over to you. All right. Frank, thank you very much.

Ahead on Power Lunch, the rising price playbooks. Some energy names may benefit from surging gas and oil prices, but the rising tide may not, Kelly, lift all stocks. Well, we have three stocks underwater. We'll lay out three potentially oversold names, and our trader will tell you whether or not to buy the dip. That's when Power Lunch comes right back. Welcome back, everybody. Just 90 minutes left in the trading week before the long weekend. and what a nice market we have going into the week.

Let's get caught up across stocks and bonds and commodities and the names that will prove resilient if the oil price surge slows. We'll start with Bob Bassani and the latest on these markets. Bob? Steady as she goes, Kelly, really since about 11 o'clock, we've held up right near the highs for the day, up about 6% for the week. Very big moves, particularly in retail and energy stocks this week. In fact, the four biggest movers this week,

all retail stocks have had a rough time, of it recently. Dollar tree is up almost 28%. Alta $20 general. Raw stores about 20% as well. The stock of the day, though, I'd have to pick Costco. What an amazing company. 10 to 15% earnings grower consistently for many years. They basically affirm that again today. Yes, they've got some lower margins and they're having to increase prices. But overall, this is just an amazing company. 10 to 15% earnings growth every year for many, many years. That's why people love the company here. As for what's down, nobody really wants any defensive names. Nobody wants pharma, nobody wants food stocks. When you have growth stocks rallying like you've seen, particularly tech,

like Nvidia's up 20 percent. But here's very few stocks down on the week, but Kraft Hein, Smucker, Merck, Bristol Myers, but not down much, one, two, or three percent. As for the S&P 500, Hard to believe a week ago we were 300 points lower, but 3810 we were on an intraday basis. Look at that. That's a 300 point move so far this week. We'll see what's going on next week, guys. The jobs report on Friday will help affirm or not affirm that the economy is still strong or not. We'll see. Guys, back to you. All right, Bob Bassani, thank you.

And we turn now to the bond market where it's been a quieter week, both for bond yields, even for inflation. Rick Santelli has the very latest. Rick? Yes, it's been a quiet week with regard to inflation, but as we learned today with the PCE core deflator and PCE year over year, they've moderated, but they're still at very lofty levels. And what isn't it lofty levels was University of Michigan sentiment. Look at a two day of tens. Kelly's right.

It's an inside session today. Remember, there's only one trading day for the month left. That'll be Tuesday. So let's look at a month to date of tens. It's been down, down, down in yields. As a matter of fact, the high cycle yield close was the, first Friday, the 6th, and that was a yield of 313. On the next Friday, we're down at 292.

The next Friday, 278. This is the fourth Friday, we're at 274, which means every weekly close has had a lower yield. And if you look at a month-to-date of boons, it is a different-looking chart. It's been more firm, and that may account for some of the strength in the Euro currency. And if you look at the difference between tens and boons, it's gone from about 200 basis points at the beginning of the month to around 100. 76 basis points over. The closest in two months. And finally, here's a month today to the dollar

index. Wow, it's really giving up some ground. Things like emerging markets are doing better. You're obviously doing better. Consider this. Mid-month, we're at a 20-year high in the dollar index. Right now, we're closing at a one-month low. Kelly, back to you. Thank you very much, Rick Santelli. Oil, that's been the standout. It's closing for the day with the sector at the high end of its recent range, the best performer in the market this week and this month. Pippa Stevens with all the latest. Pippa. Hey, Kelly, U.S. oil is now on track for a fifth straight week of gains. Now, during the session, crew did spend much of the day in negative territory before jumping this afternoon on reports that Iran has seized two Greek tankers in the Persian Gulf.

Now, this matters because any supply disruptions will rattle an already tight market. Meantime, G7, energy ministers today calling on oil and gas producers to quote act in a responsible manner and respond to tightening international markets. They added that OPEC has a key role to play as the group prepares to meet next week. Here in the U.S., the recount fell this week for the first time in 31 weeks. Let's check on prices. WTI is at 114-4 for a gain of half of 1%. Brand crude right around 119 per barrel up 1.2%. Natural gas pulling back from that $9 level, currently down 2%. And the energy sector keeps on climbing now at the highest since September 2014, Valero, Diamondback and Marathon Petroleum. Kelly, hitting record highs. Wow. All right, Pippa, thank you. When it comes to energy,

