Power Lunch - Just Right?, and The Chips Are Down 7/7/23

Episode Date: July 7, 2023

The economy added 209,000 jobs created in June, slightly less than expected. Is that number just right to calm the markets’ fear about inflation and rate hikes? We’ll explore. Plus, Treasury Secretary Janet Yellen is expressing complaints about China’s treatment of U.S. companies. We’ll discuss that, plus what China’s new export rules could mean for chip makers. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Lunch. Alongside Contessa Brewer, I'm Tyler Matheson. Glad you could join us on a busy Friday. Coming up, 209,000 jobs created in June. That was slightly less than expected. Is that number just right to calm the market's fear about inflation and potentially more and more aggressive rate hikes? Plus, Treasury Secretary Janet Yellen complains about China's treatment of U.S. companies,

specifically pointing out recent punitive actions. American firms operating there have been experiencing. We'll discuss that and specifically what China's export rules could mean for chip companies. Contessa. Well, Tyler, let's get a check on the markets here. We have stocks higher after yesterday's losses, but this is a short trading week. And likely it will end in the red for the major averages. Here you're seeing the Dow industrials up hanging into the green here, up 15th of 100ths of a percent.

How's that as a wonky way to say that? S&B 500 is up half a percent than NASDAQ composite at three quarters of a percent. moving higher today. The basics. You've got energies, materials, and industrials. Look at energy up two and a half percent. And the streamers have rebounded into positive territory here. Warner Brothers Discovery up a 10th of a percent and the Paramount Global up four tens of a percent. That is the analyst saying that the Wolf Research saying that these companies could be hurt by the weak ad market, but still positive territory. So the question is, was today's jobs report weak enough to prevent the threat from having to get even more aggressive with rate hikes, but not be so weak as to worry

about the markets and a recession. Tyler. All right. Thank you very much. Let's move on. And the overriding question today is, was the jobs report weak enough to prevent the Fed from potentially moving forward with more rate hikes? Austin Goulsby described today's number earlier on CNBC. If you take a step back, it's clear the job. Job market is still very strong, but is cooling. If you look at the ratios of vacancies to the number of unemployed workers, for example, it's definitely coming down that we're getting to a more sustainable pace, which is what we need to do for inflation. All right, joining us now to talk all things market, economy, jobs, Fed, Phil Orlando,

chief equity market strategist with Federated Hermes, and Ron Insana, a CNBC senior analyst and commentator and co-CEO of Contrast Capital Partners. Gentlemen, welcome. Good to have you with us. Ron, you say the Fed is hell-bent on ruining a good economy. Yeah, what's wrong with these numbers? I mean, the reason that we believe they're going to raise rates two more times. If you look first at the wage data about which they're supposed to be so concerned, 4.4% with inflation coming down. So wages are going up faster than inflation. In normal times, we would say that's a good thing. The New York Federal Reserve yesterday, Tyler, put out a very interesting and new, relatively new indicator called the multivariate trend core PCE.

It's a different measure of inflation. Doesn't it though? That took me about a couple times to get that one right before I came on. What it does is break down the inflation rates and shows which inputs are sticky and which are transitory, if you will, for lack of a better description. And the rate came out at 3.5%. That's 1.1 percentage points below where core PC is right now. So actually, inflation is falling. There's good news for the Fed.

Wage gains are moderating. Employment growth is moderating. As we discussed last week, we're getting very close in my estimation, my humble opinion, to a Goldilocks scenario. I don't think the Fed believes it. So your recommendation would be to the Fed if you were there. Just keep on pausing. Keep on pausing.

Four times ago I would have said that. But, you know, I think they've done enough. And I don't think they've, I don't know what they're trying to do. that, Phil, keep on pausing, or do they need to show their resolve? Let me put it that way, by raising rates one more time, two more times maybe. Well, we're sort of in that one or two more high camp. And, you know, Ron makes an excellent point with the decline in inflation. But one of the things that the market seems to be struggling with is the decline in the pace of headline inflation versus core inflation.

The core inflation is coming down, but at a much more gradual pace. The market seems to be focused on the headline inflation. And the Federal Reserve keeps coming out and telling us we're focused on core inflation. We are forecasting a 2.2% core PC number at the end of calendar 25, that's two and a half years from now. And so therefore, we're going to remain vigilant and hawkish until we think we've got this thing under control. You look at today's jobs report. You know, the non-farm payroll part of it was soft. The revisions from April and May were soft, but there were other elements of this report, which were pretty robust, the household survey, the wage numbers, the hours work.