rising prices may not always lift all boats. Our next guest says you have to know leverage. For each company, that's the key to investing in this sector. Scott Nations is the founder of Nations. scares. Nation's shares, Scott. Welcome. Don't scare us too much here. Where do you think investors should and shouldn't be placing their money? There's nothing scary about energy lately. The XLE today at a new 52-week high, it's up 60% year-to-date. And it's not too late to invest in energy if you pay attention to one sheet leverage. It's not a surprise that some of these energy names because they're all capital intensive. It's not a surprise that some of them are more levered than others. And the ones that are the most levered are the ones that have done best year to

date. So Occidental Petroleum is a perfect example. Debt to equity ratio of just over one, largely because of their Anadarko acquisition, but they're also the best performer in the space. They're up more than 140% year to date. So let's look at somebody that's a little less leverage. Actually, let's look at two. Mobile and Chevron both have debt to equity ratios are a tiny fraction of oxies and they're both up, but they're up about 50% or 60% for Exxon year today. So the key is balance sheet leverage. If things are going great, it helps when things are not going so well for the energy

names. It's really going to hurt. I mean, it's almost like saying investors are placing a levered bet on oil prices if they pick a highly levered company. So would you then recommend that people stick with the more conservative? names, you know, the Exxons of the World, EOG, for instance, at the risk of capturing upside? I think that right now we've had such a wonderful run, and you don't want to be a pig. We know what happens if you're hoggish in the market.

So I actually think that the less levered names are going to do really well. Macro issues are going to do all of the energy. Some names like Chevron, Exxon Mobile, EOG, which are probably the best risk. reward plays in energy for the rest of the year. What do the what do the dividends tell you on a company like an oxy? Do the high dividends signal anything? Well, it indicates that they have to work to keep all that capital. Oxi is kind of a special thing. You know, it spent so much money to acquire an Adarko. It had to borrow a bunch of money at eight percent annualized annual interest from from Warren Buffett and Berkshire Hathaway. So they really had to reach. And boy, it's

It's paid off in spades right now. But what the dividend yield is telling me is that they're throwing off a lot of cash, but they also have to pay a high dividend in order to keep all that money, all that equity on the balance sheet. All right. Scott, thank you very much. Great to be with you today. Have a great weekend. Thanks, Tyler.

All righty. Still to come, one more meeting on the calendar before the long weekend. Our working lunch with John Ford. He's working on a Friday, a holiday weekend Friday. highlighting the CEO of a fintech startup in India looking to help small business. Plus, as we had to a break, during May, we celebrate Asian American and Pacific Islander heritage and feature some of our CNBC teammates and contributors. Here's Kavita Patel, former Obama White House policy director.

Growing up, I had always tried to fit in, and that meant oftentimes not acknowledging my own brown skin. And so raising my five-year-old daughter, it was incredible when one day she'd be. brought home a self portrait that she had to do in class. And she filled in all the skin with a dark brown color. I always just drew children, even my own portraits as having lighter skin or yellow hair, trying to fit in with all the children around me. She was incredibly proud of what made her difference. And she celebrates that and all her drawings now include little brown girls. All right, welcome back to Power Lunch. So let's take a look at

U.S. markets right now. On this day where we, look like we're going to break a multi-week streak of negative numbers. Eight weeks in a row. For the Dow, it's eight for the S&P and NASDAQ at seven. And the NASDAQ is leading the way this week up almost seven, just more than 7%. And what's amazing, we'll talk a little bit more about it later, is the round trip that stocks have made from the first of the month back now to being basically flat. There you see West Texas crude.

You wonder why people are paying more for gasoline at the pump? There it is. week to date, up 1.5%, almost $115 a barrel. And there, once again, the Dow Industrial's up 1%. Well, this choppy market is affecting more than just public companies in the U.S. It's having ripple effects on startups and small businesses globally. And today, John Ford brings us up close with a fintech CEO who's made it her mission to help small businesses grow. John? Hey, Tyler. Yeah, Hartika Shah is the founder and CEO of Canara Capital, a fintech based in Bangalore.

Harika grew up in India before coming to the U.S. for college and launching a successful career in management consulting. And now, Canara is using data to offer collateral-free loans to small business entrepreneurs in India disrupting the traditional banking model. Harika is used to doing things in novel ways. As a girl, she assisted her father, a political science professor, who's also blind.