So there's something in this report for everyone. And I think if the Fed is hell-bent on tightening on July 26th, they found something in this report to justify that. Let me just make sure that I'm clear here. My question was really not so much, what do you expect the Fed to do? And it sounds like you expect the Fed to raise rates one or two more times. I think Ron's point was, well, maybe they will do that,

but it's probably not the right move. So is it your opinion that rates, rates one or two more times is called for? Is the smart move to wrestle inflation to the ground without damaging what Ron calls, you know, ruining a pretty good economy? Look, the reality is that the Federal Reserve is they're looking at the Phillips Curve tradeoff, is saying, okay, look, we've got an inflation problem. We don't want to have to keep hiking interest rates to increase the rate of unemployment,

slow the rate of growth in the economy and push the economy and recession because we want to. We're doing this because we feel we have to. And the reality is that they feel that elevated levels of poor inflation above that 2% target that they've established is a worse result for the economy, and we've got to take that bitter medicine. But you actually, you and I were talking before the show, you're really hyper-focused on wages, and jobs and what the Fed should be reading into that? Yeah, it's a healthy economy. Wages are growing faster than falling inflation. The United States is growing faster than the rest of the world,

inflation coming down faster than the rest of the world. You know, if I had any hair left to tear out, I would be doing it right now because I think the Fed is so misplaced in its concern. Some of its own research from the New York Fed is showing core inflation, the type of inflation that Jay Powell has identified as being central to their argument, is falling faster than any other measure, of course. So I think that, you know, there's almost no reason to take down this economy. My good friend Austin Goolsby, I think, is right.

You don't have to get a recession to get inflation down. It is falling. It will continue to fall. There is no other aspect out there, no other input, if you will, that's suddenly going to surge and make inflation go back to where it was prior to the Fed's rate hikes. Phil, I wanted to ask you. You say that the tech stocks have been overbott. We've seen that big run-up the first half of the year, but do you think there's still room for more growth?

I think that there should be a reversion of the mean over the course of the next couple of quarters. The stocks in the first half of the year, the eight big technology stocks have rallied collectively by almost 60%. They account for about 28% of the S&P 500. You strip those names out and the rest of the S&P, the other 400. 192 names are up about 3%. I think there's been a significant divergence here. A lot of these stocks like Nvidia have gotten ahead of themselves in terms of valuation. And I'd love to see a cooling off period where some of these underloved value stocks, international stocks and small cap stocks catch a little bit of a bid here and allow the technology stocks an opportunity to come back to

the mean. Phil Orlando, Ron and Sana. Thank you, gentlemen. Appreciate that. Thank you. Similar to stocks, bond market showing a split decision following this morning's jobs report. The 10-year yield slightly higher, the two-year falling after hitting a 16-year high. Rick Santelli is among the traders at the CBO. Hi, Rick. Hi, Contessa. Absolutely. What a split decision it is.

You know, the market always has an opinion. I call it a so-so report. 209,000, not too bad this far into what is considered a pretty good recovery after COVID. But do remember, it's still a little. The weakest job growth month over months since D's of 2020. And that two-year, what's it telling us? Look at a three-day chart of twos on top of tens. Tens are going up on its golden path, Mr. Gouldsby,

but two-year yields are stagnating and they're going down. That's the market telling us that all those investors that were short two-year because they were in tune with the Fed are starting to question that. And if you open the chart up towards the middle of February, you can see that 507 yield, high yield close in March, March 8th. We traded through it intraday. But a roller coaster goes round and round. The only thing that counts is where you get on, where you get off.

It's the closes that matter, and it has not closed above 507, and that is key. If you look at a two-year chart, starting to look like a double top, so let's go find a trader and see what they think. Paul. Hey, Rick. How you doing? It's not like you didn't expect me. Okay, here's what I want to know. okay what did you and the traders on the floor think of today's jobs report

uh... the number's lower than it's been but it wasn't very much below expectations so we took it in stride and the markets definitely take it in and straight do you think expectations got out of phase because of the uh... the wrong direction of the strength of the ADP report uh... yesterday yesterday people were optimistic that we might get some action with this number today based on that and uh...

you know that ADP doesn't really matter i have to interrupt you you know how You spell optimism on this trading floor? Premium volatility. What did premium volatility do yesterday? Yesterday was our first day in a while where we saw a big rip in the VIX. People were coming for the skew and the VAL. Already, that's pretty much already all gone. So they loaded up and now it's pretty much gone.

But there is something you were talking about with me off camera. Hopefully we're looking at a VIX chart. You know, the VIX bottomed recently. But what are we starting to see? Well, it bottomed last week. towards the end of the week and then early this week we saw some buyers that culminated yesterday morning with this number today things are calm until we get something that throws the throws the market for a loop with these data reports might stay on the lower end as an old technician

I always think of the choppiness you get at tops and bottoms the vix somewhat fits that real quickly do you think one hike two hikes what do you think what do you think the floor thinks Floor is probably one and a half to two. July seems pretty locked in right now, outside of something crazy next week, CPI. And then we'll see down there. Well, CPI is all about crazy. We have CPI next week. Paul, we have to run. Thank you for taking the time on this holiday short and week. Contessa, back to you. Rick Centelli, thank you. Coming up, Janet Yellen, breaking out the tough talk with China, criticizing the government's punishment of U.S. companies, and it's not just American businesses,

China's central bank slapped affiliate firm and group with a $985 million fine for violating governance, consumer protection, and money laundering violations. Power lunch. Back right after this. Welcome back, day two of U.S. Treasury Secretary Janet Yellen's trip to China. She's making her case on behalf of American businesses. She criticized during her visit the Chinese government's actions against U.S. companies and new export controls on two critical minerals used. in technologies like semiconductors, but she also emphasized the importance of healthy economic competition between the two countries. For more insight on this, let's bring in Longview Global's managing director and CNBC contributor, DeWard Rick McNeil.

Dward Rick, nice to talk to you today. There you are over my shoulder. Do you think that this issue of protecting American businesses from government punitive actions in China is realistic? Do you think that there's anything that? Treasury Secretary can do to make a difference? Well, I think it's important, Contessa, that she did make this a very big, up-front feature of her trip. Look, I don't think that there's much that she could do to stop China from putting in place what they may see are the necessary tools to protect their own national security. Certainly, we see a lot of that happening here in Washington. I think for a Treasury Secretary to go

and make this point, I think is kudos to Yellen for making it clear to China that this is a problem for U.S. businesses and that she, who is considered to be more dovish on some of these issues, is prepared to speak up on this. So I think kudos to yelling for making those statements. It seems like she's on a very high wire act here. On one hand, trying to enforce what clearly is a priority for the Biden administration in terms of getting tough with China. on a lot of different ways that China's actions have threatened national security. And then on the other hand, encouraging China to communicate and cooperate and keep moving forward for the global economy. How important is it that we are starting to see a thaw in these

relationships? Well, I want to take this in stride because I think you're absolutely right, contested. This is a tough job. She actually has an audience with the Chinese government and trying to move the ball there. But to your point, her colleagues in the Biden administration, many are not where she is with respect to China. So in some ways, this is definitely a tightrope where she's balancing views and the Biden administration with those in China. But on this issue of thaw, I think it's important that I push back a little bit on the prevailing narrative here around a thaw. I think the business community certainly wants this to be a thaw. But if you talk

to many in the Biden administration, Contessa, they see this as a continuation of an attempt to put in place the guardrails that they think is necessary as we move deeper into competition. So not a thaw in the sense that this is going to return to the days or the era where cooperation and engagement underpin the relationship, but this is perhaps the Biden administration way of testing this proposition around guardrails as we try and compete. As I read some of the commentary that is coming out from this visit, I sense that there's a lot of nice talk. There's the idea of resetting the more normal economic relationship between China and the United States. But talk, as they say, talk is one thing, action is another.

And I can well imagine that the Chinese see a lot of U.S. actions and go, how sincere are you with all this talk about resetting our relationship? When you're putting in semiconductor controls and other potential controls and you're putting tariffs on our goods, how, how, what do you mean, reset? You're being aggressive with us. Well, Tyler, I think you hit the nail on the head here in terms of China challenging the sincerity of this notion of a healthy, these are Janet Yell's words, economic relationship. But look, I think it's important for us to realize that both of these governments are putting in place what they're, They believe to be protections for national security that in some ways will and will continue to trump development and economic growth.