What I also spend a lot of my childhood doing is actually helping my father. So I would record all of his books so that he could take notes and then form his question papers. And during vacations, I would read all the answer papers that would come from the colleges

or from the students and assign marks that he would tell me to do. Well, my dad had access to the American Library because he was doing a lot of work on U.S. politics and UN, and I would go along with him. And that's where I discovered the barons guides to American colleges.

And that's frankly where I learned about this whole system of education called liberal arts. I mean, blew my mind. I was absolutely clear and certain that point in time that this is what I wanted to do. And her parents sold their house to send her to college. Hardica says Kinara has been taking a cautious approach to lending. The company has done more than 75,000 loans so far

across 90 cities in six states in India. The potential impact is large. India's got about 60 million small and medium-sized businesses employing 120 million people. I asked her, though, about risk. She said the company's experience surviving COVID helped her ensure that Canara doesn't take on too much of it. I think that when you talk about fintech,

the investor expectations for fintech and many tech startups, for that matter, is to always prioritize growth over profitability. And we have carried this mantle of sustainable growth rather than just grabbing market share. So from the COVID experience, that very thing that we stuck to actually separated us from others. Having built a profitable enterprise, ensure that we could find our way through and get back on the growth plan when the time is right. She was saying that last March before it became popular. Last month, Canara secured another $50 million investment led by New Veen's Global Impact Fund. It's a different kind of bet on the efficiency and growth that software and data,

fintech, can drive when it's applied to a big market. So let me understand here. She, these are non-collateralized loans. In other words, you don't have to pledge anything, your business, your buildings, your house against it. But that does not mean these are not interest-bearing loans. That's right. So the premium here has to be, then, on checking credit quality? Well, it's also on cash flow. See, in India right now, if you want to get a business loan that's not based on your property, generally you've got to pay these payday loan type rates.

And her insight was if we go in and we actually digitize the bookkeeping of these businesses, many of which are doing quite well and can document their cash flows, then we can run models on them and determine whether they really are good investments. And so that's what she's been doing in a system that really hasn't had, that sort of digitized bookkeeping, bringing that so that then they can be more efficient. That's fascinating. That's really interesting. By the way, it's been used by U.S. companies as well, whether it's square or others trying to, like, get that foothold,

110 branches across India. So this is the sizable company now. Yeah, growing pretty quickly. She says growing carefully. It's hard for us to know that from over here. But look, when you think about the potential, right, in people, in their ideas, when the system hasn't allowed it, that's what she grew up with, right? Her mother's family actually disowned her mother when she decided to marry her father because he was blind.

And yet he made this career as a political science professor. She was able to move them to the U.S. He's still doing that work. So don't underestimate people's potential. Where did she go to school, by the way? She went to Knox College in Illinois. Oh, in Illinois. I shouldn't misspeak.

In Illinois. That's great, though, that she was really turned on to the whole liberal arts idea. She wasn't home playing video games. No. No. There weren't as many good ones in the 80s. No, probably not. Maybe if today she would play some good video games.

John Ford, thanks. Thank you so much. Down but not out. We're going to take a look next at three oversold stocks that could be worth buying, including one down 32% from its highs. That's when Power Lunch comes right back. Welcome back to Power Lunch. It's time for today's three-stock lunch.

And today we're looking at oversold stocks that could be due for a pomp based on short interest, analyst conviction, and percent below their 200-day moving averages. Some names that popped up. Take 2, CarMax, and Under Armour. So let's bring in Craig Johnson, Piper Sandler's chief market technician. He's got our trades today. Craig, welcome. And let's start with Take 2, which is currently at its lowest level since March of 2020. Absolutely.

So we take a look at Take 2 and we look at the percent of short interest in here. There's still about five and a half days if we're going to see a short interest sort of coverage in terms of that. When I look at the chart here, we've corrected right back to those prior lows, as you had mentioned, Kelly. and it looks like we're sort of making this sort of bottoming pattern here in the charts and reversing some of the shorter term downtrends. So it looks like to us, if we just sort of trade back toward the 50-day moving average and the 200-day moving average, we got 5 to 20 percent upside here in the stock. And it looks like a stock that's kind of already discounted a lot of the bad news.

How about CarMax, Greg? So CarMax is another interesting one that we buy. So it looks like we got a nice downtrend reversal of our 50-day moving average. and we think that this is a stock that we should be buying. We had nice 20 plus percent upside back to the 200-day moving average here. So this is, again, another constructive-looking stock that we think should be bought that fits into that down-and-out category, Tyler. All right.