And so I think that is the reality of where we are, Tyler. But I do think it's important that the Chinese take yelling at her word. And this is Wimbledon Week. So meet her at the net and show after this meeting is over that they are prepared to do some things to find common ground and to find ways to cooperate. But to your point, Tyler, the proof happens after the meeting with the action. And at the moment I see on both sides, a lot of national security related, competition-related policy action still in the pipeline.

So I don't think we're out of the woods yet here, Tyler. Do you think U.S. companies would be wise to approach business in China with a healthy dose of skepticism? Yeah, you know, this is one of those situations. We saw this happen after COVID, where there's this real exuberance to see China. return to the China of old. We saw that with some of the misplaced views on where the market was going. I think we're seeing the same thing with respect to these trips by Blinking and Yellen. Kerry may be next. You know, we have to take this slow. This relationship is not going to be repaired overnight, and it will not return to what it was during the Obama administration and errors earlier.

We're in a totally different world, and I think businesses are going to have to accept that and really start to adjust. they view China going for. Let me try and squeeze in one quick final question and quick final answer. Often these meetings are seen as win or loss, win for Yellen, loss for Yellen. But maybe in this case, the win is that things just don't get worse, that things get stabilized and don't run off the rails. What is your reaction to that quickly? I'm very happy with a floor underneath the relationship, Tyler. And I think that's how we should look at this. It's unfair to put all of the on us on yelling to try and come back with a quote unquote when. But if she can help to establish the floor under this relationship, if she can have someone in China, meet her at the net,

and also do the same, that's a pretty good outcome for this visit in my view. All right. DeWordwick, thanks. Appreciate it. Always your time. DeWardwick McNeil. And further ahead on the program, Sue chefs, supermarkets, and spice lovers are sweating over one shortage in particular for Racha. Yeah, yeah, you got it. Maraca. Saracha. Details.

And pronunciers. Pronunciations. Penunciation lessons. All right, time now for our weekly ETF tracker. This week, we are going to focus on technology funds, which saw net outflows of $635 million in the latest week. This is according to our partners at Track Insight, two big factors, fears of rising interest rates and the possibility of a second half slump after a hot first half. the NASDAQ up 30% so far this year. Today's gains cutting into the weekly losses for some of the broader tech ETFs,

including the QQQs. Let's look at a few of them here on my left. You're right. But you're seeing some big gains in some specialized area of tech. FinTech, self-driving, and amplified data sharing, data sharing ETF up more than 7% this week. More information available on the FT Wilshire ETF hub. Tyler, thank you. Let's get to Amon Javvers, who has the CNBC News Update for us. Hello, Amon.

Hey there, Contessa, there's growing criticism for cluster munitions amid reports the U.S. will include the controversial weapons in a military package to Ukraine. The U.N. chief issued a statement saying he stands with the more than 100 countries who banned them over concerns about the widespread damage they can cause. The Biden administration is expected to announce the package later today in an effort to help in Ukraine's counteroffensive against Russia. Special counsel Jack Smith spent more than $5 million in the first four and a half months since he took over two criminal probes focusing on former president Donald Trump. The spending was revealed today in a Justice Department report. The bulk went toward paying for personnel. Smith's office already charged Trump for allegedly mishandling classified documents. Smith is also investigating Trump's role in the January 6th insurrection. And about 190,000 portable

Chargers are facing a recall because they could start a fire. They were sold exclusively on Amazon over the past two years. One of the chargers is blamed for a fire on a commercial flight, which sent four flight attendants to the hospital. Contessa, back over to you. All right. Amen, thank you very much for that. Appreciate it. You bet. Ahead on Power Lunch, the second half playbette chip stocks racking in some huge gains during the first part of the year, thanks to the AI boom, namely Nvidia up nearly 200%. And some analysts think these stocks could climb higher. We'll take a deeper dive next. Well, the AI boom was great for chip makers in the first half of the year, but will the

hype remain as 2023 continues? Christina Parts and Nevelas has all the answers in the second half playback. With my crystal ball. Let's talk about it. InVIDIA, up 200% year to date. AMD up 78%. Marvell, 66%. All these tickers vastly outpacing the SMP tech index. But like Contessa asked, can this pace continue in the second? half of this year. Well, Wall Street seems pretty divided. UBS expects a 10 to 15% drop in AI-related stocks suggesting positivity already priced into a lot of these names. And then there was a new June Deutsche Bank survey that said 66% of respondents think that Nvidia is more likely to half than double next. But the name is still very popular with analysts of her core ISI, Names it a top pick.

Steeful bumped its price target to 300 from 225, and the list continues. But it's not all about AI here. I don't want to just talk about that. There are signs of stabilization in the PC market with Intel raising the midpoint of its second quarter outlook. Micron also expects customer inventory levels in PCs as well as smartphones to be at quote normal levels by year end. But sometimes you got to hit rock bottom first. Competitor Samsung expects its lowest quarterly profit in 14 years. They just announced this, raising questions about the speed of the memory recovery and where micron stock can actually go from here. And then you've got concerns around auto and analog chip makers given the slower recovery from China. And that's probably part of the

reason why a recent Bank of America in investor survey showed Wolfspeed and analog maker Texas instrument among the most shorted names in those portfolios. So overall trends. AI is still hot, but it might be priced in. PCs slowly stabilizing memory and auto industrial chips could take a while too to recover, especially if tensions continue this way between the United States and China and then sales get cut off. End of my prediction. Wala. Christina, thanks so much. Our next guest says not all chipmakers will take a direct hit from China's curb of the rare

metals used in semiconductors. Joining us now with the winners and losers is Harsh Kumar, managing director at Piper Sandler-Harsh, welcome. Good to have you with us. How big a deal is this? How big a deal is this? You know, this could be a pretty significant deal. The ban is expected to go if it goes through on August 1st.

Like I said, most of the chip makers don't use gallium or germanium chips, but there is a certain sub-segment of semiconductors called compound semiconductors that do use a lot of this. For example, there are three areas that stand out for gallium use, which is RF radio frequency, optical, and power. In particular, the gallium ban, if it was to go through, could be quite troublesome. China is 86% of the global production capacity. And I'm going to say this slowly, 98% of the commercial production of gallium happens from China. So gallium is critical for radio frequency in particular. You know, any kind of phone that has R-F chips in it or any kind of base station is gallium-based.

So I heard you say twice there, if this ban goes through. through? Does that suggest that you think there is a possibility, maybe even a probability, that it won't? That's number one. And number two, what companies will be most adversely affected if this ban does go through? Yeah. So if this ban does go through, let me take the second pass first. It'd be the handset makers. Corvo would be a direct hit. Skyworks would be a direct hit. Now, we have some very senior officials that are visiting in China trying to sort out the situation. It's a little bit for Chinese response and retaliation to some of the curbs that the U.S. put on. So I suspect I'm hopeful that we will get this figured out because I see no way out of this in terms of gallium. Should the ban happen, it would be devastating to the phone industry.

Okay, so you say direct impact on Corvo and SkyWork Solutions, partial impact I am seeing in my notes, broadcom, maycom technology solutions on semiconductor and Wolfspeed, when it's, have partial impacts. Is there a way to, I mean, if China produces 98% of the world's gallium, is there a way for the United States to come in and produce any gallium domestically? So it is a very difficult metal to procure. It comes as a byproduct of zinc and bauxite production, which U.S. is not very good at, hasn't done it in a long time. So it would take us some time. Now, with the TIF that we've had with China, companies have learned to keep some supply on hand, typically between three and six months of supplies, usually on hand. We could lean on the last

two percent of the production. We could deal with sort of raising rising prices. We could get by if the ban was to go to. But the best and the most normal outcome would be not to go with the ban because this metal would be very difficult to replace, particularly for RF applications. In addition to those names that I just mentioned, and you might have people predicting that, But Volkswagen said it's monitoring the situation on raw materials and ready to take measures together with its partners if necessary, because they say that these two materials are important for the future of autonomous driving. So not so much for autonomous driving, but for electric cars. That was a power piece that I mentioned.

So you might have heard of a term called gallium nitride on silicon, GAN on silicon carbide. GAN is the key component that is derived from gallium, which is responsible for all the extra excessive power handling that the electric cars handle. So it's in your power station on the wall to charge your car. There are two or three big components that use it within the car. It would be a tough situation for the EV makers, but not so much for the autonomous. That's more so silicon-based. What was the phrase you used a moment ago with respect to the effect a ban would have on the first? phone industry, I think you said?