So that's two that you're interested in, take two in CarMax. What about Under Armour? That's the last of the bunch here. It got crushed on the back of its earnings. It's down 51 percent this year. Is it a buy for you? It's not a buy yet, Kelly. He says when I look at this particular chart, while it is off,

a lot from the prior highs. We're not even back to a big support level technically quite yet. We need to get back to those 2020 lows. We still have about 24% to go to get back to those lows. So again, more downside to go. I don't see this story totally de-risk as of yet, like I do some of these other names. That's why I think I'd be waiting on this one until we get confirmation that we found the lows. As you look for oversold stocks that might be timely, What are the key things you look for? Well, a lot of the characteristics we have mentioned here. I like to look for stocks that have either pulled back to big, huge support levels.

I'd like to look at what the short interest is. And I'd like to look at the short interest, you know, say 30 days ahead of an earnings sprint too. Is that short interest been rising, has it been declining? I also like to look at the long-term value argument. Are we trading one, two standard deviations below the five-year average for the valuation argument? those are some of the things that I'd be looking for. All right, Craig, thank you very much. Craig Johnson, we appreciate it.

Have a great weekend. And for more stock screeners and other market insights, head on over to cnbc.com slash pro. Meantime, let's take a look at Bitcoin, which has been swept up in the market volatility this year, down 38%. But J.P. Morgan says to hold tight. The firm saying it expects at least 30% upside to Bitcoin from where it is right now. And that is 26% lower in one month than it was at the start. The strategy is saying Bitcoin's fair value is about 38,000, currently trading about 28,394.

J.P. Morgan says there's little evidence that VC funding is drying up for the industry after terrorist collapse, and that the Bitcoin to gold-Val ratio has declined modestly and that that makes it attractive. The firm saying digital assets have replaced real estate as the firm's performance. alternative asset class along with hedge funds. So will there be a crypto comeback or another Bitcoin winner tune in tonight at 6 p.m. Eastern for Crypto Night in America. You should play that NBC. Don't, dun, don't, don't, down. Absolutely. All right ahead. A look at the week where the Bulls took over. We'll be right back. To say it has been an eventful week in the market is one of the great understatements. As you see here, here's a one week of the S&P. It is up 5% overall,

or actually 6% when you figured up up to the minute. But look back here on Tuesday, where we were flirting with that 3850 level, which a lot of people thought was a technically important area. That looks like a little bit like a saucer in a cup, doesn't it, right there? But that is what you would say, a saucer, and we've been off to the races since then. moving on. So this would break a seven week losing streak. It says clear. Let's see. Did it clear? Okay, let's go. One week consumer discretionary. It's basically a basket. Well, there's the NASDAQ. And look at that. Those gains there up nearly 3%. Again, Tuesday was the low. Consumer discretionary, up 8% Kelly. And the fun one about this, every component higher for the week except pool. And what did we see the huge increase in demand of the last couple of years of doing? Putting that pool in your back. Pools. And consumer discretionary is a huge. I mean, it's a real, every vegetable in the garden goes in there one way or another. It's retailers. It's thingmakers. It's service providers and

so on and so forth. Perhaps most tellingly, though, let's take a one month look at the down. And it sure doesn't feel this way, Kelly, to me. There are the industrials of 391 points today. And there we see the one month. And as you draw the line across from here all the way over to here, you are basically even month to date, 0.15% after all we've been through this month. It certainly doesn't feel that way. On that note, we have a bunch of data coming out next week that could set the tone one way or the other for either this idea that the Fed is going to ease up somewhat or the idea, as Nick Timrose has been tweeting about this afternoon as well, that maybe they might not. That's why I'm going to be especially watching yields here. one thing that the market hasn't proven is that it can keep rebounding, even as yields keep climbing higher.

We saw a lot of relief. There's the 10-year 274 today. If the data next week isn't damaged enough, tie, that has me wondering. That's really interesting, that 274. There's the 10-year note at 274.30 down a little bit today. Yields have come down from that 3% level. So there we go. Exactly. That's supported the NASDAQ. We've seen that leadership today. It's giving some breathing space for, if you want to call it the Fed or just the high growth, sort of high multiple trades. If we see yields go back higher, that would be the real question for me is how does the market hold up and hang in there? So we wish you a very pleasant Memorial Day weekend and remember why we celebrate Memorial Day for all those people, men and women who gave their lives in service to our country, protecting our freedom.

Absolutely. Thank you. Very well said. And thank you everybody for watching Power Lunch.