It would be devastating, is what I said, because if the ban was to go through, you wouldn't be able to get radio frequency chips. The chips that actually send the signal from your phone to the base station and the chips that sit inside the base station that actually receive that signal, they would be very difficult to procure. So what does that do, what does that do then to the sales of handsets? Is it freeze them? It would be bad.

We would have to find a workaround. The workaround would be very hard. We could go back to silicon chips, which are not very cost effective, nor are they as performance-oriented. We could go up the stack to silicon carbide, which would be very expensive, almost three to five times more expensive than the current gallium arsenide chips.

Well, we're putting guardrails on... Our best hope is this doesn't happen. All right. Thank you very much, Harsh. It's great to talk to you. I mean, this is what happens, though. We put the guardrails on our technology. for security purposes, we say,

and they're putting the guardrails on materials, and then the impact is clear. And this would be global impact, not just an impact on the United States. Obviously, actions have reactions and consequences. Absolutely. Well, coming up, China's tech crackdown, not just for American companies anymore. Beijing, Central Bank,

fining Alibaba's ant group nearly a billion dollars for multiple violations. We'll explain why that's actually good news for Alibaba, Sturgis. Power Lunch. We'll be right back. Time for the last three-stock lunch of the week. We're going to look at some companies making headlines as we close out this first week of the second half of the year. First up is meta platforms. Been in the news just a bit this week. It's already got 70 million signups for threads.

A new Twitter competitor, it launched on Wednesday here with the trade on that one. And several more, Gina Sanchez, Chief Market Strategist for Lido Advisors and a CNBC contributor. What do you think of meta? Gina? Well, look, I think meta is smelling blood in the water. We have seen a lot of wreckage and damage at Twitter. We've seen a decimation of the workforce and a huge fall in ad sales. So if I were meta and my ad machine has actually been doing okay,

they experienced weakness, but they actually defended pretty well and they're back up into positive growth. I would have stepped in two. I think this is a great move by the company. And you can see that they're already showing. and flexing their muscle that they can get the sign up. So now the question is, can they get the additional ad revenue? If so, this could be an enormous hit, and I would bet that they could. Well, they may need to make some improvements because I've tried it, and I've got some advice for them if they care to call me and ask me. In the meantime, let's talk about biogen, Gina, trading lower

despite gaining approval from the FDA for its Alzheimer's drug, Lekembe. So what do you think of biogen? This is a tough one. We don't really like it that much. Part of it is that they are fighting a battle on the top line, which is that revenue growth has been going down. You know, they've had a multiple sclerosis drug that's had a lot of competition. The same with their spinal muscular atrophy drug. Those are both, you know, not doing as well as they could be. They had a previous Alzheimer release that got very limited coverage from Medicare.

Lekem has gotten better coverage from Medicare, but it came out with a black box warning. So it wasn't quite the home run they were hoping for. So I think a lot of hope is being kind of put on the fact that this drug can get over those warnings, along with the, you know, the depression drug that they're going to be, that they're in the last stages of FDA approval for. And so that's a lot of hope right now to sort of stem the growth problem that they have in their revenue. So I think you have to wait and see on this one. All right. Well, biogen shares are off by two and a third percent. Levi Strauss down six percent after cutting its forecast for the year because of inventory.

issues, would you get into those genes? Well, you know, after COVID, I would have to get into a different size of those genes. But, you know, I think that what you've seen with Levi Strauss has actually reflected a lot of what has happened with spending. You know, into COVID, they got hit. Then they had supply chain issues coming out of COVID. They had a lot of demand. You saw the stock go back up. And now it's coming back down as that demand's starting to fade. And we're starting to go into a growth slowdown at the very least. And so, you know, it's really hard to get behind a lot of consumer discretionary names because, you know, inflation, although it's come down a lot, it's still, you know, lingering at higher levels than we're used to. People are paying more at the grocery

stores. They're paying more to go out for food. And so things like, you know, jeans and tops, you're just sort of wearing them out a little bit more. And that's what Levi's realizing and seeing in their numbers. Let's check up on where you stand on the stock draft, Gina, you and your partner, Diamond DeShields. You're in sixth place. The W.W.E. Superstar Charlotte Flair, still leading the way on the, on the heels, on the back of Nvidia. How are you feeling about PayPal? I guess it's PayPal and Alphabet were your two picks? It's Gina Sanchez. I don't know when I... The conversation is going to continue. Looks like we had a little hiccup there. Yeah. Can we show the screen? Can we show the screen over there? Yeah.

Let's do that. So there's going to be, so right now there's a smackdown from Charlotte Flair coming in because she picked NVIDIA. It would be hard to pick to beat anybody with NVIDIA right now because of the sheer amount of growth that that stock is, Enria. Yeah, we lost, Gina. We're sorry, Gina. We apologize, but you're in sixth place. Lots of time left. There you see.

I don't know whether those are in order or not. But Flair is leading. What an amazing little outfit she has there, right? Yeah, right. Yeah, almost looks like AI. Stick around. Tech Check is next. Welcome back to Powerlund. Shares of Alibaba jumping today, even though Ant Group, which Baba partially owns, has to pay nearly a billion dollars in fines. Dear Drubosa joins us now with today's tech check.

So why are investors reacting so optimistically to this fine? Well, on one hand, a billion dollar fine is a lot of money. It's one of the biggest fines levied on a Chinese company by the authorities. the bigger point which investors are reacting to is that this perhaps signals the end of all of this regulatory pressure on Ant Group that started way back in 2020 ahead of its IPO. But when you think about how much value has actually been destroyed over the last few years because of this regulatory pressure, because of changes that Chinese authorities wanted the company to make to its business model, to its profitability, it is much, much bigger than a billion dollars. Take a look at the screen

right now. At its peak, it was valued at over $200 billion. It is not. It is not. It is not. It is now valued somewhere around $64 billion. So that is just an enormous gap. And that has also hurt Alibaba. Alibaba has about a third, a 33% stake in Ant Group. So even if this does now free up Ant to go public, eventually have an IPO in Hong Kong or the U.S., most likely in Hong Kong, so much damage has been done to the company and Alibaba, which is a subsidiary of. And we've also seen some news on the, I guess, Alibaba's competitor, Amazon. We had, of course, the CEO on yesterday. What did you make of that interview with John Ford?

So there was sort of a silver lining for Alibaba here as well. And maybe some of that is the reason that it's doing well in the market as well. Maybe it's not just Ant Group. Because you're right, it's rival, Amazon. AWS, it's cloud business, which is a major player in China. So it competes with Alibaba in that market. We had Andy Jassy last night saying that, you know, the Chinese cloud providers are actually really good.

And he said that their AI capabilities are sort of on par with the American ones. Have a listen to what he said. There are some very strong cloud providers who are Chinese cloud providers in China. So Chinese companies in China are going to have access to AI capabilities, whether they come from U.S. companies, European companies, or Chinese companies. So contestant Tyler, that's sort of a big vote of confidence from the largest cloud player in the world. He's directly referencing Alibaba because it is the biggest Chinese player globally. So perhaps some optimism there.

But of course, it could be calculated on Andy Dassy's part, right? We had reports that the Biden administration is looking at restricting Chinese companies' access to American cloud players like Amazon and Microsoft. I don't think he wants that to happen. So he's essentially saying here it wouldn't make that much of a difference because, Alibaba and some of the other players have the same capabilities. So it would require Amazon and Microsoft to ask permission before assisting Chinese customers. Is the converse also true? In other words, would American companies have to potentially seek permission to use the services of Chinese cloud providers?

I can't imagine many American companies, for that matter, American consumers would be comfortable storing, transmitting data through Chinese clouds. There's not a lot of reason for them, too, but for that exact reason. Bilateral tensions are on the rise. There could be privacy concerns, security concerns, plus they have a lot of players here that they can use. However, it is kind of interesting that even Chinese players don't necessarily want to use the Chinese cloud providers, bite dance, right? The parent of TikTok used to use Alibaba Cloud. It switched over to an American player because of those security concerns and it wants to be seen as separate. All right.

Well, it was also facing a lot of backlash from U.S. lawmakers in different states and at the federal level as well about its ties to China. So limiting those ties would seem to make a good business case for growth here. Deirdre, thank you. A cold reality for folks who love hot sauce. Severe weather and supply chain issues are leading to a syracia shortage. Woe is me. More on that when power lunch returns. Six minutes left for our power lunch and a bunch more stories you need to know.

Let's get right to it. We're wrapping up a week that saw three of the hottest days on record for planet Earth. And we're also getting a glimpse of the health and financial impact of these extreme temperatures. The Center for American Progress estimates record heat will prompt 235,000 emergency room visits in the U.S. this summer alone and an extra billion dollars in health care costs. that is a very tangible result that we're seeing of temperature extremes. Climate change and temperature extremes, not to mention rougher storms that are coming. I saw it was 110 in Tucson yesterday or the day before?

I mean, you know, like every year we talk about these temperatures going up. It's true that in the desert, they've seen 110 before. It's not abnormal to see those kinds of temperatures, but it's the extended periods of time that they're seeing them without a break. And the ice melt, I was reading yesterday. The ice melt on the Greenland ice pack is like it's never been before. And this is, June is not usually their prime month for ice melt. It's August, early August, late July.

All right, for years now, a near surefire way for workers to secure a higher job was, as higher salary was job hopping. But new data show that while the grass may be greener on the other side of the fence, there won't be much green for your pocket. Even as employers keep up the hiring spree, pay increases for new hires, do not appear to be keeping pace according to ADP. So maybe, I guess, workers don't have quite the pay leverage that they did a couple of years ago. It's a classic case of should I stay or should I go.

They say that job changers this month saw an 11% annual increase in median annual pay. Last June, they were pulling down a 16% increase. So you may still get a bump. You still get a bump, but not as much. And then if you stay, they say that you would get a 6% increase in the median annual pay. June down from 7.7% the same time last year. And the job market still very, very healthy. Incomes rising. All right. The World Series of Poker main events smashing its record for entrance, topping the mark set in 2006. 9,300 participants so far. Registration still open. Organizers think

they're going to break the 10,000 mark. Each of them have to shell out $10,000, potentially creating a prize pool of more than $100 million. The event is being held this year at the horseshoe and the Paris casinos owned by Caesars. And in fact, a lot of times what you'll see is on this World Series of Poker, Cesar's mentions it when they're talking about their earnings for the quarter because it can be significant for what they do in Vegas. What do they get out of it? They own it. They own the tournament.

And then it's held there and the people come and they spend money and they've got lots of spectators who also come in and spend a lot of money. So it's good for Cesar. And television, the whole thing is televised. Absolutely. All right, more details now surfacing about the FTX scandal and who lost and how much. According to the New York Times, Tom Brady, the former quarterback, was paid $30 million in stock for pitching the company. And, of course, that's stock now completely worthless. And his then wife, Giselle, got and lost her own $18 million worth of stock.

And those two were not the only celebrities who went down with the ship there. You can't always follow the movie stars and the athletes for where they put the... their money. Absolutely not. All right, supply chain and weather-related issues can make it hard to find Saracha hot sauce this summer. Emily Wilkins is in our DC newsroom with more on that hot story. Emily. Very, very spicy story, Tyler. Ahoi Feng Foods whose saracha hot sauce has been increasingly hard to find on store shelves is blaming a drought in northern Mexico for a limited supply of chilies and sauce shortages. Hoi Feng told CNBC that while limited production, recently resumed, their sauce will be in short supply for the foreseeable future.

Alvin Jimenez, operating partner at Korean restaurant chain's SoulSpice, told me it was a struggle to find enough saracha to make its most popular sauce. We noticed the impact for us in April of this year. The prices started to go up, as well as the supply became really scarce, and it was hard to find. So Soul Spice decided to make its own creamy syracia sauce. from scratch. Tyler, Contessa, I have here some, and I'm going to hold on to this because I just checked Amazon, and a single 17-ounce bottle of Saracha is going for 50 bucks. Well, in that case, it seems like a good, talk about a way to invest. Stop thinking what I'm thinking at the same time

I'm thinking it. Thinking the words right out of your mouth. There we go. Well, that was, that's Emily, thank you. Hold on to that. That bottle may be worth $300 in a couple of months. You never know. There's going to be Saracha hoarding. Saracha Horning. Busy week, interesting week. Market sort of taking some lumps this week for a chain. Yeah, here and there and everywhere, but you can see the Dow right now,

just barely in the red flat for the day. S&P 500 is up at three quarters of a percent, a third of a percentage point. A third of a percentage point, a third of a percent. All right, everybody. Thanks for watching, Power Lunch. Have a good weekend.